ARCHIVÉ -  Transcription de l'audience

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:

Expedited procedure for resolving a competitive issue - Telecom application /

Procédure accélérée de règlement des questions de concurrence - Demande de télécom

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)

January 22, 2009                         Le 22 janvier 2009

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

Expedited procedure for resolving a competitive issue - Telecom application /
Procédure accélérée de règlement des questions de concurrence - Demande de télécom

BEFORE / DEVANT:

Konrad von Finckenstein              Chairperson / Président
Leonard Katz                         Commissioner / Conseiller
Rita Cugini                          Commissioner / Conseillère

ALSO PRESENT / AUSSI PRÉSENTS:

Sheila Perron                            Secretary / Secretaire
Anthony McIntyre                     Legal Counsel /
Crystan Hulley                          Conseillers juridiques
Christine Bailey                         Regional Administrative Officer / Agente
                                                administrative régionale
Kathleen Taylor                        Manager, Consumer Affairs /
                                                Gestionnaire, Consommation
Gerald Lylyk                            Director, Consumer Affairs/
                                                Directeur, Consommation

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)  

- iv -

             TABLE DES MATIÈRES / TABLE OF CONTENTS

                                                   PAGE / PARA

Opening remarks on behalf of PWGSC                     5 /     34  

Opening remarks on behalf of Bell Canada              15 /     95

Closing remarks on behalf of PWGSC                    60 /   383  

Closing remarks on behalf of Bell Canada              64 /   412

14      And you, Mr. Bibic, if you can I would prefer to separate them.

15      Do you have any problem with it?

16      MS MILTON:   No.   What I would propose to do is in my initial opening I will do some background information and then go directly to jurisdiction.

17      THE CHAIRPERSON:   Yes.

18      MS MILTON:   So it will be a bit longer than the second opening, but I'm comfortable with whatever Mirko wants to do.

28      We ask you to ensure that all cell phones and pagers are turned off at all times while you are in the hearing room.

29      We will begin with opening remarks by the applicant, Public Works and Government Services, which will have 10 minutes to make their presentation.

30      Before beginning your remarks, please I would ask that the applicant introduce the members of their team.

31      Thank you.

32      Please go ahead.

33      THE CHAIRPERSON:   Ms Milton, the floor is yours.

OPENING REMARKS ON BEHALF OF PWGSC /

REMARQUES D'OUVERTURE AU NOM DE TPSGC

34      MS MILTON:   Good morning, Mr. Chairman, Vice-Chairman Katz, Commissioner Cugini, I am Leslie Milton, counsel to Public Works in this matter.

48      The essence of Public Works' position is simple:   Public Works agrees that just and reasonable rates should recover all costs legitimately incurred by Bell to continue to provide the TSRP services.

49      Public Works does not believe that Bell should be permitted to charge rates to recover costs incurred for the provision of services for two, three, and possibly four years after Public Works has ceased to require the services and Bell has ceased to provide them.

50      The TSRP services are an integrated bundle of services that Bell contracted to provide in 2000.

59      Public Works secured a six-month cushion to protect itself against any delay in implementation.

60      The amended CSA rates, as contained in the new tariff that Bell sought and obtained approval for, were substantially higher than the rates charged under the initial CSA, in order to compensate Bell for the lack of a long-term contractual commitment.

61      In July of 2007, and without notice to Public Works, Bell sought a further amendment to this tariff to include a minimum revenue guarantee.

62      The current dispute arose as a result of delays in the implementation of the transition to TELUS' network.   When Public Works first realized that TELUS would not finish the transition by June 2008, it met with TELUS to establish new dates for completing the implementation.

63      New dates were established for completion well before December 15, 2008 , and the revised date was provided in confidence.

65      While Bell was willing to provide the services requested, it initially indicated that it could only do so at the terms in the approved CSA, including, in particular, for a fixed contract period of five years, with a minimum revenue guarantee totalling $94 million over the term of the contract.

66      These are the terms that are available to a new customer that subscribes to the CSA, and the rates reflect the cost of building a new network from scratch.

67      Bell subsequently revised its offer to a two-year term, but with a substantially higher minimum revenue guarantee.   The result was a marginal reduction in the minimum fees payable by Public Works over the term of the contract, and the total was provided in confidence.

69      THE CHAIRPERSON:   In this paragraph you say, "What Bell has proposed in its most recent offer," so that is over and above the previous two?

70      There are three offers from Bell altogether?

71      MS MILTON:   That is the proposal that they put on the record commencing December 11th, when they filed a new CSA which would cover off the regulated services, in connection with any services that could be obtained under the National Services Tariff.

72      THE CHAIRPERSON:   So there are three Bell offers, one for five years, one for two years, and the amended two-year one.

73      MS MILTON:   That is my understanding.

74      THE CHAIRPERSON:   Okay.

75      MS MILTON:   Although Public Works is willing to enter into a fixed two-year term for the DVAC services that form part of the CSA, it does not require the other services, consisting of private lines, digital network access, and high-speed digital services for this length of time.

90      Furthermore, while Bell Canada refers to the ability of numerous carriers to provide this network, the fact is that only two carriers, Bell and TELUS, bid on the 2006 RFP, and one of the two has failed to implement in the stipulated timeframe.

91      In other words, there was no carrier, other than Bell , that could have provided these services throughout the period.

92      Also, although it is undoubtedly true that other carriers can provide bits and pieces of this network, and that some routes are forborne, it is totally impracticable to run an integrated network in this manner, especially a secure network that forms an important part of Canada 's national defence system.

93      I will close there my comments on jurisdiction.

94      THE CHAIRPERSON:   Mr. Bibic?

OPENING REMARKS ON BEHALF OF BELL CANADA

REMARQUES D'OUVERTURE AU NOM DE BELL CANADA

95      MR. BIBIC:   Thank you, Mr. Chairman.   Good morning, Commissioners.

96      THE CHAIRPERSON:   Do you have a written introduction?

98      MR. BIBIC:   First, I will introduce my panel.   To my right is Louis Savoie, the Regional Vice-President of Enterprise Accounts at Bell Canada .

99      To my left is Pierre-Luc Hébert, senior counsel, who works with me in the Regulatory Department.

100     To Pierre-Luc's left is Murray Mason, an account consultant.

101     To Murray 's left is Pierre Moody, who is the Director of Sales and Support for our wholesale business unit.

102     In the back we have a few folks from the Regulatory Department, as well, in case we need some assistance throughout the hearing.

103     Again, before I continue, I would like to lay out some of the materials and explain how we have structured them.

104     Commissioners, we have provided to you a binder that says "CRTC" on the front.   It contains, at Tab 1, our opening statement, and then there are some documents on which we will ask questions later, in Part 2 of this hearing.

106     There is one mere difference in the two versions.   There is one confidential number related to our cost that is blanked out of Public Works' version, which you have.

107     Then, there is a third version, which is for the public.   We have eliminated materials that would be confidential to PWGSC.

108     That is how the materials are laid out.

109     I have managed to scribble a few notes on jurisdiction.   I had planned to come here this morning and actually let --

110     THE CHAIRPERSON:   Excuse me, I would like a clarification.   The number that is in my binder that is not public for PWGSC, can you tell me where it is, so I don't accidentally disclose it?

111     MR. BIBIC:   Absolutely.

112     At paragraph 18 of our opening statement, page 5, this is the section that deals with DVACs, their specialized alarm circuits, and the imputation test that we filed with the Commission demonstrates that our cost for those would be -- and you see the number there.

114     MR. BIBIC:   That is confidential, and then we say, "Well above 39.90," which is the price that has been offered by Public Works.

115     That is the only number that is confidential that we blanked out.

116     MR. HÉBERT:   Mr. Chairman, if I may clarify, also in the confidential version there are a number of dollar figures that refer to amounts that are payable by PWGSC.   These numbers are provided in the copy that PWGSC has, but they were removed from the general public version.

117     THE CHAIRPERSON:   That's fine, I just wanted to know what I cannot even mention to PWGSC.

118     Thank you.

119     MR. BIBIC:   Mr. Chairman, I will bifurcate my opening statement.   I had planned to simply let our written submissions in this proceeding speak for themselves on the question of jurisdiction, and I had planned to come here to convince the panel that our offers on the facts are just and reasonable, and not unjustly discriminatory.

121     In its application, Commissioners, it is quite clear that Public Works has asked a very specific question, and that is:   Are any of Bell 's proposals to DND in compliance with section 27 of the Act?

122     That is the question.   Quite apart from the legal jurisdiction issue, that is the question.

123     Before going on, I think it is worthwhile to say a few words on the Commission's role in this matter -- and this ties directly into the question of jurisdiction.

124     In our view, we clearly had a role in making sure that DND was not left stranded after December 15th, 2008 .   I am not saying that that point gives the Commission legal jurisdiction but as an overseer of how the market unfolds, and, frankly, that has been accomplished, because Bell , for a while, has committed to Public Works and to DND that we would provide service.

126     I have a quarrel with Ms Milton's characterization of our offers because, from our point of view, we budged significantly, albeit reluctantly, but significantly, from a five-year offer to a two-year offer, at a significantly lower contract value.

127     So having succeeded there in doing those two things, the Commission must consider carefully what its role should be going forward.   And it's not the Commission's role -- and I say this respectfully -- to impose a compromise solution which DND or its current network supplier, TELUS, may consider to be more fair; more just or more reasonable.

128     Just and reasonable is a rather broad concept and a myriad number of offers could be structured that would be considered just and reasonable and fall within that range and our offers clearly do fall within that range.

129     I'm going to stop there.   That touched a bit on jurisdiction.   I'm going to set out the context and then I will finish on jurisdiction as well.

131     TELUS had one year to migrate the network until June 2008; didn't do it.   Only 1 percent of the network had been migrated then.   Failed to meet a subsequent commitment of October 23rd and then on November -- on December 15th of 2008, which was the date our contract expired, more than 88 percent -- that's more than 90 percent of Bell's network remained in operation and remains in operation today.

132     Now, on November 18th, a mere month before that, Public Works wrote into the Commission of this proceeding and said that they would need less than half of Bell's services and the rest for a very short time.   Well, a short month later it turned out to be over 90 percent.

133     Now, I would like to talk a little bit about Bell 's activities throughout this.

135     We accepted it because, first, the monthly price had increased.   And it's common in the industry, and I don't think it will surprise anybody in this room, that monthly rates tend to be higher than long term rates.

136     Secondly, we knew this was going to be a complex migration and we knew that it would take a year and likely more for this to be done and that was important because that allowed for operational and business planning certainty, which is key now and is going to be a focus of our position throughout this hearing.

137     Third, the network at the time didn't require any capital investments in order to maintain the stringent service levels that DND requires from us.

138     And fourth, at that time we actually had a full operational staff in place to handle this.

139     But much has changed since then.   In February 2008, so well before the deadline of December 15th, well before we advised DND that we would not accept further short-term extensions of the contract.   And there is reasons for this.

141     And I think that date is important because Public Works has even stated today that there is no option now.   Well, there is no -- and there is the notion of temporary market power that TELUS has floated around in their submissions and so has Public Works.   And I think at some point we have to look at how this was planned.

142     So February 28, 2008 we advised that no further short term extensions would be acceptable to us, and there were reasons for that.

143     First, unlike in '07 the network now requires capital investments to make sure that the stringent service level agreements are maintained or are met; rather, the requirements, and there is a risk management issue there that's quite significant.

144     Two, some of the operational personnel have been reemployed or had been reemployed to pursue more profitable, longer term business opportunities for Bell .   It's well within our right to do that.   After all, we are a profit-making enterprise.   And frankly, we indicated that we would need a fixed term arrangement to provide operational and business planning certainty.   And this is a key issue for us and we will explore that during the questions should the Commission decide at the end of this first part that it does have jurisdiction.

146     Now, the government:   It was clear in the summer of 2008 that TELUS wasn't meeting its commitments.   Now, rather than terminating the contract with TELUS for breach, as I suspect was likely its right, DND used the market forces then at play to negotiate with TELUS a number of contractual concessions including a stronger indemnity.

147     Now, despite the fact that it could have done that, despite the fact that in February of '08 DND knew our position, it took Public Works until October 16th to ask us to negotiate an alternative arrangement.   And then on October 16th they only requested service continuity for DVACs, those specialized alarm circuits which form only one part of the network.   It's only later that they came to us asking for the full suite of services they now seek.

149     So I'm at paragraph 13 now.   DND clearly recognized the risk of continued network migration failures by TELUS and it chose a path.   It chose to insure itself through a revised contract and despite the insurance it obtained, DND now seeks to have Bell shoulder the burden of continued service delivery and in that process this application, in our view, seeks to protect TELUS from its own contractual promises.

150     Now, I was going to go on, and I will do this later -- I was going to go on and describe our offers with a view of explaining why our offers are just and reasonable.   I will leave that for the second part and I will just close for a moment on the legal jurisdiction issue.

152     But the point is this -- and I think looking at Ms Milton's opening statement on the jurisdiction issue I think it frankly misses the point entirely.   The point of the opening statement which I just heard is that these services have always been regulated.   When the CRTC assume jurisdiction after it makes a decision -- and people in the industry love to mention Nexxia but it's a red herring.   It's irrelevant. But when the CRTC assume jurisdiction clearly we have the tariff in place and the CRTC has a role there.   But that's not the point.

153     We readily admit that if service will continue to be provided some of those services are regulated and if they are regulated we will have to file a tariff, and you will have to approve it.   Peace on that; absolutely clear.

154     The point on jurisdiction is that there is no obligation to serve.   We had a contract.   It expired on December 15th.   Sure, we chose to continue to backstop the network and now we have to resolve the terms and conditions.   That's for us to resolve, not for the Commission to tinker with the offers.   Had we decided to walk away -- had we decided to walk away, which we could have done but we chose not to, the contract would have ended and the Commission couldn't have made us come back and provide service other than -- other than the fact that on the books today we have a valid, existing five-year CSA which anybody in the world who wants to meet its terms and conditions can buy from us.

164     I think I heard you say that, Mr. Bibic.   That's why you were continuing service.   You offered in writing to continue to do the service.   The question is how much is your -- you get paid for doing those services until TELUS can take over 100 percent.   Is that correct?

165     MR. BIBIC:   It is correct that we have agreed not to shutdown service because that was a choice that Bell made for a number of reasons.   I don't think that that, in and of itself means --

166     THE CHAIRPERSON:   I'm just trying to get at the facts if ever we --

167     MR. BIBIC:   The facts, yes.

168     THE CHAIRPERSON:   And this is not an issue.   I mean I think we all want to make sure that that service continues to be rendered by somebody so that DND is not left without and we don't have a national security problem.

169     MR. BIBIC:   We have indicated we will not shutdown service.

173     THE CHAIRPERSON:   Right.   And if we have any -- you know when we forbear we always reserve the right under section 27(2) even when there is forbearance to such jurisdiction should there be an undue preference.   And I guess the issue here is; number one, are we talking about one service, the DVACs, or is the whole bundle a service because Ms Milton suggests that these two are inextricably linked and that really that the whole bundle constitutes the service?   I think the wording here -- I underlined it.   Just let me find it.   It says an "integrated bundle of services" you know.

174     And I also believe she said in her opening statement there is no way that somebody else can deliver these services other than Bell.   Do you agree with this?

175     First of all, can anybody else deliver those?   She says it is impractical and presumably impractical and having anybody else deliver it might jeopardize national security.

176     MR. BIBIC:   Yes, others can deliver it.   Absolutely others can deliver it.

178     MR. BIBIC:   In a short period of time, well, no, but I think we can explore that.   I would love to explore that because I think the reason Public Works is in the position it's in is because it adopted a particular contract and that is --

179     THE CHAIRPERSON:   It is totally impractical to run an integrated network in this manner, especially a secure network that forms an important part of Canada 's national defence system.   That was Ms Milton's statement.

180     Do you disagree with that?

181     MR. BIBIC:   Well, it's an accurate statement but taken out of context.   And if you put it in context then I do disagree with it.   The point is this -- and I'm taking a slightly outrageous example.

182     But if you have a five-year contract and it's going to expire and the day before you start thinking about trying to get an alternative supplier and then you say there is no way that an alternative supplier can come to my assistance in one day, I mean, sure one can make that argument but I'm not sure it's a particularly helpful argument.

183     THE CHAIRPERSON:   Ms Milton?

185     I mean, the facts are that even if they had gone out 18 months ago it's highly unlikely they could have migrated to another service provider.   There was no other service provider that could have provided the integrated bundle of services.   So DND and Public Works would have had to work with a piecemeal approach which does not satisfy their security requirements and would have resulted in an even more complex and legally impossible migration.

186     So it's very much Public Works' position this is an integrated bundle and only Bell can provide it now and could only provide it when this initial contract went to tender for this interim period.

187     THE CHAIRPERSON:   And if I understand the facts as summarized by Bell , you had a choice to make.   You found out that Bell and TELUS could not deliver on time and even the 18 months was not enough.   And the way Mr. Bibic puts it, that in August of 2008 you could have either cancelled the contract or you could improve the contract by getting better penalties, and you chose the latter.

189     MS MILTON:   I'm not at liberty, and I will ask Katharine Hamill to leap in.   But I am not at liberty to speak to the confidential decisions that were taken in terms of whether or not --

190     THE CHAIRPERSON:   I'm not interested in your confidential -- that's not my question.   My question was very implicit because you know I wanted to find out.   You say it's an integrated bundle.   It's impractical to get somebody today.   I appreciate that.   I think Mr. Bibic doesn't dispute that either but he says you got there by deliberate choice.   You had the choice essentially in August of going another route.   Did you?

191     MS MILTON:   I don't think we had a choice because we would have had to re-tender.   Public Works is subject to very complex tendering requirements.   They take a very long time, frankly, which is something I'm sure you don't want to hear about.

193     THE CHAIRPERSON:   That's what I understood your point to be, that even when you realized you were in a mess because TELUS could not live up to the timetable with the 18-month provision, six-month cushion, therefore your choice was none.   The only person who can deliver it was Bell .   That's what you're saying.

194     I want to hear from Bell what they have to say on that.

195     MR. BIBIC:   Okay.   I think that answer needs to be clarified.   Ms Milton might not be aware of all the facts even, but we are.   We were involved throughout.

196     At the time -- you heard my statement -- in June or in the summer of 2008 the government did have a choice and they chose a particular path.

198     There was a choice.   We were asked by Public Works to keep that option alive.   It turns out that I think we were asked to keep that option alive so they could use it as a -- use the market forces then in play, as I said in my opening statement, to leverage the existence of our open offer against TELUS and secure better terms.

199     MS MILTON:   The only other party that could provide the service was Bell .   I don't think there is anything wrong with that statement.

200     THE CHAIRPERSON:   Yes.   What Mr. Bibic says yes, that's true, but we could have provided this by you cancelling the old tender and giving us a new tender or else contracting with us.

201     MS MILTON:   And Bell wouldn't have completed the migration by December 15th and they would have had to extend on a month-to-month basis.

202     MR. BIBIC:   First of all, we were the incumbent supplier.   Ninety per cent of our network is still up and running.   That's the first point.

203     Secondly, there were never any discussions with us as to what the migration schedule could be and what we could meet.

204     THE CHAIRPERSON:   What about the whole issue of the integration?

205     Ms Milton treats this as one service, one bundle there.   She says you have to treat it as one, you have a jurisdiction under section 27 to deal with it, et cetera, and so therefore exercise.

207     You are saying no, these are separate, these are two distinct ones.   You don't dispute the fact that DVACs is regulated, but most of the rest is unregulated.

208     Right?

209     MR. BIBIC:   Actually, we fully agree that the network is completely integrated from an engineering perspective.

210     But I think the answer on the bundling point is we have to divorce or separate bundling from an engineering point of view and bundling from a regulatory mechanism contracting point of view.

211     So on the engineering side -- I will explain it.

213     Now, nothing prevents -- and if we were to offer that integrated and engineered bundle as one contract, yes, the whole piece, the whole contract is subject -- CSA, as it were, is subject to CRTC jurisdiction.   It's open to us, however, to offer, from a regulatory contracting point of view, the services under two contracts, that part for the regulated services and another contract for the forborne services and treat that separately from the Commission jurisdiction.

214     In fact, you had a little bit of a discussion during Ms Milton's opening statement about our various offers.   We had one offer on the table, which was the five-year deal.   DND, clearly that wasn't acceptable to them; we budged.   We budged after Mr. Traversy got involved.   We went to a two-year offer.   In fact, we have two variations of that.

215     We have one offer which is for one contract for the entire piece, if we reached an agreement we would come to the Commission for approval.

216     And then we made a subsequent revision to that offer, in the sense that we have one contract for the DVACs and the specialized service levels that go with the DVACs and for other services and then we were offering a separate contract for the forborne services where the Commission wouldn't be involved we would sit down and we would negotiate it.

218     The whole reason why we deregulate and forbear is because there is competition.   You just told me that from an engineering point of view these are integrated and have to be treated as one, but for contracting purposes we can do differently, we can have one part pursuant to a tariff and the other part pursuant to negotiation.

219     But in that negotiation you are the monopoly supplier.   You are the only one who can provide it because engineeringly they are integrated.

220     The reason why we forbear is to provide competition.   There can't be a competition if you are telling me from a reality from the engineering point of view these things are integrated and have to be provided by the same person.

221     MR. BIBIC:   I disagree with that.

222     I think those forborne services could be provided in piece parts.

223     I mean this really becomes a question of the time to do it.

224     THE CHAIRPERSON:   You just told me a moment ago that engineeringly they are integrated.   We are the only one who can provide them.   We can provide one part under one regime and one part under another.

225     MR. BIBIC:   Mr. Chairman, let's say there were time, what Public Works could do is buy the regulated standard version of the DVACs from Bell under general tariff --

226     THE CHAIRPERSON:   Yes.

228     And then the other supplier could provide private lines and DNA, et cetera, and the engineers can integrate them together.

229     There is a difference again between an engineer being at a site and putting -- integrating the services together and the various components that one can buy in the open competitive marketplace under the general tariff.

230     THE CHAIRPERSON:   But you are making an assumption at the beginning, assuming there was time.   There isn't.

231     If I understand it, you know, this has to be up operationally throughout because of the national security background and we don't want to have a breakdown in the service and we can't allow that.   Public Works can't allow that.   You don't want to be the one that gets fingered for a breakdown in national security and we certainly don't want to be fingered of having authorized something that allows it.

233     So in the situation that we face right now, something that you tell me from an engineering point has to be integrated, has to be supplied by you, but you want to supply it under two different regimes and under the forborne regime you are effectively the monopoly supplier because of this engineering integrity.

234     MR. BIBIC:   Mr. Chairman, we are only the monopoly supplier -- we are not the monopoly supplier.

235     We are only in this position -- I really have a hard time accepting that because a customer chose a deliberate path and one of those paths -- you know, a deliberate path at a particular point in time when it had options, that because it chose the wrong path now we are deemed to be a monopoly supplier for services which in fact is a -- for which there is competitive supply, had the customer either planned their affairs appropriately or chosen the correct path.

237     MR. BIBIC:   Well, it only attenuates the thinking to the extent that we have agreed not to shut down service, but I don't think that that decision that we made gives the CRTC jurisdiction to step in and tinker with the rates that we have offered.   It doesn't.

238     I mean, I don't think there is a crisis.   There isn't one.   Service is being provided.

239     THE CHAIRPERSON:   Ms Milton...?

240     MS MILTON:   Well, I think Mr. Bibic is talking out of both sides of his mouth.   On one hand he says:   Well, if we had stopped service you could have weighed in and told us to continue providing it; but, on the other hand, back out now.

241     I don't think you jurisdiction is half way, either you have jurisdiction over the services or you don't.

242     And I go back to my initial point.   As Mr. Bibic has admitted, there is an approved CSA for this entire bundle on Bell 's books.   Mr. Bibic said that.   Surely if you had jurisdiction to approve that tariff, you have jurisdiction to amend the terms.

244     As I read the 2007-74 decision, this would not be a qualifying bundle that wouldn't be subject to approval because there are regulated elements of that bundle for which there is no tariff, so they have to come in with a new CSA for approval.   And that's a fundamental element of this integrated package so I believe that there is complete jurisdiction of the Commission.

245     THE CHAIRPERSON:   To come in with, according to you, has to cover both regulated and unregulated services?

246     MS MILTON:   Yes, we believe it's an integrated bundle.

247     THE CHAIRPERSON:   Okay.

248     Which is the outstanding CSA that you mentioned that is on their books?

249     MS MILTON:   That's the CSA that was amended to have the month-to-month extensions.

250     I can give you the number.   It's National Services Tariff 722.11.

251     THE CHAIRPERSON:   Yes.

252     MS MILTON:   That is the tariff under which these services have been providing up to the current date.

253     THE CHAIRPERSON:   What is your position, Mr. Bibic?

255     MR. BIBIC:   Yes, that CSA is still on the books and is open to be purchased by DND.

256     In fact, that was our position with DND until such time as the application was filed and Mr. Traversy got involved.

257     THE CHAIRPERSON:   But that tariff, you purported to amend that on July 26, 2007 .

258     Are you talking about the amended one or the original one?

259     MR. BIBIC:   I'm talking about the amended one.   It's the amended one that's the approved tariff that's currently on the books.

260     THE CHAIRPERSON:   How would it apply?

"The company will note that the contract amendment reflecting the proposed situation is not being provided at this time as proposed change would not impact on any existing contractual obligation held by the company or its customers.   Rather, the proposed changes will apply to customers that subscribe to the suite of service under this arrangement in the future."   (As read)

262     Surely Public Works is not a future customer.

263     MR. BIBIC:   Right.

264     THE CHAIRPERSON:   Public Works was a customer at the time that you applied for the amendment, so therefore what you have to apply to Public Works is the original contract, not the amended one.

265     MR. BIBIC:   And the original contract expired on December 15, 2008 .   Until that time --

266     THE CHAIRPERSON:   So a customer who signs up is a new customer to you?   Somebody who renews his -- I mean --

267     MR. BIBIC:   There were no further renewals, Mr. Chairman.

269     MR. BIBIC:   Mr. Chairman, it didn't apply to existing customers under the terms of their arrangements.   Under that CSA it expired on December 15th and there were no further extension rights available under that contract.

270     THE CHAIRPERSON:   Aren't you trying to have your cake and eat it, too, here?

271     MR. BIBIC:   No, sir.   The contract as constructed was a five-year term, two one-year extensions, which the customer invoked, and then in October 2006 we negotiated 18 one-month extensions and those were invoked.   The contract -- that contract expired on December 15, 2008 .   But I mean we are now getting beyond issues of jurisdiction and we are getting to the factual issues.

272     THE CHAIRPERSON:   Well, I'm trying to find what tariffs applied.   I would have thought that's part of jurisdiction.

274     THE CHAIRPERSON:   I'm just trying to understand what this means, because when I read your letter signed by David Palmer --

275     MR. BIBIC:   What it meant is we weren't amending the terms of the arrangement with Public Works.   We had a commitment to Public Works to provide service for five years, plus two one-year extensions if they chose to accept them under the then existing terms, plus 18 one-month extensions.

276     We honoured every single one of those commitments.   Those commitments all expired on December 15, 2008 .

277     THE CHAIRPERSON:   Yes.   Okay.   I understand that.   That was a very clear statement.   I thank you for that.

278     But then, therefore, here and now we are in a situation which neither you nor Public Works wanted to find themselves, which means there has to be a forced extension effectively because of the factual situation.

280     MR. BIBIC:   Yes.   And there is a number of -- I don't know if you want to get into it now, but there is a number of factual reasons why we feel the terms of continued service delivery must be different from the terms which existed during the past 18 months.   There are a number of very valid, reasonable reasons for that.

281     THE CHAIRPERSON:   We will go into that in a second, but I just --

282     MR. BIBIC:   Yes.

283     THE CHAIRPERSON:   I'm trying to -- Ms Milton, do you have anything to say on that point?

284     MS MILTON:   No.   I just come back to the fact that there is an approved tariff here for the services and what is being sought is an amendment to this tariff if there is a jurisdictional question.

286     THE CHAIRPERSON:   My question specifically was what does apply if there is a further contract -- there clearly will be -- contractual arrangements between Public Works and are they governed by the original 722.11 or as amended in July of 2007.   He says July of 2007 because the original 722.11 applied to the existing arrangement that had been terminated and anything that Public Works wants now is in effect de facto a new contract and therefore the amended tariff applies.

287     MS MILTON:   Well, that's not quite how I understand it.   I mean this is the complete tariff.

288     THE CHAIRPERSON:   I'm sorry, Mr. Bibic, did I miss characterize your position?   If so, please --

289     MR. BIBIC:   No.   My position is that service delivery going forward is under a new arrangement.   It could be the new revised CSA or under any of the other offers we have made, but it's a new offer, a new contract, new terms and conditions.

290     THE CHAIRPERSON:   Therefore, if there is a -- for the DVACs, which have to be subject to a regulated tariff, right, it would be pursuant to the 722.11 as amended.

291     That's your position?

292     MR. BIBIC:   Or pursuant to the tariff application we filed with the Commission as a result of this proceeding.

294     MS MILTON:   My point was 722.11 has governed the relationship since 2004, since the tariff was required to file, and we are operating under different terms.

295     Currently it's not clear what we are operating under because we have a month-to-month extension, but that extension under the approved tariff terminated on December 15th.   But we continue, in effect, to operate under this approved tariff, with effectively now instead of 18 months of month-to-month extension now a 19 month extension.

296     THE CHAIRPERSON:   Yes, but the amendments of 722.11 effectively introduce a guarantee which wasn't there before, and that's what I'm trying to get at, which -- under which CSA any future extension will be governed.   Because if I agree with Mr. Bibic we say, "Well, you have to offer a guarantee."   If I say "No, it doesn't apply because of the representations made in that letter of July 26th, then it's without a guarantee."

297     MS MILTON:   And my position on that would be that goes to the just and reasonableness of the rates, it doesn't go to jurisdiction.

299     THE CHAIRPERSON:   I know, but I am talking about the jurisdiction and in order to apply a tariff I have to know which tariff and there is an original one, there is an amendment.   The amendment was accompanied by a letter from Bell that said it only applies to existing customers not new customers.

300     My question in terms of jurisdiction therefore, for the purpose of this, are you a new customer or are you an existing customer?   Because I have the letter here, you have seen it yourself, so that's why I'm harking on this point.

301     MS MILTON:   Public Works does not believe it is a new customer because the network is in place.

302     THE CHAIRPERSON:   Okay.

303     Len, do you have any questions?

304     COMMISSIONER KATZ:   I do, Mr. Chairman.   Thank you.

305     I want to start by going back to, I guess, the initial application by Public Works dated November 10, 2008 and I just want to get some clarification.

306     So if you can turn to it.

307     THE CHAIRPERSON:   What tab are you in?

309     So it's a filing dated November 10, 2008 and it's the application itself, paragraph 14.

310     I will just read out the two sentences that I'm interested in, if you all have it.

"On June 22, 2007, following the evaluation of all proposals received, PWGSC awarded a contract to TELUS.   While the proposals submitted by all the bidders were compliant, the proposal submitted by TELUS offered the best value to the Government of Canada."   (As read)

311     I thought I heard Mr. Bibic say that there were only two bidders and yet the word here says "submitted by all bidders".

312     Can you clarify for us how many "all" is or was?

313     MS WYBER:   There were only two bidders; there were three bid packages.

314     Okay.   So Bell submitted two separate bids, TELUS submitted a single bid, so we had three bids, but there were only two bidders.

316     I guess I should ask Mr. Bibic, when you submitted two bids, were there two different applicants that were being submitted for?

317     MR. SAVOIE:   It was two different pricing arrangements that we were proposing to the Government of Canada.

318     COMMISSIONER KATZ:   All being offered --

319     MR. SAVOIE:   Same solution, same services, meeting the requirements of National Defence, but different pricing arrangements.

320     COMMISSIONER KATZ:   All being offered by Bell Canada ?

321     MR. SAVOIE:   All being offered by Bell Canada .

322     THE CHAIRPERSON:   So you have two bidders.

323     MR. SAVOIE:   Yes.

324     COMMISSIONER KATZ:   Further to that question, Ms Milton, when the decision was made that TELUS offered the best value, how was value determined?   Was it based on price?   Was based on deliverables?

326     MS WYBER:   It was based on a combination of price and technical merit.   And so we evaluated -- the price was weighted against the technical merit scores.   Technical merit scores for both participants were relatively close and price ended up being the deciding factor.

327     COMMISSIONER KATZ:   Was there consideration taken of the fact that Bell was the incumbent and therefore the likelihood of performing would have been perhaps higher, or were they considered equal applicants in terms of ability to --

328     MS WYBER:   They were considered equal applicants.

329     COMMISSIONER KATZ:   So there was no consideration taken for the risk associated --

330     MS WYBER:   No, there wasn't.

331     COMMISSIONER KATZ:  -- with a new entrant command?

332     MS WYBER:   No.

333     COMMISSIONER KATZ:   Okay.

335     So there was an opportunity for a bonus to be paid for early completion of migration and then the RFP also spelled out implementation credits due to the government for late implementation.

336     So late implementation service credits, but there was also a bonus available had they completed implementation early.

337     COMMISSIONER KATZ:   Okay.   But the fact that this was a complicated contract, a very detailed, complicated contract linking national security networks across Canada , you did not take into consideration that a transition had a higher risk presumably than retaining the existing provider?

338     MS WYBER:   We believed that both bidders are complex, you know, intelligent bidders in this area and therefore we had, as an initial requirement to be able to bid you had to be a Canadian telecom provider, you had to have the national security clearances and, in addition to that, they were required to provide references that they had done similar migrations and implementations.

339     COMMISSIONER KATZ:   Thank you.

341     Are there situations today where Bell Canada, to your knowledge, has any agreements with large providers that have got a separation between the forborne services in one contract and the non-forborne services in another contract that have got an integrated network?

342     MR. BIBIC:   Yes.   There are situations where we provide solutions to large enterprise customers under two separate contracts, a regulated contract and a deregulated -- or contracts with forborne services.

343     COMMISSIONER KATZ:   Do you also have contracts where it's all in one?

344     MR. BIBIC:   Yes.

345     COMMISSIONER KATZ:   How do you distinguish or differentiate them?   How do you make the decision as to whether it's going to be one contract bundled together or separate individual contracts?

346     MR. BIBIC:   It's a matter of negotiation and contracting arrangements with the customer.

348     MR. BIBIC:   Well, it depends on -- there are regulatory considerations and we take them into account every single time, being regulatory compliance.   I think there is a rule requires that if the purchases of the services are dependent on one another then it becomes a completely regulated bundle from a contracting point of view.   So we respect those rules, but we do make the arrangements this way.

349     THE CHAIRPERSON:   Why wouldn't that apply here?   The services are dependent on each other.

350     Didn't you just tell me at great length how they are integrated and they depend on each other?

351     MR. BIBIC:   Well, it's a question of what is being purchased.

353     The price they would be receiving for one of those under the regulated contract wouldn't be dependent on the price -- or acquiring any volumes on the forborne side and therefore there is no regulatory non-compliance.

354     COMMISSIONER KATZ:   When you negotiate these, presumably -- and let's say it's a bank or something, is it the bank that asks that these contracts be bifurcated or is it Bell who decides that they should bifurcate these?

355     MR. BIBIC:   It's typically Bell .   I think that -- I mean that type of activity has significantly been curtailed as a result of a lot of the deregulation that has transpired in the last couple of years, policy directive decisions, including the Type 2 CSA bundling rule.   So now that we have more flexibility we don't have to do this is much, but as a standard contracting practice beforehand.

356     But it's Bell that would do it and if the customer is fine with it then we proceed.

358     MR. BIBIC:   No, doing it as much -- what I say that we do less of is having two separate contracts, one for regulated and one for deregulated.   And the reason we do that less is now we have more pricing -- well, more contracting flexibility as a result of the Type 2 CSA decision from 2007 I believe, where we are forborne for CSA contracts that include regulated component so long as the regulated components that we actually are providing are pursuant to the standard tariff terms.

359     COMMISSIONER KATZ:   And when you do file a bundled tariff or CSA, there is an obligation to file an imputation test as well and can you explain what the purpose of the imputation test is?

360     MR. BIBIC:   The purpose of the -- well, this strikes to the heart of just and reasonable pricing, but in my view just and reasonable pricing, when I said there was a range, the Commission wants to make sure when services are regulated or when a bundled is regulated that the prices being offered are above cost and that there is no gouging on the high end.

361     So that determines your range and the imputation test is to make sure that the services are being provided above cost, phase 2 costing.

362     THE CHAIRPERSON:   So that is supposed to prevent gouging and prevent cross-subsidization?

363     MR. BIBIC:   The just and reasonable?

364     Well, you have a range.   The cost is one bookend and --

366     MR. BIBIC:   Right.

367     THE CHAIRPERSON:   Thank you.

368     MR. BIBIC:   Or I suppose, on the low end, it could also be fear of predatory pricing.

369     COMMISSIONER KATZ:   I don't know where this question fits in so I'm going to ask it now and if it's the phase 2 part of it we will deal with it.   And it's to Ms Milton or to PWGSC.

370     Did Bell ever impede the activities of PWGSC in allowing for the cut-over of services during the term of this transition?

371     MS WYBER:   I will ask Mr. Sorfleet to answer that, as he is with DND.

372     MR. SORFLEET:   No, Bell did not take any action that would have been intended or had any significant effect in impeding the migration from TSRP to GDMS.

373     COMMISSIONER KATZ:   Okay.

374     MR. SORFLEET:   That is to say from the old contract to the new.

375     COMMISSIONER KATZ:   Okay.

376     Those are my questions, Mr. Chairman.

377     THE CHAIRPERSON:   Rita...?   Okay.

379     You decide who you want from each of your teams to be in the confidential section.   Anybody who does not belong to CRTC or either of your teams we would ask to leave the room.

380     Thank you.

--- Upon recessing at 1013 / Suspension à 1013

--- Upon resuming at 1402 / Reprise à 1402

381     THE CHAIRPERSON:   Okay.   We are continuing the public part of this proceeding, having heard evidence in confidential on the costing.

382     Public Works, I think you go first with your final closing remarks.

CLOSING REMARKS ON BEHALF OF PWGSC /

REMARQUES DE FERMETURE AU NOM DE TPSGC

383     MS MILTON:   Thank you, Mr. Chairman.

384     My reply comments are broken into two parts to reflect the structure of the hearing today.   In the first part I will talk about jurisdiction and in the second part I will talk about terms.

386     First, it's my understanding that Bell has agreed to provide the services in issue.   So while I disagree that the Commission has no jurisdiction to mandate the provision of the services, I think in any event that that issue is off the table.

387     Second, the Commission, in my view, unquestionably has jurisdiction to interpret and to amend the existing CSA.   By that I am referring to Bell National Service Tariff 722.11.

388     Third, the Commission unquestionably has jurisdiction to regulate the customized DVAC services.

389     Fourth, and finally, this is an integrated package of services that cannot realistically be unbundled at a very minimum over the term over which they are required.

390     So with those brief points on jurisdiction I'm going to turn now to terms.   I'm going to start with the issue of migration because there was considerable discussion of migration this morning.

391     Bell says it continues to operate the bulk of its network.   That is correct, because out orders have not been issued.

392     But I want to make it clear that the rates that are being paid by Public Works reflect the fact that very little of Bell 's network has been decommissioned to date.

394     The second point on migration is that a huge proportion of the services have in fact been migrated to TELUS.   The number has been provided in confidence.   This traffic is being carried by TELUS, not by Bell .   What remains is the acceptance and disconnect process.

395     In my view, the large number of migrated services supports the disconnect schedule that Public Works filed in response to CRTC interrogatory of January 16th No. 1 and that the disconnection of the other services will be complete by December 2009.

396     Turning now to prices.

398     Public Works is not a new customer and the TSRP network is in place, it does not need to be rebuilt from scratch.   While some equipment such as backup power may need to be replaced, much of the equipment can continue to be used, and equipment like UPS is fungible.

399     I also want to underscore that going forward the network will be supporting significantly reduced traffic volumes.

400     There has been a suggestion in some of the comments this morning that because of the uncertainty of migration prices should be higher.

401     As I have already said, if the migration takes longer than anticipated, Bell will reap the benefits in terms of higher monthly service fees under the current CSA monthly rate.   So it will be compensated if the migration takes longer than expected.   There was also discussion of the effect of a spike in disconnect and the possible impact of that on price.

402     Now, the month-to-month rate increase that Bell sought and obtained approval for presumably included the cost to process all of the disconnects.

404     I do not believe that the costs of processing the spike in the balance of disconnects over the next three months comes anywhere close to a minimum revenue guarantee equal to the rate Public Works is currently paying for a fixed term of two years.

405     Finally, I want to come back to the DVACs issue.

406     It was Public Works' understanding that the DVACs services could be broken out relatively easily.   I want to underscore that if the DVACs are not broken out there will be included in the existing CSA monthly rate a substantial premium over what a DVACs-only service would cost.

407     We see no basis for a further minimum revenue guarantee that assumes provision of all the current services for two years.

408     Thank you.

409     Those are my comments.

410     THE CHAIRPERSON:   Thank you very much.

411     Mr. Bibic...?

CLOSING REMARKS ON BEHALF OF BELL CANADA /

REMARQUES DE FERMETURE AU NOM DE BELL CANADA

412     MR. BIBIC:   Thank you, Mr. Chairman.

414     We know that the migration and disconnection process continues at a very slow pace.   The forecast assumed a March-April completion.

415     Well, in the opening remarks of DND -- and I won't say the number -- states that a percentage of the migration is currently done.

416     Our own estimates, based on information provided to us by DND, show it's 15 per cent less than the number.

417     Ms Wyber indicated that they will be done by April-March 100 per cent.   We say that based on their own forecasts that we received two days ago it's less than that.   I don't want to say the number, but I did mention it during the questioning part of this hearing.

418     In any event, whether or not it's that number or 15 per cent less, et cetera, the forecasts are aggressive.   It assumes 100 per cent performance on the forecast and the track record to date falls considerably short of that.

420     The heavy lifting has yet to come end this migration has been back-end loaded from a migration perspective and from a disconnection perspective.   We did not expect back-end loading back in 2007 and nor did DND, as Mr. Sorfleet ultimately indicated when I questioned him.

421     Now, once the migration is done Ms Wyber said they need three months to issue disconnection orders.   That three-month assessment is also aggressive.   It assumes full staff, that everything goes well.

422     But there isn't even a disconnection schedule.

423     Ms Milton mentioned that there is some kind of disconnection schedule provided in response to the interrogatory from January 21st, 1A and 1B.   There really isn't in there at all a disconnection schedule.   We just took a look at it during her closing remarks.

424     So where does that leave us?

425     Well, the migration will take longer than forecast, so will the issuance of disconnection orders by Bell .   So ultimately Bell will be saddled with the risk and we all will be dealing with this in 2010.

427     Bell moved from its first offer, which is the five-year CSA to a second offer and the anticipated savings to DND as a result of that move is in the order of $16 million to $20 million.   Again I don't want to say the number.

428     Now, what has DND done?   They have moved as well, but they have gone backwards.   They have cut their offer by half.

429     The closing remarks of Ms Milton talked about, you know, pricing as being, you know, current -- the pricing comments that she made in her opening remarks were based on the existing arrangement, but that's not even DND's offer today.   DND's offer is half of that, as you explored, Mr. Chairman, in the in camera session of this hearing.

430     So what I would like to do now for the remainder of our remarks is break down the offers into the issues in dispute, which is term and price.

432     Now, in the DVACs, in response to questions from Vice-Chairman Katz, Ms Wyber indicated that it was always contemplated from the very beginning in 2007 that TELUS would provision IP DVACs and they knew in March 2007 that there would be challenges.   I'm not sure if it was March 2007 or 2008 -- March 2008 that there would be challenges with those IP DVACs, yet we were only approached to continue to provision our customized DVACs in October of 2008.

433     That being said, in any event, for the DVACs, as we have established, DND wants two years and we have offered two years.   So as far as I'm concerned I think that's settled.   So the issue remains the pricing.

434     As we explored, DND's proposed price, whether or not it's the price from a month ago or two weeks ago or the price offered yesterday in the interrog is below our phase 2 costs.

435     Now I would like to discuss the other services.

437     The back-end loading will have a number of important cost implications for us for which we should be compensated.   An incredible number of disconnection orders will have to be processed each month of 2009 for the Bell network to be completely disconnected by mid-2009, yet under DND's request it would stop paying for service a mere 30 days after issuing a disconnection order.

438     It's not a risk Bell is prepared to take nor should we be forced to take that risk.   When we accepted the month-to-month arrangement back in 2006 to extend from 2007 until December 15, 2008 , this is not a risk that we had anticipated and neither did DND.

439     Recall as well that Bell has cost of operation until the last service at a DND site is shut down.

440     Ms Milton, during the in camera portion during the questioning, said that:   Well, we at Bell always took that risk in the sense that SDA's -- which are in essence sites -- can be phased out when they cease being used.   But it was never contemplated that DVACs would be carved out of that arrangement and that's a key point.

442     For these reasons, Commissioners, Bell 's offer to keep providing the other services for two years at basically the same price DND has willingly paid for the last 19 months is just and reasonable.

443     Now, DND has mentioned a couple of times during this hearing that we increased the price by 58 per cent when we went to a month-to-month arrangement.   That's true.   But that number, that increase, was willingly accepted by DND at the time.

444     All we want is for DND to make a commitment to us for the commitment we have been asked to make to them.   That commitment would allow for an orderly migration, an orderly migration for DND and TELUS as they would be given the proper amount of time to migrate circuits, test them and accept them, while having the benefit of network redundancy.

446     And it would also allow for an orderly migration for Bell , as it would allow for more reasonable and staged flow disconnection orders rather than a potential avalanche.   And it will not saddle Bell with the additional cost consequences of keeping the DVACs in operation for two years or three.

447     A two-year contract will also provide a reasonable amount of time to recover the required incremental capital investments in the network and it will avoid having to come back at the end of this year.

448     So where does that leave us?

449     Well, DND is protected.

450     First the government obtained a contractual indemnity from TELUS and TELUS is not disputing that liability.

451     Second, from a network perspective Bell has indicated that it's prepared to provide service on just and reasonable terms even though we are no longer the supplier of choice.

453     First, they prepared a very thorough RFP anticipating the challenges and risks to protect the government's interest.   They also negotiated an 18 month arrangement with Bell to provide network redundancy during the migration period.   They then awarded the RFP to the lowest cost compliant better.

454     Then, when things went wrong with the migration, they could have cancelled the TELUS contract as per contract terms and conditions.   Instead they chose a different path.   That path saw them leverage the market forces then in play, the possibility of contract cancellation and the use of alternative suppliers such as Bell to secure better terms from TELUS.   In fact, DND or PWGSC asked Bell to keep our own offer alive until September 2008.   That's 15 months after TELUS was awarded the contract.

455     This decision or these decisions from PWGSC were made with the full knowledge of the tariffs available from Bell and Bell 's position.

456     Several months later, in October 2008, recognizing that significant migration difficulties still remained and that TELUS failed yet again to meet its subsequent commitments, PWGSC again could have chosen to cancel the contract.   This it didn't do and only engaged us with less than two months left on our arrangement.   In fact, they could cancel today.

458     In the process, PWGSC seeks to shift the burden from itself and TELUS to Bell .   This isn't appropriate, especially given our reasonable offers and TELUS' indemnity.   This would signal to customers that if they do not like their negotiated outcomes they can simply apply to the Commission.

459     In short, Bell should not shoulder the responsibility for TELUS' migration and performance failures and PWGSC's contracting strategies.

460     The application must be dismissed.

461     Commissioners, this really is an important matter to Bell and so I want to thank the Commissioners and the staff in particular for agreeing to hear this matter on an expedited basis.

462     Thank you.

463     THE CHAIRPERSON:   Thank you very much.

464     It seems to me this is a pretty straightforward issue.   We will take about 15 minutes to consider it and then we will be back.

465     Thank you.

--- Upon recessing at 1420 / Suspension à 1420

466     THE CHAIRPERSON:   First of all, I would like to thank both sides.   I think it was a very good hearing, very civil and very to the point.   All the questions that we had, all the facts that we need to make a decision were put forward and I appreciate the way this was conducted.

467     Now, obviously this is a very unique situation.   What is hanging over the whole thing is the national security issue, the fact that both sides want to make sure that the Forces have a communication system that works and they are not put in jeopardy.

468     I appreciate the effort of both sides to work towards that, and Bell of continuing service even though there was no contract.

469     You both made some very good points.

471     Public Works, on the other hand, you quite rightly pointed out that the numbers as they were offered by Bell is the same way as if you had picked the CSA with a five-year guarantee and the numbers are of minuscule differences.   So in effect you are being treated as if you are a new customer while you are an existing not a new customer.

472     Secondly, you also raise the point quite clearly that yes, Bell will have to do 24 months of additional work, but it's hard to accept that the cost for those 24 months is the same in month one as in month 24.   There has to be a decline.   The grade of that decline may be an argument, but to suggest that the costs are the same at both the beginning and the end of the 24 months is hard to accept.

474     Before we broke for lunch, at the end of the confidential hearing I explained to you quite clearly and I hope plainly what I consider the two bookends between the two.   Since the figures are confidential I can't mention them, but I think clearly the number between them is considerable, but it strikes all three of us that this is an eminently settleable case having had the benefit of today's hearing, having all the facts on both sides.

475     I think you both elicited very, very pertinent facts on each side, and having us set you the bookends you should try to settle it.

476     If you do not settle it one of you is going to lose everything because the effect of our judgment will be that it will be one or the other bookend.   You know what they are, I don't have to mention the figures publicly because it would be betraying confidential, but you know them full well down to the dollar.

477     If we render a decision the effects will be that one of the bookends will be guiding for both of you and one of them will basically lose a lot and one of them will gain everything.

478     So what I suggest, we will adjourn until Tuesday at 4 o'clock in this room at which time I expect you to tell me you have reached a settlement.   If not, I will render a judgment at that point in time.

479     Thank you.

--- Whereupon the hearing adjourned at 1440, to resume

    on Tuesday, January 27, 2009 at 1600 /   L'audience

    est ajournée à 1440, pour reprendre le mardi

                REPORTERS / STÉNOGRAPHES

____________________           ____________________

Johanne Morin                    Jean Desaulniers

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Sue Villeneuve

Date de modification :

2009-01-22