BEFORE THE CANADIAN RADIO-TELEVISION
AND TELECOMMUNICATIONS COMMISSION
TELECOM PUBLIC NOTICE CRTC 2011-206,
Proceeding to review network interconnection matters
Bell Aliant Regional Communications, Limited Partnership,
Bell Canada and
Télébec, Société en commandite
24 October 2011
1. Thank you Madame Secretary, Mr. Chairman and Commissioners. I am
Jonathan Daniels, Vice-President, Regulatory Law, BCE. I am pleased to introduce our
panel appearing on behalf of Bell Aliant, Bell Canada and Télébec.
2. Joining me today are: to my immediate right, Denis Henry, Vice-President –
Regulatory, Government Affairs and Public Law for Bell Aliant; to my immediate left,
Martin Cullum, Network Technology for Bell Canada; and to his left, Michelle Bourque,
Wholesale for Bell Canada.
3. At the outset, I think it is important to remember that the current local
interconnection regime is successful. It has allowed the entry and development of
competition in all sectors (local, toll and wireless), benefiting both carriers and
4. Industry participants of all types and sizes have made significant investment
decisions based on the current regime. We are not here to design the ideal system
from scratch. The various proposals must be evaluated on the basis of net public
benefits, given how the networks and interconnection of those networks are structured
today. With that in mind, we now turn to the specific questions asked by the
Commission in its conduct letter.
Question 1: Does the natural evolution from circuit-switched to IP interconnection
facilities require regulatory intervention?
Question 2: Should the Commission mandate IP-based network interconnection
and establish basic rules, or should it be commercially driven?
5. You asked about the role of the Commission in respect of IP interconnection.
We strongly believe that no regulatory intervention is required to “push” the market
towards IP interconnection. Accordingly, we do not propose that the Commission
mandate IP-based network interconnection. However, as I will elaborate later, this does
not mean that IP arrangements on a voluntary basis should not be allowed. The market
will naturally drive this migration without any need for regulatory intervention.
6. To understand where we’re coming from, you have to keep in mind that, yes,
there has been growth in IP in our networks, but that is data traffic, not voice. Today,
less than 2% of our 9 million wireline voice access circuits are IP. And we’re not alone
in this, as we estimate that wireline voice across the industry is still at least 75% circuit-
switched (also called Time-Division Multiplexing or TDM). Our IP voice subscriber base
will grow as we roll-out our Fibre to the Home (FTTH). Let me explain why. Today we
have copper almost everywhere in our territory. We also have broadband in most
places. What that means is that technically we could provide VoIP to most of our end
users. But we don’t. Why not? Because for voice services today TDM over our copper
network works perfectly. There are no added benefits to customers and no cost savings
that justify making the switch. But as we build out FTTH the situation changes. With
fibre going all the way to the home it makes no sense to provide TDM on copper.
Therefore, the business case for the roll-out of FTTH is really driven by the requirement
to offer faster Internet and television services. As such, we are just starting the
migration of our wireline network to VoIP.
7. To help your review, we’ll now look at the benefits and costs of mandating IP
interconnection. First, the benefits. As your first witness, let me be both provocative
and clear: there will not be any benefits to end-users from mandatory IP
interconnection. Millions of calls between IP voice subscribers and TDM voice
subscribers take place every day. Today, the conversion between TDM and IP traffic is
done by the IP carriers, and the calls work just fine. The calls would work just the same,
no better, no worse, if it were us that did the conversion instead.
8. The benefits of IP interconnection for voice, if any, need both callers to be on IP
access lines and also need the callers to have the right equipment. For instance, today,
end-users on IP and TDM use the same phones (think about it – when you switch from
Bell (TDM) to Rogers (VoIP) you don’t just keep your phone number, you keep your
phone) so these phones aren’t uniquely IP devices. So imagine that a cableco using
VoIP launches a new IP feature, like High-definition video-calling. The service could
not work when a cableco customer calls a Bell customer until the Bell customer was on
an IP access line, and until both customers had switched their regular phones to ones
with screens and cameras.
9. It’s crucial that we don’t mistake IP interconnection with IP retail services. To
get the benefits of new IP retail services you need IP access lines at both ends of the
call – or in the case of interconnection, at both ends of each carrier’s network. In the
context of our wireline network today, that means FTTH.
10. And that really is the crux of the issue for us. The ability to enable IP retail
services over our FTTH will encourage us to enter into IP interconnections. But, the
reverse is not true. This point bears repeating. Mandating IP interconnection will not
speed up the roll out or adoption of end-user IP services.
11. That said, you mustn’t take away that, absent a massive migration of our TDM
retail customer base to IP, we will not entertain IP interconnection. On the contrary,
there may be circumstances where IP interconnection makes business sense. It could
be because the IP interconnection is only first offered within a certain area or through
some beneficial financial arrangement that makes sense for both parties.
12. What we’ve given you here are our arguments why there are no benefits from
mandated IP interconnection to us or to end-users. But there’s also an industry cost
reality. The main outcome of mandated IP interconnection is really a shift of costs
from IP operators to TDM operators, and in fact an increase in those costs. Speaking
for ourselves, the requirement to offer mandated IP interconnection, wherever
demanded, would force us to incur significant upfront capital expenditures. These could
reach the hundreds of millions of dollars and, it must be stressed, we would see zero
return on our investment because taking on IP interconnection neither brings our
subscribers anything nor lowers our costs.
13. However, the key point is, from an industry perspective, that shifting the cost
burden simply increases the cost to the industry overall. Never mind that the VoIP
providers have already made this conversion investment.
14. You have to understand that the relative costs of performing IP conversion are
higher, other things being equal, when we do it as compared to when IP carriers do it.
The main reason for that is that our networks are legacy TDM, with older equipment and
older systems that were originally designed to go with TDM technology. For instance it
costs us more, on a relative basis, to modify our TDM-based IS/IT systems to
accommodate IP than when an IP carrier builds the equivalent from scratch to fit with IP
right from the start.
15. Think about it – Rogers launched with VoIP, even though it had to pay for the
conversion of VoIP to TDM. It’s safe to assume that the costs savings on its network
from using VoIP paled in comparison to the relatively minor costs for it to convert the
calls to TDM. And now some VoIP providers want you to mandate IP interconnection –
in other words to shift the costs of conversion from them to us. And why not? It will
save them money. But it will not save them nearly as much money as it will cost us to
set up and do the conversion.
Question 3: To what extent, if any, should the Commission forbear from the
regulation of network interconnection for voice services? If so, under what
conditions and within which timeframe would it be appropriate for the
Commission to forbear under the Telecommunications Act and consistent with
the Policy Direction?
16. I’ll now turn to your question about whether network interconnection for voice
services should be forborne. Fundamentally, yes. There are no tariffs for Internet
connection (e.g. peering) – and it works today. As such, we believe you can forbear
from regulating voice interconnection. But if the Commission is not prepared for this
change at this time, we believe the Commission should adopt the following test, which
Is the interconnection service a service that only the terminating LEC
(i.e. or in the case of toll origination the originating LEC) can provide?
17. Under such a test, local termination (including the imbalance tariff between LECs
and direct connect between IXCs and LECs) would continue to be regulated. But other
interconnection services like Access Tandem, Extended Area Service Transport and
Transit, would be forborne. We have appended some diagrams to the back of this
opening statement which describes these services, and we would be happy to explain
our logic with reference to each of these services during questioning.
18. If the Commission believes the simple test we have proposed is the right one, it
can review the various interconnection services in its deliberation and make
determinations as to which services meet and do not meet that test, and issue
forbearance as part of its decision in this proceeding.
19. Now, some parties would undoubtedly argue that the record is not sufficient for
the Commission to make any specific orders in this regard. If the Commission finds that
the record is not sufficiently complete, we see it would have two options. The
Commission could adopt our proposed test in its decision and then hold a follow up
proceeding to apply it to specific services. Alternatively, the Commission could
expressly defer the issue to its upcoming wholesale review.
20. Independently of the above, if the Commission decides that it must continue to
regulate interconnection services, the only thing it should do is set up a default tariff
regime. Let me explain. Each mandated interconnection service would be offered
under the existing TDM tariff, but parties would be free to make their own arrangements
for IP interconnection (or for that matter for variations of the TDM tariff too) without
Commission approval. The key element is that, outside of a commercial arrangement,
everyone will be entitled to purchase the services under the terms and conditions of the
default TDM tariff.
21. However, if they choose to enter into a commercial arrangement, they are free to
do so without Commission oversight. If the Commission chooses to mandate IP
interconnection, which we do not support, then the default tariff would become IP and
there would no longer be any need for TDM tariffs. As such, we are advocating that
there always be a single default tariff, either TDM or IP, but never both, for each
22. In summary, with respect to IP interconnection, there are three reasons why
mandating IP interconnection is both inappropriate and unnecessary:
No customer benefits from mandated IP interconnection;
Mandated IP interconnection raises industry costs;
No market failure requiring regulatory intervention over reliance on market forces.
Question 4: Should wireless carriers be treated as equal carriers with the ILECs
and, therefore, be entitled to shared-cost interconnection with bill and keep and,
if so, under what terms and conditions?
23. You ask if wireless carriers should be treated as equal carriers with the ILECs.
Well, wireless carriers have always had the ability to be treated as equal carriers with
the ILECs and CLECs, including the entitlement to shared-cost interconnection and bill
and keep, provided they become wireless CLECs and assume all the associated
responsibilities, like Fido did.
24. The existing regime, where wireless carriers either become co-carriers by
becoming wireless CLECs or remain customers, eligible to purchase Wireless Access
Services (or WAS), is technologically and competitively neutral (as required by the
25. Wireless carriers have lots of choice for interconnection. They can become
wireless CLECs (and thereby be co-carriers), they can remain customers and purchase
WAS, or they can enter into forborne commercial arrangements with other parties.
There is absolutely no public policy rationale for giving wireless carriers, who choose
not to invest in (and assume the obligations of) either wireless or wireline CLECs, a
shortcut to the interconnection regime applicable to CLECs. If non-CLEC wireless
carriers and LECs are to be “co-carriers” or “peers”, technological and competitive
neutrality and the Policy Direction require that they be subject, to the greatest extent
possible, to the very same obligations.
26. The Commission’s question does not ask where wireless carriers would
interconnect, if they were permitted to connect on a shared-cost and bill and keep basis.
Currently all CLECs are required to connect at the Local Interconnection Region (LIR)
level and wireless carriers who are not CLECs connect at the Local Calling Area (LCA)
level. If the Commission were to reject our proposal and grant wireless carriers CLEC-
like rights but without requiring them to be actual CLECs, then competitive equity
demands that wireless interconnection take place at the LIR level, not at the LCA level.
Moreover, we don’t have systems in place to deal with bill and keep at the LCA level.
Question 5: What measures need to be taken to ensure that wireless carriers have
the same benefits and obligations, regardless of whether they are independent or
part of a vertically integrated telecommunications entity?
27. You also asked about the merits of imposing particular measures to ensure
independent wireless carriers have the same benefits and obligations as vertically
integrated entities. We strongly believe that no such measures are necessary.
28. If an independent wireless carrier wants an alternative to becoming a CLEC or
purchasing WAS, it can purchase transport services from LECs on commercial terms.
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There is no evidence that LECs, including those with wireless arms, will not sell the
required forborne services to unaffiliated wireless carriers. These services are
competitive. Moreover, it cannot be presumed that LECs with wireless arms would
deny access. We know, for example, that Bell Canada’s CLEC operations sold similar
services in Western Canada to a wireless carrier unaffiliated with Bell. Similarly, we are
aware that wireless carriers have successfully entered into commercial arrangements
with unaffiliated CLECs (some with wireless arms, others without) in both our Atlantic
and Ontario/Quebec territories. These are commercial deals happening today. In any
event, in many LIRs there will be LECs without their own wireless operations.
29. It should also be remembered that even so-called vertically integrated wireless
carriers are not necessarily wireline CLECs everywhere they offer wireless services.
For example, we know there are national wireless carriers who do not have wireline
CLEC operations in large portions of Atlantic Canada and who do not purchase WAS
from Bell Aliant in all these areas – so they must have reached alternative
arrangements with CLECs.
30. Finally, the required forborne services remain subject to subsection 27(2); thus if
it so happens that a wireless carrier thinks it has suffered unjust discrimination, the
Commission can address this on an ex post basis.
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Question 6: Would it be appropriate for the Commission to forbear from
regulating wireless access service, and, if so, what criteria should be applied?
31. To conclude on wireless, you asked us to comment on WAS forbearance. As we
stated in our evidence, we think it is appropriate that forbearance be granted for WAS
where at least one CLEC is operating in a LIR. Indeed, where at the very least both a
CLEC and an ILEC are operating in a given LIR, competition is sufficient to protect the
interests of potential purchasers of WAS, thereby satisfying the forbearance criteria of
the Telecommunications Act. Through commercial agreements with either the CLEC or
the ILEC, WSPs will remain able to effectively access all end-customers located in any
exchange covered by the LIR. With forbearance, we would also be in a better position
to negotiate mutually beneficial commercial agreements with WSPs without these
WSPs becoming wireless CLECs. In LIRs with no operating CLECs, the WAS tariff
would continue to apply until such time as a CLEC begins its operation within it.
Question 7: Should existing rules be modified to require wireless carriers in
small ILEC territories to establish direct network interconnection arrangements
with the small ILECs, unless the two parties agree to alternative arrangements?
32. You asked if wireless carriers in SILEC territories should be required to directly
interconnect with the SILECs. No, we don’t believe this requirement should be
imposed on WSPs.
33. From Bell Canada’s perspective, the WSP is a customer who has purchased
WAS to deliver its local traffic throughout Bell’s LCA. We should be able to deliver the
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local traffic our WSP customer generates the same way we would any other customer
(like a bank) terminating local calls with us. And to be clear, WSPs are not allowed to
send us toll traffic with WAS service, so there’s no issue here relating to the SILEC toll
34. From a Bell Mobility perspective, it would be inefficient to require Bell Mobility to
interconnect twice in the same LCA (once with Bell Canada and once with the SILEC)
when its single interconnection with Bell Canada already works just fine. And it would
be needlessly disruptive if Bell Mobility had to terminate its interconnection with Bell
Canada to go directly interconnect with the SILEC.
35. But most of all, we fail to see a single consumer benefit from the SILEC proposal.
Further, from a network perspective, it would be more costly and less efficient.
36. This concludes our remarks. We welcome your questions.
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