Transcription, Audience du 16 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

4023 Competitive Network Operators of Canada

4441 BC Broadband Association

4641 TekSavvy Solutions Inc.

Engagements

4374 Engagement

4604 Engagement

4960 Engagement

Transcription

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

Gatineau (Québec)

‑‑‑ L’audience débute le vendredi 16 février 2024 à 9 h 01

4020 THE SECRETARY: Good morning, everyone.

4021 We will begin with the presentation of the Competitive Network Operators of Canada.

4022 Please introduce yourself and your colleagues and you may begin your presentation. Thank you.

Présentation

4023 MR. TACIT: Thank you.

4024 Good morning, Chairperson Eatrides, Vice‑Chairperson Scott, Commissioners Desmond and Naidoo, and Commission staff. My name is Chris Tacit, founder of Tacit Law.

4025 I would like to begin by acknowledging that those of us who are gathered here today are on the traditional unceded territory of the Algonquin Anishinaabe and I pay respect to them and their Elders.

4026 With me are:

4027 ‑ Paul Andersen, CNOC’s Chair and President, and the President of EGATE Networks;

4028 ‑ Ian Stevens, CNOC’s Vice‑Chair and the Chief Executive Officer of Execulink Telecom;

4029 ‑ Stewart Cattroll of Tacit Law; and

4030 ‑ Dr. Zhiqi Chen, Professor of Economics at Carleton University.

4031 Also assisting us and sitting behind us is Chris Copeland of Tacit Law.

4032 Mr. Andersen will now read our opening statement.

4033 MR. ANDERSEN: I am excited to join you and represent CNOC’s membership to support the Commission’s work on making the Internet more affordable for Canadians.

4034 We’re here to speak directly to you about how companies like ours help lower prices and improve service to Canadians when the right regulatory frameworks are in place.

4035 Since even before the Internet became mainstream, both Ian and I promoted the value that the Internet could bring to transform our daily lives. Our companies have for decades provided Canadians affordable competition for telecom services.

4036 Competitors in the Canadian telecom sector bring choice and affordable alternatives to the entrenched incumbents. Our members, independent enterprises, have stepped up and for a time brought market discipline to some of the largest companies in this country. Today’s basic offerings, like unlimited bandwidth wireline plans and high‑touch customer service standards were spearheaded by competitors in Canada.

4037 While the regulatory landscape never totally solidified, independent telecom competitors have leveraged the wholesale access framework to accomplish these feats.

4038 Despite these successes, the lack of regulatory certainty has meant the affordability and competition crisis in Canadian telecom remains a pressing issue for the people and businesses of Canada.

4039 Fortunately, we have a path forward. The Commission must maintain its current trajectory towards a more open and competitive telecom sector in Canada by mandating aggregated wholesale access to incumbent‑owned fibre‑to‑the‑premises (or FTTP) networks.

4040 In this presentation we will talk about the current stakes facing competitors, counter incumbent myths, and offer strategies to optimize the competition policies going forward. These include clarity on who can and can’t use the wholesale access regime, determining more accurate wholesale rates, and improving overall quality of service.

4041 I would like to review the crisis facing service‑based competition in Canada.

4042 The Commission recently determined in Decision 2023‑358 that the disaggregated wholesale high‑speed access framework, meant to promote retail competition over FTTP networks, failed to achieve its goals. Disaggregated access saw minimal adoption since its introduction in 2015 and the Commission determined it was not effectively supporting competition due to the complexity and persistent barriers to entry endured by CNOC members.

4043 This means independent Internet service providers lacked a practical way to access FTTP technology as its deployment exploded. As the Commission found, telephone companies have rapidly expanded fibre‑to‑the‑premises networks, reaching over 60 percent of Canadian homes. However, without this aggregated wholesale access, independent ISPs cannot meet the growing demand for the service quality and reliability of FTTP networks.

4044 The consequences of this difficult environment underscore the state of competition. As shown in recent market data discussed in 2023‑358, independent ISP subscriber bases have sharply declined. They’ve lost nearly 40 percent of subscribers nationally and almost half in Ontario and Quebec since late 2020. Multiple acquisitions of longstanding and successful CNOC members by incumbent providers in recent years further reduced competitive forces.

4045 Unless the Commission acts swiftly to address the lack of functional wholesale fibre access cited in its previous decision, independent ISPs risk irrelevance as incumbent market power continues to fester. Decisive regulatory intervention is required to end the crisis and maintain independent ISPs as viable competitors.

4046 While we welcome the interim decision in Ontario and Quebec, it did not remedy the crisis plaguing independent ISPs across the entire country. As CNOC has argued before, without a final policy establishing nationwide aggregated fibre access, service‑based competition faces a collapse that could leave Canadian consumers with little choice.

4047 Independent ISPs face an existential threat as incumbent companies often replace aging copper and coaxial networks with direct fibre connections. This transition shrinks competitors’ potential customer pool with each new neighbourhood, apartment building or block converted.

4048 Evidence shows incumbent deployments are pushing independent ISPs from previously served territories. If left unaddressed, the replacement of copper facilities will render the majority of Canadian homes and businesses inaccessible to competitors.

4049 The Commission cannot risk delaying its actions based on perceived or anticipated implementation issues which could be dealt with at a later date.

4050 The evidence presented around the decline in competitive intensity and the loss of subscriber share to incumbents shows that we cannot wait any longer to implement a national permanent aggregated regime.

4051 Incumbents need to take steps to implement the policy as quickly as possible and require direction to that effort so they can quickly make the information technology and information system changes now.

4052 I would like to discuss a few important aspects of a successful policy now.

4053 In Regulatory Policy 2015‑326, the Commission defined FTTP as “the fibre‑optic access facility connecting an individual customer premises to a central office or head‑end.”

4054 This ensures all fibre networks and technologies are included in the wholesale access regime. The Commission must be vigilant to reject any incumbent tactics that might seek to exclude any services that meet the Commission’s definition of FTTP.

4055 It is also important that an aggregated access is mandated at a level that makes practical sense. Aggregated access involves incumbents implementing interconnection at centralized regional locations, at a geographic level no smaller than a province‑wide basis. These access points should be in practical locations served by competitive transport options. These changes would address some of the challenges CNOC members experienced with the disaggregated regime.

4056 All major incumbent telecom providers referred to in this proceeding should be obligated to offer aggregated fibre access rights to their full footprint. This will make sure competitive options from CNOC members would reach consumers across Canada no matter their location.

4057 Certain use restrictions are also necessary. Incumbents and their affiliates should be blocked from wholesale access within their territories to maintain investment incentives between rivals. A more comprehensive restriction that applies both in‑territory and out‑of‑territory must apply to the three national carriers, Rogers, Bell, and TELUS. This is necessary due to their demonstrated dominance across multiple wireless and wireline telecom markets that enables them to bundle services more effectively and coordinate prices in a manner that could harm competition.

4058 These limitations seek to safeguard competitive vibrancy while still protecting existing customers and incumbent incentives to invest during any transition.

4059 We acknowledge that implementing these restrictions will require a transition period. Consistent with the objective of not negatively impacting the consumer, we propose that incumbents would not be permitted to add new subscribers following the Commission’s decision in this proceeding if doing so would violate one of these restrictions, but existing subscribers would not be affected.

4060 We have already talked about how an in‑territory restriction on incumbent use of wholesale HSA access will help preserve incentives to invest, and I would like to now discuss the topic of investment a bit more.

4061 You’ve heard the incumbents say that a wholesale access regime will impede investment incentives. This is a myth and the threats of reduced investments are not credible for a number of reasons.

4062 Companies that are building fibre networks will realize long‑term investment returns as the technology has a long lifecycle to benefit consumers and shareholders for decades.

4063 Because of the nature of the telecommunications business, the inherent drive among facilities‑based incumbents to upgrade their networks for competitive advantage exists independent of a mandated wholesale access.

4064 Moreover, CNOC is not proposing that companies gain access for free. Companies that build networks should be entitled to a reasonable return on their investment that is sufficient to incentivize further investments. The Commission’s Decision 2023‑196 found that incumbents receive a reasonable return on their investments under the Phase II costing methodology.

4065 And the significant public funding for telecommunications infrastructure in underserved, Indigenous communities or commercially unviable areas further undermines the credibility of incumbents’ investment threats.

4066 As well, a recent opinion from the Federal Court of Appeal denying Bell a stay of the Commission’s order to implement a temporary access regime noted that Bell failed to provide concrete evidence that the Commission’s decision to mandate temporary access would cause irreparable harm to the company.

4067 The Federal Court of Appeal also found that Bell’s choice to redirect or cut investment dollars was seen as a business decision and not as an inevitable consequence of the Commission’s ruling, suggesting that any potential harm was within Bell’s control.

4068 The current challenge facing the Commission is the appropriate pricing of wholesale access rates for incumbent networks.

4069 The previously determined rates for wholesale HSA access remain significantly above incumbent retail market offerings. This contributes to the ongoing collapse of service‑based competition across Canada.

4070 Only one of the following two scenarios can be true:

4071 ‑ Either the incumbents are engaged in below cost retail pricing that has anticompetitive effects; or

4072 ‑ The current wholesale rates are too high and need to be lowered by the Commission to ensure they are “just and reasonable”.

4073 In Decision 2023‑196, the Commission required incumbents, when making rate‑setting applications, to provide market‑level information that should include, “the equivalent stand‑alone service retail rates, promotion and winback retail rates, comparison to rates for similar services in other countries, and any other related relevant information.”

4074 Because of the information asymmetry inherent in the rate‑making process, the market‑level information must be provided as a sanity check against rates developed using the Phase II process. Otherwise, the Commission risks setting rates that are not just and reasonable and will prevent service‑based competitors from effectively competing.

4075 In addition, we urge the Commission to return to its practice adopted in its previous FTTN rate review of ensuring that incumbents do not deviate from any Phase II requirements and related disclosure rules whenever they file cost studies. This will result in a more effective and efficient review process and will make it possible for intervenors to make more meaningful submissions, resulting in a more complete and timely record.

4076 CNOC members have long expressed frustrations at the state of quality‑of‑service issues facing competitors to the incumbents due to the incumbents’ involvement on competitors’ customers onboarding and technical support process.

4077 We suggest two main changes to the quality‑of‑service reporting regime to address this concern: namely, requiring the incumbents to file quality of service metrics for their retail operations and instituting an enforcement mechanism such as a rate rebate plan.

4078 CNOC’s submissions include many technical and process improvements to wholesale services that are designed to eliminate artificial costs and barriers to competition that negatively impact the affordability and quality of telecommunications services available to our customers and thus Canadian consumers.

4079 We believe that this list of proposed improvements is important, but we recognize the need to focus on launching aggregated fibre as quickly as possible is the priority.

4080 Therefore, we are proposing that the Commission appoint a Commissioner as an inquiry officer to examine the issue of technical and quality of service improvements to wholesale services. This inquiry should include informal industry consultations and culminate in a report and recommendations for improvements to wholesale services, which can then be implemented.

4081 Chairperson Eatrides, Vice‑Chairperson Scott, Commissioners Desmond and Naidoo, thank you for the opportunity to present to you this morning on behalf of companies working tirelessly every day to make the Internet more affordable and accessible to Canadians.

4082 This week, you’ve heard from the voices of those who care deeply about the state of telecommunications in Canada. It is a critical sector to living, working and participating in society. It should be affordable and accessible to all, with choice and quality being determined through service competition instead of relying on duplication of expensive networks.

4083 Our last message to you is clear. Time is of the essence. Canadians need access to affordable Internet services.

4084 EGATE, Execulink and our other members in Ontario and Quebec are ready to bring affordable, innovative telecom services to Canadians when the initial aggregated wholesale access framework is in place on May 7th, 2024. We are excited to bring this choice to Canadians. Nonetheless, true competition will only be sustainable when an effective national permanent framework comes into fruition.

4085 Thank you for the opportunity to make these submissions. This concludes my presentation and we would be pleased to answer your questions.

4086 THE CHAIRPERSON: Thank you very much to CNOC for being here today, for sharing your perspective. You’ve covered a lot of ground in the opening remarks and I know we have a lot of questions and we look forward to the discussion around a lot of the issues that you have raised.

4087 I will turn things over to Vice‑Chair Scott to start with the questioning for the Panel. Thank you.

4088 VICE‑CHAIRPERSON SCOTT: Thank you, Madam Chair.

4089 Welcome, CNOC. Why don’t we start with a quick tour of the country because I’m interested in knowing why the various regions of Canada see such a varied level of wholesale‑based competition, and I’m thinking particularly of B.C. and Alberta, where it’s never really gotten off the ground and where we’re seeing relatively high ARPU that I would think would be an attractive target to wholesale competitors.

4090 MR. ANDERSEN: Sure. I’ll start it off and then ask my colleagues to join in.

4091 There’s a lot of factors, I suspect, in that, which we kind of touch in the opening statement.

4092 First, I think it goes to that addressable market concern we said. TELUS has been very aggressive at their fibre deployments, which means as a competitor I only have access to the DSL, which are not the speeds that people are looking for on the residential, given that the speeds are just not the same as you see on coax.

4093 And when we look at Shaw, who is the major player in that area, now Rogers‑Shaw, they had a bit of a mini‑disaggregated element there, where you had 11 interconnection points that you’re now going to have to build 22 connections to because you’re going to want some redundancy and they’re not in good locations.

4094 Also, that service improvement list really plays key here. Because we see the telcos being sometimes a little bit more mature in their technology, there’s a lot of manual processes in a lot of those carriers and that adds to cost if we have to ‑‑ because of the labour factor.

4095 So, I think what you’re seeing is just a model that’s rolled out that’s just very difficult to attract to.

4096 And then when we look at the Prairies, again, there’s very complex interconnections between SaskTel and MTS, you need multiple interconnections, the aggregation point is not in a logical place with competitive transfer, and that just all adds to cost. And when you’re looking at the addressable market that you can hit, it’s just low.

4097 I’ll turn it over to Chris to maybe add some items.

4098 MR. TACIT: Thank you.

4099 Well, there’s a few other considerations, one of which is actually the way that the regulator has approached this in part, and that is because market shares have tended to be a little higher in Ontario and Quebec for competitors, there tends to be a lot more focus on stoking that and improving that.

4100 Whereas the other markets, because they’re seen as less competitive, there tends to be the belief that they shouldn’t get as much attention because there isn’t a competitive pressure, but I think that can be a little bit of a self‑fulfilling prophecy.

4101 I would suggest that in order to make sure that competition is more even across the country, the Commission should pay attention particularly to the weaker areas, all of them, but should actually pay more attention to those that need to be levelled up to Central Canada.

4102 VICE‑CHAIRPERSON SCOTT: Mr. Tacit, I know you said you have a list, but on exactly this point before you move on.

4103 MR. TACIT: Sure.

4104 VICE‑CHAIRPERSON SCOTT: So, I think that that kind of stoking argument, I think, could definitely be a description of our last interim decision. Prior to that, are there other decisions that you think exhibited the same ‑‑

4105 MR. TACIT: Well, yeah. Even though the disaggregated model ended up not working well, you know, it was developed first in Ontario and Quebec. So, there tends to be a lot of focus on that. You know, it’s undeniable that when you look at population, there’s more concentration and so on, so those numbers can be skewed.

4106 I guess our belief is that if we can overcome some of these obstacles, like, for example, the multiple POIs out West in Shaw territory, even under an aggregated regime, 11 POIs is a lot. If disaggregated isn’t working, that needs to be fixed.

4107 And be careful not to listen to arguments like SaskTel makes that “Oh well, it’s so small here, you shouldn’t bother with it.” It’s quite the opposite. If it’s small there, then conditions actually need to be improved.

4108 I think Stewart may have some more comments as well.

4109 MR. CATTROLL: Thank you, Chris.

4110 The only thing I would like to add to what Chris was saying is we’ve seen suggestions in some of the submissions that, for example, in Atlantic Canada everything is fine there.

4111 We want to caution. With the data that we’ve seen on Atlantic Canada, it seems to suggest that a significant amount of the Bureau’s analysis, for example, was focused on competition in a single CMA, and that CMA was, you know, filed in confidence, but logically we assumed that they were talking about Halifax.

4112 And we just want to caution that, for example, when you’re looking at competition in the Atlantic Region, it’s a big region. We’re talking about Newfoundland and Labrador, Prince Edward Island, New Brunswick, Nova Scotia. So any kind of suggestion, for example, that things are fine in Atlantic Canada, we would suggest that you need to look outside that entire CMA as well and also that we are not suggesting that everything is fine, because you have the same kind of structural issues there with lack of access to aggregated FTTP.

4113 VICE‑CHAIRPERSON SCOTT: Great. Thank you for that.

4114 In your submission you said that wholesale FTTP will lead to greater choice for consumers in rural, remote and Indigenous communities. You highlighted that specifically.

4115 I’m interested in knowing to what extent your members serve those communities now. And beyond your general recommendations with regards to imposing aggregated FTTP wholesale, do you have any other specific asks of us that would support those communities in particular?

4116 MR. ANDERSEN: I’ll let Chris start off on this one.

4117 MR. TACIT: Well, I guess you know if they serve or not.

4118 But in terms of the policy aspect of this, I think you have a Broadband Fund. Obviously, targeting some of those funds as much as possible to those areas helps. We hope that other governmental institutions do likewise.

4119 There is no question that there are some areas in Canada that will not receive the benefits of FTTP without some government assistance and subsidies. It’s just not economic. So, in those areas there has to be assistance, but we want to caution that that shouldn’t be the reason for not mandating FTTP. There’s a little bit of a danger, here, of having the tail wag the dog in the regulatory sense in that if the Commission focuses on the hard‑to‑reach areas or the shrinking areas where it’s still feasible to do it but it just hasn’t happened yet, and that determines policy, we take away choice for consumers throughout Canada.

4120 And so I would just urge that that balance has to be struck very, very carefully and that you not necessarily pay as much attention to the sky is falling scenarios that some of the large incumbents are putting forward to you, because it is a much more nuanced balance than that.

4121 MR. ANDERSEN: So to answer the question, yes, we do have members that have and ones that did. Unfortunately, some of them were acquired. Distributel did a lot of work in Indigenous communities, did a large lot out there.

4122 Our organization services ‑‑ we’re a national player in that we serve from coast to cost, so we have service locations in all 10 provinces and three territories on a B2B play. But yeah, we do have members that definitely are in rural, and in fact, I’ll turn it over to one that’s right beside me.

4123 MR. STEVENS: Yeah, so at Execulink we have historically focused on small communities, southwestern Ontario. When we used wholesale and DSL was the platform of choice, it would reach outside of the villages and reach into the ‑‑ onto the back roads, into the rural areas. And that’s the only technology that’s available to them today, so those consumers have choice between DSL or they’re seeking other opportunities with fixed wireless or other options like that.

4124 But as the networks roll out and get deeper and deeper into these markets, those consumers are looking for choice and they’re looking for high speed options as well, so when we look at a national framework, we don’t think that carving those rural and remote areas out of the footprints of the incumbents makes sense, if we want to give choice to consumers. And I think you heard that in the Far North proceeding, that those folks up there who only had one choice were absolutely desperate for an alternative.

4125 MR. TACIT: And Ian, I recall that you’ve actually built out in some of those areas, haven’t you?

4126 MR. STEVENS: Yeah, so we have built out fibre networks ourselves. And it’s typically small towns. Some you might consider big. I’d consider Ingersoll and Strathroy, places like that, big, but we also do small villages with a flashing light as its most, you know, extensive traffic control device, and up and down back roads. We’ve also done First Nation communities as well.

4127 VICE‑CHAIRPERSON SCOTT: Okay, thank you.

4128 So I’ve been asking my Goldilocks questions all week, and for four days, people have been telling me that the porridge is too hot. I think today I’m going to hear that the porridge is too cold.

4129 So I’m interested in your take on the question, which really is, you know, is there a wholesale rate for FTTP that allows the network operator to recover their costs and earn a reasonable return that incents investment while still creating enough space for you to buy the service, sell the service, and put an offer into the market that benefits Canadians?

4130 MR. ANDERSEN: All right, I’m going to take a deep breath, because I’m feeling very nervous, because if I wasn’t prepared for this question, I’ve clearly not been paying attention.

4131 I guess first, before I turn it over to some of my colleagues, I’d just settle a bit. Like we talk about just and reasonable, but and as I said, we’ve never asked for a free ride that we sometimes were ‑‑ we need facilities in order to provide service‑based competition. It’s not going to be a great business model if these facilities don’t yet exist.

4132 But I think we have to talk about the current rates set for a second before we talk about this Goldilocks. And I appreciate the speed that the Commission has been going on this process. But if we look at the rates, the wholesale tariffed rates available to competitors today, if you look at the FTTN, you had the rate decision in 2019 that was overturned. And at that point, the Commission did say that those rates were not correct and the choice was not to do anything about that.

4133 But in a low‑margin game, we have rates that we know are too high. And on fibre, the only access rates currently are interim ‑‑ and this was pointed out yesterday ‑‑ are in some cases are three times the cost of prices in the market. So without that, I think we first have to say is that we’re looking for you to take that attempt and give us that Phase 2 rate, which we believe will produce the true cost and should meet this Goldilocks.

4134 But if you buy on this precision point and that it’s hard to hit this precision point, I believe we would prefer you err on the side of too low. And I think the reason is what happens to adjustment if you make a rate and then you realize that you have to make an adjustment.

4135 If you err on the rate of too high, I think you see further decline in a market. And I point out that a lot of the companies that were acquired were 30‑year‑old companies. Like these were not flash‑in‑the‑pan. You know, they sometimes were labelled as transient or short‑term, and you know, it couldn’t be farther from the truth. These are organizations that are built, and they take time to build. So that’s why we would urge you to err on the side of hit that precision point but not go too high, because it’s not easy for us to build, and we need to have facilities.

4136 So if you had to then raise it later, at least then you’re not destroying competitors. Maybe you see a bit of a slowdown and something that you need to correct, but I really think that that’s the key to us. We need to make sure that you give us that confidence that we can keep going.

4137 I’ll turn it over to Chris as to why we do think Phase 2, though, will solve your Goldilocks.

4138 MR. TACIT: So I’m going to answer your question in two parts. The first is: What are the sort of guardrails that exist to inherently keep you within the Goldilocks zone? And then how does Phase 2 address the calibration of rates so that you can be confident you’re in that zone? And where in the zone should you be?

4139 So first of all, as Paul said, the risks of rates being too high is much worse than the risk of rates being too low. So if that was a temporary condition, we’ve seen since 2021 with the acquisition of a number of very large and significant competitors, I think it was Cogeco that said that half of their wholesale business is now other incumbents. Well, that’s not incumbents who directly signed up; that’s the acquisitions. So there’s a huge loss of that capacity.

4140 Why did that happen? It happened because after 2021, those companies received the signal that it was unlikely going forward into coming years that they would have a good business case. So they exited quickly. So you saw a very rapid response that diminished competition from rates being perceived to be too high.

4141 On the other hand, if rates are too low, even if there are investment consequences, they are much slower and they’re smaller, so there is a lot of time to adjust. So if, for example, Bell or TELUS says to you, Well, we’re going to delay these projects ‑‑ they’re not really stopping investment. They’re just slowing down temporarily. Bell Canada is not going to go bankrupt if wholesale rates are too low.

4142 So in terms of that calibration, we just want to urge caution as to how you perceive directionally the perils.

4143 And I think Dr. Chen has something and then I’ll continue.

4144 DR. CHEN: Finish, yeah.

4145 MR. TACIT: Oh, I’ll finish.

4146 So the other, what are the disciplines, then, on investments so that we don’t end up in trouble. Well, first of all, the incumbents have an incentive to invest. It’s always been the case that, from a platform perspective, the ILECs and the cable carriers have competed vigorously. And although cable carriers have found ways and continue to find ways to use their fibre‑coax, hybrid fibre‑coax plant and now they’re going to be going to DOCSIS 4, as you heard, they’re still improving their technology. So in their case, they found a way to leverage that to increase speeds to ways that the ILECs can only do with FTTP. This is going to continue. Nothing you do on wholesale rates is going to diminish that.

4147 The other thing is the in‑territory restriction that we have proposed serves as a discipline on that as well to ensure that incumbents don’t just start relying on each other’s infrastructure instead. And by the way, that restriction has another collateral benefit, which is that it kind of blunts the need for a regulatory holiday as well.

4148 The other thing, as I said earlier, is that there are areas that won’t be built without a subsidy. And again, you know, policy shouldn’t be driven by that. The stuff that hasn’t been built is shrinking quite a bit. And finally, others will invest. The objective here isn’t to guarantee Bell or TELUS or Rogers or anyone else a rate of return; it’s to make sure that consumers are served. And in some cases, and you saw Ian talk about where incumbents were slow to act, there is room for other parties to come in and build.

4149 Now I’m going to turn to the specific rate‑making aspect of this. So in Phase 2, the cost of capital is specifically accounted for when you build up your Phase 2 costs. So in other words, every one of those costs actually includes a rate of return for the incumbent. And there are two parts to that. There’s a cost of debt, which changes over time. And so every time they file a study, that cost of debt may be different than it was last time. But the cost of equity has been constant for the ILECs since 1998 and for the cable carriers since 2000.

4150 Now, what’s important about that? We all know that incumbents aren’t shy about advocating when they think something in costing is wrong. We haven’t heard them complain about the cost of equity embedded in Phase 2 studies. We haven’t seen Part 1 applications saying, Help us, we’re desperate; if you don’t increase our cost of equity, we won’t be able to invest. Suggests to me that, if anything, they may be overcompensated, but they’re certainly not undercompensated.

4151 And finally, on the point of the rates, after you establish the Phase 2 costs and add them all up together, there is a markup applied on top of that. And right now, it’s 30 per cent. So that’s in addition to the build‑up of costs, which inherently already includes the cost of capital of the incumbent.

4152 Now, that markup, the purpose of it is supposed to contribute to the fixed and common costs of the incumbent. So every organization has to recover its overhead, so to speak. So the Commission has said, Well, these services must also make a contribution to that overhead, if you will. And the 30 per cent figure was chosen. And that, we think, actually, that figure is high, and we’re actually excited about the fact that you’re going to have a follow‑up proceeding in which we’re going to get a chance to test that out.

4153 But what I do want to caution is please don’t use that markup to deal with so‑called incentive, you know, investment incentives. Any investment incentives should be addressed through the cost of capital building up Phase 2 costs, not through this arbitrary markup that isn’t related to financial conditions in any way.

4154 And finally on this, I’ve got just one little point left and then I will take a breath, but benchmarking. You found in 2023‑196 that retail benchmarking is important. And I would encourage you to really use that. And I don’t want it to be used in a way that turns the regime into a retail minus. That’s not the point. The point is to use it as a sanity check.

4155 And why is that important? The reason that’s important is because there is a tremendous information asymmetry between what the incumbents know about their costs, what you know, and what we know, who also have to live with a lot of hashmarks for confidential information. I could say a little bit more about the asymmetry aspect, but I know this has been a long response, so I’ll quit at this point unless you’re interested in hearing more.

4156 DR. CHEN: Can I ...?

4157 MR. TACIT: Yes.

4158 DR. CHEN: Okay. So I would like to offer a theoretical answer to the question. So does such Goldilocks rates exist? And my answer is yes. Now, how do I know that? Well, I know that because the incumbents are making investments and offering these services, and presumably, when they decide to move forward with services, they’ve done their homework. They did their calculations. They figured that these services will generate enough revenue for them to recover the costs and also earn the reasonable rate of return and possibly more.

4159 And if you think about the wholesale ‑‑ the principle behind the Phase 2 wholesale rate‑setting, the methodology, then that’s basically the same idea. It’s based on the same idea. The idea is that the rates will be at such a level that the service providers will be able to recover those costs, incremental costs, as well as earn a reasonable rate of return. So that’s why I believe the answer is yes.

4160 VICE‑CHAIRPERSON SCOTT: Great. Thanks very much for that.

4161 Rogers also said yes, and they ‑‑ less theoretical. They pointed specifically to the TPIA rates as “working.” To what extent do you think the TPIA rates are at least working well enough to prove that the Goldilocks zone exists?

4162 MR. ANDERSEN: I don’t know if we would agree with that. I’d maybe just ask Ian to kind of walk through I think some over simplifications they’re giving you in terms of that rate.

4163 Ian?

4164 MR. STEVENS: Sure. So I guess around the FTTN TPIA service, they’re suggesting that it works. And there’s I guess a couple components to the service, and the first one is the access rates, in which there’s this fudge factor that they’re using to try to influence the retail rate based upon a service that I don’t believe has ‑‑ and I’ll let these guys get into the costing components of it ‑‑ where they have different price points for the access.

4165 Then there’s the CBB. And CBB is a bit funny. CBB is this hidden thing that we haven’t heard a lot talked about this week. So when I connect a customer on Rogers TPIA service, I have to have a few cost components, and it’s the access, and then I buy the connection from my network to Rogers, and I buy capacity on that network and it’s called CBB.

4166 And on a gig customer, 18 months ago when I did my last CBB usage study to do my costing, the CBB component of the service was $12. Well, it doesn’t sound like a lot. It’s for a gig customer. It’s access plus $12 of CBB.

4167 But the challenge with CBB is that not for five years, not for 10 years, but for 20 years, the demand that customers consume every year, every 18 months doubles. So 18 months ago, when I did this study, it was 12 bucks. It’s $24 today. And in three years’ time it’s a hundred bucks. In another three years, it’s $400.

4168 So you know, the Goldilocks number from yesterday may have made sense, but we’re charging down a path with higher speeds and increasing demand. And CBB is the silent killer that is going demolish our industry.

4169 MR. ANDERSEN: I was going to ‑‑ Chris wants to add a bit, so.

4170 MR. TACIT: Yeah, sorry, on that point, in one of the questions you’ve been asking is why are service‑based competitors focusing on the lower speeds instead of the higher speeds. This is a good part of that answer ‑‑ usage‑sensitive rates.

4171 So I want to just take a moment to explain that CBB is based on peak capacity of the pipe. That’s what it measures. It’s not an amount, but it’s based on peak capacity. And usage‑sensitive costs have been falling in the industry, which means that you get bigger pipes with bigger capacity that handle bigger peaks at a lower cost per gigabit per second.

4172 The problem is that the CBB rates have not kept up with that in terms of declining quickly enough. And that is causing these squeezes which limits independent service‑based competitors’ ability to service the highest‑speed customers. So that was an important point.

4173 I think Ian also touched on sort of value pricing and wholesale rates. And I’d like to just take a moment to talk about that. Wholesale services should be an agnostic input that go into retail services regardless of how the independent service‑based competitor wants to use them. If we force‑fit someone’s ‑‑ the wholesale service provider’s business model in the wholesale rate structure, all we’re doing is forcing the independent service provider to mimic the business model of the incumbent, and that doesn’t provide the choice.

4174 And there are historical examples where the Commission started doing this, and then realized it shouldn’t and veered course. One was going from UBB to CBB. The other was eliminating the markup differences in wholesale rates between ‑‑ based on whether they were used for residential or business use.

4175 And so I would caution you when the cable carriers come to you and say, Well, we need to have these rate bands because it reflects our retail market conditions and you’ve got to protect our business model ‑‑ to not really heed that, because that is not sound from an economic perspective. The cost is what the cost is. If the Phase 2 cost drives you to a single rate for a very broad set of speeds, then so be it. There shouldn’t be any artificial building‑in of retail considerations or so‑called value‑add considerations.

4176 MR. ANDERSEN: So just to sum up, like I said ‑‑ and I’m sorry, we might be answering six questions for each one you ask; we’re just excited to have this conversation.

4177 As you can imagine through the hearing, as other parties have been making, I’ve been getting a lot of feedback from members, and this was one that they really took issue with, that they were somehow targeting lower speeds. And it really is, as Ian said, it’s just they can’t see a way to put a package in the market that looks credible. They don’t want to embarrass themselves, almost. So the economics right now, because of the CBB component, are really holding them.

4178 So the answer to your question is no.

4179 VICE‑CHAIRPERSON SCOTT: Thank you. If you’d only answered no, I think that would’ve been too little.

‑‑‑ Rires

4180 VICE‑CHAIRPERSON SCOTT: So they were long answers, but it’s exactly the conversation we need to have. So I’m glad we’re having it. And believe it or not, I’m going to stay on pricing and costing even further.

4181 So you have said that incumbents are either engaged in cost pricing that has anti‑competitive effects or the current wholesale rates are too high.

4182 I think, to be honest, there’s actually at least one other option, because I’ve been surprised this week that there hasn’t been dispute that incumbents are pricing their retail offers below cost. I think most people have admitted that that is the case. But their argument has been that that’s not anti‑competitive, that that is in fact extremely competitive behaviour. The reason they’re pricing below cost is because that’s what they need to do to compete in the market, and they’re putting services out there that customers like.

4183 How would you respond to that notion of, yes, the retail price is below cost, but no, that is not anti‑competitive?

4184 DR. CHEN: Yeah, okay, I’ll take that. Well, I guess there’s a difference between short run and long run. And but the short answer is if firms are pricing below cost on a persistent basis, that is anti‑competitive.

4185 But in terms of the cost and benefits to consumers and to competition, I would make a distinction between short run and long run. In the short run, yes, consumers are getting a good deal. They basically get subsidized for the services they purchase because prices are below costs. But in the long run, these practices are anti‑competitive because that has the effect of driving out competitors.

4186 And when a firm is pricing below cost on a sustained basis ‑‑ if it’s a short term for a very limited period of time, then that’s loss‑leading for a promotion of services and so on. But and so I’m talking about if this is done over a sustained period of time, then the effect can be driving out competitors. And in the long run, there will be ‑‑ the market will become a less competitive place. And that, in turn, will allow the large firm ‑‑ typically it’s the dominant firms that would engage in these practices ‑‑ allow them to raise prices in the long run.

4187 So, even though in the short run it looks like a great thing, but in the long run it’s detrimental to competition.

4188 VICE‑CHAIRPERSON SCOTT: So, how do we explain to consumers that we need to keep rates high in the short term, so that in the long term there’s a prospect of them having low rates?

4189 Because there are... and I appreciate and I do understand the argument, I just really want to flush it out some more, because there are people who want low rates now and that’s a very understandable position.

4190 DR. CHEN: Right. I guess my response is prices are signals to firms to... and it should reflect costs, because that’s how... you know, in a market economy resources are allocated properly. So, when prices are below costs then that distorts the market.

4191 Now, I understand that’s a very academic answer and it doesn’t really answer your question, but maybe I’ll let my colleagues answer that, from a practical perspective.

4192 MR. TACIT: So, practically speaking, if below‑cost pricing is allowed to persist for a period of time, the competitive conditions will decline... will diminish and society will be worse off in a... if you measure it over a longer period.

4193 So, yes, I may enjoy getting a really good deal today, but if the price of that is that I’m going to have fewer choices and higher prices in the future, I have to ask myself, well, is that really what the regulator wants?

4194 The other part of that is when you measure that against a... wholesale rates that are pinned sort of at excessively high values, it’s a double whammy for competition.

4195 So, you really have to look at both sides of it, and I think that’s partly why it’s important for you to do the benchmarking as well. Not only is it a good discipline on wholesale rates but I think you may want to pursue this issue of below‑cost pricing to see how persistent it is in the market, over time, to make sure that we don’t reach that condition that we don’t want to reach, as opposed to short‑term promotions.

4196 VICE‑CHAIRPERSON SCOTT: Thank you, Sir. In addition to the short‑term aspect of it, are you seeing evidence that those promotional prices are being wielded in a targeted fashion? So, Beanfield was in front of us earlier in the week, and they certainly had some examples of very targeted promotional pricing that...

4197 MR. ANDERSEN: I’ve certainly had several of our members approach us, several of... you know, built their own facilities, for instance, and MDUs, which has been a target, similar to Beanfield, and they have seen that targeting where... you know, that building that now has this competitor who seemingly has a great rate, but the building across the street does not.

4198 We’ve certainly seen a lot of targeting... Ian, if you want to...

4199 MR. STEVENS: Yeah, I want to be careful, here. I don’t... I don’t think it’s singling out a particular operator. I think it’s targeting retail rates to a change in market conditions. It didn’t have competition yesterday, have competition today, I’m going to decrease my retail rates... I think that’s good for consumers but it could feel like a single operator targeting another. But I think it’s more just a retail strategy of when competition shows up, how do we behave?

4200 And I guess the interesting question for you folks to grapple with is that an appropriate market response or do we want to see all Canadians benefiting from competition, not just those that have access to it?

4201 VICE‑CHAIRPERSON SCOTT: Have we had enough time in any of those cycles to see the full circle? So, a competitor comes into the market, an incumbent responds by driving down price, the competitor has to exit the market, I think, through acquisition or some other unfortunate circumstance, and the price gets raised.

4202 Have we enough time to go through that full cycle? Have you observed that yet?

4203 MR. TACIT: Well, it can actually be a little more subtle than that, and I’m also... I also pay bills... you know? And I’ve seen days when I’ve had incumbent services; you get a great deal, but there’s always a little bit of a fine print that they can still increase the basic cost of this or that throughout the promotional period, and then, there’s this bill creep.

4204 So, on the one hand, they start out that way. Then, when you threaten to leave, they’ll ratchet it down again.

4205 So, it is a very finely‑tuned and targeted type of behaviour that persists over multiple years, there’s no question about that. I mean, as I said, I’ve experienced it as consumer and I think a lot of us have, but these promotions aren’t temporary things that go away, they’re very persistent. Now, they do try to take a bit of advantage to creep it back up but they’re long‑term... you know, they’ll lock you in for a year or two on a so‑called good deal.

4206 And then, of course, there’s also the cross‑subsidy that’s available to them through the bundle, and now, in the case of the national carriers, we’ve added wireless to that as well, which, you know, under the current framework very few competitors have access to.

4207 So, there are all these tools they have to do this rejigging in the market.

4208 MR. ANDERSEN: And before I ask Ian... you know, it’s that... again, our members are not able to compete with short‑term promos, but we’ve seen some of these rates, such as Videotron showed yesterday, for fibre access, they seem to have been persistent for years, yet if our member were to offer it, as they should, the demonstration to lose a $1,000 per subscriber just on the access and CBB portion, not including any of the inter‑connection, something seems wrong, there. Ian, did you want...

4209 MR. STEVENS: Yeah, I think... your own data shows that prices are higher in Alberta and BC, and the competition is lower, and we heard folks talking about... in the last three months, since Videotron has showed up... you know, rates are coming down. So, I think you see the market reacting to more competition.

4210 I appreciate Bell saying the other day that these small operators are the ones that have been doing... have been holding back and doing market discipline ‑‑ I think it was Bell that said that.

4211 So, I think... I think it’s just... it can’t... and maybe Dr. Chen can weigh into this a wee bit, but it’s not just two or three in the market that is the one that disciplines rates, it’s when there’s more than that, on a sustained basis.

4212 You talked about people leaving market. I think, as a business person, you look at risk. I talked about the risk of onboarding of customers at a gig that my wholesale input costs are going to go to 400 dollars within six years. That’s a risky decision to make. I don’t necessarily want to go acquire those customers.

4213 And regulatory risk is a big piece of this business, and signals without final rates... you know, repeated multi‑year processes to get to a final rate, after a CRTC process decision and appeals to various organizations, it can induce risk. And for... some people have left the market. They just said: I don’t see the tea leaves where I’m going to have a long‑term, sustainable business. I think that’s some of the reasons why they left the business.

4214 VICE‑CHAIRPERSON SCOTT: Okay. You gave me a couple of good segways, there, but I think I’ll turn first to my questions about who has access to the wholesale service, so, who is it that is allowed to exert that discipline.

4215 So, in your submission you noted the competitive advantage that Bell, Rogers and TELUS have, by virtue of their size, their synergies, the bundling ‑‑ we’ve been talking about it this morning. You put those forward as reasons that they should not be permitted to have wholesale access.

4216 The other side of the coin might be to argue that those are features that make them extremely strong competitors, very well‑positioned to put high‑quality/low‑cost services into the marketplace.

4217 So, how do you respond... how do you respond to that argument, that all the things you say should preclude them from having access actually make them exactly the type of strong competitors that could really deliver competitive choice?

4218 MR. ANDERSEN: I’ll let Chris answer this but I’ll just add one item on the restrictions... you know, your Goldielocks question, all that practice and I missed one point that I wanted to make, which is we don’t make these... take these restrictions lightly, we’ve, for decades, tried to ask you to remove barriers to competition, so when the Competition Bureau raised these issues we did a soul‑searching. And again, as I go back to... we look at this as trying to find a balance, to ensure that there are facilities being built. We can’t have service‑based competition without the facilities themselves, and we are the first to say that you need to find ways to encourage investment.

4219 So, I’ll let Chris kind of get into the nitty‑gritty on that.

4220 MR. TACIT: Thanks. So, in terms of the... there are two restrictions, as we’ve said, one is it would apply everywhere and one would restrict Bell, Rogers and TELUS.

4221 Why is that important? Well, I’d start with the premise that in your own wireless wholesale framework decision you made a finding that Bell, TELUS and Rogers shouldn’t be able to use MVNO on each other’s networks because of the market power they have.

4222 So, it is a natural extension of that policy to apply it nationwide, because services are bundled. When you end up having a carrier being able to... being able to obtain access on another incumbent’s network, wherever it might be in the country, you’re giving him the opportunity to provide a complete bundle.

4223 And so, now, they’re able to exercise the same market power you find... you found that they had in the wireless market, through the bundle, with all the cross‑subsidies entailed in that.

4224 And I’m going to turn it over to Dr. Zhiqi to explain some other related matters shortly, but before that let’s go to the in‑territory restriction.

4225 That one is really designed to do a couple of things. 1) to deal with the concern around investment incentives. We don’t think that, in terms of any material impact on incumbent investment incentives, independent service‑based competitors’ activities really affect that one way or another.

4226 However, we do acknowledge that it’s quite possible that incumbents, with their resources and market power, having access to each other’s facilities and territory, could do that.

4227 So, if you want to guard against that and... and have some head room in case you’re not exactly at the right place in the Goldielocks zone, and if you don’t want to have to give people regulatory holidays, this is a very good market discipline to employ. And since in the past independent service‑based competitors did impose price discipline ‑‑ and I think that was actually admitted by a couple of the incumbents in this proceeding ‑‑ you’ll still get the benefit of that.

4228 VICE‑CHAIRPERSON SCOTT: Before we go to the professor, I just want to make sure...

4229 So, I think your argument is that by virtue of the ability to provide the bundle, even companies that don’t have a facilities‑based wireline infrastructure can exert market power across the country?

4230 MR. TACIT: That’s correct.

4231 VICE‑CHAIRPERSON SCOTT: So, you’re agreeing with the Bell position that TELUS is not ‑‑ I think Bell described TELUS as not being a “plucky upstart”.

4232 MR. TACIT: Correct, yeah.

4233 VICE‑CHAIRPERSON SCOTT: Okay. And then, sorry again, before we go to the professor...

4234 MR. TACIT: Yeah, sure.

4235 VICE‑CHAIRPERSON SCOTT: Because you did make a special case with Videotron, your recommendations apply differently to them. Could you explain again the distinction between that case and yours?

4236 MR. TACIT: Sure, happy to do that.

4237 Well, we think that they’re in a bit of a different position, 1) because they are still a regional carrier that’s developing... and again, we go back to your own wireless decision. You didn’t find it necessary to prevent Videotron from... from providing MVNO access to anybody, it was only the Big Three, and you did that because you recognize they had a disproportionate degree of market power.

4238 It may be that in some years Videotron’s position changes but we’re here today and until the next wholesale review, for now we’re content with the... with the restriction that we’ve proposed. We think it’s properly calibrated, based on current market conditions, and your own findings.

4239 MR. ANDERSEN: And another thing, just to add; definitely, when you tried to find the line, we based it on your own decision, but, you know, Videotron is still obviously, with their Freedom Mobiles in their infancy, our members have had no success in negotiating any MVNO offers in any bit with the Big Three, maybe there’s a bit of hope as we see what we saw in the US many years ago with T‑Mobile trying to move up against the incumbents, and our hope is that they may be more open to such arrangements. So, I don’t think we would want to put a restriction on their ability to grow their national network at this point.

4240 VICE‑CHAIRPERSON SCOTT: Okay, thank you. Sorry, Professor. I jumped ahead of you on it.

4241 DR. CHEN: No, no. Actually, this is a good place for me to put my point in.

4242 The point I would make is actually, from the Competition Bureau’s comments on the issue of incumbent access to wholesale regulatory framework, and I generally agree with their analysis, so basically, they outlined the potential benefits and also the potential risks of such incumbent use.

4243 And on the benefits’ side, one of them, yes indeed, they allow incumbents to offer services that they would otherwise may not be able to in other parts of the country ‑‑ assuming it’s out‑of‑territory use.

4244 And I guess that relates to your question about the incumbent’s ability to actually be a strong competitor.

4245 But the point I want to add is will they. So, yes, they have competitive advantages. If they really want to compete hard, they can stir things up quite a bit, but will they? And that’s where the Competition Bureau’s other point comes in, and I think it’s an important one, and that is the risk of coo... increase the risk of coordinated behaviour.

4246 So, we are already in a very concentrated market and they are already... the incumbents are already in what the economists call a multi‑market contact, which further kind of facilitates the... the coordinated behaviour, and allowing them to use each other’s facilities out of territory, that basically adds another layer of contact.

4247 And so, the risk of further incenting or facilitating coordinated behaviour in my view is very high, and I think that that’s kind of the point of the Competition Bureau... at last, an increased risk of coordinated behaviour.

4248 And so, my... if I were to bet, then... well, they could use this to further facilitate their coordinated behaviour or they’re going to use this to compete really hard against each other in their own... in the... in the other facilities‑based competitors’ territories, and I would bet that it’s actually the risk of coordinated behaviour is a lot higher than the possibility of they use that as a way to compete.

4249 MR. ANDERSEN: I just think the final point on that is our view on this was it will allow some incremental from the Commission... you know... it’s easier for you to come back and remove that restriction down the road, whereas if there’s unintended consequences by this Wild West, I guess, scenario, it’s always harder to put it back.

4250 So, I think... as we’ve said before, there’s a bit of fragility right now, in the service‑based competitor. We’ve seen an extreme decline in the number of competitors that were acquired. And we think this just allows us... for you to nurture that and allow us to kind of regain strength in the long‑term.

4251 VICE‑CHAIRPERSON SCOTT: Thank you for those answers, it was addressed through a lot of lenses and I appreciate that.

4252 I’ve got two more topics I want to cover quickly. The first one is the recent flurry of acquisitions. Maybe Mr. Stevens or Mr. Andersen, since you’re in the business, I’d be particularly interested in your views.

4253 What’s going on with the acquisitions, really, from the business owner lens? Are people exiting because they’re getting a good offer and it’s... is that... is that valuation a reflection of a growing business? Is that a deliberate effort to take out competitors from the market? Just... what’s the dynamic, as a business owner, on the acquisitions?

4254 MR. ANDERSEN: I’ll try and take your hand to short and quick. So, there are a few points I’d highlight.

4255 So, the first is... you know, as has been said, these were healthy companies, they were long‑standing companies. They brought a lot of innovation. They built out platforms, and yes, as some have said, they were high valuations, because... I think it just speaks to breaking the myth that somehow all we are, resellers, who by Two fours and sell them as six packs, there’s a lot of innovation, systems and technology and people that we invest to build these businesses, and they’re not easy to build overnight.

4256 Which his why I think some of these incumbents saw an opportunity to expand their platform, to acquire these technologies.

4257 So, I think it’s first just a validation of some of the innovation and technology we bring.

4258 But if we take a step back ‑‑ and I highlight the fact... you know, we’ve already covered it ‑‑ there’s been a fibre mandate since 2016 and there’s no credible path, there’s no final rates, configurations have been done and the only access is going to take years to build out.

4259 You’ve got no rates right now that ‑‑ at least from our standpoint ‑‑ that are just and reasonable on the FTTN side. You have the concerns, that Ian said, with the growing rates, and some of these companies had built a lot of innovations and technologies that were value.

4260 I think in my discussions with many of them, they just didn’t see a path forward. They had a high‑value offer and they just made a smart business decision.

4261 VICE‑CHAIRPERSON SCOTT: Mister Stevens, did you want to add?

4262 MR. STEVENS: Yeah... I don’t really want to add a lot to that. I’ve talked a wee bit about risk profile and looking forward, and risk of just a return on investment.

4263 You know, when an incumbent can take an existing operation and suck it right in onto their... into their lines of EBITA, it’s good for the incumbent to make the decision, and the wholesaler or the service‑based competitor was able to exit at a time when they felt the risk was high.

4264 So, I think it made a lot of sense for them at that time and... you know, things may have changed, now that we’re sitting here today, and we have access, in theory, to fibre, starting May 7th, but that was then and this is now.

4265 MR. ANDERSEN: And back then I guess the most important signal... I’m not aware of any service‑based competitor that sold to a non‑incumbent. It wasn’t like you saw someone trying to aggregate or... you know, consolidation within the service‑based. I think that’s the signal you’re looking for, that there was just these smart, long‑term industry players that just didn’t see a path forward.

4266 MR. STEVENS: And maybe to add to that. I don’t really... I’m not really concerned that somebody sells in the industry. I don’t see that as an issue at all. What I’m super concerned about is who’s coming in? Who’s building businesses within the industry? That, to me, is the bigger sign of a systemic problem.

4267 It’s natural that somebody, an entrepreneur builds a business. Entrepreneurs aren’t really necessarily great at running businesses, they like building.

4268 But nobody has come in to entrepreneurially build a new business and create huge market share. That is, to me, the biggest concern that I have, as an operator.

4269 VICE‑CHAIRPERSON SCOTT: Great. Thank you for your on‑the‑ground perspective, it’s very valuable.

4270 And Mister Andersen, you guessed my last question and you started to answer it. I really did want to dig into service differentiation. Is that... I know you talked about being more than just buying two four and selling six packs.

4271 Is there anything else you wanted to add, in terms of kind of the unique value propositions that CNOC members provide customers?

4272 MR. ANDERSEN: Well, I guess I... I feel like that was validated by a lot of the incumbent comments earlier, but we do see a wide variety of business models even in the constraints that we have and the models that we have.

4273 We’ve certainly seen... you know, we felt we led the unlimited usage argument ‑‑ that’s actually how CNOC formed, when there was a bit of a battle to try and stop that.

4274 We’ve seen a lot of our members trying to focus on the work from home and the growing demand on that... you know, when... before Covid, home internet was seen as a way to just watch your Netflix, now it’s an operational... so, a lot of the members invested in technology, to allow for carrier diversity, higher availability, the ability to have cellular backup, trying to do more transparent pricing... you know... it was mentioned yesterday, OXIO built a digital platform that allowed almost all of their interactions without any human, just all through SMS and text, and that had a great update.

4275 We’ve seen a lot of developments, in terms of TV platforms, such as the RiverTV platform and Distributel ones. A lot of work, in terms of smart home, security.

4276 And a lot of them also focus on support. Everybody’s connected but everybody has different needs, and not everybody likes to work with a large... you know, multi‑billion‑dollar company. There’s nothing wrong with those companies but some people want that more personalized service, they want that high touch. Our business is going into businesses and taking of much further end than standard organizations will.

4277 And that’s just what we’ve seen on the existing frameworks. I think ‑‑ at least from my standpoint ‑‑ there’s a lot of excitement with fibre, when you have these copious amounts of bandwidth symmetrically with high availability that some of the innovation we’re yet to see, so... we’re excited for that.

4278 VICE‑CHAIRPERSON SCOTT: Great. Thank you for answering all my questions, and thank you, Chair, for giving me the time to ask them all.

4279 THE CHAIRPERSON: Okay, thank you very much.

4280 We will go over to Commissioner Naidoo next.

4281 COMMISSIONER NAIDOO: Hi there. Thank you so much for being here today.

4282 Earlier this week TELUS said within the last year that it turned down its copper network in 14 of its key geographic areas, and they said that they worked with their wholesale customers to provide them with alternatives.

4283 Could you talk about your members’ experience when incumbents decommission copper? Have your members been offered alternatives? And what would the rates for those alternatives be? Are they the same for copper access?

4284 MR. ANDERSEN: So I can start, because certainly my organization’s faced this. We are in the TELUS territory and, just this week, got our list of back half of 2024 decommissioning; these sites will be ‑‑ your customer will be removed from our copper platform.

4285 It’s a big challenge because, again, it goes back to that addressable market. You know, as we try and turn up new customers or customers move, we’re blocked from access because we don’t have access to that fibre platform.

4286 The general accommodation is to give us access to our retail package. While we appreciate that’s better than a complete cutoff, it removes a lot of the innovation and differentiation that we just spoke of.

4287 So I guess that would be my initial response. I don’t know if you want to speak on the Ontario...?

4288 MR. STEVENS: Yes. So, Ontario, Bell shared with you their strategy, which is just leave the old copper in for a while, while they put fibre into the house right beside them, and they leave the copper running.

4289 But they’ve also shared I think it was their ‑‑ I think when they were talking to shareholders a few weeks ago they mentioned they’re looking at turning off 100 wire centres, or COs, and turning the copper off entirely.

4290 And we don’t want decommissioning to be stopped, we embrace the concept of decommissioning the old infrastructure. It’s prone to ‑‑ it’s old therefore it’s, you know, its maintenance is an issue, it doesn’t have, you know, service attributes that necessarily meet consumers today.

4291 What we’re really after is access to the fibre replacement ahead of the customer getting turned off, giving us a chance to migrate our customers from an existing platform over to a next generation platform. And we really don’t have that in the Bell territory, or when Rogers does a fibre upgrade, but we do have a commercial solution where TELUS is decommissioning copper.

4292 And I would say, I’d echo Paul’s comments, it’s gone from something that we had much more control over in terms of how we route our customers, how we authenticate our customers, how IPs are assigned to something, that it is a retail service and it takes a lot of our service attributes away.

4293 MR. ANDERSEN: Yes. In order to accommodate that, when we’re given a retail circuit we have to dispatch a tech, ship new equipment, because we now have to tunnel the customer back to our network in a B2B play.

4294 Again, we can make it work, we’re agile, we pivot, and we’re at least happy to have some ability to access our existing customers. But it’s a big concern.

4295 But I do want to echo what Ian said, we’re not trying to say here hold onto the copper networks. In fact, you know, it sounds like TELUS is ‑‑ they’ve hinted that they’re nearly there. And I think Bell said explicitly they’re not putting new customers on copper where they have fibre facilities.

4296 Our concern just is the longevity of those networks, the reliability that our customers are having. And I’m not trying to suggest it’s malice, that this is intentional but, you know, how much investment is going to those copper networks where, you know, only a couple people on the street are being served by wholesale customers?

4297 You know, I think we heard yesterday that they’re harvesting DSLAMs to try and keep that network alive. Doesn’t really fill your customers with a lot of confidence.

4298 MR. STEVENS: The customer is losing access to choice when that happens, because we don’t have really the option to bring fibre as an alternative.

4299 COMMISSIONER NAIDOO: Would you access to aggregated FTTP address your concerns about ILEC copper decommissioning? And it sounds like you’re saying that copper networks are old and it sounds almost like you’re saying that they’re not that valuable to you.

4300 Can you just ‑‑

4301 MR. ANDERSEN: Well, they’re valuable to us because it’s the only way. So that’s a lot of value. Because, you know, a lot is made about fibre and speed, and that’s certainly important. Certainly fibre’s going to give access to higher speeds, and we’re excited about that. But I think we keep coming back to it, it’s also about access.

4302 You know, when a customer who’s long‑term with us who wants to stay with us, and I have to say I have zero speed for you, I have no way to get in there because the copper has been removed, if it’s a Greenfield deployment they’re not putting the copper in. So if you’re talking about a residential MDU or commercial any of these, you know, smart centres that pop up, we’re locked out from that standpoint.

4303 So the answer to your question, because I know we should be short is, yes, that solves the problem and would ‑‑ I think you’d see a lot of...

4304 The other issue that it’s going to solve I guess is asymmetry because there is a lot of load on the cable networks because, you know, there was a comment that so X per cent of customers are under 300. Well, I can tell you 100 per cent of my customers on the ILEC are below 300Mb, because 50Mb is about the highest speed you’re going to get on those facilities.

4305 I think Chris just wanted, if you don’t mind, to sneak in one point on the last question.

4306 MR. TACIT: Yes. So just on the thing, there is a difference in approach I think, like you heard, between TELUS and Bell. Bell is very much all or nothing. Now, they do say, and I think they’re well‑intentioned in this regard. Although we’ve had some issues that they don’t want to touch the copper of wholesale customers.

4307 But there’s also an inherent inefficiency in that, because as they’re going around and wiring neighbourhoods it’s kind of inefficient for them to leave it in, but it’s a consequence of their unwillingness to allow any kind of access to fibre to wholesale customers.

4308 The other point is that when it comes to the cable carriers, they seem to be much more interested, generally speaking, in leveraging their existing facilities, but they also do some decommissioning especially in the areas of MDUs, multiple unit buildings, and so overnight you can end up with situations where a building that you might have had access to the day before suddenly you can’t access. So that’s been happening as well.

4309 Because when they replace, that tends to be a lot of their focus. The rest of their focus is on Greenfield, a lot of their other focus is on Greenfield fibre deployments.

4310 MR. ANDERSEN: And my last point on the copper issue is if aggregated was put in similar to where we would have access to those service attributes, and I can’t underscore how important that is to differentiate which, you know, I know there’s a pressure to make sure that we’re offering that, CNOC is of the view that we have no problem with an orderly transition.

4311 So we know that both, the two major ILECs at least, want to pull their copper out for the reasons they stated. And we would have no issue, you know, working with them to have a migration plan to move our customers off their copper network and onto fibre where they have fibre available.

4312 MR. TACIT: And the Commission has addressed this as far back as 1994, it issued a letter, Decision 94‑11 where it talked about the requirement for incumbents to provide notification of network changes. So that framework can easily be used so that they can give a six‑month notification period and let everyone prepare for that.

4313 COMMISSIONER NAIDOO: Thank you very much. Can you expand on your claim that, and I’m quoting here, “Evidence shows incumbent deployments are pushing independent ISPs from previously‑served territories,” what do you mean by that and what evidence specifically are you referring to?

4314 MR. ANDERSEN: Sorry, could you just repeat the question? I apologize.

4315 COMMISSIONER NAIDOO: Yes. Can you expand on your claim that, “Evidence shows incumbent deployments are pushing independent ISPs from previously‑served territories,” just wondering what you mean by that?

4316 MR. ANDERSEN: I think that just goes to point we’re making on the shrinking footprint. That, you know, every new MDU in this country is probably fibre‑fed, and by the way not a risky investment too; the providers are literally tripping over each other trying to get in, as you probably heard from Beanfield.

4317 Every Greenfield is fibre and of course this decommissioning is occurring. And, you know, where our members used to be served in all regions, we’re now seeing huge pockets where there’s just no service. It just makes it hard when, you know, even just one side of the street, because it’s now all fibre‑fed, we have no access to. It makes it very hard to market, to target when you have these more and more disjointed groups.

4318 And I think the evidence is itself what the incumbents have said, they’re moving to fibre, they’re pulling out copper in a lot of areas, and we don’t have access to that.

4319 MR. STEVENS: You know, just that when fibre goes out, that previously addressable premise is no longer on the list of addressable premises.

4320 MR. ANDERSEN: It’s as simple as that.

4321 COMMISSIONER NAIDOO: Thank you very much. You seem to be suggesting that previously established point of interconnection locations have been changed. So I’m wondering how CNOC suggests that the costs of POI relocation should be recovered, who should incur those costs of the associated POI moves, and what would the impact be to ISPs who choose not to move and would prefer to remain in the existing location?

4322 MR. ANDERSEN: Sorry, are you talking of a move from disaggregated to aggregated, or in the aggregated model where a provider moves a POI?

4323 COMMISSIONER NAIDOO: Both. We can just explore that.

4324 MR. STEVENS: Sure. So I guess our position is that the aggregated POIs should be on a provincial or a multi‑provincial ‑‑ capture a provincial or multi‑provincial footprint.

4325 Kind of maybe walk through the country a wee bit. In Bell, in MTS, in Ontario/Quebec, on the east coast, Bell has one spot in each market that you can go to pick‑up those markets, as does ‑‑ I’m going to say Rogers does, but there’s a few edge cases.

4326 Rogers does a very similar thing in Ontario/Quebec. They already have these points of interconnection, we’re just suggesting for fibre to the premises that the services are brought to those existing points of interconnection.

4327 In the west Shaw has 11 points of interconnection across a few provinces and that’s their aggregated model today. And it feels very disaggregated from an operator perspective. We’re suggesting that they pick one point of interconnection by province or group of provinces, and I guess as part of the costing process is to include the cost of bringing the services from those points of interconnection to a common one.

4328 So then there’s the issue of what about the person that’s at the wrong POI? And that applies to disaggregated, why? And when there’s a disaggregated model, how do you do the orderly transition? I don’t think we have a clear path forward on a case‑by‑case basis, and they should be handled on a case‑by‑case basis of when you’re sitting at the wrong POI.

4329 MR. ANDERSEN: So I’d just add, you know, a general principle. We’re not trying to impede these operators from evolving their networks and changing their networks. You know, we’ve seen that in fibre deployment, the original CO model where you had to get very close to the customer because of the limitations of copper is starting to disappear, and they may be aggregating themselves a bit more even in their internal networks.

4330 I think there’s already frameworks which Chris can speak of in terms of just how that should do. I think my main message is the Commission just needs to make sure that that’s natural network evolution and not some attempt to make it more difficult for competitors to access, given that in some of the regions, especially out of Ontario and Quebec, there aren’t these more logical interconnection points that also attract a lot of transport.

4331 In the Ontario market you tend to have your aggregation points in Toronto, and there’s just well‑established transport networks and data centres and colos that allow you to access those interconnection points. And in Quebec, they’re in Montreal.

4332 After you get out of that region, it starts to get trickier, and the transport options are obviously more limited. So I think that’s our concern. I’m going to let Chris kind of just on some of the ‑‑ how the costs can be recovered.

4333 MR. TACIT: Yes. So before I do that I want to just stress that, in particular, in Shaw’s territory which covers BC, Alberta, and part of Saskatchewan, we have even in the aggregated model these 11 POIs. And, you know, one of the remedies to help boost competition in the west would be to really aggregate that more heavily into one, two or three POIs, one per province, or even more so.

4334 There’s not reason for that not to be possible now that there are linkages were shared between all the different parts of the Shaw networks, they’re not sort of islands.

4335 In terms of where to locate them, we’ve seen the extreme example in Atlantic Canada with Eastlink putting a POI 30‑some kilometres outside of the metro area, and basically holding the TPIA customers hostage because they are the only ones that can provide a transport link, at rates that are not great. And it’s been the subject of some applications before the Commission which have been addressed, but the problem still persists.

4336 So of course we want network operators to be free to design their own networks, but in doing so there should be a rule that when they establish a POI, first of all they establish it in the manner we’ve described. And in the case of Shaw, it may be necessary to collapse them, and that they also situate them at an area where there is some competitive transport available, so that they don’t end up basically leveraging market power associated with their location to bind people to only one competitive option.

4337 In terms of cost recovery, you know, when the co‑location regime decades ago came into being, there was a method to apportion the costs among different entrants occupying the CO, and we think that sort of formula in which the costs can be apportioned among the parties that take advantage of the POIs could be established, of course being very careful to ensure that the costs are just and reasonable and according to Phase II.

4338 COMMISSIONER NAIDOO: All right. Those are all my questions. Thank you very much.

4339 THE CHAIRPERSON: Maybe at this point I can just check in with you. I think we probably have about 20 minutes or so of additional questions. Did you want to take a break or should we keep going?

4340 MR. ANDERSEN: I’ll follow the line, we’re always in your hands, so we’re happy to keep going.

4341 THE CHAIRPERSON: Okay, we’ll keep going and see how that goes. I will turn things over to Commissioner Desmond.

4342 COMMISSIONER DESMOND: Thank you. I just have a couple of questions really for clarification.

4343 In November of course the Commission grated temporary and expedited access to the Bell and TELUS FTTP networks in Ontario and Quebec by May. Can you speak to your members’ plans to use that access? Maybe just give a bit more detail in terms of...?

4344 MR. ANDERSEN: Yes, I can speak to mine. We have orders queued and ready for May 7th, 9:00 a.m. We’re certainly concerned about the rates but we, as I said, have footprint that we want to get back access to.

4345 And I know that other members I’ve spoken to are also ‑‑ they’re cautious, but they’re trying to, you know, especially where they have bundles in other areas where they can try and keep customers that have been sticking with them for sometime saying, “But I keep getting my knock on the door from Incumbent A or B and they’re offering me these speeds. I’d love to stay with you, I love your service, I love what you’ve done, I’ve been your customer a long time.” So I think the focus will certainly be there.

4346 Ian, did you want to add maybe your plans?

4347 MR. STEVENS: All right. So we’re ready to go, well not quite ready to go, the teams are running around getting retail rates ready, order process testing, kind of figuring out the equipment that has to go. So our members are all excited about access to this.

4348 Like Paul, we’ve got customers who are desperate for higher speeds and we’ve figured other ways to solve their problems, and we’re looking forward to it.

4349 And I was very encouraged when Mr. Daniels shared yesterday ‑‑ Wednesday, that they’re on track and that they’re not going to miss that date.

4350 COMMISSIONER DESMOND: Okay, thank you. We also heard this week from the incumbents who talk about the steps they need to take to put the FTTP service in place as quickly as possible. And we’ve heard the steps that are required and the timeframe from different parties in terms of how long it will take to roll this out.

4351 I’m just wondering if you could comment on that and whether those timeframes, in your view, are appropriate?

4352 MR. ANDERSEN: Well, that’s a tough question. I think we’ve stressed that the time that it’s taken has been detrimental and that speed is of the essence, which is why we’re urging you to maybe even just break‑up your decision, and if that means setting the policy first, who will be mandated, and directing them to start building those networks while rates and other issues are sorted out, that would be our preference.

4353 Because we’ve heard this six months, 12 months, and longer. It seems very long, given that we’re talking about using, at least from what we see in the tariffs filed, they seem to all be making for the most part the use of their existing aggregated networks. We are already interconnected there.

4354 And in some cases it’s actually about them, at least from a network perspective, stopping the blocks they’ve put on. We’ve heard that when the incumbents have rolled out their FTTP networks it’s really that they put items in their network to stop the FTTP traffic. Because in their network, they don’t normally always distinguish between FTTP and the legacy once it starts in their aggregation.

4355 So we don’t believe the network itself, that there’s major work. There’s definitely work, we’re not saying it’s an overnight thing. And we would just urge you to put pressure on these IT systems and training. You know, the Commission has had this interim finding for some time, our hope is that they’ve put some thought into how this deploys. But we would urge as quick as possible please.

4356 MR. TACIT: And the other part of that will be to look after the rate component, because the rates are excessive. So hopefully, those will get adjusted quickly and retroactively.

4357 COMMISSIONER DESMOND: Okay, thank you. And we also heard from Bell their suggestion that, while the fibre‑to‑the‑node services can continue, they would like to see the rates frozen for the FTTN services.

4358 TELUS of course suggested that the FTTN service be discontinued.

4359 So I’d again like to hear your views on those two proposals.

4360 MR. ANDERSEN: So I’ll just talk high level that we touched on. We’re concerned that the rates aren’t right now just, as has been found. But, you know, I think our members want to not impede Canada’s development of fibre networks, so we understand that access to fibre may see services like FTTN get turned down.

4361 We highlight what we said earlier, it’s got to be done orderly, we’ve got to make sure customers aren’t left behind, especially given the importance of internet and daily lives in a work‑from‑home situation. But I think at a high level we understand that that might be next steps.

4362 I’ll turn it over to Chris on the specifics of the freeze and the regulatory stuff.

4363 MR. TACIT: So we think that Bell has made a legitimate case for rate freezing in FTTN based on the two conditions the Commission has set out, which are that it’s not a growth technology and that they have a reasonably minimal number of users. We caution not extending that to other ILECs until they demonstrate that they’ve met those conditions.

4364 In the case of the cable carriers, they’re not really converting a lot of their existing plants, so that should certainly not apply to their FTTN, which is their hybrid fibre coax.

4365 MR. ANDERSEN: Sorry, I’d like to clarify, my answer was focused on the ILEC. Because FTTN, in my world, is more copper. We think of TPIA when we think of cables. I would just echo what Chris said.

4366 COMMISSIONER DESMOND: Thank you. So you’re okay I guess with respect to the Bell proposal, but with other incumbents you want to have additional information?

4367 MR. TACIT: Yes, I mean, because Bell put their number on the record, and that seemed like a reasonable number to us, at which point they can freeze rates. But we don’t really have numbers for TELUS or Sasktel.

4368 COMMISSIONER DESMOND: Okay, thank you. Thank you, Madam Chair.

4369 THE CHAIRPERSON: Great, thank you very much. You know what maybe just before I jump into my questions, can we just maybe deal with an undertaking, if that’s okay?

4370 VICE‑CHAIRPERSON SCOTT: Sure. Staff and I have been chatting while the discussion has continued.

4371 So in your discussion with Commissioner Naidoo about copper decommissioning you stated that members have been receiving notices of copper decommissioning and disconnection notices, and have been offered alternatives by the incumbents.

4372 Could you undertake to provide the Commission any copies of those notices and any evidence of the alternatives that you’ve been offered?

4373 MR. ANDERSON: Given it’s an undertaking, I’ll turn it over to Chris.

4374 MR. TACIT: Yes.

Engagement

4375 VICE‑CHAIRPERSON SCOTT: Great, thank you. Thank you, Chair.

4376 MR. ANDERSEN: That was easy.

4377 THE CHAIRPERSON: Well, the difficulty with going last is that we’ve covered a lot of ground. So I just have a few questions and I hope they don’t overlap too much, although there will be a little bit of overlap with what you’ve already discussed with the Panel.

4378 So perhaps starting with a very high‑level question. We heard from Bell earlier this week that the market has never been more competitive. We heard from Rogers yesterday that there is intense competition. But you paint a different picture, and you have said that there is an affordability and a competition crisis in Canadian telecommunications, you said that this morning in your opening remarks.

4379 You heard as well earlier this week from PIAC, OpenMedia, Manitoba Coalition the kinds of concerns that consumers have with respect to their internet services ranging from choice, prices, customer service, and then asking for more competition.

4380 Can you just comment on that?

4381 MR. ANDERSEN: Well, I don’t think it’ll come as a surprise, is I don’t agree in the sense of in the markets where we’re now locked out, we’re not seeing that. Where we still have access, we’re still vibrantly providing that competition. You know, we still have customers who come to us all the time looking for our services.

4382 I just find it just a little disingenuous to say that, you know, when we’ve seen only facilities‑based competition in an area, that that’s what Canadians are looking for. You know, we’ve seen when conditions were better that, you know, almost 10 percent of Canadians or businesses were choosing us. And I think that was showing that the facilities‑based competition wasn’t doing what it needs to do.

4383 THE CHAIRPERSON: Okay. Thank you very much for that.

4384 DR. CHEN: Can I ‑‑

4385 THE CHAIRPERSON: Oh, absolutely.

4386 DR. CHEN: Sorry, yeah, I’ll just ‑‑

4387 MR. ANDERSEN: Can you pull the mic down, though?

4388 DR. CHEN: Okay. I guess I will address the price specifically. So, the competition is multidimensional. It is investments, quality of services, and also prices. I think a big part of the incumbents’ arguments ‑‑ it was if you look at the prices ‑‑ quality‑adjusted prices, like speed‑adjusted prices having fallen over time, and so on and so forth. And that is true; prices have been falling.

4389 But prices’ fall might be due to different reasons, and in this industry I think a big component is technological progress. So, and just so the issue of market power from a purely academic perspective, one way to measure market power is to look at the price/cost margin, and that in turn gives us a sense of whether they are earning supra‑competitive returns, but that is a fairly data‑intensive exercise, if we try to measure in that way.

4390 But another, less data‑intensive but useful way is to look at it across internationally, and there’s been quite a few international comparisons done. The incumbents produced their own reports, but in my report I pointed out that there are, in my view, flaws in these analyses that make their conclusions questionable.

4391 So, I would put more faith in the independent studies ‑‑ studies that are not done by the incumbents, and specifically with regard to price I would like to point to the FCC study ‑‑ the U.S. FCC study ‑‑ actually, they did two studies, one in 2020, and the other is ‘22. And so, if you look at Canada’s ranking between these two years, despite the fact that prices have been falling, that our international ranking actually has fallen. In other words, relative to that, the countries who are becoming more expensive, not less expensive. So, that would be one data point ‑‑ the point to indicating that the falling prices, yes, but relative to our international peers, they haven’t fallen enough.

4392 THE CHAIRPERSON: Okay, thank you for that, Dr. Chen, and I am wondering if I could perhaps pick up on a point you just made about efficiency, because TekSavvy will be up this afternoon. They’ve talked about ‑‑ and I know they will speak to this today ‑‑ they’ve talked about the incumbents’ costs decreasing and how wholesale competitors are not realizing those same cost savings, and I’m just wondering if you can walk us through that in a little bit of detail?

4393 MR. TACIT: So, that is part of the problem with, you know, multi‑year studies, is that we haven’t figured out a way how to loop back and do a sanity check on the Phase II results over time and see how the market rates ‑‑ the costs of the incumbents are actually changing over time. That is, you know, one of the couple of flaws that I see right now that’s fairly major, and it manifests probably the most in the CBB rate we discussed. The other problem is how the ‑‑ you know, the Commission deals with information asymmetry issues, but I know that’s a different problem. But this particular one we do need to find a way to loop back and make sure that wholesale rates are adjusted more than, you know, once every five, ten, fifteen years. That is a problem. We need to follow the trends in technological improvement and cost declines.

4394 MR. ANDERSEN: Yeah, that CBB or Capacity‑Based Billing ‑‑ and, you know, Ian walked you through the example ‑‑ that ‑‑ that’s a real challenge in that we need more responsiveness, because certainly anyone who looks at transport costs and the cost of building transport networks, the costs have, you know, fallen quite significantly, yet that rate has not been adjusted in many years, and as you see that Moore’s Law of traffic growing, it’s putting more and more pressure.

4395 So, I think that would be our main message to you on that item.

4396 THE CHAIRPERSON: Okay, thank you for that. Just a couple more questions.

4397 One is around the quality of service issues that you talked about. So, and Vidéotron talked about this as well. You’ve talked about the issues facing the competitors to the ‑‑ you call them the ‘giant incumbents’ ‑‑ with respect to things like customer onboarding. Can you just talk to us a little bit more about what those quality of service issues ‑‑ what impact that has on consumers?

4398 MR. ANDERSEN: On consumers ‑‑ well, that’s, as they say, a great question. So, you know, we’ve submitted a very long list, and I wouldn’t try and go through them, but there are real challenges, especially when it comes to the asymmetry of what may be a retail customer of an incumbent as versus what we have.

4399 And it can be as simple stuff as just scheduling. You know, if this customer is having service and we need to arrange a dispatch, you know, when they deal with the incumbent, they might have access to the ‑‑ the retailer will have access to a tool that can tell them in real time, “We’ll have some out there tomorrow,” whereas we sometimes have to go through a portal, wait for a response that gives us a general ‑‑ and we then have to get a hold of the customer. It adds labour on our side, and it’s not a good customer experience.

4400 As I said, some of the incumbents even on ordering don’t have any kind of automated ordering, so all that ordering is done manually. There’s inefficiencies in terms of how the service is designed and interconnected, our ability to manage traffic flows, and all of these have costs. And when our costs are higher, that ultimately is going to hit the consumer. So, you have a cost element where the costs are driven up, but you also just have a ‑‑ you know, where we’re trying in many cases to certainly provide better customer service, when you’re hampered without the same symmetry as the incumbents.

4401 And then the third one probably is just in intervals, where sometimes it’s a repair or an install seems to always be a little bit faster on the incumbents, and we see that sometimes on service outages where they may have an issue, we’re trying to get it repaired, they call the incumbent directly, who seemingly can come quite quickly.

4402 Ian may have some more examples on that.

4403 MR. STEVENS: Yeah, I think it manifests itself over time. We set service standards ‑‑ quality of service standards ‑‑ years ago, and through just simple IT upgrades the incumbents kind of leapfrogged ahead in terms of what the standard of the day was to what it is today. As simple as, you know, they’re probably using SMS for dispatch or something that used to be a phone call and, you know, a long time ago it used to be two‑way radio, but, you know, those delays that were part of the process years ago are still built in the processes we have today. And they figured out ‑‑ the incumbents have figured out how to pull that out, but they haven’t back‑ported that into the quality.

4404 The impact to customers is just delay. Time, delay, rework. A missed appointment means two afternoons off of work or two afternoons working at home, and if you have to leave your home, you’re going to have to work with your employer to make that happen, whereas, you know, those happen ‑‑ we believe more on our customers than on the incumbents’ customers. But we can’t prove it. We have anecdotes and we have no evidence. You have no evidence in front of you to test that and validate that, and we encourage you to reach out, ask difficult questions, and look A to B, does this make sense? So, we have anecdotes. We think there’s a problem. But we can’t demonstrate it.

4405 MR. ANDERSEN: I know Chris wants to jump in a bit, and I’d like to give that, but I would just say that one of the reasons we suggested the Inquiry Officer is, you know, we’ve tried through CISC and it’s just ‑‑ it’s too slow. With respect, it’s just we don’t solve these issues fast enough. And when we bring it through the more traditional, I guess, application process, the problem is it bypasses that ‑‑ what sometimes I think it lacks is, where we haven’t been able to bilaterally sort it out, just getting the incumbents and our members in a room so at least we can talk these issues throughout, at least understand why they’ve designed that system that way, before we come and bring it to the Commission from an application perspective. I just ‑‑ we’re hopeful that that process will just yield to more effective dialogue, and maybe some of these problems can be solved without the necessity to keep escalating from that standpoint.

4406 Chris, I know, just wants to get on the QS regime itself.

4407 MR. TACIT: Yeah. So ‑‑ so, there are two quality of service discussions. There’s a broad one about technical and operational challenges of using the wholesale services as they are designed and with the processes that the incumbents have ‑‑ you know, have put in place, and that’s what we’re talking about in terms of the Inquiry ‑‑ to try and shrink the gap in understanding and hopefully increased cooperation.

4408 On the actual Q of S regime as it narrowly exists right now, which deals with orders, installations, repair, disconnection intervals ‑‑ those sorts of things ‑‑ there is an evidentiary problem, and that’s what I want to get to. And that’s, I do in my practice, and CNOC hears from their membership all of these stories about problems. The problem is we can’t get our arms around the evidence because of the way that the system is ‑‑ the regime is presently constructed.

4409 In a normal situation where you have a complaint of undue discrimination, you are able to point to the discrimination and then the onus shifts to the carrier to demonstrate it’s not undue. In our case, because we have anecdotal evidence that’s across so many different service providers ‑‑ it may be a few here, a few there ‑‑ we can’t really get our arms around the evidence.

4410 So, one of the two things we’ve proposed is that you require the incumbents to report on their retail numbers for the same metrics so that you can actually see if there’s a discriminatory practice going on or not.

4411 And second, that if there is, or they’re not meeting their wholesale targets in a persistent manner, that there be some enforcement mechanism. In the voice world, we used to have the ‘rate rebate plan’, but when we came to doing this in the internet world, we sort of dropped that. So, I would encourage you to think about reinstating that.

4412 But as I say, for all the rest of this stuff ‑‑ the other bucket ‑‑ we think that appointing a Commissioner as an Inquiry Officer is the way to go.

4413 THE CHAIRPERSON: Okay, thank you very much.

4414 So, just for my last question, it really comes down to the point about urgency, and you’ve talked to my colleagues about this, and Commissioner Desmond most recently. So, you’ve said time is of the essence. We know TekSavvy is saying it’s a critical and time‑sensitive proceeding. We have heard from others that it’s ‑‑ you know, we’re already too late. But of course you’ve heard the other side of it as well, and incumbents have argued that we should wait until they’ve recouped all of their investments.

4415 Can you just talk a little bit about what will happen to your members’ businesses if we don’t move forward with aggregated FTTP, or if we take too long to do so?

4416 MR. ANDERSEN: Well, the non‑aggregated FTTP ‑‑ I would just simply say, they will cease to exist. We will have no access to the service. There will be no commercial negotiations, any attempt at that. It’s been made very clear by the incumbents they have no desire to do that. So I think you would see that.

4417 The speed issue ‑‑ it’s hard to predict. We’ve already seen a major wave, as you’ve seen, of exits, and again, I can underscore that those were not for the most part short‑lived companies that had just popped up. So, any new entrants, which you need to see ‑‑ you know, we don’t have a problem with acquisition, but we want to see new entrants ‑‑ it’s going to take some time, and I think that the more entrenched we allow these allow these incumbents to gain market share, it just becomes bigger, harder for the David and Goliath battle, to try and come and compete.

4418 Chris? Sorry, did you want to clarify?

4419 Oh, I’m being told I might have said ‘non‑aggregated’. If you were not to mandate an aggregated solution ‑‑ I apologize.

4420 THE CHAIRPERSON: Okay.

4421 MR. ANDERSEN: That’s why you have good counsel ‑‑ to keep you clean.

4422 THE CHAIRPERSON: Excellent. Thank you very much for those answers. Thank you for answering our many, many questions. We would like to turn things back over to you for any concluding remarks.

4423 MR. ANDERSEN: So, there are two items that I guess we just wanted to cover, if that’s all right. Maybe one I’ll just turn over to Ian. Because there was a bit of a ‑‑ we were very happy again to hear TELUS describe it that they sell us lumber and we build a house, because I think we just wanted to underscore that, and I’d just like to go back to head start for a second and then conclude.

4424 MR. STEVENS: Sure. So, there was a line of questioning earlier this week that talked ‑‑ or evidence that was suggested that the wholesale rate of $112 against a retail rate of $120 seemed to make sense. And I just want to walk you through what we do beyond the $112, and I know you’re already digging into it and did a whole bunch of work ‑‑ asked a lot of questions around, well, what is the real retail rate? So, I really appreciate you doing that digging. But beyond that $112, let me walk you through what we do.

4425 So, 112 bucks is the access component. We talked about CBB as cash on top of that. We have to interconnect our networks with the incumbents at an AHSSPI using a network link, and that’s a few more dollars a month. So, that’s all cash going every month to the incumbent. But that’s just getting the customer connected ‑‑ the home to our network.

4426 We still have to supply hardware to the end customer in the form of a router/modem. We have technology we have to deploy, and rent space in our co‑locations, and these are big routers; they’re access routers in our co‑lo, and power. We deploy service for authentication. We have to connect to the internet through internet connections. We go to Chicago to do some of our stuff like that. That’s not free. We add a help desk, an order desk, a sales desk, a website, HR, accounting; these regulatory lawyers actually want to get paid; a billing and provisioning platform. And this is even before we put a sign out and try to market and win the heart and mind of a customer.

4427 You also ask us to deliver on innovation. Innovation isn’t free, as well. So, that’s over and above all of that. This stuff isn’t $112 with ‑‑ you know, there isn’t room, at $120 discounted retail, and discounted off that on top of the $112, to make a profit. I think that the thought of a couple of dollars between the access rate alone and the retail rate is sufficient for competitors to offer service is, frankly, ridiculous. And the notion, if accepted, is as much a threat to competition as the notion of prohibited access.

4428 MR. ANDERSEN: So the only thing I just want to state that didn’t come up was just, you know, there were several conditions that the ILECs ‑‑ at least Bell ‑‑ stated that they felt needed to be done, and frankly, some of them we agree with, which is, you know, and hearing Bell ‑‑ sorry to say ‑‑ they agree with CNOC on things, it was a new experience, but, you know, the restrictions we agreed with in terms of who can have access and the national footprint, and we already discussed the FTTN, but the one thing of theirs I really just want to talk about, and I know it’s had some airplays, is access holiday. We did, when this came up ‑‑ just like the restrictions, again, we’re not big on asking for restrictions; we’ve generally advocated to remove them ‑‑ we tried to game this out, would this really be that bad if they had this multi‑year block? And our concern really, that we’d ask you to be careful of, is it’s going to lead to, we believe, excessive gaming. You know, suddenly every MDU, when built, doesn’t have access, and we don’t see the investment risk on that if there was a head start.

4429 Seeing, you know, just on my street alone in Toronto, where I’ve been built out for a few years but they’ve just built a cul‑de‑sac, so does that now get ‑‑ and who ‑‑ when does it start? And ‑‑ and who’s going to track? Is it, you know, because we don’t have access to data, do we just have to believe them when they say that that’s ‑‑ that period has occurred? And I think it could also lead to some ‑‑ some unintended consequences where one incumbent sees the other one building up a street and quickly builds up the second wire because they want to again have all wholesale access locked out.

4430 So, we really just say that that would be a proposal that we don’t think denying access to competition for a period of time is a good idea, because we think they have other motivations. Like, even in Bell’s diagram that they showed you on the complexity, you know, I noticed that down the street they’re putting 5G antennas. They’re motivated to build that. We’ve clearly heard that wireless is a big motivator for them to sell. You know, they are going to continue to make that investment to just be able to build out their 5G networks, because those antennas need to be so shortly placed.

4431 So, I just wanted to give a moment on that because I know there have been a lot of air time in others to ‑‑ to head starts. I think Chris has one last item, I promise, and then we can wrap up. I apologize for taking up ...

4432 MR. TACIT: So, just ‑‑ I just wanted to stress how important the rate‑making process is, not just in terms of scrutinizing data, but the process itself. And in 2016, you adopted a fairly rigorous way of requiring incumbents to make sure they complied with all their requirements under Phase II when they provide a cost study, to provide a base case that’s clean, in other words, if they want any deviations, they have to put it in a separate study and not mix it all together, and to comply with the Commission’s disclosure requirements. They didn’t follow that in these proceedings at all, and we would urge you to really reimpose that discipline and hold them to account and levy consequences if they don’t. Thank you.

4433 MR. ANDERSEN: So, thank you very much, again, for the opportunity to come speak. Our thanks to staff, who I know have to go through extremely long ‑‑ and to you, the Commissioners and Chair and Vice Chair for ‑‑ we really do appreciate the opportunity to see you. It’s ‑‑ you know, I know a lot gets lost in the essence of massive, multi‑hundred‑page submissions, so to be able to talk through these issues is very important to us.

4434 I’d just leave you that we stress that we think that access to all Canadians is important for competition. I think we’ve demonstrated, including some of our competitors ‑‑ incumbent competitors ‑‑ have validated that we do provide value and competition to Canadians. We have a longstanding history of that all the way back to the dial‑up beep‑beep‑beep basis, as Mr. Peladeau said yesterday, in many cases. And while there was certainly some pessimism recently, this proceeding has brought a lot of our members optimism. I encourage you to keep at the rapid pace, and I know that policy is never fast, but we really urge you to try and move forward as fast as possible on this issue and, you know, roll this out so that all Canadians can enjoy it.

4435 And with that, I thank you for your time.

4436 THE CHAIRPERSON: Thank you very much, CNOC. Thank you for answering two hours’ worth of questions. We really appreciated the discussion as well.

4437 THE SECRETARY: Thank you, Madam Chairperson. We will go for a break and resume at 11:15. Thank you.

‑‑‑ Suspension à 10 h 57

‑‑‑ Reprise à 11 h 15

4438 THE SECRETARY: Welcome back.

4439 We will now hear the presentation of BC Broadband Association.

4440 Please introduce yourself and your colleague and you may begin your presentation. Thank you.

Présentation

4441 MR. ALLEN: Thank you very much.

4442 Good morning, Chairperson Eatrides, Vice‑Chairperson Scott, Commissioner Desmond and Commissioner Naidoo, and Commission staff.

4443 We would like to thank you for the opportunity to present to the Commission. This is a longstanding proceeding that we’ve participated in for over a decade and so, it’s really important to us to have this opportunity to speak in front of you. So, again, it’s very much appreciated from us folks out West.

4444 My name is Bob Allen and I’m the President of the BC Broadband Association and the owner of a small internet company in the Interior of British Columbia.

4445 My associate Curtis Chiang is the administrator of our Association.

4446 The BC Broadband Association has been representing the small competitors in the telecommunication marketplace in Western Canada since 2008. Members of the BCBA deliver broadband services to urban and rural subscribers using their own fibre infrastructure, wholesale access from the incumbent providers, and fixed wireless access services particularly in rural markets but increasingly in urban markets.

4447 Our first submission on the wholesale access services came in response to the CRTC proceeding 2013‑551, Review of wholesale services and associated policies. I’d like to read a short quote from that proceeding because it struck me that not much has changed in 10 years:

    “Much debate has taken place over the past few years on the state of wholesale services, not only regarding pricing, but also the ability to match the speeds that incumbents provide to their retail customers. Plainly speaking there are virtually no new entrants in the market, and due to mergers and acquisitions along with financial distress and insolvency, the number of existing competitors will continue to diminish. The stronger, more adaptive ISPs will be the ones that survive and continue to provide choice to consumers. They will need the Commission to ensure a level playing field if they are to have any chance of competing against the market forces of today’s telecom giants. Currently the wholesale marketplace represents a dwindling market share. TELUS and Shaw dominate the residential and business markets here and continually sell at break even pricing to gain market share. Large scale electronics like iPads and LCD Televisions are given out to new customers by TELUS and ultra low entry points for several months are offered by Shaw. This is nothing new though, the biggest change to the landscape has been the ability to bundle.”

4448 That’s from 10 years ago. As you can see, things haven’t changed that much in the last 10 years, as the above statement still applies to the current wholesale marketplace.

4449 The big news today is the incumbents using wholesale to gain market share in their non‑traditional territories.

4450 The BC Broadband Association presented a detailed response to the Commission in June of 2023, which appears on the public record. We are deeply concerned that our members will continue to suffer business harm unless this very important proceeding is able to salvage the business models of the remaining competitors in Western Canada.

4451 We wish to speak directly to the Commission on several issues that have arisen since our original submission. There has been much discussion in the proceeding of these issues.

4452 The first point that we would like to comment on is the rates that have been provided by incumbents in their initial tariff filings. While we support the Phase II costing method, these rates are too close to the current retail offerings of the incumbents. This indicates that the underlying cost may be incorrect or that incumbents may be using predatory pricing to limit competitors’ opportunities.

4453 It is important that the Commission set the wholesale rates at a level where competitors can compete with the current retail pricing and bundling practices of the incumbents. As many intervenors have mentioned, there are numerous examples of FTTP services being offered at rates equal to or below the current proposed wholesale rates. If the rates are set correctly, we would expect to see new competitors entering the marketplace.

4454 Our second point is that we are disappointed that the Commission has not mandated the incumbent carriers in Western Canada to participate in the FTTP access regime. Once again, we are faced with a model that seems to divide Canada into several regions and our region is being left behind. In the past, Western Canada has been excluded from the disaggregated wholesale market.

4455 We believe that there is a role for both aggregated and disaggregated models in mandating FTTP access. There should be an opportunity for a competitor to reduce their costs by investing in a disaggregated access to a central office once they have acquired sufficient customer base to justify the investment. There should be no impact on other competitors, though, who are using aggregated service to reach their base if a competitor is able to achieve a successful disaggregated FTTP solution within a central office.

4456 Our final point and perhaps the greatest issue of concern is the use of the wholesale regime by incumbent flanker brands to provide bundled services outside of their traditional operating territories. The purchase of wholesale‑based competitors such as Start.ca and Altima by TELUS is a significant change in the traditional relationship among the incumbents.

4457 Using TPIA access, TELUS’s flanker brand Koodo is now able to offer home internet as a bundle with its mobile services in Eastern Canada. When bundled, a 100 Mbps home internet service is available at $44 per month. This price is very close to the actual price paid by a wholesale‑based competitor to the TPIA provider. This pricing pattern is very similar to the retail pricing offered to a new customer for FTTP services in that the wholesale price and the retail price are virtually the same. Given the market power of TELUS and their ability to sell this service at cost in order to obtain mobile subscribers, there seems to be little opportunity for non‑incumbent competitors to operate successfully.

4458 Access by the incumbents to the wholesale regime is an important issue within this proceeding. The BCBA supports the restrictions proposed by CNOC for access to wholesale rates by large providers. We agree with CNOC that incumbents should not have access to rates within their traditional operating territories and that the three national carriers, Bell, Rogers and TELUS and their affiliates, should not have access to wholesale rates. This is necessary due to their dominance across multiple telecom markets that can harm competition. We are also of the opinion that any off‑tariff rates negotiated between parties should be published.

4459 In closing, we believe the Commission must limit the market power of incumbents if independent competitors are to continue to exist. While there appears to be benefits to Canadians in the short term by allowing national mobile providers to access mandated wholesale pricing in that they can obtain home internet services at a relatively affordable price, it is unlikely that these prices will remain in the market once the remaining competitors are driven from the marketplace.

4460 Thank you for the opportunity to present our position on these important issues.

4461 THE CHAIRPERSON: Thank you very much to BCBA for participating in the proceeding but also for being here with us today. We really appreciate it.

4462 I will turn things over to my colleague Commissioner Naidoo to start with the questioning for the Panel. Thank you.

4463 COMMISSIONER NAIDOO: Thank you so much for being here. I know you guys came a long way from the other side of the country, so it’s much appreciated.

4464 Wholesale‑based ISPs have had varying degrees of success across Canada possibly due to unique market conditions in each region. When it comes to B.C., which obviously is your territory, your area, the success of wholesale‑based ISPs has been pretty limited. So I’m wondering what factors, including market‑specific factors, could explain why wholesale‑based competitors have been less successful in Western Canada, in your view, than other regions, and particularly, when we’re saying other regions, Atlantic provinces.

4465 MR. ALLEN: The existence of competitors, I think, traces back to the dawn of the internet, when dial‑up internet was a new emerging technology and a relatively simple technology that could be deployed by a small competitor as easily, and perhaps more easily, as the large incumbents, leading to those small competitors actually being the first companies to offer internet to Canadians.

4466 And indeed, I think there was a period of a couple of years when they had a heyday of signing up Canadians to this new service. And many of the companies that you’ve seen recently exit the marketplace actually date back to that era and were the guys hanging the modems on the wall and supporting that crazy dial‑up industry. So, you know, those companies kind of got off the ground and had a good opportunity.

4467 Then along came the entrance of the incumbents into the market, particularly with their high‑speed products. Although in those days it was a 1Mb service, that was still pretty impressive.

4468 But those 1Mb wholesale rates that were offered at the time ‑‑ and again, thanks to the Commission of the day who allowed those dial‑up competitors to have access to the incumbent networks. Otherwise, they immediately would have gone from feast to famine and been driven out of existence.

4469 So, it was good that they were allowed access, although it was, again, at rates pretty close to retail pricing. But the company did get sectioned up in the tariff regimes and the products offered by the incumbents, much as it is today.

4470 As you’ve brought up several times here, this is not a national market. I suppose it should be, we’re all Canadians, but because of the different incumbents in the different areas and the different practices and the different tariffs, we have kind of ended up with this Central Canada, Western Canada, Prairies and Eastern Canada kind of pricing and competition regimes. And here we are 25 years later with quite a difference actually in the regimes.

4471 In Ontario, the DSL product that was offered to competitors was more expensive on a port‑based price than what was offered in Western Canada. However, we had to apply our own traffic to those circuits in our model. In the Central Canadian model, traffic was included in the ports, but they were quite highly priced against the retail marketplace.

4472 But then the consumers began using more data and that created an opportunity in Eastern Canada for those companies to actually compete using those tariffed prices because they could satisfy the large usage competitors.

4473 And recall, this was all before the streaming video revolution. These people were just people that spent a lot of time on the internet and they needed more than 100MB of traffic. So, that opportunity really allowed companies like TekSavvy and the larger Eastern CNOC members to get out and grab hundreds of thousands of customers.

4474 And remember, in the dial‑up era they had the whole market. So, when they ended up with only 300,000 or 400,000 customers, they were still doing pretty good, but it was down from where they were in their glory days. But they were very large companies and they’ve been able to hang on longer than the western companies who really didn’t have that market opportunity due to the tariff model.

4475 We had basically a model similar to the capacity‑based billing model of today, where the ports were mandated but the access of getting the traffic onto the ports was not mandated. So therefore, the incumbent could jiggle the price of the access to the point where you didn’t have a competitive opportunity.

4476 That didn’t quite play out in Ontario, but it did play out in the cable companies and plays out to that model today, where capacity‑based billing in the eyes of the people buying it is overpriced and is an opportunity for the incumbent to make excessive profits off of the wholesale and also prevent them from providing higher speeds where more traffic would be required.

4477 And that’s where you’ve ended up with this situation, particularly in Western Canada but I believe it’s similar in Eastern Canada, where what the new competitors are left to sell today is TPIA at low speeds.

4478 And I would like to comment that those low speeds are important not only to those competitors but also to Canadians because the pricing that’s offered in those models is much better and if you’re a cost‑conscious Canadian, $44 is better than $100 a month for your internet and you can watch your streaming video on a 100Mb service quite adequately.

4479 So, really, there’s an important part of the consumer picture here to not see that part of the market go away as part of this new regime where we have nothing to offer at lower price points. Yes, we like to compete on service, but I think there’s a reality that the smaller players made their way in the world by having a little bit better pricing than the incumbents and having lower overheads so that they could survive at those lower prices.

4480 COMMISSIONER NAIDOO: Thank you very much.

4481 You say market share of wholesale‑based ISPs dropped sharply in recent years partly due to incumbents acquiring independent ISPs and then using them as flanker brands and then offering below‑cost bundled services and rates to incumbents’ customers.

4482 Some argue that flanker brands aren’t actually meant to address competition from wholesale‑based ISPs but are instead a way for incumbents to differentiate their products in a very highly competitive market. I’m wondering if you can respond to that.

4483 MR. ALLEN: Well, I think that the strategies of the large national providers are actually based on deep market studies and their own needs within those markets and their own sales targets within those markets and that the competitors actually are not a huge part of their decision‑making process. So they maybe think a little bit about us when they’re setting their pricing packages, but I really think they’re more about trying to get their subscriber ads for the quarter and trying to churn customers back and forth.

4484 We know that there is an awful lot of churning that goes on now between those ‑‑ there’s a lack of new customers, so really, your source of customers is to pry them off the other player and usually price is your major tool for doing that.

4485 So, I don’t know if that answered your question exactly or not.

4486 COMMISSIONER NAIDOO: I want to stick with the topic a little bit. Are there factors other than incumbent pricing that have limited your members’ competitive performance?

4487 MR. ALLEN: Well, I know it’s out of the scope of the Commission here, but the changes to the access to spectrum for the fixed wireless providers, who were once a very dominant force in Western Canada, both in B.C. and Alberta, and were the largest contingent and most successful contingent in our membership, the loss of access to the 3.65GHz spectrum and being moved up to the higher band really was a bit of a death knell for many of them and when they could see that was coming their way they began looking around to exit, and it was a time when it was convenient for TELUS to buy those small companies.

4488 And I would like to point out that these companies selling themselves is a natural part of a business cycle that people, perhaps after 25 or 30 years, they look to exit and collect their reward, so to speak, if they’re still in business. The phenomenon here is that they’re not being ‑‑ the companies are not being acquired by new entrants or by the existing smaller players amalgamating themselves, as was the case in the dial‑up era or even in the wireless internet provider era, but in fact they’re all being acquired by the incumbents.

4489 So that’s the dark side of this acquisition story, is that it’s not that they’re not being offered a reasonable price for their business, but they’re not ‑‑ it’s not that the sector is getting healthier by this practice. We have the incumbents absorbing them and no new entrants moving into the marketplace. So, I really think that’s the pattern there in who disappeared and we’re down to just a couple wholesale companies here in British Columbia now.

4490 COMMISSIONER NAIDOO: Thank you for that.

4491 I’m sure that you’ve been watching the hearing throughout the week. CNOC, you probably saw, is advocating for aggregated access to all incumbent FTTP networks. Some intervenors, though, like PIAC and OpenMedia, are also arguing for the Commission to move away from facilities‑based competition in favour of strengthening wholesale‑based competition. But incumbents say that mandating wholesale access disincentivizes network investment.

4492 So, what are your views on the claims that mandated wholesale access is a risk to network investments and how do you think we should mitigate ‑‑ as a Commission, how should we mitigate that risk?

4493 MR. ALLEN: Let me say that on the topic of telecommunications investment in Canada, I think we should follow the money. Where does the money come from? It comes from Canadians. The Canadian public are the ones who are in fact coming up with the money to build these networks and the shareholders of Bell are actually not the source of the capital. They are lending the money to the market and expect to get it returned. The Canadian people are the ones paying it and they’re paying it through their higher than international rates. So, there’s a lot of money that’s been generated in profits by these companies, enabling them to borrow the money and build the networks.

4494 So, the real threat to investment in terms of our Canadian telecom infrastructure is actually competition between these three large companies kind of going off the rails, and where they have their prices from what they would like to charge, of $110 to $65, well, there’s an awful lot of money being left on the table, so to speak, in that practice and that money won’t be available for the constructing of anyone’s telecommunications infrastructure.

4495 So, to our point of how we feel that you need to take a serious look at who has access to the wholesale regime and denying certain companies ‑‑ which may seem a little unfair, I admit. Why would Videotron have access and not Bell or TELUS?

4496 But, frankly, if we allow TELUS into the Eastern markets ‑‑ and they would be good for competition and prices would stay at the $65 per Gb service for maybe a long time because of that ‑‑ well, we would have to let Bell into Western Canada and that would be the end of the small competitors, to boot, and this whole national battle to churn customers back and forth and tons of advertising. So the money would go to the advertising industry, which sorely needs it, I hear. But in terms of money going into the pockets of the telecommunication companies to build fibre infrastructure, I would say that there’s a much greater loss of capital that would be caused by that market condition than a few small competitors trying to sell for $10 less than the going rate to get a customer.

4497 So I think we have to take a look at the triggering of that national, you know, pitted battle. I mean, I think Bell has stated very clearly that they intend to come to B.C. and clean house, and as opposed to keeping their prices up a little bit in the east and investing into the remaining 30 per cent of homes that are not connected.

4498 So I think the Commission would not want to trigger that rather short‑term benefit to the consumer, yes, but then where’s the money coming from for our networks?

4499 COMMISSIONER NAIDOO: Incumbents claim that wholesale‑based competition reduces their ability to deploy networks, particularly in rural, remote, and Indigenous communities. How do you respond to that?

4500 MR. ALLEN: Well, certainly, it does cost more money to construct rural networks. And British Columbia is a very rural area, and TELUS has done a pretty I would say impressive job of building out its rural infrastructure even before the current grant regimes. Many of the WISPs found themselves overbuilt by fibre, again, causing along with the loss of spectrum, made them feel like selling out because a well‑funded competitor would spend $7,000 or $8,000 per home to steal their customers. Well, stealing might be a strong word, there, but to acquire their customers. And so you know, that was a big investment.

4501 Now we have in British Columbia alone an $830 million fund that was put up by the federal and provincial governments to assist TELUS, particularly, in building out those rural markets. So there is an awful lot of subsidy out there that’s not really talked about in this discussion of higher cost.

4502 But putting that aside, even if you were paid a hundred per cent to build a facility, the cost of maintaining the facility in a rural setting is very high. Forest fires, disasters, floods ‑‑ these kinds of issues drive up the cost of having, you know, three or four kilometres of poles to reach a single farm kind of setting.

4503 So you know, I do have some sympathy for the idea that, you know, if you’re going to invest in rural marketplaces, do you really have to share that customer base, you know, by having an attractive cost that really is based on what the prices should be in an urban centre like Vancouver? You know, and they have their flat provincial pricing, so that’s very good that they, you know, they don’t actually charge the people in rural British Columbia the higher cost. They pay the same as the people in the city, roughly. Maybe not quite so many promotions. Maybe they don’t get the sales, you know, because there’s no need for the sales.

4504 But I think there is the tiering and the banding process that we used back in the voice services days of having rate bands to try to recognize that telecom providers had higher costs. So you could be looking ‑‑ you know, you’ve yet to call for the tariffs from British Columbia, and you could be looking at band tariffs.

4505 I think that the remaining wholesale providers in British Columbia are largely urban‑based and are not particularly interested in the rural marketplace. I mean, you do have to make the odd truck roll and visit the odd customer in the wholesale model. And particularly in the wholesale business model, you really have to be ready to go to the person’s house. And I don’t think that the wholesale competitors are really too concerned if they can’t get, you know, the urban port price and an aggregated link to that home in a Bella Coola or a New Aiyansh setting.

4506 So I mean, I do think that the Commission, you know, doesn’t want to discourage rural build, doesn’t want to see rural Canadians left behind. So, you know, that’s probably the way to recognize that, or maybe sheltered time periods. Because it’s really not the lifeline of the remaining wholesale providers. They want back into the urban business markets, and they want back into the, you know, being able to sell a gigabit head to head against the incumbents.

4507 COMMISSIONER NAIDOO: So what significance do you think deployment of new facilities by non‑incumbents plays in the fulfillment of the telecom policy objectives? And what role do you see your membership in particular playing in such investments?

4508 MR. ALLEN: Well, you know, if you think about those investments outside of a wireless infrastructure, you know, fixed wireless access is still a viable model and has some new life breathed into it with some new technologies. So I think you will see investment by non‑incumbents in that model because you can build that without any support or assistance from your competitor, which is always a preferable model. So you will see investment in wireless technologies to deliver Internet, home Internet service.

4509 But in terms of building fibre facilities, you would see that in the MDUs, which we see that’s a very active and successful segment of the Canadian telecommunications landscape. And we certainly support Beanfield’s issue with the incumbents using their market power to buy off the developers and close off choice for large chunks of the Canadian public through that process of exclusive site to access to MDUs. I think that’s wrong and that the Commission should ban that practice.

4510 And that is where a new competitor can afford to build fibre infrastructure overtop of the existing folks. And you can have three fibres to every suite in a condominium cost effectively. Now, if you move into a residential subdivision, you know, surrounding a large city, the homes are still pretty close together, but it’s a pretty tough row to hoe because you’ve got to deal with the utilities who have never really wanted to participate in the competitive landscape particularly. They don’t even like the incumbent phone companies. So you know, building out onto that is not going to be very attractive.

4511 And you’ve had these discussions here about once we have two technologies, even if they’re both fibre technologies, reaching a house, you know, should we be spending more money for a third connection to that house? We’ve already achieved a redundant option and at least two physical infrastructures. So at that point, you know, competition is really best done at a service level through innovation and price efficiencies and service. So you know, there really isn’t much of a business need or a societal need to build that third fibre to a house, and there’s not much of a business case. And then of course spread the houses farther apart and, you know, the case is even more reduced.

4512 So I do think we do have some small members who were able in the early days of the grant regimes to gain access to some grant funding money that enabled them to get into the fibre business, buy some equipment, some bucket trucks and plow machines, and they were able to do those things. So you know, I think we will see little pockets of fibre competition from our members where the conditions are right, and hopefully where some funding dollars ‑‑ the CRTC does have some funding dollars.

4513 Now, I will say you’ve probably heard the story across Canada that the small private companies have felt shut out of the grant regimes for rural broadband. And that’s the case in British Columbia. You know, we really don’t know of any small private companies who were able to access the $830 million fund.

4514 And we are very disappointed in ISED’s business practice that you can make an application, and the way that you learn that you application was not successful was by waiting three or four years and then you’re pretty sure that you were unsuccessful, or your competitor has shown up and they’re selling the service. But the fact that your application for funds has been denied is not, you know, conveyed to you. So you really, you know, after a few rounds of that, you become very discouraged of applying for these grant funds.

4515 And without the grant funds, then the new unbuilt rural areas are really not within the domain of the competitors. They need those grant dollars in order to build that, and they are being shut out of that regime.

4516 Perhaps the CRTC with their funds could do something to step up and balance that and tell people if their grants are not successful and award some grants to private companies ‑‑

4517 COMMISSIONER NAIDOO: Thank you ‑‑

4518 MR. ALLEN:  ‑‑ rather than just to TELUS and Rogers.

4519 COMMISSIONER NAIDOO: I have a lot of questions, so I’m just going ‑‑

4520 MR. ALLEN: Oh, sorry, sorry.

4521 COMMISSIONER NAIDOO:  ‑‑ just move on because I want to get ‑‑

4522 MR. ALLEN: No, no, I want to answer your questions ‑‑

4523 COMMISSIONER NAIDOO: You’ve come a long way, and I really want to make sure that we touch on all of the things that are important to you including the stuff that I read in your intervention, so I’m just going to move on to another topic now.

4524 Some parties in this proceeding have indicated that if the Commission were to permanently mandate aggregated FTTP access, there should be limitations so that certain service providers could not access that service.

4525 So I’m wondering what your perspective is on whether incumbents should be excluded from accessing a mandated aggregated FTTP service, and if so, who do you think should be excluded from that and why.

4526 MR. ALLEN: Well, I think that the position that CNOC has come around to where they really have selected Bell, TELUS, and Rogers as the companies that should not have access to this regime either within or without their traditional territories because of their market power.

4527 And I think that you can’t make a ‑‑ it’s not fair to make a statement that says that all incumbents, you know, are banned from that practice. But because, you know, take in the case of Vidéotron, who is trying to gain market share. And, as we all know, if you really wanted to become a significant player, you need to bundle all four services together to be a successful competitor. So Vidéotron has no real way to do that bundling in British Columbia except through wholesale or TPI access. And really, they should really still be able to sell fibre as well if they’re going to be a true head‑to‑head competitor against TELUS Mobility.

4528 So and Cogeco, who bought Oxio, is actively using TPI access that they obtained through Oxio in the British Columbia marketplace. But Cogeco doesn’t have access to mobile very well, so they’re not a ‑‑ they are not an equivalent competitor even to Vidéotron. So barring them from doing it, you know, that’s not really too fair.

4529 You know, Eastlink has properties all across Canada, you know, and but you know, they’re, as they mentioned, they have some tough business models in those small cable networks. And I would say barring them from accessing incumbent fibre outside of their territory would be wrong. So it is a little bit of a case‑by‑case basis.

4530 And if you take a look at Rogers, Rogers would, you know, giving Rogers the ability to access Bell and TELUS fibre might be kind of interesting, although it certainly would discourage them from investing in their new equipment that they propose. Maybe they could just switch over to wholesale and scarp their generational investment, which again wouldn’t be good for Canadians. But allowing Bell and TELUS to use their services to steal their customers isn’t really very, you know, not very fair.

4531 COMMISSIONER NAIDOO: All right so ‑‑

4532 MR. ALLEN: So I would say, you know, bar the Big Three in and out of territory, and let the smaller incumbents have access to it outside of their territory.

4533 COMMISSIONER NAIDOO: Thank you for that. I appreciate it.

4534 ILEC FTTN services rely on copper‑based technology that some have said should be considered to be legacy. Would it be appropriate in your view for the Commission to no longer mandate or, in other words, to phase out ILEC FTTN wholesale HSA services and instead rely on their FTTP facilities in a way to support competition?

4535 MR. ALLEN: Well, I think that, you know, the regime is, as it’s currently mandated, is quite well established. And so it’s really not a big deal to let it continue on to finish its transition in a successful business way.

4536 I mean, at the moment, you know, we’re having similar problems in western Canada where TELUS removes the copper when it places fibre. And yet more or less you can keep your existing customers going.

4537 And there are a number of MDUs smaller, not the big high condo towers that are so desirable for the new entrants, but you know the 40‑suite wood‑frame buildings that are not ‑‑ they don’t have fibre distribution within them. And that’s quite expensive to do. And both Rogers and TELUS in British Columbia have a challenge to get fibre to those folks. So really, if there is to be two competitors in that building, it will be DSL and cable.

4538 And maybe for some time, especially given these current turmoils in the marketplace and investment levels, maybe we won’t see people offering to completely fibre that building in the hope of getting enough customers to pay for the fibre plant. So that’s where the DSL is still in existence. And there are buildings that that is a competitive product that is a little more expensive right now than a cable product, but it may be the only facility that’s left working in the building.

4539 If a cable connection fails in one of those older buildings, then the cable company generally just abandons the customer. They really don’t send a crew in to fix that cable. They’re just out. So now the only way that those people can gain access is through the copper. And if no one’s going to run fibre to their suite because of economics for another five years, well, we need the regime for five years.

4540 So I don’t think there’s any real pressure or power to suddenly remove the mandated access to that. It doesn’t really benefit the incumbent. It doesn’t benefit the consumer. And it harms the small provider who is, you know, that’s his remaining revenue stream, so.

4541 COMMISSIONER NAIDOO: I appreciate it. Thank you very much.

4542 Sticking with FTTN, if the Commission no longer mandated ILEC FTTN, should it also apply a similar regulatory treatment to the cable carriers and phase out some of their lower speed services? And if so, in such a case, what would you consider an appropriate equivalent lower speed? Would it be up to 50 megabits per second? One hundred megabits per second? A hundred and fifty megabits per second?

4543 MR. ALLEN: Well, I think that there is another proceeding hinted at here in that if it was all going to be fibre to the home, and you could buy those products from ‑‑ you know, at most service addresses from the cable company, then we could dispense with regulating the hybrid fibre‑coax industry.

4544 But that’s not the case. And in fact, you know, the incumbents, the cable incumbents feel that DOCSIS 4 will allow them to carry on and not have to endure that expense of replacing the cable to the house from the node in the street or the amplifier up in the poles to the house. That’s still an expensive step to take. And if they can deliver competitive speeds without doing that, well, that’s going to be a much smaller investment for them, but it will be a different technology. And so really, it’s the same old cable delivery system from a rate structure that we’ve always had.

4545 So I don’t see changing that rate structure, other than addressing the carrier‑based billing that is preventing the incumbents from offering higher speeds over the hybrid fibre‑coax model. So I think that is really more about addressing the missing piece of that regime rather than saying we don’t need it anymore, because I think we’ll need it for the considerable future.

4546 Now, it would be great if there were $25 hundred‑megabit ports available, you know, so that that could be your lowest offering to a Canadian home, and they could still have a $45‑a‑month or $50‑a‑month home Internet service that gave them adequate access to the Internet. They shouldn’t all have to buy $125‑a‑month circuit just to, you know, watch Netflix.

4547 So I don’t think that, you know, unless you were going to ‑‑ if you want to step into and help the cable rate portion of it, then you need to address this capacity‑based billing. And I have a feeling that that’s liable to raise its head in the new tariff rates, although we haven’t examined them in as great detail as the CNOC guys, but they seem ready to go with it. But you know, but there is that capacity‑based billing component built into that model as well. And that can be a way that the incumbents are able to throttle the access to the market of the competitors.

4548 COMMISSIONER NAIDOO: Thank you. I want to stick with the topic just a little bit longer. I just wanted to know that ‑‑ you touched a little bit on it, but how would this regulatory approach affect your ability to compete in the long term and the short term?

4549 MR. ALLEN: Well, in the short‑term, that’s about all we have to sell at a wholesale level. DSL has many, many missing service addresses. And it’s not keen ‑‑ the incumbents are not keen, and they do like to take it out when they can. So we can’t rely on the fibre to the node as a, I think, business with any future. It’s just a bit of a revenue stream right now.

4550 So our future is access to fibre to the premise or TPIA. And so the TPI access is very important because that’s what we sell today. That is where we and Oxio and Vidéotron ‑‑ those are the products that they’re bundling in order to produce a home Internet bundle, as these, you know, lower‑priced products. They’re not bundling a $65‑a‑month port that has another $25 of other costs in it. That’s going to give them a $98‑a‑month or $100‑a‑month package, and that’s not going to help them sell their low‑price phones or get into a market where they don’t have mobility, as in the case of Cogeco.

4551 And consumers, you know, they just want an Internet that will give them the ability to watch TV and surf the net. Some people would like to have a gigabit, and most people don’t use a gigabit, even if they buy it. But I think that, you know, there are many, many Canadians, particularly in our current price pressure world, where they don’t really want to pay $95 a month for their Internet. They want to pay 50. And if they can get a 75‑megabit cable package that will do that for them, they’re happy with that.

4552 So don’t take that away in this process, because you’re harming the small competitors, taking away their only things they have to sell, and you are denying those Canadians who are using that as a way of getting an affordable home Internet service.

4553 COMMISSIONER NAIDOO: So I want to ask about a hypothetical. If the Commission decided to no longer mandate such lower‑speed wholesale services, should there be, in your view, a gradual sort of phase‑out period? And if so, what do you think would be an appropriate time frame for such a transition?

4554 MR. ALLEN: Well, again, back to, you know, you could phase out the competitors’ market opportunity, and they’d get phased out too. But it’s the Canadian public that I’m concerned about here that there should be a $50‑a‑month home Internet package available to Canadians.

4555 Now, if the lowest speed that they can get is 100 megabit, fine. That’s really just an arbitrary pick a number. As long as the capacity‑based billing allows the ISP to sell that product competitively and achieve that price point, then we can get rid of the 30‑meg and the 50‑meg and the 75‑meg and the various other speeds that are floating around down there because, you know, times have moved on, and really, it’s artificial to cap those speeds.

4556 But it’s the price of the port that’s important. If you just take your lower speed port, your 25‑ or 30‑megabit port and make it a 100‑megabit port at the same price, well, go ahead and phase out those lower speeds. But don’t phase out those prices to Canadians and to our members, because that’s what we live on. And it isn’t really the speed, it’s the price, so if you can improve the speeds for Canadians, but keep that $50‑a‑month home Internet package available to those who want it.

4557 COMMISSIONER NAIDOO: Thank you very much for answering all my questions. And those are all the questions that I have, but I know my fellow Commissioners have questions as well.

4558 THE CHAIRPERSON: Thanks very much. Thanks, Commissioner Naidoo, thank you.

4559 I will turn things over to Vice‑Chair Scott.

4560 VICE‑CHAIRPERSON SCOTT: Thank you, Madam Chair.

4561 Thank you first and foremost for your thoughtfulness and candour on kind of the financial underpinnings of broadband builds. I thought that was very useful.

4562 I’ve got a couple questions in the area of costs, wholesale rates, and retail rates and how you fit in that triangle. So we’ve heard a few people raise the issue of predatory pricing over the week. Do you see evidence of behaviour from the incumbents that you would consider predatory as distinct from long‑term sustainable downward pressure on retail pricing? Is there something specific that’s predatory, or is this competition working as it should to bring down prices?

4563 MR. ALLEN: I think I have to agree with what TELUS said regarding, you know, why they set those prices at what appears to be the cost of the port. So they would sell the port to us for $65 or to the end‑user for $65. And so that looks like an effort to put the other, the little guy out of business.

4564 But actually, as I’ve said, I don’t really think the small competitors are a big part of the landscape of those companies. They are looking at each other.

4565 In the case of Western Canada, where Rogers and TELUS ‑‑ you know, they are having a very lively competitive battle. Even though there’s two of them they are certainly not friends to each other. TELUS was not pleased about the Shaw acquisition, as you are aware, and they are ready to fight.

4566 Rogers, now that they’re back in town after their hiatus of 20 years, and so a lot of that pricing is really ‑‑ you know, pressure back and forth between those two folks ‑‑ you know, Rogers, again, they spent billions of dollars acquiring Shaw, and they need to recoup that money from the consumers in order to make that balance, that financial statement, and so they want growth and, TELUS just doesn’t like, you know, having a competitor like Rogers in their market.

4567 And so, I really think that these prices are not so much predatory as a sign of an intense competition that can take place between these two large guys, which is really more about, you know, schoolyard, standing up for yourself, two tough guys going at it, you know? I mean, if they’re pounding away at each other and it’s a fair fight, that’s fine, you know? If they start taking on some small guy with the same type of kicks, then that’s not a fair fight, but it’s really the same kick.

4568 So, you know, I think that it’s really not a classic case of predatory pricing or that they’re doing it to put the remaining little guys out of business. I think that if Bell showed in British Columbia we’d really see something that you might call predatory pricing, because they really would take the gloves off, in an attempt to gain market share.

4569 VICE‑CHAIRPERSON SCOTT: Thank you for that. So, for the ‑‑ you used the phrase ‘little guy’ so I don’t mind using it. So, for the little guys to carve out a space is there enough room just on the internet access service for the little guys to have a viable business model do they really need to sell some kind of bundle or some kind of value‑added service? Like, is there enough margin just on the spread between a cost‑based rate and what you need to sell at retail? Or do you need to sell something beyond that in order to keep going?

4570 MR. ALLEN: I think that, you know, you do want to differentiate yourself. Many of our members took up video services to try to get at least to as close to a bundle as they could, by bundling phone services and video services, linear TV and internet together. Although they really didn’t make any money on the video portion of it they just did it to try to end up with a bundle to attract customers, but it wasn’t really a great revenue source, and it was difficult to support and deploy, against the face of the very slick offerings of the incumbents.

4571 So, really, it is that, the revenue on the internet component, that is their main bread and butter bottom line profit driver, and if they are successful in that, as we have been over the years, there have been various rulings that have allowed for opportunity, and let’s hope that this FTTP ruling will be another one of those opportunities where people can say: Hey, if I buckle down and I can get to this thousand‑customer breakeven point by selling at cost until I get there, maybe then I can have a bit of a revenue stream, pay by bills and my staff, and then, now that we can at least keep the wolf from the door, maybe now we can start to innovate and differentiate ourselves.

4572 But all that innovation and differentiation costs money, so it’s difficult, from that point of view.

4573 So, I do think that it gets some help back into the small competitor marketplace, they do need some margin. And I think there was going to be some margin if the price was going to be 125 dollars a month and we could get it at 65 or 75, then sure, that’s a great opportunity. You could so some marketing and roll a few trucks and hire a few people. If it’s only 10‑dollar‑a‑month per subscriber margin, well, how many subscribers does it take to pay one office person? (laughter)

4574 So, you know, not to say that we want the Commission to give us a regulated profit, a mandated profit, percentage, or something like that, but at the same time we have to recognize that that’s the building block of what you’re doing. That’s what pays your technicians and your assist‑admin guys and your office and your marketing.

4575 And then, once you get to that point, where you’ve got the whole thing running, you know, say at neutral income level, then you want to innovate, differentiate, do creative marketing, work with the local community, be nicer to the small municipality folks ‑‑ you know, the folks that tend to get passed over. And then you develop this loyalty amongst your customer base, where they’ll pay you the same or a little bit more than what they would pay the telephone company.

4576 VICE‑CHAIRPERSON SCOTT: Right.

4577 MR. ALLEN: And quality of service probably comes up later. It’s a different question, but that’s another component of being able to please those customers.

4578 VICE‑CHAIRPERSON SCOTT: Right, yeah, and I think we’ve heard a lot about that from CNOC this morning too.

4579 I’ve just got one question, actually ‑‑ and again, it is on those cost‑based rates that you were talking about, which a number of people have described as inflated.

4580 So, I used to have a boss who was telling me: You need to hunt where the ducks are.

4581 So, if we’re looking at those costs, should we be ‑‑ the people who are alleging that they’re inflated costs, is that a problem with the costing model or is that a problem with the inputs to the model? Where are the ducks we should be hunting?

4582 MR. ALLEN: Well, I think, you know, there has been a lot of discussion amongst the competitors about the Phase 2 costing model, and some people say it must wrong, because it’s not producing the right number.

4583 But, more experienced folks, like Chris Tacit, from Tacit Law and the CNOC organization, have helped the smaller people understand that that is about the only method that we can really use to come up with a number that recognizes the incumbents’ right to make a profit, even if he’s not providing the service to the end consumer.

4584 So if TELUS was going to sell internet to the end user for 65 dollars but he could also get 65 dollars from the wholesale guy, then what does he care? The wholesale guy is going to be a lot less whiny and less needy, and need less marking, and everything else, so he should be more than happy to have thousands of those types of customers ‑‑ although they don’t seem to be.

4585 But the Phase 2 costing method is at least something that can be tested and kicked at, and maybe tweaked a little bit. You know, maybe there’s some creative accounting being used, you might say, that got it up to 65 when it really should have been 60?

4586 And I think this is to the point that the CNOC made, that, you know, you need to kind of look at international prices, you need to look at retail prices, and you need to look at the Phase 2 costing numbers, and then you need to look at the tariff submissions that you’re receiving from those incumbents, so that you can come up with, you know, I should say, that right number that’s not so low that it discourages investment ‑‑ because when a wholesale customer comes along, then the incumbent’s losing money, and they feel that they lose money. Even if you were paying the same as the retail customer, then they are still quite willing to sell that at cost, so they can obtain the rest of the profit from the other bundled components, which the wholesalers cannot. I would like to point out that that’s a great rationale but it doesn’t work for us.

4587 So I think the Phase 2 costing handrail is a good handrail, and it’s about all we have to hold onto, because at that point, then you’re guessing, and that could be ‑‑ you know, it’s so difficult to do that.

4588 So, you know, I think that the method that you’re using is good. I think it’s just that you do need to look at those other components that are being thrown in with the tariffs and sort of say: Well, okay, so now what’s a viable sized company? Is somebody okay if he’s only got 2,000 customers? Let’s say he’s got to get to 2,000 customers before he can survive. Okay, well, then, he needs to sell so many gig ports and so many 100 meg ports, and at such and such a price. You could have an independent person build a model of how to survive as an ISP and then plug in these capacity‑based building numbers and see if this is going to be a viable solution.

4589 And kind of what we’ve done is we’ve sort of given out these tariff components and then these non‑tariff components that are necessary to provide the product, and, you know, there’s a lot of moaning and groaning out there about what the end result is for the businessman, and that he’s a bit trapped, and that the port pricing is okay but the final bill that he was paying to the incumbent left him with no margin.

4590 VICE‑CHAIRPERSON SCOTT: Thank you. I very much appreciated the answers to my questions. Madam Chair, those are all of them.

4591 THE CHAIRPERSON: Okay, thank you very much.

4592 We will just go to Commissioner Desmond for final questions, thank you.

4593 COMMISSIONER DESMOND: Thank you. I just have one question. Earlier this week TELUS talked about the fact that it had turned some of its copper network in 14 of its geographical areas, and it has worked with customers to try to find alternatives to the copper network.

4594 So, I’m wondering if you can speak to whether or not any of your members have had that experience, and if they have been provided alternatives, and maybe what those alternatives were, or the rates?

4595 MR. ALLEN: Yes, TELUS has been doing that. It’s a sound financial practice, because you can actually remove an entire central office in an urban setting and given that your fibre runs can be much longer than your copper runs could have been, you can actually sell the property, make some money on the real estate, all the expense, all the maintenance, everything, goes out the window. But of course the DSLAMs go out the window as well.

4596 And, while there have been some cases and some moaning and groaning about customers being affected by that, it’s not really the main issue. The main issue is the fact that there are really very few serviceable addresses, other than those MDUs that I was describing, or rural markets, where the ADSL is really able to be offered. And in most cases the ISP has a more affordable price for the same speed, using TPIA. So, really, you know, they can move the customer from the fibre‑to‑the‑node and to TPIA in most cases, to save the customer if the incumbent is not able to help them.

4597 So, you know, we recognize the need for that to happen as part of a natural business evolution and yes, there have been cases where the customers were, you know, left in a bit of a lurch. I think there’s a constant criticism of the practice that TELUS compensates its field service people for selling while they’re installing, and so therefore there would be a tendency for you, if you have a service being installed, to have the installer explain it to the customer that they have made a bad mistake and that they really should have bought it from TELUS, and they’re really getting it from TELUS anyway, and they’re really making a mistake.

4598 And that’s very discouraging when you’ve gone through all the trouble to actually close the sale, organize the whole thing, get the modem into the customers’ hands, and then find that the technician has stolen your customer.

4599 And TELUS does not endorse that practice as a corporation, so I’m not trying to accuse it has being a corporate philosophy of TELUS, it’s really just a crash between their idea of compensating their installers with a bit of a Commission, for upselling while they’re installing, and that kind of crashing into the market reality that that’s not ‑‑ that’s a bit tacky when you consider how much work the ISP has put into getting that customer in the first place.

4600 Any of that goes to some sort of regime where you can just send in minor complaints, and not complaints necessarily that you expect to have resolved but rather, you know, a bit more like reporting spam, to the Commission, in a relatively simple, straightforward way to send an email, you know, “This happened to me. I lost a customer.” You know?

4601 Or, you know, I tried to provide service in this small rural community, but for some reason my gigabit service was $5,000 a month at that location, and so I was... You know, there was no crime committed but I would like to bring it to your attention that this untariffed backhaul environment can cause a real imbalance in the competitor’s ability to provide gigabit services, because you need fat backhaul at affordable prices, and the backhaul prices are still in yesteryear and the customer product offerings are in the modern times, so the two don’t fit, and it’s something that the Commission should have some way of just seeing what’s going on out there on a regular basis, and people shouldn’t feel that they have to go through a part 1 application to bring this to your attention. They should really just be able to report a bit of unsavoury business practice that is going on in the marketplace, and then you could conduct yourself accordingly.

4602 And if the incumbents knew that that was going on in the background it would be a bit self‑policing, I think.

4603 COMMISSIONER DESMOND: Okay, yeah, that’s an interesting suggestion, thank you.

4604 Just with respect to the alternatives to copper; I just wondered if I could put an undertaking and ask you to provide a response in writing, so we have the information on the record, and it’s a similar undertaking we’ve asked other parties as well.

Engagement

4605 MR. ALLEN: And specifically, you’re ‑‑

4606 COMMISSIONER DESMOND: Yeah, so, we’re looking for you to provide the Commission with documents that would provide evidence of the reception of notices of copper decommissioning, and if you could make that over the last five years, with the alternatives that have been proposed.

4607 MR. ALLEN: All right, we could certainly do that.

4608 COMMISSIONER DESMOND: That would be very helpful. Thank you so much.

4609 MR. ALLEN: And when do you need that by?

4610 COMMISSIONER DESMOND: There is a deadline for parties to provide their documentation. I believe it’s March 1st. So, if you could provide it by March 1st, yeah...

4611 MR. ALLEN: March 1st. All right.

4612 COMMISSIONER DESMOND: That would be very helpful.

4613 MR. ALLEN: We will. We would appreciate the opportunity to bring some of those situations forward.

4614 COMMISSIONER DESMOND: Thank you. Thank you.

4615 THE CHAIRPERSON: So, perhaps I could end where Commissioner Naidoo started, which is to say thank you for coming a long way to be with us here, in Gatineau, and have the discussion in person. We really appreciate it. We’ve covered a lot of ground in an hour. We would like to turn things back over to you for any concluding remarks.

4616 MR. ALLEN: Thank you.

4617 Well, I would like to stress that this pitting the incumbents against each other in their traditional territories by allowing TELUS access in the East and Bell access in the West, is going to create a crazy market condition, a lot of investment of capital will go up in smoke, and I don’t know that it will really do the small players or the Canadian public much good in the long term. You know, perhaps somewhere down the road you could let that lion out of the cage but right now I think that’s going to harm things, so that’s one of our key takeaways.

4618 I’d like to let Curtis comment a little bit, here, on some of the business needs and things that we see that business guys need to continue on.

4619 MR. CHIANG: Yeah. I think just to add on what Bob was commenting on, opening up to having the incumbents roaming onto each other’s network. They say that they would hold back on their investment if, you know, FTTP has been regulated, opening up the mandate for others. But at the same time, if they’re allowed access to each other’s network, that would significantly decrease their incentives and motives to actually invest into building out their network outside of their territory.

4620 And I think as the professor mentioned, from the CNOC presentation, when you get two or three competitors at a market, the easier way out is to have them each settle for a piece of the pie instead of trying to compete for better services and trying to differentiate on that regard.

4621 And just to comment on the business cycle, that I’d like to bring to your attention, is again, we are seeing a lot of companies being bought out. I don’t think there’s a problem with that, it’s just a healthy business cycle where you get new entrants coming in, they grow, eventually, they consolidate.

4622 But the problem that we’re seeing here now is that the consolidation only occurs from a small or medium‑sized company being bought out by the incumbents. They’re not getting consolidated with their peers, where, you know, TELUS claims that businesses are selling out because they’re growing. I don’t think that is the case because they’re forced into a position to sell out, because there are no incentives for companies to grow via purchasing other companies.

4623 And so that’s just my comment. I don’t know if Bob wants to add.

4624 MR. ALLEN: Well, I’d just like to add that there’s been a lot of things that I’ve sort of faced, over the years, in terms of the types of rulings that we’ve had, things like interim rates, that you’re supposed to build a business case, it’s like building it on sand, you don’t really know if it’s going to be there tomorrow.

4625 And so, having interim rates ‑‑ you know, I could see interim rates for, you know, 45 days, 60 days, or something like that, but not for five years or eight years. That just leaves people in limbo for way too long. And how do you pitch this to an investor, when there’s no certainty?

4626 Having services that are sort of subject to being phased out at some unknown point in the future, again, how do you plug that into a business model?

4627 So, some of these things are extremely important to a business person if they’re contemplating investing, and investing is ‑‑ you know, maybe you’re going to buy your competitor, but, you know, you don’t really know what your competitor’s future business model is. He wants X dollars, you need to recover that over five or ten years, but you’ve got an interim rate ruling or a service subject to phase out within two or three years. Well, it doesn’t take very much business uncertainty before people back off.

4628 So, you know, I really would make a plea from the industry to, you know, give us certainty.

4629 You know, is wholesale just something you’re going to do for another couple of years and we should just move on, or would be still be here in ten years? At least we’re still here from ten years ago, because we’ve been talking about this for ten years.

4630 So, that might be good that we never resolve it. But I really would like to see a philosophy come forward that says: Okay, we’re going to have two pipes into the house and after that it’s wholesale, and we want more than two providers available to the Canadian consumers, so we’re going to have wholesale. So, wholesale is not going away. So, wholesale people, you’re going to be okay. You’re part of the Canadian landscape. You’re not just a temporary blip while we move from some regime to another.

4631 Because I think we’ve moved to the point where we’ve built the fibre and we’re well through the fibre and technological revolutions to give the speeds to the home, so what is the future of wholesale? And I think the answers and decisions that you make here really define the future of wholesale, as well as, you know, what you’re going to do with cablecos next‑generation investment issue. Are we going to be banned from TPIA for seven years?

4632 So, anyway, I would like to see some business certainty and I think that’s maybe my closing point is that if we come away from this even with the rates where they are, but they’re going to stay there, they’re not interim rates, and that aggregated isn’t going away, then people can carry on with it. Otherwise, only those who are kind of in a bit of a desperate situation, like the existing guys, well, of course, they’re going to have to take up, but will new people take it up, when there’s no certainty?

4633 So, you know, that would be as important as anything else, is business certainty coming out of this decision and this procedure.

4634 THE CHAIRPERSON: Thank you very much to BCBA. Thank you for sharing your perspective with us.

4635 MR. ALLEN: And thanks very much for inviting us, and thanks for the First Nations for letting us hold this meeting here, on their ancestral lands.

4636 THE CHAIRPERSON: Thank you.

4637 THE SECRETARY: Thank you. We will break for lunch and resume at 1:05. Thank you.

‑‑‑ Suspension à 12 h 22

‑‑‑ Reprise à 13 h 06

4638 THE SECRETARY: Welcome back. We will now hear the presentation of TekSavvy Solutions Inc.

4639 Please introduce yourself and your colleagues, and you may begin your presentation.

4640 Thank you.

Présentation

4641 MR. KAPLAN‑MYRTH: Thank you. Good afternoon, Chairperson, Vice‑Chairperson, Commissioners and Commission Staff.

4642 My name is Andy Kaplan‑Myrth. I’m VP of Regulatory and Carrier Affairs at TekSavvy. With me today is Pierre Aube, TekSavvy’s Chief Operating Officer, and Jessica Rutledge, Director of Regulatory and Consumer Legal Affairs. We’re also joined in the hearing room by Stephanie Hauspie, our Regulatory Analyst.

4643 We appreciate the opportunity to be here in what is the most critical regulatory proceeding for TekSavvy ever.

4644 TekSavvy is one of Canada’s largest independent internet service providers and has operated for over 25 years. We’re headquartered in Chatham, Ontario, and have employees in Ontario and Quebec.

4645 We offer internet services in all 10 provinces. TekSavvy is primarily a wholesale‑based competitor, meaning that we purchase access to the incumbents’ facilities in order to deliver internet services to our customers on our own networks.

4646 We also have our own facilities; we have invested in building a wireless LTE network in southern Ontario and now our own fibre network in Chatham, Ontario and surrounding areas. A large portion of serviceable addresses on that network are rural ones. This investment would not have been possible for us without our wholesale‑based business.

4647 MR. AUBE: Andy mentioned that TekSavvy is one of the largest independent ISPs in Canada, but at this point we are one of only a few meaningful competitors left. TekSavvy itself has shrunk significantly in recent years due to the current regulatory environment. I’ll be frank here, we have lost over 100,000 subscriptions since our peak.

4648 Many independent ISPs were in the same boat as us. As the Commission knows, within about a year of the CRTC’s last major wholesale decision in May of 2021, nearly all major wholesale competitors were acquired by incumbents. This includes Distributel and its affiliates Primus, EBOX, Start.ca, Vmedia, Oxio, Comwave, Acanac, and the list goes on.

4649 The exit of wholesale competitors is no surprise to us. The business case for wholesale has nearly been extinguished under the current regulatory framework.

4650 First, the rates finalized in 2021 make it impossible for wholesale competitors to compete. Second, wholesale competitors are left behind the curve with a lack of access to the technology we need to compete, such as FTTP. In this regulatory environment, competitors were and are faced with either watching their subscriber numbers decline or, as many did, sell their business.

4651 Finally, regulatory uncertainty and excessive delays disproportionately affects smaller competitors who do not have the same level of scale and capital to continue to compete while waiting years to learn what their main cost components will be.

4652 Let’s be clear here, the exit of competitive wholesale options is detrimental to Canadians.

4653 MS. RUTHLEDGE: We are often asked why rates that were used in 2016 are causing so many issues over the last few years. It is a common misconception that preserving wholesale rates at 2016 levels just amounts to preserving the status quo.

4654 Instead, the evidence shows there has been a global decrease in the cost of delivering internet services. Both the government‑commissioned Wall Report and the US FCC report showed declining international prices in broadband, which reflect this trend. But yet, those same reports show that Canada is at the back of those international price comparisons, as both the Competition Bureau and Dr. Chen have acknowledged.

4655 The incumbents have also made statements about their decreased costs in securities filings and investor calls. When it comes to fibre, Bell executives have said that its service and support costs tend to be 40 per cent lower than they were on copper.

4656 TELUS executives have also stated that the cost to serve customers on fibre is significantly reduced, citing increased automation and an 80 per cent reduced energy appetite compared to copper. Earlier this week, they actually said that was 85 per cent.

4657 For cable, Rogers’ executives mentioned, for example, in a 2022 investor call that its cable‑adjusted EBITDA for that year increased by 6 per cent primarily as a result of improved cost efficiencies.

4658 Wholesale competitors have spent the last seven or eight years not getting to realize those same cost savings. Wholesale access rates in 2024 are still almost the same as they were in 2016 in most cases. And incumbents continue to propose high wholesale rates in this proceeding.

4659 MR. KAPLAN‑MYRTH: The easiest way to illustrate the degree to which wholesale rates are inflated is through a comparison to incumbents’ retail rates.

4660 Our interventions provide examples of the retail prices that incumbents charge compared to their proposed access rates. Dr. Chen, who appeared with CNOC earlier today noted, for example, that for Bell’s proposed FTTP rates, “all retail prices were below their corresponding wholesale access rates by a wide margin, between $38 and $75”.

4661 As the incumbents’ flanker brands often price below their flagship, those brands will often have an even bigger gap. This is the case, for example, with the Distributel and EBOX brands’ fibre rates, which we’ve filed in this proceeding as additional comparisons.

4662 It’s the same story for Rogers. When looking at Rogers’ proposed wholesale rates in this proceeding, Dr. Chen found that “all of Rogers’ retail prices for Ignite Internet 50, 150, 500, 1.5 Gigabit and 2.5 Gigabit are below the access rates for equivalent wholesale services.”

4663 When using retail prices as a sanity check of incumbents’ claimed costs, keep in mind that access rates are just one in a list of many cost inputs for competitors, including both other regulated costs and non‑regulated costs. Other regulated costs for a service include capacity charges and installation and services fees. Our non‑regulated cost inputs include equipment for customers’ premises, our own networking equipment and networking costs, marketing, overhead and operational costs like people’s salaries.

4664 Yet, even one component of our costs already exceeds the incumbents’ retail prices. As Dr. Chen’s report found, this sustained pattern of retail prices below wholesale rates shows that wholesale rates are inflated. It shows that wholesale rates must be significantly above the levels that will enable cost recovery and a fair rate of return on capital.

4665 MS. RUTHLEDGE: All of this means that we are left with a situation where the current wholesale rates actually help the incumbents sustain retail pricing above competitive levels. Canadians have not reaped the benefits of declining costs of delivering broadband the way the rest of the world has.

4666 Not only should the Commission take retail rates into account when fact‑checking incumbents’ claimed costs, but they should do so on a more proactive basis going forward. Rate setting takes time, which means there needs to be a regulatory mechanism to allow more nimble interim adjustments.

4667 Wholesale competitors should not be left stranded on eight‑year‑old rates again. An interim retail‑minus regulatory backstop would help accomplish this, where if incumbents price below their monthly access rates, wholesale competitors have the option of interim retail minus pricing.

4668 When retail‑minus has been applied in the past, the CRTC has used a rate of retail minus 25 per cent. This rate was used in 1999 and as recently as in 2016. There is no reason to deviate from that here.

4669 The ongoing collapse of the wholesale market has shown that this type of measure is necessary.

4670 MR. KAPLAN‑MYRTH: The second reason why wholesale has declined is the lack of wholesale access to fibre. This should not be controversial. The Commission has long held that speed matching is required for competition, and that without speed matching, there is a substantial reduction in competition.

4671 As we’ve explained in our interventions, Bell touts how important its unmatched speeds are on fibre. It also advertises based on how much faster its internet offerings are than those offered on cable. This means that as long as wholesale competition is not feasibly open to fibre, the Commission is not enforcing its long‑standing speed‑matching principle.

4672 But there’s also enhanced reliability on fibre. As we mentioned, Bell estimates it needs 40 per cent less service and support costs. The combination of speed and enhanced reliability means there is a growing subset of customers who do not consider other types of internet to be a sufficient substitute.

4673 In its recent motion seeking a stay of the Commission’s temporary FTTP order, Bell described FTTP services as “crucial to Bell’s competitive position in the market.” Certainly it is crucial to competitors’ ability to compete as well.

4674 There is evidence on the record showing that the share of wholesale subscribers served by ILECs has massively declined. TekSavvy’s subscriptions on Bell’s network declined by 65 per cent from October 2018 to October 2023.

4675 Meanwhile, ILECs have seen their own subscriber numbers increase. The Bureau found that the ILECs’ increase in retail subscribers from 2018 to 2022 was large enough to offset the decline in wholesale‑based subscribers on their network.

4676 We also know that incumbents have been rapidly decommissioning their existing legacy facilities and replacing them with FTTP facilities. This means that the wholesale footprint has been shrinking, with more customers left without the option of wholesale at all, regardless of technology.

4677 MS. RUTHLEDGE: There is significant evidence on the record that wholesale high‑speed access services, regardless of technology, meet the essentiality test. In applying this test, the Commission should not limit its policy consideration stage to some smaller set of policy factors. The Act requires it to make decisions in line with the statutory policy objectives and as informed by the policy direction. A policy analysis stage should consider any relevant objectives from these sources, rather than some limited set.

4678 We also ask the Commission to enforce its traditional speed‑matching rule in a manner that is agnostic of technology. If an incumbent offers a broadband internet service at retail, the equivalent wholesale service should be mandated by default.

4679 The Commission has long found that to relegate wholesale competitors to lower speeds would hinder their ability to compete and distort the market, yet this is what has happened over the past eight years. The Commission should not allow incumbents to disregard the speed‑matching rule through any further upgrades in technology and should reject attempts by incumbents to carve out specific types of technology from mandated wholesale HSA.

4680 We have heard suggestions this week that perhaps wholesale competitors deliberately do not sell higher speeds. I can say that TekSavvy would love to be able to sell high speeds to our customers, and we do try.

4681 Customer demand is shifting to higher speeds. We are not choosing to ignore that demand, that would not be a logical business choice. Instead, we have simply not been given the tools to allow us to serve it. The wholesale rates for many higher speed services do not allow us to compete with retail prices and market, and of course we do not have access to fibre to enable us to sell the highest speeds.

4682 MR. AUBE: Finally, we have seen the interim disaggregated regime has not workout in practice. We agree with many intervenors that the Commission should prioritize fixing the current aggregated regime. However, we also believe that the mandated disaggregated can and should operate in tandem with aggregated access.

4683 For now, the Commission can make a few simple tweaks to the disaggregated regime to fix unintended consequences while the two coexist.

4684 Based on the Commission’s decisions, TekSavvy began investing in enabling disaggregated access at POIs where it predicted would have the most demand for FTTP services. This includes investing in network equipment and facilities at each of these POIs. As a result, if disaggregated access is no longer mandated, or if disaggregated rates continue to be set at inflated levels, TekSavvy would actually be penalized for investing in facilities to enable disaggregated access at those locations. There is also the issue of the three‑year phaseout, which we believe should be removed.

4685 MR. KAPLAN‑MYRTH: The issues before you are complex and the record is voluminous, we recognize that. But for smaller competitors like TekSavvy, this is a critical and time‑sensitive proceeding. We need significant reductions to the wholesale rates and we need them critically. This includes the interim aggregated FTTP rates, which remain above many retail prices.

4686 TekSavvy is ready and excited to bring additional lower‑cost options to customers we have not been able to reach on the current wholesale footprint, or who we have not been able to offer their technology of choice. We want to compete fairly as part of a vibrant broadband internet market, and we hope the Commission lets us do that.

4687 Thank you for your time and we’d be happy to answer any questions you have.

4688 THE CHAIRPERSON: Thank you very much, TekSavvy, for being here with us and, in fact, finishing off the hearing with us. We are really looking forward to the discussion.

4689 I will start with the questions and then I will turn to my colleagues to continue the discussion. I know we have a lot of question, so just a heads up.

4690 So maybe starting with pricing and competition at a very high level, and I asked the same question of CNOC earlier today. We’ve heard very different views about the state of competition in the internet services market. You know, we’ve heard from Bell this week that the market has never been more competitive. We heard from Rogers about the intense competition.

4691 You’ve painted a bit of a different picture. Again, we heard from CNOC today that there’s an affordability and competition crisis in Canadian telecom.

4692 Can you just comment on that?

4693 MR. KAPLAN‑MYRTH: Thank you. This is really the question that’s at the core of the struggles that TekSavvy has had, much of the competitive industry has had, over the past, you know, may years that the wholesale rates have bene in play.

4694 The lens that we have, you won’t be surprised to know, is very different from Bell’s. This is not about competitive interaction among any number of large incumbents and how that might drive down prices. This is about the wholesale HSA framework’s purpose, which is to allow smaller competitors, or other competitors, to discipline the market power of the large incumbents who build the networks and would otherwise have a natural monopoly or the sort of natural market power.

4695 So our experience is the prices, the wholesale rates, are too high for us to effectively compete with incumbent prices, especially when it comes to their flanker brands which are used deliberately to, in our view used deliberately to target the wholesale sector.

4696 MS. RUTHLEDGE: Maybe I’ll just add. You know, incumbents have asked you to believe that things are more competitive than ever in broadband and, in doing so, they’re sort of ignoring that their market share has increased and they’re ignoring consumer perspectives. They’re disregarding independent studies that show Canada’s rank even when looking, taking costs into account, has decreased internationally. They want to rely only on their own funded studies and they want to look at prices, absolute prices, without taking costs into account.

4697 So they might point to some price decreases over time in some provinces, but the problem with that is that’s not really a measure of competitive intensity. Retail prices can decline for lots of reasons. And we’ve seen on the record that there’s indications, strong indications, that the cost of delivering services have gone down.

4698 So, I mean, what incumbents haven’t shown is have their margins gone down. Because if prices decrease because of increased competition, you might see that there was pressure on their margins.

4699 But, you know, what we see in their investor calls ‑‑ there’s only so much information available to us ‑‑ what we see in their investor calls is, for example, Bell’s last annual report 2022, they reported that their wireline EBITDA margin actually increased relative to 2021. In their latest quarterly report Bell said it had industry‑leading wireline margins, and room to compete on price. They also projected stable margins in wireline for 2024.

4700 To us, that doesn’t sound like a company that’s facing competitive pressure on their bottom line. And we think that if we had properly costed wholesale rates, we could help bring prices down to where they should be.

4701 Andy spoke about, you know, the non‑price aspects of competition, and we want to highlight that too because, you know, even if a customer is able to get a good price for a short term it might look great, what’s going to happen when that price is increased a few times on their bill and who’s left to serve that customer?

4702 If they’re not happy that it’s sort of ‑‑ the price increase is hidden on their bill or they’re not happy that they’re waiting 30 minutes on the phone and they want another competitive option, you know, who’s going to be there to serve that customer? Do they really feel like they can take their money elsewhere when they’re not pleased with the, you know, service quality of an incumbent?

4703 You know, we’d like there to be a choice for that customer beyond this single person or single company that might have a wire to their home.

4704 THE CHAIRPERSON: Thank you for sharing that with us. And you’ve touched on a number of things, I think we’re going to come back on a number of those and have some follow‑up questions.

4705 One of the things you just mentioned are consumer perspectives. And, you know, we heard on Monday certainly from OpenMedia about the consumer perspectives. You know, they shared a survey with us. They said that 78 per cent of people said their internet is less affordable today than it was in 2019. You know, a lot of comments were shared with us from PIAC, OpenMedia, Manitoba Coalition about affordability and pricing, and choice.

4706 But at the same time, you know, I think as you’ve alluded to, some intervenors have said that, you know, consumers are getting a lower price per gigabit and, you know, things are rosy. Can you comment on that?

4707 MR. KAPLAN‑MYRTH: Customers are ‑‑ I’m going to ask Pierre to weigh in here because of the customer experience. But customers come to us all the time telling us that they want an alternative that is not a large incumbent. They have a bad relationship or a bad view of them, and they’re looking for a real independent alternative.

4708 We hear that all the time. Sometimes they will even pay more when we’re in a position where our prices are not actually competitive with a large incumbent. Sometimes they’re willing to pay a premium in order to go with us. Again, that does not serve the purpose of the wholesale framework and it’s not sustainable for a small competitor like us.

4709 But for the past number of years, that’s the situation we’ve been in, and we’ve still seen customers coming to us.

4710 For the most part, we have found the lower speeds or medium‑range speeds, especially on cable, have been the ones where we’ve been able to offer services a little bit more profitably. And so, at times, those have been services that we’ve promoted and customers have used.

4711 And so I think kind of naturally over time our customer base might have, you know, might be a lower speed, lower‑priced customer base. But it’s a product of kind of ‑‑ I don’t want to say rigged wholesale rates, but the wholesale rates are constructed in a way that kind of funnels us into that sort of business model.

4712 Do you want to speak to sort of the prices that are available and what customers come looking for?

4713 MR. AUBE: Sure. I mean, customers are coming to us because they are tired of being what we call gouged by the pricing that’s out there in the market.

4714 So ultimately, they will come in with a promotional rate and then, you know, six months or a year later they’re now at a very high elevated rate and there’s no way for them to find relief on that. So then they’re looking for an alternative to get a better sort of deal for the customer, but something more stable.

4715 We had done a study looking at, you know, what do consumers want out of TekSavvy? And one of the things they were asking about was stable pricing. Right? We don’t want to play this yin and yang game all over the place. We want to have a provider that’s going to offer us excellent service and be real, be truthful, you know, and be there for us when we actually need them.

4716 So in terms of pricing out there, I see all the time, we’re monitoring the incumbents and the flanker brands daily, and I can tell you that some of the flanker brands it’s almost like they have a connection with emails or something, because one of them will change their prices at 12:00, and a couple hours later they other one will match exactly the same price at 2:00 in the afternoon. And they’re playing with that price to try and control the market and not offer a better deal for the customer.

4717 THE CHAIRPERSON: Okay, thank you for that. Maybe we can just continue on with retail internet packages. And you’ve given some examples of how the retail internet packages can be, you know, priced lower than the wholesale or tariffed price.

4718 So, you know, we’ve heard from some intervenors that this is just consumers getting a good deal. You sort of touched on this. Could you just maybe respond to that?

4719 MR. KAPLAN‑MYRTH: Lower prices for consumers, lower prices like that, have a short‑term benefit for consumers. The end result of this, if wholesale can’t compete with that and can’t serve its purpose of disciplining market power, is one or two incumbent providers and no options for customers. That is a bad competitive outcome. It may be short‑term, lower prices, but the incumbent is doing that to drive out competition, and eventually we’ll be a monopoly provider.

4720 We have a framework in place specifically designed to avoid that happening. It has not functioned properly for the past number of years, and these are the changes that need to happen in order to allow us to play that role that the framework is designed to allow us to play.

4721 THE CHAIRPERSON: Okay, thank you for that. Most of your customers are in Ontario and Quebec. Could you talk to us a little bit about what’s kept you focused on central Canada? Are there specific factors that have limited your expansion more broadly across the country?

4722 MS. RUTHLEDGE: Pierre might have more comments on where we’ve targeted specifically.

4723 We have tried to expand across Canada and we do sell in all provinces. First of all, we started in Ontario and Quebec, so that was sort of our starting market. And then we looked to expand.

4724 We don’t actually see a difference in consumer interest in Alberta or BC. Like, we don’t see a lack of interest in wholesale in the west. We actually find that we have operational challenges in getting over there and expanding as much as we’d like to.

4725 I think you heard a bit from CNOC earlier about the Shaw network, now Rogers, requiring several different connections in a given province. So that’s one difference that, you know, for us we might see, okay, we can get enough of a customer base there to merit interconnecting. But certainly a smaller wholesale provider might not find that they could reach the whole province easily.

4726 And then there’s lots of operational challenges too. I’m sure Pierre will have more examples of this. But the Shaw wholesale process doesn’t even have a portal. So you want to add a customer on Shaw, you have to email them. Maybe the customer asks for, you know, an appointment tomorrow, but it takes two days to get an email back.

4727 So you’re left in this limbo where you might take a month to sign‑up a customer, and that just doesn’t scale, it doesn’t allow you to add customers at the rate you’d like. That’s a real disincentive, together with wholesale rates that are inflated that, you know, it’s hard to sort of decide to target that area and go in really strongly when you face those types of challenges on top of the existing challenges that we see, and just the framework overall.

4728 MR. AUBE: Just to echo the comments. When we can’t properly qualify a customer out west and then we’re sending an email to try and get that customer online, it’s much much harder for us to actually do sustainable growth.

4729 We’ve also seen that whenever we actually push it hard out west, we get multi‑days and multi‑week delays to actually get our customers online. So the incentive to continue to push there is harder for us because we want to provide a great service to our customers, but we’re not able to.

4730 We’re saying, okay, we’ll get you online, oh, in three weeks. But you can do it with the incumbent the next day or a couple days later. So there’s a disincentive from us to try and do that there.

4731 And the other comment on the rates, the rates out west as well is an issue there.

4732 MR. KAPLAN‑MYRTH: Maybe I’ll just add that maybe this is a difference in processes, operational challenges among different carriers. It’s particularly stark maybe when you look at the west and central, because the west because there’s clearly delineated territories for different carriers.

4733 But even in Ontario and Quebec and Atlantic Canada there’s more carriers at play, so you may not see regional differences play out. But each of those carriers also have different processes and different operational challenges, it’s easier to sign customers up or support their services on some carriers than others.

4734 So I guess I’d caution seeing this as regional differences as opposed to carrier differences that happen to sort of fall very neatly along regional lines.

4735 THE CHAIRPERSON: Okay, thank you very much. Could I just put a general question to you about urgency? Because you’ve spoken about urgency; CNOC spoke today about urgency ‑‑ the urgency of this proceeding and decisions flowing from this proceeding?

4736 MR. KAPLAN‑MYRTH: We see this as very urgent. Is the question how urgent this is?

4737 THE CHAIRPERSON: And why ‑‑ and why?

4738 MR. KAPLAN‑MYRTH: We have been under enormous pressure for certainly the past five, six year, but really a lot of the processes, a lot of the issues you’re looking at now have been at play for ten years. You’ve seen other competitors exit the market after being part of the same fight that we are. They were strong advocates, making many of the same arguments that CNOC did and the same arguments that we did. We are under all of those same pressures.

4739 Now, it’s difficult to be here as a service provider in a public hearing where our customers are also aware, and say that we are, you know, in peril in some way. We’re fine. I want to assure people that we are ‑‑ we are, you know, here, we’re still providing service. But we cannot continue to wait in the hopes that the regulatory regime will one day catch up. We’ve been running on hope for a very long time. That hope ran out for some competitors. We are still here. I don’t know how long that lasts, but no rational business runs on hope forever.

4740 THE CHAIRPERSON: Okay, thank you very much.

4741 Maybe we can continue on the top of acquisitions, because we’ve heard a lot about that, and even this morning there was a lot more, I would say, kind of granularity added to the perspectives on that ‑‑ the concerns about who is acquiring these businesses. Certainly we heard concern from both CNOC and BCBA about who is coming in to build these businesses, so like, who else is coming in behind? So, we’ve heard that perspective.

4742 I’m wondering if you can just react to what we should read into these acquisitions ‑‑ who’s buying them, why others are not coming in?

4743 MS. RUTHLEDGE: Well, maybe I’ll start with why others aren’t coming in, and it ties a bit back to the urgency question really. TekSavvy wouldn’t have entered right now. Like, we’re still here because we were already a company and we have some hope that we’ll get some regulatory relief at this point, but, you know, this is not a market where a wholesale competitor would look at it and say, ‘There’s a viable business case for me to grow and build and innovate.’ If the rates were right, maybe they would.

4744 And I guess, but we see with the acquisitions ‑‑ there was some suggestion earlier this week that everyone was just ready to retire. I think you should probably look at the reason they decided that was the right time, all within, you know, one to two years, to exit the market. From our perspective, we would say it’s because they were looking at their business either declining or selling it at that point. And you should really look at the reason why their business was declining.

4745 MR. AUBE: Yeah, I think that we’re starting to find ‑‑ or look for a path forward because we’ve been waiting for so long. And ‑‑ and just to echo Jessica’s comment ‑‑ like, we saw the decline. I talked about a hundred thousand decline from TekSavvy. I guarantee you those businesses had similar declines ‑‑ maybe not the same scale because they were just not as large, but they would see some similar declines, and they saw no path forward. And all of a sudden these valuations came in ‑‑ these high valuations came in, and they just said, ‘Okay, I’m ‑‑ I’m out,’ type thing.

4746 THE CHAIRPERSON: So, you touched on the fact that TekSavvy had considered selling at some point. You said you’re running out of hope, ‘We’re still here.’ I appreciate that we are in a public forum. Is there anything that you could share with us in terms of your thinking, because it seems as though there was a change?

4747 MR. KAPLAN‑MYRTH: You know, I can’t share a lot of details, but we were under the same pressures as all of those other businesses. There were high valuations in the market for competitors. Like any business would, I think we considered a range of options for our future. And in the end, we did not sell, we didn’t change our ownership, and we are not for sale.

4748 THE CHAIRPERSON: Okay, thank you. So, just talking a little bit about TekSavvy’s business model, can you just share with us how you attract customers to your service?

4749 MR. AUBE: Sure. I mean, like, like every other service provider, we do marketing and we do marketing through our Google platforms and through out‑of‑home or, you know, throughout Canada. We do that throughout Canada.

4750 And we try and differentiate ourselves by the type of customer service that we offer. So, we are ‑‑ you know, we are proud to be an award‑winning, you know, Canada‑based contact centres, and we also have a ‑‑ you know, we also focus a lot on the innovation of ensuring our centres are working as optimally as possible, where not many places you’ll see this, but we actually have a ring ring, “Hello” most of the time. So, we invest more in our people to ensure that the customer really gets the proper service. Call TekSavvy, you get ‑‑ you know, somebody says, “Hello” type thing.

4751 And so, I think those things, as well ‑‑ I mean, how do we acquire? Of course, we do some promotions. Right now, we have no choice but to do aggressive promotions to try and compete with some of the stuff that’s in market, to try and stop some of the churn, of the decline, because there’s just no path forward. Some of those promotions are below the costs that are ‑‑ the tariff costs that are currently out there, for sure. So.

4752 MS. RUTHLEDGE: And maybe we’ll just also speak about the sort of independent advocacy voice we bring. We do have a lot of customers that that resonates with. You know, we don’t own media properties. We don’t have conflicting IP ownership. So, that also means we don’t have an interest in, you know, blocking customers’ access from certain things, or maybe tracking data. We don’t have those same interests, and so we have advocated strongly in the past for open internet. We’ve taken cases to court to protect our customers’ data from IP owners that are looking to access customer data.

4753 So, I mean, that’s something that we see resonates with a lot of our customers, and we think we are sort of uniquely positioned ‑‑ and other independent competitors are uniquely positioned ‑‑ to bring that sort of advocacy voice as well.

4754 THE CHAIRPERSON: Okay, thank you.

4755 So, TekSavvy is also a network operator. You’ve deployed fibre in parts of Southern Ontario. What led you to do that as opposed to using wholesale access to serve those customers?

4756 MR. KAPLAN‑MYRTH: Pierre may be able to speak to this more first hand, but that area was neglected by large carriers. The facilities serving Chatham, because we started building our fibre, only allowed very slow speeds. I think that’s true for both Bell and Cogeco, which is the incumbent cable company there, and it was a source of great frustration. Obviously, TekSavvy is a very significant employer in Chatham. Many people in Chatham have some connection to TekSavvy, and TekSavvy has a higher penetration there than anywhere else. And I would hazard to guess not by coincidence, it was neglected by the incumbents.

4757 We decided to just get ahead of that and focus on building our fibre network there. We already had our fixed wireless network that was serving a lot of the communities outside of the city itself, and so part of it was a natural fit to upgrade fibre to towers, and then also use that experience with fibre to build fibre‑to‑the‑home in Chatham and some surrounding towns.

4758 MR. AUBE: Yeah, the top speed was ‑‑ you know, in most places was about 15 Megs, if the qualification was working properly, or on the cable network it was either, you know, up to 100 Megs or whatever it was, but, and then congested, as well. So customers were complaining, saying, “Look, we’re getting degraded service.” So we decided to invest in the fibre network in Chatham ‑‑ in our home town ‑‑ which it just so happens it’s one of those home towns where a certain company decided to overbuild fibre as well ‑‑ just saying ‑‑ after we started laying our fibre. So.

4759 THE CHAIRPERSON: And what were the challenges that you faced in deploying fibre in Chatham‑Kent?

4760 MR. KAPLAN‑MYRTH: We didn’t bring a technical person with us to talk about the network build.

‑‑‑ Rires

4761 MR. KAPLAN‑MYRTH: It’s been a learning process but, you know, we hired consultants and learned how to do it. We got the equipment that we need. We built a team. We hired people. And, you know, we’ve encountered I think all of the sort of similar challenges to what you’ll hear from rural builders ‑‑ access to poles ‑‑ and we’ve participated in the support structure proceedings. You know, information ‑‑ sort of a lack of information about rural transport. We participated in the transport proceeding. Just sort of navigating tower structure rules and things like that. I think a lot of that is sort of, you know, I guess growing pains, or building capacity.

4762 You know, there is a way in which large providers enjoy these efficiencies of scale where they know these kinds of operations; they can descend on a town, bring construction crews, and build fibre very quickly. I would say that there is an advantage to having more smaller providers building that capacity, and local jobs and local expertise, and building out more smaller municipal networks of the type that we did. It encourages a kind of ‑‑ a kind of innovation capacity building that I think the incumbents can’t do and is ‑‑ you know, I think it important counterbalance to efficiency argues about being the biggest and the most capable.

4763 THE CHAIRPERSON: Takes for that. And are you able to share whether you are planning to deploy fibre in other communities?

4764 MR. AUBE: At the present time, we are not, no.

4765 MR. KAPLAN‑MYRTH: Maybe that’s an opportunity to just also so that our fibre plans were much bigger previously. This was all playing out before the 2021 rates decision, and when we were build planning and building our fibre, when that decision came out, we basically immediately cut our plans to build any fibre that we weren’t basically committed to. We had some agreements for funding and other similar things ‑‑ similar arrangements. We completed what we needed to and we did not build the rest. We cut about 50 percent of our plans.

4766 THE CHAIRPERSON: So you’ve sort of touched on this, but how reasonable is it to expect wholesale‑based providers to build their own fibre networks?

4767 MR. KAPLAN‑MYRTH: I think it is actually one of the goals of the wholesale framework. We’ve always talked about a ladder of investment in this whole policy realm. You could have a framework that just allows a small number of ‑‑ or some number of competitors to operate in the market and possibly tread water, essentially, and discipline incumbents’ prices. That doesn’t contribute very much extra. It creates a competitive effect in the end‑user market, but those providers are always going to be sort of under the incumbents’ thumb, in a way.

4768 If it’s properly tuned, you will have competitors who grow enough that they can then build parts of their own networks. maybe some transport ‑‑ and we’ll touch on disaggregated, I hope ‑‑ and maybe even our own fibre‑to‑the‑home networks locally. That is ‑‑ that has been part of the goal, to allow us to continue ‑‑ or to grow and become, you know, local service providers with the kinds of facilities that people expect a service provider to have.

4769 MS. RUTHLEDGE: And I would say as well that how reasonable it is to expect depends on the market, of course. There will be some markets where, if an incumbent has already built there, it would not be reasonable to expect that, you know, someone would overbuild, depending on, you know, the size of that market, the density, a number of factors. But how reasonable it is to expect us to build facilities of course depends on the wholesale rates because, you know, if the wholesale rates are properly set, then we may have enough density in an area where we’d have a reason to build there, and we might have enough money to actually invest in it. But if the wholesale rates are as they are now, it’s certainly not reasonable for us to invest in those facilities.

4770 THE CHAIRPERSON: So maybe just picking up on that, we’ve obviously heard a lot about wholesale same rates and costs. You spoke today about incumbents’ costs decreasing, but wholesale competitors are not realizing those same costs savings. We’ve heard from the incumbents ‑‑ some incumbents saying that, you know, the wholesale rates are artificially low, they’re below cost levels. TELUS told us that, you know, we can’t compare retail rates and wholesale rates ‑‑ that that kind of comparison is misplaced. So, there’s been a lot said on that.

4771 Is there anything else that you wanted to add in terms of costs and rates? I mean, again you talked about this in your opening. Is there anything additional on that?

4772 MR. KAPLAN‑MYRTH: I feel like you may have taken Vice‑Chair Scott’s Goldilocks question from him.

‑‑‑ Rires

4773 MR. KAPLAN‑MYRTH: On costing, I would just say that the Commission already recently made a decision about Phase II costing and to use retail pricing and other factors as sort of a reasonableness test. The sort of suggestion that in this situation we would tweak the rates in some other ways to try to find some kind of sweet spot, you know, is a bit of a concern. I think it’s important that the rates are correct, but I think that it is important to follow a process to arrive at those correct rates.

4774 So, you know, our view is that the Commission should apply the established rule Phase II costing using retail rates as a ‑‑ and other factors as a kind of reasonableness test. We think the appropriate rates will come out of that as well as, I guess, a retail‑minus option when costing processes take too long, because it’s too difficult to, you know, wait.

4775 THE CHAIRPERSON: Sorry, Vice‑Chair Scott. I thought your Goldilocks question was a bit of a different question. We’ll see what happens.

4776 I just had two other areas that I wanted to cover, and then maybe just a couple of final questions, and then I’ll turn things over to Vice‑Chair Scott. Just with respect to the limits on wholesale access, because this is something we’ve heard a lot about; there have been a lot of proposals out there. So, if the Commission were to mandate aggregated FTTP, some parties have proposed, for example, that companies with relatively small fibre deployments, like cable companies, shouldn’t be subject to a wholesale mandate.

4777 I’m wondering what your thoughts are on that? And is ILEC FTTP enough for TekSavvy?

4778 MS. RUTHLEDGE: So, maybe on the question of, you know, who should have access, should there be limits ‑‑ we have talked about this a lot because in theory, TekSavvy would love everyone to fairly compete on wholesale. We think wholesale is, you know, a great and viable path for competition and to combat that natural monopoly or duopoly that, you know, the physical lines kind of bring.

4779 But then we also have to look at, who are these players we’re talking about? Sometimes, you know, there have been suggestions that, ‘Oh, these would be the strongest competitors.’ The evidence shows us that incumbents don’t have the same incentives to compete fairly and discipline each other’s market power. And the point of wholesale is to discipline their market power.

4780 If you look at wireless right now, you know, a customer has access to the big three, and yet, at this point, the prices aren’t competitive. The big three still have market power. They don’t seem to discipline each other’s market power. In Rogers and Shaw, the Competition Bureau found that there was evidence that they coordinated prices; that they did not target each other’s home markets, so they were afraid of, you know, retaliation in another market; and didn’t put forward promos in each other’s prices. They talked about not doing something irrational for fear of retaliation.

4781 These are not players who have historically been rivalrous with each other. They have this illusion of competition, and maybe they discipline each other a little bit, but we’re talking about real competitive discipline where we don’t have that same sort of history of coordination motivations that they might have.

4782 So, because of that, and because of the abilities that the big three would have to use their market power, especially in other, adjacent markets, to then leverage into the wholesale internet market ‑‑ we don’t think that at this time the wholesale HSA framework should be open to the big three. And I think we would agree as well that, you know, with CNOC’s proposal, that it shouldn’t be open to incumbents in general outside[sic] of their own territories. And we think that sort of strikes the right balance ‑‑ or, sorry ‑‑ in their own territories.

4783 THE CHAIRPERSON: And so because the large incumbents are currently using wholesale ‑‑ like, if you think about TELUS through Koodo, for example, is that having an impact on your business?

4784 MS. RUTHLEDGE: So, it’s funny. I think that might be why we’re actually talking about this now, is because the wholesale rates are not properly costed now, so they can’t compete that well using the tariff rates. I think what the worry is, is that you will set wholesale rates that do follow Phase II and are properly costed, and at that point incumbents might be able to leverage their market dominance in, you know, mobile or just their large sort of well‑capitalized corporations, to offer more targeted deals.

4785 I don’t know if, Pierre, you have thoughts on what they’re doing right now?

4786 MR. AUBE: Yeah. No, I mean, it goes back to what you were just saying, is ultimately they’re using that power to promote heavy, heavy marketing in those ‑‑ throughout Koodo, to try and grow their brands. But we haven’t been seeing a tremendous amount of churn on that side, personally, so far. So.

4787 THE CHAIRPERSON: Okay. Thank you for that.

4788 Just in terms of the other limits on wholesale access, because I’m sure you’ve been following a lot of the proceeding ‑‑ the other restrictions that have been put forward are an access holiday or a head start. We’ve heard about speed caps. Is there anything there that you would like to respond to?

4789 MR. KAPLAN‑MYRTH: We don’t think that those other solutions are appropriate. We think they undermine the purpose of wholesale. They might address specific concerns from incumbents, but they do so at the expense of competition.

4790 This solution of limiting incumbent access in this way addresses those concerns, and also promotes competition. So, you know, our ‑‑ our view is that, once you look at how wholesale HSA would play out with appropriately costed rates where incumbents are limited in these ways, then we think that those concerns around speeds or specific facilities, or even new builds, are not as serious concerns. The impact from the small competitors who will be there will be, you know, smaller than the impact if you had all of the incumbents operating in the same way and that sort of thing. And then, that sort of obviates the need for a sunset period or ‑‑ or a regulatory holiday on new builds.

4791 THE CHAIRPERSON: Okay, thanks very much.

4792 On investment, obviously we’ve heard a lot about this ‑‑ incumbents have said they will reduce their investments ‑‑ or some have said ‑‑ if we give access to fibre networks. You’ve said that those claims are tired threats. We heard from CNOC that this is a myth and the threats of decreased investment are not credible. Are you concerned that incumbents will invest less?

4793 MR. KAPLAN‑MYRTH: I’m not concerned that they will invest less. They have business decisions to make, and they might look at the numbers and decide to change their investment plans. I will tell you that wholesale rates certainly had an impact on our investment plans, and so it wouldn’t surprise me if they have an impact on incumbents’ investment plans.

4794 What fills that gap, though, is an open question. If wholesale rates were set properly, providers like TekSavvy and other competitors, I’m sure, would be in a better position to build more networks to fill some gaps. Many of us are in rural areas. And some communities would prefer to have a local provider or a non‑incumbent, non‑large‑incumbent provider build in their area. That has been our experience.

4795 MS. RUTHLEDGE: And yeah, I mean, I was going to give the example of Build Nova Scotia where they said, you know, they didn’t see Bell making investments in their areas, so they took it upon themselves to make those investments. It’s not the strict dichotomy between investing by incumbents and competition. There’s a potential difference, a different equilibrium that could be reached.

4796 Yeah, I just, I guess we would caution you to stop thinking about investment from the lens of will Bell invest, and think about who will be able to invest and how will we reach those communities, not simply how will Bell choose to make its ‑‑ allocate its profits.

4797 And you did hear earlier this week, I think, from Mr. Bragg, who said there’s always the risk, if wholesale rates are set too high, that you might ‑‑ the incumbent might keep those profits in his pocket. There’s no guarantee that they will keep investing. They may have already reached an equilibrium where they decide to, you know, slow down their fibre investment. And if you compare to the US, maybe that indicates, you know, that we might be reaching that equilibrium as it is.

4798 So obviously, we are concerned about customers getting access to high quality networks. We just also would like to be able to serve those customers.

4799 MR. KAPLAN‑MYRTH: Maybe I’ll just also say this feels like kind of a crossroads in terms of policy‑making. You know, there’s a policy outcome here that is to encourage competition. If you achieve that through ‑‑ if you achieve that by prioritizing the ability for a small number of extremely powerful large companies to continue to build out more networks that then make themselves even more powerful, especially through mechanisms like regulatory holidays, then you’ve chosen a policy path that I think will not achieve the goal of increasing competition, and we’ll continue down a road where a small number of companies sort of control that market; whereas you have an opportunity here to choose a path where the regime, rates, and access are tuned to allow smaller providers to join the market. That will have some impact on large incumbents, surely. However, the related regimes will adjust to fill related policy goals.

4800 So government funding, broadband funding programs, and the CRTC’s funding program was tuned to the environment that it was in and the sort of business cases that could be made. If in order to achieve this policy goal of increasing competition, that changes the sort of tuning of what business cases can be made and the government needs to subsidize more builds, that seems like an appropriate use of government funds that achieves related policy goals.

4801 THE CHAIRPERSON: Okay, thank you very much. I think you’ve answered a couple of my questions on investment.

4802 Let me just ask two other questions. One is with respect to copper, removing copper. You’ve noted significant concern about ILECs removing copper when they deploy fibre. Can you maybe help us understand what the impact is on your business when incumbents decommission copper? And then maybe as a second part, I’ll just throw it out there now, if we were to mandate aggregated FTTP access, would that be enough to address any of those concerns?

4803 MR. KAPLAN‑MYRTH: I’ll start, and I’m sure that you both will want to jump in on this.

4804 There’s at least two major concerns with decommissioning copper. And let’s just focus on ILECs, because I think it’s clear the ILECs are doing this, whereas cable companies are maybe doing it for different reasons and in different ways, and anyway, we have an application open about that issue, so maybe we’ll not spend as much time on it.

4805 Two major concerns. One is just the simple reduction in the footprint available to us. This has been going on for a long time. Maybe it had accelerated recently, but for years we have complained that facilities are being removed or at the time what we were discovering was it was more rotting in the field.

4806 So that is ‑‑ and I’m not a technology guy, but my understanding is the copper line from your home goes back to maybe it’s the DSLAM, maybe it’s somewhere else, where it plugs into ports. And those ports don’t work eventually. Some ports are marked that they’re not working. And so you run out, even though the copper is there and has not been decommissioned, there are no ports available anymore to connect customers.

4807 And this has been a very frustrating obstacle to even reconnecting customers who previously had a DSL service. You can imagine you had a DSL service at your home; you disconnect it maybe for a short period. Maybe you switched to cable, and now you’re coming back to DSL. And you’re told address isn’t serviceable, not because the copper’s been removed, but because there are no available ports in the neighbourhood. And there’s really no oversight of those available ports. So that was sort of an older version of this, and we’ve seen that happening for a very long time. Now, they’re just, you know, it seems, removing copper. And that’s just a reduction in the footprint available to us.

4808 When you talk about this, I want to encourage you to think about the impact on existing customers as well as serviceable market. So yes, maybe they’ll go down the street and remove the copper at house after house, and then not remove it at a house that’s served by wholesale in order to keep that copper available. At least our customer doesn’t get disconnected, great. But we have lost this serviceable neighbourhood otherwise. So that’s one concern.

4809 Another concern is just the operational challenges that are raised when some addresses are fibre and some are copper, when we knew that they were copper in the past, and we know that address should be serviceable, and now it’s no longer serviceable, maybe by the same person, maybe not by the same person. It presents real operational challenges to qualifying addresses and getting customers signed up. I think this is a larger problem on cable than on the ILECs, but it is directly related to this kind of decommissioning copper.

4810 MR. AUBE: Yeah, ultimately, what it comes down to is we need to be able to offer an alternative to that customer. You’re saying FTTP, but FTTP at the current rates, it’s just not feasible ultimately is what this comes down to. So if there’s a mandated FTTP with reasonable rates where we’re able to convert those customers over, then I see where there’s a path forward there.

4811 MR. KAPLAN‑MYRTH: Yeah, I think ultimately our view is that it’s premature right now to be talking about sunsetting FTTN or forbearing from FTTN. I think, in practice, the availability of FTTP will mitigate some of the, you know, harm to us from the removal of copper. But it is very uncertain right now. I think it’s premature to make the choice to not require DSL and switch over entirely to FTTP.

4812 THE CHAIRPERSON: Okay, thank you for that.

4813 I just have one final question, and that is around the quality of service issues we’ve heard about from the wholesale providers’ perspective. We’ve heard about that from Vidéotron; we heard about that from CNOC, you know, the issues facing competitors, but sort of to the giant incumbents is how it was put to us, like customer onboarding. You talked about some operational issues today in the west; I don’t know if that’s something different. But could you maybe talk to us a little bit about those issues and what the impact is?

4814 MR. AUBE: Sure. I have a customer right now in Chatham that has been waiting to get online for two months now. And we’ve been trying to work with an incumbent to get this resolved, and we just can’t. We can’t seem to get to a proper path of getting this customer online for various reasons ‑‑ tech no‑show, new line required, whatever reason it is.

4815 That is pretty much across many of the footprints that we deal with. Either it’s we don’t have access to the qualification data; we have limits on qualification data; we are not able to get a proper dispatch time; customers are getting a sub‑par system; or the customers are being cross‑sold and they’re being actually installed by the incumbent. So many of those service qualities we experience all day long. It’s quite interesting.

4816 We had to build our own database or infrastructure to try and understand which ‑‑ so Andy touched on the address. So we knew it was, you know, serviceable before, no longer serviceable afterwards. The only reason we know that is because we had that customer before. And because through whatever qualification tool that we would get with the incumbent, they would just tell us it’s not serviceable. They would have told us they removed the equipment to actually get there.

4817 So there’s ‑‑ those happen all the time. It’s just part of the business that we’re dealing with on a day‑to‑day basis.

4818 MR. KAPLAN‑MYRTH: Maybe I’ll just touch a little bit more on quality of service and also kind of operational rules, which I see as both being part of this quality of service picture.

4819 But really, this is the kind of thing that you could ‑‑ the more you dig into any one of these issues, the more surprising issues and problems you find. And it’s one of the reasons there does need to be, I think, a dedicated process that looks into what these challenges are. And I agree with CNOC’s proposal that there should be an inquiry and report as a starting point.

4820 I would point to the application that was made in 2014, I think it was, it might have been 2013, but the decision was 2015‑40, that was supposed to address a number of operational challenges. That decision spun off into a number of recommendations from the Commission that CNOC and other parties have a number of bilateral or resolved some issues bilaterally with incumbents and resulted in three issues that were sent to a CISC committee.

4821 That CISC committee worked for a number of years to produce two reports. One of those reports was finalized. I would say by the time it was finalized, some of the issues that were resolved in it were already out of date. The other report that was produced was a non‑consensus report for which we’re still waiting for a decision from the Commission.

4822 It is not the most important thing, but I just, you know, use it as an example of how I think difficult it is to resolve these issue at a CISC committee. So I support CNOC’s proposal for that.

4823 Quality of service issues, of course, there’s a quality of service regime that results in the collection of some data. In our experience, that has not been useful. We don’t think that data generally reflects our experience. It feels like a bit of a numbers game. There’s no enforcement mechanism. There’s no, you know, retail comparison to be made, and we’re not sure what the value of it is going to be to the Commission.

4824 My view is that that was sort of the first step taken by the Commission to start off with collecting data and then let’s see where that goes. And I think it is going to be time soon for the Commission to think about the next steps for that quality of service regime.

4825 MR. AUBE: I just want to add one little point is we’ve actually ‑‑ we’ve gotten really good at dealing with some of these issues, with the service quality issues with some of our providers where we actually went out of our way and got some wireless hubs that ‑‑ it’s an added cost ‑‑ that we send to our customers when we know we won’t be able to resolve the issue with the incumbent for weeks or days on end. So we go above and beyond and get the customer ‑‑ try and get the customer online temporarily while we try and resolve the issue because we’re not able to properly resolve the issue in a timely fashion with the incumbent. So.

4826 MR. KAPLAN‑MYRTH: Yeah, and the way we think of that ‑‑ sorry, just to add to that, because it’s a great point ‑‑ is that we know that incumbents are going to fail in these ways so often that we have built that failure into our system and built systems internally in order to accommodate those failures. Because that’s actually more efficient to us than even dealing with those failures, you know, on a one‑off basis through a dispute mechanism or complaining, you know, escalating it internally at the incumbents. That is not ‑‑ that sort of mechanism does not scale. You can do that sometimes, but not at scale.

4827 THE CHAIRPERSON: Okay, thank you very much. Thank you, TekSavvy, for answering my many questions. Thank you to my colleagues for being so patient, because I know they have other questions.

4828 Vice‑Chair Scott, I hope you still ask your Goldilocks question; I think we all do. Over to you.

4829 VICE‑CHAIRPERSON SCOTT: I probably will ask it, just for consistency. Consistency is the hobgoblin of little minds, but that’s okay.

4830 So you’ve covered everything from operational issues to existential issues. And I think my questions are going to do the same. And I want to start with retail‑minus, because we haven’t really discussed it much this week.

4831 So to be clear, you’re proposing a retail‑minus only on an interim basis, recognizing the time it takes to do cost‑based rates well. Is that fair?

4832 MS. RUTHLEDGE: Yeah, that’s fair. We don’t really see a retail‑minus as sort of a sustainable long‑term rate‑setting mechanism, and we think that Phase 2, when it’s properly applied and properly costed, should work. It’s more an issue of how long it takes to do that and being able to respond to declining costs that incumbents might realize that we’re aren’t able to realize. And we often see that their retail prices sort of indicate to us that they are sort of realizing those cost savings. So that’s part of it, yeah.

4833 VICE‑CHAIRPERSON SCOTT: Okay, because so this week I’ve asked a number of people for undertakings on their retail costs, recognizing that the rack rate on their website may or may not have much relation at all to the rate that customers are paying. So operationally, when you talk about a retail‑minus, the minus part is pretty clear. What’s the retail number that we should be starting with?

4834 MR. KAPLAN‑MYRTH: I don’t think this is a novel solution. The Commission has applied it before, and I think in that case it was the lowest price available in the retail market. You know, we’re not fans of retail‑minus. I think one of the attractive things about retail‑minus is that nobody’s particularly a fan of it. It might create the incentives to provide appropriate costing, clear, transparent costing information and arrive at properly costed rates more efficiently.

4835 VICE‑CHAIRPERSON SCOTT: Okay, thank you.

4836 Yeah, so on the rates now and into the Goldilocks zone question, and the reason I keep coming back to it is because it really is the heart of this whole discussion, because it’s the heart of the wholesale framework and it’s the heart of your business model, I think ‑‑ correct me if I’m wrong.

4837 So are you confident, then, that Phase 2 costed wholesale rates properly applied would create enough margin for you to put a service into the market that your customers find attractive and delivers the benefits in terms of quality and price that consumers are looking for?

4838 MR. KAPLAN‑MYRTH: I think the Commission has already made the choice that Phase 2 costing with this, you know, additional reasonableness test is the right way to arrive at rates. And we like the certainty of that, and we’d like the Commission to apply, you know, apply the established test rather than creating some ad hoc rate‑setting mechanism for this proceeding alone.

4839 You’re right, there’s some kind of ‑‑ I am hopeful that that results in rates that work. You know, I think that hope is based on my very limited understanding, admittedly, of how Phase 2 costing works and that it is based on costs and provides appropriate incentives and compensation for incumbents.

4840 Will it allow competitors to compete? You know, we hope that it will. But in terms of finding ‑‑ in terms of, you know, if Phase 2 costing and a reasonableness test gets you to sort of a range, and the question is going to be where in that range should rates be, then we think a properly tuned framework would allow you to set those rates low enough that competitors would be able to meaningfully participate in the market and grow.

4841 I say properly tuning it meaning some of those limitations like limiting where incumbents can use wholesale services as a way of sort of reducing the risk to them of the wholesale framework, you know, as a ‑‑ I guess as a mechanism of reducing their margins.

4842 VICE‑CHAIRPERSON SCOTT: And what about the suggestion we heard this week from a couple players that because they will often sell their Internet access below cost and then make up the profitability on other parts of the bundle, other services that they offer, with I think some implied suggestion that you ought to do the same because that’s what consumers are looking for. Is that viable? Is that the business that you’re in? Is that what your customers want? Is that a fair suggestion, or is that an unfair suggestion?

4843 MR. KAPLAN‑MYRTH: We do the same. I mean, we have to sell these services below cost. If we don’t do that, we would not have competitive prices. So I think, you know, everybody does that. I don’t know that everybody does that, but I mean, that’s certainly a dynamic in the market. And yes, we sell below cost and then we take however long it takes to start making a profit on that customer. And we hope that we try to provide great service to keep that customer long enough that we can make that up. And I think that’s sort of the basic I guess whatever business proposal of selling that service below cost.

4844 The problem is that we’re being forced to do that by large incumbents who have market power. We’re being disciplined by them. And the whole framework is just working sort of inside out right now. I would expect, you know, an efficient framework with proper rates to also involve very vigorous competition that resulted in some people selling below cost and planning on how long they could keep customers in order to make up that difference. You know, that could certainly still happen. But it would be motivated in different ways.

4845 You know, I know that I keep returning to it, but it really is a matter of seeing just price interaction between businesses as competitive or is it fulfilling the competition goals of the framework.

4846 MR. AUBE: I just want to add one little thing there. One of the things that people tend to forget is when we buy the service, when we’re paying the incumbent for the service, we also offer the support to that customer. So in essence, we only involve the incumbent when we absolutely need to. So when the initial install happens or if there’s something with the line that needs to be repaired afterwards. All that stuff that happens in the middle ‑‑ the billing, the customer service, the speed upgrades, all those other things ‑‑ we support that through our contacts and as we handle hundred of thousands of calls a month.

4847 And they tend to forget that that lowers their cost slightly, because now they’re not providing support for that. So that would be like a win for them. You know, we’re giving you a connection. Yes, you’re not able to bundle on that customer. But guess what? You provide a lot less support to that customer because we’re actually taking care of the support for that customers. So.

4848 VICE‑CHAIRPERSON SCOTT: Thank you.

4849 So recognizing that you don’t have the same maybe scope and scale of some of the other companies that are deploying fibre these days, but you’ve nonetheless built a fibre project, what would have been the economics of your fibre build if you’d been required to open it up to others? Would you still have gone ahead?

4850 MR. KAPLAN‑MYRTH: I mean, it’s hard for me to say, in terms of numbers ‑‑ I don’t have the business case ‑‑ but philosophically, I think yes. We, in fact, have some agreements that require open access to those networks and we did go ahead with them, so I know that in those cases it was part of the business considerations, and we did still decide to go ahead with it.

4851 You know, I think, otherwise, we’re for competition and we support wholesale customers downstream from us, even though that’s not required, we do that. We have always done that, in order to continue to grow a healthy, competitive industry. I don’t know why we wouldn’t also do that on our fibre, if it were appropriate.

4852 MS. RUTHLEDGE: That was basically what I was going to say, yeah. I mean, you heard earlier this week that there is a wholesale rate, in theory, at which point you were agnostic between retail and wholesale, and, you know, we currently offer mandated wholesale to our other services, so we would agree with that proposition, that there would be a wholesale rate, you know, where it would be appropriate for us. It wouldn’t have really made a difference, in terms of our choice to invest, and we don’t really see that there is a specific threshold for size of homes or serviceable addresses past which an FTTP network should not be mandated for wholesale. We see it more as is there market power there that should be disciplined?

4853 And so, you know, if the future, if the Commission found that TekSavvy had market power, then, you know, I think ‑‑ I don’t make the business choices but we don’t see a world where we would not be open to wholesale.

4854 VICE‑CHAIRPERSON SCOTT: Great. Thank you very much for your answers, I appreciate it. Thank you.

4855 THE CHAIRPERSON: Okay, thanks very much. Let’s go to Commissioner Naidoo.

4856 COMMISSIONER NAIDOO: Hi there. Thank you so much for your answers today.

4857 In your opening remarks this afternoon, you note that you now serve 100,000 fewer subscribers than you did at your peak. So, I’m wondering if you could walk us through the timing of that, when did you reach your peak and how quickly has that customer base fallen off?

4858 MR. AUBÉ: Sure. Once the rates started changing. So, ultimately, when the 2021 rates came about we started ‑‑ we had to raise our prices, and ultimately we started seeing a huge decline.

4859 Now, prior to that we had seen a decline on the copper/DSL of our services there, because customers wanted higher speeds and we just didn’t have any other option to offer them outside of the cable footprint, or because there was no fibre access there.

4860 So, I don’t want to add more to that, but we started to decline ‑‑ the peak was 2019; I’d have to look at the numbers again, truthfully ‑‑ and then, once we started raising prices, when the decisions came on the new costs we raised our prices, and then we started seeing a decline even steeper, because we were now no longer competitive in the market.

4861 MR. KAPLAN‑MYRTH: I’ll just maybe add, as a gloss, that you might think of this as an easier question to answer than it is, where we would just have sort of a counter going somewhere and we would see it go up and go down, but we operate across every carrier, every incumbent that has mandated wholesale service and there’s different dynamics in each of those markets, different flanker brands, in particular the impact of the unavailability of fibre to us, and all of these different factors.

4862 So, it has ‑‑ our customer count has gone up and down on different incumbents, at different times, so it has really been a pattern that has been playing out since 2017, 2018, but certainly accelerating in the past few years.

4863 COMMISSIONER NAIDOO: Would you say that it was ‑‑ so, you said that it was raising prices that led to sort of a more steeper decline. Was it something that happened slowly or did it happen quite quickly?

4864 MR. AUBÉ: Well, there’s raising prices and lack of access of the fibre. So, there’s lack of options available to the customers. So, the customers wanted higher speeds that we just couldn’t offer them.

4865 COMMISSIONER NAIDOO: All right. So, you mentioned speeds. What speeds and technologies were your customers on at the peak? So, I guess the peak, you had said, we in 2019, right? So, around that time what speed and technologies ‑‑ but also, where are your customers now?

4866 MR. AUBÉ: So, we primarily have speeds that are ‑‑ well, we sell all speeds, right up to gigabit, and we’ve seen recently our customer base is actually increasing on the giga speed as well.

4867 We are offering ‑‑ we did see a much higher growth in the lower speeds, so I’m saying 100 and lower, but that has been a ‑‑ we’ve been forced, kind of, there, by the tariff rates. Ultimately, right after that the tariff doubles, plus you add the CBB cost and you add the operational cost, and everything else, it just becomes a non‑starter for the customer to start paying those elevated rates.

4868 So, I can get you the ‑‑ I can take an undertaking and give you the actual ‑‑ which speeds we’re currently at, but ultimately, we’re below, in terms of ‑‑ you know, less than 1 gigabit is our ‑‑ you know, the sweet spot would be our 50 meg to 100 meg customer base.

4869 COMMISSIONER NAIDOO: Okay. I’m going to let our legal team decide if we need an undertaking on that and I’ll let you know shortly.

4870 In your opening remarks you also talk about how you started to invest in disaggregated access. How many POIs have you established and how long did it take to get to each POI?

4871 MS. RUTHLEDGE: I hope I’m allowed to say this in public, because I’ll do it. So, we currently have five POIs enabled for disaggregated, and we’ve got a few more that are sort of in the process of finishing the enablement.

4872 But we don’t purchase any disaggregated fibre at those POIs, maybe a test case or two, but the rates, even though we’ve invested in the disaggregated infrastructure, the rates don’t allow us to even sell fibre.

4873 And we had begun the process for interconnection at a number of additional POIs, more than that, but we recently stopped that work, and that was involving significantly monthly costs for years. Those costs are now unrecoverable to us and we’ve abandoned that work, and maybe ‑‑ I’m just trying to think if there was one other point about disag POIs. I think we heard earlier this week about how much Bell has invested in disaggregated. We’ve invested almost half of that and we’re certainly not Bell’s size, so that might give you an indication of, you know...

4874 We do see some markets where it might be viable for us, and we certainly chose those markets based on the customer uptake potential, and it would be a shame if those customers were now the ones who weren’t able to get access to fibre.

4875 COMMISSIONER NAIDOO: Sticking with your opening remarks ‑‑ that’s kind of my theme, here ‑‑ you said that there were ‑‑ quote ‑‑ ‘a few simple tweaks’ that you felt were needed to adjust the disaggregated framework. So, I was hoping that you could flesh that out a bit. Can you tell us what those tweaks are that you were referring to?

4876 MR. KAPLAN‑MYRTH: Yeah, I’d be happy to. We see the sort of concerns with disaggregated as maybe falling into two categories. There is sort of a question about long‑term ‑‑ the importance of disaggregated as a framework, but also, we have disaggregated right now and there are going to be interactions with any new aggregated FTTP regime, should that come to pass.

4877 So, those tweaks I think really concern a transition period, or a transition as the aggregated service comes in.

4878 The first thing is there’s a clock ticking on disaggregated Cos or POIs, from 2015. There’s a transition period of three years, that, once competitors order disaggregated services at a POI, that POI goes fully disaggregated after three years.

4879 So, any competitors with customers served out of that POI are expected to really require to switch to disaggregated, in order to continue to serve that population.

4880 That has continued to be in place, as far as we know, and the first POI that we’re aware of, that would switch over to fully disaggregated is in August this year. That means that any competitors who have not been aware of that or who have been thinking that disaggregated is gone, or that this is all under review and they’ll never be required to move to disaggregated would now have to scramble to move their customers over. It probably is not possible at this point for them to do that, I would guess, because of the time that it takes.

4881 So, you know, in our view, that clock needs to be frozen urgently, so that the rest of the interaction between disaggregated and the long‑term viability of it can be figured out without this artificial pressure, I guess, of moving people over.

4882 The second issue is that once a competitor has moved their customers to disaggregated at a particular POI, there’s no mechanism for them to go back to aggregated, and they’re only ‑‑ the incumbent is only required to provide one of disaggregated or aggregated to a given competitor at the POI.

4883 So, if we have gone disaggregated at a POI we’ve moved all of our customers over to disaggregated at that POI, they’re being served on disaggregated right now. Should you introduce an aggregated FTTP ‑‑ well, even a temporary aggregated FTTP regime ‑‑ it is not clear to us what we can serve customers who are served out of that POI on the aggregated framework, because under the existing rules we have now switched to disaggregated and they’re only required to provide the service on disaggregated.

4884 This has an outside impact because we have targeted exactly the areas where we wanted to be able to provide fibre‑to‑the‑prem, that’s why we made the investment, to do disaggregated, we’ve targeted exactly those POIs. And now, there’s the possibility that the ‑‑ well, under the temporary regime, Bell or TELUS would prevent us from accessing customers on those areas on the temporary aggregated framework, and we think that that’s clearly the wrong outcome.

4885 So, there’s some thinking that needs to be done about the transitional work of customers who have already moved to disaggregated and how those customers can be served on aggregated.

4886 And then, there’s maybe a very niche problem of the specific POI that the incumbent uses for the aggregated interconnection. So, if that POI ‑‑ you know, the incumbent aggregates all their traffic back to one POI and that’s where we pick up the aggregated traffic ‑‑ if that’s the POI where we’ve decided to go disaggregated for the population served out of that POI, we need it to be very clear that of course we can continue to pick up aggregated traffic for the rest of the network out that POI as well.

4887 So very specific clarifications, I think, that are required for just really the interaction between aggregated and disaggregated.

4888 COMMISSIONER NAIDOO: All right, well thank you very much for ‑‑ oh, sorry, please go ahead.

4889 MS. RUTHLEDGE: I was just going to add on sort of the issue the interim rates on disag, because right now, you know, you have a connection that uses basically the same access facilities as aggregated but the rates are significantly higher on disag, so that’s sort of another tweak that, if you adjust those rates down, as kind of in the formula we suggested, it would get rid of those issues, and it might get rid of one of the issues of needing to switch customers to aggregated when they’ve already gone disaggregated. If the rates were properly set, then we wouldn’t need to switch them back.

4890 MR. KAPLAN‑MYRTH: There is one issue about disaggregated that I don’t think has come up in this hearing, and it’s about specifically RF over glass, RFoG. Sometimes the cable companies will make a distinction between DOCSIS and FTTP. RFoG is a technology that is both. It is DOCSIS over FTTP. The Commission has found that RFoG services, because it involves a fibre going to the home, that RFoG services are FTTP and therefore were only available to competitors under the disaggregated framework.

4891 That was a decision of the Commission, but that’s despite RFoG being essentially transparent to competitors, we rely on the same DOCSIS modems, the same equipment in the customer’s home, and from time to time we discover that a customer who we have online, got installed, is operating just fine. We’re contacted by the incumbent that on an audit or another tech call in the neighbourhood, it was discovered that that customer is actually served on fibre‑to‑the‑prem, and so they’re going to be disconnected, because we don’t have that service available to us.

4892 So, RFoG is this kind of intermediate technology that really has characteristics of both DOCSIS and FTTP, that raises all kinds of operational concerns, like just qualifying addresses, for example, right now, that I think has maybe not had the attention that it deserves in at least decisions or letters or RFIs. But, you know, I hope that you consider RFoG specifically and the role that it plays, and exactly where it falls. If you were to draw a distinction between DOCSIS and FTTP it would raise a lot of questions about RFoG specifically.

4893 COMMISSIONER NAIDOO: Well, thank you very much for fleshing out those simple tweaks, which didn’t sound all that simple necessarily (laughter) Much appreciated.

4894 As for the reference to the formal undertaking for that information, we don’t need an undertaking on that; thank you very much.

4895 Those are all my questions. Thanks.

4896 THE CHAIRPERSON: Thank you, Commissioner Naidoo. We’ll go over Commissioner Desmond now. Thank you.

4897 COMMISSIONER DESMOND: Good afternoon. I just have a few questions that are kind of left for clarification, so I shouldn’t be too too long.

4898 We’ve talked this afternoon about your ability to have access to reasonable rates using the current system.

4899 I’m wondering if you could share ‑‑ not with getting into any confidential information ‑‑ but are there particular companies where you’ve been able to make the rate work better for you than maybe other companies, and is there a reason why that is?

4900 MR. KAPLAN‑MYRTH: Are you asking about off‑tariff agreements or more just the way the tariff is structured?

4901 COMMISSIONER DESMOND: Well, maybe we could break it down. So, if there are particular off‑tariff agreements that have worked out with particular companies, is there a reason why that has worked better for you? Or, looking at the tariff rate, is there a reason why you’ve had success with one particular company and is there is a reason why that is?

4902 MR. KAPLAN‑MYRTH: Thank you for the question. It is a little hard to answer about off‑tariff agreements as fully as I’d really like to, because they are bound by confidentiality that I wish they weren’t bound by, and I wish that I could tell you all about them.

4903 So let’s just start with the tariffs. There are certainly some price points, some rates, where we have found we can offer competitive service, we can, you know, make a profit on a speed in a way that still offers a competitive price in the market. Those do tend to be lower speeds and just, for example, because I know they were something that we made submissions on ‑‑ Cogeco 40 and 60 are examples ‑‑ and this is public record because Rogers and Shaw were changing around some available speeds ‑‑ we made submissions about, I think it was the 100 on I think both of those, Rogers and Shaw. But this was one of the few speeds where we could offer a competitive service at a speed that people want.

4904 So, sometimes it just comes out of the available ‑‑ you know, the tariffs and the pricing that’s there in the market.

4905 There’s one particular example of that, I guess, which was a particular price on one Rogers speed, which is out of step, I guess, with the other prices. It’s a lower price than the speed that’s slower that it, and that’s a historical artefact that has been carried over, and so obviously that makes that particular speed attractive for competitors.

4906 Off‑tariff agreements. There’s a lot of dynamics that go into off‑tariff agreements. As far as I know we don’t have any off‑tariff agreements now for speeds.

4907 In the past we have found ‑‑ so, our view is off‑tariff agreements are basically a symptom of the system not working well. They come into play when the rates are high and we’re unable to rely on the tariffed rates to offer competitive services and that gives incumbents the space to pick and choose to offer us a path to offer some speeds and they can sometimes direct us which speeds to offer.

4908 So, sometimes, off‑tariff agreements are structured in a way that encourage or require us to sell certain speeds. Those are always lower speeds.

4909 That hasn’t happened recently because, basically, off‑tariff agreements have not been in play, in our experience ‑‑ on speeds, at least ‑‑ very much.

4910 I’m qualifying about speeds because different incumbents take slightly different views of what would require an off‑tariff agreement. There are some services that some of the offer that are not technically covered by the tariff or the regime, the framework. An example would be if they gave us particular access to a portal that was through some kind of an API, then, someone might require an off‑tariff agreement in order to make this available.

4911 That’s not the kind of thing that really changes the dynamic of the market the way that OTAs that change pricing do, but they are kind of funny little enhancements to the framework that are treated as off‑tariff.

4912 Does that answer?

4913 COMMISSIONER DESMOND: Yeah, that’s helpful, thank you very much.

4914 MR. AUBÉ: Can I just add one little thing on off‑tariffs? I’m the one who most of the time gets the call for an off‑tariff agreement. I make the calls out all the time to try and see if we can negotiate some deals, to try and get things running for better rates.

4915 And it’s a very one‑way street, as in it’s them that will offer whatever they feel they need to, most of the time, hit the quarter numbers that they’re trying to achieve.

4916 So, you know, I’ll get the call, “Pierre, hey, can you get an extra 2,000 subs this quarter, and then we’re going to offer you this offer.”

4917 But outside of that, if I’m going out and saying: Hey, can we get access ‑‑ let’s talk about getting access to this or that or this, you know, it’s very ‑‑ it has fallen most often on deaf ears; it just won’t be there. So I just thought I would add that.

4918 MR. KAPLAN‑MYRTH: Maybe I’ll just ‑‑ to sort of wrap that up, to state a point I keep coming back to; these off‑tariff agreements that function in this way, when the incumbent comes to us to use us in order to gain some market share basically onto their network, this is a competitive dynamic. This is us being essentially pawns in a competitive dynamic between incumbents that does not advance the competitive goals of the framework, where we would discipline the market power of the incumbents. I hope that’s clear.

4919 COMMISSIONER DESMOND: That’s helpful, thank you.

4920 I had a question of clarification. I know in your submission this morning, or this afternoon, you talked about how you agree with the CNOC proposal and that the Big Three wouldn’t be using the networks of others, and there would be no in‑territory use.

4921 But in response to a question from the Vice‑Chair ‑‑ he asked you if you rolled out your network and the rate was set properly, and you could be agnostic about whether or not you would provide wholesale access.

4922 But I’m wondering about the smaller players, because I think you’ve told us that the smaller regional players would not be part of the mandatory access but, in this instance, you did say you thought you’d be in a position to roll out and provide access.

4923 So, I’m just trying to put those two thoughts together and make them work.

4924 MR. KAPLAN‑MYRTH: I hope that I’m understanding your question right, but I want to be really clear, we don’t think that it would be appropriate at all to consider a mandate for TekSavvy’s fibre‑to‑the‑home network.

4925 It is a fibre‑to‑the‑home network in Chatham. We do not exercise market power in any measure that we would need to be disciplined by other competitors, and that has always been the initial threshold for imposing mandatory service on somebody, on a provider. So we don’t think that we’re anywhere close, you know, to that kind of thing happening.

4926 I may not have understood what you were asking about it not applying to other regional providers.

4927 COMMISSIONER DESMOND: No, that makes sense, because we’re talked about the market discipline and having market power. It was just in response to the question from the Vice‑Chair that, you know, the conversation about whether you’d be agnostic and being willing to provide service on your fibre network. And, you know, if that was the case, what about other smaller players like yourself.

4928 And I think your position is that you didn’t feel, at this time, that they had the market power to necessarily be required to provide access.

4929 MR. KAPLAN‑MYRTH: We have a long tradition of offering downstream wholesale services downstream from ‑‑ you know, we buy wholesale services and then we offer wholesale services to smaller providers who are just not large enough to enter into the agreements with a carrier and get the interconnections and buy capacity and all of that, and so we manage that for them.

4930 That’s a service that we offer that is not mandated, it’s not regulated, and we do it to encourage the growth of a competitive market. That’s very different from what the incumbents would do. You know, I doubt that they would offer downstream wholesale services like that if they were not mandated to do it. So I think that’s, you know, a key difference why that mandate should not apply to us.

4931 COMMISSIONER DESMOND: Okay, thank you. That does clarify, thank you.

4932 There’s been a suggestion I think through this past week that the Commission freeze the fibre‑to‑the‑node rates. I’m not sure if you were kind of aware of that conversation that was going on in the last couple of days. But I’m wondering if you could perhaps comment on that?

4933 Then I think TELUS also suggested that the fibre‑to‑the‑node be discontinued where there is fibre‑to‑the‑premises. So I’m wondering if you could share your thoughts on that?

4934 MS. RUTHLEDGE: Sure. So for the rates, for the FTTN rates, we’re talking specifically about ILECs. We would say that the rates in market right now don’t currently reflect costs, and there still are lots of homes that are not served on FTTP on those networks. So we wouldn’t, you know, want to sort of doubly disadvantage those consumers who currently can’t take advantage of fibre and also have rates, retails rates, that are not properly disciplined.

4935 So we think, you know, the Commission has gotten cost studies, it’s initiated a costing review, it’s something that, you know, the next logical step is to set those costs.

4936 In future, we do agree that, you know, those rates might be open to being frozen. But we think certainly right now we’re at rates that, if you look at 2021, that decision, they chose not to undergo a full review. So we’re at rates that have not been reviewed. We’d like those rates to be reviewed so we can properly compete for those customers who do rely on FTTN from ILECs. But, yes, there is a path forward where we think it would be appropriate to freeze those, provided we have access to fibre.

4937 MR. KAPLAN‑MYRTH: Maybe I’ll just ‑‑ sorry, to address specifically you talked about TELUS’s proposal. I think that’s closely related actually to decommissioning, because what I think they want to do is not maintain a copper network once they’ve rolled out fibre.

4938 And I think, you know, we have no preference for copper in principle, it would be great to be able to move to fibre if we have access to the network and if the rates are appropriate and, you know, speeds are available at workable prices for our customers.

4939 So, you know, I think it is premature to decide to forbear for regulating FTTN or to freeze the FTTN rates. But I think that the incumbents are going to accelerate decommissioning and they will likely do it in a way that’s invisible to us because of course they’ll be removing it from exactly the addresses we don’t serve.

4940 As far as I know, before this hearing, the statements from incumbents on the record had been that they had no plans to decommission copper. Certainly in the previous wholesale review and in a number follow‑up proceedings the official position was that they had no plans on a large scale to decommission copper.

4941 What we’re hearing this week is very very different from that. And, you know, I guess I would suggest that the Commission may want to introduce a way to review or understand the scale of that, those decommissioning operations. Because that information will be very important when it comes to the questions that you’re asking about, forbearing for an FTTN, because of course the footprint will have shrunk quite a bit, otherwise nobody will really know by how much.

4942 COMMISSIONER DESMOND: Just on the point of decommissioning, and I know you had a conversation with the Chair about the impact of decommissioning. I just wanted to have a follow‑up question on that.

4943 When copper is decommissioned, and I think you did suggest that they offer alternatives, can you speak a bit more about the alternatives they offer and how that’s worked?

4944 MR. KAPLAN‑MYRTH: I might ask Pierre to add some detail to this, because ultimately it’s an off‑tariff agreement of sorts. This has happened in different ways for different incumbents.

4945 I think, you know, you’ve heard in this hearing that TELUS has a particular practice around it. We have not, as far as I know, taken up any offer from TELUS to use fibre and move customers over to it. We see that as a stopgap retail measure that is not wholesale. It basically does an end run around the regulated framework.

4946 And, you know, at a time when I think it is important for competitors to demonstrate the importance of the regulated framework to us, so we have continued to rely on this. That has meant a shrinking footprint on that particular incumbent.

4947 Others have done it in sort of different ways. We sort of just discover over time that we have lost access to certain addresses or an MDU that clearly once had cable coax in it, has now been renovated, and we don’t seem to have access to it anymore. We look at street view images of the building, it’s clearly old enough that it had coax, but now it qualifies as fibre only.

4948 So there’s a huge anecdotal record of, you know, a shrinking footprint. None of those cases involve the incumbent coming to us and offering us some kind of alternative.

4949 Also sort of anecdotally, but I think it’s a good example of the operational challenges here. In 2016/2015, we were notified that Rogers was doing some work and upgrading a neighbourhood to FTTP. And the work I think had already been largely done and we filed a Part 1 application. So what I’m saying is already public record.

4950 We challenged that and what we got in a Commission decision was, as a remedy, access to Rogers fibre‑to‑the‑home network in that area. Now, it’s true that we kept our customers at the time, the customers we had not already lost just because of the sort of information issues around it.

4951 We kept the customers, but keeping the neighbourhood became very difficult because in Rogers’ database those addresses came up as fibre only. They didn’t make special accommodation and flagged those as being in a special neighbourhood that was available to competitors, so they were fibre only.

4952 Then the burden would have been on us to put in our database in someway that, oh, if you get rejected on one of these addresses, you can escalate it because actually those are available to us.

4953 And so in the end we lost customers in that neighbourhood. The addresses come up as fibre only. And the result was, you know, Rogers upgrade to fibre resulted in a loss of competition in that neighbourhood. I can’t speak for other competitors, but certainly from TekSavvy’s perspective.

4954 COMMISSIONER DESMOND: I think I heard you say that you’ve not taken up the offer for alternatives or that you haven’t been offered any alternatives?

4955 MR. AUBE: No, we haven’t been offered alternatives, other than in a TELUS area. But we haven’t been offered alternatives, no.

4956 MS. RUTHLEDGE: And I think we’d want to highlight that. When those alternatives are offered, which might be, you know, just pure resale, those are to your specific customers that you already have service with. It doesn’t deal with the issue of every address that is now becoming not serviceable. It’s not an offer to continue serving any, you know, address that’s been turned off.

4957 And so it causes issues in terms of turn, we can’t get an address back necessarily and another wholesale competitor doesn’t have access to that service even if we might be able to continue, you know, a retail resale option. So those kind of offers to continue servicing customers on retail don’t really address the bigger issue of the addressable market shrinking.

4958 COMMISSIONER DESMOND: I’m going to ask you for an undertaking, and the answer might be zero, which is fine. But maybe, if you’re willing to provide the undertaking, I’m sure it would be quite easy for you to respond to. And it’s the same undertaking we’ve asked of other parties, and that is to provide documentation, if any, that would evidence reception of notice of copper decommissioning and the alternatives that have been proposed since 2018.

4959 So if the answer’s zero, that’s fine. But if you don’t mind taking the undertaking?

4960 MR. KAPLAN‑MYRTH: We can take that undertaking, thank you.

Engagement

4961 COMMISSIONER DESMOND: Okay, thank you. And then I just have one last question, and it really is about kind of your future plans. In November of 2023, as you know, the Commission did grant temporary and expedited access on the Bell and TELUS FTTP networks effective May.

4962 Do you have plans vis à vis accessing that, what impact it’ll have on your customer base, sort of how you think that will be beneficial, or not?

4963 MR. KAPLAN‑MYRTH: Well, now that I heard that CNOC’s members are going to be offering it, I guess we need to, and that’s the competitive dynamics at play. We are planning to, all kidding aside, we are planning to use that temporary FTTP, temporary aggregated FTTP framework and offer services to our customers.

4964 Now, the rates are high for us given, you know, the market price for similar speeds from incumbents. So it’s going to be very challenging for us. But our customers want fibre. We have been fighting for fibre for a long time, and we will take up any solutions that the Commission offers to us where we can try to build a market and demonstrate that we are trying to use that framework to the best of our ability.

4965 So I think it will be very challenging but, yes, we are working on that actively. All of the background work that needs to go on, understanding the customer, premises, equipment that’s required, getting interconnections in place, understanding the costs of providing that service, and we are planning to be ready to offer it on May 7th.

4966 COMMISSIONER DESMOND: Okay, thank you.

4967 MR. AUBE: And we’ll do it faster than CNOC. He said 9:00, I’ll say 12:01.

‑‑‑ Rires

4968 THE CHAIRPERSON: I hope that the record will reflect the laughter by CNOC in response to TekSavvy’s responses.

4969 Thank you very much. You have answered a lot of questions. The Panel really appreciates the discussion that we’ve had with you this afternoon.

4970 We would like to turn things back over to you for concluding remarks.

4971 MR. KAPLAN‑MYRTH: Well, thank you very much. Jessica will close things off for us. But, first, I just wanted to thank the Chairperson and the Vice‑Chair, and the Commissioners for the opportunity to appear here and discuss all of these issues.

4972 I also want to thank CRTC Staff for reading and researching and summarizing no doubt our many many submissions. I know how important and challenging that can be, and I really appreciate that work, not to mention this very long week.

4973 MS. RUTHLEDGE: So maybe we’ll leave you with, you know, over the past 10 years competition in wireline internet services has indisputably declined. The largest incumbents have gained market share, and this has entrenched their market power. This had reduced our ability to bring competitive choices to consumers, including as a strong advocate for the open internet, and by investing and building our own facilities.

4974 This reduction in competition has accelerated through opportunistic acquisitions that have eliminated all but a few competitors.

4975 We are asking the Commission to help allow us bring vibrant service‑based competition to internet users across Canada on the speeds of their choice, not just in Ontario and Quebec, and not just in cities.

4976 This requires properly costed wholesale rates that take into account the actual retail rates that incumbents have in the market. It requires nation‑wide mandated aggregated access to fibre. These are actually not novel asks. We are asking you to restore the basic planks of wholesale; speed matching, and properly‑costed rates.

4977 Bell told you that it is okay to say no to competitors. What they really mean is, it’s okay to say no to competition. Incumbents have enjoyed a regulatory holiday on fibre networks for too long. Everybody likes having a vacation and it’s hard when it ends, but it’s okay for the Commission to end their vacation now. Consumers are tired of paying for it.

4978 Thank you again, Commission and Commission Staff, for your attention and your work this week, we really do appreciate it.

4979 THE CHAIRPERSON: Thank you very much and thank you for ending this week‑long hearing with us.

4980 THE SECRETARY: Thank you. This therefore concludes the presentations of the participants.

4981 Thank you, Madam Chairperson.

4982 THE CHAIRPERSON: Okay. Perhaps just before bringing the hearing to a formal close, on behalf of the Panel, I would just like to thank everyone who participated in this hearing. We know how much time and effort is required to take part in the hearings and we’re very appreciative of everyone who shared their perspectives.

4983 Our focus over the past week has been to find new ways to address pressing issues in Canada’s internet services industry, and you’ve all helped us understand better the realities that come with making difficult choices in the public interest.

4984 After hearing from 22 groups, including providers, competitors, consumer groups, individuals, government agencies, some common themes have emerged, and maybe I can just briefly touch on three of those.

4985 First, how important affordable internet access is for Canadians. We heard from everyone just how much Canadians need high‑quality internet services at affordable prices. We’re reminded of the key role that internet services play in enabling a wide range of economic and social activity, like helping Canadians find employment, keeping in touch with family and friends, and accessing things like healthcare and schooling.

4986 Second, we heard that competition is vital. We heard different views on the forces that drive competition. Many large companies talked about the challenge of deploying better and faster networks across Canada and how those investments enable them to compete in the market.

4987 Independent providers told us about the difficulties that they face in providing options for Canadians. And consumer groups and individuals told us that the status quo isn’t working, and that Canadians need more from their internet service providers.

4988 Troisièmement, l’importance d’atteindre le bon équilibre. On nous a fait part du besoin de continuer à avancer rapidement pour stabiliser le marché en trouvant le bon équilibre pour toutes les parties impliquées, un juste milieu ou zone Boucles d’or ‑‑ that’s Goldilocks ‑‑ pour emprunter une métaphore que le vice‑président Scott a utilisée tout au long de la semaine. Nous devons trouver une solution qui produit des investissements dans les réseaux et qui, dans la même foulée, permet aux consommateurs de bénéficier de choix. Trouver cet équilibre est la tâche complexe qui s’étend devant nous alors que nous poursuivons la présente instance, et votre participation continue sera essentielle.

4989 Comme beaucoup d’entre vous le savent, nous avons envoyé des demandes de renseignements supplémentaires à la fin du mois de janvier. Les réponses à ces demandes sont attendues pour le 1er mars. Nous encourageons toutes les parties à surveiller le dossier public. Des réponses y seront déposées. Vous aurez l’occasion de commenter ces renseignements additionnels à l’étape des soumissions écrites finales. Ces renseignements contribueront à constituer un dossier solide et encore plus complet sur lequel nous pourrons prendre des décisions fondées sur des données probantes dans l’intérêt public.

4990 So let me end by thanking everyone again. Thank you all for being here, thank you for taking the time to submit interventions and for participating in the process.

4991 As TekSavvy started their closing remarks, they offered thank you, including to the CRTC team. I would like to say thank you to our team who’s done an incredible amount of work leading up to and during the hearing, and that work will continue.

4992 I’d like to thank everybody else as well who pulled off this very smooth hearing this week, the stenographers, the interpreters, technicians who helped make this possible, so thank you. A lot of them are back there.

4993 So on that note, I will now bring this public hearing on the review of the wholesale high‑speed access framework to a close, and wish everybody a wonderful weekend.

4994 Merci beaucoup et bonne fin de semaine à tous. Merci.

‑‑‑ L’audience se termine à 15 h 09

Sténographes
Christine Ladouceur
Monique Mahoney
Lynda Johansson
Tania Mahoney
Brian Denton