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January 15, 2007

Mr. Leonard St. Aubin ByFacsimile: 613-998-1256 Director General Policy Branch Industry 16lhFloor 300 Slater Street o.ttawa, ON K1A OCB

DearMr,st. Aubin:

Re: Comments on Proposed Order Varying Telecom Decisi,on muC 20qa-15, Canada Gazette Part I. December 16. 2006

INTRODUCTION

1. Access CommunicationsCo-operativeLimited ("AccessCommunications")is hereby providing its comments inresponseto the above-referencednotice contained in the Canada Gazette Part I (December 16, 2006). In that notice, the Governor in Council proposedan Order (the "ProposedOrder") that would vary Telecom DecIsionCRTC 2006-15 ("Decision2006-15").

2, We believe the Governor in Councilwould benefitfrom receiving the views of a small market cable distribution undertaking,like Access Communications,that has announced very recently that it has decidedto invest considerable resources to enter a retail local exchange market in the province of .

3. It isAccessCommunications'respectfulopinionthattheProposedOrder, varying Telecom Decision CRTC 2006-15, is seriously flawed. The Proposed

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Order would require the Commissionto forbear from regulatingthe retail local exchangeservicesprovidedbythe ILECsevenin marketswherethe ILEChas lost littleor no marketshareandwherethereis noevidence of rivalrous behaviour. This framework for forbearance, if implemented,would not ensure that a sustainable competitive local exchange market develops in all parts of Canada. The Proposed Orderwould retard the developmentof competition in larger Canadian marketswhere it has only recently begun to appear and would prevent, altogether, any facilities-basedcompetitionfrom developing in retail local exchange markets in rural parts of Canada and in smaller Canadian communities, which would include all of Saskatchewan.

4. Given the nature of the ProposedOrder that was announced by the Governorin Council, we are now beginningto question our decision to enter that market, which (if the Proposed Order is implemented)will have no mechanismsin place to limit the ILECs' ability to use their significant market power to underminethe development of a sustainable competitivemarket.

5. As you may be aware, Access Communicationshas been operating licensed and exempted systems in Regina and in other smaller communities in Saskatchewanfor more than three decades. We are a non- profit service co-operativethat was incorporatedin 1974 under the Co-operative Association Act of Saskatchewan, Any profits earned by the co-operative are not returned to the membershipas dividends, but are, instead, retained by Access Communicationsto improvethe serviceswe provide to subscribers. Over the years, Access Communicationshas investedconsiderable resources into enhancing and expandingour telecommunicationsfacilities in order to ensure that our mandateas a community-ownedco-operative is achieved, J AN.15, 200 7 3 : 15PM ACCESS COMMUNICATIONS . NO.239." P. 4

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. ' 6. Recently, Ac~ess ~ommunications made the decision to e~p~nd the scope and the nature of the services we providein the communitieswe serve to Jnclude . . - retail local exchange services. Inmakingthat decision to enter the local '., , '. . ,

exchange market. in Regina,. Access Communications relied on the. fact that the Commission had put in place a fair and reasonable framework for ILEG forbearance that would 'prevent the ILEC (SaskTel) from using its monopoly' position in Regina to stamp out competition. We continue to believe that the market share threshold criteria established by the Commission in Decision 2006-15 (along with the additional requirements relating to quality of service indicators) is th~..mo$t appropriate framework to ensure that sustainable competition develops throughout Canada in the retail local exchange market.

7. We have invested cbnsiderable resources into this new endeavour. That investment is now at risk as a result ofthe Proposed Order issued by the Governor in Council. By eliminating a market share threshold test for forbearance and any req~irement to demonstrate the. existence of rivalrous behaviour in the localexchange market, the Proposed Order would allow an ILEC to use its dominant position in a given market to destroy the development of any competition.While Access Co~munications is committed to launching our local exchange service in Regina,because we have already made the investment to upgrade our facilities and to hire new staff. our launch plans for other smaller communities in Saskatchewanhave now beenput on hold. By failing to incl'ude inthe ProposedOrder any measures'that would limit the ILEGs' ability to u~e the,irmarket power to dominatethe retail local exchange market and impede the developmentof a competitive marketplace,the Governor in Council has created an enormousdisincentivefor us - and other .IAN,15,2007 3: 15PM ACCESS COMMUNICATIONS NO.239 P. 5

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potential facilities-based CLECs- to enter the retail local exchange market.This will mean that smaller communitiesand rural residentswill not get to enjoy the benefits of competition. Instead,those Canadianswill only have one option - to continue tQreceive local exchangeservices from a monopoly ILEC.

8. It should be understood that Access Communications is not opposed to competition. Access Communications fully supports the Governor in Council's objective of ensuring that competition develops in the retail local exchange market in communities all across Canada. As the operator of several cable systems in markets throughout Saskatchewan, Access Communications is engaged in some, of the most fiercely competitive distribution markets in the country, We are competing against two satellite distributors (ExpressVu and StarChoice), the cable systems operated by SaskTel, the wireless MMDS system operated by Image Wireless and the illegal satellite dish providers. We are, therefore, fully aware of the benefits Canadian consumers obtain from the existence of a competitive market and we are fully engaged in meeting the broadcasting and telecommunications needs of consumers in this highly competitive market.

9. ASwe enter the retail local exchange market in Saskatchewan, Access Communicationsis forced to competeagainst an incumbent company (SaskTel)that is a government~ownedmonopoly and has demonstrated in the past that it will use its market power to prevent competitionfrom developing in other telecommunicationsmarkets in Saskatchewan. In the retail local exchange markets in this province,where one service provider, SaskTel, is starting with a 100%share of the subscriber-base,a fair and sustainable competitive market can only develop if a frameworkfor deregulation is put in ,JAN,15,2007 3: 16PM ACCESSCOMMUNICATIONS NO,239 p, 6

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place that will prevent the government-ownedtelephone monopoly from using its significant market power to unfairly compete in this new market. To ensure competition in this new market is fair and sustainable,new entrants, like Access Communications,require a regulatoryframework that limits SaskTel's ability to use its dominant position in the market to,unfairly undermine competitors.

10. This issue is far too importantto the peopleof Saskatchewanand to all Canadians. Canadian consumers, regardlessof whether they live in a major metropolitan area like Toronto or Montreal or in a smaller more rural community, like . Saskatchewanor Cold Lake,Alberta, deserve to benefit from a sustainable competitive retail local exchange market. If the ProposedOrder wereimplemented,however, this would not be the case.

11. In our view, the ProposedOrder should not be implemented in its current form. If the Governor in Council were to vary DecisionCRTC 2006-15 in the manner set out in the Proposed Order, competitionwould be stifled and very few Canadians would obtain the benefits of a truly competitive market. We believe that the Commission establisheda much more fair and reasonable approachto forbearancein theretail local exchange marketin Decision2006-15. If implemented,the Commission'sapproachwould help to ensure that competition in the retail local exchange market developsin a quick and in a sustainable manner.

THE PROPOSED ORDER IS FLAWED

12. Under the ProposedOrder, an [LECwould only have to satisfy two criteria in order to be forborne from regulationfor its residentiallocal exchange service: (I) evidence that threetelecommunicationsservice providers (includingthe ILEC JAN,15,2007 3: 16PM ACCESSCOMMUNICATIONS NO,239 p, 7

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and one mobile wireleas service provider) are offering retail local exchange services in the relevant market, and (ii) evidence that it has complied with the

quality of service indicators for a six month period preceding the application for forbearance. In the business local exchange market, the Proposed Order

requires even less of the ILEC. In addition to meeting the quality of ser-vice indicators, the ILEC would only be required to demonstrate that two facllities- based, fixed-line telecommunications service providers are offering local exchange services in the relevant market.

13. The Proposed Order does not contain any market share threshold test that would have to be satisfied by the ILEC. Nor is there any requirement to demonstrate that there is evidenceof rivalrous behaviour in the relevant geographic market for which forbearance is sought. Once an ILEC can identify one facilities.based, fixed-linetelecommunicationsservice provider that is merely "offering" local exchangeservice in its market, then it will be automaticallyforborne from regulation underthe TelecommunicationsAct (assuming of course the quality of service requirementsare also met).

14. The Proposed Order would even remove the rules that have been established by the Commissionwith respectto winning back customers (the "winback rules"). If implemented,the ProposedOrderwould allow an ILEGto respondto the prospect of losing a subscriberto a competitor by immediately contacting that subscriber and offering him or her a better deal. Each ILEC knows when a subscriber has decided to switch to the services of a competing local exchange service carrier, and under the forbearanceframework set out in the Proposed Order, will have every incentiveto use that knowledgeto prevent effective competitionfrom developing in the geographic markets it serves, JAN.15.2007 3:16PM ACCESSCOMMUNICATIONS NO.239 P. 8

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15. Access Communicationsfirmlybelieves that the approsch to forbearance set out in the Proposed Order is doomed to fail. It will allow an ILEC to continue to use its market power to dominatethe retail local exchange market and will prevent Canadians in every region of the countryfrom achieving the benefits of a competitive market place.

16. We are particularly concernedwith SaskTel's ability to use its market powerto continue to dominate local exchange markets in Saskatchewan, The forbearance framework set out in the ProposedOrder simply will not work in a province where the government-ownedILEC holds almost 100% of the market share, where that ILEC has the ability to use its relationshipwith the government to continue to assert its dominance over the market, and where the largest employer is the provincialgovernment. The simple fact that a mobile wireless carrier (like RogersWireless) and a fixed-line telecommunications service provider are offering retail local exchange services in a given market in Saskatchewanwill not ensure that sustainablecompetition develops in that market. The unique circumstancesthat exist in thIs province create enormous barriers to entry into the local exchange market that simply do not exist in any. other province. We believe that strict forbearance criteria. such as the market- loss thresholds established by the CRTC in Decision2006-15, have to be maintained in this environmentto ensure that sustainable competitioncan develop.

17. In Decision 2006-15, after considerableinput from interested parties, the Commission established a reasonableapproach to forbearance that would, among other things, require an ILEGto demonstratethat it no longer has JAN.15.2007 3:16PM ACCESSCOMMUNICATIONS NO.239 P. 9

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substantial market power. Access Communicationsparticipated in that proceeding, as did numerous other parties, includingthe ILECs,competitive local exchange service providers,various consumer groups and the Commissioner of Competition. To our knowledge, no party to the proceeding- not even the ILECsthemselves - opposed the notion that a fair and reasonable test forforbearance wouldhave to includeevidence of rivalrousbehaviour and/or some form of market loss threshold.

18, A number of groups representing Canadian consumers, includingthe Consumers'AssociationofCanada,the NationalAnti.PovertyOrganizationand I'Uniondes Consommateurs, intervened in that proceeding in support of a market threshold test for forbearance. Those groups proposed a set of forbearance conditionsthat wouldrequire, as one of those conditions, evidence of 30% or greater market loss before an [LECwould be forborne from regulation in the retail localexchange market.'

19. The Commissioner of Competitionalso weighed in on this issue. Given its vast experience and expertise in competitionmatters, the Commissioner of Competitionproposed a six-partIIstructuredrule of reason test", that includeda requirementforthe ILEGto provideevidence of "vigorousrivalry"between the ILECand the new entrant.2 Thepresence oftwofacilities-basedcompetitors was also a prerequisite to forbearance under the Commissioner's test, along withother requirements, such as evidence that the competitor has been able "to obtain and retain a customer base",

I Argument, September 15,2005, paragraph 44. 2 Reply Argument, October 7,2005, page 1. JAN.15.2007 3:17PM ACCESS COMMUNICATIONS NO.239 p, 10

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20. Several potential competitorsalso filed submissions in the proceeding ahd commented on the criteria that would need to be Implementedbefore the ILECs would be forborne from regulation. UTC Canada,for Instance,argued that if its members were going makethe enormous investmentthat would be neededto compete effectively in the local exchange market.they would have be assured that the ILECswould not be able to use their substantial market power to stifle competition and prevent a competitorfrom gaining a foothold in the retail local exchange market. UTC Canada proposedthat the Commission implementa "bright lines" test whereby forbearancecould not occur until at least 35% of an ILEC's market share was lost.3

21. The one thing that each of these interestedparties has in common is the need for some form of market share and/or rivalrous behaviouranalysis to be used to determine whether the ILEC should be forborne in a given geographic market.

22. Eventhe ILECsthemselves proposeda test for forbearance that would have included a market share threshold and evidenceof rivalrous behaviour in the market. While at 5%, the market share loss threshold proposed by and Telebec, societe en commanditewasconsideredextremelylowbythe CommIssionand most other participantsin the proceeding, it is clear that the ILECs themselves assumed that any forbearancetest would have to include evidence of market loss and rivalrous behaviour.4

23. In view of the above~notedbroad-basedsupport for ,2forbearance test that would require an ILEC to provide evidence of market share loss beyond a

3 Reply Argument, October 7! 2005, paragraph 12. 4 Reply Argument, October 7,Z005,pa.ragraph 29. JAN.15,2007 3: 17PM ACCESSCOMMU~ICATIONS NO.239 P, 11

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certain threshold and evidenceof rivalrous behaviour,Access Communications submitsthatthereis nosoundbasis for the Governor in Council to now bring forth a Proposed Order that has no such requirements,

SMALL AND RURAL COMMUNITIES IN SASKATCHEWAN AND OTHER PARTS OF CANADA

24. While some major metropolitanareas in Canada might have experienced a degree of competitive entry into the local exchange marketoverthe lasttwo years, it should be emphasizedthat no such competition has developed in the vast majority of Canadiancommunities. Many small and rural communities in Canada have not experiencedany fixed-line,facilities-based competitionIn the local exchange market.Thisis certainlythecasein Saskatchewanwhere SsskTel continues to hold close to 100% of the local exchange market. Given the absence of competition in these markets,Access Communicationsbelieves that a decisionto forbearfromregulatingSaskTeJassoonas a singlefacilities- based,fixed.line service provider begins to offer service in one of its geographic markets would mean that there will be no competitionin most of Saskatchewan,

25. Creating a framework for forbearance that 'effectively prevents competition from developing in small and rural Communities in Canada is inconsistent with the telecommunications policy objective$ of the Telecommunications Act. In particular, section 7(b) of the Telecommunioatlons Aot states that Canadian telecommunications policy has as its objective "to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all reoions ofCanada,"Thisobjectivewillnot bemetif the ProposedOrderis implementedin its'currentform. JAN.15.2007 3:17PM ACCESS COMMUNICATIONS NO.239 P. 12

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26. In the absence of some form regulationthat limits the ability of an ILEC to use its dominant position in the marketplaceto subvert competition, SaskTel and the other ILECswill have the ability to respond immediatelywhen they-are notified that a subscriber is consideringmaking the change to a competitive supplier of retail local exchange services. As soon as a small market, facilities-based competitor begins to offer its local exchange service, the ILEC in that market will engage in an effective and targeted winback campaign to re-acquire any customers that might have consideredchangingto that competitor. The new entrant will not be able to respondto such a winback campaigl} and will therefore be unable to obtain a sustainablesubscriber base in that community. This will allow the ILEC to re-estab!ishits monopoly position in the local exchange market.

27. As a result, Canadians in smaller communitiesandin ruralmarketswill be denied access to competitiveprovidersof retail local exchange services. The benefits of a truly sustainable competitivemarket Willnot reach these Canadian homes.

28, As noted above, Access Communicationshas announced that it will enter the

retail local exchange, market this year and will provide service to the residentsof Regina. After the Commission issued Decision2006-15, we believedthat the forbearance framework established in that Decisionwould enable us to compete fairly in the marketplaceagainst SaskTel because it would not be able to use Its near-monopolyposition in the local exchange marketto stamp out competition. Given the enormous investmentwe have made in the Regina market, Access Communicationswill still launch its service offering in the coming months. JAN,15,2007 3: 17PM ACCESS COMMUNICATIONS NO,239 p, 13

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29. However, all plans to launch a similar competitive local exchange service in other parts of the Saskatchewanare now on hold pendingthe implementationof the ProposedOrder. Simplyput. AcceSsCommunicationsis unwillingto commit to undertakethe enormous risk and costs associatedwith launching a fixed-line, facilities-based local exchangeservice in smaller communities in Saskatchewan, if the framework for forbearanceestablishedby the Governor in Council would enable the ILEC (SaskTel)to have a significant unfair advantage over us.

30. It is important for the Governorin Councilto understand,that if facilities-based competitors like Access Communications that are cable distributors - and that already have telecommunicationsfacilities in the ground in these smaller

communities ~ are unwillingor unable to enter the retail local exchange market in smaller communities, the only Canadiansthat will have access to a facilities- based competitive provider of local exchange services are those who reside in the major metropolitanareas. Canadianswho reside in smaller communities and rural areas will not be able to receivethe benefits of a competitive local exchange market. The ILECswill continue to hold. for an indefinite period of time, a monopoly in these markets.

WIRELESS COMPETITION

31. As for the aspect of the ProposedOrder that would deem mobile wirele~s services to be in the samerelevant product market as fixed-line local exchange services, Access Communicationswould simply note that there is no evidence that a significant number of Canadiansliving in Saskatchewanconsider mobile wireless services to be a substitutefor fixed-line local exchange services. It would not, therefore, make any sense for the Governor in Councilor the - - - __n ------JAN.15.2007 3:18PM ACCESSCOMMUNICATIONS NO.239 P. 14

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Commission to conclude that mobile wireless services and fixed-line local exchange services are substitutesand in the same market.

32. Notwithstandingthat Canadians(and particularlythose living in Saskatchewan) do not viewmobile wireless services and fixed-line local exchange services as substitutes. the Governor in Council's ProposedOrder assumes, without evidence, that both types of services are in the same product market. As such, the Proposed Order deems,for the purpose of granting forbearance, the mobile wireless service of a third party to be a competingfacilities-based telecommunicationsservice.

33. It is Access Communications'submissionthat the conditions for forbearance established by the Commissionin Decision2006-15 which include the market- loss thresholds and the decision that mobilewireless services operate in a

distinct market from fixed-line local exchange services ~ should be retained. The Commission is already examiningthis specific issue in the proceeding initiated in Telecom Public NoticeCRTC 2006..12, wherein the Commission called for the public to commenton whether Canadiansconsider mobile wireless services to be in the same product market as fixed-line local exchange services. That proceeding has not yet concluded. No decision has been issued by the Commission,

34. A review of the evidencefiled in that proceeding,however, demonstrates quite clearly that the vast majority of the residentsof Saskatchewando not view their wireless phones as substitutesfor their local exchangeservice. At best, the statistics available to the Commissionindicatethat mobile wireless services should be considered complementaryto local exchange services. JAN.15,2007 3: 18PM ACCESSCOMMUNICATIONS NO.239 P. 15

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35. The fact that the survey conducted by Statistics Canada titled Residential TelephoneService Survey (which is referred to in Telecom Public Notice CRTC 2006~12) found that only 2,5% of the peoplewho subscribe to mobile wireless services in the province of Saskatchewando not also receive local exchange service demonstratesquite clearly that the two types of services are not considered substitutes by an overwhelmingmajority of the people residing in Saskatchewan.

36. Until significant numbersof Canadiansdemonstratea willingness to view mobile wireless services as a substitutefor their fixed-line local service, Access Communications believesthat the two telecommunicationsservices - mobile wireless and fixed-line local exchange- are in two distinct product markets. Clearly, Saskatchewanresidents do not view mobile wirelessserviceas a substitute for fixed-linelocal exchange service. As such,the presenceor absence of a third party mobile wireless service operating in Saskatchewan should be entirely irrelevant to the question of whether competition exists in the local exchange markets in this province.

CONCLUSION

37. For all of the foregoing reasons,AccessCommunicationssubmits that the Governor in Council should not implementthe ProposedOrder. We believethat the Proposed Order would harm the interests of Canadians by establishinga framework for forbearance that will effectivelyprevent the development of sustainable competitionin the local exchange market. IAN.15.2007 3: 18PM ACCESSCOMMUNICATIONS NO.239 P. 16

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38. In our view. the conditions necessaty to enable a truly competitive marketfor local exchange services to develop in all parts of Canada were established in Decision 2006-15. It is that Commissionframeworkthat should govern forbearance for retail local exchange services.

39. At the very least. the Governor In Council should, as a result of the submissions received in this proceeding,refer the matterto a parliamentarycommittee so that it will receive a full and fair review by all of those concerned with developing a sustainable market for retail local exchange services. To adopt a set of forbearance rules without the benefitof receivinginput from all interested parties would not benefit the Canadian public.

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