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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TELECOMMUNICATIONS COMMISSION
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
Review of regulatory framework for wholesale
services and definition of essential service /
Examen du cadre de réglementation concernant les services
de gros et la définition de service essentiel
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
October 17, 2007 Le 17 octobre 2007
Transcripts
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
Contents.
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Transcription
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès‑verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio‑television and
Telecommunications Commission
Conseil de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
Review of regulatory framework for wholesale
services and definition of essential service /
Examen du cadre de réglementation concernant les services
de gros et la définition de service essentiel
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Barbara Cram Commissioner / Conseillère
Andrée Noël Commissioner / Conseillère
Elizabeth Duncan Commissioner / Conseillère
Helen del Val Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Marielle Giroux-Girard Secretary / Secrétaire
Robert Martin Staff Team Leader /
Chef d'équipe du personnel
Peter McCallum Legal Counsel /
Amy Hanley Conseillers juridiques
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
October 17, 2007 Le 17 octobre 2007
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
AFFIRMED: STEWART THOMPSON 1744 /12430
Examination-in-chief by Yak Communications 1744 /12431
Cross-examination by Bell Canada 1745 /12438
Cross-examination by TELUS 1785 /12752
AFFIRMED: WILLIE GRIEVE 1811 /12956
AFFIRMED: JANET YALE
AFFIRMED: JOHN FLEIGER
AFFIRMED: ROBERT TASKER
AFFIRMED: DAVE McMAHON
Examination-in-chief by TELUS 1812 /12957
Cross-examination by Rogers 1819 /13018
Cross-examination by Shaw 1889 /13452
Cross-examination by MTS Allstream 1899 /13534
Cross-examination by Primus 1993 /14184
- v -
EXHIBITS / PIÈCES JUSTIFICATIVES
No. PAGE / PARA
COMPANIES-12 Summary of certain Yak dial 1768 /12628
around and selected prepaid long
distance calling card per-minute
toll rates
CRTC-8 Telus' letter dated 1898 /13530
October 12, 2007 subject: CRTC
Telecommunications Monitoring
Report: Status of Competition in
Canadian Telecommunications
Markets and Deployment
Accessibility of Advanced
Telecommunications Infrastructures
and Services, July 2007
MTS-14 TELUS Wireline Revenues, 1915 /13669
Profitability and Capital
Expenditures. Tables 1,2 and 3
BUREAU-4 Response to undertaking to comment 1991 /14174
on U.S. data related to total
plant additions aggregated for all
reporting ILECs for the period
1996-2006
BUREAU-5 Response to undertaking to provide 1991 /14174
MTS Allstream and the Commission a
summary of the timelines on the
public record in the Canada Pipe
case
PRIMUS-5 String of emails exchanged between 1995 /14201
TELUS and Primus Globility re:DS3
CDN Digital Access orders for
Vancouver co-locations
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon resuming on Wednesday, October 17, 2007
at 0830 / L'audience reprend le mercredi
17 octobre 2007 à 0830
1LISTNUM 1 \l 1 \s 24232423 THE SECRETARY: Please be seated.
1LISTNUM 1 \l 12424 Today we are starting the day fresh with the witness of Yak. I am asking Mr. Lockie to introduce his witness.
1LISTNUM 1 \l 12425 MR. LOCKIE: Thank you.
1LISTNUM 1 \l 12426 Mr. Chairman, I would like to introduce Mr. Stewart Thompson as Yak's panel. Mr. Thompson is Yak's Vice‑President of Carrier Relations, and he is ready to be sworn in. His resume has been previously submitted.
1LISTNUM 1 \l 12427 THE CHAIRPERSON: Thank you.
1LISTNUM 1 \l 12428 Do you want to swear the witness in?
1LISTNUM 1 \l 12429 THE SECRETARY: Yes. Mr. Thompson, I will affirm you.
AFFIRMED: STEWART THOMPSON
EXAMINATION / INTERROGATOIRE
1LISTNUM 1 \l 12430 MR. LOCKIE: Mr. Thompson, I would like to refer you to Yak's evidence dated March 15th, as well as Yak's responses to the interrogatory dated May 10th and subsequent response to interrogatory dated August 9th.
1LISTNUM 1 \l 12431 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12432 MR. LOCKIE: Can you confirm that these materials were prepared by you or under your direction and are accurate?
1LISTNUM 1 \l 12433 MR. THOMPSON: Yes, they were.
1LISTNUM 1 \l 12434 MR. LOCKIE: Thank you. He is ready for cross.
1LISTNUM 1 \l 12435 THE SECRETARY: Counsel Blakey, on behalf of The Companies, please proceed.
1LISTNUM 1 \l 12436 MR. BLAKEY: Thank you, Madam Secretary.
1LISTNUM 1 \l 12437 Good morning, everyone, I am John Blakey, assistant general counsel for Bell Canada. I will be cross‑examining Mr. Thompson this morning.
EXAMINATION / INTERROGATOIRE
1LISTNUM 1 \l 12438 MR. BLAKEY: Welcome, Mr. Thompson.
1LISTNUM 1 \l 12439 Can I ask that you distribute the materials, Madam Secretary? Mr. Thompson, you will be pleased to know I am mostly going to restrict my questions to your dial‑around service this morning.
1LISTNUM 1 \l 12440 Am I correct that Yak has two main long distance offerings in Canada, Mr. Thompson?
1LISTNUM 1 \l 12441 MR. THOMPSON: That is correct. We have a subscriber‑based offering and we have a dial‑around ‑‑ a number of dial‑around offerings actually.
1LISTNUM 1 \l 12442 MR. BLAKEY: In terms of the subscriber, this would be your one‑plus dialling service, where people pre‑subscribe and then they are PIC'd to your service. Is that right?
1LISTNUM 1 \l 12443 MR. THOMPSON: That is correct.
1LISTNUM 1 \l 12444 MR. BLAKEY: Then the other service, the casual calling, I take it this is the service where a subscriber is with a local service provider, be it Bell Canada or a cable company, they can casually pick up their phone and make a 10‑10 call using your service?
1LISTNUM 1 \l 12445 MR. THOMPSON: That is correct.
1LISTNUM 1 \l 12446 MR. BLAKEY: I take it that it is the 10‑10 dial‑around service in respect of Bell Canada and the other LECGs provide billing and collection service to you?
1LISTNUM 1 \l 12447 MR. THOMPSON: Yes, that is right.
1LISTNUM 1 \l 12448 COMMISSIONER del VAL: Counsel, would you mind moving your mic closer?
1LISTNUM 1 \l 12449 MR. BLAKEY: Not at all. How is this?
1LISTNUM 1 \l 12450 Before we go on, I would like to run us all through briefly the mechanics of the 10‑10 call, just so we are all familiar with what goes on and that there is really no magic associated with this, so, if you will just bear with me.
1LISTNUM 1 \l 12451 Can we just imagine that a Bell subscriber here in Ottawa decides to make a casual Yak call with the 10‑10 service. I take it the first thing that the subscriber would do is pick up their phone and dial your ‑‑ it is almost like a commercial for Yak.
1LISTNUM 1 \l 12452 MR. THOMPSON: Please continue.
1LISTNUM 1 \l 12453 MR. BLAKEY: Dial 10‑10 and your 925 number and then the area code and the destination number of the call, and let's assume it is a call to Vancouver. Is that right?
1LISTNUM 1 \l 12454 MR. THOMPSON: That is correct.
1LISTNUM 1 \l 12455 MR. BLAKEY: Then the subscriber makes that call, engages in that phone conversation. I take it that your system picks up the originating telephone number that makes the call, the destination number of the call, the length of time of the call, the date and duration of the call?
1LISTNUM 1 \l 12456 MR. THOMPSON: Right.
1LISTNUM 1 \l 12457 MR. BLAKEY: Your systems pick all that up?
1LISTNUM 1 \l 12458 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12459 MR. BLAKEY: Then you rate the call according to however many cents per minute you charge for that particular type of call?
1LISTNUM 1 \l 12460 MR. THOMPSON: Also correct, yes.
1LISTNUM 1 \l 12461 MR. BLAKEY: Then you send that information, in our case, to Bell Canada, and then Bell Canada places information about that call on the monthly phone bill of their subscriber. Right?
1LISTNUM 1 \l 12462 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12463 MR. BLAKEY: Then we deal with any follow‑up questions and make any corrections if there needs to be. Right?
1LISTNUM 1 \l 12464 MR. THOMPSON: More or less. If there is a call that someone has, they may call into Bell Canada, they may call Yak directly if there is a question about the bill.
1LISTNUM 1 \l 12465 MR. BLAKEY: At the end of it all, there is a fee that is paid to you and, as I understand it, we kind of take over your accounts receivable, and as a result of all that, we are paid and you are paid. Right?
1LISTNUM 1 \l 12466 MR. THOMPSON: Yes, you collect money on our behalf. We pay you a fee for accounts receivable management and for placing the charge on the bill.
1LISTNUM 1 \l 12467 COMMISSIONER DUNCAN: Excuse me, could I just ask a question?
1LISTNUM 1 \l 12468 MR. BLAKEY: Sure.
1LISTNUM 1 \l 12469 COMMISSIONER DUNCAN: I am just wondering, how do you communicate that information to Bell that you want them to bill for these casual calls?
1LISTNUM 1 \l 12470 MR. THOMPSON: We send them records basically on a daily basis.
1LISTNUM 1 \l 12471 COMMISSIONER DUNCAN: Electronically?
1LISTNUM 1 \l 12472 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12473 COMMISSIONER DUNCAN: Thank you.
1LISTNUM 1 \l 12474 THE CHAIRPERSON: If I understand it, then, you have no interaction at all with the customer? As far as the customer is concerned, you are just a 10‑10 number, but all his dealings are with Bell?
1LISTNUM 1 \l 12475 MR. THOMPSON: Their dealings from a billing perspective are with Bell. They pay Bell. They have chosen to use Yak's service on a casual basis, so they are not a subscriber to a Yak offering, but we view them as our customer as well.
1LISTNUM 1 \l 12476 THE CHAIRPERSON: I know, but there is no interaction between you and the casual customer really? He never touches any part of Yak's system. He just uses Bell and you get the money essentially.
1LISTNUM 1 \l 12477 MR. THOMPSON: Actually, we do the switching. We have all of the interconnection into Bell's network. So, I would say we do substantially more to provide service to the customer.
1LISTNUM 1 \l 12478 THE CHAIRPERSON: Thank you.
1LISTNUM 1 \l 12479 MR. BLAKEY: Thank you, Mr. Chairman.
1LISTNUM 1 \l 12480 Just a point of clarification following from the Chair's question. Going back to what we talked about at the beginning, you do have this other side of your house where you do have a pre‑established relationship and you do send bills to those people who are PIC'd to you.
1LISTNUM 1 \l 12481 MR. THOMPSON: Absolutely.
1LISTNUM 1 \l 12482 MR. BLAKEY: Who make the one‑plus calls?
1LISTNUM 1 \l 12483 MR. THOMPSON: Absolutely.
1LISTNUM 1 \l 12484 MR. BLAKEY: Two sides of the house. One is the direct dial folks who pre‑subscribe to you, and the other side of the house, which is mostly what we are going to be talking about here today, is the 10‑10, the casual calling side. Right?
1LISTNUM 1 \l 12485 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12486 MR. BLAKEY: To summarize in terms of what Bell does on the 10‑10 side of the house for you, and this is all basically coming from our tariff, and I don't think we need to go there, would you agree with me that essentially what we do in terms of billing and collection is we prepare and send the bill, we collect payment and charges for the calls made by your customers, we answer customer questions regarding the charges, and we apply any credits or adjustments as are needed. Is that a fair summary in terms of the billing and collection services?
1LISTNUM 1 \l 12487 MR. THOMPSON: More or less. I would say that you don't answer questions about our charges unless there is a dispute or something like that. Typically they would have our customer service number and would contact us directly.
1LISTNUM 1 \l 12488 MR. BLAKEY: Fair enough.
1LISTNUM 1 \l 12489 So, having gone through, if I could call it the 10‑10 101 course, why don't we next move into the evidence that you have filed in support of your assertion that billing and collection is an essential facility.
1LISTNUM 1 \l 12490 As I understand it from your March 15th evidence, you take the position that the billing and collection service is essential. Is that correct?
1LISTNUM 1 \l 12491 MR. THOMPSON: Yes, that is correct.
1LISTNUM 1 \l 12492 MR. BLAKEY: In paragraph 8 of that, if I could get you to turn to that ‑‑
1LISTNUM 1 \l 12493 MR. THOMPSON: Is that in the binder you provided as well?
1LISTNUM 1 \l 12494 MR. BLAKEY: Yes, although I am not sure it is actually in that binder because it is your March 15th evidence.
1LISTNUM 1 \l 12495 Do you have that in front of you, paragraph 8?
1LISTNUM 1 \l 12496 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12497 MR. BLAKEY: You say there that it is important to examine evidence of substitutable services for your 10‑10 dial‑around service. Do you see that? I could read it if you like.
1LISTNUM 1 \l 12498 MR. THOMPSON: Sure.
1LISTNUM 1 \l 12499 MR. BLAKEY: You say:
"With respect to the analysis of the downstream market, the Competition Bureau indicated that it may use the test that it proposed in Telecom Public Notice 2005‑2, including..."
1LISTNUM 1 \l 12500 And then you underlined this part here:
... "evidence of customer views on the substitutability of the products offered by alternative service providers, e.g. surveys, views on pricing and quality of service." (As read)
1LISTNUM 1 \l 12501 MR. THOMPSON: Uh‑hmm.
1LISTNUM 1 \l 12502 MR. BLAKEY: That is still your view? You think it is important in terms of understanding the definition of the market to look at consumer's views about substitutability. Right?
1LISTNUM 1 \l 12503 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12504 MR. BLAKEY: So, your evidence about substitutability, I take it, is found in the January 2007 Polaris Survey, which you filed along with your March 15th evidence. Right?
1LISTNUM 1 \l 12505 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12506 MR. BLAKEY: Why don't we turn to that now because that is what I think we will be spending a little bit of time on. That is at tab A of the compendium that I provided to you. Pardon me, that is tab B.
1LISTNUM 1 \l 12507 First off, I want to talk a little bit about your sample. If we turn to slide 4 of your deck ‑‑ do you have that in front of you?
1LISTNUM 1 \l 12508 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12509 MR. BLAKEY: You say that this is a nationally representative survey. Right?
1LISTNUM 1 \l 12510 MR. THOMPSON: I don't say that. Polaris says that.
1LISTNUM 1 \l 12511 MR. BLAKEY: Sorry, Polaris says that. Do you consider this to be a nationally representative survey?
1LISTNUM 1 \l 12512 MR. THOMPSON: I respect their expertise in the field.
1LISTNUM 1 \l 12513 MR. BLAKEY: But if I understand it correctly, this actually isn't a survey of a national slice of all toll subscribers, is it?
1LISTNUM 1 \l 12514 MR. THOMPSON: No, it isn't.
1LISTNUM 1 \l 12515 MR. BLAKEY: Would it be fair to say that this is a sample just of your customers on the 10‑10 side of the house; people who made recently a 10‑10 call, they were the people who were sort of the eligible pool for the survey?
1LISTNUM 1 \l 12516 MR. THOMPSON: Yes. We provided a database of 10,000 users who had used one of our dial‑around services over a recent period of time.
1LISTNUM 1 \l 12517 MR. BLAKEY: But if it is only your customers, isn't that a little bit like, say, General Motors surveying General Motors' drivers and then getting results and saying, and this is representative of the automobile market in Canada?
1LISTNUM 1 \l 12518 MR. THOMPSON: We are saying this is representative of the dial‑around market. We are not saying this is representative of the overall market.
1LISTNUM 1 \l 12519 What we are talking about is whether billing and collection should be mandated associated with billing and collection and equal ease of access. This is what we are talking about.
1LISTNUM 1 \l 12520 MR. BLAKEY: But again, though, I think you said it is representative of our customers, but I take it people who used other 10‑10 dial‑around services, they weren't surveyed, were they?
1LISTNUM 1 \l 12521 MR. THOMPSON: No, for expediency, given the time frame to file data and the simplicity of collecting the data, it was much simpler to take a sample from our existing customer base, which includes a number of different offerings.
1LISTNUM 1 \l 12522 MR. BLAKEY: To the extent that it is nationally representative, it is nationally representative of your customers and only your 10‑10 customers and not all 10‑10 customers and certainly not all long distance users. Right?
1LISTNUM 1 \l 12523 MR. THOMPSON: You might to able to draw conclusions, given that we make up a large component of the dial‑around market with our various offerings that it could be representative of other dial‑around customers.
1LISTNUM 1 \l 12524 MR. BLAKEY: Just so that I understand what slice of the overall toll market we are dealing with here, do you have a sense as to the proportion of all toll usage residential, because I assume your customers are primarily residential?
1LISTNUM 1 \l 12525 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12526 MR. BLAKEY: So, let's focus on residential.
1LISTNUM 1 \l 12527 If we were to look at the overall residential Canadian toll market, would you be able to give us a sense as to what proportion 10‑10 comprises of that overall market?
1LISTNUM 1 \l 12528 MR. THOMPSON: It would be a relatively low number, but what we think we do is we represent a significant number of customers as opposed to minutes or calls.
1LISTNUM 1 \l 12529 We know, for example, that we have approximately two million customers who have used our dial‑around services over the last couple of years. So I would say that is a significant customer base.
1LISTNUM 1 \l 12530 MR. BLAKEY: I understand in terms of customers, but if we thought of it in terms of overall minutes of calling, for example, or even proportion of calls, would you have a sense, if the denominator was overall calls or minutes of residential toll usage by Canadians, would you be able to tell us what the numerator would be which is representing 10‑10 usage?
1LISTNUM 1 \l 12531 MR. THOMPSON: It would be a relatively small percentage, but I will go back to we think that the relevant measure here for the public interest is how many people use our service.
1LISTNUM 1 \l 12532 MR. BLAKEY: Fair enough.
1LISTNUM 1 \l 12533 How recently did someone have to make a Yak 10‑10 dial‑around call to be eligible to be surveyed or in the pool of respondents. Do you know?
1LISTNUM 1 \l 12534 MR. THOMPSON: I am not sure if I have that data here. I believe it was a period of six months, within six months.
1LISTNUM 1 \l 12535 MR. BLAKEY: But if you want to show that there would be a substantial lessening of competition, wouldn't you have to show that there would be impacts on the overall toll market and not just for your customers?
1LISTNUM 1 \l 12536 MR. THOMPSON: We are looking at this from a couple of perspectives, one being the policy goal of providing affordable and accessible telecom services, and given that dial‑around is a choice that you make on a per call or per route basis, it is the ultimate flexibility for consumers.
1LISTNUM 1 \l 12537 There is a sub‑segment of the market that uses only dial‑around and their only option really is to subscribe to a plan which doesn't meet their needs, clearly as evidenced by our consumer survey.
1LISTNUM 1 \l 12538 So, that is what we think is relevant.
1LISTNUM 1 \l 12539 MR. BLAKEY: So, are you taking the position that your dial‑around customers are actually kind of a market unto themselves?
1LISTNUM 1 \l 12540 MR. THOMPSON: No, dial‑around is not a market unto itself, but we do believe that the existence of dial‑around, if it was not there, there may be a substantial lessening of competition.
1LISTNUM 1 \l 12541 MR. BLAKEY: Sorry, could you just repeat that last sentence?
1LISTNUM 1 \l 12542 MR. THOMPSON: We do believe that there could be a substantial lessening of competition with the removal of dial‑around for a significant number of consumers.
1LISTNUM 1 \l 12543 MR. BLAKEY: Notwithstanding what you said a moment ago, that it is a relatively small percentage?
1LISTNUM 1 \l 12544 MR. THOMPSON: I think I said that as a percentage of the minutes, but if you look at it from a consumer perspective, it is a significant number of consumers.
1LISTNUM 1 \l 12545 MR. BLAKEY: Let's now turn to the questions that you asked in your survey and assume that it was more representative than just your customers.
1LISTNUM 1 \l 12546 Could we go to slide 7 of the survey, please? I take it this is the slide where Polaris asked people about their calls in the prior 30 days and what percentages were dial‑around as opposed to others. Is that right?
1LISTNUM 1 \l 12547 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12548 MR. BLAKEY: I take it that the red shows in various demographic groupings, but why don't we just focus on the overall bar at the top.
1LISTNUM 1 \l 12549 I take it that the red indicates that 89 per cent of the toll calls made by your customers in that 30‑day period leading up to the survey were dial‑around. Is that right?
1LISTNUM 1 \l 12550 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12551 MR. BLAKEY: And the yellow, that is the 9 per cent, that is labelled regular long distance. I take it that that is some kind of one‑plus or other type of subscribed toll plan?
1LISTNUM 1 \l 12552 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12553 MR. BLAKEY: And the green, the 1 per cent there, that is the pre‑paid calling card proportion of calling?
1LISTNUM 1 \l 12554 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12555 MR. BLAKEY: Okay.
1LISTNUM 1 \l 12556 As I read your evidence, you place a fair bit of emphasis on this. You say, actually, in paragraph 11 of your evidence, that because only 1 percent indicated that they used prepaid calling cards, this demonstrates to you that dial‑around users are loath to consider prepaid calling to be a substitute for dial‑around.
1LISTNUM 1 \l 12557 Is that fair?
1LISTNUM 1 \l 12558 MR. THOMPSON: That is one reference that would be suitable. There are others, as well.
1LISTNUM 1 \l 12559 MR. BLAKEY: All right. But do you agree with that characterization?
1LISTNUM 1 \l 12560 Among other things, what this slide tells you is that your customers don't consider prepaid calling cards to be much of a substitute for their dial‑around calling.
1LISTNUM 1 \l 12561 Is that fair?
1LISTNUM 1 \l 12562 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12563 MR. BLAKEY: Again, I am going to go back to my car analogy. Isn't that a little bit like phoning up a bunch of GM owners and saying to them: How much time have you spent lately driving around in Fords?
1LISTNUM 1 \l 12564 They are not going to tell you that they are driving Fords much, because the car they are with right now is a GM.
1LISTNUM 1 \l 12565 It doesn't really tell you what they might do when it comes to their next car purchase, does it?
1LISTNUM 1 \l 12566 MR. THOMPSON: Again, I think that is one question in the survey that points to the limited substitution of prepaid cards, but there are others within the survey.
1LISTNUM 1 \l 12567 MR. BLAKEY: Fair enough.
1LISTNUM 1 \l 12568 I take it that you didn't actually get Pollara or ‑‑ I'm not sure. Did you work with Pollara in designing the survey?
1LISTNUM 1 \l 12569 How did that work?
1LISTNUM 1 \l 12570 MR. THOMPSON: We came up with a preliminary draft, and then they finished the questions.
1LISTNUM 1 \l 12571 MR. BLAKEY: I don't see any questions in the survey, unless I am wrong, where the survey asks respondents for their attitudes toward specific substitutes for dial‑around. Does it?
1LISTNUM 1 \l 12572 MR. THOMPSON: Not directly. However, if you went to page 11, it indicates the importance of having the 10‑10 alternative, where 93 percent overall, and 93 percent who earn less than $25,000, view the 10‑10 alternative as important.
1LISTNUM 1 \l 12573 So we don't think there is a lot of substitutability. If there was, then we would expect to get a much lower score there.
1LISTNUM 1 \l 12574 MR. BLAKEY: Mr. Thompson, are you familiar with the notion of a significant non‑transitory price increase?
1LISTNUM 1 \l 12575 MR. THOMPSON: Absolutely not.
1LISTNUM 1 \l 12576 MR. BLAKEY: Mr. Chair, where I am going to go with the witness is, I will briefly explain that concept to him, and explore his views on that, and whether or not he thinks that would have been relevant to ask.
1LISTNUM 1 \l 12577 Mr. Thompson, in competition law, economists, when they set out to define markets ‑‑ and the Competition Bureau does this, and the Commission has done this since its landmark decision in the mid‑nineties.
1LISTNUM 1 \l 12578 In terms of defining markets, what we imagine is, we assume that there might be a market somewhere, and we ask ourselves: What would consumers of the product in this possible market do if they were faced with what is called a significant non‑transitory price increase.
1LISTNUM 1 \l 12579 In layperson's terms, it is a 5 or more percent increase in the price of that good or service over a prolonged period of time.
1LISTNUM 1 \l 12580 If the providers of that service tried to impose such an increase, what would the consumers of that product do. If sufficient consumers of that product bail and choose other products or services, we can assume ‑‑ economists assume ‑‑ that those other things that people choose are also substitutable and, therefore, it is part of a broader market as opposed to a distinct market.
1LISTNUM 1 \l 12581 On the other hand, if they just stick with what they were with, notwithstanding the price increase, there is confidence that that is a market onto itself.
1LISTNUM 1 \l 12582 Do you follow me?
1LISTNUM 1 \l 12583 MR. THOMPSON: Sure.
1LISTNUM 1 \l 12584 MR. BLAKEY: That's basically what it is.
1LISTNUM 1 \l 12585 I take it that the survey doesn't ask what 10‑10 dial‑around users would do if they were faced with such a significant price increase in their product, if they would switch to prepaid calling cards or other substitutes?
1LISTNUM 1 \l 12586 MR. THOMPSON: No, it does not.
1LISTNUM 1 \l 12587 MR. BLAKEY: So we really don't know, to be fair. While it is true what you said about Slide 11, they might be upset if it disappeared ‑‑ and we will talk about whether or not it necessarily would disappear, but we simply don't know what dial‑around users would do, from your survey, if they were faced with a price increase, do we?
1LISTNUM 1 \l 12588 MR. THOMPSON: What we do know is that millions of consumers choose dial‑around as a viable alternative today, and it's their preferred alternative.
1LISTNUM 1 \l 12589 MR. BLAKEY: But we don't know tomorrow, if you and the other 10‑10 dial‑around service providers raised your prices, if they would stick with you or if they would choose something else, do we?
1LISTNUM 1 \l 12590 MR. THOMPSON: Let me tell you, if our costs go up and we don't have mandated access and mandated pricing, our belief is that the cost to provide the service will be too high.
1LISTNUM 1 \l 12591 In fact, over one‑third of our calls are given away free today because of the cost of LEC‑based billing. We are providing a service to customers who are making short‑duration calls.
1LISTNUM 1 \l 12592 THE CHAIRPERSON: Why are one‑third of your calls given away free?
1LISTNUM 1 \l 12593 MR. THOMPSON: Our minimum billing fee can be as high as ‑‑ I think it's 25 cents in Saskatchewan. If it costs us 25 cents to bill a call, we are not going to bill that call, because the billing fee is more than the value of a 5‑minute call.
1LISTNUM 1 \l 12594 MR. BLAKEY: Let's turn to some of the things that you did ask.
1LISTNUM 1 \l 12595 Could we go to Slide 13 of your deck?
1LISTNUM 1 \l 12596 Do you have that in front of you?
1LISTNUM 1 \l 12597 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12598 MR. BLAKEY: At the bottom, I see that the question is put: "Some Canadian telephone companies have suggested that the dial‑around services in Canada should be eliminated. Would you..."
1LISTNUM 1 \l 12599 Then, I take it that the options that were put to the respondents were "Strongly oppose" or "Oppose", et cetera, "the elimination of dial‑around services."
1LISTNUM 1 \l 12600 Is that a fair representation of that particular question?
1LISTNUM 1 \l 12601 MR. THOMPSON: Yes, it is.
1LISTNUM 1 \l 12602 Elimination in that, if there is not mandated access and mandated pricing, we do not believe it will be a viable alternative for providers like us to provide that to our customers.
1LISTNUM 1 \l 12603 MR. BLAKEY: But there is a big difference, Mr. Thompson, wouldn't you agree, between eliminating the service and simply declassifying it and saying that it is no longer mandated and no longer essential?
1LISTNUM 1 \l 12604 It doesn't necessarily follow, does it, if the service is no longer mandated, that it would just be eliminated?
1LISTNUM 1 \l 12605 MR. THOMPSON: If we go into an environment where there is uncertainty ‑‑ and who knows what that environment may look like? We don't know what it is going to be.
1LISTNUM 1 \l 12606 We are comfortable with cost‑based. As I indicated, we are giving away one‑third of our calls free today. If costs go up, if access isn't mandated by not just the incumbent LECs, but CLECs, where we are already having challenges and had to file a Part 70 against Shaw, just to negotiate so they can provide the service, I just don't see how it could be a viable product.
1LISTNUM 1 \l 12607 MR. BLAKEY: There were a lot of "ifs", though, in that last statement of yours ‑‑ if this and if that.
1LISTNUM 1 \l 12608 I am putting it to you that it doesn't necessarily follow, does it?
1LISTNUM 1 \l 12609 In fact, can you tell me ‑‑
1LISTNUM 1 \l 12610 MR. THOMPSON: We are building our business plans accordingly. That's why we are building our subscriber base.
1LISTNUM 1 \l 12611 Absolutely.
1LISTNUM 1 \l 12612 MR. BLAKEY: Okay. Can you show me anywhere in the record where Bell Canada has actually advocated the elimination and the discontinuance of its billing and collection services?
1LISTNUM 1 \l 12613 MR. THOMPSON: No. It would be by reference to no longer providing mandated services.
1LISTNUM 1 \l 12614 MR. BLAKEY: Okay. Let's look at a couple of the other questions that you asked in your survey.
1LISTNUM 1 \l 12615 Could you go to page 9, please?
1LISTNUM 1 \l 12616 I take it that this is where you asked your customers to rank the factors that are important to them in choosing their long distance service.
1LISTNUM 1 \l 12617 Is that right?
1LISTNUM 1 \l 12618 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12619 MR. BLAKEY: The one which they indicated was the most important, it would seem, is lower rates. Eighty percent ranked that as a very important factor in making their long distance choices.
1LISTNUM 1 \l 12620 Is that fair?
1LISTNUM 1 \l 12621 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12622 MR. BLAKEY: I did a quick price comparison ‑‑ some people have hobbies on a Saturday morning; I go to the website and I compare prices of your service and prepaid calling card services.
1LISTNUM 1 \l 12623 Could I ask you to turn to Tab C of the compendium, please?
1LISTNUM 1 \l 12624 I provided that to your counsel yesterday afternoon.
1LISTNUM 1 \l 12625 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12626 THE CHAIRPERSON: Are you making this an exhibit?
1LISTNUM 1 \l 12627 MR. BLAKEY: Yes, please, Mr. Chair.
1LISTNUM 1 \l 12628 THE SECRETARY: It will be Exhibit The Companies No. 12.
EXHIBIT COMPANIES‑12: Summary of certain Yak around selected prepaid long distance calling card per‑minute toll rates
1LISTNUM 1 \l 12629 MR. BLAKEY: Thank you, Madam Secretary.
1LISTNUM 1 \l 12630 Mr. Thompson, I don't purport this to be very, very scientific. I basically went to your website, I went to Bell Canada's prepaid calling card website, the VOX and the Loblaw's President's Choice and I selected Canada to Canada and Canada to U.S. calling, and given that there are a number of different rates that apply on different international destinations, I chose three randomly ‑‑ France, the U.K. and Australia.
1LISTNUM 1 \l 12631 MR. THOMPSON: Sure.
1LISTNUM 1 \l 12632 MR. BLAKEY: Would you agree with me that from this table ‑‑ and I don't think we need to go through it item‑by‑item. Would you agree with me that at least some, and, in this case, more than half of the rates associated with prepaid calling cards are actually lower than the 10‑10 Yak rates shown on your website?
1LISTNUM 1 \l 12633 MR. THOMPSON: I fail to see the relevance of that.
1LISTNUM 1 \l 12634 MR. BLAKEY: We will get to the relevance in a moment, but would you agree that, at least in some cases in the three I have chosen here ‑‑ as I say, it's not scientific, but they are out there, among others ‑‑ would it be fair to say that at least some of the rates associated with prepaid calling cards are as low, if not lower than the 10‑10 rates?
1LISTNUM 1 \l 12635 MR. THOMPSON: First of all, you are looking at one of our 10‑10 rate plans. We have multiple rate plans. We have LooneyCall, we have LuckyCall, we have 10‑10‑580. So we provide a number of competitive options, some of which would be certainly more competitive than the rates provided here.
1LISTNUM 1 \l 12636 MR. BLAKEY: Fair enough, but ‑‑
1LISTNUM 1 \l 12637 MR. THOMPSON: This is a sample of one dial‑around provider, this is not representative of the dial‑around industry.
1LISTNUM 1 \l 12638 MR. BLAKEY: But going back to your survey, and going back to the factor ‑‑ the No. 1 factor, lower rates ‑‑ would you agree with me that if the survey had actually put real rates associated with dial‑around in comparison to prepaid calling cards, or perhaps other plans, and some of those rates turned out to be lower than your rates, when presented with those actual real world examples of choices, given the importance of price which your survey seems to indicate, do you think it's possible that some of the survey respondents might have indicated a willingness to go with those lower priced alternatives?
1LISTNUM 1 \l 12639 Is that possible?
1LISTNUM 1 \l 12640 MR. THOMPSON: We don't think it is really likely, and I will tell you why.
1LISTNUM 1 \l 12641 When we conducted the survey, we were actually surprised. We acquired Yak ‑‑ Globalive Communications acquired Yak in November of last year. When we conducted the survey, we thought that the products were substitutes, in effect. When we found out and surveyed our customers and realized they weren't, we said: We should get into the prepaid calling market as well.
1LISTNUM 1 \l 12642 This month we will be in the prepaid calling market and we will have prices more aggressive than any price on this table, because we don't view it as a substitute for casual calling, where the customer has the ultimate choice to make a decision on a call‑by‑call basis, and does not have to buy a block of minutes, and does not have, potentially, minutes that are unused at the end of a three or six‑month period.
1LISTNUM 1 \l 12643 We view prepaid as another viable alternative for consumers. We do not view it as relevant to the dial‑around market.
1LISTNUM 1 \l 12644 MR. BLAKEY: Let's look quickly at your second factor that respondents cited. Seventy‑one percent said no upfront fees or service plan contracts.
1LISTNUM 1 \l 12645 Is that right?
1LISTNUM 1 \l 12646 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12647 MR. BLAKEY: Would you agree with me that there are some prepaid calling card options out there ‑‑ and these are three ‑‑ that don't have upfront fees or service plan contracts?
1LISTNUM 1 \l 12648 MR. THOMPSON: I haven't looked at the terms and conditions of all of those, but I do know that you are going to have to buy in $5, $10 or $20 increments, and you cannot make a decision to make one call, and make a decision on a call‑by‑call basis, which is valued by millions of customers today.
1LISTNUM 1 \l 12649 MR. BLAKEY: Okay. Fair enough.
1LISTNUM 1 \l 12650 The last area that I want to explore with you, Mr. Thompson, is the whole notion of practicality and feasibility of substitutes.
1LISTNUM 1 \l 12651 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12652 MR. BLAKEY: Could I ask you to turn to Tab D of the compendium, please, and look at the bottom of page 2?
1LISTNUM 1 \l 12653 It is the response to Interrogatory Yak‑CRTC‑19 July 07‑2003.
1LISTNUM 1 \l 12654 I am at the bottom of the page.
1LISTNUM 1 \l 12655 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12656 MR. BLAKEY: This is where the CRTC asked you to comment on some of the alternative billing arrangements that Bell and TELUS had mentioned in the earlier round of interrogs, and at the bottom of the page ‑‑ and I will read it to you ‑‑ you say:
"If billing and collection services were not available at mandated prices, Yak believes it would have great difficulty negotiating reasonable prices for such services from the ILECs and, as a result, Yak's only option would be to fundamentally change the service provided to a pre‑established relationship service between the service provider and the customer to be billed. Yak does not believe this is feasible." (As read)
1LISTNUM 1 \l 12657 Is that still your position, Mr. Thompson?
1LISTNUM 1 \l 12658 MR. THOMPSON: Yes. We are actually working to see if our customers are interested in migrating from casual calling to a subscriber‑based service.
1LISTNUM 1 \l 12659 The truth is, many of them are not. We have had limited success with that.
1LISTNUM 1 \l 12660 MR. BLAKEY: Okay. But you would agree with me that if the Commission were to find a billing and collection service non‑essential, that wouldn't necessarily mean that the billing and collection service would disappear from the face of the earth, and with it dial‑around calling, would it?
1LISTNUM 1 \l 12661 MR. THOMPSON: We don't expect that it is going to be easy to negotiate. We are already paying, we believe, significantly inflated rates, based on the fact that a cost study has not been filed in 12 years.
1LISTNUM 1 \l 12662 We are having difficulty negotiating access to billing and collection with Shaw.
1LISTNUM 1 \l 12663 There is enough evidence out there, from our perspective, that it is already a challenge. We are giving away one‑third of our calls free. We think that the billing fee should be less than a penny, and we have contributed $30 million to the LECs, in terms of billing and network infrastructure build associated just with our billing fee, let alone our accounts receivable and management fees.
1LISTNUM 1 \l 12664 We already think it is difficult.
1LISTNUM 1 \l 12665 MR. BLAKEY: It is difficult, but you don't necessarily know what the outcome of those negotiations would be, do you?
1LISTNUM 1 \l 12666 MR. THOMPSON: We couldn't possibly know.
1LISTNUM 1 \l 12667 MR. BLAKEY: I take it from looking at your c.v. that you have been with Globalive ‑‑
1LISTNUM 1 \l 12668 Am I right that you have been with its Canadian predecessor since 2005, as well?
1LISTNUM 1 \l 12669 MR. THOMPSON: I have been with Globalive or affiliated companies since 2002.
1LISTNUM 1 \l 12670 MR. BLAKEY: Did you have an association with Yak when it was still a sister company of the U.S. company, Yak America?
1LISTNUM 1 \l 12671 MR. THOMPSON: During the transitionary period.
1LISTNUM 1 \l 12672 One of our first objectives was to focus on the Canadian market, and we focused immediately on trying to sell that part of the business.
1LISTNUM 1 \l 12673 MR. BLAKEY: Are you aware that during that period the U.S. affiliate of Yak in the American market was engaged in the same type of 10‑10 service in a completely deregulated market?
1LISTNUM 1 \l 12674 MR. THOMPSON: Yes, and doing miserably.
1LISTNUM 1 \l 12675 MR. BLAKEY: Are you aware, as well, that billing and collection services have actually been deregulated in the United States since the mid‑1980s, completely?
1LISTNUM 1 \l 12676 MR. THOMPSON: Of course, there is vibrant local competitive business there. It is not uncommon to have to establish a relationship with thousands of local CLECs. How could you possibly deal with those? So you have to deal with clearing houses down there.
1LISTNUM 1 \l 12677 TELUS deals with a clearing house down there, as well.
1LISTNUM 1 \l 12678 MR. BLAKEY: So aren't clearing houses a possibility?
1LISTNUM 1 \l 12679 MR. THOMPSON: Clearing houses are a possibility, but they need access to rates that make sense in the industry. They have to have mandated access.
1LISTNUM 1 \l 12680 MR. BLAKEY: But don't the clearing houses negotiate privately in the United States, given that the FCC has completely deregulated that area?
1LISTNUM 1 \l 12681 MR. THOMPSON: I guess they are.
1LISTNUM 1 \l 12682 MR. BLAKEY: With a deregulated market in the United States, doesn't that suggest to you that commercial alternatives are out there?
1LISTNUM 1 \l 12683 MR. THOMPSON: They are completely different markets. I can tell you from our own experience that the markets are not similar at all.
1LISTNUM 1 \l 12684 The bad debt, the complexity, the thriving local competition makes it a completely different business.
1LISTNUM 1 \l 12685 MR. BLAKEY: Okay.
1LISTNUM 1 \l 12686 Can I get you to turn back to Tab D?
1LISTNUM 1 \l 12687 It is the same interrogatory, CRTC‑2003.
1LISTNUM 1 \l 12688 You say there ‑‑ well, let's assume billing and collection is classified as non‑essential and it is no longer mandated. I take it your view is, it is neither practical or feasible for you or anybody else to duplicate that service?
1LISTNUM 1 \l 12689 Fair enough?
1LISTNUM 1 \l 12690 MR. THOMPSON: It's not practical; correct.
1LISTNUM 1 \l 12691 MR. BLAKEY: And let's assume your worst fears come true and you can't reach a deal with an ILEC and let's further assume, flying in the face of the U.S. evidence, that in a deregulated market commercial alternatives wouldn't happen either.
1LISTNUM 1 \l 12692 When I look at your response to ‑‑
1LISTNUM 1 \l 12693 MR. THOMPSON: And I will just point to the fact that we do believe that dial‑around is not a viable business in the United States.
1LISTNUM 1 \l 12694 MR. BLAKEY: To your knowledge, are there still dial‑around companies in the United States?
1LISTNUM 1 \l 12695 MR. THOMPSON: There are probably a couple. But if you look at their plans, they are not attractive and they are not thriving in the marketplace.
1LISTNUM 1 \l 12696 MR. BLAKEY: I'll tell you, Mr. Thompson, it flies in the face ‑‑ I don't have it with me, but it flies in the face of the FCC materials that I have read where it indicates 10‑10 and prepaid calling cards is a thriving business in the United States.
1LISTNUM 1 \l 12697 MR. THOMPSON: I didn't mention prepaid calling cards.
1LISTNUM 1 \l 12698 MR. BLAKEY: Right. I guess what I'm interested in hearing from you is: In light of your statement on page 1 of that interrogatory, you say:
"Yak does in fact offer registration for casual callers, not to be confused with PIC‑based long distance services which Yak also offers."
1LISTNUM 1 \l 12699 Let's just stop there for a second. This takes us back to the beginning of our discussion.
1LISTNUM 1 \l 12700 You said that there was a subscribed PIC‑based one‑plus dialling service, and then we agreed that there was another side of the house, which was the 10‑10 dialling.
1LISTNUM 1 \l 12701 I take it from what you are saying here that you actually have a 10‑10 service where you do get free enrolled information, name, address, from your customers?
1LISTNUM 1 \l 12702 MR. THOMPSON: We had it and we withdrew it because it bombed.
1LISTNUM 1 \l 12703 MR. BLAKEY: So this is no longer accurate?
1LISTNUM 1 \l 12704 MR. THOMPSON: No.
1LISTNUM 1 \l 12705 MR. BLAKEY: All right. Well, those are all of my questions; thank you.
1LISTNUM 1 \l 12706 THE CHAIRPERSON: Thank you.
1LISTNUM 1 \l 12707 Go ahead, Commissioner del Val.
1LISTNUM 1 \l 12708 COMMISSIONER del VAL: Mr. Thompson, I just have one question.
1LISTNUM 1 \l 12709 Earlier you were talking about switching and your subscribed base of the long distance callers. What facilities does Yak own?
1LISTNUM 1 \l 12710 MR. THOMPSON: We are a reseller facility, so we lease interconnection facilities, Feature Group D, access based on CDN rights to connect our switches to the telcos, things like that.
1LISTNUM 1 \l 12711 COMMISSIONER del VAL: So it's completely 100 per cent leased. You do not own any facilities. Is that correct?
1LISTNUM 1 \l 12712 MR. THOMPSON: We own switching equipment. We do not own facilities per se.
1LISTNUM 1 \l 12713 COMMISSIONER del VAL: Thank you.
1LISTNUM 1 \l 12714 THE CHAIRPERSON: You have heard probably the evidence on the Internet. You weren't here but you have heard this week and last week about the idea being that facilities‑based competition is the best kind of competition. In the long run, it provides the greatest efficiency for the nation. People use the image of a ladder and you step up the ladder, et cetera.
1LISTNUM 1 \l 12715 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12716 THE CHAIRPERSON: From what you said this morning, it seems to me that this whole notion just doesn't apply to your business. Your business is based primarily on mandated resale and you have obviously made a very successful business on it. But take the mandated resale away and you are going to get squeezed to death.
1LISTNUM 1 \l 12717 That was your testimony, if I understood it correctly.
1LISTNUM 1 \l 12718 So there is no future for you without mandated resale, at least in terms of billing and collection that we are talking about here.
1LISTNUM 1 \l 12719 MR. THOMPSON: What we think is it takes away an important option for millions of consumers who have selected the ability to make a selection on a per‑call basis.
1LISTNUM 1 \l 12720 We do not think that what we are talking about conflicts with any of the policy directions. It's not going to result in any more investment in alternate billing methodologies. It's not going to result in any more innovation if this is removed. In fact, we view this as negative innovation if you are removing dial‑around from the market. It's not going to lead to any further investment in network infrastructure.
1LISTNUM 1 \l 12721 We fail to see any benefit associated with removal of billing and collection as an essential facility.
1LISTNUM 1 \l 12722 And we haven't even talked about collect calls as well.
1LISTNUM 1 \l 12723 THE CHAIRPERSON: I understand that part. I was actually looking at you, at Yak, and the evolution of Yak. According to the theory of the letter, et cetera, you would be progressively investing more into more infrastructure and therefore grow into primarily a facilities‑based competitor.
1LISTNUM 1 \l 12724 If I understand you, your business doesn't lend itself to that. That is not part of your long‑term plan. Or if it is, then explain it to me, please.
1LISTNUM 1 \l 12725 MR. THOMPSON: Okay; thank you.
1LISTNUM 1 \l 12726 If we have access to cost‑effective unbundled services, yes, the direction that we are trying to take Yak in is to provide a full suite of telecom services. We provide not only dial‑around, we provide long distance, we are providing local through resale today. We are providing DSL through resale today.
1LISTNUM 1 \l 12727 We have looked at making investments in collocation and equipment associated with the unbundled loop as recently as a couple of quarters ago, or even this quarter. But given the state of this proceeding, we are obviously taking a second look at that.
1LISTNUM 1 \l 12728 We have seen that Primus has invested tens of millions of dollars in collocation and in equipment to access the unbundled loop, and it looks like it may have been the wrong bet. And we think that's unfortunate because we do think that maybe the step approach isn't working as quickly as possible.
1LISTNUM 1 \l 12729 If you are going to build a subscriber base, you really do need a combination of resale and access to unbundled facilities, in our view. We don't see any other viable alternative.
1LISTNUM 1 \l 12730 THE CHAIRPERSON: Thank you.
1LISTNUM 1 \l 12731 Commissioner Cram.
1LISTNUM 1 \l 12732 COMMISSIONER CRAM: Thank you.
1LISTNUM 1 \l 12733 Mr. Thompson, did I understand you correctly to say that you are building your PIC‑based sub‑base on the premise that 10‑10 would not exist?
1LISTNUM 1 \l 12734 MR. THOMPSON: No. We would be building that anyway. There is no question we are committed to moving to a subscriber‑based service. We believe it is the right solution for Yak in the long term, as we try to offer bundled services with local and DSL and long distance.
1LISTNUM 1 \l 12735 So that's the direction we have been moving in.
1LISTNUM 1 \l 12736 COMMISSIONER CRAM: Right now, and let's say revenue‑wise, is your dial‑around 10‑10 a far larger portion of your business?
1LISTNUM 1 \l 12737 MR. THOMPSON: Yes, it is today.
1LISTNUM 1 \l 12738 COMMISSIONER CRAM: Have you noticed any difference in your uptake on minutes of revenue since things like Skype came into the market?
1LISTNUM 1 \l 12739 MR. THOMPSON: We can't really assess the impact of that. Again, based on our survey, the people who use dial‑around today, less than 1 per cent indicated that they use VoIP alternatives. That's the only reference point we have.
1LISTNUM 1 \l 12740 COMMISSIONER CRAM: Prepaid cards, while they make look cheaper than you, there is the issue that you can't use up the last 30 seconds or whatever.
1LISTNUM 1 \l 12741 Do they round up?
1LISTNUM 1 \l 12742 MR. THOMPSON: Well, they are all different. I think that's one of the issues. There is a consumer trust issue. They are just not sure what they are getting and it's not clear.
1LISTNUM 1 \l 12743 And they have to buy, in effect, a bundle of minutes anyway.
1LISTNUM 1 \l 12744 COMMISSIONER CRAM: Yes. Is there a commission on top of that on the cards normally?
1LISTNUM 1 \l 12745 MR. THOMPSON: Yes, usually, unless you are selling direct.
1LISTNUM 1 \l 12746 COMMISSIONER CRAM: Thank you very much.
1LISTNUM 1 \l 12747 THE CHAIRPERSON: Thank you.
1LISTNUM 1 \l 12748 Madam Secretary, who is next?
1LISTNUM 1 \l 12749 THE SECRETARY: Thank you, gentlemen.
1LISTNUM 1 \l 12750 I will now call counsel for TELUS Communications, please.
‑‑‑ Pause
1LISTNUM 1 \l 12751 THE SECRETARY: Counsel Lowe, you may proceed.
EXAMINATION / INTERROGATOIRE
1LISTNUM 1 \l 12752 MR. LOWE: Thank you.
1LISTNUM 1 \l 12753 Good morning, Mr. Chairman. My name is John Lowe, counsel for TELUS. In this era of substitutability of counsel, I'm the next up.
1LISTNUM 1 \l 12754 Good morning, Mr. Thompson.
1LISTNUM 1 \l 12755 MR. THOMPSON: Good morning.
1LISTNUM 1 \l 12756 MR. LOWE: There is a package of material that is taken from the record. There are handwritten page numbers on the upper right‑hand corner.
1LISTNUM 1 \l 12757 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12758 MR. LOWE: So we can talk about that.
1LISTNUM 1 \l 12759 I would like to circle back for a moment to your qualifications, if I could, sir.
1LISTNUM 1 \l 12760 MR. THOMPSON: Sure.
1LISTNUM 1 \l 12761 MR. LOWE: You were with MTS Allstream and its predecessors from 1997 to 2001. Is that right?
1LISTNUM 1 \l 12762 MR. THOMPSON: Yes, actually from 1993 to 2001.
1LISTNUM 1 \l 12763 MR. LOWE: Okay. I noticed on your biography on the corporate website of Globalive that you headed initiatives that resulted in $200 million in savings over four years. I was just wondering what that was.
1LISTNUM 1 \l 12764 MR. THOMPSON: Well, it's really associated with network optimization. I was responsible for access management, so all about how do you optimize your network and work with the regulatory group to achieve savings to make your company more viable.
1LISTNUM 1 \l 12765 MR. LOWE: And you are Vice‑President of Corporate Development for both Yak and Globalive now?
1LISTNUM 1 \l 12766 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12767 MR. LOWE: And you have the function of network optimization, regulatory and carrier negotiation. Does that cover the waterfront?
1LISTNUM 1 \l 12768 MR. THOMPSON: Not directly regulatory. Simon Lockie does have responsibility for regulatory. But I'm actively involved in the files.
1LISTNUM 1 \l 12769 MR. LOWE: Out in Calgary in the oil and gas business when you want to know how long someone has been around, you say "how many booms have you been through?" I guess here it's "how many sunsets have you been through?"
1LISTNUM 1 \l 12770 And it's been two, I guess.
1LISTNUM 1 \l 12771 MR. THOMPSON: Two anyway.
1LISTNUM 1 \l 12772 MR. LOWE: Turning to Yak's business, I think you confirmed that Yak is not a CLEC; it's a reseller.
1LISTNUM 1 \l 12773 MR. THOMPSON: That's correct. Actually, we are a Canadian carrier now too.
1LISTNUM 1 \l 12774 MR. LOWE: Because you own transmission facilities.
1LISTNUM 1 \l 12775 MR. THOMPSON: No, not because we own transmission facilities.
1LISTNUM 1 \l 12776 MR. LOWE: Do you own transmission facilities?
1LISTNUM 1 \l 12777 MR. THOMPSON: No.
1LISTNUM 1 \l 12778 MR. LOWE: Do you operate transmission facilities?
1LISTNUM 1 \l 12779 MR. THOMPSON: No.
1LISTNUM 1 \l 12780 MR. LOWE: And you are not registered as a CLEC.
1LISTNUM 1 \l 12781 MR. THOMPSON: No.
1LISTNUM 1 \l 12782 MR. LOWE: And you have about $100 million in revenues. Is that about right, in Yak?
1LISTNUM 1 \l 12783 MR. THOMPSON: More or less.
1LISTNUM 1 \l 12784 MR. LOWE: What percentage of that, roughly ‑‑ I'm not asking for an exact number. What percentage of that would be in respect of 10‑10 revenues?
1LISTNUM 1 \l 12785 MR. THOMPSON: I would rather not disclose that, but it's a significant portion.
1LISTNUM 1 \l 12786 MR. LOWE: It's a significant amount; okay.
1LISTNUM 1 \l 12787 MR. THOMPSON: More than 50 per cent.
1LISTNUM 1 \l 12788 MR. LOWE: Also on your website it says that Globalive, Yak's parent, offers billing and collection services.
1LISTNUM 1 \l 12789 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12790 MR. LOWE: Thank you.
1LISTNUM 1 \l 12791 MR. THOMPSON: It's really clearinghouse services. We are not CLEC, so we don't offer billing and collection per the definition that some people might be familiar with here.
1LISTNUM 1 \l 12792 MR. LOWE: Right. And then you mentioned to Commissioner Cram that you were looking into expanding into billing customers.
1LISTNUM 1 \l 12793 MR. THOMPSON: We are today.
1LISTNUM 1 \l 12794 MR. LOWE: On the consumer experience for 10‑10 and your relationship with casual callers, I take it they know about your prices based on your advertising in media and what they post on your website, and that's how they kind of know what they are going to get from 10‑10 when they use Yak.
1LISTNUM 1 \l 12795 Is that right?
1LISTNUM 1 \l 12796 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12797 MR. LOWE: Then in the U.S. at least there was some consumer issue surrounding surprise prices and fees that weren't disclosed and jumps in rates in minutes after certain usages, and the customers who used that service ended up not getting the savings they thought they would get.
1LISTNUM 1 \l 12798 I take it from your website that you say there are no hidden fees, there are no monthly charges. And that's in response to kind of the customer perception out there that they might get dinged for more charges than they otherwise would.
1LISTNUM 1 \l 12799 Is that kind of where the market is and you have to kind of provide people with an assurance that they are only going to pay 5 cents a minute and it's not going to increase down the road; there are no extra service charges?
1LISTNUM 1 \l 12800 MR. THOMPSON: Well, again, we have a number of different dial‑around offerings. Our Yak 10‑10‑925 is a simple offer where customers pay by the minute. There are no fees; there is no commitment.
1LISTNUM 1 \l 12801 MR. LOWE: And you can change the fees when you want. Is that right?
1LISTNUM 1 \l 12802 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12803 MR. LOWE: I hope you will agree that billing and collection services is not an essential service for CLECs in general. What you are saying is this is a special case for 10‑10 casual calling and you say it should be an essential service just for your 10‑10 casual calling business.
1LISTNUM 1 \l 12804 Do I have that right?
1LISTNUM 1 \l 12805 MR. THOMPSON: We haven't look at it from the CLEC perspective. We have looked at it from a perspective that billing and collection is an ancillary service to equal ease of access and 10‑10 dialling is indeed an essential service.
1LISTNUM 1 \l 12806 MR. LOWE: Okay. But certainly there is a lot of CLECs out there who can provide their own billing service and do quite well at it. Right?
1LISTNUM 1 \l 12807 There are lots of CLECs out there that can do it themselves. Right?
1LISTNUM 1 \l 12808 MR. THOMPSON: Yes, they can provide service to their own customers. Today they are mandated and in some cases comply with the fact that they should provide billing and collection to competitors.
1LISTNUM 1 \l 12809 MR. LOWE: But CLECs don't require billing and collection services from the ILEC to be provided on a mandated basis in general.
1LISTNUM 1 \l 12810 MR. THOMPSON: I fail to see the relevance.
1LISTNUM 1 \l 12811 They can choose to offer a dial‑around offer if they wish. They can choose to offer a collect service.
1LISTNUM 1 \l 12812 I'm not getting it.
1LISTNUM 1 \l 12813 MR. LOWE: So if CLEC was not providing 10‑10 service and was perfectly capable of providing its own billing service to customers without any help from the ILEC, do you think that it nevertheless should be an essential service and provided on a mandated basis for that CLEC?
1LISTNUM 1 \l 12814 MR. THOMPSON: Equally ease of access should be mandated. It is mandated. We wouldn't have forbearance without equal ease of access. That's the basis for our view as to equal ease of access being an essential service, as well as 10‑10 service, which is also part of equal ease of access and the ancillary service of billing and collection.
1LISTNUM 1 \l 12815 MR. LOWE: Perhaps we could turn to the package. The first document is your response to CRTC‑1002, and that's where you comment on ‑‑
1LISTNUM 1 \l 12816 MR. THOMPSON: Which page?
1LISTNUM 1 \l 12817 MR. LOWE: It's page 1 of the package.
1LISTNUM 1 \l 12818 MR. THOMPSON: Okay.
1LISTNUM 1 \l 12819 MR. LOWE: That's where you comment on the Bureau's definition of an essential facility.
1LISTNUM 1 \l 12820 Do you see that?
1LISTNUM 1 \l 12821 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12822 MR. LOWE: In the last line of the document you say:
"Thus the term 'same or similar' requires a liberal interpretation if Criterion 2 is to remain."
1LISTNUM 1 \l 12823 Do you see that?
1LISTNUM 1 \l 12824 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12825 MR. LOWE: What did you mean by a liberal interpretation of Criterion 2?
1LISTNUM 1 \l 12826 MR. THOMPSON: Well, it requires a liberal interpretation because, as an example, TELUS may not offer dial‑around services. They are in the long distance market. But whether they offer dial‑around really is not that relevant.
1LISTNUM 1 \l 12827 MR. LOWE: So you say that the words "same or similar" should mean only dial‑around services when we are looking at the issue of whether billing and collection services should be provided on a mandated basis?
1LISTNUM 1 \l 12828 MR. THOMPSON: No, we are not saying that. We are saying billing and collection should be provided.
1LISTNUM 1 \l 12829 MR. LOWE: This liberal interpretation of "same or similar" where you say:
"Thus the term 'same or similar' requires a liberal interpretation..."
1LISTNUM 1 \l 12830 I'm just wondering if liberal interpretation of "same or similar" means a broader interpretation of the words "same or similar"?
1LISTNUM 1 \l 12831 MR. THOMPSON: A broader interpretation of the relevant downstream market.
1LISTNUM 1 \l 12832 MR. LOWE: Okay. So you would say the downstream market should just be long distance service then.
1LISTNUM 1 \l 12833 MR. THOMPSON: We have never said anything to the contrary.
1LISTNUM 1 \l 12834 MR. LOWE: Thank you.
1LISTNUM 1 \l 12835 Then turning to page 9 of the package ‑‑ and this is your response to CRTC‑1003, page 2 of 2 ‑‑ the last full sentence says:
"As a result, to the extent billing and collection services might not need a narrow essential facilities test, access to LECG billing and collection services should continue to be mandated at cost‑based prices because it is fundamental to preserving customer choice in the long distance market on a call‑by‑call basis." (As read)
1LISTNUM 1 \l 12836 I take it what you are saying is we can quibble about definitions of essential facility and you say, well, irrespective of that, it is important to have billing and collection services provided on a mandated basis for the principle of preserving customer choice, and so it should be continued to be provided on a mandated basis?
1LISTNUM 1 \l 12837 MR. THOMPSON: Absolutely. We have millions of customers who have made that choice and it is the ultimate in flexibility, and to remove it would be the removal of an innovation in providing valued services to customers in the public interest.
1LISTNUM 1 \l 12838 MR. LOWE: So you are saying the CRTC can maintain a rigorous definition of essential facilities, and there is no need to import a casual definition just to protect 10‑10 service. I mean, as long as you get access to billing and collection services on a mandated basis, whether it falls within the definition strictly of an essential facilities doesn't really matter to you?
1LISTNUM 1 \l 12839 MR. THOMPSON: We think it does fall within the definition of essential facility, but if it is deemed that it is not, we think that it could be a special service or an interconnection service associated with equal ease of access.
1LISTNUM 1 \l 12840 We think it fits multiple criteria. The importance is preserving that choice for consumers.
1LISTNUM 1 \l 12841 MR. LOWE: We talked about the prices of, I think you talked about a 25 cent per bill charge that SaskTel charges. Do you recall that?
1LISTNUM 1 \l 12842 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12843 MR. LOWE: In TELUS territory, is the rate 10 cents a record?
1LISTNUM 1 \l 12844 MR. THOMPSON: Correct.
1LISTNUM 1 \l 12845 MR. LOWE: Ten cents a record works for you? You can ‑‑
1LISTNUM 1 \l 12846 MR. THOMPSON: No, it doesn't really work for us. As I indicated, we are giving away a third of our calls for free. They may be short duration, but we are still giving them away for free.
1LISTNUM 1 \l 12847 If we had cost‑based rates ‑‑ again, a cost study has not been filed in 12 years. We filed a Part 7 late last year as soon as we took control of Yak, because we did see that that was a gap. We think the rates based on the costs Bell indicated in their own submission in ‑‑ I don't have reference to it here, but it is in our Part 7, that it costs them less than a tenth of a cent to put a line item on a bill. We think that is a relevant benchmark.
1LISTNUM 1 \l 12848 MR. LOWE: We will get to cost‑based rates, but you are saying as long as the rates reflect the true costs of the ILEC, you don't mind paying those costs?
1LISTNUM 1 \l 12849 MR. THOMPSON: That is correct. It should be cost plus.
1LISTNUM 1 \l 12850 MR. LOWE: Right. Cost plus a mark up?
1LISTNUM 1 \l 12851 MR. THOMPSON: Cost plus a 15 per cent mark up we are comfortable with.
1LISTNUM 1 \l 12852 MR. LOWE: When this was first ordered, the mark up was 25 per cent, wasn't it?
1LISTNUM 1 \l 12853 MR. THOMPSON: Yes. When this was first ordered, there was no such thing as a dial‑around competitor either. So, there were demand volumes that were picked out of the air, and we are convinced that the market has grown significantly since then and the costs are way too high.
1LISTNUM 1 \l 12854 MR. LOWE: A penny, where do you get a penny from? Is that what it could cost you if you did it yourself?
1LISTNUM 1 \l 12855 MR. THOMPSON: No. Bell has gone on record indicating if they had to do itemized billing it would cost them 1.6 cents to put the 20 line items on their bill, which comes into well under a tenth of a penny. So, we have extrapolated from that. Even with a 15 per cent mark up you are still going to be less than a tenth of a cent.
1LISTNUM 1 \l 12856 MR. LOWE: If you did do the billing yourself, the rates would depend on your customer base and what platforms you decide to use and when you roll out the billing service and so on. Is that right?
1LISTNUM 1 \l 12857 MR. THOMPSON: Yes, and when we have subscriber services, we are putting more charges on the bill. It is not on a per‑call basis. So, it is significantly different.
1LISTNUM 1 \l 12858 MR. LOWE: Thank you.
1LISTNUM 1 \l 12859 I would like to turn to the survey that you filed for a moment.
1LISTNUM 1 \l 12860 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12861 MR. LOWE: Yours is the only survey filed in the hearing to your knowledge?
1LISTNUM 1 \l 12862 MR. THOMPSON: I have no idea.
1LISTNUM 1 \l 12863 MR. LOWE: You had customer contact information to pursue that survey; you knew who to call?
1LISTNUM 1 \l 12864 MR. THOMPSON: We have the telephone numbers, yes.
1LISTNUM 1 \l 12865 MR. LOWE: So, you could have called these customers and said, look, we would like a commitment from you to continue to provide service and some of them could say, well, all right, we will give you a commitment and we will sign up with you. That is possible, isn't it?
1LISTNUM 1 \l 12866 MR. THOMPSON: Yes, it is. In fact, our subscriber PIC'd service, our one‑plus service, has a lower rate than dial‑around service. You can view them as different products. They do not overlap. We have a different customer base that is interested in dial‑around than one‑plus.
1LISTNUM 1 \l 12867 Most of our one‑plus customers are coming from other one‑plus customer bases because we don't charge any network access fees and plan fees. So, customers aren't paying $8 or $9 before they even make a call, like happens with many of the LECGs. They are paying three and a half cents a minute, no sneaky fees.
1LISTNUM 1 \l 12868 MR. LOWE: Okay. On the transition period, if we can talk about that for a moment, and perhaps turn to pages 10 and 11 of the package.
1LISTNUM 1 \l 12869 MR. THOMPSON: 10 and 11 of, sorry?
1LISTNUM 1 \l 12870 MR. LOWE: Of this package of information.
1LISTNUM 1 \l 12871 MR. THOMPSON: Okay.
1LISTNUM 1 \l 12872 MR. LOWE: It was your response on page 2 of 2, which is page 11 in the package that I was interested in.
1LISTNUM 1 \l 12873 You say:
"Any transitional regime must allow for at least three years of transition with respect to non‑essential services and perhaps longer, up to five years, for certain services, depending on the competitor's reliance on the service." (As read)
1LISTNUM 1 \l 12874 Do you see that?
1LISTNUM 1 \l 12875 MR. THOMPSON: Yes.
1LISTNUM 1 \l 12876 MR. LOWE: The consideration for the length of the transition period, in your view, is driven by how long it would take the competitor to make arrangements to bring on line a substitute service; is that what you have in mind?
1LISTNUM 1 \l 12877 MR. THOMPSON: That is one aspect of it. There needs to be recognition that competitors in the marketplace have also made significant investments. Primus Globility in terms of building out in co‑lo's; Global Live, even as an example, in making an investment in Yak. We need time to look at recovering the investment, as well as what is the alternative, and we don't see a viable alternative, I will state again, associated with billing and collection and dial‑around.
1LISTNUM 1 \l 12878 MR. LOWE: How would that work, then? Would you file evidence or somehow provide an indication of how long you need before you get pay back of your investment to provide 10‑10 service? I am just trying to wrap my head around this.
1LISTNUM 1 \l 12879 MR. THOMPSON: Common sense may prevail in that typically people bill businesses and make investments on three‑ to five‑year horizons. That is why we went ‑‑
1LISTNUM 1 \l 12880 MR. LOWE: I am with you now. You just say three years is probably in line with the expectation of ‑‑
1LISTNUM 1 \l 12881 MR. THOMPSON: Three years would be the minimum, and that is with price protection. We are not talking about step price increase.&n