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Ottawa, 7 August 1985
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Telecom Decision CRTC 85-15
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BRITISH COLUMBIA TELEPHONE COMPANY - PORTABLE COMMUNICATIONS DIVISION
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Background
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On 25 June 1985, the Commission received an application from the British Columbia Telephone Company (B.C. Tel) requesting the Commission to forbear from tariff regulation of its discretionary radio paging and land mobile radio-telephone services, including both conventional and cellular services. As well, B.C. Tel requested that the Commission issue an interim order of forbearance to be effective 22 July 1985.
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In its application, B.C. Tel indicated that it has formed a Portable Communications Division to meet the challenge of an increasingly competitive environment in the portable communications field. It indicated that the business of the division would be conducted with adequate accounting safeguards to prevent cross-subsidy from monopoly services and to ensure that it is not afforded an undue preference or advantage contrary to subsection 321(2) of the Railway Act.
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B.C. Tel further contended that its proposed accounting separation for the division is consistent with the criteria enunciated by the Commission in Cellular Radio Service, CRTC Telecom Public Notice 1984-55, 25 October 1984 (Public Notice 1984-55) for its decision to forbear from rate regulation of cellular radio service provided by Cantel or telephone company affiliates. According to B.C. Tel, its accounting separation would allow the Commission to determine that there is no cross - subsidy from regulated activities and that all transactions between the division and the company are conducted at arm's length.
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B.C. Tel argued that forbearance from price regulation for these services is necessary if B.C. Tel is to compete on an equal footing with unregulated competitors in a market which it does not dominate. In particular, B.C. Tel contended that, without the interim decision requested, the company's financial position in the existing portable communications services would deteriorate. Moreover, the company might be unable to re-establish itself in the market and would probably be required to withdraw. Furthermore, the company's plan to enter and compete in the cellular marketplace could be placed in jeopardy due to the non-recoverable financial losses which the division would suffer.
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The company requested that the unabridged attachment to its application be treated as confidential since it contains proprietary information pertaining to B.C. Tel's competitive position, the release of which would provide its competitors with an undue competitive advantage and cause the company specific and direct harm.
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Conclusion
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In Public Notice 1984-55, the Commission indicated that it would not require Cantel or affiliates of federally-regulated telephone companies to file tariffs for the provision of cellular telephone service to the public. However, with respect to telephone company affiliates, this approach was conditional on there being adequate safeguards to ensure that their cellular activities are at arm's length from, and are not cross-subsidized by revenues from, regulated telephone company activities.
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The Commission is concerned that the approach proposed by B.C. Tel may not be adequate to ensure that services offered by the division are not cross-subsidized by revenues derived from the company's monopoly services. Further, the Commission is concerned that B.C. Tel's proposed approach may not be adequate to ensure that B.C. Tel could not grant itself an undue competitive preference or advantage with respect to the offering of radio paging and mobile radio-telephone services. This is so by virtue of B.C. Tel's monopoly position with respect to services which provide telephone access to these services.
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Such concerns have previously arisen in the case of B.C. Tel's Business Terminal Equipment (BTE) Division, which offers terminal equipment products and services. The Commission notes that B.C. Tel's Portable Communications Division has been set up in a manner similar to BTE. In the case of BTE, in British Columbia Telephone Company, General Increase in Rates, Telecom Decision CRTC 83-8, 22 June 1983, the Commission indicated that it was not satisfied that B.C. Tel had taken the necessary steps to develop and implement all possible safeguards to prevent cross-subsidies.
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In Structural Separation - Multiline and Data Terminal Equipment, CRTC Telecom Public Notice 1984-66, 9 November 1984, the Commission sought comment on whether approaches other than structural separation could be employed to ensure that monopoly subscribers are not cross-subsidizing the carriers' multiline and data terminal equipment business. Until this matter has been adequately addressed, the Commission is of the view that it would be premature to approve B.C. Tel's application.
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Accordingly, the Commission denies B.C. Tel's application for both interim and final orders of forbearance.
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The Commission notes that, consistent with Public Notice 1984-55, it is prepared not to require the filing of tariffs for B.C. Tel's discretionary portable communications services should they be provided through an arm's length affiliated company subject to adequate safeguards to prevent cross-subsidies and any undue preference or advantage.
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Fernand Bélisle
Secretary General
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