2010 05 27

To: Mr. Yochai Benkler

Faculty Co-Director,
Berkman Center for Internet & Society
Harvard University
23 Everett Street, Second Floor
Cambridge, MA 02138

Subject: Canadian Unbundled Local Loop Monthly Tariff Rates

Dear Mr. Benkler,

I am writing to you on behalf of Bell Canada 1 with regard to the Berkman Center's Next
Generation Connectivity: A Review of Broadband Internet Transitions and Policy from Around
the World, February 2010 Final Report (the "Berkman Report"). We were surprised to read in
the report claims that Canada has some of the highest regulated rates for local loop unbundling
in the OECD. Upon examination of the data in the Berkman Report, we have found an error
made by the authors in comparing Canada's rates with the rest of the OECD countries. We are
writing to bring this error to your attention.

The Berkman Report states:

During the first generation transition and to this day, Canada has had some of
the highest regulated rates for unbundling anywhere in the OECD. 2

The only other reference in the report which explains the basis for this conclusion is the
statement on page 168 of the report which reads:

As of September 2008, the monthly price of an unbundled local loop in Canada,

excluding prices for remote areas or the most dense downtown areas, in terms of
PPP, was roughly 70% higher than in South Korea and Denmark, almost 50%
higher than in Italy, 30% higher than in Japan, France, or Norway, and 25%
higher than in Finland or the UK. Indeed, Canada has the highest monthly
charge for access to an unbundled local loop of any OECD country. 3

1
Bell Canada is Canada's largest Incumbent Local Exchange Carrier (ILEC). In fact, it is Canada's largest
communications company with product offerings in voice, data (including Internet), wireless and video
distribution. Bell Canada is a wholly owned subsidiary of BCE Inc. Details of BCE can be found at www.bce.ca.
The numbers presented in this letter also cover Bell Aliant Regional Communications, Limited Partnership's (Bell
Aliant's) Ontario and Québec operations. Under Canadian telecom regulatory rules, Bell Aliant is considered an
affiliate of Bell Canada.
2
Next Generation Connectivity: A review of broadband Internet transitions and policy from around the world,
Feb 2010, Chap 4.9, pg 163.
3
Next Generation Connectivity: A review of broadband Internet transitions and policy from around the world,
Feb 2010, Chap 4.9.3, pg 168.

Bell Canada
Mirko Bibic
Floor 19
160 Elgin Street
Ottawa, Ontario K2P 2C4

Telephone: (613) 785-0615

Facsimile: (613) 560-0472
bell.regulatory@bell.ca
2010 05 27 2

It thus appears that the conclusion about unbundling rates is based on a comparison of OECD
data for unbundled local loop (ULL) rates in Canada with the rest of the OECD countries' ULL
rates. As outlined below, this conclusion is based on an incomplete OECD dataset.

The Berkman Report based its conclusions on data from the OECD, specifically the OECD
Communications Outlook 2009 - OECD 2009 - ISBN 9789264059832 (the "OECD Report")" 4
Chapter 2, Table 2.10. Local Loop Unbundling Pricing of the OECD Report typically provides
average weighted or national monthly ULL rates for the OECD countries. A review of that table
in the OECD Report shows that most countries have uniform unbundled loop rates throughout
their territory. 5 For countries listed in the table with more than one rate (specifically Australia,
Finland, Japan, and the U.S.), a weighted or national average is provided or can be determined
from the data presented. For example, in the U.S., which has a multitude of unbundled loop
rates throughout the country, the OECD Report provides a national average. 6 In the case of
Canada, which also has more than one rate for unbundled loops, the OECD Report provides
three ULL rates, pertaining to Canada's core major cities, towns and villages, and remote areas.
As explained below, the three rates cited by the OECD correspond to three of the seven Bell
Canada ULL rates set by the Canadian regulator, the Canadian Radio-television and
Telecommunications Commission (CRTC).

In order to discover how the Berkman Report reached its conclusion about Canadian ULL rates,
we attempted to replicate the comparison that we believe the Berkman Report undertook. Our
assumption is that in the case of Canada the Berkman Report authors have utilized the mid-
range unbundled loop rate quoted in the OECD Report as the basis of its conclusions that it
excluded “remote areas and the most dense downtown areas." 7 By using this assumption and
using a purchasing power parity conversion rate, 8 we can see how the Berkman Report found
that Canada's mid-range rate of $15.96 CAD ($12.98 PPP) was significantly higher than South
Korea's rate of KRW 6570 ($8.62 PPP) (51%), Denmark DKK 68.20 ($7.94 PPP) (63%), Italy
EUR 7.81 ($9.30 PPP) (40%) as well as Japan, France, Norway, Finland and the UK. 9

The mid-range monthly ULL rate for "towns and villages" does not reflect the Canadian
weighted average monthly lease rate for an ULL. The monthly lease rate for the mid-range
"towns and villages" ULL in the OECD Report Chapter 2 Table 2.10 is actually the lease rate for

4
"The result, in any event, is that by comparison to high performers for which the OECD reported data in the
Communications Outlook 2009, Canada's rates for local loop are high." Next Generation Connectivity: A review
of broadband Internet transitions and policy from around the world, Feb 2010, Chap 4.9.3, pg 168.
5
With respect to full unbundled local loops, sub-loop unbundling is excluded.
6
A Survey of Unbundled Network Element Prices in the United States, Billy Jack Gregg, Public Service
Commission of West Virginia.
7
Next Generation Connectivity: A review of broadband Internet transitions and policy from around the world,
Feb 2010, Chap 4.9.3, pg 168.
8
The OECD Report provides unbundled loop rates in each country's domestic currency. The Berkman Report
appears to have performed a purchasing power parity (PPP) analysis to compare these rates. The Berkman
Report does not provide the source of its PPP calculation. We have used OECD PPP for GDP 2008 which
provides a reasonable and reputable PPP calculation.
9
Unfortunately, because we do not know the exact source of the Berkman Report's PPP analysis, we were unable
to duplicate the exact same percentage differences as outlined in the Berkman Report for these countries.
Nonetheless, in all cases cited, using the PPP analysis we performed found the Canadian mid-rate range to be
significantly higher than the cited countries. A complete list of the results of the PPP for each country is found
below in Table 2.
2010 05 27 3

Bell Canada's residential (Type A) analogue local loop rate for Band D ($15.96 CAD). For
unbundled loop pricing, Bell Canada's territory is divided up into seven (7) rate bands,
specifically Bands A through G. 10 Although Rate Band D is the middle rate band it represents
only two percent (2%) of Bell Canada's ULL, and is mostly associated with small towns and rural
areas. Ninety percent (90%) of Bell Canada's ULLs fall into Rate Bands A and B, the two least
expensive rate bands for ULL. Regardless of whether the Berkman Report used Bell Canada's
Band D rate to draw its conclusions, or made some other calculation based on similar data,
what is clear is that the conclusions reached for Canada are erroneous.

Using a weighted average unbundled loop rate for Canada would have led to a very different
result. Below is a breakdown of the unbundled loop rates and geographic distribution for Bell
Canada that have been in effect since 2001. As can clearly be seen in the following data tables,
the weighted Bell Canada average monthly ULL rate is comparable if not lower than the monthly
ULL rates for the comparative countries in the Berkman Report.

Table 1
Bell Canada Unbundled Local Loop Monthly Rate

Rate Band Monthly Rate USD PPP Percentage of Unbundled

(CAD) 11 (2008 Year) 12 Local Loops (ULL) 13
Band A $ 8.50 $ 6.91 14.32%
Band B $ 12.19 $ 9.91 75.64%
Band C $ 14.44 $ 11.74 7.92%
Band D $ 15.96 $ 12.98 1.73%
Band E $ 25.82 $ 20.99 0.00%
Band F $ 26.39 $ 21.46 0.40%
Band G $ 44.20 $ 35.93 0.00%
Total 100.0%
Weighted Average $ 11.96 $ 9.72

10
Bell Canada's unbundled loop bands are generally a division of geographic regions by density and loop lengths.
The specifics of the divisions listed below (as set out in Telecom Decision CRTC 2001-238).
Band A – Metropolitan Centres - 9 core wire Centers in Bell territory (4 in Toronto, 4 in Montreal, 1 in Ottawa);
Band B – Wire Centres with greater or equal to 150,000 total Network Access Services (NAS – the Canadian
term for telephone connections) (excluding Band A Wire Centres);
Band C – Wire Centres with between 10,000 and 150,000 NAS;
Band D – Wire Centres with less than 10,000 NAS but more than 1,500, but not in Bands F or G;
Band E – Wire Centres with less than or equal to 1,500 total NAS;
Band F – Wire Centres with between 1,500 and 8,000 total NAS, and where the average loop length is greater
than 4 km; and
Band G – "Remote" Wire Centres (e.g., without year-round road access or found in remote parts of an ILEC's
serving area).
11
Rates reflect the Phase II costs approved in Telecom Decision CRTC 2001-238, plus a 15% mark-up, as
approved in Telecom Decision CRTC 2002-34.
12
OECD 2008 GDP - http://stats.oecd.org/Index.aspx?datasetcode=SNA_TABLE4
13
Bell Canada General Tariff - Various Tariff Items CRTC 8740-B2-200908569 – 2010-05-17
http://www.crtc.gc.ca/8740/eng/2009/b2_7205.htm (also includes Bell Aliant in Ontario and Québec).
2010 05 27 4

Table 2
2009 OECD Report Monthly ULL Rate Converted to USD Purchasing Power Parity

Percent Monthly Charge

Monthly Rate from USD PPP
lower or higher than
Country 2009 OECD Report (2008 Year
Bell Canada's Weighted Average ULL
Table 2.10 OECD GDP)
(OECD Country – Canada)/Canada
CAD 11.96 $9.72
Canada 0%
(Weighted Average) (Weighted Average)
Australia AUD 14.30 $9.66 -1%

Austria EUR 10.44 $11.69 +20%

Belgium EUR 9.29 $10.19 +5%

Czech Republic CZK 262 $25.00 +157%

Denmark DKK 68.20 $ 7.94 -18%

Finland EUR 11.21 $11.58 +19%

France EUR 9.29 $10.11 +4%

Germany EUR 10.50 $12.24 +26%

Greece EUR 8.48 $11.52 +19%

Iceland ISK 1 147 $ 9.18 -6%

Ireland EUR 16.43 $16.66 +71%

Italy EUR 7.81 $ 9.30 -4%

Japan JPY 1334 $11.50 +18%

Korea KRW 6 570 $ 8.62 -11%

Luxembourg EUR 10.75 $11.30 +16%

Norway NOK 95 $10.44 +7%

Poland PLN 36 $18.65 +92%

Portugal EUR 8.99 $13.36 +37%

Spain EUR 9.72 $12.81 +32%

Switzerland CHF 31.00 $18.90 +94%

Turkey TRY 17 $17.75 +83%

United Kingdom GBP 6.67 $10.08 +4%

United States USD 13.70 $13.70 +41%

2010 05 27 5

As can be seen from the tables above, Bell Canada's weighted average monthly ULL rate is
among the least expensive in the OECD data set, with only five countries having lower ULL
rates.

We trust that our letter has provided you with a better insight into the monthly ULL rate bands
and associated cost structures that Bell Canada is required to work under, and that the
conclusions reached in the Berkman Report (however they were arrived at) were based on
erroneous data. Clearly, if one compares the weighted average loop rate cited above to the
OECD table, one can see that far from having one of the highest monthly ULL rates, Canada in
fact has one of the lowest among the OECD countries.

Yours truly,

Mirko Bibic
Senior Vice-President
Regulatory & Government Affairs
MB/es