Transcription, Audience du 24 février 2020
Volume : 5
Endroit : Gatineau (Québec)
Date : 24 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 Monday, February 24, 2020 at 9:00 a.m./ L’audience reprend le lundi 24 Février, 2020 à 9h00
6801 THE CHAIRPERSON: Good morning. Bonjour tout le monde. Madame la secrétaire.
6802 THE SECRETARY: Merci.
6803 We'll start this morning with the presentation of Manitoba Coalition. Please introduce yourself and your colleagues, and you may begin.
PRESENTATION / PRÉSENTATION
6804 MS. DILAY: Good morning. Bon matin. My name is Katrine Dilay. I’m a lawyer with the Public Interest Law Centre in Winnipeg, and legal counsel to the Manitoba Coalition.
6805 To my right is Mr. Benjamin Klass, who is a consultant to the Manitoba Coalition as well as a graduate student in his PhD at the School of Journalism and Communication at Carleton University.
6806 To my left is Gloria Desorcy, the Executive Director of the Manitoba branch of the Consumers' Association of Canada. And I'll refer to them as CAC Manitoba throughout our comments this morning.
6807 And to her left is Damon Johnston, President of the Aboriginal Council of Winnipeg.
6808 On behalf of CAC Manitoba, the Aboriginal Council of Winnipeg and Winnipeg Harvest, we thank the Commission for the opportunity to provide our comments this morning.
6809 While Winnipeg Harvest, our other client organization, would have liked to be here in person today, they unfortunately were unable to attend.
6810 In terms of a brief road map for our presentation this morning, we'll begin by providing brief background information on this unique coalition of organizations that is before you today.
6811 Ms. Desorcy and Mr. Johnston will then discuss the importance of this hearing to all Manitobans, and Mr. Klass will then present findings of his and Dr. Winseck's expert evidence that was filed on the record of this proceeding.
6812 Ms. Desorcy and Mr. Johnston will then present findings from the consumer engagement undertaken by the Manitoba Coalition, and I will then close our presentation by going through the recommendations of the Manitoba Coalition.
6813 Informed by the overarching role of the Commission to regulate and supervise in the public interest, the Manitoba Coalition has approached this hearing by asking itself whether an appropriate balance is being struck between the interests of the industry and consumers in the wireless marketplace.
6814 The evidence in this proceeding has demonstrated that balance is not being achieved. The wireless market does not work for all Canadians, especially for low income Canadians and other vulnerable consumers. As a result, it is time for the Commission to act for three main reason.
6815 First, because of the importance of access to wireless service for meaningful social and economic inclusion. Second, the industry has consistently failed to provide the services that are needed by Canadian and Manitobans at affordable prices. And third, the Commission's policy objectives and section 7 of the Telecommunications Act as well as government policy directives emphasize affordable access for all Canadians.
6816 The Manitoba Coalition brings a unique consumer-focused perspective from the Manitoba marketplace. CAC Manitoba is a volunteer, non-profit, independent organization working to inform and empower consumers, and to represent consumer interests in Manitoba.
6817 Winnipeg Harvest is a non-profit, community-based organization committed to providing food to people who struggle to feed themselves and their families, and they also actively advocate for broader strategies to end poverty.
6818 The Aboriginal Council of Winnipeg is an indigenous political organization representing First Nations, Inuit and Métis living in Winnipeg. Among other activities, it seeks to ensure that indigenous voices are represented around the tables of decisionmakers, policymakers, as well as service providers.
6819 In terms of preparing the intervention of the Manitoba Coalition in this proceeding, the Manitoba Coalition worked with numerous other community organizations, including groups who represent persons with disabilities, indigenous peoples and newcomers to Canada.
6820 The Manitoba Coalition conducted significant direct engagement with over 1,000 consumers that included a large-scale survey which collected responses from over 1,000 Manitobans, a survey that was circulated amongst community organizations that specifically work with consumers who may face specific challenges or barriers in the marketplace, and they also conducted more qualitative engagement sessions with newcomers to Canada, clients and/or volunteers at Winnipeg Harvest, which is the largest food bank in Manitoba, students at the Neeginan Centre, an organization that promotes the social, educational and entrepreneurial growth of the indigenous community in Winnipeg, and finally, a session with students, seniors and rural consumers.
6821 And finally, in terms of its intervention, the Manitoba Coalition also retained the services of two independent, highly qualified, expert witnesses, Mr. Benjamin Klass and Dr. Dwayne Winseck.
6822 They were asked to independently assess the state of retail competition in Canada’s mobile wireless markets, review Canada’s mobile wireless markets in comparison to other countries, and finally, comment on whether mandated wholesale access for mobile virtual network operators, or MVNOs, may be an outcome of this proceeding.
6823 And I'll turn it over to Mr. Johnston.
6824 MR. JOHNSTON: Good morning.
6825 THE SECRETARY: Please open your mic. Yes, thank you.
6826 MR. JOHNSTON: Good morning, everyone. Pleasure to be here. Thank you.
6827 So with more than 31 million subscribers, the retail mobile wireless service market is a critical means by which Canadians connect with each other and the broader world. Wireless services enable us to be socially included by connecting with friends, family, government services, community organizations, employment opportunities and emergency lifelines.
6828 For consumers who do not live in urban centres, including Indigenous consumers living in rural and remote First Nations, wireless service can be the primary means of accessing many essential services, as well as connecting with family and close ones who do not live nearby.
6829 MS. DESORCY: The Manitoba Coalition is deeply concerned that the wireless market does not work for all Canadians, especially for low income Canadians and other vulnerable consumers. While telecommunications companies boast about their speed and coverage across the country, high-quality wireless services are of little use if they are simply out of reach for too many Canadians due to lack of affordability.
6830 Canadian consumers have been on a patient regulatory journey and have waited long enough. It is time for the Commission to act.
6831 MR. KLASS: Thank you, Katrine, Gloria, and Damon.
6832 My name is Ben Klass. I am a PhD Candidate at Carleton University’s School of Journalism and Communication, and a senior researcher at the Canadian Media Concentration Research Project, directed by Dr. Dwayne Winseck.
6833 The Manitoba Coalition asked Dr. Winseck and I to assess the state of competition in Canada’s mobile wireless markets, including an international comparative review of Canada’s mobile wireless market performance, and to provide comment on the Commission’s consideration of a potential mandate for MVNO access. In undertaking this work, we relied primarily on a broad range of publicly available data from authoritative sources such as the OECD, the U.S. FCC, the European Commission, Statistics Canada, the CRTC, and others.
6834 Before going into the details, I would like to note that, as independent researchers, I see our first and most important duty being to place reliable, credible evidence on the record to inform the Commission as it considers the matters before it. Our contract with the Manitoba Coalition reflects this independence. Our work has therefore focused on making assessments, rather than recommendations.
6835 Our report covers two main areas, the performance of Canada’s mobile market in relation to peer countries; and the role that MVNOs play in mobile markets.
6836 Using standard economic measures, our research finds that mobile markets around the world are highly concentrated, and that Canada is not an outlier. While concentration levels on their own are not necessarily indicative of market power, anti-competitive behaviour, or other undesirable market features, our examination of more detailed evidence supports the conclusion that current levels of market competition in Canada are failing to live up to expectations.
6837 First, there is some good news. It is clear that our mobile networks are generally fast and widely available. Canada’s mobile networks perform consistently well in speed tests, and coverage of LTE is geographically broad, with existing gaps set to be addressed with help from the CRTC’s Universal Broadband Fund.
6838 That being said, availability of service should not be confused with affordability or adoption. Near-ubiquity of mobile signals provides cold comfort to those unable to afford service, or those who must restrict their usage due to high prices. On these measures, the evidence clearly shows that we are falling flat.
6839 Canada ranks consistently amongst the bottom of peer countries, in terms of adoption of mobile broadband. As of June 2018, the most recent data available, we sat at 30th of 37 OECD countries in terms of smartphone penetration. Statistics Canada data showed that on a more fine-grain level, low-income households are drastically less likely to have mobile service than their higher-earning counterparts.
6840 As research conducted for the CRTC in 2016 explains, “While lack of interest or low skill levels partially explain lower adoption and use among low- income individuals, cost remains a dominant motive for why low-income Canadians do not use the Internet.”
6841 The data on price in Canada’s mobile market supports this explanation. While no single price study or methodology is comprehensive, or otherwise free from flaws, the preponderance of data from multiple sources point to one conclusion, mobile prices in Canada tend to be amongst the highest, and sometimes are the most expensive, of peer countries.
6842 This is the case whether comparisons are made using “service basket” methods, regression analysis used by independent academic scholars and the U.S. FCC; or whether prices are measured on a per-Gigabyte or ARPU basis. In addition, according to the most recent Wall Report conducted for Innovation Science and Economic Development, prices here tend to be falling more slowly than they have been elsewhere in G7 countries.
6843 While broad studies such as the ones canvassed in our report will always have exceptions and even flaws, the fact that so many different studies, using so many different approaches, all point to the same conclusion, and that they have done so over an extended period of time, is notable and concerning.
6844 Consumers in Canada are paying more, and, as the data demonstrate, are using their services less than their peers in other countries as a result. Put simply, too many people are unable to benefits of mobile service due to the high price.
6845 At the same time, the financial performance of the mobile industry in Canada has been robust. According to data from the CRTC and GSMA, average mobile EBITDA margins in Canada, a proxy for profitability, consistently exceed margins in other countries. At the same time, data from the European Commission showed that Canadian mobile providers invest less of their revenue in capital than the average across EU countries for which data are available. If high prices were truly justified by higher capital requirements, as is often contended, capital intensity here would be closer to, if not higher than, the average in other countries, but that isn’t the case.
6846 It has been suggested that mandating access for MVNOs may be required to address these problems. Our report canvasses the role of MVNOs in other countries, drawing on available market and academic research. Our research finds that MVNOs are a regular feature of mobile wireless markets around the world, although their impact does vary in terms of number and market share. In some markets their presence appears to be marginal, while in many of the countries studied, they appear to play a substantial and valuable role.
6847 In Canada, by contrast, MVNO presence is negligible, due to the unwillingness amongst existing market players to voluntarily enter into agreements with MVNOs.
6848 The academic literature on the role of MVNOs in mobile wireless markets provides mixed lessons. Some authors point to the potential benefits of voluntary agreements between MVNOs and MNOs, while noting that it may be appropriate for regulators to consider mandatory access in cases where network operators are found to possess market power, as is the case in Canada.
6849 Other research suggests that mandated MVNO regulations may lead to decreases in network investment, although these are qualified, and it is observed that decreased investment may not necessarily lead to inefficient outcomes. Research also indicates that overall profitability (i.e. EBITDA margins) in mobile wireless markets can serve as a useful indicator for assessing the benefits of additional competition. In Canada, high profitability levels in the mobile market suggest that the market could sustain additional competition and that this might help to make services more competitive and affordable. Further research shows that mandated access regulations enabling MVNO entries can be beneficial for consumers.
6850 Our report also examines a series of European mergers in which mandated MVNO access was implemented as a remedy to decreased competition. Although this approach was not always successful, a post-merger review conducted by BEREC found that the MVNO remedies did have a positive effect on post-merger prices in at least some cases.
6851 Finally, our report notes that the CRTC’s longstanding approach to wholesale access obligations in the Canadian wireline broadband market should be instructive when considering a similar approach to the wireless space.
6852 There are significant similarities between the wireline broadband market and the mobile wireless market in Canada. The Commission has consistently found that wholesale access obligations are a necessary and beneficial requirement for ensuring sustainable competition in retail markets for broadband internet access. The ongoing processes associated with wireline wholesale access regulations not only demonstrate the Commission’s capacity to develop and manage these and similarly complex mechanisms, but they also indicate that there are firms already present in adjacent markets capable of leveraging their existing competence and market position to expand into mobile wireless markets should the opportunity arise.
6853 Based on our research, and in specific consideration of the consistent shortcomings of Canada’s mobile market, it is our view that the evidence, on balance, supports mandating wholesale MVNO access.
6854 I’d be happy to discuss the details further during questions. Thank you.
6855 MS. DESORCY: The findings from the Manitoba Coalition’s direct engagement with consumers are consistent with our position taken previously: a number of problems persist in Canada's mobile wireless marketplace, resulting in a market that does not work for all Canadians.
6856 We have identified five main conclusions from the consumer engagement.
6857 First, cost and pricing are priorities for Manitoba consumers. For many Manitoba consumers, mobile wireless services are prohibitively expensive.
6858 Second, rates of adoption for wireless services remain lower for lower-income consumers.
6859 Third, rates of usage remain lower than consumers would prefer, which can be an indication that cost barriers persist for many market participants.
6860 Fourth, the range of available product offerings does not adequately meet consumers' demand for flexibility and choice and is not responsive to consumers' needs.
6861 And, fifth, the majority of Manitoba consumers surveyed would choose a Basic Use Wireless Plan that includes talk, text and data for 25 to $35 per month.
6862 I will start by discussing the first finding relating to cost and pricing in more detail, including referring to the Commission's public consultation report. Mr. Johnston will then discuss the other findings in more detail.
6863 The Manitoba Coalition's consumer engagement demonstrates that price is the most significant driver of consumer choice for mobile wireless services.
6864 Manitoba consumers have made clear that cost impacts their access to wireless services in a number of concrete ways.
6865 First, for respondents who did not have cell phones, cost was cited as a significant barrier preventing them from owning a cell phone. This finding is supported by the higher likelihood of phone ownership that was found among higher-income respondents.
6866 Second, Manitoba consumers consistently said that price and cost are significant drivers of many facets of decision-making in the mobile wireless market.
6867 One indicator of this was the popularity of the Basic Use Wireless Plan, in which a majority of respondents were interested. Manitoba consumers also displayed a willingness to switch providers if comparable services were available through a different service provider for a lower cost.
6868 The Commission's public consultation reports similar findings regarding the importance of cost and pricing in consumer access to wireless services, satisfaction with the services and consumers' decision-making process.
6869 In the Commission's online consultation report, almost half or 45 per cent of respondents were at least somewhat dissatisfied with their current cell phone provider, and cost was the main reason for the dissatisfaction.
6870 Specifically, the cost of their cell phone service (87 per cent), the data (86 per cent), and overage charges (53 per cent) were the main reasons for dissatisfaction.
6871 The majority of respondents in the online consultation report said that the quality of service was good, but, only one in three said they have a good selection of providers in their region, with 51 per cent disagreeing that this is the case.
6872 Only 15 per centt agreed that they get good value for money from their cell phone provider and only 8 per cent agreed that the cost of cell phone plans have decreased in the last three years.
6873 In fact, 74 per cent of respondents disagreed that they get good value and 83 per cent disagreed that that the cost of plans have decreased.
6874 An overwhelming majority, or 95 per cent of respondents think Canada's cell phone prices are worse than prices compared to other countries.
6875 In the representative telephone survey, one in six respondents were dissatisfied with their provider, with cost being the reason for dissatisfaction.
6876 In that survey, the majority of respondents thought that the quality of networks in Canada is high, but over half did not agree that they get good value for money from their cell phone provider and 58 per cent disagreed that the cost of cell phone plans has decreased in the last 3 years.
6877 Sixty-six (66) per cent of respondents in the telephone survey thought that Canada's cell phone prices are worse than other countries.
6878 So, both in Manitoba specifically and in Canada generally, it is clear that cost and pricing are key factors with respect to access to and satisfaction with wireless services.
6879 MR. JOHNSTON: Findings from the Manitoba Coalition's consumer engagement are consistent with concerns previously raised regarding lower adoption rates in Canada than in other countries and specifically, lower adoption rates amongst lower income consumers.
6880 Among some populations, cell phone adoption rates are high. For example, one survey indicated as high as 100 per cent of respondents between 18 and 29 years of age were cell phone users. However, other populations such as those over the age of 65 and lower-income households show lower adoption rates.
6881 To the Manitoba Coalition, this is an indication that cost remains a barrier to access, especially to those with particular needs or who face other barriers in the marketplace. It also demonstrates the market's failure to provide plans and service offerings that are responsive to the needs of some distinct consumer groups.
6882 Consumers have made clear to the Manitoba Coalition that they would increase their data usage if they could.
6883 For example, multiple consumers said that higher data made the proposed Basic Use Plan more attractive. Many respondents used free wifi to supplement their data or displace their need for data all together.
6884 The consumer engagement also showed that the range of product offerings and services in the wireless market do not meet the needs of Manitoba consumers.
6885 In the surveys, some respondents said that there's a product or service in which they are interested but that is not currently offered by their provider. According to these respondents, the most highly sought service was more, and in some cases 'rollover' or unlimited, data.
6886 The prospect of switching providers was particularly compelling for rural residents, who expressed dissatisfaction with current rural network coverage and a willingness to switch providers for improved service. For many consumers, this has implications on safety as well as connectivity.
6887 The Manitoba Coalition also canvassed Manitoba consumers on the popularity of a proposed basic -- base use wireless plan. The proposed plan presented to respondents was described as costing 25 to $35 per month. The plan included a device as well as unlimited talk, text and one gigabyte of data.
6888 Respondents were asked a series of questions about the price and contents of the plan with the intent of gauging their priorities. The findings demonstrate that price and the amount of data included in the plan are highly determinative of its popularity.
6889 While the majority of survey respondents said that they found this plan attractive at the initial proposed price and content, a larger proportion of respondents would find it attractive if it had tw gigabytes of data or more.
6890 These findings suggest that the proposed price may be appropriate, but that one gigabyte of data may not sufficient to meet consumers' needs. This is also consistent with the Commission's Telecommunications Monitoring Report, which has found that the average monthly data usage is 2.5 gigabytes.
6891 Given the significant barriers existing in the marketplace, especially high prices, the need for a Basic Use Wireless Plan is pressing. There is a high potential for mobile wireless connectivity to positively impact the lives of Canadians who may face barriers in the marketplace.
6892 The Manitoba Coalition's consumer engagement has illustrated that demand for lower-cost network access is palpable, and strongly suggests that a minimum of 2 gigabytes of data, with talk, text and a device included for up to $35 per month could meet the presently-unmet needs of many.
6893 MS. DILAY: And if it's acceptable to the Commission, I'll just spend a last two minutes on our recommendations of the Manitoba Coalition.
6894 Taken together, the lack of diverse and responsive product offerings, the low usage and adoption rates, and the high prices that Canadian consumers have to pay leads the Manitoba Coalition to a singular conclusion. Market problems plague mobile wireless services in Canada and must be addressed.
6895 The Coalition's consumer engagement has demonstrated that the negative impacts of these problems on consumers are not insignificant.
6896 In its role, the CRTC must strike a balance between the interests of the industry on the one side, and consumers on the other side. And the evidence in this proceeding has demonstrated that there currently exists an imbalance in the wireless market, in that the wireless market does not work all Canadians, especially low-income Canadians and other vulnerable consumers.
6897 And so this leaves the Manitoba Coalition makes two distinct but complementary recommendations to remedy this imbalance.
6898 First, the Manitoba Coalition recommends that the Commission mandate wholesale MVNO access subject to appropriate rates, terms, and conditions to be determined by the Commission with rates based on capacity rather than per-unit prices, as well as a periodic review of the effectiveness of this framework in achieving policy objectives.
6899 Second, the Manitoba Coalition recommends that a $25 to $35 basic use wireless plan, including voice, text and data be mandated as a condition of service that all wireless carriers must provide, under section 24 of the Telecommunications Act.
6900 The market is not working for all Canadians, and consumers have waited long enough and need the Commission to act.
6901 Just one final note regarding MVNO access. From the Manitoba Coalition's perspective, mandating MVNO access has the potential to enable diverse companies and entrepreneurs to enter the market, including businesses who may have a non‑traditional business model.
6902 For example, the social enterprise model is a model that some Indigenous-led businesses have chosen, and these businesses may be enabled to enter the wireless marketplace as MVNOs if terms and conditions for wholesale support their entrance into this market.
6903 Encouraging marketplaces that are more conducive to the formation and success of Indigenous-owned companies aligns with the objectives of the Truth and Reconciliation Commission, as well as the United Nations Declaration on the Rights of Indigenous Peoples, or UNDRIP.
6904 In conclusion, the impacts of the mobile wireless market's failure to meet the needs of consumers perpetuates social exclusion and exacerbates economic marginalization. The Manitoba Coalition urges the Commission to exercise its authority to ensure that mobile wireless networks in Canada are set on a trajectory that will provide adequate, reliable, and affordable services in a manner that promotes economic opportunity and social inclusion for all Canadians.
6905 Subject to questions from the Commission, that's our presentation for this morning. Thank you.
6906 THE CHAIRPERSON: Thank you very much.
6907 Commissioner Laizner?
6908 THE VICE-CHAIRPERSON: Good morning. Thank you so much for your intervention and for the survey and engagement sessions that you conducted and the reports you filed. They made for very interesting reading.
6909 I'm going to start my questioning on the issue of the retail market power assessment. In the report you filed on May 15th, 2019, you submitted that a comparison of Canada and international mobile wireless markets, using various matrix, shows that Canada is increasingly falling behind the rest of the world in terms of prices, penetration, and usage.
6910 As you've heard during this proceeding, and read in the interventions, other parties, including the National Mobile Network Operators, have questioned the relevance of international comparisons. They argue that most studies comparing Canada with other jurisdictions do not compare similar mobile wireless service plans, they don't take into account several socio-economic factors, and other factors, such as our geography and our population density across the country.
6911 So I'd like to know how you respond to those criticisms.
6912 MR. KLASS: Thanks. I'll start. So first of all, I think that there is going to be a problem in comparing Canada to other countries based on any methodology. None of them will be complete as a standalone look. So if one or two studies were to appear suggesting that the prices here are higher than others, I think it would be reasonable to question them.
6913 But consistently since studying this market, my research interest in this area began roughly around 2010-2011, virtually every independent report that I've come across points to the same conclusion. And so when you see over time reports using different methodologies constantly pointing to the same thing, it, I think, lends credibility to those reports.
6914 One of the studies that we referred to in our report, I believe it is the Yun, Kim, & Kim Study conducted in 2019, did use a regression method to assess the quality adjusted price indices in mobile telecommunications services. So this particular method does control for a number of different factors. It was conducted independently of any particular interests in the industry, and indicated that prices in Toronto for the service, controlling for other factors, are -- were I think the highest amongst the dozen or so countries measured.
6915 So ---
6916 THE VICE-CHAIRPERSON: Did you file that ---
6917 MR. KLASS: Yes.
6918 THE VICE-CHAIRPERSON: --- study?
6919 MR. KLASS: It's Figure ---
6920 THE VICE-CHAIRPERSON: Okay.
6921 MR. KLASS: I mean, I filed some of the relevant findings of the study.
6922 THE VICE-CHAIRPERSON: Would you be able to file the study for us?
6923 MR. KLASS: Subject to any copyright concerns that might exist over the intellectual property, I can.
6924 THE VICE-CHAIRPERSON: Thank you.
6925 MR. KLASS: I have access to the studies by virtue of my affiliation with the university, and so ---
6926 THE VICE-CHAIRPERSON: I see.
6927 MR. KLASS: --- I -- subject to clearing that, I would be happy to do so.
UNDERTAKING / ENGAGEMENT
6928 THE VICE-CHAIRPERSON: Thank you.
6929 MR. KLASS: So that's one thing.
6930 The second I'd like to say is that we have a clear -- I think clearly identified a problem in the market. Price -- the connection between price and adoption, I think is fairly clear and supported by the research with which I am familiar, but consistently the one measure that I find the most troubling is the low adoption figure.
6931 So in previous years, prior to the emergence of the Smartphone as a standard type of service, data, and mobile voice, Canada has been right at the bottom of OECD countries for adoption, and this has been explained, I think, in part, or at least it's been justified in part by some parties that people in other countries might subscribe to more than one service on account of roaming regulations in Europe and the need to maintain different service plans. But I think that that trend has increasingly disappeared in light of the Smartphone service. The reliance on data is the primary means of communicating, as opposed to voice, as well as efforts amongst European regulators to address the issue of expensive roaming between countries. And the Canadian standing in OECD matrix for adoption still remains very low.
6932 When we look, specifically, and this is not a comparative figure, but when we look specifically at adoption levels in Canada, you see people earning over roughly 55 to 60K a year are more or less universally adopting services; they're north of 90 percent. Whereas below those figures, in the bottom two quintiles, and this is Statistics Canada data I'm referring to that is submitted in the report, people earning lower incomes just aren't subscribing at the same levels. I believe it's in the area of 70 percent for the lowest income earning families, and in -- roughly 85 percent for the next quintile.
6933 So I think that that is a really clear problem in terms of the success or failure of Canada's communication policy. I think guaranteeing that access is there and within reach for people is -- you know, it's amongst the policy objectives of the communications legislation. The basic service policy that the CRTC established in 2016 includes access to mobile service, and it's clear to me that there is a portion of the population that just isn't able to avail themselves of that access here.
6934 So regardless of international comparisons on price, I think that this is a policy problem that really needs to be addressed.
6935 THE VICE-CHAIRPERSON: And what are your views on Dr. Dippon's study? He appeared with TELUS. His conclusion that Canadian mobile wireless prices are below international benchmarks based on his study.
6936 MR. KLASS: So I think you're referring to the accurate assessment of Canada's pricing in comparison to other countries? This is the one that was in 2018 in response to the ISED's (inaudible)?
6937 THE VICE-CHAIRPERSON: Dr. Dippon was an expert that appeared ---
6938 MR. KLASS: For TELUS, yeah.
6939 THE VICE-CHAIRPERSON: --- on behalf of TELUS.
6940 MR. KLASS: M'hm.
6941 THE VICE-CHAIRPERSON: And in the assessment he did of plans in Canada, his view was that Canadian mobile wireless prices are below international prices.
6942 MR. KLASS: So TELUS has recently undertaken a marketing initiative that is advertising their services as True North affordable, I think. And in response to this, I just casually investigated the price of service in the United States. They had a currently running an ad campaign in the national newspapers, suggesting that Canadians pay less than Americans for service.
6943 And I -- so I compared TELUS family plans, which they have advertised under this marketing initiative, to similar plans available from an incumbent in the United States, and I found that factoring for exchange rates for four 10‑gigabyte plans, which is what TELUS offers for $60 a month for each line, it would be about $55 from AT&T in the U.S.
6944 THE VICE-CHAIRPERSON: $55 U.S. or $55 Canadian with the exchange rate?
6945 MR. KLASS: $55 Canadian, I'm sorry, yeah. I misspoke.
6946 THE VICE-CHAIRPERSON: Okay.
6947 MR. KLASS: About $55 Canadian, and I think that that plan includes something like 50 gigabytes. So, as I understand, and I'm not certain that I'm familiar with the particular details of the method used in that report, but doing just a simple comparison like that leads me to believe that the price for a service that provides quite a bit more in the U.S. can be had for less money.
6948 THE VICE-CHAIRPERSON: You've submitted in your May 15th intervention -- I'm looking at paragraph 22 -- that the 3 national mobile network operators continue to occupy a dominant position in the marketplace, leading to high prices, low adoption rates and low usage. And, again, TELUS submitted in this proceeding that there is no economic or other evidence that establishes a correlation between mobile wireless penetration rates or data usage and the retail prices.
6949 We've seen in Quebec that the rates are lower than elsewhere in Canada, and yet the wireless adoption in Quebec is also lower than elsewhere. So, is there anything else that you'd like to tell us about in support of your conclusion that the high prices are what result in the lower wireless penetration rates, usage. You talked a little bit about this, just want to ask if there's anything else.
6950 MR. KLASS: My conclusions are primarily supported by a report that was commissioned for the CRTC by Drs. Ragabiun, Ellis and Middleton in 2016. There was a survey on the literature with respect to affordability of telecommunications services. And I think that the conclusions of that study drew a strong connection between the price of service and people's adoption and use of those service. I think it goes to sort of fairly foundational economic principles that higher prices will depress service and usage. And so, in the report that we've made, I think all the boxes are checked in respect to that connection.
6951 In terms of causation, I can't sit here and say that I've conducted a study that removes all doubt that for all customers price is the determinative factor, but I think it is amongst the strongest.
6952 There are other factors involved, you know, and I'm familiar with research that suggest people thinking that it's not something that they find useful, not knowing how to use the service are also factors that explain that. But in my opinion, and on the face of the evidence, price is the strongest factor explaining the difference in adoption.
6953 THE VICE-CHAIRPERSON: Thank you.
6954 Now, since that study, we've seen the introduction of unlimited plans by the national MNOs around June of 2019, and do you think that those represent a significant development in terms of competition in the mobile wireless retail market? Do you think they're meeting consumer expectations?
6955 MR. KLASS: I think that the introduction of unlimited plans is undoubtedly a positive development. It's come significantly later in Canada than it has in other countries, and there are also concerns that I have with the way in which it's being introduced.
6956 So, I'll start with a discussion of the unlimited plans that are branded as "infinite" or "peace of mind".
6957 THE VICE-CHAIRPERSON: I'm sorry. I didn't hear what you just said.
6958 MR. KLASS: There are essentially two tiers of these plans that have been introduced. One group being through the main or flagship brands, Bell, Rogers, and TELUS, and then another type of unlimited plan that's been introduced through the varied discount brands, Lucky and Chatr.
6959 In terms of the first plan, I think that on a per gigabyte basis it represents a significant reduction in price. So, you see that for a similar price level the people who access these services are getting access to more data. That's undoubtedly positive. As I said, these have come later than they have in other countries. So, for instance, I know numerous people -- and this is anecdotal -- but who rely on mobile wireless service as their primary means of internet connectivity. For instance, I have a friend who travels to work on pipelines in the U.S. who only relies on his mobile service. The allowances there for the price are much more generous, and I think the level of usage that's made available before the service is throttled here is quite a bit lower in comparison to the prices, for instance, available in the States on an unlimited basis.
6960 According to Rewheel's research, the prevalence of truly unlimited plans, plans with caps that are so large that a user couldn't realistically hit it, have been increasing, and we haven't yet seen those here.
6961 So, while it is positive, I think in comparison to developments in other countries, there is still a lot of room for improvement there.
6962 In addition, these plans have been -- I'm sorry, did you have ---
6963 THE VICE-CHAIRPERSON: No, go ahead.
6964 MR. KLASS: In addition, these plans have come also at a time when the device has been separated into a sort of separate item, right, so the financing of devices; whereas, previously, the plans that were offered by the flagship brands would include I think part of the price of the device within that service plan. So, you'd get the phone for that top line price with, you know, potentially some upfront payment. So, I think some analysis would need to be undertaken to do a comparison of the actual price customers are paying now for the total cost of service including the phone versus the bundled price to see how these new price plans actually compare, so looking at the per gigabyte price only tells you part of the story.
6965 That being said, the $75 or $65 in Quebec price plan is the floor, and that's quite high, I think. So, there's another type of plan that's been made available without the overage fees by Lucky and Chatr, and I think that that is undoubtedly positive because, as we discuss in the report, the most acute and -- well, it's acute and chronic, but -- problem is in the lower end of the market.
6966 So, removing overage fees from lower priced plans is something I think that for price cut sensitive customers is very helpful. However, there are a number of ways in which these plans are -- have the quality reduced that I think is discriminatory and merits some investigation, particularly in terms of the way they're advertised.
6967 So, both Chatr and Lucky advertise their lower priced no overage plans as 3G to customers, which I think up until, you know, maybe 5 or 6 years ago was more or less the standard. The 3G or HSPA standard for mobile connectivity affords speeds up to 42 megabits per second, in my understanding, but, in fact, what these 3G plans are, are LTE plans that have the speed throttled to 3 megabits per second. So, in my mind, as a person who's reasonably informed about this when I see 3G, I'm thinking up to 20 megabits per second, when, in fact, they're throttled to something much less. So, there's a transparency problem with respect to that.
6968 As well as something I think is hard to justify and that's for these lower price plans, once you hit the limit for the month, your speed is throttled to much more, much slower speeds than it would be for those higher level plans. So, they tell you for a Bell unlimited plan, you hit the limit and you are throttled to 512 kilobits per second, which is a reasonably -- you know, it's I think an old definition of broadband might include that speed, but you can still stream low definition video, you can still use your device more or less as normal. Chatr, on the other hand, will throttle to 64 kilobits per second once its users reach that limit, and that's dial-up speed basically. So, your ability to continue using that lower-priced service afterwards is significantly reduced.
6969 And I think that the Commission has rules about internet traffic management practices that look with a skeptical eye towards that type of discrimination. And so for me, I see these lower price plans that differentiate themselves on the basis of speed as a positive improvement, with the caveat that some of the terms that are connected to them are discriminatory and wind up punishing the people who can only afford that service.
6970 THE VICE-CHAIRPERSON: And do you think that it's fair to say that consumers looking at these plans don't find them interesting because of some of those factors you've just mentioned about the throttling after a certain point, making the speeds a lot lower?
6971 MR. KLASS: I think that it's hard to say ahead of time what the experience might be. The experience on mobile networks is going to be variable from time-to-time and depending on where you are and load on the network, but I think it'd be reasonable to say that someone experiencing a drop from 3 megabits per second to 64 kilobits per second might be frustrated.
6972 THE VICE-CHAIRPERSON: You mentioned the price of handsets and we've heard about a significant increase in recent years in the prices of handsets, particularly with the introduction of smartphones. I believe Shaw, when they were before us, mentioned that the price of a smartphone had gone up from 1,000 to 2,000 in one year. Although there are many options in terms of handsets and they are on a price scale that can range from a few hundred to $1,000, there is a second-hand handset market as well, we’ve seen.
6973 What I’d like to know is, to what extent do you think that the persons that you spoke with in your survey and in the engagement sessions, who expressed concerns about high prices, were those concerns related to high prices for the service, or the price of the handsets?
6974 MS. DILAY: Thank you for the question, Commissioner Laizner. Maybe before going into answering your question, which of course we will do, I just have a couple of comments if I may, on some of the previous questions you asked?
6975 THE VICE-CHAIRPERSON: Oh, absolutely.
6976 MS. DILAY: So just to add to Mr. Klass’ expertise on the international comparison, I think some of the findings from the CRTC’s public consultation, of course not expert evidence, but some of the questions about international pricing, were also instructive. Of course, we know a lot of Canadians have family abroad, or have lived abroad, and so the overwhelming majority of those surveyed indicated that Canada’s prices are -- seem to be higher than other countries.
6977 More directly related to your question, in the surveys and the engagement sessions we conducted, or our clients conducted, cost and pricing were really top of mind when it came to decision making. And of course, we -- that would be related to both service, as well as handset device purchases. I think maybe I’ll just turn it to Ms. Desorcy if she has any comments at this point.
6978 MS. DESORCY: Sure. Thank you.
6979 Yeah, I agree that cost and pricing were really important. It was both the cost of service and the handset as well. And what I was just looking back to see was, you know, there was -- it was also how one pays for the handset. And you know, what -- whether or not, particularly in the engagement sessions, there was a lot of discussion about, you know, the trade offs between having to pay interest, essentially on a product when you buy it over a long period, traded off with the value of not having to put out the large amount of money up front.
6980 So yeah, it -- there is a lot of discussion and cost is right at the forefront of it.
6981 THE VICE-CHAIRPERSON: And I -- I recall reading with interest that you received a number of comments that the persons you surveyed were not interested in having longer term contracts to amortize the cost of a phone over a longer period?
6982 MS. DESORCY: Yeah, the majority were looking for two-year contracts, or possibly one. You know, some people said that they might like that option, to have a lower -- particularly in not so much in the survey, but in the consumer engagement -- they might like that option to have a lower price over time. But others were concerned about being locked into a specific company for a longer period of time, ending up after three years with a phone that is now somewhat outdated, you know, those kids of concerns. So there was a variety of response there.
6983 THE VICE-CHAIRPERSON: And do you think it’s fair to expect that given the increasing usage of data for a variety of functions that people use, whether it’s streaming videos, or texting, or doing your banking online, that it’s fair to say that prices will go up given that increased data usage?
6984 MS. DILAY: Not necessarily, especially given what Mr. Klass indicated, in terms of the per-Gigabyte price actually going down as some of those data buckets increase, and I’ll let him speak more eloquently to that. I think what the concern -- one of the main concerns of the Consumer’s -- the Manitoba Coalition, is that while we’re seeing, perhaps, some of those larger data bucket plans, we’re seeing some prices shift there, that’s not necessarily responding to the needs of consumers who can’t afford those plans.
6985 And so, some consumers are looking for lower cost, lower capacity use, but the still want the capacity, or they still need the capacity to be able to function in today’s society. And so, it’s really that, sort of, gap in the marketplace that we’re seeing. So it’s not occasional or emergency use that those consumers are looking for. They’re looking for something meaningful that will enable them to participate in society without having to pay the prices that are prohibitive for some of those consumers at the upper data bucket numbers.
6986 And I’m not sure if Mr. Klass would have anything to add on that.
6987 MR. KLASS: So just to be clear, the question is should we expect the unit price of data to increase in the future due to increasing demand?
6988 THE VICE-CHAIRPERSON: The evolution in data allowances in recent years has meant that people are using more data, and do you think that as a result it’s only natural that these prices will go up?
6989 MR. KLASS: So I think that the primary innovations in this space have been in the utilization of spectrum efficiently, first through 3G and then 4G, and the various sort of, sub-improvements that have taken place that essentially make the unit cost approach zero. I think that price -- and there’s, I think a terrific study conducted in 1995 into problems of treating information as a commodity. You know, the decreasing marginal cost of what is the marginal cost of a byte?
6990 I know that the CRTC’s process makes estimates using the Phase 2 method, as to what a Megabyte costs. But I think really, the cost is associated with building the tower and then afterwards, the primary driver is revenue requirements of the company. I think that, for instance, the rates that the CRTC has determined using Phase 2 for mobile service, the roaming tariff, are per Megabyte, but approximate out to about between $13 and $14 per Gigabyte.
6991 This is supposed to be a cost-based rate, yet the average revenue for a Gigabyte of data, according to the CRTC’s most recent monitoring report is $12 and change. So I think there’s always going to be problems when you are trying to assign a cost in a unit, in a decreasing marginal cost industry.
6992 The fact that the companies even charge per Megabyte, I think is much more closely related to their desire for, A, the lucrative overage fees, which I believe at last report generate in the area of a billion dollars a year; B, the ability to segment the market so that customers who make that usage will contribute more revenue; and C, the diagonal integration that each of the mobile operators is characterized by. And by that, I mean the fact that they operate in adjacent related markets. A company that sells you mobile wireless service and home internet doesn’t want you to be able to take the mobile service and ditch the home internet.
6993 So you see, I believe Rewheel conducted a study making comparisons of independent mobile operators versus diagonally integrated mobile operators some years ago, that found the independents are much more likely to offer generous data buckets, and I don’t think that has anything to do with the cost structure of the market. It has everything to do with the business interests of a company that sells both of these services.
6994 And so, in Canada, all of our mobile providers are now connected into these types of companies, and I think that that is something that at least needs to be considered when looking at the types of limits that are associated with these plans.
6995 THE VICE-CHAIRPERSON: Thank you.
6996 You mentioned that part of the good news is that network quality is very good in Canada, and we’ve heard from Bell for example, and the other MNOs, that they need to continue making investments in networks, investing particularly in 5G, and that in order to deploy new technologies these require high levels of investment.
6997 We’ve also heard that consumers have positive things to say about the network quality and that they actually expect good network quality.
6998 So how do we reconcile the desire for lower prices with the financial needs of the carriers to continue investing in their networks to meet Canadians’ expectations and also to ensure that we don’t lag behind as a country in terms of our development of our network to the 5G level?
6999 MR. KLASS: I was quite surprised by what I would, quite frankly, characterize as histrionics, listening last week to the hearing. Surprised to the extent to which carriers have reacted to this, and also surprised this is an argument we keep hearing over and over again.
7000 The data on capital investment in both the wireline and wireless sectors of the market indicate that capital investment has continued to rise.
7001 This is in spite of warnings, repeated warnings, from the companies that any decision contrary to their interests by the CRTC would result in a capital fight.
7002 Since 2010 with speed matching in the wireline space, with the extension of the wireline wholesale obligations into fibre, and with the set-aside string auctions, as well as the Commission’s decision to implement roaming regulations, each time a decision that runs contrary to management opinion about the best direction for the industry is undertaken by the CRTC or even considered, we hear the same argument and it hasn’t happened.
7003 So I think has to be taken with a grain of salt.
7004 That being said, I’m not simply dismissing these types of arguments as histrionics. It is obviously important to continue to ensure that Canada has networks that meet the needs of individuals and of the business community.
7005 Increasingly, mobile service is relied upon by business in order to provide better services to customers.
7006 So I’m not simply saying that we should ignore what the carriers are saying, but I think that their response needs to be tempered.
7007 Research submitted or canvassed in our survey of the academic literature suggests that EBITDA margins can serve as a useful indicator when determining if an increase in competition can be sustained by the industry in terms of investment levels.
7008 It’s in my report somewhere, I’m sorry, I forget the particular figure, but the report established, essentially, a range of EBITDA levels when an authority ought to consider when making decisions such as the one before us, found that in the 42 and above range, I believe, it’s clear that the market can sustain increased competition without negative affect to investment.
7009 THE VICE-CHAIRPERSON: And I gather your response would be the same if I talked to you about the carriers needs to recoup the costs of their investment in spectrum given the high prices of spectrum in Canada?
7010 MR. KLASS: Yeah. So the -- I mean, the EBITDA levels are something I, you know, haven’t investigated specifically.
7011 You know, I’m aware of the discussion of high spectrum costs in Canada. And to the extent that that’s a problem, I think it’s something that ISED should certainly take up.
7012 May I just add one more thing on the investment question?
7013 THE VICE-CHAIRPERSON: Absolutely.
7014 MR. KLASS: I think that reduced investment, you know, it’s easy to use that as a threat, but when announcing network sharing agreements, carriers are quite glad to tout the reduction of investment as a cost-saving measure.
7015 So I think that if we simply look at investment, “Investment big equals good, investment small equals bad,” it’s not the right way to look at these things.
7016 I think we need to look at the most efficient possible use of scarce resources such as capital.
7017 And to the extent that network sharing can contribute to that objective, that money could be better spent elsewhere.
7018 In addition to one last thing, is I think that there is -- a singular focus on price may be misguided.
7019 I think there are numerous different ways that you could measure price.
7020 And so simply saying, “We’re going to bring the price down and everyone’s going to have a plan for five dollars, and, you know, the company can’t sustain those types of prices,” is not the best way to look at these things.
7021 I think there are ways that companies other than the ones in the market currently operating might think is an interesting way to offer a service that makes the price that a customer pays for it less, without actually reducing the revenue.
7022 And so for instance, during the CRTC’s investigation into lower cost data plans, in 2018 I think, I had proposed a flexible plan that the customer would pay, I think, five dollars as a baseline, and then depending on usage, it would increase up to a level of I think $30 or $40.
7023 And I costed that out according to the tariff rate for mobile roaming, which in the Commission’s decision, it equates the retail rates.
7024 And in designing that plan, I had made sure that the cost was above what the carriers were offering.
7025 So these are plans that are sort of available in the market to a limited extent, but the price jumps very quickly up to $40 if you use more than a marginal amount of data.
7026 So the carriers have decided not to offer that, even though it would be above the cost of what they’re -- above their costs and, frankly, very similar to plans that are already in the market, but just offering a bit of flexibility.
7027 So in terms of allowing MVNOs to come in, they might package a service in a different way.
7028 It doesn’t necessarily reduce the price, but makes the option, nevertheless, more affordable for customers.
7029 THE VICE-CHAIRPERSON: Okay. Thank you.
7030 MS. DILAY: Maybe if I can just add here, Commissioner Laizner, from the consumer perspective?
7031 The Manitoba Coalition definitely recognizes that investments, continued investments, are important, and we’ve said that in our intervention, especially when it comes to rural and remote consumers, investments and continued investments are even more important.
7032 However, consumers currently are being left behind in the marketplace.
7033 And Mr. Klass and Dr. Winseck’s evidence shows that that is disproportionality at lower income consumers.
7034 And so that’s, from our perspective, there is that imbalance that exists, and so the priority cannot be given to continued unlimited investments. There’s an imbalance that needs to be addressed currently.
7035 And so from our perspective, speculative concerns about the future of network investments can’t be the only things that are driving the decision-making process, especially given historical examples that Mr. Klass, for example, referred to in the wireline industry.
7036 I think this was from the Competition Bureau, that they indicated that lower investments may not mean underinvestment.
7037 And that also speaks to Mr. Klass’ point about efficient investing.
7038 And then I guess the final point, price is important. And that’s one way that consumers can access the marketplace, if prices are affordable.
7039 However, there are different business models that may also meet the needs of certain consumers in niche marketplace.
7040 So for example, social enterprises who may be geared towards better meeting the needs of certain communities, whether that be through an on the ground service that is being provided and a remote First Nation, for example. Or a service -- a sales person going to speak to the people in a community to see what are their needs and why are they not able to afford the service?
7041 Price is important, but there are other ways that service and needs can be met for consumers.
7042 Thank you.
7043 THE VICE-CHAIRPERSON: In Manitoba, we’ve seen the acquisition of MTS by Bell and Xplornet Communications has recently launched a mobile wireless service offering.
7044 Do you consider that competition in the Province of Manitoba for mobile wireless services is better, worse, or about the same as it was before these developments?
7045 MS. DILAY: Thank you. I’m just going to turn to -- we had one of our survey questions, both in the quantitative survey of 1,000 Manitobans, as well as the Open Link, which was the same survey, but distributed to community groups, asked a question about consumers’ awareness of Xplore Mobile in the marketplace.
7046 Unfortunately, the awareness of that company was not very high in our surveys. It was about a quarter of Manitobans who were surveyed who were even aware that the company was providing -- well, awareness of Xplornet as the internet provider, and Xplore Mobile as the wireless provider was about the same, around one‑quarter awareness. So to us, that was not great in terms of consumers' awareness of this now -- now this fourth carrier in the Province of Manitoba.
7047 Prices in Manitoba, of course we have to look at it over time. One big development that we saw after the Bell/MTS merger was that the removal of the unlimited data product offering that was offered by MTS prior to that, that was something, based on our review and our participation in these hearings, that was sort of unique to Manitoba, and of course Manitoba prices on average were lower than the average across the country.
7048 So that product offering was removed off the market after the merger. I believe it's now back, as we just discussed a few minutes ago.
7049 So overall, I think based on our understanding of the marketplace, we would say that it's not very positive since the merger.
7050 And maybe I'll let Ben -- Mr. Klass add anything he might have.
7051 MR. KLASS: Yeah, thanks, Katrine.
7052 I think that at present, Gloria and I are working on a two‑year pricing study comparing the price of mobile, home, Internet, and television service, thanks to funding from the Office of Commissioner Affairs -- Consumer Affairs. Sorry.
7053 So we'll be able to come back with a definitive answer, I think, about the price movements in Manitoba up to that time. We haven't conducted the analysis; we're in data collection mode at the moment. So I think it's hard to say for certain.
7054 However, one -- we've heard a lot, I think, already about the decline in prices, and it's something that you've observed in the Ontario, Alberta, and B.C. market, in particular through the use of the flanker brands. That the -- I think -- just from a review of the websites, you can see that the prices have come down, particularly in the mid-range flanker brands.
7055 However, the prices for Manitoba and Saskatchewan for those same flanker brands have charged -- have come up. So it's been a convergence a prices. And so, you know, from the perspective of Ontario, B.C., or Alberta, I think there have been improvements in price, but in the context of BCE MTS, I think it's resulted in a -- at least on its face, and from my preliminary look at the data, has resulted in a price increase.
7056 So for instance -- and I could -- I have pricing literature dating back to 2013 to show that prior to Bell having taken over MTS, Bring Your Own Device Plan for $48 would give a customer 5‑gigabytes of data. The flanker –- the same flanker brands are currently charging $55 for 4‑gigabytes of service.
7057 So while, you know, the unlimited plan disappeared for some period of time, and has now come back in a different form, these other plans, and specifically the ones that were targeted towards mid‑users or lower-end users on initial look at the prices, have actually come up in the wake of the merger.
7058 THE VICE-CHAIRPERSON: Yes. And if we look at the -- Exhibits 1A and 1B that were filed at the beginning of this hearing with respect to the CRTC's survey, I note that those 2‑gigabyte plans that you propose be offered in Manitoba for up to $35 are widely available in Québec, but not in Manitoba.
7059 MS. DILAY: Yes. Thank you. We noted that as well in terms of, yeah, being available at the 2‑gigabyte point in Québec but not elsewhere across the country, and so -- yeah. Thank you for noting that.
7060 THE VICE-CHAIRPERSON: So do you think that given the plans that Xplornet talked about at the hearing here, and the recent introduction of their service, do you expect that as they evolve the level of competition in the Manitoba market will evolve and that you'll see some price reductions? Do you have any expectations in that regard?
7061 MS. DILAY: So I think from our point -- from our perspective, consumers have waited for a long time. So we -- of course, we were not involved with this coalition in the 2015 wireless review, but we read with interest the part of the record of that hearing as well as the decision where a lot of the same problems that we're talking about today with respect to the marketplace were noted, and the Commission didn't go so far as to mandate MVNO access so as not to disincentivize investments.
7062 And so our concern is that consumers are currently being priced out, being left behind with significant impacts on their lives, their families' lives, and their ability to afford to be able to meaningfully participate in society. And so certainly our concern is that waiting to see if competition will develop as the companies say that it will, has not been working, and so that there needs to be additional steps taken.
7063 And so that's where our two recommendations are attempting to be complementary, in the sense that the mandated MVNO access, we recognize will take time first to implement, and then will take time to have an impact on price, on diversity of product offerings, and other impacts on the marketplace, competition will take time to develop. So the mandated Basic Use Wireless Plan that we're talking about would be sort of an immediate response to the needs of consumers who have been waiting for a long time to see products that are at an affordable price point for them and that meet their needs.
7064 THE VICE-CHAIRPERSON: And I understand that your proposal on the question of mandating a lower-cost plan is that it can be accomplished under section 24 of the Telecommunications Act as a condition of service. But what's your view on whether or not the Commission should be deforbearing from section 27.1 and section -- and/or section 25 on this basis insofar as it's necessary to mandate that kind of a service for a specific segment of the population?
7065 MS. DILAY: Thank you. At this point in time -- and we've responded to this in requests for information, so I won't go into it in detail. But essentially, we see that this could be a condition of service that be mandated, and that through a price ceiling and a capacity floor that it would not amount to rate regulation that would require the Commission to deforbear in this area. However, we have also presented an alternative response in one our requests for information that goes through the deforbearance analysis, if that is the route that the Commission chooses to go in for lower cost plans.
7066 But we do certainly believe that under section 24, given the case law, the implementation of the Wireless Code, and the various components of the Wireless Code that there is room under section 24 to mandate this Basic Use Wireless Plan as a condition of service.
7067 THE VICE-CHAIRPERSON: And we've had a number of different proposals for low‑cost plans, including the one that you submitted. If we were to mandate a low‑cost plan, how would the Commission assess the needs of consumers and decide on the characteristics of the mandated plan?
7068 MS. DILAY: So I think that's a multi-part answer. So maybe I'll start and I'll let my clients, Mr. Johnston, or Ms. Desorcy, answer as needed.
7069 So really the purpose of the Basic Use Wireless Plan, as we've started to call them -- call it, is to ensure that there is consistently plans in existence in the market that meet the needs of all consumers. Based on our review of the marketplace, the upper end of the market in terms of cost and capacity is currently being met, but the evidence that we've seen from our independent experts, as well as consumer engagement, shows that it's more the lower cost end of the market that still provides sufficient capacity for meaningful participation in society that is lacking.
7070 So we've undertaken some preliminary consumer engagements that you've seen in our surveys and engagement sessions, and we were trying to gauge what are the priorities of Manitobans to see what should be offered in a basic use plan. And so we started with a plan that was $25 to $35, including talk -- unlimited talk and text, and 1‑gigabyte of data.
7071 And interest was -- the interest was there. I believe it was close to half of consumers who were interested in that plan. When price increased over $35, interest dwindled considerably, and so we're seeing that after the $35 there are some issues there in terms of affordability. But when we increased the data to 2‑gigabytes or more, interest went up a lot.
7072 And so our analysis of that is that 1 gigabyte is likely not enough to meet the needs of consumers in order to participate in society effectively, and at 2 gigabytes is likely closer to that. And based on our review of the CRTC’s recent monitoring report, that’s pretty close to the average use of data of Canadians, which is, in the recent report, 2.5 gigabytes.
7073 And so our proposed plan is a little bit lower than the average use of Canadians of data; we recognize that that average use may be driven up by consumers who have unlimited data or very large data buckets, and so putting it at the 2 gigabyte mark, we think represents -- is close enough to the average use and still represents -- there was still interest from consumers in that plan.
7074 One thing we think is very important is that this plan not be means tested. And so there are -- based on our clients’ participation in various proceedings and policy processes, means testing can be problematic in some instances, especially where there is sort of a hard cut-off. Someone who makes a dollar more than the cut-off, presumably, would not qualify for these plans, but they may be dealing with very similar challenges to participation in the marketplace as the lower income consumers who would qualify for the plan.
7075 Ms. Desorcy can likely speak more eloquently to this but that would be something that our clients think is very important.
7076 While we’ve done preliminary consumer engagement, we think that there could be further consumer engagement also done with Canadians about what do they need to see in a basic use wireless plan. This is meant to meet the basic needs of Canadians in order to participate in society. So we’re not talking about the occasional use or emergency use, but we’re also not talking about unlimited plans where you can maybe supplement -- or replace the need for home internet; we’re talking about basic use.
7077 And maybe I’ll let Ms. Desorcy speak a little bit more to that, if that would be acceptable.
7078 THE VICE-CHAIRPERSON: Yes, but just let me ask one question on that first.
7079 Your low-cost plan included unlimited voice calls. Did you mean Canada-wide calls, within the province, or just unlimited voice calls?
7080 MS. DILAY: I believe it would be Canada-wide.
7081 THE VICE-CHAIRPERSON: Okay, thank you.
7083 MS. DESORCY: No, that’s fine, thank you.
7084 Yeah, certainly with regards to the means testing, I would reiterate how difficult that makes a choice, sometimes, for consumers. How difficult it can be to decide, “Am I going to give up my tax return, my personal information, to get into this program?” You know, “How far do I want to go in divulging my personal situation in order to get my cell phone?”
7085 And so that’s one side of it. The other side of it ---
7086 THE VICE-CHAIRPERSON: If I can just stop you there?
7087 One of the concerns about that means testing is that, you know, as consumers go and negotiate a plan or take up a plan, there’s the whole issue of their credit, right? So would you suggest that to address that issue, that the basic plan would be prepay or still post-paid?
7088 MS. DESORCY: I would suggest that the basic plan be post-paid, and without a credit check.
7089 THE VICE-CHAIRPERSON: Without a credit check.
7090 MS. DESORCY: Right, and I know that’s going to seem different than what you might hear from others, but we feel strongly that if communication is a necessity, like electricity is a necessity, like other things that we get are necessities, because we don’t have a credit history; perhaps we’re new to the country, perhaps we have a credit history with some issues in it, should not be a reason for us not to be able to access those necessary services. So, yeah, that’s what we would say.
7091 And to go to the second point that you were discussing -- and I’m sorry; I’ve just forgotten the second -- what was the thing you spoke about afterwards? Yeah, I think I’ve already spoken about means -- sorry; there was something else that I was ---
7092 THE VICE-CHAIRPERSON: I’m sorry; that was me.
7093 MS. DESORCY: No, no. No, no, that’s totally fine. I’m just trying to remember what your original question was, after I got on to ---
7094 THE VICE-CHAIRPERSON: Well, we were talking about what the characteristics of the plan would be.
7095 MS. DESORCY: Ah. And what I wanted to add was, to what Ms. Dilay was saying, I wanted to add that consumer engagement is really important to do on something like this which is you’re trying to tailor to the needs of certain groups of consumers, more than once, right? You know, we’ve taken a Manitoba shot at it but, you know, you would likely want to take a nation-wide shot at it before you set up a plan, and then maybe run the plan past people a second time and see if you’ve got the right plan; if you’ve heard the right message. And then when it starts, you would want to be monitoring it.
7096 That would be the ideal way to, in my mind, to engage consumers on the topic of what works for them as a basic use plan. So we don’t see it as kind of a one shot and done. You know, it maybe that this is something that needs to be proposed, needs to start, and then needs to be monitored going forward.
7097 THE VICE-CHAIRPERSON: In terms of monitoring, do you mean reviews at set time periods or what were you thinking of in terms of suggested monitoring?
7098 MS. DESORCY: Evaluation from people who are using the plan; and, also, beyond that evaluation from people who’ve chosen not to use the plan but perhaps fit the demographic, and why. You know, we found, for example, we, for the first time, included in surveys and face-to-face engagement this time consumers who did not have cell phones when we were talking about wireless, and it was illuminating to hear why they did not have cell phones and to hear from those consumers on what that means for them in their lives and what, you know, they feel that they would be able to benefit if they could have that access to that.
7099 And so sometimes it’s important not just to ask people who are using it but people who are also not using it.
7100 And I don’t know, Mr. Johnston, if you have -- yeah, I think he would like to add something as well.
7101 Thank you.
7102 MR. JOHNSTON: Yeah. So can’t really do justice to answering your question in the allotted timeframe but maybe we’ll have some future opportunity.
7103 Indigenous perspective on some of these issues. So basically, some of the question we’re answering is how does Canada become a more inclusive society? How do we address issues like poverty in a better way? You know, I know as one Indigenous leader that we have the highest per-capita rates of poverty in this country. And we know why that is, the history of all that, but we will speak to that at another occasion, too.
7104 Here, having a phone -- so this is my phone right now. But I guess theoretically, this phone could be an iPad. And we know that in addressing the digital divide, access to this kind of technology as it continuously improves, is of huge importance to groups who are marginalized by society, who don’t have the same access because of poverty and other issues.
7105 And then when you dig deeper into this, Indigenous Canadians, we’re 5 percent of the entire Canadian population. So if companies are going to argue that the cost of making a basic plan available to Canadians is prohibitive, then I would want to see, you know, real evidence of that. Because even though we’re 5 percent, what percentage of that would need a basic plan? Because we have a growing middle class as well; I’m one of those people.
7106 So, you know, there’s work to be done going forward to -- if we’re going to, you know, create more opportunity for Canadians generally -- and I’m saying it should be, not just Indigenous but there’s other Canadians who live in poverty as well -- that these things are important decisions and they speak more to creating rather than just looking at a return on investment, we’re looking at a social return on investment.
7107 And so as one practitioner of social enterprises, co-ops, credit unions, et cetera, et cetera, Indigenous peoples, as we move forward on our self-determination, self-government, what that means to us is that we will, through Indigenous innovation, maybe address some things in a much better way going forward, and thinking outside the box.
7108 You know, I think the private sector in Canada right now, you know, must see to some degree. So today we see the news that the Ontario Provincial Police have moved in to break up the blockade of the rail line here in Eastern Ontario.
7109 To some degree, that outcome, having to do that, is a direct result of our marginalization of a failure to create opportunities, real opportunities for Indigenous people in this country to create equality, equity.
7110 And as you know, those two things are different.
7111 So but there’s also, on the good side of the equation, newer partnerships between the private sector and Indigenous Canadians that are showing real signs of progress.
7112 And so I think as we begin to engage more with the private sector, in this case with telcoes, telecom companies, we can work with them to do these things in a better way and to, as I say, close that gap, that huge gap in many cases, between the social determinants of health outcomes of Canadians, of Indigenous Canadians and other Canadians.
7113 And that’s one of our primary goals. We want to achieve equity with other Canadians.
7114 So I think, you know the CRTC is appreciative of government and institution of government and that, you know, you have to be, I think, committed to truth and reconciliation, and I think you have to be open to some of the offerings that we are going to make that I’m making now as one Indigenous leader.
7115 And the last thing I’ll say is that, you know, there are some unique differences between First Nations persons, between Métis persons, and between Inuit persons, and what I represent, urban Indigenous community. But I’m also a First Nations person. But I never lived on my reserve.
7116 So, you know, there’s many differences within the Indigenous population itself.
7117 And some of our, you know, business propositions are taking, you know, an entrepreneurial form, or a capitalist form. However you want to phrase it.
7118 But others of us are using social enterprise, newer forms of business structure, because we have different values. We have more of our traditional values and we want to be able to share any, we call it excess revenue that we generate in that kind of a structure, it’s not profit, we want to be able to share that in a better way with our employees, with our community generally. And so, you know, when we have concrete example of how that works.
7119 So I’ll just stop there and thank you very much.
7120 THE VICE-CHAIRPERSON: Well thank you for those most thoughtful comments.
7121 I recall reading when I was looking at the materials that you submitted about comments made by individuals who have said, for example, that they had no reception within their home and they had to go down the road to get reception to make a call out, but they couldn’t get a call in.
7122 So certainly there are definite challenges there. And your comments, in a more holistic fashion, are very well received by the Commission.
7123 If I could just go back and ask a couple of tie-up questions for this mandated low-cost plan, you’ve talked about it being up to two gigabytes.
7124 How would you propose that the plan would deal with instances where consumers would go up beyond the two gigabytes? Do you see that as a scale of payment for extra gigabytes or do you see that as a situation where throttling would be acceptable? Had you thought about how that would be taken into consideration?
7125 MS. DILAY: We did think about it. And we would propose that there be no overage charges, but that throttling at slower speeds after that two-gigabyte mark would be acceptable.
7126 We have noted in some requests for information responses significant issues with overage charges, especially the price, and how high they are.
7127 So if we’re trying through this basic use plan to make the plan affordable and accessible to consumers who are looking for that basic use plan, having the potential for overage charges we think goes counter to that narrative.
7128 MS. DESORCY: Can I just add though, based on what Mr. Klass said earlier about the very low ramping down to the point where it becomes not usable, you know, we’d be happy with throttling, but not throttling simply -- you know, particularly because this is a lower cost plan, not throttling to a point where the phone becomes useless from a data perspective.
7129 THE VICE-CHAIRPERSON: Right. We saw in the CRTC survey that consumers were reluctant to consider flanker brands as a viable option.
7130 Why do you think that would be?
7131 MR. KLASS: If I could just add one point to the previous question before responding?
7132 THE VICE-CHAIRPERSON: Absolutely.
7133 MR. KLASS: I would refer my -- you know, my eyes popped out of my head when I was looking at this CRTC’s Exhibit number 2 placed on the record of the existing lower price plans.
7134 You know, and I understand the difference between discrimination and undue discrimination, that there can be benefits to differentiating products in the market in order to make them more affordable, pay less, get less, but still have access; right?
7135 But I see here we have overtries in the range of 10 cents per megabyte, two dollars for 20 megabytes, 25 cents per megabyte, two dollars per megabyte, for some of these plans that are ostensibly on the lower end of the market.
7136 Two (2) dollars per megabyte, quite frankly, is a usurious rate and I cannot believe that this is in the market. For $15 of base plan, they’re charging orders of magnitude more than what the cost that the CRTC has determined for this.
7137 So to me, it looks like a vehicle to get someone in the door for a low introductory price, afterwards they’ll inevitably incur these fees.
7138 So I think it is very important that these types of plans, to the extent that they would be allowed to use overage charges, those charges would have to be controlled.
7139 You know, I know that the CRTC is forborne from regulating the price, but I disagree strongly with the idea that means the price is just by definition. And I think in the CRTC’s exhibit here we have an example.
7140 THE VICE-CHAIRPERSON: So you’re referring to the Telus plans that offer no data, but if the customer uses data, they’re paying two dollars per megabyte? Is that the ones you’re looking at?
7141 MR. KLASS: The second to last and the third to last in the list here. Telus, $15, ---
7142 THE VICE-CHAIRPERSON: Right, Telus.
7143 MR. KLASS: --- prepaid.
7144 You know, and Telus, I believe is offering better plans themselves potentially through their flanker brand or not.
7145 So I think that this can speak to your present question.
7146 THE VICE-CHAIRPERSON: And most of these plans, these $15 and under, have no data.
7147 MR. KLASS: M’hm. Yeah.
7148 THE VICE-CHAIRPERSON: Yeah.
7149 MR. KLASS: So I mean, I don’t know in some circumstances whether the use of data from these other plans might incur a rate. I think part of the problem is that it’s not necessarily transparent.
7150 But those are Telus branded; right? And so with respect to your current question, I do recall seeing research that the CRTC had conducted with respect to trust in brands.
7151 And so I think there are a certain demographic who will go for the Telus and the Bell because of a certain level of trust. You know, the marketing is targeted towards certain demographics.
7152 Telus’ flanker brand, for instance, Koodo, runs ads on television, YouTube, and so on, that actually claim, “We’re not like the big guys. Don’t go with the big guys. Go with us.” Right?
7153 So while a flanker might be offering a plan that’s objectively better than this one, and in my opinion, no rational person who thought they might ever use data could actually take this plan, it’s nevertheless still in the market from a main brand.
7154 THE VICE-CHAIRPERSON: So in your view, it’s more that the plans that are offered aren’t of -- are not sufficient to meet the consumers’ demands, as opposed to consumer awareness about the fact that these flanker brands travel on the same network as the national MNOs?
7155 MR. KLASS: More transparency would definitely help in respect to the relationship between the flanker brands and the main brands.
7156 I know there is some concern with respect to dilution of the perception of quality in the main brand.
7157 Although I think that the quality, at least in my experience, is either overtly disclosed with respect to the reduction in quality of speed in the bargain brands, or the reduction in quality of customer service that’s associated with the mid-range flanker brands.
7158 However, I think there are -- I mean, there are problems with respect to the relationship between these things.
7159 The companies will come and point to their lower price plans to say that there’s competition in the market, but a customer calling the main brand may not be referred to -- so Telus might have a superior plan to this, and quite frankly I think this is a trap, this plan, to generate the cream, the extra additional two dollars from time to time. Will a customer who calls Telus and indicates an interest in this plan be informed by the sales representative that Telus’ other flanker brands offer something that is objectively superior? I listened to their testimony last week and it didn’t seem that they gave a straight answer to that question.
7160 THE VICE-CHAIRPERSON: Do you know whether in your province, consumer groups have initiatives in place to help consumers find information about the different options available to them for the myriad of plans that are out there? Do you offer anything like that?
7161 MS. DESORCY: We don’t have -- CAC Manitoba does not specifically have, you know, a program or a website you can go to that says, here’s how you can compare the phone plans. Although you have now given me a very good idea. That’s something we should do.
7162 But we certainly do -- well, we certainly have a lot of opportunities to talk with consumers about it when we are out doing public speaking. It is a frequent question. If it’s not on my agenda, I am sure to be asked, you know, about how do we make these comparisons? How do -- you know, what kinds of things should we be looking for? You know?
7163 So there is certainly a need for that and you have just given me a very good idea. So thank you. And I’m not aware of other consumer groups who offer that. I don’t know, Damon, if you are?
7164 MR. JOHNSTON: No, not at this point, no.
7165 THE VICE-CHAIRPERSON: Do you think there’s a role here for the Commission to require the wireless service providers to, for example, ensure that their customer service reps are properly trained so that they do point consumers to those alternatives, providing links on their websites to lower cost plans, or making more clear visual displays in their stores?
7166 MS. DESORCY: I think that would be an excellent idea. I think I can echo what Mr. Klass said, just from my experience with consumers, that there is not a, you know, an overwhelming knowledge about which flanker brands belong to which of the Big 3 companies, or even that they do belong to the three big companies. A lot of consumers really don’t realize that.
7167 So you know, the more that that can be informed by the person over the phone that they’re speaking with, or informed on a website, or informed through whatever visual displays are used in the actual bricks and mortar locations, would be great.
7168 THE VICE-CHAIRPERSON: And do you have anything else to add in terms of the gaps that you see in the market regarding the needs of consumers for low cost or occasional use plans that you haven’t addressed in -- right now?
7169 MR. JOHNSTON: Yeah. So one thing that does come into play, I see this directly in the organization that I lead. So within the Indigenous population, there, you know, is a range of individuals who do not currently possess the capacity to address these things themselves. So they need support. They need direct support from organizations like ours and others. And you know, to be able to discern what is fair and reasonable when they’re negotiating their phone plan.
7170 And some -- like I say, some would be illiterate. How does a person who is illiterate do that, you know? So we’ve got, you know, some challenges that way, and so anything that would make it easier for these individuals to be able to make these decisions, from you know, more rational or fair and reasonable way, would be helpful. And you know, for us as organizations to have access to those things as well, it makes it easier for us to support those individuals.
7171 And if a, you know, basic plan was available, then more of these individuals would be able to access phones. As an example, we have a training program right now that we run at our centre back in Winnipeg, and these trainees can’t afford phones because they are paid at a minimum wage, rate of minimum wage, and so we purchased phones for them, and we were able to get, you know, grants to do that. So -- and it’s proving to be very helpful to them and so we have, you know, good evidence that that works better.
7172 THE VICE-CHAIRPERSON: I just have a couple more questions regarding a model of an MVNO if the Commission were to mandate an MVNO access. You’ve indicated in your submissions that it should apply to the three Bell, Rogers, and Telus. Do you think other carriers should be obligated to provide MVNO access, such as SaskTel, or regional carriers in other provinces that have facilities?
7173 MR. KLASS: In terms of the range of offers that are available on -- on this front, I think that the PIAC proposal has a thoughtful solution to this question. Who should it apply to? They’ve suggested a timed phase in. So I would say, as an expert not necessarily representing the group, that I think in terms of whether it should apply to regional providers or not, I think PIAC’s proposal is quite thoughtful.
7174 THE VICE-CHAIRPERSON: And do you think it would be important to establish investment targets for MVNOs that might be mandated of the facilities type, to ensure that investment continues?
7175 MR. KLASS: I think that the competition -- I mean, I think that the Competition Bureau’s model -- is it correct, that this is essentially what you’re referring to?
7176 THE VICE-CHAIRPERSON: Okay. And my last question, just circling back a little bit to the issue of win-backs. Do you have a position on how you see win-backs, whether you support them, or you think that there needs to be constraints on win-backs?
7177 MS. DESORCY: So if I have an opportunity -- and I think Mr. Johnston would like to speak to it, and Ms. Dilay -- I’m just going to say with the -- with regards to the topic of win-backs, consumers both you know -- some consumers can use that fairly effectively, but they find it very frustrating.
7178 You know, you feel that as a consumer who’s been loyal to a company, you should be able to access the deals that are going to make it possible for you to start to save some money. You don’t feel that you should have to leave a company and then go to another company that’s offering you a better deal, which they won’t offer to their current customers, and then be won back by your -- the original company that you were with. And so, they are frustrating and a very roundabout way to go about offering people lower price plans, from our perspective.
7179 MR. JOHNSTON: So again -- again, I can evidence how an MVNO opportunity would -- could be quite beneficial to the Indigenous community. So -- and we’ve already done some work in this area. So we’ve established a small entity known as Farfox in our centre. So it gave us the ability to own our own phone system. And then we were, you know, granted access.
7180 So we negotiate directly with the telco’s on the cost for the phones to Farfox, and also you know, the data, et cetera. And so, we’ve made, you know, in the instance -- first instance, we made a deal with Rogers, and then the next year we went -- we’re now currently with Telus.
7181 So it’s using the, you know, the current tools available to us for access points, you know that CRTC had created. But I think the -- I know the MVNO would be a step -- another bit step forward for us.
7182 It’s really, as an example, we did a study two years ago now, to look at indigenizing the co-op model in Canada. So we completed that work and so basically, what I’m speaking to here is Indigenous Peoples looking at current business models for anything and how we would Indigenize them, how they would be different Indigenous owned. And that doesn’t mean that everyone is going to do it that way, but we, and I mean we as where we are right now in our centre, we in the centre in Winnipeg, you know, it was a social enterprise before that word was even used. And then it's like a coop in its structure, because as a tenant organisation like also that I lead is a part owner of the building. And then we achieve economies of scale in that particular model, and any excess revenue we generate is reinvested in the building, in the services to our community. And at times when we established another social enterprise called Mother Earth Recycling, we had the necessary $300,000 investment to establish Mother Earth. And now that's led to a partnership with Ikea.
7183 So, none of these things I see as any kind of direct danger, or even serious competition to these, you know, magnificently large companies, you know, if the willingness -- if the door is open to, as I say, reasonably negotiate something, a win/win situation.
7184 So, but, like I say, the MVNO would be a new door of opportunity for Indigenous peoples who want to move in that direction, so thank you.
7185 THE VICE-CHAIRPERSON: Thank you very much.
7186 Those are all my questions, Mr. Chairman.
7187 MS. DILAY: Commissioner Laizner, if I could just add a few points to your last two questions, if I may?
7188 THE VICE-CHAIRPERSON: Sure.
7189 MS. DILAY: So, just regarding your question about the regional carriers having access or providing access to MVNOs. The Manitoba Coalition certainly recognises the need not to discourage further investments by regional carriers including Shaw and potentially even Xplore Mobile in Manitoba, but we want to make sure that from a consumer perspective really the objective is to meet the consumer need. And so, there's no guarantee necessarily that those regional carriers will, in the future, meet the consumer need.
7190 And then regarding the facilities, the condition to invest in facilities in order to access the wholesale market, to Mr. Johnston's point regarding non-traditional business models, we would just want to ensure that smaller, newer, innovative companies who may not meet a traditional business model would not be prevented from entering the marketplace, especially given that they may be able to meet the needs of consumers better in certain demographics.
7191 And then the last point, just to your win-back question, we did outline some recommendations in our RFI responses to the CRTC's letter of July 5th of last year. And really, the Manitoba Coalition's position there is that offers should be made broadly in terms of product offerings to the public, and so that it may be appropriate to put some conditions on win-backs once a consumer has decided to leave.
7192 As Ms. Desorcy pointed out, if a consumer is calling, complaining about the price or the service, we wouldn't want the consumers to be precluded from being offered a better price in order to stay with that company. But if a consumer has decided to leave, that cooling-off period of 90 days may be appropriate, just in order to equalise the marketplace and make sure that product offerings are being made to all consumers, and not just those who have decided to take that step and leave the company.
7193 THE VICE-CHAIRPERSON: Right. Thank you. And I take the position as being you're more in favour of the PIACC model of a mandated MVNO than the Competition Bureau model of a mandated MVNO?
7194 MR. KLASS: Yeah, I think the -- it's actually, in my mind, quite hard to actually to see how the Competition Bureau's model is an MVNO. It's an extension of support for the facilities-based regional providers, which I think is something that the CRTC and government should continue to do, supporting -- that is, to be clear, supporting the original carriers. I think the benefits that we've seen, the improvements we've seen are primarily due to that and have only come about thanks to the mechanisms such as the set-asides and the actions and the roaming regulations that exist.
7195 But I think that the Competition Bureau's overly restrictive in terms of setting essentially a cap on how much competition, you know, that that model can produce. Will have a fourth carrier, maybe these four carriers will extend their networks everywhere, but that's it. That's as best as we can do, and I certain -- the idea of fining them if they don't meet those buildout requirements seems overly harsh to me.
7196 I think if I had to pick one of -- one or two of the models, CNOC's full MVNO model or PIACC's phase-in approach are most closely align with what I would view as an MVNO model that strikes an appropriate balance.
7197 THE VICE-CHAIRPERSON: Thank you.
7198 Thank you, Mr. Chairman.
7199 THE CHAIRPERSON: Commissioner Levy?
7200 COMMISSIONER LEVY: Good afternoon, or good morning, I guess.
7201 I talked on last week to a presentation made by the Province of British Columbia, and they had done a huge survey. They had about 15,000 people respond to the online side, and their statistics and the outcome was not terribly different I don't think from the generalisations that came out of your surveys.
7202 But in comments afterwards, it was explained that in some cases people are having to cut back on their food budget in order to afford what is now considered a necessity, you know, some ways of communicating with the outside world.
7203 And I wondered whether you know if, as part of the Manitoba social assistance program, whether there is a budgeted item for a phone or some sort of device as part of the package that they put together when they are trying to determine what social assistance should include. Do you know whether that's the case?
7204 MS. DESORCY: I'm going to say that I believe that the current employment assistance program in Manitoba offers the opportunity for a landline phone. I don't believe there is -- and I stand to be corrected, because I haven't checked that recently, so I'm going to say in past there hasn't been -- that's more accurate -- an opportunity for internet or a cell phone to be part of a plan.
7205 I don't know, is that -- yeah, okay. So, Mr. Johnston concurs with me on that.
7206 And, you know, when you say people are giving up food, you know, to be able to pay their cell phone, yeah, or prescriptions, or buying -- taking their drugs every other day -- we hear that sometimes -- instead of every day, as they should be, you know, their prescription drugs. Or, you know, all kinds of ways of trying to balance. You know, using payday loans, or, you know, all kinds of ways that they try to balance out, so that they can get this communication device, so that they can be called back on a job interview, so that they can get a job to change their situation. You know, there's -- it's sort of a -- this step, to this step, to this step, to this step, but at the heart of it lies the ability to communicate, to go on the internet, to make applications, to, you know, have proper healthcare that you get through, you know, having a number that you can give to your doctor for getting results on -- you know, just one thing after another that kind of puts barriers in the way of moving forward. So, thank you for that question.
7207 MR. JOHNSTON: Just to add too, I mean, it's becoming increasingly, you know, human safety issue, having access -- direct access to a phone. We have many examples now in the media where individual's lives have been saved because they had a cell phone, so I think that's an important issue as well.
7208 COMMISSIONER LEVY: Thank you.
7209 THE CHAIRPERSON: Commissioner Barin?
7210 COMMISSIONER BARIN: Thank you.
7211 Good morning. Thank you for your submissions and presentation.
7212 I have a question that relates to the research that you did that tested your basic use wireless plan. I noted that you said the interest generated was at the 50 per cent level. I'm wondering if in your data you were able to determine that that interest was coming from a particular demographic, or would you say that, in fact, it was widespread interest in that plan?
7213 MS. DILAY: So, I'll start while Ms. Desorcy actually looks at our surveys. And the reason we're going to take a look is that one survey, the one with 1,000 Manitobans was more representative of the population; whereas, the one that was circulated amongst consumer groups had a very large proportion of respondents associated with food banks, and so who would have been lower income, and who were, in fact, lower income, according to the income information they provided and so, I believe the interest was in both surveys, and so would have been also from the more larger demographic, but the interest was certainly there from the lower income survey as well.
7214 COMMISSIONER BARIN: If I can add, I really just want to have a sense whether the interest was specific to a particular niche, whether it was low income, or an age demographic, or whether it was widespread interest across the board on having a low-cost plan?
7215 MS. DILAY: Thank you. We certainly wouldn't expect that consumers who currently have a plan with much higher data allowances at a much higher price point, we would not expect based on the responses and talking to consumers that those consumers would let go of their existing plan for the smaller data bucket that would be in the basic use plan.
7216 So, the basic use plan is really -- the objective is to kind of meet that minimum or basic requirement to sort of meaningfully participate in society at an affordable price point. And so, we've tried to achieve that balance with the two gigabytes. Someone who is currently using 5, or 10, or has unlimited are simply likely not going to change to that 2-gigabyte plan, but someone who currently maybe is in the proportion in Mr. Klass' research who are not adopting cell phones in the lowest quintile, they may be able to afford a plan such as this one.
7217 MS. DESORCY: And the difference between the large online survey at 51 per cent who were interested, the smaller survey with more consumers that may be more limited income was 60 per cent interest.
7218 COMMISSIONER BARIN: Thank you.
7219 MR. JOHNSTON: And also, a factor, you know, if a package like that was available, then governments or whoever, you know, support income-assistance programs might be more willing to make those available to the people they're serving. So, you know, that's another opportunity, so.
7220 THE CHAIRPERSON: Thank you. Thank you very much for your presentation, for your fulsome responses. We will recess now for 15 minutes, resume 11:15.
7221 Thank you. Oh, pardon me. A question from legal counsel. You're not quite off the hook yet. I made it fast.
7222 MR. BOWLES: Thank you, Mr. Chair.
7223 THE CHAIRPERSON: Thank you, Counsel.
7224 MR. BOWLES: Sorry. It's early on a Monday morning. Well, not so early anymore, but still Monday morning.
7225 I just have one question to ask you and it's a record-building question. I'd like to refer you to figure 40 of -- I found in the report prepared by Mr. Klass and Mr. Winseck, which you filed as part of your 15 May 2019 intervention. This figure is titled "Average Capital Intensity for Mobile Markets in Canada and the EU, Excluding Spectrum 2013/2016".
7226 Now, I understand that one of the sources of data that was used for the purposes of that figure was the Commission's own communications monitoring report, but could I get you to undertake to provide for the record the other data that you used to calculate these averages and to create that graph?
7227 MR. KLASS: Yeah, I will undertake to provide that information.
7228 MR. BOWLES: Thank you very much.
7229 And just a quick follow-up on that, if you have any more recent data, for example, for the years 2017 or more recent, could you provide those as well, please?
7230 MR. KLASS: I don't believe that I do, but I will look into it for you, yeah. Thank you.
UNDERTAKING / ENGAGEMENT
7231 MR. BOWLES: Thank you very much.
7232 THE CHAIRPERSON: Then with that, I will once again thank you for your contribution to the proceeding. It's very helpful.
7233 We'll recess for 15, return at 11:15. Thank you.
--- Upon recessing at 10:59 a.m./
L’audience est suspendue à 10h59
--- Upon resuming at 11:17 a.m./
L’audience est reprise à 11h17
7234 THE SECRETARY: We will now hear the presentation of Tbaytel. Please introduce yourself and your colleagues and you have 20 minutes.
7235 MR. TOPATIGH: Thank you.
PRESENTATION / PRÉSENTATION
7236 Good morning Mr. Chairman, Commissioners. We thank you for this opportunity to appear before you on behalf of Tbaytel. My name is Dan Topatigh, President and Chief Executive Officer of Tbaytel, and with me today to my left, is Kathleen Jones, our Vice-President – Sales, Marketing and Communications, and to my right is Amy Meunier, Director – Marketing and Communications.
7237 Tbaytel is a small independent municipally-owned wireless service provider based in the City of Thunder Bay, and operating in Northwestern Ontario. We began providing telecommunications services over a hundred years ago and entered the cellular market in the early 1990's.
7238 Several initiatives such as the establishment of Tbaytel as a Municipal Services Board and the creation of strategic business relationships have allowed Tbaytel to grow and maintain its position as a strong wireless service provider in Thunder Bay and the region.
7239 In our appearance five years ago before this Commission on similar issues, Tbaytel, along with MTS and SaskTel, spoke to the fact that we are not one of the "Big Three" national carriers, as we lacked their size or economies of scale, but rather that we are regional carriers.
7240 Today, Tbaytel is here again as a small regional mobile wireless service provider to put forth its comments, opinions and recommendations on the views expressed by the Commission in this proceeding.
7241 As the regional market leader in Northwestern Ontario, Tbaytel continues to meet the needs of its customers with not only competitive rates but through new service plans and pricing options as well. Consumers in Tbaytel’s market area have a choice of service providers. In addition to Tbaytel, Bell Mobility, TELUS Mobility, Virgin Mobile, Lucky Mobile, Koodo, and Public Mobile are also present, making for a healthy competitive-choice environment.
7242 Essentially, Tbaytel, as the regional wireless carrier, is fulfilling a number of roles. We provide high quality mobility networks to rural and remote, low density areas throughout Northwestern Ontario. We are a viable independent carrier in the vast geographic market, and we ensure that our customers are the beneficiaries of a healthy competitive wireless environment.
7243 MS. JONES: We are here today to continue to explore the preliminary view of the Commission that any new regulatory framework for mobile wireless carriers should include mandated wholesale Mobile Virtual Network Operator access.
7244 We, however, are not here today to speak to the numerous studies and reports that have been put on record of this proceeding by several interveners. The way we can provide value to this consultation is to speak from our own unique experiences.
7245 Tbaytel is not aligned with the Commission's preliminary view and the notion that mandatory access to facilities-based mobile wireless carriers will provide sustainable competition. MVNOs should not be considered guaranteed avenues to sustainable competition at reasonable rates, but rather as a conduit for the possible entrance of countless MVNOs having varied operating structures and limited long-term staying power.
7246 Our Canadian networks are considered among the best in the world and have been built through ongoing capital investment and stable, responsible operators.
7247 Tbaytel is firm on its position that mandating the provision of wholesale MVNO access, especially in Tbaytel’s serving area, is not warranted for sustainable wireless competition.
7248 The CWTA supported this position with its May 2019 intervention when it stated that the mandating of MVNO wholesale access would threaten an independent regional carrier’s capacity to contribute to sustainable competition by favouring economically inefficient MVNOs whose business models are dependent on gaining regulatory access to the national carriers’ networks at discounted rates.
7249 Mandating wholesale MVNO access that gives MVNOs the freedom to enter and exit our market without having to risk major investment capital, damages Tbaytel’s ability to recover capital expenditures made for our low density, rural and remote coverage area.
7250 Further, future expenditures for continued network expansion and technology upgrades could potentially be crippled by the presence of mandated MVNOs especially if market share losses are combined with the potential of no interconnection revenues.
7251 In an environment of mandated MVNO access, Tbaytel may not be given consideration by that MVNO.
7252 An MVNO launching in multiple markets, for example, would favour national carriers’ networks in order to streamline the launch process.
7253 Additionally, it is presumed that national carrier interconnection rates may be lower based on their economies of scale.
7254 Overall, there is the likelihood for the reduction of investment in spectrum and networks by not only new entrants, but also by the existing carriers, who will assume the disproportionate recovery of their capital investment.
7255 Generally speaking, the wireless market should continue to be allowed to develop naturally as it has in the past, unaffected by regulatory intervention.
7256 MS. MEUNIER: Tbaytel, in the next part of our presentation, has put aside its conscious bias against mandated wholesale MVNO access and has provided recommendations for a regulatory regime that would provide for the inclusion of mandated MVNO access in the event that the Commission proceeds with its ill-advised implementation.
7257 Tbaytel defines a full MVNO to be a Canadian service provider registered with the Commission that owns and operates core network hardware, and in some cases, uses the spectrum and radio access network and other facilities or services of a wireless carrier, as necessary for the provision of mobile services to consumers.
7258 Tbaytel does not view flanker brands as MVNOs due to their ownership structure. They are simply a marketing tactic to address different consumer segments.
7259 Branded resellers (entities that have no wireless infrastructure but may have a billing platform) have a sole reliance on their underlying carriers for their presence and existence in the markets.
7260 Brand resellers exist today in the marketplace and Tbaytel does not believe that they need to be defined and mandated as an MVNO.
7261 For the purpose of its proposal, Tbaytel is extending the definition of a full MVNO, by having an entity considered an eligible full MVNO, only when it has less than a million subscribers, nationally.
7262 This last condition is deemed reasonable, considering that an entity having over a million subscribers certainly should have the facilities and financial resources to become a full-fledged mobile network operator.
7263 Key to Tbaytel’s proposal for the provision of mobile wireless services in a regulatory environment containing mandated wholesale MVNO access is that it should be done on a regional basis.
7264 Where a regional provider has established a facilities-based mobile wireless network, the full MVNOs should first connect directly with the regional provider, such as Tbaytel.
7265 Accordingly, Tbaytel is advocating that a prospective MVNO will have to directly connect with Tbaytel, as the regional carrier, in order to enter Tbaytel’s mobile wireless market, thereby allowing for Tbaytel, as the regional carrier, to take priority over the national carriers in the provision of wholesale MVNO access in its regional serving territory.
7266 It is important that regional carriers such as Tbaytel get priority access to MVNO interconnection opportunities and revenues in order to level the playing field.
7267 It is also important that access rates consider the compensation for initial use plus the impact that the MVNO will have on the mobile network operator’s network over time.
7268 Tbaytel believes that the greater the investment of the entering MVNO, the more likely that competition will remain over a longer period of time.
7269 However, Tbaytel is also aware that in the event wholesale access is mandated, the degree that any Mobile Network Operator has to share its facilities will have a bearing as well on the future sustainability of the investment they are able to make on wireless networks.
7270 It is Tbaytel’s opinion that commercially negotiated agreements, reasonably discussed and without imposed timelines, between mobile network operators and eligible MVNOs is the preferred and recommended route to take and can work, if required, in the Commission’s preliminary proposed view of a mandated wholesale access regulatory framework, with each MVNO access service having its own agreement, and each subject to a 5 year term.
7271 The majority of agreements that exist or are used today contain some form of arbitration or dispute process, either by the Commission or an alternative third party.
7272 It would be through the agreement negotiation process that the type of arbitration process would be discussed and agreed to, inclusive of any specific conditions that would drive the initiation of a dispute or lead to arbitration.
7273 Tbaytel further recommends that all rates related to MVNO access service will be commercially negotiated, allowing the parties to identify and deal with the circumstances that are particular to their individual situations.
7274 The negotiated arbitration process previously mentioned would allow for the arbitration of any dispute that may arise in the context of rate development.
7275 Due to the complexity and the need for security related to the wholesale elements of access to the mobile network operators’ networks, Tbaytel also recommends that MVNOs should not be permitted to resell network access to other entities, nor should there be any set aside of capacity in reserve for MVNO use.
7276 MR. TOPATIGH: Tbaytel is well aware of the importance of the future development and deployment of 5G networks throughout Canada, and of their complexities and high costs.
7277 Since 5G services are based on a dense network of thousands of small cells that need to be attached to a greater number of locations, deployment costs will be significantly higher in the future.
7278 Also requiring consideration is the challenge of the availability and cost of dark fibre and access to municipal assets, both necessary for the connection of the 5G small cells.
7279 While Tbaytel’s plans to launch 5G have not yet been finalized, Tbaytel anticipates that its roll-out will begin in the next few years and continue for the foreseeable future. And for that reason it is premature to discuss what will and what won’t work.
7280 Tbaytel will be facing challenges, such as accessing spectrum targeted for 5G, along with how it will deploy 5G equipment.
7281 Even though Tbaytel recognizes the impact that 5G will have on the wireless industry and its subscribers, it is also cognizant that in the event that wholesale MVNO access is mandated, not only will investment in the current wireless infrastructure be curtailed, but considering the wants of the potential MVNOs, future investments in 5G technologies will also be the target for reductions by the mobile network operators.
7282 Once again, our position remains that the Commission should not mandate the provision of wholesale MVNO access service, because it will significantly harm the efforts made by Canada’s regional wireless providers.
7283 Mr. Chairman and Commissioners, thank you for this chance to make our presentation today and we look forward to your questions.
7284 THE CHAIRPERSON: Thank you. Thank you very much.
7285 Commissioner Barin?
7286 COMMISSIONER BARIN: Thank you.
7287 Welcome and thank you very much for your presentation.
7288 I want to start the questioning this morning with the areas of pricing and competition in your markets.
7289 I noted you spoke about competition in particular in North Bay.
7290 And you also mentioned in your interventions that you believe that competition is gaining momentum in Canada.
7291 So let me start with a general question.
7292 You are the dominant provider in your regions.
7293 Can you explain whether you consider the mobile market to be competitive in Northern Ontario?
7294 MS. JONES: Bell came in over -- built over our entire serving territory and thereby allowed both Bell, Telus, and all of their flanker brands to start to compete with us.
7295 We do find it to be a very competitive market.
7296 And I have to say that as it relates to competition, Tbaytel has no problem with what we deem as fair competition. We think that that’s good and we accept all that comes with that. I think our concern in terms of competition here is that, when competition is something that is imposed and where the people that are coming to compete have absolutely no risk, no investment, and that they come forward to benefit their own companies, and will harm those carriers that have already borne the burden of the costs of this very complicated business. That’s where the competition, we feel is, you know, it’s unfavourable toward us.
7297 So we do feel we have a competitive market and we’re happy to compete within one.
7298 MR. TOPATIGH: Yeah. I just might want to -- in defining competitive market. Certainly, we have been sharing, and I think the views of the Competition Bureau as well, show that -- I think they refer to the regional players as disruptors. From that viewpoint, we have long shared the fact that for a great number of years we’ve been priced somewhere between 30 to 40 percent lower than other larger centres across Canada. So we certainly believe that there is a competitive landscape in our certain territory.
7299 COMMISSIONER BARIN: Thank you.
7300 So let me pick up on that point that you just made about pricing being 30 to 40 percent lower in your markets. To what extent is the fact that Tbaytel is municipally owned, influence the price of the mobile wireless market in your eyes?
7301 MR. BARIN: Yeah. I can tell you there’s no direct connection to that. Certainly, our shareholder views the investment that they’ve made in Tbaytel as one that produces, I’ll call them dividends back to the municipal entity.
7302 We have some very unique corporate objectives, without question. We look to try and develop investments that will create more economic development in Thunder Bay and in the region itself. We look to help create jobs from that standpoint as well. But from an objective of delivering the service, we ensure that we’re competitively priced. And so, we have to be fluid with whatever is in the marketplace at the time.
7303 COMMISSIONER BARIN: Fair enough. Now, in your main intervention, you submitted a post-paid plan that said pricing was on average 47 percent lower in Tbaytel’s market when compared to the prices that were being charged by the National MNOs. And I’m just trying to better understand the data. How did you come up with the average? And maybe indicate whether you were using prices -- posted prices or whether they were in particular geographic markets. I mean, just get -- trying to get a sense of where that percentage came from.
7304 MS. MEUNIER: Absolutely. I can speak to that.
7305 So as Kathleen had mentioned earlier, Bell entered our market and has begun directly competing with us. Now, interestingly enough, in our marketplace, they have special, what they call Northwestern Ontario plans. So those plans contain the same elements in terms of features, and data allotments, and calling options, that they do across other parts of Canada. However, they are priced significantly less in Northwestern Ontario.
7306 So that calculation is really the variance between the price of that plan, as to how it’s priced nationally, versus how it’s priced locally, in our Thunder Bay and Northwestern Ontario market.
7307 COMMISSIONER BARIN: If you were to do that same comparison on a local basis, do you have a sense of what the percentage would be? So you’re using national MNO pricing. But if you used the MNO pricing in your -- in your territory.
7308 MS. MEUNIER: Oh, that is. That is the ---
7309 COMMISSIONER BARIN: Is that 30 to 40 percent ---
7310 MS. MEUNIER: --- calculation, yes. So for example, say a 1 Gig plan at the national level, at one point was $115 and in our market it was $60.
7311 COMMISSIONER BARIN: Thank you.
7312 Now, has anything changed in terms of the pricing when you generated that data, and today, given what has evolved in the last year, in terms of unlimited pricing plans, et cetera?
7313 MS. MEUNIER: Yes, absolutely. Certainly exciting to work in such a dynamic environment as telecommunications, and we did see a lot of changes that began in the summer of 2019. So since then we have seen prices somewhat change, but there is still customized pricing in Northwestern Ontario.
7314 So we heard some of the other speakers speak to the fact that some of the Big 3 carriers start their data plans at five or six Gigs or higher. Specifically, in our market, they have lower level entry level plans available, just in Northwestern Ontario, that start at the two Gig level for example. So they have different price points and options to compete directly with us as the regional carrier.
7315 COMMISSIONER BARIN: Now, with the relation to overage charges, can you explain your practices with relation to data overage charges in your plans?
7316 MS. MEUNIER: Yes, absolutely. So with regards to our post-paid plans, you have a data bucket allotment and anything over that you do incur data overage charges. I believe those are sitting at seven cents a Meg for overage. We do have processes in place though, to proactively inform our customers about their data usage.
7317 So while we don’t have what we saw from some of the Big 3 as unlimited plans, we do proactively notify our customers at 75 percent of their data usage, so letting them know where they are at in their cycle and how much they’ve consumed, as well as at 100 percent. And then we also follow the Wireless Code of Conduct practices in terms of capping those overages.
7318 From the unlimited plans perspective, that is certainly something that we have investigated to try to determine if that is something that we would like to do. However, we are still looking at the concept of implementing those changes in our network and the benefits to consumers about the throttling speeds.
7319 COMMISSIONER BARIN: Thank you. I’m going to move now to low-cost plans.
7320 Do you offer any low-cost plans, and if so, how do you promote them? And here I have to admit, I went onto your website and I had a little difficulty finding the low-cost option. So I’d like to see if you could point me in the right direction.
7321 MS. MEUNIER: Yeah, absolutely. Actually, our website plan section has overgone a bit of an overhaul. We’re actually in the process of redoing our entire website this year. But we did overhaul how our plans are displayed in about October of last year, so I’m not sure the timeframe as to when you went and took a peek. But all of our plans and pricing are listed on our website.
7322 We do have a number of different categories for plan pricing in there. And our plans range from $25 post-paid upwards. So we do have low-cost options on post-paid that include voice and text, entry level options, as well as multiple data options. In addition to that, on the prepaid side, we do have low-cost prepaid plan options that begin as low as $10 a month.
7323 All of our plans and pricing outside of being posted on our website, are available in our corporate retail store. So our brochures and fly sheets are regularly displayed on our counters for customers to come in and grab.
7324 And our customer service agents are trained on all of our plans and pricing, and they sell based on needs of the consumer. So they have the discovery conversation on the consumer to try to understand what’s best to position to them. And unlike some of the national carriers, we don’t have a flanker brand. So it’s in our best interest to actually advertise all of our plans and pricing available, because we do have that wide array of options.
7325 COMMISSIONER BARIN: Okay. Were you here this morning when the previous intervenor was talking about a basic low-cost plan in the range of $25 to $35? Can you give me a sense of what your lowest cost plan would be that includes data?
7326 MS. MEUNIER: Yes. Our lowest cost plan that includes data is our Light 1 Gigabyte plan, and that is at $45 per month. It then would -- that’s for if you have your own device that you would like to bring. Or if you’d like to finance a device, and for a phone to be included, that would be $55 a month.
7327 COMMISSIONER BARIN: Thank you. Now, if we talk about low-cost occasionally use plan, we’ve had providers stating on the record that the market is very well served in that area. There was an exhibit that was exhibited -- that was distributed at the beginning of the hearing, Exhibit 2, which details some of those low-cost occasional plan options.
7328 In your view, is the market well-served by those plans? And I guess a subsidiary question, is the Tbaytel plan that is in Exhibit 2, still available?
7329 MS. MEUNIER: Yeah. Certainly, speaking to our market in terms of the plans and pricing available in the Tbaytel serving area, we do feel as though there are a variety of different low-cost plan options available, and in that exhibit, yes, the Tbaytel prepaid plan is still available and has not changed.
7330 COMMISSIONER BARIN: Okay. And do you believe that there is a subset of users whose interests are not being met by these occasional use low‑cost plans? Or do you believe that the market is well-served?
7331 MS. MEUNIER: Certainly, I cannot speak to any inquiries that we've received from our customer base in the fact that we have not had a viable plan option available to them. We do often feel that when customers are coming in looking for service, then in having that conversation based on the customers' needs, that our prepaid service is definitely an option for customers that need a low‑cost of entry, or just a low‑cost emergency use plan. So from our perspective, we feel as though our market is well-served.
7332 COMMISSIONER BARIN: Okay. Now, if the Commission decided to impose a condition of service under section 24 of the Act to ensure that the information regarding these plans is clearly communicated to potentially interested consumers, and this would involve ensuring training, proper training for customer service representatives, providing links to those plans on the website, prominent links, visually displaying information in retail stores, et cetera. What is your position? Would this kind of service condition be appropriate?
7333 MS. MEUNIER: Certainly, from a Tbaytel perspective we should have no concerns with that type of position. We feel as though we're already meeting those mandates today in terms of prominence in communication of all of our plan options. And we certainly are proud of the training that we do with all of our customer service agents. Certainly from any new hires, there's an extensive training program that they go through, and that they actually need to pass a test before they're allowed to get in front of speaking to customers. So we would have no concerns with that from a Tbaytel perspective.
7334 COMMISSIONER BARIN: Thank you.
7335 I'm moving on to the topic of winbacks. You are the dominant provider in your area, but has Tbaytel had any challenges with respect to winbacks from the national MNOs?
7336 MS. JONES: No. We really don't see this as an issue in our marketplace. We don't have a lot of instances of aggressive winback actions, and we also don't participate in winback activity ourselves.
7337 COMMISSIONER BARIN: Can you speak to any proactive measures that you would employ with your own customers in terms of ensuring that you are meeting their evolving needs with your plan options?
7338 MS. JONES: Well, we do do regular research with our customers when they have transactions with Tbaytel to talk about their experiences and if we met their needs, and we track with very high results from all our consumer groups. And that goes -- that's a regular post transactional survey that happens throughout the year.
7339 Additionally, we are a fairly small company, and so we have regular meetings with frontline staff and marketing staff to be able to talk about the fact of -- you know, the kinds of customer concerns or complaints that they're hearing, and we have a really good sort of natural pipeline to make sure that we're meeting the needs of the consumer.
7340 COMMISSIONER BARIN: Thank you. Now, I want to move on to the MVNO proposals that have been put on the record.
7341 I'd like to know your opinion specifically on the Competition Bureau's proposal for regional facilities-based carrier MVNO model.
7342 MR. TOPATIGH: Certainly. First off, I'd like to compliment the Competition Bureau on the work that they had done in recognizing the benefits being provided by the regionals. I think, as I said before, we long spoke to the competitive landscape that exists.
7343 There is certainly a theme running through that, that they believe the regionals are best positioned to be able to expand outside of their traditional serving territory, they have the structure, they have the wherewithal, and the capital processes in place to be able to be successful. I certainly can understand that thinking. I did not take from their conclusion that opening the door to full MVNO is necessarily the best result for Canadians long-term, so I would certainly concur with that as well.
7344 But at the same time, I see challenges in terms of our own ability to move outside of our traditional serving footprint. So you know, looking for specific direction on whether or not we would be able to achieve that would certainly take a great deal more work.
7345 COMMISSIONER BARIN: So I take it that if the Commission were to look at the Competition Bureau's model that you would not consider taking advantage of access if you qualified under the Bureau's model?
7346 MR. TOPATIGH: No, I wouldn't say that. I think there are a great number of factors to be considered.
7347 One of the things that has allowed Tbaytel to be as successful as they are, certainly our brand recognition in our serving territory. As I said in my opening, we've been around for decades. We believe that we do provide good service to our customers, high quality networks. But replicating that brand presence outside of our serving territory certainly has its challenges.
7348 I think we heard some of that from the intervenors this morning that, at least in Manitoba, some folks who were surveyed didn't even recognize that there was another provider. I know Xplore Mobil last week talked to the challenges of being a new provider in a new market. We would face those same challenges.
7349 I think more to the point as well, is it would certainly change our risk profile as an organization. Being municipally owned, I can assure you that municipalities have a very conservative approach to risk, and so as a result of that we would have to do far more work to understand whether that opportunity, and how far reaching it might be, represents something that we can tolerate.
7350 COMMISSIONER BARIN: Okay. Because the Bureau's model seems to suggest that MVNO access would be granted only if the regional facilities-based carriers had spectrum, and they had not yet built out. Would -- and I understand the conservative elements of your model, but would the Bureau's proposal potentially encourage you to purchase additional spectrum to deploy a network in areas where you otherwise would not have considered doing so.
7351 MR. TOPATIGH: Again, we do have spectrum that we've been successful in acquiring that reaches outside of our current footprint. And for those of you who may not be familiar, we serve from the Manitoba Border to essentially Sault Ste Marie, but the tier licence that we have specifically reaches as far down to Parry Sound. So there certainly is the ability, even with the spectrum we might have today to reach outside of that footprint.
7352 Acquiring spectrum outside of that traditional footprint, again, I believe brings a certain risk appetite that we would have to do further work on to understand whether or not we'd be capable of, and today, we don't hold any spectrum outside of our serving territory in kind of new markets. So we would be starting from scratch, and I could see that being a challenge.
7353 COMMISSIONER BARIN: With respect to any spectrum that you have that has not been deployed yet, could you undertake to provide the Commission with plans for that spectrum, and additionally, if it might be impact by the Bureau's proposal?
7354 MR. TOPATIGH: Certainly. We do have arrangements with some of our strategic partners in terms of shared use, but we can undertake to provide that.
UNDERTAKING / ENGAGEMENT
7355 COMMISSIONER BARIN: Okay. Thank you.
7356 Now, I want to discuss the broad MVNO model that you suggested with its different characteristics in your presentation this morning. And there were also elements that you had brought out in the course of your interventions. Specifically, you had some suggestions with regards to eligibility criteria, and also some -- a position that you took on the fact that there should be no capacity set‑asides for broad MVNOs.
7357 Can you discuss those elements of your model?
7358 MR. TOPATIGH: Certainly. We look to see who has been successful in developing a regional solution or a alternative fourth provider solution, and we feel it's very important to make sure that you have the backbone and the structure in place to be able to continue to deploy.
7359 We had created a 1 million subscriber threshold thinking that that would certainly reflect a mobile network operator that has sufficient size and scale, that has continued to build support mechanisms, if you will, to be able to be successful as they continue to branch out.
7360 You know, we look at it relative to our own size. We serve a very large geographic area and we feel that a subscriber -- or sorry, an MNO that has subscribers over that limit certainly has the wherewithal to be able to replicate that in other parts that they may not serve currently.
7361 COMMISSIONER BARIN: Okay. You had spoken about a case by case approach to eligibility for potential MNOs.
7362 Would you say -- were you suggesting that it be the Commission that would perform a review on a case by case basis, or were you thinking of a different kind of review process?
7363 MR. TOPATIGH: I think the way we looked at is we were concerned that if MVNOs were to be put into play, it would have significant impact on Tbaytel.
7364 As the market leader in our territory, it would likely mean that proportionality, we would use the most number of customers potentially.
7365 It would also mean that if you’re an MVNO looking to get with speed to market, you’re likely to contract with one national player. Thereby, the wholesale revenue would go to that larger player.
7366 As a result, our topline revenue, and then eventually the bottom line, would be most impacted as a result of that.
7367 I want to remind the Commission that years ago, we appeared with both MTS and SaskTel to talk about mandatory roaming pricing.
7368 And to the Commission’s credit, they realized that as a small provider in low density, high cost serving areas, the decision was made that mandated rates would apply only to the larger players and not the smaller players, that they were free to go out and negotiate rates on their own.
7369 Well I can tell you effectively that repriced the market instantly overnight. And as a result of that, anyone who was looking for national roaming agreements went to the larger players, they didn’t look at the regionals anymore, and as a result of that, we were left in a position to try and recover from what was some considerable lost roaming revenue for us.
7370 So we want to, I guess, make sure that the Commission is cognizant of the fact that even imposing something on the large players only will undoubtedly have an impact on small regional providers.
7371 COMMISSIONER BARIN: Can you speak to your suggestion that MVNOs be implemented via the regional players and not the national MNOs? Would one of those reasons be to compensate for potentially lost revenues ---
7372 MR. TOPATIGH: Yeah.
7373 COMMISSIONER BARIN: --- from an MVNO?
7374 MR. TOPATIGH: It’s lost revenues and the impact that that has in terms of a trickle-down effect to our ability to reinvest in network or support our shareholders.
7375 COMMISSIONER BARIN: Thank you. I want to clarify your position with respect to commercial negotiations.
7376 From what I understand, it is your view that rates and conditions be left to the parties to negotiate and that dispute resolution also be up to the parties in terms of what mechanism they choose?
7377 MS. JONES: I think from Tbaytel’s perspective, we have a long history of being able to negotiate with our partners effectively, and that would include all terms and conditions, including dispute resolution.
7378 We don’t have a lot of experience on the wireline side using the Commission’s final arbitration. So we really aren’t able to comment on whether or not we think that that would be appropriate.
7379 COMMISSIONER BARIN: Fair enough. I’d like to ask you some questions on roaming, and specifically we spoke briefly about 5G.
7380 In your opinion, does the current definition of roaming, the roaming tariffs for the MNOs apply to 5G services?
7381 MR. TOPATIGH: I wouldn’t -- I think it’s premature to draw that conclusion from our standpoint. I know the investment that we’d be looking at, the complexity that would be involved. I’d have a hard time drawing a conclusion at this time to whether or not that’s appropriate.
7382 COMMISSIONER BARIN: Okay. And with regards to seamless roaming, it’s been a highly contentious area.
7383 But is this something that you are interested in? Or have you tried to negotiate a seamless roaming agreement?
7384 MS. JONES: Because we have a marketplace that is fairly contained, we do not have -- and we have a network that is very well built out, we don’t have a lot of areas where this is an issue for our customers.
7385 We do have seamless roaming with our primary roaming partner, but we don’t have a lot of points of interconnection for that to matter.
7386 We’re not really in a position to comment on whether we think in general this needs to be something that’s mandated.
7387 But again, in our area, we are not seeing this as an issue.
7388 COMMISSIONER BARIN: So you don’t see a big problem with dropped calls among your customer base?
7389 MS. JONES: No.
7390 COMMISSIONER BARIN: Thank you. Okay. Just to double back on your model for how to level the playing field with having the regional MNOs be the source -- sorry, the regional carriers be the source for MNOs if that was what the Commission mandated, how would this work from a technical standpoint?
7391 MR. TOPATIGH: Technically they would enter into the same agreements that they would with any of the other players. We would enter into an access agreement for them.
7392 We -- I’m not an engineer by background, so it’s more technical than that. I’m sure my group will tell me.
7393 But at the end of the day, we certainly believe that we would have the wherewithal to do that.
7394 It does certainly create another complexity for those looking to be an MVNO.
7395 But it’s our view that it doesn’t necessarily, or should not necessarily be easy to enter into that.
7396 And if we’re looking to continue to strengthen the fourth carrier option across Canada, I think this is a very viable solution.
7397 COMMISSIONER BARIN: Thank you. Voiceover LTE roaming. Do you support voiceover LTE on your network?
7398 MR. TOPATIGH: Yes, we just recently turned that up and we’re actually weeks away from putting it across our entire subscriber base.
7399 COMMISSIONER BARIN: And do you have plans for supporting voiceover LTE roaming with your domestic roaming partners?
7400 MS. JONES: Yes, we will have roaming with our primary roaming partner.
7401 COMMISSIONER BARIN: And I take it then that you plan to support the 911 real-time text with your roaming partners by the 31st of December 2020 as mandated by the Commission?
7402 MR. TOPATIGH: Yes, we will.
7403 COMMISSIONER BARIN: Thank you. So I have one last question before I pass it off to the Chair and to further questions from my colleagues.
7404 As a small regional player, are there specific challenges that the Commission should consider when developing its mobile wireless policy in this proceeding?
7405 MR. TOPATIGH: I think, keeping in mind, I’ll call it the work and heavy lifting that has been done by both the regionals and all new entrants.
7406 Quite simply, we took a bit of a gamble for new entrants in 2008, when spectrum first became available, to building network, to getting roaming agreements, to getting handset agreements. That’s just scratching the surface of what it means to be a good mobile wireless provider.
7407 I would hate to see those efforts undone as a result of the decision that is, I hope, looking to find out whether or not we have a competitive landscape and not turning this into an exercise of how to draw the conclusion that MVNO is the answer.
7408 I believe we have a competitive landscape. I believe that that can be said for a number of regions across Canada.
7409 So I’d caution against undoing the successes of what’s already been established.
7410 COMMISSIONER BARIN: Thank you. Thank you very much for your answers to my questions. I will pass it off to the Chair.
7411 THE CHAIRPERSON: Thank you, Commissioner Barin.
7412 Commissioner Levy?
7413 COMMISSIONER LEVY: Hello. You mentioned in your presentation today that once identity gets to one million subs, that should be the cut off for when they become an MNO.
7414 How did you arrive at that number?
7415 MR. TOPATIGH: Yeah, it -- respectfully, I asked the same question about the 25 percent reduction. But I believe, as I said earlier, that there is a threshold whereby a MNO can continue to sustain a successful operation, and we believe that that’s the quantum.
7416 The -- you know, the industry is not a stranger to setting different limits. We have a 10 percent Canadian market share for set-aside; we have a 20,000 subscriber threshold for BDU licensing. How did we arrive at those numbers? There was probably a lot of debate but certainly we feel that there is a certain threshold by which the current MNO does not need to have that head start, I’ll call it.
7417 COMMISSIONER LEVY: So you didn’t do any particular study; you sort of looked at the landscape?
7418 MR. TOPATIGH: Looked at the landscape and decided what might be appropriate in terms of who might be able to continue to develop networks successfully.
7419 COMMISSIONER LEVY: And if I understand your position, you would rather not see MVNOs of any type, but should they be mandated, you want some opportunities to play in that sandbox as well.
7420 What do you -- therefore, as you make those determinations on a business case, what do you see as what could be some real opportunities for you, should they be mandated?
7421 MR. TOPATIGH: I would suggest that we’re not seeing an opportunity, quite honestly. So our first positon that you’ve correctly articulated is that we don’t believe MVNOs have a place inside of the -- particularly inside of the regional marketplaces. I don’t see it as an opportunity but I do see it as a reduction of the risk that would come with MVNO, and that’s all it would be at the end of the day for us.
7422 COMMISSIONER LEVY: Okay, thank you.
7423 THE CHAIRPERSON: Thank you. Maybe one or two last questions from my part.
7424 In response to a question from Commissioner Barin you answered quite clearly that you feel that consumers in your territory are well-served; I heard that. I think you were in the room this morning during the earlier presentation in relation to situation in Manitoba, and I guess I’d just like to ask you what comments you have about those of the lowest -- of a lower income levels, how they are being served well in your territory, just given what we heard this morning.
7425 MS. MEUNIER: Yes, certainly, I can speak from our perspective.
7426 THE CHAIRPERSON: Microphone. Somebody else is on -- yeah.
7427 MS. MEUNIER: All right, thank you.
7428 Yes, I can speak from our perspective, and I had addressed it a little bit earlier, just about the fact that we do have low-cost plan options available for consumers today. But specifically one of the largest, I guess, references of our brand is our social giving component, and through that social giving we work with a lot of not-for-profit organizations upon request to provide them with loaner devices and/or zero dollar rate plans to assist them in their needs to run their not-for-profit organizations.
7429 We also have some special programs in place to support newcomers to Canada so we take into account that there are newcomers and a lot of them don’t have credit built up. So we have special programs in place with our multicultural associations to make sure that they’re not given any undue preference in terms of preventing them from signing up for service for deposits and things like that, things that would create barriers for them.
7430 And we also work with employment agencies. We have some programs in place for those in our communities that are looking for employment that may not have the ability or have had the means to get a cell phone, and we provide them with free service while they’re seeking employment so that they can be reachable by possible employers to contact them for interviews or follow-ups to help them just become a little bit more successful as they’re trying to get off their feet.
7431 So those are the kind of programs that we have in place from a wireless perspective, in addition to a number of wireline solutions. We have a Phones for Families Program where we provide landline service to vulnerable people in our community that have school-age children so that the school can contact them about their children if need be, if there’s emergencies or progress updates. And then we also produce -- participate in the Connecting Families Program to provide the low-cost broadband service.
7432 So I would say we’re unique in our approach that we really are front and centre when it comes to social giving and helping those in our community.
7433 THE CHAIRPERSON: Okay, thank you.
7434 You mentioned low-cost plans. Again, I’m just looking at your site, and I think your response earlier -- and if I’m looking at this correctly, your lowest cost plan including data is $45; is that correct, 1 gigabyte unlimited voice?
7435 So you’ve no doubt heard our discussions about the desirability of mandating a low-cost plan of 2 gigabytes for $35. What would you say? Do you have any comments on that proposal specifically?
7436 MS. MEUNIER: I think specifically what we need to consider is just the separation of service and the cost of the phone. So that is certainly something that I think needs to be thought out. So a lot of the plans need to factor in the cost of the recovery of the cost of the device, and as we had heard earlier from some of the intervenors, those costs of devices have been increasing, certainly over the last several years.
7437 THE CHAIRPERSON: Sorry to interrupt. That plan; is it bring your own phone, is it not? Or is that with a phone? Did I misunderstand?
7438 MS. MEUNIER: Oh, no, you are correct. The $45 is a bring-your-own-device plan.
7439 THE CHAIRPERSON: so I guess just to be a little more pointed, are you prepared or able to introduce a low-cost plan of 2 gigabyte for $35?
7440 MR. TOPATIGH: We’d have to look at what our cost is to be able to support that. If I understood the intervenor this morning they talked about a plan with a device. At $25 we’d be hard pressed to be able to find a device that would allow us to recover that cost of the device.
7441 THE CHAIRPERSON: Okay, thank you. Those are all my questions. Thank you very much for your submissions and responses.
7442 Madame la secrétaire.
7443 THE SECRETARY: Thank you.
7444 I will now ask Bob Boron, Bruce Kirb [sic], and Alek Krstajic to come to the presentation table.
7445 (SHORT PAUSE)
7446 THE SECRETARY: Please introduce yourself, and you may begin.
PRESENTATION / PRÉSENTATION
7447 MR. BORON: Good afternoon, Mr. Chair, Commissioners, and Commission staff.
7448 My name is Bob Boron and I’m here with my colleagues, Alek Krstajic and Bruce Kirby. Thank you for the opportunity to appear before you today.
7449 We each have decades of experience managing Canadian telecommunications enterprises, both with the Big 3 wireless carriers and with competitors, but we are participating in this proceeding as private citizens.
7450 In the interest of full disclosure, we wanted to note that as a result of our previous roles as senior executives at Freedom Mobile, which we sold to Shaw in 2015, we each hold a relatively significant number of Shaw shares. However, we are not here to advocate on behalf of Shaw, or any of our previous employers. In fact, our recommendations may well not be positive for Shaw or the other MNOs.
7451 Our objective is to give the Commission our best advice on how to make a wireless regime successful in Canada in a manner that will improve the wireless market for Canadians.
7453 MR. KRSTALJIC: Mr. Chairman, Commissioners, thank you very much for allowing us to appear today and giving us some time.
7454 I’m not going to read the statement that’s in front of you verbatim. In the interest of efficiency, perhaps I’ll just touch on some highlights and we’ll recover some of the time that we need so that people can get to lunch.
7455 Look, I think that it’s important that we start with a little bit of our background in the context from which we’re approaching this real question about how do you create sustainable competition for Canadians as a whole, and what is the current state and how likely is it to actually evolve in a way that you're going to have sustainable competition if left alone, or with a light touch.
7456 I started in this industry 25, 30 years ago in wireless, selling a brick-sized cell phone that was $5,000 in the mid-80s. I went on to Rogers and spent a decade there working for five different CEOs including Ted Rogers himself, and I ended as the two IC for John Tory running the cable company.
7457 I went over to Bell as the Chief Marketing Officer and then the President of Bell Mobility. And what I saw during those years was not surprising. Corporations exist for a primary directive, which is to maximise profit for their shareholders. That's not a bad thing. It allows them to actually do good things with respect to philanthropy, building good networks and improving product quality.
7458 But what we saw was the penetration levels being very, very low in terms of we were I think in 30th place of the OECD countries in terms of who had wireless phones at the time. It was in -- we're talking mid-2005/6 timeframe. It was somewhere in the neighbourhood of 70 per cent penetration. Today it's much higher.
7459 I left, and with Bruce, and Bob, and others created Public Mobile. We raised a lot of money and I hear a lot of the regional players that have appeared before you talk about putting money at risk. I put money that, you know, I -- that I had and some that I didn't have at risk to build Public Mobile. We saw a market evolve that -- even people like us that came from the incumbents, we had a healthy fear and respect of how powerful the incumbents were. We all underestimated the market power.
7460 We come to you today with what we think is a solution that will work for sure. Is it perfect? No solution is ever is, but it's a solution that will, without a doubt, bring prices down and allow more Canadians to use more spectrum.
7461 The starting point for this is really what's the background and current situation in the market. And not surprisingly, you have incumbents, the Big Three, MNOs coming here and telling you everything is okay. You have nothing to really do here. You folks are smart. You're going to see that we're right. We're investing in networks, and they are, and they have great networks.
7462 Now, the utilisation on those networks is far below what you're going to see in other countries. So, the average data usage in Canada is lower, not surprisingly, because the average price for that data usage is much higher.
7463 You can look at a lot of micro-level arguments for, you know, is Canada vast and large, and do you have to, you know, give them higher margins in order to be able to build networks and all this. At the end of the day, one of the gentlemen from the Manitoba panel this morning talked about EBITDA as being the proxy for how profitable the organisation is. The Big Three in Canada earn EBITDA margins that are at least 10 points higher than the biggest best run European and American companies. Those are facts. You can find them.
7464 When I worked for Ted Rogers many years ago, he used to say the numbers don't lie. Look at the numbers. They're earning 10 points more. Now, why is that? Is that because the folks at TELUS and Rogers and Bell, the executives running those companies are truly superior executives that run companies more efficiently? They may tell their spouses and kids these stories, and they actually may be believed by them, but having worked with them, and having been one of them, I will tell you they're not that much better.
7465 In fact, when you look at the economies of scale that are available in the U.S. and Europe, it actually really begs the question, how is it possible that they could have 10 points higher EBITDA margins?
7466 The answer actually resides with -- not just with you, but with Ottawa. It's that you've allowed -- you've bought into their arguments and you've allowed them to actually continually change what's really at question.
7467 We're here to talk about MVNOs and should MVNOs be mandated in a way that causes Canadians to be able to get wireless service at a lower cost and, therefore, use more wireless service.
7468 The market is so very clearly dominated by the Big Three. In fact, when they talk about, you know, they're going to cut jobs if you do this, or they're not going to invest in 5G networks, it's actually laughable. I mean, literally all you've got to do is call their bluff. And let me explain why.
7469 When they threaten that they're not going to invest in 5G, it misses the really big point here, which is who are their competitors? Their competitors aren't Freedom Mobile and Videotron, the smaller regional players. They really aren't. Their competitors are each other. And so, they're always looking to find a way to grab more customers from each other. Just look at their churn rate. If their churn rate is slightly more than one per cent, which it is monthly, that means that each of those big players is losing somewhere around 15 per cent of their subscribers annually. That is millions and millions of Rogers, Bell and TELUS subscribers that are going somewhere else. And where are they going? They're not all going to Freedom and Videotron and the other regional players. If they were, their subscriber bases would be much higher. The answer to where they're going is, they're shifting between Rogers, Bell and TELUS. And when they shift between them, they're shifting because somebody's got some advantage, maybe a price, but sure as heck it's not going to be that one of them is going to allow the other to have 5G and they won't. So, they will all deploy 5G at very accelerated ways.
7470 In fact, any one of those CEOs, so whether it's Darren who sat here, whether it's Mirko, or whether it's Ed Rogers or Joe Natale, whoever comes from Rogers, any one of them who tells you that they aren't going to deploy 5G in the fastest way possible should be fired by their shareholders and their board of directors because that would be the single biggest gaffe they could make in terms of maximising shareholder value.
7471 This market in '08 started to expand and we had a fragmented new entrant market. Somebody talked earlier in the presentations about the fact that the -- none of the new entrants had enough spectrum. They didn't have what was required to compete. But understand, some of the new players that arrived on the scene were -- well, I think everybody, including us at Public Mobile, we thought by having come from the incumbents we'd come up with a model that was going to not draw their aggression and they weren't going to come after us, and we were going to be able to go to the sort of underserved, lower end of the market with rate plans that they couldn't with their cost structure of shouldn't serve.
7472 Well, greed has an interesting way of driving strategy, and they decided they needed to basically destroy everybody. And big players came into this market. Naguib Sawaris, who owned Wind Mobile, who is a billionaire more than 10 times over came into the market. And to put this in perspective, Wind Mobile outside of Canada was more than twice the size of Rogers, Bell and TELUS combined. Naguib Sawaris came to this country expecting to -- you know, he saw these massive margins and he thought, "I'm just going to come to the heart of this issue and decimate these three, you know, big, lazy incumbents". He underestimated the market power of these people.
7473 He had a -- he was interviewed by one of the television networks and actually said, "There will be blood in the streets". Naguib's a very smart guy. He just didn't understand it was going to be his blood, and Naguib proceeded to lose billions of dollars in Canada.
7474 And so, when we look at the market power of these three incumbents, and I recall talking to some American shareholders around the time that Verizon was actually looking to come into Canada. If you recall the visceral reaction of the three MNOs, you know, they talked about suing individuals in the government. They -- you know, they did everything possible to discourage Verizon from coming into Canada.
7475 Now, whether Verizon was right -- whether it was right or wrong for Canadians for Verizon to come in I'm not here to discuss, but I will tell you that they looked at what was going on in Ottawa and felt that there was no appetite here to level the playing field with the three incumbents, and decided there's other places they can invest in.
7476 I've often had conversations with American shareholders and try to explain to them the market power of the Big Three here, and said they actually dwarf Verizon and AT&T on a relative basis.
7477 Americans who often feel everything down there is bigger and therefore better say, "How's that possible? How can a little Canadian telco like Rogers, Bell or TELUS dwarf the relative power of Verizon?" And I say to them, when you land at Pearson International in Toronto, in the old days it was only Rogers who had a GSM cell phone. Now, you know, they're all ubiquitous, but you're roaming on one of the Big Three. When you get into your limo to drive downtown, the radio station that you're listening to I would have said was owned by Rogers, and if it's not owned by Rogers it's now owned by Bell. The signs that you see, the big billboards on the way down are owned by one of them. When you drive by the Rogers Centre where the Blue Jays play or the Air Canada Centre, whatever it's called now, where the Leafs and the Raptors play, they're all owned by Rogers.
7478 The magazine in the back of the newspaper -- or magazine in the back of the limo is probably McLean's, and it's owned by Rogers. When you check into your hotel, your TV service is delivered by one of them.
7479 So the market power that exists here with those three is truly not with equal anywhere.
7480 So if that's the situation, then the question becomes, you know, is it a problem? I mean, should people just work harder to get -- be able to afford the cell phone rates and if we don't make cell phone rates affordable for everybody, then, you know, what happens?
7481 When we launched public mobile in 2010, our slogan was "Everybody Talk", and the view that we had was that being able to talk, whether it's to say something good has happened or something bad has happened just to communicate should be a right, not just a right to those that can afford it, but a right to everyone.
7482 And so making cell phone service affordable, I think, has some real merit.
7483 I think when you add data into the mix, I think data has another whole aspect to it.
7484 When I grew up, I grew up in a poor working-class family in the east end of Toronto. My parents were immigrants. The difference between a poor kid and a rich kid when I was young was essentially, the poor kid had one hockey stick and had to use it for both street hockey and ice hockey, whereas the rich kid had two hockey sticks. It didn't really matter much in terms of, you know, you could -- if you were smart and you worked hard, you could get ahead.
7485 It's different today. Kids today, if they don't have access to data and the internet, they don't have access to information. They don’t develop at the same rate.
7486 And so when I hear incumbents here -- come here and say to you, you know, our networks are great. You know, we have great low pricing. We don't really need to co much different. The networks are really reliable.
7487 They are reliable. I actually think the networks here are probably more reliable than I've seen in Europe and in United States, but I think a big reason for that is because they simply aren't being utilized at the same level.
7488 And when I look at data usage in Canada, the average number of gigabytes of data usage here compared to the U.S., I would suggest to you that more data usage at a lower price is good for everybody.
7489 And when you look at the incremental cost, it may shave some margin down from that 45-plus EBITDA margin of the incumbents, but it's okay.
7490 And so I do take -- look, I don't take it personally, but I'm a little bit annoyed to hear some of the arguments that are being put forward by the Big 3.
7491 And be clear what Bob said at the beginning here. We are -- we are significant by anybody's standards shareholders of Shaw. And if you adopt even a little bit of what we are suggesting, it will cost us personally millions of dollars just immediately in terms of share price depreciation.
7492 So we're still here saying we struggled with this, what's the right -- what do we want to do here. We want to give you a formula. Whether you follow it or not, whether you believe it's right or not is up to you, but we're trying to give you a formula in terms of what you could do to fundamentally change the landscape that exists today.
7493 So how do we fix this? And I'll just give you a couple of options and then stop and we can take some questions.
7494 Do MVNOs generally work? The answer to that question is, more MVNOs fail than succeed. And so it begins the question why.
7495 I believe that MVNOs, for the most part, emerge as an adjunct or an extension to an existing business. And people say, hey, we've got all these customers now. They use wireless. Why shouldn't we like sell wireless? If we can get a licence, we should do it.
7496 And they invest a bunch of money in trying to expand, create a billing system. They underestimate, usually, the incumbent response. They underestimate the level of inertia that exists in a market to stay with their -- stay with the existing suppliers. They underestimate the impact of people wanting a new phone because it's a status symbol and not bringing their own device and therefore being locked into a contract.
7497 The other thing that they underestimate is how hard it is to manage multiple lines of business. And if you're already in a business -- and I know some of the very smart folks at Tek Savvy and firms like Comwave will disagree with me, but I can tell you when I was the chief marketing officer at Bell, we worked very hard to launch bundles. They didn't actually exist at Bell when I arrived. I was the one who started bundles at Rogers.
7498 And I will tell you that wireless is a completely unnatural bundle, so it's a natural bundle for someone to buy their telephone service, their internet service and their television service all from the same supplier, from the same wire, if you will, coming into the house. But then they'll almost immediately consider buying from someone else that doesn't supply those their wireless phone.
7499 Telus got -- had great success in Ontario where they didn't supply anything other than wireless.
7500 THE SECRETARY: I'm sorry. Can you please conclude? Because your time is over.
7501 MR. KRSTAJIC: All right.
7502 THE SECRETARY: Thank you.
7503 MR. KRSTAJIC: So we look at the different options of what you can do and say. You could literally do nothing. You can leave the market as is and, not surprisingly, things probably won't change much.
7504 You can do what the Competition Bureau says and allow the fourth wireless player to proceed on their own and you will see some movement.
7505 You could open the floodgates completely to MVNOs. And if you do, I think you're going to see a lot of people fail because it's a lot harder to do than you might otherwise realize.
7506 The other thing to understand in that particular point is the incumbents have market power to be able to make some of the newer players that are trying to launch wireless on the banks of other internet or television services or telephone services suffer in their core business and, therefore, control them that way.
7507 The other option, and the one that we're proposing to you, is that you choose one national MVNO, you appoint that MVNO, you enable that MVNO with a transfer price that allows them to compete and allows them to deliver service so that they will earn nothing more than the 35 percent EBITDA margin that's available in the rest of the world and be able to do it for Canadians at a price that's competitive.
7508 I'll conclude there, Mr. Chairman.
7509 THE CHAIRPERSON: Thank you.
7510 Commissioner MacDonald.
7511 COMMISSIONER MacDONALD: Good afternoon. Thanks for your presentation.
7512 I think that's where I'd like to start with some questions. The challenge will be now I need to actually read my own writing because I've been taking notes as you've been speaking.
7513 And I think I want to start off with one of your last points because it's not something that we've heard. And it's around the fact that wireless is not a natural bundle with phone, internet and TV services.
7514 And I confess I hadn't turned my mind to that in the past, and I'm wondering, can you expand on that a little bit?
7515 Is it just because people buy or companies provision phone, internet and TV over a single cable going into the house or is it more fundamental than that?
7516 MR. KRSTAJIC: I think it's partly what you've just described. It's that it's coming across one.
7517 It's also one decisionmaker in the home, so you'll have the person -- you know, in the case of a family, you'll have the person making those buying decisions buy those things.
7518 They don't necessarily translate to a teenager who's paying their own cell phone bill who may buy from a brand like Virgin Mobile versus a brand like Bell, and so they make their own buying decisions. So I think that's part of it.
7519 I think the other part of it is, you'll often see the incumbents marketing in very, very different ways.
7520 It was brought up this morning that there will be some substitution.
7521 If you can get the price of wireless data usage down to really competitive levels, then people won't need their home connection quite as much, and so while they want bundles, they will always try to maintain the margins in each of the businesses on their own.
7522 COMMISSIONER MacDONALD: I liked your comment about teenagers paying for their own phone. That's not been my experience.
7523 MR. KRSTAJIC: To be clear, it's not mine, either.
7524 COMMISSIONER MacDONALD: Okay. Does any of that tie to the fact that people may add wireless services one at a time as, you know, children reach a certain age or contract periods come to an end, whereas on the wireline side everything tends to be up for negotiation at the same time?
7525 MR. KRSTAJIC: I think that has a big part to play as well.
7526 COMMISSIONER MacDONALD: Okay. Thank you. With respect to your suggestion of mandating MVNO access with that it being just one provider that's selected, why is that beneficial to do as opposed to mandating or -- mandating multiple MVNOs across the country?
7527 MR. KRSTAJIC: I think there's a couple of reasons. Number one, having a single player with a single strategy and a single objective that's completely aligned with what you want is easy to manage. Having multiple players in a more fragmented market causes a lot of, at times, irrationality.
7528 I can tell you from experience that had there been only one new entrant back in 2008 with all the spectrum that was available as a set‑aside, and it had been just made available in a beauty contest, if you will, with a certain price, I think we'd be much further ahead in terms of competition today.
7529 I think by the fact that you had, at that time in Ontario, three new entrants, Public Mobile, Wind, and Mobilicity, one of them soon as they didn't get traction and didn't have the experience in terms of how to manage literally dropped prices to levels that were uneconomic.
7530 So if what you're after is short-term massive price drops, yeah, open the floodgates. If what you're after is a long-term sustainable solution and sustainable low prices, then they have to be done in a way that's measured.
7531 When Mobilicity -- I remember trying to sit down with the folks from Mobilicty when they came up with rate plans and said -- I said to them, "Look, there's no -- you know, there's no contribution margin at the levels you're selling at. Like, what are you doing?" And when their leader says to me, "I'm going to make it up in volume", I sit, and I go, "Okay. Well, this is going to bring everybody down", and it did. Those types of moves caused massive capital erosion in terms of the investments that were made.
7532 And so I think, one, it makes sense because -- and by the way, I would -- you know, it's a walk-before-you‑run strategy. Point one that aligns with the objectives you've got, if it's not enough you can add a second one, but opening the floodgates and then going back, I thnk creates a bigger headache for you.
7533 COMMISSIONER MacDONALD: And on the topic of selecting that one, and we'll get back to the beauty contest and what that could look like in a few minutes, but do you envision that one being one of the newer entrants that have come into the market, one of the newer facilities-based providers? Do you view it as being a net new logo, or you have no preference one way or another?
7534 MR. KRSTAJIC: I'm torn in terms of answering that because I think that there has to be some consideration given to the fourth wireless players in these markets, or even before us when Tbay was speaking. I think people have made massive capital investments in a strategy that was deployed here in Ottawa that said we're going to have facilities-based players. And so I think those facilities-based players do require some consideration, maybe along the lines of what the Competition Bureau was saying, although we need to study that a little bit more and would be happy to get back to you on that.
7535 No, I -- to use your expression, it's one "net new logo". I think that you need to have a pure wireless play that is not constrained by other lines of business. If you look at the success that -- whether it's facilities-based or an MVNO, you look at the United States and you see how well T‑Mobile has done as a facilities-based player or TracFone as an MVNO, they're pure plays. They're not distracted by well let's leverage wireless to help our Internet sales, or let's not poke the bear with Internet sales because they might, you know -- or not let's not poke them with wireless because Internet sales might suffer because the big guy might crush us. A pure play, a single one, makes a lot of sense to me.
7536 COMMISSIONER MacDONALD: And if it is just one, knowing that this company would have to get up and running and turn a profit as quickly as they're able to, don't you think that the motivation would be just to go and launch in the larger centres, at least at the initial stages, versus bringing more competition to Montreal, or the GTA, or Calgary, as an example? And that's great for the people living in those particular urban centres, but not so much for the rest of the country.
7537 MR. KRSTAJIC: I didn't come today prepared to talk about how I think it should rollout, but I think that your question is fair. I think that, first of all, if you ran up a process to try to figure out which plan was the best plan, one, it needs to take into account that it's going to launch everywhere; two, quite frankly, done right, they should announce what the rate plan is going to be, and it should be a ubiquitous rate plan nationally.
7538 I've watched areas where there was -- actually some of the lowest prices existed in Manitoba when Manitoba Tel was around. All of a sudden what happens is -- and look with all due respect to the folks here in Ottawa that made that decision. You let Bell take out Manitoba Tel, they've funnelled of some assets to Xplornet and the prices went up.
7539 And so I look at it and say I think that for the folks that were ahead of us from Tbay, if they're going to launch a rate plan that's going to be the exact same rate plan that the -- this national MVNO would launch, well then the national MVNO doesn't need to be there because someone's actually already doing that. But I think the national MVNO needs to make a commitment to launch everywhere.
7540 By the way, the -- some of the folks that are here, I think there's a lot of well-intentioned folks that are ambitious to think that they can become an MVNO. The costs we're talking about to really launch a service that's -- they're still quite extensive even if you don't have a network.
7541 When I was the chief marketing officer of Bell, now granted that was a few years ago, the cost for me to blanket the country to launch a new service was $52 million for one year. So at the very least you're going to spend 52 million, plus your billing, plus everything else. So there has to be -- whoever comes forward needs to say look, I have $100 million at least to start getting this thing going.
7542 But yeah, I think it has to be a plan that's going not just try to exploit the highest density population centres, like Toronto and Montreal, it has to go everywhere.
7543 COMMISSIONER MacDONALD: Okay. Thanks for that.
7544 With respect to a lot of the comments that we've heard, especially from the existing providers, around the fact that one of the consequences of mandated MVNO access will be reduced investment, based on your submission today, I think you believe that some of those statements are not credible. You said they'll still deploy 5G, those investments won't dry up.
7545 But if the risk profile for wireless investments change and the cost of borrowing does go up, doesn't that mean that either investments will be reduced, at least by some degree, or customers will end up paying more at the end of the day for those services?
7546 MR. KIRBY: I mean, the simple answer is no. I mean, they all talked to you last week about how, you know, if you do anything that does this we're going to cut back investment and cut back charitable giving for some reason. But the actual drivers behind what they invest isn't that.
7547 I mean, like Mirko Bibic from Bell sat here and said that every year he has to go out and, you know, get the privilege to invest the $4 billion in Cap X, you know, and talked about the shareholders or investors who enable him to do that. Well, shareholders and investors don't enable him to do that, the customers in Canada enable him to do that.
7548 That investment, including all of the operating expenses and everything else they do is paid for by Canadian customers with plenty of money these days left over that is used to pay dividends out to their shareholders. The shareholders are always receiving money back. They're not actually investing in Canadian networks and Canadian operations.
7549 And so the answer is if those excessive profits they're able to generate today due to the oligopoly position they operate in shrinks somewhat they'll still be able to make all those investments.
7550 And so the question becomes is will they choose not to do so for some other reason. Now, you know, they can say, well as he has, you know, we made a threat and we're going to live up to that if you actually make this decision. So we're going to cut back on the investment that we put into our networks, and we're going to slow the deployment of 5G. Well that only works if in fact everybody does that at the same time. In other words, if they have exactly the ability to collude in market power they constantly come here to tell you they don't have.
7551 Because if Bell and TELUS live up to their demands that they're going to cut back on investment, and Rogers decides to go ahead with 5G, Rogers then will create a substantial differentiation in the market through its network, and by doing so will gain market share and would be much more successful than the other tow, which will then force the, of course, to respond and compete.
7552 What actually happens in the market today is they actually compete a fair amount on deploying networks and deploying services. What they do -- by competing on those types of features, what they void is competing on price. And so, they all match of each other on price, and then try to, sort of, be a little more differentiating in terms of some of the deployments they do and how quickly they roll out the networks. And they’ve always competed in the Canadian market around the investments.
7553 And so -- and so and even if all three of them decided to elude and scale back their investments, you actually have these four regional players who are continuing to invest and continuing to grow, and that gives them even more of an incentive to invest, because now they’re going to gain and reduce the differential they currently have with the Big 3 players and will be more successful by doing so.
7554 So the only way this threat actually really works for them is if they can somehow get all of the existing operators to, you know, at the exact same time, agree to scale back their investments and to do so in a manner that is -- requires the collusion that they claim is impossible.
7555 COMMISSIONER MacDONALD: Okay. But just to stay on that topic for a second. If the costs to borrow do increase, and I’m not suggesting it would be a billion dollar cut, but the options would be, at least off the top of my head, delay or cut back on investment to a certain degree, raise prices, or at least not implement planned pricing reductions, or cut the dividend. And I’m sure a great many people would question the willingness of any of these providers to actually cut their dividend.
7556 So what other area can the efficiencies be found?
7557 MR. KRSTAJIC: First of all, cost of borrowing for any of these big players is literally looking at what the prevailing Bank of Canada rate is and, you know, what the markets will give them. The other comment that was made by some of the incumbents was the if you all did this, that investors would go to other markets and invest in other telco’s that don’t have this onerous MVNO policy.
7558 And I would just say, so investors are going to go and take money from 45 percent EBITDA merchant companies, to 35 percent margin companies doesn’t make -- doesn’t make any sense.
7559 With respect to your exact point, I guess I look and I say the trade offs will always be made in a way that says, we will have a network first and foremost that is going to be able to serve all the potential uses that our customers have, both our current and any of the customers we’re trying to get.
7560 On the point of planned price reductions, I don’t think in all my years at incumbents, there was never a planned price reduction in a business plan. And so, I think that if they are telling you they have planned price reduction, you should ask for a schedule. So I think that one’s way off.
7561 So I actually think that they -- if they had a choice, and let’s just take the one -- the last one you brought up. You could cut the dividend, or you could cut your 5G deployment. The cutting the dividend might have a short-term impact on your stock price, and so they really work hard never to do that. But cutting your 5G deployment is cutting off your future, and so that’s -- out of the two, they’ll cut the dividend first.
7562 COMMISSIONER MacDONALD: So that’s kind of a good segue to my next question, because if you know, we assume that okay, there’s not going to be widescale reductions in investment in networks and deployment, yes, 5G is going to be deployed. Again, I think that’s a given in regions of the country where the population is more dense. That may not -- there will always be a business case to build in downtown Montreal. There may not always be a business case to build on Miscou Island in Northern New Brunswick, as an example.
7563 So if there are any reductions or delays to 5G deployment, just to stay on the same theme, isn’t it more likely that those delays will happen in the very rural and remote areas that collectively we’re working so hard to bring online?
7564 MR. KRSTAJIC: I think that’s correct. But I think that happens anyway. I think whenever you’re deploying, they’re not starting in the least dense areas. They’re going to leave those until last because they payback is longer there. That’s -- that’s the reality. And if they’re telling you that they are going build 5G in those areas first, I don’t think that’s accurate.
7565 And so, yes, a reduction in -- a reduction in margin may have an impact on the rate of deployment in some areas. But again, I would suggest to you, you know, the folks -- the good folks from Tbaytel this morning were saying, if you’re going to mandate this, then you want -- they wanted the MVNOs to have to deal with them or the regional players.
7566 I think what will happen, it’s a little bit of a prisoner’s dilemma, which is what keeps it sort of, self-policing and honest, somebody will deploy on those areas and the MVNO will go to the people -- to the party that has the 5G network. If you don’t deploy in a remote area, so all 4G and one person does 5G, all the customers will gravitate to that customer -- to that supplier.
7567 So I can’t solve for your problem that the remote areas don’t take priority. But I don’t think it's accurate to say that they just won’t get served.
7568 COMMISSIONER MacDONALD: What about being served by regional carriers. Because one of the things we’ve heard time and time again are that MVNOs will by in large cause the most harm to the -- to the regional carriers that are just now starting to gather steam. And with more competitors in the market, those same regional providers may be less apt to go to regions where the business case for them is already a little bit suspect, because they will no longer be able to assume that they’ll get a particular market share that perhaps they’ve been used to in the past. Would you care to comment on that concern?
7569 MR. KRSTAJIC: I think it’s a fair concern, but I think the question that we all have to answer is what is the problem we are trying to solve? And if we try to be everything to everybody, we just won’t get there, and that’s a little bit of the, you know, shell game that goes on with some of these arguments.
7570 If what we’re here to do is to figure out how to bring pricing down to levels that are, sort of, world competitive levels on a sustainable basis, then the reality is there’s something has to give. So some of those regional players might have had expansion plans and they -- it won’t make sense anymore, because an MVNO can go in.
7571 But, like, I was trained as an economist. If it’s about, you know, maximizing the marginal utility and maximizing the overall interest for everybody, then the reality is that something is going to have to give. And so if some of those regional players don’t expand, that may be okay.
7572 COMMISSIONER MacDONALD: Okay. Thank you.
7573 You know, the last time we really looked at this was five years ago, and the strength of the regional players at that time, their proportion of the market share was less than it is today. We can have a debate as to whether they’ve been able to get as many customers as perhaps they could have, or that the Commission was expecting.
7574 But given all of the complexities with gaining access to spectrum, building a facilities-based network potentially from scratch, starting with a customer base of zero, and perhaps an unknown brand, should we at all be surprised that they’re still hovering around the 10 percent mark after these years in the market? I’m just wondering, is it -- if it appears to be working, albeit perhaps too slowly, is now not the time to meddle?
7575 MR. KRSTAJIC: It’s a fair question, and I don’t think I have a definitive answer for you. But what I would say to you is this, you have to ask yourself, did they get 10 percent on their own, or did the Big 3 realize they’ve got to let them have, and they took the 10 percent that was the lowest marginal utility customers? And what suggests to you that the next 10 percent -- because that’s the low hanging fruit. So why do you believe they’re going to more successful in the next five years? Is it critical mass? Is it that the incumbents are going to all of a sudden realize, geez, we should play nice?
7576 I mean, look, Chatter was launched in 2010, just was Wind, Mobilicity and Public launched. They had a massive advertising campaign that didn’t talk about the press, the product, or the price, or any of their service. All it was designed to do was attack the new entrants about having bad networks. So much so that the Competition Bureau levied, I think at the time, the highest fine ever levied on a Canadian Corporation for false and misleading advertising.
7577 And so the way these guys play the game is really tough. Telecom in Canada is a blood sport. And they are all going to do whatever it takes to protect the golden goose of 45 percent plus EBITDA margins.
7578 So am I surprised that it’s only 10 percent? No, I’m not.
7579 My question is, what makes you think that they’re going to get to 20 percent ever?
7580 COMMISSIONER MacDONALD: Well and I guess my thought is, some of that comes back to the time to deploy and the time to get a certain level of credibility in the market.
7581 In, you know, previous conversations last week, we were talking about dropped calls when a provider leaves one network, perhaps a regional carrier, and goes out of their range.
7582 That impacts customers. It takes time to physically build out your network. It takes time to build your brand and for customers to understand, “Okay. You know what? When I pick up my phone, it’s actually going to work on this new service provider.”
7583 Given the amount of time and the complexity involved, I just don’t know whether it would have been reasonable to assume that as these companies started, they would have been able to reach more than 10 percent.
7584 I know the big guys are always going to play hardball. I’m just not sure -- and you were a new entrant, in the modeling you did, are you surprised by the length of time it’s taken to reach 10 percent? And is your view at all coloured by perhaps their more recent success in adding new subscribers at a higher rate in the last couple of years than perhaps they might have in their initial couple of years in the market? Might be like six questions in there. I apologize.
7585 MR. KRSTAJIC: Look, I think they’ve done a wonderful job.
7586 And I’m smiling because, I mean, Paul McAleese who is running Freedom Mobile for Shaw is a brilliant marketer. I knew him in my days at Rogers. And I was the guy that brought him in when I was leaving. I think he’s done an amazing job. I think that it takes a lot of really smart people working really hard to do what they’ve done and what the good folks at Videotron and other similar players have done.
7587 So I think that the original business plans, if you took Public Mobile, Mobilicity, and Wind in 2010, 10 years ago, they probably all said to their, you know, investors they were going to get to 10 percent market share within five years and that seemed pretty reasonable.
7588 Now the aggregate of all of them is getting to 10 percent 10 years later.
7589 So I’m -- I think I was naïve in 2010 to believe that we would have been able to get to 10 percent in five years.
7590 So I’m not surprised now that I see how the market has evolved that it’s only at 10 percent.
7591 But again, my concern is the next 10. Look, this is a very difficult question. Do you license one MVNO? Many MVNOs? I think that -- or do you not license any new ones and just do what the Competition Bureau is suggesting and take the facilities-based regional fourth players, who are doing a good job, and give them a leg up?
7592 There may be an option to actually have a hybrid of the two.
7593 And be clear, if what you do is say, ”We’re going to give the fourth regional players another five year run, but we’re going to ensure they become more successful because they’ve invested the capital, and what we’re going to do is make them essentially an MVNO, and they can plug into the national networks and compete across the board,” as a shareholder of Shaw, I’m very happy.
7594 Is that the right plan? Does it ensure the competitive landscape that I think you want? Not as well as having that new MVNO that makes everything self-policing, because any of these incumbents that are -- Shaw is still an incumbent, they still have to worry about their internet business, their landline cable business. They still have to worry about these things. They’re not a pureplay.
7595 That’s why we are so convinced that if you have one objective and that objective is to, as quickly as possible, change the competitive landscape so that Canadians get more usage at a lower price, then you need to put someone, you need that net new logo you described.
7596 COMMISSIONER MacDONALD: Thank you for that. Just to switch gears, because we’ve talked a lot about the innovation that MVNOs can bring to the market. I think that’s a term you actually used in one of your submissions as well.
7597 Beyond price, what innovation do MVNOs bring to the market that isn’t there already between the primary brands, the new entrants, and the flanker brands?
7598 MR. KRSTAJIC: I think innovation can take a variety of different forms, from the way the product is taken to market in terms of both, you know, the four Ps of marketing, price, promotion, position, et cetera.
7599 I think the other way is distribution.
7600 We are so locked into a bricks and mortar approach to selling these services and the stores are big and beautiful. And that may be required.
7601 I don’t think that -- I think the MVNO -- if an MVNO emerged that was going to be really successful, it would go to the underserved areas first and foremost. That’s still, I believe, the lower end of the market, the customers that are more price sensitive.
7602 We did some studies of our own years ago when we launched Public Mobile in terms of what’s the elasticity of demand at different price ranges for service.
7603 And I think that you can get innovation in terms of how some of those packages come to market.
7604 COMMISSIONER MacDONALD: Okay. Thank you. Let’s jump to the beauty contest, as you described it, for selecting this new national MVNO.
7605 Your submission this morning mentioned three basic criteria, market experience, sufficient capital, and viable plan. Those all seem very logical.
7606 Are there other characteristics that we should take into account when weighing what could potentially be a fairly large number of applicants to become that new national MVNO?
7607 MR. KRSTAJIC: I’ll start, but I’ll toss this to Bob and Bruce as well.
7608 I don’t know -- those are the three obvious ones. I think that it’s a bit like how long is a piece of string? It could be anything. There could be -- I think you’ll have as many innovative approaches to this question as you’ll have applicants.
7609 And I think there could be some applicants that come forward and have a real strategic niche in terms of how they’re going to approach the market, and it might be something that resonates with you and you realize, “Wow, that really stands out compared to just a bunch of folks who have money and have done this before.” There could be something really interesting from a strategic perspective.
7610 I don’t know, Bruce and Bob, if you think there’s anything else?
7611 MR. KIRBY: I don’t really have much to add to that, because, I mean, the answer is you’d want to have a broad opportunity to make that as what we’d describe as a viable plan, like, I mean innovative ways like, that addresses your previous question about how you go and serve the market in a new and different way.
7612 And then you need to, at the end of the day, make a judgement around which of those is the most likely and effective to achieve the quality objective.
7613 COMMISSIONER MacDONALD: Is there any concern in your mind that such a scenario would just amount to the CRTC picking winners and losers in that process?
7614 MR. KRSTAJIC: Well hopefully you’re going to pick a winner.
7615 Look, I think that I’ve heard that question from folks at industry, from folks here.
7616 At the end of the day, it’s your job. I mean, you’re supposed to come up with a solution to solve this problem for Canadians. And what you have to do is pick a winner.
7617 So, yeah, I think -- look, coming up with a policy in a vacuum isn’t something you would ever do. That’s why you’re having these hearings. That’s why you have interventions.
7618 But then there’s this whole other thing that a beauty contest could actually do for you, which is to actually show you what’s out there in terms of creative thinking.
7619 And, yeah, you would have to pick a winner. I think that’s actually okay.
7620 COMMISSIONER MacDONALD: So one end of the spectrum we have your suggestion, which is one national MVNO. At the other end of the spectrum, it’s, you know, we’ll blow the doors off and open it up to how ever many providers actually want to come in and let market forces decide which ones are successful and which ones are not. You, yourself, noted that most MVNOs actually end up failing.
7621 Can you unpack for me a little bit, if we did mandate a large number of MVNOs and a significant number of them failed, what does that mean for the end customer? The good, the bad, and the ugly about the large three providers right now, no one needs to worry about their cell phone not working tomorrow because the provider has gone bankrupt. That may not be the case if there's a large number of MVNOs out there.
7622 MR. KRSTAJIC: I think there's a disruptive thing that takes place for customers. I don't know how some of these MVNOs will go to market. Some may be brilliant marketers and decide they're going to go to market, and the one hook is you get this great rate plan but you've to buy your device, and the device may or may not be something that other carriers will take or use.
7623 So you could have a situation where customers are laying out cash to get this deal and then it's not sustainable. I think you're going to get a lot -- if you open the floodgates I think you're going to get a lot of people, it'll -- there'll be chaos in the market, there will be a lot of noise, it'll be difficult for any one to actually emerge with their message because I think there'll be, as I say, a lot of noise. I think that there will be a lot of capital lost.
7624 There was a lot of capital lost after 2008 with the –- all this money that was spent on spectrum and then all the money on marketing and building networks, and it was wasted.
7625 COMMISSIONER MacDONALD: Thank you. Just a couple of last questions. The first one is with respect to rate setting.
7626 You suggested a retail minus approach. Others have suggested following, you know, Phase II costing. We all know that can be a time-consuming and very complex process.
7627 Can you outline what the benefits would be to a retail minus approach? Because even that may not be all that simple given the sheer number of plans that are available out there right now, especially if there's any suggestion that we should look at plans that are available in other markets outside Canada to set that rate.
7628 MR. KRSTAJIC: I'll start, but these two guys are way smarter than me, so I'm going to get them to weigh in.
7629 Look, whatever mechanism you use, you have to understand that the incumbents are very smart and they come here and they find ways to cloud the issue. So whatever mechanism you use needs to take into account that they are really intelligent and they're finding ways to go around it.
7630 The retail minus approach I like personally because it's depending on where you peg it. If it's their lowest retail rate available anywhere.
7631 First of all, I don't believe that we should have regional differences in rates. People in Manitoba, or Toronto, or Montreal, or B.C., anywhere should all be paying the same rate if it's coming from the same supplier. I don't think there should be regional differences in rates.
7632 So the retail minus keeps everybody honest. It says, okay, don't try to exert your market power in different ways in different markets. We're going to take your lowest available rate in the market and it becomes a retail minus from that. That's why I like retail minus.
7633 But Bruce, over to you if there's more, and Bob.
7634 MR. KIRBY: Yeah, I think that's the key point. And by lowest retail rate, I mean the actual lowest rate they offer to a customer, not necessarily what they list in their rate plans. Because they often offer rates that are substantially below those as ways to win back customers and so on.
7635 And that becomes a policing effect, because to the extent they decide to drop their prices to try to engage in predatory pricing, they effectively lower the wholesale rate that applies to that when they do that, make that reduction.
7636 And as you said before, the alterative is these costing studies, which always sound great in theory but becomes a multi -- and I think we went through it with the rate for roaming -- it was a multi-year process. I mean, the Commission spends an enormous amount of time working on it.
7637 The only -- like there's a lot of gameplaying by the incumbents. Nobody other than the incumbents gets to see enough of the data to actually challenge any of their assumptions around what these economic costs are, other than directly within the Commission itself have to spend a lot of time on that. And then it becomes a thing that becomes fixed, and you've got to go through an entire process again to try and revise that in what can be a fairly dynamic market.
7638 And so if you just make it, like the reduction off of what they're charging -- they're -- if they're prepared to sell a certain amount of data to a customer at a certain price, then clearly that's above their cost, unless they're selling it below cost, which is its own separate issues. But -- and if that's the case, then if you just set the rate below that you create room for someone to come in and compete with these guys and it becomes, as Alek said, a self-policing effect because any attempt to sort of go after them on price is one that forces them to then reduce their own prices they're offering on that wholesale service.
7639 COMMISSIONER MacDONALD: Okay. So just one quick follow up to that, maybe two. Would the retail minus approach just be looking at what's available -- what's being offered in the Canadian market, or would we also look to other jurisdictions internationally in setting that rate for trying to decide, I'm thinking the context of deciding what the markdown should be?
7640 MR. KRSTAJIC: You'd just added another layer, which I think is a very good question. But I think that retail minus works in terms of the Canadian market, but I love the way you're thinking because you're already now saying okay, but then they could just raise all their retail rates.
7641 So there has to be some objective, I think, that is set here that says this is sort of the average world price, this is what we are sort of looking to try to get to, the MVNO has a goal to get you there.
7642 The MVNO, look, if you're lucky enough to become this single MVNO if this plan ever came to be, they can't -- you can't also allow the MVNO to make extraordinary profits. Right? It's got to be done in a way that says you've got to keep dropping your price to the point where you're bringing Canadians down to where the world levels are. So there's a second layer there.
7643 We could take an undertaking to come back to you and think that through, but there's a second part we -- I can't think of quickly enough.
UNDERTAKING / ENGAGEMENT
7644 COMMISSIONER MacDONALD: Yeah. If you want to take offline that would be very appreciated.
7645 I guess to add an extra layer of complexity, you had said not just the best available posted price but also what they offer to their customers, assuming if the customer is in some type of the negotiation and the service provider is trying to maintain the -- that customer on their network.
7646 How would we then factor in what's become very common, the gift of some type of gift with purchase? You sign up for this package and, you know, we'll throw in a Smart TV because we're such good guys. How do we take that into account in the retail minus approach?
7647 MR. KRSTAJIC: Another very good question. I think what happens is you will -- what you will see is the incumbents probably start to do a version of gift with purchase that involves the other services that a wireless customer they have in a bundle, they're going to find ways to lock that customer up.
7648 I don't know that you should worry about that. I think the gift with purchase that's a big screen TV is a marketing expense, and I wouldn't waste much time on that because the MVNO should just be able to compete against that as a marketing expense, and if they have to match the TV they'll match the TV. I wouldn't be as worried about that.
7649 COMMISSIONER MacDONALD: Okay. Thank you. And just one final question before I turn you over to my colleagues. You didn't read your opening statement, but I did. So I'm going to read part of it back to you. Again, with respect to negotiations and rate setting:
7650 "...must not in any way rely on negotiations with the Big 3....It is impossible to have reasonable commercial negotiations with a party that, by definition, sees no benefit whatsoever in the completion of a negotiation..."
7651 I think that's an interesting statement, but we have discussed commercial negotiations a great deal. What do you get from the retail minus approach that couldn't also be accomplished by a commercial negotiation so long as there was a CRTC backstop to finalize a given rate in the event of a dispute?
7652 MR. KIRBY: So in the early days of Public Mobile we had this experience. The original mandatory roaming requirements was for a commercial negotiation, and so we went and sat down with the major carriers, had a commercial negotiation. At the first meeting you discuss what your objectives are and then explain their objective was to not come to a deal, other than at the price that they wanted to set it at, which was absurdly high, about a thousand dollars a gigabyte for data. And that's because that was the incentive.
7653 I mean, worst case is they would drag it out through a negotiation and then force you to go through a complicated arbitration process, and you know, worst case was you got a reasonable rate as opposed to an unreasonable rate and would take you six months or a year to get through all that process.
7654 If you say, well here's a negotiation with the CRTC backstop as sort of a backstop, it's a one -- better than a more commercial arbitration approach. It's much better because you have experts who understand the issues. But you're effectively just forcing the issue into the backstop because the approach of the incumbents will always be to -- because the longer they can delay anything that happens in terms of bringing new competition, it's a success for them.
7655 And so they have every incentive to drag out the process as long as they can, to force into a backstop, to drive a process that hopefully they can, you know, game in some fashion that actually comes out with a number that they see as effective to them, and effective by being it's not a sustainable competitor that they're facing.
7656 But that's the result. You're never going to get to a solution with a party where one of the parties has no incentive whatsoever to come into a reasonable conclusion.
7657 MR. BORON: If I can just add, sitting here less than a week ago in this hearing room, the CEO of Bell Canada, when asked the question by -- it might have been yourself, Commissioner; I'm not sure -- about what his appetite was to sit down and negotiate with an MVNO with respect to price or the provision of services, he gave a flat no, that if the MVNO wanted to provide broadly-based services to Canadians, he had no appetite to sit down with them.
7658 So as Bruce said, I think, you know, putting that mechanism in place is simply just putting a time plug in that's going to further delay getting to something that makes sense for the MVNO if there's a CRTC backstop.
7659 MR. KRSTAJIC: I think there was also -- I mean, we watched some of the hearings, a question asked about how many parties have they negotiated with for MVNOs, and I think the answer was 15 that they've been negotiating with.
7660 I can't remember which Commissioner was asking the questions.
7661 And then the follow-up question, which I thought was great, was just, "How many of the 15 have you negotiated a deal with?", and the answer was a big zero.
7662 There's no surprise. I mean, look, I'm probably going to lose a few more friends as a result of being here today that work at Rogers, Bell and Telus, if I still have any, but I remember when we launched Public Mobile and we thought -- in good faith, we thought, look, we're going after a different market. We're not going to sell Blackberries. We're not after the big data customers. We're going to the market you don't want to serve.
7663 I know you don't want to serve it because I worked with you guys.
7664 And so tower sharing was one of the things that was supposed to be done with commercial negotiations. And it's a big joke.
7665 We would come to them and we'd say, "Here are the towers we'd like to get on". They'd take the maximum number of days, they'd come back and they'd say, "Oh, Alek, here's the problem with that tower. First of all, you can't expect to go ahead of our future plans. And there's this thing, 5G, in about 10 years so we're going to need space for that".
7666 And so then they get you way down the tower where the tower's no longer feasible for a radio antenna and then they add one last piece, which is, "And the extra weight of your equipment now requires a full re-engineering, so that's another quarter of a million dollars".
7667 I mean, they make this thing -- it's a game to them in some ways and, in other ways, look, I have to also show some respect.
7668 They are really good at what they do. That's why there's no MVNOs in Canada. That's why there's no tower sharing.
7669 Look, they are -- this is the last jurisdiction where they haven't farmed out their towers.
7670 Towers are trading at multiples that it makes really good sense for their shareholders to divest themselves of towers. The reason they don't, it would open up competition, potentially. So it's another lever where they say facilities-based players won't be able to go to these towers because we control them.
7671 In the same way, commercial negotiations with a backstop, you're just buying yourself a headache. You're going to be arbitrating everything.
7672 COMMISSIONER MacDONALD: Okay. Thank you very much for your participation throughout this process and your comments today.
7673 Each of you bring a different perspective than perhaps we've heard from other parties, so it is appreciated. Thank you.
7674 MR. KRSTAJIC: Our pleasure. Thank you very much.
7675 THE CHAIRPERSON: Thank you.
7676 Maybe just one final question following on Commissioner MacDonald's discussion with you.
7677 How long do you think -- you talked about lengthy processes. How long do you think it would take us to get to your recommended conclusion?
7678 MR. KRSTAJIC: I have a habit of making things seem easier than they are, so I apologize in advance if that comes across here, but ---
7679 THE CHAIRPERSON: Well, you can assume it'll take us several months to render a decision this matter.
7680 MR. KRSTAJIC: Okay.
7681 THE CHAIRPERSON: And then you propose ---
7682 MR. KRSTAJIC: So we haven't convinced you, then.
7683 THE CHAIRPERSON: And then you propose another process ---
7684 MR. KRSTAJIC: No, I think you ---
7685 THE CHAIRPERSON: --- where we would ---
7686 MR. KRSTAJIC: So sir, look, I think it can -- look, I think you're going to take a few months to figure this out. I think on the heels of that, and maybe as part of that, you could ask all the parties that if you were going to licence one or multiple MVNOs some detailed analysis on what that transfer price should be.
7687 So I think you can do that in parallel. If you decide to then have an MVNO, that work has already been done and you can start to do that in parallel in terms of the analysis.
7688 I think the -- if you decide to go the route that we're suggesting and try to run a beauty contest to choose one, I think you have calls for applications on how this would all transpire and you could do that in parallel as well.
7689 You could say that over the next 90 days all interested applicants would put something forward and that might actually have an impact on your deliberations because you may look at some of these applicants and go, "Hadn't though of that. That's a really good idea".
7690 So look, if it were me, I'd probably say -- you know, I have this expression, "There's always a way".
7691 So run your process, but it doesn't have to be done in series. It can be done in parallel.
7692 Run three processes in parallel, the one you've got going right now, ask for applicants, and run a -- ask for submissions on what the transfer price should be.
7693 THE CHAIRPERSON: Thank you.
7694 Counsel, any questions?
7695 Then I thank you very much, as did Commissioner MacDonald, for taking the time to share your views with us. They're very informative.
7696 We'll take a break, returning at 2:15.
--- Upon recessing at 1:17 p.m./
L’audience est suspendue à 13h17
--- Upon resuming at 2:16 p.m./
L’audience est reprise à 14h16
7698 THE SECRETARY: A l'ordre, s'il vous plait.
7699 Good afternoon. We'll now hear the presentation of Mr. John Roman. You have 10 minutes.
7700 You may begin.
PRESENTATION / PRÉSENTATION
7701 MR. ROMAN: Welcome. Thank you.
7702 Mr. Chairman, Commissioners, CRTC Staff, thank you for allowing me to appear before you today.
7703 For years people have complained about prices in the Canadian telecommunications system. Some observers correctly argue that Canadian telecom prices are falling, but our prices remain high compared to international norms. Of course, consumers often complain when they hear about record profits of a company they pay monthly; that’s just human nature.
7704 But pricing isn’t the only issue faced the Commission that the Commission must consider here. So instead of delving into pricing, something you’ve already heard about at length, or other issues I’ve raised, I’d like to change the focus from whether MVNOs are good or bad, though I’ll be happy to answer questions on MVNOs later. Instead I’d like to focus on something of direct importance to the CRTC itself, your effective authority.
7705 The importance of this room, these hearings, and the authority vested in you by Parliament to decide such matters is beginning to be undermined, albeit not presently to the degree that it completely degrades the process. But, and it’s a significant "but", if this de facto regulatory sedition increases, our system of telecommunications regulation will be diminished.
7706 As I've mentioned in earlier submissions, there are foreign telecommunications services providing competitive services to people residing in Canada. These services do not appear currently to be subject to CRTC regulations, but they necessarily do make use of Canadian infrastructure.
7707 This isn’t something to be heralded as competition winning out but a failure of adaptation and a lack of foresight. Instead of Canadians guiding competition through their own regulatory tributary, competition has eroded our regulatory riverbanks and is starting to flood urban centres.
7708 Our domestic prices are too high and foreign competition, having seen an opportunity, has been able to burrow into the market with the promise of lower prices and/or better service offerings.
7709 The result is a two-tiered system that benefits not those playing by the rules, indeed, those not even governed by those rules, at the expense, not yet of Bell and Rogers, but at the expense of the Commission’s own regulatory authority, which is being flouted.
7710 I refuse to see this regulatory body as some scarecrow in a field of corn that acts more as an ornament than a protector.
7711 For decades, one of our system’s key tenets has been protection of the domestic market, but there comes a time when necessary protection can wilt into mere protectionism of domestic companies. Such misguided protectionism is inconsistent with the other statutory purposes delineated in section 7.
7712 Commissioners, the central issue isn't of MNVOs, really. It's not technology or competition, but about an underwhelming situation in the competitive market. Yes, prices have come down, but they’ve come down from being too high then to being too high now compared to international norms.
7713 This leaves us in a quandary. The problem isn’t only domestic competition; it's also international suppliers beginning to compete with Canada’s telecommunications providers. We regularly see reports of how much Canadian subscribers pay compared to international markets in France, Britain, Australia, et etcetera, and now some of that that competition is finding its way into Canada by the back door.
7714 Surely this requires that we analyze things from a new perspective. MVNOs are a domestic solution that would further isolate the Canadian market from the international market; in fact, just another Band-aid. They offer, at best, an inferior solution to a logical one; formally opening the market to international competition.
7715 International competition should not necessarily be viewed as a problem for a country that has free trade agreements in the works or already negotiated with various regions around the world. Indeed, given that the domestic market is relatively small, Canadian telecommunications companies should relish the opportunity to compete for a billion customers in Europe, for example.
7716 Why not consider letting Orange and Vodaphone into our market and, in reciprocity, Bell and Rogers into Europe?
7717 It would be reasonable to contend that since 2012, the CRTC has effectively employed and even prioritized section 7(d) of the Telecommunications Act, but there is a distinction between promotion of ownership by Canadians and foreign competition in the domestic market. Moreover, I question whether it's reasonable to assign section 7(d) pre-eminent importance over every other policy objectives of the Telecommunications Act in sections (a) through (h).
7718 Indeed, if seven policy objectives are collectively better served by opening up our market to foreign competition in addition to Canadian-owned services, it would seem only right to do so.
7719 This logic is supported by the findings in the Supreme Court case Canada v Vavilov paragraph 121, quote:
7720 "The Administrative decision maker’s task is to interpret the contested provision in a manner consistent with the text, context, and purpose, applying its particular insight into the statutory scheme at issue. It cannot adopt an interpretation it knows to be inferior - albeit plausible - merely because the interpretation in question appears to be available and expedient..."
7721 Let’s look at each of those three in turn; text, context and purpose.
7722 I would suggest that interpretation of the text, promotion of control of Canadian carriers, should not be misconstrued as prohibition against entry of foreign service. As long as the market has fostered and delivered healthy Canadian options, the legislative requirement for their "promotion" has clearly been met and interpretation of the text is satisfied.
7723 "Context" did not previously include foreign competition in the domestic market. That reality has, however, now altered so the context has necessarily changed and, therefore, interpretation should be re-examined.
7724 It could be argued that as long as the Canadians carriers were permitted market entry, our telecom system was intended to be a closed system. However, now that the original regulatory wall has been breached by advanced technology, great neon signs may be flashing to attract other would-be entrants. There's no way to know if the current trickle will become a torrent, but ignoring a leak never works out well.
7725 Finally, the "purpose". Although for decades there's been a wall around our fair market, the point of the policy was to protect domestic ownership of our home-grown Canadian carriers from foreign acquisition. That this automatically also precluded foreign entrants from competing in the Canadian marketplace was also a great boon to those carriers.
7726 Though the text would seem to imply differently, if we assume that the intent was to permanently prevent foreign competitors from entering the Canadian market, then it has failed in its purpose because it has been frustrated by a regulatory bypass, resulting in an inferior outcome.
7727 Ultimately, the Commission must determine what optimal outcomes it can -- that can result from this hearing. Despite protestations from the largest telecommunications providers, competition has been deemed to be insufficient to deliver a consumer-friendly market. MVNOs seek entry into the market, claiming their arrival will reduce consumer prices. That was not the lesson learned from the introduction of Wind Mobile.
7728 Moreover, your regulatory authority is being bypassed by foreign entrants harnessing new technology that was created long after the Telecommunications Act was written. The conclusion one should draw adds up to but one option. The Canadian telecommunications' regulator should act to allow controlled access by foreign entrants into the domestic market.
7729 De minimis non curat lex: the law is not concerned with trifles. In 2014 I appeared at the Let's Talk TV hearing and predicted what would happen to Canada's broadcasting sector, and more particularly the CBC. Sadly, time has supported my predictions. I come before you today to warn even earlier of a problem in the offing. We have seen how the trifles of today can become the tragedies of tomorrow, and I hope that this time the CRTC will take a proactive stance.
7730 If the Commission decides it has the authority to make such a determination, this could be done after a three to five-year lead up time through wholesale rental of spectrum and/or network access, which would continue to protect the principle of control of Canadian airwaves by Canadians while supporting our telecoms' transition into a more dynamic and competitive marketplace.
7731 If, on the other hand, the CRTC is convinced it lacks the authority to make this decision on its own, I suggest that the Commission either request the powers to be delegated by the Government of Canada or that the situation be remedied as part of the anticipated revisions to Canada's telecommunications legislation.
7732 Thank you for your time.
7733 THE CHAIRPERSON: Thank you.
7734 Commissioner Levy?
7735 COMMISSIONER LEVY: Good afternoon. Just a quick question for you ---
7736 MR. ROMAN: Sure.
7737 COMMISSIONER LEVY: --- in terms of your background in the field. Can you tell me a little bit about where you ---
7738 MR. ROMAN: Sure.
7739 COMMISSIONER LEVY: --- got your experience?
7740 MR. ROMAN: I was actually asked that question back in 2014, exact same question. I grew up in this field. My father started PIACC a number of years ago, and my mother was also involved on the broadcast side, so I grew up around, you know, with this around the kitchen table. I couldn't avoid it if I wanted to. And after going to law school, I found this was something I was drawn to.
7741 COMMISSIONER LEVY: Excuse me. In your submission posted in November, you indicated that while the new unlimited mobile wireless offering may be viewed as an improvement, the ones that were introduced last summer, these new offerings still fail to compare favourably to plans offered by other foreign wireless carriers, such as T-Mobile in America or Optus in Australia.
7742 Can you explain why?
7743 MR. ROMAN: I had a graph in the form there that I don't have in front of me, but I'll endeavour to do my best.
7744 So, for years, I believe it was even at the 2016 hearings and the 2017 hearings I appeared at, Bell and Rogers all said, "We have a different market". We weren't doing -- we were not doing unlimited. We were just doing Canada's market just to build up, where you pay for what you get, and you have the best networks in the world. Now, I think they're right about that, but at the same time, you pay for what you use, and it might be expensive.
7745 And then as a result they'd said, "You can't compare apples to oranges. We cannot compare the Canadian markets and our infrastructure system and how we pay for it compared to, say, Australia, or Europe, or America". And recently, in -- with Shaw coming in, taking over Wind, bringing in Freedom, we have a system where now is an apples-to-apples comparison. So, we're seeing that the family plans are not necessarily better compared to some of the American options.
7746 Now, are the proposals great in rural Canada? No, they're admittedly not where they need to be yet, but in urban centres we're seeing that a family plan for four is very different from what you can get as a family plan for four from Bell, or Rogers, or TELUS.
7747 COMMISSIONER LEVY: You point to lack of capacity as a reason for data overage charges and suggest that this means it's unlikely there's much spare capacity for MVNOs to use. Is that still your position?
7748 MR. ROMAN: That was an argument made in 2016/2017. They were saying, look, we have a problem with capacity. We're trying to build out an advance, and that's fair enough, but that this is one of the reasons prices were high intrinsically because they had to have plans that would restrict use because otherwise bandwidth would just be unavailable. I take commuter trains sometimes in Toronto, and packed into a sardine can of a commuter train, there are times when my data just doesn't work, just because there's so many people trying to access the network at one time. So, I'm sympathetic to that argument; however, there comes a point beyond which where you have to have saturation of access, where in theory you've got enough infrastructure built up so that you can provide sufficient coverage.
7749 COMMISSIONER LEVY: Excuse me. So, in light of the introduction of all these plans ---
7750 MR. ROMAN: Right.
7751 COMMISSIONER LEVY: --- for unlimited ---
7752 MR. ROMAN: Yeah.
7753 COMMISSIONER LEVY: --- is it still true that there's a limit on the capacity, or there is too small a supply?
7754 MR. ROMAN: Right. And that's an excellent question to ask, but I don't think I'm the right person to have the answer for that question. I would say that if the arguments were a couple years ago still hold, then that would be intrinsically, no, they would not -- or the argument would still hold and then they could not have space for MVNOs.
7755 If, on the other hand, now they've built up sufficient infrastructure to allow for MVNOs, great, but then alternatively, they could also just offer less price for a gig of data. So, that would have been an alternative as well, if they wanted to be competitive that way.
7756 COMMISSIONER LEVY: Could you expand on your opinion that full MVNOs would be the obvious choice if the Commission were to mandate wholesale MVNO access? So, why would this model be more obvious than a model that leveraged the facilities-based carriers at the regional level, for instance?
7757 MR. ROMAN: I'm going to have to circle back to that at a later point. I haven't had a chance to review the MVNOs as of late, but I think what I was trying to say is a model that they have to build up some infrastructure as opposed to being, for lack of a better term, opportunists, of just being able to jump into the market with no infrastructure or no requirements to come in, aside from just showing up with a contract. They have to contribute something to the market, more or less was what I was trying to get at.
7758 COMMISSIONER LEVY: And you have suggested that the issue of MVNO access opens up opportunities to allow in foreign MVNOs, so I take it that you don't share some of the concerns we've heard that have been raised by some with respect to entry by well-capitalised companies as MVNOs?
7759 MR. ROMAN: Intrinsically I'm inclined not to be a big fan of MVNOs in general in this -- for this process. I see this as -- the Commission has sort of hemmed themselves in, and I don't mean you directly, but over a period of time, to say that you've wanted to have a fourth competitor, and a fourth competitor -- and reasonable competitors are now in the marketplace, so what is a reasonable amount of time to let that system flourish -- to allow that competition to grow. I'm not saying I have the right answer to that, but it's something to be determined.
7760 I think Commissioner MacDonald said earlier today that if not now, then when is the right time to intervene, and maybe that's a fair point. I'm not saying that it is, or it isn't, but if you're going to allow competition to operate completely, then should we not allow Shaw more time to grow into its market capitalisation, why is now the time?
7761 So, I would say it's either a four competitor and regional marketplace, or it is a -- we might as well open up the market in its entirety. Either/or seems a more prudent option.
7762 COMMISSIONER LEVY: Okay. Just a couple more questions. In your submission today you talked -- you said that we see reports of how Canadian subscribers pay compared to international markets, and then you say, "And now some of that competition is finding its way into Canada by the back door".
7763 MR. ROMAN: M'hm.
7764 COMMISSIONER LEVY: Would you like to elaborate on what you mean by ---
7765 MR. ROMAN: Sure.
7766 COMMISSIONER LEVY: --- by the back door?
7767 MR. ROMAN: Sure.
7768 COMMISSIONER LEVY: So, from people I've talked to who don't work in this industry, they've said -- many people who have dual citizenship, they'll say, "Okay, well, you know, I have a family member in America, or I have dual citizenship. I'm just going to get an American plan and I'll bring it here". Or a student studying abroad coming to Canada from Europe or from Asia will say, "I can use a residence there as my point of access for phone line. There's no point in me getting a Canadian phone plan here when it will cost more, and the coverage I get here through reciprocity of a local carrier to get coverage in Europe or Asia allows for 8 to 10 gigs here at a lower price effectively". So, at that point it's sort of -- it's a work around of the system that wasn't intended and probably wasn't foreseen, but it's happening.
7769 COMMISSIONER LEVY: So, this is anecdotal. It's -- you don't have any ---
7770 MR. ROMAN: No.
7771 COMMISSIONER LEVY: --- facts to back that up?
7772 MR. ROMAN: No, this is just what I've ---
7773 COMMISSIONER LEVY: Okay. Thank you.
7774 MR. ROMAN: --- I've been told, and why I wanted to raise it early, so that there could be an approach taken in case it needed to be resolved.
7775 COMMISSIONER LEVY: Okay. I think that that covers all of my questions. Thank you very much.
7776 THE CHAIRPERSON: Thank you. Maybe one quick question from me, maybe by way of summary.
7777 So in a perfect world, what would you prefer to see, how would you prefer to see the market in Canada evolve right now? Would you prefer to see large U.S. mobile companies come to Canada? See the government change the foreign ownership rules? See MVNOs -- a full MVNO made available in Canada restricted to Canadians or perhaps not? What's your -- what is your bottom-line? I'm struggling to sort of fathom what you think is the best solution.
7778 MR. ROMAN: Sure. I feel that I've just been given the golden goose of everyone who would want that question.
7779 THE CHAIRPERSON: As long as the goose doesn't take too long to answer.
7780 MR. ROMAN: So in the international business world that Canada sees itself in, we see a number of people going abroad. It makes sense for us to have Canadian networks who are operating in say Europe or South America where businesses are operating from Canada but businessmen and women are still going there. Similarly, the Vodaphone network, or any other, Orange, doesn't matter whom, it would make sense for them to be able to have reciprocity here.
7781 As to changing the foreign ownership rules, I'm not sure how much of the foreign ownership rules need to be rewritten as opposed to reinterpreted. I think it was section 16, and I could be wrong, I'm just not going to stare down and trying to be quick here, but I think that it allows for a situation where we can have foreign entrance into the market, it just has to be done through the right way, and through a reinterpretation of what we're trying to have as an outcome.
7782 To that end, I'd love it as a hypothetical if we could have Canadian carriers offering services much like how TD has expanded into the United States, and in a similar capacity, if we would have competitors who want to come into the Canadian market, great.
7783 I don't see that MVNOs, whether Canadian or foreign-owned, will necessarily be as successful as -- I think it was Mr. Bibic said -- portfolio-based companies. It will be not an automatic uphill transition that will be very difficult, if at all possible.
7784 The intervenors who came before me said they wanted to have one MVNO come in. I was sincerely hoping that that was an option that was available. When I looked over the Telecommunications Act it didn't look like that was easily -- and that would also require a reinterpretation of the Act. So if we're talking about reinterpretations of the existing Telecommunications Act, I'd say opening up the market to increased competition is probably beneficial, and since everyone seems to compare to the international market why not let the international market in to really see what was available.
7785 THE CHAIRPERSON: Thank you.
7786 MR. ROMAN: Thank you.
7787 THE CHAIRPERSON: And thank you for taking the time to share your views with us.
7788 Madame la Secrétaire?
7789 THE SECRETARY: Merci. I will now ask the Canadian Communications Systems Alliance to come to the presentation table.
7790 (SHORT PAUSE/COURTE PAUSE)
7791 THE SECRETARY: Please introduce yourself when you are ready, and you may begin.
PRESENTATION / PRÉSENTATION
7792 MR. THOMSON: Good afternoon Mr. Chair, Madam Vice-Chair and Commissioners. I am Jay Thomson, CEO of the Canadian Communication Systems Alliance. With me, starting from my immediate right, are Chris Edwards, Vice-President, Regulatory Affairs at CCSA; Carmela Haines, COO of Access Communications based in Regina; and Stéphane Arseneau, Directeur général de CCAP based in Québec.
7793 CCSA speaks for independent TSPs who serve Canadians from sea to sea to sea. In many rural and remote markets, CCSA members are the only competitors to a single large incumbent. The services they provide are vital to the communities in which they live and work.
7794 The inability of CCSA's members to offer mobile service to their customers has been a long-standing challenge for those companies. It prevents them from offering a quad play that Canadians demand as mobile devices become more capable and ubiquitous. It limits the choice and price benefits available to the Canadians they serve.
7795 CCSA's members cannot offer mobile services because, despite years of trying, the incumbents are unwilling to provide our members with any form of wholesale access to the incumbents' wireless networks.
7796 Rules that support MVNOs can only assist in delivering choice and competitive benefits to all Canadians, regardless of where they live and work. CCSA strongly supports the Commission's preliminary view that MVNO access should be mandated.
7797 Our members have two primary interests in this matter: first, if the cost and conditions of wholesale access are reasonable, our larger members will make the investments necessary to turn up service as full MVNOs in their markets; and, second, our smaller members will operate as lighter MVNOs if they can purchase the wholesale services they require to serve their communities.
7798 The resistance of the national carriers to mandated access is in direct opposition to Canada's policy framework for the provision of affordable communications services to all Canadians. The Commission has stated that it:
7799 "...fully supports a vibrant and diverse competitive landscape that includes a mix of facilities-based competitors and resellers".
7800 The Government's 2019 Policy Direction states that the Commission's regulatory framework should:
7801 "...encourage all forms of competition and investment [and] reduce barriers to entry into the market [for TSPs that are] new, regional or smaller".
7802 To support those policy objectives, we recommend a regulatory framework which: mandates access by full MVNOs, as defined by the Commission; sets tariffed rates and terms for wholesale access; establishes standard agreements for wholesale access; and permits resale of access by Full MVNOs.
7803 We also recommend that SaskTel be mandated to provide wholesale access to its network. Mandated access to the RANs of the national MNOs is not sufficient to support MVNO entry in Saskatchewan, where SaskTel owns the majority of the wireless network facilities.
7804 MS. HAINES: Access Communications Co‑operative Limited was originally formed in 1974. because we are structured as a not-for-profit service co‑operative, we re-invest 100 percent of our earnings into the communities we are privileged to serve.
7805 Access provides over 230 communities with broadband Internet, TV, telephony, and security monitoring. In addition, we serve over 160,000 square kilometres with our fixed wireless broadband Internet service, bringing connectivity to farms and businesses, cottages, and homes in rural Saskatchewan.
7806 We get constant requests every year from customers who wish to have their cellular service with Access Communications. Our customers want choice, more competitive prices, and the benefits of bundling their cellular service with us.
7807 A co‑operative our size cannot build a network to offer cellular services. However, we are very interested in the possibility of offering cellular service as soon as possible and growing toward operation as a full MVNO.
7808 Today, the CRTC has two frameworks in place, one for wired telephony and TPIA for Internet. Both of these frameworks have allowed for more players, more competition, and more choice for consumers. We encourage the CRTC to put a wholesale framework in place for cellular service that achieves those same objectives.
7809 We want to enter the market as quickly as possible for our customers. Therefore, we need the ability to launch, initially, as a light or partial MVNO, to gain experience and to move towards being a full MVNO. Being a full MVNO will provide us with the ability to operate with the largest degree of autonomy with responsibility for all aspects of the operations of our network except for the RAN. That is, after all, how we successfully launched wired telephony service; initially light and then full service. As a result, we provided Saskatchewan consumers with much needed choice.
7810 Access urges the Commission to follow its two proven successful models for opening up competition in wired telephony and internet access.
7811 Access also urges the CRTC to mandate SaskTel, in addition to the large three MNOs, to provide tariffed RAN access. Without access to SaskTel’s RAN, we will not be able to provide cellular service to all of our customers.
7812 MR. Arseneau: CCAP has been serving communities in the area north of Quebec City for 35 years now. Very few privately-owned companies have considered providing service to many parts of that area.
7813 Some parts of our service area are so remote that no wireless service is available. We are installing Wi-Fi access points to strategically chosen locations in order to provide basic Wi-Fi telephony to the population in case of emergencies.
7814 Our cooperative serves 18,000 members over 22,000 homes passed. Our members take any combination of our three services; Internet, television and IP telephony.
7815 None of the major wireless companies or their flanker brands has a point of sale in our service area. We have been a sales agent for Videotron’s branded mobile service for close to 10 years now, and are the only point of sale for Videotron in our footprint.
7816 Today, our main competitor is Bell. Only Bell is able to offer quad play service in our footprint. Our goal is to be able to offer that quad play to our members as well.
7817 Many of our members want to have one bill for their main telecom products and to be able to take advantage of multi-service savings.
7818 We want to be able to offer these benefits to our customers as a mobile wireless re-seller using the services of a willing MVNO partner. We urge the Commission to establish a competitive framework which allows us to do just that.
7819 MR. EDWARDS: One issue in this proceeding is the question of whether opening of competition to MVNOs will chill mobile network investment by the MNOs.
7820 An effective opening of competition in the mobile wireless sector is a rational next step in the decades-long process of opening up competition in the provision of telecommunications services. Despite the repeated warnings of dire consequences by the incumbents at virtually every stage of that process, the results --increased choice and affordability of services -- have been good for Canadians.
7821 There is a more positive way to look at this matter. Many customers want all of their telecom services from a single provider. The ability to offer mobile wireless service as part of a “quad play” offering to their customers will help smaller TSPs satisfy this demand. This in turn means an improved ability to invest in their terrestrial broadband networks.
7822 The incumbents argue that investment in wired broadband facilities has nothing to do with investment in mobile networks, especially 5G. That is too narrow a view.
7823 Canada’s over-arching goal is to connect all Canadians with broadband service; 5G is but one part of the response to that objective.
7824 Fibre networks are critical infrastructure needed for the deployment of 5G service. At first, 5G will be an urban solution. It will remain that way until fibre networks are driven deeply enough out from the urban centres to support 5G deployment in less populated markets.
7825 Opening of MVNO competition in a way that enables independent TSPs to offer mobile wireless service will increase demand for wired broadband connectivity. It will enhance those TSPs’ ability to invest in extension and improvement of their wired backhaul and last mile networks.
7826 Ultimately, such investment will support the extension of 5G to Canadians in all parts of the country.
7827 MR. THOMSON: There is a wealth of evidence on the record of this proceeding to the effect that, “certain aspects of this market are not, in fact, sufficiently competitive in their current state to properly protect the interests of users”.
7828 To date, competition in the mobile wireless sector has failed to create a “vibrant and diverse competitive landscape”.
7829 We ask that both the incumbent national MNOs and SaskTel be mandated to provide RAN access at tariffed rates and terms, buttressed by use of a standard industry agreement for the provision of such service.
7830 We also ask that the tariffed provision of RAN access expressly permit resale of such access by MVNOs.
7831 That’s our presentation.
7832 Thank you very much for your time and attention. We’d be happy to answer your questions.
7833 THE CHAIRPERSON: Thank you. Thank you very much for your presentation.
7834 Let me begin, perhaps.
7835 Mr. Thomson, you just -- in, I guess, paragraph 37 you just made the point in your view there's a wealth of evidence on the record demonstrating that the market’s not sufficiently competitive and that we lack a vibrant and diverse competitive landscape. I assume you’ve been following the proceeding and you will no doubt have noted that a number of parties, including yourselves in your May submission, submit that retail wireless rates are higher than rates for similar services in other countries. If you’ve been listening to the proceeding you will have heard, in particular, the national MNOs we’ve heard from thus far questioning the relevance of some of those international comparisons and even the validity.
7836 Given what you’ve heard to this point -- or let me rephrase it. Is there anything that you’ve heard that changes your view on that particular point?
7837 MR. THOMSON: The short answer is no, Mr. Chair.
7838 THE CHAIRPERSON: Fair enough. Short answers are sometimes sufficient.
7839 There has, however, been a fairly significant change in the market since your May evidence, and that would be the introduction of the -- well, sometimes we refer to them as unlimited or -- we’ll call it unlimited -- for the moment -- plans by the national MNOs which started in June. Certainly there’s been some discussion about how significant a development the introduction of those plans are. Do you have a view on that?
7840 MR. THOMSON: Those of us who are paying for the mobile services that our children use, I certainly welcome them.
7841 THE CHAIRPERSON: Which is most of us, I assume.
7842 MR. THOMSON: Yes. I certainly welcome those unlimited plans, and I understand that they have become quite popular.
7843 I also heard discussion earlier in this proceeding that they’re not as significant a competitive addition to the marketplace as maybe some might think they are, just given the limitations on bandwidth that are tied into the unlimited plans.
7844 But that being said, it’s certainly a step in the right direction. We welcome, as consumers, any new plans that are consumer friendly. But in itself -- also combined with price drops that have arguably occurred -- it’s still not enough, in our minds.
7845 And perhaps some of my panel colleagues could speak to that.
7846 MR. EDWARDS: I think I would just add that we haven’t seen evidence of which I’m aware that introduction of those plans has fundamentally altered the competitive landscape, in terms of market share and subscribership, across the industry. And, you know, certainly our understanding is that the three incumbents still have well over 90 percent of market share in the business. And I guess we listened to the presenter one before the one that just appeared and we didn’t hear much that we disagreed with in his assessment of the existing market.
7847 THE CHAIRPERSON: Thank you. So you obviously support the introduction of wholesale MVNO access. What impact do you see that as bringing to address the concerns you’ve just described in the marketplace?
7848 MR. THOMSON: I think this would be a great opportunity for some of our members to weigh in because they’ll be in the marketplace themselves.
7849 MS. HAINES: Well, for Access Communications, we would love to be able to be in this marketplace. It would provide our customers a quad play. There's many communities -- we service over 90-plus rural communities, of which we’re the only ones that provide TV and Internet. If we were able to provide cellular, we’d also be able to provide another option for these customers as well as with a price reduction and they would have promo savings.
7850 THE CHAIRPERSON: Thank you.
7851 MR. ARSENEAU: Maybe I can add, when I think about competition, to me, I’m looking a little forward, later on a longer term. In my mind, if 5G is only half of what it promises, companies like ours are going to have a hard time to stay competitive on the other services we offer. What we’re asking right now is to have a chance to have access to that new -- to this mobile service and be able to compete on the mobile service, but also on the broadband, television, and landline telephone that we already offer.
7852 THE CHAIRPERSON: And I assume from the references you’ve made to 5G that you believe any MVNO arrangement should include access to 5G services?
7853 MR. EDWARDS: Yes. We don’t think it should be restricted by technology.
7854 Just to follow up on what Stéphane was saying, what our members perceive is that this industry is moving to a place where all of the providers will essentially be offering a broadband service over a combination of fibre and wireless, and 5G holds the promise of some really fine broadband capability within that context. So given that context, we’re in a situation where government and the Commission are looking at, how do we connect all Canadians?
7855 And it’s within that context of the fibre -- combination of fibre and radio that that is going to happen. And our members are looking and saying, how can we continue to play a role in this? But what we’re looking at, from CCSA’s perspective, is we probably have 100 plus companies who are itching to offer a wireless service to their customers as part of a full bundle of services, and as players in that new technological environment. They want to get started as soon as they can.
7856 And on the other hand, weighed against that is their inability to participate in the technology in the market, and we find that very hard to square with meeting the objective of connecting all Canadians, especially in the rural and remote markets that so many of our members serve.
7857 THE CHAIRPERSON: But you’d agree with me that the 5G plans are still at a relatively early stage, and you’ve proposed a network evolution as between them and how they together will provide a new ubiquitous form of broadband certainly isn’t clear to me at least. But you’ve suggested that we have a tariff establishing terms and conditions for the MVNO.
7858 How would -- how do we deal with 5G when we don’t even know what it looks like yet, or the costs are?
7859 MR. EDWARDS: Yeah, I would accept that concern and in discussions we’ve had around the table, LTE is the place to go right now, because that’s what’s available, I think. But what -- our statement would be that, as the technology evolves and as the tariff evolves along with it, that would be captured at some point. The point for us is not to be shut out of the availability of that technology when it’s there and ready.
7860 THE CHAIRPERSON: And could you not -- assuming that the industry department makes spectrum available, perhaps in a different way, smaller scale, smaller tiers, is that something that would interest your members obtaining spectrum and building up for themselves?
7861 MR. EDWARDS: For some members, yes. I think that would be very much of interest and you know, the tier 5 subdivisions, we have yet to see whether that will be affordable at the sorts of scales that our members operated, even the larger members like Access. We’ll have to see what that is. I’m very interested. I’ve been watching the American Citizen’s Band Radio Shared Spectrum model, and we’ve also suggested to -- I’ve said possible sharing models other than that. Spectrum is a service. Those sorts of things.
7862 So we are very interested in exploring ways that our members can get spectrum that they can use themselves. Then you follow on with whole question of, how do you build the facility -- the other facilities of our RAN? Obviously, a very expensive proposition. But yes, the members are very interested in acquiring spectrum and deploying that.
7863 THE CHAIRPERSON: Thank you. Paragraph 4 of your submission, you note that despite years of trying, incumbent are unwilling to provide your members with any form of wholesale access. And again, earlier last week, Distributel indicated that it had -- it too had attempted to negotiate MVNO arrangements, but the MNOs in their view, were not interested to negotiate such an arrangement.
7864 Can you just tell me a little more about your member’s attempts to negotiate an arrangement?
7865 MR. THOMSON: Back in 2014 for the previous proceeding that looked at this issue, we provided evidence as to the attempts that our members had made to connect with the MNOs and to start negotiations on MVNO access and the failures that transpired, as a result they got nowhere. Since that time, it’s been clear that they’re still not going to get anywhere as a -- so nothing has changed in that respect. And to our knowledge, our members have not renewed those attempts to try to negotiate because they already see the writing on the wall.
7866 MR. EDWARDS: If I could just add, as CCSA, since the last time we appeared, and we gave you evidence as -- in response to an undertaking we took at that 2014 hearing. So that’s on the record. We can provide it if you wish it. So that was everything up to the time of that hearing that we discussed as CCSA.
7867 THE CHAIRPERSON: I meant more recently as opposed to 2014.
7868 MR. EDWARDS: Right. So as CCSA, since that time, we really haven’t reengaged those discussions. I do believe a couple of our members continue a dialogue with some of the MNOs. I’m thinking of Novus Entertainment, and I think Access has probably had some discussion as well, but it hasn’t -- from a CCSA point of view, it hasn’t been something we’ve organized.
7869 MR. ARSENEAU: Maybe I can add, if you wish, if I can?
7870 As I stated in my oral remark, initial remark, we’ve been an agent, or a point of sale for Videotron for close to 10 years now and it was a way for us to have a foot in the door, and maybe be ready whenever they’d be ready to open up and maybe offer us the possibility of reselling their service and bill the customers on our own. But since then there’s always been excuses, we’re not ready, let us start, let us -- we’re not there yet. And today it’s still the same answer.
7871 THE CHAIRPERSON: Thank you. Just returning to the -- I guess the 5G deployment issue and investment in rural areas, more generally. I mean, one of the challenges is building out RAN networks and in rural areas. Can you tell me how extending MVNO to your membership helps stimulate investment that’s already challenged in rural areas?
7872 MR. EDWARDS: So -- so just to clarify our starting premise. We see two cases. One of them in which a few members who may have the scale would actually develop from initial entry as a reseller or lighter form of MVNO to a full MVNO operation, having built the RAN. So in Access’ case for instance, that might take the shape of rolling that network out into rural parts of Saskatchewan.
7873 The other premise from which we proceed is that we see a need to have partners, full MVNO partners, in the field, from whom our members could purchase wholesale services. And so, we see that as a way for some of the smaller members, in particular, to at least get into the game of offering wireless.
7874 Now, as far as investment in 5G networks, don’t know if those people would ever get there. That’s a big proposition. But Stéphane, you were making some remarks about how you might deal with 5G in your market, I think? No. Okay, I thought it ---
7875 THE CHAIRPERSON: But still, I guess I’m trying to focus on the actual deployment of further facilities, whether it’s a -- you’re obtaining it from an MVNO, or you’re turning it from -- obtaining it from one of the national carriers. One of the challenges is continuing to extend service in rural areas. And I’m just trying to get my -- just trying to get my head around how your members, making use of MVNOs is going to help ensure there is sufficient investment in rural facilities.
7876 MS. HAINES: Well, Access, we have invested in rural communities and we continue to invest in rural communities. We have services now -- I know it’s different product line, but in our T.V. it is just as good a quality as the packaging and pricing that we have in Regina. And we intend to do the same thing in regards to if we got cellular is to provide these rural communities with the same level of service, but for us to do that we're going to have to get onto the RAN of SaskTel.
7877 THE CHAIRPERSON: Okay. Thank you. Just changing subjects a little bit.
7878 You've probably heard quite a bit of our discussions about low‑cost plans. What measures do you envisage -- what measures do your members envisage taking in terms of making available more affordable service to low‑cost -- low‑cost services to low‑income Canadians?
7879 MR. EDWARDS: Maybe I'll start this one and then let the individual members comment.
7880 But I -- we're a cable organization originally. I extrapolate from our experience in TV first. When Skinny basic came out, our members, who as a general proposition tend to serve a rural more senior very cost sensitive demographic, jumped all over the opportunity to offer Skinny basic at a low price to their customers, and used it as a -- an element of their competitive advantage and their relationship with their customers.
7881 And I would expect to see the same thing in the wireless services. It is a price-sensitive demographic, and our members are very highly attuned to that.
7882 MS. HAINES: Well, in regards to us, like I mean, we just had to offer Skinny basic in our licence system in Regina, but we offer it in all of our systems across the province, a Skinny basic.
7883 And in regards to the connected families, we weren't part of it initially, we weren't asked, but as soon as we found out about it we got ourselves onboard and we also offer that service as well to all our customers that are eligible for it.
7884 MR. ARSENEAU: So I echo that. On the Skinny basic, we're not mandated to do so but we chose to do it nonetheless to stay competitive. On the connect Canadians, we chose to step onboard as well. We also, on the telephony side introduced maybe a year ago a plan that's $10 tax included. So I chose that small players can do the necessary work to help low‑income families.
7885 THE CHAIRPERSON: Thank you. Changing subjects somewhat. Again, if you're following the proceeding you will have heard several of the discussions we've had about the model put forward by the Competition Bureau. What are your general views about that model?
7886 MR. THOMSON: Well, the starting point is that the Bureau's model relies entirely on the regionals as the form of competition, which is entirely contrary to the position we're putting forward is that our members should have the opportunity to provide a competitive service, and in doing so, would generate the benefits for Canadians through the bundling opportunities and through other means of addressing pricing needs, packaging needs, and so on.
7887 THE CHAIRPERSON: But it would extend to anyone who obtains spectrum. So if your members are interested in -- if some of your members are interested in obtaining spectrum, would that not be relevant for them?
7888 MR. THOMSON: Notwithstanding the intertest in obtaining spectrum through the possibility of the new Tier 5 areas. As Chris said, that is still something that is unknown right now in terms of how that's going to rollout and the costs associated with it.
7889 Up 'til now our members have not been in a position to afford spectrum, and we don't anticipate that that would change going forward unless those Tier 5 roles are particularly favourable.
7890 THE CHAIRPERSON: So you don't think the Bureau's proposal on its own would stimulate or increase interest on the part of your members in obtaining spectrum?
7891 MR. THOMSON: No.
7892 THE CHAIRPERSON: What about if that model were expanded such that the regional -- if you took the Bureau's model and expanded it such that they were able to act as an MVNO outside of their licence territories, does that seem more attractive to you and your members, recognizing it's not the same as your position?
7893 MR. EDWARDS: I think going back to the premise I articulated a few minutes ago that one of the primary aims of our members is to find partners from whom they can -- or with whom they can engage to provide wireless services, yeah, that would be a more attractive proposition.
7894 THE CHAIRPERSON: And this may be a little far afield given where your members are in terms of spectrum, but on the Bureau's model would you have a concern with a situation where someone obtains a minimal amount of spectrum and puts up one tower, and then has access, for example, with an MVNO nationally or regionally, is that something that you think would be appropriate or something that you think the Commission would have to put limits on? Do you have any views on that?
7895 MR. THOMSON: It's certainly not a scenario that we've contemplated or had an opportunity to discuss. So I would hesitate to ---
7896 THE CHAIRPERSON: Fair enough.
7897 MR. THOMSON: --- jump in.
7898 THE CHAIRPERSON: If we are to go ahead with MVNOs, let's say full MVNOs for the moment, do you think it's necessary to add any eligibility criteria or restrictions? Again, something you've no doubt heard us ask a number of parties.
7899 MR. THOMSON: Beyond the definition of the full MVNO, we don't propose any eligibility restrictions.
7900 THE CHAIRPERSON: No concerns about, for example, foreign, large, well-financed players coming into the market?
7901 MR. THOMSON: We haven't proposed any restrictions on those players entering the market. We're focused primarily on opportunities for our members.
7902 THE CHAIRPERSON: Fair enough. Thank you.
7903 Going to the tariff that you propose for a second. What terms and conditions are you thinking that are required to support MVNO access besides the rate?
7904 MR. EDWARDS: I guess the fundamental prospect is access to the RAN at a just and reasonable rate, I guess if we can put it that way. Certainly in our May -- in our earlier submissions we have talked about some of the functionality that may also be required in terms of handsets are obviously a concern to us, so some requirement to, beyond an initial exclusivity period, provide handsets on an equitable basis.
7905 Off tariff, I thnk similar to what ITPA has been talking about, we'd want the ability to secure other related -- wholesale services related to the RAN from the MNOs, but I don't think that's tariffed. I think fundamentally what we're looking for is access to the RAN at tariffed rates.
7906 THE CHAIRPERSON: And what would your starting point be? Would it be the current roaming tariff?
7907 MR. EDWARDS: We've had a fair bit of discussion about that. We had been thinking that what -- one of the concerns that our members would have is that in order to go forward with the investment in building what has to be built here you require certainty as to rates. And so when we had thought about interim rates based on a roaming tariff we were concerned with the uncertainty and that people won't invest until they actually know what they're going to have to pay.
7908 Having said that, we listened to the presented too before us about the question of the retail minus model, and we had tended to stay clear of that for reasons of its potential complexity, but in the way it was described half an hour, and hour ago, if there was a way to do it simply and quickly, based on a national bottom-line rate, that could be an attractive way to proceed.
7909 THE CHAIRPERSON: And do you have a proposal for how we can do it simply and quickly?
7910 MR. EDWARDS: I'll leave it to the guys who suggested it.
7911 THE CHAIRPERSON: I'm all ears.
7912 MR. EDWARDS: I have nothing more to add beyond what those presenters said.
7913 THE CHAIRPERSON: What about retail minus? You heard our discussions, I assume today, and last week. What do you think of retail minus as a possible approach to setting those rates?
7914 MR. EDWARDS: I think that was the point I was just making, actually, is that if it's possible to do it simply it's actually quite attractive for us.
7915 THE CHAIRPERSON: But one, but you're one, and any details as to what rate we use?
7916 MR. EDWARDS: Well, and this is probably the difficult part of it, is it’s not necessarily the lowest posted marketed rate. It might be the lowest rate that’s actually given to customers.
7917 Then you run into questions of how do you find that out and how do you use that in a public way that you can establish in a tariff?
7918 So that might get a bit complex.
7919 But a single rate as a benchmark, makes a certain amount of sense to us.
7920 THE CHAIRPERSON: You suggested that both tariffs and standard form agreements are necessary. Is that correct?
7921 MR. EDWARDS: So our concern here, the MNOs and the regionala actually have taken the position that access should simply be a commercial negotiation.
7922 We’ve obviously suggested there needs to be a tariff backstop to that.
7923 We have a lot of experience on the broadcast side with dispute resolution and arbitration. And we know that as smaller players, that’s a very difficult place to be when you’re arrayed against the power of the national incumbents.
7924 And so we think that much as the MALI does in the wired telephone environment today, a standard industry agreement that sets out the default terms for interconnection would be a very useful tool, and in the event that we could not negotiate, and we expect that we will have a very, very difficult time of negotiating terms with the MNOs, if at all, that the ability to revert to an agreed standard industry agreement would be a very powerful tool.
7925 THE CHAIRPERSON: Sorry, I think I’m missing something. If we have a tariff and we have terms and conditions set out in the tariff, what’s in the agreement that’s distinct from the tariff?
7926 MR. EDWARDS: It might be some of those other non-tariffed services that go with the bare RAN access.
7927 THE CHAIRPERSON: Can you give me an example?
7928 MR. EDWARDS: SIM cards, handsets. Those sorts of things.
7929 THE CHAIRPERSON: Okay. Thank you.
7930 MR. EDWARDS: And also methods of attachment. I think most of that would be in the tariff itself. So maybe I’m misspeaking here.
7931 THE CHAIRPERSON: You’re talking about attachment to support structures?
7932 MR. EDWARDS: Or interconnection to the facilities itself. That would be part of the tariff.
7933 THE CHAIRPERSON: Okay. Thank you. You proposed that in addition to the Big 3, the MVNO requirement would also apply to SaskTel, your submission is because it has the most extensive coverage in Saskatchewan.
7934 But isn’t the issue as to whether or not they have market power? I have not heard much discussion thus far that SaskTel has market power.
7935 Can you tell me on what basis we would make that determination?
7936 MR. EDWARDS: I was reading and I think it’s in -- I’m trying to remember the reference, that SaskTel does in fact have 60 percent market share, and that does meet the test for the Bureau’s review threshold.
7937 So perhaps that’s the answer to the market share part.
7938 In practical terms, if I was to look at it as access communications, I would say, “If I’m going to get into this business, how do I actually get to the facilities?”
7939 And we understood Telus earlier in the week to say they did not have the ability to provide MNO access under their agreements with SaskTel. And I think we’ve also seen that in written RFI responses from the MNOs.
7940 So if SaskTel owns 90 percent of the facilities in the province, 60 percent of the subscriber share, I think we see the case there for imposing the mandate on them.
7941 THE CHAIRPERSON: But you are saying that 60 percent market share is sufficient to make a determination that they have market power throughout the Province of Saskatchewan?
7942 MR. EDWARDS: I’m struggling to remember the reference where I read that, but I did.
7943 MS. HAINES: It was in the -- it was a report, in the Chen Report, that indicated that they had over -- I believe the number was over 65 percent on the market share.
7944 THE CHAIRPERSON: Yeah, no, I understood ---
7945 MS. HAINES: Yeah.
7946 THE CHAIRPERSON: --- that market share. I’m just trying to understand. That’s one of the Bureau’s thresholds.
7947 But you’re saying, that market share, in your view, is sufficient to make a determination that they have market power?
7948 MS. HAINES: I would say in the Province of Saskatchewan that they do.
7949 THE CHAIRPERSON: Okay. Thank you.
7950 MR. EDWARDS: Now that I’m reminded -- I’m quite sure the Chen Report made the assertion that with that 60 percent, that passed the test for market power, in accordance with the Bureau’s thresholds.
7951 THE CHAIRPERSON: I guess my last question for you is, I understand, and you’ve explained, how an MVNO arrangement will benefit your members and your members are certainly invested in the communities they serve.
7952 But can you give me examples of what will be different?
7953 We’ve heard a lot about kind of me-too offerings, even with the regional competitors. So just trying to get a sense of -- give you an opportunity to share with us what kind of service differentiation, product differentiation, you envisage if you’re able to use an MVNO to provide service to your customer base?
7954 MR. ARSENEAU: I think it goes back to the quad play, first of all. Again, in our footprint, where only Bell is able to offer four services to the customers. So Videotron, or Rogers, or Telus, or us, we cannot offer all of the services to that customer.
7955 So I think that’s one place where telecom providers like us can help.
7956 MS. HAINES: I think we would be able to provide plans or products for our customers. We would go out with something that’s simple for them and for ourselves to manage.
7957 So and I agree with Stéphane here that, you know, with many of the markets that we’re in, it’s being able to provide the quad play that these customers currently do not have.
7958 THE CHAIRPERSON: Thank you. Those are all my questions.
7959 Members? Any other questions? Commissioner Levy?
7960 COMMISSIONER LEVY: With regard to access, Ms. Haines, you talked about the importance of the quad play and you said that that would help to reduce price.
7961 How does adding mobile on top of the other services help you to reduce the price?
7962 MS. HAINES: Well, being able to offer more products to our customers means more revenues and then we’d be able to provide an additional savings to our customers in order for them to have all the three or four products with access.
7963 We do that with all our product lines today for our customers.
7964 COMMISSIONER LEVY: I’ve been to your store, so I’ve seen the array of services that you provide.
7965 MS. HAINES: M’hm.
7966 COMMISSIONER LEVY: So it goes beyond to home security and all of the rest of it ---
7967 MS. HAINES: Correct. Correct.
7968 COMMISSIONER LEVY: --- that you offer.
7969 MS. HAINES: And, you know, really, it would be five products that we would have to our customers.
7970 And when we launched phones, like, we have 61 communities now that we’ve launched a landline too. And we’ve got a product out there as low as 9.95 to our customers on our phone products. So that, you know, differentiates us to our competition.
7971 COMMISSIONER LEVY: And beyond reductions in price, are there any other innovations that you think you could bring to the whole mobile wireless market, either in terms of extra services or a different take on it?
7972 As an example, Xplornet in Manitoba has a data roll over which is sort of an innovation that they’ve brought to the market.
7973 But can you think of any innovative market segments or market approaches that you think that you could bring to your customers?
7974 MS. HAINES: I haven’t done an in-depth analysis on that, but I know according to our other product lines, for example, our rural wireless that we offer, we’re out there on the marketplace with unlimited. We don’t have any service offering with our internet in regards to rural wireless. It’s all unlimited to our customers. So that makes us different than everyone else in the marketplace in regards to that.
7975 COMMISSIONER LEVY: One of the ---
7976 MR. ARSENEAU: Sorry, may I?
7977 COMMISSONER LEVY: Certainly. Yes. By all means.
7978 MR. ARSENEAU: I don’t know about innovation, but one thing I know about is presence in the footprint we serve.
7979 Again, having been a reseller of Videotron, it’s very often that we see customers coming in with their phone and saying, you know, "I've got difficulty putting in my email address and working my phone, so that I can have access to the Wi-Fi in my house", or whatever. And we provide that service, but the big MNOs just don't have a presence in our footprint.
7980 So, if customers want to have a face-to-face discussion, it's pretty hard to have. They have to go down to Quebec City and talk to a sales rep there, but often they don't know what they're talking about because they're only re-sellers; right?
7981 So, I don't know about innovation, but presence and being able -- customers being able to come face-to-face, and have a discussion, and so that we can help them certainly.
7982 MS. HAINES: I would agree with that. One of our differentiators as well is our ability to service our customers. I think we go above and beyond in regards to servicing them.
7983 I just lost my train of thought.
7984 COMMISSIONER LEVY: Just in order for you to perhaps have a moment to gather it up, one of the suggestions and other offerings from others has been, you know, the idea of using some of your power in your communities to offer, you know, free handsets, that kind of thing, to people who may not be able to afford them, in order to spread the ability for a lot of different people to access mobile wireless. Now, of course, you don't have that yet, but is that something in terms of trying to reach a very basic low-cost offering, is that something that you think would work in your markets, would really help a segment of the population that isn't being reached yet?
7985 MS. HAINES: I would think so. I think if we could find a cost-effective way in order to do that, we would do that.
7986 COMMISSIONER LEVY: Okay. Thank you.
7987 THE CHAIRPERSON: Thank you. Thank you very much for your presentation and your responses.
7988 We will take 10 minutes to set up for the next intervener by Skype. Thank you.
--- Upon recessing at 3:26 p.m./
L’audience est suspendue à 15h26
--- Upon resuming at 3:38 p.m./
L’audience est reprise à 15h38
7989 THE SECRETARY: Hi, can you hear me well?
7990 MS. BOUCHETTE: Thank you very much.
7991 THE SECRETARY: Thank you, welcome. You may introduce yourself, and you may begin.
PRESENTATION / PRÉSENTATION
7992 MS. BOUCHETTE: Thank you, Madame Secretary, and thank you for the technical team that help set up this videoconference.
7993 And good afternoon. Good afternoon, Chairperson Scott, Vice-Chair Laizner and Commissioner.
7994 My name is Brenda Bouchette, and I'm here to represent the members of the British Columbia Broadband Association. Our members are internet service providers across British Columbia, who offer cable, fixed wireless, and wholesale services to communities across the province. I myself am an employee of ABC Communications.
7995 We have asked to appear today because we think that small carriers have an important part to play in the Canadian telecommunications market. We bring competition to consumers across Canada, and we bring high speed services to rural and remote communities.
7996 I'm going to touch on four points today. I'll speak about our vision of the telecommunications market in Canada, I'll explain our support for the Hybrid Mobile Network Operator model proposed by Cogeco, and I'll address some points raised by the Competition Bureau as well as some other interveners. Finally, I'll ask the Commission for a ruling that fosters broad-based investment in telecommunications infrastructure across Canada.
7997 Our members foresee that in the coming years, more and more Canadians will connect to the internet using only a single, mobile, connection. This trend could harm service providers that cannot offer any form of mobile service, and so it will harm competition.
7998 We also think that architecture of SG will permit more flexibility in the way that service providers interconnect with each other to reach customers. The SG architecture has the potential to support a variety of investors in the network infrastructure. Companies that are not mobile carriers today will invest in this infrastructure if we have a pathway to participate in the market.
7999 The BCBA sees opportunities to participate in the market through the hybrid -- throug this hybrid model, particularly in communities that are underserved, rural and remote. For example, a regional provider could install a cell site in a community without cellular service or with poor coverage. People in the community could buy handsets and services from the local carrier, and they could roam onto other networks when they travel. Visitors to the area could roam onto the local network. If small companies can construct cell sites that are part of the national SG network, then we will expand cellular service in under-served communities.
8000 The BCBA thinks that Cogeco's hybrid model sets out a clear path for a broad base of small and medium-sized regional companies to invest in telecommunications infrastructure. The hybrid framework would stimulate investment -- pardon me -- into the infrastructure that is needed the most, whether that is backhaul, fixed access, or mobile access. It would encourage a broad base of companies to invest, by permitting investment at a scale that matches business volumes. For small companies, in particular, a hybrid model would permit entry into the mobile market if we can purchase wholesale and roaming access through an intermediary, rather than dealing directly with a large national carrier. The hybrid model would provide smaller regional companies with a regulatory framework that permits growth without facing barriers to entry, and new barriers at each phase or increment of investment.
8001 The Competition Bureau accurately identified many of the challenges, and the various barriers to entry and growth, that small and medium-sized telecommunications companies face today. We think that the Cogeco hybrid model allows companies to overcome these barriers and addresses the dual goals of increasing both retail competition and facilities-based competition.
8002 We think that the proposal to introduce a temporary framework does not provide a strong incentive for market entry and investment. In rural areas in particular, where it is difficult to achieve a substantial business volume, the use of penalties is a strong disincentive to market entry.
8003 And of course, as the Bureau and many others have pointed out, constructing a mobile network requires spectrum. It is extremely difficult for small or regional companies to acquire mobile spectrum. If there is not enough spectrum for competitors, then mandated permanent access to the radio networks of incumbents is the only route to mobile competition. Wholesale and roaming access to mobile networks will support investment into telecommunications facilities in the hybrid model.
8004 If Canada is to have a broad base of telecommunications companies investing in infrastructure and bringing mobile competition to Canadians, then the Commission needs to ensure a clear and timely path to wholesale and roaming access. As the Competition Bureau noted, it is challenging for competitors to negotiate access to any incumbent's facilities. However, cost-based tariffs are difficult to get right. They are complicated to administer, they take a long time to determine, and they produce wholesale rates that we believe are frequently too high. So, we think that a negotiated wholesale rate is the best choice, but these need to be accompanied by a strong regulatory
8006 And this regulatory backstop will have to be stringent in order to be effective. We think that it would be appropriate for the Commission to target a certain level of wholesale business, for example, by mandating that a minimum percentage of mobile revenues or traffic should be wholesale revenues or traffic.
8007 A timeline for successful negotiations should also be mandated; a competitor should be able to go from a request to a service launch in about 18 months. If small and regional providers have a high expectation of success wholesale and roaming access, then these companies will have a strong incentive to invest in infrastructure in our home markets.
8008 In closing, I would like to reiterate that regional facilities-based providers have invested extensively in telecommunications infrastructure, and we are a significant source of potential investment into mobile networks. If we have a regulatory framework that allows us to take advantage of mobile opportunities, we will build more infrastructure and expand cellular coverage in rural areas, and increase competition in markets across Canada.
8009 For a regulatory framework to support investment it must create opportunities in the near future; it must provide operators with business certainty; and it must induce large carriers to negotiate with smaller competitors. We think that the Cogeco hybrid proposal is an excellent model to start with to create a framework that brings more services and competition to Canadian consumers.
8010 Thank you, and I look forward to your questions.
8011 THE CHAIRPERSON: Thank you very much.
8012 Commissioner Levy?
8013 COMMISSIONER LEVY: Good afternoon.
8014 MS. BOUCHETTE: Good afternoon.
8015 COMMISSIONER LEVY: Hi. Let’s talk a little bit to begin with about competition in the marketplace.
8016 Can you explain whether you considered the introduction of the unlimited plans by the national, you know, network operators in the summer of last year, do you consider that to represent a significant development, in terms of competition in the mobile wireless market?
8017 MS. BOUCHETTE: I would say so. I think -- apologies; I’m getting some feedback on my audio.
8018 I do think that those plans appear to be motivated by the competition that was brought in by Cogeco -- thank you; the audio is repaired -- and the other mobile competitors.
8019 COMMISSIONER LEVY: If the Commission were to mandate wholesale MVNO access, what impact do you expect them to have on the Canadian marketplace, and in what kind of timeframe?
8020 MS. BOUCHETTE: The impact would certainly depend on how the Commission decides to mandate that. But I think that if MVNOs are enabled at wholesale rates that are advantageous, then I think that we would start to see service launches of new operators within the course of the year from the mandate of the Commission.
8021 COMMISSIONER LEVY: Do you have any notion of what the margin should be on those wholesale rates and access?
8022 MS. BOUCHETTE: We currently have no members who are mobile carriers, so I could not say. We do have members who provide wholesale wireline services, and the margins are quite low on those. I do not have that number right now. I could undertake to provide you some feedback on that.
8023 COMMISSIONER LEVY: I was more interested on the wireless side, but -- just in case you had a notion of what that might be.
8024 Do you know whether any of your members have ever approached any of the main network operators in order to negotiate MVNO-like access or any other arrangement to provide mobile wireless service?
8025 MS. BOUCHETTE: I’m not aware of any members who have approached any operators for MVNO access. Our members are generally quite small and that would be an extremely intimidating prospect, even if they did know where to start.
8026 I will, though, mention the company I work for, ABC Communications, has negotiated access to some mobile spectrum with Rogers; that is our public -- published on the ISED Website.
8027 COMMISSIONER LEVY: And what are you using that for?
8028 MS. BOUCHETTE: So this arrangement is quite recent. It covers five communities that are very small and somewhat remote. We have only recently begun our technical deployment in one of those communities. So it’s still at early stages of commercial development.
8029 COMMISSIONER LEVY: And what was the negotiation process like in that -- do you have some firsthand knowledge of what that was -- how that negotiation process unfolded?
8030 MS. BOUCHETTE: It unfolded over the course of, I would say, a couple of years. It was not -- I will say that our partner, Rogers, was not averse to these discussions. It was not an unpleasant negotiation process. It was conducted in normal commercial terms. So in the end we were pleased with the outcome of this negotiation.
8031 COMMISSIONER LEVY: In your intervention you stated that fixed wireless and cable operators are not able to offer mobile services, and that with very limited access to spectrum or roaming agreements, smaller companies faced insurmountable barriers to entry in the mobile market.
8032 Well, that said, you’ve managed to carve off a little piece of it.
8033 MS. BOUCHETTE: We’ve managed a small piece in a small area, yes.
8034 COMMISSIONER LEVY: So a number of, you know, you and some others have managed to launch wireless service. What does the ability for these providers to launch mobile wireless operations say about spectrum as a barrier to entry?
8035 MS. BOUCHETTE: Spectrum is a tremendous barrier to entry. The -- low-band spectrum is, for small carriers, out of the question; it’s really off the table. We have interest in following what happens with the millimetre wave spectrum, the upper bands of spectrum, which we anticipate will be part of the 5G ecosystem. And we anticipate that there will be perhaps more of that available, a large quantity, and it might be available in smaller regional tiers for -- at auction or for purpose or however it’s administered by ISED.
8036 This is not appropriate for large-scale rural coverage, but it could be quite appropriate for town centres; you know, the main centre of a small town this could be an opportunity.
8037 In the mid-band spectrum range there are some companies, such as the company I work for, ABC Communications, that own some mid-band spectrum; we own spectrum in the 3.5 gigahertz range. Xplornet, of course, has extensive holdings in that same band.
8038 There may be some avenues to access for spectrum; however, currently the way spectrum is distributed at auction in large tier sizes, makes it very difficult -- well, makes it impossible for a small carrier to access spectrum at auction.
8039 And notwithstanding our success with Rogers in these small -- and I’ll say again; these are very small communities that are somewhat remote. It is challenging. It would be challenging I’m sure for us to negotiate access to spectrum in less remote communities.
8040 COMMISSIONER LEVY: If your members were to become NVMOs in Canada, what measures do you believe they’d have to take to ensure that their wireless plans would be readily available to vulnerable populations, such as seniors and low-income households?
8041 MS. BOUCHETTE: Because our members are very small companies, we live in the same communities that we work in, and we have close relationships not only with our customers but with the communities our customers live in: the First Nations communities, the municipal councils, the regional districts, the local levels of government. So we not only respond to those -- to our customers, but we also receive a great deal of pressure from the regional levels of government that we work closely with, and if we are not providing adequate levels of service or affordability, we hear about that on multiple fronts.
8042 It is important to provide accessible packages. In many of our communities, people either have low levels of income or frequently irregular sources of income, and those people still need connectivity options.
8043 So we certainly do our best to serve all of those people who need low-cost connectivity options, and will continue to do so if we had the ability to do that without losing money.
8044 COMMISSIONER LEVY: A very important consideration.
8045 Let's talk a little bit about wholesale services, and in -- and here we're going to discuss duplication.
8046 We've heard from many parties that more facilities-based competition is unlikely to arise in the mobile market, given issues like large barriers to entry and the spectrum scarcity that we've just discovered.
8047 However, in your submission in May of last year, you said you think that further facilities-based competition will arise from smaller existing companies if given the opportunity. And I wonder if you could expand on that a bit. What specific opportunities do you feel you need that the Commission could facilitate?
8048 MS. BOUCHETTE: So spectrum is indeed a barrier, but I think that coming into the future we'll see that millimetre wave spectrum may be less of a barrier. And we remain optimistic that ISED will undertake measures to make spectrum more accessible to us.
8049 And just as you heard from the gentleman who intervened from Voyageur Internet last week, there are a lot of members who are chomping at the bit. We would like very much to install a cell site or several cell sites in a community if we had the opportunity. The Commission isn't in charge of the spectrum currently, so the Commission isn't in a position to see that, but if we have opportunities to obtain spectrum, which we have seen we have some limited opportunities, we will go ahead and deploy that and go sell access in these communities.
8050 Outside of that, we would like to continue to invest in our fixed networks, be they fibre build outs or backhaul to the various communities.
8051 COMMISSIONER LEVY: You've indicated that, in fact it's sort of key to your intervention, that you support Cogeco's hybrid MNO proposal because it would support the goals of enhancing competition and investment in telecommunications in your view. And this was part of your July RFI response.
8052 Again, I realize that your members are quite small, but are any of them in a position to take advantage of the HMNO model at this stage, and who would -- who might they be? What specific areas would be served? How many Canadians do you think they could reach? That kind of thing.
8053 MS. BOUCHETTE: I think that in the HMNO model what we would see is much like the cable service providers that were just making a presentation to you, there are local service providers, many of them cablecos, who would like to have the opportunity of selling their own mobile services in the communities where they're operating. So these companies would like very much to become an MVNO if they could, and they would also like to leverage that into investment into their own plant to build out a variety of services that they can offer their customers.
8054 These would be primarily small communities, to answer the second part of your question. Many of the communities that our members operate in have populations of anywhere between 150 people and, you know, 1,500 people. These are -- some of them may be up to 10,000 people, I would say.
8055 So these are small communities, and many of them are far away from the major centres, and many of them are currently poorly served by the national carriers.
8056 COMMISSIONER LEVY: How are they getting their service now?
8057 MS. BOUCHETTE: Our members are a mix of -- so some of them are cablecos, and some are fixed wireless providers, so offering fixed home Internet through either their own cable plant, or if it's wireless, and we have several members who have built out fibre services.
8058 The primary backhaul carrier in our province is TELUS, and most of our members would be buying their backhaul access and their connection to the larger -- their upstream connection from TELUS.
8059 COMMISSIONER LEVY: Let's talk a little bit about the investment targets to maintain HMNO eligibility. You proposed that investment targets should be commensurate with revenues, and that a minimum investment threshold could be set as a percentage of telecom revenue. What percentage do you think would be appropriate?
8060 MS. BOUCHETTE: If I may, I'd like to take that as an undertaking.
UNDERTAKING / ENGAGEMENT
8061 COMMISSIONER LEVY: Okay. Great. Noted. The deadline for that is March the 10th.
8062 MS. BOUCHETTE: Thank you.
8063 COMMISSIONER LEVY: Okay. You also propose penalties for failure to meet targets with the potential of revocation of access. What would those penalties be? Would they be like our AMPs, our Administrative Monetary Penalties, or would -- and subsequent to that, would those not create a disincentive to invest? Would people get gun‑shy?
8064 MS. BOUCHETTE: You know, penalties certainly do create a disincentive to invest however they're done, but if the Commission chooses to go the route of an HMNO-type model or a model similar to the one that the Competition Bureau proposed where you're going to tell companies that in order to enjoy MVNO access you have to invest, the Commission should have some muscle to enforce that. And that does take the form of a penalty. The penalty, again, should be commensurate to the scale of the commitment that's been undertaken and the revenue that's been taken in through the MVNO access.
8065 For example, it would be unreasonable for a company to undertake to be an MVNO in a small community, open up a cell store in Downtown Vancouver, make millions and billions of dollars from selling MVNO to Vancouver residents, invest nothing, and have no penalty for that. So there would indeed have to be some form of penalty, but it should be commensurate with the scale of the operation.
8066 COMMISSIONER LEVY: Do you really think that setting up an MVNO of any kind doesn't involve some kind of investment? I mean, none of these things are free. If someone got the opportunity to set up an MVNO, whether they did as you just suggested or not, it's not going to come without some kind of cost to the entity that's attempting to get into this business; correct?
8067 MS. BOUCHETTE: Absolutely. There's business risk and there's investment in hardware, in network equipment, and there's tremendous investment into training and into the business process setting it up. So it's a significant undertaking for sure.
8068 COMMISSIONER LEVY: Okay. If the Commission did not mandate HMNOs, which you support, which of the other MVNO models that have been proposed would you favour? You mentioned the one supported by the Competition Bureau. Are there any others that you thought had some merit?
8069 MS. BOUCHETTE: Our second choice would be the wider MVNO proposal of CNOC. We think the Competition Bureau's proposal is unduly limiting as to who could be an MVNO. Only relatively large companies with significant spectrum holdings would become MVNOs in that case.
8070 COMMISSIONER LEVY: Could you talk a little more about why mandating MVNO access at the Tier 4 level would be impractical? This is something you referred to in July in your RFI response. Can you explain why?
8071 MS. BOUCHETTE: Right. So I wouldn't assure you right off the bat that it couldn't be done because we don't operate a mobile network, but from the point of view of the operator that is selling us MVNO access it may be difficult for them to limit the way that they sell us that wholesale access. I don't have the answer to that question is the short answer, but I want to make sure that whatever the -- I want to see that whatever the Commission mandates is practical to implement for the company that's providing us with the wholesale service; otherwise, we'll be faced with an extra complication.
8072 COMMISSIONER LEVY: Your submissions indicated that you're proposing, it would appear, multiple levels of wholesale MVNO access. Can you confirm that you suggest a national level access for large MVNOs or an HMNO competitor, but only say provincial level access defined by area code for small, regional HMNOs. And this again ---
8073 MS. BOUCHETTE: We think ---
8074 COMMISSIONER LEVY: This was part of your July RFI response.
8075 MS. BOUCHETTE: We think that the scale of -- in an HMNO framework -- sorry can we get the echo turned off the audio. Thank you. In an HMNO framework, the scale of wholesale access should be -- would be commensurate with the extent of the investment that the company is putting forward. So, a company would -- our members, for example, who are operating in a particular community would primarily want to offer wholesale cellular access in that particular community. There's not really a practical reason for a member who's providing cellular and fixed service in Bella Coola, for example, to want to provide cellular service in Smithers. So, we think it would be appropriate to couple the two. Thank you.
8076 COMMISSIONER LEVY: Okay. Capacity. Some parties have suggested that one of the reasons MVNOs have not emerged in Canada is because there's not sufficient spare capacity available in the networks of the Canadian MNOs, and that as a result MVNOs will be detrimental to network quality. However, you and others suggest that MVNOs will not significantly change the total number of customers using the networks.
8077 Can you talk about the concerns raised over the course of the hearing with respect to capacity?
8078 MS. BOUCHETTE: Well, I think that in the communities that we serve where there's no cellular service at all that we would certainly increase the number of cellular subscribers if we were able to construct a cell site.
8079 In the rural communities that we serve, we do not believe that the networks of the incumbents are over capacity or at capacity. These are not large communities. These are not generating a large amount of traffic. I have no doubt that on the metro at rush hour in Toronto or Montreal that the network is at capacity, but at the network fringes, there is -- there should be capacity to serve additional customers, and I think that it would be very sensible for small operators to be able to access that.
8080 COMMISSIONER LEVY: And finally, let's talk about rates, terms and conditions. You argued in your July RFI responses that wholesale rate setting has historically been ineffective due to complex pricing and processes, and that the Commission should strive for the simplest pricing model. Can you tell me a little bit more about what that ideal pricing model might look like?
8081 MS. BOUCHETTE: So, we do -- we've had a lot of discussions internally in the B.C. Broadband Association about mandated rates versus negotiated rates. And we did come to the conclusion that we think that a negotiated pricing model is better, because we can come to terms and conditions and prices in a good commercial negotiation that would be suitable for all parties.
8082 Now, the Commission would need to provide significant incentive for the large carriers to engage in negotiations with us, and that's why we've suggested that some targeted wholesale business would be appropriate, because if those carriers are indeed incentivised to open up their networks and have wholesale access, then they may engage in negotiations with us.
8083 In the -- in our experience with wholesale rates in the fixed wireline business, of course, as you know, there's a number of proceedings going on regarding fixed wholesale rates. These proceedings are going on for a -- they're taking a long time. It's many, many years before these rates are determined and years after the fact with the temporary rates in place the Commission determines that the temporary rates are inappropriate or had been inappropriate. This delays investment. This makes this dual business very difficult as a small -- well, even as a large business owner it makes doing business very difficult, and it doesn't provide us with the certainty or the margins that we need in order to invest in our businesses.
8084 So, we think that the negotiated model would be better, if it can be made to work.
8085 COMMISSIONER LEVY: Well, your experience has been that it took two years to negotiate with Rogers on something. Is that within the sort of realm of time that you think is appropriate, or ---
8086 MS. BOUCHETTE: We think that that was too long. We think that 18 months is certainly reasonable. It -- these are complicated negotiations and they will not be done very quickly and mandating some sort of timeframe may be good. Again, if the telcos are incentivised to engage in negotiations, if they have a strong stimulus to produce wholesale arrangements then those negotiations may go quite a bit faster.
8087 COMMISSIONER LEVY: What can you suggest would be the incentives or the prod, if you like, to move things along and to incentivise them?
8088 MS. BOUCHETTE: So, we haven't given you a number, but we have suggested that the Commission might want to target a certain level of wholesale revenue. For example, that a certain percentage of a company's mobile revenues should come from wholesale services or wholesale traffic. It could be a graduated scale of penalties associated with not meeting those targets, but that sort of incentive might do the trick.
8089 COMMISSIONER LEVY: Are there any other suggestions you have for innovations that your membership could bring to the whole MVNO ecosystem, if you like? Are there specific things that you have in mind that they could do?
8090 MS. BOUCHETTE: That's an excellent question that I wasn't prepared for, so thank you for that.
8091 Our members work very closely with businesses in the communities where we work. And many of these businesses do have unique needs, and many of these businesses are also quite small. So, when one of these businesses would go to a large national carrier and suggest that they have a unique need for monitoring type systems, for a network extension to an area that's unserviced, these companies are too small to have that kind of conversation with a large national carrier.
8092 Whereas, our members would happily have those sorts of conversations. What kind of monitoring services do you need, where you need these services, how do you want these services connecting back to your head office network or interconnected between the various sites? These are the sorts of conversations that our members regularly have with businesses in our communities and that those businesses are very pleased to have.
8093 So, that's the sort of innovation that I think that our members and small internet service providers across Canada would be prepared to bring to these rural communities.
8094 COMMISSIONER LEVY: Thank you very much.
8095 MS. BOUCHETTE: Thank you very much, Commissioner Levy.
8096 THE CHAIRPERSON: Commissioner Laizner?
8097 THE VICE-CHAIRPERSON: Good afternoon. Thank you so ---
8098 MS. BOUCHETTE: Good afternoon.
8099 THE VICE-CHAIRPERSON: -- thank you so much for your presentation and the questions you've answered. I just have one question with respect to the incentive that you just described of mandating a minimum percentage of mobile revenues that have to be part of wholesale revenues as a means of getting negotiations to move more expeditiously or more successfully.
8100 In your research, have you seen any other jurisdiction where that approach has been adopted or adopted successfully, or is this creative thinking on the part of ---
8101 MS. BOUCHETTE: This is creative thinking on the part of our members. I'm not aware of any other jurisdiction where that sort of mandate has been undertaken.
8102 THE VICE-CHAIRPERSON: Okay. Thank you. Good for you thinking outside the box. Very good.
8103 MS. BOUCHETTE: We're doing our best. Thank you.
8104 THE CHAIRPERSON: Thank you. Those are all our questions. I thank you for taking the time to file and to answer our responses. It's very helpful.
8105 Counsel, any questions on your part? No?
8106 Then, Madame la secrétaire.
8107 THE SECRETARY: This adjourns ---
8108 MS. BOUCHETTE: Thank you.
8109 THE SECRETARY: --- this adjourns the day. We will be back at 9:00 a.m. tomorrow morning.
8110 Thank you.
8111 MS. BOUCHETTE: Thank you.
--- Upon adjourning at 4:13 p.m./
L’audience est levée à 16h13
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