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Telecom Public Notice
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Ottawa, 30 May 1985
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Telecom Public Notice CRTC 1985-34
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STRUCTURAL SEPARATION - MULTILINE AND DATA TERMINAL EQUIPMENT
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I Background
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In CRTC Telecom Public Notice 1984-66, 9 November 1984 (Public Notice 1984-66), the Commission announced a proceeding to examine the feasibility of implementing structural separation of the multiline and data terminal business of Bell Canada (Bell) and British Columbia Telephone Company (B.C. Tel). In addition, the Commission stated that it intended to examine the appropriateness of applying a similar approach to other federally regulated carriers. Bell and B.C. Tel were directed to file with the Commission and serve on other parties a detailed proposal for conducting all of their respective multiline and data terminal equipment business through a structurally separate affiliate. CNCP Telecommunications (CNCP), NorthwesTel Inc. (NorthwesTel) and Terra Nova Telecommunications Inc. (Terra Nova) were directed to file with the Commission and serve on other parties either a similar detailed proposal or reasons why they should not be required to file such a proposal, together with any alternative proposal to meet the concern that terminal equipment offerings be demonstrably free of any subsidy from monopoly or other regulated service revenues.
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The submissions of the carriers were filed with the Commission by 29 January 1985.
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On 5 March 1985 parties filed comments on these submissions with the Commission. The carriers filed reply comments with the Commission on 2 April 1985.
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II CNCP, NorthwesTel and Terra Nova
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In their submissions dated 29 January 1985, CNCP, NorthwesTel and Terra Nova submitted that they should not be required to conduct their respective multiline and data terminal equipment business through a structurally separate affiliate. CNCP argued that it is not in a position to cross-subsidize its terminal equipment offerings from any of its other service revenues. NorthwesTel and Terra Nova cited several factors, including limited markets, large service areas, and the extra costs and administrative complexity associated with establishing an arm's length subsidiary, in support of their alternative proposals to separate the costs of terminal equipment using a further development of the procedures they proposed in Phase III of the Cost Inquiry.
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In the case of CNCP, the Commission recognizes that there is limited potential for cross-subsidization of its terminal equipment offerings from its other service revenues. In the case of NorthwesTel and Terra Nova, the Commission recognizes the small size of the terminal equipment markets served by these carriers. Therefore, the Commission has decided not to consider further the structural separation approach for these three carriers in this proceeding. Rather, the Commission has decided that the alternative proposals of these three carriers should be considered in other proceedings. Accordingly, the balance of the present proceeding will be restricted to a consideration of structural separation of the multiline and data terminal business of Bell and B.C. Tel.
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III ACTS v. B.C. Tel
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On 16 August 1984, the Association of Competitive Telecommunications Suppliers (ACTS) filed a submission with the Commission complaining about charges for the provision of terminal equipment by B.C. Tel and Cantel Leasing Ltd. (Cantel Leasing), a wholly owned subsidiary of Canadian Telephones Systems and Supplies Ltd. which is in turn a wholly owned subsidiary of B.C. Tel. The ACTS submission contained two requests. First, ACTS sought a surprise audit of B.C. Tel by the Commission. Second, depending on the results of the audit, ACTS suggested that the Commission should consider prosecution of B.C. Tel for violations of the Railway Act. By letter to the parties dated 7 November 1984, the Commission denied the request to perform an audit.
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By letter to the parties dated 22 May 1985, the Commission disposed of the second request. It concluded that prosecution of B.C. Tel was not warranted. Specifically, the Commission concluded that the payments for provision of the equipment were made to Cantel Leasing and were therefore not charged by a company within the meaning of s.320(1) of the Railway Act.
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At the same time, however, the Commission expressed concern about the closeness of the relationship between B.C. Tel and Cantel Leasing and indicated that it would examine this situation in the context of the structural separation proceeding. Accordingly, the file relating to this complaint will be considered to form part of the record of the structural separation proceeding.
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IV ACTS v. Bell
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On 13 February 1985, ACTS filed a complaint with the Commission alleging that Bell has accorded subscribers who obtain their terminal equipment from Bell more favourable network cut-over dates than those accorded to subscribers who obtain their terminal equipment from an interconnect supplier. ACTS requested the Commission to order Bell to immediately cease the practice and to order that all competitors in the terminal equipment marketplace be treated equally.
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In its answer to the ACTS' application dated 18 March 1985, Bell denied "that its employees have now or ever competed in the market on the basis that subscribers can receive preferential treatment if they choose Bell Canada's terminal equipment".
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ACTS filed a reply dated 29 March 1985. In response to a Commission request, on 26 April 1985 Bell filed a description of the company's current procedures concerning the installation and supply of network facilities for Bell-provided and customer-provided key systems and PBXs. For the Ontario region of Bell's operation, ordering intervals for Bell-provided equipment are set out in the Appointment Plan section of the company's Ontario region Communications Handbook, while those associated with customer-provided equipment are contained in a document entitled "Customer/Vendor Bulletin Number 7 Issued by the Ontario Region Customer Provided Equipment Group" (Bulletin 7). - Bell admitted that the ordering intervals for Bell network services connected to customer-provided equipment are 5 business days longer than those associated with the connection of Bell-provided equipment.
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In the case of the Quebec region of Bell's operations, the ordering intervals for Bell-provided equipment are contained in a document entitled "Répertoire des services d'affaires". Bell stated that "the ordering intervals for Company network services to be connected to customer provided equipment are not set out in a written Company procedure, but rather are negotiated on a case by case basis."
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Turning first to the procedure currently in use in Bell's Quebec region for customer-provided equipment, the Commission has come to the conclusion that Bell should develop standard written procedures as it has done in the Ontario region. Bell is requested to file a document with the Commission, with a copy to ACTS, within 60 days, showing how this has been accomplished.
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Turning to the procedures currently in use in Bell's Ontario region, the Commission has concluded that, based on the difference between the ordering intervals for Bell-provided equipment, which is 5 days, and customer-provided equipment, which is 10 days, Bell is according itself a preference. The Commission has decided that the structural separation proceeding provides an appropriate forum to consider whether this preference is undue or unreasonable.
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V Telecom Decision CRTC 82-14
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In Attachment of Subscriber-Provided Terminal Equipment, Telecom Decision CRTC 82-14, 23 November 1982 (Decision 82-14), at p.70 the Commission discussed the merits of structural separation in relation to terminal equipment provided by the carriers. At that time, the Commission determined that subscribers' interests could best be served and the development of a dynamic competitive market could best be accomplished through continued direct carrier participation in the terminal equipment market.
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In interrogatories issued today, the Commission has requested Bell and B.C. Tel to provide, inter alia, updated information concerning the status of the terminal equipment market, the scope of products and service provided by them in this market and the estimated cost of setting up an affiliated company. This information will assist the Commission in making comparisons between the market as it existed at the time of Decision CRTC 82-14 and as it exists and is developing at the present time.
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VI Procedure
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The files relating to the ACTS v. B.C. Tel and the ACTS v. Bell matters may be examined at the following CRTC offices:
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1 Promenade du Portage
Room 561, Central Building
Les Terrasses de la Chaudière
Hull, Quebec
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1894 Barrington Street
Barrington Tower, Room 428
Halifax. Nova Scotia
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Complex Guy Favreau
Suite 602, East Tower
200 Dorchester Blvd. West
Montreal, Quebec
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275 Portage Avenue
Kensington Building
Winnipeg, Manitoba
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- and -
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700 West Georgia Street
Suite 1130
Vancouver, British Columbia
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With reference to paragraph 9 at page 11 of Public Notice 1984-66, the Commission announces the following procedure for the balance of this proceeding:
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1. Parties may address interrogatories to Bell and B.C. Tel by 2 July 1985, with a copy to the
Commission, respecting:
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(a) the proposals filed pursuant to paragraph 4 of Public Notice 1984-66
at p. 7;
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(b) the ACTS v. Bell application;
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(c) the closeness of the relationship between B.C. Tel and Cantel Leasing; and
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(d) the evolution of the terminal equipment market in federally regulated territory since the
establishment of the record of Decision 82-14.
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2. Responses to all interrogatories must be filed with the Commission and served on the other
parties by 1 August 1985.
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3. Bell and B.C. Tel may file final argument with the Commission, serving a copy on the other
parties, by 16 September 1985.
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4. Parties other than Bell and B.C. Tel may file final argument with the Commission, serving a copy
on the other parties, by 18 October 1985.
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5. Bell and B.C. Tel may file reply argument with the Commission, serving a copy on the other
parties, by 8 November 1985.
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Fernand Bélisle
Secretary General
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