ARCHIVED -  Telecom Decision CRTC 98-15

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Telecom Decision
CRTC 98-15

Ottawa, 2 September 1998


File No.: 8662-B2-01/97


1. On 10 October 1997, pursuant to section 62 of the Telecommunications Act (the Act) Bell Canada (Bell) filed an application to review and vary Regulation of Mobile Wireless Telecommunications Services, Telecom Decision CRTC 96-14, 23 December 1996 (Decision 96-14). In its application, Bell requested that the Commission amend Decision 96-14 to forbear from regulating the provision of paging services by Bell.

2. Rogers Cantel Inc. (Cantel), Clearnet Communications Inc. (Clearnet), Canadian Wireless Telecommunications Association (CWTA), Microcell Telecommunications Inc. (Microcell), Mobility Canada (Mobility) and The New Brunswick Telephone Company, Limited (now called NBTel Inc.) participated in the proceeding.

3. Bell’s application was filed prior to the Commission’s new Guidelines for Review and Vary Applications, Telecom Public Notice CRTC 98-6, 20 March 1998. Accordingly, Bell’s application has been considered under the criteria in force at the time of the application.

4. Bell submitted that substantial changes in the paging market and in the regulatory environment since Decision 96-14 warrant a review and variance of the Decision so that the determination to forbear from regulation of paging services also applies to paging services provided by Bell. Bell also stated that there is substantial doubt about the correctness of Decision 96-14 in today’s circumstances.

5. Bell argued that the primary focus of Decision 96-14 was to categorize wireless services for the purpose of determining the appropriate regulatory regime, and that issues related to forbearance from regulation of paging services provided by "in-house dominant carriers providing primary exchange service" were not discussed in the proceeding that led to Decision 96-14. Bell submitted that the Commission’s concern that a telephone company may cross-subsidize paging services from Utility revenues dates back to Regulation of Wireless Services, Telecom Decision CRTC 94-15, 12 August 1994 (Decision 94-15).

6. Bell submitted that the sole reason that the Commission did not forbear from regulating paging services provided "in-house" by a telephone company providing primary exchange services was because of concerns about cross-subsidization. However, Bell argued that, since Decision 94-15, the risk of cross-subsidies to paging services has been reduced by the introduction of the split rate base in Implementation of the Regulatory Framework - Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, 31 October 1995 and by implementation of price cap regulation in Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997, and by the prospect of competition in local services.

7. Bell submitted that in Canadian Association of Message Exchanges Inc. v. Bell Canada - Marketing of Paging Services, Telecom Decision CRTC Decision 95-16, 15 August 1995 (Decision 95-16), the Commission concluded that the paging market is too competitive for any targeted or predatory pricing strategy by Bell to be profitable. Consequently, the Commission did not extend to the paging market the safeguards contained in Cellular Radio - Adequacy of Structural Safeguards, Telecom Decision CRTC 87-13, 23 September 1987 (Decision 87-13), and Rogers Cantel Inc. v. Bell Canada - Marketing of Cellular Service, Telecom Decision CRTC 92-13, 29 June 1992 (Decision 92-13).

8. Bell submitted that the competitiveness of the paging market is not in doubt, as recognized by the Commission in Decisions 95-16 and 96-14. Bell also argued that the paging market has become more competitive as a result of entry by foreign companies supplying only paging, and from new personal communication services providers. Bell stated that additional entrants would be attracted by the predicted high growth rates in demand for paging services. Bell submitted that there exists sufficient competition in the paging market to warrant forbearance such that it can offer its paging services on a similar basis as its competitors.


9. Mobility argued that the paging market is competitive, and that recent changes in the regulatory regime have reduced incentives and opportunities for cross-subsidies.

10. Mobility submitted that all carriers in a competitive market should be subject to the same regulatory regime. Mobility argued that tariff filings would alert competitors of Bell’s plans, and that forbearance is necessary for a telephone company to offer paging service on the same basis as its competitors.

11. Mobility argued that pursuant to subsection 34(2) of the Act, the Commission is required to forbear from regulation where markets are sufficiently competitive to protect the interests of users. In light of the high degree of competition in this market, Mobility argued that the Commission should forbear without conditions from the regulation of paging services.

12. Clearnet submitted that Bell incorrectly relied on Decision 95-16 for evidence that the paging market is competitive, since that Decision dealt only with the distribution of pagers through Bell Canada’s Phonecentres, and argued that this focus was too narrow to serve as a precedent as to whether there is sufficient competition to forbear from the regulation of paging services supplied by Bell.

13. Cantel and Clearnet submitted that Bell should have applied for forbearance from regulation as outlined in Decisions 94-15 and 96-14. These Decisions directed the Stentor member companies who provide wireless services "in-house" to propose appropriate costing and marketing safeguards when seeking forbearance.

14. Further, Clearnet argued that an applicant proposing competitive safeguards permitting forbearance would also have to demonstrate that forbearance is consistent with section 34 of the Act. Clearnet noted that the competitive assessment criteria required for forbearance are set out in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), and include information on market shares, and demand and supply conditions to determine whether the dominant firm has significant market power.

15. Cantel and Clearnet argued that Bell should not be able to circumvent the requirement for an assessment of the state of competition in the paging market by filing an application under section 62 of the Act.

16. Cantel and Microcell submitted that there has been no substantial change in circumstances since Decision 96-14. Cantel argued that Bell focused incorrectly on changes since the release of Decision 94-15, instead of on changes subsequent to the release of Decision 96-14. Cantel further submitted that the possible entry of American paging businesses into Canada was discussed in the proceeding that led to Decision 96-14.

17. Cantel, Clearnet and Microcell argued that the Commission should not forbear from Bell’s paging services if Bell could use its dominant position in the market for primary exchange services to obtain an advantage in the paging market.

18. Cantel argued that telephone companies remain dominant in local exchange markets, and thus there is a requirement for continued regulation of dominant service providers.

19. Cantel also argued that the requirement to file tariffs for paging services would not disadvantage Bell, since the Commission has established an ex parte process for tariff approvals.

20. Microcell argued that the Commission should not forbear from regulation of Bell’s paging services, since it will be some time before local competitors will be able to curb the telephone companies’ ability to cross-subsidize competitive services from Utility revenues.

21. Cantel, Clearnet, CWTA and Microcell submitted that Bell could have an advantage over its paging competitors, by using information about monopoly subscribers to market paging services. CWTA also stated that Bell could bill for paging on Utility subscribers’ monthly bills. According to these interveners, Bell would not have these advantages if it supplied paging through a structurally separate affiliate.

22. CWTA stated that the Commission should determine whether there exist sufficient costing safeguards if paging services are supplied directly by Bell. CWTA also submitted that approval of the application could result in a competitive market reverting to a monopoly market.


23. The Commission determined in Decision 95-16 that the paging market is a mature and competitive market with low barriers to entry. The Commission is of the view that the current retail paging market is sufficiently competitive to protect interests of paging users. Further, the Commission is of the view that a strategy of predatory pricing of paging services by Bell would not be successful, given the state of competition and the low barriers to entry into the retail paging services market.

24. The Commission notes that interveners did not contest Bell’s claim that the paging market is competitive. In light of its previous conclusions with respect to the competitive nature of the paging market, the Commission considers that in the circumstances of this proceeding, it was not necessary for Bell to submit the kind of information that Decision 94-19 prescribes on the competitiveness of the paging market, for purposes of determining whether forbearance is appropriate. The Commission is of the view that, in the circumstances, an application to review and vary Decision 96-14 is sufficient.

25. The Commission agrees with interveners that Bell could obtain an advantage through joint marketing of paging and other telecommunications services. However, given the competitive nature of the retail paging market, the Commission is of the view that any such advantage would not be undue. The Commission notes, in this regard, that it found in Decision 95-16 that the joint marketing safeguards for cellular services described in Decisions 87-13 and 92-13 were not needed for paging services. Further, the Commission notes that the prohibition against joint marketing of wireless and other services was recently removed in Joint Marketing and Bundling, Telecom Decision CRTC 98-4, 24 March 1998.

26. The Commission notes Cantel’s argument that it is necessary to examine the incentives and ability that Bell may have to cross-subsidize its paging services. However, the Commission is of the view that there are adequate safeguards against cross-subsidies from Utility revenues to paging services. The Commission has implemented the split rate base regime which requires that revenues, investment and expenses associated with retail paging services be assigned to the Competitive segment of the split rate base. The price cap regime that the Commission ordered implemented within the last year is a further disincentive against cross-subsidy from the Utility segment.

27. The Commission agrees with Cantel that there have been no fundamental changes in circumstances in the paging market since Decision 96-14 was issued. In this regard, the Commission notes its findings in Decision 95-16, and the fact that competition in paging, and the growing competitiveness of the paging market, were considered during the proceeding that led to Decision 96-14.

28. However, the Commission considers that, based on the record of this proceeding, there is substantial doubt about the correctness of Decision 96-14 as it relates to retail paging services provided by Bell. The Commission notes that Bell is not dominant in the paging market, and considers that competition from other paging providers will constrain the rates charged by Bell for these services. On this basis, the Commission is of the view that it is appropriate to forbear from regulating paging services offered by Bell.

29. Accordingly, pursuant to section 62 of the Act, the Commission finds that there is substantial doubt as to the correctness of Decision 96-14, in that it should have forborne pursuant to subsection 34(2) of the Act from the regulation of paging services in Bell’s territory. The Commission also finds that forbearance from regulation of retail paging services would not be likely to impair the continuation of a competitive paging market, pursuant to subsection 34(3) of the Act.

30. In light of the foregoing, the Commission makes the following determinations:

(a) effective the date of this Decision, the Commission will refrain, with respect to paging services offered by Bell, from the exercise of its powers and performance of its duties with respect to sections 24, 25, 27, 29 and 31 of the Act;

(b) pursuant to section 34(4) of the Act, sections 24, 25, 27, 29 and 31 of the Act do not apply to retail paging services provided by Bell; and

(c) Bell is directed to issue tariff pages within 15 days of the date of this Decision withdrawing the tariffs for retail paging services.

Laura M. Talbot-Allan
Secretary General

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