Telecom Decision CRTC 98-11
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Ottawa, 16 July 1998
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OPTICAL FIBRE SERVICE
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File Nos.: BCTEL TNs 3660/A; Bell TN 6067; TCI TN 933; and TCEI TN 59
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I BACKGROUND
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1. Pursuant to the Commission’s directive in Tariff Filings Related to the Installation of Optical Fibres, Telecom Decision CRTC 97-7, 23 April 1997 (Decision 97-7), BC TEL under Tariff Notice (TN) 3660, Bell Canada (Bell) under TN 6067, TELUS Communications Inc. (TCI) under TN 933, TELUS Communications (Edmonton) Inc. (TCEI) under TN 59, and MTS Communications Inc. (formerly MTS NetCom Inc.) (MTS) under TN 280, filed proposed tariff revisions for the introduction of optical fibre service under General Tariffs (GTs). BC TEL under TN 3660A, and Bell in a letter, subsequently submitted their respective standard agreements with customers for the provision of optical fibre service.
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2. The Commission received comments from AT&T Canada Long Distance Services Company (AT&T Canada LDS), the Canadian Cable Television Association (CCTA), fONOROLA Inc. (fONOROLA), Westel Telecommunications Ltd. (Westel), Call-Net Enterprises Inc. (Call-Net), Clearnet Communications Inc. (Clearnet), and Vidéotron Télécom ltée. In general, the interveners claimed that the proposals of the companies are not consistent with Decision 97-7 and, accordingly, proposed changes to the tariffs.
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3. In Applications for Review and Variance of Telecom Decision CRTC 97-7 and Follow-Up Matters Relating to the Requirement for the Atlantic Companies to File General Tariffs for Optical Fibre, Telecom Decision CRTC 98-10, 16 July 1998, the Commission has determined that MTS need not file a GT for optical fibre, and accordingly, has approved the withdrawal of MTS TN 280. Thus, only the tariff applications of BC TEL, Bell, TCI and TCEI (the companies) are dealt with in this Decision.
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II ISSUES
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4. The issues raised by the interveners are considered below.
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Service Limited to Within an Exchange
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5. Bell, BC TEL and TCI/TCEI proposed that the fibre facilities be limited to service between customer premises on non-continuous property within the same exchange.
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6. Certain interveners submitted that this limitation is unduly restrictive and unjustifiable. CCTA submitted that as a result, service provision between two exchanges within the same extended area service (EAS) area would require a special tariff, even though the service would be identical to the GT service and would not raise any contribution avoidance issues. AT&T Canada LDS asserted that the companies’ proposals are inconsistent with the intent of Decision 97-7, and would significantly erode the attractiveness of the tariffs for all customers.
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7. Bell, in reply, submitted that AT&T Canada LDS and CCTA have mistakenly interpreted the expression "local application" to mean an exchange’s entire local calling area. The company submitted that the expression "local application" as used in Decision 97-7 has the meaning of the word local as used in the company’s intra-exchange distance tariff for local channels, which states that "local distance charges or rentals apply to local channels between points in the same exchange. Bell also noted that in general, fibre Special Facilities Tariffs (SFTs) were provided on an intra-exchange basis
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8. The Commission notes that the word local has different meanings in different parts of Bell's GT. In Decision 97-7, the Commission stated that GTs are to apply to local facilities. The Commission confirms that the term local as used in Decision 97-7 refers to facilities provided within an exchange or the greater area within which EAS is available from an exchange. The companies are directed to modify the proposed tariffs accordingly.
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Termination of Fibre Facilities in Central Offices
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9. In their tariff applications, the companies state that optical fibre facilities are to be provided only between customer locations and specifically that termination at central offices (COs) is not permitted.
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10. AT&T Canada LDS submitted that this provision is intended to deter alternate competitive providers from subscribing to the fibre GT as they are the most likely customers who would want termination of fibre in a CO. According to AT&T Canada LDS, such a restriction would prevent provisioning of fibre capacity from a competitor’s point of presence to the companies’ COs. It would also prevent a physically co-located alternate carrier from provisioning capacity using the fibre GTs to its customer’s premises. AT&T Canada LDS and Call-Net submitted that this would be counter to the Commission’s determinations regarding termination and co-location of transmission equipment in Co-location, Telecom Decision CRTC 97-15, 16 June 1997 (Decision 97-15). AT&T Canada LDS also submitted that as a result of Decision 97-15, competitors points of presence could in the future be located within telephone company COs. In such instances, competitors would be prevented under the proposed tariffs from cross-connecting the fibres to their own transmission facilities. AT&T Canada LDS also provided three instances where Bell provided customers with fibre SFTs that terminate at one end at a company CO and at the other end at the customer’s premises. Call-Net proposed that customers be allowed to terminate optical fibre between two customer premises, between two COs (with co-location) and between a customer premises and a CO (with co-location).
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11. BC TEL, in reply, stated that there is no "right" of co-location with respect to optical fibre service and that the restriction applies to all potential customers. BC TEL further submitted that this service is meant to replace the existing customer-to-customer point services currently provided under SFTs, which do not permit termination of the service in COs. TCI/TCEI indicated that allowing CO termination would encourage dependence on companies’ facilities instead of developing facilities-based competition. Bell indicated that unlit optical fibre is designed to interconnect customer provided equipment located on different premises within a given exchange.
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12. The Commission notes AT&T Canada LDS’ submission that in some cases, Bell Provided SFTs for fibre between customer locations and Bell’s COs.
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13. The Commission also notes that co-location is mandated under the co-location tariffs for interconnecting carriers (ICs). The Commission further notes that co-location of equipment is provided for under SFTs to customers other than ICs. In the Commission’s view, it would be appropriate to allow any customer to access the GTs for fibre, in order to connect co-located equipment. Further, the Commission notes that some non-IC customers provide or could provide certain services to their own ultimate customers, in competition with ICs who build their own fibre facilities to the CO under the co-location tariff. In the Commission’s view, termination of optical fibre in COs, obtained under GTs, should be permitted. Accordingly, BC TEL, Bell, and TCI are directed not to include any specific prohibition against such termination in the revised tariffs which they are required to issue pursuant to this Decision. Thus, for example, an IC would be able to terminate optical fibre service in a CO for the purposes of connecting to co-located equipment.
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14. The Commission is of the view that the above directives should also apply to TCEI, since customers may locate equipment in TCEI’s COs.
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Resale of Optical Fibre Service
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15. TCI and TCEI proposed in their tariffs that resale of optical fibre not be allowed. Interveners noted that the restriction on resale applies to both optical fibre and the sale of services which utilize optical fibre service, with the result that the facilities could not be resold to any competitor’s end customers. The interveners considered this restriction to be onerous and unwarranted.
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16. TCI/TCEI replied that no party will be treated in a preferential or discriminatory manner, the restrictions apply to all customers, whether they are business customers or alternate carriers, and therefore their proposal does not contravene section 27(2) of the Telecommunications Act (the Act). Further, TCI/TCEI submitted that the prohibition of resale is essential in order to effectively promote the advancement of facilities-based competition, and the continued and prolonged development of a resale market is inconsistent with the Commission’s vision of facilities-based competition.
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17. The Commission notes that in Telecom Order CRTC 93-1136 dated 23 December 1993, the Commission required that GT offerings be generally available for resale. In the Commission’s view, no persuasive reason has been given to deviate from this principle, and accordingly, any services made available under these GTs for optical fibre should be made available for resale. The Commission notes that while BC TEL’s proposal could be construed as having the same prohibition, BC TEL indicated in response to Westel’s submission to that effect, that it has no intention of restricting resale and that it would issue new tariff pages to clarify that service can also terminate at a customer’s end-user’s premises, and not only at a customer’s own premises. The Commission accepts BC TEL’s undertaking to modify its proposed tariff pages. TCI and TCEI are directed not to include their proposed limitations on resale in their revised tariffs.
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Definition of Rate Distance
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18. In Decision 97-7, the Commission indicated that rates are to be based on distance. In their tariff applications, the companies indicated that charges will be based on facility distance, by the meter or a number of meters, of a cable pair.
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19. fONOROLA noted that the companies proposed different ways of measuring distance in their tariff proposals, and submitted that the definitions should be consistent. BC TEL proposed "the shortest routed distance between customer’s premises via the serving COs". Bell proposed the "shortest routed distance". TCI/TCEI proposed the "shortest available routing as determined by TCI/TCEI". fONOROLA submitted that BC TEL’s definition is the most appropriate and clearest, and should be used by the other companies.
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20. Bell provided clarification, in reply arguments, that facilities will be routed from the customer’s premises to the service wire centre. Thus, in the case of Bell and BC TEL, optical fibre facilities will not be routed directly between customer premises. TCI/TCEI proposed that the optical fibre service be provided and routed either through a suitably equipped CO, or on a direct point-to-point basis, and that rating be based on the shortest available routing as determined by the companies. fONOROLA suggested that in the case of facilities between customer premises that do not go through a CO, the lowest cost option should be used, not one based on the shortest routing. According to fONOROLA, the lowest cost option would not necessarily be the shortest routing once construction and additional charges are taken into account. Further, fONOROLA argued that the phrase "... as determined by TCI or TCEI" should not be allowed because it will provide the two companies opportunities for unjust discrimination. TCI/TCEI replied that fONOROLA’s argument does not consider that service is provided only where suitable existing facilities are available. There would be no construction nor additional charges, and as a result, the least cost routing option would always be the shortest available routing.
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21. The Commission agrees with BC TEL’s proposed basis for the measurement of rate distance. Bell’s clarification that facilities would only be routed from the customer’s premises to the serving wire centre is to be included in its tariffs. With respect to TCI/TCEI, the Commission considers that the proposed wording could result in unjust discrimination. Accordingly, the Commission directs TCI/TCEI to reflect in their tariffs that the rate is to be "based on the shortest routed distance between the customer’s premises via the company’s serving COs".
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Listing of Offices Where Facilities are Available
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22. CCTA noted that the companies have indicated in their proposed tariffs that the provision of optical fibre service will be subject to availability of facilities, but none have supplied a listing of the locations, either by wire centre or exchange where service will be available. CCTA submitted that without this information, prospective customers will still face the possibility of unjust discrimination with regard to the availability of optical fibre.
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23. TCI/TCEI stated that this information is proprietary and confidential, the release of which would cause specific direct harm to the companies. BC TEL indicated that "availability" essentially means whether an individual fibre pair is available within individual fibre routes. In BC TEL’s view, availability is constantly changing, and it would be impractical to update on a route-by-route basis. BC TEL stated that the listing of offices where optical fibre service is available would be onerous, impractical, and very expensive. Bell noted that the information requested is confidential and costly to update.
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24. The Commission notes that Decision 97-7 allows the companies to provision optical fibre service on the basis of availability of facilities. The Commission considers that there is merit to CCTA’s argument that the absence of details as to the availability of facilities would leave opportunities for unjust discrimination. While the companies claim that release of this information on the availability of fibre by CO would cause specific direct harm to the companies, the Commission is not persuaded that the harm would outweigh the public interest in disclosure of the availability of fibre on a CO basis.
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25. Accordingly, the Commission directs the companies to provide on the public record the availability of fibre on a CO basis at the same time as the issuance of revised tariff pages (or alternatively, by a listing of where fibre is not available), followed by periodic updates every six months.
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Limits on the Number of Fibres
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26. TCI and TCEI proposed to limit service to a maximum of six pairs per service, while Bell proposed rates for anywhere between one to six pairs of fibres. BC TEL proposed rates for any number of pairs subject to the availability of suitable facilities.
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27. AT&T Canada LDS, Clearnet, and fONOROLA noted that TCI/TCEI provided no rationale or justification for their restrictions and submitted that they should be denied. fONOROLA also noted that the incremental costs of providing additional fibres at the same time as the original six pairs is not large, and could be addressed in the rate structure.
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28. TCI/TCEI in reply indicated that the Commission has encouraged the development of a competitive market-place based on facilities-based competition. To allow more than six pairs would in the two companies’ view merely perpetuate the reliance on leased facilities which would be contrary to the above objective. Further, without any such limits, one or two companies could purchase all of the available existing facilities.
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29. On the basis of the record of this proceeding, the Commission is not persuaded that there should be a limit on the availability of fibre optical pairs, other than the availability of suitable facilities. Accordingly, TCI/TCEI are directed to remove any such limitation from their tariffs.
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Use of Fibre Rings to Provide Service
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30. fONOROLA objected to TCI/TCEI’s proposal that optical fibre service would not be provided using the two companies’ access fibre rings and noted that no other company proposed a similar restriction. According to fONOROLA, TCI/TCEI would be in a position to discriminate against certain customers by providing them with less efficient service.
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31. TCI/TCEI submitted that excess fibre capacity does not exist on the TCI/TCEI fibre rings. The two companies also submitted that the use of fibre in the ring by one customer could strand the balance of the ring and preclude its use by the company or other customers. According to TCI/TCEI, it would impair the companies’ ability to provide service in other areas served by the ring, as the remainder of the ring would be stranded and deemed unusable. TCI/TCEI claimed that the proposed condition is necessary to allow the two companies to maximize the use of their networks.
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32. In the Commission’s view, there is no need for this restriction as the provision of service is subject to availability of facilities. The Commission also notes that Bell and BC TEL did not raise any similar technical concerns. TCI/TCEI are directed not to include such limitations in their tariffs.
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The Proposed Rates
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33. The interveners submitted that the proposed rates are excessive and therefore unreasonable. AT&T Canada LDS contended that the rates are much higher than what would be necessary to protect revenues from existing private line services, and would do exactly what the Commission seeks to avoid - stifle the demand for this service - since at the proposed rates, no business case can be made by any customer to subscribe to such services.
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34. AT&T Canada LDS and CCTA also provided comparisons between the rates of some optical fibre arrangements provided under SFTs and what the rates would be under the proposed GTs. AT&T Canada LDS and CCTA suggested that these comparisons illustrate the wide gap between the rates in the GTs and those in the SFTs and underline the undue preference being given to existing customers under those SFTs. Call-Net submitted its analysis indicating that Bell's and BC TEL’s rates would become economical for a customer only at high numbers of DS-3 equivalent circuits, and that TCI’s fibre tariff proposal will never be economical relative to DS-3 service.
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35. According to AT&T Canada LDS, since customers still have to buy terminal equipment and spend money on related space, power, and racking requirements to light up the fibre, the possibility of customers subscribing to the companies’ proposed fibre GTs becomes unlikely. In the case of TCI/TCEI, the rates would, according to AT&T Canada LDS, eliminate the demand completely. In Call-Net’s view, the companies have filed proposals simply to technically "comply" with the directive in Decision 97-7, and the rates do not reflect a genuine, good faith intention to ensure general broad-based, non-discriminatory access to the companies’ optical fibre facilities.
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36. In reply, Bell and BC TEL indicated that the proposed rates are price positioned relative to existing services. TCI/TCEI indicated that optical fibre is neither a bottleneck nor an essential facility for which rates are to be based on costs and that optical fibre is an asset with potentially unlimited capacity. According to TCI/TCEI, the proposed rates take into account opportunities foregone should the companies relinquish a cable as optical fibre. Bell and TCI/TCEI indicated that comparisons are not meaningful because competitive suppliers are not compelled to provide capacity to competitors and to consider re-price impacts and erosion of existing revenues.
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37. In Decision 97-7, the Commission stipulated that rates for optical fibre should recover costs and that while premiums may be appropriate to protect existing private line revenues, too high a premium could effectively stifle demand.
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38. Consistent with that finding, and based on the current rates for DS-3 local facilities, the Commission finds Bell’s and BC TEL’s proposed rates to be reasonable. Accordingly, Bell’s and BC TEL’s proposed rates are approved. As Bell’s rates are limited to six pairs, the Commission directs Bell to file, within 30 days, proposed tariff revisions providing rates for cross-sections of more than six pairs.
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39. The Commission finds that the rates proposed by TCI/TCEI are excessive and would stifle demand. The Commission considers rates in the range proposed by Bell and BC TEL to be more appropriate. Accordingly, the Commission approves a rate of $2.40 per meter per month, on an interim basis for TCI/TCEI. TCI/TCEI are invited to de-average the rate level in terms of rate distance, contractual term commitment or volume of pairs, if they consider de-averaging to be appropriate. The interim rate will become final after 60 days from the date of this Decision, unless a de-averaging proposal is received. The Commission notes that at $2.40 per meter per month, the rates will have a significant mark-up.
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40. TCI/TCEI and BC TEL also proposed a $1,000 service charge with respect to a service inquiry. This charge is refundable if the customer proceeds with the service installation. Clearnet submitted that this would penalize customers for asking these companies if they can provide service. BC TEL submitted that the purpose of the fee is to discourage bogus requests intended solely to size up BC TEL's network architecture for competitive purposes and added that each service request will cause BC TEL to incur actual costs which need to be recovered. TCI/TCEI submitted that a similar application fee was approved by the Commission in Decision 97-15.
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41. The Commission considers that a refundable service inquiry charge is appropriate given that a company incurs certain costs to process a service request. However, the Commission is of the view that the proposed $1,000 fee is excessive. The Commission directs BC TEL and TCI/TCEI to reflect in their tariffs a charge of $500, which will be refunded, if the customer goes ahead with a request for service or if the answer to the inquiry is that facilities are not available.
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Migration of Customers From SFT to GT
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42. Paragraph 36 of Decision 97-7 states that all optical fibre customers who are provided service in areas for which GTs would be applicable, should be migrated to the GTs by 1 January 1998.
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43. In response to this paragraph in Decision 97-7, the companies proposed various arrangements depending on the effective date of the SFT and whether the SFTs were given final or interim approval. Bell and BC TEL proposed that SFTs granted interim approval between the date of Telecom Public Notice CRTC 96-1, Tariff Filings Related to the Installation of Optical Fibres, 9 January 1996 (PN 96-1), and the present should be migrated to the GTs by 1 January 1998. The single exception proposed by Bell is the SFT given interim approval under Order 95-1305 which predated PN 96-1, but would under Bell’s proposal be treated similarly. Bell and BC TEL proposed that migration of these SFTs to GTs would be subject to the qualification that customers should have the option of either terminating the contract without penalty or continuing to receive service at the contracted rates until expiry of the contract.
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44. For the existing SFTs that were given final approval prior to PN 96-1, Bell and BC TEL proposed that customers be given the option of migrating to the GT immediately without penalty or maintaining service under the SFT until the contract expires.
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45. TCI submitted that existing customers should be given the option to migrate to the GTs without penalty or to stay under the SFT. TCEI did not propose any migration arrangements.
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46. According to AT&T Canada LDS and Call-Net, the telephone companies’ proposals are designed to enable all existing customers to continue under the SFT, as the option to migrate to the GT would not be exercised due to the proposed GT rates being much higher than the SFT rates. According to the two interveners, the companies’ proposals would perpetuate the undue preference already extended to those existing customers and circumvent the Commission’s directive in Decision 97-7 and should therefore be denied.
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47. CCTA submitted that Bell had an obligation to notify its customers of the prospective impacts of Decision 97-7 and the forthcoming issuance of GTs. Since Bell was aware of the Commission’s requirement to file a GT within 90 days of Decision 97-7, neither Bell nor the customer could have any expectation of remaining under the SFT and customers should be migrated to the GTs immediately. CCTA also submitted that the companies should be required to file a listing of optical fibre SFTs, whether these are in situations where GTs or SFTs apply, regardless of whether the SFTs have received interim or final approval, including information on facility distances to prove that the rates meet the requirement in Decision 97-7.
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48. BC TEL noted, in reply, that Decision 97-7 indicated that there are situations where SFTs are appropriate because facilities are going to be constructed. BC TEL submitted that it would be unfair for customers who have made a major financial commitment towards the construction of facilities specifically for their purpose to be migrated to a GT since, if these customers are required to move to the GT, they will lose the benefits of their investment. BC TEL submitted that these customers should have the option of continuing to receive service pursuant to the SFTs.
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49. Bell submitted that customers whose contracts have been given final approval should not be varied, in effect on a retroactive basis, by requiring these customers to migrate to the GT. Bell submitted it has an obligation to customers who entered into service agreements in good faith and whose SFTs have been given final approval. Any such blanket migration policy without the conditions proposed by Bell would cause irreparable damage to the company’s reputation. For customers that have chosen to pay large up front fees, migration to the GTs would in effect penalize them by making them effectively pay twice for the same service. Bell submitted that it is not clear as to how the company could retroactively adjust these prior charges.
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50. The Commission notes that Decision 97-7 stipulated the use of GTs, in order to eliminate concerns regarding unjust discrimination in the pricing and availability of optical fibre. In Decision 97-7, the Commission required that all optical fibre customers who are provided service in areas for which GTs would be applicable, should be migrated to the GTs. The Commission remains of the view that generally, this approach is valid. Accordingly, except as modified below, the companies are hereby directed to migrate all such customers to the GTs within 90 days of the date of this Decision or the effective date of any tariff revisions required to affect this migration, whichever is later.
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51. The Commission recognizes that in certain cases, repricing may be necessary. In Decision 97-7, it stated that in considering optical fibre SFTs, both stand-alone optical fibre and optical fibre included as part of a bundled service should be considered. To avoid unjust discrimination, the fibre should be available at the same price as is implicit in the bundled price. It also stated that SFT rates for optical fibre should not be less than GT rates for the same facility distance. The companies are directed to file, within 45 days of the date of this Decision, information for each existing optical fibre SFT, whether stand-alone or bundled with other elements, indicating whether it is proposed to remain as an SFT or to migrate to the GT and showing that the above requirements are satisfied. At the same time, for each existing SFT which is proposed to remain as an SFT, the companies are to: a) justify why an SFT is appropriate; and b) to demonstrate that the foregoing pricing requirements are met, or submit proposed tariff revisions which would comply with the requirements.
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52. The Commission notes that some SFTs were structured so as to have a large initial charge and lower on-going monthly payments. Charging the GT rates without adjustment could potentially give rise to excessive charges for these customers. In order to compensate for this situation, the Commission directs that where the up front payment substantially exceeds the service charge stipulated in the new GTs, the difference shall be prorated over the original life of the SFT contract to better reflect the monthly amount being charged under the SFT in comparison to the monthly GT rates. Customers are to be credited with this prorated monthly amount against the new tariff rates for the remaining life of the contract. Tariff revisions identifying the credits are to be filed for approval within 45 days.
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III DISPOSITION
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53. The proposed revisions under BC TEL TNs 3660/A and Bell TN 6067 are approved, while TCI TN 933 and TCEI TN 59 are approved on an interim basis, with changes required to be consistent with this Decision. The revised tariff pages are to be issued within 15 days.
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Laura M. Talbot-Allan
Secretary General
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This document is available in alternative format upon request.
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