But how come I am able to hear the East tower on my 396XT/996XT's, both being only Phase 1 capable? Or is the East tower also in some Phase1 fallback mode?
A system that is Phase 2 only means it is able to carry Phase 2 talkgroups. Phase 1 talkgroups are still on the system, and are monitorable by your radio.
Same deal as Metrolinx - you're able to hear the Phase 1 groups, but if a Phase 2 group transmits, you'll be SOL.