Intervention: Rogers Communications

Document Name: 2015-134.223978.2394476.Intervention(1fbl801!).html

Rogers Communications hereby files its comments pursuant to Telecom Notice of Consultation CRTC 2015-134, Review of basic telecommunications services.Raisons pour comparaitre / Reasons for appearanceRogers requests to appear at the public hearing scheduled for **** 11, 2016. Rogers is a major provider of broadband services, as well as local and mobile telephone services in Canada. It is also a major contributor to the contribution fund and will be affected financially by any changes to the contribution regime that might result from this proceeding. For these reasons, Rogers believes that it should be permitted to attend and participate in the public hearing.

Intervention: Rogers (Intervenor 238)

Document Name: 2015-134.223978.2394476.Intervention(1fbl801!).html

Rogers Communications hereby files its comments pursuant to Telecom Notice of Consultation CRTC 2015-134, Review of basic telecommunications services.Raisons pour comparaitre / Reasons for appearanceRogers requests to appear at the public hearing scheduled for **** 11, 2016. Rogers is a major provider of broadband services, as well as local and mobile telephone services in Canada. It is also a major contributor to the contribution fund and will be affected financially by any changes to the contribution regime that might result from this proceeding. For these reasons, Rogers believes that it should be permitted to attend and participate in the public hearing.

Intervention: Rogers Communications

Document Name: 2015-134.223978.2394474.Intervention(1fbl601!).doc
[image: ]
**** Watt
333 **** Street ****
9th Floor
Toronto, Ontario *** ***
******@***.com
o *-***-***-****
m *-***-***-****
July 14, 2014
CRTC File # 8663-C12-201503186
Via GC Key
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Centre Building
1 Promenade du Portage
Gatineau, Quebec *** ***
**** Mr. Traversy:

[bookmark: OLE_LINK1][bookmark: OLE_LINK2]Re: Telecom Notice of Consultation CRTC 2015-134, Review of basic telecommunications services; Rogers Comments1. Rogers Communications hereby files its comments pursuant to Telecom Notice of Consultation CRTC 2015-134, Review of basic telecommunications services.

2. Rogers requests to appear at the public hearing scheduled for **** 11, 2016. Rogers is a major provider of broadband services, as well as local and mobile telephone services in Canada. It is also a major contributor to the contribution fund and will be affected financially by any changes to the contribution regime that might result from this proceeding. For these reasons, Rogers believes that it should be permitted to attend and participate in the public hearing.

Yours very truly,
[image: ]
**** Watt

Interim Senior Vice President – RegulatoryCorporate Affairs

cc: **** Seidl, CRTC, ******@***.comJohn Macri, CRTC, ******@***.com

BMW

Intervention: Rogers (Intervenor 238)

Document Name: 2015-134.223978.2394474.Intervention(1fbl601!).doc
[image: ]
**** Watt
333 **** Street ****
9th Floor
Toronto, Ontario *** ***
******@***.com
o *-***-***-****
m *-***-***-****
July 14, 2014
CRTC File # 8663-C12-201503186
Via GC Key
Mr. John Traversy
Secretary General
Canadian Radio-television and
Telecommunications Commission
Centre Building
1 Promenade du Portage
Gatineau, Quebec *** ***
**** Mr. Traversy:

[bookmark: OLE_LINK1][bookmark: OLE_LINK2]Re: Telecom Notice of Consultation CRTC 2015-134, Review of basic telecommunications services; Rogers Comments1. Rogers Communications hereby files its comments pursuant to Telecom Notice of Consultation CRTC 2015-134, Review of basic telecommunications services.

2. Rogers requests to appear at the public hearing scheduled for **** 11, 2016. Rogers is a major provider of broadband services, as well as local and mobile telephone services in Canada. It is also a major contributor to the contribution fund and will be affected financially by any changes to the contribution regime that might result from this proceeding. For these reasons, Rogers believes that it should be permitted to attend and participate in the public hearing.

Yours very truly,
[image: ]
**** Watt

Interim Senior Vice President – RegulatoryCorporate Affairs

cc: **** Seidl, CRTC, ******@***.comJohn Macri, CRTC, ******@***.com

BMW

Intervention: Rogers Communications

Document Name: 2015-134.223978.2394475.Intervention(1fbl701!).doc
[image: ͹Đ]
Telecom Notice of Consultation CRTC 2015-134, 2015-134-1
Review of basic telecommunications services
Comments of
Rogers Communications Partnership
July 14, 2015
Rogers Intervention
TNC 2015-134
**** vi of ____
Table of Contents
1.0 Introduction 1
2.0 It is Self-evident that Broadband Internet Service is now a Basic Service 2
3.0 Competition is Constantly Pushing ISPs to Improve 3
4.0 Market forces ensure basic services are accessible and affordable 6
4.1 Wireless as a competitive alternative to wireline 8
4.2 Internet access availability and affordability 9
5.0 Government initiatives addressing internet availability 12
5.1 High tech companies are racing to bring new technologies to market 12
6.0 Regulatory Reform in an Era of Convergence 13
6.1 The Current Basic Services Regime 13
6.2 The Framework for Reform 14
6.3 Proposed Changes to the Basic Services Regime 15
Appendix - Responses to Questions in Appendix B of TNC 2015-134 21
Rogers Intervention
TNC 2015-134
Executive Summary
1. This intervention is filed by Rogers Communications Partnership (Rogers) pursuant to the procedures set forth in Telecom Notice of Consultation 2015-134, Review of basic telecommunications services (“TNC 2015-134”).

2. In TNC 2015 – 134, the Commission asks whether its definition of basic service and its basic service obligation should be modified, whether broadband Internet access should be considered a basic service, and whether the contribution regime should be modified to support the extension of broadband access to unserved and underserved areas.

It is Self-evident that Broadband Internet Service is a Basic Service

3. It is self-evident to Rogers that broadband Internet service is a basic telecom service that should be available to all Canadians. It is required by Canadians to access countless services including government and health services, educational services, business services and entertainment services. It is used by Canadians to communicate either using email, VoIP or other services and millions of Canadians use it to access social media. Moreover, use continues to expand with Canadians using ever increasing numbers of apps and consuming ever larger quantities of data. High-speed broadband Internet access is a necessary prerequisite for Canadians to participate in the digital economy in a meaningful way and almost all Canadians now have access to this important service.

4. In the words of the Canadian telecommunications policy statement in section 7 of the Telecommunications Act, high-speed broadband Internet access has become an essential enabler for the social and economic fabric of Canada.

5. While Rogers believes that the vast majority of Canadians now have access to this service, it acknowledges that there may be some percentage of the population that still does not have access to a service that qualifies as high-speed. Canadian telecommunications policy states that the Canadian telecommunications system should extend to all Canadians, regardless of where they live in Canada. Rogers supports this objective, and supports government measures designed to ensure it is achieved.

6. However, Canadian telecommunications policy also requires the Commission to foster increased reliance on market forces for the provision of telecommunications services and ensure that regulation, where required, is efficient and effective. This objective, together with the requirements of the Direction to the CRTC on the implementation of Canadian telecommunications policy objectives, require a careful assessment of the market to be made in advance of implementing any new regulatory measures. In this case it is necessary to first determine the areas of Canada where high-speed Internet services may not be available, and whether the competitive market is likely to serve these persons in the near term. In considering this issue, regard must be had to the subsidy programs administered by the the federal government under its Economic Action Plan for Canada, pursuant to which contracts have been awarded to extend the reach of high-speed Internet access over the next two years. Regards must also be had to the activities of the many competitive suppliers of high-speed Internet access, who are constantly extending and upgrading the quality of their services. As well, exciting new developments involving satellite, drone and balloon technology initiatives aimed at delivery of lower cost broadband service by several of the largest tech companies in the world also hold great promise.

7. Consideration must also be given to the fact that the level of basic service that should be available to Canadians is not static. It must respond to their social and economic requirements which evolve over time. By way of example, in the 2011 Review of Basic Services, the Commission included Internet access in the basic service definition for the first time. It set the required speed at the level required for dial-up Internet access – 64 Kbps. At the same time, the Commission set a target of 5 Mbps downstream and 1 Mbps upstream as the objective to achieve over the next five years.

Basic Service Standard of 5 Mbps Downstream and 1 Mbps Upstream

8. A basic service standard of 5/1 Mbps is consistent with the evolution in the market as well as the Government’s current service level to which service providers must commit to be eligible for funding. It was used as the standard in the Government’s most recent funding initiative in 2015. It therefore makes sense for that to be the level to include in the basic service object for the next period of time, pending another review by the Commission.

9. Broadband Internet service with at least 5 Mbps downstream enables the use of key Internet applications such as web browsing, email, VoIP, social media and video streaming in at least standard definition. At this speed, participation in the digital economy is achieved.

A Prospective Target of 25 Mbps Downstream and 1 Mbps Upstream

10. Adopting a basic service objective that requires Internet connectivity to be provided at a minimum speed of 5/1 Mbps does not preclude the Commission from establishing a target goal for the future that aims for higher speed services. Just as was done in Telecom Regulatory Policy 2011-291, when the basic service objective required only low-speed Internet connectivity while establishing a target of 5/1 Mbps for 2015, the Commission could adopt 5/1 Mbps as the basic service objective while a target speed for 2020 could be set at a higher level, for example, at 25/1 Mbps. The standard in the basic service objective represents a minimum level of service today that could be eligible for subsidy if warranted. Service providers seeking a subsidy would need to commit to delivering service that achieved no less than that minimum. At the same time, a higher speed goal for 2020 would signal to ISPs the Commission’s goal for the future level of service. The competitive market conditions that largely delivered on the Commission’s goal set in Telecom Regulatory Policy 2011-291 will drive the industry towards a new goal for 2020.

How Many Canadians Lack Access to Broadband Internet Services?

11. In Rogers’ view, a key question in this proceeding is where we stand as a country in the delivery of high-speed Internet services at the proposed level. How many Canadians will still lie outside the coverage area of the various service providers in the market once the Government of Canada’s funding efforts have run their course?

12. In Rogers’ view, competition, together with advances in technology, are on the verge of bringing affordable, high-speed Internet services to all Canadians, regardless of where they live. Networks are continuously being extended and upgraded and will increasingly bring accessible and affordable broadband Internet to previously underserved or unserved areas. Broadband satellites are filling in the gaps in terrestrial coverage.

13. Cable wireline networks alone provide access to broadband services for approximately 90% of Canadian households. Telephone companies and hundreds of ISPs offer high-speed Internet services either across the country or on a regional basis. Other companies offer broadband satellite coverage using new high-throughput satellites. These satellites fill in most of the coverage gaps in the country.

14. Almost all areas in Canada are, therefore, already accessible through a combination of wireline, wireless mobile, fixed wireless and satellite services. The only question really is whether some sort of subsidy is required to finish the job to achieve the basic service objective.

15. According to the Satellite Inquiry Report, there are roughly 18,000 households without access to broadband Internet service at 5/1 Mbps speeds in satellite-dependent communities across Canada’s northern regions. The Report acknowledges that these communities will continue to be reliant on satellite facilities for telecommunications services for the foreseeable future. As noted in that Report, access to transport services at just and reasonable rates is a key factor in delivering affordable access to such speeds.

16. Much has been achieved already as a result of the efforts of the telecommunications industry and a number of government-funded subsidy programs carefully targeted to unserved areas. The fact that some of the remotest communities have yet to receive the 5/1 Mbps service does not mean that they will not receive them under the existing regulatory framework, or through ongoing initiatives of the Government and the private sector. Satellite companies like Xplornet are continuing to deploy broadband satellites capable of bringing the targeted levels of service to these communities and capable of exceeding these levels, if consumer demand is there. Xplornet has also announced the launch of two additional high throughput satellites in 2016. Rogers hopes to get clarity on the coverage of these satellites during this proceeding.

Newer Technologies May Hold the key to Lower Cost Service to Remote Areas

17. Newer technologies are also looming on the horizon. The question of how to provide broadband access to rural and remote areas at low prices is occupying some of the best minds and largest tech companies in the world. The most promising developments in this area are based on new satellite technologies that deliver higher speeds and lower delays than the system of satellites currently used for rural service in Canada.

18. In December 2014, O3b Networks completed the launch of a system of 12 satellites orbiting at an altitude of 8,000 kilometer (relatively low compared to the 42,000 kilometer typical of existing satellites servicing Canada), which will provide Internet and LTE backhaul services. O3b Networks’ business plan targets "the other 3 billion" people world-wide without access to Internet service, and has the potential to deliver service to much of Canada; although near-term plans are focused on regions nearer the equator. Future projects using satellites orbiting over the poles at even lower altitudes present great potential for Canada. OneWeb, whose backers include **** Network Systems, Intelsat, QUALCOMM, Virgin Group, Bharti, and Coca Cola, is working to deploy a 680 satellite system in 1,000 kilometer polar orbits to service aircraft, service providers and end-consumers in 2019. Other projects with similar objectives are being undertaken by other groups.

19. The possible success of one or more of these projects over the next few years should not be ruled out. Technological developments over the previous five years have been astounding. When the Commission last looked at this issue, the tablet had only recently been launched, there were no LTE mobile networks, and the first Canadian broadband satellite had yet to be launched. There is no reason to suppose that the next five years will be any different. If anything, technological progress can be expected to accelerate.

A New Subsidy is Not Required

20. In these circumstances it is difficult to inject a new subsidy regime into what is clearly a competitive market in all parts of Canada, including the northern territories. The Commission’s experience with the Deferral Account process underscores how difficult it is to predict the capacity of the competitive market to extend service and improve service levels without government intervention. That program resulted in subsidies being paid to the ILECs in areas that were already served by other carriers by the time the process was completed. The prospect of subsidized entry by the ILECs also forestalled competitive entry by other carriers in some areas and ultimately resulted in the waste of scarce funds, all of which were generated by other telecommunications customers in lower- cost service areas.

21. The use of subsidies for service to higher cost areas is a very blunt instrument that produces unintended consequences and economic distortions. Today for example, unemployed residents of the economically challenged areas of Toronto, unfairly subsidize the residential local wireline phone bill of the bank managers, the doctors and the lawyers in **** City. Rogers strongly believes that such economic unfairness and distortion should be eliminated, not extended to other services.

22. In these circumstances, the Commission would be doing a disservice to Canadians by introducing a new subsidy system for broadband Internet services, and especially for service speeds above those established in the basic service objective. It should heed the requirements of the Policy Direction and “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives”. It should leave subsidy programs to governments which have established processes, as well as the knowledge and capacity to target funds more accurately, and with less economic distortion.

23. If this proceeding provides the Commission with clear evidence that market forces, technological developments and existing and announced government support programs will not achieve the requirements of the basic service objective, it should consider redirecting the existing subsidy for local telephone service towards achieving this objective in a manner that is both technologically neutral and competitively neutral, that is, does not favour or hinder any particular class of carrier over another. Since such broadband access can support VoIP service, the subsidy for local exchange service could be phased-out wherever high-speed Internet service is available. Rogers notes in this regard that many Canadians have already abandoned local exchange service in favour of mobile wireless (20.4%) or some form of VoIP (40%) services. The number of Canadians with mobile only service is projected to increase to 33% by 2017. These are very clearly substitute services.

Regulatory Reform in an Era of Total Convergence

24. High-speed Internet access provides the technology for total convergence - something consumers have been promised for many years. High-speed Internet connectivity at speeds of 5/1 Mbps, minimum, can support all of the functionality included in the current basic service objective, including voice communications, either as access-dependent or access-independent VoIP service. The updated basic service objective should explicitly recognize that the functionality currently provided by local and long distance telephone services can be provided over such a broadband Internet service, and allow for service providers to meet the basic service objective using this connection.

25. Rogers submits that once full access to high-speed broadband is achieved, the Commission can transition away from its current regulatory model which is centred on the provision of dial-tone as the foundation for basic service, towards a new world where Internet connectivity is the foundation, and expect voice communications will be available wherever broadband access is available. Ultimately, no service other than high-speed Internet connectivity needs to be defined as basic telecommunications services. Rogers believes that the Commission should set this as an objective in the current proceeding and establish a transition period to achieve it within two years of concluding this proceeding.

26. Should a subsidy regime be established for broadband service, it should not be limited to subsidizing the ILECs. An alternative mechanism would consider competitive bids, similar to the open approach used to award government funding. Competing for the subsidy should be open to all providers and the entity requiring the least subsidy from the fund would be selected as the winning bidder. In addition, consideration should be given to funding just backhaul transport facilities on a location-by-location basis. Information already provided to the Commission has identified lack of access to backhaul transport facilities at reasonable cost as a key limiter in delivering affordable higher-speed Internet services.

27. For all the reasons above, once all Canadians have access to high-speed Internet services, Rogers submits that the contribution collection mechanism should be eliminated except for the funding of Video Relay Service (VRS) as ordered by the Commission in Telecom Regulatory Policy CRTC 2014-187. If a subsidy regime is directed to broadband Internet service, Rogers suggests that details such as the scope of contributing services and eligibility criteria be developed in a follow-up process based on key principles established as a result of this proceeding.

Rogers Intervention
TNC 2015-134
**** i of vi
Rogers Intervention
TNC 2015-134
**** vi of vi
[bookmark: _Toc424630232]1.0 Introduction
This intervention is filed by Rogers Communications Partnership (Rogers) pursuant to the procedures set forth in Telecom Notice of Consultation 2015-134, Review of basic telecommunications services (“TNC 2015-134”).

Rogers requests to appear at the public hearing scheduled for **** 11, 2016. Rogers is a major provider of broadband services, as well as local and mobile telephone services in Canada. It is also a major contributor to the contribution fund and will be affected financially by any changes to the contribution regime that might result from this proceeding. For these reasons, Rogers believes that it should be permitted to attend and participate in the public hearing.

Rogers position on the principle issues raised in this proceeding may be summarized as follows:
· It is self-evident that broadband Internet service is now a basic service that should be made available to all Canadians.
· Under a highly competitive market structure, almost all Canadians now have access to broadband Internet service and those who may not currently have such access, will soon.
· Competition will ensure that prices are reasonable and service continuously improves.
· High tech companies are racing to develop new technologies to meet the global demand for lower cost broadband for remote and rural areas.
· Rogers supports a basic service standard of 5 Mbps downstream and 1 Mbps upstream.
· Rogers supports a prospective target of 25 Mbps downstream and 1 Mbps upstream.
· Rogers believes that broadband access ushers in a new era of true convergence in which all services, including local telephone service, can run over broadband networks.
· In this environment, the subsidy for legacy wireline telephone service should be phased-out.
· Rogers does not believe a new subsidy is required for broadband Internet service, but if one is established it should be modeled on the open approach used to award government funding.
[bookmark: _Toc424630233]2.0 It is Self-evident that Broadband Internet Service is now a Basic Service
It is self-evident to Rogers that high-speed Internet service is a basic telecommunications service that should be available to all Canadians.

High-speed Internet service provides access to a huge number of services and applications; it is also a communications tool used to support e-mail and voice over Internet protocol (VoIP) service, which provides a substitute for local exchange service. It provides a primary means for participation in the digital economy and society.

The Canadian telecommunications industry has evolved significantly over the past 5 years since the Commission last reviewed its basic service regime. We have augmented an excellent local telephone service, provided principally by the incumbent local exchange carriers (ILECs), with broad-based mobile telephone services, VoIP and competing wireline services provided by competitive local exchange carriers (CLECs) and resellers. Although subscription to wireline telephone services has declined in the face of these alternative services, there is virtually ubiquitous coverage provided by this combination of technologies.

There has also been a transformation of data markets in Canada. Data has become the engine of the mobile wireless market and use of high-speed access services has exploded. The prevalence of smart phones and tablets with powerful microprocessors has put pressure on mobile data markets to increase bandwidth and data speeds to satisfy this demand. Rogers has observed the same phenomenon in its cable-based high-speed access services. Growth in consumer usage has been increasing at 50% per annum and is not expected to let up in the foreseeable future.

Rogers and other network providers have invested billions of dollars to keep up with this voracious demand for data by expanding their network capacity.

In the wireless market, Rogers has made very large investments in additional spectrum which will be used to augment its LTE network. In 2014, Rogers spent an unprecedented $3.3 billion to purchase prime 700 MHz spectrum for this purpose. This has been augmented by investments in 2500 MHz, 2300 MHz and 3500 MHz spectrum. Capital expenditures to support wireless services throughout 2014 averaged $2.7 million daily. Most recently, Rogers has acquired AWS spectrum from Shaw and Mobilicity enabling faster speeds to be achieved on its wireless network. Through its participation as a partner in Inukshuk Wireless Partnership (“Inukshuk”), Rogers has also participated in the build-out of a stand-alone wireless data network delivering high-speed broadband access to consumers and businesses located outside its cable footprint. This network is experiencing the same type of growth in data usage as Rogers’ mobile wireless and cable-based Internet services.

What Rogers is experiencing with the growth in data services is being played out across **** America. It is not only video that is driving this data explosion. The “Internet of Things” is starting to catch on, with many of the products we use expected to include wireless devices to report on usage, maintenance or other issues. Cisco projects that by 2019 there will be 382.4 million networked devices in Canada - up from 185 million in 2014. There will be 10.3 networked devices per capita in 2019 in Canada - roughly double the current number. Internet traffic is expected to triple in this same timeframe.[footnoteRef:1] [1: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update 2014-2019 **** Paper.] It is not possible to single out any of the many ways that Canadians use data services as a top priority and it is certainly not a proper role for governments or the regulator to pick the most important services. Everyone has different priorities and the possible uses of broadband networks are proving to be infinite. Broadband access is now a huge contributor to the social and economic fabric of Canada. It is now more important than the wireline telephone network since its myriad of uses incorporates that functionality as well.

Rogers leads the way in supporting these changes by increasing the speeds it offers its customers. Rogers’ entry level Internet package on its cable network is now 15 Mbps (download), up from 3 Mbps in 2010, and its upload speed is 1 Mbps, up from 256 Kbps in 2010. At the high end, Rogers offers speeds of 250 Mbps - five times higher than in 2010, and upload speeds of 10 Mbps - 10 times higher than in 2010.

Rogers’ mobile data speeds have also increased. Rogers used HSPA+ technology in 2010 with a maximum speed of 21 Mbps. Today with LTE, speeds up to 150 Mbps are provided with **** Term Evolution (LTE)-Advanced providing even higher speeds in certain locations. These speeds greatly exceed the Commission’s targets set in 2011.

[bookmark: _Toc424630234]3.0 Competition is Constantly Pushing ISPs to Improve

Nothing is static in this market. Consumer demand and competition from other suppliers is constantly pushing Rogers to improve its data services in terms of both speeds and coverage. Rogers spends more than $1.6 billion on average each year to constantly improve its networks.

Competition is coming from numerous technologies including cable networks, fibre, ADSL, mobile wireless, fixed wireless and satellite service providers. Population densities and the cost of reaching subscribers will often dictate which technologies are best suited to serve specific customers. Outside of urban and suburban centres, mobile data may be available in the vicinity of major traffic corridors, fixed wireless can be used wherever population densities can accommodate construction or sharing of a tower or other support structure, and broadband satellites are being used to fill in coverage gaps that will inevitably exist in a country as big and as thinly populated as parts of Canada.

All of these technologies have improved since 2010, furnishing a reliable source of broadband service capable of providing access to the services that Canadians demand. The advent of high-throughput satellites capable of providing download speeds up to 25 Mbps, are also having an impact on the Canadian market. Xplornet Communications Inc. is promising Internet download speeds of up to 25 megabits per second for rural and remote areas of Canada by 2017. Xplornet is rolling out a new wireless network and increasing satellite space on two next-generation satellites being launched in 2016. Xplornet has announced that it has made a significant commitment to more remote locations in Canada and purchased all the residential capacity on these two satellites.[footnoteRef:2] Other countries have also used broadband satellites to fill in coverage gaps - even in Europe, which is usually thought of as densely populated. [2: Xplornet has “purchased Canadian capacity on two next-generation satellites that will launch in mid-2016. In addition to three satellites it presently uses, it has committed up to $275-million for capacity on ViaSat Inc.’s ViaSat-2 satellite and about $200-million for Canadian broadband capacity on **** Network Systems LLC’s Echostar XIX satellite.” The **** and Mail, **** Dobby – July 28, 2014. ] While satellite-based services have often been criticized as either unreliable or as having too much latency, this is no longer the case.[footnoteRef:3] The new satellites provide a high quality service which can satisfy demand in areas where other high-speed Internet services are not available. Wherever satellite is the least cost service option for Canadians, it should be relied on to deliver Internet access. [3: The President of Xplornet said the company will make it possible to download video or stream HD content in rural and remote parts of Canada “for about the same price you would pay if you lived in Vancouver, Calgary, Toronto or Fredericton.” CBC News – July 28, 2014] Attitudes are changing. Trying to meet the needs of Canadians with one specific technology, such as wireline telephone service or fibre is not a sensible way forward. Many Canadians have rejected traditional wireline telephony in favour of VoIP, which can be carried on broadband data networks. Many more have abandoned wireline telephone service in favour of mobile service. This is particularly true of younger users who have grown up with this service. Statistics Canada indicates that wireless only households increased to 20.4% in 2013, while households that have only wireline fell to 14.4%; in other words, there were more households with only wireless than wireline service.[footnoteRef:4] This number for wireless-only subscribers has been growing over time, revealing that local wireline service is not viewed by Canadians in the same way it was in the past. [4: Statistics Canada, Survey of Household Equipment, Cansim Table 203-0027.] Rogers has responded to these changes in the telecommunications environment in a number of ways. It has expanded the ways in which its cable customers can receive their television programming by offering its services on-line to its subscribers. Many content services are also available on smart phones. Rogers has also enabled VoIP service to its cable customers. It has continued to extend and upgrade its mobile wireless network to produce higher data speeds using the LTE protocol and it has extended and upgraded its fixed wireless networks to extend high-speed data service further from urban markets.

In Telecom Regulatory Policy 2011-291, the Commission established target goals for Canadian Internet Service Providers to strive to achieve on a national level. These were set at 5 Mbps downstream and 1 Mbps upstream. All of the services provided by Rogers have exceeded these targets.

In TNC 2015-134, the Commission noted the findings of Commissioner **** in the Satellite Inquiry Report, where she reported that roughly 18,000 households without Internet service at the Commission’s targeted speeds are located in satellite-dependent communities in the Northwest Territories, Yukon, Nunavut and the northern reaches of BC, Saskatchewan, Manitoba, Ontario and Quebec. It was also noted that these households will likely remain dependent on satellite facilities for telecommunications services for the foreseeable future. The Commission also noted that these 18,000 households were included in the approximately 1.2 million, or 9% of Canadian households that did not have access to broadband services at the Commission’s target download and upload speeds in 2013.[footnoteRef:5] [5: Rogers notes that it is uncertain as to the source of this 1.2 million number as the notice did not provide a reference and the number appears to be at odds with numbers in the 2014 CRTC Communications Monitoring Report, specifically the information provided at Table 5.3.12 and Figure 5.3.15 regarding the percentage of households unable to access service with downstream speeds of at least 5 Mbps.] Rogers believes that this situation has improved since 2013, and is continuing to improve. According to the Minister of Industry, Hon. **** Moore, the Government of Canada’s Economic Action Plan 2014 has succeeded in narrowing that gap. Minister **** has announced that the Government will spend $305 million to connect an additional 356,000 households to the Internet at minimum speeds of 5 Mbps. When these extensions of service are completed by 2017, he reports that 98% of households will be able to subscribe to new or improved high-speed services at the targeted rate. This is not far from the availability percentage achieved by local telephony in its heyday.

Rogers questions whether significant numbers of Canadians are truly without access to broadband services now that broadband satellites reach virtually all corners of Canada.[footnoteRef:6] [6: Only the very farthest northern Arctic islands are not served by satellite.] Rogers does not believe that the Commission should be concerned that some percentage of Canadians will need to use satellite service for broadband in remote areas of Canada. Satellite is the best means of reaching those Canadians who live in the remotest parts of the country. It is very unlikely that fixed wireless, mobile wireless or wireline broadband facilities will ever be extended to such areas at anything approaching economically viable conditions.[footnoteRef:7] Satellite is likely the only cost-effective solution in such cases. Broadband satellites are also being resorted to in other countries to fill in coverage gaps. This is the case in the United States, Australia, New Zealand, Indonesia and Europe, among other regions. [7: In this regard, extension of facilities at such costs is likely to be a most inefficient use of resources that disadvantages Canada in today’s highly competitive world.] In Australia, the Government has funded a broadband expansion project which will provide access to all Australians, regardless of location using a mix of technologies, including satellite. The National Broadband Network will connect approximately 7% of all premises in the country to wireless networks. They consist of an LTE-based component that will cover 5%, with a satellite-based network dealing with the remaining 2%. In all, fewer than one million premises will be affected.[footnoteRef:8] [8: http://www.budde.com.au/Research/Australia-National-Broadband-Network-Fixed-Wireless-and-Satellite-Networks.html#sthash.5LEoP35N.dpu] New high-throughput broadband satellites can deliver speeds of up to 25 Mbps, making them a good alternative to other terrestrial infrastructure. In Canada, Xplornet is offering this type of satellite service with two such satellites in orbit and two more on order.

Rogers believes that the competitive market will continue to narrow the gap between Canadians with access to high-speed Internet services and Canadians without such access.
[bookmark: _Toc424630235]4.0 Market forces ensure basic services are accessible and affordable

Competition in the Canadian telecommunications market is widespread and vigorous. This is true not only for the provision of discretionary telecommunications services - but also for basic services. This competition is providing technology options for consumers, as well as price and service feature options. Canadians take advantage of these choices and select the carrier providing the service that best suits their requirements. Regulatory intervention is not required.

The delivery of basic local telephone service has changed substantially, providing consumers with a range of choices in addition to the traditional wireline local exchange service provided by the incumbent telephone companies. Not only can consumers purchase home phone service from their cable television company or use their mobile wireless service, VoIP services are available from a variety of sources that piggy-back on the high-speed Internet services. Consumers are starting to realize that a broadband connection is all they really need to meet their communications requirements. Today, approximately 40% of households have local telephone service that uses some form of VoIP.[footnoteRef:9] [9: CRTC CMR 2014, Figure 5.2.1, including access-dependent and access-independent local lines.] The fact that 20.4% of Canadians now rely exclusively on mobile wireless service for local telephone service (and do not subscribe to a wireline telephone service) underscores the changes in consumer perception and preferences that have taken place. Forecasts indicate that wireless-only households in Canada could reach 33% by 2017.[footnoteRef:10] For many consumers the wireless smart phone is now a communications centre providing communications and entertainment services, as well as access to all web-based services, rendering the traditional fixed voice service increasingly less relevant. [10: SaskTel Annual Report, 2014, page 36, based on Scotiabank Global Banking and Markets.] There is also extensive competition in the Internet broadband retail services market with two large carriers in each market plus approximately 500 smaller carriers and resellers. With the Commission regulating the wholesale side of this business, resellers have wholesale access to the two main competing networks at regulated rates. In addition, mobile wireless operators provide data services in the areas they serve with four carriers present in most markets. Fixed wireless service providers also provide access in rural and remote areas. This includes the Inukshuk wireless network, which is pushing out service to more rural communities.

Through the Inukshuk network, Rogers, in partnership with Bell Sympatico, is offering a high-quality fixed wireless alternative to rural Canadians and Canadian businesses and consumers in smaller urban centres. This coverage is not limited to areas served by Rogers cable.

Other Canadian fixed wireless companies are doing the same thing, including Bell Canada, TELUS and Xplornet.

Rogers notes the finding by the Commission that providing higher speeds and capacity are limited by the cost of satellite backhaul transport.[footnoteRef:11] The Satellite Inquiry Report, the result of a proceeding to investigate the cost of satellite transport, noted a number of potential solutions, including new technologies, government and private-sector initiatives, and regulatory intervention with respect to C-band satellite.[footnoteRef:12] Based on these findings, as well as further developments from ongoing regulatory processes and investment by government and the private sector, Rogers is of the view that there may not need to be any additional funding support. However, to the extent gaps remain, the focus should be on backhaul transport, as discussed in response to questions 10 and 13 in the Appendix. [11: CRTC Telecom Regulatory Policy 2013-711.] [12: CRTC Satellite Inquiry Report, paragraphs 158, 202-205.] [bookmark: _Toc424630236]4.1 Wireless as a competitive alternative to wireline

The criteria for forbearance of residential local exchange services include the availability of mobile wireless services and the role such services play in providing a viable alternative to wireline. The wireless services market is characterized by three major providers, each operating on a national basis, as well as increasingly important regional providers. More than 99% of Canadians had access to wireless services in 2013.[footnoteRef:13] [13: CRTC CMR 2014, **** 207.] Competition in the industry has increased over the past five years with the appearance of new operators that entered the business after Industry Canada’s 2008 auction of spectrum licences for advanced wireless services (AWS). Subsequent spectrum auctions and regulatory initiatives have also increased the competitive intensity of the market. The presence of typically, at least four mobile service providers further enhances the range of competitive telecommunications choices for consumers.

The rapid proliferation of smartphones and tablets coupled with almost insatiable consumer demand has dramatically increased wireless traffic volumes. Moving forward, the ongoing and costly rollout of 4G LTE networks will increase the speed at which these services are offered, driving demand for data services and smartphones. Demographics tell the tale. In 2013, 60% of households under the age of 35 reported using a cell phone exclusively; up from 39% in 2010 and 26% in 2008.[footnoteRef:14] The penetration rate of smartphones among Canadian households has increased from 14% in 2009 to 62% in 2013. For tablets the rate increased to 39% in 2013[footnoteRef:15] from zero prior to the launch of the Apple iPad in 2010. [14: Ibid.] [15: CRTC CMR 2014, **** 217, Figure 5.5.8.] The local subsidy regime was intended to safeguard the affordability of basic service in high-cost areas. However, with the emergence of more wireline and wireless alternatives, this is not as significant an issue. Low-income households may find it more economical to subscribe to wireless instead of wireline services in some circumstances, particularly considering the additional functionality of mobile phones. An entry level wireless service can be less expensive than wireline, according to the most recent price comparisons report for the Commission.[footnoteRef:16] Many Canadians have chosen to stop paying for fixed local telephone service in order to direct these funds to supplementing their wireless service that provides mobility, data (including video), instant messaging functionality not provided by local telephone service. Past results from the Residential Telephone Service Survey have found that wireless only households are more likely to be lower income households. [16: **** Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions, 2015 Edition, prepared for the CRTC by **** Communications Inc., **** 2015; Figures 1 and 3 for level 1 basket of services and features.] When viewed against the environment described thus far in Rogers’ submission, using the telecommunications regulatory framework to extend subsidies for service to higher cost areas should be considered as a very blunt instrument, one almost guaranteed to produce unintended consequences and economic distortions. Today for example, unemployed residents of economically challenged areas of Toronto, unfairly subsidize the residential local wireline phone bill of the bank managers, the doctors and the lawyers in **** City. Rogers strongly believes that such economic unfairness and distortions should not be extended to other services. To the extent possible, subsidies should be eliminated from the system.

[bookmark: _Toc424630237]4.2 Internet access availability and affordability

In the past, basic telecommunications services primarily provided voice communications. Today, however, access to the Internet is considered by many to be an equally effective and valuable communications medium. Some Internet-based activities, such as email, instant messaging and increasingly, social media websites, can fulfill communications needs that voice conversations might have met. To that extent, these services also provide a means of substitution for voice calls. More direct substitutes include “over the top” VoIP services such as Skype or access-independent VoIP services such as Vonage. Such services allow consumers to use their Internet connection to achieve voice communications, just as traditional wireline telephone services have in the past.

Wireline and wireless based Internet services are available from numerous service providers. The two most common wireline-based service providers are cable providers and incumbent telephone companies. The cable companies offer broadband service over their wireline networks to more than 90% of Canadian households in 2013.[footnoteRef:17] [17: Based on the number of households passed by cable companies’ FTTN service, as indicated in CRTC CMR 2014, Figure 5.1.5, and public financial reports of individual cable companies.] The emergence of wireless broadband adds at least two independent facilities-based competitors to the existing cable and DSL wireline platforms. This brings the number of competing service providers to at least four.

Different broadband technologies such as mobile, wireline and broadband satellites are used to provide high speed Internet to all Canadians. In 2013, over 95% of Canadian households had access to at least 5 Mbps broadband service through the above platforms. [footnoteRef:18] [18: CRTC CMR 2014, **** 193, Figure 5.3.15 Broadband, 5 Mbps availability (percentage of households) (2013).] Standard service pricing is generally uniform throughout a company’s serving territory. As a result, subscribers in more rural areas benefit from the same competitive pricing as in urban areas, even though costs differ. Moreover, competition among service providers contributes to numerous promotional offers that can provide further savings.

The reduction in prices can be seen in the decline in the price of Internet services measured by the price per Mbps. Chart 1 provides a summary of price changes for Rogers’ Internet services between ****, 2010 and ****, 2015 for several service tiers.[footnoteRef:19] All of Rogers’ service tiers have reduced prices per Mbps. [19: Based on non-promotional prices and including applicable fees for the modem.] Chart 1

Rogers Retail Broadband Internet Services
$/Mbps per month
**** ($ per month)
Mbps (download)
$/Mbps
2010
2015
2010
2015
2010
2015
Tier 1
(Lite)
$38.99
$54.49
3
15
$13.00
$3.67
Tier 2
(Express)
$49.99
$64.99
10
30
$5.00
$2.17
Tier 3 (Extreme)
$62.99
$74.99
15
60
$4.20
$1.25
Tier 4
(Extreme Plus)
$74.49
$84.99
25
100
$2.98
$0.85
Tier 5 (Ultimate)
$104.49
$94.99
50
250
$2.09
$0.38

Service speeds have improved dramatically over the past 5 years. For example, Rogers’ most popular tier in 2010, Tier 3, Extreme, had a download speed of 15 Mbps with a price of $62.99. Today, the same download speed is available for Rogers Tier 1 but at a lower price point of $54.99. In 2010, Rogers’ highest-speed offer, Tier 5, Ultimate, had a download speed of 50 Mbps with a price of $104.99. Today, the most comparable service is Rogers Tier 3 service with a download speed of 60 Mbps, with an upstream speed 5 times faster and a price of $74.99, fully $30 less than in 2010. Rogers’ highest speed offer today has a download speed of 250 Mbps, 5 times greater than in 2010, with an upstream speed 10 times faster and a price of $94.99, $10 lower than in 2010.

Looked at another way, at the extremes in 2010, Rogers Tier 1 service offered a download speed of 3 Mbps and an upload speed of 256 Kbps. The Tier 1 service now offers a download speed of 15 Mbps and an upload speed of 1 Mbps. Rogers Tier 5 service has increased download speeds from 50 Mbps in 2010 to 250 Mbps in 2015. Upload speeds have increased from 2 to 20 Mbps.

Rogers’ enormous investments in its local distribution plant and the deployment of DOCSIS 3.0 in cable networks have been key to delivering these higher tiers. And Rogers is continuing to deploy even more advanced technologies. Rogers’ top two tiers now include unlimited usage, while its other tiers have increased the monthly usage included in the service price by at least 100%.

The telephone companies have also increased the speeds of their service, particularly in the past few months. As of July 2015, the fastest speeds offered by these companies in most major communities were 50 to 100 Mbps, with faster services available in certain areas. For example, some locations served by Bell Aliant’s fibre optic service already can receive speeds of up to 450 Mbps, while those served by SaskTel’s fibre optic service can receive speeds of up to 260 Mbps. Bell Canada has recently announced the introduction of a new Gigabit Internet Service in major Canadian cities with speeds of up to 1000 Mbps by 2016.[footnoteRef:20] [20: The Wire Report, **** 25, 2015.] Speeds of up 150 Mbps are available in some areas served by the wireless networks of Rogers, Bell and TELUS. Ongoing upgrades to the wireless platform will further enhance download speed. **** Term Evolution (LTE) - Advanced promises more significant increases in both downstream and upstream speeds, with theoretical top speeds of more than 250 Mbps downstream.

The take-up of wireless broadband by consumers has the potential to function as a substitute for wireline broadband services, not unlike what has already been observed for voice services. The monthly price for Rogers’ wireless broadband hub-based service, for example, ranges from $60 to $145 per month for 5 GB and 100GB respectively with advertised download speeds of up to 50 Mbps.[footnoteRef:21] Rogers wireless subscribers on its LTE network also have access to mobile hotspot service that can support download speeds ranging from 12 Mbps to 40 Mbps. The majority of Canadian Internet subscribers rely on services that have advertised download speeds comparable to these speeds.[footnoteRef:22] A share of these subscribers have usage profiles that would make it economical to consider a wireless Internet service as an alternative, even without considering the added utility of service mobility. [21: http://www.rogers.com/web/content/mobile-plans. Prices based on plans for heavier usage. There are intermediate steps of different volumes and rates for subscribers with varying levels of data usage, and additional charges of $5GB apply for usage in excess of 10GB.] [22: CRTC, Communications Monitoring Report 2014, Table 5.3.10 indicates that 32.8% of ISP residential customers have subscriptions with download speeds of 5 to 9 Mbps and a further 56.9% subscribe to services with download speeds greater than 9 Mbps ] Only some consumers need to view wireless broadband as a substitute in order to exert competitive market pressure in the wireline broadband market.[footnoteRef:23] The widespread availability of wireless Internet services offering speeds comparable to the most popular wireline services increases the potential for some level of substitution to occur. [23: See for example the presentation by **** Schwartz, “Remarks on Broadband Competition and Access Regulation,” FCC Workshop on Economic Issues in Broadband Competition, October 9, 2009, in which he makes the following points: “wireless competition [is] potentially more important:…for mobile to constrain fixed we don’t need all users to view them as good substitutes – only enough users on the margins.” The presentation is available at: http://www.broadband.gov/ws_economic_issues.html.] [bookmark: _Toc424630238]5.0 Government initiatives addressing Internet availability

Over the last decade there have been many federal and provincial government sponsored initiatives directed at expanding the availability of broadband services. Connecting Canadians is one such program and will help households in rural and remote areas get access to high-speed Internet and participate in the digital economy. The Government will invest up to $305 million beginning in 2015 to extend and enhance services at speeds of 5 Mbps or greater to a targeted 356,000 households by the end of 2017.[footnoteRef:24] [24: Industry Canada News Release, High-Speed Internet Coming to Rural Canada, May 20, 2015.] There is no requirement for additional government or regulatory intervention at this time. Rather, monitoring of unserved areas should continue, with a full reassessment in 2018 when most current government-supported projects will be completed. This will minimize the risk of unnecessary wasteful duplication, unfair taxation on consumers and increasing inefficient subsidies that would serve to distort market forces.

Several initiatives have been taken by the government to increase the Internet penetration and accessibility for the Canadians through the satellite platform. These initiatives are summarized in the Satellite Inquiry Report, October 2014, Appendix D, Part A.

[bookmark: _Toc424630239]5.1 High tech companies are racing to bring new technologies to market

The world is not standing still. The question of how to provide broadband access to rural and remote areas at low prices is occupying some of the best minds and largest technology companies in the world. The most promising developments in this area are based on new satellite technologies that deliver higher speeds and lower delays than the system of satellites currently used for rural service in Canada.

In December 2014, O3b Networks completed the launch of a system of 12 satellites orbiting at an altitude of 8,000 kilometer (relatively low compared to the 42,000 kilometer typical of existing satellites servicing Canada), which will provide Internet and LTE backhaul services. O3b Networks’ business plan targets "the other 3 billion" people world-wide without access to Internet service, and has the potential to deliver service to much of Canada; although near-term plans are focused on regions nearer the equator. Future projects using satellites orbiting over the poles at even lower altitudes present great potential for Canada. OneWeb, whose backers include **** Network Systems, Intelsat, QUALCOMM, Virgin Group, Bharti, and Coca Cola, is working to deploy a 680 satellite system in 1,000 kilometer polar orbits to service aircraft, service providers and end-consumers in 2019.

Space X, a private sector rocket company providing launch services to NASA and commercial satellite operators, is exploring the development of a 6,000 satellite polar orbit system with plans for prototype testing beginning in 2016. Beyond satellite, entrepreneurial companies are experimenting with aerial wireless platforms to provide remote communications. These include aircraft-based relay systems, most famously Project Titan - a Google project that uses solar-powered drones to provide high-speed Internet to remote areas. Project **** is another Google-backed project that utilizes high altitude balloons to relay LTE cellular signals. Other similar projects are being studied by other companies. The possible success of one or more of these projects over the next few years should not be ruled out.

[bookmark: _Toc424630240]6.0 Regulatory Reform in an Era of Convergence
[bookmark: _Toc424630241]6.1 The Current Basic Services Regime
The basic service objective consists of the following service elements:
Individual line local touch-tone service;
Capability to connect to the Internet via low-speed data transmission at local rates;
Access to the long distance network, operator/directory assistance services, enhanced calling features and privacy protection features, emergency services, as well as voice message relay service; and
A printed copy of the current local telephone directory upon request.

The basic service objective currently includes the capability to connect to the Internet, albeit at much lower speeds (e.g., 64 Kbps) compared to the target speed of 5 Mbps established as the goal for 2015 in Telecom Regulatory Policy 2011-291. The Internet speed that was chosen at that time as part of the basic service obligation was taken in recognition of the fact that higher broadband speeds had already become “the prevalent means of accessing the Internet.”[footnoteRef:25] [25: CRTC Telecom Regulatory Policy 2011-291, paragraph 55.] Currently, the basic service objective applies to the ILECs only in local exchanges where the Commission continues to regulate the rates, terms and conditions of wireline local telephone services. These consist of (i) unlimited local calling at a flat monthly rate, subject to a price ceiling, and (ii) access to a choice of long distance service provider. The ILECs are permitted to meet this obligation by offering mobile wireless voice services.

The basic service provided by ILECs is subject to the contribution regime when provided in high-cost serving areas (HCSAs). This is because these carriers have the obligation to serve. Prior to Telecom Regulatory Policy CRTC 2011-291, any carrier providing a local service that met the basic local service conditions was permitted to receive the subsidy in HCSAs, if selected by a customer to provide its service. The contribution was “portable” in this respect.

[bookmark: _Toc424630242]6.2 The Framework for Reform

Section 7 of the Telecommunications Act sets forth the Canadian telecommunications policy. These objectives make it clear that the Canadian telecommunications system should extend to all Canadians regardless of where they live in Canada; it must respond to Canadian’s economic and social requirements; it must be affordable and of high quality.

The Canadian telecommunications policy objectives also comment on how the Commission is to regulate telecommunications services. The Commission is to foster increased reliance on market forces for the provision of telecommunications services and ensure that regulation, where required, is efficient and effective. This means that regulation is not axiomatic. The need for regulation must be assessed against the strength of market forces.

The Governor in Council shed further light on how the Canadian policy objectives are to be implemented by the Commission in its, “Order issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives” (the Direction). The Direction requires the Commission to fulfill the objectives of the Telecommunications Act by relying on “market forces to the maximum extent feasible”. When relying on regulation, the Direction requires the Commission to “…use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives.”A further requirement of the Direction is “to use only tariff approval mechanisms that are as minimally intrusive and as minimally onerous as possible”. The Commission is also required “to continue to explore and implement new approaches for streamlining its regulatory process”.

The basic service obligation should be reviewed based on the general framework established by the Direction. The same is true of any new proposals to extend the subsidy regime to additional services, such as broadband access services. The goal should be to streamline the existing regime but not to extend regulation to new services unless competitive market forces are found to be incapable of addressing any deficiencies. A minimalist approach should be taken with respect to any new regulatory measures that are found to be necessary.

[bookmark: _Toc424630243]6.3 Proposed Changes to the Basic Services Regime

Rogers is of the view that the evolution in the social and economic requirements of Canadians warrants changes to the basic service objective. The changes should incorporate a higher-speed connection to the Internet, and as part of that shift, recognize that voice communications can be delivered wherever such a connection is present.

[bookmark: _Toc424630069][bookmark: _Toc424630129]6.3.1 Internet Connectivity at 5 Mbps Downstream and 1 Mbps Upstream

Rogers supports a revision to the basic service standard to include broadband access at a speed of 5 Mbps downstream and 1 Mbps upstream, as a minimum. This is consistent with the evolution in the market as well as the Government’s current service level to which service providers must commit to be eligible for funding. It was used as the standard in the Government’s most recent funding initiative in 2015.

Broadband Internet service with at least 5 Mbps downstream enables the use of key Internet applications such as web browsing, email, VoIP and video streaming in at least standard definition. In addition, setting the basic service objective to require Internet connectivity at 5/1 Mbps could also replace the requirements related to voice communications.

Canadians are increasingly using a variety of technologies to communicate. This includes VoIP service provided over broadband services. Since more than 98% of Canadians have access to high-speed Internet services, it is possible for them to rely on this form of access for their telephone service. Moreover, this service is widely available from at least two independent platforms, ensuring competitive supply.[footnoteRef:26] [26: CRTC CMR 2014, Table 5.3.12.] The Commission has tied the subsidy to ILEC service over the past 5 years based on the definition of basic telecom service and the determination that only the ILEC has an obligation to deliver that service. However, if market forces are robust enough to offer consumers a choice in their home region, the subsidy ought not to be tied to the ILECs’ service.

Canadians should be able to choose the technology and the supplier they wish to use for their telephone service. For many Canadians, it might make sense to use their mobile phone as their local service, or their broadband access, in lieu of a local wireline service. The subsidy system should not direct them towards an older technology or dictate what service and what supplier they need. If the Commission wishes to harness the power of the competitive market, and encourage innovation in the Canadian market, it should free Canadians up in high cost areas and let them choose their carrier and their form of communications service. Rogers believes that the circumstances exist to transition from the current basic service framework and phase-out the existing subsidy regime for local telephone service.

The question is whether the proposed change in the basic service objective justifies a departure from the Commission’s existing regulatory framework for Internet services, which has relied on market forces except in very limited circumstances.[footnoteRef:27] This in turn depends on how the industry is performing in extending this service to all Canadians and in meeting the basic service objective Rogers has proposed regarding speeds for Internet access. Rogers believes that the revised basic service objective can be delivered to the vast majority of Canadians today. [27: See for example, Telecom Regulatory Policy CRTC 2009-657, Review of Internet traffic management practice of ISPs; and various CRTC decisions respecting regulated rates for wholesale access to ILEC and cable carriers’ Internet access services.] [bookmark: _Toc424630070][bookmark: _Toc424630130]6.3.2 A Prospective Target for Internet of 25 Mbps Downstream and 1 Mbps Upstream

Rogers notes that adopting a basic service objective that requires Internet connectivity to be provided at a minimum speed of 5/1 Mbps does not preclude the Commission from establishing a target goal for the future that aims for higher speed services. Just as in Telecom Regulatory Policy 2011-291 when the basic service objective required only low-speed Internet connectivity while establishing a target of 5/1 Mbps for 2015, the Commission could adopt 5/1 Mbps as the basic service objective while a target speed for 2020 could be set at a higher level, for example, at 25/1 Mbps.

The standard in the basic service objective represents a minimum level of service today that could be eligible for subsidy if warranted. Service providers seeking a subsidy would need to commit to delivering service that achieved no less than that minimum. At the same time, a higher speed goal for 2020 would signal to ISPs the Commission’s goal for the future level of service. The competitive market conditions that largely delivered on the Commission’s goal set in Telecom Regulatory Policy 2011-291 will drive the industry towards a new goal for 2020.

[bookmark: _Toc424630071][bookmark: _Toc424630131]6.3.3 A New Subsidy is Not Required for Broadband

In Rogers’ view, competition, together with advances in technology, are on the verge of bringing affordable, high-speed Internet services to all Canadians, regardless of where they live. Networks are continuously being extended and upgraded and will increasingly bring accessible and affordable broadband Internet to previously underserved or unserved areas. Broadband satellites are filling in the gaps in terrestrial coverage.

All areas in Canada are already accessible through a combination of wireline, wireless mobile, fixed wireless and satellite services. The only question really is whether these services are affordable - or whether some sort of subsidy is required to finish the job to achieve the basic service objective.

According to the Satellite Inquiry Report, there are roughly 18,000 households without access to broadband Internet service at 5/1 Mbps speeds in satellite-dependent communities across Canada’s northern regions.[footnoteRef:28] The Report acknowledges that these communities will continue to be reliant on satellite facilities for telecommunications services for the foreseeable future. As noted in that Report, access to transport services at just and reasonable rates is a key factor in delivering affordable access to such speeds. [28: Yukon, Northwest Territories, Nunavut, and remote areas of British Columbia, Saskatchewan, Manitoba, Ontario and Quebec.] Much has been achieved already as a result of the efforts of the telecommunications industry and a number of government-funded subsidy programs carefully targeted to unserved areas. The fact that some of the remotest communities have yet to receive 5/1 Mbps service does not however mean that they will not receive them under the existing regulatory framework, or through ongoing initiatives of the Government and the private sector. Satellite companies like Xplornet are continuing to deploy broadband satellites capable of bringing the targeted levels of service to these communities and capable of exceeding these levels, if consumer demand is there. Xplornet has also announced the launch of two additional high throughput satellites in 2016. Rogers hopes to get clarity on the coverage of these satellites during this proceeding. And newer technologies such as described in Section 5.1 above are looming on the horizon.

The Government of Canada has also announced that its Economic Action Plan for Canada will be subsidizing the extension of service to 365,000 more households in the first round of partnership approvals. The money has now been committed to do this and the suppliers have been selected in a competitive process. The Commission will want to have a thorough understanding of where these funds are being spent in order to assess the magnitude of any deficiency.

Minister **** has indicated that Industry Canada received over 300 applications to the Connecting Canadians program from ISPs across Canada. The program will cover 75,000 more households than was originally projected at an average speed of over 5 Mbps. According to Minister ****, by Canada’s 150th birthday in 2017, over 98 percent of Canadian households will be able to subscribe to new or improved high-speed Internet services.[footnoteRef:29] [29: High-Speed Internet Coming to Rural Canada, May 20, 2015, Industry Canada News Release.] Satellite-based Internet services will play an important role in achieving this goal. Notably, it was recently announced that SSi Micro Ltd. has been awarded $35 million to extend and enhance its satellite-based Internet service to 8,600 homes in Nunavut beginning in 2016.

Rogers does not believe that this is a static situation. In addition to this Government subsidy program that has yet to have its full impact felt, all carriers continue to extend their services. While there may still be Canadians without access to high-speed broadband Internet services at affordable prices, this number continues to shrink and will in all likelihood disappear over the next few years. Further Government subsidy programs will likely continue to be targeted to improving services to various regions of Canada that might be underserved today.

The fact that 300 ISPs responded to Industry Canada’s last funding program is itself telling of the amount of facilities-based competitors in the market today. These are all companies that were proposing to build networks to serve areas that do not have adequate coverage today. The fact that they are undertaking to serve 75,000 more households than were projected by Industry Canada also demonstrates that they are competing for these subsidies by either offering more coverage than was in the Request For Proposal, or by bidding a lower amount to receive the subsidy.

By injecting competition into the bidding process to receive government subsidies, Industry Canada is harnessing the energy of the competitive market and giving all qualified carriers the opportunity to bid on subsidies. In areas where subsidies are required to extend service, this process is the fairest and produces the best value for the public funds being spent on the project.

Contrast this with the Commission’s last attempt to subsidize extension of Internet service in the “Deferral Account” proceedings. That approach made the funds only available to the ILECs in a non-competitive process. It resulted in no competitive checks on the amount of money being spent and ended up paying for the ILECs’ extension of wireless service into many regions that already had service. Bell Canada’s deployment of the network extensions proceeded at a snail’s pace and is still not completed despite the passage of 5 years.

The deferral account approach resulted in unfair competition as the ILECs were subsidized to compete with other ISPs. This distorted the competitive market and resulted in uneconomic entry by the ILECs and discouraged entry by other parties. It basically put competitors’ investment decisions on hold for a number of years and slowed the process of extending service down.

In these circumstances, the Commission would be doing a disservice to Canadians by introducing a new subsidy system for broadband Internet services, and especially for service speeds above those established in the basic service objective. It should heed the requirements of the Policy Direction and “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives”. It should leave subsidy programs to governments which have established processes, as well as the knowledge and capacity to target funds more accurately, and with less economic distortions than the Commission.

If this proceeding provides the Commission with clear evidence that market forces, technological developments and existing and announced government support programs will not achieve the requirements of the basic service objective, it should consider redirecting the existing subsidy for local telephone service towards achieving this objective in a manner that is both technologically neutral and competitively neutral, that is, does not favour or hinder any particular class of carrier over another.

[bookmark: _Toc424630072][bookmark: _Toc424630132]6.3.4 No Obligation to Serve is required
Rogers does not believe there should be an obligation to serve. Rogers submits that in almost all cases, the communications industry will chose to provide service in response to consumer demand and competitive market forces.

Rogers submits that voice services included in the current basic service objective can be provided to any customer where there is a 5/1 Mbps high-speed Internet connection, either as access-dependent or access-independent VoIP service. The updated basic service objective should explicitly recognize that the functionality currently provided by local and long distance telephone services can be provided over such a broadband Internet service, and allow service providers to meet the basic service objective using this connection.

Rogers submits that once full access to high-speed broadband is achieved, the Commission can transition away from its current regulatory model which is centred on the provision of dial-tone as the foundation for basic service, towards a new world where Internet connectivity is the foundation and voice communications will be available wherever there is broadband access. Ultimately, no other service needs to be defined as basic telecommunications services. Rogers believes that the Commission should set this as an objective in the current proceeding and establish a transition period to achieve it within two years of concluding this proceeding.

Should a subsidy regime be established for broadband service, it should not be limited to subsidizing the ILECs. An alternative mechanism would consider competitive bids, similar to the open approach used to award Government funding. Competing for the subsidy should be open to all providers and the entity requiring the least subsidy from the fund would be selected as the winning bidder. In addition, consideration should be given to funding just backhaul transport facilities on a location-by-location basis. Information already provided to the Commission has identified lack of access to backhaul transport facilities at reasonable cost as a key limiter in delivering affordable higher-speed Internet services.

For all the reasons above, Rogers submits that the contribution collection mechanism should be eliminated except for the funding of Video Relay Service (VRS) as ordered by the Commission in Telecom Regulatory Policy CRTC 2014-187. If a subsidy regime is directed to broadband Internet service, Rogers suggests that details such as the scope of contributing services and eligibility criteria be developed in a follow-up process based on key principles established as a result of this proceeding.

Rogers Intervention
TNC 2015-134
**** 21 of 30
Rogers Intervention
TNC 2015-134
**** 30 of 30
[bookmark: _Toc424630244]Appendix - Responses to Questions in Appendix B of TNC 2015-134
Canadians’ evolving needs for telecommunications services
1. Canadians are using telecommunications services to fulfill many social, economic, and cultural needs in today’s digital economy.

a) Explain how telecommunications services are used to meet these needs. For example, uses may include e-commerce (i.e. the online purchase and trade of products or services), e-banking and/or telephone banking, e-health or telehealth services, telework, and distance education. Which of these uses of telecommunications services are the most important to ensure that Canadians meaningfully participate in the digital economy?

Each of the services listed above is important. No doubt some important services that Canadians will need have not even been invented yet. More important than forecasting what services are or will be most important is ensuring that Canada has advanced, robust, reliable and accessible networks that will both provide Canadians access to these services and create an environment where Canadian themselves will play a key role in developing these applications. Rogers has always been a world leader in deploying advanced networks and is committed to maintaining its leadership role.

The ability to use an advanced broadband network is the key objective as this will enable all services and applications many of which are critical to meaningful participation in the digital economy. Rogers believes that its proposed basic service objective fulfills this goal. Rogers submits that consumers, and not governments, should decide how they wish to participate in the digital economy secure in the knowledge that world-leading broadband networks are available to them. It is not the role of government to choose.

b) Explain which telecommunications services are most important to support these needs and uses. What characteristics (e.g. capacity, mobility, high speed, and low latency) should these telecommunications services have?
All wireline and wireless voice telephony and Internet services are important. The circumstance of the needs and use dictate which is the best service to use at the time.

Every service and every characteristic is also important. What is important for one individual’s use may not be as important for another. For example, video streaming has different requirements than fleet tracking but both of these applications play roles in the digital economy and each requires different service characteristics. Networks must, as well as possible, provide all these characteristics.

Rogers notes that the 2014 CRTC Communications Monitoring Report (CMR) provides a good explanation of the Internet speeds required by various applications on pages 188-192 and in particular in Figure 5.3.8 Popular Internet applications – Bandwidth requirements (reproduced below).

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c) Identify and explain the barriers that limit or prevent Canadians from meaningfully participating in the digital economy (e.g. availability, quality, price, digital literacy, and concerns related to privacy and security). Identify which segments of the Canadian population are experiencing such barriers.

The vast majority of Canadians have world-leading access to the digital economy over the telecom networks built in Canada. The cost of building terrestrial services in the very remote, far **** and other remote locations is the principle barrier. These costs lead to unavailability or high pricing or slow speeds, as recognized in Telecom Regulatory Policy 2013-711 and the Satellite Inquiry Report.

Canada has world class networks by any measure. Canadians are enthusiastic adopters with very high wireless and wireline usage. Unfortunately, the Information Technology Association of Canada (ITAC) has identified that Canadian businesses, especially **** and Medium businesses that form a very large part of the economy, have been poor adopters of technology.[footnoteRef:30] This low adoption has caused Canada’s productivity levels to be lower than the United States and held Canada back. The government should address this structural issue to enhance productivity, competitiveness and economic growth. [30: ‘Canada’s Networks and the Digital Economy’, Information Technology Association of Canada (ITAC), November 13, 2013, http://itac.ca/blog/itac-releases-canadas-networks-and-the-digital-economy-study/]

d) Identify and explain any enablers that allow Canadians to meaningfully participate in the digital economy (e.g. connected devices and applications).

Canada has some of the most advanced networks in the world. Rogers in particular has leading edge networks in both cable and wireless with a tradition of pioneering new technologies such as DOCSIS, GSM and LTE, that have driven the ILECs to advance their networks and technologies in order to compete effectively. This competitive technology and network dynamic is the foundation of Canada’s world-leading networks.

e) As Canada’s digital economy continues to grow and evolve during the next 5 to 10 years, which telecommunications services are Canadians expected to need to participate meaningfully? Specify how your responses to parts a) through d) above would change based on your answer.

As explained in our response to question 1 b), every service is important - wireline and wireless voice telephony and Internet services. The key to success for Canada is having advanced networks that can support all nature of services including those that may come in the future. World-leading networks will enable Canadian consumers and businesses to obtain the services they need and desire.

2. The Commission’s current target speeds for broadband Internet access service are a minimum of 5 Mbps download and 1 Mbps upload, based on uses that consumers should reasonably expect to make of the Internet. Are these target speeds sufficient to meet the minimum needs of Canadians today? If not, what should the new targets be and what time frame would be reasonable to achieve these new targets?

[bookmark: _GoBack]As evidenced in the diagram provided in response to 1. b), a download speed of 5 Mbps permits high-definition video streaming at 1080p and a host of less bandwidth demanding applications. Rogers submits that this speed is sufficient for the basic needs of Canadians. This speed will also support multiple simultaneous use of basic needs such as email, accessing government services, web-page browsing, audio streaming and standard definition video streaming. Rogers submits that 5/1 Mbps represents a minimum speed for the basic service objective, based on these considerations.

Rogers notes that adopting a basic service objective that requires Internet connectivity to be provided at a minimum speed of 5/1 Mbps does not preclude the Commission from establishing a target goal for the future that aims for higher speed services. Just as in Telecom Regulatory Policy 2011-291 when the basic service objective required only low-speed Internet connectivity while establishing a target of 5/1 Mbps for 2015, the Commission could adopt 5/1 Mbps as the basic service objective while a target speed for 2020 could be set at a higher level, for example, at 25/1 Mbps.

The Commission’s role regarding access to basic telecommunications services
3. Which services should be considered by the Commission as basic telecommunications services necessary for Canadians to be able to meaningfully participate in the digital economy? Explain why.

a) Explain whether the underlying technology (e.g. cable, digital subscriber line, fibre, fixed wireless, mobile wireless, and satellite technology) should be a factor in defining whether a telecommunications service should be considered a basic service.

Canadians should have access to voice and Internet service. The underlying technology (e.g. cable, digital subscriber line, fibre, fixed wireless, mobile wireless, and satellite technology) should not be a factor in defining whether a telecommunications service should be considered a basic service.

b) Identify, with supporting rationale, the terms, conditions, and service characteristics under which basic telecommunications services should be provided. Should any obligations be placed on the provider(s) of these services? If so, what obligations and on which service provider(s)?

Where services are provided in a competitive market, the Commission should forbear from rate regulation of the service. For basic local telephone service, the Commission has regulated the terms, conditions and service characteristics in regard to such items as interconnection, 9-1-1, Message Relay, law enforcement access, number portability, and others. The Commission should continue regulating such items. Where forbearance has not been granted, the Commission should apply its regulatory processes and requirements to rates as it has historically. Such rate regulation has only applied to the ILECs and Rogers submits that this should continue to be the case. Assuming high-speed Internet is incorporated in the basic service objective, and thus mandated in higher cost locations, and it is determined that subsidies should be provided, the subsidy and any restrictions on the maximum price should bear in mind the higher costs of service. The customer should bear a reasonable portion of the higher cost before subsidies come into play.

c) What should be the prices for basic telecommunications services and how should these prices be determined? Provide rationale to support your answer.

Currently, the Commission has established a price ceiling of $30 per month in high-cost serving areas for local telephone service. For purposes of calculating the subsidy, the Commission has estimated that providers receive an additional $5 per month from optional services for total revenue of $35 per month for a high-cost subscriber. The price ceiling and associated subsidies were based on detailed cost studies. As explained elsewhere, Rogers believes that local phone service subsidies should be eliminated. In the alternative, if the local telephone service subsidy structure remains in place, the subsidy should be redirected to broadband Internet service in line with its proposal for the basic service objective as discussed further in response to Question 10. Voice communications can be provided wherever there is Internet connectivity provided as part of the basic service, either as access-dependent or access-independent VoIP.

4. Can market forces and government funding be relied on to ensure that all Canadians have access to basic telecommunications services? What are the roles of the private sector and the various levels of government (federal, provincial, territorial, and municipal) in ensuring that investment in telecommunications infrastructure results in the availability of modern telecommunications services to all Canadians?

The Telecommunications Act and the Policy Direction support competitive forces. Government intervention should be tightly targeted and only occur where benefits outweigh the costs and such intervention should be minimally intrusive to the competitive market.

Market forces should be relied upon to the greatest extent possible and they can be in almost all instances in Canada. The private sector has done an outstanding job in deploying services to the vast majority of Canadians.

As they have been doing, governments should step in to assist only those sparsely populated, remote regions where there is no reasonable prospect of an economic case for investment. Governments must assist with funding from general revenues for very remote locations to complement private funding. Levying industry-specific taxes to fund subsidies is inefficient and produces economic distortions impairing Canadian productivity. If Canada is to be successful in an increasingly competitive world it must improve its productivity and this can only occur if resources are deployed in an economic manner. Resources will only be deployed efficiently if economic principles and proper economic signals and incentives are in place. Any subsidies that remain in place should reflect an equitable sharing of the additional cost between the subscriber and those who fund the subsidy program.

5. What should be the Commission’s role in ensuring the availability of basic telecommunications services to all Canadians? What action, if any, should the Commission take where Canadians do not have access to telecommunications services that are considered to be basic services?

The Commission should rely upon market forces to the greatest extent possible. If this proceeding provides the Commission with clear evidence that market forces, technological developments and existing and announced government support programs will not achieve the requirements of the basic service objective, it should consider redirecting the existing subsidy for local telephone service towards achieving this objective. It would be more economically efficient for the Commission to encourage government to provide the necessary funding. However, in the absence of additional funding from government, the Commission should develop a transparent subsidy regime that will achieve the requirements of the basic service objective in a manner that is both technologically neutral and competitively neutral, that is, does not favour or hinder any particular class of carrier over another.

6. In Telecom Regulatory Policy 2011-291, the Commission stated that it would closely monitor developments in the industry regarding the achievement of its broadband Internet target speeds to determine whether regulatory intervention may be needed. What action, if any, should the Commission take in cases where its target speeds will not be achieved by the end of 2015?

The Commission should be pleased that its decision in 2011 not to apply regulation to the Internet industry in respect of speeds and pricing has proven wise. Private industry has risen to the challenge and with the assistance of government programs will have achieved the targets by the end of 2015 for almost all Canadians. Rogers proposes that the basic service objective be revised to require Internet connectivity at 5 Mbps downstream and 1Mbps upstream which is more than sufficient for multiple simultaneous use of basic applications such as email, accessing government services, web-page browsing, audio streaming and standard definition video streaming as explained in the response to question 2 above.

7. In Telecom Regulatory Policy 2013-711, the Commission stated its intention to establish a mechanism, as required, in Northwestel’s operating territory to support the provision of modern telecommunications services. Such a mechanism would fund capital infrastructure investment in transport facilities (e.g. fibre, microwave, and satellite), as well as the cost of maintaining and enhancing these facilities. The Commission considered that this mechanism should complement, and not replace, other investments from the private sector and governments, including public-private partnerships.

a) Explain, with supporting rationale, whether there is a need for the Commission to establish such a mechanism in Northwestel’s operating territory. As well, explain whether there is a need for such a mechanism in other regions of Canada.

Rogers submits that the Commission should consider in this proceeding whether such a mechanism is required in Northwestel’s operating territory, based on updated submissions by Northwestel and other service providers targeting service in its territory.

The Commission should take into consideration that new technologies are being deployed, such as by Xplornet, and being developed in the case of alternative new satellite technologies, as well as other regulatory initiatives such as those under consideration in Telecom Notice of Consultation 2015-133. These initiatives could address backhaul transport services, already identified by the Commission as one of the key limiters in delivering affordable higher-speed Internet services.

Once further information has been gathered on these matters, the Commission and interested parties should be in a better position to consider what, if any subsidy mechanisms are required for Northwestel.
b) What impact would the establishment of such a mechanism have on private sector investment and government programs to fund the provision of modern telecommunications services?
Rogers submits that the establishment of such a mechanism could have a negative impact by interfering with pricing signals for private sector investment, and it leads to the uneconomic deployment of resources.
Regulatory measures for basic telecommunications services
8. What changes, if any, should be made to the obligation to serve and the basic service objective?

Rogers submits that the basic service objective should be revised to include high-speed Internet connectivity at speeds of 5/1 Mbps, at a minimum. This level of service supports current basic applications and also could replace the current low-speed Internet service and encompass voice communications as a basic service objective. Rogers does not believe there should be an obligation to serve. Rogers submits that in almost all cases, the communications industry will chose to provide service in response to consumer demand and competitive market forces.

9. Should broadband Internet service be defined as a basic telecommunications service? What other services, if any, should be defined as basic telecommunications services?

Rogers submits that broadband Internet service should be defined as a basic telecommunications services and provided as part of the basic service objective at speeds of 5/1 Mbps, at a minimum. As explained above, Rogers submits that the voice services included in the current basic service objective can be provided to any customer where there is a 5/1 Mbps high-speed Internet connection. The updated basic service objective should explicitly recognize that the functionality currently provided by local and long distance telephone services can be provided over such a broadband Internet service, and allow for service providers to meet the basic service objective using this connection. Ultimately, no other service needs to be defined as basic telecommunications services.

10. What changes, if any, should be made to the existing local service subsidy regime? What resulting changes, if any, would be required to the existing regulatory frameworks (e.g. price cap regimes)?

As explained above in response to question 2 c), Rogers submits that if the existing local service subsidy funds continue to be collected, the funds should be redirected to support broadband Internet service included in the basic service objective. The necessary cost information to address the quantum of any subsidy for the basic service objective, if required, should be assessed in a follow-up process based on key principles established as the result of this proceeding.

Also as explained above, Rogers does not believe that an industry-funded subsidy program is either necessary or desirable.

Should a subsidy regime be established for broadband service, it should not be limited to subsidizing the ILECs. An alternative mechanism would consider competitive bids, similar to the open approach used to award Government funding. Competing for the subsidy should be open to all providers and the entity requiring the least subsidy from the fund would be selected as the winning bidder. In addition, consideration should be given to funding just backhaul transport facilities on a location-by-location basis. Information already provided to the Commission has identified access to backhaul transport facilities at reasonable cost as a key limiter in delivering affordable higher-speed Internet services.

11. What changes, if any, should be made to the contribution collection mechanism? Your response should address, with supporting rationale, which TSPs should be required to contribute to the NCF, which revenues should be contribution-eligible and which revenues, if any, should be excluded from the calculation of contribution-eligible revenues.

For all the reasons above, Rogers submits that the contribution collection mechanism should be eliminated except for the funding of Video Relay Service (VRS) as ordered by the Commission in Telecom Regulatory Policy CRTC 2014-187. If a subsidy regime is directed to broadband Internet service then broadband Internet revenue should be included in contribution-eligible revenues. Rogers suggests that such details be developed in a follow-up process based on key principles established as a result of this proceeding.

12. Should some or all services that are considered to be basic telecommunications services be subsidized? Explain, with supporting details, which services should be subsidized and under what circumstances.

As explained above, Rogers does not support subsidies from an industry-specific fund. Rogers submits that the vast majority of Canadians receive broadband Internet service without subsidies – in 2013, 94% of households having access to 5/1 Mbps – with new technologies emerging that will increase both availability and speed while decreasing costs. To the extent that support has been required, governments have been providing funding for broadband Internet services from general revenues which is the correct approach based on sound economic principles.

To summarize, Rogers believes that only broadband Internet service needs to be included in the basic service objective, thus defining the scope of services that should be subsidized. Even at that, Rogers believes little subsidy is required based on current market conditions. See also the response to Question 5.

13. If there is a need to establish a new funding mechanism to support the provision of modern telecommunications services, describe how this mechanism would operate. Your response should address the mechanism described in Telecom Regulatory Policy 2013-711 for transport services and/or any other mechanism necessary to support modern telecommunications services across Canada. Your response should also address, but not necessarily be limited to, the following questions:

At the outset, Rogers believes that the specific elements of a new funding mechanism should be determined through a follow-up process based on the key principles that will be established as a result of this proceeding. The scope and size of a funding mechanism, as well as the appropriate contributors and recipients will be critically informed by the principles. Notwithstanding this, Rogers offers the following preliminary views on the questions that follow.

a) What types of infrastructure and/or services should be funded?

As explained above to the extent that any service should be funded that service should be broadband Internet service only, as defined by the basic service objective. One option for funding would be to address backhaul transport facilities, as discussed in response to Question 10.

b) In which regions of Canada should funding be provided?
If funding is to be provided it should only be provided in high-cost uneconomic locations that would not otherwise achieve the level of service required by the basic service objective. See also the response to Question 13 d).

c) Which service providers should be eligible to receive funding, and how should eligibility for funding be determined (e.g. only one service provider per area, all service providers that meet certain conditions, wireless service providers, or service providers that win a competitive bidding process)?

To the extent a subsidy is required, Rogers is of the view that the process should be open to all service suppliers regardless of technology, unlike the current funding mechanism that is limited to the ILECs. As discussed in response to Question 10, one alternative would allow for all potential suppliers to participate in a competitive bidding process that would result in only one service provider per area receiving funding.

d) How should the amount of funding be determined (e.g. based on costs to provide service or a competitive bidding process)?

As noted in response to Question 13 c), to the extent a subsidy is required, Rogers is of the view that a competitive bidding process based on an established quality of service and known retail price is the appropriate mechanism. These factors will determine the least-cost subsidy submitted by the winning bidder.

e) What is the appropriate mechanism for distributing funding? For example, should this funding be (i) paid to the service provider based on revenues and costs, or (ii) awarded based on a competitive bidding process?
As discussed in response to Question 13 c), an appropriate mechanism for distributing funding could be based on a competitive bidding process.
f) Should any infrastructure that is funded be available on a wholesale basis and, if so, under what terms and conditions?
Any infrastructure that is funded should be available on a wholesale basis; however, it is imperative that the wholesale rates fully recover the costs of service with an appropriate rate of return that properly reflects risk.
g) Should the Commission set a maximum retail rate for any telecommunications service that is subsidized?

Should the Commission determine that subsidies are appropriate, then, a follow-up process would be the appropriate forum in which to establish the allowable retail rate that potential suppliers would use in their financial analysis underlying their competitive bid for the subsidy.

h) Should this mechanism replace the existing residential local wireline service subsidy? If so, explain how the existing subsidy should be eliminated, including details on any transition period. In addition, explain whether the small ILECs and/or Northwestel should be subject to any special considerations or modifications for this transition period.

Rogers submits that the existing residential local wireline service subsidy should be eliminated for the reasons set out in this submission. Rogers is of the preliminary view that the transition period would need to last for at least one full year following the release of the Commission’s decision in this proceeding before taking effect, assuming no new services are to be subsidized. This is the minimum time necessary given that companies will have already completed their planning and budgets for the upcoming year and would need to adjust to the regulatory change. The widespread availability of broadband Internet services at a level consistent with the basic service objective could also be taken into consideration for determining when to eliminate the subsidy for local wireline service. If in the alternative, the Commission decides to maintain a subsidy, Rogers is of the view that it should be redirected to broadband Internet service as defined by the basic service objective. The timing of the transition for this change will depend on the follow-up process required to establish the terms and conditions for contributors to, and recipients of, such funds.

***END OF DOCUMENT***
Q ROG ERS”

Intervention: Rogers (Intervenor 238)

Document Name: 2015-134.223978.2394475.Intervention(1fbl701!).doc
[image: ͹Đ]
Telecom Notice of Consultation CRTC 2015-134, 2015-134-1
Review of basic telecommunications services
Comments of
Rogers Communications Partnership
July 14, 2015
Rogers Intervention
TNC 2015-134
**** vi of ____
Table of Contents
1.0 Introduction 1
2.0 It is Self-evident that Broadband Internet Service is now a Basic Service 2
3.0 Competition is Constantly Pushing ISPs to Improve 3
4.0 Market forces ensure basic services are accessible and affordable 6
4.1 Wireless as a competitive alternative to wireline 8
4.2 Internet access availability and affordability 9
5.0 Government initiatives addressing internet availability 12
5.1 High tech companies are racing to bring new technologies to market 12
6.0 Regulatory Reform in an Era of Convergence 13
6.1 The Current Basic Services Regime 13
6.2 The Framework for Reform 14
6.3 Proposed Changes to the Basic Services Regime 15
Appendix - Responses to Questions in Appendix B of TNC 2015-134 21
Rogers Intervention
TNC 2015-134
Executive Summary
1. This intervention is filed by Rogers Communications Partnership (Rogers) pursuant to the procedures set forth in Telecom Notice of Consultation 2015-134, Review of basic telecommunications services (“TNC 2015-134”).

2. In TNC 2015 – 134, the Commission asks whether its definition of basic service and its basic service obligation should be modified, whether broadband Internet access should be considered a basic service, and whether the contribution regime should be modified to support the extension of broadband access to unserved and underserved areas.

It is Self-evident that Broadband Internet Service is a Basic Service

3. It is self-evident to Rogers that broadband Internet service is a basic telecom service that should be available to all Canadians. It is required by Canadians to access countless services including government and health services, educational services, business services and entertainment services. It is used by Canadians to communicate either using email, VoIP or other services and millions of Canadians use it to access social media. Moreover, use continues to expand with Canadians using ever increasing numbers of apps and consuming ever larger quantities of data. High-speed broadband Internet access is a necessary prerequisite for Canadians to participate in the digital economy in a meaningful way and almost all Canadians now have access to this important service.

4. In the words of the Canadian telecommunications policy statement in section 7 of the Telecommunications Act, high-speed broadband Internet access has become an essential enabler for the social and economic fabric of Canada.

5. While Rogers believes that the vast majority of Canadians now have access to this service, it acknowledges that there may be some percentage of the population that still does not have access to a service that qualifies as high-speed. Canadian telecommunications policy states that the Canadian telecommunications system should extend to all Canadians, regardless of where they live in Canada. Rogers supports this objective, and supports government measures designed to ensure it is achieved.

6. However, Canadian telecommunications policy also requires the Commission to foster increased reliance on market forces for the provision of telecommunications services and ensure that regulation, where required, is efficient and effective. This objective, together with the requirements of the Direction to the CRTC on the implementation of Canadian telecommunications policy objectives, require a careful assessment of the market to be made in advance of implementing any new regulatory measures. In this case it is necessary to first determine the areas of Canada where high-speed Internet services may not be available, and whether the competitive market is likely to serve these persons in the near term. In considering this issue, regard must be had to the subsidy programs administered by the the federal government under its Economic Action Plan for Canada, pursuant to which contracts have been awarded to extend the reach of high-speed Internet access over the next two years. Regards must also be had to the activities of the many competitive suppliers of high-speed Internet access, who are constantly extending and upgrading the quality of their services. As well, exciting new developments involving satellite, drone and balloon technology initiatives aimed at delivery of lower cost broadband service by several of the largest tech companies in the world also hold great promise.

7. Consideration must also be given to the fact that the level of basic service that should be available to Canadians is not static. It must respond to their social and economic requirements which evolve over time. By way of example, in the 2011 Review of Basic Services, the Commission included Internet access in the basic service definition for the first time. It set the required speed at the level required for dial-up Internet access – 64 Kbps. At the same time, the Commission set a target of 5 Mbps downstream and 1 Mbps upstream as the objective to achieve over the next five years.

Basic Service Standard of 5 Mbps Downstream and 1 Mbps Upstream

8. A basic service standard of 5/1 Mbps is consistent with the evolution in the market as well as the Government’s current service level to which service providers must commit to be eligible for funding. It was used as the standard in the Government’s most recent funding initiative in 2015. It therefore makes sense for that to be the level to include in the basic service object for the next period of time, pending another review by the Commission.

9. Broadband Internet service with at least 5 Mbps downstream enables the use of key Internet applications such as web browsing, email, VoIP, social media and video streaming in at least standard definition. At this speed, participation in the digital economy is achieved.

A Prospective Target of 25 Mbps Downstream and 1 Mbps Upstream

10. Adopting a basic service objective that requires Internet connectivity to be provided at a minimum speed of 5/1 Mbps does not preclude the Commission from establishing a target goal for the future that aims for higher speed services. Just as was done in Telecom Regulatory Policy 2011-291, when the basic service objective required only low-speed Internet connectivity while establishing a target of 5/1 Mbps for 2015, the Commission could adopt 5/1 Mbps as the basic service objective while a target speed for 2020 could be set at a higher level, for example, at 25/1 Mbps. The standard in the basic service objective represents a minimum level of service today that could be eligible for subsidy if warranted. Service providers seeking a subsidy would need to commit to delivering service that achieved no less than that minimum. At the same time, a higher speed goal for 2020 would signal to ISPs the Commission’s goal for the future level of service. The competitive market conditions that largely delivered on the Commission’s goal set in Telecom Regulatory Policy 2011-291 will drive the industry towards a new goal for 2020.

How Many Canadians Lack Access to Broadband Internet Services?

11. In Rogers’ view, a key question in this proceeding is where we stand as a country in the delivery of high-speed Internet services at the proposed level. How many Canadians will still lie outside the coverage area of the various service providers in the market once the Government of Canada’s funding efforts have run their course?

12. In Rogers’ view, competition, together with advances in technology, are on the verge of bringing affordable, high-speed Internet services to all Canadians, regardless of where they live. Networks are continuously being extended and upgraded and will increasingly bring accessible and affordable broadband Internet to previously underserved or unserved areas. Broadband satellites are filling in the gaps in terrestrial coverage.

13. Cable wireline networks alone provide access to broadband services for approximately 90% of Canadian households. Telephone companies and hundreds of ISPs offer high-speed Internet services either across the country or on a regional basis. Other companies offer broadband satellite coverage using new high-throughput satellites. These satellites fill in most of the coverage gaps in the country.

14. Almost all areas in Canada are, therefore, already accessible through a combination of wireline, wireless mobile, fixed wireless and satellite services. The only question really is whether some sort of subsidy is required to finish the job to achieve the basic service objective.

15. According to the Satellite Inquiry Report, there are roughly 18,000 households without access to broadband Internet service at 5/1 Mbps speeds in satellite-dependent communities across Canada’s northern regions. The Report acknowledges that these communities will continue to be reliant on satellite facilities for telecommunications services for the foreseeable future. As noted in that Report, access to transport services at just and reasonable rates is a key factor in delivering affordable access to such speeds.

16. Much has been achieved already as a result of the efforts of the telecommunications industry and a number of government-funded subsidy programs carefully targeted to unserved areas. The fact that some of the remotest communities have yet to receive the 5/1 Mbps service does not mean that they will not receive them under the existing regulatory framework, or through ongoing initiatives of the Government and the private sector. Satellite companies like Xplornet are continuing to deploy broadband satellites capable of bringing the targeted levels of service to these communities and capable of exceeding these levels, if consumer demand is there. Xplornet has also announced the launch of two additional high throughput satellites in 2016. Rogers hopes to get clarity on the coverage of these satellites during this proceeding.

Newer Technologies May Hold the key to Lower Cost Service to Remote Areas

17. Newer technologies are also looming on the horizon. The question of how to provide broadband access to rural and remote areas at low prices is occupying some of the best minds and largest tech companies in the world. The most promising developments in this area are based on new satellite technologies that deliver higher speeds and lower delays than the system of satellites currently used for rural service in Canada.

18. In December 2014, O3b Networks completed the launch of a system of 12 satellites orbiting at an altitude of 8,000 kilometer (relatively low compared to the 42,000 kilometer typical of existing satellites servicing Canada), which will provide Internet and LTE backhaul services. O3b Networks’ business plan targets "the other 3 billion" people world-wide without access to Internet service, and has the potential to deliver service to much of Canada; although near-term plans are focused on regions nearer the equator. Future projects using satellites orbiting over the poles at even lower altitudes present great potential for Canada. OneWeb, whose backers include **** Network Systems, Intelsat, QUALCOMM, Virgin Group, Bharti, and Coca Cola, is working to deploy a 680 satellite system in 1,000 kilometer polar orbits to service aircraft, service providers and end-consumers in 2019. Other projects with similar objectives are being undertaken by other groups.

19. The possible success of one or more of these projects over the next few years should not be ruled out. Technological developments over the previous five years have been astounding. When the Commission last looked at this issue, the tablet had only recently been launched, there were no LTE mobile networks, and the first Canadian broadband satellite had yet to be launched. There is no reason to suppose that the next five years will be any different. If anything, technological progress can be expected to accelerate.

A New Subsidy is Not Required

20. In these circumstances it is difficult to inject a new subsidy regime into what is clearly a competitive market in all parts of Canada, including the northern territories. The Commission’s experience with the Deferral Account process underscores how difficult it is to predict the capacity of the competitive market to extend service and improve service levels without government intervention. That program resulted in subsidies being paid to the ILECs in areas that were already served by other carriers by the time the process was completed. The prospect of subsidized entry by the ILECs also forestalled competitive entry by other carriers in some areas and ultimately resulted in the waste of scarce funds, all of which were generated by other telecommunications customers in lower- cost service areas.

21. The use of subsidies for service to higher cost areas is a very blunt instrument that produces unintended consequences and economic distortions. Today for example, unemployed residents of the economically challenged areas of Toronto, unfairly subsidize the residential local wireline phone bill of the bank managers, the doctors and the lawyers in **** City. Rogers strongly believes that such economic unfairness and distortion should be eliminated, not extended to other services.

22. In these circumstances, the Commission would be doing a disservice to Canadians by introducing a new subsidy system for broadband Internet services, and especially for service speeds above those established in the basic service objective. It should heed the requirements of the Policy Direction and “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives”. It should leave subsidy programs to governments which have established processes, as well as the knowledge and capacity to target funds more accurately, and with less economic distortion.

23. If this proceeding provides the Commission with clear evidence that market forces, technological developments and existing and announced government support programs will not achieve the requirements of the basic service objective, it should consider redirecting the existing subsidy for local telephone service towards achieving this objective in a manner that is both technologically neutral and competitively neutral, that is, does not favour or hinder any particular class of carrier over another. Since such broadband access can support VoIP service, the subsidy for local exchange service could be phased-out wherever high-speed Internet service is available. Rogers notes in this regard that many Canadians have already abandoned local exchange service in favour of mobile wireless (20.4%) or some form of VoIP (40%) services. The number of Canadians with mobile only service is projected to increase to 33% by 2017. These are very clearly substitute services.

Regulatory Reform in an Era of Total Convergence

24. High-speed Internet access provides the technology for total convergence - something consumers have been promised for many years. High-speed Internet connectivity at speeds of 5/1 Mbps, minimum, can support all of the functionality included in the current basic service objective, including voice communications, either as access-dependent or access-independent VoIP service. The updated basic service objective should explicitly recognize that the functionality currently provided by local and long distance telephone services can be provided over such a broadband Internet service, and allow for service providers to meet the basic service objective using this connection.

25. Rogers submits that once full access to high-speed broadband is achieved, the Commission can transition away from its current regulatory model which is centred on the provision of dial-tone as the foundation for basic service, towards a new world where Internet connectivity is the foundation, and expect voice communications will be available wherever broadband access is available. Ultimately, no service other than high-speed Internet connectivity needs to be defined as basic telecommunications services. Rogers believes that the Commission should set this as an objective in the current proceeding and establish a transition period to achieve it within two years of concluding this proceeding.

26. Should a subsidy regime be established for broadband service, it should not be limited to subsidizing the ILECs. An alternative mechanism would consider competitive bids, similar to the open approach used to award government funding. Competing for the subsidy should be open to all providers and the entity requiring the least subsidy from the fund would be selected as the winning bidder. In addition, consideration should be given to funding just backhaul transport facilities on a location-by-location basis. Information already provided to the Commission has identified lack of access to backhaul transport facilities at reasonable cost as a key limiter in delivering affordable higher-speed Internet services.

27. For all the reasons above, once all Canadians have access to high-speed Internet services, Rogers submits that the contribution collection mechanism should be eliminated except for the funding of Video Relay Service (VRS) as ordered by the Commission in Telecom Regulatory Policy CRTC 2014-187. If a subsidy regime is directed to broadband Internet service, Rogers suggests that details such as the scope of contributing services and eligibility criteria be developed in a follow-up process based on key principles established as a result of this proceeding.

Rogers Intervention
TNC 2015-134
**** i of vi
Rogers Intervention
TNC 2015-134
**** vi of vi
[bookmark: _Toc424630232]1.0 Introduction
This intervention is filed by Rogers Communications Partnership (Rogers) pursuant to the procedures set forth in Telecom Notice of Consultation 2015-134, Review of basic telecommunications services (“TNC 2015-134”).

Rogers requests to appear at the public hearing scheduled for **** 11, 2016. Rogers is a major provider of broadband services, as well as local and mobile telephone services in Canada. It is also a major contributor to the contribution fund and will be affected financially by any changes to the contribution regime that might result from this proceeding. For these reasons, Rogers believes that it should be permitted to attend and participate in the public hearing.

Rogers position on the principle issues raised in this proceeding may be summarized as follows:
· It is self-evident that broadband Internet service is now a basic service that should be made available to all Canadians.
· Under a highly competitive market structure, almost all Canadians now have access to broadband Internet service and those who may not currently have such access, will soon.
· Competition will ensure that prices are reasonable and service continuously improves.
· High tech companies are racing to develop new technologies to meet the global demand for lower cost broadband for remote and rural areas.
· Rogers supports a basic service standard of 5 Mbps downstream and 1 Mbps upstream.
· Rogers supports a prospective target of 25 Mbps downstream and 1 Mbps upstream.
· Rogers believes that broadband access ushers in a new era of true convergence in which all services, including local telephone service, can run over broadband networks.
· In this environment, the subsidy for legacy wireline telephone service should be phased-out.
· Rogers does not believe a new subsidy is required for broadband Internet service, but if one is established it should be modeled on the open approach used to award government funding.
[bookmark: _Toc424630233]2.0 It is Self-evident that Broadband Internet Service is now a Basic Service
It is self-evident to Rogers that high-speed Internet service is a basic telecommunications service that should be available to all Canadians.

High-speed Internet service provides access to a huge number of services and applications; it is also a communications tool used to support e-mail and voice over Internet protocol (VoIP) service, which provides a substitute for local exchange service. It provides a primary means for participation in the digital economy and society.

The Canadian telecommunications industry has evolved significantly over the past 5 years since the Commission last reviewed its basic service regime. We have augmented an excellent local telephone service, provided principally by the incumbent local exchange carriers (ILECs), with broad-based mobile telephone services, VoIP and competing wireline services provided by competitive local exchange carriers (CLECs) and resellers. Although subscription to wireline telephone services has declined in the face of these alternative services, there is virtually ubiquitous coverage provided by this combination of technologies.

There has also been a transformation of data markets in Canada. Data has become the engine of the mobile wireless market and use of high-speed access services has exploded. The prevalence of smart phones and tablets with powerful microprocessors has put pressure on mobile data markets to increase bandwidth and data speeds to satisfy this demand. Rogers has observed the same phenomenon in its cable-based high-speed access services. Growth in consumer usage has been increasing at 50% per annum and is not expected to let up in the foreseeable future.

Rogers and other network providers have invested billions of dollars to keep up with this voracious demand for data by expanding their network capacity.

In the wireless market, Rogers has made very large investments in additional spectrum which will be used to augment its LTE network. In 2014, Rogers spent an unprecedented $3.3 billion to purchase prime 700 MHz spectrum for this purpose. This has been augmented by investments in 2500 MHz, 2300 MHz and 3500 MHz spectrum. Capital expenditures to support wireless services throughout 2014 averaged $2.7 million daily. Most recently, Rogers has acquired AWS spectrum from Shaw and Mobilicity enabling faster speeds to be achieved on its wireless network. Through its participation as a partner in Inukshuk Wireless Partnership (“Inukshuk”), Rogers has also participated in the build-out of a stand-alone wireless data network delivering high-speed broadband access to consumers and businesses located outside its cable footprint. This network is experiencing the same type of growth in data usage as Rogers’ mobile wireless and cable-based Internet services.

What Rogers is experiencing with the growth in data services is being played out across **** America. It is not only video that is driving this data explosion. The “Internet of Things” is starting to catch on, with many of the products we use expected to include wireless devices to report on usage, maintenance or other issues. Cisco projects that by 2019 there will be 382.4 million networked devices in Canada - up from 185 million in 2014. There will be 10.3 networked devices per capita in 2019 in Canada - roughly double the current number. Internet traffic is expected to triple in this same timeframe.[footnoteRef:1] [1: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update 2014-2019 **** Paper.] It is not possible to single out any of the many ways that Canadians use data services as a top priority and it is certainly not a proper role for governments or the regulator to pick the most important services. Everyone has different priorities and the possible uses of broadband networks are proving to be infinite. Broadband access is now a huge contributor to the social and economic fabric of Canada. It is now more important than the wireline telephone network since its myriad of uses incorporates that functionality as well.

Rogers leads the way in supporting these changes by increasing the speeds it offers its customers. Rogers’ entry level Internet package on its cable network is now 15 Mbps (download), up from 3 Mbps in 2010, and its upload speed is 1 Mbps, up from 256 Kbps in 2010. At the high end, Rogers offers speeds of 250 Mbps - five times higher than in 2010, and upload speeds of 10 Mbps - 10 times higher than in 2010.

Rogers’ mobile data speeds have also increased. Rogers used HSPA+ technology in 2010 with a maximum speed of 21 Mbps. Today with LTE, speeds up to 150 Mbps are provided with **** Term Evolution (LTE)-Advanced providing even higher speeds in certain locations. These speeds greatly exceed the Commission’s targets set in 2011.

[bookmark: _Toc424630234]3.0 Competition is Constantly Pushing ISPs to Improve

Nothing is static in this market. Consumer demand and competition from other suppliers is constantly pushing Rogers to improve its data services in terms of both speeds and coverage. Rogers spends more than $1.6 billion on average each year to constantly improve its networks.

Competition is coming from numerous technologies including cable networks, fibre, ADSL, mobile wireless, fixed wireless and satellite service providers. Population densities and the cost of reaching subscribers will often dictate which technologies are best suited to serve specific customers. Outside of urban and suburban centres, mobile data may be available in the vicinity of major traffic corridors, fixed wireless can be used wherever population densities can accommodate construction or sharing of a tower or other support structure, and broadband satellites are being used to fill in coverage gaps that will inevitably exist in a country as big and as thinly populated as parts of Canada.

All of these technologies have improved since 2010, furnishing a reliable source of broadband service capable of providing access to the services that Canadians demand. The advent of high-throughput satellites capable of providing download speeds up to 25 Mbps, are also having an impact on the Canadian market. Xplornet Communications Inc. is promising Internet download speeds of up to 25 megabits per second for rural and remote areas of Canada by 2017. Xplornet is rolling out a new wireless network and increasing satellite space on two next-generation satellites being launched in 2016. Xplornet has announced that it has made a significant commitment to more remote locations in Canada and purchased all the residential capacity on these two satellites.[footnoteRef:2] Other countries have also used broadband satellites to fill in coverage gaps - even in Europe, which is usually thought of as densely populated. [2: Xplornet has “purchased Canadian capacity on two next-generation satellites that will launch in mid-2016. In addition to three satellites it presently uses, it has committed up to $275-million for capacity on ViaSat Inc.’s ViaSat-2 satellite and about $200-million for Canadian broadband capacity on **** Network Systems LLC’s Echostar XIX satellite.” The **** and Mail, **** Dobby – July 28, 2014. ] While satellite-based services have often been criticized as either unreliable or as having too much latency, this is no longer the case.[footnoteRef:3] The new satellites provide a high quality service which can satisfy demand in areas where other high-speed Internet services are not available. Wherever satellite is the least cost service option for Canadians, it should be relied on to deliver Internet access. [3: The President of Xplornet said the company will make it possible to download video or stream HD content in rural and remote parts of Canada “for about the same price you would pay if you lived in Vancouver, Calgary, Toronto or Fredericton.” CBC News – July 28, 2014] Attitudes are changing. Trying to meet the needs of Canadians with one specific technology, such as wireline telephone service or fibre is not a sensible way forward. Many Canadians have rejected traditional wireline telephony in favour of VoIP, which can be carried on broadband data networks. Many more have abandoned wireline telephone service in favour of mobile service. This is particularly true of younger users who have grown up with this service. Statistics Canada indicates that wireless only households increased to 20.4% in 2013, while households that have only wireline fell to 14.4%; in other words, there were more households with only wireless than wireline service.[footnoteRef:4] This number for wireless-only subscribers has been growing over time, revealing that local wireline service is not viewed by Canadians in the same way it was in the past. [4: Statistics Canada, Survey of Household Equipment, Cansim Table 203-0027.] Rogers has responded to these changes in the telecommunications environment in a number of ways. It has expanded the ways in which its cable customers can receive their television programming by offering its services on-line to its subscribers. Many content services are also available on smart phones. Rogers has also enabled VoIP service to its cable customers. It has continued to extend and upgrade its mobile wireless network to produce higher data speeds using the LTE protocol and it has extended and upgraded its fixed wireless networks to extend high-speed data service further from urban markets.

In Telecom Regulatory Policy 2011-291, the Commission established target goals for Canadian Internet Service Providers to strive to achieve on a national level. These were set at 5 Mbps downstream and 1 Mbps upstream. All of the services provided by Rogers have exceeded these targets.

In TNC 2015-134, the Commission noted the findings of Commissioner **** in the Satellite Inquiry Report, where she reported that roughly 18,000 households without Internet service at the Commission’s targeted speeds are located in satellite-dependent communities in the Northwest Territories, Yukon, Nunavut and the northern reaches of BC, Saskatchewan, Manitoba, Ontario and Quebec. It was also noted that these households will likely remain dependent on satellite facilities for telecommunications services for the foreseeable future. The Commission also noted that these 18,000 households were included in the approximately 1.2 million, or 9% of Canadian households that did not have access to broadband services at the Commission’s target download and upload speeds in 2013.[footnoteRef:5] [5: Rogers notes that it is uncertain as to the source of this 1.2 million number as the notice did not provide a reference and the number appears to be at odds with numbers in the 2014 CRTC Communications Monitoring Report, specifically the information provided at Table 5.3.12 and Figure 5.3.15 regarding the percentage of households unable to access service with downstream speeds of at least 5 Mbps.] Rogers believes that this situation has improved since 2013, and is continuing to improve. According to the Minister of Industry, Hon. **** Moore, the Government of Canada’s Economic Action Plan 2014 has succeeded in narrowing that gap. Minister **** has announced that the Government will spend $305 million to connect an additional 356,000 households to the Internet at minimum speeds of 5 Mbps. When these extensions of service are completed by 2017, he reports that 98% of households will be able to subscribe to new or improved high-speed services at the targeted rate. This is not far from the availability percentage achieved by local telephony in its heyday.

Rogers questions whether significant numbers of Canadians are truly without access to broadband services now that broadband satellites reach virtually all corners of Canada.[footnoteRef:6] [6: Only the very farthest northern Arctic islands are not served by satellite.] Rogers does not believe that the Commission should be concerned that some percentage of Canadians will need to use satellite service for broadband in remote areas of Canada. Satellite is the best means of reaching those Canadians who live in the remotest parts of the country. It is very unlikely that fixed wireless, mobile wireless or wireline broadband facilities will ever be extended to such areas at anything approaching economically viable conditions.[footnoteRef:7] Satellite is likely the only cost-effective solution in such cases. Broadband satellites are also being resorted to in other countries to fill in coverage gaps. This is the case in the United States, Australia, New Zealand, Indonesia and Europe, among other regions. [7: In this regard, extension of facilities at such costs is likely to be a most inefficient use of resources that disadvantages Canada in today’s highly competitive world.] In Australia, the Government has funded a broadband expansion project which will provide access to all Australians, regardless of location using a mix of technologies, including satellite. The National Broadband Network will connect approximately 7% of all premises in the country to wireless networks. They consist of an LTE-based component that will cover 5%, with a satellite-based network dealing with the remaining 2%. In all, fewer than one million premises will be affected.[footnoteRef:8] [8: http://www.budde.com.au/Research/Australia-National-Broadband-Network-Fixed-Wireless-and-Satellite-Networks.html#sthash.5LEoP35N.dpu] New high-throughput broadband satellites can deliver speeds of up to 25 Mbps, making them a good alternative to other terrestrial infrastructure. In Canada, Xplornet is offering this type of satellite service with two such satellites in orbit and two more on order.

Rogers believes that the competitive market will continue to narrow the gap between Canadians with access to high-speed Internet services and Canadians without such access.
[bookmark: _Toc424630235]4.0 Market forces ensure basic services are accessible and affordable

Competition in the Canadian telecommunications market is widespread and vigorous. This is true not only for the provision of discretionary telecommunications services - but also for basic services. This competition is providing technology options for consumers, as well as price and service feature options. Canadians take advantage of these choices and select the carrier providing the service that best suits their requirements. Regulatory intervention is not required.

The delivery of basic local telephone service has changed substantially, providing consumers with a range of choices in addition to the traditional wireline local exchange service provided by the incumbent telephone companies. Not only can consumers purchase home phone service from their cable television company or use their mobile wireless service, VoIP services are available from a variety of sources that piggy-back on the high-speed Internet services. Consumers are starting to realize that a broadband connection is all they really need to meet their communications requirements. Today, approximately 40% of households have local telephone service that uses some form of VoIP.[footnoteRef:9] [9: CRTC CMR 2014, Figure 5.2.1, including access-dependent and access-independent local lines.] The fact that 20.4% of Canadians now rely exclusively on mobile wireless service for local telephone service (and do not subscribe to a wireline telephone service) underscores the changes in consumer perception and preferences that have taken place. Forecasts indicate that wireless-only households in Canada could reach 33% by 2017.[footnoteRef:10] For many consumers the wireless smart phone is now a communications centre providing communications and entertainment services, as well as access to all web-based services, rendering the traditional fixed voice service increasingly less relevant. [10: SaskTel Annual Report, 2014, page 36, based on Scotiabank Global Banking and Markets.] There is also extensive competition in the Internet broadband retail services market with two large carriers in each market plus approximately 500 smaller carriers and resellers. With the Commission regulating the wholesale side of this business, resellers have wholesale access to the two main competing networks at regulated rates. In addition, mobile wireless operators provide data services in the areas they serve with four carriers present in most markets. Fixed wireless service providers also provide access in rural and remote areas. This includes the Inukshuk wireless network, which is pushing out service to more rural communities.

Through the Inukshuk network, Rogers, in partnership with Bell Sympatico, is offering a high-quality fixed wireless alternative to rural Canadians and Canadian businesses and consumers in smaller urban centres. This coverage is not limited to areas served by Rogers cable.

Other Canadian fixed wireless companies are doing the same thing, including Bell Canada, TELUS and Xplornet.

Rogers notes the finding by the Commission that providing higher speeds and capacity are limited by the cost of satellite backhaul transport.[footnoteRef:11] The Satellite Inquiry Report, the result of a proceeding to investigate the cost of satellite transport, noted a number of potential solutions, including new technologies, government and private-sector initiatives, and regulatory intervention with respect to C-band satellite.[footnoteRef:12] Based on these findings, as well as further developments from ongoing regulatory processes and investment by government and the private sector, Rogers is of the view that there may not need to be any additional funding support. However, to the extent gaps remain, the focus should be on backhaul transport, as discussed in response to questions 10 and 13 in the Appendix. [11: CRTC Telecom Regulatory Policy 2013-711.] [12: CRTC Satellite Inquiry Report, paragraphs 158, 202-205.] [bookmark: _Toc424630236]4.1 Wireless as a competitive alternative to wireline

The criteria for forbearance of residential local exchange services include the availability of mobile wireless services and the role such services play in providing a viable alternative to wireline. The wireless services market is characterized by three major providers, each operating on a national basis, as well as increasingly important regional providers. More than 99% of Canadians had access to wireless services in 2013.[footnoteRef:13] [13: CRTC CMR 2014, **** 207.] Competition in the industry has increased over the past five years with the appearance of new operators that entered the business after Industry Canada’s 2008 auction of spectrum licences for advanced wireless services (AWS). Subsequent spectrum auctions and regulatory initiatives have also increased the competitive intensity of the market. The presence of typically, at least four mobile service providers further enhances the range of competitive telecommunications choices for consumers.

The rapid proliferation of smartphones and tablets coupled with almost insatiable consumer demand has dramatically increased wireless traffic volumes. Moving forward, the ongoing and costly rollout of 4G LTE networks will increase the speed at which these services are offered, driving demand for data services and smartphones. Demographics tell the tale. In 2013, 60% of households under the age of 35 reported using a cell phone exclusively; up from 39% in 2010 and 26% in 2008.[footnoteRef:14] The penetration rate of smartphones among Canadian households has increased from 14% in 2009 to 62% in 2013. For tablets the rate increased to 39% in 2013[footnoteRef:15] from zero prior to the launch of the Apple iPad in 2010. [14: Ibid.] [15: CRTC CMR 2014, **** 217, Figure 5.5.8.] The local subsidy regime was intended to safeguard the affordability of basic service in high-cost areas. However, with the emergence of more wireline and wireless alternatives, this is not as significant an issue. Low-income households may find it more economical to subscribe to wireless instead of wireline services in some circumstances, particularly considering the additional functionality of mobile phones. An entry level wireless service can be less expensive than wireline, according to the most recent price comparisons report for the Commission.[footnoteRef:16] Many Canadians have chosen to stop paying for fixed local telephone service in order to direct these funds to supplementing their wireless service that provides mobility, data (including video), instant messaging functionality not provided by local telephone service. Past results from the Residential Telephone Service Survey have found that wireless only households are more likely to be lower income households. [16: **** Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions, 2015 Edition, prepared for the CRTC by **** Communications Inc., **** 2015; Figures 1 and 3 for level 1 basket of services and features.] When viewed against the environment described thus far in Rogers’ submission, using the telecommunications regulatory framework to extend subsidies for service to higher cost areas should be considered as a very blunt instrument, one almost guaranteed to produce unintended consequences and economic distortions. Today for example, unemployed residents of economically challenged areas of Toronto, unfairly subsidize the residential local wireline phone bill of the bank managers, the doctors and the lawyers in **** City. Rogers strongly believes that such economic unfairness and distortions should not be extended to other services. To the extent possible, subsidies should be eliminated from the system.

[bookmark: _Toc424630237]4.2 Internet access availability and affordability

In the past, basic telecommunications services primarily provided voice communications. Today, however, access to the Internet is considered by many to be an equally effective and valuable communications medium. Some Internet-based activities, such as email, instant messaging and increasingly, social media websites, can fulfill communications needs that voice conversations might have met. To that extent, these services also provide a means of substitution for voice calls. More direct substitutes include “over the top” VoIP services such as Skype or access-independent VoIP services such as Vonage. Such services allow consumers to use their Internet connection to achieve voice communications, just as traditional wireline telephone services have in the past.

Wireline and wireless based Internet services are available from numerous service providers. The two most common wireline-based service providers are cable providers and incumbent telephone companies. The cable companies offer broadband service over their wireline networks to more than 90% of Canadian households in 2013.[footnoteRef:17] [17: Based on the number of households passed by cable companies’ FTTN service, as indicated in CRTC CMR 2014, Figure 5.1.5, and public financial reports of individual cable companies.] The emergence of wireless broadband adds at least two independent facilities-based competitors to the existing cable and DSL wireline platforms. This brings the number of competing service providers to at least four.

Different broadband technologies such as mobile, wireline and broadband satellites are used to provide high speed Internet to all Canadians. In 2013, over 95% of Canadian households had access to at least 5 Mbps broadband service through the above platforms. [footnoteRef:18] [18: CRTC CMR 2014, **** 193, Figure 5.3.15 Broadband, 5 Mbps availability (percentage of households) (2013).] Standard service pricing is generally uniform throughout a company’s serving territory. As a result, subscribers in more rural areas benefit from the same competitive pricing as in urban areas, even though costs differ. Moreover, competition among service providers contributes to numerous promotional offers that can provide further savings.

The reduction in prices can be seen in the decline in the price of Internet services measured by the price per Mbps. Chart 1 provides a summary of price changes for Rogers’ Internet services between ****, 2010 and ****, 2015 for several service tiers.[footnoteRef:19] All of Rogers’ service tiers have reduced prices per Mbps. [19: Based on non-promotional prices and including applicable fees for the modem.] Chart 1

Rogers Retail Broadband Internet Services
$/Mbps per month
**** ($ per month)
Mbps (download)
$/Mbps
2010
2015
2010
2015
2010
2015
Tier 1
(Lite)
$38.99
$54.49
3
15
$13.00
$3.67
Tier 2
(Express)
$49.99
$64.99
10
30
$5.00
$2.17
Tier 3 (Extreme)
$62.99
$74.99
15
60
$4.20
$1.25
Tier 4
(Extreme Plus)
$74.49
$84.99
25
100
$2.98
$0.85
Tier 5 (Ultimate)
$104.49
$94.99
50
250
$2.09
$0.38

Service speeds have improved dramatically over the past 5 years. For example, Rogers’ most popular tier in 2010, Tier 3, Extreme, had a download speed of 15 Mbps with a price of $62.99. Today, the same download speed is available for Rogers Tier 1 but at a lower price point of $54.99. In 2010, Rogers’ highest-speed offer, Tier 5, Ultimate, had a download speed of 50 Mbps with a price of $104.99. Today, the most comparable service is Rogers Tier 3 service with a download speed of 60 Mbps, with an upstream speed 5 times faster and a price of $74.99, fully $30 less than in 2010. Rogers’ highest speed offer today has a download speed of 250 Mbps, 5 times greater than in 2010, with an upstream speed 10 times faster and a price of $94.99, $10 lower than in 2010.

Looked at another way, at the extremes in 2010, Rogers Tier 1 service offered a download speed of 3 Mbps and an upload speed of 256 Kbps. The Tier 1 service now offers a download speed of 15 Mbps and an upload speed of 1 Mbps. Rogers Tier 5 service has increased download speeds from 50 Mbps in 2010 to 250 Mbps in 2015. Upload speeds have increased from 2 to 20 Mbps.

Rogers’ enormous investments in its local distribution plant and the deployment of DOCSIS 3.0 in cable networks have been key to delivering these higher tiers. And Rogers is continuing to deploy even more advanced technologies. Rogers’ top two tiers now include unlimited usage, while its other tiers have increased the monthly usage included in the service price by at least 100%.

The telephone companies have also increased the speeds of their service, particularly in the past few months. As of July 2015, the fastest speeds offered by these companies in most major communities were 50 to 100 Mbps, with faster services available in certain areas. For example, some locations served by Bell Aliant’s fibre optic service already can receive speeds of up to 450 Mbps, while those served by SaskTel’s fibre optic service can receive speeds of up to 260 Mbps. Bell Canada has recently announced the introduction of a new Gigabit Internet Service in major Canadian cities with speeds of up to 1000 Mbps by 2016.[footnoteRef:20] [20: The Wire Report, **** 25, 2015.] Speeds of up 150 Mbps are available in some areas served by the wireless networks of Rogers, Bell and TELUS. Ongoing upgrades to the wireless platform will further enhance download speed. **** Term Evolution (LTE) - Advanced promises more significant increases in both downstream and upstream speeds, with theoretical top speeds of more than 250 Mbps downstream.

The take-up of wireless broadband by consumers has the potential to function as a substitute for wireline broadband services, not unlike what has already been observed for voice services. The monthly price for Rogers’ wireless broadband hub-based service, for example, ranges from $60 to $145 per month for 5 GB and 100GB respectively with advertised download speeds of up to 50 Mbps.[footnoteRef:21] Rogers wireless subscribers on its LTE network also have access to mobile hotspot service that can support download speeds ranging from 12 Mbps to 40 Mbps. The majority of Canadian Internet subscribers rely on services that have advertised download speeds comparable to these speeds.[footnoteRef:22] A share of these subscribers have usage profiles that would make it economical to consider a wireless Internet service as an alternative, even without considering the added utility of service mobility. [21: http://www.rogers.com/web/content/mobile-plans. Prices based on plans for heavier usage. There are intermediate steps of different volumes and rates for subscribers with varying levels of data usage, and additional charges of $5GB apply for usage in excess of 10GB.] [22: CRTC, Communications Monitoring Report 2014, Table 5.3.10 indicates that 32.8% of ISP residential customers have subscriptions with download speeds of 5 to 9 Mbps and a further 56.9% subscribe to services with download speeds greater than 9 Mbps ] Only some consumers need to view wireless broadband as a substitute in order to exert competitive market pressure in the wireline broadband market.[footnoteRef:23] The widespread availability of wireless Internet services offering speeds comparable to the most popular wireline services increases the potential for some level of substitution to occur. [23: See for example the presentation by **** Schwartz, “Remarks on Broadband Competition and Access Regulation,” FCC Workshop on Economic Issues in Broadband Competition, October 9, 2009, in which he makes the following points: “wireless competition [is] potentially more important:…for mobile to constrain fixed we don’t need all users to view them as good substitutes – only enough users on the margins.” The presentation is available at: http://www.broadband.gov/ws_economic_issues.html.] [bookmark: _Toc424630238]5.0 Government initiatives addressing Internet availability

Over the last decade there have been many federal and provincial government sponsored initiatives directed at expanding the availability of broadband services. Connecting Canadians is one such program and will help households in rural and remote areas get access to high-speed Internet and participate in the digital economy. The Government will invest up to $305 million beginning in 2015 to extend and enhance services at speeds of 5 Mbps or greater to a targeted 356,000 households by the end of 2017.[footnoteRef:24] [24: Industry Canada News Release, High-Speed Internet Coming to Rural Canada, May 20, 2015.] There is no requirement for additional government or regulatory intervention at this time. Rather, monitoring of unserved areas should continue, with a full reassessment in 2018 when most current government-supported projects will be completed. This will minimize the risk of unnecessary wasteful duplication, unfair taxation on consumers and increasing inefficient subsidies that would serve to distort market forces.

Several initiatives have been taken by the government to increase the Internet penetration and accessibility for the Canadians through the satellite platform. These initiatives are summarized in the Satellite Inquiry Report, October 2014, Appendix D, Part A.

[bookmark: _Toc424630239]5.1 High tech companies are racing to bring new technologies to market

The world is not standing still. The question of how to provide broadband access to rural and remote areas at low prices is occupying some of the best minds and largest technology companies in the world. The most promising developments in this area are based on new satellite technologies that deliver higher speeds and lower delays than the system of satellites currently used for rural service in Canada.

In December 2014, O3b Networks completed the launch of a system of 12 satellites orbiting at an altitude of 8,000 kilometer (relatively low compared to the 42,000 kilometer typical of existing satellites servicing Canada), which will provide Internet and LTE backhaul services. O3b Networks’ business plan targets "the other 3 billion" people world-wide without access to Internet service, and has the potential to deliver service to much of Canada; although near-term plans are focused on regions nearer the equator. Future projects using satellites orbiting over the poles at even lower altitudes present great potential for Canada. OneWeb, whose backers include **** Network Systems, Intelsat, QUALCOMM, Virgin Group, Bharti, and Coca Cola, is working to deploy a 680 satellite system in 1,000 kilometer polar orbits to service aircraft, service providers and end-consumers in 2019.

Space X, a private sector rocket company providing launch services to NASA and commercial satellite operators, is exploring the development of a 6,000 satellite polar orbit system with plans for prototype testing beginning in 2016. Beyond satellite, entrepreneurial companies are experimenting with aerial wireless platforms to provide remote communications. These include aircraft-based relay systems, most famously Project Titan - a Google project that uses solar-powered drones to provide high-speed Internet to remote areas. Project **** is another Google-backed project that utilizes high altitude balloons to relay LTE cellular signals. Other similar projects are being studied by other companies. The possible success of one or more of these projects over the next few years should not be ruled out.

[bookmark: _Toc424630240]6.0 Regulatory Reform in an Era of Convergence
[bookmark: _Toc424630241]6.1 The Current Basic Services Regime
The basic service objective consists of the following service elements:
Individual line local touch-tone service;
Capability to connect to the Internet via low-speed data transmission at local rates;
Access to the long distance network, operator/directory assistance services, enhanced calling features and privacy protection features, emergency services, as well as voice message relay service; and
A printed copy of the current local telephone directory upon request.

The basic service objective currently includes the capability to connect to the Internet, albeit at much lower speeds (e.g., 64 Kbps) compared to the target speed of 5 Mbps established as the goal for 2015 in Telecom Regulatory Policy 2011-291. The Internet speed that was chosen at that time as part of the basic service obligation was taken in recognition of the fact that higher broadband speeds had already become “the prevalent means of accessing the Internet.”[footnoteRef:25] [25: CRTC Telecom Regulatory Policy 2011-291, paragraph 55.] Currently, the basic service objective applies to the ILECs only in local exchanges where the Commission continues to regulate the rates, terms and conditions of wireline local telephone services. These consist of (i) unlimited local calling at a flat monthly rate, subject to a price ceiling, and (ii) access to a choice of long distance service provider. The ILECs are permitted to meet this obligation by offering mobile wireless voice services.

The basic service provided by ILECs is subject to the contribution regime when provided in high-cost serving areas (HCSAs). This is because these carriers have the obligation to serve. Prior to Telecom Regulatory Policy CRTC 2011-291, any carrier providing a local service that met the basic local service conditions was permitted to receive the subsidy in HCSAs, if selected by a customer to provide its service. The contribution was “portable” in this respect.

[bookmark: _Toc424630242]6.2 The Framework for Reform

Section 7 of the Telecommunications Act sets forth the Canadian telecommunications policy. These objectives make it clear that the Canadian telecommunications system should extend to all Canadians regardless of where they live in Canada; it must respond to Canadian’s economic and social requirements; it must be affordable and of high quality.

The Canadian telecommunications policy objectives also comment on how the Commission is to regulate telecommunications services. The Commission is to foster increased reliance on market forces for the provision of telecommunications services and ensure that regulation, where required, is efficient and effective. This means that regulation is not axiomatic. The need for regulation must be assessed against the strength of market forces.

The Governor in Council shed further light on how the Canadian policy objectives are to be implemented by the Commission in its, “Order issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives” (the Direction). The Direction requires the Commission to fulfill the objectives of the Telecommunications Act by relying on “market forces to the maximum extent feasible”. When relying on regulation, the Direction requires the Commission to “…use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives.”A further requirement of the Direction is “to use only tariff approval mechanisms that are as minimally intrusive and as minimally onerous as possible”. The Commission is also required “to continue to explore and implement new approaches for streamlining its regulatory process”.

The basic service obligation should be reviewed based on the general framework established by the Direction. The same is true of any new proposals to extend the subsidy regime to additional services, such as broadband access services. The goal should be to streamline the existing regime but not to extend regulation to new services unless competitive market forces are found to be incapable of addressing any deficiencies. A minimalist approach should be taken with respect to any new regulatory measures that are found to be necessary.

[bookmark: _Toc424630243]6.3 Proposed Changes to the Basic Services Regime

Rogers is of the view that the evolution in the social and economic requirements of Canadians warrants changes to the basic service objective. The changes should incorporate a higher-speed connection to the Internet, and as part of that shift, recognize that voice communications can be delivered wherever such a connection is present.

[bookmark: _Toc424630069][bookmark: _Toc424630129]6.3.1 Internet Connectivity at 5 Mbps Downstream and 1 Mbps Upstream

Rogers supports a revision to the basic service standard to include broadband access at a speed of 5 Mbps downstream and 1 Mbps upstream, as a minimum. This is consistent with the evolution in the market as well as the Government’s current service level to which service providers must commit to be eligible for funding. It was used as the standard in the Government’s most recent funding initiative in 2015.

Broadband Internet service with at least 5 Mbps downstream enables the use of key Internet applications such as web browsing, email, VoIP and video streaming in at least standard definition. In addition, setting the basic service objective to require Internet connectivity at 5/1 Mbps could also replace the requirements related to voice communications.

Canadians are increasingly using a variety of technologies to communicate. This includes VoIP service provided over broadband services. Since more than 98% of Canadians have access to high-speed Internet services, it is possible for them to rely on this form of access for their telephone service. Moreover, this service is widely available from at least two independent platforms, ensuring competitive supply.[footnoteRef:26] [26: CRTC CMR 2014, Table 5.3.12.] The Commission has tied the subsidy to ILEC service over the past 5 years based on the definition of basic telecom service and the determination that only the ILEC has an obligation to deliver that service. However, if market forces are robust enough to offer consumers a choice in their home region, the subsidy ought not to be tied to the ILECs’ service.

Canadians should be able to choose the technology and the supplier they wish to use for their telephone service. For many Canadians, it might make sense to use their mobile phone as their local service, or their broadband access, in lieu of a local wireline service. The subsidy system should not direct them towards an older technology or dictate what service and what supplier they need. If the Commission wishes to harness the power of the competitive market, and encourage innovation in the Canadian market, it should free Canadians up in high cost areas and let them choose their carrier and their form of communications service. Rogers believes that the circumstances exist to transition from the current basic service framework and phase-out the existing subsidy regime for local telephone service.

The question is whether the proposed change in the basic service objective justifies a departure from the Commission’s existing regulatory framework for Internet services, which has relied on market forces except in very limited circumstances.[footnoteRef:27] This in turn depends on how the industry is performing in extending this service to all Canadians and in meeting the basic service objective Rogers has proposed regarding speeds for Internet access. Rogers believes that the revised basic service objective can be delivered to the vast majority of Canadians today. [27: See for example, Telecom Regulatory Policy CRTC 2009-657, Review of Internet traffic management practice of ISPs; and various CRTC decisions respecting regulated rates for wholesale access to ILEC and cable carriers’ Internet access services.] [bookmark: _Toc424630070][bookmark: _Toc424630130]6.3.2 A Prospective Target for Internet of 25 Mbps Downstream and 1 Mbps Upstream

Rogers notes that adopting a basic service objective that requires Internet connectivity to be provided at a minimum speed of 5/1 Mbps does not preclude the Commission from establishing a target goal for the future that aims for higher speed services. Just as in Telecom Regulatory Policy 2011-291 when the basic service objective required only low-speed Internet connectivity while establishing a target of 5/1 Mbps for 2015, the Commission could adopt 5/1 Mbps as the basic service objective while a target speed for 2020 could be set at a higher level, for example, at 25/1 Mbps.

The standard in the basic service objective represents a minimum level of service today that could be eligible for subsidy if warranted. Service providers seeking a subsidy would need to commit to delivering service that achieved no less than that minimum. At the same time, a higher speed goal for 2020 would signal to ISPs the Commission’s goal for the future level of service. The competitive market conditions that largely delivered on the Commission’s goal set in Telecom Regulatory Policy 2011-291 will drive the industry towards a new goal for 2020.

[bookmark: _Toc424630071][bookmark: _Toc424630131]6.3.3 A New Subsidy is Not Required for Broadband

In Rogers’ view, competition, together with advances in technology, are on the verge of bringing affordable, high-speed Internet services to all Canadians, regardless of where they live. Networks are continuously being extended and upgraded and will increasingly bring accessible and affordable broadband Internet to previously underserved or unserved areas. Broadband satellites are filling in the gaps in terrestrial coverage.

All areas in Canada are already accessible through a combination of wireline, wireless mobile, fixed wireless and satellite services. The only question really is whether these services are affordable - or whether some sort of subsidy is required to finish the job to achieve the basic service objective.

According to the Satellite Inquiry Report, there are roughly 18,000 households without access to broadband Internet service at 5/1 Mbps speeds in satellite-dependent communities across Canada’s northern regions.[footnoteRef:28] The Report acknowledges that these communities will continue to be reliant on satellite facilities for telecommunications services for the foreseeable future. As noted in that Report, access to transport services at just and reasonable rates is a key factor in delivering affordable access to such speeds. [28: Yukon, Northwest Territories, Nunavut, and remote areas of British Columbia, Saskatchewan, Manitoba, Ontario and Quebec.] Much has been achieved already as a result of the efforts of the telecommunications industry and a number of government-funded subsidy programs carefully targeted to unserved areas. The fact that some of the remotest communities have yet to receive 5/1 Mbps service does not however mean that they will not receive them under the existing regulatory framework, or through ongoing initiatives of the Government and the private sector. Satellite companies like Xplornet are continuing to deploy broadband satellites capable of bringing the targeted levels of service to these communities and capable of exceeding these levels, if consumer demand is there. Xplornet has also announced the launch of two additional high throughput satellites in 2016. Rogers hopes to get clarity on the coverage of these satellites during this proceeding. And newer technologies such as described in Section 5.1 above are looming on the horizon.

The Government of Canada has also announced that its Economic Action Plan for Canada will be subsidizing the extension of service to 365,000 more households in the first round of partnership approvals. The money has now been committed to do this and the suppliers have been selected in a competitive process. The Commission will want to have a thorough understanding of where these funds are being spent in order to assess the magnitude of any deficiency.

Minister **** has indicated that Industry Canada received over 300 applications to the Connecting Canadians program from ISPs across Canada. The program will cover 75,000 more households than was originally projected at an average speed of over 5 Mbps. According to Minister ****, by Canada’s 150th birthday in 2017, over 98 percent of Canadian households will be able to subscribe to new or improved high-speed Internet services.[footnoteRef:29] [29: High-Speed Internet Coming to Rural Canada, May 20, 2015, Industry Canada News Release.] Satellite-based Internet services will play an important role in achieving this goal. Notably, it was recently announced that SSi Micro Ltd. has been awarded $35 million to extend and enhance its satellite-based Internet service to 8,600 homes in Nunavut beginning in 2016.

Rogers does not believe that this is a static situation. In addition to this Government subsidy program that has yet to have its full impact felt, all carriers continue to extend their services. While there may still be Canadians without access to high-speed broadband Internet services at affordable prices, this number continues to shrink and will in all likelihood disappear over the next few years. Further Government subsidy programs will likely continue to be targeted to improving services to various regions of Canada that might be underserved today.

The fact that 300 ISPs responded to Industry Canada’s last funding program is itself telling of the amount of facilities-based competitors in the market today. These are all companies that were proposing to build networks to serve areas that do not have adequate coverage today. The fact that they are undertaking to serve 75,000 more households than were projected by Industry Canada also demonstrates that they are competing for these subsidies by either offering more coverage than was in the Request For Proposal, or by bidding a lower amount to receive the subsidy.

By injecting competition into the bidding process to receive government subsidies, Industry Canada is harnessing the energy of the competitive market and giving all qualified carriers the opportunity to bid on subsidies. In areas where subsidies are required to extend service, this process is the fairest and produces the best value for the public funds being spent on the project.

Contrast this with the Commission’s last attempt to subsidize extension of Internet service in the “Deferral Account” proceedings. That approach made the funds only available to the ILECs in a non-competitive process. It resulted in no competitive checks on the amount of money being spent and ended up paying for the ILECs’ extension of wireless service into many regions that already had service. Bell Canada’s deployment of the network extensions proceeded at a snail’s pace and is still not completed despite the passage of 5 years.

The deferral account approach resulted in unfair competition as the ILECs were subsidized to compete with other ISPs. This distorted the competitive market and resulted in uneconomic entry by the ILECs and discouraged entry by other parties. It basically put competitors’ investment decisions on hold for a number of years and slowed the process of extending service down.

In these circumstances, the Commission would be doing a disservice to Canadians by introducing a new subsidy system for broadband Internet services, and especially for service speeds above those established in the basic service objective. It should heed the requirements of the Policy Direction and “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives”. It should leave subsidy programs to governments which have established processes, as well as the knowledge and capacity to target funds more accurately, and with less economic distortions than the Commission.

If this proceeding provides the Commission with clear evidence that market forces, technological developments and existing and announced government support programs will not achieve the requirements of the basic service objective, it should consider redirecting the existing subsidy for local telephone service towards achieving this objective in a manner that is both technologically neutral and competitively neutral, that is, does not favour or hinder any particular class of carrier over another.

[bookmark: _Toc424630072][bookmark: _Toc424630132]6.3.4 No Obligation to Serve is required
Rogers does not believe there should be an obligation to serve. Rogers submits that in almost all cases, the communications industry will chose to provide service in response to consumer demand and competitive market forces.

Rogers submits that voice services included in the current basic service objective can be provided to any customer where there is a 5/1 Mbps high-speed Internet connection, either as access-dependent or access-independent VoIP service. The updated basic service objective should explicitly recognize that the functionality currently provided by local and long distance telephone services can be provided over such a broadband Internet service, and allow service providers to meet the basic service objective using this connection.

Rogers submits that once full access to high-speed broadband is achieved, the Commission can transition away from its current regulatory model which is centred on the provision of dial-tone as the foundation for basic service, towards a new world where Internet connectivity is the foundation and voice communications will be available wherever there is broadband access. Ultimately, no other service needs to be defined as basic telecommunications services. Rogers believes that the Commission should set this as an objective in the current proceeding and establish a transition period to achieve it within two years of concluding this proceeding.

Should a subsidy regime be established for broadband service, it should not be limited to subsidizing the ILECs. An alternative mechanism would consider competitive bids, similar to the open approach used to award Government funding. Competing for the subsidy should be open to all providers and the entity requiring the least subsidy from the fund would be selected as the winning bidder. In addition, consideration should be given to funding just backhaul transport facilities on a location-by-location basis. Information already provided to the Commission has identified lack of access to backhaul transport facilities at reasonable cost as a key limiter in delivering affordable higher-speed Internet services.

For all the reasons above, Rogers submits that the contribution collection mechanism should be eliminated except for the funding of Video Relay Service (VRS) as ordered by the Commission in Telecom Regulatory Policy CRTC 2014-187. If a subsidy regime is directed to broadband Internet service, Rogers suggests that details such as the scope of contributing services and eligibility criteria be developed in a follow-up process based on key principles established as a result of this proceeding.

Rogers Intervention
TNC 2015-134
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Rogers Intervention
TNC 2015-134
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[bookmark: _Toc424630244]Appendix - Responses to Questions in Appendix B of TNC 2015-134
Canadians’ evolving needs for telecommunications services
1. Canadians are using telecommunications services to fulfill many social, economic, and cultural needs in today’s digital economy.

a) Explain how telecommunications services are used to meet these needs. For example, uses may include e-commerce (i.e. the online purchase and trade of products or services), e-banking and/or telephone banking, e-health or telehealth services, telework, and distance education. Which of these uses of telecommunications services are the most important to ensure that Canadians meaningfully participate in the digital economy?

Each of the services listed above is important. No doubt some important services that Canadians will need have not even been invented yet. More important than forecasting what services are or will be most important is ensuring that Canada has advanced, robust, reliable and accessible networks that will both provide Canadians access to these services and create an environment where Canadian themselves will play a key role in developing these applications. Rogers has always been a world leader in deploying advanced networks and is committed to maintaining its leadership role.

The ability to use an advanced broadband network is the key objective as this will enable all services and applications many of which are critical to meaningful participation in the digital economy. Rogers believes that its proposed basic service objective fulfills this goal. Rogers submits that consumers, and not governments, should decide how they wish to participate in the digital economy secure in the knowledge that world-leading broadband networks are available to them. It is not the role of government to choose.

b) Explain which telecommunications services are most important to support these needs and uses. What characteristics (e.g. capacity, mobility, high speed, and low latency) should these telecommunications services have?
All wireline and wireless voice telephony and Internet services are important. The circumstance of the needs and use dictate which is the best service to use at the time.

Every service and every characteristic is also important. What is important for one individual’s use may not be as important for another. For example, video streaming has different requirements than fleet tracking but both of these applications play roles in the digital economy and each requires different service characteristics. Networks must, as well as possible, provide all these characteristics.

Rogers notes that the 2014 CRTC Communications Monitoring Report (CMR) provides a good explanation of the Internet speeds required by various applications on pages 188-192 and in particular in Figure 5.3.8 Popular Internet applications – Bandwidth requirements (reproduced below).

[image: ]

c) Identify and explain the barriers that limit or prevent Canadians from meaningfully participating in the digital economy (e.g. availability, quality, price, digital literacy, and concerns related to privacy and security). Identify which segments of the Canadian population are experiencing such barriers.

The vast majority of Canadians have world-leading access to the digital economy over the telecom networks built in Canada. The cost of building terrestrial services in the very remote, far **** and other remote locations is the principle barrier. These costs lead to unavailability or high pricing or slow speeds, as recognized in Telecom Regulatory Policy 2013-711 and the Satellite Inquiry Report.

Canada has world class networks by any measure. Canadians are enthusiastic adopters with very high wireless and wireline usage. Unfortunately, the Information Technology Association of Canada (ITAC) has identified that Canadian businesses, especially **** and Medium businesses that form a very large part of the economy, have been poor adopters of technology.[footnoteRef:30] This low adoption has caused Canada’s productivity levels to be lower than the United States and held Canada back. The government should address this structural issue to enhance productivity, competitiveness and economic growth. [30: ‘Canada’s Networks and the Digital Economy’, Information Technology Association of Canada (ITAC), November 13, 2013, http://itac.ca/blog/itac-releases-canadas-networks-and-the-digital-economy-study/]

d) Identify and explain any enablers that allow Canadians to meaningfully participate in the digital economy (e.g. connected devices and applications).

Canada has some of the most advanced networks in the world. Rogers in particular has leading edge networks in both cable and wireless with a tradition of pioneering new technologies such as DOCSIS, GSM and LTE, that have driven the ILECs to advance their networks and technologies in order to compete effectively. This competitive technology and network dynamic is the foundation of Canada’s world-leading networks.

e) As Canada’s digital economy continues to grow and evolve during the next 5 to 10 years, which telecommunications services are Canadians expected to need to participate meaningfully? Specify how your responses to parts a) through d) above would change based on your answer.

As explained in our response to question 1 b), every service is important - wireline and wireless voice telephony and Internet services. The key to success for Canada is having advanced networks that can support all nature of services including those that may come in the future. World-leading networks will enable Canadian consumers and businesses to obtain the services they need and desire.

2. The Commission’s current target speeds for broadband Internet access service are a minimum of 5 Mbps download and 1 Mbps upload, based on uses that consumers should reasonably expect to make of the Internet. Are these target speeds sufficient to meet the minimum needs of Canadians today? If not, what should the new targets be and what time frame would be reasonable to achieve these new targets?

[bookmark: _GoBack]As evidenced in the diagram provided in response to 1. b), a download speed of 5 Mbps permits high-definition video streaming at 1080p and a host of less bandwidth demanding applications. Rogers submits that this speed is sufficient for the basic needs of Canadians. This speed will also support multiple simultaneous use of basic needs such as email, accessing government services, web-page browsing, audio streaming and standard definition video streaming. Rogers submits that 5/1 Mbps represents a minimum speed for the basic service objective, based on these considerations.

Rogers notes that adopting a basic service objective that requires Internet connectivity to be provided at a minimum speed of 5/1 Mbps does not preclude the Commission from establishing a target goal for the future that aims for higher speed services. Just as in Telecom Regulatory Policy 2011-291 when the basic service objective required only low-speed Internet connectivity while establishing a target of 5/1 Mbps for 2015, the Commission could adopt 5/1 Mbps as the basic service objective while a target speed for 2020 could be set at a higher level, for example, at 25/1 Mbps.

The Commission’s role regarding access to basic telecommunications services
3. Which services should be considered by the Commission as basic telecommunications services necessary for Canadians to be able to meaningfully participate in the digital economy? Explain why.

a) Explain whether the underlying technology (e.g. cable, digital subscriber line, fibre, fixed wireless, mobile wireless, and satellite technology) should be a factor in defining whether a telecommunications service should be considered a basic service.

Canadians should have access to voice and Internet service. The underlying technology (e.g. cable, digital subscriber line, fibre, fixed wireless, mobile wireless, and satellite technology) should not be a factor in defining whether a telecommunications service should be considered a basic service.

b) Identify, with supporting rationale, the terms, conditions, and service characteristics under which basic telecommunications services should be provided. Should any obligations be placed on the provider(s) of these services? If so, what obligations and on which service provider(s)?

Where services are provided in a competitive market, the Commission should forbear from rate regulation of the service. For basic local telephone service, the Commission has regulated the terms, conditions and service characteristics in regard to such items as interconnection, 9-1-1, Message Relay, law enforcement access, number portability, and others. The Commission should continue regulating such items. Where forbearance has not been granted, the Commission should apply its regulatory processes and requirements to rates as it has historically. Such rate regulation has only applied to the ILECs and Rogers submits that this should continue to be the case. Assuming high-speed Internet is incorporated in the basic service objective, and thus mandated in higher cost locations, and it is determined that subsidies should be provided, the subsidy and any restrictions on the maximum price should bear in mind the higher costs of service. The customer should bear a reasonable portion of the higher cost before subsidies come into play.

c) What should be the prices for basic telecommunications services and how should these prices be determined? Provide rationale to support your answer.

Currently, the Commission has established a price ceiling of $30 per month in high-cost serving areas for local telephone service. For purposes of calculating the subsidy, the Commission has estimated that providers receive an additional $5 per month from optional services for total revenue of $35 per month for a high-cost subscriber. The price ceiling and associated subsidies were based on detailed cost studies. As explained elsewhere, Rogers believes that local phone service subsidies should be eliminated. In the alternative, if the local telephone service subsidy structure remains in place, the subsidy should be redirected to broadband Internet service in line with its proposal for the basic service objective as discussed further in response to Question 10. Voice communications can be provided wherever there is Internet connectivity provided as part of the basic service, either as access-dependent or access-independent VoIP.

4. Can market forces and government funding be relied on to ensure that all Canadians have access to basic telecommunications services? What are the roles of the private sector and the various levels of government (federal, provincial, territorial, and municipal) in ensuring that investment in telecommunications infrastructure results in the availability of modern telecommunications services to all Canadians?

The Telecommunications Act and the Policy Direction support competitive forces. Government intervention should be tightly targeted and only occur where benefits outweigh the costs and such intervention should be minimally intrusive to the competitive market.

Market forces should be relied upon to the greatest extent possible and they can be in almost all instances in Canada. The private sector has done an outstanding job in deploying services to the vast majority of Canadians.

As they have been doing, governments should step in to assist only those sparsely populated, remote regions where there is no reasonable prospect of an economic case for investment. Governments must assist with funding from general revenues for very remote locations to complement private funding. Levying industry-specific taxes to fund subsidies is inefficient and produces economic distortions impairing Canadian productivity. If Canada is to be successful in an increasingly competitive world it must improve its productivity and this can only occur if resources are deployed in an economic manner. Resources will only be deployed efficiently if economic principles and proper economic signals and incentives are in place. Any subsidies that remain in place should reflect an equitable sharing of the additional cost between the subscriber and those who fund the subsidy program.

5. What should be the Commission’s role in ensuring the availability of basic telecommunications services to all Canadians? What action, if any, should the Commission take where Canadians do not have access to telecommunications services that are considered to be basic services?

The Commission should rely upon market forces to the greatest extent possible. If this proceeding provides the Commission with clear evidence that market forces, technological developments and existing and announced government support programs will not achieve the requirements of the basic service objective, it should consider redirecting the existing subsidy for local telephone service towards achieving this objective. It would be more economically efficient for the Commission to encourage government to provide the necessary funding. However, in the absence of additional funding from government, the Commission should develop a transparent subsidy regime that will achieve the requirements of the basic service objective in a manner that is both technologically neutral and competitively neutral, that is, does not favour or hinder any particular class of carrier over another.

6. In Telecom Regulatory Policy 2011-291, the Commission stated that it would closely monitor developments in the industry regarding the achievement of its broadband Internet target speeds to determine whether regulatory intervention may be needed. What action, if any, should the Commission take in cases where its target speeds will not be achieved by the end of 2015?

The Commission should be pleased that its decision in 2011 not to apply regulation to the Internet industry in respect of speeds and pricing has proven wise. Private industry has risen to the challenge and with the assistance of government programs will have achieved the targets by the end of 2015 for almost all Canadians. Rogers proposes that the basic service objective be revised to require Internet connectivity at 5 Mbps downstream and 1Mbps upstream which is more than sufficient for multiple simultaneous use of basic applications such as email, accessing government services, web-page browsing, audio streaming and standard definition video streaming as explained in the response to question 2 above.

7. In Telecom Regulatory Policy 2013-711, the Commission stated its intention to establish a mechanism, as required, in Northwestel’s operating territory to support the provision of modern telecommunications services. Such a mechanism would fund capital infrastructure investment in transport facilities (e.g. fibre, microwave, and satellite), as well as the cost of maintaining and enhancing these facilities. The Commission considered that this mechanism should complement, and not replace, other investments from the private sector and governments, including public-private partnerships.

a) Explain, with supporting rationale, whether there is a need for the Commission to establish such a mechanism in Northwestel’s operating territory. As well, explain whether there is a need for such a mechanism in other regions of Canada.

Rogers submits that the Commission should consider in this proceeding whether such a mechanism is required in Northwestel’s operating territory, based on updated submissions by Northwestel and other service providers targeting service in its territory.

The Commission should take into consideration that new technologies are being deployed, such as by Xplornet, and being developed in the case of alternative new satellite technologies, as well as other regulatory initiatives such as those under consideration in Telecom Notice of Consultation 2015-133. These initiatives could address backhaul transport services, already identified by the Commission as one of the key limiters in delivering affordable higher-speed Internet services.

Once further information has been gathered on these matters, the Commission and interested parties should be in a better position to consider what, if any subsidy mechanisms are required for Northwestel.
b) What impact would the establishment of such a mechanism have on private sector investment and government programs to fund the provision of modern telecommunications services?
Rogers submits that the establishment of such a mechanism could have a negative impact by interfering with pricing signals for private sector investment, and it leads to the uneconomic deployment of resources.
Regulatory measures for basic telecommunications services
8. What changes, if any, should be made to the obligation to serve and the basic service objective?

Rogers submits that the basic service objective should be revised to include high-speed Internet connectivity at speeds of 5/1 Mbps, at a minimum. This level of service supports current basic applications and also could replace the current low-speed Internet service and encompass voice communications as a basic service objective. Rogers does not believe there should be an obligation to serve. Rogers submits that in almost all cases, the communications industry will chose to provide service in response to consumer demand and competitive market forces.

9. Should broadband Internet service be defined as a basic telecommunications service? What other services, if any, should be defined as basic telecommunications services?

Rogers submits that broadband Internet service should be defined as a basic telecommunications services and provided as part of the basic service objective at speeds of 5/1 Mbps, at a minimum. As explained above, Rogers submits that the voice services included in the current basic service objective can be provided to any customer where there is a 5/1 Mbps high-speed Internet connection. The updated basic service objective should explicitly recognize that the functionality currently provided by local and long distance telephone services can be provided over such a broadband Internet service, and allow for service providers to meet the basic service objective using this connection. Ultimately, no other service needs to be defined as basic telecommunications services.

10. What changes, if any, should be made to the existing local service subsidy regime? What resulting changes, if any, would be required to the existing regulatory frameworks (e.g. price cap regimes)?

As explained above in response to question 2 c), Rogers submits that if the existing local service subsidy funds continue to be collected, the funds should be redirected to support broadband Internet service included in the basic service objective. The necessary cost information to address the quantum of any subsidy for the basic service objective, if required, should be assessed in a follow-up process based on key principles established as the result of this proceeding.

Also as explained above, Rogers does not believe that an industry-funded subsidy program is either necessary or desirable.

Should a subsidy regime be established for broadband service, it should not be limited to subsidizing the ILECs. An alternative mechanism would consider competitive bids, similar to the open approach used to award Government funding. Competing for the subsidy should be open to all providers and the entity requiring the least subsidy from the fund would be selected as the winning bidder. In addition, consideration should be given to funding just backhaul transport facilities on a location-by-location basis. Information already provided to the Commission has identified access to backhaul transport facilities at reasonable cost as a key limiter in delivering affordable higher-speed Internet services.

11. What changes, if any, should be made to the contribution collection mechanism? Your response should address, with supporting rationale, which TSPs should be required to contribute to the NCF, which revenues should be contribution-eligible and which revenues, if any, should be excluded from the calculation of contribution-eligible revenues.

For all the reasons above, Rogers submits that the contribution collection mechanism should be eliminated except for the funding of Video Relay Service (VRS) as ordered by the Commission in Telecom Regulatory Policy CRTC 2014-187. If a subsidy regime is directed to broadband Internet service then broadband Internet revenue should be included in contribution-eligible revenues. Rogers suggests that such details be developed in a follow-up process based on key principles established as a result of this proceeding.

12. Should some or all services that are considered to be basic telecommunications services be subsidized? Explain, with supporting details, which services should be subsidized and under what circumstances.

As explained above, Rogers does not support subsidies from an industry-specific fund. Rogers submits that the vast majority of Canadians receive broadband Internet service without subsidies – in 2013, 94% of households having access to 5/1 Mbps – with new technologies emerging that will increase both availability and speed while decreasing costs. To the extent that support has been required, governments have been providing funding for broadband Internet services from general revenues which is the correct approach based on sound economic principles.

To summarize, Rogers believes that only broadband Internet service needs to be included in the basic service objective, thus defining the scope of services that should be subsidized. Even at that, Rogers believes little subsidy is required based on current market conditions. See also the response to Question 5.

13. If there is a need to establish a new funding mechanism to support the provision of modern telecommunications services, describe how this mechanism would operate. Your response should address the mechanism described in Telecom Regulatory Policy 2013-711 for transport services and/or any other mechanism necessary to support modern telecommunications services across Canada. Your response should also address, but not necessarily be limited to, the following questions:

At the outset, Rogers believes that the specific elements of a new funding mechanism should be determined through a follow-up process based on the key principles that will be established as a result of this proceeding. The scope and size of a funding mechanism, as well as the appropriate contributors and recipients will be critically informed by the principles. Notwithstanding this, Rogers offers the following preliminary views on the questions that follow.

a) What types of infrastructure and/or services should be funded?

As explained above to the extent that any service should be funded that service should be broadband Internet service only, as defined by the basic service objective. One option for funding would be to address backhaul transport facilities, as discussed in response to Question 10.

b) In which regions of Canada should funding be provided?
If funding is to be provided it should only be provided in high-cost uneconomic locations that would not otherwise achieve the level of service required by the basic service objective. See also the response to Question 13 d).

c) Which service providers should be eligible to receive funding, and how should eligibility for funding be determined (e.g. only one service provider per area, all service providers that meet certain conditions, wireless service providers, or service providers that win a competitive bidding process)?

To the extent a subsidy is required, Rogers is of the view that the process should be open to all service suppliers regardless of technology, unlike the current funding mechanism that is limited to the ILECs. As discussed in response to Question 10, one alternative would allow for all potential suppliers to participate in a competitive bidding process that would result in only one service provider per area receiving funding.

d) How should the amount of funding be determined (e.g. based on costs to provide service or a competitive bidding process)?

As noted in response to Question 13 c), to the extent a subsidy is required, Rogers is of the view that a competitive bidding process based on an established quality of service and known retail price is the appropriate mechanism. These factors will determine the least-cost subsidy submitted by the winning bidder.

e) What is the appropriate mechanism for distributing funding? For example, should this funding be (i) paid to the service provider based on revenues and costs, or (ii) awarded based on a competitive bidding process?
As discussed in response to Question 13 c), an appropriate mechanism for distributing funding could be based on a competitive bidding process.
f) Should any infrastructure that is funded be available on a wholesale basis and, if so, under what terms and conditions?
Any infrastructure that is funded should be available on a wholesale basis; however, it is imperative that the wholesale rates fully recover the costs of service with an appropriate rate of return that properly reflects risk.
g) Should the Commission set a maximum retail rate for any telecommunications service that is subsidized?

Should the Commission determine that subsidies are appropriate, then, a follow-up process would be the appropriate forum in which to establish the allowable retail rate that potential suppliers would use in their financial analysis underlying their competitive bid for the subsidy.

h) Should this mechanism replace the existing residential local wireline service subsidy? If so, explain how the existing subsidy should be eliminated, including details on any transition period. In addition, explain whether the small ILECs and/or Northwestel should be subject to any special considerations or modifications for this transition period.

Rogers submits that the existing residential local wireline service subsidy should be eliminated for the reasons set out in this submission. Rogers is of the preliminary view that the transition period would need to last for at least one full year following the release of the Commission’s decision in this proceeding before taking effect, assuming no new services are to be subsidized. This is the minimum time necessary given that companies will have already completed their planning and budgets for the upcoming year and would need to adjust to the regulatory change. The widespread availability of broadband Internet services at a level consistent with the basic service objective could also be taken into consideration for determining when to eliminate the subsidy for local wireline service. If in the alternative, the Commission decides to maintain a subsidy, Rogers is of the view that it should be redirected to broadband Internet service as defined by the basic service objective. The timing of the transition for this change will depend on the follow-up process required to establish the terms and conditions for contributors to, and recipients of, such funds.

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