Transcription, Audience du 26 février 2020
Volume : 7
Endroit : Gatineau (Québec)
Date : 26 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 Wednesday, February 26, 2020 at 9:55 a.m./ L’audience reprend le mercredi 26 Février, 2020 à 9h55
9289 THE SECRETARY: À l'ordre, s'il vous plait. Good morning, everybody.
9290 We'll now begin the presentation of Rogers Communications Canada Inc. Please introduce yourself and your colleagues, and you have 20 minutes for your presentation.
PRESENTATION / PRÉSENTATION
9291 MR. WATT: Thank you. Mr. Chairperson and Commissioners, my name is David Watt, and I am Rogers' Senior Vice President, Regulatory. It is my pleasure to introduce our panel.
9292 To my right is Joe Natale, President and CEO of Rogers Communications. To Joe's right is Brent Johnston, President of Wireless. To Brent's right is Howard Slawner, Vice-President Regulatory Telecom. To Howard's right is Richard Feasey. Mr. Feasey has 30 years of experience in regulatory matters across 20 markets in Europe, Asia, and the Americas. He was the Director of Vodafone, then the largest wireless carrier for 10 years. Currently, Mr. Feasey is a member of the UK Competition Authority, the Competition and Markets Authority, and he wrote RPs on the international experience.
9293 To my left is Jorge Fernandes, Chief Technology Officer. To Jorge's left is Pam Dinsmore, Vice-President Regulatory Cable and Broadband; and to Pam's left is Diane Gilbert, Director, Wholesale.
9294 Behind me is Suzanne Blackwell, President of Giganomics. Suzanne authored our expert piece on sunset clauses and is well-known to the Commission.
9295 And beside Suzanne is Jeff Hunter, President of IMOBIX. Jeff is a telecom expert with 20 years experience in start-ups, deployment, operations of telecom companies, experience in roaming, MVNOs, and wholesale matters, and he authored our piece on cost structures for MVNOs and that experience.
9296 With that, I will turn it over to Joe.
9297 MR. NATALE: Thank you, David, and good morning Mr. Chairman and Commissioners. Thank you for the opportunity to speak this morning.
9298 This proceeding is absolutely critical to the future of our industry, Canada's global leadership in the digital economy and, ultimately, the prosperity of Canadians.
9299 We've been listening intently for the past week. We have found the discussion informative, but also discouraging. Clearly, there is a wide awareness gap. Rogers, and our industry as a whole, have failed to communicate to Canadians that Canada is a global leader and enjoys world-class network experience based on coverage and quality, and that we have an intensely competitive wireless market that continues to deliver more affordability and value for Canadians.
9300 I implore you to keep reminding yourselves of the importance of what is at stake here. This is about nation-building. This is about the future of wireless investment and Canada's ability to leverage it for the promise of 5G and for all Canadians.
9301 Like the railroad a century ago, it's vitally important we get this right. We have built a great industry where Canada dominates when it comes to coverage and quality, reaching 99 percent of Canadians with wireless speeds second only to South Korea.
9302 Rogers brings a unique perspective to these discussions that is founded in our entrepreneurial history. Ted Rogers was a great Canadian entrepreneur, who was a builder and a visionary. In 1960, he borrowed $85,000 to buy one FM radio station when less than 3 percent of Canadians had FM radios. He was one of the first to introduce cable TV to Canadians. Today that network reaches four-and‑a‑half million homes and businesses. He was the first to bring wireless to Canada in 1985, 35 years ago this Canada Day.
9303 If you'll indulge me, let's take a moment and reflect on that moment in our history.
9304 (VIDEO PRESENTATION)
9305 MR. NATALE: Today we are on the very next important doorstep - 5G.
9306 When you look back at FM radio, Cable TV, and the dawn of wireless, they all have common themes. They all required an appetite for great risk and massive capital investments, and the returns have not always been self-evident from the outset. 5G is no different.
9307 Making Canada a global leader in these areas was only possible because of two critical factors: the ability to take a long-term view of investment; and a regulatory environment that facilitated and supported investment and allowed a long-term perspective.
9308 Some people have appeared before you presenting what we think are misperceptions and mischaracterisations. Your decisions must be based on facts. You have the evidence and you have the expertise. Evidence-based decision-making may not sound flashy, but it's what delivers sound public policy and thoughtful regulation.
9309 Looking back at the last 35 years of wireless, and more specifically the last five years, I would ask you to reflect on five important principles. These are as valid today as they were when you held your last wireless review.
9310 Principle number one, it is critical that regulatory policy continue to take a long-term view. When we look to 5G and beyond, it’s clear the wireless industry in Canada has not fully matured and still needs careful nourishing. The 5G road ahead requires another generational investment, not unlike the road from 1G to 4G.
9311 For the first 25 years of wireless, Rogers did not make a single cent of return on our $15 billion investment in network and spectrum during that period. Since February 2014, only six years ago, we have invested $12 billion in our networks for equipment and spectrum, and we borrowed much of that money. Our debt has gone up by $6 billion. We now sit with more debt than ever in the company’s history, over $18 billion, and we’re not alone. Our Canadian competitors all sit with debt leverage ratios that are at or near their maximum.
9312 Principle number two, competition is alive and well in Canada. I cannot over-emphasize how competitive the market is. We have two sources of customers, new wireless subscribers and switching subscribers. Both categories of customers are extremely price sensitive. Look at churn. Every year since 2015, five to 6 million customers have switched providers. In 2019 alone, 6 million customers switched, over 17 percent of the Canadian market.
9313 The fourth-carrier policy is working. In the past five years, Videotron has almost doubled its subscribers to 1.3 million. Freedom has done the same, growing to 1.7 million customers on an LTE network that now extends to most Canadian CMAs and is being extended to smaller communities. Last year, Freedom and Videotron accounted for 33 percent of net new customer additions. This is not a market crying out for mandated MVNOs.
9314 I get up every morning knowing there are at least three formidable competitors and seven or eight brands in every market trying to eat our lunch. Simply put, wireless competition in Canada has never been this intense. Since you took your preliminary view, there have been dramatic changes in consumer offers and significant competitor successes in the wireless market. The events of the last year cannot be dismissed as inconsequential or unimportant.
9315 I listened carefully to what regional carriers told the Commission over the last six days of the Hearing. Why would you jeopardize Canada’s regional carriers now?
9316 Principle number three, our ability to drive affordability and a customer-first agenda is critical. This intense competition is expanding and the range of affordable options available to Canadians is also expanding. Overall, the price per Gigabyte of data is down by 50 percent since 2015. In contrast, since 2015 the CPI has increased almost 10 percent.
9317 We are seeing massive increases in data consumption. As data usage climbs, prices per Gigabyte are coming down dramatically. This shift is significant.
9318 If you drive an extra 200 kilometres a week to get to a new job, you will spend more money on gas. If your hydro use goes up 50 percent, your hydro bill is going up 50 percent. That’s not what Canadians are seeing with their wireless bills. The price of data is going down as usage goes up.
9319 Since joining Rogers almost three years ago, my number one priority has been putting customers first. This means driving affordability and customer service for Canadians, while continuing to invest in our wireless network. We are meeting the accelerating demand for data and providing leading edge wireless technologies across our vast country.
9320 We launched unlimited plans. Rogers kick-started the introduction of unlimited data plans in Canada with Rogers Infinite, a development that has dramatically changed the marketplace. These plans are not just radically cheaper than previous plans; they eliminate overage costs and provide peace of mind.
9321 Let me be clear, regulatory considerations had nothing to do with our decision. Those who suggest otherwise are spectacularly ill-informed about our business and what drives it. Our introduction of Rogers Infinite was solely motivated by the competitive need to address the customer pain point with overage charges and to increase data affordability and consumption. We have seen an immediate material improvement in customer satisfaction scores and massive adoption of the plans. The launch of Infinite was a crucial step to make Rogers 5G ready in advance of how Canadians will use wireless services in the future.
9322 We expanded lower-priced options. The range of lower cost plans in the marketplace has expanded, as has the service included in those plans. Your own list, distributed at the first day of this hearing, demonstrates the range and scope of these plans, as low as $15. Consumers can choose from a number of data-only plans, the one gap previously identified and addressed by the Commission in Canadian wireless markets.
9323 If pricing is a central issue, then surely we must consider up-to-date data and rely on sound methodology. Some presenters have relied on dated price comparisons. Our rates are comparable to the U.S. A Verizon starter unlimited plan costs slightly over $90 Canadian, versus $75 for Rogers Infinite.
9324 Introducing a wider range of plans at lower prices means more Canadians are now connected. In the last five years, Canada has added 5 million more wireless customers, increasing the penetration rate by 10 percent. And 81 percent of the Canadian population has a smartphone. This is virtually everyone in the country over the age of 10. These phones have been made available to Canadians with substantial upfront subsidies by Canadian wireless carriers.
9325 And it’s important that consumer sentiment on wireless pricing not get confused with the exploding costs of smartphones. The iPhone was introduced in 2007 and was sold for $700. The high-end iPhone today costs close to $2000.
9326 Principle number four, the industry must earn a reasonable return on investments to keep technology investments rolling out to all Canadians. I have heard various participants in this hearing quoting EBITDA margins, or various other metrics, as some indication of heightened profitability. I think it’s important to understand and respect that return on assets is the only true indicator of profitability, especially in a capital-intensive business.
9327 A partial accounting measure, such as EBITDA, that excludes key costs like capital expenditures, spectrum purchases, interest and income taxes, is not a measure of profitability. It excludes up to 50 percent of our expenditures. It isn’t economic profit.
9328 Over the last five years, our return on assets was 5.1 percent. Over the same period the Canada Pension Plan returned 10.1 percent. And this is despite heightened costs relative to other countries across the globe, specifically, we have a population density one tenth the size of the US, with a geographic area that is the second largest in the world. Tough economics for an industry where coverage matters.
9329 We pay up to seven times the amount paid for spectrum in other countries. That’s a fact. We pay a vast portion of our costs in U.S. dollars, from handsets to network equipment, and that is a 35 percent currency premium, and we pay more in taxes and fees to our government than the U.S. industry does. Despite these heightened costs, prices for our customers are comparable to U.S. levels.
9330 Principle number five, network quality and capability really matters to our future. We were one of the first countries to launch 4G, and now we cover 99 percent of Canadians with LTE, and we continuously expand capacity to address demand for data. Data growth is going up by 30 percent per year.
9331 So today, our 4G networks are twice as fast as U.S. networks, on average. Make no mistake, this is a massive and profound achievement, given the cost to serve a country the size of Canada with our challenging topography and low population density. It will come as no surprise to the Panel that we subsidize our wireless operations outside of the major cities in our country. We do this because it’s right for Canada and universal access is good for Canadians. We’ve been able do this in smaller cities and rural communities because we have had a regulatory environment that supports infrastructure investment.
9332 MVNOs do not bridge the digital divide. They do not bring new services to underserved communities. They do not bring more rural coverage to Canadians.
9333 We began the launch of 5G this January. 5G will require a massive investment over the next five years and beyond. It will be one of the most significant civil engineering projects in generations.
9334 These five principles have served Canadian consumers well. We cannot square the success of these principles with any need to mandate MVNOs.
9336 MR. FEASY: Good morning. I was asked by Rogers to consider the evidence from the rest of the world and you have a copy of my report. In my view, that evidence leads to three key conclusions:
9337 First, very few regulators around the world ever implemented mandatory MVNO access regulation and the international trend over the past 15 years is for less, not more. Canada would be an international outlier if you were to impose MVNO regulation.
9338 There’s been no new mandated wholesale regulation in the European Union since 2006. In the two markets where it was applied, it’s since been withdrawn. The latest changes to the European regulatory framework are intended to make this kind of regulation less likely in future and that reflects the realization that MVNO regulation has been ineffective and that it’s undermined the incentives to invest in the new mobile networks and technologies which deliver real benefits to consumers.
9339 The United States has never mandated MVNO access, nor has Australia, nor New Zealand. There’s only one relevant case for your purposes today and that’s in Norway, which has two facilities-based carriers, one with a 60 per cent wholesale market share of which is regulated.
9340 European competition authorities thought for a few –- a few years ago that mandated MVNOs might restore the competition lost in mergers between wireless carriers, but they’ve abandoned that remedy in recent cases once it became clear that it was ineffective.
9341 Second, the evidence suggests that the promises that are made by MVNOs in proceedings like this and elsewhere in the world as to their market impact are rarely kept in practice. I’ve seen no credible evidence that having more MVNOs in a wireless market or mandating access for those MVNOs leads to lower prices, either for consumers in general or for those on low incomes.
9342 Third, there’s been little research on the impact of mandated MVNOs on wireless investment because there have been so few cases to study. What there is suggests it’s negative, but more importantly, there’s now strong evidence that wholesale regulation with mandated rates in the wireline market has had a significant impact –- adverse impact on wireline investment. And in my view, there’s no reason to think that wholesale regulation in wireless markets would not have the same significant adverse impact on wireless investment including in 5G.
9344 MR. FERNANDES: Unprecedented new investment in Canadian wireless networks is required.
9345 In the Notice of Consultation, the Commission has posited that given the extensive investments that made in recent years, the benefits that a well-developed MVNO market would deliver to Canadians are now more likely to outweigh any negative impacts. That is wrong. In fact, the opposite is true.
9346 While Rogers already spends $1.3 billion in capital each year just to maintain capacity while data usage grows 30 per cent a year, Rogers and the entire wireless industry are now also poised to make the most extensive telecommunication investments ever.
9347 One month ago, Rogers started to light up the first 5G network in Canada. This is a proud accomplishment for Rogers and indeed all of Canada.
9348 It is crucial that we keep pace with the rest of the world; however, while it took a considerable amount of time, capital and effort to launch 5G, this was just a small fraction of what needs to come.
9349 Why is 5G so important? Because without it, Canada’s digital economy can’t move to the next frontier. 5G will enable new applications for business in every sector of the economy and make faster and more innovative services available to consumers. Through a combination of ultra-low latency and high bandwidth connectivity, a combination of 5G networks will enable applications such as autonomous mining, autonomous driving and smart communities. These advances are not just important to the wireless industry; they will be the backbone of the Canadian digital economy.
9350 We know that over time investment in new technology helps drive down prices to customers. We will see a lower unit cost enabled by these investments, but to get there, 5G and the Canadian digital economy hinge on massive investments being made by wireless carriers. As you have heard before, but it bares repeating, it is estimated that between 2020 and 2026 approximately $26 billion in incremental investment by Canadian wireless carriers will be carried out to deliver 5G.
9351 People often equate wireless investment with sophisticated equipment. In fact, 70 per cent of our 5G investment costs are related to bricks and mortar, physical infrastructure we need built. This translates into well-paying jobs in communities right across our country as we work with dozens of construction suppliers to build our networks. This includes small regionally- based businesses and large companies like Ledcor and Telecon. These firms build access roads to cell sites. They build towers. They install small cells.
9352 Canadian carriers will shoulder the investment burden for Canada to compete; however, this will only happen if they have the financial ability to make the massive necessary investments. K
9353 If this money is not available from our operations, the investment level will be lower and the 5G rollout will not be as extensive as it would otherwise be. The single biggest impacts will be on rural areas outside of the major centres as they are the most costly to build and maintain and generate less revenue. Yet, these are the very areas that both the Government of Canada and the CRTC have identified as key targets for their broadband policies.
9355 MS. DINSMORE: Instead of inhibiting investment, the CRTC should be taking this opportunity to enable it. There are several measures that the Commission can take that will assist carriers to deploy new technologies and expand their footprints into unserved areas.
9356 It’s no exaggeration that hundreds of thousands of 5G small cells will need to be deployed. Traditional telephone and hydro company poles are ideal supporting structures, as is street furniture such as streetlights, bus shelters and signs, and public buildings. Timely, cost-effective, non-discriminatory access to this passive infrastructure is critical. Higher access costs translate to higher prices for consumers and delay means slower rollout to consumers and Canada falls behind.
9357 We recognize the current limitations on the Commission’s jurisdiction to address access to provincially-regulated utility poles; however, we believe the Commission can take steps to clarify the rules regarding carrier access to municipal infrastructure and ILEC support structures within the existing Canadian legal framework.
9358 The Commission should clarify now that its jurisdiction under the Telecommunications Act extends to wireless equipment, as well as to municipal street furniture and buildings. In doing so, the Commission must clarify that the rules established in the Ledcor decision for wireline deployment apply to wireless equipment including the core principles of no occupancy fees and reimbursement from municipal work-related relocation of our equipment. This would address a key 5G issue; that is, the annual fees municipalities seek to charge for the placement of small cell antennas on municipal infrastructure.
9359 The Commission should also convene a proceeding to review and amend the ILEC support structure tariffs to address transparency on available capacity and future use and the fees and timelines to access available capacity.
9360 Finally, the Commission should confirm that small cell antennas are captured by the existing approved ILEC tariffs.
9362 MR. NATALE: In conclusion, let me circle back to where I began. What's most important is doing the right thing for Canada and Canadians long-term.
9363 We have a massive appetite for investment. We want to continue on our path of excellence in nation- building, especially on the doorstep of 5G, but we can only make those bets when we have regulatory certainty and support in our future. Without a recognition of that investment potential and an appropriate regulatory framework, our collective costs of capital increase materially, and the investments that are required are jeopardized.
9364 You have my commitment and the commitment of Rogers to work together and strike the right balance between driving affordability and fueling investment for the future. It is that regulatory mindset that allowed Ted to be a great Canadian entrepreneur. It is that mindset that has created a leading global telecommunications industry. And more than ever, global leadership is critical for Canada.
9365 Thank you for the opportunity to participate in today's hearing. We'd be happy to answer any questions you may have.
9366 THE CHAIRPERSON: Thank you. Thank you, Mr. Natale and your colleagues. You have indeed it would appear from your opening remarks been paying attention to our proceeding and you've touched on, not surprisingly, a number of the areas that we've been discussing with interveners. I guess the good news is that you've had a chance to listen and prepare yourself. The bad news is we have lots of statements in evidence to put before you to ask you to speak to.
9367 It won't surprise you the outline of what I want to talk to you about today I think I have a couple of questions about market power and associated definitions. We'll talk a little about retail market issues. Then not surprisingly, wholesale market issues, and finish off with a few questions about the future of the mobile wireless industry. So, that's our menu for this morning.
9368 Perhaps I'll begin just with a very broad question about market definition. Back in May, in Roger's intervention -- pardon me. I'm not getting choked up by your participation.
9370 THE CHAIRPERSON: I'm just struggling with a little bit of a cold.
9371 You submitted that the geographic market was provincial, and you submitted a document -- figure 1, sorry, of your intervention had a summary that looked at province-by-province geographic market definitions. And in that one, for example, there were six competitors in Northern Ontario for Manitoba. Now, I don't want to minimise or dispute the fact that companies like Xplornet or Tbaytel and Eastlink are not providing service in Manitoba or Northern Ontario, but certainly they're not on the same footing or basis as the three national players.
9372 So, all that to ask you, do you continue to hold the view that using province as the relevant geographic market is appropriate, and I guess I'd ask you elaborate on do you think it hides some particular market characteristics or peculiarities that might be better addressed if we took a smaller market definition such as that proposed by the Competition Bureau?
9373 MR. WATT: Yes, we would bonify our position in light of the substantial evidence and material put on the record over the last eight months. You know, we thought we put forward our position provincially. Typically, it has been provincial pricing, et cetera. However, we agree with other parties that a smaller geographic market would be more appropriate given the nature of competition that exists today and the ability for people to switch carriers.
9374 So, we would think the two options that have been most discussed is at the CMA level, which causes me to wonder -- that really doesn't define the areas outside the CMA area I think that has been picked up by people who have suggested a tier four categorisation. That comes, as you know, from ISED spectrum categorisation of geographic territories. I think that likely -- well, we would view that as more appropriate than our original provincial position. We have -- I'd say we've learned and improved our position.
9375 THE CHAIRPERSON: Thank you for that.
9376 Do you see -- you may have heard me ask the representatives from the Competition Bureau whether or not they saw any particular challenges in going forward with a sort of two-pronged approach of looking at provinces and potentially some kind of collection of CMAs. Any views on that particular challenge?
9377 MR. WATT: I guess what you're looking at there is you're saying is there a province that is -- where competition is widespread throughout the entire province, such that that province could be treated as a geographic market. I think we would still think that the better approach would be the smaller tier four approach.
9378 THE CHAIRPERSON: Okay. Thank you.
9379 Moving a little to pricing, generally speaking, in your submissions you've certainly made reference to declining mobile services rates. And, again, this morning, Mr. Natale, in your opening remarks you've touched on it.
9380 But how do you -- what would you say price declines in Canada -- well, let me rephrase that. How do recent price declines in Canada compare to price declines internationally? You no doubt have heard the discussions that say, yes, but they're going down everywhere, which is generally true, but I'd just like to give you an opportunity to speak to that particular point as it's been raised by several interveners.
9381 MR. WATT: Sure. I'll start. Maybe then I'll ask Brent to chime in as well.
9382 As we find ways to improve the efficiency of our business, as we find ways of adding capacity at better unit costs, we're more than happy to pass those savings along to consumers and therefore drive price points and affordability to a better place as a whole. I think it's kind of where the industry started.
9383 Go back to -- you know, go back to the early days of wireless and look at what it would cost for a minute of voice service, or the early days of data, they were far, far higher than prices are today. So, there's a natural technology curve. The technology curve has a slope on it based on the evolution of technology and our ability to invest in it, but that curve also has a floor based on what are the inherent costs of operating in a particular country.
9384 You know, the biggest cost drivers we have, I talked about them in my opening comments. First and foremost is population density and geographic area. I can't change that for Canada. It's just a fact that countries like ours that span 5 time zones, and have a population density that's 1/10th out of the U.S., and, you know, 1/20th or 30th that of many European countries are more expensive to cover period, especially if our goal is to leave no Canadian behind, if our goal is to extend the latest technology to 99 per cent of Canadians.
9385 The second cost factor really has to do with the price of some of out inputs. Spectrum's a very expensive input. We spent $9 billion on spectrum since the first day of wireless. As I said, you know, we pay a premium for that spectrum.
9386 If you look at -- you compare it to the U.S., we're paying in rough terms, you know, 75 per cent to 100 per cent premium on U.S. cost of spectrum. You compare it to other countries, it's two or five times the amount that some of the European countries have paid for spectrum as a whole. And then there's the topic of equipment that is all priced in U.S. currency.
9387 So, there's a natural floor to that curve. We'd like nothing more than to continue increasing affordability because it's good for Canada and it'll continue to drive adoption and data consumption. We're in some ways forecasting that we'll be able to deliver a unit cost of data more efficiently in the world of 5G; hence this move to unlimited and the ability to actually lower prices. In one fell swoop last summer, we dropped that one plan that used to cost about $100 for 10 gigabytes of data to $75, to $75 with unlimited on the plan as well. I mean, that was a big move. We though about that ---
9388 THE CHAIRPERSON: We’ll talk about that in a minute.
9389 MR. WATT: We thought about that for the better part of a year before even, you know, taking that decision. So we’re motivated to make those moves, but they are conditioned by the reality of investment and our ability to drive that curve.
9390 MR. JOHNSTON: I would just add, building on the 5G investments, the cost curves that ensue, and the unlimited decision in June of last year, that pricing trends and pricing developments in any market are inherently non-linear. So they -- they tend to have break points and they move in single point events in large part. And I think we’d look no further than last June to see that a catalyst like the move to unlimited, creates a breakpoint and a discontinuity in the pricing environment.
9391 And we see that as 5G rolls out, as Joe mentioned, that the ability for Canadians to use more data will drive a continued price per gigabyte downtrend in the market. And I’m sure as new technologies within 5G, and millimetre wave, et cetera, come to the market, there will be continued price compression on that price per gigabyte as we move forward.
9392 THE CHAIRPERSON: Thank you for that. That’s helpful.
9393 Just back to my original question though, a number of parties -- well, for example, Telus -- suggested that the recent data in, for example, the Competition Bureau’s examination is out of date. And I guess my core of my question was do you think everything you said is -- I’ll accept is arguably true, but it’s true elsewhere. Are our rates going down faster or slower than other countries?
9394 MR. WATT: I think you’re probably referring -- there we go. I think you may be referring to the Competition Bureau chart in Bill’s book about that, and others ---
9395 THE CHAIRPERSON: I am.
9396 MR. WATT: --- make the same point, that chart ended in 2018. So our prices have dramatically fallen since then. Your question is fair enough, don’t dispute that. But what about other countries? Well, our view is -- because another question we’ve heard is, it’s fabulous that you have introduced the unlimited plan, but frankly, what took you so long?
9397 THE CHAIRPERSON: That’s one of my questions.
9398 MR. WATT: Yes. So I think that it’s fair to say that our position -- I think it’s safe to assume and you know, we tell people never to do that here, but that our prices have fallen more than others because we have, as Brent said, introduced that breakpoint now, with that very substantial change, than in some other countries came a bit before.
9399 We do think, just to make the fundamental point, and you talk about the international price comparison, to really want to look to the American situation for the most comparable match to Canada in terms of the characteristics. And so that is the one that we -- we would draw your attention to.
9400 THE CHAIRPERSON: Thank you.
9401 I’ll get you to reformulate all my questions. Your statement of my question was clearer than my question.
9402 You raise -- you answered this in part in your opening remarks, Mr. Natale, with respect to the motivation behind the introduction of last June’s reductions. But I’m sure, as you are referring, a number of -- a number of intervenors have questioned the timing. You’ve said it did not relate to the threat of regulatory intervention, but I should give you an opportunity to add to that. The point’s been made, what say you?
9403 MR. NATALE: Thank you, Mr. Chair.
9404 If you were to spend time in my strategy meetings with my team, many of whom are here today, you would hear us talk about what are some of the next moves in the industry? Often informed by, what are the most important customer pain points that we see out there? We had that conversation a few years ago when the topic of discussion was roaming and how roaming is packaged or priced for Canadians, and that gave birth to the notion of roam like home.
9405 We’ve had this conversation around unlimited for the last, I would say year in earnest, and longer frankly. The thing that’s always held us back is that the market in Canada grew up with an overage regime or an overage structure that constituted a significant part of our economics. As you heard me say last summer, five percent of our revenue is in overage. We’ve been quickly melting that five percent. Roughly $500 million has been quickly melting as people have adopted these plans.
9406 We did it because it’s the right thing for consumers. We did it because consumers want to that peace of mind. We did it because the 5G era is around the corner. We wanted to kind of create an environment where people feel comfortable and open in using more data as a whole. When we looked at it before, it was two years ago or so, where overage was 10 percent of our revenue.
9407 So you get to a place where you say, when is the right moment we’re willing to rip off the band aid and make the move? And we had a debate over a long period of time and we finally decided that we were ready to do it. We got great support from our Board. We had a Board meeting in June of last year where we talked about this topic at length and we were very open about the fact that it would lead to financial pressure. As you saw later in the year, we revised our financial guidance, not something you do lightly in a public company. But we felt it was the right thing for consumers and it’s time to march on.
9408 So you can rely on us to keep looking at, you know, pain points as they come along, and other opportunities to either remove customer friction, or to create more affordable plans at all levels in the marketplace.
9409 THE CHAIRPERSON: Thank you. I omitted when we were talking about your cost curve, you made a couple of references now to spectrum costs or fees specifically, and indicated that they were in the order of seven times more than foreign jurisdictions, or the U.S. Do you have documentation, or could you undertake to provide us with details as to how that was calculated, or the source for it?
9410 MR. WATT: Yes, we can do that. The source is the GMSA Efficient Spectrum Pricing, and that’s the source of the numbers that Joe was mentioning, 1.75 times the U.S. level, three and a half times higher here than in Australia, Italy, et cetera. And so, the curve is there and we’ll file that with you.
UNDERTAKING / ENGAGEMENT
9411 THE CHAIRPERSON: I’d appreciate that. Thank you.
9412 We’ve heard a fair amount in the course of the proceeding relating to why there are differences, sometimes significant, sometimes not, between provinces, with respect to rates, and notably in Quebec. You are a national player, how do you explain the difference in regional pricing in Quebec, versus other regions or provinces?
9413 MR. JOHNSTON: Thank you. Well, first of all, I would mention that as we look most recently, and as the fourth carrier structure has emerged across the entirety of Canada in the last two or three years in a meaningful way, that the pricing variation across the province has actually normalized to a large degree.
9414 So we see on an everyday basis, all provinces, with the exception of Quebec, showing high levels of consistency in their pricing. I think the exhibits earlier in the submission, or in the hearings, supported that -- that observation.
9415 So as we look forward, you know, you will -- described it as, sort of, the various market dynamics and structures in the various provinces have led to various pricing outcomes. Quebec seems to be and has been in my experience in the industry, a persistent market where the pricing levels are different.
9416 And it’s a little interesting in the sense that, for example, Alberta, where the pricing and the ARPU levels are higher, but the penetration is also higher, we see Quebec with the unique outcome where the pricing is lower, ARPUs are lower, but the penetration is also lower. And so, that points to a market behaviour or consumer behaviour that places, perhaps, less value on the latest technology or the amount of data that is being provided, and has created a persistent and enhanced competitive dynamic for any particular price point because we've seen that demand for any levels of service just seem to be lower in Québec and has led to a more competitive dynamic around that.
9417 THE CHAIRPERSON: And I would take it from that response that those are generally the factors that you take into account when you determine prices for a region? It's those -- that set of considerations?
9418 MR. JOHNSTON: Well, I think it's important to note that when we determine prices, very much the market determines the prices. So we are but one player in a very competitive market.
9419 And very often I'm a price taker not a price setter in a various -- in a market, so we are responding and reacting to the moves of our competitors. And it's that dynamic, the demand levels of consumers, the behaviour of my competitors, and our responses that ultimately define and shape the pricing. And as I said, in Québec there's a unique environment that has created a unique outcome.
9420 THE CHAIRPERSON: And is that -- is the province the smallest geographic territory or market that you would look at in terms of establishing pricing, or would there be submarkets where you would adjust pricing beyond that?
9421 MR. JOHNSTON: There -- the level of pricing discrimination is like where we set -- like the prices in Québec generally have been a provincial decision, so we wouldn't have, you know, a price in Montréal that's different than a price in Québec City, and you'll even see that Ottawa prices here reflect more prices in Québec.
9422 But if you -- if you're more broadly in Ontario, you'll see a different price level. And that's been the structure of the industry to have the major players and all the players, is that the provincial boundaries have defined sort of what the prices have been in the various jurisdictions.
9423 THE CHAIRPERSON: For marketing reasons, I assume as much as anything?
9424 MR. JOHNSTON: Yes. I would say simplicity and defining, you know, where is the boundary, and in an arbitrary sense, the provincial boundary becomes the natural place to put that line.
9425 THE CHAIRPERSON: There may not be a single answer to this question, but what's the smallest region, in your view, where you might have a different price, or package?
9426 MR. JOHNSTON: That would be at a provincial level. Yeah.
9427 MR. NATALE: Let me just add one thought on this dialogue. I think it's important to understand that when we look at, you know, marketing and pricing and how it looks geographically, yes, the province is sort of the main cut, just given the expanse of Canada as a whole. But when it comes to promotional periods, when it comes to intensely hot periods like Black Friday or Boxing Week, there are often very aggressive promotions that are aimed at a particular city or a particular retail chain, or sometimes a particular shopping mall. So there's a whole promotional intensity.
9428 And bear in mind that, you know, the majority of our volume actually happens during these promotional periods. There are about 40 to 50 days a year that make up a substantive amount of our volume, in fact, a massive amount of our volume, and they would -- they're the periods you might imagine – Back To School, Black Friday, over the holiday period, through Boxing Week.
9429 And there, you'll see very targeted things that are often, as we call them, "back pocket offers". They're just happening in a channel, they're not advertised, and through our competitive intelligence - because every weekend we send people out to do mystery shopping, every weekend we send people out to look at what's happening in all banners, all stores, and come back for, you know, the Monday meeting that Brent holds and says "What did you learn this weekend?" "Well we saw that Competitor X is offering this particular bonus or offer or gift card in that particular channel", et cetera. And in fact, the people on the ground often will respond to that very quickly.
9430 But during these intense periods we have, for lack of a better descriptor, a War Room that is staffed by marketing people that are making in‑the‑moment pricing decisions because of the intensity of those periods. And if you look at the proportion of our customers that, you know, get something on a promotion, it's massive. It's the vast majority of customers get something on a promotion during those periods.
9431 THE CHAIRPERSON: Thank you. This question probably belongs in another part of my questions, but you just referenced looking at your competitors' offerings.
9432 We've heard a couple of times in this proceeding, from those in particular who support MVNOs, that there is little product differentiation in offers between the Big 3, as between the Big 3. Is that part of the reason for that, that you are closely examining your competitives' -- competitors' offerings and then matching or bettering it?
9433 MR. NATALE: The market is intensely competitive and highly efficient. It's not different than, you know, three gas stations on a corner. If one of them changes the price of gas, the other two quickly get up on the ladder and change the price of gas. And we have a strong pulse of market intelligence, and the reaction time is very quick in any part of the particular market.
9434 At the end of the day, there are no real structural advantages anymore. There was a time in our history when there was a structural advantage around a particular network technology, CDMA versus GSM, or the structural advantage around whether you had the iPhone and someone else didn't.
9435 Now, technology has pretty much become, you know, ubiquitous. Everybody's got every technology at their disposal; and therefore, we really do compete on a combination of customer service and price because as a service provider, we have no other structural advantage.
9436 THE CHAIRPERSON: Thank you. We'll probably come back to that theme when we talk about 5G later on.
9437 MR. WATT: I just wonder, this -- Richard, would you like to weigh on this on basically competitive markets? What is a competitive market around the world in wireless, how they structure, you know, in reference to the Chairperson's question?
9438 MR. FEASEY: Thank you. So I think the way that, at least in my experience, other regulators, and as a member of the Competition Authority I would think about it, is we're obviously trying to find another -- you know, what would a -- what is the relative competitive benchmark for the Canadian wireless market.
9439 I've heard a lot about comparisons with other countries. It's an obvious thing to do to go and look at another market that you think's competitive and say well the performance in that market gives us a benchmark against which we then compare Canada. My view, my experience is that you can attach some weight to those sorts of comparisons, but not a great deal because there are simply too many other variables involved in these cross-country comparisons to really allow you to draw very strong conclusions.
9440 In my experience, what people tend to look at much more is not historic measures of market performance, such as HHIs and market shares, that tells you something about how people have got to where they are today, but it doesn't tell you very much about what's going on today, but the standard measure that I've seen in wireless markets, certainly, is shares of net additions would be the most -- would be the measure that I would attach the greatest weight to, because that gives you an indication of the current competitive capabilities of the different parties. And I observe in Canada that in that case, the regional carriers are -- appear to be performing very strongly now in terms of their share of net additions.
9441 The other point I would make that I would also attach quite a bit of weight to is a point that Joe made in his opening remarks, which is ultimately to look the relationship between the returns -- the revenues, and the returns on assets that firms are running and their cost of capital because that takes into account pricing, quality, differences in costs, and all the other factors, and in my view, would be the sort of standard view of how you would think about is this market competitive and firms are running reasonable returns on their assets or is it a market where we see there's a problem.
9442 THE CHAIRPERSON: Thank you.
9443 Change of provinces. We talked about Québec for a moment. In reference to Manitoba, in your May intervention, you emphasized that Xplornet's entry in Manitoba ensured that there would be a continuation of a fourth carrier; and therefore, continuing levels of competition.
9444 I've seen some information in the course of the proceeding that suggests that the prices actually rose initially following the merger, but that said, since that time it seems that except for the larger plans pricing in Manitoba and Saskatchewan is now generally in line with that of other provinces.
9445 Is that a fair assessment of how you see the market? And how do you -- how would you assess Xplornet’s impact on the competitive environment in Manitoba?
9446 MR. JOHNSTON: I would -- I would agree that that is a fair assessment of how the market has shaped up since that time. We’ve seen, you know, the intensity levels, you know, continue to increase over time more broadly across Canada, and that has led to an equilibration of pricing across those markets. And I see that actually persisting and moving forward now.
9447 THE CHAIRPERSON: Thank you.
9448 You’ve already made reference to this in your opening remarks, Mr. -- well, actually, Mr. Natale, but perhaps more in response to one of my questions -- when you talked about the cost curve of being a mobile provider. And you have, I think in your -- again, May intervention, talked about the declining per unit price of mobile wireless data over roughly, the last five years.
9449 But I also assume you were listening to the hearing yesterday and you may have heard Mr. Lawford’s reference to magic math, effectively not -- I mean, the transcript speaks for itself. But Mr. Lawford was suggesting that cost declines can and should happen every year and therefore, increased data allowance should happen naturally. So the price decrease if -- to the extent that we’re characterizing increased data as part of the increased benefit to consumer is a bit of a smoke and mirrors exercise.
9450 Would you care to respond to that?
9451 MR. NATALE: I find that highly disappointing, that characterization. You know, Jorge referenced the fact that 70 percent of our capital costs our civil engineering costs, our people that are clearing roads, building towers. Well, the price of that labour is not going down in Canada, it’s going up. And in fact, almost any direct comparison with the U.S. to Canada, you find that we pay our employees and our suppliers that provide those services, far better income than in many parts of the U.S. In fact, if you compare us to the State of Florida, it’s roughly half the amount per hour for a technician that is clearing a road or building a tower.
9452 We talked about spectrum already, and that analogous cost around spectrum. We talked about the fact that we buy our equipment in U.S. dollars. You know, a lot of our plans include the cost of the phone. The price of the phone is going up, not down. I talked about that in my opening remarks. So you know, we are working hard to drive unit cost as we find better technologies that make better use of spectrum. We have dynamic spectrum sharing that can give us more bang for our buck on spectrum.
9453 As we find these opportunities, as I said before, we pass them along to consumers. They’re not natural. They don’t just happen randomly or accidentally. They happen because of the investments that we’re making every year to drive that capability and that opportunity.
9454 THE CHAIRPERSON: Thank you.
9455 A little bit of a change of subject, what about network quality, generally speaking? Is there much of a difference in network quality across the province -- across the country, rather? Do you -- if you’re looking at a provincial level, are there variations in network quality from one to another? You mentioned earlier, or we discussed earlier that prices were generally lower in Quebec. Is there a differentiation in network quality between Quebec and elsewhere, for example?
9456 MR. FERNANDES: Thanks for the question.
9457 We have standard engineering policies that we apply across the country. From an engineering point of view, we don’t think about the country on a province by province basis. We have central engineering teams that define quality, parameters, and standards that apply across the entire country. And then these parameters are managed and maintained by the teams on a regional basis.
9458 So at any given moment, any difference in quality that might exist is always a temporary one and would have been as a result of a particular market situation. Where, for instance, an increase in consumption of data in a particular area, particular city, might then drive up the congestion at that particular city, then obviously degrade the quality parameters. And obviously that is managed by the local teams to bring the quality of the network back up to the standard parameters that we establish. And we have those, obviously for voice and for data, to ensure that our customers experience exactly the same service across the whole country.
9459 THE CHAIRPERSON: Thank you.
9460 So by design there is no differentiation. Does it follow then that network quality is not taken into account when setting prices in various provinces?
9461 MR. FERNANDES: The quality is taken into account in as much as there is a very close alignment between the engineering and the marketing departments whenever we’re thinking about a new -- a new plan, a new product. So we will consider what the impact of that new product might be, might have on the network, and if we believe that the impact is going to be significant, then we make sure that we take into account investments required to maintain that quality of service.
9462 So to give you an example, before we launched our infinite plans, we had a -- obviously, a deep discussion in terms of what the forecasting of data growth impact would be on the network across the whole country. And then based on that forecasting, we made sure that we -- we provide the investments necessary to obviously add the capacity required to maintain that quality, wherever it might be.
9463 THE CHAIRPERSON: Thank you. Mr. Watt?
9464 MR. WATT: Yes. From an economist’s spin on that, I think I would say that the -- the overall level of prices is set to accommodate the costs of the network quality. But then within any particular region, as we’ve seen in Quebec, we then deal with demand characteristics that are unique of each of the individual markets, or where the demand is significantly different, even though the network quality is identical.
9465 To get customers on the network to drive revenue, we will -- we will have to make differences in the price plans.
9466 THE CHAIRPERSON: Understood. Thank you.
9467 And does that, I guess all of that, both from a technical and the perspective of an economist, does that hold true for the flanker brands? Is that equally true for Fido and Chatter?
9468 MR. FERNANDES: The networks that serves our customers are the same networks, and so the differentiation that we have currently is with Chatter, where the customers are on our 3G network. So we have a 2G, a 3G, a 4G, and a 5G network. Our Chatter customers use our 3G network more or less dedicated and set bans on the device that they would have. Otherwise, for other brands, whether they would attach to one or another network.
9469 THE CHAIRPERSON: And generally, you’ve probably heard a fair amount of discussion over the past week or so, that there is broad consumer -- we can call it confusion, or lack of information, with respect to the flanker brands, as to whether or not they are of inferior quality. And you’ve probably again, heard our discussion the past several intervenors, whether or not they think that hesitation to subscribe to flanker brands is driven perhaps by a sense that it is an inferior quality. You’ve also no doubt heard the different approaches expressed by Bell with respect to the management of its flanker brands, versus the approach identified by Telus.
9470 So that’s a bunch of questions in one, but if you’d care to respond?
9471 MR NATALE: I’ll start and then ask Brent to add to it. We are very proud of the network quality that our flanker brands represent. And if you were to look on the website and look at the maps that show the network, or you walk into a Fido store and speak to one of our representatives there, they would extol the virtues, and quality, and reach of that network, and tell you unequivocally that it’s the same network that the Rogers' brand lives on. So, we make no bones about that, and we're very proud of that fact.
9472 Where the brands are delineated is, they speak to different parts of the market, and there's certain capabilities that live in each of the brands. So, Rogers, by definition, is a premium brand with high touch service, and, you know, a person to answer the phone and be there for every interaction. It's a brand that allows sharing and share -- plans of share constructs. It's a brand that will allow any phone whatsoever to be now financed, originally subsidized, et cetera. Whereas, the Fido brand is meant to be more of a digitally present brand that doesn't provide sharing in the construct, and certain handsets are not eligible, a lower assortment overall. So, it's meant to be tuned to a part of the market that is in a different sort of affordability strata, and, therefore, lower price points, and, therefore, lower level of support as a result. So, we try to tune these brands specifically in that manner.
9473 MR. JOHNSTON: I would also add that if you look at the mix of our gross additions and the customers coming to us, there's a very, very healthy mix of Rogers, Fido and Chatr. So, I would say that there's -- that would demonstrate a very open and transparent understanding from consumers to which choices they're making, and given the way those brands are tuned, to satisfy the needs of various customer segments. So, that'll be point number one.
9474 Point number two, when you look into a mall in Canada and look at the opportunity to make that choice transparently, you would look no further than, say, perhaps the Rideau Center here in Ottawa and discover 13 different opportunities or places to buy wireless. Some are exclusive, so they sell one brand only, some are non-exclusive, they sell multiple brands.
9475 Very, very often they are located very close to each other. So, the Fido store is very, very often very close, sometimes co-located next door to a Rogers' store, or very close to a Koodo, a Virgin, and a TELUS and a Bell store. And so, it becomes very easy for consumers to walk across and have these conversations and discover the various attributes of the service offerings and the network qualities.
9476 And then as I mentioned, you know, the vast majority of places in Canada are actually non-exclusive where all the brands are represented and the sales people there are trained by the various brands on all the, you know, pros of their particular offerings, and they can go and get that one-stop shop and be able to cross compare very, very efficiently.
9477 And thirdly, of course, is, you know, all of this information is widely and broadly available online on your mobile phone in the moment, or at home, and that makes it even more efficiently available to consumers to compare and make these decisions.
9478 So, the information is there. The mall -- the shopping environment itself actually facilitates -- very much like an auto mall -- the cross comparison of all these different attributes and makes it quite transparent.
9479 MR. NATALE: Let me just add, just to give some dimension to it, there are two-and-a-half thousand places in Canada where you can buy one of our products, one of our wireless products. About 1,500 of them are places that carry multiple -- and when I say "multiple" I mean competitor brands as well. So, the majority of those locations are places where customers can readily compare.
9480 If you walk into a BestBuy, you walk into a Walmart, or walk into a Wireless Wave ,or Telephone Booth, these are all multi-banner, multi-product locations. And given the sales representatives in those locations make their money on their ability to convince a customer to do something, whether it's their bonus or their commission, et cetera, they're very well versed in comparing and contrasting one against the other. And any time there's even a minute difference in some opportunity, whether it's price or data, et cetera, it quickly shifts the volume, which is quickly understood by the competitor and ameliorated.
9481 So, the market works very much efficiently, as I said before. And every day, in the vast majority of locations across Canada, the brands are side-by-side on a display and being talked about by the customer sales representative.
9482 THE CHAIRPERSON: Thank you.
9483 Again, changing gears a little bit, on the CAPEX front, you've already talked a little bit about the significant 5G investment requirements. Where's -- with LTEA mostly deployed, where are you right now in your investment cycle?
9484 MR. FERNANDES: We continue to invest on our current infrastructure. So, as I said before, in order to maintain the network quality across the country, we continue to invest even on LTEA as we speak. You know, in 2019 alone we deployed over 300 sites, new sites with LTEA, and we have similar plans to continue even with the event of 5G.
9485 THE CHAIRPERSON: And you've made reference, Rogers made reference to itself and its national competitors punching well above their weight, to quote your evidence. I think the numbers were $95 per subscriber in CAPEX in 2018, which you submitted was more than the per sub levels in the U.S. You may want to take this -- answer this particular question by way of undertaking, but I'll ask you in any event.
9486 Would you be able to give us that number for 2019? I don't know if that needs to be in confidence or not, and do you have any estimates of what that number will be in the coming years as associated with 5G.
9487 MR. WATT: Okay. I think it's certainly no problem providing that number for 2019. In fact, our -- we've already released our fourth quarter results, so we know we spent 1. -- roughly $1.3 billion in wireless last year up from 1 billion the year before, so we can turn that into the per capita and per sub. And I think, subject to check, I believe we gave a forecast of our CAPEX for 2020, but we'll check. If we haven't ---
9488 THE CHAIRPERSON: Okay.
9489 MR. WATT: --- we'll give it to you in an undertaking.
UNDERTAKING / ENGAGEMENT
9490 MR. WATT: One thing I would add though, when you look at those charts, I would encourage you to add the spectrum cost to the physical plant and equipment capital expenditure, which those charts only show now. Point being that over the last six years we've spent $6 billion in wireless, property plant and equipment, traditional CAPEX. We spent almost 6.1 billion spectrum, and spectrum is needed, and there's a trade-off there in the sense that, you know, when you have more spectrum -- Jorge can elaborate, this is by layman's explanation -- that decreases the need for additional sales to a point it's a trade-off spectrum, and then sale sites. Therefore, I think to get an accurate picture you really need to look at the sum of the two. And there we know, you know, property plant and equipment Australia looks like it's more. But I know in -- Telstra spent 1.3 Canadian over the past 6 years for spectrum. We spent 6.1 billion. And the two -- both those components of the expenditure need to be looked at in a chart of that nature.
9491 THE CHAIRPERSON: You can certainly include that analysis in your response -- undertaking response.
9492 I should give you an opportunity to respond as well to the more broad issue of if the Commission were to mandate MVNO access, how would that impact those investment numbers? You can feel free to answer that now, or you can include that in your response to the undertaking.
9493 MR. NATALE: Be happy to address that question. We can certainly follow up with more specificity if it's required.
9494 If there is mandated MVNO access that impacts our investment thresholds, then investment will be reduced, and investment will be reduced in the places where the economics of that investment no longer make sense.
9495 You asked the question, Mr. Chair, a few minutes ago around were stood with LTE advanced. You know, if you go back five years when LTE advanced, we were sitting at roughly 83 per cent of Canada covered. This year we're at 95 per cent. We'll make our way to 99 in the time ahead.
9496 I will tell you the last 5 or 10 per cent is the hardest because of population density. As you know, 48 per cent of Canadians live in the big, major cities. The 52 per cent that do not live spread across our vast landscape.
9497 And if you were to sit in one of our capital investment meetings where Jorge gets his money to build those 300 new towers and to add $1.3 billion of capacity, it is a serious discussion where we take every single request for capital, and in any given year there are far more requests than we have affordability for.
9498 We rank them one‑by‑one over, you know, a 20‑30‑page spreadsheet, and we rank them based on the expected return from that particular investment, and then we draw a line around our affordability based on the 5 percent return invested capital, and the other metrics I talked about earlier, and anything above the line gets done, anything below the line doesn't get done. So what'll happen is that line will be further up the page, and that line will impact rural Canada in the most significant way.
9499 Right now, we -- as I said earlier, we enjoy some of the best networks in the world. The fact that we're second only to South Korea, in many ways we're a global superpower when it comes to network capability and network coverage as a whole.
9500 The U.S. has speeds that on average half of Canadian speeds. If you were to draw that table, Canada would be Number 2, the U.S. would be Number 30 on that list, France would be 19, Germany would be 24. If rural Canada were a country, it would rank 14th on that list, far above the U.S. and the UK. That's the benefit of having a regulatory regime that supports this investment because we are fortunate in Canada not to have a very significant, and in fact, a very small digital divide when it comes to wireless.
9501 On the wireline side of our business, about 15 percent of Canadians across the industry, as you know, 15 percent of homes in Canada either have no Internet or have very poor Internet. There is a real and significant digital divide in our country that we're desperately trying to figure out ways of closing between government programs, CRTC programs, and our own efforts. We are blessed that we don't have that kind of divide on the wireless side.
9502 If we change the economic thesis of our industry, we will open up a digital divide on the wireless part of our world, which I think would be a shame. Would be a shame. 99 percent of Canadians is, I think a trophy on our mantle as a country. I want to keep it there.
9503 THE CHAIRPERSON: Thank you. Talk for a moment about barriers to entry. In your November intervention you submitted that barriers to entry in the mobile market are low. Obviously, there is some differing views.
9504 Shaw, for example, indicated last week that in addition to paying 1.6 billion for its acquisition of wind, they've undertaken billions in further investments, including 400 million per year upgrading and expanding their network. That doesn't sound like an insignificant barrier. Similarly, Mr. Bragg, when he appeared, also outlined what he described as this difficulty experienced by a privately-held company as it endeavours to build out.
9505 So I guess I'd like to ask you again, is that still your view that there are not significant barriers to entry to the mobile wireless market?
9506 MR. WATT: Okay. I don't recall that statement. It's obviously there. You can give me reference.
9507 THE CHAIRPERSON: I -- it should say paragraph 80 of 22 November intervention is what I'm referring to.
9508 MR. WATT: Okay. I'll take a look at that, but it -- for the reasons ---
9509 THE CHAIRPERSON: Hopefully, I haven't mischaracterized it.
9510 MR. WATT: No. For the reasons you outline they are clearly substantial barriers to entry for any facilities-based entrant. There is no question about that. Having said that, I'll stop, I'll go read that reference to see ---
9511 THE CHAIRPERSON: We can come ---
9512 MR. WATT: --- what we said. See what we ---
9513 THE CHAIRPERSON: --- back to it. Hopefully, I haven't misquoted you.
9514 MR. WATT: Oh, Howard, I think ---
9515 THE CHAIRPERSON: It's says it's low.
9516 MR. WATT: --- in a potential momentary minute of madness.
9517 MR. SLAWNER: No, I don't think it was a moment of madness. I don't think we were trying to say that there's a not a cost to enter the market. I think the point was that with the government's support, with set‑asides, spectrum caps, mandatory roaming, the fourth carrier policy of the government has enabled entry by these players and they've been able to at a much lower price than otherwise they could've done.
9518 So the barriers are actually -- they're not insurmountable. People have been investing in wireless networks in this country over the last 10 years with the help of the government, and so it's not basically a free market (unintelligible). The barriers are actually being kind of brought down by the government.
9519 THE CHAIRPERSON: Thank you. That is helpful.
9520 So based on that, to what extent do you think its possible that we'll see a potential new entrant, regional or otherwise?
9521 MR. SLAWNER: It's always possible. I mean, with the -- if the government keeps providing assistance during auctions, there's always the opportunity for somebody to come along and take advantage of the set‑aside or the cap. I think you also have an opportunity now with Xplornet, who has allotted 3500 megahertz of spectrum, who was just recently acquired by a large investment fund, so they have the potential.
9522 But I think there's a real market difference between possibility and probability. I don't think you witness a lot of market entry in a competitive market where prices are declining every single year. So even if the opportunity is there, whether or not somebody actually tries to enter it seems questionable.
9523 THE CHAIRPERSON: Fair enough. So let me say the question differently, but I think the answer will probably be the same.
9524 Do you expect, let's say in a 5‑year time horizon, do you expect to see new entry in the Canadian market facilities-based entry deploying spectrum?
9525 MR. WATT: We can't be certain. We've seen Xplornet come in as a fourth in Manitoba, we actually have five, actually in the Ottawa region. As to somebody else coming in, I think -- I'm going to ask Richard maybe to comment on sort on the global perspective, four to five, four to three.
9526 But you know, in a country of 36 million people spread across this huge landmass already with four facilities-based competitors, five in some locations, and the sub brands, the spectrum that's been given out, the spectrum that remains, I think it would be difficult to see another facilities-based competitor arrive.
9527 THE CHAIRPERSON: Thank you. Oh, go ahead.
9528 MR. FEASEY: Thank you. I mean, just to add. If you look at this market from the perspective of an outside observer, Canada is a bit of an outlier in going from three to four facilities-based, four facilities-based competitors. The trend certainly in Europe, to some extent in the United States, and elsewhere in the world has been towards a greater concentration in facilities-based markets, I would say over the period over the last, certainly the last five years.
9529 Typically markets are moving down from four to three carriers elsewhere in the world. To the extent that that indicates anything about how the economics of the industry is changing then the move would not be towards additional entry.
9530 THE CHAIRPERSON: Thank you. Network sharing arrangements. You have one with Videotron. Can you talk to me a little about what your rationale or reasons were at the time for entering into that agreement?
9531 MR. NATALE: Sure. At the time, we go back in time, it is before my time so I'll ask David to fill in as appropriate. At the time, we had a re‑sale arrangement with Videotron as they were looking to enter the wireless market. That re‑sale arrangement turned into a network-sharing agreement. We looked at it specifically and said given the extent of the network build they want to do in Québec, given the opportunity to share infrastructure we believe there is an opportunity to share some of the capital load between two providers, maintaining, of course, our competitive distinction, delineation, but share the capital load with respect towers, and fibre, and the rest, and we embarked on that path to strike a network-sharing agreement.
9532 That network sharing agreement now is evolving. It's evolving to one where we will be sharing infrastructure, meaning we'll be sharing towers and backhaul. And so philosophically, from our perspective if there's an opportunity to strike a network-sharing agreement that makes sense for Rogers and makes sense, of course, with the other partner then we're open to the idea of the construct. We do so thoughtfully and carefully.
9533 I'll ask Jorge to comment. Network sharing agreements are very hard to orchestrate, very hard to manage over time, and in Europe the experience has been a troublesome one with agreements unravelling over time. So we do it with a very thoughtful eye.
9534 Our view generally is that sharing passive infrastructure makes sense. Sharing spectrum is more difficult, and I believe fundamentally in a 5G world even more problematic as 5G evolves into multi-dimensional applications and ideas for each of the players in the market.
9535 THE CHAIRPERSON: Before you add, maybe I can just throw in another element to the question which would be: have you been approached by any other regional MNO to enter into a similar agreement?
9536 MR. NATALE: The short answer is we have –- we have.
9537 THE CHAIRPERSON: And ---
9538 MR. NATALE: And ---
9539 THE CHAIRPERSON: --- successfully or I guess maybe you can (inaudible).
9540 MR. NATALE: Yeah, I won’t comment on the state of any particular negotiations, whether they’re old or current. I don’t think it’s fair given the confidentiality around some of those discussions, but of course, we will always address and look at opportunities as they come along.
9541 THE CHAIRPERSON: So I’ll take it as that you are prepared to negotiate with such network-sharing agreements with other carriers?
9542 MR. NATALE: Absolutely, if it’s in the best interests of Rogers and our future, more than happy to do so. If it helps to deploy technology more efficiently and reach more of Canada more efficiently –- extend further into rural Canada, absolutely we’re open to the idea.
9543 MR. WATT: I would just say -- and you’re aware of this -- we have a network-sharing arrangement with Tbaytel and we also do in Manitoba; it was originally with MTS and then it was in –- in the BCE acquisition of MTS that was assigned over in a revised format and again, involves Xplornet et cetera to make that deal workable.
9544 In terms of any type of network-sharing agreement, you really need two partners who bring relatively equal value to the table and that is the issue in –- that either makes your network-sharing arrangement happen or makes one not happen. There has to be relative equal value brought to the situation by both parties.
9545 THE CHAIRPERSON: Thank you.
9546 MR. FERNANDES: Just to maybe add a bit of colour to the statements that have been made, the balance of interests between both sharing parties is incredibly important, and this is why we believe that if there is a balance of needs, then we are open to sharing.
9547 I think it's also important to differentiate on the kinds of sharing that exists. Again here, we believe –- and I mentioned in the opening statement that 70 per cent of the costs of building a network are down to the civil works; you know, the steel, the cement, the infrastructure, and so this is what you would call passive sharing arrangements and we are very open to passive sharing arrangements.
9548 Where it becomes more complex is when you have active sharing arrangements when you extend to the electronics, to the radios, to the frequencies that you own and especially in situations where there is an imbalance of ownership of spectrum, then it tends to become a very complex (inaudible) to have different strategies, different markets that they want to address, different needs in capacity and so on and so forth.
9549 And so this is where the discussion enters on, you know, one of the parties want to invest and the other one not wanting to make that respective investment and so that’s –- that tends to complicate sharing agreements.
9550 I think it’s also important to say in the Canadian context that regardless of what sharing agreements we may, you know, come to implement, I think it’s fair to say that none of these sharing agreements would match the sharing arrangement that exists between Bell and TELUS where that particular sharing arrangement I think is unique in probably every circumstance, even at the global level where the –- both parties have been allowed to share spectrum and this in the Canadian context where it is incredibly expensive to apply set spectrum in what are incredibly complex auction environments where, you know, the parties are able to essentially set the price of the other. You know Bell and TELUS have the ability, more or less, to set the price of spectrum that we pay and we have, you know, very little to no chance of doing the same. And then bidding as an individual operator and then joining that spectrum is obviously something that certainly I haven’t seen anywhere else in the world and does create an imbalance when it comes to sharing arrangements in this country.
9551 THE CHAIRPERSON: Thank you. That will let me move on in a one second to believe it or not, that was Part 1. Hope you’re settled in.
9552 But before I leave it, I do have a short list; maybe I can save legal counsel some work later on.
9553 There are a number of reports that were used in the May intervention, and I’m not certain that they are all on the public record. Perhaps I’ll read them quickly and –- for the transcript and you can see them later, but if you could undertake to file any that are not on the public record.
9554 We had the Open Signal reports; The 5G Opportunity dated February 2019, Mobile Network Experience Report Canada dated February 2019, Mobile Network Experience Report US, January 2019 and the Open Signal reports listed in footnote 11 of your May 2019 submission.
9555 There’s also an Ericsson Mobility Report and a CWTA Report, the Benefits of the Wireless Telecommunications Industry to the Canadian Economy in 2017.
9556 Lastly, in your 22nd November further comments at Page 17, figure 1, there’s a reference to compound annual decline in ARPU in the G-7 and Australia, 2013 to 2018. If you could please undertake to file the data used to calculate those compound annual growth rates. You can guess I did not make up that list.
9557 MR. FERNANDES:Yes, we will provide those documents and the calculation.
UNDERTAKING / ENGAGEMENT
9558 THE CHAIRPERSON: Thank you.
9559 All right, a few questions about the retail market.
9560 You have –- I assume, Mr. Natale, you hear it a lot in your day-to-day business; we certainly hear it: there is a view from Canadians the prices for their wireless services are not reasonable. What -– how do you explain that? We have heard a lot in this proceeding about the range of offers, the effectiveness of (inaudible), the –- you know, the -- notwithstanding the quality and coverage of the network, there is nevertheless a continuing view that prices are not reasonable. Why is that there; what’s your explanation for it?
9561 MR. NATALE: I think, generally speaking, that Canadians probably have concerns about affordability period, a whole bunch of different categories in terms of affordability.
9562 We did an exhaustive survey last year and asked Canadians the question: if you could have better affordability for something, what would you like it for? And with the support of Nanos, we did a survey across Canada and wireless was ranked as seventh or eight on that list on the two different surveys that we did and in the top five were, no surprise, housing, food, electricity, gasoline and out-of-pocket Pharmacare costs.
9563 So generally speaking, I think that life is becoming more expensive as a whole, and there’s a general view that if people can get a better price or better affordability for something, they would like it.
9564 Well, frankly, we’re aligned with that mission and that view. We want nothing more than to offer Canadians more affordable options and more affordable opportunities with respect to wireless services. It’s actually in our best interest to do so because it will continue to drive demand for our product. It will continue to drive penetration rates in Canada and continue to drive the essential use of wireless services as a whole, especially on the doorstep of 5G, as we've discussed.
9565 If you look at, you know, any of the comparisons that we've drawn, we talked about the U.S. with respect to unlimited plans. The entry level unlimited plan in the U.S. on T-Mobile is $80 Canadian. On Verizon it's $92 Canadian. If you look at the MVNOs in the U.S., specifically Ting has a 1-gig plan at $29 Canadian. Republic has a 1-gig plan at $27 Canadian, while the Fido version of that is $30 and the Virgin version of that is $28.
9566 So, by, you know, a very empirical comparison, we're roughly in the same zone as the U.S.
9567 I think it's just the view that as people use more of a particular service and they like using more of that service, there is a desire to make it more affordable.
9568 I do think that, you know, the approach that the industry took to overage historically created dissonance, a lot of the customer friction that you're articulating I believe is rooted in the fact that bill shock became a major point of customer friction. And one of our goals and mandates has been to eradicate this notion of bill shock. On the Rogers' brand it's the move to unlimited. And on the Fido brand, we created something that's called worry free data protection. That is a very customer-friendly way of managing your data plan, and has been well received and lauded by our customers as a result.
9569 So, I think as we remove those friction points, you know, drive those likelihood to recommend our customer satisfaction scores, continue to drive more affordability that we'll be in a better stead with Canadians as a whole.
9570 You know, historically, we've given Canadians a lot more to think about and complain about, if -- whether it's bill shock or a customer service issue, et cetera.
9571 My personal mandate and vision and drive is to eradicate those friction points and just create a better relationship with Canadians as a whole and keep driving affordability directly.
9572 THE CHAIRPERSON: Well, we certainly wish you luck in that regard.
9573 How do you promote your lower cost plans? Are they as much a focus as the higher or larger data plans, for example, and what can you tell us about the supporting materials, training manuals, customer care, and the like that goes with that?
9574 MR. JOHNSTON: And I think I preface that with I think a constant refrain and conversation on just how vigorous the competition for subscribers are in light of the net added success of our regional players that every service rep in every store is vigorously trying to encourage and convince customers to buy with them and for the offerings that they provide. So, that creates I think a backdrop for our then desire to satisfy and deliver to those reps the materials and all of the information, both on the higher tier plans, but also on the low-cost data plans, everything that they need to be successful in that endeavour.
9575 So, there is the same treatment for the high-end plans that there is for the low-end plans, or the low-cost data plans, and similarly on our websites, they're also similarly available and available for people to see.
9576 So, there's every effort made to make them as transparent as possible, but, again, rooted in this desire to ensure that, you know, we have the right thing for the right -- for that right customer when they walk into our store.
9577 THE CHAIRPERSON: And does your promotion or advertising for some of those lower-cost plans, do they target any particular demographic market, seniors, or new Canadians, for example?
9578 MR. JOHNSTON: Certainly -- you know, the first conversation in a store from the rep is largely around discovery and understanding the unique needs of that particular customer. And it's really that conversation that opens up the door to the rep to be -- say, "Well, here's what I have that can help solve that need for you". So insofar as those conversations are happening every day across the thousands and thousands of stores across Canada, yes, there is a discern effect to ensure that the right solution is being presented to the customer given their unique needs.
9579 THE CHAIRPERSON: A bit of a -- call it a side-step, a shuffle, but you used the word "vigorous" when you described your agents or employees explaining and offering their services. Obviously, we, not so long ago, had a proceeding to look at aggressive and misleading sales practices. I'd be remiss if I didn't give you a chance to tell us how you think you're doing in light of the issues raised in that proceeding and since then.
9580 MR. JOHNSTON: Well, first of all, my vigorous comment was really around the vigorous competition and that risk.
9581 I will say that we are in a repeat business, meaning customers stay with us -- our desire is for them to stay with us as long as possible. So, the quality of the conversation at the beginning of that relationship is very, very central to the quality of the relationship that ensues.
9582 And so, reps deeply understand that when they have the right conversation, present the right solution, they are developing an ongoing relationship with the customer, and those customers often come back to the same store, talk to the same rep about their ongoing needs.
9583 We have implemented, you know -- and have had in place, you know, the structures and the training and the infrastructure to ensure that those conversations happen appropriately.
9584 I might hand it off to David or Joe to talk more specifically.
9585 MR. NATALE: First of all, we take the issue of sales practices very seriously. We've worked very hard to drive the right behaviour, the right training, and deal with any issues that come along.
9586 We have 13,000 team members that interact with customers every single day. It's a great team. They care deeply about the customer.
9587 Yes, from time to time there may be some small be it, but some behaviour that is not right, which we quickly kind of find and deal with.
9588 Eric Agius was here in that hearing last year and spoke at length around our sales practices and what we're doing about it. He's done a great job of actually driving that to a new place, a new height for us overall. In fact, Eric was just recently promoted to Chief Customer Officer for Rogers, which really means that he bears the burden of responsibility for customer advocacy at our table, reporting to me directly. And I think that'll help to enshrine not just the focus on this topic, but more broadly, the customer as a whole and having a voice at my table.
9589 THE CHAIRPERSON: Thank you. And I was going to ask you if you had -- if you could file training manuals and other documents that show how you teach your sales representatives to propose those -- or describe those low-cost plans ---
9590 MR. NATALE: Sure.
9591 THE CHAIRPERSON: --- and that relates to the earlier discussion ---
9592 MR. NATALE: Sure.
9593 THE CHAIRPERSON: --- not the discussion we just had about misleading and aggressive sales practices. I just, as you've heard from other parties, would be interested in seeing your training materials in relation to how you describe and promote those brands.
9594 MR. WATT: We will provide that information.
UNDERTAKING / ENGAGEMENT
9595 MR. WATT: Can I maybe do sideways shuffle back to I think two questions ago, and this was the -- sort of the threshold question of general perception the prices are too high. This is a real problem. What do you have to say in your defence? And Joe has explained our view there.
9596 This is a real conundrum because the thesis goes that if your prices are too high, and then the next statement is, quote one of the interveners, they were advocating for MVNO on the basis that the goal should be to immediately reduce excess profit taking from the Big Three. So, the connection between these high prices and excess profit.
9597 And if there's one message we'd like to get across to -- amongst many, is that, no, that happy solution of stripping a layer of big excess profits off the carriers to lower prices and still have everything continue on, that scenario isn't an accurate scenario. We've outlined in our opening statement the 5.1 per cent return on net assets, and people sometimes question that number. They say, well, your plant is mostly depreciated. No, that 5.1 percent number is calculated on the net book value of that plan, what is undepreciated so far. This, we almost -- you could go and put your money into a long government bond at 4 percent. Five point one (5.1.) percent with the risk that we -- we bear, is not evidence of excess profits. In fact, those are the profits that we need to continue to run our business.
9598 So this -- this is the conundrum. People think the high prices, big profits, therefore -- and then vice versa, and it -- you get into a mindset thinking that you can sort of, have it all. So we really need to, from our perspective, break this perception of high prices, because we understand the problem it causes for us, for you, for Canadians, and the danger that it generates for the fundamental development of the industry going forward. That’s long enough.
9599 THE CHAIRPERSON: Well, thank you. You’ve clearly put it on the record for our consideration. So instead of talking about high prices, how about we talk about low prices for a second? There’s been some discussion for example, about the success of the Connecting Canadian Families program on the broad wireline broadband side, as providing us with an example of perhaps what might be done in respect of mobile services.
9600 What are your thoughts about to what extent that would be feasible, and if it were feasible, need it be means tested? I’ll give you the floor.
9601 MR. WATT: I’m going to start off again, I pretty much said what I was going to say as a framing of this particular question. Again, it is the situation of we have all these competing objectives. We want to have a high-quality network, we want to build more rural and remote locations, we want to deploy 5G broadly, and then we have the -- some of the pricing issues that work in the other direction.
9602 I’m going to pass it over to Joe. I will say that we are certainly very proud of our wireline initiatives in this area with our own initiative, Connected for Success in rent geared to income community housing, that has been out in the market for six, seven years. It’s now a 25 Megabit per second service at $10 and it’s -- there is an eligibility qualification around that.
9603 So certainly, in the wireline side, we’ve gone down this path and we are participants, willing participants in the Connecting Families program of ISED, which we really see as a compliment to our program. That one is addressed at households who receive the maximum Child Care Benefit.
9604 And Joe, over to you.
9605 MR. NATALE: I think it’s a great question, and I think it’s something that we’re philosophically aligned with. As David mentioned, we’re proud of our Connected for Success program that we launched on our own intuitive in 2015. It now supports 25,000 low income households. We’d be happy to sit down with the right people to figure out some of the complexities around it.
9606 You hit the nail on the head, one of the complexities is means testing. What is the right approach to means testing? And secondly, you know, how do we architect and structure that program in terms of price point, in terms of amount of data, et cetera. It requires some careful thought and discussion.
9607 And thirdly, how do you make sure that you direct at the people that really do deserve it and it -- it’s not -- doesn’t fall prey to augmentation unnecessarily that take it away from the people that deserve it? Because in the case of Connect for Success, we can connect it to the household itself. Mobility, by its definition is a mobile service and the question is, is it the individual, is the family? How do we characterize that?
9608 But, you know, suffice to say that we’re more than happy to entertain that discussion, and it would be great to launch something that makes sense in Canada with the right parties at the table to discuss how we deal with the complexities.
9609 THE CHAIRPERSON: Mr. Lawford -- I mentioned means testing, which was not what was proposed by consumer groups that we’ve heard from. You’ve indicated that’s one of the complexities. Mr. Lawford yesterday indicated that he thought it shouldn’t be a concern given the relatively low cost of a program. You know, is there a serious risk for providers if they don’t have to means test, don’t have to do a credit check, with respect to post-paid? I think, setting aside devices.
9610 MR. WATT: Okay. We may have misunderstood then. We heard the discussion yesterday around line 150 of the income tax return as potentially being means of qualifying eligibility. There’s a substantial difference between a program that is -- has eligibility qualifications, as opposed to a wide-open program which exacerbates greatly the concerns that Joe raised.
9611 THE CHAIRPERSON: Thank you, Mr. Watt. I misspoke.
9612 I’m referring -- I should have said with respect to credit checks, would put Mr. Lawford’s comment in the appropriate context. When asked about pre-paid versus post-paid and the recommendation was for post-paid, and then with respect to post-paid, a need for a credit check. So I misspoke.
9613 MR. WATT: Terrific.
9614 THE CHAIRPERSON: But your views on that, pardon me.
9615 MR. WATT: So the -- oh, right.
9616 MR. JOHNSTON: You know the -- first of all, I would say that the distinction between pre-paid and post-paid in a world where on our Fido brand we have the data overage protection that Joe mentioned, where your data allotment stops at the end and then you decide if you want to go over. And if you use it -- on pre-paid on the other hand, if you get to the end of your purchased data, you can buy more. I would say that the concerns over credit distinct from handset, do sort of, you know, fade away in some respect.
9617 And I would say that the pre-paid option in that construct mimics almost entirely the post-paid. And so, they start to mimic one another and I think there’s a lot of space between those two constructs to create a value proposition for customers, for those customers, that makes sense and that does not really create a user experience differential that would be meaningful at all.
9618 So you know, I think, subject to going into the details of that, I think there’s a lot of room to solve and not make -- I guess the concern being will credit be a barriers? I think credit needn’t be a barrier to providing and satisfying the needs that were presented yesterday.
9619 THE CHAIRPERSON: Thank you.
9620 You introduced a number of low-cost data only plans with some urging form the Commission in 2018. What could -- what did we learn from that process? I’ll stop there.
9621 MR. JOHNSTON: We’ve learned -- first of all, we have a substantial number of people on those plans, and we’ve described the process by which they are promoted in store, that there is a segment there that has adopted those plans, and that continues. At the same time, we’re also seeing that Canadians’ desire for, you know, full solutions remains intact. And there’s many, many Canadians that are looking for other alternatives.
9622 And so, we see that there’s been a healthy balance between the low-cost data only, but also the in market plans, which are, you know, very, very close to those offerings as well. So the balance of that has been, I would say, a very healthy outcome for -- for the market and for us.
9623 THE CHAIRPERSON: Just more broadly ---
9624 MR. WATT: Sorry, I think ---
9625 THE CHAIRPERSON: Sorry, go ahead.
9626 MR. WATT: Really, we were both interesting to see the attractiveness of having voice and text included with the data, even though a substantially bigger package of data, without voice and text is not as appealing. I think we had thought with low cost data only, appeal to people who would obviously use a fair bit of wi-fi, but also would use a voice app on the data. And that really hasn't proven to the be case. People -- the talk and text plans have proven to be more attractive. These are ones that we introduced in conjunction with the $30 1-gig data only plan there in March, but talk and text, very popular.
9627 THE CHAIRPERSON: Thank you.
9628 I'll maybe come back to the issue of credit checks on postpaid plans in a second, but before I do, you will have seen Commission's Exhibit 3, which provides a summary of low-cost plans that have been proposed by consumer groups. It was a range that had been proposed. You heard submissions yesterday.
9629 How feasible, in your view, would it be for you to offer a plan with similar attributes to those proposed, recognizing there is a range both in terms of price and the data allowances in the plans, at a price between 20 and $30?
9630 MR. JOHNSON: I'll start off by saying that a 40-gigabyte rate plan today with unlimited nationwide talk and text postpaid is in the very heart of the Fido value proposition as it stands today and appeals to a very wide berth of Canadians.
9631 So, the introduction of a plan in the 20 to $30 range would be sort of a 25 to $30 discount to the market price for that service above -- you know, in a available to all scenario would have a dramatic effect on the overall price in the industry. And I say that because that 40-gigabyte rate plan today is what I refer to is what -- you know, pretty much a reference plan. It's a reference value point in the market.
9632 Rogers' pricing, Fido pricing and Chatr pricing all are interconnected. The pricing is always -- everything is always connected to other pricing in the market at every time. And so, by offering -- changing the price point at that price point, it would hinge and ratchet on the pricing of all the plans in the market across Canada.
9633 So, in an above the line in market scenario, it would have a dramatic effect and get in the way of some of these -- you know, the balancing acts that we talked about between financials and the essence of the future, et cetera.
9634 With a strong eligibility criteria, as we described earlier, and the right conversation around exactly how to fine-tune that value proposition within that range, I think there is an opportunity to offer something, you know, with substantially more value for those customers in Canada in the most need.
9635 THE CHAIRPERSON: What about, for example, a two-gig plan? Same views? I ---
9636 MR. JOHNSTON: The two-gig plan clearly wouldn't be quite as -- you know, four gigs is right in the heart at $55 today. Two gigs though would -- I think is still at 45, in the 40 to $45 range, so it would have that similar effect, for sure. On Chatr right now we have a $30 1-gigabyte plan unlimited nationwide. That plan is an in-market plan. We see that plan satisfying, you know, the basic needs of Canadians looking for some data, understanding how much wi-fi is consumed amongst our customer base when they're not on wireless connectivity. So, you know, there's already that price point in place today.
9637 But getting north of into the two and the four-gigabyte range starts to really hit at the center point of the Canadian market where we looked at an average usage in Canada of two-and-a-half to three gigabytes per sub. That becomes a -- at the very heart of the Canadian wireless market today.
9638 THE CHAIRPERSON: But just bears repeating, but you did say with the -- with necessary, in your view, restrictions, then you're prepared to look at those types of plans.
9639 MR. NATALE: Yeah, if it's aimed specifically at groups of low-income Canadians or seniors with the right means testing, then I think it's a conversation we're willing to entertain, discuss how to best approach it. If it's a plan that's broadly available to everyone, it's -- it could be devastating overall.
9640 As Brent said, the average customer that we have uses about 2 1/2 gigabytes of data a month, and our average revenue per customer right now is -- sits around $55 -- 54, $55. Our break-even point, and I'm not going to repeat all the elements of our cost and our cost base, our break-even point sits in the 40s, in the 40s. So, it stands to reason that if we introduce a plan that in -- you know, would impact two-thirds of our customer base is our math in terms of how a four-gigabyte plan would actually, you know, reflect itself in the market, it would eradicate, you know, I would say the vast majority of our profits. And more importantly, it would actually stop investment in totality.
9641 So, by narrowing the size of the plan and aiming it at a specific group that is means-tested, then I think that's a great conversation to have and something we can work on. But a broad plan at four gig would -- it would eviscerate the industry economics, given the cost structure and all the things we talked about around population density.
9642 As we continue to invest in the future, as we drive the unit cost economics to a better place, of course there'll be an opportunity to offer more data at a better affordable price point, just like we have over the last five years. But to do it in sort of one key moment would make the melt from overage on unlimited plans seem immaterial in comparison to what would happen here.
9643 THE CHAIRPERSON: Thank you. I think I know the answer to the next question, but I will ask you for the record. Would you have a view on whether the Commission should mandate such a plan?
9644 MR. NATALE: Mr. Chair, you are correct. I think I've answered that question.
9645 THE CHAIRPERSON: Just touching back on the marketing or the way in which you communicate with consumers at your retail points of presence and so on, you said that the initial contact helps the sales agent or Rogers' employee to determine needs and so on. If I were a customer just asking what my best low-cost option is, I don't know if you can answer that, what would you -- where do you think your representative would begin? What kind of information would be provided? That's a bit general, I understand, but ---
9646 MR. JOHNSTON: Yeah. I can give you -- like a directional answer I think to that broad question.
9647 Many Canadians view their wireless service as a solution which includes both service plan and a hardware solution. That solution very often has -- and depends -- you know, the time of year, as Joe mentioned earlier, a promotional aspect to it. So, there will be certain plans that are discounted and certain devices that are discounted. I would say that becomes a very important point of the conversation.
9648 Customer would -- you know, would ask you what -- how much your data usage tends to be, have you gone over on your old plan? Because we know -- we want people to feel comfortable that they're in the right data plan for them. And what kind of device do you really like to use? Are you a heavy Smartphone user? Do you have an appetite towards Android or IOS? These all become very important factors. Are you a really engaged user, or are you an occasional user?
9649 For the occasional user, I'm just going to argue that a customer -- we're going to probably, you know, suggest to you a mid-range iPhone, a mid-range Android device with a plan that has somewhere around the average gigabytes for Canadians and you would give us a very -- hopefully a very specific answer around the type of user that you are, probably in the sort of two to four-gigabyte range would be the solution.
9650 Increasing, increasingly, customers are moving to used devices in Canada also. So, we're seeing -- and we're -- probably to create affordable solutions with that allow people to get into a used phone that's certified by Rogers and/or Fido to -- so they can get even more affordable outcome on the device side, because that allows them to get into a device that's more of a mid-range and perhaps a few generations old, but it's been previously used, but we've refurbished for them.
9651 THE CHAIRPERSON: Thank you. What about customers who may be more vulnerable due to their age, language barriers, and so on? How do you address those types of challenges?
9652 MR. JOHNSTON: Again, you know, this the beginning of a relationship in that conversation in the store, so there's, you know, every effort made to ensure that there's the right communication occurring.
9653 One of the more recent things we've done, is we -- on the Rogers brand we've introduced a service Pro‑On‑The‑Go. We're expanding that nationally. This is a service where a rep will actually come to your home and offer -- you know, you buy online or over the phone through a phone conversation, have that discussion. But a rep will physically come to your home, often in the language of -- because there are multiple language opportunities -- to offer very tailored and unique assistance in the comfort of your home or in the local Starbucks around the corner.
9654 We've seen this appeal greatly to people with accessibility issues, people who find it difficult to get out to the mall, and we're quite excited about its opportunity to serve those customers which have difficulty and also to expand our addressable market, and that's been something we're rolling out as we speak. We're starting in Toronto and we're rolling it out nationally.
9655 THE CHAIRPERSON: Thank you. A little more of a focus question having regard to the concerns raised about overall about reasonableness of wireless prices, including those on behalf by vulnerable customers.
9656 Can you comment on whether you believe it would be appropriate for the Commission to deforbear from either or both of section 25 and 27.1 on that basis, and only insofar as is necessary to mandate a specific low cost occasional use plan?
9657 MR. SLAWNER: Yeah. I think it really depends on what actually you mandate. If you mandate something that's very specific, very targeted with high eligibility requirements then perhaps section 24 might work. However, if you do something that's more broad that would impact the market in the way that Joe and Brent were describing, that you set one price point and everything pivots around that would possibly lower the entire industry's prices, then I think that possibly forbearance would have to go through, or deforbearance, excuse me. I don't, however, believe that the market conditions as they are right now would dictate deforbearance.
9658 THE CHAIRPERSON: You mentioned how broad it might be and whether or not it would be suitable to impose a condition under section 24. If it were to ensure that customer service representatives are properly trained, provide prominent links, for example, on websites and kiosks, and in the stores, is that type of ---
9659 MR. SLAWNER: Yeah. I think that's probably ---
9660 THE CHAIRPERSON: --- framework suitable to mandate under section 24?
9661 MR. SLAWNER: Yes. I think those kind of ideas would probably fall under section 24, would be more suitable, yes.
9662 THE CHAIRPERSON: Thank you. Perhaps, and I'm nearing the end of my questions on retail, then we can take a short break, I think, before I do wholesale.
9663 Winback, talk about winback for a moment. Are winback tactics appropriate and fair for consumers?
9664 MR. JOHNSTON: Let me start that by saying customers switching is one of the primary means in which customers communicate with us as a carrier, and when customers switch we have a variety of what we would refer to as retention activities. We certainly don't want to see them go.
9665 And so there's two instances. One is, of course, they call us and say, you know, I'm thinking of switching. We will offer them a solution which we think better fits their needs and try to retain those customers; and/or secondly, if they go to a store and they port out and port their number to another provider, we will call within 24‑hours that customer with a similar conversation to try to retain their business with us. Yeah, and it's within the 24‑hours -- 24‑hour period. Sometimes it takes us a little longer, depending on how quickly we're able to contact the customer.
9666 We see, you know, Joe mentioned the vigorous promotional activity that occurs in the market. There is -- all prices are bouncing very, very often. Sometimes at the store level there will be a one‑day sale. Sometimes over the weekend there will be a weekend sale. And so you know, carriers are different -- moving prices at different times and the prices are moving around the market constantly.
9667 So this, again, reflects the -- hesitate to use the word "vigorous" again, but vigorous competition for subscribers, and as was mentioned earlier, the 33 percent of net additions taken by the regional carriers in the market in 2019.
9668 So this is actually an opportunity for us to provide more choice and a solution to that customer that if we didn't communicate -- if they didn't provide that communicate to us and we didn't respond they would not have available to us. So to me, it enhances choice for consumers. It creates another basis of competition, and it keeps the promotional intensity sharp in the industry because customers know, you know, every participant knows that everybody is all trying to win back each others' customers when these things are in place. So it actually -- it stimulates even more competitive dynamic around that.
9669 So I would say no, or the original question being that I would encourage winbacks to continue be seen as a valid and customer-oriented promotional and business activity in the light that I described.
9670 THE CHAIRPERSON: I think you were saying no for my next question ---
9671 MR. JOHNSTON: Okay.
9672 THE CHAIRPERSON: --- which would be would you agree with a proposal, for example, that we've heard about restricting on a time-limited basis winbacks?
9673 MR. JOHNSTON: My personal -- it's my view that that would be anti-consumer. I think the only -- the consumers would be hurt in that situation, and I don't see a basis for making that decision. It -- yeah.
9674 THE CHAIRPERSON: Do you have proactive programs or proactive measures to ensure that your long-time customers have plans tailored to their needs? You know, do you reach out proactively to go get them to sign up, give them another plan, a better plan ---
9675 MR. JOHNSTON: Sure.
9676 THE CHAIRPERSON: --- before an opportunity to leave you occurs?
9677 MR. JOHNSTON: Yeah. There's -- you know, there's always the pricing that one sees on the website, there's the offerings, and then we have, you know, a large customer base, and we have tactics and promotions and treatments that we provide to our base on an ongoing basis that are tailored for their unique needs.
9678 And we'll always be looking to figure out how we can offer our customers things that make their experience better with us. Sometimes there is treatments where maybe our network was down in a particular area and we want to apologize to that customer and you know, ensure that they continue to be happy with our services, and we take action on that, or we see them that they're on one of our older plans and they've been bumping up against their data limits and are experiencing overages, which ---
9679 THE CHAIRPERSON: M'hm.
9680 MR. JOHNSTON: --- we don't think is just a great thing. So we will reach out to them proactively and offer them an infinite plan and try to get them onto a better place. And when it's -- you know, more win‑win.
9681 As I mentioned earlier, we were -- we try to be in long-term sustainable relationships with our customers. Customers can switch very easily in the Canadian market, 17 percent in a given year. It's a real fight every day to both attract and retain customers in the Canadian marketplace, so we need to always be on our front foot in terms of ensuring customers see us as having, you know, good value with the right solution.
9682 And increasingly, actually, that we're personalizing our experiences and our solutions to their unique needs. Given the state of play across, you know, a broad -- other set of industries that Canadians increasingly expect us to know more about them and how we can serve them more uniquely and in a more personalized manner.
9683 THE CHAIRPERSON: This will be my last one.
9684 MR. NATALE: Just one quick comment ---
9685 THE CHAIRPERSON: Oh, sorry.
9686 MR. NATALE: --- on that. Sorry, Mr. Chair.
9687 We have a team that we call Customer-Based Management. Brent's alluding to their activities and how they treat customers, et cetera. What they do every day is they have an ability to look into our customer base and say which customers do we think have a propensity to churn, and they have created a model, if you will, that says have we let that customer down recently because maybe the network was down or they had a billing problem that we had to make an adjustment or they tried to call us and they couldn't get through.
9688 We have a number of parameters that speak to how that customer might be thinking about leaving and we'll practically reach out to a list every single day to say hello, we notice that, you know, you've bumped up against your overage plan. If we do this, would that resolve your problem, et cetera.
9689 So it’s been a very effective approach for us, and it’s actually helped to drive churn improvement by getting ahead of it before customers decide to leave.
9690 Sometimes we know the customer loves the latest phone, we’ll call them well before they’ve paid off their phone balance and we’ll say, “Hey, the new iPhone is out, you’ve been a great customer of ours. Here’s a special promotion on the new iPhone if you want to make the change right now.”
9691 So this base management is sort of -- is a massive activity and a big investment that all the carriers have made that isn’t as visible on the Website or isn’t as visible anywhere else, but it actually fuels affordability in the industry.
9692 THE CHAIRPERSON: That’s a great segue to my last question.
9693 But you understand, appreciate the view from consumers that they don’t know what the real price is for that very reason, that it’s not necessarily what’s on the Website; that there are a wide range of promotions that the service providers are reaching out to some customers but not all customers and offering them what they might perceive as a sweetheart or special deal.
9694 So there’s a great angst among consumers that they’re not sure about the prices and the fairness of the prices.
9695 MR. JOHNSTON: Well, just having -- when we see the results of these particular programs -- which we’re always evaluating, saying is what we’re doing making a difference -- if we don’t offer an above-value plan; in other words, some solution that’s more than what they could get by going onto the Web, we don’t get the results that we need on those campaigns.
9696 So I would say that, if anything, Canadians are becoming more and more aware of the various things, and are highly aware of the various offerings. They are one click away from a Website to look at what’s available; or, actually, it’s on the device that they’re using every day.
9697 And so -- and a lot of these communications aren’t -- they’re not individual one-on-one conversations; they might be an MMS; like, a text message that we send to the customer. They don’t have to respond right away, so they have the opportunity to shop and compare.
9698 And I would just go back to, you know, those offerings are always above what -- and attuned in a way to get customers to a new place that you wouldn’t otherwise be able to get on the Website because they’re offering value, given their unique circumstances, and given our understanding and the relationship we have with them.
9699 THE CHAIRPERSON: Thank you.
9700 Mr. Watt?
9701 MR. FERNANDES: I was going to say outside of what we asked Mr. Feasy -- Richard -- to do for us, but from your experience around the world, do you have any insight into this particular type of issue, the posted price versus promotional and discounted pricing?
9702 MR. FEASY: I think my experience -- I mean, it’s a standard feature of certainly all the wireless markets that I’ve seen; and I recognize, I think, the challenge to some extent that the Chairman is characterizing, which is the appearance that active and engaged customers appear to be able to get a better deal than customers who are less engaged, either because they’re vulnerable, as you talked about earlier, so that they have sort of identifiable reasons why they may struggle to engage with the market, or for other reasons which may be quite difficult, in terms of them being able to identify them.
9703 And I think, you know, regulators around the world, in my experience, are wrestling with this problem because the answer to it does not appear to be on the supply side of the market. It does not appear to be giving customers -- inactive customers more choices. It’s on the demand side. It’s finding ways in which customers who otherwise struggle to can engage effectively with the choices that are available to them and the opportunities that are available to them. And certainly my experience, the big insight, in a way, and the new insight that people are currently wrestling with is the solution to these kinds of challenges, is not on the supply side; it is trying to find ways on the demand side to help groups of customers engage better with the market.
9704 THE CHAIRPERSON: Thank you.
9705 Madam Secretary, let’s take a 10-minute break and we’ll resume at 12:27.
9706 Thank you.
9707 --- Upon recessing at 12:17 p.m.
9708 --- Upon resuming at 12:29 p.m.
9709 THE SECRETARY: Please take your seats.
9710 THE CHAIRPERSON: Welcome back.
9711 Wholesale. Let’s start, I guess, with first question, which most -- put in the most general sense, one would expect regard -- not regardless, putting aside the mandating of MVNOs that such arrangements would occur naturally in a market, and we’ve heard much about the various MVNO offers that have evolved in various markets. But we really haven’t seen that in Canada. And I know -- and we’ll put aside MVNOs focused on IOT applications or -- which I know you have taken on, or negotiated, I should say. Why not? I mean, a simple -- really simple question; why don’t we have -- why haven’t MVNO arrangements been negotiated? Why haven’t you negotiated MVNOs?
9712 MR. NATALE: Well, first of all, we have negotiated MVNOs. But let me just start more broadly and I’ll come back to that statement.
9713 As a carrier, as a provider, we look at market segments and areas of the market and say should we address those directly? Or should we do it through a wholesale arrangement? And that’s been happening since the very beginning of the telecommunications industry.
9714 As you well know, on the wireline part of the business in Canada and elsewhere, it’s -- there’s a fervent wholesale market. On the wireless market, you know, we made a decision to buy Microcel and keep the Fido brand. We made a decision to launch the Chatter brand. These were ways of addressing a part of the market. We could have easily have said, you know what; we’re to going to address the Chatter segment of the market. We’re going to do that through an MVNO post-sale relationship. And you basically make a trade-off in your mind, do I want to open stores, open a call centre, worry about marketing, building a brand, or do I just get economic rent from my network and let someone else worry about that.
9715 In Canada the market has evolved such that we have multiple brands by carrier, not just on national carriers, but increasingly the regional carriers with the launch of Fizz in Quebec, as well as the Videotron brand, as a whole. So, the markets evolve in that manner.
9716 Where there are areas of the market that we feel are being underserved, or there's an opportunity, we're very open to the idea of MVNOs. We have an MVNO relationship with a company called Star. They are provider of wireless services under the Petro-Canada brand, under the 7-Eleven brand. So, that's a part of the market where we believe it's important to have presence, but we don't want to do it directly. We -- happy to form that sort of relationship.
9717 We have -- we had a relationship with both Videotron and Eastlink in the early days of their foray into wireless where essentially they were reselling the wireless network of Rogers to get going in the marketplace. And we felt both in Quebec and Atlantic Canada it was the right economic trade-off between wholesale and retail for us as an organisation. So, we've been very open to those notions and those ideas.
9718 In areas where we may own spectrum that we're not using as much or that we can't seem to get it above that list that Jorge looks at with respect to investment, we're happy to subordinate that spectrum to really it's a wholesale relationship, but it's really an infrastructure-based provider and we've got dozens of these across the country that, you know, will address the market by wholesaling our spectrum, for lack of a better descriptor, by subordinating to them. So, we're open to the ideas.
9719 I would maybe ask Diane, if you don't mind, Diane, just talk a bit about -- Diane's our director of wholesale -- about the proposals you do see from potential MVNO candidates, how you approach and address it. Just give the panel a view into that world.
9720 THE CHAIRPERSON: Well, and a good start -- just a starting point would be helpful in terms of just how do you -- what is the starting point for negotiations? Do you propose a set of terms and conditions? How do you go about it?
9721 MS. GILBERT: Thank you. We get approached by a number of prospects year -- every year. We have conversations with each one of them. We assess the proposal, the value proposition that they want to bring to market. And then at that point, if we believe there's a way forward and there's a larger conversation to be had, we sign an NDA with them, but only 50 per cent make it to the NDA stage. Many of them drop off, for the reasons we've mentioned earlier, go into the IOT market segment because they're not quite clear on what exactly they want, so they come to me first.
9722 Some of them get -- proceed with the discussions with our competitors and sign arrangements with them. And then many of them actually tend to -- once we start to talk about what it's required, the scale and scope of running such a business, sometimes they end up speaking to our branded channels and go to the retail side because they're much more supported there, and the role that they play is at a smaller scale and scope, and they feel that that's something that they could be more successful with.
9723 So, they approach us. If they make it to the NDA stage, like I said, about 50 per cent of them do, once we get past that stage, that's for the purposes of share more details, to understand more about how they want to go to market, what level of investment they have, what market or segment they want to target, and we give -- we ask them for a business case. And when we get to that stage, then another about 70 per cent of the 50 per cent that remain drop off because they just don't have -- they don't understand what's required to get into a business like this, and they tend to lose interest.
9724 And so that's kind of the process we follow, but certainly there's been a mass shift from a Smartphone MVNO voice proposition to the machine-to-machine, as we mentioned, and I know you already said you're very well aware of that, but it's very difficult to find a niche market today that isn't already fully addressed by the many brands in the market today.
9725 THE CHAIRPERSON: In most of the proposals, for lack of a better word, that come to you, do they tend to be sort of full MVNO proposals, or do they tend to be a rebranding type offering?
9726 MS. GILBERT: They are generally and mostly full. They don't have any infrastructure. They don't own spectrum. And they are looking for -- what they believe is an easier way into the market and quicker, but when they realise that just because you're not bringing the engineering or the spectrum to the table, there's still a very large endeavour behind that.
9727 THE CHAIRPERSON: And what -- sorry, go ahead, Mr. Watt ---
9728 MR. WATT: Oh, I was just going to -- to clarify in terms of how full that we're talking about the same thing here in terms I think full is in the context of the hearing, a full MVNO is where the MVNO provides a core network, you know, switching and billing, et cetera, as opposed to more what you might call a rebrander. I think Diane is going the other way there.
9729 MS. GILBERT: You're absolutely right, David, and I apologise for that. I always knew the full MVNOs being those where they fully MVNO the business case. I apologise for that.
9730 THE CHAIRPERSON: I understood your response ---
9731 MS. GILBERT: Okay. Apologies for that.
9732 THE CHAIRPERSON: Not at all.
9733 What role does spare capacity play in your consideration? Is that a determining factor, the amount of capacity available, spare capacity in your network?
9734 MR. NATALE: Given the 30 per cent per annum data growth rates that we have, spare capacity is being very quickly used up across our network. And Jorge spoke earlier to how we manage capacity. The forward capacity in our network is often measured in months, in some cases, depending on, you know, events or major activities, it can be managed -- measured in weeks. So, Jorge has a methodology that looks on a -- as he mentioned, a 100-square meter basis it looks at capacity and is forever evolving it.
9735 It's not in our interest to have capacity lay fallow. Given our cost of capital, given the amount of debt that we take on as an organisation, given the returns at 5.1 per cent, it's not in our interest to have capital in the ground that's not earning revenue. So, we tend to try to really synchronise as much as possible the additional capacity with the ability to extract return from that capacity.
9736 The only thing that's sort of warehoused, for lack of a better word, often is spectrum, because we're waiting for spectrum to, you know, be cleared, or be available, or be deployed, but everything else is done as much as possible on a just in time basis for the reasons I described.
9737 THE CHAIRPERSON: Thank you.
9738 Some parties in the proceeding have argued that wholesale MVNO access is not an essential service in the same way that wholesale roaming was found to be in 2015-177. I'm guessing that's your position as well.
9739 MR. NATALE: Correct.
9740 THE CHAIRPERSON: So, what's the appropriate service or facility to apply the test to? Is it RAN access or is it MVNO access?
9741 MR. SLAWNER: Sorry, I think it would probably more apply to the RAN, but I don't think the RAN would actually meet the test by itself. I think there are ways -- excuse me -- for people to get entry into the market, as you already discussed. The government's been setting aside spectrum -- excuse me -- consistently for over 10 years now. I think we've seen a lot of entry into the regional markets of Canada. I again see Ray's Xplornet who has the possibility to become an additional carrier on the network. And last, but not least, I don't think there would be any substantial lessening in competition if someone did get access to these components. The market in Canada is clearly competitive. There are, you know, three or four -- excuse me -- four facilities-based carriers in each market, seven or eight brands, so I don't think it would meet the essentiality test in any event.
9742 THE CHAIRPERSON: Thank you.
9743 We talked earlier, Mr. Watt, about appropriate geographic market with respect to retail for wholesale. It was national for roaming, but some parties have argued for MVNO access it be provincial or smaller. Which of these positions do you hold?
9744 MR. WATT: I believe we would want the wholesale definition to match the retail definition.
9745 THE CHAIRPERSON: Okay. We've also seen arguments that RAN's not essential because it's been duplicated by the regional carriers. But in areas where the regional carriers -- sorry -- in areas where regional carriers have duplicated the RAN does that decrease the likelihood of further duplication? We talked about this a little bit this morning.
9746 MR. WATT: I think it does because we come the fifth carrier, they're starting up, they would have to acquire spectrum. Spectrum is not easy to acquire; a lot of spectrum is already in the hands of the existing four providers. Those four providers also need additional spectrum to grow. I think it would be difficult.
9747 THE CHAIRPERSON: In your view, do national wireless carriers have market power in the upstream wholesale market for MVNO access?
9748 MR. WATT: Well, I believe there are three sources of acquiring the supply in the current time. Now, you might say that there's four. It depends on the restrictions within the network sharing agreements as to whether there are four potential suppliers of the service to MVNOs. So that is one of the ways you could possibly promote more competition in that sector by requiring the elimination of those requirements to get approval to the extent that they exist. By that I mean you get approval from Partner A if Partner B wishes to offer an MVNO service to an MVNO potentially from agreements have restrictions or require the approval of the other partner, and by eliminating those you could increase the potential supply of that product.
9749 THE CHAIRPERSON: Assume or agree with me for a moment that there is upstream market power. Would denying wholesale access to MVNOs substantially lessen or prevent retail competition in your view?
9750 MR. WATT: No.
9751 THE CHAIRPERSON: In response to an RFI, you -- and we appreciate the effort that was put into it -- did put forward a proposed model for an MVNO access service. It contains, however, a number of conditions and qualifications. I'd like to talk about those for a second.
9752 In your model, you propose that eligibility be restricted to facilities-based cable carriers, ILECs and small ILECs, but exclude CLECs. So can you -- can we start there? Why exclude CLECs?
9753 MR. SLAWNER: Just that some CLECs don't actually put a lot of -- it's just that some types of CLECs don't actually have to invest in any kind of significant amount of facilities, so they want restrict it to those entities that actually have -- make the facilities investments that wouldn't preserve the incentive to invest.
9754 THE CHAIRPERSON: Would that include facilities-based cable carriers who are also CLECs?
9755 MR. SLAWNER: Well, at the time that we did the proposal we suggested that, but in fact since we've seen the proposal made by the Bureau, if you are going to mandate MVNOs, and we don't believe that you should, but if there was to be a mandated MVNO model it should probably be more reflective of what the Competition Bureau suggested.
9756 THE CHAIRPERSON: Okay. Thank you. Again, with regard to small ILECs and CLECs -- sorry -- ILECs and cable facilities-based cable carriers, some of them are also operating as CLECs outside their incumbent serving territories. Would their eligibility be restricted to their incumbent territories in your view?
9757 MR. SLAWNER: It should be restricted to wherever they actually have footprint for delivering service using their own facilities, and if they're not making any significant investments then they shouldn't. I'd also like to point that when we made our suggestion we had said that just investing in landline facilities is not sufficient. If they are going to do anything they have to actually invest in wireless facilities, and that would have to be their ongoing obligation. Otherwise, they're just going to continue making the investments they otherwise would've. And there's really no teeth to the small. So in our view you'd have to actually mandated investment in wireless facilities.
9758 THE CHAIRPERSON: Thank you for that. You also proposed a restriction on the reselling of MVNO access. Can you elaborate on your reasons of why it's necessary?
9759 MR. SLAWNER: It's just to keep control of who's entering the business. It's to understand how much traffic will be on the network. Anybody -- if there's a mandated regime out there, anybody can approach us directly. So it doesn't make sense, in our view, to actually have somebody who can resell resell. You need to keep some control over it.
9760 THE CHAIRPERSON: But if you had the necessary -- go ahead, Mr. Watt.
9761 MR. WATT: Well, I was just going to say, there has been some discussion earlier this week about the –- about cybersecurity issues of having resale of resale so that being able to actually track where the traffic is originating and how it is going I think is another consideration when contemplating resale of resale.
9762 THE CHAIRPERSON: But if the resale -- if the reseller reselling is subject to Commission jurisdiction and the concerns about full information or cybersecurity concerns were removed, does it still remain a problem in principle? In other words, if we got rid of the practical concerns are you still opposed to reselling?
9763 MR. WATT: Could I take an undertaking on that? Because you know, I'm thinking back several years. There have been -- there were certain clauses required of us, actually. So we were the -- the carrier was held responsible for actions of certain reselling parties. I'd like to refresh my memory on that ---
9764 THE CHAIRPERSON: You are welcome to take an undertaking.
9765 MR. WATT: --- and make a proper answer.
UNDERTAKING / ENGAGEMENT
9766 THE CHAIRPERSON: Another condition is restricting it to the consumer market. Again, can I ask why prohibit MVNOs from selling to IoT business or enterprise customers?
9767 MR. SLAWNER: Just because we ourselves have over 200 M2M IoT relationships out there. I think there's two distinct marketplaces between retail and business and enterprise, and clearly there is no shortage of MVNOs on the business side. I'm sure that other facilities-based carriers have similar, you know, customers on their networks, so I don't understand why we would try to create a mandated regime for something that's so obviously well-served.
9768 THE CHAIRPERSON: Thank you. You ---
9769 MR. NATALE: Mr. Chair, may I just take a second ---
9770 THE CHAIRPERSON: Yes.
9771 MR. NATALE: --- and explain these relationships now that we've talked about them?
9772 We do have about 200 different resale relationships in the IoT machine to machine world. They are everything from a service that enables your Kindle e‑reader, a service that enables entertainment in your car if you subscribe to a particular service, it will enable transportation on fleet management. We even have a service that will deal with, you know, pest control.
9773 So we are open for business as it relates to entrepreneurs and Canadian small businesses that show up at our doorstep and say I've got a great idea for a machine to machine or IoT business or platform in a particular industry. We think it's part of our responsibility to actually enable these businesses.
9774 And I think in some ways it's a microcosm of what 5G is all about. 5G is all about creating these platforms that will go far beyond, you know, e‑readers and transportation management that really go into enabling the business of the future and driving productivity in all sectors.
9775 THE CHAIRPERSON: Thank you. In your response you also included a condition that does not give MVNOs access to domestic or international roaming arrangements of the host carrier. Again, can you speak to why?
9776 MR. SLAWNER: Again, those are relationships that we have spent a lot of time and effort building over the years. It is perfectly possible for any MVNOs to actually build those relationships. There actually are middleman broker types out there that'll do them for them, and you can just go to one stop. So there is no requirement for them to take advantage of our roaming relationships. They are fully able to build their own.
9777 And I think the idea is to keep creating that incentive for these MVNOs to do as much as possible on their own and not rely upon on us.
9778 THE CHAIRPERSON: Okay. Thank you. You've no doubt, if you've been monitoring the hearing, heard our questions about in relation to some concerns that have been raised about entry by large, well-financed companies as MVNOs, for example, large North American tech firms. You’ve heard the questions; do you share the concern? Can you tell me if you share it, and if so, why and what kind of potential measures we could use, market caps, and so on if appropriate?
9779 MR. NATALE: I share the viewpoint that says large, global Webscale providers whose business value is measured, you know, at a trillion dollars or less that have massive balance sheets don’t need any help or support coming into the country if that’s what they chose to do.
9780 They have the financial wherewithal. They have the investment dollars to come and participate in this market and become an infrastructure-based player in this market and build network and capability that would support Canada and Canadians, so I feel the same way that they just don’t deserve a handout in any way, shape or form. The market’s been open to them from the very beginning and they’re welcome to participate is the way I would describe it.
9781 THE CHAIRPERSON: And as to measures, subscriber limits, market caps; any suggestions for us?
9782 MR. NATALE: As an infrastructure-based player?
9783 THE CHAIRPERSON: Measures to potentially limit their ability to make –- avail themselves, pardon me, of an MVNO arrangement if mandated.
9784 MR. NATALE: I don’t –- I don’t think they –- first of all, we don’t believe that MVNOs should be mandated and certainly ---
9785 THE CHAIRPERSON: I got that.
9786 MR. NATALE: --- should be made available to a Webscale provider. In terms of a test, I defer to my colleague to see if there’s something we’d like to propose or whether we want to make it an undertaking.
9788 MR. WATT: I think we’d like to make it an undertaking because we think there are lots of complexities with any type of a cap or test in terms of, you know, trade considerations in a number of attributes, so can we take an undertaking?
9789 THE CHAIRPERSON: That would be fine.
9790 MR. WATT: Thank you.
UNDERTAKING / ENGAGEMENT
9791 THE CHAIRPERSON: Another favourite subject of yours.
9792 MR. NATALE: Can I just make one more comment, Mr. Chair, on this ---
9793 THE CHAIRPERSON: You may.
9794 MR. NATALE: --- topic? I do think that it would be absolutely devastating to the quality and capability of the networks in Canada to allow an MVNO of that scale or proportion as a whole. I do think it would just change the very nature and the future of the general economy in Canada.
9795 They’ve got incredibly deep pockets. Any one of them could just buy Rogers if foreign restriction on ownership weren’t there as a verbal rounding (inaudible) in their balance sheet. So I just don’t understand any logic by which they would even be allowed to participate on any threshold.
9796 THE CHAIRPERSON: Thank you. I do understand your position.
9797 Back to my next question, another favourite subject area: negotiated terms. What if there is to be a wholesale MVNO access arrangement and if mandated, your view is that terms and conditions and rates should be left to commercial negotiations, so couple of questions on that front.
9798 Putting aside the rate, which is not insignificant, in your view, would it be more efficient and less administratively burdened if the Commission were to endeavour to set out terms and conditions at the outset rather than –- in a tariff or decision rather than leave it all to commercial negotiations?
9799 MR. WATT: We would prefer to leave it all to commercial negotiation.
9800 THE CHAIRPERSON: And would the Commission’s existing processes -- it’s FOA process be appropriate for resolving disputes between prospective MVNOs and Rogers?
9801 MR. WATT: We think that would be the fallback position, yes. We think it –- really the FOA should be conducted by a third-party arbitrator. Maybe that –- and I understand this raises issues in your mind as to the delegation of authority et cetera, et cetera, but we do think that you could provide guidelines to that third-party arbitrator, and we would find that preferable to having the Commission act as the arbitrator.
9802 THE CHAIRPERSON: But whether ---
9803 MR. WATT: I just think it makes it more –- a stronger sort of commercial setting.
9804 THE CHAIRPERSON: But whether it was the Commission or a third party, if everything is left to the negotiation process, including all the terms and conditions, is it likely –- I can just envisage some very complex negotiations if parties are coming with –- starting from totally different starting points, someone looking for a full MVNO versus a lighter version or rebranding version.
9805 Absent terms and conditions, how do you see all of that being resolved, in particular, by a third-party arbitrator?
9806 MR. WATT: As we say, we think it should be resolved in a commercial negotiation. We really think that’s the essence of a properly functioning MVNO market. If people come with the propositions they negotiate, ultimately, the only way it can work is when it’s a win-win for both when both parties agree, and that can only be achieved when they’re able to hammer out a meeting of the minds, and that really is what you should want. You should want all those matters to be sorted out by the parties, but if they are not, I would suggest it’s very unlikely it’s going to be a very successful MVNO experience for anybody.
9807 THE CHAIRPERSON: The record is clear that you don’t support other approaches to establishing terms and conditions and rates for an MVNO if mandated, but I should give you an opportunity to put on the record your view for, first, retail minus approach to establishing a rate.
9808 MR. WATT: It won’t be surprise, but ---
9809 THE CHAIRPERSON: Few things are, Mr. Watt.
9810 MR. WATT: Yeah, sorry. We’re not in favour of a cost-based study to arrive at a rate. Whether it be the traditional methodology of phase II, we think –- think we have clear evidence of the difficulty of that exercise earlier this year.
9811 In terms of retail minus: retail minus, a problem that generally arises; there is what is the definition of the services and then how do you address promotions, discounts? The product has provided three months’ free; is that the lowest retail price that you then discount from?
9812 There are these complexities we have mused and we know that we’re coming to a proceeding on a review of costing methodology we muse and will it hold us to this when we make our submissions, but whether something such as an average retail (inaudible) ARPU for a service, it would take into account the discounts in the promotions et cetera would be a better starting point that said the listed price that takes –- it sort of ignores your problem with discounts and free months. And then arguably, it’s simpler to identify the costs –- the avoidable costs than it is to do a bottom up Phase II and get into the complexities of the network which is very difficult.
9813 So –- but in general, we don’t like any of those proposals. I might ask Richard to talk about the international experience on how some of these –- some rates have been set or how are they set, if that’s alright, Mr. Chairman?
9814 THE CHAIRPERSON: Yes.
9815 MR. WATT: Okay, thank you.
9816 MR. FEASY: Thank you. So the first point, I suppose, is that instances of regulators determining the price are so rare as I think to be almost nonexistent.
9817 In the two cases that I referred to in my opening remarks in Europe where MVNO access has been regulated, the regulator was never asked; the firms were always able to come to a commercial conclusion with the MVNOs because the -- in those cases it's worth noting the challenge that had been identified was that there was a lack of offers of MVNOs. It wasn't there wasn't an allegation that the operators were coordinating on the terms, the commercial terms that were then supplied. So, once the operators were obliged to supply, the commercial terms appear to sort of take care of themselves.
9818 The problem, in my view, or the biggest problem, whether you're doing some kind of cost model or you're using the retail minus, but any sort of regulatory approach, is that you end up setting a single price for a very diverse set of demands.
9819 So, typically in MVNO markets, their characteristic is the MVNOs differ amongst themselves in terms of the parts of the market they're seeking to serve, the niche -- often niches, and the strategies that they're pursuing. And in a normal functioning competitive market that would lead to different commercial prices for each of those MVNOs with the host operators reflecting the different value calculations for each in particular model.
9820 So, and the difficulty with using a regulated pricing approach, it's very hard for a regulator to set all those different pricing points that would mimic the way a properly functioning competitive market was. You would just set sort of one rate, and that rate will then apply to all the MVNOs who are seeking access. And it might be appropriate for some, if you can get there, but it won't be appropriate for others.
9821 So, you're in a world where there will be permanent discontent amongst at least some of the players because the pricing is not reflecting the commercial situation.
9822 So, I think the experience is that -- and the consequence of that, recognising that is that typically regulators have adopted this approach of saying we look to the parties to find that -- a commercial price that you would expect to get in a properly functioning market, and we seem to avoid and thus far successfully in the rest of the world, ourselves intervening in terms of substituting our own view of what the rate should be.
9823 THE CHAIRPERSON: Thank you.
9824 Let's talk about the Bureau's model for a second. Let's set aside their conclusions with respect to the competitiveness of the retail market, which I understand you do not agree with. Otherwise, what's your view of their model?
9825 MR. NATALE: I know this sounds repetitive, but I need to say it. We are against the notion of mandated MVNO ---
9826 THE CHAIRPERSON: Understood.
9827 MR. NATALE: --- access in the market.
9828 You know, on the surface, when you look at the Competition Bureau proposal, it's the most similar to an infrastructure-based investment oriented regulatory approach that we've seen or that has been, you know, postulated. But -- and they, on the surface, seem like the least harmful, if I can call it that, with respect to investment, et cetera. But when you dig into the details, you realise it's very complex, extremely complex, and it really, you know, pivots on this notion of the five-year sunset. And we've debated amongst ourselves, we just can't seem to figure out how we could actually effectively manage a five-year sunset if we were to have -- given responsibility for it.
9829 Frankly, I think it does undermine the regional carriers and the investments that they've made and the success that they're having in the market. And it just punts the problem into the future with respect to managing that sunset.
9830 I don't know what would happen in year four, for example, when there are, you know, customers being served by that provider, yet they have not met their obligations with respect to building, and then we're into this very difficult circumstances that will probably start with a plea to extend the period longer, and we will, you know, really never effectively be managing to that complexity is the worry.
9831 So, I mean, I'll pause there and let others comment if they want to, but we think it's problematic.
9832 THE CHAIRPERSON: You mentioned the sunset and I appreciate you've made clear that you don't support the approach. If it were to be implemented, in your view, would it be from the day of a decision or would it be tied to when a competitor buys spectrum in the market?
9833 MR. WATT: We do think it would be from the day of the decision.
9834 THE CHAIRPERSON: Would it be ---
9835 MR. WATT: In terms of ---
9836 THE CHAIRPERSON: Pardon me.
9837 MR. WATT: Excuse me. I was going to -- I was thinking of the second part.
9838 When there's a spectrum auction probably either later this year, early next year, should a new player acquire spectrum, I think it would start for that player at the time of the spectrum acquisition. I don't think that's all that administratively complex because I don't think you're going to have really large numbers of players, new players buying spectrum. So, I don't think at least in that perspective from the start date that their proposal is overly complex.
9839 THE CHAIRPERSON: If we did adopt the Bureau's model, would it be appropriate to restrict MVNO access to regional carriers with a minimum investment, spectrum deployment or number of subscribers in order to ensure continued investment?
9840 MR. NATALE: I think it's fair to say we just don't support the proposal as a whole, and it just in its complexity feels like we're trying to land a very big airplane on a very small aircraft carrier to try to find a solution that might work with all these complexities wrapped around it. So, it's very difficult to comment on a specific element of it when we just think the models doesn't make sense in totality, Mr. Chair.
9841 THE CHAIRPERSON: Okay. Thank you.
9842 MR. WATT: Maybe one comment we would make though, we really do not understand the possibility of having a fine levied on people who availed themselves of the opportunity, and went into an area where they had previously been, and actually sold, and then started to deploy, and then found, well, it just doesn't make sense. I think, quite frankly, they've been punished quite enough having that investment and/or having had customers come to them and then being told, "Well, no, we're not going to actually provide service in that area anymore". I really don't see how that aspect of the proposal plays.
9843 THE CHAIRPERSON: And what do you think of the notion of call it a Bureau plus approach where access on an MVNO basis might be permitted for the regional players outside of their serving territories?
9844 MR. WATT: I think for the reasons that Howard mentioned earlier, we would be opposed to that. We believe it should be closely tied to facilities-based investment and facilities-based provision as possible in the wireless spectrum field.
9845 THE CHAIRPERSON: Thank you.
9846 In your submissions you've stated that if the Commission mandates the provision of wholesale MVNO access it should be limited to a period of five years. Can you clarify what you're thinking? You just mentioned some of the concerns about the Bureau's proposal to sunset after five years. Are they not similarly true for an MVNO arrangement?
9847 MR. WATT: Yes, they are. This was in our -- I'll reiterate what Joe has reiterated that we're opposed to MVNOs. So, this was in a spirit of in the alternative should that be the case, how would you, in our view, limit the damage, and in our view, you would limit the damage by a sunset clause, despite our reservations that the sunset clause would not ultimately be adhered to. But we ---
9848 THE CHAIRPERSON: Is the -- if you look at other carriers -- again, if the Commission were to mandate MVNOs, should regional carriers be mandated? And you can guess the follow-on question, SaskTel specifically, or Tbaytel.
9849 MR. WATT: Well, if you're going down that path, I think you probably would have to with respect to SaskTel and Tbaytel. They are the large provider in those territories.
9850 With respect to the three newer regionals, I would think you possibly could not place the obligation on them.
9851 I mean, quite frankly, I don't think that it resolves the concern. If you're thinking that if they are not mandated to provide the access that lightens the issue for them, I don't think so because they still will be facing -- an MVNO would be riding on the larger players' networks and competing against them in the retail market.
9852 I know Tbaytel said they actually wanted, should you go down this course, that they would have -- an MVNO would have to come to them first. And again, their presumption there is that the rate that would be struck by whatever means would be fully compensatory.
9853 They might live to regret that decision that it comes to them first if the rate were to be struck below the cost, but I think that would -- that would be our answer, Tbaytel and SaskTel as the largest players in those markets, and don't think you should have to mandate on the -- between new players.
9854 THE CHAIRPERSON: Thank you.
9855 I know you don't -- all of this is assuming something to which you stated your opposition, but I have a couple of more points in this -- in this area.
9856 Should the requirement to provide MVNO access only apply to the wireless carrier in each area with the largest network coverage -- coverage area or market share?
9857 MR. WATT: As you can tell, this is one we really haven't thought of before. Can I take an undertaking?
9858 THE CHAIRPERSON: You may.
9859 And why don't I give you two other sub-points, and maybe you can address them all together?
9860 So maybe it would bear repeating. Should the requirement to provide MVNO access only apply to the wireless carrier in each area with the largest network coverage area or market share?
9861 And perhaps we can add, you might want to comment on the benefits of requiring the provision of a wholesale MVNO service over multiple networks covering a given area and what would be the implications if we were to mandate only a subset of the national carriers to provide MVNO access and if a subset were appropriate, to whom would it apply.
9862 So if you'd care to respond to those in an undertaking, that would be fine.
UNDERTAKING / ENGAGEMENT
9863 MR. WATT: We will.
9864 I think Richard wants to respond from the international perspective now since we have him here.
9865 THE CHAIRPERSON: Go ahead, please.
9866 MR. FEASY: Thank you.
9867 I mean, just a quick comment about how I think in other contexts people would think about this is the scope of your intervention depends on the problem that you've identified.
9868 So if the problem you've identified is that one carrier somehow has market power and is distorting the functioning of the market, then you would focus on the problem on that carrier.
9869 My understanding is those people who are advocating intervention in this proceeding, I'm not aware that anybody is suggesting that the single carrier in and of itself has market power. As I understand it, the suggestion is that collectively some group of carriers.
9870 So at least the starting point for thinking about that question in other contexts would be that the scope of the intervention would depend on the way you characterize the problem.
9871 THE CHAIRPERSON: Thank you.
9872 In your view, does the current definition of "roaming" in your roaming tariff apply to 5G?
9873 MR. SLAWNER: No, the current wording in the roaming tariff does not cover 5G.
9874 THE CHAIRPERSON: And what would need to be changed if it was to apply to 5G?
9875 MR. SLAWNER: You'd have to redo the roaming tariff.
9876 THE CHAIRPERSON: And the supporting rates?
9877 MR. SLAWNER: And the supporting rates to roaming?
9878 THE CHAIRPERSON: Would it require re-examination of the rates -- of the -- pardon me, of the costs? Not rates.
9879 MR. SLAWNER: Possibly, yeah.
9880 MR. WATT: I'll make it a more definitive yes.
9881 THE CHAIRPERSON: I thought you might.
9882 Would such a change have an impact on 5G rollout?
9883 MR. WATT: So the question is, if roaming were required on a 5G network if the rates were redone to reflect the cost.
9884 I'm going to say likely not. To put it in perspective, roaming -- and there's been a lot of talk about roaming.
9885 You have the numbers. You know the relatively small quantum of roaming, the dollar amount. It's -- I'm not going to say it's de minimis, but you're looking at, say, in the one to two percent range of the costs of people so that that is not -- that change in and of itself is not going to make or break a new player.
9886 You know, in terms of, I think, for us, an absolutely new product that we're rolling out when they have exactly the same opportunity to roll it out, like I don't think it would be appropriate to require us to have to give access to 5G. It's again -- assuming that we have some type of advantage on something that hasn't even -- we're just in the very early stages of rolling something out and to be ordered to give access to it just doesn't seem to be the right way to go about it.
9887 MR. NATALE: It would only serve to slow the progression of 5G. If anything, you know, those who can avail themselves of set-aside spectrum at a lower cost, they have a bit of an advantage as relates to 5G, so I think look at it from the perspective of, you know, 5G's early days. Let's push as hard as we can to extend it as far as we can into Canada before potentially impeding it.
9888 THE CHAIRPERSON: Thank you.
9889 Just sticking with the roaming tariff for a moment, would any changes be required to limit the scope of mandated 5G roaming to service this connecting to individual consumers versus like IOT devices?
9890 Would that -- would that kind of change also be required?
9891 Using the current roaming tariff as a starting point.
9892 MR. WATT: Again, I think this is one I'd like an undertaking for, if I could. Even just listening to the question I was having trouble.
UNDERTAKING / ENGAGEMENT
9893 THE CHAIRPERSON: That may be the responsibility of the questioner, but ---
9894 MR. WATT: No, no. The question was fine.
9895 THE CHAIRPERSON: --- you can see it on the transcript and I'll accept the undertaking ---
9896 MR. WATT: Yeah. No, thank you.
9897 THE CHAIRPERSON: --- and not let you embarrass me.
9898 MR. WATT: No, the question was clear. My brain just couldn't connect the two pieces to think of an answer.
9899 THE CHAIRPERSON: I'm kidding.
9900 And a question we have asked a number of parties, which really is two parts. We've asked whether your current network supports full tape, but I think the most important consideration is are you on schedule for the 31st December, 2020 date mandated by the Commission for 911 real-time text?
9901 MR. SLAWNER: Yes, we are.
9902 THE CHAIRPERSON: Thank you.
9903 Seamless roaming. You have identified -- you've no doubt again heard the discussion on the record. You've identified that there are a number of changes required, billing systems, in effect, having two networks inter-operate seamlessly. Others have presented us with a different picture, suggesting that the costs are less than -- and complexity is less than has been suggested. So, for the record, could you give us your views, and I guess more important, and I'm sure this will be via undertaking, could you give us an estimate of what it would actually cost to implement seamless roaming and that will -- as I said, I will assume you will want to respond to that on -- via undertaking.
9904 MR. FERNANDES: Mr. Chairman, the implementation of seamless roaming is not only incredibly complex and costly to implement, but so compalex to maintain that it becomes effectively useless looking to qualify this statement.
9905 We have around 135,000 cells on our network. To provide seamless roaming we would have to map each and every one of these in terms of the neighbor relationships between these cells and the cell of the roaming or the handover network. And not only would this be incredibly costly, as you can imagine, I mean, it's costly as it is for our own network because, you know, we have to provide this mapping and relationship between the cells on our network, but we now have to align the ongoing management and optimization with the other network as well.
9906 And so even if such an endeavour were to be done, every time there was, you know, a change in power on the network because of an increase in demand, or there was a change on a tilt of an antenna, or a change on a fault, that work would have to be redone again.
9907 I can also state from personal experience in the UK where we had to apply this solution between two networks, one in the east of the country, the other on the west of the country, that, you know, even with the ongoing effort in what is arguably a much, you know, simple solution because it's along a well-defined boundary, even there we were never really able to successfully implement it, and so, you know, troubles continue to happen.
9908 I would end by saying that, you know, even so, you know, a seamless handover is only something that truly only really applies to voice. It's not a problem for data.
9909 THE CHAIRPERSON: Out of curiosity, how long did it take to implement that solution in the UK?
9910 MR. FERNANDES: It's still ongoing, to be honest.
9911 THE CHAIRPERSON: But the initial attempt to?
9912 MR. FERNANDES: It takes -- well, a few things. One, it takes months, and the other one, it has to be done within a part of the -- you have to essentially separate your engineering teams because this information of both networks is complexitively (sic) sensitive information. So, if you can imagine, a network that is building a new site would have to provide information of this new site to the competitor to inform that this change would have to be done.
9913 And so, in the case in the UK, we had well-defined Chinese walls between engineering teams that were part of this partnership and the ones that were not part of this partnership. And so, this was an operation that took, you know, essentially months and months.
9914 But as I said, you know, it's an ongoing effort because I think as, you know, Richard will attest, if he uses the M4, I'm sure he still has the same dropped calls that, you know, we've tried to solve for many, many, many years.
9915 THE CHAIRPERSON: Recognising, or taking into account what you've just said, would you undertake to give us a best efforts response at what would be the cost and timeframes involved ---
9916 MR. WATT: Yes, we will.
UNDERTAKING / ENGAGEMENT
9917 THE CHAIRPERSON: --- in facilitating it with the usual underlying calculations and assumptions?
9918 THE CHAIRPERSON: Change of subject and I'm getting near the end, you'll be glad to hear. You've heard from some parties, for example, Railway Association of Canada last week and other public utilities who are seeking mandated access for enterprise and public entities. Your view is, I take it, that such access isn't required because there are commercial solutions. Is that a fair assessment?
9919 MR. SLAWNER: Yeah, that's the case. We've actually had discussions with several utilities and railroads. We've already started to explore possible solutions for their issues. I think that we are, as a wireless carrier, the wireless connecting -- connection experts. They have clearly special issues, including security, that they need to have addressed. And I think what will happen, is that we'll work together to provide a solution that, whether it's private, or semi-private, or something, something will happen.
9920 I think you've already seen around the world with utilities or, you know, port installations or what have you, these kind of partnerships are already developed and I think that they will develop in Canada as well.
9921 THE CHAIRPERSON: Thank you for that.
9922 Do you object to their proposal to obtain mobile network codes?
9923 MR. SLAWNER: I think as long as it becomes part of the commercial arrangement, then we can figure out how best to do it. And if that's the best way, then we could consider it.
9924 THE CHAIRPERSON: Thank you.
9925 MR. NATALE: Mr. Chair, just one comment on this topic. In the world of 5G, one of the capabilities that we're working on is this notion of network slicing. And as you know, network slicing will allow us to deliver a portion of our network to a particular customer application that has very specific characteristics that meet their needs, whether it's latency, whether it's connection time, whatever that might be for that railroad, or mining operation, or utility, and actually save them the cost and effort of having to do something themselves. Where the expertise is becoming more complicated and more individualised, we think that one of the great promises of 5G, besides speed and latency, is mobile edge computing and network slicing. We haven't talked much about these things, but I think they're topics that are worth considering as you opine on the future of the industry.
9926 THE CHAIRPERSON: Thank you.
9927 Some of those parties, same parties have also raised the use of eSIMs. Is that -- do you support the use of eSIMs in your devices, in your network today?
9928 MR. NATALE: We do.
9929 THE CHAIRPERSON: You do? And would a device -- see how to put this -- would a device on your network be permitted to have another network profile on its eSIM at the same time as yours?
9930 MR. FERNANDES: Not at the same time. The device would be attached to one network at a time, if that's your question.
9931 Now, the device could detach from one network and then attach to another network. You're able to do that today on any iPad where you can select another network and attach that network through the eSIM capability.
9932 THE CHAIRPERSON: But not multiple ones at the same time?
9933 MR. FERNANDES: Not at the same time.
9934 THE CHAIRPERSON: Thank you.
9935 And is that true for machine-to-machine devices as well, the same applicability -- availability, rather, of eSIMs and those same characteristics?
9936 MR. FERNANDES: Those devices, when they do need alternative connectivity, they tend to resort to roaming to provide the alternative connectivity.
9937 THE CHAIRPERSON: Thank you.
9938 You've already answered my questions about network sharing I think when we talked earlier on the retail side. So, my last area of questions, just a couple or final ones, and that goes to support structures.
9939 So, you're unique among national carriers in that you don't have the same support structure assets that Bell and TELUS do, since you started off as a cable operator, not as an ILEC. So, in that sense you've probably got more in common with the regional competitors than with at least Bell and TELUS.
9940 Something that we've heard from both sides on this issue is that we don't seem to have a lot of hard data, and there's a lot of missing facts with respect to the magnitude of the problems faced and the resulting impacts. There's a lot of anecdotal evidence, anecdotal descriptions, not so much in the way of hard evidence.
9941 Is there anything that you can provide now or through an undertaking that, for lack of a better term, a little harder data that can give us some information on frequency of denials, length of delays, financial impacts on your business?
9942 MS. DINSMORE: We heard that question being asked the other day, and we got the wheels in motion to begin looking at a more fact-based approach that we could provide to you in an undertaking.
9943 We have many, many anecdotal stories. They are legion. The problems are real. They span from anything from the permit application process, where we're paying for inspections, we're effectively doing an audit for the ILECs. And when we finally complete that process and given the bill we are told that they don't actually have spare capacity for us, and on some occasions they end up using that very same capacity that they claim is not available for us. That's one anecdote.
9944 When we do get denials we're never really told is it because we're using the capacity or is it because we're saving that capacity for future use. So the rules under the tariff are very different than they are under the ISED protocol that we have for towers siting. That process is far more transparent.
9945 There are requirements if you are going to reserve capacity to provide that reservation to the requesting licensee. You have to provide drawings as to what the loads look like on the tower, and if you do reserve for say 18 months imminent future use and space does become available in the interim, you then have to go back to that requesting licensee and you let them know that they can get on now. We have none of that when it comes to the ILECs.
9946 So what we're doing is we are doing, for your purposes, a more extensive audit of our own -- of the problems that we're facing. We're very hopeful that that can then feed into a tariff review process where these things would be fully aired, and we would end up with a tariff that would be far more transparent and where we would have much more, again transparency in this process.
9947 THE CHAIRPERSON: Thank you. To be ---
9948 MR. NATALE: Mr. Chair, if I were to -- just a quick comment. There are three things that will impede the progress and evolution of 5G for the benefit of Canadians. One, we've talked about investment support in terms of regulation. Number 2 is access to spectrum. Access to 5G spectrum in all its frequencies; and Number 3 is this issue, access to support structures.
9949 We are woefully underprivileged on this -- in this area and we need your help and support so that Rogers can fulfill in their commitment to deliver 5G to Canadians.
9950 THE CHAIRPERSON: Thank you. To the extent that you can provide, as I said, some more specifics by the deadline date of 10th of March, that would be appreciated.
UNDERTAKING / ENGAGEMENT
9951 THE CHAIRPERSON: Beyond that, and you just made reference to this, you proposed that we hold a follow-up proceeding to look at the tariffs. But late last year, we did launch a proceeding looking at barriers to infrastructure deployment in rural areas. In your view, could the issues that you've raised about support structure access be addressed in that proceeding, or do you -- are you still in favour of a separate proceeding to specifically address these tariffs?
9952 MS. DINSMORE: I think we'll still need a proceeding to separately address these problems because we're talking about -- so the tariff sets out the rules of engagement between, say Rogers and Bell, Rogers and TELUS in terms of our actual access, it's very detailed. And I think we can raise these issues in that proceeding, we will raise these issues, but I think more specifically we're going to need to actually amend the tariff.
9953 THE CHAIRPERSON: You have given us an indication of the kinds of issues you want. Perhaps in that undertaking you could give us a more complete list of the issues that you would propose to see examined in that follow on proceeding?
9954 MS. DINSMORE: We'd be happy to do that. Thank you.
UNDERTAKING / ENGAGEMENT
9955 THE CHAIRPERSON: Thank you.
9956 Last question from me, and then I'll ask my colleagues.
9957 You've also heard our discussions that we've had with numerous parties about the desirability of establishing a 5G working group, for example, as proposed by the FCM and some others. You've said some other things should come first, for example, some clarity around jurisdictional arrangements. But are there any lessons that we can take from your prior experience in other working groups, CISC or otherwise, that would make a 5G working group effective?
9958 MS. DINSMORE: I mean, I think the problem is if we go back to the model MAA process, which I think was one of the working groups that was referenced in this context, that process took a year-and‑a‑half. The parties could not come to consensus on many of the major issues, most of which revolved around, you know, what are causal costs, what gets reimbursed, what doesn't, and so that process then took another year-and‑a‑half to get a decision.
9959 So I think the lesson learned there is that this process probably won't work. That we really do need the Commission to clarify the rules of engagement. We had proposed that frankly out of this proceeding you can do that. The record is rich in terms of discussion around these issues. You asked questions in your RFIs that specifically addressed what was in the bounds of your jurisdiction.
9960 We responded, so did many other parties, it's a legal issue, it's a legal interpretation. There really in our mind is no policy reason that would cause you to treat wireless and wireline equipment differently.
9961 Now with the onset of 5G, the time is nigh. If we have to wait for a working group which we think would just get bogged down in issues of non‑consensus, especially around things like occupancy fees.
9962 I mean we -- as you know, we don't agree that we should have to pay occupancy fees to place small cells of municipal street furniture, but we have in our negotiations to date with municipalities, because we don't have the Commission's framework that we're looking for, we do end up paying occupancy fees to municipalities to place our small cells on traffic, you know, on traffic standards, light standards. That's something that is totally contrary to the Ledcor principles, but because we don't have the framework and we need the access we need to go ahead, and so we're currently signing those kinds of agreements but we don't think it's right. And if we had your oversight and we had this clarification, then we would be well on our way to resolving that problem.
9963 We're quite prepared to pay for causal costs as we do with access to rights-of‑way, and we think that that same rule should extend to wireless equipment and to street furniture, and we've detailed that in our RFIs to you.
9964 THE CHAIRPERSON: Thank you. Thank you very much.
9965 Those are all my questions. Commissioner Barin?
9966 COMMISSIONER BARIN: Thank you.
9967 I have a question for you regarding the example of the Québec market. This morning, we spoke about the fact that Québec has lower prices for wireless services. Now, I want to understand your position with regards to competition from regional facilities-based carriers in other markets.
9968 So when you say that the Canadian market is currently competitive, are you saying that regional competitors in other markets are already providing effective competition and that this will drive prices down potentially if we're patient or are you saying that the Québec is an outlier or different in some fundamental way?
9969 MR. NATALE: We're saying both. First of all, we're saying that the regional carriers are doing a good job of driving competitive intensity in the markets. Look no further than last year. Last year between Videotron and Freedom and Eastlink they garnered 33 percent of the net new customers in the first three-quarters of the year. That's more than Rogers got, that's more than TELUS got.
9970 And to Richard's commentary earlier, that is probably the most visible demonstration of success in a market that new customers coming to market they're getting that proportion of. When you compare that to the size of their base it's even more stark given that they have, you know, a far smaller base of customers than we have as a whole.
9971 As it relates to the Québec market, it's as intensely competitive as the other markets. Even before the arrival of Videotron prices were lower in Québec because the appetite for whatever reason was lower in Québec. And today, even though prices are lower in Québec, the percentage of Québecers that have a cell phone is also amongst the lowest in the country. You know, it's just the nature of the market and the structure of the market.
9972 Brent talked about Alberta, where in Alberta our pool is the highest and actually penetration is amongst the highest in the country. So these are vagaries of the Canadian market as they differ from region to region.
9973 But I would say to you that when you look at the fact that wireless prices have gone down by 50 percent in the last five years; you look at the percentage of new customers garnered by the regional carriers; you look at what’s happened this last year along with respect to unlimited plans, the market is working, and the market is driving affordability while at the same time supporting investment.
9974 COMMISSIONER BARIN: Thank you. I don’t have any more questions.
9975 THE CHAIRPERSON: Pardon me.
9976 Commissioner Levy.
9977 COMMISSIONER LEVY: Good morning -- good afternoon now. Just a couple of questions.
9978 We’ve seen different assessments of the Canadian market, and you’re in the forecasting business; you do it all the time. What do you see as the capacity, the expansion and capacity of the growth in the numbers of consumer in the Canadian market over the next few years?
9979 MR. NATALE: Sure. Well, as I said earlier if you look at the number of Canadians over the age of 10, by the math alone, it’s roughly equal to, you know, complete penetration as a whole.
9980 Having said that, a couple of factors do play in; our models and forecasts look at the benefit of immigration to Canada, roughly about 2 percent growth in the population, and we’re seeing that in terms of the growth in wireless subscribers in the marketplace as a whole.
9981 We’re also seeing growth in penetration in the remaining portions of penetration fueled by a few factors that are more novel to Canada right now and have been fully articulated in the U.S., for example.
9982 The idea of having two phones is not as prominent in Canada. In the U.S. it’s actually quite prominent. The idea of separating your personal life from your work life and having a work device and a personal device is starting to take root in Canada; we’re seeing some of that. So that creates a penetration gain in opportunity as well.
9983 The opportunity for people to add a tablet or other device to their plan, you know, counts as a degree of penetration, albeit a different type of penetration but still a rich appetite in use for the technology as a whole.
9984 So we think between immigration growth, the use of dual devices; thirdly, the fact that the used phone market, as Brent has called it, will actually create more opportunity in terms of affordability and we’ll seeing people give a used phone to, you know, the older person in their family that may not have a phone yet, or a child that wants a phone for whatever reason, for security, safety reasons, or entertainment reasons. So we’re seeing the proliferation of used phones actually expand the market as well.
9985 Penetration rates in Canada are roughly about 85, 87 percent, and we see them marching towards, you know, 100 percent over the fullness of time based on these factors.
9986 MR. WATT: I’m just going to pick up on that last point that Joe mentioned.
9987 We do recognize a lower penetration in the lowest income quintile and it’s -- so there’s opportunity there to drive more penetration in what Joe has described as a pretty saturated market. And that’s going to come from things like the used phones, some of the plans we’re introducing and, you know, quite frankly, the potential plan that we were discussing earlier today. But there clearly is opportunity to drive more penetration in that area.
9988 COMMISSIONER LEVY: What about your forecast for Canadians’ data usage? Do you have anything that you can add to your previous comments on that?
9989 MR. NATALE: Sure. I mean, right now we’re seeing about a 30 percent growth into the usage. We do look to other markets to see, you know, if you will, where the puck is going. If -- you know, we talked earlier about South Korea. South Korea probably leads the world in many ways, along with Japan, in terms of overall consumption. Their data consumption sits in the 20s; 25, 25 gigabytes per month on 5G. They’ve got a very vigorous 5G network.
9990 Before they launched 5G in Korea, the average consumption was sitting closer to 7 or 8 gigabytes. So there really is no reason why we won’t be on that progression path. It’s almost a bit of a view into the future. And we spent time with our peers in different countries to understand, you know, how they’re seeing data consumption.
9991 So data consumption, we believe, will, you know, march from 2.5 to 3 gig to eventually 7 or 8 and beyond in the next many years.
9992 COMMISSIONER LEVY: You mentioned that that 5.1 percent return on assets, and you suggest that that’s a better way of looking at your profitability, if you like.
9993 MR. NATALE: M’hm.
9994 Commissioner LEVY: How do you think that compares to your major competitors?
9995 MR. WATT: Bell and Telus are both roughly in the same range.
9996 COMMISSIONER LEVY: Okay. And, finally, transparency has arisen several times in various parts of the conversation this morning and this afternoon. You talked about the relationship with your customers and the kinds of deals that you’re prepared to offer them.
9997 We heard one of the intervenors earlier in this process suggest that Canada is still such a small market that you can’t get Apple, for instance, to give you a bulk discount on devices for Canada. Is that your experience?
9998 MR. NATALE: I’ll defer to Brent, who is the former leader of Apple Canada.
9999 MR. JOHNSTON: I’ll be careful what I say here.
10000 So, you know, the -- I would say in the global context, Canada is relatively small, from an Apple -- in the single digits in terms of percentage of their business. But is large enough, fully, for sure, to be engaging with carriers to offer, you know, various incentives, and we work together to perform well in the market together. I’ll just leave it at that.
10001 MR. NATALE: I think one comment I’ll make much more broadly, not specific to Apple, but if you add up the revenue of Rogers, Bell, and Telus, and then add to it Videotron, Shaw, and Eastlink as a total in wireless, we are no more than 2 to 3 percent of the total global revenue of the wireless industry across every country.
10002 So we sometimes have a hard time punching above our weight. We sometimes have to really work hard to understand what the very large players are doing, the Vodafones, the Verizons, the SK Tels of the world because they actually make the market and drive the technology direction.
10003 We often find ourselves draughting in their wake and making sure that we avail ourselves of some of the ideas that are out there. And we all do it; all the players do it, industry does it. It’s part of being in Canada and being small on a global scale.
10004 COMMISSIONER LEVY: So are you prepared to make any kinds of discounts and so forth readily apparent to your customers when you’re negotiating with them? You know, if I have come to the end of my plan and I’m trying to decide am I going to have more muscle in the market as I come to my new plan if I bring my own device, if I buy it myself, but if you can get it for me at a discount and over the course of a term it will be less, does that -- can you break that out for a customer so that they can make those kinds of decisions?
10005 MR. JOHNSTON: Yeah, I’ll say a couple of things. We’ve moved now across all of our brands that provide devices to a financing world where the service -- the cost of service and the cost of the phone are delineated and very, very transparently separated. So people know exactly what they’re paying for the phone and they know exactly what they’re paying for the service. And then at the end of the contract when you’re done paying for the -- payment for the device falls off and you’re left with just paying for the rate plan.
10006 So I think that takes us a giant leap forward versus a day when subsidy was -- in some ways the rate and the hardware repayment were baked into the same cake and it was hard to disaggregate, sometimes, which was which. So that’s been a major step forward I would say, first of all.
10007 Second, when you look at a customer and you’re deciding at the end of their contract what type of promotion, or what type of offer you might want to provide to them, I’d say two things, one Joe mentioned that the vast majority of our volume, a large proportion of the volume that happens in the market happens at these peak moments, Black Friday, Boxing Week, and back to school.
10008 When you dig into that volume, you’ll find that the majority of that is actually renewal activity. Those are people that are coming back to you and resigning a contract and extending their relationship. And those happen disproportionately as well in those sale moments.
10009 So that’s when customers are getting a deal. And those deals are very much set across the entire industry, given the level of competition, so that everybody is offering deals at the same time.
10010 And then in the case where perhaps we’re talking to a customer one on one, given financing and given the opportunity to also understand that customer’s unique needs, and their loyalty to us over time, and how long they’ve been a customer, and the quality of that relationship, we will reward that and offer, you know, specific promotions and incentives to continue to be a customer with us. And those are very clearly laid out.
10011 And of course, we want them to say yes to that, so we’ll always be referencing the in-market price at the time and the discount that’s being offered.
10012 So that would be the nature of those interactions.
10013 COMMISSIONER LEVY: Thank you.
10014 THE CHAIRPERSON: Commissioner Laizner?
10015 MR. NATALE: If you look at our desire, our number one priority as a company is to put customer’s first.
10016 Right in that language and that manifest to the Roger’s team is to be clear and simple with our customers.
10017 So it’s part of our wiring to focus on all of these areas where we could improve clarity.
10018 MR. WATT: Commissioner Levy, if I could, just very quickly, I very confidently said that Bell and Telus’ return on assets was similar to Rogers, 5.1.
10019 I said that on the basis of having looked at that number for 2018.
10020 It’s dawned on me the 5.1 number we provided, in order to take out gyrations or any jumps up and down in one year, is a five-year average.
10021 Can I undertake to do the precise same five-year average for Bell and Telus just to make absolutely certain that what I said, that’s very comparable, is true? I don’t want to mislead you.
UNDERTAKING / ENGAGEMENT
10022 THE CHAIRPERSON: Thank you. Sorry, I interrupted you, Mr. Natale.
10023 Commissioner Laizner?
10024 THE VICE-CHAIRPERSON: Good afternoon.
10025 You’ve argued that the current definition of roaming in your tariff does not include 5G.
10026 There are other parties that have argued, based on the way the roaming service is defined in the tariffs, that is incidental access to GSM based voice, text, and data services, that 5G would automatically be included, unless the definition were to be changed.
10027 And I understand that that is the kind of wording that you used in Rogers Access Services Tariff.
10028 So how do you respond to that argument?
10029 MR. SLAWNER: I just think that 5G is a big revolutionary step from the current existing technology. I’m not sure that the current tariff has phrases specifically directed at GSM type technologies covers 5G.
10030 So I do think that some changes would be needed to reflect that change.
10031 THE VICE-CHAIRPERSON: Okay. I had another question on spectrum.
10032 You mentioned that you have subordinated spectrum to a number of other providers. Would you undertake to provide us with a list of the specific spectrum and providers?
10033 MR. WATT: Yes, we will.
UNDERTAKING / ENAGEMENT
10034 THE VICE-CHAIRPERSON: Okay. And then my last couple of questions.
10035 We heard yesterday from the Coalition for Cheaper Wireless Service that -- and specifically I’m thinking of the representative from ACORN, that a one gig plan just doesn’t meet needs.
10036 I think she gave the example of currently there’s a lot of disruption in the educational system in Ontario, and the only way she gets her information about whether the schools have will be closed for her children is through data.
10037 You’ve indicated that you have a one gigabyte plan which you feel is very reasonably priced. I think you mentioned around $27.
10038 So what’s the overage charge on that plan?
10039 MR. JOHNSTON: The one I mentioned was a Chatr prepaid plan for $30. That, by its definition, doesn’t have overage.
10040 THE VICE-CHAIRPERSON: Okay.
10041 MR. JOHNSTON: So prepaid, you pay in advance, and then when you use up your allotment, then you’re prompted to pay more if you’d like to continue to use it.
10042 It allows you to very efficiently begin and end service. It really appeals to people who don’t always know that they’re able to, you know, continue on with service also.
10043 So that’s -- it’s sort of inherent to that plan that it doesn’t have overage.
10044 MR. NATALE: Broadly speaking, the biggest consumer of data is video.
10045 If you were to see a pie chart or a sort of unpacking of how data gets consumed, video, and especially high-definition video, is the biggest consumptive factor.
10046 And it’s happening in all media that people are watching more and more video, for entertainment, or information, or other purposes.
10047 And that’s the challenge that we face in trying to structure these plans, at the same build a network that can, you know, transmit and broadcast more and more video time.
10048 THE VICE-CHAIRPERSON: Although, I mean, we have seen that two gigabytes are available in Quebec for $35 amongst virtually all the providers. It just seems to be that outside that province, consumers are out of luck at that price point.
10049 MR. NATALE: As we said before, there are variations in plans across the country.
10050 As opportunities come along, we will look to create more value in low end plans.
10051 We hear the comments of Canadians loudly and clearly.
10052 As the economics of the business improve and evolve, much like when we went from 250 meg, to 500 meg, to a gig, at roughly that price point, we’ll continue to see more low-end price points over time.
10053 THE VICE-CHAIRPERSON: Thank you.
10054 THE CHAIRPERSON: I believe Commission counsel has a short snapper. Hint.
10055 MR. BOWLES: Given the time, I’ll endeavour to make this short.
10056 I just wanted to make it perfectly clear -- or sorry, to get your position on the matter perfectly clear.
10057 When you were discussing the issue of the current roaming tariff and 5G, is your position that the current tariff ought not to cover 5G, because changes should be made to the tariff, or that it technically does not apply to 5G?
10058 MR. SLAWNER: Technically it does not. It does not contemplate 5G.
10059 MR. BOWLES: Okay. Last question.
10060 MR. SLAWNER: Just a -- yeah, no, that’s right. That’s fine. Sorry.
10061 MR. BOWLES: So it’s how the terms are defined in the tariff do not ---
10062 MR. SLAWNER: The tariffs, as currently written, do not cover 5G.
10063 MR. BOWLES: So then your position on that would be that Videotron’s interpretation of the tariff language is incorrect?
10064 MR. SLAWNER: Exactly.
10065 MR. BOWLES: Last area that I wanted to ask a question on has to do with the discussion that was going on earlier about the mechanism for establishing rates, terms, and conditions in a hypothetical environment where there was a mandated MVNO.
10066 I believe, Mr. Watt, you were saying that in that hypothetical environment, it should be left to negotiations backed up by some third-party arbitration process, which would see, to the best as I understood it, no Commission involvement.
10067 Now, I believe you spoke a little bit to the question of delegation and why you thought this would not constitute impermissible delegation, but I just wanted you to expand a little bit on that.
10068 MR. WATT: I’ll have to turn to one of my lawyers to expand on the delegation authority.
10069 I’m not sure if we’re prepared to speak to that today or give you an undertaking on that.
10070 I know it was an issue that you raised with other parties.
10071 We’ve addressed it. We’re still coming to the conclusion on it.
10072 I’m not sure if that’s helpful or not.
10073 MR. BOWLES: If you’d like to take that away as an undertaking, ---
10074 MR. WATT: We will.
10075 MR. BOWLES: --- that would be fine. Thank you.
UNDERTAKING / ENGAGEMENT
10076 MR. BOWLES: Then that’s all. Thank you.
10077 MR. SLAWNER: Sorry, could I just clarify? Because before you asked whether it technically covered 5G or ought to cover 5G.
10078 So technically I don’t think it covers 5G.
10079 And why I got a little confused is our position is very clear that it should not include 5G. If there is a mandated MVNO regime, 5G should not be a part of the regime.
10080 So I just wanted to make sure that position is quite clear. Thank you.
10081 THE CHAIRPERSON: That concludes the presentation from Rogers.
10082 Mr. Natale?
10083 MR. NATALE: Mr. Chairperson, thank you for the time and the considered thoughtful questions and commentary. We appreciate the opportunity to state our views and thoughts.
10084 Before we go, I think it would be remiss to not recognize a particular individual.
10085 It was 38 years ago this year that a young David Watt first sat at a CRTC hearing.
10086 And this year we will celebrate the contribution of Mr. Watt to the Rogers organization, as we celebrate his retirement and he takes the next chapter forward.
10087 I would ask for the record to recognize Mr. Watt.
10088 THE CHAIRPERSON: Thank you for that. I wasn’t sure that Mr. Watt would ever actually retire.
10089 (Laughter / Rires)
10090 MR. NATALE: We tried to convince them otherwise. We were unsuccessful.
10091 THE CHAIRPERSON: And I'm not entirely persuaded that that's the case.
10092 We may leave a seat somewhere in the back with a name plate on it in the event that he just starts to hang out at future proceedings. But I would -- I, too, would like to acknowledge Mr. Watt.
10093 He has always been a collegial and responsive participant in our proceedings -- see, I'm getting choked up now -- in our proceedings and has no doubt made significant contributions to building a public record on many proceedings over many years.
10094 Mr. Watt, I wish you well in your retirement.
10095 MR. WATT: Thank you very much. Thank you very much for the kind words, and it has been a great honour for me to appear before the Commission.
10096 THE CHAIRPERSON: Thank you.
10097 We will adjourn, returning at 3 o'clock.
--- Upon recessing at 2:03 p.m.
--- Upon resuming at 3:00 p.m.
10098 THE SECRETARY: Good afternoon. Before we begin, we would just like to announce that due to the weather forecast for tomorrow and to allow everyone extra time to arrive, the hearing will start at 9:30.
10099 And now we'll hear the presentation of the Canadian Wireless Telecommunications Association.
10100 Please introduce yourselves, and you may begin.
PRESENTATION / PRÉSENTATION
10101 MR. GHIZ: Thank you. Merci beaucoup.
10102 Good afternoon, Chairperson Scott, Vice-Chair Laizner, Commissioners, Commission staff and counsel. My name is Robert Ghiz, and I am the President and CEO of the Canadian Wireless Telecommunications Association.
10103 To my right is Eric Smith, Senior Vice-President of the CWTA, and to my left is Katherine Winchester, CWTA’s Vice-President of Operations.
10104 CWTA is the recognized authority on wireless issues, developments and trends in Canada. In addition to promoting the importance and benefits of wireless connectivity in Canada, CWTA also facilitates a number of industry councils and committees as well as consumer-facing programs such as Mobile Giving Foundation Canada, Wirelessaccessibility.ca, DeviceCheck Canada, and Recycle My Cell.
10105 We appreciate having the opportunity to participate in this important proceeding and to appear before you today.
10106 Dans son avis d’audience, le Conseil a déclaré que le principal objectif de l’audience était de
10107 « s’assurer que son cadre réglementaire favorise une concurrence durable qui donnera lieu à des tarifs raisonnables et à des services novateurs, ainsi que des investissements continus dans des réseaux sans fil mobiles de haute qualité dans toutes les régions du pays ».
10108 Le Conseil demande aux intervenants de déterminer s’ils « répondent aux besoins des Canadiens et atteignent les objectifs stratégiques énoncés dans la
10109 Loi. »
10110 Autrement dit, il convient d’examiner la santé globale de la concurrence dans le marché de détail en tenant compte de sa capacité à produire des résultats attendus, plutôt qu’en tenant compte de résultats statistiques, comme le nombre ou le type de concurrents.
10111 Le gouvernement fédéral a clairement défini les besoins des Canadiens en matière de services sans fil mobiles dans le document intitulé Perspectives du spectre de 2018 à 2022. Reconnaissant que le Canada dispose d’une « infrastructure de télécommunications de classe mondiale », le gouvernement déclare qu’il veillera à ce que « les consommateurs, les entreprises et les établissements publics canadiens continuent de bénéficier les applications et des services avancés de télécommunications sans fil ».
10112 Pour parvenir à ce résultat, le gouvernement a cerné trois principaux objectifs : qualité, couverture et prix abordables.
10113 MR. SMITH: These objectives of quality, coverage, and affordable prices are not controversial. They reflect the policy objectives in the Telecommunications Act, are consistent with the Commission’s stated focus, and are shared by CWTA and its members. The question is, what is the right path to achieving these goals.
10114 To quote the Competition Bureau from its appearance before you last week, facilities-based competition should be the “guiding principle” for the path forward. Why? Because facilities-based competition is working.
10115 Facilities-based competition is widely recognized as the market structure best capable of delivering sustainable competition and encouraging the level of investment in network infrastructure that is necessary to achieve desired outcomes for Canadians. It is driving more intense competition, growth in wireless adoption, increased data consumption, declining prices and more choices for consumers.
10116 Equally important, continuing innovation and investment by Canada’s facilities-based carriers is providing Canada with some of the fastest and highest-quality networks in the world, as well as expanding network coverage.
10117 Despite this success, in the Notice of Consultation the Commission expressed its concern that an appropriate mix of facilities-based competitors and MVNOs has not developed and that it might be appropriate to mandate wholesale MVNO access.
10118 We strongly disagree. A low number of MVNOs is not an indication of a competition problem. In fact, as expert witness in this proceeding attests, the number of MVNOs in any particular country is largely irrelevant when it comes to assessing competitive intensity and positive consumer outcomes.
10119 The Commission’s preliminary view on mandating wholesale MVNO access comes at a critical time in the evolution of the wireless market in Canada. The Commission and the federal government have placed the expansion of both wired and wireless coverage near the top of their agendas.
10120 They have also stressed the importance of investing in next-generation 5G wireless technologies. Yet a mandated wholesale MVNO access regime would undermine both of these objectives with little, if any, corresponding benefits.
10121 First, the reduction in capacity to invest brought on by mandated MVNO wholesale access would be disproportionately borne by Canadians in rural and remote areas where the economics of network deployment are already challenging. By way of example, existing wholesale internet access regimes have already forced national and regional providers to suspend certain planned investments into smaller communities where the wholesale regime would impede them from obtaining a reasonable return on investment.
10122 It is notable that if facilities-based carriers no longer have the capital to expand and upgrade networks in less populated markets, residents of those areas will not receive any of the alleged benefits that come with mandating of wholesale MVNO access.
10123 MS. WINCHESTER: With respect to 5G, the Commission has correctly stated that, with the introduction of 5G wireless technology, the wireless market is -- and I quote -- "on the verge of a major transformation" and that "wireless carriers will be required to make significant investments in network infrastructure".
10124 5G will bring more than improved and faster wireless communications. 5G will expand the capabilities of wireless communications through the use of different bands of spectrum, new technologies, and a more intelligent and dynamic wireless network. The impact of 5G extends well beyond the wireless industry. It will be an indispensable platform for innovation, increased economic prosperity, and improved quality of life, and countries that do not recognize the importance of 5G will fall behind their international counterparts.
10125 The deployment of 5G in Canada will add an estimated $40 billion in GDP to the economy by 2026 and create close to 250,000 new permanent fulltime jobs in that same time frame. Beyond these macroeconomic factors, 5G will provide benefits to cities and rural communities and improve the quality-of-life of Canadians, including helping to fight climate change and extending network connectivity to underserved rural communities.
10126 However, deploying 5G will require massive investments by facilities-based wireless providers. According to Accenture, this level of necessary investment is estimated to be 26 billion by 2026. This does not include the several billions more that is likely to be spent by facilities-based wireless providers from 2020 to 2022 in the upcoming 3500MHz, mmWave, and 3800MHz spectrum auctions.
10127 MR. GHIZ: Mandating wholesale MVNO access will reduce facilities-based carriers' capacity to invest in 5G infrastructure and spectrum, threatening Canada's leadership role in wireless telecommunications, and hampering Canadians' access to the latest mobile innovations which are vital to increasing productivity, growing the economy, creating jobs, and improving Canadians' quality of life.
10128 Finally, while mandating MVNO access to facilities-based carriers' networks would negatively impact investment by all facilities-based carriers, regional providers will be particularly harmed. In CRTC 2015-177, which set out the current wholesale wireless roaming framework, the Commission acknowledged the important role that the regional providers are playing in bringing sustainable competition to the wireless retail market. Mandating MVNO wholesale access would effectively "pull the rug out" from under the regional providers, threatening their capacity to contribute to sustainable competition as independent network operators. It would instead favour economically inefficient MVNOs whose business model is dependent on gaining regulated access to the national carrier networks.
10129 As we have discussed in our written interventions, mandating MNVO access will not improve consumer outcomes, nor, as the Competition Bureau has testified, can MVNOs substitute for the positive impact that regional providers have had in increasing sustainable competition, investment, and declining prices.
10130 Justifying regulatory intervention requires compelling evidence that the benefits of such intervention clearly outweigh any negative consequences. The benefits of mandating MVNO wholesale access are purely speculative, and if they exist at all, are minimal and short term. In contrast, the negative effects of mandated wholesale MVNO access on sustainable competition and investment are well-established by the record of this proceeding and will have long-term negative impacts affecting all Canadians.
10131 These negative impacts have also been recognized time and time again by the Commission, which has concluded in past proceedings that the costs of mandated MVNO wireless access outweigh any potential benefits. Since those decisions, the benefits of facilities-based competition are even more evident, and the need for massive ongoing investment in innovation, infrastructure and spectrum has only increased. The evidence on the record does not support mandating wholesale MVNO access.
10132 Thank you, and we'd be happy to take your questions.
10133 THE CHAIRPERSON: Thank you for your presentation.
10134 Commissioner MacDonald?
10135 COMMISSIONER MacDONALD: Good afternoon and welcome. Your comments today and your submissions throughout this process have largely been consistent with statements that we've heard from the large facilities-based carriers across the country that are also members of your organization. So, I'm not going to cover all of the same ground perhaps we have with other -- with facilities-based providers, but if there are particular points where you potentially take a different view from that of some of your members, perhaps you might just want to outline that as we go through.
10136 I guess the first question I would have is one of the criticisms that has been levied against MVNOs is the fact that they don't invest in any infrastructure, but other parties have said, "Well, yes, they actually do. They invest in core network. They invest in billing systems. They hire people".
10137 Why are you of the view that such investments are not significant enough to warrant some merit in this proceeding?
10138 MR. GHIZ: Well, I'll start off with that. Just to address your first point where you asked if we have any different views than our members to let you know when those issues come up, we're not going to have any different views than our members today.
10139 COMMISSIONER MacDONALD: I was expecting that response. Thank you.
10140 MR. GHIZ: Or I'd be in a lot of trouble.
10141 With regards to investment, when we talk investment, we talk about investment in building the world-class networks that Canadians have enjoyed. Where we've got 99 per cent of Canadians that have access to LTE networks, where we have, you know, some of the fastest networks in the world, second only behind South Korea, those are the investments we're talking about. And where we see that investments that, from a particular point of view that I have, that where they will definitely not invest is for those Canadians that still do not have access to wireless networks.
10142 So, if you're a Canadian out there today and you happen to be watching this at home, and you do not have access to wireless networks, or you're still waiting for upgrades to your wireless networks, it's very important to know that mandating MVNO access, allowing MVNOs to have access to the incumbent networks is going to do absolutely nothing, nothing to build out into those rural and remote communities where Canadians are still waiting to be able to be connected. And that's probably the biggest -- one of the biggest issues that I have.
10143 They also don't do anything in terms of upgrading our networks where we're on the verge of 5G, which, as we've heard, is going to be transformational. And perhaps I'll talk a little bit about it later, but even with 5G, with those upgrades, we're going to go into fixed wireless, which is even going to make it even more easier to be able to connect those Canadians that don't need it.
10144 So, where my concern comes from is people out there that don't have access, MVNOs -- mandating MVNOs is going to do absolutely nothing to help.
10145 COMMISSIONER MacDONALD: Sorry, go ahead.
10146 MR. SMITH: Yeah, if I could just add. I, you know, definitely agree with Rob. I think also, you know, you heard this morning from Rogers where they talk about like 70 per cent of their investments are in things like building roads, building towers, building that physical infrastructure. So, certainly, depending on, you know, the model, an MVNO will have to make some investments, but those are sort of more in some operational things that they will need, that any business needs, but they're not contributing, as Rob mentioned, to actually building the physical infrastructure that's necessary to provide world-class service to Canadians.
10147 COMMISSIONER MacDONALD: Thank you for that.
10148 So, given your viewpoints that investments should be focused on building networks, not necessarily investing in internal systems or a new core network for a potential MVNO, are there certain proposals from different parties that cause you more or less concern when talking about a mandated MVNO? Because if I'm looking at the range of possibilities, at one end of the spectrum we have what the Bureau has proposed, and then at the other end of the spectrum we have what perhaps a provider wishing to be a full MVNO would like to see as a result of this proceeding. So, which ones give you more concern?
10149 MR. SMITH: Well, obviously we're -- we've stated quite clearly, as has our members, we're against any MVNO model.
10150 And I think, you know, some have commented that maybe the Bureau model is less harmful.
10151 But I think what’s key is that any type of intervention along that will still have potential negative impact.
10152 And the key is, you know, the Bureau has created that model as part of this proceeding.
10153 But the focus of their report is really that facilities-based competition is working, the regional providers have provided additional competitive intensity, and basically they’re saying, “Commission, whatever you do, don’t do anything to hurt the regional providers.”
10154 Even with that proposal, the regional providers aren’t asking for that proposal. They’re not asking for that.
10155 So, you know, could it potentially, in theory, be less harmful than the others? Yes.
10156 But also, as we heard, there’s many complexities to it, unanswered questions.
10157 Even the Bureau themselves indicated that, in response to some of your questions, well, you know, that they weren’t sure what the answers were, there maybe would need to be another proceeding, et cetera.
10158 So it’s a theoretical model that even they said -- they didn’t say in the report it would work, they said it may work.
10159 So we’re really against all the models, because we don’t think we need any of them and facilities-based competition is working and it’s producing positive outcomes.
10160 COMMISSIONER MacDONALD: Thank you. One of the things that you -- or one of the points that you tried to drive home in your submissions was around the negative financial impact that mandating MVNOs would have, particularly in the context of the rollout for 5G.
10161 So on that topic, I’m just wondering, in your original submission, you note the many benefits of 5G to transportation, mobility solutions, precision agriculture, energy management, rural connectivity.
10162 Those would seem to be excellent lines of business that a 5G provider could leverage to offset any potential harm that MVNOs might create.
10163 Could you perhaps comment on that?
10164 Mr. GHIZ: I’ll start off. Well just allow me to put things into context.
10165 For us to even get to where we want to be so that we can take advantage of 5G, it’s going to take a $26 billion investment.
10166 We know that that is a massive investment that needs to be made by facilities-based providers.
10167 For us to -- and then there’s a lot of other steps along the way as well.
10168 But when we do get to that step, I think that the benefits that are going to come are going to be delivered to society.
10169 I did talk about, and in our open remarks, about how 5G will actually help with climate change.
10170 We see from some of the examples that you just used, whether or not it is smart grids, smart energy, less traffic on highways, reducing down our carbon footprint, there’s a lot of things for us to get there.
10171 But when it comes to, again I go back to MVNOs, they will do nothing to help us get there.
10172 Are there going to be other avenues to be able to gain, perhaps, revenue? It’s unpredictable what’s exactly going to happen with 5G. We know what some of the use cases are.
10173 But in terms of exactly how that’s all going to work, I think it’s going to be an evolution, kind of like how we didn’t predict a lot of the things that were going to come about when 4G arrived.
10174 So it’s going to be an evolution before we start to see what some of those results could be.
10175 COMMISSIONER MacDONALD: Thank you. A couple of days ago, I was asking questions of a panel of former telecom executives, and I’m going to paraphrase, but the statement was made, “The investments are going to happen. No provider would not invest in 5G.”
10176 And that could very well be true, but I think the example that I used at the time was there will always be a business case to build in the GTA, there will always be a business case to build in Montreal, but there’s an awful lot of Canada outside of the larger centers.
10177 Could you perhaps give your thoughts on where the negative financial impact will most be felt from a network deployment standpoint?
10178 MR. GHIZ: Very good point. And I agree with your assessment that I think where the bigger components are going to be felt, and I addressed this a little bit earlier, is going to be on those Canadians that do not have access to networks, first of all, that are still waiting for 4G and LTE, that are still waiting on the hope of what fixed wireless and 5G could bring to those communities.
10179 It’s also going to hinder the buildouts in rural areas.
10180 You heard from just Rogers this morning, they’re going to look for areas where they can get a return on their dollars.
10181 But to go back to -- and I watched the testimony of those three former telecom executives, and they’re partially right.
10182 And I think you’ve heard this from all the members.
10183 There’s still going to be buildouts that are going to happen, they’re just not going to happen as fast as they could have, which then leads to some major issues for Canada as a nation.
10184 Because you heard from Joe Natale this morning talking about we should be proud of our networks and how this is about nation building.
10185 And there is a race to 5G. And those countries that get there first are going to have the new jobs, the new apps, the new technologies.
10186 I don’t want rural Atlantic Canada missing out on that, or the prairies missing out on that, or the north missing out on that.
10187 And so while buildouts may still happen, they will happen at a much slower pace.
10188 And if they happen at a much slower pace, then there’s incremental costs that will happen because we’re losing out on that growth that could deliver that.
10189 And I have just some quotes here from -- and we’ve referenced it in our submissions, and you mention it, from our 5G report from Accenture, and it just has to do with rural connectivity, just to put things in perspective, and those that may not have broadband today, or may not have wireless, and what 5G and the potential of fixed wireless is able to do.
10190 And it says here:
10191 “studies have shown that a 10 percent increase in broadband penetration can achieve a 0.9 percent to 1.5 percent increase in GDP growth…”
10192 Applying these figures to Canadian rural regions showed significant economic benefits.
10193 In Saskatchewan, a province with 296 rural municipalities and 33 percent of the population live in rural regions, only 75 percent of households have access to broadband services.
10194 In a scenario where the province achieves the Canadian Government target of 95 percent broadband service availably, Saskatchewan can expect a potential increase in GDP of up to 1.2 billion.
10195 Similarly, the same marks in Nova Scotia and in Newfoundland and Labrador are 520 million and 430 million, respectively.
10196 Rural connectivity will become easier with 5G through fixed wireless.
10197 Slowing down those investments will mean that they’ll get those investments years later down the road.
10198 And the incremental cost to that is something that concerns me, from someone who comes from a small jurisdiction in this country, that we cannot afford to be left behind. We need to be able to get there together. We need to be able to make sure that Canada is competitive all over the world and that no matter where you live in our country, you have every possible opportunity to compete with anywhere else in the world, let along with Canadians regardless of where they live.
10199 COMMISSIONER MacDONALD: So still on the topic of 5G and making sure that Canada is at the forefront, some parties have indicated that we’re already lagging behind.
10200 And one of the suggestions that’s been put forward in this proceeding was the possibility of a working group being established to sort through some of the many complexities that are going to be involved in the rollout.
10201 I believe, and I may use the wrong term, but you also have a 5G collaborative group who share thoughts within your organization.
10202 But pretty much universally, all of the service providers have said that the working group won’t provide any benefits and may, in some cases, actually slow down progress.
10203 So what are your thoughts on a 5G working group?
10204 MR. SMITH: Yeah, as you mentioned, there’s divergence of opinion among carriers.
10205 I think the majority of our members have indicated that they’re not in favour of some type of mandated working group and they have concerns with it and whether it’s things like potential sharing of confidential information, or just even the feasibility or workability of it. And others have indicated it may have some merit.
10206 I mean, definitely collaboration itself is important in our industry, and it goes on every day, and we know the that carriers work with municipalities on issues, et cetera. But you know, in terms of whether that should be a mandated working group, I mean we'll let the comments of our members that are on the record stand. We don't, you know, as we said, there's a divergence of opinion, so we don't have anything to add to that.
10207 MR. GHIZ: If I can -- sorry.
10208 COMMISSIONER MacDONALD: Go ahead.
10209 MR. GHIZ: If I can just add to that, because you talked about where are with 5G and are we behind other jurisdictions in the world.
10210 I like to point out, I was -- I remember I was at a conference in the U.S. and I was listening to a panel, and this was when I first started my job, and we like to talk about how great our LTE networks are and how we're world leaders, and there was a panel on and there was -- they were talking about 5G. And they were talking about how they were the first to get there to 4G. And I said to my staff is that true. And they said yeah it's it true. You know, the U.S. was the first country to get to 4G.
10211 And here we are a number of years later, and Canada's networks are twice as fast as the United States. We reach more on a percentage-wise of Canadians.
10212 And then there's a great quote from OpenSignal that I like to use where they say
10213 "There is no question, Canada is a global 4G superpower today. That likely means there are few other countries better prepared than Canada to deploy the 5G networks of the future." (As read)
10214 There's a caveat to that, and that caveat is that if we do not have a regulatory environment that supports facilities-based competition, then we cannot help deliver on that to help make sure that maybe we will be a little bit behind in terms of 5G, that -- but that in 5‑years time OpenSignal will say isn't it great that Canada is a 5G superpower today. And I think that's what we should try to strive for when we look at our regulatory framework.
10215 COMMISSIONER MacDONALD: I have a question on building networks in just a second, but before I go there, do you have specific thoughts around if a working group were established who should be at that table. Obviously, the carriers, I would assume municipalities, ISED. Are there other parties that you think should be around that table, if indeed they are invited to that table?
10216 MR. SMITH: No, I mean, I think you've hit the main ones. But I think, as Rogers mentioned this morning, part of the issue is that there is uncertainty regarding the sort of regulation of certain things like access to municipal infrastructure, passive infrastructure, access to electrical utility poles, et cetera. And so it's probably -- you know, the concerns I know that Rogers expressed anyway, and I think some others have was that it's more difficult to have that kind of discussion without those rules and those frameworks being worked out.
10217 COMMISSIONER MacDONALD: I have some experience with working groups, and one of the challenges can be, well one, not having the right people at the table; but two, having too many people at the table to actually get everything accomplished. Is that a concern when we're talking about the number of municipalities that will be involved in a 5G rollout? They all may have different priorities, very different circumstances. Can you comment on that?
10218 MR. SMITH: Yeah. I mean, you know, we have roughly, I guess, the same number of municipalities as when rolling out 4G, but the issues are probably more complex now because of, you know, small cell ---
10219 COMMISSIONER MacDONALD: M'hm.
10220 MR. SMITH: --- architectures, et cetera.
10221 You know, we know that our carriers have good relationships with municipalities, obviously some relationships better than others. Our hope is that as, you know, we're still very much in the infancy of 5G in a lot of these, you know, sort of best practices and things like that are still being worked out, and we hope as deployments begin those best practices will be identified, will be shared across municipalities, et cetera, and that it will make the process more streamlined and work better.
10222 But you're right. I mean, it's always a challenge because every municipality has, you know, different concerns from their citizens, has different priorities, has different economies of scale. So they may -- you know, one -- a large city may have a department dedicated to it, whereas a smaller municipality may have somebody who it's, you know, part of their job. So those challenges are very real.
10223 COMMISSIONER MacDONALD: On the topic of building a 5G network for Canada, I would assume it's cheaper, faster, and easier if one network were built as opposed to multiple networks serving the needs of each individual carrier. So I'm wondering, could I get your thoughts on a potential mandate for all carriers to build a 5G network to serve Canadians' needs and where the challenges might be with such a proposal? Other countries have gone down that road, which is why I ask the question.
10224 MR. SMITH: Right. What was the last part, sorry, that you just said?
10225 COMMISSIONER MacDONALD: I was just going to say, what might the challenges be with a mandate for all the carriers to work together ---
10226 MR. SMITH: Right.
10227 COMMISSIONER MacDONALD: -- and build one 5G network ---
10228 MR. SMITH: Yeah.
10229 COMMISSIONER MacDONALD: --- as opposed to building one individually for each of them.
10230 MR. SMITH: Right. And I think, though, you said something about others ---
10231 COMMISSIONER MacDONALD: Oh, other countries, particularly South Korea and Germany, have received a mandate that all carriers will build a single network.
10232 MR. SMITH: Yeah. I did hear that earlier in the proceeding, and I was looking into it for –- your information, obviously may be better than mine. I'm not sure in Germany that it's an actual mandate. I thought it was basically cooperation among three of the carriers who are, in one case I think they've entered into a letter, a memorandum of understanding, another one they're exploring discussions, and I think TELUS's expert talked a little bit about that in terms of sharing some of the building to address white spots areas of the country that are not receiving coverage. But obviously I stand to be corrected if I'm not accurate there.
10233 And I think part of that was actually -- arose out of concerns with some of the recent happenings in the German market, where with the spectrum auctions, the recent spectrum auctions were incredibly inflated in terms of the costs for the 5G spectrum. And basically, the comments that came out of the CEOs of the carriers were essentially, you know, our whole investment model is broken, we don't have money to invest in infrastructure, with this money we could've built out in these areas, areas, and areas. And so it was really a solution they came to, not because they felt it was the best thing to do or the best thing for the German people, or to provide the best networks, it was really driven out of a necessity.
10234 South Korea as well, I don't know too much about that situation other than I would say that, you know, South Korea is a much different country. Almost half the population lives in the Greater Seoul Area. Their population density is roughly around 16,000 people per square kilometre, whereas if you look at the GTA area it's like 800. And so they have some very real issues in terms of building the type of small cell architecture in a relatively small area to serve that many people, and so again, I think it's more of a -- come out of a necessity, rather than something seen as it will drive the, you know, the best network experience.
10235 One of the strengths of Canada is having multiple networks that allow facilities-based carriers to compete based on network performance differentiation, and I think in 5G that'll be even more key. Because we're not talking just about providing connectivity. We've heard earlier speakers talk about the diverse set of capabilities that 5G will deliver, and that will enable carriers to differentiate themselves from others even more.
10236 So you know, I don't think a mandated network is really something that's in the benefits of Canada.
10237 COMMISSIONER MacDONALD: Okay. Thank you. Regardless of whether we're living in a 4G or a 5G world, I think everyone could agree it's important for Canadians, particularly, perhaps more vulnerable Canadians, to have access to the communication services they need.
10238 And we've talked a lot about the potential to mandate a particular plan that would be available to low income Canadians. We've talked about low cost plan that would be available to all Canadians. We've talked about, and others, and myself included have referred to it as the ISED model, but it includes the partnership with, I think last count 13 different service providers have come together in the Connecting Families initiative. If we were looking as a way –- looking for a way to potentially solve that gap in the market if indeed it does exist, what’s the best vehicle to do that with?
10239 MR. SMITH: Yeah, no, certainly, I mean, you know, our view and our members, view is right now that the market is serving Canadians in terms of providing a broad range of plans at different price points, plans attributes, as well, but we certainly heard the discussion of different interveners and some of the questioning from the Commission about, well, isn’t there still potentially a segment of Canada who simply, you know, just does not find wireless affordable and you reference to the Connecting Canadian Families program on the wireline side.
10240 And I think, as Rogers mentioned this morning, I mean our industry is always open to have conversations about ways that that can be addressed. But I think the need for a mandate is not there. I think that, you know, some of the plans that have been proposed as part of this proceeding, as other members of ours have mentioned, are really not economically feasible and don’t reflect, you know, the true cost of delivering a service.
10241 But in terms of having an engagement with industry to look at whether something could be put together, I think is fair. I don’t think you can simply map the Connecting Families program to wireless because there’s different economies; it’s a different, you know, it’s a –- on one side, it’s connectivity to a family or household versus connectivity to individuals.
10242 COMMISSIONER MacDONALD: M’hm.
10243 MR. SMITH: There’s device costs, so there’s a lot of, you know, issues and complexities that would be –- had to be worked out. But I think that’s –- that would be the way to do it.
10244 And again, you know, along the lines that it would have to be, you know, strictly means tested et cetera because you don’t want to distort the whole market. You don’t want to totally destroy the economics of the market and impact investment et cetera, but you do want to, you know, look for ways if there’s a manageable way to address the needs of Canadians.
10245 MR. GHIZ: And I totally agree and those are great points and, you know, as Eric mentioned, you know, we don’t believe there’s a need to mandate. Industry is open to conversations. You hear –- you know, our members are always looking for better ways to find new customers, but for those that perhaps need help in our society, you know, I think that yes, you know, obviously you’ve heard from some of our members saying that they are open.
10246 There is another avenue, and I think I heard you asking some questions about this the other day. And with my background, I can say that, you know, provinces do receive a transfer payment from the Federal Government specifically designed for provinces themselves to decide on whether or not the needs of their citizens are being met to help them in areas where they may not be able to afford things. It was the health and social transfer; that was divvied up I think in 2004-2005. Now, it's the Canada Social Transfer, and within the provinces, there’s different names for social assistance programs all across the provinces, but that could be another area that to help make sure that those Canadians that need the help are able to get it.
10247 COMMISSIONER MacDONALD: Thank you for that. If we did decide to mandate a low-income plan, do you think that should also come with a requirement that it would be promoted in the same way –- sorry, a low-cost plan -- that that low-cost plan should be promoted in a similar way as carriers would promote other plans in their market: visual displays at kiosks, same size font on their website, that sort of thing?
10248 MR. GHIZ: Well, first of all, I think that there are inherent dangers in mandating a plan that is below cost and that could distort the entire market. You know, obviously, I’m somewhat paraphrasing Mr. Natale from this morning, but also, at the same time, if you remember Lee Bragg who represents a smaller private company said that they had a program at one point and that there was very little uptake on it, so they got rid of it.
10249 I think that I go to our two ways that I’ve described, but I think that if you want to sit down with industry and perhaps have some discussions or the second avenue would be to ensure that provinces do have the mechanisms in place to help bridge those gaps that exist within our society.
10250 COMMISSIONER MacDONALD: Thank you. Just one final question and then my colleagues may have questions of their own, and it’s a bit unfair to ask you, but I’m going to anyway.
10251 Just because you have a large number of members who compete with each other, who steal –- steal –- who attract customers away from each other with enticing offers, -- we have talked a lot in this proceeding about win back activity, especially what could be described as somewhat aggressive behaviour of a service provider calling one of their soon to be former clients upon receiving the (inaudible) request while the customer is still in the store -- do you think that there should be any guidelines put around that activity to: 1) allow the customer to still take advantage of the advantageous offers that may be put in front of them, but protect the service provider who has just unwrapped the $2,000 iPhone?
10252 MR. SMITH: Yeah. Yes, we heard the discussion about win backs. I mean, again, I’ll just say, you know, one of the concerns was brought by one of our members and it was, I guess, opposed by other members of ours, so, you know, we don’t have a view as an association on that issue. It’s not something we talk about at the CWTA, so we don’t have anything to add to the record on that.
10253 COMMISSIONER MacDONALD: Fair enough. Thank you. Those are my questions.
10254 THE CHAIRPERSON: Commissioner Barin. Pardon me.
10255 COMMISSIONER BARIN: I thank you. Thank you for the responses to the questions. I have a couple more.
10256 I heard you say that Canadian networks are twice as fast, and we’ve heard in the course of this proceeding that Canadians consume less data generally than international benchmarks, so that the networks are possibly less congested which makes it so that the speeds are better. We’ve –- so I’d like your comments on that.
10257 And also, we’ve heard from some of your members that they refer to the Canadian networks as higher quality, so I want to just ask you what is meant by the term higher quality; is it the equipment that’s different? What accounts for Canadian networks being of higher quality?
10258 MR. SMITH: Yeah, I mean on the issue of congestion or capacity –- I think we’ve heard those comments as well, but we also heard from facilities -- facility-based providers is they essentially build to the demand and the anticipated demand. So this notion that there’s a whole bunch of excess capacity just sitting there that they happened to spend millions of dollars in building, but nobody’s using it, I think that’s a fallacy.
10259 In terms of what quality means, quality is more than just speed; it’s reliability. There was a reference –- I think it was this morning – to one of the Open Signal reports they did on the performance of networks in rural Canada, and they looked at things, not just speeds compared to other nations, but they looked in terms of availability, the –- so essentially the expansion of the network or how broad it is and also its reliability.
10260 So those are some of the elements that go into quality, but it’s everything that makes up the consumer’s experience, so, you know, whether it’s the reception on a call, whether it’s how quickly your device connects to the network; it’s how many devices can connect to a network, so there’s a lot of elements that go into quality.
10261 MR. GHIZ: And then the other part of your question, I’ll paraphrase, I guess, some of my members in terms of data usage and that is that, you know, you are starting to see today incredible growth and you just heard with the unlimited plans that are taking place now.
10262 We also have a higher rate than some. I heard a comparison between Canada and Norway, you know, in terms of Wi-Fi availability and Wi-Fi availability makes a big difference there too. So, I don't think there's any one direct answer to why our data usage is lower. I think there's a whole lot, but I think you're going to see -- and you've heard this from our members -- is an incredible amount of growth, and we've seen an incredible amount of growth over the last number of years, but I would say if we're here in another couple of years, it won't be an average of 2.5, that average will be much higher.
10263 MR. SMITH: And just -- just to add to just that is I don't think Rogers mentioned this morning, but I think it was one of their submissions that with -- or actually, it may have been as part of their financial earnings conference calls, that, you know, on their -- they're seeing on their unlimited plans a usage of those subscribers going up to average like seven or eight gigabits. And obviously, as Mr. Natale said this morning as well, they're getting ready and anticipating much higher growth because of the capability that 5G will bring.
10264 COMMISSIONER BARIN: Thank you.
10265 For my second question, you talked about the dangers of mandating low-cost plans that are below cost. Yesterday we spoke with Québecor that operates the Videotron service, and they mentioned that there are $35 2-gig plans that are widely available in the Quebec market, and these are not plans that are targeted at low-income groups, so they're widely available.
10266 So, and we asked Québecor about the costs of operating a network in Quebec. Their response was that they were similar to the costs of operating networks elsewhere in Canada.
10267 So, my question to you is, is it fair to say that that price point of $35 for a 2-gig plan is not below cost?
10268 MR. GHIZ: I'll let Eric fill in if I don't go into anything too technical here, but just basically from the testimonies that have taken place, and I love to support my members, and I believe that if you heard -- the reason why the rates are lower in Quebec is, according to Mr. Péladeau, is because Québecor's offering that competition, and they've been in the market a little bit longer. And it's the facilities-based competition with the fourth player that is allowing those rates to go lower.
10269 My argument would be allow that -- those new entrants to have the opportunity to continuing to grow, the Shaws, the Eastlinks, the Xplornets, so that all the other jurisdictions can get to the same level and start to drive down prices after they've been in the market a little bit longer. That's one of the arguments that you hear.
10270 In terms of prices, you know, I take it from what our -- all our members say is that, you know, they're knowing their best to find those low-cost plans. We know that in Quebec the rates are a little lower. I would say that you heard from these proceedings that the rates in Saskatchewan were a little bit lower a few years ago. And then now it's becoming more of an equilibrium across the country.
10271 I think that if we allow facilities-based competition to continue and encourage the new entrants to continue to grow by not mandating MVNOs, that we'll see more of an equilibrium as well.
10272 COMMISSIONER BARIN: Okay. So, I understand that it's really a competitive issue to get the price lower, but that in terms of the costs, that costing a low-cost plan at that level would not be below cost.
10273 MR. SMITH: Yeah, I mean, I think that obviously we don't have a lot of discussions with our members about pricing, et cetera, for obvious reasons. You know, they're competitors and so we don't talk about those things. And we don't have a lot of visibility into different cost structures that companies have.
10274 I'll note that that offer though, you know, is from Fizz, their flanker brand, which is a purely sort of a digital light -- I'd say light touch with the consumer. So, I mean, that has a lower cost structure.
10275 And I think every carrier is a little bit different. I mean, Eastlink said it would not -- they couldn't offer them because they would -- at least so an so were opposed because they would be -- it's cost prohibitive.
10276 And also, you know, I even have to note that when you ask some of the interveners who, you know, are advocating for MVNO access or aspiring to be MVNOs, when they were asking would you make these plans available, and to paraphrase, you know, the response was, well, not if they're below our cost, and those are the people that are holding themselves out as, you know, people who will serve those markets better than the facilities-based carriers.
10277 At the end of the day, costs, you know -- you can't look at price without looking at cost, but we can't really answer about one particular member and what their structure is.
10278 COMMISSIONER BARIN: Fair enough. Thank you.
10279 THE CHAIRPERSON: Thank you. Thank you for your submissions and for taking the time to appear and answer our questions.
10280 I bid you a good afternoon and turn it, Madame secrétaire.
10281 THE SECRETARY: Merci. I will now ask the Halton Regional Police Service to come to presentation table.
10282 THE CHAIRPERSON: Hopefully no guns at the table.
10283 CHIEF DURAIAPPAH: We barely found our pens.
10284 THE SECRETARY: Please introduce yourself when you are ready, for the record, and you have 10 minutes for your presentation.
PRESENTATION / PRÉSENTATION
10285 CHIEF DURAIAPPAH: Thank you. Merci beaucoup.
10286 Good afternoon Commissioners. My name is Nishan Duraiappah, and I'm the Chief of Police for Peel Regional Police Service in Ontario, and the former Deputy Chief for Halton Regional Police Service. I'm pleased to be here today with my co-panelists to present on the CRTC's review of mobile services.
10287 We'll be focussing our submission today on the growing importance of and the role of reliable mobile data communications in the context of daily 9-1-1 emergency services across tri-services, first responders, municipalities, and critical infrastructure entities across Canada.
10288 It's my pleasure to introduce my co-presenters, who consist of leaders from a cross-section of Public Safety agencies, associations, critical infrastructure and communities, which you will see outlined on the slide. In the interest of time, I won't go through each -- everybody's name.
10289 Public safety communication needs have seen a rapid evolution in operational revolution in the past decade and significant increases in the reliance on broadband data as part of emergency services and day-to-day operations.
10290 In our collective experience providing emergency services, we can confidently state that data has become as important to emergency services as voice communications. From text messages and data files to video and photos, through new applications that provide for better frontline efficiency and coordination in life-saving missions to society.
10291 Emergency responders require reliable access to data during the minutes and seconds that can make a difference between life and death.
10292 We need telecom services that resiliently survive all manner of disasters, both human and natural, and the ability for communications to survive in the face of new, modern issues, such as cyber security.
10293 Unfortunately, commercial broadband services around the world have been shown to provide a level of resiliency and reliability below the threshold required by first responders and critical infrastructure entities during our times of needs.
10294 We, therefore, suggest that enabling a pro-MVNO telecom policy in Canada will provide emergency services with an added technology tool that permits first responders to seamlessly collaborate and coordinate in disasters and during surges of traffic seen during large public events.
10295 Our interest and vision is that the CRTC Mobile Wireless Review pertains to a series of transformative policy and infrastructure decisions happening this year. And that's related to a Canadian public safety broadband network, or PSBN, and key generational decisions related to setting up a reliable, resilient and cyber secure framework for emergency responders communication over the next several decades.
10296 ISED has allocated 20 megahertz of spectrum in the band class 14 or the 700-megahertz spectrum for the experimental and future operational use by Public Safety. This valuable spectrum was reserved for Public Safety in light of the tragic deaths of hundreds of first responders during the September 11, 2001 attacks in New York City, where access to reliable data could have saved hundreds of lives of first responders and civilians during the evacuation of the towers during that disaster.
10297 Key decisions on the technology and business model for the Canadian PSBN and the future course and effectiveness of first responder communications in Canada are going to be made in 2020.
10298 We submit that permitting a small and specialized class of public safety MVNOs is a key enabling technology tool to ensure always available data, communications for emergency responders.
10299 SUPT. ODOARDI: Thank you, Chief.
10300 My name is Anthony Odoardi. I'm a Superintendent with the Halton Regional Police.
10301 Reliability, resilient cyber security, cost effectiveness and interoperability are the theme of what we're here talking today.
10302 The revolution in data needs for first responders are going to grow. In fact, they're upon us with near-term enhancements to next-generation 911 in the next couple years.
10303 In fact, here today, we're seeing changes, also including enabling Voice Over IP-based services and an exponential growth in data sources that are fast approaching first responders today.
10304 If we're to accept, then, that next-generation 911 and all these -- and the growth of digital sources are essential for community safety and well-being and that the upstream path of that data from civilians requires resiliency so the data can reach our call takers, then the same is true for the downstream path of those sources to reliably reach our first responders, our front-line people out working.
10305 Without broadband connectivity that reliability gets 911 data to front-line emergency personnel, effectiveness and reliability of coordinated 911 services are diminished and at jeopardy.
10306 So given the generational explosive growth in data use for first responders and issues related to commercial grade telecom reliability, our vision for public safety communication stems from a desire to ensure, and these are key for us, public safety agency oversight and collaboration on strategic direction, initiatives and operations surrounding a shared public safety LTE core.
10307 Canada's emergency services, although small, representing a small portion of the commercial telecom system, represent a critical facet of overall telecommunication users in our country and an important arena to CRTC policy reviews and the parallel legislative reviews of the Broadcasting and Telecommunication Act which can help address important issues to assist mission-critical efforts on behalf of all first responders.
10308 As part of our commitment and concern for reliable communications, a rapidly-growing not-for-profit association of first responder agencies, municipalities, like-minded commercial and non-governmental partners has been established -- we will talk about that in a moment -- to advocate for reliable communication policy, focused changes to the Telecommunications and Radio Communications Act that take into account the specific needs of public safety, what our citizens have come to expect and demand.
10309 Our rapidly-growing not-for-profit association, named the PSBN Innovation Alliance, encompasses lead responder agencies and critical infrastructure entities that cover over three million of Canadians, and growing daily, which I am the Executive Director of.
10310 Our members support telecommunications policy, business models and technology innovations that help establish a level of communication, reliability, need for 911 response.
10311 You will hear that we are also firm advocates for policies that help bridge the rural and remote broadband digital divide in Canada, business models and partnerships that bring new capital to bear on this critical issue.
10312 MR. CRNKO: Thank you, Commissioners. My name is Phil Crnko. I am President of Black Castle Networks and Engineering Consultants Inc.
10313 In our collective view, there are several key areas we need to focus on improving in a holistic network approach that would provide 4G and 5G service resiliency for first responders, including a focus on rural and remote broadband enablement, reliability for first responders, resiliency, high-cost service rates, cyber security from a holistic systems view.
10314 Public safety MVNOs or PS-MVNOs can be a key innovative enabler for better reliability of communications for emergency responders. PS-MVNOs effectively create a digital right-of-way to help 911 life-saving services in times of need.
10315 As noted in our written submission and also in the submissions of the Canadian Electricity Association and the Rail Association of Canada, MVNOs offer technical architecture that is better able to withstand outages of individual MNOs.
10316 Put simply, MVNOs permit stacking the reliabilities and availabilities of several carriers, one on top of the other, to get a net better level of signal strength and system reliability than any individual MNO.
10317 The PS-MVNO model is an effective concept that has been proven and implemented in other jurisdictions in the world. Indeed, in a recent study on MVNO performance in the United States market, a report by Tutela has confirmed that the concept of stacked reliability where reported in their October 2019 state of the MVNO paper that MVNO performance measured across all 50 states have shown an ability to be as good and even better than Tier 1 MNOs.
10318 This superior performance stems from an ability of MVNO users with multiple roaming agreements to effectively jump to the best signal level and the best network in any given location, thereby always maintaining the best level performance for their users.
10319 This MVNO concept of providing first responder access to the best signal in any given location effectively amounts to a digital right-of-way in a similar manner that an emergency responder's vehicle sirens and lights provide a right-of-way in the real world on our highways and roads.
10320 Besides the performance advantages that a PS-MVNO policy has for first responders, the relatively high cost of telecom in Canada shown over years of international studies also impacts the operational budgets of first responders.
10321 Chronic high costs due to competitive skew in the Canadian telecom marketplace in turn draws valuable operational budget dollars away from critically-needed 911 field resources, staff and equipment.
10322 MR. PAYNE: Thank you, Phil.
10323 Good afternoon, Commissioners. My name is Bill Payne. I'm the Director of Information Technology for the Halton Regional Police Service.
10324 The advantages of PS-MVNOs run across both operational and financial considerations. Our financial modelling has shown that a pro market-driven approach to a PSBN in Canada, which includes enabling PS-MVNO services, can result in operational cost savings of between two and four billion dollars in the sample case of the Province of Ontario over a 20-year operational period.
10325 These projected savings are considered to be a conservative view given the growing use of data anticipated for first responders due to next-generation 911 services and represent funds that will go back into the budgets of first responder agencies to buy essential equipment, apparatus or vehicles for emergency response and to hire more front-line staff for 911 life-saving response.
10326 Our proposed hybrid PSBN model consists of a network of networks approach with an ability to roam via PS-MVNO services on multiple, if not all, MNOs in Canada through roaming agreements with CRTC-established fair market rates for specialized PS-MVNO service with an ability to connect to 4G and 5G networks and traditional land mobile radio networks.
10327 Recent successful testing conducted between both Halton Regional Police Service PSBN and Land Mobile Radio networks and the Telesat Low-Earth-Orbit satellite network, a technical first in Canada, has demonstrated the effectiveness of our network-of-networks approach.
10328 A network-of-networks model provides resilient communications and extends the reach of first responders by giving municipalities and their first responder agencies the flexibility to license and monetize Band Class 14 spectrum in PSBNs in the manner best suited to their diverse regional needs. With PS-MVNOs as an architectural tool for reliability and cost savings, we can assure that valuable spectrum resources are flexibly deployed in a manner that best meets the diverse needs of Canadian communities.
10329 Our PSBN model consists of a two-tiered choice for municipalities and provinces to select the spectrum deployment model that is most effective. The model includes a place for MNOs and yet with a strong competitive framework between MNOs and PS-MVNO service providers, it's about choice in how Band Class 14 is deployed and monetized in a given community.
10330 In turn, to maximize competitive forces flexibility in choice for first responder agencies, we propose a second optional MNO oriented licensing and PSBN service approach that provides municipalities the market-driven option to obtain PSBN services from MNOs also.
10331 MR. SLACK: Thanks, Bill.
10332 I'm Shawn Slack. I'm the Chief Information Officer for the City of Mississauga.
10333 From an IT municipal services stance, a pro-public safety MVNO policy enacted by the CRTC gives regional municipalities more market choice and competitive options in our current marketplace.
10334 This choice helps drive down costs and serves to align Canada with other G7 countries and the majority of G20 nations around the world that have had strong MVNO markets for the past several decades, providing both facility and virtualized competitive services.
10335 Canada remains one of the very few industrialized countries on earth without an MVNO model.
10336 On the balance of analysis, a pro-public safety MVNO policy can help solve the problems we noted earlier in our presentation, namely rural broadband.
10337 Our policy proposals leverage Band Class 14 spectrum, which has been made available to first responders and municipalities to permit deploying the public safety use case in rural areas where it makes sense for community safety needs.
10338 Coupled with new sources of P3 capital investment, our model creates new facilities-based competition via the 700-megahertz spectrum.
10339 Municipalities can partner with both critical infrastructure, for example, rail, and transit, and utilities, and public safety, as part of an existing smart city or smart rural programs to gain a trifecta win that solves both the need for reliable public safety access, provides municipalities with new tools through spectrum, along with a PS-MVNO business model that provides cost savings on municipal broadband.
10340 This approach also enables rural and urban broadband infrastructure in areas where MNOs decline to invest today, and achieves a better net service resiliency than a single carrier.
10341 On reliability, as noted earlier, the PS-MVNO concept permits stacking multiple MNOs where existing commercial service providers exist, or to layer Band Class 14 PSBN networks on top of incumbent MNO services, or in partnership with incumbent MNOs in a given region.
10342 This helps build a more robust layer of survivable infrastructure.
10343 Resiliency. A strategy for the first responders that built a skeleton of highly ruggedized Band Class 14 sites, coupled with PS-MVNO services to permit first responders to jump to the best available single strength, enables the digital right-of-way concept for data that we’ve described, the better survivability for public safety than relying on a single MNO today.
10344 High cost. The chronic problem can be alleviated by permitting new sources of competition.
10345 Canada’s telecom market continues to exhibit constrained competition with the three main incumbent MNOs commanding market power, with a significant majority of the national mobile wireless market.
10346 Where this power dynamic constrains competition, in our view, requires ongoing regulatory review by the CRTC to ensure market forces are viable for the long-term.
10347 And lastly, cyber security. With the growing risk of cyber attacks, it is incumbent for Canada to build a secure and survivable telecom network for times of crisis and disaster response, where reliable and secure communications help in the minutes and seconds that count in emergencies.
10348 MR. MITCHELL: Good afternoon. Chris Mitchell. I’m the Associate Director of Airport Operations for the Greater Toronto Airport Authority, the Operator of Toronto Pearson.
10349 We are pleased to note that our recommendations for PSBN Band Class 14 and PS-MVNO policy are aligned with the views of the Canadian Electrical Association, the Ontario Association of Chiefs of Police, the Rail Association of Canada, and the Ontario Professional Firefighters Association, as well as the membership of the PSBN Innovation Alliance.
10350 We also, in turn, firmly endorse and support the RAC and the CEA proposals for PVNO services in Canada.
10351 Critical infrastructure entities also often bring significant telecom assets in rural and remote regions, such as fibre backhaul links in Northern Ontario, where no commercial cell service exists today.
10352 In partnering, we can share PSBN costs and leverage fibre assets across critical infrastructure organizations.
10353 It would also reduce the burden on government and taxpayers in building a secure 5G PSBN asset for Canada, and yet obtain the required level of reliability in critical communications where lives are on the line.
10354 At the Greater Toronto Airport’s Authority, we are firm believers in the risk mitigation benefits that a sound public safety MVNO and public safety broadband policy can provide.
10355 As a mission critical entity, the GTAA understands first hand the impact of communications breakdowns and how failures in communications can lead to catastrophic results to society.
10356 As a personal anecdote which highlights the critical importance of coordinated and reliable communications, the GTAA experienced major communications failures on cellular services during the Air France flight 358 disaster at the airport in 2005 due to a surge in network traffic.
10357 During the crisis, cellular service ground to a halt with very significant impacts on operational effectiveness during the event.
10358 MS. PAYNE: Good afternoon. My name is Susan Payne. I work for Peel Regional Police and I am the Manager of VCOM and Support Services.
10359 Our proposed PS-MVNO concept combines the strategic use of Band Class 14 and hybrid PS-MNO approach, which can help in many emergency scenarios ranging from special events and high-density gatherings.
10360 And as an example of cases where combined PS-MVNO and Band Class 14 could have helped include the very recent Raptors’ Victory Parade where broadband communications experienced serious access issues.
10361 Also, in cases of ad hoc evacuations where networks experiences surges of users on limited RF site capacity, including school and high rise building evacuations, where large numbers of civilians can congregate and overwhelm limited commercial sites, crisis events where commercial telecom infrastructure is damaged, or where power outages exceed the relatively short levels of battery backup at commercial sites, or where infrastructure is down due to a lack of resiliency and poor architectures or links to cores.
10362 Additionally, special events and emergencies where seamless coordination and data sharing across tri-services and secondary responders is essential to saving lives, where minutes and seconds can mean the different between life and death.
10363 In order to help address these risks and challenges to public safety communications, Halton and Peel Police have embarked on an innovative path for first responder communications with the first multi-regional public safety broadband network in Canada, providing coverage and resilient first responder communications in a region that covers over two million Canadians.
10364 We are also pleased to note our work with the Canadian Electricity Association in a series of ongoing inter-PSBN core tests with public safety and utilities innovating and collaborating together between our PSBN in Ontario and the Powertech-hosted PSBN in British Columbia, with the multicore PSBN tests showcasing security, resiliency and reliability in communications.
10365 CHIEF LAZENBY: Good afternoon. I’m Dave Lazenby, Fire Chief for the Burlington Fire Department.
10366 From a tri-services stance, reliable broadband communications has never been more important to saving lives on a daily basis in Canada.
10367 We’re please to note that our fast-growing coalition within the PSBN Innovation Alliance includes a significant support of a number of public safety associations and agencies, including the Ontario Association of Chiefs of Police and the Ontario Professional Firefighters Association.
10368 Reliable communications saves lives and makes sense from a CRTC policy stance.
10369 Our proposed hybrid model PSBN would provide Canadians with many advantages, including improved reliability, resiliency, and cyber security for first responder communications, support to help bridge the rural broadband divide, support to critical infrastructure entities in municipalities such as healthcare, transit, rail, utilities, airports, and public works, a maximum market-driven choice for municipalities, a maximum fostering of market innovation and technology innovation, and maximum optimization of costs by permitting innovative market solutions.
10370 CHIEF DURAIAPPAH: We’d like to conclude our presentation with the following four key recommendations for the CRTC to consider in the development of a telecom policy that can help save lives and help emergency responders.
10371 First, to permit a PS public safety MVNO model for public safety focused on the niche emergency responder community.
10372 Number two, establish competitive wholesale PS-MVNO rates for emergency responders as a specialized CRTC MVNO rate at or below commercial rates, given our life-saving mission with CRTC involvement in rate establishment, negotiations with carriers as well.
10373 Number three, further consider our additional detailed legislative recommendations, which we’ve submitted, for the Radiocommunications and Telecommunications Acts, including the perspective of emergency responder needs within the Acts.
10374 Number four, to mandate and facilitate a special case for public safety roaming, given our public safety life-saving mission, and permit the following key technical elements: MNC allocation and intersystem roaming; seamless roaming; special cooperation with public safety; potentially network sharing; access to MNO VoLTE services; access to MNO 4G and 5G networks.
10375 We’d like to sincerely thank the Commissioners and the CRTC staff for their time today and we remain available for questions.
10376 Thank you.
10377 THE CHAIRPERSON: Thank you. Thank you for your presentation.
10378 Where to begin? I might just make a note with respect to your summary of proposed CRTC and government policy actions, that obviously the CRTC does not have a direct role in amendments to the Radiocom Telecommunications Act. That is the work of parliamentarians and the Minister for Industry.
10379 So we’ll leave that on the side. I appreciate the suggestions that you’ve made and I know you made them to the expert panel as well. So we’ll just note that. I’d like to start by just having you give me a little more of an explanation of what a non-profit public safety MVNO would look like. I’m assuming this is fairly comparable to the FirstNet Services in the U.S.?
10380 SUPT. ODOARDI: Good afternoon, again, Anthony Odoardi, and I’ll be directing the questions to our subject matter experts on the panel so that we save some time for you folks in comment. Phil, I’ll turn that over to you.
10381 MR. CRNKO: Certainly, thank you Anthony. And so quite simply, you’re correct in that it’s an analogy to the FirstNet system which is in the United States. However, our proposal is that Canada has different needs, given the different population density and diverse geographic needs across Canada.
10382 And so as a result, we propose a flexible framework that at its core has a shared core model for municipalities and provinces, so that they can essentially share on costs similar to a co-op model at a very broad and high level. And it allows municipalities to share those central costs for connectivity into the cores and allow them, in turn, to plug in RANs that they can, for example, monetize in the fashion that is most appropriate for their needs. And also, to solicit and procure equipment with P3 partners, public private partnerships.
10383 And for example, we have had interest from several venture capital institutions and institutional investors that would certainly provide billions of dollars for the build out of these networks that would be again, constructed to a higher level resiliency, reliability and cybersecurity than we currently have with the MNO networks.
10384 So the twist is that it is a model that is actually analogous to the approach that land mobile radio networks take in municipalities today. So municipalities in many of our jurisdictions have oversight and deploy these land mobile radio networks independent from mobile network operators.
10385 THE CHAIRPERSON: But they’ve built those networks for themselves, they’re not using the networks of other providers, right?
10386 MR. CRNKO: There’s inter operability and certainly coordination with network providers that do also have land mobile radio networks as well.
10387 THE CHAIRPERSON: But take a step back. Just what are the differences between your approach and FirstNet in the U.S.
10388 MR. CRNKO: So our approach provides the oversight into the hands of public safety communications.
10389 THE CHAIRPERSON: As opposed to the network operator?
10390 MR. CRNKO: Correct. Yeah, so it’s the control which we feel is so important. Again, in times of need we’ve seen countless examples where, left to their own devices, commercial operators will build based on the motivation of profit, and not necessarily providing the overbuild required to handle those corner cases, where you have surges of traffic that overwhelm the networks.
10391 And so, we have countless examples of where we -- there is a different level of construction and engineering, for example. We could cite recent examples, such as hurricane Dorian, where networks were down for days, certainly, and we contrast that with the build of land mobile radio networks, which survived far better than the carrier networks in those particular examples. And there are many other examples that have occurred in recent history as well.
10392 THE CHAIRPERSON: You may have answered this question in part. But if the Commission were to go forward and mandate full MVNO access, under one of the other models that have been proposed to us, why is that not sufficient to meet your needs?
10393 MR. CRNKO: So again, it stems from the commercial motivations. We think that public safety needs to have a direct hand and involvement in establishing the criterion and standards, similar to how they have been directly involved in that land mobile radio networks. And we feel it’s that oversight that has allowed land mobile radio networks in large part to survive better in these crisis situations, in these surge conditions that occur.
10394 THE CHAIRPERSON: Is emergent -- the carriers work together through Emergency Preparedness Canada and do have a number of activities to coordinate among themselves in the case of emergencies. Why doesn’t that respond to the public safety component of this?
10395 MR. CRNKO: So Anthony, if you wanted to ---
10396 SUPT. ODOARDI: As Phil has indicated, despite sitting on these committees and participating in these organizations, we’ve cited several examples throughout the presentation where the reliability factor just hasn’t been there. And so, to leave it solely in the hands of the carriers in the greatest times in need, and we don’t want to overstate that this is just about critical incidents and disasters.
10397 But this is about everyday, day to day uses or surges, and the reliability the network needs to come through. We don’t feel right leaving that solely in the hands of the carriers. Our participation in making those rules and regulations, and standards, and policies, we think is critical and essential to delivering on our mission critical needs.
10398 MR. SLACK: If I may add as well, from a public safety communication standards point of view, we design our sites very differently from how a carrier would. For instance, so they’re hardened sites with generators, they’re monitored. We have multiple diverse routes, and service levels that we contract to for those sorts of things. And it’s those disciplines that really make a very large difference in reliability and predictability of networks.
10399 THE CHAIRPERSON: And in your view, it’s not possible to contract with commercial providers to obtain higher and necessary standard of service? I assume carriers have contractual arraignments with the Department of National Defense and other customers who demand particularly onerous conditions of service.
10400 MR. SLACK: In our experience it’s been best effort, sort of the commercial approach to that sort of coverage. And it’s very difficult to predict when and where an incident will happen, as you know, we’ve talked about in our presentation. It’s the day to day use case, as well as the emergency, sort of disaster. And so, designing a network from the ground up that has that sort of resilience built in is, you know, not -- it’s not an option not to do that in a public safety, sort of approach.
10401 THE CHAIRPERSON: And if you had such PVNO access, would you use the service to deploy handsets to personnel in the field?
10402 MR. SLACK: Yes, we would. In our initial tests -- sorry -- our initial tests today are on a mobile designed network, which is performing quite well. And it would be our plan to have a -- areas of coverage where it makes sense under band 14, under a private network, and then be able to use the PS-MVNO relationships to be able to ensure coverage in those worst case scenarios, where we either need to leave an area, or where there are other disasters affecting other pieces of infrastructure.
10403 THE CHAIRPERSON: And would this connect with and communicate with conventional smart devices?
10404 MR. SLACK: It would. It would, absolutely.
10405 THE CHAIRPERSON: And then I guess, the logical question is, if you’re deploying handsets, would you be willing and able to comply with all of the typical obligations imposed by government and the Commission on carriers?
10406 MR. SLACK: Yes, we would. And certainly, elements such as next generation 9-1-1, which are new standards coming for -- for facilitating digital engagement with civilians during crisis situations. So new data, or digital driven elements, such as SMS text, video calls, and data file transmissions first responders in the course of 9-1-1 calls. So absolutely.
10407 THE CHAIRPERSON: Is the ---
10408 SUPT. ODOARDI: If I could -- sorry, sir. If I could ---
10409 THE CHAIRPERSON: Go ahead.
10410 SUPT. ODOARDI: --- also top up, and Mr. Shawn Slack could weigh in on this, we speak about this at length in our innovation alliance meetings as to audit standards in terms of regulations.
10411 MR. SLACK: Thank you, Anthony. And so, I think what we talked about was really the -- the requirements to be able to have a multi agency response with the inter operability for the everyday. So when you’ve got fire, EMS, transit, utilities, and traffic, all responding as a multi agency response to an incident, that’s the everyday use case that drives the ROI for this type of solution. And I think that’s really why you want to have the public safety aspect to have a hand on the implementation and operations of this MVNO model.
10412 THE CHAIRPERSON: Thank you. I’m struggling a little bit. Essentially what you’ve told me is that commercial networks provide reasonable reliability for everyday services, but not for the exceptional circumstances. But your proposal still relies on the very same networks.
10413 I'm just not adding two and two together to reach five.
10414 MR. CRNKO: So let me help you get to four. So essentially ---
10415 THE CHAIRPERSON: That would be a good start.
10416 MR. CRNKO: So essentially, it's the stacked reliability concept. So where the individual reliability of a single MNO may not be sufficient, when you have the ability to stack one on top of the other, so if –- let's say, for example, during the Ottawa tornado disaster that happened recently here in this region, individual MNOs might be impacted in a given jurisdiction with one, let's say, having an issue in terms of an outage. But another tower site nearby with a second MNO would provide coverage in that circumstance.
10417 So it's the overlapping coverages from the three MNOs, the major MNOs, and the additional regional incumbents that when you stack together provide the ability to bounce effectively to the best signal strength and the best network throughput given the circumstance. So it's the staked reliabilities, when you add them all together, provide a superior net reliability.
10418 THE CHAIRPERSON: But my understanding is the carriers do work together through the Emergency Preparedness System to do just that.
10419 MR. CRNKO: So similar -- in a similar vein to how the Rail Association noted, you know, the stacked reliability concept provides the advantage, you know, for net superior reliability, and I believe the Canadian Electricity Association when they are before you later this week will also refer to this concept. You essentially, you do obtain a superior reliability when you combine the net availabilities of those individual networks.
10420 THE CHAIRPERSON: So a number of the parties that have appeared before us are certainly supportive of the public safety objectives and have indicated that some of these objectives are indeed being entertained at the moment, both with public safety and in some negotiations with the providers themselves. The suggestion is that it's premature and the Commission should wait until the PSBN model is agreed upon and adopted before we should be acting.
10421 Can you give me some comments on that view, please?
10422 SUPT. ODOARDI: Certainly and thank you. And just to address the first comment about the MNOs, perhaps, or the carriers working in that space with public safety. To date, there hasn't really been any dialogue in that. We have approached and we have asked to speak about this.
10423 THE CHAIRPERSON: Sorry. Dialogue with the service providers, or dialogue with public safety?
10424 SUPT. ODOARDI: Dialogue with service providers.
10425 THE CHAIRPERSON: Thank you.
10426 SUPT. ODOARDI: And so working in that space has been difficult and challenging to date, and I'm -- I won't say that there has been zero, but they have not been substantial or productive. Yet, we continue to see those very instances of which we've mentioned here today of outages, or the lack of reliability affecting our operations, and again, not just in crisis but on a day‑to‑day basis.
10427 So the urgency for us is now. It's to move now and to speak about this, and this is why we're here today is to really help solve that issue and hope that part of what comes out of -- from these hearings is a greater collaboration with those providers.
10428 THE CHAIRPERSON: Now, when -- oh. Go ahead.
10429 MR. CRNKO: Just one additional point is that in terms of the timing. The timing is actually right in that the decisions surrounding the spectrum, and again, which would permit us to act, in effect, as a facilities-based MVNO, which some of the suggestions have been related to the HMNO and other models, those decisions are happening in 2020. And so the timing is essentially aligned with the timing of the decisions surrounding the MVNOs subject with the CRTC.
10430 THE CHAIRPERSON: Thank you. When Bell was in front of us, however, they expressed a concern, and I'd like to hear your view about it, that it wasn't entirely clear to them that there was internal alignment, I believe was the term they used. That whether -- and they didn't speak specifically to whether it was law enforcement agencies or electrical utilities, but they indicated that their experience was that sometimes the broader proposals were not consistent with the proposals or demands of individual members or subcomponents of the group.
10431 Could you comment on that?
10432 SUPT. ODOARDI: We have two comments. And first, I'll turn it over to the Executive Director of the Ontario Association of Chiefs of Police, and he will comment on that, and then I will top him up.
10433 THE CHAIRPERSON: Thank you.
10434 MR. McGUIRE: Thank you, Commissioner. My name's Jeff McGuire, and as Anthony indicated I'm the Executive Director of the OACP, and we have come onboard. We represent the police services across the province as a professional and leadership entity, and also advocacy to government issues on all public safety matters that impact all police services across the province.
10435 That said, we have 46 municipal police services in Ontario, 9 First Nations policing services, and the Ontario Provincial Police. All of those are members of our organization.
10436 We've been involved in presentations from the group before you here today over the past year, and a motion was put forward two years ago at our annual general meeting to support this issue, which was brought forward by then Deputy Chief Nishan Duraiappah, and then following that, the motion was adopted in September of last year by our executive board to sign on as an advisor group to this very alliance that is here before you.
10437 So (unintelligible), you may be correct that there would be times out of the 56 police services where there may be one or two that don't always have the exact agreement, but I can tell you that we do represent the totality of those police services, and that agency, that's why we are supporting this group moving forward.
10438 THE CHAIRPERSON: Thank you for that.
10439 SUPT. ODOARDI: Just to top up, I'd like to say that the information provided by Bell, perhaps, on that specific item, we would characterize as inaccurate. The PSBN invasion alliance grows by the day. Although at this point we cover 3 million Ontarians and Canadians, we know from even recently, Chief Duraiappah and I attended a conference in Vancouver just yesterday and spoke to hundreds of delegates and were approached afterwards in terms of those who are willing to sign our document, our memorandum of understanding to join the alliance from East Coast to West Coast.
10440 So to say that in fact that there is support is the truth and is more accurate than there is a -- there is not. We are a fast and very speedy, growing coalition of interested first responders who want to collaborate in this space.
10441 THE CHAIRPERSON: Thank you.
10442 SUPT. ODOARDI: Secondly, I also noted, sir, that Mr. Bibic, and I'll paraphrase here, also said that "If they come forward with a particular customer segment in a particular area of the country that could tackle better than we can, we're all ears". Well, we need to follow up on that. We are a particular segment in all areas of the country with particular needs, so we will be looking forward to talking to Bell, Mr. Bibic, further about what our needs are, and I think he clearly stated that before the Commission, and we look forward to doing so.
10443 THE CHAIRPERSON: And I encourage you to do so.
10444 I'll get into maybe a slightly more technical area in a second, but before I leave this, a little -- just back to the larger picture. You suggested that your model also would help bridging the urban rural divide through the use of the hybrid MVNO model for a PSBN. Can you tell me how that works? How -- again, how is that the case? Is it because, again, the over -- the stacking of the various providers? I'm just trying to figure out how you better serve rural areas if the rural area is underserved with facilities.
10445 SUPT. ODOARDI: Thank you. And I'm going to turn it over to our technical experts.
10446 Before we do that, we believe there is several fundamental tenets of that model, one of which we -- some exciting news that we just released yesterday was some work with Telesat, which we know will revolutionize the way we're able to use a PSBN and the spectrum to bridge that rural and remote, remote broadband divide. Because right now, we feel that where there are not people, where people are not in clusters, where there are not urban centres they are not greatly represented in terms of emergency response efforts via data, via our ability to use data and respond to them.
10447 And so that is where we partner with critical infrastructure agencies like rail, electricity, where they have existing infrastructures to run through those routes and add on to them and pave the way for other investment opportunities by MNOs.
10448 And I will admit a little deficiency in that, so I will turn that over to Mr. Crnko to explain. However, we feel that we've established a good model far superior to what has been put out there to date perhaps, which is not a lot in terms of public safety, in terms of our niche in public safety.
10449 MR. CRNKO: Thank you, Anthony.
10450 And, Commissioner, certainly in terms of areas where there is a lack of MNO investment today, that exists because the MNOs are motivated by commercial profit reasons and margins, and hence, they have not invested in those regions today.
10451 Nevertheless, notwithstanding that the infrastructure's not there, our members, our first responders, emergency responders still need to respond to 911 calls. There are being inquests in scenarios in, for example, Northern Ontario, I believe in Sudbury area, where lack of MNO access has resulted in deaths. And there are other examples we could cite historically.
10452 And so in those regions where the MNOs have simply refused to invest because of commercial motivations, we would suggest that our partnership, which brings, for example, the Canadian Electricity Association assets from their members -- we had one of our charts that indicated the fibre assets in Northern Ontario as an example, and there are similar cases in the other provinces, where those fibre assets would be a significant baseline of investment that already exists that we could leverage to lower the cost of bringing access to those rural and remote regions.
10453 And in turn, with our public/private partnerships, and as noted, we have received indications of significant interest in terms of investment, we would bring those partnerships to bear, to pave the way, to bring down the commercial cost, and in turn, allow MNOs to collocate on our infrastructure that we would build in these remote locations.
10454 And in terms of that trifecta benefit that my colleague, the CIO of Mississauga, Shawn Slack, noted, it also brings besides public safety access in those areas for 911 response, it also brings the resiliency that members of the Canadian Electricity Association need for their purposes, the Rail Association members need for their particular needs, as well as provides a potential mutual host infrastructure, or a method of monetisation with, for example, First Nations' communities, who can also coinvest and reap the benefits for their communities, which would, in effect, provide a lower cost of entry for commercial entrants to come and collocate and collaborate.
10455 So, it's that P3 angle. It's the public/private partnership that brings those multiple sources to reduce the net cost that's inhibiting the carriers for deploying today.
10456 THE CHAIRPERSON: And to perhaps more of a question for the electrical distribution representatives, but if they have fibre extending into rural areas and there's a lack of service by the existing MNOs, I just wonder why there isn't a win/win available there and why perhaps they're not working together to build out facilities that are mutually beneficial. But I don't expect you to answer that. We can raise that with the representatives of the CEA.
10457 So, your proposal also seems to suggest that the Commission should set a different and preferential rate for Public Safety MVNOs than any other general rate it might set. Others have, not surprisingly, suggested otherwise.
10458 Could you comment on that, and then perhaps we'll talk a little bit about how a rate would be reached?
10459 SUPT. ODOARDI: I won't speak to how a rate would be reached perhaps, and then I'll turn that over to my colleagues.
10460 And it's tough for me as an executive in the police department to sit before you and always lean on the fact that Public Safety agencies should come first and foremost in terms of not only financial and economics when it comes to data, but just really in all courses of response to emergencies. And, again, this isn't just about emergencies. It's about day-to-day use.
10461 But that is a reality. And the demands from the community to meet expectations on public safety suggests that we have to use all the tools and resources available to us. And we've talked about in the near future what those resources are, and it will be, as my friend, Mr. Crnko alludes to it, is a tsunami of data available to Public Service and Public Safety agencies to utilise in life-saving, mission-critical response.
10462 And so, the consumption of that data is a burden on not only police, fire and EMS, but also agencies that assist us, critical infrastructure agencies. And to provide that level of service to the community in a cost-effective way that minimises the impacts to budgets, we feel that it is important to negotiate rates specifically for public safety to protect all of us.
10463 And I know it's a motherhood and apple pie statement, but, in fact, that is exactly why we're here today.
10464 THE CHAIRPERSON: We share in some of those motherhood and apple pie objectives. I mean, we serve the public interest as well, so I appreciate it, and I'll let your colleagues answer the other part of the question. But before we leave that, but if the Commission sets different rates for different types of entities, you've made the case for why Public Safety should qualify. What do we do about the others who will make a similar case, medical services, hospitals? I mean, we can go and make a list of entities or sectors that contribute importantly to society and to the general wealth, health and safety of Canadians. And, you know, to use a tired expression, is this not a slippery slope?
10465 SUPT. ODOARDI: Thank you, sir, and I do agree with you it is a slippery slope in some instances, and I -- ultimately, I don't have the answer for you in terms of some of those other organisations or facets of society that require the same critical usage of data as emergency responders.
10466 However, in our model, we do indicate that not only critical infrastructures, but our partners in health are also -- have been provided by legislation access to the spectrum through Public Safety agencies. And so, we feel that there would be a benefit to them with our endorsement of a PS MVNO and they can capitalise on that.
10467 THE CHAIRPERSON: Thank you.
10468 And the other part of the question?
10469 MR. CRNKO: Certainly, Commissioner, and we would be certainly accepting of whatever the CRTC felt was fair in light of the societal life-saving role of tri-services emergencies responders and also secondary and tertiary responders, such as rails, transits, utilities. And so, we don't necessarily ask for more than that, which is going to be granted, if it were granted, to any other particular MVNO. So, first of all, we would be accepting of an equal standing with other MVNOs.
10470 We are simply suggesting as an option for the CRTC to further consider that perhaps an additional discount, given the societal life-saving role and the fact that all of us do benefit as Canadians from those 911 emergency services. So, for that reason, we would suggest that a further reduction could be considered, but it's certainly not necessary and is not a requirement in our recommendation.
10471 THE CHAIRPERSON: Thank you.
10472 Do you have any views, and I know it's not your traditional area of expertise, but we'd be interested in hearing any advice you might share, on, for example, with commercial negotiation, backstop by a binding arbitration process, in your view, would that be the best approach, or a preferred approach to reaching a rate, or do you see an alternative approach you -- if you've been following the hearing, you might have heard discussion about either doing a retail minus approach or relying on our traditional bottom-up costing approach. Do you have any views on that?
10473 MR. CRNKO: Certainly. First of all, we would -- we'd certainly prefer to have the CRTC backstopping those negotiations because of the market power position of the carriers. And as was noted I believe by representatives of Rogers and the other carriers, you know, they certainly don't have an interest, as they've clearly stated many times, in enabling MVNOs. It's not their current position.
10474 So, from a stance of negotiation, you have to have parties that have equal motivations to come to an agreement. And when one party is clearly indicating on public record that they have no interest, it's difficult to have those fair negotiations. And for that reason, we'd suggest it would be preferred that the CRTC act as that mutual intermediary and provide fair rates.
10475 Furthermore, the CRTC has visibility and confidentiality with respect to costing and true cost, EBIDTA and other numbers, and so we think the CRTC would be best positioned to backstop those negotiations.
10476 And I think furthermore, with respect to the model, our MVNO model really works because we do have access to Bank Class 14 spectrum as part of what is sort of the intention of Public Safety Canada and ISED in terms of providing access to that spectrum in one way or another, ultimately, to Public Safety.
10477 So it’s our hope that that spectrum be provided to the hands of Public Safety to deploy as they see best for their particular municipal and provincial needs.
10478 And so we would be able to work along the full spectrum of, essentially, all thus far the MVNO scenarios that have been presented to the CRTC. So just noting the flexibility of that as well.
10479 THE CHAIRPERSON: In the same vein, in your view should any of the regional carriers be required to provide wholesale MVNO access?
10480 MR. CRNKO: So one of the options, again, it’s because of the stack reliability. The ability to have a digital right-of-way, so sirens and lights for data; the ability to get access in those times of crisis where minutes and seconds count to save lives.
10481 We would rely upon the CRTC for perhaps a staggered or a prorated -- just as one idea, a prorated rate that could be differentiated between major incumbents and regional players to allow, you know, perhaps a further facility for the regional players so that we don’t overburden them.
10482 So we would defer to the CRTC for ---
10483 THE CHAIRPERSON: There you’re talking about a rate. I’m talking -- I guess my initial question is; should they be obligated? So we’ve discussed -- most of the discussion in this proceeding has been about requiring the three national players to provide MVNO access. My question is, under your proposal, would it be necessary to obligate the regional players to provide MVNO access?
10484 MR. CRNKO: We would propose to negotiate with them, in terms of a fair market value. And, again, backstopped by the CRTC.
10485 THE CHAIRPERSON: Sorry; I don’t know if we’re -- we’re just at cross-purposes.
10486 MR. CRNKO: Okay.
10487 THE CHAIRPERSON: You’re talking about rate; I’m talking about an obligation.
10488 MR. CRNKO: Right. Well, certainly I think that is part and parcel with, I guess, a secondary question which is are the regional operators going to be granted, by the CRTC, some sort of special status; a five-year period -- grace period, and so forth?
10489 It depends on the model -- the particular MVNO model that is ultimately selected, if it in fact is selected.
10490 THE CHAIRPERSON: Let me give you a more concrete example. In SaskTel territory in Saskatchewan both Telus and Bell ride on the network of SaskTel. If the Commission were not -- were to oblige Bell and Telus to do something but not SaskTel, does this hold up for your model in other parts of Canada?
10491 MR. CRNKO: Again, we are flexible in terms of our model, in, you know, the spectrum of MVNO scenarios. We would ideally ask to have access on all networks because, again, emergencies have no -- you know, they don’t have no distinction as to where they occur. So they could occur on a regional player’s territory.
10492 But, again, the rate could be prorated by the CRTC to provide an appropriate rate for the regional players.
10493 THE CHAIRPERSON: Thank you.
10494 So I have one last question, it’s kind of a -- it’s a very broad one, and you probably won’t like it but I’ll ask it anyways.
10495 The Industry Department set aside spectrum in the last auction for Public Safety. We have a department, a Ministry of Public Safety, that is focused on these issues. One way of characterizing your request is you want to leverage all of these assets of a variety -- you want us to oblige or mandate a number of providers to give you, if you will, pieces of a network that would then allow you to assemble a higher quality, more robust, reliable network for your purposes. And there is no suggestion that that is not an appropriate and laudable objective. But could I ask you if you don’t think, then, that it’s the role for other parts of government to assign to you or make available to you the necessary spectrum and for you to work with your proposed partners, whether they be hydro utilities or railways, and put together that network for public safety purposes for yourselves?
10496 MR. CRNKO: No, we certainly are all about a collaboration, both with our secondary and tertiary responders as well as the MNOs. We feel, in light of the lifesaving service that Public Safety, paramedics, medical professionals, firefighters, and policing, and again, those secondary and tertiaries provide, it’s all about collaboration with the MNOs. So we would want to leverage their participation in a collaborative, cooperative fashion.
10497 So, again, we’re all about a win/win. We certainly want fair rates and we would look to the CRTC to establish those rates.
10498 In terms of Public Safety Canada’s involvement, perhaps if you just clarify that part of the question.
10499 THE CHAIRPERSON: I’m just saying is it -- to put it in the most basic terms; is this a problem for the CRTC to solve, or should you be out there building a network, getting the necessary spectrum, working with your partners, and building the network you desperately need and deserve?
10500 CHIEF DuraiappaH: Thank you, Commissioner.
10501 I think just to preface it, we have been, for the last year or two, concurrently working with Public Safety Canada and ISED in direct collaborations. We’re regularly here and across the bridge in Ottawa with Public Safety Canada and we have proposed to them a very collaborative hybrid model of utilities, everybody.
10502 So we see that as a concurrent activity to, you know, this discussion with you. I think the totality of our model that we’re proposing, the outcomes of whatever the CRTC decides, along with the work we’ve done with Public Safety Canada to date on a PSBN model will be the most fulsome, reliable backbone for emergency services in Canada.
10503 So I think we haven’t had the opportunity to give you full line of sight of what we’ve been doing to date with PSE and other elements of the Federal government, but I can assure you that there are concurrent, really fulsome activities that are occurring.
10504 I’ll just turn to my colleagues if they want to elaborate.
10505 SUPT. ODOARDI: Our presence here before the CRTC is in fact to espouse one fundamental tenet of those concurrent working relationships that we have had with ISED and PSE, just in particular those two government agencies.
10506 There are other pillars, I won’t call them silos because they, in fact, are pillars of the model, but this is one key pillar of the model and it speaks to the resiliency and reliability of -- not to mention the cost-effectiveness, absolutely, of what we aim to achieve.
10507 THE CHAIRPERSON: Thank you.
10508 MR. SLACK: If I could just add ---
10509 THE CHAIRPERSON: Oh, yes.
10510 MR. SLACK: --- to participation with PSBN.
10511 So I had the opportunity to participate as a Federation of Canadian Municipalities representative on the consultation around the principles and use case for PSBN, and I can tell you the alignment in here, as far as reliability and resilience as being principles for PSBN, is very strong in this model here as well. And we continue to work with and collaborate with all of the agencies that have been involved in that consultation, so the alignment is quite strong.
10512 SUPT. ODOARDI: One more thing and I probably should turn it over to Mr. Crnko who has written the academic papers, and a total of seven so far that are peer-reviewed and looking to be published, is that this isn’t something where we’ve decided to appear here before you today to ask for a discount. And if it came across that way, that’s absolutely not our intent.
10513 Our intent is to put forth, really, the fact that PSMVNOs provide us a level, sir, of resiliency and reliability; certainly we think so. And that the cost-effectiveness would be a benefit. In collaboration with Public Safety Canada and ISED and the Temporary National Coordinating Office, a group of 30 people who made up across Canada, we anticipate their final recommendations. In fact, that was supposed to happen last week and may have a little delay. We anticipate their final recommendations on the use of the spectrum.
10514 In anticipation of that, we’re here before you today looking for that support.
10515 THE CHAIRPERSON: Thank you.
10516 MR. CRNKO: And the last part of your question with respect to dialogue with ISED, in terms of spectrum licensing; we are strong proponents of building those facilities and infrastructure. And, again, it’s two sides to the coin in terms of the model. One piece is that resilient, ruggedized infrastructure that can withstand those example cases such as Hurricane Dorian, providing, again, those skeletons of coverage that will be resilient, for example, when the big quake hits Vancouver, again, wildfires that we saw in Alberta where we had cell outages, and the cases go on and on. And so, for that reason, we'd want to work collaboratively with the MNOs, have fair rates, deploy our spectrum, to build facilities and infrastructure that also, again, win for the municipalities that could be monetized in a mutual host infrastructure manner, provides also facilities-based infrastructure that helps foster competition, which is one of the aspects of this committee here.
10517 And the other aspect, the other side of the coin is the MVNO piece, which is all about the reliability and resiliency angle, more so than the cost. The cost is a benefit, again, to society, because it liberates resources for infrastructure and equipment such as fire trucks and frontline staff, but we're not really focussed on the cost aspect as much as the reliability and resiliency piece.
10518 So, there's two sides of the coin. We're firm believers in building facilities-based infrastructure. And, again, the MVNO piece is the other side, which allows some of those advantages on reliability and resiliency.
10519 THE CHAIRPERSON: Well, thank you. We have a much better understanding of your proposal.
10520 Commissioner Levy?
10521 COMMISSIONER LEVY: Good afternoon. Just a couple of questions to follow up on the discussions that you have -- that you've already had.
10522 You just talked a little bit about, you know, this isn't about the savings, although they -- there are going to be savings. Can you give us any kind of sense of what kind of savings you are looking at in this kind of proposal?
10523 MR. CRNKO: So, certainly, Commissioner. We've undertaken studies, again, that we feel conservatively estimate, just as an example, for the Province of Ontario over a 20-year operational period, something on the order of between 2 and $4 billion, which we've included in our submission to you, the original submission. We feel ---
10524 COMMISSIONER LEVY: Is that the one that's over 20 years?
10525 MR. CRNKO: Correct, yes. And we feel those numbers are actually conservative in terms of all the parameters that we used in the model. We always took -- gave the benefit of the doubt to carriers. And also, it depends on the exponential growth that is anticipated in terms of Internet of things and the societal use of data.
10526 As noted, there's some significant changes in how the public will be engaging with Public Safety. To date, we're essentially limited to land -- or, well, there was a period where we were limited to landline phones, but now we are entering into a digital age where you'll be able to share video messages, you'll be able to share data files, SMS texts, and that's fast approaching over the next three years.
10527 In terms of that explosion, as 5G grows, societal use of data in turn increases the amount of data that Public Safety will need to manage and deal with. In terms of that load of data, it would be anticipated it will be so significant that certainly there'll be additional amounts of data heading downstream to field based first responders that are actually out there in the real world, as opposed to just at dispatching facilities. So, we think that there is significant upside to those savings, again, depending on which side of the spectrum of growth that you anticipate for 5G use.
10528 COMMISSIONER LEVY: And my second question has to do with you've talked from time-to-time about this being monetised and giving municipalities new tools and things like that. Could you give me some sense of what that might look like?
10529 MR. CRNKO: Certainly, I'll give you a few, and perhaps Shawn, Mr. Slack from the City of Mississauga can also elaborate.
10530 In terms of the monetisation for municipalities, there's a concept, a mutual host infrastructure, which I think was alluded to earlier in one of the proceedings today, in terms of building a single set of 5G infrastructure to municipality. Again, for cost savings, but also because of the space constraints on the municipal infrastructure in terms of mounting on lampposts, on other municipal-held infrastructure. So, building one set of 5G infrastructure that's perhaps held by the municipality, provides them this mutual host infrastructure approach that could be monetised by reselling access to the MNOs. And so, in that regard -- and we're talking about fostering competition. We're talking about building infrastructure. And so, there's an opportunity for the municipalities to benefit from that as well.
10531 And I'll let Mr. Slack comment further.
10532 MR. SLACK: Thanks, Phil. And so, 5G is probably the example I would have used where we see a lot of downward pressure on the built environment, the right-of-way as it is today, the infrastructure that's going to support 5G. And we think there's a real opportunity to collaborate with the proponents around the placement of 5G, looking at different infrastructure to facilitate the radio equipment, electrical requirements, the backhaul, smart pole-type technology.
10533 Because the challenge with the right-of-way is the amount of radio equipment that will be placed along the poles and the site lines within the city, so beautification is actually a factor. So, we want to make sure that we're able to look at an infrastructure, and smart pole technology, and the right power, and the right backhaul that could support a resilient infrastructure, but also create opportunity by having a shared infrastructure within the right-of-ways in cities.
10534 But I can give you a specific example of savings. So, with in the Region of Peel, and actually, many of the partners at the table here, we have built out over the last 20 years the public sector network, which is a fibre infrastructure, which supports fire, police, the Region of Peel, the three municipalities within the Region, we connect the hospitals and post-secondary. And the annual savings -- this is annual from within the Region of Peel is $10 billion a year -- 10 million in operating costs. So, over the life of the last 20 years of building a fibre infrastructure we save over a hundred million dollars in operating.
10535 So, these types of models can work. And so, that's a shared infrastructure model, and it really does demonstrate, you know, building a resilient infrastructure and collaborating with partners can save money.
10536 COMMISSIONER LEVY: Thank you.
10537 THE CHAIRPERSON: Commissioner Laizner?
10538 THE VICE-CHAIRPERSON: Good afternoon. And may I start by thanking you for the excellent work you do in keeping our communities safe.
10539 When we had CN Rail before us earlier this week, they mentioned that one of their concerns was the inability to get service level agreements with the MNOs, that they were only operating service level objectives. And I think I heard you talk about in discussions with MNOs, just getting agreement on a best efforts level in terms of agreements with them.
10540 Is that an accurate assessment?
10541 SUPT. ODOARDI: No, go on.
10542 MR. PAYNE: I think that's an accurate assessment, and so to compare that paradigm to how we operate our other critical communications infrastructure, such as our land/mobile radio system, and including our test-bed PSBN, which is throughout our region, we're contracted for, like, five nines above time basically, which is unheard of in the commercial world of commercial broadband.
10543 THE VICE-CHAIRPERSON: So, why is it that you can't get service level agreements with the national carriers? What is the reason that they give you?
10544 MR. PAYNE: My understanding that it comes down to designing networks to meet certain coverage and loading and backhaul demands. And there are differences in doing that, so you might design a network to meet a certain purpose of reaching into an area, but not necessarily for peaks and things like that, or investing in generators and that sort of infrastructure.
10545 The way that we look at it within the Halton Region is -- and we use our voice radio system as a parallel to that is that we enjoy 99.96 per cent coverage outside anywhere within Halton Region on a portable on the hip of our police officers and firefighters. And that sort of coverage, combined with that reliability, is -- we have not had the ability to contract that with a commercial carrier.
10546 MR. SLACK: Oh, sorry, I just want to add one more example with the Region of Peel. Caledon is a partner in our fibre infrastructure. You only have to drive two minutes south of Caledon to get no coverage, zero coverage, so that's within the GTA, within a, you know, fairly large urban centre, and it's because there's no commercial incentive to put that kind of coverage there.
10547 So, these are the types of issues. If you are first responder, no coverage is not good enough.
10548 MR. CRNKO: And, sorry, one last thing, Commissioner, it really boils down to the design principles, the engineering principles that are used. And certainly, the MNOs are motivated by commercial interests and want to deploy where, as was noted by Rogers this morning and other -- the other carriers equally, they desire to build where they can maximise profits.
10549 We, however, have to operate wherever emergencies occur, and they can occur in areas where infrastructure is not overbuilt. There are areas of Canada where the MNOS have overbuilt capacity, but as they noted today as well, they rapidly exhaust those resources, so they rapidly fill them up. And when those resources are either filled up or they're inadequately provisioned in areas, because it simply doesn't make economic sense to overbuild everywhere, it's in those circumstances that we have surge conditions.
10550 So if you think about it, for example, on the TransCanada Highway, you'll have a set of infrastructure, but you won't necessarily have sufficient capacity to handle the surges that could occur when there's a multi-car, a hundred car, you know, pile-up of vehicles in let's say a winter crash where those individuals then are trying to access a single cell site that could be in a remote location.
10551 So in our case, in those examples, which also exist in urban areas, so again, as noted by Mr. Slack, there are areas even surprisingly in Southern Ontario in the densest area of Canada for population where we do not have sufficient coverage in terms of signal strength or where emergencies can rapidly provide surges in terms of commercial use that overwhelm the capacity of those sites. So we need the ability to deploy an overlay of ultra resilient reliable capacity that we have the ability to access in those places.
10552 And again, we are not motivated by profit but rather by being able to deploy where we need access in those societal lifesaving moments. So that's the difference in engineering design philosophy.
10553 THE VICE-CHAIRPERSON: Thank you.
10554 THE CHAIRPERSON: Thank you.
10555 I believe those are all our questions. I will -- I was going to thank you for taking the time and for sharing with us. We certainly share your public service objective and understand it. You'll need to leave the rest to us, but there is no doubt about what your objectives are.
10556 I appreciate it, and as the Vice-Chair indicated, we also appreciate what you do for Canadians every day. Thank you for taking the time.
10557 And with that, we'll adjourn. As the Hearing Secretary mentioned, we will start 30 minutes later, 9:30 tomorrow, given the weather circumstances.
10558 THE SECRETARY: Exactly. Thank you very much, Mr. Chairman.
10559 THE CHAIRPERSON: Thank you.
--- Upon adjourning at 5:08 p.m.
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