ARCHIVED - Telecom Decision CRTC 2002-58

Telecom Decision CRTC 2002-58

Ottawa, 20 September 2002

GT Group Telecom Services Corp. v. Bell Canada - Non-compliance with Bundling Rules

Reference: 8661-G7-01/02

In this decision, the Commission finds that a Bell Canada promotion offering business customers a rebate of long distance charges contingent on the customer obtaining local exchange services from Bell Canada is a bundled service that requires tariff approval.

The Commission directs Bell Canada to cease providing this service and any similar service that is provided without an approved tariff.

The Commission also directs Aliant Telecom Inc., Bell Canada, MTS Communications Inc., Saskatchewan Telecommunications, Société en commandite Télébec, TELUS Communications Inc. and TELUS Communications (Québec) Inc. to file information with the Commission relating to similar services no later than 21 October 2002.

1.

On 19 April 2002, GT Group Telecom Services Corp. (Group Telecom) filed an application pursuant to Part VII of the CRTC Telecommunications Rules of Procedure alleging that a promotion offered by Bell Canada did not comply with the Commission's determinations in Joint Marketing and Bundling, Telecom Decision CRTC 98-4, 24 March 1998 (Decision 98-4) regarding the bundling of tariffed and forborne services. Specifically, Group Telecom submitted that Bell Canada's promotion offering business customers a rebate of long distance charges contingent on a customer obtaining local exchange services from Bell Canada qualified as a bundled service and that, contrary to Decision 98-4, Bell Canada had not obtained tariff approval prior to offering this service.

2.

Group Telecom requested that the Commission direct Bell Canada to (a) cease offering the promotion that was the subject of its application and all similar non-tariffed promotions or offerings that involved the bundling of tariffed and non-tariffed services unless and until the Commission approved a tariff providing for any such arrangements; and (b) file a report that included information on other Bell Canada non-tariff rebate or incentive plans. Group Telecom also asked that, on receipt of this report, the Commission initiate a public proceeding to determine the appropriate remedies.

3.

AT&T Canada filed comments in support of Group Telecom's application on 21 May 2002. Bell Canada filed its answer to Group Telecom's application on 21 May 2002. Bell Canada filed further comments on 30 May 2002 in response to AT&T Canada's submission. Group Telecom filed reply comments on 7 June 2002.

Positions of parties

Characterization of the service

4.

Group Telecom submitted that the promotion offered by Bell Canada was a bundled service since it required a business customer to take both local exchange and long distance service from Bell Canada in order to receive a per-line rebate. Group Telecom argued that, prior to being provided to customers, this service required approval by the Commission pursuant to the bundling rules established by the Commission and, therefore, subsection 25(1) of the Telecommunications Act (the Act). Group Telecom submitted that Bell Canada was in violation of the Act because it had not received this prior approval.

5.

AT&T Canada supported Group Telecom's characterization of Bell Canada's promotion as a bundled service for which tariff approval is required. AT&T Canada argued that it was clear the rebate offered by that promotion depended on the customer migrating both local and long distance service to Bell Canada. AT&T Canada further argued that it was therefore reasonable to conclude that Bell Canada had, at a minimum, misinterpreted the bundling rules and had employed this misinterpretation to offer, for some time, on a non-tariffed basis, winback promotions that should be tariffed.

6.

Bell Canada stated that it targeted the promotion to businesses that were not its customers for local or long distance service. Bell Canada further stated that the service, which it described as a winback promotion, provided a customer with a rebate of $140 on charges for long distance service for each local business line in respect of which the customer returned to the company. To receive the rebate, the customer had to satisfy two qualifying criteria. The customer had to take local service from Bell Canada and spend a minimum of $50 per month on Bell Canada's long distance service. Bell Canada stated that it had offered this service as a promotion since October 2001. It also stated that it had periodically offered similar promotions of lesser amounts in the past.

7.

Bell Canada argued that the rebate did not bundle tariffed local and forborne long distance services because Bell Canada had not aggregated service elements for the purpose of applying volume discounts that would not be available on a disaggregated basis. Bell Canada further argued that the terms of the rebate did not create a bundle because the rate of one or more service elements did not depend on the customer's usage of other services. Bell Canada stated that the promotion involved two qualifying criteria and that a customer that met these criteria was entitled to the promotion independent of any tariffed service. Bell Canada submitted that the benefit to the customer was fixed and did not vary with the type of local service.

8.

Bell Canada noted that Group Telecom attached to its application a copy of a fax that a Bell Canada sales representative had sent to a potential customer. In that fax, the sales representative deducted from the rebate of $140 per local line the service charge that Bell Canada would require the customer to pay for the connection of such line. Bell Canada stated that its sales representative had done this to demonstrate to the potential customer the net effect of taking both its local and long distance services from Bell Canada.

9.

Bell Canada emphasized that its sales representative's presentation of the rebate as a credit in respect of local service connection charges was contrary to company policy and the training received by its sales representatives. Bell Canada described the remedial actions it had taken to ensure that its sales representatives described the promotion to potential customers as a long distance promotion that was independent of any other tariffed service.

10.

Bell Canada stated that, if a customer's long distance charges on its first bill amounted to at least $140, the rebate would be credited to those charges. Bell Canada stated, however, that if a customer's first month of long distance charges were not large enough to absorb the full amount of this credit, it would apply the credit to the customer's total bill. Bell Canada also indicated that it was investigating modifications to its billing system that would permit it to apply the rebate against a customer's long distance charges as those charges accrued over time. Bell Canada added that it was investigating these modifications because it was concerned that crediting the rebate to a customer's total bill might give to a customer an impression not intended by Bell Canada with respect to the nature of the promotion.

11.

In reply, Group Telecom submitted that Bell Canada's interpretation, that a rebate notionally provided in respect of forborne long distance service must vary with the type or usage of local service before a bundle resulted, was not consistent with Decision 98-4. In essence, Group Telecom argued that all that was necessary for a bundle to exist was for the rebate to be contingent on the customer taking both local and long distance service from Bell Canada.

Remedies

12.

Bell Canada argued that the remedies requested by Group Telecom and AT&T Canada were not necessary because its service was not a bundled service. Bell Canada submitted that, because it had taken prompt remedial action, there would be little point in initiating the public proceeding requested by Group Telecom.

13.

In its reply comments, Group Telecom requested additional remedies that it described as marketplace remedies. These remedies included the termination, without penalty to the customer, of all contracts between Bell Canada and its business customers relating to the allegedly illegal bundled service. Bell Canada did not provide comments on these proposed remedies.

Commission analysis and determination

14.

The Commission notes that bundling rules were first established in Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994 in which the Commission addressed the regulatory approach to the bundling of tariffed services. In Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8) these rules were adapted to the bundling of tariffed local service with forborne services. The main thrust of these rules is that all bundled services that include a tariffed service component must receive prior Commission approval.

15.

The Commission further notes that in Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997, and Stentor Resource Centre Inc. - Forbearance from Regulation of Interexchange Private Line Services, Telecom Decision CRTC 97-20, 18 December 1997, the Commission described bundling as the inclusion of different services or service elements under a rate structure. The Commission noted that this rate structure could be a "single rate, a set of rates for various service elements and/or rates for one or more service elements which are dependent on the usage of other services." In Decision 98-4, the Commission adopted this same description of bundling.

16.

In the present case, a long distance customer would receive a rebate only if it also subscribes to Bell Canada's tariffed local service. The Commission considers that, as a result of this requirement, the rates for long distance service depended on the usage of local exchange service.

17.

In light of the above, the Commission finds that Bell Canada's promotion meets the definition of a bundled service to which the requirements of Decision 97-8 and subsequent decisions apply. The provision of this service without prior tariff approval is therefore in contravention of subsection 25(1) of the Act.

18.

The Commission considers that Bell Canada's non-compliance with the Act is unacceptable and inconsistent with fair and sustainable competition.

19.

The Commission considers that Bell Canada knew, or ought to have known, that it has been and continues to be in contravention of the Act, even if its stated interpretation of these rules is applied. In this regard, the Commission notes Bell Canada's acknowledgement that, if the customer's long distance charges for the first month of service are not great enough to absorb the full amount of the rebate, the rebate is applied to the customer's total charges, including charges for tariffed local service.

20.

The Commission also notes Bell Canada's statement that it is investigating modifications to its billing system to change this practice. However, the Commission considers that Bell Canada's promotion would remain a bundle even if Bell Canada were to change its billing practice to attribute the rebate entirely to a customer's charges for long distance service because the rate for long distance service would still be dependent on the usage of another service.

21.

The Commission directs Bell Canada to immediately cease providing the bundled service at issue. The Commission also directs Bell Canada to immediately cease providing, except pursuant to an approved tariff, any other service, including any promotion, that involves a Bell Canada tariffed service and one or more forborne services of the company, where a reduction, discount, rebate, incentive or any other benefit in respect of any of those services is conditional on the customer obtaining one or more of the other services from Bell Canada.

22.

The Commission further directs Bell Canada to file by 21 October 2002 a report, serving a copy on Group Telecom and AT&T Canada, identifying, separately in respect of each of its business, Centrex and residential services, each service, including a promotion, offered as of the date of this decision without an approved tariff, where the service involves a tariffed service and one or more forborne services of the company and the customer is offered a reduction, discount, rebate, incentive or any other benefit depending on the customer's use of any of those services. The Commission also directs Bell Canada to include in that report the following information in respect of each service:

23.

The Commission notes that, in its answer to Group Telecom dated 21 May 2002, Bell Canada referred to a second promotion that represented a 10% credit on a customer's annual long distance charges. Although Bell Canada characterized this second promotion as a long distance promotion, it did not describe the conditions a customer must satisfy to receive the credit. The Commission directs Bell Canada to provide, with the report, the information required under paragraph 22 of this decision with respect to this promotion.

24.

The Commission further directs Aliant Telecom Inc., MTS Communications Inc. Saskatchewan Telecommunications, Société en commandite Télébec, TELUS Communications Inc. and TELUS Communications (Québec) Inc. to each file a report setting out the information referred in paragraph 22, serving a copy on Group Telecom and AT&T Canada, no later than 21 October 2002.

25.

Group Telecom and AT&T Canada may file comments with respect to the reports filed pursuant to this decision, serving a copy on the telephone company on whose report it is commenting, no later than 4 November 2002. The Commission invites Group Telecom and AT&T Canada to include their views as to appropriate remedies. Each telephone company in respect of whose report Group Telecom or AT&T Canada filed comments may file reply comments, including comments with respect to remedies, serving a copy on Group Telecom or AT&T Canada, no later than< 12 November 2002.

26.

On receipt of the telephone companies' reports and parties' comments, the Commission will determine what further action, if any, is appropriate.

Secretary General

This document is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca