Final Submission : Canadian Network Operators Consortium Inc.

Document Name: 2015-134.223974.2614239.Final Submission (1k15r01!).pdf
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BEFORE THE CANADIAN RADIO-TELEVISION
AND TELECOMMUNICATIONS COMMISSION
IN THE MATTER OF
REVIEW OF BASIC TELECOMMUNICATIONS SERVICES,
TELECOM NOTICE OF CONSULTATION CRTC 2015-134, AS AMENDED
FINAL ARGUMENT
OF CANADIAN NETWORK OPERATORS CONSORTIUM INC.
25 MAY 2016
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TABLE OF CONTENTS

1.0 Introduction .......................................................................................................................... 6 1.1 Background ...................................................................................................................... 6 1.2 Structure of Submission ................................................................................................... 7 2.0 Broadband is a Basic Telecommunications Service ............................................................ 8 3.0 Setting the Appropriate Targets ........................................................................................... 9 4.0 The National Broadband Strategy ...................................................................................... 11 5.0 Funding the National Broadband Strategy ......................................................................... 13 6.0 Affordability of Broadband Services ................................................................................. 15 7.0 Prioritizing the Most Cost-Effective Telecommunications Service Platforms .................. 16 8.0 Terms Associated with the Subsidized Provision of Broadband Internet as a Basic Telecommunications Service ............................................................................................. 18 9.0 The Existing Local Services Framework ........................................................................... 20 10.0 Northwestel’s Operating Territory ..................................................................................... 21 11.0 Changes to the $10 Million Contribution Threshold ......................................................... 22 12.0 Transport Discoverability and Forbearance ....................................................................... 25 13.0 Digital Literacy .................................................................................................................. 26 14.0 Conclusion ......................................................................................................................... 26 1

EXECUTIVE SUMMARY1

ES1. The record reflects a resounding consensus on the importance of broadband access. These services must now be considered basic telecommunications services.

ES2. The ‘needs’ of Canadians include, but are by no means limited to, email, e-commerce, banking, news, social media, VoIP, video-conferencing, telework, distance education, telehealth, access to educational and government tools and certain accessibility features like Video Relay Service. The basic service objective must be defined appropriately to ensure that Canadians have access to these ‘needs’.

ES3. CNOC submits that 10 Mbps D / 3 Mbps U is an appropriate speed target which provides adequate capacity for practical everyday use of ‘needs’ applications. In contrast, continued reliance on the current 5 Mbps D / 1 Mbps U target will not provide sufficient capacity to accommodate the evolving technical demands of basic broadband uses.

ES4. A lower, yet still practical, speed target may be required for high-cost terrestrial and satellite serving areas where 10 Mbps D / 3 Mpbs U is unattainable.

ES5. The Commission should confirm that other broadband service characteristics such as latency, jitter, packet loss and data caps are important. However, the record does contain sufficient information to establish definitive targets for such characteristics. CNOC therefore recommends that the Commission apply regulatory tools such as CISC or the appointment of an Inquiry **** to engage further study of these technical issues in order to arrive at evidence-based determinations.

ES6. A national broadband strategy must be founded on targeted government funding and a robust regulatory framework. The strategy requires a multi-stakeholder approach that includes participation from the Commission, federal, provincial and territorial governments, First Nations and local governments as well as industry. Each stakeholder should have a well-defined role and 1 Capitalized terms in the Executive Summary are defined in the body of the Intervention, with full citations where applicable.

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set of responsibilities. Coordination amongst stakeholders is essential and begins with open and action-oriented communications between the Commission and the federal government.

ES7. The primary responsibility for funding the development of telecommunications network infrastructure rests with the federal government, as it always has. Matching private investments should be required for every dollar of public funds invested in a subsidized broadband deployment.

Provincial and territorial governments should also be encouraged to contribute through the national program or other mechanisms.

ES8. Broadened redistribution of TSP revenues through the NCF is another tool that could, if necessary, assist the funding of a subsidy regime for broadband Internet access deployment.

However, a great degree of caution should be exercised in relying on this approach in light of the significant market distortions that could result from contribution obligations that are not appropriately calibrated.

ES9. Canadian consumers are cost-conscious and have a low tolerance for the kinds of price increases for telecommunications services that expanded contribution mechanisms would inevitably entail.

ES10. The Commission should reject proposals for affordability subsidy mechanisms funded through the NCF. Affordability issues and social assistance programs fall within the domain of the provinces and the territories, who have the appropriate authority, expertise and resources to oversee such programs.

ES11. By offering services at significantly lower prices than incumbent carriers, CNOC members are contributing to the increased affordability of broadband services and look forward to seizing new opportunities to do so in areas assisted by the national broadband program.

ES12. The national broadband program should prioritize the roll-out of wireline facilities, and in particular, FTTP and FTTN facilities, to the maximum extent feasible. These facilities deliver vastly superior performance compared to alternative technologies and therefore support the broadest range of service characteristics and applications, today and in the future.

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ES13. At the same time, CNOC acknowledges that there are areas in which it is not practical to deploy wireline facilities due to sparse population densities or great distances between central offices and end-user buildings. Funding of fixed wireless broadband deployments in these areas, and satellite, where even fixed wireless is not practical, will be critical to ensuring that no Canadians are left behind in their ability to access broadband services.

ES14. The Commission must not create policy based on the emerging and future satellite technologies that were described by some interveners in this proceeding. Regulation must be based on telecommunications services that are readily deployable today, not speculative technologies that may or may not come to market in coming years.

ES15. As a condition on the subsidized provision of broadband services as a basic telecommunications service, the Commission should impose a mandated wholesale access obligation. This will accelerate the introduction of competition in new markets that require it the most. Rates should be based on Phase II costs plus a reasonable mark-up. **** providers who do not have the scale or resources to provide regulated wholesale services should be exempt from this requirement.

ES16. With the exception of very high-cost areas, all subsidized broadband deployments should also be upgradable to 25 Mbps D / 10 Mbps U. This condition will ensure a greater economic lifespan for subsidized network infrastructure.

ES17. The current local service framework has been successful and should be maintained. Parties in this proceeding have not justified the elimination, reduction or redirection of the local voice subsidy regime as it applies throughout Canada.

ES18. The geography, population density and other distinguishing factors of Northwestel’s operating territory must receive special treatment as part of Canada’s national broadband strategy.

A transport subsidy mechanism is urgently needed in the Far **** and other areas with substantially similar characteristics.

ES19. The transport subsidy mechanism should replace all current subsidy programs in Northwestel’s operating territory. All funding occurring through this mechanism should subsidize 4

transport costs in Northwestel’s territory that exceed comparable costs for transport facilities in **** Canada. Comparable costs would be those that are no more than 10% greater than the **** Canada costs.

ES20. To smooth the subsidy mechanism transition in Nortwestel’s territory, CNOC proposes a five year transition plan. Each year, 20% of the local voice subsidy will be phased out with a corresponding 20% increase in subsidies for transport.

ES21. The current $10 million threshold for NCF contributions creates a situation of inequity for smaller players who just barely meet or surpass this level of Canadian Telecommunications Service Revenues. CNOC therefore recommends that the Commission replace this model with a revenue exemption model which exempts the first $10 million in Canadian Telecommunications Service Revenues for all TSPs – large and small. Having reviewed the input of the Canadian Telecommunication Contribution Consortium Inc., CNOC is confident that this change is realistic and would not burden the Central Fund Administrator or other required contributors.

ES22. CNOC also requests that the Commission increase the contribution exemption from the current $10 million level to $15 million. This increase is proportionate to the increase in Canadian Telecommunications Service Revenues and consistent with the impact of inflation since the $10 million threshold was originally established in 2001.

ES23. Discoverability of transport facilities is a barrier to the competitive rollout of broadband connectivity in Canada. Accordingly, CNOC recommends that the Commission require carriers to provide maps indicating the location of their transport facilities. As a security safeguard, these maps can be made accessible on a restricted basis to providers who are registered with the Commission as providers of telecommunications services.

ES24. CNOC also recommends that the Commission launch a review of its forbearance framework for inter-exchange private line transport. This forbearance regime is nearly twenty years old and relies on forbearance criteria that are no longer relevant to the modern marketplace for transport services. A modern and well-calibrated forbearance regime for inter-exchange 5

transport will have a profoundly positive impact on broadband deployment and competition in downstream retail markets for broadband services.

ES25. Finally, improving digital literacy is an important issue that is best addressed by provincial and territorial government as well as municipalities. To complement the efforts of government bodies, the Commission should continue to encourage public discourse on digital literacy, as it has in this proceeding.

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1.0 Introduction
1.1 Background

1. Canadian Network Operators Consortium Inc. (“CNOC”) is pleased to file its final submissions in the proceeding initiated by Telecom Notice of Consultation CRTC 2015-1342 (“TNC 2015-134”).

2. Over thirteen months have elapsed since the Commission first issued its notice of consultation in this proceeding. In that time, the proceeding has evolved tremendously. With the guidance of the Commission, the focus has shifted from an open-ended review of basic telecommunications services to a concentrated effort aimed at developing a national broadband strategy. This progression signals a call to action for federal, provincial and local governments as well as telecommunications service providers (“TSPs”) and other stakeholders.

3. Undoubtedly, CNOC and its members have an important role to play. CNOC members have long been committed to providing broadband access on competitive terms. The introduction of competition in underserved areas will benefit consumers by increasing choice when it comes to: providers, services, service features and price. In turn, these benefits will encourage Canadians to engage and experience the digital economy more meaningfully.

4. Of course, designing a national broadband strategy with a view to enabling competition in areas that are presently unserved or underserved is a daunting proposition. Indeed, merely introducing one basic broadband option to certain areas is a challenging first step. To assist the Commission, this submission outlines key features, considerations and best practices that are most likely to characterize a successful national broadband strategy – which not only pushes broadband access to parts of the country that need it the most, but also sows the seeds for competition.

5. In CNOC’s view, a successful national broadband strategy has two parts: targeted government funding and a robust regulatory framework. Notwithstanding the arms’ length relationship between the Commission and the government, these two pillars of a national 2 Review of basic telecommunications services, Telecom Notice of Consultation CRTC 2015-134, 11 **** 2016.

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broadband strategy do not need to be designed and implemented on a mutually exclusive basis. To the contrary, coordination between stakeholders is critical to achieving the policy objectives that are shared by the Commission and governments: conquering the digital divide and empowering all Canadians with access to the digital economy. To this end, CNOC is proposing a regulatory model that will unify, guide and support the national broadband strategy.

6. Before addressing the structure of this submission, it should be noted at the outset that the Commission has jurisdiction to implement all of CNOC’s regulatory recommendations. The Commission’s authority to do so stems from the statutory grants of power conferred upon the Commission by the Telecommunications Act3 (the “Act”). For example, the Commission has jurisdiction to mandate the provision of broadband internet access services at minimum speeds based on sections 24, 24.1 and 32(g) of the Act. The Commission also has jurisdiction to order either the upgrade or construction of new facilities based on subsections 42(1) and (2) of the Act.

CNOC has provided more detailed submissions concerning questions of the Commission’s jurisdictional authority and correspondinglimits by way of the following responses to Commission issued requests for information (“RFIs”): CNOC(CRTC)25Apr16-1 and CNOC(CRTC)25Apr16-3.

1.2 Structure of Submission
7. This final argument is structured as follows:

• Part 2.0 of the submission characterizes broadband as an essential service and draws a distinction between the ‘needs’ and ‘wants’ of Canadians;

• Part 3.0 makes recommendations with respect to speed targets and other service characteristics that should be reflected in the basic service objective;

• Part 4.0 of the submission outlines CNOC’s views on how to develop and engage a national broadband strategy;

• Part 5.0 sets out CNOC’s views as to how the national broadband strategy should be funded;

• Part 6.0 addresses affordability concerns;
3 Telecommunications Act, S.C. 1993, c. 38.
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• Part 7.0 underlines the importance of prioritizing the most cost-effective telecommunications service platforms;

• Part 8.0 proposes terms that must be associated with the subsidized provision of broadband Internet as a basic telecommunications service;

• Part 9.0 includes CNOC’s recommendations relating to the existing local services framework;

• Part 10.0 contains CNOC’s submissions with respect to special regulatory measures that are required in the serving territory of Northwestel Inc. (“Northwestel”);

• Part 11.0 sets out proposed changes to the current contribution framework;

• Part 12.0 addresses the need for discoverability of transport facilities and a review of the forbearance regime for inter-exchange transport;

• Part 13.0 discusses digital literacy; and
• Part 14.0 provides CNOC’s conclusions.
2.0 Broadband is a Basic Telecommunications Service

8. The record of the proceeding reflects a resounding consensus on the importance of broadband access to the daily lives of Canadians. Canadians have spoken and CNOC agrees that broadband access must therefore be considered a basic telecommunications service. Although the status of broadband as a basic service is now evident, the approach to defining the basic service objective is still somewhat unclear.

9. In its first intervention, CNOC proposed a method of tiering different types of broadband applications or uses based on minimum supporting technical requirements.4 As the proceeding evolved, the focus has now shifted to distinguishing between the ‘needs’ and ‘wants’ of Canadians.

In the context of a proceeding aimed at empowering Canadians with access to the digital economy, CNOC concedes that a needs vs. wants approach is more appropriate and streamlined than a multi-tiered classification model based on minimum supporting technical requirements.

4 CNOC intervention dated 14 July 2015, at Sections 2.1 and 2.4.

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10. Today, the following broadband uses / applications should be considered ‘needs’: email, e-commerce, banking, news, social media, VoIP, video-conferencing, telework, distance education, telehealth, access to educational and government tools and certain accessibility features like Video Relay Service (“VRS”).

11. In CNOC’s view, access to the above-listed ‘needs’ is necessary to ensure a fulsome participation in the digital economy. These applications for broadband access services can be contrasted with recreational luxury applications such as 4k video streaming.

12. Having defined a category of services that Canadians must have access to now and into the future, the question becomes how to define the basic service objective to ensure that broadband funding programs can facilitate access to such ‘needs’ in unserved and underserved areas. As discussed below in Part 3.0, answering this challenge depends on appropriate targets for broadband speeds and other service characteristics.

3.0 Setting the Appropriate Targets

13. Download and upload speeds are factors which have a significant impact on what a broadband service can and cannot do. The same can be said for other broadband service characteristics such as latency, jitter, packet loss and data caps. Consequently, providing all Canadians access to broadband ‘needs’ depends on setting these targets at the right level.

14. Much of the focus in this proceeding has been on speed. Interveners have proposed radically different speed targets ranging from continued support for the current 5 megabits per second (“Mbps”) download (“D”) / 1 Mbps upload (“U”)5 target to calls for 25 Mbps D / 3 Mbps U6.

15. CNOC proposes a regulatory speed target of 10 Mbps D / 3 Mbps U.7 5 See for example, Rogers Communications Inc.’s (“Rogers”) position in Transcript Volume 9, at para 11975; See also TELUS Communications Company’s position in Transcript Volume 6, at paras 7814-7853.

6 See for example, the intervention of the Government of Yukon dated 14 July 2015, at para 3.

7 See Transcript Volume 14, at para 19514.
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16. As CNOC explained in its intervention, realistic speed targets should not be unattainable for high-cost serving areas and yet not sufficiently ambitious for more accessible rural areas.8 A 10 Mbps D / 3 Mbps U target strikes an appropriate balance between these competing considerations.

17. Several interveners have submitted that the current 5 Mbps D / 1 Mbps U target is sufficient to enable the kinds of broadband ‘needs’ described in the preceding part of this submission.9 Although it may be true that most ‘needs’ might have bare minimum technical requirements within the 5 Mbps D / 1 Mbps U range, CNOC is concerned with both the practical implications of such a speed ceiling in 2016 and the relevance of this target for the next few years. For example, during the hearing for this proceeding, the Commission elicited evidence with respect to the technical requirements of VRS.10 One intervener explained that VRS can operate at an “appropriate quality” at 737 kilobits per second (“Kbps”) U, but would require 1.3 Mbps U for “high quality” functionality.11 CNOC is concerned that the minimum technical requirements for VRS and other applications and services may reach and surpass 1 Mbps U in real time usage conditions, especially when other basic broadband applications are used concurrently. It is for this reason that CNOC supports a higher speed target of 10 Mbps D / 3 Mbps U, which provides greater capacity for practical everyday use of broadband services now and in the future.

18. Although a 10 Mbps D / 3 Mbps U target is a balanced benchmark for the vast majority of the country, CNOC acknowledges that this target may still be unattainable for high-cost terrestrial and satellite serving areas.12 It may therefore be desirable for the Commission to establish lower, yet still practical, speed targets on an exceptional basis for these special cases.13 8 See CNOC intervention dated 14 July 2015, at ES5.

9 See for example, Bell Canada’s position in Transcript Volume 7, at paras 94749483; See also Rogers’ position in Transcript Volume 9, at para 11975; See also TELUS Communications Company’s position in Transcript Volume 6, at paras 7814-7853.

10 See Transcript Volume 7, at paras 9777-9778.
11 Id. at para 9778.

12 CNOC intervention dated 14 July 2015, at paras ES5 and 33.

13 Ibid.
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19. With respect to other broadband service characteristics including latency, jitter, packet loss and data caps, CNOC submits that the Commission should confirm that setting targets for these types of quality of service measures is important. However, it would be premature to set definitive targets without further industry consultation focusing on such matters. CNOC has surveyed its membership and carefully reviewed the record of the proceeding, including responses to RFIs asking parties to propose targets for all of the above-listed service characteristics,14 and is unable to recommend a meaningful set of targets at this time. The Commission should use the regulatory tools at its disposal, such as CISC or the ability to point an Inquiry **** to engage further study of these technical issues and make specific evidence-based determinations.15 4.0 The National Broadband Strategy

20. A national broadband strategy must be developed and implemented by way of a multi-stakeholder approach. At the outset, each stakeholder should have a well-defined set of responsibilities that accord with its respective capacities and mandate. In the subsequent paragraphs, CNOC outlines recommendations as to how these roles and responsibilities could be allotted.

21. First, the federal government has the core responsibility, resources and authority to lead the development and implementation of the national broadband program. The federal government must spearhead the program to fund the rollout of broadband facilities in unserved and undeserved parts of Canada. The federal government must also exercise its taxing power to spread the very significant funding required to fund this program across the entire Canadian tax base over a number of years.

22. Second, First Nations, provincial and territorial governments as well as municipalities have the capacity to make contributions to programs designed to improve broadband infrastructure and deliver digital literacy and skills training. Provincial and territorial governments also have the responsibility of monitoring broadband affordability concerns and implement programs, as 14 See for example, CNOC(Rogers)14Aug15-1 TNC 2015-134. The same RFI was also issued by Rogers to several other parties.

15 Transcript, Volume 14, at para 19516.
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necessary, to address price barriers to broadband adoption within their respective jurisdictional boundaries.

23. Third, the Commission has significant means at its disposal to collect, analyze and obtain public input on the data that is critical for the formulation, by the federal government, of a comprehensive national broadband funding program. The Commission’s regulatory arsenal for performing these tasks includes the ability to solicit submissions, issue RFIs, appoint Inquiry Officers and hold public hearings. This very proceeding is an invaluable exercise that will inform all aspects of the design and implementation of the federal government’s broadband program going forward.

24. Subject to appropriate legislative amendments, the Commission could also create and oversee an entity similar to the Canadian Telecommunications Contribution Consortium (“CTCC”) to implement, at arms’ length, an evidence based funding model for large scale and regional projects. This entity would principally channel federally sourced funding into projects.

However, other governments could also choose to contribute funding for these types of projects that benefit their home jurisdictions.

25. Fourth, TSPs can apply their expertise, capital and other resources to deploy and improve broadband infrastructure in unserved and underserved parts of Canada. Enabling TSPs to do so will require the type of national broadband infrastructure program that CNOC is recommending.

As aforementioned, CNOC members are committed to providing broadband access on competitive terms and are eager to do so in unserved and underserved areas where opportunities are created by a broadband funding program.

26. As emphasized in the introduction, coordination among stakeholders is key to a successful national broadband strategy. As a starting point, the Commission should open communications with the federal government as soon as possible. In these early discussions, the Commission and the federal government could, as soon as possible after a determination is made in this proceeding, exchange information and perspectives on the proceeding, broadband infrastructure funding and plans, opportunities to collaborate and the engagement of other stakeholders such as First Nations, 13

provincial, territorial and local governments. The goal should be to ensure that parties are on the same page so that collectively, all individual stakeholders can contribute in a harmonized manner that prevents wasteful and inefficient use of resources.

5.0 Funding the National Broadband Strategy

27. The primary responsibility for funding the development of telecommunications network infrastructure rests with the federal government, as it always has. The government has already invested a substantial amount of the $305 million dedicated to the Connected Canadians program.16 Those investments have contributed significantly to addressing broadband coverage gaps in Canadian communities. The government has also announced $500 million over five years in broadband infrastructure investment to increase high-speed broadband coverage.17 This commitment will undoubtedly make a difference, but more is needed to ensure that all Canadians have access to a basic level of broadband service. In its collaborative dialogue with the federal government, the Commission should share evidence, analysis and projections of funding costs that were gathered over the course of this proceeding. In turn, the federal government will be better situated to reassess the budgeted funding that is currently allocated to broadband infrastructure investment in light of forecasted funding requirements over the short, medium and long term. In addition, the Commission’s expertise could assist in ensuring that funds to support the construction of broadband infrastructure are spent with maximum impact and efficiency.

28. To complement federal government funding, matching private investments should be required for every dollar of public funds invested in a subsidized broadband deployment.

Provincial and territorial governments should also be encouraged to contribute through the national program or other mechanisms to help fund projects within their provincial or territorial boundaries.

29. Broadened redistribution of TSP revenues through the National Contribution Fund (“NCF”) is another tool that could, if necessary, assist the funding of a subsidy regime for broadband Internet access deployment. However, a great degree of caution should be exercised in relying on this approach in light of the significant market distortions that could result from 16 https://www.ic.gc.ca/eic/site/028.nsf/eng/50010.html

17 http://www.budget.gc.ca/2016/docs/plan/ch2-en.html
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contribution obligations that are not appropriately calibrated. Contribution taxes on telecommunications revenues to support multi-billion dollar funding programs could result in deadweight losses that would ripple throughout the economy. These kinds of market distortions would send improper economic signals throughout the industry, with corresponding losses in efficiencies.18

30. It is equally concerning that the cost of any contribution taxes to fund broadband deployment would trickle down to consumers. In the experience of CNOC and its members, consumers are not tolerant of $1-2 price increases on monthly telecommunications bills – let alone the $5-10 increase that may result from the scale of NCF based programs that some interveners are proposing.19 Canada already ranks very poorly in international comparisons when it comes to wireline broadband prices.20 Further increasing monthly telecommunications costs as a result of contribution taxes will aggravate this situation to the detriment of Canadian consumers who have proven to be very sensitive to price increases.21

31. In summary, funds raised through general tax revenues and government fees can contribute meaningfully towards a broad-based subsidy regime for broadband Internet deployment in high-cost serving areas, without a corresponding risk of disrupting the telecommunications industry and harming certain classes of consumers through increased monthly telecommunications costs.

Consequently, government funding and matching private investments must be relied upon as the core means of funding the national broadband program. If the Commission determines that an expanded contribution mechanism is necessary, such a mechanism must be complementary to government sourced funding and appropriately calibrated to minimize the risks discussed above.

18 CNOC intervention dated 14 July 2015, at para 67.

19 For example, the affordability funding mechanism and broadband deployment funding mechanisms proposed by AAC in its intervention dated 14 July 2015.

20 **** Report, at p.35.

21 CNOC provided examples of consumer sensitivity to very minor increases to monthly bills in Transcript Volume 14, at paras 19710-19715.

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6.0 Affordability of Broadband Services

32. Based on Canada’s international rankings when it comes to price for broadband services22, it is no surprise that affordability has become an important issue in this proceeding. Parties like the Affordable Access Coalition (“AAC”) have suggested that it is incumbent on the Commission to resolve affordability issues through NCF funded affordability funding mechanisms.23 These proposals must be rejected for two main reasons. First, subsidy programs for broader affordability issues are properly within the constitutional jurisdiction of provincial and territorial governments.24 Beyond jurisdictional qualifications, provincial government are also the experts in leading social assistance programs and the Commission is not. Furthermore, the introduction or expansion of a subsidy for monthly telecommunications costs must be contemplated alongside all other social assistance programs within a province or territory’s control that may be indirectly affected. Second, like broadband deployment programs funded through the NCF, AAC’s proposed affordability funding mechanism runs the risk of creating substantial deadweight losses that would ripple throughout the economy. For these reasons, the Commission must reject requests for affordability programs funded via an expanded contribution mechanism.

33. While a Commission approved NCF-based funding mechanism is not the answer to broadband affordability issues, the Commission does have regulatory tools at its disposal that can improve the state of affordability and help lower price related barriers to broadband adoption.

These tools consist of regulatory policies aimed at promoting competition. As noted throughout this submission, CNOC members are contributing to the increased affordability of broadband services and look forward to seizing new opportunities to do so in areas targeted by a national broadband program. On this point, it is worth reproducing an excerpt from CNOC’s appearance at the oral hearing in this proceeding, referencing Exhibit 4:

“19592 COMMISSIONER MENZIES: Moving forward, affordability. Looking at paragraph 22.

You say your members advanced the cause of affordability, more or less, because they offer prices 22 **** Communications Inc. “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions”, **** 30, 2015.

23 Affordable Access Coalition intervention dated 14 July 2015, key position 7.

24 Specifically, this jurisdiction can be traced to the provincial domain over “charities and eleemosynary institutions”, “municipal institutions”, “property and civil rights” and “matters of a merely local or private nature in the province” under section 92 of the Constitution Act, 1982. being Schedule B to the Canada Act 1982 (UK), 1982, c 11.

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that are significantly lower than those of the incumbents. How much lower? How do your prices compare with the incumbent’s?

19594 MR. HICKEY: Yeah, I won’t pull out a couple, but in the -- I’ll pull out just a couple from the Commission’s exhibit that I put forward on this proceeding.

19595 MR. HICKEY: The -- if you take a [sic] area like Toronto and you’re looking at the 5/1 that was detailed in the exhibits, you have our member TekSavvy 24.95 for 150 gig. You have Execulink at 29.995 for 100 gig. You have Distributel for 36.95 for unlimited. You have Bell at 42.95 with a question mark because the data cap isn’t listed. And you have Rogers at 54.99 for 60 gig. And so if you look at TekSavvy to Rogers, you’re looking at a substantial difference.

19596 Though it doesn’t just stop in purely urban areas like Toronto. If you go to Halifax it lists, for example, TekSavvy is a 41.95 products versus -- for unlimited at versus Bell 76.45 products for unlimited, also for 5 to 1 services.

19597 So you see that across the board in many ways. And the -- we think that is significant savings and everyday pricing. So these are also just not promotional. That’s everyday website pricing.”25 34. Exhibit 4 and the above quote clearly demonstrate that CNOC members are contributing to increased affordability by offering services at significantly lower prices than equivalent incumbent offerings.

35. In terms of promoting competition, the Commission has recently issued decisions such as Telecom Regulatory Policy CRTC 2015-32626 and Telecom Decision CRTC 2016-11727 which promise improvements to the competitive landscape for broadband services. In the context of this proceeding, the Commission can further encourage the development of competitive broadband markets by requiring mandated access to subsidized facilities, as proposed in Part 9.0 of this submission.

7.0 Prioritizing the Most Cost-Effective Telecommunications Service Platforms 36. The national broadband program should prioritize the roll-out of wireline facilities and in particular, Fibre-to-the-premises (“FTTP”) and fibre-to-the-node (“FTTN”) facilities, to the 25 Transcript Volume 14, at paras 19591-19597.

26 Review of wholesale wireline services and associated policies, Telecom Regulatory Policy CRTC 2015-326, 22 July 2015.

27 Review of costing inputs and the application process for wholesale high-speed access services, Telecom Decision CRTC 2016-117, 31 **** 2016.

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maximum extent feasible. Compared to other telecommunications platforms, wireline technologies deliver vastly superior performance for virtually all service elements. As discussed in Section 2.2 of CNOC’s intervention, wireline networks are unparalleled in their capacity28, service speeds29 and performance with respect to other service characteristics30. These advantages ensure that wireline facilities, where they can be economically deployed, will support the broadest range of service characteristics. In other words, prioritizing the deployment of wireline facilities will empower Canadians with the greatest access to the digital economy. Furthermore, the high performance and capacity ceiling of wireline facilities ensures that broadband services will scale alongside the evolving demands and ‘needs’ of consumers. For all of these reasons, wireline facilities, although seemingly expensive compare to alternative platforms such as fixed wireless, must be considered the most cost-effective solution to addressing coverage gaps over the long term in the vast majority of unserved and underserved areas.

37. At the same time, CNOC acknowledges that there are areas in which it is not practical to deploy wireline facilities due to sparse population densities or great distances between central offices and end-user buildings. Funding of fixed wireless broadband deployments in these areas, and satellite, where even fixed wireless is not practical, will be critical to ensuring that no Canadians are left behind in their ability to access broadband services.

38. Over the course of this proceeding, OneWeb Ltd.31, Telesat Canada32 and Xplornet Communications Inc.33 have described promising emerging and future satellite technologies including high-throughput34 and low orbit35 satellite systems. These new technologies promise 28 For example, all of the theoretical capacity for all spectrum up to 100GHz is unable to come close to achieving the capacity of a single fibre optic strand; See CNOC intervention dated 14 July 2015, at para 10.

29 For example, FTTP can reach speeds of up to 1 Gigabit per second while FTTN can reach 50-250 Mbps, compared to wireless LTE-A which peaks at around 5-20 Mbps; See CNOC intervention dated 14 July 2015, at para 10.

30 For example, unlike satellite systems, wireline facilities are not encumbered by high latency and do not suffer service degradations in poor weather conditions; See CNOC intervention dated 14 July 2015, at para 11.

31 OneWeb Ltd. intervention dated 14 July 2015, at p.1.

32 Telesat Canada intervention dated 1 February 2015, at paras 13-15.

33 Xplornet Communications Ltd. intervention dated 14 July 2015, at ES 8.

34 Ibid.
35 OneWeb Ltd. intervention dated 14 July 2015, at p.1.
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coverage over 100% of Canadian residences and businesses36, speeds of 25 Mbps37, low latency38 and more. If these technologies are deployed, and if this occurs within a few years and if they are capable of meeting the performance targets that were advertised in this proceeding, then such satellite technologies could play a role in addressing broadband coverage gaps in the country.

However, at this point the capabilities of these technologies remains highly speculative and the Commission must not make policy based on speculation. Instead, the Commission must regulate and the national broadband strategy must revolve around telecommunications service platforms that are known and readily deployable in today’s markets. Accordingly, CNOC urges the Commission to disregard emerging and future satellite technologies in its determinations. To the extent that these technologies do come to market in the next few years, they will undoubtedly be a core focus in the Commission’s next review of basic telecommunications services.

8.0 Terms Associated with the Subsidized Provision of Broadband Internet as a Basic Telecommunications Service

39. CNOC recommends that the national broadband program impose two conditions on the subsidized provision of broadband services as a basic telecommunications service: (1) mandated access to subsidized broadband facilities; and (2) a requirement that subsidized facilities be upgradable to 25 Mbps D / 10 Mbps U.

40. First, the mandated access condition will accelerate the introduction of competition in new retail markets where subsidized broadband facilities are deployed. As emphasized in CNOC’s intervention, the lack of competition that affects retail markets for broadband services is one of the greatest barriers that limits or prevents Canadians from meaningfully participating in the digital economy.39 As mandated access has done in other parts of the country, this condition will increase levels of choice when it comes to providers, services, features and price. Wherever consumers can 36 Xplornet Communications Ltd. intervention dated 14 July 2015, at ES 8; Telesat Canada intervention dated 1 February 2015, at paras 13-15.

37 Xplornet Communications Ltd. intervention dated 14 July 2015; OneWeb Ltd. intervention dated 14 July 2015, at p.5.

38 OneWeb Ltd. intervention dated 14 July 2015, at p.3.
39 CNOC intervention dated 14 July 2015, at para 23;
19

benefit from choice, they are more likely to find a broadband solution that suits their personal ‘needs’.

41. The rates for wholesale services over subsidized facilities should be based on Phase II costs plus a reasonable mark-up. Importantly, the Phase II costs used to compute wholesale rates should exclude all subsidies that the carrier received to deploy its facilities.40 Carriers should not be compensated by wholesale customers for costs that are subsidized from other sources.41 This costing approach will provide operators with clear expectations when developing business plans for subsidized deployments. Wholesale obligations do not prevent broadband investment in non-subsidized areas, there is therefore no reason why mandated wholesale services at cost-based rates would dissuade operators from investing in subsidized areas.

42. A mandated access condition should however exempt a class of smaller providers who lack the scale to support wholesale services. Unlike large carriers who are very experienced with wholesale service provisioning, smaller providers do not have the resources or expertise to conduct costing exercises and provision wholesale services along with all the associated overhead in terms of billing services, customer support, maintenance, etc. The Commission should evaluate the threshold proposed by CNOC member Teksavvy Solutions Inc.42 (“TekSavvy”), as a starting point for consideration, whereby a network provider, together with its affiliates, must reach 25,000 residences, businesses and institutional campuses, and other locations with broadband access in order to have the necessary scale to warrant an obligation to provide wholesale access to subsidized broadband facilities.43

43. The second condition that should apply to subsidized broadband services is a requirement that underlying facilities must be upgradable to 25 Mbps D / 10 Mbps U. This condition will ensure a greater economic lifespan for subsidized network infrastructure. Without this requirement, there is a risk that certain facilities become outdated, irrelevant and lay fallow soon after they are 40 CNOC intervention dated 14 July 2015, at para 42;

41 Ibid.

42 TekSavvy Solutions Inc. intervention dated 14 July 2015, at para 28.

43 Ibid.
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deployed with the assistance of subsidies.44 In CNOC’s view, subsidized broadband facilities that are upgradable to 25 Mbps D / 10 Mbps U will have a long economic lifespan. In the end, this condition will ensure that public funds are invested efficiently and generate long term benefits for consumers.

44. As explained in CNOC’s first intervention, the condition that subsidized facilities must be upgradable to 25 Mbps D / 10 Mbps U should not apply in the case of the operating territory of Northwestel Inc. (“Northwestel”) or other serving areas with substantially similar characteristics.45 In such areas, this condition could be unduly onerous or impossible to satisfy. Therefore, bids to deploy scalable infrastructure in Northwestel’s territory (or areas with similar characteristics) should be accorded additional weight, but no strict condition should be enforced.

9.0 The Existing Local Services Framework

45. CNOC maintains its position that, except in the case of Northwestel (discussed in Part 11.0, below), the current local services framework should be maintained, including the following policies: the basic service objective, the obligation to serve, the associated subsidy regime, applicable price caps and standalone Primary Exchange Service (“PES”).

46. The local service framework has been successful in its goal of ensuring access to basic telephone service for all Canadians. CNOC submits that the Commission should continue to oversee the framework and ensure that the subsidy requirement continues to decline over time.

Parties in this proceeding have not demonstrated compelling grounds to justify the elimination, reduction or redirection of the local voice subsidy regime throughout Canada. Accordingly, all such proposals should be rejected and the Commission should affirm the continuation of the local services framework in its current state.

44 CNOC intervention dated 14 July 2015, at para 45.
45 Id. at para 44.
21
10.0 Northwestel’s Operating Territory

47. The geography, population density and other distinguishing factors of Northwestel’s operating territory must receive special treatment within Canada’s national broadband strategy.

The main obstacle to the provision of telecommunications services in this vast area is the high cost of terrestrial and satellite transport. The Commission explicitly acknowledged this problem when it announced its intention to fund capital infrastructure investment in transport facilities (e.g. fibre, microwave and satellite) in Northwestel’s operating territory in Telecom Regulatory Policy CRTC 2013-71146 (“TRP 2013-711”) after holding an inquiry on satellite transport services in Canada.

As CNOC explained in its intervention, the lack of affordable transport services is a much greater impediment to the availability of affordable retail services than the cost of access which can be managed more readily in the relatively small communities situated in this territory.47 48. The transport subsidy that was contemplated in TRP 2013-711 is now urgently needed.

During the oral hearing, Vice-Chair **** referenced a report of the Department of National Defence and Border Services that concluded that connectivity in the Far **** was sub-standard and needed to be upgraded as a matter of survival and based on three principles: the maintenance of sovereignty, security and public safety.48 There is no doubt that the stakes are higher in the Far ****, both for Canadians and the country as a whole. Such high takes warrant swift and decisive action. The lack of transport facilities is the single biggest impediment to the availability of services in the Far ****. Therefore, the national broadband strategy must address the lack of transport in Northwestel’s territory, and in certain other remote high-cost serving areas, as a priority. Doing so will require a transport subsidy mechanism.

49. In order to fund a transport subsidy program, CNOC proposes, as an exceptional measures, the redirection of current subsidy programs in Northwestel’s operating territory. All funding occurring through the transport subsidy mechanism should be calculated with reference to baseline costs for terrestrial and satellite transport services in non-high cost serving areas. CNOC submits that the mechanism should subsidize transport costs in Northwestel’s territory that exceed 46 Northwestel Inc. – Regulatory Framework, Modernization Plan, and related matters, Telecom Regulatory Policy CRTC 2013-711, 18 December 2013.

47 CNOC intervention dated 14 July 2015, at para 59.
48 Transcript Volume 9, at paras 12554-12555.
22

comparable costs for transport facilities in **** Canada. Comparable costs would be those that are no more than 10% greater than the **** Canada costs.49 50. Redirecting local voice subsidies will have an impact on both providers and consumers of such services. For this reason, CNOC proposes a transition plan to mitigate harms (e.g. sudden price hikes for wireline voice services) throughout the period of change wherein subsidized transport facilities will progressively translate into greater availability of telecommunications services (including alternative voice services such as Voice over Internet Protocol or “VoIP”).

More specifically, CNOC proposes a five year transition plan that is similar to what SSI Group of Companies recommend in their intervention.50 In each year of the transition plan, 20% of the local voice subsidy will be phased out with a corresponding 20% increase in transport subsidies. This will ensure a smooth transition for all stakeholders, including consumers.51 51. Overall, this approach is balanced and specifically designed to address the unique circumstances of Northwestel’s serving area and other areas with similar characteristics.

Consistent with CNOC’s other positions: the transport subsidy mechanism is only intended to complement government funding sources and any transport-based services that are subsidized should be subject to mandated wholesale access as contemplated in Part 9.0 of this submission.

11.0 Changes to the $10 Million Contribution Threshold

52. The current $10 million threshold for NCF contributions creates a situation of inequity for smaller players who just barely meet or surpass this level of Canadian Telecommunications Service Revenues.52 The threshold is an “all or nothing” model that has a disproportionate impact on small providers who lack the scale and resources that allow larger players to absorb NFC related expenses comfortably.53 As described at the oral hearing, “…a competitor that just breaches 11 million and has 3 million of intercarrier expenses or terminal equipment revenues, will owe 44,000 49 CNOC intervention dated 14 July 2015, at para 62.

50 Schedule 3 of SSI Group of Companies intervention dated 14 July 2015, at Section 2.3.

51 Referenced in Transcript Volume 14, at paras 19684-19685.
52 CNOC intervention dated 14 July 2015, at para 70.
53 Ibid.
23

on those revenues, which for a growing service provider could mean a salary, could mean a piece of equipment, or another important need that wasn't there one year and is there the next.”54 53. To remedy this built-in situation of inequity, CNOC recommends that the Commission replace its current contribution threshold with a revenue exemption model. Such a model would exempt the first $10 million in Canadian Telecommunications Service Revenues for all TSPs – large and small. Calculations will then be calculated based on all amounts surpassing the exemption figure, at a percentage rate determined by the Commission. The end-result will be that TSPs of all sizes are affected in a similar manner by the obligation to contribute to the NCF.

54. CNOC has reviewed the RFI response of the Canadian Telecommunications Contribution Consortium Inc. (“CTCC”) setting out its views on the impact of CNOC’s proposal to the national contribution fund, its operations and the contribution percentage of required contributors if the Commission were to adopt CNOC’s proposal.55 With reference to 2014 data, the CTCC calculates that the total contribution eligible revenues (“CER”) for 2014 would have been reduced by $662,448,201 under CNOC’s proposal, leaving a total CER of $20,882,093,886.56 From that figure, a contribution rate increase from 0.55% to 0.57% would obtain $118,494,994, the total amount of contribution to the NCF in 2014 under the current model.57 CNOC submits that the relief that an exemption model would create for small providers and the far more equitable structure of such a model justifies a 0.02% or similar contribution rate increase.

55. Beyond the contribution rate increase, the CTCC notes that CNOC’s proposal would require changes by the Central Fund Administrator (“CFA”) to forms and reports as well as system changes.58 These changes are feasible and would not impose an unreasonable burden on the CFA.

Finally, the CTCC states that it would need to know “…whether the proposed $10 million deduction from a Required Contributor’s CTSR59 would be taken evenly over the course of the data year or as soon as the Required Contributor’s cumulative CTSR, as reported to the CFA, 54 Transcript Volume 14, at para 19616.

55 CTCC(Shaw)14Aug15-1.
56 Ibid.
57 Ibid.
58 Ibid.
59 Canadian Telecommunications Service Revenues (“CTSR”).
24

exceeded $10 million.”60 At this stage, it appears as though a deduction taken evenly over the course of the data year would result in more consistent CER levels month-to-month, especially in the month of January. CNOC therefore supports this approach on the condition that required contributors can carry forward deductions not used in a month to future months.

56. Finally, CNOC recommends that the Commission increase the contribution exemption from the current $10 million level to $15 million. The $10 million figure has remained static since its introduction in 200161. At that time the Commission noted that the $10M figure represented an initial exemption threshold that would be reviewed as required62. This has not occurred despite the significant changes in the telecommunications market that have occurred since 2001. For this reason, CNOC submits that the threshold should be raised proportionately with the increase in CTSR since 2001. As noted during the oral hearing63, the $10 million figure represented .032 percent of $31 billion64 CTSR in 2001. If we apply that same ratio to the $45.9 billion CTSR in 201665, the result is approximately $15 million. This amount is also consistent with an increase that would result from the application of inflation factors over the period 2001 to 201666.

57. The $15 million exemption model should apply whether or not the Commission decides to extend the contribution regime to broadband services. The Commission should also ensure that the transition from a threshold to an exemption contribution model does not impose additional reporting requirements for TSPs with Canadian Telecommunications Service Revenues at or below $15 million. Otherwise, the benefits of this transition could be offset by the administrative burden that such reporting requirements would represent for the smallest players in the industry.67 60 CTCC(Shaw)14Aug15-1..

61 Telecom Decision CRTC 2000-745, Changes to the contribution regime, at para. 99.

62 Ibid.
63 Transcript Volume 14, at paras 19615-19619.

64 2006 CRTC Telecommunications Monitoring Report, Table 4.1.1 (available at:

http://publications.gc.ca/collections/Collection/BC92-57-2006E.pdf) 65 Communications Monitoring Report, October 2015, Table 3.0.1.

66 Inflation rate of 31.72 calculated using the Bank of Canada Inflation Calculator (available at:

http://www.bankofcanada.ca/rates/related/inflation-calculator/) 67 CNOC intervention dated 14 July 2015, at para 72.

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12.0 Transport Discoverability and Forbearance

58. Discoverability of transport facilities is a barrier to the competitive rollout of broadband connectivity in Canada. Throughout this proceeding, parties including CNOC68, TekSavvy69 and the Canadian Cable Systems Alliance Inc. (“CCSA”).70 have demonstrated how this barrier needlessly frustrates the operations and expansion of small providers. Fortunately, a solution is simple and can be readily implemented. All that is required is for providers to map out the location of their transport facilities so that wholesale customers who wish to lease such facilities can discover the location and provider of transport lines throughout their operating territories. At least one major provider already publishes this information publically71 and others72 have expressed an openness to do so.

59. No intervener has presented any compelling reasons in opposition of a mapping exercise to facilitate the discoverability of transport facilities. Saskatchewan Telecommunications (“SaskTel”) objected on security grounds stating that this information might open its network to sabotage.73 However, this concern can easily be addressed. Maps of transport facilities do not need to be made available to the world on public company websites. These maps can be made accessible on a restricted basis to entities that are registered with the Commission as providers of telecommunications services.74 This measure would create a simple and effective safeguard to protect against the security concern expressed by SaskTel.

60. Finally, CNOC agrees with TekSavvy that the Commission should launch a review of its forbearance framework for inter-exchange private line transport.75 This forbearance regime is nearly twenty years old76 and relies on forbearance criteria that are no longer relevant to the 68 Transcript, Volume 14, at para 19518.

69 TekSavvy intervention dated 14 July 2015, at paras 41-52.
70 As noted by CCSA in Transcript Volume 8, at para 11229.

71 As noted by Bragg Communications Inc. in Transcript Volume 13, at para 18104.

72 As noted by Rogers in Transcript Volume 9, at para 12295.

73 As noted by SaskTel in Transcript Volume 11, at para 14934.

74 As noted by CNOC in Transcript Volume 14, at para 19585.

75 TekSavvy intervention dated 14 July 2015, at para 47; See also TekSavvy in Transcript Volume 1, at para 1232.

76 The regime was first introduced in Stentor Resource Centre Inc. – Forbearance from regulation of interexchange private line services, Telecom Decision CRTC 97-20, 18 December 1997, and Follow-up Proceeding to Telecom Decision CRTC 97-20: Establishment of criterion and process for considering further forbearance for High Capacity/DDS interexchange private line services, Telecom Order CRTC 99-434, 12 May 1999.

26

modern marketplace for transport services. A modern and well-calibrated forbearance regime for inter-exchange transport will have a profoundly positive impact on broadband deployment and competition in downstream retail markets for broadband services. CNOC therefore urges the Commission to initiate, as soon as feasible, a proceeding to review the forbearance framework for inter-exchange transport services.

13.0 Digital Literacy

61. Digital literacy is a topic that attracted increasing attention as the proceeding progressed – and for good reason. Programs designed to improve digital literacy will help push broadband adoption and empower an important segment of the population to engage the digital economy and reap its benefits. Fundamentally, these programs are the responsibility of provincial and territorial governments as well as municipalities. However, it should also be recognized that the Commission can have an important role in promoting digital literacy objectives by encouraging public discourse, as it has in this proceeding.

14.0 Conclusion

62. The first step in Canada’s national broadband strategy is nearly complete. This proceeding has shed invaluable insight on the challenges that lay ahead and the roles that all stakeholders must fulfill in pursuit of a nation-wide world class communications system that leaves no Canadians behind. Moving forward, the national broadband strategy must be anchored by targeted government funding and a robust regulatory framework. CNOC is confident that the adoption of the recommendations set out in this submission will translate in a balanced and effective national strategy that will not only help introduce broadband services where they are most desperately needed, but will also continue to improve the levels of competition for such services throughout the country. This forward looking approach will ensure that Canadians can experience and participate in the digital economy on their terms, in a manner that best fulfills their ‘needs’.

*** END OF DOCUMENT ***
1.0 Introduction
1.1 Background
1.2 Structure of Submission
2.0 Broadband is a Basic Telecommunications Service
3.0 Setting the Appropriate Targets
4.0 The National Broadband Strategy
5.0 Funding the National Broadband Strategy
6.0 Affordability of Broadband Services

7.0 Prioritizing the Most Cost-Effective Telecommunications Service Platforms 8.0 Terms Associated with the Subsidized Provision of Broadband Internet as a Basic Telecommunications Service 9.0 The Existing Local Services Framework

10.0 Northwestel’s Operating Territory
11.0 Changes to the $10 Million Contribution Threshold
12.0 Transport Discoverability and Forbearance
13.0 Digital Literacy
14.0 Conclusion

Final Submission : Canadian Network Operators Consortium (Intervenor 267)

Document Name: 2015-134.223974.2614239.Final Submission (1k15r01!).pdf
i
BEFORE THE CANADIAN RADIO-TELEVISION
AND TELECOMMUNICATIONS COMMISSION
IN THE MATTER OF
REVIEW OF BASIC TELECOMMUNICATIONS SERVICES,
TELECOM NOTICE OF CONSULTATION CRTC 2015-134, AS AMENDED
FINAL ARGUMENT
OF CANADIAN NETWORK OPERATORS CONSORTIUM INC.
25 MAY 2016
i
TABLE OF CONTENTS

1.0 Introduction .......................................................................................................................... 6 1.1 Background ...................................................................................................................... 6 1.2 Structure of Submission ................................................................................................... 7 2.0 Broadband is a Basic Telecommunications Service ............................................................ 8 3.0 Setting the Appropriate Targets ........................................................................................... 9 4.0 The National Broadband Strategy ...................................................................................... 11 5.0 Funding the National Broadband Strategy ......................................................................... 13 6.0 Affordability of Broadband Services ................................................................................. 15 7.0 Prioritizing the Most Cost-Effective Telecommunications Service Platforms .................. 16 8.0 Terms Associated with the Subsidized Provision of Broadband Internet as a Basic Telecommunications Service ............................................................................................. 18 9.0 The Existing Local Services Framework ........................................................................... 20 10.0 Northwestel’s Operating Territory ..................................................................................... 21 11.0 Changes to the $10 Million Contribution Threshold ......................................................... 22 12.0 Transport Discoverability and Forbearance ....................................................................... 25 13.0 Digital Literacy .................................................................................................................. 26 14.0 Conclusion ......................................................................................................................... 26 1

EXECUTIVE SUMMARY1

ES1. The record reflects a resounding consensus on the importance of broadband access. These services must now be considered basic telecommunications services.

ES2. The ‘needs’ of Canadians include, but are by no means limited to, email, e-commerce, banking, news, social media, VoIP, video-conferencing, telework, distance education, telehealth, access to educational and government tools and certain accessibility features like Video Relay Service. The basic service objective must be defined appropriately to ensure that Canadians have access to these ‘needs’.

ES3. CNOC submits that 10 Mbps D / 3 Mbps U is an appropriate speed target which provides adequate capacity for practical everyday use of ‘needs’ applications. In contrast, continued reliance on the current 5 Mbps D / 1 Mbps U target will not provide sufficient capacity to accommodate the evolving technical demands of basic broadband uses.

ES4. A lower, yet still practical, speed target may be required for high-cost terrestrial and satellite serving areas where 10 Mbps D / 3 Mpbs U is unattainable.

ES5. The Commission should confirm that other broadband service characteristics such as latency, jitter, packet loss and data caps are important. However, the record does contain sufficient information to establish definitive targets for such characteristics. CNOC therefore recommends that the Commission apply regulatory tools such as CISC or the appointment of an Inquiry **** to engage further study of these technical issues in order to arrive at evidence-based determinations.

ES6. A national broadband strategy must be founded on targeted government funding and a robust regulatory framework. The strategy requires a multi-stakeholder approach that includes participation from the Commission, federal, provincial and territorial governments, First Nations and local governments as well as industry. Each stakeholder should have a well-defined role and 1 Capitalized terms in the Executive Summary are defined in the body of the Intervention, with full citations where applicable.

2

set of responsibilities. Coordination amongst stakeholders is essential and begins with open and action-oriented communications between the Commission and the federal government.

ES7. The primary responsibility for funding the development of telecommunications network infrastructure rests with the federal government, as it always has. Matching private investments should be required for every dollar of public funds invested in a subsidized broadband deployment.

Provincial and territorial governments should also be encouraged to contribute through the national program or other mechanisms.

ES8. Broadened redistribution of TSP revenues through the NCF is another tool that could, if necessary, assist the funding of a subsidy regime for broadband Internet access deployment.

However, a great degree of caution should be exercised in relying on this approach in light of the significant market distortions that could result from contribution obligations that are not appropriately calibrated.

ES9. Canadian consumers are cost-conscious and have a low tolerance for the kinds of price increases for telecommunications services that expanded contribution mechanisms would inevitably entail.

ES10. The Commission should reject proposals for affordability subsidy mechanisms funded through the NCF. Affordability issues and social assistance programs fall within the domain of the provinces and the territories, who have the appropriate authority, expertise and resources to oversee such programs.

ES11. By offering services at significantly lower prices than incumbent carriers, CNOC members are contributing to the increased affordability of broadband services and look forward to seizing new opportunities to do so in areas assisted by the national broadband program.

ES12. The national broadband program should prioritize the roll-out of wireline facilities, and in particular, FTTP and FTTN facilities, to the maximum extent feasible. These facilities deliver vastly superior performance compared to alternative technologies and therefore support the broadest range of service characteristics and applications, today and in the future.

3

ES13. At the same time, CNOC acknowledges that there are areas in which it is not practical to deploy wireline facilities due to sparse population densities or great distances between central offices and end-user buildings. Funding of fixed wireless broadband deployments in these areas, and satellite, where even fixed wireless is not practical, will be critical to ensuring that no Canadians are left behind in their ability to access broadband services.

ES14. The Commission must not create policy based on the emerging and future satellite technologies that were described by some interveners in this proceeding. Regulation must be based on telecommunications services that are readily deployable today, not speculative technologies that may or may not come to market in coming years.

ES15. As a condition on the subsidized provision of broadband services as a basic telecommunications service, the Commission should impose a mandated wholesale access obligation. This will accelerate the introduction of competition in new markets that require it the most. Rates should be based on Phase II costs plus a reasonable mark-up. **** providers who do not have the scale or resources to provide regulated wholesale services should be exempt from this requirement.

ES16. With the exception of very high-cost areas, all subsidized broadband deployments should also be upgradable to 25 Mbps D / 10 Mbps U. This condition will ensure a greater economic lifespan for subsidized network infrastructure.

ES17. The current local service framework has been successful and should be maintained. Parties in this proceeding have not justified the elimination, reduction or redirection of the local voice subsidy regime as it applies throughout Canada.

ES18. The geography, population density and other distinguishing factors of Northwestel’s operating territory must receive special treatment as part of Canada’s national broadband strategy.

A transport subsidy mechanism is urgently needed in the Far **** and other areas with substantially similar characteristics.

ES19. The transport subsidy mechanism should replace all current subsidy programs in Northwestel’s operating territory. All funding occurring through this mechanism should subsidize 4

transport costs in Northwestel’s territory that exceed comparable costs for transport facilities in **** Canada. Comparable costs would be those that are no more than 10% greater than the **** Canada costs.

ES20. To smooth the subsidy mechanism transition in Nortwestel’s territory, CNOC proposes a five year transition plan. Each year, 20% of the local voice subsidy will be phased out with a corresponding 20% increase in subsidies for transport.

ES21. The current $10 million threshold for NCF contributions creates a situation of inequity for smaller players who just barely meet or surpass this level of Canadian Telecommunications Service Revenues. CNOC therefore recommends that the Commission replace this model with a revenue exemption model which exempts the first $10 million in Canadian Telecommunications Service Revenues for all TSPs – large and small. Having reviewed the input of the Canadian Telecommunication Contribution Consortium Inc., CNOC is confident that this change is realistic and would not burden the Central Fund Administrator or other required contributors.

ES22. CNOC also requests that the Commission increase the contribution exemption from the current $10 million level to $15 million. This increase is proportionate to the increase in Canadian Telecommunications Service Revenues and consistent with the impact of inflation since the $10 million threshold was originally established in 2001.

ES23. Discoverability of transport facilities is a barrier to the competitive rollout of broadband connectivity in Canada. Accordingly, CNOC recommends that the Commission require carriers to provide maps indicating the location of their transport facilities. As a security safeguard, these maps can be made accessible on a restricted basis to providers who are registered with the Commission as providers of telecommunications services.

ES24. CNOC also recommends that the Commission launch a review of its forbearance framework for inter-exchange private line transport. This forbearance regime is nearly twenty years old and relies on forbearance criteria that are no longer relevant to the modern marketplace for transport services. A modern and well-calibrated forbearance regime for inter-exchange 5

transport will have a profoundly positive impact on broadband deployment and competition in downstream retail markets for broadband services.

ES25. Finally, improving digital literacy is an important issue that is best addressed by provincial and territorial government as well as municipalities. To complement the efforts of government bodies, the Commission should continue to encourage public discourse on digital literacy, as it has in this proceeding.

6
1.0 Introduction
1.1 Background

1. Canadian Network Operators Consortium Inc. (“CNOC”) is pleased to file its final submissions in the proceeding initiated by Telecom Notice of Consultation CRTC 2015-1342 (“TNC 2015-134”).

2. Over thirteen months have elapsed since the Commission first issued its notice of consultation in this proceeding. In that time, the proceeding has evolved tremendously. With the guidance of the Commission, the focus has shifted from an open-ended review of basic telecommunications services to a concentrated effort aimed at developing a national broadband strategy. This progression signals a call to action for federal, provincial and local governments as well as telecommunications service providers (“TSPs”) and other stakeholders.

3. Undoubtedly, CNOC and its members have an important role to play. CNOC members have long been committed to providing broadband access on competitive terms. The introduction of competition in underserved areas will benefit consumers by increasing choice when it comes to: providers, services, service features and price. In turn, these benefits will encourage Canadians to engage and experience the digital economy more meaningfully.

4. Of course, designing a national broadband strategy with a view to enabling competition in areas that are presently unserved or underserved is a daunting proposition. Indeed, merely introducing one basic broadband option to certain areas is a challenging first step. To assist the Commission, this submission outlines key features, considerations and best practices that are most likely to characterize a successful national broadband strategy – which not only pushes broadband access to parts of the country that need it the most, but also sows the seeds for competition.

5. In CNOC’s view, a successful national broadband strategy has two parts: targeted government funding and a robust regulatory framework. Notwithstanding the arms’ length relationship between the Commission and the government, these two pillars of a national 2 Review of basic telecommunications services, Telecom Notice of Consultation CRTC 2015-134, 11 **** 2016.

7

broadband strategy do not need to be designed and implemented on a mutually exclusive basis. To the contrary, coordination between stakeholders is critical to achieving the policy objectives that are shared by the Commission and governments: conquering the digital divide and empowering all Canadians with access to the digital economy. To this end, CNOC is proposing a regulatory model that will unify, guide and support the national broadband strategy.

6. Before addressing the structure of this submission, it should be noted at the outset that the Commission has jurisdiction to implement all of CNOC’s regulatory recommendations. The Commission’s authority to do so stems from the statutory grants of power conferred upon the Commission by the Telecommunications Act3 (the “Act”). For example, the Commission has jurisdiction to mandate the provision of broadband internet access services at minimum speeds based on sections 24, 24.1 and 32(g) of the Act. The Commission also has jurisdiction to order either the upgrade or construction of new facilities based on subsections 42(1) and (2) of the Act.

CNOC has provided more detailed submissions concerning questions of the Commission’s jurisdictional authority and correspondinglimits by way of the following responses to Commission issued requests for information (“RFIs”): CNOC(CRTC)25Apr16-1 and CNOC(CRTC)25Apr16-3.

1.2 Structure of Submission
7. This final argument is structured as follows:

• Part 2.0 of the submission characterizes broadband as an essential service and draws a distinction between the ‘needs’ and ‘wants’ of Canadians;

• Part 3.0 makes recommendations with respect to speed targets and other service characteristics that should be reflected in the basic service objective;

• Part 4.0 of the submission outlines CNOC’s views on how to develop and engage a national broadband strategy;

• Part 5.0 sets out CNOC’s views as to how the national broadband strategy should be funded;

• Part 6.0 addresses affordability concerns;
3 Telecommunications Act, S.C. 1993, c. 38.
8

• Part 7.0 underlines the importance of prioritizing the most cost-effective telecommunications service platforms;

• Part 8.0 proposes terms that must be associated with the subsidized provision of broadband Internet as a basic telecommunications service;

• Part 9.0 includes CNOC’s recommendations relating to the existing local services framework;

• Part 10.0 contains CNOC’s submissions with respect to special regulatory measures that are required in the serving territory of Northwestel Inc. (“Northwestel”);

• Part 11.0 sets out proposed changes to the current contribution framework;

• Part 12.0 addresses the need for discoverability of transport facilities and a review of the forbearance regime for inter-exchange transport;

• Part 13.0 discusses digital literacy; and
• Part 14.0 provides CNOC’s conclusions.
2.0 Broadband is a Basic Telecommunications Service

8. The record of the proceeding reflects a resounding consensus on the importance of broadband access to the daily lives of Canadians. Canadians have spoken and CNOC agrees that broadband access must therefore be considered a basic telecommunications service. Although the status of broadband as a basic service is now evident, the approach to defining the basic service objective is still somewhat unclear.

9. In its first intervention, CNOC proposed a method of tiering different types of broadband applications or uses based on minimum supporting technical requirements.4 As the proceeding evolved, the focus has now shifted to distinguishing between the ‘needs’ and ‘wants’ of Canadians.

In the context of a proceeding aimed at empowering Canadians with access to the digital economy, CNOC concedes that a needs vs. wants approach is more appropriate and streamlined than a multi-tiered classification model based on minimum supporting technical requirements.

4 CNOC intervention dated 14 July 2015, at Sections 2.1 and 2.4.

9

10. Today, the following broadband uses / applications should be considered ‘needs’: email, e-commerce, banking, news, social media, VoIP, video-conferencing, telework, distance education, telehealth, access to educational and government tools and certain accessibility features like Video Relay Service (“VRS”).

11. In CNOC’s view, access to the above-listed ‘needs’ is necessary to ensure a fulsome participation in the digital economy. These applications for broadband access services can be contrasted with recreational luxury applications such as 4k video streaming.

12. Having defined a category of services that Canadians must have access to now and into the future, the question becomes how to define the basic service objective to ensure that broadband funding programs can facilitate access to such ‘needs’ in unserved and underserved areas. As discussed below in Part 3.0, answering this challenge depends on appropriate targets for broadband speeds and other service characteristics.

3.0 Setting the Appropriate Targets

13. Download and upload speeds are factors which have a significant impact on what a broadband service can and cannot do. The same can be said for other broadband service characteristics such as latency, jitter, packet loss and data caps. Consequently, providing all Canadians access to broadband ‘needs’ depends on setting these targets at the right level.

14. Much of the focus in this proceeding has been on speed. Interveners have proposed radically different speed targets ranging from continued support for the current 5 megabits per second (“Mbps”) download (“D”) / 1 Mbps upload (“U”)5 target to calls for 25 Mbps D / 3 Mbps U6.

15. CNOC proposes a regulatory speed target of 10 Mbps D / 3 Mbps U.7 5 See for example, Rogers Communications Inc.’s (“Rogers”) position in Transcript Volume 9, at para 11975; See also TELUS Communications Company’s position in Transcript Volume 6, at paras 7814-7853.

6 See for example, the intervention of the Government of Yukon dated 14 July 2015, at para 3.

7 See Transcript Volume 14, at para 19514.
10

16. As CNOC explained in its intervention, realistic speed targets should not be unattainable for high-cost serving areas and yet not sufficiently ambitious for more accessible rural areas.8 A 10 Mbps D / 3 Mbps U target strikes an appropriate balance between these competing considerations.

17. Several interveners have submitted that the current 5 Mbps D / 1 Mbps U target is sufficient to enable the kinds of broadband ‘needs’ described in the preceding part of this submission.9 Although it may be true that most ‘needs’ might have bare minimum technical requirements within the 5 Mbps D / 1 Mbps U range, CNOC is concerned with both the practical implications of such a speed ceiling in 2016 and the relevance of this target for the next few years. For example, during the hearing for this proceeding, the Commission elicited evidence with respect to the technical requirements of VRS.10 One intervener explained that VRS can operate at an “appropriate quality” at 737 kilobits per second (“Kbps”) U, but would require 1.3 Mbps U for “high quality” functionality.11 CNOC is concerned that the minimum technical requirements for VRS and other applications and services may reach and surpass 1 Mbps U in real time usage conditions, especially when other basic broadband applications are used concurrently. It is for this reason that CNOC supports a higher speed target of 10 Mbps D / 3 Mbps U, which provides greater capacity for practical everyday use of broadband services now and in the future.

18. Although a 10 Mbps D / 3 Mbps U target is a balanced benchmark for the vast majority of the country, CNOC acknowledges that this target may still be unattainable for high-cost terrestrial and satellite serving areas.12 It may therefore be desirable for the Commission to establish lower, yet still practical, speed targets on an exceptional basis for these special cases.13 8 See CNOC intervention dated 14 July 2015, at ES5.

9 See for example, Bell Canada’s position in Transcript Volume 7, at paras 94749483; See also Rogers’ position in Transcript Volume 9, at para 11975; See also TELUS Communications Company’s position in Transcript Volume 6, at paras 7814-7853.

10 See Transcript Volume 7, at paras 9777-9778.
11 Id. at para 9778.

12 CNOC intervention dated 14 July 2015, at paras ES5 and 33.

13 Ibid.
11

19. With respect to other broadband service characteristics including latency, jitter, packet loss and data caps, CNOC submits that the Commission should confirm that setting targets for these types of quality of service measures is important. However, it would be premature to set definitive targets without further industry consultation focusing on such matters. CNOC has surveyed its membership and carefully reviewed the record of the proceeding, including responses to RFIs asking parties to propose targets for all of the above-listed service characteristics,14 and is unable to recommend a meaningful set of targets at this time. The Commission should use the regulatory tools at its disposal, such as CISC or the ability to point an Inquiry **** to engage further study of these technical issues and make specific evidence-based determinations.15 4.0 The National Broadband Strategy

20. A national broadband strategy must be developed and implemented by way of a multi-stakeholder approach. At the outset, each stakeholder should have a well-defined set of responsibilities that accord with its respective capacities and mandate. In the subsequent paragraphs, CNOC outlines recommendations as to how these roles and responsibilities could be allotted.

21. First, the federal government has the core responsibility, resources and authority to lead the development and implementation of the national broadband program. The federal government must spearhead the program to fund the rollout of broadband facilities in unserved and undeserved parts of Canada. The federal government must also exercise its taxing power to spread the very significant funding required to fund this program across the entire Canadian tax base over a number of years.

22. Second, First Nations, provincial and territorial governments as well as municipalities have the capacity to make contributions to programs designed to improve broadband infrastructure and deliver digital literacy and skills training. Provincial and territorial governments also have the responsibility of monitoring broadband affordability concerns and implement programs, as 14 See for example, CNOC(Rogers)14Aug15-1 TNC 2015-134. The same RFI was also issued by Rogers to several other parties.

15 Transcript, Volume 14, at para 19516.
12

necessary, to address price barriers to broadband adoption within their respective jurisdictional boundaries.

23. Third, the Commission has significant means at its disposal to collect, analyze and obtain public input on the data that is critical for the formulation, by the federal government, of a comprehensive national broadband funding program. The Commission’s regulatory arsenal for performing these tasks includes the ability to solicit submissions, issue RFIs, appoint Inquiry Officers and hold public hearings. This very proceeding is an invaluable exercise that will inform all aspects of the design and implementation of the federal government’s broadband program going forward.

24. Subject to appropriate legislative amendments, the Commission could also create and oversee an entity similar to the Canadian Telecommunications Contribution Consortium (“CTCC”) to implement, at arms’ length, an evidence based funding model for large scale and regional projects. This entity would principally channel federally sourced funding into projects.

However, other governments could also choose to contribute funding for these types of projects that benefit their home jurisdictions.

25. Fourth, TSPs can apply their expertise, capital and other resources to deploy and improve broadband infrastructure in unserved and underserved parts of Canada. Enabling TSPs to do so will require the type of national broadband infrastructure program that CNOC is recommending.

As aforementioned, CNOC members are committed to providing broadband access on competitive terms and are eager to do so in unserved and underserved areas where opportunities are created by a broadband funding program.

26. As emphasized in the introduction, coordination among stakeholders is key to a successful national broadband strategy. As a starting point, the Commission should open communications with the federal government as soon as possible. In these early discussions, the Commission and the federal government could, as soon as possible after a determination is made in this proceeding, exchange information and perspectives on the proceeding, broadband infrastructure funding and plans, opportunities to collaborate and the engagement of other stakeholders such as First Nations, 13

provincial, territorial and local governments. The goal should be to ensure that parties are on the same page so that collectively, all individual stakeholders can contribute in a harmonized manner that prevents wasteful and inefficient use of resources.

5.0 Funding the National Broadband Strategy

27. The primary responsibility for funding the development of telecommunications network infrastructure rests with the federal government, as it always has. The government has already invested a substantial amount of the $305 million dedicated to the Connected Canadians program.16 Those investments have contributed significantly to addressing broadband coverage gaps in Canadian communities. The government has also announced $500 million over five years in broadband infrastructure investment to increase high-speed broadband coverage.17 This commitment will undoubtedly make a difference, but more is needed to ensure that all Canadians have access to a basic level of broadband service. In its collaborative dialogue with the federal government, the Commission should share evidence, analysis and projections of funding costs that were gathered over the course of this proceeding. In turn, the federal government will be better situated to reassess the budgeted funding that is currently allocated to broadband infrastructure investment in light of forecasted funding requirements over the short, medium and long term. In addition, the Commission’s expertise could assist in ensuring that funds to support the construction of broadband infrastructure are spent with maximum impact and efficiency.

28. To complement federal government funding, matching private investments should be required for every dollar of public funds invested in a subsidized broadband deployment.

Provincial and territorial governments should also be encouraged to contribute through the national program or other mechanisms to help fund projects within their provincial or territorial boundaries.

29. Broadened redistribution of TSP revenues through the National Contribution Fund (“NCF”) is another tool that could, if necessary, assist the funding of a subsidy regime for broadband Internet access deployment. However, a great degree of caution should be exercised in relying on this approach in light of the significant market distortions that could result from 16 https://www.ic.gc.ca/eic/site/028.nsf/eng/50010.html

17 http://www.budget.gc.ca/2016/docs/plan/ch2-en.html
14

contribution obligations that are not appropriately calibrated. Contribution taxes on telecommunications revenues to support multi-billion dollar funding programs could result in deadweight losses that would ripple throughout the economy. These kinds of market distortions would send improper economic signals throughout the industry, with corresponding losses in efficiencies.18

30. It is equally concerning that the cost of any contribution taxes to fund broadband deployment would trickle down to consumers. In the experience of CNOC and its members, consumers are not tolerant of $1-2 price increases on monthly telecommunications bills – let alone the $5-10 increase that may result from the scale of NCF based programs that some interveners are proposing.19 Canada already ranks very poorly in international comparisons when it comes to wireline broadband prices.20 Further increasing monthly telecommunications costs as a result of contribution taxes will aggravate this situation to the detriment of Canadian consumers who have proven to be very sensitive to price increases.21

31. In summary, funds raised through general tax revenues and government fees can contribute meaningfully towards a broad-based subsidy regime for broadband Internet deployment in high-cost serving areas, without a corresponding risk of disrupting the telecommunications industry and harming certain classes of consumers through increased monthly telecommunications costs.

Consequently, government funding and matching private investments must be relied upon as the core means of funding the national broadband program. If the Commission determines that an expanded contribution mechanism is necessary, such a mechanism must be complementary to government sourced funding and appropriately calibrated to minimize the risks discussed above.

18 CNOC intervention dated 14 July 2015, at para 67.

19 For example, the affordability funding mechanism and broadband deployment funding mechanisms proposed by AAC in its intervention dated 14 July 2015.

20 **** Report, at p.35.

21 CNOC provided examples of consumer sensitivity to very minor increases to monthly bills in Transcript Volume 14, at paras 19710-19715.

15
6.0 Affordability of Broadband Services

32. Based on Canada’s international rankings when it comes to price for broadband services22, it is no surprise that affordability has become an important issue in this proceeding. Parties like the Affordable Access Coalition (“AAC”) have suggested that it is incumbent on the Commission to resolve affordability issues through NCF funded affordability funding mechanisms.23 These proposals must be rejected for two main reasons. First, subsidy programs for broader affordability issues are properly within the constitutional jurisdiction of provincial and territorial governments.24 Beyond jurisdictional qualifications, provincial government are also the experts in leading social assistance programs and the Commission is not. Furthermore, the introduction or expansion of a subsidy for monthly telecommunications costs must be contemplated alongside all other social assistance programs within a province or territory’s control that may be indirectly affected. Second, like broadband deployment programs funded through the NCF, AAC’s proposed affordability funding mechanism runs the risk of creating substantial deadweight losses that would ripple throughout the economy. For these reasons, the Commission must reject requests for affordability programs funded via an expanded contribution mechanism.

33. While a Commission approved NCF-based funding mechanism is not the answer to broadband affordability issues, the Commission does have regulatory tools at its disposal that can improve the state of affordability and help lower price related barriers to broadband adoption.

These tools consist of regulatory policies aimed at promoting competition. As noted throughout this submission, CNOC members are contributing to the increased affordability of broadband services and look forward to seizing new opportunities to do so in areas targeted by a national broadband program. On this point, it is worth reproducing an excerpt from CNOC’s appearance at the oral hearing in this proceeding, referencing Exhibit 4:

“19592 COMMISSIONER MENZIES: Moving forward, affordability. Looking at paragraph 22.

You say your members advanced the cause of affordability, more or less, because they offer prices 22 **** Communications Inc. “Price Comparisons of Wireline, Wireless and Internet Services in Canada and with Foreign Jurisdictions”, **** 30, 2015.

23 Affordable Access Coalition intervention dated 14 July 2015, key position 7.

24 Specifically, this jurisdiction can be traced to the provincial domain over “charities and eleemosynary institutions”, “municipal institutions”, “property and civil rights” and “matters of a merely local or private nature in the province” under section 92 of the Constitution Act, 1982. being Schedule B to the Canada Act 1982 (UK), 1982, c 11.

16

that are significantly lower than those of the incumbents. How much lower? How do your prices compare with the incumbent’s?

19594 MR. HICKEY: Yeah, I won’t pull out a couple, but in the -- I’ll pull out just a couple from the Commission’s exhibit that I put forward on this proceeding.

19595 MR. HICKEY: The -- if you take a [sic] area like Toronto and you’re looking at the 5/1 that was detailed in the exhibits, you have our member TekSavvy 24.95 for 150 gig. You have Execulink at 29.995 for 100 gig. You have Distributel for 36.95 for unlimited. You have Bell at 42.95 with a question mark because the data cap isn’t listed. And you have Rogers at 54.99 for 60 gig. And so if you look at TekSavvy to Rogers, you’re looking at a substantial difference.

19596 Though it doesn’t just stop in purely urban areas like Toronto. If you go to Halifax it lists, for example, TekSavvy is a 41.95 products versus -- for unlimited at versus Bell 76.45 products for unlimited, also for 5 to 1 services.

19597 So you see that across the board in many ways. And the -- we think that is significant savings and everyday pricing. So these are also just not promotional. That’s everyday website pricing.”25 34. Exhibit 4 and the above quote clearly demonstrate that CNOC members are contributing to increased affordability by offering services at significantly lower prices than equivalent incumbent offerings.

35. In terms of promoting competition, the Commission has recently issued decisions such as Telecom Regulatory Policy CRTC 2015-32626 and Telecom Decision CRTC 2016-11727 which promise improvements to the competitive landscape for broadband services. In the context of this proceeding, the Commission can further encourage the development of competitive broadband markets by requiring mandated access to subsidized facilities, as proposed in Part 9.0 of this submission.

7.0 Prioritizing the Most Cost-Effective Telecommunications Service Platforms 36. The national broadband program should prioritize the roll-out of wireline facilities and in particular, Fibre-to-the-premises (“FTTP”) and fibre-to-the-node (“FTTN”) facilities, to the 25 Transcript Volume 14, at paras 19591-19597.

26 Review of wholesale wireline services and associated policies, Telecom Regulatory Policy CRTC 2015-326, 22 July 2015.

27 Review of costing inputs and the application process for wholesale high-speed access services, Telecom Decision CRTC 2016-117, 31 **** 2016.

17

maximum extent feasible. Compared to other telecommunications platforms, wireline technologies deliver vastly superior performance for virtually all service elements. As discussed in Section 2.2 of CNOC’s intervention, wireline networks are unparalleled in their capacity28, service speeds29 and performance with respect to other service characteristics30. These advantages ensure that wireline facilities, where they can be economically deployed, will support the broadest range of service characteristics. In other words, prioritizing the deployment of wireline facilities will empower Canadians with the greatest access to the digital economy. Furthermore, the high performance and capacity ceiling of wireline facilities ensures that broadband services will scale alongside the evolving demands and ‘needs’ of consumers. For all of these reasons, wireline facilities, although seemingly expensive compare to alternative platforms such as fixed wireless, must be considered the most cost-effective solution to addressing coverage gaps over the long term in the vast majority of unserved and underserved areas.

37. At the same time, CNOC acknowledges that there are areas in which it is not practical to deploy wireline facilities due to sparse population densities or great distances between central offices and end-user buildings. Funding of fixed wireless broadband deployments in these areas, and satellite, where even fixed wireless is not practical, will be critical to ensuring that no Canadians are left behind in their ability to access broadband services.

38. Over the course of this proceeding, OneWeb Ltd.31, Telesat Canada32 and Xplornet Communications Inc.33 have described promising emerging and future satellite technologies including high-throughput34 and low orbit35 satellite systems. These new technologies promise 28 For example, all of the theoretical capacity for all spectrum up to 100GHz is unable to come close to achieving the capacity of a single fibre optic strand; See CNOC intervention dated 14 July 2015, at para 10.

29 For example, FTTP can reach speeds of up to 1 Gigabit per second while FTTN can reach 50-250 Mbps, compared to wireless LTE-A which peaks at around 5-20 Mbps; See CNOC intervention dated 14 July 2015, at para 10.

30 For example, unlike satellite systems, wireline facilities are not encumbered by high latency and do not suffer service degradations in poor weather conditions; See CNOC intervention dated 14 July 2015, at para 11.

31 OneWeb Ltd. intervention dated 14 July 2015, at p.1.

32 Telesat Canada intervention dated 1 February 2015, at paras 13-15.

33 Xplornet Communications Ltd. intervention dated 14 July 2015, at ES 8.

34 Ibid.
35 OneWeb Ltd. intervention dated 14 July 2015, at p.1.
18

coverage over 100% of Canadian residences and businesses36, speeds of 25 Mbps37, low latency38 and more. If these technologies are deployed, and if this occurs within a few years and if they are capable of meeting the performance targets that were advertised in this proceeding, then such satellite technologies could play a role in addressing broadband coverage gaps in the country.

However, at this point the capabilities of these technologies remains highly speculative and the Commission must not make policy based on speculation. Instead, the Commission must regulate and the national broadband strategy must revolve around telecommunications service platforms that are known and readily deployable in today’s markets. Accordingly, CNOC urges the Commission to disregard emerging and future satellite technologies in its determinations. To the extent that these technologies do come to market in the next few years, they will undoubtedly be a core focus in the Commission’s next review of basic telecommunications services.

8.0 Terms Associated with the Subsidized Provision of Broadband Internet as a Basic Telecommunications Service

39. CNOC recommends that the national broadband program impose two conditions on the subsidized provision of broadband services as a basic telecommunications service: (1) mandated access to subsidized broadband facilities; and (2) a requirement that subsidized facilities be upgradable to 25 Mbps D / 10 Mbps U.

40. First, the mandated access condition will accelerate the introduction of competition in new retail markets where subsidized broadband facilities are deployed. As emphasized in CNOC’s intervention, the lack of competition that affects retail markets for broadband services is one of the greatest barriers that limits or prevents Canadians from meaningfully participating in the digital economy.39 As mandated access has done in other parts of the country, this condition will increase levels of choice when it comes to providers, services, features and price. Wherever consumers can 36 Xplornet Communications Ltd. intervention dated 14 July 2015, at ES 8; Telesat Canada intervention dated 1 February 2015, at paras 13-15.

37 Xplornet Communications Ltd. intervention dated 14 July 2015; OneWeb Ltd. intervention dated 14 July 2015, at p.5.

38 OneWeb Ltd. intervention dated 14 July 2015, at p.3.
39 CNOC intervention dated 14 July 2015, at para 23;
19

benefit from choice, they are more likely to find a broadband solution that suits their personal ‘needs’.

41. The rates for wholesale services over subsidized facilities should be based on Phase II costs plus a reasonable mark-up. Importantly, the Phase II costs used to compute wholesale rates should exclude all subsidies that the carrier received to deploy its facilities.40 Carriers should not be compensated by wholesale customers for costs that are subsidized from other sources.41 This costing approach will provide operators with clear expectations when developing business plans for subsidized deployments. Wholesale obligations do not prevent broadband investment in non-subsidized areas, there is therefore no reason why mandated wholesale services at cost-based rates would dissuade operators from investing in subsidized areas.

42. A mandated access condition should however exempt a class of smaller providers who lack the scale to support wholesale services. Unlike large carriers who are very experienced with wholesale service provisioning, smaller providers do not have the resources or expertise to conduct costing exercises and provision wholesale services along with all the associated overhead in terms of billing services, customer support, maintenance, etc. The Commission should evaluate the threshold proposed by CNOC member Teksavvy Solutions Inc.42 (“TekSavvy”), as a starting point for consideration, whereby a network provider, together with its affiliates, must reach 25,000 residences, businesses and institutional campuses, and other locations with broadband access in order to have the necessary scale to warrant an obligation to provide wholesale access to subsidized broadband facilities.43

43. The second condition that should apply to subsidized broadband services is a requirement that underlying facilities must be upgradable to 25 Mbps D / 10 Mbps U. This condition will ensure a greater economic lifespan for subsidized network infrastructure. Without this requirement, there is a risk that certain facilities become outdated, irrelevant and lay fallow soon after they are 40 CNOC intervention dated 14 July 2015, at para 42;

41 Ibid.

42 TekSavvy Solutions Inc. intervention dated 14 July 2015, at para 28.

43 Ibid.
20

deployed with the assistance of subsidies.44 In CNOC’s view, subsidized broadband facilities that are upgradable to 25 Mbps D / 10 Mbps U will have a long economic lifespan. In the end, this condition will ensure that public funds are invested efficiently and generate long term benefits for consumers.

44. As explained in CNOC’s first intervention, the condition that subsidized facilities must be upgradable to 25 Mbps D / 10 Mbps U should not apply in the case of the operating territory of Northwestel Inc. (“Northwestel”) or other serving areas with substantially similar characteristics.45 In such areas, this condition could be unduly onerous or impossible to satisfy. Therefore, bids to deploy scalable infrastructure in Northwestel’s territory (or areas with similar characteristics) should be accorded additional weight, but no strict condition should be enforced.

9.0 The Existing Local Services Framework

45. CNOC maintains its position that, except in the case of Northwestel (discussed in Part 11.0, below), the current local services framework should be maintained, including the following policies: the basic service objective, the obligation to serve, the associated subsidy regime, applicable price caps and standalone Primary Exchange Service (“PES”).

46. The local service framework has been successful in its goal of ensuring access to basic telephone service for all Canadians. CNOC submits that the Commission should continue to oversee the framework and ensure that the subsidy requirement continues to decline over time.

Parties in this proceeding have not demonstrated compelling grounds to justify the elimination, reduction or redirection of the local voice subsidy regime throughout Canada. Accordingly, all such proposals should be rejected and the Commission should affirm the continuation of the local services framework in its current state.

44 CNOC intervention dated 14 July 2015, at para 45.
45 Id. at para 44.
21
10.0 Northwestel’s Operating Territory

47. The geography, population density and other distinguishing factors of Northwestel’s operating territory must receive special treatment within Canada’s national broadband strategy.

The main obstacle to the provision of telecommunications services in this vast area is the high cost of terrestrial and satellite transport. The Commission explicitly acknowledged this problem when it announced its intention to fund capital infrastructure investment in transport facilities (e.g. fibre, microwave and satellite) in Northwestel’s operating territory in Telecom Regulatory Policy CRTC 2013-71146 (“TRP 2013-711”) after holding an inquiry on satellite transport services in Canada.

As CNOC explained in its intervention, the lack of affordable transport services is a much greater impediment to the availability of affordable retail services than the cost of access which can be managed more readily in the relatively small communities situated in this territory.47 48. The transport subsidy that was contemplated in TRP 2013-711 is now urgently needed.

During the oral hearing, Vice-Chair **** referenced a report of the Department of National Defence and Border Services that concluded that connectivity in the Far **** was sub-standard and needed to be upgraded as a matter of survival and based on three principles: the maintenance of sovereignty, security and public safety.48 There is no doubt that the stakes are higher in the Far ****, both for Canadians and the country as a whole. Such high takes warrant swift and decisive action. The lack of transport facilities is the single biggest impediment to the availability of services in the Far ****. Therefore, the national broadband strategy must address the lack of transport in Northwestel’s territory, and in certain other remote high-cost serving areas, as a priority. Doing so will require a transport subsidy mechanism.

49. In order to fund a transport subsidy program, CNOC proposes, as an exceptional measures, the redirection of current subsidy programs in Northwestel’s operating territory. All funding occurring through the transport subsidy mechanism should be calculated with reference to baseline costs for terrestrial and satellite transport services in non-high cost serving areas. CNOC submits that the mechanism should subsidize transport costs in Northwestel’s territory that exceed 46 Northwestel Inc. – Regulatory Framework, Modernization Plan, and related matters, Telecom Regulatory Policy CRTC 2013-711, 18 December 2013.

47 CNOC intervention dated 14 July 2015, at para 59.
48 Transcript Volume 9, at paras 12554-12555.
22

comparable costs for transport facilities in **** Canada. Comparable costs would be those that are no more than 10% greater than the **** Canada costs.49 50. Redirecting local voice subsidies will have an impact on both providers and consumers of such services. For this reason, CNOC proposes a transition plan to mitigate harms (e.g. sudden price hikes for wireline voice services) throughout the period of change wherein subsidized transport facilities will progressively translate into greater availability of telecommunications services (including alternative voice services such as Voice over Internet Protocol or “VoIP”).

More specifically, CNOC proposes a five year transition plan that is similar to what SSI Group of Companies recommend in their intervention.50 In each year of the transition plan, 20% of the local voice subsidy will be phased out with a corresponding 20% increase in transport subsidies. This will ensure a smooth transition for all stakeholders, including consumers.51 51. Overall, this approach is balanced and specifically designed to address the unique circumstances of Northwestel’s serving area and other areas with similar characteristics.

Consistent with CNOC’s other positions: the transport subsidy mechanism is only intended to complement government funding sources and any transport-based services that are subsidized should be subject to mandated wholesale access as contemplated in Part 9.0 of this submission.

11.0 Changes to the $10 Million Contribution Threshold

52. The current $10 million threshold for NCF contributions creates a situation of inequity for smaller players who just barely meet or surpass this level of Canadian Telecommunications Service Revenues.52 The threshold is an “all or nothing” model that has a disproportionate impact on small providers who lack the scale and resources that allow larger players to absorb NFC related expenses comfortably.53 As described at the oral hearing, “…a competitor that just breaches 11 million and has 3 million of intercarrier expenses or terminal equipment revenues, will owe 44,000 49 CNOC intervention dated 14 July 2015, at para 62.

50 Schedule 3 of SSI Group of Companies intervention dated 14 July 2015, at Section 2.3.

51 Referenced in Transcript Volume 14, at paras 19684-19685.
52 CNOC intervention dated 14 July 2015, at para 70.
53 Ibid.
23

on those revenues, which for a growing service provider could mean a salary, could mean a piece of equipment, or another important need that wasn't there one year and is there the next.”54 53. To remedy this built-in situation of inequity, CNOC recommends that the Commission replace its current contribution threshold with a revenue exemption model. Such a model would exempt the first $10 million in Canadian Telecommunications Service Revenues for all TSPs – large and small. Calculations will then be calculated based on all amounts surpassing the exemption figure, at a percentage rate determined by the Commission. The end-result will be that TSPs of all sizes are affected in a similar manner by the obligation to contribute to the NCF.

54. CNOC has reviewed the RFI response of the Canadian Telecommunications Contribution Consortium Inc. (“CTCC”) setting out its views on the impact of CNOC’s proposal to the national contribution fund, its operations and the contribution percentage of required contributors if the Commission were to adopt CNOC’s proposal.55 With reference to 2014 data, the CTCC calculates that the total contribution eligible revenues (“CER”) for 2014 would have been reduced by $662,448,201 under CNOC’s proposal, leaving a total CER of $20,882,093,886.56 From that figure, a contribution rate increase from 0.55% to 0.57% would obtain $118,494,994, the total amount of contribution to the NCF in 2014 under the current model.57 CNOC submits that the relief that an exemption model would create for small providers and the far more equitable structure of such a model justifies a 0.02% or similar contribution rate increase.

55. Beyond the contribution rate increase, the CTCC notes that CNOC’s proposal would require changes by the Central Fund Administrator (“CFA”) to forms and reports as well as system changes.58 These changes are feasible and would not impose an unreasonable burden on the CFA.

Finally, the CTCC states that it would need to know “…whether the proposed $10 million deduction from a Required Contributor’s CTSR59 would be taken evenly over the course of the data year or as soon as the Required Contributor’s cumulative CTSR, as reported to the CFA, 54 Transcript Volume 14, at para 19616.

55 CTCC(Shaw)14Aug15-1.
56 Ibid.
57 Ibid.
58 Ibid.
59 Canadian Telecommunications Service Revenues (“CTSR”).
24

exceeded $10 million.”60 At this stage, it appears as though a deduction taken evenly over the course of the data year would result in more consistent CER levels month-to-month, especially in the month of January. CNOC therefore supports this approach on the condition that required contributors can carry forward deductions not used in a month to future months.

56. Finally, CNOC recommends that the Commission increase the contribution exemption from the current $10 million level to $15 million. The $10 million figure has remained static since its introduction in 200161. At that time the Commission noted that the $10M figure represented an initial exemption threshold that would be reviewed as required62. This has not occurred despite the significant changes in the telecommunications market that have occurred since 2001. For this reason, CNOC submits that the threshold should be raised proportionately with the increase in CTSR since 2001. As noted during the oral hearing63, the $10 million figure represented .032 percent of $31 billion64 CTSR in 2001. If we apply that same ratio to the $45.9 billion CTSR in 201665, the result is approximately $15 million. This amount is also consistent with an increase that would result from the application of inflation factors over the period 2001 to 201666.

57. The $15 million exemption model should apply whether or not the Commission decides to extend the contribution regime to broadband services. The Commission should also ensure that the transition from a threshold to an exemption contribution model does not impose additional reporting requirements for TSPs with Canadian Telecommunications Service Revenues at or below $15 million. Otherwise, the benefits of this transition could be offset by the administrative burden that such reporting requirements would represent for the smallest players in the industry.67 60 CTCC(Shaw)14Aug15-1..

61 Telecom Decision CRTC 2000-745, Changes to the contribution regime, at para. 99.

62 Ibid.
63 Transcript Volume 14, at paras 19615-19619.

64 2006 CRTC Telecommunications Monitoring Report, Table 4.1.1 (available at:

http://publications.gc.ca/collections/Collection/BC92-57-2006E.pdf) 65 Communications Monitoring Report, October 2015, Table 3.0.1.

66 Inflation rate of 31.72 calculated using the Bank of Canada Inflation Calculator (available at:

http://www.bankofcanada.ca/rates/related/inflation-calculator/) 67 CNOC intervention dated 14 July 2015, at para 72.

25
12.0 Transport Discoverability and Forbearance

58. Discoverability of transport facilities is a barrier to the competitive rollout of broadband connectivity in Canada. Throughout this proceeding, parties including CNOC68, TekSavvy69 and the Canadian Cable Systems Alliance Inc. (“CCSA”).70 have demonstrated how this barrier needlessly frustrates the operations and expansion of small providers. Fortunately, a solution is simple and can be readily implemented. All that is required is for providers to map out the location of their transport facilities so that wholesale customers who wish to lease such facilities can discover the location and provider of transport lines throughout their operating territories. At least one major provider already publishes this information publically71 and others72 have expressed an openness to do so.

59. No intervener has presented any compelling reasons in opposition of a mapping exercise to facilitate the discoverability of transport facilities. Saskatchewan Telecommunications (“SaskTel”) objected on security grounds stating that this information might open its network to sabotage.73 However, this concern can easily be addressed. Maps of transport facilities do not need to be made available to the world on public company websites. These maps can be made accessible on a restricted basis to entities that are registered with the Commission as providers of telecommunications services.74 This measure would create a simple and effective safeguard to protect against the security concern expressed by SaskTel.

60. Finally, CNOC agrees with TekSavvy that the Commission should launch a review of its forbearance framework for inter-exchange private line transport.75 This forbearance regime is nearly twenty years old76 and relies on forbearance criteria that are no longer relevant to the 68 Transcript, Volume 14, at para 19518.

69 TekSavvy intervention dated 14 July 2015, at paras 41-52.
70 As noted by CCSA in Transcript Volume 8, at para 11229.

71 As noted by Bragg Communications Inc. in Transcript Volume 13, at para 18104.

72 As noted by Rogers in Transcript Volume 9, at para 12295.

73 As noted by SaskTel in Transcript Volume 11, at para 14934.

74 As noted by CNOC in Transcript Volume 14, at para 19585.

75 TekSavvy intervention dated 14 July 2015, at para 47; See also TekSavvy in Transcript Volume 1, at para 1232.

76 The regime was first introduced in Stentor Resource Centre Inc. – Forbearance from regulation of interexchange private line services, Telecom Decision CRTC 97-20, 18 December 1997, and Follow-up Proceeding to Telecom Decision CRTC 97-20: Establishment of criterion and process for considering further forbearance for High Capacity/DDS interexchange private line services, Telecom Order CRTC 99-434, 12 May 1999.

26

modern marketplace for transport services. A modern and well-calibrated forbearance regime for inter-exchange transport will have a profoundly positive impact on broadband deployment and competition in downstream retail markets for broadband services. CNOC therefore urges the Commission to initiate, as soon as feasible, a proceeding to review the forbearance framework for inter-exchange transport services.

13.0 Digital Literacy

61. Digital literacy is a topic that attracted increasing attention as the proceeding progressed – and for good reason. Programs designed to improve digital literacy will help push broadband adoption and empower an important segment of the population to engage the digital economy and reap its benefits. Fundamentally, these programs are the responsibility of provincial and territorial governments as well as municipalities. However, it should also be recognized that the Commission can have an important role in promoting digital literacy objectives by encouraging public discourse, as it has in this proceeding.

14.0 Conclusion

62. The first step in Canada’s national broadband strategy is nearly complete. This proceeding has shed invaluable insight on the challenges that lay ahead and the roles that all stakeholders must fulfill in pursuit of a nation-wide world class communications system that leaves no Canadians behind. Moving forward, the national broadband strategy must be anchored by targeted government funding and a robust regulatory framework. CNOC is confident that the adoption of the recommendations set out in this submission will translate in a balanced and effective national strategy that will not only help introduce broadband services where they are most desperately needed, but will also continue to improve the levels of competition for such services throughout the country. This forward looking approach will ensure that Canadians can experience and participate in the digital economy on their terms, in a manner that best fulfills their ‘needs’.

*** END OF DOCUMENT ***
1.0 Introduction
1.1 Background
1.2 Structure of Submission
2.0 Broadband is a Basic Telecommunications Service
3.0 Setting the Appropriate Targets
4.0 The National Broadband Strategy
5.0 Funding the National Broadband Strategy
6.0 Affordability of Broadband Services

7.0 Prioritizing the Most Cost-Effective Telecommunications Service Platforms 8.0 Terms Associated with the Subsidized Provision of Broadband Internet as a Basic Telecommunications Service 9.0 The Existing Local Services Framework

10.0 Northwestel’s Operating Territory
11.0 Changes to the $10 Million Contribution Threshold
12.0 Transport Discoverability and Forbearance
13.0 Digital Literacy
14.0 Conclusion

Final Submission : Canadian Network Operators Consortium Inc.

Document Name: 2015-134.223974.2614240.Final Submission (1k15s01!).pdf

Canadian Network Operators Consortium Inc.

Consortium des Opérateurs de Réseaux Canadiens Inc.

107-85 Curlew Drive, Toronto, ON, *** *** (416) 613-CNOC

www.cnoc.ca
May 25, 2016
FILED VIA GCKEY
Ms. **** May-Cuconato
Secretary General

Canadian Radio-television and Telecommunications Commission Gatineau, Quebec

*** ***
**** Ms. May-Cuconato,

Subject: Review of basic telecommunications services, Telecom Notice of Consultation 2015-134, as amended (CRTC File No. 8663-C12-201503186) – Final argument of Canadian Network Operators Consortium Inc.

1. Canadian Network Operators Consortium Inc. (“CNOC”) hereby files its final written argument in the above cited proceeding.

Yours very truly,
**** Sandiford

Chair of the Board and President Copy: Distribution ****

*** END OF DOCUMENT ***

Final Submission : Canadian Network Operators Consortium (Intervenor 267)

Document Name: 2015-134.223974.2614240.Final Submission (1k15s01!).pdf

Canadian Network Operators Consortium Inc.

Consortium des Opérateurs de Réseaux Canadiens Inc.

107-85 Curlew Drive, Toronto, ON, *** *** (416) 613-CNOC

www.cnoc.ca
May 25, 2016
FILED VIA GCKEY
Ms. **** May-Cuconato
Secretary General

Canadian Radio-television and Telecommunications Commission Gatineau, Quebec

*** ***
**** Ms. May-Cuconato,

Subject: Review of basic telecommunications services, Telecom Notice of Consultation 2015-134, as amended (CRTC File No. 8663-C12-201503186) – Final argument of Canadian Network Operators Consortium Inc.

1. Canadian Network Operators Consortium Inc. (“CNOC”) hereby files its final written argument in the above cited proceeding.

Yours very truly,
**** Sandiford

Chair of the Board and President Copy: Distribution ****

*** END OF DOCUMENT ***

Final Submission : Canadian Network Operators Consortium Inc.

Document Name: 2015-134.223974.2614241.Final Submission (1k15t01!).html

Raisons pour comparaitre / Reasons for appearanceSince Canadian Network Operators Consortium Inc. appeared at the original hearing, it would wish to appear at any subsequent hearing related to this proceeding.

Final Submission : Canadian Network Operators Consortium (Intervenor 267)

Document Name: 2015-134.223974.2614241.Final Submission (1k15t01!).html

Raisons pour comparaitre / Reasons for appearanceSince Canadian Network Operators Consortium Inc. appeared at the original hearing, it would wish to appear at any subsequent hearing related to this proceeding.