ARCHIVÉ -  Transcription - Québec, Québec - 2001-11-15

Transcripts

In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of

Contents.

However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.

Transcription

Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès-verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

BEFORE / DEVANT:

ALSO PRESENT / AUSSI PRÉSENTS:

EXHIBIT NO. DESCRIPTION PAGE / PARA

ARC et al-8 Document entitled "Summary of evidence presented by McShane and by Booth and Berkowitz in the 1997 price cap proceeding and in 2001 in an AEUB filing on ATCO pipeline south" 589 / 3465

ARC et al-9 Document entitled "Evaluation of the spread calculated from Ms. McShane's schedule 5 presented July 6, 2001" 589 / 3466

ARC et al-10 Document entitled "Canadian Market Risk Premium Estimates". 589 / 3467

ARC et al-11 Document entitled "The Shrinking Equity Premium". 589 / 3468

ARC et al-12 Document entitled "The Death of the Risk Premium". 590 / 3469

ARC et al-13 Document entitled "First Boston, Global Strategy Perspectives...". 590 / 3470

Reference Action

Page 354, line 21 "quoi?" s/b "coi!"

Page 354, line 24 "quoi?" s/b "coi!"

Page 361, line 12 "Rouin" s/b "Rouyn"

Québec (Québec)

--- L'audience reprend le jeudi 15 novembre 2001

à 0835 / Upon resuming on Thursday, November 15,

2001 at 0835

2584 LE PRÉSIDENT: Bonjour tout le monde. À l'ordre, s'il vous plaît.

2585 Order please.

2586 Est-ce qu'il y a des questions préalables? Non, je n'en vois pas!

2587 Alors, nous allons poursuivre le contre-interrogatoire du Panel numéro 1, de TELUS Québec.

2588 Maître McCallum ou, maître Turmel.

RAPPELÉ: YVAN BEAULIEU

RAPPELÉ: CLAUDE GENDRON

RAPPELÉ: ALAIN CARMICHAEL

RAPPELÉ: RÉNALD CARON

RAPPELÉ: ALAIN COUETTE:

INTERROGATOIRE / EXAMINATION

2589 Me TURMEL: Bonjour, messieurs.

2590 J'ai encore, ce matin, quelques questions concernant votre PAS, mais plutôt dans l'aspect social.

2591 Dans la réponse à la Partie I de TELUS Québec (CRTC) 5 octobre 2800, vous déclarez:

"À l'exception des logements permanents qui, lors de la demande initiale de service, ont refusé de contribuer tel que prévu au tarif général aux sept constructions engendrées par l'expansion du service pour les desservir, TELUS Québec n'a pas, à sa connaissance, dans son territoire de résidences ou logements permanents non-desservis." (Tel que lu)

2592 J'aimerais savoir quelle est la politique actuelle de TELUS Québec, en ce qui concerne l'expansion du service aux clients non-desservis?

2593 M. GENDRON: Comme indiqué dans nos notes d'introduction, au cours des années 1980 en particulier, la Régie a favorisé que nous faisions le dégroupement des lignes, de façon à ce que les clients aient une ligne individuelle, mais aussi de façon d'user la desserte de toutes les agglomérations, même des agglomérations de résidences étant relativement peu importantes.

2594 Donc, nous nous retrouvons avec une quantité de résidences non-desservies relativement peu importante.

2595 La politique de notre tarif est de recevoir les demandes des éventuels clients. Nous avons un frais -- nous assumons, dès le départ, une partie des coûts de construction, 2 500 $ et nous demandons aux clients d'en assumer le reste.

2596 À venir jusqu'ici, nous considérons que cette façon de procéder a vraiment satisfait nos clients puisque nous ne sentons pas de pression de leur part, pour changer quoi que ce soit à cette façon de procéder.

2597 Me TURMEL: Donc, si je comprends, dans la préparation de votre PAS, vous avez seulement utilisé le tarif en place.

2598 Est-ce que vous avez recontacté ces personnes non-desservies, pour leur offrir le service utilisant plutôt la contribution maximale de l'abonné qui a été fixée dans la Décision 99-16, à 1 000 $?

2599 M. GENDRON: Nous n'avons pas recontacté ces clients. Je vous explique quel est le mode de fonctionnement, pour ces clients.

2600 Nous n'avons pas, en place, de processus qui nous permet de connaître avec exactitude les résidences n'ayant pas le service. Ce que nous avons c'est une liste de clients ayant fait une demande pour éventuellement avoir le service, auxquels clients nous avons fait une proposition. Et, nous avons conservé que ces clients-là ont refusé la proposition en question.

2601 Or, si nous devions -- je vais le dire autrement -- l'attrait pour nous de refaire une consultation auprès de ces clients-là était minimale, puisqu'ils auraient risqué de susciter des appétits qui auraient pu être déçus éventuellement, puisque la majorité des cas non-desservis -- puis là, c'est un peu plus du jugement, que basé sur une vérification individuelle de chaque cas.

2602 Mais, soit qu'ils sont vraiment dans une situation où les coûts seront très élevés parce qu'ils ont choisi de s'installer dans un endroit plutôt retiré, ou qu'ils sont -- et, je dirais que c'est probablement le cas d'une partie importante -- ils sont près de zones urbaines.

2603 Et, ils ont accès à des services comme le cellulaire et, c'est suffisant pour eux en termes de satisfaire les besoins essentiels au niveau d'urgence.

2604 Donc, nous n'avons pas cru bon, compte tenu du peu de pression que nous subissions dans ce sens, ou compte tenu qu'on aurait pu susciter des attentes qui auraient, somme toute, été probablement déçues, nous n'avons pas cru bon de refaire cet exercice.

2605 Me TURMEL: Juste, peut-être, pour comprendre un peu votre système.

2606 Quelqu'un appelle chez vous pour demander une information, pour savoir comment il peut obtenir le service. Comment est-ce que vous traitez cette information-là? Comment vous la conservez?

2607 Est-ce que vous la conservez plusieurs années? Je veux savoir qu'est-ce que vous faites avec l'information. Quel type d'information que vous conservez?

2608 M. GENDRON: Toutes les demandes, que ce soit pour des clients qui habitent des zones où le réseau existe déjà ou pas, entrent au même endroit, à notre bureau de service. On détermine alors si, oui ou non, il y a des existences d'une capacité de réseau. Si oui, bien, c'est assez simple!

2609 Sinon, il y a deux grandes possibilités. C'est que le réseau existe déjà et puis, il n'est pas en capacité suffisante auquel cas, on procède aux additions nécessaires sans autre --

2610 Les cas qui nous intéressent sont ceux de la deuxième catégorie. Et à ce moment, les gens de notre bureau d'études d'ingénierie de réseau extérieur vont sur les lieux, évaluent les coûts et des discussions ont lieu avec le client au cours desquelles une proposition de coûts leur est faite. Et, ils ont à décider sur la valeur de la proposition qui est faite.

2611 Me TURMEL: Mais, combien de temps vous gardez cette information?

2612 Si, par exemple, quelqu'un a fait une demande il y a trois ans -- et, vous avez fait toute votre étude et que vous en êtes venus à la conclusion, à ce moment-là, que vous n'étiez pas pour étendre le service jusqu'à lui -- est-ce que vous gardez cette information-là quelques années, quelques mois?

2613 M. GENDRON: Nous gardons à la fois cette information-là, pour longtemps. Puis, d'un autre côté, on ne peut pas vraiment se fier à cette information-là.

0845

2614 On en, encore, dans nos registres, des demandes qui ont pu être faites en 1983. Mais, vous comprendrez qu'après un certain nombre de mois, la valeur de cette information-là diminue sans qu'on puisse vraiment l'apprécier. Peut-être que l'abonné pourrait être intéressé au service ou possiblement que non, puisqu'un si grand nombre d'années s'est écoulé, sans qu'on ait de retour.

2615 Donc, la réponse à la question c'est qu'on a de l'information, mais sa valeur peut être questionnée.

2616 M. COUETTE: L'information de façon régulière, de façon standard, est conservée dans des registres manuels, donc sous format papier. Chacune des demandes est conservée dans chacun des bureaux d'études dans chacune des régions.

2617 Récemment, pour les besoins de l'audience d'aujourd'hui, on a fait faire une compilation de ces données-là, tout en sachant que -- comme le mentionnait Claude -- que cette liste est probablement non-complète, "non-existing".

2618 Donc, on a des données qui remontent jusqu'à 1983. On est bien conscient que certaines résidences, habitations secondaires, peuvent exister aujourd'hui et puis, il n'y a jamais eu de demande. Donc, elles ne sont pas dans ces registres.

2619 Et à l'inverse, des demandes qui ont pu être faites dans le passé, sont pour des habitations qui n'existent peut-être plus, aujourd'hui.

2620 Donc --

2621 Me TURMEL: Donc, malgré que votre liste est incomplète, vous n'avez jamais procédé à du suivi?

2622 M. COUETTE: Non. On fait le suivi centralisé de ça. On l'a fait récemment pour les besoins de cette cause.

2623 Me TURMEL: Quand vous dites "vous avez fait du suivi récemment", c'est que vous avez plutôt regardé votre liste, vous n'avez pas fait de suivi auprès des clients --

2624 M. COUETTE: Non.

2625 Me TURMEL:  -- ou des personnes qui étaient sur cette liste-là? D'accord. Merci.

2626 Donc, on vient de parler d'une liste qui est existante. Mais, est-ce que vous avez fait d'autres démarches pour identifier les clients non-desservis sur votre territoire, pour préparer le PAS que vous avez présenté dans l'instance ici, outre vous fier à cette liste?

2627 M. GENDRON: La réponse à la question c'est, "non".

2628 Me TURMEL: Merci.

2629 M. COUETTE: Je peux peut-être rajouter qu'on n'a pas jugé pertinent de le faire en fonction de la valeur de l'information qu'on avait actuellement entre les mains.

2630 C'est-à-dire que selon l'information que l'on a, 100 pour cent des demandes étaient soit pour des besoins d'affaires, c'est-à-dire des cabanes à sucre, des porcheries, des pourvoiries, des choses de même, ou pour des résidences saisonnières.

2631 Donc, on n'a pas jugé pertinent d'aller plus loin, dans ce sens-là.

2632 Me TURMEL: Ça va, merci.

2633 On va maintenant discuter ensemble de la qualité du service.

2634 J'aimerais commencer en jetant un coup d'oeil aux pièces que nous avons remises à votre avocat mardi matin, entre autres, la pièce 3 qui est le tableau dont le titre est "Nombre de mois où la qualité est inférieure aux normes pour TELUS Québec".

2635 C'est aussi à la pièce 4, qui présente le rapport d'exceptions indicateurs de la qualité du service, septembre 2001 que la compagnie a déposé auprès du Conseil, le 29 octobre 2001.

2636 Est-ce que vous avez les pièces entre les mains?

--- Pause

2637 Me TURMEL: On me dit, aussi, que c'est la pièce 4 et 5, et non 3 et 4.

2638 Donc, on voit sur le tableau six indicateurs de qualité de service et puis le rendement associé à chacun d'eux.

2639 Je vais procéder un peu de la même façon que je l'ai fait avec Télébec. Cependant, je vais omettre de ré-expliquer la norme parce qu'on l'a déjà fait, une première fois. Donc, on va se concentrer sur les résultats.

2640 Seulement pour confirmer, est-ce que vous avez eu la chance d'examiner la pièce, le tableau et les --

2641 M. BEAULIEU: Oui.

2642 Me TURMEL: D'accord. Parfait!

2643 Donc, si on prend, par exemple, l'indicateur 1.2(B) qui est le "Rendez-vous pour installation respectée", vous n'avez pas atteint la norme 19 mois sur un total de 36 mois, pour les années 1998, 1999, 2000.

2644 Et depuis janvier 2001, vous n'avez pas satisfait à la norme, du tout. Donc, neuf mois sur un total de neuf. Est-ce exact?

2645 M. BEAULIEU: C'est exact.

2646 Me TURMEL: Quant à l'indicateur 1.5 qui est "Accès au bureau d'affaires", TELUS Québec n'a pas satisfait à la norme, 34 mois sur 36 de 1998 à 2000. Puis, en 2001, vous n'avez pas atteint la norme trois mois sur neuf.

2647 Et puis, on constate que vous n'avez pas rapporté de résultats pour cet indicateur pendant cinq mois, alors que vous étiez dans l'obligation de le faire. Est-ce que c'est exact?

2648 M. BEAULIEU: C'est exact.

2649 Me TURMEL: Quand à l'indicateur 1.7 qui est "Activation dans les délais des EIB pour les autres fournisseurs de services interurbains", on constate que vous n'avez pas rapporté de résultats pendant 11 mois en 1998, mais que vous n'avez jamais manqué à la norme, par rapport à cet indicateur-là depuis.

2650 M. BEAULIEU: Exact.

2651 Me TURMEL: En ce qui concerne l'indicateur 2.1(B) qui est "Rapport de dérangement/Pannes réglées en moins de 24 heures", on constate que depuis janvier 1998, vous n'avez jamais satisfait cet indicateur.

2652 Puis, depuis janvier 2001, vous n'avez, non plus, satisfait à l'indicateur et puis votre moyenne est considérablement sous le 80 pour cent de la norme. Est-ce exact?

2653 M. BEAULIEU: C'est exact.

2654 Me TURMEL: En ce qui a trait à 2.2(B) qui "Rendez-vous des réparations respectées", la compagnie n'a pas respecté la norme 26 mois sur 36, pour les années 1998, 1999 et 2000, ainsi que six mois sur neuf, cette année.

2655 Puis, on remarque ici, que l'indicateur 2.2(B) inclut les résultats de l'indicateur 2.6 qui est "Rendez-vous pour réparations des concurrents respectés". Est-ce exact?

2656 M. BEAULIEU: C'est exact.

2657 Me TURMEL: Ensuite, pour l'indicateur 2.5, "Accès au centre de réparations", la compagnie a rapporté les résultats inférieurs pour 31 mois en 1998, 1999 et 2000. Et depuis janvier 2001, l'entreprise n'a pas atteint la norme quatre mois.

2658 Et, pour les cinq autres mois de l'année 2001, vous n'avez pas rapporté les résultats alors que vous étiez dans l'obligation de le faire. Est-ce exact?

2659 M. BEAULIEU: C'est exact.

2660 Me TURMEL: Donc, maintenant quant aux résultats concernant l'indicateur 2.1(B), les "Rapports de dérangement réglés en moins de 24 heures", il semble que depuis janvier 1998, vous n'avez jamais satisfait cet indicateur.

2661 Pourriez-vous nous expliquer la ou les raisons pour lesquelles TELUS Québec n'a pu atteindre la norme minimale que le Conseil a déterminée?

2662 M. BEAULIEU: On remarque qu'à 2.1(B), la norme fixée est de 80 pour cent. C'est entendu que lorsqu'on rapporte les résultats et qu'on mentionne qu'une norme n'est pas respectée, c'est qu'on n'a pas atteint ce 80 pour cent là.

2663 Il se peut donc qu'on ait atteint 79 ou qu'on atteint une norme, pas une norme mais, un résultat qui est plus faible, encore.

2664 Il y a plusieurs raisons qui ont fait que nous n'avons pas rencontré l'indicateur 2.1(B). On a parlé, on a rapporté régulièrement, au Conseil, la question du nouveau système de répartition mobile qui avait été installé, et où on a eu beaucoup de difficultés et d'implantation et par la suite, de bris et de réparations de ce système-là.

2665 Il existe -- et ma réponse est bonne aussi pour l'ensemble des indicateurs -- plusieurs éléments qui justifient ou qui expliquent la non-atteinte de résultats.

2666 Mais, la raison principale se situe souvent à la taille de notre compagnie, où il est difficile, avec le peu de personnes qui sont dédiées à chacune des fonctions, dans chacun des centres d'appels.

2667 Il est difficile d'assumer une demande qui est plus forte que prévue à un moment ou un autre dans la journée, dans la semaine ou dans le mois.

2668 Ce qui fait qu'en principe, une faible demande ou un faible accroissement, un changement des prévisions initiales, perturbe beaucoup une compagnie comme TELUS Communications (Québec) avec sa taille de personnes, que ce soit dans les accès à la réparation, que ce soit pour aller faire des installations ou autres.

2669 Je pense que c'est un facteur qui revient souvent dans nos discussions internes.

0855

2670 M. GENDRON: J'aimerais rajouter ici que, comme nous l'avons expliqué dans notre intervention d'introduction, hier, il est sûr que nous pourrions, en utilisant la "méthode HARD", mettre les ressources qu'il faut, pour rencontrer tous ces objectifs.

2671 Cependant, comme indiqué, notre "préoccupation-client" inclut la relation qualité/prix et nous vous avons exposé que par ailleurs, nous utilisons des indicateurs plus subtils de mesure de la qualité, qui démontrent la satisfaction de notre clientèle.

2672 Me TURMEL: Vous aurez la chance de revenir en détails, un petit peu plus loin.

2673 M. GENDRON: Merci.

2674 Me TURMEL: Peut-être juste jeter un coup d'oeil à l'annexe 3, qui est votre rapport, "Les résultats mensuels pour l'indicateur de la qualité de service" qui était adjacente de la pièce 5, mais à l'annexe 3.

2675 On peut lire au bas de la page votre plan d'action par rapport à l'indicateur 2.1, dont on vient juste de parler, qui est le "Rapport de dérangements réglés en moins de 24 heures":

"Il est à noter que nous sommes à revoir l'ensemble de nos systèmes d'extraction, lesquels sont à la base de la préparation des résultats pour les indicateurs. Nous estimons que tels systèmes comportent des lacunes, lesquelles, une fois corrigées, permettront aux résultats de se redresser rapidement." (Tel que lu)

2676 Quand vous me parliez, tout à l'heure, de système de réparation, c'est à ça, qu'on faisait référence?

--- Pause

2677 M. GENDRON: Les systèmes qui sont en place actuellement, pour mesurer les données nécessaires à la production de ces rapports, sont des systèmes qui ont un certain âge et, qui ont été conçus avec une logique à l'époque où les activités relatives aux terminaux-réponses, pour des services qui ne sont pas parties du secteur réglementé, sont aussi inclus.

2678 Alors, quand on mentionne "système d'extraction", c'est qu'on n'a pas fini de faire la remise à jour, si on veut, du classement des informations. Et ceci s'applique à pas seulement cet indicateur-là qui est celui du 24 heures, mais il y a d'autres systèmes aussi.

2679 Qu'un client appelle chez nous pour son service Internet ou parce qu'il veut des informations sur un terminal, ces activités-là -- comme le mentionnait M. Beaulieu -- pour nous, une façon de créer de la productivité, c'est d'avoir une seule porte d'entrée où les gens répondent à toutes les questions.

2680 La complication, la complexité vient au moment d'analyser toutes ces activités-là, de s'assurer qu'on est capable de mesurer seulement les activités qui sont pertinentes à l'indicateur ici mentionné

2681 Me TURMEL: Vous dites que vous n'avez pas terminé, encore.

2682 Avez-vous une idée quand ce système-là va être vraiment adéquat et le plus parfait possible?

2683 M. GENDRON: Je ne peux pas vous donner une réponse précise ici, mais on peut s'engager à vous la fournir.

2684 Me TURMEL: Parfait!

2685 Peut-être, maintenant, vous pourriez clarifier les problèmes que vous avez rencontrés avec certains indicateurs, qui sont uniques à certaines régions de votre territoire ou s'ils sont rencontrés à travers tout votre territoire?

2686 Vous pouvez prendre un indicateur précis, si vous le voulez, ou parler généralement, mais nous donner une idée s'il y a des régions plus problématiques, si on peut dire.

--- Pause

2687 M. BEAULIEU: C'est certain que nos systèmes sont centralisés et nous permettent de ramener l'ensemble des données dans un système central.

2688 La seule région qui pourrait se qualifier pour la question précise que vous posez, est la Basse Côte-Nord. Par contre, on voit que les indicateurs de dérangements seraient tellement minimes dans cette région-là, ils ne viendrait pas influencer les résultats globaux.

2689 Me TURMEL: Donc, il n'y a pas vraiment de problème particulier rattaché à une partie de votre territoire. Quand vous avez des problèmes avec les indicateurs, c'est vécu par l'ensemble de vos abonnés sur l'ensemble de votre territoire?

2690 M. BEAULIEU: Je ne pourrais pas dire directement "oui" parce qu'il existe des problèmes particuliers.

2691 Mais, la réponse que je vous donnais c'est qu'on ne peut pas mesurer à travers ces indicateurs-là, le poids réel d'une partie des résultats qui nous viendraient de cette région-là.

2692 Me TURMEL: Est-ce qu'il serait possible, par engagement, que vous puissiez nous fournir cette information-là?

2693 M. BEAULIEU: Pourriez-vous préciser l'information que vous désirez avoir, s'il vous plaît?

2694 Me TURMEL: Peut-être nous donner par territoire, par indicateur, par territoire, les résultats, si c'est possible.

--- Pause

2695 M. GENDRON: Pour quelle période?

2696 Me TURMEL: Pour cette année, seulement.

2697 M. GENDRON: Nous pouvons nous engager, oui.

2698 Me TURMEL: Merci.

2699 Donc, maintenant, pour ce qui est du "Nombre de rendez-vous respectés", indicateur 1.2(B) et 2.2(B), je vous demanderais de consulter la réponse à la demande de renseignements TELUS Québec 5 octobre 2906.

--- Pause

2700 Me TURMEL: Dans cette réponse, vous indiquez que:

"L'impact financier des rendez-vous non-respectés pour les installations et les réparations est presque nul parce que nos techniciens peuvent aller chez les clients après 17h en semaine et les samedis." (Tel que lu)

2701 Si je comprends bien votre réponse, vous soutenez qu'un abonné résidentiel ne subit pratiquement aucune conséquence financière négative pour un rendez-vous non-respecté -- autant pour l'installation que pour une réparation -- parce qu'il n'a pas à prendre un congé de travail, par exemple, puisque vous pouvez vous déplacer après 17:00, les soirs de semaine et le samedi.

2702 Est-ce que j'ai bien compris ce que vous voulez dire par ce passage?

0900

2703 M. BEAULIEU: La réponse à la question est bien celle que vous soulignez!

2704 Effectivement, on pense toujours, dans l'optique d'un indicateur, rencontrer à 90 pour cent. Lorsqu'on ne rencontre pas l'indicateur, je le souligne, encore, ce n'est pas qu'on n'a pas rencontré un pourcentage nécessairement plus bas ou inexistant. Il y a donc plusieurs clients qui bénéficient de ce rendez-vous respecté.

2705 Mais, lorsqu'on manque le rendez-vous, effectivement, avec ce qui est mis en place aujourd'hui, on pense qu'il y a plusieurs arrangements possibles pour se rattraper. Et ce qu'on dit, c'est qu'il n'y a pas nécessairement perte de revenus. On parle de l'ensemble des cas où ça pourrait arriver.

2706 Me TURMEL: Donc, "perte de revenus" pour l'abonné. On ne parle pas de --

2707 M. BEAULIEU: On parle des --

2708 Me TURMEL:  -- l'impact financier sur l'entreprise, mais bien sur l'abonné?

2709 M. BEAULIEU: On parle des désavantages pour l'abonné.

2710 Me TURMEL: Pour l'abonné. D'accord.

2711 Si on prend l'exemple d'un abonné qui a effectivement pris un congé de travail pour être disponible, tel que convenu avec vous, et que le technicien ne se présente pas au rendez-vous, est-ce qu'on peut dire, à ce moment-là, que l'abonné subit un impact financier négatif?

2712 M. BEAULIEU: Ce sont des exemples qui sont analysés au mérite, lorsque ça arrive. Il arrive qu'un client puisse effectuer une plainte et on regarde, avec le client, le meilleur arrangement possible vis-à-vis cet événement-là.

2713 Me TURMEL: Mais ici, on parle -- à la réponse 2906, vous disiez qu'un abonné ne subit pas ou pratiquement pas d'impact financier.

2714 Mais, s'il a manqué une journée de travail, puis finalement votre technicien ne s'est pas présenté, est-ce qu'on peut dire que "oui", en quelque sorte, il y a un impact financier puisqu'il a perdu une journée ou une demi-journée, ou quelques heures de travail?

--- Pause

2715 M. BEAULIEU: On parle toujours d'un cas hypothétique. C'est difficile d'admettre qu'il y a eu dans ce cas-là, un impact financier pour la personne dont vous parlez. C'est difficile aussi d'admettre qu'il n'y en a pas eu.

2716 Ce que vous mentionnez pourrait, bien sûr, se réaliser.

2717 Me TURMEL: Merci.

2718 Maintenant, j'aimerais savoir si cette même réponse, c'est-à-dire que l'impact financier est presque nul, s'applique aussi à vos clients affaires, par exemple?

2719 Quand vous avez écrit ce passage-là, est-ce que vous aviez en tête "clients résidentiels ou clients affaires"?

--- Pause

2720 M. BEAULIEU: C'est, bien sûr, que les clients d'affaires comme les clients de résidences, sont inclus dans notre réponse.

2721 Par contre, lorsqu'on mentionne ce point spécifique là, davantage financier, c'est difficile de mentionner si nous pouvons avoir à l'esprit directement un client affaires ou un client de résidence.

2722 C'est des préoccupations qui sont naturellement différentes.

2723 Me TURMEL: Donc, prenons l'exemple d'un abonné d'affaires qui ne peut pas utiliser son téléphone pour 12 heures et puis, que c'est un service essentiel pour son commerce.

2724 Est-ce que votre position est qu'il ne subit pas d'impact financier, ou vous êtes d'accord avec moi que "oui", il y a un impact financier pour lui, si le technicien n'a pas pu se présenter et puis que pour ça, une journée complète ou une demi-journée, ou trois heures, il n'a pas pu avoir accès à son service téléphonique?

2725 M. BEAULIEU: Je ne voudrais pas laisser entendre qu'il y a nécessairement des services plus prioritaires que d'autres. Mais, c'est certain que ces avis de dérangements-là, dont vous parlez, sont transmis à des personnes qui se servent de leur jugement.

2726 Et parfois, on peut mentionner qu'un commerce, quel qu'il soit, puisse exiger ou demander de nos préposés qu'on agisse avec davantage de célérité. Et naturellement, les clients qui nous rapportent un trouble pour lequel il y a un impact majeur sur son entreprise, cet impact-là est pris en compréhension immédiate.

2727 Me TURMEL: Merci.

2728 Maintenant, si on se réfère à la réponse de Télébec, cette fois-ci, 2902 -- vous n'avez peut-être pas besoin de l'obtenir -- je vais vous dire qu'est-ce qu'il en était!

"La compagnie soutient que les normes de qualité de service devraient être différentes pour les centres urbains et les régions plus rurales." (Tel que lu)

2729 J'aimerais seulement que vous commentiez cette proposition.

--- Pause

2730 M. GENDRON: Notre optique là-dessus est la suivante: il nous apparaît qu'il n'y a pas beaucoup de justification, quand on regarde ça du bout du client pour que ce soit différent. Donc, les attentes des clients normalement veulent faire en sorte qu'il dit: "Regarde" --

2731 Cependant, il faut admettre que, quand dans Place Ville-Marie, il y a plus de clients qu'il y en a dans la ville de Rimouski, c'est un petit plus facile d'être capable de satisfaire les attentes des clients à des coûts moins élevés.

2732 Je m'excuse, mais je reviens encore à notre position de base, qui est de dire on essaie de s'assurer que le client bénéficiera du meilleur ratio qualité/prix.

2733 Bon, je comprends que votre question est probablement davantage: "Est-ce que vous autres, TELUS Québec, vous voudriez avoir des objectifs différents?". Je ne peux pas vous dire que notre réflexion est suffisamment profonde là-dessus pour vous indiquer ça en ce moment.

2734 Vous avez compris que notre approche était de garder le meilleur équilibre possible entre la satisfaction telle que mesurée subjectivement des clients et puis la rencontre des indicateurs. On essaie de rencontrer les indicateurs le mieux possible, mais en utilisant des moyens plus "soft que hard".

2735 Me TURMEL: Merci.

2736 On va maintenant parler de votre déclaration d'ouverture.

2737 À la page 6, au deuxième paragraphe sous le titre "La qualité de service", vous dites:

"Outre les indicateurs objectifs que le Conseil connaît, TELUS Québec utilise des indicateurs qui leur permettent de jauger la perception des clients sur plusieurs dimensions du service. Ces indicateurs mesurent la satisfaction des clients des différentes interfaces avec lesquelles ils sont en contact, soit le téléphoniste, l'installateur/réparateur, le préposé au service et à la télé-vente." (Tel que lu)

2738 Est-ce que les résultats démontrés aux annexes 3(A) à 3(F), qui étaient joints à cette déclaration d'ouverture-là, sont basés sur des sondages?

2739 M. BEAULIEU: Oui, effectivement. Ce sont des analyses trimestrielles qu'on appelle des "baromètres".

2740 Me TURMEL: Est-ce que ce sont des sondages internes préparés par votre compagnie ou, vous donnez ça à l'externe?

2741 M. BEAULIEU: Je vous dirais que c'est mixte. On a une équipe de spécialistes internes qui sont spécialisés dans ces éléments-là, les sondages, qui ont conçu les questions et tout l'environnement. Mais les questions comme telles, sont administrées par une firme externe.

2742 Me TURMEL: Quand vous dites "administrées", est-ce que c'est vous qui préparez les questions, c'est eux qui l'administrent ou, si c'est eux qui préparent les questions et qui l'administrent?

2743 M. BEAULIEU: Ce sont nos experts internes qui ont préparé les questions, d'accord! Et les gens de l'externe ne font que les poser aux clients et recueillir les commentaires.

0910

2744 Me TURMEL: Est-ce que vous effectuez ces sondages-là sur l'ensemble de votre territoire ou vous ciblez certains territoires, à l'occasion?

2745 Est-ce que c'est à chaque fois des gens de partout ou, est-ce que vous ciblez --

--- Pause

2746 M. BEAULIEU: Effectivement, on publie des résultats et on compile des données. Lorsqu'on publie les résultats, ce sont des résultats compagnie. C'est vraiment ceux qui sont regardés, d'ailleurs ceux qui sont produits dans l'annexe.

2747 Par contre, on a des données disons plus précises au moins par région pour plusieurs indicateurs.

2748 Certains autres indicateurs, comme la valeur totale du service comme tel, sont des indicateurs qui sont plus globaux parce qu'on veut que, statistiquement, ils reflètent le niveau de fiabilité requis.

2749 M. GENDRON: Si vous me permettez, j'aimerais peut-être dresser un tableau de la façon dont ce système-là a été conçu et puis, les principes derrière.

2750 D'abord, je dois dire que depuis de nombreuses années, on avait déjà un système qui satisfaisait, disons, certains besoins mais qui avait vieilli.

2751 En quelque part en 1996, nous avons décidé de nous doter d'un système plus performant que nous avons développé à l'aide d'un consultant que nous appelons la "Stratégie de service".

2752 L'idée qui a présidé à son élaboration est la suivante: il faudrait d'abord demander au client quels sont les éléments qui, pour lui, sont les plus importants dans la transaction avec son entreprise de téléphone.

2753 Donc, une première étape qui a consisté en des focus groups -- des groupes de discussions, pardon -- et certains sondages nous ont permis de dégager un certain nombre d'éléments qui étaient les éléments qui étaient importants pour les clients.

2754 Donc, ça nous a permis de déterminer quels étaient les points qu'on allait mesurer. Et puis, ça nous a permis aussi de déterminer quelles allaient être les questions ou les paramètres qu'on voulait suivre à chaque trimestre et qui, par conséquent, décident des questions qui sont posées et lesquelles questions sont les mêmes à tous les trimestres depuis 1997.

2755 Et c'est essentiel pour pouvoir mesurer l'évolution de la performance dans le temps.

2756 Deuxième caractéristique de ces questions-là aussi, ce sont des questions qui comportent un certain volet pratique dans le sens que la réponse à ces questions-là nous est utile pour parler à la préposée au service, à l'installateur/réparateur et, nous permet de lui communiquer: "Regarde, le client, là, sur ce point-là, il y a un problème qui se développe là. Insistez donc davantage."

2757 Les points sont: est-ce que l'installateur s'est identifié en arrivant chez le client? Est-ce qu'il a expliqué au client la nature des travaux qu'il allait faire? Est-ce qu'il a expliqué au client -- et puis ça se peut qu'il y a des frais qui vous soient faits, pour telle et telle raison. Il y a un certain nombre de questions comme ça.

2758 Bon, quant à quel client on pose les questions, il y a deux types d'indicateurs, si on peut dire. Il y a les indicateurs genre: comment qualifiez-vous la valeur du service fourni par votre entreprise?

2759 Une question qui est posée à un échantillon composé de 100 pour cent de nos clients et qui est supposé représenter la répartition. C'est une répartition géographique, une certaine répartition selon différents caractères.

2760 Par contre, quand il s'agit de mesurer la satisfaction face au fait de la réparation, par exemple, bien on a fait notre échantillonnage, que parmi la population de ceux qui ont utilisé ce volet-là de notre service, pendant la période en question.

2761 Je ne sais pas si ça vous donne un meilleur éclairage?

2762 Me TURMEL: Oui, merci.

2763 Vous avez parlé, un peu, des indicateurs et puis, comment ils étaient formulés.

2764 Mais est-ce que, par exemple, les questions se rapportaient encore plus précisément aux indicateurs de qualité de services qui sont utilisés, qui ont été établis par le Conseil?

2765 Par exemple, si je donne pour la réparation, est-ce que les clients savent que vous avez 24 heures pour -- vous avez une obligation de réparer en 24 heures? Est-ce que c'était ce genre de questions qui étaient posées, par exemple?

2766 M. GENDRON: Je ne pense pas que dans les questions -- il faudra -- une seconde, s'il vous plaît!

--- Pause

2767 M. GENDRON: Je pense que dans ce cas-là précis, il n'est pas fait mention de 24 heures. On parle davantage: à ce que l'employé s'est présenté chez vous, dans le délai qui vous avait été annoncé?

2768 Je pense à un élément très important que j'ai oublié de vous mentionner dans l'exposé que j'ai fait, il y a deux minutes. Puis, c'est utile quand quelqu'un veut peut-être comparer les résultats avec ceux d'une autre entreprise.

2769 Un des changements que nous avons faits dans le nouveau système, par rapport à l'ancien, ça a été d'établir qu'il y aurait quatre niveaux de réponses possibles, au lieu de cinq.

2770 Nous avions constaté dans l'ancien système que beaucoup de clients répondaient à la question du milieu: "C'est le 'fun', si on ne se branche pas!"

2771 Là, "c'est pleinement satisfait", "plutôt satisfait", "plutôt insatisfait" et "pleinement insatisfait". Et, les tableaux qui sont annexés à l'exposé d'ouverture, c'est le pourcentage des gens qui ont répondu "pleinement satisfait". Nous ne comptons pas dans les gens qui ont dit "plutôt satisfait".

2772 Donc, vous pouvez comprendre qu'il y a un certain niveau de célérité, dans le processus.

2773 Me TURMEL: Peut-être qu'il y aura lieu, pour mieux comprendre, si vous pouvez vous engager à nous fournir une copie des sondages ou, du dernier sondage que vous avez effectué, pour qu'on puisse avoir une meilleure idée des questions qui sont associées, par exemple, aux résultats que vous nous avez démontrés, dans les annexes.

2774 M. GENDRON: D'accord.

2775 Me TURMEL: Merci.

2776 Donc, maintenant, êtes-vous d'accord que vos sondages et les opinions des clients, sur le rendement de la compagnie, n'ont pas d'incidence sur les indicateurs que le Conseil a déjà jugés appropriés?

2777 C'est-à-dire que vous devez, tout de même, satisfaire aux normes malgré les résultats positifs de vos sondages.

2778 M. GENDRON: Nous ne contestons pas que les objectifs fixés par le Conseil doivent être rencontrés. Le jugement que nous avons porté est que cela doit se faire en ménageant l'impact financier, l'impact économique pour nos clients.

2779 Mais je l'ai mentionné. Nous nous sommes "commis" à offrir à nos clients la qualité de service. Nous voulons rencontrer les indicateurs du Conseil. Mais, nous préférons l'approche intelligente à la mise en place de solutions pour les rencontrer.

2780 On l'a mentionné dans notre introduction. Les coûts estimés pour 2002 sont basés sur les coûts de 2001 et, si le Conseil devait nous ordonner de prendre tous les moyens, il est clair que nous devrons réviser les coûts qui ont servi à déterminer nos tarifs d'entrée en plafonnement des prix.

2781 Me TURMEL: Merci.

2782 Maintenant, dans la demande de renseignements TELUS Québec (CRTC) 31 juillet 1903, (a)(i), vous avez déclaré en partie, ceci:

"Nous continuons de croire qu'il n'y a aucune relation entre une réduction de la qualité du service et l'introduction d'un régime de plafonnement des prix. Nous sommes également d'avis qu'il n'est pas nécessaire de prévoir des pénalités pour fournir une bonne qualité de service. La qualité de service dispensée à TELUS Québec dépasse largement le service dispensé par une foule d'entreprises de services, qu'elles soient réglementées ou non.

Nonobstant ce qui précède, s'il faut absolument implanter un tel mécanisme selon l'optique du Conseil, l'entreprise continue de croire qu'une forme de rabais ciblés serait indiquée, rabais qui s'appliqueraient seulement aux clients lésés." (Tel que lu)

2783 Donc, si j'ai bien compris votre position, vous soutenez au statu quo qui existe présentement. En fait, il n'est pas nécessaire d'apporter des changements ou, d'utiliser un Facteur Q?

0925

2784 M. GENDRON: Le statu quo, étant la situation qu'ont vécu pendant les quatre dernières années, les compagnies ex-Stentor.

2785 Me TURMEL: Maintenant, j'aimerais savoir conformément à votre position, est-ce que les clients lésés recevraient les rabais automatiquement ou, ils devraient en faire la demande?

2786 M. GENDRON: Notre proposition est que les clients en feraient la demande.

2787 Me TURMEL: Maintenant, vous précisez à la même réponse, mais en (a)(ii), que l'indicateur 1.2 et 2.2 conviennent le mieux au mécanisme que vous proposez.

2788 Est-ce que ce sont les seuls indicateurs, que vous suggérez d'inclure?

2789 M. GENDRON: Effectivement, ce qui est écrit.

2790 Me TURMEL: Pourquoi, est-ce que les autres devraient être exclus?

2791 M. GENDRON: Je donnerais probablement, des raisons de deux ordres.

2792 La facilité à les mesurer, et illustrons par un exemple: on s'engage à venir chez moi mercredi après-midi, on ne vient pas. Là, c'est facile de retracer l'information, démontrer, oui.

2793 J'appelle au bureau de services et je prétends qu'on a pris trop de temps à me répondre. C'est relativement complexe de pouvoir retracer l'appel et faire une démonstration que, oui ou non, ça a pris trop de temps.

2794 Donc, ça, c'est une des raisons.

2795 L'autre raison aussi, c'est que ce ne sont pas tous les manquements ou ce ne sont pas tous les points pour lesquels on rencontre la -- qui assurent la même -- tu as le même poids, face à la satisfaction au client.

2796 Je pense bien que tout le monde est prêt à admettre que le service ne soit pas fourni, ou que le service soit interrompu, ça a pas mal plus d'impact que le fait que je dois attendre peut-être 30 secondes, au lieu de 20 pour recevoir une réponse quand j'appelle au bureau de services pour obtenir une information sur mon dernier compte de téléphone.

2797 C'est un peu ça aussi, dont on pense qu'il faut tenir compte dans la conception d'un tel système, si ça devait être le cas.

2798 Me TURMEL: Mais, pour les indicateurs, qui selon votre proposition, devraient être exclus, avez-vous d'autres mesures correctives à recommander pour compenser les clients qui ont reçu un service de qualité inférieure aux normes?

2799 M. GENDRON: La réponse c'est, non.

2800 Me TURMEL: Merci.

2801 Donc, il semble relativement clair, suivant plusieurs de vos réponses aux demandes de renseignements, que vous vous opposez à la mise en oeuvre d'un Facteur Q.

2802 Malgré cette opposition à la demande de renseignements 2903, vous avez, quand même, soumis une proposition pour un Facteur Q, basé sur un système de points pour 12 indicateurs particuliers. Je tiens à justifier que c'était, évidemment, à la demande du Conseil.

2803 Si le modèle que vous proposez à la réponse 2903 qui est en fait, le Rhode Island ajusté, si ce modèle-là avait été en vigueur pour les années 1998 jusqu'au mois d'août 2001, combien auriez-vous pour chaque année, déboursé, en réajustements?

2804 Peut-être que vous n'avez pas fait l'exercice! Je vais vous laisser vérifier.

--- Pause

2805 M. GENDRON: Comme vous l'avez dit, nous avons répondu à cette question parce que le Conseil nous demandait effectivement d'y répondre.

2806 Pour la question que vous nous posez, on a une certaine inquiétude quant à notre capacité de pouvoir y donner une réponse très rigoureuse. On va prendre un engagement de vérifier ce que nous pouvons vous fournir, pour y répondre.

2807 Me TURMEL: En fait, c'est de prendre les résultats que l'on a de 1998 jusqu'à maintenant, puis appliquer la méthode que vous nous proposez dans cette question-là et, la quantifier en termes de dollars.

2808 M. GENDRON: J'ai un problème avec l'expression "la méthode que vous nous proposez".

2809 Me TURMEL: Vous proposez --

2810 M. GENDRON: Nous avons --

2811 Me TURMEL:  -- ce qu'on voulait demander.

2812 M. GENDRON: Parce que, comprenez-vous, compte tenu de ce que je vous ai exprimé tantôt que pour nous, la non-atteinte ou l'atteinte de tous les indicateurs ou de chacun des indicateurs, n'a pas le même impact sur le client. Nous ne serions pas d'accord pour qu'ils aient tous le même poids dans la détermination de l'impact.

2813 On a de la misère à être convaincu dans la préparation d'une réponse à une question comme celle que vous posez.

2814 Me TURMEL: Mais en fait, il n'y a pas de question d'être convaincu ou non, parce que c'est seulement appliquer des chiffres, appliquer une méthode à des résultats.

2815 Donc, si vous voulez vous engager à faire l'exercice pour nous, pour qu'on puisse avoir une idée en termes de dollars, de l'impact qu'un tel système pourrait avoir sur cette compagnie, s'il était mis en place -- par exemple, en gardant en tête, évidemment, que ce n'est pas votre proposition.

2816 M. GENDRON: Nous allons faire les efforts requis pour tenter de répondre à votre question.

2817 Me TURMEL: Merci.

2818 On va continuer un peu, sur justement, cette réponse à 2903.

2819 Pouvez-vous nous expliquer comment vous avez procédé pour déterminer une moyenne mensuelle de passage de 65 pour cent? Peut-être en profiter pour élaborer, un peu, sur votre suggestion, pour nous aider à bien la comprendre.

--- Pause

2820 M. GENDRON: La note de passage mensuelle de 65 pour cent a été choisie tout à fait arbitrairement.

2821 Me TURMEL: Merci.

2822 Maintenant, conformément à votre plan, que faire si une compagnie ne présente pas des résultats pour un indicateur donné, pour un mois donné -- les sans-objets, là, qui étaient dans le tableau -- qu'est-ce qui arrive suivant, là, votre proposition?

--- Pause

2823 M. GENDRON: Je pense bien qu'il faudrait appliquer une approche qui tiendrait compte du contrôle que l'entreprise avait dans la fourniture ou non, de l'indicateur.

2824 Disons, un exemple: dans votre tableau, l'indicateur 1.7 à la colonne 36, "mois précédents", on a "11" et "sans objets".

2825 Vous comprendrez que le "sans objets" est dû au fait que c'est la fourniture de service aux concurrents, il n'y en avait pas.

2826 Donc, c'est un exemple très évident, vous allez nous dire. Je pense qu'il faudrait tenir compte aussi, du fait que les entreprises, dans leurs opérations, ont à faire évoluer ou à changer les systèmes et puis que malheureusement, il est assez rare que ça ne crée pas certaines perturbations pendant un mois ou un autre. Et d'ailleurs, un certain nombre des cas sont dus à des choses comme ça.

2827 Je pense que le Conseil pourrait exercer son jugement pour décider si le mois est inclus ou pas.

2828 Me TURMEL: Merci.

2829 Dans la Décision CRTC 2000-217, le Conseil a ordonné aux compagnies de rapporter séparément les résultats du troisième trimestre de 2001, pour les indicateurs 2.2 et 2.6.

2830 J'aimerais seulement que vous confirmiez si vous serez en mesure de respecter cette exigence-là?

--- Pause

2831 M. CARMICHAEL: Au niveau des indicateurs indiqués, ce sont des questions comme, rendez-vous des réparations de concurrents respectifs, or qu'on n'est pas encore en concurrence locale.

2832 À partir du moment où est-ce qu'on aura la concurrence locale, on devra se déplacer à certains endroits pour pouvoir faire les travaux. À ce moment-là, on entend respecter les indicateurs.

0930

2833 Me TURMEL: Je suis contente ou de seulement savoir si, techniquement, vous étiez prêts à pouvoir procéder de cette façon-là et rapporter, séparément?

2834 M. CARMICHAEL: Oui.

2835 Me TURMEL: Merci.

2836 Je passe, maintenant, à la dernière question.

2837 Que pensez-vous d'une suggestion du Conseil voulant, par exemple, de rendre obligatoire la vérification indépendante des résultats concernant la qualité du service?

2838 M. GENDRON: Nous ne considérons pas qu'il soit nécessaire que ce soit fait, au moins dans notre cas.

2839 Je pense que le tableau, Pièce 4, démontre qu'on n'a pas triché! De plus, il y aura un coût à cette activité, et ce coût-là devra être supporté par nos clients.

2840 Me TURMEL: Si, par exemple, c'était quelqu'un de chez nous qui faisait la vérification, et que ça n'entraîne pas nécessairement des coûts pour vous, est-ce que vous continuez à vous opposer à notre proposition?

2841 M. GENDRON: Bien, sûr!

2842 Me TURMEL: Merci.

2843 Monsieur le Président, ceci complète nos questions, pour le panel.

2844 LE PRÉSIDENT: Merci, maître Turmel.

2845 J'aimerais toucher deux sujets. Le premier est le PAS.

2846 J'écoutais l'explication que vous donniez sur le fait que vous n'avez pas cru bon d'informer le public -- parce qu'on ne parle pas de vos clients -- c'est plutôt le public de votre territoire, à l'effet que vous étiez en train de préparer un document.

2847 Et, je poserais une question générale pour vous entendre, en disant: est-ce que vous considérez que cette attitude envers les gens de votre territoire qui ne sont pas desservis, est-ce que vous considérez que vous êtes justes, envers eux?

2848 C'est de cette façon-là que j'aimerais que vous répondiez.

--- (Pause)

2849 M. GENDRON: Il n'y a pas de système parfait!

2850 Pour les gens du public qui n'ont pas le service, ils ont l'opportunité de nous en faire la demande, disons, de façon répétée, s'ils le désirent.

2851 Évidemment on peut penser, comme vous le soulignez, qu'il y a une certaine injustice que de ne pas leur offrir.

2852 Nous sommes cependant aussi motivés par le fait que l'offre de services, dans de telles conditions, est de nature à coûter beaucoup plus cher que les revenus qui seront générés. Et qu'en conséquence, il faut s'assurer aussi de ne pas pénaliser les clients déjà abonnés ou, les contributeurs, à un fonds national quelconque qui devront augmenter, d'une façon ou d'une autre, la somme des revenus.

2853 Donc, comme on dit souvent: le droit des uns s'arrête là où le droit des autres commence!

2854 Tout est une question d'équilibre, et notre proposition est basée sur cet équilibre-là, qu'on ne veut pas empêcher quelqu'un, qui n'a pas le service aujourd'hui, de l'avoir. On a établi un certain nombre de règles.

2855 Si la proposition qu'on lui fait lui convient, nous allons le faire sans aucune hésitation, mais nous avons une préoccupation qu'il y aura un coût pour l'ensemble des autres abonnés, soit uniquement les nôtres, si ça devait être des hausses de tarifs, ou l'ensemble des abonnés canadiens, si un système de péréquation devait exister.

2856 LE PRÉSIDENT: Je suis d'accord.

2857 Maintenant, vous êtes, jusqu'ici, la seule entreprise qui peut desservir ces personnes-là, et jusqu'ici, le service local dans votre région est un monopole.

2858 Vous avez répondu assez généralement, tout à l'heure, et je veux m'assurer que j'ai bien compris!

2859 On indiquait que c'est dans les territoires, dans vos régions, que serait l'information sur des gens qui ont demandé le service et qui, pour des raisons économiques probablement, vous vous êtes entendus sur le prix. Comme ça dépassait les normes de votre tarif, ces gens-là n'ont pas eu le service.

2860 Avez-vous une perception ou, quelqu'un est-il allé voir ou demander une évaluation de ce qu'il y avait, dans vos coffres, sur ces gens, qui ont pu, dans le passé, demander le service et qui ne l'ont pas, encore?

2861 Et j'étais un peu surpris -- on a indiqué un exemple, et je pense que ce n'était pas nécessairement un client potentiel exact -- mais qu'une entreprise, comme une porcherie, pourrait ne pas avoir de service dans votre région, ou j'ai peut-être mal compris!

2862 Je mets, peut-être, ça dans un contexte qui n'existe pas!

2863 M. GENDRON: Je vais commencer par la question de détails.

2864 Quand on a mentionné "une porcherie", je pense que les installations, dont il est principalement question, de nature commerciale, dans ces cas-là, sont d'avantage des cabanes à sucre et des pourvoiries.

2865 Les prochains commentaires que je vais faire sont basés sur des données qui ne sont pas 100 pour cent fiables.

2866 J'ai eu l'occasion de consulter une liste qui est un produit local, si on veut, de notre bureau d'étude de réseaux extérieurs de la région de Québec. De façon surprenante, c'est dans cette région-là que le nombre de personnes ayant fait une demande et qui ont décidé de ne pas l'accepter, se situe.

2867 La liste -- et je ne peux pas vous assurer qu'elle inclut tout le monde qui a fait une demande mais, en principe, oui, -- contient à peu près 300 demandes, pour la région de Québec. On a la perception que pour la région de Saint-Laurent/Côte-Nord, c'est beaucoup, beaucoup moins.

2868 Quelle est la nature de ces demandes-là? On est sûr que, pour un certain nombre, c'était plus exploratoire: "Si je m'achetais une maison à telle place, qu'est-ce qui arriverait?" Ça, c'est un point.

2869 On sait qu'il y a des projets commerciaux aussi, le Lac Claire, où on a finalement donné le feu vert à une installation, et il y a beaucoup moins de résidences que ce que le prometteur nous avait indiqué qu'il y aurait. Donc, ça nous amène à avoir une certaine prudence.

2870 L'autre commentaire que je ferais est que la couverture sans fil étant ce qu'elle est, nous assumons qu'un bon nombre de ces demandes-là visaient à vérifier: "Est-ce que ça va me coûter moins cher, si je suis filaire ou sans fil?".

2871 Et, je vous répète que nous ne rejetons pas ces demandes-là! C'est clair que nous ne faisons pas une sollicitation particulière. Mais nous ne les rejetons pas, nous les traitons avec la diligence requise. Et si les règles de notre tarif général sont rencontrées, nous allons assumer notre obligation de le faire.

2872 LE PRÉSIDENT: Tous ces gens-là pourraient, donc, quand même avoir le service selon votre tarif général, s'ils payaient la différence entre ce que vous offrez et ce qu'il reste à investir pour les desservir?

2873 M. GENDRON: La réponse à votre question, monsieur le président, est "oui".

2874 On m'indique ici qu'on offre aussi, dans certains cas, des paiements échelonnés pour faciliter -- et que ça ne semble pas avoir, disons, un succès tellement considérable -- la perception étant que les gens hésitent à s'engager au service pour une longue période.

2875 LE PRÉSIDENT: Je reviendrais sur un projet particulier, que vous avez. Pour mieux comprendre, c'est un projet de 600 000 $, à l'Île-aux-Grues et à Grosse-Île.

2876 Les éléments que vous indiquez dans votre texte -- vous avez peut-être précisé, et vous me le direz -- est pour: "y compris les fonctions de protection de la vie privée, les fonctions spécifiques et évoluées".

0945

2877 En tout les cas, pour que je comprenne bien, quel est le service qu'ont les gens de l'Ile-aux-Grues, par exemple, pour que vous puissiez ajouter?

--- Pause

2878 M. COUETTE: Actuellement, l'Ile-aux-Grues est desservie par radio analogique, qui est une technologie aujourd'hui désuète. Et cette technologie ne permet pas d'offrir les services numériques accessibles par les gens de Montmagny, de la même circonscription.

2879 Le projet est de remplacer la radio analogique par la radio numérique, pour que les gens aient accès au service numérique du commutateur de Montmagny, donc rejoindre le niveau minimal de base de service.

2880 M. GENDRON: Quand on faisait référence à la protection de la vie privée, c'est que les services, entre autres, dont il est question ici, c'est affichage et non-affichage du numéro, blocage de l'affichage.

2881 LE PRÉSIDENT: Merci. Je toucherais maintenant, aux indicateurs.

2882 Comme vous le savez, je n'ai fait que de la régulation dans ma vie, je ne fais "qu'en manger", c'est tout ce que je connais!

2883 Donc, en régulation, les barèmes, les règles sont importantes, du point de vue du régulateur.

2884 En tout cas, c'est sa façon de s'évaluer, je pense, d'une certaine façon, d'évaluer son efficacité.

2885 Face au fait que votre entreprise a eu des manquements, plus sur certains points que sur d'autres, m'amène à poser la question -- vous y avez peut-être répondu un peu tout à l'heure -- mais j'aimerais que vous ramassiez cela, un petit peu!

2886 En principe, y a-t-il un autre façon, pour nous, de vous évaluer, que d'avoir des indicateurs?

2887 Donc, à ce moment-là, les indicateurs deviennent importants pour nous et, par conséquent, pour vous. Je ne doute pas du fait que vous faites des enquêtes de qualité sur votre service, pour améliorer votre façon de rendre votre service à vos clients.

2888 J'aimerais que vous commentiez sur ce qui arrive quand on ne fait pas ou, quand on ne rencontre pas un indicateur de façon -- je ne dirais pas régulière -- mais d'une façon importante.

2889 Qu'est-ce qui arrive à l'intérieur de l'entreprise? Est-ce qu'on ce préoccupe de ça? Ces chiffres vont nous arriver et, on en fait une liste et on rend ça public!

2890 Avez-vous des commentaires, là-dessus?

2891 M. GENDRON: Mon premier commentaire, monsieur le président, est que je ne voudrais pas que le Conseil pense que nous sommes des délinquants! Ce n'est pas du tout le cas.

2892 Je comprends ce que vous dites, qu'un organisme de réglementation doit disposer de certains outils. Vous me demandez de vous faire une suggestion.

2893 Nous avons connus, tous les deux, un autre organisme de réglementation et, le modèle qui s'appliquait dans ce cas, incluait un certain nombre d'indicateurs, dits de "perception". Ils permettaient à cet organisme de réglementation de se faire une bonne idée de l'impact de l'atteinte ou de la non-atteinte d'un indicateur plus mécanique, plus objectif.

2894 Je comprends votre commentaire quant à la nécessité, pour un organisme de réglementation, d'avoir des bornes qui puissent déterminer les limites.

2895 Mais, je comprends aussi qu'un organisme de réglementation compétent est capable d'utiliser le jugement, pour apprécier les situations comme celles-là.

2896 L'exposé que je vous faisais, nous y croyons fermement, que ce qui est important pour le client, c'est le rapport qualité/prix.

2897 Ceci étant dit, il est clair, comme je vous le disais, nous ne sommes pas délinquants! Nous nous soumettrons aux décisions du Conseil.

2898 LE PRÉSIDENT: De notre point de vue -- en tout les cas de mon point de vue -- quand on compare les entreprises et qu'on voit qu'il y en a qui remplissent ou, enfin, qui s'approchent plus des indicateurs que d'autres, notre souhait n'est pas d'avoir des indicateurs qui ne sont pas rencontrés, en d'autres mots.

2899 Alors, l'inquiétude est toujours de voir si ces indicateurs sont bien valables et représentent bien le service que vous offrez à vos clients. C'est toujours la question.

2900 Je ne sais pas si vous avez autre chose à ajouter, mais je dirais que les indicateurs sont importants pour nous et, nous nous en servons pour évaluer.

2901 Comme vous voyez, s'il y a de la concurrence, ces indicateurs, dans notre perception, vont devenir importants pour tous ceux qui se référeront aux services que vous allez offrir à vos compétiteurs. Alors, ça devient encore plus important.

2902 Merci. Ma collègue, la conseillère Noël.

2903 CONSEIlLÈRE NOËL: Monsieur Gendron, deux petites questions.

2904 Je vous ramène, un petit peu, en arrière.

2905 En fait, si vous avez la transcription d'hier, à la page 430, paragraphe 2413 et suivants, la discussion que vous aviez avec maître McCallum, hier après-midi, sur le facteur de productivité, à la page 430, paragraphe 2413 et suivants, en bas de la page.

2906 Vous avez discuté, pendant à peu près une page et demie, sur le facteur de productivité. Je ne vous ferai pas tout lire ça!

2907 Ce que je voulais vous demander, c'est: est-ce que le sens de ce que vous nous avez dit, hier, c'est que le facteur de 1,65 pour cent, qui apparaît dans votre mémoire, pourrait être différent si le Conseil décidait de l'appliquer, également, aux services aux concurrents?

2908 M. GENDRON: Honnêtement, je préférerais que vous posiez cette question --

2909 CONSEILLÈRE NOËL: À M. Berstein!

2910 M. GENDRON:  -- à M. Berstein, qui est un bien meilleur spécialiste que moi!

2911 CONSEILLÈRE NOËL: La deuxième question -- on ne va pas beaucoup plus loin -- je vous envoie à la page 434, paragraphe 2429, où vous avez discuté assez longtemps de l'hypothèse dans laquelle vous feriez des dépôts tarifaires et, qu'est-ce qui justifierait le Conseil de les accorder ou, de ne pas les accorder.

2912 Est-ce qu'il ne serait pas juste de dire que le droit de regard du Conseil serait pour déterminer si les tarifs résultant des demandes de hausses tarifaires, seront justes et raisonnables? Ce ne serait pas la réponse que vous cherchiez, hier?

2913 M. GENDRON: Je pense que vous avez une excellente formulation de l'idée que je voulais exprimer!

2914 CONSEILLÈRE NOËL: Ce sont toutes mes questions.

2915 LE PRÉSIDENT: Merci, madame Noël. Le président Colville.

2916 COMMISSIONER COLVILLE: Merci, monsieur le président.

2917 Mr. Gendron, I am understanding your proposal for a four-year plan, with an option to renew for three years? I am thinking about the discussion that you had yesterday with "maître" Turmel, with the measurement, the test would be to determine whether the four-year plan was a success or not.

2918 As I recall, you indicated that one of the measures would be the degree to which competition may exist.

2919 And this morning, in discussing some of the indicators, you and Mr. Carmichael indicated that some of the indicators may not be relevant because, for example, some of them that are measuring service to competitors, there may not be any competitors, so the indicator may not be relevant.

2920 Let us assume that, in four years' time, there still are no competitors and, it's not because of a problem with the price cap regime. We announced the party and, nobody came!

2921 In that situation, where competition is not existing but, it's not because of any apparent flaw with the price cap regime, how would we, in your view, measure the success or failure of the price cap regime, in terms of deciding whether or not to go forward for another three years? What factors should we consider?

2922 Now, you have indicated -- and I understand your position -- that we should not look at a rate of return that may exist at that time or, may have existed over the period. So, if we are not going to look at the rate of return, and assuming that there's no competitors, what other factors would we want to consider, in order to determine whether the price cap regime that we have put it place, has been a success or not?

--- Pause

2923 MR. GENDRON: May I answer in French?

2924 COMMISSIONER COLVILLE: Yes, please go ahead, sir!

2925 M. GENDRON: Dans l'exposé d'introduction, j'ai indiqué que l'approche retenue dans la préparation de notre proposition, c'est de ne pas mettre beaucoup d'accent sur les aspects plus théoriques des modèles de réglementation, compte tenu de l'ampleur des résultats dont nous disposions.

2926 Donc, pas en mesure en ce moment -- et je désirerais bien répondre d'une façon beaucoup plus précise que celle que je vous ai indiquée hier, sur quels seraient les outils.

2927 Cependant, il m'apparaît que si le Conseil entreprenait de faire un exercice avec l'ensemble des compagnies qui seront soumises au régime par plafonnement des prix, il pourrait en ressortir des outils très intéressants, pour atteindre l'objectif que vous venez de soumettre.

2928 COMMISSIONER COLVILLE: I appreciate that answer.

2929 But, perhaps, you could give some thought and just take an undertaking? Because the notion of having a four-year review, with almost an automatic renewal, if you could have some factors as a test -- which, I think from a regulatory point of view, has some appeal -- I would appreciate having a bit of a sense of what that test might be, particularly given your proposal.

2930 So, if there are some other factors you think of, it might be helpful to us! Thank you.

2931 LE PRÉSIDENT: Merci, monsieur le président.

2932 Alors, ceci termine les questions du contre-interrogatoire du panel numéro 1. Merci beaucoup, messieurs.

2933 Le secrétaire a peut-être quelque chose à nous donner?

2934 M. SPENCER: Merci, monsieur le président. J'ai deux documents à introduire.

2935 Le premier, TELUS Québec, "récupération du déficit de la réserve pour amortissement, segment service public", sera introduit comme CRTC pièce numéro 8.

PIÉCE N^o CRTC-8: TELUS Québec, récupération du déficit de la réserve pour amortissement

2936 La deuxième pièce, "Décision CRTC 2001-374", sera identifié comme CRTC pièce 9.

PIÉCE N^o CRTC-9: Décision CRTC 2001-374

2937 LE PRÉSIDENT: Merci, monsieur le secrétaire.

2938 Alors, nous allons suspendre 15 minutes et, nous allons reprendre avec le panel numéro 2.

2939 We will take 15 minutes and, then, come back with panel number 2, Dr. Berstein.

--- Upon recessing at 1000 / Suspension à 1000

--- Upon resuming at 1030 / Reprise à 1030

2940 THE CHAIRMAN: Order, please. Good morning, Madam McShane.

2941 Monsieur Laprise.

2942 MR. LAPRISE: Seated before you is the TELUS Québec Panel No. 2. It will speak to the TELUS Québec proposal related to the rate of return aspects.

2943 It is chaired by Claude Gendron, Vice-President, Finance. To the left of Mr. Gendron is Rénald Caron, the Controller of TELUS Québec, and Mrs. Kathleen McShane, Senior Vice-President and Senior Consultant with Foster Associates Inc. She has been involved in the development of TELUS Québec's proposal related to the aspects of our evidence -- sorry, I need the document that I gave you. This is for Mrs. McShane's expertise.

2944 At Foster Associates Mrs. McShane has worked in the areas of financial analysis, energy, economics and cost allocation. Mrs. McShane has presented testimony in more than 100 proceedings on rate of return and capital structure before federal, state, provincial and territorial regulatory boards on behalf of U.S. and Canadian telephone companies, gas pipelines and distributors and electric utilities.

2945 We have already filed this document.

2946 Might Mrs. McShane be sworn. It has already been done for Mr. Caron and Mr. Gendron.

SWORN: KATHLEEN C. McSHANE

RAPPELÉ: CLAUDE GENDRON

RAPPELÉ: RÉNALD CARON

2947 MR. LAPRISE: Mrs. McShane, can you confirm that your qualifications which have been filed with the Commission in this proceeding are accurate?

2948 MRS. McSHANE: Yes, they are.

2949 MR. LAPRISE: Mrs. McShane, please confirm that Appendix 1 to the TELUS Québec evidence, dated June 2001, and entitled "TELUS Québec Prepared Testimony of Kathleen C. McShane" was prepared by you or under your direction.

2950 MRS. McSHANE: Yes, it was.

2951 MR. LAPRISE: Is this evidence true and correct?

2952 MRS. McSHANE: Yes, with a couple of corrections and updates to be made.

2953 MR. LAPRISE: What are those updates and corrections?

2954 MRS. McSHANE: Look at page 3, please, at line 10.

2955 That line states:

"TELUS Québec is owned by TELUS Corporation 70 per cent and Horizon 30 per cent."

2956 TELUS Québec is now 100 per cent owned by TELUS Corporation.

2957 At page 13, in the table at the top of the page, the DBRS rating for TELUS Québec has been reduced from A-low to BBB-high.

2958 Finally, on page 24, Footnote 13, the footnote states:

"In Decision 98-2 the Commission concluded..."

2959 And then there is an opening quotation mark and there is no quotation.

2960 The quotation that belongs in that footnote may be found on page B-1 in the first paragraph. It states:

"In the Commission's view the use of arithmetically average risk premiums would, on its own, tend to overstate a market risk premium for any of the telephone companies. For an investor with a multi period investment horizon, the Commission considers it more appropriate to rely on the geometric mean of the historical risk premium." (As read)

2961 Those are my corrections and updates.

2962 MR. LAPRISE: Thank you.

2963 The witnesses are available for cross-examination.

2964 LE PRÉSIDENT: Merci, maître Laprise.

2965 Maintenant, le contre-interrogatoire par ARC et al.

2966 Please proceed.

EXAMINATION / INTERROGATOIRE

2967 Me JANIGAN: Merci, monsieur le Président.

2968 My name is Michael Janigan. I am appearing as counsel for this portion of the proceeding for ARC. Accompanying me is Dr. Lawrence Booth.

2969 I have several areas of questions for the panel, but only for the witness Ms McShane.

2970 Ms McShane, in looking at the Public Notice for this proceeding the CRTC states in 12(iii) -- and you may not have to turn this up -- that:

"In this regard, the Commission seeks comments as to why the company's going-in rates should not reflect the same ROE and capital structure that were used in setting the ex Stentor member companies' initial going in rates." (As read)

2971 That was 11 per cent ROE and a maximum capital structure of 55 per cent.

2972 I want to revisit your testimony in the proceeding that gave rise to the decision referred to in that paragraph.

2973 I wonder if you could confirm that in your testimony for what was then referred to as the Stentor companies, in that case you recommended a 12.75 per cent overall ROE based on a 7 per cent forecast of long Canada bond yields, with a risk premium of 5.75 per cent.

2974 Is that correct?

2975 MRS. McSHANE: The 12.75 is certainly correct, and the 7 per cent is correct. I believe the market risk premium was 6.

2976 Are you talking about the market risk premium, or are you talking about the telco-specific risk premium?

2977 MR. JANIGAN: I think it was the final risk premium estimate, which was a combination of the two, was it not?

2978 MRS. McSHANE: I think we need to be clear about what we are talking about in the context of the risk premium test. We have to determine, if we are doing a capital asset pricing model, for example, what the risk premium for the market is first, and then ultimately we need to determine what the risk premium for the Stentor companies was in that particular instance.

2979 MR. JANIGAN: I don't think I was being even that complicated, Ms McShane. I was just taking the 12.75 per cent and subtracting --

2980 MRS. McSHANE: Pardon me. Then it is not that difficult.

2981 That would have been the effective risk premium, including the proposed adjustment for financial flexibility.

2982 MR. JANIGAN: That is correct. That is the 5.75 per cent.

2983 In that decision, as you are aware, the CRTC allowed 11 per cent.

2984 MRS. McSHANE: Correct.

2985 MR. JANIGAN: In this hearing you are recommending a 12 to 12.5 per cent ROE, or a mid-point of 12.25 per cent.

2986 MRS. McSHANE: Correct.

2987 MR. JANIGAN: That is over a forecast 6 per cent long Canada bond yield?

2988 MRS. McSHANE: Correct.

2989 MR. JANIGAN: For a forecast risk premium of 6.25 per cent.

2990 MRS. McSHANE: Including the adjustment for financing flexibility; that is correct.

2991 MR. JANIGAN: Briefly, can you explain the National Energy Board's formula for adjusting ROE with long Canada bond yields for the major pipelines?

2992 MRS. McSHANE: Yes, I can. Would you like me to explain it?

2993 MR. JANIGAN: Yes. The point I am trying to make is that, under that particular formula, risk premium increases .25 per cent for every 1 per cent decline in the long Canada bond yield forecast.

2994 MRS. McSHANE: Correct.

2995 MR. JANIGAN: Relative to your Stentor forecast of 7 per cent long Canada bond yields, all else constant, the application of the formula in this case would mean a decline in long Canada bond yields of about 1 per cent and an increase in the risk premium of .25 per cent, if we applied the NEB formula.

2996 MRS. McSHANE: We are talking about my evidence in this instance versus the Stentor evidence in conjunction with the NEB formula?

2997 MR. JANIGAN: Correct.

2998 MRS. McSHANE: That is correct.

2999 MR. JANIGAN: Arithmetically, based on your long Canada bond yield forecast, the allowed ROE, according to the NEB formula, would be 10.25 per cent.

3000 MRS. McSHANE: Yes, if you believe that the NEB formula works.

3001 MR. JANIGAN: Can you confirm that similar formulas and formula adjustments are being, or have been, made by the Ontario Energy Board, the B.C. Utilities Commission and the Public Utilities Board of Manitoba?

3002 MRS. McSHANE: Yes, they have. A number of regulators have drifted to using very similar formula for determining returns.

3003 I should also point out, however, that the companies who are being allowed these returns are generally very unhappy with them, and a number of companies are going back to the regulators and asking them to review these formulas.

3004 Specifically TransCanada PipeLines is going back to the National Energy Board and asking it to approve a 12.5 per cent return on equity. Most of the major gas distribution companies in Ontario are looking to have the formula revisited and the benchmark return reset, because they all believe that the formula as applied has resulted in returns that are much lower than they should be.

3005 MR. JANIGAN: So far, there has been no change in the Board policy in those instances.

3006 MRS. McSHANE: None of them have come to hearing as yet.

3007 MR. JANIGAN: On pages 17 to 20 of your evidence you discuss the changes in the bond market that may have caused equity risk premiums to increase over long Canada bond yields, and you give a number of reasons why those equity risk premiums have increased.

3008 The first reason you give is that interest rates are likely to increase.

3009 MRS. McSHANE: Sorry, I don't believe that that has anything to do with the level of the risk premium. That is simply a remark as to where interest rates are likely to be over the term of the price cap term relative to where they were when the evidence was prepared.

3010 That comment was not intended to be a reflection in the change of the size of the risk premium.

3011 MR. JANIGAN: In fact, because you used the Consensus Economics forecast, any anticipated increase in interest rates would have been captured by the 6 per cent, I presume.

3012 MRS. McSHANE: Yes, that is absolutely correct, because I was looking at the longer term forecast.

3013 MR. JANIGAN: You also comment in this section on the fact that the Bank of Canada doesn't have an exchange rate policy and is willing to sacrifice the exchange rate to preserve its monetary targets.

3014 MRS. McSHANE: Correct.

3015 MR. JANIGAN: In what fashion have you incorporated that information into the fashioning of your risk premium?

3016 MRS. McSHANE: If you mean by that question is there a specific change that has been made to it, there has not. The comment was made simply to point out that when a number of decisions were made, including a number of the decisions that govern these automatic adjustments that you mentioned earlier, there was a relationship between interest rates in the U.S. and Canada; that being that interest rates in Canada were significantly higher than in the U.S. Therefore, when we looked at the returns on equity at that point in time, the returns on equity for utilities seemed to be in line with the relationship with interest rates.

1040

3017 As that relationship basically has been deconstructed over the past number of years, what we have seen is the returns on equity for Canadian utilities come away down following the decline in interest rates and the decline in the exchange rates as the returns in the U.S. have remained much higher.

3018 MR. JANIGAN: Another point that you make in these pages of your testimony is that you claim that there is now a smaller premium for unanticipated inflation. For example, at the time of your testimony in the Stentor proceeding in 1997, for lack of a better term to describe those proceedings. You calculate the spread as being nominal bond and the inflation protected bond at 2.8 per cent.

3019 MRS. McSHANE: Yes.

3020 MR. JANIGAN: I wonder if at this point in time it might be useful to refer to an exhibit that has been prepared that sets out a summary of the evidence.

3021 It is entitled at the top "Summary of Evidence Presented by McShane and by Booth and Berkowitz in the 1997 Price Cap Proceeding" -- which I have just referred to as the Stentor proceeding -- "and in 2001 in an AEUB Filing on ATCO Pipeline South".

3022 Could I have that marked as an exhibit.

3023 Ms McShane, do you have a copy of that?

3024 MRS. McSHANE: I do.

3025 MR. JANIGAN: I would like to use it in terms of following along with these questions.

3026 At that time you calculated the spread between the nominal bond and the inflation protected bond of 2.8 per cent, and inflation forecasts at the time were 1.7 per cent, which left an inflation risk premium, if we can call it that, of about 1 per cent.

3027 Is that correct?

3028 MRS. McSHANE: Yes.

3029 MR. JANIGAN: If we turn to your current testimony, you have long Canada's at 5.9 per cent and an inflation index bond yield at 3.5 per cent, for a spread of 2.35 per cent.

3030 Is that correct, just taking the first three figures?

3031 MRS. McSHANE: Could we just make sure that we are on the same page. You are referring to page 18, lines 22 to 26?

3032 MR. JANIGAN: Yes.

3033 MRS. McSHANE: So the difference between 5.9 and 3.55 is --

3034 MR. JANIGAN: 2.35.

3035 MRS. McSHANE: Yes.

3036 MR. JANIGAN: Concurrent with these figures, the expected inflation that you have recorded in your testimony is 2.1 per cent, with the difference between the inflation risk premium or the difference between those numbers being .25 per cent.

3037 MRS. McSHANE: Yes.

3038 MR. JANIGAN: We note that shortly after you filed in 1997 in respect of that proceeding there was also a filing made by Professors Booth and Berkowitz, which also recorded different numbers and estimates for the numbers that we have just gone through.

3039 Could you confirm that for the 1997 numbers, that appears to be the estimate and numbers that they set out in their 1997 position?

3040 MRS. McSHANE: I will take it subject to check. I did not go back and verify that they were what appeared in their testimony.

3041 MR. JANIGAN: And similarly in the Alberta Energy Utility Board testimony these are accurate extracts from that testimony filed about the same time as your evidence was filed.

3042 Would you take that subject to check?

3043 MRS. McSHANE: Yes, I will take that subject to check. I didn't check these either.

3044 MR. JANIGAN: Your position is that long Canada bonds were riskier in 1997 due to a series of increased inflation which caused their yields to be bid up, and that now because the government has managed the deficit in an appropriate way, have their finances under control, this inflation risk premium has come down.

3045 MRS. McSHANE: The inflation risk premium has come down. That is correct.

3046 MR. JANIGAN: That is why your estimate of the spread over inflation has come down from the 1.1 per cent in the exhibit, which you have rounded to 1.0, to .25 per cent.

3047 Is that correct?

3048 MRS. McSHANE: There is less of a premium in the nominal bonds for unanticipated inflation, yes.

3049 MR. JANIGAN: You feel that the equity risk premium has gone up since equity yields are less affected by this inflation risk premium.

3050 MRS. McSHANE: That is correct; that relatively speaking, bonds are less risky today than they were several years ago.

3051 MR. JANIGAN: I want to take a look at the exhibit once again with the extracts from the testimony of Professors Booth and Berkowitz.

3052 At the time they filed their evidence, the long Canada bond yield was 6.55 per cent and the real Canada yield, which is the inflation protected bond, was 4.14 per cent, a spread of 2.41 per cent.

3053 At the time they filed their evidence the expected inflation was 1.7 per cent, with an inflation risk premium of .71 per cent.

3054 Would that be correct?

3055 MRS. McSHANE: I have accepted the numbers subject to check, so the math works.

3056 MR. JANIGAN: Similarly, if we follow through their evidence this year that was filed in the Alberta proceedings, you end up as a result of the computation from those numbers with an inflation risk premium of .27 per cent.

3057 Is that correct?

3058 MRS. McSHANE: Yes.

3059 MR. JANIGAN: Between their two filings, if we look at the spread between the long term bonds and the index bonds, the spread was about the same.

3060 Is that correct?

3061 MRS. McSHANE: Sorry, I am not sure what point in time you are pointing to.

3062 MR. JANIGAN: If you look at the Both and Berkowitz evidence, the spread between the long Canada yield and the real Canada yield filed in 1997, and their filing of this year, the spread is pretty much the same. It is 2.41 in one case and 2.37 in the other.

3063 MRS. McSHANE: That is correct.

3064 MR. JANIGAN: If we look at their interest rate data, the risk premium and long Canada yields would just have declined by the increase in your inflation forecast of .40 per cent.

3065 Is that correct?

3066 MRS. McSHANE: Sorry, could you repeat that?

3067 MR. JANIGAN: Sure. If you look at the interest rate data, the inflation risk premium and long Canada yields would just have declined by the increase in your inflation forecast of .40 per cent.

3068 MRS. McSHANE: That is true. That is what the difference could be explained by. It is not my forecast of inflation, though. It is the Consensus forecast of inflation.

3069 MR. JANIGAN: The forecast that you used.

3070 Between these two filings, the long run Canada yield forecast has dropped by about 1 per cent. If we accept your argument of a decline in the inflation risk premium, Professor Booth and Berkowitz's evidence would argue for an increase in .4 per cent in the risk premium.

3071 Is that correct?

3072 MRS. McSHANE: Based on their evidence alone, yes; not based on my evidence alone.

3073 My evidence was done at a different point in time, and the interest rate that was the benchmark in the Stentor cases was higher than the 6.55.

3074 MR. JANIGAN: I think there is a timing difference in your evidence in 1997 and Booth and Berkowitz's evidence.

3075 MRS. McSHANE: Absolutely there is.

3076 MR. JANIGAN: In the circumstance, under the National Energy Board formula, the NEB formula would produce a .25 per cent increase in risk premium, a drop of 1.0 per cent.

3077 Is that correct?

3078 MRS. McSHANE: Yes. We have already agreed that is what the formula does.

3079 MR. JANIGAN: If we look at your data, between the filing of your testimony and that of Professors Booth and Berkowitz, the long Canada yield fell by .55 per cent, while the real Canada yield only fell by .16 per cent, if we accept that you were both correct in your estimates and the time frames.

3080 MRS. McSHANE: That is what the table shows, yes.

3081 MR. JANIGAN: Assuming no change in inflation, that would indicate that the inflation risk premium fell by almost .40 per cent prior to the price cap or the Stentor decision.

3082 Is that correct?

3083 MRS. McSHANE: True.

3084 MR. JANIGAN: Isn't it likely that the 11 per cent the CRTC allowed the Stentor companies already reflected the decline in the inflation risk premium?

3085 MRS. McSHANE: I don't think so, because I don't think it was really an issue and I don't think it was discussed in that context.

3086 I do believe that the forecast of long Canadas that was relied on in that case was higher than the 6.55.

3087 MR. JANIGAN: I'm sorry, could you repeat the last point.

3088 MRS. McSHANE: The forecast of long Canadas that the CRTC relied upon when it came up with the 11 per cent was higher than the 6.55 per cent. It was in the range of 6.7 to 7.0, I believe.

3089 MR. JANIGAN: Barring some method of going back and re-opening the decision or finding out what was in the minds of the Commissioners, certainly the evidentiary record that exists here was before the Commissioners at the time they made the decision.

3090 MRS. McSHANE: Certainly the interest rates were. My point was that I don't believe this discussion of the impact of the premium for unanticipated inflation had been clarified at that point.

3091 MR. JANIGAN: I want to touch upon your Schedule 5, which has also been distributed as an exhibit, which indicates the "Evaluation of the Spread Calculated from Ms. McShane's Schedule 5 Presented July 6, 2001".

3092 If you have that document before you, Ms McShane, would you confirm that this piece of paper accurately reflects the material set forth in your evidence?

3093 MRS. McSHANE: If the numbers in the column "Canada Yield" are on my Schedule 5 and the numbers in the column entitled "Inflation Indexed" are on my Schedule 5, then the spreads have been calculated correctly.

3094 MR. JANIGAN: We note that the spread is in the 3.50 to 4.50 range in the years 1992 to 1995. Then it dropped to 2.89 per cent in 1996, and then again to 2.28 per cent in the Stentor filing year.

3095 It would appear that prior to the CRTC's price cap decision there was a big drop in the spread between long Canadas and the inflation index bond.

3096 MRS. McSHANE: There was.

1050

3097 MR. JANIGAN: Would you agree with me that throughout this period inflation was just under 2 per cent, whether you measure that by the Consumer Price Index or the --

3098 MRS. McSHANE: Yes. Inflation had been around 2 per cent.

3099 MR. JANIGAN: Throughout this period the Bank of Canada's target zone for inflation has remained in the range of 1 per cent to 3 per cent?

3100 MRS. McSHANE: Yes, it has.

3101 MR. JANIGAN: I think you have indicated that since the inflation risk premium and long Canada bond yields has declined, you believe the market risk premium over long Canada bond yields has increased.

3102 MRS. McSHANE: Correct.

3103 MR. JANIGAN: I wonder if you could look at the attachments -- and this is another exhibit, I believe.

3104 It is entitled "Canadian Market Risk Premium Estimates". There should be a correction on this document that indicates that the evidence was submitted in PN97-11 rather than 97 --

3105 MRS. McSHANE: What was the correction?

3106 MR. JANIGAN: At the bottom where it says "From the evidence submitted by Ms. McShane in PN97", it should be "PN97-11" rather than whatever it is.

3107 MRS. McSHANE: Mine says 97-11.

3108 MR. JANIGAN: I note for this testimony you presented a market risk premium derived from four sources: and that was the Task Force on Pensions; the Hatch & White data; the Canadian Institute of Actuaries; and the Ibbotson et al U.S. data.

3109 Is that correct?

3110 MRS. McSHANE: Yes.

3111 MR. JANIGAN: If we look at the three Canadian studies, would you agree that the one with the largest risk premium estimates is the one that uses the Canadian Institute of Actuaries data?

3112 MRS. McSHANE: Yes, that has the highest numbers.

3113 MR. JANIGAN: They cover almost identical period, all of these sources. Would you agree with that?

3114 MRS. McSHANE: The Hatch & White covered three less years.

3115 MR. JANIGAN: Yes. Other than that qualification, they are pretty much the same.

3116 MRS. McSHANE: They covered the post war period.

3117 MR. JANIGAN: In your current study you report only one study. Was that from the Canadian Institute of Actuaries?

3118 MRS. McSHANE: Yes, it is.

3119 MR. JANIGAN: Is it fair to say that updating these other studies would have resulted in a lower market risk premium estimate for Canada?

3120 MRS. McSHANE: It would result in lower purported achieved returns. That follows.

3121 But the updates would have had to have been done by me. The fact of the matter is the Canadian Institute of Actuaries study is the only study that continues to be updated year by year, as well as the Ibbotson & Sinquefield.

3122 The Task Force data only went through 1978, I think; and the Hatch & White data went through 1987. Neither of those studies, to my knowledge, have been updated. All the updates that were done were basically ones that I had undertaken myself.

3123 Since the Canadian Institute of Actuaries and the Ibbotson & Sinquefield studies are the ones that continue to be updated and continue to be viewed and available to investors, those are the two that I focused on.

3124 MR. JANIGAN: Is it fair to say that if these studies had been updated, they would have resulted in lower market risk premiums?

3125 MRS. McSHANE: Assuming that the data that they had added to them was the same data that is used in the Canadian Institute of Actuaries study, that would have to follow.

3126 MR. JANIGAN: I want to deal with estimation methods. I wonder if you could turn to your current risk premium estimates in Schedule 6.

3127 You have a one-year, five-year and ten-year holding period estimate set out here.

3128 MRS. McSHANE: And the compound average, as well.

3129 MR. JANIGAN: Yes, and the compound average.

3130 If you look at the Canadian study period, the estimates for the market risk premium are 4.4 per cent for the ten-year holding period, then 4.9 per cent for the five-year and 6.5 per cent for the one-year.

3131 MRS. McSHANE: Correct.

3132 MR. JANIGAN: And the U.S. estimates are 6.5 per cent, 7.4 per cent and 8.6 per cent.

3133 Can you explain why the risk premium estimates increase as the holding period gets shorter?

3134 MRS. McSHANE: There are a lot of overlaps of the periods. It is all possible five-year holding periods. It is a question of the overlap and repeating periods.

3135 The reason I have focused on the one-year and the compound is to make sure I have given equal weight to each year and not double counted various periods.

3136 MR. JANIGAN: Supposing you had presented quarterly or monthly risk premium estimates, do you think they would be greater or smaller than the one-year estimates?

3137 MRS. McSHANE: I don't understand what you mean by quarterly or monthly estimates.

3138 MR. JANIGAN: If you had taken estimates based on a quarter of the year or on a monthly basis instead of the one-year basis, would they have been greater or smaller than your one-year estimate?

3139 MRS. McSHANE: They might be larger.

3140 MR. JANIGAN: Which holding period of the ones that you have set out here is correct?

3141 MRS. McSHANE: I think I have made it clear in the evidence that what I believe and have provided the appendix for is the one-year holding period. The arithmetic average is the most appropriate number to be using for the forward looking risk premium, because it is the arithmetic average which effectively gives the measure of the uncertainty in the market in the future.

3142 The long term compound average has its benefits as a measure of history and gives what the long term achieved return has been, but it doesn't give you the same sense of the uncertainty that is indeed in the market. In fact, what it does is smooth out all the uncertainties that have been incurred in the past.

3143 MR. JANIGAN: Your choice of one year obviously gives you the highest risk premium.

3144 MRS. McSHANE: the arithmetic average is, by its very nature, larger than the long-term compound average unless the return in every year is exactly the same. In that case, the geometric average and the arithmetic average will be equal.

3145 MR. JANIGAN: I take it that the answer to the question was yes?

3146 MRS. McSHANE: Yes, it is and I explained why. The fact of the matter is that the arithmetic average is the average that is consistent with providing an estimate which reflects the uncertainty in the market.

3147 MR. JANIGAN: There is no magic to the one-year term. It could be two years; it could be three years.

3148 MRS. McSHANE: Well, no. It needs to be a one-year holding period return so that you see each year what the possible options are.

3149 MR. JANIGAN: Let's take it from the standpoint of telco stocks themselves. Have you any evidence of whether telco stocks are likely to be held by short-term traders or long-term investors?

3150 MRS. McSHANE: Well, they are probably likely to be held by long-term investors. In that regard, there is some weight given to the compound average.

3151 The fact of the matter is that each year, looking forward, an investor may choose to rebalance his portfolio and sell his shares. It is the probability of where those returns in that year may be that is going to determine the risk that he faces in holding that additional year.

3152 MR. JANIGAN: Have you ever presented testimony relying on compound mean estimates of the market risk premium rather than arithmetic means?

3153 MRS. McSHANE: I don't know what that means, compound mean estimates. This is a compound average in here. I am giving weight to the compound average.

3154 MR. JANIGAN: In terms of the arithmetic mean estimates, have you always relied on arithmetic mean estimates for the risk premium?

3155 MRS. McSHANE: I an not relying solely on the arithmetic mean averages.

3156 MR. JANIGAN: Have you ever presented testimony that didn't rely on the arithmetic mean estimate?

3157 MRS. McSHANE: At all?

3158 MR. JANIGAN: No, in terms of the presentation of estimates.

3159 You have indicated that your testimony relies upon arithmetic mean estimates for the rate risk premium. Have you ever relied upon testimony with compound mean estimates of the risk premium?

--- Pause

3160 MRS. McSHANE: Maybe this will clarify the situation. If you look on page 23, at lines 28 to 29, it says:

"The experienced Canadian equity risk premium since World War II, 1947 to 2000, has been in the range of 5.8 per cent (compound average) to 6.5 per cent (arithmetic average)." (As read)

3161 Then if you flip over to page 24, at lines 4 to 7 it says:

"Giving 70 per cent weight to the Canadian historic risk premiums and 30 per cent weight to the U.S. risk premiums, the indicated expected equity market risk premium is in the approximate range of 6.5 to 7.0, based on compounded arithmetic historic averages, respectively." (As read)

3162 So, I am giving weight to both.

3163 MR. JANIGAN: I wonder if I could keep you at that reference and look at the issue of U.S. evidence.

3164 Could you explain briefly why investors hold diversified portfolios?

3165 MRS. McSHANE: Primarily to attempt to achieve better returns at lesser risk.

3166 MR. JANIGAN: Is it fair to say that diversification lowers investment risk?

3167 MRS. McSHANE: Yes, it does.

3168 MR. JANIGAN: What happens to expected rates of returns as investors lower their risk?

3169 MRS. McSHANE: In the case of a number of studies that have been done supporting diversification into global markets, the expected returns have increased.

3170 MR. JANIGAN: And in general economic terms of diversification lower risk, you would also expect lower rates of return, would you not?

3171 MRS. McSHANE: Those are two separate propositions. Yes, there is generally a relationship between risk and return: the lower the risk, the lower the required return.

3172 What analysts and researchers have shown is that diversification particularly into global markets has been able to achieve higher expected returns at lower risk.

3173 MR. JANIGAN: What happens as investors take a Canadian portfolio and then diversify into foreign markets? Will risk increase or decrease?

3174 MRS. McSHANE: It depends what they are diversifying into. I would say, generally speaking, if they are diversifying into the U.S. where they have a significantly larger choice of investments and a number of larger companies and industries that are not very well represented in Canada, currency risk aside, which can be heavy, the risk is lower.

3175 MR. JANIGAN: You weigh your Canadian market risk premium with the higher U.S. market risk premium to get a higher overall estimate.

3176 Is that correct?

3177 MRS. McSHANE: It's a higher overall estimate because the returns in Canada have been lower than in the U.S.

3178 MR. JANIGAN: Presumably historic returns reflect the lower risk.

3179 MRS. McSHANE: I don't think you can say that. History is what it is. I know that sounds like a facetious perhaps even tautological response. But one cannot presume that what investors have achieved in the past reflects what they expected.

3180 We do presume this, in effect, when we use history as a proxy for the future. But particularly in the case of the Canadian market, there are a number of factors which suggest that the Canadian market has not performed the way investors would have liked it to perform.

3181 I would draw your attention, for example, to the bottom of page 22, in Footnote 11, where we look at some of the returns that have been achieved on key industries in this country compared to returns on some of the more consumer oriented industries.

3182 What we see are that the industries that are typically viewed as being the riskier industries, the resource-based industries, have been lower than the overall return on the market.

1115

3183 So that, in and of itself, suggests to me that one has to be very careful about making the assumption that the past returns are a good estimate of what investors had expected.

3184 Indeed, when the caps on foreign investment in RFPs were raised and in pension funds were raised, we saw significant movement to include more foreign investment in Canadian portfolio. And, a significant amount of pressure preceded the lifting of those caps, to actually lift them because there was a lot of belief that there were better returns available elsewhere.

3185 MR. JANIGAN: I guess I just want to follow a simple proposition that, if the risk is lower, surely the risk premium would follow suit?

3186 MRS. McSHANE: In principle, I don't disagree with you. If you had, what you believed was a perfect measure of the risk premium, going forward, then if risks were then reduced after that, then you would expect the risk premium to go down. But, we're dealing with the frailties of historic data.

3187 And, so the common sense proposition that you're making can't simply be applied to historic data without taking into account factors that made the level of those returns what they were, in the first place.

3188 MR. JANIGAN: But, going forward, surely diversification and, lowering risk means lower risk premium.

3189 MRS. McSHANE: Compared to what, though? I mean that, to me, is the question.

3190 You know, what we're doing is taking historic risk premiums from a market that we know is not really a diversified market, that there is significant evidence that the returns understated investor expectations. We are giving significant weight to those.

3191 So, if we gave 100 per cent weight to them, I mean to me, that's saying that we're already understating what investors are requiring for the future.

3192 We know investors in Canada have shown a propensity in the last five years, to move significant amounts of money into foreign portfolios, into foreign shares, particularly U.S. shares. And, presumably, with the idea that the returns that they will be able to achieve in those shares, are higher than those that they have achieved in the Canadian sphere, in the past.

3193 That, to my mind, provides a bonified rationale for giving weight to the predominant bench-mark marking into which they are likely to invest.

3194 MR. JANIGAN: But theoretically, the premise behind your position is that allowing Canadian investors to buy U.S. shares, increases the risk to their portfolio and drags up Canadian risk premiums?

3195 MRS. McSHANE: No. I'm afraid I don't agree with that!

3196 I think you're trying to take a theoretical proposition and, apply it to historic data that don't fit the patterns that we would associate with the theory.

3197 MR. JANIGAN: Well, I wanted to go into some of these historic, evidence with you.

3198 I wonder if you could look at your evidence, page 25 and footnote 15.

3199 MRS. McSHANE: I have that.

3200 MR. JANIGAN: You refer to an unpublished paper, by Ivo Welch. Do you know whether that paper was ever published?

3201 MRS. McSHANE: Not off the top of my head. I have a vague recollection that it may have been. I know other people have referenced it.

3202 MR. JANIGAN: I presume to get published in academic paper, it has to be peer reviewed, to make sure the methodology was sound. Would that be correct?

3203 MRS. McSHANE: Yes.

3204 MR. JANIGAN: Now, I wonder if you could turn to a paper, I believe we furnished you, which we would also like to put in evidence. It's called the "Shrinking Equity Premium".

3205 This paper appears to have been presented at the same conference, the UCLA conference, that Welch's paper was also presented at.

3206 MRS. McSHANE: I'm sorry! Was there a question?

3207 MR. JANIGAN: It was to confirm that.

3208 MRS. McSHANE: I would --

3209 MR. JANIGAN: Would you accept that subject, to check?

3210 MRS. McSHANE: I'll accept that, subject to check.

3211 MR. JANIGAN: It was published in the "Journal of Portfolio Management". I take it that's an academic journal of peer reviewed papers.

3212 MRS. McSHANE: I mean, I'm familiar with the "Journal of Portfolio Management". But, whether it's peer reviewed or not, I don't know.

3213 MR. JANIGAN: Now, if you can see in Siegel's exhibit number 2, his risk premium over bonds in the U.S. was presented and, that the highest arithmetic risk premium estimate of 6.5 to 7.3 per cent is for the period 1946 to 1998.

3214 MRS. McSHANE: Yes.

3215 MR. JANIGAN: This is the closest time period to the one that you used in your estimation, 1947 to 2000? Would you agree?

3216 MRS. McSHANE: Yes.

3217 MR. JANIGAN: Now, if we took the period 1871 to 1925, the market risk premium was 4 per cent. Is that correct?

3218 MRS. McSHANE: So, he says!

3219 MR. JANIGAN: I understand that the EBITs in data, which starts in 1926, used those data and it only starts in 1926 because they wanted to start prior to the "Great Crash" of 1929. Are you aware of that?

3220 MRS. McSHANE: It sounds familiar, yes.

3221 MR. JANIGAN: And, that the data from 1871 and 1926 is the same Cowles data?

3222 MRS. McSHANE: Sorry, what?

3223 MR. JANIGAN: That the data from 1871 to 1926, is the same Cowles data?

3224 MRS. McSHANE: Oh! Cowles data!

3225 MR. JANIGAN: Yes?

3226 MRS. McSHANE: Yes, I have heard that they are.

3227 MR. JANIGAN: I'm glad you have because if I had gotten into it, I wouldn't know what it was!

3228 MRS. McSHANE: Well, I'm not really sure what it is, either! I just heard it referred to, as the "Cowles data". It's spelled C-O-W-L-E-S, for anybody who wants to know!

3229 MR. JANIGAN: Now, if we look at Siegel's concluding remarks in this package, he notes that:

"The degree of the equity premium calculated from the data estimated from 1926 is unlikely to persist in the future. The real return on fixed income assets is likely to be significantly higher than the estimated on earlier data. This is confirmed by the yields available on Treasury Link Securities which currently exceed 4 per cent." (As read)

3230 Now, Siegel obviously feels that this historic equity risk premiums are too high. Do you agree?

3231 MRS. McSHANE: Well, yes. His view is that based, on that it was the longest period of history available, these returns are unlikely to be repeated.

3232 MR. JANIGAN: In his opening paragraph, when he looks at the material presented by Mehra and Prescott, he notes that:

"They calculate the margin by which stocks outperform safe assets, the equity premium, to be in excess of 6 percentage points per year, and claim that the profession is at a loss to explain its magnitude."

3233 That's what Prescott and Mehra referred to, as "their equity risk premium puzzle". Is that correct?

3234 MRS. McSHANE: Yes, that's what they have called the "equity risk premium puzzle", that basically a number of academics have stated that they don't believe that the amount of risk aversion that investors tend to exhibit can explain that this size of the risk premium has been achieved.

3235 MR. JANIGAN: If you look at exhibit 1, his exhibit 1 on this, you note that in the bottom, you'll see that it has been primarily due to the shrinking of the bottom return throughout the reported period.

3236 MRS. McSHANE: Sorry! What has been?

3237 MR. JANIGAN: The difference, the 6 per cent different, the equity premium.

3238 MRS. McSHANE: It's in exhibit 1?

3239 MR. JANIGAN: Exhibit 1, of his article, Siegel's article. He notes, during that period of time, the compound annual real returns for bonds under the --

3240 MRS. McSHANE: Yes, okay.

3241 MR. JANIGAN: Do you understand?

3242 MRS. McSHANE: Yes. So, you're saying that the risk premium in part, is explained by the decline in the real return on bonds.

3243 MR. JANIGAN: That's correct.

3244 MRS. McSHANE: Yes.

3245 MR. JANIGAN: Now, the point of Siegel's work is simply that it isn't a puzzle, that the 6 per cent estimates presented from similar periods that you use, are specific to those periods and that using any other period would lower numbers. That's his thesis, right?

3246 MRS. McSHANE: His thesis is that it's specific to the period?

3247 MR. JANIGAN: Yes. That, in fact, the 6 per cent estimates that are presented are specific to those periods and, that using any other period results in lower numbers.

3248 MRS. McSHANE: Yes, that may well be true. You know, I wouldn't feel comfortable in saying that returns that we have achieved from 1802 to even early in this century, would be the types of numbers we could rely on for the future or, the types of returns that we might expect for the future.

3249 I mean, if you go back and look at some of these data in the past, you're talking about an index of stocks which was basically a couple of banks and the railroads. But, we all know how well the railroads have done!

3250 So you know, I don't think that I would be willing to place a lot of credence in returns that were achieved back in the early 1800s!

3251 MR. JANIGAN: I don't want to belabour this point, Ms. McShane. But we should note, on exhibit 1 once again, the returns that are associated -- the real returns that are associated with stocks have been pretty much the same, throughout all periods?

3252 MRS. McSHANE: Well, they have. But I think that if you look, for example, at the returns within the 1946 to 2000 period, for example, that although you're looking at a real return, which averaged 8 per cent, if you start to break down some of those returns and, look at how they changed with the rate of inflation and the rate of growth, what you will find is that the stock returns have been inversely related to the rate of inflation and, higher when growth was high.

3253 You know, what we are looking at, going forward, is a period of low inflation and a period of relatively high growth, compared to what was deemed to be achievable in the past.

3254 So on those grounds, one would expect to be able to achieve higher stock returns in the future.

3255 MR. JANIGAN: I want to turn to your forward-looking market risk premiums study. You do a forward-looking risk premium test by looking at the analysts' growth expectations and dividend yield, estimate a discount of cash flow cost and, then tracked along Canada yields, to get the market risk premium.

3256 MRS. McSHANE: To get one estimate of basically the market risk premium in the next five years, if you will.

3257 MR. JANIGAN: And, you estimate the Canadian DCF equity market risk premium at 6 per cent and the U.S. one at 9.6 per cent. Is that correct?

3258 MRS. McSHANE: I don't think so. The indicated premiums, based on the TSE300 is 8. That's at page 24, line 17. And the U.S. one was, I think you said that correctly, 9.6 per cent.

1130

3259 MR. JANIGAN: That's right. That would not account for the average being what it is, of 8.5 per cent?

3260 MRS. McSHANE: Correct.

3261 MR. JANIGAN: And, the model you have used is the dividend yield plus growth estimates, that has been used before this Commission by numerous experts in the field, where you use the analyst estimates as the long run growth estimates?

3262 MRS. McSHANE: Correct.

3263 MR. JANIGAN: And, these estimates are based on analyst earning forecasts. I note, on page 24, line 27, that you indicated it was acknowledged that investment analysts forecasts had been optimistic.

3264 MRS. McSHANE: Correct.

3265 MR. JANIGAN: I take it what you mean that "optimistic" is that it has been over-optimistic?

3266 MRS. McSHANE: Well, "optimistic" to me, means that they are probably higher that what can reasonably be expected to be, at least sustained.

3267 MR. JANIGAN: Okay.

3268 I would now like to turn to another exhibit, another paper that we have furnished you, entitled "The Death of the Risk Premium", by Robert Arnott and Ronald Ryan.

3269 The second paragraph, first sentence, indicates:

"One of the most striking developments of the 1990s is the evaporation of the forward-looking risk premium for stocks measured relative to bonds."

3270 At the top of page 62, the top paragraph states:

"And investors have enjoyed this risk premium: stocks have outpaced bonds by about 5% per year for a 74-year span, and have produced real returns north of 7% for an entire century."

3271 Let me go on to analyze this return.

3272 Do you see the section starting "Dividend Yields", where they state:

"Today's stock market dividend yield of around 1.2% is 4.2 percentage points below the dividend yield of 1925."

3273 If the authors are correct, when the EBITs data started in 1926, the market had a dividend yield of 5.4 per cent, and they have calculated that it has declined by 4.2 per cent, since market prices have increased relative to dividends.

3274 Have I correctly interpreted what the authors have set out here?

3275 MRS. McSHANE: I think what they are saying is that, in their view, in part -- there are two factors.

3276 One is that the prices have been bid- up, but the other one is that if there is expected higher growth in the future, part of that is to be achieved through reinvestment of earnings, rather than payment of dividends from the near term.

3277 The other factor they do mention is that there has been a tendency for companies, particularly in the U.S., to pay less in dividends than they used to in the past, because there is a tax benefit to achieving your returns, through capital gains rather than through dividend payments.

3278 MR. JANIGAN: But, in continuing on, they look at -- if you look further in the article, on page 62:

"Suppose we take the 8.4 per cent real return of the last 74 years and subtract both the 2 percentage points attributable to rising valuation levels and the 4.2 per cent drop in forward-looking dividend yields on the S&P 500, this brings us to an expected real return for equities of 2.2 per cent, a shockingly bad real return."

3279 MRS. McSHANE: Right. And, that is what they are potentially saying, that investors should be looking at. But, the fact of the matter is that when you step back and ask yourself the question that we are asking ourselves here, which is "What do investors require as return?", you're looking at a quite different issue than what this author is.

3280 What this author is basically saying is that, irrespective of what you require on equity, based on this -- this and this factor -- I don't believe you can achieve it. So, I believe you are going to be disappointed.

3281 But, I don't think that that, in any way, takes away from what we are trying to estimate here, which is not what these authors believe investors are actually going to be able to get in the next while, but what is the investor's required return on equity.

3282 MR. JANIGAN: But presumably, if the 2 per cent of the return is coming from a re-evaluation of the price, you can't continue to get capital gains with lower dividend yields, you can't continue to bid up the prices a lot more to get less --

3283 MRS. McSHANE: I agree with that, and I think that what we are going to see is some reevaluations. But, I think that all of the evidence points to the fact that investors do expect an efficient market that requires returns based on history.

3284 MR. JANIGAN: And, with a 2 per cent dividend yield, the only way an equity investor can get a higher return, is through capital gains. Is that right?

3285 MRS. McSHANE: Higher return than --

3286 MR. JANIGAN: If he only had a 2 per cent dividend yield, the only way in which the equity investor can get a return, than 2 per cent--

3287 MRS. McSHANE: Is through a capital gain?

3288 MR. JANIGAN: And, these capital gains have to either come from growth and profits or dividends, or for increased prices paid for the same stream of dividends?

3289 MRS. McSHANE: That's correct.

3290 MR. JANIGAN: Okay.

3291 And, if the increased valuation levels can't go on forever, where are we going to get the kind of estimation of returns that you believe investors expect?

3292 MRS. McSHANE: It has to be through increased profits.

3293 MR. JANIGAN: If you could turn up the opening paragraph of this "Real Dividend Growth", on page 62:

"Real dividend or earnings growth cannot exceed real economic growth in the very long run, or eventually earnings ad dividends grow larger than the economy itself."

3294 Do you disagree with that statement?

3295 MRS. McSHANE: That in the long run, it is true that in the aggregate, earnings and dividends, because dividends come from earnings, cannot grow faster than the economy as a whole.

3296 MR. JANIGAN: I wonder if I could ask you to turn to exhibit no. 7.

3297 MRS. McSHANE: Which is what?

3298 MR. JANIGAN: I'm sorry! Your Schedule 7.

3299 One moment, Mr. Chairman. We may not have the right reference, here!

--- (Pause)

3300 MR. JANIGAN: I'm sorry! It's Schedule no. 13.

--- (Pause)

3301 MR. JANIGAN: You present an estimate, in column no. 2, here, of IBF growth of 12.6 per cent.

3302 MR. JANIGAN: You're talking about, in 2000?

3303 MR. JANIGAN: Yes.

3304 MRS. McSHANE: Yes.

3305 MR. JANIGAN: Would you accept that this exceeded the growth rate of GDPs, throughout that period?

3306 MRS. McSHANE: Yes. Well, for what period? I guess any period. I mean GDP growth has not been 12.6 per cent.

3307 MR. JANIGAN: And real growth rates, for most of this period, have always been less than 5 per cent.

3308 MRS. McSHANE: Real growth rates?

3309 MR. JANIGAN: Yes.

3310 MRS. McSHANE: Yes, they have.

3311 MR. JANIGAN: So a maximum GDP growth was about 7 per cent per year.

3312 MRS. McSHANE: Nominal. Correct.

3313 MR. JANIGAN: And, it appears to be much less than the earnings growth estimates that you have presented here.

3314 MRS. McSHANE: Yes. Let's go back to what I said!

3315 What I said was, in the long run, in the aggregate. But if you look at individual industries, if you expected everybody's growth expectation to be 5 per cent, that is not consistent with the differentiations among the different industries.

3316 Sure, some of the industries are going to be fully mature, and therefore their expected growth rates, like utilities, are going to be around 5 per cent, but their dividend yields are also going to reflect the fact that growth is expected to be around 5 per cent.

3317 We are looking at an industry here which is expected to grow very quickly in the next five years at least, and this is what investors are looking at. They don't have the ability to forecast beyond that period, therefore these estimates are the best estimates of their longer term growth expectation. And that has to be put in the context of the dividend yield which accompanies that. You cannot separate the two. They are integrally related.

3318 MR. JANIGAN: What interests me is that these estimates, though, are so much higher than the actual numbers that are produced by the economy.

3319 If you turn up, on the same paper, exhibit no. 3 --

3320 MRS. McSHANE: Are we in the same article?

3321 MR. JANIGAN: Yes, that's right, "The Death of the Risk Premium".

3322 They have real economic growth rates and real growth rates of dividends and earnings. If you look at the Canadian column for this 30-year period 1145

3323 MRS. McSHANE: Sorry, to interrupt! Can you tell me which page, you are referring to?

3324 MR. JANIGAN: Sure! On page 56, exhibit number 3, they have the real economic growth rate and the real growth rate of dividends and earnings.

3325 If you look at the "Canada" column, the real growth rate, for this 30-year period, was 2.9 per cent, the highest of any of the other countries. You can see that the really earnings growth was negative 2.2 per cent and, dividends at negative 0.9 per cent whereas now, we are forecasting earnings growth of plus 7 per cent, actual real earnings growth was negative.

3326 Is that what people mean when they say that "analysts are optimistic"?

3327 MRS. McSHANE: I think what they mean, when they say that "analysts are optimistic" is that they have tended to forecast growth rates that are higher than what is ultimately achieved. And, most of these forecasts focus on the shorter-term forecasts.

3328 I don't think that has changed the other type of analyses, which have been done with these forecasts, which is to come to the conclusion that the forecasts are better in the instance of being a measure of investor expectations, than history. The research has also shown that the forecasts, they are better estimates than history, as a measure of future growth.

3329 MR. JANIGAN: But surely, the market, at some point in time, corrects for history. If analysts' expectations have all been in excess of real economic growth, somewhere in a point in time, the market has to adjust?

3330 MRS. McSHANE: I think that you have to be careful about what you are saying when you are talking about "the forecast being in excess of growth in the economy"!

3331 The S&P 500 is not the economy. The S&P 500 are the stocks that basically -- I will call them "the engine of the future growth" -- but the expected growth in those shares should be higher right now, than the overall growth in the economy.

3332 MR. JANIGAN: Let's return to that.

3333 If you look at exhibit 3, that is not what is happening, in this table. The real earnings per share, over this period of time, is less than the real GDP, the real growth of the economy. As a matter of fact, earnings per share is negative and dividends are negative. So, if the expectations are higher, their expectations are brutally shattered.

3334 MRS. McSHANE: I guess they have been in these cases, particularly if those numbers are correct for Canada, that the real growth in earnings has been negative. That is certainly not what one should have expected in advance.

3335 MR. JANIGAN: And, even for the U.S., there is nothing to write home about!

3336 MRS. McSHANE: Well, the way they have measured. I have not analyzed this in depth, so I cannot comment on how these were done.

3337 MR. JANIGAN: Would you accept that a long-run economic growth forecast should be about 4.5 per cent with inflation of about 2 per cent, phenomenal growth around 7 per cent. So, I think it is about 4.7 per cent below your analysts' growth estimates.

3338 MRS. McSHANE: The long-run growth in the economy as a whole should be the real growth approach for -- we are talking Canadian growth?

3339 MR. JANIGAN: Yes.

3340 MRS. McSHANE: Inflation of 2 per cent, the long-run economic growth, that is correct.

3341 MR. JANIGAN: Thank, you.

3342 I wonder if I could now turn to the Credit Suisse article, which I furnished you. Did I have the last one marked as an exhibit? I can't remember. "The Death of the Risk Premium", was that marked as an exhibit?

3343 The Credit Suisse article and, once again, Credit Suisse First Boston is a major international brokerage house, would you agree?

3344 MRS. McSHANE: Yes.

3345 MR. JANIGAN: And, as you can see, the date, September 28, it is pretty current as well. I would like to draw your attention to the comment on the first page, in paragraph 2:

"However, as we believe I/B/E/S numbers are unusually unreliable, we stress test by assuming cyclically normalised earnings and terminal growth rates of 5% in US and 4.5% in Europe. The equity risk premiums fall to 3.7% in the US and 3.6% in europe."

3346 MRS. McSHANE: I see that.

3347 MR. JANIGAN: Then, I wonder if I could have you turn to page 4, near the bottom, they state:

"We would remind readers that over the last ten years..."

3348 That's the second paragraph from the bottom --

"... I/B/E/S earnings numbers have on average been 6% too optimistic 12 months prior to a reporting date. Thus some of our assumptions may be overly conservative."

3349 MRS. McSHANE: Yes, I see that.

3350 MR. JANIGAN: Okay. And, I/B/E/S is the analyst forecast that you use?

3351 MRS McSHANE: They are the consensus forecast, and there are various consensus forecasts that are available: First Call, S&P has one. And they tend to call on the same analysts and, they tend to produce the same types of numbers.

3352 MR. JANIGAN: Now, I believe the Arnott Study indicated that the analyst forecasts were about 4.7 per cent too optimistic, and Credit Suisse's response says they are 6 per cent too optimistic.

3353 MRS. McSHANE: These are not the long-term forecasts they are talking about here, in this study, the way I understand it. But I think they are talking about the month --

3354 MR. JANIGAN: Well, they refer to the last ten years.

3355 MRS. McSHANE: No, no, no. I'm sorry! That doesn't mean ten-year growth rate. That means that they are looking at the 12 to 24 month growth rates, over ten years.

3356 MR. JANIGAN: The earnings numbers have been 6 per cent too optimistic, 12 months prior to reporting date?

3357 MRS. McSHANE: Correct. That's the shorter term growth rate, is what I'm talking about. Those are what -- when the studies look at the amount of optimism, they typically look at the shorter-term growth rates, to determine how often mistaken they have been.

3358 MR. JANIGAN: Well, do you have some measure of optimism that deflate analysts' predictions?

3359 MRS. McSHANE: No. I have not done that.

3360 What I have done, if you look at the evidence, is to simply say that if you get the forecasts and accept as studies have shown is the case, that these are estimates of investor expectations and, you look at the fundamentals which underpin the economy today.

3361 Looking at these PCF-based models simply supports the contention that investors are expecting returns that are at the upper end of the range of what has been achieved, historically.

3362 MR. JANIGAN: Well, as they have indicated that they believe that the I/B/E/S estimates are 6 per cent too optimistic, you have used these estimates. What figure should we use to explain your estimate?

3363 MRS. McSHANE: Sorry! I'm not, as I suggested to you, directly building these estimates into the equity risk premium. What I said was that while experts may disagree on the extent of investor optimism -- this is on page 25 -- the higher forward-looking risk premiums relative to the historic values, are consistent with the basic economic fundamentals that will support higher long-term sustainable growth relative to the past, primarily rising productivity and low inflation.

3364 All I said was that in summary, the estimated equity market risk premium is in the range of 6.5 to 7.5 per cent, based on an analysis of historic Canadian/U.S. risk premiums, supplemented by direct measures of the forward-looking risk premium.

3365 The forward-looking risk premium confirms that the historic averages are likely to understate current investor expectations. But, there has been no taking these estimates and saying: "Okay, if history was 6, they are 12, I'm going to put the number somewhere in the middle."

3366 All I'm saying is that if you look at the trends, then these values, look at the economic fundamentals in relation to history that, despite the optimism that's in the analyst views, they are supportive of the contention that investors expect something higher today, than many achieved in the past.

3367 MR. JANIGAN: I wonder if you could look in the same report, on page 3, where it's indicated, for their risk premium, mid-way through the page:

"Hence we solve for the equity risk premium by taking market assumptions of earnings growth, earnings yield and the bond yields. We used the I/B/E/S numbers up to five years and for terminal growth, Consensus Economics numbers which is the six- to ten-year Consensus Economics real GDP growth forecast." (As read)

3368 Just to confirm, this is the same I/B/E/S and Consensus Economics, these are the numbers that you use. Is that correct?

3369 MRS. McSHANE: That's right.

3370 MR. JANIGAN: And then, they conclude:

"Currently, the problem is that the current I/B/E/S numbers are unusually misleading." (As read)

3371 MRS. McSHANE: The current ones, they are saying?

3372 MR. JANIGAN: Yes.

3373 MRS. McSHANE: That they believe that's a concern.

3374 MR. JANIGAN: Yes. Down below the figures --

3375 MRS. McSHANE: Well, I think their problem is that the expectations of earnings are considerably higher than the long-term economic growth.

3376 MR. JANIGAN: But, they use a two-stage growth model in order to go after that, do they not? They use the analyst growth forecast for a certain period and then, they normalize?

3377 MRS. McSHANE: They do. But you know the problem is that, in a sense, it's quite arbitrary because you don't know when you are looking at the pieces of the model -- and pieces being the dividend yield or the earnings yield -- and the growth, how long investors expect these growth rates to persist.

3378 So in a sense, they are building their own judgment into the length of time that growth may persist.

3379 What essentially they are trying to do is something similar to what I guess, I was describing before, is they are trying -- based on where the market is right now and what might be expected in their mind -- what investors are going to get as opposed to what investors actually require, which is what we are trying to determine here.

3380 MR. JANIGAN: That is the reason why you didn't adjust analyst growth forecasts in a similar fashion, in your own evidence?

3381 MRS. McSHANE: No, because that's not my job! My job isn't to go out and advise clients on what they are likely to achieve in the market, over the next while, based on how high the market is.

3382 My role is to determine what the required return on equity is.

3383 MR. JANIGAN: If you can turn to page 9 of the same article, Credit Suisse First Boston used the Gordon Constant Growth Model.

3384 MRS. McSHANE: Sorry! Page 9?

3385 MR. JANIGAN: Yes. They used the Gordon Constant Growth Model -- no favourite of mine, I might add!

3386 This is the same dividend yield, plus perpetual growth model that you use, on page 31 to estimate prices instead of cost of equity. Is that correct?

3387 MRS. McSHANE: Sorry! I was reading the page. Could you repeat the question?

3388 MR. JANIGAN: Sorry! It's the same dividend yield, plus perpetual growth model that you use, in your evidence on page 31, to estimate prices instead of cost of equity?

1200

3389 MRS. McSHANE: So, they are assuming the cost of equity is what you are saying?

3390 MR. JANIGAN: Yes.

3391 MRS. McSHANE: And then, it's trying to determine what, I guess, the fair value of the market is on that assumption.

3392 MR. JANIGAN: Yes. Whether the market is cheap or expensive.

3393 MRS. McSHANE: Correct.

3394 MR. JANIGAN: In this case, their model is an earnings per share return on equity of 15.8 per cent and, the cost of equity for the market of 8.5 per cent.

3395 MRS. McSHANE: I see that. But I don't know where that cost of equity comes from.

3396 MR. JANIGAN: But for the purpose of their modelling, they assume a cost of equity of investor expectation in the market, of 8.5 per cent.

3397 MRS. McSHANE: They are assuming it, but they have already developed prior a risk premium of -- I guess it was 3.5 per cent.

3398 So, I mean it's almost coming back around to something they have already determined.

3399 MR. JANIGAN: It supposes probably a long-term rate of around 5 per cent and, the market risk premium of about 3.5 per cent.

3400 MRS. McSHANE: Well, they are looking at -- I think this was the article where they had the bond yields of -- on page 2 and, they are talking about a 10-year bond yield of 4.7.

3401 So I mean, you know, that's implicit market risk premium of 3.8, which they sort of have already gotten in their prior analysis.

3402 I don't know whether that was done independently or whether that was simply pulling through that analysis, to follow the Gordon growth model.

3403 MR. JANIGAN: Let's turn to the issue of BETAs.

3404 As I understand it, market risk premium estimates have to be lower to reflect the lower risk of "Telcos", relative to the market itself.

3405 MRS. McSHANE: That's correct.

3406 MR. JANIGAN: That's what we call a "BETA coefficient"?

3407 MRS. McSHANE: That's what we call it.

3408 MR. JANIGAN: Your BETA estimates on page 26, are these simple or raw BETA estimates?

3409 MRS. McSHANE: These are raw.

3410 MR. JANIGAN: If you look under your evidence on page 27, if I understand this, your argument here is that BETA doesn't capture the interest rate risk of the "Telcos". Is that correct?

3411 MRS. McSHANE: Probably not. I mean this is done on a TSE utility return. I didn't have the data to do it on the "Telco" stocks because of the influence of BCE.

3412 So I would look at this analysis strictly on the basis of the utility index, overall.

3413 MR. JANIGAN: But I just wanted to get it straight!

3414 Do you make the point in your evidence that "Telcos" are riskier because they have an interest rate risk as well as a market or BETA risk?

3415 MRS. McSHANE: I'm not saying they are riskier. I'm just saying that the BETA itself which is simply a correlation between or a regression analysis, which looks at the relationship between the "Telco" stocks and the market as a whole, doesn't necessarily capture the amount of interest rate risk that there is.

3416 MR. JANIGAN: And, it wouldn't be captured in the BETA.

3417 MRS. McSHANE: Not necessarily, no! Because the interest rate sensitivity of this market is different than the interest rate sensitivity of "Telcos" or utility shares, or bank shares.

3418 MR. JANIGAN: Just on page 27 on that equation that you have, the second equation, could the CRTC use this equation, to set rates of return?

3419 MRS. McSHANE: No, I don't think that they can use it to set the return. It's history in the one instance and, it's done on the utility index, in the second instance.

3420 It's simply there to show that once you put in the interest rate risk, that you are getting some further explanatory power that you are not getting in the BETA, by itself.

3421 MR. JANIGAN: But could you not use this as a particular of future returns, this formula?

3422 MRS. McSHANE: Not for "Telcos", no. It's simply to be indicator of the extent to which there is interest rate risk as above and beyond the BETA itself.

3423 MR. JANIGAN: Could you do it for utilities?

3424 MRS. McSHANE: I wouldn't want to use this one because it has got a lot of BCE in it. If I were going to do it for utilities, utilities being gas or electric utilities, I would want to do it in relation to gas and electric sub-index.

3425 MR. JANIGAN: I wonder if you could just turn up the "Telco" sub-index of BETAs that appears on page 26.

3426 MRS. McSHANE: Yes, I have that.

3427 MR. JANIGAN: I take it that this includes BCE.

3428 MRS. McSHANE: The TSE 300 "Telco" index does, yes. The TSE 300 "Telco" index, less the BCEs. I extracted BCE from that cross index to calculate it, without BCE in it.

3429 MR. JANIGAN: I take it, it also reflects a period which involved increasing competition to "Telcos"?

3430 MRS. McSHANE: Yes.

3431 MR. JANIGAN: It's fair to say that long-distance competition in particular is reflected in the averages, throughout this period?

3432 MRS. McSHANE: Yes, because that was introduced in 1992. It would be for most of that period, yes.

3433 MR. JANIGAN: If we are dealing with the BETAs for the utility segment of the "Telcos", we wouldn't ordinarily expect to find a decrease in the BETA to allow for the influence of competition in the long distance?

3434 MRS. McSHANE: Do I want to subtract something from it, for --

3435 MR. JANIGAN: What I'm saying is that if we are looking at the BETAs for the utilities, for the local service part of the "Telcos", it's likely to be lower because it wouldn't include the measurements that are associated with the intensification of long-distance competition.

3436 MRS. McSHANE: Well, I think what you need to do to get my answer on that, is to look at my discussion of where I come out on where the overall risk of local access falls, relative to the overall risk of these companies.

3437 My conclusion is that basically that is a stand-alone operation, that one should view the local access as having similar risk to the overall consolidated operations because of the reasons that were set forth on page 11.

3438 So, given the fact that a BETA is not supposed to be history, but it is supposed to be a forward-looking number, I would say no, that I would not say that the BETA for the stand-alone local operation should be less than the BETAs for the consolidated operations.

3439 MR. JANIGAN: I'm just wondering, looking at the BETA figures, particularly for the last three years, 1998, 1999 and 2000, BETAs, by and large, haven't changed at all, notwithstanding the fact that local competition has been introduced.

3440 MRS. McSHANE: Well, I think that you have to be very careful about interpreting the lack of change in BETA in 1999-2000, as being a function of the fact that perhaps local competition hasn't been quite as intense as one might have anticipated.

3441 There are very definitive market factors that have affected BETAs for lower risk stocks in 1999 and 2000, that really have nothing to do with the underlying fundamental risk of these companies.

3442 What we have seen in 1999 and 2000, is basically some extreme movements in the market as a whole, as investors in the first place were extremely exuberant in 1999 and then, were almost in the opposite direction as pessimistic, starting in late 2000.

3443 What we have seen is that for some stocks like utility stocks, in particular and "Telco" stocks to a lesser extent, I mean there has been what I will characterize as a real decoupling between the market and these sectors of the economy.

3444 It has been probably a bit more extreme, here, than in the U.S. simply because of the major impact of Nortel which has created much lower BETAs for some of these shares, than would have happened without the debacle of the Nortel price.

3445 MR. JANIGAN: Mr. Chairman, after we have established conclusively that economics is a dismal science, I would like to conclude my examination of this panel.

3446 THE CHAIRPERSON: Thank you, very much. Do we have Commission counsel questions?

3447 MR. McCALLUM: Mr. Chair, I propose to be very brief and, if that is satisfactory to everyone, that is what I propose to do.

3448 THE CHAIRPERSON: Please!

EXAMINATION / INTERROGATOIRE

3449 MR. McCALLUM: Mrs. McShane, since filing your evidence in July of this year, July 2001, in light of the recent financial and economic events -- I include, for example, the events of September 11th in my question -- have you considered what impact, if any, these events could have on your evidence, that a fair return on common equity for TELUS Québec, should be 12.0 to 12.5 per cent?

3450 MRS. McSHANE: Yes, I have. And probably in retrospect, I might have written a short comment on that. But I didn't think of it until the last minute.

3451 Effectively, what we are looking at is what most economists believe will be a relatively short-term downturn, probably somewhat severe. But the consensus of economists is they are still looking at growth in both the U.S. and Canada above the 3 per cent mark by the second half of next year.

3452 So, that in terms of interest rates, while we are looking at relatively low short-term interest rates right now, if you look at the longer-term forecast -- the most recent longer-term consensus forecast came out in October, in mid-October -- the 12-month forward 10-year Canada forecast was 5.5 per cent. And, that was 20 basis points lower than at the time that the evidence was prepared when I had the May 2001 forecast -- that was 5.7.

1215

3453 If you look at the long-term forecast, which appears every April and October -- I had the April one when I prepared this evidence.

3454 The 10-year for Canada was forecast to be 5.7 per cent from 2002 to 2006, and the most recent long-term forecast shows that they will be 5.8 per cent, over that same period.

3455 I also did take a look at the U.S. forecast. We are still looking at similar long term forecasts for U.S. 10-year bonds, which are now the benchmark in the U.S., since the U.S. Government decided it was not going to issue 30-year bonds any longer, as we were before.

3456 I would say, on average, over the period for which the price cap plan would be in effect, that I would not see any reason to change my number. I will grant you that there is a lot more uncertainty surrounding the forecast than there was at the time the evidence was prepared.

3457 Because an awful lot is hanging on psychology, I guess, if you will, the fact that we are depending on the consumer and the business person, to basically thrust aside this fear that has developed in light of the events that have taken place.

3458 I think that some author -- I have forgotten who it was -- has described what consumers have done, so far, as "cocooning". They have sort of disappeared inside their houses, and they are not spending. And, yes, the expectation is that this will be put aside. But I do agree that there is a fair amount of risk associated with that.

3459 MR. McCALLUM: Thank you, Mr. Chairman.

3460 THE CHAIRMAN: Thank you.

3461 Thank you very much, Madame McShane.

3462 This is probably a good time for the Secretary to enter some documents.

3463 MR. SPENCER: Thank you, Mr. Chairman.

3464 I have six documents to introduce as exhibits.

3465 The first document is entitled "Summary of evidence presented by McShane and by Booth and Berkowitz in the 1997 price cap proceeding and in 2001 in an AEUB filing on ATCO pipeline south". This will be introduced as ARC et al, exhibit No. 8.

EXHIBIT NO. ARC et al-8: Document entitled "Summary of evidence presented by McShane and by Booth and Berkowitz in the 1997 price cap proceeding and in 2001 in an AEUB filing on ATCO pipeline south"

3466 "Evaluation of the spread calculated from Ms. McShane's schedule 5, presented July 6, 2001", ARC et al Exhibit No. 9.

EXHIBIT NO. ARC et al-9: Document entitled "Evaluation of the spread calculated from Ms. McShane's schedule 5 presented July 6, 2001"

3467 "Canadian Market Risk Premium Estimates", ARC et al, exhibit No. 10.

EXHIBIT NO. ARC et al-10: Document entitled "Canadian Market Risk Premium Estimates".

3468 "The Shrinking Equity Premium", ARC et al, exhibit No. 11.

EXHIBIT NO. ARC et al-11: Document entitled "The Shrinking Equity Premium".

3469 "The Death of the Risk Premium", ARC et al, exhibit No. 12.

EXHIBIT NO. ARC et al-12: Document entitled "The Death of the Risk Premium".

3470 "First Boston, Global Strategy Perspectives...", ARC et al, exhibit No. 13.

EXHIBIT NO. ARC et al-13: Document entitled "First Boston, Global Strategy Perspectives...".

3471 That is all, Mr. Chairman. Thank you.

3472 LE PRÉSIDENT: Merci.

3473 Nous allons reprendre à 1345. We will be back at 1345.

3474 Thank you very much.

--- Upon recessing at 1220 / Suspension à 1220

--- Reprise à 1345 / Upon resuming at 1345

3475 LE PRÉSIDENT: Bon, après-midi. Nous sommes prêts à continuer. À l'ordre, s'il vous plaît. Order please.

3476 Nous sommes prêts à poursuivre avec le prochain panel.

3477 Y a-t-il des questions? Non. Alors, je cède la parole à maître Laprise.

3478 MR. LAPRISE: Before you is the TELUS Québec, panel 3. It will speak to the TELUS Québec proposal related to the X-Factor aspects.

3479 We will have, with this panel, Mr. Claude Gendron, vice-president of Finance and, Dr. Jeffrey I. Berstein, professor, Department of Economics, Carleton University, Ottawa and a research associate at the National Bureau of Economic Research, Cambridge, Massachussetts, U.S.A.

3480 Mr. Berstein has been involved in the development of the evidence related to the X-Factor for TELUS Communications (Québec) Inc.

3481 Dr. Berstein is a renowned expert in productivity matters in the telecom industry, and well known by the Commission!

3482 Back to the panel! We have Mr. Alain Carmichael, director, Regulatory Sector at TELUS Québec, and Mr. Marc-André Dubé, directeur du secteur Planification et résultats, à TELUS Québec.

3483 Dr. Berstein, can you swear him in, please?

SWORN: JEFFREY I. BERSTEIN

3484 MR. LAPRISE: Mr. Berstein, can you confirm that your qualification, which has been filed with the Commission in this proceeding, is accurate?

3485 DR. BERSTEIN: Yes.

3486 MR. LAPRISE: Mr. Berstein, please confirm that appendix 2, to the TELUS Québec evidence dated July 2001 and, entitled "Setting the X-Factor for TELUS Communications Québec" was prepared by you or under your direction? Is this evidence true and correct?

3487 DR. BERSTEIN: Yes.

3488 MR. LAPRISE: The witness is available for cross-examination.

3489 LE PRÉSIDENT: Merci, maître Laprise. Good afternoon, Dr. Berstein. Maître McCallum.

EXAMINATION / INTERROGATOIRE

3490 MR. McCALLUM: Good afternoon, Mr. Berstein.

3491 DR. BERSTEIN: Good afternoon.

3492 MR. McCALLUM: What I thought I would do, is take two seconds and just address Mr. Gendron, in French, as a preliminary matter.

3493 Monsieur Gendron, merci d'être venu, sur subpoena.

3494 Je propose, suite à une convention informelle entre le personnel et vous-même, de poser des questions en anglais à M. Berstein. Vous êtes d'accord avec ça?

3495 M. GENDRON: Ça me convient très bien!

3496 Me. McCALLUM: Si jamais vous désirez qu'une question soit posée en français, vous n'avez qu'à le demander!

3497 M. GENDRON: Je vous remercie.

3498 Me. McCALLUM: Également, si jamais vous désirez répondre, pour le point de vue de la compagnie, vous êtes entièrement à l'aise de répondre dans la langue de votre choix!

3499 M. GENDRON: Merci, beaucoup.

3500 MR. McCALLUM: Thank you, very much.

3501 Mr. Berstein, I understand from both your evidence, and the "mémoire" that TELUS Québec filed in this proceeding, that the company has indicated that the productivity factor, the X-Factor, should be based on the residential service in the high-cost serving area and it's based, I understand, on a Phase II proxy.

3502 The high-cost serving area residential services are, of course, those that are eligible for the National Contribution Fund.

3503 I guess, what I would like to do, is discuss with you other possibilities. If the Commission were to determine that the productivity factor should be applied to not just the high-cost areas but, also the non-high-cost areas for residential services, would the opportunity for productivity gains increase above the 1.65 per cent, that you have recommended in your evidence, and what would it be in that case?

3504 DR. BERSTEIN: Actually, the 1.65 per cent offset was based on Phase II costs that relate to all of resident services, not just the high-cost serving area. So, in that sense, we have taken a very conservative route -- I have taken a very conservative route, in obtaining the 1.65 per cent.

3505 So, if we were going to -- if the Commission was going to expand the set of cap services to include all of resident services, the number would actually stay the same.

3506 MR. McCALLUM: Thank you. What then, if I ask the same question but, broadened it not just to the high-cost service areas for residential services in the non-high-cost areas, but also broadened it to all services in the utility segment, high-cost and non-high-cost areas, the whole territory in other words -- so, I am not limiting it just to the residential.

3507 DR. BERSTEIN: Right, I understand. Here now, my answer is drawn from the information and the analysis that I conducted for TELUS, because there is a lot more information and data available for TELUS as opposed to TELUS Québec.

3508 So, my answer in terms of how the offset changes will first relate to TELUS and then, I will bring the answer back to the response for TELUS Québec, if I may.

3509 What my analysis has shown is that if we expand the set of cap services from residents to, let's say residents in single-line business, the number changes very, very little. It changes at a third decimal point. For TELUS from 1996 to 2001, it moves from 2.23 per cent to 2.26 per cent. That covers 50 per cent of the utility segment.

3510 If we then, extend those services beyond that 50 per cent, the analysis that I conducted which basically is contained in the response to the CRTC exhibit 36, shows essentially that the utility segment offset would not go beyond 3 per cent, at all.

3511 Now, the way that the offset is calculated for TELUS Québec, it's calculated by using the information on the analysis obtained from the Commission decisions in 9521 and 9822, 9916, where the Commission has recognized that density, and other factors, play a very strong and direct link in causing the costs of more rural operating firms, remote and northern firms, to be higher.

3512 And so, in that regard, the offset for TELUS Québec would be lower but, with the same regard, since the number would not change as we are moving from resident services to resident and business services, all the way through the utility segment, the number for TELUS Québec would also not change significantly, although it would be lower than the number for TELUS, as a whole.

3513 MR. McCALLUM: The exhibit 36, that you referred to, that's exhibit 36, in the 01-37 proceeding?

3514 DR. BERSTEIN: That's correct.

3515 MR. McCALLUM: So, we should have reference to that, for the purpose of completing your response here, is that right?

3516 DR. BERSTEIN: Yes. I didn't bring a copy with me, if that's what you mean! Would you like me to take an undertaking, to produce that?

3517 MR. McCALLUM: Yes, please.

3518 M. GENDRON: Nous allons prendre l'engagement de le fournir.

--- Pause

1355

3519 MR. McCALLUM: Thank, you.

3520 You are probably aware, in this proceeding, that various parties have proposed different methodologies for computing the productivity offset.

3521 The three methodologies are marginal costs, as you have done for TELUS Québec, total implied productivity, which I believe that Télébec has done for its territory and, also total factor productivity, which ARC, the other party, has suggested would be the appropriate methodology.

3522 Could you provide TELUS Québec's views and comments on the advantages and disadvantages of each methodology?

3523 DR. BERSTEIN: Certainly, it would be my pleasure!

3524 Let me start with the marginal cost guideline. Essentially, the marginal cost guideline is a Phase II, cost based method. And so, it uses Phase II costs and, these costs really are the basis for which the Commission has, in the past, determined the rates for non-forborne services. So, it uses those same Phase II costs. Indeed, Phase II costs have also been the basis for the contribution decision.

3525 All that the marginal cost guideline does, instead of looking at the levels of the incremental costs or the unit costs, it looks at the rate of change. So, essentially, the marginal cost guideline is perfectly consistent with Phase II costing, except not dealing with levels but dealing with the trend or the rate of change.

3526 The advantage of the marginal cost guideline is that it focuses particularly at whatever the set of cap services we are dealing with. It doesn't matter what the set of cap services are because you are always interested in measuring the incremental costs associated with the services, under the cap.

3527 Just as your previous question asked me about what happens if the set cap services extends from resident to business, all the way through to the utility segment, the proper type of analysis to conduct would be to calculate the rate of change and the Phase II costs, for each of those groups of services and then, determine the offset on that basis.

3528 MR. McCALLUM: Let me turn to the TFP approach because there has been a lot of discussion about TFP and, this is used in the previous decision.

3529 As we know, the total factor productivity is essentially an all-service concept. So, it is definitely relevant when all the services that are provided by the telecommunications firms and the telecommunications industry are capped.

3530 But, let's step back for a minute and look at the objective of price cap regulation. Price cap regulation is designed to set prices, the rate of change of prices of cap services to emulate a competitive environment.

3531 What do competitive firms do? Competitive firms change their prices for the particular service at hand.

3532 And, how do they change those prices? They change their prices according to how the incremental cost change, of those particular services.

3533 Imbedded in -- or included in the incremental cost -- are the efficiency improvements associated with that particular service. So, in competitive markets, one is pinpointing the right of change of the prices, pinpointing the services that are under consideration.

3534 Total factor productivity growth is basically not just an all-service concept but, it measures the efficiency changes associated with the average service. And so, if you use the efficiency changes associated with the average service, then you know that the prices that are going to be set, based on total factor productivity growth efficiency, will generally be either too high or too low because we are not dealing with the efficiency improvement associated with the set of cap services but the average efficiency.

3535 Let me give you a particular example, since we are heading into the end of the November and, we are heading into final exam period. I have just been making up final exams, the process, everybody in this room wrote a final exam and, then the marks were determined -- let's say the average mark was 80 per cent, the smart group -- and the Commissioner decided that everybody was going to get 80 per cent, what would happen?

3536 Of course, everybody who got a lower mark than 80 per cent would be elated but, everybody who got a higher than 80 per cent, would be grossly disappointed. And, that is the same thing with using total factor productivity growth. Essentially, you will always set prices either too high or too low, unless you happen to have the efficiency change associated with the particular service that matches total factor productivity growth.

3537 The second reason why one would not want to use total factor productivity growth, is because total factor productivity growth includes the efficiencies of utility services and the competitive services.

3538 In competitive markets, the very nature of competition drives prices down. And, how are prices driven down? They are driven down by the efficiency improvements associated to both services.

3539 So, when you look at all the poll market, poll prices have been falling because competition has entered into poll services. There are efficiencies associated with poll services.

3540 Those efficiencies have been passed on to the consumers, already, due to the lower prices. If you then, take total factor productivity growth, which includes the efficiency associated with poll services, and include it into the X-Factor, then we are essentially double counting those efficiencies. They have already been counted in the declining prices of poll services.

3541 So, I would say that total factor productivity is basically just too crude an object to consider. TIP suffers from all the difficulties of total factor productivity but, even more so because it is just essential a partial productivity measure. It is a measure of expenses, per line. So it doesn't capture all of the costs, it omits capital costs and it doesn't include all of the output. So, it is a partial productivity measure.

3542 You can liken TIP to what Statistics Canada produces as labour productivity, that is output per hour. So Statistics Canada produces output per hour as a partial productivity measure and also, produces total factor or multi-factor productivity.

3543 So, TIP is like labour productivity and that bears the same relationship to total factor productivity. It is a partial productivity measure.

3544 Moreover, like total factor productivity growth, you cannot deal with TIP for a sub-set of services. You cannot measure TIP for the utility segment but, rather for the company as a whole.

3545 And the reason is, of course, that one can conduct artificial cost separation. It is very difficult, even at the expense level, to dethrone it for various labour categories and long labour categories, the cereal field, supplies, et cetera, vehicles, all these things, non-capital cost.

3546 What costs are associated with the utility segment and, what costs are associated with the company as a whole? You cannot break that between utility and competitive segment. And so, TIP suffers from the same problem as total factor productivity growth more so because it is just a partial productivity indicator.

3547 MR. McCALLUM: I would just like to come back, if I may, on just a couple of aspects of your response.

3548 The first one is I heard lots of negative comments about TIP but, I wonder if it has any advantages?

--- Pause

3549 DR. BERSTEIN: If you think of an advantage -- I never think of an advantage of something, whether it is easier or harder to calculate! I know some people, do!

3550 It is relatively easy to calculate. But to me, "easy and irrelevant" don't really go, together! So, it is simple to calculate, I understand that.

3551 MR. McCALLUM: I heard all the advantages, I think, of the marginal cost methodology but not the disadvantages of marginal cost methodology.

3552 And, I wondered if one of the disadvantages of marginal cost methodology is that it is rather subjective in nature, since it is based on forecasts of costing studies, rather than on historical data.

1410

3553 DR. BERSTEIN: Well, it is based on Phase II costs. And, Phase II costs has a long and important history, in front of this Commission.

3554 So, I find it somewhat ironic that, all of a sudden, we are putting Phase II costs to use to determine the X-factor, when it has been determined in the past, to determine tariffs and it forms a strong basis for the contribution decision. Now it seems to be getting a bad name!

3555 I am of the opinion that Phase II costs are very important. It is now taking on a more prominent role, and I am very much in favour of what the Commission noted in the contribution decision, that ILECs should be aware that they may be subject to random audits of their Phase II cost data and, their Phase II cost studies. I am very much in favour of that!

3556 I think that is important because, irrespective of determining the X-factor, Phase II costs are important in determining the national subsidy, as well as tariffs.

3557 So, apart from the X-factor, Phase II costs are extremely important and now, with the added feature that determining the X-factor Phase II costs is an important principle and methodology, I think all the more that these audits should come to the fore, so everyone could satisfy themselves that appropriate principles and methodologies are being satisfied.

3558 If I may say one thing about the forecast.

3559 In the Phase II cost studies done to determine the X-factor, there are certain forecasts that have to be made. Those forecasts are not any different than the forecasts that are being made in TFP, that is, you have to forecast in terms of the future. So, you have to forecast really a lot more information, whether it is done explicitly or implicitly.

3560 TFP involves a lot more information, because it involves all the costs and all the outputs for all the services and all the inputs, for the company as a whole. And, although we are using historical information, we are using historical information to forecast into the future. So, typically, one would have to forecast each of those components in TFP.

3561 We were not asked to do that in this particular hearing. But, in the previous price cap proceeding, the companies were asked for the TFP growth numbers from 1988 to 1995, and then their forecasts for 1996 and 1997.

3562 And, to do those forecasts is very much more complicated than to do the forecast for Phase II costs. This is the first point.

3563 The second point is, in the Phase II, costs that were undertaken to determine the X-factor, there were no forecasts of demand. Demand was always assumed to be one unit, because we were just interested in the incremental cost of the particular service.

3564 So, whatever forecasts there were, the forecasts were really related to changes in prices of the elements that the firm would be buying for the inputs used in those particular services.

3565 MR. McCALLUM: Thank you.

3566 Would one of the limitations, on the Total Factor Productivity methodology, be that it cannot be calculated for the utility segment alone?

3567 DR. BERSTEIN: Exactly.

3568 MR. McCALLUM: If the Commission determined that the Total Factor Productivity methodology should be used in this case, what percentage would Telus Québec recommend, and why?

3569 DR. BERSTEIN: I'm afraid I don't quite understand the question! Do you mean what percentage, TFP?

3570 MR. McCALLUM: If the Commission determined that the TFP methodology should be used, what percentage for the productivity offset -- I should have added that the first time -- would Telus Québec suggest, recommend, and why?

3571 DR. BERSTEIN: I don't know what Telus Québec would recommend, but I would not recommend any number, because it just seems to me to -- or, I would not recommend to the Commission -- I would not recommend to Telus Québec any number, because to me TFP is not the relevant concept.

3572 If I may elaborate a little bit on that.

3573 We have heard in this proceeding and in other proceedings, that this notion "but for the utility segment", there would not perhaps be any productivity, that although it is true that Total Factor Productivity growth is an all-service concept, it is really driven by the utility segment, so that even on a conceptual level, maybe we are right to think about using Total Factor Productivity growth.

3574 When I heard that, I thought that was an interesting argument, that one had to think about how to really analyze that statement.

3575 Giving some thought to that, I think that one has to distinguish between the building blocks that go into the production process of a company, or an industry, or a sector, or an economy, and the value added.

3576 As a particular example, suppose that we have a telephone company that produces two services -- utility service and competitive service -- and, we measured Total Factor Productivity growth, and we believe that we are going to attribute Total Factor Productivity growth to the utility segment, even though it produces utility and toll services.

3577 The company then, decides to sell the toll aspect of its business. We bring in an analyst, we go out and we measure Total Factor Productivity growth for the company, providing utility service and the company providing toll service.

3578 If we were right in attributing Total Factor Productivity growth to just the utility services before the divestiture, then, we would expect to observe zero Total Factor Productivity growth for the toll service company.

3579 If we go out and measure Total Factor Productivity growth for the toll company and we see a positive number, then, we know that we would be wrong.

3580 Indeed, if we take this analogy to its logical extension, if Total Factor Productivity growth in the telecommunication services industry is attributable, really, to the utility services, then, companies that just provide toll services alone, or local service companies that are non-facilities based, we would believe that they would not be contributing at all to the productivity improvement or the standard of living of Canadians.

3581 It would only be the local service providers, providing utility services, facilities based.

3582 Let's move away from the telephone industry for a second! Let's think about the economy as a whole.

3583 Statistics Canada produces Total Factor Productivity Growth measures, let's say, for four sectors in the economy: Agriculture, resources, manufacturing, and services.

3584 It is true that the building blocks of the Canadian economy are resources and agriculture, just like in the telephone industry utility services. But, no one would argue that manufacturing and services do not contribute to productivity, to well-being to the Canadian standards of living.

3585 So here, what we really have to do, is distinguish between the building block and the value-added. After all, we all believe that services are important. Do we not believe that health services, because it is not part of agriculture or resources, does not contribute to our well being or, something dear to my heart, educational services, clearly contributes to productivity in the Canadian standard of living?

3586 I think in that light -- I know it is a long answer, but in that light, I think that we cannot use Total Factor Productivity growth both as a theoretical concern and as a practical concern.

3587 MR. McCALLUM: I am going to ask the devil's question then: Supposing we do? Supposing the Commission, in its wisdom, decided that Total Factor Productivity is the methodology we are going to use, and it wants to establish a percentage for Québec for the productivity offset, based on the TFP methodology, what percentage should be used in those circumstances?

3588 I should perhaps preface my question with something that we have offered all the other parties, and that is, if at any time the witness or the company feels that it wishes to take an undertaking to respond -- because it is difficult to come up with something right off the bat -- please feel free to do so at any time!

3589 DR. BERSTEIN: Thank you.

3590 I think it is going to be pretty impossible to take an undertaking, because TFP studies take a long time to do, so --

1415

3591 DR. BERSTEIN: I would say that -- let me answer the question, if I may -- looking at total factor productivity studies.

3592 Let's consider the total factor productivity study done by TELUS, for example, that was filed in a previous price cap proceeding, 37 -- and whatever those numbers were -- and those numbers were filed from 1988 to 2000.

3593 If we look at those total factor productivity growth numbers and, we study them carefully, we see that, from 1998, 1999 and 2000, there is an enormous jump in total factor productivity growth.

3594 What is that jump due to? It is not due to the advent of price cap regulations. It is due to one simple thing and, that was the enormous growth in toll minutes from 1998 to 2000.

3595 The historical average growth rate in toll minutes for TELUS Alberta, is 6 per cent from 1988 to 1997, 6 per cent. For TELUS B.C., it was 6.4 per cent -- 6.7 per cent. From 1998 to 2000, those growth rates for TELUS Alberta went from 6 per cent to 18 percent. These are average -- these are annual growth rates, 18 per cent a year, and 13.4 per cent for TELUS B.C.

3596 When parties were looking at these TFP numbers and said: let's look at 1988 and 1997 and then 1998 to 2000, look at this difference! And implicitly, there was an attribution to price cap.

3597 If one conducts the simple experiment, instead of allowing toll minutes to grow by 18 per cent per year for Alberta, and 13.4 per cent per year for B.C., just use the long-run historical growth of 6 per cent and 6.4 per cent, it turns out that the difference in total factor productivity growth before price caps and after price caps is the same. It completely vanishes, just to flat rate, toll calling plan.

3598 So, if you are asking me -- notwithstanding all of that -- what number would you use for total factor productivity growth, my first response is -- well, I guess this is my nth response -- would be: you have normalize for toll minutes because that has nothing to do with the utility segment.

3599 That brings your TFP down, enormously. Essentially, there is no difference pre-imposed, in 1997. But, the only adjustment we have to make, we have to make an adjustment for the changing contribution regime because now, contribution is not based on toll minutes but is based on revenues. So, we would have to make an allowance for the changing contribution regime.

3600 If we made these adjustments for toll minutes and for contribution regime, then the number turns out to be about 3 per cent, for the offset. And that was also described in the TELUS' response to exhibit 36, that we are going to provide.

3601 So I would say, if the Commission was to use TFP, they would have to use the right TFP, that is the TFP normalized for all these extraneous factors moving forward. And if they did that, they would end up with the same offset, an offset of around 3 per cent.

3602 MR. McCALLUM: I understand from your answer, that one of the possible difficulties is that there may be some lack of data to calculate TFP but, to deal with the lack of data issue, would it be possible to calculate TFP, using a proxy?

3603 DR. BERSTEIN: What proxy would that be?

3604 MR. McCALLUM: For example, it could be similar to the proxy you used in determining marginal costs.

3605 DR. BERSTEIN: Do you mean adjusting the TFP for a company like TELUS for effect of density, to come up with a TFP number for TELUS Québec? Do you mean something like that? I am sorry, I am not following you!

3606 MR. McCALLUM: I am thinking of adjusting the study that you did for TELUS Québec by, I guess, a proxy, in order to come up with some calculation for TELUS Québec, of a TFP figure.

3607 DR. BERSTEIN: I couldn't see how that would be done! My proxy, for deriving the X-Factor for TELUS Québec, uses the recognition that the Commission determined that Phase II costs or unit costs per urban -- or more urban-oriented companies differ from the unit costs or, the incremental costs of rural companies -- and the Commission determined that long density was the main driver. So, I used that analysis and obtained that data to determine my X-Factor for TELUS Québec.

--- Pause

3608 MR. McCALLUM: Could you specify what productivity initiatives TELUS Québec would likely realize during the initial two or three years of the price cap period?

3609 M. GENDRON: Dans les témoignages précédents de l'exposé d'hier, nous avons indiqué, en évoquant les contextes historiques, réglementaires et de membres de l'industrie canadienne que, déjà, au cours des dernières années, des initiatives de technologie, des initiatives dues au fait que nous avons dû supporter des baisses de prix importantes d'interurbains, des diminutions importantes au niveau des contrats de trafic, que les initiatives qui pouvaient générer des diminutions considérables, s'est déjà réalisé.

3610 Il est bien clair que nous allons continuer à apporter à tous nos équipements, les améliorations que permettront les développements technologiques. Il est clair aussi qu'une bonne partie de nos efforts va maintenant aussi porter sur la mise en place de systèmes plus performants, particulièrement ceux utilisant le web.

3611 M. McCALLUM: Et ça pourrait aussi inclure l'intégration de certaines fonctions avec TELUS?

3612 M. GENDRON: Ça pourrait inclure l'intégration de certaines fonctions avec TELUS, dans la mesure où c'est plus avantageux.

3613 J'aimerais, ici, partager avec vous une expérience que j'ai vécue au cours de ma carrière, en participant à un groupe de travail de Stentor à l'époque, où l'idée du groupe de travail était la suivante:

3614 Nous sommes neuf ou dix compagnies membres. Chacune a son système de facturation, son système clients. On devrait pouvoir faire des économies en mettant tout ça ensemble.

3615 Première conclusion, c'est que les grosses compagnies ont plus de moyens, plus de besoins et développent des systèmes ayant beaucoup plus de fonctionnalité, qui coûtent relativement très cher. De telle sorte que la part des petites compagnies, même basée en proportion des revenus, devenait plus grande que le coût de développer un système relativement approprié.

3616 L'autre inconvénient ou l'autre difficulté qui a été identifiée, était le fait que de telles intégrations de systèmes doivent se faire à un rythme qui tient compte du fait que les points de départ des entreprises ne sont pas les mêmes et que, très souvent, les interfaces entre les systèmes -- par exemple le système clients puis, le système de facturation -- ne sont pas aux mêmes endroits, créant des besoins pour développer des interfaces ou des adaptations.

3617 Ceci étant dit, je répète que, quand ce sera avantageux, il y aura intégration avec les systèmes de TELUS --

--- Pause

3618 M. GENDRON: J'ajouterais que l'intégration va générer des avantages, mais il y aura aussi certains coûts venant avec l'implantation de ces avantages.

1430

3619 Me McCALLUM: Merci.

3620 Could I have comments, possibly, on the potential risks, financial and non-financial, that a high productivity factor could have on the company and its subscribers?

3621 M. BERGERON: Il est clair que si le facteur de productivité qui est imposé à l'entreprise, alors qu'elle a toujours l'obligation de servir, risque de placer les clients et l'entreprise dans une situation difficile.

3622 L'autre côté de la médaille est que la productivité puisse être fixée à un niveau inférieur. Je pense que ce serait une situation où les clients risquent de moins souffrir, puisque ça nous permettra de leur fournir la qualité que nous désirons lui fournir.

--- (Pause)

3623 MR. McCALLUM: If the Commission applied a productivity factor to the entire utility segment and to the entire territory, then, should Telus Québec have the same factor as the entire industry?

3624 DR. BERSTEIN: As the entire industry operating in that territory?

3625 MR. McCALLUM: The entire telecom industry in Canada?

3626 DR. BERSTEIN: No.

3627 MR. McCALLUM: How different should it be, and why?

3628 DR. BERSTEIN: I think we have to stop thinking about an X-factor, for one-size-fits-all!

3629 Every part of this country does not look like metropolitan Toronto, and every telephone company does not look like Bell Canada. And although, we are talking about a price cap regime of I-minus-X, that is the commonality, that is the common feature, price cap regime of I-minus-X, and perhaps, even applied in all cases to high-cost-serving areas.

3630 But, that does not imply that the X-factor has to be the same for each and every territory.

3631 So, although we have heard that we want a national standard and other kind of commonalities, we do have in this particular instance, a national standard and commonality. We have a price cap regime that we are dealing with. The price cap regime relates to I-minus-X, but it does not necessarily imply that the "X" has to be the same. That actually runs counter to, I think, very much the Canadian tradition.

3632 MR. McCALLUM: Thank you, Mr. Chair. That completes this set of questions.

3633 THE CHAIRMAN: Thank you.

3634 Président Colville.

3635 CONSEILLER COLVILLE: Merci, monsieur le président.

3636 Dr. Berstein, just a couple of quick points.

3637 When you were discussing with Counsel earlier, the changes in the X-factor that you would have for Telus if we stepped from just residence to residence and business and then, to all cap services, you went from 2.3 to 2.6, to, I think you said, no more or something less than 3.

3638 On a relative basis, then -- maybe I missed it when you indicated the number -- if we were looking for all cap services for Telus Québec, would the number be somewhere in the neighbourhood of 2?

3639 DR. BERSTEIN: That is correct.

3640 COMMISSIONER COLVILLE: I know you have not done the work for Télébec, in analysing what an X-factor would be, but given the discussion that you just had with Counsel, and the discussion we had in a previous hearing on this issue, would you expect the X-factor to be different as between Telus Québec and Télébec, and would you speculate as to which one would be higher, and by how much?

3641 DR. BERSTEIN: As you mentioned, I did not study the situation for Télébec but, a priori, I would think that the number would be the same for Télébec, as Telus Québec.

3642 COMMISSIONER COLVILLE: Why do you say that?

3643 DR. BERSTEIN: I am just assuming that they operate in the same territory, have the same density and density growth, and -- that is my working hypothesis.

3644 If that is the case, then I would recommend the same offset. If that is not the case, then, I would have to study the situation. But that is what I am assuming.

3645 I am assuming that essentially their density issues and, their other cause characteristics are similar to Telus Québec.

3646 COMMISSIONER COLVILLE: Thank you, very much.

3647 LE PRÉSIDENT: Merci, Monsieur le Président.

3648 Ceci termine les questions que nous avions à poser au Dr. Berstein.

3649 Avons-nous, Monsieur le secrétaire, d'autres pièces à coter?

3650 M. SPENCER: Non, monsieur le président.

3651 LE PRÉSIDENT: Ceci termine l'audition de ces témoins.

3652 Y a-t-il des questions à soulever?

3653 Sinon, je suis prêt à terminer l'audience.

--- (Pause)

3654 LE PRÉSIDENT: Non?

3655 Alors, le premier commentaire que je ferais est de rappeler que les engagements sont pour le 21 novembre.

3656 Pour les autres détails -- si vous ne les avez pas pris en note -- ils sont certainement bien inscrits aux notes sténographiques, pour les autres dates à suivre.

3657 En terminant, au nom de mes collègues, monsieur Colville, madame Noël, je remercie les procureurs, les personnes qui ont témoigné, toutes les personnes qui les ont assistées, qu'elles soient dans la salle ou aux entreprises.

3658 Je remercie les employés du CRTC, qui sont ici avec nous.

3659 Un grand merci à nos interprètes, à qui nous n'avons pas donné de chance sur le débit oratoire.

3660 Et, un grand merci au sténographe officiel et son équipe.

3661 Enfin, merci à mes deux collègues, qui m'ont rendu la tâche facile.

3662 Bonne journée, à tout le monde.

3663 Donc, c'est la fin de l'audition.

3664 Thank you very much, and have a good trip back home.

3665 Merci, et au revoir.

--- L'audience se termine à 1440 / Whereupon the

hearing concluded at 1440

Date de modification :

2001-11-15