ARCHIVED - Transcript, Hearing 26 November 2014
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Volume 3, 26 November 2014
TRANSCRIPTION OF PROCEEDINGS BEFORE THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION
Review of wholesale service and associated policies
140 Promenade du Portage
26 November 2014
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.
Canadian Radio-television and Telecommunications Commission
Review of wholesale service and associated policies
Eric BowlesLegal Counsel
Lyne RenaudHearing Manager
140 Promenade du Portage
26 November 2014
- iv -
TABLE OF CONTENTS
PAGE / PARA
8. Bell Canada and Bell Aliant521 / 2935
9. Québecor Media Inc., (Vidéotron)730 / 4070
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PAGE / PARA
Undertaking600 / 3321
Undertaking634 / 3498
Undertaking637 / 3521
Undertaking689 / 3822
Undertaking726 / 4036
Undertaking728 / 4047
Undertaking728 / 4050
Undertaking729 / 4054
Undertaking786 / 4413
Undertaking801 / 4525
Undertaking803 / 4543
Undertaking806 / 4565
Undertaking810 / 4585
--- Upon resuming on Wednesday, November 26, 2014 at 0902
2930 LE PRÉSIDENT : À l'ordre, s'il vous plaît.
2931 Good morning. You are a great number of people, you are actually testing the capacity of our witness tables there.
2932 Madame la Secrétaire, could you introduce the next panel, please?
2933 THE SECRETARY: Good morning, everyone.
2934 We will now hear the presentation from Bell Aliant and Bell Canada. Please introduce yourselves for the record. You have 20 minutes for your presentation.
2935 MR. DANIELS: Thank you, Madam Secretary, and good morning. That's what happens when we put two companies together.
2936 I'm Jonathan Daniels, Vice-President of Regulatory Law at Bell.
2937 With me on our panel today, beginning to my left, is André Beaulieu, President of Bell Wholesale;
2938 - Mirko Bibic, Executive Vice President and Chief Legal and Regulatory Officer; and
2939 - Michelle Bourque, Vice President, Product and Marketing for Bell Wholesale.
2940 Beginning on my right is:
2941 - Denis Henry, Vice President, Regulatory, Government Affairs and Public Law for Bell Aliant;
2942 - Dan McKeen, Vice Chair and Senior Vice President, Residential Services for Bell Aliant; and
2943 - James Gilmore, Vice President, Wireline Technology and Network Planning for Bell Canada.
2944 Beginning from my far right behind James is:
2945 - Sheldon MacDonald, Vice President, Network Strategy and Engineering for Bell Aliant;
2946 - beside him is Peter Dilworth, Vice President, Finance and Procurement for Bell Aliant.
2947 And beginning behind Denis are our experts:
2948 - Bryan Tramont, Managing Partner at Wilkinson Barker Knauer LLP;
2949 - Margaret Sanderson, Vice President, Competition Practice Leader at Charles River Associates;
2950 - Andrea Renda, Senior Research Fellow at the Center for European Policy Studies;
2951 - Robert Hahn, Professor of Regulatory Economics at the University of Oxford; and
2952 - Jeffrey Church, Professor at the University of Calgary.
2953 Telecom policy in Canada has long recognized that facilities-based competition delivers the greatest benefits to Canadians. To this end, the Commission recognized back in 2008 that it was appropriate to begin eliminating access obligations over time and subsequently refrained from mandating access to fibre-to-the-premise. Cabinet decisions have also encouraged investment in broadband infrastructure and rejected unbundling of facilities that are duplicable.
2954 Today, Canada is a world leader in broadband investment, availability, speed, penetration and usage, but massive investments still lie ahead if we want to stay on top.
2955 Expanding mandated access rules threatens to create or accentuate a digital divide where only some Canadians benefit from a competitive choice of next generation networks. That would be an unfortunate outcome.
2956 The stakes are high. Countries around the world are concerned about network investment and the impact of their regulatory policies. In Europe, where wholesale regulation is pervasive, the former Vice-President for the Digital Agenda at the European Commission Neelie Kroes concluded that
"[c]urrent trends are unsustainable for the sector, and unsustainable for our whole economy. Without the infrastructure to compete, we aren't going anywhere - in any sector. We hurt consumers, we hurt the economy, we hurt our strategic future if we do not act."
2957 In contrast, the United States deliberately refrained from wholesale regulation of next generation networks and has since enjoyed a rapid increase in fibre deployment.
2958 BCE is eager to build more fibre networks in more communities so that consumers can have a choice of at least two. Expanding the reach of our fibre and advanced wireless networks is a top priority for our company but regulatory rules must be properly calibrated to avoid discouraging us and others from making these investments.
2959 Wholesale regulation is only justified if retail markets are not sufficiently competitive. The economists all agree on this point.
2960 Telcos, cablecos and wireless providers have made huge investments to compete in voice, Internet and television services. The result is a market characterized by all the indicators of intense competitive rivalry.
2961 Let's look at this evidence:
2962 - The share of subscriber additions won by telcos and cablecos has fluctuated widely over the last 15 years, demonstrating the obvious rivalry in the market.
2963 - Telcos and cablecos advertise frequently and aggressively, specifically targeting each other on everything from speed, to features, to price.
2964 - Retail broadband prices have been reduced numerous times since 2012 by us and our competitors. And that does not even capture all promotional and retention offers.
2965 - Canada is a global leader in the availability and adoption of high-speed broadband.
2966 - Most importantly, Canadians are global leaders in broadband usage, proving that we must be getting the balance right between prices and quality.
2967 Against this impressive body of evidence, there is a lack of evidence advanced by those seeking mandated access regarding actual conditions in the retail market, let alone any evidence of an actual competition problem. The evidence supports our proposal that GAS, TPIA and unbundled local loops no longer need to be regulated, at least in urban areas and perhaps after a short phase-out period.
2969 MR. McKEEN: Thank you, Jonathan.
2970 We believe the central issue in this proceeding is how to ensure that fibre-to-the-premise networks are rolled out as quickly and to as many communities as possible. That is how we will bring broadband choice and competition to even more Canadians. Having pioneered the deployment of fibre-to-the-home widely throughout our territory, this is a passion for Bell Aliant.
2971 Bell Aliant's leadership in fibre-to-the-home shows how market forces can achieve public policy goals. Not too many years ago, most of Bell Aliant's territory was characterized by early and now well-established home phone competition, and cable companies were the market leaders in Internet and TV. To address this challenge we adopted a strategy that was unprecedented in Canada: a completely new and costly fibre overbuild of 70 percent of our access network in Atlantic Canada. This was not an easy choice.
2972 Bell Aliant began building fibre-to-the-home in 2009. Our investment accounts for 40 percent of such deployments in Canada despite our predominantly rural serving territory. Why haven't other ILECs followed? It's because the jury is still very much out as to the financial success of this strategy, as even five years later the financial turnaround has yet to materialize. And we are all too familiar with how even a small hurdle, be it regulatory or otherwise, can derail the business case and curtail further investment.
2973 Although we are the clear leader, with fibre-to-the-home now available to about two thirds of households in Atlantic Canada, that still means a third of Atlantic Canadians are waiting for investments that extend these benefits to them. While Canada is making good progress, with these networks now available to more than two million households, there is much work to do. Only 14 percent of homes in Canada are passed by fibre-to-the-home.
2974 Not surprisingly, competitive rivalry is particularly vigorous where we have fibre-to-the-home. Launching these networks provokes an aggressive response from our cable competitors through product innovation and price discounting. And we have responded with product innovation and price discounting of our own. This is what market forces have delivered, and consumers have been the winners.
2975 Even if the Commission maintains wholesale access to DSL/FTTN and current generation cable networks, we ask you not to mandate access to FTTP. These networks are fundamentally different.
2976 First, there is no "incumbent." Each new access network is built from the ground up. New competitors such as Vianet, Wightman and Execulink -- in fact, we have 17 different companies in Ontario and Quebec who have built fibre-to-the-home networks in our territories. Mandated access has its origins in overcoming an incumbency advantage stemming from legacy networks that were constructed entirely in monopoly conditions. That advantage simply does not apply to FTTP.
2977 Second, even in areas where all-fibre networks have been deployed, we only build the final leg or "fibre drop" connecting the premise to the network when the customer subscribes. This represents up to a third of the network capital. That means you would be mandating wholesale access to a network that in large part does not exist. Those who invest in facilities would be forced to incur capital expenditures purely for the benefit of their competitors.
2978 We want to create better choices for more consumers across Atlantic Canada, Quebec and Ontario. With fibre-to-the-home deployment in its infancy, the right signals from the Commission now will allow us to invest in creating those choices -- and others will invest too.
2979 Of course, we are not suggesting that with mandated access such investment will immediately grind to a halt in every location in Canada, but the inescapable conclusion is that smaller and rural communities with only DSL today will be deprived of, or significantly delayed in, receiving the benefits of fibre-to-the-home technology, leaving them with access to only the cable network for advanced broadband.
2980 It also means that overbuilding fibre-to-the-home in urban areas that have fibre-to-the-node today will be curtailed or delayed. And to be clear, unlike what you heard yesterday, for us fibre-to-the-home is not just an extension from fibre-to-the-node, it is an entirely new network built all the way from the CO to the customer premises.
2981 In either case, our focus should be on seizing this opportunity to build future-proof all-fibre networks to as many of these communities as possible as rapidly as possible.
2982 The impact of mandated access on investment is demonstrated by the detailed business case analysis we filed on the record. That analysis is not hypothetical -- it uses the model we at Bell Aliant use to make investment decisions, as the operator with the most experience deploying fibre-to-the-home.
2983 Introducing mandated wholesale access to the model for 21 of the communities where fibre-to-the-home networks were deployed in Bell Aliant's 2014 capital program causes the discounted payback period to become even longer and the net present value of the investments to plummet. More importantly, the net present value becomes negative for 9 of the 21 communities, meaning that investing in fibre-to-the-home in those communities would be unprofitable and the investment would not be made.
2984 Our conclusions are consistent with the clear consensus of economists. The record includes not only professors Church, Hahn and Renda on our behalf but the economic experts for TELUS, Rogers and the FTTH Council, and papers from the Boston Consulting Group and Professor Yoo, all of which conclude that mandated access undermines investment in facilities such as FTTP.
2985 We have also seen that far less significant changes in the investment climate can undermine this investment. We have described the situation in Sault Ste. Marie where we faced a formidable cable competitor who has deployed DOCSIS 3.0 with speeds as high as 100 Mbps. After launching our fibre-to-the-home build in Sault Ste. Marie, we subsequently encountered regulatory issues and as a result we halted the rollout well short of the coverage we had announced. We decided it made more sense to compete with DSL than invest in fibre-to-the-home with these additional costs. This is another illustration of just how challenging the business case is.
2986 Some have argued that the Commission should ignore this real-world evidence and have faith that because we compete with cable companies we will make the same investments regardless of regulatory policy. These parties want the Commission to believe that competition with cable companies is simultaneously so strong that we will invest hundreds of millions or even billions of dollars without expecting an acceptable return, and yet not strong enough to rely on market forces rather than regulation.
2987 There is a fundamental contradiction in that argument. We are driven by our customers to deliver superior services but we also have a responsibility to our shareholders to invest their capital wisely. Simply put, we cannot make these huge investments where the business case is not viable.
2989 MR. BEAULIEU: Merci, Dan.
2990 En observant le cours des événements depuis la décision 2008-17, le Conseil ne devrait pas craindre de s'en remettre aux forces du marché. Nous avons maintenant l'occasion unique de constater de façon directe l'impact, d'une part, de l'accès obligatoire et, d'autre part, de l'abstention de réglementation, en observant tout simplement ce qui s'est passé durant les 10 dernières années dans le cas des installations Ethernet et RNC haute vitesse, qui font maintenant l'objet d'une telle abstention.
2991 Avant l'abstention, l'accès de gros obligatoire à des tarifs établis par le Conseil a eu pour effet de réduire sensiblement les investissements dans ces installations. En 2004, nous avons réévalué les déploiements de réseau prévus dans l'Ouest du Canada et nous avons finalement décidé de ne pas y investir, préférant louer les installations nécessaires. TELUS, pour l'essentiel, a fait la même chose à l'extérieur de son territoire. Le concurrent Enmax s'est entièrement retiré du marché. Vidéotron a considérablement réduit sa construction de nouvelles installations.
2992 Dix ans plus tard, sur le marché des services d'affaires, l'abstention de réglementation des services RNC et Ethernet a favorisé une vague de nouveaux investissements ainsi que de nouvelles ententes commerciales basées sur le marché. Le réseau national de transport par fibre optique de MTS Allstream a connu une croissance de plus de 20 pour cent et le nombre d'immeubles auxquels elle a acheminé la fibre optique s'est accru de 50 pour cent en moins de trois ans. Les câblodistributeurs se sont également attaqués à ce marché avec vigueur. Par exemple, Rogers a fait croître de 81 pour cent son réseau de transport par fibre optique, parfois avec des acquisitions, tandis que celui de Cogeco a enregistré une croissance de 20 pour cent.
2993 Ce niveau élevé de concurrence dans le marché a clairement protégé les intérêts des utilisateurs. On en trouve la meilleure preuve dans l'étude quantitative détaillée menée par l'expert Margaret Sanderson.
2994 Son rapport examinait toutes les façons possibles par lesquelles l'abstention de réglementation aurait pu nuire à la concurrence. Sa conclusion est sans équivoque : l'abstention n'a pas été nuisible. En particulier, nos revenus des services de gros n'ont pas augmenté, notre part du marché de détail a fléchi ou est restée la même, et les prix de détail eux-mêmes n'ont pas augmenté, bien au contraire. Les fournisseurs de services concurrentiels ont soutiré des parts de marché aux entreprises titulaires et continuent de gagner d'importants contrats. Voilà exactement le résultat attendu d'un véritable marché concurrentiel.
2996 MR. DANIELS: We generally support the existing wholesale services framework and in particular the well-established and widely endorsed definition of an essential facility. The experience with CDN and Ethernet demonstrates that rigorously applying this definition preserves incentives to invest, protects retail customers and ultimately results in outcomes that advance the objectives in section 7 of the Act.
2997 In fact, for CDN and Ethernet the burden is on those seeking re-regulation to file evidence that is -- and I'm quoting your test here -- "sufficiently persuasive to demonstrate that the circumstances that justified the original forbearance determinations are no longer present." They have not met it.
2998 More broadly, the facilities-based competition model preferred by the Commission and the government has put Canada on a trajectory toward widespread deployment of at least two next-generation wireline networks along with at least three advanced wireless networks in most communities. In contrast, countries that have relied on mandated access now find themselves with investment issues or relying on government subsidies to construct just a single next-generation network, even in larger urban areas.
2999 The Commission's current policy to refrain from mandating access to FTTP has Canada on the cusp of reaping real dividends from access to competitive all-fibre networks, and forbearance of CDN and Ethernet has already delivered concrete benefits to users. We believe implementing our evidence-based proposal will encourage the deployment of advanced networks to more Canadians at a faster pace.
3000 Mr. Chairman, we have what we think is some compelling international evidence that I have only been able to touch on briefly in this opening statement and we have a number of our international experts here from the U.K., Italy, the U.S. and Canada, so I would invite you to explore their evidence further with them should you wish.
3001 With that said, we want to thank the Commission for the opportunity to participate in this proceeding and we and the experts on our panel look forward to answering your questions.
3002 THE CHAIRPERSON: Well, thank you very much.
3003 The Vice-Chair of Telecom will start us off. Thanks.
3004 COMMISSIONER MENZIES: Good morning. Thank you for your presentation. I will try to start with some less complicated stuff.
3005 Do you think it would be useful for us to formalize a set of principles or criteria or conditions to consider when we are deciding whether to mandate the service? In other words, we have a framework around essentiality, a test for that. Would it be useful to have a set of principles around our other categories for predictability and processing purposes?
3006 MR. DANIELS: Sorry, if I understand the question correctly, you're saying beyond the essentiality --
3007 COMMISSIONER MENZIES: Yes.
3008 MR. DANIELS: -- just for the other categories, so meaning interconnection and public good?
3009 COMMISSIONER MENZIES: Yes. Your view on essentiality is clear.
3010 MR. DANIELS: Okay.
3011 COMMISSIONER MENZIES: Just in the other areas.
3012 MR. DANIELS: So --
3013 COMMISSIONER MENZIES: The other mandated areas.
3014 MR. DANIELS: I think in terms of the two other key categories that I think step away from essentiality -- which are public good and interconnection -- on public good, I don't think there's been any dispute on the record, so I'm not sure that we really need to establish any principles in terms of -- basically there's reasons why elements are in those categories and they're pretty much non-controversial, like 9-1-1 or support structures.
3015 On interconnection, our view is that interconnection should actually -- we support that as a separate category and we believe it should be limited, however, to services that are truly forms of interconnection, which is exchanging traffic.
3016 And in that regard and where I will draw a distinction, we specifically criticize billing and collection as a service, for example. Again, it's not the biggest issue but this is a service that we don't see falling into the interconnection category at all because it's not about exchanging of traffic, it's about whether competitors or offers of alternative long distance providers, whatever, they can send their own bills or they can come to us and ask us to put it on our bills, and we're not -- we don't understand why that would be regulated, let alone called interconnection, because it doesn't do anything with interconnection.
3017 And there's a couple of other services like that that aren't really interconnection services, like EAS sharing. So there's some other services that fall into that category which we question and which we've put in our evidence. I mean I could take you through that but I think you're looking for just the principles right now.
3018 COMMISSIONER MENZIES: Yes. I'm just looking at this stage to see if it would be useful to have sets of principles or criteria around those.
3019 MR. DANIELS: And my principle would be services that truly are about two carriers interconnecting and exchanging their own traffic, which I think a number of the services in interconnection don't fall into that category.
3020 COMMISSIONER MENZIES: Okay. Thank you.
3021 Some, CNOC and others, consider that slower-speed services and high-speed services constitute separate retail product markets. Agree? Disagree? Why? Why not?
3022 MR. DANIELS: I guess I'm going to hand this off to Jeff in a second to --
3023 COMMISSIONER MENZIES: You have a lot of help there. You should make use of it.
3024 MR. DANIELS: I promise I will. But just as a starting point when we just -- I take it you are talking about high-speed Internet because -- and I just want to clarify that because we do --
3025 COMMISSIONER MENZIES: Yes, sorry. Yes, of course I was.
3026 MR. DANIELS: -- because we do agree in CDN it's different. So Jeff, maybe I could ask you to take the lead on this.
3027 MR. CHURCH: Good morning.
3028 Mr. Vice Chair, I think that actually I would just make sure I have the question correct. We are dealing with high-speed Internet and we are distinguishing between weather, say 1.5 Mb per second service competes with 50 Mb per second service or 100 Mb per second service.
3029 COMMISSIONER MENZIES: The question really is whether they constitute separate retail product markets, slower speeds and higher speeds.
3030 MR. CHURCH: Whether they are in the same market?
3031 COMMISSIONER MENZIES: Whether they are in the same product market or whether they should be in separate product markets. Some argue that they should be in separate product markets.
3032 MR. CHURCH: So typically the way we do the relevant market definition which is all about trying to decide what competes with each other and which doesn't compete with each other, so what are reasonably good substitutes, we apply the hypothetical monopolist test and we start with a particular product.
3033 So you would start, say, with 2 Mb per second service and ask if a hypothetical monopolist of that particular product went to raise the price by a small but substantial non-significant, non-transitory amount, would it be profitable? Would it be profit maximizing?
3034 Then you are essentially asking, would the present consumers of that service, would they substitute to other speeds? Right. I mean you are asking if the speeds are in the same market. That's what you would ask, right.
3035 But no, the important thing to recognize here is you start either with the low speed or you start with the high speed and you may end up with different answers, right, depending on where you start. Because what you are trying to do is decide in the provision of to 2 megabits service or 50 megabits service, do I have market power? And would substitution to other speeds in this particular -- and given your question, would that discipline the exercise of that market power, right?
3036 COMMISSIONER MENZIES: But don't we have to define the market before we determine whether market power exists?
3037 MR. CHURCH: Well, Mr. Vice Chair, that's the point, is that when you are defining the market the point of doing that is to identify market power. So if you are interested in market power over 2 Mb per second service, then you start with that and ask would consumers substitute?
3038 Alternatively, if you start at --interested in high-speed, very high-speed and whether there was market power in the provision of that, then you start with that when you are defying your market and ask, would consumers substitute to that?
3039 COMMISSIONER MENZIES: All right.
3040 MR. CHURCH: So if you take, for instance, the 50 Mb or 100 Mb or are ultra fast stuff to begin with, we start with that and ask, you know, what would consumers do in terms of their willingness and ability to substitute? There is a couple of things to recognize on that.
3041 So one is that there is evidence -- I discuss it in my report -- that for very high speeds there is survey evidence from other jurisdictions that suggest that consumers aren't willing to pay a premium or a substantial premium for very high speeds as opposed to, you know, reasonable high speeds. That is in some sense reflected by the fact that we don't have applications or, you know, it's hard to identify applications that are widespreadly adopted that people need very high speeds to do. So if you started to raise the price of the very high-speed stuff they would substitute down to lower speed stuff.
3042 So that would suggest the hypothetical monopolist test has likely failed for very high-speed stuff, that it does compete over some range with lower speed stuff.
3043 MR. BIBIC: Mr. Vice Chair, if I could just add some kind of data, on the ground data to support that answer?
3044 COMMISSIONER MENZIES: Sure.
3045 MR. BIBIC: So one is we have taken -- obviously we have been listening to the questions so we went back -- in Quebec City Bell has an all fibre-to-the-home network based on almost 260,000 premises in that city. So we went back to look at what are consumers buying in Quebec City and 80 percent of the subscribers who are on that network by Internet service are at speeds that are supported by FTTN or DSL. In other words, they are 50 megs and below, so 80 percent. So that tells you that even if you have an FTTH network that can support far higher speeds, the vast majority of consumers are opting for the lower speeds.
3046 Yesterday I observed -- I think it was Mr. Stevens of Execulink who has an FTTH network of his own in his operating territory -- he said that you cannot price FTTH so high because consumers will then go to cable. So essentially, you know, the providers who are on cable and providers who have FTTH and providers who have FTTN are competing from our perspective in the same market today.
3047 Now, what will happen five years down the road when bandwidth needs are higher or applications, as Jeff mentioned, are different and require more bandwidth, that will be a different set of circumstances and facts at that time.
3048 COMMISSIONER MENZIES: Okay, thank you. So the answer is no, right?
3049 MR. BIBIC: No.
3050 COMMISSIONER MENZIES: Thank you.
3051 MR. BIBIC: And I think the Bureau said we don't have evidence to determine right now if FTTP is in the same market and we would suggest that it is.
3052 COMMISSIONER MENZIES: Okay. What about bundled services that, rather than each service, whether it be telephony or Internet or television services, if they are all separate products, when they are bundled together doesn't that become a single product market? Some would argue that.
3053 MR. DANIELS: I'm going to turn that again to Jeff.
3054 MR. CHURCH: So my apologies, Mr. Vice Chair. We have to start with a little bit more economics.
3055 COMMISSIONER MENZIES: That's no problem. I mean the next question was going to be why so you can start with the why --
3056 MR. CHURCH: I can start with the why?
3057 COMMISSIONER MENZIES: -- and then finish with the yes or the no.
3058 MR. CHURCH: And I apologize. I have a tendency always to start with the why.
3059 So I mean the question is, are bundles a relevant market? So it does -- in particular a question that the Commission is interested in, I think, is does an ILEC have market power in the provision of a bundle?
3060 So as I said before, you know, market power is a function of the alternatives available to your customers, you know, what would they substitute to? Again, you asked if I start with a particular bundle and I think about raising the price of that bundle and asking would it be profit maximizing, I ask, "But would consumers have a willingness and ability to substitute to?"
3061 So presumably they could substitute to other producers of the same bundle or they could assemble their own bundles. They could match whatever is in their present bundle by choosing alternative services or they might drop some services and consume a subset of those services.
3062 So, you know, bundling is a very difficult question. I mean, it's clear that you could just start with a particular bundle and you could apply the test as is done. We don't have very good evidence on that kind of exercise, starting with the bundle and raising the prices and asking how people would substitute. So my suggestion would be to do something a little bit different, which is ultimately what we are worried about here, is the exercise of market power, and ask the question and said, "Does bundling increase the likelihood of market power?" right.
3063 You know, if I did my analysis for all the separate products and found that there was no market power by the ILEC for instance in any one of those individual products, then I might be interested in asking the question -- well, hold it. That was for individual products. Maybe I should ask whether bundling makes it different; tells a different story because we can do the single product stuff, because we have fairly good evidence on the single product stuff. We can look and see, as is done in my report about people's willingness and ability to substitute.
3064 But on the bundle evidence we don't have such a very good evidence. So rather than necessarily dealing in trying to apply the market definition test to it, I think it's more useful to ask instead, you know, "Why would I think this might be different? Why might bundling give me a different answer than I get when I look at single products, right? So is there something different about bundling?"
3065 In which case then you are asking, you know, "When they bundle do they do something about the willingness or ability of consumers to substitute? Is there some sort of cost or demand advantage that is created by the vertically integrated firm when it bundles which can't be replicated by its competitors?" And it seems to me in this particular case that it is unlikely that if you don't have market power in a single product that you might have it in a bundle, okay. There are two reasons for that.
3066 One is that the margin on a bundle is going to be higher so when you are bundling it you are getting a margin on all of the products that are included in the bundle. So when a consumer substitutes away from you, the loss of your profits is much higher, right, so that negative consequences of raising the price of the bundle when people substitute is worse for you.
3067 And bear with me, please. There is a theoretical reason why the elasticity of demand for the bundle might be higher, right. So elasticity of demand is the way we quantify what will happen in aggregate to consumer substitution. When you raise the price by 1 percent, how much does demand go down by? Higher elasticity says that more customers will substitute at the margin when you raise the price.
3068 So think about a bundle, Mr. Vice Chair, if I could have two minutes of a little bit of economic theory here, abstract thinking.
3069 So suppose we had two products. We have product A and we have product B. I am a monopolist in A and I have market power in A. In product B, I have a competitor. So there might be a B1 and a B2, okay? And so because there is a competition there, my elasticity of demand for B1 which I supply is higher, because my customers when I go to raise my price would substitute to B2, my competitor in product B.
3070 If I bundle and put A and B1 together, what happens? Well, what happens to my elasticity is that for the elasticity of the bundle it likely goes down because it's going to be an average of A and B1. B1 was more elastic, A was inelastic. So my market power at the margin for the bundle is going to be less.
3071 An intuitive way to think about this is that there may be people out there who really dislike my B1. They would buy A from me if I provided it individually, but they really dislike my B1. So when I bundle A with B1 they go and -- and I try to raise the price of that bundle -- they say, "I'm not buying A. I will just go buy B2", so my elasticity goes up.
3072 So for both of those reasons I would make that it's less likely that they would exercise market power in a bundle.
3073 COMMISSIONER MENZIES: Sure. Well, I think the argument, though, is that people who have access to fibre and, you know, consumers might look and say I will buy Bell's bundle because it's better than Cogeco's bundle or it's better than Videotron's bundle, whatever, because people are looking from the consumer point of view, which is the economics are not as sophisticated. But from the consumer point of view they are looking for who has the best bundle because they see value in the bundling.
3074 And my sense of what some of the other arguments that have been presented to us -- I can't put these words in their mouth, but this is my understanding of them -- is that the combination of CBB rates and lack of access, mandated access to fibre networks, makes it essentially a market power situation because it is uneconomic for them to be able to compete when it comes to the offering of video services and other high consumption products.
3075 MR. BIBIC: Okay. So you got the economic evidence and now kind of the consumer-based evidence. A couple of points there.
3076 One is if you look -- think of the bundle and the way we construct the bundle. You buy three services. We have covered this in other hearings -- I'm talking for Bell -- you buy three services. You get a discount on each service. If you choose to switch -- and now switching is easier than it was before as a result of various market moves and Commission rulings.
3077 For example, if you want to move you can move today immediately and we have to cancel the service immediately and shift you over to your competitor within two days and all these things. So if you move for one service, we will not penalize you on the other two services, so you retain your discounted price on the other two services. Of course, if you move down to one service, you pay -- you don't get a bundle discount because now you only have one service.
3078 So customers that -- to Jeff's economic point, the way we constructed our bundle customers have the choice of moving to the competitor's bundle if it's the cable company, or if it's a single or double product competitor they can disaggregate our bundle and choose to stay with us for some and move to another competitor for other services without losing their discounted price with us. So that's one point.
3079 Two, it's really important to look at our consumer or our subscriber distribution across services. At Bell roughly 50 percent of our -- so I'm going to put aside DTH and wireless because those are separate networks we are talking about, the wireline Internet network -- approximately 50 percent of our subscribers buy just one service, 30 percent buy two services and approximately 20 percent buy a triple. So it's much more heavily weighted towards single product.
3080 Now, to the last point about can independent ISPs compete with the model we have today, they are doing very well. So again, if the evidence matters, there is significant evidence on this. The Communications Monitoring Report says they have an 8 percent share. In fact, that number is low because that is a national share. So if you spread it across nationally, of course it depresses the real number. All the action is in Ontario and Quebec. Independent ISPs choose not to operate in Atlantic Canada and there is very little in Western Canada.
3081 On our network in Ontario and Quebec, 17 percent of end users on our network are with independent ISPs. That is much higher than 8 percent. That's because the national number masks it.
3082 COMMISSIONER MENZIES: I'm sorry, I just missed the number.
3083 MR. BIBIC: Seventeen (17).
3084 COMMISSIONER MENZIES: Seventeen (17), thank you. One-seven.
3085 MR. BIBIC: Yes.
3086 And then another data point for you, if you looked at 2013 in Ontario and Quebec, we estimate that about 50 percent of net ads in 2013 are from wholesale customers, both in the -- if you add telcos and cablecos together.
3087 So net ads, you have people switching. You know, we gain subscribers; we lose subscribers. The net difference is the net ad. Plus, there is market growth. So 50 percent of net ads in 2013 in Ontario and Quebec we estimate went to wholesale. So where they are predominantly operating they are succeeding.
3088 Now, I think if you would allow us, Vice Chair, because the CBB issue is a really important one and you raise the question, I think Michelle has some -- I mean, there was a statement made that the CBB rates are so high and we can't compete. I think again the evidence really matters here because the evidence we have in terms of our CBB experience does not match what they said.
3089 COMMISSIONER MENZIES: Sure. And feel free to answer, but we will be coming back to that.
3090 MR. BIBIC: Okay. Then we will wait, okay.
3091 COMMISSIONER MENZIES: And if for some reason we don't, we will, okay.
3092 COMMISSIONER MENZIES: I would like you right now to sort of articulate why when you talk about the deployment of fibre-to-the-prem being such a massive high risk investment, isn't the real risk -- I mean there is always risk to an investment, but isn't the real risk being a stagnant company that's not moving forward and building new technology while perhaps the cablecos are? So isn't -- I understand that it's a risk, but I don't understand why building would be a bigger risk than not building.
3093 MR. BIBIC: Okay. So if you go to paragraph 20 we do make the point of our opening statement. We were very careful to say this:
"... we are not suggesting that with mandated access such investment will immediately grind to a halt in every location in Canada."
3094 But it is a question of balance and it will have an impact. So others have said -- I mean, I think your question was far more nuanced and others -- people have said we have to invest because it's a matter of survival. Again, you kind of have to look at kind of the facts on the ground and how we would think of doing things within a finite, you know, capital budget, prioritizing our investments. Do we shift some towards wireless, do we shift others towards a billing system upgrade that we want to do and then just in terms of the wireline Internet investments, just prioritizing the communities we will go to?
3095 So what we are saying is a mandated access rule will affect the pace of deployment and the breadth of deployment. That is essentially the issue.
3096 Again, now, let's look at the facts. Even today people say you have to invest to compete with cable or else you won't survive. Twenty percent of Bell's footprint today is ATM. That's a lot. That's 20 percent in ATM. Not the FTTN, not FTTH; ATM. And we are competing.
3097 We are just offering the service we are offering. We are coupling it with satellite TV. We can't offer Fibe TV there. We are just, you know, doing that now. Now, let's look at our fibre networks FTTN and FTTH. The vast majority of our fibre networks today are FTTN, fibre-to-the-node, not FTTH.
3098 So again, Bell in Ontario and Quebec, 70 million homes passed. Eighty percent -- I said 20 percent is ATM, which obviously means that 80 percent is FTTN and FTTH, the vast majority of that being FTTN. That's a good network. We are offering Fibe TV on that. We are offering speeds up to 50 Mb per second on that FTTN network. And if you look at the marketplace results we are doing well.
3099 So the point is, 80 percent of the territory is covered with fibre. We can hold on and do really well with FTTN for longer than we otherwise might, and that's the key thing.
3100 COMMISSIONER MENZIES: I mean, I understand that and I understand the risk. I guess I'm trying to ask you to justify the adjective, right.
3101 MR. BIBIC: Which adjective?
3102 COMMISSIONER MENZIES: It's a "massive" risk investment.
3103 MR. BIBIC: Well, then again this is --
3104 COMMISSIONER MENZIES: Why is it that much riskier than other investments?
3105 MR. BIBIC: Okay.
3106 COMMISSIONER MENZIES: Or is everything a massive risk investment? I need to be familiar with your terminology and whether one is different from the other.
3107 MR. BIBIC: Well, one issue with "massive" --
3108 COMMISSIONER MENZIES: And why it's so different?
3109 MR. BIBIC: Okay. So I will turn it over to my colleagues. "Massive" obviously indicates in one sense just the volume, the quantity, the number of dollars that are required for the investment. That's one key thing.
3110 COMMISSIONER MENZIES: Is it a massive investment that is risky --
3111 MR. BIBIC: Yes.
3112 COMMISSIONER MENZIES: -- or a massive risk investment?
3113 MR. BIBIC: Okay.
3114 MR. HENRY: Well, I think it's a massive investment that's risky. I will let my colleagues here who have experience on the ground to get into the risk factor.
3115 But I think if you look at the examples we have given you -- Sault Ste. Marie, we talked about that. The business case is so thin and we made some assumptions, fairly aggressive assumptions we thought were reasonable. We get in there. We start building and lo and behold the costs tick up a little bit higher than we anticipated. Couldn't make the business case work.
3116 We are facing a competitor who is a robust cable competitor with DOCSYS 3. We still decided that we can't justify the investment. We pull out.
3117 We did the analysis that we referred to on our opening statement of 21 communities and those are the 21 communities that we decided to go to in 2014. We redid it and overlaid -- what would we do if we rolled back the clock and said we had wholesale access? And the numbers tell a story. The business case, it didn't go negative everywhere, but overall it went negative and for nine communities it went negative.
3118 Again, I have my colleagues here who can tell you exactly why that is.
3119 COMMISSIONER MENZIES: What I'm understanding, so that we don't get too bogged down in it, was part of the question was informed by the thought that while Keith Stevens doesn't seem to have a problem taking on the risk, why would Bell have a problem taking on the risk? And what I think I heard was it's not a matter of taking on that risk. It's on a matter of prioritizing where you are going to invest where you will get the most immediate return on that investment.
3120 Is that what you said, Mr. Bibic?
3121 MR. HENRY: I will let Dan handle that one.
3122 MR. McKEEN: So I think it is valuable to think about the business case. In Atlantic Canada --
3123 COMMISSIONER MENZIES: Before you go on too far, I want to make sure that the assumption I was making was correct or incorrect.
3124 MR. BIBIC: So it's risky to begin with. With a long payback period in many communities it's borderline. You add another risk factor, which is mandated access, it gets riskier. Some communities fall off altogether because they go negative. Other communities, despise the riskier nature of the investment are still positive payback.
3125 Then you prioritize it vis-à-vis other potential investments you can make that might have a better payback in that case. It doesn't have to go negative to fall off the list. Another community falls off the list. Pretty soon you are going, okay, let me focus on Montreal, Ottawa, Quebec City and Toronto and other communities get delayed or drop off altogether. So it becomes riskier. Then some drop off and some are delayed. So it's prioritizing.
3126 COMMISSIONER MENZIES: But don't Montreal, Toronto and Ottawa, Vancouver, Calgary, Edmonton, whatever the five biggest cities in the country, don't they always -- I mean they always have the fastest return on investment, right. I mean you don't start builds in Lloydminster, right?
3127 MR. BIBIC: No. So here's what happens.
3128 You have communities who only have DSL today, those 20 percent that are ATM today. Now you are thinking to going to one of those communities. Now, do you do it if there's mandated access? You do the numbers. I mean, if you take a look at the 21 communities that Bell Aliant filed, Bell Aliant actually built fibre-to-the-home in Sturgeon Falls, 1,600 people. It's amazing, but it goes negative with reasonable assumptions we made with mandated access.
3129 COMMISSIONER MENZIES: Okay. I understand. I should probably let --
3130 MR. BIBIC: Pardon?
3131 COMMISSIONER MENZIES: You can finish her sentence, but I should probably get back to Mr. McKeen.
3132 MR. BIBIC: Okay. I will just quickly answer on the large cities.
3133 The large cities in Bell Canada territory have FTTN today. So then the decision becomes, do we just ride FTTN for longer than we initially hoped for because of the mandated access issue and the return on investment? It will go lower. The return on investment even there will go lower. So we will get there eventually, obviously. We are not saying we will stop, but it will be delayed. That's the risk.
3134 COMMISSIONER MENZIES: Okay, thank you. I understand that.
3135 Mr. McKeen, as you were saying, sorry.
3136 MR. McKEEN: Thank you.
3137 One of the reasons why the investment is risky is that you have to spend two-thirds of the money up front. So when you build fibre-to-the-home you don't -- you can't incrementally spend capital as you get the customers, besides the one-third that we talked about which is the fibre dropped to the home. You spend two-thirds of the capital up front.
3138 You actually engineer the entire city, you build all the fibre, you put in the capacity to serve 100 percent of the customers, because you don't know which customers are going to take your service and which customers are not going take your service. So in any particular street or any particular area, you put in enough fibre that you have fibre, enough fibre that you can go fibre-to-the-home to every single address. You don't do the drops, so that's that one-third. You don't do that part.
3139 So part of the reason investment is risky is because you have to put all that money up front and then you have to gain enough customers to make enough revenue to pay back the capital that you did. If you contrast that to the cable guys -- and I have some experience in the cable business -- so when you do that the cable guys can build more incrementally. So they build out basically a fibre-to-the-node infrastructure and then as more customers come on they split that node and they do it. So they don't have to spend all their money up front.
3140 So one of the reasons that fibre-to-the-home is a risky investment is because you need to spend all that up front. If you get enough customers it's okay, but if you fall short it's bad, it's disastrous, because you spent an awful lot of money and you didn't get enough return for it.
3141 In Atlantic Canada -- in some ways Atlantic Canada was as good as it gets. So Atlantic Canada had kind of the best business case for building fibre-to-the-home and that's why we were ahead of most of the countries. The reasons for that -- there is a number of reasons.
3142 One is local competition for phone started in Atlantic Canada and was more advanced than Atlantic Canada. So it started there and competitors who had gained a lot of market share. So our staying where we are was bad.
3143 We also had -- because of our low density our options to build fibre-to-the-node were more expensive than other places. So normally, like if you took Toronto, it's less expensive to build fibre-to-the-node because there's more density and Atlantic Canada's less density fibre-to-the-node was more money. And our fibre-to-the-home was actually less expensive than in other areas because we had a predominance of aerial plant so we didn't have to bury. So lots of hours on poles and it's cheaper to build fibre-to-the-home on poles then it is in buried infrastructure.
3144 So for all those reasons, and when we looked at fibre-to-the-home it was about 3 percent more expensive than fibre to the node. So because it had a better capacity network it made more sense for us to do that. So all those reasons for Atlantic Canada the fibre-to-the-home build was basically as good as it gets.
3145 And for us, in order to make sense, it still has a 10 year payback. It requires us to gain about -- between 50 and 55 percent penetration. So we have to become a dominant player, so we have to do extremely well versus our cable competitors and the other options that customers had, and we have to get an average revenue for customer upwards of $145 per month from those customers.
3146 So in order for the business case to work -- and you're right. The big risk is to not build, but we don't have an inexhaustible supply of money. We have shareholders and we have to make investments to make sense. We absolutely want to build. We absolutely do not want to be left behind, but we have to have a business case that makes sense in order to make those investments.
3147 COMMISSIONER MENZIES: And just so I'm clear, because I don't want to overestimate it or underestimate it, was some of that build in Atlantic Canada publicly financed? I seem to recall -- was it New Brunswick?
3148 MR. McKEEN: Yes, we had a little bit of capital. It was significant. I don't remember whether it was $2 million or something along those lines.
3149 COMMISSIONER MENZIES: A very small amount, okay.
3150 MR. McKEEN: So it wasn't -- it was more symbolic and a help and it also -- it allowed us to work closely with the governments and to also -- we wanted them to know the investments that we were making because we work in partnerships often with governments and there were some areas. So it was symbolic, but in the other provinces very, very small amounts.
3151 COMMISSIONER MENZIES: Okay. Thank you very much.
3152 I mean you have just suggested that competitors, the CNOC members in particular, but others are not disadvantaged and are doing quite well, as you suggest. How do you square that with TekSavvy's assertion yesterday that it's being advised to avoid investment within the current framework, that if they want to invest they are not being encouraged to do so because the current framework is not one that's attractive for their type of investors?
3153 MR. HENRY: Well, maybe I will start off. And I don't know if others have a view, but I find that rather puzzling because there are other operators. As Dan said, 17 of them building fibre-to-the-home in our territory. They beat us to it. They don't seem to have a problem investing. They are building from the ground up. They are not using our facilities. So I don't understand why others can't build.
3154 And we're not -- again, we are not always talking about being the third wire in. We should have a race to be the second wire in. There's no reason they can't do it, too. And if we encourage everybody to be the second wire in and compete with cable, then we are going to have a better environment and better investment environment.
3155 COMMISSIONER MENZIES: Okay.
3156 MR. DANIELS: In terms of like TekSavvy, I know that a few years ago they appeared before this hearing and talked about how the ladder of investment and that they were actually building facilities, that they were in Perth, they were going to build fibre-to-the-home. On the record of this proceeding we see that they actually sold off their assets. They exited and they have concentrated on doing well on GAS because they can succeed on GAS for a number of reasons. They are growing. They and others are growing and so they are able to compete very well in the market and I think they are making whatever business decisions they want to make in terms of about how to invest and they are focusing on subscribers because that's what they do well and they are succeeding in that market.
3157 Primus talked about how they actually since 2008, since your decision, that they actually built facilities by building rings in Ottawa and Vancouver. So I think it's a question of where people are focusing on and so have a different approach. But it's doable out there.
3158 COMMISSIONER MENZIES: Okay. Given the high risk that you point to, and so I can get a record on this in essence, if fibre-to-the-premise was mandated service, what would be an appropriate markup or would there be other ways to compensate for the risk factor? Fibre-to-the-node, I think is 40 percent. It includes 10 percent risk, for example, right now. Would fibre-to-the-prem look different in that?
3159 MR. DANIELS: So I'm going to hand this over to Michelle, because I think there is a couple -- well, I mean you know our opposition here, but we will answer the question.
3160 COMMISSIONER MENZIES: I understand your position.
3161 MR. DANIELS: Right. So within the premise if the Commission is going to mandate, it would be a GAS service. So we can ask Michelle.
3162 MS BOURQUE: So first off, these customers are extremely important. You know we have hundreds of ISPs and customers that we support in the wholesale market. So our best option would be the ability to have commercial deals versus mandated rates.
3163 Many of the ISPs that we interface on a regular basis have unique requirements and different variables that make it more effective for them to compete in their respective marketplace. So having commercial deals rather than a mandated rate we can work on the best solutions for them.
3164 If the Commission insists on a tariff rate, then we need to find a balance between recouping the infrastructure costs associated with deploying that last loop with a balance with an access rate and installation services that align to support the deployment of the service.
3165 Lastly, we need the ability -- well, second-last, we need the ability for a long-term commitment. Many of the ISPs, and there are obviously a lot of -- as Mirko indicated, there is a lot of customers that move between ISPs. And in-between the cablecos and ILECs on the retail space and in order to recoup some of the costs associated with that last mile deployment, we need to be able to have the ISPs sign up to long-term commitments as well as an effective markup that would allow us to support that.
3166 MR. DANIELS: If I could just jump in just to explain this for a second? Sorry.
3167 COMMISSIONER MENZIES: Can you just hang on for a second because I just want to follow up there before we go.
3168 If you had commercial deals, given -- and I would like to hear from you on this anyway -- commercially negotiated deals, given the imbalance of power between the one with the service and the one seeking the service, how do we assure ourselves that the rates that come out of a commercially negotiated agreement are just and reasonable?
3169 How would we be able to be assured of that, that we didn't run into a situation where people said, "Well, I got a commercially negotiated rate, but I got to tell you, there wasn't much negotiation". So Bell came to me and said, "This is your rate. Buy it or don't", right, and how do we ensure that there is anything just and reasonable about that?
3170 MR. BIBIC: So I'm going to break the question up into -- to answer your very specific initial question, assuming that access to FTTP is regulated and mandated, so in that context because there is a different answer for a service like CDN and Ethernet which is forborne.
3171 COMMISSIONER MENZIES: Yes, assuming under a mandated structure.
3172 MR. BIBIC: Okay. So our position -- just to clarify, our position on the mandated structure is that the rates should be cost-based Phase II with the continued ability to negotiate off-tariff deals.
3173 So today with GAS we have a Commission-set tariff and we also have the ability to do off-tariff deals with our ISP customers and we would ask for Phase II costing methodology for FTTP as well with the suggestions or the modifications that Michelle mentioned, plus the continued ability to do off-tariff deals.
3174 COMMISSIONER MENZIES: Okay. So go ahead.
3175 MR. DANIELS: Okay. I just wanted to take a step back. So what's different, there are two issues that are different about FTTP from a costing perspective of how you would do it.
3176 One issue is the greater risk and FTTP is more risky than FTTN, for sure, and so there would have to be a higher markup to reflect that. I don't have a proposal of a particular number associated with that but it would have to be a higher number that would come out of the follow-up preceding.
3177 But what Michelle was talking about also is that there is a separate, very specific issue, which is unlike anything else that we have ever had before, which is with cable, with TPIA or with our fibre-to-the-node or even our DSL network, which is that with FTTP we don't do that final drop.
3178 I assume that you are familiar with this, but if not I'm happy to explain what I'm talking about. I'm seeing some shaking heads.
3179 So we don't do that final drop until the customer signs up. So that means that we are actually doing a capital outlay on behalf of the customer. That's about, as we have talked about, one-third of the total cost of the bill. So it seems inappropriate, for example, that an ISP could order that and that we would have to outlay that capital for a month-to-month commitment.
3180 Now, the alternative could be to have a really high up front fee which paid us for the one-third of the capital. What I think Michelle is saying is that you probably are going to want to strike a balance between having a much higher up front fee than we have had for other services, as well as also having a -- what's different and we are suggesting for FTTP, is that you would actually have a term commitment associated with it.
3181 And there are ways to average this out I don't want to get into. It wouldn't be that we would say if we are building in this case we would do it -- there are ways. Phase II does this all the time. You average it out. So we will assume that X percent or in times when we actually have the extra deployment, we will average it out, so that it's not like there is an incentive one way or another to worry where the ISP would have to worry whether they actually have to build or don't have to build in that circumstance. That can all be done, handled out in averages so that would be a standard rate across in all cases.
3182 So I just wanted to explain the context of Michelle's distinction.
3183 COMMISSIONER MENZIES: Sure. Thank you.
3184 MR. HAHN: Mr. Commissioner, I was wondering if we might add a point about your question related to mandated access because it's not often the case that economists speak with --
3185 COMMISSIONER MENZIES: Actually, I`m still kind of struggling for an answer to the original question, which was what should the rate be if there was mandated access, or should there be a markup? If you have that answer --
3186 MR. BIBIC: The answer is yes.
3187 COMMISSIONER MENZIES: -- or should it be different from a fibre-to-the-node markup?
3188 MR. DANIELS: Yes, and I'm saying it should be higher. I don't have -- you said is it 40 percent with the number. It's more risky so there should be a reflective of a higher markup. But I don't have a specific number. We haven't sat down and thought. We sort of thought that that would be in the follow-up proceeding if, and we are hoping it's not, mandated.
3189 COMMISSIONER MENZIES: Okay, I understand. Higher at this stage will do, thanks.
3190 I just want to sort of continue with this and in part to some -- and some have made the argument that your argument is a familiar argument. So I just want to read you your argument from the 2010 proceeding, right, because it is somewhat familiar. At paragraph 80 from your submission there, I'm quoting:
"Given the vigorously competitive environment within which the companies currently operate, demand for all of these future services is uncertain and regulatory protections such as guaranteed rates of return are long gone. The company's studies have concluded that even under the base case scenario, i.e. no mandated access imposed by the CRTC, investments in an FTT and NGN will involve a significant degree of financial risk as well as a long-term payback. If the company's NGN facilities must be provided to competitors at regulated rates through the perpetuation of the Commission's Internet speed matching policy or through mandated access to a universal ADSL-CO service then an enormous additional business risk will be introduced into the company's NGN investment plans. The business case for investing in NGN facilities is founded on the potential retail revenues from the companies." (As read)
3191 And then I will dot, dot, dot, paragraph 82:
"Accordingly the regulatory framework that the Commission establishes as a result of this proceeding will have a significant impact on the company's investment in NGN facilities and more generally on the overall level of investment in network facilities in Canada." (As read)
3192 And then go on to conclude, the last two sentences at paragraph 82:
"The CRTC must not make the mistake of viewing the regulation of NGNs in the historic manner that applied to Legacy copper networks. Rather the CRTC should be forward-looking with an appreciation for the fundamentally-changed environment that surrounds the construction of NGNs and the offering of services which utilize NGNs." (As read)
3193 So some would say that the argument you made then, that if the CRTC took action then it would halt your investment, didn't hold up, that you did continue to invest. And the argument was fundamentally the same as the argument that you are putting before us today.
3194 So I just want to -- that was on the record yesterday in terms of that so I just wanted to give you the opportunity to address it. That, I guess, to paraphrase them, essentially my take on it was that they were saying that Bell is just crying wolf again in this proceeding because that's what they did before.
3195 MR. BIBIC: Okay. So it's one thing to just make an assertion and it's another thing to back it up with evidence. So the arguments are fundamentally the same and in both cases they were backed up with evidence. So in 2010 we filed a detailed study, financial study showing the business case. Today in this proceeding we have done the same thing.
3196 So when we were here in 2010, the Commission was examining the business cases that we filed and then asked us to file on the record of that proceeding what our planned -- what our deployment plans were looking forward and asked us to put on the confidential record where we thought we would be with our network deployment in 2012. That's what we were asked to do in 2010, look ahead, where will you be in 2012?
3197 In this proceeding the Commission in the interrogatory phase asked us to show where we were at and what we actually did do in 2012.
3198 So if you look at where we thought we would be when we were looking at this in 2010 by 2012, and you compare it to where we actually ended up in 2012, we are close to 400,000 homes behind where we thought we would be now. Now, I'm not going to lay that entirely at the feet of the Commission's ruling, but clearly we didn't go as fast as we thought we would be going.
3199 Every single regulatory decision has an impact, just like the economy has an impact, just like not being able to get access to an MDU in Toronto has an impact. All these things have an impact. But the fact is, we didn't go as fast as we thought we would go. It again goes to the fundamental point. We are not saying we will stop. We will stop in many communities of course, the smaller ones, but it will affect the pace and the breadth.
3200 That's our evidence. It's our submission. It is fundamentally the same and we are backing it up with detailed analysis, economic evidence and actual facts.
3201 MR. DANIELS: If I could just add, when you look at the competitors' arguments on this; Primus for example, the most on this when they actually laid it out and said, "Let me show you that Bell's capital expenditures actually stayed the same or actually went up over the last few years overall", that's correct.
3202 And I don't think we are saying here that our capital expenditure as a company is going to go down depending on the outcome of this proceeding. I think what we are saying here is our decision making within that capital envelope because of the risk associated, where do we put our money?
3203 In that regard I'm wondering if this would be a good time to get a sense of the international comparisons and experience with this because I think -- but with your permission, or if you would like to hold off on that.
3204 COMMISSIONER MENZIES: Yes, quickly.
3205 MR. DANIELS: So maybe I could turn it over to Andrea and Bob.
3206 MR. HAHN: Okay. Thank you. I have been very impressed with the Commission's interest in empirically-based policy and I would hope that you transfer some of your insights to Washington D.C. where I used to work. I will keep it short.
3207 There are a few things that economists agree on almost with unanimity, but one fact in the economics literature that most folks agree on is that you don't stimulate investment with more regulation. That is particularly true for new technologies and that's one of the reasons Professor Renda and I argue in our paper on Europe that Canada ought to think very carefully before it regulates further in this sphere because we don't think it would be good for consumers.
3208 And I'm going to ask my colleague, Professor Renda, to just say one or two words about Europe.
3209 MR. RENDA: Yes, I will be very, very quick, of course unless you want me to elaborate further on it. But I will just give a couple of statements and then hand it over to you whether you have further interest.
3210 The first thing is that the leading countries around the world that have actually deployed fibre-to-the-premises are all countries in which there has been no mandated access one way or the other. I'm talking about the United States, South Korea, Japan, although historically Japan is a bit more complicated. I could get further into this.
3211 Europe is a different story. In Europe the announcement that the European Commission has been -- that there will be mandated access to fibre-to-the premises and today we are seeing a stalemate in investment. Many countries have -- in many countries the incumbent operators have decided not to invest, to turn to other investments less risky such as VDSL. In general, the overall region is not stimulating investment, mostly due to mandated access.
3212 Empirical literature in economics confirms this and I'm happy to further elaborate on individual countries if you have an interest specifically.
3213 Thank you.
3214 COMMISSIONER MENZIES: Okay, thank you. We may go back to that, but I should proceed for now and others will be curious when we are done this.
3215 So fibre-to-the-prem offers the same wholesale services basically that people get through DSL and DOCSIS-based technologies and, as you know, incumbents are required to provide speed matching for wholesale high-speed access clients.
3216 Some say that to maintain technological neutrality, speed-matching requirements should apply to fibre to the prem as well. Your view?
3217 MR. BIBIC: Well, that would be mandated access and we would disagree with that.
3218 I guess it comes down to managing the risks or what risks would we be taking as a country, or what risk is the regulator trying to manage?
3219 So we're saying that the retail market is vigorously competitive so, therefore, for that reason there need not be mandated access of FTTP and, in fact we ask, as you know, that the current speed-matching be -- our obligation be rolled back.
3220 So it's a question of balancing the risk of not having multiple service-based competitors on FTTP networks that largely are not there today versus the risk of not having FTTH networks at all in order to compete with the cable networks to the benefit of consumers.
3221 So what we would say ultimately is, now is not the time to order speed-matching on FTTP, now is the time to send the signal to us go and go aggressively.
3222 Now, I can't sit here today and say and, of course, that ruling should apply for ever and ever, because I don't know where the facts are going to be. We think it's going to continue to be extremely vigorously competitive at retail so there will be no need to have mandated access in the future either.
3223 But the Commission could look at this again in a certain number of years and say, okay, we sent you the signal, where are you in your deployment plans and what's the state of retail competition? And if down the road it turns out that we're wrong, then there's a possibility to do mandated access then.
3224 But in the meantime, I don't think independent ISPs will be harmed because they will have access regulated or otherwise to the FTTN that works on the cable networks.
3225 COMMISSIONER MENZIES: Some have suggested just such a moratorium as you mentioned, and I'll skip forward to that. How long would you suggest that be?
3226 And the Competition Bureau, as one example, said there isn't enough data for them to come to a conclusion essentially, so the wisest thing for us to do right now is nothing in terms of fibre to the prem, for instance, and others have sort of indicated there should be a moratorium, right.
3227 If there was, if that was a path for us to go, what would be reasonable, because what wouldn't be reasonable would be for us to say, okay, we're going to leave it alone and we'll get in touch with Bell and they'll tell us when it's time, because I don't think that would be a very good strategy on our part.
3228 MR. BIBIC: Yeah, and I didn't think -- and that's the reason I brought it up, it's not an entirely trust us argument, it's let us build and let's look at the facts then.
3229 So moratorium means different things to different people. Our position is, no mandated access to FTTP today, let's build and let's look at it again.
3230 You're asking me when. Five years would seem like a reasonable timeframe to me.
3231 COMMISSIONER MENZIES: Okay, thanks.
3232 Now, Cablecos offer higher wholesale and retail access speeds than fibre to the node technologies. So if we don't mandate fibre to the premise, should the Cablecos be required to offer higher speeds on a wholesale basis?
3233 MR. DANIELS: Our position, of course, is that we think in urban areas the market is competitive enough that you don't need to mandate cable TPIA or GAS. So I think you should reach the conclusion, first and foremost, that you can remove regulation entirely.
3234 Having said that, we then say that if you don't agree with that, regardless, there's a special case for FTTP and, no, we're not suggesting that there be an exception for cable at different speeds in the same way that if we can have higher speeds on FTTN as advancements happen with vectoring or other technology, that would still continue to apply.
3235 The key point, though, really is that regardless of whether you mandate or not, the ISPs on cable I believe and for sure on our plant, they will continue to receive service because we have every incentive to actually provide them. We have almost all of our ISPs right now on special deals that are below our tariff rates because we're competing with cable, and that's just not going to go away.
3236 That's really, you know, why you don't need to worry about in that area.
3237 COMMISSIONER MENZIES: And I --
3238 MR. HENRY: And just to be clear, our position on FTTP is symmetrical, in that it doesn't matter who builds it, cable or us, we're saying don't regulate it. And, in fact, Cogeco I think actually agrees with that position as well.
3239 COMMISSIONER MENZIES: While I have your attention, what are your plans for, or do you have any for your legacy copper facilities in places where you have done an over build with fibre?
3240 MR. McKEEN: So, we don't have any plans to change what we have in our copper network. In fact, in all the areas where we've built fibre to the home, we still actively sell our DSL services alongside with them.
3241 So we have not, don't have any plans to decommission or get rid of that plant at this date.
3242 If you project out into the future, at some point you'd see it, but we think that's a long ways off because it's very costly to decommission that, there's a whole bunch of other ramifications.
3243 But we don't see that coming up in the short term at all, like certainly not within five years or 10 years, we just don't see that happening in the marketplace.
3244 COMMISSIONER MENZIES: Okay, thank you.
3245 MR. BIBIC: Mr. Vice-Chair, if the question was coming up because of -- I heard yesterday a lot of -- a couple of times that you can't -- this issue of stranded investments, you can't leave the investors with stranded investment if there is forbearance and I don't know, I think it was put in the context of unbundled loops, it might have been broader.
3246 And I just don't understand why a forbearance order equates to stranded investment for the competitors. We're in the business of selling services and even with forbearance we would continue to want to generate revenues from those customers.
3247 So I don't see the stranded investment point at all.
3248 COMMISSIONER MENZIES: Okay, thank you.
3249 CNOC made it clear yesterday that, in their view, there's no technological barrier or need for a second drop, for instance, to serve a fibre customer with multiple service. In other words, there's no technological barrier to allowing multiple service providers to homes served by fibre. Do you agree with that?
3250 MR. GILMORE: Today, in terms of our fibre to the home deployments, the ONT, which is the extension of the equipment sitting in the central office, does have multiple use networks on that would allow us to have multiple services served off the FTTN -- sorry, the FTTH node sitting within the home.
3251 COMMISSIONER MENZIES: Okay. Thank you very much.
3252 So some have suggested that if we stopped mandating aggregated high-speed access they would still offer the services on a negotiated basis. Would you?
3253 MR. BIBIC: Yes.
3254 MR. DANIELS: Absolutely.
3255 COMMISSIONER MENZIES: Would it work and how could we trust it?
3256 MR. DANIELS: It already is working. So maybe I could ask Michelle...
3257 MR. BEAULIEU: It is an important point here, Mr. Vice-Chairman. There was a reference earlier to dictating terms of a particular commercial agreement if there was no mandate. In the broader environment, the key fact is all the major ISPs, our customers, people with whom we deal with every day are interconnected with cable, are avid buyers of TPIA, they get a certain level of service, certain prices, certain speeds available to them and that situation will continue, it's an important business for us, they're our business partners and we have no interest in reducing our services sales to them because they will naturally rely on the infrastructure of our cable competitors.
3258 And I think that really structures the market, increasingly so over the last three or four years, and I don't see that there's any reason for that to change and somehow that we would change our mind about doing those commercial agreements because that would just be lost revenue and lost profit for us.
3259 COMMISSIONER MENZIES: Thank you very much.
3260 In its submissions, CNOC has listed a variety of values it offers to Canadians in the system and among those others -- again not words in their mouth, but others have said that they provide downward pressure on retail rates which is good for consumers, that they contribute competition which is good for consumers because, at the end of the day -- well, you're familiar with the arguments between building and other -- but they also kind of make the point generally that denying them BAS and fibre to the prem would essentially diminish the system because it would handicap them in a way that they would not be able to provide the value that they do.
3261 Your comments?
3262 MR. DANIELS: First of all, I mean, we're not trying to say there's no value in terms of, and as you just heard, they will continue to be in the market and that, but we believe fundamentally that innovation which is the future that comes from facilities-based competition and they're in the best position, facilities-based competition, to innovate both on scale and scope.
3263 And so from that perspective, we actually see that you want to encourage facilities-based competition. That doesn't mean, pardon me, earlier as you say, that they offer some differences in the market, we know that they generally offer a cheaper version of some of the same services, and so they're able to compete and are succeeding in the market in that regard.
3264 I think Dan wanted to add something.
3265 MR. McKEEN: Yes. I'm sure you're familiar that in Atlantic Canada -- ISPs have not concentrated on Atlantic Canada, so essentially we have competition in Atlantic Canada between Cablecos and Telcos, so between ourselves and the cable guys, and we have very vigorous competition in those areas without ISPs, particularly in promotional discounts.
3266 So particularly against Rogers, they offer a product for $99 for 36 months that previously to our competition, so previously until we put in fibre to the home, the regular price of that product was $180 a month, so a reduction from $180 down to $99 for 36 months, 50 megabits per second Internet, 250 gigabits of usage, over 100 channels, HD, PVR, Canada-wide long distance, six features.
3267 So a very robust package which really benefitted consumers and we have matched that. So we have gone back and we have matched that.
3268 We've done other promotions where we've offered free TVs and combined with a 99 for 12 months, a 99 for 24 months. We've offered iPad minis, we've done surface tablets, we've done $300 gift cards. We've also improved the services that we put into those packages. So we've added provincial long distance, more HD channels going from 100 to 158, 100 per cent upgrade to whole home PVR, I think you get the idea, from 30 megabits to 50 megabits per second within those packages. We have very strong retention offers as we both provide -- retention offers, as they try to take our customers, we provide our customers with discounts if they commit to stay with us; they do the same thing.
3269 So the point is that with the build of fibre to the home infrastructure it creates a very rivalrous competition between us and the cable companies and the consumers are still very well served.
3270 COMMISSIONER MENZIES: Thank you.
3271 MR. DANIELS: I realize that in terms of --
3272 COMMISSIONER MENZIES: Okay.
3273 MR. DANIELS: -- there were two parts to your question and I answered about the innovation and the state of competition, but I didn't get --
3274 COMMISSIONER MENZIES: Well, I think that was a pretty fulsome answer, but go ahead.
3275 MR. DANIELS: Well, do you want me to address the specific question about BAS itself because --
3276 COMMISSIONER MENZIES: I would like that.
3277 MR. DANIELS: Okay. So when you look at BAS and the request there, this really is -- I think you have to look at a cost/benefit analysis because it's a big question to come in to ask -- to introduce something new that's pretty costly and when I say cost, let me just -- there's obviously the impact of doing BAS is access to fibre to the premise and if you do it -- whether it's GAS or BAS, it's still an impact there, so we have the incentive to invest cost.
3278 Putting that aside, there are actually specific costs associated and complications involved in us actually setting up the BAS service which, if you want, I have James who can take you through that.
3279 But before I go there, we've got to take a step back and ask, well, what are the benefits that we're going to try to achieve if we mandate BAS, what are we trying to do?
3280 Because let's be very clear, CNOC's proposal is not mandate BAS and get rid of GAS, remove GAS; no, it's we should have both running, we should have an extra -- we need an extra additional market intervention.
3281 And so you come back and say, what are we going to get out of this? How is this going to help consumers? Are we going to actually add to competition?
3282 And we've already talked about how well the ISPs are actually doing today. Is there a real competition problem? You've mentioned they've gone from six to eight per cent, mostly in Ontario and Québec where we know they're responsible -- 50 per cent of the net adds in 2013 and that's based on numbers that the Cablecos filed as well as ours.
3283 So you look at that and come down and say, so what should be the test, how would we go about this? And you actually looked at it and answered this question in 2010.
3284 You looked at -- there we called not BAS, it was called ADSLCO, but it's the same service, it's the same issue, and you determined -- and I'm quoting from your summary:
"There is no convincing evidence to indicate that there would be a substantially lessening of competition in the absence of ADSLCO..." (As read)
3285 But now BAS.
3286 So if there's not going to be a substantially lessening of competition, why are we mandating it? And do we expect a huge uptake in this area?
3287 And part of the reason that you determined at the time is you knew that you actually had disaggregated on cable, and I think you quoted yesterday -- I can't remember exactly which Member was quoting, saying you wanted aggregation and that cable wasn't working until you actually created an aggregated service.
3288 And even on the record of this proceeding, CNOC in its reply said only six of their 35 members expressed an interest in actually taking BAS service, only six of the 35 and that's like a costless commitment, just putting it down.
3289 So we look at all of that in terms of what benefit are you going to get and really, last point on this one, is that it's just an urban area benefit because they're not -- you're going to leave rural behind, rural -- they're not going to go out to the central offices in rural areas, so that means you're still going to have to run two different services.
3290 COMMISSIONER MENZIES: Right. But I mean, part of their argument now that we're into that and we come back to CBB rates at this point too, is that without BAS -- BAS allows them to avoid the transportation costs connected with CBB rates which allows them to be competitive in terms of being able to offer video and that the current structure may have worked -- and again, I'm summarizing and stand to be corrected -- the current structure may have worked to date, but will not work in the future unless they can have that sort of access, BAS.
3291 And we talked about fibre to the premise a lot so far this week, but we should probably talk about BAS a bit more at some point, but that that's required for them to remain competitive in an evolving marketplace because of changes in demand from consumers for more video basically.
3292 So maybe we can get back to Ms Bourque on CBB rates at this point because I told her we could come back to it.
3293 MS BOURQUE: Sure, thank you.
3294 COMMISSIONER MENZIES: And then we can deal with the other.
3295 MS BOURQUE: So just to level set on the ISPs and kind of the components that they buy.
3296 Firstly, all of the ISPs buy more than just mandated services from me so, but specific to GAS, you know, that are forborne and they strike commercial arrangements with us, but for GAS they have an access component, a capacity-based component or CBB and the interface component.
3297 And since 2012 we've seen many significant reductions in the access rates, as it related to competing with the cable wholesale providers we've had to offer off-tariff arrangements in order to be able to compete to get their share of wallet.
3298 We've seen the CBB rates cut in half as a result of a regulatory decision. The interface points of the ISPs have also seen a significant reduction.
3299 So on a per subscriber basis in aggregate across all the ISPs, the per subscriber revenue or costs that they bear to us have gone down significantly and the sub-counts have increased.
3300 And, in addition to that, the largest of the ISPs, the ones who presented yesterday, have all seen a reduction on a per subscriber basis to Bell and have seen growth in their ISP sub-growth grow with us.
3301 So significant reductions that we've seen and it makes them very competitive and, frankly, gaining significant share in the market.
3302 COMMISSIONER MENZIES: But why is it possible for you to offer an IPTV service and they say it's not economic for them to be able to do the same?
3303 MR. DANIELS: Well, first of all, I think some of them are offering IPTV service. You've got Zazeen out there, you have VMedia out there.
3304 Now, there is -- they say CBB rate which is a cost-based rate and it's based on the principle that we all agreed to which is that usage drives costs, so those are costs on our network, but I think what they're trying to say is that there's something different and there was some discussion about applications yesterday, that there should be different rates for different applications, which I don't understand because our network is blind to whatever content that's been saved, we just charge based on usage.
3305 But I think what it really comes down to, when you mentioned video, you've got to keep in mind that we are the new entrant in the video market. The most markets, there are two DTVH providers, there's cable and there's us building IPTV, so we're the new entrant competing in that area.
3306 And so, the notion of coming in and saying in that area we should be -- that Bell should be mandated to provide access in order to allow the IPTVs or that we should do it with BAS so that they can compete in the video market, I don't really understand that in the context of where we're the new entrant, we're the ones who are trying to get into that market and succeed in that market.
3307 MR. BIBIC: Mr. Vice-Chair, the test -- we're offering IPTV service because we spent all the money developing a network that would sustain an IPTV service.
3308 The test is, would mandating access to a particular service solve a competition problem in the BDU market? We're the new entrant in the BDU market and, as Jonathan says, there's a lot of competition there.
3309 The test isn't a particular party wants to offer an IPTV service.
3310 COMMISSIONER MENZIES: Thank you. So if we mandate BAS, if we were to do that -- and these are theoretical questions, and whenever I ask one of those, no matter who's sitting across, they always get a very concerned look on their face.
3311 COMMISSIONER MENZIES: So this is a -- if we mandate BAS, how would you suggest it best be implemented?
3312 I mean, I'm assuming that you would wish to be compensated for costs. So for instance, what would be the best way to do it, up front or monthly rates?
3313 MR. DANIELS: I'm sorry -- oh, you mean from a cost basis perspective?
3314 COMMISSIONER MENZIES: The costs that would be incurred. I mean, there's assumptions that people would ask for access at different points, at different points in time, that there would be some kind of burden placed on the provider in terms of a cost to them associated with providing the access.
3315 And the question is, what would you think would be the most appropriate way of -- first of all, making an assumption about those costs and I doubt that you're going to deny that there would be any, but if there are any, what would be the most appropriate way for those to be compensated for by the purchaser?
3316 MR. DANIELS: I think it's best that I take an undertaking in terms of us to take away.
3317 The thing about BAS in terms of the structure, there's a couple of different issues, so I'll give a comment now but we'll come back with a little bit more detail.
3318 In terms of the structure, there is a capacity-based component to BAS which is different than GAS. The notion that there could be no -- there'd be no capacity-driven costs if someone interconnects directly at our CO is not correct, and I could ask James to elaborate if you want to understand that.
3319 So I think there would be a capacity-based charge to that, but it's not -- I'm not saying it would be the same rate as the CBB because obviously it's a different service.
3320 But as to how do we recoup all the up-front costs associated with launching that service, that's something that I think I'd like to take an undertaking to just discuss that with my costing folks as to the best way to do that.
3321 COMMISSIONER MENZIES: Sure, that's fine and legal will confirm that with you later.
3322 COMMISSIONER MENZIES: I have one more and then I'm going to ask the Chairman to consider a request for a break.
3323 So given costs of wireless data, as noted by competitors, how could a wireless Internet realistically ever be considered a substitute for wireline Internet?
3324 MR. BIBIC: Well, there's two ways to tackle that one. So we are not -- our proposals to not mandate access to FTTP and to forbear from GAS and TPIA and unbundled loops, in urban areas at least, isn't anchored to the wireless competition.
3325 Now, we believe that wireless is a -- wireless broadband is a factor clearly with LTE to 80 per cent of the Canadian population and the speeds that it can provide and, you know, the advantage of mobility, et cetera.
3326 LTE advanced is coming along, 5G before, you know, we know it. So it's clearly a factor. If you're going to put in place a forward-looking framework, I think it's something to consider.
3327 And when we were having these debates in 2006 we were having arguments about wireless voice substitution and here we are, it's not that long ago, right, and there's no debate any longer that wireless voice is a clear substitute.
3328 So I guess to sum it up, I would say we are not saying that you need to agree that wireless is a broadband substitute today in order to agree with our proposals, but I think it's something to consider, especially if you're going to look out ahead in the not too distant future.
3329 COMMISSIONER MENZIES: Thank you.
3330 THE CHAIRPERSON: Okay. So why don't we take our morning break until five to 11:00. That's a 15-minute break.
3331 Thank you.
--- Upon recessing at 1038
--- Upon resuming at 1055
3332 LE PRÉSIDENT : À l'ordre, s'il vous plaît. Order, please.
3333 The Vice-Chair will continue. Thanks.
3334 COMMISSIONER MENZIES: Thank you.
3335 Do you believe that your position that high-speed access services are in the same relevant wholesale market as unbundled local loops?
3336 MR. DANIELS: I think our position is we actually look at what market you're trying to address, starting from the retail market in terms of the market failure that you're looking at because we don't believe there's wholesale.
3337 So when you say our position that unbundled loops are in the same market, I would actually say that there's two different markets where the Commission has mandated unbundled loops for: voice and separately for Internet. And then the question is: Are they needed in either market?
3338 So in voice, voice is extremely competitive. There's wireless, there's cable, there's us and there's over-the-top using GAS service to be able to compete. So loops are basically completely unnecessary in the voice market.
3339 And I will point out in that regard, just like listening to CNOC and how they have actually proposed and tried to defend the need for unbundled loops is basically saying well, our customers want -- we want that as an option. They don't lay out a test. There is no test. Every single test that they could articulate, including all their others, would demonstrate that it's completely unnecessary.
3340 Then you come to the second one, which is -- so voice, you don't need unbundled loops.
3341 Then you come to the second one, which is to say: Do you need unbundled local loops to serve the Internet market? And the answer is unequivocally no. There's competitive alternatives out there.
3342 Again, we maintain that the high-speed Internet market is completely competitive at both the retail -- sorry, at both the residential and the business markets and so you don't need it as a form of intervention. And I don't think there's any better proof than the fact that the Commission itself said that there's less than 1 percent of people -- of competitors relying on loops now.
3343 We've seen a 57-percent drop in our demand from 2007 to 2013 -- that's part of the record of this proceeding -- and there's a further decline this year as well. So --
3344 COMMISSIONER MENZIES: Do you have a forecast on that decline? I mean sometimes you get declines and then they halt, and sometimes you get declines and then they accelerate. Do you have any sense of what the future for unbundled local loop demand looks like?
3345 MR. DANIELS: In 2014, I know we're down another 8 percent and I don't know about --
3346 MS BOURQUE: We've seen and projected consistent declines in that space. Now, where there may be a few ISPs -- a very, very small number, a very small number, I believe there's four ISPs -- that seem to have any kind of activity in that space, only one has shown growth year over year and it's a very, very small number, less than 1,000.
3347 COMMISSIONER MENZIES: Okay. What service do you see there still being demand for in the future?
3348 MR. DANIELS: You mean do I see that there would still be a demand for unbundled loops, for example, in the future?
3349 COMMISSIONER MENZIES: Yes.
3350 MR. DANIELS: Yes, I think we will still continue -- and we're going to continue to sell it. I mean the difference is between mandated regulation as opposed to whether we continue to sell it. So will there be a demand for unbundled loops? Yes, we see that they will be in demand --
3351 COMMISSIONER MENZIES: And what would be the nature of that demand? What sort of services do you see the demand for?
3352 MR. DANIELS: I mean I think that what you heard from -- CNOC said that there's some of their customers who are using unbundled loops who want a voice line, who want a traditional voice line. There's other people that CNOC could be asking -- running different services over. All we know is the demand is going down overall and there's competitive alternatives. So people are switching off of it.
3353 I'm not sure if Michelle --
3354 MS BOURQUE: We've seen a few providers who have used loops in a bonded way to deliver services to specific business customers in some cases. I can't comment on how successful they've been but we have seen instances where they've used loops for that capability. Mind you, there's significant Ethernet availability and CDN availability that provide more stability services in that regard that are available in that same market space.
3355 COMMISSIONER MENZIES: So would it be feasible to forbear on the residential side, in the services demanded for residential service in unbundled local loops and maintain a mandate on business?
3356 MS BOURQUE: The challenge that we have in our systems is that we really don't distinguish between residential or business in terms of the ongoing implementation and management of it.
3357 COMMISSIONER MENZIES: And what about telephone and Internet, would it be possible to distinguish between those in unbundled local loops?
3358 MR. DANIELS: So you mean in terms of like having a voice versus a data with some sort of restriction on use on it? I mean I suppose it's conceivably possible.
3359 COMMISSIONER MENZIES: Forborne in one area and mandate --
3360 MR. DANIELS: Yeah, in the other.
3361 COMMISSIONER MENZIES: -- in another.
3362 MR. DANIELS: The problem is at the end of the day, are they going to say to a competitor: You can't do it for this purpose, come and negotiate and so on? That's something we actually proposed in 2008 but the Commission wasn't particularly enamoured with that proposal.
3363 As a practical matter, I think it's pretty hard to distinguish. And coming back, I understand --
3364 COMMISSIONER MENZIES: I guess the point is, as a practical matter, is it possible to distinguish?
3365 MS BOURQUE: It's possible. It would require system changes and some implementation activities.
3366 MR. DANIELS: And we don't want to get into monitoring what they're doing on it.
3367 But the truth is, at the end of the day, I mean this is clearly a business -- it's a plant that we should be incented to sell. We wanted to step away from mandated because what happens with mandate is that you get into debates about costing and so on and so forth. And we saw a loop rate reduction over the last couple of years, which we think makes absolutely no sense to take something that is a legacy business and take rates down. That's another proposal that we had.
3368 But I come back. Business, residential, data, voice: the market does not need it. There may be a couple of competitors who are interested in it and we're going to sell it to them on a commercial basis in those markets.
3369 COMMISSIONER MENZIES: Okay. So say you convinced us of that, what would be a workable phase-out period?
3370 MR. BIBIC: In our proposal we said one year. We have experience with the three- and five-year phase-outs with CDN and Ethernet. Depending on the nature of the service, we thought five years was far too long. All the activity took place in the very end. So I think one year would be optimal.
3371 MS BOURQUE: I think also --
3372 COMMISSIONER MENZIES: Are there any other -- sorry, go ahead.
3373 MS BOURQUE: I want to draw a distinction between some of the other phase-outs of other products and services. We don't foresee any changes, certainly in the wholesale space, in terms of how we're supporting the customers that we're supporting today relative to the forbearance or potential forbearance of the unbundled loops or the GAS. So those areas and those products and services we will continue to offer a commercial basis and we don't plan on discontinuing any of the availability of those services regardless of any phase-out period.
3374 COMMISSIONER MENZIES: Okay. Are there any other specific conditions we should be mindful of prior to a theoretical forbearance? I mean if that's where we go, is there anything that you could advise us of, any specific issues or conditions that would make, say, your one year more workable or less workable?
3375 MR. DANIELS: No. I think our -- I mean the basis of the one year is that we're not talking about trying to encourage people to go and replace -- build their own facilities like the five years, five years ago. One year is sufficient to negotiate terms and conditions for extensions because we're going to continue to have these people buy loops on our networks.
3376 So the only other part of our proposal was to say we limited this to urban versus rural areas. I mean we think it could actually be justified entirely but we limited it to urban areas as part of our proposal. Outside of that, I think that's all you need.
3377 COMMISSIONER MENZIES: Okay. And what would happen to the dry loop tariff?
3378 MR. DANIELS: Although we argue that you should forbear in the Internet market, if you're asking us about if you're going to continue to regulate in the Internet market, continue to mandate us to provide GAS, then we're not proposing any changes to the dry loop just because there's unbundled loop forbearance. We see that as part of the GAS service and therefore we're not asking for forbearance in that circumstance.
3379 COMMISSIONER MENZIES: Okay. Thank you.
3380 Do high-speed CDNs and Ethernet fall into the same product market?
3381 MR. DANIELS: I think when you're looking at it for high-speed CDN and Ethernet from a wholesale perspective, what you're looking at there is saying the Commission looked at this in 2008 and said do we need a remedy in either of these markets and concluded that they didn't because what happens is that in both cases the underlying facility in question is that fibre needs to be built, can you provide it by fibre, is fibre duplicable? So whether it's Ethernet or high-speed CDN services, the underlying facility in question is can the competitor build fibre?
3382 So for wholesale purposes, we are not drawing a distinction between Ethernet and CDN as a market because the underlying facility in both cases -- I'm repeating myself, sorry.
3383 COMMISSIONER MENZIES: Do you think there is anything else that falls into the same market -- or those markets?
3384 MR. DANIELS: I mean in terms of -- there are different services that ride over the fibre, which are the business data services like MPLS, IP VPN. Those are all -- you could argue, in the retail market, hey, are there distinctions? But underlying the question, again, they're all -- you need fibre in order to serve that market -- or for the most part. And so that's the question of the duplicability. So I don't think there's anything else really to add to from a wholesale perspective.
3385 COMMISSIONER MENZIES: Okay. Thanks.
3386 In Decision 2007-35, DNA forbearance, we concluded that the route was the geographic market but we chose the wire centre for administrative practicality. If we were to re-regulate, would the same approach work for high-speed CDN or for Ethernet?
3387 MR. DANIELS: It's hard for me to answer that question without saying, first and foremost, in terms of -- like when you say re-regulate, well then we have to find that there's been some market failure here and that the evidence, again your test, should demonstrate that the circumstance that gave rise to forbearance has changed to such an extent that your original findings are no longer consistent.
3388 So I'm uncomfortable with saying let's talk about what your forbearance test is assuming we're going to re-regulate everything because no one has proved any evidence on the record to suggest that there is a problem. There have been statements made but there's no actual evidence.
3389 And we do have the evidence -- and I'm happy to go into that in a minute -- to demonstrate exactly that there is no problem in this market and in fact we actually have that evidence.
3390 So I guess if you want me to talk about that specific test, I can, but my concern is that isn't there a bigger issue here first, is there a problem that needs to be fixed before we get into the details of what the actual test should be?
3391 COMMISSIONER MENZIES: Well, true, but we're just trying to establish -- you know, like I said, these are hypothetical questions. The one before is: What if you're right on unbundled local loops? This one is: What if we disagree on this one?
3392 So if there's anything you can add -- I mean I appreciate that's your position, that sort of stuff, and you can say that you don't think there's anything to add or you can say there is something to add or you can say we haven't thought that far about it because we don't think there's any evidence, as you have.
3393 MR. BIBIC: Just to add.
3394 So the question, I think, was: If we were to re-regulate these fibre services, CDN and Ethernet -- so now, we're back to regulation -- what geographic market should we use when we would be looking at potentially forbearing in the future and is wire centre a better geographic market? I think that was the question.
3395 COMMISSIONER MENZIES: That was the question, yes.
3396 MR. BIBIC: And I would say that for these services you have to kind of hang your hat back onto the essentiality rest, which really is the right test, and if you apply it rigorously, I think the answer -- the answer is apply the essentiality definition rigorously and you will actually get the outcome you want.
3397 So in other words, it's fibre, so it's duplicable. If it can be duplicated in wire centre A, it can be duplicated in wire centre B and D and E. All you need is the demand because we know it's duplicable.
3398 So I think I would go back to -- you quoted that 2007 Decision. I would go back to 2008-118 where the Commission says you don't need to show duplicability on a national scale to show a service is not essential and to have forbearance apply on a national scale.
3399 So we think we have the right test. I don't think wire centre -- because if it's duplicable in one, it's duplicable in another.
3400 COMMISSIONER MENZIES: I mean the Commission has mandated services in the non-essential category for various reasons too, right?
3401 MR. BIBIC: Oh, correct. So I'm not -- I understand that you are looking at it and that goes back to the question of we have evidence that shows that forbearance was successful and those asking for forbearance haven't put any evidence that there's been a problem.
3402 I'm answering the specific question on is wire centre a better geographic market and my answer is if it's duplicable in one, it can be duplicated in another, therefore, national is the better geographic market.
3403 COMMISSIONER MENZIES: Okay, thanks.
3404 CNOC made the point that after forbearance, rates for high-speed CDN went up as much as 400 percent. That's part of their record. So why? I mean --
3405 MR. HAHN: So two parts.
3406 COMMISSIONER MENZIES: -- that's a pretty big number, 400 percent.
3407 MR. BEAULIEU: Yeah. So the situation here was the following. We had DNA rates that were completely divorced from either our cost structure or from retail rates that had been set years earlier. And so both us and our customers in the wholesale business were thrown into -- okay, this is a market environment, the tariff's no longer the tariff and we need to make adjustments. We made many adjustments. If a DNA rate is extremely low versus cost you will increase it significantly. If it's closer to the cost structure you won't touch it very much.
3408 So we made these adjustments. We communicated them to our customers and the evidence there is that the market worked. So in a purely commercial framework we met with our customers. We had discussions about what they were paying now, what they would like to pay in the future, what services there were, how long they were going to be using those services, how much Ethernet they would use in the future to replace CDN, those kinds of things, but we also talked about price.
3409 So what happened then is in 91 percent of the cases our sales that were previously sold under tariff became part of a commercial agreement we negotiated with them, and in 50 percent of the cases the former tariff was actually the price we settled at because we didn't have the innate science to set the price correctly in every case. So the discussions with our customers -- by the way, customers who had alternative sources of supply, particularly in Quebec and Ontario, particularly in urban areas, they would literally come up to us and say, "Well, I can get this from someone else at this price. What can you do for me? How can we solve this? Maybe I don't want to migrate. Maybe I want to buy something else for you on top. Can we do something?"
3410 So overwhelmingly in CDN and Ethernet now, we are in a commercial environment that works because buyer and seller are agreeing not just on price, but on the terms for these agreements.
3411 Just to point out a particular example, and a very concrete image even with MTS Allstream, who is a fierce competitor to Bell and with whom over the years we have disagreed about some of these issues, including in front of the Commission, we are very advanced now. We have a conditional agreement on most services that they buy from us, including on price and availability and multi-year options. We expect to have a definitive agreement in place by the beginning of next year, so consciously optimistic about that. But I think it shows how much that market -- that was part of the opening statement, how much that market has matured into a "normal" commercial market.
3412 And so at the end of the day, I think you can pick any particular example of a rate change, but the market worked and the rates settled where they should be, given our relative positions with our customers.
3413 COMMISSIONER MENZIES: Okay. I mean I heard that the market is working for you and I heard your point about in 50 percent of the cases the rate was -- I believe I heard you say the rate was the same as the tariffed rate.
3414 MR. BEAULIEU: Yes.
3415 COMMISSIONER MENZIES: But my question was about the 400 percent in terms of the number that CNOC put on the record.
3416 I need to know your view. I mean is that a, "We found one case where it was 400 percent and in 98 percent of the cases everything was fine, 50 percent being one thing" but like I said, 400 percent is a big number --
3417 MR. BEAULIEU: Yes.
3418 COMMISSIONER MENZIES: -- and when you forbear from something and then somebody comes back and says, "I am now paying four times what I used to pay", I get that that market might be working for you, but I think it would be fair to say their perspective is that that is not the market outcome they were looking for. I mean I understand the sort of market-base that markets are markets and that sort of stuff but just from a competitive point of view, it's a large number. So is it an extreme example or is it representative of trends?
3419 MR. BIBIC: I think what's representative is where everything settled, not a blip along the way. It's where we started and where we ended.
3420 So to really answer this, you have to follow the story all the way back to 2004. I think what happened in 2004 is that the regulated environment didn't work for anybody. Rates were significantly reduced by regulatory Decision 2004 and, as we said in our opening statement, investment just stopped. You may recall in 2004 Bell went on a very significant build in Western Canada, stopped it completely at that time because it didn't make sense. It was cheaper to buy.
3421 So the 400 percent to get right to your question, the regulated rates were divorced from what we thought or think was an appropriate market rate and our costs. So when there was forbearance we had the initial blip of, okay, here is our new price book, let's start talking.
3422 So what is really important is not that we asked for 400 percent. It's what happened next. So our customers had several choices. They could -- you know, in theory what would happen. So a customer faced with the 400 percent proposed price increase will either say, "Forget it. I'm going to build my own". We have evidence on the record of that. I won't repeat it.
3423 COMMISSIONER MENZIES: I think if he stops at "Forget it" you're lucky. But there you go.
3424 MR. BIBIC: Right. And it didn't happen.
3425 Two, the customer can go to an alternative source of supply. Just on that, 90 percent -- so this is for Bell again. 90 percent of the retail circuits that Bell Canada lost were not regained by Bell wholesale.
3426 So if Bell retail loses a circuit to a competitor, they are not coming back to Bell wholesale in 90 percent of the case. That tells you that there are alternative sources of supply, either self supply or buy from a third party.
3427 And then finally, you know, to your question, where did the rates settle? They didn't settle at the 400 percent, you heard Andrea say. And in all cases -- in all cases and all negotiations the rates at wholesale in the forborne market were still significantly lower than prevailing retail rates. So competitors were able to compete.
3428 MR. BEAULIEU: Just to --
3429 COMMISSIONER MENZIES: Okay, thanks.
3430 MR. BEAULIEU: Sorry, Mr. Vice Chairman, just to complete --
3431 COMMISSIONER MENZIES: Sure, go ahead.
3432 MR. BEAULIEU: The direct answer to your question is it's an extreme example, part of a much larger basket of adjustments we made where the average adjustment was much lower and where on average the final agreements were nowhere near that particular percentage.
3433 COMMISSIONER MENZIES: Okay, thank you. I understand your answer. That's good.
3434 My understanding is that you use multicasting for your video services to support your bundles. Is that correct?
3435 MR. DANIELS: I'm sorry, do we use multicasting?
3436 COMMISSIONER MENZIES: Yes.
3437 MR. DANIELS: Yes, we use multicasting.
3438 COMMISSIONER MENZIES: Okay. So do you think denying multicasting functionality to competitors could be considered giving yourself an undue preference?
3439 MR. DANIELS: Absolutely not.
3440 COMMISSIONER MENZIES: Why not?
3441 MR. DANIELS: So let's break this down into a couple of components.
3442 COMMISSIONER MENZIES: I'm not surprised by the absolutely not part.
3443 MR. DANIELS: So let's break this down into a couple of things.
3444 First of all, we are the new entrant -- I come back -- because if you are talking multicasting, what is the product market that you are talking about? You are talking about video television.
3445 We are the new entrant. So I don't think that is a new entrant we have any obligation to provide -- that there is an unjust discrimination in denying to competitors as a new entrant because that same argument would say that every single new entrant that, you know, when Keith at Execulink builds in our territory that he has an obligation to unbundle his network as a competitor. So number one.
3446 Two, I also think you are talking about when you are talking about multicasting it is strictly a video service so you are under the Broadcasting Act so I'm not -- I don't think the Telecom Act applies. The issue becomes only when we provide a telecom service, are we doing anything to interfere with their -- no, they are able to offer their IPTV service as they are doing today.
3447 We are agnostic; completely blind to the traffic that they are sending out. We are not making any determinations. Whatever they sent to us, video, voice, Internet, it's all we are just blind to it. But that's separate from our video network on the multicasting side.
3448 COMMISSIONER MENZIES: So what can you offer up that would help us better understand to what degree costs differ between incumbents for similar services or the same services essentially? Would CNOC's efficient competitor model -- yes, efficient competitor model -- be more useful?
3449 Why are we not -- I'm just trying to get it to the costing area. I'm trying to determine the range of differentiation and cost for the same services.
3450 MR. DANIELS: No, I don't think that CNOC's model of the efficient competitor because it's -- and we have detailed interrogatory responses that went into that basically explain there is a conceptual problem and a practical problem.
3451 Conceptually, we think you are asking the wrong question if you are going to some hypothetical model that no one actually -- a network that no one actually has built -- because the whole point of costing is to send the right investment signals to both us and those who use it, based on what our actual network costs.
3452 In addition, I think it would be completely unfair to say, oh, as CNOC suggests, we think that a more efficient way to build your network is this way, so therefore that's the price upon which you have to give access to us at that price because we have set in a room hypothetically and come up with a big model after two years of debate.
3453 Then the practical aspect, and you can look at this and see in the States as to exactly how long the time and the resources that go into when they try to come up with their model. For example, they used it in the Telerik model that you often -- I don't know if you are familiar with it, but years ago the FCC had multiple, multiple hearings and debates and meetings and so on, to come up with a Telerik model which is that kind of concept. And it was a tremendous amount of resources that would go into it.
3454 At the end of the day mostly that model was just used to determine how to allocate between different like, for example, subsidies between different SILECs and ILECs, our equivalent. But to actually set prices, I think, would be extremely problematic. So no, I don't support that model.
3455 COMMISSIONER MENZIES: That's fine. I guess the other part of the question is, is there anything you can give to us that would actually just help us better understand the extent to which costs differ between incumbents, like you and TELUS or you and whatever for the same services when we get into that?
3456 MR. DANIELS: So it could be choice of technology, it could be supplier arrangements, it could be different architecture, the density. There is a whole bunch of different reasons why costs could differ, which is why we have always supported the notion that it has to be ILEC-specific costs for it.
3457 On the other hand, the balancing, the counterbalancing that I will say to that is that we think the Commission can, in terms of trying to assess the reasonableness of the various different costs, look at the different cost components and test in that area. In recent years, to our detriment, that's what the Commission has done for example.
3458 COMMISSIONER MENZIES: Thank you.
3459 Most parties have had a negative response to the idea of a CISC working group on costing issues. What's your position on that idea?
3460 MR. DANIELS: We are with most parties. It's just the idea of getting us -- CISC is good for working out technical implementation issues, but CISC is not -- is poorly placed for resolving things that ultimately underline policy and costing, it's too fundamental to the business for people to sit there and agree as to how to do costing. I think it would be a massive exercise in frustration if we went down that route.
3461 COMMISSIONER MENZIES: All right. Are there better alternatives to Phase II costing for all mandated services? Retail minus, for example?
3462 MR. BIBIC: No, we support Phase II costing for the services that we are discussing here.
3463 And to get to your final offer or retail minus question, rather, others have talked about --
3464 COMMISSIONER MENZIES: It was just -- I am not really asking --
3465 MR. BIBIC: Okay.
3466 COMMISSIONER MENZIES: -- it was just an example.
3467 MR. BIBIC: All right.
3468 But back to -- so we support Phase II costing. It's kind of intuitive or it's not only intuitive, it's factual that different operators have different costs, and you kind of have to live with that and go compete. But what is the outcome for the things that we are worried about?
3469 If you take TPIA versus GAS and then CBB, the Commission studied this very many times and adjusted the rates several times and then last year -- just last year said, "Okay, this is it. We set the rates. Now, let's all move on and serve customers". So what happened? Of course, some have higher CBB costs. Some have lowered CBB costs. Some access rates are higher and lower. And what happened, though? What happened?
3470 Is the ISP -- we had initially higher CBB costs, then lower CBB costs, and you know the rates are all over the place. So the customer goes to whichever is more favourable.
3471 We were losing share to cable TPIA. What did we do? We didn't just hang back and say: This is wonderful. Our tariffed rates aren't satisfactory to our customers. Great, now we don't have to deal with wholesale anymore. It's nirvana.
3472 No, we actually, combined with the fact that rates were Phase II based on each competitor, the customer had a choice -- and this is important, had a choice, cable or telcos, chose one or the other. We didn't hang back. With the ability to do off-tariff deals we have struck arrangements with ISPs to encourage them to come back. And why is that?
3473 The reason is simple. We are investing and we are competing so hard at retail there is inevitably a retail loser in the market share game. And it shifts over time. That loser wants to fill the pipe and is trying to regain losses at wholesale. The other one is saying, "I'm losing my wholesale share now. I have to -- forget what my tariff says, I want to go compete".
3474 So we did off-tariffed deals. Ultimately the lesson is, if we can't compete at our cost structure, we have to tackle the cost structure.
3475 MS BOURQUE: If I can add one more thing, because beyond rates and competing on commercial offers, which I could expand on, we have spent considerable capital investment improving enhancements to support the ISPs because we need to compete against cable on the TPIA side.
3476 We have built flow-through capabilities, we have enabled our portals, we have spent a considerable amount of money improving the service experience. We moved to a single truck roll solution to make the service experience for their end-users more seamless.
3477 All of those things in collaboration with discussions with the ISP community on a regular basis, to make sure that we are trying to be the viable competitor and the choice that they make in terms of where they bring their subs to. So beyond rate we have been very aggressive in making sure we make the investments to get the choice that they make to be us.
3478 COMMISSIONER MENZIES: Okay. Thank you.
3479 So for the purpose of this question Phase II will go in the category of things that drive people crazy, but nobody really wants to change.
3480 MR. BIBIC: For these services, correct.
3481 COMMISSIONER MENZIES: Do you think the current markup should be adjusted?
3482 MR. DANIELS: I'm sorry, I didn't hear the question.
3483 COMMISSIONER MENZIES: The current markup should be adjusted? Sorry.
3484 MR. DANIELS: We are not proposing any changes to the current markups, based on the categories of where they're at.
3485 COMMISSIONER MENZIES: Now, TELUS suggests that markups should address proportionate recovery of fixed common expenses, network risk and return to shareholders. What's your view on that?
3486 MR. DANIELS: I think that's right in the sense of we are all in agreement that a markup is designed to cover fixed and common costs. There is also the embedded cost differential, so those are costing concepts of stuff that's not included in the cost model.
3487 But in terms of the risk, we do believe that that is the most effective and direct means in order to compensate for risks associated with a higher risk investment. I could get into -- I'm not sure if you want me to, but I can go a little bit more into detail as to why I disagree with the CNOC proposal as just a counter of that.
3488 COMMISSIONER MENZIES: I mean part of that is that you don't have to go into the -- I think your record is clear on why you disagree with the CNOC proposal, but maybe -- I think the comment was made yesterday that the cost of capital already incorporates risk.
3489 MR. DANIELS: That's the specific point I would like to address, so thanks for asking.
3490 Okay, cost of capital. So CNOC is correct, in our models there is a cost of capital. And CNOC is also correct in saying that when you go out to market to raise funds there is a cost of equity associated with the cost of capital, cost of debt. Put it together, that's your cost of capital.
3491 CNOC yesterday made a statement which said, "Well, you know, the reason why" you can do -- "We can just adjust within the cost model itself", they said, "the cost of capital is because you can have the real clear number. It's easy to figure out what that number is".
3492 And there they couldn't be more dead wrong. Why do I say that, because there is no such thing as us going out to the market and saying, market, please. We are going to build fibre-to-the-home for this portion so let's raise this amount of capital for that. Our wireless requires this kind of capital return. Here, give us a dollar for that. This is how much that should cost. We are going to do some legacy upgrades over here, and so on.
3493 No, that's not how it works. You go out to the market and you get one number. Back in the company then, you make decisions based on how you are going to allocate that capital envelope at that point and that's where you assess the risk of the investment.
3494 So CNOC seemed to suggest, "Oh, you can just choose. There has to be one number at the company". But there is no one number at the company. What we have is we have a minimum amount of saying any investment we make has to make this return, the hurdle rate they are referring to, and then as between those different investments we look at it and see how risky is that investment and how quick is the return on that investment and you judge. Everything has to cross the hurdle rate. But on top of that then, you make decisions based on the investment rates. That is the whole notion that is not captured.
3495 The notion of taking our cost of equity as a starting point for what we raise capital is a monopoly notion, which is correct. But then you want to actually augment that notion and figure out how do you compensate for the extra risk because some things are more risky, and that is not done through a higher rate of return on the cost of capital.
3496 The best way to do that, to send their signal is actually the price itself. Let's make sure that the price is higher. And how do you do that directly? As a markup. So you increase the markup. FTTN, you take it to 40 percent. FTTP, don't want it to be mandated, but if it is it would have to be something even higher considering the higher level of risk.
3497 And I guess the last thing and, again, if you want a file undertaking because I find this -- myself, I had to be explained this a number of times. But actually there are circumstances where if you actually increased our cost of capital within a model, depending on how, when the cash flows work in that model, it could actually result in a taking down the overall price. And it is complicated. It has to do with the timing of when certain investments are made, if the investments come later because they are all net present valued.
3498 At the beginning it's complicated and, if you would like, I will file an undertaking to explain it all. But my point, really, is that playing with the cost of capital is not the proper way to address risk. Markup is the most direct attributable way to do it.
3499 COMMISSIONER MENZIES: Sure, feel free to file the undertaking. And I enjoyed listening to somebody speak with such passion for cost accounting.
3500 MR. DANIELS: You found the right guy.
3501 COMMISSIONER MENZIES: I must say. I haven't seen that for a very long -- I do see it from time to time, but it's rare.
3502 Oh, we will stay on cost accounting. Do you think it's appropriate to use other incumbents costs for the purpose of benchmarking?
3503 MR. DANIELS: I think I come back to what I said before. It's appropriate to benchmark for a test of reasonableness. So if that's what you mean by benchmarking --
3504 COMMISSIONER MENZIES: Yes.
3505 MR. DANIELS: -- then yes.
3506 COMMISSIONER MENZIES: Okay, thank you.
3507 MR. DANIELS: I think the Commission is doing that.
3508 COMMISSIONER MENZIES: Okay.
3509 Actually I think this -- oh. Shouldn't cost components have similar outcome rates?
3510 You may have addressed this earlier but, to be honest, I can't remember at this stage so I'm going to ask this question. If I am repeating a question, forgive me.
3511 Shouldn't cost components have similar outcome rates when similar wholesale services are offered, such as backhaul costs?
3512 MR. DANIELS: Well, that's where I come -- I don't know that I answered it directly, but in terms of our view, benchmarking makes sense.
3513 COMMISSIONER MENZIES: I know you addressed it generally, but that specific --
3514 MR. DANIELS: But, really, you have to allow for variables that are different between the companies and it could be as simple as the density, and so on. So for sure backhaul out of Northwest Territories is not going to be the same as in Ontario.
3515 COMMISSIONER MENZIES: So I asked this yesterday as well, but we hear from a lot of parties that costs filed under Phase II are incomprehensible. Notwithstanding your passion for it, are there -- I mean we are open to ideas that would make it better.
3516 Are there other approaches in terms of how we accept or the data we ask for that might make it more comprehensible to people or shall we put that in the category of things that are difficult that people don't wish to change?
3517 MR. DANIELS: Although we have in the record of this proceeding proposed a couple of changes to different aspects, I think fundamentally the system, although it is not the best, I agree with what Chris Tacit said yesterday, there is no better.
3518 And as a result of that we don't have -- in terms of the issue you are addressing, the Commission came out a couple of years ago, very recently, and came out with a detailed of -- requiring us to put more stuff we used to put in confidence that went through as to what now goes on the public record. So a fair amount of costing detail goes on the public record than ever had before and it resulted in scrutiny, accordingly.
3519 So I think the Commission got the balance right. I might have a quibble with a couple of things that are being disclosed here and there, but on the whole I think you have the balance right now with your most recent confidentiality ruling, which I think was in the last couple of years.
3520 COMMISSIONER MENZIES: Okay. Now, we have heard -- we hear frequently, too, about lack of detail in our decisions regarding our reasons for adjustments made to cost studies. Now, given the confidential nature of the data, is there anything we can do in that area to make things better?
3521 MR. DANIELS: That's an interesting question. I think I would like to take an undertaking because there are people who know this way better than me that would be able to make sure that I don't say something wrong.
3522 COMMISSIONER MENZIES: Feel free.
3523 I just have one last fairly broad question which I know you have addressed in the process, but CNOC has put considerable time and effort, energy and resources into their equivalents of input proposal. It is an energetic effort, although I am familiar with your view on it and that we have seen in some time. So you can let the record stand or I would like to give you the opportunity to speak to that proposal in general right now if you wish.
3524 MR. DANIELS: So I will speak to it and I'm also then going to ask Professor Hahn who I think has done specific examination and he can talk about it from the international experience.
3525 I don't think CNOC has put in this record any evidence that there is some market failure that is a result of EOI. The purpose of EOI, as I understand it from CNOC, is they have talked about that there is some discrimination going on. Again, it's statements, but there was actually no factual basis upon which it was made.
3526 The only thing I saw on the record was that CNOC specifically asked about our missed commitments on installs. They knew we had a problem one particular month earlier this year at wholesale, which is true. But they asked us that question and they asked us over the course of the year and the actual answer said that wholesale and retail are about the same in terms of -- not that one month, but if you look from the beginning of this year, January 2014 up to the date we filed, wholesale actually was getting 1 percent better provision. So the notion that somehow they are suffering from a service perspective because of EOI.
3527 The cost of doing EOI is extremely significant and would be massively, massively disruptive to all of the incumbents. We were asked -- and we are the only ones of the cable and the ILECs, the only ones who looked at this to try to -- because we thought you needed the facts. So to look at this we said -- we looked at our loops, one particular service. When we provisioned an unbundled loop as opposed to how Bell when it provisions a primary exchange service, a voice service, what would happen.
3528 Because just keep in mind the point of EOI is that we would have to change our retail systems to go through our wholesale business unit. That's the point of EIO. It's not look at the outcome. Both -- for example in loops, both retail and wholesale have to do it within 48 hours if it's a migration or a new install is five days. That's what is called an equivalency of output, that you just look at the outcome.
3529 CNOC is saying, "No, I want to make Bell change their system so all of your retail systems use the same systems as your wholesale". They are treated as just a wholesale customer. That is what equivalency of input is.
3530 So we looked at it. There are nine different service groups and over 250 separate ISIT systems would be impacted by this.
3531 And then we went and just looked at one group and that's listed in the answer using 33 separate systems. The problem was that like, when we provision a loop for example for Bell, we use the telephone number. But for a wholesale customer because we don't have -- it may be in an unbundled loop, it may be DSL -- we use the circuit number. And just changing that itself would be a massive rewrite of all of those 33 systems for just that one issue.
3532 That's why we are saying, like, if we were mandated to do this we would basically be spending the next three years on our ISIT development just completely caught up in this. We were asked to sort of estimate the cost and we said we estimate at a high level at least $100 million in ISIT systems. That's not so crazy when you look at the international experience, because this has been done in BT, where they put in 150 million towns over the first three years.
3533 So perhaps I could, to fill the record, I could ask Professor Hahn to talk about the international experience with EOI, if you would like.
3534 COMMISSIONER MENZIES: Yes, please.
3535 MR. HAHN: Thank you.
3536 I'm a regulatory economist by training and I hope you won't hold that against me, but my view is that EOI or equivalents of input regulation is a very stringent form of regulation and it can be costly, as Jonathan mentioned.
3537 But CNOC did not really do diligent research on there could be real significant costs attached to this. BT, for example, estimated that the costs associated with functional separation in EOI several years back, which is in the report that I submitted to you, could be on the order of 50 million pounds per year, that was for three years. As my mother is fond of saying, that ain't chopped liver.
3538 So I think before you move to, or even consider something like this form of regulation, you ought to go through the normal exercise that we do in economics and ask the first order question, which is, is there a fundamental market failure? My paper concludes there isn't given the existing regulatory regime and that it is well worth considering the costs and benefits of regulation and trying to quantify them to the extent possible. The initial Nordicity report unfortunately did not do that.
3539 I am just going to ask my colleague, Professor Renda, if he wants to add anything about the European experience.
3540 MR. RENDA: Very quickly. Thanks, Bob.
3541 I would like to add a couple of things. First of all, that under the EU regulatory regime, if a European regulator landed here they would never consider imposing such a remedy in Canada on the ILECs. We do have a rule in Europe that you need to find significant market power before you impose any remedy, regardless of how proportionate is the remedy and the market share here would not be compatible with a finding of significant market power. So that's the first thing.
3542 So we are talking about the relatively rigid and considered to be oftentimes disproportionate remedy, even at the EU level, as sort of a last resort remedy, the EOI. At the same time, the European Commission recently observed that EOI could be the surest way to achieve non-discrimination in extreme cases, but the surest way the European Commission acknowledged that comes with very high compliance costs.
3543 But let me get back quickly to the UK experience. The UK experience is a completely different case compared to the Canadian one. We have BT heavily charged with non-price discrimination, with very high market share, a market that was in a stalemate. The decision was taken that BT should be functionally separated.
3544 In my opinion and the opinion of many economists, there is no big difference between functional separation which is the organizational arrangements and EOI, which is the outcome in terms of how you treat wholesale access seekers. What has happened in the imposition of these remedies, if we judge by the outcomes in the market, I am going to give you a couple of figures, then I can elaborate further if you wish.
3545 FTTP has 1 percent coverage in the UK. Rural coverage in the UK is 0 percent. This has imposed a lot of rigidity in the UK system. It has discouraged investment from both the incumbents and the access seekers. It has created a situation which we would call lose-lose to some extent, meaning economists would call it Pareto passim um, when everybody is worse off, and the only ones that invest in the UK in NGA are the unregulated cable providers.
3546 COMMISSIONER MENZIES: Thank you. I'm just going to circle back on a couple of things and then I will turn things over to my colleagues.
3547 I just want to go back. You mentioned Sault Ste. Marie earlier. Wasn't that a poles issue?
3548 MR. HENRY: Yes, it was a regulatory issue associated with Ontario regulations applicable to poles and how it was applied in Sault Ste. Marie. So yes it was. But the point is -- the point isn't so much that it was a regulatory issue, although it was. The point is that --
3549 COMMISSIONER MENZIES: It was another regulator, right?
3550 MR. HENRY: Oh, it wasn't you, if that's what --
3551 MR. HENRY: No, no.
3552 But I think what it illustrates is that, as we said in our opening statement, any hurdle, be it regulatory or otherwise, can impact a business case because it is so thin, and so all it took was a few extra costs to make us pull out. And despite what everybody says, "Oh, they won't -- they will build because they have to build because the cable is there", cable was there and we had to pull out.
3553 COMMISSIONER MENZIES: Okay, I understand. There is reputation management there.
3554 COMMISSIONER MENZIES: Would you be willing to undertake to -- I think you mentioned earlier that there are 17 fibre-to-the-prem competitors in your territory?
3555 MR. HENRY: Yes. We actually have them on the record and I could actually read them to you.
3556 COMMISSIONER MENZIES: They are on the record?
3557 MR. HENRY: Yes, they are.
3558 COMMISSIONER MENZIES: Okay, that's fine. You don't need to read them.
3559 MR. HENRY: They are in in our first intervention.
3560 COMMISSIONER MENZIES: Okay, thank you.
3561 MR. HENRY: Bell Aliant's first intervention.
3562 COMMISSIONER MENZIES: Right.
3563 And I'm done. I will conclude my questioning. Thank you for your time.
3564 And I will turn things over to my colleagues. Thanks.
3565 THE CHAIRPERSON: Vice Chair can always loopback afterwards if he finds something.
3566 So I will pass it on to Commissioner Molnar now.
3567 COMMISSIONER MOLNAR: Thank you. I understand that you did put information about the 17 on the record, but I just have a couple of questions, if you don't mind. What have you done within the territories where there have been others build fibre-to-the-prem networks?
3568 MR. McKEEN: So in most of those cases we have competed with our DSL offering and with our combined -- with Bell Satellite combining those services, but it has been an offering that we have done over the entire territory. We went in with some strong win-back offers in some of those areas where we decreased the price for customers for a period of time in order for them to come back, lower than we had done in other areas to try to see if there was an opportunity to win the customers back, but largely unsuccessful.
3569 So in most of those areas where those competitors have built fibre-to-the-home where we have DSL, they have won the majority of the customers and they continue to keep those customers. We have not gone in and built our own fibre-to-the-home network in those areas. And mostly about use of capital, because just when we look at the business case it didn't rise up above the one. There is one area in Sudbury. There actually is two fibre-to-the-home providers where we did go in and build and that cable has a fibre-to-the-node there, their broadband service in that area.
3570 COMMISSIONER MOLNAR: So those are still on your list, and at some point if the NPV goes positive you will build?
3571 MR. McKEEN: Yes, that's exactly right. And we use an A minus B kind of scenario when we look at it.
3572 So to a degree the more customers you lose the better the business case becomes to build, because then you are gaining more customers back to the revenues and you get more new revenue than revenue from your current customers just switching from one technology to another. But there are also lots of things that go into the business case.
3573 So in many of these areas it's not only the cost to build in the area, but it is the cost to get to that area. So many of them are rural areas where we may not have strong transport. We might have to build additional fibre networks to get to them where it doesn't make sense.
3574 We have a bunch of those in Atlantic Canada, too. But the one that comes to mind is when you look at like Goose Bay or other areas where the actual town is dense enough to make sense to build fibre-to-the-home but the cost to get to the town is too expensive, so it destroys the business case.
3575 So there are a number of different inputs, but in any of those ones where they have built we have not got to the point where it makes sense for us to build against them.
3576 COMMISSIONER MOLNAR: I'm sure that you folks listened carefully when others were in front of us and essentially the argument is that fibre-to-the-prem is really a monopoly kind of a service. There is no overall consumer economic welfare to duplicating fibre-to-the-prem.
3577 MR. McKEEN: I think that maybe I would ask some of our experts to talk about that, but I think that their argument was kind of, we should only have one network and that everybody should be on that one network. I think that the Commission, and I think worldwide people have concluded that that is not the right solution, that still --
3578 COMMISSIONER MOLNAR: Fair enough. Probably you can't speak for the Commission on this right now.
3579 MR. McKEEN: Right. Yes, the facilities-based competition --
3580 COMMISSIONER MOLNAR: But I mean there was a lot of conversation about the fact that it is not economically the best economic outcome to duplicate fibre-to-the-prem. So you are suggesting that you would duplicate where the business case allows.
3581 MR. McKEEN: That's correct.
3582 And maybe Andrea --
3583 COMMISSIONER MOLNAR: Would you do that if you could access the fibre that's there?
3584 MR. McKEEN: To this point we have not accessed anybody else's fibre to do that. I'm not sure if that would work or not.
3585 COMMISSIONER MOLNAR: Yes.
3586 MR. RENDA: Well, the issue here is that Canada is, in my opinion, in a unique position. If I look at the figure you have in your monitoring report at page 197 about the percentage of the population that get access to specific speed tiers, I think what we are seeing is almost a unique situation in which you have two types of technologies that can reach a large portion of the territory and are doing it. They are creating this type of neck and neck competition that is needed and in some cases in some years sees some operators taking an advantage over others through technology and advances and others trying to chase them and reach them and overtake them, which is exactly the competition that creates all the virtuous consequences and outcomes that we attribute to the competitive process.
3587 What we are seeing now currently is a situation of years in which the cable operators have had the possibility of upgrading their infrastructure at a relatively lower cost compared to the former copper operators and they have taken a lead. This is stimulating the fibre investments to reach those players and to match their speeds and offerings.
3588 Now, in the future many more things could happen, including wireless, including more advances, DOCSIS 3.1, more advances in the scalability of fibre networks. I think you don't get the same vibrant competition and good outcomes for consumers if you don't allow this facilities-based competition to take place.
3589 MR. TRAMONT: If I could step in?
3590 MR. RENDA: Who else wants to step in?
3591 MR. TRAMONT: I will jump in if I may.
3592 I do think regulators are faced -- certainly the U.S. experience was that you have a choice of managing scarcity or promoting abundance and that is sort of a fundamental choice that all regulators face. In the United States we have seen cable get the lead and you will see our regulators have been very active in trying to promote fibre-to-the-prem as a way to compensate for cable's lead. We have seen aggressive fibre deployment.
3593 In 2009 we had 485 fibre deployers. As of 2013 that number is 744, and including in markets where new entrants come in and deploy fibre. For example, when Google goes into a market we have seen the incumbents respond with fibre deployment. So you not only have the cable plant, but you also have the ILEC and you have the new entrant in the form of Google or other fibre providers.
3594 So we have seen a competitive response that includes multiple pipes to the home and we feel that is what has delivered the most consumer value.
3595 MR. BIBIC: Commissioner Molnar, if I just tie it all up, those who claim that FTTP is kind of a monopoly or monopoly conditions or create a monopoly environment, I mean, obviously ignoring the fact that we have ubiquitous cable high-speed networks in Canada, so that is wrong to start.
3596 Two, you are absolutely correct. We can't speak for what the Commission is going to do, but we do have a long line of Commission decisions going back to the nineties saying that facilities-based competition brings -- facilities-based competition brings the most benefits to end-users. That policy has been adopted for decades and it has served this country really, really well.
3597 We also have the policy direction which encourages facilities-based competition. I am going back to -- and I will just end it with this last point -- I am going back to the example I gave earlier. When I looked at Bell Aliant's Sturgeon Falls, when we can serve Sturgeon Falls with fibre-to-the-home and you have cable and you have fibre-to-the-home in a community like that, that is fantastic.
3598 And we are on the cusp here. We are already, you know, at the top of the pile worldwide, but we only have 14 percent nationally fibre-to-the-premises networks, like home has passed. Like, we are on the cusp here of really being able to launch that to a really, really high figure.
3599 And we will be the envy of the world. I think our experts behind me are supporting that, so the folks who are saying what you repeated back in your question are just wrong.
3600 COMMISSIONER MOLNAR: Moving on to where we are not the envy of the world, maybe we could talk about the 20 percent of your network that is still on ATM. Could you tell me about them? What are you folks delivering to those, into those communities? What kinds of speeds or services?
3601 MR. McKEEN: I'm sorry, the 20? I didn't understand the question, the 20 percent?
3602 COMMISSIONER MOLNAR: Mr. Bibic made a comment that 20 percent of your customers continue to be served by ATM technology.
3603 MR. BIBIC: So let me clarify. I want Dan to answer because he is kind of the operator, but just to put it into perspective.
3604 COMMISSIONER MOLNAR: So it is Aliant?
3605 MR. BIBIC: No.
3606 COMMISSIONER MOLNAR: They are with Aliant?
3607 MR. BIBIC: No. Twenty percent is in the former Bell Canada, Ontario and Quebec operating territories. It's ATM, but Bell Alliant also has ATM geography.
3608 So with that context he should answer, I think, about what Bell Aliant was or is offering in the areas where they have ATM and it's largely the same for Bell Canada. I think essentially lower speed DSL and satellite TV, wireless services, because we have ubiquitous wireless coverage.
3609 COMMISSIONER MOLNAR: Yes. I mean just a range of that. What speed are you offering in those communities?
3610 MR. McKEEN: Basically a lower speed of 1.5 Mb per second and a higher speed of, like, 7 Mb per second and that we combine that service with our -- we still offer bundles in that area where we combine a bundle with two different technologies where we have local phone obviously. And then we combine that with our Bell satellite service to have a competing service to the cable competitors who offer a triple play on the same network.
3611 So we have actually lowered the prices on those and we spend capital in order to make sure that we continue to provide throughputs so that there is not congestion. But there are some markets that are challenged with the congestion and lower services and in those ones we make decisions on whether the --
3612 COMMISSIONER MOLNAR: Right, okay. Can I just make sure I'm understanding?
3613 Did you say 20 percent of your network, 20 percent of your customers, 20 percent of communities?
3614 MR. BIBIC: Twenty (20) percent of homes passed.
3615 COMMISSIONER MOLNAR: Within the combined Bell family?
3616 MR. BIBIC: So Bell -- no. So if you put us -- so Bell Aliant -- November 3rd we combined Bell and Bell Aliant so it's now one. So let's give you the stats from before that period of time. Before November 3rd you had Bell Aliant whose operating territory was the Atlantic provinces and the more rural parts of Ontario and Quebec.
3617 COMMISSIONER MOLNAR: Okay.
3618 MR. BIBIC: Bell Canada was Ontario and Québec minus the parts of Ontario and Québec served by Bell Aliant.
3619 So the Bell Canada part's roughly, seven million homes passed, 20 per cent with ATM.
3620 COMMISSIONER MOLNAR: And so, they're getting 1.5 to 7 megabits service, 7 being the highest and a price discount, I think you said.
3621 MR. BIBIC: That's correct.
3622 COMMISSIONER MOLNAR: But are these areas where you're competing? Do you have cable competitors within these areas?
3623 MR. BIBIC: For sure.
3624 COMMISSIONER MOLNAR: For sure.
3625 MR. BIBIC: Oh, for sure. Now, I can't tell you the proportion of that -- I mean, we can get back to you as to the percentage of that 20 covered by cable, but of course, yes. Over -- André says it's 90 per cent and above.
3626 COMMISSIONER MOLNAR: Ninety per cent you're competing against cable and you're competing --
3627 MR. BIBIC: For 90 per cent or more of those homes passed, yes.
3628 COMMISSIONER MOLNAR: And you're competing at 5 to 7 megabits?
3629 MR. BIBIC: Well, we don't walk away, we have to, but we're not competing by upgrading the networks to FTTN or FTTP because there's a number of equations there. One is -- well, primarily the cost.
3630 So where are you going to start first; are you going to start first with building FTTN in Toronto or building FTTN in the smaller communities represented by that 20 per cent?
3631 And so, you go down the list and there's the hurdle, right, and there's a whole bunch of other factors. In the meantime, you're kind of there, you know, blocking and tackling and trying your best.
3632 MR. McKEEN: And just, our challenge and what we try to do is to be successful enough in the areas where we've deployed fibre to the home that we can make the business case so we can go out further.
3633 We absolutely want to do that, we absolutely -- but we need to make the business case, we're going to make the economics work so we can go farther and farther.
3634 We also work with governments, both provincial and federal governments because there's some areas, as I talked before, where the real hurdle is getting to the community in order to be able to provide that and we have a couple of examples where we have done cooperative deals to be able to build infrastructure with some government money that has allowed us to build up some areas that otherwise would have been non-economic, and so you have two facilities-based providers in those areas.
3635 So we're absolutely motivated to do that, but we have to make the business case work. And some of it's also about the demand for the product. So we believe that there will be more demand in the future for these higher speeds which will allow us to hopefully improve the economics so that we can go deeper into the country.
3636 MR. BIBIC: We also have -- and this is targeted to these areas as well as areas with no DSL, so both our turbo hub product, so wireless broadband product for the home.
3637 COMMISSIONER MOLNAR: Okay, thank you.
3638 It's interesting because we're so focused on fibre to the prem and all of the opportunities that that promises, and here's 20 per cent that are --
3639 MR. BIBIC: Oh, but that's not an inconsistency. I think it's entirely consistent because if you kind of match up the couple of points here, there's still 20 per cent there.
3640 COMMISSIONER MOLNAR: It's all a business case then --
3641 MR. BIBIC: Yeah. No, no, but it's 20 --
3642 COMMISSIONER MOLNAR: -- is that what you're going to tell me?
3643 MR. BIBIC: Well, yes, but 20 per cent is ATM only, yet there is evidence, and Bell Aliant is the perfect example of an incumbent telephone company pushing fibre to the prem out to very small communities.
3644 So I don't want this discussion to end up being, well, they'll never go there anyway. We're going there, it's just, back to the business case.
3645 MR. DANIELS: If you'd like, I don't know if it would help, we could take an undertaking because I don't want to put our projections on the public record, but I'm looking at our numbers in front of us.
3646 We do see -- we are projecting that legacy numbers are going to go down; why they go down as a percentage is because we build other alternative technologies.
3647 So the way we count our ATM, for example, is when we build FTTN or build FTTP, we consider an FTTP and we take that out of the legacy. I'm looking, the trend has been that we're building and replacing.
3648 So it goes back to what I think Mirko said at the very beginning when he was talking to Commissioner Menzies, there's two opportunities here for fibre to the prem; there's opportunities where we only have DSL and we want to go in and there you're doing fibre to the prem, going right from DSL to fibre to the prem which Aliant has tons of examples.
3649 And if you look at the 21 communities listed, you'll see that they're pretty small communities and virtually -- correct me if I'm wrong, Dan -- but I think almost all of them, the 21 communities were DSL communities, ATM, not FTTN.
3650 MR. McKEEN: That's correct.
3651 MR. DANIELS: So that's 2014 the build, Aliant. So we are building, yeah.
3652 COMMISSIONER MOLNAR: In 2014 these guys are going to leap frog to fibre to the prem; is that what you're telling me?
3653 MR. DANIELS: They did.
3654 COMMISSIONER MOLNAR: Please...
3655 MR. DANIELS: Not they will, they did. In 2014, the 21 communities that we filed, so --
3656 COMMISSIONER MOLNAR: Oh yeah, I'm sorry. Okay.
3657 MR. BIBIC: Commissioner Molnar --
3658 MR. DANIELS: Those were DSL communities --
3659 COMMISSIONER MOLNAR: If you want to undertake to put something on the record as to when this 20 per cent -- if you already have plans to serve these 20 per cent, please go ahead and put it on the record.
3660 MR. BIBIC: I don't think we need to because we already did on the confidential record.
3661 COMMISSIONER MOLNAR: Okay.
3662 MR. BIBIC: If you look at March 28 of this year, Response to CRTC Interrog 19, you'll see the projections -- what happened in '13, projections for '14 '15, '16 and you see what happens to the ATM number.
3663 COMMISSIONER MOLNAR: And this is just a quick question because I should go on, but I am interested.
3664 Is there a point in time where FTTN is not your next capital -- like it sounds like right now you are still making a decision whether you go FTTN or FTTP.
3665 MR. BIBIC: Again, we -- so there's -- let's answer it from a two company perspective.
3666 So Bell Aliant several years ago put its investment, its capital dollars behind FTTP.
3667 COMMISSIONER MOLNAR: So all upgrades now are through FTTP?
3668 MR. McKEEN: Yes, we've decided to go one technology, fibre to the prem.
3669 COMMISSIONER MOLNAR: Okay, thanks.
3670 MR. BIBIC: Yeah. So all, we like to say over builds because it really is, as we said in our opening statement, from the CO all the way to the home, it's not an extension of fibre to the node to the home.
3671 Okay. So for Bell Canada there was a big push until a couple of years ago with FTTN, as you know, and that's why we have Toronto, Montreal and a whole bunch of other, Ottawa, et cetera -- well, Ottawa done just now with FTTN actually.
3672 It's been more focused on FTTP recently. So, for example, all green fields are now FTTP. You saw what we did within Québec City a couple of years ago with FTTP.
3673 We just announced, I believe it was in August, that our next FTTP community is going to be Kingston. Gatineau, we're constructing FTTP now.
3674 So Bell Aliant started earlier, but now that's where Bell Canada is putting more emphasis on an FTTP.
3675 COMMISSIONER MOLNAR: Fair enough. But just to confirm, at this point you have not made the commitment that it is only FTTP going forward, all new capital builds will be FTTP?
3676 MR. BIBIC: I think the best way to answer that, again, is to go back to this interrogatory I pointed to and you'll see how much FTTN grows over the next couple of years versus how FTTH grows and how ATM is reduced and that actually will answer your question.
3677 COMMISSIONER MOLNAR: Okay. I'll do that, I'll pick it up off the transcript.
3678 I want to ask about your wholesale customers. You have commented quite a lot here this morning about how important they are to you, what you've done as it regards going off tariff and negotiating special arrangements and fixing your fulfilment and assurance processes and all of that to serve them well.
3679 Tell me, have any of them requested what's now BAS, what used to be ADSLCO; have any of them come to you and requested that of you?
3680 MS BOURQUE: I couldn't say specifically, no. I think there are those customers today that co-locate for certain access to services, but not specifically for a disaggregated service. It's not something I could build, either.
3681 COMMISSIONER MOLNAR: I suppose the first question I should have done, just to confirm is, you don't provide that to anyone today?
3682 MS BOURQUE: Other than the access that they get today through co-location and access to unbundled loops, or EA service, no.
3683 COMMISSIONER MOLNAR: And you don't know that any of them have ever requested of you? I mean, they've been requesting it of us since 2010, but they've never had a conversation with you?
3684 MS BOURQUE: Not specifically that I can recall.
3685 COMMISSIONER MOLNAR: Okay.
3686 MR. DANIELS: I mean, to be fair to them on this one. So --
3687 COMMISSIONER MOLNAR: They probably are going to recall a conversation, would be my guess, after.
3688 MR. DANIELS: But, you know, it would be a fundamental re-design of our system, it's extremely expensive. So they may not have asked, but probably they appreciate that, you know, it's really complicated to do and would be --
3689 COMMISSIONER MOLNAR: M'hmm. And you've said they're really important customers. So all I'm asking is, has there been a conversation?
3690 MR. DANIELS: But they're really important customers who are succeeding on the network and adding. So they're important customers, but we have -- you know, in terms of -- like everything's a cost/benefit analysis and --
3691 COMMISSIONER MOLNAR: Yeah. I mean, we don't need to argue it, it's not the point as to whether or not they're succeeding, it's the point that you've said they're an important customer and they clearly have a new service need because they're coming here asking for it.
3692 MS BOURQUE: But I also don't have significant demand. Even CNOC themselves have said six of their 34 members, or 35 members have indicated that they, you know, want it I guess on public record, but I don't have any significant demand that would have justified on any of my priorities in terms of service development.
3693 COMMISSIONER MOLNAR: You have no demand. You said they've never asked you.
3694 MS BOURQUE: They did not specifically ask me for that service, but they also know, to Jonathan's point, that requires a significant amount of service development, service development that, you know, is in a set of priorities among other things that they've prioritized more, like single trunk roll, which they were unanimous about needing in the marketplace and in all of our customer assessments and in all of our discussions was the top of their list and so, that was where we prioritized our investment in order to improve the service experience we extended to them.
3695 MR. BEAULIEU: I think it's important, if I may add, Mr. Commissioner, the conversations they're likely to have with you will be somewhat different than the ones they're likely to have with us.
3696 So Michelle and I spend time with those ISP customers every week, I spend a lot of time with all of them, including the largest ones, so we have a few hours together.
3697 They'll say, well, I'd like to talk about the off-tariff arrangement for access in 2015; I'd like to talk about the provisioning metrics that are falling behind; I'd like to talk about -- I need some help in my call centre; when I have certain assurance problems, I'd like you to help me this way.
3698 They set the agenda. Like they come to us and they say, well, in our business relationship we give you millions of dollars, we have thousands of subscribers that depend on Bell, so here's the three or four things we want to improve.
3699 So radical change in the architecture of interconnection, it doesn't make their list in the conversations we have with them, possibly because it's a lower priority for many of them, I suspect; quite possibly also because they realize the extent to which these would be not only costly, but you know, multi-quarter, multi-year projects to put in place.
3700 They want to make sure they do well next month, the next quarter. So I don't think there's a contradiction, I just think we're having conversations of a different nature.
3701 MS BOURQUE: If I can clarify.
3702 COMMISSIONER MOLNAR: M'hmm.
3703 MS BOURQUE: I'm recalling conversations and I would say Mr. Max Stein when he was at Primus probably would have brought up that that's something he would have desired, given the infrastructure they have deployed in co-location. So he might have brought that up at that point in time.
3704 COMMISSIONER MOLNAR: Thank you. There's still another part here, so perhaps in reply they might want to identify, you know, whether they have.
3705 I mean, fundamentally you've come and said that this should all be forborne and they're important customers and you'll continue to serve them and meet their needs, and yet they've come to us with the need; it sounds like either they have not come to you with or it has not been met. So that's just a little confusing, so...
3706 A separate question entirely here, Phase 3 costing, and you folks are very happy with it, everybody here seems to be happy with it, but nobody's happy with the outcome of it because it's always under review and vary.
3707 Anyway, if I understand, you've said that it's appropriate for the services under consideration in this hearing.
3708 MR. BIBIC: Yes.
3709 COMMISSIONER MOLNAR: And you have a different approach for legacy; do you?
3710 MR. DANIELS: Yes. Our approach on legacy is to say, not that Phase 2 is not appropriate because if there are cases when our Phase 2 costs have gone up for legacy, as they have for CDN DS1, which is something we are saying should be regulated we file it.
3711 Our approach where it is different is to say, it doesn't make sense to say, oh, do a cost study for a service and that's legacy, let's regulate it, and if the costs have gone down because we're not building that service anymore, let's lower the rate.
3712 An example of that same thing, CDN DS0, this is a service we're barely selling, we're doing updated cost study and the rates would go down.
3713 We don't think the regulator should be mandating and incenting, encouraging people to actually grow on our legacy network, and that's what happens when you say, oh, let's look, unbundled loops have gone down, which happened a couple of years ago, let's take the rate down, or CDN DS0, let's do an updated cost study, the rates have gone down.
3714 So our proposal is to say, continue with Phase 2 costing, but leave -- like basically set a floor based on the existing rate. So if the costs have gone up for some reason, examine it, it can all --
3715 COMMISSIONER MOLNAR: So you're suggesting that we do that simply for a policy reason of trying to incent moves to new --
3716 MR. DANIELS: Exactly.
3717 COMMISSIONER MOLNAR: -- and generate --
3718 MR. DANIELS: And you would not be alone, because the EU basically -- they've gone further, we're not there -- the EU's approach to this on how they set the rate for unbundled loop is they said, we're going to use next generation technology, so they based it on fibre to the node as the cost of loop.
3719 COMMISSIONER MOLNAR: M'hmm.
3720 MR. DANIELS: We're not suggesting that. We're saying, don't take down legacy prices because it sends the wrong incentives as a policy matter, but it's not a change to the costing as you're identifying.
3721 COMMISSIONER MOLNAR: Okay. Okay, just one final thing I wonder if you could comment on. There has been discussion, and I'm sure you've heard it, that the CBB rates are too high and they should be reviewed and there's been many changes; there's been change in cost, change in usage, their quantities, the amount that they require is greater and so the -- I think we priced it at 100 megabits and now they're suggesting maybe it should be at a gig.
3722 What are your thoughts on that?
3723 MR. DANIELS: Here I am enthusiastically answering this question, so thank you for it.
3724 COMMISSIONER MOLNAR: I'm not enthusiastic about CBB rates ever, just that --
3725 MR. DANIELS: Yeah. Well, my first proposition to you is that you went through a three-year study, you went through all of the details on this and you determined at the end of it, you said we want to send a signal to move on, if I can -- this was from your 2013-70:
"...need to move away from regulatory process and to a period of certainty. We are pleased to finally close this chapter after careful examination of the wholesale rates." (As read)
3726 We're both conceptually in agreement with capacity-based billing. Their issue is they're saying we're just not happy with the rate, with the outcome.
3727 Now, when you said they wanted to go from 100 megs to 1 gig, I don't think that's accurate in terms of their position. Let me characterize it, they can correct me if I'm wrong.
3728 I think their complaint is that they say the CBB rate is just too high. The CBB rate is based, we sell it at 100 megabits of increments, so -- and they've never complained that they want to buy it in 1 gig increments. That's a difference of how they -- there's a port where they interconnect to us, that's the AHSSPI, we have a 1 gig and they now have a 10 gig where they've actually asked us for 10 gig and we've filed a tariff for a 10 gig. So that's a different issue.
3729 The question is the price. What they're saying is the price of -- I mean, they talked yesterday about it being -- you know, ours is roughly a thousand dollars, it's a little over a thousand dollars, we have the cheapest in the country, it's a thousand dollars for 100 megabits.
3730 COMMISSIONER MOLNAR: Sorry, sorry, I'm just going to stop.
3731 MR. DANIELS: Yeah.
3732 COMMISSIONER MOLNAR: And I maybe made my question larger than it should have been. I'm aware that folks are not happy with the price.
3733 I'm asking more about, you know, you're supporting Phase 2 costing as the appropriate thing. As you know, the price for CBB was based on a 10-year study period. I think I heard somebody yesterday supporting the notion of 10-year study periods, and yet conditions change and I think it was the B.C. Broadband Association that said, well, every two years you should just do a check and see whether all the conditions continue to be appropriate.
3734 So I'm not actually asking about the price itself that's in place as much as it is a process for saying, how do you, or should you reflect ongoing changes within a Phase 2 cost study such as the CBB rate?
3735 MR. DANIELS: So, and there I think you hit the nail on the head in terms of the fundamental contradiction.
3736 We actually proposed a five-year cost study when we filed CBB and the Commission took it to 10 years which drives the rate down.
3737 Now, why does a longer cost study, like period take the rate down? Because what the Commission does -- and what we do as part of Phase 2, but then by extending it, is you assume over 10 years this is the amount of productivity that's going to happen, how much more efficient, how much cost savings are there going to be. And so by taking a rate, using a five-year study and changing it to a 10-year study it actually says, oh, we're expecting that much more efficiency gains over the 10 years and you net present value that, so it results in a lower rate up front.
3738 So to say, for example, as was suggested yesterday, let's have 10-year cost studies and do them again every two years basically says, let's take all of the efficiency gains that you're expected to get over 10 years and ignore it after two years; take all the benefit and ignore it after two years.
3739 And that just can't be right, that can't be right. So I mean, if you wanted to have it two years, you'd have to only have two years of productivity and we'd be doing cost studies every two years which would -- because they take about two years to complete, we'd just permanently be doing them one after another in perpetuity and that doesn't make sense either.
3740 So I think what the Commission has done is said, we'll do this and our actual proposal, one of the tweaks that we said is, we think you should make sure to run to the end of the cost study or for a long enough period of time before you re-do it for the exact same reasons that you articulated in your decision.
3741 COMMISSIONER MOLNAR: Thanks. Those are my questions.
3742 THE CHAIRPERSON: Commissioner Shoan...?
3743 COMMISSIONER SHOAN: Good morning. I have three or four, hopefully quick questions.
3744 I wanted to ask you, how do you respond to criticisms, and in this respect I'm recalling the Conference Board of Canada Report, amongst others, that despite no mandated access to fibre to date Canada's deployment of FTTP lags that of other countries?
3745 MR. DANIELS: Let's talk about where we are compared to other countries.
3746 MR. RENDA: Well, just going a bit deeper into what I briefly mentioned in terms of international comparisons, the first thing I want to say is that I'm actually quite surprised and shocked that we can compare Canada to some of the countries that appear to be leaders in the world.
3747 For example, if you take Canada and the Netherlands, which sometimes are very close in the rankings in a number of different indicators, it's unbelievable, right, because Canada is a huge territory, where the Netherlands is a small country and very densely wired, the legacy cable infrastructure.
3748 So I think that this should be the first element of caution when we draw international comparisons at the same time of pride on the side of Canada because it has achieved results that for other countries were much easier to achieve. At the same time it's a lucky country because it has a legacy cable infrastructure.
3749 Now that said, when we compare Canada with other countries, at the first level of depth, the countries that lead in the world on FTTP, as I said before, United States, South Korea, Japan, these are all countries that early on, roughly a decade ago realized that one thing is mandate access to a legacy facility; another thing is to consider an essential facility as a facility that hasn't been built yet.
3750 They took the decision to lift regulatory obligations on FTTx 10 years ago, N or P, and this has stimulated investment.
3751 Now, in a number of these countries, including Japan for example or South Korea, the interesting thing that has developed is that countries that formerly had a number of access seekers have evolved into countries where the electricity companies provide competition, they have deployed high-speed infrastructure and there's intense facilities-based competition in these countries that drives the deployment up to levels that are unbelievable at this stage.
3752 What about other countries? Well, some of the countries in Europe that are considered to be leaders are not leaders over Canada.
3753 The U.K., I've already mentioned. In the U.K. you have zero rural coverage and VDSL covers 47 percent of the population, cable 48. Roughly, these are the same areas. So the 20 percent that we were talking about before of the ones that are on DSL today in some areas of Canada, in the U.K. would be 52 percent and this is a much smaller territory.
3754 Other countries. Sweden has fibre-to-the-premises; 50 percent of those networks are publicly owned. Whether this is municipalities or state-owned, they've used cohesion funds from the EU to achieve a not really shocking 6 percent rural coverage of NGA.
3755 COMMISSIONER SHOAN: Okay. I see.
3756 MR. RENDA: So there's a number -- just to wrap up, in my opinion, when you do international comparisons you have to choose the right indicators. In my opinion, from looking at -- you might correct me if I'm wrong, but in the academia we consider three major indicators to be the most meaningful ones, which correspond basically to past, present and future.
3757 The penetration availability indicators are the ones that tell you what the country has achieved so far; the usage indicators tell you whether consumers are liking the current offerings and using them; and investment indicators are the ones that tell you whether the country is proceeding towards greater levels of competitiveness in this field.
3758 In all three sets of indicators Canada ranks at the top. I can go further into this.
3759 COMMISSIONER SHOAN: Great. Thank you for that answer.
3760 Mr. Daniels, you mentioned earlier -- you referenced earlier that there actually was a capacity-based issue with respect to BAS and that Mr. Gilmore could give us more information on that. Can we discuss that further?
3761 MR. GILMORE: Sure. (Off microphone). Sorry. Thank you very much.
3762 So as we currently understand it, with BAS access service, the wholesale ISP require what I would call a mini-AHSSPI in every --
3763 COMMISSIONER SHOAN: Could you lean into your microphone a little bit closer?
3764 MR. GILMORE: Sorry about that.
3765 The wholesale ISP would require what I would call kind of a mini-AHSSPI in every single serving CO where we serve DSL and FTTN customers today in order to get access to the same number of subscribers.
3766 So just for example to kind of put that in context, in Ottawa there are 12 central offices serving the community of Ottawa and Kanata and Orleans as an example. That's 360,000 homes and 44,000 businesses in those areas. With GAS, a wholesale ISP can have access to all those customers with a single connection.
3767 COMMISSIONER SHOAN: Right.
3768 MR. GILMORE: When you move to BAS, that's going to be a minimum of 12 AHSSPI connections. Just to kind of put that in perspective, when you compare that to our entire footprint, that's hundreds and hundreds of COs to kind of say why there's a component we need to consider from an AHSSPI perspective in a disaggregated fashion.
3769 In addition to that, we would need to -- in order to support all these mini-AHSSPI connections, we need to install a brand-new Ethernet aggregation switch or a fanout switch in order to support all those individual mini-AHSSPI connections for those individual ISPs -- in every single central office that's serving FTTN and DSL.
3770 And then in addition to that, we would have to reconfigure how we actually deliver Internet service today for Internet wholesale. Today, for wholesale GAS, it's designed in the exact same fashion that we deliver Bell's Internet service today.
3771 So we would have to redesign that in every single CO for every single access network element in those serving areas and then have the new service that we would be creating and building a brand-new layer 2 Ethernet service configuring discrete virtual networks for every BAS ISP on every single access network within that serving CO.
3772 COMMISSIONER SHOAN: So, Mr. Gilmore, if I can just stop you there.
3773 As I recall, CNOC isn't actually asking for the aggregated HSA or GAS service to be discontinued, it's asking for mandated aggregated and disaggregated.
3774 So presumably there would be an opportunity there for a provider such as yourself to say, you know what, we should probably make off-tariff deals for the aggregated service more favourable so we don't have to go through the headache of the disaggregated service or is that not a dynamic that would occur, in your view?
3775 MR. GILMORE: I won't comment on the business aspect. Maybe Michelle or --
3776 MS BOURQUE: Yeah. I would say our commercial deals are pretty aggressive and that, you know, our revenues have gone down, the subs have gone up and their per subscriber costs that they're incurring to us have gone down. So they're pretty aggressive deals.
3777 COMMISSIONER SHOAN: Okay, fair enough.
3778 MR. DANIELS: I think at the end of the day, Commissioner Shoan -- to your question -- if we're mandated that means you have to build all the systems, the expense and so on and so forth. So being mandated and then trying to negotiate with everyone to avoid doing it and whatever, one person says no, I really want it for this office, that's going to cause a huge expense if the whole system changes and so on.
3779 So I don't think it's realistic that we would be able to avoid all of the details which James was talking about by just --
3780 COMMISSIONER SHOAN: Sure.
3781 MR. DANIELS: It's different if it's negotiated, but as a mandated we're going to have to build probably that option and spend a lot of money and time.
3782 COMMISSIONER SHOAN: Okay. Just on the business case with respect to those added expenses, and I take your point that every network is different. Your network has specific technical configurations that may require more expenses in certain areas than others. If we were to pass some of those costs down to the competitors, would that make the transition for a mandated service easier?
3783 MR. DANIELS: Well, I guess it comes down to two issues. So we will take away as part of our answer between the two how we would suggest costing them and so on.
3784 COMMISSIONER SHOAN: Sure.
3785 MR. DANIELS: But the real question is you can get mandated but it all depends. Like there's no guarantee that they're going to stay on our network as opposed -- because they have alternatives.
3786 COMMISSIONER SHOAN: Right.
3787 MR. DANIELS: They have alternatives and so it's not like we can assume that they're going to be just there no matter what.
3788 MR. BIBIC: And you really do have to ask what retail market issue you're trying to solve and is it already being solved with, you know, market-based arrangements or with regulatory measures that are already there, that are serving them by all evidence well.
3789 So for a party to come forward and not meet the test that in the absence of this service there will be a substantial lessening of competition --
3790 COMMISSIONER SHOAN: M'hmm.
3791 MR. BIBIC: -- they have to cross that hurdle and on this one it's their burden.
3792 We have a tool that's there now that's working and then here's another tool that will be very costly to implement. What extra benefits in the form of reducing some lessening of competition will be achieved and then why do you need both? I mean if this isn't working, then prove that this is going to work.
3793 But you can't say I'm not going to prove that there's a problem and I'm not going to prove that this solves it and that this is not solving it, give them both to me. And at the same time, by the way, change the essential facilities test so that everything is essential, make all wholesale prices at the same essential facilities-based markup, and change the forbearance test so that nothing is ever forborne, and implement EOI so that CNOC members end up looking like cablecos or ILECs, whichever one they want, in every single respect. And then when asked, prioritize all these asks, the answer is they're all important.
3794 I mean ultimately -- sorry.
3795 COMMISSIONER SHOAN: No, that's fine.
3796 MR. BIBIC: At the end of the day there has to be a test to be met rather than I want it.
3797 COMMISSIONER SHOAN: Thank you for your fulsome answer.
3798 At paragraph 9 of your oral submission you made reference to a number of facts about the evidence with respect to Canada's broadband market. One of those aspects was usage and you made the statement that:
"Canadians are global leaders in broadband usage."
3799 Now, this is something we hear quite regularly in a variety of hearings and a variety of reports: Canadians are voracious consumers of the Internet, and that apparently is only increasing.
3800 So I guess it's a very basic question. If Canadians are such voracious users of the Internet, how is your FTTP investment "a massive risk"?
3801 MR. BIBIC: Because we are doing extremely well with -- first of all, we have FTTN. So FTTN is meeting -- cablecos have networks that are meeting the needs. We are investing in next-generation networks and have done so aggressively, starting first with FTTN and hopefully more and more FTTP, and those are meeting the needs as well.
3802 So when you're kind of looking at the next incremental community, I've got FTTN in Ottawa, do I go to FTTP? Well, I'm competing in the marketplace, I'm serving consumer needs, now something happens, a variable changes, it could be regulatory or something else, do I make that investment or not or do I -- it's back to the pace and extent of the deployment.
3803 I think Dan wants to join in too.
3804 COMMISSIONER SHOAN: Sure.
3805 MR. McKEEN: The risk is that yes, Canadians want to use the service but we have competitors, so we have cable competitors who have built out and we need to gain a certain amount of the market share in order to make our business case work.
3806 And if you look at Bell Aliant, our overall territory, which is a six-province view, so Atlantic and Ontario and Quebec, we've covered 37 percent of our territory with fibre-to-the-home and that's basically the business case stretched. But in 41 percent of the territory we have DSL competing against cable, so that's the challenging part for us.
3807 So we have to win enough in the territory where we have built out fibre-to-the-home in order to generate enough revenue that we can actually have the capital to build out in the other areas and we need the business case to improve in those areas in order to invest.
3808 So although Canadians use it a lot, if cable can serve that need more cost-effectively than we can, we won't get those customers and we won't be able to invest the money in order to do that. So we want to invest, we want to be competitive with cable all across, but they're the first movers and we're trying to catch up but the business case is more difficult for us.
3809 Maybe Andrea can talk about that, about how the -- you know, at the crux of it, it's more challenging for us to build fibre-to-the-prem to serve those customers than for the cable guys to do DOCSIS 3 on their technology, but I would like the experts to add on to that.
3810 MR. TRAMONT: I would just note that it is risky around the world, so that we see this phenomenon elsewhere, including in the U.S. where fibre builds have begun and some companies have adopted a fibre-to-the-node strategy, others fibre-to-the-home. Some have slowed fibre-to-the-home while they wait for demand to catch up.
3811 For example, when Google was deployed in Kansas City, one example, there was a series of news reports about trying to find apps that could consume all that bandwidth because in some ways they're outpacing, but the only way we get to that bandwidth is by having it out there, right.
3812 COMMISSIONER SHOAN: Yeah.
3813 MR. TRAMONT: The only way we find those apps is to have the capability in the marketplace. So I think fibre-to-the-home starts to tease or whet the appetite of Canadians and Americans for higher bandwidth uses and that's how we get this sort of cycle of innovation and investment that you want from all of your infrastructure providers.
3814 MR. RENDA: Yes, if I can mention something briefly about the other side of the story, I come from Italy originally. Mine is one of those countries in Europe in which Netflix has decided not to enter yet, mostly because the infrastructure is not sufficiently capable to support their traffic. This is happening in a number of other countries in Europe, mostly because of the absence of a suitable infrastructure.
3815 This is also affecting heavily the differences in usage. So the indicators of, for example, penetration of certain levels of broadband speed and the usage indicators are very much related to each other.
3816 COMMISSIONER SHOAN: Great. Thank you.
3817 I just have one last question, Mr. Chairman.
3818 Can you provide your thoughts on annual reporting with respect to network investments? There seems to be an expressed concern that if service were mandated in this proceeding it will not result in additional network investments if we were to have an annual reporting requirement for those taking advantage of those mandated services to demonstrate whether they had conducted network investments at the last mile, the middle mile, the first mile, what have you.
3819 Would that be a useful process perhaps even to inform the next wholesale services review?
3820 MR. BIBIC: Are you talking about reporting in terms of how many homes passed or the dollar amounts? Is it telcos, cablecos and others?
3821 COMMISSIONER SHOAN: I leave it to you to provide a suggestion on that.
3822 MR. BIBIC: Okay. Can we come back to you on that next week?
3823 COMMISSIONER SHOAN: Sure. No problem. Great.
3824 Those are my questions, Mr. Chairman, thank you.
3825 THE CHAIRPERSON: Thank you. Vice Chair Broadcasting, please.
3826 COMMISSIONER PENTEFOUNTAS: Good afternoon, ladies and gentlemen.
3827 I can't keep myself from discussing the Italian situation and maybe it's the fact that real-life Italian politics are much more interesting than the House of Cards. That might be what may be stopping Netflix.
3828 But on the matters at hand, if we don't mandate FTTP, will you willingly provide access to FTTP as you claim you will with HSA under negotiated terms and conditions?
3829 MR. McKEEN: So I think that I'm going to ask Michelle to answer, but the short answer is probably sometime in the future but not immediately. So Michelle can explain why.
3830 COMMISSIONER PENTEFOUNTAS: The answer is no?
3831 MS BOURQUE: Immediately, yes.
3832 The challenge, we have four kind of principles that are a little bit different in the FTTP area.
3833 So one, it is not a similar service in terms of how I delivered today from the front end of quoting pricing; flow-through automation. The downstream systems that have been developed have been developed exclusively by our retail divisions and are separate from wholesale and all of the systems and solutions that we deploy in wholesale enable the ability for the ISPs to be more streamlined in terms of how they buy their services today. So out of the gate it is a new service that needs to be developed.
3834 Secondly, our deployment in Ontario and Quebec is not significant at this point to warrant sort of that development of service from a wholesale perspective. There is less than 16 percent households passed with FTTP and so there is not nearly the demand. They are still in the deployment today.
3835 It's a tough business case in terms of being able to justify that the retail market, which you have heard them talk about, requires the triple and at a certain high percentage of win rate from a penetration perspective. The only service realistically that we would be selling in the wholesale space would be the intranet component at a higher speed and so it makes the business case justification on a wholesale level problematic.
3836 And lastly, I don't have a forbearance order that would allow me to offer that service on a commercial term basis regardless.
3837 MR. BIBIC: Vice Chairman, I think the answer really is in a very large sense kind of out of our control, so right now -- and here's why. Right now the focus is on building this and the business case in the immediate term assumes the winning of whole home revenues without mandated access. So you are asking for a commitment which is really hard to give, but the reason I say -- so that's the focus.
3838 Now, what's happening now, so with independent ISPs, they have access to GAS over TPIA -- sorry to GAS over FTTN and they have access to TPIA over cable. They are doing well, even in Quebec City where we have FTTH, right?
3839 COMMISSIONER PENTEFOUNTAS: I understand what they have access to. I am asking you if you will offer them something that for the time being they do not seem to have access to.
3840 MR. BIBIC: Okay. But most people even on FTTH are buying FTTN speeds. That's a quicker way to say it, and here is why it's out of our control.
3841 But it matters so much because it's the retail competition that is going to dictate what happens at wholesale, because what is going to happen is there is going to be a loser in the marketplace quarter by quarter, year by year, between cablecos and telcos and that one who is losing market share is going to be incented on whatever technology and whatever network to fill the pipe at wholesale. The other is going to follow suit.
3842 The proof is in the pudding. We see it on FTTN right now with TPIA versus GAS. There is competition at wholesale because we want to fill those pipes.
3843 COMMISSIONER PENTEFOUNTAS: And that competition will keep the ISPs alive over the next five years before, as you wish, they gain access to FTTP?
3844 MR. BIBIC: We are focused on building FTTP. What happens is, as more and more consumers migrate to those types of speeds there is going to be a retail loser in the marketplace who is going to ignite that wholesale market.
3845 So you are asking for a commitment tomorrow. I don't know what tomorrow is going to bring, but I think the retail market is going to cause a wholesale market to develop for FTTP as well.
3846 COMMISSIONER PENTEFOUNTAS: You began your statement by saying that you feel that the retail market is competitive today.
3847 MR. BIBIC: Yes.
3848 COMMISSIONER PENTEFOUNTAS: Was that your position four or five years ago?
3849 MR. BIBIC: Yes.
3850 COMMISSIONER PENTEFOUNTAS: It was at the time?
3851 MR. BIBIC: Yes.
3852 COMMISSIONER PENTEFOUNTAS: Ergo the statement that the sky was falling did not prove to be the case from five years back when matching speeds was an issue and FTTN access was an issue.
3853 MR. BIBIC: No, no. We never said back when we were considering matching speeds that your matching speed mandate will cause the retail market to no longer be competitive. We never said that. What we said is its competitive today. You don't need to mandate matching speeds.
3854 What we said is matching speeds will cause a slowdown in investment based on the business cases we filed. And we did not build as aggressively as we ended up thinking we would.
3855 COMMISSIONER PENTEFOUNTAS: No, I understand that. I heard that this morning.
3856 Had we not mandated would we have the competitive market we have today?
3857 MR. BIBIC: Okay. Well, that -- you know, we can go back in time and have a debate as to what caused that market to develop, you know. The genie is out of the bottle, so whether the Commission rubbed that bottle or something else cause that genie to escape the bottle, it is out of the bottle.
3858 COMMISSIONER PENTEFOUNTAS: I understand.
3859 It's a very simple question, though. Did the Commission's intervention contribute considerably to the competitive market that you yourselves have admitted exists today?
3860 MR. BIBIC: Okay. So I think what was a contributing factor in that respect, put in that context, is mandating of cable TPIA. But now we are six years later and the question is, was it necessary back then? We can quibble about that if you wish.
3861 The question is with what we see today, is removing GAS and TPIA as a mandated service -- will that cause the wholesale market to cease? I do not think so. Will mandating access to FTTP today -- is an absence of mandated FTTP -- will it cause the independent ISPs to no longer be able to compete? Absolutely not today.
3862 COMMISSIONER PENTEFOUNTAS: And will not mandating FFTP create a similarly competitive market four or five years down the road, as was the case four or five years ago?
3863 MR. BIBIC: Well, we either -- I mean, you can trust in the market or not, but I would say that on the -- I get your point. So you have to balance that with incentives to invest or getting us to build.
3864 So back to my point to the Vice Chairman of Telecom, let's focus on building, recognizing that they will be able to compete in the meantime. And if the world is not, as I believe it will be five years from now, the Commission is still here and has a jurisdiction to mandate access then if it is required.
3865 COMMISSIONER PENTEFOUNTAS: I will try and be quick with my questions and perhaps be quick with your answers.
3866 Do CNOC members grow the pie?
3867 MR. BIBIC: I think CNOC members, in terms of those net ads that I talked about before, it's partially a result of stealing share and the share of the pie is growing. But would the pie grow regardless? I mean, if you look at it compared to a wireless, how have providers grown the pie in wireless? You attack different segments of the market in your low-cost brands, which we own. We don't do that in the Internet market. They fill that niche.
3868 So probably the answer to your question is yes, but we could find other ways to grow that pie anyway by targeting specific niche is with different brands. We don't.
3869 COMMISSIONER PENTEFOUNTAS: The answer is yes but no.
3870 MR. BIBIC: No, the answer is probably yes. I don't have the data to support exactly what I'm saying. The answer is probably yes, but that doesn't mean that without them the pie wouldn't grow.
3871 COMMISSIONER PENTEFOUNTAS: Okay, yes.
3872 You talked about the fact that there is no incumbency advantage as regards FTTP. Given the fact that you still have a legacy ILEC infrastructure, you have a network, you have a significant customer base, you have more poles than anyone else going to people's homes, you have purchasing power and on and on and on, you also have fibre-to-the-node already in place, is it really fair to say that there is no incumbent advantage as regards FTTP?
3873 MR. BIBIC: We are bigger, yes. We have more customers, yes. That comes with certain disadvantages too, by the way. We hear CNOC members saying we are more nimble than those big guys. We provide better customer service than those big guys. So there are ways to neutralize that.
3874 Poles, they are mandated. They are a public good. Conduits, they are mandated. They are a public good. And FTTN, we don't use any aspect of FTTN at Bell Canada when we overbuild FTTH.
3875 COMMISSIONER PENTEFOUNTAS: Okay. You talked about the fact that 50 percent of your -- 80 percent of your customer base -- I think it was in Quebec City -- are at the 50 Mb speed.
3876 MR. BIBIC: Or below.
3877 COMMISSIONER PENTEFOUNTAS: Or below.
3878 I understand that, but networks and access to networks is not necessarily -- the thinking is not present day, but where we are going to be in a year or two years' time and it would be safe to say that not even five years from now, but in the very short term we will be well north of the 50 MBS speeds, will we not?
3879 MR. BIBIC: Well, I'm not -- in terms of the availability of what people are buying, we are already north --
3880 COMMISSIONER PENTEFOUNTAS: What people will demand.
3881 MR. BIBIC: The demand? Okay, I'm going to say that three years ago predictions internally were that there would be more people on the higher speeds in Quebec City then there are today.
3882 But, again, it's a balance that you have to judge. You have to judge whether or not you are going to tip the scales towards let's get more investment and really ignite this for the next couple of years or let's make sure that whenever these things get built there are multiple service providers able to offer these services at those speeds.
3883 I appreciate what you are asking and that's the balance.
3884 COMMISSIONER PENTEFOUNTAS: When Bell Aliant spoke of the fact that FTTP is 3 percent more expensive than FTTN, are you excluding the fibre drop in that calculation which is a third of your cost?
3885 MR. McKEEN: No, we looked at the entire piece and including the drop for the penetrations that we thought we were going to get.
3886 COMMISSIONER PENTEFOUNTAS: So given the fact that you are not dropping until you have a client, then it is at least 33 percent cheaper to build out FTTP as opposed to FTTN, if that's the case.
3887 MR. McKEEN: Yes.
3888 Maybe Sheldon -- maybe ask Sheldon. Sheldon is the engineer who designed the system.
3889 MR. MacDONALD: Yes. I mean you wouldn't include that cost until you actually loaded up the customer. So I mean, but there are also other costs you wouldn't include with FTTN including, you know, the modem and costs associated with grooming the outside plant, these types of costs until you loaded up the customer in some cases.
3890 COMMISSIONER PENTEFOUNTAS: At the end of the day, it was cheaper for you to build FTTP as opposed to FTTN?
3891 MR. McKEEN: It was.
3892 COMMISSIONER PENTEFOUNTAS: Okay.
3893 MR. McKEEN: I'm sorry, it was slightly more expensive. It was 3 percent more expensive to build fibre-to-the-prem --
3894 COMMISSIONER PENTEFOUNTAS: FTTP, right.
3895 MR. McKEEN: -- than FTTN. So I think we answered --
3896 COMMISSIONER PENTEFOUNTAS: Exactly. But when you subtract the one-third cost which is associated with the drop, given the fact that you don't incur that cost until you have signed that customer, then an FTTP build out is a third less expensive than an FTTN build out?
3897 MR. McKEEN: I think what we did is we compared what we thought our penetration was going to be under the two different scenarios. So we knew that we would get more customers under FTTN -- FTTP than FTTN and then we looked at our whole capital program and said which one will cost us more to be competitive in the marketplace? And we thought it was going to be 3 percent more, including the drops, like including the whole expense.
3898 COMMISSIONER PENTEFOUNTAS: That's under 100 percent scenario, an uptake of 100 percent scenario.
3899 MR. McKEEN: No, no, based on the number of customers we thought we were going to get over a period of time. So when we looked at our capital program we knew we wouldn't get 100 percent of the customers.
3900 COMMISSIONER PENTEFOUNTAS: Exactly.
3901 MR. McKEEN: We said here is what it cost us to do FTTN. This is how many customers we think we are going to be able to get under FTTN and this is the cost of that program.
3902 Then we said here is what we think we can build. This is what it will cost us with fibre-to-the-home. Here's how many customers we will get with the fibre-to-the-home. Here's how many total costs including the drops with fibre-to-the-home.
3903 So a full costing of both of them --
3904 COMMISSIONER PENTEFOUNTAS: Right.
3905 MR. McKEEN: -- and the fibre-to-the-home piece was 3 percent more money. So we said given that we think it has a better long-term investment and just because, as operators, as telcos we want to build the best technology, we have lots of engineers telling us, "Build the better stuff, build the better stuff, don't worry about it. It only costs 3 percent more". So that's what happened and we decided --
3906 COMMISSIONER PENTEFOUNTAS: I get it. But at the end of the day it's not costing you 3 percent more because the drop, the fibre drop is not included and that's a third of your cost.
3907 MR. McKEEN: Yes, but it is costing 3 percent --
3908 MR. DANIELS: Yes. I think -- yes, I think --
3909 COMMISSIONER PENTEFOUNTAS: When you include the drop.
3910 MR. DANIELS: No, no. I think where you're coming from -- if I follow your question correctly, what you are basically saying is if the customer doesn't show up, isn't that going to make it cheaper because you are saving a third of the cost? And so isn't -- so I think that's where, if I understand your question.
3911 I think what's missing in that is when we build fibre-to-the-premise we have to build to -- we don't build that we are going to sign up 100 percent of the homes, but we have to build out the capacity of that two-thirds to 100 percent.
3912 So if that customer doesn't show up, yes, we save that one-third on that cost, but that means that two-thirds that we spent has now got to be shared over a much smaller base, which increases the cost. So I don't think the -- I understand your --
3913 COMMISSIONER PENTEFOUNTAS: Balance it out from that perspective.
3914 MR. DANIELS: It still makes fibre-to-the premise more expensive, is my short point.
3915 MR. HENRY: And just one last point that Dan had said earlier.
3916 Remember also that FTTN -- we are comparing FTTP to FTTN in Atlantic. FTTN in Atlantic was more expensive to begin with than FTTN in other parts of our -- well, in Ontario and Quebec in Bell, for example.
3917 COMMISSIONER PENTEFOUNTAS: Right, given the density, the disparity with most of the region's serve points.
3918 MR. McKEEN: And also aerial, because in Atlantic we had more aerial which made the cost of FTTP come down.
3919 COMMISSIONER PENTEFOUNTAS: Yeah, cheaper than breaking concrete to lay down piping.
3920 I think Professor Hahn, briefly, on the Japanese example that you brought forward, because it was brought up yesterday and the day before that Japan had a 70 percent fibre-to-the-prem, high-speed fibre penetration and we have a 3 percent fibre penetration, if we are going to be comparing apples to apples, and the cost per megabit is four or five times greater in Canada than it is in Japan, is that information correct?
3921 MR. HAHN: Yes, the Japanese example is a very interesting example because Japan has adopted much more, let's say, flexible regulatory framework vis-à-vis NTT Docomo, so around 2005-2006, and allowed NTT Docomo to negotiate commercially the prices initially for the deployment of fibre-to-the-premises, so on a forborne basis.
3922 Some of the mavericks that were climbing the famous ladder of investment during the copper era such as SoftBank, they decided to go wireless and this has created a fertile ground for the emergence of facilities-based competition over time.
3923 I have to add that there are a number of conditions in Japan that make the deployment much cheaper. One thing is that most of the fibre goes up poles and it's cheaper --
3924 COMMISSIONER PENTEFOUNTAS: It's aerial.
3925 MR. HAHN: -- to deploy, as was said before.
3926 Second, the density of the population is unbelievable.
3927 COMMISSIONER PENTEFOUNTAS: Yeah.
3928 MR. HAHN: There's 120 million people in such a space so that's four times the population of Canada in a much smaller territory. So I mean the case for deploying fibre is completely different.
3929 COMMISSIONER PENTEFOUNTAS: And, lastly, there was a question that was missed and I will read it directly:
"In response to a question posed by Commissioner Molnar in relation to your responsiveness to service requests from your wholesale customers, you indicated that the extent of network reconfigurations that would be needed to satisfy such a request was an important factor in deciding whether to provide the customer with the facility or service it is requesting." (As read)
3930 I also seem to recall that you have indicated you have implemented multicasting functionality in your own networks. So the question is: Can you clarify whether you have provided multicasting functionality to wholesale customers and, if not, why?
3931 MR. DANIELS: Well, so, no, we have not.
3932 COMMISSIONER PENTEFOUNTAS: Right.
3933 MR. DANIELS: And again, because we are -- I come back to the different jurisdictions. We are the new entrant and so to the extent that they want to provide broadcasting service over the Internet network, that's absolutely fine. But to ask us as opposed to -- cable for example also does multicasting -- to ask us as the new entrant to have to do that -- and keep in mind, this would be a completely separate network. You can't do this over GAS because what is multicasting, just so -- it would be identifying what the program is in replicating that program.
3934 So if someone is watching TSN we would have to replicate TSN throughout our network because more than one end-user is watching it. So it's a completely -- yeah, so it's a completely separate network that you are talking about building. It's not GAS.
3935 COMMISSIONER PENTEFOUNTAS: But you are offering it to yourselves, but you are not offering it to your competitors? There is an inherent --
3936 MR. DANIELS: As a new entrant in the broadcasting --
3937 COMMISSIONER PENTEFOUNTAS: -- injustice there. Does anyone see that, or is the fact that you are a new entrant --
3938 MR. DANIELS: Where's the -- the injustice is supposed to be starting from the principle of the market failure.
3939 COMMISSIONER PENTEFOUNTAS: Justice is a big word, Mr. Daniels, a big goal. But there is --
3940 MR. BIBIC: Two competitive, two things --
3941 COMMISSIONER PENTEFOUNTAS: -- one may see it as uncompetitive.
3942 MR. BIBIC: One thing is there is intensive competition in the BDU market, number one.
3943 Two, is there a difference between providing multicasting to ourselves and others not having it, that in the technical sense of the word, the way the Commission interprets a test would be on its prima facie discrimination? But that's not the test. The test is if its undue discrimination or unjust discrimination. Then you have, as Jonathan said, and I won't repeat the answer, is you know you are kind of mixing the broadcasting test with the telecom network.
3944 So, no, we absolutely do not see the issue, competitive issue that is undermining, you know, the end-user market when it's already vigourously competitive. We are building these networks as the new entrant. So no, we don't see the issue.
3945 COMMISSIONER PENTEFOUNTAS: I already noted your answer on the triple play and the fact that you don't think that that is such a significant factor in determining what should or should not be made available to competitors. Final thoughts on that issue?
3946 MR. DANIELS: I just want to be clear that on GAS we make no -- we are blind to the traffic. If you are talking multicasting, it's a different network that we would have to build for the competitors to be able to know what they are sending and replicating it throughout our network. It's a complete -- like you are asking us for a completely different network and I don't know if James has anything to say about that.
3947 MR. GILMORE: I just want to really emphasize crystal clear, so there is no mistake, we are not doing any multicasts over our Internet service. We are just a victim to the other CNOC members, to Netflix, any over-the-top provider. We are not able to do any multicasts as a pure Internet service. The multicast is purely on our BDU-based service. I just want to make sure that's crystal clear.
3948 COMMISSIONER PENTEFOUNTAS: Mr. Chairman, thank you.
3949 THE CHAIRPERSON: All right. You have been up here for a while and I have a few more questions and I think legal has a few questions. So if that's okay with you, we will just keep ploughing through. Is that okay?
3950 That way we only -- we'll see you again at reply and we can end this panel at this point, although Mr. Bibic has already started his reply comments, I noted earlier, when he was commenting on CNOC's perspective.
3951 THE CHAIRPERSON: So my questions are very much -- take them in the context of FTTP and perhaps you can help me because I struggle with this, and it's with all due respect to the international comparison experts in the back row.
3952 But how useful and probative is it for the purpose of this hearing to delve into what happened in other jurisdictions, because inevitably it opens up a rabbit hole, a kind of mini trial about, you know, is the geography the same, is their density of population the same? Is the subsidization by any level of government the same, the capital markets at the time, the economy at the time, the strength or diversity of the various players in the market, the structure of the market.
3953 It just goes on and it forces us -- we have enough of having to figure it out in Canada. It forces us to almost develop knowledge and expertise well beyond Canada and I'm not sure if it really is probative. It's not that it's not valuable in other contexts, but for the purposes of this proceeding.
3954 MR. BIBIC: So we would say that, really, if what you are talking about FTTP, we have the stats as to where we are in deployment in Canada. We have our own domestic stats, you know, 14 percent nationally. I think we can all agree that it would be nice, great, actually if that number could accelerate and accelerate fast and that's what we are that's what we are looking to do. So I won't repeat the answer I gave to the Vice Chairman when you are balancing the two things and look at it again in five years.
3955 We are not saying that look at what happened here; therefore you must do this here. We are saying these are factors to consider based on what other people have been putting forward on the record as the anchors to their arguments, you know, Canada is lagging behind so we must do this.
3956 So we just wanted to
3957 THE CHAIRPERSON: But more at a high-level policy directional --
3958 MR. BIBIC: Exactly.
3959 THE CHAIRPERSON: -- level rather than -- okay. I saw somebody in the back row who may be wanting to add. I don't want to cut you off, it's not a lack of respect.
3960 MR. HAHN: Hi. I was simply going to say that I don't know what the word probative means, but I think that it's informative. And so if you can't find a place in the world where regulation has encouraged new investment for next-generation activities, I think that ought to inform your decision-making.
3961 That's all I'm saying.
3962 THE CHAIRPERSON: I understand.
3963 So moving on to another area, you have obviously -- and you have had discussions with some of my colleagues up here about Canada being a world leader, investment availability, speed penetration. I don't want to open up a debate on that. Obviously some people have, will, and will continue to disagree on that. It becomes a bit of a question of dogma and you can't really convince people, but that doesn't matter.
3964 Assume that that statement is correct. Then you use it -- and I point like for instance in your oral presentation today at paragraphs three and four together. You're saying, "Well, we are a world leader. Therefore, expanding mandated access rules would not be the right way to go", right?
3965 So I put it to you, though, in the other -- so it's not broke, you don't need to change it. So I put it to you with respect to the non-FTTP services, if we are indeed in agreement with your statement that it has been a success, why wouldn't we just do steady as you go? If it's not broke, don't fix it.
3966 MR. BIBIC: So a non-FTTP?
3967 THE CHAIRPERSON: A non-FTTP.
3968 MR. BIBIC: Okay. So it comes back to my genie is out of the bottle answer to Mr. Pentefountas.
3969 So a decision was made several years ago to mandate access and then extend it to the cable companies and now we have a vigourous retail market and a vigourous wholesale market. So you can certainly do steady as she goes and, in fact, our proposal is not just let her rip everywhere. We have a distinction between urban and rural. So if you find on the evidence that there is not enough or sufficiently a vigourous retail market then steady as she goes would be the right answer, I believe.
3970 If you find that you now have, based on the facts before you as a result of your previous decisions, a vigourous retail market and a vigourous wholesale market, then I think you can forbear at wholesale.
3971 THE CHAIRPERSON: You see, I struggle with the need for predictability, what the rules are. Every time we tweak, as tempting as that might be, the Commission's regulatory framework becomes part of the ecosystem. In fact we affect it in a way.
3972 So maintaining the rules as is, because I have heard you make arguments about a predictable environment within which to make investment decisions, one could also argue that maintaining the status quo for the non-FTTP would be a good thing.
3973 MR. DANIELS: I think our position sort of comes down to two different things: What is the impact of regulation? Obviously, as you say, you are part of the ecosystem. You matter, and we have talked clearly in FTTP about how that would impact investment.
3974 But what about other areas? I think our problem is the way we approach this issue. If we don't think there is a market failure, if there is enough competition, we don't think the regulator should be there. Now, you may say, well, what's the consequence, you know, will competitors ever agree?
3975 The consequence, why are competitors here asking for unbundled loops for example when clearly the demand is falling and there is clearly competitive alternatives, no doubt about it and their arguments, they have listed tests other places and they can't pass the test. Because they like having an alternative of regulation in order to try to use costing to try to put pressure on us to lower the rates because that just makes sense to try to always have an alternative regardless of whether it's needed or not, which I mean unbundled loops in my mind is just so clear.
3976 Similar with Ethernet and CDN, we have the evidence. Again, that is where I am trying to come back to. That's an area where, rather than just leaving the status quo you, in 2008, decided, okay, we think this is duplicable, we are stepping out of it here. We are giving a three-year and a five year transition and we're going to see what happens. And what happened is the competitors come here and say, well, the rates went up, but they didn't really. And that's -- I mean, the market, I know we haven't gotten into all that.
3977 THE CHAIRPERSON: We won't reargue everything you put on the record. It's --
3978 MR. DANIELS: No, no, and I'm not trying to. I'm just trying to pull it together to say that continuing regulation when it's not required can have -- the reason why they wanted is because they want to come in and to eventually argue for price decreases and put other pressure on as an additional lever beyond just the commercial market and we believe you can rely on the commercial market.
3979 MR. BIBIC: Mr. Chairman, I may be anticipating the wrong thing and the question, but for a whole number of reasons, and I would include policy reasons and my own kind of firmly-held views on where we want to be down the road, just broadly speaking with broadband Internet, I would say that it is more important not to mandate access to FTTP than it is to forbear from FTTN and TPIA, if I had to rank those.
3980 THE CHAIRPERSON: Well, that was going to be my next question, so it makes it much more efficient in these questionings when I guess I become predictable.
3981 THE CHAIRPERSON: In two places in your opening statements and elsewhere, I was struck by a turn of phrase you had, especially at paragraph two in 37, where you are saying is that the Commission refrain from mandating access to FTTP, could you give me paragraph numbers or sentences in either 2008-17 or 2010-632 where we actually, clearly and unequivocally, actually said that?
3982 MR. BIBIC: No.
3983 THE CHAIRPERSON: Because I put it to you, you are interpreting something rather aggressively.
3984 MR. BIBIC: It was on the table and then the Commission said in 2010-632, I believe, that we are going to impose -- you know, extend and impose speed matching on copper-based networks.
3985 THE CHAIRPERSON: Right --
3986 MR. BIBIC: You end up with the result that there has not been speed matching requirement on FTTP.
3987 THE CHAIRPERSON: -- but it is a bit of a stretch to say the Commission has already turned its mind to FTTP and made a clear policy statement.
3988 MR. BIBIC: We are not --
3989 MR. DANIELS: I think --
3990 MR. BIBIC: -- hold on -- we are not saying that in this proceeding you have turned your mind to this issue or 2010-632 prejudges what you are going to decide here.
3991 MR. DANIELS: Just to be clear --
3992 THE CHAIRPERSON: Well, I'm sorry for that. I mean in paragraph two you say "refrain from mandating access to FTTP". I mean that suggests a decision.
3993 The French version is different, but I suspect it might have been written in English.
3994 MR. DANIELS: If you look at --there's a footnote. Like, we put footnotes in for all of our statements.
3995 THE CHAIRPERSON: Yes, I saw that and that's why I'm asking specific references to that where we made that policy decision.
3996 MR. DANIELS: Okay. So our view was that you looked at it and decided not to do -- you did not mandate FTTP in 2010 in that decision, say, so that we are and you were very clear there is some references in there that this doesn't apply to FTTP. And so that's --
3997 THE CHAIRPERSON: There is a far cry between not doing something and, as you say at paragraph 37, the Commission's current policy is to refrain from mandating.
3998 MR. BIBIC: Okay, fair point.
3999 THE CHAIRPERSON: I thought perhaps, moving on, you could help me with something else again with FTTP in mind and it's the third leg of the essentiality test. Unfortunately I am going to have to pronounce duplicability. I hate that word. There is something in its synapse that prevents me from it slipping off the tongue.
4000 So if I understand correctly, you have argued that some had built those FTTP networks and we have had a discussion earlier about that. But I'm wondering how relevant any one of those particular examples are to the application of the duplicability test beyond those particular circumstances, because what may be feasible and practical in one geographic location in a particular set of circumstances theoretically may be interesting, but I'm not sure it gets us very far in a broader application of the test. In other words, that we almost have to go in a very much smaller geographic or regional application of it.
4001 MR. McKEEN: So I could do --
4002 THE CHAIRPERSON: Anyone.
4003 MR. McKEEN: Well, the 17 that are in their submission, and I know from our experience of competing with them, they are in very small, very small, very rural geographies so you would think, if you looked at the whole spectrum, that they had actually built out in some of the most difficult most challenging areas to build FTTP as opposed to being, you know, downtown Montréal or downtown Toronto or someplace else where there is very high densities and the costs are lower.
4004 THE CHAIRPERSON: Well, I guess that's my very point, is how can you extrapolate? Is it fair to extrapolate from those specific examples and their geographic positioning to a broader applicability of the ability to duplicate elsewhere?
4005 MR. McKEEN: So I would say yes because they are small and they are not -- they are in small geographies. The densities are not high and they are small companies.
4006 So they have been able to do this in the areas that are probably the most difficult to do it. Therefore, it states to the fact that there is good duplicability. If they can do it, then others should be able to do it because they don't have a whole bunch of advantages and they are really on the small end of the scale, the most difficult end of the scale.
4007 MR. DANIELS: And the other important point is there are no legacy components, so it's not like copper built to every home. So those two things combined, the fact that there are no Legacy components, it's a brand-new build and then you turn around and you see others are doing it --
4008 MR. McKEEN: And mostly out of their territories. Like those are mostly SILECs who their builds are outside of their territories where they are kind of the third player. There is normally us, cable, and then a small SILEC overbuilding with fibre-to-the- prem in that area and at small scales.
4009 THE CHAIRPERSON: Right, which you have just made the case that the fact you have ongoing operations probably gives you a leg up.
4010 MR. McKEEN: I really meant that they were at the small end of the scale. They do have ongoing operations, too.
4011 THE CHAIRPERSON: No, but you said they were also in most cases SIlECs that had something going on, right?
4012 MR. McKEEN: Right. But they are very small. By definition SILECs are small and they are small companies and don't have gigantic scale.
4013 THE CHAIRPERSON: Right. But I don't think --
4014 MR. McKEEN: I guess the question was, is it --
4015 THE CHAIRPERSON: -- you already dealt with that earlier, and I don't want to go back. You have had a chance to answer that.
4016 So my last question gets back to, again with FTTP, the Competition Bureau's position that we lack information; therefore we should monitor, report looking at all that, and I wanted your perspective on the impact of that on your own decisions on the climate of investment because in a sense what the Competition Bureau is saying is it almost keeps a sort of Damocles over the head, right, because they may at one point say, well, we do have to jump back in.
4017 And I wanted to put to you that between that potential sort of Damocles, not now but may be, versus a clear, "Yes, we are going to mandate this and this is the clear conditions, these are the markups, these are exactly how it is going to operate" between the two I suspect I know your answer. Between the two which is the preferable option, assuming the option of not doing anything ever is not on the table, just those two choices, the ongoing uncertainty of a potential regulatory decision to jump back in as opposed to a clear regime that you will be able to make your decisions with?
4018 MR. BIBIC: Definitely the answer you suspect we are going to give, which is between those two options it's much preferable to have no mandated access now and to look at it again down the road. Because a ruling that says we are going to mandate access now and here all the terms and conditions, we now know there is mandated access. We know. We have a lot of experience with mandated access and costing so we can predict some of these outcomes. And the model is going to result -- the model -- I say the model in the large sense, not just the Bell Aliant financial model. We know that we are going to get back into the issue of prioritizing investments and slowing the pace and the breadth. So I think definitely that that's why knowing now is not going to be conducive to more rapid expansion of these networks.
4019 Now, the other option, which is to say no mandated access now, let's look at it again. We can make our judgment call, okay. We are going to come back four and five years and we have faith that if we put forward the right evidence, the Commission will see that the retail market is competitive and so is the wholesale market. In fact, if we have a competitive retail market you don't need a regulatory measure at wholesale. But, be that as it may, if we put the evidence forward you will find that you don't need to mandate access. So we will have the benefits both of incenting that investment and debating it based on the proper facts then. So that's why we choose that option.
4020 THE CHAIRPERSON: Right. Are you assuming that we would only look at this in three, four or five -- I mean you seem to suggest it's further down. I didn't necessarily get that from the Competition Bureau's position that we may actually -- they may actually come to us and say, well, no, you have to jump in now after one, two, three years.
4021 I realize maybe we don't have the full evidence, but I just want to know if your answer to that question was that we wouldn't revisit for a set period of time?
4022 MR. BIBIC: While it would be nice to have, it would be nice to have clarity. So I said five years in my answer to Commissioner Menzies --
4023 THE CHAIRPERSON: Right.
4024 MR. BIBIC: -- Vice Chairman Menzies. You know, you just mentioned one, two, three. I think in one year we are not going to have --
4025 THE CHAIRPERSON: Right.
4026 MR. BIBIC: -- you know, it takes time to build so we are going to kind of end up at three anyway. That doesn't preclude -- I don't think the Commission could preclude itself from saying we are going to look at this in three years.
4027 But if there is a manifest competition problem earlier, I think you have to look at it. So saying we are going to look at it again in three or five years doesn't preclude you from looking at it earlier if there is a manifest competition problem.
4028 THE CHAIRPERSON: Okay.
4029 So I believe legal -- those are my questions. I believe legal may have a few questions.
4030 MS DIONNE: Yes, thank you, Mr. Chair.
4031 With respect to Bell Canada's deployment of FTTP in Quebec City, can Bell Canada undertake to provide the number of customers that subscribe to a bundle of two, three and four services respectively, as well as the proportions of subscribers to these various bundles relative to the total customer base served by your FTTP network in Quebec City?
4032 MR. BIBIC: We can do that, but I just want to clarify that we don't offer four services over an FTTP network because if you are now talking about wireless, first of all, we don't bundle services. We don't have wireless bundles and wireless doesn't run on these networks, so in a sense, if you go up to four products we are not getting into the same networks.
4033 MS DIONNE: Right.
4034 MR. BIBIC: So we can provide, though -- if it's satisfactory we can provide the number of subscribers who subscribe to one, two and three services over our FTTH network in Quebec City and then the proportions you asked for.
4035 MS DIONNE: Correct.
4036 MR. BIBIC: Okay.
4037 MS DIONNE: Mr. Bibic, you have indicated that following phase-out of the mandated status of high-speed CDN services and associated forbearance, all negotiated agreements reached with respect to the provision of these services were settled at rates below prevailing retail rates. Can you undertake to provide us with the data supporting this position, meaning the wholesale rates provided for each customer and prevailing retail rates?
4038 MR. DANIELS: I think you actually have all of that. There was an interrog that came in that we had to list every single contract that we have and there was a chart in that. So I actually think -- maybe we can discuss it afterwards with someone, but I think you actually have all of that because we had to go through every single contract.
4039 MS DIONNE: For high-speed CDN services?
4040 MR. DANIELS: For high-speed CDN, I'm pretty sure.
4041 MR. BIBIC: Yeah.
4042 MR. DANIELS: Yes, I'm pretty sure.
4043 MS DIONNE: Okay. We will verify that after.
4044 With respect to BAS implementation, I want to clarify which you will undertake to provide to the Commission. As mentioned by Vice Chair Menzies, competitors will likely request a mandated BAS service at only certain COs or head-ends and at different times and they might not use the service at all of the incumbent sites.
4045 In light of this, explain how Bell, through an undertaking if you wish, explain how Bell would propose that such a service be implemented in the event that its provision is mandated.
4046 Also, and given these same assumptions, provide Bell's views on how it should be compensated for the associated start-up costs, for example recovered up front from the first requester or recovered in a monthly rate, and provide these costs with underlying assumptions in devising these anticipated costs.
4047 MR. DANIELS: That's fine.
4048 MS DIONNE: Okay.
4049 And I would like to clarify another undertaking discussed with Vice Chair Menzies. Can you undertake to provide an explanation as to how and under what circumstances would raising the value ascribed to a company's cost of capital would result in lowering the overall rate resulting from the Phase II exercise?
4050 MR. DANIELS: Yes.
4051 MS DIONNE: Thank you.
4052 Last question. In response to a question from Commissioner Molnar you indicated that of the 20 percent of the former Bell Aliant network footprint provision over ATM technology, a substantial proportion of that footprint was contested by cable competitors.
4053 Can you undertake to quantify the extent of these overlapping footprints and also to indicate what proportion of your ATM footprint is contested by cable competitors utilizing DOCSIS 3 technology?
4054 MR. DANIELS: We will do our best. The reason why I'm taking that, we will see what we can do because it's not -- in order to map it to that level, you know, we don't have the accurate street by street whatever. Like I can tell you exactly what's on my network, how much, but we will do the best that we can.
4055 MR. BIBIC: I just want to clarify that. I may have misheard you, but the answer was with respect to Bell Canada, not the former Bell Aliant?
4056 MS DIONNE: Well, it's because we discussed Bell Aliant's ATM technology earlier, but --
4057 MR. BIBIC: Yes, but the 20 percent number is for --
4058 MS DIONNE: Yes.
4059 MR. BIBIC: -- it's for Bell Canada.
4060 MS DIONNE: Okay, thanks.
4061 Those are my questions. Thank you, Mr. Chair.
4062 THE CHAIRPERSON: Thank you. And I encourage if there is any confusion as to what the exact undertaking, you should do that lawyer-to-lawyer off-line, just so we have certainty on that.
4063 So I apologize again for keeping you on the stand this long, but this way you are free to go until we see you again at the reply phase. So thank you very much.
4064 We will adjourn until 2:30. Thank you very much.
--- Upon recessing at 1322
--- Upon resuming at 1432
4065 LE PRÉSIDENT : Bonjour. À l'ordre, s'il vous plaît.
4066 Madame la Secrétaire.
4067 LA SECRÉTAIRE : Oui. Merci, Monsieur le Président.
4068 Nous entendrons maintenant la présentation de Québecor Média et de Vidéotron.
4069 Alors, Monsieur Béland, je vous en prie. Vous disposez de 20 minutes. Allez-y.
4070 M. BÉLAND : Monsieur le Président, Messieurs les Vice-présidents, Madame la Conseillère, Monsieur le Conseiller, bonjour. Je m'appelle Dennis Béland et je suis vice-président, Affaires réglementaires, Télécommunications de Québecor Média.
4071 Permettez-moi de vous présenter les collègues qui m'accompagnent aujourd'hui.
4072 Immédiatement à ma gauche, il s'agit d'Hugues Simard, vice-président principal et chef de la direction financière de Vidéotron; suivi de Maxime Guévin, directeur général, Grossiste et service aux télécommunicateurs de Vidéotron.
4073 À ma droite, Daniel Proulx, chef de la direction technologique de Vidéotron; et Bertrand Hébert, vice-président, Marketing, Télécommunications de Vidéotron.
4074 Derrière moi, Patrick Désy, conseiller principal, Affaires réglementaires, Télécommunications de Québecor Média; à sa gauche, Patrick Simoneau, directeur, Projets spéciaux et planification stratégique, Finances de Vidéotron; et, à sa droite, Sylvain Archambault, directeur, Planification & Performance IP de Vidéotron.
4076 M. SIMARD : Merci, Dennis, et merci au Conseil de nous accorder l'opportunité de partager avec vous nos perspectives quant à la réglementation des services filaires de gros au Canada.
4077 À peine huit semaines se sont écoulées depuis que nous sommes venus ici vous parler du dossier des services sans fil de gros. Lors de cette audience nous avons exprimé la ferme conviction que ce sont les investissements en infrastructures qui permettent de maximiser les bénéfices pour les consommateurs. Nous avons réclamé des interventions ciblées de la part du Conseil, toujours dans la perspective d'éliminer des stratégies précises d'abus anticoncurrentiels et de promouvoir la concurrence entre fournisseurs dotés de leurs propres installations.
4078 Nos positions dans la présente instance s'appuient sur cette même conviction.
4079 D'ailleurs, Vidéotron n'est pas la seule à tracer un lien direct entre les investissements dans les infrastructures et les bénéfices pour les consommateurs. Pour citer le Bureau de la concurrence dans sa soumission du 27 juin 2014 :
« La concurrence fondée sur la mise à disposition d'installations est avantageuse puisqu'elle est la plus susceptible de déboucher sur une concurrence robuste et efficace à long terme. ... [L]es fournisseurs de services qui contrôlent leur réseau de bout en bout sont plus motivés à investir, innover et améliorer l'efficacité économique que ceux qui utilisent les réseaux [des autres] pour fournir des services de détail... »
4080 L'histoire de la concurrence en téléphonie locale est probablement la preuve la plus convaincante de cette réalité. En effet, la concurrence fondée sur la location de boucles locales n'a jamais réussi à se tailler une place importante au sein des consommateurs. Les opérateurs utilisant cette approche étaient trop dépendants de leurs fournisseurs sous-jacents, et ils étaient incapables de se différencier. Tout a changé lorsque la concurrence fondée sur les réseaux alternatifs -- à savoir, l'offre de services de téléphonie par câble -- est devenue réelle. Aujourd'hui, les parts de marché des câblodistributeurs dans certaines circonscriptions téléphoniques sont équivalentes, voire supérieures, à celles des fournisseurs titulaires.
4081 L'expérience de Vidéotron dans le marché des services sans fil permet également d'illustrer la nécessité d'encourager la concurrence fondée sur les infrastructures. Au début, Vidéotron opérait dans ce secteur strictement à titre de revendeur. Son impact a été modeste, le nombre d'abonnés n'ayant jamais dépassé le cap des 60 000. Tout a changé, par contre, à partir de septembre 2010, moment où Vidéotron a lancé son propre réseau, investissant au passage plus de 1,8 milliard de dollars pour l'acquisition de fréquences et la construction des installations. Nous avons dès lors été en mesure de différencier nos offres, d'ajouter des services innovateurs et d'agrandir de façon remarquable notre base de clients au point où celle-ci approche maintenant les 600 000.
4082 C'est à la lumière de ces expériences en téléphonie filaire et sans fil que nous prions le Conseil de porter un regard critique envers les promesses des revendeurs dans le domaine des services à large bande, et surtout de se demander à quel point ces joueurs contribuent véritablement à générer des bénéfices durables pour les consommateurs canadiens.
4083 Je passerai la parole à Daniel Proulx.
4084 M. PROULX : Merci, Hugues, et merci au Conseil.
4085 Je vous parle aujourd'hui avec la perspective de quelqu'un qui est responsable de la construction et de l'opération d'un réseau hybride fibre/coaxial qui rejoint près de 2,8 millions de résidences et entreprises à travers le Québec ainsi qu'une partie de l'Est de l'Ontario.
4086 Le réseau de Vidéotron est un des plus performants en Amérique du Nord. Depuis les cinq dernières années, nous y avons investi plus de 500 millions de dollars en moyenne par année, et plus de 1700 ingénieurs et techniciens sont fiers d'y être associés.
4087 Gérer le maintien et la modernisation d'un réseau d'accès Internet dans un contexte où la consommation de données moyenne par usager augmente de presque 50 pour cent par année est loin d'être une mince affaire. Un équilibre très délicat doit être maintenu entre le rythme des changements technologiques, la capacité de l'entreprise à investir et la responsabilité de l'usager à payer pour le service qu'il reçoit. Cet équilibre est particulièrement difficile -- on peut même dire menacé -- lorsqu'une partie des usagers échappe à cette responsabilité. C'est la situation que nous vivons présentement avec le régime d'accès Internet aux tierces parties (AITP).
4088 Fondamentalement, le processus d'approbation tarifaire AITP est inadéquat. Les tarifs qui en résultent ne reflètent pas le coût réel du réseau, et par conséquent nos revendeurs ne contribuent pas suffisamment à l'infrastructure qu'ils utilisent. Cette situation est d'autant plus préoccupante dans un contexte où les deux autres services qui utilisent cette même infrastructure -- la télédistribution et la téléphonie locale -- sont en phase de décroissance.
4089 Laissez-moi vous donner quelques chiffres. Actuellement, un usager AITP moyen contribue (à travers son fournisseur de services) 29,88 dollars par mois au maintien de notre réseau, tout en consommant deux fois plus de données qu'un usager moyen de Vidéotron. Cela représente un rabais d'à peu près 45 pour cent par rapport au forfait le plus populaire chez Vidéotron. Et je répète, l'usager AITP moyen consomme deux fois plus de données que l'usager moyen de Vidéotron.
4090 Une telle situation est injuste et ne peut pas continuer sans ultimement avoir un impact sur la capacité de Vidéotron à continuer à investir dans son réseau.
4091 Comment sommes-nous arrivés à une telle situation? Je vous propose deux principales raisons.
4092 Premièrement, pour toute étude de coûts déposée pour justifier un tarif AITP, le Conseil exige une période d'étude de 10 ans. Or, prévoir les paramètres de coûts d'un service d'accès Internet sur une période aussi longue relève de la pure spéculation. Qui plus est, le Conseil ne permet jamais aux tarifs de demeurer en place pendant toute la période demandée. La solution à ce problème est simple : s'assurer que la période d'étude corresponde à la durée de vie réellement anticipée du tarif. Nous considérons qu'une période d'étude de trois ans serait beaucoup plus réaliste.
4093 Deuxièmement, le personnel du Conseil a tendance à réviser -- de façon arbitraire, à nos yeux -- les paramètres de coûts soumis par les opérateurs de réseaux sous-jacents. Par le passé, des modifications discutables ont été apportées à divers paramètres, dont le taux de croissance du trafic par client, le taux d'augmentation de la productivité des équipements, les pourcentages d'attribution de coûts aux différents services qui partagent la même infrastructure, et j'en passe. Nous soumettons que nos études seraient plus fidèles à la réalité si le personnel du Conseil adoptait une approche plus juste et objective lorsqu'il juge nécessaire d'y apporter des modifications.
4094 L'impact de ces erreurs est réel et sérieux. Les revendeurs AITP, dont la base de clientèle est en croissance rapide, ne contribuent pas suffisamment aux réseaux qu'ils utilisent, ce qui met à risque la capacité des opérateurs sous-jacents à maintenir leur rythme d'investissement. Ultimement, ce sont tous les usagers -- de détail et de gros -- qui seront affectés.
4096 M. BÉLAND : Nous réitérons notre conviction profonde que les interventions réglementaires dans le marché des télécommunications doivent être ciblées, s'attaquer à des abus anticoncurrentiels spécifiques et reconnaître en tout temps que les avantages durables pour les consommateurs passent nécessairement par des investissements dans les infrastructures.
4097 Or, les recommandations mises de l'avant par les revendeurs de services à large bande dans le cadre de cette instance ne satisfont à aucun de ces critères.
4098 Le modèle Equality of Inputs, par exemple, mis de l'avant par le Consortium des Opérateurs de Réseaux Canadiens (le CORC), est une solution à la recherche d'un problème. Elle obligerait la haute direction de Vidéotron (et d'au moins sept autres câblodistributeurs et compagnies de téléphone) de consacrer la majeure partie des deux ou trois prochaines années à revoir l'ensemble de leurs processus opérationnels, comptables et de ressources humaines afin d'implanter ce qui ressemble à une séparation structurelle de leurs opérations de détail et de gros. Nous répliquons que toutes ces équipes de gens créatifs et compétents feraient mieux de se consacrer au développement de services innovateurs pour les consommateurs canadiens.
4099 Le modèle Broadband Access Service, pour prendre un autre exemple, forcerait les équipes techniques des câblodistributeurs et des compagnies de téléphone à revenir à la table à dessin afin de défaire la consolidation de points d'interconnexion demandée par les revendeurs lors de la dernière instance du Conseil à ce sujet. Cette partie coûteuse de ping-pong doit cesser. Nous soulignons d'ailleurs que la déconsolidation ne permettrait pas aux revendeurs d'offrir aucun nouveau service à leurs usagers.
4100 Partout au pays, les deux principales plateformes de services Internet haute vitesse se livrent à une concurrence féroce, alimentée par des investissements annuels de centaines de millions, voire de milliards de dollars. D'autres plateformes, notamment les réseaux sans fil LTE, exercent une discipline réelle et croissante sur le marché.
4101 Dans un tel contexte, nous soumettons qu'il serait approprié que le Conseil entame dès maintenant une déréglementation des services à large bande de gros. Parmi les modèles proposés dans le cadre de cette instance, celui de Bell Canada a le plus de potentiel, c'est-à-dire une déréglementation progressive qui débuterait immédiatement par les bandes tarifaires A et B -- les secteurs urbains les plus denses et où les forces de la concurrence inter-plateforme sont les plus vives.
4102 En parallèle, et dans la mesure où les services à large bande de gros continuent à être offerts par le biais de tarifs réglementés dans les bandes C, D et autres, nous réitérons qu'il sera important que le Conseil corrige les défauts les plus criants du processus actuel de tarification, tel que mentionné par Daniel plus tôt dans cet exposé.
4104 M. HÉBERT : Merci, Dennis.
4105 Une question qui a énormément suscité de commentaires tout au long de cette instance est le traitement à accorder à la revente de services à large bande fournis par le biais de réseaux de fibre à la maison, mieux connus sous l'acronyme anglais FTTH.
4106 Selon le cadre réglementaire actuel, tous les services à large bande fournis sur un réseau FTTH échappent aux tarifs de revente mandatés, tandis que tous les services DOCSIS -- même à des vitesses supérieures -- sont assujettis à une obligation de tarification de gros.
4107 À nos yeux, ce traitement asymétrique est non justifiable. Il n'est pas inutile de rappeler que les services DOCSIS les plus évolués -- soit DOCSIS 3.0 et 3.1 -- exigent des investissements très importants tant en termes de fibre optique qu'en conditionnement de réseau. Ces services sont d'une qualité équivalente à celles que l'on retrouve sur les réseaux FTTH. D'ailleurs, presque toutes les parties à cette instance s'entendent pour dire que les services DOCSIS évolués et les services FTTH font partie du même marché pertinent. Traiter ces deux services de manière différente en matière d'obligations de revente va clairement à l'encontre des principes de neutralité technologique.
4108 Cela dit, nous sommes très sensibles aux préoccupations soulevées par certains joueurs quant à l'impact que peut avoir une obligation de revente sur les plans de déploiement des réseaux les plus évolués, dont les réseaux FTTH. Ces mêmes préoccupations existent pour les services DOCSIS évolués.
4109 La solution pour soutenir les investissements n'est pas d'assujettir les réseaux FTTH à un régime de revente mandatée, mais plutôt de soustraire de manière symétrique l'ensemble des offres de services à large bande les plus évolués qui se retrouvent dans le marché. En procédant ainsi, le Conseil enverra un message très clair à l'industrie qu'il entend maximiser les bénéfices durables pour les Canadiens.
4110 Une approche juste et équitable consisterait à définir un seuil, par exemple 50 Mbps, à partir duquel les offres de services à large bande ne seraient plus assujetties à un régime de revente mandatée. Nous soulignons que, selon le Rapport de surveillance du Conseil, 95 pour cent des Canadiens sont actuellement abonnés à des services de moins de 50 Mbps.
4112 M. GUÉVIN : Avant de terminer, nous aimerions aborder rapidement le sujet des services Ethernet et d'accès numérique de gros. Vidéotron est un fournisseur alternatif de ces services au Québec et dans l'Est de l'Ontario. Notre intention est de jouer un rôle encore plus important dans ce marché au cours des prochaines années.
4113 À notre avis, la déréglementation progressive des services fibrés de gros en 2011 et 2013 a jeté les bases d'une concurrence réelle où les fournisseurs alternatifs comme Vidéotron peuvent concurrencer les fournisseurs traditionnels comme Bell sur un terrain égal. Ce marché fonctionne bien et rien ne justifie une nouvelle réglementation de ces services de gros.
4114 L'étude de Charles River Associates soumise par Bell Canada est éloquente à cet égard. Depuis la déréglementation de 2011 et 2013, les acheteurs des services fibrés de gros ont pu déployer leurs propres infrastructures et/ou diversifier leurs sources d'offre. Le Conseil détient les statistiques soumises en confidence par les différents joueurs quant au nombre d'édifices fibrés, et nous sommes confiants que ces statistiques démontrent que les forces du marché protègent les intérêts des acheteurs de gros.
4115 Tel que mentionné, Vidéotron prévoit accentuer sa présence dans ce marché au cours des prochaines années. Selon notre expérience, la réglementation des telcos traditionnels n'est pas nécessaire pour protéger les intérêts des acheteurs et pourrait même nuire à la diversification de l'offre. Quant à la réglementation des fournisseurs alternatifs, comme Vidéotron, ce serait tout simplement un non-sens.
4116 M. BELAND : Merci, Maxime, et merci au Conseil pour votre attention. Nous sommes maintenant prêts à répondre à vos questions.
4117 LE PRÉSIDENT : Merci bien, messieurs, le vice-président de la radiodiffusion débutera les questions.
4118 CONSEILLER PENTEFOUNTAS : Alors, bon après-midi. Je suis très content de voir qu'il y a tellement de consensus entre les rivaux traditionnels, Bell, Vidéotron. Vous semblez d'accord sur presque tous les points qui intéressaient vos collègues ce matin.
4119 J'avais une première question. Il y a certaines de mes questions auxquelles vous avez déjà répondu dans votre présentation orale aujourd'hui, que vous avez traitées avec plus de détails que dans votre présentation écrite qui date de quelques mois. Mais CORC ou CNOC nous a dit hier que la concurrence au détail est sous-développée. Est-ce que vous serez d'accord avec ce constat-là?
4120 M. BELAND : Que la concurrence au détail...
4121 CONSEILLER PENTEFOUNTAS : Est sous-développée.
4122 M. BELAND : ...sous-développée?
4123 CONSEILLER PENTEFOUNTAS : Oui.
4124 M. BELAND : Non, pas du tout. La concurrence au détail dans les services à large bande, ce qu'on a présentement, c'est deux plateformes technologiques filaires, le telco et le câblo...
4125 CONSEILLER PENTEFOUNTAS : Um-hum.
4126 M. BELAND : ...qui sont présentement dans une course au développement, à l'investissement, qui se concurrencent férocement dans le marché de détail. En plus, il y a l'impact des autres plateformes alternatives sans fil LTE qui se développent très rapidement, qui se densifient notamment dans les centres urbains, qui offrent une solution de rechange pour une partie importante de la population.
4127 Il y a aussi la présence des revendeurs, des membres du CORC dans notre marché. Donc, notre évaluation de la situation, c'est que la concurrence est très robuste, surtout encore une fois dans les centres urbains et qui militent en faveur d'une déréglementation progressive de ces services.
4128 CONSEILLER PENTEFOUNTAS : Mais vous avez de toute évidence également dit dans votre déclaration orale aujourd'hui que ces joueurs, les concurrents, les membres du CORC, vous mettez en doute s'ils contribuent véritablement à générer des bénéfices durables pour les consommateurs canadiens. Est-ce votre position, vraiment? Autrement dit, est-ce qu'ils ont contribué d'une manière quelconque au marché concurrentiel dans lequel on se trouve aujourd'hui, 2014?
4129 M. BELAND : Je peux demander à mes collègues Daniel et Bertrand à ajouter, mais, fondamentalement, ce sont des joueurs dont les plans d'affaires sont basés l'arbitrage tarifaire, fondamentalement. Ils apportent certaines innovations modestes. Essentiellement, c'est ça. Et, dans un contexte de rivalité entre plateformes comme on vient de décrire, on questionne, on qualifie comme étant très modeste leur contribution véritable au marché. Je ne sais pas si Daniel ou Bertrand veulent ajouter quelque chose.
4130 M. PROULX : Au niveau des développements technologiques pour les réseaux d'accès, il y a peu ou pas de contribution de ces joueurs-là. Ce qu'ils font, c'est souvent des évolutions qui sont plus au niveau des offres de service à la clientèle. Mais, fondamentalement, ils n'ont pas apporté de game changer dans l'équilibre de l'offre pour les réseaux d'accès.
4131 CONSEILLER PENTEFOUNTAS : Est-ce qu'ils n'ont pas contribué au développement et déploiement en offrant un autre client, un client de gros qui contribue à vous aider à déployer?
4132 M. BELAND : On dirait même le contraire. Le prix auquel ils achètent nos services n'est pas suffisant actuellement. Et ça a justement l'effet inverse. C'est de risquer l'expansion des réseaux les plus évolués.
4133 CONSEILLER PENTEFOUNTAS : Je ne veux pas mettre des mots dans votre... Je ne veux pas présumer de votre position, mais je vais vous poser la question suivante. Est-ce qu'on peut dire que ces concurrents ne rajoutent pas, contrairement, qu'ils nuisent au bénéfice durable du système et du consommateur canadien? Peut-être le prendre en deux phases. C'est-à-dire, jusqu'ici, en 2006, 2008 et aujourd'hui, est-ce qu'ils ont contribué ou est-ce qu'ils ont nui et quel rôle vont-ils jouer dorénavant?
4134 M. BELAND : Encore une fois, ça revient au fait que leur plan d'affaires, leur plan de marketing dans le marché, fondamentalement, mise sur l'arbitrage tarifaire. Donc, il faut se demander si l'arbitrage tarifaire contribue réellement de façon robuste à l'évolution des plateformes technologiques dans le secteur.
4135 Si vous avez déterminé le prix de gros par magie à perfection, leur présence est probablement neutre. C'est difficile d'imaginer une situation où leur présence est vraiment positive en termes de croissance du marché, mais c'est facile d'imaginer une situation où leur présence est négative si le prix est à un niveau inférieur à ce qui est justifié par les examens réels des coûts.
4136 CONSEILLER PENTEFOUNTAS : Et comme une espèce de profit (ph) de discipline sur les prix dans le marché, est-ce qu'ils ont un rôle à jouer?
4137 M. BELAND : Il faut revernir avec la même réponse. S'ils achètent des services à un prix approprié et équitable et s'ils ont, par exemple, une façon d'offrir un service à la clientèle qui, de quelque sorte, est meilleur ou peut-être à moindre coût ou peut-être est plus efficace, oui, ils ont potentiellement quelque chose à donner aux consommateurs.
4138 Mais si leur offre est basée uniquement sur un arbitrage tarifaire artificiel d'un prix de gros artificiellement bas, on ne voit pas encore une fois quel est l'avantage durable pour les consommateurs canadiens.
4139 CONSEILLER PENTEFOUNTAS : Jusqu'ici, leur présence n'a pas empêché le déploiement et l'investissement considérable de Vidéotron et d'autres dans le marché?
4140 M. BELAND : Notre préoccupation -- puis vous l'avez vu clairement dans notre exposé oral -- c'est qu'ils sont au point à commencer à nuire sérieusement à nos plans de déploiement.
4141 CONSEILLER PENTEFOUNTAS : Le discours que vous présentez aujourd'hui diffère en quoi de ce que vous nous avez présenté il y a six ou sept ans? Revenez en 2007, 2006, 2008, il me semble que le ciel était plein de nuages également à l'époque. Vous serez d'accord avec moi que le ciel n'a pas tombé sur terre. L'investissement a continué, le consommateur a continué à être intéressé par vos services et, vous, vous avez continué à investir dans ces services-là.
4142 M. BELAND : Encore une fois, je vais inviter Daniel à commenter sur la nature de la menace actuelle, mais, fondamentalement, oui, notre discours n'a pas changé. Je pense que notre discours depuis toujours a été que les services de gros, les revendeurs ont une contribution modeste à l'expansion, au développement du marché. On ne dit pas qu'ils ne devraient pas exister, mais ils devraient exister à un prix de gros qui est raisonnable. Je pense que ça a toujours été notre discours.
4143 CONSEILLER PENTEFOUNTAS : Êtes-vous prêt à dire que, en 2007, vous vous êtes trompé dans votre discours et que la catastrophe annoncée n'a pas vu le jour?
4144 M. PROULX : Bien, en tant que tel, on regarde plus le futur. On a...
4145 CONSEILLER PENTEFOUNTAS : Non, non, je comprends ça, puis on y arrivera. Mais revenons un petit peu en arrière, parce que, souvent, le passé est garant de l'avenir. Alors, en 2007, 2008, vous avez présenté le même discours que vous présentez aujourd'hui, c'est-à-dire que, de permettre à des concurrents d'utiliser nos réseaux, ce sera catastrophique pour l'investissement.
4146 M. BELAND : Mais...
4147 CONSEILLER PENTEFOUNTAS : N'est-ce pas le cas?
4148 M. BELAND : ...lors de la dernière audience, on n'était pas réfractaires aux modifications demandées, par exemple, la consolidation des points d'interconnexion. Ça, c'est quelque chose que Vidéotron a offert volontairement des années avant la dernière audience du CRTC. Et on l'a fait parce qu'on trouvait que ça avait du sens. Ça avait du sens pour nous, ça avait du sens pour nos revendeurs.
4149 On l'a offert volontairement. On a même été applaudis pendant des années à avoir été le premier à le faire. Donc, je questionne un peu l'orientation de votre question qui semble dire qu'on était très réfractaires la dernière fois.
4150 On a toujours questionné les obligations de revente à des prix artificiels, on a été consistants dessus depuis longtemps, mais on était des joueurs fairs la dernière fois. C'est mon avis.
4151 M. PROULX : On n'a pas d'enjeu en tant que tel avec revendre des services, en autant que ce soit au bon tarif. Ça fait que, le plus important pour nous, c'est que les tarifs soient établis d'une façon correcte, qu'ils tiennent compte des taux de croissance réels de la consommation qui vont être dans le marché pour nous permettre d'assurer une qualité de service à l'ensemble de nos clients pour qu'il y ait pas un groupe de clients qui finance l'autre groupe de clients au niveau des offres.
4152 CONSEILLER PENTEFOUNTAS : Et, ce que vous dites présentement, c'est que les revendeurs -- pour utiliser vos mots, là --, mais les concurrents, votre clientèle finance ou subventionne les clients des revendeurs ou des concurrents. C'est la position de Quebecor?
4153 M. BELAND : Oui et c'est très important que ce soit présenté comme tel parce que, ce qu'on entend dans les soumissions depuis 12 mois, ce qu'on entend à l'audience hier, par exemple, à la présentation du CORC, on entend uniquement les doléances, les accusations...
4154 CONSEILLER PENTEFOUNTAS : Um-hum.
4155 M. BELAND : ...de tarif excessif, les accusations de qualité et de service inférieurs.
4156 CONSEILLER PENTEFOUNTAS : Très excessif, même.
4157 M. BELAND : Bien, très excessif, les tarifs vont devoir être coupés par 10.
4158 CONSEILLER PENTEFOUNTAS : Ils sont très malheureux avec... Oui, exactement.
4159 M. BELAND : Et ce qu'on vous a présenté dans notre présentation de cet après-midi, c'est la réalité. Ce sont des joueurs qui contribuent en moyenne 29,88 dollars par mois à notre réseau, dont les utilisateurs utilisent deux fois plus que nos utilisateurs. C'est une belle opportunité d'arbitrage tarifaire qu'ils ont présentement. Et notre réalité telle qu'on vous présente, il n'y a pas une grosse correspondance entre ça puis leurs doléances.
4160 CONSEILLER PENTEFOUNTAS : Bien, les faits sur le terrain sont à peu près, vous dites, ils offrent cette offre à 29,98 en moyenne. Bell nous a dit ce matin qu'ils ont réussi à aller chercher 17 pour cent de leur marché. Ça comprend l'Ontario, le Québec. Vous, est-ce que vous avez un chiffre semblable à offrir au Conseil aujourd'hui, quant aux parts du marché de ces revendeurs?
4161 M. BELAND : On peut vous donner des chiffres absolus. Le nombre d'utilisateurs finaux des revendeurs sur notre réseau présentement, c'est de l'ordre de, je dirais, entre 80 000 et 90 000 plus ou moins.
4162 CONSEILLER PENTEFOUNTAS : Sur un dénominateur de?
4163 M. BELAND : La base de clientèle Internet de Vidéotron étant de...
4164 CONSEILLER PENTEFOUNTAS : Ce n'est pas 2,8? C'est moins que ça?
4165 M. HÉBERT : Je pense que c'est moins que ça.
4166 CONSEILLER PENTEFOUNTAS : Oui, oui, c'est moins que ça, il me semble.
4167 M. HÉBERT : Oui, c'est autour de 1.5 million, 1.6 million.
4168 CONSEILLER PENTEFOUNTAS : Un point cinq. Alors, 100 000 sur 15, c'est ça? Un quinzième du marché.
4169 M. BELAND : Et plus important encore, c'est la croissance. C'est depuis un peu moins de trois ans, depuis justement l'entrée en vigueur du nouveau régime...
4170 CONSEILLER PENTEFOUNTAS : Oui.
4171 M. BELAND : ...architectural et tarifaire de la dernière fois, la base de clients des revendeurs a été multipliée par six, six fois en moins de trois ans.
4172 CONSEILLER PENTEFOUNTAS : Vous restez quand même dans la moyenne nationale, tandis que nos amis chez Bell parlent d'un chiffre de 17 pour cent. Ici, vous êtes pas mal proche de ce qu'est la moyenne nationale. Ils sont pas toujours tout à fait dans le même quartier que le nombre d'utilisateurs du telco dans votre région desservie.
4173 Alors, si j'ai bien compris votre position sur le FTTP ou FTTH, si le Conseil était pour forcer l'accès obligatoire au FTTH, on doit faire de même pour DOCSIS 3.10.
4174 M. BELAND : Non, nous avons déjà l'obligation de revendre l'ensemble de nos vitesses DOCSIS.
4175 CONSEILLER PENTEFOUNTAS : Mais, là, vous voulez comparer DOCSIS 3.01 et 3.1 au FTTH.
4176 M. BELAND : Ce qu'on affirme, c'est : si le Conseil accepte la logique que, au-delà d'une certaine vitesse, les risques sont plus prononcés puis, en passant, c'est une affirmation qu'on fait également, c'est un point où nous sommes d'accord avec Bell, les plus grosses vitesses sont les services où les déploiements technologiques sont tels que le risque est plus prononcé.
4177 Notre point de vue, c'est si une des deux plateformes principales échappe à l'obligation de revente pour ces grosses vitesses-là, ça devrait être le cas pour l'autre aussi. C'est une symétrie technologique de base à notre point de vue.
4178 CONSEILLER PENTEFOUNTAS : Et, là, on parlera de vitesse qui dépasse les 50 mégabits par seconde, au-delà de ça, ça doit être exclu? Et est-ce que la barre... est-ce que ça commence à 50 ou est-ce que ça doit être 100?
4179 M. BELAND : La barre qu'on propose, c'est 50. Et une des raisons qu'on le propose, c'est parce que, selon les informations mêmes du Conseil, 95 pour cent des Canadiens présentement s'abonnent à des services avec des vitesses inférieures. Donc, encore une fois, l'opportunité pour les revendeurs dans le marché demeure très, très importante avec le seuil fixé à ce niveau-là.
4180 CONSEILLER PENTEFOUNTAS : Et il faut peut-être fixer le dénominateur en fonction de ce qui est disponible dans un marché. Québec a mis de l'avant que... à Québec, on est au fait que le FTTH est arrivé à Québec. Je pense que 80 pour cent de leur clientèle s'inscrit à des vitesses de 50 ou moins.
4181 Alors, là, on trouvera un 20 pour cent déjà qui migreront vers des vitesses supérieures quand ces vitesses seront disponibles. Alors, ce sera peut-être déjà plus élevé que ça dans les régions où les vitesses sont disponibles.
4182 Dans vos régions desservies, où des vitesses au-delà de 50 MBs sont disponibles, je dirais -- je ne veux pas présumer de la réponse --, mais il doit y avoir plus que 5 pour cent de votre clientèle qui s'inscrit à des vitesses supérieures à 50.
4183 M. HÉBERT : Non, c'est pas mal ce qu'on constate auprès de notre base de clients actuellement. Donc, la majorité des clients ont des vitesses en deçà de même 30 mégabits par seconde.
4184 CONSEILLER PENTEFOUNTAS : Et, dans votre réseau, quel est le nombre de clients qui ont accès à des vitesses supérieures à 50?
4185 M. HÉBERT : La presque totalité de notre clientèle a accès à sinon toute la... je dirais, en totalité, la clientèle a accès à des vitesses au-delà de 60 mégabits par seconde.
4186 M. PROULX : Quatre-vingt-dix-neuf point neuf huit.
4187 M. HÉBERT : Oui.
4188 CONSEILLER PENTEFOUNTAS : Quatre-vingt-dix-neuf pour cent?
4189 M. PROULX : Quatre-vingt-dix-neuf pour cent?
4190 M. PROULX : Quatre-vingt-dix-neuf point neuf huit pour cent.
4191 M. HÉBERT : En fait, les seuls...
4192 CONSEILLER PENTEFOUNTAS : Ils sont à quoi, à au-delà de 60 ou 100?
4193 M. HÉBERT : En fait, les limites...
4194 M. PROULX : À 60.
4195 CONSEILLER PENTEFOUNTAS : à 60.
4196 M. HÉBERT : Oui, c'est ça. En fait, c'est rendu à 120 mégabits par seconde actuellement que la couverture est plus limitée.
4197 CONSEILLER PENTEFOUNTAS : Et le DOCSIS 3.1 ou 3.0 sera en place d'ici...
4198 M. PROULX : Le DOCSIS 3 est déjà déployé.
4199 CONSEILLER PENTEFOUNTAS : O.K.
4200 M. PROULX : Le DOCSIS 3.1, on est dans les essais techniques puis la normalisation de l'équipement. Puis ça va prendre quelques années avant que l'ensemble de l'écosystème soit développé.
4201 CONSEILLER PENTEFOUNTAS : Et le 3.0, vous pouvez mettre des vitesses de 120?
4202 M. PROULX : La plus haute vitesse qu'on offre avec 3.0, c'est 200.
4203 CONSEILLER PENTEFOUNTAS : Deux cents. Et le 3.1 vous permettra d'atteindre le 250 comme le FTTP, en fait.
4204 M. PROULX : On espère mieux.
4205 CONSEILLER PENTEFOUNTAS : Ou même mieux, oui, good. Je vais peut-être laisser vos documents du jour puis retourner sur des questions qui ont été soulevées suite à votre présentation écrite de plus tôt cette année.
4206 Pour différentes raisons qu'on sait au cours des années, le Conseil a mandaté certains services, accès à certains services de gros pour des raisons autres que le test d'essentialité. En fait, je vais y revenir à ce fameux test d'essentialité. On peut prendre l'exemple du service 911 ou des structures de soutènement interconnexion.
4207 L'approche du Conseil de par le passé et ce test d'essentialité, quel devrait être le rôle de ces tests-là dorénavant? Y a-t-il d'autres outils qu'on peut utiliser au Conseil que ces tests-là?
4208 M. BELAND : On a abordé cette question un peu dans notre première intervention. Puis fondamentalement, nous sommes d'avis que le test d'essentialité devrait être votre test...
4209 CONSEILLER PENTEFOUNTAS : Tel quel?
4210 M. BELAND : ...pour décider si, oui ou non, un service de gros devrait être mandaté. Il y a pourtant deux exceptions, deux catégories d'exception. Ce sont des services de bien public premièrement. Donc, vous en avez mentionné, le 911, les structures de soutènement.
4211 CONSEILLER PENTEFOUNTAS : Oui.
4212 M. BELAND : On ajouterait ça à ça, les pylônes sans fil, sujet de notre audience. Donc, ça, c'est une catégorie, les services de bien public. Il y a une motivation autre que le test d'essentialité pour mandater...
4213 CONSEILLER PENTEFOUNTAS : Um-hum.
4214 M. BELAND : ... l'offre de ces services. La deuxième catégorie, ce sont les services d'interconnexion où, évidemment, c'est un bien en soi que, par exemple, tous les abonnés de service de télécommunication, de téléphonie au Canada puissent se parler. Donc, de toute évidence, l'interconnexion doit être mandatée aussi.
4215 CONSEILLER PENTEFOUNTAS : Est-ce que ça doit s'appliquer sur une base régionale plutôt que nationale? Je pense à Quebecor qui se concentre sur le marché québécois. Est-ce que ça... Oui.
4216 M. BELAND : Oui, que le test d'essentialité...
4217 CONSEILLER PENTEFOUNTAS : Oui.
4218 M. BELAND : ...soit évalué sur une base régionale, on n'a pas de problème avec ça. Ce n'est pas probablement pas une question du Québec versus l'Ontario versus l'Alberta, mais c'est plutôt probablement une question des centres urbains, ruraux, éloignés, et caetera. Il n'y a pas d'erreur à effectuer cette analyse sur une base régionale dans ce sens-là.
4219 CONSEILLER PENTEFOUNTAS : Dans ce sens-là, excellent. Peut-être retourner sur ces fameuses offres de services coupés, les bundles. J'ai vu des gens qui ne comprenaient de quoi je parlais. Alors, oui, les bundles -- pour parler en bon français -- tout le monde sera d'accord qu'ils sont d'une importante croissante?
4220 M. HÉBERT : D'une importance croissante? Moi, je vois le bundle plus comme, actuellement, une stratégie d'acquisition de clients qu'une stratégie de produits. Donc, effectivement, dans la vente de nos produits actuels, on travaille énormément avec nos canaux de vente pour favoriser la vente croisée lorsqu'on vend des produits à des clients.
4221 Souvent, les clients, ils viennent nous voir pour un produit en particulier, mais ils en ressortent avec plus qu'un produit. Quand on regarde les alternatives dans le marché, je pense qu'on peut facilement avoir l'abonnement télé chez Vidéotron. Le client ne bénéficie pas nécessairement d'une réduction de prix significative en prenant d'autres produits avec Vidéotron. Je pense qu'en télé, on parle de 3 dollars de réduction sur le prix lorsqu'il est accompagné d'un autre produit.
4222 Donc, le consommateur a le choix de prendre la télé chez Vidéotron, prendre l'Internet chez un concurrent et, à la limite, prendre la téléphonie chez un autre fournisseur. Donc, dans bien des combinaisons, le consommateur a des alternatives de faire affaire avec plusieurs fournisseurs.
4223 CONSEILLER PENTEFOUNTAS : Alors, ce n'est pas un marché de produits ni de gros ni au détail?
4224 M. HÉBERT : Le bundle?
4225 CONSEILLER PENTEFOUNTAS : Oui.
4226 M. HÉBERT : Non, pour moi, ça reste une stratégie d'acquisition clients.
4227 CONSEILLER PENTEFOUNTAS : De clients.
4228 M. HÉBERT : Et de fidélisation aussi. J'ajouterais le volet Fidélisation qui est assez important. Donc, on réalise que plus nos clients ont de nombres de produits plus ils sont fidèles à nous. Donc, c'est la suite dans une stratégie, oui, d'acquisition de clientèle, mais aussi de fidélisation de la clientèle.
4229 CONSEILLER PENTEFOUNTAS: Je pense que je connais la réponse à la prochaine question, mais parlons un petit peu vitesse et surtout de base vitesse.
4230 Quand on parle des vitesses de téléchargement inférieur à 5 MDS, est-ce que... puis ces vitesses-là demeurent pertinentes aujourd'hui ou elles seront d'une importance quelconque dans les cinq prochaines années?
4231 M. BÉLAND: C'est clair que si on regarde l'évolution des vitesses, j'avais fait un petit... j'ai un... si on regarde l'évolution des vitesses, là, dans les dernières... dans les dernières cinq années, dans les accès d'entrée, c'est clair qu'on a vu une augmentation des vitesses de façon significative.
4232 Je pense qu'on est passé de deux Mbps à dix Mbps pour notre service d'accès d'entrée.
4233 Donc, oui, c'est clair que ces vitesses-là risquent d'évoluer dans les prochaines années en fonction de l'évolution de la consommation de notre clientèle. Donc, on s'ajuste en fonction de l'évolution de notre clientèle et, évidemment, le vidéo risque d'être un élément important dans l'évolution des vitesses, la consommation de vidéo.
4234 CONSEILLER PENTEFOUNTAS: Tout à fait. Mais selon ces basses vitesses, est-ce que vous continuez à avoir un rôle réglementaire?
4235 M. HÉBERT: Si la question c'est par rapport à la définition du marché puis est-ce que c'est un marché ou plusieurs marchés, nous, notre réalité...
4236 CONSEILLER PENTEFOUNTAS: J'y arrivais, mais je ne l'ai pas dit.
4237 M. HÉBERT: Nous, notre perspective d'effectifs, c'est un continuum.
4238 CONSEILLER PENTEFOUNTAS: Et alors c'est un autre marché?
4239 M. BÉLAND: C'est un continu... non. C'est un gros marché avec beaucoup de mouvements entre les niveaux du...
4240 CONSEILLER PENTEFOUNTAS: Vous dites de cinq à 250 potentiellement, c'est un marché?
4241 M. BÉLAND: Oui, oui. Ah! C'est sûr que le cinq n'est pas un substitut pour le 200, mais le cinq est un substitut pour le 10 qui est un substitut pour le 20, qui est un substitut pour le 40 et pour le 60, jusqu'à...
4242 C'est un continuum où il y a beaucoup de mouvement à l'intérieur et un joueur qui va essayer de contrôler juste une tranche.
4243 Moi, je contrôle le 60 ou moi je contrôle le cinq ou moi je contrôle le 120, il va rapidement trouver que les clients sont partis ailleurs puis c'est justement l'expérience de Bell à Québec.
4244 Je crois que Bell a essayé de contrôler des vitesses, mais ils ont vu que lorsqu'ils vendent un service FTTP à Québec qui rend possible des vitesses assez importantes, une grande partie de la clientèle s'abonne quand même à des vitesses pas mal plus modestes.
4245 Donc, c'est un continuum, c'est un grand marché qui s'appelle le « marché des services à large bande ».
4246 CONSEILLER PENTEFOUNTAS: Mais n'existe-t-il pas un point de rupture où même vous avez mentionné la vitesse de 50 dans un autre contexte? Est-ce qu'au delà de la vitesse, au delà de 50 MBS on ne rentre pas dans un autre marché?
4247 M. BÉLAND: Non, on ne rentre pas dans un autre marché, mais la ligne est significative pour deux raisons : Premièrement, parce que la grande majorité des Canadiens ont des vitesses en bas de la ligne.
4248 Mais, deuxièmement, en haut de cette vitesse-là, c'est là qu'on commence à toucher des vitesses qui exigent des investissements plus importants, des risques plus importants. C'est ça la distinction à faire.
4249 CONSEILLER PENTEFOUNTAS: Et nonobstant ces faits-là, vous ne le considéreriez pas comme un autre marché?
4250 M. BÉLAND: Non.
4251 CONSEILLER PENTEFOUNTAS: O.k. Puis l'impact sur Québecor d'un accès obligatoire au service FTTP ou d'un USLD, un ILEC, Bell en l'occurrence?
4252 M. BÉLAND: Je pense que c'est déjà assez difficile pour nous à prévoir ce que Bell va faire avec FTTP qu'à prévoir ce que ses revendeurs vont faire avec, donc...
4253 CONSEILLER PENTEFOUNTAS: L'impact pour Québecor si l'accès obligatoire n'est pas exigé et, également, ne sera pas exigé non plus sur le DOCSIS 301, 3.0 et 3.1 sur votre déploiement, sur la rentabilité de Québecor?
4254 M. PROULX: C'est sûr que, là, on parle du 3.1 parce que 3.0 est déjà déployé.
4255 CONSEILLER PENTEFOUNTAS: Pardon, 3.1.
4256 M. PROULX: Au bout de 3.1 ça va favoriser un déploiement puis des investissements capitaux pour déployer à la grandeur de notre territoire comme on a fait avec 3.0.
4257 CONSEILLER PENTEFOUNTAS: Et dans l'éventualité que le Conseil décidait de réglementer les services HTTP, pouvez-vous commenter sur si et comment le Conseil peut compenser les titulaires pour couvrir leur risque... le risque à investissement bien entendu?
4258 M. SIMARD: Bien, écoutez, il y a plusieurs façons de regarder ça. Nous, ce qui nous semble peut-être plus intuitif et plus transparent, c'est la majoration des tarifs.
4259 On a parlé... vous avez parlé avec certains de nos concurrents et d'autres, de différentes méthodes, mais nous, ce qui nous semble le plus... parce que, vous savez, ces choses-là sont basées sur les modèles intégrés, hein!
4260 Toute structure de coûts est basée sur un modèle intégré qui n'est pas d'une simplicité à tout casser, hein, qui intègre différents accès, différentes vitesses, différent "timing" d'investissement.
4261 Donc, nous, ce qui nous semble plus simple dans un modèle, c'est de pouvoir, dans chacun des scénarios, dire : Bon, bien, vas-y dans ce cas de figure-ci, il y a une majoration de tarif de X et dans ce cas-ci, Y, et à ce moment-là on peut... on peut « dealer » avec chacun des scénarios de façon...
4262 CONSEILLER PENTEFOUNTAS: Alors, ce serait semblable à cette prime de risque qui est similaire à celle appliquée aux services FTTM?
4263 M. SIMARD: Oui, oui.
4264 CONSEILLER PENTEFOUNTAS: Vous ne prônez pas un changement dans les calculs?
4265 M. SIMARD: Oui, effectivement. Oui, tout à fait.
4266 M. BÉLAND: En terme de mécanisme, là.
4267 M. SIMARD: Oui.
4268 M. BÉLAND: Si vous avez fait la décision qu'il y a certaines vitesses ou certains types d'investissements qui méritent une prime à cause du risque, le mécanisme pour offrir la prime plus élevée, là...
4269 M. SIMARD: Certainement.
4270 M. BÉLAND: ... c'est via la majoration.
4271 CONSEILLER PENTEFOUNTAS: Oui. C'est une question, c'est un jugement sur le passé et, également, un regard vers l'avenir, on répond à ces deux perspectives en même temps avec cette question-là et votre réponse était claire.
4272 Également, c'est une hypothèse où les FTTPs seraient réglementés, est-ce que le consommateur devrait être capable d'obtenir différents services de différents fournisseurs?
4273 M. BÉLAND: Je n'ai pas compris tout à fait la question.
4274 CONSEILLER PENTEFOUNTAS: Est-ce qu'à l'intérieur, parce qu'on parle du "drop" puis le réseau dans son ensemble, il y a possibilité qu'un client de FTTP peut chercher ses services Internet d'un fournisseur, télé d'un autre, téléphonie d'un autre, ma question parle de ce partage potentiel des installations?
4275 M. BÉLAND: Je crois que...
4276 CONSEILLER PENTEFOUNTAS: Est-ce qu'on doit permettre ce genre d'approche?
4277 M. BÉLAND: Je crois que c'est une question qui est vraiment spécifique au TELCO puis à leur technologie HTTP puis l'architecture HTTP puis la configuration du "drop" puis l'équipement chez l'abonné, s'il y a des enjeux technologiques spécifiques à leur cas.
4278 Dans notre cas, n'importe quel client peut s'abonner à un service de revendeur aujourd'hui et ce n'est pas sur le point de changer.
4279 CONSEILLER PENTEFOUNTAS: Il peut chercher son service sur Internet de TEXAVI et un service téléphonie de Vidéotron, par exemple, sans problème?
4280 M. PROULX: À sa convenance.
4281 CONSEILLER PENTEFOUNTAS: Excellent. Vous avez déployé également un petit peu de HTTP vous-même, non?
4282 M. PROULX: Non.
4283 CONSEILLER PENTEFOUNTAS: Pas du tout? Nulle part?
4284 M. PROULX: On a débuté un petit voisinage pour faire des essais mécaniques, mais on n'a pas déployé.
4285 CONSEILLER PENTEFOUNTAS: O.k.
4286 Parlons un petit peu de HV. Si le Conseil arrêtait de réglementer le service HV, est-ce que vous allez essayer d'offrir un tel service aux concurrents?
4287 M. BÉLAND: Je crois qu'on se perd dans les acronymes même avec nos ingénieurs.
4288 CONSEILLER PENTEFOUNTAS: HSA, High Speed Access?
4289 M. BÉLAND: Ah! Le service de gros de TELCO?
4290 CONSEILLER PENTEFOUNTAS: De gros...
4291 M. BÉLAND: Parlez-vous du service PIA?
4292 CONSEILLER PENTEFOUNTAS: Non, non, non; PIA.
4293 M. BÉLAND: PIA?
4294 CONSEILLER PENTEFOUNTAS: PIA.
4295 M. BÉLAND: PIA. O.k. À revendre des services d'accès haute vitesse chez les câblodistributeurs.
4296 CONSEILLER PENTEFOUNTAS: C'est ça.
4297 M. BÉLAND: O.k. Et si HV...
4298 M. BÉLAND: Ce qu'on appelle... ce qu'on...
4299 CONSEILLER PENTEFOUNTAS: On se perd dans les acronymes. Ça va.
4300 M. BÉLAND: Et puis la question c'est : Si le Conseil met fin à...
4301 CONSEILLER PENTEFOUNTAS: Si on arrêtait, oui.
4302 M. BÉLAND: ... au mandat des reventes...
4303 CONSEILLER PENTEFOUNTAS: D'exiger l'accès obligatoire, oui?
4304 M. BÉLAND: Peut-être que Maxime qui gère nos relations avec nos revendeurs il veut commenter.
4305 M. GUÉVIN: Tout à fait. C'est un canal de vente important pour nous. La vente consiste en... Je suis le directeur général, je m'occupe de cette équipe-là et les revendeurs, on les connaît bien, on travaille avec eux de concert depuis des années.
4306 Alors, pour nous, c'est sûr, il n'y a aucun doute là-dessus, on préfère avoir des revendeurs sur notre réseau plutôt que sur le réseau des compagnies titulaires.
4307 Il n'y a aucun bénéfice pour nous de mettre ces revenus-là à risque au fil du temps. Au contraire, on aimerait mieux travailler de concert avec eux pour trouver un intérêt commun auprès des entreprises.
4308 CONSEILLER PENTEFOUNTAS: Et dans le cadre d'un câble, CABLECO, un câblodistributeur comme vous et non pas un TELCO, vos concurrents peuvent facilement offrir un "bundle" ou le fameux "triple" qui a été discuté plus tôt ce matin également.
4309 Rien n'empêche que dans la cadre de la HV vos concurrents peuvent concurrencer efficacement et offrir des services groupés, incluant télé, data et téléphonie?
4310 M. PROULX: Et il y en a qui le font déjà.
4311 CONSEILLER PENTEFOUNTAS: Qui le font déjà. Et si c'était réglementé, ça continuerait d'être le cas? Pour les fins de compléter le dossier, il faut que vous me répondiez.
4312 M. GUÉVIN: Oui, tout à fait.
4313 CONSEILLER PENTEFOUNTAS: Vous êtes sur le dossier, c'est clair. O.k.
4314 Il n'y a rien qui... les membres du CORC nous ont dit clairement que le CBB tel quel, devant la provision de certains risques est impossible.
4315 Vous, aujourd'hui, vous me dites le contraire. Vous ne voyez pas un problème dans le modèle et dans la fixation des prix?
4316 Je vous demande de répondre à la question du... aux préoccupations qui ont été soulevées par CORC hier, par CORC hier, quant à leur incapacité d'offrir ce fameux "triple play" si on tient compte des taux de CBB?
4317 M. BÉLAND: Peut-être que notre tarif AETB a deux composants appuyés par les études de Group Alder, de compostants de l'accès à un montant fixe par mois qui varie quand même selon la vitesse, mais qui est fixe par mois, et un composant variable qui est ce qu'ils appellent le CBB, le Capacity Base Building Rate, ces deux montants sont bien appuyés, sont justifiés et à toutes fins pratiques, ils font ce qu'ils veulent après.
4318 Ils pompent les données qu'ils veulent dans notre réseau, mais ils paient le coût de transmission de ces données.
4319 Et la preuve que le tarif est raisonnable en date d'aujourd'hui, on revient encore une fois au fait qu'ils pompent en moyenne deux fois plus de données que nos propres clients et nos revenus totaux par usager AIPP, c'est notre réseau, c'est de l'ordre de 29,88 $.
4320 Donc, deux fois plus de données, prix par mois très raisonnable qui offre une belle opportunité d'affaires, puis ce qu'ils... ils font ce qu'ils veulent avec.
4321 CONSEILLER PENTEFOUNTAS: Je comprends çà, mais n'empêche que les prix sont prohibitifs quant à leur capacité de fournir du vidéo. On s'entend là-dessus?
4322 M. BÉLAND: Mais Daniel va peut-être vouloir commenter, mais la question c'est comment ils veulent envoyer le vidéo, l'efficacité avec laquelle ils veulent envoyer le vidéo.
4323 Nous, notre... nous et vous, si vous me permettez, notre devoir ici ce n'est pas de prendre un modèle que les revendeurs aimeraient adopter puis faire en sorte que c'est rentable pour eux.
4324 Notre devoir ici c'est d'avoir des tarifs basés sur les coûts réels, appuyés par des études approuvées par le personnel puis par le Conseil.
4325 CONSEILLER PENTEFOUNTAS: C'est sûr et certain que ce n'est pas dans votre intérêt de perdre de la clientèle en tant que EDR à des concurrents qui veulent offrir de la télé guidée.
4326 M. PROULX: On ne distribue pas de télévision de cette manière dans nos propres réseaux à cause des contraintes économiques.
4327 CONSEILLER PENTEFOUNTAS: Alors, vous avez les mêmes contraintes économiques que les concurrents?
4328 M. PROULX: Exactement.
4329 CONSEILLER PENTEFOUNTAS: O.k. Monsieur Béland?
4330 M. BÉLAND: Mais pour répéter ce que Daniel a dit, on ne distribue pas les signaux de télévision de cette manière.
4331 CONSEILLER PENTEFOUNTAS: Oui, je comprends.
4332 M. PROULX: C'est que c'est non économique définitivement.
4333 CONSEILLER PENTEFOUNTAS: Quand c'est bien dit.
4334 M. BÉLAND: Et encore une fois, ce n'est pas notre... ce n'est pas notre rôle de le rendre économique. Ce sont... pour notre réseau d'accès, ce sont des "bites"...
4335 CONSEILLER PENTEFOUNTAS: Tout à fait.
4336 M. BÉLAND: ... qui passent comme d'autres "bites" qui mettent le même fardeau sur le réseau que d'autres "bites".
4337 CONSEILLER PENTEFOUNTAS: C'est noté. Et c'est offert aveuglément, là. Qu'est-ce qu'ils vont faire avec, libre à eux de décider et leur modèle d'affaire et ainsi de suite. Je comprends tout ça. C'est exact? C'est votre réponse?
4338 M. PROULX: C'est exact.
4339 CONSEILLER PENTEFOUNTAS: Parfait. Vous avez critiqué les fournisseurs des services concurrents pour ne pas avoir investi, pour ne pas vouloir investir dans leurs propres installations. C'est exact de le dire? Puis c'était même dans votre... dans votre présentation orale aujourd'hui et dans votre document écrit?
4340 M. BÉLAND: Il y a très très peu de preuve dans le marché que les revendeurs investissent dans leurs propres installations.
4341 CONSEILLER PENTEFOUNTAS: Là, ils nous proposent le service d'accès à large bande, le fameux BAS, qui encourage ces derniers à investir. Est-ce que cette indication de vouloir investir par ces fournisseurs de service ce n'est pas un élément important à considérer par le Conseil dans sa décision à savoir si le service devrait ne pas être réglementé?
4342 M. BÉLAND: Gros sujet, la fameuse BAS.
4343 CONSEILLER PENTEFOUNTAS: BAS.
4344 M. BÉLAND: Puis on va essayer de donner notre vision de ce sujet complexe.
4345 Les revendeurs affirment qu'avec le service BAS ils vont pouvoir se rendre viables, alors la possibilité pour eux d'investir dans des installations de transport.
4346 CONSEILLER PENTEFOUNTAS: Exactement. Est-ce que a va réduire le coût?
4347 M. BÉLAND: Le "midle mile", je crois qu'ils ont dire hier.
4348 CONSEILLER PENTEFOUNTAS: Oui, oui, avoir une réduction considérable pour eux autres c'est dans la partie transport?
4349 M. BÉLAND: Donc, c'est le supposé bénéfice du modèle BAS.
4350 CONSEILLER PENTEFOUNTAS: Hum, hum. Et que ça incite l'investissement?
4351 M. BÉLAND: Oui, ça incite l'investissement dans le transport. Le problème avec...
4352 CONSEILLER PENTEFOUNTAS: Qu'est-ce que vous avez contre ces concurrents, c'est qu'ils n'investissent pas. Voilà un exemple où ils veulent investir.
4353 M. BÉLAND: Oui. Et le problème avec le modèle, c'est... puis on peut même se mettre à la place des revendeurs pour l'instant.
4354 CONSEILLER PENTEFOUNTAS: Pourquoi pas.
4355 M. BÉLAND: Regardons le "business case" à la place des revendeurs. Ils affirment qu'en enlevant les éléments de transport de notre étude de coûts, parce que c'est ça l'idée.
4356 CONSEILLER PENTEFOUNTAS: Oui.
4357 M. BÉLAND: Ils vont... ils vont approvisionner eux-mêmes les éléments de transport. Donc, on enlève ça de nos études de coûts, il va y avoir une économie pour les revendeurs.
4358 CONSEILLER PENTEFOUNTAS: Hum, hum.
4359 M. BÉLAND: La première chose c'est la très grande majorité de nos coûts qui sont dans nos études de coûts sont dans le réseau d'accès. Le réseau de transport représente une petite fraction des coûts par rapport au réseau d'accès.
4360 Donc, premièrement, cette économie tarifaire qu'ils espèrent avoir va être assez modeste. Deuxièmement...
4361 CONSEILLER PENTEFOUNTAS: Mais là, le coût n'est pas dans l'accès... n'est pas dans le transport, mais dans l'accès?
4362 M. BÉLAND: La très grande majorité des coûts sont dans l'accès.
4363 CONSEILLER PENTEFOUNTAS: Alors, ils se tromperaient là?
4364 M. BÉLAND: Deuxièmement, donc voilà l'économie qui est déjà modeste.
4365 CONSEILLER PENTEFOUNTAS: O.k.
4366 M. BÉLAND: Après ça, il va falloir qu'ils paient leur propre transport qu'ils vont acheter d'autres fournisseurs. Peut-être qu'ils ont des tuyaux qu'on n'a pas, peut-être qu'ils sont extrêmement efficaces, mais on a des doutes qu'ils vont... qu'ils vont trouver des prix dans le marché du transport qui sont inférieurs à ce que Vidéotron est capable de faire dans son réseau à l'intérieur.
4367 CONSEILLER PENTEFOUNTAS: Oui, je comprends ça.
4368 M. BÉLAND: Puis peut-être que ce sont des génies puis ils vont trouver de belles économies quelque part.
4369 CONSEILLER PENTEFOUNTAS: Mais admettons qu'ils se trompent?
4370 M. BÉLAND: C'est ça.
4371 CONSEILLER PENTEFOUNTAS: Donc, pour prendre vos paroles?
4372 M. BÉLAND: Mais on voit que l'économie modeste est déjà rendue beaucoup plus modeste.
4373 CONSEILLER PENTEFOUNTAS: Hum, hum.
4374 M. BÉLAND: C'est la différence entre ces deux coûts qu'ils vont économiser.
4375 Après ça, il faut poser la question : Quels sont les coûts sur... dans le réseau de Vidéotron...
4376 CONSEILLER PENTEFOUNTAS: C'est ça que je veux savoir.
4377 M. BÉLAND: ... pour implanter le BAS.
4378 CONSEILLER PENTEFOUNTAS: Hum, hum?
4379 M. BÉLAND: Que Vidéotron va devoir récupérer de ces mêmes revendeurs-là et ce qu'on peut vous dire aujourd'hui c'est que ces coûts, et ce qu'on avait déjà des réponses à des demandes d'information, ces coûts sont très importants.
4380 Donc, une fois que le revendeur a fait le "tally" de ces coûts et de ces bénéfices, nous avons la ferme conviction qu'il y a à peu près aucun, et probablement aucun revendeur qui en fin de journée va frapper à la porte pour vouloir acheter ce service-là.
4381 C'est une préoccupation très importante pour Vidéotron d'avoir potentiellement un mandat de dépenser des montants très importants dans une restructuration de notre service de gros, dans un contexte où les acheteurs ne vont pas se présenter en fin de journée.
4382 M. GUÉVIN: Est-ce que je peux interrompre?
4383 CONSEILLER PENTEFOUNTAS: Mais s'ils se trompent -- excusez-moi -- brièvement, juste pour qu'on ne perde pas le fil, puis s'ils se trompent, c'est dommage pour eux autres. Ils vont en souffrir les conséquences de ce mauvais calcul, de ce calcul qui est fautif.
4384 Et s'ils sont prêts à payer des coûts supplémentaires sur votre réseau où est le problème avec ce modèle-là pour Vidéotron?
4385 M. BÉLAND: Le problème, et je vais inviter Daniel à commenter, mais le problème c'est avec la grandeur de ces coûts-là. C'est... et vous dites s'ils se trompent. Ils vont devoir se tromper royalement parce que ces coûts sont très importants.
4386 M. PROULX: Présentement, il faudra architecturer notre réseau pour accueillir plusieurs points d'interconnexion. Il faut comprendre qu'avant on avait cinq points d'interconnexion qui étaient demandés, seulement deux ont été utilisés pour qu'on se retrouve avec un point d'agrégation concentré.
4387 Ça fait que c'est... ce serait à discuter, mais c'est comme une fois il faut agréger puis l'autre fois il faut désagréger, ça fait que c'est...
4388 Mais pour nous, on n'a pas dans les têtes de lignes des installations qui permettent de... on n'a pas cette zone-là une fois que...
4389 CONSEILLER PENTEFOUNTAS: Impossible de les séparer?
4390 M. PROULX: Bien, il va falloir des...
4391 CONSEILLER PENTEFOUNTAS: Ou très difficile?
4392 M. PROULX: Il va falloir le faire. Il va falloir le faire, mais ça va coûter énormément d'argent. Puis, là, après ça, c'est de voir une fois que cet argent-là est dépensé, est-ce que ces gens-là ont toujours intérêt ou c'est toujours un gain pour eux? C'est notre questionnement.
4393 CONSEILLER PENTEFOUNTAS: Alors, ce n'est pas strictement le risque sur les membres du CORC, mais également un risque considérable pour Vidéotron de procéder par cette voie-là?
4394 M. PROULX: Exactement.
4395 CONSEILLER PENTEFOUNTAS: Voulez-vous rajouter quelque chose ou est-ce que nous avons tous ensemble répondu à la question?
4396 M. GUÉVIN: Oui, mais je voulais juste préciser. Daniel a été plus vite que moi sur la statistique, mais on avait cinq points d'interconnexion sur Montréal, Québec, Sherbrooke, Chicoutimi et Gatineau. Seulement deux étaient utilisés, qui étaient Montréal et Québec.
4397 Alors, on doute fort que les gens déploieraient du réseau jusqu'à Sherbrooke ou Chicoutimi par exemple.
4398 CONSEILLER PENTEFOUNTAS: Je comprends.
4399 M. BÉLAND: Et si vous me permettez, j'ajouterai deux points.
4400 Je répète que Vidéotron a volontairement consolidé ses points d'interconnexion avant la dernière instance du Conseil et on a été applaudi pour le faire.
4401 L'autre commentaire que je vais faire puis on est peut-être dans des commentaires sur les intentions des autres joueurs, mais je vais le faire quand même.
4402 On a l'impression, nous, en toute franchise, que cette idée-là de BAS, de points d'interconnexion désagrégés par douzaines à travers le Québec et l'Ontario, c'est une idée mise de l'avant par un très petit nombre de revendeurs qui sont déjà présents dans de nombreux centraux téléphoniques à travers ces provinces.
4403 Des joueurs comme Primus, peut-être un ou deux autres y voient peut-être un avantage de faire un « leverage » de ces investissements qu'ils ont déjà dans des centraux des Telco. Il y a peut-être un business case pour le faire côté Telco. C'est à eux à faire l'analyse.
4404 Et, on a l'impression qu'on a collé les câblodistributeurs à cette idée-là à la toute fin. C'est comme O.K. C'est une bonne idée pour une couple de nos membres dans le milieu des Telco. Mais, il faut que toutes nos recommandations soient symétriques. Donc, on va coller ça aux câblos aussi.
4405 Mais, en toute franchise, ça n'a aucun sens économique pour le moins dans le contexte d'un réseau de câblodistribution.
4406 CONSEILLER PENTEFOUNTAS : Je comprends.
4407 Avant de procéder à d'autres questions qui ont été soulevées suite à votre document, à votre document écrit de plus tôt cette année, Bell nous a dit ce matin que la vaste majorité de la clientèle qui est perte à ces concurrents ou revendeurs ne retournent pas sur le réseau. Ils sont perdus.
4408 Est-ce que vous avez des statistiques, des chiffres à l'appui? Est-ce que les clients de Vidéotron qui sont perdus par Vidéotron, est-ce qu'ils se retrouvent sur votre même réseau, mais par le biais d'un revendeur?
4409 M. PROULX : Je pourrais pas dire.
4410 M. HÉBERT : J'ai pas accès à ces informations-là.
4411 CONSEILLER PENTEFOUNTAS : Est-ce qu'il y a quelqu'un dans l'entreprise qui a accès à ces informations-là?
4412 M. BÉLAND : Précisément, les clients que Vidéotron perd, qui reviennent à titre de client d'un de nos revendeurs.
4413 CONSEILLER PENTEFOUNTAS : Via, oui. Via l'offre de gros.
4414 M. BÉLAND : On pourrait prendre un engagement pour voir si les informations sont disponibles dans la compagnie.
4415 CONSEILLER PENTEFOUNTAS : Merci.
4416 Dans sa deuxième ronde de réponses, encore, je retourne sur CORC. Puis, ils ont réitéré hier l'accusation d'un certain sérieux que...
4417 Ils ont argumenté que certaines entreprises des câblos ont refusé d'offrir à un concurrent certains services de gros sur la base que ces services ont été développés strictement pour l'utilisation d'entreprises et non pas pour l'utilisation résidentielle.
4418 Que diriez-vous à cette accusation-là, à la question?
4419 M. BÉLAND : Oui. C'est le cas pour Vidéotron. Vidéotron a des vitesses, des forfaits. Je devrais appeler ça des offres, pour le secteur affaires...
4420 CONSEILLER PENTEFOUNTAS : Oui.
4421 M. BÉLAND : ... qui ne sont pas disponibles sous notre tarif AITP.
4422 CONSEILLER PENTEFOUNTAS : On parle de quelle vitesse? On parle de vitesse... de quelle vitesse? Je ne vous mettrai pas des paroles dans la bouche.
4423 M. BÉLAND : L'exemple qui me vient à l'esprit, Bertrand, il y a un service 12 Mbps en amont et 12 Mbps en aval. Donc, un service symétrique 12/12.
4424 M. HÉBERT : En fait, le grand différentiel entre les accès consommateur ou résidentiel et les accès du service affaires, c'est le niveau de la vitesse en amont.
4425 Donc, le marché affaires, les clients affaires ont des besoins en vitesse en amont qui sont plus... beaucoup plus élevés que le marché consommateur. Donc, c'est de là que...
4426 CONSEILLER PENTEFOUNTAS : Bien, ces vitesses en amont ne sont pas offertes à vos consommateurs résidentiels?
4427 M. HÉBERT : Non, ne sont pas offertes.
4428 CONSEILLER PENTEFOUNTAS : Pas du tout?
4429 M. HÉBERT : Pas du tout.
4430 CONSEILLER PENTEFOUNTAS : Alors, ils se trompent...
4431 M. HÉBERT : Ça n'a...
4432 CONSEILLER PENTEFOUNTAS : ... dans le sens...
4433 M. HÉBERT : J'étais pas...
4434 CONSEILLER PENTEFOUNTAS : Vas-y.
4435 M. HÉBERT : Hum?
4436 M. BÉLAND : J'ai pas entendu la question, excusez-moi.
4437 CONSEILLER PENTEFOUNTAS : Bien, est-ce qu'il y a des services ou des vitesses qui sont offerts à de la clientèle Vidéotron, qui n'est pas disponible pour les concurrents?
4438 M. BÉLAND : La clientèle résidentielle de Vidéotron?
4439 CONSEILLER PENTEFOUNTAS : Si. Oui.
4440 M. BÉLAND : Aucune.
4441 CONSEILLER PENTEFOUNTAS : O.K. Ethernet, brièvement. La grande question à la fin de la journée, c'est, est-ce qu'on doit désabstenir sur les services Ethernet?
« En 2008, le Conseil a pris la décision d'éliminer graduellement le service Ethernet. Ainsi, les entreprises de câblo, telles que Vidéotron, ont investi dans les installations... »
4443 Vous avez déjà parlé de ça.
« ...pour s'auto approvisionner ces services. Et certains ont même accru leur investissement rendant le marché d'affaires de gros, rentable.
Aujourd'hui, certaines entreprises ont demandé à ce que les services Ethernet soient règlementés à nouveau. » (Tel que lu)
4444 La question est à savoir, est-ce que la décision de 2008 était la mauvaise décision, d'après vous?
4445 M. BÉLAND : Non, c'était la bonne décision. Puis, Maxime pourrait peut-être commenter plus. Mais nous, ce qu'on constate depuis la dérèglementation de ces services-là enclenchée par la décision de 2008, mais en vigueur quelques années plus tard, ce qu'on constate, c'est un marché qui fonctionne, qui est rationnel et rentable, qui donne la place à un nouvel entrant comme Vidéotron.
4446 CONSEILLER PENTEFOUNTAS : Justement, si la réponse est non, puis ça semble être non, est-ce que vous avez des preuves qui démontrent que les marchés sont en meilleure santé, ou minimalement, ne sont pas en pire santé qu'ils étaient à l'époque?
4447 M. GUEVIN : Mais, je peux parler pour nous, avec la dérèglementation de 2011 et 2013, ceux-ci ont eu un effet bénéfique sur nous. Les ventes ont été augmentées du côté grossiste.
4448 Ce qui est arrivé, c'est que, comme Bell l'a dit ce matin, ils ont réajusté leurs taux. Et, comme le client n'était plus captif des compagnies titulaires, il s'est tout simplement retourné vers les fournisseurs de services alternatifs.
4449 Donc nous, on a pu en bénéficier, de ça, puis ça a été quand même des revenus marqués à la hausse pour nous.
4450 CONSEILLER PENTEFOUNTAS : Merci.
4451 Vous avez déjà... on a déjà effleuré un petit peu la question. Mais la question de la télé IP pour les fins du dossier, est-ce qu'il y a un rôle... est-ce qu'il doit être considéré dans le cadre de ce processus ici, dans cette audience, c'est-à-dire?
4452 M. BÉLAND : Vidéotron ne fait pas de télé IP.
4453 CONSEILLER PENTEFOUNTAS : Non, non, je comprends.
4454 M. BÉLAND : Et, encore une fois, s'il y a des joueurs, des revendeurs qui veulent faire ça, puis il y en a déjà une couple qui le font, c'est à eux à le faire fonctionner à l'intérieur d'une structure tarifaire qui reflète nos coûts réels.
4455 CONSEILLER PENTEFOUNTAS : O.K. Je comprends votre réponse. Merci.
4456 Efficacité, et la fixation des tarifs. On rentre dans quelques questions à cet égard-là. Et l'idée toujours étant de créer des tarifs et une formule qui restent cohérents et prévisibles.
4457 Et, on va commencer avec un négatif, parce que la plupart des parties ont formulé des commentaires, il faut le dire, négatifs concernant la proposition mise sur pied d'un groupe de travail de CIDIC... de CDCI, CISC. Puis, on a entendu parler également de la même... la même question a été posée ce matin.
4458 Sur la tarification qui avait pour mandat de se pencher sur les questions liées à l'établissement des coûts, si le CISC ou le CDCI n'a pas le format approprié pour résoudre ces différends pour l'industrie, quel serait le forum approprié?
4459 M. BÉLAND : Le forum ou le processus approprié, c'est le processus actuel. C'est des études de coûts déposées par chaque compagnie, chaque fournisseur sous-jacent qui sont évaluées par le personnel du Conseil.
4460 Il faut toujours reconnaître que des réseaux sont différents, pas juste Telco versus Câblo, mais même à l'intérieur de la communauté des câblodistributeurs, les réseaux sont différents. Il y a des choix différents qui sont faits.
4461 Donc, chaque fournisseur sous-jacent devrait avoir le droit de déposer sa propre étude de coût. Le personnel du Conseil a les moyens puis la compétence pour faire des tests de benchmarking entre le réseau. Toujours reconnaissant que des différences entre les réseaux sont réelles et légitimes.
4462 Et je suis comme tout le monde, souvent très frustré par le processus phase II actuel. Mais, on n'a pas d'autres recommandations à vous faire pour un processus alternatif.
4463 CONSEILLER PENTEFOUNTAS : C'est le meilleur des pires systèmes.
4464 M. BÉLAND : Oui.
4465 CONSEILLER PENTEFOUNTAS : Et sur le CDCI et cette proposition, il n'y a aucune question liée à l'établissement des coûts qui pourrait être réglée par ce genre de groupe de travail?
4466 M. BÉLAND : Pas vraiment, parce qu'on essaie juste d'imaginer. On s'assoit. Daniel va peut-être nommer trois, quatre ingénieurs avec expertise dans différentes parties de notre réseau. Puis, on va s'asseoir dans une salle avec nos vis-à-vis de trois, quatre autres câblodistributeurs, puis avec les représentants de peut-être une douzaine de revendeurs, puis on va parler de comment notre réseau est « designé » et les coûts de notre réseau, les drivers de nos décisions d'investissement.
4467 Sérieusement, ça serait une partie de pêche monumentale avec... qui aboutirait à une série de disputes.
4468 CONSEILLER PENTEFOUNTAS : En tout cas. Ça a commencé négatif, ça reste négatif de A à Z.
4469 M. BÉLAND : Oui.
4470 CONSEILLER PENTEFOUNTAS : Ce compris.
4471 Également, une autre question sur le rôle que le Conseil peut jouer dans le cas des situations où il n'y a pas d'entente.
4472 Dans le cadre des négos, entre fournisseurs et FST, inévitablement, il va y avoir des différences face à la capacité des parties à mener à bon terme ces négos.
4473 Dans ces circonstances, est-ce que le Conseil peut-il s'assurer que le résultat constitue un arrangement qui comprend des taux justes, raisonnables, des modalités?
4474 Est-ce que le Conseil peut s'impliquer dans la résolution des échecs de négos, de négociations?
4475 M. BÉLAND : Mais à notre avis, dans la mesure où il existe des négociations sur des services de gros mandatés...
4476 CONSEILLER PENTEFOUNTAS : S'il y avait pas de tarif, par exemple.
4477 M. BÉLAND : Mais c'est là où j'achoppe.
4478 CONSEILLER PENTEFOUNTAS : O.K.
4479 M. BÉLAND : Nous, on n'a pas proposé un modèle ou un arrangement où il n'y aurait pas de tarif pour des services mandatés.
4480 Donc, des négociations sont possibles, sont même souhaitables si, de gré à gré, le vendeur puis l'acheteur, pour s'entendre sur quelque chose qui est mieux que ce qui est dans le tarif.
4481 Mais nous, on ne propose pas le modèle où il n'y a pas de tarif.
4482 CONSEILLER PENTEFOUNTAS : Ça me fait penser à quelque chose qui a été également soulevé par des membres du CORC hier.
4483 Je pense qu'ils ont dit « Non pricing discrimination » c'était leurs paroles et c'est modalités extra pécuniaires.
4484 Votre réaction face à cette allégation également, que sur des éléments autres que les tarifs, bien entendu, sur les vitesses, sur la qualité de services, sur toute sorte d'autres points, les titulaires leur mettent des bâtons dans les roues.
4485 M. BÉLAND : Oui. Vous me permettez d'exprimer quelques frustrations par rapport à ça, les accusations généralisées de mauvaise qualité de services pour les services de revente.
4486 Vous savez que le CORC a déposé une demande partie I, c'est ce qu'ils appellent une demande omnibus, il y a à peu près un an, à ce sujet-là.
4487 Et, dans cette demande, il y avait deux accusations précises contre Vidéotron, deux accusations factuelles et précises contre Vidéotron.
4488 Quand nous avons reçu ces allégations-là, nous avons fait des recherches. Nous avons sorti des fichiers, une recherche manuelle. Et nous avons déterminé que les deux accusations étaient totalement erronées, complètement dans le champ.
4489 Je vous donne un exemple. Il y a un revendeur membre du CORC qui nous accusaient de manquer nos rendez-vous d'installation -- j'oublie le chiffre exact -- mais 30 - 40 pour cent du temps. C'est quand même énorme, 30 - 40 pour cent du temps, le technicien de Vidéotron se présente pas à la porte du client, du revendeur, à l'heure convenue.
4490 Donc, et ça, ça nous a touché de près parce que c'est une fierté chez Vidéotron, justement, le contraire, que notre fiabilité de nos rendez-vous chez Vidéotron, c'est quelque chose dans laquelle Vidéotron investit énormément. Et le taux de rendez-vous manqués est extrêmement faible. On ne vous donne pas le chiffre précis, parce que c'est une information confidentielle.
4491 CONSEILLER PENTEFOUNTAS : Autrement dit, qu'il soit un de vos clients au détail ou le client du concurrent.
4492 M. BÉLAND : Mais, on utilise les mêmes systèmes.
4493 CONSEILLER PENTEFOUNTAS : O.K.
4494 M. BÉLAND : C'est le système de prise de rendez-vous, le système de dispatch des techniciens, les pratiques des techniciens. Tout est identique.
4495 Donc, comment est-ce qu'un revendeur peut avoir un taux de rendez-vous ratés de 30 - 40 pour cent, puis nos clients, c'est un taux extrêmement faible.
4496 CONSEILLER PENTEFOUNTAS : O.K.
4497 M. BÉLAND : Ce qu'on a...
4498 D'abord, on a prouvé que l'allégation était fausse et les deux allégations, les deux seules allégations ont été retirées.
4499 CONSEILLER PENTEFOUNTAS : On était là!
4500 M. BÉLAND : Mais, je pourrais continuer. Mais la frustration que j'exprime, c'est l'absence de faits derrière ces allégations. Parce que je répète, les revendeurs...
4501 Prenons par exemple la prise de rendez-vous. C'est les mêmes systèmes, aucune priorisation des clients de Vidéotron. « First come, first served. » Prochaine fenêtre de rendez-vous disponible, vous l'avez si vous êtes là devant nous.
4502 Donc, qu'ils appuient au moins leurs allégations avec quelques faits, ça serait plus intéressant.
4503 CONSEILLER PENTEFOUNTAS : Ils ont pu mettre de l'avant leurs frustrations. Vous avez exprimé vos frustrations. Alors, au moins, tout est sur le dossier. Et vous avez clairement expliqué que c'est exactement les mêmes systèmes. Alors, il n'y a pas de discrimination quelconque, autre que sur les prix et les tarifs.
4504 Ça va?
4505 Pour entrer brièvement dans l'établissement des coûts de la phase II ou autre, cet établissement des coûts visait l'ensemble des services de gros règlementé.
4506 Mais, est-ce qu'il n'y a pas des circonstances spécifiques où il pourrait être approprié de recourir à une autre approche?
4507 Est-ce que l'idée potentielle d'un détail minus et non pas un coût plus, peut être considéré?
4508 Est-ce qu'il y a des circonstances où on doit regarder une autre approche, qu'il soit « retail minus » ou autres?
4509 M. BÉLAND : Le « retail minus », c'est quelque chose que nous avons appuyé justement dans l'instance sur les services sans fil de gros pour deux raisons.
4510 Premièrement, le Conseil (ph).
4511 CONSEILLER PENTEFOUNTAS : J'étais là pour ça aussi.
4512 M. BÉLAND : Le personnel du Conseil n'a pas d'expérience à faire des analyses...
4513 CONSEILLER PENTEFOUNTAS : « Retail minus ».
4514 M. BÉLAND : ... phase II de réseau sans fil. Donc, ça serait une courbe d'apprentissage assez abrupte.
4515 Deuxième raison pourquoi ça fonctionne dans ce cas-là, c'est... les prix qu'on regarde, c'est les prix d'unité.
4516 Donc, votre prix moyen au détail pour une minute, c'est tant, c'est X. Puis, on va fixer un prix par minute de « Go de Y » megabytes, megabytes, minutes, minutes, messages, messages.
4517 Le problème, quand on arrive avec des modèles « retail minus » dans le domaine de l'internet haute vitesse, c'est que quand on parle de ce modèle dans ce contexte-là, on parle typiquement de forfaits. Donc, il y a un forfait de 50 Mbps avec une certaine consommation de données. Puis, en théorie, on pourrait fixer un prix qui est « retail minus » pour ce forfait-là.
4518 Le problème c'est, on n'est pas avec les unités maintenant. On n'est pas par minute, par megabyte, par message. On est avec un forfait.
4519 Et, qu'est-ce qu'on fait avec des forfaits illimités? Il y aurait un potentiel d'abus massif. Parce qu'imagine qu'il y a un forfait illimité qu'une compagnie vend pour 60 $ et un prix « retail minus » qui est fixé en bas de 60 $, mais le revendeur va chercher une clientèle cible des super utilisateurs qui consomme des terabytes. Puis le réseau est mis à terre.
4520 Donc, c'est pour ces raisons pratiques-là que le modèle « retail minus » marche pas dans ce contexte-ci.
4521 CONSEILLER PENTEFOUNTAS : Vous avez également commenté sur le modèle descendant « Top bottom »... c'est ça. « Top down model » pardon. Et est-ce que là aussi, il y a une autre formule? Est-ce qu'on peut trouver une autre façon autre que le « Top down model » qui sera approprié dans le contexte de l'établissement des coûts pour l'internet, l'offre d'internet?
4522 M. BÉLAND : Nous... on n'a pas regardé de modèle spécifique à cet égard-là. Donc, on revient au modèle phase II.
4523 CONSEILLER PENTEFOUNTAS : Également, était soulevé par Tellus et d'autres, l'idée des suppléments, des « Markup » les fameux « Markup » je comprends vous êtes contents avec le modèle.
4524 Mais un bref commentaire sur le modèle qui a été proposé par Telus, que les suppléments devraient viser, un, recouvrement proportionné de dépenses communes fixes, deux, les risques liés au réseau et trois, les retours sur investissement?
4525 Si vous n'êtes pas familier, vous pouvez vous engager à regarder et à revenir au Conseil quant à l'opinion sur cette proposition-là.
4526 M. BÉLAND : Oui, ça serait mieux. Spécifiquement sur le modèle proposé par Telus?
4527 CONSEILLER PENTEFOUNTAS : Telus, oui.
4528 M. BÉLAND : Oui, on va prendre l'engagement.
4529 CONSEILLER PENTEFOUNTAS : Parfait.
4530 Mais, peut-être au-delà du modèle, puis ça fait partie du modèle. Grand débat sur la majoration, grand débat sur comment récupérer les coûts qui soient pour les 3.1 ou le FTTP.
4531 Est-ce que quand on pense au recouvrement de coûts, au retour sur l'investissement, aux obligations envers les actionnaires, est-ce qu'ils sont pas expressément calculés en fonction du coût de l'équité, coût de la dette, coût en capital?
4532 Est-ce qu'on ne va pas rentrer tous les risques dans ce calcul-là ou est-ce qu'ils doivent faire partie de la majoration, ces fameux « Markup »?
4533 M. SIMARD : Je serais...
4534 Je reste toujours dans l'établissement des coûts et comment les récupérer.
4535 CONSEILLER PENTEFOUNTAS : Absolument. Absolument.
4536 M. SIMARD : Et, sans partager peut-être la passion de mon collègue de chez Bell de ce matin pour le cost accounting et l'analyse financière, je voudrais vous dire que je partage quand même son opinion que, quand on parle de « cost of capital », c'est un concept qui est compliqué, qui est basé dans un modèle comme ça sur plusieurs hypothèses.
4537 Et, si je peux me permettre l'opinion peut-être de quelqu'un de finance, c'est qu'à partir du moment où on multiplie les hypothèses et les variations sur les hypothèses, notamment du côté financier, dans un modèle financier, donc sur le cost of debt puis le cost of capital, which leads to the WACC.
4538 CONSEILLER PENTEFOUNTAS : Oui.
4539 M. SIMARD : À mon avis, ça ouvre la porte à interprétation, à critiques, etc.
4540 Donc, si l'objectif... et comme l'objectif c'est vraiment de rémunérer la prise de risques.
4541 CONSEILLER PENTEFOUNTAS : Oui.
4542 M. SIMARD : À mon avis, gardons ça simple, gardons ça transparent et une majoration des tarifs permet selon nous d'arriver à cet objectif-là de façon beaucoup plus directe.
4543 D'autant plus, j'ajouterais que -- et là, je suis assez d'accord avec mes collègues -- que ce n'est pas automatique ou ce n'est pas nécessairement vrai que la majoration, par exemple, du coût de capital mène justement à la reconnaissance de la prise de risques, et donc, à la majoration -- pas nécessairement en tout cas -- à la majoration des tarifs.
4544 Si vous voulez, c'est peut-être pas nécessaire de rentrer dans ce détail-là aujourd'hui. Mais on serait tout à fait prêt, je pense, à prendre un engagement pour vous revenir dans ce détail-là.
4545 M. BÉLAND : Tout à fait.
4546 CONSEILLER PENTEFOUNTAS : En parlant de la majoration, est-ce plus simple de faire le calcul quant au retour sur un risque plus élevé dans la majoration? En fin de compte, c'est la façon la plus simple d'arriver à un coût... à une formule?
4547 M. SIMARD : Oui, exact.
4548 CONSEILLER PENTEFOUNTAS : Puis c'est votre position que ça doit être dans la majoration?
4549 M. SIMARD : C'est notre position, tout à fait.
4550 CONSEILLER PENTEFOUNTAS : Là, vous vous alignez pas mal avec la proposition de Bell de ce matin?
4551 M. SIMARD : Absolument. Puis comme je disais, surtout que la deuxième façon de faire avec le coût de capital, selon nous, ne mène pas nécessairement à l'objectif visé.
4552 CONSEILLER PENTEFOUNTAS : Parce ce que le coût et le risque dépendent du projet et du territoire, et impossible...
4553 M. SIMARD : Effectivement. Tout à fait!
4554 CONSEILLER PENTEFOUNTAS : Quand t'empruntes sur une base globale puis à l'intérêt de ça, l'entreprise décidera où ce sera plus approprié d'investir?
4555 M. SIMARD : Ça, c'est le côté compliqué. Ça, ça répond au côté compliqué des choses, et ça, je suis tout à fait d'accord avec mes collègues de Bell de dire qu'on ne peut pas appliquer un coût de capital différent pour chacun des sous-secteurs de l'investissement. Nous, on emprunte globalement, et après ça, on priorise nos différents investissements.
4556 Mais je faisais référence surtout au fait que dans la formule d'une structure de coûts, et donc d'un modèle intégré, il est tout à fait possible, et même ça arrive, que l'augmentation du coût de capital peut en fait n'avoir aucun impact, voire un impact légèrement négatif, sur le tarif nécessaire pour rémunérer la prise de risque.
4557 Et comme je vous dis, on peut tout à fait vous fournir... on a un modèle qu'on pourrait tout à fait vous fournir pour vous donner des exemples de ces situations-là.
4558 CONSEILLER PENTEFOUNTAS : O.K. Je pense pour moi, ça va. J'ai sans doute manqué certains éléments mais qui se trouvent dans ce que vous avez déposé plus tôt cette année. Mes collègues ont sans doute des questions à vous poser. Merci.
4559 LE PRÉSIDENT : Merci.
4560 Je crois que le vice-président de la télécommunication a une ou deux questions.
4561 COMMISSIONER MENZIES: Thank you.
4562 Just quickly to follow up on what you just told my colleague. You said you would be willing to share a model with us of where that applied?
4563 MR. SIMARD: Yes. Yes. That's what I said, yes.
4564 COMMISSIONER MENZIES: Okay. So can I sort of get you on the record saying that you will?
4565 MR. SIMARD: We will.
4566 COMMISSIONER MENZIES: Okay. Thank you.
4567 I just really have one other question and it's in terms of clarification, and I may have missed something in interpretation.
4568 When you were talking about the contribution of small competitors, what I understood was said was that you didn't -- you said there was little evidence of competitors investing in facilities and I, just as a matter of clarification, wanted to know whether you were talking about specifically in the market that you serve primarily presently or if you were speaking more broadly, in part because I just heard Bell this morning saying they had 17 facilities-based competitors.
4569 MR. BÉLAND: Yes. We were referring specifically to our resellers in our market, is there any evidence that they're investing in anything, and the evidence in that respect is extremely weak.
4570 COMMISSIONER MENZIES: Okay. Because the majority of Bell's competitors are SILECs, right, and based in Ontario, et cetera, so you wouldn't have seen them.
4571 That's really all I wanted to know, was just clarification on what your position was there. Thank you very much.
4572 LE PRÉSIDENT : Monsieur le Conseiller Shoan.
4573 COMMISSIONER SHOAN: Thank you very much, Mr. Chairman.
4574 It just struck me that I asked Bell earlier today whether they could conceive of a reporting model, an annual reporting model whereby we could gain some annual information with respect to network investments made by competitors who are perhaps taking advantage of a mandated access rate and what that would look like, in order at the very least to build a bit more of a fulsome record for the next wholesale services review.
4575 If you could turn your thoughts to that and in the context of your undertakings provide some information about what sort of reporting model that would look like, I would appreciate that.
4576 MR. BÉLAND: I guess the first comment I would make is that in the context of the Commission's annual telecom survey --
4577 COMMISSIONER SHOAN: M'hmm.
4578 MR. BÉLAND: -- in March of every year, we already provide quite an amount of information. For example, my recollection is we even go so far as providing coverage maps of which technologies, which speeds are available over which areas, that sort of thing --
4579 COMMISSIONER SHOAN: Absolutely.
4580 MR. BÉLAND: -- as well as our aggregate investment figures. So I'm just wondering what further granularity or precision you would be looking for.
4581 COMMISSIONER SHOAN: Absolutely, and I appreciate the distinction you are making. I was actually wondering about competitors who were accessing your wholesale services. I understand with respect to your network but one thing that I found in the context of this proceeding is there is a bit of a he said/she said situation with respect to the large wholesalers indicating that when rates are mandated the competitors aren't investing in networks and the competitors coming forward saying we do in fact invest in our networks, it may not necessarily be last mile, perhaps it's middle mile.
4582 So I would like to close that gap a little bit and perhaps discuss instituting a mechanism of some sort of reporting requirement whereby we could look to see what sort of network investments are actually being made, if they're not last mile, then perhaps middle mile, by competitors using your wholesale services to see whether or not those using those services are actually investing back into infrastructure.
4583 MR. BÉLAND: The difficulty I have is the idea of us reporting on our competitors' investment. We could report on -- of course you could ask us for all the information you need about their --
4584 COMMISSIONER SHOAN: No, and I wasn't suggesting that you would be reporting on them. I was thinking just generally if we were to look at instituting such a requirement what would be a good piece of information to request from competitors, if you had any thoughts on that.
4585 MR. BÉLAND: Okay. Okay. I understand. I think we can give some thought to that in an undertaking, yes.
4586 COMMISSIONER SHOAN: Great! Thank you.
4587 THE CHAIRPERSON: I think those are our questions. Thank you very much. Merci beaucoup.
4588 Donc, on est ajourné jusqu'à 9 h 00 demain matin. Merci.
--- Whereupon the hearing adjourned at 1607, to resume on Thursday, November 27, 2014 at 0900
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