ARCHIVED - Telecom Decision CRTC 2002-73

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Telecom Decision CRTC 2002-73

Ottawa, 4 December 2002

Call-Net Enterprises Inc. v. Bell Canada - Compliance with winback rules

Reference: 8622-C25-16/02

In this decision, the Commission finds that Bell Canada is in violation of the Commission's winback rules. The Commission directs Bell Canada to: (1) cease and desist from violating the winback rules; (2) develop internal procedures to ensure that it complies with the winback rules from the time that a local service provider submits a local service request; and (3) report to the Commission within 60 days on the internal procedures it has put in place to ensure and track compliance with the winback rules.

1.

On 3 May 2002, Call-Net Enterprises Inc. on behalf of itself and its affiliated companies, including Sprint Canada Inc., (collectively, Call-Net), filed an application pursuant to Part VII of the CRTC Telecommunications Rules of Procedure, requesting that the Commission direct Bell Canada to cease and desist from violating the Commission's winback rules and implement the compliance program proposed in its application.

2.

Comments on Call-Net's application were filed by Futureway Communications Inc. (Futureway), and by AT&T Canada Corp., on behalf of itself and AT&T Canada Telecom Services Company (AT&T Canada), on 3 and 4 June 2002, respectively. Bell Canada filed its answer on 3 June 2002. Call-Net filed reply comments on 11 June 2002.

3.

Bell Canada filed supplementary comments on 20 June 2002. Call-Net filed reply comments on 24 June 2002.

Background

4.

The local exchange winback restrictions were initially established by the Commission in a letter decision entitled Commission Decision Regarding CRTC Interconnection Steering Committee Dispute on Competitive Winback Guidelines, dated 16 April 1998 (the winback letter decision). Pursuant to the winback letter decision, an incumbent local exchange carrier (ILEC) was not to attempt to win back a customer with respect to primary exchange service, for a period of three months after that customer's service had been completely transferred to another local service provider (LSP). In that same letter decision, the Commission stated its concern that without such guidelines, ILECs would potentially be able to win back customers even before local service was effectively transferred to a competitive local exchange carrier (CLEC).

5.

In Application of the winback rules with respect to primary exchange service, Telecom Decision CRTC 2002-1, 10 January 2002 (Decision 2002-1), the Commission amended the winback rules by expanding the type of residential services that were subject to the restrictions. ILECs were directed to refrain from attempting to win back residential customers, with respect to primary exchange service or any other service, for a period of three months after the customer's primary local exchange service had been completely transferred to another LSP.

Call-Net's application

6.

In its application, Call-Net alleged that Bell Canada was violating the winback rules by contacting customers immediately after receiving Call-Net's local service requests (LSR), before the customers had migrated to the Call-Net network. Call-Net submitted thatthe winback rules were explicit, and that contact for winback purposes was prohibited until three months after a customer's service had completely migrated to an LSP's network. In support of its application, Call-Net filed a sample of 21 residential local exchange customers who, according to Call-Net, had switched to Sprint Canada Inc. for local service, and had been contacted by Bell Canada within days of Bell Canada receiving the LSR.

7.

Call-Net submitted that non-compliance with the winback rules represented a significant threat to the emergence of residential local competition. Call-Net argued that it was critical that the competitive momentum that was gathering in the residential local market not be impeded by the ILECs.

8.

Since in its view the winback rules were explicit and unequivocal, Call-Net submitted that it would not be sufficient for the Commission to merely direct Bell Canada to cease and desist from violating the winback rules. Call-Net argued that, in addition, Bell Canada should be required to implement a program that would demonstrate its compliance with the winback rules.

9.

In particular, Call-Net requested that the Commission direct Bell Canada to implement a compliance program in which Bell Canada would:

- provide comprehensive training for its sales personnel on regulatory compliance, with specific focus on winback activities; the training would include written communication to sales personnel of the winback rules and any other relevant Commission Orders; Bell Canada would then report to the Commission on the internal processes it had put in place to track compliance on a going-forward basis, as well as to rectify non-compliance vis-à-vis both the CLEC and the affected customer;

- include a billing insert for all its residential customers that would provide:

a) a statement that the local service market had been opened to competition by the Commission and that, where available, customers were free to switch to alternative LSPs, without incurring a disconnection penalty;

b) a statement that Bell Canada was prohibited by the Commission from contacting the customer for three months after the customer had chosen to switch to another service provider;

c) a Commission general telephone number and address where customers could report improper contact by Bell Canada representatives;

d) the names of CLECs currently providing residential local exchange service and their general telephone numbers; and

e) a statement that all residential households were free to use any local exchange service provider of their choice.

Comments on Call-Net's application

Bell Canada

10.

Bell Canada argued that it was not violating the winback rules because it was not attempting to win back customers after they had been completely transferred to another LSP. Bell Canada submitted that the winback rules did not apply until a customer's primary exchange service had been completely transferred to another LSP. Bell Canada further submitted that a customer was not completely transferred when an LSR was filed with Bell Canada, but rather, only when a customer's services had actually been transferred to another LSP.

11.

Bell Canada argued that, if winback restrictions applied as soon as an LSR was filed, the ILECs would not be able to contact customers for a period well beyond three months, and, as a result, CLECs would have an incentive to put forward invalid LSRs in an attempt to delay the process.

12.

In addition, Bell Canada maintained that, if the winback rules did commence at the time an LSR was filed, it would be required to edit telemarketing lists by deleting customers identified in the LSRs. Bell Canada argued that this editing would impose substantial operational and financial penalties on ILECs, and would result in the breach of the terms and conditions of the Master Agreement for Interconnection between Local Exchange Carriers (MALI) which prohibit the disclosure of information relating to the migration of customers in this manner.

13.

Bell Canada submitted that the information provided in Call-Net's sample of 21 residential local exchange customers who had allegedly been contacted by Bell Canada within days of Bell Canada receiving the LSR, was inconsistent with the information in its databases. Bell Canada stated that it had, in four instances contacted customers prior to the complete transfer of these customers' services to Call-Net as a result of legitimate toll winback calls. In its view, these contacts were in compliance with the winback rules set out in Decision 2002-1.

14.

Bell Canada submitted that Call-Net had not established a prima facie case that the proposed compliance program was warranted. Bell Canada submitted that it already had internal procedures in place to preclude improper winback initiatives. In addition, Bell Canada argued that Call-Net's request for a billing insert was nothing more than an unjustified attempt to impose an advertising obligation on Bell Canada for the commercial benefit of Call-Net.

AT&T Canada and Futureway

15.

Both AT&T Canada and Futureway supported Call-Net's view that Bell Canada was in violation of the winback rules.

16.

Futureway submitted that there was little, if any, competition in the residential market. In Futureway's view, winback violations by the ILECs threatened the ability of CLECs to establish a long-term market presence.

17.

Both AT&T Canada and Futureway supported Call-Net's proposed compliance program. AT&T Canada argued that, in addition to Call-Net's program, the Commission should, immediately order Bell Canada to:

- in the case of cancellation prior to migration, pay a penalty to the CLEC equal to the contract termination fee; and

- rebate the CLEC for all costs associated with the migration of the customer, including, but not limited to, all tariffed charges paid to the ILEC and, in particular, service charges associated with the migration from the ILEC to the CLEC.

Reply comments

18.

In its reply comments, Call-Net argued that it was clear that the winback rules had been violated, given that Bell Canada had indicated that it had contacted some of Call-Net's customers after LSRs had been filed with Bell Canada. Call-Net submitted that ILEC winback campaigns continued to create significant barriers to Call-Net's ability to successfully penetrate the local residential market.

Supplementary comments submitted by Bell Canada and Call-Net

19.

In its supplementary comments filed on 20 June 2002, Bell Canada argued that AT&T Canada and Call-Net were attempting to rewrite the winback rules and that this amounted to a review and vary application, pursuant to section 62 of the Telecommunications Act (the Act), without notice to other ILECs. In reply, Call-Net submitted that its application was neither a request to review and vary the winback rules, nor an attempt to rewrite Decision 2002-1.

Commission analysis and determination

20.

The Commission does not accept Bell Canada's view that the winback rules do not apply until a customer's primary exchange service has been completely transferred to another LSP. The Commission considers that the winback rules apply from the time that an ILEC receives an LSR until three months after the customer has been completely transferred to another LSP.

21.

The Commission notes that winback activities are not limited to activities serving to convince a customer to revert to its original service provider after their service has been transferred, but also relate to activities aimed at convincing the customer not to change service providers before the transfer is effected. In Decision 2002-1, the Commission referred to the definition set out in CISC dispute - Rules regarding communication between the customer and the broadcast distribution undertaking, 1 April 1999 (April Letter Decision), in which winback activities were defined as:

.the offering to customers of discounts, free services or other inducements in order to convince those customers not to change service providers or to revert back to their original service provider.

22.

The Commission considers that the winback rules were clearly intended to restrict winback activities from the time a customer expresses its intent in changing LSPs until three months after the customer's local services have been completely transferred. In this regard, the Commission notes that, in both the winback letter decision and Decision 2002-1, it stated that without the winback restrictions, the ILECs would potentially be able to win back customers even before local service was effectively transferred to a CLEC.

23.

In the April Letter Decision the Commission addressed the rationale for winback rules in the local exchange telephone market, and stated that:

[t]he rationale for imposing these restrictions is primarily related to the time interval between ordering a customer transfer from one local exchange telephone provider to another, and the point at which the transfer is made. However, the winback restrictions are also an acknowledgement of the ability of incumbents to attempt to win back customers that have indicated their intention to change service providers. The Commission found that such activities would likely be an impediment to the development of a competitive local market.

24.

The Commission therefore concludes that the winback rules set out in Decision 2002-1 apply from the time the customer's decision to change service providers is communicated in an LSR until three months after the customer's local services have been completely transferred. The Commission therefore finds that Call-Net's application is not a request to review and vary the winback rules set out in that decision.

25.

The Commission notes Bell Canada's admission that, in the four instances where customers were being migrated to Call-Net and were contacted by Bell Canada, such contacts were made prior to the complete transfer of these customers' services to Call-Net as a result of legitimate toll winback calls. Accordingly, the Commission finds that Bell Canada has violated the winback rules set out in Decision 2002-1.

26.

The Commission considers that measures are required to ensure that Bell Canada complies with the winback rules on a going-forward basis. While the incidence of the violations appears to be low, the Commission is, nevertheless, concerned that the violations, if they were to continue, would harm the competitive market.

27.

The Commission considers it appropriate to require Bell Canada to develop and implement internal procedures to ensure its compliance with the winback rules, including, but not limited to, training programs and other specific measures to ensure that it is not contacting local customers from the time an LSP submits an LSR, until three months after the customer has completely transferred to another LSP. The Commission also considers it appropriate to require Bell Canada to report to the Commission on the internal procedures that have been put in place.

28.

The Commission notes Bell Canada's submission that it had internal procedures in place to preclude improper winback activities and that the customers cited by Call-Net were contacted as a result of a legitimate telemarketing campaign. The Commission considers, however, that it is essential that measures be taken to ensure that the winback rules are not violated as a result of telemarketing campaigns. The Commission therefore requires Bell Canada to take the appropriate action to ensure that the names of customers identified in LSRs are deleted from its telemarketing lists. In the Commission's view, such measures would not constitute violations of the confidentiality provisions in the MALI, as alleged by Bell Canada, but rather, would be consistent with Bell Canada's obligations under the MALI. In this regard, the Commission notes that Schedule D of the MALI prohibits local exchange carriers (LECs) from using any customer-specific information disclosed by other LECs through the ordering process, to aid in their marketing or sales efforts. Schedule A of the MALI allows for exceptions to the confidentiality and non-disclosure obligations in instances where the information is required to be disclosed by any government body or agency, or rule of law.

29.

The Commission expects that the internal procedures that will be put in place by Bell Canada will be sufficient to ensure Bell Canada's compliance with the winback rules on a going-forward basis. Accordingly, the Commission does not consider it necessary to direct Bell Canada to implement all of the measures proposed by Call-Net in its compliance program. In particular, while the Commission acknowledges that billing inserts may be an effective tool to ensure that consumers are informed about the current regulatory and competitive environment as well as an effective means of deterring future non-compliance, the Commission does not consider it necessary to require billing inserts at this time.

30.

Furthermore, in view of the low incidence of Bell Canada's violations of the winback rules, the Commission considers that AT&T Canada's proposal that Bell Canada compensate CLECs for contract termination fees and costs associated with customer migration is not warranted at this time.

31.

The Commission will consider imposing additional measures to ensure compliance with the winback rules, such as billing inserts and compensation mechanisms, should there be further violations.

32.

In light of the above, the Commission directs Bell Canada to:

- cease and desist from violating the winback rules;

- develop internal procedures to ensure that Bell Canada does comply with the winback rules from the time that a local service provider submits an LSR for a customer, until three months after that customer has completely transferred to another LSP; and

- report to the Commission, within 60 days of the date of this decision, on the internal procedures Bell Canada has put in place to ensure and track its compliance with the winback rules.

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

Date Modified: 2002-12-04

Date modified: