Transcription, Audience du 21 février 2020
Volume : 4
Endroit : Gatineau (Québec)
Date : 21 février 2020
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Les participants et l'endroit
Tenue à :
Centre des conférences
140 Promenade du Portage
- Président: Ian Scott
- Vice-présidente, Télécommunications: Christianne Laizner
- Conseillers(ères): Christopher MacDonald, Alicia Barin, Joanne T. Levy
- Conseillers Juridiques: Adam Balkovec, Eric Bowles
- Secrétaire: Jade Roy
- Gérants(es) de l’audience: Jeremy Lendvay, Marianne Blais
--- Upon resuming on Friday, February 21, 2020 at 8:59 a.m./ L’audience reprend le Vendredi 21 Février, 2020 à 8h59
5392 THE CHAIRPERSON: Good morning. Madame le Secrétaire?
5393 THE SECRETARY: Merci. We will now hear the presentation of Bragg Communications Inc. carrying on business as Eastlink. Please introduce yourself and your colleagues, and you have 20 minutes for your presentation.
5394 MS. MacDONALD: Thank you. Good morning Chairman, Vice-Chairman, Commissioners and Commission staff. We appreciate the opportunity to be here this morning. I’m Natalie MacDonald, Vice-President Regulatory at Eastlink. And with me today is Lee Bragg, Executive Vice Chair; and Marielle Wilson, Manager of Regulatory.
5395 MR. BRAGG: Thank you.
5396 Eastlink has appeared before the Commission many times over the years to communicate our views on important matters affecting our business, but the issues under consideration in this proceeding have the potential to significantly alter our investment plans going forward. It is critical that the Commission maintain a wireless framework that focuses on policies of advancing sustainable facilities-based competition. Policies on which Eastlink has relied and based our investment decisions, and which are necessary for us to continue to do so into the future.
5397 To this end, we urge that the Commission not regulate an MVNO access regime. There no evidence of a competitive need to do so, and there is no evidence that mandated MVNO access will bring the benefits sought. To the contrary, it would have a significant negative impact on facilities-based competitors, and will impede the future of Canada’s wireless industry. Instead, the Commission should strengthen its policies to reduce barriers for facilities-based providers so we can continue to grow our business.
5398 Eastlink is a family-owned company who started with one small cable system in Amherst, Nova Scotia in 1970. Through a series of acquisitions and investments we have been able to grow our business to provide Canadians with TV, high speed internet, wireline phone and home security services over our state-of-the-art networks to communities across seven provinces.
5399 Expanding into other service areas was a major decision for us, as we had to overbuild our existing cable network to provide internet and telephone services. Eastlink was the first cable company in Canada to compete against the incumbent Telcos in the wireline phone business. And although we were a recognized brand in the market, we faced a major uphill battle to convince Telco customers to move their lifeline basic phone service to a competitor who used a different technology.
5400 The Commission’s policies and support recognized that investments in our network still required access to essential inputs controlled by the incumbents, such as access to support structures and interconnection. With that support, we were willing to take on the additional challenges of trying to convince customers to move their phone line from the only network they had known their entire life. As a result, consumers have benefitted from choice in quality of networks, better prices and services, and we have seen the incumbents counter our investments with further investments of their own.
5401 In 2007, based on those same pro-investment policies, Eastlink decided to once again expand our services and took on the risk of building an entirely separate wireless network. Eastlink made the choice to compete with one of the best networks, so we built the first 100 percent LTE network in Canada. The wireless incumbents defended their position in the market with vigour, including making it very difficult to build our network in a timely and cost-effective manner. Many of the barriers we faced –- such as access to towers, and roaming negotiations -- have been described on the record of this proceeding.
5402 To date we have invested hundreds of millions building our wireless business which is now available to Canadians in six provinces. We have consistently invested 100 percent of our profits back into the business, based on the belief that we will continue to do so as long as we can provide our customers with the best networks and the best customer experience, in a cost-effective manner, while earning a reasonable return on our investments.
5403 MS. WILSON: We could not have made these investments and taken on the substantial risk without government and CRTC support through policies that encouraged facilities-based competition. We don’t come here with exaggerated positions, nor do we come quoting expert reports or examples of international experience that may help us make a point.
5404 Instead, we come here to tell you why we have been successful thus far, to describe the importance of the policies that brought us here, and the need for the Commission to continue to stand by those policies, so Eastlink and other facilities-based providers can continue building our networks, growing our subscriber base and providing competition to the national incumbents.
5405 Unlike the national incumbents who have spent the last 30 years building their wireless business, Eastlink has only been offering wireless services since 2013. To get us where we are today we acquired spectrum in five auctions, we navigated the barriers of obtaining access to infrastructure, we invested in 30 retail stores; we invested in new back office systems, we hired and trained staff, and we endured lengthy negotiations with device vendors. And although we had an existing wireline business, we started this business with a customer base of zero.
5406 We faced the same pressures we did when entering the telephone business of convincing customers we have a high-quality network, and we did so in the face of aggressive campaigns by the national incumbents. To build that base and to do so properly, means we must offer competitive services while also being mindful of the need to receive a reasonable return on the massive investments made. This takes time.
5407 The evidence on the record does not support the need to mandate any MVNO access. The range of services and offers available to consumers illustrates that regional operators are fulfilling the promise they have made to bring sustainable competition to Canadians. However, even if the Commission is not immediately convinced of this, the solution is not to mandate that MNOs provide access to their networks to MVNOs who have no desire or intention to invest in spectrum and facilities.
5408 To do so would be simply handing over the potential subscriber base that we need to build a viable business to resellers, who have made no such investments. This will compromise not only the sustainability of what we have built to date, but it will most certainly stop us from making further investments. Indeed, we have already stopped investment plans relating to broadband as a result of a similar wholesale access model.
5409 Instead, the Commission’s primary focus in this proceeding should be on the barriers facilities-based competitors face. Barriers that not only impede or delay our ability to build, improve capacity or upgrade our networks, but also increase our costs. The most critical issues that we believe need to be addressed are the high roaming rates which impede our ability to compete in an increasingly data driven market, and timely access to infrastructure on reasonable terms.
5410 MS. MacDONALD: There is a major difference between reducing the barriers in accessing critical inputs like towers and roaming rates, for facilities-based operators like Eastlink, who have invested hundreds of millions to provide competitive services to Canadians; and handing over access to already-built networks to MVNOs who have neither an interest nor a need to invest in facilities themselves.
5411 When we invest in spectrum and build facilities, we need to ensure that we are efficient operators who build excellent, secure networks, while also providing consistent high quality service at competitive rates and terms, so that customers not only choose our service, but they stay with us. The cost to acquire customers in this business is substantial. It is out of necessity that we operate a well-run business as it is essential that we receive returns on our investment.
5412 Mandating any regime where competitors can enter the market with little to no investment, means they are entering with minimal financial risk. This puts them not only at a serious and unjustifiable competitive advantage to us, but it also means their behaviour in the market has fewer financial repercussions.
5413 Competitors, who operate without the same need to run efficient businesses and to carefully ensure they can receive adequate returns on massive investments, can behave in a very undisciplined way, whether in terms of pricing and services, or in terms of lack of customer care, managing processes properly or concern about following the rules.
5414 Eastlink has recently experienced a large influx of non facilities-based internet resellers using our network, many of whom know very little about how to run a basic business, let alone a complicated business like the provision of communications services. Many of these entities are unaware of the basic operational requirements, they care little about privacy laws or security of networks, and their primary focus is seeking expanded support and assistance from us, at the lowest possible cost.
5415 This is not a situation where a properly-costed model will address these concerns. In Eastlink's experience costing exercises for such a broad range of service inputs cannot be achieved with any level of accuracy and the risk to the industry of getting it wrong is significant.
5416 Eastlink maintains our views as stated in our submissions that any decision to mandate MVNO access will be a decision that lasts in perpetuity. MVNO operators' key tool to seek outcomes to improve their ability to compete will be to use the regulatory process to seek ongoing expansion to the services they are entitled and to continually seek reductions in rates.
5417 Eastlink urges the Commission to instead look at the existing barriers faced by those who are fulfilling the promise of bringing true, sustainable, wireless competition to Canadians. Help us by improving our access to important support structures, addressing disputes in a timely manner, and reviewing the wholesale roaming rates.
5418 We will be pleased to answer any questions you have. Thank you.
5419 THE CHAIRPERSON: Thank you. Thank you very much for your opening remarks.
5420 Commissioner MacDonald?
5421 COMMISSIONER MacDONALD: Good morning, and thank you for, well, both for being here and for your contribution to the process so far.
5422 You started off your comments this morning around investment, and I think that's where I'd like to start too. And I'm wondering, you've raised concerns that, you know, if MVNOs are mandated it could have a significant impact on your operation and how much you can invest in your networks.
5423 I'm just wondering, at a high-level, could you try to give me an idea of how significantly your medium and long-term investments plans are to your current level of profitability?
5424 MR. BRAGG: I can -- I mean, I can do better than speculate, I can tell you the capital we've cut back and what we've done this year.
5425 Our initial capital budget for this coming year, year end August 31st, was about $220 million. We've cut $60 million out of that; we'd laid off people. And part of it has been a challenge associated with the costing associated with TPIA where we have to operate below cost, and we lose $30 a month per customer. So we've cut back in all our rural expansion from a wireline standpoint.
5426 And also, we're -- our concerns associated with an MVNO process and not getting the costing right, we decided to cut back 100 percent of all our cellular expansion. We've put on hold all of our cellular plans, all of our growth because we could not take the risk of spending that money and building out that infrastructure just to have MVNO rates done incorrectly, as we've seen with TPIA, and be stuck with, you know, having people access our customers and not getting a reasonable return. So we have already cut back all the capital and have already put on hold any expansion in all parts of the business.
5427 We are -- I say we're a little bit like the canary in the coal mine. We are predominantly rural, so we operate in the highest cost serving areas for wireline and cellular. We're also -- I would also argue it's good that we're a private company, but it's a little bit tougher for us when we see banks be critical of the business model because of these regulatory rules.
5428 The publicly traded companies have a bit of a buffer, where we are 100 percent bank financed, and when the banks say you have a broken business model now because of the regulatory structure and the risk associated with it, you know, they don't lend me money and I can't build networks anyway. So we have to anticipate. I still have to pay the banks back the money I borrowed to build these networks, so we have been forced to suspend all growth capital.
5429 COMMISSIONER MacDONALD: And just to go a little bit deeper into that because it ties into my next question around one line of the business subsidizing another line of the business.
5430 Did you halt your planned wireless investments because of previous rate decisions the Commission has made or out of concern as to what the end decision coming out of this process might be?
5431 MR. BRAGG: I'll answer, a little bit both. Because we see the previous decision as a bit of a preview as to what may potentially be the outcome of this. So yes, we've stopped our wireless rollout in a sense because of TPIA but it's because of if the same principles in TPIA get applied to cellular we can't have -- we can't strand that capital.
5432 So I'm not sure if I'm answering your question exactly, but you know, you know, one led us to believe -- one - with the greatest respect - one bad decision led us to believe maybe there'll be another.
5433 COMMISSIONER MacDONALD: And with respect to how closely those two levels of investment are tied, both wireless investment and wireline investment, I assume that also has an impact on facilities that you might have otherwise deployed that would be shared between the two services. I'm thinking perhaps a fibre build that might be delivering broadband to customers in a region but might also be fibering up a tower that you intend to build.
5434 MR. BRAGG: Yeah, that's right.
5435 COMMISSIONER MacDONALD: Okay. We -- I know you're in a very different business situation and ownership structure than Bell. But they have made some comments on the record with respect to the weighted average cost of capital, and that if driven by a lower quality evaluation that could step from a decision from this hearing that their cost of borrowing and would increase.
5436 So I'm just wondering, could I get your comments on whether that's an accurate view on their part?
5437 MR. BRAGG: Yeah. I think it's 100 percent accurate.
5438 COMMISSIONER MacDONALD: And just to follow that to the next level. If I'm an investor and knowing that potential changes may be coming down the pipe, that would change the risk profile of the investment and would increase the cost to borrow. Do you think there's any scenario whereby those increased borrowing costs will ultimately be borne by the customers?
5439 MR. BRAGG: I do. I mean, all costs eventually are borne by the customers. So anything that drives additional costs, it will either increase cost to the customer or decrease the available capital they have to deploy to build out networks. If -- you know, if there's anything that effects their capacity to borrow or raise funds, you get -- you know, one of the other is going to happen.
5440 COMMISSIONER MacDONALD: Okay. Thank you. In your intervention, you indicated that competition is gaining momentum and that's tied to the impact of regional such as yourselves.
5441 Do you still view prices as being high in Canada because we have study after study, or comment after comment in this proceeding from individual Canadians that they do still feel that we pay too much for the services that are available to us?
5442 MR. BRAGG: Do I think they're high? You know, that's a -- you know, I know what it costs to provide the service. You know, Canada's not a very densely populated country.
5443 I'll give you an example. When we were looking to build out our networks, you know, I travelled around. We were looking for equipment providers, what was the right equipment. So, you know, I did my due diligence. I went to other countries, talked about people who were spending money on equipment, who would they provide, and I talked to a provider who was doing an upgrade of the entire network in France, 850 sites, 70 million people. I said, "Well, that's interesting." Eight hundred and fifty (850) sites is about what I have to build to cover the Maritimes for 4-and-a-half million people.
5444 So, this is a capital recovery business model that you have to deploy the capital. The actual operating costs are not that tremendous. There's no cost of goods sold. You know, it's really the capital you deploy, you have to recover that from your customers.
5445 So, prices in Canada will always be higher than they are in Europe or the U.S. Like, it's really ridiculous to use those as comparatives, because it's the amount of capital per customer we have to provide to cover that service. We need to recover that capital from fewer customers. That's just math. It's not terribly complicated.
5446 So, are they -- if you ask customers -- I mean, I would suggest your surveys are not statistically valid, that if I ask customers if they think they pay too much for gas, for cars, for electricity, for food, everybody says yes. People are always going to say -- I think if we continue down this path, we've seen price reductions as a result of, you know, competitive pressure in the marketplace, and people will always say they cost too much.
5447 Like, cell phones are cheaper now per megabyte, you know, data plans, than they've ever been. When I -- you know, my cell phone cost 10 years ago was higher than it is now. Voice was 50 cents a minute. Like, it's -- prices have come down dramatically, but I think if you just -- if you ask anybody they're going to say they pay too much, but -- and that's -- so, that's not -- I don't think that's a real way to look at it.
5448 I think the proper way to look at is are there excess rents in this business? Are people reaping, you know, disproportionate profits? I know we are not. I know I may have the advantage -- it's not speculation or opinion because I'm the guy who's spending the money and running the network. I know what our costs are, and I know, you know, the profitability of this business at this stage. I'm able to read the financial statements of Bell, Rogers and TELUS. I see their return on assets. I understand their business model. I know, because I can do the math, that there are not excess rents in this business. So, it's really -- you cannot escape the actual cost to provide the service. I mean, the -- that's what drives the pricing in the marketplace.
5449 COMMISSIONER MacDONALD: Thank you for that, and I think it's a fair point.
5450 One of the challenges is people only complain when they're not happy, and people may be more apt -- individuals may be more apt to intervene in a proceeding like this if they do feel the rates are too high. I don't read a lot of interventions where people say, yeah, everything's great, keep it up. But you have day-to-day contact with your customers. There have been -- we know prices factually are decreasing. You've had an impact in the markets that you serve. Can you give us more of a flavour of your day-to-day interactions with your clients with respect to offering more for less, or offering more for the same price, that may not be captured in some of the interventions or studies on the file -- on the record?
5451 MR. BRAGG: I mean, that's a -- you know, it's an interesting question. I don't really have any factual information, other than anecdotally, on just people -- you know, I mean, we know customer behaviour. They tend to consume more and buy more.
5452 You know, we're subject to a competitive marketplace, so, you know, our pricing is reflective to what we can achieve versus our competitors. So, like, the customers don't -- they don't just email me, call me, and write me letters to say the price is too high. They just go to my competitor if they think the price is too high.
5453 So, it's -- I mean, I understand what you're trying to ask and what you want to know, but we don't -- I don't -- you know, they don't communicate that way. They just leave if they think the price is too high and go to somebody else. You know, we continue to grow our business and grow the number of customers we have, so we think that obviously our pricing must be okay.
5454 And I know many have argued that, "Well, the incumbents set their prices and they have market dominance." And I think it's somewhat of a ridiculous supposition to say, you know, the three incumbents have market dominance when you add them together. That's like trying to suggest that Ford, Chev and Chrysler have market dominance in the pickup truck business, because if I add them all together, they dominate the market. But those guys, they all compete with each other. So, there's no -- you can't add them up and say that's market dominance. That doesn't make any sense to do that.
5455 So, we think it's a -- we see it. It's a vibrant marketplace. And, you know, I've heard other people argue that, you know, pricing, it's all the same. Well, when -- I don't care if it's Rogers, TELUS, Bell, ourselves in the marketplace, if we come up with a plan that works, and we start to get customers, you know, the other guys are going to match it. Or if Rogers comes up with a plan that works and start to get customers, we're going to match that plan, or do similar things.
5456 Like, so you end up with -- you know, I think somebody talked about it, it was -- you know, a bit of a vanilla marketplace, everything was the same. Well, that's because we're all capable of doing the same things and offering similar products. There's not that much variety to a data plan, a voice plan and a text plan. Yes, you can play with pricing, but when something works in the marketplace, we all do it because we all want to try to satisfy the customer.
5457 MS. MacDONALD: If I could add to that as well. So, just going back to the question of our day-to-day experience with the customer and our interactions, and what I will add is a lot of -- you know, I agree with Lee here, but we have done a number of things, as a new entrant into this market, and some interesting things. In fact, we were the first company to separate the device cost from the plan costs, and we didn't just separate it. We provided a tab program that allowed customers to select whatever phone they wanted. It wasn't tied to a specific high cost plan, and they could choose the phone, and the plan, and as soon as that tab was paid down, their bill went down. And that was -- I would say that was a first, I think, in Canada when we did that.
5458 And, you know, separating those two, we have seen other companies just, you know, beginning to do that over the last couple of years. And I think that highlights something that was a unique approach that we took to the market.
5459 We have worry-free data. We also have worry-free roaming, so that customers don't get dinged with a shocking or surprising bill. They make a choice once they hit those minutes.
5460 We interact with our customers on a daily basis. We sit down every single week, and I'm sure the other companies that are facilities-based providers here do as well, but we sit down every week. And when we have an offer in the market, or a promotion, or we experience a customer loss in a certain area, or, you know, we have a conversation. What's happening here? Is this good? Is this bad? Is this the right offer? Is it -- you know, are we acquiring customers? If we lose customers, we're discussing why that happened. Could it be this? Could it be that? And we try to figure it out.
5461 And, I mean, that sounds like a little bit of an ad hoc, but we look at those numbers every single week, and we receive customer feedback every single day. And that customer feedback doesn't just get dumped into a, you know, to -- received by a customer care rep who does nothing with it. They have conversations. And when there's a consistent feedback coming back, we take that feedback, and we have other discussions around it. And we have implemented, you know, all different kinds of tweaks, you know, to whatever the offer is, and we pride ourselves in customer care. And that has been one of our core objectives, combined with high quality networks.
5462 And our focus on customer care means that we're constantly revisiting how we describe things, how we offer them, making sure our customers are happy, and that includes the type of service they get. And we put a lot of effort into providing high quality service for our customers.
5463 So, one of the interactions we often have from our customers is how pleased they are dealing with us, how easy it is to deal with us, and, you know, we pride ourselves in those things.
5464 So, these are all elements that go far beyond a low price in the market. And I do think there's plenty of evidence the prices are coming down and will continue to do so in the right environment.
5465 MR. BRAGG: And we've also had many other offers in the marketplace that may not have worked, so we cancelled it. Like, we're always trying to have different plans and just -- because we know we need to differentiate ourselves as best we can. So, you know, the -- you know, we’ve heard some -- some evidence -- or not evidence, but, you know, some people question whether, you know, there are a lack of options for customers. I mean, we try all kinds of different things. But the fact that we may not be doing it now, we likely tried it and it just didn’t resonate with the customers, so we don’t do it anymore. So there’s -- we’re always constantly based on customer feedback, grooming our offers to best suit the customers. And we can’t, like, we can’t control what customers want or what they want to do. We just -- we respond to their wants and needs and try to groom the packages to best serve them.
5466 COMMISSIONER MacDONALD: In larger centres it’s easy to support more competitors, and each of those competitors can still make a decent return on their investment, if you are operating in the GTA or Montreal. But you’re operating in Digby, and Lunenburg, and Truro, and there’s obviously a much, much smaller population in those centres. The centers that are served by you and serves by the Big 3. Do you think that another entrant could come into communities like that, even on a larger scale, say across the Atlantic Region in communities like that, and have a viable business case to move forward?
5467 MR. BRAGG: On a facilities-based -- facilities basis, or an MVNO basis?
5468 COMMISSIONER MacDONALD: Both. So you can start with facilities base.
5469 MR. BRAGG: On a facilities based, I certainly think it’s more challenging in the rural areas. Again, it’s a capital recovery business model. So the obvious place, and we’ve seen this in the past with some of the others who focused on the urban markets, because obviously that makes sense, with the greater density. Like, it’s -- you can have a viable business model potentially, with 10 percent of the market in Toronto. You can’t with 10 percent of the market in Digby. You need to get 50 percent of the market in Digby.
5470 But so, on a facilities based, yes, it’s more difficult in the rural markets. Again, that’s just math, that’s not -- that doesn’t need to be an opinion, that’s a fact.
5471 From an MVNO standpoint, unless the rates were applied to reflect the actual capital, sort of capital per customer potential in those areas, then it would be just as easy for an MVNO operator to come in anywhere, if it was sort of a flat rate, the same in Toronto is the same as Digby, why wouldn’t they? There’s no difference. I might argue they might attempt to go to the rural areas first, because if there is less competition there, that may actually look more attractive to them. But you know, that’s -- that’s just a market dynamic issue.
5472 MS. MacDONALD: I’d like -- I have technology issues. So I would like to add to that, you know, when we talk about is this a viable business model for an MVNO? Because -- and I understand the purpose of the proceeding and we’re trying to lay everything out on the table. So a lot of the questions need to canvass all issues.
5473 But I have a concern about the approach in watching the hearing to date with a lot of the questions which are about, how can we bring MVNOs to the market? Can we? Do we need to regulate them, or can we -- can it happen naturally, organically? And the reason I have a concern with that is because, I note that the Commission indicated that they view as a preliminary and they had referenced in the consultation, that the expectation would be that an MVNO market develop.
5474 And I really, you know, urge the Commission to maybe just take a step back in this proceeding and think about what is the right question? And I don’t think that’s the right question. I don’t think the question is, how can we encourage a scenario where an MVNO? Because it pre-supposes that MVNOs entering the market are automatically better. And I think the first question we need to ask is do we need -- is there any benefit of an MVNO at all?
5475 And I think what’s happened is the issue of the definition of an MVNO has been conflated with competition. It’s a different issue. The question we need to be saying is, is there enough competition in the market? Is competition doing its job? And because we seem now to be focussing on, well, how can we get MVNOs in the market? It’s already assumed that they’re going to bring some benefits, and I don’t think they are. In fact, the evidence seems to suggest they won’t.
5476 And I just want to add something else to that. Yesterday we sat here, and we listened to Distributel and CNOC, CNOC representing a group of MVNOs. What did they tell us? They told us the want access. They don’t want to build facilities. Some have implied that they may invest in some something. But what they did is they came here after almost a year, a year to think about this, companies that claim they want access to provide valuable services to Canadians that are unique and different.
5477 They did not have one example of the type of package, or service, that they thought that they could bring to the market to Canada. And the reason is, because they didn’t think through a business model. And I find it very hard to imagine any company, anyone looking to build a business, with a year to think about it, to come to a hearing like this and not even have an example other than some random example that they saw that happened in a U.S. market somewhere.
5478 And so, these are the reasons why we find it highly offensive. They want to come here and run an MVNO business within a year. We bought spectrum in 2008, and we bought mid-band spectrum. And I know it gets into complications, but it merely highlights the complexity of this business. We bought mid-band spectrum, which meant that we couldn’t even co-located to existing towers throughout most of our serving areas, because the incumbents were already operating on low band spectrum. What does that mean? That means that they didn’t have to build the same number of towers as we did.
5479 So we had to spend five years, from 2008 to 2013 building a network before we could even sell one customer service, because the type of spectrum we bought at that time was mid-band and we needed to build double or triple the number of towers just to have a network to sell a service. And so, we made the investments, we did it in a great environment we believe in, the facilities-based environment.
5480 But I’m just saying, they want it in a year, and they start saying they just want our RAN access, but it’s RAN plus, because it is. Now, we want RAN, now we want devices. And so, I just -- I can’t fathom that these companies come here before you after a year to prepare, and they don’t have an example of what’s missing in the market.
5481 MR. BRAGG: I mean, we heard some great arguments about some the deficiencies on why some of these others are not able to get into the business. But most of the arguments were about, it was almost like the proceeding was around how -- how do we allow these others to get into the cellular business? As opposed to, do we need to solve a competitive issue?
5482 I mean there were -- there were a lot of I call, sort of, self-serving arguments about here -- here are the things the Commission needs to do to allow us to get into the business. And it’s like, well, there are lots of businesses that people aren’t in or can’t get into, economies of scale issues. Like, I might want to get into the car business, but I just can’t justify building an automobile factory. Well, I don’t go to the Department of Transportation and say, or Industry Canada, or whoever, to say somehow you have to force General Motors to give me access just because I want to build cars.
5483 Like that’s, you know, sure lots of people want to be in different businesses, but that’s not the -- that’s not the point of this. The point is, I think, is to try to determine, is there a competitive lack in the cell phone business in Canada? We don’t think so. So the fact that somebody just wants to be in the business is not a good enough reason to completely cause upheaval to the marketplace.
5484 COMMISSIONER MacDONALD: I sensed you may want to talk about the CNOC presentation yesterday, so I was going to give you the opportunity, but I’m glad you took it.
5485 I guess the next question is, we want expanded networks, we want better networks. From a corporate standpoint, from a business standpoint, how do you make the decisions with limited dollars, whether you’re going to expand in a given region, or invest in new technologies to improve customer -- customer service, for example?
5486 MR. BRAGG: I’ll answer the first one. How do we decide on where we’re going to expand? You know, typically our roll out pattern is we go to the denser markets first. I’ll use New Brunswick for an example. We built the major markets, Moncton, Saint John, and Fredericton first. That was enough of the population, we felt that we could launch the service. We rely on roaming arrangements to allow our customers when they're outside of our network to fulfill calls. So according to the roaming rules, we're not allowed to sell outside of the territories, and that's fine. And then we just -- we continue to say, well, based on our penetration, based on the number of we're continue we just continue to invest.
5487 If, you know, again, I'll just use New Brunswick. If for some reason we weren't getting the customers we thought we were, or in Sudbury, or in Timmons, we'd say, yeah, well, for some reason there's a deficiency in the marketplace, we're not attracting the customers. We'd change our offer; we'd try to figure out how do we get those customers. If -- and so far that hasn't happened. If were unable to attract the customers, well then we'd say well we can't build anymore because obviously this market is not receptive to what we have.
5488 As for the advancing technology, well that's –- you know, that's just a competitive aspect of the marketplace. I mean, we cannot fall behind our competition. It's no different than any business. You need to be able to differentiate, get ahead of your competition with new technology, products, and services, or quickly follow if what they're doing is popular with customers.
5489 So it's just -- you -- the competitive nature of the business drives those decisions to a certain standpoint.
5490 MS. MacDONALD: And I will just add one additional note: This industry, and the Commission has done a good job over the last number of years of addressing concerns. We've got also privacy laws in place. There's a lot of additional issues that we need to protect against going forward. Consumers are online all the time. There are cybersecurity issues.
5491 So we're facing ongoing challenges on cost on a daily business to implement systems, to prevent the company against cyberattack, which is every company, it's common. And that will continue.
5492 This is a business where people's information is out there on our networks, and in everyone's networks that has a network, of course, but the point being it's not getting easier. We need to be able to focus on the important issues about protecting Canadians that involve significant investments that we don't even know about today. Cybersecurity is a big one.
5493 I mean, we've also been doing other investments as part of regulatory requirements, but that are sensible, like wireless public alerting service, E‑911, there's recent call blocking, you know, investments we've had to make. We've also had the unknown issues that come up. Major fibre breaks, subsea fibre breaks and wireline fibre breaks that happen every year at the cost of millions dollars. We had Hurricane Juan, which fortunately because we've made the significant investments we've made in our network, we actually fared out pretty well in Hurricane Juan. But these are investments that are critical to continue to protect the networks and to ensure that Canadians have the best quality protection going forward.
5494 I mean, that's why I say it's a complicated business, and those who are making these investments and doing it on a daily basis on all fronts are protecting the future data that Canadians are sharing with one another and transferring, and it's important. And I just don't think we should be making light of it, you know. And obviously, we don't think -- you know, we want everyone to take this seriously.
5495 So these are the concerns we face every day, and people aren't just generally thinking about them when they think about how we operate our company.
5496 COMMISSIONER MacDONALD: Thank you.
5497 Your comments, Mr. Bragg, about your wireless build out in New Brunswick are a great segue to where I wanted to go next. Because in New Brunswick, outside of Sackville, the Eastlink brand is not as well known as perhaps it is in Downtown Halifax, obviously.
5498 What unique challenges do you face in gaining brand recognition and selling to a population in New Brunswick that when they see the Eastlink logo they're not familiar with it? Because if MVNOs do come to market, they will come with a multitude of new brands that will have no recognition within the public mind space.
5499 MR. BRAGG: It's a good question. I mean, because initially when we started in the cellular business, our focus was going to be let's build out essentially where we could on top of our existing wireline base. We already had an existing customer relationship, we thought, and I think it's obvious, it's easier to promote and communicate with somebody who you already have a relationship with and already have brand recognition.
5500 New Brunswick was a bit of a expensive experiment. We -- I was always of the opinion that I felt that it would be difficult for, I called them one trick ponies to compete in a bundled environment. So I was nervous about the concept of building out in New Brunswick. We had a bit of an advantage. You know, New Brunswick's not that far from Nova Scotia or PEI. We generally had reasonable brand recognition. People were aware of it. I went to UNB, whether that was any help. My wife's from Fredericton. But my point is, it's not like I was going to the Yukon where nobody had ever heard of Eastlink.
5501 So we kind of -- we rolled the dice, and it turns out we -- you know, we've done okay, but I think it's a bit of a unique circumstance. I would say I don't think we would have that type of success if we launched wireless only in Saskatchewan. Like nobody knows us. We don't have any of that sort of knowledge or recognition to rely on.
5502 And again, with the greatest respect to my competitors, through, I'll call it, a series of historical events, and my knowledge and discussions with lots of people in New Brunswick, my competition, I'd say, was not dearly loved so we saw that as a bit of an opportunity as well.
5503 That'll get me in trouble.
5504 COMMISSIONER MacDONALD: Thank you for that.
5505 In your submission, you talked quite a bit about significant delays that you've encountered in getting access to support structures, specifically, ILEC support structures. And I'm just wondering, can you help quantify the impact and the significance of those delays on your deployment plans?
5506 MS. MacDONALD: So I might clarify, we did provide information in our -- some of our responses with regard to the processes. We also provided great detail about the process of siting wireless towers and getting municipal approvals associated with that. So we gave a lot of detail in that to provide context for the Commission to understand exactly what is involved in that process and the challenges.
5507 The other issue of Teleco support structures does also remain a problem. I think the focus of our comments at the time were more on the wireline, but we continue to have issues with access in terms of futures and delays in access to the support structures, which Marielle can speak to.
5508 MS. WILSON: Yeah. I don't think we quantify it because we just kind of keep going with business as usual; right? We don't keep a tally of it.
5509 But the main problem is we will seek access to a support structure and the response, which will takes weeks or months, is no spare capacity without any detail to it. And when we go to try to determine what structures we're going to apply to, we do an engineering assessment prior to submitting the application. So we only submit application to areas where we think there's probably a high likelihood of success.
5510 So when we get just a blanket denial, no spare capacity, we're not sure why. We've asked, you know, for their process around they assess spare capacity and they won't give that to us, so you know, we just kind of go on to the next structure. But it does have significant delays in our build.
5511 COMMISSIONER MacDONALD: I asked a similar question to TELUS yesterday, and you've kind of answered it already. But can you give me more of a flavour of those conversations that you have with the ILECs when you're trying to access their support structures? I'm wondering if there's going to be delay in responding to you, do they let you know? Do they give you reasons for denial? If a denial does come through, do they say, "We can't do this, but we could accommodate your request taking this particular pole route", if we're talking about a fibre build, for example?
5512 MS. WILSON: It varies, but generally, no. The application permits are done through a third-party, and it's a portal, generally. So we'll just get a notice back, "no spare capacity". There's not a lot of back and forth.
5513 So, no, they wouldn’t -- my knowledge is they wouldn’t suggest an alternative location, it’s just deny/no spare capacity.
5514 COMMISSIONER MacDONALD: Okay. And what about reserving spare capacity? I wanted to give you an opportunity to discuss that because, again, when I was asking the Telus panel, they suggested it would be appropriate to reserve spare capacity for three and a half years, when pressed for a number.
5515 I guess, what would your thoughts be on a three and a half year reservation period?
5516 MR. BRAGG: That sounds like a long time. I can only -- you know, and I’ve also heard some people say it should be two or three months. I would argue that would be great. But that’s, realistically, too short.
5517 I think of our own business planning cycles. We tend to know, you know, six months, certainly within a year of what our capital plans are for the following year and what we’re going to do and where.
5518 So we would have an understanding of what our, you know, use of our facilities or support structures are going to be.
5519 So is three and a half years, you know, I’m pretty sure Telus does not have a detailed engineering plan for what they’re going to be doing three years from now. I suspect they do a year from now.
5520 So a year seems reasonable. Maybe 18 months. I mean, you do have to -- I’m not trying to defend Telus, but, I mean, you know, it does take time to plan out.
5521 But their argument on why three and a half years was the right number seemed to be a little baffling.
5522 But, you know, it certainly takes time.
5523 But that’s -- we see that on towers. We see it on pole lines. We see it all the time. It’s just a fact that they can reserve it for future use and there seems to be no mechanism to hold them accountable on whether they actually ever use it.
5524 And we don’t see the same thing -- when I think of a pole line support structure, when we go to electric utilities, it’s a much different experience than it is with telco owned facilities.
5525 So we -- they’re the same facilities, so we know it’s not necessarily something unique to the pole that a telco owns versus the pole an electrical utility owns.
5526 So, I mean, I don’t know. I’m going to say a year and a half. To sum it up.
5527 COMMISSIONER MacDONALD: Okay. Thank you for that.
5528 Just one question, that’s a bit of a stranded question on its own, before I move on to low cost and affordability plans.
5529 Because you’ve built into multiple different markets, I want to ask, do you notice a difference in the quality of your competitors’ networks or their customer experiences when you move between various different regions?
5530 And the reason I ask is Bell commissioned a study by Charles Rivers and Associate and said pricing variations across the country are tied to differences in the quality of the networks.
5531 MR. BRAGG: I don’t think we’ve done an exhaustive look on the quality of our competitors’ networks across the country.
5532 I would say there are differences, but we just see it in maybe we get more customers in one area than another. We don’t necessarily ask why or do a ton of analysis.
5533 I do know our networks are different in different areas just based on whether it’s timing of a capital upgrade program, or the density -- the number of customers we happen to get in one area versus another might drive a different decision.
5534 So there are lots of different things that can contribute to differences in networks and different geographies.
5535 But so, I don’t know. It’s -- that’s conceivable.
5536 COMMISSIONER MacDONALD: But at a very high level, would it be safe to assume that you try and always build to the same standard, there just may be practical reasons why at a particular point in time or in a particular region you can’t?
5537 MR. BRAGG: I’m going to say yes, but it depends how you define standard.
5538 If we are seeing greater growth in one area than another, we will build out more capacity to the network in anticipation of that continued growth.
5539 So the consumer may see better network performance because we’ve invested more earlier in that area than another area.
5540 So is that the same standard? Our intentions would be to likely do that in -- I don’t want to say lower quality area, but that’s just a dynamic of meeting the market need at a certain time.
5541 But at a high level, generally we want -- you know, we try to build the same standards everywhere.
5542 But again, it depends on how you define standards as to what you invest when and where, based on the customer demand.
5543 COMMISSIONER MacDONALD: Okay. Switching gears to low cost plans and affordability.
5544 I’m sure you would tell me you think all of your plans are affordable.
5545 But out of curiosity, do you currently offer any low-cost plans?
5546 And I draw your attention to CRTC Exhibit 2, which outlines a series of plans offering various different options at a price of $15 and below.
5547 MR. BRAGG: I don’t think we have -- I think our lowest existing plan in the marketplace today is $30.
5548 I think we had lower price plans in the past, but the take rate was so small that it didn’t warrant keeping those plans in the market place.
5549 There is a cost to have plans. I mean, your billing system, your administration, your customer support, like, you just can’t support thousands and thousands of different plans. So you tend to groom them down to what customers are actually buying.
5550 And I know you can always make the argument they’ll always buy something cheaper, but we also have a cost to service. So you know, I -- when we pare down the value or pare down the consumer cost to the point we say, “Well, we can still afford to provide this,” it ends up being such that what they’re actually getting, nobody wants.
5551 So we’ve kind of found a sweet spot where that $30 one, you know, it’s not super popular, but it’s enough that we still maintain it in the market place, but, you know, most customers buy bigger plans than that.
5552 But that would be the lowest cost plan we have.
5553 I mean, I can build a plan that’s $15 that’s pretty thin on what it offers, just to satisfy some government policy, but I don’t want to do business that way. You know, nobody buys them. We’ve done stuff like that in the past and it just seems to be a complete waste of time.
5554 COMMISSIONER MacDONALD: To support the statement of nobody buys them, because obviously the number of consumer groups in this proceeding that think a plan or various plans should be mandated, would it be possible for you to undertake to provide us with the uptake that you have for the lowest price plan that you have in the market?
5555 And if you do have any details on the popularity, or lack there of, of cheaper plans that you’ve had in the markets over the years, that would be -- if you still have access to that data, that would be appreciated.
5556 MR. BRAGG: Certainly can give you the number of customers on the existing plan. And we’ll make an attempt, like, to be honest, I’m not sure if we have that data.
5557 COMMISSIONER MacDONALD: That’s fair.
5558 MR. BRAGG: But we’ll take a look at it and provide it.
UNDERTAKING / ENGAGEMENT
5559 COMMISSIONER MacDONALD: That’s fair. Thank you very much. And the date for undertakings is March the 10th.
5560 When you’re tailoring your specific plans, do you have a specific customer in mind when you’re doing that? You don’t have a low-income plan or a low-cost plan, but do you have a plan that you think is specifically geared towards seniors or students on a fixed budget?
5561 MR. BRAGG: I’ll use students for an example. I mean, we do have -- we will have plans that are sort of student oriented.
5562 Now, I say plans, it tends to be, you know, price points and a certain package we’ll put together, and it may be bundled with an internet product. I mean, we’ll construct something that we think is attractive to students.
5563 But, you know, again, that’s a market dynamic driven thing we do.
5564 You know, at a high level, we’re -- we -- again, because we operate in such thinly populated areas, we generally construct our plans to get, you know, a significant part of the market share. So we don’t really target to say, you know, we need this segment that's five per cent. We might, but our goals are to build plans such that we can get half the market. You know, obviously, that's pretty lofty, but, you know, we're aggressive sometimes, so we try to offer plans that are as popular to as many people as we can get.
5565 MS. MacDONALD: I would just add that, of course, there's promotional activity. So, when Lee speaks about student, obviously we would look to have promotions different points in time. And so I believe we did file some examples of promotional activity on the record as well, but obviously promotions are also used to try to attract certain customers in a certain area based on, you know, whatever issues we feel need to be addressed at a given point in time. So, that I just wanted to add.
5566 MR. BRAGG: I would -- if -- just to talk about customer segmentation. The product itself isn't -- like, you know, a data plan -- the data, or the voice experience, or the texting is the same for me, and you, and a senior, and a student. So, it's not the product that we can differentiate much. We might differentiate the price point, but our focus tends to be -- it's -- when we differentiate on some of those market segments, it's -- it tends to be more on the customer service side. Like, it's accessibility of the product. We would set up a kiosk on the campus to try to service students.
5567 So, it's -- we would target what are the deficiencies for, you know, seniors who maybe don't like to online chat, or have a challenge from a mobility standpoint getting into our retail store, so we have some door-to-door options on how we approach and sell cell phones. We try to run a very good contact centre that's not -- that's easy for people to manage.
5568 So, the differentiation tends to be around how you support the different customer segments, because you can't -- like, the products we sell are the pretty standard products.
5569 COMMISSIONER MacDONALD: We've had various consumer groups engaged in this process, and they've presented sort of their view on what a mandated low-income plan could look like. We provided examples in Exhibit Number 3. Basically, they range in the 25 to -- sorry, 20 to $35 range, and include, you know, voice, texting and 4 gigs data allowance. Would a plan in that range be reasonable and feasible to implement? I just -- I'm looking at your website and I see a 3-gig plan for $45. So, it's not that far off.
5570 MR. BRAGG: What was the price point that you ---
5571 COMMISSIONER MacDONALD: Well, I put in my postal code and I have ---
5572 MR. BRAGG: No, no, no, the one you were -- that ---
5573 COMMISSIONER MacDONALD: Oh, oh, the ---
5574 MR. BRAGG: --- that the others suggested we should have, 4-gig plan.
5575 COMMISSIONER MacDONALD: They range from 20 to $35.
5576 MR. BRAGG: Yeah, see that's likely below our cost, so for 4 gigs I can't offer a $25 plan.
5577 COMMISSIONER MacDONALD: Okay. And some have suggested as a possible solution to address that particular market a program similar to the one that ISED has implemented for low-income individuals, offering them a $10 a month internet package. Putting aside what the features would be, putting aside what the price point would be, would a similar type of framework around a low-income wireless plan make sense?
5578 MR. BRAGG: The challenge we always get into when discussing these things is, they ultimately force us to offer a product below cost. It's very difficult -- I mean, I understand the ISED $10 plan. It's logistically challenging. I don't think it works particularly well. We've opted out of it for those reasons.
5579 We know where our margins are. It's difficult for us to offer products below cost. I'm not -- and personally -- it's not -- I don't think it's our responsibility. I think, you know, low-income issues are a societal issue that I think lots of people can work to solve, but to, you know, ask us to do it below cost, like, that's tough. We're already in a tremendously competitive marketplace. Like, we don't have the room to do some of that. It's not to mean we can't work with, you know -- you know, we actually have worked with, you know, the local municipalities on some issues offering cable TV to the -- some of the subsidised housing areas. So, there are some things we could do.
5580 I mean, wireless is a little tricky because it's not -- there's no geographic boundaries. If you're thinking about, you know, whether it's video, landline phone, internet, you can control it a little easier, but I have a hard time trying to figure out how you -- other than with an artificial cap, which, again, I don't like about the ISED plan, which -- like, that doesn't make any sense to me either, I just -- it's hard to do.
5581 COMMISSIONER MacDONALD: I guess maybe generally, could you comment on the wisdom of mandating one specific low-income plan that would apply across the country? And the reason I ask is, depending on where you live or who you are, the features may be very different that you require based on, you know, how much data you use. A low-income individual living in an urban centre may have better access to free Wi-Fi hotspots than someone -- than a low-income individual in a very rural community that, you know, you may service.
5582 MS. MacDONALD: We don't think that's needed. Although we just spoke about our own challenges serving smaller rural areas, we have no urban areas, we do know that on Exhibit 2 on the record there's plenty of examples of various service offers available, including some with data, at the, you know, well, $15 price point.
5583 So, I don't know, you know -- I don't think there's a need necessarily, and we've heard some evidence that those who are offering those plans they're not seeing the kind of interest in them in any case, but I think there's plenty of offers available out there that would serve those markets. And I think as competition continues as well, and, you know, in an environment that facilitates further buildouts, and cost improvements, et cetera, we're just going to see more of that coming. Prices have been coming down over the last few years and they're likely to continue in the right environment.
5584 COMMISSIONER MacDONALD: I don't know, but I've got a very strong hunch that you look closely at your competitor's websites, and perhaps send secret shoppers into their stores periodically. Do you think the lack of update for some of those low-cost plans is just because they're not promoted, general lack of awareness?
5585 MR. BRAGG: I'm going to say no, but that's based on our experience of some low-cost plans that we used to have is that when you -- unless you're going to have a low-cost plan that is actually a discounted big plan, that you get all the value of the $50 plan for $15, when you pair it down to something that you can actually afford to offer, and you get into this argument -- this happens all the time -- you get into this argument of needs versus wants. Well, this is -- you know, from a low-cost plan, it only needs to be a bucket of 1-gigabyte of data, and 200 minutes of voice, and 25 texts. You know, you could argue that meets the needs, but it doesn't meet the wants. Like, everybody wants something different. What the -- everybody ends up saying is, "No, no, no, I want the $55 plan for $15". And then, like, that's where -- that's where the thing kind of falls apart. I mean, it's -- you know, that's the challenge.
5586 So, I don't necessarily know that it's a lack of advertising or a lack of effort. Like, it's not -- you know, somebody's going to argue, well, if you don't have high speed internet, how can you go to the website to see the -- but, you know, the -- you know, the -- they're not hard to find if you want to look for them.
5587 COMMISSIONER MacDONALD: Okay. Thank you.
5588 We've talked a lot about low-income plans. Just generally speaking, how do you train your sales staff, whether they're on the phone, on a live chat, in one of your stores, on their interactions with more vulnerable Canadians? Specifically, how do you match them to the right plan for their individual needs?
5589 MS. MacDONALD: We do have thorough training programs for our staff, and the objective is to provide customers with what they want. And we do take great pride in our customer service.
5590 And it wasn't that long ago that we were before the Commission in another proceeding investigating, you know, sales taxes and looking at them. And in that process, we were actually asked to file volumes of our materials in how we train, so I recall pulling that information and looking at them.
5591 And you know, our materials include quite a bit of detail around getting to what the customer wants, providing the right service for the customer's needs.
5592 And so our staff are trained to inquire, similar to what others have said earlier this week, you know, what is it you need, what are your -- what are your day-to-day needs, what do you have today to try to get at the right plan and options for them.
5593 COMMISSIONER MacDONALD: And if we don't already have it on file, would you undertake to provide a copy of those training manuals?
5594 MS. MacDONALD: Sure, we could. There may be a significant amount, but we can even look to what we filed and ---
UNDERTAKING / ENGAGEMENT
5595 COMMISSIONER MacDONALD: Okay.
5596 MS. MacDONALD: --- reference that or provide it.
5597 COMMISSIONER MacDONALD: Perfect. Thank you.
5598 MVNOs. Your position, I think, is very clear, but I do just have a few questions on that topic.
5599 If we look at the Bureau's proposal where MVNO access would be granted in areas where companies had spectrum but hadn't yet deployed, I would think Eastlink would qualify. I assume you have spectrum assets you have not yet deployed.
5600 Would you be interested in becoming an MVNO yourself where you have yet to deploy?
5601 MR. BRAGG: I looked at the Competition Bureau's approach, and it's -- you know, it's not all bad. I think there's -- I think it would potentially allow us a little more speed to market and allow us to start acquiring customers, you know, pre-billed or during a build-out phase.
5602 So would we take advantage of it? Possibly. A lot of it would depend on the rate.
5603 But you know, we -- yeah. I mean, you know, there's obviously a lot of other factors that would have to go into that, but it certainly would -- I mean, a little bit of the risk is -- well, it actually takes some of the risk away.
5604 I mean, we could launch in an area on an MVNO basis pre-build. If we didn't get very many customers then we'd say, okay, we don't want to build now.
5605 Then there's an issue of what do we with those customers but, you know, we could get our heads around that.
5606 So yeah, I mean, I think it may be advantageous to us. I mean, we'd have to look at every situation, certainly.
5607 COMMISSIONER MacDONALD: Would the information you'd receive under such an MVNO arrangement be better than the information you receive with your roaming arrangements? I'm thinking specifically on where to build next.
5608 You would know -- you know today when customers are leaving your network and that may inform some of your decisions about where to put the next towers. Would MVNOs help in that regard?
5609 MR. BRAGG: Possibly.
5610 We already get information from our roaming arrangements on where our customers are roaming. That's one of the things that drives our build-out decisions, are if there are certain towers that we see we're roaming a lot on a Bell tower or a Rogers tower because it's -- you know, for whatever reason, our customers are passing through that area, we will target those areas to build out.
5611 So from an MVNO standpoint, it may allow us to pick and choose where we build.
5612 I mean, it's -- you know, there are certainly market dynamics that drive where you build and when, but there's also just a network efficiency to how you build out your network. You can't just willy-nilly throw towers out there. You end up with lots of borders you have to manage.
5613 You tend to want to sort of, I call it, creep your network out on the edges and not build a bunch of islands, so again, theoretically yes, but practically, I mean, I'm not sure. It would just depend on what type of information we got, where it was, so I'm going to say possibly.
5614 COMMISSIONER MacDONALD: Are there any tweaks to the Bureau's proposal that you would suggest to make it better?
5615 And maybe you haven't thought about that and you want to take that offline and provide it as an undertaking.
UNDERTAKING / ENGAGEMENT
5616 MR. BRAGG: Yeah, I think I'd like to think about that more.
5617 COMMISSIONER MacDONALD: Okay. Thanks.
5618 You mentioned that if you were to become an MVNO, it might help your speed to market. Would that -- in certain regions.
5619 Would that benefit that you would gain offset concerns that you may have with MVNO -- mandate MVNO access in general?
5620 MR. BRAGG: I think it depends on how the MVNO -- if it's Competition Bureau MVNO, you know, that speed to market may be valuable. If it's sort of just like -- I'm going to call it resale light MVNO -- I don't know. So much of it depends on the rate.
5621 COMMISSIONER MacDONALD: I'll get to the rate in just a moment.
5622 MS. MacDONALD: I think -- I just want to clarify and that's, I guess, the challenge with all of these different versions of MVNO.
5623 We do not support in any way, shape or form a mandated full MVNO or a version of that that does not involve the MVNO operator operating without licence spectrum.
5624 And so my understanding is that the Bureau's proposal is that the MVNO would have spectrum. I would expect they would have licence spectrum and requirements associated with that.
5625 So that is an important distinction that I would want to make there.
5626 COMMISSIONER MacDONALD: And -- that's correct.
5627 And you may want to provide this as an undertaking. Would that positively impact your plans to acquire more spectrum in the future?
5628 MR. BRAGG: If there was a mandated MVNO regime ---
5629 COMMISSIONER MacDONALD: There was an MVNO as the Bureau has proposed.
5630 MR. BRAGG: It -- yeah, it possibly could impact our participation.
5631 If it's -- and I don't like to keep coming back to TPIA, but if it's -- and this is where it's -- this is where I have a challenge.
5632 If the rates are done improperly, I'll say too high, then it's of no value to anybody. If the rates are too low, it will definitely threaten further investment.
5633 That may be a short-term benefit for us because I can shut down my network and I'll just go on somebody else's network. That's got a short-term benefit for me. It's got a long-term detrimental effect to the industry, but in a way I'm not likely going to care because I'll be operating on a crappy network along with everybody else so my competitive stance in the marketplace is going to be equal as the -- you know, as the networks -- as there's less and less investment. That's fine, I'm at no disadvantage. I get the benefit of roaming on a -- or operating on a below cost rate as compared to the guy who owns the network. But that's not beneficial in the long run.
5634 Like we tend to think we're going to be in business for a long time, not just the next 10 years until the networks grind to a halt, so might be fine in the short term, but -- and that's the -- and that's the challenge I have with this whole thing is getting that sweet spot of the right rate. And our experience has been we, everybody, doesn't -- we don't get the right rate done.
5635 It's not as detrimental when it's an element of your business. I would argue the roaming rates, although better than they were, aren't exactly right.
5636 You know, we've got lots of evidence to suggest one way or the other, but that's only an element of the business. We're -- access to twisted pair years ago, was that the right rate? I'd argue not quite. But again, only an element of the business.
5637 When you're talking about a wholesale rate that is the business, when it's off, that destroys the business.
5638 So it's -- and again, it comes back to I don't -- what's the -- I don't think anybody's demonstrated the need to suggest that it's not a competitive marketplace, so why would we risk stopping all investment and destroying all the progress we've made just because a handful of people are trying to make an argument they want to get in this business. Like it seems a little ridiculous to me.
5639 COMMISSIONER MacDONALD: I expect I know the answer to this question, but I assume if you are supportive or lukewarm towards the Bureau’s proposal as is, you would be against any scenario whereby MVNO access would be granted to providers, even if they own wireless spectrum, outside the areas where they have licenced spectrum?
5640 MR. BRAGG: I ---
5641 COMMISSIONER MacDONALD: That would allow you to provide service in, I don’t know, Iqaluit for example.
5642 MR. BRAGG: As appealing as that may be ---
5643 COMMISSIONER MacDONALD: It’s a bit of a ways from Halifax.
5644 MR. BRAGG: Yeah, I -- again, you’re -- we’re in an exercise of trying to chop this thing up a little bit on what might be acceptable or what might not be, in a situation that I don’t think it necessary to have a discussion at all. So it’s -- I haven’t spent much time speculating on what elements of this bad idea I think are acceptable or not. So it’s ---
5645 COMMISSIONER MacDONALD: No, I appreciate your comments. Just one area before I move on to my final few questions. What were your thoughts on the Cogeco model?
5646 MR. BRAGG: I think Cogeco is a great organization and they’ve done a great job. I do think it was somewhat -- and this goes back to one of my previous comments. It was a little, you know, self-serving. Again, with the greatest respect to those guys. But it was -- it looked like, and it was similar to other presentations that I heard. It was designed to solve the problem of why they’re not in the cellular business, not designed to solve the problem of addressing a lack of competition in the marketplace. So you know, I think they did a good -- the did a good job of presenting their arguments. I just don’t think they were targeting the right issue.
5647 MS. MacDONALD: And with due respect as well, you know, to everything that Lee just said as well, and Cogeco is a great company, but when we look at the subscriber numbers that they have compared to ours on the wireline business, you know, we’re approximately one third. And we took on the risk in 2008, and for four auctions after that, to acquire spectrum to build this business. And we don’t think it is an impossible feat to do.
5648 I mean, they’re a company that has some spectrum, I understand, but they are capable of entering the market. And on this issue of spectrum, we have to keep in mind as well that ISED is managing the spectrum, and they’re holding consultations, and there’s others scheduled, to look at further future spectrum release. So if you look at the -- first of all, they’ve been investigating tier four level spectrum auctions. They just had a consultation on the merits of tier five, which are smaller and smaller areas. What that means is that there will be spectrum potentially coming available at much smaller geographic areas if someone is interested in buying it.
5649 Now, we’ve had some challenges in the early days, you know, because you need to bid on all of Alberta in order to get spectrum to serve Grand Prairie. And so, in those cases there were challenges. But there is some momentum there where ISED is looking at these issues, these very issues of the size of the tiers and what’s appropriate for future licencing. And when you look at ISED’s spectrum outlook, up to 2022 -- I mean I haven’t looked at it in detail, but there’s a list of low, mid, and high band spectrum that they’re going to be revisiting in the future.
5650 And so I just say, is it really necessary right now to rush to give MVNO access when there’s no evidence that it’s needed and there may be other opportunities at some future point for someone to actually take on the risk to run a business?
5651 MR. BRAGG: I mean, Natalie’s point is a good one. Because there is the potential that if I said, change the approach or at least adopt the approach they’re talking about, that reduces -- one of the biggest barriers to facilities -- additional facilities-based competitors entering the wireless business has been this -- this spectrum auction structure because of the big blocks, and the way they’re auctioned off.
5652 And I get it from Cogeco’s point of view, is because it’s the nature of their geography, they kind of cut across two big blocks that have big requirements to serve, and it just may not have made economic sense. I mean, it’s an economic argument. But if ISED does this, and we can all lobby ISED whether we want this or not, but they -- there is the potential to reduce that barrier.
5653 So if we assume that that is achievable, which I think it is, and then the access to spectrum in those geographic sizes that fit some of these different smaller, different geographically challenged organizations, if that’s off the table then I think now we’re just in an economy of scale argument that is -- I don’t think that’s a regulatory jurisdiction. Then it just comes back to the, well, I want to be in this business and I’m too small. Well, you know, with the greatest respect to all those guys, sometimes that’s just too bad.
5654 Like, it’s -- Cogeco is a bigger company than we are, so they should be able to get over that hurdle. I use TekSavvy for example, they’re bigger than we are. You know, so if they want to invest, if that spectrum option issue is gone, then it’s just a business issue. Like, choose to do it or not.
5655 COMMISSIONER MacDONALD: Thank you.
5656 Seamless roaming. I take it from your submission that you have not been able to negotiate seamless roaming arrangements with anyone. Can you give me a flavour of those negotiations?
5657 MS. MacDONALD: I think what I’d like to say about seamless roaming, and it really gets to kind of our core philosophy I guess, in the early days we certainly -- it’s great to have. Obviously, we would like to have seamless roaming in the sense that it’s better for the customer, particularly if they’re on a highway and they drop a call.
5658 There’s quite a bit of evidence on the file -- on the record of this proceeding, with a range of debates about whether it’s feasible or not feasible, whether it’s costly or not. And also, companies that are operating these wireless networks are at different stages of the evolution of their network in terms of LTE, LTE advanced, et cetera. So I think it becomes complicated as to what is the right answer and whether it’s actually feasible. Because everyone is operating from a different experience as to where their network is right now.
5659 What we know is that there will be some technical requirements to implement it. At certain network evolutions, depending on where you are, it may be more cumbersome than in others and there may be some costs associated with that.
5660 What we also know is we cannot have our roaming rates go up. In fact, we absolutely think they need to be reviewed to go down. And if a discussion around seamless roaming is going to, as part of that, involve increases or any costs incorporated into roaming rates, that would be problematic for us. It already -- the rates are already problematic. So when we pick our battles, we’re trying to be reasonable here and say, what is it logical for us to have to run our business?
5661 And in our experience today, we’re not ready to say we absolutely, like, need this at any cost. We’re focussing on, let’s review the roaming rates. Let’s try to improve some of the debates we have about getting access to infrastructure in a timely fashion. And that’s our core, core concerns here today.
5662 COMMISSIONER MacDONALD: Thank you. Shaw indicated in their initial intervention that national MNOs are incented and able to foreclose new competitors from gaining access to the spectrum they need. Would you agree with Shaw in that regard? Or do you have any evidence that they’re hoarding the spectrum?
5663 MR. BRAGG: I mean, are the hoarding the spectrum? I, you know, they go into the spectrum auction like everybody else. Do they put it on the shelf for future use? Maybe some. I do know there is -- there is only a limited amount of spectrum, everybody’s capacity requirements are growing like crazy. So everybody is trying to get as much spectrum as they can. When do they use it and not?
5664 The challenge is you can’t -- you can’t say, well, I might not need 2,500 Megahertz spectrum right now. But the problem is, is the auction is now. So I might need it five years from now, but if I don’t get it now I’ll never have it, even when I do need it. So it’s -- you know, that’s a tough one to answer. I mean, I ---
5665 MS. MacDONALD: I would like to add something because it did come up in this proceeding already, and I don’t actually see it as relevant to the scope, in the sense, but it needs to be addressed because it was already put on the record, which is the claims by Telus that the auction process is unfair in that it allows for set-asides for new entrants.
5666 Now, I don’t think we need to go there. But if Shaw’s comments also relate to concerns around the process, such that the large national wireless incumbents will seek to acquire as much as they can to the exclusion of new entrants, I think that’s a fair concern, which is the very basic reason why we’ve always supported and advocated set-asides in the auction.
5667 So again, not an issue here, but I just want to get on the record that we absolutely disagree with Telus. Set-asides are critical, and have been, for the auction process, so that we can apply our spectrum.
5668 COMMISSIONER MacDONALD: Okay. Thank you. I just have two more quickly. One I should have asked earlier.
5669 Have you approached any of the national operators in the past to negotiate a roaming agreement?
5670 And part two, have any potential new local MVNOs in your service territory approached you trying to seek MVNO access?
5671 MR. BRAGG: Well we -- you asked if we have approached any of the national carriers for roaming agreements, which we have, because we have roaming agreements with everybody.
5672 But we ---
5673 COMMISSIONER MacDONALD: Yes, no, I meant you -- sorry. Eastlink becoming an MVNO, ---
5674 MR. BRAGG: Oh, has anybody approached us?
5675 COMMISSIONER MacDONALD: Has anyone approached you? Yes.
5676 MR. BRAGG: No, not to my knowledge. And I would hope that that would be part of my knowledge if somebody did approach us.
5677 COMMISSIONER MacDONALD: Okay. And just one final question, without getting into your plans with respect to rolling out 5G, some people, some parties have suggested a 5G working group with various different stakeholders to try and address some of the complexities in rolling out the network, complexities in dealing with many, many different municipalities.
5678 Would you care to comment on the effectiveness of a possible working group?
5679 MS. WILSON: We agree that it’s difficult and challenging to have to deal with multiple municipalities.
5680 As a small company, participating in multiple working groups is a significant strain on resources.
5681 And the concern we have is that the processes put in place for, say, a Toronto, would then apply in a small community in Nova Scotia.
5682 So we’re not quite sure how that would work.
5683 I think what we would like is, you know, a simple process laid out. I don’t know if that has to be an extensive working group with everybody across the country.
5684 COMMISSIONER MacDONALD: Okay. Thank you very much. Those are my questions.
5685 THE CHAIRPERSON: Thank you.
5686 Commissioner Laizner?
5687 THE VICE-CHAIRPERSON: Hi. I just have one question, and it relates a little bit to what we’ve just discussed.
5688 You’ve talked about the issues that relate to concerns about access to infrastructure, and tariffs, and that sort of thing.
5689 There’s been a lot of discussion on the record regarding issues that, you know, relate to ISED, and rules, and that sort of thing.
5690 I’m just wondering whether you have any suggestions with respect to what the Commission, within its jurisdiction, could do to alleviate some of these problems?
5691 I mean, you did talk about, you know, reserving spare capacity for a shorter period of time.
5692 But what would you suggest that the Commission ought to do?
5693 MR. BRAGG: How ---
5694 THE CHAIRPERSON: I was going to caution you to be polite.
5695 MR. BRAGG: How broad are your ---
5696 THE VICE-CHAIRPERSON: We can certainly discuss, in our eventual decision, what we’ve heard.
5697 But in terms of our jurisdiction, what do you see that we can take in terms of concrete steps to help alleviate some of those issues?
5698 MR. BRAGG: You know, part of the challenges I’ve -- you know, maybe I should know.
5699 I’m not perfectly clear how much jurisdiction creep you’re allowed to have into what ISED does. You know, ISED does some great things.
5700 Their challenge is they’re not as sort of structurally oriented when somebody fails to comply with something.
5701 I mean, I will often complain that you guys get some things wrong sometimes. Not always.
5702 But you have a structure on, when there’s a rule or there’s a process, on, you know how it’s done, and then some, you know, penalties, alleged teeth.
5703 Like, ISED, they’re not very good at that. They don’t have that. So, you know, they can have a policy, but then they don’t really have any mechanism to hold anybody to it. And that’s a bit of a challenge. They’re not very good from a market policy standpoint.
5704 So if there’s any opportunity for you to, again, jurisdictionally creep in and do some of that stuff, that would be potentially helpful.
5705 MS. MacDONALD: Okay. So what I will say is, we’ll start with the easy one, which is telco support structures, because there’s a lot of argument on the record with the issues with that.
5706 And we think that’s the easy one because the Commission already regulates a telco support structure.
5707 In fact, it regulates access -- facility access to that structure, has already made decisions to address wireless equipment attached to that infrastructure, and the definitions within the support structure tariff already allow for both wireline and wireless attachments.
5708 So when we talk about concerns around microcell access to telco support structures, it’s, as far as we’re concerned, already addressed.
5709 Does it need tweaking? Maybe some will say it does.
5710 But we already have negotiated or arranged construction standards pursuant to those processes that can be, and have been, in some cases, addressed for microcell attachments.
5711 So we don’t agree with any of those parties who have said something new and a separate new tariff needs to be established. We think that would be a whole lot of work and it’s unnecessary. It just needs maybe a bit of tweaking, but we don’t think it does. And we have our answers on the record in that regard.
5712 On the issue of challenges with -- similarly with getting access to municipalities, we’ve just described, you know, our thoughts on working groups.
5713 You know, but ultimately I think there may be room for the Commission to be able to address on a case-by-case basis, or whether, you know, one case might set a precedent that avoids future with regards to a dispute or, you know, an issue of not getting access to a municipality quickly enough.
5714 There’s plenty of argument on file as well with regard to the Commission’s jurisdiction and whether there’s public -- it’s a public place and, you know, et cetera, and whether -- you know, whether the wireless connection is actually qualified.
5715 And I think that there is room for the Commission to say, “Yes, there is.”
5716 So I think that the Commission certainly will have to look at that.
5717 But we think that might be an avenue that allows for at least escalated issues to be dealt with quickly.
5718 The one that’s challenging for us, and we might need to do a little bit more thinking about, is on the wireless tower side for siting, because that really is, today, within ISED’s process, and what Lee referred to is right, the process, and we provided a very detailed description of that in our rogatory.
5719 That process allows us to get basically a consent from the municipality.
5720 And when we do that and actually get through that process, we should be able to build a tower.
5721 But we’ve described some situations where that simply doesn’t happen.
5722 And then when we go back to ISED and we’ve completely complied with the process and the reasons for not getting access aren’t justifiable under the rules, we don’t really have another remedy. And that’s the one we struggle with.
5723 And so I often think, well, okay, we’ve got a situation where ISED sets a process and can manage the spectrum, et cetera.
5724 But the Commission has stepped up under its jurisdiction to deal with sort of the details of the dispute issue, the allocation of costs when there’s a dispute on a tower.
5725 So I do think there’s room for the Commission to deal with disputes we have on wireless towers that have to do with the costs of upgrading when we seek access, and who pays them in certain disputed cases.
5726 I think the Commission is equipped to do that. And I would say because there is no process to deal with that at ISED, that the Commission could step up and do that.
5727 That’s my reaction to the question.
5728 THE VICE-CHAIRPERSON: Thank you very much.
5729 MR. BRAGG: That was a much better answer than mine.
5730 THE VICE-CHAIRPERSON: That’s fine. They’re both good.
5731 THE CHAIRPERSON: Commissioner Barin?
5732 COMMISSIONER BARIN: Thank you.
5733 So you very clearly explained your capital recovery business model. And I wanted to ask a question about future retail prices and how those might be impacted by your capital plans. So hypothetically, let's assume we continue with the current regulatory regime. In your view, do consumer prices have room to come down in the short-term, or do you absolutely need your current margins to pay back your past and future capital spending? In other words, do you believe that in Canada we will end up with prices being structurally higher than in other jurisdictions, for the reasons that you explained in terms of the capital needs, or do you believe that they have room to come down?
5734 MR. BRAGG: I do believe they have room to come down, but also, I don't think they'll come down to the levels that we see in other jurisdictions because the reasons why our prices will go down are the same reasons prices can go down in other jurisdictions.
5735 And what I'm saying is, as consumers -- like, if you just freeze the business today, nobody consumes anymore data, that the average consumption stays at whatever it is, 2.5 gigabytes a month, so many minutes of it, then we don't really have much opportunity to lower prices. You know, we can -- we're always going to react competitively, but at some point in time -- you know, we're pretty close to operating at the margins now that it gets hard to say, well, prices will continue to go down. They cannot go down below cost.
5736 Where we see them going down is as consumers continue to chew up and use more and more data, the incremental cost to provide more and more data actually gets less. Like, it's incrementally every new gigabit of data we put on the network costs a little less than the last gigabit. So, our -- the average cost of data goes down actually, as people use more, and that's where we see prices actually go down. Pricing go -- prices going down per gigabyte.
5737 You know, lots of our plans have remained flat because -- from a pricing standpoint, but we've continue to add more and more capacity, customers continue to use more. So, you get that balance effect.
5738 So, yes, I do see prices to continue to go down, as long as we continue to see usage going up, which I do think usage will continue to go up. I mean, if you think about, you know, a cable modem customer, or an at-home internet customer still today uses 500 to 1,000 times the data that a cell phone customer does, and that's generally because of the -- I'll call it the economic restrictions, because the cost of service, the cost to provide data over cellular network is hugely more expensive than it is on a wireline network. So, there's an economic disincentive to use.
5739 But to my point, as long as that marginal cost continues to go down to provide the additional data, that, in effect, will -- on a usage basis, or per megabyte, continue to lower prices.
5740 COMMISSIONER BARIN: Okay. So, if I'm looking at it from a consumer standpoint, the consumer may not necessarily see their absolute bill go down, but the relative value that they're getting is -- it's better value, in other words.
5741 MR. BRAGG: Right.
5742 COMMISSIONER BARIN: Okay. Thank you.
5743 THE CHAIRPERSON: Thank you.
5744 Just following on the discussion you just had with Vice-Chair Laizner, Ms. MacDonald, if you wish, you can put on the record, through an undertaking, suggestions you might have with respect to the tower siting issue. Obviously, as Mr. Bragg said, this is -- there's a -- well, there are two regulators operating here, and each has their proper realm of activities, but it's always useful to hear proposals for improvement, and I'm sure those that -- the officials at ISED are carefully watching this proceeding, so ---
5745 MS. MacDONALD: Correct.
5746 THE CHAIRPERSON: --- feel free to do so, if you wish to.
5747 MS. MacDONALD: Okay.
UNDERTAKING / ENGAGEMENT
5748 THE CHAIRPERSON: I have no further questions. I believe counsel might have a couple of short questions.
5749 MR. BALKOVEC: Thank you, Mr. Chairman.
5750 If you've been following the hearing thus far you likely have an idea of the flavour of question that I'd like to ask you. It has to do with low-cost plans and jurisdiction, specifically whether protecting the interests of vulnerable consumers would be a valid consideration for the Commission in potentially reasserting some form of regulation.
5751 Again, it's clear that you don't -- you wouldn't consider such a measure to be necessary, but at the jurisdictional level, would you consider that to be a valid consideration?
5752 MR. BRAGG: You know, I think if you or if -- I'm not going to say if you thought. If there was a demonstrated lack of competition and a demonstrated sort of need to control pricing because some -- there were excess rents in the business, then I'd say, yeah. But I think we have suggested and/or demonstrated that it is a competitive marketplace, and that rate regulation is not needed. And as the risk of affecting operators by, you know, driving them to have to operate below cost, if the rate falls under their cost, and essentially driving them out of business.
5753 MS. MacDONALD: If I could add to that, when I think about a regulated rate to ensure that Canadians who need a regulated rate are protected, I think back to the days of the monopoly telco environment when there was no other option, and so the Commission had to regulate a rate to ensure that the telcos would not exceed that rate for vulnerable consumers as well. And in doing so, the Commission determined that an appropriate rate -- and I'm not necessarily going to get it exact, but was somewhere in the range of over the years, and, you know, when we entered the market providing phone service I think our competitor incumbent was offering services in the 25 to 30 range per standard basic phone line, depending on what part of the country. And that's a basic phone line at 25 to $30 in the late '90s.
5754 The rates stayed regulated for them while we entered the market as a competitor, so that we could compete. And we weren't regulated to provide such a rate because -- and I don't mean to be saying this, obviously the Commission knows this, but I'm just getting on the record -- we weren't required as a competitor to provide a regulator rate because we're a competitor. We're trying to win a customer. We're trying to convince customers to come to us. So, the protection only needed to be with an incumbent who is already subject to that rate.
5755 This is a far cry today from what we had then. This is a market characterised by numerous competitors now on the market, including flanker brands. And when you look at the pricing out there, these are not, you know -- I mean, $30 for a basic phone line in the '90s or $25, which was a regulated rate, I mean, what people -- consumers get today with a wireless product, and there's plenty of other low-cost options that are on the record of this, I just don't see how we can justify stepping in and regulating in this kind of environment. So, that would be my answer on that.
5756 MR. BALKOVEC: Thank you. As you say, there's always value in getting this stuff on the record.
5757 My final question would be would you see any kind of need for a potential condition of service surrounding visibility of lower cost options to make sure that if these options exist in the market they're readily apparent to the people who could benefit from them?
5758 MS. MacDONALD: I'm just trying to think about whether that already may exist in some form or fashion, whether it be in a consumer code, expectations, you know. I know that there are definitely legal requirements for transparency of pricing, et cetera, in terms of disclosure of every and -- you know, every plan, et cetera. I don't know if that's already in place under a CRTC Code of Conduct, but it's something that we might have to look at answering.
5759 I don't know the answer to that right now in terms of whether it should be mandated. I would expect -- and we've heard TELUS yesterday speak to the fact that they -- in fact, they have an entire flanker brand dedicated to that, so they're -- part and parcel of their brand is to disclose to customers what they have available. So, I would be inclined to say that applies for many companies across the board.
5760 MR. BALKOVEC: Thank you. Those are all my questions.
5761 THE CHAIRPERSON: Thank you. Thank you very much for your presentation and responses today, and for travelling to be with us. Much appreciated as always.
5762 Let’s take a 15-minute break. We’ll return at 11:05.
5763 MR. BRAGG: Thank you for the opportunity.
--- Upon recessing at 10:47 a.m.
La séance est suspendue à 10 :47
--- Upon resuming at 11:06 a.m.
La séance reprend à 11:06
5764 THE SECRETARY: We will now hear the next participants, Railway Association of Canada and CN Railway.
5765 We will hear each presentation, which will then be followed by questions by the Commissioners to all participants.
5766 We will begin with the presentation by Railway Association of Canadas.
5767 Please introduce yourself and your colleagues, and you have 10 minutes for your presentation.
PRESENTATION / PRÉSENTATION
5768 MR. BRAZEAU: Thank you, Madame Hearing Secretary.
5769 Monsieur le président, Madame la Vice-présidente, Conseillers distingués; personnel du Conseil; et collègues de l’industrie des télécommunications.
5770 Good morning. My name is Marc Brazeau and I am the President and CEO of the Railway Association of Canada. Before I start, I’d like to introduce the other members of the panel.
5771 And to my left is Tanis Peterson, our Senior Director of Operations and Regulations; and to my right is Daniel Lafrenière, our Director of Spectrum and Telecommunications. And behind Daniel is Bram Abramson, our outside regulatory affairs consultant.
5772 C’est un honneur de comparaître devant vous ce matin sur ce panel conjoint avec nos collègues du Canadian National, qui s’adresseront à vous immédiatement après notre présentation.
5773 Ce matin, nous vous parlerons de ce que nous considérons être une occasion considérable d’améliorer l’intensité concurrentielle du secteur sans-fil. Et surtout, d’améliorer le cas d’affaires pour desservir ceux et celles vivant en zones rurales et éloignées.
5774 Pour ce faire, nous vous demanderons de vous adresser à un manquement de nature réglementaire qui freine actuellement la capacité de nos membres d’avancer et de négocier les solutions dont ils ont besoin. Il s’agit de quelques mots des Lignes directrices canadiennes relatives à l’attribution des identificateurs internationaux de stations mobiles (IISM) - ou, en anglais, les Canadian IMSI Assignment Guidelines - qui limitent l’accès de nos membres aux codes du réseau mobile.
5775 On parle aussi des MNC – Mobile Network Codes.
5776 MS. PETERSON: Well, it won’t surprise you to hear that we’re the industry association representing nearly 60 freight, intercity, commuter, and tourist railways in Canada. Our members move close to 88 million people and over $310 billion worth of goods each year across our country.
5777 But our members are also among Canada’s biggest telecom operators, and employ more than 2,100 telecom professionals to do it.
5778 That’s nothing new. CN established the national broadcast network that became CBC. CN and CP together created a national network that kicked off telecom competition in this country, with your historic 1979 decision to mandate its interconnection with Bell Canada. Eventually CNCP became Allstream.
5779 We are, today, out of the service provider business, but we continue to be extremely active in the Radio Advisory Board of Canada, which we co-founded. In 2000, Industry Canada awarded us the first spectrum licence to be granted to a user.
5780 Our role coordinating activity under that licence has helped carry forward the intensive use, investments, and innovation in national wireless networks that is core to the safety and efficiency of our railways.
5781 MR. LAFRENIÈRE: Mais loin de nous l’idée de ralentir en matière d’innovation ou d’investissement. En tant que Directeur, Spectre et télécommunications à l’ACFC, je passe beaucoup plus de temps avec nos collègues de chez ISED, qui sont responsable de la gestion du spectre, qu’avec vous, chers membres du CRTC. Et ce, pour la simple raison que ni notre association, ni nos membres ne sont des fournisseurs de services de télécommunication. Nous sommes des usagers et nous détenons une licence de spectre à titre d’usager, mais l’étendue et la qualité de notre réseau se compare avantageusement à ceux des plus grands fournisseurs de service de télécommunications canadiens.
5782 In the past our member networks have operated in a way that is parallel to the networks used by most Canadian consumers, with a few exception for non-mission critical applications.
5783 MR. BRAZEAU: But the railway communications grid is changing. So are the kinds of networks that we are building. Our mission-critical applications now need higher speed and higher-volume data transmission. The density of connected, fast-moving, wireless, always-on devices we rely on is continuing to grow.
5784 We still rely principally on narrowband communications to do that. You’d be surprised at what we have been able to squeeze out of that spectrum. We keep upgrading how we use our transmission facilities. We keep pushing forward on our own orderly development of a trackside communications grid that safeguards and strengthens the key social and economic role that telecom enables us to play in all of Canada’s regions; moving people and moving cargo.
5785 Those changes are moving us from parallel narrowband towards participation in an interconnected, interoperable network of broadband networks.
5786 MR. LAFRENIÈRE: Railways have never run without managing their own networks, assembling their own connectivity, and interconnecting with other networks core-to-core. As Critical Infrastructure Operators, the stakes are just too high for our sector. We are committed to railways’ migration to broadband spectrum as we feel that it will help -- that it will -- sorry. And at the same time, we will look -- we will help the Commission deliver on some of its goal in this proceeding. Sorry.
5787 You want to see lower barriers to competitive entry and a better business case for rural and remote wireless broadband. As the situation is, we are thriving in rural and remote areas. We are talking about lowering the cost of wireless deployment by being in a position to share a radio access network with mobile network operators or public safety operators wherever it needs to be built; whether they are members of the Big 3, they are regional disruptors, or anyone else looking to partner on deployment and share costs.
5788 But here’s the problem: In narrowband, we’re doing just fine; in broadband, not so much. We face a barrier to interconnecting with mobile network operators core-to-core because interconnection is subject to a Mobile Network Code, which we don’t have right now; a Mobile Network Code by which we are identified to other network, and which we can use to route traffic to each other is critical for our operation -- for our broadband operations.
5789 These Mobile Network Codes, or “MNCs”, are basic building blocks of the LTE and 5G worlds. Without MNC access, we can’t route our own traffic. It is as if rather than binding together upstream connectivity to make a very strong rope, we’re hanging by a thread from a single carrier. It would mean outsourcing a core function that we need to be able to deploy, manage, fix, reconfigure, and control in order to meet railway industry standards and run our business. This is simply not possible; we can’t outsource that.
5790 So we’re here today to ask for the removal of a regulatory barrier preventing us from moving forward.
5791 I would like to be clear; this is about Mobile Network Codes, not eSIMs. Different Critical Infrastructure Operators design and build different telecom networks, yet lack of MNC access to our own routing is a key building block holding all of us back. The RAC’s members are all on the same page. We think you’ll find the Canadian Electricity Association’s members are too; we do share some interests with them and you will be hearing from them next week.
5792 We’re asking that you direct the Canadian Steering Committee on Numbering to revise the Canadian IMSI Assignment Guidelines to enable critical infrastructure operators to access Mobile Network Codes so that we can migrate our mission-critical communications to broadband.
5793 MR. BRAZEAU: This wouldn’t be the first time the Commission has done exactly that. In your 2015-177 Wireless Regulatory Framework you took care, at paragraphs 161 and 162 to direct the CICs Numbering Committee to revise the IMSI Assignment Guidelines to let full MVNOs be issued mobile network codes.
5794 We respectfully submit that the case is even clearer here.
5795 You are grappling with a very heated debate in this hearing about whether and how to mandate wholesale unbundling of access facilities for MVNOs.
5796 We don’t have a dog in that fight.
5797 But we can make it a much better fight all with one regulatory change.
5798 Lack of MNC access is blocking critical infrastructure operators from buying lots of connectivity from those who can sell it to us, and from building shared radio access networks where there’s nobody to sell it to us.
5799 Your move to fix that could create significant positive change within the sector.
5800 Directing the numbering committee to revise the IMSI Assignment Guideline to enable critical infrastructure operators whose core mission includes running telecom networks to gain access to MNCs will deliver three key benefits.
5801 First, safer, more efficient, and more secure ways of moving people and freight across this country.
5802 Those ribbons of steel you heard about are becoming digital railways, but can’t get there without routing their own traffic.
5803 Secondly, you will unlike shared wireless bills in rural and remote areas, enabling their deployment at a lower cost structure.
5804 And thirdly, you will fuel competitive intensity once we are all able to move into broadband and buy connectivity in a way that rewards the best performance and value.
5805 Il nous fera plaisir de répondre avec vos questions avec nos collègues du CN une fois leur présentation terminée.
5806 THE SECRETARY: Merci.
5807 We’ll now hear the presentation of CN Railway.
5808 Please introduce yourself and your colleagues. You have 10 minutes.
PRESENTATION / PRÉSENTATION
5809 MR. ARANIBAR: Merci beaucoup, Madame la Secrétaire.
5810 Good morning, Mr. Chairman, Madame Vice-Chair, distinguished Commissioners, Commission staff, ladies and gentleman in attendance at this hearing.
5811 Je m’appelle Antonio Aranibar. Je suis Architecte de Solutions Senior en Technologies d’Opérations au sein du Canadien National.
5812 Je suis accompagné aujourd’hui par M. Tim Pulak, au bout de la table, notre Directeur principal du programme ETC (Enhanced Train Control – par son acronyme en anglais) et par Catalin Miu, Directeur principal de Mise en opération de technologies.
5813 First and foremost, Canadian National Railway would like to express its appreciation for the opportunity to address the Commission in this joint panel attendance with our Railway Association of Canada representative.
5814 CN has actively contributed to the RAC’s May 15th, 2019 submission in response to CRTC’s consultation 2019-57 at the outset of the review of mobile wireless services proceeding in Canada.
5815 The hearing is an opportunity to share our industry position.
5816 It is our view that Canada may obtain multi-faceted and multi-lateral benefits if the Commission were to consider a minor enhancement to the Canadian IMSI Identity Assignment Guideline that would allow the allocation of a mobile network code to critical infrastructure operators, CIOs.
5817 We believe that such regulatory amendments would enable transformational public/private partnerships in the mobile wireless communication sector.
5818 Access to a mobile network code for data routing and network identification would allow critical infrastructure such as rail and utilities to operate key components of mobile communications networks in line with our operational requirements by leveraging incumbent mobile operator networks and/or private/public initiatives, such as the upcoming Public Safety Broadband Network of Canada.
5819 A key innovative highlight of the proposal is that it could also enable MNOs and MVNOs to serve rural and remote communities of Canada currently deprived of reliable and/or affordable mobile broadband wireless access, and hence, excluded of the social and economic benefits of the technology it brings.
5820 It is important to note that the vision we are sharing hereby is non-committal and will have to be subject to a thorough review of its economic sense and viability for all stakeholders if the regulatory hurdles were to be removed.
5821 Before we elaborate on the proposal, we would like to share with the Commission some key principals of railway operations to outline the justification of our request.
5822 Mr. Brazeau has clearly articulated the significance of the railway industry as an economic engine of Canada.
5823 As such, and as a critical infrastructure operator, railway operations are closely linked to concepts of great importance to Canada’s social and economic sustainable development.
5824 The Government of Canada defines critical infrastructure as:
5825 “Processes, systems, facilities, technologies, networks, assets, and services essential to the health, safety, security, or economic well-being of Canadians and the effective function of government.”
5826 Our government also highlights the importance of reliable critical infrastructure by saying that:
5827 “Disruptions of critical infrastructure [operations can] result in [significantly] adverse economic effects and […] harm to public…”
5828 Canadian National Railway opposes these principles. Hence, our operations rely on the same pillars: safety and reliability.
5829 Railway technological advancements are integrated into our operations only after exhaustive assessment and verification of their compliance with our most stringent safety requirements for both the communities we serve and our personnel.
5830 These systems need to be also reliable and not disruptive to the continuity of our rail operations.
5831 Proof of our commitment to safety and reliability is our sustained investment in safety enhancing technological systems, as well as continuous improvements and innovations to our rail operations.
5832 CN has over 800 wayside field devices in Canada that monitor train and locomotive health, including hot wheel detection, wheel impact and load detectors, cutting edge railcar imaging portal systems, and new and highly specialized track inspection railcars capable of inspecting rail condition and track components.
5833 This data and information are essential to railway operations.
5834 These systems are strategically located and integrated as a network within CN’s transportation, mechanical and engineering functions at CN.
5835 As these systems evolve, CN is a leader in safety, innovation, and the common thread is managing telecommunications and data effectively as a digital railway.
5836 Reliable communications across our vast territories, through mountain ranges, prairies, and lakes, both in urban and rural settings, are hence of the essence.
5837 CN has deployed one of the largest privately owned fibre-optic networks in Canada spanning over more than 9,500 kilometres, running aside our tracks.
5838 We operate narrow band radios in dedicated VHF and UHF spectrum (160MHz, 450 MHz, 800 MHz and 900 MHz) licensed to the RAC for a variety of mission critical railway operations.
5839 Narrowband wireless technology is, however, becoming a bottleneck.
5840 New mission critical applications demand increased wireless data communications capability that only broadband wireless can deliver.
5841 Data capability demand for advanced systems such as distributed power, diagnostics, intra locomotive consist communications, new methods of train control, and their optimization is increasingly evolving.
5842 On the other hand, commercial wireless broadband networks are designed, operated and maintained with a primary focus on the consumer electronics market, that is, the smartphones and tablets.
5843 Through no fault of its own, the nature of MNOs’ business model does not require mission critical levels of network hardening, reliability, availability and ubiquitous rural coverage.
5844 Commercial mobile network offerings are driven mostly by service level objectives and do not commit to stringent service level agreements.
5845 MNOs’ networks coverage is naturally driven by market forces and subscriber population density, which is not necessarily aligned to critical infrastructure presence in remote regions.
5846 The rail industry requires a higher ubiquitous wireless reliability performance standard for the continuity of its operations.
5847 These are all factors that have curbed the adoption of broadband wireless technologies in the critical infrastructure domain, and limited their utilization to bulk non-mission critical data transfers, or as best effort backup mechanisms to private narrowband communication-dedicated networks.
5848 A mobile network code for critical infrastructure operators sectors such as rail transportation would enable CIOs to route their mission critical data to their own high availability core networks while also enabling a host of collaboration and partnership opportunities.
5849 The proposal is hinged on two complementary network models, namely critical infrastructure operated shared radio access network (CIO shared RAN) and private virtual network operator (PVNO).
5850 Shared RAN is a standard global practice supported by all major equipment manufacturers and widely used by mobile network operators in Canada and abroad for radio network sharing.
5851 In the proposed scenario, critical infrastructure would be able to install, operate and maintain a shared radio access network over their infrastructure footprint, while also providing MNOs, MVNOs, and/or potentially public safety, with radio access to remote communities.
5852 Conversely, in urban settings, the aforementioned highly available critical infrastructure operator Core Networks can connect to two or more overlapping MNO radio access networks, obtaining enhanced reliability through radio network redundancy. This is the network model referred to as PVNO.
5853 The allocation of an MNC to critical infrastructure operators would entail multiple benefits for Canadians and all stakeholders. Namely, reduction of the digital divide in underserved rural and remote areas surrounding critical infrastructure footprint. Critical infrastructure operators access to a high level of core and radio access network control. MNOs’ and MVNOs’ opportunity to enhance their subscriber base into remote communities over shared critical infrastructure operator radio access networks. Potential for Public Safety Broadband Network, PSBN, extended reach into rural and remote communities.
5854 In concluding this address, we would like to state that the decisive collaboration between government, critical infrastructure industries and mobile network operators proposed herein, has the potential to situate Canada in a global leadership position concerning the adoption of wireless cellular technologies in support to safe and reliable critical infrastructure applications, while delivering outstanding social and economic benefits in the form of wireless broadband inclusion to the communities that we jointly serve.
5855 Thank you so much for your attention today. We look forward to answering any questions that the Commission may have about either of our two presentations.
5856 THE CHAIRPERSON: Thank you. Thank you very much for your presentation. Let me start.
5857 I guess at the most general level, what you are saying is that your proposal -- and I think it’s similar although there are differences, what the electric distribution industry is raising and even some other public safety and law enforcement players are saying -- is that it’s possible that some of these changes could improve not only operational efficiency, as you said -- just said for the railway industry, but also fulfill other broader public safety objectives.
5858 So can you unpack that a little bit for me, in terms of there are obviously public safety measures developed both on the carrier side for the transportation industry? Can you unpack just how this would -- the changes that you propose, would in fact increase public safety and support the national security strategy and action plan which you’ve quoted in your submissions to us? We’ll start there.
5859 MR. LAFRENIÈRE: Okay.
5860 THE CHAIRPERSON: Vous pouvez répondre en français ou en anglais.
5861 MR. LAFRENIÈRE: Okay. Merci. We are a little bit different from the public safety community in the fact that what we are looking at is really, full control over our network. We are looking for an MNC to be able to operate our own core. So we are master of our own destiny when it comes to routing communications.
5862 We are not looking at a shared network with the public safety. We are very well-aware of band 14 availability. We are very well aware of the work of the TNCO group, the Temporary National Coordination Office of the Public Safety Broadband Network. But really, we are not looking to be a PSBN user. We are really looking at being a -- if we ever partner with a PSBN, we will be a co-operator, but we are again, differentiating ourself from the public safety community because we really need that core network to be part of our operation, and we will -- and we do not intend to depend on somebody else running a core network that we will invest in.
5863 THE CHAIRPERSON: And how does it differ from other sectors, industry players, who might too like to operate their own networks for their own reasons, separate from the commercially available services? Why -- why can’t the existing wireless players, wireless and broadband players, fulfil your needs in a commercially viable way?
5864 MR. LAFRENIÈRE: Okay. That’s a good question, actually. Trains are running on -- they are not depending fully on communications right now, okay? So even if there is a shortage of communications -- and right now we’re talking about narrow band communications -- a train will keep running. And if there is a really -- if there’s a real shortage in communication for example, I don’t know, two or more towers go down in a train route and there’s no way to communicate with the locomotive, the train will stop. Okay.
5865 What we are fearing here, and not only are we fearing, but we are -- it’s safety first in our industry. And whenever there would be a cut in communications, right now it’s narrow band, but if we go broadband, whenever there is a cut in communication, the train will stop. And stopping a train is a long -- it’s a short process, okay? Trains don’t stop on a dime of course, but restarting a train is a long process. So we don’t want that to happen all the time, because we cannot control all the variables of a network, such as, you know, maintenance time, or RAN cut off and stuff like that.
5866 So this is where I think we differentiate from the other players, is that you know, we need to keep our train running, and if there is a shut down of communications between the train and the central, the train will stop. And it’s -- it’s a pain to restart a train.
5867 THE CHAIRPERSON: Thank you.
5868 MR. ARANIBAR: If I may add -- if you’ll allow me?
5869 THE CHAIRPERSON: Please.
5870 MR. ARANIBAR: Commissioner ---
5871 THE SECRETARY: I’m sorry, could you please just ---
5872 THE CHAIRPERSON: Microphone?
5873 MR. ARANIBAR: Yeah, it’s up. So if I may add to what Daniel just alluded to, it -- personally, I bring a couple of decades of background in the wireless cellular industry. It’s -- and again, as I mentioned during my presentation, it’s not through fault of their own that industry is catering for a different set of users as their bulk subscriber base.
5874 These days currently, we do have in our rail operations, some utilization of cellular connectivity, but it’s very unlikely that we would put all our eggs on that one basket, in the sense that the wireless cellular industry is characterized for not having service level agreements that they are willing to undersign or to put forward in contractual terms. They are mostly doing it by service level objectives, which is a yearning of performance and wanting to remember just to make an anecdotal analogy.
5875 In our workspace, if we were to produce -- do some maintenance or some configuration work on rail equipment that is linked to mission critical applications, such as train safety, and so on and so forth, we have full situational awareness of where are trains are at the moment, and we would not conduct such maintenance until that train has stopped, or has already passed, or is not in service.
5876 The wireless cellular industry as we used to kind of kid around back in the days as a young engineer, right? Midnight to 5:00 a.m. maintenance window period is a pretty hectic period where they are allowed to do a lot of things, while most subscribers are sleeping, and they will not feel the impact of a relatively not as performing or reliable service. Which is good enough for people who are having glitches of 30 seconds of a Netflix show, which is going to be buffered anyways, but a train might stop, and again, there goes our reputation as a supply chain and as economic engine of Canada.
5877 THE CHAIRPERSON: So I’m going to follow up, but I think I’ll follow up on those two themes, maybe separately. So in the first response, if I can paraphrase, what you’re saying is that, you know, for everyday use so to speak, the system is fine, but you’re more concerned about emergency, or exceptionally, extraordinary circumstances, but if a public safety version of an MVNO is relying still on the underlying carriers to provide you with the service in any event, how is it more secure? How is it different fundamentally underneath? If towers go down, towers go down, and it wouldn't be available to the wireless provider or you.
5878 MR. LAFRENIЀRE: Thank you. That's a very good question.
5879 And that's one of the main reasons why we need to operate our own core. We need to have access to at least two radio access network in any given areas.
5880 Right now with centralized train control, which is good old dispatch with voice communications, we have double or triple redundancy for communications all across our network. We would need something like that when we go -- we will need something like that when we go broadband, and having our own coordinate work will allow us to -- in urban areas where there are service providers with spectrum, would allow us to connect to the RANs of two or more providers.
5881 So if one tower goes down, we would still rely on the RAN of the other service provider.
5882 THE CHAIRPERSON: But isn't that the case for the industry today that they, in turn, rely on one another? If there is a major outage on one system, I assume from a public safety and service continuity perspective, that they support each other so that there would be service.
5883 MR. LAFRENIЀRE: It is, but if a Radio Access Network, if a RAN, if the last mile link goes down, there will be a -- there will be a shortage in communications which is not -- it's not acceptable for us.
5884 Maybe -- yeah, because the train will stop. And maybe Antonio can go a little bit further on that with respect to shared RANs.
5885 MR. ARANIBAR: Sure. I can elaborate on that.
5886 I mean, it's worth remembering that the Public Safety Broadband Network of Canada is still a work in progress, so the only real-life example, I guess, we can refer to is what happens in the United States, FirstNet, which is the first responders' network.
5887 Bell in Canada has some offerings. They have been trying to introduce quality of service content into the offering for -- to cater for first responders and potentially to position themselves towards being operators of the Public Safety Broadband Network of Canada. But what it's worth remembering is that in FirstNet, which is operated in a wholesale fashion by AT&T Wireless in the United States, just what Daniel was saying, the last mile access, it's risk management. They're playing with the statistics, right.
5888 The last mile access has coverage redundancy for multiple towers. They are solely depending on that layer of one operator, but then if one tower goes down there will be some marginal coverage provided by another tower.
5889 The core network, conversely, which is a hub which centralizes all these Radio Access Network, which is affiliated network coverage which is centralized in the back office systems of, say, AT&T, that one has to be built at the highest level of availability, reliability. And it's no surprise that AT&T built a separate core just to cater for public safety. Not the regular core because maintenance window, once again, on that commercial subscriber workspace, it's a best effort network.
5890 So the same thing would have to happen in Canada once we build a PSBN. And all those are driven by this technical artefact known as a mobile network code.
5891 We are pretty much asking for our own ability to access to a mobile network code as critical infrastructure operators of Canada to be able to build the same resiliency that the public safety community could build by owning a separate core network.
5892 THE CHAIRPERSON: And what about concerns, for example, about cybersecurity? Networks operators have obligations, responsibilities with respect to cybersecurity. It's an increasingly complex area.
5893 I guess in the most simple sense, the more devices attached to the network -- and this obviously will be a challenge in the future in 5G, but also more that things are not in their direct control, I'm assuming that they will have increased concerns about cybersecurity.
5894 MR. LAFRENIЀRE: Well, you know, we -- as I mentioned earlier in my presentation, we belong in this market. We've been around for a while.
5895 We are well aware of all the threats that could come out when it comes to communication and especially mission critical communications. And I believe that we have standards that are way up there.
5896 We do have policies in terms of cybersecurity within our main members -- our Class 1 members, which are CN and CP, that are, again, way up there, equal or maybe superior to what is -- what might be going on in the public safety community or the MNO community.
5897 Do you have anything to add to that?
5898 MR. ARANIBAR: No.
5899 THE CHAIRPERSON: Okay. Thank you.
5900 So you've -- in your submissions, you wrote that, in effect, you'll become an IOT player and to push out your operational capacity in terms of 5G connectivity. What kind of services are you envisioning a PVNO -- I'm going to have to make sure I say that. It doesn't immediately leap to mind.
5901 What kind of services do you envision a PVNO offering?
5902 MR. ARANIBAR: Okay. So the PVNO, it's a network model which is capable of providing with overlapping coverages like you were suggesting through multiple mobile network operators on that last mile access we were talking about.
5903 So by owning a core network of our own, right, which could be enabled by having access to a mobile network core so that we can route our device traffic towards that core network and riding on top of redundant, overlapping mobile network operator coverage on urban settings. And this applies only to urban settings, again, where they have a strong presence, right.
5904 We are able then to have an aggregate redundancy of core network plus redundant, as I was saying, best effort overlapping Radio Access Network coverage which would enable a host of industrial internal things, use cases which are very specific to our industry.
5905 Examples of that, again, if we go back to the operational technology I alluded to in my presentation, advanced rail car imaging systems or track inspection -- autonomous track inspection systems which are extremely more efficient to detect. They go through the whole anatomy of the track and they collect enormous amounts of data, gigabytes of data which eventually, if a help alert is noticed on this track, eventually it will issue an alert and send a host of artefacts that will get someone out of bed so that they go and look into that track situation right away, pre-emptively.
5906 So it's an enhancement to safety, it's an enhancement to efficiencies. So these are the type of industrial internal things -- cases that we're looking at.
5907 THE CHAIRPERSON: Thank you.
5908 Could it also be used to deploy handsets to the workforce? Is that part of your vision?
5909 MR. ARANIBAR: To?
5910 THE CHAIRPERSON: Provide handsets, mobile devices ---
5911 MR. LAFRENIЀRE: Of course.
5912 THE CHAIRPERSON: --- to the workforce.
5913 MR. LAFRENIЀRE: Of course. We would take full advantage of an MNC and migrate our network on our own core in order to make -- to make this a global thing amongst railway or critical infrastructure operators.
5914 We would eventually have private networks. There's a lot of talks about private 5G basically because of the nature of the 5G spectrum that will be up. The one that will be optioned eventually or the one that is a millimetric wave, we are looking at using 5G eventually to replace Wi-Fi, which is not very performant in urban areas, so yes, we would take advantage -- full advantage of a mobile network code to -- yeah, to migrate our personal communication devices.
5915 THE CHAIRPERSON: And is your industry looking at acquiring 5G spectrum for itself?
5916 MR. LAFRENIÈRE: Right now we’re not eligible for bidding in any option -- in any options; sorry. But it’s not out of the question, especially since the spectrum that we are -- that we might look at is not the expensive spectrum in urban areas. These are very much out of reach for our industry because, you know, the cost per pop is extremely high and we don’t work on a per pop industry.
5917 But it’s not out of the question. We actually look at that a few years ago but we decided not to because we were not eligible. We were not registered with you guys as a facility-based service provider.
5918 THE CHAIRPERSON: But I assume you’ve raised the issue with ISED in the past, or currently, with respect to possible changes to option rules and eligibility?
5919 MR. LAFRENIÈRE: Yeah, we talk with ISED on a regular basis. We actually submitted some comments when there was the consultation on 600 megahertz spectrum. We proposed that a block of five plus five megahertz be assigned to Critical Infrastructure Operators. That was not -- obviously, that was not approved by ISED.
5920 But it’s the story of spectrum management at the RAC for the last 20 years, that we meet regularly with ISED; we’re trying to find solution to migrate to a broadband, and this is actually one of the solutions that -- that’s the latest solution that we thought about.
5921 THE CHAIRPERSON: Thanks. So I assume you’ve had a chance to look at the record of this proceeding, and hopefully, had a chance to look at some of the other proposals that have been put forward by parties to the proceeding. If the Commission were to mandate full MVNO access, would that not be sufficient to meet your needs?
5922 MR. LAFRENIÈRE: As Marc mentioned in his part of the presentation, we don’t have a dog in that fight. We would rather not get into that debate that is left to -- that debate is amongst service providers; we are users. And we are certainly not counting on any MVNO decision by the CRTC to meet our needs.
5923 We are all about getting NMNC and managing our own core, and anything that would delegate some of our railway network management is simply not -- it’s off the table for now.
5924 So, again, we don’t have -- we’re users; we’re not service providers.
5925 You have something to add, Antonio?
5926 MR. ARANIBAR: Yeah. I mat add to what Daniel just alluded to.
5927 The -- and I agree that we are not stakeholder on that. We understand all what’s at stake; we’re following closely the process but we don’t take any sides.
5928 Nevertheless, having said that, to address more directly, like, if you were to mandate MVNO access and whether that would facilitate, well, not really. An MVNO provider is entitled by the IMSI location guideline to obtain a Mobile Network Code as a non-facility based operator because they need that precisely to be able to route their traffic, which is the same conundrum we are on, right?
5929 Having said that, we still are not -- we don’t want to go into the network operator business; we don’t want to deal with subscribers. If anything, we want to be enablers.
5930 And also to bring back perspective to what I mentioned during my presentation, there is a second component, other than the MVNO, which is these CIO shared RAN we have been alluding to, which is our value proposition of potentially -- and I emphasize potentially -- considering building radio access network, shared radio access network with multiple stakeholders that could use our fibre, we could use our right-of-way presence, and serve the social and economic purpose of catering for urban and -- sorry; for rural and remote communities as well.
5931 And, depending on who are the players, that’s when, in my presentation, I didn't -- I made a reference to public safety. If they were to entertain us as one of the partners, and that’s one of the multiple possibilities, definitely we will be looking forward to also bringing not only helping to bridge the core network for Mobile Network Operators, MVNOs if they ever get mandated, to the remote communities, but potentially also public safety.
5932 This is all a vision we are sharing with you today, and this vision can be materialized, the twofold vision, by revising the IMSI location guideline and paving the road for a Mobile Network Code access to Critical Infrastructure Operators as economic engines of Canada.
5933 THE CHAIRPERSON: Thank you.
5934 MR. BRAZEAU: So -- go ahead.
5935 MR. ABRAMSON: If I could just add?
5936 In very simple terms, just from a regulatory standpoint, you know, we’re talking about in this hearing about full MVNOs, after in 2015 the Commission changed those IMSI Assignment Guidelines to provide for full MVNOs to be able to route traffic.
5937 Today we have Critical Infrastructure Operators. Obviously we’re not talking about public safety operators; they’re a different kind of user. But we’re talking about Critical Infrastructure Operators who would like to not only be able to route their own traffic, who require the same kind of change that full MNVOs obtained in 2015, which really set the table for them being able to hopefully negotiate their MVNO business; that apparently hasn’t come to fruition.
5938 But on the -- you know, on this side when we’re talking about these hybrid networks with PVNO elements and shared RAN elements, really, in rural and remote regions, and we’re talking about building networks where no networks are available, you can’t do that if you can’t route traffic to and from your network.
5939 And so, really, any discussion of, you know, things like a tariff and all that is well beyond what the Critical Infrastructure, et cetera, I think is looking for. Here it’s really just a question of being able to route traffic. Everything else is a question of building, and it’s a question of negotiation.
5940 THE CHAIRPERSON: Thank you.
5941 You just mentioned the hybrid approach. Can you compare your hybrid approach to, for example, what’s being proposed by Cogeco in its model?
5942 MR. LAFRENIÈRE: Yeah. We had an interesting discussion just yesterday about that.
5943 Cogeco is hybrid in the sense that they want to leverage some of their wireline infrastructures with wireless. Our approach might be called hybrid also but we are more talking about going virtual on existing networks in urban areas where there is no spectrum available because it’s all hold by MNOs. And the other part of the hybrid model would be going on our own network, where that’s actually where we thrive in a rural and remote areas, going on our own network using secondary market spectrum, which is available obviously, or using eventually then working spectrum. You know, I’m dreaming out loud here but this is the way we see -- we see being hybrid.
5944 But, of course, same as Cogeco, we do have some wire -- some land infrastructure, major land infrastructure. We are actually the -- one of the biggest owner of a private fibre optic network. So that could be seen as hybrid in that sense also.
5945 But when we’re talking amongst ourselves, when we think hybrid, it’s really, you know, shared RAN that we operate and where there is no spectrum, where we cannot build a RAN, we go virtual on existing RANs, more than two again to forward NMC, and for safety.
5946 THE CHAIRPERSON: Thank you.
5947 MR. ARANIBAR: If I may?
5948 THE CHAIRPERSON: Yes.
5949 MR. ARANIBAR: Maybe for further clarification, and I agree with everything that Daniel just said.
5950 Just to make it simpler, I think they’re using the term hybrid in a different context. It’s an unfortunate coincidence, right? So when we say hybrid, it’s a two-fold proposal, PVO plus shared RAN versus the hybrid they are talking about is a different type of setup.
5951 THE CHAIRPERSON: I understand, thank you.
5952 I don’t know if you were listening or in attendance when representatives from Bell were here the other day. Vice-Chair Laizner had a discussion with them about some of these requests, and I'm just looking at the responses. We asked them basically if they'd had some discussions or negotiations with industry players such as yourselves, and I think his description was they wouldn't call them negotiations, but some discussions, and that's in part because they've suggested that in part on the customer side there's not necessarily complete alignment between individual customers and the associations. That may or may not be true in your case. You can speak to that. But generally speaking, the view is simply it's premature, that we're not ready at this point. There's a wide range of demands being made. And they feel, in their words, that they can respond in a commercial sense to your needs. So, I wanted to give you the opportunity to respond to those. Maybe starting with have you had negotiations with the MNOs, and propose, for example win/win solutions, joint builds, and so on?
5953 MR. LAFRENIÈRE: I did listen to Bell's presentation, which was very interesting. That did get my attention when they mentioned that some of the industry players were not totally aligned with their associations. And I can tell you today that it's absolutely not the case with the Railway Association. We are totally aligned with our members. We actually have one co-presenting with us today, and there are always negotiations. Again, we are using MNOs quite extensively. We are very good clients of MNOs right now, but we are using their network for non-mission critical operation; okay? It's -- and they're unvaluable (sic). I mean, we need them; okay?
5954 But this is different. When we're talking about integrating wideband to our mission-critical operations, no MNO can provide us with a solution because what we need is to, again, manage our own core, manage our own routing, and it's -- in this world, we will, of course, need to work with the MNOs, but we will need to negotiate equal-to-equal with them, and that can only be done if we get our MNC.
5955 THE CHAIRPERSON: I don't want to belabour this, but I'm guessing that the carriers must have some fairly specialised services available for national defence purposes for others. You really don't see a possibility that they can develop a commercial service that will meet your needs?
5956 MR. LAFRENIÈRE: No. Based on experience -- we are not basing this on studies or technical analysis. Based on experience, based on the multiple report we get from our broadband equipment that report any failure in a given day to a central computer, based on that, we are 100 per cent sure that the service that can be provided by an MNO right now -- and it's not their fault, but because they need to -- you know, they need to provide service not only to critical infrastructure operators, but they need to provide service to everybody else. We know for a fact that it's not sufficient enough for our mission-critical operation.
5957 And, again, they're valuable partners in our operation, but there is this niche service that they cannot provide us with and it's mission-critical applications.
5958 Antonio probably has some first-hand anecdotes or experience on that. Antonio?
5959 MR. ARANIBAR: Well, once again, right. I guess we are in a better place, position as an industry to know what kind of operational technology we're willing to put in the hands of systems, understanding the type of service that we are expected to get.
5960 If they are telling us we are giving you best effort communications, it's for sure that I'm not going to put the reliability of our precision of schedule railroading in the hands of a best-effort communications system.
5961 Again, safety will never be compromised, we'll stop the trains. The trains that stop all the time are very inefficient; right?
5962 Having said that, and I would like to just refer you to a study that was put together. That's somewhat old, but at the same time still relevant until this day. A report from an independent consultant to the European Union, 188 pages report, in which they concluded that commercial cellular services could be potentially suitable for mission-critical applications, and they looked at it through three angles: rail, electrical -- I think it was utilities in general -- and public safety, which has a different naming in Europe, Public Disaster Relief or something along those lines. And the conclusion is that it would be viable, provided that two pages of regulation were to be enforced on commercial cellular providers before we can put very delicate matters in the hands of their service.
5963 So, that's a public report that is available out there and it's an interesting report to look at.
5964 THE CHAIRPERSON: I'm not sure if it is currently on the record. If it isn't, would you undertake to put the report on the record of this proceeding?
5965 MR. ARANIBAR: I surely would not have a problem with that, but, again, in general, I'm going to fall back to our legal counsel here if we want to file that in confidentiality. Bram?
5966 MR. ABRAMSON: We would be happy to file that as an undertaking.
UNDERTAKING / ENGAGEMENT
5967 THE CHAIRPERSON: Thank you, Counsel.
5968 I'll come back to some -- a few more questions about actual MVNO structure in a second, but before I do, what about the concerns that's being raised by some parties about future exhaustion of mobile network codes. Do you have a view as to whether the concerns are valid? You know, how are we going to limit? Is it going to be individual members? Is it codes for the association? How do you envisage that going and how do you address the concerns about exhaust?
5969 MR. LAFRENIÈRE: First of all, we are well aware that this is a very -- it's a limited resource. That's why our original submission was for a MNC two critical infrastructure operators. We are also well aware that this is not something to be given broadly, but we think we have a good business case for getting one. And it's -- to be frank with you, we had many discussions because it's seen as a -- Antonio called it the Saint Graal of communication when you get your hands on one. And we respect that very much.
5970 But we've seen some local -- very, very, very local providers with three MNCs. So, there might be some, you know, some cleanup to do in terms of having those MNC handled like that. But I think one MNC for critical infrastructure in Canada is not too much.
5971 THE CHAIRPERSON: So, just to be clear, you've said one a couple of times now. You are proposing that it be one?
5972 MR. LAFRENIÈRE: Well, we would like 10. We would like -- we'd like two ---
5973 THE CHAIRPERSON: There are lots of things I would like. I'm just trying to understand what it is your request.
5974 MR. LAFRENIÈRE: Yeah. Our original request -- okay, Bram, do you want to step ---
5975 MR. ABRAMSON: Yeah, I mean, look, at the end of the day, this is exactly why the CSCN exists. Certainly in 2015 the Commission wrote 2 paragraphs and said CSCN figured out what's the right efficient way to use this limited resource, given the routing means, given the benefit of the Canadian Telecommunication System and everything else.
5976 And, you know, while we can try and sort of second guess their work here and really figure out the proper way of managing these codes, I know that at the end of the day they're a form which includes all the experts and has the ability to deal with it.
5977 I would note, by the way, that the current work of the CSCN in this area is going to back to the ITU to ask for another block of MNCs precisely because they’ve recognized that both full MVNOs and also private LTE operators are likely to use MNCs in the future.
5978 So this is certainly not something that nobody sees coming.
5979 But that said, they really are the right place, I think, to work out this sort of detailed question.
5980 THE CHAIRPEROSN: Thank you for the response.
5981 Going back to your model for a second, so you have some facilities you’ll continue to build out to a certain extent, but you’ve explained that in all likelihood, your members won’t bid on spectrum.
5982 Can you talk a little more in terms of who will actually be operating this RAN? I’m still having a little trouble understanding exactly how this is operationalized. Who would run the RAN? Who would be responsible for fulfilling any and all obligations that might be imposed?
5983 MR. LAFRENIÈRE: Yeah, we’ve looked at all options. Obviously the less MNC we get, the more complicated it gets.
5984 So for example, if we get one MNC for all critical infrastructure operators, it would obviously be a new entity that would need to be formed, that would need to not only operate the RANs, but also operate the core, manage all the routing of the MNC, of the eventual critical infrastructure operator’s network.
5985 We’ve already talked with the Canadian Electricity Association quite extensively. You might be aware of that.
5986 We had not only talks, but we did hold a seminar last year on broadband access for critical infrastructure operators.
5987 Again, it would be -- the way we see it, it would be a joint venture. We would need to create a new entity.
5988 But again, we are -- we belong in the telecom market.
5989 Again, we are -- have extensive experience.
5990 And that’s not something that we are afraid of, creating a new entity manager network for managed RANs. This is something we can do as an association.
5991 We already manage quite a big chunk of spectrum on behalf of two competitors, CN and CP.
5992 The Railway Association of Canada actually holds a spectrum license that includes all the frequencies used by all our members, which are all competitors in the market.
5993 So we have experience on that. And we also have experience managing more day to day core operations of our radio network.
5994 So this something that we already thought of.
5995 Of course, it gets less complex if we have more than one MNC. If we have one MNC per sector, for example, one for rail, one for electricity or utilities.
5996 And yet even less complex if we have one MNC for each railway that needs to operate broadband, because then we can delegate all the core operations to our members.
5997 But should it be the decision of the Commission to assign one MNC to particular infrastructure operators? I mean, we’re in. We are ready to take the lead and we are ready to enter into negotiations with any critical infrastructure operators that might be interested in joining our coalition.
5998 THE CHAIRPERSON: A couple of other quick questions before I change subjects a bit.
5999 I’m still struggling a little to understand. Why -- I know you don’t want to be in the -- if you will, in a consumer business. But why couldn’t the RAC simply create an MVNO and go get access?
6000 MR. ARANIBAR: So the difference between -- and our understanding is that mobile cooperators, mobile virtual network operators, their definition is such that they are there to serve end users, part of the general public; right?
6001 So the distinction between an MVNO and a PVNO is because it’s a private entity which is using and creating network components, these core networks I’ve been talking about all along, that is only used to deliver, with the highest cyber security levels, direct data rather through mobile network operators radio access networks onto that common consolidated core network, just for private usages. So by CRTC’s own definition, an MVNO eligibility does not apply to us.
6002 Along the same lines, when you were asking about why don’t we apply for a spectrum? In the same -- like, spectrum, we understand, is a very scarce resource, very valuable, and needs to serve a higher purpose; right? So that’s why it’s broadband. We’re talking broadband spectrum here; right? That’s why it’s only made available to entities such as MNOs, MVNOs, which will be -- or MNOs, sorry, who would be serving the general population.
6003 THE CHAIRPERSON: In your view, would the PVNO have to take on all the other requirements that the Commission typically applies with respect to E911 or, you know, other services meant to -- for public safety purposes or to protect the public?
6004 MR. ARANIBAR: Precisely the model is such that the PVNO has no interference in that area. Like, we leave the space of 911 and E911 on the PVNO model.
6005 On the share brand model, which is where we would be potentially operating a last mile access, then definitely we would have to have the same obligations as share brand providers that are on a regular network.
6006 THE CHAIRPERSON: But even under the PVNO, you mentioned earlier handsets, for example, would be used.
6007 Would your employees limit their use of handsets only to strictly work functions? I’m seeing a concern about, you know, people with phones that are not able to obtain warnings and the like.
6008 MR. ARANIBAR: And you’re absolutely right.
6009 So at this point, I mean, we are at the baby steps of this whole vision. Handhelds would be a phase two. But handhelds, and those would be operational handheld technology for operational purposes. We’re not trying to put the services of, you know, their smartphones and what not, because, again, we’re very aware of the scarcity of all these resources that potentially the government would be granting to us.
6010 THE CHAIRPERSON: Thank you. Maybe a last area.
6011 You may have also heard a bit of that discussion with Bell. Commissioner Laizner also asked about eSIMs. And basically the answer was, yes, they’re coming.
6012 You’ve emphasized the importance of that in your submissions to us.
6013 Again, if the carriers were to have that technology commercially employed, would that assist in their ability -- would that lessen your concerns about a reliance on commercial services? Let me put it that way.
6014 MR. LAFRENIÈRE: I believe Marc’s opening remarks mentioned eSIMs.
6015 This is not a solution for us.
6016 Again, we’re not looking at switching service providers on a dime here. We’re looking at operating our own core and being the -- you know, being the master of our own routing system.
6017 So even though eSIMs might be a solution for some of critical infrastructure operators, it’s not possible for us because we need a shared RAN in areas where there are no providers.
6018 So an eSIM is totally unusable in most of the areas where we operate.
6019 I heard the number yesterday, 35 percent of our route is not covered by actual MNOs right now.
6020 So eSIMs is -- we looked at it, and we simply put it off the table, even though it’s an interesting technology.
6021 THE CHAIRPERSON: Thank you. I think my last question -- I just want to be clear. Is you model dependent on the ability to connect to multiple RANs?
6022 MR. ARANIBAR: Sure. Just to fully understand the question, so PVNO is precisely about that. it’s unifying a virtual -- like, virtualizing basically a couple of more (inaudible) radio access networks and making it work as a sole entity aggregated at the core network level by a facility operated by critical infrastructure. So PVNO does that precisely, what we just alluded to.
6023 THE CHAIRPERSON: So the Commission -- a future regulatory framework that would be consistent with your objective would require that the Commission liberalize access, MVNO access or PVNO access, on all carriers everywhere. Is that correct?
6024 MR. ARANIBAR: If it were to be mandated, that is, I would say a different discussion. The ability to have access -- because the part of the mandate comes along with wholesale services, and that’s not something we’re after. We’re after network hardening, after robustness, and not after, you know, cheaper rates basically, right? Definitely it would be beneficial, and it would foster whatever business model we would have. But definitely that’s not the primary concern.
6025 THE CHAIRPERSON: Thank you.
6026 MR. ABRAMSON: Just to -- and just to be completely clear, the only regulatory ask is to direct the Canadian Steering Committee on numbering to revise the MC assignment guideline. Everything else is doable in the marketplace.
6027 THE CHAIRPERSON: Thank you. Members, questions? Commissioner Laizner?
6028 VICE-CHAIR LAIZNER: Good morning. So if those changes were to be made, such that you would be able to access those MNCs, do you have a roll out plan, a timeframe, in terms of your vision?
6029 MR. LAFRENIÈRE: Well, of course it’s -- the first thing that comes to mind is replacing -- replacing wi-fi in yards, in railyards, okay? So we have lots of promises from 5G operations that would suit our needs for that. But in terms of a complete roll out of PVNO that could obviously be done quite quickly. We’d need to enter into negotiations with providers, mainly in urban areas.
6030 But for a RAN roll out, we will need to study a little bit more, make a business case for our -- for our executive -- the bean counters up there. And it’s -- we cannot -- I cannot commit as a member of the Rail Associate right now to a roll out plan that would need to be discussed with, I believe, individual railways, which are more -- which hold the -- you know, they have the wallet. But maybe Antonio will have something to add to this.
6031 MR. ARANIBAR: Yes. Absolutely. At this point, I think it’s a very early stage, right? We are coming here before you precisely asking for the removal of these regulatory hurdles, given the fact that these, as Danny alluded to, it is the holy grail to enable, even to dream about this vision.
6032 Once we have that out of the way, then we can start sitting around the table with potential partners, whether MNOs, MVNOS if they ever get mandated, and so on. Share brand players, say MNOs that would be willing to subordinate some of their spectrum to us, or potentially Public Safety, who are also listening to this potential. But it’s all potential at this point, which existing, kind of -- still captive because of these regulatory barriers of the lack of access to MNC.
6033 VICE CHAIR LAIZNER: And if you weren’t successful in getting that access, what would be the impact on you? Where do you see the hurdles?
6034 MR. LAFRENIÈRE: Well, we would be able to go wide band. I mean, we looked at a lot of options over the last 20 years. We’ve petitionized as I mentioned earlier, to get access to 600-Megahertz spectrum. We did petitionize it again to have some power limits in the various ITS, Intelligent Transportation System band, raise the power limits to suit rail operations because those -- those limits are more suited for -- for car operations. So we did explore a lot of avenues.
6035 We even looked at a band that is currently assigned to the electrical utilities in the 1.7-Megahertz band. It’s a Simplex band. We looked at a thing called TDMA LTE, which is not suitable for us because the nature of TDMA implies some delays in communications. So that would be -- that’s kind of a deal breaker for us. We will -- we will keep on using broadband, obviously, because we live in a broadband world, but we will not use broadband for mission critical operations.
6036 VICE-CHAIR LAIZNER: Thank you.
6037 THE CHAIRPERSON: Counsel, any questions? Thank you very much. Thank you for taking the time to appear and for your submissions and fulsome responses.
6038 We will break for lunch, returning at 1 -- 1:30.
--- Upon recessing at 12:23 a.m./
La séance est suspendue à 12h23
--- Upon resuming at 1:28 p.m.
La séance reprend à 13:28
6039 THE SECRETARY: Good afternoon. Welcome.
6040 We'll now hear the presentation of TekSavvy Solutions Inc. Please introduce yourselves and your colleagues, and you have 10 minutes.
PRESENTATION / PRÉSENTATION
6041 MR. KAPLAN-MYRTH: Thank you.
6042 Good morning, Mr. Chairperson, Vice-Chairperson, Commissioners and Staff.
6043 My name is Andy Kaplan-Myrth. I am VP of Regulatory and Carrier Affairs at TekSavvy. To my right is Janet Lo, VP of Privacy and Consumer Legal Affairs, and to my left is TekSavvy’s Chief Technology Officer, Charlie Burns.
6044 Our experts attending today are, first, on my far left Webb Henderson’s Ish Omar from Australia, and on my far right Martyn Roetter, MFR Consulting, from the United States. Our Regulatory Analysts seated behind me are Stephanie Miller and Bryson Masse.
6045 TekSavvy is Canada’s largest independent internet service provider with over 300,000 subscribers across Canada. Based in Chatham, Ontario, we have over 700 employees in Ontario and Quebec. We deliver internet services to our customers largely by buying wholesale services from incumbents. They only sell us those services because the CRTC mandated it, and over the past decade, we’ve paid incumbents nearly $1 billion for those services, and now we’re ready to do the same on mobile.
6046 Our mission is to offer Canadians the real competition they deserve for communications services, but we can’t do that for mobile services yet. On the wireline side, we’ve lowered prices not once, but twice for our customers in the past four years.
6047 TekSavvy was one of the first ISPs to offer unlimited packages and we also actively fight to protect net neutrality and privacy rights. The value and price point of the services we deliver is central to our customer experience. This is possible because we are different, in a good way, from the Big 3 incumbents. We are not beholden to shareholder interests. And as you heard in the sales practices hearing, we do business with our customers honestly, transparently, and fairly.
6048 MR. BURNS: TekSavvy is an independent competitor that makes significant investments in traditional telecommunications facilities. We are investing $26 million to build fibre to the home infrastructure for 38,000 homes and businesses in the Chatham-Kent area. But more relevant to this wireless hearing at hand, we are working to modernize our fixed wireless network with LTE in southwestern Ontario.
6049 We have kept MVNO in mind when selecting a suitable core network solution, and we are prepared to further integrate or introduce the necessary network components to enable the provision of mobile wireless services. This will position TekSavvy to be a wireless competitor under a full MVNO regime.
6050 MR. KAPLAN-MYRTH: The Big 3 are against real competition. They consistently act to keep prices high, and they will continue to do so, protecting their above-normal profits, if their entrenched dominant position is not challenged.
6051 Their strategy to achieve this is woefully transparent. It illustrates market power and market failure. Do not fall for their competition theatre designed to stave off wireless wholesale obligations that mandate real competition.
6052 It is more important than ever for independent competitors like TekSavvy to be able to offer wireless services. People come to TekSavvy because they want an alternative to the incumbents, but consumers today expect quad-play offerings, and mobile is a critical part of that. As long as consumers are stuck with an incumbent because of their mobile service, TekSavvy’s margins are likely to fall to unsustainable levels.
6053 MS. LO: First, let’s be clear. The needs of Canadians are not fairly served by the current wireless market. We agree with the Competition Bureau that the wireless business is highly consolidated and that the Big 3 exercise market power.
6054 You’ve heard several times on the record of this proceeding that consumers pay too much for wireless services. Canadians have demanded lower prices and more choice for wireless services. Over 75,000 Canadians took action to support the government’s new Policy Direction which encourages all forms of competition and lower prices, and over 152,000 Canadians spoke up to support your decision fostering greater competition for wireline internet services.
6055 The CRTC’s own survey results show that only eight percent of Canadians have seen wireless prices go down in the past three years. Moreover, 95 percent of Canadians believe wireless prices are higher in Canada than elsewhere in the world and CCTS complaints about wireless services have increased across all mobile carriers.
6056 The Commission must be skeptical of the incumbents’ recent attempts to avoid regulation. Flanker brands, wireless affordability trust marks and so-called “unlimited” offers are feeble attempts by dominant players to pretend that there’s no problem. The problem is clear, and only mandated full MVNO will solve it.
6057 MR. KAPLAN-MYRTH: Regulatory action is needed now to address the lack of competition, and the solution is right in front of us. The full MVNO model is the only solution that would bring competition, drive prices down, and encourage investments, while complementing the existing regulatory framework that brought competition to internet.
6058 Since dominant wireless carriers exercise unconstrained market power, mandating full MVNOs is the only way that affordability and lower prices will be sustainably achieved in the Canadian wireless market. And the full MVNO solution is consistent with the 2019 Policy Direction that requires the Commission to encourage all forms of competition and reduce barriers for entry into the market.
6059 This Full MVNO framework must be backed by fair rates and terms mandated by the CRTC. It must also allow MVNOs to have the maximum degree of control possible, minimizing their reliance on incumbents that consistently act to eliminate competition, and maximizing opportunities for service innovation.
6060 The full MVNO framework must also not have obligations related to facilities or minimum investment levels. Canada’s well-established framework for wholesale wireline competition has no such requirements.
6061 Properly set wholesale rates will contribute to MNOs’ revenues, adequately compensate MNOs for their investments, and allow MVNOs to capitalize their own investments.
6062 Other, more limited MVNO proposals before you would merely crown a very small number of new facilities-based fourth incumbents in a small number of areas. Admitting one more spectrum-holding legacy incumbent into the MNOs’ private club will not create the competitive diversity Canadians need. Only a full MVNO model will.
6063 The benefits of MVNOs are real, as seen in other jurisdictions and as TekSavvy detailed in our written submissions. For example, the United States and Australia offer important examples of innovative and differentiated MVNO services.
6064 MR. OMAR: In Australia, there are a diversity of MVNOs which are a material part of the mobile services market. Notably, MVNOs that have been most successful in Australia are the ones that drive innovations. In this regard, some Australian MVNOs play a special role to address the low-cost end of the market, typically with offers that are significantly more affordable than the mobile incumbent operators offer themselves.
6065 The presence of MVNOs as a whole have brought favourable prices to all Australian consumers, high broadband performance, and high customer satisfaction. In Australia, greater competitive intensity reduced retail mobile prices by 30 percent in three years. As a result, mobile networks serve a greater and more diverse base of end users than would otherwise be the case without inefficient overbuilding.
6066 Meanwhile, there's been no meaningful impact on MNO revenues. While MVNOs in the Australian market emerged on a commercial basis, a key feature of the wireline dynamic is structural separation where infrastructure-based competition is inefficient.
6067 MR. ROETTER: MVNOs deliver benefits to American consumers through pricing structures and service features that are attractive to consumers who have been neglected by the major MNOs. MVNOs also rate higher for customer service and quality of service than MNOs.
6068 This is true despite a more challenging competitive atmosphere in the U.S. as compared to Australia, since two of the largest MNOs exercise dominant market power in their negotiations with MVNOs, which has hampered the impact of MVNOs and limited their scope. For example, American MVNOs pay higher than competitive market prices and are not able to operate as full MVNOs.
6069 MVNOs have not negatively impacted MNOs’ investments or performance. Instead, wholesale access has contributed to MNO revenues and profits.
6070 The two smaller MNOs are open to more fair MVNO arrangements because they have enjoyed benefits through increased, more efficient productive use of their investments in facilities.
6071 Unfortunately, the situation for MVNOs and competition is likely to get worse now with approvals of the merger of the third and fourth largest MNOs.
6072 MR. KAPLAN-MYRTH: Full MVNO will allow new entrants and regional competitors to bring sustainable competition to reduce prices, increase choice for all Canadians, and spur innovations in mobile service offerings.
6073 Canadians have waited many years for competition and increased choice for wireless, and they cannot afford to wait another five years for failed regulatory solutions. The time has never been better to open up wireless to meaningful competition.
6074 TekSavvy is ready to deliver the same benefits to wireless consumers as we have for two decades on wireline Internet.
6075 Thank you for the opportunity to present today, and we look forward to your questions.
6076 THE CHAIRPERSON: Thank you very much.
6077 Commissioner MacDonald?
6078 COMMISSIONER MacDONALD: Good afternoon, and thank you for your comments this afternoon and for your comments throughout the process.
6079 I think we have a good understanding of exactly what you want and why you want it. But I do want to start off our time together with a few points of clarification on different matters.
6080 And the first one is we’ve seen a number of different studies as of late pointing to wireless prices going down in recent months and years. And you’ve acknowledged that prices have decreased, but you state that that’s result of regulatory action. And although we’d all love to take all of the credit, I’m wondering why you feel the competition doesn’t account for those decreases.
6081 MR. KAPLAN-MYRTH: Wireless prices are undeniably high in Canada. There have been some small changes in the market, certainly over the last, say, five years, possibly as a result of the mandated roaming regime in the last major review.
6082 Those are extremely limited competitive effects that just allow one new competitor, essentially, to slightly undercut the dominant three carriers. We don’t see that as sustainable dynamic competition that’s going to result in a variety of services at a variety of prices that are available to Canadians across the country.
6083 Certainly, I think the new services in the last year; say the unlimited throttled services in the past year, I think cannot be seen as anything other than the result of regulatory pressure. They did not emerge previously, although they were present in other places. I think -- it seems utterly transparent to me that those are -- I mean, I think they are good services; I think they ought to have come along sooner but I think they are clearly here now, you know, not as a result of competitive pressure but because of the regulatory environment.
6084 I don’t know if you want to add to that?
6085 MS. LO: Sure.
6086 If I can add to that, if we look at the last five years, we still see a very high concentration of market share by the big three dominant providers, and as the Competition Bureau mentioned throughout its presentation, the big three still possess market power and exercise that. And we’ve seen -- the Bureau also mentioned that market power allows the big three to coordinate high prices and keep retail prices high for Canadian consumers.
6087 So we see the international comparisons, in terms of where Canadas’s prices are relative to the world, but it’s the control, the ability to control and keep prices high in the Canadian market that sort of reinforce, I think, what you’re hearing from Canadians, which is that prices for wireless remain too high.
6088 COMMISSIONER MacDONALD: Thank you. At paragraph 86 of your additional comments from November the 22nd, you submitted that MVNOs -- Canadian MVNOs currently enjoy profit levels which constitute a significant margin of 4.6 to 5.2 percentage points over levels typically found in competitive telecom markets.
6089 Can you just define for me how you would define a competitive telecom market in that situation?
6090 MR. KAPLAN-MYRTH: The context for those EBIDTA figures, I believe we are citing a study that indicated that investment levels by incumbents would remain consistent down to EBITDA levels of 37 percent.
6091 My understanding is that the, I believe 43 percent, EBITDA levels that we cited here are above normal for that market. And the purpose of us raising it in our submission was really that there was plenty of room for EBITDA levels to come down before having any impact on incumbent investments.
6092 Beyond that, I’m not sure that I can comment on the financial, ---
6093 COMMISSIONER MacDONALD: Okay.
6094 MR. KAPLAN-MYRTH: --- you know, aspect of that.
6095 Do you want to?
6096 MS. LO: Yeah. I would just also point to paragraph 25 of the same further comments there. Really, the point we’re making is that the profitability levels and the EBITDA levels of Canada’s national operators is significantly higher than in other markets. And, you know, we’ve seen that recently reflected in the Broadcasting and Telecom Legislative Review Report as well. I think Canadian oligopoly of big telecoms are very healthy; they’re proving that in terms of the earnings that they’re reporting.
6097 So we’ve got some capturing there in paragraph 25 in terms of their EBIDTA levels. And as Andy said, that paragraph 86 that you referred to earlier, Commissioner MacDonald, was a reference to a report that was submitted as part of Cogeco’s submission where it sort of similarly reflected that EBIDTA’s are high.
6098 COMMISSIONER MacDONALD: Okay, thank you for that.
6099 And in your May 15th intervention, you submitted -- and I’m going to paraphrase here, but the three national carriers have captured over 90 percent of the market. And the result of that is that the market is insufficiently competitive.
6100 If 90’ish percent isn’t the right mix spread across the three largest operators, what should that number be, in your mind, in a competitive market? Is it 80? Is it 70? Is it 60?
6101 MR. KAPLAN-MYRTH: So it’s not the 90 percent on its own that would be identified with it being a non-competitive market. Their 90 percent market share allows them to operate without competing effectively. They have divided the market 30/30/30, and they are comfortable there and there is nothing to effectively disrupt that.
6102 What would constitute a competitive market would not be a particular market share or change in market share; it would be the nature of interactions that we saw in the market that would show that it was a competitive market.
6103 COMMISSIONER MacDONALD: What interactions in the market would you hope to see that you’re not seeing right now?
6104 MR. KAPLAN-MYRTH: So I don’t think that you could see it with three MNOs. I think if NVMOs were in the market and actively participating, then what you would -- and were, you know, an accepted part of the market dynamic, so MNOs saw the value of wholesale and used it to their advantage, then you would see NMOs trying to work with MVNOs to build their market share. And you would see MVNOs, you know, grow as a result and compete with each other. And you would see different MNOs’ market shares shifting as a result.
6105 So it’s the dynamic competitive environment that would change, as opposed to a specific number of market concentration.
6106 MS. LO: So what’s particularly striking about the 90 percent, and again, I’ll go back to the Competition Bureau’s presentation, is not just the number, but what they’re able to do with the 90 percent, which is, together, they possess market power, which means they are able to control prices in the retail marketplace.
6107 So I’m not able to provide a specific number, but I think the threshold that we would be looking for, where we could say, you know, competition is achieved, is where no single or combination of firms put together control prices in the marketplace, i.e., they wouldn’t have market power. And that would be what you would be looking for in terms of whether there’s a sufficiently competitive marketplace.
6108 COMMISSIONER MacDONALD: Is any of the concern that the three providers are relatively similar in their overall share of the market that they get right now, they’re a third/a third/and a third, reaching about 90 percent. We could have more competition, they could be 25/25/25, and still have the same breakdown. Would that still lead to the same levels of concern?
6109 MR. KAPLAN-MYRTH: So I don’t know about 25/25/25 because the remaining 25, you know, if that’s one more MNO, one more incumbent, or a regional who grew to 25, then you would have four players who, I think, would be relatively comfortable in their positions and would probably not want to disrupt that market very much.
6110 If the Big 3, you know, became 25/25/25, and then you had a dynamic competitive market of MVNOs that occupied the other -- and regional incumbents who occupied the other 25, that might be a competitive environment.
6111 You know, right now, how they have it divided up, I guess, for lack of a better word, they sit at 30/30/30, gives them a fairly comfortable position to not really rock the boat and do anything that’s going to change things too much.
6112 Telus’ statement the other day, or yesterday, in their presentation, that they would reduce investment, is certainly interesting in this way. It would be interesting to see if other MNOs would step up to occupy the market that Telus would be abandoning by doing that.
6113 And, you know, that would certainly look more like competitive dynamics.
6114 If they don’t, that looks more like market power to me.
6115 COMMISSONER MacDONALD: Just based on the way you responded to that last point, I would assume, not to speak for Telus, but a large portion of their suggested decrease in investment would probably be in regions which are not as well as served as more urban areas.
6116 So is it realistic that an MVNO could move into those areas and fill the gap, investment or otherwise, in those types of regions?
6117 MR. KAPLAN-MYRTH: No, I may have misspoken, but what I meant was that the supposed competition among facilities-based carriers, among, say, the three MNOs, I think, you know, if Telus were to announce to us that they are no longer going to invest, I think it was a billion dollars over five years in some areas, and then if you saw other MNOs, that they’re at 30/30/30, if you saw either Bell or Rogers step in to say, “Okay. Well then we’ll grow into that market that you have abandoned,” that would look like competitive dynamics.
6118 If none of them are willing -- if none of them will do that and they are prepared to let that market not be served, that looks more like market power, rather than MVNOs stepping into fill that gap. I was talking about the ---
6119 COMMMISSIONER MacDONALD: Okay.
6120 MR. KAPLAN-MYRTH: --- sort of dynamic among the MNOs.
6121 COMMISSIONER MacDONALD: Okay. Thank you.
6122 Moving through the points of clarification, you stated in your various submissions that you’re of the view that flanker brands are competition theater that provide the illusion of competition and serve to stave off regulatory action that would enable real competition.
6123 In your minds, do flanker brands provide any benefit at all?
6124 MR. KAPLAN-MYRTH: So flanker brands are just services of the main MNOs.
6125 So to the extent that they offer more price points that people want, that’s fine. That part I don’t think we take issue with.
6126 The part that is competition theater and that we think is harmful is marketing them under different names and very separately, and often not transparently at all.
6127 That creates -- that is designed to create, really, the illusion of competition where there is no competition.
6128 You know, when they are used, when they are really weaponized to go after real competition, this is certainly our experience on the wireline side, then they do, certainly, harm that real competition.
6129 That has not yet been the case yet on the wireline side, to my knowledge, because that competition is not there to be attacked.
6130 But the -- you know, really the theater is behaving as though these are operating independently as competitors with each other, when really, they are not.
6131 MS. LO: I would say as well, the illusion of flanker brands is creating the perception of more competitors in the marketplace, when the reality is that the flanker brands do not compete with the MNOs’ main brands or premium brands, or with each other within a single corporate entity. They are really not creating more dynamic competition, perhaps more offers, and perhaps more marketing opportunities to segment customers. But they don’t compete against it -- they don’t compete against the main company, which raises a question as to whether they are truly providing a competitive -- a dynamic competitive element into the marketplace.
6132 And as Andy said, on the wireline side, we’ve seen them weaponized and we’ve seen reflected in the shareholder comments themselves, which we’ve included in our submissions, that the flanker brands are really just part of their overall marketing strategy. They’re not a competition strategy against the main brands.
6133 So they’re really there to create the illusion that there is sufficient competition in the marketplace and a lot of options to choose from, when that’s not really the case.
6134 COMMISSIONER MacDONALD: Just to play Devil’s advocate, for a moment, some may say that consumers don’t care who they buy it from or who the underlying provider is. They want what they want when they want it at the price that they’re willing to pay.
6135 So perhaps you could explain to me, in your view, what benefits and innovation that MVNOs would bring to the marketplace that currently aren’t being offered by the flanker brands?
6136 MS. LO: Sure. And actually, I think this might be a good place to pin it off to some of our international experts, who can bring examples from international experiences as well.
6137 But overall, MVNOs are able to provide differentiated service offerings, which is one of the things that the 2019 policy direction asks for.
6138 And that is because MVNOs are focused on service-based competition.
6139 In order to be successful, MVNOs need to, as we have on the wireline side, focus on delivering the best service, the most cost-effective service, to their customers. That is the way that MVNOs will differentiate.
6140 So that is going to be what primarily drives an MVNO, which makes its incentives completely different than what she will see from a facilities-based provider.
6141 I think there is a ton of examples where MVNOs internationally have provided affordable options, low cost pre-paid and post-paid plans, potentially serving different niches of customers, low income, fixed income seniors, for example.
6142 And we simply are not seeing that in the Canadian marketplace right now.
6143 And those are all kinds of options, as well as technology-driven options, that could be opened up by MVNOs in the marketplace.
6144 So perhaps I’ll ask Martyn, if you've got a couple of examples, and then maybe Ish after?
6145 MR. BURNS: Yes, if I can give a bit of perspective from the U.S. market, and we're faring here really to essentially a 20-year history, and some MVNOs have been around for that long, and many of them came and flamed out. That's the nature of competition. Not everyone is going to succeed.
6146 And what they have done often has been pioneers actually, kind of laboratories, if you will, from the perspective of the MNO, without the MNO having to do it themselves, of trying to serve particular customer segments that the MNO hasn't really been paying much attention to.
6147 And then if they succeed up to a certain point, well, maybe sometimes they remain independent, like Consumer Cellular, which is focussed upon seniors living on fixed incomes who want to know exactly how much they're going to have to pay, and need to have tremendous customer service, perhaps more customer service than millennials, who are much more familiar with dealing with digital devices, and they score much more highly, for example, than AT&T in surveys of customer satisfaction. There've been people who've gone after particular ethic groups, providing free international calls to the places which they want to remain in touch with. Companies that have gone off to the -- they're still unbanked, providing money transfer services, which, of course, are major -- you know, undercutting Western Union.
6148 So, I think there are a number of examples, and several of them, pioneered by MVNOs, have then been taken up by the MNOs, either themselves or because they have actually acquired the MVNO, and they at least continued it for a certain amount of time.
6149 So, I think in terms of services-based competition, you'll just see a much greater variety of innovation, a much greater spread. And some of them won't, but it doesn't matter because if they fail, it's not as if they're going to lose their mobile service, and others will be successful and then will be adopted into the mainstream in ways which wouldn't happen if it'd been left up entirely to the MNOs themselves.
6150 COMMISSIONER MacDONALD: Thank you for I guess the context on the U.S. market because it does lead me to a question, just so I'm sure I'm clear in my own mind. You submitted that MVNOs in the U.S. operate under a light-touch regulatory regime, which you argue enables MNOs to exercise dominant market power in their negotiations with MVNOs.
6151 You also argue that this has limited the availability -- sorry, the ability of U.S. MVNOs to launch new services at affordable prices. However, you also stated that MVNOs in the U.S. offer a diversity of plans, serving various market niches, with plans that cost consumers as little $9 a month.
6152 So, given those statements, can you unpack that a little bit for me? I'm wondering do you feel that had there been more regulatory intervention in the U.S. that the market would have been improved in some way, and if the CRTC were to take a light touch approach, that we could expect similar plans and pricing to be in the market in Canada?
6153 MR. BURNS: Yeah, I'd like to make two points about that. One is that in the negotiations, and I'm referring particularly to those between the two largest MNOs, AT&T and Verizon, and the MVNOs, what is considered to be a commercially reasonable outcome is defined in incredibly vague terms. Like, in every circumstance you have to take account of all the facts that are relevant, and that allows the MNO, in effect, to say, "Well, this is relevant because we've already established this deal with this other company, and what we're offering you is really not worse than that." To pick and choose which MVNO they're going to deal with that usually involves the MVNO, particularly if it's an MVNO that's part of a much larger organisation, and the biggest MVNO in the U.S., as you may know, is Tracfone, which is owned by American Mobile, which itself is a huge multi-national operator in Mexico and other places in Latin America. And obviously, AT&T, for example, has an interest in its relationships with American Mobile that I'm sure plays a role in the way in which they'll respond to Tracfone, which is focussed quite naturally on the many Mexican/Americans and Mexican immigrants in the United States to provide services to them, that have then actually now been offered also by the U.S. Métis MNOs. So, that's one aspect.
6154 What is the definition of commercially reasonable, and is it something that is fairly tightly defined, even to the level of saying these are the rates that you have to offer, or is it something that's left open to a wide range of interpretation?
6155 And in these negotiations, in many cases, unless you happen to have a parent who's very large, you're basically a very small guy dealing with a very big guy. And the asymmetry of information that's involved in those negotiations, the consequences if the negotiations drag on for very long and you can't arrive at a conclusion can be almost fatal to the small company, but it really doesn't matter to the big guy at all. So, you're left with a very unequal situation, and that is the concern.
6156 So, the light regulatory regime has been, I think, because the FCC has not been willing to be precise or precise enough about what it means by commercially reasonable, which has allowed, therefore, the MNOs -- and they often use this phrase in their filings, "at their sole discretion". And I couldn't think of a more blatant way of saying basically, we decide who's going to get access and under what conditions. And in practice, in many cases, even if you're negotiating a wholesale access rate, it turns out that there are other things involved in the deal. It may be that an MVNO maybe or -- has a bit of spectrum somewhere, in fact, then it builds out networks as part of the deal. So, that's my concern.
6157 COMMISSIONER MacDONALD: Thank you.
6158 In one of your earlier submissions, you said that TekSavvy may offer low-cost occasional use plans, and we've been talking a lot about affordability and low-cost plans. Why is it a "may" and not a "would", and it if it is now a "would", do you have any characteristics around the plan that perhaps you could -- that you would intend to offer if you became an MVNO that you could describe to us?
6159 MS. LO: Sure. In our responses to the Commission's R5s around low-cost plans, our primary position is that MVNOs at large would have the opportunity to deliver low-cost plans to the market. A very important key precondition to the ability to deliver low-cost plans is how the wholesale rates are set. It's just not -- there's no business case for us to be able to offer low-cost plans where rates are too high, and we can't sell the below our fixed cost.
6160 So, you know, I think generally our TekSavvy brand has always stood for honest and fair pricing. That's what we've done. That's how we price services on our wireline side, and you see that as well in terms of the types of options that we have developed over the years to help customers manage potential overages, and also pushing for unlimited plans and being able to offer that to our customers.
6161 But we've always, in terms of how we've priced our products, kept a mind to sort of what is a fair way to price our services.
6162 So, I think it's important to note that any provider, any MVNO's ability to offer affordable low-cost plans is going to be directly related to what their fixed costs are and what they pay MNOs for access.
6163 COMMISSIONER MacDONALD: So, the "may" ties back to ensuring that rates are just and reasonable, not to your willingness or lack thereof to put a low-cost plan on the market for low-income Canadians?
6164 MS. LO: Correct, yes. And we have always designed our product catalogue in mind in terms of making sure that there's an entry level service that is as affordable as we can make it, again, based on the just -- the reasonable cost, but, yes, it is directly related to just and reasonable costs of wholesale services that are fixed.
6165 COMMISSIONER MacDONALD: Okay. Thank you.
6166 There are a number of things I could ask, but I note that you're obviously a member of CNOC. They appeared yesterday and had a conversation with Vice-Chair Laizner. Is there anything in their testimony or submission which you do not agree with that you would like to highlight at this time?
6167 MR. KAPLAN-MYRTH: No, I think we substantially agree with CNOC's submissions in this proceeding.
6168 COMMISSIONER MacDONALD: If something does come to you, feel free to file that as an undertaking if you want to give that a little bit more thought and review their comments from yesterday.
6169 MR. KAPLAN-MYRTH: We will. Thank you.
UNDERTAKING / ENGAGEMENT
6170 COMMISSIONER MacDONALD: Just a couple of areas. I don't know if you were in the room or not, but we -- I guess we had a conversation with the team from Eastlink earlier today, and they noted that from a size standpoint TekSavvy's bigger than they are, they've bought spectrum, why can't or haven't you, or entered into an arrangement with other providers to pool resources to buy spectrum or share spectrum.
6171 MR. KAPLAN-MYRTH: I did hear that. I thought that was interesting.
6172 And you know, we're both privately held companies. Certainly TekSavvy is, as far as I know. Bragg is as well. And so I can only guess that the measure by which we are larger is customer base.
6173 I’m not necessarily sure, and I ---
6174 COMMISSIONER MacDONALD: And I don't know what was the foundation for that statement, either.
6175 MR. KAPLAN-MYRTH: No. I mean, it's -- it was -- certainly the comment it's the only measure that I can think of and certainly customer base would not translate into the ability to purchase spectrum, so you know, our size in that regard, I don't think, is really relevant.
6176 We're just not capitalized in a way to create -- to try to create a new business model or create a sustainable business as a new facilities-based carrier, and we fundamentally disagree that that ought to be the goal as a new competitor. Facilities are limited and -- I mean spectrum is limited, and a competitive model built solely on spectrum and facilities-based competitors will tend toward a monopoly or a duopoly, essentially, that the two networks that we have now and with the three major carriers.
6177 The problems that we're trying to address here, the problems that you have heard from Canadians and the problems that various proceedings have tried to address certainly going back to the 2015 decision relate to services. And the focus on encouraging more facilities-based carriers in order to somehow deliver those services later, that hasn't -- that has just not come to fruition.
6178 So you know, why have we not purchased enough spectrum to launch a mobile carrier on our own? That spectrum has not been available in -- and we have not been able -- we would not have been able to afford it. And that's just not -- that ought to not be the way that we are trying to create competition on the service layer.
6179 Now, that being said, I will also say that TekSavvy has been getting more involved in spectrum process. We participated in the last two consultations concerning spectrum at -- through ISED, Tier 5 serving areas and the consultation on the 3500 Megahertz auction, and we're watching that very closely and expect to participate.
6180 That is partly to support plans that we -- plans that we have to -- on our fixed wireless side and some of the facilities that we're getting to support the fixed wireless side and partly it is because we are not really sure how mobile is going to play out here. And so we kind of need to do what we can while we can.
6181 You know, the options only come along so often, and here's 3500. And so we're watching it very closely to see if we need to participate.
6182 But it's certainly not our view that that is an effective way for us to enter the market as a competitor.
6183 COMMISSIONER MacDONALD: And I note that, at paragraph 14 of your opening comments today, you said that the full MVNO framework must also not have obligations related to facilities or minimum vestment levels, so from that can I assume -- and understanding that you're engaged with ISED spectrum consultations than perhaps you have been in the past, but should I take from that comment at paragraph 14 that if we were to implement a mandated MVNO model similar or identical to what the Bureau has put forward that you would not be inclined to purchase spectrum to qualify for such a model?
6184 MR. KAPLAN-MYRTH: I don't think that model is interesting to us. I mean, I -- that's the simple way to put it. It would essentially allow us to operate -- well, it wouldn't allow us to participate, I think. We don't have the spectrum right now, and certainly, you know, if you did something identical to the Bureau's model, it would have a five-year sunset which would not be enough time for us to launch as a mobile provider on full MVNO, roll out, you know, acquire spectrum, roll it out, move customers over to that to facilities.
6185 So that simply would not work for us, and I don't think that we would take advantage of it.
6186 The main thing about investment not being an obligation associated with full MVNO is really about what you value as really the important type of competition that's happening here.
6187 If you're trying to create many facilities-based providers who all own their own spectrum and compete with each other and then the full MVNO model on the Competition Bureau's proposal would basically accelerate somebody into the market. It would take you five years to put these people onto spectrum that you're going to do anyway. We'll just accelerate those people onto your network now.
6188 It really assumes that the end goal is to have the spectrum and have the facilities and move people onto that, and that's going to be some kind of sustainable and sufficient competition between facilities.
6189 The reason that we don't believe that that investment in facilities ought to be an obligation of MVNO is that MVNO is an end on its own, so you know, sustainable competition is possible and, in fact, common in -- outside of Canada on a wholesale model, on a full MVNO model.
6190 COMMISSIONER MacDONALD: Just one final question, and then I'll turn you over to my colleagues. And it's on the topic of not investment.
6191 I can certainly understand why it would be advantageous for you to be able to offer wireless services to your customers to complete the bundle with your other services. Then why not simply enter into a resale arrangement with one of the national operators? Is that lack of interest on their part, lack of interest on your part, have negotiations broke down in the past?
6192 MR. KAPLAN-MYRTH: We have entered into some negotiations with one of the Big 3 looking for an MVNO model that gave us a high degree of control, and they're simply not open to it.
6193 They were not actually prepared to do a resale model. They were prepared to do -- basically, we would sell their brand to our customers.
6194 COMMISSIONER MacDONALD: And was some of their resistance, do you believe, tied to the fact that they just didn't -- because they do resale arrangements with other companies that don't compete with them for other services like President's Choice or Petro-Canada. Was that resistance on their part because you potentially are taking some customers away from them, or was there another reason than that?
6195 MR. KAPLAN-MYRTH: I guess it's hard to say what was motivating that on their side. Certainly the, you know, competitive dynamic between us is there and might factor into it. I can't be sure.
6196 MS. PETERSON: Not specific to the negotiation aspects which Andy is privy to more than I am, but certainly from a brand perspective, when we think about what we would want to bring to a wireless market, absolutely a wireless product adds to our ability to offer customers a quad-play, which we know they want. But we look at our brand, and we have always prided ourselves on being different, in a good way, and offering services honestly, fairly, and transparently.
6197 So we’ve designed our packages independently. We’ve been able to, on the wireline side, innovate over time to offer different types of usage control options.
6198 And those are key things that our customers look for in terms of not being able -- not being shocked, for bill shock and things like that.
6199 So having that independence to design a product that is consistent with the way that we offer the rest of our services is very critical to how we would want to add wireless to the complimentary services that we want our customers to have.
6200 COMMISSIONER MacDONALD: Thank you very much. Those are my questions.
6201 THE CHAIRPERSON: Thank you.
6202 Commissioner Levy?
6203 COMMISSIONER LEVY: Thank you.
6204 I guess one of the questions I had has to do with the two gentleman who are here from other countries.
6205 Were we to mandate an MVNO regime, what are the sort of one or two takeaways that we might benefit from your experience in the jurisdictions that you know the most about? What are the things that we should pay the most attention to, given your experience, that would make it an all-around success for everybody?
6206 MR. OMAD: Thank you for the question, Commissioner.
6207 I think that in Australia, MVNOs, as a feature of the market commercially, in some of the other jurisdictions that I’m familiar with, it’s resulted from regulatory intervention.
6208 In both cases, one of the key elements of value that MVNOs can bring to the market is the kind of competitive differentiation, the service innovation that Andy spoke about before, and their ability to bring new types of packages to bear has been quite important.
6209 And if that level of control is not afforded by commercial negotiations, then I think that it’s important that it is afforded by regulatory backstop, if you like.
6210 So in Australia, for example, there are 60 MVNOs. Some of them are commonly held. But what’s particularly important is the way they’ve been able to innovate.
6211 And there’s some detail in my report, particularly Box 1 at page 25, which talks about what sort of competitive dynamics amongst the MNO market might have led MNOs to voluntarily host MVNOs.
6212 But those competitive dynamics in Australia led to a great degree of control for MVNOs over the type of services they were able to offer.
6213 Just to contrast that with Malaysia, which is another market that I’m quite familiar with, the regulator there decided to intervene recently, in the last few years, to mandate MVNO access, despite the fact there were several MVNOs already active in the market.
6214 And the reason for that, in the regulator’s words, were that the MVNOs that were present in the market at the time were all thin MVNOs. They weren’t able to differentiate very much from their host mobile operators.
6215 And so it was important to create the kind of vibrancy that you see from a more competitive market, that there was a regulatory backstop that allowed them to increase the level of control they had over their own packages and differentiation.
6216 MR. BURNS: Yes, thank you.
6217 So to add to that or give a U.S. perspective, I think there were a couple of points.
6218 One is, why a full MVNO rather than any other kind of MVNO?
6219 And the point there is to maximise the independence of movement, the independence of competitiveness of the MVNO, in particular, that they control -- no, control is the wrong word, that they are dealing directly with the customer, they provide the SIM card.
6220 Another aspect of that is, if you’re an MVNO, you don’t want to be stuck with one operator. You really want to be able to access all of them.
6221 And in fact, there are a number of imaginative ideas that I’m aware of in the U.S., and maybe they are in other countries too, in which the MVNO proposes to have a really intelligent SIM so that literally the customer will have access to, at any particular time, at any particular location, that network which provides the highest quality service.
6222 And as we know, particularly in dense urban areas, a network that happens to be the best one to be using at a certain time of day, may turn out not to be the best network to be using at another time of day.
6223 So to be able to guarantee -- you know, there are a lot of metrics that are put forward about the speed with which networks deliver.
6224 But really, one of the key things that customers notice is consistency. That you want to know, “Oh, my gosh. You know, I got really rapid delivery here and now it seems to be crawling along, like, you know, a car that’s only firing on one cylinder out of six.”
6225 So that’s one aspect. It has to be a full MVNO.
6226 And then the other one, of course, is the cost.
6227 You know, any MVNO that puts together a business plan, it has certain costs that are under its control. It can be as efficient as it wants.
6228 But if it has to pay an unreasonable amount for access to the network, it will kill it.
6229 So how you go about that is tough. You know. There are lots of arguments about what are the costs and how they should be accounted for, but I think it has to be cost-based and it also has to be subject to review fairly frequently.
6230 One of the problems that we’ve got into in some of these negotiations in the U.S. is that people say, “Well, you know, this price was okay, you know, with this company.” Yes, well that was three or four years ago.
6231 And one of the things that is driving prices down is, as you know, the fantastic advance of technology. The devices, the equipment, that’s literally a global -- I hate to use the typical word, consolidate, but a global ecosystem, very, very competitive.
6232 And, I mean, the wireless story is just an incredible success. I’m old enough to remember how wrong my predictions were a long time ago. It’s an incredible success. So you need to be ambitious in thinking about what is the proper price.
6233 And we see now, wholesale access rates that are higher than many, many retail prices. And that, to me, clearly makes a business plan infeasible.
6234 COMMISSIONER LEVY: Thank you.
6235 THE CHAIRPERSON: Commissioner Barin?
6236 COMMISSIONER BARIN: Thank you.
6237 We’ve heard several times in the course of this process that potential MVNOs have been offered the option by carriers to function as MVNOs, but under the brand of the carrier.
6238 And I’m curious, in the course of your negotiations, when that was put on the table, was it to offer a different product under the brand of the carrier, or was it a recognition that there was another subset of customers that you would be able to get with different pricing and packing options, but under the brand of the carrier?
6239 MR. KAPLAN-MYRTH: I don’t believe our negotiations went into that kind of detail.
6240 We were at the stage where we were, you know, trying to come to even more general terms about it being resale or not resale.
6241 And it wasn’t on its own. This was in the context of a possible arranged negotiation that included many other elements. This was one part of it.
6242 So it did not go into details about what plans would be available, to my knowledge.
6243 COMMISSIONER BARIN: Thank you.
6244 THE CHAIRPERSON: I have perhaps one last question. And I’m trying to figure out how to word it in a way that I neither speak for someone who appeared this morning, or sound like I’m adopting their position.
6245 But you mentioned several times -- well, in your opening remarks, you talked about needing mobile services to -- in order to have sustainable margins.
6246 And later, in some of your responses to questions from Commissioner MacDonald, you emphasized the need to get the wholesale rate right, and terms and conditions right, so that you have enough margin to offer services.
6247 And clearly, one of the most -- one of the driving features of MVNOs would be to bring lower prices, whether it’s targeting particular ethnic groups, and at the end of the day, most of the offers we’re talking about are lower price.
6248 So, Mr. Bragg, this morning, who also is privately held, said -- and is not one of the big three; isn’t a national player, is a competitor to the big three, and has invested in spectrum, basically said in response to a question -- the same question Commissioner MacDonald asked you, could you offer a low-cost service, and he said, “I do.” And I think the number -- and I stand to be corrected -- was a $30 service. And, quite properly, we asked him, “Could you offer a lower cost service than that?” And his answer was, “No, it would be below my cost.”
6249 So without getting into an argument of cost, how do you enter a market on a wide scale, such as you propose, without having an adverse impact on perhaps smaller facilities-based entrants, and how do you enter those smaller markets? I get Toronto; I get Montreal. But use that as an example. I’m not taking a position; I’m just using it as an example to say, so how do you offer lower-cost service in an area where the new entrant is struggling to offer a service, he submits, at $30?
6250 MR. KAPLAN-MYRTH: So, first, just to be sure it’s clear, our full MVNO model would only mandate -- our proposal would only mandate access on the large -- the big three, Bell, Rogers, and Telus.
6251 THE CHAIRPERSON: Understood.
6252 MR. KAPLAN-MYRTH: Rates that were set properly would be based on cost inputs, cost-plus. And our view is that the margins indicate that there is sufficient room for much lower priced services.
6253 What exactly those will be, it’s really impossible to say without knowing the rates. But I will say that as a competitor on the wireline side, our mission there really is to sell services that people can afford, that meet their needs as much as possible. And certainly through the, you know, rates fiasco, without litigating that here, we have had an extremely hard time with our margins as we have tried to bring the lower prices promised by those wholesale rates to consumers.
6254 Our priority there was to bring those lower prices to consumers, that’s what that was for. And as a result, our margins are extremely, extremely thin right now. Unsustainably thin.
6255 So on the mobile side I can say that we would be motivated by the same things. Not that we want to live with unsustainably, you know, thin margins forever, but that we are, you know, fundamentally driven by what our customers need, and will go to great lengths to bring them the kinds of packages that they want.
6256 So what exactly those prices would be, what constitutes, you know, the cheapest price we would be able to do entirely depends on rates.
6257 MS. LO: From a pure math perspective, I would say I would go back to, you know, looking at different regions in Canada where the market share is controlled and is dominated by some of the big three.
6258 So just from a pure math perspective, the customers that we would be seeking to attract would be those that are probably with the big three, because that’s where the numbers are. And, to be quite frank, our success on the wireline side has largely been because our customers are looking for an option that’s not the big three. So that would be consistent sort of with what we’ve heard from our own customers who, quite frankly, call -- Andy, Charlie and I often sit on the floor and take customer demand so that we’re connected to what our customers are asking for, and they’re often asking for -- you know, “We love what you’re doing on the wireline side, can you also be our wireless service provider?
6259 So I think that I suppose I would say that the adverse impact on smaller competitors is perhaps exaggerated because if you look at the market structure when you have dominant players that are still the big three, which is no different than five years ago, that’s probably where most of our new entrants into the wireless sphere, if where we are able to, that’s where our growth will start.
6260 MR. KAPLAN-MYRTH: I’m sorry; if I may, I think Ish had something to add. Is that right?
6261 MR. OMAR: Just from an international perspective, and I’ve heard kind of other intervenors in the proceedings talk about Canada’s wide geographic area and low population density. Australia obviously has similar characteristics, and the mobile operators and MVNOs in Australia deal with that as well. And some of the prices that we’re able to offer are outlined in my report in Tables 2 and 3, but we’re talking about things like a $15 price; that’s in Australian dollars, so cheaper again in Canadian real-price terms. The 3 gig of data, unlimited calls and texts, and so -- and that’s while MNOs continue to have quite a healthy EBIDTA as a result of -- despite the MVNO presence in Australia.
6262 THE CHAIRPERSON: Thank you. Thank you very much. Thank you for your submissions and your fulsome responses to our questions.
6263 Madame la secrétaire.
6264 La secrétaire: Merci. I will now ask Mobilexchange Ltd. to come to the presentation table.
6265 (SHORT PAUSE)
6266 THE SECRETARY: When you are ready, please introduce yourself, and you may begin.
PRESENTATION / PRÉSENTATION
6267 MR. KEDAR: My name is Mike Kedar.
6268 Chairman, Commissioners, and staff, you probably remember me as a pioneering champion of long distance competition, way back.
6269 Now as an independent, I am very concerned about the lack of wireless competition in this country.
6270 My approach in this presentation and involved in this consultation is as a Canadian with experience, and I have no conflict of interest on either side. I am here as a Canadian.
6271 I only have five minutes but I’ll try to share with you an innovative approach that I believe will enhance competition in this country.
6272 As you mentioned, Chairman, we are facing many challenges. This consultation is being conducted under a cloud of rapidly changing technology, policy, and political uncertainties. To name just a few, the conflicting interpretations of government policies as seen from the 2019 which incorporated 2006 Directives; they’re not separated, they’re incorporated.
6273 The ACTs Review Panel recent recommendation has just released and will take time to implement. This causes another uncertainty, as far as making decision.
6274 And then, of course, there’s the 5G controversy about the technology itself, the deployment, and particularly, the RAN over small cells, and associate sites and backhaul issues, which I haven’t heard much about. But that’s the fixed line going back from thousands -- hundreds of thousands of cells that they’re talking about, duplicated four times in a particular market. This is not conceivable and it’s probably not going to happen.
6275 There are many other challenges but I’ve listed them, and I won’t go through all of them in my presentation, but you can read them later.
6276 Now, as you know, government and regulators in Canada have attempted for many years -- and I give them a lot of credit for trying -- to create a competitive environment that would promote market forces. That is the basis of competition.
6277 However, they fail to control market power, and we’ve heard about this from the Bureau. Let me give you an example of what I heard as a -- in the audience about market power.
6278 The Big 3, although just of them so far, have threatened to stop investments and, on the other hand, when they're asked, "Tell us about your sharing agreement", they said, "It's none of your business. We won't tell you how we do it".
6279 So with government policies and regulators, we are focused more on services in the past rather than duplication of facilities. We would have seen a real evolution of market forces, competitive, innovation driven. And I'll talk a bit about innovation for this burgeoning digital economy.
6280 It's not all about prices. It is about innovation. And it's not how we charge, it's what the content of the information transmitted over the infrastructure which will now, and more so in the future, make the difference.
6281 What we are seeing instead is resulting of many years of laissez-faire facility-based regulation, a combination of a huge barrier to entry, and isolation of foreign investment and the most closed telecom industry in the world. That is a name that Canada has received.
6282 But you know of this. I'm not telling you anything new.
6283 And therefore, do you really think, and I'm asking you, do you really think anybody will enter the Canadian wireless market in light of the history of failed new entrants to create a sustainable competitive market?
6284 I was one of them involved in a number of companies who entered the market, but we have been taken over. We did not have sustainable effect.
6285 It's been 35 years -- excuse me. I have to take a bit of water.
6286 I believe that even if MVNO connectivity access were mandated under new regulation with or without future infrastructure build obligation and even if wireless spectrum were set aside or given for free that no one would invest and build a significant innovative services layer on wireless infrastructure that is owned and access to it is exclusively controlled by the market power of their competitors without solid guarantees of quality of service and just and reasonable rate.
6287 So are we really wasting time here? You're going to spend almost two weeks of hearing people from both sides. Is it really worthwhile? And I would say yes. I think it is, and I'm here to tell you why.
6288 Today in my presentation that you have from last year, I presented a vision of the future of how this industry will evolve. Today I will tell you how we can start.
6289 There is cause for optimism stemming from a number of fundamental technology and market changing lining up now creating, by themselves, a push for new sharing competitive future.
6290 First we see market demand for higher quality of service, we heard it from the railway, driven by public safety, business and consumer as well as the big internet tech companies. That demand is forcing MNOs to increase network quality of service spending and push finding -- and push them to find new solution of sharing network infrastructure.
6291 Then we see increasing cost of infrastructure duplication, facility-based duplication, particularly with the new 5G small cells sites and backhaul challenges. A further push by the incumbent to finding sharing network solutions.
6292 As you know, and this has been mentioned a few minutes ago, among the five dominant Canadian carriers, we have increased sharing over the years, resulting today in only two national infrastructure networks. I'm talking about the infrastructure.
6293 There are only two with infrastructure. There are only two national networks. We have Bell and Telus, and we have Rogers and Quebecor.
6294 These dominant carriers and their associate regional carriers have been sharing and providing RAN, backhaul, core and other electronic transmission services, the new term, to each other and they actually operate MVNO as we speak.
6295 This increase of network sharing is the reason for my optimism that we will find a solution.
6296 And here's my message to you. We have a legislative tool that, if acted upon to the letter, will create a real opening for a sustainable competitive environment. This tool exists in the current 1993 Telecom Act and is particularly relevant in light in the increased network sharing.
6297 Let me remind you what the Act ensures. Section 27(2):
6298 "No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage."
6299 Ladies and gentlemen, this is the law. No one shall be allowed to discriminate. All network infrastructure owners must provide same services and rates to others as they provide to themselves. And as we know, they don't.
6300 I think until now this provision has not been interpreted properly as the definition of "telecommunication service" was assumed to be retail only, but now it must be understood to mean all electronic transmission services, retail, wholesale and sharing alike.
6301 So as sharing trend intensified and provided the Act is properly interested and enforced, and that's where you come in, guaranteeing the same treatment dominant carriers afford themselves to be available to all other service providers, then and only then we will see new, innovative wireless services provider entering the market backed up by Canadian and international investors as has been the case in other countries.
6302 The move from duplication of facilities to sharing infrastructure deployment will be a win for Canada. For MNOs, sharing means less capital.
6303 We heard so much about them worrying about investment. They won't have to invest as much if they can share between themselves the infrastructure build, both the upgrade of the existing and the 5G.
6304 For MVNO, sharing means guaranteed quality of service and just and reasonable RAN access. And for all Canadians, sharing means finally a wireless market where choices and innovations will keep the country competitive.
6305 Implementation of this plan or this idea can start now. It is a win/win solution for all. This solution is not a structure separation, as has been in other countries, nor is it a government takeover. It is an industry/technology/market evolutionary restructuring creating great opportunities for all.
6306 Thank you.
6307 THE CHAIRPERSON: Thank you very much, Mr. Kedar.
6308 Commissioner Levy.
6309 COMMISSIONER LEVY: Good afternoon. Thank you so much for your presentation. It is quite different from the intervention that you sent in originally.
6310 MR. KEDAR: It is ---
6311 COMMISSIONER LEVY: Your thinking has obviously evolved.
6312 MR. KEDAR: Evolved. That's correct.
6313 Well, my vision was my presentation which actually went, as you know, to the Review Panel, which I copied, and then I answered some of your questions. But yes, I've thought about it since and I said how can we start the process to create those two national networks, networks of networks, one for people like the railway for mission-critical and public safety, and the other one for consumers and businesses. How do we get there? And sharing is what came to mind.
6314 COMMISSIONER LEVY: Sharing has been, at some levels, successful and negotiated when people are in -- wherein companies seem to be in positions of equal strength, if you like. The difficulty seems to be when there is an imbalance of power in the market and the difficulty of creating a sharing atmosphere at that level.
6315 How would you suggest that we address that difficulty?
6316 MR. KEDAR: Well, when it comes to the safety, and security, and the economy of Canadians, the power relies with the elected official. In this case, it relies with you.
6317 COMMISSIONER LEVY: We’re not elected.
6318 MR. KEDAR: Well, I meant you by extension. Obviously, you’re not elected, you’re nominated. But the government gave you instruction, the government creates the Act, and you are supposed to enforce the Act. That’s my understanding. So when we talk about powers, what the interest of coalition should be is, again, the security and the affordability of Canadians, not the individual players themselves.
6319 So we start by looking at the Act, as I suggested. And the Act says, you have to be -- you cannot discriminate it. So you know, when I said that they are running an MVNO, let me give you the example, okay? If I live in Calgary, and I have a Bell subscription, my phone doesn’t show Telus as my carrier, it shows Bell. Why? Because Bell is an MVNO in Calgary. They don’t own this -- the sites, they don’t even own the core. They have their own core, and the base station sends the information back and forth to their closest core, wherever that is, and it looks like it’s a Bell network, but it isn’t.
6320 That is true full MVNO as they’re calling it and it’s being done every day. And it seems to be okay because it’s between the big players. Why should it not be affordable, based on the Act, to anybody else who wants to do it?
6321 COMMISSIONER LEVY: You’ve said in your presentation today we would see new, innovative wireless service providers entering the market backed by Canadian and international investors, as has been the case in other countries. Now, it’s not explicit in that, but are you suggesting that international investors should own some of the MVNOs that would enter the market?
6322 MR. KEDAR: Well, I mean, the regulation today is that they can’t own more than 10 percent of the market as a foreign owner. But there are other ways of creating an arm’s length company that have been done before. What I’m referring to is that today, if I want to enter the market, even if you mandate MVNO access and then we start, you know, the process of work will be delayed and so on. I will not be able to get a backer like I did 30 years ago for Call-Net, because they will say, there is no way you are going to succeed.
6323 So to start a business you need -- you need financing, you need somebody to back you up, and therefore, if the rule of the law is being adhered to as the Act says, and I can go to Deutsche Bank and say, look, this is the law, and will you lend me a few million dollars so I can start a business, they probably will.
6324 I’m not -- by the way, I’m not able to eager to enter the market again. I said in the beginning that I’ve been there and I’m now representing the Canadian at large, not as an investor or a promoter. Thank you.
6325 COMMISSIONER LEVY: In your original submission, you indicated that you foresee MVNOs gaining 10 percent of the market by 2024. Do you still think that that is likely, and how did you come to that conclusion?
6326 MR. KEDAR: Well, at the time I though things would move a little faster and it’s been a year before we got here to this room. It’s probably going to be another year before we’re going to see a decision. So no, I think we should extend that by, if they have the ability to enter the market on a sustainable basis the way I propose, then yes, within a few years of the entrance, I think they can achieve that.
6327 COMMISSIONER LEVY: And you seem to suggest that the introductions of MVNOs would not have some of the adverse economic impacts that were entered -- that were identified by certain of the other intervenors this week. Could you explain a little more about what you mean when you contend that carriers would have the reduced expenditures? You mentioned that again today, that you think that it would be a win-win all around.
6328 MR. KEDAR: Yes. It would be a win-win, particularly for the large MNOs who are, they way I hear it, are complaining that they have so much capacity they have to grow, they have to grow the capacity. They have to invest, and they can’t afford not to do that in order to appease their customer base. I don’t see the entrance of a competitor -- and it’s really not so much a competitor, it’s a complimentary, it’s a partner.
6329 The MVNO like between Bell and Telus, those are partnerships, and I can see those partnerships all the way from the big down to the lower level. Those partnerships will create common interest to build a network on which each player, based on his contribution to that network, will be able to build a service and differentiate itself by innovation.
6330 Now, I wanted to mention something about innovation. It’s not about price. Particularly when we go into the 5G era. The IoT means that some equipment, some telemetry, some distance education, some medicine, these will be always on facilities, those services where you have to have a lot of capacity, where you have to have resilience networks, and those are services. The access is only a part of it. The access is bundled with the service. Today everybody talks about rates for access and nothing beyond.
6331 But there are many applications that will have rates that you can charge for, like Netflix. Let’s take Netflix, even though the consumer side, Netflix could be bundling its service with the access. And I see in the future that the services side will be more revenue producing than the access. Everybody only talks about access and rates for access, but what do you do with access? You can’t roam the internet with access. You need access to the internet, you need to have the various equipment to do all this, both the hardware and the software, and so on.
6332 So access is only the enabler for mobile wireless services. And I see that there will be a lot more applications and opportunities to build services over this common infrastructure, the one which will keep us safe, the high resolution, the resilience one, and the other one which will keep us entertained. Those are the two networks that we need to have.
6333 COMMISSIONER LEVY: And under this system, I take it you’re thinking more in terms of a full MVNO sort of system, rather than a facilities-based one? You don’t see the ---
6334 MR. KEDAR: Well, it’s a choice of the entrant. If you want to contribute to the common build, and get services for that corresponding to your contribution, by all means. Then you are quasi-facility because you are part of that common network. If you just want to access it and provide service on it, without adding financing to the build, that’s fine too.
6335 There should be a mix of service providers, and the basis of how that’s going to be structured is what’s been happening today between those dominated, powerful carriers who are providing services to each other, and it seems like it’s okay for everybody.
6336 COMMISSIONER LEVY: The -- those large players certainly do -- or the focus for many people, the source for MVNO access, should the regional carriers be obligated to provide MVNO access in a future regime?
6337 MR. KEDAR: The regional will be part of the new network of networks. They are part of it now if their facility -- okay, I don’t know if they have agreement sharing determined yet, but they will come. If they are going to be part of the 5G, they will have to have sharing agreement with the dominant carrier.
6338 So they will be part of the network of networks, and they can then provide access to their portion of the network, or to their percentage if you like, to others on either pure access or investment ensuring in building it further. I know I’m a bit -- I should naïve that if everybody can sit around the table and we can sort it out, but somehow, we have to get there.
6339 It doesn’t make sense to keep building layers of infrastructure, one over the other in Toronto, while 2- or 300-kilometers further north there’s only one network and people can not really get the benefit of the digital economy. It doesn’t make sense. ...
6340 COMMISSIONER LEVY: Thank you very much for your presentation today and for your thinking ---
6341 MR. KEDAR: Thank you.
6342 COMMISSIONER LEVY: --- about the issues that are before us. Thank you very much.
6343 MR. KEDAR: All right.
6344 THE CHAIRPERSON: Thank you, Mr. Kedar, very much for your presentation.
6345 I'd make maybe a little comment on your proposals or suggestion for us. I mean, there is -- you point out that the Act today requires that there be no unjust discrimination and undue preference. I guess it's those two other words, the "unjust" and "undue" that perhaps make it a little bit more complicated, but we certainly understand what you're saying in terms of network provision.
6346 MR. KEDAR: At least this proposal should allow you to look into how they're sharing, how they're providing MVNO service to each other. Why not open that up? I mean, they're asking you, they're threatening you, we are not going to invest if you allow MVNO to get to -- at least look at what they're doing today.
6347 They're telling you, and I heard Bell saying it's less and that's all they're going to tell you. It's confidential. You the regulator. Anyway, you see my point.
6348 THE CHAIRPERSON: Thank you. I do. Thank you very much for taking the time to share it with us.
6349 MR. KEDAR: Thank you.
6350 THE CHAIRPERSON: Very much appreciate it.
6351 We'll take a 10-minute break, return at 3:10. Thank you.
6352 MR. KEDAR: Thanks.
--- Upon recessing at 2:59 p.m./
L’audience est suspendue à 14h59
--- Upon resuming at 3:13 p.m./
L’audience est reprise à 15h13
6353 THE SECRETARY: À l'ordre, s'il vous plait.
6354 THE CHAIRPERSON: Bonjours. Bon après-midi. Madame la secrétaire.
6355 THE SECRETARY: Merci. We'll now hear the presentation of the Federation of Canadian Municipalities. Please introduce yourself and your colleagues, and you have 10 minutes.
PRESENTATION / PRÉSENTATION
6356 MR. RUBINSTEIN: Thanks very much, Mr. Commissioner and Commissioners. We're pleased to be here today.
6357 My name is Daniel Rubenstein. I'm the Director of Policy and Research at FCM. I'm joined by my colleague Stéphane Emard-Chabot, he's Legal Counsel for FCM; Janis Ingram, Senior Counsel from the Regional Municipality of York; Sylvain Boudreau, who's with the Engineering Services Department, Ville de Gatineau; and we also have joining by Skype from the City of Vancouver Karim Hirji and Brian Charleston, also from the Engineering Department.
6358 All the folks here represent members of FCM's technical committee on rights of way and telecommunications, long-standing members of that group. We've all been involved with various proceedings before the Commission on telecoms, including the model MMA process.
6359 Just a few notes about FCM before I get into our remarks. We represent around 2,000 members, 90 per cent of the Canadian population in communities from our biggest cities to smallest towns, from coast to coast to coast, rural, remote, northern and urban, and our board is very actively involved in telecom and broadband access issues.
6360 I'd like to start by acknowledging that we realise the CRTC is grappling with some very significant issues relating to how the wireless market should be structured. And, you know, as you consider how to move forward on the market issues, we're really here today to talk about how we can move forward with 5G deployment in an efficient and timely way, and really share the view from the municipal sector at a national level on the logistical aspects of 5G deployment.
6361 We have a presentation here today that I'll walk you through, along with my colleague, Stéphane.
6362 Our focus is really on and squarely on the work that's needed to address technical challenges related to 5G deployment and how can this happen without delay within the current regulatory environment and the current jurisdiction, divisional jurisdiction between the CRTC and ISED.
6363 Certainly, other interveners have spoken about the broader policy context and conversations that are happening, including with the Legislative Review Panel. We certainly participated in that process and made robust submissions to that proceeding. We're very much aware of some of the issues that have come out of that. We're discussing those amongst our members. There's a lot to digest there, understand that you and our federal counterparts are as well.
6364 And as that policy conversation happens, I think what we want to reiterate today is that 5G deployment can and should proceed under the current administrative structure on a timely and efficient way, and we're here to give more context about that.
6365 We share with you four key elements of what we think the path to successful 5G deployment looks like from an access perspective.
6366 So, first is on preparation. Our members fully recognise the importance of 5G. They're actively preparing for 5G. Our residents, our businesses, community services, municipal services, all understand the importance of connectivity to economic, cultural and social development.
6367 The second element I'll mention is balance. So, you know, municipalities are the stewards of numerous public assets, and our members have a legislative duty and unique expertise to manage the deployment of these assets responsibly and safely for the benefit of all users, that's telecom utilities, municipal and others.
6368 The third is on issue resolution, and obviously the timely deployment of 5G depends on resolving technical issues in a timely manner, and we'll speak a lot about that today. We really think this is the core challenge right now for all stakeholders and this conversation. And developing workable parameters for efficient municipal approval processes.
6369 And the fourth is on coordination. Collaboration and communication are the most effective means of developing the best practices to address both technical and process issues and pave the way for a successful 5G.
6370 I'll start on -- on the first element of preparation to offer some more perspective from the local level what are municipalities themselves facing right now, and then I'll speak a little bit about the national perspective and what FCM is doing as an association.
6371 At the local level, municipalities currently process thousands of permit applications from carriers to access, rights-of-way for their wireline infrastructure. And once carriers refine their 5G timetables and technical issues, a work that we understand is very much in progress, the current municipal permitting process can be adapted for wireless installations as well. This is certainly happening in the handful of municipalities where carriers have currently expressed a desire to begin deploying small cell technology.
6372 I mentioned we have a technical committee of both engineering and legal folks from across the country, so we're -- we have regular calls that have provided this context.
6373 And the kinds of things that are happening in those municipalities are multi-stakeholder working groups established to develop best practices, particularly focussed on addressing congestion and deployment time.
6374 Tools such as technical guides have been developed to assist carriers and subcontractors, and business processes are being tested and adapted to reflect the nature of small cell requests, specifically around the bulk sort of context that we're looking at versus 4G or LTE applications.
6375 At the national level, I'll mention we've actually struck a small cell working group subset of our technical committee that's fostering information sharing on these issues, on access issues. We're very close to publishing a first edition of our own small cell guide for members that outlines the various issues related to small cell deployment and disseminate evolving practices that have come out of the small cell working group and our technical committee, and we're very much continuing to participate in this and other processes aimed at developing a mutually beneficial national framework for 5G deployment.
6376 So, I'm happy to be here today, and I'll pass it off to my colleague, Stéphane.
6377 MR. ÉMARD-CHABOT: There are, in fact, two good reasons why municipalities and the municipal sector as a whole is preparing for 5G. The first reason is that we rely on these services. 5G will usher in new eras of services for our communities, and as well, for municipalities. Smart city initiatives and the service improvements they promise rely on this technology. So, there's certainly a shared interest in timely deployment and efficient deployment of this next wave of wireless technology.
6378 The second reason municipalities are preparing is that we are, and we know, vital partners in this. We manage the right-of-way where most of this action will take place. We own a lot of the infrastructure that we know carriers would like to use as a support structure for small cells. We also have a balancing row. We have legislated obligations to manage various assets to enforce different codes. We also bring unique expertise. Nobody in the country knows this business the way we do, and, in fact, nobody can do the role we do of making sure that all these networks can coexist peacefully, safely, effectively, and not just now, but for the long term as well.
6379 This is why we’re here. And this is, for us, the real challenge from the ground up.
6380 The areas where the first wave, certainly, of 5G deployment and the most commercially interesting locations look like this.
6381 The urban environments are quite congested, above grade and below grade.
6382 The below grade spaghetti photo you have there is actually a straight -- just a couple blocks behind the CRTC building here in Gatineau.
6383 So this what we have to manage. And this is why we feel if we want to address, and if we want to be ready for 5G and get it right, this is the core issue right now.
6384 We do not see the rules or the framework as something that is a hindrance at this point. We share the same connectivity goals on the wireline side. There are hundreds of functioning MAAs across the country.
6385 And yes, there have been some litigation cases, and some have taken a while to resolve, and some are still ongoing.
6386 But if you look in the last 25 years, there’s about a dozen of those cases, which, in fact, have allowed to set parameters and help develop best practices.
6387 The existing tools that we have at the municipal level can be adapted. And they are being adapted where pilot projects are now ongoing with the carriers.
6388 And this work to deploy, in fact, those steps to prepare deployment, can begin today.
6389 So changes to the regulatory environment may happen, and that’s a discussion outside this room, but operationally, there’s a lot of work we can do today to make sure that those technical issues that we see as the real barriers to speedy deployment can be addressed.
6390 So not to go over things that most of you already know, but the landscape in urban areas, especially the central areas where, again, the most services are demanded and they’re most commercially interesting, are very complex environments. There’s a lot happening below grade, various telecom networks, water, fire suppression, gas, district heating, on, and on, and on. At grade, all the stuff you see from switching kiosks, to mailboxes, to bus shelters. And above grade, obviously wires, and poles, and traffic lights, and everything else that hovers above our heads.
6391 That means that getting 5G right is challenging, technically. From a regulatory point of view, we can function today, we can move forward today, and we should.
6392 But technically, there are in fact three big challenges that need to be addressed in some kind of fashion if we want to do this quickly and if we want to do this efficiently and correctly.
6393 And the first thing is power source. Every single small cell, and we’re talking 253 to 300,000 of them across the country, will have to be powered.
6394 You have a photo there with an individual meter, which is required at some locations.
6395 So there is limited space to accommodate this at grade infrastructure that supports the antenna above. And working through those is key.
6396 We need individual shut off switches at each location so that if workers are working on a traffic light, or a light bulb, or installing a decorative banner, they don’t have their face smack in the middle of the radiation zone of the small cell.
6397 Many large cities operate their power supplies to the streetlights only during the evening hours. During the day, there is no power.
6398 So figuring out how we’re going to power, 24 hours a day, thousands of small cells on circuits that do not provide power half the day is a challenge. And that’s something that we need to figure out together with the industry.
6399 And there are regulatory barriers where we may need assistance, where a municipality could plug into its own feed, but the rules don’t allow the city to resell its power to someone else.
6400 So we can’t directly feed the antenna ourselves, even though we might want to.
6401 So that’s the type of issue from the power perspective.
6402 The attachments are also challenges for us. They’re a variety of different products, different poles, different structures on which these will go.
6403 Each require making sure that from an engineering perspective, we don’t have weight issues, snow or ice load issues, wind issues, that could damage or create a hazard to the structure.
6404 We also have a challenge that in many municipalities, access to municipal structures are protected by collective agreements. So the carriers or their subcontractors can’t go in on a city lightbulb and do the work.
6405 So we have to figure out a way to do that that functions for everybody.
6406 Lastly, each of these -- most of these cells, unless they’re wiring -- or connecting wirelessly to a larger cell, will require an underground connection. And these again will take up space, will be challenging.
6407 And we already see some best practices developing where municipalities are actually building the conduits for power and for fibre that the carriers can all use to connect their cells.
6408 So one set of conduits in a congested area which everybody can use.
6409 That’s an example of a solution that can be explored and that is being implemented on a trial basis in some cities.
6410 So that’s to give you an idea of what we think is the challenge today to make sure that we can move forward with timely and efficient deployment.
6411 And I’ll pass it back over to Daniel to summarize, basically, our recommendations at this point.
6412 MR. RUBENSTEIN: Thanks very much, Stéphane.
6413 We certainly think these challenges are ones that can be resolved by coming together, and coming together soon, and in a robust way to work through them.
6414 We’re certainly trying to do that on our own part with our own members, but it will take an effort that goes beyond the municipal sector to include carriers, other stakeholders, and both the Commission and ISED.
6415 So we definitely would recommend and support others’ recommendations for the creation of a national 5G working group that would be mandated to look at these issues.
6416 And I’ll just list quickly what we think the scope of that working group’s activities could be.
6417 I think, first and foremost, is that the need for a stake holder consensus on how best to proceed and how to inventory these various issues. I think we’ve laid out three technical issues that are the ones that we hear from our members that are top of mind.
6418 The second, common technical standards and means of resolving engineering issues.
6419 Some of these issues are complex and require -- a working group space to work through them would be helpful.
6420 Certainly, determining appropriate measures or incentives to ensure efficient deployment and access in the most congested areas in an urban context present different challenges than in areas that are less congested.
6421 Developing consistent parameters for a municipal permit approval processes, including the ability to take into account the unique nature of certain urban environments, whether that’s a heritage district.
6422 Introducing a faster, simpler, evidence-based dispute resolution mechanism to address individual disputes following under either ISED or CRTC.
6423 And setting out parameters and a shared understanding of reasonable and consistent occupancy fee structures, as well as cost-recovery calculations that recognize the critical role and legitimate interests of municipalities as infrastructure asset owners.
6424 So that we can speak to it a bit more, we have folks here today both from a legal and operational perspective that can share what they’re seeing first hand in their own cities.
6425 Some of the cities here are ones that are sort of at that cutting edge of early stage deployment.
6426 And certainly encourage the Commission to consider this recommendation.
6427 So I’m happy to -- thank you again for an opportunity here. I can take your questions.
6428 THE CHAIRPERSON: Thank you very much for your submission.
6429 Madame Barin?
6430 COMMISSIONER BARIN: Thank you. Welcome. Good afternoon. Thank you for your submissions in this process, for being here, and for your presentation today.
6431 Throughout this process, we’ve had interventions on the 5G deployment and there have been areas of consensus and areas where we’ve had some mixed views.
6432 So on the consensus side, I think it’s clear that access to municipal infrastructure is critical for the 5G deployment.
6433 On the mixed views is, you know, how we get there.
6434 And on the question of establishing a working group, there were intervenors that were concerned that that process might introduce inefficiencies.
6435 Now, considering that there seems to be agreement that there’s a need for streamlined processes and efficient dispute resolution, I heard you in your oral presentation today, that you have, already, working groups at the municipal level, and what you’re proposing is the creation of a national working group as well.
6436 Can you maybe describe, you know, how these two levels of processes could work together to end up with an efficient process. And ultimately, what would be the expected outcomes in each of these levels of working groups?
6437 MR. ÉMARD-CHABOT: I think framing the mandate for a working group would be the -- obviously the first step, but the biggest step. We went through the model and A process with mixed reviews, and our written submissions speak to some of the shortfalls of that process, and hopefully how we could avoid that.
6438 We have to understand that at the local level, 5G deployment is really in its infancy. The backhaul has been deployed in I think fairly robust ways in most large cities, but the small cell piece of 5G is only really starting now. And Calgary and Vancouver have pilots where they're testing different processes. Calgary has set up a local working group with all their wireless carriers. They're all at the table except for one, who does not want to participate. So, that's a type of dynamic that we hope that a Commission-sanctioned process would help address, making sure that all the pieces are there, including ISED, because right now we are still in a split jurisdiction environment.
6439 And what we see is the local experiences feeding into the national parameters. Unfortunately, we don't have, as we do, for example, in the wireline, we have 20 year's worth of experience and best practices that we all share and we can bring. When it comes to small cell installations, we're all still figuring it out and, frankly, so are the carriers.
6440 So, instead of figuring it out each on our own and then it arriving and saying, "Well, this is our solution", and us saying, "Well, that doesn't work with our solution", our thought is to avoid that type of siloed approach that I think dominated the early days of wireline deregulation, and avoiding those pitfalls and having that discussion.
6441 What is required is some way to -- and I don't know what that mechanism and I don't know what -- I know you have, as a Commission, a fair amount of power within your jurisdiction to set processes, to govern your work, but there's got to be some kind of mechanism to move forward and resolve. And that was, I think, what was the key lesson from the model and A process was the more contentious issues. There was one position, one -- another position. In this context of 5G, utilities will be part of the discussion. There'll be others, and we have to find a way to break that loss, and I'm not sure what the specific key to that is, but that is certainly the challenge that the process would have to address.
6442 And I think Daniel wants to add.
6443 MR. RUBINSTEIN: Sure. I just underscore I think what, you know, we can do with our own members is share experience of what's happening on the ground and the stage that folks are at. That does -- you know, and it's very helpful for our members to share their lessons learned.
6444 If there isn't a shared consensus in vocabulary about the technical challenges that are really, in our view, at the core of what's going to make or break time of deployment in the next few years of 5G with other actors in this phase, we won't realise the efficiencies that I think other interveners are looking for. And so, even having an understanding that, you know, a small cell antennae isn't just about putting it on a building -- we talked about this in our written submissions -- it's about the structure -- structural integrity of where it's being attached, it's about the power connections, it's about the electrical connection, it's about the backhaul connection.
6445 So, you know, and we've heard -- maybe -- I might actually ask folks from Vancouver to jump in as well because they're experiencing this, but the issues are much more complex once you actually start this work, and much preferable to do it together than just as our own sector. But I'll defer to Karim.
6446 MR. HIRJI: The challenges around the power supply are significant, and also, the fibre, bringing the fibre to each one of the cells. And furthermore, the impacts on the public realm as well as, you know, if you have four or five different -- five cell attachments on a street light, that could also have impacts on what the look and feel of the public realm could be. So, those are all things to consider as we go through the deployment process.
6447 COMMISSIONER BARIN: Thank you. I guess I can understand that there are technical complexities, and one of the concerns I believe was that processes that are put in place be timely. And you mentioned in your recommendation dispute resolution.
6448 Can you maybe elaborate because there were interveners in this process that suggested that it be a Commission-led dispute resolution process? How do you see that process in the context of your recommendation?
6449 MR. ÉMARD-CHABOT: The -- because of the nature of the issues that we think will need to be resolved, the technical nature of the first batch of issues. And, you know, we're here because we think from our members that we can achieve standards on key things, costs, fees, attachment mechanisms, best ways to bring fibre and power, we think there are technical solutions to those things that can be modelled and work.
6450 That type of debate, if there's a disagreement over a technical issue, the current sections 43 to 46 and similar processes that mean coming to you as a large group are heavy. And I don't think there -- I don't presume to speak for you, but I don't think they're a good use of your time, frankly, to figure out if the best way to power up cells is through a joint municipal carrier conduit that is half funded through some mechanism, or whether there should not be another forum for that to happen, through some other delegated power from the Commission to some other type of body.
6451 So, that's where I think we need to be creative and think outside the full we're appealing to you on an issue. When it's a policy issue and it's a big issue, I think this still makes sense obviously, but for the smaller issues of how we do this, coming to you and having this type of forum, or even the whole written process that can go on is lengthy. And having people, frankly, who perhaps do this on a day-to-day basis from the industry and from the municipal side sort of look -- have a look at this and resolve this quickly would probably be a better way to achieve best practices. And I think Daniel will complete that.
6452 MR. RUBENSTEIN: Sure. I'll just add again, and it goes to the previous question that I think through an exercise that in good faith looks at the full suite of issues that are -- that comprise access, the access challenge, we'll find that there are very limited issues that may end up needing a dispute process. You know, in our view, from what we hear from our members, the access is not a problem. The fee structure is in itself not a problem. But we don't yet have a shared vocabulary and understanding of the issues. Very difficult to say this is the dispute resolution mechanism that you might need when we haven't actually identified the issues that may lead themselvf to that point.
6453 And certainly the model and A process did not come to conclusion on everything, but it did -- and this is on the telecom side, and -- but it did narrow significantly the issues where we weren't in agreement, and eliminated that big scope.
6454 So, our message would be, again, doing a working group on a time-bound quick basis to really survey the landscape and understand before jumping to creating, or solving a problem that we may not yet have fully understand together.
6455 MR. ÉMARD-CHABOT: And if I may add, that there may be coming out of that common issue, identification common vocabulary development, there may be an issue where there is just no consensus, and the informal mechanism isn't working, and maybe we move to a hearing process on issue X, but I think there's a lot that can be done through consensus building and collaboration, because there is that shared impetus and the shared desire to make this work. I mean, the carriers want this. We want this. Let's figure out how to plug these things in and move on.
6456 COMMISSIONER BARIN: So, if I understand, there's an element in what you're saying that is about making a definitive process or decision on a process right now being premature and having the working group kind of iron the issues, and as time goes on and the issues are ironed out, it will be easier to determine a better -- what is the best dispute resolution process to put in place.
6457 I'm going to move to a different area now, maybe more on the operational side.
6458 I note in your submission you did mention that in the short term there will likely be more demand than supply for the actual infrastructure available for -- in the 5G deployment. So I note that there are plans in some municipalities to start moving to smart cities, and I'm wondering if maybe you can talk about whether, as municipalities move to deploy their smart city strategies, whether some of these issues about availability to infrastructure will iron themselves out or resolve.
6459 MR. RUBENSTEIN: I'll ask Karim from Vancouver to speak to this question.
6460 MR. HIRJI: In terms of the availability of assets like streetlights, that -- there -- that is available. I mean, in terms of the availability of assets, I think it's about where the attachments go, the look and feel of the attachments, and also around a coordinate approach amongst their different carriers in terms of where the attachments go in terms of the location and all of that.
6461 So in terms of the asset availability, I don't think that is necessarily a challenge. I think the challenge is more around coordination amongst the carriers as to where these assets go and then, obviously, the technical challenges around servicing them both from a power and a fibre perspective.
6462 MR. ÉMARD-CHABOT: And to continue on that, the physical challenge is likely at and below grade. The aerial aspect given the range of most of the small cell products and so on is probably feasible, but there may be clutter and, as Karim was saying, field issues and things of that nature.
6463 But certainly at and below grade will be the biggest issues.
6464 We would also -- you know, the first to deploy, we would like to -- and in managing the wireline and the rights-of-way corridors, municipalities have been really careful. And I know this has irritated some of the players at times, but we've been really careful in making sure that there is corridor space for another carrier later on.
6465 The carriers don't care, and if they can plug up a road and make sure nobody else goes down Main Street, they'll be happy. But our role is to make sure that doesn't happen.
6466 So same thing for the antennas. We want to make sure that the first to deploy issue is not problematic.
6467 And the last point I'll make before turning it over to Sylvain is we also need to make sure that whatever tools that municipalities already use -- so a lot of cities use GPS and locators for their buses. There are a lot of already wired -- wireless, I should say, connections to many pieces of infrastructure.
6468 We need to make sure that there will not be frequency overlaps or interference between those things. Those are, again, things that we need to work at with the industry to make sure that if a small cell is attached, I don't all of a sudden lose the control over the traffic light, which would be problematic, of course.
6469 And I'll turn it over to Sylvain to add a bit.
6470 MR. BOUDREAU: The underground utilities, hydro, Bell, gas, they don't really -- they know what they have in terms of the amount of conduits they have, but they don't really know where it is and they don't know what the depth is. And it causes an incredible amount of costs and risks to municipalities.
6471 I had a meeting this morning for St. Joseph, which is a main boulevard here that we're working on for sewer and water, and we asked -- Bell was there because they have the main assets. And what you saw on the picture earlier with all the conduits that they have, that's just behind the CRTC building here.
6472 And they have the same amount of conduits, 22 conduits in a concrete box that's been poured there in place. And we asked them, "Do you know exactly where it is?" And they said no.
6473 "How deep is it?" "About a metre deep". "Can it support itself if we go work underneath?" because that's -- all this equipment is about a metre deep underneath the road and we have to go work on sewer and water, which is two and three metres under that equipment.
6474 So as I'm -- can it be supported. They said, "We don't know".
6475 We said, "So how do we work?" "Well, you need to break it, support it and then you can go work on your stuff".
6476 So when it comes to 5G deployment, we asked them, "What do you want? What's the scope? How many light streets are you going to use?" And they have no answers.
6477 Are you going to use the same lamp -- street lamp for each carrier? We don't know. Are you -- is every carrier going to use every third lamp? Is that how it's going to work? So you need to bring a fibre optic and then power to every third lamp and everybody has their own conduit or can they use the same conduit for the same fibre optic or not? They don't know. We don't have any answers.
6478 So unless we have scope, then we'll have an idea where to put the equipment in the right-of-way, how deep it should be, should it be controlled, should it be within a conduit, should it be within concrete so that if somebody goes and digs close to it, we'll know what it is exactly.
6479 We asked them to show exactly where the infrastructure is often, and the result is always the same, that we don't really know what we have.
6480 So what we have to put in place is standards where if you need to go to certain amount of lamp posts within a boulevard, within a residential street, it needs to be done in the right-of-way, in the street, in the sidewalk or in the grass. It has -- you know, and we have to figure out how this is done before we give a go to yeah, you can go anywhere and increase the amount of infrastructure that we have in the right-of-way and maybe decrease the risk for municipalities when we go work on our infrastructure.
6481 I brought just one picture because I had it in my office this morning and I went, okay, this would be a good one.
6482 This is Philadelphia, you know. And this -- sometimes we open the right-of-way and we need to dig with backhoes within a metre of the equipment that is one metre deep. And after that, you have to do it by hand or it needs soft type of excavation.
6483 So in the winter when you need to go repair sewer work or waterworks and you need to dig by hand around one metre of infrastructure, it'd be fun to know exactly where the equipment is.
6484 So just my comment.
6485 COMMISSIONER BARIN: So it appears that in many cases there's going to be some case by case because of the technical issues that you encounter on specific sites. And there have been suggestions in this process that sometimes there is not -- there's no -- there's less consistency in terms of the approaches and decisions that are made across different municipalities and that there is a need for an increased level of consistency.
6486 And it brings up the issue of municipal approvals with some parties suggesting that this -- that their municipal approval be eliminated. I'd like your views on that suggestion.
6487 MR. ÉMARD-CHABOT: I'm just going to confer with Daniel for two seconds on something. I'll be right back.
6488 (SHORT PAUSE)
6489 COMMISSIONER BARIN: And if -- maybe a bit of context. There were suggestions that there are municipalities that are resource constrained and where the permitting process, you know, takes a long time and in the interests of more timely and efficient deployment that this would be one area where things could be streamline.
6490 MR. ÉMARD-CHABOT: So to speak to -- and do you want to speak to the streamlining efforts?
6491 So to the -- the premise that's behind the question, which is overwriting municipal approval or municipal consent, there is, in fact, no issue of municipal consent. Municipalities do not say no, and when it comes to issues like the placement of transmission antennas, we have a very clear decision by the Supreme Court that sets the parameters for what municipalities can and cannot do.
6492 This was an issue in the U.S. It was one of the reasons the FCC intervened.
6493 Cities were saying no, cities were setting up exclusive agreements with certain carriers and not others. That’s again, not allowed under municipal law in this country. So the notion that this is something that needs to be addressed, frankly, we don’t see it.
6494 We -- our membership is telling us they want these services, they need these services, and the legal parameters in Canada, both Constitutionally and under Administrative Law for municipal principles, are pretty clear on that. So the issue is not that. And frankly, if we were to go from a consent-based system where we sit together, figure out the parameters, to a notification based system, then you’re saying that this one infrastructure can do something within the public realm that no other essential service can do.
6495 Hydro can’t just go in and plop stuff down wherever they want to and just tell cities, by the way, we’re putting something somewhere. Gas can’t do that, and the reason is -- and there are even judgements that speak to this from the Courts -- is there are so many constraints. Where there is a gas pipe you can’t put anything within a metre, or two metres, depending on the provincial codes. Same thing with hydro, same thing with district steam heating. All these things have their sphere that is required in most cases, by law.
6496 So there is no systemic issue. Municipalities are not saying no. There may be the odd outlier. I’m not saying odd in the strange, but there might be one or two. But Châteauguay is clear, when it comes to antennas, the location of antennas is part of the core federal jurisdiction over telecommunications and this is not within the municipal realm. We got that.
6497 So we’re not moving into, how do we do this properly and allow for this balance to take place? And to say that this can take place without the key conductor role of an orchestra that the municipalities play, I think is a recipe for disaster. And it’s certainly not, in the long run, anything that will be any more efficient or cost effective when we have workers who are hurt, services that are cut because we didn’t know where they were. That is just not practical from our perspective.
6498 MR. RUBENSTEIN: Maybe I’ll share a couple of thoughts and see if other colleagues want to speak to this as well.
6499 So I mean, one is about going back to our starting premise, which is that there are many interconnected issues here that are barriers to access, and I think Sylvain has given a really good portrait of the congestion in the wireline space actually being the key access problem. It’s not the municipality granting access to a streetlight, or a pole within the right of way above that they may own. And those are challenges that require the coordination, and best practice development, consistency. I think our members want that too.
6500 And when we speak about these issues with our technical committee, you know, we are sharing intel around occupancies, around bulk permitting, around what steps can happen at the early stage. A lot of this is dependent on what our members also get from carriers, so they can respond to access requests in a way that’s more comprehensive. So we are completely interested, available, and wanting to be part of a process. That’s not just municipal, but that involves all parties, and the -- you know, the utilities matter a lot as well, because, you know, even in some parts of the country the streetlights aren’t owned municipally anymore, they’re utility owned.
6501 We all need to be together at the table to work through this, and I’m not aware of any circumstance that may have existed in other countries where municipalities were using their ability to set an occupancy, for example, as a barrier. That’s just not what’s happened here in Canada. Janis?
6502 MS. INGRAM: If I could add something from York Region’s perspective, our experience has been that we discover one of the 10 carriers has put their antennas up on hydro poles. Hydro poles are not owned by York Region, of course, so we find out the antenna’s up there, the small cell is up there. And when they come to get their wireline consent from us, from York Region, we now need to figure out how we get their wires attached to that small cell.
6503 So going back to the very beginning of this presentation, where we talked about collaboration and discussion, that could be avoided because some of this -- the technical issues that we’re experiencing is because of a lack of understanding or a lack of discussion at the front end of these installations. So if we had a working group and we had more collaboration with everyone who’s involved, including the hydro companies and the -- and the municipalities who actually are involved in this as well -- as well as York Region, we could at least educate some of the players.
6504 Because their contractors simply don’t realize once they put that small cell up there, that they need to feed it somehow. And some people have actually thought that there’s already hydro to it where there isn’t. Remarkably, it’s on a hydro pole, but the feed isn’t there for the antenna. So these are the small things that at the front end can be resolved by actually collaborating with everyone involved.
6505 The other -- the other thing about our suggestion about a national working group is that what was mentioned earlier was that there was a lack of resources sometimes in small municipalities. And I think that’s been suggested as one of the reasons to eliminate our consent, or some kind of speed up our permit process. That is actually -- that is a logistical issue across municipalities. Some of us are well staffed, York Region is, others are not.
6506 So in terms of educating the municipal staff, a nation wide, you know, working group consensus approach would bring together some of the best practices that the bigger municipalities can develop and roll out. And the other municipalities who are personnel challenged, they can then piggyback on those processes and address, I think, what are some of the criticisms that’s been leveled at municipalities, in terms of how quickly they process these applications.
6507 MR. ÉMARD-CHABOT: Just to give you perhaps one very ---
6508 MR. HIRJI: Sorry, could I just ---
6509 MR. ÉMARD-CHABOT: Yes, sorry. Sorry.
6510 MR. HIRJI: I just wanted to add to what Stéphane said earlier about the -- around the governance of the right of way, which is really the key of the issue, is in Vancouver we have 10 plus different utilities that all have to co-exist in the right of way. So if one -- one utility in this case, the telecom industry, had sort of, you know, unfettered access to the right of way, versus the other utilities, then that would be an unfair advantage for one utility. And at the end, we have to be -- all the utilities need to coexist at the same space, because all customers and residents not only need cell service, but they need power, and gas, and we have steam, and water, and sewer, all of those services need to coexist.
6511 And in terms of the permitting process, we are currently staffed up to meet the current demands of the carriers. If there is a significant ramp up, and if they are able to share their deployment plans, we’d be in a position to staff up to meet the demands and the requirements of the carriers.
6512 MR. ÉMARD-CHABOT: And one final point on -- so one aspect of your question was the -- the local versus national. There will always be local characteristics and the smaller cities.
6513 One of the advantages we see of a national working group that would work through some of these technical issues, for example, Calgary is already working on this very simple tool. But there are, let’s say five types of poles within Calgary, and there are six different types of antennas that the carriers want to deploy. They just do the calculations once on wind load, snow, ice, and figure out, okay, on pole A small cells C, no problem. We’ll give you a permit in 20 minutes. This other one requires strengthening. If you wanted to put three of them you’re going to have to swap the pole, the pole can’t take that type of load.
6514 So that type of calculation is, you know, if you want to speed up the process, let’s not do that 2,000 times and let’s develop national loads and transfer those. And a smaller city, like, Timmons, that might not have the engineering capacity or the time to do all that will simply take our tables and say, okay. I’ve got a three-millimeter spun aluminum pole that’s 10 metres tall. I know I can stick three antennas on that. I’m good. Here’s your permit.
6515 COMMISSIONER BARIN: Thank you. And this is my last question before I pass it off to my colleagues.
6516 So the working group then would be focused on technical and implementation issues.
6517 And in your view, do you have a particular timeline for setting up of the group and specific deadlines for making decisions on issues that you feel are critical at this stage in the 5G deployment?
6518 MR. RUBENSTEIN: It’s an excellent question.
6519 I think our offer is that we’re ready to do this work now.
6520 Again, I think we all need a shared understanding of the scope of questions that need to be tackled in order to determine how much time is reasonable.
6521 And there’s probably a way to do that sequentially so some issues can be resolved relatively quickly and others may take more time.
6522 I think the more understanding and consistency that we can get about different aspects and continue to narrow this down will be helpful.
6523 I’m not giving you a definitive answer because I -- we don’t have a magic number to give you.
6524 But I think it’s something that should be -- start quickly and on a priority basis.
6525 We -- you know, everybody has an interest in more consistent approaches and more understanding.
6526 And I’ll echo what Janis and Karim said, that, you know, if the frame is that municipalities don’t have the resources in place to do permitting, it’s contingent on information about how to staff to respond to permitting.
6527 You know, if there’s a perception that the timeline barrier is, you know, to get access to the pole, but it’s actually about the technical challenge to figure out the power connections to the pole, we need to think these things through. And, you know, a working group that’s struck urgently could do that work.
6528 COMMISSIONER BARIN: And am I to understand that to date, you’ve had, generally, the full cooperation of carriers, with the exception of one?
6529 MR. ÉMARD-CHABOT: That’s certainly the experience in Calgary.
6530 Karim, maybe you could speak to how things are going in Vancouver?
6531 MR. HIRJI: I would say in Vancouver we’ve got cooperation from all the carriers in terms of working with them in the permitting process. So I wouldn’t say there’s been any uncooperative carriers.
6532 MS. INGRAM: From York Region’s point of view, we have had full cooperation from the carriers. They’ve been very willing to sit down with us and understand our processes and our requirements as to esthetics and just where they can deploy.
6533 They’re working out their technical deployment issues, but together with our experts in house, they are planning it sort of, you know, sort of as they go along.
6534 So it’s been pretty positive.
6535 MR. BOUDREAU: In Quebec there’s a small research group called CERIU, Centre for Expertise and Research in Urban Areas.
6536 And there’s a group there talking about 5G and the carriers are there, but there’s no scope, we have no idea where they’re going.
6537 And there’s discussions on what can and can’t be done, what -- how it could be done.
6538 But we have no idea of scope.
6539 If you ask for an antenna somewhere, I’ll give you an answer in an hour. But if you need 1,000 antennas on the right of way, then it’s not the same decision.
6540 MR. RUBENSTEIN: I’ll just -- I think it’s worth remembering the model and the process, although not perfect, it’d have representation from across our membership and also from all the major carriers and players.
6541 We’ve also worked on a voluntary basis with the industry through CTWA on the antenna-setting protocol template that was actually a best practice precursor to ISED updating its own regulations.
6542 So we’ve been down this path before. And I think we’re, again, at the very early stage of this conversation and would like to be at the table and replicate that again.
6543 COMMISSIONER BARIN: Great. Thank you. Thank you for your questions. I’ll pass it back to the Chair.
6544 THE CHAIRPERSON: Pardon me. Thank you very much. Thank you for your submissions and taking your time to share with us.
6545 Madame la secrétaire?
6546 THE SECRETARY: Merci. I would now ask the Province of British Columbia to come to the presentation table.
6547 (SHORT PAUSE)
6548 THE CHAIRPERSON: Good afternoon.
6549 Madame La Secrétaire?
6550 THE SECRETARY: Thank you.
6551 Please introduce yourself. And you may begin. You have 10 minutes.
6552 MR. D’EITH: It’s different.
6553 THE CHAIRPERSON: Only if you wish to be heard.
6554 MR. D’EITH: It’s different in our legislature. I apologize.
6555 THE CHAIRPERSON: Not at all. And you can only have one of them on at a time, just so you know, as you -- if different people speak.
6556 MR. D’EITH: Thank you.
6557 THE CHAIRPERSON: Welcome.
PRESENTATION / PRÉSENTATION
6558 MR. D’EITH: Thank you.
6559 Good afternoon, Chair and Commissioners.
6560 I’d like to take the opportunity to thank you for inviting us today.
6561 My name is Bob D’eith. I’m the MLA for the B.C. Constituency of Maple Ridge Mission.
6562 And I’m joined here today by Toby Louie. He’s the Executive Director of Corporate Policy and Planning in the Ministry of Public Safety and Solicitor General.
6563 And Roman Mateyko, who is the Executive Director of Information Communication Technologies Division in the Ministry of Citizens’ Services of British Columbia.
6564 Together we are here representing the Province of British Columbia in these proceedings.
6565 I was appointed by Premier John Horgan last year as B.C.’s federal lead on telecommunications.
6566 I was tasked with leading a public engagement on cellphone-related issues, and representing British Columbians in federal discussions regarding certain telecommunications matters.
6567 I am here today to present key findings from a public survey that B.C. held last year on cellphones. Fifteen thousand five hundred and forty-nine (15,549) people completed the survey and the results were included in B.C.’s further comments to the CRTC.
6568 The survey was the first ever undertaken by the Province regarding cellphone services. It was similar to other citizen engagement initiatives that the province regularly undertakes on programs, policies and services that affect citizens’ lives.
6569 The survey provided an important opportunity to hear directly from British Columbians on a variety of cellphone-related issues.
6570 My comments and recommendations today are based on the input that we received.
6571 Much of what we heard concerns the matters under review by the Commission and are the focus on my comments.
6572 Now first, consumers want more affordability and choice in wireless services.
6573 The survey results affirmed what many Canadians have been saying for some time: people are highly frustrated and unhappy with the current cost of cellphone services.
6574 For example, 86 percent of respondents do not think the cost of their cellphone service is reasonable. And 79 percent do not think they get good value for their service.
6575 The survey included space for people to provide additional comments on topics that they wanted. And actually, over 4,500 respondents provided additional comments criticizing the cost and value of cellphone services.
6576 The greatest number called for more affordability and competition. Frequently used terms included: “expensive”, “gouging”, “unfair”, “monopoly”.
6577 The high costs of cellphone services has a significant impact on people.
6578 Now more than ever, cellphones are a necessity for families, a way to keep safe, stay connected and receive services.
6579 These costs are a staple expense, much akin to a monthly transportation or utility cost.
6580 Cellphones are no longer a luxury item.
6581 For example, in the survey, one person stated the cost of their family’s cellphone service was as high as their monthly food bill. Others described only being able to afford pay-per-use services depending on how much money they had left at the end of the month.
6582 So the anger and frustration expressed by people should not be underestimated.
6583 It was a clear and simple message that was conveyed by, really, nearly everyone surveyed. There was a demand for more affordability and choice, and that’s what’s needed in the retail wireless service market.
6584 The Province of B.C. fully supports this goal, as reflected in the B.C. Throne Speeches. Our government committed to work to improve cellphone billing transparency for British Columbians, beginning with a public consultation and legislative review.
6585 B.C. also committed to encourage the Federal Government to deliver more affordable cellphone options, which is why we’re here today.
6586 British Columbians want government action to improve affordability and choice. Citizens want their governments to take meaningful steps to ensure that wireless services are affordable and that there are sufficient choice in the retail market.
6587 Within survey responses were a variety of suggestions on how this could be accomplished. And the top four were more retail competitive competition and innovation; government regulation; more choices for low-use and mid-use cellphone plans; and greater ability to pick and choose services in cellphone plans.
6588 They key message to draw from this input is that a significant number of people are unhappy with the current state of affairs and want government action to improve affordability and choice.
6589 There is need for more low-cost, low-usage plans. The Province of British Columbia provided information requested by the Commission regarding occasional-use or emergency-use wireless plans. The evidence from B.C.’s engagement shows that there is sufficient need for these types of plans. This need is most felt amongst seniors and vulnerable groups who have affordability issues and/or low-usage needs.
6590 Additional evidence was also presented showing that prepaid plans are prone to other issues. These issues include confusing contract terms, disproportionately high costs for services, and restrictions on those services.
6591 Other notable complaints we heard on this topic include unused credits expiring at the end of the service coverage period of a prepaid plan; prepaid plans provide less billing transparency; and aggressive or misleading sales tactics that undermine the intent and effectiveness of existing low-cost or low-usage plans.
6592 So these are our recommendations. There’s currently an imbalance between the needs of consumers and what is being offered in the retail wireless service market. This applies generally to wireless services, as well as to specific lower-cost, low-usage cellphone plans.
6593 The Province of B.C. therefore encourages the Commission to address this imbalance and meet its policy objectives, to the benefit of all Canadians. The guiding principle should be facilitating greater affordability and choice for families.
6594 Now, achieving this goal will require the Commission to take meaningful and effective actions that give Canadians more choice and affordable and innovative services.
6595 Furthermore, the Province wishes to restate its recommendation for the Commission to exercise its powers to mandate the provision of lower-cost, low-usage plans for all Canadians, both rural and urban.
6596 We also respectfully encourage the Commission to support expediting the next review of the Wireless Code and the CCTS mandate. We understand that these matters are not under consideration as part of this review. However, we wanted to note that there was a disconcerting number of contract and bill-related issues were raised by survey respondents.
6597 The survey results also show that there’s a very low level of awareness among consumers of both the Wireless Code and the CCTS complaint process. As a result, people don’t know their rights, or what their options are if they have complaints.
6598 All of these things point to a need for future reviews aimed at making improvements.
6599 So in conclusion, Commissioners; to conclude, I have come here to represent the overwhelming number of people who have said they are frustrated with the lack of affordability and choice for cellphone services that they need. And British Columbians know exactly how much they pay for their cellphone services each month, and they’re asking for government to do more. That’s why I’m here today, with three recommendations:
6600 First, increase competition in the market to help decrease costs for Canadians;
6601 Second, mandate lower-cost, low-use cellphone plans for people who need a basic plan without the bells and whistles;
6602 And, third, strengthen consumer rights by working to expedite changes to the Wireless Code.
6603 Together, these actions would promote the kind of affordability and choice in cellphone services that British Columbians have long been seeking. We encourage the Commission to use all of the tools at its disposal to achieve these goals as soon as possible.
6604 The Province was also pleased to see the Federal Throne Speech committing to cut cell phone costs and wireless services by 25 percent. We think that this goal is a step towards better cell phone affordability issues that were raised in our survey.
6605 I’d like to thank the Commission for allowing the Province to intervene and present at these important hearings, and I hope that our comments and submissions will assist the Commission in the work that lies ahead, and I’d like to thank you very much.
6606 THE CHAIRPERSON: Thank you. Thank you for taking the time and putting in the necessary effort and resources to conduct the survey and put it on the public record.
6607 Commissioner Levy.
6608 COMMISSIONER LEVY: Yes, thank you.
6609 It’s a long trip from British Columbia; thank you for being here.
6610 According to your survey, only one in 10 responded, so about 9 percent agreed with the statement that, quote, “I get good value for my cell phone service.” However, according to the survey that was commissioned by the CRTC, nearly half, 46 percent, agreed with the same percent and only 26 percent disagreed.
6611 Do you have any views as to why the level of satisfaction differed so much between the two surveys?
6612 MR. D’EITH: Well, I’ll turn it over to Toby to answer the specifics around that. My understanding is that there were -- certainly the phrasing of the questions were quite different to -- you know, one issue was brought up, for example, that there was a large satisfaction in the CRTC survey for the service people were getting, but the question wasn’t asked were those same people satisfied with the price of the service, and we asked that question.
6613 So I think our survey shows that the people that took part in the survey, the vast majority were not happy with the price. Now, there’s obviously a difference between the price and the feeling of value of the service. So, for example, they may feel that they’re -- that, you know that their data is fine, that they’re not dropping out for their cell phones, so the actual service from their provider is fine. But as we found if you ask those same people whether they feel that their cell phone cost is too high, the vast majority will say yes.
6614 Toby, do you want to just jump in on that?
6615 MR. LOUIE: I think you just hit it, man.
6616 MR. D’EITH: All right.
6617 MR. LOUIE: I’d just add that I think that there’s differences in terms of the survey questions. I think people also say there’s differences in terms of point in time.
6618 I do want to say that British Columbians have heard that there was a point in time but they did take the time to provide comments to us. So there was an avenue for them to provide comments.
6619 Our survey also had a number of other questions which may have influenced or shaped how they provided their perceptions on cost. We were also asking for things in terms of their experiences at point of sale with their contracts, with billing transparency. So I think you need to look at our survey in a total view, and I think some of that might have shaped their views in terms of the value and the cost response as well.
6620 COMMISSIONER LEVY: Have you had a look at the exhibit that was provided on Day 1 of the hearing?
6621 MR. D’EITH: My apologies again. Are you talking about the Exhibit 2 and 3, ---
6622 COMMISSIONER LEVY: Yes.
6623 MR. D’EITH: --- which sets out the review of the present mobile wireless services?
6624 COMMISSIONER LEVY: Yes. The Exhibit 2 is ---
6625 MR. D’EITH: And then, of course, the other one is the proposed ---
6626 COMMISSIONER LEVY: --- the subset of occasional use plans and Exhibit 3, the review of mobile wireless services.
6627 MR. D’EITH: Yes, the ones that are proposed by a number of consumer groups?
6628 COMMISSIONER LEVY: Right.
6629 MR. D’EITH: Yes, I did see those. Yes.
6630 COMMISSIONER LEVY: In Exhibit 2, there are many plans at various prices with the various features, many under $15. To what extent are consumers’ needs for occasional use or emergency use wireless plans being met by these current offerings?
6631 MR. D’EITH: Well, one of the things we heard from the survey was that some of the sales practices -- that people don’t necessarily hear about the plan. So there may be some plants that might be suitable for people, but unfortunately, we hear about seniors who are being sold plans that are way more than their needs are. And I do think that if you look at Exhibit 3, for example, some of these ideas here, in terms of plans, might address some other issues for consumers. And I think that’s part of the problem.
6632 So one is the lack of knowledge that consumers have and the other one is the utility of the plans that are being presented.
6633 Now, keep in mind that even if someone is going month to month, they may still need to have robust access, let’s say, to the internet to get services, because many government services are going online now, for example.
6634 So there’s -- so the utility is an issue too, with the Exhibit 2 versus Exhibit 3.
6635 So I think that’s worth mentioning.
6636 But I don’t know if Toby, did you want to say a little bit more on that?
6637 MR. LOUIE: As MLA D’Eith noted, I think there is a disconnect. We’re not saying that there are no low-cost plans available. But from what we’ve heard from the survey responses, what we’ve heard is there’s a disconnect between what’s being offered and what individuals are accessing or purchasing as a service. And the services that they have are not meeting what their needs are.
6638 So we’re not sure about that disconnect.
6639 And one other piece, if I could ask, is we did not ask about low-cost plans specifically in our survey, but we had an open-ended comment section.
6640 The majority of individuals that responded were on a post-paid plan, or a plan.
6641 But we did get comments from individuals that said they didn’t know.
6642 So despite the fact that we didn’t ask a question about this, we still did get some comments and questions from individuals that didn’t -- they felt they didn’t actually know about these lower cost plans, or these plans didn’t meet their needs.
6643 COMMISSIONER LEVY: You’ve talked a little bit about the gap that you feel is sort of asking to be met with regard to seniors.
6644 Are there any other really identifiable gaps that you can see that aren’t being met in the market?
6645 MR. D’EITH: Well, if I may, it might stray a little bit away from the specificity of the hearings, but we did hear from seniors, and there’s a few things.
6646 For example, many seniors don’t have access to online billing, for example.
6647 So even though the Wireless Code says you have to provide a paper bill if it’s asked for, it doesn’t say that you can’t charge for it.
6648 So seniors are saying, “We’re getting charged in some circumstances for asking for paper bills.”
6649 So that is an example of something that could be looked at in the review for Wireless Code.
6650 Some of the other things too is, and this came out a lot from seniors, is the aggressive sales tactics, where they’re being upsold on plans that they just don’t need.
6651 And so that’s a real issue that needs to be addressed.
6652 So there may be a plan that would be suitable for them, but unfortunately, some of the sales practices that are happening are simply leading to them getting stuck in two-year plans that are way more than they can afford with may more than they need.
6653 So what’s wrong with their old phone, you know? They get sold on the latest iPhone that they don’t really need.
6654 And so those sorts of practices we’ve been hearing from from seniors as well.
6655 Is there anything else that you wanted to add to that, Toby?
6656 MR. LOUIE: No, thank you.
6657 COMMISSIONER LEVY: So that seems to be the biggest gap then?
6658 MR. D’EITH: Yeah.
6659 COMMISSIONER LEVY: The service to seniors?
6660 MR. D’EITH: And also the need for plans that are suitable for seniors. And I think if you look at Exhibit C -- or 3, for example, I think some of those plans may be worth looking at if you do consider mandating the low-cost plans that seniors or vulnerable people need. These types of plans might be more suitable.
6661 We don’t want to speak to the specific plans, because I think you’re hearing evidence from a lot of experts and people who understand these areas, and that’s great. And that’s what the CRTC should do.
6662 We’re looking at the results and what people are asking for. And that’s why we’re here. We’re here to convey to you what we heard from seniors.
6663 COMMISSIONER LEVY: What do you think needs to be changed to address that? Is it something that could be handled by more competition in the market?
6664 MR. D’EITH: Sure. I mean, that’s really the two main areas that we’re asking for, is more competition in the market. And certainly, that would help. You know, if prices, generally, are lower, that would help.
6665 But also, low-cost cellphone plans for vulnerable groups, in addition to that, would be very helpful.
6666 COMMISSIONER LEVY: As part of your survey, did you look at how many different providers there are in the communities across B.C.? How many different -- even the flanker brands, the different kinds of programs. Did you do any kind of survey about the broad range of offerings in the province?
6667 MR. D’EITH: Just so you know, we did the survey, and that was a public survey, but we also did a number of stakeholder meetings as well with a number of different groups.
6668 Now, that doesn’t necessarily factor into the report, because that was primarily on the survey itself.
6669 But as a team, our group that was looking at this did go out and met with telecoms, met with, you know, associations and groups, consumer groups that were interested. And so we did have sort of a broader look at it.
6670 But Toby, please, if you want to get into the specifics of the survey?
6671 MR. LOUIE: The survey didn’t, again, cover the lower-cost plans.
6672 But I think part of what the government is doing currently, and has been doing, is looking to see what the availability is.
6673 And I know the CRTC has these exhibits as well as part of these hearings, and they’re very helpful for us as well.
6674 We were looking more just in terms of not so much an exhaustive list, but we were just seeing what was available and how to, kind of, reconcile, as the questions are today, how to reconcile what we’ve heard with what the marketplace has.
6675 And we don’t have a definitive answer on that. And I think we’re still looking at that question.
6676 MR. D’EITH: And one -- but one of the things that did come up, if I may, on the survey, was this idea of there needs to be more options and flexibility.
6677 One of the things of the lower cost plans is they’re very rigid in terms of what they provide and they aren’t necessarily meeting the needs.
6678 And I think that’s key, because there is this disconnect that we heard between, you know, people perceiving, “Hey, we’re not getting the pricing that we want and the services that we want.” And that seemed loud and clear in the survey. And that sort of plays into it.
6679 But as Toby said, we didn’t specifically ask about these low-cost plans.
6680 COMMISSIONER LEVY: Was there a particular service they felt was particularly problematic?
6681 MR. D’EITH: I don’t think that was covered in the survey, no.
6682 COMMISSIONER LEVY: Okay. Now, as a province, you have various programs, particularly for low-income individuals.
6683 As part of, for instance, the assistance that you provide to low-income folks in B.C., do you -- when you put together the basket of goods that are required, do you allow for cellphone service or some sort of communication service as part of that basket that you need to -- that people need in order to survive?
6684 MR. LOUIE: There’s -- as you can appreciate, there’s different departments within the province, and I’ll try to answer as best I can.
6685 I don’t think I can answer that definitively, but I do know that there are programs for individuals.
6686 When that became -- you know, one that was raised with us is there are youth who are transitioning out of care, and there are service providers that are providing a service -- as part of a program, they are providing that service.
6687 There’s probably similar types of services for lower-income individuals.
6688 And I’m just not certain if there is something specifically that we include as a basket of services for low-income individuals.
6689 But I think the overall point you’re trying to make is, it’s not so much the very-low-income people. There is a broader group. Seniors are one. There are some individuals that we are calling some vulnerable individuals, populations, seniors, and others, and lower income, that are just not getting what they feel is a service they need from a wireless plan.
6690 COMMISSIONER LEVY: We’ve heard about the Telus plan that offered free -- a free phone and service to children in care who are under 26 for 2 years after they ---
6691 MR. D'EITH: And I think it's worth mentioning that MCDF, which is, you know, the Ministry that deals with Children's Service, actually piloted that project. So, that's an example of, you know, government and telecoms working together, and we have that happening quite a bit.
6692 For example, in connectivity in British Columbia in rural and remote areas. That's a very important consideration. I think it's also important for the CRTC to take that into account when you are looking at competition and affordability, because we want to make sure that that same affordability is -- and connectivity is available in rural and remote areas.
6693 So, those are the kinds of things where we are working with the telecoms in British Columbia to provide that connectivity.
6694 So, we have to take all of these -- you have to take all of these pieces and take them into account when you're looking at competition.
6695 I did want to add, though, we did -- we were talking about seniors and vulnerable people, but we also have to talk about families, and we heard from families. We heard from just regular folk who feel that they're paying way too much for cell phones, and that's part of the request for greater competition.
6696 And so, I think we have looked at some specific issues around vulnerable and seniors and others, but I wouldn't want to deemphasise the request for potential more competition to allow more, you know, pricing to come down.
6697 COMMISSIONER LEVY: The ISED had a connecting families initiative that was designed to connect hundreds of thousands of low-income Canadian families to the internet, and in that instance, participating internet service providers voluntarily contributed to the initiative by offering $10 internet service to eligible families, and the eligibility was determined by families that received the maximum amount of Canada Child Benefit.
6698 Do you think a similar approach could be taken for mobile wireless services, particularly as you have just referenced the needs of families?
6699 MR. D'EITH: Well, I think there's -- when the CRTC looks at all the different issues in front of them, those kinds of programs are certainly worth looking at, and I think there's a multiplicity of issues around affordability that have to be looked at, and a number of different solutions to that. And, you know, one of those, of course, is mandating the -- you know, the lower cost low-usage plans. But, of course, there's other options that are being put in front of the CRTC, and we encourage you to look at all of these in making your determination.
6700 Roman, did you ---
6701 MR. MATEYKO: I'll just add to that. So, the CRTC recognised internet access is almost a lifeline required access. I think certainly cellular service probably is even more important. So, to have those kind of programs would be very beneficial, from a social perspective.
6702 COMMISSIONER LEVY: Do you see the difficulties between the urban/rural divide? I know that we had Xplornet in and they said they didn't actually participate in this program, because when you're talking about incomes, rural versus urban, in their rural areas, they would have been covering 65 per cent of their market with this program, and that just was not economically feasible for them.
6703 So, do you have any notions about how we would deal with the dichotomy between the two?
6704 MR. D'EITH: Yeah, and I think that's why I brought it up. I think it's very important to make sure that, we -- you know, we have connectivity issues in British Columbia, and we have access issues for -- in rural and remote areas, and we want to make sure one of the issues -- one of the problems, of course, is, you know, we heard about 5G, you know, if it becomes an urban phenomenon to the exclusion of rural, then we're creating more of that divide. And that's not a good thing. So, I think it's really important for the CRTC.
6705 We would probably, you know, submit that it would be -- it's very important to take those considerations into account when looking at affordability, because if certain measures are taken that somehow affect rural and remote areas from getting connectivity or affordable cell phone service, that's an issue, and I think it's really important to look at, very important, because we want to make sure that, you know, this pricing is available and in rural areas and remote areas as well. It's not just -- and I appreciate the fact that it costs more when you have less people per square kilometre. I get there. And so, we have to -- I think that's where the CRTC has to find the balance. I think that's something that we encourage you to look at is find that balance.
6706 Did you want to -- okay, sorry.
6707 COMMISSIONER LEVY: As a province, you make certain programs and government assistance available through various means tests, I would assume. How feasible do you think it is for a regulator like the Commission to implement such a program?
6708 MR. D'EITH: Do you mean -- which program, just so I'm clear?
6709 COMMISSIONER LEVY: A means tested low-income program.
6710 MR. D'EITH: Well, I certainly -- yeah, I'd certainly think it's quite doable. I mean, it's certainly looked at in many other types of programs, so I don't see why it would be any different for this.
6711 COMMISSIONER LEVY: Would it be more sensible to simply mandate a low-cost plan for all Canadians regardless of income?
6712 MR. D'EITH: Well, I think as long as those plans meet the needs of the users, that's -- that would be my only concern. If sure, fantastic. If there was lower cost plans that met everyone's needs, that's the best case scenario. It'd be very great. You know, that'd be -- that would make sense because people are getting more affordable cell phone access. They're getting the type of service that they need, not more than they need, so -- which is important.
6713 And I think to get to there, it's -- it would be a great place to be because, as I said, we are talking about vulnerable and seniors and low-income people, but we're also talking about, you know, middle and -- middle income Canadians as well, who are struggling paycheque to paycheque in their families. And as we said, that one example where, you know, it was this -- the amount of their cell phone bill for their family was the same as their food bill. And that's a real burden on families, and it's something that I think the CRTC should really take into account.
6714 COMMISSIONER LEVY: How do we then assess the needs of consumers and decide on the characteristics of, say, a mandated plan? How would we assess the needs?
6715 MR. D'EITH: That's a very good question, and I'm sure that as the experts you will do very well in coming up with a ---
6717 COMMISSIONER LEVY: Oh, yes. Nice rally.
6718 MR. D'EITH: Sorry, I can't help myself. I'm the Chair of the Finance Committee, so I'm not used to being on this side, so I apologise here.
6720 COMMISSIONER LEVY: Yeah, you're more used to saying no.
6722 COMMISSIONER LEVY: Just finally, the -- do you think that plans should be, you know, a low-cost more responsive -- plan responsive to people's needs should be on a prepaid basis, so that people with credit issues wouldn't be denied access to such plans?
6723 MR. D'EITH: That's a very good point. I think one of the problems that we heard from the survey was that a lot of the prepaid -- the prepaid plans are actually problematic because they ended up being used by people of lower incomes and seniors, and they ended up usually being higher in cost, and then credits weren't used, and then they disappeared, and things like that. So, we'd want to make -- if that was the case, we want to make sure that it was very clear, you know, how that would work and that would -- and so there would be fairness for consumers on that.
6724 I think the -- some of the challenges with that would be the cost of phones. We did hear from telecoms that one of the biggest costs, of course, is the cost of the devices now, and you're up to $1500 for devices. And that -- you know, that could present some issues in terms of doing a month-to-month type approach. Mind you, if they were using older phones, or not the latest thing, that might work, but I think there would be challenges with that in terms of amortizing costs over a period of time, and making it -- I don't know how the telecoms would get to that affordability if it wasn't amortized over a certain period of time. And I think that's part of the reason why the month-to-month is more expensive.
6725 So, I think there's challenges with that. It would be great, but I think there's challenges with that.
6726 COMMISSIONER LEVY: Okay. Thank you very much. I appreciate the efforts that the Province of British Columbia went through to do such an extensive survey, and to send us the results and make your -- travel all this way and make your presentation today. Thank you very much.
6727 MR. D'EITH: Thank you so much. Really appreciate it.
6728 THE CHAIRPERSON: Thank you.
6729 Commissioner Laizner?
6730 THE VICE-CHAIRPERSON: The CRTC report on missing and -- misleading and aggressive sales practices was published in mid-February 2019. Could you tell me again when the data was collected for your survey? Was it before or after that?
6731 MR. LOUIE: It was the end of May to early July was the time period that the survey was opened, so the perceptions -- we did ask respondents to go back just within two years of their experiences with their cell plans for consideration of their responses.
6732 THE VICE-CHAIRPERSON: Well, I find it very disconcerting that you've seen some of the complaints that we heard during our hearing, which was before our report was published about being upsold and other issues that seem to be continuing in the summer of 2019.
6733 Do you have any plans to redo that survey?
6734 MR. LOUIE: Not at this time. I think there's so many different areas where it can dive into, I think at the moment we're just trying to digest what we have and, as you say, do further research, talk to more people, but not at this time in terms of replicating the survey.
6735 THE VICE-CHAIRPERSON: You have some recommendations with respect to a review of the Wireless Code, and in your review of the responses and comments you received, did you see that there was a problem of non-compliance with the Wireless Code or a problem of gaps in the Wireless Code that need to be addressed?
6736 MR. D'EITH: I would say both. And a third one is just the lack of knowledge of its existence.
6737 And I appreciate that efforts have been made by the CRTC and others to make sure consumers are aware of the Wireless Code, but it was shocking how few people actually knew it existed or the CCTS existed, and that's a real issue. So education is a -- is sort of another pillar we haven't really talked about today, but I think as far as the rights and remedies that are available to people, I think that's an important piece that we might be able to help with, too.
6738 I think provinces might have a role in education and working with the CRTC and the CCTS to try to make sure consumers are aware of their rights.
6739 But there are some issues. I'll give you an example, a gap.
6740 I've been a lawyer for 30 years and I don't think I've ever told a client -- I can't imagine telling a client to sign a contract they've never seen. And that -- the Wireless Code says yes, you have to give the contract immediately to the person, but that's after they've signed it, you know.
6741 So they're not reviewing the contract. They might have the summary, but they're not actually reviewing the contract.
6742 And in the case of over the phone, it's 15 days later.
6743 Now, I know there's remedies if they subsequently read it and they can -- I appreciate that there's things in there, but quite frankly, that's -- we've seen that, that that's a gap. That's a gap, you know.
6744 Consumers should have the contract before they sign it and should be able to review it, and I think that's just a basic issue. And I can understand the telecoms saying, well, it might affect our competitiveness and people might go and shop around. Well, good, you know, quite frankly.
6745 So I think with the Wireless Code there are some issues. We can follow up.
6746 Obviously there's going to be a whole Wireless Code review in two years or -- is it 2022? So that will be coming. And we're obviously happy to answer any questions in the interim.
6747 And we would, again, really encourage the CRTC to expedite the review of the Wireless Code because, as we know, telecom -- any kind of technology moves much faster than government, and by the time you have the review and those recommendations are put into force, it could be three years from now.
6748 So that would -- that was just one example of a few examples that came forth with the Wireless Code in regards to gaps, so.
6749 And there was a third -- sorry. My apologies. There was the gap and then there was?
6750 THE VICE-CHAIRPERSON: Whether it was an issue of a gap or non-compliance with the terms of the Wireless Code.
6751 MR. D'EITH: Right.
6752 THE VICE-CHAIRPERSON: And you said -- I think you said you thought there were both.
6753 MR. D'EITH: Yeah. As far as the non-compliance, I mean, there are some really great things in the Wireless Code. And I think part of it is -- and this is one of the things with the CCTS.
6754 And it's a wonderful organization. It's hearing people's complaints and it's resolving them and, you know, the problem is with the CCTS, in my humble opinion, is that -- or our opinion. I keep saying "me". I apologize.
6755 Our -- is that it's transactional. So if the CCTS finds something that's systemically wrong, they can't act on it. And that's, I think, a gap.
6756 Now, it's different, of course, in the Wireless Code, but that's an example, I think, of a gap with the CCTS is that if the CCTS found something that was a systemic issue like, you know, aggressive sales practices by a particular group, they can only act on that one thing. They can't act for the country.
6757 And so those -- again, that's one example of a gap that we saw.
6758 THE VICE-CHAIRPERSON: Thank you.
6759 Did you receive any comments related to confidence in the quality of lower cost brands, flanker brands?
6760 We had talked to some of the -- well, we talked to Telus and Bell about the fact that in our survey, one of the comments we received was that people didn’t have confidence in low-cost plans that were on flankers actually owned by the national MNOs, but the consumer didn't realize that these brands were riding on the same networks.
6761 Did you get any comments of that nature?
6762 MR. D'EITH: Toby, do you want to...?
6763 MR. LOUIE: I think it speaks generally to that issue of awareness. Not specifically -- to answer your question, not directly, but I think it answers -- it -- I think what we were hearing is it's the general awareness of the lower cost plans or even the flanker brands ---
6764 THE VICE-CHAIRPERSON: It's not there.
6765 MR. LOUIE: It's not there.
6766 And I think even though the -- at the government staff level, you know, we're not immersed in the telecom issues like the CRTC or ISED, but even our look at it, we found we had to connect the dots. It wasn't clear.
6767 If you're in this field, in the telecom field, and you know and you do your research, then you would know. And I'm just thinking the average consumer, the average person or someone who's looking for not necessarily a deal, but a lower cost plan, they will have a hard time making heads or tails of it unless they do the work, unless they do the research into this.
6768 And same for the pre-paid plans as well.
6769 THE VICE-CHAIRPERSON: And my last question is related to the issue of low cost, low data usage. I think you mentioned the example of seniors who may just need occasional use, emergency use cell phone but they don't need large data.
6770 When Mr. Noss of Tucows was before us earlier this week, he was of the view that persons on low income may not even have internet access in their home and that, for them, their mobile phone data usage is really important because it may be their only way to access online services such as you mentioned.
6771 Did you get any comments of that nature from that demographic?
6772 MR. D'EITH: Well, I don't know. That sounds like a really good sales tactic to upsell someone on data, to me, quite frankly.
6773 THE VICE-CHAIRPERSON: All right.
6774 MR. D'EITH: But Toby, I don't think we heard anything specifically on that, did we?
6775 No. I think we sometimes hear issues around affordability ---
6776 THE VICE-CHAIRPERSON: I think in fairness ---
6777 MR. D'EITH: Yeah. Sorry.
6778 THE VICE-CHAIRPERSON: --- to Mr. Noss, I think he was ---
6779 MR. D'EITH: No, I appreciate ---
6780 THE VICE-CHAIRPERSON: He was ---
6781 MR. D'EITH: I don't mean to be flippant with that.
6782 THE VICE-CHAIRPERSON: He was positing that someone may have a -- I can't afford both home internet and a phone, the phone is more important to me and that'll be my means of getting on the internet, so ---
6783 MR. D'EITH: Yeah. And we're worried about having to make the choice between the phone and food, you know, I mean, with seniors because they have a fixed income ---
6784 THE VICE-CHAIRPERSON: Right.
6785 MR. D'EITH: --- and the cost of living, especially in British Columbia -- this is throughout Canada, but certainly in the lower mainland is extremely high and people on fixed outcomes are having to make choices.
6786 And I said one senior at the end of each month is making that really tough choice, can I afford another month of cell phone. And they need that because it isn't -- it isn't a luxury any more, really. And to be fair, I was a bit unfair to your comment on that, but it just -- I agree that people who are struggling financially are having to make choices on things that everybody else is using all the time, and that’s really problematic. And that’s part of this entire discussion, and something that the CRTC really has to examine when you’re looking at all this.
6787 THE VICE-CHAIRPERSON: Thank you very much.
6788 MR. D’EITH: Thank you.
6789 THE CHAIRPERSON: She doesn’t want me to go on, I can tell.
6790 Thank you very much.
6791 Just a comment and then I think we are done. And I do again thank you once more for coming to share your experience with us.
6792 You mentioned something I was going to raise, which was can provincial and other governments, play a role, too, in the education. I think consumer awareness is clearly emerging as a theme; awareness of low-cost options, awareness of this CCTS, the Wireless Code, and so on.
6793 So I would indeed encourage you and your confrères in government to consider how that might be done, and if you wish to submit any suggestions to us in that regard about awareness, we’d be happy to accept it by undertaking. I think the due date is 10th of March, if you have any additional submissions in that regard.
UNDERTAKING / ENGAGEMENT
6794 MR. D’EITH: Really happy to, Chair. That’s a really good suggestion.
6795 THE CHAIRPERSON: We’d appreciate seeing them. And with that, I thank you.
6796 MR. D’EITH: Thank you, Mr. Chair.
6797 THE CHAIRPERSON: We will adjourn for the day, for the week, and resume Monday morning, 9:00 a.m.
6798 Madame la secrétaire?
6799 THE SECRETARY: Thank you, Mr. Chairman.
6800 Next Monday -- well, next Monday, yes, at 9:00 a.m.
--- Upon adjourning at 4:54 p.m./
L'audience est ajournée à 16h54
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