February 22, 2011

Filed via Access Key

Mr. Robert A. Morin

Secretary General
Canadian Radio-television and
Telecommunications Commission
1 Promenade du Portage, Centre Building
Gatineau, Quebec K1A 0N2

Dear Mr. Morin:

Re: Telecom Notice of Consultation CRTC 2011-77

Requests by various parties to amend the Scope of the Notice and issues
as defined by the Commission
1. This submission is filed by Cogeco Cable Inc., EastLink Cable Inc., Quebecor Media
Inc. on behalf of its affiliate Videotron G.P., Rogers Communications Partnership
and Shaw Communications Inc. (collectively the “cable carriers”) in response to
submissions filed by the Public Interest Advocacy Centre (“PIAC”) on behalf of itself
and the Consumers’ Association of Canada, the Canadian Network Operators
Consortium Inc. ("CNOC"), Vaxination Informatique (“VI”), and The
Samuelson‐Glushko Canadian Internet Policy and Public Interest Clinic (“CIPPIC”),in
connection with Telecom Notice of Consultation CRTC 2011-77– Review of billing
practices for wholesale residential high-speed access services (The “Notice of
Consultation”).

2. In its submission PIAC has asked the Commission to broaden the scope of the
public proceeding announced in the Notice of Consultation to include retail as well
as wholesale Internet services and to change the wording of the issues on which the
Commission has sought public input.

3. In its submission CNOC has asked the Commission to broaden the scope of the
public proceeding in a different manner to include a wide-ranging review of the
regulatory framework applicable to all wholesale high-speed access services
 Cable Carriers Submission
Re: TNC CRTC 2011-77
Page 2 of 12

provided by incumbent local exchange carriers and cable carriers to their

competitors with respect to both the residential and business market.

4. In its submission VI has questioned the Commission’s classification of wholesale

high-speed Internet services, whether the Commission should regulate retail internet
services, whether the Commission considers usage-based billing (“UBB”) to be a
form of Internet Traffic Management Policy (ITMP), and whether the Commission
has prejudged the outcome of the public consultation by asking for comments on
alternative mechanisms to implement its regulatory policy with respect to wholesale
rates. Like PIAC and CNOC, VI has also urged the Commission to expand the
evidentiary stage of the public consultation.

5. In its submission CIPPIC has supported the requests of PIAC and CNOC to broaden
the scope of the public consultation and has expressed its view that a more
comprehensive evidentiary record is necessary for a proper determination of the
issues before the Commission.

6. For the reasons provided below, the Cable Carriers oppose the requests by PIAC,
CNOC, VI and CIPPIC to expand the scope of the public consultation.

Request by PIAC to Broaden the Scope of the Public Consultation

7. In its Notice of Consultation the Commission initiated a review of its regulatory

approach with regard to the terms upon which large incumbent telephone companies
and cable carriers provide their services to wholesalers, who, in turn, provide high-
speed Internet access to retail customers.

8. In its submission, PIAC has invited the Commission “…to consider the utility of
usage-based billing ("UBB") as an Internet Traffic Management Practice for all retail
customers and to expand the scope of the present Notice of Consultation to include
this inquiry”.

9. The Cable Carriers oppose this request.

10. To accede to PIAC's request would be tantamount to re-regulation of the retail

Internet market and would be contrary to the Commission's decision to forebear from
engaging in regulation of the rates or terms and conditions of service in that market.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
Page 3 of 12

11. The Commission itself made this point less than 16 months ago in Telecom
Regulatory Policy 2009-657 - Review of the Internet traffic management practices of
Internet service providers.

Consistent with the current regulatory approach, under which the

Commission has granted forbearance for retail Internet services, primary
ISPs may continue to apply ITMPs to retail Internet services as they
consider appropriate, with no requirement for prior Commission
approval. This approach remains valid due in part to the large number of
existing ISPs. A change in the approach would amount to interference
with market forces and would result in inefficient regulation, which is
contrary to the Policy Direction. (Paragraph 46, emphasis added)
12. As the Commission noted in that determination, it would be inconsistent with the
Policy Direction to regulate retail Internet services. The Commission has repeatedly
concluded that regulation of the retail Internet market is not required 1 and reaffirmed
this finding more recently in Telecom Regulatory Policy CRTC 2010-632 at
paragraph 50.

13. The Commission’s conclusion that competition remains sufficient to forbear from
regulating retail internet services relied in part on the participation by smaller or
secondary ISPs in the market. 2 Applying regulatory measures at the wholesale
rather than retail level represents “an efficient and proportionate” means to achieve
the telecommunications policy objectives as required under 1 (a) (ii) of the Policy
Direction. The proceeding initiated in Notice of Consultation 2011-77 to review the
application of UBB to wholesale Internet access services is therefore entirely
consistent with the Commission’s approach to fulfilling the Policy Direction.

14. The Commission's decision to address this issue at the wholesale level, rather than
the retail level, is also consistent with the approach in other countries, including the
EU countries, where effective regulation of wholesale services is recognized as a
valid means of freeing the retail market from regulation.

15. In contrast, PIAC’s request implies that the Commission’s wholesale regulatory
measures are not effective to protect the public interest and should be replaced by
direct regulation at the retail level. If PIAC's request were granted, there would be

1
See Telecom Decision CRTC 98-9, Telecom Order CRTC 99-592, Telecom Decision CRTC 2002-37
at paragraphs 26-27, Telecom Decision CRTC 2004-28 at paragraph 63, and Telecom Decision CRTC
2006-49 at paragraph 23.
2
SeeTelecom Regulatory Policy CRTC 2010-632 at paragraph 55.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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no need for wholesale regulation since direct regulation of retail rates would replace
competitive market forces as the arbitrator of pricing. This is not what the ISPs
would want, as evidenced by CNOC’s letter of February 11, 2011, and it would be
totally inconsistent with the terms of the Policy Direction.

16. Direct regulation of retail Internet services in the Canadian market would not be
“efficient or proportionate” nor “interfere with the operation of competitive market
forces to the minimum extent necessary”, as required by the Policy Direction.

17. In Telecom Regulatory Policy 2009-657, the Commission clearly endorsed usage-
based billing as a form of economic ITMP 3 and concluded that such measures are
preferable to technical ITMPs 4 . The Commission also set out a clear framework for
the application of retail ITMPs 5 .

18. If PIAC has an issue with the application of UBB to retail internet services, it remains
open to it to bring a complaint before the Commission pursuant to the framework
and the provisions set out at paragraphs 47 and 48 of Telecom Regulatory Policy
2009-657. As noted therein, the complainant is required to provide evidence and
rationale as to why an ISP’s ITMP measures are not compliant with the ITMP
framework.

19. PIAC has not made such a complaint and it did not ask the Commission to review
and vary its Regulatory Policy after it was released. The current proceeding is
clearly not the correct forum to make these arguments.

20. The Cable Carriers would also note in this regard that the focus of the remarks made
by Minister of Industry, the Honorable Tony Clement, on the issue of UBB has been
squarely on the issue of wholesale rates. Like the Commission, the Minister’s
concern has been to put in place a wholesale framework that enables smaller ISPs
to increase choice for consumers at the retail level. The following passages from the
Minister’s February 5, 2011 interview on the CBC radio show “The House” make this
clear. The Minister was clearly unconcerned about UBB being implemented at the
retail level:

3
Telecom Regulatory Policy CRTC 2009-657.
4
Ibid, at paragraph 40.
5
Ibid, at paragraph 43.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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Well I guess our approach as a government is that we should allow

different Internet service providers to offer different packages to customers
and then customers get to choose which one best suits their lifestyle.
…
So, I guess my answer is, to Bell: If you want to pursue user-based
billing, go right ahead. And if your customers want to pay for that
because they like Bell services, that’s fine. But you don’t have a right
to force your business structure on all of your competition.

Request by PIAC to Change the Wording of the Issues on which Public Comment
is Invited

21. In its submission, PIAC has also taken issue with the Commission’s statement of the
issues for comment in the Notice of Consultation.

22. In particular, PIAC has requested the Commission to amend the wording of issue (i)
identified by the Commission in paragraph 12 of the Notice of Consultation. That
issue currently reads as follows:

i. How best to implement the following principles with respect to

large incumbents’ wholesale services used by Small ISPs;

a. As a general rule, ordinary consumers served by Small

ISPs should not have to fund the bandwidth used by the
heaviest retail Internet service consumers.

b. It is in the best interest of consumers that Small ISPs,

which offer competitive alternatives to the incumbent
carriers, should continue to do so.

23. PIAC has asked the Commission to remove subparagraph (a) of (i) and replace it
with “…a request for parties to comment on usage-based billing in the wholesale and
retail markets generally and in particular regarding its effectiveness as an ITMP”.

24. As discussed above, there is no basis to open up a discussion of retail pricing

principles in the retail Internet market which is subject to a forbearance order and
wholesale pricing safeguards.

25. PIAC has also asked the Commission to delete subparagraph 13(ii) which provides
as follows:
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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13. In their comments, parties should provide full supporting

rationale and all evidence on which they rely. In addition,
parties requesting or proposing changes to the regulatory
approach are expected to demonstrate, as applicable, how
such changes would:

i. Benefit consumers to allow them fulsome access to the

Internet;

ii. Respect the principle that ordinary consumers served by

Small ISPs should not fund the bandwidth used by the
heaviest retail Internet service consumers; and

iii. Ensure that Small ISPs retain flexibility and continue to

be a source of innovation in the industry.
26. According to PIAC:

These statements assume the cause of Internet congestion is a user with

a high bandwidth usage based on a simple count of bits transferred with
no relation whatever to use or capacity at peak times. They assume that
the “fix” for any capacity problems is an economic ITMP, rather than a
capacity increase or a technical fix. They assume a billing method that
penalizes individuals, rather than encouraging aggregate use shifts. It is
bordering on a fettering of the Commission’s jurisdiction and inappropriate.
27. The Cable Carriers disagree with PIAC’s characterization of the principle enunciated
by the Commission in paragraphs 12(i)(a) and 13(ii).

28. First, the Commission is not saying that consumers served by Small ISPs are
funding the bandwidth used by the heaviest retail Internet service consumers. Its
principle is that they ought not to be required to do so. The Commission has asked
interveners to propose reforms that are consistent with this principle. This is a
safeguard for consumers – not a recipe for a dictated outcome as PIAC is
suggesting.

29. Second, PIAC is wrong when it states that the Commission assumes that the “fix” for
any capacity problems is an economic ITMP, rather than a capacity increase or a
technical fix. As the Commission made clear in the Notice of Consultation, as well
as in the Chair’s February 3, 2011 appearance before the Standing Committee on
Industry, Science and Technology, an ISP’s first response to network congestion
should always be to invest in more network capacity. Given that network upgrades
are not always practical, the Commission has determined that if it is necessary to
manage Internet traffic, it should be done through transparent economic means.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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Finally, traffic shaping and other technical means should only be used as a measure
of last resort. These are the same principles as were established in Telecom
Regulatory Policy 2009-657. The FCC has taken a similar approach in its Report
and Order FCC 10-201, released December 23, 2010. 6

30. It is ironic that PIAC recognizes that an increase in capacity may be required to carry
increases in Internet traffic – but is at odds with the notion that those who are driving
the increase in demand should be required to pay in accordance with their usage.
As indicated above, the Commission has already determined that technical fixes are
a last resort and are considered inferior to economic ITMPs. If PIAC disagreed with
the Commission’s determination, it ought to have sought review and variance of the
Commission’s 2009 Regulatory Policy. The Commission will however recall at the
time of that public process, there was considerable public outcry concerning the
imposition of technical measures to slow down Internet traffic in peak periods.
Indeed in the proceeding leading to Telecom Regulatory Policy 2009-657, PIAC
itself was suspicious of technical measures and proposed “minimally intrusive”
technical measures “[o]r an ISP could implement a bit cap with overage charges
tuned to discourage any extremely high bandwidth use.” 7

31. Finally, PIAC’s argument that the Commission is in some way fettering its jurisdiction
or that its statement of the issues in the Notice of Consultation is somehow
inappropriate is without any merit. It is entirely within the Commission’s jurisdiction
to frame the issues to be addressed in a public consultation and this has been done
in countless previous proceedings. One of the principles of “smart regulation” is to
have a measure of certainty in the regulatory framework so that carriers and service
providers can plan their network investments in a stable environment and
consumers can have some certainty on how to order their affairs to avoid excessive
expense. If PIAC or other parties were permitted to reopen any Commission
decisions or regulatory policies in any proceeding they wanted to without any
supporting evidence for their reconsideration, there would be regulatory chaos in
short order. There are legal mechanisms to trigger such reviews by the Courts, the
Commission or the Governor in Council and these procedures are safeguarded by

6
In paragraph 72 the FCC discusses the reasonableness of pricing mechanisms as ITMPs, including
usage-based pricing.
7
The Consumers Group, Written Reply to Oral Comments July 28, 2009, para 22 Telecom PN 2008-19.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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certain timelines and tests in order to provide some measure of certainty to the
regulatory framework. PIAC ought not to be permitted to circumvent these tests just
because it disagrees with a Commission determination.

32. The Commission’s Notice of Consultation provides ample opportunity for parties to
propose new measures to address the issue at hand which is a review of the
Commission’s regulatory approach with regard to the terms upon which large
incumbent telephone and cable carriers provide their services to wholesalers who in
turn provide high-speed Internet access to retail residential customers.

33. For these reasons, PIAC’s request to expand the scope of the proceeding and to
amend the issues posed in the Notice of Consultation, should be denied.

Request by CNOC to Expand the Scope of the Proceeding

34. While CNOC does not support the request by PIAC to broaden the scope of the
proceeding to include a review of the regulatory framework for retail high-speed
Internet services 8 , it has requested the Commission to include a comprehensive
review of the regulatory framework applicable to all wholesale high-speed access
services provided by ILECs and Cable Carriers to competitors.

35. What CNOC has in mind is not limited to high-speed Internet services or the
provision of wholesale services targeted at the residential market. It would appear to
involve wholesale access to all broadband services for both the business and
residential market; the unbundling of the ILECs’ and cable carriers’ broadband
networks; access to last mile fibre facilities and an ADSL-CO service, as well as a
new pricing model.

36. In short, CNOC is seeking a major review of the Commission’s essential services
regime as it applies to wholesale high-speed access services – a review that the
Commission completed as recently as six months ago in August 2010. That review
included two rounds of Evidence, three rounds of interrogatories and a week-long
Oral Hearing culminated with Final Comments in June 2010. That proceeding
addressed all the issues raised by CNOC in its current filing.

8
CNOC letter to the CRTC, February 11, paragraph 26.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
Page 9 of 12

37. In fact, the points raised on pages 2 to 5 of CNOC’s letter are highly reminiscent of,
and in some cases identical to, the Teksavvy and Cybersurf arguments in the
Telecom Notice of Consultation CRTC 2009-261 proceeding. 9 In paragraphs 121 to
122 of Telecom Regulatory Policy CRTC 2010-632 the Commission decided against
trying to scope out what new “next generation” wholesale access services should be
mandated and expressly stated that if there is demand for specific types of services,
the Commission would apply its essential services framework on a case-by-case
basis. The CRTC also considered – and rejected – calls for a CO-based ADSL
access service and local head-end based cable access service, concluding that
declining to mandate these services would not result in a substantial lessening or
prevention of competition. 10 Like CNOC, Teksavvy and Cybersurf had also argued
that the cable head-end service was necessary to offer a triple play.

38. CNOC has not only recycled the same arguments made in that proceeding, it has
failed to update the statistical evidence filed in support of these arguments the last
time around. For example, CNOC has relied on outdated OECD statistics on the
relative price of Canadian high-speed Internet bandwidth. The OECD data is
suspect when compared to popular pricing packages currently available in Canada.
For example, Rogers’ most popular high-speed package provides 10 Mbps for a
monthly price of $46.99, or $4.70/Mbps. This compares with the $26.11/Mbps cited
in Figure 8 of CNOC’s letter to the Commission and would put the Canadian rate
among the lower priced OECD countries on the outdated chart.

39. CNOC’s proposal has little to do with the issues raised in the Commission’s Notice
of Consultation. It ignores the fact that the wholesale services under consideration,
namely the ILECs’ GAS service and the Cable Carriers’ TPIA service provide a
managed network service to the wholesale market that is designed to alleviate the
requirement for smaller ISPs to lease DSL lines to serve individual customers. Both
GAS and TPIA are an alternative for ISPs who do not wish to purchase unbundled
network components from the ILECs and other carriers and piece together their own
network.

9
Teksavvy Final Submissions in response to TNC 2009-261, June 21, 2010, at paragraph 34 is identical
to paragraph 2 of the CNOC letter filed February 11, 2011.
10
See paragraphs 131 to 132 and 139 to 140.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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40. CNOC has provided no rationale for the type of comprehensive review of the
essential services regime that it appears to be asking for. If the Commission were to
accede to CNOC’s request, it would be embarking on a path already addressed over
the past almost two years by initiating a proceeding that could drag on for years
without coming close to addressing the more immediate issues raised in its Notice of
Consultation. CNOC presents no evidence that circumstances have changed at all
from those extensively canvassed and considered in the proceeding leading to
Telecom Regulatory Policy 2010-632 (August, 30, 2010).

41. For these reasons, CNOC’s request to expand the scope of the proceeding should
also be denied.

Requests by VI for Clarification and Expansion of the Scope of the Public

Consultation

42. On page 2 of its submission, VI has asked the Commission to clarify whether GAS is
a resale service involving resale of the carrier’s retail internet services or a "bulk data
communication service".

43. In response, the Cable Carriers would point out that the Commission has
consistently treated GAS and TPIA as conditional mandated non-essential services
required by small ISPs to provide competitive high-speed Internet services to the
residential market. Evidence of this approach can be found in the mandated
discounting of these services, which would not occur if all that was being offered was
resale of a retail service. The Commission’s determinations in TRP 2010-632 made
it clear these wholesale access services exist to support competition in the retail
internet services market. 11 This view is reiterated in paragraph 11 of the current
Notice of Consultation where the Commission stated that:

The objective of the review is that Small ISPs continue to be

afforded the flexibility to bring pricing discipline, innovation and consumer
choice to the residential retail Internet service market. (emphasis added)

44. In paragraph 12 of its submission VI expresses puzzlement over what it sees as an

attempt by the Commission to seek to define a fair retail pricing philosophy to be
11
See paragraphs 7 to 8 and 50-55 or TRP 2010-632
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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imposed on retail ISP services which the “Commission pretends it does not
regulate”.

45. In the Cable Carriers’ view, VI is mischaracterizing the Notice of Consultation. The
principle advanced by the Commission seeks to avoid wholesale rates that
necessarily result in lower usage retail customers of small ISPs paying for bandwidth
demands of higher usage customers. Rather than dictate retail pricing policies by
small ISPs, the Commission is focusing on precisely the opposite – namely
wholesale rate structures that do not dictate retail outcomes.

46. As discussed above in response to PIAC’s submission, there is no question of re-

regulating retail rates. The focus should be, and is, on establishing a reasonable
wholesale rate structure that will support the Commission’s policy of affording
smaller ISPs the flexibility to bring pricing discipline, innovation and consumer choice
to the residential retail Internet market.

47. In paragraphs 17 to 20 of its submission, VI has questioned whether the

Commission is treating UBB as an ITMP or a cost-based component of a rate.
Again, VI appears to be looking for confusion in the face of clarity. The Commission
has been very clear that UBB is an ITMP. 12

48. Finally, like PIAC, VI has suggested that the Commission has prejudged the debate
on appropriate rate structures for wholesale high-speed Internet services. As
discussed above, VI is wrong in this respect. To the contrary, the Commission has
expressly asked interested parties to come forward with their proposals for
regulatory reforms in respect of wholesale pricing that respect the Commission’s
regulatory principles.

Request by CIPPIC to Broaden the Scope of the Proceeding

49. In its submission CIPPIC has generally supported the requests by PIAC and CNOC
to broaden the scope of the public consultation and has expressed its view that a
more comprehensive evidentiary record is necessary for a proper determination of
the issues before the Commission.

12
See Telecom Decision CRTC 2011-44, at paragraph. 2.
 Cable Carriers Submission
Re: TNC CRTC 2011-77
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50. The Cable Carriers consider that they have responded to the concerns expressed by
CIPPIC regarding the scope of the public consultation in their responses to PIAC
and CNOC.

51. As regards CIPPIC’s additional comments on the relative role of ITMPs and network
upgrades in meeting Internet demand, it would appear that CIPPIC is simply trying to
re-argue the case it made in the traffic management proceeding. The current public
consultation ought not to be used to revisit recent Commission decisions and
policies with which CIPPIC disagrees.

52. All of which is respectfully submitted by the Cable Carriers.

Yours very truly,

Yves Mayrand Natalie MacDonald

Vice President Vice President
Corporate Affairs Regulatory
Cogeco Cable Inc. EastLink Cable Inc.
Tel.: 514.874.2600 Tel: 902.431.9979
Fax: 514.874.2625 Fax: 902.446-9979
yves.mayrand@cogeco.com regulatory.matters@corp.eastlink.ca

Dennis Béland Ken Engelhart Jean Brazeau

Senior Director, Regulatory Affairs, Senior Vice President Senior Vice President
Telecom Regulatory Regulatory Affairs
Quebecor Media Inc. Rogers Communications Shaw Communications Inc.
Tel.: 514.380.4792 Tel.: 416.935.2525 Tel.: 416.649-5211
Fax: 514.380.4664 Fax: 416.935.2523 Fax: 416.649-5201
regaffairs@quebecor.com ken.engelhart@rci.rogers.com regulatory@sjrb.ca

cc: Interested parties to TNC CRTC 2011-77

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