File No.

1011-NOC2019-0057

2020 08 04

To: Mr. Claude Doucet

Secretary General
Canadian Radio-television and
Telecommunications Commission
Ottawa, Ontario
K1A 0N2

Subject: Telecom Notice of Consultation CRTC 2019-57 – Review of mobile wireless

services (TNC 2019-57) – Procedural Request – Competition Bureau Matrix
Report

Dear Mr. Doucet,

1. This procedural request arises from the filing by the Competition Bureau (the Bureau) of
revisions to its Final Comments on 31 July 2020. In this request, we seek a decision from the
Commission to remedy significant prejudice to our procedural fairness rights and ensure that
any evidence that could influence the Commission's decision in this proceeding has been
subject to sufficient scrutiny to have confidence in its accuracy. In particular, we are asking the
Commission to strike the Matrix Report (filed with the Further Comments of the Bureau on 22
November 2019) from the record.

Context for the Request

2. In accordance with TNC 2019-57-3, all parties to the proceeding filed their Final
Comments on 15 July 2020. Shortly after receiving the submission of the Bureau, we identified
what appeared to be a significant error in the analysis and presentation of data in paragraphs 14
to 18 of the Bureau's Final Comments. We notified the Bureau of the apparent error, and
provided the corrected data, on 22 July 2020 and discussed it further with them and provided
additional data and analysis on 23 July 2020.

3. Upon further review of its submission, we identified additional errors which we outlined in
a phone call and subsequent letter to the Bureau on 27 July 2020. In total, we identified
multiple errors in six different points of evidence and noted 16 paragraphs in the Bureau's Final
Comment submission that needed to be revised to reflect the corrected evidence. Our letter to
the Bureau

Bell Canada
Robert Malcolmson
Floor 19
160 Elgin Street
Ottawa, Ontario K2P 2C4

Telephone: (613) 785-0473

Facsimile: (613) 560-0472
bell.regulatory@bell.ca
2020 08 04 2

is attached to this request. We are submitting certain information contained in the Attachment in
confidence1. An abridged version of the Attachment is provided for the public record.

4. The Bureau filed revised Final Comments on 31 July 2020, making only a partial
correction to just one of the six points of incorrect evidence we identified. It also corrected an
additional error (an incorrect claim that prices in Canada were not falling as quickly as in other
countries). Notably, despite two fundamental changes to its evidence on market power, the
Bureau insisted that it would not adjust any of its conclusions.

5. The errors made by the Bureau and its unwillingness to fully address them or to update
its conclusions to reflect its corrected evidence raise grave and irremediable concerns regarding
the reliability of the Matrix Report. No other party has access to the data or analysis on which
the Matrix Report is based, and it therefore has not been subject to the type of scrutiny that
uncovered the errors in the Bureau's Final Comments.

6. It would be a significant breach of our procedural fairness rights to allow this unreliable
evidence to remain on the record when it has not been subject to the type of review that it is
now clear is necessary to ensure its accuracy.

Procedural Background

7. In our 27 March 2019 letter to the Commission, we identified the highly complex and
high-risk nature of the data analysis the Bureau and its economic expert proposed to conduct as
part of this proceeding, given the likely volume, gaps, errors, and inconsistencies in the data
maintained and produced by various carriers. We were specifically concerned that "all of these
data issues will not be identifiable on the face of the output produced by the Bureau,
which means there is a risk that an unreliable analysis will unduly influence the record
before the Commission."

8. We suggested various means, consistent with Commission practice, by which the

Commission could attempt to address this issue. These included a Request for Information
(RFI) process similar to the one to which other experts in the proceeding were subject (for
example, Margaret Sanderson and CRA responded to at least seven RFIs over multiple rounds;
Dr. Chipty and Matrix did not respond to any). Given the early stage at which these suggestions
were made, they would not have had an undue impact on the timeline for the proceeding.

9. Commission staff commented on our concerns and requests in a letter dated

11 December 2019, in which they stated the view "that it will be possible for parties to
participate meaningfully in the 13 January 2020 reply phase based on the materials already filed
on the public record by the Competition Bureau in its further comments. For instance, parties
may comment on the methodologies employed or the appropriateness of the policy
recommendations proposed by the Competition Bureau."2 Our request was formally denied in
Decision 2020-1043 dated 20 March 2020, approximately one year after it was submitted to the
Commission.
1
In particular, the information which we have provided in confidence represents information that the Commission
has already determined as confidential. Release of this information on the public record would provide existing
or potential competitors with invaluable competitively-sensitive information that would not otherwise be available
to them, and which could undermine competition in the marketplace or enable our competitors to develop more
effective business strategies to counter our competitive strategies. An abridged version of the Attachment is
provided for the public record.
2
This view appeared to be affirmed by the Commission in a 10 January 2020 letter.
3
Telecom Decision CRTC 2020-104, TELUS Communications Inc. and the Canadian Network Operators
Consortium Inc. – Requests for disclosure of information filed in confidence as part of the Telecom Notice of
Consultation 2019-57 proceeding, and related procedural requests.
2020 08 04 3

The Commission Cannot Rely on the Matrix Report

10. From even the very limited information that is publicly available, it is clear the concerns
expressed in our 27 March 2019 letter were well-founded. For example, Telus did not produce
the data sought by the Bureau and therefore the Matrix Report does not include data from Telus
but simply assumes that its results would be the same if it did. In effect, this approach assumes
the outcome the analysis is otherwise designed to test. Moreover, the magnitude of price
differences the Bureau claims result from increased regional carrier penetration do not
correspond to any real-world examples, which raises the significant concern that in at least
some markets or over at least some range the results are merely an artifact of an inappropriate
treatment of the data.

11. The record of the proceeding now reveals three additional reasons why the Commission
must strike the Matrix Report from the record.

The Bureau's Final Comments show a pattern of analytical/calculation errors, use of

misleading data, and failure to use the best sources of data/evidence

12. As the Commission is aware from the Bureau's revised filing, it calculated a "Revenue-
to-Capex" ratio as part of its evidence and mistakenly used for this calculation revenues in local
currencies but capital expenditures converted to Canadian dollars. This error was only
identified because we had access to the underlying data and attempted to replicate the
Bureau's findings (as they were inconsistent with our understanding of the market).

13. The Bureau has indicated that it "was not aware, when preparing its Final Comments,
that the revenue data it used was reported in local currencies while the capital expenditure data
it used was reported in Canadian dollars." 4 While the Bureau indicates that it was not aware,
the difference is evident on the face of the data.

14. What is relevant here is not whether the Bureau's mistake was justified. The data and
analysis involved in the Bureau's Final Comments is vastly more simple and straightforward
than what was involved in the Matrix Report, and yet the Matrix Report is the only evidence of
its kind in the proceeding that has not been subject to review by any other party.

15. The fact that this mistake was made, in the context of the simple and straightforward
analysis in the Bureau's Final Comments, illustrates that the risk of unidentified errors in the
Matrix Report is intolerably high.

4
While the Bureau may not have been aware, the header row for the data used by the Bureau specifically
includes a column for the exchange rates and the total "Adjusted to $Cdn" for capital expenditures but does not
include these for revenues. Only capital expenditures were converted to Canadian dollars because this was the
only data used in the undertaking from which the data was drawn. The revenues included in the file also would
not make sense in Canadian dollars, as it would mean for example that carriers in Indonesia earn revenues an
order of magnitude greater than in any other G20 country.
2020 08 04 4

The Bureau's response to these errors confirms that their evidence in this proceeding
cannot be relied upon if it has not been properly tested

16. The Bureau has refused to correct most of the errors we identified.

17. To take just one example, the Bureau's Revenue-to-Capex analysis was previously cited
to the well-known Bank of America Merrill Lynch Global Wireless Matrix when in fact it relied on
a data set provided in response to an unrelated RFI that exclusively addressed capital
expenditures. When we pointed out the errors in this analysis to the Bureau, we provided them
with the most recent version of the actual data received directly from Bank of America Merrill
Lynch. The Bureau has chosen not to use the correct and updated data, and has instead
continued to rely on older incorrect data in the RFI. It is not clear why, if the Bureau's goal is to
provide the Commission with evidence-based recommendations, it has chosen to change its
cited source and base its submission on inferior data rather than the best and most recent data.
Had it used the best available evidence, the corrected ratios would be as set out in Table 1:

Table 1. Comparison of Original and Corrected Evidence on Revenue-to-Capex Ratios

Bureau's Original Final Submission Fully Corrected Evidence

Canada 7:1 UK 10:1
US 5:1 South Korea 9:1
UK 4:1 United States, Australia, & 8:1
Canada
France, Germany, Italy 4:1 or less France, Germany, Japan 7:1
Italy 6:1

18. On this and the other issues we identified, the Bureau has said that it disagrees changes
are required. We leave it to the Commission to judge whether the Bureau's Final Comments
are consistent with a neutral presentation of the full picture from the best available evidence.

19. Perhaps more concerning is that, in addition to refusing to correct other mistakes, the
Bureau refused to alter any of its conclusions despite fundamental changes to its evidence. 5
This specifically calls into question whether conclusions stated in or about the Matrix Report
fairly reflect even the data that is in the report (regardless of any errors in that data).

The errors in the Bureau's Final Comments are consistent with other submissions they
have made in this proceeding

20. The fact that the Bureau has made similar errors in previous submissions further
increases the likelihood that the Matrix Report also contains such errors.

21. For example, in its Further Comments the Bureau cited an OECD document discussing
the market in the Netherlands from which it highlighted two irrelevant cases while leaving out
the third highly relevant case that directly contradicted its position. Similarly, the Bureau cited
preliminary regulatory decisions that were found to be incorrect and overturned, without
acknowledging the reversals that directly contradicted its position.6

22. The Bureau also included in its Further Comments a figure referencing specific dates,
companies, and price changes that it described as an "illustrative timeline [showing] a series of

5
The Attachment to our letter to the Bureau included shows how the Bureau's conclusions could be amended to
fairly reflect the corrected evidence.
6
See Bell Mobility Response to the Competition Bureau, paragraphs 11 to 13 and footnote 28.
2020 08 04 5

pricing announcements by the carriers resulting in a $5 increase in wireless prices on all plans
from Rogers, Bell and Telus." After trying to identify the market activity referred to in that figure
and being unable to do so, we reached out to the Bureau for clarification and they confirmed it
was not a real example but one they had made up to illustrate their point. The fact that they
relied on a made up example rather than the extensive real-world evidence they had available,
and that their description was at best ambiguous as to whether the example was real, raises
additional concern about whether the Bureau's untested Matrix Report reflects the actual
evidence.7

The Commission Must Strike the Matrix Report From the Record

23. To ensure its decision reflects the best interests of Canadians and is consistent with the
policy objectives in the Telecommunications Act, the Commission must strike the Matrix Report
from the record and consider the conclusions regarding market power reached by the Bureau
on that basis. Failure to do so will significantly prejudice us and other parties who could be
directly and significantly affected by a Commission decision reflecting this unreliable evidence.

24. In this regard, we note that in its 11 December 2019 letter the Commission expressed its
satisfaction with the process it had established in part because parties had the ability to
comment on the methodologies employed in the Matrix Report. It is now evident that this was
not nearly sufficient, as many of the errors described above could not have been identified
simply through comments on methodology.

25. The Commission has in the past struck evidence from the record to address issues
regarding its reliability and associated procedural fairness concerns. 8 Striking the evidence from
the record in this case is particularly important given the unique role both the Bureau and the
Commission have suggested the Bureau will play in the Commission's decision-making
process.9

26. The Commission can strike the Matrix Report from the record on its own initiative and
without further process, as it has done in the past. Alternatively, the Commission could give all
parties the opportunity to comment on whether the Matrix Report should be struck from the
record. As this is a narrow procedural issue that does not require (indeed, would not permit)
parties to address other issues or evidence, parties should not need more than a week to
comment.

27. The Bureau has requested that, if criticisms of its Final Comments are raised with the
Commission, two new rounds of process be established in this proceeding despite the record
having already closed. This is neither necessary nor appropriate. The issues raised in this
letter are directed at a narrow procedural issue and are not a reply to the Bureau's submission
(which would be significantly more extensive) nor do they touch directly or indirectly on the
submissions of any other party.

28. In any event, as the Bureau is a federal agency intended to be an impartial participant
the Commission's proceeding it has no procedural fairness interest that could be engaged. 10 If
the Bureau believes further process is required not as a matter of procedural fairness but to
ensure the Commission has an adequate record on which to base its decision, it should raise
7
See Bell Mobility Response to the Competition Bureau, paragraph 22.
8
See Broadcasting Commission Letter Addressed to Corie Wright (Netflix) (29 September 2014).
9
See e.g., Competition Bureau Final Comments, paragraph 2; Transcript, Vol. 1, lines 52-54 and 108-109; and
Telecom Commission Letter addressed to Mr. Matthew Boswell (Competition Bureau) (18 April 2019).
10
See e.g., Kachkar (Re), 2014 ONCA 250. Even less does the Bureau have the type of interest that could
require extensive additional process to be created at this late stage.
2020 08 04 6

that issue directly and not simply raise the spectre of it as a consequence of any criticism of its
submission.
2020 08 04 7

Conclusion

29. Like all parties and the Commission, after nearly a year and a half we are eager for the
record of this proceeding to be closed on a final basis. However, the revised Final Comments of
the Bureau raise fundamental issues of procedural fairness and related concerns regarding the
reliability of prominent evidence on a core issue in the proceeding. In this procedural request,
we have suggested a simple step the Commission could take, on its own initiative and without
further process, to address these issues and concerns, finalize the record, and allow its
decision-making process to continue.

30. We want to thank the Commission and Commission Staff for your continued efforts in
this proceeding and for your consideration of this request.

Yours truly,

[ Original signed by R. Malcolmson ]

Robert Malcolmson
Chief Regulatory Officer

Attachment

c.c.: Philippe Kent, CRTC

Competition Bureau
Distribution List as per CRTC letter dated 26 June 2020

*** End of Document ***