Transcription, Audience du 12 février 2024

Les participants et l'endroit

Tenue à :

Centre de Conférence
Portage IV
140, Promenade du Portage
Gatineau (Québec)

Participants :

• Présidente :Vicky Eatrides
• Membres : Adam Scott, Vice-président, Télécommunications
  Ellen Desmond, Conseillère, Région de l’Atlantique et Nunavut
  Nirmala Naidoo, Conseillère, Alberta et Territoires du Nord Ouest
• Conseillers juridiques : Eric Bowles
  Megan Maloney
• Secrétaire : Sonia Gravelle
• Gérante d'audience : Marianne Blais
• Gestionnaire, Télécommunications : Adam Mills

Table des matières

Présentations

35 Competition Bureau of Canada

290 Vaxination Informatique

398 OpenMedia and Public Interest Advocacy Centre

687 Manitoba Coalition

938 John Roman

1014 Dr. Michel Mersereau

Transcription

Gatineau (Québec)
12 février 2024
Ouverture de l'audience à 9 h 00

Gatineau (Québec)

‑‑‑ L'audience débute le lundi 12 février 2024 à 9 h 00

1 LA SECRÉTAIRE : Bon matin.

2 Madame la Présidente, nous pouvons débuter.

3 THE CHAIRPERSON: Thank you very much.

4 Welcome, everybody. I would like to begin by acknowledging that those of us who are gathered here in Gatineau are on the traditional unceded territory of the Algonquin Anishinaabeg People and I would ask that everybody who is joining us virtually from different Indigenous lands take a moment to reflect on the Indigenous land that you are on and to pay respect to the Indigenous Peoples and their Elders.

5 Let me just start this morning by thanking everyone. Thank you for being here both in person and virtually, thank you for taking the time to review the heavy public record, and thank you for putting so much effort into your submissions. We know how much work is involved in preparing for these hearings and so we just want to recognize that and to recognize how important this work is.

6 As you know, as a quasi‑judicial tribunal, we need to hear diverse perspectives to make decisions in the public interest. Your participation is critical to helping us get this right. As part of this consultation, we have received over 300 submissions and we will hear from 22 groups over the next five days.

7 I know that we are all eager to get started, but before we do, let me just briefly touch on three things: first, let me set the stage with some context; second, I will touch on the work that we have done so far; and finally, the questions that we will focus on during this hearing.

8 So, first, starting with some context. We know that Internet is critical to our daily lives. Canadians need high‑quality Internet services at affordable prices and we know that vigorous competition between service providers is essential to reaching our goal. Competition makes businesses innovate and work hard to win customers, and it empowers consumers by ensuring that they get the most for their money when choosing an Internet service, but in recent years we have seen declining competition between Internet providers. Many Internet providers, independent providers have been bought out by the large companies and those that are left have fewer subscribers than they once did. We also know that telecommunications networks are expensive to build, to maintain and to operate. So, unless there is a prospect for returns, investors will put their money elsewhere.

9 C'est donc dans ce contexte que le Gouvernement du Canada a demandé au CRTC de renouveler son approche quant à la politique sur les télécommunications.

10 En février de l'an dernier, nous avons été chargés d'examiner comment nos décisions peuvent promouvoir la concurrence, l'abordabilité, la fiabilité et les investissements. Voilà donc l'équilibre que nous tâchons d'atteindre. Nous devons trouver la route vers l'avant qui mènera à des services Internet fiables par l'intermédiaire d'une compétition améliorée et de robustes investissements. C'est ce qui a motivé une grande partie de notre travail au cours de la dernière année.

11 Le CRTC a reconnu que son approche quant à la concurrence entre services Internet n'atteint pas son objectif. En mars dernier, nous avons donc lancé la présente consultation. Dans l'intervalle, nous avons assemblé un dossier public substantiel, lequel nous a permis d'agir rapidement pour aider à stabiliser le marché. En vertu de ce dossier, en novembre dernier, nous avons fourni aux concurrents un moyen pratique de vendre des services Internet en utilisant de manière temporaire les réseaux de fibre jusqu'au domicile des grandes compagnies de téléphone. Nous avons ciblé avec cette première décision l'Ontario et le Québec, où la concurrence a le plus diminué.

12 Jusqu'à la fin de la présente instance, nous devons continuer à agir rapidement. Il nous faut trouver de nouvelles façons de promouvoir la concurrence entre les fournisseurs de service Internet et nous devons créer une certitude réglementaire pour permettre des investissements continus dans les réseaux de grande qualité sur lesquels les Canadiens comptent au quotidien.

13 This week we will be focusing on three questions:

14 First, how well are Internet services markets working today for Canadians?

15 Second, what changes are necessary to ensure a more competitive future?

16 And third, how can we provide regulatory clarity so that companies can invest in and bring more high‑quality innovative services to market?

17 We look forward to hearing everybody's views on these issues and then our job will be to balance these views and to make decisions in the public interest.

18 Thank you again to all of our presenters for taking the time to participate.

19 I would now like to invite our Hearing Secretary Sonia Gravelle to introduce the team and to explain the procedure that we will follow.

20 Madam Secretary, let's get started.

21 THE SECRETARY:  Thank you, Madam Chairperson.

22 The Panel for this hearing consists of: Vicky Eatrides, Chairperson of the CRTC; Adam Scott, Vice‑Chair of Telecommunications; Nirmala Naidoo, Commissioner, Alberta and the Northwest Territories; and Ellen Desmond, Commissioner, Atlantic Region and Nunavut.

23 The Commission staff assisting us include: Marianne Blais, Hearing Manager; Eric Bowles and Megan Maloney, Legal Counsel; and myself, Sonia Gravelle, Hearing Secretary.

24 Before we start I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.

25 Une transcription des comparutions sera affichée quotidiennement sur le site Internet du Conseil le jour suivant.

26 Veuillez noter que les documents seront disponibles sur Twitter, sur le compte du Conseil @CRTCaudiences en utilisant le mot‑clic #CRTC.

27 Just a reminder that pursuant to section 41 of the Rules of Practice and Procedure you must not submit evidence at the hearing unless it supports statements already on the public record. If you wish to introduce new evidence as an exception to this rule, you must ask permission of the Panel of the hearing before you do so.

28 Please note that if parties undertake to file information with the Commission in response to questioning by the Panel, these undertakings will be confirmed on the record through the transcript of the hearing. Parties will have to file responses to any undertakings, serving a copy on all parties by 1 March 2024. Future steps and associated timelines will be announced at a later date.

29 The hearing is expected to last five days. We will advise you of any scheduling changes as they occur.

30 Participants are reminded that they must be ready to present on the day they are scheduled.

31 Also, when you are in the room we would ask that you take the time to familiarize yourself with the emergency exits.

32 Finally, please make sure to speak clearly into your microphone and if you are not speaking to put your microphone on mute.

33 Now, Madam Chairperson, we will begin with the presentation of the Competition Bureau of Canada.

34 Please introduce yourself and your colleagues and you may begin your presentation. Thank you.

Presentation

35 MS. McWHINNIE: Thank you very much.

36 Good morning, Chairperson Eatrides, Vice‑Chairperson Scott, Commissioner Desmond, Commissioner Naidoo, Commission staff and audience members.

37 My name is Krista McWhinnie and I am a Deputy Commissioner with the Competition Bureau, overseeing our Monopolistic Practices Directorate.

38 Let me begin by introducing the members of our panel:

39 ‑ to my right is Matthew Strathearn, Senior Economist in our Economic Analysis Directorate;

40 ‑ next is Ryan Jakubowski, Major Case Director and Strategic Policy Advisor in our Policy, Planning and Advocacy Directorate;

41 ‑ next is Conor Parson, Senior Competition Law Officer in our Monopolistic Practices Directorate;

42 ‑ at the end is Derek Leschinsky, Senior Counsel with Competition Bureau Legal Services;

43 ‑ and finally, to my left is Laura Sonley, Associate Deputy Commissioner of our Mergers Directorate.

44 The Competition Bureau is an independent law enforcement agency that protects and promotes competition for the benefit of Canadian consumers and businesses. The Competition Bureau is an evidence‑based public agency that follows the facts and evidence in making its recommendations with respect to competition. We are not influenced by commercial interests but by the public interest in protecting and promoting competition for Canadians.

45 The internet is essential for Canadians. It supports our daily lives, our economy, our culture and our well‑being. The pandemic has shown us how vital the internet is for working, learning, communicating and accessing information and services. As more of our activities move online, Canadians need internet access to an even greater degree to participate and thrive in the economy and in society. That is why we need to ensure that the market for internet services is competitive.

46 Competition among internet providers is not only about price and service quality in the short run but also about building and improving internet networks in the long run. The Bureau recognizes that both forms of competition are important and each should be promoted.

47 Concerns over physical and economic access to internet services are especially pressing as rising prices drive up the cost of living for Canadians and productivity growth continues to be weak. Internet is not a luxury but a necessity. Paying more for internet means Canadians have less for other expenses.

48 Le Bureau est donc heureux d’être ici aujourd’hui pour participer à ce processus important concernant un service essentiel pour les Canadiens et les Canadiennes. Nous savons que le Conseil reconnaît l’importance d’une concurrence durable, de prix raisonnables et de services innovants. Nous pensons que nos commentaires d’aujourd’hui et nos interventions tout au long de cette instance sont en accord avec les objectifs de politique du Conseil. Nous partageons vos objectifs de renforcer la concurrence et de faire en sorte que tout le monde au pays ait accès à des services de télécommunications fiables, abordables et de haute qualité, entre autres objectifs importants. Le Bureau est également conscient que trouver l’équilibre entre différents objectifs est un exercice difficile qui nécessite d’équilibrer les risques.

49 One of the key issues in this hearing is determining how the wholesale access framework can more effectively promote broadband internet competition. To help inform this issue, the Bureau analyzed the performance of Wholesale‑based Competitors and other marketplace trends in a granular manner. Wholesale‑based Competitors and the wholesale access framework can play an important role in promoting competitive outcomes.

50 We have now considered all of the evidence available on the record. Having done so, the Bureau recommends that the CRTC update its wholesale access framework to include effective access to wholesale inputs delivered over FTTP networks. This update will better position the wholesale access framework to support competitive outcomes now and into the future.

51 Nous avons quatre points essentiels à faire aujourd’hui à cet égard. Premièrement, notre analyse suggère que l’absence d’un accès de gros efficace aux réseaux FTTP contribue au déclin de la part des abonnés desservis par l’accès de gros. Deuxièmement, notre analyse suggère que ce manque d’accès de gros efficace aux réseaux FTTP limite les avantages concurrentiels du cadre d’accès de gros. Troisièmement, la forme actuelle du cadre fait que les réseaux de câble transportent une majorité croissante du trafic de gros, ce qui peut avoir une influence sur les motivations concurrentielles au niveau du réseau. Quatrièmement, la mise à jour du cadre d’accès de gros pour garantir qu’un accès de gros efficace est disponible, quel que soit le type de technologie filaire, favorisera davantage la concurrence. Le Bureau croit que ce changement contribuerait à ce que le cadre d’accès de gros puisse faire diminuer les prix et continuer à offrir du choix aux consommateurs, tout en servant à mieux équilibrer son impact entre les différents types de technologie de réseau.

52 Let me take each of these points in turn.

53 First, the lack of effective wholesale access to FTTP networks is contributing to the decline in the share of subscribers served by wholesale access.

54 Much of the information in this proceeding begins in 2018, picking up from when the information in the Bureau’s Broadband Study largely ends. As noted by many, the results of the Broadband Study painted a largely positive picture of the state of competition at the time. The study recognized the important contributions to that competitive picture from both Facilities‑based Competitors and Wholesale‑based Competitors. One of the study’s key conclusions was that the wholesale access regime appeared to be fulfilling its promise to bring about greater consumer choice and increased levels of competition for Canadian consumers. The study also called for this competition to be preserved and leveraged going forward.

55 The Bureau has sought to focus its analysis in this proceeding on evaluating whether the wholesale access framework has continued to deliver the benefits observed during the Broadband Study. In short, the results of this analysis suggest that the wholesale framework’s current technology‑specific restrictions are diminishing its ability to enable competition over time.

56 The current technology restrictions apply to both types of network operator, but ILECs have a larger proportion of FTTP connections than cable operators. So, the impact of these restrictions is more pronounced on ILEC networks.

57 In its October analysis, the Bureau found that the proportion of subscribers served using wholesale inputs on ILEC networks declined nationally, in every region and in nearly every Census Metropolitan Area analyzed. In contrast, the Bureau observed a national trend of ILECs having gained retail subscribers at the same time as their wholesale end users have fallen. This leads us to rule out a cause specific to ILECs.

58 Likewise, we observed a national trend of Wholesale‑based Competitors having gained subscribers on cable networks. This leads us to rule out a cause specific to Wholesale‑based Competitors.

59 Taken together, the Bureau believes that this decline has been principally caused by the lack of effective wholesale access to FTTP networks, rather than a declining demand for internet delivered over ILEC networks or for internet provided by Wholesale‑based Competitors.

60 Moving to our second point, the lack of effective wholesale FTTP access is limiting the competitive benefits of the wholesale access framework.

61 The Bureau’s analysis indicates that consumers have shifted towards faster speed services in recent years, and the proportion of subscribers who purchase speeds that are widely available on FTTN connections has diminished. More importantly, while FTTP connections are frequently discussed in the context of faster speed services, these connections are one of, and sometimes the only, means of physical access to a customer regardless of their desired speed.

62 The impact of this limitation on physical access is that the wholesale access framework’s ability to influence competitive outcomes for consumers varies with the network technologies available at a consumer’s address. While this may be more common when considering ILEC networks, it is equally true when considering areas where cable companies have deployed FTTP networks. Households that have only FTTP connections are not effectively reached by the wholesale access framework.

63 The Bureau understands that there is debate about whether FTTN connections are being decommissioned in areas where FTTP connections have been built. We do not have any clear evidence on this point, but we expect there to be increasing problems if incumbents are required to operate legacy networks for use principally by Wholesale‑based Competitors. Incumbents would have reduced incentives to maintain a high quality of wholesale service on these networks.

64 Taken together, the evidence suggests that the current wholesale framework is acting as a less effective constraint on market power than it used to. This worsening trend is likely to continue into the future unless the framework is updated.

65 Our third point is that the framework’s technology‑specific restrictions are resulting in cable networks carrying an increasing majority of wholesale traffic, which may impact competitive incentives at the network level.

66 The Bureau’s analysis demonstrates that over time, cable networks have taken on an increasing majority of high‑speed as well as low‑speed wholesale traffic. The Bureau believes that this trend towards cable networks serving an increasing share of wholesale traffic can negatively impact competition, especially if FTTN connections become scarcer, leaving cable as the only wholesale option for more households.

67 The Bureau recognizes that wholesale access can negatively impact investment incentives. From the record of this proceeding, the Bureau understands that cable providers are contemplating alternative network investments to FTTP in the near term. Maintaining a wholesale framework on certain technologies but not others may alter the incentives for network operators to invest in different technologies. It may also result in the wholesale access framework having a larger impact on the investment incentives of one type of network operator than on the other.

68 And our fourth and final point: Eliminating these technology‑specific restrictions will better promote competition.

69 The Bureau believes that the CRTC should update its wholesale access framework to include effective access to wholesale inputs delivered over FTTP connections. This will provide Wholesale‑based Competitors with access to an increasingly important network while also serving to reduce asymmetry between incumbent Facilities‑based Competitors that can distort competition.

70 The Bureau believes that effective FTTP wholesale access can better foster competition for several reasons:

71 ‑ first, we expect it will better position the wholesale access framework to support competitive outcomes now and into the future;

72 ‑ second, a renewed wholesale sector would help to restore the balance we observed in our Broadband Study by better promoting price and service competition;

73 ‑ third, to the extent that it makes more overlapping wholesale products available, it may also increase incentives for network operators to compete with each other, including for wholesale customers;

74 ‑ finally, it can avoid impacting the incentives for network operators to make specific types of investments to improve their networks, thereby better enabling market forces to determine the most efficient way to make the important large‑scale investments to improve Canada’s wireline networks.

75 By effective wholesale access to FTTP networks, we mean terms of access that (1) facilitate the competitive benefits of wholesale access that we observed during the Broadband Study and (2) encourage both incumbent and non‑incumbent Facilities‑based Competitors to invest in their networks.

76 We acknowledge that other intervenors have raised important questions about the design of wholesale access to FTTP. As we have not analyzed these issues specifically, we cannot offer a conclusive view on the likely effectiveness of different access designs and limitations. However, we would be pleased to share our opinion on relevant considerations to the extent the Commission is interested.

77 And, as we suggested in our October submission, tracking additional indicators of short‑ and long‑run competition will enable the CRTC to better monitor the success of the wholesale access framework.

78 The Bureau thanks the Commission for the opportunity to participate in these proceedings. We will endeavour to answer any questions that you may have in a clear and concise manner. Thank you.

79 THE CHAIRPERSON: Thank you very much, Competition Bureau, and thank you for kicking off the hearing with us this morning. We're very please to have you here as the voice of competition advocacy in Canada, so thank you.

80 I will turn things over to our Vice‑Chair who will lead the questioning for the Commission. Thank you.

81 VICE‑CHAIRPERSON SCOTT: Good morning. Thank you for being here and thank you for your offer to answer clearly and concisely. It will make up for my long rambling questions.

82 I want to start with maybe just a foundational question. So, we know there's competition between network operators. How many facilities‑based wireline networks can a Canadian market support and consequently how important is the role of the wholesale framework overall if we want a level of competition that can deliver on the social and economic needs of Canadians?

83 MS. McWHINNIE: Thank you very much for the question. My colleagues leading our work in this proceeding will answer questions about our analysis and findings and recommendations.

84 MR. PARSON: Thank you very much for the question.

85 I think in terms of how many networks the Canadian economy can support isn't a question we analyze specifically. Just from a theoretical consideration, we anticipate that it may vary depending on the precise area of Canada we're discussing, but we don't have any detailed evidence on that point.

86 VICE‑CHAIRPERSON SCOTT: Okay. Did you want to give a general comment about the importance of the wholesale framework? Recognizing there is competition between network owners as well, is wholesale useful and what about the trends of wholesale and kind of the growing or declining effect it's having just in terms of its absolute importance, very important, marginal?

87 MR. JAKUBOWSKI: Maybe I can speak to that. So, we have seen some of the indicators of the importance of the wholesale‑based competitor regime. Some of this is from our Broadband Market Study from 2019 and some of the things we saw there was that the wholesale‑based competitors can provide a competitive alternative, something that's useful not just for their own customers but even customers of the facilities‑based competitors can benefit from leveraging those options. In this study, in our October report what we saw was that the wholesale‑based competitors tend to offer or obtain ARPUs, average revenues per user, lower than the facilities‑based competitors and this is true across speed bands, not just overall on average. So that's another benefit.

88 There's also from ‑‑ going back to the broadband study, we had linked ‑‑ that study had linked the emergence of flanker brands, at least to some extent, to the presence of wholesale‑based competitors. And then in our October analysis, we see again the ARPU that the flanker brands get is lower than the mainline brands. So that's another benefit.

89 I think to kind of give a complete answer, something else we noted from that broadband study was that some of the facilities‑based competitors were quoted that they didn't view wholesale‑based competitors necessarily as significant competitors, so.

90 VICE‑CHAIRPERSON SCOTT: Thank you. Your written submission highlighted some of the regional differences in the wholesale market ‑‑ so generally speaking, Ontario and Quebec declining, the Atlantic market growing, the West never having really gotten off the ground. I'd love to hear your thoughts on the various factors that contributed to those outcomes. You know, to what degree is it network operator behaviour? To what degree is it the behaviour of the independent ISPs, or a function of the regulatory framework or consumer preference?

91 MR. PARSON: That's a great question. I think that we noted those trends in our October report and also noted certain considerations that we thought could be influencing them. I think we don't have a determinative view as to what definitively is driving those differential outcomes, but we think that there are a number of different potential indicators that we noted in our October submission that could be influencing those regional differences. I'd be happy to go through those in turn.

92 VICE‑CHAIRPERSON SCOTT: I think that would be time well spent, if you wouldn't mind.

93 MR. PARSON: Absolutely. So I think that, you know, we noted in our submission the different areas of Canada having different trends. I think that there were a variety of different factors.

94 I think starting first in the Atlantic region, we noted that wholesale access there was a relatively recent development as compared to other regions and that that may be playing some role in the current trendlines, but not the absolute outcomes that are occurring.

95 We also considered whether ‑‑ that maybe influence by the population makeup in the region, which I think it equally true when considering the trends in each of the regions.

96 We also considered that there may be some underlying difference in terms of the competitive efforts made by wholesale‑based competitors in each region which may vary amongst the regions to date and may be contributing to some of the different outcomes that we've seen.

97 I think finally, too, we noted that a certain degree of those outcomes may be influenced by the particular realities of the markets in each region. I think, you know, we noted that, all else being equal, we anticipate a higher degree of wholesale‑based competitor subscriber shares in regions where they are able to, with the terms of access that currently exist, all else being equal, charge a lower price as compared to facilities‑based competitors. So one of the factors we noted may be driving some of those outcomes is that in certain areas, you know, the current terms of access may be offering a more attractive entry segment as opposed to other ones.

98 VICE‑CHAIRPERSON SCOTT: Okay, so in your written submission when you spoke about consumer preference, is that really then a function of kind of demographics or price sensitivity driven by the population makeup of a regional market? Is that ...?

99 MR. PARSON: We suspect that's true. That, you know, that suspicion is in part based on the 2018 broadband study where the Bureau did conduct some consumer analysis and noted that there appear to be different types of consumers when it comes to purchasing broadband Internet services. So you know, with the information that we had, we can't say definitively, you know, is there more of a certain type of consumer in one region. But we have observed that that is, you know, something that exists, and we anticipate that, you know, if the demographics contain more of one type of consumer than the other, that that could influence those outcomes.

100 VICE‑CHAIRPERSON SCOTT: How strongly do those disparate results suggest that we need regional frameworks to be applied?

101 MR. PARSON: That's a great question. I think it suggests that regional frameworks are something that should be considered. You know, I think that essentially what we've seen is that the available inputs in different regions combined with those other factors, you know, could likely be playing a key role. And so to the extent that that's due to certain kind of inherent underlying differences with the regions that that certainly could be an option worthy of study.

102 VICE‑CHAIRPERSON SCOTT: So one of the other observations you made in your October intervention is that the wholesale‑based competitors tend to serve the lower‑speed tiers of the market, typically below 100 megabits per second, but what we heard loud and clear in your remarks today is the ongoing importance or the increasing importance of the FTTP access.

103 So I'm curious, if they were given access, how successful would you anticipate that the independent ISPs would be? Is this their target market? How important is FTTP specifically to them, given that today they don't appear to be making use of the highest speeds they have available?

104 MR. PARSON: That's a great question. I think before diving into the slower speeds, I think an important consideration from our perspective with regards to the effective access to FTTP is that ‑‑ the point about physical access. And so for households, you know, where there isn't currently effective access, that would be true kind of regardless whether we're talking above or below 100 megabits.

105 But turning to the slower speed consideration, in our October submission, we highlighted two possibilities that we thought could be influencing that. I think with the information available, we can't kind of say definitively whether certain types of access would change that outcome. In our view, that's still an open question, and I think we noted that the two key considerations in that regard or two key potential causes of that are the possibility that, like you suggested, that they may be targeting a certain market segment, but it also could be due to the particularities of the current access design such that there may only be attractive opportunities or effective opportunities to compete at lower speeds and not at higher speeds.

106 VICE‑CHAIRPERSON SCOTT: Yeah, I think the last part of your answer really put a pin in exactly what I'm trying to dig into here. Have you observed anything that would suggest this is ‑‑ like any evidence to suggest this is a business strategy? Or is there no evidence? Have you found evidence to support that or evidence to contradict that?

107 MR. PARSON: I think our views are based on the data, and that just, you know, reports outcomes. I think to the extent ‑‑ I think generally speaking, I don't think we have information to suggest that it is or isn't a strategy. I think that in evaluating that question, you know, what we would look for would be business records of competitors to get a better sense of, you know, what exactly their strategy might be.

108 MR. JAKUBOWSKI: Maybe I could add one thing to that. One thing in the October report is there's a chart that shows the ARPU by speed band for the wholesalers and the wholesale‑based competitors and the facilities‑based competitors. And you see at the lower speeds, in those lower‑speed bands, that gap between or the sort of discount of the wholesale‑based competitors is greater. And then for the higher‑speed bands, that gap is much smaller. And so that suggests maybe part of the reason is the terms of access to the wholesale‑based system rather than a business strategy. But we don't have really any information on the business strategies.

109 VICE‑CHAIRPERSON SCOTT: Thank you for that. And yeah, I'm glad you mentioned ARPU, because I did want to ask about Alberta in particular, where we do see generally a higher ARPU, which would seem to suggest that it's a fairly attractive target market for independent ISPs, and yet we've not seen that bear out in the outcomes. Did you find anything particular about Alberta that's informative?

110 MR. PARSON: In terms of Alberta, I know, you know, our discussion largely related to Alberta and British Columbia, and so just want to preface my remarks with that point.

111 I think that as we observed in our report, you know, we looked at those provinces, just given the outcomes we saw with the relatively low penetration of wholesale‑based competitors, and I think what we ultimately found when we looked at the ARPUs were that, you know, looking in particular at cable, which is the predominant technology used by wholesale‑based competitors in other regions, where they have been successful in gaining a higher market share, that the difference between the ARPU charged by wholesale‑based competitors and the facilities‑based cable providers was larger or, sorry, I shouldn't say larger, but there was a difference between them in that, in our view, that that differed from the areas where they had been more successful where there was less of a difference.

112 VICE‑CHAIRPERSON SCOTT: Thanks. I'm going to change gears a little bit. What do you make of the claims that wholesale aggregated FTTP will slam the brakes on fibre investment? Especially when we consider other investment drivers like the intense competition between telcos and cablecos.

113 MR. PARSON: From our perspective, you know, I think we recognize, as we stated in our opening statement, we do recognize the prospective impact on investment incentives that wholesale access can have. You know, I think when considering the question of aggregated access to FTTP, it's a relevant consideration, but it also relates to other factors as well, not merely kind of the exact theoretical design of the access framework, but that other considerations contained, you know, kind of in the details of the access framework would bear on that point.

114 VICE‑CHAIRPERSON SCOTT: Okay. Is any evidence in the data ‑‑ are we able to observe impacts of previous regulatory frameworks on kind of the leading technology at the time? Any parallels we can draw there?

115 MR. PARSON: We didn't observe any of those types of relationships in our October submission.

116 VICE‑CHAIRPERSON SCOTT: Thanks. We've seen a number of smaller ISPs acquired in recent years. Some folks have characterized this as an attempt to wipe out competition. Others have, you know, have noted that it's just another way for large players to differentiate their service offerings, target specific market segments. What's going on with the mergers? What impact do they have on choice and affordability for Canadians? Should we be worried? And if there is a problem, what should be done about it?

117 MS. SONLEY: Unfortunately, we are bound by our confidentiality restrictions. And as you know, we did undertake a review of some of those transactions, so I can't really speak to any specific transaction.

118 I can say generally, as we described in our submission, there are differing impacts on competition, and you've highlighted some of them. So a good reference here would be paragraphs 101 to 105 of our report.

119 Basically, where an incumbent doesn't have a pre‑existing network, the resale regime can allow them to compete potentially in an area where they wouldn't have otherwise competed. It can also mean that they can offer bundles in a region. But there are complicating factors. There may be regions where it's unclear that an incumbent may have built in the future. So if they had planned to, the use of the resale regime may decrease their incentives to do so going forward.

120 Another note of caution is expansion by incumbent providers to new geographic and product market also increases what's called multi‑market contact. And that can increase the likelihood of price coordination and a softening of competition.

121 It also can raise barriers to entry for wholesale‑based competitors, given the nature of the Canadian market, where Internet providers also are wireless providers, them being able to provide bundles may raise barriers to entry.

122 So it's hard to make a definitive statement. You have to kind of look acquisition by acquisition. But those are some of the considerations.

123 VICE‑CHAIRPERSON SCOTT: Thanks for that, and I appreciate you answering the question despite being bound by some confidentiality concerns.

124 Digging into wholesale rates a little bit, so you spoke about or you reference the kind of the Goldilocks formulation of pricing, where if rates are too low, it discourages investment; if rates are too high, it prohibits competition; and which seems to suggest that the challenge for us is just to get the rates exactly right.

125 But presumably there's a scenario where a rate is set that accurately reflects the costs of the service provider but doesn't necessarily provide a rate at which an independent ISP can offer a competitive service. So I guess my first question is like how big is the Goldilocks zone, and is it possible that there isn't one, that there isn't kind of this magical price at which everything works?

126 MR. JAKUBOWSKI: I think the challenge is the Goldilocks zone is ‑‑ because there's some uncertainty and so, you know, if we knew how big it was, we probably would know where the middle of it was and we wouldn't really have this problem.

127 So I think what our submission is trying to highlight is taking into account that uncertainty, it is a challenge. And one of the things that we suggest to kind of hopefully deal with it somewhat is gathering and collecting certain indicators of competition; and monitoring the performance of the market both in terms of the price and service type of competition and the investment, the deployment, the availability type of competition; and using that as a way of trying to kind of gauge where you are, you know, in that Goldilocks zone.

128 VICE‑CHAIRPERSON SCOTT: So from your perspective, should our objective be to strike a balance between kind of the too hot and too cold? Or should we take more of a purist approach to costing and endeavour to accurately capture the foregone costs of the incumbents' framework and stick with kind of a purist model and let the chips fall where they may?

129 MR. JAKUBOWSKI: I hope this isn't avoiding the question, but I don't think we see them as a conflict. I think it's just seeing it as more information on the same goal. So you know, because there's uncertainty over the costing, there's just another kind of source of information as a check of, you know, where that ‑‑ sort of how these estimates are playing out.

130 VICE‑CHAIRPERSON SCOTT: Okay, thank you.

131 On the same topic, would it be fair to say that there are competitors or types of competitors who could be better positioned to offer a competitive service offering within a wholesale framework?

132 MR. PARSON: Just to confirm, do you mean like certain types of wholesale‑based competitors who may be better?

133 VICE‑CHAIRPERSON SCOTT: That's correct, so if we take as constant kind of a wholesale framework, is it fair to assume that not everyone would have the same capacity to offer a competitive service offering?

134 MR. PARSON: That's a good question. I think from a theoretical perspective, you know, to the extent, you know, there are barriers to entry or expansion within this market, we anticipate that, all else being equal, a wholesale‑based competitor who has overcome those barriers to entry or expansion, whether that be because they are larger and have additional scale economies that they could theoretically be better‑positioned to compete.

135 MR. JAKUBOWSKI: I'll just add and say in addition to the scale economies, I think also maybe economies of scope or having complementary business lines. One of the things that we highlighted briefly was offering TV services as well as home Internet services. And you know, so that's an example of a kind of complementary business line. And there might be other complementary business lines, bundling with wireless, for example.

136 VICE‑CHAIRPERSON SCOTT: I appreciate those answers, and I wouldn't mind if you have any other ‑‑ so beyond kind of scope and scale, if there are any other factors. Because I do think this may be an important issue that we're examining. Are there any others you can think of?

137 MR. JAKUBOWSKI: The other one that comes to mind is the brand. So if you have another business that's well‑known, I think that's a type of economy of scope. You're kind of reusing that same asset. I think those are the main ones that we've seen, the brand, the TV, you know, perhaps other services that can be bundled.

138 VICE‑CHAIRPERSON SCOTT: Thanks. So with that as background, do you have any thoughts on the willingness and ability of network operators making use of the wholesale framework, either within their own territory or outside of the territory? It would seem that they've got some of the positive attributes you just flagged. Well, maybe all of the positive attributes you just flagged. How are they positioned, and do you see any willingness to make use, and what are the ‑‑ it's actually kind of a big question, because it's got implications for investment and competition pricing. Your thoughts on that?

139 MR. PARSON: Yeah, that's a great question. From our perspective, we talked about various considerations in our October submission in terms of potential theoretical benefits to competition and potential risks as well associated with that trend. So I think kind of, you know, one of the areas we mentioned in terms of competition was the possibility that, you know, larger firms may have some of those economies of scale and scope associated with the possibility of being able to compete aggressively. I think, you know, we recognize this as kind of a larger issue as well, with other considerations. But I think just to summarize, I think from our perspective, it's a trend with potential benefits and risks.

140 VICE‑CHAIRPERSON SCOTT: Thanks. So just two more questions from me.

141 You had mentioned in your opening remarks that the cablecos are carrying a disproportionate share of the wholesale traffic. Is that necessarily a negative for the cable companies? Or would we expect that network operators would actually be competing to carry more traffic, especially given the cost of deploying those networks? And wouldn't you rather get, you know, cents on a dollar versus zero cents on a dollar?

142 MR. PARSON: So I think in terms of answering that question, I think kind of approaching it from a theoretical perspective, you know, I think you're correct in terms of the incentives to add a subscriber are there, regardless. I guess it kind of comes down to the differential incentives between adding a subscriber on your retail brand as opposed to adding it on your wholesale network.

143 You know, looking back at the overall trend towards cable, I think that our comments were made within the context of, you know, the potential risks to investment incentives from a theoretical perspective in that it may impact the incentives to compete both in terms of a network building and also kind of more generally overall for both retail and wholesale subscribers.

144 VICE‑CHAIRPERSON SCOTT: My last question takes advantage of the fact that you've got the expertise you have and you happen to be our first witnesses of the hearing. Would you mind giving us maybe a mini seminar, a couple minutes explaining the difference between predatory pricing and a really good deal? Because I suspect there are lots of Canadians who hear the term predatory pricing and it actually sounds appealing. You know, to the extent that we're just talking of really low prices, that can appear very positive. Can you educate us on predatory pricing?

145 MS. McWHINNIE: Yeah, I'd be happy to speak to that. And it's a very good question because it's an extremely difficult line to draw between what is aggressive pro‑competitive pricing and when does it tip over into being predatory.

146 So when we're looking at these types of allegations under the Competition Act, we're generally reviewing them under the abuse of dominance framework. And in that scenario, we're looking to first assess whether the firms using this tactic do in fact have a substantial degree of market power. But when we're looking at the motivation for the conduct, there's various measures of, you know, how to compare the price relative to cost. But I think at the core, we're looking at the evidence of what motivated the behaviour. Is it really driven to just be the best option for consumers and drive others to meet you there as an effective competitor, or does the evidence show that the intention is more temporary to drive out rivals or to make them less effective competitors to maybe dissuade them from entering or expanding in a market? And where the evidence shows that that is the overall purpose, that's when we are in the world of predatory pricing, and we're doing an analysis then to determine whether it's likely that those costs could be recouped once those rivals are driven out of the market or disadvantaged. And that's goes to an assessment of barriers to entry and that type of thing.

147 VICE‑CHAIRPERSON SCOTT: Great, thank you very much, Madam Chair. Those are my questions.

148 THE CHAIRPERSON: Thank you, Vice‑Chair. Let us go to Commissioner Desmond.

149 COMMISSIONER DESMOND: Good morning and thank you for being here.

150 I just have two questions. The first relates to the four points that you have identified in your opening comments, and then... part of your submission from June. And in your submission from June there is a note that if the disaggregated challenges could be overcome then there could be competitive benefits, as opposed to an aggregated model, and then this morning we heard of the benefits arising maybe more from the aggregated model.

151 So, I'm just curious if you could speak to whether in your view the... some of the challenges associated with a disaggregated model could still be overcome at this point?

152 MR. PARSON: Thank you, that's a great question. I think in terms of our perspective... you know, I think we spoke about effective access. Our view is that either aggregated or disaggregated access could be a form of effective access.

153 The comments you are referring to, in June; I know we pointed out, from a theoretical consider... or theoretical perspective, rather, some potential benefits and also some potential risks associated with the full‑scale transition to disaggregated. We also understand... you know, very much that there are a few practical considerations and the... the actual practical design and definition of different matters within that framework is an entirely different matter.

154 We recognize that there was a decision made earlier this year, in which the Commission concluded that there is unlikely to be a viable way to redesign that framework. We don't have any information to add to the practical question of design of the disaggregated access framework. I think within that context... you know, we did recognize that historically aggregated has been an effective form of access and that consideration of changes to it appear to be a reasonable way forward, but I think just to summarize, overall, I think from our perspective, either disaggregated or aggregated could be a form of effective access.

155 COMMISSIONER DESMOND: Okay. And then, just secondly... as a second question. This morning you spoke with my colleague about the regional differences and what you saw as some of the factors leading to regional differences, one of which was efforts made by competitors.

156 So, I'm just curious if you could expand a little bit more on why you think there is a difference as a result of competitor efforts.

157 MR. PARSON: That's a good question. So, I think, when thinking about that particular consideration, I think this was a... a theoretical concept that we view as possibly driving the outcomes that we saw.

158 Ultimately, all that we did see in our report were those outcomes, and I think in those sections of our analysis we were trying to use the information we had to suggest possible drivers of that.

159 So, I think that overall... I don't know if we have any direct information on that point, just to kind of note that, from a theoretical perspective, if firms have not specifically targeted a market, invested and competing their... such as possibly developing a brand, or other factors along those lines, that that could be a theoretical driver that could explain the outcomes that we saw in our report.

160 MR. JAKUBOWSKI: Just to...

161 COMMISSIONER DESMOND: Thank you, sorry.

162 MR. JAKUBOWSKI: Oh, sorry, just to add quickly. The one thing we couldn't deduct here was that... just where the companies are based, so most of the wholesale base compared is being based in Ontario or Quebec, and then, also in Atlantic Canada, with Purple Cow and City Wide and... I think that's the only kind of observation, going to that, that we made in our reports.

163 COMMISSIONER DESMOND: Thank you.

164 THE CHAIRPERSON: Thank you very much. Let's go to Commissioner Naidoo.

165 COMMISSIONER NAIDOO: Hi there. Thanks so much for being here today. I just have a couple of questions.

166 You say regional frameworks should be considered. And so I'm wondering, if the Commission were to consider a national framework how could such a framework, in your view, help to address regional differences? Do you have any ideas?

167 MR. PARSON: I think the exact kind of design of the potential regional frameworks isn't an issue that we studied specifically and unfortunately, I can't add much on that point.

168 COMMISSIONER NAIDOO: Fair enough, okay, thank you. I'm going to ask you a little bit about Alberta. We've seen claims on the record of intense competition between Shaw ‑‑ now Rogers ‑‑ and TELUS in the West, but it doesn't seem to be showing up in retail prices. So, I'm wondering if you have a position or any context for that?

169 MR. PARSON: So, I think the exact degree of competition in that region isn't a question we studied specifically. I think what we did note in our report was that all else being equal, we were anticipating that in regions where there was less penetration of wholesale‑based competitors, that we would have likely seen more... a higher degree of similarity in the average revenues per user that were obtained between wholesale and retail, on each network... Specifically with cable, which is the predominant technology that is used for wholesale, our observation there was just that in British Columbia and Alberta we didn't see a much kind of closer alignment of those wholesale and retail of who is on the cable network.

170 COMMISSIONER NAIDOO: All right, thank you very much. That's all I have, thanks.

171 THE CHAIRPERSON: Okay, great. My turn.

172 So, maybe just kind of going back to basics. You started your remarks this morning by talking about your raison d'être, the mandate of the Competition Bureau. You exist to protect and promote competition to the benefit of Canadian consumers and businesses.

173 You're not doing that for the sake of promoting competition for the sake of competition. Can you talk to us in our own words about why... what does competition lead to?

174 MS. McWHINNIE: I'm happy to start on that, and I think... I think I would first link back to something that you mentioned in your opening remarks; competition, it really drives players to be the best option for consumers, and so, that's right, it's not... it's not about promoting or protecting a certain number of players or who they should be, it's really to support the competitive process so that that drive to be the best option and to always be thinking about how you change and adapt and innovate to continue to the best option is what is motivating behaviour, rather than switching to strategies that are about protecting your place in the market and making it more difficult for others to challenge your position, competition makes players laser‑focused on how are we the best today? How do we continue to be the best tomorrow? For the customers that we serve, in terms of price, offering high‑quality, making sure that Canadians have choice and innovation into the future.

175 THE CHAIRPERSON: Okay, thank you for that. So, you have mentioned some benefits to Canadians, price, choice, higher quality. Coming back to the question that the Vice‑Chair asked, what about investment? You mentioned innovation, what about investment? Does competition also drive investment?

176 MS. McWHINNIE: Yes, generally speaking it does, and so in the context of our work I think we are always thinking about the dimensions of short‑term competition, like price and service, but also the dimension of longer‑term competition, dynamic competition of continuing to invest and innovate, and being the best, moving forward.

177 So, absolutely, we see a clear link between competition and investment, and that longer‑term dynamic competition. I'll just see if my colleagues have anything to add.

178 THE CHAIRPERSON: Okay. Thank you for that. In terms of the rates. So... I think... So, PIAC is coming up after you. They have pointed to some pricing that they have seen across the country. We have heard from some interveners that incumbents are offering lower retail rates than wholesale rates that are available, therefore making it very difficult for these independent providers to compete. You have said in your opening remarks that these independent providers offer a competitive alternative.

179 Should we be concerned about that? I mean, I know we have talked about predatory pricing, a little bit of a different issue, but should be concerned if the retail prices out there are lower than the wholesale rates that are accessible by independent providers?

180 MS. McWHINNIE: It's a very, very good question, and stepping back, I think in general we view incumbents offering lower prices and competing aggressively, including via different brands, as positive for competition, and we noted this in the broadband study, and link the launch of flanker brands to the presence of wholesale‑based competitors and a desire to compete.

181 But the use of those flanker brands and low‑pricing strategies can also facilitate conduct by incumbents that at times can be intended to reduce competition.

182 So, going back to my remarks on predatory pricing, where we see in the evidence that it is more a temporary strategy to use low pricing for the purpose of excluding or deterring entry or expansion, that's where I think there is a concern that could frustrate the... your goals of the wholesale access framework and at times can also be an issue that is looked at in the Competition Act.

183 MR. JAKUBOWSKI: Maybe I could add to that as well and say... on the one hand there is the price or... and the other is the cost of the wholesale‑based competitors have. It may also be an indicator that you can use... I think the Commission is gathering price information and it can use that as an indicator, going forward, with wholesale cost setting.

184 So, that would be the other side of it, where it could be a useful indicator.

185 THE CHAIRPERSON: Okay, thank you for that. So, just maybe staying with that. You said in your submissions that other interveners have talked about the parameters of the wholesale access regime and you hadn't necessarily opined on some of that but that you would be happy to share perhaps some considerations from a competition perspective with us.

186 So, maybe just continuing along the lines of what we were just talking about. As you know, some parties have proposed limits on the regime so that incumbents would not be allowed to access the regime. I'm wondering if you have any views on that.

187 MR. PARSON: That's a great question. From our perspective, we think that there are potential benefits and risks associated with that, and accordingly, we don't have a conclusive view as to whether that is something that is worth prohibiting...

188 I think we highlighted in our October submission that there are potential benefits to competition associated with that, and that could differ, depending on whether that was being used within the territory or outside of the territory, but that there are also certain risks associated with that.

189 In particular, the risk that would be present throughout would be, as my colleague mentioned, an increase in multi‑market contact.

190 So, just to come back to the original question, I think from our view we seen potential benefits and risks but not necessarily a clear path forward, from our side.

191 THE CHAIRPERSON: Okay, great, thank you. Let me just ask a follow‑up question, then.

192 If there are areas where there are... where there is limited competition, would consumers benefit from having additional competition, even if it came from a large provider?

193 MR. PARSON: I think, from our view, the ability of the framework to promote competitive outcomes on the benefits' side seems to be true, regardless of the identity of the person purchasing the input.

194 And so, in this theoretical situation, it seems that that could be a potential benefit, but we also recognize that the identity question also kind of comes with a certain other suite of risks that would be broader than that one particular area.

195 THE CHAIRPERSON: Okay, thank you for that.

196 So, just maybe coming back to mergers, for a minute ‑‑ and we fully appreciate the confidentiality provisions of the Competition Act ‑‑ but at a higher level, we have heard a lot and you have seen it on the record of this proceeding, we have heard a lot about independent providers being bought out and what the impact is of that.

197 Can you talk to us at a higher level about... you have said that these are competitive alternatives. You have talked about the benefits of these independent providers. If they are getting bought out by the large providers, what is the impact of that? Should we be concerned about that kind of concentration?

198 MS. SONLEY: Yeah, I mean, I think, as I mentioned, there are sort of benefits and risks, and it is very tied to what you were just discussing with my colleague... it does result potentially in new entry in areas where there might not have been entry, or may not have been entry in some time. There is also risks associated with it, including increased coordination in the long run, so it's something to monitor, certainly, to ensure that those benefits aren't outweighing the potential risks.

199 But, we have not challenged a transaction to date under our current framework, so...

200 THE CHAIRPERSON: Okay. Could you maybe touch on... under your merger review your process, could you maybe touch on removal of a smaller competitor?

201 MS. SONLEY: Yeah, so I think certainly, the size of the competitor may be relevant to our analysis and it comes into play particularly when we are determining whether the lessening of competition is substantial or not.

202 And so, as we discussed in our report, at times there may be a lessening of competition, which is not substantial, and therefore we cannot challenge it at the Tribunal, and we did draw a comparison. The CRTC may have different policy objectives, ours is narrowly the test of whether a merger would result in a substantial prevention or lessening of competition.

203 By comparison, the CRTC has policy objectives, including the maintenance of a regulatory framework, and so we just have, I think, potentially different considerations in that regard, so I can't comment beyond our own.

204 THE CHAIRPERSON: Okay. Thank you for that.

205 We have seen some reports that have been submitted on the public record with respect to international pricing comparisons. They are conflicting. How much weight should we give to international pricing comparisons when we are talking about competition in Canada?

206 MR. JAKUBOWSKI: It is an interesting question... you know, it is something we brought up in our June submission as well, and we do think it is informative, to some extent... maybe not determinative but I think in this hearing, looking at...

207 So, I should start and say I would take away from these international price comparisons is that Canada tends to rank poorly on price and... okay to above average on quality and deployment.

208 And that is really consistent, with, I think, the other evidence in this hearing.

209 So, maybe even if you don't want to put a ton of weight on those international price comparisons as a stand‑alone piece of evidence, I think seen the context of everything else, it does seem to line up.

210 THE CHAIRPERSON: Okay. Thank you for that. I think the Panel finds your presentation very interesting and wants to continue the discussion.

211 So, I'm going to go back to Commissioner Naidoo and then we will go back to Commissioner Desmond. Thank you.

212 COMMISSIONER NAIDOO: Thank you very much.

213 So, you stated that you expect the wholesale‑based competitors will be most successful in gaining market share in markets or market segments where they are able to offer the lowest prices... retail prices.

214 So, the question I wanted to ask is how sustainable is it, in your view, for smaller wholesale‑based ISPs to compete with larger incumbents on prices alone?

215 MR. PARSON: That's a great question. I think at a high level it would come down to their ability to offer said lower prices relative to the incumbents over time. And so, I think that that... that may be kind of a question with regards to the precise determination of wholesale rates and costs, and also, on the other side, a consideration of the pricing levels and the market.

216 MR. JAKUBOWSKI: If I could just add to that. One of the things that came out of the broadband study that we did in 2019 was that price is a very important factor for consumers, obviously, but there are also other factors that they value... you know, customer service or the specific plans, and things like that.

217 So, you know, even in cases where maybe the price is not the most attractive there could be other features of that offer that are attractive for some customers and that would be, I think, a valuable benefit of the wholesale access system.

218 COMMISSIONER NAIDOO: Thank you. Still on the same topic, is an arbitrage model good for competition in the long run, do you think? And what are the long‑term prospects for this type of business model?

219 MR. JAKUBOWSKI: I don't think we know the long‑term prospects for this business model, but coming back to some of the benefits of competition that my colleague pointed out; you know, in some sense maybe we don't need to know, we can just put the option out there and let customers make these choices, and those choices are kind of filling in the information that we maybe don't have.

220 So, you know, we can find out, basically.

221 COMMISSIONER NAIDOO: Thank you. I also wanted to take the opportunity to just get some clarification on something.

222 You had talked earlier about what happens when incumbents use wholesale access to compete outside of their service areas, but you used a couple of terms I just wanted to ask you about, that I'm not really familiar with.

223 One was 'multi‑market contact' and the other was 'coordinated effects,' and I'm wondering if you can explain a little bit more about what you meant by that.

224 MR. JAKUBOWSKI: It's a very good question and it may be a little difficult to fully explain, 'coordinated effects,' but I will give it a shot.

225 It is... you know, when firms are kind of not acting independently, so there is something more than independent behaviour on the part of companies that are normally independent entities, and it is basically if they are acting in the best interests of the group of the firm, as opposed to their individual firm.

226 So, one way of thinking about it would be if you imagine the kind of coordinating firms which is one firm, if they had merged or they had kind of made some sort of agreement, without the agreement they would have... they would have independently... you know, somehow come to this understanding.

227 So, that's the coordination sense of it, it... we're exactly...

228 COMMISSIONER NAIDOO: That's the coordinated effects, that you were referring to? Right.

229 MR. JAKUBOWSKI: Yes, the coordinated effects would be the difference between firms acting independently and in a coordinated manner. That is... you know, by coordinating they would be internalising... or lessening the competition between them, and the effect of that would be the... what we call the 'coordinated effects'.

230 And then, 'multi‑market contact' is a way in which it can be easier for firms to reach a coordinated understanding, and essentially, by operating in multiple markets it gives them more options to find a workable arrangement where that could coordinate on...

231 So, it may be easier to coordinate with multi‑market contact then without it.

232 COMMISSIONER NAIDOO: All right. Thank you very much.

233 THE CHAIRPERSON: Thank you, Commissioner Naidoo, thank you. Let's go to Commissioner Desmond.

234 COMMISSIONER DESMOND: Thank you. I just had a couple of follow‑up questions.

235 You did have a conversation with our Chair and our Vice‑Chair about what has been happening with the competitors being acquired by incumbents, and you talked about your framework for review.

236 But I'm curious if you could give a sense of what a healthy market does look like, what would indicate a healthy competitive wireline marketplace?

237 MR. PARSON: So, I think, in our view, a healthy competitive wireline marketplace would see competition occurring across both horizons, so competition... you know, in the short‑term, both across price and service, as well as continued competition over the long run, in terms of continued optimal investment...

238 You know, I know we recognize that that... it is somewhat of a general answer and in our view, you know, that kind of... the way to go about kind of ensuring that outcome is by monitoring the different indicators of those short and long‑run competition, as we have proposed in our October submission.

239 COMMISSIONER DESMOND: Can you speak to why we’ve not seen new wholesale ISP entrants in the last few years? I mean, do we have or have we not had a healthy market?

240 MR. PARSON: I don't think we have information directly on the point as to why we haven’t seen any entry. You know, I think the degree of entry and exit in a market is something that is worthy of consideration when considering the amount of competition in that region. But, unfortunately, I don’t think that we have the direct information in this particular market.

241 COMMISSIONER DESMOND: I just have one other question here. We’ve been talking about mandated access to FTTP and the risk to investment. But what, if any, risks to you see if the Commission were to discontinue mandated access to FTTN?

242 MR. PARSON: Just to confirm I understand. As part of a transition to another type of network?

243 COMMISSIONER DESMOND: Yes, as part of the entire transition period.

244 MR. PARSON: That's a great question. I think, you know, I don’t think we have any direct information on this point. I think from a theoretical consideration, you know, we anticipate that a transition program would have to take place and would have to ensure that the transition between network types was smooth. But I think, unfortunately, we don’t have any precise information on that.

245 COMMISSIONER DESMOND: Okay, thank you.

246 THE CHAIRPERSON: Thanks very much. Let’s go back to the Vice‑Chair.

247 VICE‑CHAIRPERSON SCOTT: A couple of follow‑up questions on ‑‑ well, really just drawing from your written submissions.

248 So you had indicated that effective wholesale access to FTTP networks should encourage network investments by both the incumbent and the wholesaler.

249 Could you clarify some thoughts on ‑‑ so this is definitely an argument we used to hear a lot in the disaggregated model, kind of a ladder of investment concept. Is that what you had in mind when you were talking about investments by the small ISP in the context of wholesalers, or is there something else there?

250 MR. JAKUBOWSKI: I think what we were referring to there is investments by the third‑party fibre companies, so the small ISPs who are building their own fibre, the sort of MDU‑type investments.

251 VICE‑CHAIRPERSON SCOTT: Okay. So in that case, do you have any recommendations on measures we could take that would encourage that type of facilities‑based investment by a non‑traditional fibre deployment company, if we can call it that?

252 MR. PARSON: I think it really comes down to a question about the determination of the wholesale costing. And I think, you know, kind of within that context I don’t think we have any precise recommendations on that point. We understand that rates are cost‑based.

253 I think, just further to that point, you know, I think keeping an eye through an increased monitoring framework, both on the price as well as the long‑run indicators, including by those third‑party companies, could be an appropriate way to just kind of ensure that that balance is being struck.

254 VICE‑CHAIRPERSON SCOTT: Is there a threshold below which we should not bother implementing the wholesale framework. Is there a magic number when somebody gets to a certain size wholesale becomes an important contributor? Are we really just talking about a handful of the largest companies that ought to be subjected to a wholesale framework?

255 MR. PARSON: I think that in terms of the idea of... Do you mean kind of with regards to a third network operator?

256 VICE‑CHAIRPERSON SCOTT: That's correct. So you’re talking about, you know, incentivizing investments for those independent third‑network operators. At what point ought they be captured within a wholesale framework?

257 MR. PARSON: Yes, absolutely. I think that, you know, from our perspective we typically look at markets from the perspective of the end user or the house and, you know, recognize that that’s not really a workable standard to make policy from.

258 But, you know, I think that we don’t have precise information about the line within which it’s appropriate to regulate or not regulate a company. I think that that’s kind of part of a broader policy question. And we understand that you currently have a process by which you select which companies the benefits of having mandated wholesale access would outweigh the costs.

259 VICE‑CHAIRPERSON SCOTT: Okay, thank you. Last question for me, again.

260 So another line from your submission you said that low market share of the wholesale‑based carriers does not mean that competition is lacking. Instead, it may be the result of competitive pricing by facilities‑based carriers. Which also got me thinking about this notion of what’s good for consumers may not necessarily overlap completely with what’s good for the wholesale ‑‑ you know, the independent ISPs.

261 Could you just talk a little bit in that space, like benefits of competition that aren’t necessarily measured in percentage of the market captured by competitive ISPs?

262 MR. PARSON: Yes, that's a great question. I think from our perspective, you know, we did mention that wholesale‑based competitor market share isn’t the only indicator of the degree of competition within a region.

263 I think when thinking about the framework I think we also suggested there that it’s plausible that even in areas where wholesale‑based competitors don’t necessarily have a high market share it’s plausible that the wholesale access framework itself could be influencing the incentives to compete by the firms who provide that mandated service.

264 So I think from our perspective that could be a positive outcome of the wholesale access framework itself even in areas where that doesn’t necessarily lead to a high penetration of wholesale‑based competitors themselves.

265 VICE‑CHAIRPERSON SCOTT: Is that just kind of the threat of competition exerting discipline or is there something more to it than that?

266 MR. PARSON: I think it would be in terms of the wholesale access framework providing ‑‑ you know, I think you could refer to it as the threat of competition. I think kind of generally just, you know, the prospect that a firm could come in and compete on those terms and conditions may, you know, create incentives to compete on terms better than those.

267 VICE‑CHARI SCOTT: Thank you.

268 THE CHAIRPERSON: Okay. We're going to go back to Commissioner Naidoo for the last questions, for real this time.

269 COMMISSIONER NAIDOO: I'm wondering about are the recent acquisitions, in your view, a sign of the wholesale regime failing, or do you think that they’re a sign of a healthy market?

270 MS. SONLEY: I think, beyond what we’ve already said, the question is sort of, from our perspective, assessed on an acquisition by acquisition basis, assessing whether that transaction will result in a substantial lessening or prevention of competition.

271 So I can’t really speak to whether the pattern is troublesome in and of itself. That is something that we do consider under our abuse of dominance provisions as well.

272 I don’t know if Krista wanted to comment under that test as well?

273 MS. McWHINNIE: Sure, happy to. So while the merger framework looks at each individual transaction, we could also, if there was a pattern of acquisitions by either a dominant player or a group of jointly dominant players that could, depending on the circumstances, be captured by the abuse of dominance framework, or if you wanted to look at a concern related to acquisitions in addition to other anti‑competitive conduct, that could be looked at as well.

274 MR. JAKUBOWSKI: If I could add. One of the main kind of points we wanted to highlight from our findings is this trend that the wholesale‑based competitors are losing share on the ILEC network operator types, but not on the cable operators.

275 And so that is, you know, one indication to us that maybe what’s going on is something with the business on the ILEC side of things as opposed to something generally affecting wholesale‑based competition. And part of the reason that, you know, our main recommendation is more effective access to the FTTP networks.

276 COMMISSIONER NAIDOO: Thank you for that. Reading through the interventions it’s come up over and over again the topic of bundling. So I wanted to just address that. I wanted to see what your thoughts were.

277 Obviously, many providers do bundle their broadband internet services with other services, including cellular services. How important do you think that that type of bundling is to competition?

278 MR. PARSON: I think that it is relevant, it’s definitely relevant. And I say that based on our 2018 broadband study where we did conduct a consumer analysis about what consumers considered when purchasing internet services. And I believe one of the key takeaways from that was that consumers did like buying bundles.

279 So I think that kind of being the first part of the answer. But I think that it really will ultimately, the impact of bundling on competition, comes down to consumer preferences overall; namely, whether a consumer preference to buy multiple services together is strict enough to, you know, ultimately deter them from purchasing those same services from different providers.

280 COMMISSIONER NAIDOO: All right, thank you very much. That’s all I have. Thank you.

281 THE CHAIRPERSON: Okay, great. Thank you so much. Thank you for answering our many many questions.

282 We would like to give you the last word. So if there are any key messages that you would like to leave with the panel or if there’s something that we didn’t get a chance to talk about during our discussion, now would be a good time to raise those.

283 Thank you.

284 MS. McWHINNIE: Thank you very much for your questions and for the good discussion. I think we’ve hit on all the key messages from my perspective. But I’ll just see if my colleagues have anything to add.

285 All right. Then I’ll just say thank you again for the opportunity to take part in this.

286 THE CHAIRPERSON: Thank you so much to the Competition Bureau for being here.

287 THE SECRETARY: Thank you. We will now take a break and resume at 10:40 a.m.

‑‑‑ Suspension à 10 h 24

‑‑‑ Reprise à 10 h 41

288 THE SECRETARY: Welcome back.

289 J'invite maintenant Vaxination Informatique à faire leur présentation. Merci.

Presentation

290 MR. MEZEI: Bonjour. My name is Jean‑Francois Mezei, of Vaxination Informatique. I’m here in this unceded territory because I have DSL, and my upload isn’t high enough for me to do Zoom reliably. There’s impact to consumers.

291 It’s been 14 years since incumbents started to deploy FTTP, 14. It’s been nine years since 2015‑326. We have yet to get any benefits from that.

292 FTTP and DSL are layer 2 services, and that offers ISPs additional capabilities such as fixed IP address, no blocked parts, services to small business, et cetera.

293 Now, in the current climate, with ISPs dying by the week, we can’t choose another ISP because we don’t know which one’s going to be alive. We need clarity. If you’re subscribed to an incumbent or a flanker brand, you can’t move to an independent ISP because they have lower speeds. So for competition to work, you know, consumers need to be able to switch ISPs without losing their service.

294 To implement the 2006 policy direction there was what was called the ADSL CO proceeding, 2009‑261, which looked disaggregation as well as matching speeds. Now, despite the 2006 policy direction, the 2010‑632 decision reluctantly had to admit that ISPs were needed to prevent formation of duopoly. ISPs needed access to matching speeds to compete, and ISPs needed aggregated access on cable because, at the time, they didn’t.

295 Today, the same issues remain valid. The 2015‑326 decision killed off aggregated with the hopes a non‑existent disaggregated system would emerge. Souring the aggregated milk when there’s no viable alternative, means death.

296 Now, whenever incumbents deviate from the behaviour of a structurally separate entity regulation is necessary to ensure no undue preference is given to their own retail operation. It’s a predatory tactic to needlessly pay to prolong the copper so it can be used as a prison for ISPs where they will die, and that’s what’s been happening.

297 It’s a predatory tactic for Bell Canada to offer full retail service at a price that’s lower than the access rate, which is just one of may components of a retail service. Now, it’s either overstating its cost to you in order to ensure wholesalers are competitive or, if these costs are actually honest, it’s selling below cost in order to hurt the competitors. It’s clear the incumbents have strayed from the behaviour of a structurally separated environment.

298 Incumbents may be able to say, oh, we’ll negotiate rates, and they’ll negotiate only with other incumbents because only other incumbents have leverage.

299 There’s something called conscious parallelism. And if you have only incumbents left because only incumbents will have leverage to negotiate rates, conscious parallelism means that you know someone else will raise its prices if you raise your own, and we see this in mobile all the time.

300 Specifically, the ONT, Bell I just learned now has embedded it into the access rates, which boost the access rates to make ISPs non‑competitive. Bell has an ONT that’s a combo; it’s got the ONT itself, it’s got a router, it’s got the telephone ETA, and it’s got a UPS. Now, that’s part if its retail offering.

301 ISPs need to be able to differentiate their offering, and they need to be able to choose their router and all of the other things that are not specific. The ONT can be as small as what is called an SFP module, which can cost around $100. I’ve seen some on eBay at $5 but, you know, I guess that’s not the real one. But, you know, you see the quantum of difference.

302 An expensive ONT that’s perpetually rented prevents an ISP from offering a sign‑up bonus which Bell, in its recent filing, says they should do. You can’t do this, you have to pay this every month. And it’s not just unreasonable to pay for that over and over and over again, especially if it’s a cheap device at $100.

303 In terms of investment all forms of investment include more than just the incumbents. ISPs invest in their own facilities. They’re not resellers no matter what the incumbents say. And there’s a large ecosystem behind it, including carrier hotels, transit providers that you don’t regulate, and you don’t regulate because they’re competitive. There’s a whole ecosystem behind this that also invests if you call the ISPs a whole bunch of stuff below that, and you need to consider this.

304 Lastly, for the incumbent to pay extra to keep copper alive longer than necessary means that money is not going to the incumbents investment. So, in essence, prolonging the current situation reduced the incumbent's investment because it wastes money on cooper. And on this, thank you.

305 Oh, sorry ‑‑ I can answer your question ‑‑ your question in French or anglais.

306 THE CHAIRPERSON: Thank you very much. Thank you for your presentation this morning, and thank you for participating in the proceeding. So, the panel does have some questions, and then we will give you an opportunity at the end for any closing ‑‑

307 MR. MEZEI: Okay.

308 THE CHAIRPERSON:  ‑‑ remarks.

309 So, we will start the questioning with Commissioner Desmond. Thank you.

310 COMMISSIONER DESMOND: Good morning. Thank you for being here.

311 You talk about the benefits of an aggregated framework. So, I am curious if you could expand a little bit more on what you see the benefits are to consumers, to ISPs, to incumbents? What are the benefits, and why would we go forward with mandating an aggregated framework?

312 MR. MEZEI: Going back to the 632 decision ‑‑ all that debate ‑‑ it was the ISPs that required aggregation because they were having so many problems with Rogers. One of the problems is, when you have multiple links to each of the POIs, if you have growth, a lot of people signing up in the neighbourhood, all of a sudden that link becomes overwhelmed, and then you have to place the order, and it takes three months for the incumbent to actually do the upgrade, and you get all the fees, and they have to do this constantly, to adapt each, as sales go on.

313 When you have the aggregated model, you have a bulk purchase of capacity, so a promotion in one neighbourhood that gets a lot of people won't require so much finagling and ‑‑ and order processing.

314 For the consumer, when this aggregated came out, in one of my submission back in my previous life, I mentioned as a consumer, I need to be able to know whether my ISP has a point of presence in the CO that serves me, and many people don't know which CO serves them. And it's impossible to know. So, how is it ‑‑ how is an ISP going to tell its customers, ‘Yes, you’re allowed ‑‑ because you live there, you're allowed a certain price, but if you live two doors down, because you're plugged into a different CO, you have to pay a higher price’? The confusion from this ‑‑ the aggregated model is the simplest.

315 Now, in the current environment, where ISPs are struggling after nine years of ‑‑ of bad policy, essentially ‑‑ bad rates ‑‑ they need a boost, and they need a boost quickly. And aggregated is the fastest way right now, and the simplest because it's there and it's just a question of fixing the CBB rates, and all of a sudden they can go ‑‑ they can move forward.

316 COMMISSIONER DESMOND: Okay, thank you.

317 You talk about how ISPs are not resellers, and you mentioned that ‑‑ you said that in your reply comments, and ‑‑

318 MR. MEZEI: Yeah.

319 COMMISSIONER DESMOND:  ‑‑ you mentioned it again this morning. And you spoke this morning specifically about how there is a whole range of investments behind ISPs, but I am curious if you can speak a bit more in terms of how they are not resellers from the consumer's perspective. How would they differentiate themselves, if we were to have an aggregated model?

320 MR. MEZEI: In my case, one of the reasons I'm stuck with one megabit upload is because I'm on DSL because of layer 2, and when I signed up with my ISP, EBOX, which is now a flanker, which is why I need to find another alternative ‑‑ when I signed up with them, they gave me a fixed IP address, reversed IP translation, because they were small. I found out later they had less than a thousand customers (laughs) when I signed up, and they wanted the business. So, they gave me all these features, which I now stand to lose when Bell starts to, you know, congregate all of this into its own operations.

321 ISPs are able to do a lot around just the pipe ‑‑ the ends, essentially. ISPs generally have better transit to the internet than Bell or Telus or the other ones, and they have multiple choices. So, if I want to connect to another Canadian site with an independent ISP, I am more likely to stay in Canada. But if you're with Bell, they'll go to New York or ‑‑ that’s where their main connection to the internet is, and then back to Canada via Chicago or something.

322 And ISPs will play. And there's ‑‑ there's a whole bunch of range of how much capacity they buy per customer, which impacts the quality of service you get. And some ISPs can offer you a much lower rate with much higher contention, which means your performance isn't as good, and some other ISPs will do better. I mean, there’s a lot of nuance in what ISPs can do outside of that pipe that's provided by the incumbent.

323 COMMISSIONER DESMOND: Okay, thank you.

324 As you have pointed out, it has been a difficult perhaps nine years, maybe, for the smaller ISPs. If the Commission were to mandate aggregated FTTP service, how long would it take, in your view, for the market to start to grow again, to start to rebound?

325 MR. MEZEI: Assuming the CBB rates are set properly, because that's also one of the reasons you ask to the ‑‑ why don’t people sign up to the higher speeds? The higher speeds are far more sensitive to the CBB rate. Now, assuming all the rates are set properly, I think it'd be ‑‑ for the ISPs that remain, it'd be fairly quick, because the investment for them ‑‑ I know this is not going to sound very good here at the CRTC talking about investment's going to be lower, but because of their current state, the ability to jump‑start the ISP business by making it easy to grow again and compete, I think is very important. And you can look at investment from the ISPs' point of view later on, maybe 10 years from now, but how quickly ‑‑ I think if ‑‑ if the incumbent were to allow FTTP tomorrow, I have a plug in my appointment; I'll place the order right away to my ISP. I mean, it could be very quick.

326 Now, obviously the incumbents will slow this down because their plan is to delay, delay, delay ‑‑ what's being said about a former U.S. president. That's exactly what they've been doing, and I remember at the 511 hearing, which led to 326 decision, Bell was asking for five years. It got nine. And that's assuming this year is a year that it's forced to do wholesale.

327 COMMISSIONER DESMOND: So, you mentioned that those ISPs that remain could fairly quickly compete. Do you see new companies competing as well? Do you see new start‑ups? How much time would be required for new start‑ups to get into the market and actually offer competition?

328 MR. MEZEI: That's a good question. I think it's a slow business because if you're going to start an ISP, you have to look ‑‑ what can I offer that the others don't have? Are the rates competitive? How much business can I steal from Bell, Vidéotron, Rogers, and Eastlink, et cetera? It all depends on the rates.

329 You may see mom and pop shops start off like my ISP, which is now a Bell brand. EBOX ‑‑ basically, they were working out of ‑‑ one was in his kitchen; the other was ‑‑ one was in Sherbrooke; the other was in Québec City, and that's how they got started. And they grew into something ‑‑ I can't remember what the actual number is, but at one point they had over 30,000 customers.

330 So, yes, it's possible, and I think if the rates are good you can see some new starts, but I don't think anyone can promise. It's up to the market to decide, you know, what's going to happen. It also depends if the remaining ISPs ‑‑ how quickly they can get back to their feet and start advertising and get customers again.

331 COMMISSIONER DESMOND: Okay, thank you.

332 Earlier this morning we heard from the Competition Bureau, and they identified that in their study they have seen some regional differences. I am curious if you ‑‑ in your view, do you think there are differences in each region, and what the impact is of that?

333 MR. MEZEI: There's differences in terms of the wholesale system. In 2009, 2011, we had the great UBB war here in Quebec and Ontario, which we won ‑‑ yay! And by the way, if we hadn't, you would still be stuck with 20‑gig limits on the incumbents because it was ‑‑ the forcing ‑‑ the wholesale ISPs, once UBB was struck down, were able to raise the limits and provide services, and then the incumbents had to follow. It's one of the rare times in Canada where incumbents had to follow the ISPs. So, you can see there is potential for true competition there. It's ‑‑ a new ISP may start, but, you know, you can’t promise. It’s up to them. But it depends on the rates that you set.

334 COMMISSIONER DESMOND: So, in terms of regional differences, ‑‑

335 MR. MEZEI: Oh, sorry.

336 COMMISSIONER DESMOND: Yeah.

337 MR. MEZEI: Yeah, okay. Okay, that's where ‑‑ sorry; I got sidetracked.

338 In B.C./Alberta, the CRTC retained their old fixed‑pricing model, whereas the CBB model in Quebec and Ontario allowed a lot greater flexibility from the ISPs, and better cost, and it was more attractive. And I think that’s one of the cases. There’s also, I think, more business ‑‑ more people here, so you get a greater potential for market. If you start off as a small ISP on a population of one million versus a population of 20 million, or 15 million ‑‑ whatever Quebec/Ontario are ‑‑ your market potential is a lot smaller. So, you need much better help.

339 The other aspect is the bundle. And ‑‑ and I’ll ‑‑ maybe you had a question already, but I'll just insert that because it’s an important aspect. For an independent ISP who is not allowed to have mobile phones, not ‑‑ you know, can’t have legacy linear TV BDU now ‑‑ but if you’re not allowed to have mobile phone, you need to be able to beat the bundled price from the incumbent to get your customers ‑‑ not just the advertised price. So, when Bell advertises $50 for internet, but $45 in a bundle, the ISP needs to beat that 45. So, again it all comes back on the pricing that you set. To make it attractive for ISPs as a business, they need to be able to be successful.

340 COMMISSIONER DESMOND: We have seen where the wholesale‑based competitors have in the last few years been selling the slower speeds. Can you comment on that? Do you think that they are focusing on lower speeds as a way to differentiate themselves? Is that a way to be kind of a unique service?

341 MR. MEZEI: No. They'd love ‑‑ I mean, I'd love to get higher speed, but I'm stuck on 15.1 because VDSL2, where I live, didn't work. It was unreliable; it kept going down all the time. And from the ISP point of view, the CBB rates were so high because you guys didn't implement 2019‑288, and now it's five years later and, you know, we're stuck basically at the same rates when they should be going down.

342 To be competitive, you ‑‑ the rates ‑‑ the wholesale rates have to follow the industry, and the CBB is very, very sensitive to that because when you raise the speeds, you get a lot more CBB. And, you know, just for fun, calculate how much 1 gigabit of CBB is at $100 per ‑‑ a‑hundred‑and‑whatever dollars per 100 megabits is. It's 10 times. It’s $1,000. So, if I were to subscribe to 1‑gigabit service on FTTP, and the ISP would have to pay $1000 for me, it wouldn't be able to compete. Right?

343 Now, obviously there's contention and ‑‑ and they don't actually buy at 1 gigabit per customer, but you see the point that I make, that the more people subscribe to the higher speeds, the much more they spend on CBB. And you know, the access rate is just one component. CBB is a huge revenue stream for the incumbent ‑‑ or incumbents. And you shouldn’t disregard that. And when you lower the rate, the ISPs will buy more. So, the revenue ends up, you know, being more or less neutral ‑‑ or positive for the incumbent.

344 COMMISSIONER DESMOND: I'm not sure if you have had the opportunity to review the submission that was filed by Bell, but they have suggested that some of the recent acquisitions of wholesale‑based providers really isn't a reflection of a lack of competition; it's more a reflection of the fact that these smaller ISPs have value and they are purchasing these companies as proof of their value, and not because there's a lack of competition in the marketplace.

345 MR. MEZEI: No, they were failing. Someone who has worked to build his ISP with his ‑‑ with his buddy wouldn't sell out after having grown so much and being such a big success unless they were about to fail. So, I'm sorry, but this isn't about competition; this is about the ISPs failing.

346 And I think you're going to hear from them later this week, and I hope they make the same cry, because I've seen this. I'm ‑‑ look, I'm ‑‑ I'm trying to find an ISP, and first of all, EBOX didn’t tell me they got bought by Bell; I found out about it in the media. And I found out in the media that Bell was planning to aggregate all their operations. I didn't find it out from EBOX.

347 ISPs that remain ‑‑ they need to have ‑‑ hopefully this week from you, an indication that you're going to do something to save them. This is to save competition. This is far more dire than just, ‘Oh, Bell is ‑‑ is successfully buying successful ISPs.’ No. And at the end of the day, when all the major ISPs are gone, all that's left is going to be the flanker brands and the other incumbents coming in with their flanker brands. And incumbents ‑‑ they have the conscious parallelism and they pretend it's all competition, but it's not.

348 COMMISSIONER DESMOND: Okay, thank you.

349 You've talked about the importance of pricing and making sure that the price is set correctly to allow the survival of some of the smaller players. We've also talked this morning about promotional pricing and whether, when we see the incumbents lower prices to make prices more attractive to consumers, they are in fact trying to encourage competition and allowing prices to come down. Incumbents have argued that that type of approach is actually indicative of a strong, competitive market, and that it benefits consumers.

350 Do you think that we should be mindful of promotional retail pricing and recognize that as a good practice for consumers?

351 MR. MEZEI: Context matters. When ISPs are no longer able to compete because their wholesale prices are higher than what Bell and the others are charging, and where they're falling by the wayside, one by one, this becomes predatory. And when you look also at the way that Bell has refused to allow ISPs to go on FTTP, where, you know, they could stay alive and compete ‑‑ this is also predatory. I mean, I'm stuck on DSL because I have these special inherited features, and if I didn't need that, I'd  ‑‑ I'd be gone. You know?

352 But the ‑‑ the predatory nature of keeping ISPs ‑‑ and look, I'll give you an even more specific of how predatory this is. For years, I've complained about my speeds. And I tried VDSL2; it kept going down. I have had Bell repairmen come in. Serving my house ‑‑ or my apartment building are two DSLAMs, a 7330 from Alcatel and the old Stingers from Lucent. These were discontinued in 2005, and Bell kept installing them till 2012. And those are the ones that need those special custom modems because they don't actually support VDSL2. I was stuck on that. And I asked Bell ‑‑ the actual repairmen that come in ‑‑ “Can you move me to the 7330?” “No, that's for Bell only. Bell customers only.” And I said, “Yeah, but I can't get the promised speeds that I get. Can't you move” ‑‑ “No, that's for Bell only.”

353 And I wrote to the CRTC years ago, and Bell responded, “That's not our policy,” but then another visit ‑‑ same thing again. And lo and behold, EBOX got bought by Bell, and I get moved to a 7330. Now, I could upgrade to VDSL, but since I might have to leave, what's the point? Because if I leave, I'll be moved back to the Stinger, and so, right now, that's why I'm a little angry at you guys, because I'm waiting, stuck for nine years waiting for a promised service, and I'm stuck with that lousy service with that.

354 So, I'm sorry if I'm longwinded on this, because we are impacted by this ‑‑ the consumers are impacted by this with lousy service because we want to help competition. And we see how the incumbents are purposefully and systematically always ‑‑ and over the years ‑‑ I've been around; my first submission to the CRTC was 2008, and Bell was calling ISPs ‘resellers’ back then as well, in order to say, you know, “If we charge UBB, they are just resellers; they charge UBB too.” They’ve been at this all the time, to try to prevent the competition.

355 And when you see that trend, and you see the type of rhetoric that the incumbents use, you can read between the lines, and you see this. So, I ‑‑ it's ‑‑ you know, it's really predatory, the way they've been treated ‑‑ the ISPs right now ‑‑ it's very predatory. I'm sorry, but that ‑‑ it's the only view I can get.

356 COMMISSIONER DESMOND: No, and I appreciate you sharing your views, and it's important that we hear from consumers like yourself. It brings a valuable perspective. I think that the challenge is trying to balance competition with affordability. Right? I mean, what we're hearing from incumbents is that prices are becoming more affordable as a result of a health competitive market. I think you're focusing on competition and the need for competition. How do we balance that with providing affordable prices for consumers?

357 MR. MEZEI: Okay. Well, the current rate ‑‑ the access rate for DSL, VDSL is around $23.75 or something like that. How much does Bell want to charge for FTTP? Now, FTTP is replacing ‑‑ and Bell finally admitted it in a recent reply ‑‑ finally admitted it's actually replacing copper with FTTP, which means all the speeds are going to be served by FTTP. This isn't going to be low speeds on copper and high speeds on fibre. It's going to be all the speeds on fibre. And that means your rates on fibre have to be able to be competitive and affordable for both the low speed and the high speed ‑‑ but more importantly, the low speed. So, that $23.75 that we currently have for DSL ‑‑ it should remain the same for fibre.

358 And if ‑‑ you know, and the reason I mention the ONT ‑‑ I don’t have access to the numbers because they're all hashed out ‑‑ I've got my section 39 tie here, full of hashtags. They're all hashtagged, and I can't see them, but I can just see Bell ‑‑ the way to justify that very high monthly access rate is to bundle ‑‑ they said the access loop is bundled into this ‑‑ the cost of the access loop and the cost of the ONT. Now, you pay the ONT every month ‑‑ your monthly rate's going to be higher. And you can't compete when Bell offers the same thing at 50 bucks and when the access rate only is what ‑‑ 75 or whatever it is this week. That's where the rates matter.

359 And you know, you’re going to make Bell mad. It's going to have its temper tantrum and, you know, we've seen this. I've been around. I'm sure you’ve got all the stories. They'll threaten to cut employees, they'll threaten to cut investment. But guess what? Investment was already planned to be cut. They knew, you know, because they're ‑‑ they're getting to the end of the FTTP roll‑out, so they’re slowing it down. And if needed, they’re going to increase it again. They can't go to their shareholders and say, “We're going to reduce our profits because we have a temper tantrum with the CRTC.” They need to continue investor remain profitable and grow.

360 And you know, you have to take the threats not as a binary thing. There's a grey area in between that you have to understand, that they're playing games, and they know that in policy direction there's the word ‘investment’, and they're playing with this. But if you look at the greater picture, you have to go back to them and say, “Look, the alternative is we regulate your retail rates, because the wholesale is dying.” Right? And without wholesale, you have to go back to regulating retail rates like you did back in the old days. You got to give them that ultimatum because that's the choice that exists. Either you have affordable wholesale ‑‑ and to have affordable wholesale, you get the temper tantrum for two weeks and then they go on and do their job. You know? You have to stand up to them. As a consumer, as a citizen, I'm ‑‑ you have to stand up to them. Please. And I beg you.

361 COMMISSIONER DESMOND: And we will be hearing from them later this week for sure, ‑‑

362 MR. MEZEI: Yeah.

363 COMMISSIONER DESMOND:  ‑‑ and I am confident they will have other views on some of the things that you have shared with us this morning.

364 If we could just go back to the copper issue for a moment, because you have said this, this morning, and I know you made mention of it in your reply as well, that maintaining the copper networks in parallel with FTTP would be inefficient and not affordable. And I think in your reply comments you say that it's simply being kept alive as a strategy to negatively impact the ISPs. I'm wondering if you can just speak a little bit more about why you think that maintaining that copper network ‑‑ I mean and particularly in some of the areas where FTTP has not been rolled out ‑‑ is predatory or anti‑competitive.

365 MR. MEZEI: Okay. Where FTTP has not been rolled out, that not an issue. Obviously, you can't just shut down the copper because it's your only source of revenue.

366 But the whole goal of FTTP is to replace copper. And I remember listening to a Bell analyst conference to the shareholders where their CFO ‑‑ I think it was 2016 or 2017 ‑‑ their CFO, Glen C. LeBlanc at the time, promised euphoric savings when they shut down copper.

367 Now, a year before, they told you in your face ‑‑ well, not you, but the Commission ‑‑ that they had no plans to shut down copper. And that was the premise by which 2016‑325 kept copper on aggregated because they figured, you know, if they're not shutting down copper, it's not changing the big picture, right, because the existing system can remain. And they go tell their shareholders the exact opposite.

368 Now, this year, in these filings, they finally admit, yes, they're shutting down copper. But every FTTP telco around the world, the goal is to reduce the cost. Because FTTP costs a whole lot less to maintain. And in one of the Bell submissions, it mentions the cost of stringing all the cables. They don't mention ‑‑ and you know, the cost of installing those FTTN DSLAMs on the street corners.

369 And that was made interesting in Australia when they did the NBN, and then a new prime minister came in and put the wrecking ball to FTTH and put in DSL instead. They found out the cost just of bringing electricity to the DSLAM on the street corner and everywhere was exorbitant, plus the cost of the electricity, the actual account cost for that.

370 And you know, when you look at the FTTN infrastructure deployed in every street corner ‑‑ except for me, because I'm too far, it's like three blocks away ‑‑ it's a lot of money to invest. The P in GPON is for passive. There is no electricity at all between the central office and the end user. It's just a piece of glass. What Bell calls a CSP, which is the optical splitter, is just a glorified prism that takes one strand and comes out with 32. It's just light.

371 COMMISSIONER DESMOND: I don't want to cut you off, and I know this is really useful and helpful. I just appreciate my colleagues may also have questions, so I don't want to take all of the air time with you.

372 MR. MEZEI: But just to put it very quickly, copper was very expensive to deploy, especially FTTN, and fibre is less expensive to deploy. And yes, it is an investment, they had a capital investment, but that's going to last a lot longer.

373 COMMISSIONER DESMOND: I'm just going to ask you two further questions, and I hope I can keep them relatively straight forward so there's time for others to intervene as well.

374 I think in your view, you're suggesting that we should mandate the FTTP services and that the copper eventually would be declared legacy.

375 MR. MEZEI: Yeah.

376 COMMISSIONER DESMOND: But what then would happen to the lower speeds on cable? Would they also be declared legacy? And in the event that it does, would we phase out the requirement to provide wholesale HSA on the slower speeds?

377 MR. MEZEI: The slower speeds are available on fibre. So it's a non‑issue. You can get any speed on fibre that you want. The same thing with cable. I mean, that's not an issue at all. You don't have to ‑‑ now, you can forebear copper per se, once service is available on fibre. And Bell is able to replicate the full copper offering on its fibre, including telephony.

378 COMMISSIONER DESMOND: Okay. And then just my last question: If the Commission were to go forward and mandate the aggregated service, could you speak to what if any conditions or limitations might apply? I'm sure you've looked at the other interventions, and we've had a whole range of suggestions in terms of limitations and conditions. And I would just like to hear your view on whether or not any of those conditions should be mandated as well.

379 MR. MEZEI: Well, back in 2010, 632 found matching speeds were essential for survival of high speeds.

380 And the market moves. And Bell started with GPON. Now it's with, what do you call, XGS‑PON, and it's going to be another generation in a couple years. You don't want to redo this process every couple years because a new technology is in. Whatever the incumbent offers should be available to wholesale. And there should be no conditions in terms of those speeds.

381 And you know, I have a friend in New Brunswick. His neighbourhood was upgraded, and Bell came in and changed their ONT because they were upgrading the OLT in the central to a newer version. And he's got XGS‑PON, even though his speeds that he subscribed to, don't require it. But it's what Bell installed there; that's what they're getting.

382 And so you see a whole lot of PR from the incumbents to try to protect the higher speeds with some fancy words. The principle matching speeds should override everything else. And if it's available to the incumbent, it should be available to wholesale at any of the other speeds and priced properly. And you know, so those conditions, especially in the current state of the ISP business, you don't want to put conditions. You want them to flourish. You want them to get back to what they were in 2014 or 2013, when the CRTC thought they were strong enough to build their own networks. You want at that point.

383 COMMISSIONER DESMOND: Thank you very much.

384 THE CHAIRPERSON: Thank you. Thank you, Commissioner Desmond.

385 I'm going to turn things over to our vice‑chair.

386 VICE‑CHAIRPERSON SCOTT: Thank you. So you were pretty blunt in your comments that the ISPs that have been acquired were failing businesses. I would have thought that the greater risk to competition would be if ISPs were acquired as they started to see some success. So what's your theory on the motivation behind acquiring a failing competitor?

387 MR. MEZEI: In the case of Bell, my thinking ‑‑ and I don't have evidence, but it's just looking at the market ‑‑ my thinking is from what's been going on and their blocking of ISPs from FTTP, my thinking is they want to kill off the wholesale ‑‑ and they've begged to do that ‑‑ and then get negotiated rates with their buddies the incumbents and then pretend it's competition. That's my thinking.

388 In terms of ‑‑ and that would also explain why I think ‑‑ was it Telus that bought VMedia? No, sorry, that was Vidéotron. Oxio I think was brought by Telus to start. That does get them a foot in Ontario‑Quebec. And the same thing when Vidéotron bought VMedia, they had a presence, Ontario and Quebec. Ontario is new to Vidéotron, and as well as B.C. and Alberta because VMedia was an ISP there. But it wasn't just that. It was also that VMedia had the TV distribution rights already. So Vidéotron wouldn't have to negotiate new distribution rights as a BDU because that was already there. So it was a nice bundle for them.

389 But you have to ask yourself why is the owner of the ISP, the independent ISP selling if his business is successful, if he sees a bright future. If he's grown a lot and all of a sudden, 2015‑326 comes along and he sees his sales going down and he sees no hope of that getting fixed, and then he gets an offer, well yeah, you sell, you know. And that's ‑‑ the feeling is this is what happened.

390 And for the incumbent, this is good because they reduce competition and they get to their stage where they can pretend there's competition, but it's all incumbent flanker brands. And that's the danger, I think. You really must not let the market become like Mobile was just the incumbents and their little flanker brands that they do pretend competition.

391 THE CHAIRPERSON: Okay, great. Thank you very much. So I would like to thank you on behalf of the Panel. We really appreciate hearing directly from Canadian consumers. So thank you for so passionately sharing your perspectives with us. We would like to give you an opportunity to share any concluding thoughts if there's something we didn't have a chance to cover.

392 MR. MEZEI: Well, I want to thank the secretary for giving me a little leniency on time. It was a big challenge for me to fit everything in.

393 You can do a lot of good, but you need to stand up and don't be afraid of the incumbents. I've been around, and I'm sure you've got the stories, and Mr. Scott has been around too in another job long enough to know that incumbents do this all the time. And in the end, they don't actually cut the investment.

394 And I'll tell you, Ottawa, FTTN, oh yeah, because you guys passed some decision that Bell didn't like, We're cutting investment in Ottawa. And all they did was just they changed the schedule of upgrading to FTTN to do another city before Ottawa. And Ottawa got done, because if it didn't get done, Bell would lose the cable.

395 So take their bluffs as they are. They're just bluffs. So that's ‑‑ I'm sorry to be ‑‑ I'm being an individual. I can be blunt. And so I've been blunt. Thank you.

396 THE CHAIRPERSON: Thank you very much.

397 THE SECRETARY: Thank you. I will now invite OpenMedia and the Public Interest Advocacy Centre to come to the presentation table. When you are ready, please introduce yourself and your colleagues, and you may begin your presentation. Thank you.

Presentation

398 MR. LAWFORD: Thank you, Madam Secretary. Just give me a second, here.

399 It's still morning. Good morning, Madam Chair, Mr. Vice‑Chair, and Commissioners. My name is John Lawford, and I am executive director and general counsel at the Public Interest Advocacy Centre. And with me on my left is Myka Kollmann, PIAC's articling student. Also presenting, on my right, from OpenMedia Engagement Network, is Matt Hatfield, their executive director.

400 PIAC represents the interests of Canadian consumers. We advocate for accessible, affordable, high quality, and reliable telecommunications services for retail customers.

401 OpenMedia is a community‑driven organization that works to keep the Internet open, affordable, and surveillance‑free. OpenMedia operates as a civic engagement platform to educate, engage, and empower Internet users to advance digital rights around the world.

402 Canadian consumers are here to ensure a vibrant marketplace for home Internet access services with choice, affordability, reliability, and higher speeds and innovative services made possible by access to fibre‑to‑the‑home broadband.

403 This hearing is about implementing the 2023 Policy Direction. The Government has spoken. The wholesale and retail market for broadband has already been decimated in the last 18 months by numerous acquisitions of independent ISPs by incumbents.

404 Now, what did the government direct?

405 Firstly, that there will always be wholesale competition, and the Commission must maintain it and keep it up to date. That's section 9. So the Commission must make clear there will be no sunsetting, phase‑out, or trials. Wholesale competition is an integral part of the facilities‑based telecom policy.

406 Secondly, that aggregated wholesale FTTP access will be mandated ‑‑ section 10. Aggregated wholesale access must be offered

407 ‑‑ that's you ‑‑

408 Thus, this is to ensure both large, if they want to, and, very importantly, small and competitive ISPs do not have to divert efforts and money to duplicating transport services, even if they might be capable of doing so. This diktat focuses the Commission on leveraging these competitive ISPs to help lower retail prices and improve service. Wholesale competition is not being promoted for its own sake, but for retail customers.

409 PIAC and OpenMedia submit that due to the presence of disaggregated access and tariffs in the market, and some competitive ISPs that do rely upon them, the Commission can and should mandate both aggregated and disaggregated wholesale FTTP access at reasonable rates for a long and carefully monitored transition period.

410 The Commission must resist all incumbent arguments about inefficient regulation, essentiality, forgone investment and the like and allow the full effect of the 2023 Policy Direction to guide the wholesale market.

411 Matt?

412 MR. HATFIELD: There is no question that aggregated wholesale FTTP access must be mandated. Fibre is the future of Internet access. Consumers want to subscribe to fibre and the higher speeds and reliability it delivers. Functioning effectively in an increasingly virtual business and social environment where many users must access video simultaneously from one access point now depends on that quality of service.

413 Okay, could we get slide 1 up here?

414 OpenMedia performed a survey of our members about fibre broadband and their Internet use, and about 65 per cent of non‑fibre subscribers said that they would likely switch to fibre if it was more affordable. The vast majority of the rest were already on fibre, as you can see in the slide.

415 Now, if you could get slide 2 up now.

416 For current fibre subscribers, 61.38 per cent of respondents indicated they did not have a choice of more than one fibre ISP, yet 60.55 per cent of current fibre subscribers still responded that they want the option to switch providers. Sixty‑three point eight three per cent of current fibre subscribers also indicated the service was too expensive, but they still subscribed as they see it as a basic necessity.

417 Several incumbents have suggested that consumers' demand for competitive ISPs is for low‑speed offerings on older FTTN or copper/coaxial connections. This is not true. Consumers want to move to fibre as soon as they can at an affordable rate, and many consumers have been forced to abandon competitive options to secure the fibre they need. Our members have told us loud and clear that fibre at affordable rates from competitive ISPs is what they want, need, and deserve.

418 Here's Valentin, from Quebec: I have been a client of an independent ISP for over a decade. After the CRTC reversed its pricing decision, many independent ISPs could no longer compete with big telecom discount brands that were offering the services cheaper at very close to the wholesale rates. To add another nail to the competition's coffin, many independent ISPs were bought out by big telecom. In my particular case, a great ISP, Ebox, was bought by Bell. Now, it is just a question of time until the prices start going up significantly and service quality goes down due to lack of competition.

419 And here's Jeff from B.C.:

420 And I have to emphasize that this is not simply consumers who want more for less. It is people struggling to deal with what is often one of their largest mandatory monthly bills, on very limited means.

421 Here's Sandy from B.C.:

422 Please hear the voices of Canadians: they want fibre Internet, now.

423 MR. LAWFORD: We refuse to bow to the threats of the incumbents that they will withhold investment if you mandate aggregated wholesale FTTP. Competition from wholesale‑based competitors and the prospect of savings from retiring older copper and coax networks will cause incumbents to build out FTTP in order to find new customers, sell more services, and save on network maintenance.

424 What the incumbents are doing with their threats of investment withdrawal is twofold: first, maintain their overwhelming market share and power during the switch from copper to fibre; second, ensure super‑normal profits promised to their own creditors, shareholders, and Bay Street and to do this on the backs of their retail customers.

425 I'd like slide 3 put up, please.

426 For example, this, as seen on the third slide, is Bell's expert's effort in its XGS‑PON FTTP tariff proposed to justify a “real option,” a 33.2 per cent wholesale markup above Phase II costs due to the potential wholesale use of Bell's capital for FTTP build.

427 This ‑‑ this is nonsense. The Commission has a mandate to achieve the telecommunications policy objectives and not to return monopoly rent to incumbents. The incumbents are bullying the Commission into using their overheated definition of investment as a trump card that always wins, and they just must be told no.

428 MR. HATFIELD: I must say, I'm astonished this morning that we're even entertaining the possibility that there's a functional competitive market for small ISPs currently.

429 Fewer independent ISPs due to incumbent acquisitions is undeniable evidence of a failed market. Consumers have less choice but want more. And there's lots of reasons for consumers to avoid incumbents. They might be seeking lower prices, better customer service, less upselling, more flexibility, higher caps. Our members tell us this every day, and they see the benefits of the greater competition that exists in many comparable countries all the time, and can't understand why Canada allows this essential service to be made so rigid and inaccessible.

430 Cable hybrid‑fibre‑coaxial is not a substitute for true FTTP. Cable's footprint is vastly smaller than the ILECs, meaning many fewer Canadians will have access to fibre, especially in rural areas, for years to come. Cable cannot get to ILEC speeds ‑‑ now selling at three to eight gigabytes per second, although not from Bell ‑‑ no matter what version of DOCSIS they use. Uploads are highly asymmetrical on DOCSIS technology, so users cannot engage in highly interactive activities. And HFC has many more problems of going down and lower quality of service, including variable speeds. FTTP has consistent bandwidth.

431 MR. LAWFORD: PIAC has proposed that there be no off‑tariff agreements allowed under FTTP access tariffs, and now we also say no to final offer arbitration as a method for setting final rates.

432 PIAC and OpenMedia see the folly and confusion arising from reliance on this method of rate‑setting in the MVNO access situation with all of the Part Is and appeals to the Federal Court of Appeal whenever one party loses ‑‑ which is, by definition, always.

433 MR. HATFIELD: OpenMedia has some other concerns regarding Internet retail pricing.

434 Nearly all of the incumbents have gleefully reported that StatsCan says the price for Internet service in Canada has dropped in the last five years, and so, Look, competition is working and we don't need wholesale competition. This is not true to consumer experience. Consumers are generally paying more for their Internet monthly plans than before. This is evident in the ARPU and profit of the incumbents.

435 Secondly, StatsCan assumes that when you get more data, at least some of that value should be thought of as the price dropping. This is not a fair assumption of what it's actually like to have Internet access. We as consumers expect companies to become more efficient and to pass at least some of those efficiencies on to consumers. Moore's Law also works in telecommunications: we expect more data for the same price or even less. StatsCan does not build in this real‑world expectation that more is justified.

436 It is the price people pay every month to have normal, average service that meets their telecommunications needs that matter and the goods and services some of us must give up to meet that exorbitant bill.

437 Here's Brigitte from Ontario to that point:

438 And here's Andreas from Alberta:

439 Please, listen to what Brigitte, Andreas, and thousands more of our community members have said on the record of this proceeding about what they pay for retail Internet now, and what that means for them.

440 The conclusion is we need more competitors and competition in Internet access services. Wholesale mandated FTTP at reasonable rates is the answer to this problem.

441 MR. LAWFORD: There is still a risk of failure during the transition period to wholesale mandated FTTP access. And during this period, the Commission should provide consumer protection by updating its Codes of Conduct, which is mentioned in the Policy Direction as well, notably, the Internet Code to mirror the Wireless Code, so that, at the least, fixed‑offer contracts over two years have no price increases.

442 In conclusion, we remind the Commission and urge them to follow the Policy Direction and use its statutory authority to impose the conditions necessary to ensure a healthy competitive market and affordable rates to this essential service for consumers.

443 We thank you very much and welcome your questions.

444 THE CHAIRPERSON: Thank you very much. We really appreciate you being here.

445 Maybe I can start where you started, which is to say that you are here to represent Canadians and we really do appreciate you putting consumers' views on the record. On behalf of the Panel I would like to thank you for bringing forward the voices of Valentin, Jeff, Sandy, Brigitte, Andreas and the thousands of others who shared their perspectives, so thank you very much. It is very valuable to hear those directly.

446 So, just maybe as a starting point. I have some things... I know my colleagues have a lot of questions as well, so I will try to get through mine relatively quickly.

447 You talked about Canadians' experiences and what they're looking for. Can you tell us a little bit more, in your own words, why Canadians want more choice in internet providers?

448 MR. LAWFORD: Do you want to start, Matt?

449 We have a sort of underdeveloped internet market, and certainly the wireless market is also this way. Canadians know that when they reach for internet service or wireless service, that really, the market share is huge for the big incumbents and that's the default choice, tons of marketing. They don't see much in terms of small, independent providers.

450 And I think that folks who lived through the dialup era still kind of expect there to be more choice, because they grew up with names that have now been bought, like Star and these other smaller ones, and they're wondering where it went. And, you know, in other markets, you can switch. They're getting more and more frustrated with grocery markets, banking, other services.

451 So, to the extent that all of these large essential services are becoming centralised and reduced into a small oligopoly, it puts a lot of pressure on their budgets, and they're looking for... in this particular cost centre, some way to manage their budget, so that if the internet is less important to them, they can spend less, or if it's more important, then they can spend more. There are times in life when you need more service at home and sometimes less.

452 So, they don't feel they have that flexibility. That's what we're hearing from them... and Matt has stories, I'm sure.

453 MR. HATFIELD: Yeah, you know, speaking to your telecom provider about other wireless for many Canadians is one of the worst consumer experiences you have. It's... consumers don't necessarily bring the competition expertise that the Competition Bureau or even that we would have, but they know when a company has far too much power, relative to them. They can feel it in their interactions with that company.

454 And so, that has been an issue for a very long time, on both sides of the telecom market in Canada, and... but I think we are seeing a moment where people, frankly, have had enough, of kind of cost sectorally in terms of these competition problems in Canada. They're demanding change. We're starting to see some of that change come and I think the policy direction you have received is reflective of what Canadians now expect and it is putting very squarely on you, not that you balance affordability and investment but actually that you prioritize consumer choice and affordability, and welfare.

455 THE CHAIRPERSON: Okay. Thank you for that.

456 So, sticking with affordability; you have seen on the record some interveners have told us that consumers are now getting a lower price per gigabyte, when they buy internet services. At the same time your submissions and I... I mean, in fact, you know, slide 1 this morning went to affordability.

457 But your submissions in June, you had survey results where you said that 78 percent of people said that their internet is less affordable today, overall, than it was in 2019. And I'm just hoping that you can help us reconcile those two.

458 MR. HATFIELD: You know, people's internet needs are developing and changing immensely and so we're coming out of this pandemic, where many of us were working from home from the same connection, and I had family members who had... you know, two or three children and all the adults, all of them using the simultaneous video connection at the same time. That is putting far more pressure on internet than sort of the model of like one household, one connection, one computer accessing services.

459 And so, people are buying the plans that they need to accomplish the things they need to do and as it happens, those plans, yes, do offer many more gigabytes than they did previously, per dollar, but still, the actual cost paid is quite a bit higher, in many cases, than it used to be.

460 MR. LAWFORD: I'll just add... you know, folks are accessing services... more services over their internet connection than ever before. Certainly, broadcasting or streaming services is a big part of that, so they're getting more entertainment, over the top, if you will. And they may well... you know, take bundles and services that they get marketed, because they get used to them.

461 We're... you know, we're in the same dark as you, in terms of retail pricing data. It's not that accessible to us, so we can't... you know, get into the very fine details of why this anomaly appears to be existing, and hopefully... you know, more research, maybe some done by the Commission could help clarify that. We're certainly missing the OECDs and stuff, that used to come out every once in a while, that would be helpful.

462 But, you know, we see people just using the internet in different ways. Matt says, certainly the pandemic amped everybody's needs, and I think that if you just asked people anecdotally, do you spend more on internet, they would be like: Yeah, because we need it now. That's the best answer I can give.

463 MR. HATFIELD: And just briefly, I think the idea put forward earlier that consumers liked bundles; consumers don't like bundles, they are making the best of a bad situation. So, if you've got total digital needs in the $200‑$300 range, yes, you're probably going to take a bundle that cuts that by $20, $30, $50. That doesn't mean that you're enthusiastic about the bundle, that means you're just... you're doing what you can to minimize those huge costs.

464 THE CHAIRPERSON: Thank you for that. The survey that you commissioned from Mainstream Research showed that 83 percent of Canadians say their internet and cell phone bills affect their monthly budget.

465 I'm wondering how we should be thinking about affordability. So, is it price that we should be focusing on? Is it price on something else? And if so, what are the... what is that something else?

466 MR. LAWFORD: Let me start. We have been on this tip for 15 years, affordability is a percentage of your household budget and you shouldn't be getting over 4 to 6 percent for communication services, and that's all communication services, including TV and internet and home phone and cell phones, and if it starts to get more than that then people have to make the tough choices that Matt referred to, where they are... some people in the lower income quintiles are choosing between essential services, and that is a... that's the red line where we say that is not affordable, when you have to take one essential service and cut it in order to afford another one, and different households cut different things, or at different times, to make their budget match it.

467 So, to us, that's the way to define affordability. Don't start talking about price because price is different for everybody and different income brackets and lifestyles. The incumbents want you to talk about price and think household budgeting, control of consumers over their own spending is more important.

468 MR. HATFIELD: And just to add to that. You know, programs like Connecting Families are sometimes used as... well, affordability might not be great for everyone but at least we can make things a bit better for people in some of the most affected demographics.

469 We do not like those kind of options, even though of course we're happy some people benefit, but they tend to trail the actual needs of people, so connecting families 1.0 existed for a number of years and was so visibly and completely inadequate by the time it was replaced. It couldn't possibly meet anyone's reasonable needs. Connecting Families 2.0, at the time it was adopted, was a better program, a more appropriate program, but five years from now I think it may look a lot like Connecting Families 1.0.

470 That's why we prefer competition, because it will continue to drive down in between decisions from the CRTC, price and expand options outside of what is just mandated.

471 THE CHAIRPERSON: Okay, thank you for that. So, PIAC's intervention last June referred to a Bell 1.5 gig package for sale at $75. And some interveners would claim that that is consumers getting a good deal. I think that you have a different perspective on that, so I'm wondering if you could elaborate.

472 MR. LAWFORD: Sure. Well, it looks like a good deal, based on the proposed FTTP tariff for wholesale, for Bell, which is $100 and... whatever it is, plus capacity.

473 The actual costs we can't see, so I don't know. I'm going to suggest that the real problem you have here is whatever the costs are, they have to be carefully scrutinized. But, more the problem is in the markup. So, Bell has whatever it is, in terms of costs, and then they ask for a markup that brings them enough of a wholesale price so that it matches their retail pricing market ‑‑ that's normal ‑‑ and then they discount from that, because it doesn't hurt them. They're just digging into their margin when they need to be... some people call it predatory pricing, so people call it good pricing, it depends if you get it or not.

474 That is the stick they are all beating us all with. So, you have to look at... not only their costs ‑‑ and that's a difficult process ‑‑ but also... like, how much margin do they really need? How much is being promised to the street? How much is being supposedly reinvested as capex.

475 And so, that's the way I answer that question, is it's really about... you know, them using the margin to give a price that they can afford to go into a market at some competitive entry and pricing... more intensely now in Quebec, because there's this fight breaking out between Videotron and Bell, for obvious reasons.

476 THE CHAIRPERSON: Okay, thank you for that, and I do want to come back to wholesale rate.

477 In terms of term rates. So, you said in your submissions that the terms rates are lower... or were lower in 2021 than they were in 2017. I'm just wondering if you could help us unpack that a little bit. What does that mean to you, to see the term rates going down?

478 MR. LAWFORD: A term rate means there's no options for consumers to move to, and/or that the choices that are left are very similar.

479 And the pricing in the market that we have observed ‑‑ although again, we don't have retail pricing comprehensively for all markets and all places ‑‑ but they are very closely matched to the Big Three, and then there are not other options to go to.

480 So people don't switch because there's no independent options, and then, amongst the Big Three, why bother. Like, unless you're having a fight and they won't fix something, you're not going to call and disrupt your entire household to switch to a highly similar competitor. There might be a better difference between cable and fibre now but that's for the higher‑speed customers.

481 THE CHAIRPERSON: Okay, great, thank you. Maybe I can just ask a question about urgency.

482 You know that a big part of this proceeding focuses on whether competitors should get wholesale access to fibre networks in Canada. What would happen if we decided that competitors not get that access? What is the harm of maintaining the status quo?

483 MR. LAWFORD: The status quo being you've... you have given expedited decisions so what does the status quo mean, here, exactly?

484 THE CHAIRPERSON: No... let's say it's no access. What would be the harm in not giving the access?

485 MR. LAWFORD: So, kind of rescinding the expedited decision or maybe it gets overturned on appeal, or something? Okay... I'm sorry, I'm being difficult, but you know what I'm saying?

486 THE CHAIRPERSON: Let's just say, if there is no access, what's the harm? Because you've said it's urgent. Why is it urgent?

487 MR. LAWFORD: The continued dominance of the large players at the moment means that the remaining small ones who are stuck of FTT and with non‑competitive speeds, they will continue to get smaller and weaker, and this means... this means that people like Teksavvy and other folks will fail the launch and grow, like Cogeco or Videotron, in new markets where we would hope that there would be a well‑capitalized competitor that could use this immediately. And the policy direction says: Let's go, let's do, kind of now, and we agree.

488 And what we have observed from consumers is they are very frustrated, I think, as Matt's commentators have said, they don't understand why this isn't available at the moment.

489 So, the loss is that the momentum, if you will, of consumer anger in this and... is going to continue to mount; and the second reason ‑‑ more to your point ‑‑ is that the competitors' business plans are premised on getting timely access. The longer you delay that those fall apart, they get weaker, and then we wait for the competitors to materialize.

490 Matt, do you want to...

491 MR. HATFIELD: Yeah. I would point out... I think this proceeding verges on being too late as is. Like, I... I think that the expedite in term rates was some recognition from the CRTC that if you waited six months or another year, there might be no competitors in the market to support, and I think we will see no competitors in the future if these rates aren't made final.

492 And in fact, frankly, if more is not done for them we can't just be looking to create the smallest possible space for small ISPs to survive, we actually need to be looking to make it an attractive business environment where new competitors will be entering.

493 We're seeing very few new people trying this market in Canada, because most people recognize it is not going anywhere, or it hasn't been going anywhere up until now.

494 THE CHAIRPERSON: Okay. Thank you for that. I have a few questions on the role of wholesale‑based competitors.

495 So, historically, wholesale‑based competitors have competed by offering lower prices. Are you seeing other ways that wholesale‑based competitors are differentiating their service offerings, and also, maybe just looking ahead to the future, do you see other ways that they may start doing that?

496 MR. LAWFORD: Okay, so... as Mr. Mezei mentioned, you have different approaches to the way you architect your individual customers' connections with IP services. You can do over that, it's allowed when you're running your own network, to a certain extent.

497 Pricing, obviously, can be more aggressive and there can be different speed tiers chosen, provided that he has access to those.

498 Different customer service approaches. Most of the smaller ones have a local customer service representatives who really know the area and the people, and are more... let's just say helpful, then some of the larger incumbents' customer service. You can often even get the same rep back if you called them back, and they understand situations, you don't have to reexplain it and them pull up a ticket, and all that stuff.

499 So, those are some of the benefits that we see from smaller providers having access right now, but there is other innovation that they say they can bring, and I'm not... I don't run networks so I don't know what that would be, but they... they have made clear that if they are given a rate they can start to innovate on packages and perhaps get into business...

500 I recall ‑‑ and I'm blanking on it now, whether it's Teksavvy or somebody else ‑‑ I think Teksavvy wanted to get into wireless, right? And then, in 2021, the decision came out and killed that.

501 So, if there's lower prices people might even branch into new product areas and maybe make bundles that they thought they were too small to do that but now it's possible.

502 MR. HATFIELD: Yeah. I mean, I think there are definitely side benefits that tend to Cooccur with wholesale, in terms of choice and trying to differentiate yourself from other competitors.

503 But the ability to offer a lower price is a very important foundational piece to this. There's tremendous advantages the incumbents hold in holding to their customers, even if there is some meaningful price different between them and wholesale. I mean, they're already in the home. They have the name recognition. They have the advertising. They have bundles. There's many reasons people might choose to stay. And so, there needs to be quite an attractive package overall, not just a small benefit here or there, for wholesale to really acquire a significant market share.

504 THE CHAIRPERSON: Okay. Thank you for that, and thank you, Mister Lawford, for flagging innovation. We will hold on to that question for the wholesale‑based competitors.

505 You've said that wholesale‑based competitors are good for competition, and you note that consumers might be able to use the wholesale‑based competitors to bargain for lower rates.

506 I'm just wondering if there's anything more that you can share about that.

507 MR. LAWFORD: Wholesale‑based competitors keep the tendency towards monopoly profits down, like people flagged them off as being... you know, resellers or arbitragers or whatever, but you need a bit of that in a... if you're going to have a facilities‑based market, that is necessary, because they... they're never going to have 50 percent market share, so their role is to firstly put some pricing pressure down on monopoly profits, where if you leave three players, they're... you know, they do tax seclusion and they see each other's prices and they slowly ramp up... every March, they... you know, up $5, up $10, and they're all of the same amount. That's the first function.

508 I guess what is frustrating to me is that there's this fantasy that every small ISP is some day going to enter the ranks of the huge incumbents, and there's nothing wrong with having people do a role, permanently, or arbitrage ‑‑ if you want to call it that ‑‑ and they'll say they're also going to do innovative services as well, just give us a chance, right? You know... some will try to be the lowest cost provider, some will try to be like pure arbitragers, if you want, or resellers, others will try to be... adding extra services and meeting consumers' needs.

509 For example, you can have an ISP that focuses on people that want high upload speeds, so 90 percent of your data going up is fast and 10 percent coming down is slow... I guess if you're a day trader, or something.

510 But we don't see those, because they get a chance to create themselves. Matt?

511 MR. HATFIELD: Yeah, I mean, you can call it arbitrage. You could also call it placing some weight on someone as much as possible by way of consumer exploitation. There should be some limits to just how much of a premium you can charge consumers. There is not going to be in many parts of Canada where there's most likely never going to be more than one physical set of infrastructure.

512 And so I think the CRTC has overestimated what is possible by way of facilities‑based competition, and we have seen the results in the market, and so having a permanent role for wholesale will just preserve some elements of competition, despite those realities.

513 THE CHAIRPERSON: Okay, thanks very much. I just have three more areas that I want to cover and then I will turn things over to the Vice‑Chair.

514 You... so, starting with wholesale rates ‑‑ and we touched on this ‑‑ but you have shown some recent promotional activity that shows that incumbents are offering internet packages at retail that are lower than the wholesale rate, so you have shown that.

515 At the same time, as part of this proceeding ‑‑ and you've seen this ‑‑ we have incumbents saying that the rates we have set are below their costs. Can you help us reconcile that?

516 MR. LAWFORD: It depends on what goes into costs. I find it hard to believe that they're below cost. If it's below cost, theoretically they should have brought an application to raise the rate. I don't recall seeing Part 1s like that. Perhaps they're waiting to have this framework in place before they go about doing that.

517 But... I don't know if I can answer this, there. I guess... could be efficient incumbents ‑‑ if that's the case ‑‑ and that... I don't know, whenever we'll be able to see their costs... I can't comment on why they're saying their rates are below cost, and I see no evidence on a regulatory basis that they're... other than them saying that ‑‑ and we can't see the numbers, so... okay ‑‑

518 MR. HATFIELD: I mean, without knowing their costs we can say it's one of two things, either they're actually setting retail rates below their costs and it's potentially predatory pricing they're engaging in, or they're misrepresenting their costs to you and they're not actually below cost at retail.

519 THE CHAIRPERSON: Okay, thank you for that. Just one other question on rates, before moving on to the limits on wholesale access.

520 So, you claim that high wholesale rates limit how much wholesale‑based competitors can compete, and you have even gone so far as to say that the rates are ‑‑ quote/unquote 'plainly unreasonable' in some circumstances.

521 I'm wondering if you can help us understand why you think that the wholesale rates are unreasonable and if there are certain parts of the rates that you think we should be focusing on?

522 MR. LAWFORD: Okay. I'm going to start with a proposed FTDP rates for... let's forget about XGS‑PON and all that stuff, just the regular... up to 1.5.

523 The... the proposed rates... you know, no matter how you slice them, they come up for the speed tiers that we saw, to be butted a dollar less than what Bell sells their own access too in the market.

524 So, you know, we were banging around numbers, here, but for a 1.5 gigabytes speed I'm not sure... do you have it handy, here?

525 For... a 1.5 gigabyte speed was $107 per customer a month, plus you have to buy your capacity, and it's $328, but, you know, that's for a 10... I think a 10 giga... 100 gigabit per second first.

526 So, you've got to add that in, and then there's... if there is a service charge and they don't have... I believe the billing is $10.55, if they've got to send a technician, it's $250.

527 So, you get a little bit of 1 percent, say dumped, to all that stuff.

528 So, it's about... yeah, $108, $109, and Bell is generally selling it for $110. That's their baseline price, and then they'll do a promotion at... you know, $75 or $85, or whatever, like I said.

529 So, it's just kind of coincidental that Bell's cost plus the markup that I tried to show you, that they're justifying from economic experts or just the standard $30 plus $10, for whatever reason markup. It always seems to come to $1 below their retail, or about, for... like, it doesn't leave much room for a wholesale competitor to move in, and therefore to grow in.

530 And, like I said, whatever their costs are, whether it's 70 percent of that or 50 percent of that, or 40 percent of that, the markup gives them this huge cushion to work in, and I don’t think they need that much mark‑up to incent building, as many intervenors so far even today have said, they’re going to do it anyway. They’re getting rid of copper because it saves them money. There is some nipping at the heels from cable.

531 And, you know, there’s one big cable company pretty much now across the country. There is going to be investment in fibre. They will pick, by that I mean mostly Bell and Telus, will pick the spots that they roll out to, to be strategic or political or whatever, but it’s going to happen. And I don’t think they need 40 per cent return to incent that.

532 MR. HATFIELD: I think the Commission spends a lot of time thinking about the incentives for big telecom companies, I’m not sure it’s spending enough time thinking about the incentives for consumers or for small ISPs.

533 So I don’t think it should be mysterious that given the many advantages we’ve talked about that a telecom company has for holding onto their customers, the fact that they’re in the house already, they have the brand, they can maybe bundle, all of these many reasons people might choose to stick with them. Oh, and by the way, our rates are comparable or maybe even a bit cheaper than a wholesale provider. Very few customers are going to make the switch in that situation. And if you’re the wholesale provider, you probably don’t actually have a business model in that situation.

534 THE CHAIRPERSON: Okay, thank you. So in terms of the limits on wholesale access, you’ve seen through the proceeding different intervenors have proposed limits on who should be allowed to access wholesale or to use wholesale access. Some have said that we shouldn’t allow the incumbents to use wholesale at all.

535 I’m wondering from the perspective of Canadians, as you were just saying, would you agree with that?

536 MR. LAWFORD: Well, this is where it gets into the weeds. But generally speaking, as a principle, everybody should be able to wholesale off everybody else, except that that could mean a large provider, like one of the biggest three, wanting to wholesale in a small community that has a look of abuse about it. It might not be a smart, immediate thing to do.

537 There are some concerns from the smaller cables that they may be rushed as well from the large incumbents like Cogeco. I think that’s their point of view.

538 On the other hand, take Videotron, I think the government, I think, is hopeful that they will move out of Quebec, and they’ve certainly signalled that I think in their press and their marketing campaigns, and their Parts 1s, that they intend to do that. And that’s out of territory for them, and I think in that case they are competing as a well‑capitalized independent in that area.

539 So depends a bit, and there may have to be a transition period, and a bunch of different transition periods, but generally speaking there shouldn’t be a reason why Telus can’t wholesale from Bell, and Bell from Telus, and Rogers and so on, in their own incumbent territories, and small providers obviously should be able to go to all of them, the larger ones.

540 MR. HATFIELD: In general, I don’t think Canadian consumers have a strong interest in benefitting one company more than another. But I will say in the policy direction in 2(e) there is a specific instruction to focus attention on lowering barriers to market entry for smaller competitors.

541 And so from that perspective, there’s maybe an incentive to provide some threshold or some duration of a little bit of protection from that kind of wholesale purchase. But it shouldn’t be an indefinite feature of the system necessarily, at least for providers that reach a certain size.

542 MR. LAWFORD: I mean, in theory, the wholesale rate will be compensatory above cost as well, so you won’t be losing money if you have to wholesale. Just we’re back to this how much money were you expecting to make, and did you expect to get 100 per cent of the customers, and did you build your financial projections on 100 per cent of fibre customers being with you for seven years, or 20 years, or whatever, or one year?

543 THE CHAIRPERSON: Great, thank you. So last few questions on investment.

544 And, you know, I shared this in my opening remarks, and we know that telecommunication networks are expensive to build, maintain, and operate. You’ve seen on the record of the proceeding incumbents telling us that they will reduce investments if we give access to fibre networks.

545 In your intervention you say those claims are to be expected and that, “We...” and I’m quoting:

546 Are you concerned that incumbents will invest less?

547 MR. LAWFORD: I listened extremely carefully to Bell’s fourth quarterly call last Thursday, and Mr. Bibic didn’t say they’ll stop investing. He said, they’ll stop their accelerated program of investment, and that they will be more disciplined about where they do that.

548 That, to me, doesn’t sound like they’re not going to continue spending capital on this. And they still spend $4 billion a year, that’s still going to grow their network. So, yes, we’re saying call their bluff. You know, call their bluff, let’s see what happens. Because the consequence of not calling their bluff is there will be no independent ISPs, the end.

549 And so the policy direction seems to say, you know, we want you to make this choice towards competition and, yes, you know, we’re willing to withstand very political or very showy kinds of ‑‑ or even very difficult, if you’re being fired from Bell, these choices being made. But it’s to benefit a large number of customers and to give people an independent choice that’s been lacking.

550 MR. HATFIELD: Yes. And if we look at the big picture. I mean, the incumbents have been scaring the CRTC off from doing anything aggressive with them for decades now with threats of pulled investment. And the policy direction I think is very clearly asking for a correction of how the CRTC has interpreted that situation.

551 It doesn’t give you a sort of 50/50 way in of investment versus consumer welfare if you count sort of the balance of words and what different items are focused on, it’s probably a good 70 or 80 per cent focused on consumer choice and consumer affordability.

552 I think that is both what our elected leaders are asking for, but also what Canadians are asking for. It is time to put greater priority on consumer welfare, and we can assess where that leaves us five years from now in terms of the results on investment.

553 I am not convinced it’s going to lead to giant declines of investment. And even if, in some cases, it affects some communities, we do have public funds already allocated through the universal Broadband Fund and other things to fill those gaps, and should expand those, if necessary, to address them.

554 THE CHAIRPERSON: Okay. Thank you for that. Still on investments. You’ve noted and we heard that this morning as well, that some large incumbents, fibre investments, are already you’ve said winding down. But at the same time, we know that not all Canadians are connected to fibre.

555 Can you explain a little bit what you mean by winding down, what you were talking about there, and how that should affect our decisions?

556 MR. LAWFORD: Probably more getting close to achieving their full fibre roll‑out is what we meant by winding down. That I think, as we said, the copper decommissioning will counter that.

557 I mean, that’s going to be done even though they’re supposedly putting the brakes on investment, but also they’re going to switch over 105 COs so there’s no more copper, and 110,000 of their customers who will be affected, it will be a larger number of customers that could benefit from the new fibre if there’s a mandated aggregated FTTP in those 105 CO areas, I think, depending on the architecture, whatever.

558 So, yes, we weren’t trying to say that they’re done, and certainly we know that the cable companies are on a different schedule because DOCSIS does work up to 1.5ish, and maybe they can juice it to 2, but you know at a certain point it’s going to be leapfrogged and that’s what Bell and Telus and the fibre‑based incumbents are betting on, is jumping over the cable folks so they are going to be catching up, and that’s their incentive, that’s already in place.

559 If you’re 90 per cent done ‑‑ well, I think Bell said they had 7 ‑‑ in June last year they said they had 7.4 million, I think, done of 9 that they were planning to do, and overall I think they have 11 million residences to go to.

560 So maybe they’re 75 per cent done. I forget all the ‑‑ everybody’s fighting over the figures about how much is covered. All we were trying to say is that they might do what they did on last Thursday, which is say we’re going to, you know, not try to ‑‑ like, we’re far enough ahead of cable, we can stop now, or we can slow down. And if that’s a way to preserve our market share and our control over who gets into fibre access through threats, we’re going to do it, and that’s what I read last week. So that’s all I meant by that.

561 MR. HATFIELD: Also, if we look at the big picture here, like fibre is important and transformative enough that no one can be left behind from its build out. However, as is, commercial incentives aren’t doing the whole job. You know, we do need the universal Broadband Fund, and OpenMedia is very grateful that it exists and is doing that work.

562 But we also, looking at the overall picture of consumer welfare, we can’t sacrifice consumer welfare across the entire country just to ensure that some folk at the margin will have an incentive to get commercial service. If we need to reach those people, perhaps we need to invest in reaching those people. But many consumers across Canada are suffering under the current pricing regime.

563 THE CHAIRPERSON: Okay, thank you. Last question, still on investment. So some parties have referenced the fact that wholesale‑based competitors make less investments than facilities‑based competitors.

564 I think your position is that wholesale based competitors, deploying networks doesn’t really make sense from a policy perspective. I’m hoping you can just unpack that a little bit more.

565 MR. LAWFORD: Yes, what's the role? It’s hard to know, because the conditions for solid growth of independent ISPs haven’t, I don’t believe, really been in place since the disaggregated decision. So this is 2015, right? That cut the knees out of these guys. And it made, you know, a couple of them have grand plans to try the disaggregated model and, you know, mixed success on that. And I think the hope was that they would build.

566 And I’m just of the view that they’ve got a hard lesson and it’s more difficult to be a big incumbent than you think. That’s not to say that if the conditions of pricing for wholesale weren’t in place they wouldn’t find niches where they would grow their fibre.

567 Like, pick somebody like Community Fibre, it’s just out here in Perth, they have a small fibre network, and they had to have a fight to get one pole. But anyway, you know, they might go to neighbouring communities and build their fibre network in western Ottawa area, if Bell’s not going there. We don’t know, because all their money is being paid in wholesale access fees. And if they had suddenly extra capital, perhaps they would grow it.

568 Is it a way though to rapidly grow, you know, especially at the ends of rural areas, fibre? No. As Matt was saying, to the extent that investment has slowed down, that’s where public subsidies come in, and the Broadband Fund of the Commission as well can be targeted and coordinated with the federal government.

569 It also creates a political force, right? So if people are in that weird gap where you’re ex‑urban and you’re not quite rural enough to get broadband funding, but Bell’s ‑‑ or whoever, Telus is slowing down and saying, well, we’re going to go right up to the edge of your community but not do you, and there’s no little ISP to cover that area, now you’ve got a political problem.

570 So those people are going to go to their MP and say, where’s my broadband? And that will mean either expanding the subsidy so it can cover ex‑urban areas or it’ll be calls to the Commission to direct part of the Broadband Fund to these zones. But at least we’ve uncovered the problem, if you will. Right now, it’s hidden under layers of confusion.

571 THE CHAIRPERSON: Okay. Thank you for that. Thank you for answering my many questions. Thank you to my colleagues for your patience, because I know you have a lot of your own questions.

572 Vice‑Chair.

573 VICE‑CHAIRPERSON SCOTT: Thank you. The Chairperson left me with a couple on my list. And I’m going to start with affordability even though it’s been well covered, but also critically important.

574 So I heard you loud and clear on consumers having a range of internet needs and on consumers having a range of outcomes. So, unfortunately, we don’t have to stretch our imaginations or it’s not theoretical at all to picture a low‑income household that actually has a high internet need. Maybe somebody’s trying to get back to school, trying to start‑up a small business, whatever.

575 That’s a very plausible scenario. You can have an extremely low‑income household that needs a high quality of internet service.

576 Are there limits on what we can expect a wholesale competitive framework to do in terms of meeting some of those extreme situations? When we’re talking about kind of a national policy framework and, you know, businesses operating at a regional or a national scale, how far can we expect competition to carry the ball? At what point does some other solution need to takeover?

577 MR. LAWFORD: I’ll just do it quickly. I mean, from PIAC's point of view, we have consistently come to all rate‑setting hearings and to all subsequent policy hearings on universal service to say you’ll never reach the bottom quintile with competition. I don’t believe it.

578 Sometimes the small internet indie providers say, oh, well somebody will pop up that does it at 10. No, they won’t, $10 a month, it’s not going to happen, and not at that capacity.

579 That’s why you’re going to need to have the equivalent of Lifeline and ACP from the US, which is now being nuked, but whatever. That you have to have a government program to cover the bottom part because you’re right, the numbers ‑‑ I don’t think they will ever add up.

580 And just because you’re lower income, yes, you don’t know what your household needs might be, and we should have a program to cover them. So we’re continuing to advocate for that, even here, although it’s kind of outside the scope.

581 So competition can’t fix that, but I think the encouraging message would be that let’s give independent ISPs a good wholesale rate and see what they can do. And then we can see how big that part is we need to cover. Right now, we don’t know what the gap is. Like, we’re just fumbling with connecting families and we can’t see the scope of the problem because the competition masks it.

582 MR. HATFIELD: I think both are needed. I think government programs tend to have hard edges that exclude some people, so you’re not necessarily reaching the entirety of the bottom quintile even with a program like Connecting Families. You need to be reaching the max government support rate in one of a couple different programs for that particular program.

583 And if you’re not, even if you have some very obvious income challenges, you’re not going to have any access whatsoever to that support. So competition can provide some side support to folk that fall outside of those programs as well.

584 VICE‑CHAIRPERSON SCOTT: Thank you. Mr. Lawford, you referenced paragraph 10 of the policy direction, which is the aggregated wholesale requirement, which is pretty clear in saying, “Commission must mandate provision of aggregated wholesale high speed.”

585 And then you also referenced kind of the until clause, so until it determines that broad sustainable meaningful competition, et cetera, et cetera.

586 Do you have thoughts on what it would take to satisfy that test? So kind of at what point is the until necessary?

587 MR. LAWFORD: Well, okay. Most markets for internet access, now the independents are gone or they’re ‑‑ I’m counting flanker brands as being the same as the big company, you’ve got two choices; you’ve got a cable‑based and a telco‑based. That’s not good enough.

588 So you need three, at the very least, or four. I mean, most large communications markets the ideal is four or more. You don’t see it for wireless, except in a few markets there’s four or five. But three or four is acceptableish.

589 At the moment, the direction for home internet access is ‑‑ like, we are careening towards duopoly here. So that’s not good enough. So definitely the number of ‑‑ like, I’d like three or four, and maybe five or six, that’s one thing.

590 The second thing is affordability. So, again, if households are paying more than 4 to 6 per cent of all their communications stuff, it’s too much. So you just get the numbers and you say, are people paying 10 per cent of their income, and then unless they are in the very bottom quintile and it just spikes, and then you have a government program.

591 But if you’re like in, you know, the middle and you’re paying 10‑15 per cent or something for your communications, it’s too much, it’s too much money. So there’s that too.

592 You can also look at what services are available in the market, like what kind of choice I have if they’re all the same exact offer. And I guess there’s not much point in having four competitors if they all offer exactly the same. There could be that.

593 The Competition Bureau might be able to think of others. Do you have other thoughts?

594 MR. HATFIELD: I mean, I think this one is difficult because we’re so clearly so far from this situation. I think the policy direction allows you space to consider this question in the future. But at this point, this isn’t something we’re going to achieve in the next five years or even 10 years realistically I don’t think.

595 MR. LAWFORD: Just to finish ‑‑ sorry, Commissioner Scott, it would help if the government said we have this policy for telecom, and this policy for telecom, in my view, should be telecom is an input to everything else you do, it’s not an end in itself.

596 So if you have a very strong telecom sector that makes tons of money and produces tons of dividends that get distributed to, you know, people’s pension funds, it’s a pretty inefficient way of running the country. It’d be better if telecom was cheap and we’d have lots of businesses that could use it as an input.

597 But I feel like that’s never been the policy or it's not been said out loud. And that’s where an agency would get its mandate to say, let’s track the prices, right, let’s see how much people are spending and let’s see how many competitors are in the market. Because that’s our goal, not just that, you know, all our telcos are really strong and, you know, good companies.

598 VICE‑CHAIRPERSON SCOTT: Thanks. And I apologize, my questions jump around a lot, but you’re handling them fine, so don’t worry.

599 Mr. Hatfield, I think I’m quoting fairly accurately. You said, you subscribe to what used to be a great ISP, EBOX?

600 MR. HATFIELD: One of our members, yes.

601 VICE‑CHAIRPERSON SCOTT: Okay. That may change the nature of my question. I was going to ask in what ways were they a great ISP, and in what ways are they no longer a great ISP post‑acquisition?

602 MR. HATFIELD: I don’t think I can answer that on behalf of the member. I don’t have more than that quote. I’m a Shaw customer, so I’ve also gone through a transition, but not the same one they’re referring to.

603 VICE‑CHAIRPERSON SCOTT: Okay. If we broaden it out then, is there anything inherently disadvantageous from a customer perspective or to what extent does the customer care about the ownership structure of the company providing their service?

604 MR. HATFIELD: Well, I'll loop back to something I said earlier. Customers can tell whether a business cares very much about them and is working very hard to secure their business. I think it was JF in the last presentation said, early on he realized that EBOX deeply wanted his business because they would offer all kinds of unique features to him. That is not the relationship that anyone in our community has when they go to a Bell or a Rogers.

605 And, in fact, even the world of a decade ago where customers sometimes found they could negotiate, you know, deeper loyalty bonuses or I’ve been a customer for a long time, shouldn’t you give me a little bit extra of X or Y? Fewer people even have that kind of interaction with their provider now. It's basically, here’s the deal, take it or go and get the exact same deal from someone else and deal with the inconvenience of the switch.

606 VICE‑CHAIRPERSON SCOTT: So your written submission is particularly strong on expressing support for both aggregated and disaggregated. And I’m feeling a little bit of tension or perceiving a little bit of tension between your statement about the inefficiencies of network investment.

607 So what’s behind your support for disaggregated, if not to encourage additional facilities‑based investment.

608 MR. HATFIELD: I mean, our support is essentially to the very limited extent anything has worked, that has been something that small providers have been using. So we don’t want to see the rug yanked out from under them, again, yes. But, I mean, a transition towards an aggregated model seems to be the more appropriate way of structing things over all we think is appropriate. We just can’t destroy the very limited business that exists currently.

609 VICE‑CHAIRPERSON SCOTT: Okay. Would it be fair to characterize that as not wanting to take something away that has limited use ‑‑ so you’re not betting the future on that, you’re just saying to whatever extent, let’s not take ‑‑ there’s no reason to take it away as opposed to this is something that needs to be in place to accelerate?

610 MR. HATFIELD: Well, I think this is where we need to look at the incentives around the small business in question, right? So the Commission needs to be very cautious about if it does thing like saying we’re going to provide a very limited amount of time to transition from your current model or, for example, in the same way that the incumbents are saying, you need to look at our incentives and worry about what we might do in the future.

611 If you’re saying, well, we’re not really sure if the current model’s going to be here in two years or five years, we might pull your whole business at any time, what reasonable businessperson is going to go into that market, right? We need to make sure that we’re making this actually an attractive thing for them to do.

612 MR. LAWFORD: Can I add? The remarks, the overall remarks today said, you know, for many smaller ISPs it doesn’t make sense to make them; as soon as they’re capable of buying transport, go ahead and buy transport. So that’s why we want to have an aggregated choice for them. But there are other ISPs who have architected already some parts of their network in disaggregated and have them suddenly have to switch it all around.

613 Now, I do know that the present tariff and the proposed FTTP tariff from Bell says you can’t do both. And I understand their argument to be that for some reason the ASP gets plugged in a different way, whether it’s at the CO or at some other more disaggregated point ‑‑ or aggregated point, excuse me, or something. Anyway, I don’t really even know why they can’t support both in their central offices. You should ask them because it seems to me that at a certain point this whole aggregated/disaggregated stuff kind of melts away. Like, it’s just access to a fibre network, and you can think of ‑‑ like, they’ve already gotten rid of the local loop piece. Like, remember there was all that fight about the local loop has this section that you can break off and it’s forborne, and blah, blah, blah, blah? Well, the new architecture ‑‑ it flows right to the house because it’s passive optical. It seems to me that at a certain point, wherever you plug into the incumbent network, they should support that open access and you don’t have to call it aggregated/disaggregated; it just has to be available wherever ‑‑ wherever there’s a point they can interconnect.

614 And I don’t know their cost. They’re saying there’s great cost to that, so I would ask them for more details, because that’s the only conceivable reason why you shouldn’t support both. And then again, the policy direction seems to say if you have to choose, try to choose the one that’s more favourable to small or independent ISPs than the big guys who have the advantage so far.

615 VICE‑CHAIRPERSON SCOTT: Thank you for that clarification. That was really helpful. And as Mr. Mezei pointed out earlier this morning, I’ve been around a long time, so I remember lots of things.

‑‑‑ Rires

616 VICE‑CHAIRPERSON SCOTT: I also forget some things, but that’s okay.

617 My last question ‑‑ so, very interested in the public opinion research that you did, and the slide you highlighted today shows a strong indication that customers would prefer fibre to the premises if it was cheaper. Is there any more to that to unpack, other than the fact that customers would like faster speeds at lower prices? Like, can you go ‑‑ can we explore this a little bit deeper? Is there more going on there than just that superficial level?

618 MR. HATFIELD: I mean, I don’t know if ‑‑ I’m sure you didn’t mean it that way; I don’t know if it’s superficial. I mean, it’s customers want the results. Right? Like, they’re not technologists. They don’t just get excited about this technology ‑‑ how these networks work. They want the service they need at a reasonable price. And so, I think ‑‑ I don’t know, did you want to ‑‑ ?

619 MR. LAWFORD: I think that customers want the reliability. The quality of service of fibre is fantastic compared to any copper ‑‑ like, you put copper in this thing, and it breaks, it corrodes, it ‑‑ you know, it ‑‑ it’s not junk, but it’s not ‑‑ it’s nothing like fibre. And people know that. Like, once they try fibre, they go, “I’m not going back.” I mean, Bell’s own ads are having people run out of the cottage because it’s served by cable, you know, with the implication that it’s served by partly copper. And, you know, that quality of service is something they know they can rely on.

620 Also, the symmetrical speeds ‑‑ it means a huge deal. So, when you’re doing video, like we all have to do now so much for work, you need some upload speed, especially if other people are backing up or doing things where you’re also uploading. Fibre is almost always architected kind of fifty‑fifty. It should really be more perfect, but anyway it’s mostly fifty‑fifty. That’s a huge jump, because you’re going from 10 percent of your upload speed on cable, for the most part, or on other FTTN, to you get 40 percent more upload room. And I think that the capacity of fibre is almost unlimited, really. So, that’s ‑‑ that is the future, as I think we said.

621 There are so many benefits to it and, again, you can also fix things from the central office. Not having to wait for a technician to come around your house, to let them in, to ‑‑ you know, unscrew something; they just switch you to a different colour of light, and it works. So, that I think people are starting to hear ‑‑ that the quality of service, and it’s just a ‑‑ it’s just a superior product.

622 MR. HATFIELD: And I think a lot of people who thought maybe that cable wasn’t so bad discovered the difference during the pandemic, when they had three, four, five people trying to do simultaneous video. They were like, “Oh, this doesn’t meet my needs anymore.” And that’s part of the big shift we see in our survey results.

623 VICE‑CHAIRPERSON SCOTT: Okay. Thanks very much. And I certainly didn’t mean to imply that the research or the opinions it captured was superficial; I meant my summary of it was the superficial aspect. I appreciate that answer and all your answers.

624 Madam Chair, those are my questions.

625 THE CHAIRPERSON: Okay. Thank you very much, Vice‑Chair Scott.

626 Let’s go to Commissioner Naidoo.

627 COMMISSIONER NAIDOO: Hi. Thank you. So, in your opening remarks today, you said ‑‑ and I’m just going to quote:

628 As you know, we typically use an economic test which we call the ‘essentiality test’, and complement it with policy directions. So, with your opening submission, what does your position tell us regarding our use of the essentiality test? Are you proposing that we don’t consider it in this case and that we only rely on the 2023 policy direction? Or are you suggesting that we should make changes to the test in light of the 2023 policy direction?

629 MR. LAWFORD: Yes, but the answer is more nuanced. It is ‑‑ our first answer is, the policy direction says ‘do it’, so do it. And people can complain in court that it’s outside the Cabinet’s powers. We’ll see about that. But the longer answer, other than it does wipe out the test, is the essentiality test isn’t as ‘in stone’ as you think. So, firstly, like, if you go all the way back to 97‑8, you see that the test was slightly different. It was talking about monopoly‑controlled instead of competition, and it was talking about CLECs and things, and I’m going to suggest to you that the essentiality test was birthed at a time when it was copper all the way down, and it was easier to segment than network, into chunks that they called ‘addressable markets’ like the local loop, right, or transport, or other bits in between, and then you would have this big long song and dance because the competition lawyers want to say, “Is the market,” you know, “addressable, and can you go to bat?” And they were ‑‑ they were hoping to birth from the CLECs someone to be a competitor to the monopolist. Okay? We don’t need to do that anymore. I think the role of competitors now ‑‑ as we’ve said, some of them is to just in a sense resell, and they don’t all have to have dreams of knocking off the monopoly, because the monopoly isn’t there. We have at worst a duopoly.

630 So, things have changed, and I think you have to think, like, the Competition Bureau ‑‑ I was encouraged to see them today say, ‘Well, there’s a little chink in the armour. Maybe we’ll change our view of the essentiality test.’ They got it kind of half right. They said, ‘Oh, it’s about ‑‑ it’s about cable versus telco.’ I’m like, ‘Mm, almost, guys.’ It’s actually about copper versus ‑‑ versus fibre. And as I said, fibre doesn’t segment well.

631 Like, you want to control from the CO all the way to the house, so it doesn’t make sense to talk about a local loop. So, why make ‑‑ why tell competitors they have to, you know, duplicate from the street with a piece of fibre of their own, right, or pay Bell a fee? Because it’s silly. You’re not doing anything to that ‑‑ that piece of fibre is the same as every other piece of fibre. It goes through a couple prisms and you’re at the central office.

632 So, you know, it’s a big question, but ‑‑ and we’ll try to answer it in the RFIs, but I think that yeah, it’s time to rethink that whole thing on the sort of ‑‑ you can ask the fundamental questions now because ‑‑ and the excuse is it’s not a copper network, and 97‑8 and 94‑19 and subsequent ‑‑ 2015 and all that stuff ‑‑ was all based on this assumption that we were talking about this network, which was an easily segmentable copper network, and it’s not that way anymore.

633 COMMISSIONER NAIDOO: All right. Thank you for that.

634 You’ve highlighted that acquisitions of wholesale‑based competitors by incumbents could have negative effects on consumer choice and competition. So, have you seen in the marketplace any changes following these acquisitions? And have incumbents removed any offers that the acquired companies used to have tin the market, to your knowledge?

635 MR. LAWFORD: Not so sure about that. The flanker brands have been marketed, now that they’ve been acquired, as ‘the competition’. And again, you know, on Bell’s quarterly call, they talk about having their newly acquired flanker brands in Ontario to meet certain types of customers. Like, ‘We’re your full service company. If you have this much money, we give you this brand. If you have this much money, we give you that brand.’ Right? That’s what is appearing in the market.

636 The overall prices ‑‑ I guess I don’t have a pricing study. I believe that the smallest ones were acquired ‑‑ the EBOXs, these sorts of things ‑‑ those prices have probably been maintained for a little while and are starting to drift up. We’ll see, but I don’t have a study to show that. But I do know that flanker brands are being used as if they were independents, and that’s a completely different market than an actual independent. So, if that helps.

637 COMMISSIONER NAIDOO: It does. Thank you very much.

638 Part and parcel to this question, some incumbents have bought competitors who operate in a different part of the country from their normal serving territory. Are those types of acquisitions problematic when they allow incumbents to expand and offer services in parts of the country where they weren’t before?

639 MR. LAWFORD: Yeah, that is, is the VMedia buy okay for Vidéotron? I think yes, because the ‑‑ the overall strategy that seems to be underlying this is to try to get a fourth national player. Other people might say no; we could have built it through lots of little independents, and so all acquisitions of independents are bad. But I think we’re at the point now where you’ve basically got the B.C. Broadband people, you’ve got TekSavvy, you’ve got Cogeco sniffing around, and there aren’t a lot ‑‑ there aren’t a lot of independents left. There are so few left now that I feel it’s ‑‑ it’s unviable, and that the most competitive pressure could come from an incumbent buying a far‑flung ‑‑ you know, to have a beachhead in B.C. and Alberta, and to have a new product line, as was mentioned by the Competition Bureau ‑‑ it might be okay.

640 MR. HATFIELD: Yeah, and certainly better to have a few incumbents with beachheads than to have no presence whatsoever. I mean, that’s still a little bit better for the consumer, but I am still struck by this idea that, do we or do we not have a health market? I mean, if we had a health market, surely we wouldn’t see so many small ISPs simultaneously exit, and no sign of ‑‑ of anyone choosing to enter the market, or certainly not at a grand scale. That doesn’t suggest that the system is working as it’s intended to.

641 COMMISSIONER NAIDOO: All right. I want to stick with competition a little bit here. I just want to get your view on this. Is competition about a wide number of competitors, in your view? Or is it about a small number of competitors vigorously competing? Or is it about both?

642 MR. LAWFORD: Yeah. Yes, it’s about both. I think the answer I gave before to Vice‑Commissioner Scott was that you look at things like how many competitors are in the market, and then pricing information, to try to do both. It’s a big ask, and if the market has gone critical now, you might just encourage number of competitors first, and then try to work on the other stuff. Or you might try to set it so that the price is so attractive you’ll ‑‑ you’ll start new ones, but the difficulty there being that they’ve got to grow from tiny acorns to be mighty oaks, and it’s going to take a long time.

643 MR. HATFIELD: Yeah, as a matter of competition philosophy, in theory you could have a small number of very vigorous competitors. The problem is there’s a lot of ways the competition might actually not be that vigorous that are hard to detect. So, one of the best ways of ensuring the competition is actually vigorous is having it be very easy to enter the market, so if there’s something going on behind the scenes that’s not perfectly clear, a new competitor can enter and sort of unveil that.

644 COMMISSIONER NAIDOO: All right. You talked a lot about flanker brands, and I just wanted to just dive down into it a little bit and just give you a chance to respond to what some intervenors have said. Some intervenors could argue that flanker brands can offer consumer choice and competitive pricing. And I’m wondering how you respond to that?

645 MR. LAWFORD: I think our position has always been that that’s untrue. It’s simply a market segmentation effort by the majors to show fake competition and to ‑‑ yeah, because, I mean, all the money goes to the mother ship. It’s not like it’s kept in ‑‑ like, Altima ‑‑ now it’s going to go to, I guess, Telus. So, if it were staying ‑‑ if they were separate entities, it would be a different matter, but that’s where the money goes. So, they’re just segmenting the market. I’m not sure what the Competition Bureau would say. I think we had a little discussion of coordination in the morning, but I guess we’ll just stop there.

646 MR. HATFIELD: I mean, just, like, the purpose of a flanker brand isn’t competition; it’s market capture. It’s market segmentation ‑‑ get as broad a slice of each portion as you can. But the providers certainly don’t direct their competition towards each other, between the flanker and the mother ship. They just try to identify which segments they can slot into each category, and move them as high as they can within the category.

647 MR. LAWFORD: It's pretty much deceptive, okay, because it’s not like they say “X,” you know, whatever the company is, “a Rogers brand”. Maybe in the fine, fine print somewhere you can find that, but it’s not like it’s a feature that, “This is Rogers, just another product.” They have completely different kiosks in the mall ‑‑ like, different storefronts, different colours for their logo. I mean, they’re trying to trick you into thinking that this is offered by somebody else. It can only be hard for people coming in with an independent provider to fight three ‑‑ three little versions of Bell, as well as the big Bell.

648 COMMISSIONER NAIDOO: Is there any advantage to consumers, in your view?

649 MR. LAWFORD: I mean, if there's nothing else, it’s nice to have an offer in the market, but, you know, we hear more customer service complaints, and the quality of the product is less; it’s often a slower speed, there’s caps. You know, it comes ‑‑ you get what you pay for.

650 MR. HATFIELD: Well, and in some ways, I think the big three even degrade the service provided in some ways relative to their mother ship. So, on things like sim swaps, people have had a lot more complaints around the flanker brands than around the main brands. It’s not obvious to me that the providers couldn’t be provided equivalent protection there to customers. I think they choose to, to hurt them, in part.

651 MR. LAWFORD: Yeah, like self‑serve customer service is a big part of flanker brands, where you have to do everything. If you’re older and you get on a flanker brand ‑‑ like, I have a relative who I’m forever helping, who is on a flanker, but it’s for wireless ‑‑ because she can’t figure out how to manage her account through texting and such. You know, like stuff like that.

652 COMMISSIONER NAIDOO: All right. Those are all my questions. Thank you.

653 THE CHAIRPERSON: Thanks, Commissioner Naidoo.

654 Commissioner Desmond?

655 COMMISSIONER DESMOND: Thank you. I'll try and keep my questions short. I think I’m standing between everybody’s lunch, so.

656 First of all, I was very interested in all of the comments that were attached to your ‑‑ I think it was your June submission; you had many, many pages of comments from lots of people in your community group. But I was curious, how regional do you receive those comments from? Like, were they ‑‑ I did find some provinces, but I couldn’t find a couple of ‑‑ I think P.E.I. might have been one where I was looking for comments from different regions. So, do you think that your perspectives that you’ve offered here do truly reflect all of the regions?

657 MR. HATFIELD: I think you would probably find someone from P.E.I. somewhere in there, but I mean, certainly it is a smaller proportion of the population. OpenMedia’s community roughly resembles Canada’s population. We’re a little bit stronger in some provinces than others, and a little bit weaker in some. But I don’t think there’s any part of the country, including the Territories, that we have no one from, and in fact, some of the people that feel most passionately will be in remote Canada, where they have some of the worst experiences with their telecom.

658 COMMISSIONER DESMOND: Okay. And I did see some of your comments from Nunavut, so I think that affirms that. But, you know, that said, do you think that the Commission needs to look at an approach that is regional?

659 MR. HATFIELD: That worries us. I mean, you could consider it. I guess our concern is the big three have proven very good at fighting every single possible improvement for consumers, and so our worry of a regional approach is it seems to us like an opportunity just to serve some Canadians worse than others ultimately, by the final system. So, I don’t know if it’s off the table, but it wouldn’t be our preferred approach.

660 MR. LAWFORD: Yeah, and I can also just ‑‑ I can already see the application for leave to appeal to the Federal Court of Appeal. Bell’s first point ‑‑ ‘Oh, it just targeted us in Ontario and Quebec.’ You know? ‘And the Western ‑‑ oh, the Western ‑‑ you know, Telus doesn’t have to deal with us.’ That would be their first point of appeal.

661 It’s just ‑‑ yeah, structurally, it doesn’t make sense to ‑‑ I see that, you know, fibre has rolled out less far in some provinces, and that’s a concern. That seems to me to be a different concern, but the forces that are weighing on Telus, for example, to retire copper and to grow their network and to offer services on fibre including broadcasting ‑‑ they’re the same. So, I would hope that it would help there. And I think actually the East is pretty decent for fibre access.

662 COMMISSIONER DESMOND: So, I do have a question then around, I guess, as a regional player, and I think of this because of your conversation with the Chairperson around any limitations or restrictions that might be appropriate if we were to roll out mandated aggregated access. And what comes to my mind is the situation of Eastlink where they, as a small competitor, have been able to build a network. In your scenario, would they then open up their network to other players, including incumbents? And is that the best approach? I mean, some of the arguments they make in their submissions is that would be to their disadvantage. It would make it more difficult for them to continue to grow because they are small, they’ve made investments, and they need time to recoup those investments ‑‑ time that other players have had.

663 MR. HATFIELD: I think this is where some possible thresholds that are allowed for under Section 2(e) of the policy direction, perhaps investment is harder to come by for some of these small providers than it would be for a Bell or a Rogers, and so perhaps either a timebound or a size‑bound exception for some of them might be appropriate. But we wouldn’t want to create a system where it was permanently favouring some companies kind of arbitrarily for no reason. I mean, ultimately the consumer just wants the effective service. It’s not about benefitting some companies over others.

664 MR. LAWFORD: And I’ll also just say that, you know, Eastlink has wholesale customers right now. They have had trouble with outages and things, as I recall, and they want fibre access. And it’s unfair to the smaller‑than‑Eastlink people to keep them on coax. And I’d just stop there.

665 COMMISSIONER DESMOND: Okay. So, how long then do you think it will be ‑‑ I know you talked about five years, ten years ‑‑ how long will it be before we see the conditions where we do have competition? How long do you think this is going to take, to get back to a healthy place?

666 MR. HATFIELD: That’s very hard to say. I mean, I think that depends to some degree on how aggressive a business case the CRTC is creating for the small competitors. I mean, if the conditions were very favourable, you might see more competitors faster than otherwise. My concern is, historically it seems like they’ve been given the smallest possible slice of, like, maybe in these very narrow conditions, for a small period of time ‑‑ and then that even gets eaten away over time. I think frankly there is a need to convince the market that it’s worth reinvesting in in Canada in this type of service because the experience of the competitors who have tried to date has been very poor ultimately.

667 MR. LAWFORD: And I would just add to say that you would kind of want to give something of a guarantee that FTTP access won’t be yanked. A need we’re suggesting a long transition period, I think we said in the oral remarks, so, like, that’s ten years or something so you can get through at least two Chairs at the CRTC, in case one person takes a different view than the other person.

668 There is ‑‑ yeah, I think I’ll just stop there, but that’s the kind of consideration these folks have, and when there were the 2019‑288 rates, okay, boom, overnight prices dropped. The same thing could happen again if the wholesale rate ‑‑ like, that would be the level of quickness, I think, that certain market actors would react to.

669 But the building the new small ISPs, and to get the growth of the larger, say Vidéotron type ones, would take a lot longer. And I think, yeah, we have to be more realistic. Not two years. Not three years. More like kind of a ten‑year horizon that you’re aiming for. I know you can’t control the future that much, but that’s our justification.

670 COMMISSIONER DESMOND: I just have two shorter questions, hopefully. The first is about bundling. I know we’ve talked a little bit about bundling in terms of the benefits to consumers, and I think I heard you say that consumers don’t really like bundles, but isn’t it something that does provide a benefit to consumers? And how will that impact competition? How will these smaller competitors actually be in a position to compete with bundles in place?

671 MR. HATFIELD: Well, bundles are a huge competitive challenge for small players. I mean, I think there’s very few consumers sitting there thinking, ‘Gosh, I wish I was forced to buy a whole bunch of things at once and couldn’t choose one and not get the other.’ Bundles are attractive simply because the prices are so high that any kind of meaningful discount ‑‑ and this is typically the only meaningful discount available to many customers ‑‑ winds up being very appealing. So, it’s a huge advantage that players that can offer a bundle have, but that doesn’t necessarily mean that it’s actually a thing that benefits consumers ultimately.

672 MR. LAWFORD: Yeah. I mean, bundles do make sense if the price is low enough; then I can see where a competitor says, you know, ‘We are going to take the plunge and add TV ‑‑ you know, get all the licensing and all that stuff, because we think our customers want it and we want to make it simple for them to do their internet and their TV at once.’ Okay. But the trouble is the base price of the internet part is too high for most companies to consider that. That was VMedia’s strategy, and it kind of worked.

673 COMMISSIONER DESMOND: Okay. And just my last question. We had the Competition Bureau here earlier today, and they suggest that dynamic competition between the facility‑based competitors is driving lower internet prices across Canada. There’s some evidence of that. So, I did want to just have your views on that, and whether or not we risk those benefits if we are to focus too much on wholesale‑based competition.

674 MR. LAWFORD: I think they’ll still have the benefits of that. They’ll still be competing with each other, to the extent that they want to gain market share. To the extent you think they’re happy to sit at 30‑30‑30 and leave 10 for somebody else, then that won’t change. But that’s a different matter. So, it'll still happen. You don’t want to ‑‑ like, I don’t know what the Competition Bureau is saying, prices are going down. It’s probably back to the StatsCan stuff. We dispute the fact that prices are going down because people are paying the same amount for what I’ll call in‑market internet packages that serve their needs, and we expect to get more data. And that’s not a price drop. It just isn’t.

675 So, you know, are you going to lose that supposed dynamism? Like, I don’t know. We need more data, and I think the international stuff is important because we might have prices even going down, but they’re not going down as fast as some other places.

676 COMMISSIONER DESMOND: Thank you very much.

677 THE CHAIRPERSON: Well, thank you very much, and thank you again for bringing consumer views on to the record. We really appreciate that. We will give you the final word or words.

678 MR. HATFIELD: Fundamentally, we’re asking you not to blink on this one. So, we all saw Bell’s announcements last week. There was a pretty strong response from some of our elected officials, and it was interesting to see. I think they kind of said some very explicit things about their feelings and reactions to what Bell was saying, but what stood out to me is there seemed to be some sense from some Ministers that there was some kind of gentleman’s agreement that was being violated by what Bell was doing, where essentially St‑Onge said, ‘We have seen that you have made a lot of buyouts that maybe weren’t great for competition, and the expectation was you were going to be returning some of the social benefits through things like news, that wasn’t as profitable as some other services.’ If that agreement ever existed, it’s gone.

679 And so, we’re asking you to focus just on the fundamentals, which in this case, per the policy direction, are affordability and choice. That’s the message that we see from Canadians and even from our elected officials as well now.

680 MR. LAWFORD: Lastly, I’d like to say on behalf of PIAC that we expected there to be a reaction from major incumbents, mostly Bell, and it has already happened. And they said they are going to be a digital services company now; so, if they’re going to go and be a digital services company, you have room to change the wholesale rate and provide mandated FTTP aggregated, and see what happens. Now is your chance. And the policy direction says, ‘Go ahead.’ So, I say now is your chance to do it.

681 Thank you.

682 THE CHAIRPERSON: Thank you again, PIAC and OpenMedia.

683 THE SECRETARY: Thank you. We will now break for lunch and resume at 1:35. Thank you.

‑‑‑ Suspension à 12 h 51

‑‑‑ Reprise à 13 h 37

684 THE SECRETARY: Welcome back, everyone.

685 We will now hear the presentation of the Manitoba Coalition.

686 Please introduce yourself and your colleagues and you may begin the presentation. Thank you.

Presentation

687 MR. KLASSEN: Good afternoon, Madam Chair, Mr. Vice‑Chair, Members of the Commission. The Manitoba Coalition is pleased to be here this afternoon and appreciates the opportunity to present. In the course of my opening remarks, I will introduce my colleagues.

688 Manitoba consumers face barriers to adequate and affordable fixed internet service which are driven by a longstanding lack of choice in the marketplace. These retail market problems are symptoms of the deeper wholesale issues that the Commission is poised to address in this proceeding. The Manitoba Coalition is pleased to here on behalf of Manitoba consumers.

689 The Manitoba Coalition is a distinct regional perspective group consisting of three not‑for‑profit organizations dedicated to promoting and protecting the interests of Manitobans through evidence‑based advocacy:

690 ‑ the Manitoba Branch of the Consumers’ Association of Canada, an experienced advocate and educator guided by the internationally recognized consumer rights and responsibilities, and we are joined to my right by Ms. Peggy Barker of the Board of Directors;

691 ‑ next, the Aboriginal Council of Winnipeg is a membership‑driven advocacy organization working on behalf of the urban Indigenous population in Manitoba, and to my far right is their President, Mr. Damon Johnston, who is also the Co‑Chair of the National Urban Indigenous Coalition Council;

692 ‑ third, Harvest Manitoba, though unfortunately not represented in person here today, is a province‑wide food network serving 90,000 Manitobans every month through a network of approximately 380 food banks throughout the province.

693 To my left, Mr. Benjamin Klass is an instructor at the School of Journalism and Communication at Carleton University and he is widely recognized for his expertise on competition and its impacts across communications industries. Mr. Klass’ report titled “Maximizing the Benefits of Competition in Canadian Internet Access Markets”, has been filed by the Coalition as evidence in this proceeding. We note that after preparing his report Mr. Klass joined the federal public service. Given his work for the Coalition and to preserve the independence of the parties’ respective submissions in this proceeding, we note that his employer established an ethical wall and excluded him from any involvement in the preparation of its submissions and from accessing information it created and received. Mr. Klass is here today solely in his individual capacity as an independent expert and not as a representative of any government department.

694 Finally, my name is Chris Klassen, I'm a lawyer for the Public Interest Law Centre at Legal Aid Manitoba, which is pleased to represent the Manitoba Coalition in this matter.

695 Before proceeding, our presentation will consist of four parts.

696 We will hear first from Ms. Barker addressing the results of the Manitoba Coalition's consumer research, explaining that the Manitoba consumer experience is characterized by lack of choice.

697 Then we will hear from Mr. Johnston, to my far right, presenting on opportunities for creative solutions in Manitoba to address social and economic inclusion.

698 Third, Mr. Klass will walk us through some of the key points of his evidence, after which I will provide a summary of the Manitoba Coalition's recommendation and conclusions before we invite your questions.

699 With that, I will turn our attention to Ms. Barker here on Slide 3.

700 MS. BARKER: Thank you, Chris.

701 Good afternoon.

702 When the Manitoba Coalition received the Commission’s Notice of Consultation, we retained an independent research firm to carry out focus groups and an online survey of 1,000 Manitobans, with an oversampling of Northern residents. The report on this research was filed with our first intervention so that the Commission could hear directly from the affected Manitobans.

703 The research told us that the home internet market in Manitoba is characterized by a lack of choice, compounded by the impacts of price barriers and poor service quality. Manitobans told us that their retail market is dominated by only two providers, with no third provider holding more than 4 percent of the provincial market share. Note that this slide includes non‑fixed services such as Starlink, meaning that the market is even more concentrated than it appears in this slide. Given the small scale of most of Manitoba’s regional providers, a majority of respondents reported having only one or two fixed broadband options to choose from.

704 Slide 4.

705 Our research confirmed that cost is the most important consideration for Manitobans when choosing home internet services. However, complicating Manitobans’ concern about affordability is that consumers can only make decisions based on price where they have multiple viable options to choose from. If these do not exist, which we know to be the case for many Manitobans, consumers will choose the service with sufficient speed and reliability for their needs even if it is more expensive. This affirms that consumers see adequate home internet as an essential service. It also means that discussions about affordability and “low‑cost plans” must also consider consumers’ needs.

706 This was made clear in our research, which shows that Northern residents, who pay more for internet service that is historically of poorer quality, rank reliability above price as the most important factor informing their choices. Thank you.

707 MR. KLASSEN: Thank you, Ms. Barker.

708 Turning to Slide 5, Mr. Johnston will describe persistent and growing consumer demand in Manitoba and the need for creative regulatory solutions to facilitate social and economic inclusion.

709 MR. JOHNSTON: Good afternoon, Madam Chairperson, Mr. Vice‑Chair, Commissioners.

710 The Manitoba Coalition’s research confirms that consumer demand for home internet is significant and diverse. Manitobans have never before needed to rely so heavily on connectivity to participate in community, society and the economy.

711 The Commission’s Policy Direction and its Policy Objectives confirm that the goal in this proceeding is not just to increase competition but to make sure that internet access “serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions.” This means that internet access needs to be meaningful and make a difference in the lives of Manitobans and their communities.

712 Our research heard from rural, remote and Northern Manitobans whose internet access, if available at all, is unreliable, slow, and expensive. We also know that Indigenous Canadians are further disadvantaged among rural and remote residents with even lower rates of access. This is very concerning in Manitoba, where we consistently boast the highest per capita population of Indigenous people among the provinces, approximately half of whom live in their Nation's reserves and traditional territory, frequently in remote and northern parts of our province.

713 The Manitoba Coalition understands that fixed broadband networks are still expanding into rural and remote regions, including much of Manitoba. Urban and rural Manitobans already connected to these networks look to the Commission to resolve longstanding market failures and improve retail competition.

714 While those not yet connected to these networks are beyond the scope of this proceeding, they also look to the Commission to not impose barriers preventing creative solutions to improve connectivity where it is still sorely lacking.

715 We urge the Commission to craft regulatory responses that allow for creative solutions to meet the needs of all Manitobans, including rural, urban, and Indigenous.

716 Non‑profit and social enterprise service providers, for example, led by Indigenous organizations or supported by local government, show tremendous promise for providing region‑specific services in a community‑oriented manner, either as wholesale‑based resellers or small facilities‑based providers. The Commission’s historic preference for facilities‑based competition and strong regional providers may, in this context, prevent connectivity where the Commission intends to create it. Thank you.

717 MR. KLASSEN: Thank you, Mr. Johnston.

718 Mr. Klass.

719 MR. KLASS: Incumbent facilities‑based providers, comprising former telephone and cable monopolies, have been and continue to be dominant across Canada’s retail internet access markets. While the leading role that they play investing in infrastructure to connect Canadians is undoubtedly important, competition between facilities‑based providers alone is not sufficient to deliver on the promise of Canada’s telecommunications policy objectives.

720 In light of this sad fact, it has consistently been reaffirmed that regulatory requirements related to interconnection and wholesale access are necessary elements of enabling innovation and competition in Canadian telecommunications. This remains true as internet access transitions from copper‑ to fibre‑based media.

721 Recent developments, as we've heard today, suggest that the competitive balance the Commission has been seeking to foster is at risk. At present, the benefits wholesale‑based competition brings to Canada’s communication marketplace appear to be in jeopardy. The high‑profile exit of numerous competitors in recent years should present a clear red flag that policies designed to enable access‑based competition need correction and improvement.

722 To that end, the Commission should make it clear that its access framework is a not a temporary measure. The Government’s 2023 policy direction encourages the Commission to address this very problem by suggesting it “should ensure that its proceedings and decisions are transparent, predictable and coherent” and by requiring the Commission not only to maintain a regulatory framework mandating such access services but to be proactive in ensuring that this framework remains effective over time.

723 Wholesale competition is not a panacea. In areas where competition remains insufficient to ensure the policy objectives are being achieved, the Commission could shore up its existing approach to retail regulation. This means using the Commission’s codes of conduct, building upon them and improving them to address issues as they arise, and by ensuring that they are updated and harmonized in a timely fashion. This could include tailoring requirements to areas where competition is lacking, such as in rural and remote areas, or other parts of the country where wholesale competition has yet to take hold.

724 Chris.

725 MR. KLASSEN: The Manitoba Coalition joined this proceeding with its June intervention, subsequently filed materials in October and a reply in November, and has closely monitored the development of the record throughout, and it is based on its observations of the research it conducted as well as the reading of the submissions of other parties that it provides these recommendations to the Commission today.

726 Based on the record as it has developed to date and informed by the needs and interests of Manitoba consumers, the Manitoba Coalition supports the Commission’s preliminary view that aggregated wholesale high‑speed access should be mandated, including fibre‑to‑the‑premises facilities, at just and reasonable rates.

727 The Manitoba Coalition agrees that the Essentiality analysis remains sound and applicable and permits regulatory action, albeit with minor contextual updates as canvassed in the Coalition’s October submission.

728 The Coalition agrees that aggregated and disaggregated wholesale services can coexist and that an environment in which they do may support creative solutions in markets that are underserved or so far unserved.

729 The Coalition also supports the mandating of wholesale access at various speeds to ensure the provision of low‑cost services so long as these services provide adequate connectivity for facilitating social and economic inclusion.

730 The Coalition cautions against retail rate regulation in Manitoba at present in response to the Commission's question, and that position is given the virtual non‑existence of wholesale‑based competition in the province at this point in time, and in regard to retail regulation more broadly, the Commission adopts Mr. Klass' recommendation regarding revitalizing codes of conduct such as the Internet Code.

731 As well, relatedly, the Coalition recommends that the Commission gather and publicize region‑specific market data that can be used by both the Commission as well as stakeholders like our Coalition to assess market competition, service availability and product usage for the purposes of future assessments of market activity.

732 The Manitoba Coalition again thanks the Commission for the opportunity to appear today and to present written submissions previously. We thank you for your attention and look forward to any questions you might have.

733 THE CHAIRPERSON: Thank you very much for your presentation today. Thank you for being here with us and, as we said earlier today with other intervenors, we really appreciate having the consumer voice on the record of this proceeding, so thank you for that.

734 I know that the Panel has a lot of questions. I will turn things over to Commissioner Desmond to kick things off. Thank you.

735 COMMISSIONER DESMOND: Good afternoon. Thank you for being here and certainly, thank you for your submissions and the research that you've done, all of which have helped us to understand the landscape in your province, which is very useful. I also noted the three attachments that came in as your original submission and I think one of the attachments was a home internet services survey, which was very useful.

736 I'm wondering if you could expand and explain how consumers choose their internet provider and how that changes based on where they live in Manitoba. So, are you seeing regional differences in your province?

737 MR. KLASSEN: Thank you for the question. I will provide an initial response and I will also invite my colleague Ms. Barker to respond on behalf of CAC Manitoba.

738 So, in response to your question about how consumers choose in Manitoba, absolutely, consumer practice varies on their location in the province and that's a direct product of the presence or absence of competition in their region.

739 We heard in response to our survey from of course residents of Winnipeg who benefit from, if you will recall from an earlier slide, options between the two major fixed service providers in Manitoba, which at the time that we did the survey were Bell and Shaw, now being Bell and Rogers.

740 Other parts of the province, we heard clearly from consumers that they may only benefit from one of those two choices and maybe though not necessarily another smaller regional fixed wireless provider.

741 But those two circumstances don't capture the full extent of consumer experience in Manitoba, because, as we know, and recognizing the limits of the scope of this proceeding, we know that there are residents of Manitoba still waiting for connection to fixed wireless networks and if those residents are lucky, they may be situated close enough to a tower to take advantage of a wireless service such as from a provider like Xplore or may have the opportunity if they have the financial means to access service through a satellite‑based provider such as Starlink. But we know as well that that good fortune, both in terms of proximity to a tower as well as financial means as well don't capture the full extent of the Manitoba consumer experience.

742 And so, the choices that Manitoba consumers have available to them are definitely a direct product of their geography as well as market dynamics.

743 And as we heard Ms. Barker explain in her portion of the presentation, when consumers have the opportunity to choose, yes, absolutely, price is a very important factor.

744 The other factors that have been referenced today already, such as, for example, quality customer service, local provision of service, opportunities to bundle services, et cetera, those are all certainly in play in Manitoba as well, but again, consumers can only take those factors into consideration when they have the opportunity to choose, which for many Manitobans is not the case.

745 Subject to any additions from Ms. Barker, I will leave the response there.

746 MS. BARKER: Thank you. I keep forgetting to turn myself on.

747 I'm originally from rural Manitoba, so I still have lots of friends and connections in rural Manitoba and I hear stories about having the option, only option of internet through Xplornet and you never knew whether it was going to be on or whether it would stay on and how slow it was. At least one friend opted to get Starlink, which cost them $900 just for the basic equipment to go ahead with it, and they don't need the speed and the amount of service that is available to them with Starlink. They did it because they wanted the reliability.

748 Anytime you're talking to somebody from rural Manitoba, they've always got stories of not being able to do things on internet, like during COVID, people trying to do their university courses when they didn't have reliable internet. Even the elementary and high school kids in rural Manitoba had real problems trying to do their school by internet.

749 Now, I think this is ‑‑ hopefully, COVID is a one‑time sort of thing, but the kind of restrictions that that places on people who don't have reliable internet in our day and age really restricts their ability to be part of the Canadian experience.

750 COMMISSIONER DESMOND: Thank you very much.

751 I'm sorry, did you want to add anything?

752 MR. KLASSEN: If I might briefly conclude the response for the Manitoba Coalition, Ms. Barker has identified the combination of factors related to lack of choice and the fact that has been acknowledged today, connectivity has become a basic and essential need.

753 If the Commission is looking for additional illustrative examples of the challenges experienced by Manitobans navigating the intersection of those barriers, they need look no further than the excerpts from our focus groups presented in the report that you referenced earlier. Thank you.

754 COMMISSIONER DESMOND: Thank you for that and I appreciate your comments with respect to the real challenges that people are facing.

755 I'm interested in hearing a little bit more about the Manitoba experience. I mean we've had wholesale HSA services for a while in some form, not necessarily HTTP but wholesale access, and we haven't seen a whole ‑‑ I guess a lot of development in Manitoba, a lot of smaller players, and I'm curious if you could comment on why you think that is. Even though there's been some availability of access to smaller players, why haven't smaller players evolved in Manitoba as opposed to maybe other parts of the country?

756 MR. KLASSEN: Thanks very much for the question.

757 The most important point I will make in response is the fact that they haven't. Regardless of the underlying reasons, Manitobans are still waiting for that competition to materialize and that's the case both in the centre of Winnipeg as well as in the rural regions. The Manitoba Coalition's consumer research doesn't give clear responses to that question. We focused on the consumer experience.

758 And the one point I'll make in addition is that the observations made by the Commission in a series of decisions in early 2023 related to the realization of the ‑‑ I won't use such a strong word as failure, but the way the disaggregated framework did not achieve its intended results, those realities ring true in Manitoba. And so the challenges faced by efforts across the country to build wholesale competition are in large part consistent with our experience in Manitoba.

759 My colleague Mr. Klass may have comments to add, but I'll leave the response there.

760 MR. KLASS: Yeah, I suppose I'd draw the Commission's attention to an agreement between Manitoba Hydro Telecom and Xplornet that was entered into during the pandemic. I think a number of the terms of this agreement are not public, and so perhaps the Commission would have to exercise some power in that regard. But their point being that there had been opportunities for this type of arrangement to emerge in Manitoba, and I'm not aware of any sort of great shining success stories coming out of it.

761 COMMISSIONER DESMOND: Okay, thank you.

762 Mr. Klass, I do want to just maybe ask you a question as it relates to wholesale‑based providers. In your report, I think it was the second attachment in the package of materials that were originally filed, your report indicates at page 8 that in 2013 there were 693,000 households who did subscribe to wholesale‑based providers, and then by 2021 that number increased to 1.2 million households. So there appears to have been a growth in household subscribers.

763 But how do we square that with your view that there's been a recent downturn in the trajectory of wholesale‑based competition? So that might be on a more national level as opposed necessarily just to Manitoba, but if you could maybe comment on that and what factors influenced growth.

764 MR. KLASS: So I think a big focus of my report has been the sort of long‑standing commitment to this type of approach, the recognition at each step of the way in revisiting these policies both by government and by the regulator. At each opportunity, it's sort of been reaffirmed that wholesale‑based competition and facilities‑based competition, while sometimes intentioned, actually form two sides of the same coin.

765 Mr. Mezei's comments this morning with respect to the sort of recent last 15 years' evolution of this policy reflect that. He discussed speed matching. He discussed usage‑based billing. In my report, I go further back into the 1980s and 1990s to point to the inflection points in this policy's development.

766 I think basically the period leading from usage‑based billing, speed matching, put these wholesale‑based providers on the footing that they need to compete with the technology available at the time. And so with speed matching, with the ability to offer unlimited service, companies such as TekSavvy or VMedia were in a position where their efforts were beginning to bear fruit.

767 You'll notice that the data I cite in that assessment ends I think around 2021. So you know, there's a bit of a lag in terms of the performance of that ‑‑ or the availability of the data on the performance of those companies.

768 In the intervening years, I think it comes down to the problems with the rates. You know, you see, as Mr. Lawford referred to this morning, a sharp drop in the subscriptions in wholesale providers following the 2019 ‑‑ I'm going to get the numbers wrong on this, but there was the lowering of the wholesale rate that these companies pay, and then there was the reversal of the rate. And the prices that these companies charge, they basically couldn't continue to be competitive in the market at that point.

769 So the Goldilocks question that was asked earlier, I think, is something that we're not in the right place with respect to where those rates are right now. The policy direction to sort of revisit this question of whether aggregated or disaggregated, what the configuration of wholesale should be, sets us on the right track. And then the hard work I think will come in getting into those details and sorting out what sort of a rate can allow these companies to proceed and reverse their downward slide.

770 COMMISSIONER DESMOND: Okay, thank you.

771 In your view, has the landscape changed since Bell acquired MTS?

772 MR. KLASS: With respect to the presence of wholesale providers, not that I'm aware of. Changes since, like broad perspective changes, Manitoba used to be at a price advantage. The retail services in mobile and in Internet were often quite favourable in comparison to what would be available in the rest of the country's retail markets.

773 What I've observed and researched since that time, specifically in a report for CAC Manitoba that was commissioned by the Office of Consumer Affairs and published in 2021 ‑‑ not filed on the record of this process, but could potentially be if requested ‑‑ showed that prices in Manitoba essentially converged with most of the rest of the country following that acquisition. And so while other provinces were seeing gains, Manitoba was basically standing still in terms of its pricing.

774 COMMISSIONER DESMOND: Okay, thank you.

775 Earlier this afternoon, you talked about how deployment in Manitoba and certainly in the rural areas has been slow. We've seen 68 per cent of northern and 85 per cent of southern Manitobans having access to fibre or cable. And of course, there's still quite a bit of work to do in terms of connecting people in rural areas. At the same time, the incumbents have made the argument that if we were to mandate wholesale access, then that would limit the areas where the could deploy fibre, particularly again in the rural and remote areas.

776 So I do know that in your intervention you're skeptical of their claims, that their investments would not take place. But how do we kind of reconcile those two things, where past wholesale mandates that we've seen have not really resulted in the roll‑out of fibre at the level maybe that you'd like to see with your statement that, you know, these investments won't take place and the fibre deployment is slow in Manitoba?

777 MR. KLASSEN: Thanks very much for the question.

778 With respect to the promise that the Manitoba Coalition sees in the Commission's proposed solution in mandated aggregated wholesale access, from our perspective and based on our observation, it's a new experiment for the purposes of the Manitoba market. And so there's at least some reason for optimism that these opportunities will be more effective than regulatory interventions attempted in the past.

779 In terms of balancing that with the skepticism, as you call it, on the part of the Manitoba Coalition of the service providers' position that a mandated access framework will undermine their commitment to investment in infrastructure, you're correct in that the written submissions on the record to date of the Manitoba Coalition express that skepticism. And I'm happy to provide a little bit more detail today.

780 You know, as is canvassed in Mr. Klass' report as well as in our earlier submissions, arguments have been raised before this Commission that wholesale access mandates will undermine investment since the beginning of discussion of wholesale access mandates. And through that period of time, we have seen fibre networks grow, and the service providers continue to be profitable both for their shareholders and executives and continue to provide services. And so we note that as long as this discussion has been going on, the threats, so to speak, have yet to materialize.

781 Second, and importantly, we note that the Commission's wholesale rate‑setting exercise, Phase II costing, is designed to have capacity to account for these realities, taking into account both capital costs and forward‑looking incremental costs.

782 Recognizing the challenge of the Goldilocks zone, as it's been referenced already today, we note that we didn't hear from the Competition Bureau this morning that finding the Goldilocks zone was not possible or that it did not exist. And recognizing that it might be challenging, this Commission is well equipped to pursue it.

783 Third, we note that there are significant federal subsidies available to support the expansion of networks into currently unserved parts of the country, including in Manitoba. And those funds exist both through the Commission as well as from the federal government. And we know that there has been significant expenditure to date, including in Manitoba, and opportunity for further investment from those sources down the road.

784 Fourth, and finally, part of the narrative from the large service providers assumes that they are the only sources of these services and that they have been making plans to expand services through investment in infrastructure into unserved regions. And customers that aren't yet served have only to wait, and they'll be come to eventually.

785 The reality is that those services have not been provided yet, and they are not provided today. And the Manitoba Coalition sees significant opportunity for these creative solutions that we referenced in our presentation to fill that gap where the incumbent service providers have so far been unwilling to go. Manitobans have been waiting for a long time for competition to materialize. And it's a reality that, even with a wholesale access mandate as is being discussed here, that wait may be prolonged still as the incumbent providers on which we've been relying to date continue to work through their list of communities to serve.

786 But more importantly, we know that these gaps in services can be filled by other competitive sources that aren't currently present in the market in the large way. We've heard today about factors considered by consumers in assessing competition and their choices do include price. But we know that among those factors are other attributes of possibly alternative business models, such as locally oriented, community‑owned, community‑oriented, or social enterprise models that may be attractive to consumers for reasons other than price or reliability.

787 And the Manitoba Coalition has first‑hand observation of some of that work that has begun in Manitoba and, from our perspective, presents significant opportunity for non‑traditional service providers to step in and fill the gaps left by the incumbent service providers in the event that a wholesale access mandate is implemented.

788 And if I might, Mr. Johnston, to my right, is the member of the coalition with the most direct experience and observation of those initiatives in Manitoba. And if you'll indulge us for a few moments, I'll invite him to provide an explanation to the Commission of what we see and what we might have in mind when we suggest that it's no longer necessary to continue to rely on the incumbent service providers to fill those gaps that remain open.

789 MR. JOHNSTON: Thank you. So I can't really do justice to the Indigenous concerns that I carry with me today as one leader but at a national level with a growing, very quickly growing organization. As you may know, 80 per cent of all Indigenous peoples now live off reserve, and primarily in the larger cities and towns.

790 But coming to this, it's a slab of concrete example of, as my friend pointed out, an Indigenous social enterprise, which we own in our centre that they call the Neeginan Centre. And it's called Far Fox. And Far Fox is on our hopefully a broader pathway to becoming an MBNO at some point in time.

791 And the last time I was here, I spoke to that issue, and the Commission responded and opened a door a little bit. But I think there's ‑‑ more could be done. The door could be opened wider for those kinds of entities to enter the marketplace and demonstrate the capacity that my friend has mentioned.

792 And as an example, our head of IT, who oversees Far Fox, worked with the Sagkeeng First Nation outside of Winnipeg, north Winnipeg, northeast, and helped them to develop a fibre line from Selkirk, Manitoba, to their reserve at Pine Falls, Manitoba. And that's operational now, and they own it. And now they have the capacity to connect other First Nations communities.

793 So it's a first step, but a big one. And it also demonstrates in a real way, which is very important in the future, a stronger connection between those of us who live in cities and those who lives on reserves or remote or rural communities and how we could truly help each other.

794 The last thing I'll say is ‑‑ and it's an understatement ‑‑ we really haven't yet told Canada, you know, the greater benefit that can come from our participation in the economy, and in this case the telecommunications sector of that economy. You'll know that we were kept out of the economy for almost 84 years when the Indian Act was implemented in 1876. And then but today, we're in this time of truth and reconciliation and UNDRIP, and the Supreme Court just underscored our right to self‑government.

795 So the urban leadership is coming together across Canada, and we will act to enhance our engagement with First Nations, with Métis, and with Inuit interests to address these bigger issues that we're facing around the telecommunications sector going forward. And that would include, I guess, more presentations to the Commission, the minister responsible, prime minister, and Cabinet. And some of those thing are already underway.

796 So we're hopeful and for more positive change and absolutely believe we have a right to ‑‑ because we were kept out of the economy and are playing catch‑up in so many different ways, we have the right to work with these big telcos in answering some of these questions.

797 And in that regard, I went to the big three websites this past weekend, and I noticed that Rogers and Telus both have T&R pages on their website. And Telus has a full report there on actions they've taken to date on economic reconciliation. But and maybe I missed it, I went to the Bell site. I didn't ‑‑ couldn't find anything.

798 So again, I'll just close there and say that so much more work to do yet, but the value statement in terms of Indigenous participation in the telecommunications sector, particularly in terms of our needs in medicine for e‑medicine, those kinds of things, connections between First Nations and their members who live in cities ‑‑ in a lot of cases over 50 per cent. I'm very fortunate that my band in Thunder Bay ‑‑ I can attend chief and council meetings online in Winnipeg. So those are, you know, sort of hints of what can come in the future.

799 So connectivity is hugely important to us and we need, you know, to make our own investments, but also we need to see more investment from the industry as a whole. And hopefully under T&R that can happen. So thank you.

800 COMMISSIONER DESMOND: Thank you for that. And Mr. Johnston, I think it's really important that we do hear from Indigenous communities, and certainly really appreciate hearing your perspective today. It's interesting to hear some of the creative ways and innovative ways that communities can come up with new solutions to ensure that they do have access and new companies being developed.

801 I'm wondering if you could just comment on what is the state of Internet access for Indigenous Manitobans? Are you able to speak to how many Indigenous peoples in Manitoba would have access to the Internet or what the state of access is?

802 MR. JOHNSTON: Yeah, it would vary a little bit between the rural communities, which generally may have a better connection than those in the remote communities. So in Manitoba, we have 63 First Nations, and at least a third are in the remote areas. And the connection there is very poor and often is reliant on satellite connection, which can be very slow and onerous to use. So again, some of our work going forward with PILC and with other interests will be to present a better picture, a more accurate picture of the question that you've asked. So thank you for that. It underscores work we have to do.

803 And I might point to you, you have a presentation in writing from the First Mile Connectivity Consortium. And I looked at it, and it does complement our own submission. And as I said, we will start to take more action to connect with those kinds of groups and to, as I say, improve, create a more accurate picture of the question that you've just asked me, so.

804 COMMISSIONER DESMOND: That's great. And I'm actually glad you mentioned the First Mile Connectivity Consortium because I had a question on that as well. And as you've pointed out, their submission aligns quite closely with yours in terms of suggesting that if there was access, then there would be strong opportunities for reconciliation.

805 But at the same time, we have a Telus submission which suggests that if we were to mandate aggregated FTTP access, it would limit investments and that it would undermine reconciliation efforts. So I'm curious if you could comment on that, the views of maybe some of the larger players that say if we were to open up access, then they would ‑‑ it would undermine their investments and would, as a result, impact on reconciliation.

806 MR. JOHNSTON: I think that's a sort of a premature conclusion by anyone in the process. The historic lack of relationship between Indigenous peoples and their organizations is still in its infancy and under very new legislation, and the Indian Act is still there. The two are as different as night and day.

807 There are other impacts on our people, particularly the First Nations peoples. They were the ones who were segregated on reserve. They were directly impacted in a very real way by the residential school system. And so people like myself, who are First Nations with status but not 'til I was 38 years old because of changes in the Indian Act, are experienced growing up off reserve, going to schools with other Canadians, and beginning to appreciate the value of building good relationships and partnerships.

808 And so I think Telus needs to open its mind a little more and see the potential of partnerships with First Nations, Métis, and Inuit groups and the value, the business proposition, the value position that that could represent for them and for us.

809 As I said earlier, we were never meant to be part of the economy. We were prohibited by law, the Indian Act, from participating. And so but we can't dwell on the past. We have to focus on the future. And I think, in the final analysis, I believe the quality of engagement between our leaders and companies like Telus and Bell and Rogers that can lead us all to a better place that will make Canada a better country. Exclusion never works. Never has worked.

810 And so I'm very ‑‑ being an older person, I'm an older leader, having participated with the first Prime Minister Trudeau in putting us in Canada's Constitution, we're only seeing right now a trickle of what that truly means. And we're going to answer the question for all Canadians: What would Canada look like today if we'd had been allowed to participate in its creation, creation of its institutions, and the, how we phrase it, the application of our ways of knowing, being, seeing, and doing to this country that comes from one of our words, kanata?

811 So I’m hopeful, but it takes hard work. Our leaders have to be willing to engage, to ‑‑ you know, I was one of the first Indigenous business graduates in Canada back in 1970, and at that time there was no other Indigenous person in my class. And so again, as more of our leadership, Chiefs, Councils attain higher levels of education, you’ll see a difference in the outcomes of their advocacy or their representation of our peoples. And not that it’s bad right now, but these are important factors and, you know, segregation has evidence‑based psychological impacts on human beings and so we still see that in the picture, but time will erase it.

812 And now, as I said, with 80 percent of us living off reserve going to school and getting educated ‑‑ our average attainment of education off reserve is higher than it is on reserve. But overall, we’re still trailing.

813 When I was in Saskatoon recently, the provincial government announced that the graduation rates for other Canadian students was nine out of 10. For Indigenous, it was six out of 10.

814 So you know, part of the predicament that we’re in right now as Canadians in terms of our relationship with each other and a better future is very much dependent on the change that I’m speaking to here, so thank you.

815 MR. KLASSEN: And if I might, Commissioner Desmond, the Manitoba Coalition certainly appreciates seeing content in the submissions of TELUS related to the importance of economic reconciliation and the importance of connectivity to those efforts, but we caution the Commission against taking those submissions in the full weight as they're presented.

816 We suggest that threats that a wholesale access framework will undermine investment through a reconciliation lens are still threats that a mandate will undermine investment. And as we discussed a few moments ago, there are significant opportunities for economic reconciliation in this industry that don’t rely on the cooperation of large service providers.

817 And so the Commission has a lot more creative options at its disposal than TELUS submissions would suggest.

818 And very briefly in response to your earlier question about data on the availability of connection for First Nations, I’ll draw your attention to the figure presented on slide 5 of our presentation, which is page 7 of the Auditor‑General’s report filed as Attachment 3 to our June submission on remote and rural connectivity in Canada and we’re comparing connectivity for First Nations compared to rural and urban Canadians as well as data I believe disaggregated by First Nation shown geographically available to the Commission through its own communications marketing reports.

819 Thank you.

820 COMMISSIONER DESMOND: Thank you very much.

821 Mr. Johnston, if I could, I’d like to ask you just a very direction question. And that is, I mean, we’ve talked about the TELUS submission and the opportunities that exist for economic reconciliation, but in your view, what else could the Commission do to be mindful of and to help advance reconciliation? Do you have any specific recommendations that you would bring to the Commission for actions we could take?

822 MR. JOHNSTON: Yes. Thank you very much for that question.

823 And so as I spoke earlier mentioning the partial opening of the door for the NVMOs in Canada ‑‑ and I say partial because the requirement of these organizations to create their own ‑‑ or establish their own network within seven years may be overly onerous to Indigenous interests because of our historic lack of equity, capital to make investments for infrastructure.

824 So again, we need to get a better handle on that going forward and so, in my efforts as a newer national voice, I will be reaching out to my First Nations, Métis and Inuit brothers and sisters to raise the level of engagement and discourse on these important subject matters, and hopefully achieve a higher level of consensus on action steps that are required with the Commission, you know, with the Prime Minister and the Cabinet, the government to ‑‑ and then, you know, doing that same thing with the private sector, again at a higher level.

825 I mean, our ‑‑ the representation of Indigenous persons in the boardrooms of these major corporations is almost non‑existent in most cases, so unless you ‑‑ you know, my own experience is again coming back to that ‑‑ our segregation. My whole life has been ‑‑ any success I’ve had is the relationships that I’ve built with other Canadians, and I grow that almost every day. And my willingness to engage with groups like PILC and CAC Manitoba and Harvest Manitoba, again, are hard evidence of what can come out of those kinds of partnerships.

826 So I think, you know, there’s ‑‑ again, to state how much more work is ahead of us of this nature. And you know, if I can help my brothers and sisters who live on reserves and the Métis community and Métis Nation and the Inuit as well, then, you know, that’s how I anticipate being able to do that, is to enhance my engagement with them now because I’m a national voice for urban structures, mostly charitable ‑‑ Indigenous charitable not‑for‑profits. And we’re at ‑‑ Inuvik is already at over 400 organizations with the potential to grow in the thousands.

827 So it’s that kind of ‑‑ those kinds of changes that I think offer Canada that better future that I’ve spoken to now in a much improved relationship between all Canadians and ourselves. And that’s true truth and reconciliation.

828 So thank you.

829 COMMISSIONER DESMOND: Thank you very much.

830 I just have two questions to finish with and then I’ll pass it over to my colleagues for ‑‑ I’m sure they’ll have additional questions as well.

831 The first of my two is about any limitations that should be imposed if in the event the Commission were to mandate access. What, if any, limitations would you suggest as being appropriate and then how would those limitations impact on rural or remote areas? Should there be something specific for rural or remote areas, and what could we do to mitigate any impact arising from that?

832 MR. KLASSEN: Thank you very much for the question.

833 From the perspective of many Manitobans, the prospect of a retail internet market in which it might be appropriate to impose limits on competition sounds like a luxury and would be something they’d be very excited to experience and, frankly, seems quite a distance down the road. And that informs the Coalition’s perspective on many of the forms of limits that are proposed on the record of this proceeding.

834 And the general response to all of them is that, given the dearth of competition in Manitoba, it would not be appropriate to limit competition through the Commission’s regulatory intervention at this time.

835 We’ve heard proposals of, for example, not providing wholesale access to incumbent providers. We’ve heard proposals of, for example, not permitting wholesale access framework to apply in rural areas or to portions of networks or infrastructure projects that have recently been developed within a certain time period. And from the Manitoba Coalition’s perspective, many of these proposed limits are akin to requiring customers to tolerate a non‑competitive market longer than is necessary effectively in order to pay for the right to enjoy a basic service, and that’s, from our perspective, simply not acceptable or appropriate.

836 And secondly, again recognizing its limitations and the challenges of finding the Goldilocks zone, we understand the wholesale methodology ‑‑ the wholesale costing methodology and rate setting through Phase 2 to be designed to account for exactly these challenges, being capital costs and forward‑looking incremental costs.

837 And so concisely in response to your question, particularly in light of the experience in Manitoba, the Manitoba Coalition would not support limits on the introduction of competition to the market in Manitoba.

838 COMMISSIONER DESMOND: Okay, fair enough. Thank you very much.

839 Just as a last question, in your opening comments I believe you commented that both aggregate and disaggregate could coexist, and I just wondered if you could add a little bit more detail about how you see the two continuing to operate. And of course, the incumbents have expressed concern about the cost of continuing both on an ongoing basis, so if you could just address that.

840 MR. KLASSEN: Thanks very much for that question as well.

841 That position is a direct product of our recognition of both the need and the opportunity for creative solutions in Manitoba. We recognize that in places where network infrastructure already exists, an aggregated wholesale access service would enable a wholesale‑based retailer to enter the market and provide competitive pressure without investing in infrastructure. But keeping in mind residents of Manitoba, and particularly residents of First Nations in Manitoba who don’t yet benefit from connection to fixed wireline services, we note that the availability of a disaggregated service leaves the door open for investment by, for example, First Nations like Sagkeeng, as my colleague mentioned a few minutes ago, to overcome historic barriers to accessing capital, invest in, for example, community owned or community supported network infrastructure and create a relationship with the service provider to access a network in order to provide a service where it might otherwise not be available or where they might otherwise be waiting for five, 10 or any number of years more for the incumbent providers to eventually get their way to providing service in their community.

842 MR. KLASS: So in tracing the history of this regulatory policy ‑‑ excuse me ‑‑ in my report I sort of canvassed the development of the facilities‑based competition policy. And what you see is that in 1996, the federal government was considering how to introduce competition in the wake of the introduction of the Telecommunications Act.

843 They primarily countenanced the idea of allowing previous cable monopolies to enter into competition in telecommunications and previous telephone companies to enter into competition in broadcasting. This is sort of the origin of the facilities‑based competition policy, right, and so a lot of what we hear about this juxtaposition of the dynamic competition of facilities providers competing to provide the best technology against the short‑term considerations of price in a sort of a more classical economic conception comes from this policy direction that the federal government issued in 1996, but what you don’t hear about in a lot of the discussions of this is that it also contemplated mandatory network component sharing as a part of this policy because the convergence policy of 1996 recognized that simply allowing one company to compete with another would just give a duopoly and it wouldn’t bring enough competitive force to deliver on objectives like affordable service.

844 And so if I just might read, this policy direction said:

845 And I think that the philosophy behind this ‑‑ we heard the word “end to end” earlier in Mr. Mezei’s framing of the scenario was that we should be affording the maximum opportunity for carriers to provide services that they thought would be able to tailor to people’s needs and let the market sort it out from there.

846 By making these opportunities available, companies can come in and serve different segments of the market or adapt to the circumstances that face their particular situation. So in a city, it might be getting access to a particular point of interconnection where things are dense or to getting one point of interconnection to cover the whole area, whereas the challenge that faces someone who’s trying to set up a network in a rural area may be getting access to a transport link, you know, where they can set up towers cheaply, for instance, in the context of wireless internet service providers.

847 So the idea of providing that type of interconnection at technically feasible points allows for flexibility for the service providers and basically affords the opportunity to create a regulatory structure that doesn’t pre‑determine the outcomes. It leaves it up to market participants to pick and choose what they want to best serve the needs of their particular circumstance.

848 COMMISSIONER DESMOND: Thank you very much.

849 THE CHAIRPERSON: Thank you. Thanks, Commissioner Desmond.

850 We’re going to go over to Commissioner Naidoo.

851 COMMISSIONER NAIDOO: Hi. Thank you so much for being here today.

852 I’m going to start off by asking you a little bit about affordability. And when we’re thinking about affordability and benefits to consumers, I’m wondering if you think it’s just a matter of prices or whether there are other factors to consider, particularly as it relates to your province, Manitoba.

853 MS. BARKER: I think at least in one of the slides that I showed, it’s not just a question of affordability. It has to meet the needs of the consumers. And that ‑‑ you know, Damon has shared that for northern residents, Indigenous residents they’re paying more so that they have ‑‑ they’re willing to pay more so that they have not just affordable, but dependable service.

854 And I think that’s true for all of rural and remote Manitoba, and in some cases ‑‑ I mentioned I knew someone that paid for more than they needed so that they would get the ‑‑ or they would get the dependability. But I think one of the issues for consumers is that they either get not enough or too much and they don’t have the choice of picking and choosing what works best for them.

855 I think that’s one of the issues that the average consumer is faced with and that for people on the ‑‑ with lower incomes, they need internet but they need to have it in ‑‑ something that they can afford and may not be to the ‑‑ you know, the Cadillac level.

856 MR. KLASSEN: And if I might add to that response, we have a couple illustrative examples of this reality in the report following our consumer research which, again, consisted of both the survey and a series of focus groups, first acknowledging the limitations of that survey. It was an online survey and the focus groups were conducted by Zoom. And so we acknowledge that we do not have the views of Manitobans for whom price barriers prevented access.

857 We do see a correlation between household income and connection speed and connection capacity, and so we see that consumers are making decisions based on price and ability to pay.

858 But the important thing to keep in mind is that coupled with the importance of prioritizing affordability is the fact that, as has been acknowledged by the Commission and by other parties today, we’re talking about a basic and essential service. And we saw in our consumer research that a majority of respondents would decline the opportunity to reduce their service speed in order to save money, which tells us that consumers are using what they have and they need what they have. And you know, to use a technical term, we’re getting what we think is inelastic demand for connectivity in Manitoba because of its necessity for social and economic inclusion, access to education, housing, public services and similar.

859 COMMISSIONER NAIDOO: Do you see a remedy for that?

860 MR. KLASSEN: Thanks very much for that question as well.

861 And there’s certainly merit to the position of our friend, Mr. Lawford, for the Public Interest Advocacy Centre earlier this morning recognizing that social benefit programs have a role to play in ensuring that there’s equitable access for all to basic services to meet basic needs, and there’s still considerable work to do on that front on the provincial level both in Manitoba and elsewhere in terms of gaining access and recognition for those needs through social benefit programs.

862 But the Commission has an opportunity and a role to play, particularly through the provision of low‑cost services as are being contemplated in this proceeding, to do what it can within the scope and realm of its authority to provide adequate affordable services in this current discussion through a wholesale market at just and reasonable rates with the intention that in the retail market, those services would be accessible to the people who need them.

863 COMMISSIONER NAIDOO: Thank you.

864 I think if you’ve read any of the interventions online, you’ve probably seen that bundling is a huge issue. It seems to come up over and over again.

865 Incumbents, of course, can bundle services with cell phone and television services, but wholesale‑based providers often can’t offer the same range of services. So in your view, do you think consumers prefer buying bundles and how does that affect wholesale‑based provider’s ability to compete?

866 MR. KLASSEN: Thanks for this question.

867 And if I might ask you to indulge us for a moment, my colleague, Mr. Klass, was about to chime in with your previous question, and if I could invite him to provide that response and then I’ll ‑‑

868 COMMISSIONER NAIDOO: My apologies. Yes, please do.

869 MR. KLASSEN:  ‑‑ respond to your current question.

870 Thank you.

871 MR. KLASS: No problem. Thanks.

872 So I mean, I think my response to the previous would touch on both questions, and it’s specifically in reference to something that’s come up earlier in the day, like is competition going to reach some people, right. Are these companies going to offer internet at $10?

873 I think Connected for Success and similar programs are a step in the right direction, but means testing is necessarily going to leave some people behind. Even if you get to something that looks like what the traditional conception of just and reasonable rates looks like in internet, it takes into consideration the high fixed capital costs of providing the service. And the fact of the matter is, is that some people are not going to be able to afford what a telecom company considers to be the just and reasonable rate.

874 Companies likes Rogers, who have introduced and expanded the service, deserve recognition for contributing to solving the problem, but even those programs won’t take it the rest of the way.

875 And so in the report that I’ve submitted, I pointed to existing modes of regulation that the Commission has already engaged. I’m speaking specifically of the Codes of Conduct that I believe were promulgated under section 24. It’s a relatively broad power that allows you to impose conditions on the offering of telecommunication service.

876 You have your Internet Code, you have your Wireless Code, you have your TV Service Provider Code, all three of which are administered by the CCTS.

877 I think that those types of approaches are a good way of catching these problems in the market that aren’t addressed by the direct and sort of more onerous economic regulation.

878 So for instance, the Wireless Code includes measures that limit overage fees, right, because if you’re stretching your budget and you’re budgeting and you’re stretching your budget to afford the lowest‑priced internet service offering on the market, you probably can’t afford to get overage fees unexpectedly at the end of the month, right.

879 This is where bringing those Codes up to date, keeping the dust off of them and potentially harmonizing them, for instance, to address issues with bundling that they don’t individually address could be something that’s within reach for the Commission to address this type of a problem in a way that economic regulation can’t, you know.

880 And it also, I think, affords the benefit because the CCTS administers this to the extent that people know about the CCTS and how to access and the wherewithal to engage with them, they have an advocate, right. So people who may be struggling to access these services, who perhaps don’t have the time to spend on the phone haggling with the phone company between jobs or while taking care of their children can engage with an advocate who will help them understand and represent these rights.

881 And I think I’ll just close by saying that part of making this recommendation comes, in my thinking, in line with this directive to ensure that your decisions are predictable and coherent, right? Because you hear the same thing from all sides of the table in this consultation. We want certainty, we want predictability ‑‑ you know, the end outcome might be different from people but everyone is saying the same thing, and that's one way you can address the problem.

882 MR. KLASSEN: Thanks, Mister Klass. And back to the question on bundling ‑‑ and I recognize that Mr. Klass took us there at the end, which I appreciate ‑‑ I'll three brief points, in response to your question about bundling.

883 First, recognizing the value and the opportunity for consumers of the ability to save money when purchasing multiple services.

884 Realistically, those savings are only available to consumers who are purchasing multiple services, and so for consumers who, for example, don't have the means for something that might be considered an extra, such as a television service, or for those, by nature of their geography in the province, may not have the opportunity to access all services from the same provider, those savings aren't available.

885 Second, the Manitoba Coalition is observing a trend in which consumer opportunities, like bundling, might be becoming less relevant with time, as, for example, things that we ‑‑ historically relied on, home phone, are increasingly available through internet connection, and the same can be said for television service, there's streaming services.

886 And with that reality the importance of bundling to consumers may be decreasing over time.

887 And third and finally, we recognize the importance, for consumers, of price, and that's made clear in our consumer research, coupled with, of course, the importance of reliability.

888 But a theme that I think we've heard a number of times today is that focusing narrowly on things such as price and reliability as indicators of competition and more importantly as things that consumers rely to make decisions in the marketplace is an unduly narrow view of the nature of competition as is experienced by consumers, recognizing that consumers also want to take into account other realities that may be more easily available through alternate service providers, as our colleague said this morning, such as locally‑based customer service ‑‑ there's a significant amount of value in that ‑‑ or, for example, as suggested by Mr. Johnston, a consumer might see value in purchasing services from a service provider whose mission it is to both provide service and invest in the community where they provide services.

889 And so, recognizing the value for consumers of savings available through bundling, there are more things that are important to consumers in the marketplace, as we move forward.

890 COMMISSIONER NAIDOO: All right. So, I think what you're saying is that there are other ways that wholesale providers can compete with those who are able to bundle?

891 MR. KLASSEN: More ways that they can compete and more ways that they can provide value to consumers.

892 COMMISSIONER NAIDOO: All right.

893 MS. BARKER: Just a little comment. I was talking to a friend who lives in the Southeast corner of Manitoba and trying to get service for a TV that wasn't working, and was told by the customer service person on the phone: Well, you could just go down to the Mississauga office and pick up this piece of equipment that she needed.

894 Like, a piece of service that isn't necessarily recognized ‑‑ you know, you can talk to a real person, which these days is not always known, but it needs to be somebody that knows the local situation.

895 COMMISSIONER NAIDOO: Thank you very much. Those are all my questions. Madam Chair?

896 THE CHAIRPERSON: Thank you, Commissioner Naidoo. Let's go to the Vice‑Chair.

897 VICE-CHAIRPERSON SCOTT: Thank you. So, I think everyone would agree that the market share of small ISPs that use wholesale in Manitoba is very low, like it's a fair characterization, but interestingly it is not zero. If it was zero that might raise all kinds of other questions and concerns, but the fact that there is some activity in that area suggests a couple of things ‑‑ you know, so at least it is technically possible. Clearly, the regulatory framework allows for it to some degree. Clearly, somebody thought it was forth their while to offer the service and somebody somewhere found it attractive to take the service ‑‑ but very few people.

898 So, how would you attribute causality in those things is that ‑‑ is it the pricing that is causing the service to be taken so seldomly? Are there fewer service providers interested in providing it in Manitoba, for some reason? Because in other provinces we are seeing higher numbers with the same framework in place, so what is different about Manitoba that is giving us these results, I think in essence is the question.

899 MR. KLASSEN: Thanks very much for the question, Mister Vice‑Chair, if I could take a moment to confer with my colleagues, we will provide a response.

900 MS. BARKER: I would just like to say that Manitoba is a province that has more than 60 percent of its people living in one centre, and a whole lot of people living in very remote areas and very segregated from each other. I guess it would be very difficult, and I think the ‑‑ in Ontario it would be ‑‑ if you took Northwestern Ontario off and just look at it, as opposed to Ontario as a whole.

‑‑‑ Pause

901 MR. KLASSEN: Thanks, Ms. Barker and thanks for your patience.

902 Again, and not to unduly repeat the point, but you are correct that the reality in Manitoba is that presence is small, and we haven't seen that growth that may have been evident elsewhere, and which consumers in Manitoba are waiting for and relying on.

903 Not in direct response to your question, but I think an important point to raise, related to recommendations to the Commission for data collection and data sharing, you ‑‑ you know, correctly identified that there is some activity in Manitoba but with respect to stakeholders, like ourselves, and our ability to assess that reality based on public information from the Commission, we can't do that on a granular level, due to the constraints on the information that is made available, and so we are a little bit constrained in our ability to respond.

904 But, we know a few things; 1) That the providers that do exist in Manitoba, other than the incumbent providers, remain constrained to relatively small geographic areas, and those that are expanding are showing that they have, to a certain extent, are needing to rely on the subsidy and funding programs available from the federal government, and we see that in Southcentral Manitoba.

905 But, you know, importantly ‑‑ and to go back to the example from Mr. Klass earlier today ‑‑ there are challenges related to access and rates that we see in the example of Manitoba Hydro Telecom and the inability of Xplore to actualize the agreement in principle that was made public with respect to their use of that network.

906 And so, we are observing advertising in Manitoba from service providers elsewhere, that suggest that if the framework proposed by the Commission is put in place, that there may be an opportunity to act on it, but it's not evidence in the market so far.

907 MR. KLASS: Yeah, so in the material I submitted I referred to Videotron's purchase of the media part of this pattern we've seen of the facilities‑based telecoms purchasing, for whatever reason, wholesale‑based competitors.

908 I'm not certain of the extent to which VMedia was present in Winnipeg prior to this purchase but I know that commitments were made with respect to the use of wholesale arrangements and Videotron's part in the Roger‑Shaw merger.

909 So, I mean, I think part of ‑‑ regardless of the reason that Canadians, in Manitoba in particular, may not have taken up preexisting wholesale services, I think part of the point of this policy is to remove barriers to entry for increased competition. And we have commitments from companies to expand in this area.

910 Anecdotally, I can tell you, during the period of time ‑‑ during the pandemic I was in Manitoba for most of the time and I saw billboards; VMedia was actively advertising to people there, Facebook ads were targeting Manitobans with VMedia advertising. You can look at Facebook's ad library historically, to see the nature of their representations that were being made. And Facebook, interestingly, also preserves the discussions that people have surrounding these advertisements. And so, you could see people going ‑‑ what is this company? Have you ever heard of it? Oh, it's a big incumbent telco. Oh, their service isn't good. My mom said it wasn't working for her ‑‑ that type of thing; right?

911 So, I mean, I think it is potentially the fact that it is new and it hasn't been taken off in the past, could be a bit of a barrier. It may be one of the interesting sort of trends to watch with respect to facilities owners expanding outside of their territory, making use of this service. And I don't think previous lack of uptake is necessarily indicative of which direction you should go and look when considering how to expand this policy.

912 VICE-CHAIRPERSON SCOTT: Great. Thank you very much. That's helpful.

913 Madam Chair?

914 THE CHAIRPERSON: Thank you very much. Thank you for answering all of our questions. I know we had a lot.

915 We covered a lot of ground. I actually don't have any additional questions because we have had quite a discussion, here, together.

916 Maybe I could just make a comment, which is that we just ‑‑ we really appreciate ‑‑ you know, you brought us views of Manitoba consumers. You talked about the survey and the focus groups, and brought us a lot of information, so we really appreciate that.

917 Namely, you talked about the challenges and the work that lies ahead. You also used words like optimistic and hopeful, so that was very nice to hear.

918 We would like to give you the last word, if you would like to each take a moment to share any final thoughts, we would welcome that. Thank you.

919 MR. JOHNSTON: Yeah. We were chatting a little earlier and talking about spectrum and licencing, and the issue around some of these being brought up by the big interests, and then just holding them, not really doing anything with them. And then, some discussion of, I guess put in the system, of maybe opening the purchase of those licences up to other groups that historically haven't been able to do that.

920 So, I think that would be another option that could have some value, going forward, particularly for Indigenous interests in ‑‑ like I have shared with you today, so thank you.

921 MS. BARKER: I remembered this time to turn myself on.

922 As a member of the Consumers Association, and it is included in some of the printed material that we sent to the Commission, the mention of the consumer's rights and responsibilities; what in the early 1960s, when President Kennedy first promulgated his idea about consumer rights and responsibilities, the first one that was mentioned was the consumer's right to satisfy their basic needs, and at the time internet didn't exist, so it wasn't considered a basic need.

923 But I think, from what we have presented and what the other interveners have presented today too, I think it is right to say that internet is a basic need for consumers nowadays, and that they have a right to satisfy that need.

924 Like, another one of the needs under the Consumer's rights and responsibilities is the right to choice, and that too has been something that we've mentioned and that the other interveners today too. I think the need to have a choice, to be able to make a choice in the marketplace is something that is an inherent right, or has been recognized as a right.

925 Thank you.

926 MR. KLASSEN: On behalf of the Manitoba Coalition, we very much appreciate the opportunity to address you this afternoon. On behalf of Manitoba consumers who continue to face the impacts of a lack of choice in the marketplace, we appreciate the Commission's consideration of these important questions as well as the directions issued to the Commission, to protect consumers' interests, including by fostering affordability and low prices, and by ensuring affordable access to high‑quality services for all Canadians, including rural areas, remote areas and for Indigenous Canadians.

927 And we look forward to the Commission considering the experiences of Manitoba consumers in pursuing these important goals. Thank you.

928 MR. KLASS: In 1999 two scholars of communication in Canada said that policies were established to hold markets accountable to the obligations which gives substance to citizens' entitlements.

929 I don't envy your role in having to shape these complicated policy questions and having to make hard decisions about how they turn out, but I appreciate the opportunity to take part.

930 Another scholar ‑‑ you may recognize the name of Graham Spry, called communication the heard of democracy, and for me, personally, it is tremendously valuable to see that it is still beating today, 50 years after he said those words. Thank you.

931 THE CHAIRPERSON: Thank you again for being here with us today.

932 THE SECRETARY: We will take a short break and be back at 3:15. Thank you.

‑‑‑ Suspension à 15 h 03

‑‑‑ Reprise à 15 h 15

933 THE SECRETARY: Hello everyone. Please take your seats. Thank you. We will now hear the presentation of John Roman who is appearing remotely.

934 Can you hear us correctly?

935 MR. ROMAN: Yes. Can you hear me?

936 THE SECRETARY: Yes, we can now. Thank you.

937 So you may begin your presentation. Thank you.

Presentation

938 MR. ROMAN: Thank you, Commissioners, Staff, and Chair, for allowing me to appear before you today.

939 Commissioners, I had another speech planned for you. I had written it two weeks ago and submitted it to the Commission last Thursday, and then Bell’s layoff news broke. I was going to talk about my Part 1 application requesting a forbearance hearing. I was going to discuss natural monopoly and apply it in terms of a tight oligopoly.

940 I was going to say the Commission needs to do something to protect consumers, to show relevance to Canadians. But now, after the news from last week, I realize I have it backwards. Bell is understandably annoyed because of its lack of desire to have to build networks for others to use, and compete with them. It’s literally helping their competition.

941 How are Bell, Rogers and Telus supposed to make a reasonable profit in a natural monopoly when the regulator keeps interfering?

942 Commissioners, stop trying to fight gravity, and work with it to everyone’s betterment. Government policy and the regulator have been going about things backwards. We have three large competitors in a national telecoms market with some very good regional competitors. In other locations we have less forbearance and more active application of the regulation to ensure the system works. That should be our model, not more ineffective competitors.

943 What good is regulatory fear? Yes, there’s a hearing, but any result would be largely meaningless. The issue for the CRTC now, after decades of assuming that introducing one or two more minor service providers equals more competition, is to consider whether doing the same thing over and over will suddenly have different results. It won’t, and we know it won’t.

944 I plan to argue for an end to the forbearance policy to some degree to show Canadians the CRTC’s relevant at stopping Bell, Rogers and Telus from bullying the market and consumers. Now though, I’d argue the CRTC needs to end its forbearance policy, because otherwise Bell, Rogers and Telus can’t justifiably make enough profit to keep themselves in business.

945 Bell’s Chief Legal and Regulatory Officer said, before last November, Bell planned to reach 9 million locations through its fibre network build by the end of 2025. And that’s been scaled back to 8.3 million.

946 He went on to say, “We can’t justify investing the capital when we’re just building a network for our competitors to resell.” And finally he said, “We have to make tough decisions sometimes, and hopefully those decisions will cause the government and regulators to notice.”

947 I would suggest the Commission notice, and challenge Bell and others why it shouldn’t either rate regulate or provide rate of return regulation as options other than allowing new entrants into the wholesale HSA.

948 Now, policy change on forbearance would ensure stable deployment of infrastructure and predicable margins for investors. It would allow the oligopoly that controls 90 per cent of the market to never again threaten the Commission, as they have done for decades, over infrastructure or job cuts while giving you, the Commission, final say over what is right and reasonable for Canadians’ wallets.

949 We had a natural monopoly in Canada, and you fought against it long enough.

950 In this hearing’s first round, I initially proposed mild reductions in forbearance policy. I still support those. But now, if we have to worry about Bell’s viability in the face of a regulator who doesn’t notice them, I suggest the regulator notice everything and be all over them through a complete review of forbearance policy.

951 My initial submission and my Part 1 were about consumers. Now, given the recent developments, it’s potentially about the viability of Bell’s telecommunications division in the face of competition, it’s just too serious to ignore.

952 Thank you, and I welcome your questions at this time.

953 THE CHAIRPERSON: Thank you very much, Mr. Roman. Thank you for participating in the proceeding and also for joining us virtually today, we appreciate it.

954 I will turn things over to my colleague, Commissioner Naidoo, to start with the questioning for the Commission. Thank you.

955 COMMISSIONER NAIDOO: Thank you, Mr. Roman. Thank you so much for being here with us today. Virtually is better than not at all, so we appreciate it.

956 In your intervention you say that large ISPs “target customers of wholesale‑based ISPs by offering promotional rates for wireline subscribers who bundle wireless services.” But you say that smaller players can’t offer those same bundled services, which the large players are able to offer.

957 So I’m wondering if you think consumers might benefit from savings through bundling compared to what they’d pay without bundling? And how do you think the Commission should balance the goals of increased competition and affordability for consumers?

958 MR. ROMAN: So your first question with regards to the bundles, which I noticed you’ve asked everyone today, which is fair enough.

959 So I recently actually unbundled. I had previously been with Rogers for 20 years for all of my services. And then when my contract came up this time, I went to Rogers and said, okay, you know, what can you do for me? I had only ever been with Rogers. And they offered me a deal that was worse than if I was a new customer for my cell phone provider. And I went, well, that doesn’t seem reasonable.

960 But the goal here for them is, when I asked why, they said, “Look, this is our marketing team, we don’t control this. This is what we can offer.”

961 So I’m not saying that there should be policies that say, look, retention plans of you’ve been here 10 years you get a free TV or lower price or whatever. That would be anti‑competitive in ways that would be very disruptive to the market.

962 But when it comes to bundling, if we have a system where the big guys, regardless of whether it’s Bell, Rogers, Telus, can say we can provide all of these services and make aggregated profits. That is where necessarily a TekSavvy or someone else can’t compete because they don’t have that option.

963 So how do we score in that circle? Again, I proposed in my Part 1 not allowing bundling. I can appreciate why that might be unpalatable at first for Canadians. But on the other hand, it would force prices to actually come down across individual services and ultimately see better savings or at least potential.

964 And I’m sorry, I know there’s a second part to your question, and I’ve blanked on it.

965 COMMISSIONER NAIDOO: Yes. The second part was, how do you think the Commission should balance the goals of increased competition and affordability for consumers?

966 MR. ROMAN: I don't think increased competition is going to work. But I objectively think that horse is out of the barn, and it’s gone. So that’s why my Part 1 application was there.

967 We have a situation where all the small ISPs are struggling, or at least most are. And while we have some very good regional competition, we’re seeing a market that’s stabilizing not in favour of the 10 per cent, they’re not growing. The 90 per cent are quire happy.

968 So rather than trying to focus on competition, let’s focus on the vast majority of the market and the vast majority of Canadian consumers and get results the other way around.

969 I appreciate that that puts me out in the weeds for my arguments, but it’s time to think about the majority of industry and the fact that we’re not going to be ever as hypercompetitive as the entire European market or the American market. We just don’t have the population and our geography’s too big.

970 COMMISSIONER NAIDOO: All right, thank you. I want to dive down a little bit more into the competition issue. I read your intervention, I know that that’s a big thing for you, competition.

971 You’ve said in your intervention that you just don’t think that competition has worked. But many intervenors, I’m sure if you had listened earlier today, many intervenors argue exactly the opposite, that competition allows customers to choose providers based on the best price or best service, or proximity to them, they know the market that they’re living in. They say it empowers customers.

972 This morning, you may have heard, the Competition Bureau said, “Competition drives players to be the best option for consumers, encouraging them to change, to adapt, to innovate about how to be the best option.”

973 So what’s your response to that?

974 MR. ROMAN: Thank you, that is an awesome question. Starting with the Competition Bureau. I noticed a lot of the language they used this morning was all very, may, could, might. It wasn’t will, does... There was no seriousness as far as what will happen.

975 My proposal for more regulatory intervention would definitely provide results as opposed to may, could, might.

976 So do I think that the Competition Bureau, who obviously has a focus specifically on increasing competition, has an inherent bias that is understandable and appreciated? Yes. And they obviously have to look through that lens, they are the Competition Bureau.

977 As to others who have spoken about how competition increases choice, it does, but it doesn’t mean that you’re going to be getting the results you want. I believe the last group talked about how, the Manitoba group, forgive me, I don’t remember the name exactly, they were talking about how there’s a lack of choice.

978 But even if you have more choice, for instance Starlink I think was mentioned, they were then having to buy more than what was required than just getting what they needed. So more competition in terms of just players in the market isn’t necessarily better if effective competition isn’t working.

979 As John Lawford mentioned earlier today, we see prices being fairly consistent between the big three competitors. So, again, how may competitors makes for a competitive market? Is it four? Is it eight? Is it three? Do we need massive competition if we have good and firm regulation from the regulator? I would contend that that is the better approach, one with an equilibrium point.

980 We can’t necessarily always have more and more increased reliance on competition. It doesn’t work. Eventually, people will go out of business or get bought up, as we’ve seen, and in both cases then there’s less competition. So we’re going to hit a cyclical nature there that we have to resolve somehow. And the only way to really do that is through regulation and the application therein.

981 COMMISSIONER NAIDOO: All right, thank you so much. Those are all my questions. Back to you, Madam Chair. Thank you.

982 THE CHAIRPERSON: Okay. Thanks very much. I will turn things over to the Vice‑Chair.

983 VICE‑CHAIRPERSON SCOTT: Thank you. So I've heard your remarks with regards to kind of favouring more regulatory intervention rather than a reliance on competition.

984 I’m wondering if you’ve got more nuance on your views, particularly as we look at the various types of competitors that could be engaging in the market? For example, I think you made reference to, you know, a handful of really small players.

985 But in the scope of what we’ve heard on the record, we’ve got people projecting the possible impact of large well‑financed players competing out of territory or competing in territory, making use of the wholesale facilities of others in the market.

986 My question really is, are there types of competitors for which you hold more optimism or are you across the board negative, that competition is going to be adequate to advance the interests of consumers?

987 MR. ROMAN: That goes back to the nature of a question that was asked to me in 2016, and I think it was Hearing 192, when I proposed bringing in the Americans as an option to increase competition.

988 You know, at what point do we say, okay, local, well‑financed people are interested, but it’s not going to work, or are we going to say bring in foreign competitors to a degree that is going to be sufficient to actually compete with multi‑billion‑dollar companies?

989 But the problem is with the wholesale access the infrastructure’s built, right? It’s largely ‑‑ well, not completely, but it’s largely built, especially in urban areas. So do I think that it’s going to be beneficial to bring in new groups, whether it be one really well‑financed one or a bunch of little ones?

990 I don’t see much difference long‑term, because unless they are putting across all the markets, so that’ll be cell phone, home internet, and we might now want to include streaming or, you know, broadcasting. Unless they’re doing everything, they’re always going to be outclassed by bundling.

991 VICE‑CHAIRPERSON SCOTT: Okay. I...

992 MR. ROMAN: If I missed the point, please do clarify.

993 VICE‑CHAIRPERSON SCOTT: No, not at all. I think you may have taken the answer in a direction I didn’t anticipate, so congratulations. But that’s not a criticism. The pause is a complimentary pause.

994 Do you have any optimism for a framework that puts downward pressure on pricing by virtue of creating the possibility of competitive entry? So even if we aren’t to see large international players come into the market, could the wholesale framework still exert some discipline on the pricing power of the established players?

995 MR. ROMAN: Short‑term, yes, long‑term, no. I view the Commission’s approach this sort of thing, and I mean in telecommunications across the board, sort of filling a bucket one drip at a time to see where the scales balance out.

996 And I know that my current approach might be just tipping your hand on the other end of the scales entirely and pushing down hard. That’s certainly not my intent. But the soft velvet glove approach doesn’t seem to be working for Canadians. You’ve heard today a number of complaints. And I’m sure for the rest of the week you’ll be hearing a number of comments from the other side saying, look, we are plenty competitive.

997 But we’ve also seen competition, as we saw last week with Bell cutting a number of workers in various fields and all the rest, that is an effect of competition. Right? That’s competition “working” to some degree. So is that the kind of output we want from the wholesale approach?

998 I’m not saying it is or it isn’t. But I’m saying that rather than take the approach of increasing competition, the Commission take an entirely different approach on the regulation front.

999 And I know that gets into the Section 10 comment from the policy direction, which I’m happy to discuss, but it seems like a more wholistic approach for the regulator to take a regulatory approach as opposed to a let’s see what can happen if people want to dip their toes in the water.

1000 VICE‑CHAIRPERSON SCOTT: So you're clearly not satisfied with the outcome of the framework that’s been employed so far. But what’s the fatal flaw in the concept of the competitive approach? So the outcome’s no good. Is there an inherent flaw in the approach or is it simply that it’s not delivered outcomes?

1001 MR. ROMAN: I would say historically the outcomes, we’ve seen where those go. And entropy is going to keep doing what it does. Even if we get a short‑term benefit, it means that in three years’ time ‑‑ three, five, seven years’ time, I’ll be back here arguing the same thing, as I have been doing.

1002 So I hope this doesn’t seem as a criticism to the Commission, as much as I enjoy appearing before you, I’d like to talk about new things as opposed to having to come back to the same points.

1003 VICE‑CHAIRPERSON SCOTT: Thank you very much, Mr. Roman. Thank you, Chair.

1004 THE CHAIRPERSON: Okay, thank you very much. And thank you for sharing your thoughts with us, your very candid thoughts. That might be a good segue to turn things back over to you to share any sort of concluding remarks with us.

1005 MR. ROMAN: Thank you very much, Chair. So I would say that the wholesale approach isn’t going to work for a number of reasons, which I can talk to you more in my final submission. But I would say that the Commission needs to go back to the government and ask for a new policy direction, removing section 10 from the existing direction, reconsider the long‑term viability of the whole market, not just a piecemeal approach.

1006 And, I mean, as much as we see that there is improvement in pricing, we are going to hit an equilibrium that may not be where the Commission or Canadians want it to be, or where the telecommunications companies need to peel back other options.

1007 So I guess the approach is the Commission has to figure out not where it wants to be in two years’ time, but where it wants to be in 10 years’ time, and that’s really I suppose the message that I’m trying to get to.

1008 So thank you very much for your time and for hearing me.

1009 THE CHAIRPERSON: Thank you very much. Thank you for taking the time to participate.

1010 THE SECRETARY: Thank you. We will now hear the presentation of Dr. Michel Mersereau. You can hear us correctly?

1011 DR. MERSEREAU: I can. Can you hear me?

1012 THE SECRETARY: We sure can, thank you. You may start your presentation. Thank you.

1013 DR. MERSEREAU: Okay

Presentation

1014 DR. MERSEREAU: I’m going to share my screen now. I’m hoping that the Commission can see my presentation. Good afternoon and thank you to the Commission for the opportunity to speak.

1015 My objective in this proceeding is to present data obtained from the City of Toronto through an FOI request for capital construction records related to the deployment of fibre conduit and facilities in the City of Toronto between 2014 and 2022. The request covers all facilities‑based carriers operating in the City of Toronto. The map presented on the screen shows the line segment topographic view of all conduit deployed during this period of time.

1016 The data file includes standard GIS data markers of locations and links of conduit deployment in both point and line segment format. And only three carriers are represented in the entire dataset.

1017 Importantly, an access to information request for the same data was subsequently submitted to the CRTC on October 26, 2023. In response, the Access to Information Division of the Commission reported that no such data was held by the CRTC.

1018 In light of this, it is my hope that the data will provide clarity to the Commission’s adjudication of this matter as well as important context and insight as the Commission considers the utility of the essentiality test, as indicated in its RFI of January 31st.

1019 I also hope that this data will move to resolve the problematic information asymmetry and I think is at the heart of the matters that are in front of the Commission now, and also demonstrate the true viability of downstream facilities‑based competition.

1020 Of the three facilities‑based carriers represented in the data file, Bell is clearly dominant; having deployed three and a half times more conduit than its nearest competitor, Rogers Telecommunications, and 21 times more conduit than Toronto’s third most competitive facilities‑based carrier which is Beanfield.

1021 Longitudinal view of the two dominant carriers shows that Bell has nearly a two‑year head start on its closest competitor with deployments peaking in 2016 at near 1,500 km conduit deployed. Rogers’ peak occurs in 2018, but with just under 400 km of conduit deployed. Note that the downward trajectory of both carriers occurs prior to the pandemic lockdowns of 2020.

1022 Street‑level data of both carriers’ deployments yields additional insight into the robustness of competition. The chart shown highlights the percentage of parallel conduit projects; that is adjacent conduit deployed on the same street segments by both carriers. Of a total of 3,451 conduit projects only 12.4 per cent represent parallel deployments of right‑of‑way conduit.

1023 As highlighted by the line segment map presented earlier, this view evidences the segmentation and carving‑up of the City of Toronto’s retail telecommunications market between the two dominant carriers. I would refer the Commission back to the Competition Bureau’s explication of coordinated effects in speculating on this particular view.

1024 And lastly, the geomarkers also allow us a neighbourhood‑level view of where carriers have concentrated their efforts. In this case, we’re looking at census track income by neighbourhood, with the highest concentration of conduit deployment in the third income quintile.

1025 And that is the end of my presentation. I welcome questions.

1026 THE CHAIRPERSON: Thank you so much, Dr. Mersereau. We really appreciate you participating in the hearing and bringing us forward the information and data that you have presented. So thank you.

1027 I am going to turn things over to my colleague, Commissioner Naidoo, to start with the questioning for the Panel.

1028 COMMISSIONER NAIDOO: Hi, Dr. Mersereau. Thank you so much for being here today. I look forward to hearing your views.

1029 DR. MERSEREAU: Thank you for having me.

1030 COMMISSIONER NAIDOO: One of the big questions, I think, if you have read the interventions online, which I am sure you have, is who should be able to use the mandated FTTP aggregated HSA services? For example, should it just be available to small or regional carriers? Should it be available to all ISPs, including the large incumbents? Should incumbents be able to use the service only outside of their serving territory? I’m wondering what your views are on this.

1031 DR. MERSEREAU: Is the question the size of the carriers or the nature of the carriers that should be able to access existing infrastructure, based on the HAS framework? Is that the question?

1032 COMMISSIONER NAIDOO: I think the question is about both. It’s basically, do you think that the incumbents should be able to access the mandate outside of their territories? Or do you think it should just be pertinent to the smaller players? What’s your opinion?

1033 DR. MERSEREAU: Well, as much as I am critical of the incumbents, we have to call fair play where fair play is, and I think it would be ‑‑ I don’t think it would be particularly prudent or ethical to disallow an incumbent an access to HSA access outside of their serving area. I think that would send a bad signal.

1034 At the same time, though, I think that the idea of allowing or incentivizing small service providers through aggregated access is a necessary step for the Commission to take in these proceedings. Obviously, there would be no need for an incumbent within their serving area, but I don’t think disallowing them just on principle outside of their serving area is going to serve anybody’s interests.

1035 COMMISSIONER NAIDOO: Thank you for that.

1036 DR. MERSEREAU: I hope that answers your question.

1037 COMMISSIONER NAIDOO: It did. It did, thank you very much.

1038 You may have seen that some intervenors have pitched the head start rule ‑‑ that the mandate should not be available for a fixed number of years in order to allow incumbents time to recoup some of their costs to deploy FTTP. Do you have an opinion on that?

1039 DR. MERSEREAU: Yes, I have very strong opinions on that. I think one of the considerations that has been absent in the submissions that I have read ‑‑ all the submissions I have read, and not only the submissions that were made today, is the reality I am speaking specifically in an urban context, specifically in the City of Toronto. And I think one of the considerations that needs to be brought to the surface is once the initial capital expenditure ‑‑ there is no disputing deploying conduit; deploying or pulling cable; deploying cable boxes, junctures, pull boxes ‑‑ this is a very expensive capital undertaking.

1040 Once the conduit is in the ground, I think we also need to bear in mind that this is tariff‑free commercial use of public right‑of‑way space enjoyed by carriers. So, the argument of recouping costs, to me, is a bit of a red herring. Once the ground is closed up, once the carriers have repatriated the sidewalk, the road, wherever they have deployed their conduit and covered their capital expenditures, they have a de facto license to print money under the sidewalk in the public right‑of‑way that no other commercial use of the public right‑of‑way enjoys.

1041 If we just take a nominal figure in the City of Toronto, a hotdog vendor has to pay approximately $14.50 per square metre on an annual basis ‑‑ sorry, on a daily basis, just to operate their hotdog truck. If we were to apply a very meager standard to the incumbents’ access of the right‑of‑way, we’re in the tens of billions of dollars just based on the kilometres of conduit that I presented in the data today.

1042 So, this idea that incumbents need time to recoup their FTTP costs, their capital deployment costs ‑‑ I don’t buy it, frankly.

1043 COMMISSIONER NAIDOO: All right. Thank you so much. I really appreciate that.

1044 Those are all my questions.

1045 DR. MERSEREAU: Thank you.

1046 COMMISSIONER NAIDOO: I’m going to ‑‑ no, we're not done, sorry. I’m just done, but I’m going to pass it back to the rest of the Panel. Thank you.

1047 THE CHAIRPERSON: I think we have a couple more questions. So, I’m just going to hand things over to Commissioner Desmond. Thank you.

1048 COMMISSIONER DESMOND: Good afternoon. I just have a couple of questions.

1049 DR. MERSEREAU: Good afternoon.

1050 COMMISSIONER DESMOND: I did listen to your submissions closely, and I read your written comments, and in your written comments you do speak closely and talk about the MDUs and how, you know, with ‑‑

1051 DR. MERSEREAU: Yes.

1052 COMMISSIONER DESMOND:  ‑‑ urban density and the number of MDUs in Toronto, and how important it is for low‑income and individual seniors, people living in condominiums, to have the ability to choose. But I’m wondering if you had a chance to read the Beanfield submission where they talk about the fact that the idea of competition has the greatest potential to thrive in the MDU market where there is an increasing number of Canadians living. So, can we carve out the MDU sector and say, you know, there is a very real chance of competition with the current framework that we have?

1053 DR. MERSEREAU: Thank you for the question. The issue around MDUs, especially in the city, is particularly problematic. We have a sizeable if not the majority of our low‑income populations living in particular in older tower neighbourhoods. What the data that I presented to you now allows us to do is drill down on a neighbourhood‑by‑neighbourhood, and actually an MDU‑by‑MDU basis, to identify, and the data is showing that the segments that are red are Rogers, the segments that are blue are Bell, and MDUs, especially older tower neighbourhood MDUs, are broadly exclusive to one or either ‑‑ not both ‑‑ of the service providers. That’s purposeful segmentation.

1054 With regard to Beanfield’s submission, this is a longstanding issue with Beanfield, and I take side with them. I agree with them that there is a problematic history, that I’ve indicated in my submission the problems associated with the CRTC’s handling of mandating access to fibre IBW. I think this is particularly problematized by the segmentation we see of conduit in the right‑of‑way here. They already have neighbourhoods locked up between the two providers ‑‑ buildings that are broadly and exclusively provisioned by one or either of the providers.

1055 My fear is that, even if the Commission moves towards an aggregated wholesale model, that is not going to resolve that gap. MDU access is the completely different animal to ‑‑ for lack of a better term. You’re not dealing with public administration of public spaces. You’re dealing with private ownership, and this is where I think ‑‑ and I believe Beanfield has argued to this point ‑‑ that larger incumbents, like Bell and Rogers, are able to wield their market dominance and their weight in negotiating contractual concessions of exclusivity agreements with MDU owners. We see it.

1056 I play a dual role. I am both a faculty member here at the University of Toronto, but I am also a staff member at the City of Toronto, working specifically on telecom capital deployment, and we know that this is a pressing and ongoing problem. I know that Beanfield has been arguing this for quite some time. So, I would urge the Commission to look closely at bridging the MDU gap if they do indeed move towards mandating aggregated wholesale access.

1057 So, I hope that answers your question.

1058 COMMISSIONER DESMOND: Okay. Thank you. And just as a second question, if I could ask you, given the role of the Commission and the need to balance competition with investment, how can we enhance competition and yet still ensure that critical investments in network infrastructure will happen going forward?

1059 DR. MERSEREAU: Yeah, I think ‑‑ and this may take some of my colleagues, and maybe some of the Members by surprise ‑‑ I’m not ‑‑ I really don’t have a firm line as to the perfect balance of competition. What we clearly see here is Toronto is a duopolistic market. Plain and simple. There is no question about it. And if you consider that the City of Toronto is arguably the most valuable retail telecommunications sector in this country, that’s stark. And that should send a message.

1060 However, in terms of an optimal balance of competition, I’m not really keen on commenting on that, because I do not believe that that alone is going to resolve affordability issues. I’ll go back to the submission of PIAC. I’ve also indicated this to my own submission, a joint letter signed by all the City Managers of the largest cities across Canada, that what the Commission needs to focus on is operative and functional affordability at the household level. Whether that comes through enhanced competition or more direct intervention in the retail space, that is what the Commission’s objective should be.

1061 Telecommunication access to digital services, both fixed broadband and mobile broadband ‑‑ this is what I call in my field of study ‘logistical and instrumental infrastructure’, meaning it is necessary for households to function ‑‑ low, middle, high income households. The demands are not dissimilar. The infrastructure needs are not dissimilar.

1062 So, if we take that view and we look at affordability in that context, the overall costs to maintain de facto compulsory connectivity based on a percentage of household income ‑‑ to me, that is what the Commission should be more meaningfully attempting to address, whether it’s through enhancing competition ‑‑ whatever market mechanisms or levers that the Commission can pull, including consideration of intervention at the retail level ‑‑ that’s where I believe that the Commission should be directing its attention, and why I’m not really going to give too deep of a comment on the state of balance versus innovation.

1063 I will, though, add one caveat, and I have heard from all of the deputations and submissions today, and read in the submissions of the incumbents as well, the age‑old threat of withdrawal of investment, and in some cases, the extreme withdrawal from service markets all together in the face of regulation. What I would ask the Commission to do, in its due diligence, is to look for a single qualified example in any telecommunications sector where that threat has actually borne out.

1064 And that’s all I have to say on that.

1065 COMMISSIONER DESMOND: Okay. Thank you so much.

1066 THE CHAIRPERSON: Okay, thank you. We have written down your question for the incumbents.

1067 I will turn things over to the Vice‑Chair.

1068 VICE‑CHAIRPERSON SCOTT: Thank you, Professor, for being here today.

1069 One of the other issues you raised in your submission is the concept of information asymmetry with regards to the underlying costs of the networks.

1070 DR. MERSEREAU: Yes

1071 VICE‑CHAIRPERSON SCOTT: Do you have any recommendations for us regarding either methods of addressing the degree of asymmetry while still respecting legitimate confidentiality concerns, or advice regarding alternative approaches to regulation that might make a fundamental information asymmetry less of a contentious issue?

1072 DR. MERSEREAU: Yeah, I think that is ‑‑ and this is a sadly auspicious day to be giving this representation. I am standing on the shoulders of the recently departed Professor Vincent Mosco, who is a seminal political economist in Canadian academia, and he would have some very strong thoughts on information asymmetry which I will do my best to echo here.

1073 I think that this highlights the jurisdictional and the limits of adjudicative authority of the Commission itself. To my knowledge, there are no levers or tools that the Commission currently possesses to gain actual and credible insight into the costs submissions of carriers. You can sample on the ground. You can go to your colleagues ‑‑ or sorry, not your colleagues, but municipal broadband carriers like the City of Calgary, York ‑‑ there is a number of them in Canada who can provide you fairly accurate and robust actual deployment costs. I could do it right here, but I don’t think that’s what you’re asking for.

1074 But you can get markers, and you can also frame those markers against the scale efficiencies enjoyed by the incumbents, and yeah, I think ‑‑ I don’t have a perfect answer for you except to say I think it highlights the limits of what the Commission is able to do. I think the Commission sometimes gets a lot of flak that it does not deserve. There is only so much information that you can tease and compel. But there are good markers that I think you can use to better scrutinize what the incumbents are providing you. But just based on the data that I’ve shown you today, I mean, that is clearly an exercise in concentrating with the ability or with a view to exercising our asymmetric information disclosures.

1075 VICE‑CHAIRPERSON SCOTT: Great. Thank you very much, Professor Mersereau.

1076 THE CHAIRPERSON: Thank you very much, and thank you for answering our questions. We would like to turn things back over to you to have the final word.

1077 DR. MERSEREAU: I have no final words. I would like to comment and thank the Manitoba Commission, and especially their work ‑‑ their shout‑out to the good work of the First Mile Connectivity Consortium. I do some work in that space, and I will say that I think one of the barriers that has been encountered by First Nations‑led and Indigenous Community‑led telecommunications interests is, funding aside, good will aside, encountering barriers when they have to obtain and establish primary backhaul connectivity. I’m not sure about the ‑‑ well, actually I am sure about the status in Manitoba.

1078 Primary backhaul connectivity ‑‑ you’re dealing with Bell there as well, and there have been a number of instances where First Nations‑led connectivity initiatives have hit a roadblock with Bell either outright refusing their backhaul connectivity requests or offering it at an exorbitant rate, largely owing to the fact that Bell was not able to go into the community and provision the services themselves.

1079 So, just a shout‑out to the Manitoba Coalition on the great work they do, and a little bit of a tease into some of the deeper problems that are being encountered in those rural communities.

1080 So, I thank the Committee for its time. I thank the empty room ‑‑ the empty chairs for their time, and I wish you all the best, unless there is anything else.

1081 THE CHAIRPERSON: Thank you again, and thank you for ending day one with us.

1082 DR. MERSEREAU: Okay. Thank you very much.

1083 THE SECRETARY: Thank you, Madam Chairperson.

1084 So, that concludes the agenda of today. We will adjourn for the day and resume tomorrow at 9:00 a.m. Thank you. Good evening, everyone.

‑‑‑ L'audience est ajournée à 15 h 53 pour reprendre le mardi 13 février 2024 à 9 h 00

Sténographes
Christine Ladouceur
Monique Mahoney
Lynda Johansson
Tania Mahoney
Brian Denton