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 26, 2007                      Le 26 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 26, 2007                  Le 26 octobre 2007

 

- iv -

 

           TABLE DES MATIÈRES / TABLE OF CONTENTS

 

 

                                                 PAGE / PARA

 

RESUMED:  WILLIE GRIEVE                          2053 /14653

RESUMED:  ROBERT TASKER

RESUMED:  DAVE McMAHON

 

Cross-examination by PIAC                        2054 /14656

Cross-examination by Cybersurf                   2102 /14956

Cross-examination by Xittel                      2143 /15234

 

 

AFFIRMED:  BRENT MOONEY                          2188 /15554

AFFIRMED:  JOHN MACDONALD

AFFIRMED:  TERESA GRIFFIN-MUIR

AFFIRMED:  KELVIN SHEPPARD

AFFIRMED:  RON ROUT

AFFIRMED:  PAUL BRISBY

AFFIRMED:  LEE SELWYN

 

Cross-examination by The Companies               2188 /15558

 

 

- v -

 

              EXHIBITS / PIÈCES JUSTIFICATIVES

 

 

No.                                              PAGE / PARA

 

PIAC-1        Excerpt from Canadian Gazette of  2071 /14759

              The first iteration under

              Section 8, dated June 17, 2006

 

PIAC-2        Excerpt from Canadian Gazette of  2071 /14759

              the final version of the order

              of December 14, 2006, dated

              December 27, 2006

 

CYBERSURF‑4   Paragraph 232 of Decision 2002‑34 2124 /15113

 

XITTEL‑3      Xittel Tariffs                    2157 /15344

 

CRTC‑9        CRTC 2006 Monitoring Report       2181 /15524

 

COMPANIES‑16  Toronto Hydro map of Toronto,     2270 /16084

              Tab BB

 

 

                 Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon resuming on Friday, October 26, 2007

    at 0832 / L'audience reprend le vendredi

    26 octobre 2007 à 0832

1listnum "WP List 3" \l 12189            THE SECRETARY:  Please be seated.

1listnum "WP List 3" \l 12190            THE CHAIRPERSON:  Mr. Rogers, are you on?

1listnum "WP List 3" \l 12191            MR. ROGERS:  I guess.  Thank you, Mr. Chairman.  Good morning.

1listnum "WP List 3" \l 12192            We are ready to resume with the TELUS panel.  As per the discussions last week, we have a slightly reduced panel.

1listnum "WP List 3" \l 12193            The members today are Mr. Willie Grieve, Mr. Rob Tasker and Mr. Dave McMahon, all of whom were on the panel when the group last appeared.  They are ready to resume cross‑examination.

1listnum "WP List 3" \l 12194            THE SECRETARY:  I am sorry, Mr. Chair, I will remind our witnesses that they are still under oath.

RESUMED:  WILLIE GRIEVE

RESUMED:  ROBERT TASKER

RESUMED:  DAVE McMAHON

1listnum "WP List 3" \l 12195            THE CHAIRPERSON:  Okay, Mr. Janigan, go.

1listnum "WP List 3" \l 12196            MR. JANIGAN:  Thank you, Mr. Chair.

EXAMINATION / INTERROGATOIRE

1listnum "WP List 3" \l 12197            MR. JANIGAN:  Panel, I would like to take you through the essentials of your position, then attempt to try to true it up with the interests of the residential consumer constituency that we are trying to represent and the likely net effect on that market if the Commission chose to adopt your views.

1listnum "WP List 3" \l 12198            Now, first of all, as I understand your definition of essential services ‑‑ which appears, I believe, in your July the 5th evidence on page 25 and paragraph 60 ‑‑ that the definition of essential facilities, there must be three criteria met in order for a facility to be declared essential:  first of all, that it is monopoly controlled, secondly, that competitors require it as an input, and thirdly, that competitors can't duplicate it economically or technically.

1listnum "WP List 3" \l 12199            Am I correct on that?

1listnum "WP List 3" \l 12200            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12201            MR. JANIGAN:  Okay.  Now, in terms of looking at what these criteria mean, I understand that in your test, TELUS indicates that using concepts of market power dominance or lessening of competition in an essential facilities test is wrong, and I point out page 17 of your evidence.

1listnum "WP List 3" \l 12202            Your supplementary evidence of July the 5th at paragraph 40 seems to give a fairly definitive statement of that in that it is indicated:

                      "As such, the essential facilities test is entirely focused on whether competition is prevented without access to the facility.  Thus, whether competition is lessened substantially or otherwise is irrelevant to the question of whether a facility is essential.  Therefore, any test for essential facilities that is predicated on a firm's ability to lessen competition or affirms dominance or market power in the upstream or downstream market is simply incorrect." (As read)

1listnum "WP List 3" \l 12203            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12204            MR. JANIGAN:  Okay.  And with respect to the qualification of the input, I understand that on page 13 of your supplementary evidence, the test is whether every competitor requires it to compete and as soon as cable enters a market somewhere with the same cost structure of another market where there is mandated access to unbundled loops that these facilities cease to be essential in that market.

1listnum "WP List 3" \l 12205            Am I correct on that?

1listnum "WP List 3" \l 12206            MR. GRIEVE:  Just about.  Where there is entry in one geographic market, then other similar geographic markets based on this proxy test, similar to what the Competition Bureau talked about, would make those facilities non essential in all of those similar geographic markets and we use the bands to locate or identify those.

1listnum "WP List 3" \l 12207            MR. JANIGAN:  So if every competitor doesn't need it to compete, then the facility can't be essential?

1listnum "WP List 3" \l 12208            MR. GRIEVE:  That is right.

1listnum "WP List 3" \l 12209            MR. JANIGAN:  Okay.  Now, I take it this may be the case even if cable hasn't hindered the particular geographic market?

1listnum "WP List 3" \l 12210            MR. GRIEVE:  That is right.  That is why we have a five‑year transition period ‑‑

1listnum "WP List 3" \l 12211            MR. JANIGAN:  Okay.

1listnum "WP List 3" \l 12212            MR. GRIEVE:  ‑‑ for the access portion.

1listnum "WP List 3" \l 12213            MR. JANIGAN:  Just a collateral question here.  Would that mean that you could possibly have forbearance in the wholesale market but no forbearance in a retail market?

1listnum "WP List 3" \l 12214            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12215            MR. JANIGAN:  Okay.  Now, there are other qualifications on page 25 and para 61 of your July the 5th evidence and some of these other qualifications ‑‑

1listnum "WP List 3" \l 12216            MR. GRIEVE:  I am sorry ‑‑

1listnum "WP List 3" \l 12217            MR. JANIGAN:  I am sorry, could you turn it up?

1listnum "WP List 3" \l 12218            MR. GRIEVE:  What paragraph?

1listnum "WP List 3" \l 12219            MR. JANIGAN:  It is paragraph 61 of page 25 ‑‑

1listnum "WP List 3" \l 12220            MR. GRIEVE:  Thank you.

1listnum "WP List 3" \l 12221            MR. JANIGAN:  ‑‑ of the July 5th evidence.

1listnum "WP List 3" \l 12222            MR. GRIEVE:  Okay, thanks.

1listnum "WP List 3" \l 12223            MR. JANIGAN:  These are sort of additional sort of qualifications or considerations that the facilities must meet or that the test is sort of expanded to include these kind of qualifications and the first is just because competitors lack scale and scope enough to duplicate doesn't mean that they should have mandated access.

1listnum "WP List 3" \l 12224            MR. GRIEVE:  That is right.

1listnum "WP List 3" \l 12225            MR. JANIGAN:  Okay.  So a small new entrant, I take it, better become large before he gets access ‑‑ it gets access, I should say?

1listnum "WP List 3" \l 12226            MR. GRIEVE:  Well, what we are ‑‑ can you point me exactly to the sentence you are talking about?  I just want to make sure.

1listnum "WP List 3" \l 12227            MR. JANIGAN:  Okay.  It is in 61 ‑‑

1listnum "WP List 3" \l 12228            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12229            MR. JANIGAN:  ‑‑ and it is actually the first sentence, that:

                      "In addition to satisfying these three criteria, the competitor's need for the facility and inability to economically duplicate it..." (As read)

1listnum "WP List 3" \l 12230            MR. GRIEVE:  Right.  Right.

1listnum "WP List 3" \l 12231            MR. JANIGAN:

                      "...should not be the result of a lack of reasonable scale or scope." (As read)

1listnum "WP List 3" \l 12232            MR. GRIEVE:  Right.  The idea of the essential facilities doctrine is not to say that something is an essential facility for one competitor in a market but not another competitor.  The idea of an essential facility is it is essential for competition and if competition cannot ‑‑ competition and not individual competitors but competition cannot arise without access to it, then it is an essential facility.

1listnum "WP List 3" \l 12233            MR. JANIGAN:  But I take it a small new entrant might fail to meet these conditions simply because it is small?

1listnum "WP List 3" \l 12234            MR. GRIEVE:  I don't ‑‑ the question here is whether it can be duplicated and the way we look at it, we look across the country in the different areas and we find evidence of duplication in all the major areas so that to the extent that there is duplication, we know it is duplicable under the test.  Whether it has been duplicated by a small or a large carrier is not a consideration of ours.

1listnum "WP List 3" \l 12235            MR. JANIGAN:  But a new entrant, for example, a small new entrant may require these facilities in order to expand and get larger.  I mean isn't your test a bit like the old whine that the banks won't lend you money until you prove that you don't need it?

1listnum "WP List 3" \l 12236            MR. GRIEVE:  Well, Mr. Janigan, you know, in every market, small new entrants try to enter and they have various ways of entering.

1listnum "WP List 3" \l 12237            You can use the idea of a small professional firm like an accounting firm or a dentist or something like that.  They go, they start their business, they lease a building, they finance their equipment possibly through a lease and they start their business and they grow their business.  Eventually, they might buy the building, get more dentists or accountants in the building.  That is the way these things work.

1listnum "WP List 3" \l 12238            Our concern with adopting a test for essential facilities that is not an essential facilities test, which is basically a test for what you are going to unbundle and when, is that you end up in a situation where you don't allow competition to arise on the wholesale level.

1listnum "WP List 3" \l 12239            So using the dentistry firm or accounting firm, they never get an opportunity to go to the marketplace to look for something to lease because there are no alternate suppliers of the things that they need.

1listnum "WP List 3" \l 12240            MR. JANIGAN:  But in your example, for example, obviously, the scale and the scope of the accounting firm when it came in to lease the office is a lot different from the scale and the scope of the accounting firm when it bought the building?

1listnum "WP List 3" \l 12241            MR. GRIEVE:  Right.  And the accounting firm could do that because the accounting firm was operating in or was entering into a market or was acquiring assets in a market that it needed to conduct its business, assets that were provided in a competitive market.

1listnum "WP List 3" \l 12242            Our concern about the Commission's approach, the way the Commission has approached unbundling, is that it has unbundled non‑essential facilities and we believe that its policies, as we have said many times, have actually stifled or reduced the opportunities for competition to arise in the facilities market.

1listnum "WP List 3" \l 12243            MR. JANIGAN:  But taking your example again, this only works if the accounting firm, for example, had access to small office space to begin with?

‑‑‑ Pause

1listnum "WP List 3" \l 12244            MR. GRIEVE:  Well, that is right but you are making the assumption, Mr. Janigan, that if the Commission doesn't order unbundling and doesn't order mandated access that there would never be any access provided to our facilities or other ILECs' facilities and our position is that is simply not the case and it is less and less the case the more you have other suppliers of those facilities in the market.

1listnum "WP List 3" \l 12245            The purpose of our proposal here and the purpose of our transition period is to make sure that the right incentives are created for everyone in the market to build or to lease or to negotiate but that the market determine it, not the regulator, and what you are asking for is a regulated solution that will actually, in our view, stifle the development of that competitive wholesale market.

1listnum "WP List 3" \l 12246            MR. JANIGAN:  Okay.  But back to your example again, if there are only one or two buildings in the city, presumably, the price that is going to be obtained by the building owner is going to be somewhat higher than what one would anticipate in a competitive market?

1listnum "WP List 3" \l 12247            MR. GRIEVE:  Not if that market is open to competition and anybody else can come in and build other buildings.

1listnum "WP List 3" \l 12248            MR. JANIGAN:  The other qualification I believe you put, and it is at the tail end of that sentence, is that the rates have to be compensatory as well, that they are being charged for the essential facilities.

1listnum "WP List 3" \l 12249            MR. GRIEVE:  Yes.  You know, we have used the expression "fully compensatory" since that time but that is our belief, that you have to allow the rates for essential facilities to be at compensatory levels, fully compensatory levels, which I described to the Chair last week.

1listnum "WP List 3" \l 12250            MR. JANIGAN:  And that test presumably will be met in a future proceeding which decides upon what will be compensatory rates?

1listnum "WP List 3" \l 12251            MR. GRIEVE:  That is right.  The Commission in this proceeding has put in scope the question not of what the rates will be but the important first question, which is what are the pricing principles that it should adopt, and we have said that the prices should be based on company‑specific actual long‑run incremental costs or phase II costs plus a mark‑up for fixed common costs and to recover your proportionate share of the embedded cost differential and that should be the pricing principle for ‑‑ the main pricing principle for essential facilities.

1listnum "WP List 3" \l 12252            Dr. Aron can speak in more detail to those.

1listnum "WP List 3" \l 12253            MR. JANIGAN:  So after the Commission concludes that proceeding, this particular qualification, I assume, would not be relevant?  I mean we are not going to endlessly have to parse or to examine whether or not the rates for facilities are compensatory in your analysis?

1listnum "WP List 3" \l 12254            MR. GRIEVE:  Well, if the Commission ‑‑ well, the Commission will make a determination of what the principles are in this proceeding and then I am sure we are going to be into a very interesting proceeding on how to apply those principles.

1listnum "WP List 3" \l 12255            MR. JANIGAN:  And after that proceeding is concluded, that will be the end of that test, right?

1listnum "WP List 3" \l 12256            MR. GRIEVE:  Whether the rates are compensatory?

1listnum "WP List 3" \l 12257            MR. JANIGAN:  Yes.

1listnum "WP List 3" \l 12258            MR. GRIEVE:  Yes, if the Commission decided they are going to do compensatory, fully compensatory rates, that will be the end of it.

1listnum "WP List 3" \l 12259            MR. JANIGAN:  Okay.

1listnum "WP List 3" \l 12260            THE CHAIRPERSON:  Can I just interject?

1listnum "WP List 3" \l 12261            I gather from this you feel that the present rates are not fully compensatory?

1listnum "WP List 3" \l 12262            MR. GRIEVE:  That is right.

1listnum "WP List 3" \l 12263            THE CHAIRPERSON:  Just in 50 seconds, tell me why you feel they are not compensatory.

1listnum "WP List 3" \l 12264            MR. GRIEVE:  I have 50 seconds?

‑‑‑ Laughter / Rires

1listnum "WP List 3" \l 12265            MR. GRIEVE:  The Commission over the last, I would say, decade has gone through a process of changing what we believe, and our submission has been consistently changing, phase II costing from being a company‑specific kind of costing mechanism to being one where the Commission has increasingly used proxies or adjusted key parts of the costing elements so that every time one of those is adjusted, the costs go down or the reported costs go down.

1listnum "WP List 3" \l 12266            That doesn't mean the costs of the companies have gone down, it just means that the costs that the Commission has allowed have gone down.

1listnum "WP List 3" \l 12267            Then on top of that, the Commission has changed its test for the mark‑up from a mark‑up that, although different words have been used over time, from a mark‑up that was supposed to allow for an opportunity to recover the proportionate share for each service of the fixed common costs plus what has come to be known the embedded cost differential, the Commission changed that in their price cap, well, actually changed it in a contribution decision and then later changed it for everything in the second price cap decision.

1listnum "WP List 3" \l 12268            It is not clear exactly to us what all the reasons for that were but they have changed those policies.  So now the rates are not company‑specific and the mark‑ups are not sufficient, in our view, for essential services or essential facilities.

1listnum "WP List 3" \l 12269            THE CHAIRPERSON:  Isn't it a bit of a contradiction that when you talk about whether something is duplicable or not, you say don't be company‑specific, don't look at this for size but take a reasonable approach, i.e., sort of an average normative approach, but when it comes to determining rates, you say go company‑specific?

1listnum "WP List 3" \l 12270            Shouldn't it be one way or the other for both, both for determining its duplicability and for determining what is an appropriate rate?  Either you have company‑specific or you take an average of the industry.

1listnum "WP List 3" \l 12271            MR. GRIEVE:  Well, I think if you take the company‑specific costs, the way we talk about similar geographic markets is we define them by band.  The bands are defined uniformly for costs that are similar as amongst or between companies across the country.

1listnum "WP List 3" \l 12272            So if, for example, you had one company who had higher costs than another company, then the possibility is that those higher costs would result in ‑‑ the likelihood, if they were significantly higher, is that company's services in that geographic area would be in a different band than another company.

1listnum "WP List 3" \l 12273            So, you know, I think that the banding structure itself is supposed to look at the individual costs or the specific costs of the companies and then say, okay, every place that you have costs between, say, $5 and $15, or something like that, we will put that in one band.

1listnum "WP List 3" \l 12274            And so one company might have $5 to $15 in one kind of geographic area and the other in another kind of geographic area, but the costs across those bands would be similar, but you would still be using company‑specific costs to figure out what the costs are in that individual ILEC's territory.

1listnum "WP List 3" \l 12275            THE CHAIRPERSON:  Back to you, Mr. Janigan.

1listnum "WP List 3" \l 12276            MR. JANIGAN:  Thank you, Mr. Chair.

1listnum "WP List 3" \l 12277            Now, as I understand it, there's one final hurdle that has to be jumped in order for a facility to be essential, and that's on paragraph 62 of your evidence, on page 26.  It's noted:

                      "...however, the Commission should only require mandatory unbundling of an essential facility when it finds such unbundling is in the public interest."  (As read)

And it's indicated there that some of the interests, the public interests that would be promoted are things like investment in innovation...

1listnum "WP List 3" \l 12278            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12279            You know, this would be a very good question to ask Dr. Weisman because this really comes out of his evidence.  I can give you a little bit of an answer, but it wouldn't go beyond what's in this paragraph.

1listnum "WP List 3" \l 12280            I mean, there are some times when you want to make sure that innovation is not stifled by saying to someone, "If you innovate so well that you find yourself in a position where you really are going to be able to reap a lot of benefits from it, well, then, we are just not going to let you reap those benefits".

1listnum "WP List 3" \l 12281            That puts a chill on innovation.

1listnum "WP List 3" \l 12282            MR. JANIGAN:  How do you construct the test on this, in terms of you have already gone through, you know, the first part, your three criteria, then we have got a few more.

1listnum "WP List 3" \l 12283            Now this test, how does the Commission administer this test?

1listnum "WP List 3" \l 12284            MR. GRIEVE:  Well, I think Dr. Weisman answered an interrogatory on this.  I don't have it in front of me, but, you know, perhaps you could ask him.

1listnum "WP List 3" \l 12285            MR. JANIGAN:  Okay.

1listnum "WP List 3" \l 12286            Is it TELUS's position that the converse is also true, that, should the Commission require mandatory unbundling, even if it doesn't meet your test, if it's in the public interest?

1listnum "WP List 3" \l 12287            MR. GRIEVE:  Well, I suppose the Commission always has the opportunity to determine that it's in the public interest to mandate the unbundling of non‑essential facilities.  Our position is that it's not in the public interest to do that because the evidence has show that it actually stifles investment in facilities.

1listnum "WP List 3" \l 12288            Now, I suppose you could say that the Commission, as they did in 97‑8, could use a transition period, and that's exactly what we have said here is that we need a transition period to go from where we are today and create the right incentives for us to have to move out of the unbundling of non‑essential facilities.

1listnum "WP List 3" \l 12289            But, in theory, certainly the Commission could unbundle non‑essential facilities, at the end of five years we just think it's the wrong policy choice.

1listnum "WP List 3" \l 12290            MR. JANIGAN:  Yes.  Now, in paragraph 64, on page 27 of your evidence, you concede that nearly all facilities will fail to satisfy one of the three elements of the definition and the analysis will rarely move beyond step one.

1listnum "WP List 3" \l 12291            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12292            MR. JANIGAN:  So, effectively, we are dealing with a very, very small group of facilities that will be declared essential?

1listnum "WP List 3" \l 12293            MR. GRIEVE:  Right.  And not coincidentally, because the test is the same, it is almost identical to the list of facilities the Commission found to be essential in Decision 97‑8

1listnum "WP List 3" \l 12294            MR. JANIGAN:  Okay.

1listnum "WP List 3" \l 12295            I would like to deal with your evidence dealing with the effect of the policy direction, and to assist I have taken two excerpts from the Canada Gazette, the first being the first iteration of the order under section 8 of June 17th, 2006, which is being distributed.  I think you have a copy of that.

1listnum "WP List 3" \l 12296            MR. GRIEVE:  Yes, I do, thank you.

1listnum "WP List 3" \l 12297            MR. JANIGAN:  And the second being the final version of December 27th, being the order of December the 14th, 2006.

1listnum "WP List 3" \l 12298            MR. GRIEVE:  Yes, I have that.

1listnum "WP List 3" \l 12299            MR. JANIGAN:  Okay.

1listnum "WP List 3" \l 12300            THE SECRETARY:  Those will be registered as Exhibit Nos. 1 and 2, respectively.

                      EXHIBIT PIAC‑1:  Excerpt from Canadian Gazette of the first iteration under section 8, dated June 17, 2006

                      EXHIBIT PIAC‑2:  Excerpt from Canada Gazette of the final version of the order of December 14,2006, dated December 27, 2006

1listnum "WP List 3" \l 12301            MR. JANIGAN:  Now, the TELUS evidence makes it quite clear what it believes the impact of the policy direction of f December 2006 is on the outcome of this proceeding, and I ask you to turn up page 4 and paragraph 7 of your evidence...of your supplementary evidence of July 5th.

1listnum "WP List 3" \l 12302            MR. GRIEVE:  Thanks.  Hang on a second.

‑‑‑ Pause

1listnum "WP List 3" \l 12303            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12304            MR. JANIGAN:  And actually, I'm looking at a quote from the bottom of the page, the previous page, page 3:

                      "But it is important to focus on the language of the policy direction because it provides further context for the Commission's current proceeding and also because the policy direction is, as a matter of law, binding on the Commission.  In other words, the language of the policy direction must be interpreted as legally binding and subject to the same rules of statutory interpretation as would imply to any other law, regulation or statutory instrument."  (As read)

1listnum "WP List 3" \l 12305            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12306            MR. JANIGAN:  That's the position of TELUS.

1listnum "WP List 3" \l 12307            And as it is binding, as I understand the TELUS position is that the only permissible interpretation of the language of the policy direction is that the issue that the Commission is to determine is solely the extent of the phasing out of mandatory access.  The Commission cannot expand the regime of access or keep it the same.

1listnum "WP List 3" \l 12308            MR. GRIEVE:  That's what we believe it says.

1listnum "WP List 3" \l 12309            MR. JANIGAN:  Okay.  And is it your position that even if the Commission found that the objectives of the act would be better met by broadening the terms of the mandated access, the policy direction would not let them do so?

1listnum "WP List 3" \l 12310            MR. GRIEVE:  I think that's what the intention of the policy direction is, that the government has found that it is not in the public interest to expand access.

1listnum "WP List 3" \l 12311            MR. JANIGAN:  So even if the Commission found that the objectives of the act would be better met by broadening the terms, this policy direction would prevent them from doing so?

1listnum "WP List 3" \l 12312            MR. GRIEVE:  I think the policy direction is clear.  It says a reliance on market forces and improving incentives to innovate and invest.  That's the clear objective of it and I think that the policy direction is clear that expanding mandated access would not be in the public interest so defined.

1listnum "WP List 3" \l 12313            MR. JANIGAN:  And TELUS has come to that conclusion that this result follows primarily from the rules of statutory interpretation, that words must be presumed to have a meaning and must be given their ordinary meaning?

1listnum "WP List 3" \l 12314            MR. GRIEVE:  Yes.  And also, you know, you have to interpret these things in the context of the Telecom Policy Review, which was referred to in the Canada Gazette, as well.

1listnum "WP List 3" \l 12315            MR. JANIGAN:  Okay.

1listnum "WP List 3" \l 12316            Now, if we turn up Exhibit 1, which is the first ‑‑

1listnum "WP List 3" \l 12317            MR. GRIEVE:  It's the June 17th one?

1listnum "WP List 3" \l 12318            MR. JANIGAN:  The June 17th one, that's Exhibit 1, June 17th, and we compare it with Exhibit No. 2, looking at section 1(c)(ii), and that's page 4 ‑‑

1listnum "WP List 3" \l 12319            MR. GRIEVE:  Yes, I have it.

1listnum "WP List 3" \l 12320            MR. JANIGAN:  ‑‑ of the first exhibit ‑‑

1listnum "WP List 3" \l 12321            MR. GRIEVE:  Yes, I have them both.

1listnum "WP List 3" \l 12322            MR. JANIGAN:  ‑‑ and page 2 of the second exhibit.

1listnum "WP List 3" \l 12323            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12324            MR. JANIGAN:  In the first iteration, it simply says that they will

                      "...conduct a review of its regulatory framework regarding mandated access to wholesale services, in order to determine the extent to which mandated access to wholesale services that are not essential services should be phased out and the appropriate pricing of mandated services to encourage investment and innovation in network infrastructure."

1listnum "WP List 3" \l 12325            Now we note ‑‑ that's in June ‑‑

1listnum "WP List 3" \l 12326            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12327            MR. JANIGAN:  ‑‑ in December, we have, at the end of mandated services, determine the appropriate pricing to mandated services, we have the phrase:

                      "...which review should take into account the principles of technological and competitive neutrality, the potential for incumbents to exercise market power in the wholesale and retail markets for the service in the absence of mandated access to wholesale services, and the impediments faced by new and existing carriers seeking to develop competing network facilities."  (As read)

1listnum "WP List 3" \l 12328            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12329            MR. JANIGAN:  If you turn to the Regulatory Impact Analysis Statement, which follows that ‑‑

1listnum "WP List 3" \l 12330            MR. GRIEVE:  Page?

1listnum "WP List 3" \l 12331            MR. JANIGAN:  Page 5 of that statement ‑‑

1listnum "WP List 3" \l 12332            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 12333            MR. JANIGAN:  ‑‑ about three‑quarters of the way down, it says:

                      "However, in particular, a large number of interested parties suggested changes to subparagraph 1(c)(ii),..."

‑‑ which is the one we have just been dealing with ‑‑

                      "...a policy direction which proposes a review of the regulatory framework surrounding mandated access to wholesale services to increase innovation, investment and infrastructure‑based competition in the telecommunications industry."  (As read)

1listnum "WP List 3" \l 12334            And if you flip over the page, to page 6, it says:

                      "The Government has taken note of the significant questions raised concerning the implications of subparagraph 1(c)(ii) and the potential market impact of the CRTC's review of its framework governing wholesale services. In particular, amendments to subparagraph 1(c)(ii) in the definitive version of the Order respond to concerns with the review of mandated access to wholesale services.

1listnum "WP List 3" \l 12335            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12336            MR. JANIGAN:  So, as you indicated, that in looking at the intent we often look at the legislative evolution of a particular statutory provision, is that correct?

1listnum "WP List 3" \l 12337            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12338            MR. JANIGAN:  In this case, the government responded to, in its consultation to comments it has received in this consultation phase, and put in this particular section, which governs the way in which or what the Commission is supposed to take into account upon its review.  Would you agree with that?

1listnum "WP List 3" \l 12339            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12340            MR. JANIGAN:  Now, in fact, in page 18 of your evidence, paragraph 42, you indicate:

                      "For these reasons, parties who continue to rely on the definition of essential facilities provided in the draft bulletin or who have included notions of market power, dominance or lessening of competition in the respective definitions have proposed definitions of essential facilities that cannot be supported." (As Read)

My question is ‑‑

1listnum "WP List 3" \l 12341            MR. GRIEVE:  Right, right.

1listnum "WP List 3" \l 12342            MR. JANIGAN:  ‑‑ if the Commission here is telling us to take into account a market power ‑‑

1listnum "WP List 3" \l 12343            MR. GRIEVE:  You mean the Governor in Council?

1listnum "WP List 3" \l 12344            MR. JANIGAN:  The Governor in Council.  Sorry, what did I say, the Commission?

1listnum "WP List 3" \l 12345            MR. GRIEVE:  Yeah.

‑‑‑ LAUGHTER / RIRES

1listnum "WP List 3" \l 12346            MR. JANIGAN:  The Governor in Council is telling us to take into account market power, and this policy direction is binding on the Commission.  How can you tell the Commission to disregard it in relation to your analysis of essential facilities?

1listnum "WP List 3" \l 12347            MR. GRIEVE:  Thanks for that question.

1listnum "WP List 3" \l 12348            First of all, let us be clear of what the direction says.  It says:

                      "To complete a review of its regulatory framework regarding mandated access to determine the extent to which mandated access to wholesales services that are not essential services should be phased out and to determine the appropriate pricing standard." (As Read)

1listnum "WP List 3" \l 12349            So it is a review about mandated access and to phase out and the pricing, okay?

1listnum "WP List 3" \l 12350            MR. JANIGAN:  M'hmm.

1listnum "WP List 3" \l 12351            MR. GRIEVE:  Normal statutory interpretation would say that ‑‑ then it goes on to say, when you are doing that review that does these three things, take into account the principles of technological and competitive neutrality.  In TELUS' proposal we have done that, because we say it is not the facility itself, it is the functionality of the facility that could be provided by any particular technology.

1listnum "WP List 3" \l 12352            The next one, the potential for incumbents to exercise market power in the wholesale and retail markets for the service in the absence of mandated access to wholesale services.  The way we took into account the market power, the potential for the exercise of market power in wholesale and retail markets, is we looked at how long the transition period needed to be to create the right incentives to actually have competition in the wholesale market.

1listnum "WP List 3" \l 12353            Then, and the last one, and the impediments faced by new and exiting carriers seeking to develop competing network facilities, and just look on the next page, which I actually thought had ‑‑ anyway, those kinds of impediments, my recollection from the record of that, was things like access to rights of way and that kind of stuff and we have actually dealt with that.  The Commission has, you know, quite a sophisticated and well‑tested method of regulating that.

1listnum "WP List 3" \l 12354            So the question that is addressed in the evidence about using market power or market power concepts in the definition of essential facility is a different question and how the Commission takes into account the potential exercise of market power.  And we, ourselves as a SILEC, had a concern about making sure the right incentives were created.

1listnum "WP List 3" \l 12355            At the end of the day, you have to remember that the number one purpose for this review is with a view to increasing incentives for innovation and investment in and construction of competing telecommunications network facilities.

1listnum "WP List 3" \l 12356            As you heard us say last week, if you have a loose definition of an essential facility and you've heard that even the strict market power definition, the way the Bureau uses it, has been used by all sorts of parties in various ways.  If you have a loose definition of essential facility, then people are going to be able to argue that just about everything is essential.

1listnum "WP List 3" \l 12357            So with a view to increasing incentives for innovation and investment, we looked at what is the correct definition of an essential facility based on the jurisprudence and based on Canadian experience.  And how do you take into account this market power concern?  We did it through the vehicle of the transition period.

1listnum "WP List 3" \l 12358            MR. JANIGAN:  Okay, let us get back to this particular phrase.  As I understand it, TELUS' position is that market power is taken into consideration in your evidence by a lengthy transition period.

1listnum "WP List 3" \l 12359            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12360            MR. JANIGAN:  But you also criticize other parties for taking it into account in the context of their essential facilities test.

1listnum "WP List 3" \l 12361            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12362            MR. JANIGAN:  Surely, that is what the Governor in Council is calling for with respect to this particular view, that market power is taken into account?

1listnum "WP List 3" \l 12363            MR. GRIEVE:  Yes, and we took it into account.  And you have to remember that the principal purpose of this proceeding is with a view to increasing incentives for innovation and investment.  And our position is, and has been for 12 years, that ordering mandated access to non‑essential facilities, and especially if prices are too low, we will end up stifling incentives for investment in construction of facilities.

1listnum "WP List 3" \l 12364            MR. JANIGAN:  But if the Commission takes your earlier view, that the words of this policy direction are binding, and the plain and ordinary meaning of this is that market power has to be a part of the analysis, surely that means that all of your expert evidence is directed to overturning the plain wording of this direction.

1listnum "WP List 3" \l 12365            MR. GRIEVE:  Absolutely not.  In fact, the plain wording of this direction does not ask the CRTC to reconsider its definition of essential facilities at all.

1listnum "WP List 3" \l 12366            No, no, the plain wording of this direction says look at how to phase out the ‑‑ sorry, I am going to read the exact words:

                      "...the extent to which mandated access to wholesale services that are not essential services should be phased out." (As Read)

1listnum "WP List 3" \l 12367            It doesn't say go and redefine essential services.

1listnum "WP List 3" \l 12368            MR. JANIGAN:  Let us accept, for the purpose of this discussion, your initial point about the only thing we can do is phase it out.  Okay, let us accept that, okay?

1listnum "WP List 3" \l 12369            MR. GRIEVE:  All right.

1listnum "WP List 3" \l 12370            MR. JANIGAN:  But the process of phasing it out has to be based on a process that takes into account the exercise of market power.  Now you have it into account ‑‑

1listnum "WP List 3" \l 12371            MR. GRIEVE:  Exactly.  No, no.

1listnum "WP List 3" \l 12372            MR. JANIGAN:  ‑‑ by way of your transition period.

1listnum "WP List 3" \l 12373            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12374            MR. JANIGAN:  Other people have taken it into account by way of their definition of essential facilities.  But you can't tell us that what those other parties have done is contrary to the direction that has been given to us by the Governor in Council.

1listnum "WP List 3" \l 12375            MR. GRIEVE:  Well, I mean, that is your view.  We can argue about it all day, Mr. Janigan.  But my view is that an essential facility is an essential facility.  The Commission had a definition going into this.  And this direction, if you want to really be plain language about this, this direction does not instruct the Commission to redefine essential services or essential facilities.  But it does instruct the Commission to take into account the potential for incumbents to exercise market power in the wholesale and retail markets.

1listnum "WP List 3" \l 12376            MR. JANIGAN:  Can we agree that it is likely that the Governor in Council is aware of the difference between market power and monopoly power?

1listnum "WP List 3" \l 12377            MR. GRIEVE:  I wouldn't suppose to know what the discussions were at the Governor in Council around this issue.  I wouldn't know.  But if they wanted a definition that ‑‑ no, you can't speculate, I can't speculate.

1listnum "WP List 3" \l 12378            MR. JANIGAN:  Well, presumably it would have been as easy for them to specify that they exercise monopoly power not market power and met your definition, would it not?

1listnum "WP List 3" \l 12379            MR. GRIEVE:  But you are assuming that this phrase tacked onto the end that says that while you are doing this review, which is the main thing to increase incentive for innovation and investment in the construction of competing facilities, while you are doing that review, which includes a phase out period or a transition period, have regard to these three things; technological and competitive neutrality, the market power issues and, the third, the impediments.

1listnum "WP List 3" \l 12380            So it is my view that we have fully taken that into account.  It may not be your view, but it is certainly my view that we have fully taken it into account and it is a secondary list of considerations, and the first consideration is creating the incentives for innovation and investment.

1listnum "WP List 3" \l 12381            MR. JANIGAN:  Well, Mr. Grieve, though, this was a big deal.  I mean, obviously, the regulatory impact statement shows that they were responding to comments and made an amendment to their own policy directive to include these principles upon which the Commission would have a review.

1listnum "WP List 3" \l 12382            I mean, I think it is a big deal. We asked them to change a lot of this policy direction and we didn't get a thing changed.  So obviously, when they looked at this they thought that this was a significant change.

1listnum "WP List 3" \l 12383            MR. GRIEVE:  Well, I think it is a significant change, in that it tells the Commission what specifically, what to take into account in its review.  And its review is about determining the extent to which mandated access for wholesales services that are not essential services should be phased out.

1listnum "WP List 3" \l 12384            MR. JANIGAN:  Let me ‑‑

1listnum "WP List 3" \l 12385            MR. GRIEVE:  Like, I don't know..

1listnum "WP List 3" \l 12386            MR. JANIGAN:  Let me push onto the third element of this change, and it uses the term what the Commission has to take into consideration, the impediments faced by new and existing carriers seeking to develop competing network facilities.

1listnum "WP List 3" \l 12387            How does your formulation that if any competitor can duplicate the services not essential, how does that square with the rather expansive phase here, "the impediments faced by new and existing carriers seeking to develop competing network facilities?"

1listnum "WP List 3" \l 12388            MR. GRIEVE:  Well, my view of that third one is that it was really focused on things like access to rights‑of‑way and buildings and support structures like conduit and poles and those things.  But, you know, other impediments, you mean ‑‑ like, I don't know what other kinds of impediments they might have meant there.

1listnum "WP List 3" \l 12389            MR. JANIGAN:  On a regime that might produce more effective competitors.

1listnum "WP List 3" \l 12390            MR. GRIEVE:  Well, you know, we have said, as I said, since 1993 ‑‑ you have to remember, Mr. Janigan, that there is one consistent theme that TELUS has been on from the beginning and you have to remember that it was actually TELUS in 1993, not one of the competitors, but TELUS in the reg framework proceeding that proposed opening all the other markets to competition.

1listnum "WP List 3" \l 12391            Long distance had been opened.  TELUS got on the stand and said open the local market for competition.

1listnum "WP List 3" \l 12392            The reason was at the time that we knew that competition was coming and it was time to open the market, for technological change was making it possible.  And we knew that there would be opportunities for us to expand and opportunities for us to become a better company in a competitive market.

1listnum "WP List 3" \l 12393            We also knew there was no turning back to monopoly even if we wanted to go there.

1listnum "WP List 3" \l 12394            I know you are trying to say well, everyone in this proceeding is coming into this proceeding with their best interests at heart.  Certainly it is in our best interest to have a competitive market.

1listnum "WP List 3" \l 12395            Some people have said that we are not acting in our own best interest, but that is a short‑term look.  We look at these things in the longer term: how to adapt our company, how to become stronger and better in a competitive market.

1listnum "WP List 3" \l 12396            MR. JANIGAN:  In a competitive market wouldn't it be more likely that TELUS would be urging a strategy to minimize competitor strength or to maximize prices for desirable facilities rental?

1listnum "WP List 3" \l 12397            MR. GRIEVE:  I'm sorry, say that again.

1listnum "WP List 3" \l 12398            MR. JANIGAN:  Wouldn't it be more likely that TELUS would urge a strategy to minimize competitor strength or maximize prices for desirable facilities rental?

1listnum "WP List 3" \l 12399            MR. GRIEVE:  You know, it's not in TELUS' best interest to ask for a policy that doesn't get a competitive market and the competitive market that constrains the market power of everyone, or the potential market power of everyone in the market.

1listnum "WP List 3" \l 12400            You know, as an ILEC you might think we have one strategy, as a CLEC another.  But we have had one consistent strategy from the beginning and that is creating a healthy competitive market at both the retail and the wholesale level.

1listnum "WP List 3" \l 12401            MR. JANIGAN:  There is some agreement that cable has provided the most effective, or maybe the only really effective competition to local service, but it wasn't enabled by mandated access and it doesn't seem to have been deterred by mandated access.

1listnum "WP List 3" \l 12402            Why does it matter if smaller entrants can access facilities if the competition is not strong enough to affect ILEC pricing?

1listnum "WP List 3" \l 12403            MR. GRIEVE:  Strong enough to affect ILEC pricing of what?

1listnum "WP List 3" \l 12404            MR. JANIGAN:  Of local service, for example.

1listnum "WP List 3" \l 12405            MR. GRIEVE:  Of local residential service?

1listnum "WP List 3" \l 12406            MR. JANIGAN:  Yes.

1listnum "WP List 3" \l 12407            MR. GRIEVE:  We just don't want to be in a position of having access to our facilities mandated in a way that is one‑off month‑to‑month low prices.  You can get on the service one month, off the service the next month.

1listnum "WP List 3" \l 12408            It is very difficult for us to administer.  It's costly to administer that kind of a process.  And it's inefficient for us.

1listnum "WP List 3" \l 12409            So we are looking for a way to get to a competitive market where we can negotiate in the market for people getting access to our facilities.  We believe that it will be better if people build their own facilities.

1listnum "WP List 3" \l 12410            MR. JANIGAN:  The Commission in your example presumably has to be satisfied that there will be a competitive market for access to the facilities without mandated access, I would assume.

1listnum "WP List 3" \l 12411            MR. GRIEVE:  A competitive market?  I'm not sure what you mean.

1listnum "WP List 3" \l 12412            MR. JANIGAN:  You indicated that you wanted to get to a place where you can negotiate competitively for these facilities rather than have them provided on the basis of a mandate.

1listnum "WP List 3" \l 12413            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12414            MR. JANIGAN:  Presumably the Commission has to be satisfied that such a competitive market exists before they depart from the mandate.

1listnum "WP List 3" \l 12415            MR. GRIEVE:  No.  I think that the Commission needs to trust the market.  The direction does say rely on market forces, and the Commission needs to trust the market.

1listnum "WP List 3" \l 12416            We have provided for a five‑year transition period.  We do see alternate facilities in the case of cable, but we also see other alternate facilities out there.  We believe wireless is a substitute for local wireline fixed line telephone service, and we believe that there are other wireless ‑‑ well, we know that there are other wireless services coming available as we get more and more of that competition from other technologies, including Wi‑Max, which could be used in the residential market, and other wireless providers that we have in Alberta, Alberta MBC, for example, now; that there will be pressure on us and that we will respond in the marketplace.

1listnum "WP List 3" \l 12417            MR. JANIGAN:  So your five‑year horizon you believe will take care of any concerns that a competitive market for facilities won't exist?

1listnum "WP List 3" \l 12418            MR. GRIEVE:  Yes.  We believe that it will create the right incentives over that period to allow competition to arise or allow the right incentives to be created for the ILECs to negotiate contracts with other market participants.

1listnum "WP List 3" \l 12419            MR. JANIGAN:  Let me deal with a real world problem here, which was more or less presented by Yak in their evidence.

1listnum "WP List 3" \l 12420            What do you tell Yak customers who have made use of this service that is enabled by mandated access that may be shut out under your proposed access regime?

1listnum "WP List 3" \l 12421            Surely an admonition that this kind of competition is not good for you is probably not going to be effective.

1listnum "WP List 3" \l 12422            MR. GRIEVE:  Well, the particular Yak service in question, the 10‑10 service and equal access and those things, in our evidence we have said that those are interconnection arrangements and should be grandfathered.

1listnum "WP List 3" \l 12423            We actually believe that the market is going to make those kinds of services moot in time, but it may not.

1listnum "WP List 3" \l 12424            Dial‑around service, once everyone goes to flat rate calling, what is there to dial around?

1listnum "WP List 3" \l 12425            So we just said those are interconnection services.  If that continues, that's great for Yak.  They provide a service that is used by specific kinds of customers.  It's obviously needed.  But over time those customers may be getting flat rate local and toll calling, and then there's nothing to dial around, as I said.

1listnum "WP List 3" \l 12426            MR. JANIGAN:  And new entrants presumably then will be taken care of within your five‑year horizon by having new facilities being brought aboard.

1listnum "WP List 3" \l 12427            MR. GRIEVE:  Yes, and any new entrants that want to enter during those five years would still have access to the tariffs during that five‑year period, or they could negotiate, or both.

1listnum "WP List 3" \l 12428            MR. JANIGAN:  Now, if you are wrong about this dynamics of competition, I take it we are likely stuck with what we have now.  Right?

1listnum "WP List 3" \l 12429            MR. GRIEVE:  Well, five years is an awfully long time.  I don't know why you would say "stuck with what we have now".  Consumers are in the best position they have been in, in terms of competitive supply and the potential for competitive supply, ever in the history of telecom in Canada.  So I don't know why you would use the word "stuck".

1listnum "WP List 3" \l 12430            MR. JANIGAN:  I don't want to debate that with you at the moment.

1listnum "WP List 3" \l 12431            All I'm concerned with is that effectively we would have a duopoly that would effectively be entrenched in the local services market.

1listnum "WP List 3" \l 12432            MR. GRIEVE:  I absolutely don't agree that there is a duopoly today in the local services market or that there will be going forward.  I know that a lot of people don't believe that wireless service is a substitute, but increasingly more and more all the time, especially in Vancouver and Calgary, we see people who have no home phone.

1listnum "WP List 3" \l 12433            We know that 70 percent of people who have wireless phones ‑‑ I think this was the data ‑‑ use them to make calls from home.  They are substitutes.

1listnum "WP List 3" \l 12434            We also have other services coming, as we have said before, and in place now, things like Wi‑Max.  So there are other kinds of services out there.  Just because it's wireline doesn't mean it's not ‑‑ just because things aren't wireline doesn't mean they are not in the same market.

1listnum "WP List 3" \l 12435            MR. JANIGAN:  Mr. Grieve, I'm getting flashbacks to last year, so I think I will conclude my questioning of the panel.

1listnum "WP List 3" \l 12436            Thank you very much, panel.  Thank you very much, Mr. Chair.

1listnum "WP List 3" \l 12437            THE CHAIRPERSON:  Mr. Grieve, two points of clarification.

1listnum "WP List 3" \l 12438            On Yak, did I understand you correctly that you thought that the 10‑10 service would fall under interconnection and would remain mandated?

1listnum "WP List 3" \l 12439            MR. GRIEVE:  Yes, I ‑‑

1listnum "WP List 3" \l 12440            THE CHAIRPERSON:  I thought I heard before, last week, that it was your company's suggestion that they would have to be renegotiated; that a negotiated arrangement should replace the mandated service.

1listnum "WP List 3" \l 12441            MR. GRIEVE:  That was just the billing and collection portion of it.

1listnum "WP List 3" \l 12442            THE CHAIRPERSON:  I see.  The billing and collection should be negotiated but the interconnection would remain mandated?

1listnum "WP List 3" \l 12443            MR. GRIEVE:  Correct.

1listnum "WP List 3" \l 12444            THE CHAIRPERSON:  Okay.  Secondly, Mr. Janigan, just talked to you shortly about Order‑in‑Council and, if I understand it, it is your contention that under the wording as it reads right now we can shrink the amount of services mandated but we can't expand it, we couldn't designate something new as being mandated, being essential, et cetera?

1listnum "WP List 3" \l 12445            MR. GRIEVE:  That's what I understand, yes.

1listnum "WP List 3" \l 12446            THE CHAIRPERSON:  I understand that, but are you referring to this proceeding, or are you referring generally, because the Order‑in‑Council says, "Continue this proceeding...".

1listnum "WP List 3" \l 12447            So, I assumed you were referring to this proceeding, but please correct me if I am wrong.

1listnum "WP List 3" \l 12448            MR. GRIEVE:  Yes, I was referring to this proceeding.

1listnum "WP List 3" \l 12449            THE CHAIRPERSON:  Okay, thank you.

1listnum "WP List 3" \l 12450            Commissioner Cram.

1listnum "WP List 3" \l 12451            COMMISSIONER CRAM:  And I heard you talking about the direction and saying that the added parts were really secondary concerns, so I want to go to what you call your primary concern, Mr. Grieve, and that is:

                      "...with a view to increasing incentives for innovation and investment."  (As read)

1listnum "WP List 3" \l 12452            I don't know any way that we can empirically decide what will increase innovation.  I mean, there is no data we can look at saying this increased innovation, this didn't.

1listnum "WP List 3" \l 12453            I mean, we can hear all the doctors of economics, and we are going to, and as we have ‑‑ I have for the last nine years ‑‑ but I am asking for numbers.

1listnum "WP List 3" \l 12454            MR. GRIEVE:  Me too.

1listnum "WP List 3" \l 12455            COMMISSIONER CRAM:  You know, show me what I can do to increase or decrease innovation.

1listnum "WP List 3" \l 12456            MR. GRIEVE:  You know, I'd like you to ask that question of Dr. Wiseman.

1listnum "WP List 3" \l 12457            COMMISSIONER CRAM:  Oh, yeah, sure, get me back to the doctor of economics.

1listnum "WP List 3" \l 12458            Thank you.

1listnum "WP List 3" \l 12459            MR. GRIEVE:  That's why we have him.

1listnum "WP List 3" \l 12460            COMMISSIONER CRAM:  Now, my question one is though, when we are talking about increasing incentives for investment, so, I look at one regulatory regime in the States and you would agree with me that it is far more restricted on access, mandated essential services?

1listnum "WP List 3" \l 12461            MR. GRIEVE:  Or liberal, depending on which side of the coin you're coming from.  There was a lot more mandated access ‑‑

1listnum "WP List 3" \l 12462            COMMISSIONER CRAM:  But then with the ‑‑

1listnum "WP List 3" \l 12463            MR. GRIEVE:  ‑‑ but then it has been pulled back, yeah.

1listnum "WP List 3" \l 12464            COMMISSIONER CRAM:  Yeah.  And if I said to you the only data we have available, which is ILEC spending, shows a reduction in ILEC investment since that has happened, if you were our consultant, what would you tell us then?

1listnum "WP List 3" \l 12465            MR. GRIEVE:  You know, I'm not the one to ask this question, I think Bob Crandall would be the one to ask this question.

1listnum "WP List 3" \l 12466            COMMISSIONER CRAM:  But if we are looking at empirical data and we are looking at ILEC spending, which is the only data available to us, that would clearly give us a result of one particular type of regulation.

1listnum "WP List 3" \l 12467            And if I looked at ILEC spending in the U.K., would that also give me an indication of your primary purpose of this whole thing, increasing incentives for investment?

1listnum "WP List 3" \l 12468            MR. GRIEVE:  You know, you'd have to understand the data itself and I don't know that just looking at that data alone helps you without understanding what else is in there, and that's why, you know, I've suggested that you talk to Drs. Crandall and Wiseman.

1listnum "WP List 3" \l 12469            But, you know, I think you also have to ‑‑ you'd have to look at what the investment was overall in the industry, the investment by CLECs and things like that.

1listnum "WP List 3" \l 12470            That's really what you're looking for, is incentives for innovation and investment in construction of competing telecommunications networks.

1listnum "WP List 3" \l 12471            COMMISSIONER CRAM:  So, if I looked at our own system and I look at a doubling of self provisioning in a year in our system now, wouldn't that tell me something about the success of CLEC investment?

1listnum "WP List 3" \l 12472            MR. GRIEVE:  Well, you know, we've had some time to try to get to the bottom of that number and, as you know, there was a minor change because of our reporting.

1listnum "WP List 3" \l 12473            And we went back to our wholesale group in Calgary and asked them to tell us whether these numbers in those reports made any sense given their experience in Alberta and British Columbia and they said were not reflective of our experience in Alberta and British Columbia.

1listnum "WP List 3" \l 12474            So, if that's the case, then using the number, that 27 to 41 per cent, and it doesn't matter if the numbers change because it still represents 172,000 self provisioned lines ‑‑ new self provisioned lines in 2006, and we look at that and we go, "tsssk", and we didn't see enough people out there digging trenches in Ontario and Quebec, which is pretty well where it would have had to be.

1listnum "WP List 3" \l 12475            So, we don't know.  We think there might be a data issue there, but even if there is no data issue there it certainly proves one thing and that is that there are ‑‑ that these accesses are not essential facilities.

1listnum "WP List 3" \l 12476            And so, you know, it's kind of a two‑edged sword, but we don't see in Alberta and B.C. that transformation from leased to self supplied that that particular piece of information would suggest.

1listnum "WP List 3" \l 12477            And, you know, we don't have access to Bell's information in that we don't know what's gone on in Bell's territory, but it certainly hasn't happened in ‑‑ there's some, you know, some migration from re‑sold like Centrex where people migrate and that's Bell on its Government accounts we think, but then other kinds of competitors, we just don't see those numbers.

1listnum "WP List 3" \l 12478            COMMISSIONER CRAM:  They may be digging in Indian Head, I don't know, but...

1listnum "WP List 3" \l 12479            So, what you are really saying though is at the end of the day there is no empirical way by looking at data that we can philosophically drive essentiality to show us ‑‑

1listnum "WP List 3" \l 12480            MR. GRIEVE:  You mean mandating it?

1listnum "WP List 3" \l 12481            COMMISSIONER CRAM:  ‑‑ absolutely that we can increase innovation or we can increase investment?

1listnum "WP List 3" \l 12482            MR. GRIEVE:  I wouldn't ‑‑

1listnum "WP List 3" \l 12483            COMMISSIONER CRAM:  The primary...

1listnum "WP List 3" \l 12484            MR. GRIEVE:  I wouldn't know that, you'd have to ask the good doctors.

1listnum "WP List 3" \l 12485            COMMISSIONER CRAM:  I don't think we'd get a yes or no from them either.  Thank you.

1listnum "WP List 3" \l 12486            THE CHAIRPERSON:  Okay.  If there are no other questions, Madam Secretary, who's next?

1listnum "WP List 3" \l 12487            THE SECRETARY:  The next company to cross Cybersurf Corp., counsel Tacit.

1listnum "WP List 3" \l 12488            MR. TACIT:  Thank you.  I have a package of documents which I'd ask to be distributed, please.

1listnum "WP List 3" \l 12489            MR. GRIEVE:  Are these the same ones you gave us last night, or before?

1listnum "WP List 3" \l 12490            MR. TACIT:  And the ones you got two days ago ‑‑

1listnum "WP List 3" \l 12491            MR. GRIEVE:  Yeah.

1listnum "WP List 3" \l 12492            MR. TACIT:  ‑‑ until the end.  There are also some portions from the record in accordance with the Commission's instructions.

1listnum "WP List 3" \l 12493            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 12494            Thank you.

1listnum "WP List 3" \l 12495            THE CHAIRPERSON:  Okay, Mr. Tacit, proceed.

1listnum "WP List 3" \l 12496            MR. TACIT:  Thank you, Mr. Chairman.

EXAMINATION BY:  MR. TACIT

1listnum "WP List 3" \l 12497            MR. TACIT:  Mr. Grieve, would you agree with me that today the main sources of high‑speed Internet services are the ILECs and the cable companies?

1listnum "WP List 3" \l 12498            MR. GRIEVE:  To residential customers ‑‑ well, just generally, yes.  I think so, yes.

1listnum "WP List 3" \l 12499            MR. TACIT:  Thank you.  And would you also agree with me that more and more residential consumers are choosing broad band Internet services over dial‑up?

1listnum "WP List 3" \l 12500            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12501            MR. TASKER:  That's correct.

1listnum "WP List 3" \l 12502            MR. TACIT:  And is one of the reasons that broad band Internet services are finding favour with consumers that it's possible to do tasks a lot more quickly than it is with dial‑up, for example, downloading software, watching video and so on?

1listnum "WP List 3" \l 12503            MR. TASKER:  Yes, of course.

1listnum "WP List 3" \l 12504            MR. TACIT:  So, another reason is that broad band Internet connections can also support other services such as VoIP, long distance services, broad band video services such as TELUS IPTV; correct?

1listnum "WP List 3" \l 12505            MR. TASKER:  That's correct.

1listnum "WP List 3" \l 12506            MR. TACIT:  So, would you agree with me that the bundle is becoming more and more important for consumers today than it used to be, the bundle of services and that that's being enabled by broad band technology?

1listnum "WP List 3" \l 12507            MR. TASKER:  I think you're seeing many, many players in the market address the market in very interesting ways in terms of bundling various applications.  So, the scope of competition is increasing incredibly in terms of who the players are as a result.

1listnum "WP List 3" \l 12508            MR. TACIT:  Okay.  But my specific question was:  Are bundles increasing significantly as a means ‑‑

1listnum "WP List 3" \l 12509            MR. TASKER:  I think my answer was consistent with that, that yes, if what you call bundles, I guess we would term them to be more innovative value add applications of different varieties and they would certainly include things like voice access and Internet access and video and so on and so forth.

1listnum "WP List 3" \l 12510            MR. TACIT:  Okay.  If I could ask you in that package that I gave you to turn to the page that has the number 6 at the bottom of the page, and this is an interrogatory response from the Companies to a Cybersurf interrogatory that addressed the significance of bundles.

1listnum "WP List 3" \l 12511            And I'd like to focus your attention specifically on the last sentence of the second paragraph which says:

                      "Investment firm UBS estimated that 90 per cent of households in Bell Canada's traditional territory of Ontario and Quebec will subscribe to bundles by the end of 2008."  (As read)

1listnum "WP List 3" \l 12512            MR. GRIEVE:  Yes, I see that.  Just a little housekeeping for the benefit of those listening.

1listnum "WP List 3" \l 12513            We've been calling out the interrogatory name, so it's the Companies/Cybersurf 12 April, 07‑6.

1listnum "WP List 3" \l 12514            MR. TACIT:  Yes, thank you very much.

1listnum "WP List 3" \l 12515            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 12516            MR. TACIT:  I appreciate that.

1listnum "WP List 3" \l 12517            MR. GRIEVE:  It was also for the benefit of the people behind me.

1listnum "WP List 3" \l 12518            MR. TACIT:  No, absolutely, absolutely.  Thank you.

1listnum "WP List 3" \l 12519            Would you expect that TELUS' experience is going to be similar to this in 2008?

1listnum "WP List 3" \l 12520            MR. TASKER:  I think in a general nature, yes.

1listnum "WP List 3" \l 12521            MR. TACIT:  Now, we've already discussed that the Telus test isn't concerned directly with market power but rather the prevention of competition; is that right?

1listnum "WP List 3" \l 12522            MR. GRIEVE:  Market power is not part of the test for the essential facilities test that TELUS has proposed in this proceeding and that the Commission has adopted in the past.

1listnum "WP List 3" \l 12523            MR. TACIT:  Okay.  Now, can you also confirm with me that if a competitor provides DSL service through its own combination of unbundled local ILEC loops, for example, its own DSLAMs co‑located on ILEC premises, that the ability of the competitor to distinguish its DSL service from the ILEC's DSL service is greater with respect to such matters as speed, quality of service and so on?  Is that factually true?

1listnum "WP List 3" \l 12524            MR. TASKER:  Are you suggesting that they would ‑‑ I am sorry, say that question again, just quickly.

1listnum "WP List 3" \l 12525            MR. TACIT:  You have a competitor that leases ILEC unbundled loops ‑‑

1listnum "WP List 3" \l 12526            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12527            MR. TACIT:  ‑‑ co‑locates its own equipment ‑‑

1listnum "WP List 3" \l 12528            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12529            MR. TACIT:  ‑‑ and provides its own DSL service over that loop.  Is it able to distinguish its service to a greater degree from the ILEC's own DSL service by using that form of competition than simply buying a GAS‑type service or ‑‑

1listnum "WP List 3" \l 12530            MR. TASKER:  Oh! I see.  There are certainly opportunities for that, albeit minimal.  I believe when you compare that to, for example, a cable access and their ability to differentiate, it is an order of magnitude different.

1listnum "WP List 3" \l 12531            MR. TACIT:  Well, I didn't ask you to compare it to cable.  I am just saying could a competitor have the ability to set its own quality of service for its services, set its own DSL speeds and so on?

1listnum "WP List 3" \l 12532            MR. TASKER:  They are limited by ‑‑

1listnum "WP List 3" \l 12533            MR. TACIT:  Limited in what way?

1listnum "WP List 3" \l 12534            MR. TASKER:  For example, in terms of whatever SLA service level agreement we offer on our unbundled loop, in terms of our ability to restore that in a certain period of time.  That is consistent between retail and wholesale but it is a single quality of service that we offer on that.

1listnum "WP List 3" \l 12535            So if, for example, the line is cut, then we offer, for example, maybe a 24‑hour mean time to repair and whether you are a retail customer or service to a wholesale customer, it is the same guaranteed repair time.

1listnum "WP List 3" \l 12536            MR. TACIT:  Well, fair enough but we are not talking about the line being cut.

1listnum "WP List 3" \l 12537            I am talking about when the line is operating, would the competitor be in a better position to distinguish his services?

1listnum "WP List 3" \l 12538            MR. TASKER:  A better position than...?

1listnum "WP List 3" \l 12539            MR. TACIT:  Than if it were buying a GAS‑type service.  Would it be in a position ‑‑

1listnum "WP List 3" \l 12540            MR. TASKER:  It would have an opportunity.

1listnum "WP List 3" \l 12541            MR. TACIT:  ‑‑ to determine its own broadband speeds, its own quality of service?

1listnum "WP List 3" \l 12542            MR. TASKER:  It would have the ability to differentiate.  I would suggest it may also be behind what we are doing on our GAS‑type service.

1listnum "WP List 3" \l 12543            MR. TACIT:  Behind in what way?

1listnum "WP List 3" \l 12544            MR. TASKER:  In terms of whatever facilities we are offering on our ‑‑ sorry, just hang on a second.

‑‑‑ Pause

1listnum "WP List 3" \l 12545            MR. TASKER:  Just a clarification here.  The limitation is based on the DSLAM equipment that you are using.

1listnum "WP List 3" \l 12546            MR. TACIT:  Right.

1listnum "WP List 3" \l 12547            MR. TASKER:  And so, for example, if our GAS service is offering ‑‑ is using one type of DSLAM that may be superior, for example, then what ‑‑

1listnum "WP List 3" \l 12548            MR. TACIT:  But it could be inferior too compared to what the competitor chooses?

1listnum "WP List 3" \l 12549            MR. TASKER:  It could be.

1listnum "WP List 3" \l 12550            MR. TACIT:  Okay.  And the competitor would be also in a position in that scenario to provide its own bundle of services, correct, including VoIP and IPTV?

1listnum "WP List 3" \l 12551            MR. TASKER:  Yes, of course.

1listnum "WP List 3" \l 12552            MR. TACIT:  Okay.  Would you agree with me that the ILECs and cable companies appear to be in a constant race to increase broadband speeds on their networks in order to provide new services in bundles?

1listnum "WP List 3" \l 12553            MR. TASKER:  Yes, no question, we are in quite a competitive race with the cable companies.

1listnum "WP List 3" \l 12554            MR. TACIT:  Okay, thank you.

1listnum "WP List 3" \l 12555            Now, I would like to switch topics for a minute and look at how the TELUS test for essential facilities could be operationalized and I am looking specifically now at paragraphs 72 and 73 of the TELUS supplementary evidence, the main supplementary evidence of July 5th.  This is at pages 30 and 31.  If you could turn there with me, please.

‑‑‑ Pause

1listnum "WP List 3" \l 12556            MR. TASKER:  Okay, we have them here.

1listnum "WP List 3" \l 12557            MR. TACIT:  Now, what TELUS is doing here, as I understand it, is providing an example of how it would apply its test to certain residential exchange loops in rural areas and then concludes that they are not essential.

1listnum "WP List 3" \l 12558            I would like to just read paragraphs 72 and 73 quickly here.

1listnum "WP List 3" \l 12559            Paragraph 72 says:

^^"Furthermore, independent internet service offers service in bands E to G, making available to customers in bands E to G access independent voice services which also duplicate TELUS' residential exchange loop functionality." (As read)

1listnum "WP List 3" \l 12560            Now, just stopping there for a minute, you would agree with me that in order to have an access independent voice service it is necessary first to have a broadband platform; correct?

1listnum "WP List 3" \l 12561            MR. GRIEVE:  That is right.

1listnum "WP List 3" \l 12562            MR. TACIT:  Okay.  And then paragraph 73 says:

^^"The fact that local loop facilities are supplied by cable carriers in bands E and F and that the same functionality can be obtained from wireless carriers in bands E to G or access independent VoIP service providers in bands E to G demonstrates that residential exchange local loops or their functionality have been economically and technically duplicated.  Therefore, TELUS residential exchange local loops in rural areas are not essential and the analysis is concluded." (As read)

1listnum "WP List 3" \l 12563            Do you ‑‑

1listnum "WP List 3" \l 12564            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12565            MR. TACIT:  That is TELUS' evidence; correct?

1listnum "WP List 3" \l 12566            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12567            MR. TACIT:  Would you agree with me that nowhere in this analysis is TELUS looking at the residential service bundle as whole, you are just looking at local service; correct?

1listnum "WP List 3" \l 12568            MR. GRIEVE:  Yes, that is right.  If the facility can be duplicated or the functionality of the facility can be duplicated for one or two services, it can certainly have ‑‑ you know, there is potential for it to be used for other services as well.  But yes, we are just looking at basically voice service here.

1listnum "WP List 3" \l 12569            MR. TACIT:  And we can agree that right now the wireless platform isn't being used in any kind of broad way as a substitute for the residential service bundle, is it?

1listnum "WP List 3" \l 12570            MR. GRIEVE:  Residential service bundle?  Well, there is internet access with wireless.

1listnum "WP List 3" \l 12571            MR. TACIT:  Yes, but if I am at home, if I want to download and browse, I am not likely to pull out my ‑‑ if I have my computer and I have my wireless, I am not likely to sit there ‑‑

1listnum "WP List 3" \l 12572            MR. TASKER:  Well, for example, I have a close friend of mine whose parents live on a rural farm in Alberta and if they want to surf the internet, right now the only way they have to do that is through a wireless ISP.

1listnum "WP List 3" \l 12573            MR. TACIT:  But for most consumers, that is not the experience?

1listnum "WP List 3" \l 12574            MR. TASKER:  No, but that is a huge geography and if they can do it there, they can certainly have that option anywhere in the province or in the country, for that matter.

1listnum "WP List 3" \l 12575            MR. TACIT:  So according to the duplicability test of TELUS, you are saying because certain people in certain areas may have to do it that way and are able to do it that way, then it is a non‑essential facility ‑‑

1listnum "WP List 3" \l 12576            MR. TASKER:  Well, I think it has been shown that as a result of the ILECs and the cablecos not having the ability to get there soon enough, the innovation and the incentive for other players to step up to the plate was proven to take effect.

1listnum "WP List 3" \l 12577            MR. TACIT:  Well, we have seen the earlier testimony confirming the figures in the CRTC Monitoring Report that the incumbents, the ILECs and cable BDUs account for 95.6 percent of all high‑speed internet services as of ‑‑

1listnum "WP List 3" \l 12578            MR. TASKER:  What is interesting is if you look at the percentage of cable companies' voice access three years ago, what percentage would that be and we are looking at a five‑year transition plan.  So the fact that wireless is a very small percentage at this point, I don't think it is fair to say that it is not material in terms of the effectiveness of that type of competition.

1listnum "WP List 3" \l 12579            MR. TACIT:  So what you are really asking the Commission then to do is to bet on the development of wireless in making its decision?

1listnum "WP List 3" \l 12580            MR. TASKER:  Not only wireless, that is for sure, but I am using that as a great example.

1listnum "WP List 3" \l 12581            MR. GRIEVE:  Well, the other important point ‑‑

1listnum "WP List 3" \l 12582            THE CHAIRPERSON:  Mr. Tacit, where are you going with this?  I am sorry, I don't follow your line of questioning at all.

1listnum "WP List 3" \l 12583            MR. TACIT:  Okay.

1listnum "WP List 3" \l 12584            THE CHAIRPERSON:  Are you trying to establish that bundles is a separate market?

1listnum "WP List 3" \l 12585            MR. TACIT:  Yes.

1listnum "WP List 3" \l 12586            THE CHAIRPERSON:  Okay.

1listnum "WP List 3" \l 12587            MR. TACIT:  And you give the same example for residential local loops; is that correct?

1listnum "WP List 3" \l 12588            MR. GRIEVE:  I am sorry ‑‑

1listnum "WP List 3" \l 12589            MR. TACIT:  I am sorry.  At paragraphs 61 and 62 of that same evidence, you have a similar ‑‑ you reach a similar conclusion in the case of urban residential local loops, is that right, based on pretty much similar considerations?

1listnum "WP List 3" \l 12590            MR. GRIEVE:  I am sorry, Mr. Tacit, I am just going to look at the evidence.

1listnum "WP List 3" \l 12591            MR. TACIT:  Absolutely.

1listnum "WP List 3" \l 12592            MR. GRIEVE:  Sixty‑one and 62 of the...?

1listnum "WP List 3" \l 12593            MR. TACIT:  Supplementary evidence ‑‑

1listnum "WP List 3" \l 12594            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 12595            MR. TACIT:  ‑‑ pages 25 and 26.

1listnum "WP List 3" \l 12596            MR. GRIEVE:  And your ‑‑

1listnum "WP List 3" \l 12597            MR. TACIT:  Oh! Sorry, I am in the wrong place here.  Anyway, just forget that.

1listnum "WP List 3" \l 12598            But what I am trying to get at here is that the analysis that you did here did not really take into account bundles, is that right, it was based solely on local services?

1listnum "WP List 3" \l 12599            In fact, you haven't really considered bundles that much in your evidence and yet that is the main form of competition going forward.  I find that rather curious.

1listnum "WP List 3" \l 12600            MR. GRIEVE:  Well, it is the main form of competition going forward but not everyone can offer the same bundles.  TELUS is not in a position today to offer IPTV.  We are trying to get there as fast as we can but it is very expensive for us.  Other carriers like Shaw, they don't yet have a wireless service.

1listnum "WP List 3" \l 12601            So just the fact that people don't happen to have those doesn't mean that bundles aren't going to be important in the future and people are going to be trying to get what they need to provide those bundles going forward if indeed it turns out that that is what consumers want but that appears to be where they are going.

1listnum "WP List 3" \l 12602            MR. TASKER:  I would consider also that what Google offers today and what they are offering now would be a type of bundle as well and they don't require any access to facilities directly but they are able to compete very effectively.

1listnum "WP List 3" \l 12603            MR. TACIT:  Okay.  But I am talking about, let's say, a bundle of high speed, local and long distance, perhaps video.  You would agree with me that right now it looks like the choices for offering that platform are pretty much restricted to the ILECs and the cable companies?

1listnum "WP List 3" \l 12604            MR. GRIEVE:  ­Well, in ‑‑

1listnum "WP List 3" \l 12605            MR. TACIT:  ­By and large.  I mean, we saw the figure that, you know, less than 1 percent of technology accesses other technologies.

1listnum "WP List 3" \l 12606            MR. GRIEVE:  I'm not trying to be difficult, Mr. Tacit, it's just that TELUS is just in its infancy in offering a television service in some places in Alberta, so to suggest that we can offer that full bundle somehow in a broad way across our serving territory is just not right.

1listnum "WP List 3" \l 12607            MR. TACIT:  ­So you are disadvantaged relative to the cable company in that market?

1listnum "WP List 3" \l 12608            MR. GRIEVE:  In that particular bundling, yes, and any satellite provider.

1listnum "WP List 3" \l 12609            MR. TACIT:  So you haven't been able to duplicate facilities to do that yet, is that what you are saying?

1listnum "WP List 3" \l 12610            MR. GRIEVE:  Not yet ‑‑

1listnum "WP List 3" \l 12611            MR. TACIT:  ­Okay.

1listnum "WP List 3" \l 12612            MR. GRIEVE:  ‑‑ but we are working on it.

1listnum "WP List 3" \l 12613            MR. TACIT:  ­Right.

1listnum "WP List 3" \l 12614            Let's look at the three elements of the TELUS essential facilities test for a moment and ‑‑ well, sorry, we know what they are, but I'm curious, specifically, that branches two and three of the test talk ­only about CLECs.  For example, it says:

                      "CLECs require the facility function or services and input to provide services."  (As read)

And condition three is:

                      "CLECs cannot duplicate it economically or technically."  (As read)

1listnum "WP List 3" \l 12615            I guess my question to you is:  in light of the increasing significance of bundles, what happens if other types of carriers who aren't CLECs require access?  Why are they not included in the test, especially if bundles are becoming so important?

1listnum "WP List 3" \l 12616            MR. GRIEVE:  Mr. Tacit, thanks for asking this, because we wrote CLEC in the test because that's what the original test had been back in 1997, the Commission's test.  But I think it's fair to say that the essential facilities test would apply to all competitors.

1listnum "WP List 3" \l 12617            MR. TACIT:  ­Okay, well, thank you.  That's a very important clarification.

1listnum "WP List 3" \l 12618            But would you also agree with me that, you know, as Mr. Janigan also explored, these three elements aren't the whole test.  You have to look at the public interest, the reason why things aren't duplicated.  And when you look at those factors, the test is not quite as cut and dry as just the first three branches would lead one to believe.  Correct?

1listnum "WP List 3" \l 12619            MR. GRIEVE:  That's right, but we really haven't had to spend a lot of time on the other parts that you mentioned because, you know, we have looked ‑‑ you know, we said, What's a practical way to apply this test?  Well, let's go out and see if stuff has actually been duplicated, if these functionalities have been duplicated.  So that was what our approach was.

1listnum "WP List 3" \l 12620            MR. TACIT:  ­Okay, but we are still left with the problems that Commissioner Cram pointed out, about how do you determine if something is going to be innovated or built going forward?

1listnum "WP List 3" \l 12621            If you add those requirements to your tests rather than just sticking to the tests of the main three branches, you make it a more subjective and difficult test to apply, don't you?

1listnum "WP List 3" \l 12622            MR. GRIEVE:  Well, I think those other pieces ‑‑ and you could talk to Dr. Weisman about it ‑‑ but those other pieces are meant to be sort of a ‑‑ you know, if you did find that you had a monopoly facility that couldn't be duplicated, is it really worth the effort to unbundle it or to provide it to someone else, or are you going to then send a clear signal to someone who just spent a fortune developing something that was brand new, that was really important?

1listnum "WP List 3" \l 12623            And this is where we get into intellectual property law.  I mean, there are all sorts of tests there about it.  But those are the kinds of considerations.  The essential facilities doctrine is not a test that says if you find these three elements, then, automatically you provide access.

1listnum "WP List 3" \l 12624            You know, you heard the Competition Bureau, Mr. Hughes and Dr. Church, when they were up, talking about section 79, the abuse of dominance section of the act, having a whole range of activities that could be considered an abuse of dominance, and then a whole range of remedies to apply to that.  This is just an example of that.

1listnum "WP List 3" \l 12625            So what you would ask yourself is:  in that whole range of activities by a dominant carrier that could be an abuse of dominance, in what circumstances and what particular ‑‑ which one of those would you say that mandated access to an upstream facility is the remedy that you would apply?

1listnum "WP List 3" \l 12626            And you remember Mr. Abugov asked Rogers if they would accept the jurisprudence.  We will accept it.  And the jurisprudence says that, if it's a monopoly‑supplied, non‑duplicable facility in the upstream market in that whole range of things that can be an abuse of dominance, then the remedy that you may apply in the downstream market is forcing shared access.  And that's what our test is about.

1listnum "WP List 3" \l 12627            MR. TACIT:  ­And I understand that and I'm not trying to get you to repeat the elements of test.  My point is a different one, and it is that if you start layering on top of that test, whether one likes it or not, accepts it or not, if you start layering other requirements which are more subjective, you are kind of undermining the basic thrust of the tests, the benefit of the test of being simple and objective, aren't you?

1listnum "WP List 3" \l 12628            MR. GRIEVE:  Well...

1listnum "WP List 3" \l 12629            MR. TACIT:  ­I mean, you have said yourself you can't really apply the test without the benefit of experts in every case, so, I mean, basically ‑‑

1listnum "WP List 3" \l 12630            MR. GRIEVE:  Well, you can apply it if you can ‑‑ it's easy to apply here because you can see just from observing that these facilities are duplicable, but I agree with you it becomes a more subjective portion of the test.  I just don't think we need to go there in our analysis here.

1listnum "WP List 3" \l 12631            MR. TACIT:  ­Okay.  So I will take the rest of that line of questioning with the joint panel of you and your experts.  It may provide a more interesting conversation.

1listnum "WP List 3" \l 12632            MR. GRIEVE:  I think they will be answering the questions.

‑‑‑ Laughter / Rires

1listnum "WP List 3" \l 12633            MR. TACIT:  ­Okay.

1listnum "WP List 3" \l 12634            I would like to turn for a minute now to discuss your approach to pricing both essential services and non‑essential services during the transition period.  This is an area that I don't think has been explored that much yet.

1listnum "WP List 3" \l 12635            Now, as I understand it, TELUS wants the pricing of essential services to recover costs that allow an ILEC a reasonable opportunity to recover all forward‑looking incremental costs incurred to provide the service, which includes a normal return to invested capital, as well as a reasonable share of the fixed common costs and other residual costs, such as the embedded cost differential.  Is that right?

1listnum "WP List 3" \l 12636            MR. GRIEVE:  Yes, it's what I was referring to this morning ‑‑ or earlier this morning with the chair.  That's what we would call a fully compensatory rate, and it's really a regulatory construct of a fully compensatory rate.

1listnum "WP List 3" \l 12637            MR. TACIT:  ­Okay.  And I'm going to explore that a bit with you, but before I do, I just want to get on the record that TELUS believes that the current 15 percent mark up on competitor one services is too low to achieve these objectives.  Is that right?

1listnum "WP List 3" \l 12638            MR. GRIEVE:  Yes, that's right.

1listnum "WP List 3" \l 12639            MR. TACIT:  ­Okay.

1listnum "WP List 3" \l 12640            I would like to take you now to page 59 of your supplementary material, and it's part way into paragraph 137, if you could turn there with me, please?

1listnum "WP List 3" \l 12641            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12642            MR. TACIT:  ­Now, starting at the very bottom of the paragraph, not in the footnote portion but in the paragraph itself, right at the end ‑‑

1listnum "WP List 3" \l 12643            MR. GRIEVE:  Paragraph 137?

1listnum "WP List 3" \l 12644            MR. TACIT:  ­Yes.  ­It says:

                      "If prices were to continue to be compensatory every time the Commission removed some costs from Phase II it would have had to raise the mark up, yet that is not what the Commission has done.  It has simultaneously removed costs from Phase II and lowered the mark up.  In Decision 2007‑45, and again in Telecom Decision CRTC 2002‑‑34, it abandoned the pricing principle of fully compensatory prices by omitting costs it had previously included in the mark up."  (As read)

1listnum "WP List 3" \l 12645            MR. GRIEVE:  Correct.

1listnum "WP List 3" \l 12646            MR. TACIT:  ­Now, first of all, can you confirm for me that in Decision 2007‑45, the Commission wasn't setting rates for individual competitor services, but rather quantifying the total subsidy requirement for the new contribution regime?

1listnum "WP List 3" \l 12647            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12648            MR. TACIT:  ­Okay.  Second, can you confirm that in paragraph 232 of Telecom Decision 2002‑34, which did involve a review of the methodology for setting rates for competitor services ‑‑

1listnum "WP List 3" \l 12649            MR. GRIEVE:  Which paragraph again?

1listnum "WP List 3" \l 12650            MR. TACIT:  ­Paragraph 232 of Telecom Decision 2002‑34, and that's at page 21 of the package I gave you, if you want to look at that.

1listnum "WP List 3" \l 12651            THE SECRETARY:  That would be an exhibit, Mr. Tacit.

1listnum "WP List 3" \l 12652            MR. TACIT:  ­That will be an exhibit.

1listnum "WP List 3" \l 12653            THE SECRETARY:  And it will be Cybersurf Exhibit No. 4.

1listnum "WP List 3" \l 12654            MR. TACIT:  ­Thank you.

                      EXHIBIT CYBERSURF‑4:  Paragraph 232 of Decision 2002‑34

1listnum "WP List 3" \l 12655            MR. GRIEVE:  Two thirty...?

1listnum "WP List 3" \l 12656            MR. TACIT:  ­Paragraph 232.

1listnum "WP List 3" \l 12657            MR. GRIEVE:  ­Thank you.

1listnum "WP List 3" \l 12658            MR. TACIT:  ­Now, you see it says there:

                      "The Commission considers that a mark up of 15 percent on each ILEC's Phase II costs for Category 1 competitor services, subject to mandated cost‑based pricing, will provide sufficient contribution towards the recovery of each ILEC's fixed common expenses and the embedded cost differential."  (As read)

1listnum "WP List 3" \l 12659            Do you see that?

1listnum "WP List 3" \l 12660            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12661            MR. TACIT:  ­Okay.  So the Commission wasn't ignoring these cost categories.  What there is is simply a difference of opinion between TELUS and the Commission as to whether the 15 percent mark up is enough of a contribution.

1listnum "WP List 3" \l 12662            MR. GRIEVE:  Yes, that's right.  In fact, it was when I read this portion of the price cap decision, I said, Well, at least they have backed away from throwing out our embedded costs, but now it's just a question of how much of the embedded cost differential is the Commission allowing us.

1listnum "WP List 3" \l 12663            What's interesting about this particular decision is that by adopting a uniform 15 percent mark up in the analysis the Commission did in this decision, it really started with saying, okay, we are going to start with the 15 percent mark up and see if it covers fixed common costs, it does for all of the ILECs, and, well, whatever's left over, that will be enough for the embedded cost differential.

1listnum "WP List 3" \l 12664            So we don't actually see any analysis in here about how the Commission determines whether the amount of percentage left over was actually sufficient for any company to recover any proportional share.

1listnum "WP List 3" \l 12665            What we had asked for was what the Commission had done in the past, which was compared Phase II to Phase III, which was the old revenue requirement analysis and say, what is the average mark up needed over Phase II costs across all of the services to get to that notional revenue requirement?

1listnum "WP List 3" \l 12666            Now, we don't have Phase III any more, but that was the notion.  The Commission had backed away from that analysis and sort of done this backward ‑‑ you know, sort of looking back analysis, starting with 15 percent saying, will that recover fixed common costs?  Yes, it will.  Whatever's left over, which is a different percentage amount for each company, will be a contribution to the embedded cost differential.

1listnum "WP List 3" \l 12667            So there's nothing in this decision that actually explains how the Commission determined that for each of those individual companies this would be sufficient for them because it's different for each one.

1listnum "WP List 3" \l 12668            MR. TACIT:  Nevertheless, all I am getting at here, the point is the Commission didn't ignore these cost categories, there is simply a difference of opinion between TELUS as to whether the market..  So, in a sense, what you are really trying to do is get a review and variance of this.

1listnum "WP List 3" \l 12669            I am not suggesting there is anything improper, because pricing is part of this proceeding.  But you are really trying to change the Commission's mind about the quantum of the mark‑up, right?

1listnum "WP List 3" \l 12670            MR. GRIEVE:  The Commission asked us, in this proceeding, to talk about pricing principles.  We welcomed the opportunity, as I am sure you can imagine, to go back and remind the Commission of the costs that it has pulled out of Phase 2 since 1999, the kinds of proxies it has put in Phase 2 studies, the way that Phase 2 costs have dropped, not because the costs of the companies have dropped, but because of the things that were pulled out, and to re‑look at the mark‑up and the principle of what the mark‑up should be.

1listnum "WP List 3" \l 12671            And here, the principle that the Commission seems to be talking about is to cover fixed common costs, which is good, we are good with that.  And then they say a sufficient contribution towards the recovery of each ILEC's fixed common expenses which ends up being, by the evidence in that proceeding, a different percentage for each ILEC, but no analysis about whether each ILEC is actually getting a sufficient amount.

1listnum "WP List 3" \l 12672            MR. TACIT:  Yes, I think you have made your point there.

1listnum "WP List 3" \l 12673            THE CHAIRPERSON:  Just so that I understood it, Mr. Grieve.  If I understand you correctly, then that you don't really have a problem with the principle that we applied, you just don't like the methodology and the evidence that we used in the outcome?

1listnum "WP List 3" \l 12674            MR. GRIEVE:  The principle, partial yes.  The principle that you applied was Phase 2 plus fixed common costs.  And if we assume that Phase 2 costs are, you know, company specific, then the mark‑up should cover fixed common costs plus, in our view, a proportionate share of the embedded cost differential.  There is no analysis by the Commission in this decision of a proportionate share.

1listnum "WP List 3" \l 12675            THE CHAIRPERSON:  I got that.

1listnum "WP List 3" \l 12676            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 12677            THE CHAIRPERSON:  Thanks.

1listnum "WP List 3" \l 12678            MR. TACIT:  So, just moving on from that point, as I understand it TELUS then wants to increase prices to what it considers fully compensatory levels over the three to five‑year transition period for non‑essential services, correct?

1listnum "WP List 3" \l 12679            MR. GRIEVE:  Actually, our proposal would be that when the costing is redone, and actually we have a Phase 2 costing review going on at the same time or it is a partial Phase 2 costing review because some things are not in it, but once we get a costing review done and the principles established here, which we would hope would include proportionate share of the embedded cost differential, then we would know what that rate for each of these Category 1 competitor services would be.

1listnum "WP List 3" \l 12680            Then, what the Commission would do is allow prices to move toward that level during the transition period, but it doesn't mean that the ILEC must raise them to those levels, because at some point during the transition we actually expect that the market is not going to allow us to get there.

1listnum "WP List 3" \l 12681            MR. TACIT:  Just for clarity on the record, you agree with me that mark‑ups is not part of that other Phase 2 proceeding?

1listnum "WP List 3" \l 12682            MR. GRIEVE:  That is right.  The quantum of the mark‑up would have to be in the proceeding that follows.  This proceeding is about pricing principles and mark‑up is an important part of pricing.  The other one is just the Phase 2 costs, yes.

1listnum "WP List 3" \l 12683            MR. TACIT:  Thank you.  Okay, now in considering what TELUS considers to be fully compensatory costs, I believe one of TELUS' complaints about the current situation is that there are two types of costs that are not identifiable in a Phase 2 cost study.  The first, is the cost of assets that have not been fully depreciated due to regulatory depreciation rules, the fact that they are no longer producing revenue, and the costs that TELUS incurs as a carrier of last resort.  Is that correct?

1listnum "WP List 3" \l 12684            MR. GRIEVE:  Yes, well, the first one is included in the embedded cost differential. The second one, the Commission has said in the past that the carrier of last resort costs are included in Phase 2.  We found that quite startling, not when the Commission said it, but when Bell said it, because it is only true if you get the fill factors right and the fill factors is a measure of the percentage of your network that you are actually using.  And the Commission, in our view, did not get the fill factors right because they are not using company‑specific fill factors, so they can't possibly be accounting for that.

1listnum "WP List 3" \l 12685            MR. TACIT:  But if we look at paragraph 65 of Decision 2000‑745 ‑‑ and that is another exhibit, Madam Secretary ‑‑ which is at page 17 of that package.  The excerpt starts at page 15, but I am looking at page 17.  The Commission is of the view there that the ILEC's Phase 2 costs includes the obligation to serve, correct?

1listnum "WP List 3" \l 12686            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12687            MR. TACIT:  Now, I know so what we ‑‑

1listnum "WP List 3" \l 12688            MR. GRIEVE:  That is what they say, yes.

1listnum "WP List 3" \l 12689            MR. TACIT:  ‑‑ have here again is a difference on the interpretation of the right quantum, but not whether conceptually the Commission did what you are asking.  It is in the application of the principle that you have a disagreement with the Commission?

1listnum "WP List 3" \l 12690            MR. GRIEVE:  Yes, I would say that.

1listnum "WP List 3" \l 12691            MR. TACIT:  Okay.  Now, going back to the depreciation issue for a minute.  That complaint would seem to suggest that TELUS has some sort of a stranded investment problem.  Does TELUS believe it has such a problem?

1listnum "WP List 3" \l 12692            MR. GRIEVE:  I actually haven't looked at that, Mr. Tacit.  What we were trying to do is get all the principles down that the Commission would have to consider in that.  What is interesting is all of those factors that we articulated in there, if you got a mark‑up that covered the difference between Phase 2 and Phase 3, all of that stuff is automatically taken care of.

1listnum "WP List 3" \l 12693            MR. TACIT:  No, I understand that that is your prescription, but I am not talking about the prescription.  I am trying to figure out whether we have a problem and to quantify it a bit.

1listnum "WP List 3" \l 12694            MR. GRIEVE:  I haven't tried to quantify.

1listnum "WP List 3" \l 12695            MR. TACIT:  Okay, so you don't really know if you have a problem?

1listnum "WP List 3" \l 12696            MR. GRIEVE:  That is right.

1listnum "WP List 3" \l 12697            MR. TACIT:  Okay.  Well, let me help you a bit with that.

1listnum "WP List 3" \l 12698            MR. GRIEVE:  Well, we have stranded assets, but I don't know ‑‑

1listnum "WP List 3" \l 12699            MR. TACIT:  But not through the regulatory ‑‑

1listnum "WP List 3" \l 12700            MR. GRIEVE:  I don't know.

1listnum "WP List 3" \l 12701            MR. TACIT:  Okay.  Specifically, would you expect that if you had such a problem and it was material it would be disclosed in the company's financial reports?

1listnum "WP List 3" \l 12702            MR. GRIEVE:  Certainly, if it were material it would likely be there.

1listnum "WP List 3" \l 12703            MR. TACIT:  Now, I have looked at TELUS' 2006 annual financial statements and MD&A in preparation for this cross‑examination and I certainly couldn't find anything that would suggest that.  Are you aware of anything I those documents that would suggest that?

1listnum "WP List 3" \l 12704            MR. GRIEVE:  No, but I could undertake to see if we have made reference to that for you.

1listnum "WP List 3" \l 12705            MR. TACIT:  Okay.  I do want to take you through a couple of things in there that would suggest there is no such problem.

1listnum "WP List 3" \l 12706            THE SECRETARY:  Sorry, Mr. Tacit, which document, this one?

1listnum "WP List 3" \l 12707            MR. TACIT:  Yes, it starts at page 23 of the package, the 2006 financial review.

1listnum "WP List 3" \l 12708            And if we look at page 25 for a minute, which sets out segmented statistics for TELUS' wireline and wireless business.  We see, for example, a fairly healthy EBITDA for the wireline segment, correct?

1listnum "WP List 3" \l 12709            MR. GRIEVE:  Just hang on a second.  Yes, I see it.

1listnum "WP List 3" \l 12710            MR. TACIT:  All right.  Now, I have reproduced pages 31 to 32.  In pages 31 to 32 the section that deals with depreciation and amortization of company assets, tangible and intangible.  And again, I haven't seen any mention in there of any stranded investment problem due to regulatory issues.

1listnum "WP List 3" \l 12711            MR. GRIEVE:  No, I said I wasn't aware of any.  But I could check to see if there are places where we have talked about it.

1listnum "WP List 3" \l 12712            MR. TACIT:  Okay.

1listnum "WP List 3" \l 12713            MR. GRIEVE:  So would you like me to undertake to do that?

1listnum "WP List 3" \l 12714            MR. TACIT:  Yes, please go ahead and do that.

1listnum "WP List 3" \l 12715            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 12716            MR. TACIT:  And the other undertaking I would like from you is if you could tell me what instances there are where the Commission has required TELUS to depreciate assets over longer periods than what TELUS has requested.

1listnum "WP List 3" \l 12717            MR. GRIEVE:  Okay, we can do that.

1listnum "WP List 3" \l 12718            MR. TACIT:  And, if so, if you could quantify the impact, in a global way, I don't want you to quantify it by decision.  But if you have some sort of a global estimate of any impact as of today.

1listnum "WP List 3" \l 12719            MR. GRIEVE:  We can try that.

1listnum "WP List 3" \l 12720            MR. TACIT:  Okay.

1listnum "WP List 3" \l 12721            MR. GRIEVE:  Without getting too granular, we can..

1listnum "WP List 3" \l 12722            MR. TACIT:  Yes, of course, I understand that.

1listnum "WP List 3" \l 12723            MR. GRIEVE:  Okay, thanks.

1listnum "WP List 3" \l 12724            MR. TACIT:  Now, I guess what I would like to suggest to you is that if we go too far afield with increasing the mark‑ups to recover more of this embedded cost differential, what it is really going to amount to is a guaranteed income source for TELUS that is going to provide it some shelter from competition at the retail level.

1listnum "WP List 3" \l 12725            And the reason I say that is because, of course, you are only going to be able to increase the mark‑ups on those services because the demand for those wholesale services is inelastic.  Otherwise, presumably, if you felt you had a problem and you could recover it from other services TELUS would already be doing that, wouldn't it?

1listnum "WP List 3" \l 12726            MR. GRIEVE:  Well, first of all, those service are not inelastic, they are not essential facilities and we have a five‑year transition period over which the incentives for people to build and the opportunities for a competitive market and wholesale facilities will develop.  I said to you before, I actually don't expect to get there, but it has be a reliance on market forces to decide where we end up with those prices during the transition period.

1listnum "WP List 3" \l 12727            Now, on essential facilities themselves, to the extent there are any, we would be looking to go there.  But that is not, for the small number of essential facilities, that doesn't give you any degree of comfort on recovering revenues that you might otherwise.  And all we are asking for is a proportionate share of the embedded cost differential from those services, not in excess of the proportional share.

1listnum "WP List 3" \l 12728            MR. TACIT:  Well, but since the exercise of market power in wholesale isn't really relevant under the TELUS essential facilities test, except where you get the extreme case of a monopoly supply, I suggest to you that it is entirely possible that you could have significant market power and, therefore, relatively inelastic demand with respect to some wholesale services.  What allowing this kind of increase in margins would mean is that it would be a sheltered source of revenue for the company, a subsidy in effect.

1listnum "WP List 3" \l 12729            MR. GRIEVE:  Well, it is certainly not a subsidy.  From my perspective, I just don't accept that you are going to have a situation at the end of this transition period where there is going to be the ability of an ILEC to abuse market power in wholesale services.  There are all sorts of reasons why that is just not going to make any sense for us to try to do that, the most obvious of which is the duplicability of the service.

1listnum "WP List 3" \l 12730            That is what reliance on market forces means.  The Commission has a choice:  rely on market forces or rely on regulation.

1listnum "WP List 3" \l 12731            We are saying that you have a golden opportunity now over the next five years, or three to five years, to transition out of this when prices start to rise, find their market levels and rely on market forces.

1listnum "WP List 3" \l 12732            MR. TACIT:  So, as I understand it, you are giving a two‑part response.

1listnum "WP List 3" \l 12733            You are saying with regard to non‑essential services, it is unlikely that they are going to be relatively inelastic.

1listnum "WP List 3" \l 12734            Is that what your claim is?

1listnum "WP List 3" \l 12735            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 12736            MR. TACIT:  Okay.  With regard to essential services, there are so few that we don't really need to worry about it that much anyway.

1listnum "WP List 3" \l 12737            MR. GRIEVE:  But it wouldn't be a subsidy anyway, to use your words, Mr. Tacit, because they would be paying no more than their proportionate share of the imbedded cost differential, which would be a small amount.

1listnum "WP List 3" \l 12738            MR. TACIT:  What if it turned out that the number of essential services is significantly greater than what TELUS is asking for, though?  Could there not be a significant benefit to TELUS of getting that increased amount?

1listnum "WP List 3" \l 12739            MR. GRIEVE:  Well, it's the same answer.  There aren't a lot being sold.  And if these things really are essential facilities, then there is no reason why the company shouldn't have regulated rates for those things that are essential facilities, and no reason why they shouldn't recover their proportionate share.

1listnum "WP List 3" \l 12740            MR. TACIT:  Again, because if there is market power, there is market power; too bad.

1listnum "WP List 3" \l 12741            MR. GRIEVE:  Well, if they are not essential facilities, they can be duplicated.

1listnum "WP List 3" \l 12742            You said if they are essential facilities.

1listnum "WP List 3" \l 12743            MR. TACIT:  Right.

1listnum "WP List 3" \l 12744            MR. GRIEVE:  And I say if they are essential facilities, then they can't be duplicated.  In that case, there is no reason why regulation shouldn't allow them to be responsible for a proportionate share of the imbedded cost differential, plus the fixed common costs, a proportionate share of that as well.

1listnum "WP List 3" \l 12745            MR. TACIT:  I guess what I would like to ask you then is:  Is it efficient economically in terms of trying to encourage facilities builds by other parties to make their threshold, the costs that they have to overcome in order to make it financially viable for them to build, is it reasonable for them to be saddled with a significant portion of TELUS' past regulatory problems?

1listnum "WP List 3" \l 12746            Is that an efficient way of allocating resources in the marketplace?

1listnum "WP List 3" \l 12747            MR. GRIEVE:  Well, that's probably a question better left to the economists, but let me just make this comment:  that one of the purposes of opening the market to competition in 1992 to facilities‑based competition in the long distance market and later the local market, as TELUS requested in 1993, one of the purposes of that was to replace regulation with competition, regulation with market forces, because the market forces would determine how much of that kind of imbedded cost differential you would actually be allowed to recover.

1listnum "WP List 3" \l 12748            We accepted the risk of going into a competitive market.  We accepted the risk that we might not be able to recover that.

1listnum "WP List 3" \l 12749            But to the extent that we have monopoly supplied facilities, which is what essential facilities are, then those have to be continued to be regulated under a just and reasonable rate standard.  And a just and reasonable rate standard calls for the recovery of costs.

1listnum "WP List 3" \l 12750            MR. TACIT:  Okay.  But I guess my question is slightly different.

1listnum "WP List 3" \l 12751            You said you wanted the Commission to follow the policy direction.  You say the policy direction is concerned with encouraging the construction of facilities and facilities builds.  What I'm asking you is:  Where is the balance?

1listnum "WP List 3" \l 12752            To the extent that the Commission has discretion as to how much recovery to allow you of the imbedded cost differential, what I understand TELUS' position to be is it should be 100 per cent.  It doesn't matter what the impact on construction of facilities is.

1listnum "WP List 3" \l 12753            MR. GRIEVE:  Well, Mr. Tacit, I mean, the idea is that you are supposed to be competing against the company that you see in the market, the ILEC in the market, not some hypothetical company.  But we are talking here about essential facilities.  So they are by definition not duplicable.  Right?

1listnum "WP List 3" \l 12754            MR. TACIT:  Well, according to your test.

1listnum "WP List 3" \l 12755            MR. GRIEVE:  Well, according to the test for essential facilities, non‑duplicability.  And it's just in about everyone else's test in this room.  That's the test.

1listnum "WP List 3" \l 12756            So if it's not duplicable and it's monopoly supplied, which it would be if it's not duplicable, then you charge a fully compensatory rate.  That's our position.

1listnum "WP List 3" \l 12757            MR. TACIT:  And no matter what the impact is on facilities incentives for others.

1listnum "WP List 3" \l 12758            You have said yourself that what ‑‑

1listnum "WP List 3" \l 12759            THE CHAIRPERSON:  I think you have made your point.  You are making submissions now.

1listnum "WP List 3" \l 12760            Why don't you move on.

1listnum "WP List 3" \l 12761            MR. TACIT:  Thank you.  Those are my questions, Mr. Chairman.

1listnum "WP List 3" \l 12762            THE CHAIRPERSON:  Go ahead.

1listnum "WP List 3" \l 12763            COMMISSIONER CRAM:  So, if I understand you correctly, let's just say ‑‑ I forget who said we should make the local loop in the higher bounds essential.

1listnum "WP List 3" \l 12764            For the purposes of essentiality, we would cost it ILEC‑specific with the appropriate working fill factors and everything else.  But for the purposes of contribution, the rebanding decision would still apply?

1listnum "WP List 3" \l 12765            MR. GRIEVE:  You would have to ‑‑ the short answer is yes, it still applies.

1listnum "WP List 3" \l 12766            COMMISSIONER CRAM:  Okay.

1listnum "WP List 3" \l 12767            MR. GRIEVE:  The longer answer is it's scheduled for review I think either in 2008 or 2009, the contribution mechanism.

1listnum "WP List 3" \l 12768            COMMISSIONER CRAM:  Darn, I won't be around to do it again.  Thank you.

1listnum "WP List 3" \l 12769            Thank you, Mr. Chair.

1listnum "WP List 3" \l 12770            THE CHAIRPERSON:  I think we will take a ten‑minute break now.  Thank you.

‑‑‑ Upon recessing at 1019 / Suspension à 1019

‑‑‑ Upon resuming at 1034 / Reprise à 1034

1listnum "WP List 3" \l 12771            THE CHAIRPERSON:  Madam Secretary, who is next?

1listnum "WP List 3" \l 12772            THE SECRETARY:  I'm calling on Xittel Inc.

1listnum "WP List 3" \l 12773            Mr. Denton, please step forward.

‑‑‑ Pause

1listnum "WP List 3" \l 12774            THE CHAIRPERSON:  Mr. Denton, the floor is yours.

EXAMINATION / INTERROGATOIRE

1listnum "WP List 3" \l 12775            MR. DENTON:  Good morning, Mr. Chairman, Commissioners.

1listnum "WP List 3" \l 12776            I think, like me, you like to know where questions are going and where we are coming from, because it helps to frame one's understanding of these obscure little points of factor doctrine that we are getting at.

1listnum "WP List 3" \l 12777            I basically think that what we are dealing with here is some basic narratives.  What is the story?

1listnum "WP List 3" \l 12778            The story that we are dealing with from our learned friends from TELUS is that essential facilities need to be cut back; that an error has been made; and that investments can only properly be made, and should be made, when this excessive expansion of essential facilities is cut back.

1listnum "WP List 3" \l 12779            So it's basically give us the tools and we'll do the job.  It's a common theme we have heard from regulated companies.

1listnum "WP List 3" \l 12780            The narrative that the Internet service providers will take is equally simple, which is to say that if this hearing only concerns rearrangements of income among players in this room, it is not finally of terribly great significance, though it may be unfortunate for some of us; and that the real issue here always will remain:  What effect will all of this have on Canadians in terms of their access to services through and by the Internet and what will be the power position of carriers vis‑à‑vis service suppliers and consumers through Internet delivered services?

1listnum "WP List 3" \l 12781            And we say the outcome could possibly be quite negative.

1listnum "WP List 3" \l 12782            So that's our story and we're sticking to it.

1listnum "WP List 3" \l 12783            Our questions will be framed in relation to the notion of addressing the questions of incentives to invest and what has actually happened.

1listnum "WP List 3" \l 12784            So my first set of questions for TELUS is based on the Telecommunications Monitoring Report of 2006, which will take you a little while to open up, and looking at Table 4.1.2.

1listnum "WP List 3" \l 12785            So take your time.  It is just a matter of fact.

‑‑‑ Pause

1listnum "WP List 3" \l 12786            MR. TASKER:  Yes, we have it here.

1listnum "WP List 3" \l 12787            MR. DENTON:  If we look at Table 4.1.2, we see in terms of the long distance a decline of 7.9 per cent, the CAGR between 2002 and 2005.

1listnum "WP List 3" \l 12788            MR. TASKER:  Sorry, the table doesn't show percentages, but I see the decline.

1listnum "WP List 3" \l 12789            Table 4.1.2?

1listnum "WP List 3" \l 12790            MR. DENTON:  Table 4.1.2, Segmented Telecommunications Service Revenues.

1listnum "WP List 3" \l 12791            MR. TASKER:  My mistake.  I was looking at the Figure.

1listnum "WP List 3" \l 12792            MR. DENTON:  I do that all the time.

1listnum "WP List 3" \l 12793            MR. TASKER:  Okay; thank you.

1listnum "WP List 3" \l 12794            MR. DENTON:  So we see that it has declined 7.9 per cent, and we see immediately below it that Internet based revenues have climbed in the same period, on average, 11.3 per cent.

1listnum "WP List 3" \l 12795            MR. TASKER:  I see that.

1listnum "WP List 3" \l 12796            MR. DENTON:  I'm asking you to reflect on the significance of this and say:  Does this indicate a long‑term shift of revenue away from PSTN‑based sources toward Internet access?

1listnum "WP List 3" \l 12797            MR. TASKER:  I believe that is a fair statement.

1listnum "WP List 3" \l 12798            MR. DENTON:  Thank you.

1listnum "WP List 3" \l 12799            I'm going to shift you again to the 2007 Telecom Monitoring Report, at the same Table 4.1.2.

1listnum "WP List 3" \l 12800            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12801            MR. DENTON:  And we look again at the long distance and we see that it has declined by 8.2 per cent CAGR in the studied period.

1listnum "WP List 3" \l 12802            MR. TASKER:  I see that.

1listnum "WP List 3" \l 12803            MR. DENTON:  And we also see an 11.3 per cent increase in the Internet.

1listnum "WP List 3" \l 12804            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12805            MR. DENTON:  And interestingly, a new category is added, dear to our hearts, called Legacy Data and Private Line.

1listnum "WP List 3" \l 12806            Do you see that one farther down?

1listnum "WP List 3" \l 12807            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12808            MR. DENTON:  And Newer Data Protocols.

1listnum "WP List 3" \l 12809            Again, I invite you to observe the same pattern:  that newer data protocols are going up 29 per cent in the study period and legacy and private line are declining 7.8 in the same period.

1listnum "WP List 3" \l 12810            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12811            MR. DENTON:  Would you agree with me that these newer data protocols are based on the Internet protocol, by and large?

1listnum "WP List 3" \l 12812            MR. TASKER:  I think by and large, but I think there is also another pack of protocols in there.

1listnum "WP List 3" \l 12813            MR. DENTON:  Yes.

1listnum "WP List 3" \l 12814            MR. TASKER:  But yes, essentially there is a lot of IP involved in that number.

1listnum "WP List 3" \l 12815            MR. DENTON:  Okay.  I invite you to ponder the following question, which is:  Is it true that we are moving to an all IP‑based infrastructure where the previous protocol, Time‑Division Multiplexing, the circuit switching, is an increasingly obsolescent legacy architecture?

1listnum "WP List 3" \l 12816            MR. TASKER:  It is true that is the direction we are moving.  You may question how long it's going to take us to get there for sure.  People predicted the end of private line ten years ago.

1listnum "WP List 3" \l 12817            But yes, it's a fair statement that that is the direction we are going.

1listnum "WP List 3" \l 12818            MR. DENTON:  I understand these questions may provide us with our pensions for the rest of our career, but they may not.

1listnum "WP List 3" \l 12819            In any case, we have agreed then the general thrust of the technology and that it's moving to a more increased IP platform.

1listnum "WP List 3" \l 12820            Mr. Grieve, did you have any wisdom to add to this observation?

1listnum "WP List 3" \l 12821            MR. GRIEVE:  No.

1listnum "WP List 3" \l 12822            MR. DENTON:  I would like us to move, if we can, to Table 4.5.5 of the 2007 Monitoring Report ‑‑ for which, by the way, I just can't say enough to the CRTC for collecting and showing this data.

1listnum "WP List 3" \l 12823            MR. TASKER:  Table 4.5.5?

1listnum "WP List 3" \l 12824            MR. DENTON:  Yes.

1listnum "WP List 3" \l 12825            MR. TASKER:  Yes, we see that.

1listnum "WP List 3" \l 12826            MR. DENTON:  This is the private line market.  It says Private Line Service Retail and Wholesale Revenues by Service Category.  These are the ones to which competitors have mandated access.

1listnum "WP List 3" \l 12827            You will notice the point I'm going to address here is differences between retail and wholesale.

1listnum "WP List 3" \l 12828            I draw your attention to the decline in short haul wholesale from 2002 to 2006.  I see a decline here of 16.2 per cent.

1listnum "WP List 3" \l 12829            If we look for the retail figures for the same category of service in the same years, we see a decline of 4.9 per cent.

1listnum "WP List 3" \l 12830            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12831            MR. DENTON:  So, likewise, when we look at the long haul market, we see the same disparities between changes in the retail and changes in the wholesale.

1listnum "WP List 3" \l 12832            For instance, we notice in the retail the drop was 5.6 per cent, whereas in the wholesale the drop was more significant, at 13.7 per cent.

1listnum "WP List 3" \l 12833            We did our arithmetic and the rate of decrease is 3.3 times greater in the wholesale short haul than in the retail short haul.

1listnum "WP List 3" \l 12834            My question for you is:  How do you explain the relatively greater drop of revenue in the wholesale than in the retail markets?

1listnum "WP List 3" \l 12835            MR. TASKER:  I see that is a very simple answer.  Those are revenues that are being measured in this table and with the CDN and the CDNA pricing changes, that brought about a significant drop in the wholesale revenues but not equivalently on the retail side.

1listnum "WP List 3" \l 12836            It wasn't actually a reflection of the number of circuits, I don't believe.

1listnum "WP List 3" \l 12837            MR. DENTON:  Can I have that again, please.

1listnum "WP List 3" \l 12838            I'm sorry, I'm just processing your information.

1listnum "WP List 3" \l 12839            MR. TASKER:  Sure.  This is showing revenues.

1listnum "WP List 3" \l 12840            MR. DENTON:  Yes.

1listnum "WP List 3" \l 12841            MR. TASKER:  There was the introduction of the CDN tariffs, both CDN access and CDN, the IX portion of that, and that resulted in a significant reduction in the price that we charge for wholesale services.

1listnum "WP List 3" \l 12842            Therefore, the revenues have declined significantly compared to the retail side where there wasn't the same sort of tariffed reduction.

1listnum "WP List 3" \l 12843            MR. DENTON:  Right.

1listnum "WP List 3" \l 12844            So then on the whole the private line represents the older generation of TDM and other protocols from which we are evolving?

1listnum "WP List 3" \l 12845            MR. TASKER:  That's correct.

1listnum "WP List 3" \l 12846            MR. DENTON:  Thank you.

1listnum "WP List 3" \l 12847            MR. TASKER:  It is probably worth clarifying that as a result of the CDN and CDNA tariff, those same private line circuits have been used for a lot of IP‑based services because of the cheaper form of access.

1listnum "WP List 3" \l 12848            MR. DENTON:  All right.

1listnum "WP List 3" \l 12849            Continuing on the theme of technological transformation ‑‑ and this may be one for Mr. Grieve; I don't know ‑‑ are you still buying any switches based on TDM architecture, or have you moved to an all IP‑based?

1listnum "WP List 3" \l 12850            MR. TASKER:  There are certainly still assets that we need to purchase on both TDM side and the IP side.

1listnum "WP List 3" \l 12851            MR. DENTON:  What kind of assets are you buying on the TDM side?

1listnum "WP List 3" \l 12852            MR. TASKER:  Well, as I said, we continue to provision quite aggressively ‑‑ aggressively is not the right word.

1listnum "WP List 3" \l 12853            But on the wholesale side there is a much higher volume of TDM access circuits now than there was prior to the CDN decision.

1listnum "WP List 3" \l 12854            For example, we are provisioning DS3 circuits in order for competitors to provide E10 services, their Ethernet services.  So that requires things like cards, new cards on our CL gear.

1listnum "WP List 3" \l 12855            MR. DENTON:  In terms of net direction of where you want to go, I think you said before that you are moving to IP.

1listnum "WP List 3" \l 12856            MR. TASKER:  Our strategic investments are certainly more based on IP technology, for sure.

1listnum "WP List 3" \l 12857            MR. DENTON:  Thank you.

1listnum "WP List 3" \l 12858            I notice at page 5, paragraph 11, of your main evidence, TELUS wrote that:

                      "Technological change has allowed cable companies to bypass dependence on the framework of forced sharing and artificially low prices by adapting their own existing networks to provide telephone service."

1listnum "WP List 3" \l 12859            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12860            MR. DENTON:  So would you agree with me that the technological change in question was the increased functionality that cable companies could get out of their systems by the use of Internet protocols, which had the effect of rendering their facilities more flexible and multi purpose?

1listnum "WP List 3" \l 12861            MR. TASKER:  Certainly the cable companies have exploited the benefits of IP.

1listnum "WP List 3" \l 12862            MR. DENTON:  You say at several points in your evidence that the Commission departed from the true path of competition by incremental decisions, extending the range of services which could be unbundled.

1listnum "WP List 3" \l 12863            For instance, you call for a "return to the pursuit of its original vision" of facilities‑based competition in paragraph 5, and later make reference to Commission decisions of 1979 and 1997.

1listnum "WP List 3" \l 12864            Would you agree with me that there was a policy fashion in the mid‑1990s for unbundling and access to network elements?

1listnum "WP List 3" \l 12865            MR. GRIEVE:  Yes, it was a fad.

1listnum "WP List 3" \l 12866            MR. DENTON:  Would you agree with me that the 1996 U.S. Telecommunications Act was predicated on the notion that significant competition, that is more than Telco cable duopoly, could arise from the unbundling of network elements?

1listnum "WP List 3" \l 12867            MR. GRIEVE:  That's what it says, that's what the news releases said, but interestingly when Reid Hunt was here in the summer of 2005 speaking at the Telecom Policy Review Forum he said, "Look, the practical purpose of the Telecom Act of 1996 was to transfer customers and revenues from the RBOCs, about 40 per cent to the IXCs and customers and revenues from the IXCs, about 40 per cent to the RBOCs and let them dosey doe in the market."

1listnum "WP List 3" \l 12868            And his advice was, after that that the more ‑‑ first of all he said, "We forgot to factor in the Internet and we forgot to factor in wireless".  And then he went on to say, "If you make your regulatory framework and you're trying to micro manage these kinds of things it's too complex and it won't work."

1listnum "WP List 3" \l 12869            So, the purpose of the Act, the way it's stated is competition, the reality was market management.

1listnum "WP List 3" \l 12870            MR. DENTON:  Mr. Grieve, thank you very much for that point, that we forgot to factor in the Internet, that's a fundamental concern to us all whatever side we take on this essential services proceedings, and I quite agree with you that competition came in from a wholly different direction than that which was foreseen and that competition and PSE and services is competition and buggy whips.

1listnum "WP List 3" \l 12871            So, would you say that Telecom decision 97‑8 was also predicated on the same assumption that it would lead more to a cable Telco duopoly?

1listnum "WP List 3" \l 12872            MR. GRIEVE:  I think decision 97‑8 contemplated cable entry but the regime was set up and the expectation that after the five‑year transition period, or during that five‑year transition period people would be allowed to get started and get going in the market and then the mandated unbundling of non‑essential facilities, which was everything but loops in the high‑cost areas, would fall away.

1listnum "WP List 3" \l 12873            So, I guess the short answer is, it was the same general idea but far less extensive.

1listnum "WP List 3" \l 12874            MR. DENTON:  Thank you.  So, how would you explain the rise of the policy fashion for unbundled network elements?

1listnum "WP List 3" \l 12875            MR. GRIEVE:  Well, I think, you know, the source of it was the U.S. frustration I think with the failure of divestiture to do what it was supposed to do.  So, you'd have to ‑‑ I think it would be best to ask Dr. Wiseman or Dr. Crandall about where the fad started.

1listnum "WP List 3" \l 12876            MR. DENTON:  And so, how would you characterize the market experiment in unbundled network access which we've had for the past 10 years:  success, failure, interesting, useful?

1listnum "WP List 3" \l 12877            MR. GRIEVE:  You know, Mr. Denton, you've heard our evidence in this proceeding which is that the way the Commission proceeded has resulted in too much unbundling and, as a result of that too much unbundling, we ourselves, especially after CDNA and CDN, have invested less in facilities than we otherwise would have.

1listnum "WP List 3" \l 12878            But I think the very fact of opening up the local market and the fact that the cable companies have come in and the fact that there are other kinds of technologies being developed that are competing in that market means that the opening up of the market has been a success; the unbundling I don't think has been the success that people expected or hoped it would be.

1listnum "WP List 3" \l 12879            MR. DENTON:  Would you agree with me perhaps that the unbundling strategy of the Telecommunications Act in the United States of 1996 was successfully litigated by the incumbent telephone companies into complete ‑‑

1listnum "WP List 3" \l 12880            MR. GRIEVE:  After a couple of things that happened in 2002, I stopped paying attention to the United States unbundling regime because it was getting far more complex than it was worth my time to spend on it, but you should ask Dr. Crandall about it.

1listnum "WP List 3" \l 12881            MR. DENTON:  I appreciate the economy of your mental effort on U.S. regulatory policy.

‑‑‑ Laughter / Rires

1listnum "WP List 3" \l 12882            MR. GRIEVE:  Believe me, you're not the only one.

1listnum "WP List 3" \l 12883            MR. DENTON:  We'd now like to move to the discussion of your tariffs which I believe should have been distributed to you.

1listnum "WP List 3" \l 12884            These are asymmetrical digital subscriber line, ADSL services, access services, item 214.

1listnum "WP List 3" \l 12885            THE SECRETARY:  That will be Exhibit XITTEL No. 3.

                      EXHIBIT XITTEL‑3:  XITTEL Tariffs.

1listnum "WP List 3" \l 12886            MR. DENTON:  And 226.

1listnum "WP List 3" \l 12887            MR. GRIEVE:  Do you have an extra copy?  Sorry.

1listnum "WP List 3" \l 12888            THE CHAIRPERSON:  Madam Secretary, have you distributed those?

1listnum "WP List 3" \l 12889            MR. TASKER:  We have them here.

1listnum "WP List 3" \l 12890            MR. DENTON:  So, you'll recognize them, at least they purport to be from your company.

1listnum "WP List 3" \l 12891            And so, my first question is:  Are the services under tariff 214 commercially available?

1listnum "WP List 3" \l 12892            MR. TASKER:  Yes, they are.

1listnum "WP List 3" \l 12893            MR. DENTON:  Are you aware of whether any ISP has in fact used tariff item 214?

1listnum "WP List 3" \l 12894            MR. TASKER:  Yes, they have.

1listnum "WP List 3" \l 12895            MR. DENTON:  Do you know what size of numbers have availed themselves of 214?

1listnum "WP List 3" \l 12896            MR. TASKER:  Are you looking for a dollar value or number of suppliers ‑‑ number of customers?

1listnum "WP List 3" \l 12897            MR. DENTON:  Number of customers.

1listnum "WP List 3" \l 12898            MR. TASKER:  I think that would be considered confidential information.

1listnum "WP List 3" \l 12899            MR. DENTON:  All right.

‑‑‑ Pause

1listnum "WP List 3" \l 12900            MR. TASKER:  I think we can answer you that it's more than a dozen.

1listnum "WP List 3" \l 12901            MR. DENTON:  Thank you.  If ISPs relied on 214, which I believe does not have a transport component between the COs, would they have a greater incentive to build their own facilities for transport between central offices?

1listnum "WP List 3" \l 12902            MR. TASKER:  Yeah, I believe that's true, or have that provided by another supplier because there's many inter‑exchange suppliers of transport services.

1listnum "WP List 3" \l 12903            MR. DENTON:  If an ISP or someone who does not have access to sub‑loops, would you agree that the services identified in tariff 214 are the only way to reach the customer available from TELUS?

1listnum "WP List 3" \l 12904            MR. TASKER:  From TELUS, yes, that's true today.

1listnum "WP List 3" \l 12905            MR. DENTON:  All right.  In previous testimony Bell indicated that its gateway access service is not a mandated service.

1listnum "WP List 3" \l 12906            Is the same true in the case of TELUS' wholesale Internet ADSL service tariff item 226, switching tariffs on you.  The question is whether 226 is mandated?

1listnum "WP List 3" \l 12907            MR. TASKER:  Well, it is a tariffed item, so I believe...

1listnum "WP List 3" \l 12908            MR. DENTON:  It is certainly a tariff item, but nothing requires you to tariff it in that sense.  There was no decision I believe of the CRTC ‑‑

1listnum "WP List 3" \l 12909            MR. TASKER:  Oh, I see.

1listnum "WP List 3" \l 12910            MR. DENTON:  ‑‑ mandating you to supply it.

1listnum "WP List 3" \l 12911            MR. GRIEVE:  I think it was mandated.  Let me check.

1listnum "WP List 3" \l 12912            MR. DENTON:  That's a very interesting question, Mr. Grieve.  It's our information that it was never ‑‑ it was the subject of commercial negotiation.

1listnum "WP List 3" \l 12913            MR. GRIEVE:  226?

1listnum "WP List 3" \l 12914            MR. DENTON:  Yeah.

1listnum "WP List 3" \l 12915            MR. GRIEVE:  We'll have to check.  I know there was negotiation.

1listnum "WP List 3" \l 12916            MR. DENTON:  I believe that a service can be ‑‑ sorry.

1listnum "WP List 3" \l 12917            MR. GRIEVE:  Oh yeah.  This is the classic Canadian story in telecom.  Bell negotiated it and then we were mandated to provide it.

1listnum "WP List 3" \l 12918            MR. DENTON:  And you were mandated to provide it by a Telecommunication decision, order or...?

1listnum "WP List 3" \l 12919            MR. GRIEVE:  I think ‑‑ I'll take an undertaking, but it may have been a phone call.

1listnum "WP List 3" \l 12920            MR. DENTON:  Well, thank you for this exposé of how things really work in this country.

‑‑‑ Laughter / Rires

1listnum "WP List 3" \l 12921            MR. DENTON:  I wish I had that power.

‑‑‑ Off microphone / Hors microphone

1listnum "WP List 3" \l 12922            MR. DENTON:  Thank you, Mr. Chairman, I shall take that under advisement.

1listnum "WP List 3" \l 12923            MR. GRIEVE:  We'll take an undertaking to see if there was an order or decision, Mr. Denton.

1listnum "WP List 3" \l 12924            MR. DENTON:  I think that's ‑‑ thank you very much, Mr. Grieve.

1listnum "WP List 3" \l 12925            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 12926            MR. DENTON:  But your answer is wonderful.

1listnum "WP List 3" \l 12927            MR. GRIEVE:  I thought you'd like it.

1listnum "WP List 3" \l 12928            MR. DENTON:  No, it's delicious.

‑‑‑ Laughter / Rires

1listnum "WP List 3" \l 12929            MR. DENTON:  Would you agree with me that the rates for tariff 226 have been set at fully compensatory levels by a company TSI, an unregulated affiliate of TELUS free from any obligation to do so by the Commission?

1listnum "WP List 3" \l 12930            MR. GRIEVE:  Are you talking about this tariff?

1listnum "WP List 3" \l 12931            MR. DENTON:  226, yeah.

1listnum "WP List 3" \l 12932            MR. GRIEVE:  And what was your question again?

1listnum "WP List 3" \l 12933            MR. DENTON:  That in fact the rates established in 226 were set by an unregulated affiliate of TELUS?

1listnum "WP List 3" \l 12934            MR. GRIEVE:  This is a TELUS Communications Company tariff.

1listnum "WP List 3" \l 12935            MR. DENTON:  Yes.

1listnum "WP List 3" \l 12936            MR. GRIEVE:  It's not a ‑‑

1listnum "WP List 3" \l 12937            MR. DENTON:  The prices were decided upon by TELUS?

1listnum "WP List 3" \l 12938            MR. GRIEVE:  I just don't know.  I mean, I could take an undertaking to look at how these prices were ‑‑ maybe that should be part of the same undertaking, how we arrived at the prices in here.

1listnum "WP List 3" \l 12939            MR. DENTON:  It's an important question for us of course because, you know, sticking with our thesis is that you have, in fact, freely negotiated these services and they have been taken up freely in the market without regulatory compulsion.

1listnum "WP List 3" \l 12940            MR. GRIEVE:  Yeah, so, there are many services that we provide on a wholesale basis that have been freely negotiated that we've offered in the marketplace.

1listnum "WP List 3" \l 12941            MR. DENTON:  Thank you.

1listnum "WP List 3" \l 12942            Now, switching slightly but not greatly, in earlier testimony the Companies revealed that they are moving fibre closer to the home to enable the provision of next generation network services, NGN services.

1listnum "WP List 3" \l 12943            Is TELUS currently moving optical fibre closer to the home in order to provide NGN services?

1listnum "WP List 3" \l 12944            MR. TASKER:  Yes, we are in isolated circumstances.  Right now we're doing pilots.

1listnum "WP List 3" \l 12945            MR. DENTON:  Yeah.  Is this a general tendency you intend to pursue?

1listnum "WP List 3" \l 12946            MR. TASKER:  Yes.  Sorry, I think the clarification was, right now we're extending fibre to the curb.

1listnum "WP List 3" \l 12947            MR. DENTON:  Mm‑hmm.

1listnum "WP List 3" \l 12948            MR. TASKER:  Not actually directly to the home, that's in a pilot phase.

1listnum "WP List 3" \l 12949            MR. DENTON:  Yes.  No, we're talking about moving it closer to the home but not ‑‑

1listnum "WP List 3" \l 12950            MR. TASKER:  Just moving closer to the home.  Absolutely it's a technology that gives us benefits that way.

1listnum "WP List 3" \l 12951            MR. DENTON:  Is TELUS' IPTV offering one of those nice generation services that would be part of the thrust to get fibre closer to the home?

1listnum "WP List 3" \l 12952            MR. TASKER:  It is certainly one of the factors.  TV can be offered over copper today, though.

1listnum "WP List 3" \l 12953            MR. DENTON:  Yes, but copper is an inherently unsuitable medium for transmission above certain distances; is it not?

1listnum "WP List 3" \l 12954            MR. TASKER:  There are certainly restrictions that copper provides or that copper has in terms of offering hi‑speed services.

1listnum "WP List 3" \l 12955            MR. DENTON:  Yes.  So closer to the home really in some sense means closer to the home than the central office?

1listnum "WP List 3" \l 12956            MR. TASKER:  Yes.

1listnum "WP List 3" \l 12957            MR. DENTON:  Thank you.  Is there any general tariff item offered by TELUS by which access to sub‑loops is made available today as an unbundled service?

1listnum "WP List 3" \l 12958            MR. TASKER:  Can you define sub‑loop?

1listnum "WP List 3" \l 12959            MR. DENTON:  Yes.  A sub‑loop is ‑‑ good question.  A sub‑loop is any connection between the home, shall we say, and any point in the TELUS network short of a central office.

1listnum "WP List 3" \l 12960            MR. TASKER:  No, we do not offer that as a service.

1listnum "WP List 3" \l 12961            MR. DENTON:  Thank you.

1listnum "WP List 3" \l 12962            MR. GRIEVE:  Just to be clear, Mr. Denton, this would be at a pedestal or something like that ‑‑

1listnum "WP List 3" \l 12963            MR. DENTON:  In a junction box or whatever they call them?

1listnum "WP List 3" \l 12964            MR. GRIEVE:  Yes, what the municipalities call street furniture.

1listnum "WP List 3" \l 12965            MR. DENTON:  Street furniture, thank you.  I shall recall that.

1listnum "WP List 3" \l 12966            So then can we take it for a fact that competitive services supplied by ISPs need to be supplied through central office connections, connections in the central office?

1listnum "WP List 3" \l 12967            MR. TASKER:  If they are using the ILEC unbundled loop facility as the means to get there ‑‑ of course, there are other means, as we have mentioned before, but if they are using that technology, then yes, it is from the central office.

1listnum "WP List 3" \l 12968            MR. DENTON:  Okay.  So is it reasonable to infer that the opportunities to compete are being hindered by the movement of service provision from COs to remotes and sub‑loops?

1listnum "WP List 3" \l 12969            MR. GRIEVE:  The ability to compete by whom?

1listnum "WP List 3" \l 12970            MR. DENTON:  By non‑incumbent operators such as ISPs.

1listnum "WP List 3" \l 12971            MR. GRIEVE:  So you are suggesting that by the ILEC seeking to move closer ‑‑ move fiber closer to the home in order to compete with the cable companies and provide a better service that somehow competition is being diminished?

1listnum "WP List 3" \l 12972            MR. DENTON:  I am suggesting that the ability to compete for other forms of carrier than the cable and the telco is being diminished, yes.

1listnum "WP List 3" \l 12973            MR. GRIEVE:  Over that particular line, yes, but there are other technologies that they can avail themselves of to compete.

1listnum "WP List 3" \l 12974            MR. DENTON:  Thank you.

1listnum "WP List 3" \l 12975            So the question I would now pose to you is:  What services do you provide today on a wholesale and mandated basis that in your view provide reasonable incentives for competitors to supply for themselves at least a portion of the required facilities?

1listnum "WP List 3" \l 12976            MR. TASKER:  I am not sure how we are supposed to answer that question.

1listnum "WP List 3" \l 12977            MR. GRIEVE:  We don't understand it.

1listnum "WP List 3" \l 12978            MR. TASKER:  There are a lot of, I think, embedded assumptions there.

1listnum "WP List 3" \l 12979            MR. DENTON:  Embedded assumptions.  Let me see if I can parse it out.

‑‑‑ Pause

1listnum "WP List 3" \l 12980            MR. DENTON:  I will pass on it.

1listnum "WP List 3" \l 12981            Now, I gather that TELUS is concerned with investment and that you are concerned with making investments and one of the investments you are making is for IPTV over DSL lines; is that correct?

1listnum "WP List 3" \l 12982            MR. TASKER:  That is a development we are taking on, yes.

1listnum "WP List 3" \l 12983            MR. DENTON:  And I take it you are doing it to provide the kinds of services that your competitors, either Bell via satellite or Shaw, are able to offer in your service areas?

1listnum "WP List 3" \l 12984            MR. TASKER:  That is correct.

1listnum "WP List 3" \l 12985            MR. DENTON:  So is it proper to say that you are investing in broadcasting distribution?

1listnum "WP List 3" \l 12986            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 12987            MR. DENTON:  Okay.  And will you be providing the opportunity on a wholesale basis for ISPs to allow them higher speed delivery to do the same thing?

1listnum "WP List 3" \l 12988            MR. TASKER:  I think the question is whether we do that on a mandated basis.  I think the answer is we would definitely be opposed to that.

1listnum "WP List 3" \l 12989            I think whether or not we would set up partnership arrangements with players who come to the table with significant value add, I think we will definitely be interested in setting up arrangements where other players bring valuable components of some sort of ‑‑ whether it is a bundle or a service to the consumers and to the extent that there is significant value they can add that they are in a better position to do, we would obviously be interested in partnership arrangements.

1listnum "WP List 3" \l 12990            MR. DENTON:  Okay.  So if I understand the thrust of the TELUS argument, which has been perfectly clear, the argument has been that the requirement of the forced sharing, as it is called, has been a disincentive to investment, and yet, we observe that TELUS is making investment in the ability to broadcast television programming entirely without regard to the essential services problem.

1listnum "WP List 3" \l 12991            So what does essentiality really have to do with your real incentives to invest?

1listnum "WP List 3" \l 12992            MR. GRIEVE:  Well, our incentives to invest in ‑‑ well, first of all, the incentives to invest that we were talking about primarily were our incentives to invest in Ontario and Quebec mostly, in the telecom market there.  You heard the evidence about us holding back after CDNA and CDN.

1listnum "WP List 3" \l 12993            The incentives in our ILEC territory to invest in facilities that are going to make it possible for us to be in the broadcast distribution business are driven by the intense competition from the competitor Shaw.  It is competition that is driving it.  Competition trumps that.

1listnum "WP List 3" \l 12994            Then you ask but in the face of essential facilities ‑‑ that part of your question I don't understand.

1listnum "WP List 3" \l 12995            MR. DENTON:  Well, I am trying to say what I think is perfectly evident.  The essential facilities doctrine or any interpretation thereof has nothing really to do with your desire and ability to invest.

1listnum "WP List 3" \l 12996            MR. GRIEVE:  Well, first of all, in the ILEC territory, what we are investing in is not an essential facility and we don't expect that it would be unbundled.  Our big concern in ILEC territory would be the possibility of us starting to invest in things and the Commission just turning around, as a matter of course, and unbundling it because somebody asked for it on a mandated basis.

1listnum "WP List 3" \l 12997            MR. DENTON:  So then you are making these investments on the basis of your real perception of competition unaffected by the need to or the lack of need to unbundle and offer them to competitors?

1listnum "WP List 3" \l 12998            MR. GRIEVE:  Well, I don't really understand what you are looking for here in terms of how to answer the question but I will tell you that one of the biggest concerns that I am confronted with by the company often is, well, if we build this, are they going to force us to unbundle it.

1listnum "WP List 3" \l 12999            And our response has been, the broadcasting stuff, that is highly unlikely because the Commission has never done that before.

1listnum "WP List 3" \l 13000            The rest of it, we will fight tooth and nail to prevent that from happening because we don't think it is right, that we are the ones making an investment in these new facilities out in the field to try to compete with the cable companies, for us to be mandated to provide it at some regulated rate.

1listnum "WP List 3" \l 13001            But as you heard Mr. Tasker say, our principal competitor in the broadcast distribution business is Shaw in the wireline side and ExpressVu.  If there is a way that we can better utilize our networking and get it utilized through the use of other service providers that bring something to the table that help us and prevent customers from going to Bell or Shaw and make sure they are our customers, then we are open to talking to them.

1listnum "WP List 3" \l 13002            MR. DENTON:  Okay.  So that segues into the sort of question I would really like to ask.

1listnum "WP List 3" \l 13003            We are going to assume that you get everything you want and three to five years out, TELUS has got it everything it wants out of this proceeding.  What is the world going to look like is sort of the theme for my next set of questions.

1listnum "WP List 3" \l 13004            Is the pathway to the home or business going to be run on the basis rather more like cable television tiers where you pay different rates of ‑‑ different amounts of money per month for a tiered access to the internet or do you expect that the access to the internet would be on the same basis as it is now, that is to say that one has access to all of it?

1listnum "WP List 3" \l 13005            MR. TASKER:  I think it is very difficult to predict.  If we could predict the future and we had a crystal ball, then I think we would be all in better shape in terms of what exactly it is going to look like.  So I am not sure it is worth giving my commentary of what I think the world is going to look like in terms of the structure of our services.

1listnum "WP List 3" \l 13006            But we do know for sure that the players involved in this market are not the players that we think about today, like, for example, what we call the TSPs.  The players are expanding rapidly in terms of players like Microsoft, and as I mentioned before, Google.  These are the players that are going to define the future in many ways.

1listnum "WP List 3" \l 13007            And so I think defining how it is going to look in terms of tiered access of the way we structure service today, I think is a very narrow, narrow focus on looking at what the future will look like.

1listnum "WP List 3" \l 13008            MR. DENTON:  Well, I would suggest for your consideration that is a very important point for consumers because right now they pay a monthly fee to get access to all of it and if in the future they are paying various access like we do for cable television, that is a fundamental change that we might be interested in knowing about and whether your plans encompass this.

1listnum "WP List 3" \l 13009            MR. GRIEVE:  I don't understand how ‑‑ perhaps you could skip to the point of this.  I don't understand what the point is for this particular portion of the hearing or for this hearing.

1listnum "WP List 3" \l 13010            MR. DENTON:  Well, that is interesting.  Well, for instance ‑‑

1listnum "WP List 3" \l 13011            MR. GRIEVE:  We are talking here about access to facilities, right, and you are asking us about retail pricing plans.

1listnum "WP List 3" \l 13012            MR. DENTON:  No, I'm not asking you about retail pricing plans, I'm talking about, fundamentally, something very important that we have gained since 1994.

1listnum "WP List 3" \l 13013            Supposing I'm some Tim Burners‑Lee of the future and I have come up with a World Wide Web equivalent and I want to launch it, now, Burners‑Lee, when he launched the World Wide Web in 1991, he just put up a website and people came to it.

1listnum "WP List 3" \l 13014            Now, in the ideal future of TELUS are the Burners‑Lees of the future going to be negotiating with TELUS in commercial negotiation to be able to launch a product or service across your networks?

1listnum "WP List 3" \l 13015            MR. TASKER:  I think they will be negotiating with a number of different players, so it's not just ‑‑ I mean, if it's deemed to be ‑‑ if we are talking about access, once again, to an essential facility, then I think the definition is pretty clear about what that is.  Otherwise, by definition, there will be alternatives to either other suppliers or other players building various accesses.

1listnum "WP List 3" \l 13016            So, first of all, if you look at the forborne market today ‑‑ over half of our wholesale business today is forborne ‑‑ there's hundreds of small players who buy services from TELUS in a commercially negotiated arrangement, and there's ‑‑ then there are customized relationships, in terms of the partnership and what value they bring to the table.

1listnum "WP List 3" \l 13017            I don't see that changing.  And certainly as we start to move away from the tariffed and mandated regime of some of these underlying elements, I don't see anything different taking place there, in terms of TELUS being very willing and eager to negotiate with many, many different players, small and large, in terms of leveraging our facilities to make sure that as much as possible of the business overall is going across TELUS facilities versus the numerous alternatives that there will be out there, so...

1listnum "WP List 3" \l 13018            I mean, the sense I get is there's a fear that TELUS will just stop negotiating and stop offering services, and, like I said, if you look at the forborne market today that's just not the case.

1listnum "WP List 3" \l 13019            MR. DENTON:  I agree with what you are saying.  My concern is actually that right now, when I get a monthly subscription to the Internet, I get every website available to me that's not otherwise censored.

1listnum "WP List 3" \l 13020            Now, when I subscribe to cable television, I get a distinctly different kind of plan.  I get tiers, rates and packages, whereby I get access to some of it.

1listnum "WP List 3" \l 13021            MR. TASKER:  Yes.

1listnum "WP List 3" \l 13022            MR. DENTON:  So where do you want to drive this?  Do you want to drive the Internet to, basically, a tiered package solution?

1listnum "WP List 3" \l 13023            MR. TASKER:  No.  I would say the world is looking more like what the Internet is looking like, as opposed to anyone that has ‑‑ I mean, the cable companies, of course, are coming from a monopoly environment for cable television service, so...that's what monopolies result in, and we don't have a monopoly here for the Internet access.

1listnum "WP List 3" \l 13024            THE CHAIRPERSON:  Mr. Denton, I think you have gone far enough.  This is wholesale prices, we are not talking retail Internet.  I mean, you got your question in, I think, but it should return to the main thrust of this inquiry.

1listnum "WP List 3" \l 13025            MR. DENTON:  Actually, that completed my questioning, sir.

1listnum "WP List 3" \l 13026            Thank you.

1listnum "WP List 3" \l 13027            THE CHAIRPERSON:  Thank you.

                 Mr. Grieve, I just want to get back to one of the questions Mr. Denton raised here with the whole issue of disincentive.  I asked the same question to Bell, and maybe I have misinterpreted it, but my answer was that ‑‑ I said, why is this a disincentive if you have one input price, which is actually lower than market price surely?  I find it strange that you call this a disincentive.

1listnum "WP List 3" \l 13028            And after a bit of back and forth, essentially, it came out to control.  He said, you know, we want to build the access, we want to control it and we want to give access to those people whom we have on terms that we negotiate, rather than having that.  And that's really what, at the bottom line, was their main concern rather than having to build out a network and being mandated to share it with others.

1listnum "WP List 3" \l 13029            Is that at the bottom of your thrust, as well?

1listnum "WP List 3" \l 13030            MR. GRIEVE:  I'm just trying to remember that exchange with Bell.  Maybe you could help me.

1listnum "WP List 3" \l 13031            THE CHAIRPERSON:  It was Mr. Bibic, and I really basically said, I mean, where is the disincentive?  You are getting an input price cheaper than you would normally get it.

1listnum "WP List 3" \l 13032            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 13033            THE CHAIRPERSON:  Why is that so ‑‑ I mean I can understand from a public good point of view ‑‑

1listnum "WP List 3" \l 13034            MR. GRIEVE:  Okay.

1listnum "WP List 3" \l 13035            THE CHAIRPERSON:  ‑‑ from an efficiency, sir ‑‑

1listnum "WP List 3" \l 13036            MR. GRIEVE:  Yes.

1listnum "WP List 3" \l 13037            THE CHAIRPERSON:  ‑‑ a competition, sir, yes, this is suboptimum, I understand, but why is it suboptimum for Bell?  And he said, Well, it's ‑‑ you know, you have to look at it in terms of running your network ‑‑

1listnum "WP List 3" \l 13038            MR. GRIEVE:  Right.

1listnum "WP List 3" \l 13039            THE CHAIRPERSON:  ‑‑ controlling, your network and determining where you are going, and that's really what, if I understood him correctly, was the main driver.

1listnum "WP List 3" \l 13040            MR. GRIEVE:  Yes.  And thanks, I remember the discussion now.

1listnum "WP List 3" \l 13041            For us, in our non‑ILEC territory, our original plan, as Mr. Fleiger mentioned last Wednesday, was to roll out the services and roll out the, you know, access and transport, and all of those things, and then we got slowed down in that because of CDNA and CDN.

1listnum "WP List 3" \l 13042            And as I explained to counsel for MTS Allstream, it didn't make much sense for us to continue building, because that was more expensive, because our competitors, like MTS Allstream, were now going to be getting the advantage of that.  So in order to stay competitive, at least in the short term, we had to do that.

1listnum "WP List 3" \l 13043            So it does, in the final analysis, come down to control over the customer experience, as Mr. Fleiger said.  And from that perspective, it's interesting that we have invested a lot of capital investment in collocations, which then kind of gets you stuck in the central office of the other carrier.

1listnum "WP List 3" \l 13044            And, you know, I have also been told that, once you lease a facility and you get that in there, it's very difficult to pull yourself off it because you have to make a whole bunch of other investments to do that.

1listnum "WP List 3" \l 13045            So, really, for us, it's having control over the customer experience, and it's also not being dependent on another carrier and basically being in their footprint all the time.

1listnum "WP List 3" \l 13046            THE CHAIRPERSON:  Yes, that leads me to another question which Mr. Denton tried to ask, but differently.

1listnum "WP List 3" \l 13047            Assuming you get everything, we accept your spin and you get a five‑year freeze of that, what will TELUS in that new environment do that it doesn't do right now?

1listnum "WP List 3" \l 13048            MR. TASKER:  Well, there's a number of differences.  One is it makes our freedom to invest in innovative and growth networks less hampered because we have less to worry about, in terms of precedent setting, in terms of offering other customers the same thing.  It makes negotiations a lot more free‑flowing, in terms of partnerships that we can build, in terms of ‑‑ once again, not having to worry about whether this partnership is going to then be mandated to offer to everybody.  And those are very, very key business issues that get in the way right now of our business.

1listnum "WP List 3" \l 13049            I mean, we don't ever believe we will build an entire network that's for sure.  We will always be dependent on other suppliers.  The intent is to be less dependent on Bell, more dependent on players like the telcos or more dependent on other technologies.

1listnum "WP List 3" \l 13050            And, once again, we believe, we will be fine negotiating those in commercial terms with those players.

1listnum "WP List 3" \l 13051            MR. GRIEVE:  I will just add one thing, Mr. Chairman.  What will be different in many ways, it will be more of the same, because we already ‑‑ one of our most successful wholesale services is one that was never mandated, it was one that we developed ourselves, and that's operator services.

1listnum "WP List 3" \l 13052            This is kind of a crucial thing for a competitor to be able to provide.  We provide our wholesale operator services to many competitors now and we are quite proud of the service, in fact we are providing it overseas, as well.

1listnum "WP List 3" \l 13053            So our wholesale group looks for wholesale opportunities on the forborne services area today, and I don't see that changing.

1listnum "WP List 3" \l 13054            THE CHAIRPERSON:  Yes, but if I understand Mr. Tasker correctly, it's not going to lead to massive change, it's just leads to more flexibility.  We are not going to see you suddenly rolling out a major network in the Bell territory or Atlantic Canada or whatever, it's just you have more freedom ‑‑

1listnum "WP List 3" \l 13055            MR. TASKER:  Yes, that's true.

1listnum "WP List 3" \l 13056            THE CHAIRPERSON:  ‑‑ you are going to go where you want.

1listnum "WP List 3" \l 13057            MR. TASKER:  I think it will make some significant change in architectures.  I mean, the current CDN promotes an architecture which use a TDM circuit, as Mr. Denton was referring to, and then put Ethernet on top of it, which is quite an inefficient way, actually, architecturally, to build services.

1listnum "WP List 3" \l 13058            So it will likely change some of those architectures and we will be much more willing to ‑‑ wanting to negotiate with Bell, if we do use Bell, or other players, on not having to use this layered arrangement, as an example.

1listnum "WP List 3" \l 13059            So there's some significant architectural changes we will be making.

1listnum "WP List 3" \l 13060            THE CHAIRPERSON:  Thank you.

1listnum "WP List 3" \l 13061            Any questions?

1listnum "WP List 3" \l 13062            MR. McCALLUM:  Yes, Mr. Chair.

1listnum "WP List 3" \l 13063            THE CHAIRPERSON:  Yes.

1listnum "WP List 3" \l 13064            MR. McCALLUM:  There was reference to the 2006 CRTC Monitoring Report, so for the use of all I suggest we make it CRTC Exhibit 9.

1listnum "WP List 3" \l 13065            THE CHAIRPERSON:  Okay, thank you.

                      EXHIBIT CRTC‑9:  CRTC 2006 Monitoring Report

1listnum "WP List 3" \l 13066            THE CHAIRPERSON:  I gather this ends the cross‑examination of TELUS for the time being, so we will take a five‑minute break to let the next panel set itself up.

1listnum "WP List 3" \l 13067            MR. GRIEVE:  Thank you, Mr. Chairman.

‑‑‑ Upon recessing at 1121 / Suspension à 1121

‑‑‑ Upon resuming at 1129 / Reprise 1129

1listnum "WP List 3" \l 13068            THE CHAIRPERSON:  Okay, let us proceed.

1listnum "WP List 3" \l 13069            Madam Secretary.

1listnum "WP List 3" \l 13070            THE SECRETARY:  The next panel of witness for MTS, Counsel Song, you will present your witness?

1listnum "WP List 3" \l 13071            MS SONG:  Yes.  Monica Song, again, on behalf of MTS Allstream Inc.

1listnum "WP List 3" \l 13072            At my right this afternoon is Mr. Chris Peirce, Chief Regulatory Officer of MTS Allstream.  To my left is my co‑counsel, Michael Koch.

1listnum "WP List 3" \l 13073            I will be presenting the MTS Allstream Inc. panel this morning.  I will start in the back row.  Assisting the panel today, starting closest to me, is Mr. Jamie Lefkowitz, he is Senior Manager, Carrier Relations for MTS Allstream.  Right beside him, seated right next to him is Mr. Bernie Lefebvre of Wall Communications.

1listnum "WP List 3" \l 13074            Next I will be presenting our experts.  First, closest to the commissioners in the back row is Lee L. Selwyn.  Dr. Selwyn is President and Founder of Economics and Technology Inc.  He is an internationally recognized authority on telecommunications economics, regulation and public policy.  He has appeared as an expert in a number of CRTC proceedings, at the U.S. FCC, the U.S. Congress and before more than 40 state commissions across the United States.  He has served as a consultant to the CRTC on several occasions and was an invited speaker at the Canadian Telecommunications Policy Review Forum in Ottawa in October, 2005.

1listnum "WP List 3" \l 13075            Dr. Selwyn holds a PhD in Management from the Alfred P. Sloan School of Management, Massachusetts Institute of Technology; a Master of Science in Industrial Management from MIT again; and a BA with Honours in Economics from Queen's College of the City University of New York.

1listnum "WP List 3" \l 13076            Commissioners, Dr. Selwyn has provided two pieces of evidence in this proceeding.  First, is his March 15 direct testimony and, on July 5, supplementary evidence prepared by himself and his colleague, Helen Golding.

1listnum "WP List 3" \l 13077            To Dr. Selwyn's right, again in the back row, is Paul Brisby.  Mr. Brisby is a partner in Tower House Consulting LLP, a London‑based law firm advising communications industries. Mr. Brisby joined THC in 2004 and advises many of the world's leading telecoms and internet companies on UK Telecom's regulation.

1listnum "WP List 3" \l 13078            Before joining THC Mr. Brisby acted as counsel for several telecommunications carriers.  In particular, Mr. Brisby was first head of UK Regulation and then Director of Regulatory Affairs and Public Policy for an alternate carrier, COLT Telecom Group plc with global responsibility.  In that capacity he chaired the Alternative Carrier's Working Group on the UK Communications Act, meeting negotiations with the UK's Department of Trade and Industry.

1listnum "WP List 3" \l 13079            His more recent work at Tower House includes acting for a major carrier on Ofcom's strategic review of telecoms.  He was one of only two lawyers to negotiate directly with both the BT and Ofcom legal advisors on the final form of the Enterprise Act undertakings given by BT to Ofcom.

1listnum "WP List 3" \l 13080            Mr. Brisby also chairs the local‑loop unbundling contract group, leading negotiations with  BT on behalf of the competitive industry.  Mr. Brisby is a qualified solicitor in the City of London.  He was educated at Oxford University and the London College of Law.

1listnum "WP List 3" \l 13081            Again, Commissioners, Mr. Brisby prepared twp pieces of evidence on behalf of MTS Allstream in this proceeding.  The first, dated March 15, is the regulation of fixed telecoms networks and services in the UK.  And on July 5 he submitted supplemental evidence in reply to Bell Canada's Gilbert & Tobin NCRA reports.

1listnum "WP List 3" \l 13082            Next, I will turn to the business panel presented today on behalf of MTS Allstream Inc.  Leading the business panel we have Mr. John A. MacDonald and Mr. Kelvin Sheppard.

1listnum "WP List 3" \l 13083            Mr. MacDonald is President, Enterprise Solutions of MTS Allstream Inc.  In this role he is responsible for driving the efforts of the company in the enterprise and mid‑sized business telecommunications markets across Canada.  He joined Allstream in 2002 as President and Chief Operating Officer.  Mr. MacDonald has over 30 years experience in communications and telecommunications industries.  He has held senior executive positions with Leitch Technology Corporation, a leading provider of high technology products and solutions to the global broadcasting industry, Bell Canada and, before that, in NBTel.

1listnum "WP List 3" \l 13084            Mr. MacDonald holds a Bachelor of Science in Electrical Engineering from Dalhousie University as well as a Bachelor of Engineering from the Technical University of Nova Scotia.

1listnum "WP List 3" \l 13085            Mr. Kelvin A. Sheppard is President, Consumer Markets for MTS Allstream Inc. He is seated second from the left.  As President, Consumer Markets, Mr. Sheppard is responsible for consumer and small business markets as well as ILEC sales, service and operational support for customers in Manitoba.  He also oversees the operations of AAA Alarm Systems Ltd., which provides home and business security services in Western Canada.

1listnum "WP List 3" \l 13086            Mr. Sheppard joined Manitoba Telecom Services in December, 2000 as Vice‑President, Network Services and Chief Technology Officer.  His previous career included nearly 20 years with Saskatchewan Telecommunications in various senior executive roles.

1listnum "WP List 3" \l 13087            Mr. Sheppard is a registered professional engineer and a member of the Association of Professional Engineers and Geoscientists of Manitoba.

1listnum "WP List 3" \l 13088            Next, Brent Mooney, Senior Vice‑President, Finance, Enterprise Solutions.  He is seated in the front row closest to the commissioners.  Mr. Mooney has more than 20 years experience working in finance.  For 10 years prior to joining MTS Allstream in August, 2006 Mr. Mooney held many executive roles with BCE Inc., most recently as Vice‑President, Finance, Divisional CFO, Bell Mobility.  During his tenure in the BCE group Mr. Mooney held senior positions with Financial responsibility for Bell Globemedia, Bell Nexxia and Bell Canada.

1listnum "WP List 3" \l 13089            Mr. Mooney holds a Bachelor of Mathematics Honours, specializing in Accounting and Operations Research from the University of Waterloo.  He is a Chartered Accountant and holds a Canadian Tax Foundation designation.

1listnum "WP List 3" \l 13090            Ron Rout, Vice‑President, Access Management and Carrier Services.  He is seated in the front row closest to me.  Mr. Rout has worked in the telecommunications industry for over 15 years in various leadership roles at Bell Canada and MTS Allstream Inc.  Since joining MTS Allstream in 2000 Mr. Rout has held roles in Customer Service and Network Services accumulating responsibilities that include the provisioning of voice, data, IP and interconnection services for customer networks and, more recently, the introduction of VoIP‑based services.

1listnum "WP List 3" \l 13091            In his current capacity as Vice‑President, Access Management and Carrier Services Mr. Rout is responsible for the day to day interface with incumbent and alternate access and transport suppliers, the management of agreements with municipalities, building landlords and rights‑of‑way holders, as well as leading the MTS Allstream Carrier Services group which provides competitor services within Manitoba.

1listnum "WP List 3" \l 13092            Last but not least, in the middle of the front row, I present to you Ms Theresa Griffin‑Muir, Vice‑President, Regulatory Affairs.

1listnum "WP List 3" \l 13093            Ms Griffin‑Muir has developed and directed the implementation of MTS Allstream's regulatory strategy.  She has extensive experience in and knowledge of the telecommunications industry.  Prior to joining MTS Allstream she worked at Bell Canada and held progressively more senior positions within that company.

1listnum "WP List 3" \l 13094            Those are the MTS Allstream Inc. witnesses.

1listnum "WP List 3" \l 13095            Madam Secretary, may I ask that they now be affirmed?

AFFIRMED:  BRENT MOONEY

AFFIRMED:  JOHN MACDONALD

AFFIRMED:  TERESA GRIFFIN‑MUIR

AFFIRMED:  KELVIN SHEPPARD

AFFIRMED:  RON ROUT

AFFIRMED:  PAUL BRISBY

AFFIRMED:  LEE SELWYN

1listnum "WP List 3" \l 13096            THE SECRETARY:  Thank you very much.

1listnum "WP List 3" \l 13097            Now, for the benefit of our listeners, I am informing that the Competition Bureau withdrew its intention to cross‑examine the MTS panel.  We will move forward with Counsel Hofley and Daniels for The Companies.  Thank you.

1listnum "WP List 3" \l 13098            THE CHAIRPERSON:  Mr. Hofley, go ahead, or Mr. Daniels, whoever.

EXAMINATION / INTERROGATOIRE

1listnum "WP List 3" \l 13099            MR. DANIELS:  Thank you very much, Mr. Chair.  It is Mr. Daniels, sir, and I am going to start.

1listnum "WP List 3" \l 13100            I would like to ask you a couple of questions about the Commission's 6 buckets.  And specifically, I would to start in understanding about bucket 3.

1listnum "WP List 3" \l 13101            Now, for ease of reference we have handed out a compendium and you can find the Commission's letter of October 3, 2007 there at tab A.  It just maybe helpful to have that handy because I am going to want to read from that in a second.

1listnum "WP List 3" \l 13102            Now, the reason why I am asking these questions partly is, although you haven't filed the revised opening statement ‑‑ as a result of this letter parties were given the opportunity to do that ‑‑ and so I would like to explore your understanding of bucket 3 as a result of the fact that I haven't heard from you guys yet on this.

1listnum "WP List 3" \l 13103            Specifically, I would really like to ask you about the last sentence in bucket 3.  So this is services subject to be phased out.  The last sentence says:

                      "Provision would also be made for a carrier at the end of the transition period and at its discretion to: 1) continue to offer the service pursuant to a tariff; 2) file and application for forbearance; or 3) file an application to withdraw the service." (As Read)

1listnum "WP List 3" \l 13104            So I would like to understand your position on the second option, which is filing an application for forbearance.  Does MTS envision that it would be able to write in if we, for example, filed an application at the end of the transition period to remove a particular service, to have it forborne I should say, not to remove it, but to have it forborne from regulation, does MTS envision that it would be able to write in and oppose that application?

1listnum "WP List 3" \l 13105            MS GRIFFIN‑MUIR:  I guess it would depend really on the circumstances under which it was removed.  If you are suggesting that the service is determined as a result of this proceeding to be not essential and also there is no longer a requirement that the service continue to be regulated, then probably not unless there is some opposition.

1listnum "WP List 3" \l 13106            But if it were simply a question that you decided there were sufficient alternative sources of supply and that Bell Canada, in the provision of that particular service, no longer had significant market power, in other words would meet the criteria for forbearance under section 34, it would depend on whether on not we agreed with you in that assessment.  And, based on that, we would or would not oppose your application.

1listnum "WP List 3" \l 13107            MR. DANIELS:  Okay.  Just so I understand this a little clearer, Ms Muir.  I understand your second point.  But I am not sure that the second point applies, because what we are talking about here would be the Commission determination in this proceeding that a service falls into bucket 3.  So I am open to interpretation, I want to hear your understanding. My understanding of that, that means it is non‑essential service subject to phase out.  That is the title there.

1listnum "WP List 3" \l 13108            So given that they put a service in bucket 3, at the end of this proceeding, at the end of the transition period I just want to confirm and I think you said this but I want to confirm that you are saying, you know, if we apply to have it forborne, because the determination would have already been made, it would be automatically granted.  There wouldn't be an opportunity, you wouldn't intervene and come in and say we don't think it should be forborne?

1listnum "WP List 3" \l 13109            MS GRIFFIN‑MUIR:  I think what I said was it would depend on how it was characterized in the decision.  So if it is characterized as not essential and a transition period of a certain amount of time was put in place, at the end of that transition period the notion would be that something would have happened in the market to continue to deem it not essential, then we probably wouldn't oppose if that something (i.e. there were alternative sources of supply) happened, then we would agree that you could withdraw the service or, if in fact that is what the Commission determined at the outset, that irrespective ‑‑ although, I would never undertake not to oppose under those circumstances ‑‑ irrespective of what turned out in the market you would get to withdraw the service.

1listnum "WP List 3" \l 13110            MR. DANIELS:  Okay.  So, if I understand, your first part is it is kind of a conditional phase out, it is conditional on certain factors happening in the market.  And then as for your second one, you are saying well if they actually determine, which is I think what bucket 3 is, we are determining now it is not essential and, you know, here is the phase out.  Then you said I would never undertake not to oppose.

1listnum "WP List 3" \l 13111            So that is really my question.  Are you suggesting that you always have the right to come back at the end of the period, despite what they determine now, and when we would apply for forbearance at the end of the transition period you would have the right to oppose?  That is my question.

1listnum "WP List 3" \l 13112            MS GRIFFIN‑MUIR:  Well, I think what I am really saying is that the transition period or even the determination as not being essential would be predicated on a certain definition and certain criteria, either based on our criteria where there would actually a demonstration that the incumbent service provider didn't have significant market power in the provision of that particular underlying facility or service or on some other criteria or definition that..

1listnum "WP List 3" \l 13113            For example, you are suggesting that there would hopefully be some sort of negotiation or a build‑out of facilities during the transition period.  And I would think on the latter case, if whatever we were hoping would transpire in the market did not transpire, it would be open to everybody to oppose because, of course, our goal here is to have competition, not just to allow incumbent carriers to withdraw certain services and only make them available if they choose to.

1listnum "WP List 3" \l 13114            MR. DANIELS:  Okay.  So what you have here is it conditional on whatever is expected to happen.  Now, let us just take that for a moment and let me understand something.  If MTS opposed such an application at the time on whom would the onus lie for proving that forbearance should or should not be granted?

1listnum "WP List 3" \l 13115            MS GRIFFIN‑MUIR:  Well, I think the onus always lies on the applicant who makes the application.

1listnum "WP List 3" \l 13116            MR. DANIELS:  Ms Muir, what are we doing here, like what are we deciding here in this proceeding?  Because if we are going to go through this all again with applications now for anything that have to be forborne and the onus is on us and you are going to say, oh, the conditions that I think should have been met and materialized in the market didn't happen and so on and therefore I didn't build or whatever the answer is.  What is the purpose of this proceeding then?  What are we doing here under your interpretation of what bucket 3 is about?

1listnum "WP List 3" \l 13117            MS GRIFFIN‑MUIR:  I think those are two different questions actually, what are we doing here and what is bucket 3 all about?  So we are here to determine what is the appropriate definition and, as a result of that, what services should be determined to be essential to promote investment and innovation in telecommunications networks and to incent competition.  So that is what I think we are here for.

1listnum "WP List 3" \l 13118            And what is non‑essential service subject to phase out, would be should there be any services determined to be non‑essential?  One of the categories that the Commission would allocate services into as a consequence of this proceeding and they would actually probably, with that, incorporate some sort of transition period with guidelines as to what:  a) would be expected to transpire at the end of them; and b) the process for actually removing these services from regulation.

1listnum "WP List 3" \l 13119            MR. DANIELS:  Okay, I guess ‑‑

1listnum "WP List 3" \l 13120            THE CHAIRPERSON:  Ms Griffin‑Muir, could I ask the question which I think is on his mind, but for some reason it is not being put bluntly?

1listnum "WP List 3" \l 13121            Bell's submission makes it quite clear that this bucket 3 test at the end is wrong. If it is just a conditional phase out at the end of three or five, whatever it is, that is it, the market is forborne, let her rip, that is their position.

1listnum "WP List 3" \l 13122            What is your position on that?

1listnum "WP List 3" \l 13123            MS GRIFFIN‑MUIR:  Well, actually, our position is that if it was determined that ‑‑ because Bell's position is that everybody will be able to negotiate or there would be replication or further investment in facilities.

1listnum "WP List 3" \l 13124            If that didn't transpire, we wouldn't just say let her rip.  That's essentially our position.

1listnum "WP List 3" \l 13125            THE CHAIRPERSON:  Assume, as a service, we say it's non‑essential.  It goes for five years.  There might be price increases X or Y, or whatever, in years three, four and five.  That's what the Commission says, end of story.

1listnum "WP List 3" \l 13126            And at the end of it, the market is forborne, according to Bell's submission.

1listnum "WP List 3" \l 13127            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 13128            THE CHAIRPERSON:  Could you live with a scheme like that or not?

1listnum "WP List 3" \l 13129            MS GRIFFIN‑MUIR:  No.

1listnum "WP List 3" \l 13130            Go ahead, John.

1listnum "WP List 3" \l 13131            MR. MacDONALD:  One of the issues, of course, is that in many cases the services are provided to customers under extended multi‑year contracts.  There is not just the existing contracts that would be in existence at that point in time, but what do you do when you are actually faced with a contract term that is longer than the transition time?

1listnum "WP List 3" \l 13132            Where do you anticipate that the prices are going to be or what the alternative sources of supply are going to be when the transition time is up?

1listnum "WP List 3" \l 13133            In effect, what it will do is there will be less competition in the environment that I could visualize in that transition period for certain kinds of businesses.  In particular, I'm looking at multi‑location kinds of customers.

1listnum "WP List 3" \l 13134            You are not going to know exactly what prices you are going to be able to bid.

1listnum "WP List 3" \l 13135            THE CHAIRPERSON:  Okay.  But what do you then suggest that we as a Commission should do?

1listnum "WP List 3" \l 13136            We have applied whatever test we agree on.  We have determined this service is not essential and we say it is subject to a phase‑out.

1listnum "WP List 3" \l 13137            Now how do we work in with the existing commercial agreements that you talk about?

1listnum "WP List 3" \l 13138            MR. MacDONALD:  I think in terms of operating in that particular marketplace, for sure I would like some predictability that existing contracts are going to be fulfilled, and we would like to have some predictability and some determinism in terms of what the input costs are going to be associated with those.

1listnum "WP List 3" \l 13139            I think it is also important that before we actually move to the new environment that we actually have something that has been negotiated, something that is acceptable.

1listnum "WP List 3" \l 13140            THE CHAIRPERSON:  Back to you, Mr. Daniels.

1listnum "WP List 3" \l 13141            MR. DANIELS:  Thank you, Mr. Chair.

1listnum "WP List 3" \l 13142            My purpose in this next section is to show that MTS is basically an outlier to the most basic principles that almost all the parties can agree to in this proceeding relating to negotiating off tariff during the transition.

1listnum "WP List 3" \l 13143            And it is actually going to come back to something you just said, Mr. MacDonald.

1listnum "WP List 3" \l 13144            But let's first get some facts straight.

1listnum "WP List 3" \l 13145            Of all the cross‑examining parties, the major parties participating in this proceeding other than Xittel, MTS is the only one to seek a prohibition against negotiating off tariff for non‑essential services during the transition.

1listnum "WP List 3" \l 13146            So let's just be clear that what I'm talking about here is there would still be a tariff default, whatever those terms would be.  Whether there are price increases or not, there is still a tariff default.  But if parties want to make an agreement outside of that tariff for a service that falls into bucket 3, parties could negotiate their own arrangement.

1listnum "WP List 3" \l 13147            Clearly The Companies and TELUS have supported such an activity.  The Bureau supports off‑tariff negotiations and so do the major cable companies, Rogers, Shaw, QMI and Cogeco.  And even CLECs, like Primus Globility and Cybersurf, support the concept.

1listnum "WP List 3" \l 13148            If you want, I will take you through every interrogatory ‑‑ I have them here in the book ‑‑ to show you that that is exactly the case.

1listnum "WP List 3" \l 13149            But MTS does not.

1listnum "WP List 3" \l 13150            So let me first confirm:  Is that still your position that that should not be allowed?

1listnum "WP List 3" \l 13151            MS GRIFFIN‑MUIR:  Yes, that's still our position.  We don't support that, for a number of reasons.

1listnum "WP List 3" \l 13152            MR. DANIELS:  Just a minute ago I heard you say, Mr. MacDonald, that what you need is to have long‑term contracts.  You have to anticipate prices.  We have to see what's going to happen in the future.  So we need some sort of predictability.

1listnum "WP List 3" \l 13153            I'm trying to understand why on earth you would not just allow negotiations.  If something is competitive, there is alternative.  People want to sign a long‑term contract.

1listnum "WP List 3" \l 13154            They can choose to get the tariff if they want; but if they don't and they want to sign a long‑term contract and get that stability, all those things you just listed, why would you say that should be prohibited?

1listnum "WP List 3" \l 13155            MR. MacDONALD:  I guess it is basically our experience in trying to do just that.  We are not against negotiation, but our experience up until now, without somebody holding a hammer, has been not all that fruitful.

1listnum "WP List 3" \l 13156            At the end of the day, even when the wholesale groups within the incumbent telcos may on their own be willing to undertake some of those negotiations, my 30 years of experience in telecom is that at the end of the day, retail trumps wholesale.

1listnum "WP List 3" \l 13157            As a result of that ‑‑ we talk about all sorts of alternative sources of supply and what I believe to be a very simple minded approach that an instance of one can be generalized into an instance of many in terms of this notion of duplicability, which I find completely ludicrous in terms of practical implementations of networks.

1listnum "WP List 3" \l 13158            Really what happens in many cases is that the results of these negotiations take an extended period of time, even as we set out with the best sorts of intentions.

1listnum "WP List 3" \l 13159            The other thing we find is that ‑‑ and I've heard in many cases during this proceeding ‑‑ one of the intentions is to encourage investment; that is, by establishing high wholesale prices, we'll be encouraging investment, which I think does not apply as well.

1listnum "WP List 3" \l 13160            MR. DANIELS:  Mr. MacDonald, let's focus here on the question, because I've got to say, I'm confused.

1listnum "WP List 3" \l 13161            You said that you are not against negotiations, but in fact your position is against negotiations because ‑‑

1listnum "WP List 3" \l 13162            MR. MacDONALD:  In theory, I'm not against negotiations.

1listnum "WP List 3" \l 13163            MR. DANIELS:  Well, you are just looking for a regulatory prohibition that prevents such negotiations.  Then I'm a little bit more confused because you said ‑‑ and maybe I'm just not being clear enough.

1listnum "WP List 3" \l 13164            You understand that the tariff is there.  You can buy off the tariff during transition.  But if someone wants to make an alternative arrangement with the ILEC during that period, your position is that shouldn't be allowed.

1listnum "WP List 3" \l 13165            Now, no one has to make that alternative arrangement.  They can stay on the tariff.  But you guys are saying:  No, you are not allowed to make an alternative arrangement outside of what the tariff is during that period.

1listnum "WP List 3" \l 13166            I'm listening to this and I'm trying to understand, because I hear you make statements like negotiations take time and so on.  And I'm at a loss for your logic between your explanation and your position.  I'm just not seeing the two come together.

1listnum "WP List 3" \l 13167            MR. ROUT:  Maybe I could add something.

1listnum "WP List 3" \l 13168            Our position really is based on the experience that we have had over many years.  We regularly approach the ILECs and the alternate providers in order to negotiate an agreement or get access to a new service type or capability, either in the access or transport.

1listnum "WP List 3" \l 13169            What we find, unfortunately, and part of it comes to the equality of people sitting down at the table.  Can you get to a deal that makes sense for both parties or not?

1listnum "WP List 3" \l 13170            What we have in fact experienced, not just with respect to the delay of timeframes ‑‑ and I think it's clear to everybody that in certain negotiations there has been lengthy timeframes.

1listnum "WP List 3" \l 13171            MR. DANIELS:  Mr. Rout ‑‑

1listnum "WP List 3" \l 13172            MR. ROUT:  Hold on just a second.

1listnum "WP List 3" \l 13173            But the practical experience has been that what we inevitably encounter is an agreement that in the end is weighted towards the ILEC and in one form or another actually holds us in and prevents us from providing the service that we are after getting.

1listnum "WP List 3" \l 13174            Ethernet, for example, where we were interested over a timeframe of many years in getting to an arrangement that would be workable between ourselves and the ILECs, has never come to be.

1listnum "WP List 3" \l 13175            We also experienced situations where ‑‑

1listnum "WP List 3" \l 13176            MR. DANIELS:  Mr. Rout ‑‑

1listnum "WP List 3" \l 13177            MR. ROUT:  Just one second.

1listnum "WP List 3" \l 13178            MR. DANIELS:  I think we should just stick to the areas of the question.

1listnum "WP List 3" \l 13179            The question isn't about could you make negotiations about what had happened.  The question was just about the prohibition against it.

1listnum "WP List 3" \l 13180            What I'm trying to understand ‑‑ and I'll ask this one last time.  I still haven't heard an explanation.  You want to go on to say how you can't make arrangements and so on.  That's not my question.

1listnum "WP List 3" \l 13181            Everyone else, everyone else in this room ‑‑ with the exception of Xittel, I have to admit.  Everyone else in this room said let it happen.  Cybersurf, all the cable companies, Primus Globility.  You are the ones who are saying no.

1listnum "WP List 3" \l 13182            And it's not a question of can you reach a deal, because if you can't reach a deal, you still have the tariff.  But you are saying they should not be allowed to make arrangements.

1listnum "WP List 3" \l 13183            So everything you have said, no one has given me an explanation.

1listnum "WP List 3" \l 13184            Now if we don't have one, fine, let's just move on.  But unless you have something that explains why an arrangement that is made should not be allowed, then I'm at a loss.

1listnum "WP List 3" \l 13185            So we can move on.

1listnum "WP List 3" \l 13186            MS GRIFFIN‑MUIR:  It is actually based on our experience.  To create that certainty for everyone in the market that we all understand what the price point is and what conditions can be made with the ILEC through that time period.  We know there is a certain price in the market for that particular service or facility during the transition period.

1listnum "WP List 3" \l 13187            MR. DANIELS:  Okay, I understand.  So it's a certainty that everyone gets the same price for a conditional, for something that's not central.

1listnum "WP List 3" \l 13188            All right, let's move on.

1listnum "WP List 3" \l 13189            As I understand your proposal, all central facilities should be offered at phase two plus a mark‑up of no greater than 15 per cent.

1listnum "WP List 3" \l 13190            Is that correct?

1listnum "WP List 3" \l 13191            MS GRIFFIN‑MUIR:  Yes, that's our position.  We just take the current pricing definition of essential, and that's the current pricing definition.

1listnum "WP List 3" \l 13192            MR. DANIELS:  And you have proposed a list of essential facilities and services in Appendix C of your March 15th submission.

1listnum "WP List 3" \l 13193            Could I get you to turn to that for a moment, specifically to Appendix C, page 4, of that March 15th submission.

1listnum "WP List 3" \l 13194            Let me know when you have it.

‑‑‑ Pause

1listnum "WP List 3" \l 13195            MS GRIFFIN‑MUIR:  I have that; thanks.

1listnum "WP List 3" \l 13196            MR. DANIELS:  Just looking at the bottom ‑‑ and this is the list of all your essential services, as I understand it.

1listnum "WP List 3" \l 13197            I'm interested in your last box, which is the Joint Interconnection and Connectivity in Service.  You have a heading there saying Resale and Sharing.

1listnum "WP List 3" \l 13198            Do you see that at the bottom?

1listnum "WP List 3" \l 13199            MS GRIFFIN‑MUIR:  Yes.  Actually, just to prevent you from going on, this was the list in a preliminary sense prior to our analysis.  We would not include those particular services as essential.

1listnum "WP List 3" \l 13200            MR. DANIELS:  Just so I'm clear, in terms of Centrex business local service and mega link service, you are not proposing that they are essential.

1listnum "WP List 3" \l 13201            MS GRIFFIN‑MUIR:  No.  I think what we were saying, and in the evidence we say that.  It is simply a question of when we looked at the way the service is provided to competitors, it's provided in a manner that demonstrates dominance in the market by the incumbent.

1listnum "WP List 3" \l 13202            But no, we are not proposing those services be essential.

1listnum "WP List 3" \l 13203            THE CHAIRPERSON:  Mr. Daniels, I notice it is noon.  Unfortunately, I have a luncheon engagement that I have to honour.  I have been away for a week and I have another job besides doing hearings.

1listnum "WP List 3" \l 13204            So let's break and resume at 1:15.

1listnum "WP List 3" \l 13205            MR. DANIELS:  Excellent; thank you.

‑‑‑ Upon recessing at 1200 / Suspension à 1200

‑‑‑ Upon resuming at 1316 / Reprise à 1316

1listnum "WP List 3" \l 13206            THE CHAIRPERSON:  Okay, Mr. Daniels, continue.

1listnum "WP List 3" \l 13207            MR. DANIELS:  Thank you, Mr. Chair.

1listnum "WP List 3" \l 13208            As I read in all of your press releases and I've put one in that was in one of your interrogatories in Tab M, but it's in every single one of your press releases, so I'm sure in your standard boiler plate you make the statement:

                      "MTS Allstream's extensive national broad band fibre optics spans  more than 24,300 kilometres."  (As read)

1listnum "WP List 3" \l 13209            If you want I'll get you to turn, but I assume you guys are familiar with that figure.

1listnum "WP List 3" \l 13210            MS GRIFFIN‑MUIR:  Yeah, we are, but can you just tell me where you are.  Sorry, I didn't...

1listnum "WP List 3" \l 13211            MR. DANIELS:  I was in Tab M.

1listnum "WP List 3" \l 13212            MS GRIFFIN‑MUIR:  Tab M.  Okay, thanks.

1listnum "WP List 3" \l 13213            MR. DANIELS:  Page 10.  It's just a press release and I went to your boiler plate because that's just one of the ones that are on the record, but I'm really not doing anything more than just the 24,300 figure of that.

1listnum "WP List 3" \l 13214            So, in terms of this 24,300 kilometres, is that figure primarily broken, back bone network connecting between cities or is it connections within cities?

1listnum "WP List 3" \l 13215            MR. ROUT:  That would include back bone and in city fibre.

1listnum "WP List 3" \l 13216            MR. DANIELS:  And I take it you have fibre connections in all of the major Canadian cities.  Is that a fair statement?

1listnum "WP List 3" \l 13217            MR. ROUT:  Yes, we do.

1listnum "WP List 3" \l 13218            MR. DANIELS:  Now, if I could get you to turn to Tab K, which is MTS/Rogers 12 April, '07 No. 2.

1listnum "WP List 3" \l 13219            This is an interrogatory where you state ‑‑ and I'm just looking really at the last couple of lines of this ‑‑ or three last lines of this interrogatory, you state that:

                      "MTS Allstream serves close to 38,000 buildings."  (As read)

1listnum "WP List 3" \l 13220            Do you see the reference there to 38,000 buildings?

1listnum "WP List 3" \l 13221            MR. ROUT:  I see that.

1listnum "WP List 3" \l 13222            MR. DANIELS:  Okay.  And then it goes on to say that:

                      "About 93 per cent of these buildings are served using facilities leased from the ILEC and about six per cent of these buildings are served using MTS Allstream facilities."  (As read)

1listnum "WP List 3" \l 13223            So, if I understand it, you're saying six per cent are self provisioned of the 38,000 and the rest are provided from the ILEC.  Do I have that correct?

1listnum "WP List 3" \l 13224            MR. ROUT:  Six per cent would be we're providing the access directly to the customer premise to give the service, yes.

1listnum "WP List 3" \l 13225            MR. DANIELS:  So, that's what I mean by self provisioned, just so ‑‑ you're using different language, I just want to make sure, self provisioned meaning it's your own facilities right into the building that you're providing to the customer as opposed to leasing something from us; right?

1listnum "WP List 3" \l 13226            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13227            MR. DANIELS:  Okay, so...

1listnum "WP List 3" \l 13228            Now I did some quick math, six per cent of 38,000 is roughly 2,280 buildings and that's outside of Manitoba.

1listnum "WP List 3" \l 13229            So, I don't know if someone wants, can we just ‑‑ because I'm going to use that figure, so I just want to make sure you guys are comfortable with my math.

1listnum "WP List 3" \l 13230            MR. ROUT:  It seems right.

1listnum "WP List 3" \l 13231            MR. DANIELS:  Okay.  Now, I'd like you to turn to Tab L which is the next one, which is Telecom Ottawa's response to Cogeco 12 April, '07, this is Interrogatory No. 1, and here this is where Telecom Ottawa is describing its network.

1listnum "WP List 3" \l 13232            And if we look there in the second paragraph that they're:

                      "...an alternative telecom provider focused mainly making available the user/client's fibre facilities in Ottawa, Gatineau, Cornwall and Kingston."  (As read)

1listnum "WP List 3" \l 13233            So, they're in four cities.  And if we drop down to the fourth paragraph:

                      "Currently Telecom Ottawa has some 1,000 kilometres of root core backbone fibre lit and through fibre laterals connecting some 950 buildings which are self supplied."  (As read)

1listnum "WP List 3" \l 13234            Do you see that there?

1listnum "WP List 3" \l 13235            MR. SHEPPARD:  We see the reference.

1listnum "WP List 3" \l 13236            MR. DANIELS:  So, here's the thing,  they've got 950 buildings connected in four cities, Ottawa, Gatineau, Kingston and Cornwall.  But you operate in all the major centres ‑‑ cities in Canada, you have 24,000 ‑‑ over 24,000 fibre kilometres and you've only built, by my calculations, 2.4 times the amount of buildings as Telecom Ottawa.

1listnum "WP List 3" \l 13237            And just to be clear, so you can see my math, all I did is I took 2,280 and divided it by 950 and I came out to 2.4.

1listnum "WP List 3" \l 13238            So, am I correct in what I'm seeing here?

1listnum "WP List 3" \l 13239            MR. ROUT:  I can't really speak for the Telecom Ottawa number.  I see it there, but yes, that seems to follow.

1listnum "WP List 3" \l 13240            MR. DANIELS:  So, now can we agree that MTS Allstream is the successor of AT&T Canada?

1listnum "WP List 3" \l 13241            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13242            MR. DANIELS:  Sorry.  And MTS Allstream owns all the assets of AT&T Canada I take it; is that correct?

1listnum "WP List 3" \l 13243            MR. ROUT:  Yes, that's right.

1listnum "WP List 3" \l 13244            MR. DANIELS:  Yeah.  You didn't sell off a bunch of fibre or a bunch of access to buildings, did you, since you took over MTS Allstream; did you?

1listnum "WP List 3" \l 13245            MR. ROUT:  Well, certainly over time the network's dynamic, so there would have been changes in the number of buildings that were served, perhaps customers were lost or multiple sites might have been consolidated.

1listnum "WP List 3" \l 13246            MR. DANIELS:  But in terms of access to buildings, you didn't sell off a bunch of ‑‑ like, you haven't sold off any major fibre assets, you know, over the last ‑‑ like, since MTS Allstream ‑‑ MTS Allstream bought...

1listnum "WP List 3" \l 13247            MR. ROUT:  Yeah.  In terms of the back bone and major transport, that would be correct.  In terms of going to an individual building, there would have been some change for sure.

1listnum "WP List 3" \l 13248            MR. DANIELS:  Some change, meaning you sold off a portion ‑‑ a large portion?

1listnum "WP List 3" \l 13249            MR. ROUT:  Well, it's not a matter necessarily of selling, it's a matter of if we have fibre perhaps to test centres or our own buildings which we are no longer resident in, or a customer who moves from one location to another, we may move equipment out of that building.  Since we no longer have a customer present there, we would re‑deploy the facility.

1listnum "WP List 3" \l 13250            MR. DANIELS:  Re‑deploy the facility.  When you say re‑deploy the facility, are you talking about the equipment, or are you talking about you'd pull the fibre out of the building?

1listnum "WP List 3" \l 13251            MR. ROUT:  There would be cases of both.

1listnum "WP List 3" \l 13252            MR. DANIELS:  You'd pull the fibre out of the building.  Okay.  So, let's just see how much of that's gone on.

1listnum "WP List 3" \l 13253            If I can get you to turn to an exhibit that I gave you which is at AA and, Madam Secretary, this is going to be our first exhibit.

1listnum "WP List 3" \l 13254            THE SECRETARY:  It will actually be Exhibit No. 13, though.  Okay.

1listnum "WP List 3" \l 13255            MR. DANIELS:  Oh, I'm sorry.  I meant the first exhibit, I stand corrected, of the afternoon.

1listnum "WP List 3" \l 13256            MR. DANIELS:  If I can get you to turn to, this is at Tab AA, this is AT&T Canada Inc.'s May 6th, 2003 annual information form, and I specifically ‑‑ and the only page that I've given in this book is page 14.

1listnum "WP List 3" \l 13257            Just so we're clear, this is Tab AA not A, we have to ‑‑ it's not in your books.  Sorry, I'm just going to ‑‑

1listnum "WP List 3" \l 13258            THE CHAIRPERSON:  Hang on.  What is going on here?  You didn't get one of these books?

‑‑‑ Off microphone / Hors microphone

1listnum "WP List 3" \l 13259            THE CHAIRPERSON:  Did you get one?

1listnum "WP List 3" \l 13260            MR. DANIELS:  Are we short a book?

1listnum "WP List 3" \l 13261            THE CHAIRPERSON:  How come you didn't get a book?

1listnum "WP List 3" \l 13262            MR. DANIELS:  Oh, I see.  Okay.

‑‑‑ Off microphone / Hors microphone

1listnum "WP List 3" \l 13263            MR. DANIELS:  Okay.  I'm just wondering.  Sue, do we have an extra book for Commissioner...

1listnum "WP List 3" \l 13264            Do we have extra books?  Okay.

1listnum "WP List 3" \l 13265            THE CHAIRPERSON:  After Z comes AA.

‑‑‑ Off microphone / Hors microphone

1listnum "WP List 3" \l 13266            COMMISSIONER CRAM:  Here, I'll show you  ‑‑

1listnum "WP List 3" \l 13267            THE CHAIRPERSON:  You've got it or not?

1listnum "WP List 3" \l 13268            COMMISSIONER CRAM:  He just gave it to us.

1listnum "WP List 3" \l 13269            THE CHAIRPERSON:  Oh, they have it, okay.

1listnum "WP List 3" \l 13270            Then let's proceed.

1listnum "WP List 3" \l 13271            MR. DANIELS:  Okay, sorry about that.

1listnum "WP List 3" \l 13272            So, what I'm interested here at this point is there's a table, AT&T Canada Inc. operational data as of December 31st, 2002.  Do you see that table there?

1listnum "WP List 3" \l 13273            And there the first column in that table says buildings accessed and it has a number here, 3,348 buildings.  Do you see that?

1listnum "WP List 3" \l 13274            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13275            MR. DANIELS:  So, now you're in roughly 2,300 buildings outside of Manitoba is what your testimony is today; correct?

1listnum "WP List 3" \l 13276            And I take it we can quickly dismiss the notion that the difference of the thousand buildings, 2,300 to 3,300, is not due to just Manitoba for AT&T Canada in 2002 I think.  Can we agree on that?

1listnum "WP List 3" \l 13277            MR. ROUT:  Some would have been Manitoba, but not the majority.

1listnum "WP List 3" \l 13278            MR. DANIELS:  Yeah, not counting for a thousand.  So, this is a difference of roughly a thousand buildings which is close to 50 per cent of the total buildings you're in.

1listnum "WP List 3" \l 13279            So, in five years, rather than built to buildings you somehow lost buildings.

1listnum "WP List 3" \l 13280            MR. ROUT:  I think a thousand over 3,000 would have probably been a third, not 50 per cent.

1listnum "WP List 3" \l 13281            MR. DANIELS:  I meant to say that, of your 2,300 today, a thousand, so...

1listnum "WP List 3" \l 13282            But let's just focus.  I take your point.

1listnum "WP List 3" \l 13283            So, but somehow we've gone down by a thousand buildings; is that correct?

1listnum "WP List 3" \l 13284            MR. ROUT:  That's the difference in the number, yes.

1listnum "WP List 3" \l 13285            MR. DANIELS:  Now, could the difference be that you actually have facilities in those thousand buildings or close to those thousand buildings, not every single one, but you are not using those facilities because you've re‑deployed the equipment that you talked about?

1listnum "WP List 3" \l 13286            Is that a possible response as to what's gone on here?

1listnum "WP List 3" \l 13287            MR. ROUT:  Yeah, there's a couple of circumstances.  As I sort of said at the beginning, the network is dynamic and the buildings where we would be present and how we would be present in those buildings would change.

1listnum "WP List 3" \l 13288            So, for example, when we do build into a building, on some occasions we would build a POP site in the building to serve multiple customers, in other arrangements we would build directly to a particular floor or suite.

1listnum "WP List 3" \l 13289            Some buildings can serve, when we set up a POP, we might be able to actually serve multiple buildings within a business centre from one site.

1listnum "WP List 3" \l 13290            So, there can be some difference in calculating of the number.

1listnum "WP List 3" \l 13291            I would suggest to you ‑‑ and I'm not sure exactly where you're trying to get us with the number ‑‑ but in terms of, was there a massive sell‑off of buildings, not to my knowledge there was not.

1listnum "WP List 3" \l 13292            MR. MacDONALD:  Sorry.  It's not clear to me and I'm not sure when I'm reading the reference there, I mean, this is a number of years back, the comment, it says:

                      "It has networked to more than 3,300 buildings..."  (As read)

1listnum "WP List 3" \l 13293            I'm not sure whether this buildings access necessarily assumes what you referred to as self supplied buildings, I'm not sure if that's the case.

1listnum "WP List 3" \l 13294            And, in any case, we don't market to buildings, we market to customers.

1listnum "WP List 3" \l 13295            MR. DANIELS:  I understand that.  But I guess what we're trying to assess in this proceeding is about your ability to build to buildings and we're looking at ‑‑

1listnum "WP List 3" \l 13296            MR. MacDONALD:  No, well...

1listnum "WP List 3" \l 13297            MR. DANIELS:  And, so, what else could it be if it's 3,300 and, you know, if it's not self supplied?

1listnum "WP List 3" \l 13298            MS GRIFFIN‑MUIR:  Well, it could be a combination of self supplied and leased facilities.  So, if you're talking the actual access, that may actually be provisioned through a leased access.

1listnum "WP List 3" \l 13299            MR. DANIELS:  So, you're saying it could be that you went from 3,300 to 38,000 in five years; that's what you're suggesting, because you're now in 38,000 buildings including the leased?

1listnum "WP List 3" \l 13300            MS GRIFFIN‑MUIR:  No, no.

1listnum "WP List 3" \l 13301            MR. DANIELS:  No.

1listnum "WP List 3" \l 13302            MS GRIFFIN‑MUIR:  We're not suggesting that.

1listnum "WP List 3" \l 13303            MR. DANIELS:  Okay.  So...

1listnum "WP List 3" \l 13304            MR. MacDONALD:  It all depends on what's included.  The thing is that we don't have the information in terms of what was included there.

1listnum "WP List 3" \l 13305            MR. DANIELS:  All right.

1listnum "WP List 3" \l 13306            MR. MacDONALD:  But suffice to say that we're not out there, have a program of abandoning buildings or withdrawing facilities, et cetera.

1listnum "WP List 3" \l 13307            MR. DANIELS:  I'm not suggesting that you would, that doesn't make sense.  I guess my question was:  Are there some buildings that you have facilities in that you're not using those facilities and don't count in your numbers because you're using CDN instead?

1listnum "WP List 3" \l 13308            MR. ROUT:  No, I don't believe there would be, no.

1listnum "WP List 3" \l 13309            MR. ROUT:  All right.  So, we just don't know what happened, why the number's gone down by a thousand.

1listnum "WP List 3" \l 13310            MR. ROUT:  Well, again, it's sort of a different calculation.  I'm not entirely sure of the exact detail that went into this number in 2002 but, again, there has been some consolidation, as I said before, in terms of test centres, places where, you know, with the coming together of AT&T and other acquisitions where we would have had multiple POPs within the same building, we would have consolidated those to ensure the network was as efficient as possible and that would account for some of the decrease.

1listnum "WP List 3" \l 13311            MR. DANIELS:  Now, Bell's put forward in this proceeding the proposition that the creation of CDN and lowering of rates for CDN access in 2005 undermined other parties' incentive to invest, at least in the access facilities.

1listnum "WP List 3" \l 13312            Now, I know you disagree with that statement, but other than Bell, when I look through the record of this proceeding, at least seven parties including Atria, NMAX, Hydro One, QMI, SCBN, Telecom Ottawa and TELUS, not to mention The Companies, state that they spent less on access as a result of CDN decisions.

1listnum "WP List 3" \l 13313            And, again, if you want me to, I have all the material here, we can look at that.

1listnum "WP List 3" \l 13314            But throughout the interrogatory process, MTS is the only party to claim the contrary who's actually building facilities, because I know there are some other parties who say otherwise, but you're the only ones who are building facilities.

1listnum "WP List 3" \l 13315            So, I'd like to discuss and understand your position.

1listnum "WP List 3" \l 13316            MS GRIFFIN‑MUIR:  Sorry, can I just ask you to clarify.  You're saying we're the only party that's saying they're building facilities?

1listnum "WP List 3" \l 13317            MR. DANIELS:  No.  My statement was, you're the only one who is contesting the notion about the incentive to invest.

1listnum "WP List 3" \l 13318            Of all the parties who are contesting that notion, you're the only one who's actually building facilities, access; the other parties we haven't ‑‑ based on their evidence aren't building the facilities.

1listnum "WP List 3" \l 13319            In terms of access to actual buildings, you're the only one who, granted you have some facilities we just looked at it, you're the only one.

1listnum "WP List 3" \l 13320            So, that's why I want to explore it.

1listnum "WP List 3" \l 13321            MS GRIFFIN‑MUIR:  I'm just questioning whether that's true or not, not that I think it matters one way or another, but I'm not sure that's a true statement.

1listnum "WP List 3" \l 13322            MR. DANIELS:  Okay.  Well, you can raise that in final argument if you disagree.

1listnum "WP List 3" \l 13323            But in MTS' supplemental evidence, Appendix "I", this is where you basically put in ‑‑ and if I can get you to turn to that for a moment ‑‑ this is where you ‑‑

1listnum "WP List 3" \l 13324            THE CHAIRPERSON:  Which Appendix was it?

1listnum "WP List 3" \l 13325            MR. DANIELS:  Sorry, it's the supplemental evidence, Appendix "I".

1listnum "WP List 3" \l 13326            THE CHAIRPERSON:  "I", okay.

1listnum "WP List 3" \l 13327            MR. DANIELS:  Now, the purpose if I understand of this appendix was to describe the benefits that have flowed from having CDN, impacts on competition and investment and your ability to innovate.  Is that a fair assessment?

1listnum "WP List 3" \l 13328            MS GRIFFIN‑MUIR:  Well, essentially we were saying it didn't cause us to stop making capital investment, contrary to what Bell was saying actually.

1listnum "WP List 3" \l 13329            MR. DANIELS:  Now, if I can get you for a moment to turn to page 5 of that appendix, and let's look at your line in paragraph 16, just so we're clear.

1listnum "WP List 3" \l 13330            The last sentence says:

                      "Suggesting that the decline in capital expenditures in 2002 or 2005 is explained by the Commission's initial or final CDN decision is completely without basis."  (As read)

1listnum "WP List 3" \l 13331            Which is what you're suggesting we're saying, and I don't disagree, we are saying that.

1listnum "WP List 3" \l 13332            Now, in response to this The Companies asked you a question ‑‑ I'm sorry.  In terms of ‑‑ if I could get you to ‑‑ you know, just give me a second.

‑‑‑ Pause

1listnum "WP List 3" \l 13333            THE CHAIRPERSON:  Hang on, Mr. Daniels, we seem to have a problem here.

1listnum "WP List 3" \l 13334            Commissioner del Val.

1listnum "WP List 3" \l 13335            COMMISSIONER del VAL:  Can you just give the reference of the document that you're looking at again?

1listnum "WP List 3" \l 13336            MR. DANIELS:  Sorry.  It's Appendix "I" to MTS' supplemental evidence and I'm at paragraph 16, the last sentence.

1listnum "WP List 3" \l 13337            COMMISSIONER del VAL:  I'm sorry, I think the problem is that our electronic documents are ‑‑

1listnum "WP List 3" \l 13338            COMMISSIONER NOEL:  Incomplete.

1listnum "WP List 3" \l 13339            COMMISSIONER del VAL:  Yes, are not the same as our hard copies, sorry.

1listnum "WP List 3" \l 13340            MR. DANIELS:  Let me give you a minute because I am going to refer back to this Appendix "I" a couple of times, so to the extent that you may want to have it handy, it may be worth taking a minute.

1listnum "WP List 3" \l 13341            THE CHAIRPERSON:  Okay.  So, we're with you, now go.

1listnum "WP List 3" \l 13342            MR. DANIELS:  Okay.  So, now I'd like to turn you in our material to Tab U which is MTS Allstream/The Companies 19 July, 07‑40, and in this interrogatory The Companies asked you to indicate whether the percentage decline ‑‑ you can see it says at the end:

                      "...with supporting data, to indicate whether the percentage decline in MTS Allstream's capital expenditures on access out of incumbent territory between 2002 and 2006 was consistent with, greater than or less than the percentage decline in its total out of incumbent territory capital expenditures in that same period."  (As read)

1listnum "WP List 3" \l 13343            And your answer to this was, if I jump down four lines ‑‑ five lines I should say.

                      "MTS Allstream notes that generally the percentage decline in its out of territory capital expenditures on local access and transport between 2002 and 2006 was roughly the same percentage decline in the total out of territory capital expenditures on network services."  (As read)

1listnum "WP List 3" \l 13344            So, your answer is you spent less but you spent less in the same proportion but you cut back spending on Cap‑ex overall.

1listnum "WP List 3" \l 13345            Is that a fair assessment?

1listnum "WP List 3" \l 13346            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 13347            MR. DANIELS:  Okay.  But now I'd like to go on and see what you mean by access, because your last sentence says:

                      "For the purposes of this response, MTS Allstream defines local access and transport as including deployment of intracity fibre rings and direct builds, co‑location and associated equipment and hub sites and access centres, all of which in MTS' view constitute access."  (As read)

1listnum "WP List 3" \l 13348            Do you see that?

1listnum "WP List 3" \l 13349            MS GRIFFIN‑MUIR:  Yeah, we see that.

1listnum "WP List 3" \l 13350            MR. DANIELS:  Okay.  So for you, spending money on access is building a fiber ring around the city?

1listnum "WP List 3" \l 13351            MS GRIFFIN‑MUIR:  Yes, in part, and I am sure that John and Kevin and Ron can add to why that is the case.

1listnum "WP List 3" \l 13352            Also, we don't necessarily separate out in our financial statements, which is where these numbers would have come from, access into each separate building that we build into.  We just look at the architecture inside the city and define transport as outside.

1listnum "WP List 3" \l 13353            MR. MacDONALD:  So we could have a customer, for example, that might have a data centre in a particular part of the city and we want to provide an extension.  It could be a fairly long extension that may involve extending the fiber ring to provide that access to that particular data centre and so that is the way we would treat that investment, and you are accessing the customer, really.

1listnum "WP List 3" \l 13354            MR. DANIELS:  Right.  And so you are including co‑locations, upgrading, elements in your co‑location area; that also is part of your access spend, as I read this answer?

1listnum "WP List 3" \l 13355            MS GRIFFIN‑MUIR:  Yes.  Yes, it is.

1listnum "WP List 3" \l 13356            MR. DANIELS:  Okay.  Now, to be quite clear, the purpose of this question was to figure out whether you spent less money building local access, in your words, not transport, not co‑locations, not fiber rings around the city, but physical access to the end customers into buildings.  That is what the purpose is.

1listnum "WP List 3" \l 13357            So let's call that, for our purposes of discussion, end user access.

1listnum "WP List 3" \l 13358            MS GRIFFIN‑MUIR:  Okay.  Can I just ask you a question?  You are suggesting we somewhere else defined access to be more narrow?

1listnum "WP List 3" \l 13359            MR. DANIELS:  No, I am just saying when you said here local access, you said capital expenditures on local access and transport, and the question was about access.

1listnum "WP List 3" \l 13360            So I assumed, maybe incorrectly, that you guys put the word "transport" into access and made a distinction on the basis of local access and transport because we didn't ask you anything about transport.  So you redefined or defined ‑‑ maybe it is unfair to say redefine but you put in the word ‑‑ you took the word "access" and put in local access and transport.

1listnum "WP List 3" \l 13361            Fine, I am not quibbling with it.  I just want to get to the purpose of the real question, which is I would like to talk about end user access, building into buildings.

1listnum "WP List 3" \l 13362            And my question is:  Given this clarification that we are really focused to see whether CDN had an impact not on whether you spent money on co‑locations but whether you spent less on building into buildings, was the percentage decline in MTS Allstream's Capex on end user access ‑‑ that is my definition for building into buildings ‑‑ for out of territory between 2002 and 2006 consistent with, greater than or less than the percentage decline in its total out of incumbent territory Capex in that same period?

1listnum "WP List 3" \l 13363            MR. SHEPPARD:  I want to just try to address part of your question to begin with.

1listnum "WP List 3" \l 13364            So first of all, when we talk about networks, access networks are not composed solely of a connection to a end user point.  An access network has many components and when we invest in access, it may be getting closer to the customer, it may not get all the way to the customer or it may go all the way to the customer in terms of a fully owned facility.

1listnum "WP List 3" \l 13365            So we don't in particular go and track access to buildings per se in terms of how we would categorize our capital investment.  We look at investment in the network and in terms of the total investment in the network, access could include a whole number of initiatives.

1listnum "WP List 3" \l 13366            And so I think we answered that question in the context of what an access network really is.  It is not simply kind of the last few feet of a connection to a customer building.  It is, in fact, the total investment required to get to a customer and that could include building out rings, building closer to a customer or building to a particular building.

1listnum "WP List 3" \l 13367            THE CHAIRPERSON:  Is that a long way of saying you don't have that data?

1listnum "WP List 3" \l 13368            MR. SHEPPARD:  Yes, we don't ‑‑

1listnum "WP List 3" \l 13369            THE CHAIRPERSON:  Let's get this moving on.  If you don't have the data, just say it.  We don't need the explanation.  I appreciate you want to give it to explain it but he asked you a very specific question.  Do you have what he calls the end user access data or not?

1listnum "WP List 3" \l 13370            MR. ROUT:  I would just highlight one thing just to hopefully clarify, which is we do have absolutely an annual capital budget which is associated to direct builds or adding equipment to sites where we are serving a customer directly, and that level of capital spending has been stable over the last three to four years and, in fact, has increased this year.

1listnum "WP List 3" \l 13371            MR. MacDONALD:  Some of the biggest drivers associated with the reduction had to do with ‑‑ don't forget this is a company, prior to the acquisition by MTS that went through CCAA, that had spent billions of dollars trying to replicate and duplicate the incumbent company's networks and we were lucky but about two dozen companies didn't quite survive that initiative.

1listnum "WP List 3" \l 13372            And in many cases what we do today is we just make investments based on customers.  We don't just go in and say we are going to make an investment in the building.

1listnum "WP List 3" \l 13373            For example, do we use CDN as a way of doing that?  Absolutely, but we look at our investment in a network, not as an investment in an access, and as Mr. Rout had indicated, we are continuing to invest in innovating on a network service basis, not just investing in the raw access.  I think that is really important.

1listnum "WP List 3" \l 13374            There is an example where we recently had a customer win in a major national bank, for example.  It was 1,050 branches across the country.  We looked at what it would take, what it would cost us from a capital build standpoint to service each and every one of those bank branches.  It would cost us over $2 billion to do that.  So we said that is unrealistic.

1listnum "WP List 3" \l 13375            Let's assume for purposes of the argument that if the branch is greater than 160 kilometres away from a fiber serving point that we wouldn't build.  That is $1 billion.  At the market price for access to those bank branches, do you know how long it would take to pay for that capital investment?  203 years.

1listnum "WP List 3" \l 13376            MR. DANIELS:  Okay.  So let's just try to keep ‑‑ because I understand you want to get in certain speeches or whatever.

1listnum "WP List 3" \l 13377            I was just simply asking whether you spent more or less.  I heard it has been stable.  I didn't hear back to 2002.  I did hear that you cut back on your spending.  The question is ‑‑ and so on.

1listnum "WP List 3" \l 13378            So I think we have covered it in terms of we got the amount of buildings.  You have got only 2.4 times ‑‑ you have got 24 times the amount of fiber but you have only got 2.4 times the amount of building access.  So we can use the numbers to draw our own conclusions and we will do that.  So I will move on.

1listnum "WP List 3" \l 13379            MR. ROUT:  I would just like to highlight one other thing because I went back to look at the sheet that you referenced back from 2002.

1listnum "WP List 3" \l 13380            There is a list of various items there and the other side of the investment that is not clear here, you are focusing on buildings and certainly that is one of them but there are many other aspects within that same time frame.

1listnum "WP List 3" \l 13381            As I indicated, our capital funding for direct builds has remained stable in that time frame and our investment in other areas of the network in terms of the backbone, establishing a converged core, pushing out Ethernet closer to the customer, all of those things, in fact, would have to be added onto that page, with the addition of Ethernet switches we have deployed, voice over IP switches, et cetera.

1listnum "WP List 3" \l 13382            MR. DANIELS:  Okay.  So let's talk a little bit about some of the things that you have done because in your supplemental evidence you reject the notion that CDN has had a negative impact on investment.  I think we have already talked enough about access to buildings and the fact that the amount of buildings hasn't increased but actually decreased.

1listnum "WP List 3" \l 13383            Nonetheless, in Appendix 1I of your supplemental evidence, you purport to demonstrate how CDN has helped you invest and innovate and so I would just like to look at a couple of those things there.

1listnum "WP List 3" \l 13384            So the first one I want to turn to is, again, on page 4 of Appendix I ‑‑ this is your supplemental evidence ‑‑ paragraph 11.  Now, here you are talking about MTS' network resident IP telephony service.  So this is an example, if I am fair, that you have talked about of some of the things that you have been able to do because of CDN.

1listnum "WP List 3" \l 13385            You say:

                      "MTS Allstream..." (As read)

1listnum "WP List 3" \l 13386            This is the fourth line down.

                      "...partnered with regional cable companies such as Persona in Newfoundland and Access Communications in Saskatchewan to offer viable local service alternatives to the incumbent.  In the case of its partnership with Persona, the availability of CDN service helped enable MTS investment in a long haul DWDM system connecting Newfoundland with the mainland." (As read)

1listnum "WP List 3" \l 13387            Now, when we read this, we were a little confused as to what CDN had to do with this, so we simply asked you a question.

1listnum "WP List 3" \l 13388            I would like to turn to that question that we asked you and the answer you gave and that is at KK of our compendium.  That is MTS company's 19 July 07‑39.

1listnum "WP List 3" \l 13389            Do you have that?

1listnum "WP List 3" \l 13390            COMMISSIONER NOEL:  Could you repeat the reference?

1listnum "WP List 3" \l 13391            MR. DANIELS:  Sorry, it is KK and that is MTS Allstream company's 19 July 07‑39.

1listnum "WP List 3" \l 13392            So we asked you, referring to this paragraph, what exactly ‑‑ what was the impact of CDN or Cat 1 and Cat 2 and then you corrected our understanding.

1listnum "WP List 3" \l 13393            You said:

                      "It is apparent that Bell et al. have misunderstood Appendix I and more importantly the potential benefits brought about by the introduction of CDN in similar competitive services.  Appropriately classifying and properly pricing CDN in other competitive services enables entrants to make capital expenditures to expand and enhance their core networks and develop new services.  The combination of these savings associated with expanded competitor service portfolio, including CDN and the partnership with Persona enhance MTS' ability to make the investment in long haul DWDM system connecting Newfoundland with the mainland." (As read)

1listnum "WP List 3" \l 13394            And then you go on:

                      "Obviously, none of the investment in the DWDM system..." (As read)

1listnum "WP List 3" \l 13395            Which I take it is the undersea cable, I assume.

                      "...is directly accounted for by Category 1 or Category 2 competitor service purchased from the ILEC." (As read)

1listnum "WP List 3" \l 13396            THE CHAIRPERSON:  Mr. Daniel, what is DWDN?

1listnum "WP List 3" \l 13397            MR. DANIELS:  I think ‑‑

1listnum "WP List 3" \l 13398            THE CHAIRPERSON:  We can find out from MTS.

1listnum "WP List 3" \l 13399            MR. DANIELS:  Yes.

1listnum "WP List 3" \l 13400            MR. SHEPPARD:  DWDN is dense wavelength division multiplexing.  It is basically a technique to deploy optical wavelengths on a fiber optic cable.

1listnum "WP List 3" \l 13401            MR. DANIELS:  But the key thing here, without getting into the technology here, is we are talking about building a cable connecting Newfoundland to the mainland, right, that is what you were talking about?

1listnum "WP List 3" \l 13402            MR. SHEPPARD:  Yes.

1listnum "WP List 3" \l 13403            MR. DANIELS:  Okay.  So if I am understanding this correctly, Appendix I is not about how you use CDN to build these things, it is simply about the money you saved on CDN that allowed you to spend on these things, which is not the same thing.

1listnum "WP List 3" \l 13404            Is that a fair description?

1listnum "WP List 3" \l 13405            MR. MacDONALD:  The way I look at it is ‑‑ once again, the point that I made earlier is that we sell networks, we sell network services, we just don't go out there and sell network access, and the point being is a lot of the innovation that is occurring in terms of services being delivered to customers has to do with a bunch of things.

1listnum "WP List 3" \l 13406            Let's take, for example, our MPLS network which we have had in service in Canada since the year 2000.  I mean we have close to 300 customers on that particular network at this particular point in time, a few thousand drops across the country.

1listnum "WP List 3" \l 13407            Now, a lot of the investment associated with the MPLS core have to do with big terabit routers, a lot of edge routers, a lot of interoffice facilities, a lot of the management systems, the security systems that go along with that, and innovation of a total end‑to‑end MPLS service that happens to use, in some cases, CDN as the Last Mile access.

1listnum "WP List 3" \l 13408            If you didn't have the CDN Last Mile access, if you had to go and build to each and every one of those buildings, like the one I was referring to earlier, spend $2 billion to get to those buildings, guess what, we wouldn't have a competitive MPLS service.  That's the relationship.

1listnum "WP List 3" \l 13409            MR. DANIELS:  Mr. MacDonald, I'm really trying to capture what I understand, because the actual example wasn't ‑‑ and I will come to, actually, an MPLS one in a minute ‑‑ but the actual example that you gave there was about building the fibre optic network, I think an undersea cable connecting Newfoundland to the mainland, and you said has nothing to do with CDN, you are not using CDN, but your point was, and I want to make sure I'm capturing this correctly, that the money you save from CDN allowed you to do this.  I mean, I take it that's what you are saying here.  Am I miss ‑‑ I just want to make sure of that, because ‑‑

1listnum "WP List 3" \l 13410            MR. SHEPPARD:  I don't think I would characterize it as "the money we save".  I think what I would characterize is, when you look at the CDN decision, it allowed the business to be more successful over all, and that frees up, at the end of the day, the cashflow and capital that can be invested in innovation and in overall networks versus any particular building or Last Mile access to a certain point.

1listnum "WP List 3" \l 13411            So I wouldn't characterize it as we took money we saved from CDN and put it into fibre to connect to Newfoundland.  I think the ability of the business to be more successful and to deliver better services to customers, which was enabled by CDN, allows you to continue to sustain investment in innovation and new technology.

1listnum "WP List 3" \l 13412            MR. DANIELS:  Okay, so ‑‑

1listnum "WP List 3" \l 13413            THE CHAIRPERSON:  So it gives you investment flexibility, maximum investment flexibility, that's what you are really saying?

1listnum "WP List 3" \l 13414            MR. SHEPPARD:  Absolutely, because what we are really interested in is serving customers and investing in networks, not necessarily investing in buildings.

1listnum "WP List 3" \l 13415            MR. DANIELS:  So if I could get you to turn back a page ‑‑ two pages, sorry, to page 2, paragraph 7.  And I'm looking, sorry, at the MTS supplemental Appendix I again, I'm looking at paragraph 7, and in the fourth line down, without going through the whole description here, you are talking about your Ethernet network:

                      "As a result of the CDN decision, MTS Allstream recognized a market opportunity for medium investment in next‑generation carrier switched Ethernet transport switching and routing technology."  (As read)

1listnum "WP List 3" \l 13416            Now, when I read that, when I first read it ‑‑ sorry, are you with me?  Do you see where I am?

1listnum "WP List 3" \l 13417            MR. SHEPPARD:  I'm just struggling to follow you a little bit.  So it's paragraph 7 ‑‑

1listnum "WP List 3" \l 13418            MR. DANIELS:  Paragraph 7 ‑‑

1listnum "WP List 3" \l 13419            MR. SHEPPARD:  ‑‑ on page 2?

1listnum "WP List 3" \l 13420            MR. DANIELS:  ‑‑ five lines down:

                      "As a result of the CDN decision, MTS Allstream recognized a market opportunity for medium investment in next‑generation carrier switched Ethernet transport switching and routing technology."  (As read)

1listnum "WP List 3" \l 13421            Now, when I first read that, I thought you were saying that you used CDN to build your Ethernet network, but now I think you may be saying that you are getting flexibility over ‑‑ the financial flexibility, so the CDN part of this Ethernet network you are referring to here or is it not?

1listnum "WP List 3" \l 13422            MR. SHEPPARD:  CDN is one access method, and just one access method that can be used to provide access from a customer location to a core network, yes.

1listnum "WP List 3" \l 13423            MR. MacDONALD:  And this would be mostly referring to the core network investments, the big gigabits, the Ethernet switches, for example, and now all of a sudden you can ‑‑ we had a number of our fees that hit the street that were looking for switched giga E service and said, Okay, now we can make the investment in the core network.

1listnum "WP List 3" \l 13424            Because now we can actually reach the customers, albeit kind of inelegantly from time to time, by using CDN to try and derive Ethernet kinds of capability, which I think is an ongoing issue for folks like us, in terms of trying to march down the technology curve, but that's the case.

1listnum "WP List 3" \l 13425            MR. DANIELS:  Okay.  So what we have here is that CDN can use it to provide for your Ethernet network and the access, but ‑‑

1listnum "WP List 3" \l 13426            MR. ROUT:  Well, CDN can be used to derive an Ethernet service, but it's not the same as a true Ethernet service.

1listnum "WP List 3" \l 13427            MR. DANIELS:  Okay, I understand that, and you are using it, but all I was really trying to say is you are using it today for that part of it, but it's not with an intention to take all these accesses and replace them by building your own facility on the access.  Because you are using your financial flexibility, if I understand correctly, to build and innovate in the core is ‑‑

1listnum "WP List 3" \l 13428            MR. MacDONALD:  No, that's not true.  Yes, the capital investments we would be making may be allocated to the core, but we are building and innovating in the marketplace.  We are building new service capability to provide competitive alternatives to our customers.

1listnum "WP List 3" \l 13429            See, when you try and subdivide ‑‑ like, a network is more than just access.  When you look at a network just from an access standpoint, and I have heard these theoretical discussions of an end‑to‑end/point‑to‑point network, like networks are actually derived not just by access, but by the multiplicity of connections and the service that are delivered on those core networks.  That's the important thing.  You can't just subdivide this.  Certainly in my experience, you have to look at, overall, what is the competitive alternative, what is the value proposition being delivered to the customer, and what are all the various pieces that go to make that up?

1listnum "WP List 3" \l 13430            MR. DANIELS:  You see, what I'm trying to get at ‑‑ because, actually, you do have to subdivide when you are trying to figure out what's an essential facility, and so what I'm trying to get at here is is CDN ‑‑ it doesn't strike to me that CDN for you ‑‑ I understand the benefit that you are talking about, but it's not about the stepping stone, it's not about building CDN so that you can replace your own facilities, it's about as you ‑‑ you know, we don't have to go through it all again, I don't really want to summarize what you said, because you will just say, No, that's not the same and correct it, but I heard what you said, so...but it's not about the stepping stone because it's not about, Oh, we are going to replace the CDN access, and I think that's ‑‑ that's what I'm putting forward.

1listnum "WP List 3" \l 13431            I think it's consistent with what we have just seen, in terms of the amount of buildings that you have built, or less buildings, it certainly hasn't increased in the last few years.

1listnum "WP List 3" \l 13432            And I understand what you are saying about the benefits and innovation, but I just want to be clear, can we agree, that it's not about the stepping stone, which is something that really didn't appear in your evidence anyway, so I don't think that would be hard, but I want ‑‑ that's what I'm trying to make sure that we are in agreement on.

1listnum "WP List 3" \l 13433            MR. SHEPPARD:  I would like to just kind of try to clarify that, though, because you used the term "stepping stone" sort of in the context that you see a vision where every CDN access would be replaced by some kind of self‑provision facility.

1listnum "WP List 3" \l 13434            We continue to build access, we continue to look at places where there's sufficient aggregated CDN services that warrant us replacing it with a fibre build.  For example, I think this year we are building our own access into approximately 30 new buildings, if you want to call it buildings, locations where we have customers.

1listnum "WP List 3" \l 13435            But, clearly, we would not see it economical to replicate that pervasive ILEC network out there with its many hundreds of thousands of locations where CND access is available.  That would just not be economically viable.  And that stepping‑stone strategy you talked about makes no sense in the context of an overall network.

1listnum "WP List 3" \l 13436            MR. MacDONALD:  We have gone through that experiment already in Canada.

1listnum "WP List 3" \l 13437            MR. DANIELS:  Okay.  So agreed, we are agreed.

1listnum "WP List 3" \l 13438            Now in this proceeding, you have also proposed an new wholesale service you want to created called IX channel service, and as I understand it, this is a wholesale version of IXPL.  Is that correct?

1listnum "WP List 3" \l 13439            MR. ROUT:  Could you reference what you are referring to?

1listnum "WP List 3" \l 13440            MR. DANIELS:  The IX channel service?  Well, I'm taking it from your material, so perhaps I can go to look at Appendix ‑‑ no, actually, just give me a second, I will figure out the quickest reference to it.  Sorry, I thought you would know what service.

‑‑‑ Pause

1listnum "WP List 3" \l 13441            MR. DANIELS:  If you look at your cover to Appendix A to your supplemental, you have a title there called "Interexchange IX Channel Services".  Do you see that?

‑‑‑ Pause

1listnum "WP List 3" \l 13442            THE CHAIRPERSON:  You are at paragraph 99, Mr. Daniels?

1listnum "WP List 3" \l 13443            MR. DANIELS:  Sorry, I'm just on the cover page of Appendix A to their supplemental.

1listnum "WP List 3" \l 13444            THE CHAIRPERSON:  I saw that.

1listnum "WP List 3" \l 13445            MR. SHEPPARD:  We see the cover page, yes.

1listnum "WP List 3" \l 13446            MR. DANIELS:  Okay.  And down, under "Connectivity Service", you have something called "Interexchange IX Channel Services".  Do you see that?

1listnum "WP List 3" \l 13447            MR. SHEPPARD:  Yes, we see that.

1listnum "WP List 3" \l 13448            MR. DANIELS:  Okay.  Now, I'm at a disadvantage in that my copy does not actually have the page number here, so...

1listnum "WP List 3" \l 13449            THE CHAIRPERSON:  It's on page 30.  Paragraph 99 deals with ‑‑

1listnum "WP List 3" \l 13450            MR. DANIELS:  Thank you, you are ahead.

1listnum "WP List 3" \l 13451            THE CHAIRPERSON:  ‑‑ IX channel, so...

1listnum "WP List 3" \l 13452            MR. DANIELS:  Thank you very much.

1listnum "WP List 3" \l 13453            Sorry, this is where you have a whole discussion about the service that you are looking for.  Do you now know what I'm taking about?

1listnum "WP List 3" \l 13454            MR. SHEPPARD:  Yes, we are with you.

1listnum "WP List 3" \l 13455            MR. DANIELS:  Okay.  So this is a service, as I understand it ‑‑ let's just first get clear on what an IXPL in the retail market is.

1listnum "WP List 3" \l 13456            An IXPL, an interexchange private line, as I understand it, is a route that runs between two exchanges.  That's the official definition, we can agree on that?

1listnum "WP List 3" \l 13457            MS GRIFFIN‑MUIR:  That's right, a dedicated service, yes.

1listnum "WP List 3" \l 13458            MR. DANIELS:  Okay.  So a dedicated service, for example, from Ottawa to Toronto would be an example?

1listnum "WP List 3" \l 13459            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 13460            MR. DANIELS:  And the CRTC has a forbearance regime for these routes.

1listnum "WP List 3" \l 13461            MS GRIFFIN‑MUIR:  That's right.  Once a competing provider is offering a DS‑3 and above service to a customer on their own facilities, the route is forborne.

1listnum "WP List 3" \l 13462            MR. DANIELS:  Right.  And when we say "DS‑3 and above", that's really meaning, practically speaking, that someone's built an alternative fibre facility.  Can we agree on that?

1listnum "WP List 3" \l 13463            MS GRIFFIN‑MUIR:  Yes, I said on the competitor's own facility, as opposed to ‑‑

1listnum "WP List 3" \l 13464            MR. DANIELS:  No, but I'm being specific about fibre, that that's basically ‑‑

1listnum "WP List 3" \l 13465            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 13466            MR. DANIELS:  ‑‑ practically what we are talking about here.  Okay.

1listnum "WP List 3" \l 13467            And again, using our example out of Toronto, it's likely forborne because there's probably someone else who's built on that route.  Correct?

1listnum "WP List 3" \l 13468            MS GRIFFIN‑MUIR:  That's right.

1listnum "WP List 3" \l 13469            MR. DANIELS:  Yes.  Now, but what you have asked for here, as I understand it, is you said that you want wholesale IXPL, but you have limited ‑‑ you have basically said I want you to create a wholesale version of the IXPL service, but you have limited that request, I believe, to only regulated routes.  Is that correct?

1listnum "WP List 3" \l 13470            MS GRIFFIN‑MUIR:  Yes, I guess what we are doing here is just applying the test to certain services, so our tests.  This would be falling within the monopoly control, so that's why we had identified IXPL as being an input that the incumbent only provides.  There is no alternative source of supply, so it's only the regulated ones.

1listnum "WP List 3" \l 13471            MR. DANIELS:  Right.  So what you have here is you are only asking for it though when there is no alternative supply, so your request doesn't cover forborne routes?

1listnum "WP List 3" \l 13472            MS GRIFFIN‑MUIR:  That is right, yes.

1listnum "WP List 3" \l 13473            MR. DANIELS:  Okay, and that is because they are alternative.

1listnum "WP List 3" \l 13474            And we can agree probably that there are a number of routes that are already forborne, in fact, and we can turn to it if you want, but I have page 81 of the most recent CRTC 2007 monitoring report.

1listnum "WP List 3" \l 13475            MR. ROUT:  We agree that there are forborne routes and that they are well publicized.

1listnum "WP List 3" \l 13476            MR. DANIELS:  And it is 2,800 private lines is the route and, if you want, it is in tab WW, which is from the CRTC's telecom monitoring report of 2007 at page 81, the last page that I put in your material there.  It just says:

                      "In 2006 the Commission forbore from regulating approximately 549 inter‑exchange private line routes bringing the total to approximately 2,800 forborne private line routes." (As Read)

1listnum "WP List 3" \l 13477            So you can agree there are 2,800 private line routes that are forborne?

1listnum "WP List 3" \l 13478            MS GRIFFIN‑MUIR:  Yes, we don't have a problem with that.

1listnum "WP List 3" \l 13479            MR. DANIELS:  Okay.  Now, in this proceeding you are also seeking Ethernet transport service as an essential facility, is that correct?

1listnum "WP List 3" \l 13480            MS GRIFFIN‑MUIR:  Right.  But just to be clear, predominantly what we are seeking is the metro piece of that.  Overall in terms of access and connectivity we look at it from a metro perspective.  So we are not asking for the long haul.

1listnum "WP List 3" \l 13481            MR. DANIELS:  So, in that case, we can agree then, like in the CRTC's Ethernet decision that came out earlier this year which was, some of us might remember, kind of controversial and resulted in a review and vary.  The CRTC had ordered mandating separation of that ETS, Ethernet Transport Service, be unbundled separate from Ethernet access, correct?

1listnum "WP List 3" \l 13482            MS GRIFFIN‑MUIR:  That is correct, yes.

1listnum "WP List 3" \l 13483            MR. DANIELS:  And they had mandated it for three different services; regional, provincial and metro, metro within a metro area, provincial within a province and regional between the provinces.  And so if I understand you correctly you are actually saying that you agree with The Companies that argued that it should not be mandated between the provincial and the regional, is that correct?

1listnum "WP List 3" \l 13484            MS GRIFFIN‑MUIR:  No, that is not correct.  We do believe that it should be unbundled so that you have the option of having leased transport on Ethernet.

1listnum "WP List 3" \l 13485            MR. DANIELS:  Okay, so now I think, because you just said predominantly and we are not looking for the non‑metro piece, but now you just told me it should be unbundled and you should get it.  So let us see if we can get this cleared up.

1listnum "WP List 3" \l 13486            MS GRIFFIN‑MUIR:  Well, I guess with Ethernet, and certainly Ron can explain further, but I guess how we looked at is a lot of the times you are beholden to the entire incumbent service once you are on the service between where the network interfaces are, the various cities between where the various network interfaces are.  So the design of the service actually speaks to keeping you on the service.

1listnum "WP List 3" \l 13487            MR. DANIELS:  Let us talk a little bit about that.  And I sort of skipped to the punch line when you said that you weren't looking for anything more than the metro.  But now I am going to have to go back a little bit, so I apologize for this.  So let us help everybody come along and make sure we understand what this service is.

1listnum "WP List 3" \l 13488            Ethernet transport, right, we are talking about a CO, from a central office, back to your point of presence somewhere, wherever your point of presence is in the ILEC's territory, is that correct?

1listnum "WP List 3" \l 13489            MR. ROUT:  That is right.

1listnum "WP List 3" \l 13490            MR. DANIELS:  Okay.  So your POP could be in the same metro area, but it also could be in a different city, it could even be in a different province, is that possible?

1listnum "WP List 3" \l 13491            MR. ROUT:  It is possible.

1listnum "WP List 3" \l 13492            MR. DANIELS:  Right.  And as I said, today, this service does exist and there are three different versions of it, metro, provincial and regional ETS.  But all of this is priced today at a Category 2 non‑essential service, is that correct in your understanding?

1listnum "WP List 3" \l 13493            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13494            MR. DANIELS:  But is only, and this is the key today, it is only available when you buy Ethernet access.  So you can get this transport at a Category 2 rate non‑essential service, but you have to buy Ethernet access, at least in Bell territory.  I should limit my questions, because that is what I know.  In Bell territory you have to buy Ethernet access along with it, is that correct?

1listnum "WP List 3" \l 13495            MR. ROUT:  That is correct.  The transport function, what we believe, is to allow to occur what is natural in Ethernet, which is to be able to consolidate traffic actually from multiple access points into a single more efficient network to bring it back to a POP, that is what the transport piece is about.

1listnum "WP List 3" \l 13496            MR. DANIELS:  Now, in that decision the Commission did not find, the Ethernet decision, that is Telecom Order 2007‑20 and we can turn to it if you want, but I am not sure it is going to be necessary, in that decision the Commission didn't find that ETS was essential, did it?

1listnum "WP List 3" \l 13497            MS GRIFFIN‑MUIR:  I would just like to refer to the decision.  They made it a ‑‑

1listnum "WP List 3" \l 13498            MR. DANIELS:  Okay, no problem.  It is in your material ‑‑

1listnum "WP List 3" \l 13499            MS GRIFFIN‑MUIR:  ‑‑ Category 2 competitor service.

1listnum "WP List 3" \l 13500            MR. DANIELS:  ‑‑ it is in your material at tab Y, as in Yankee.  And if you want a specific reference, you can turn to paragraph 89 of the excerpt that I have given you here.  And this is under the heading of classification of Ethernet transport service, paragraph 89:

                      "In light of the above, the Commission determines that the interim classification of ETS as a Category 2 competitor service is appropriate and that this classification should be approved on a final basis." (As Read)

1listnum "WP List 3" \l 13501            So that is why I am saying it is a Category 2, they didn't find it to be essential.

1listnum "WP List 3" \l 13502            MS GRIFFIN‑MUIR:  Right, they found it to be near essential.

1listnum "WP List 3" \l 13503            MR. DANIELS:  Well hold on, near essential I thought ‑‑ don't we use the term near essential to apply it to Category 1 services?

1listnum "WP List 3" \l 13504            MS GRIFFIN‑MUIR:  Well actually, there is probably a mix, but..

1listnum "WP List 3" \l 13505            MR. DANIELS:  Okay.  To you anything in Category 2 is near essential as well? I mean, I think in the industry we generally refer to near essential as the ones that they found not to be essential but still said would be treated like essential, that's why they call it near essential.  I mean, that is how I have used the term.  Is that not your understanding?

1listnum "WP List 3" \l 13506            MS GRIFFIN‑MUIR:  No, no.  I just look at them all as competitor services.

1listnum "WP List 3" \l 13507            MR. DANIELS:  Competitor services, I agree it is a competitor service.

1listnum "WP List 3" \l 13508            MS GRIFFIN‑MUIR:  And then if I looked at DS‑3, for example, it is in the nature of essential, you are predominantly the ‑‑ or your client ‑‑

1listnum "WP List 3" \l 13509            MR. DANIELS:  But it is not being priced at an essential facility rate, which is the Phase 2 plus 15.

1listnum "WP List 3" \l 13510            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 13511            MR. DANIELS:  So I think that is the distinction most of us use.  But anyway, fine, I am not going to use the term near essential then.  We will create something else to be clear.

1listnum "WP List 3" \l 13512            So we can agree then that it is a Category 2 and we also can agree that Bell was ordered to unbundle the service separate from EAS in that decision, is that correct?

1listnum "WP List 3" \l 13513            MS GRIFFIN‑MUIR:  That is correct.

1listnum "WP List 3" \l 13514            MR. DANIELS:  So MTS would be able to buy ETS separate from EAS.  And, in that case, you could consolidate or even if you weren't getting Ethernet access you could backhaul loops or DSL from the CO, you could put it on your Ethernet transport.  That would be the purposes that you would use it for.  Is that correct?

1listnum "WP List 3" \l 13515            MR. ROUT:  That is one method, yes.

1listnum "WP List 3" \l 13516            MR. DANIELS:  And it would take you across the metro area, the province or even the region which is, as I say, between the provinces.  Now, we know that decision was reviewed and buried.  And I would like to understand your position about though of why it is essential because, and again, Ms Muir, I want to make sure.  When you say essential now, something that should be found essential in this proceeding, your proposal is that it be at Phase 2 plus 15 or a mark‑up no greater 15, is that correct?

1listnum "WP List 3" \l 13517            MS GRIFFIN‑MUIR:  Yes, that is correct.

1listnum "WP List 3" \l 13518            MR. DANIELS:  Okay.  So what we are talking about in the old language is change it from Category 2 to Category 1 and ordering it be separate?

1listnum "WP List 3" \l 13519            MS GRIFFIN‑MUIR:  That is right, yes.

1listnum "WP List 3" \l 13520            MR. DANIELS:  And that is for all ETS, metro, province or regional routes, that is what you are submitting?

1listnum "WP List 3" \l 13521            MS GRIFFIN‑MUIR:  No, not necessarily the non‑metro.

1listnum "WP List 3" \l 13522            MR. DANIELS:  You see, we could have skipped this whole thing because I was confused on this in the beginning.  You said that predominantly and now you are saying not necessarily.  And I am really trying to look a firm ‑‑ if you are not asking for it and saying it is not an essential facility outside of the metro, fine, we can move on.  But I am focused on trying to figure out here whether you are looking for it in the province or between provinces.

1listnum "WP List 3" \l 13523            MS GRIFFIN‑MUIR:  I guess we are looking for it to be unbundled, I think that is where our..

1listnum "WP List 3" \l 13524            MR. DANIELS:  But not at essential facility rates?

1listnum "WP List 3" \l 13525            MR. ROUT:  Maybe if we could just back up for a second.  So what we are saying about Ethernet is a couple of things and there is a distinction between Ethernet access and the transport.

1listnum "WP List 3" \l 13526            Ethernet, particularly in the transport area, you know, is by virtue of how that service works, a cloud.  So there is great efficiency in all networks that deploy Ethernet in terms of being able to consolidate traffic together into single locations and transport via the cloud based on the protocols of that service.

1listnum "WP List 3" \l 13527            So the Ethernet access can certainly be used and brought back to a location within a metro centre into our network.  The other fact of the matter though is, and why we sort of categorize it in the essential category, is that from a transport perspective, again, we see that the ILECs are the predominant supply of the fibre inter‑province and also the deployment of the Ethernet network is pervasive.

1listnum "WP List 3" \l 13528            MR. DANIELS:  Mr. Rout, I mean, I understand how you want to use it, but I am really just trying to understand whether you guys are saying that Ethernet transport, which does exist today, should be mandated separate from Ethernet access from, let us just give an example, Ottawa to Toronto, whether: 1) that should be mandated; and 2) if you are saying it should be mandated, that should be at essential facility rates meaning Phase 2 with a mark‑up no grater than 15 per cent to use your language.

1listnum "WP List 3" \l 13529            THE CHAIRPERSON:  Mr. Daniels, can I understand what you ‑‑ you are saying should be mandated.  If it isn't mandated right now, it isn't subject of these proceedings.  As we established throughout its review of existing, it is not a hearing to determine what else should be mandated.

1listnum "WP List 3" \l 13530            MR. DANIELS:  It makes me a little awkward to ‑‑ I think the issue here is the service does exist today and it is a Category 2 service.  The question was whether it should be unbundled separate and, to be honest, there is also the review and vary which did send this back and fold it into this proceeding.

1listnum "WP List 3" \l 13531            So to be quite honest, Mr. Chair, I would like to accept that, but I am not sure that ‑‑ if the ruling is that it shouldn't be done, that is fine, but that is why I have asked the questions.

1listnum "WP List 3" \l 13532            THE CHAIRPERSON:  But because of the review and vary that you are referring ‑‑ of course.  Okay fine, if that is your route, go ahead.

1listnum "WP List 3" \l 13533            MS SONG:  Mr. Chairman, if I could just interject, with respect, at this point.

1listnum "WP List 3" \l 13534            Counsel referred to I believe Telcom Order CRTC 2007‑20, and at paragraph 65 of that decision, Mr. Chairman, the Commission specifically reserved pending the conclusion of this proceeding the issue of determining the essentiality of Ethernet services.

1listnum "WP List 3" \l 13535            So I would just bring that point to the attention of the Commission at this time.

1listnum "WP List 3" \l 13536            MR. DANIELS:  I think, without getting into the argument ‑‑

1listnum "WP List 3" \l 13537            THE CHAIRPERSON:  I said go ahead, so I don't know why you think the intervention is necessary.  You corrected me.  I stand corrected.  Go.

‑‑‑ Laughter / Rires

1listnum "WP List 3" \l 13538            MR. DANIELS:  Sorry about that.

1listnum "WP List 3" \l 13539            Again, we can move on.  If your proposition is that Ethernet transport is not covered in that situation, that you are not looking for it to be mandated or treated as an essential at Category 1 rates, fine.  But I'm not sure I have an answer on that.

1listnum "WP List 3" \l 13540            COMMISSIONER CRAM:  Excuse me.  I'm not sure I understand the question, because you referred to "in that situation".  And right now ‑‑

1listnum "WP List 3" \l 13541            MR. DANIELS:  Non essential within a province.  I'm not talking the metro area.  I will come to that in a moment.  I'm talking within a province.

1listnum "WP List 3" \l 13542            COMMISSIONER CRAM:  Intra province; okay.

1listnum "WP List 3" \l 13543            MR. DANIELS:  Intra province or between provinces, which are ‑‑

1listnum "WP List 3" \l 13544            COMMISSIONER CRAM:  Inter/intra.

1listnum "WP List 3" \l 13545            MR. DANIELS:  Right, exactly, but outside of the metro area, because there are two of the three services that exist.

1listnum "WP List 3" \l 13546            MR. ROUT:  So just to clarify, within the province Ethernet transport we would deem to be essential.

1listnum "WP List 3" \l 13547            MR. DANIELS:  So the example, therefore, would be the Ottawa to Toronto, you would say in that situation it is essential.

1listnum "WP List 3" \l 13548            MR. ROUT:  Within a province, yes.

1listnum "WP List 3" \l 13549            MR. DANIELS:  Well, they are in the same province.

1listnum "WP List 3" \l 13550            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13551            MR. DANIELS:  Okay.  I'm trying to understand this in terms of the logic, now that we know your position.

1listnum "WP List 3" \l 13552            We have just talked about how there is an alternative fibre facility that exists.  Probably you even have an alternative fibre facility between Toronto and Ottawa.  There is a number of routes.

1listnum "WP List 3" \l 13553            What is the basis upon which the Commission should mandate essential facility rates for a service which they have determined, by definition, alternatives exist?

1listnum "WP List 3" \l 13554            MR. ROUT:  Well, it has been clarified that there are IXPL rates where there are alternatives and those are forborne, and there are many routes that are not forborne where there is no other alternative.

1listnum "WP List 3" \l 13555            MR. DANIELS:  But you are looking for both.  You are not making a distinction on the basis like you were with DR IXP service between forborne and non‑forborne.  You are looking for it everywhere.

1listnum "WP List 3" \l 13556            MR. ROUT:  Right.  And that's by, again, virtue of the service itself, which is Ethernet is in a cloud.  So when we reach the first point of the pop, by necessity there does not need to be a direct route back to another location.

1listnum "WP List 3" \l 13557            MR. DANIELS:  Okay.

1listnum "WP List 3" \l 13558            So now let's look at what you have built.

1listnum "WP List 3" \l 13559            MR. MacDONALD:  Excuse me.  It is important on that point that we are not talking about point‑to‑point necessarily, the operation of an Ethernet service.  It is once I get on the network; right?

1listnum "WP List 3" \l 13560            MR. DANIELS:  Actually, ETS is a point‑to‑point service because it's route specific in terms of within the province, and it's from a CO back to your pop.

1listnum "WP List 3" \l 13561            We can go on and talk about going into a cloud and so on, but the fact is that you have the facility there.

1listnum "WP List 3" \l 13562            Anyway, I'm prepared to move on.

1listnum "WP List 3" \l 13563            Let's go to Tab X of my compendium.  I would like you to look at MTS‑Allstream‑The Bureau 12April07‑2.

1listnum "WP List 3" \l 13564            Do you have that there?  Okay.

1listnum "WP List 3" \l 13565            In this interrogatory The Bureau asks you, the Competition Bureau asks you to provide a map of your network, and you submitted that that would be confidential, which I don't have much of an issue with.

1listnum "WP List 3" \l 13566            But what you did do is you provided a list of IXPL routes that you self supply, and these can be found in the attachment to that interrogatory.

1listnum "WP List 3" \l 13567            What we did ‑‑ and Madam Secretary, I would like to introduce this as our next exhibit.

1listnum "WP List 3" \l 13568            We took your routes ‑‑

1listnum "WP List 3" \l 13569            It's going to be CC.

1listnum "WP List 3" \l 13570            What we did is we took all the routes that you had listed here and created a map for visual purposes, which is in people's materials.  We just mapped out the routes that you listed there.

1listnum "WP List 3" \l 13571            I sent this to your counsel last night and pointed out that that is how we came up with this.

1listnum "WP List 3" \l 13572            By our count ‑‑ and again I trust you will agree, but if I get it wrong you will let me know ‑‑ there are 109 routes that were listed in the attachment that you looked at.

1listnum "WP List 3" \l 13573            So you have 109 IXPL routes outside of Manitoba.  Is that fair?

1listnum "WP List 3" \l 13574            MS GRIFFIN‑MUIR:  I'll accept that subject to check.  I haven't counted them.

1listnum "WP List 3" \l 13575            MR. DANIELS:  If I look here, we can see what these 109 look like.

1listnum "WP List 3" \l 13576            Back to that 2,800 figure that we were talking about before, we have 109 of these routes and there's, I don't know, 27, a little less than 2,700 other routes that aren't mapped on this map because those are other parties, if you are following my logic here.

1listnum "WP List 3" \l 13577            We looked at other parties who have built the facilities.  When we say 2,800, they are talking about routes so two parties building on the same route is still one route.

1listnum "WP List 3" \l 13578            So we have 2,800 and 2,700 other routes that we don't see on this map here.  Is that fair?

1listnum "WP List 3" \l 13579            MS GRIFFIN‑MUIR:  Subject to check, yes.

1listnum "WP List 3" \l 13580            You are just saying in addition to ourselves, there are either parties on these same routes or 2,800 additional routes.

1listnum "WP List 3" \l 13581            MR. DANIELS:  I'm actually specifically saying ‑‑ you are right that there are some that would be on these same routes.  But the 2,700 is actually ‑‑

1listnum "WP List 3" \l 13582            MS GRIFFIN‑MUIR:  Different routes, right.

1listnum "WP List 3" \l 13583            MR. DANIELS:  They all have to be, by definition, other routes.

1listnum "WP List 3" \l 13584            MS GRIFFIN‑MUIR:  Okay.  Subject to check, sure.

1listnum "WP List 3" \l 13585            MR. DANIELS:  So when I look at this ‑‑ and I'm looking at your network and knowing that this is only 1/28th of the routes out there ‑‑ I'm still trying to figure out how ETS is an essential facility when there are all these other fibre out there, because they are fibre.  We have agreed that they are fibre and that's what Ethernet can be provided over, is fibre.

1listnum "WP List 3" \l 13586            So you have the capability in Toronto and Ottawa ‑‑

1listnum "WP List 3" \l 13587            MR. ROUT:  I think what the map shows is there is fibre out there and I guess this is supposed to represent IXPL routes that we have.

1listnum "WP List 3" \l 13588            You will also see that there is not fibre going to many other locations on the map that aren't listed.  There are many centres and many cities and other very viable urban places that aren't on the map where there is no alternative fibre.

1listnum "WP List 3" \l 13589            And that's where we come back to Ethernet transport being essential, whereby from the Ethernet access, from the customer prem to the central office, there is no alternative route in many cases.  Perhaps from Ottawa‑Toronto there is an alternative, but from many other locations in Ontario ‑‑ and our objective is to serve and provide these kinds of services to those customers ‑‑ there needs to be an effective method to be able to get that traffic back.

1listnum "WP List 3" \l 13590            Ethernet again, in that the transport of the protocol and signalling happens in the cloud, it doesn't work the same way as a direct private line route.  There are methods to consolidate and to send that traffic through multiple different methods or routes to arrive in the most efficient way back at the point where you would pass that traffic off to us.

1listnum "WP List 3" \l 13591            So what is not being shown on the map is all of the places where there are no alternate facilities.

1listnum "WP List 3" \l 13592            MR. DANIELS:  Agreed.  Also the 2,700 other routes aren't on the map as well, but anyway.

1listnum "WP List 3" \l 13593            We will stop talking about the provincial and the regional and let's talk about your metro.

1listnum "WP List 3" \l 13594            In this case, I take it that you support right now ‑‑ it's not only ETS metro, but the CRTC has mandated that CDN at a metro level be required.  So this is CDN transport within a metropolitan area.

1listnum "WP List 3" \l 13595            Is that correct?

1listnum "WP List 3" \l 13596            MS GRIFFIN‑MUIR:  Yes, there is CDN within a metro.

1listnum "WP List 3" \l 13597            MR. DANIELS:  And it's your position that CDN metro as well as ETS metro should be essential, meaning at Phase 2 plus a mark‑up no greater than 15 per cent.

1listnum "WP List 3" \l 13598            Is that correct?

1listnum "WP List 3" \l 13599            MS GRIFFIN‑MUIR:  That's correct, yes.

1listnum "WP List 3" \l 13600            I guess on CDN, though, it was established actually in Decision 2004‑5 on the metro piece that we can't really use CDN as the transport in conjunction with Ethernet, because initially that's what the Commission did ask that the ILECs do and actually Bell Canada ‑‑ sorry, they just asked Bell Canada, and it was Bell Canada who came back and said no, we can't really do that.

1listnum "WP List 3" \l 13601            MR. DANIELS:  Well, we could spend time because then I could take you to the opposite language that was in the most recent Ethernet order.

1listnum "WP List 3" \l 13602            Let's just focus right now on metro, whether it's ETS or CDN.  We don't have to get into the distinction here.  We are just talking about you are basically saying that both CDN and ETS within a metro area should be mandated as an essential facility.

1listnum "WP List 3" \l 13603            MS GRIFFIN‑MUIR:  Right.  And I'm just explaining why they should be mandated as an essential facility.

1listnum "WP List 3" \l 13604            MR. DANIELS:  So if I can get you to go back to the AT&T table that we were looking at earlier from your annual information form ‑‑

1listnum "WP List 3" \l 13605            MR. SHEPPARD:  What was the reference there again?

1listnum "WP List 3" \l 13606            MR. DANIELS:  Your annual information form from 2003.

1listnum "WP List 3" \l 13607            The problem I'm having is that I didn't mark it.  I had it earlier but I forget now what tab it is.  Forgive me for not being organized in that regard.

1listnum "WP List 3" \l 13608            It's AA.

1listnum "WP List 3" \l 13609            Looking back at that page 14 and in looking at that table, I see there below buildings access you have inner city fibre route kilometres, 4,781.

1listnum "WP List 3" \l 13610            Do you see that figure there?

1listnum "WP List 3" \l 13611            MR. SHEPPARD:  Yes.

1listnum "WP List 3" \l 13612            MR. DANIELS:  And if I look up in the paragraph beforehand, in the second sentence of that paragraph you are describing this network and you say:

                      "Built as a series of protected self‑fuelling ... rings, the ... network links large local networks in Canada's ten largest urban areas, spanning 29 communities and more than 3,300 buildings."  (As read)

1listnum "WP List 3" \l 13613            I did some simple math.  If I divide 4,781, which is the amount of intra city fibre that you have, by ten major centres, I get an average of 470 kilometres in each major centre.

1listnum "WP List 3" \l 13614            Are you following me on this?

1listnum "WP List 3" \l 13615            MR. MacDONALD:  Well, the math is right, I think.

1listnum "WP List 3" \l 13616            MR. DANIELS:  Yeah.

1listnum "WP List 3" \l 13617            MR. MacDONALD:  But I'm not sure you could apply it to say on average it works.  I mean GTA, for example, you might have different concentrations in different metropolitan areas.

1listnum "WP List 3" \l 13618            MR. DANIELS:  Right.  So, to be fair, although I'm taking an average, it could be that, and likely in Toronto that Toronto has a lot more than 470 kilometres of your 4,781.  That's what you're saying?

1listnum "WP List 3" \l 13619            MR. MacDONALD:  No, what I'm suggesting is that depending upon the size of the metropolitan community, just the simple math of the geography will dictate smaller or lesser amounts of fibre.

1listnum "WP List 3" \l 13620            MR. DANIELS:  So, would Toronto be bigger or smaller than...

1listnum "WP List 3" \l 13621            MR. MacDONALD:  Well, I think the last time I checked it was a little bit bigger than...

1listnum "WP List 3" \l 13622            MR. DANIELS:  That's what I recall.  Okay, so...

1listnum "WP List 3" \l 13623            Now, in my view it's a lot of fibre in a city, and I've been trying to figure out a way to visualize exactly what 500 kilometres of fibre could provide you.

1listnum "WP List 3" \l 13624            So, to do that, since we didn't have a map of Allstream's network, we found one in the public domain of Toronto Hydro and that is at Tab BB which would be the next Companies' exhibit.

1listnum "WP List 3" \l 13625            THE SECRETARY:  Now we're at Exhibit No. 16.

                      EXHIBIT COMPANIES‑16:  Toronto Hydro map of Toronto, Tab BB.

1listnum "WP List 3" \l 13626            MR. DANIELS:  If you turn to that you can see that we have ‑‑ that in their opening paragraph ‑‑ this is something we took off the Internet ‑‑ you see a reference to, that they have 450‑kilometres of fibre optic network.  This is Toronto Hydro telecom, so they're talking within the City of Toronto; right?

1listnum "WP List 3" \l 13627            And to get a picture of what that looks like, if you turn over into our exhibit, you see ‑‑ we can see, this is a picture that was from their website but was actually filed previously by Bell Canada, so  there's a reference there.

1listnum "WP List 3" \l 13628            And if you look at the top we can see that they basically have a bunch of fibre in the downtown core; is that ‑‑ are you guys seeing the same thing as I am?

1listnum "WP List 3" \l 13629            MR. MacDONALD:  We see it.

1listnum "WP List 3" \l 13630            MR. DANIELS:  Yeah.

1listnum "WP List 3" \l 13631            MR. MacDONALD:  Yeah.

1listnum "WP List 3" \l 13632            MR. DANIELS:  And then outside ‑‑ below we see that this is what 450 kilometres can get you in terms of circling the whole city, getting a fair amount of circling the whole city and getting a whole bunch of areas within the city.

1listnum "WP List 3" \l 13633            And, as you point out, you have likely more than 450 kilometres.

1listnum "WP List 3" \l 13634            MR. ROUT:  I would just sort of highlight, when you look at the map and just sort of comments like encircling the city, there's definitely density of their fibre in the core and then you can see that, you know, running along Finch and other major streets there's fibre, but it certainly would not be ubiquitous throughout Toronto.

1listnum "WP List 3" \l 13635            MR. DANIELS:  I'm not trying to suggest for a moment, Mr. Rout, that it's ubiquitous throughout Toronto, but I'll tell you what I am trying to suggest.  I'm trying to suggest that if I look at Toronto Hydro and know that you have more fibre in the city, that when I look at CDN Metro, which is a transport service not an access, and I look at ETS Metro which is again a transport service looking for it within a metro area, if I look at Toronto Hydro they've got pretty much the city covered, they can ‑‑ on a metro basis and by that same token you've got more fibre, you've probably got that same type of coverage, maybe not the exact same route, probably yours builds directly into our COs in most cases because that's where you would be getting your co‑location and getting your unbundled loops.

1listnum "WP List 3" \l 13636            So, given all of that, I'm trying to understand why is CDN Metro and ETS Metro, why are those essential facilities?

1listnum "WP List 3" \l 13637            I mean, I can see here Toronto Hydro's got the whole network, you've got the same amount of fibre, probably got the whole network as well, others do; why is this an essential facility?

1listnum "WP List 3" \l 13638            MR. ROUT:  I think we have to just come right back to the customer and the service that the customer is looking for a competitor to provide them, which is, typically this kind of a service would be provided to a customer with multiple sites and not necessarily in the core of Toronto, so...

1listnum "WP List 3" \l 13639            MR. DANIELS:  I understand that, but I think where ‑‑ I'm not talking CDN access, I'm really talking about your request for transport, and transport we agreed at the beginning of this is not about accessing customers, it's about going from one CO to another CO, it's about the backhaul network.

1listnum "WP List 3" \l 13640            And so, the ability ‑‑ I can understand your argument about CDN access, but I can't understand what relevance it has with regard to the transport which is the service we're discussing, or the two services we're discussing.

1listnum "WP List 3" \l 13641            MR. ROUT:  Well, the IX Metro service as I understand it, in fact goes quite a bit beyond the borders the borders that are reflected in this map.

1listnum "WP List 3" \l 13642            MR. DANIELS:  Right.  No, I agree, but of course I'm looking at Toronto Hydro which, by definition, doesn't go outside of Toronto Hydro, MTS does go outside of ‑‑ you know, you're not bound by ‑‑ you don't have ‑‑ Toronto Hydro is limited to the City of Toronto because that's where it's the hydro utility, so...

1listnum "WP List 3" \l 13643            MR. ROUT:  Right.

1listnum "WP List 3" \l 13644            MR. DANIELS:  Anyway, I think we've made our point and had our discussion.  I'm prepared to move on.

1listnum "WP List 3" \l 13645            MR. ROUT:  Just, Toronto Hydro is limited to the City of Toronto and certainly for them to go anywhere beyond it, based on these maps, they would need access to Metro IX to be able to do that.

1listnum "WP List 3" \l 13646            MR. DANIELS:  But they're not asking for it, it's you who's asking for it.

1listnum "WP List 3" \l 13647            So, let's go on to talk about transiting.

1listnum "WP List 3" \l 13648            Now, it's my understanding that MTS Allstream's position is that transiting is an essential facility; is that correct?

1listnum "WP List 3" \l 13649            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13650            MR. DANIELS:  And just so we're clear, and I know we had this discussion the other day, Mr. Chair, so if it's worth it I'll briefly remind everyone.

1listnum "WP List 3" \l 13651            MS GRIFFIN‑MUIR:  Excuse me, can I just ‑‑

1listnum "WP List 3" \l 13652            MR. DANIELS:  Yeah.

1listnum "WP List 3" \l 13653            MS GRIFFIN‑MUIR:  The way we have it is, it's a service ancillary to interconnection though.  So, that's how we would have it classified.

1listnum "WP List 3" \l 13654            MR. DANIELS:  Okay.  It's ancillary to interconnection.

1listnum "WP List 3" \l 13655            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 13656            MR. DANIELS:  Are you saying that it should be mandated at phase 2 plus a mark‑up?

1listnum "WP List 3" \l 13657            MS GRIFFIN‑MUIR:  Yes, yeah, we're not changing that definition, but it's in the context of being an interconnection.

1listnum "WP List 3" \l 13658            MR. DANIELS:  Okay.  So, rather than calling it an essential facility, it's not an essential facility?

1listnum "WP List 3" \l 13659            MS GRIFFIN‑MUIR:  No, no, that that's fine, I just wanted you to understand in the six categories we looked at in the context of interconnection.

1listnum "WP List 3" \l 13660            MR. DANIELS:  Right, okay.  But ‑‑ and I don't know if you were here the other day when I had a whole discussion with Cogeco about whether transiting ‑‑ I mean it's still you're talking about, it helps to have a clear understanding of what the service we're talking about, it's so that two parties, two CLECs don't have to directly connect to each other.

1listnum "WP List 3" \l 13661            So, it's ancillary to interconnection, but it is providing connectivity service that they themselves are choosing not to do, they're doing it through the ILEC; is that correct?

1listnum "WP List 3" \l 13662            MS GRIFFIN‑MUIR:  That's correct, yes.

1listnum "WP List 3" \l 13663            MR. DANIELS:  That's right.  Okay.

1listnum "WP List 3" \l 13664            So, and your proposal is that, again, it be at category 1, continue to be at a category 1 rates as it was previously; is that correct?

1listnum "WP List 3" \l 13665            MS GRIFFIN‑MUIR:  That's correct, yeah.

1listnum "WP List 3" \l 13666            MR. DANIELS:  Okay.  And now this is just a little bit of the history here.  In Decision 97‑08, the CRTC in that decision first created the service, at the time it didn't find that it was essential but it said it would be treated as essential for a five‑year period; is that correct?

1listnum "WP List 3" \l 13667            MS GRIFFIN‑MUIR:  Yeah, that's correct.

1listnum "WP List 3" \l 13668            MR. DANIELS:  Okay.  And that meant at category 1 rates, so...

1listnum "WP List 3" \l 13669            Now that's ‑‑ and I've got to watch my terminology here ‑‑ I would call that near essential because when they refer to it as treat it at category 1 rates, that what near essential means to me.

1listnum "WP List 3" \l 13670            So, let's just call that treat it as essential, meaning at category 1 rates.

1listnum "WP List 3" \l 13671            Now, the Commission proposed to extend the sunset period in Telecom Notice 2000‑96 and they actually did it in Telecom Order 2001‑184 and extended it indefinitely; is that correct, your understanding?

1listnum "WP List 3" \l 13672            MS GRIFFIN‑MUIR:  Yeah, that's correct.

1listnum "WP List 3" \l 13673            MR. DANIELS:  Okay.

1listnum "WP List 3" \l 13674            MS GRIFFIN‑MUIR:  That they decided there was sufficient competition to discontinue it.

1listnum "WP List 3" \l 13675            MR. DANIELS:  So now, Mr. Chair, the purpose of this part of my cross here is I want to emphasize the importance of having a hard stop to a transition period.  In other words, why it's important for competitors to know now, not in five years, not in three years, not in one year but now that there will be no continuation for regulation of non‑essential services.

1listnum "WP List 3" \l 13676            And to do that I'd like to turn to AT&T Canada's submission that they made in that proceeding about extending it to the five‑year sunset clause.

1listnum "WP List 3" \l 13677            And that can be found at Tab EE, that's E as in Egypt, double E of our material.  So, this is a submission that AT&T Canada made, your predecessor, on August 15th, 2005.

1listnum "WP List 3" \l 13678            Now, in this proceeding there were some services, for example unbundled local loops ‑‑ I know I provided this to your counsel last night but I'm not sure if you remember all the details, so let me know if I'm going too fast ‑‑ but for unbundled loops in this decision you proposed to have them ‑‑ you said that unbundled loops in all areas should be extended indefinitely.

1listnum "WP List 3" \l 13679            Is that your recollection, and if you want I'll take you to the paragraphs, but...

1listnum "WP List 3" \l 13680            It's paragraph 40, if you'd like a reference.

1listnum "WP List 3" \l 13681            MS GRIFFIN‑MUIR:  Well, paragraph 13 says:

                      "Type A and Type B local loops and all bands indefinitely in order to continue to promote broad based competition ‑‑"  (As read)

1listnum "WP List 3" \l 13682            MR. DANIELS:  Right.  So...

1listnum "WP List 3" \l 13683            MS GRIFFIN‑MUIR:

                      "‑‑ of the local telecommunications market."  (As read)

1listnum "WP List 3" \l 13684            Is that what you're referring to?

1listnum "WP List 3" \l 13685            MR. DANIELS:  Yeah.  So, for unbundled loops you said ‑‑ your proposal was it should be extended indefinitely, but ‑‑ and you can find this at paragraph 42.  I'm using the conclusion because it's a little bit pickier and easier to follow.

1listnum "WP List 3" \l 13686            At paragraph 42 you conceded there that for transiting and another service, ETS Transport, which I'm going to spare us getting into the description of but it's sort of similar, you proposed that they be extended for a further five years.  Is that correct?

1listnum "WP List 3" \l 13687            MS GRIFFIN‑MUIR:  Yeah.  At that time, yes.

1listnum "WP List 3" \l 13688            MR. DANIELS:  Okay.  And we can agree that you got that extension and that further five years has gone by; hasn't it?

1listnum "WP List 3" \l 13689            MS GRIFFIN‑MUIR:  We can agree on that, yes.  But I think you're skipping over a lot of things that transpired in between those five years and trying to negotiate the intraconnection regime.  In fact, the Commission had a network of networks proceeding.  Like, there's a lot that's happened in between then and now that you're just kind of jumping from a point in time ‑‑

1listnum "WP List 3" \l 13690            MR. DANIELS:  Well, they had a network of network, I know that you and I know that intimately well from our earlier days, but they had that regime, but as I understand that regime the ultimate was that it actually, instead of having an interconnect on an exchange basis, you could interconnect at a larger area which is the LIR; is that correct?

1listnum "WP List 3" \l 13691            MS GRIFFIN‑MUIR:  That was the outcome of that proceeding.

1listnum "WP List 3" \l 13692            MR. DANIELS:  Yeah.  So, it would result in ‑‑ it would cut down the amount of connections that competitors had to, I mean that was the whole point of that decision was to cut down the amount of places that ‑‑

1listnum "WP List 3" \l 13693            MS GRIFFIN‑MUIR:  Well, that was the upshot, yeah.  There's still stuff in the interconnection ‑‑

1listnum "WP List 3" \l 13694            MR. DANIELS:  Right.  Okay, so...

1listnum "WP List 3" \l 13695            MS GRIFFIN‑MUIR:  ‑‑ regime that's continuing even to this day.

1listnum "WP List 3" \l 13696            MR. DANIELS:  So, it just made it easier in terms of the amount of places that you actually would have to interconnect directly with someone else.

1listnum "WP List 3" \l 13697            But let's go on.  I want to understand the logic in this decision.

1listnum "WP List 3" \l 13698            MS GRIFFIN‑MUIR:  Well, it placed less onus on competitors.

1listnum "WP List 3" \l 13699            MR. DANIELS:  Right, less onus.

1listnum "WP List 3" \l 13700            Now, if I look at the logic of your extension for transiting, unlike loops, you didn't state the services are essential, instead what you said, and I think the essence ‑‑ I'm looking at paragraph 42 here, you confined it, it says in the second last line on page 11:

                      "Such services allow CLECs to focus capital spending on expansion of serving areas and end customer access rather than on the deployment of facilities connecting CLECs to other carriers' networks in the case of transiting."  (As read)

1listnum "WP List 3" \l 13701            So, here you go again.  It's not mandated because it's essential and you never in this submission anywhere said it was essential.

1listnum "WP List 3" \l 13702            What you said is it is mandated in order to ‑‑ I want to use the term "save the CLEC some money."  You would prefer me to use the term ‑‑ I wrote it down ‑‑ "Financial flexibility," I think, is what we agreed to here.

1listnum "WP List 3" \l 13703            But anyway, the key point here is that that was the argument then, in five years, and you said, well, do a five‑year extension.

1listnum "WP List 3" \l 13704            But now, today, all of a sudden, this service, which you, yourself, said five years ago, when you were less developed, wasn't essential, now, you are saying it is essential.

1listnum "WP List 3" \l 13705            Is my understanding correct?

1listnum "WP List 3" \l 13706            MS GRIFFIN‑MUIR:  Well, I guess there are a couple of things.

1listnum "WP List 3" \l 13707            It is more than five years ago.  It is in 2000.

1listnum "WP List 3" \l 13708            But putting that aside, I think, really, all we are looking at is from the orderly interconnection regime for the entire industry.

1listnum "WP List 3" \l 13709            What you are suggesting is we are going to negotiate transiting rates with each other and with the incumbent where the majority of the traffic resides in the local voice market, where the incumbent still, by and large, has control over the PSTN, and that is essentially how we looked at it.

1listnum "WP List 3" \l 13710            MR. DANIELS:  So it has nothing ‑‑ and I think we are in agreement here ‑‑ it has nothing to do whether you can replicate, will replicate.  It is just the question, you are saying, of well, I think it is ‑‑ we don't want to spend the money, which is what you said here.  We don't want to be spending the money doing this, we want to spend it on other things.

1listnum "WP List 3" \l 13711            MS GRIFFIN‑MUIR:  Well, I think you are kind of paraphrasing what we are saying.

1listnum "WP List 3" \l 13712            But I think basically what we are saying is it is a different deal to replicate several interconnection agreements and all of them have to in some way or another interconnect back into the PSTN, which is, by and large, controlled by the incumbent.

1listnum "WP List 3" \l 13713            MR. ROUT:  Transiting really does two things.

1listnum "WP List 3" \l 13714            First of all, it allows for all the telecom players in the market to have a more efficient means of interconnection.  The vast majority of the traffic today is still destined to the ILEC and it allows for that to happen efficiently.

1listnum "WP List 3" \l 13715            The other thing that it allows is for the customers to know that they are always going to get their call.  It seems, quite frankly, unnecessary to drive everyone to invest in interconnections where the demand of volume does not really require it, nor is it economical to do so when in fact what really transiting is allowing, it is allowing to ensure that all customers get the calls that they are.

1listnum "WP List 3" \l 13716            MR. DANIELS:  But let's look at ‑‑ because I am trying to figure out it works with your definition of essential facility.  So let's go look at this by turning to your definition of essential facility found in your initial submission, paragraph 129 ‑‑ of March 15, sorry, of your initial submission.

1listnum "WP List 3" \l 13717            Do you have that handy?

‑‑‑ Pause

1listnum "WP List 3" \l 13718            MR. DANIELS:  So even by your definition ‑‑ let's look at it here:

                      "The facility or service provided by the former monopoly is required as an input by a competitor or competitors to provide downstream retail services." (As read)

1listnum "WP List 3" \l 13719            I am not going to quibble with you for a moment based on what you just said about it is required.  I mean you do need to interconnect with other parties.  That is not in dispute.  Whether transiting is required is another issue but I am just going to ignore that.

1listnum "WP List 3" \l 13720            I am going to go to part (b):

                      "The former monopoly dominates the wholesale supply of the facility of service." (As read)

1listnum "WP List 3" \l 13721            So I take it then your position is in order to get essential facility rights here that the reason why it should be mandated is because the ILEC dominates the wholesale supply of the facility or service; is that correct?

1listnum "WP List 3" \l 13722            MS GRIFFIN‑MUIR:  That is correct, although, just to save you the time, we actually looked at it as interconnection, which we do have to interconnect with the incumbent and this is a service ancillary to interconnection.

1listnum "WP List 3" \l 13723            MR. DANIELS:  But it is ancillary to interconnection not with the incumbent but to someone else, right?  Your responsibility is to connect with every CLEC, right, that you want to exchange service in an LIR?

1listnum "WP List 3" \l 13724            MS GRIFFIN‑MUIR:  Well, I guess that is where we are saying the majority of the traffic, as was the case in 2000, it is still the case today.  So ‑‑

1listnum "WP List 3" \l 13725            MR. DANIELS:  I understand it is the majority of the traffic.  I understand that but ‑‑

1listnum "WP List 3" \l 13726            MS GRIFFIN‑MUIR:  Well, and that is ‑‑ I think Mr. Rout described the fact that it is really for efficiency.  I mean you may or may not agree with us but that is essentially ‑‑

1listnum "WP List 3" \l 13727            MR. DANIELS:  No, no.  I am not disagreeing that it may be efficient but that doesn't mean that it is an essential facility.  That is what I am disagreeing with.

1listnum "WP List 3" \l 13728            I went through ‑‑ and I am not going to take you through it again.  With Cogeco, I went through the whole notion that interconnection of taking a line from London, England to Toronto does not make the service in between on the undersea cable interconnection.  That is still a transporting function.

1listnum "WP List 3" \l 13729            So I guess my question that I really want to get to here is to actually see whether you could do it.

1listnum "WP List 3" \l 13730            And let's look ‑‑ in that regard, if we go to Tab FF, which is your MTS/Companies 12 April 07‑18.

‑‑‑ Pause

1listnum "WP List 3" \l 13731            MR. DANIELS:  This is an interrogatory here where we asked you who are you directly connected with and I see there are a whole bunch of companies here.  By my count, I know, subject to check, there are 37 carriers that you have listed here.

1listnum "WP List 3" \l 13732            Now, I see you have a direct connection to Cogeco on the list.

1listnum "WP List 3" \l 13733            Now, they don't operate in Manitoba, I assume, right?

1listnum "WP List 3" \l 13734            MS GRIFFIN‑MUIR:  I don't think they do.

1listnum "WP List 3" \l 13735            MR. DANIELS:  Yes.  So we are talking about a direct connection outside your Manitoba operations.

1listnum "WP List 3" \l 13736            And I take it, it is the same thing with EastLink?

1listnum "WP List 3" \l 13737            MS GRIFFIN‑MUIR:  Yes.  Access, yes.

1listnum "WP List 3" \l 13738            MR. DANIELS:  Yes.

1listnum "WP List 3" \l 13739            And then I see you are directly connected to major cable companies, Rogers Video, Shaw, et cetera.  You have got everybody ‑‑ well, almost everybody, all the CLECs on here, almost all the CLECs.

1listnum "WP List 3" \l 13740            So I am looking at this and I am saying these have nothing to do with Bell Canada, you are directly connected.

1listnum "WP List 3" \l 13741            So quite simply, my punchline on this point, Mr. Chair, is there is no reason to mandate transiting as an essential service.

1listnum "WP List 3" \l 13742            MR. ROUT:  Well, just to clarify what is on the list, because what we were asked to do is provide a list of service providers which we interconnect with and the majority of these, and I would have to think about each one of them, but the majority of these interconnections are for the purpose of data traffic.

1listnum "WP List 3" \l 13743            MR. DANIELS:  But you are directly connected to them, are you not?

1listnum "WP List 3" \l 13744            MR. ROUT:  There would be a connection to exchange data, yes.

1listnum "WP List 3" \l 13745            MR. DANIELS:  Yes, which means that there is ‑‑ you are directly connected, which means you have your own facility connecting to them.  So you are only choosing, I agree, you are only choosing to put data over but you are directly connected.  I mean it didn't say ‑‑ it said interconnect with directly.  So that is why I am making that supposition.

1listnum "WP List 3" \l 13746            MR. ROUT:  Right.  So there would be in most cases, from what I see on the list, a single connection with these parties for the exchange of data traffic.  The removal of this list in no way would help with the removal of transit.  If that were taken away, there would need to be a voice interconnection in every appropriate exchange with every party.

1listnum "WP List 3" \l 13747            MR. DANIELS:  No, there wouldn't have to be, right?  I mean you could directly connect with one place, with one carrier and exchange all your traffic with that one carrier?

1listnum "WP List 3" \l 13748            MR. ROUT:  You could do that as well, yes.

1listnum "WP List 3" \l 13749            MR. DANIELS:  Right.  And we have already ‑‑ I don't know if you were here the other day when we heard other carriers do do that.  But anyway, I am ‑‑

1listnum "WP List 3" \l 13750            THE CHAIRPERSON:  Mr. Daniels, did I understand the witness correctly that she didn't say that it should be designated as essential but she called it interconnection?

1listnum "WP List 3" \l 13751            MR. DANIELS:  I believe she said that it was ancillary to interconnection.

1listnum "WP List 3" \l 13752            MS GRIFFIN‑MUIR:  Yes, but ‑‑

1listnum "WP List 3" \l 13753            THE CHAIRPERSON:  No, no, but when you asked her the question, I thought she said it is not essential, it is an interconnection, it goes into a connection basket.  That is how I understood her.

1listnum "WP List 3" \l 13754            MS GRIFFIN‑MUIR:  Right.  The way we would classify it in terms of the Commission's six baskets is in the six baskets, it is a service ancillary to interconnection.

1listnum "WP List 3" \l 13755            MR. DANIELS:  I am sorry, but ‑‑

‑‑‑ Pause

1listnum "WP List 3" \l 13756            MR. DANIELS:  Mr. Chair, I guess, my point on this is regardless of whether they say it is interconnection, it is truly ‑‑ it is not about us interconnecting with them, it is about enabling them to avoid it.  So that is why I took them to their essential facilities definition in terms of establishing they could duplicate and in fact they do have 37 direct connections.

1listnum "WP List 3" \l 13757            THE CHAIRPERSON:  I am not quarrelling with your arguments.  I just want to make sure I understood her correctly because that was the answer she gave to you.  Now, you put your spin on it but that is fine, leave it.

1listnum "WP List 3" \l 13758            MR. DANIELS:  I would like to address the issue of treatment, since you mentioned it, of ancillary services with you and I think in this area we can agree on a definition of essential facilities.

1listnum "WP List 3" \l 13759            I put in Tab JJ of our material here interrogatory MST Allstream/CRTC 12 April 07‑303, and in the first line there you said:

                      "MTS Allstream defines an ancillary service as a service that is subordinate to or part of a primary or antecedent interconnection or connectivity service." (As read)

1listnum "WP List 3" \l 13760            I don't really have much of a problem with that definition.  I think where we tend to disagree has to do with the treatment of ancillary services and so, to illustrate, I would like to focus on an example using a service call to a connecting link in a central office.  So let's see if we can agree on some facts first.

1listnum "WP List 3" \l 13761            In terms of a link, let's imagine that MTS Allstream orders today a CDN DS‑3 access service in a Bell Canada central office.  So that would be an access from a customer premise to the central office.

1listnum "WP List 3" \l 13762            Can we agree that actually today that is a Category 2 non‑essential service?

‑‑‑ Pause

1listnum "WP List 3" \l 13763            MS GRIFFIN‑MUIR:  I am actually not sure but ‑‑

1listnum "WP List 3" \l 13764            MR. DANIELS:  Okay.  So ‑‑

1listnum "WP List 3" \l 13765            MS GRIFFIN‑MUIR:  ‑‑ I know that links for, let's say, CDN ‑‑

1listnum "WP List 3" \l 13766            MR. DANIELS:  I am not at the link yet.  I am talking about the CDN access ‑‑

1listnum "WP List 3" \l 13767            MS GRIFFIN‑MUIR:  Oh!

1listnum "WP List 3" \l 13768            MR. DANIELS:  ‑‑ the access.  The access at a DS‑3 level would be ‑‑

1listnum "WP List 3" \l 13769            MS GRIFFIN‑MUIR:  Oh! Okay, sorry.

1listnum "WP List 3" \l 13770            MR. DANIELS:  ‑‑ a Category 2?

1listnum "WP List 3" \l 13771            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13772            MS GRIFFIN‑MUIR:  Yes.  Yes.  Sorry.

1listnum "WP List 3" \l 13773            MR. DANIELS:  Okay.  I am trying to really do this so it will be explained to people who may not be familiar with what a link is in the esoteric.

1listnum "WP List 3" \l 13774            So we have a CDN access that is a DS‑3.  And then if you are not co‑located there for whatever reason, you may want to backhaul it out of there and so you may buy a CDN transport service from us at a DS‑3 level.

1listnum "WP List 3" \l 13775            And that too would be CDN but it would be a Category 2 service, non‑essential, today; is that correct?

1listnum "WP List 3" \l 13776            MS GRIFFIN‑MUIR:  Okay, well, other than the fact that you keep throwing in "non‑essential" ‑‑

1listnum "WP List 3" \l 13777            MR. DANIELS:  Well, when I say "non‑" ‑‑

1listnum "WP List 3" \l 13778            MS GRIFFIN‑MUIR:  ‑‑ you know, I can't win.  Yes.

1listnum "WP List 3" \l 13779            MR. DANIELS:  I'm trying to use today.  I'm trying to be fair and factual.  Today, in the CRTC's definition, it's non‑essential because it's not Category 1.  There's a distinction between Category 1 and Category 2, in terms of what the mark ups allowed.

1listnum "WP List 3" \l 13780            MS GRIFFIN‑MUIR:  Okay, it has a 15 percent mark up and it doesn't have ‑‑ you are right, it's a mark up that's well in excess of 15 percent.

1listnum "WP List 3" \l 13781            MR. DANIELS:  Generally for just Category 2.  Right, okay.

1listnum "WP List 3" \l 13782            MS GRIFFIN‑MUIR:  Generally speaking, yes.

1listnum "WP List 3" \l 13783            MR. DANIELS:  Okay.  Now, what you would need, though, is you would need in the office ‑‑ because the are two separate services, in the central office the one little piece you need is the link that connects the CDN access to the CDN transport.  That's, if you pardon the pun, the missing link, but that's the extra service that you have to buy.  Is that correct?

1listnum "WP List 3" \l 13784            MR. ROUT:  That's what you need to make it function, yes.

1listnum "WP List 3" \l 13785            MR. DANIELS:  Okay.  And can we also agree that today that service is ‑‑ as a result of the CRTC's decision that one is actually an essential facility, or near essential, being priced a Category 1 service?  That was the Commission's ruling.

1listnum "WP List 3" \l 13786            MS GRIFFIN‑MUIR:  Okay, it priced at cost plus 15, yes.

1listnum "WP List 3" \l 13787            MR. DANIELS:  Yes, priced at cost plus 15.

1listnum "WP List 3" \l 13788            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 13789            MR. DANIELS:  Now, the link itself has  no value in and of itself, it's only use is in relation to other services.  Is that a fair description?  I mean, no one is going to buy a link in and of itself, right?

1listnum "WP List 3" \l 13790            MS GRIFFIN‑MUIR:  That's correct, yes.

1listnum "WP List 3" \l 13791            MR. DANIELS:  Now if I understand it, the logic of the CRTC's ruling, which The Companies strongly oppose, is that if MTS wants to connect those two Category 2 services it has to purchase the link from Bell, and that's why the link is at Category 1 rates.  Is that a fair description?

1listnum "WP List 3" \l 13792            MS GRIFFIN‑MUIR:  Well, we have to purchase the service from Bell, yes, and it's ‑‑ we are in your CO and that's how come the Commission decided in the CDN decision that it was priced at cost plus 15.

1listnum "WP List 3" \l 13793            MR. DANIELS:  And do you support that?  Is that the right way to think about ancillary?

1listnum "WP List 3" \l 13794            MS GRIFFIN‑MUIR:  No, no, that ‑‑ I don't think ‑‑ you are suggesting that the link is ‑‑ we can't get the service without the link, but there's other services that are ancillary, just as I described transitting, so we don't have the same definition.

1listnum "WP List 3" \l 13795            MR. DANIELS:  I'm not talking about other services, I'm asking you whether you support the notion that, despite the fact that the CRTc found that at both end is a Category 2 service, that the link in between should be at Category 1 rates?

1listnum "WP List 3" \l 13796            MS GRIFFIN‑MUIR:  Okay.  Well, we are agreeing the link in between, but we had also asked for the other two parts to be a Category 1 rate, too.

1listnum "WP List 3" \l 13797            MR. DANIELS:  I know you would ‑‑

1listnum "WP List 3" \l 13798            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 13799            MR. DANIELS:  ‑‑ but I'm really trying to focus for the moment on ancillary.  So let's fast forward to next year and assume that the Commission determines that CDN DS‑3 access and transport fall into Bucket 3, at least at the DS‑3 level, and are subject to a transition period during which the ILECs are allowed to raise the rates for those services, is it your position that the link between those two services is a Bucket 1 or a Bucket 2 essential facility or does the link fall into Bucket 3?

1listnum "WP List 3" \l 13800            MS GRIFFIN‑MUIR:  Well, the problem of putting the link in Bucket 3 would be nobody else can provide the link in Bucket 3, so it's sitting inside the CO of Bell Canada or some other incumbent.

1listnum "WP List 3" \l 13801            MR. DANIELS:  Good, so we are getting to the heart of this issue.

1listnum "WP List 3" \l 13802            COMMISSIONER CRAM:  Mr. Daniels, is it Professor or Dr. Selwyn has had his light on for about two questions ago, and I wonder if...

1listnum "WP List 3" \l 13803            MR. SELWYN:  What I was going to point out was that the reason that the link is essential should be driving the decision on the access and transport components.

1listnum "WP List 3" \l 13804            You have infrastructure that, historically, fans out from the wire centre, from the ILEC central office, and the reason that the kind of circuit you are describing is routed through the central office is because that's where the facilities are.  To do it any other way would involve stringing new wire.

1listnum "WP List 3" \l 13805            So for the very reason that the CRTC determined that the link was essential also implies that the access and transport components of that circuit are similarly essential because they have to be routed efficiently through the ILEC wire set.

1listnum "WP List 3" \l 13806            And, you know, the fact that they could be done some other way really is not important.  What's important is that's the efficient way to do it.  It is recognizing the fact that the wire centre acts as a hub, where a lot of things come together, and that's why, I think, the Commission correctly classified the link as Category 1 and it also justifies classifying the components as Category 1.

1listnum "WP List 3" \l 13807            MR. DANIELS:  Okay, but, you see, Dr. Selwyn, actually, what you are saying is that the logic of however you should treat the link should be the same as how you treat the other services, and, frankly, that's exactly our proposition because ‑‑

1listnum "WP List 3" \l 13808            MR. SELWYN:  Well, that's not what ‑‑

1listnum "WP List 3" \l 13809            MR. DANIELS:  Well, hold on ‑‑

1listnum "WP List 3" \l 13810            MR. SELWYN:  Excuse me, that's not what I'm saying.

1listnum "WP List 3" \l 13811            MR. DANIELS:  Hold on, excuse me, let me ask my question, okay?  The proposition ‑‑

1listnum "WP List 3" \l 13812            MR. SELWYN:  Well, don't mischaracterize my testimony.  What I said was ‑‑

1listnum "WP List 3" \l 13813            MR. DANIELS:  Well ‑‑

1listnum "WP List 3" \l 13814            THE CHAIRPERSON:  Okay, I think at this point, everybody's getting testy.  Let's take a 10‑minute break.

‑‑‑ Upon recessing at 1453 / Suspension à 1453

‑‑‑ Upon resuming at 1506 / Reprise à 1506

1listnum "WP List 3" \l 13815            THE SECRETARY:   Please be seated everyone.

1listnum "WP List 3" \l 13816            THE CHAIRPERSON:  Okay, Mr. Daniel, and to Dr. Selwyn, I hope you have both cooled off and we can come together and come to this very quickly.

1listnum "WP List 3" \l 13817            Go ahead.

1listnum "WP List 3" \l 13818            MR. DANIELS:  Mr. Chair, I'm prepared to move on.

1listnum "WP List 3" \l 13819            THE CHAIRPERSON:  Okay, move on.

1listnum "WP List 3" \l 13820            MR. DANIELS:  So I'm going to hand it over to my colleague, Mr. Hofley.

                 MR. HOFLEY:  Mr. Chairman.

1listnum "WP List 3" \l 13821            Good afternoon, lady and gentlemen.

1listnum "WP List 3" \l 13822            Just to be clear, just so that we understand, I will be reserving my questions for Dr. Selwyn until he appears with the Primus panel, which is next week.  It is bad enough having to cross‑examine an expert once, let alone doing it twice, and his counsel has been made aware of that.

1listnum "WP List 3" \l 13823            I want to talk to the business panel about I think three issues only.  The first issue is about MTS Allstream's position concerning alternate sources of supply and self‑supply.

1listnum "WP List 3" \l 13824            At paragraph 13 of your July 5 evidence ‑‑ and I should have said, I'm sorry, you should probably have in front of you your evidence, as well as the compendium.  That's this big Bell binder.  So you will have perhaps two big binders in front of you, which, given the number behind the Commission, seems rather small.

1listnum "WP List 3" \l 13825            So in paragraph 13 of your July 5 evidence, you say:

                      "It is simply incorrect to equate the presence of a competitor having some facilities with an alternate source of local access."  (As read)

Do you recall that statement?

1listnum "WP List 3" \l 13826            Now, I think this is your point ‑‑ and you have made it a number of times today already ‑‑ that until there's physical access to the premise, regulation should be maintained.  Just put it simply, I think that's probably a fair summary.  I'm not a technical person, so is that a fair statement?

1listnum "WP List 3" \l 13827            MS GRIFFIN‑MUIR:  I'm sorry, what's your question?

1listnum "WP List 3" \l 13828            MR. HOFLEY:  The question is, where you say:

                      "It is simply incorrect to equate the presence of a competitor having some facilities with an alternative source of local access."  (As read)

1listnum "WP List 3" \l 13829            Okay?  I'm just saying this is basically part of your proposition that, until physical access to each premise is established, regulation should be maintained.  It's your point about the Last Mile.  Correct?

1listnum "WP List 3" \l 13830            MS GRIFFIN‑MUIR:  Well, actually, our point is broader than the Last Mile.  I guess our point is a network is really based on ‑‑ there's huge economies of scale with each physical point of connection, so when you talk about the fact that maybe in some locations in a specific exchange there are alternatives sources of supplies both for access and transport within that area doesn't necessarily equate to being a competitive wholesale supply.

1listnum "WP List 3" \l 13831            MR. HOFLEY:  So is this why, for example, that you say, and it's in MTS/Companies 19July07‑29, it's Tab LL ‑‑ you know we were up late when you are getting Tab LL, Mr. Chairman ‑‑ is this why you say that the number of buildings passed is irrelevant?

1listnum "WP List 3" \l 13832            Do you see that?  It's in (b).  You say:

                      "The percentage of buildings passed by MTS Allstream facilities is not relevant."  (As read)

1listnum "WP List 3" \l 13833            And you don't give an answer as to what percentage of buildings you passed, you just say it's not relevant and we don't have an answer to that.

1listnum "WP List 3" \l 13834            MR. MacDONALD:  Well, ultimately, what is relevant is whether you actually have access to the building, I mean, by virtue of the fact that the fibre may be going near the building.  And in many cases, when you talk about one instance, you could say, Well, it's only one building, you know, I just shoot a lateral somewhere into that particular building and what's the big deal, but in many cases when you are establishing a network, we follow where our customers are, and, ultimately, you could end up with hundreds of locations like that, that it becomes impractical.

1listnum "WP List 3" \l 13835            MR. HOFLEY:  No, I understand that.  Sorry, Mr. MacDonald, I understand that, but what I thought I heard you say earlier today was that you look at this from a customer‑by‑customer perspective and you look at the locations of the customers.  Correct?  So location‑a‑by‑location perspective, that's how you choose whether or not to invest?

1listnum "WP List 3" \l 13836            MR. MacDONALD:  Well, we do that, and we also look at the concentration of customers in a particular area.  So when you are talking about one customer, it could be a bank branch or it could be a retail outlet, that becomes a different investment decision than when I have a metropolitan area where I have multiple customers in a serving area.  As I get into the core network, then it becomes easier as I can amortize the investment over multiple sources of traffic.

1listnum "WP List 3" \l 13837            The incumbents, actually, by virtue of how they grew up, and under the monopoly regime, have access to all of the customers, so...

1listnum "WP List 3" \l 13838            MR. HOFLEY:  No, and I understand that.  I just wanted to make sure I understood what you meant by to equate the presence of a competitor with an alternate source of local access.  So I think we have established that.

1listnum "WP List 3" \l 13839            But you wouldn't leave it just there, would you?  Would you agree with me that you would also want to look at other methods of access, other platforms, like wireless ‑‑

1listnum "WP List 3" \l 13840            MR. MacDONALD:  Yes, we do.  As a matter of fact, we actively pursue other sources of supply.  Because, quite frankly, we are in a competitive environment and, to be perfectly blunt, I much prefer to give the access to somebody else than my primary competitor.  So if there is a viable source of supply out there, then we actively use them.

1listnum "WP List 3" \l 13841            As a matter of fact, Mr. Rout negotiates on an ongoing basis different supply arrangements with other players as they can provide facilities.

1listnum "WP List 3" \l 13842            MR. HOFLEY:  Now, you have said on that point ‑‑ this is paragraph 12 of your July 5 evidence ‑‑ you say, I'm going to quote you and you can tell me if I have go it wrong:

                      "In all local voice and data markets from the small to enterprise there is very little deployment of alternate supply.  In particular, there is no deployment of copper loop facilities by out‑of‑territory former monopolies or by competitors." (As Read)

1listnum "WP List 3" \l 13843            See that?

1listnum "WP List 3" \l 13844            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13845            MR. HOFLEY:  Okay.  So can you explain to me why it would be an important indicator of alternate supply in the business markets if competitors were deploying copper loops as opposed to other technologies that competitors are in fact deploying like coaxial cable, fibre cable or wireless?

1listnum "WP List 3" \l 13846            MR. ROUT:  I think we are simply suggesting on this particular point that there is no viable alternative for copper.

1listnum "WP List 3" \l 13847            MR. HOFLEY:  Okay.  And then you go on to say in the same paragraph that there is, and I am quoting again:

                      "No evidence that any wireless facilities and services exist that could meet the data transmission needs of all but the smallest of small businesses." (As Read)

1listnum "WP List 3" \l 13848            Do you see that?

1listnum "WP List 3" \l 13849            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13850            MR. MacDONALD:  Yes.

1listnum "WP List 3" \l 13851            MR. HOFLEY:  Now, you have been in the industry a very long time, Mr. MacDonald, and ‑‑

1listnum "WP List 3" \l 13852            MR. MacDONALD:  A grizzled vet, as people have told me.

1listnum "WP List 3" \l 13853            MR. HOFLEY:  I am getting there myself, except not in your industry obviously.

1listnum "WP List 3" \l 13854            Now, you are aware of course of the Inukshuk product or project, correct?

1listnum "WP List 3" \l 13855            MR. MacDONALD:  Intimately aware. As a matter of fact, our company participated as part of the initial consortium that deployed that particular technology with Microcell and one other partner.  We had two locations, we ran trials just outside of Ottawa, in Cumberland, and we ran one in Vancouver as well.

1listnum "WP List 3" \l 13856            And the intention of that and our whole engagement with Inukshuk was to basically use and explore the Inukshuk spectrum as an alternative source of supply.  The conclusions we came to in both those trials in using it with multiple customers was that there were serious limitations that basically limited the application of the technology to basically what we have categorized here as a small business niche kind of application.

1listnum "WP List 3" \l 13857            MR. HOFLEY:  How many years ago was that, Mr. MacDonald, that you participated in those trials?

1listnum "WP List 3" \l 13858            MR. MacDONALD:  It was underway just at the time when Rogers acquired Microcell, so we are talking what, two and a half, three years ago?

1listnum "WP List 3" \l 13859            MR. SHEPPARD:  2001, 2000.  But it was using the same technology.

1listnum "WP List 3" \l 13860            MR. MacDONALD:  Same technology.

1listnum "WP List 3" \l 13861            MR. HOFLEY:  So you are aware though that using pre‑WiMAX technology they have deployed it across Canada and it is offering up to three megabits of bandwidth?

1listnum "WP List 3" \l 13862            MR. MacDONALD:  Yes, I don't dispute that.  We found the technology works, it works in most cases and we like the idea of the fact that it was in our line of sight. But when we wanted to provide that technology as an alternative to an enterprise, let us say once again a retail outlet that was running, you know, point of sale transactions, etc., over to a particular location, then there were some issues.

1listnum "WP List 3" \l 13863            MR. HOFLEY:  Okay.

1listnum "WP List 3" \l 13864            MR. MacDONALD:  We found that they really ‑‑ and this was our marketing and engineering assessment, is that it would fit, it would fit in some applications, but in terms of servicing the needs of large enterprise it was not ready for primetime.  We were sort of hoping it would be, by the way.

1listnum "WP List 3" \l 13865            Then we were advised that we weren't welcome in that consortium anymore.

1listnum "WP List 3" \l 13866            MR. HOFLEY:  Well, let us go back to the paragraph I read you, Mr. MacDonald, because you said:

                      "No evidence that any wireless facilities and services exist that could meet the data transmission needs of all but the smallest of small businesses." (As Read)

1listnum "WP List 3" \l 13867            Now, you have just said that it doesn't work from your perspective on enterprise. But would you care ‑‑

1listnum "WP List 3" \l 13868            MR. MacDONALD:  I think that is still accurate, I would still agree with that.  And when I talk about the service, it is not just the transmission speeds that we are talking about here.  You know, enterprise customers are interested in the availability of the service, like what is the up time.  And when we sign a contract with one of large enterprise customers we have to sign up for service level agreements that put certain conditions and requirements on the stability and the level of evolution and the reliability of the underlying delivery system.

1listnum "WP List 3" \l 13869            And the conclusion we came to is that there was nothing wrong with the technology. I am still quite hopeful that this stuff is going to be ready for primetime at some point and represent a viable delivery system because we would like to see this in a marketplace.  But our assessment at that time, and maybe the technology has evolved somewhat since, but we have dealt with other alternative sources of supply that Mr. Rout could talk to that was basically that.

1listnum "WP List 3" \l 13870            MR. HOFLEY:  So let us keep focusing on the statement that you made, all but the smallest of small businesses. And I hear you on enterprise but, of course, in enterprise there might be other alternatives and there might be greater revenues at stake.  I think you would agree with me there, wouldn't you?

1listnum "WP List 3" \l 13871            MR. MacDONALD:  Correct, yes.

1listnum "WP List 3" \l 13872            MR. HOFLEY:  So let us just take another look at another possibility, something called TeraGo Networks.

1listnum "WP List 3" \l 13873            And by the way, Mr. Chairman, this is at tab QQ.  I don't know if we need to give it an exhibit number, at least now, but we can give them as we did last week, at the end.  This is a big binder, Mr. Chairman, I want to help us move through.  And these were all, by the way, provided to this panel early evening last night.

1listnum "WP List 3" \l 13874            Now, are you familiar with this?  Well, you must be now since you had it last night, Mr. MacDonald.

1listnum "WP List 3" \l 13875            MR. MacDONALD:  Oh absolutely.  Actually, Ron could ‑‑

1listnum "WP List 3" \l 13876            MR. ROUT:  Yes, we are familiar with TeraGo.

1listnum "WP List 3" \l 13877            MR. HOFLEY:  So this company says that they operate a national wireless network spanning nearly 10,000 kilometres and covering 24 cities across Canada, serving over 3,000 customers.  Do you see that?  In fact, I actually gave a little check in the side, which is like the cross‑examiner never do.  But, of course, I am trying to be helpful, so you are aware of that, right?

1listnum "WP List 3" \l 13878            MR. ROUT:  We see that.

1listnum "WP List 3" \l 13879            MR. HOFLEY:  Okay.  So they offer 1.5 megabits up to 100 megabits services to business customers.  Is that what they say?

1listnum "WP List 3" \l 13880            MR. ROUT:  That is what their document says, yes.

1listnum "WP List 3" \l 13881            MR. HOFLEY:  Now, would you agree with me that 100 megabits is bitrate that is fit for the smallest of small businesses?  I am happy to have Mr. Sheppard answer if he would wish.

1listnum "WP List 3" \l 13882            MR. ROUT:  I am sorry, your question again please?

1listnum "WP List 3" \l 13883            MR. HOFLEY:  Would you agree with me that 100 megabit service is a rate that is fit for the smallest of small businesses or more than the smallest of small businesses?

1listnum "WP List 3" \l 13884            MR. ROUT:  What I read here is that they seem to indicate they have some spectrum licences and that they provide bandwidth from 100 MHz and up.  That is certainly, you know, a qualifiable amount of bandwidth.  I actually have some direct experience with TeraGo, in that about two years ago we actually did some trial work with them in understanding the services that they provide.  And again, this was actually between one and two years ago.

1listnum "WP List 3" \l 13885            Again, just to add to John's point earlier, we did not find that the service quality existed, at least for the applications that we would need to provide to our customers.

1listnum "WP List 3" \l 13886            MR. HOFLEY:  And your customers, your focus I think here has been on kind of what I will call the medium to large business, is that a fair statement?

1listnum "WP List 3" \l 13887            MR. MacDONALD:  That is correct.  From what I am speaking, that is what I am referring to.

1listnum "WP List 3" \l 13888            MR. HOFLEY:  Now, I am going to take you to the next one and we will probably stop here.  But you will see that, it is tab RR, our friends Xittel here, it is an announcement from something called the new economics of fibre.  They spell fibre differently than I do, but I must be spelling it wrong.

                      "Xittel recently revealed that it has used fixed wireless technology to offer hi‑speed services under terms and conditions similar to DSL in 45 communities and, in the next two years, expects to roll out its network to another 90 communities." (As Read)

1listnum "WP List 3" \l 13889            Were you aware of this?

1listnum "WP List 3" \l 13890            MR. ROUT:  Yes, I see that.

1listnum "WP List 3" \l 13891            MR. HOFLEY:  And so this would be another platform that could provide services to business.  We might not agree it is enterprise business, but to business, is that a fair statement?

1listnum "WP List 3" \l 13892            MR. ROUT:  Well, I am not as familiar with this organization, but it is clear that they seem to be focusing mostly on communities and residential service offer.

1listnum "WP List 3" \l 13893            I did have an opportunity to quickly look at the article last night.  One of the parts that I found interesting because, as John indicated, we do look for alternatives and we are interested in looking at both alternative technologies and alternative service providers that can help us build our portfolio of services and be able to compete more effectively.

1listnum "WP List 3" \l 13894            And it even says further on in the article that, and I am not sure of the author, but that several telephone carriers see this as a compliment to their deployment of wireline services.  And, in fact, that is where about two weeks ago we met with TeraGo and had a pretty in‑depth discussion with them about their service proposition and what they are really able to offer us.

1listnum "WP List 3" \l 13895            And again, the outcome of that meeting was not a prime service, that it would not meet the needs of businesses and potentially sometime down the road there would be some differences.  But today and certainly in the near term we don't see it as viable.

1listnum "WP List 3" \l 13896            MR. HOFLEY:  And again, I am focusing on smallest of small businesses and your focus is on medium and large businesses, correct?

1listnum "WP List 3" \l 13897            MR. ROUT:  Well, we provide service to a wide range of customers.  Certainly, when we are developing new products we typically are looking for innovative services to provide to larger business and enterprise.  But we provide service to a full spectrum of customers.

1listnum "WP List 3" \l 13898            MR. HOFLEY:  Now, did I understand you to suggest that this service from Xittel is not intended to go to businesses?

1listnum "WP List 3" \l 13899            MR. ROUT:  I am not sure, do they indicate that here?

1listnum "WP List 3" \l 13900            MR. HOFLEY:  Yes, in fact, if you look on the firs page, in a grey box under background, it says how much Xittel owns.  And then it says:

                      "Amongst its partners and customers Xittel counts about 100 public and private organizations such as school boards, municipalities, and natural resources companies." (As Read)

And then further on you will see that it talks about providing it to homes and small businesses.

1listnum "WP List 3" \l 13901            MR. ROUT:  I see, it says that they provide to home and small business, yes.

1listnum "WP List 3" \l 13902            MR. HOFLEY:  Maybe we had better just go, since we focused on small business, to the next tab very quickly, and that is a press release by Primus Canada and MIPS.  It says, "Primus Canada and MIPS expand mobile WiMAX trial to Toronto."

1listnum "WP List 3" \l 13903            Now, according to the MIPS website, which by the way is found in the next tab, which is tab TT, MIPS is the owner of spectrum licences in 35 areas covering most major cities and towns across Canada potentially serving over 15 million in population.  Did you read that last night when you were looking at this?

1listnum "WP List 3" \l 13904            MR. ROUT:  No, I am reading it now.

1listnum "WP List 3" \l 13905            MR. HOFLEY:  And it says:

                      "MIPS' market strategy is to focus on a wholesale model where it will provide the network infrastructure to telecom service providers and major enterprises." (As Read)

1listnum "WP List 3" \l 13906            Were you aware of this?  Perhaps it is new, I guess it is.  October 4, that is pretty new.  Were you aware of this?

1listnum "WP List 3" \l 13907            MR. ROUT:  Not until I received it. But I do see that they have just announced their intent to do so.

1listnum "WP List 3" \l 13908            MR. HOFLEY:  No, no, I understand it is an announcement, okay.

1listnum "WP List 3" \l 13909            Now, have you conducted any similar trials to test any wireless technology of this nature?  You obviously didn't know about this, but have you conducted kind of similar trials?

1listnum "WP List 3" \l 13910            MR. ROUT:  We have engaged in trials with WiMAX both internally and with external parties.

1listnum "WP List 3" \l 13911            MR. MacDONALD:  We actually have a long history of looking at wireless options.  We have some LNDS spectrum ourselves.  We have actually looked at deploying the technology in some instances, and we are constantly looking for alternative sources of supply.

1listnum "WP List 3" \l 13912            MR. HOFLEY:  So you have hope for this technology.  I think that's what you said fairly, Mr. MacDonald.

1listnum "WP List 3" \l 13913            MR. MacDONALD:  Yes, actually I do.  I just think it's not ready for prime time at this particular juncture.

1listnum "WP List 3" \l 13914            I'm not suggesting, by the way ‑‑ and I really do wish these guys the best of success.  And I think that the technology will evolve over time.  But at this point in time and for the foreseeable future, we just don't see it there yet for the kinds of applications that we are looking for.

1listnum "WP List 3" \l 13915            And we don't see, by the way, our competitors using large parts of this technology.  I don't know how much Bell is using out west.  I don't know how much TELUS is using out east.  I suppose Bell could be using their Inukshuk spectrum out west as well.

1listnum "WP List 3" \l 13916            MR. HOFLEY:  The technology is there and it's another platform.  Correct?

1listnum "WP List 3" \l 13917            MR. MacDONALD:  It's a technology with a limited niche kind of application at this point.

1listnum "WP List 3" \l 13918            MR. HOFLEY:  At this stage.

1listnum "WP List 3" \l 13919            MR. MacDONALD:  At this stage.

1listnum "WP List 3" \l 13920            MR. ROUT:  I just want to highlight something.

1listnum "WP List 3" \l 13921            In terms of the success that we have had in actually competing to date and in terms of access technologies that are proven to provide the quality of service, the expectations that the customer is looking for, provide a method for us to innovate, Wi‑Max is not there.  So I would not suggest that Wi‑Max as a technology is there as an alternative to anything outlined in the essential services proceeding.

1listnum "WP List 3" \l 13922            MR. MACDONALD:  There are a number of Wi‑Max players that have cropped up in some regions of the country in western Canada and Alberta.  We have spoken to them, as a matter of fact, because they need to have partners to provide a full range of services.

1listnum "WP List 3" \l 13923            Most of them are data and Internet based at this point in time.  I'm not aware of any of them that are providing voice.

1listnum "WP List 3" \l 13924            They have a big problem because the problem is that all the local interconnection arrangements that are required to work their technology to have a full service offering.

1listnum "WP List 3" \l 13925            MR. HOFLEY:  These are the interconnection arrangements ‑‑

1listnum "WP List 3" \l 13926            MR. MacDONALD:  For voice.

1listnum "WP List 3" \l 13927            MR. HOFLEY:  ‑‑ that pretty much everybody agrees can be mandated, you mean.

1listnum "WP List 3" \l 13928            MR. MacDONALD:  Yes, for voice.  It's just the nature of the technology.

1listnum "WP List 3" \l 13929            What I'm saying is each one of these technologies carries with it its own challenges.

1listnum "WP List 3" \l 13930            Wireless, for example, in some cases even if you had a rock solid, fairly well developed technology, some customers get concerned about it just in terms of security.  They feel it is more subject to interception, et cetera.

1listnum "WP List 3" \l 13931            MR. HOFLEY:  But of course that is your job and you have been very successful at convincing customers to adopt new technologies.

1listnum "WP List 3" \l 13932            MR. MacDONALD:  Yes, but it's the nature ‑‑ the point being that it's not ready for prime time yet, certainly the kinds of applications in terms of a replacement for what we currently get from a wireline basis from the incumbents.

1listnum "WP List 3" \l 13933            MR. HOFLEY:  I would like to talk about ‑‑ and this may be just frankly clarificatory.

1listnum "WP List 3" \l 13934            I would like to talk about your use, not of wireless, but of the ILEC services, both at wholesale and retail and facilities.

1listnum "WP List 3" \l 13935            I would like you to turn, if I could, to your interrogatory response 12April07‑13.  It's at Tab VV.

1listnum "WP List 3" \l 13936            Apparently I didn't say it.  It's MTS‑Companies12April07‑13, Tab VV, for our radio listeners.

1listnum "WP List 3" \l 13937            Do you have that?

1listnum "WP List 3" \l 13938            MR. MacDONALD:  Yes, we have it.

1listnum "WP List 3" \l 13939            MR. HOFLEY:  You are going to see in Tab VV a second page and a table that you have provided.  Do you see that?

1listnum "WP List 3" \l 13940            This is the ILEC Service Type Category Top Ten Ranking, 1 through 10.

1listnum "WP List 3" \l 13941            MR. MacDONALD:  Yes, we have it.

1listnum "WP List 3" \l 13942            MR. HOFLEY:  Let's go down this list.  Can you tell me which of these services are Category 2 or Category 1?

1listnum "WP List 3" \l 13943            If you want to do it more quickly, I'm happy to kind of walk you through it, Ms Muir.

1listnum "WP List 3" \l 13944            Can you tell me which ones?

1listnum "WP List 3" \l 13945            Let's talk about Centrex for Resale.  I think it's obviously retail.

1listnum "WP List 3" \l 13946            MS GRIFFIN‑MUIR:  It's a retail service.  DNA is a retail service.

1listnum "WP List 3" \l 13947            CDN service is both Cat 1 and Cat 2.

1listnum "WP List 3" \l 13948            Unbundled loops are Cat 1.

1listnum "WP List 3" \l 13949            LD trunk interconnection, you've got me.  I don't know.

1listnum "WP List 3" \l 13950            Directory assistance, I'm not sure whether it's Cat 1 or Cat 2.

1listnum "WP List 3" \l 13951            It's retail; thank you.

1listnum "WP List 3" \l 13952            Local trunk interconnection, I think it's Cat 1.

1listnum "WP List 3" \l 13953            MR. HOFLEY:  Yes, I believe it is, just like (e).

1listnum "WP List 3" \l 13954            MS GRIFFIN‑MUIR:  Sorry?

1listnum "WP List 3" \l 13955            MR. HOFLEY:  Just like I think LD interconnection is.

1listnum "WP List 3" \l 13956            MS GRIFFIN‑MUIR:  Okay.

1listnum "WP List 3" \l 13957            MR. HOFLEY:  How about subject to check for you on that, if you want.

1listnum "WP List 3" \l 13958            MS GRIFFIN‑MUIR:  DSL is Cat 2.

1listnum "WP List 3" \l 13959            And VNET LD usage is retail.

1listnum "WP List 3" \l 13960            And collocation is Cat 1.

1listnum "WP List 3" \l 13961            MR. HOFLEY:  So there are four retail services there.  Correct?

1listnum "WP List 3" \l 13962            MS GRIFFIN‑MUIR:  Yes, subject to check.

1listnum "WP List 3" \l 13963            MR. HOFLEY:  And the top two are retail.

1listnum "WP List 3" \l 13964            MS GRIFFIN‑MUIR:  That's correct.

1listnum "WP List 3" \l 13965            MR. HOFLEY:  Can you confirm that based on your information in this response, of your total expenditures ‑‑ and you refer to that on the previous page.

1listnum "WP List 3" \l 13966            Of $250 million on ILEC wholesale services, can you confirm that well over ‑‑ well, actually, I didn't think directory assistance was a Cat 1 service.  So it's retail.

1listnum "WP List 3" \l 13967            I thought it was a Cat 1 service; it is retail.

1listnum "WP List 3" \l 13968            Would you confirm for me that over 55 per cent of your $250 million spend is on services that are not Category 1 or Category 2?

1listnum "WP List 3" \l 13969            In other words, these are on services that are forborne in the retail ‑‑ well, pardon me, let me just stop there.

1listnum "WP List 3" \l 13970            They are not in Category 1 or Category 2.  So about 55 per cent.  That's my math.

1listnum "WP List 3" \l 13971            MR. SHEPPARD:  Give us a second.  We just want to check something.

1listnum "WP List 3" \l 13972            MR. HOFLEY:  Sorry, it might be approximately 50.

1listnum "WP List 3" \l 13973            MS GRIFFIN‑MUIR:  Actually, it's just that the percentage of total expenditure ‑‑

1listnum "WP List 3" \l 13974            MR. HOFLEY:  Doesn't add up to 100.

1listnum "WP List 3" \l 13975            MS GRIFFIN‑MUIR:  No, it probably doesn't.  I think we are saying roughly Cat 1 and Cat 2 ‑‑ Cat 1 is about 37 and Cat 2 is about 18.

1listnum "WP List 3" \l 13976            MR. HOFLEY:  So it's 54.9 per cent, around 55 per cent.  Right?

1listnum "WP List 3" \l 13977            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 13978            MR. HOFLEY:  And in fact some of these expenditures are on services that are forborne in the retail market.  Is that a fair statement?

1listnum "WP List 3" \l 13979            So, for example, VNET LD usage.

1listnum "WP List 3" \l 13980            MS GRIFFIN‑MUIR:  Yes, there would be lease transport, so some would be forborne, some wouldn't.

1listnum "WP List 3" \l 13981            MR. HOFLEY:  Your table indicates that 12 per cent of the $250 million, or about $30 million annually, is spent on unbundled local loops.

1listnum "WP List 3" \l 13982            Do you see that?

1listnum "WP List 3" \l 13983            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 13984            MR. HOFLEY:  That would be the $30 million.

1listnum "WP List 3" \l 13985            Would it be fair to say that that represents about 200,000 unbundled local loops?  Let's take an average of $12 a month per unbundled loop.

1listnum "WP List 3" \l 13986            MR. ROUT:  There would probably be some non‑recurring charges in there, so it would be under 200,000.

1listnum "WP List 3" \l 13987            MR. HOFLEY:  Is that a fair approximation, 200,000?

1listnum "WP List 3" \l 13988            MR. ROUT:  It's not far.

1listnum "WP List 3" \l 13989            MR. HOFLEY:  I am just really asking for round numbers here.

1listnum "WP List 3" \l 13990            So these unbundled loops, they would represent approximately 40 per cent of your total 506,000 business lines out of territory.  Correct?

1listnum "WP List 3" \l 13991            The 506,000, just so you know, I got from Ms Song's cross‑examination.  That's Volume 7, paragraph 13653.  But I figured it was a number you would be familiar with, 506,000 business lines.

1listnum "WP List 3" \l 13992            If you really want to check ‑‑ I anticipated that ‑‑ it's at Tab YY.  The reproduction from the transcript is at Tab YY.

1listnum "WP List 3" \l 13993            MS GRIFFIN‑MUIR:  That's okay.  I am familiar with the number.

1listnum "WP List 3" \l 13994            MR. HOFLEY:  So 200,000 of 506,000, that means that these unbundled loops represent about 40 per cent of your business lines out of territory.  Correct?

1listnum "WP List 3" \l 13995            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13996            MR. HOFLEY:  I'm a simple guy.  Simple math indicates that 60 per cent of your business lines out of territory are being provided either through self supply or through resale of ILEC retail services.

1listnum "WP List 3" \l 13997            Is that a fair statement?

1listnum "WP List 3" \l 13998            MR. ROUT:  Yes.

1listnum "WP List 3" \l 13999            MR. HOFLEY:  Now, of your business lines not being provided using unbundled local loops, how many are provided using self supply and how many are provided using resale of ILEC services?

1listnum "WP List 3" \l 14000            MS GRIFFIN‑MUIR:  Well, actually, you already have a lot of information.  We are getting to a level of detail that is confidential now, breaking it apart between ‑‑

1listnum "WP List 3" \l 14001            MR. HOFLEY:  Breaking that apart is confidential.  Okay.

1listnum "WP List 3" \l 14002            Why don't we try and do something that is not confidential.  Why don't we look at the CRTC Monitoring Report 2007, which is at Tab WW.  And if we look at Figure 4.2.2 there, the second‑to‑last page, you will see there on the right‑hand side a pie chart, Business.

1listnum "WP List 3" \l 14003            Would it be fair to say that a reasonable split, assuming that a lot of these would be your lines, would be 40 per cent self supply and 20 per cent retail?

1listnum "WP List 3" \l 14004            You will see that here it shows resold at 21 per cent and self supply at 41 per cent.

1listnum "WP List 3" \l 14005            MS GRIFFIN‑MUIR:  I think those numbers are okay, but could you just repeat them for me.

1listnum "WP List 3" \l 14006            MR. HOFLEY:  Figure 4.2.2 ‑‑

1listnum "WP List 3" \l 14007            MS GRIFFIN‑MUIR:  Right, I have that.

1listnum "WP List 3" \l 14008            MR. HOFLEY:  ‑‑ shows 41 per cent owned, I believe.

1listnum "WP List 3" \l 14009            MS GRIFFIN‑MUIR:  Right.  That's everybody.

1listnum "WP List 3" \l 14010            MR. HOFLEY:  That's everybody.  I don't want to give away your confidential information, so let's just say 40 per cent and 20 per cent is a rough approximation: 40 per cent unbundled local loops.

1listnum "WP List 3" \l 14011            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 14012            MR. HOFLEY:  Twenty per cent resale; 40 per cent self supply.

1listnum "WP List 3" \l 14013            MS GRIFFIN‑MUIR:  Yes, that sounds about right.

1listnum "WP List 3" \l 14014            MR. HOFLEY:  So on those numbers that about 200,000 lines using self supply, 200,000 of your 506,000.

1listnum "WP List 3" \l 14015            That's just rough math.  I'm a lawyer, not an accountant.  It's very clear.  Sometimes not even a lawyer, Ms Muir.

1listnum "WP List 3" \l 14016            MS GRIFFIN‑MUIR:  Right, according to your rough math.

1listnum "WP List 3" \l 14017            MR. HOFLEY:  So about 200,000 or so of your 506,000 lines out of territory are from self supply.

1listnum "WP List 3" \l 14018            Can you tell me how this number has changed over the past few years?  Has your self supply proportion increased or decreased, say, from 2002 to now?

1listnum "WP List 3" \l 14019            MS GRIFFIN‑MUIR:  I think Mr. Rout can explain further.  But yes, some of our self supply has increased.  We have certain programs where we were trying to migrate our services from let's say resold services to unbundled loops.  So there is some shift.

1listnum "WP List 3" \l 14020            And I think in some of this there is probably captured ‑‑ some of this 40 per cent captured a similar problem to TELUS in the sense that some would include when we migrate from a resold, we might call it self supply.  So there is some mix‑up between collo and ‑‑

1listnum "WP List 3" \l 14021            MR. HOFLEY:  Of course, you're way past me now.

1listnum "WP List 3" \l 14022            MS GRIFFIN‑MUIR:  Okay, sorry.

1listnum "WP List 3" \l 14023            MR. HOFLEY:  You're 10 miles over my head, Ms Muir.

1listnum "WP List 3" \l 14024            I asked you whether or not you would say the proportion of self supply had increased or decreased from 2002 for the proportion, not the total, and I had thought I heard Mr. Rout, and I hope I'm ‑‑ Rout.

1listnum "WP List 3" \l 14025            MR. ROUT:  Rout.

1listnum "WP List 3" \l 14026            MR. HOFLEY:  I apologize, Mr. Rout.  Yes, there's no "e" there, I apologize, Mr. Rout, I thought I heard him say that it was stagnant, that the investment was stagnant.

1listnum "WP List 3" \l 14027            So, I'm just trying to see whether the proportions have changed or whether they're similar.

1listnum "WP List 3" \l 14028            MR. ROUT:  So, what I said earlier was that our building ‑‑ if we're going back to buildings ‑‑ was that our building list in fact was not stagnant, but that in fact there might be a drop in buildings, but in fact we continue to build into buildings and we have an annual capital budget that we use to fund build‑out of buildings.

1listnum "WP List 3" \l 14029            With respect to our provision of service in local voice services, our provision on our own network has increased over the last 12 months.

1listnum "WP List 3" \l 14030            MR. MacDONALD:  We have an active program to move more and more of our local lines from the resold ‑‑

1listnum "WP List 3" \l 14031            MR. HOFLEY:  Maybe instead of speculating I could just ask you for an undertaking so that you could come back to me and tell me.

1listnum "WP List 3" \l 14032            We've estimated the numbers, but can you tell me whether or not the proportion of self supply has increased or decreased from 2002 forward?  We've got it at around 40 per cent now I think.  Can you tell me what ‑‑ and if you need to put it on the confidential record, that's fine, but I just want to understand whether or not that proportion of self supply has changed, either up or down.

1listnum "WP List 3" \l 14033            MS GRIFFIN‑MUIR:  What was the time period, sorry?

1listnum "WP List 3" \l 14034            MR. HOFLEY:  2002 to date.  Obviously I'm not expecting up to yesterday.  Is that a yes, Ms Muir?

1listnum "WP List 3" \l 14035            MS GRIFFIN‑MUIR:  I just want to make sure I understand the undertaking.

1listnum "WP List 3" \l 14036            MR. HOFLEY:  Fair enough.

1listnum "WP List 3" \l 14037            MS GRIFFIN‑MUIR:  The proportion of self supply relative to the total, whether it's gone up or down between the period of 2004 to 2006?

1listnum "WP List 3" \l 14038            MR. HOFLEY:  Yes.  2002 to 2006, the proportion relative to the two other figures we were talking about, which is unbundled loops use and resale use.

1listnum "WP List 3" \l 14039            MS GRIFFIN‑MUIR:  Yeah.

1listnum "WP List 3" \l 14040            MR. HOFLEY:  You've all agreed it's kind of 40 unbundled local loops, 40 self supply, 20 resale and I'm asking you, has the proportion of self supply changed or not.

1listnum "WP List 3" \l 14041            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 14042            MR. HOFLEY:  And how.

1listnum "WP List 3" \l 14043            MS GRIFFIN‑MUIR:  And how?

1listnum "WP List 3" \l 14044            MR. HOFLEY:  Yeah.  Well, like...

1listnum "WP List 3" \l 14045            MS GRIFFIN‑MUIR:  Up or down you mean?

1listnum "WP List 3" \l 14046            MR. HOFLEY:  Yeah, yeah.

1listnum "WP List 3" \l 14047            MS GRIFFIN‑MUIR:  Yeah, okay.

1listnum "WP List 3" \l 14048            MR. HOFLEY:  Well, if you have precise numbers, I'm sure the Commission would like precise numbers.

1listnum "WP List 3" \l 14049            MS GRIFFIN‑MUIR:  Oh, how is the ‑‑ by how much?

1listnum "WP List 3" \l 14050            MR. HOFLEY:  Yes, by how much, I'm sorry.  Not why, by how much.  I'm not asking you to talk about your builds.

1listnum "WP List 3" \l 14051            MR. MacDONALD:  Just maybe give some anecdotal support to this because I don't have the actual numbers at hand, but I can look at how much capacity of our existing switching fabric we have been using and there's been a number of things that we've done over the past little while and looking at customers where we weren't ‑‑ it was actually uneconomic to service them.

1listnum "WP List 3" \l 14052            And, so, some of those customers have actually migrated off our local service.

1listnum "WP List 3" \l 14053            We actually have started to sell to customers such as Primus, for example, to provide them with access to their facilities for local dial tone, and the net effect that I look at is, how many line cards are we buying.

1listnum "WP List 3" \l 14054            So, we did have some surplus capacity in our existing switching fabric, our class 5 offices and we used that up fairly quickly and we're actually at a point ‑‑ a year and a half ago we were actually out there buying more line cards which, by definition to me, means that we've actually grown over that period of time.

1listnum "WP List 3" \l 14055            We're not buying new switches, but we're just looking at building out the capacity for existing switches.

1listnum "WP List 3" \l 14056            MR. HOFLEY:  Well, the numbers will play that out, I think.

1listnum "WP List 3" \l 14057            MR. MacDONALD:  Yeah.

1listnum "WP List 3" \l 14058            MR. HOFLEY:  Won't they?

1listnum "WP List 3" \l 14059            MR. MacDONALD:  Yes.

1listnum "WP List 3" \l 14060            MR. HOFLEY:  Okay.  I'd like to move on, if I could, Mr. Chairman, to my final topic.  So, depending on how this topic goes, you'll see that we will not be using all of our cross‑examination time.

1listnum "WP List 3" \l 14061            And it's my favourite topic and that's maybe not yours, maybe not anyone's in this room any more, it's the essential facilities definition.

1listnum "WP List 3" \l 14062            THE CHAIRPERSON:  I thought you were saving Dr. Selwyn for next time.

1listnum "WP List 3" \l 14063            MR. HOFLEY:  I am.  Dr. Selwyn doesn't have an essential facilities definition in his report, he actually has two clients, each of whom have a slightly different essential facility definition, so I'm going to be asking MTS Allstream about their definition.

1listnum "WP List 3" \l 14064            Now, if I could ask you to have handy your March 15th evidence.

‑‑‑ Pause

1listnum "WP List 3" \l 14065            MR. HOFLEY:  At paragraph 63 of that evidence you say, and I'm quoting, that a:

                      "Competitor access regime requires a robust definition of essential services."  (As read)

1listnum "WP List 3" \l 14066            Do you see that?  I think it's the first ‑‑ it's in the middle ‑‑ pardon me, the last sentence, although it's about four lines from the bottom.

1listnum "WP List 3" \l 14067            MS GRIFFIN‑MUIR:  Yeah, I see it, thank you.

1listnum "WP List 3" \l 14068            MR. HOFLEY:  Right.  And you describe in the same paragraph the CRTC's definition ‑‑ existing definition as narrow.  Do you see that?

1listnum "WP List 3" \l 14069            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 14070            MR. HOFLEY:  Now, is there any other participant in this process proposing a broader definition than MTS Allstream?

1listnum "WP List 3" \l 14071            MS GRIFFIN‑MUIR:  I'm not entirely sure.

1listnum "WP List 3" \l 14072            MR. HOFLEY:  Well, you've read the record ‑‑ Ms Muir, I know you've read the record, I know you're very familiar with it.  So, are the cable COs?

1listnum "WP List 3" \l 14073            MS GRIFFIN‑MUIR:  Well, off the top of my head I can't say one way or another, but...

1listnum "WP List 3" \l 14074            MR. HOFLEY:  Would it surprise you to hear me suggest that you are providing the broadest definition of essential facility, perhaps with the exception of Primus, and I'm going to try and figure out what Primus is saying on Monday or Tuesday?

1listnum "WP List 3" \l 14075            MS GRIFFIN‑MUIR:  Well, it wouldn't surprise me to hear you say that.

1listnum "WP List 3" \l 14076            MR. HOFLEY:  Okay.

1listnum "WP List 3" \l 14077            MS GRIFFIN‑MUIR:  I'm not saying I agree with you.

1listnum "WP List 3" \l 14078            MR. HOFLEY:  No, no, you made that very clear.

1listnum "WP List 3" \l 14079            MS GRIFFIN‑MUIR:  I'm just saying, I'm

not surprised you said it.

1listnum "WP List 3" \l 14080            MR. HOFLEY:  Now, you say that ‑‑ it's at paragraph 64, the next paragraph, you say that:

                      "The interests of users clearly demand a robust definition of essential facility."  (As read)

1listnum "WP List 3" \l 14081            And so, users, by that you mean users like MTS Allstream; correct?

1listnum "WP List 3" \l 14082            MS GRIFFIN‑MUIR:  No, actually we mean the customers, that it's for competition.

1listnum "WP List 3" \l 14083            MR. HOFLEY:  Oh.  So, you mean the customers, so you mean downstream is what you mean?

1listnum "WP List 3" \l 14084            MS GRIFFIN‑MUIR:  Yes.  Actually ‑‑

1listnum "WP List 3" \l 14085            MR. HOFLEY:  Retail customers?

1listnum "WP List 3" \l 14086            MS GRIFFIN‑MUIR:  ‑‑ that's how our definition, as I'm sure you know, is determined by ‑‑

1listnum "WP List 3" \l 14087            MR. HOFLEY:  By market power downstream?

1listnum "WP List 3" \l 14088            MS GRIFFIN‑MUIR:  No, by the impact that market power upstream has on the downstream market.

1listnum "WP List 3" \l 14089            MR. HOFLEY:  Okay.  Well, we'll come to that I think.

1listnum "WP List 3" \l 14090            Now, I want to suggest to you that perhaps your definition should be read in a particular context and that context I think can be found at paragraph ‑‑ I'm going to suggest to you can be found at paragraph 43 of your submission.

1listnum "WP List 3" \l 14091            And in that paragraph you say that promoting facilities‑based competition ‑‑ and I'm paraphrasing that part ‑‑ is, and I'm quoting:

                      "...fundamentally unachievable..."  (As read)

1listnum "WP List 3" \l 14092            Sorry, I'm going to read the whole thing, let's be fair.

1listnum "WP List 3" \l 14093            It is:

                      "Fundamentally unachievable and inefficient to set as a goal the replication of the former monopoly's ubiquitous local access and transport network."  (As read)

1listnum "WP List 3" \l 14094            Do you see that?

1listnum "WP List 3" \l 14095            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 14096            MR. HOFLEY:  Would it be fair to say that that proposal has had an effect ‑‑ or that belief, pardon me, has had an effect on your definition of essential facilities?

1listnum "WP List 3" \l 14097            MS GRIFFIN‑MUIR:  Well, I think it would be fair to say everything we say here has an effect.  I wouldn't say that's the cornerstone of our definition, but certainly we don't believe that it's possible for us to replicate the incumbent's network.

1listnum "WP List 3" \l 14098            MR. HOFLEY:  And is it fair to say that you don't ‑‑ we can quibble on how the policy direction should be interpreted ‑‑ but is it fair to say that you don't believe that the encouragement of facilities‑based competition is a fruitful exercise?

1listnum "WP List 3" \l 14099            MS GRIFFIN‑MUIR:  No, I don't think that's fair to say.

1listnum "WP List 3" \l 14100            MR. HOFLEY:  No, pardon me, in respect of the local access and transport network?  I just hadn't finished with it.

1listnum "WP List 3" \l 14101            MS GRIFFIN‑MUIR:  Well, I don't even  think we'd say that.  What we would say though is that when you look at how networks are actually built and how investment was made to get it a fully ubiquitous network, which is what the ILECs have, that was a whole different environment.

1listnum "WP List 3" \l 14102            So, the regime has to actually reflect the fact that the only two ubiquitous ‑‑ separate ubiquitous networks that exist in Canada are the former monopoly telephone company networks and the cable company networks in residential, neither of which were built in a manner that ‑‑ where they had to compete with anybody or where they had to worry about getting a return on their investment.

1listnum "WP List 3" \l 14103            So, we're just trying to put it in the context of the reality that we would have to construct a network under.

1listnum "WP List 3" \l 14104            MR. HOFLEY:  Well, let me see, I want to be fair because I took this from some other portions of your evidence that this was an underlying kind of disagreement with the proposition that facilities‑based competition can and should be encouraged by an essential facilities definition in respect of access and transport.

1listnum "WP List 3" \l 14105            I look at paragraph 102 of your evidence and I see there that you say, and I'm quoting:

                      "Although the Commission has clearly expressed a preference for facilities‑based competition, it never really made the case against its original stance established in Decision 97‑08 that resale in and of itself can deliver the full benefits of competition."  (As read)

1listnum "WP List 3" \l 14106            So, I read that as you saying that, you know, perhaps we didn't get it wrong, perhaps resale is.

1listnum "WP List 3" \l 14107            MS GRIFFIN‑MUIR:  Well, I think there's two things there.  First, facilities‑based competition in our definition would include a model that the competitor looks like we do, which is the model that uses both facilities that we've invested in and own and facilities we lease from the incumbent.

1listnum "WP List 3" \l 14108            And the Order‑in‑Council for local competition also defines facilities‑based that way.

1listnum "WP List 3" \l 14109            We would also say that resale is a legitimate form of competition and that it's something that should be encouraged if you want to be able to rely on market forces downstream.

1listnum "WP List 3" \l 14110            MR. HOFLEY:  So, this isn't a suggestion to harken back to the glory days of resale competition?

1listnum "WP List 3" \l 14111            MS GRIFFIN‑MUIR:  I don't think we've ever made a suggestion to harken back to the glory days and certainly I don't think you could find a competitor who's made more investment in facilities than we have.

1listnum "WP List 3" \l 14112            MR. HOFLEY:  Well, I'm sorry, it just says:

                      "It never really made the case against its original stance that resale in and of itself can deliver the full benefits of competition."  (As read)

1listnum "WP List 3" \l 14113            It sounds to me like that's what you are saying.

1listnum "WP List 3" \l 14114            MS GRIFFIN‑MUIR:  Well, I just told you that's not what we are saying.

1listnum "WP List 3" \l 14115            MR. HOFLEY:  Okay, we have that clear.  Let's go on to the definition.

1listnum "WP List 3" \l 14116            MR. SELWYN:  Mr. Hofley ‑‑

1listnum "WP List 3" \l 14117            THE CHAIRPERSON:  Hang on, I think Commissioner de Val wanted to ask you a question.

1listnum "WP List 3" \l 14118            MR. SELWYN:  Mr. Hofley, I would note that ‑‑

1listnum "WP List 3" \l 14119            MR. HOFLEY:  Dr. Selwyn, I will be happy to ask you questions about this.  This is not part of your testimony and I had indicated ‑‑

1listnum "WP List 3" \l 14120            MR. SELWYN:  Well, actually, sir, it is, and I was going to refer you ‑‑

1listnum "WP List 3" \l 14121            THE CHAIRPERSON:  Dr. Selwyn, would you please answer questions that they pose to you.  Nobody posed a question to you.  Okay?  We have got to have some order here.

1listnum "WP List 3" \l 14122            MR. SELWYN:  I'm sorry.

1listnum "WP List 3" \l 14123            THE CHAIRPERSON:  Commissioner de Val, you wanted to ask a question?

1listnum "WP List 3" \l 14124            COMMISSIONER de VAL:  Mr. Hofley, I just wanted to follow up on a question that you had directed to the panel earlier.  You had asked MTS for an undertaking to provide the proportion of owned facilities, you know, relative to resold and lease unbundled loops.

1listnum "WP List 3" \l 14125            I took a look at the 2006 Telecom Monitoring Report and in there it shows that the year prior the owned facilities was 27 percent, the leased facilities is 36 percent and the resold is 37 percent.  So the proportion of owned facilities has, in fact, increased just based on those figures.

1listnum "WP List 3" \l 14126            I'm just wondering what conclusion did you want me to draw from the difference in the numbers.

1listnum "WP List 3" \l 14127            MR. HOFLEY:  Well, I don't want you to draw any conclusions from the difference in those numbers.  What I want the Commission to have is what the proportions are for MTS Allstream from 2002 to 2006, so we can see how their numbers have gone up or down, particularly on the self‑supply part.

1listnum "WP List 3" \l 14128            COMMISSIONER de VAL:  Okay.

1listnum "WP List 3" \l 14129            MR. HOFLEY:  And remember, part of this, of course, is investment, it's one of our themes.

1listnum "WP List 3" \l 14130            So that's what want, and they can provide it confidentially, if they wish.

1listnum "WP List 3" \l 14131            COMMISSIONER de VAL:  Thank you.

1listnum "WP List 3" \l 14132            THE CHAIRPERSON:  Okay, back to you, Mr. Hofley.

1listnum "WP List 3" \l 14133            MR. HOFLEY:  Let's turn to your definition, Ms Muir.

1listnum "WP List 3" \l 14134            Now, you begin your discussion of the essential facility or service issue at paragraph 126, which is page 59 of your March 15 evidence, and at paragraph 127 you say:

                      "Essential services would include any facility or service that is critical to a competitor's ability to compete effectively in one or more downstream retail telecommunications service markets."  (As read)

That's the first part of your definition.  Do you see that?

1listnum "WP List 3" \l 14135            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 14136            MR. HOFLEY:  You call it the first prong, I think, later on.

1listnum "WP List 3" \l 14137            I just want to break that down for a second.  First of all, it is critical "to a competitor's ability to compete".  Does that mean any effect on the ability of the competitor to compete downstream should be taken into consideration?

1listnum "WP List 3" \l 14138            MS GRIFFIN‑MUIR:  No, actually, but I think the Order‑in‑Council has a pretty broad look at it.  But here I think you are putting a lot more emphasis on ability than is necessary.  Subsequently, we describe the criteria you would use to make that determination.

1listnum "WP List 3" \l 14139            MR. HOFLEY:  Okay, so we will get into that.

1listnum "WP List 3" \l 14140            And then you say that they have to be able "to compete effectively".  Correct?

1listnum "WP List 3" \l 14141            MS GRIFFIN‑MUIR:  That's what we say, yes.

1listnum "WP List 3" \l 14142            MR. HOFLEY:  Okay.  And I think your proposition is that this should be done ex ante, correct, this should be applied ex ante?

1listnum "WP List 3" \l 14143            MS GRIFFIN‑MUIR:  Absolutely, yes.

1listnum "WP List 3" \l 14144            MR. HOFLEY:  Yes.  How would you determine whether or not a competitor could compete effectively without the world of regulation on an ex ante basis?

1listnum "WP List 3" \l 14145            MS GRIFFIN‑MUIR:  Well, first of all, you can't make that determination, but I think what we can determine is, based on the 10 years that we have, we know what we need to compete and what doesn't work and that we cannot replicate the incumbent's network.

1listnum "WP List 3" \l 14146            So on an ex post basis, if we were making this determination, we know what our experience is trying to negotiate certain things with the ILEC, we know what access and connectivity facilities and services are required to compete and we know that, if we don't have them and we just do a cut today, it would take quite a bit and be very damaging to competition.

1listnum "WP List 3" \l 14147            MR. HOFLEY:  Okay, I'm sorry, I'm just trying to understand the test. "Compete effectively", so I asked you whether or not it could be easily judged ex ante, and I think you said, it couldn't be, but you would look at other ‑‑

1listnum "WP List 3" \l 14148            MS GRIFFIN‑MUIR:  I think maybe you are mixed up.  That's not the test, that's just the lead‑in paragraphs.  The test is ‑‑

1listnum "WP List 3" \l 14149            MR. HOFLEY:  I'm sorry.  Okay, so that's not the test.  "Would include any facility" is not the test.  Paragraph 127.

1listnum "WP List 3" \l 14150            MS GRIFFIN‑MUIR:  Right.  Now, at 129 are the two criteria ‑‑

1listnum "WP List 3" \l 14151            MR. HOFLEY:  Okay.

1listnum "WP List 3" \l 14152            MS GRIFFIN‑MUIR:  ‑‑ and then later on in the text ‑‑

1listnum "WP List 3" \l 14153            MR. HOFLEY:  I will come to those criteria.  I'm sorry, but under the proposed definition, I guess I misread that.

1listnum "WP List 3" \l 14154            But you do say "ability to compete", and you have told me not to focus on that language, but ‑‑

1listnum "WP List 3" \l 14155            MS GRIFFIN‑MUIR:  No, I said ‑‑ actually, what I said was I think you are putting a lot ‑‑ too much emphasis on "ability".

1listnum "WP List 3" \l 14156            MR. HOFLEY:  Okay, I apologize.  But you have said that it would be any facility that is "critical to a competitor's ability", okay?  So let's just focus on that for a second.

1listnum "WP List 3" \l 14157            "Critical to a competitor", so is that any competitor, any single competitor?

1listnum "WP List 3" \l 14158            MS GRIFFIN‑MUIR:  It could be a single competitor, but, in essence, it would be a typical competitor.  But I think probably it's better for you to take a look at paragraph 129, that had the test criteria.  And then the definition that we propose is ‑‑

1listnum "WP List 3" \l 14159            MR. HOFLEY:  Well, let's look at 129, and 129 says, "is required as an input by a competitor..." ‑‑

1listnum "WP List 3" \l 14160            MS GRIFFIN‑MUIR:  Right.

1listnum "WP List 3" \l 14161            MR. HOFLEY:  ‑‑ "...or competitors".  So all I'm asking you is whether or not, under your definition, the focus of the Commission should be on the ability of a competitor to compete to provide downstream retail services?  A competitor.

1listnum "WP List 3" \l 14162            MS GRIFFIN‑MUIR:  Yes.  A competitor or competitors, yes.

1listnum "WP List 3" \l 14163            MR. HOFLEY:  Right.  So it could be a competitor?

1listnum "WP List 3" \l 14164            MS GRIFFIN‑MUIR:  Could be.

1listnum "WP List 3" \l 14165            MR. HOFLEY:  Right.  And you say later on, and again ‑‑ and it's here ‑‑ you focus on "that competitor's ability to compete effectively to provide downstream retail services", so again the focus is on the single competitor.

1listnum "WP List 3" \l 14166            So to MTS, is the level of competition downstream more a quantitative assessment, in other words, let's just make this simple, the more entrants, the more competitive it is downstream, regardless of the nature of those entrants?

1listnum "WP List 3" \l 14167            MS GRIFFIN‑MUIR:  Well, obviously, the more competition there is downstream and the more alternatives the customers have downstream, the more competition there is.

1listnum "WP List 3" \l 14168            MR. HOFLEY:  Sorry, the more competition downstream?  I just asked you:  your understanding of "competition downstream" is that a numbers game?  The more competitors there are downstream ‑‑

1listnum "WP List 3" \l 14169            MS GRIFFIN‑MUIR:  No, no.

1listnum "WP List 3" \l 14170            MR. HOFLEY:  ‑‑ the more competition there is?

1listnum "WP List 3" \l 14171            MS GRIFFIN‑MUIR:  No.  I think ‑‑ I'm not sure I totally understand your question, but it's not by counting up the number of competitors there are in the market, it's by determining what real choices customers have in the market, and then, I guess, if you were really looking at whether or not the incumbent has significant market power in the downstream market.

1listnum "WP List 3" \l 14172            MR. HOFLEY:  Okay.  So you go on to say, I think ‑‑ and if we want I can take you to it, it's at your interrogatory response MTS/CRTC 12April07‑101, it's Tab ZeeZee, that's for our friend, Dr. Selwyn, and Tab ZedZed, for everyone else.  You know you are in trouble when you are at ZZ.

1listnum "WP List 3" \l 14173            You say here that dominance downstream or market power downstream:

                      "...should not be necessary because if the facility provider is a competitor downstream, it has the ability and incentive to abuse market power in pursuit of dominance."  (As read)

It's at page 2.

1listnum "WP List 3" \l 14174            Do you recall that language?

‑‑‑ Pause

1listnum "WP List 3" \l 14175            MS GRIFFIN‑MUIR:  I'm sorry, where exactly are you?  Are you in the interrogatory?

1listnum "WP List 3" \l 14176            MR. SHEPPARD:  It's down here, right there.

‑‑‑ Pause

1listnum "WP List 3" \l 14177            MR. HOFLEY:  We can make it quicker, at paragraph 128, the paragraph before what you have now told me is the test:

                      "If the former monopoly is dominance in the upstream market and is a significant competitor in the downstream market, then that former monopoly has the ability and the incentive to abuse its market power in pursuit of dominance in the downstream market."  (As read)

1listnum "WP List 3" \l 14178            MR. MacDONALD:  Yes.

1listnum "WP List 3" \l 14179            MR. HOFLEY:  Okay.  Now, I think you would agree with me, and with everyone here, that the purpose of wholesale regulation is, of course, to address market failure in the retail market, correct, the exercise of market power downstream.  Do you agree with that?

1listnum "WP List 3" \l 14180            MS GRIFFIN‑MUIR:  I'm sorry, can you repeat the question?  The purpose...?

1listnum "WP List 3" \l 14181            MR. HOFLEY:  The purpose of wholesale regulation of mandating access is to address market failure or the exercise of market power in the retail market downstream.  You just said that's what your concern was, the end customer.

1listnum "WP List 3" \l 14182            MS GRIFFIN‑MUIR:  That's right, yes.

1listnum "WP List 3" \l 14183            MR. HOFLEY:  Okay.  So where there's no market power downstream ‑‑ and remember your test doesn't look at whether there's market power downstream ‑‑

1listnum "WP List 3" \l 14184            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 14185            MR. HOFLEY:  ‑‑ where there's no market power downstream what is the facility provider's ability to abuse ‑‑ to use your language ‑‑ to abuse its facility upstream?

1listnum "WP List 3" \l 14186            MS GRIFFIN‑MUIR:  Well, if the competition that is provided downstream is actually coming from competitors who lease facilities from the incumbent service provider, who's also dominant in the control of the upstream facility.

1listnum "WP List 3" \l 14187            MR. HOFLEY:  But that would be part of a downstream market power assessment, wouldn't it?  That would be part of the Commission's look to see whether or not, but for access, but for wholesale regulation ‑‑

1listnum "WP List 3" \l 14188            MS GRIFFIN‑MUIR:  Absolutely it would.

1listnum "WP List 3" \l 14189            MR. HOFLEY:  Right, okay.

1listnum "WP List 3" \l 14190            MS GRIFFIN‑MUIR:  And if you had competition in the upstream market, then, obviously, there would be no need for the test.

1listnum "WP List 3" \l 14191            MR. HOFLEY:  No, but you could have competition in the downstream market ‑‑

1listnum "WP List 3" \l 14192            MS GRIFFIN‑MUIR:  Absolutely, and not.

1listnum "WP List 3" \l 14193            MR. HOFLEY:  ‑‑ irrespective of mandated access.  Correct?

1listnum "WP List 3" \l 14194            MS GRIFFIN‑MUIR:  You could or you could not.

1listnum "WP List 3" \l 14195            MR. HOFLEY:  Well, okay.  I was hoping we wouldn't have to go there, but let's go to triple‑A ‑‑

‑‑‑ Laughter / Rires

1listnum "WP List 3" \l 14196            MR. HOFLEY:  ‑‑ 12April07‑105.  It's at page 3, and you say:

                      "If the former monopoly is found to be dominant upstream in the..."

‑‑ sorry, this is MTS/CRTC 12April07‑105:

                      "If the former monopoly is found to be dominant upstream in the supply of a facility and competitors require that facility as an input in order to compete downstream, then the former monopoly could, absent regulation, exercise its market power over that facility to lessen or prevent competition in the downstream market.  This would be true regardless of whether there is some degree of competition in a downstream market.  In fact, even in the case of a forborne downstream market, this conclusion would hold because the former monopolies are still the predominant sources of supply, so true, regardless of whether there is some degree of competition in a downstream market.  (As read)

1listnum "WP List 3" \l 14197            MS GRIFFIN‑MUIR:  Right.  I'm sorry, I didn't perhaps explain myself properly, but I think this is exactly what I just said, that it really depends on how that competition comes to the downstream market.

1listnum "WP List 3" \l 14198            So you can still have a situation where ‑‑ well, let's take the local business forbearance decision, where the market for local businesses in many exchanges is forborne because of a competitor presence test, but the fact is in most if not all of those cases in the business market that presence is derived from the competitor's ability to lease facilities from the incumbent to provide services to customers downstream.

1listnum "WP List 3" \l 14199            So if the Commission did not mandate those particular connectivity services as essential, the incumbent would, in fact, in a forborne market be able to exert its market power.

1listnum "WP List 3" \l 14200            MR. HOFLEY:  Right, but this is requiring a downstream market power analysis, is it not?  You are saying that the Commission needs to look to see whether there is market power downstream and what the source of that market power is downstream in order to determine whether or not ‑‑

1listnum "WP List 3" \l 14201            MS GRIFFIN‑MUIR:  No, no, I'm not saying that.  I'm saying the opposite.  I might not be explaining myself well.

1listnum "WP List 3" \l 14202            I'm saying irrespective of whether there is downstream market power if the only way competition is coming to the market in the downstream is through the leased access of facilities and services in the upstream.

1listnum "WP List 3" \l 14203            MR. HOFLEY:  No, I understand that, but that requires an assessment by the Commission as to whether or not, for example, in your case, that is where the only source of competition is coming from, as opposed to another end‑to‑end, facilities‑based provider, as opposed to another platform, correct, requires a downstream market assessment?

1listnum "WP List 3" \l 14204            MS GRIFFIN‑MUIR:  Okay, I wouldn't look at that that way, but, yes, if you are saying that.

1listnum "WP List 3" \l 14205            MR. HOFLEY:  Well, let's take the hypothetical.  Let's take the movie rental market.

1listnum "WP List 3" \l 14206            I'm the only supplier of blank beta tapes and you sell movies on beta tapes.  Now, if I read your definition correctly, under your definition you should get mandated access to my blank beta tapes irrespective of the fact that, at retail, consumers can rent movies on VHS or on DVD or Pay Per View, because you, as a competitor, have chosen to use my blank beta tapes, and I'm the only one selling them.  Is that how this should be analyzed?

1listnum "WP List 3" \l 14207            MS GRIFFIN‑MUIR:  No, but I think you are putting a little bit of emphasis in the wrong place, let's say.

1listnum "WP List 3" \l 14208            I think what we would say was if there was a situation, which is, in fact, the situation in the business market, where there is no other ubiquitous network but for the incumbents, and if today, as is the situation today, competition comes to business customers through competitors that use, typically, a combination of their own facilities and facilities they lease from the incumbent, then irrespective of whether you say there's a lot of competition in the downstream.

1listnum "WP List 3" \l 14209            So that competitor gets market share in the downstream, even significant market share, if in the upstream those facilities were no longer regulated, obviously, the incumbent controlling those facilities could influence the ability of the competitor to compete in the downstream.

1listnum "WP List 3" \l 14210            So the only way in the business market that we could assess whether or not there is truly alternative sources of wholesale or upstream supply is by looking at the upstream market.

1listnum "WP List 3" \l 14211            MR. HOFLEY:  So in your example, that's an example where the only other competitor in the business market downstream relies, in whole or in part, on someone else's facilities?

1listnum "WP List 3" \l 14212            MS GRIFFIN‑MUIR:  And that's ‑‑

1listnum "WP List 3" \l 14213            MR. HOFLEY:  Right.

1listnum "WP List 3" \l 14214            MS GRIFFIN‑MUIR:  ‑‑ the business market today.

1listnum "WP List 3" \l 14215            MR. HOFLEY:  Okay.  And so if they didn't rely on someone else's facilities, if there was a competitor in one exchange, one wire centre, then it would be a different analysis.

1listnum "WP List 3" \l 14216            All I'm trying to establish here, Ms Muir, is that you would, looking at the downstream market power and the Commission would assess, whether or not there was market power and what the source of that was.  Is that a fair statement?

1listnum "WP List 3" \l 14217            MS GRIFFIN‑MUIR:  I suppose it's a fair statement.  That's not the way I would characterize it, and I'm not entirely sure I completely understand ‑‑

1listnum "WP List 3" \l 14218            MR. HOFLEY:  Okay, well ‑‑

1listnum "WP List 3" \l 14219            MS GRIFFIN‑MUIR:  ‑‑ what you are saying.

1listnum "WP List 3" \l 14220            We are saying that you have to figure out where competition's coming from, and in the business market that is where competition's coming from.

1listnum "WP List 3" \l 14221            MR. HOFLEY:  I'm an anti‑trust lawyer and we find this stuff fun, Ms Muir, so...

1listnum "WP List 3" \l 14222            MR. ROUT:  Maybe I could just give a real example, just to try to express what we are talking about.

1listnum "WP List 3" \l 14223            You had highlighted in some of the questioning with regards to our provision of local service to customers, and we do that through three means.  We do that through self‑provisioning on net, what we call on net, we build directly to the customer; we also invest in collocate facilities and switching equipment and transport and use unbundled loops in order to reach a customer; and we use resale.

1listnum "WP List 3" \l 14224            So those are three means by which we are able to reach customers across the country because it's not economically feasible for us to build either directly to a customer or everywhere.  And, again, when we get a certain volume of customers, we will build a new collocate and serve them via unbundled loops.  But in many parts of the country, I mean, it's just not economically feasible, and, therefore, we serve those customers via resale.

1listnum "WP List 3" \l 14225            MR. HOFLEY:  That, of course, doesn't speak to whether or not the Commission needs to look at the competitive structure of the downstream market in determining whether or not someone who controls an input can exercise market power downstream, does it?

1listnum "WP List 3" \l 14226            MR. ROUT:  So what I'm trying to highlight is in different markets we are able ‑‑ in some markets we are able to provide to some customers directly ourselves, in others it has not been economically feasible to do so.  So we would have an agreement in place with Bell Canada to provide, for example, resale services.

1listnum "WP List 3" \l 14227            Based on the dominance of the ILEC, they can negotiate terms or construct the contract in such a way that, over a time period, in fact, they can modify the pricing structure in the retail market, which would, in fact, inhibit us from being able to use that very contract to provide local service to customers.  So that's just a real practical example of some of the issues we face.

1listnum "WP List 3" \l 14228            THE CHAIRPERSON:  Can I get it with respect to the theoretical.

1listnum "WP List 3" \l 14229            Ms Muir, in paragraph 124, you actually don't in (a) and (b) make any reference to downstream market power, but your chapeau says:

                      "Such facilities or services would provide the former monopoly the potential power to lessen or prevent the competition of one or more downstream retail market."  (As read)

1listnum "WP List 3" \l 14230            What Mr. Hofley is trying to get you to admit is that you cannot determine whether there is the power to lessen or prevent competition in the downstream market without making an analysis of the downstream market.  So that's really implicit in your tests is that you have to look at the downstream market and see whether the former monopoly in the upstream market can exercise power, what its role is in that downstream market, what's the state of competition in that downstream market.

1listnum "WP List 3" \l 14231            MS GRIFFIN‑MUIR:  Yes, I understand that part.

1listnum "WP List 3" \l 14232            THE CHAIRPERSON:  And so the answer is yes, if I get what you mean.  What he's trying to say, you have to make a market analysis of the downstream market, otherwise how are you going to determine whether there's power to lessen or prevent competition in that market?

1listnum "WP List 3" \l 14233            MS GRIFFIN‑MUIR:  Well, I think it's how the competition's coming to the downstream market, as opposed to whether or not there is competition in the downstream.

1listnum "WP List 3" \l 14234            THE CHAIRPERSON:  Yes, but all of that is part of an analysis.

1listnum "WP List 3" \l 14235            MS GRIFFIN‑MUIR:  Okay.  Well, that's not the part ‑‑ that was less clear to me, that's all.

1listnum "WP List 3" \l 14236            THE CHAIRPERSON:  Okay.

1listnum "WP List 3" \l 14237            Dr. Selwyn, you had you hand up?

1listnum "WP List 3" \l 14238            MR. SELWYN:  Yes.

1listnum "WP List 3" \l 14239            THE CHAIRPERSON:  Go ahead.

1listnum "WP List 3" \l 14240            MR. SELWYN:  In Mr. Hofley's hypothetical, he's assuming that there is market power in the upstream market, and yet there are alternatives in the downstream market.  And what I'm having difficulty with in his hypothetical is that, if there are alternatives in the downstream market, then, by definition, there would not be market power in the upstream market.

1listnum "WP List 3" \l 14241            If the upstream provider, the ILEC in this case, has market power with respect to access, then that's because other forms of access aren't acceptable and aren't suitable in the downstream market.

1listnum "WP List 3" \l 14242            So I don't think and I don't agree that it's necessary to perform an analysis of the downstream market when, in fact, you can establish that there's market power in the upstream market and where the firm with upstream market power competes in the downstream market.

1listnum "WP List 3" \l 14243            The other problem is that if such an analysis is going to be performed, it has to be based not upon the condition that exists when the upstream facility is subject to regulation, but rather what happens when it ceases to be subject to regulation.

1listnum "WP List 3" \l 14244            So I think his example is basically a non sequitur, because you can't have market power upstream and yet have these alternatives downstream.  It doesn't make any sense.

1listnum "WP List 3" \l 14245            THE CHAIRPERSON:  I wasn't talking about his example, his hypothetical.  I was just talking about the test here.  The test seems to imply that you look at the downstream market.

1listnum "WP List 3" \l 14246            DR. SELWYN:  And that is what I am suggesting, I don't agree with it.  I don't think that is necessary if you can establish that there is market power upstream and ‑‑

1listnum "WP List 3" \l 14247            THE CHAIRPERSON:  You make the assumption that if there is market power upstream and the person participates in the downstream market then ‑‑

1listnum "WP List 3" \l 14248            DR. SELWYIN:  Correct.

1listnum "WP List 3" \l 14249            THE CHAIRPERSON:  Okay.  Back to you, Mr. Hofley.  I don't know whether I clarified or confused ‑‑

1listnum "WP List 3" \l 14250            MR. HOFLEY:  I am doing everything in my power not to ask Dr. Selwyn some questions. Whenever anyone accuses me of a non sequitur I have to take a deep breath.

1listnum "WP List 3" \l 14251            Let us just turn to your test then.  Let us just talk about another thing that we have talked a lot about and it is a word a lot of people can't pronounce, including myself, duplicability.  And let us talk about your test in 129.

1listnum "WP List 3" \l 14252            Now I believe, again, if we just stay with tab ZZ at page 5, perhaps move back to tab ZZ, this is your interrogatory response again, 12‑April‑07‑101, you suggest that the CRTC should assess whether there is the possibility of self‑supply or third‑party supply.

1listnum "WP List 3" \l 14253            And if we go to page 5, it is your response B, and you go on to say:

                      "The most practical approach to assessing the degree to which a specific facility or service can be duplicated is to examine the extent to which it is actually being duplicated.  This involves estimating the extent to which the facility or service is actually being duplicated (i.e. self‑supplied by competitors) as well as the extent of third‑party supply of the facility or service." (As Read)

1listnum "WP List 3" \l 14254            So again, this is the practical approach and you are asking whether or not it can be self‑supplied by competitors.  Is that by a competitor or is that by any competitor?  So in other words, does the Commission look to see whether it is being duplicated or self‑supplied by others or do they simply look to whether or not it is being self‑supplied by the competitor who is seeking access?

1listnum "WP List 3" \l 14255            MS GRIFFIN‑MUIR:  Well, no.  I think it would be looking at the market more broadly.  But it is more than just self‑supplied in a certain instance, it is self‑supplied on a broad scale or that other competitors offer alternatives.

1listnum "WP List 3" \l 14256            MR. HOFLEY:  Okay.  And you go on to say that actually.  You say:

                      "For duplication to be deemed practical and feasible a variety of alternatives to the incumbent's facilities and services should exist through both self‑supply and a third‑party wholesale market." (As Read)

1listnum "WP List 3" \l 14257            Do you see that?

1listnum "WP List 3" \l 14258            MS GRIFFIN‑MUIR:  I do see it.

1listnum "WP List 3" \l 14259            MR. HOFLEY:  So you are suggesting that in order for the Commission to find that something is duplicable they have to find that there is a variety of alternatives and that they are both through self‑supply and through a third‑party wholesale market, one doesn't do, it has to be both?

1listnum "WP List 3" \l 14260            MS GRIFFIN‑MUIR:  Well, actually if you found that if someone had ubiquitously covered a certain geographic territory, that would say there is coverage of an alternative competitor in that territory.  But typically, we don't subscribe specifically to duplicability as a test, that is just a piece of the first test.

1listnum "WP List 3" \l 14261            MR. HOFLEY:  But what I am asking you is whether or not, if the Commission found that the facility or service could be self‑supplied by competitors is that enough?  Because this test seems to read that, no, that is not enough, they need to go on and find out whether or not it can be supplied through both self‑supply and a third‑party wholesale market.

1listnum "WP List 3" \l 14262            MS GRIFFIN‑MUIR:  Right.  And I would say more the latter, but obviously it is a combination of the two.  It is either one or the two.

1listnum "WP List 3" \l 14263            MR. HOFLEY:  So is it "or" or is it "both"?

1listnum "WP List 3" \l 14264            MS GRIFFIN‑MUIR:  I would have to say it depends on the market you are looking at and the geography you are looking at.  And so if you had ubiquitous supply, as I said, by one competitor ‑‑ I think really what we are writing about is the reality of the business market in this instance, where some of the facilities are self‑supplied and some are obtained from a third party and the vast majority are obtained from the ILEC.

1listnum "WP List 3" \l 14265            And when the degree of the self‑supply or the third‑party supply are sufficient to restrain the market power of the ILEC, then the facilities are sufficiently duplicated, that they are no longer essential.

1listnum "WP List 3" \l 14266            MR. HOFLEY:  I am just looking at your language, Ms Muir, and you have said that duplication has to be deemed practical and feasible.  And this language says that a variety of alternatives to the incumbents, facilities and services should exist through both self‑supply and a third‑party wholesale market.

1listnum "WP List 3" \l 14267            So I am asking you, do I have to have both or is one or the other going to do from your perspective?

1listnum "WP List 3" \l 14268            MS GRIFFIN‑MUIR:  Both.

1listnum "WP List 3" \l 14269            MR. HOFLEY:  Both, okay

1listnum "WP List 3" \l 14270            MS GRIFFIN‑MUIR:  Because both are indicative of whether it is practical or feasible, that is what we are saying.

1listnum "WP List 3" \l 14271            MR. HOFLEY:  Okay.  Now, if I could take you back to your definition discussion in your evidence.

1listnum "WP List 3" \l 14272            THE CHAIRPERSON:  Before you do that, I am sorry, but I am losing track here.  I look at the definition 129, I don't see the word "duplicability" there at all.  How did we get into a definition of duplicability here?

1listnum "WP List 3" \l 14273            MR. HOFLEY:  We get into it under their ‑‑ it is built in, Mr. Chairman, to both the first prong of the test, the facility or service provided by the former monopoly is required as an input by a competitor.  They define that as kind of the self‑supply question.

1listnum "WP List 3" \l 14274            THE CHAIRPERSON:  M'hmm.

1listnum "WP List 3" \l 14275            MR. HOFLEY:  And then under (b), the former monopoly dominates the wholesale supply and they say you look at whether is third‑party supply.

1listnum "WP List 3" \l 14276            THE CHAIRPERSON:  So there is an imply to the duplicability test.

1listnum "WP List 3" \l 14277            MR. HOFLEY:  Yes.

1listnum "WP List 3" \l 14278            MS GRIFFIN‑MUIR:  Well, just ‑‑

1listnum "WP List 3" \l 14279            MR. HOFLEY:  Well, I am happy for you to explain it, but that is certainly how I have read it.

1listnum "WP List 3" \l 14280            THE CHAIRPERSON:  I shouldn't ask him, I should ask you, Ms Muir.

1listnum "WP List 3" \l 14281            MS GRIFFIN‑MUIR:  Well, to a certain extent that is part of our test.  But we never look at duplicability in an either or isolated basis.  It is more a significant market power test in the upstream market that we would look for.

1listnum "WP List 3" \l 14282            THE CHAIRPERSON:  Yes, but everybody else has in their test whether it is capable of duplication, both in economic and technical terms.

1listnum "WP List 3" \l 14283            MS GRIFFIN‑MUIR:  Right, and ‑‑

1listnum "WP List 3" \l 14284            THE CHAIRPERSON:  We don't spell that out, but it is implied.

1listnum "WP List 3" \l 14285            MS GRIFFIN‑MUIR:  It is implied in that prong of the test, but not quite as cut and dried as the way Mr. Hofley described it.  Because even in the wholesale of third‑party, we could be one of those third parties even.  It is a significant market power test.

1listnum "WP List 3" \l 14286            THE CHAIRPERSON:  Okay, back to you, Mr. Hofley.

1listnum "WP List 3" \l 14287            MR. HOFLEY:  Where I got that from, Mr. Chairman, just so you know, is paragraphs 131 and 132 of MTS Allstream's evidence.

1listnum "WP List 3" \l 14288            And I am going to go there right now.  And I want to focus on your first prong, this is the self‑supply side.  In paragraph 132 you say that to determine if a facility is necessary for a competitor, or required I guess, one looks at a comparison of the scale and geographic coverage of former monopolies network facilities.  Do you see that?

1listnum "WP List 3" \l 14289            And, in fact, I think you referred to that, Ms Muir, perhaps five minutes ago.  You said if there was another ubiquitous network then ‑‑ do you recall that testimony?

1listnum "WP List 3" \l 14290            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 14291            MR. HOFLEY:  So right there from your standpoint it is game over, right, because you are saying that there needs to be another ubiquitous network supplier and that that can't happen.  So you don't really need to go further, do you on that first prong?

1listnum "WP List 3" \l 14292            MS GRIFFIN‑MUIR:  No, I think we are just looking at the scope of supply.  So we are pretty sure, in most cases, there is not another ubiquitous supplier of services in the business market.

1listnum "WP List 3" \l 14293            MR. HOFLEY:  No, but we are talking about self‑supply here.  So what you seem to be saying ‑‑

1listnum "WP List 3" \l 14294            MS GRIFFIN‑MUIR:  Well, I think we are talking supply actually, just generally.

1listnum "WP List 3" \l 14295            MR. HOFLEY:  First prong of your test, whether or not it is required as an input by a competitor, and that goes to whether or not you can provide it yourself, paragraph 132, the last ‑‑

1listnum "WP List 3" \l 14296            MS GRIFFIN‑MUIR:  Well, okay, perhaps that is where the confusion comes from.  It could be required by us and whether we could feasibly or practically self‑supply it.

1listnum "WP List 3" \l 14297            MR. HOFLEY:  And you say you need to compare the scale and geographic coverage of the former monopolies network facilities along with their capacity to add new customers relative to that of a typical competitor.  So what I am suggesting to you is under that test, at least that test there, the self‑supply side, it is game over, we move onto the next test because they will never satisfy that test according to you.

1listnum "WP List 3" \l 14298            MS GRIFFIN‑MUIR:  No, I think you are reading it a little simplistically or maybe it is not well phrased here.

1listnum "WP List 3" \l 14299            MR. HOFLEY:  Okay.

1listnum "WP List 3" \l 14300            MS GRIFFIN‑MUIR:  We are really talking about determining that the input is necessary for us to compete, determining how easy or difficult it is for us to replicate that in our own network to the geographic ubiquity in whatever the relevant geographic market is of the incumbent.

1listnum "WP List 3" \l 14301            MR. HOFLEY:  Well, I am mindful of time here, Mr. Chairman, so I just want to explore for one minute the second prong of the test, then I am going to move onto the last issue within the essential facility definition.

1listnum "WP List 3" \l 14302            The second prong of your test, Ms Muir, is at paragraph 134, and this is looking as to whether or not there are third‑party competitive supply alternatives.

1listnum "WP List 3" \l 14303            Do you see that?

1listnum "WP List 3" \l 14304            MS GRIFFIN‑MUIR:  Yes.

1listnum "WP List 3" \l 14305            MR. HOFLEY:  And you say there again that:

                      "The Commission must consider actual competitive supply considering scale, market coverage, service quality, price levels, and general substitutability." (As Read)

1listnum "WP List 3" \l 14306            So to pass this prong of the test one would have to consider whether there is significant third‑party competitive supply that is equivalent to or at least close to the scale, market coverage, service quality, price levels and general substitutability of that offered under a mandated regime.  Is that a fair statement?

1listnum "WP List 3" \l 14307            MS GRIFFIN‑MUIR:  Yes, I think that is a fair statement.

1listnum "WP List 3" \l 14308            MR. HOFLEY:  Now, and I am sorry, you do go on, and I should point this out, in MTS‑CRTC‑19‑July‑07‑1002, it is tab BBB, to say that:

                      "This can only be met where the substitute technology provides, at a minimum, an equally efficient and broadly available substitute to the facility in question."

1listnum "WP List 3" \l 14309            Do you recall responding to that interrogatory?

1listnum "WP List 3" \l 14310            MS GRIFFIN‑MUIR:  Can you let me know what page that is on, please.

1listnum "WP List 3" \l 14311            MR. HOFLEY:  Page 4.

1listnum "WP List 3" \l 14312            I guess all I'm suggesting to you, Ms Muir, is that that is yet another qualifier to the definition of third party competitive supply.

1listnum "WP List 3" \l 14313            MS GRIFFIN‑MUIR:  Yes, it's a qualifier because when you look at what gives the income and significant market power in the upstream, these are all the features that exist in the upstream market for the income and ubiquitous network.

1listnum "WP List 3" \l 14314            So if we are trying to determine how that would impact downstream competition, in making an assessment you would have to take these factors into consideration.

1listnum "WP List 3" \l 14315            MR. HOFLEY:  So then if I go to paragraph 135, where you have now kind of established what the Commission has to look at, and even if all of these factors indicate that a facility is ‑‑ and I'm going to use the word duplicable; you don't.  You say if the third party supply is limited in comparison to the owner of the essential facility, then the second prong of your test is met.  Correct?

1listnum "WP List 3" \l 14316            So again it's a comparison between the third party supplier and the owner of the essential facility.

1listnum "WP List 3" \l 14317            It seems to me, again, a very difficult test to ever meet.

1listnum "WP List 3" \l 14318            MS GRIFFIN‑MUIR:  I guess because in the business market there is nobody else with a network ‑‑

1listnum "WP List 3" \l 14319            MR. HOFLEY:  But this is just a general test that you are proposing to the Commission, Ms Muir, for all markets.  That's what I'm asking you about.

1listnum "WP List 3" \l 14320            Again, the Commission is going to use it for every market.

1listnum "WP List 3" \l 14321            MS GRIFFIN‑MUIR:  Right.  It's an assessment of what is available.  Today we spoke to you about the alternatives that are available and how useful, or not, they may be in providing service to the customers we currently serve.

1listnum "WP List 3" \l 14322            MR. HOFLEY:  Okay.  I think we've walked through your definition and the various hoops that one has to jump through, both under self supply and under third party supply.

1listnum "WP List 3" \l 14323            I would like to now finish by trying to get a sense of what this means in practice.

1listnum "WP List 3" \l 14324            Could I ask you to have Appendix C of your March 15th evidence, that is where you first set out your list of essential facilities.  And Appendix A of your July 5 evidence where you provided some additional detail.

1listnum "WP List 3" \l 14325            Then I would also like you to have handy ‑‑ and frankly, this is what I would like you to focus on ‑‑ CRTC Exhibit 4.

1listnum "WP List 3" \l 14326            That can be found at Tab CCC to the compendium.  This is the CRTC's exhibit that was distributed on 11 October 2007 with the list of services.

1listnum "WP List 3" \l 14327            I'm sure you spent some time looking at this list since the Commission has asked that everyone be prepared to address it.

1listnum "WP List 3" \l 14328            Do you have that in front of you, Ms Muir?

1listnum "WP List 3" \l 14329            MS GRIFFIN‑MUIR:  Yes, I do.

1listnum "WP List 3" \l 14330            MR. HOFLEY:  I have had some analysis done and I have done some of your submissions.  With the exception of ‑‑ I don't want to use the word "concession".

1listnum "WP List 3" \l 14331            With the exception of your statement this morning that resale and sharing services in this list, resale and sharing services, with the exception of that, which you initially had in your Appendix C as an essential facility ‑‑ you seem to have withdrawn that now ‑‑ you will agree with me that that is not a wholesale service, resale and sharing?

1listnum "WP List 3" \l 14332            It's a retail.

1listnum "WP List 3" \l 14333            MS GRIFFIN‑MUIR:  Well, it could be retail or wholesale.  It depends.

1listnum "WP List 3" \l 14334            MR. HOFLEY:  But it is retail.  Correct?

1listnum "WP List 3" \l 14335            MS GRIFFIN‑MUIR:  Typically resale.  Reselling a retail service.

1listnum "WP List 3" \l 14336            MR. HOFLEY:  So let's just focus on wholesale, then.

1listnum "WP List 3" \l 14337            If I look at this list, CRTC Exhibit 4, and again applying your definition, does anything on this list fall in the Commission's ‑‑ and I've come to use this word so I will use it ‑‑ bucket, although I call them Category 3?

1listnum "WP List 3" \l 14338            Does anything fall in non essential subject to phase‑out?

1listnum "WP List 3" \l 14339            MS GRIFFIN‑MUIR:  Well, we haven't filled it out, but I'm told yes, some things fall in.

1listnum "WP List 3" \l 14340            MR. HOFLEY:  Could you tell me what because I've looked at your two lists and I haven't seen a single one that falls into 3.

1listnum "WP List 3" \l 14341            You have had this list since October 11th.  Can you tell me whether or not any one falls into Category 3?

1listnum "WP List 3" \l 14342            MS GRIFFIN‑MUIR:  Actually, I can't speak to the list itself.  We haven't finished filling it out.

1listnum "WP List 3" \l 14343            But we do have ‑‑ and I'm just trying to put my hand on it.  I think in an interrogatory response to your client we listed some services that fell in Category 3.

1listnum "WP List 3" \l 14344            MR. HOFLEY:  Could you refer me to that interrogatory, please.

1listnum "WP List 3" \l 14345            MS GRIFFIN‑MUIR:  I will just as soon as I figure it out myself.

‑‑‑ Pause

1listnum "WP List 3" \l 14346            MS GRIFFIN‑MUIR:  I can undertake to provide it.

1listnum "WP List 3" \l 14347            MR. HOFLEY:  I can tell you that we've looked, so it is going to be very surprising to me that you provide us with anything that indicates that it would fall into 3.

1listnum "WP List 3" \l 14348            I'm happy for you to undertake to do that.

1listnum "WP List 3" \l 14349            But let's look at the big ones.  Let's go down this list very quickly.

1listnum "WP List 3" \l 14350            ADSL coverage information.  Would that be essential?

1listnum "WP List 3" \l 14351            MS GRIFFIN‑MUIR:  You know, the difficulty I have with this list ‑‑ I would hazard a guess yes.  But a lot of the services, just because they are put in alphabetical order, aren't the services that we provide or the titles we provide them under.

1listnum "WP List 3" \l 14352            MR. HOFLEY:  Can I suggest to you that if you just frankly flip to ‑‑

1listnum "WP List 3" \l 14353            MS GRIFFIN‑MUIR:  But just on coverage information, that's typically the coverage information of the incumbent service provider who provides the ADSL service.

1listnum "WP List 3" \l 14354            MR. HOFLEY:  Well, at Tab DDD we have a response from you to CRTC 19July07‑108, where you state that all ADSL access services are essential and should be priced at Phase 2 costs plus a 15 per cent mark‑up.

1listnum "WP List 3" \l 14355            So I guess that's why I concluded ‑‑

1listnum "WP List 3" \l 14356            MS GRIFFIN‑MUIR:  Right.  And then I said to you I would hazard a guess yes, but my difficulty is I can't really put my finger on exactly what this particular service is.

1listnum "WP List 3" \l 14357            I think it's probably the coverage that the ILEC provides in conjunction with their ADSL service.

1listnum "WP List 3" \l 14358            MR. HOFLEY:  Fair enough.

1listnum "WP List 3" \l 14359            MS GRIFFIN‑MUIR:  So that would fit, obviously, with your other ADSL service.

1listnum "WP List 3" \l 14360            THE CHAIRPERSON:  Mr. Hofley, are you not going to at the end of the day get a list like this filled out from every single person here?

1listnum "WP List 3" \l 14361            MR. HOFLEY:  I am.

1listnum "WP List 3" \l 14362            THE CHAIRPERSON:  What is the purpose of going through this right now?

1listnum "WP List 3" \l 14363            MR. HOFLEY:  I'm not going to go through every one, Mr. Chairman.

1listnum "WP List 3" \l 14364            My purpose is ‑‑ and we are going to come to it ‑‑ that as far as we can see on the record, nothing is non essential.

1listnum "WP List 3" \l 14365            THE CHAIRPERSON:  You heard the witness say that she disagrees and she gave you an undertaking that she will let you know what she considers non essential.  What more do you need?

1listnum "WP List 3" \l 14366            MR. HOFLEY:  I am happy with that, Mr. Chairman, with that undertaking.  But I do have one follow‑on question.

1listnum "WP List 3" \l 14367            THE CHAIRPERSON:  Go ahead.

1listnum "WP List 3" \l 14368            MR. HOFLEY:  Now, would you agree with me that in addition to what is on this list, there are other services which you consider essential?

1listnum "WP List 3" \l 14369            MS GRIFFIN‑MUIR:  It's entirely possible.

1listnum "WP List 3" \l 14370            MR. HOFLEY:  I think you agreed with Mr. Daniels that wavelength services would be one, this morning.

1listnum "WP List 3" \l 14371            MS GRIFFIN‑MUIR:  I believe ‑‑

1listnum "WP List 3" \l 14372            MR. HOFLEY:  Pardon me, IX channels.  I apologize.  IX channels.

1listnum "WP List 3" \l 14373            MS GRIFFIN‑MUIR:  I think we said Ethernet transport actually.

1listnum "WP List 3" \l 14374            MR. HOFLEY:  No.  I think you said IX channels.  That's what we were talking about.

1listnum "WP List 3" \l 14375            The record will speak for itself.

1listnum "WP List 3" \l 14376            What about wavelength services?  That's another one that appears on your list.

1listnum "WP List 3" \l 14377            MS GRIFFIN‑MUIR:  Yes.  That's just another transport service.

1listnum "WP List 3" \l 14378            MR. HOFLEY:  So in addition to what is on this list, there are more services out there that are essential from  your perspective.

1listnum "WP List 3" \l 14379            MS GRIFFIN‑MUIR:  I think what we looked at was what services are necessary, access and connectivity services are necessary to compete that met the requirement of being competitively and technologically neutral.

1listnum "WP List 3" \l 14380            So it's just as technology evolves, the suite of essential facilities and services would expand to include those similar access or connectivity services at the next level.

1listnum "WP List 3" \l 14381            MR. HOFLEY:  IX channels is not a new technology.

1listnum "WP List 3" \l 14382            MS GRIFFIN‑MUIR:  No, no, IX channels is ‑‑ I was responding to wavelength actually.

1listnum "WP List 3" \l 14383            MR. HOFLEY:  So there is more than on this list.  That's all.

1listnum "WP List 3" \l 14384            MS GRIFFIN‑MUIR:  It's possible.  I can't tell you everything that is on this list, but it's possible.

1listnum "WP List 3" \l 14385            MR. HOFLEY:  I'm happy to have her undertaking, Mr. Chairman.

1listnum "WP List 3" \l 14386            THE CHAIRPERSON:  Counsel, do you have an announcement to make before we break?

1listnum "WP List 3" \l 14387            MR. McCALLUM:  Yes, please.

1listnum "WP List 3" \l 14388            First of all, we propose to meet at 8  o'clock on Monday morning and on Tuesday morning, the 29th and 30th.

1listnum "WP List 3" \l 14389            Second, I would invite counsel to come up and discuss revised estimates at the end of this session.

1listnum "WP List 3" \l 14390            Third, exhibits and undertakings, instead of being read into the record by the Secretary, will be updated over the weekend and e‑mailed to participants.

1listnum "WP List 3" \l 14391            THE CHAIRPERSON:  Let me just add that the whole idea of meeting at 8 o'clock on Monday and Tuesday is with the fond hope, which I am sure you can all fulfil, that we will finish by Tuesday night.

1listnum "WP List 3" \l 14392            MR. HOFLEY:  Mr. Chairman, if it would help, unless it is not clear already, The Companies are finished with this panel.

1listnum "WP List 3" \l 14393            THE CHAIRPERSON:  Okay.  Thank you very much.

1listnum "WP List 3" \l 14394            So we will start with the next cross‑examiner on Monday morning at 8 o'clock.

1listnum "WP List 3" \l 14395            Have a nice weekend, everyone.

‑‑‑ Whereupon the hearing adjourned at 1635, to resume

    on Monday, October 29, 2007 at 0800 /

    L'audience est ajournée à 1635, pour reprendre le

    lundi 29 octobre 2007 à 0800

 

                      REPORTERS

 

 

 

______________________          ______________________

Johanne Morin                   Fiona Potvin

 

 

 

 

______________________          ______________________

Beverley Dillabough             Jennifer Cheslock

 

 

 

 

______________________          ______________________

Sharon Millett                  Monique Mahoney