Intervention: Joint Task Force (Intervenor 281)

Document Name: 2015-134.224016.2395575.Intervention(1fcfr01!).pdf
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CRTC Question 1

Canadians are using telecommunications services to fulfill many social, economic, and cultural needs in today’s digital economy.

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

b. Explain which telecommunications services are most important to support these needs and uses. What characteristics (e.g. capacity, mobility, high speed, and low latency) should these telecommunications services have?

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

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

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

Answer

a) From the perspective of telecommunications carriers, e-commerce, e-banking and/or telephone banking, e-health or telehealth, telework and distance education are all examples of applications (i.e. “needs and uses” as that phrase is used in question 1.b) below) that are facilitated via telecommunications services, as opposed to being telecommunications services themselves.

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This service/application distinction is important in the context of this proceeding as the Commission determines the list of services that should be included in the Basic Service Objective (“the BSO”).

The list of applications available to Canadian consumers is potentially unlimited since it is usually non-telecommunications service providers that develop these applications. For example, e-banking was developed by the banks based on the widespread availability of broadband Internet access.

In a recent blog-post on his website, former CRTC Commissioner **** Denton argued as follows regarding the importance of applications:

By contrast, the highway model [of competition] says that traffic should freely interchange among networks, and that this interchange should be subject to regulation if the carriers exert market power. In this vision, competition among applications is more relevant to the consumer interest than competition among physical networks. Thus, while competition among carriers is always relevant, useful, and important, the number of carriers is not the supreme consideration.

The ability of the consumer to use large amounts of cheap bandwidth, and to reach the largest number of other people, is decisive.

Telecom and broadcasting are not converging; they are being absorbed into the architecture of the Internet. Applications are what matters, just as cars are generally of more concern to us than highways. Nothing carriers can do can make them relevant to competition in applications. If they play in that space, all they do is favour some applications over others.

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... but for me this is not so much an error, as some think, as a pre-Internet idea of competition. A fourth carrier may be good or it may be bad, but is a distraction from the importance of applications riding freely over transport.1 (emphasis added)

While the JTF is not raising the number of cellular networks in Canada as a matter for consideration in this proceeding, nor does it take any position on that issue, the JTF believes that Mr. ****’s views of the importance of applications is important to this proceeding. Simply stated, Canadian consumers use applications facilitated by telecommunications services to participate in the digital economy.

It is difficult for telecommunications service providers (“TSP”) to determine which applications are the most important to ensure that Canadians meaningfully participate in the digital economy. Which applications are used most by consumers is, of course, driven exclusively by individual consumers and not TSPs. The range of individual consumers and households types - the factors that drive the use of applications is enormous. One Australian study has concluded that there are 192 household types:

We then further combine these individual profiles into household profiles...

depending on household composition. This is based on 16 household types (for example, single adults, two adults, two adults one child and so on), and also on the type of primary TV set (SD/HD/4K - extremely high resolution “4K” TVs have the potential to be an important contributor to bandwidth demand). We also disaggregate households out into high, medium and low categories based on their 1 www.tmdenton.com/index.php/easyblog/entry/the-number-of-cellular-networks-is-largely-irrelevant-if-how-they-interconnect-is-set-right.

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propensity to use the Internet. In combination, these splits build to a total of 192 household types.2

The variety of household types, and indeed of individuals themselves, makes it impossible to say which applications are the most important. However, there can be no doubt that being able to use telephone and Internet-based applications is critical for Canadians to participate in the digital economy.

b) The most important telecommunications services needed to support consumers’ use of the applications discussed in a) above are voice telephony and broadband Internet access.

With regard to voice telephony the most relevant characteristics are reliability (e.g. up time) since landline telephone, in general, is moving towards being used for personal security purposes such as access to E9-1-1 and home alarm systems.

With regard to broadband Internet access the most relevant characteristics include reliability but low rates of latency and jitter have also become extremely important in the world of Internet Protocol traffic where high rates of either or both latency and jitter can impede voice and video traffic. Sustainable throughput is also a key requirement.

Furthermore, tele-presence applications such as video conferencing have, until recently, been available to only large corporations that have been able to afford the closed/closely managed networks required for broadcast quality signals. As Internet-based video applications have evolved (e.g. Skype) and become more widely available, the availability 2 Domestic bandwidth requirements in Australia - a forecast for the period 2013-2023, **** Kenny and Tom Broughton, Communications ****, page 5.

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of higher-speed upload capabilities has become more and more important. The link provided below to Cisco’s website provides an example of the importance of two-way (i.e.

symmetrical) services.

http://www.cisco.com/web/strategy/healthcare/telepresence_hc.html Applications such as telemedicine (e.g. video conferencing) require real-time, near symmetrical no-loss communication channels to ensure that important medical advice and diagnostic information are transmitted reliably.

Considering these requirements, the JTF submits that in this proceeding the Commission must seriously consider whether wireless services are a “apples-to-apples” substitute for wireline voice and wireline broadband services and whether wireless technology is capable of meeting Canadians’ long term needs for broadband services. The JTF is well aware of the wireless revolution that has occurred not only in Canada but the rest of the world. However, based on its experiences and observations in Canada’s High Cost Serving Areas (“HCSAs”) the JTF does not believe that wireless services, be it fixed, mobile or satellite are the dependable solutions for HCSAs due to the rapidly growing capacity demands of customers. This problem is compounded by the fact that in some HCSAs tower-based wireless services are simply not available.

Based on information from Execulink Telecom Inc. (“Execulink”), network data indicates that the average peak period usage per customer is currently 1.2 Mbps. This is the demand on the core network by the average individual user during the peak traffic time.

This is determined by taking the peak capacity at the peak hour of use and dividing by the total number of users on the network. It is important to recognize that not all users use a http://www.cisco.com/web/strategy/healthcare/telepresence_hc.htmlCITC-JTF

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network at the same time, however the daily peak represents the sizing requirements for backhaul and to prevent blocking of services.

Based on 12 years of data, Execulink has observed a capacity use increase of 50% year over year. This means that every year, the increase in demand on the network is 50% higher than the previous year.

Using these data points the JTF created the following network demand profile. It is important to recall that network traffic is always aggregated and thus a user’s experience is not only based on the speed of their last mile service, but also on the end-to-end performance of a given connection. There is often a misunderstanding between what a user is buying versus how the network actually operates. While there is a speed setting in the last mile component, most residential users are not buying dedicated capacity/speed (in fact many businesses do not purchase those either) which means that while the service can operate at that maximum it is not guaranteed to deliver those measures continuously.

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the actual speed delivered in the last mile, the data clearly demonstrates future demands that will only be met by fibre optic infrastructure Based on this data, the JTF does not believe that the access component of any wireless service will be able to meet the long term demands of consumers and that investment in wireless technologies will only be a stop gap to meet immediate demands. The JTF believes that this is why large incumbent providers are investing heavily in Fibre-to-the-Home projects in cities such as Toronto, Montreal, Peterborough and ****, to name just a few.

c) As noted above in sections a)&b) of this answer, the types and number of applications available to consumers are not barriers to meaningful participation. Rather, the barriers appear when consideration is given to how (or even whether) Canadians are able to access these applications. From a service provider’s perspective - especially in rural, high-cost areas the most relevant barriers are availability, service quality (i.e. jitter, latency and available throughput) and the available price.

Thanks to the BSO and the associated subsidy mechanism, rural consumers have access to high-quality and affordable wireline telephony service. However, this is not always the case today with access to wireline broadband services, where the combination of distance, topography and the high cost of providing service (i.e. the lack of a workable business case) have prevented some customers from having a broadband connection.

With regard to wireless Internet access alternatives in rural high-cost areas, JTF members have heard from their residential customers that these services face capacity issues (i.e.

many customers share the same wireless access conduit (i.e. a tower or satellite), wireless systems are unable to deliver the same network capacity as wireline systems and, once again due to the combination of distance and topography, wireless services can be inconsistent and unreliable.

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JTF Attachment 2 to this submission is a paper prepared by the Nordicity Group entitled Wireless Substitutability - Examination of the Substitutability of Wireless for Wireline Broadband Connectivity, dated 9 May 2014. The paper was commissioned by the Canadian Network Operators Consortium for regulatory proceedings in 2014. The authors provide their conclusions beginning on page 63 of their report. They state in part as follows:

Although wireless technologies have evolved a great deal, and offer greater capacities and speeds than ever before, it is important to note that that so have wireline technologies. In addition, the needs of users also continue to grow and evolve. **** from a practical, and theoretical technical assessment, wireless technologies cannot act as substitutes for wireline technologies. At the fundamental of capacity, the medium is simply not capable of handling the volumes of data for a mass audience.

While the backhaul and backbone networks that serve the wireless network can handle ever-larger capacity thanks to the use of fibre optics, the radio access network (RAN) itself is a limiting factor. In order to deliver greater capacity and/or speeds to end users, the volume of antennas that would need to be deployed would be very large, in order to serve fewer customers/connections per tower.

Also beyond the pure capacity limitations present in the RAN of a mobile wireless network, additional flags would be raised by the limitations based on geographic coverage, as well as higher constraints around time-of-day usage when many users are trying to connect to the network.

...

The reality is that in areas in which wireline options are present, mobile wireless options are not truly substitutable for a meaningful portion of the population.

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d) The JTF submits that reliable and affordable telephone and broadband connections are the key enablers that allow Canadians to meaningfully participate in the digital economy.

e) In the JTF’s view, although the number and variety of the applications available to Canadian consumers will continue to grow quickly, the two relevant services will remain the same: voice telephony and broadband services will be the key access methods.

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CRTC Question 2

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

Answer

In Telecom Regulatory Policy 2011-291 the Commission established its current target speed and also provided its view as to what Canadians should be able to do with these speeds at that time:

74. Based on the record of this proceeding, the Commission considers that Canadians should have access to a broadband Internet access service that allows several users in one household to use the World Wide Web (alpha-numeric text, images, and small video files), voice over Internet Protocol services, and other online services (such as email and banking) over a single connection at the same time. With this type of access, users will be able to actively participate in online discussions, take advantage of many government services, and carry out research, to name just a few possible applications.

75. The Commission also considers that a broadband Internet access service should allow a single user to stream higher-quality audio and video and to participate in video conferencing at reasonable quality using online services. This capability will enable users to engage in such activities as participating in distance learning and online consultations with professionals (basic e-health).

76. To accommodate such uses, the Commission considers that the appropriate target speeds for broadband Internet access service are a minimum of 5 Mbps download and 1 Mbps upload. The Commission notes that, while many Canadians CITC-JTF

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in urban areas already have access to broadband Internet services at or above these target speeds, such speeds are not currently available to most Canadians in rural and remote areas.

77. The Commission further considers that the target speeds are to be the actual speeds delivered, not merely those advertised. That stated, the Commission recognizes that the broadband Internet access speeds actually experienced by users are affected by a wide range of factors, some of which are outside the control of the network provider.

78. The Commission expects that the target speeds set out above will be available to all Canadian homes, regardless of their geographic location, through a range of technologies. For example, new satellite technology will soon be available to increase the footprint and quality of satellite broadband Internet access offerings, and numerous wireless network providers are expanding the reach of their latest network technologies, which promise greater speeds to more Canadians at reasonable rates.

The JTF notes that in Question 1 the Commission mentioned e-commerce, e-banking and/or telephone banking, e-health or telehealth services, telework and distance education as key elements of the digital economy. However, it did not mention on-line entertainment (e.g. on-line gaming or streaming video services) and so the JTF will exclude consideration of those applications from its answer to this question. The Commission has also used the phrase “the minimum needs of Canadians” which the JTF has interpreted as “adequate to serve the basic needs of Canadians.” CITC-JTF

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The Commission’s Question 1 also raised the concept of “meaningful participation” in the digital economy. Meaningful can be defined as “significant”, life impacting or life changing. Given the applications mentioned by the Commission in Question 1, the JTF believes that in order to participate meaningfully in the digital economy, consumers’ lives should experience improvements or advantages relative to what they experienced without these applications. Access to new applications (e.g. telemedicine) and the ability to use them without impediment, without interruption and without waiting will ensure meaningful, life impacting participation. These assumptions point toward the increasing need for reliable two-way connections and beg the question as to which technologies are best positioned to support the latest applications that rely on two-way connections.

Moreover, to facilitate modern applications such as telemedicine, the importance of up-load speeds increases. The ability to access increased, or even symmetrical upload speeds will drive true participation by Canadians. Improved upload speeds will transition customers from being passive recipients of content (e.g. streaming video) to meaningful interaction with the providers of digital economy applications.

For example, the Ontario Telemedicine Network (“the OTN”) (https://otn.ca) has as its mission statement the following:

Our mission is to develop and support telemedicine solutions that enhance access and quality of health care in Ontario, and inspire adoption by health care providers, organizations, and the public.

The OTN recently awarded its “Champion of Telemedicine Award” to Dr. **** Lossing.

One newspaper article covering the award stated as follows:

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Technology is changing our world and Southlake Regional Health Centre’s chief of vascular surgery, Dr. **** Lossing, has been quick to embrace all that it has to offer.

Accordingly, the innovative physician was honoured Friday with a Champions of Telemedicine Award by the Ontario Telemedicine Network as the Newmarket hospital.

Lossing received the award for his enthusiasm and support for telemedicine and for wholeheartedly enveloping the network’s solutions into his practice, Network CEO Ed **** said.

Traditionally, patients requiring specialized care may travel far distances so they can see a particular specialist, **** explained. Now, with the help of telemedicine technologies, patients from all over the province have the ability to consult with Lossing from their own communities for pre and post-op visits, making his specialized techniques for aortic aneurysm repair more accessible.

Lossing has been an advocate for telemedicine within the health care network and is always eager to help the network develop, test and deploy new solutions, such as personal computer video conferencing and its new “send invite” feature that allows providers to invite those outside the network, such as patients and caregivers, to a videoconference call.

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“I am thrilled to receive this award.” Lossing said. “It’s amazing to see how with videoconferencing on computers, tablets and iOS devices we are able to give patients easy and convenient access to specialized care”3 The OTN’s website discusses the technical requirements4 for video conferencing and recommends that the user subscribe to a “business-grade” bandwidth package for the application. In addition, JTF Attachment 3 is the OTN’s “Personal Videoconferencing Troubleshooting: Poor Video Quality” guide. In this guide users are encouraged to:

• Use a business-grade internet connection;
• **** OTN’s connectivity tests
• Use an HD webcam

• Use the best possible connection - wired is better than wireless • Close all programs except those necessary for your videoconference (to free up your CPU)

The JTF notes that the OTNs allowances for Latency and Jitter for its video conferencing application are as follows:

• Maximum Latency: 15.0 ms
• Maximum Jitter: 15.0 ms

In light of all of the above and the continued rapid evolution and use of applications such as telemedicine, the JTF submits that the Commission’s current target speeds are only just sufficient but not sufficient for all Canadians. Many service providers also advertise using 3 Doctor will see you now... from 100 km way - Southlake’s Dr. **** Lossing wins Champions of Telemedicine Award”, **** Region Section, Newmarket Era ****, Thursday 18 **** 2015, page B1.

4 https://otn.ca/en/services/pcvc/technical-requirements CITC-JTF

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an “up to” scheme which speaks to the theoretical capabilities of a circuit but not what is actually attainable on it. They do so for any number of reasons. For example: the attainable download and upload speeds of a DSL circuit diminish as the distance from the DSLAM increases; access circuits on cable, wireless and satellite networks are often shared between many end-users impacting available speeds; and, service providers may under provision backhaul facilities which impacts the available throughput of an access circuit .

With regard to the Commission’s current targets, the majority of JTF members’ customers have access to circuits providing at least the target speeds. Those customers that do not, are typically serviced by last mile facilities that are not physically capable of delivering those speeds. Provisioning facilities capable of delivering these speeds to the farthest flung customers in an HCSAs would be cost prohibitive for private sector companies in the absence of funding from public sector sources to make the business case workable.

The graph below is one example that illustrates the increasing capital costs associated with activated customers versus percentage of homes covered. The graph demonstrates that the costs escalate dramatically for technologies other than satellite. While this graph shows costs associated with activated customers, the graph is similar for the capital costs of homes passed. This graph demonstrates that it is extremely costly to service the last 10% of homes furthest from an existing fibre network with FTTP.

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Figure 1

Cost of Connection of Last Subscribers – Source: Australia, National Broadband Network Implementation Study, 6 May 2010, Library of Parliament, at:http://data.dbcde.gov.au/nbn/NBN-Implementation-Studycomplete-report.pdf.

The JTF notes that the Commission established its current target in 2011, almost 5 years ago. It is indeed time to re-evaluate this target to reflect the current minimum needs of Canadians and their increasing needs in the near future. The JTF notes that other regulatory agencies such as the Federal Communications Commission revisit their minimum targets on a regular basis5 and that Canada should do the same since experience has shown that customers’ bandwidth demands will only continue to increase over time.

Left to their own devices, JTF member companies have largely met the Commission’s current target speed for broadband Internet access service in their SILEC operating 5 See for example the following press releases by the FCC: FCC increases rural broadband speeds under Connect America Fund - Rural consumers must receive broadband delivering at least 10 Mbps downloads, 1 Mbps uploads from providers who benefit from Connect America Support, 11 December 2014; and, FCC finds U.S. Broadband deployment not keeping pace - Updates broadband speed benchmark to 25Mbps/3Mbps to reflect consumer demand, advances in technology, 29 January 2015.

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territories based on market demand and the ability to meet that demand and employ a sound business case.

However, if the Commission were to mandate a certain broadband speed, even the current target speed, be available to every single customer via an expanded BSO and then increase the target speeds on a regular basis, this would require funding from a public sector source. As noted in the JTF’s position paper that accompanies these answers to the Commission’s questions, if a government or one of its agencies imposes an obligation on the private sector such as building or augmenting a broadband network, this obligation must be funded.

Assuming that adequate subsidy funds are made available, the JTF would support including broadband in the BSO and raising this target to 10 Mbps download and 3 Mbps upload as a target to be achieved over the course of the next five years.

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CRTC Question 3

Which services should be considered by the Commission as basic telecommunications services necessary for Canadians to be able to meaningfully participate in the digital economy? Explain why.

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

b) Identify, with supporting rationale, the terms, conditions, and service characteristics under which basic telecommunications services should be provided.

Should any obligations be placed on the provider(s) of these services? If so, what obligations and on which service provider(s)?

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

Answer

The JTF submits that voice telephony (including most of the features of the current BSO) and a broadband circuit that delivers a specified set of characteristics, including a basic capacity package, should be considered basic telecommunications services.

a) The JTF does not believe that underlying technology should be a factor in defining whether a telecommunications service should be considered a basic service. Instead, it should be the characteristics of the service that determines what is a basic service. For example, the current BSO includes the requirement for touch tone service regardless of how that feature is provisioned.

With regard to broadband services and regardless of how the service is delivered by the underlying technology, the Commission should specify the upload and download speeds as well as the tolerances for jitter and latency to ensure, once again, that Canadians are able to meaningfully use the services provided.

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b) If the BSO is revised according to the JTF’s proposal and assuming the needed public funding is provided, much of the existing OTS/BSO regime, the service providers these regimes apply to and the obligations could be maintained in place.

c) Questions surrounding the pricing of the basic package of services sufficient to meet the minimum needs of Canadians are not questions for service providers. The goal of private sector service providers (e.g. privately held SILECs and co-operatives) is to serve as many customers as possible within a workable business case and to keep their networks current. Left on their own, service providers will price their services in accordance with these factors and consumer demand.

As a result, the Commission should continue with its practice of setting an affordable rate for subsidized services. With regard to basic broadband services, an affordable retail price should be set in each province and should be derived from the retail prices currently on offer by service providers in the major urban markets across each province. For example, the affordable rate in British Columbia could be determined by using an average of the retail rates of the major service providers in Vancouver, ****, Kelowna, Kamloops and Prince ****. A similar approach could be taken in other provinces. Such an approach would give the Commission some assurances that the chosen retail rate reflects current market realities and would provide an easily up-datable methodology. Service providers would continue to be free to offer other service speeds and capacity packages on an unregulated basis as they do today.

Any difference between the mandated retail price of a package of basic services and a service provider’s cost (as determined by Phase II costing principles, including a CITC-JTF

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reasonable rate of return) to provide that package of services must be subsidized by public sector funding.

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CRTC Question 4

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

Answer

The JTF’s response to this question assumes that “government funding” does not include the fund established by the Commission “to support continuing access by Canadians to basic telecommunications services.” (i.e. the Central Fund). “Government funding” is defined as capital grant programs.

Canadian history has demonstrated that market forces and government funding alone cannot be relied upon to ensure that all Canadians have access to basic telecommunications services. For example, it took a system of CRTC mandated cross-subsidies and Service Improvement Programs (“SIP”) to bring telephone penetration up to near universal levels and to be consistent with the BSO. Even now, in high cost areas, the Commission’s mandated affordable rate of $30 (adjusted yearly for inflation) for Primary Exchange Services does not generate sufficient revenue to cover the costs of providing this service and CRTC mandated subsidies continue to be necessary.

Recent government funding programs have only been concerned with the roll-out of broadband services (for the capital portion). By implication, governments assume that telephone service is essentially universally available and it relies on the CRTC’s Central Fund to ensure the continued availability of **** Old Telephone Service in HCSAs.

With regard to the roles of the private sector and the various levels of government, the current Internet access market is informative. It demonstrates that, on its own, the private sector will (and should) only go where there is a workable business case (including CITC-JTF

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a good return on the investment in a reasonable period of time). The Market left to itself will not address the problem of “services to all Canadians”, nor should it be expected to.

It is the role of government and its agencies (e.g. the CRTC) to set communications policy/mandates and from there, establish mechanisms to enable the private sector to roll-out these services into areas where there is no business case independent of these mechanisms. If it is government policy that all Canadians in rural areas should have access to a certain package of basic telecommunications services it should develop policies and funding mechanisms to address the gap between a workable business case to serve an area and the revenue available to service providers.

Government program funding (e.g. the latest Digital Canada 150) has not been adequate to ensure that all Canadians have access to basic telecommunications services. For example, Industry Canada’s latest Digital Canada 150 program has focussed on providing lower-range broadband speeds of 5 Mbps download and 1 Mbps upload speeds.

Programs such as this are not “future proof”, are not transparent with regard to how various projects were chosen for funding and have not provided a reliable and fixed stream of capital funding dollars.

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CRTC Question 5

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

Answer

Taking into account the JTF’s response to Question 4, and assuming that the nature of government funding will not change in the near future, the JTF submits that the Commission’s role is to ensure that the Policy Objectives in the Act are achieved. The relevant Objectives in this context are as follows:

a) to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions;

b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada; and h) to respond to the economic and social requirements of users of telecommunications services.

Besides its rate setting powers, the Commission’s main tool to achieve these Objectives is the subsidy mechanism pursuant to its powers delegated in the Act:

46.5(1) The Commission may require any telecommunications service provider to contribute, subject to any conditions that the Commission may set, to a fund to support continuing access by Canadians to basic telecommunications services.

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Where Canadians do not have access to basic services, the Commission should use the Central Fund to ensure that the basic package of services (as to be determined by the Commission in this proceeding) are available to all those Canadians who want them from those carriers with an OTS.

The Commission should also assume responsibility, in co-operation with Industry Canada, for monitoring the availability of the basic package of services across Canada. The Commission should be the prime agency responsible for monitoring, assessing gaps in coverage and reviewing the basic package of services on a regular basis.

The JTF would like to conclude its answer to this question by addressing SIP-type programs that the Commission has used in the past to fund various initiatives such as touch tone and equal access. SIP programs have typically employed temporary local rate increases on telephone services to fund these initiatives.

Based on JTF members’ recent experiences with the local rate increases employed by the Commission in the context of the SILEC regulatory regime, this type of exogenous factor funding simply is not a workable option for small services providers in rural areas due to competitive pressures. First of all, the widespread availability of wireless services and customers’ willingness to cancel their wireline voice service in favour of wireless or Internet-based VoIP means that SILECs cannot increase their local rates, even on a temporary basis to fund these types of initiatives without risking significant market share loss. The introduction of local competition by the Commission has compounded these competitive pressures for a significant number of JTF members.

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Second, and based on their collective experience, JTF member companies believe that the perceived value of local wireline telephone service has dropped significantly in the eyes of the Canadian public. Today, local voice is the least valued component in a triple play bundle of voice, Internet and broadcast services. The JTF estimates that to the average consumer, even in HCSAs, local voice services are valued below $15 per month. See JTF Attachments 4 and 5 for examples of service offerings that reflect this reality. The Commission’s current affordable rate for local telephone service in HCSAs is approximately $30. Therefore, if a telephone-based SIP approach to funding the roll-out of broadband services were to be used, SILECs would be faced with the prospect of having to increase the rate of a service that is already significantly over-priced in the eyes of many consumers. This would hasten further migration to alternate and readily available alternatives such as wireless and VoIP offered by companies that are not under an obligation to serve.

Therefore, the JTF would not support the use of consumer funded, temporary SIP programs to fund an enhanced BSO.

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CRTC Question 6

In Telecom Regulatory Policy 2011-291, the Commission stated that it would closely monitor developments in the industry regarding the achievement of its broadband Internet target speeds to determine whether regulatory intervention may be needed.

What action, if any, should the Commission take in cases where its target speeds will not be achieved by the end of 2015?

Answer

The various SILECs represented by the JTF in this proceeding were actively involved in the proceeding leading up to the issuance of Telecom Regulatory Policy 2011-291 and the Commission’s current target. The Commission established a target without an obligation and a target without a subsidy mechanism. As such, the JTF respectfully submits that the Commission should take no punitive actions where its target speeds will not be achieved by the end of this year.

Instead, and as noted elsewhere in its responses to the Commission’s questions, the JTF believes that broadband should be considered a basic service and that this proceeding represents an opportunity to set firm targets and establish or refine the arrangements between the industry and the Commission to ensure that the targets are fulfilled as part of the OTS imposed on incumbent service providers in their operating territories.

Furthermore, in those instances where the targets were not met, the Commission should take the opportunity afforded by this proceeding to further investigate why the targets were not met in forborne environment. From the perspective of JTF members, the answer is a simple one. There is no business case and there is no on-going, reliable funding arrangement with the public sector that would enable these companies to meet even the current target for all customers.

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CRTC Question 7

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

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

b. What impact would the establishment of such a mechanism have on private sector investment and government programs to fund the provision of modern telecommunications services?

Answer

a) The JTF takes no position on the need for such a support mechanism in Northwestel’s operating territory.

However, the JTF submits that the situation in parts of southern Canada is exactly the opposite to that in the north.

The population in the north is typically located in relatively dense communities, not widely scattered away from the CO/POP in the community. As a result, there are short last mile facilities and essentially no-one living outside of town. For example as demonstrated in Attachment 6, in Inuvik, **** West Territories the bulk of the population of approximately 3,500 people live within an area of 4-5 square kms.

Communities in the **** are separated by vast expanses of unpopulated space. As a result, it is easy to see that the problem is transport to the Internet and that most people in town can be served with DSL or fixed wireless coverage areas.

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In much of southern Canada the situation is different. The population is denser and more widely distributed across the countryside, beyond the reach of DSL. Unlike the north, the rural areas and countryside are populated.

The operating territory of **** Telecom Co-operative Limited provides a useful “negative image” to the situation in Northwestel’s operating territory. Attachment 7 is a map of **** Telecom’s operating territory that demonstrates the following:

• **** Telecom’s SILEC operating territory has no densely populated communities or areas.

• The incumbent carrier in the villages of Watford and Alvinston is Bell Canada leaving **** to serve only the outlying rural areas as the incumbent service provider.

• There are 1,385 NAS in **** Telecom’s serving territory which is approximately 500 square kms (including the combined area of Watford and Alvinston). These NAS are found down each of the rural routes and concession lines in ****’s serving territory. The population density in ****’s operating territory is about 3 homes per square KM.

Therefore, the most significant problem in **** Telecom’s operating territory, and generally in the south, is not a lack of transport facilities, it is lack of broadband capable last mile facilities across a scattered rural, and when compared to the north, relatively dense population. Many of **** Telecom’s customers are beyond the reach of DSL.

Having provided a concrete example from southern Canada that conflicts completely with the situation in the north, the JTF would like to emphasize the fact that there are SILECs whose situations fall squarely in the middle between the Inuvik and **** Telecom CITC-JTF

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cases. For example, CityWest Communications experiences both of these problems on a daily basis. Like Inuvik, acquiring adequate and reasonably priced transport facilities to the Prince **** exchange6 in British Columbia has proven exceedingly difficult for CityWest. Like **** Telecom, CityWest’s customers are spread out over a largely rural exchange. The JTF does not believe that the Commission should conclude that only transport or only last mile facilities should be subsidized. Rather, the Commission should adopt more of a case-by-case analysis of each situation.

b) Establishing an on-going funding mechanism to support the provision and operation of last mile broadband capable infrastructure in areas where it does not currently exist would spur the private sector carriers to build these facilities and provide services. On-going funding would also ensure that these carriers continue to upgrade these networks over time as bandwidth demands increase.

6 A map demonstrating the location of the Prince **** exchange can be found at http://www.itpa.ca/itpa-map.

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CRTC Question 8

What changes, if any, should be made to the obligation to serve and the basic service objective?

Answer
Obligation to Serve - No Unfunded Obligations

It is the view of the JTF that the OTS should remain with the historical incumbent carriers.

However, any obligations that are imposed as a result must be fully funded. This isn’t the case now with the stand ready requirement where carriers are required to maintain networks with no subsidy on individual NAS lines (i.e. the entire circuit running from the Central Office to the customer’s premises) that aren’t currently served by the incumbent carrier. If the Commission wishes to continue to impose a carrier of last resort obligation, these types of lines should be eligible for continued monthly funding from the Central Fund. Subsidy must not be portable but remain with the carrier that has the OTS.

Basic Service Objective

The JTF has inserted its proposed changes to the existing BSO in red type below:

• Individual line local **** Tone service;
• Access to low-speed Internet at local rates;

• A broadband enabled last mile circuit capable of delivering 10 Mbps download and 3 Mbps upload speeds and a capped capacity package;

• Access to the long distance network and to operator/directory assistance services;

• Enhanced calling features, including access to emergency services, voice Commission mandated message relay services, and privacy protection features;

• A copy of the current local telephone directory upon request;

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The Commission also assumes that customers will receive a paper bill at no charge as part of the BSO. The Commission should permit incumbent service providers to provide a paper bill only upon request.

With regards to the requirement to provide a copy of the current local telephone directory, the JTF submits that the Commission should revise this requirement so that they are only provided upon request. In a SILEC’s operating territory, they would be available at the company’s business office. Customer demand for local directories has plummeted in recent years and JTF members have actually received complaints over the fact that they are still delivered. Many customers are simply not interested in receiving them due to the availability of on-line directory services. Indeed, the Commission has forborne from the regulation of retail rates for Directory Services partially in recognition of the fact that many alternate sources are available. Providing local telephone directories only on demand would be a reasonable extension of this forbearance.

Providing paper bills as part of a customer’s regulated service is an implicit component of the BSO. The Commission has investigated the provision of paper bills by the industry in the recent past. Most consumers now have the option to receive their monthly invoices via email or to view them on their service providers website. The JTF believes the public interest would still be served if the Commission were to determine that customers would receive a paper bill only upon request.

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CRTC Question 9

Should broadband Internet service be defined as a basic telecommunications service?

What other services, if any, should be defined as basic telecommunications services?

Answer

As discussed in its answers to the Commission’s questions, the JTF believes that broadband access should be added to the list of basic telecommunications services since the modern applications that permit Canadians to participate meaningfully in the digital economy largely require that type of access.

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CRTC Question 10

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

price cap regimes)?
Answer

The JTF is proposing changes to the OTS and the BSO. The proposed changes to both these would require changes to the existing local subsidy regime.

Continued Funding of Primary Exchange Service

As discussed the JTF’s responses to these questions, the Commission should continue to subsidize the provision of PES service and begin funding the OTS’ stand-ready requirement as well. This would require a slight change to the mechanism for reporting NAS to the CFA. Incumbent carriers would report both NAS that are active and those that may not be actively in use but that are being maintained as part of the carrier of last resort obligation. The CFA would continue to pay subsidy on a monthly basis, based on the total number of NAS reported. The subsidy amounts should not differ between NAS in use and NAS being maintained for future possible use.

Funding Broadband Service

The JTF’s proposal to include broadband in the BSO should be implemented along the following lines with regard to the local subsidy regime. As noted above, the mechanism as it relates to the monthly subsidy for Primary Exchange Service (“PES”) should not change. The subsidy calculation, monthly reporting and payment mechanisms are well understood and function well and should remain unchanged.

With regard to subsidizing broadband services, the JTF submits that the Commission should establish an additional subsidy program within the CFA structure funded by industry retail internet revenues. Retail Internet revenues are currently not contribution CITC-JTF

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eligible but are well understood and reported monthly/yearly by all TSPs. This pool of funds should be used to subsidize the cost of homes passed, the customer drop facilities and the associated electronics required to provide a live circuit. This pool of funds in conjunction with other government funding can be used to ensure that all Canadians have access to a broadband enabled access circuit and basic Internet capacity package.

Furthermore, the existing Phase II cost minus revenue approach to determining subsidy payments should also be maintained. As a result, if the Commission adopts the JTF’s proposal in this proceeding, additional costing work will be required to determine the cost for carriers of having to provide the broadband enabled circuit, as described above, and the basic level service package. The JTF is recommending that if the Commission determines via this proceeding that broadband should be included in the BSO, a follow-up proceeding should be launched to deal with costing and implementation issues.

Outside the Commission and the large ILECs themselves, the JTF notes that there are extremely limited Phase II consulting resources available to industry players. This represents a significant challenge to both the Commission and the industry and the continued reliance on Phase II costing. The Commission should investigate way to develop Phase II expertise that would be available to all service providers as required.

Determining industry costs for including broadband in the BSO would require extensive Phase II work. As part of a national program such as this, the development costs of the going-in Phase II studies should also be subsidized due to the large costs and scarce resources available in the industry to perform this kind of work.

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CRTC Question 11

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

Answer

If broadband access is to be included in the BSO and subject to an OTS, the JTF submits that the current retail Internet revenue exemption should be revoked and the funds generated from the removal of this exemption should be used to subsidize the roll-out of broadband services. The JTF’s response to Question 10 detail other required changes to the subsidy mechanism.

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CRTC Question 12

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

Answer

The list of basic items/telecom services that needs to be subsidized is limited. Voice telephony (including most of the features of the current BSO) and a circuit that delivers speeds of 10 Mbps download and 3 Mbps upload, including a basic capacity package, should be considered basic telecommunications services and should be subsidized.

The BSO as described in these responses are the only services that need to be subsidized.

Access circuits that deliver the BSO should only be subsidized where the affordable rate, as determined by the Commission, does not exceed the Phase II costs of offering these services.

Where the Phase II costs to provide the BSO exceed the Commission determined affordable rate for a service, there should be subsidy for the service providers under the OTS.

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CRTC Question 13

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

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

b. In which regions of Canada should funding be provided?

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

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

e. What is the appropriate mechanism for distributing funding? For example, should this funding be (i) paid to the service provider based on revenues and costs, or (ii) awarded based on a competitive bidding process?

f. Should any infrastructure that is funded be available on a wholesale basis and, if so, under what terms and conditions?

g. Should the Commission set a maximum retail rate for any telecommunications service that is subsidized?

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

Answer

a) As noted in its responses to this series of questions, the JTF believes that the most important telecommunications services that Canadians need today are voice telephony CITC-JTF

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and a broadband Internet connection. These services will enable Canadians to access the telephone/Internet based applications that will enable them to meaningfully participate in the digital economy. Therefore, the focus of the funding arrangement between the public and privacy sectors should be on the suite of services that will be considered “Basic” and not the types of underlying infrastructure used to provide these services. The JTF also acknowledges that the Internet transport is an important issue for certain regions of the country and agrees that the Commission should evaluate a subsidy mechanism for transport where required.

b) The Telecommunications Act’s Policy Objectives do not apply only to select regions in Canada. Funding should be provided in all regions of Canada wherever a revised BSO is not available, in the same way as existing High Cost funds are paid out.

c)&d) Only service providers subject to an OTS should be eligible for subsidy funding due to the fact that they are under an obligation and must stand ready as the carrier of last resort. This is consistent with Commission precedent and past practice.

e) As discussed in answers to these questions, a per NAS model of monthly funding via the existing CFA continues to be the appropriate mechanism for distributing subsidy. The amount of subsidy should be based on the difference between the Phase II costs of providing the BSO and the affordable rate for these services as determined by the Commission.

f) The existing wholesale regimes for both ILECs and SILECs should continue to apply. The JTF notes that the Commission’s pending decision on wholesale services may impact these existing regimes. Accordingly, the JTF reserves the right to review its position on this question in the event of significant changes to these regimes.

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g) It has been the Commission’s practice to set an affordable maximum rate for services that are subsidized (i.e. residential PES service). The rate set by the Commission is one of the key factors in the subsidy calculation mechanism. The JTF’s proposal in this proceeding would see the Commission continue to use this mechanism to subsidize not only PES service but a basic level of broadband Internet access as well. Therefore, the Commission would need to continue its practice of rate setting. As proposed elsewhere in these responses, a rate for a basic broadband package should be set using an average rate derived from retail rates available in the largest cities or communities in each province.

h) The JTF’s proposal as discussed in this initial submission would mean that the existing contribution mechanism could remain in place with the alterations described.

*** End of Document ***

Intervention: Joint Task Force (Intervenor 281)

Document Name: 2015-134.224016.2395573.Intervention(1fcfp01!).pdf
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Introduction

1. At paragraph 5 of Review of basic telecommunications services - Telecom Notice of Consultation CRTC 2015-134, 9 **** 2015 (“TNC 2015-134”), the Commission set out its purpose for launching this proceeding:

As the regulator of Canada’s communications system, the Commission seeks to ensure that all Canadians have access to a world-class communications system and that they are able to participate in the digital economy. Given this, as well as the importance of telecommunications services to Canadians, the Commission is initiating a public proceeding to conduct a comprehensive review of its policies regarding basic telecommunications services in Canada and of the

telecommunications services that Canadians require to participate meaningfully in the digital economy.

2. The 27 **** Incumbent Local Exchange Carriers (“SILECs”) represented by the Canadian Independent Telephone Company Joint Task Force (“the JTF”) are listed in the Appendix to the covering letter associated with these comments.

Each of these companies, including those owned by municipalities (e.g. CityWest Telephone and Cable Corp.) or that are co-operatives (e.g. Hay Communications CITC-JTF

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Co-operative Limited), operate as stand-alone, and for all intents and purposes, private sector entities responsible to their owners/shareholders for executing responsible business plans and for achieving the maximum returns on their investments.

3. The imposition through legislative and regulatory mechanisms of an Obligation to Serve (“OTS”) and a Basic Service Objective (“BSO”) has over the years created a regime between incumbent carriers and federal authorities that supports the provision of basic local telephone service to Canadians. Even though, as demonstrated below, the legal basis of this regime has been cobbled together over the past 100 years, the regime needs to transparently and adequately address the needs of each of the parties. Most SILECs have CLEC operations as well, however, the JTF’s position relates only to their SILEC operations. The JTF reserves the right to change its position if the topic of subsidy availability to CLECs becomes an issue in this proceeding.

4. The alterations to both the OTS and BSO proposed by the JTF in this proceeding are based on the experiences of JTF member companies with this regime and will serve to address current areas of concern.

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A brief history of the Obligation to Serve

5. JTF members, in exactly the same way as the large ILECs (i.e. Bell Canada, NWTel, SaskTel, MTS and TELUS), hold a prominent place in the Canadian telecommunications constellation as telecommunications carriers with an Obligation to Serve (“OTS”). The Commission has defined the OTS as follows:

The obligation to serve requires ILECs to provide telephone service to existing customers, new customers requesting service where the ILEC has facilities, and new customers requesting service beyond the limits of the ILEC’s facilities. (TRP 2011-160 para 6) 6. From the perspective of the small incumbent local exchange carriers (“SILEC”), the OTS is a direct result of their collective history. SILECs came under federal jurisdiction in 1994 and it fell to the Commission to transition these companies from provincial to federal jurisdiction. At the time the Commission engaged **** Grieve to draft recommendations for the regulations of SILECs under its jurisdiction. The opening pages of **** Grieve’s report, entitled CRTC Regulation of the Ontario Independent Telephone Systems – Report to the Canadian Radio-television and Telecommunications Commission, dated 7 **** 1994 (“the **** Report), provides a succinct history of the small incumbent local exchange carriers (“SILECs”) operating in Ontario:

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The Ontario Telephone Association (“OTA”) was asked to provide a brief history of each of the companies. It responded by providing a brief general history of the independent telephone companies in Ontario. The history provided indicates that the independent companies have similar histories. They were established independently of the Bell system in the early 1900’s because Bell indicated that it was concentrating its efforts in large cities and was not prepared to incur the additional higher costs of serving rural Ontario. By 1921 there were nearly 700 independent telephone systems in Ontario. Many were started by doctors needing to contact neighbouring towns. Eventually, as demand grew, the systems were expanded to provide service to others in the communities.

**** distance service became available through interconnection with Bell. After World War II many systems were sold to Bell because of the need to upgrade the networks. As recently as 1975 there were forty independent systems. Since 1983 the number has CITC-JTF

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stabilized at 30 independent telephone companies.1 (emphasis added)

7. The **** Report demonstrates the long history of the independent telephone companies in Ontario. SILECs have similar histories in British Columbia and Quebec.

8. JTF Attachment 1 to these comments is a letter from Mr. **** Seidl, the Executive Director Telecommunications at the CRTC, dated 20 July 2012, which provides important regulatory background on the origins of the OTS as it applies to SILECs:

A telephone company’s ILEC status is founded... on its history...

until the 1990s, telecommunications services in Canada were provided almost exclusively by telephone companies that operated on a monopoly basis within their respective serving territories, each company [providing] regulated services in a given area within a province.

Having operated as the sole providers of telecommunications services in their respective serving territories, those incumbent telephone companies, both large regional companies and small 1 Pages 7 and 8.

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independent companies, have an obligation to serve in their respective areas.

The obligation of telecommunications companies, and more generally speaking, utilities, to serve in their respective serving territories is based on jurisprudence and the decisions of regulatory agencies like the Commission.

9. As noted in Mr. Seidl’s letter, the Canadian telecommunications market was opened to competition in various decisions made by the Commission throughout the 1990s. It is interesting to note, however, that even though the introduction of local competition, as well as competition from other sources such as wireless services and Voice over Internet Protocol (“VoIP”), has meant the loss of significant market share for both large and small ILECs alike, the Commission has not relieved the incumbent carriers of the OTS:

Certain parties submitted that an obligation to serve can only be lawfully imposed where there is a monopoly. Because there is no monopoly, these parties argued that the Commission does not have the legal authority to impose an obligation to serve in forborne exchanges. The Commission notes its disagreement with this argument. In the Commission’s view, it is unduly narrow, is CITC-JTF

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inconsistent with the broad statutory powers granted to the Commission, and fails to recognize the broad policy objectives to which the Commission must have regard. (emphasis added) (TRP 2011-291 footnote 33)

10. The JTF is aware of the fact that there continues to be some difference of opinion as to whether an OTS continues in a non-monopoly environment.2 However, the JTF does not intend to challenge the Commission’s position on the OTS in this proceeding and has formulated its position based on that assumption.

11. Even though the Commission has modified the OTS in the residential markets of forborne exchanges3 an OTS remains imposed by the Commission to ensure that all Canadians have access to at least **** Old Telephone Service (“POTS”). It is important to note that no SILEC has requested local residential forbearance. Therefore, all JTF member operating territories remain under the un-modified OTS. Finally, although the Commission has considered whether to impose an OTS on competitive service providers in the past, it has never done so.

The incumbent service providers alone, both large and small, remain the only 2 For example see, Telecommunications Carriers and the Duty to Serve, **** H. ****, McGill Law Journal, vol. 57, no 3, 2012, p.519-551.

3 The Commission permitted incumbents to meet the OTS in forborne exchanges using mobile wireless services. See Obligation to serve and other matters - Telecom Regulatory Policy CRTC 2011-291, 3 May 2011, paragraph 49.

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service providers subject to an OTS and are eligible for the subsidy payments help ensure this obligation is fulfilled.

12. The SILECs’ lengthy experience of operating with federal authorities under the OTS and the BSO regimes in their SILEC operating territories have provided these companies with valuable insight with regard to the impacts of these regulatory measures. The imposition of these regulatory measures on SILECs necessitates a respectful balance that permits these small companies to continue to operate and fulfill their obligations to their owners/shareholders and customers while fulfilling the mandates of the OTS and the BSO.

Issues with the current OTS - No unfunded obligations 13. Once again, it is important to note for the purposes of this proceeding that the OTS is imposed on private sector companies As a result, due consideration must be given by the regulator to the appropriate scheme and level of financial support associated with imposing an OTS. Private companies are in business to maximize the returns to their investors and to act responsibly with regards to the development and execution of business cases associated with the growth of their companies. For incumbent telecommunications companies this includes the business cases associated with reaching and serving their customers in high cost serving territories. It is an understatement to say that there is no workable CITC-JTF

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business model that would allow a company to serve customers in SILEC rural high-cost serving territories in the absence of a subsidy from federal authorities.

14. The current OTS regime poses some problems for service providers in light of the fact that the Commission has opened the local telecommunications market to competition. Competitive forces comprised of Competitive Local Exchange Carriers, Wireless Services Providers and VoIP Service providers are causing significant loss of customers, while at the same time the incumbent service provider faces the obligation at all times to “stand ready” as the carrier of last resort. The stand ready requirement dictates that a SILEC must be prepared indefinitely to take a customer back from a competitor and maintain the telephone line in question (i.e. the entire physical circuit from the Central Office to the customer’s premises) in a workable state. However, under the current subsidy regime, once a NAS is no longer served by the incumbent, subsidy payments immediately stop even though the incumbent service provider is required to maintain that line and be ready to re-activate it.

15. This obligation imposes an unfair burden on the incumbent provider that has lost all revenue (retail revenue and subsidy) on the line but remains responsible for the costs of keeping the line ready for possible future service.

Furthermore, the original cost of the line in question may not be fully depreciated resulting in additional on-going expense. Fulfilling the OTS in the absence the full CITC-JTF

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funding of the obligation places undue financial hardship on small private service providers who are facing significant outside competitive pressure from wireless competition, VoIP and other forms of local competition. Unlike large ILECs, these small providers are unable to cross-subsidize their rural operations with revenues from large, densely populated, low cost urban communities. It is a clear violation of the regulatory bargain between these carriers and federal authorities. It is the “quid” without the “pro quo”.

16. The current exchange-based local forbearance regime also presents similar problems for SILECs. The JTF acknowledges that the local forbearance regime is not strictly within the scope of this proceeding. However, residential local forbearance does result in the possible elimination of all subsidy for a SILEC in the event forbearance is granted. Still, with forbearance and 100% loss of subsidy, SILECs would maintain an OTS across all parts of the exchange indefinitely.

17. Such an outcome would be a particularly difficult blow to those SILECs (e.g.

Mornington Communications) whose incumbent territory is comprised of a single exchange. Approximately one half of Mornington’s residential NAS are located in the town of Milverton, Ontario while the remainder are scattered across its rural serving territory which compromises the majority of its geographic footprint. A scenario where Mornington Communications faces the loss of high-cost subsidy CITC-JTF

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across its entire exchange simply because it seeks flexibility to vigorously compete against a CLEC in its core area is not appropriate.

18. The JTF is proposing that this one key component of the SILEC forbearance regime be revised by the Commission in this proceeding. If the Commission grants forbearance, the order should cover only those areas that are actually served by the competitor, leaving the remaining areas where there are no competitive alternatives regulated and where the incumbent service provider would continue to receive funding from the CFA.

19. This proceeding represents the opportunity for the Commission to correct these problem areas of the existing contribution regime and ensure that there are no unfunded obligations. If federal authorities impose obligations such as the OTS and the BSO, they must be fully funded.

Issues with the current Basic Service Objective

20. The existing Basic Service Objective (“BSO”) was established by the Commission in Telephone Service to High-Cost Serving Areas - Telecom Decision CRTC 99-16, 19 October 1999 and set out the minimum list of services that Canadians are entitled to. The basic service objective consists of the following:

• individual line local ****-Tone service;
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• access to low-speed Internet at local rates; access to the long distance network and to operator/directory assistance services;

• enhanced calling features, including access to emergency services, voice message relay service, and privacy protection features; and

• a copy of the current local telephone directory 21. Implicit in the BSO is the provision of a paper bill included as part of the price of residential Primary Exchange Service (“PES”). The JTF is making recommendations with regards to both the provision of a paper directory and a paper bill in its responses to the Commission’s questions. In short, paper bills and local telephone directories should only be required to be provided upon request.

Any change to the BSO must be future proof

22. As noted earlier in these comments, the JTF is proposing that broadband Internet access should be included in the BSO as well as a telephone line. While the technical characteristics of voice telephony have not changed over the years, the same cannot be said regarding consumer demand for faster broadband access circuits. The demand for faster broadband is largely fuelled by the Internet applications that are now available.

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23. The telecommunications industry’s emphasis has shifted away from the provision of twisted pair copper line-based Primary Exchange Services to the reality that delivering the “broadband pipe” requires capturing the revenue from the entire “broadband home” (i.e. voice, Internet and video services). As described in the JTF’s responses to the Commission’s questions, the perceived value of the voice telephony component of a bundle of services has decreased to Canadian consumers. At the same time, the importance of broadband and broadcasting services have increased.

24. As part of this proceeding the Commission has indicated that it intends to review whether its current target broadband speeds remain adequate approximately five years after they were first established in 2011. The JTF notes that many countries, including the U.S., regularly re-visit the status of broadband availability. The JTF submits that Canada should implement a regular monitoring and target updating process to ensure that Canadian consumers do not lag behind consumers across the world.

Is digital entertainment a part of the digital economy?

25. As the JTF has been preparing these comments it has closely reviewed the wording of TNC 2015-134 and the wording of the Commission’s questions as they relate to digital entertainment (e.g. over-the-top video streaming/gaming CITC-JTF

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services). Given the wording in TNC 2015-134, the JTF assumes that Canadians’ use of these services and their ability to access this type of content is out of scope for this proceeding.

26. For example, in Question 2 the Commission asks whether its current target speeds are “sufficient to meet the minimum needs of Canadians today” (emphasis added). Additionally, in its discussion of the digital economy, the Commission makes reference to e-commerce, e-banking and e-health applications as examples of the digital economy. The Commission’s focus on the phrase “basic telecommunications services” apparently indicates that Canadians’ use of digital entertainment services, such as YouTube and Netflix, are not in the scope of this proceeding.

27. Given that digital entertainment traffic constitutes such a large component of the Internet’s total traffic on a daily basis and is in such demand by Canadian consumers, the JTF would like to highlight its assumption that these services are not in scope at the outset of this proceeding. If this proceeding develops into a discussion about Canadians’ access to digital media and whether access to this traffic needs to be facilitated via a regulatory framework, the JTF reserves the right to revisit this issue in subsequent rounds of comments.

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The Policy Direction

28. The introductory paragraph of Appendix B to TNC 2015-134 asks parties to take into consideration and address the relevant aspects of the Policy Direction when submitting their responses to the Commission’s questions. The JTF has reviewed the Policy Direction and submits that the relevant sections that the Commission must take into account in this proceeding are as follows:

1.(a) the Commission should

(i) rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives, and

(ii) when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives;

and

1.(b) the Commission, when relying on regulation, should use measures that satisfy the following criteria, namely, those that ...

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(ii) if they are of an economic nature, neither deter economically efficient competitive entry into the market nor promote economically inefficient entry

29. With regard to section 1.(a)(i), the JTF’s position in these comments is that market forces have not and cannot be relied upon exclusively to achieve the Policy Objectives highlighted by the JTF in its response to the Commission’s question 5. The history of local telephony as well as the roll-out of broadband Internet access in rural areas demonstrates that, left to themselves, market forces will not result in the achievement of these Objectives across the country.

That is why the JTF is proposing that broadband Internet access be included in an expanded BSO.

30. With regard to section 1.(a)(ii), the JTF’s proposal to continue to use the existing Central Fund Administrator (“CFA”) mechanism to subsidize the provision of a basic package of services in High Cost Serving Areas (“HCSAs”) is efficient and proportionate to that purpose. The CFA mechanism has not interfered with the operation of competitive market forces in Canada. This is evidenced by the fact that 93% of retail telecommunications revenues were earned by forborne services4 . Telecommunications industry players are very familiar with the 4 CRTC Communications Monitoring Report 2013, Executive Summary.

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existing contribution mechanism and the JTF’s proposal would ensure that only those companies with the OTS continue to receive funding from the CFA.

31. Similar arguments can be applied to section 1.(b)(ii). The OTS and BSO are economic regulatory measures that impact carriers’ cost of doing business. As noted above, over 93% of retail telecommunications revenues were earned by forborne services and so it is not reasonable to argue that the CFA mechanism has deterred economically efficient entry or promoted economically inefficient entry. Even during the period of time when CLECs were eligible recipients of contribution, the JTF doubts that CLECs relied extensively on those funds to achieve their business targets. In the Commission’s previous decision regarding the OTS - Obligation to serve and other matters - Telecom Regulatory Policy CRTC 2011-291, 3 May 2011 (“TRP 2011-291”), the Commission eliminated the portable subsidy and stated as follows:

The Commission considers that subsidies should be available only to those carriers that have an obligation to serve all customers in a given HCSA and that meet the basic service objective. (para 140) 32. As a result, the JTF believes that continued use of the current contribution regime, as modified by the JTF’s proposal in this proceeding would not deter CITC-JTF

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economically efficient competitive entry into the market nor promote economically inefficient entry.

33. Therefore, the JTF’s proposals satisfy the requirements of the Policy Direction.

34. This document has provided the JTF’s preliminary comments and outlined the key assumptions behind its position in this proceeding. The JTF has also filed in a separate document comprehensive responses to the Commission’s questions as posed in TNC 2015-134.

*** End of Document ***

Intervention: Joint Task Force (Intervenor 281)

Document Name: 2015-134.224016.2577217.Intervention(1j8ld01!).html

Copie envoyée au demandeur et à tout autre intimé si applicable / Copy sent to applicant and to any respondent if applicable: Non/No