Transcription, Audience du 14 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

2082 TELUS Communications Inc.

2603 Bell Canada

Engagements

2556 Engagement

2923 Engagement

2926 Engagement

2941 Engagement

3097 Engagement

Transcription

Gatineau (Québec)
14 février 2024
Ouverture de l'audience à 9 h 01

Gatineau (Québec)

‑‑‑ L'audience débute le mercredi 14 février 2024 à 9 h 01

2076 THE SECRETARY: Good morning, everyone.

2077 We will begin with the presentation of TELUS Communications Inc.

2078 For the participant appearing remotely, can you please confirm that you hear us correctly?

2079 DR. DIPPON: Yes, I can. This is Christian Dippon.

2080 THE SECRETARY: Perfect, thank you.

2081 Please introduce yourself and your colleagues and you may begin your presentation. Thank you.

Présentation

2082 MR. SCHMIDT: Thank you.

2083 Good morning, Madam Chair, Vice‑Chair Scott, Commissioners and Commission staff.

2084 I would like to start by acknowledging that we are gathered here today on the traditional, unsurrendered and unceded territory of the Anishinaabe Algonquin people, who have and continue to care for this beautiful land and watershed that sustains us.

2085 My name is Stephen Schmidt and I am Vice‑President, Telecom Policy and Chief Regulatory Legal Counsel at TELUS. Thank you for the opportunity to appear before you today.

2086 Joining me on our panel are my TELUS colleagues whose names and titles are enumerated below:

2087 ‑ Zainul Mawji, Executive Vice‑President and President, TELUS Consumer Solutions;

2088 ‑ Jelena Bajic, Vice‑President, Consumer Strategy and Planning;

2089 ‑ Shazia Zeb Sobani, Vice‑President, Network Planning;

2090 ‑ Daniel Stern, Associate General Counsel;

2091 ‑ Matthew Murray, Senior Vice‑President and Corporate Controller;

2092 ‑ Kal Amery, Vice‑President, TELUS Partner Solutions;

2093 ‑ Tina Corrado, Director, Regulatory Strategy and Planning;

2094 ‑ Grace Waschuk, Senior Regulatory Legal Counsel;

2095 ‑ Vitali Berd, Director, Regulatory Law and Advocacy; and

2096 ‑ Ashraf Al Daoud, Director, Economic Decision Support.

2097 I am also joined by Dr. Christian Dippon, our economic expert, who is appearing remotely and who is Senior Managing Director at NERA Economic Consulting.

2098 MS. MAWJI: Thanks, Stephen.

2099 TELUS is both a pioneer of fibre deployment in our own incumbent territory and the most successful new entrant in Canadian telecommunications. We have an established history of boldly entering new markets with innovative products and services, and the best customer experience in the industry.

2100 Prior to 2000, we were a regional copper telephone company. We had zero market share outside of Alberta and British Columbia and we are proof that it is possible to compete and win customers in a market, starting with no share, no running start and no preferential treatment.

2101 Since then, we have expanded nationally, connecting Canadians coast to coast across mobility, business solutions, security and home automation, as well as TV and content packaging, all successfully leveraging the existing regulatory framework.

2102 We have also expanded outside of the telecom business through the establishment of TELUS Health, TELUS Agriculture and Consumer Goods, and TELUS International, operating in more than 30 countries around the world.

2103 As an industry leader in providing customers with a best‑in‑class experience and innovative new products and services, we are proud of a number of firsts.

2104 We are the first company in the world to bundle Netflix, Disney+ and Amazon Prime at a discount.

2105 We are the first company in Canada to package home automation and security with online security, protecting Canadians digitally to lock their doors and their identities simultaneously, and the only Canadian telecommunications company to offer virtual health care at no additional cost, regardless of who your communications provider is.

2106 In some regions, over one third of Canadians who do not have access to a family doctor gained access to care over our platform.

2107 Our “customers first” ethos, with continued focus on innovation and investment, has benefited competition. We have achieved these outcomes through numerous bet‑the‑company generational investments, leveraging the ingenuity of our team, their grit, passion and relentless desire to serve Canadians during even times of the most economic uncertainty.

2108 There has been some discussion on the record about TELUS, Bell and Rogers being “national incumbents.” Let me be very clear: There is no national market for Internet service and there are no national incumbents. TELUS is an incumbent in our traditional serving territories in British Columbia, Alberta and a small part of Eastern Quebec. We are not an incumbent in any major centre east of Alberta. When it comes to Ontario and Quebec, TELUS is a new entrant, in the strongest possible position to drive competition.

2109 MR. SCHMIDT: Thank you, Zainul.

2110 Canada’s broadband value proposition is world leading:

2111 ‑ According to the Commission’s own statistics, Canada surpassed its target for 50/10 coverage ahead of schedule, with 91.4 percent of households now having access to 50/10 speeds.

2112 ‑ Between 2017 and 2022, fibre availability almost doubled, from 35 percent of households in 2017 to nearly 64 percent of households in 2022. Fibre adoption is up 16.4 percentage points and average residential download speeds have quintupled during the same period.

2113 ‑ Canadian high speed internet adoption is nearly 25 percent higher than the OECD average.

2114 ‑ And finally, most Canadian homes have a choice between two gigabit‑capable technologies, on average more than residents of the United States, Australia, the U.K., Germany, Belgium and France, among others.

2115 Meanwhile, data from Statistics Canada show that Internet prices are decreasing while prices for nearly everything else of consequence are increasing. Internet access is 5.9 percent cheaper than a year ago. By comparison, food is 5 percent more expensive and rental housing is 7.5 percent more expensive. Relative to 2018, Internet prices are down 8.3 percent against an inflationary backdrop of nearly 20 percent.

2116 This national market performance is being driven by superior competition in British Columbia and Alberta in particular, where citizens are enjoying higher quality bandwidth, customer service and innovation.

2117 Canada’s broadband prices are also competitive when viewed from an international perspective. Dr. Dippon can speak further to that.

2118 DR. DIPPON: Thank you, Stephen.

2119 At TELUS’ request, I ranked the pricing of broadband services in eight countries, including Canada. These countries are the G7 countries plus Australia, though I replaced Japan with New Zealand due to the language barrier.

2120 I constructed a database consisting of over 1,600 retail plans from 30 providers in these countries, documenting each plan with over 80 descriptive variables. I also collected data that describe demand and supply conditions in each country.

2121 Unlike other international price ranking studies, my study is not limited to prices in cities or even capital cities only but examines price variations throughout each country. Based on these data, I predicted the prices of four standardized plans for each country if those countries had similar demand and supply characteristics as Canada. I then ranked the countries according to these prices.

2122 The results of this analysis reveal that Canada ranks as the third least expensive country among the eight study countries. This finding suggests that Canada's fixed broadband industry is high‑performing and retail prices compare positively to Canada's peers.

2123 MR. SCHMIDT: Thank you, Dr. Dippon.

2124 Four government agencies have made recent findings about the strong performance of the market in British Columbia and Alberta:

2125 ‑ Statistics Canada data show that Internet prices are decreasing significantly in British Columbia and Alberta but increasing in Ontario year over year and decreasing less rapidly in Quebec. The Statistics Canada Internet Access Services Index for December showed a year‑over‑year increase of 4.2 percent in Ontario and a 7.1 percent decrease in Quebec as compared to a decrease of over 16 percent in each of British Columbia and Alberta.

2126 ‑ The Commission itself found in its decision imposing an interim mandate that reseller market share is increasing in Alberta and British Columbia, while significantly decreasing in Ontario and Quebec.

2127 ‑ The Competition Bureau found that Alberta has the highest fibre capital expenditures in the country and British Columbia is near the top of the range as well.

2128 ‑ The Competition Tribunal determined that Videotron will be able to profitably bundle wireless and Internet services in British Columbia and Alberta at prices materially below what Shaw was offering before its acquisition by Rogers.

2129 As such, it is critical that the Commission maintain its existing geographic market definition and assess competition in each regional market separately. Given the governmental recognition of declining prices, increasing competitor market share, and the recent enablement of additional competition and additional entry in Alberta and British Columbia, the Commission should at a minimum let these developments continue to take effect before making any finding that the market in British Columbia and Alberta requires further intervention still.

2130 MS. MAWJI: TELUS’ success in fibre deployment to date has been implemented by our dedicated team members despite rising costs. This has included several years of negative returns on investment.

2131 Today, our Fibre‑to‑the‑Premise network reaches over 3.2 million homes and businesses in British Columbia, Alberta and Eastern Quebec, but we started in rural areas. Today, we serve 386,000 homes and businesses in rural areas, including 111 communities with fewer than 5,000 residents. Our customers also include over 250,000 businesses that contribute to local economies across the country.

2132 We have accomplished this success in deployment despite the fact that, according to Statistics Canada, labour is 12 percent higher and more expensive in Alberta and British Columbia than it is in Ontario and Quebec. This is significant because labour is approximately 70 percent of the total build cost.

2133 MR. SCHMIDT: Disaggregated access will enable the most sustainable form of competition because:

2134 ‑ it requires resellers to credibly commit to serving their communities and investing in facilities;

2135 ‑ it improves the reliability and resiliency of the country’s transport network, both by reducing single points of failure and encouraging the burden of transport to be spread across the many transport providers in the country;

2136 ‑ it is also consistent with the Commission’s own MVNO framework, which requires significant upfront investment in facilities; and finally,

2137 ‑ it is consistent with the Competition Bureau’s submission that disaggregated access will “likely offer additional competitive benefits as compared to an aggregated access model in areas where competitive transport options exist.”

2138 Critically, the Commission cannot conclude that a disaggregated framework has failed in Alberta and British Columbia because it has never in fact been implemented there, even on an interim basis. In Ontario and Quebec, where it was implemented on an interim basis, the Commission has never set final rates or finalized the service configurations.

2139 If the Commission does impose a wholesale mandate, it should be narrowly tailored.

2140 First, the Commission should exempt rural and remote areas as well as high‑cost buried fibre. We started our fibre build in rural communities, but the most difficult builds remain ahead of us and an expanded mandate will weaken the already tenuous business cases for building in these areas.

2141 Second, a wholesale mandate should not be available for facilities‑based carriers to access in their incumbent serving territories. In particular, if cable companies are able to access aggregated FTTP service in their own territories, they will have no incentive to invest in their own facilities. The result over time will be consolidation to a single physical network, which will create vulnerabilities in the event of a natural disaster, technical failure or intentional attack, putting Canadians and Canadian businesses at risk. Of course, the wholesale mandate should be available for all carriers outside of their traditional serving territories, precisely because a wholesale mandate is useless as a tool to drive competition if the strongest competitors can’t also use it.

2142 Third, any aggregated mandate must apply across the relevant product market, which includes not just fibre and cable access but also low earth orbit satellite providers like Starlink. LEO services are available nationwide now, growing in popularity and compete directly with both fibre and cable Internet service.

2143 MS. MAWJI: Broadband deployment is a foundational driver not just of connectivity for its own sake but for crucial social and economic outcomes.

2144 These outcomes can be seen in practice as a result of TELUS’ investments. For example:

2145 ‑ Healthcare outcomes are improving. Reliable broadband is enabling innovative telemedicine solutions, benefiting Canadians and particularly those living in rural and remote areas.

2146 ‑ Economic outcomes and productivity are thriving. According to Statistics Canada, wireline broadband investment contributed $5.6 billion, or 0.9 percent, to the GDP of rural Canada. The industry's high labour productivity, at 2.5 times the national average, leads to wages that are 40 percent higher than the service sector average.

2147 ‑ Indigenous reconciliation is advancing meaningfully. Today, TELUS serves over 240 Indigenous communities, with more than 197 communities and 608 reserves and treaty settlement lands connected to our most advanced broadband networks. TELUS Local Content has also funded over $7 million of Indigenous community programming in the last five years.

2148 ‑ TELUS is a leader in supporting Canadians in need. We were the first company to create a For Good program and to date, between our For Good and TELUS Wise programs, we have supported 1.1 million low‑income Canadians, seniors, persons living with disabilities, refugees and youth leaving foster care.

2149 In summary, in approaching its task in this proceeding, the Commission must look to what regulatory framework will continue to drive these critical outcomes for Canadians. In doing so, it must be mindful of recent intervention and regional differences in the market. In recognition of the market conditions in Ontario and Quebec, the Commission should solidify a disaggregated mandate to enable sustainable competition.

2150 Thank you for your time this morning. We welcome your questions.

2151 THE CHAIRPERSON: Thank you very much to TELUS. Thank you for being here with us. Thank you for your participation in the proceeding.

2152 I should let you know right up front that the Panel is very interested in having a discussion with you. We have a lot of questions. I will start the questions for the Commission and I will turn things over to the Vice‑Chair and then we will take a short break just because we have a long list, so I think that would be most civilized.

2153 Perhaps I could start with pricing and competition. We've heard a lot about pricing in this proceeding. You talked about it in your interventions, you talked about it this morning. Obviously very wildly different views, if I can characterize it that way. You've talked about how internet prices are coming down and you pointed to some data.

2154 We've heard from PIAC, OpenMedia, others who were here this week on Monday representing Canadian consumers that, you know, in fact, that's not what Canadian consumers are seeing and feeling. They feel ‑‑ and OpenMedia did a survey. I think they said 78 percent of people said their internet is less affordable today than it was in 2019. Their feeling is that it's becoming increasingly less affordable.

2155 So, I'm just wondering if you can help us reconcile those views.

2156 MR. SCHMIDT: Thank you. That's a fantastic starting point, I think, quite foundational.

2157 I'm going to start with a broader point about market performance. I'm going to ask Dr. Dippon after that to briefly situate Canada's pricing in an international context because I think that will be illuminating. And then if my business colleagues want to talk a bit about what's happening on the ground in Alberta, I think that will be helpful to the Panel, too.

2158 So just in terms of the broader framing ‑‑ and the Bureau reminded us of this on Monday ‑‑ you know, price is not exhaustive of the analysis by any means of market performance and you need to look at other indicators of market performance.

2159 The level of investment is going up, the fibre footprint keeps increasing, adoption keeps increasing, usage is going up, prices are going sharply down, according to Statistics Canada. So, it's a good ‑‑ it's a very promising trajectory of overall market performance, particularly in the West. So, my urging to you would be to look at it holistically.

2160 And I will ask Dr. Dippon now to contextualize the pricing piece internationally.

2161 DR. DIPPON: Yes. Madam Chair, I think you're bringing up a very good point in there seems to be a bit of contradiction in the record whether Canada's prices nationwide are high, too high or even declining.

2162 I'll give you my response to it. I have to say I focused mostly on the international piece. I have not seen OpenMedia's survey, but one thing is I'm dealing frequently with surveys and depending on how the question is asked, it could lead to misleading results.

2163 For instance, people will always necessarily prefer a lower price. You can ask them about anything. Do you think gasoline is more affordable? Do you think pizza is more affordable? It could be anything, so one has to really carefully look at that and how the questions were asked, because consumers, as utility‑maximizing individuals, they maximize their happiness, they will necessarily say it is not affordable.

2164 In the international context, I think it is important to correct the record in some respects, that you might ‑‑ you know, throughout the hearing you've seen reference to, for instance, the Wall Report. The Wall Report, and there are also other price‑ranking reports, they compare prices on an absolute basis. On an absolute basis, I don't think there is a disagreement amongst the parties that on absolute price, on actual levels Canada has high prices. My own study finds if you were just to look at nominal prices, just a dollar amount, that out of eight countries Canada ranks seventh. Now, here's the problem. You can't stop at that point. That is not a price‑ranking study.

2165 I'm currently testifying from Bangkok, Thailand, where my dinner was $3 tonight, and it was delivered to my house. So, can I now say that in Washington, DC, where I usually live, can we say now that my $15 dinner is more expensive? It is, that's a fact, but does that mean that there's something in Washington, DC not working in terms of competition that is working in Bangkok, Thailand?

2166 And that's where I have a disagreement. One cannot look at absolute or nominal prices and draw a conclusion on whether prices in Canada are too high.

2167 So what I undertook is making those very adjustments, making those adjustments that reflect the high factors of production that are present in Canada, making all of those proper adjustments, and when one accounts for the population density, the educational attainment, the terrain ruggedness, the gross national income in Canada. Once we adjust for that or, as econometricians, we control for that, we control for these differences, then Canada's position goes from seven to three.

2168 So, I think that's where the record is a little bit different, that in essence there's an agreement that nominal or absolute prices are high, but where other studies stop ‑‑ and they shouldn't stop ‑‑ is to make the controls, make the adjustments, and then we would realize that the market is actually performing quite well, relative to its peers.

2169 THE CHAIRPERSON: Maybe I could ‑‑ sorry, I know that we want to go back to the table. Maybe I can just jump in for a second, then, Doctor Dippon.

2170 So, you have come to a different conclusion than a number of other organizations like the OECD, like the Wall Report, like ISED, like the US FCC, but from what I understand you're telling the Panel that we should be disregarding the other studies and accepting yours?

2171 DR. DIPPON: I think that's a bit strong, of disregarding, because I do think there is agreement, OECD, Wall, FCC, my study, that nominal prices are high, and that's an important finding, and there's an agreement.

2172 So, where I disagree is that that should be the only point when we saying they're too high, because one cannot conclude, just by looking at absolute prices.

2173 So, the Wall Report and the OECD are studies. They don't go further, they stop there. I criticize that and I urge you to look further.

2174 Now, then, that leaves the FCC study and my study on the table that actually make adjustments. The FCC study is a different study ‑‑ and I've had quite a few communications with the FCC about that particular study. It's a quite limited study, in that they only looked at prices in capital cities. So, their price‑ranking for Canada only includes Ottawa, no other prices. So, it's a quite different study.

2175 They also did a couple of things ‑‑ and they're technical, but I'm very happy to talk about it; it might take a few minutes to explain it ‑‑ but they made other adjustments that clearly biased their study in favour of the United States.

2176 So, for instance, they introduceda language variable, and it says: Content is more valuable in countries that are English‑speaking. That's true. It's also my study.

2177 But they introduced a very particular way to control for that. That changed the US's position. That single change brought the US from number 13 to 5. However, it only brought Canada from 25 to 22. Why is that, when both countries speak English? It should have the same effect.

2178 So, I would say there's differences, OECD and Wall, I think they're just indicators, there's a high price. We need to understand it better. Versus the FCC and my study, through regression analyses, attempt to control for that. But then I think one needs to further understand what the FCC did with its study. It's a very narrow study, in the sense that it only looks at capital cities and then, at least in my view, they made some adjustments which really help the United States and didn't do a favour to all of the other countries, including Canada.

2179 MR. SCHMIDT: We'll continue the party.

2180 MS. BAJIC: Yes, we will. Thank you so much for the question.

2181 So, I think we are at a point in Canada where prices are increasing across a number of categories, unfortunately. We've seen that groceries are 5 percent more expensive, housing is 7.5 percent more expensive, but internet pricing has actually decreased 8 percent over the last five years.

2182 And while internet pricing has decreased, Canadians are actually enjoying better quality and speed of their internet access, which I think actually provides even more value.

2183 And has that has happened, they are also able to access other products and services through the internet that also help them save money across other categories.

2184 So, by having faster broadband speeds at home we can now work at home ‑‑ we mostly work at home ‑‑ and that actually saves us money on gas and commuting. When we're at home watching Netflix, that actually saves us money from going to the movies and having to buy tickets for a movie and popcorn for the family.

2185 Digging a little bit deeper, in Alberta and BC specifically, we think that customers are actually seeing a bit of a triple win, in fact. So, internet in Alberta and BC is down 16 percent, versus last year, in 2022, and wireless prices are down over 25 percent versus 2022. In addition to this we are seeing increased competition from the merger of the Rogers‑Shaw organization, as well as Videotron as a new entrant.

2186 And really, we don't need to look very much further than our holiday promo periods, where Stats Can actually show that during the month of December, that in Alberta and BC prices were down 8 percent, versus in Ontario, they were only down 0.6 percent, and there was no change in Quebec.

2187 So, we really do feel that we are providing Canadians with more value, and we are seeing that the prices are coming down in internet services.

2188 MR. STERN: Sorry, go ahead, Madam Chair.

2189 THE CHAIRPERSON: No, I was just ‑‑ I wanted to unpack that a little bit more, just because...

2190 So we've seen that evidence on the record and what you've put forward. There is conflicting evidence on the record, and you've seen that as well, and what we've heard through interveners like PIAC and OpenMedia, and we've seen their survey results.

2191 But Canadians feel that it's less affordable. That's a significant number of Canadians, almost 80 percent.

2192 So I'm just asking if you can help us reconcile, is it an issue of, you know, the idea that price per unit, megabyte, gigabyte, is coming down and people are paying more.

2193 If you could just maybe offer any thoughts on that, that would be helpful.

2194 MR. STERN: Thanks, Madam Chair.

2195 A few points that I think are going to answer your questions ‑‑ and I promise we'll get there.

2196 Maybe I'll start with where you ended, on price per gigabyte.

2197 Internet service is not like wireless service, right? Almost all Canadians are on unlimited plans. So, that completely eliminates any idea of some sort of, well, you're paying more for more. You were getting unlimited before, you're getting unlimited now. The price is what you're getting, and so, when you see prices going down, they're going down.

2198 When you talk about conflicting evidence on the record. I want to go back to what both my colleague, Ms. Bajic and what Dr. Dippon said, and really get at, I think, the core of the issue here, which comes to market definition.

2199 It's not open to the Commission to make a finding on the basis of national pricing data because the Commission has repeatedly accepted a regional geographic market definition or even narrower than that.

2200 And so, even if you accept that prices are going up, nationally ‑‑ and we can again debate that ‑‑ you need to look at whether prices are going up or down in the market you're talking about.

2201 And I know we've discussed ‑‑ you've put to us that the record is contradictory. I would actually respond that the record is actually unequivocal, that in Alberta and British Columbia prices are declining. That is not challenged on the record anywhere, and that is what is open to you.

2202 And I would add two other points, one is ‑‑ and this goes, I think, also to Dr. Dippon's point about not looking at prices alone, which is trends are important. Even if the Commission were to accept that prices were high in Alberta and British Columbia ‑‑ and obviously, we dispute that ‑‑ if the Commission equally accepts that prices are declining under the current framework, then the course of action has to be to let the current framework let prices decline.

2203 Similarly, if the Commission were to determine that, in a different geographic market ‑‑ Ontario, Quebec, wherever ‑‑ prices were increasing, then that's a cause for concern.

2204 And I want to add one last point, just about the Wall Report, and further to my last one.

2205 I agree with everything Dr. Dippon said about the flaws in the Wall Report, but if you accept the Wall Report on its ‑‑ within its four corners, it concluded: Relative to last year Canadian prices have declined in every basket.

2206 So, if you want to go to the Wall Report, again, you can accept that position too. Thanks.

2207 THE CHAIRPERSON: Okay, thank you very much for that.

2208 Sticking with competition; can you talk to us about the competition in BC and Alberta, and what is it about the competition between TELUS and Rogers that's unique, compared to the rest of Canada?

2209 MS. BAJIC: So, the competition between TELUS and Rogers ‑‑ formerly Shaw in the West ‑‑ has been really intense and it's been intense for quite a while, in fact, and the competition is actually across all of our products and services, so we're not competing on price alone and we're competing with each other to make sure that we're offering our customers the best and the most differentiated products and services, to help them actually live in their homes and get the most of their working lives, and lives in general.

2210 In addition to that, we're also really fiercely competitive on customer experience. We really pride ourselves on the amazing customer experience and customer‑first philosophy and values that we live by at TELUS.

2211 And so, when we think about everything that we do, in terms of our value prop it is all with the customers at the centre of our products, and everything.

2212 MR. SCHMIDT: I'm going to provide one short overlay to Ms. Bajic's answer, from a regulatory perspective.

2213 There's a distinction with a difference in the West as well, in the sense of a very significant and whole‑of‑government, across the minister, ISED, the Tribunal, the CRTC, to put Rogers in the shoes of Shaw as a better capitalized competitor and to, you know, fundamentally reanimate the fourth carrier in the West, in the form of Videotron endowed with more spectrum, endowed with an enviable mandate, endowed with other enablements pursuant to the Tribunal proceedings, pursuant to the merger process.

2214 So, that's a significant pool of government intervention in the West that we want you to take proportional account of when you consider whether there's any need to overlay further measure still.

2215 THE CHAIRPERSON: Okay. Thank you for that.

2216 Maybe just before we leave pricing and competition, you've said that internet prices are different across the country and different regions. Can you help us understand how TELUS goes about setting prices? What factors go into that decision across the country?

2217 MS. MAWJI: Yeah, so again, to maybe top up on the last point, all of the data points my colleague, Ms. Bajic, highlighted are Stats Canada results, they're not our estimates or our own internal studies. So, we're going with, you know, the national pricing indices that are produced both for our services and other services.

2218 In terms of how we go about setting prices, I think you heard us talk about the fact that we are focused on ensuring that we have driven a number of investments to provide the best quality service, so we started our fibre commitments and investments, over $7 billion over the last 10 years, to build fibre out to the 2.3 million homes and businesses that I highlighted in my opening remarks.

2219 And when you look at the impact of making those investments ‑‑ that's one of the first parameters, of course ‑‑ in terms of how an individual company will set its prices, in terms of its return on investment, you look at the competitive environment, you look at the bundle of services that are enabled over that connectivity. And that bundle isn't unique to us; others that use those facilities can provide the same bundling capabilities, and it's a question of what is your business proposition and what particular areas are you diversified in, and how will that look at the overall household economics and the overall household pricing, as well as the overall household profitability.

2220 So, we look at all of those parameters, and in addition to that I think the key thing is that pricing is adjusting based on competitive behaviour and based on customer preference and desire.

2221 You know, we have seen points in the market where customers will really understand and see the value of premium service, like fibre, of course, because it has the symmetry, the capacity, the reliability, and all of the characteristics of a superior network solution.

2222 As prices decline, you know, certain preferential desires and demographics lead towards those lower prices with maybe an inferior technology.

2223 So, different dynamics have a different impact, and it can be temporal. And has Jelena highlighted, the bottom line is that in Alberta and BC prices have come down drastically, in a very short period of time, and the differential of that price decline, relative to the rest of the country, has been very stark.

2224 THE CHAIRPERSON: Okay. Thank you for that. Maybe we can move on to consolidation.

2225 So, some parties have told us that the recent acquisitions that we've seen by the large providers is a sign that the wholesale system is not working. And you have a different perspective. You've said that those acquisitions are evidence of success, not failure, and I'm hoping you can just help us understand your reasoning.

2226 MR. SCHMIDT: So, I think I would potentially start by making a distinction. Where resellers are being acquired in Bell's incumbent footprint, for example, that is having an impact on the overall market structure and magnifying concentration.

2227 Whereas when TELUS is acquiring a reseller to enter a greenfield market for us ‑‑ Ontario, Quebec, wherever ‑‑ that isn't altering market concentration, and it is in fact increasing competitive intensity.

2228 MS. MAWJI: Yeah, so as we highlighted, I think the really important element of no, here, is who are the incumbents, in terms of the facilities' providers, and we take our position as an incumbent incredibly seriously, in terms of our obligation to ensure that we do our absolute best to serve customers, with the best technology and the best service that we can. We are not perfect, we humbly try to win the hearts and minds of our customers every single day against a backdrop of exceeding competition, and that has been a challenge.

2229 But when you look at the reseller market, it is different in Alberta and BC, versus Ontario and Quebec, and as an incumbent we're seeing, in our home territory, new entrants in Alberta and BC, and we've seen evidence of that even based on the Commission's own interim decision and findings, in terms of a 17 percent increase in reseller share.

2230 In Ontario and Quebec we're seeing that share decline, and some of the ISPs are being bought out by incumbents in the territory and yes, we have acquired resellers to enter the market and to provide new capabilities and new bundles, and new products and services within our bundle, and that should be treated as a new entrant, as we are a new entrant and do not have fixed facilities in those markets.

2231 THE CHAIRPERSON: Thank you for that, and maybe just continuing along those lines.

2232 So, you've just talked about the acquisitions that have gained you a user base in Ontario and Quebec. Can you talk to us about the decision, going into ‑‑ entering with wholesale access versus building out a network?

2233 MS. MAWJI: Sure. So, I think the key thing around that is that there has to be a economically viable footprint across Canada that you look at. And when we are looking at our incumbent territory and when we're looking at economics of building network facilities, really, you're looking at areas where you can be first to fibre and that there's two access points into the home, one provided through cable and one provided through the telecommunications provider, and typically that's fibre, but it's growing, it's not everywhere, we're still completing our builds.

2234 And then, when you look at territories outside of our incumbent territory, we're looking at how do we bring ‑‑ if there's already facilities in place does it make sense to add facilities or to leverage the existing framework to provide facilities that we can access and ensure that we can provide more innovative bundles to our consumers?

2235 And in our territory, competitors have come into that territory as resellers the same way, and those number of resellers are increasing in our territory. So, we look at it in the context of what is the most economic, feasible and viable way to enter?

2236 And one of the points I'd like to bring this back to is the point around this aggregated access, because that is an important element of this proceeding. When you look to think about how a fibre network would be enabled in a resell context, if you have a single point of presence, if you had a single point of presence in Toronto, you were serving customers from Montreal to Toronto, the burden on that network from the single point of failure would be immense, if you started to scale and grow, because you're going back and forth between those points of presence and putting that much of an impact on the transport.

2237 A better way to provide facilities is to build in regional disaggregated points of presence, so that you can reduce those single points of failure and you can increase the reliability, the security, reduce the vulnerability of those networks to climate, to other potential vulnerable attacks, and ensure that you reduce the size of the customer base that could be impacted by any sort of network issue.

2238 So, that's a much more reliable way of building out infrastructure but it does require a commitment to make an investment, and we are prepared to do that, and we would like to see a framework where that investment has an incentive, so that the rate structures in those ‑‑ and for making those investments are an incenting of those investments.

2239 And we have, through our business‑to‑business networks, numerous points of presence that we could leverage in terms of building out that distributed access to the retail market.

2240 THE CHAIRPERSON: Okay. Thank you for that. You now offer internet plans under your Koodo brand in Manitoba, Ontario and Quebec. Do you plan on expanding Koodo‑branded internet services in other parts of Canada? Like, Atlantic Canada, for example?

2241 MS. MAWJI: We'll look at every area of the market and, you know, the reality is that our customer base, given the new dynamics of the industry, is competing now across the country with everyone who can bundle. So, we will be looking to ensure that we can support our customer base with the right innovative bundles.

2242 We have looked at other regions and territories, and we will look to expand, so that we can offer national services. Many of the services that we provide today across home security and automation, across our streaming bundles and our healthcare services, are available nationally, and so we will look to continue embracing the opportunity to provide holistic bundles to our customers across the country.

2243 THE CHAIRPERSON: Thank you for that. Can you talk to us a little bit about the marketing strategies in those territories with Koodo?

2244 MS. MAWJI: Sure. So one of the elements is that the Koodo brand has been well‑embraced outside of Alberta and BC where we have a lot of brand equity with our TELUS brand. So we are looking at that base of customers and thinking about what are the types of bundles that are going to attract those customers.

2245 We see a lot of growth, of course, in areas that we’ve been traditionally underpenetrated, like in the newcomer market. So there are opportunities for us to grow in those areas where there is growth and there’s opportunities for us to provide more value to our Koodo customer base, and that’s why we’re experimenting with, you know, different bundles and different value propositions to really look to see how we can compete effectively.

2246 Maybe the other point I’ll make is that, you know, of course every market is dynamic. But our market has changed so drastically in the last year. The level of price declination, 27 per cent on mobility, and the number of switchers has increased drastically. We are a company who has traditionally and will continue to focus on gaining share economically with the value prop that attracts customers, but retaining those customers, making sure that we’re continuing to provide value every single day, and making sure that customers are making that active choice to stay with the TELUS brand family.

2247 We’re finding that we need to offer more differentiation in that dynamic environment so that customers see that value. That’s great for competition, and it’s led us to do things like offer Stream+, which is a global first.

2248 So these are the types of things that we’re excited about in terms of our entry into the market. We have the most diverse and breadth and depth of our products, and we want to ensure that we support our customers and their growth and their retention.

2249 MR. STERN: Zainul, I completely agree with everything you’ve said. And I just want to let the Commission know that, though I completely agree with Ms. Mawji, you don’t even have to take her word for it, because it’s precisely what the Competition Bureau said to you the other day.

2250 They said, when asked what made for competition or a strong competitor into a new market, they said:

2251  : : : :“In addition to scale economies, it may be economies of scope or complimentary business lines, one of the things we highlighted was offering TV services and home internet services. That’s an example of a complimentary business line. The other one that comes to mind is brand, that’s another kind of economy of scope. You see, you’re reusing the same asset, those are the main ones we’ve seen, and perhaps other services can be bundled.” (As Read)

2252 I think if you distill what Ms. Mawji said, you have the essence of what our competition regulator in this country just told you two days ago, makes for strong competition on a wholesale basis outside of one’s territory.

2253 THE CHAIRPERSON: Okay. Thank you for that. Just one last question on Koodo.

2254 Are you getting wholesale access under a tariff or are these off‑tariff agreements?

2255 MS. MAWJI: We're using existing tariffs.

2256 THE CHAIRPERSON: Thank you for that. We heard from PIAC and OpenMedia on Monday that wholesale‑based competitors bring innovation to the market.

2257 But then we heard from SaskTel yesterday that resellers offer no technological improvements. We also heard this week that selling internet services is like selling water, there’s just kind of no room for innovation.

2258 Could you just comment on that?

2259 MS. MAWJI: I would say all of our team members, including myself, would be fairly bored if there was absolutely no way to differentiate our services in the market. We pride ourselves on differentiating our services and we pride ourselves on looking at new ways to unlock value.

2260 At the end of the day, value is only what the customer sees and what the customer is willing to pay for, and ascribes value to.

2261 If resellers, or any business, were to enter a market and didn’t have a strategy ‑‑ I mean, we can go back to the business basics of price versus differentiation, if you want to enter a market and you can’t offer either of those things, then I’m going to question, regardless of what business you’re in, what are your objectives and what do you hope to achieve.

2262 Because every business has to have a strategy. If the strategy is only based on price, then I would say that, you know, that’s probably not sustainable particularly in an environment where there’s increasing competition, increasing innovation, increasing diversification and differentiation.

2263 If there’s a market where, you know, you’re entering the market and you have something new to offer customers and they value that, then you’ll always be successful based on your value proposition. You have to have a value proposition.

2264 THE CHAIRPERSON: Thank you. Could you maybe just touch on what those innovations look like? And I know you’ve talked about this in your submissions, but if you could just explain to us, that would be great.

2265 MS. MAWJI: So I think you can look at innovations across the board with the core technology. You could look at innovation of the service that you provide customers and the level of service. We’ve done things on our internet service like offer Wi‑Fi Plus, which is an incredible service that provides wall‑to‑wall Wi‑Fi service, because you never want to be stuck in that corner of your home without Wi‑Fi.

2266 And we provide incredible fibre differentiation which creates reliability, sustainability, capacity, and symmetry of that two‑way connection on the technology so that, you know, your upload and your download speeds have the same level of capacity, and that fibre connection directly to the home also provides a unique way to provide reliable service, that you’re not sharing that network across the board in terms of sharing the capacity of that network. So higher speeds provide differentiation.

2267 So these are things, reliability, you might have a service guarantee or not a service guarantee on certain things. Our entry into the east where we could provide reliability on our wireless backup or our internet service over TPIA and any kind of agreement we’re able to achieve, those all provide points of differentiation.

2268 Then you look at that in the construct of a bundle, and what are you providing in that bundle. And we’ve talked a bit about that in terms of security and automation, online security, different content packages, health services across the board and how those services come to life and enable the digital lives of our customers.

2269 THE CHAIRPERSON: Okay. Thank you for that. Maybe we can move onto wholesale rates.

2270 So we’ve seen during this proceeding that there are situations where large providers are offering services at retail at prices that are lower than the wholesale rates. TekSavvy claims that there are circumstances where large providers are offering retail internet packages at less than half the tariff price for the equivalent wholesale service.

2271 You’ve said that comparisons between retail prices and wholesale prices are misplaced. So can you help us understand what you mean by that?

2272 MS. BAJIC: Yes, maybe I'll start. So we believe that you cannot compare a wholesale and retail rate. For starters, there’s a few things that we need to know about retail rates.

2273 One, when we have a discounted retail rate, we are entering the home with internet and we’re leveraging that connection to really drive product intensity and grow our revenue and margin through that way. We are not the only ones that have that capability, resellers have that capability as well. So they could also sell additional products and services and increase their product intensity.

2274 The second piece of differentiation is a wholesale rate has no time or volume commitment. So when we look at our no‑bundled pricing, as an example, we often refer to it as month‑to‑month if you were shopping on our site. A 1Gb rate is $125, and when you compare that to the wholesale rate of $112 there is a bit of margin there to play with.

2275 The last thing to consider in terms of the retail rate is that we serve our customers locally on our networks, as Zainul talked about, in a disaggregated‑like framework, which actually decreases cost, increases capacity and reliability for the customers that we serve on the retail rate.

2276 So, really, the wholesale pricing reflects the burden of risk that we are taking where we’re losing any potential incremental household ARPU from product intensity, and any risk from no volume or time commitments with those customers.

2277 THE CHAIRPERSON: So how could a wholesale‑based provider compete if the wholesale rate that they have access to is higher than the retail rate in the market?

2278 MS. BAJIC: So I think what ‑‑ and sorry if I didn’t communicate that clearly, is that the wholesale rate is in fact equal. So if you look at a month‑to‑month 1Gb price that we sell to a customer, that is $125/month. When you look at a reseller wholesaler, we would give that same rate month‑to‑month 1Gb at $112, so it is actually in fact less than what we retail to customers for that service.

2279 MR. STERN: Maybe Mr. Al Daoud will go.

2280 MR. AL DAOUD: So on the wholesale rates, the methodology for actually calculating those wholesale rates is long‑run incremental costing, and that’s actually supposed to achieve multiple things besides the fact that incumbents can recover their costs. It also has to set, you know, the right price level so that it would encourage, you know, efficient entry into the market.

2281 So the fact that there are forward‑looking and long‑run costs, it actually has economic value of encouraging economic entry. If they are too high then, you know, nobody is going to buy the service. If they are too low the same time, they’re going to actually encourage trend seeking into the market. So there is something beyond also cost recovery that you want to achieve through those rates.

2282 MR. STERN: I'd also just like to tie this back to market definition again, if you can believe it. The question is how can resellers compete? Well, one answer is if a market is competitive and the rates are set at your long‑run incremental cost, then there’s not a lot of cream to skim, because the rates are precisely set at your long‑run incremental cost.

2283 And sometimes your long‑run incremental cost is actually a level that is sufficiently high because of the nature of building and where you are, and including in Alberta and BC, like difficult geographies, and it leads to a high cost of building.

2284 But I also want to just look at the implications of these allegations and unpack them for a second. If the allegation is well you, TELUS, are pricing below cost and that’s predatory pricing; first of all, as Ms. Bajic said, that’s just simply not true, we’re not pricing below even our wholesale rate.

2285 But even if that’s true, like it can’t possibly fit as predatory pricing when you look at market behaviour in Alberta and British Columbia. Reseller market share is increasing and prices are going down, month after month, year after year. So if we’re engaged in some sort of predatory pricing tactic, well we’re clearly not doing a very good job if prices continue to go down, it’s not a short‑run thing, and if the competition keeps going up and entering.

2286 So I think that should be evidence that what’s going on is clearly not a predatory below‑cost pricing tactic, and that the fact is our costs are truly tied to the long‑run incremental cost of our serving area.

2287 THE CHAIRPERSON: Just on costing, let me put something to you that we heard from Eastlink yesterday. They said, “If we get the costing right, nothing else matters.” So they’re ambivalent as to whether ‑‑ you know, between the wholesale and the retail rate.

2288 MR. AL DAOUD: And we agree with that. I think it’s the interim rate in November speaks to that fact. The rates that we set for, or we proposed for Quebec, were pretty much close to what were set in the actual interim rate in that decision.

2289 So I totally agree. Setting those, you know, right prices that give the right signal to the market is the important fact here, and I agree with that.

2290 MR. STERN: I apologize, I’m going to shut‑up soon.

2291 MR. SCHMIDT: By about noon.

2292 MR. STERN: Yes, by Thursday, I promise.

2293 I want to touch on what it means; if you get the rate right, nothing else matters. It’s certainly correct, I agree completely with my colleague. If you have already determined the competitive conditions warrant, for example, an aggregated wholesale service, then what matters is you get the rate right.

2294 But you’ve got to first go through the analysis to determine whether the facts are there on the ground to mandate the service, that takes you through the entire essentiality test, through its analysis of competition. There’s not an overarching ability to say, well, it doesn’t matter how we regulate, because as long as the rate set is right then the market will work.

2295 No, it’s once you’ve identified the very specific problem; for example, do we need disaggregated, do we need aggregated, then the rate setting is all that matters. But there’s an important predicate step, which I think is a large part of why we’re here today.

2296 THE CHAIRPERSON: Okay, thank you. So maybe moving onto the limits on wholesale access that we’ve heard about during the proceeding. So some intervenors have suggested that large providers should not be allowed to use wholesale access at all.

2297 And as a large provider who’s currently using wholesale access, I’m wondering what your perspective is on that.

2298 MR. SCHMIDT: This might be the rare instance where I get to speak. I have very enthusiastic people on either side of me here.

2299 As we’ve said in our opening, there’s no national incumbents in wireline, there’s no big three in wireline, we are as much an entrant in Ontario or almost all parts of Quebec, as Videotron or Cogeco would be in Western Canada, and we are precisely the type of competitor that you want purchasing these inputs and bringing more competition into these markets.

2300 I think PIAC agreed with that and I think, if I recall correctly, the Bureau was on that page too. Because these are the people you want coming east, in this case, and bringing more competition.

2301 So there’s no principled reason to exempt us from the ability to purchase these inputs. It would be bad for competition, bad for customers, bad for Canada, you know, but highly protectionist and highly good for certain large players that have asked you for this. And we don’t want any protection either.

2302 MS. MAWJI: Maybe I'll top up and provide a different ‑‑ I agree with everything my colleague said, but I want to provide an alternative use case.

2303 We take our responsibility where we are an incumbent, where there is a very distinct definition that we’re incumbent, very seriously. And we are accountable for ensuring that we can provide the best possible service and the best possible networks to our customers in our incumbent territory.

2304 If we were only looking for financial outcomes in the short term and we were looking to leverage the existing framework in that context, there are many many places that we serve today that our cable competitor can provide 1Gb access to where we are disadvantaged with copper network because we haven’t been able to complete the fibre to that particular area yet, and we will.

2305 In that instance, it would be much more economically viable for us to use a TPIA agreement and get access to that network in our incumbent territory, but we do not do that. That is something that should be disallowed when those other providers come and say that, we are a national incumbent. We are not. We do not have facilities in the areas that we’ve participated as a new entrant.

2306 Where we are an incumbent, we will not use existing facilities to provide access to our customers.

2307 So we believe strongly that the framework in place should ensure there’s an incentive for the cable company in that area to keep investing and for the telecommunications company in that particular area to keep investing. And to do that, we should be precluded from using each other’s networks when we are truly an incumbent.

2308 But when we’re not an incumbent, we should be leveraging the framework to ensure that we can provide new forms of competition and create new sources of differentiation and value for customers across the country.

2309 THE CHAIRPERSON: Okay. Thank you for that. We may have more questions on that, but I’m mindful of time. So maybe I can just finish with some questions on investment for now, and then I can turn to my colleagues.

2310 So with respect to investment, maybe just as a starting point, we know that networks are expensive to build, operate and maintain, can you talk to us a little bit about that? You’ve also suggested that rural and remote areas be exempt. Can you talk to us about the difference in terms of the investments required there?

2311 MR. SCHMIDT: I'll start us off, and I’ll ask my finance colleague, Matt, to kind of illuminate the numbers and dynamics better.

2312 So it’s good to start with what has the scientific literature in this area unequivocally established across decades, across jurisdictions. And it’s that these types of mandates in all relevant countries supress investment by entrants and incumbents alike.

2313 And it’s intuitive and unsurprising, as a result if you can access someone else’s network you’re less inclined to build your own. The flip case for the incumbent in terms of undermining investment incentives is also intuitive. So that’s what the literature establishes.

2314 The question is how are these pressures and dynamics playing out in our particular case in Alberta and BC?

2315 MR. MURRAY: So maybe I'll start specifically on the kind of remote rule. I would say these are by far the most challenging business cases we have, going and taking fibre into these communities. They’re the most expensive to build, but they’re also the most expensive to maintain.

2316 I think it’s important that we make sure that we avoid any premature commoditization of the investments that we’ve made, because we have not yet had a chance to generate a payback on these types of investments. And we’re not done our fibre build, and my colleague, Ms. Mawji, highlighted where we still have copper facilities that we do intend to get to with fibre.

2317 But what I would highlight more broadly is it is getting increasingly more expensive to invest. We did have some benefit of investing during periods of low interest rates, but interest rates are going up and that puts a more acute focus on us ensuring that we can generate a return.

2318 I give you an example; in 2023 our interest expense as an organization was up 50 per cent year over year, that’s $427 million more that we are now paying in interest than we were a year before, and that constrains our ability to invest.

2319 So while we are projecting revenue growth in 2024, our CapEx will actually be down to approximately $2.6 billion versus more than $2.7 last year. And where we are investing is also more broad; 25 per cent of our revenue is now generated from TELUS International, TELUS Health and TELUS Agriculture & Consumer Goods.

2320 We are no longer just a western regional telecom company. We have a much broader base and that CapEx also has to be split across that area. So we need to be more prudent with where we invest and we need to make sure that we can generate returns on these rural and remote areas.

2321 MS. SOBANI: I could offer a few examples right from the field that how difficult those builds are out in the rural and remote areas. There are a number of factors that impact it.

2322 First of all, the distance. So let me share one example. To build in a small community called Red Earth Creek, we had to build 28‑kilometre‑long transport from nearest centre in Fort Vermillion. This is just one example. And the Red Earth Creek community only has less than 500 homes. So the distance itself matters.

2323 Once we are in the community, the distance between homes is four times longer than the distance that we will see in the urban markets.

2324 Another factor is that when we are doing those builds, to take the craft label from the nearest available centre to there itself is an expense because now we have to pay for their building and lodging, and those small communities sometime do not have sufficient building and lodging and we are being charged at premium because we need to complete our networks.

2325 Ongoing sustainment and maintenance of networks is extremely expensive in those areas, and especially now with the recent environmental turn we are rebuilding thousands of premises every year that have been a victim of either a flood or a fire.

2326 THE CHAIRPERSON: Okay. Thank you for that. You said in your June intervention that the cost of your fibre investments is not being passed on to consumers. So could you just help us understand that? How are those investments being recouped if they’re not being passed on?

2327 MS. MAWJI: Sure. Thank you for the question. Shazia ‑‑ my colleague ‑‑ Zeb Sobani, who I am just using first name with because we are being very formal here today, I guess, with the last names ‑‑ but we have been part of our fibre build since its inception. I believe I was employee number three, and maybe you were employee number five, since 2013. So we can give you a lot of background on how we approached this transformational generational investment.

2328 What we did was we looked at the entire ecosystem of building a new network, and we thought about, what if we were coming into this brand new? How would we generate a return? And we built our assessment of that on the back of a number of things, including the ability to create more reliability. We see two‑thirds less maintenance truck rolls in a fibre context than we see in a copper world, as an example. We talk about resiliency from floods and fires. In many cases, we’ve seen some of the most incredibly impactful climate change ‑‑ or climate impacts in the last few years with respect to floods, fires, and our infrastructure has been resilient because of the way that it was engineered. So, we ‑‑ we started from a perspective of looking at all of the aspects of how a return would be enabled, from operating costs to growing market share, to providing value‑added services, to bundling economics, to overall digitization of our business. We have not left a stone unturned and are continuing to turn over more opportunities to generate a return.

2329 Customers are willing to pay for higher speeds, for more capacity, for better services. We’ve rolled out now the next generation of our fibre build in XGS, and it offers even higher speeds. I talked about out Wi‑Fi Plus offering. I’ve talked about our bundles in a number of statements that we’ve made so far. So these are all elements of how we gain a return on our investment.

2330 THE CHAIRPERSON: Okay, thank you. And you’ve said that there should not be a wholesale mandate on your fibre until you’ve recouped your investment, and I’m wondering if you can talk about the implications of that. I mean, if it takes decades, does that mean there should not be any wholesale access for decades?

2331 MR. MURRAY: Thank you for the question. Yeah, we ‑‑ we’ve invested billions and we do need an ability to recoup that investment, and we’ve not yet realized that payback, and we want to be cautious against any premature commoditization. You know, as my colleague says, you know, we’ve in some cases had to build 28 kilometres’ worth of fibre in order to connect a premises, and that is something that we need to be able to get that return at some point before we commoditize the service.

2332 In addition to that, particularly for rural and remote areas, our ability to generate that return is predicated on the ability to bundle multiple services over that line. So, going back to the comment on wholesale versus retail pricing, this is not about just an internet service, and the question that you posed around competition ‑‑ the ability to compete ‑‑ we do not compete, nor do we build fibre purely for the basis of selling an internet service. It really is about the full bundle and suite of products that we can provide.

2333 So, our ability to do that is predicated on being able to serve that customer, and in a wholesale regime we lose that opportunity to sell the double‑play, the triple‑play, the quad‑play services that enable our ability to generate that return.

2334 MS. SOBANI: I would just like to add on that when we take the fibre to the community, our focus is not only to help the community to generate economic remarkable outcomes. We also highly focus on enabling some social outcomes, and particularly with the backdrop of our commitments to Indigenous reconciliation.

2335 I have many, many examples that I can share where the fibre connectivity opened up for a Nation like Haisla for their language revitalization; or for a small reserve in Chilcotin region for the children not to travel 45 kilometres to go to a school; or our economic partnership with the Nation of Nisga’a, which is training their Nation members to participate very productively in the economy.

2336 So, our ‑‑ our fibre commitment and fibre investment to those communities has longstanding commitment and far‑reaching, positive impacts on generations to come.

2337 THE CHAIRPERSON: Okay, thank you. So, perhaps a final question with maybe a few sub‑questions embedded here. So, following the Commission’s decision to mandate a temporary aggregated FTTP service, as you know, Bell announced that it would reduce network investments. TELUS did not make similar statements in terms of that impact of the temporary mandate. I’m wondering if you can comment on that, and I have a few specific questions.

2338 MR. SCHMIDT: We certainly will, and we welcome the opportunity. I’m going to again reiterate the baseline of the science. It’s undoubted internationally and over time what these mandates do. But you’re asking about TELUS’ particular response in the circumstances, and my colleague Matthew can illuminate.

2339 MR. MURRAY: I think more broadly it’s important to understand that we are already diversifying our investments. So, if you look at the last five years between our capital expenditures and our MNA, we’ve invested roughly 25 billion dollars. That is 10 billion dollars more than the previous five years; however, that increase is all outside telecom. We’re investing in TELUS International. We’re investing in TELUS Health. We’re investing in TELUS Agriculture & Consumer Goods. We’re building a security and home automation business.

2340 Our telecom CapEX actually is down. Over the last five years, it’s down 29 percent. And so, to the extent that we are making our capital investment decisions based on where we see returns, we make those decisions day‑to‑day and ultimately, you know, the interim decision is interim, but where we end up with the final wholesale rates will ultimately determine how we invest the next dollar.

2341 MR. SCHMIDT: And I think it’s fair to say in some contextual backdrop that this framework has been under contention, review, appeal, et cetera, shifting back and forth for 15 years, and it’s challenging for incumbents, it’s challenging for entrants, and that level of flux has also coloured our decisions of where to put our attention, our focus, and our money in some risk management strategy.

2342 THE CHAIRPERSON: Okay, thank you. So maybe to ask a very specific question, did the temporary mandate decision impact TELUS’ FTTP investments in Quebec?

2343 MS. MAWJI: No.

2344 THE CHAIRPERSON: And could you maybe walk us through any analysis that you did with respect to the impact the temporary mandate would have on your fibre deployments in Quebec?

2345 MR. AL DAOUD: The fibre deployment in Quebec is almost complete, so we ‑‑ we just have the service there up and running. So there is ‑‑ to my colleague’s point here, there is no impact ‑‑ direct impact on the investment when it comes to Quebec.

2346 MS. SOBANI: I think I would just like to add, on Quebec particularly with regards to the build, my colleague alluded to that, that the interim rate actually reflects the ‑‑ the cost to build there, and the terrain where we are building needs to be taken into account. Like, for example, in Western Canada, when we are doing the build across extremely difficult terrain using big hydrovac trucks, additional slurry disposal cost, coating equipment ‑‑ those things are not used when the deployment method is easy and relatively less expensive to build.

2347 THE CHAIRPERSON: Okay, thank you. Maybe one final question on that. Did TELUS do any kind of similar analysis, given, you know, the possibility of a similar mandate elsewhere in your serving territory? Did you do any other kind of analysis, given the possibility of extension?

2348 MR. SCHMIDT: We can explore that on a ‑‑ I mean, I have a concrete answer at one level. We don’t have analyses about things that haven’t happened, that we don’t know the shape of it, et cetera. It hasn’t happened yet in our territory, but if necessary we can undertake to explore, if we looked at anything speculative and did scenarios, but, you know, the science is quite dispositive of what will happen over time in any event, regardless of what studies TELUS did. And the other thing that’s quite dispositive is we are far, far, far from done in terms of household coverage by fibre in Alberta and B.C. It’s a very different fact situation than our tidy little ILEC island in Quebec.

2349 THE CHAIRPERSON: Okay, thank you very much for that.

2350 MR. SCHMIDT: Thank you.

2351 THE CHAIRPERSON: Thank you for answering all of my questions. I have more, but I’m going to stop because I’d like to give my colleagues an opportunity as well.

2352 Would you like to take a break now, or should we turn to Vice‑Chair Scott? We’re in your hands.

2353 MR. SCHMIDT: It’s up to the Vice‑Chair. We’re happy ‑‑ we’re having fun. If you can tolerate our 30‑minute answers, we can ‑‑

‑‑‑ Rires

2354 MR. SCHMIDT: We can go a little longer till he wants a break.

2355 VICE‑CHAIRPERSON SCOTT: Yeah, let’s go ahead, if that’s okay with you.

2356 MR. SCHMIDT: Okay.

2357 VICE‑CHAIRPERSON SCOTT: And I won’t get all of them in now, but we’ll give you a break in a second. In part, I wanted to keep going because your statement that you don’t like to engage in speculation is the worst possible segue into my next question.

‑‑‑ Rires

2358 VICE‑CHAIRPERSON SCOTT: So, we’ve had a fair bit of discussion already about the question of who should have access to wholesale services, and I’ve noted your concern over facilities‑based providers having access within the territory where they’ve got facilities, but this is such an important issue that I would like to have you kind of game out a scenario.

2359 So, we wake up tomorrow. The wholesale framework is place. There are no restrictions on who can access that wholesale rate. What would you do? You know, what would other parties do? How would you respond? Could you kind of walk me through the sequencing of kind of the tit‑for‑tat ‑‑ like, literally kind of the game theory of that scenario?

2360 MR. SCHMIDT: I will start the question till the more able people can collect their thoughts and speak. And I think the wireless framework from ISED, with essentially permanent, without‑end, domestic roaming, provides for all players. It provides a very useful analogy. So, Rogers can decide to roam on us in Alberta in their incumbent wireless footprint. You know, so could other players as well.

2361 What we’ve seen in that framework ‑‑ and I’m using it as an analogy ‑‑ is they ‑‑ whoever they are ‑‑ access seekers on our wireless network, won’t build in the difficult areas. They will roam on us. We see it with all the set‑aside 5G and other spectrum over time. It is 80‑plus percent undeployed in rural. Those carriers ‑‑ the entrants roam on us instead. So, it’s very, very foreseeable, I think, that it will incent non‑building in remote and rural, but carriers may continue of course to invest in the big cities.

2362 So, it’s a bad outcome, I think, for remote and rural because it establishes very poor incentives for other people, and it’s played out quite empirically in wireless.

2363 I don’t know if you’d like to continue, Zainul.

2364 MS. MAWJI: Thank you for the speculative question. Of course we can provide our opinion, based on the facts that we know and our experience in the industry, and just our knowledge of, you know, the way the competitive dynamic plays out.

2365 What I would say is that that outcome, I believe, would be a very stark outcome for Canada. And I think that there are, you know, two or three fundamental reasons why that would be the case. The first is that I think incumbents would have a clear capability mandate to say, “We don’t have to invest,” depending on which incumbent has access and which particular technology in that particular area is superior.

2366 And what’s kept competition going ‑‑ why we built fibre ‑‑ you know, we ‑‑ we wanted to compete and we’ve had very strong facilities‑based competition in Alberta and B.C. against a formidable competitor in Shaw. We wanted to compete, and we had to have superiority to compete. We were not the market leader. We had very, very low market share in internet when we first started, and they were the leader and we had to find ways to ensure that we could attract customers through our IPTV investments, through our fibre deployments, and through other means to really show customers there’s more value.

2367 Cable is on the cusp of a major transformational upgrade ‑‑ to DOCSIS 4.0. That technology is just coming to light. They will want to push for that technology to get as close to the symmetry that fibre provides as they possibly can. That would create an environment in Canada with two infrastructures ‑‑ dual infrastructure, strong reliability, reduced vulnerability.

2368 I mean, we’ve all seen the impacts of something like ‑‑ what terribly happened with the Rogers outage, and the impact to Canadians for something like that. And you want to have diversified network access to every home and business in the country, and that’s difficult in some very broad areas, but it is something that should be a desired objective.

2369 So I think the first thing that would happen would be that you would see incumbents ‑‑ maybe not right away, but over time for sure ‑‑ reduce, diversify their investments elsewhere, and start to ride on each other’s networks.

2370 The second thing that would happen, as Stephen highlighted, is those remote areas would be the most impacted. We do have in Canada some of the best coverage for both fibre and wireless access to a broad base of the country. There are remaining places to complete access to. They’re expensive. Some of them require significant transport investments before you can even think about the access infrastructure. That would, I think, be highly vulnerable in that kind of dynamic.

2371 And the third thing that would happen, I think, is that because of numbers one and two, the burden ‑‑ the burden of either expanding networks to places that do not have them, or ensuring there is dual access when it gets recognized that that is an important parameter ‑‑ is that that burden over time would shift to citizens and the taxpayer base, unnecessarily. What should happen is private companies should be given a parameter and a framework on which to want to make those investments, even if it takes years to recoup that investment, but they should want to be there sustainably to do so.

2372 We have definite competitors in all of our markets that are backed by short‑term investment outcomes come and go, whether they are, you know, of their own volition making those investments or backed by third parties, but the sustainable infrastructure providers in Canada should have a framework that’s reliable, that is clearly understood, that is leveraged to be able to make long‑term decisions, because those are the investments that we make.

2373 VICE‑CHAIRPERSON SCOTT: Great. I really do appreciate your engaging with the question.

2374 I just, as a follow‑up, because you also spoke previously about, you know, when cable was the leading technology, and the fact that TELUS nonetheless made investments in its own network when it could have been, and maybe some might argue should have been, incented to make use of wholesale, using the best available technology currently deployed in the market.

2375 So, it sounds a little bit like you are concerned about a future pattern of behaviour that’s actually not what’s happened in the past. So, what’s the explanation of why TELUS chose to invest despite economic incentives historically, and how is that different from kind of the speculative, forward‑looking narrative you just presented?

2376 MR. SCHMIDT: I’ll start, and by analogy to wireless, the pattern of underinvestment in incumbent footprints against the backdrop of sharing has happened. And these networks at some level are transport networks anyways to towers, so when they’re using our towers and our transport networks, they’re underinvesting. We’re also investing in the face of obligation to serve, et cetera. We’re not leaving the communities; so, we have to build.

2377 And it’s the defining competitive dynamic, frankly, in the U.S. and Canada, which is this dynamic contention between networks ‑‑ the cable network which was better than ours, probably up until 2010, 2013, and we had to go in and leapfrog them and overbuild them, and it’s just better in the end to own than rent. So, we build these networks ‑‑ and that’s the kind of dynamic contention that you really want to preserve to the maximum degree possible in your calibrated approach here.

2378 MS. SOBANI: Sorry, just one thing to build on. That is, you referenced that that was the best technology at the time. If we would not have made the investment, the innovation and the new technologies would not have been unleashed in Western Canada. And everybody would have been on that technology which was the latest 20 years ago and would have become a legacy technology now. So, by having the right framework, it actually continues to incent not only the investment, but the right incentive for the continued innovation and creativity, as well.

2379 VICE‑CHAIRPERSON SCOTT: Great. Thank you for that. And if you can stick around for one more question before break, it might sound unrelated but then I’ll ‑‑ I promise I’ll circle back.

2380 So, this is kind of the Goldilocks framework that, you know, the Competition Bureau mentioned that I’ve been discussing a bit. So, the notion that if we get our prices too high ‑‑ the wholesale price is too high, there’s no room for competitors to compete. If it’s too low, it deters your incentives to invest. So, I want to start by asking, what are your thoughts on whether or not there is in fact a Goldilocks zone?

2381 So, is there a price at which you can recover your cost in a reasonable return with enough margin for a reasonably efficient wholesale or two to put an offer into the market that meets the needs of Canadians?

2382 MR. SCHMIDT: I will start off again, before the more qualified and diligent people get their answers ready.

2383 So, there is a single global standard for this type of wholesale costing, and it’s LRIC, and the Commission’s version of it is Phase II, and it’s rigorous. It’s been used for 40 years. The Commission declared it would use it setting any rates falling out of this proceeding. And it’s designed to do ‑‑ send all the right signals about people making purchases or in different ‑‑ whether I build my own or buy from you. So, LRIC properly done, Phase II in the Commission’s language, sends the right signals, would be my submission. And I think Daniel wants to add.

2384 MR. STERN: Yeah. The Commission is on record saying you want LRIC cost studies. As Mr. Schmidt said, LRIC is the global standard. So, on the Goldilocks problem, I think the first point is, you should try to get to the right answer. I don’t think we know the LRIC Phase II pricing does not work in a way that you get to a range. You should try to get to the right answer that makes someone ambivalent or agnostic between building or renting. So, that’s the goal.

2385 But if the question is, Okay, but how can you expect us to get it to the penny, and where ‑‑ like, what do we do here, like, acknowledging that you can’t be perfect? But I think you have to look at the consequences of error on one side or the other.

2386 And if you’re looking at an aggregated mandate, the consequence of setting the rate too low is far worse than the consequence of setting a rate too high. And I say that because, if you err on the side of a rate too low, you will send a strongly negative investment signal, as we’ve heard, and you will set back investment for who knows how long, because companies would make capital decisions on where to invest, and it won’t be in an aggregated world.

2387 The flip side ‑‑ if you set it too high. Well, then, when you lower it, if it’s lowered to a level that more incentivizes competition, given the nature of aggregated access, which requires almost no investment from a competitor, it will not be difficult for competition to spring up and enter and correct the problem.

2388 So, that’s point one on aggregated. Always got to try and get it right, but if you’re going to get it wrong, the way to err is on rates being too high rather than too low.

2389 But that problem does not inhere, at least not to the same point, in our view, on disaggregated, because on disaggregated, investment incentives are there regardless. Wherever the rate is set, any person wanting to make use of a wholesale disaggregated framework must invest in co‑location appropriately, must invest in transport. There is an absolute skin‑in‑the‑game requirement from day one.

2390 So, if you’re looking there, the negative effects of setting a rate too low will not distort ‑‑ send the same investment distorting signals ‑‑ as they will on aggregated. And so, in our view, if you’re asking, Do we have to get it right? Well, if you try to get it right, accepting that’s not possible, I think the real error to be worried of is too low on aggregated, but that’s less of a concern on disaggregated.

2391 VICE‑CHAIRPERSON SCOTT: Thank you for that.

2392 And so, my last question before we break. Are there types of competitors, particularly like those that have greater scope and scale, offer more services, are better financed, that could take an accurate cost‑based rate and more easily or more readily or more viably offer a competitive service in the market? And by restricting those types of competitors from accessing the wholesale rates, are we forgoing a potential competitive pressure, and are we doing Canadians a disservice by reducing their choice in the market?

2393 MR. SCHMIDT: I think it would be a grave error ‑‑ and I think we heard this from PIAC, and we heard this from the Competition Bureau ‑‑ to exclude the players most capable of bringing competitive pressure, more choice, lower prices, et cetera, into market. So, it would be a grave error to prevent us from accessing this in Ontario and Quebec, and indeed it would be a grave error to prevent Bell, for example, or Cogeco, from accessing these inputs from us in the West, if there was a similar mandate imposed on us. So, if I’ve understood the question.

2394 MS. MAWJI: Maybe to top up, as well, and agree, Stephen. I think that fundamentally, look at the outcome and the objective. I think there is always an outcome and an objective to have the best infrastructure in Canada, to have a pricing framework that enables access for Canadians, and enables choice and flexibility, that is a framework that incents competitive behaviour in terms of driving innovation and wanting to differentiate services.

2395 And fundamentally, I think what you’ve heard third parties and ourselves say is that if you exclude competitors who want to make investments, who want to provide differentiation, who want to innovate on services and give customers more choice and flexibility, not just in passing but for the sustainable future because they built their business on all of those mechanisms to drive a return across the bundle, across the value of the services, across their service infrastructure, across their infrastructure of boots on the street and going into home ‑‑ these are things that you would want to ensure Canadians have access to from a choice and flexibility perspective.

2396 So, I think it is really important to differentiate that concept of enabling riding on infrastructure as an incumbent, versus enabling riding on infrastructure as a non‑incumbent. And as we go back to the first points of our opening statement, there are no national incumbents in internet, and there is no national internet market. So, we should treat the market the way that it is currently defined and constructed.

2397 VICE‑CHAIRPERSON SCOTT: Thank you.

2398 THE SECRETARY: We will now go for our break, and resume at 10:55.

‑‑‑ Suspension à 10 h 40

‑‑‑ Reprise à 10 h 58

2399 THE SECRETARY: Thank you. Madam Chairperson, we're ready to continue.

2400 VICE‑CHAIRPERSON SCOTT: Welcome back.

2401 MR. STERN: Thank you.

2402 VICE‑CHAIRPERSON SCOTT: You're welcome. So there's one more question that I wanted to dig into. Earlier this morning, you made reference to your price, your retail price for a one‑gig offer being $125. One of the things I did on my break is hop on to the TELUS website, where I see that you've currently got a posted price of $95 per month for that service, which I think does highlight one of the challenges we face with regards to kind of the rack‑rate price versus what customers are actually paying on the market. It does make price comparisons challenging, both for consumers and for regulators and for academics like Professor Dippon.

2403 How many customers actually pay the 125? How many customers pay significantly less than that? Could you shed some light on what customers are actually paying for that service?

2404 MR. SCHMIDT: I mean, happy to illuminate the question, but given the competitive sensitivity, we would be happy to take an undertaking on this.

2405 VICE‑CHAIRPERSON SCOTT: Yeah, if you could do both of those things. Say what you can today, and undertake to provide additional data to support the questions.

2406 MR. SCHMIDT: Yeah, directionally say what we can today, please, and then ‑‑

2407 MS. MAWJI: Yeah, so I think one of the things that I can appreciate is that we are in a complex business and customers buy different speeds, different packages, different elements that come with those packages, different add‑ons in terms of value‑adds, and different terms.

2408 So one thing that I think can give you some visibility is that most of our pricing that we provide that is non‑rack‑rate pricing is a two‑year commitment promotional price, and the price would not change within that two‑year commitment. So that gives you some visibility and certainty into the pricing that you see.

2409 And then the other element is typically you might have some bundled pricing and non‑bundled pricing, but that would be very visible and transparent to the customer as well as communicated that you are entering into a bundled price. If something were to change in your bundle, that price could change.

2410 So I think there's a little more certainty than might look upfront, but as Steven highlighted, we'd be happy to do an undertaking to give you more visibility.

2411 MR. SCHMIDT: And ultimately, you know, the access that they're purchasing as an input, the piece of lumber that you're taking to sell a house at full retail, and they're buying the access and they are selling a bundle of TV, phone, Internet, more, depending who you are, you know, and the comparative reference point isn't sort of Internet wholesale price to Internet package, but you have to take into account the potential multi‑hundred‑dollar‑a‑month package that's being retailed.

2412 VICE‑CHAIRPERSON SCOTT: Sorry, are you talking about kind of the over‑the‑top services being sold by the wholesale ‑‑

2413 MR. SCHMIDT: Yeah, the access is the enabler, and then they or TELUS in Ontario can sell a whole range of services on top of that, whether it's security, voice, et cetera, et cetera, et cetera. So it's ‑‑ misleading is too strong a word, but maybe it's unduly narrow to say, Oh, I'm looking at the prevailing retail rates for Internet on the market. I'm looking at the price of the input, and this seems to be a problem.

2414 We are doing this now in Ontario as an entrant here, and it's partly predicated on the total package of stuff we can sell. We face this perplexity.

2415 DR. DIPPON: Stephen, if I may chime in here to Mr. Vice‑Chair's question, when we're talking about international price comparisons, we're looking at what broadband providers offers to the market, because that's the outcome of competition. It's on the supply side. It is true that customers might be on an old plan and they might be on a more expensive or less expensive plan. We don't know. But the focus in all of those studies, be that Wall, OECD, FCC, or my study, is on the supply side. What is being offered to the market with the expectation that a subscriber would be well informed, and so if he or she sees a lower price, that they would switch. It's not always possible, but often it is possible. But all the price‑ranking studies are looking at what competition forces broadband providers to offer to customers.

2416 VICE‑CHAIRPERSON SCOTT: But if the panel just told us that they can't publicly disclose what prices are available on the market, do you have access to carriers' actual prices that consumers can take around the world that we don't?

2417 DR. DIPPON: I don't. So basically, the 1,600 observations are those that I pulled from ‑‑ I had my team pull those off of the providers' websites. I understood the response from TELUS being that they can't tell you in public how many people are taking those plans. Maybe I misunderstood that.

2418 MR. SCHMIDT: But StatsCan has access to below the line, with much more granularity both at home ‑‑

2419 MR. STERN: What they have is they track consumer spending on these products. So the consumer spends what the consumer spends and by definition incorporates offers and rates no matter where they get them.

2420 MR. SCHMIDT: You pick up some granularity from StatsCan, and we can further amplify with the particulars of our market circumstances and company.

2421 VICE‑CHAIRPERSON SCOTT: That would be great. So maybe I'll ask staff to craft some language for an undertaking that we can read in. Thank you.

2422 THE CHAIRPERSON: Okay, thank you very much. Let's go over to Commissioner Desmond.

2423 COMMISSIONER DESMOND: Thank you. I have just a few miscellaneous questions. I think a lot of what I had planned has been asked, so I'm going to just maybe jump around a little bit with some of these questions.

2424 I think earlier today you talked about how there is competition in Alberta and B.C. and that any mandate would not necessarily be required to be applied in those provinces. I'm wondering if you could speak to what would happen in the other regions and does your approach mean, then, that we're looking for regional perspectives and that if a mandate was to be ordered that it would have to be applied on a regional basis? How would that be administratively administered?

2425 MS. MAWJI: So the market today is regionally defined for wholesale Internet access, and it's defined based on the prices and the costs that are located in those regions.

2426 When we talk about the market dynamic in Alberta and B.C. currently, I'll just bring reference to the key points that we highlighted earlier, which are the market has changed drastically in the last 12 months.

2427 There has been a whole government effort to enable an east‑to‑west new entrant as part of the Rogers‑Shaw closure of their deal. StatsCan shows that prices have declined significantly in Alberta and B.C. over the last year and significantly even in the last month with respect to promotional periods in concert with wireless prices that have also declined significantly.

2428 And the interim mandate provided by the Commission also highlighted that the reseller market has grown in Alberta‑B.C. relative to Ontario and Quebec and other regions.

2429 So I think the market is already defined as regional. And mandates have been regional. There's a precedent for mandates being applied regionally. And costing has to be applied regionally because costs change drastically, as my colleagues have pointed out, depending on terrain, depending ‑‑ even depending on the way infrastructure is placed.

2430 As an example, one that we didn't talk about is that when we undertook our fibre build, we decided to ensure that as part of our initial build we would put all the drops so that last mile access to even existing customers if they were on copper, without them ordering fibre, and help them transition to the new fibre network. And we did that proactively. And that's not something that's a common practice, but it adds a lot of cost to the build because you're deploying all of that cost at the same time.

2431 Over time there's economies of scale in doing so, and there's a way to ensure that you are protecting and insulating your customer base by giving them the best possible infrastructure you possibly can. But those kinds of decisions are investment decisions and they vary from provider to provider. And so costing needs to be done on a regional basis.

2432 So I think that it would be ‑‑ there are precedents for how mandates could be set regionally. Market conditions change. I think what we're highlighting is that there's a framework that's been identified for providing mandated access. Alberta and B.C. doesn't fit that criteria in the current time frame.

2433 And it still hasn't even been a year since the significant amount of regulation that we've seen and intervention that we've seen with respect to the Rogers‑Shaw deal. And we need to then see how that plays out in the market, and then conclude in a couple of years' time what happened, you know, has the market performed the way we thought it would. And if prices start to increase and competitors start to pull out of the market, then the market might meet the conditions of needing incremental intervention.

2434 MR. SCHMIDT: I'd like my colleague Daniel to add just a couple of points on the regulatory mechanics.

2435 MR. STERN: Thank you, Stephen, and thank you, Zainul.

2436 Just to provide I guess sort of the legal backup to all the excellent points Zainul made, for starters, the Commission has used almost exclusively a provincial or regional market definition for decades. Right? This is the market definition the Commission used in 1997. It's the market definition the Commission used in 2008. It's the market definition the Commission used in 2015. It's the market definition the Commission used in 2021. And implicitly, without saying it, it's the market definition from the interim decision, because if you were making market‑wide findings, then there would have been a market‑wide ‑‑ a nation‑wide finding, then that would have been on the basis of a nation‑wide market.

2437 It's what the Competition Bureau said in their intervention. They're the experts on market definition. They said ‑‑ and I probably agree with that ‑‑ you know, if you actually go through hypothetical monopolist test, snip test, whatever, maybe the market is as small as one premises or one house or one block. But realistically, providers set their prices on a regional basis. TELUS, for practicalities ‑‑ we can't price discriminate against every possible person anywhere ‑‑ is going to ‑‑ we set our prices on a regional basis.

2438 And then even if you look at the evidence, you know, we don't have to go through the whole test here, but to do this on a national basis, you know, you would have accept that if like TELUS lowered prices in Calgary, then someone in Halifax, a provider there would change their price in response. But no one's going to move from Calgary to Halifax for a five‑dollar difference in their Internet price.

2439 And so once you accept a regional market definition, which again is 30 years of Commission precedent, it's I think just about everyone is on the record at that, you're bound by regional findings. You can't say, This is what's going on nationally, and so we're going to do something nationally. You can't say, This is what's going on in Ontario, so we're going to do something in Alberta. The findings in each region must be based exclusively on the economic evidence from that region, and the remedy in turn must be based on the competitive findings on the basis of that regional evidence.

2440 COMMISSIONER DESMOND: Okay, thank you.

2441 I'd like to just have a short conversation about investments. I know this was a topic that's been covered, so I really just want to clarify your response because I've heard different things this morning. I've heard that we need to make sure that investments continue to happen, how important they are for reliability. But at the same time, I've heard this morning that, you know, the cost is getting more expensive, that you're having to be very careful about your CapEx.

2442 So just to be clear, what is the intent vis‑à‑vis your rollout of investments if there were to be a mandate in the manner that you've suggested?

2443 MR. MURRAY: Thank you for the question. And yes, to clarify my comments earlier, I did reference in terms of where we are being prudent with our next dollar and what the trend has been. I think it's important to emphasize that, you know, our current forecast is not zero when it comes to incremental investment. And as my colleagues have articulated, we do have areas of our network in B.C. and Alberta where we are not finished our fibre build and we would like to continue to do that and finish those communities, but it does require ensuring that we have a framework and, if necessary, rates that would allow us to recover those costs, get a payback on those investments. And so for us, it really is framing the conversation around our ability to earn a return and having that return be fairly compared to other uses of that capital.

2444 MR. SCHMIDT: And you know, regionally calibrated restrained action on the part of the Commission is compatible with continued building by TELUS. And the analysis ultimately is all these business cases, particularly the challenging ones in remote and rural are always sensitive to regulatory risk, always sensitive to the economics, always sensitive to the availability of public funding. And we take that all into account.

2445 I'm just saying something self‑evident about responsiveness to regulatory risk. We are articulating no threats, to be clear.

2446 COMMISSIONER DESMOND: Okay, and earlier today as well you spoke about how if there were to be a mandated wholesale access, there would need to be time for those who have made investments to recoup those investments until the facilities have matured. So at the same time, I heard this morning that there's a huge cost associated with maintenance and upkeep and that's ongoing. I mean, at what point, then, would there actually be maturity? And how would the Commission be able to monitor that? When would we revisit this question and then be affirmed or assured that the market is now mature and it should be opened up?

2447 MR. SCHMIDT: So I think a lot of our comments were around not extending mandates to remote and rural because of the more fragile economics of it. So I'll make a couple comments there and I'd welcome interventions from my colleagues.

2448 You have to find effectively like a simply operational path where you're not sending teams of accountants to every build to check the payback periods, et cetera. And one simple path can be just exempting remote and rural, full stop, from these mandates in recognition, frankly, that the policy problem is not getting the second, third, eighth, or ninth fixed network in these areas, it's even having one.

2449 And so your focus ought to be on how can we build these networks together, how can we walk forward hand in hand together with the private sector. Bigger, better broadband processes, better coordination with government. So I think your challenge in remote and rural is getting even one of these networks. And I would say you exempt them from sharing mandates and focus more vigorously on building hand in hand with the private sector.

2450 An alternative approach that's operational in some simple way would be ‑‑ and regulatory holiday, you see this in other countries ‑‑ you exempt them for a five‑year period or you exempt them for a 10‑year period. And it's just a rough justice way of saying they take a long time to pay back, but we're going to give you scope to get that payback. And then at that point, there may be the overlay of some mandate.

2451 So those would be my comments, subject to my colleagues.

2452 MR. MURRAY: Yeah, thank you, Stephen.

2453 The only thing I would top up ‑‑ appreciate your thoughts on kind of like the five‑year period. The other way to look at this as well is to think of the rates and the markup needs to be reflective of the investment risk. I would use an example of something like FTTN, which originally had a 40 per cent markup reflective of the investment risk at the time. Now we see it with a 30 per cent markup. It's got comparable speeds to our lowest fibre offering, and so there's an opportunity as well to have that markup set higher at the outset to reflect the increased risk, and then to review that over time as the market becomes more mature.

2454 COMMISSIONER DESMOND: Just back to your rural and remote comment, in what fashion would the Commission then define what is rural and remote? I mean, how extensive is rural and remote, and how does that evolve or change with time?

2455 MR. SCHMIDT: The Commission has done it in ‑‑ you have optionality. And the Commission has done it in different ways over the years, grouping geographies into cost bands and defining high‑cost serving areas. That's a tool that you still have and it is potentially tenable. ISED has hexagons where they classify the country. There may be other simple rough justice ‑‑ I think StatsCan, I think, says rural is under 5,000. And it may be ‑‑ by the time in Alberta ‑‑ by the time you're done with Alberta and Edmonton ‑‑ and setting aside Red Deer for a moment, sorry, I'm not going to say anything bad about Red Deer, don't worry ‑‑ it may be all actually below the threshold. So it's probably not that hard to define rural, whether it's StatsCan or using an ISED tool or using the Commission's existing tool of grouping all telephone exchanges in the country into costing bands on an ascendent basis of cost of service. So there are tools.

2456 MS. SOBANI: Sorry, I just wanted to top up on that. So in extension to rural and remote, I think a similar approach needs to be taken for extremely high‑cost buried build and buried premises that are today attached with FTTP, because the cost to build those and the profile will not be any different from the cost profile building in rural.

2457 COMMISSIONER DESMOND: One of the suggestions that we heard from Eastlink was that any mandate wouldn't apply until the incumbent had passed 350,000 homes, I think it was that they had suggested. I'd just like to have your comments on that and, you know, how that could work as an option in this particular case.

2458 MR. SCHMIDT: I think I'll answer it in a slightly wider but brief sense in respect of lunch. When you look at section 10 of the Policy Direction ‑‑ I know the Vice‑Chair brought at least one party to section 10 yesterday ‑‑ it looks at first highly confining and mandatory, and then you read it a few more times and you realize it's absolutely replete with discretion. And it doesn't say who; it doesn't say where; it doesn't say when. So you have a lot of optionality.

2459 And one of the ways you may play with it ‑‑ that's not the right word, but I'm going say play ‑‑ one of the ways you may deploy it is using time or something as opposed to some number. Like it seems inherently arbitrary to come up with some number, until they've passed X number of houses. I don't know what it's going to be. But you know, time, you know, we won't have a mandate imposed under section 10 until such time as five years have passed. Or we'll only have a mandate for two years, or whatever, until certain conditions are met, et cetera. So I suspect that time is a better tool. But if my colleagues feel differently, please jump in.

2460 MR. STERN: I just want to make sure we properly understand Eastlink's proposal, because we listened, and I'm ‑‑ maybe you could let us know the exact proposal you're talking about, because I just ‑‑ my understanding was Eastlink said that nothing would apply ‑‑ that carrier itself would not have to have any wholesale access regardless of community until they had a total of 350,000 homes passed, or is the proposal that a community would not be opened up? Like I just want to make sure we have the right question, that we're answering you properly.

2461 COMMISSIONER DESMOND: No, that's a good point, and perhaps what I'll do is ask staff to actually go back and find their words, because I don't want to misquote what Eastlink had suggested. I don't want to misphrase or misquote that.

2462 MR. SCHMIDT: Thank you.

2463 COMMISSIONER DESMOND: So it's likely better if we have exactly their proposal, and then you can respond to that properly.

2464 And in the same vein, I understand Rogers' position to be that if there were to be a situation where a mandate would apply such that if you are ‑‑ you have a network in territory, then you have to continue just to use your network, not ride on someone else's network. But out of territory, you could have ‑‑ you'd be at liberty to be able to use someone else's network. If understand Rogers' position correctly, they say that would be unfair to them because they have a presence in all provinces, so and that would be inequitable.

2465 So I'd just be interested to hear your reply on their proposal.

2466 MR. SCHMIDT: So there's some symmetry, for sure, with our proposals. It's manifestly untrue that Rogers is everywhere. Cable plants tend to be very urban, and they're not everywhere in the fixed broadband sense. And my colleague Dan will kind of illuminate.

2467 MR. STERN: So two points. They're not everywhere in the sense that their plants serve very few rural areas, but they're not even in every province, right. Rogers has very minimal presence in Quebec. They have very minimal presence in parts of Atlantic Canada.

2468 But beyond that, I think you have to go back to the rationale for the proposal; right? It's you shouldn't get access in your territory, because if you get access, you're not going to invest. Right? This is your territory. You have facilities. So Rogers has to figure it out. They have cable. Are they saying, We're going to upgrade to DOCSIS 4 to make these general investments to do it? And if that's the case, then they really shouldn't care whether or not they get access because they're going to make those investments. But if they're saying, Uh‑oh, we need access, then maybe that's precisely the signal to you that they're not going to make those generational investments if they do get the access.

2469 So the theory in here is it's you have to be incentivized to upgrade your network where you have it.

2470 MR. MURRAY: If I can make one top‑up, I also sit on our Emergency Management Operations Committee, and so every summer, unfortunately, now we're dealing with forest fires, floods in the spring, and whatnot. And I know references have been made earlier to outages. I do think we can't lose the point around network reliability, which includes elements of network redundancy, ensuring there's at least two carriers in these centres.

2471 And if we go back to November of 2021, we saw the floods that came down the Coquihalla Valley in B.C. We did lose elements of our network at that time. And if not for opportunities with network redundancy, we would not have been able to continue supporting our customers. So, I do worry that any regime that removes that incentive to invest does threaten network redundancy and I think that's very important.

2472 COMMISSIONER DESMOND: Thank you.

2473 I'm wondering if you could speak to your view as to whether there's a higher risk to deploy FTTP rather than use other access technologies. So, are there potentially higher costs associated with FTTP deployment and are they offset by the lower offering cost of FTTP?

2474 MS. MAWJI: I think that what I'll do is apply your question to our incumbent territory and if I've misunderstood that, please correct me.

2475 So, when we look at a particular area in our incumbent territory where we have existing networks and we're providing service today and we're upgrading those services to a next‑generation network and we have some choices to make, you know, we have traditionally been deploying Fibre‑to‑the‑Node up until 2013. Since then, we transition primarily to Fibre‑to‑the‑Premise and have been working our way diligently through the $7 billion that we've deployed across the 2.3 million homes and businesses.

2476 And so, when we look at that investment, we do look at, you know, what is the best way to address that investment. Are there some areas ‑‑ as Shazia highlighted, there are some areas even sometimes in urban footprints that are incredibly difficult to access for whatever reason. It may just be the topology, the way the street was built, the way that you have to go at accessing the direct buried infrastructure and how much you have to dig. There are areas that, you know, people live right outside a service area, maybe like on an acreage, that are very difficult to access as well. So, we look at all of that topology and we make an assessment of where does Fibre‑to‑the‑Prem make the most sense.

2477 There are going to be areas, and we have worked this and provided this feedback to ISED as well in very UBF type of scenarios where we're accessing Universal Broadband Fund, where it's just more economical to enable that access through wireless and fixed wireless capabilities. So, it's still built infrastructure, it is still providing access at a higher speed than lower speed copper networks, but it's probably a more economic way to address that particular footprint.

2478 We look at all the various aspects, but what I will say is that ‑‑ you know, I highlighted one of the things that's unique about our approach to Fibre‑to‑the‑Prem, which is that we deploy access right to the last mile for all of our existing customers and for prospective customers.

2479 One of the other things that we have done in the past is we have always and continue to build out the whole community. We try our absolute best to leave very few, if no, homes and businesses behind. We can attest to that. So when you're doing a build in a particular community, it might look very homogeneous but you might have actually a very diverse return on investment even within a particular urban footprint to serve that particular community.

2480 And we've really worked hard to make sure that we don't leave have‑nots behind even in the context of serving multi‑dwelling units where you have to go and negotiate access and right‑of‑way with each landlord.

2481 So, this is a large undertaking and we've had a lot of experience with it, but our goal is always ubiquity when we undertake a build.

2482 COMMISSIONER DESMOND: So just on that note, would you consider the risk profile of your projects different than those of other incumbents?

2483 MS. SOBANI: Definitely. When we take a look at what is the cost to build and the effort behind it, it's definitely high‑risk profile and especially when you take into account the terrain where we predominantly operate.

2484 So, our own territory has a number of challenges in terms of going through the mountains, building below the ground when we can only build six months of the year because everything is frozen below ground, and then that artificially raises the labour cost and the cost to rent the equipment during those six months, because everybody in Alberta wants to do everything during those months. So, we are actually taking a higher risk.

2485 And then to Zainul's point where she referenced like when we started to do our PureFibre program or our fibre build program, we actually started in smaller communities. We did not start with big geos where we felt that consumers had choices and they had reliable services. We started with very small communities in Alberta and B.C., and we took a huge risk there because we didn't know what kind of return we will generate. We ran some test communities initially and we built over 40 communities below 5,000 households in the first two years of our build.

2486 COMMISSIONER DESMOND: Thank you.

2487 I will pass the microphone back to the Chair. If there's an opportunity to come back to the Eastlink proposal, then hopefully we will have time to do that, but I will see how we make out. Thank you.

2488 THE CHAIRPERSON: We will definitely do that, we will come back to Commissioner Desmond.

2489 Let's go to Commissioner Naidoo.

2490 COMMISSIONER NAIDOO: Thank you so much for being here today.

2491 I just wanted to follow up on something that you touched on earlier. You've argued that remote and rural areas, which I think many can argue are some of the least competitive areas in the country, should be exempt if aggregated FTTP services are mandated.

2492 In our Telecom in the Far North proceeding we heard very loud and clear that people in remote areas feel that they're most in need of competition. They want the choice that comes with competition, the competitive pricing. They want for providers to strive to be their best option.

2493 Shouldn't people living in rural and remote areas have the same opportunity to benefit from competition as other Canadians?

2494 MS. MAWJI: So, I think that the market has evolved. Maybe I'll just start by saying that given the expansion of competitors like Starlink and others, there are a lot of choices in the market that there were not before. So, one of the things that we have argued for is that if there is a mandate, it should apply to all the providers in the particular territory or region that that mandate is being applied to. So, I think that you have to look at those markets in totality and see what choices customers have.

2495 And then when it comes to areas that are very difficult to reach, just because they're far away doesn't mean they're as expensive. There's a major range, because there's a range based on whether transport facilities exist; there's a range in terms of accessing the terrain; there's a range based on whether there's effective wireless capabilities there that can be leveraged for support.

2496 So, every community can be ‑‑ you know, it feels like oh, okay, well, there should be a playbook of, okay, it's this many homes, it's this much and it should cost this much. All of the engineering comes back differently even within a particular urban community, as I highlighted.

2497 So, there is quite a diverse range of build and you are going to see some communities that are north of a 40‑year payback, right, and you're going to see some that look exactly the same that might be a 12‑ or 15‑year payback. So, you know, you really have to look at the variable cost to invest and what it's going to take and what that return will be.

2498 MR. SCHMIDT: Thank you, Zainul.

2499 And so, just to further assist, I think the Commission will be led into some form of peril if the product market is only one technology, fibre, and not reflective of the full range of options available in any geography.

2500 And even in these geographies where there may be a single fixed provider like TELUS having extended its fibre footprint into a remote or rural community, they get the benefit of the competitive dynamic in urban areas because our pricing is postalized across the territory. The price in Calgary is the price in wherever even if there's a single option there and it's us. So, the benefit of competition sort of extends from urban outward because of this provincialized pricing.

2501 COMMISSIONER NAIDOO: All right, thank you for that.

2502 I wanted to move on. Bell Canada proposed a sunset clause whereupon wholesale access to a given infrastructure would end after five years. So, I wanted to find out what your view is on the appropriateness of a sunset clause on wholesale access and I guess the question on most people's minds would be: After the sunset, what happens? How could we be sure that consumer interests are indeed protected?

2503 MR. SCHMIDT: Thank you for the question.

2504 The sun never sets is the problem and it's hard to let go when the five‑year basis for making non‑essential loops available in the Local Competition Framework in '97, I think the five‑year sunset actually set 20 years later. So, it's very challenging to ‑‑ it's hard for the regulator to make sort of credible commitments and the economic literature around that.

2505 It's not clear to me that the sun will ever set and it might be more prudent to do the reverse timing, regulatory holiday. We're not doing anything for five years in a particular geography, coupled with just much more calibrated and proportional intervention, geography by geography by geography. Because I just don't think the history of sunsets is particularly good, and not just with the Commission, it's probably just a universal regulatory fact.

2506 COMMISSIONER NAIDOO: I'm going to get to the access holiday in a second, but I just wanted to follow up on the sunset clause thing because it has been pitched obviously by Bell.

2507 If the Commission did establish a sunset period after which aggregated FTTP services were no longer mandated, how do you envision transitioning wholesale‑based competitors and their end‑users off of the incumbent wholesale service?

2508 MR. SCHMIDT: My wholesale colleague, Mr. Amery, will answer that.

2509 MR. AMERY: Thank you so much. It's a great question.

2510 We do have quite a bit of experience in what we would typically refer to as migration from tariff to forborne. So, there are numerous examples in history where a variety of services previously subject to a mandate and a tariff pricing structure, once competition no longer requires the service to be formally tariffed and mandated, the migration path is relatively clear.

2511 I've been doing wholesale at TELUS for 19 years. What largely would occur is there would be a conversation about a migration path not so much from the service but to the commercial construct. It previously would have been governed under the terms of a formal tariff, including pricing, et cetera, and it would migrate to a commercial construct agreement. In recent CDN services that were subject to forbearance, that's exactly what happened.

2512 MS. MAWJI: I think there's one other model that could be considered in that context and that's what we've been advocating for on a disaggregated basis and it has some parallels with respect to wireless and MVNO.

2513 So, you know, as a wireless provider, you leverage your own network where you have your own network, you use the MVNO rate where you don't have your own network but you have a commitment to build.

2514 And I think that when you look at the wireline access network and Fibre‑to‑the‑Premise there is a point in the access infrastructure that it's really redundant if you build that last mile four or five times, right? Like how many wires do you need coming into your house?

2515 I think that we've talked about the value of having redundant, you know, two sets of assets, but if you look at an environment where it's really incented to turn that aggregation into a disaggregated model, then you encourage the investments that need to be made at a more localized level. You don't carry the cost of a dual infrastructure that isn't required so that, you know, it's really that single infrastructure that is built in the areas that don't have it and you create an environment where the provider also can ensure that they are providing better service and customers aren't going to be disrupted in that context and customers will also continue to get better reliability, better service in terms of having their internet connection served over a more localized point.

2516 So, I think in many ways there's a win‑win model with respect to ensuring there's a parallel disaggregation, an incentivized structure to build your own infrastructure and create that sustainability. Because once you have to build it, you are going to maintain it and you are going to be in there to compete for the long term and you are going to be incented to continue to innovate and differentiate your service and attract customers.

2517 COMMISSIONER NAIDOO: Thank you very much.

2518 As I said, I wanted to talk about the concept of an access holiday. Bell Canada suggested seven years; Cogeco proposed three years.

2519 If the Commission were to determine that an access holiday or a head start is appropriate, how can we balance these two different proposals or possibly other proposals? What number do you think would be appropriate and why?

2520 MR. STERN: Our point, I think, to come back to some of the points we've made, is if you do an access holiday, which is sort of the accepted way to do this in literature, you have to tie it to what my colleague Matt said, it has to be tied to the risk of the investment. So, I don't think you probably want one access holiday, because your DPP of a build in one area may be drastically different from another.

2521 So, I think the approach to what we've been coming back to has to be you need to look, and you can classify it, right, remote/urban, trenched fibre versus aerial fibre, and you categorize the builds and you categorize the higher‑cost builds and you would have a set access holiday length based on the risk inherent in that build. Because the point of the access holiday is to let you make your money back and your money gets made back at different rates depending on where you are.

2522 One point I might ask either Matt or Ashraf to top up about there are ‑‑ it's perhaps not quite consistent with the exact Phase 2 methodology, but you can look at the way Phase 2 rates are structured and actually weight them to a sort of quasi‑access holiday. I don't know, Ashraf, if you wanted to talk about markup that way.

2523 MR. AL DAOUD: Yeah. The way Phase 2 rates are actually proposed, they are actually based on the forward‑looking basis. They actually capture the cost of the future but also capture the risk in the market.

2524 We have actually asked for that markup to recover ‑‑ or to add a premium in the markup for that risk, and that risk actually is reflective of the different difficult business cases that we do have with some of those communities. And according to that, we propose different ‑‑ as Matt alluded to this earlier, this risk actually is different based on the risk that is associated with the speed.

2525 COMMISSIONER NAIDOO: Thank ‑‑ oh, sorry, go ahead.

2526 MR. STERN: I apologize, accidental tap.

2527 COMMISSIONER NAIDOO: Okay, thank you.

2528 I just want to flesh this out a little bit more.

2529 How would you see an access holiday being implemented in a very practical manner? And by that, I mean, like, what would trigger the start, what would trigger the end, who do you think would be best to track all of that?

2530 MR. SCHMIDT: I can start it and Shazia and others may have views because they actually build these networks we're living.

2531 It can't be super painful or super complicated for the Commission or it will be infeasible to implement in practice. So, there may be some simple segmentation around urban, rural or remote. There may be stuff that you would pull out that's subsidized build because it's often overlain with an access mandate anyways that comes with public funds.

2532 So, on the one hand, as Daniel suggested, you may have some simple geographies because they are rough proxies for how long it takes. In the middle of nowhere, it can take decades to get your money back. In downtown Vancouver, it may be must faster. So, you can have some rough proxies.

2533 There are ways you do this. Like, for inter‑exchange transport, where you've had a framework in place for a quarter century, where people are reporting on the presence of their facilities twice a year for inter‑exchange to do transport. The Commission looks at the presence of the facilities and then makes a forbearance determination.

2534 You could be doing something similar where people are reporting on some specified footprints. It might be telephone exchanges or whatever and they tell you where it is. The access holiday runs from that point. In inter‑exchange private transport you have people report on 1 April and 1 October each year. And then those specific points are noted in a tariff actually and it's creatively gathered over time. You've been doing it for 25 years.

2535 So there's ways you can do it that are non‑painful, that would use simple constructs. We and others would have to self‑report the presence of new builds.

2536 MS. SOBANI: I will just make one small top‑up bit.

2537 Thinking about the framework for an access holiday, then all the dimensions that impact, are done on investment need to be respected, right? Some of those are not just whether it's rural or urban, it's also what is the topology like, right?.

2538 One my colleagues touched upon aerial versus buried. And then Zainul touched upon all the effort that goes into negotiating the rights of entry to multi‑dwelling buildings. So the framework needs to be robust enough and needs to look at multiple dimensions and not just a few.

2539 COMMISSIONER NAIDOO: All right. Thank you very much. Those are all my questions, Madam Chair.

2540 THE CHAIRPERSON: Thanks, Commissioner Naidoo.

2541 We will go back to Commissioner Desmond on the Cogeco Eastlink proposal.

2542 COMMISSIONER DESMOND: Thank you and thank you to staff for finding the correct reference.

2543 Eastlink spoke about a proposal and the proposal originally came from Cogeco. They had proposed that a given provider would be excluded from having to provide a mandated service until it as a whole reached 350,000 homes with FTTP.

2544 I know we've already had a conversation this morning about how to measure and manage some of these limitations, so I'm not sure you have anything new to add.

2545 MR. STERN: There's 420,000 households in Nova Scotia where Eastlink serves. So, if their point is that you need to get to 350,000 before you have to open yourself up to wholesale access, they're effectively saying Eastlink should be excluded forever because we're the Nova Scotia company.

2546 COMMISSIONER DESMOND: Yes, and I understand that, but I would like to hear your views on Cogeco, who made the original proposal.

2547 MR. STERN: It's a similar point. The population served by the carrier is irrelevant. You look at their incumbent serving territory and if they are the incumbent there because they have the facilities, then they should be required to give up access to someone from elsewhere that wants to come in and provide price competition.

2548 I'll give you an example. Let's say you have a ‑‑ go to Eastlink or Cogeco, whatever, but an ISP that is under the $350,000 limit, and you determine that that market is non‑competitive, right? You have to make that determination first in order to do any wholesale access under 27(2), under the essentiality test. So, you make that determination.

2549 And then you have someone, say TELUS or anyone else that wants to come in and says, “Well, we know the market is not competitive. You've decided that. We'll come in and bring competition.” What is the rationale not to? The obvious rationale is it's cynical protectionism from the companies that are floating this.

2550 COMMISSIONER DESMOND: Okay, thank you very much.

2551 MS. MAWJI: If I may? I'm sorry, I just wanted to provide one top‑up and say that, you know, we have to take the approach of the Canadians and the customers first, and in that context, what's happening in the market: are people paying more, do they have less choice and flexibility than they had in the last X number of months and years, is there innovation happening in that market? These are things that determine should a mandate be required and, as Dan would say, in the regulatory terms, is it competitive. Then we can decide what is the best way to apply a mandate.

2552 But I think in some cases we're sort of mixing, you know, whether a mandate should be applied and how should it be applied. And I think when it comes down to it, is that market, regardless of 350,000 homes or 200,000 homes or a holiday or a non‑holiday, is that market demonstrating that customers are paying more, are costs increasing for those customers, are they getting less quality, are they getting less choice and flexibility, are we making those determinations based on facts, data and third‑party verification, and then based on the outcome of that assessment, what is the best, most sustainable form of competition?

2553 I think we've provided our views on that in terms of disaggregation, but I think fundamentally, you know, if we just apply the merits of supporting the protectionists of one competitor or another, we're losing the focus on the importance of the customer. Thank you.

2554 THE CHAIRPERSON: Okay, thank you. We will go back to the Vice‑Chair on the undertaking.

2555 VICE‑CHAIRPERSON SCOTT: So I just need to read into the record the undertaking. Could you undertake to provide the Commission, by no later than the 1st of March, 2024, with data about your 1‑gigabit wireline fibre‑based internet access service plans; in particular, information as to the various rates at which those plans are made available, either advertised or unadvertised, and the number of persons who subscribe at those rates. Could you additionally provide similar data with regards to bundle packages that include 1‑gigabit wireline fibre‑based internet access, as part of the suite of services?

2556 MR. SCHMIDT: We do so undertake and we'll file in confidence, to the degree necessary, yeah.

Engagement

2557 VICE‑CHAIRPERSON SCOTT: Thank you.

2558 THE CHAIRPERSON: Okay. Thank you very much.

2559 Maybe I can just wrap up with two final questions, and then we will turn things back over to you for any concluding remarks.

2560 So, the first one is about copper decommissioning.

2561 So, some competitors have noted that they have concern about ILECs removing copper when they deploy fibre, and from their perspective, that decommissioning essentially removes one of the ways they can offer service to consumers.

2562 So, can you maybe just talk to us about the decision to decommission copper and what the benefits are to TELUS when you do us?

2563 MS. SOBANI: Thank you for that question. Copper decommissioning, or retirement of copper, is a necessary step towards a more sustainable Canada. When we look at other access technologies, they use 85 percent less power, and migration towards those alternate technologies significantly reduce greenhouse gas emissions for our country.

2564 Once we have built fibre in those areas, the benefits for the customers to migrate to alternate technology, other than copper, for a more reliable and for higher‑speed tier services is significant. In the meanwhile it allows them to use a bigger bandwidth to contribute, not just to turn down the copper equipment and copper network, which is consuming a lot more power, but also it allows them to enjoy a very different lifestyle for working, for their education experience and to access digital healthcare while sitting in their home.

2565 We have been on the journey of trimming down some of our key geos for our copper network. In the last year we turned down 14 of those key geos. While doing that we had to work with a number of resellers that were utilizing our services, and we have successfully worked with them to provide alternatives.

2566 THE CHAIRPERSON: Okay. Thank you for that. And then, perhaps a last question.

2567 So, under a scenario where the Commission mandates aggregated FTTP access, could you talk to us about what timeframe would be required for implementation of the service in your serving territories? And maybe also as part of that discussion around the timeframe, what are the steps that are required and maybe the associated timing with that?

2568 MR. AMERY: Okay, so that's a great question, because we've been turning our minds to that, both to fulfill the obligation in Quebec as well as more broadly speaking.

2569 I'm going to break it down into a couple of different components, to illustrate the challenges that we're facing.

2570 There are some unique characteristics around the fibre‑to‑the‑prem program, including the backend service provisioning and the service implementation process, in order to ensure that the customer has a reliable service that they can count on day in and day out. You know, there's a number of elements there.

2571 In the Quebec scenario, given the relatively small footprint, we're going to do it manually, in order to meet the date, and that's a commitment that TELUS has, to meet the obligation that we've been hit in a request to fulfill as part of the interim decision, and that is not replicable nationally, and in our Alberta and BC footprints it's impractical, given the volume and scale that would be required.

2572 And so, we have to separate those two pieces. We can meet the request of timeframe in Quebec, as a result of a choice that we have made to fulfill in a manual construct.

2573 That's neither scalable or practical from an efficient deployment of resources, or frankly, to meet either the end customer's needs or the wholesale customers' needs, it's impractical to have a manual order flow. It's impractical to have manual intervention in order to do service fulfillment or service assurance over a broad footprint and a geography as extensive as Alberta and BC.

2574 The steps that would be required, when ‑‑ if you think about the fulfillment flow, the wholesale customer would have to be able to do an availability check, would need to be able to make a choice about initiating an order with TELUS, would have to be in the flow through to TELUS' processing, order management stream, would have to be able to get updates over the course of the fulfillment flow to determine where it is in the life cycle between order created, order executed, order completed, customer service being turned up, because they're going to also have some elements of obligation to fulfill in the value chain.

2575 Because we want to do it as officially and effectively as possible, there's a significant amount of system development and service development work that would need to happen in order to deliver a process that would make it valuable for the wholesale customer and give a reliable and resilient level of service to the end consumer.

2576 THE CHAIRPERSON: Thank you very much for that answer.

2577 Perhaps before we turn it back over to you for the final word, I could thank you on behalf of the Panel. You've answered many, many questions and, you know, we recognize that we've spent I think about three hours together this morning. I hope that was quality time.

2578 But we just very much appreciate you being here and answering our questions. And we'll turn things back over to you.

2579 MR. SCHMIDT: Thank you. I couldn't think of a better way to spend Valentine's Day.

‑‑‑ Rires

2580 MR. SCHMIDT: And thank you for your generosity with our expansive answers, et cetera. This is an important opportunity for, I mean, everyone in the room.

2581 So, I'm going to end with a couple of thanks and one framing point.

2582 In terms of thanks, again, these opportunities to speak face to face are actually very rare, and these are important issues and we cherish this opportunity and we take it seriously, so thank you for that.

2583 This Commission also makes a sturdied effort to make appearing before it non‑scary, and that matters when I bring business unit witnesses who have never appeared before a tribunal, so I think you're yielding a better record and a more open and generous form of conversation, so thank you for that and thanks to the Commission staff, because I know it's moving a huge mountain to have a hearing and indeed to have ‑‑ it felt like we had 19 proceedings at once in about six months, so it has been busy, so thank you.

2584 My framing comment is if we step back, about a third of the world, about 2.5 billion people, 2.7 billion people don't have any internet access at all. About 2 in 10 people in the world have some form of terrestrial access to internet. It's rarer still, maybe less than 1 in 10 people in the world have the network plurality that we have, in terms of fixed networks.

2585 So, we're in a very rarified space, maybe 1 in 10 people on Earth have the network assets and topology that's equivalent to Canada: you know, cable, ILEC, et cetera.

2586 And within that rarified space, when you see rankings and studies of market performance, investment, innovation, speed, usage, Canada still typically comes out very close to the top of the pile on these things. The US is usually a little bit above us, Europe well below us, and South Korea is a special case. I feel okay to lose to them, they've earned it.

2587 So, I would caution the Commission about finding famine in abundance, and be ‑‑ you know, we have to be aware of the assets we have, nationally, in terms of network plurality and network performance, et cetera.

2588 In the handful of countries in the world that have the same cable ILEC network plurality, like multiple fixed networks going to the same house, the response has either been forbearance or very calibrated wholesale mandates, in a handful of European countries that typically withdraw on a kind of checkerboard basis, city by city by city, depending on whether cable is also there.

2589 So there are some mandates in the US ‑‑ or sorry, there are some mandates in European countries but they tend to be super focused. There's no mandate in 145 different cities and towns in Germany, it's because it's kind of withdrawn, and the presence of facilities.

2590 There's mandates in about 10 percent of the municipalities in Portugal where there's no presence of cable.

2591 So, all of that to say that your peers in quasi‑similar circumstances, who are doing this, are doing so in a very calibrated way, having regard to type, geographic definitions, the presence of competition and they're calibrating their result in the face of that.

2592 You've made some moves in that direction in your interim decision in November and I think you should continue to carefully and thoughtfully calibrate remedies ‑‑ and clearly there's a conversation going on about that ‑‑ and carefully calibrate your approach across regions, you know? Baffin Island is not the same as Vancouver. Vancouver is not the same as Charlottetown, and so I think we're going to have to regionally differentiate.

2593 And that's it.

2594 MS. MAWJI: I just want to thank my colleagues and thank all of you as well. Maybe the final point I'll make is that we really appreciate the opportunity to discuss this critical matter, how we provide access to our customers and to Canadians, it couldn't be more important, in terms of the future productivity of this country, so thank you for undertaking this proceeding.

2595 I will say that, given that we are an incumbent pioneer, again, in fibre deployment, as well as a new entrant, I think we have a very unique perspective to offer, and if there's any other information or undertaking we can provide in the future, we'll be happy to do so, in terms of what our goals are and our experience.

2596 And I think it's really important to highlight that the market is a state of disruption, at least our home market, and we are trying to see how that plays out.

2597 It's getting, quite honestly, more and more difficult to explain to our team, that's working hard every day to serve customers, why competitors who want to move West are treated very differently than those of us who want to move East.

2598 And we have an opportunity here to provide sustainable, innovative, diversified, differentiated competition and hope to pursue that opportunity and do well for Canadians.

2599 Thank you very much.

2600 THE CHAIRPERSON: Thank you, TELUS.

2601 THE SECRETARY: Thank you. We will now break for lunch and resume at 1 p.m. Thank you.

‑‑‑ Suspension à 12 h 00

‑‑‑ Reprise à 13 h 00

2602 THE SECRETARY: Welcome back, everyone. We will now hear the presentation of Bell Canada. Please introduce yourself and your colleagues, and you may begin your presentation. Thank you.

Présentation

2603 MR. MALCOLMSON: Thank you. Thank you, Madam Secretary, Madam Chair, Commissioner, Commission Staff. My name is Robert Malcolmson. I'm the Executive Vice‑President and Chief Legal and Regulatory Officer at Bell Canada.

2604 Before introducing our panel I would like to acknowledge that we are meeting today on the unceded Territory of the Algonquin and Anishinaabe Peoples who have been stewards of this land since time immemorial.

2605 So our panel today consists of, starting immediately on my right, Mark Graham, Vice President, Legal and Regulatory. Next to Mark is Curtis Millen, Chief Financial Officer. Beside Curtis is Ivan Mihaljevic, Senior Vice President, Revenue Management, Client Experience and Wholesale. Seated immediately on my left is Jonathan Daniels, Vice President, Regulatory Law. Next to Jonathan is Andre LeBlanc, Vice President, Pricing, Revenue Management and Content. And finally, last but not least, next to Andre is Tanya Nasehoglu, Director of Network, and she's responsible for many elements of our fibre build.

2606 So, at Bell, our goal is to advance how Canadians connect with each other and the world. We set this goal in recognition of ‑‑

2607 THE SECRETARY: Pardon me. May we ask that you approach the mic? Yes, please.

2608 MR. MALCOLMSON: Is that better?

2609 THE SECRETARY: Thank you.

2610 MR. MALCOLMSON: We set this goal in recognition of the critical role that leading edge digital infrastructure, like FTTP networks, plays in the lives of Canadians and the future of the Canadian economy.

2611 While based on a November 6th decision the Commission's goal of prioritizing resell over network investment may be predetermined. We nevertheless urge you to consider the many negative long‑term implications of yet more wholesale regulation of brand new FTTP networks. Such a decision will relegate millions of Canadians, including those living in rural and remote and Indigenous communities to the wrong side of the digital divide. A decision to prioritize resell over investment will undermine network expansion and competition.

2612 In the short run, inflation and the cost of living loom large for Canadians, yet due to intense competition among facilities‑based players the broadband market has bucked this trend.

2613 According to Statistics Canada, between January of 2016 and December of 2023, retail internet prices in Canada have declined by nearly 7 percent, while the cost of living overall has increased by nearly 25 percent.

2614 Facilities‑based competition is delivering affordability for Canadian consumers at a time when the prices of other essential goods and services, like groceries, housing and insurance, are out of control.

2615 Over the longer term, the primary public policy challenge affecting Canada is lagging productivity, which has caused living standards to stagnate.

2616 There's a widespread consensus that this in part the result of business investment falling dramatically, relative to the US, and other OECD countries, over the last decade.

2617 Again, despite this trend, the telecom industry has been a success story. Telecom capital investment per capita has grown at a similar pace in Canada to that of the US, and telecom capital investment as a percentage of GDP, has been consistently higher in Canada.

2618 Since 2020 we have invested billions in fibre, building to 7.4 million locations, hiring hundreds of suppliers and contractors in the process, and delivering the fastest internet speeds in North America. Why would the Commission want this to stop?

2619 Despite our progress of the more than 12.5 million locations in our serving territory, 5 million locations in suburbs, small cities and rural and remote communities still do not have access to FTTP.

2620 With your November decision we have dramatically reduced our planned deployments and we have begun the difficult process or notifying affected communities, like La Pêche and Saguenay, in Quebec, Clarence‑Rockland and Leamington, in Ontario, and Baker‑Brook and Rivière‑Verte, in New Brunswick.

2621 The Commission's view that there would be ‑‑ and I quote: 'minimal risk' regarding investments in fibre, by accelerating wholesale FTTP was dead wrong. The question in this final phase of the proceeding is whether the Commission will double down or pause and consider how investments in centres can be restored while maintaining the vigorous price competition that is so clearly occurring in the marketplace? Andre?

2622 MR. LeBLANC: The retail broadband market is highly dynamic and vigorously competitive. We estimate that more than 2.7 million Canadian consumers switched broadband providers last year, illustrating this competitive intensity.

2623 Let me give you just two examples of the price declines Rob mentioned have meant for Bell.

2624 The average retail price of 500 megabits per second, a residential internet package has fallen from $71 four years ago, to $54 today. For a 150 megabit package, the retail price has fallen from $69 to $52 over the same period. Both of those examples reflect about a 25 percent decline over four years.

2625 This is the result of competition between facilities‑based providers, not resellers, and the trend is continuing. For example, on February 1st, Rogers announced price reductions of up to $30 per month, across various internet packages, and Bell responded with similar price reductions.

2626 Our Virgin brand, with is more focused on the value‑conscious segment of the market, reduced its prices by up to $35 per month.

2627 It is this competitive dynamic amongst facilities‑based players that is driving prices lower. When Bell enters a market with fibre competition increases, speeds available to consumers goes up, and prices go down, all to the benefit of the customer.

2628 There's no compelling evidence on the record that resellers are truly in decline, let alone the precipitous decline that some have claimed. If you put aside the companies whose owners have recently chosen to sell their businesses at high valuations, the market share of resellers have remained relatively consistent.

2629 Meanwhile, we have invested in these brands that we have purchased and we have reduced the price of internet on the brands that we have acquired, as we seek to load subscribers on our newly‑built fibre network.

2630 For example, Distributel's price of 100 megabits per second plan fell from $52.90 in November of 2022, before we closed the acquisition, to $44.95 today. The price for its 1 gigabit plan in Ontario fell from $89.90 in November, 2022 to $69.95 today.

2631 So, in our view, there is simply no correlation between reseller and market share, and lower prices for consumers. Mark?

2632 MR. GRAHAM: Resellers today benefit from aggregated wholesale access at every speed available on incumbent FTTN and cable networks. They also have the disaggregated wholesale access to FTTP that they asked for but never used.

2633 Resellers are not making material use of the higher speeds available on these services, so why should the Commission even consider mandating yet another aggregated service?

2634 The market distortion and investment costs will surely outweigh any marginal benefit for resellers from such a heavy‑handed intervention.

2635 Given the cost of fibre networks and the wholesale alternatives already available, resellers are unlikely to use any new mandated FTTP service if rates are set appropriately. But we know, from experience, that rates will not be set appropriately. Indeed, the interim rate has already been set below our cost.

2636 We are concerned that the Commission appears to define the success of the wholesale regime on whether it guarantees reseller market share. The fundament premise of competition policy is to protect the competitive process, not individual competitors or classes of competitors.

2637 The focus should be on end users, who continue to benefit from a wide variety of plans, increasing availability and speeds, extensive consumer choice and switching, and consistently declining prices.

2638 M. MILLEN : À la base, Bell est un constructeur d'infrastructure. C'est la proposition de valeur que nous offrons à nos clients, des Canadiens ordinaires, ainsi qu'au fonds de retraite, qui nous font confiance pour être les gardiens du capital qu'ils ont durement gagné.

2639 En 2010 nous nous sommes lancés dans un programme pluriannuel de dépenses pour remplacer notre ancien réseau sur cuivre par la fibre haute vitesse. Aujourd'hui, nous avons encore plus de cinq millions d'emplacements non desservis par la fibre optique, ce qui représente 40 pour cent des emplacements dans notre zone de couverture, et ce, malgré qu'en 2020 nous avons accéléré la construction de notre fibre optique afin de connecter le plus grand nombre possible de Canadiens pendant la crise de la Covid‑19.

2640 La construction d'un nouveau réseau est une proposition risquée et exigeante en capital, et la période de recouvrement est longue et incertaine. Les plans d'affaires ne peuvent et n'absorberont pas les décisions réglementaires négatives sans conséquences.

2641 C'est pourquoi, suite à la décision de novembre, nous avons réduit nos dépenses en immobilisations réelles au cours du dernier trimestre de 2023, de 105 millions de dollars, et nos plans pour 2024 et 2025 d'au moins un milliard de dollars.

2642 Nous ne prenons pas cette décision à la légère, compte tenu des répercussions pour nos clients, nos employés, nos actionnaires et les collectivités où nous vivons et travaillons, mais nous ne pouvons pas continuer à investir des milliards de dollars dans la construction d'une toute nouvelle infrastructure si elle est offerte à nos concurrents, à des tarifs fixés par le gouvernement, avant même que nous ayons eu l'occasion d'abonner nos propres clients dans ces collectivités.

2643 Tout au long de ma carrière chez Bell, notre principal impératif stratégique a été de bâtir les meilleurs réseaux pour les Canadiens. C’est pourquoi des dizaines de milliers d’employés de BCE viennent au travail chaque jour. Mais comme nous l’avons dit la semaine dernière, dans l’environnement réglementaire actuel, nous nous éloignerons des secteurs de nos activités qui sont plus réglementés. Si les conditions réglementaires empirent, nous continuerons à nous adapter en conséquence.

2644 MR. DANIELS: We believe the evidence supports adjusting the Commission’s preliminary conclusions. But if you intend to mandate aggregated FTTP, we urge you to consider the following so as to reduce the negative impact on investment.

2645 First, only mandate speeds of up to 1.5Gb, mirroring the top speeds available today on the cable networks. This would address the equity notion that seems to be important to the Commission while preserving at least some competitive advantage from building a faster network.

2646 Second, make the mandated FTTP access apply to a location only five years after the network is deployed there. This would provide a minimal window to recover some of our investment before handing our network over to our competitors.

2647 Rob.

2648 MR. MALCOLMSON: We also agree with the proposals by CNOC, Cogeco, and more recently CIK Telecom to restrict the eligibility of incumbents for mandated resale. Specifically, the national wireless carriers, Bell, Rogers and TELUS, should not be able to rely on resale anywhere. And other incumbents, like Videotron, should not be able to rely on resale within their wireline footprint.

2649 From a public policy perspective, these eligibility rules would ensure the country’s facilities‑based providers remain motivated to invest in their own networks rather than shifting their focus to resale.

2650 This shift in strategy is not hypothetical. In anticipation of your final decision, we have actually begun reselling internet over cable networks under the Bell brand within our legacy footprint. Although right now we are only at the early stages, we stand ready to reduce further FTTP deployment, and reluctantly shift to reselling cable and TELUS fibre if regulatory conditions so dictate.

2651 Incumbent resale would be bad for the country. If the larger players begin to rely on each other’s existing networks there is no incentive to expand deployment, upgrade speeds or differentiate products.

2652 Finally, any FTTP mandate must apply equally to all providers, whether they’re legacy networks are copper or coax cable, and it must apply in every province. There is no justification for regulating fibre networks when they are built by Bell, but not when they are built by other incumbent telcos or cable companies, the latter of which often have more internet subscribers and a higher market share in their territory.

2653 It is very important to appreciate that Bell is not the broadband market share leader in Ontario and Quebec, rather, it is a competitive disruptor.

2654 In this context, it makes no sense to apply burdensome regulation just to Bell when the market share leaders, Rogers and Videotron, are building fibre as well, nor does it make any sense to mandate fibre access in Ontario and Quebec, but not in BC and Alberta where ARPUs are higher and TELUS is further advanced in its fibre build than Bell.

2655 Madam Chair, as you mentioned recently before the C.D. Howe Institute and again on Monday, we need telecommunications providers to invest in high‑quality networks, and they need incentives to do so. We wholeheartedly agree.

2656 The best way to incentivize the industry to invest the billions of dollars that are still required is to decline to extend additional wholesale regulation onto fibre networks that are still being rolled out. The resulting facilities‑based competition will continue to drive retail prices lower, while resellers will continue to play the same role through aggregated wholesale access to incumbent FTTN and cable networks.

2657 Thank you, and we’re ready to receive your questions.

2658 THE CHAIRPERSON: Thank you very much, Bell. Thank you for being here with us this afternoon. Thank you for sharing your perspectives.

2659 The Panel is very much looking forward to the discussion, we have a lot of questions, as we did with TELUS this morning. We’ll take a break at some point and we’ll do a check‑in at some point when Vice‑Chair Scott takes a breath.

2660 So I will turn things over to the Vice‑Chair to start with the questioning for the Commission. Thank you.

2661 VICE‑CHAIRPERSON SCOTT: Thank you, Madam Chairperson.

2662 So I would like to begin on the broad theme of investment. And to start, I have a few questions regarding the process that leads to Bell making decisions on its investment plans.

2663 So I’m assuming that a material change to your network investment plans would be a decision of the Board ultimately, is that correct?

2664 MR. MALCOLMSON: It depends on the decision, quite frankly. You know, management makes decisions at a certain level, and then the board also considers decisions, so it really depends.

2665 VICE‑CHAIRPERSON SCOTT: Would $1.1 billion be a board‑type decision or a management‑type decision?

2666 MR. MALCOLMSON: Certainly the board was consulted.

2667 VICE‑CHAIRPERSON SCOTT: Okay. And was that something that you would take to the board immediately following a CRTC decision or was that something where management and the board would be engaged in discussions and running scenarios prior to a decision coming out?

2668 MR. MALCOLMSON: Well, we assess on an ongoing basis what we think the regulatory climate is. We knew I think early on, I think perhaps back in March, that it seemed like the regulatory pendulum was shifting perhaps to more resale. And then we obviously received your November 6 decision, which disproportionately impacted Bell, which we’d like to talk about some more, with your permission, and then we articulated our response.

2669 Because, quite frankly, as a publicly‑traded company, when decisions that have an impact on your business, like the one you made on November 6 are articulated, we need to respond quickly, and can’t keep building out high‑speed fibre networks when it certainly seems to appear that we’re going to have to be reselling them to our competitors.

2670 And, as I said, the decision disproportionately affected Bell. I know it’s couched in the language of applying to ILECs in Ontario and Quebec, but there are two ILECs in Ontario and Quebec: one, Bell, has built 6 million fibre locations in Ontario and Quebec; the other, TELUS, has built roughly 300,000.

2671 So the impact of that November decision disproportionately affected Bell and caused us to immediately reduce our planned investments in fibre.

2672 VICE‑CHAIRPERSON SCOTT: And I do want to dig in further on exactly that topic, really getting at it through kind of the analytics and the modelling that you do as you look at the return on your investment decisions that you have to make.

2673 So would it be fair to assume that you’ve got kind of a fairly complex, robust model that you use to assess the return you’re going to get on a given investment and whether or not a project would make it over a satisfactory hurdle rate?

2674 And then I’ll ask a couple questions maybe, and give you space to respond all of them.

2675 So I’m interested in kind of how robust that model is, that the types of inputs are, you know, to what degree your exposure to wholesale risk would affect those decisions. So how sensitive is the model to regulate a wholesale risk?

2676 And we did hear from Mr. Bragg that Eastlink has a bit of a gut‑feel approach and that not all of these decisions are maybe formulaically driven or algorithmically driven. So to what degree is there kind of a management discretion or an overall strategic approach as opposed to a more algorithmic approach?

2677 MR. MALCOLMSON: That's a long question, I won’t ask you to repeat it. But I’ll ask Curtis to talk about the model that we use and the inputs that go into the decision when we’re deciding where to allocate capital.

2678 But at the end of the day, I thought Mr. Bragg was quite refreshing actually. You know, he didn’t need a bunch of Bell people with spreadsheets and running models to simply articulate that when I’m being asked to build a network, that I’m going to have to open up to my competitors who can then resell my network, that at some point it doesn’t make sense to keep sort of throwing good money after bad.

2679 And I think he was talking ‑‑ you know, he was saying there are numerous rural and remote communities in his footprint where it just doesn’t make sense to build anymore, given the level of ‑‑ and he was talking about TPIA access to his network, given the level of resale on his network.

2680 So I thought that was probably some of the best evidence that you might have in front of you this week as opposed to spreadsheets and models.

2681 But Curtis will tell you what he has to deal with on a daily basis in terms of that assessment.

2682 MR. MILLEN: I feel like I should downplay spreadsheets and models despite my finance background.

2683 It’s a lot of question in not that many words, Vice‑Chair. I think there are a few points. Ultimately, we take risk when we build fibre, right? If you go back in time, 13‑14 years ago when we decided to start our fibre‑build program we had to convince investors that it was a good idea and that it made sense, and that they should fund our build out.

2684 I mean thankfully, you know, the superiority of the fibre technology has proven out and it’s worked. But we continuously have to convince our investors that funding our build out and our investments remains a good idea, right?

2685 So, you know, there’s part of our capital allocation discussion, but then there’s the investors’ capital allocation discussion. And if they decide that they don’t want to buy our bonds or buy our equity, the decision kind of gets taken out of our hands. So we’re hopefully staying away from that part.

2686 But I would say, you know, during COVID, in terms of taking financial risk, we accelerated our fibre‑build program, right, and that was a risk. So we leveraged the balance sheet to go out and build more fibre, right?

2687 And we, again, had to convince investors that that was good idea. We had to convince bondholders that was a good idea, that they would see a financial return. Because ultimately, we’re stewards of their capital, we’re stewards of their money. And they have to believe that there’s a financial return to invest in us, so that we continue to build‑out fibre networks.

2688 And, again, we want to build‑out fibre networks. Again, no one builds‑out fibre networks and increases their capital spend during COVID if it’s not something that’s kind of part of their DNA of a company. I mean, as I mentioned in the prepared remarks, we are a network infrastructure company.

2689 So in terms of other decisions, so there’s what will the markets bear, what can you actually do, what can you convince the street investors that this remains a good idea?

2690 But then there’s the standard capital allocation within our company and within every other company, right? So this is what can you afford to spend and how do you force‑rank good ideas? And there are a bunch of good ideas that we just can’t fund because it’s not financially feasible, right?

2691 But, again, I don’t know what my TELUS competitors were talking about in terms of the science is clear, where the science was, but I don’t disagree with them. I mean, it’s pretty clear that as an investment opportunity gets worse, whether it be because interest rates have gone up, which they have, whether competition is more intense, whether that regulatory environment has worsened, or there’s uncertainty, I mean many factors go into what is the expected risk versus expected return.

2692 So ultimately, it winds up being a capital allocation process in that regard. If that helps.

2693 VICE‑CHAIRPERSON SCOTT: It does indeed. I appreciate that some of my questions are quite wide‑ranging. I think talking in the space of the space that I create with the question is a very helpful approach, if that’s reassuring at all.

2694 MR. MALCOLMSON: So if I can share a little more, because I think the last part of your question was how do we assess the impact of third‑party access to our networks when we’re deciding whether or not to continue with a fibre build or launch a fibre build. I think that was the last part of your question.

2695 And I think there’s two levels of assessment. Because there is the traditional resale market, which we’ve lived with for four years in terms of wholesale‑based competitors riding on our FTTN networks and the cable folks have dealt with it on TPIA. That’s existed, it’s not something that, you know, we’re entirely enamoured with. But, you know, it's part of the world in which we exist.

2696 And then there’s another level of wholesale access, which is being mooted in this proceeding, and which was I think contemplated perhaps in your November decision, which is anyone can resell anyone else’s network and that is, you know, the specter of: Bell reselling TELUS’s network in the west; TELUS reselling Bell’s network in the east and in Quebec; Bell reselling Rogers’ network in Ontario and the west; Bell reselling Cogeco’s network in other areas like where I live, I live in Burlington, Ontario, we don’t have fibre there, Bell hasn’t built fibre there, it’s FTTN, Cogeco’s got a very high‑speed cable network there. If the rules of the game are you can resell, Bell will resell Cogeco’s fibre ‑‑ or high‑speed cable.

2697 But, to us, that has an immediate and potentially devastating impact on network investment and network expansion. And so there’s the reseller level and then there’s the large‑scale incumbents or the smaller regional facility‑based incumbents engaging in resale. I think they’re two different things with two different impacts, and the decision you make will essentially sort of chart the course for the industry going forward.

2698 Are we going to pivot to unfettered resale? If we do, there will be a long‑lasting impact on investment. If you take a look at just the job ‑‑ you know, we started our fibre job in 2010, we’ve got 12.5 million households in our footprint, we still have 40 per cent to go. So there are 5 million locations, homes and businesses, in the Bell footprint that we still have not yet built fibre to.

2699 As Curtis said, we want to build fibre to those, but we can’t justify the deployment of capital to keep doing that when we’re just building that fibre to open it up to third‑party resale.

2700 VICE‑CHAIRPERSON SCOTT: Two follow‑up questions on that. I think I know the answer to the first one, but to get it on the record. Of those two risks, I think I know which one is the greater concern. Can you give some sense of scale, how much more concerned are you about wholesale by other large, well‑financed incumbent players, as compared to more traditional, small, wholesale‑based ISPs?

2701 MR. MALCOLMSON: Sure. I'd say a couple of things, and Curtis may want to jump in. Some of my colleagues may want to jump in.

2702 In terms of I’ll call them the traditional resellers or wholesale‑based competitors, as I said we’ve lived with that, but we don’t think that you should mandate aggregated access for that constituency, and we say that for a few reasons.

2703 So we recognize that they’re a presence in the marketplace, but we think that what they have available to them today on FTTN and on cable is more than sufficient in terms of the wholesale access they need to serve the consumers that they are choosing to serve.

2704 And if you look at where they tend to focus their marketing efforts, they generally tend to focus their marketing efforts and selling 100‑300 Mbps packages. That’s where I think 93.5 per cent of their customer base resides. So they have the wholesale access that enables them to sell to the customer base they’re targeting.

2705 They also, if they want to move up speed tiers and sell higher speed packages, that’s available to them as well. It’s available on our FTTN network, it’s available to them on cable, and it’s also available to them, as you well know, on our FTTP network in Ontario and Quebec on a disaggregated basis if they choose to move up and sell those speed tiers.

2706 So we think you don’t need to do anything to serve that constituency over to you. And then what’s the bigger threat between the two? You have our answer, it’s a world in which the incumbents all immediately pivot to reselling each other’s networks.

2707 Sure, you know, we’ll figure out a way to manage through anything, that’s what we’re paid to do. But we can’t see a scenario in which it’s good for the country, given the job that still needs to be done in terms of building out high‑speed networks to the millions of Canadians that, quite frankly, are continuing to sit on the wrong side of the digital divide.

2708 And then the last thing I’d say is you shouldn’t feel the urge to act immediately if you think you need to act and impose more wholesale.

2709 Because, right now, if you look objectively at the evidence in terms of what’s happening for consumers, because at the end of the day it's about consumers, it’s about access to networks, competition, choice and affordability, prices are coming down. And I won’t go on much longer, but there’s lots of objective evidence on the record, setting aside everyone else’s international studies, lots of objective evidence on the record that internet prices are coming down.

2710 VICE‑CHAIRPERSON SCOTT: Thank you. So if, I think you called them the traditional wholesale service providers, if they’re not taking advantage of the highest speeds available to them on a wholesale basis today, what’s the risk of giving them access to even higher speeds?

2711 It would seem to suggest that they’re not focused on that end of the market, and therefore your risk will be pretty minimal from that?

2712 MR. MALCOLMSON: My colleague will want to comment. But it’s a provocative question. I guess what I would ask you is what is the imperative behind imposing what is a burdensome regulatory instrument, wholesale regulation, when it’s clear that the resellers are not targeting customers within that speed tier?

2713 And I’ll go back to the disaggregated example. It was the resellers or the wholesale‑based providers, as you know, that asked. They came to the Commission and they said, we need disaggregated access to FTTP, we would like to have the optionality of being able to target a central office here or a central office there, we’ll pay for transport, we’ll invest in transport, and then we will, you know, we will deploy in areas where we think it makes sense. Typically, for them, it’s heavily‑populated urban areas.

2714 You granted them that assess right and then they never used it. We had to provision it. I think it cost us something like $14 million to provision that very service, and it was never utilized.

2715 So, you know, regulating for the sake of regulating when I think you could say that right now the resellers are well‑served in terms of the target market that they’re selling to, doesn’t make a whole lot of public policy sense.

2716 Mark.

2717 MR. GRAHAM: Sure. I’d just add I think, Commissioner Scott, you asked what’s the risk of giving them access to the higher speeds if they won’t use it? It’s actually sort of worse than that; they already have access to the higher speeds, so 93 per cent of their customers are on this 300Mbps and below speed tiers. They have access of up to 1Gb on cable already today.

2718 And typically, there’s not even a big price difference or no price difference between the prices of the speeds they’re selling today and the higher speeds on cable. So there may be some price difference inside their network, but there’s no price difference in their access price to the cable companies. And so they’re not competing at that higher end of the market when they already have the access today.

2719 So it’s not as though, well, let’s test out in the market whether they will or won’t use the access. They have it, and they’re not using it. That’s the fact.

2720 So the question is, what’s the risk of mandating aggregated access to FTTP? And I’d say there’s sort of two things, they’re related. I think the big risk from our perspective is it becomes a self‑fulfilling prophecy. So you mandate access to FTTP, then in a couple of years we’re back here and you’re being told the rate is too high, and the proof point is they’re not using the service.

2721 So we’re not using the service, therefore the rate’s too high. So lower the rate, and lower the rate, and lower the rate despite the costs until they can use the service. And obviously, that’s not something you want to do. It’s not the right economic approach, it’s going to distort investment. But more importantly, just the very risk is going to distort investment.

2722 Because when we see that path coming, and there’s uncertainty around what the rate will be over the long term, we’ll have to respond in how we allocate capital, and the investors who we ask for capital will respond in what capital they allocate to us.

2723 So I think it’s a long answer to say, they already have access to the speed and they’re not using it. And the risk is if you mandate more, it implies that eventually the rate is going to come down well below our cost, and that’s going to have a dramatic impact on investment.

2724 MR. DANIELS: If I could just add, because I’m looking at this from your question and the perspective of why the 1.5 limit in terms of looking at, and why did we choose 1.5, and what makes sense about that.

2725 So I think it’s for all the reasons that Mark said. There’s also this notion that it gets back to that balance that the Commission ‑‑ the Chair actually raised in your beginning speech opening this proceeding. How do we still balance the incentives to invest?

2726 And we think this provides an opportunity because we can go into an area and still claim that we have the fastest speed, but the minute that we have to resell ‑‑ it doesn’t matter who, first of all, we’re reselling to, in terms of not being able to make the claim ‑‑ the minute that we go into that area, if we can’t make that claim, that can have an impact. And I’m not saying it’s totally detrimental, that it’s the only thing, but it could have an impact that decides, is it worth that extra incremental investment? So, I’d add that as the third item.

2727 But I wanted to come back and to say we chose the 1.5 because there is a technology reason, which we ‑‑ you know, in terms of the nature of fibre‑to‑the‑home, it’s the difference between GPON and the next generation, which we are starting to invest in. But it also ‑‑ it gives the resellers lots of room, when we’re talking that smaller class that you had ‑‑ you had asked about.

2728 Today, as Rob said, you know, 93.5 percent of their customers are on 300 megabits or lower. The average speed in the country, according to your last CMR Report, says 331 megabits. The resellers we know ‑‑ because we also are one ‑‑ focus on the value segment where it’s less important to them about the speed; it’s more important price, which is why they’re focused on the lower ‑‑ the lower speeds. But it still allows up to more than four times what the national average is today, right, because 331 ‑‑ like, yes, it’s growing, but it gives lots of runway for them to sell higher speeds.

2729 And to Mark’s point, for the same price they can get 1 gig today on Rogers at $49.06. It’s the same price for a gig as it is for 300 megabits. So, they’re choosing, as are we, with Virgin and so on, which Andre can talk about ‑‑ they’re choosing to be at the lower end of the market because it’s not about speed in that market ‑‑ that market segment; it’s much more about the value that you provide the price, and so on.

2730 So, I just wanted to jump in at that point. Thanks.

2731 VICE‑CHAIRPERSON SCOTT: Thank you for that. And is there a counterpoint to those positions? If we’re looking on a forward‑looking basis, does it make sense, as Canadians increasingly demand higher and higher speeds, yes, of course they’re still looking for value, but we know the types of speeds they’re looking for are going to increase over time, as they always have. Would it be prudent to put a forward‑looking plan in place that gets us ready for the speeds that people are going to be increasingly demanding?

2732 MR. MALCOLMSON: It’s always good to plan, but I don’t think that you need to impose the remedy you’re contemplating now, given a couple of factors. First of all, as we just said, the resellers have access to the speeds they seem to want to sell to. Point number one.

2733 Point number two, the market has never been more competitive. The competitive intensity is like nothing we’ve ever seen, and it is delivering declining retail prices. And as I said, there’s evidence on the record about that. There’s the StatsCan evidence. There’s the Wall report. Those are the two we’d like to talk about.

2734 So, in a world where there’s no evidence of market failure, where prices are objectively declining and where the reseller constituency is being served by the array of wholesale access that it has available to it today, I don’t think it does make sense to act proactively. It doesn’t mean that two, three, four years down the road, let’s say, if everybody is on one‑and‑a‑half gigabit speeds and the resellers aren’t competing, that you then don’t relook at it and say, ‘Okay, we need to do something.’

2735 But that’s not the world we live in right now. And the world we live in right now is we’ve got a large gap to close in terms of Canadians who don’t have access to high‑speed broadband, and we think quite frankly that should be the priority over prioritizing resale. It would be quite a different proposition if the retail market wasn’t competitive and prices were increasing. Then you might say to yourself, ‘We need to act; we need to act now,’ because at retail customers are suffering. That’s not the case. Prices are coming down.

2736 VICE‑CHAIRPERSON SCOTT: Great. I’d like to move on. I’m still not even out of my investment section, if you can believe it, but another aspect of the investment theme.

2737 There’s a heuristic I always have in my head where presumably there’s a percentage of households where the economics of deploying fibre‑to‑the‑premises will never be fulfilled, absent some kind of government subsidy. And then I would imagine that there is a percentage of households where you would need to invest in fibre‑to‑the‑premises or you would ultimately cede the entire market to your cable competitors, and I think you’ve stated publicly, and really to no one’s surprise, that you’re prioritizing your fibre deployment in areas that are served by cable.

2738 How big is that middle ground, which I might think of as more discretionary than the two ends? How big is that ground, and how susceptible is it to regulatory risk?

2739 MR. GRAHAM: It’s a great question. I think it’s very large, and sometimes, because I think people often have these categories in mind, and it may be surprising how large it is. I think probably the best way I have to illustrate that ‑‑ I’ll talk about some specific communities in a minute, to give you a sense of what they are, but you just have to look to other countries to see how fragile the business case for investing in FTTP is.

2740 So, if you look in the United States, where they don’t have the regulatory headwind that we’re discussing in this proceeding, ILECs have built out fibre‑to‑the‑home on average across the United States to about 40 percent of the country. Compare that to what the job we’ve done here in Canada, and we should feel pretty good about how we’re doing, but it also shows you that we’re right on the edge of the viable business cases, arguably, and have been for some time. And like, the case is very fragile.

2741 So, and just dig one step deeper into the United States. AT&T, even at their scale, have built fibre‑to‑the‑home to about 35 percent of their traditional serving territory. In fact, there’s only one company in the United States that’s built fibre‑to‑the‑home to more than 50 percent of their traditional serving territory, and that’s Verizon, and that’s only because over the years they’ve made decisions about which communities are economic, and they’ve sold off huge swaths of their tens of millions of locations of their traditional serving territory for billions of dollars, so they’re at a highly concentrated level, but it’s from cutting loose some of the communities.

2742 So, if you come to Canada, where the types of communities where ‑‑ where it’s on the edge in response to the type of regulatory risk you’ve discussed or you mentioned, we’ve discussed some of them today. There’s Burlington, Ontario, where I also happen to live ‑‑ a city of 200,000 people, a suburb of Toronto, that doesn’t have fibre‑to‑the‑home. Niagara Falls, Ontario. London, Ontario. Cambridge, Ontario. These are not small, remote, far‑flung towns where you would expect subsidy to be required to do the job. These are mid‑size cities in Ontario. Longueil, Quebec. Boucherville. Simcoe, Ontario. Bona Vista, Ontario. It goes on and on. It’s lists like that.

2743 So, I don’t think we have a precise number of homes to give you today, but it’s in the millions. It’s millions and millions of homes in the types of places that I think are unlikely to see subsidized builds by government.

2744 VICE‑CHAIRPERSON SCOTT: That’s very helpful. And then, just to get kind of the other side of the coin, so recognizing the fragility of some of those investment cases, should it then be equally fair to say that there are still a large number of homes where the economics are strong enough that, despite the fact that cable has a strong ‑‑ you know, there’s a TPIA service that you could be reselling, you’ve nonetheless made the decision to invest in fibre‑to‑the‑premises, and that continues?

2745 MR. MALCOLMSON: Yeah, there are, and I think the Bureau in its ‑‑ I think it was in its broadband study, perhaps said it best. They spoke about the impact of wholesale access on investment, and they said the wholesale access ‑‑ any form of wholesale access has a negative impact on investment. There will always be areas where it’s strategic to build, or it’s so densely populated to build, or it’s low‑cost to build, that you will build fibre there, and that the impact of a wholesale mandate is likely to be more acutely felt at the fringes of the network.

2746 So, apply that to where we find ourselves today. As I said earlier, we’ve still got five million locations to build out to. You build the ones that are easiest to build to first, that have the best business case or that are driven by the competitive imperative, because, you know, our legacy copper network certainly wasn’t as good as cable’s network, so we had to step up our game and invest capital to build fibre to compete with cable. The remaining job is the hard part of the job. It’s the areas that are more costly to serve, don’t give out the same return on investment, and there are a lot of them. And if we pivot to the resale model that we’re talking about, be it mandated access for the true resellers on an aggregated basis, or big three resale, those investments just ‑‑ they will stop over time. Investment will slow to an absolute trickle.

2747 Curtis?

2748 MR. MILLEN: Yeah, I might just add ‑‑ you know, it may sound fairly obvious once I say it but, you know, inflation and the rise in interest rates certainly don’t help our business cases. Right? So, if you go back a couple of years, a scenario or a build location that was ‑‑ you know, had some economics positive return, you know, while ‑‑ while ARPU ones are being basically flat, right, and consumer prices are kind of down, our costs to actually build go up, and our cost to finance these has gone up dramatically. Right? I mean, our year‑over‑year interest expense has gone up 300 million dollars.

2749 So, you start looking at the business case, like the ones that were lower economic return have probably moved into uneconomic. Right? So, you are looking at a bunch of different factors, and I agree with other folks on ‑‑ on panels that came before us in terms of rural remote. Right? I mean, you are looking at different business cases for different types of builds.

2750 MR. GRAHAM: And Vice Chair, if I could just add one thing, because I think in your question you said, you know, there are some areas where, notwithstanding ‘you could have been reselling cable, you’ve been building’ ‑‑ and that’s certainly true, but it’s really important there’s two sides of the coin. There’s we could be reselling cable, but by building we gain an advantage in the market. We gain an advantage because we believe in fibre. We believe that it has benefits for consumers, and so it’s not just an economic decision, what’s a cheaper way to enter the market ‑‑ resell cable or build fibre? It’s if we build fibre, we can gain a competitive advantage in the market.

2751 That’s good for us, but more importantly, it’s good for consumers. More importantly for you, it’s good for consumers, because if you look at what’s happened in the market ‑‑ in Ontario, for example, we’ve built fibre, so we have a competitive advantage. So we start winning subscribers away from cable. So then cable reacts with (a), investments in their network to improve the quality of the network, and (b), significant price reductions like the ones Andre mentioned in our opening statement. And then, we need to respond to those. And you get ‑‑ you generate this competitive environment where prices get driven down to sort of the bare economic minimum, and consumers are the winners.

2752 And the only way resale features in that story is by its absence. The absence of resale on our fibre‑to‑the‑home network is what gives us the incentive to invest in it despite the cost, to gain that competitive advantage. But if other parties can resell our network, that advantage goes away, and it’s a very different decision than the type of economic decisions we’ve been making to date.

2753 VICE‑CHAIRPERSON SCOTT: Thank you for that. So, how substitutable are fibre‑to‑the‑prem and the cable HFC networks? Because I think in your submission you said that they’re fairly substitutable or they’re an effective substitute, but then I’ve been watching a lot of football lately, and the commercials would certainly suggest otherwise. So, from your perspective, and maybe more importantly from a consumer perspective, are those substitutable services?

2754 MR. GRAHAM: Sure. I mean, I think what you see reflected in our submissions is from an economic product market standpoint, they’re substitutes. In other words, we can’t exercise market power by having a fibre‑to‑the‑home network because we need to compete with cable. But from a marketing standpoint, certainly we think there are advantages to the fibre network, for some use cases. But I think for the vast majority of consumers, like, you can kind of use both for most of the things you do. Therea re some advantages to fibre not sufficient to change sort of what a relevant product market would be from an economic perspective, but it does have real relevance to us from a business and investment perspective.

2755 VICE‑CHAIRPERSON SCOTT: Thank you.

2756 So, moving on a bit, I want to put the same question to you that I put to TELUS this morning, which is that I’m hoping you can engage in a little bit of speculation with regards to who has access or whether or not there are restrictions imposed on access to wholesale.

2757 So, take a scenario where we wake up tomorrow, the wholesale framework is in place, there are no restrictions on who can access the wholesale tariff. What do you do? What do your competitors do? How do you respond to one another? What kind of tit‑for‑tat? Can you game out how this plays out, and where we land eventually?

2758 MR. MALCOLMSON: Sure. I’ll start, and I know both Curtis and Mark will want to correct me where I go off the rails, but, at the end of the day, if I wake up tomorrow and the world is one of, I’ll call it ‘unfettered resale’, it’s an unfortunate but pretty easy decision from a deployment of capital standpoint.

2759 I can ‑‑ I can either walk down the hallway to Curtis’s office and say, “Hey, Curtis. We’ve got five million locations passed to still build out to in our fibre footprint, and they’re going to cost $X.” Or I can go and look west into B.C. and Alberta where I have no network and I have no customers, and I can say to myself, “I can ride the TELUS network and pick up, you know, a couple of million customers at a much lower incremental cost.” I think Curtis would say to me, “We’re gonna have to go west and resell fibre.” And every entity that is faced with that choice will ‑‑ will react the same way.

2760 So, we will then have a world in which you’ve gone from a number of facilities‑based competitors who have been dedicated to deploying shareholder capital to build networks ‑‑ and the job is not done ‑‑ to one in which the pivot is to resale. So, Bell will end up selling TELUS fibre in the West; Bell will sell Cogeco high‑speed cable in Burlington because it may be better than our FTTN network; Bell will sell Vidéotron’s cable and newly‑built fibre in Quebec. Rogers will do the same.

2761 So, you’ll have short‑term, probably intensified competition, and you’ll have longer‑term, and I think structurally damaging impact on network investment, where those who aren’t fortunate enough to be living in areas where high‑speed networks are built are going to have to wait a whole lot longer and may never get them. So, you’ll have an immediate pivot to resale, a stoppage of investment, and a redeployment of capital.

2762 Curtis has something to say.

2763 VICE‑CHAIRPERSON SCOTT: Sorry, can I just jump in? Because I’ll absolutely let you speak, Curtis, but I think ‑‑ because I do want to keep a consumer lens front and centre on this ‑‑ so, I think what I heard you say is that in the short term consumers might see a burst of competitive intensity that could be to their benefit, but longer term we’d be creating structural challenges that would be detrimental, not just for the companies, but for the consumers as well?

2764 MR. MALCOLMSON: For consumers as well ‑‑ certainly the consumers that don’t have access today, in our case the five million locations that don’t have access today. And that short ‑‑ you know, you’ll have to decide whether that potential short‑term burst in competitive intensity is going to be much different than the prolonged competitive intensity that is demonstrably happening today in the marketplace, where prices are ‑‑ certainly across our footprint ‑‑ coming down as a result of facilities‑based competition.

2765 And I think when you ‑‑ when you do that math, it’s not worth the tradeoff, because prices are happening ‑‑ prices are going down, and it’s happening because of competition among network build companies while they’re still building. You’ve kind of got the best of all worlds right now in terms of network build companies continuing to invest in their networks, and also competing like crazy for the hearts and minds of consumers, and that’s manifesting itself in much, much lower pricing.

2766 Curtis?

2767 MR. MILLEN: Yeah. I ‑‑ I don’t think this is, in your earlier words, Commissioner Scott ‑‑ like, this is not a heavy spreadsheet or modelling type analysis. I mean, this is more on the Lee Bragg side of, it's fairly straightforward. The rationale for investment goes dramatically downward, and the case for trying to load subscribers out West goes up.

2768 I’m not sure ‑‑ I’m not sure it’s going to be better for consumers in terms of price. I think, you know, we’d go out West, we’d compete, we’d pick up our share. I don’t know if that’s more competitive, or maybe a little bit more competitive in terms of what you’d see with price action. I think we would just get access and be able to take subs without building a network. And I think in our territory ‑‑ so, I agree with my colleague, Rob ‑‑ where, you know, the incentive to expand our footprint again drops dramatically, and, you know, a simple way I think about it ‑‑ I mean, it’s the pace of investment, it’s the ultimate coverage of the fibre network, and then it’s the product innovation side, which impacts the entire fibre footprint.

2769 And, you know, I thought you asked a good question this morning in and around innovation, and you asked it earlier in our session in and around customer expectations. You know, I think customer expectations change over time because of the product innovation that we drive forward. Right? If there hadn’t been any product innovation on network, we’d still be pleased as punch watching a pinwheel go around as we watch Crave. Right? We wouldn’t know any better that there was, “Oh, we can get 3 gig, 5 gig.” So, it’s harder to actually quantify and specify what the innovations will be going forward, but it’s pretty dramatic in terms of every product category over time.

2770 If you look back five years ago, I don’t even know how we lived with that. Right? I mean, could you imagine that world in ‑‑ during COVID, where, you know, you’re working from home, your partner is working from home, you’ve got teenagers ‑‑ I have a nine‑year‑old who still doesn’t understand how he can’t swipe the TV. Right? Like, the advancement of technology happens, and you look back over time and go, “We used to think that was good enough.” Right? I don’t like the world where you’re stagnating in terms of the product set and you start looking at what other countries are doing, and what that actually does to our kind of personal experience, as well as our enterprise capabilities.

2771 MR. MALCOLMSON: Vice Chair Scott, as you can tell, there’s lots of interest on this side of the table in your hypothetical scenario, because what you decide is going to sort of chart the ‑‑ the future for the industry, and I’m not exaggerating. It’s going to ‑‑ there will be structural change, perhaps.

2772 So, in your scenario, where we wake up to a world of unfettered resale, there’s a couple of other impacts that I think are worth mentioning that I didn’t mention in the first go‑round. And I’m sure the resellers will talk to you about this, but from where we sit, I think in that world that we’re mooting, the resellers will be obliterated. I don’t know how, in a world of the incumbents reselling each other’s networks everywhere, the resellers are going to be able to compete with the brands, and compete with the wireless and wireline bundles that the incumbents can offer on a resale basis. I don’t think it leaves any room for the resellers. So, that’s number one.

2773 Investment we’ve talked about. It’ll slow the investment tap to a trickle, and those that don’t have high speed won’t have it anytime soon. It also undermines network resiliency, because investment in network expansion will, as I said, either stop in some places, slow to a trickle in others, and therefore you won’t have the benefit of ‑‑ of multiple networks in a geography. So, that ‑‑ that’s ultimately not good. Everyone will just start riding existing as‑built networks.

2774 And the reality is that there seem to be only three companies ‑‑ Bell, Rogers, and TELUS ‑‑ that probably have the capacity to continue building out high‑speed broadband infrastructure to all reaches of the country, and I think you want to incentivize all of us to keep doing that. In your scenario, you’ve created an immediate disincentive.

2775 And then, the last point, which I think I made, is you’ll make it a lot harder for the Cogecos and the Eastlinks of the world, who all of a sudden are going to be competing, having their networks resold by the likes of us.

2776 VICE‑CHAIRPERSON SCOTT: Thank you for indulging the scenario, because I agree with you, it is pretty fundamentally important, the work that we're doing here today.

2777 I do want to turn to rates and prices. So you'd mentioned earlier in your remarks I think on a 69.95 one gigabit per second service. Is that the lowest price you've ever offered that service at?

2778 MR. MALCOLMSON: André is our pricing expert, and rather than me translating, André should take you through, because he's the fellow that has to deal with the competitive intensity that exists today. And he can walk you through not only that example, but numerous other examples of where competition among facilities‑based players is just driving down prices.

2779 André?

2780 MR. LeBLANC: Yeah, thank you, Rob.

2781 Maybe ‑‑ and I'll get to your question at the end ‑‑ but maybe I'll just start with what is happening in our market from a retail pricing perspective, just to give you some, you know, some of the facts in terms of what we see day in and day out.

2782 You know, as Rob said in his opening remarks, you know, the Statistics Canada data is clear. Since 2016, rates have come down seven per cent, inflation's up 25 per cent. I can tell you our Bell Canada Internet retail pricing over the last four years is down nine per cent. And just last year, down five per cent year on year. So retail rates are coming down.

2783 And it really is a function of facilities‑based competition. Like I do agree with some of the folks from TELUS that were up this morning that it is ‑‑ you have to look at these at a regional‑by‑regional basis. But if you look at ‑‑ you think about Ontario, the cable incumbent Rogers is the majority market share leader; we are not. So we see ourselves as the smaller competitor of the two. And we have to compete very aggressively to win market share in that market. And even in Quebec, the same is true for Vidéotron. They have a majority market share in that market, so we have to compete very aggressively in that market.

2784 And I'm a marketing guy, so I had to bring some pictures, not spreadsheets. But and I can hand out some of this later, but these ads just show you some of that dynamic in Ontario, for example, 2021, this would have been our 50‑megabit plan ‑‑ we have, you know, many other examples ‑‑ 84.95. So this was the price we were selling. It's our ad selling our package.

2785 I think Rogers, pretty similar, like because we're ‑‑ we always try to be competitive in order to win market share. Again, we have less market share in this Ontario region than they do. They had dropped the price, I remember this was 2023, $70. There's our $70 ad. Same speed, lower price. February, they just dropped their price again. We responded in kind ‑‑ $50. So you see the price ‑‑ 84.95, 70, 50.

2786 So I mean, it does show that based on, you know, the framework today, pricing is incredibly competitive in the Ontario market. If you indulge me just for a few other examples, and then you can remind me of your first question.

‑‑‑ Rires

2787 MR. LeBLANC: Here's Virgin, $65 last year. Today ‑‑ this is the 300‑meg package, by the way ‑‑ we have many packages. Virgin, by the way, focuses more on the let's call it more value‑conscious end of the market, so speed, top speeds are 300 meg on our Virgin product. Today, $45. Again, this was in response to a very competitive market where we are trying to win market share.

2788 Quebec, I'll give you two more examples. Three years ago, the price of 1.5 gig, $95; today, $70. I might kind of get to some of your question in a second.

2789 And Virgin Internet in Quebec, four years ago, price of 100‑meg plan $55; today, $49.

2790 So in both markets ‑‑ I think there was a comment this morning that the Ontario market wasn't very competitive. I can tell you that's the farthest thing from the truth. Prices have come down. I live and breathe this every day. The market is very, very competitive Ontario, Quebec, and across all parts of our footprint.

2791 Now, I don't think I fully answered your question, which was ‑‑

2792 VICE‑CHAIRPERSON SCOTT: That's okay. You've actually prompted ‑‑

2793 MR. LeBLANC:  ‑‑ something about 69.95.

2794 VICE‑CHAIRPERSON SCOTT: You've prompted another one I think might be more interesting. So of all these, you know, you've described as highly competitive or aggressive prices, do all of those prices full cover your costs?

2795 MR. LeBLANC: Yeah, if you think about our investment, you know ‑‑ and I quoted Internet prices, and you know, I know you made ‑‑ you had that question this morning ‑‑ you know, the fibre is really an access. It's a platform upon which we sell Internet; we sell TV on that Internet; we sell pods, which extends your Internet throughout your house; we sell phone; we sell security; we sell a whole bunch of basket of goods. And I think if you look at the basket of goods that we sell, vast majority of our consumers take more than Internet. And so yes, when you look at a basket of goods, we make sure, obviously, or Curtis wouldn't provide the investment, that we make a return on that fibre investment, including all of those services.

2796 So looking at just the Internet prices ‑‑ I think we're just doing this to give you examples of the competitiveness ‑‑ is kind of a narrow view. You have to look at all of the products and services in the bundles we sell and what we earn in aggregate from the household.

2797 VICE‑CHAIRPERSON SCOTT: Yeah, no, that's helpful. It actually takes us into exactly the area I wanted to explore some more.

2798 So is it really just by virtue of the ability to sell the other services or are there other circumstances or other forces that would incentivize you to offer a below‑cost price? We explored it a little bit with the Bureau. We had a bit of a discussion about prices that are below cost may or may not necessarily be predatory. So I really wanted to explore what's the scenario in which you will feel the need to, feel the pressure to provide a service at a below‑cost rate?

2799 MR. LeBLANC: Yeah, it's a good question. I'll let Mark take that one.

2800 MR. GRAHAM: Sure. I used to, many years ago now, be a competition lawyer. So when you had that discussion, I was keenly interested.

2801 And so you'll forgive me, despite how long we're taking to answer, for attributing a comment to Nobel Prize economist Ronald Coase, who used to complain that when prices go up, they say it's a monopoly; when prices go down, they say it's predatory pricing; and when prices stay the same, they say it's tacit collusion. And it sometimes feels like that here, when we're here defending why the prices are so low.

2802 But I think to answer your question, you know, the Bureau said when you think about predatory pricing, you need to look at what's the motivation. Why are the prices low? Because it is the case, as André said, our single Internet plan is sometimes sold at a cost that is less than what it costs to build a network to that home. But what's the motivation for that?

2803 Well, we spent billions on building a fibre network. That money's been spent. Now we're in the market with a network and we're competing against a cable incumbent whose network mostly already existed. And if they lower prices, we have a choice to make. Do we lower our price, try to get a household, try to convince them of the value of our other services, try to convince them of the value of our wireless service and sell them more services? Or do we cede that household entirely to the cable company?

2804 So sometimes our prices do go below cost, but it has nothing to do with driving resellers out of the market and everything to do with the competitive dynamic in the market.

2805 And you know, I think TELUS said, and I in this case agree with that, that if it's a predatory pricing strategy that someone's deploying, we're not very wise or good at our jobs because the prices seem to keep going down more and more, never coming back up. That's the first thing. And the second thing is, just from a theoretical level, you could never execute a predatory pricing strategy in a market like this one.

2806 I mean, I think, you know, economists generally would agree and the Bureau said this, you know, lower prices, more brands is pro‑competitive. That's pro‑competitive activity. There may be rare edge cases that fit in the mould of predatory pricing. But in those cases, it's where you have a very long‑time horizon and big upfront investment to enter the market, and then the price can be put down very quickly once you enter, put you out of business, and then go very quickly back up.

2807 And the classic example is an airline. So you have to invest tens or hundreds of millions of dollars to buy airplanes and get landing slots and spin up an airline. And then the second you start a new route, someone lowers the price on just that route, targeting you. And then you go out of business, and they put the price back up. And they have a long period until someone else can enter.

2808 But the Internet market's not like that. With the aggregated services that are available, there are more than 150 resellers in the market, and any one of them on any given day can add a new customer with no upfront investment. So they can start selling a service in one city or another city with no upfront investment. So just from a theoretical level, it's utterly unimaginable that you could execute that kind of strategy in the Internet market.

2809 VICE‑CHAIRPERSON SCOTT: Thank you for that. I've got two follow‑up questions.

2810 So you spoke about kind of the sunk cost of your ‑‑ the upfront cost of deploying your network and then the economic need to kind of get traffic onto it to, you know, to pay for it. Is there a reason why wholesale traffic wouldn't also be a part of the strategy for recouping the sunk cost of that network? Shouldn't you want wholesalers at some price to be contributing to the cost that you've invested in that network and making optimal use of that capacity?

2811 MR. GRAHAM: I mean, I think the short answer is not at a rate that's set by someone else. And I may motivate that in two ways. I think I said one of the reasons we sell like a stand‑alone Internet package at such a low rate is to gain entry into the household and the opportunity to demonstrate the value of our other services, and over time potentially sell that household other services. And that opportunity is obviously not there if it's at a wholesale rate.

2812 And to your point if, you know, you're thinking, you know, a $68 wholesale rate is better than nothing, well, then, we could sell the Internet service for $68. Or if you imposed a different wholesale rate, we could sell the Internet service for that rate to the customer and get the opportunity to have the relationship with that customer over the long term. So no.

2813 And then the other thing I'd say is, you know, we talked about it's risky to invest in fibre. That's why other companies much larger than us, like AT&T, have invested less. We took that risk and that's what, you know, the people at this table are paid to do is then go and execute in the market. And sometimes you take risks and it works out to your advantage, and sometimes it doesn't. And that's our job. But it's different to say, Well, because sometimes it may not work out to your advantage and you're selling at lower than what you anticipated in your business case, you should then be forced to sell to anyone else at that lower than what you anticipated in your business case.

2814 VICE‑CHAIRPERSON SCOTT: Thank you for that.

2815 And then my other follow‑up question and then I'll move on. And so regardless of intent, would you agree that it's punishingly difficult for a wholesale‑based ISP to compete against you if you're offering a retail service at a rate lower than your wholesale tariffed rate?

2816 MR. MALCOLMSON: I'll start. Others may want to add.

2817 I think that the inconvenient truth, perhaps, is that, you know, at one point in time, the market was such that the resellers contributed to disciplining prices. The market has now evolved greatly. Facilities‑based competition at the retail level has intensified like we've never seen it before. And that is driving prices ever lower. The StatsCan data shows a five‑year trend of that. We can dissect the Wall report and show you that our actual prices that we offer to consumers are in fact lower than the prices that Wall reports on.

2818 So we now have a world in which the facilities‑based players are driving prices down, imposing price discipline on each other. And yes, in a world where a reseller is only selling broadband ‑‑ only selling Internet as a product on the broadband platform that we sell them, it may have become increasingly difficult for them.

2819 And but what the resellers are going to have to do in the world in which we live ‑‑ which by the way is benefitting end‑users at the end of the day ‑‑ but they're going to have to figure out ways to load more products on that broadband platform that they're purchasing. So but when they're selling one Internet connection, yeah, it's highly competitive. The retail prices are going ever lower, and I'm not sure it's going to stop ‑‑ again, to the benefit of the consumer. But does that make it harder on the reseller? Yes.

2820 The question is: Is another layer of wholesale regulation for a new aggregated service at a higher speed going to resolve that problem for the resellers? I don't think it will, quite frankly.

2821 VICE‑CHAIRPERSON SCOTT: So I've been planning to end on my Goldilocks question and then take a breath as the Chairperson had suggested I should. I think you've started to answer the question, at least, but maybe just to wrap it all up. So you know the Goldilocks problem, the notion of if our prices are ‑‑ if the wholesale rate is set too high, wholesale‑based competitors can't offer something that's attractive to consumers. And if the rate is too low, then it disincentivizes you from making investments that do benefit Canadians.

2822 I think what you were starting to say is that there may not be a Goldilocks zone that allows you to get a return that incentivizes investment and also allows wholesale‑based ISPs to get a competitive market or to get a competitive offering into the market. Is that your sense?

2823 MR. MALCOLMSON: Sorry, the reality is that prices are continuing to decrease: good for consumers. Yes, there are potential consequences for resellers. But as someone said earlier this morning, you know, the Goldilocks question is important because the consequence of getting the rate wrong is potentially altering in terms of the future of broadband deployment in Canada.

2824 So in a market where you have demonstrably decreasing prices, when you're exercising the sort of Goldilocks dilemma, I think you should lean in favour of ensuring that the rates that you set compensate the network builder fully for the risk they take in building that network and the true cost of that network. Otherwise, network deployment stops. And to what end? You clearly have already achieved lowering prices.

2825 So it's hard to get costing right. That's why we said, Why don't we go to commercial negotiation backstopped by final offer arbitration and then maybe we will have commercially negotiated rates? But if you're going to insist on deploying Phase 2, there will inevitably be errors, and you need to err on the side of compensating the network builder in order to ensure you have continued network deployment.

2826 I think Mark wanted to answer as well.

2827 MR. GRAHAM: The only thing I'd say is I think it depends on what you're saying the Goldilocks rate needs to support. If the question is, is there a rate that allows a reseller to run a buy‑at‑a‑regulated‑rate, sell‑at‑a‑little‑bit‑more‑than‑a‑regulated‑rate single Internet service on a fibre‑to‑the‑home network, I think it's likely there is no such rate. For the same reason ‑‑ and Curtis could tell you ‑‑ we wouldn't invest in building a fibre to the home network only to sell a single Internet service.

2828 So it shouldn't be surprising that there's not a wholesale rate that accomplishes the objective of incentivizing investment while allowing someone to sell only one service that the network owner with their owner's economics would also not invest in the network for regardless of the regulatory framework.

2829 So it's, you know, and then I think, and I agree with the way Lee Bragg put it, it's sort of over to the resellers. We're building a super premium platform to sell a variety of services to consumers and taking a lot of risk doing that. If they want to take a risk on their ability to sell a variety of services to consumers using that platform, maybe at that level there is a rate. You know, the evidence from the disaggregated service is that by and large they don't want to take that risk. And that's okay. They've got existing incumbent networks with aggregated services that they continue to use.

2830 VICE‑CHAIRPERSON SCOTT: So, sorry, Madam Chair, I lied. I do have one more question.

2831 So given that, would you say that there are types of competitors that might be better positioned to ‑‑ you could say they have a larger Goldilocks zone and they're better positioned to be able to use that rate to put competitive services in the market, given that they can offer a breadth of services? And would any restrictions that we put on who can access wholesale actually be denying Canadians a competitive opportunity or a competitive offering that they might otherwise have? If the kind of the uni‑service wholesale ISPs can't do it, should we be denying or is there a significant risk in denying certain types of competitors from access to the wholesale service?

2832 MR. GRAHAM: So I think you need to go back to first principles, which is are the market outcomes for consumers today competitive and delivering results for consumers. And I think all the evidence in our discussion today is that they are. You know, we're selling services at what we're being accused of are rates that are too low. We're selling Internet services at prices that are too low. It's punishingly difficult to compete. You've seen and heard the commentary in the industry around the number of providers that are switching, declining telecom and Internet bills for Canadians. So I think that's the answer to the question. There's no risk from not mandating the service. There's no risk from restricting who can access the service because there's no lack of competition in the market.

2833 Is there a competitor, are there some companies who could buy the service and fragment market share while offering sort of relatively equivalent services to what are already offered in the marketplace using different brands or different established customer relationships? Maybe. There may be some competitors who are better positioned to do that. But it's not delivering any positive outcomes for consumers in the short run, just sort of a fragmentation.

2834 And in the long run, it's going to deprive consumers of all the benefits we've been talking about because that dynamic is we invest in the network to gain a competitive advantage over others, and others need to respond with their own investments and price competition, and we need to respond in turn. And you're in the virtuous circle.

2835 But if you eliminate that dynamic, all you do is, you know, maybe someone else comes in and rides the existing investment to offer the same kind of thing that's offered today, but you cut off that virtuous cycle of investment, network expansion, network improvement, price competition.

2836 VICE‑CHAIRPERSON SCOTT: Thank you for answering my many questions.

2837 Madam Chair?

2838 THE CHAIRPERSON: Maybe just on that note, before we continue on, we heard from TELUS this morning, and you probably heard their opening remarks. But they said ‑‑ it was very blunt ‑‑ they said the wholesale mandate should be available for all carriers outside of their traditional serving territories precisely because a wholesale mandate is useless as a tool to drive competition if the strongest competitors can't use it.

2839 I'm wondering if you can react to that, just along the lines of what you were talking about.

2840 MR. MILLEN: Yeah, I'll jump in. I'm sure half the table wants to jump into that too, because we all heard that live.

2841 You know, they said a handful of items and comments that I agree with depending on what side of the argument they were arguing for that 10 minutes. So you know, they did say you have to be incented to invest in your network. Right? I mean I would view TELUS getting access to our network as a disincentive.

2842 You know, they also mentioned that they basically dramatically reduced their investments in telecom and, like investors, can move their money across geographies and different opportunities. They said they've invested in health and ag and international call centres. So you know, they made those capital allocation decisions over the last decade.

2843 We made the capital allocation decisions to actually invest more and more fibre. So we're nearly seven and a half million. Right? We spent another $3 billion in CapEx during COVID.

2844 I don't quite understand their rationale to say, Hey look, we didn't take that financial risk, being TELUS, but Bell did, so why don't you benefit TELUS on the backs of B.C.'s investment? I got lost in that argument, frankly.

2845 MR. MALCOLMSON: If I could just add, because I must say that I thought the TELUS appearance in front of you today was a tour de force performance of regulatory gymnastics. And I say that with respect and fondness.

2846 But if you break down what they actually said to you, at least as I understand it in my simple mind, they said: “Don't let anyone ride on TELUS fibre in the West, but let us ride on Bell's fibre, Rogers' network, Cogeco's network, Videotron's network, Eastlink's network.” So, protect us in the West because ‑‑ I'm not sure what the rationale was. The West is somehow different, it's somehow unique.

2847 And they said that in circumstances where, by our estimation, the pricing at retail in B.C. and Alberta is actually higher than it is in Ontario and Quebec. So, maybe there is a case for resale in B.C. and Alberta. I think we looked at prices in Ontario and Quebec on average have gone down by 15 percent since 2015. In B.C. and Alberta they've gone up by 7 percent. That might suggest there's more of a role for resellers to play in the West.

2848 So, what they had to say was, I think, intensely self‑serving. Resale is okay in areas where they don't have a network, but where they've made the investment in network they should continue to be exempted from a regulatory resale mandate.

2849 THE CHAIRPERSON: Okay. Thank you for that.

2850 We will be taking a break soon. Should we carry on with a few more questions? I was going to go over to Commissioner Naidoo. Do you want to break now or do you want to continue on and then take a break?

2851 MR. MALCOLMSON: I think we're in your hands, but we're good to keep going if you are. Up to you.

2852 THE CHAIRPERSON: Okay, sounds good. So, why don't we continue with a few questions from Commissioner Naidoo and then we'll take a break.

2853 COMMISSIONER NAIDOO: Thank you.

2854 You recommended that the Commission freeze FTTN rates, and TELUS, as you heard this morning, suggested that an FTTN service be discontinued in areas where FTTP exists and with FTTP rates applied to any remaining FTTN customers in those areas.

2855 I'm wondering what your view is of TELUS' proposal, and also, if the Commission were to adopt any of these proposals, would you suggest that it apply to ILECs, cable carriers, both, and why?

2856 MR. DANIELS: There's a lot to unpack there. I'm wondering if ‑‑ to specifically answer your very last question, we look at the question of FTTN, it's a copper network, but we have basically stopped building ‑‑ that we're not using anymore ‑‑ I don't want to say not using anymore, that we're not building any new locations anymore. I'm not sure that's the same situation with cable, so I wouldn't think that whatever happens with FTTN that we're talking about, it would apply today to the coaxial cable network. They're still investing. In fact, you heard ‑‑ you've seen several providers who appeared here today who are on the cable side who are still investing in the coaxial network.

2857 So, I guess there's two things I could go to. One ‑‑ and I'm in your sort of hands. I'm happy to answer directly about why our proposal is that FTTN rates be frozen, but we have not proposed an actual ‑‑ that they remove the obligation to provide it. Because at wholesale, we are actively right now decommissioning, as you know and hear about it all the time, copper from our retail customers. But we are not doing that for our wholesale customers.

2858 I would like to answer your FTTN rate question or how we think it should be treated, but with your indulgence, if it makes sense, I thought first maybe you would like to understand what we're actually doing with our copper network, and that would be to Tanya to explain what our approach is. And then we could come back and talk about the rates, but I'm in your hands.

2859 COMMISSIONER NAIDOO: You're here. Sure, we would love to hear it. Thank you.

2860 MR. DANIELS: Okay. So, I will turn to Tanya and then come back.

2861 MS. NASEHOGLU: Thank you, Jonathan.

2862 I will take a minute to talk about our copper decommissioning program. And it's not actually decommissioning. We call it a rationalization and some of the rationale behind it is that it's really expensive to run two networks in parallel. So, in a single market where we have both a copper and we've done a fibre overlay, it's very expensive for us to run both.

2863 Other things to take into consideration in this program is that a lot of the copper equipment, not the actual cables themselves, our manufacturer discontinued. We cannot actually procure them anymore. Finding replacement equipment is very difficult end‑of‑life, end‑of‑support. So, even when we have issues that need resolving, it's very, very difficult.

2864 It is expensive to run in that we need to power all this equipment, and I will give you a very realistic example of what we live with every day on our copper footprint still today.

2865 If I have a piece of equipment, I'll take an example, a DSLAM, which is very prominent in our copper network, we may have multiple ones in a single central office or in a location and what we'll try to do is as we seamlessly migrate some of our retail customers onto our fibre network, we'll consolidate the remaining customers onto one of those pieces of equipment so that we can liberate the other one and harvest it in case of an outage maybe in another market or just having it as a spare or a backup in those situations.

2866 So, it's really important for us to have those sorts of equipment in areas where we haven't been able to do our fibre to date. It is not a complete pull of the copper, so it really is a rationalization in that exercise.

2867 The other thing, and I think Jonathan mentioned it as well, is that it's a retail only exercise. So, if a customer orders their voice service from Bell but has internet from a reseller, we will offer the option to go to voice on fibre, but we will not remove their copper service with the reseller. So, they will have that service remain intact.

2868 So, that is one of the areas that required some clarification because I think there were some allegations in that regard.

2869 And that's pretty much it. I mean, really, the gist of it is that there's no impact to wholesale or to resellers as it stands because it's a retail only exercise at this point. We would have to come back to the Commission in the case that we did decide to go ahead and remove the service entirely.

2870 Jonathan.

2871 MR. DANIELS: So then if I come back now to just the regulatory question, because I think it's helpful to understand it's a retail program, not wholesale in our area. I'm not speaking for TELUS, I'm just talking about how we're approaching it.

2872 If we wanted to do anything at wholesale in terms of actually withdrawing or whatever or destandardizing, which, you know, to add new customers, we'd have to come to you to ask for permission to do that and we haven't. I don't want to say that we won't ever, but we don't have an immediate plan to do that now.

2873 So, then it goes to what's the issue, what's the question that we have to worry about in this hearing, and, in my view, it's the concern that you have raised about actually resetting the FTTN wholesale rate. You asked for new cost studies on it because people are going to argue that that rate should be lower. They're not investing, which is true, in FTTN anymore. Shouldn't that rate come down?

2874 In that regard, we think it's a very different issue if you're talking about, on the one hand, that we may look in the future to actually try to decrease it, but that's very different from actually being mandated to lower rates. Because lowering rates is going to drive demand, it's going to increase. Like, if we lower the rates, it's going to result in new people, new end‑users being added. Resellers are good at that. They will find a way to sell to certain people who will take a much lower rate.

2875 And we don't think that's a good policy because it ultimately ‑‑ and it gets to the same notion that we don't want to load new end‑users on our FTTN. We do. We allow wholesalers to do that today, resellers can do that, but we're not encouraging it and we don't want to because eventually we do want to exit.

2876 So, there's a number of, you know, policy reasons. The EU actually just last week came out with the gigabit reference which specifically said, “Hey, we now allow regulators to actually increase the rates of copper in order to encourage migration off at wholesale.” We're not asking for that. We're just asking for you to freeze the existing rates.

2877 We have asked this before and we've been turned down by the CRTC. The last time we were turned down was basically for two reasons.

2878 One, you said you're still investing in FTTN, which is now not the case.

2879 And, two ‑‑ and this is the most recent one, both in 2019 and 2021 ‑‑ you said there's a significant amount of existing end‑users who are still on the service. But we've hit the point now that we have under I think 133,500 end‑users on our FTTN network, wholesale FTTN customers, end‑users. That is less than the amount when you froze the DSL legacy rate back in 2015. At that point we had 244,000 forborne from unbundled loops, saying that the demand wasn't there at 200,000.

2880 So, we're really now come to a factual point where it's indisputable that we meet all the thresholds for the requirement and that is why we are yet again suggesting that we think you should freeze the rates.

2881 But back to your question about TELUS' proposal. At this point in time we are just simply saying don't make matters worse, it's slowly decreasing. Yes, there will come a time when we may come to you with a proposal, but it requires us to ask permission, so there should be no concern. In the meantime, we're going to continue to run that network to the best of our abilities and move retail customers to free up equipment, as Tanya explained, so that we can provide excellent service to our wholesale customers.

2882 COMMISSIONER NAIDOO: All right, thank you very much.

2883 In your opening statement today, you indicate that if aggregated FTTP were mandated for the longer term that you're ready to reduce further FTTP deployment. You mentioned that you were ready to shift to reselling cable and TELUS fibre in your territory.

2884 So, I'm wondering if you can explain to us why it would be a bad thing if you were to compete out of territory using aggregated HSA services, because it seems to me that unless you're planning to overbuild incumbent networks outside of your territory, it seems like it would be a really effective way for you to compete in those areas.

2885 MR. MALCOLMSON: It would be a really bad thing for the 5 million homes and businesses within our network footprint that still do not have access to fibre, because we would shift from building out to those homes and businesses to reselling the networks that exist on the ground and the folks that don't have access to those networks would continue not to have access to them. That's why we think it has a negative impact for Canada, given the still very significant job to be done in terms of building out fibre access and high‑speed cable access to the millions of Canadians that don't have that access.

2886 I think that something like 50 percent of rural Canadians don't have access to high‑speed broadband. I think 68,000 First Nations households do not even have access to 50/10 speeds. I think when you're balancing the competing public policy considerations of ensuring a place for the resellers in a highly dynamic, competitive world versus ensuring that Canadians have access to high‑speed broadband, to me, the choice is clear and that's the choice you're sort of staring down.

2887 COMMISSIONER NAIDOO: All right, thank you for that.

2888 I want to talk a little bit about the access holiday or head start that you mentioned in your intervention and the five‑year sunset provision. You had said that you wanted to see a seven‑year access holiday and a five‑year sunset provision. I just want to dive down into this, so I have a series of questions.

2889 I'm just going to start, though, with a simple one, as to how you arrived at those timeframes.

2890 MR. MALCOLMSON: I'll start and then Jonathan will add in.

2891 First, just to be clear, in terms of the...

2892 First, one observation. We've heard from numerous parties that are going to be perhaps subject to this new wholesale mandate that, you know, one idea is to exempt rural remote communities. Another idea is to, as we said, exempt it for a period of time. I think Mr. Bragg or Cogeco's proposal is you should exempt it until 350,000 locations passed or have occurred. Others have said you should exempt it in certain areas. All of that should prompt us to ask ourselves the question: Why are we doing this?

2893 It's clear from the discussion around exemptions that there's an appreciation and understanding that another wholesale access mandate is going to negatively impact investment. So then we're into, well, how do we limit the contagion, you know, how do we try and soften the blow, and then there are all these proposals.

2894 But we should ask ourselves, given the wholesale access that is available today on cable, on FTTN, at high speeds, at lower speeds, should we be doing anything in the first place? Do we need a regulatory remedy right now, given what's available?

2895 I know that's a bit of a speech, but I'll go to Jonathan on our specific proposal.

2896 The other thing I would say about our proposal is you shouldn't take from the concept that we've reluctantly put forward an access holiday to assume that during that holiday we're able to recover the full cost of our fibre investment. We're not. The payback on fibre is long term and risky. The five years is really sort of a defeatist view of in a world where you're going to mandate aggregated access, how do we limit the damage to some level.

2897 MR. DANIELS: So I guess we haven't had the question, I'm sure it's coming at some point: What would be the conditions upon which if it's mandated we would say ‑‑ and we have seven that I would list off in terms of the type, and we've discussed some of them already. We haven't as part of our seven today proposed to say to you the sunset clause that we had argued for. Just looking at the nature of the proceeding and so on, we understand if you're going to mandate it that, you know, as per the Policy Direction, you will look at when should the mandate be removed. So that's a different issue from the access holiday. So, I'm just explaining sunset wasn't ‑‑ we haven't listed our seven. I'm happy to, but it's not on our list today.

2898 As for the access holiday, we have ‑‑ like Rob said, it's really about first looking at a long term, how long does it take to recover your investment, but that's not the sole motivation or approach to it, because otherwise we would have to have different timelines, different things. Like, I heard TELUS talk about, you know, different for aerial, buried and so on. It's very confusing.

2899 Our proposal, I would like to again ‑‑ today we would say five years. We heard you say Cogeco said three. Why seven? It's an arbitrary five. We moved to five as sort of just a recognition of what we think is a reasonable period. For when we build a new location, the issue isn't just how long does it take us to recover our cost ‑‑ I mean, long term, that’s what the issue is ‑‑ but even if you think about it, what we're looking for is that opportunity if we're building to a new community, is the opportunity to sell to people. Because when you build fibre‑to‑the‑home, you start from zero and it takes time to build up your ‑‑ like, it takes time to win customers. It's not that you get five years of everyone riding your network and paying you and then you open up to wholesale, it's actually that it takes us a certain period of time. You know, it's a trajectory. You get a small percentage in the first year, it grows in the second, it grows in the third. So, we're looking at a period that allows us to capture and to try to get retail customers on our network. Is five arbitrary? Absolutely.

2900 COMMISSIONER NAIDOO: Okay. So, I just want to dive down on some of the stuff that you just said. Are you saying that your support for both regulatory holiday and a sunset clause is just another way of saying that you don't want wholesale FTTP?

2901 MR. DANIELS: No, I wouldn't say it's another way of saying that, because we don't want wholesale FTTP. We were very clear on that. But this is if you're going to mandate it, we've dropped the sunset and just said, “If you're going to mandate it, one of our conditions would be for new areas that we should go in, we should still have the incentive to build, give us a five‑year period ‑‑ or give not just us, anyone, cable, anyone who's building fibre‑to‑the‑home a five‑year period on which they can go in.”

2902 COMMISSIONER NAIDOO: Okay. So let's turn it back to consumers then. How would an access holiday, in your view, benefit Canadians, especially Canadians who want to see more choice?

2903 MR. DANIELS: Because it's going to incent us to build. This is specifically designed for areas that don't have it or didn't have it in the last couple of years and just got built. So, it builds an alternative network. And so, in areas where there's only cable, we'll build, we'll provide another competitive alternative that otherwise would not have gotten built. Second, in areas where we don't have ‑‑ where there's no cable, it just increases the opportunity and the justification for us to go into an area and build. So, both of these just go to the incentive. So, how does it benefit consumers? It benefits directly those who are in those areas.

2904 COMMISSIONER NAIDOO: All right. When you're talking about incentive with reference to the five‑year sunset, do you think anyone would make use of aggregated wholesale services if they could only offer such a service for such a short time?

2905 MR. DANIELS: As I said, we're not supporting the sunset. We're stepping away. But yes, I do think people would make use of it, because I think what would ‑‑ this is mainly the main reason we're stepping away, because they would get customers and then they would come to you at year five and say, “You can't take this away from me.”

2906 COMMISSIONER NAIDOO: So to be clear ‑‑

2907 MR. DANIELS: Yes, I think they totally would. In fact, that's how I started my career. Unbundled loops were mandated in 1997. I was working for a company called Call‑Net, now Sprint Canada, and that's exactly what we would do. We were given a five‑year sunset. It was the first time the Commission had ever set it. Everyone thought they were very serious and we said, “Well, we're just going to go get the customers” and then put themselves in the position in five years' time that you're going to have to renew it. And guess what? Well, you heard TELUS talk about it today. It took over 20 years for that to disappear. So yes, they will use it.

2908 COMMISSIONER NAIDOO: I just want to clarify then. So, it's your position now that you're stepping away from the sunset clause; is that correct?

2909 MR. DANIELS: Correct.

2910 COMMISSIONER NAIDOO: Okay, thank you.

2911 Those are all my questions. Back to you, Madam Chair. Thank you.

2912 THE CHAIRPERSON: Okay. Thanks very much.

2913 I will suggest that we take a short break. Madam Secretary, back to you.

2914 THE SECRETARY: Thank you, Madam Chairperson.

2915 Yes, indeed. We will go for a break until 3:00.

‑‑‑ Suspension à 14 h 45

‑‑‑ Reprise à 15 h 03

2916 THE SECRETARY: Welcome back. We are ready to proceed, Madam Chairperson.

2917 THE CHAIRPERSON: Great, thank you very much. Welcome back. I will turn things over to Commissioner Desmond.

2918 COMMISSIONER DESMOND: Thank you. I just have a few questions, and most of my questions really are to clarify a few things that we've talked about earlier today, so if it sounds like it's been asked it's really just because I'm trying to clarify a few points, I do apologize in advance for any duplication.

2919 My first question is with respect to the five million fibre locations that we've talked about, and how they represent 40 percent of the locations within your network footprint.

2920 Could you confirm how many of those five million locations also fall within a cable footprint?

2921 MR. MALCOLMSON: I don't have that at my fingertips. We would take an undertaking to provide that, because I want to give you a correct answer. Probably people on the Panel can give you an estimate but maybe a precise answer is better.

2922 COMMISSIONER DESMOND: Okay, if you could give an undertaking, that would be helpful.

2923 MR. MALCOLMSON: Sorry, yes, we will.

Engagement

2924 COMMISSIONER DESMOND: Okay, thank you.

2925 And with respect to some of the fibre build outs, we know that some third‑party companies have overbuilt fibre in your legacy serving area. So, how many households does that account for out of the five million that you've referred to? And again, if you need to have an undertaking that's okay. I just ‑‑

2926 MR. MALCOLMSON: It's a small number but again, I don't have that in front of me so I don't want to give you a wrong answer, so I will take an undertaking.

Engagement

2927 COMMISSIONER DESMOND: Okay, thank you. And can I ask if you would be intending to overbuild where somebody else has already deployed fibre?

2928 MR. GRAHAM: It depends. We have done that in some cases, there would be other cases we wouldn't do it. So, it depends, very specific to the community and the adjoining territory, and some other factors.

2929 COMMISSIONER DESMOND: Could you maybe enumerate what some of those factors might be? I do appreciate it might depend on the community or if it's adjacent to a community, but if you could expand on that, that would be helpful.

2930 MR. MILLEN: I think if all the other factors were the best possible in the world, having an overbuilder already there would be a reason to be less interested, right? So, it's a negative factor but it's not the only factor, right? You would still look at the overall investment case.

2931 MR. DANIELS: If it's helpful, like I can give you ‑‑ for example, I'm very involved in our subsidy, bids and so on, and in our subsidy models there is a benefit ‑‑ really, when we do the subsidy models we look at where we bid and where we succeed, then you may also build a bunch of other things along the way because if you're building fibre to the location and there's other things that can happen that could justify it along the way.

2932 So, I guess what I'm trying to say is that it's not necessarily driven strictly by looking at a community in isolation, it has to do with where we have network, where we're going, where it makes sense, what we can pick up along the way. There are all sorts of different factors that go into it, but yes, there are definitely cases where we'll look at it and say, you know, obviously, if we're building into a location ‑‑ to Curtis' point ‑‑ that has someone else already on fibre, you can't make the same market share or the same gains that you're going to make if you build into a location where there's no one else providing fibre, or even to another extent, cable.

2933 COMMISSIONER DESMOND: Okay, thank you. In your opening statement you commented that you've already begun reselling internet over cable networks, under the Bell brand, within your legacy footprint.

2934 So, are those customers perhaps that were through an arrangement, maybe with the former Distributel or EBOX customers that may have migrated over to the Bell brand?

2935 MR. MALCOLMSON: No. We've actually started during the early stages of reselling cable under the Bell brand. It's not something we want to do and we're doing it extremely reluctantly. We don't think it's the right public policy decision to encourage that type of behaviour, but as Curtis can tell you, we have to be ready for market conditions.

2936 COMMISSIONER DESMOND: Okay, and are those resell customers only in areas where you haven't deployed fibre?

2937 MR. MALCOLMSON: Yes, I believe so.

2938 COMMISSIONER DESMOND: Okay, and are your reseller agreements with cable companies using tariff rates or are they off‑tariff agreements?

2939 MR. MALCOLMSON: Tariffed rates.

2940 COMMISSIONER DESMOND: Okay. Would you be in a position to undertake and provide some details ‑‑ and I'll list some of the details we're looking for ‑‑ but could you provide copies of the agreements you've entered into with cable carriers, to support your wholesale‑based business within your legacy footprint? And that would include the total number of subscribers that you serve within your incumbent‑serving territory, maybe the specific geographic localities.

2941 MR. MALCOLMSON: Yes, we'll take that undertaking.

Engagement

2942 COMMISSIONER DESMOND: Okay. And can I ask if you started doing the same thing outside of your legacy footprint?

2943 MR. MALCOLMSON: No, we have not.

2944 COMMISSIONER DESMOND: Okay, thank you. I have just a couple of other questions. Earlier today you talked about how resellers have now what they need, and I made a note of that. I think you said it isn't ‑‑ they haven't been using the higher speeds and that they now have access to what they need and as a result there's no need to go any further with providing wholesale access.

2945 But isn't that because ‑‑ and we've heard this argument from other parties ‑‑ that resellers aren't able to access FTTP and as a result of that they're not able to sell the higher speeds, so it's not necessarily a reflection on what they have and what they need, it's just that they're not able to access the higher speeds.

2946 So, I'm just wondering if you could share your views on that.

2947 MR. MALCOLMSON: Sure. Well, Mark will answer as well, but I think we ‑‑ I just want to make it clear that our understanding of where they traffic exists today, 93.5 percent of their customers are on those lower speeds, notwithstanding the fact that they've had access since at least 2015 to higher speeds in the form of 1 gigabit‑capable cable on TPIA, and then they've had access to multi‑gig speeds on a disaggregated basis on our fibre.

2948 So I think Commissioner Scott asked the question the other day, is it a business strategy of the resellers to sell into that particular segment of the market? It seems to be. If over time that changes, then we're saying to you ‑‑ and they don't have access at wholesale to those higher speeds, which they are using today, then let's revisit it. Mark?

2949 MR. GRAHAM: No, I think that ‑‑ so, just to make sure it's really clear, they do have access to the higher speeds on cable networks since the Commission eliminated the restriction on higher speed wholesale services on cable about five, six years ago, so for years they've had access to up to a gigabit speed, that they're not using.

2950 COMMISSIONER DESMOND: A comment you made earlier today ‑‑ and I think it was in conversation with the Vice‑Chair ‑‑ that there is no lack of competition in the market.

2951 And earlier this week we did hear the views of PIAC and OpenMedia, and of course they take, you know, the opposite view, that there is no competition, and consumers are at a disadvantage as a result of that.

2952 So, I'd be interested in hearing your views on the comments shared by PIAC and OpenMedia.

2953 MR. MALCOLMSON: I'll start and others will join in.

2954 I think it's a misplaced view by PIAC that there is no competition. That's what I'll say about that. It's pretty obvious that there's a lot of competition. There's a lot of providers. I think in our footprint about 150 resellers, then there's the facilities‑based players that are slugging it out every day and prices are coming down.

2955 I think what you're seeing is an overall ‑‑ and I have great sympathy for this fatigue, concern around the affordability of everything.

2956 So, in today's environment of inflation it feels like everything is expensive, that nothing is affordable, and telecom gets brought into that.

2957 But I think if you ‑‑ and we mentioned this in our opening statement ‑‑ if you look at actual price trends in telecom, as a result of facilities‑based competition they're the one sort of positive outlier in a sea of rising prices.

2958 So, I understand the concern around affordability and everything seems too expensive, but I think telecom internet access is bucking the trend. Mark?

2959 MR. GRAHAM: Yeah, I'll add a couple of data points, because we really want to be responsive to this feedback that you've received and I think the Chair asked about the same point to TELUS this morning.

2960 So, yeah, you've got the Stats Canada data about what's happening with prices. It's our experience too, not just the prices of individual ‑‑ like, not just the price per megabyte or the price per amount of speed, but the actual price of individual plans are going down significantly. In fact, household bills are going down, notwithstanding people are taking higher speeds.

2961 You know, if you look at the Wall Report, the prices that you can get if you go to our website today, are between 30 and 60 percent lower than the prices that are reported in the latest Wall Report, for buckets 3 to 7. So, the prices in the market today would make Canada the lowest price or the second lowest price in everyone of those buckets, 3 to 7 in the Wall Report.

2962 If you look at the cost of wireline internet services as a percentage of disposal income for the bottom income quintile in Canada, which PWC has done, you know, Canada fairs very well. It's 0.7 percent in Canada, compared to 1.2 percent in France, 1.4 percent in Germany, and we're below the average in Canada, amongst peer countries, and that share of income that the lowest quintile spends on internet has gone down 15 percent over the last four years.

2963 So, what's causing the feedback that OpenMedia received in the survey? I think what it is ‑‑ as Rob said ‑‑ is the price of everything else has gone up dramatically, and so it's harder to pay for everything, including internet. And I think, like, that's a very understandable consumer reaction and it reflects an affordability problem, but given the data it just doesn't reflect a telecom problem.

2964 So, if you ask about telecom prices, for sure they would feel less affordable, given what has happened to the cost of living and how that impacts consumers' living standards, but it isn't a fact about telecom prices, it's a fact about the price of everything else.

2965 MR. MALCOLMSON: The other thing, Commissioner Desmond, that's not ‑‑ and this isn't the fault of Wall ‑‑ but that's not reflected in the various pricing studies, so you have your rack‑rater website pricing already lower than Wall, so published undiscounted pricing already lower than Wall, in our case, and then, because of the competitive intensity in the marketplace there are many, many, many instances in which you, as the service provider, will offer the prospective customer, you know, discounts or promotions or credits.

2966 So, there's a lot of customers that are buying our services that are also paying less then the published prices, which are already less than Wall. There's no way Wall could ever reflect that in the work he does. But it's an important point for you to understand.

2967 COMMISSIONER DESMOND: Okay. No, thank you. Yesterday or on Monday, perhaps, we heard from National Capital FreeNet, and there was an example shared and I just wanted to kind of get your views on what was provided by way of a submission, and it was a gentleman who said that he had taken service and then it was a promotional package, a promotional price, it was the result of an offer that was being made.

2968 And then, once he was subscribed to that service his service price increased three or four times more over the next year.

2969 So, I appreciate that we have information in front of us about how competitive it is and how prices are going down, but is there a practice, then, of once you've got a captured customer, of then having the opportunity to increase that price once the customer has committed, and then, they're seeing their prices inflate over a period of time?

2970 MR. LeBLANC: Yeah, it's a very good question. For sure, I mean, when you get a promotion, probably like many products and services, there's a duration for the promotion and then, after that period of time the promotion ends and the price goes up. I mean, that's a fact, it's been like that in our industry and many industries for a long time.

2971 But, you know, I think to pick up on Mark's point, the fact is that those promotional prices, though, are still coming down, and they have been, based on the Statistics Canada data and our own internal data, again, 9 percent in the last four years, 5 percent last year. Those continue to come down.

2972 Do some of those promotions end? Yes, but, you know, another important fact is that our average billings, even with those promotions falling off and prices going up to a higher price, those billings, after those promotions, are coming down as well. So, the total billings of consumers are coming down. If you look at the basket of goods that we sell, whether it's across our Bell brand, our Virgin brand, our EBOX brand, our Distributel brand, all the other brands that we support, you know, prices are coming down.

2973 So yes to your question, but again, in aggregated, both promotional prices and billed prices are coming down in the industry, and again, I think it's just a reflection of everything we've been saying, which is very intense competition, as we build fibre into a market it actually spurs competition, which lowers prices, and then we have an incentive to invest.

2974 MR. MALCOLMSON: The other point that I think is important to make is in the example you referred to, if you look at churn across our base ‑‑ so “churn” is the industry term for customers that come in or come out of your network. In 2022 ‑‑ or sorry, 2023, over 850,000 of our internet customers churned away from Bell to another provider, so that indicates, in an instance where a particular customer isn't happen with his or her pricing, or price increase, whatever the case may be, there are plenty of options available for them and they are availing themselves of that, and, you know, that's a...

2975 When I first hear that number I thought it was wrong, because it was so high, but it does show you just how competitively intense the market is, and it shows you the vast array of choices that out there for consumers.

2976 COMMISSIONER DESMOND: Okay. Thank you very much.

2977 THE CHAIRPERSON: Thanks, Commissioner Desmond. I know you spoke at great length with the Vice‑Chair about investment. I'm wondering if we can go back there and if perhaps you could walk us through your fibre builds story, so going back to 2010. Can you maybe talk to us at a higher level about where you started, why you started there and where you went?

2978 MR. MILLEN: Sure. At the highest level, ultimately cable had a better product then we did, right? In terms of our copper network or even fibre to the node. So, in order to become competitive and frankly, with a superior product, in our view, we launched a fibre build program. We spent, I mean, even over the last ‑‑ well, since 2019, a billion dollars, so it's tens of billions of dollars that we've invested here, but ultimately, it's because we could differentiate in the market. We could, we thought, have an ability to go out and earn customers' business. I mean, if you earn customer business, if the family or the household, their most important buying decision is broadband internet, we thought we could differentiate and then sell the rest of the bundle of services and earn their business over time.

2979 THE CHAIRPERSON: Thank you for that. Could you talk to us about where you started, why you started there, and where you moved to?

2980 And, you know, I'm ‑‑ coming back to the point, you know, there was a comment that Bell made this afternoon about, you know, you sort of started in the ‑‑ if I could put it this way, the sort of easier areas, rural and remote are more challenging. I think there was a comment about, you know, the remaining job is the hard part.

2981 Can you kind of walk us through that journey?

2982 MR. MILLEN: Sure, and I think it all comes back to the ‑‑ I mean, I hate to say probability weighed, right, but the probability weighed opportunity, right? So, you know, what kind of market share are you going to be able to pick up? What kind of timeline would that look at? Who are the other competitors there? What is the cost to build? What's your cost of capital? You know? Is it a more expensive build because it's winter 10 months out of the year? Right?

2983 So, all of those factors kind of come into it, and I think in very broad general strokes you'd look at all else being equal, the lower cost places to build, whether it be urban, whether it be arial, whether it be a neighbourhood, as opposed to, you know, this block and that block, and that block, so you get a little bit of economy as a scale. I mean, those would all be kind of beneficial factors to decide where to start, and then you kind of grow out from there.

2984 MR. MALCOLMSON: Maybe while I was talking about the fibre journey, it might be useful just to hear from Tania, in terms of the journey, the build component of the journey, because it's ‑‑ you know, as Curtis said, we've been at it since 2010, that's a long time. It's a long, intensive, expensive build process, and I think it's worth hearing a little bit about, if you don't mind.

2985 THE CHAIRPERSON: That would be great, thank you.

2986 MS. NASEHOGLU: Thank you, Rob. I guess I would start by saying that any FTTH build is years in the making. People are under the understanding that we just build on what’s already there, where we have existing copper legacy, and that’s not the case. It’s actually a brand new build for us and it starts really at the central office in any city or town.

2987 So the route planning is really the first part of that exercise where we really establish how do we go out from the central office and hit every single home in a certain area.

2988 We’ve actually shared with you a diagram that kind of helps walk through what I’m going to talk about, just so you have a reference. So I would encourage you to take a look at that because it does sometimes help to get your bearings.

2989 But as we start the work at the central office we have new electronics to install. So there’s equipment that needs to go into the central office to prepare it for an FTTH deployment. There’s a lot of work done then to build out the infrastructure, and that’s really our feeder network, so what we’re going to bring out to the neighbourhood.

2990 And then we build out our distribution, so out last mile. And then from there on in, depending on the type of build, whether it’s a condo building, so an MDU, a single‑family home, whether we’re feeding it through a buried build or an aerial build, you’ll have different permutations on that last connection, or the drop towards the household. TELUS made allusion to it this morning. I’ll just repeat actually some of the parts of a dense urban build, that’s in a buried scenario.

2991 So as we build out, some of the first steps we have to undertake are actually to begin with our permitting, and that’s just the process of determining with a municipality what plan is already in place.

2992 So we circulate our plans, where we’re going to build our fibre, what underground networks we’re going to require for that, and make sure that it doesn’t interfere with other utilities. So we actually share our plans and then each of those utilities will go back and look at their archives to ensure that there isn’t a possibility for us interfering with their existing infrastructure. So making sure that we can have the accurate information on where everybody is in comparison to us.

2993 That process of permitting in and of itself can take weeks and months with a single municipality. So that’s even before the shovels go into the ground, and while engineering is sort of beginning to take place.

2994 From thereon in, we actually have to then go back and run the actual locates, which is to actually physically locate all of the underground structure that may already exist in an area.

2995 After that, even with the locates in hand, we go through an extra careful step, which is daylighting, which is really using a hydrovac and doing test pits every few metres to make sure that we actually are sure where the locates are saying the build is, that we’re actually not accidentally hitting it because it’s maybe off by a little bit.

2996 So that exercise is quite time‑consuming as well. That’s before the drills go in the ground. So as we begin the drilling, you know, there’s heavy equipment involved.

2997 We then have to actually place the conduit after we’ve drilled. We jet each individual fibre cable into those conduits. And then we actually have to go through the exercise for every section built, splicing the cable. So bringing two fibres together is an exercise known as splicing. So that exercise then needs to take place.

2998 We then actually have to do the drops. And I think it’s really important to mention. This morning it was alluded to as a practice that’s uncommon, but doing the drops is something we very commonly do in our buried builds.

2999 So we will jet those drops, we will splice the drops, we will bury the drops, and then bring it into the individual households, or in the case of an MDU bring it into the equipment room and, from there, do the risers up to each individual unit.

3000 Just to contrast that with some of the things that we’ll see in an aerial build, I’m responsible for Quebec, we’re coming off of our subsidy, we’ve done a lot of remote and rural areas. There’s a lot of challenge out there.

3001 So it's interesting, this morning’s remarks were that it's very hard to build in the west. I would argue that it’s just as hard to build in the east, whether we’re talking about the Atlantic provinces or Ontario, which is 80 per cent buried.

3002 But even more so in rural and remote areas you run into things like seasonal homes and you need permissions to access them. You work on numbered highways or numbered roads, which requires additional resources, flagmen, to make sure that our teams are safe and secure while they’re doing their work.

3003 There’s complexities in the way of distances. We’re running many many, tens of kilometres in order to even get to the community. And then the distribution, the densities there are a lot lower. Sometimes you could be running 5 kilometres of distribution to hit a single home. So that’s really really important work that has to take place.

3004 An example I like to throw out often is we’re actually still working on a buried submarine cable that needs to be put in for an island in Quebec called Notre‑Dame‑des‑Sept‑Douleurs. Just to give you a sense, there’s maybe about 100 homes on the island, most of them seasonal.

3005 This project has been three years in the making. We’ve gone through multiple ministries, we’ve worked with the Indigenous Relations teams just to make sure that we are working with respect to the land that we’re working in. We also have had to get additional permitting and environmental assessments done, and that’s still ongoing work.

3006 So three years in the works just to get that cable laid. And it will only get completed probably as the spring thaw starts to happen. I think our window of time to get it installed is within a week.

3007 So some of the complexities of building in more rural areas are actually quite important. People don’t always want to see us in their backyard where there is a pole running and our fibre runs across it. So we do have different sets of complexities, but nonetheless I think really really important to note.

3008 Like, this is a lot of work; hundreds of people, thousands across the country just to get these builds done. And a lot of work with other parties, so we do have a lot of construction partners and specialized teams that work with us to get this work done in addition to the engineering.

3009 That’s how I would share it. Thank you.

3010 THE CHAIRPERSON: Okay. Thank you very much for that. So you’ve described a lot of challenges. You talked about how ‑‑ you sort of started with kind of the easier part, the difficult job is to come. You’ve just elaborated on some of the challenges with respect to rural and remote areas. We heard about interest rates. It sounds like it’s a challenging environment.

3011 We heard on Monday from PIAC, and this was on the record, that large providers, fibre builds, have been winding down, just generally. Is that the case?

3012 MR. MALCOLMSON: No. We have 5 million locations still to build, that’s 40 per cent of our footprint. We have a monumental task ahead of us. I don’t know where PIAC was coming from on that point. But there’s nothing we would like more than to be able to continue building at a pace that makes sense in order to get to those 5 million households and be able to serve them with fibre, it’s essential.

3013 THE CHAIRPERSON: So then how would these various challenges feed into your decision as to whether you’re going to continue to build out the fibre?

3014 MR. MALCOLMSON: Do you want to take that, Curtis?

3015 MR. MILLEN: Sure. I don’t have a lot new to add, but I’ll say it perhaps differently.

3016 So I do think ultimately it’s pace of fibre deployment. So how fast can we get fibre access and frankly drive competition in cable‑only markets? It’s size of the fibre footprint. So how many Canadians are actually going to get access to ultimately broadband competition and the fibre product? And then how we allocate capital in and around innovation within our fibre footprint.

3017 So increasing speeds, reliability, Wi‑Fi products, et cetera.

3018 MR. MALCOLMSON: Just to complete the point, Madam Chair. In response to your November 6 decision, we reduced our plan to build by 700,000 locations past. Because staring down the prospect of a wholesale mandate of the magnitude that you’re contemplating, it doesn’t make sense to keep investing at the level that we would like to invest at, and at the pace that would get more Canadians connected as fast as possible.

3019 THE CHAIRPERSON: Okay. Thank you for that. With respect to consolidation, because we touched a little bit on some recent acquisitions. Some parties have told us that these recent acquisitions of competitors is a sign that the wholesale system is not working. And I’m just wondering if you could react to that?

3020 MR. GRAHAM: Sure. We disagree. And again, I think you need to dig into the actual dynamics of what’s happened in the market to figure out whether, you know, an observation like some wholesale‑based competitors have been acquired suggests a problem or a thriving market.

3021 You know, obviously companies, and it’s normal in a vibrant market, entrepreneurs enter the market, they operate their business for a while and grow, and then some of them choose to exit the market at various stages for various reasons.

3022 You know, a common one and one that’s relevant to acquisitions we did is sort of succession planning, wanting to move on to other challenges, start different businesses, focus energy in different areas or, you know, enjoy some of the finer things in life. And so some of these entrepreneurs and, you know, through their hard work built businesses that they then sold for hundreds of millions of dollars.

3023 And meanwhile, other entrepreneurs have entered the market, and the fact that some chose to exit the market at very high valuations is an incentive for others to come in behind and build other thriving businesses.

3024 Someone else, Curtis or maybe Rob or Andre will want to speak to some of our rationale on our side of the equation. But on the side of the equation of the people who started the business, it wasn’t about a failure in the market or any struggle to compete. I mean, you can imagine we’re not in the business of buying struggling businesses for hundreds of millions of dollars. It’s just the natural evolution of the market for some of those people.

3025 And then there are other resellers who have been around in the market, you know, discussing possible transactions, given the valuations that were in there and, you know, in some cases we weren’t interested, and in some cases they determined that their business was more valuable even than the very high valuations that businesses were being sold for in the market, because they have a viable opportunity ahead of them in the industry as it exists today, and they continue to operate. And all that I think is for the good and part of a thriving market.

3026 So I don’t know if someone else wants to speak to the rationale on our side?

3027 MR. LeBLANC: Yes. Maybe to add to Mark’s point. I mean, we saw ‑‑ you know, as Rob and Curtis have laid out, you know, part of building our fibre network is monetizing that network. And we actually saw real opportunities with the brands that we did purchase, you know, EBOX, you know, a sizeable number of internet clients, the same with Distributel and Primus brands, and they were actually able to build businesses and customer bases with segments that we weren’t able to attract.

3028 So more I’d say similar to our Virgin brand, which is more focused on the value segment of the market. Like Virgin, just so you know, like a lot of resellers, 90 per cent of our customers on the Virgin brand have speeds of 100Mb or less, that’s who that brand attracts and that’s what these brands attract. So we saw, you know, real opportunity to continue to support these brands and actually grow these brands, and we have done that since the purchase of these companies.

3029 We’ve actually invested marketing. If you pay attention to this market, you actually see us market these brands quite heavily to actually acquire customers. For people who might not want to buy from Bell or Rogers or Videotron for some reason, they’re just more ‑‑ you know, they’re interested to do business with somebody else. So we saw a benefit to that.

3030 And, you know, as Rob has mentioned earlier, it does, you know, give us a capability should something ‑‑ you know, should conditions change in the regulatory environment. Again, we don’t think that they should, but it does give us that capability if it does come to that.

3031 MR. MIHALJEVIC: I'd like to just add that I’ve been running our wholesale business for seven years. And so the companies that we bought; EBOX, Distributel, Primus, et cetera, I got to know a lot of those entrepreneurs firsthand. And even with the state of regulation prior to November 6, they were able to build thriving businesses and exit at a very nice multiple or valuation. So I think it’s important to state that.

3032 THE CHAIRPERSON: Okay, thank you. I just have two more questions and then I think we’re going to do a couple more questions, and then we will turn things back over to you for concluding remarks.

3033 Actually, maybe what we can do next is take Mr. Daniels up on Bell’s offer to share with us the list of what Bell would like to see in terms of limitations on wholesale access.

3034 MR. DANIELS: Thank you for that. We’ve discussed most of them, but not all. So the list that we have is seven.

3035 The first and foremost which I think Rob has talked about is the restrictions on who’s available for resale, that the big three should not be able to because their national footprints would be able to sell access resale, as well as in Cogeco or whatever would not be able to resell in their own territory on someone else’s network. So we’re adopting the CNOC proposal, that’s number one.

3036 Number two is the limit of 1.5Gb for the reasons again we discussed, so I don’t think I have to repeat that one.

3037 The third one is the access holiday, a five‑year access holiday.

3038 The fourth one, which Rob discussed before as well, is that whatever does get mandated needs to be mandated across the country on both cable and ILEC networks.

3039 The fifth one, which hasn’t been mentioned is, in our view if you are going to mandate aggregated FTTP, then disaggregated should be removed from the market on a phaseout basis. We have virtually virtually no customers. I mean, it’s less than 100 end users are on our disaggregated FTTP today. We believe that it does not make sense to have both an aggregated and disaggregated solution. That goes more to the idea of creating what we call the regulatory buffet; this reseller wants this, this reseller wants that, let’s have all sorts of regulatory options.

3040 We have some concerns about doing that which, again, I’d be happy to go more into. But I thought I would just give you the list and just explain that one because we haven’t touched on that one. So it would be to freeze the disaggregated rates as they exist today, and phase out disaggregated.

3041 The next one, and this is one with your permission I’ll come back to in a second, because I would like to raise it, is to fix the wholesale FTTP rates. We have concerns about the rates that were set on November 6. I know that there’s been lots of discussion about theoreticals and so on, but it is part of this proceeding and so, with your permission, I’d like to spend a few minutes talking about the issue of our concerns with those rates.

3042 The last one we’ve covered, number seven, which is not necessarily directly related to aggregated FTTP, but the idea of freezing the FTTN wholesale rates.

3043 So those are our list of seven. But I’m over to you, if we can touch on our concerns with our wholesale ‑‑ with the November 6 decision, from a rate perspective was.

3044 THE CHAIRPERSON: Sure. Absolutely happy to hear that because, as you know, we’ve heard a lot about rates being too high. So back to you.

3045 MR. DANIELS: At the risk of the late day and getting into sort of detail on the access rates, I’m really just going to focus on two issues, there are more, and we look forward to the written chance, but most of them are touched on. But there’s two things that really caught us by surprise that happened in the November 6 decision and, unfortunately, requires a little bit of explanation.

3046 The first one relates to the use of historical costs only. What I’m talking about there is that we filed a five‑year cost study. In the five‑year cost study, what we did is we laid out here’s what we’re going to spend each year for the next five years and here’s how many homes we’re going to build for the next five years. It results in this is what the cost per home is.

3047 But we also put in what we spent for the last fives years, how many homes we built. That was 10 years of data. And then we used in our cost study an average of those 10 years, so what it’ll cost over the course of the 10 years on average.

3048 What the Commission did in the November 6 decision is it said, we’re only going to look at the historical cost. We’re going to only look at what you did for the last five years, we’re not going to look at what you’re predicting what your costs are going to be for the next five years.

3049 And to give you a sense of the magnitude, that’s about $18 of the rate. So $68, $18 of the rate came off by just that change, it’s a very significant change. So what’s the problem with that? Well, the problem with that first and foremost from a theoretical standpoint, and I’ll come back to the practical, from a theoretical standpoint Phase II costs, you heard reference today, I think Dan Stern from TELUS talked about it, it’s forward‑looking, long‑run cost.

3050 Forward‑looking means the whole point and the whole purpose is to incent invest, is what you’re going to spend in the future. If you’re only looking at what you spent in the past, that’s not a forward‑looking cost study. So that’s the theoretical concern.

3051 The actual practical concern of what happened and why it was so significant is that our costs for building a home have gone up every year and will go up even more significantly over the next few years, and it’s for the reason that you asked about before, that you were talking about with Rob, which is we built the low‑hanging fruit first, we did the ones ‑‑ the urban areas, the most densely populated areas where it’s cheaper first. Every year in our build it gets more expensive on a per‑home basis to build.

3052 And to put that into just reality, in 2022 our actual costs per home were 15.6 per cent higher than they were in 2021. And then we predicted that they’d go up even more over the next five years. So in 2023 ‑‑ you wouldn’t have this because I, you know, obviously when we filed our cost study it was a prediction of what would happen in 2023, but I actually have the actuals ‑‑ our average cost is 22.5 per cent higher than what we spent in 2022.

3053 But by only looking at historical, you’ve assumed that we had the average costs of what we did for the last five years. So it actually really significantly lowered our rate from what our actual costs are.

3054 So, sorry, that’s the long explanation of issue number one.

3055 The second issue that I want to touch on is your treatment of subsidy. And honestly, I think this was just, because there’s no discussion of it in the decision, I think this may have just been an error, like an unintentional error.

3056 This one, to give you a sense, is worth about $4.10 of our rate. And what happened in subsidy is we put in what we’re going to spend historically the last five years and the next five years. But we also, wait a minute, we’re getting subsidy, we’re building, you know, there’s going to be a lot of subsidy built over the next couple years, especially with the Ontario program and Quebec program and so on.

3057 So what did we do? We said, all right, here’s what our costs are going to be, they’re much higher, it’s including subsidy, that shouldn’t be a surprise. But here’s the subsidy we’re going to receive. And we took ‑‑ you know, take off the subsidy from the cost, it’s done through the model; here’s the full cost, here’s the subsidy.

3058 When you came up with your rate you took the full cost, took only a look at the historical last five years, but you kept our reduction of the full subsidy we’re going to receive over the next five years. It actually in effect means that our average cost, according to you, is less as we build subsidy, because you’re looking historically, when we weren’t doing much subsidy, and you took the full discount.

3059 And again, I think that was an error, but it’s worth $4.10. So it’s a significant error.

3060 So, again, I’m sorry to have bored you so much in going into detail. But I kind of feel like it’s a chance to talk to the Panel, to try to explain these things. Because I know they happened in the back room, and when you discuss costing that it’s worth to hear us on these two important issues.

3061 Our other concerns related to the treatment of disaggregated and the mark‑up. I know TELUS mentioned about the mark‑up, we agree with them on that. But I’m not going to spend anymore time today, unless you demand it.

3062 Thank you.

3063 THE CHAIRPERSON: Okay. Thank you very much for sharing that. I just have one more question, and you’ve heard us ask this question already.

3064 But under a scenario where the Commission mandates aggregated FTTP, what do you think would be an appropriate timeframe to implement that service in your serving territory, and what would need to happen?

3065 MR. DANIELS: Let me get to first what needs to happen, because that explains the timeframe.

3066 We don’t have the capability of providing wholesale access on fibre‑to‑the‑home. Ontario/Quebec will have it, it’s going to be ready in time for May 7th, but if you’re talking about when it would be mandated in Manitoba or Atlantic ‑‑ I assume that’s the nature of the question? I should just check to make sure.

3067 THE CHAIRPERSON: It is.

3068 MR. DANIELS: Yeah. So, we have recommended 12 months. The reason for it is that we’ve got to build ISIT systems. We’re not in a situation like TELUS that they described in Quebec where you could do things manually, given the volumes that we expect. It’s not a small ILEC footprint in either Atlantic or Manitoba we need to have to build the solutions. These are things that haven’t been built before, so we would need time to do that. We had the advantage in Ontario and Quebec that, one, we had built FTTP on disaggregated, and we also had ‑‑ we were able to leverage some of the buildings that we did when we bought EBOX and Distributel and brought them on. We were able to leverage some of the synergies which don’t exist because we don’t ‑‑ they don’t have access to fibre‑to‑the‑home in Manitoba or Atlantic. So, it’s going to take us longer.

3069 I know that Ivan wanted to explain just a couple of things like, ‘What takes so long?’ ‘What’s the ISIT system?’ ‘Like, why is it? Can’t you just, you know, bill it?’ And maybe he can explain a little bit about that.

3070 MR. MIHALJEVIC: So, now we’re going to get to the best part of the afternoon.

‑‑‑ Rires

3071 MR. MIHALJEVIC: So, within Ontario and Quebec, there are 46 different applications that Bell Canada, just in those two provinces, has to touch. So, 35 of those different applications ‑‑ and I’m not an IT expert, but in talking to the IT people at Bell who are working on this, they actually have to go in and do some code development, and then there’s the other 11 systems ‑‑ that gets to your 46 ‑‑ they have to do some regression testing to make sure what we did in this application doesn’t mess up that application, because at the end of the day, whether it’s the qualification tool, whether it’s the ordering of the service, provisioning it, the service assurance, making sure it’s billed accurately, all of that stuff touches those systems, and like Jonathan said, we did do disaggregated FTTP six, seven years ago, so we had some learnings there, and so we’ve moved heaven and earth in order to get six months ‑‑ like the implementation done for May 7th. That’s why, when you look at Manitoba and Atlantic, they’re completely different IT systems. Those were separate companies that we’ve purchased over the last decade or so, and so we have identified those, we’ve started looking at it, but that’s why we need 12 months, as Jonathan said.

3072 THE CHAIRPERSON: Okay. Thank you very much for that.

3073 I will quickly turn things back to Commissioner Desmond, we’ll go to the Vice‑Chair, and then we will turn things back over to you.

3074 COMMISSIONER DESMOND: Thank you.

3075 I just have one question of clarification. We talked about the amount of churn you have in your business, and you estimated that about 2.7 million Canadians switched broadband providers last year. I’m wondering if you could add a bit of detail to how you calculated that number, and what monthly churn rate you used?

3076 MR. LeBLANC: That was based on the CRTC report of average 1.5 percent monthly churn. So, if you take that out by 12 months, that’s about 2.7 million consumers across 15 million broadband customers.

3077 COMMISSIONER DESMOND: And then I think you spoke specifically about the amount of churn at Bell?

3078 MR. LeBLANC: Correct.

3079 COMMISSIONER DESMOND: And you were surprised about that. So, did you use the same ‑‑

3080 MR. LeBLANC: Yeah, it’s a similar ‑‑

3081 COMMISSIONER DESMOND: It’s the same?

3082 MR. LeBLANC:  ‑‑ methodology.

3083 COMMISSIONER DESMOND: Okay.

3084 MR. LeBLANC: Yes, similar methodology. I mean, and Rob’s point was that it is a very ‑‑ there is a lot of competitive switching going on in the market. The broadband market is very mature. I think based on even the CRTC report, internet penetration is at 94 percent now. So, when you have competitive pricing, there’s not a lot of growth left in the market, so it’s a lot of consumer switching.

3085 COMMISSIONER DESMOND: And s that churn include churn from your own brands or affiliates, such as Distributel or EBOX?

3086 MR. LeBLANC: Yes.

3087 COMMISSIONER DESMOND: Okay. And has that changed over the last five years? Have you seen the rate going up or going down? Just specific to your own company?

3088 MR. LeBLANC: I’d say more recently it’s been going up. You know, just reflecting ‑‑ and I think TELUS had the same comment this morning ‑‑ reflecting just the more prices have come down, the more ‑‑ which has been a function of us being more competitive with our network ‑‑ it’s actually driven more competition, prices coming down. Unfortunately that means it’s actually driven churn up recently, as more consumers are ‑‑ we’re fighting even harder for market share.

3089 COMMISSIONER DESMOND: Okay, thank you for clarifying that.

3090 THE CHAIRPERSON: Thanks very much.

3091 Let’s go back to the Vice‑Chair.

3092 VICE‑CHAIRPERSON SCOTT: So, I was hoping to secure an undertaking similar to what I had requested from TELUS this morning with regards to kind of your rack rate pricing on a 1 gig service, as well as the variety of prices that you charge for it. Liking at your website, I’m actually not seeing a 1 gig posted price. Would it make more sense to ask for a 1.5?

3093 MR. LeBLANC: One ‑‑ yes, 1.5. Yes.

3094 VICE‑CHAIRPERSON SCOTT: One‑point‑five?

3095 MR. LeBLANC: Yeah.

3096 VICE‑CHAIRPERSON SCOTT: Okay. In that case, I’ll read it again with that edit. Could you undertake to provide the Commission data about your 1.5 gigabit wireline fibre‑based internet access service plans, in particular information as to the various rates at which those plans are offered, either advertised or unadvertised; and the number of persons who subscribe at each of those rates? Could you additionally provide similar data with regards to bundled packages that include 1.5 gigabit wireline fibre‑based internet access as part of the suite of services in the bundle?

3097 MR. MALCOLMSON: Yes, Vice‑Chair Scott. Some of our response to that undertaking may of necessity need to be filed in confidence.

Engagement

3098 VICE‑CHAIRPERSON SCOTT: Understood. Thank you.

3099 THE CHAIRPERSON: So, maybe before we turn things over to you, I can just say thank you very much for spending the afternoon with us and answering our dozens of questions. We really appreciate it.

3100 So, we’ll turn things back over to you for any concluding thoughts.

3101 MR. MALCOLMSON: Sure, and I’m cognizant that I am probably the only thing standing between now and the best part of the afternoon, which is when we all leave here and move on, but first of all, thank you. Thank you very much for listening to us. Thank you for a very respectful, collaborative dialogue on an issue that is near and dear to our hearts, as you know, and which we have strong feelings about.

3102 I think we would say that, at the end of the week, after you’ve taken an objective review of the evidence, we hope that you recognize the following. Number one, the retail market has never been more competitive, and that’s the raison d’être as to whether you consider the need for another wholesale remedy. There is no retail market failure. The retail market is competitively intense, and that competitive intensity is driving prices down, providing affordable pricing, high quality network access, and choice. And that competitive intensity is coming from facilities‑based players. Those are the primary drivers of retail market competition in today’s marketplace.

3103 Where we’re not as far along is in building access to broadband to the millions of Canadians that don’t have it today and continue to sit on the wrong side of the digital divide. We’re an infrastructure build company. That’s what we want to do. That’s what our value proposition is, and we stand ready to continue building, but in order for us to be able to do that ‑‑ to attract the capital to do that ‑‑ we need a certain, stable, long‑term regulatory environment that enables and prioritizes investment. And we are extremely concerned that resale is going to be prioritized over investment, and we think that’s the wrong decision at the wrong time.

3104 Why is that? As I said, the retail market is competitive, prices are coming down, and you have this somewhat ideal situation today where facilities‑based players are driving the prices down, and at the same time investing in networks. And you have an array of wholesale access available to the resellers. They are using it in configurations that are currently available to them.

3105 And at the end of the day, I think, given the significance of the decision you could make here and the impact ‑‑ negative impact on investment ‑‑ it’s okay to say ‘no’ to one constituency of competitors ‑‑ the resellers. It’s okay to say ‘no’, and they can continue to use the wholesale access that’s available to them. We can continue to invest in next generation fibre networks, we’ll continue to have an array of competitors, and we’ll continue to have declining prices. And Canadians that don’t have access today will get it.

3106 So, thank you.

3107 THE CHAIRPERSON: Thank you very much, Bell.

3108 Madam Secretary, back to you.

3109 THE SECRETARY: Thank you, Madam Chairperson.

3110 So, this concludes today’s agenda. We are therefore adjourned for the day, and we will resume tomorrow at 9:00 a.m.

‑‑‑ L'audience est ajournée à 15 h 58 pour reprendre le jeudi 15 février 2024 à 9 h 00

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Christine Ladouceur
Monique Mahoney
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