Industry Committee on Feb. 8th, 2011

[Jean-François Mezei]

In my presentation, I didn't have time to talk about that. Pre-UBB GAS service was based on the phase 2 costs. The phase 2 costs guaranteed not only that Bell Canada is paid for its operating costs, but also that it is paid for infrastructure costs. When demand rises, Bell Canada has the money to invest and increase capacity. The AHSSPI and GAS charges combined gave Bell Canada money so it could make guaranteed profits with no risk and invest for growth. Adding UBB technology provides additional money that Bell Canada does not need to make profits. It is really a double tax.

[Serge Cardin, Bloc, Sherbrooke, QC]

Gentlemen, do you agree with that?

[Rocky Gaudrault]

The reality is exactly what Mr. Mezei has just described. It is a huge problem in general and it is really a case of double dipping.

[Serge Cardin, Bloc, Sherbrooke, QC]

This is better than in the House of Commons, we have unanimity.

In 2009, the CRTC released its regulatory policy 2009-657 on Internet traffic management, the fundamental objective of which was to prevent Internet traffic congestion. We are told that usage-based billing is also intended to prevent congestion. Do you think Canada is currently facing a serious problem with Internet traffic congestion? Do you think the unlimited plans, like those offered by independent suppliers, are partially responsible for the problem?

[Jean-François Mezei]

Given that he represents an Internet supplier, Mr. Gaudrault has a little more knowledge about congestion. So I'm going to let him answer.

[Rocky Gaudrault]

Congestion is a subject that it is very important to talk about. Instead of saying there is congestion, Bell Canada showed in its ads in November that for the third quarter it had activated service for more than 40,000 customers with IPTV, IP television. If there was congestion at that point and we add 10 to 25 MB services instead of just the 5 we now have, that means there was a greater increase in traffic on Bell Canada's side, at a time when it was saying there was congestion. That doesn't make sense. It is impossible for there to have been congestion, given that it added so many things that are really significant in terms of use.

[Serge Cardin, Bloc, Sherbrooke, QC]

There has been higher demand for some years, but there has also been progress in technology that compensates for the increase in demand. So in terms of congestion, it doesn't seem to be necessarily so.

[Jean-François Mezei]

One thing has to be noted. During the proceedings on ITMPs and throttling and the UBB, Bell always reported the figures on congestion confidentially. We ordinary people saw some lovely tic tac toe, while the CRTC saw the real figures. It's very difficult for us to tell exactly what Bell has.

In the forums and elsewhere, we don't hear complaints about congestion or complaints about Internet slowdown. There are isolated problems that we find here and there. For example, take the case if Bell has a link that breaks. If there are three links between two central offices and one of those links breaks, there will be congestion for a day or two. If Bell does its statistics during those days, it can show there was major congestion on the network. We can't judge from that whether there was congestion or not. However, it doesn't seem there has been congestion in most cases in the entire territory covered by Bell.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Mezei. Thank you, Mr. Cardin.

[Cardin]

Did you credit the seconds from the beginning?

[The Chair, Conservative, David Sweet]

We added it.

Now we'll go to Mr. Van Kesteren for five minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair, and thank you to the witnesses for appearing.

I want to dumb this thing down a bit. I think I'm beginning to understand this, but correct me if I'm wrong. I'm going to ask some questions and you can just say yes or no.

Let's imagine that the fibre optics are in the middle of this room. They connect each one of us. You're a server, I'm a server, and Mr. McTeague is a server. Have I got that right so far? The pipes are fibre optics. So we provide what you call the last mile. Is that correct?

[Rocky Gaudrault]

Keep going.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

The pipes, the fibre optics, channel all that information from point A to point B. Then it's picked up at the very end. You buy a segment of that pipe. If you use more than what you've bought—

[Rocky Gaudrault]

We can't. We have to buy more.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

You can't use more. So you have gone to Bell. I guess that decision happened in 2001 or so to create more competition out there.

So you buy a channel in that pipe. Do I have that right so far?

[Jean-François Mezei]

I think I can provide a simple explanation. Basically you buy throughout the Internet by capacity. You buy a pipe of a certain size. You cannot push more data into that pipe than the size of it.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

But you've bought that.

[Jean-François Mezei]

Yes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

What you do with your customers really has no bearing on Bell. So if Bell wants to charge for caps, it really makes no difference. You're just working in that channel you've bought.

[Jean-François Mezei]

Correct.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

They want you to charge caps when they're charging caps. They want you to do the same thing.

Have I got that right so far?

[Matt Stein]

I think an important distinction here is that in this case, Bell would charge the small ISP or alternate ISP, such as Primus, per user. Rather than using the analogy of pipes, you could say, “All the users of Primus use this many million gallons of water. Primus, you buy all that water and sell it to all those people. No individual person can take more than one gallon per day.” That's where the cap comes in. The right thing would be to say, “Primus, you have to pay for all the gallons of water your customers draw”, as opposed to saying, “We'll sell it to you, but none of your customers can use more than one gallon of water per day.”

The last and most important distinction is that there is a finite amount of water on earth, but there is not a finite amount of Internet. The Internet is truly limitless. It's about the thickness of the pipe. That's why, to my earlier point, it's very difficult to price a gallon of something that is infinite.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Again, we want to keep this as simple as possible.

Here's another question. You're selling mostly to Internet.... Do those pipes also accommodate TV that will go through the fibre optics, and the telephone?

[Matt Stein]

Television, telephone, and Internet are all now moving over Internet protocol.