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Ottawa, 8 May 1986
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Telecom Decision CRTC 86-9
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TELESAT CANADA AND BELL CANADA - AMENDMENTS TO CONNECTING AGREEMENT BETWEEN TELESAT CANADA AND TELECOM CANADA
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INTRODUCTION
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The Commission received applications from Telesat Canada (Telesat), dated 15 July 1985, and from Bell Canada (Bell), dated 16 July 1985, for approval of a Memorandum of Agreement amending Schedule A to the Connecting Agreement made between Telesat and the members of Telecom Canada on 31 December 1976. These applications were submitted to the Commission for approval pursuant to section 320(11) of the Railway Act. The Commission also received an application from Telesat, under Tariff Notice 114 dated 15 July 1985, for approval to amend its General Tariff CRTC 8001 to reflect the proposed changes.
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As directed by the Commission on 26 July 1985, Telesat and Bell, in letters dated 12 August 1985 and 13 August 1985 respectively, filed the supporting documentation required pursuant to section 46(2)(a) of the CRTC Telecommunications Rules of Procedure.
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The proposed amendments provide for the following:
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a) Telesat's customer base would no longer be restricted to broadcasting undertakings and
specified common carriers.
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b) For the years 1985, 1986 and 1987, the maximum transfer payment to be paid to Telesat by
other Telecom Canada members would be limited to $20 million in any one year. However, if
in any of these years Telesat were unable to meet the interest due on its total indebtedness,
calculated as of 31 December 1984, a supplementary settlement would be made. No further
settlement arrangements between Telesat and the other members of Telecom Canada would
occur after 31 December 1987.
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c) Telecom Canada members would agree to lease from Telesat 14/12 GHz channel services
using at least four RF transponders. This commitment would apply through the life of the Anik
C series of satellites to the end of the life of the first satellite replacing the Anik C series or to
31 December 1998, whichever first occurs. This commitment would survive any termination
of, or withdrawal from, the agreement by any Telecom Canada member.
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In its letter dated 12 August 1985, Telesat indicated that the proposed amendments respond to the "changed circumstances in the Canadian telecommunications infrastructure". It stated that the proposed amendments would lead to an increase in satellite utilization and to the development of new services. Telesat indicated that arrangements with regard to customer base and minimum satellite services to be provided to carriers have been altered since the Connecting Agreement was originally approved, but that these changes have not yet been formally included in the Connecting Agreement.
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In its letter dated 13 August 1985, Bell indicated that the purpose of the amendments is "to establish a framework within which Telesat Canada can develop and market a greater variety of satellite based services to a broader customer base than is allowed under the existing agreement". Bell also noted that the capping of the transfer payments from Telecom Canada to Telesat would result in increases in Bell's settled revenues and reductions in its revenue requirements from other services.
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In Telecom Orders CRTC 85-534 and 85-535, dated 21 August 1985, the Commission granted interim approval to the proposed amendments and tariff revisions and on 30 August 1985 the Commission issued CRTC Telecom Public Notice 1985-61 calling for comments from interested persons.
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The following parties submitted comments: Canadian Business Telecommunications Alliance (CBTA); CNCP Telecommunications (CNCP); the Director of Investigation and Research, Combines Investigation Act (the Director); edmonton telephones (et); Ministry of Transportation and Communications, Government of Ontario (Ontario); and NorthwesTel Inc. (NorthwesTel). Bell, Telesat and Alberta Government Telephones (AGT) replied to the comments.
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POSITIONS OF INTERVENERS
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CBTA argued that the proposed amendments would be in the public interest. It expressed concern, however, that potential benefits would not be realized since Telesat does not appear to have secured interconnection rights with all of the telephone companies that are members of Telecom Canada. Without such rights, Telesat would be unable to offer interconnected services such as those that CNCP and recently B.C. Rail Ltd. have been authorized to provide. CBTA submitted that final approval should therefore, not be granted to the application until the Commission is satisfied that Telesat, Bell and British Columbia Telephone Company (B.C. Tel) have done their best to obtain interconnection rights for Telesat with all the telephone companies that are members of Telecom Canada.
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CNCP submitted that the Connecting Agreement, as amended, would allow Telesat to offer interconnected services of the type permitted by the Commission in CNCP Telecommunications: Interconnection with Bell Canada, Telecom Decision CRTC 79-11, 17 May 1979 (Decision 79-11). CNCP noted that when it provides interconnected services, it is required to pay surcharges to the telephone companies. It expressed concern that Telesat would be allowed to provide the same services without requiring the payment of such surcharges. CNCP submitted that final approval should be withheld until provision is made for payment of surcharges and that the surcharges should apply when Telesat connects to any telephone company, not just those regulated by the Commission.
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CNCP also expressed concern that there appeared to be nothing in the proposed amendments which would preclude Telesat from offering MTS/WATS.
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The Director supported the proposed amendments but noted that the Connecting Agreement would retain clauses which would restrict Telesat's ability to compete effectively. These clauses relate to the exchange of planning information between Telesat and the other members of Telecom Canada and to restrictions on Telesat's right to provide terrestrial facilities in association with its satellite services.
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et stated that the Connecting Agreement, with or without the proposed amendments, excludes it from the list of telephone companies, set out in Appendix A of the Connecting Agreement, which enjoy certain rights and privileges in their dealings with Telesat. et expressed concern that the amended agreement would continue to confer preferential treatment on Telecom Canada members and on the other carriers listed in Appendix A, thereby discriminating against excluded Canadian carriers. et noted that only Telecom Canada members have unfettered rights to provide terrestrial transmission facilities between an earth station and the premises of a user. et concluded by urging the Commission to deny final approval to the amendments until its own proposals for changes were effected.
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Ontario supported the proposed amendments. It argued, however, that there would be more effective competition in the provision of telecommunications services if Telesat were not a member of Telecom Canada.
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NorthwesTel stated that the proposed amendments would have an immediate and negative impact on NorthwesTel. It argued that the amended agreement is an attempt to impose the same terms and conditions on carriers which are not members of Telecom Canada as on those which are members, despite the fact that the former have not negotiated an agreement and do not benefit accordingly. NorthwesTel's main concern was that the proposed amendments would allow the introduction of interexchange bypass, contrary to the intent of Interexchange Competition and Related Issues, Telecom Decision CRTC 85-19, 29 August 1985. It suggested that the proposed amendments would enable Telesat to offer private line services in NorthwesTel's operating area which could be used to bypass NorthwesTel's own interexchange facilities. Such bypass, NorthwesTel argued, would be accomplished by connecting a customer location in its territory via a satellite channel to a PBX which is situated in the territory of a member of Telecom Canada and connected to the local exchange network. NorthwesTel's facilities could then be bypassed by routing traffic over the satellite channel to the PBX and then through the PBX to the local exchange network. It argued that its distant geographic location and the north to south community of interest of the northern business establishment make NorthwesTel highly vulnerable to revenue loss through satellite bypass.
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NorthwesTel therefore submitted that Telesat should be limited to marketing services directly to end users only in the territories of those telephone companies that are parties to the Connecting Agreement.
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REPLIES TO INTERVENTIONS
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In its response to the interventions, Telesat submitted that the Commission's jurisdiction is limited to approving or withholding approval of agreements filed pursuant to section 320(11) and does not extend to altering various portions of agreements.
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In reply to CBTA's argument that Telesat apparently has not obtained interconnection rights with the telephone companies, Telesat stated that it has had such rights with the members of Telecom Canada since 31 December 1976, when the Connecting Agreement was signed. In its reply, Bell confirmed that Telesat has interconnection rights with Bell, subject to the requirements of any regulatory or governmental bodies.
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Telesat agreed with CNCP that it would be appropriate to make contribution payments for interconnected satellite services. However, it also argued that it would be inappropriate to withhold approval of the proposed amendments until such contribution charges are determined by the appropriate regulators. With respect to the offering of MTS/WATS, Telesat indicated that it would not offer such services without specific approval by the Commission.
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Telesat noted NorthwesTel's concern about the possibility of satellite bypass of NorthwesTel's interexchange facilities and replied that its "private line service agreement will contain a clause prohibiting the use of 'leaky' PBX's to bypass the carrier's network". However, Telesat stated its opposition to NorthwesTel's proposal to restrict the operation of the amended agreement to the areas served by the signatories.
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Regarding et's arguments about preferential treatment, Telesat argued that under the amended agreement all customers of Telesat including carriers are treated equally. Regarding et's concern about the provision of terrestrial facilities between an earth station and a user's premises, Telesat stated that the Connecting Agreement does not prevent et from providing such facilities to earth stations located within et's operating territory. Bell expressed a similar view.
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AGT replied to et, arguing that et had raised objections to clauses of the Connecting Agreement which are not affected by the proposed amendments. A&T argued further that since these clauses have been previously approved by the Governor in Council, such objections are not relevant to this proceeding.
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CONCLUSIONS
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Having considered the submissions of the parties, the Commission has decided that the proposed amendments and the associated revisions to Telesat's tariff should be approved. In this regard, the Commission notes that the proposed amendments would allow all users of satellite services to deal directly with Telesat, an arrangement that the Commission has long supported. Accordingly, the Commission grants final approval to the Memorandum of Agreement amending Schedule A to the Connecting Agreement and to the tariff revisions filed by Telesat under Tariff Notice No. 114.
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With regard to the comments of the Director and Ontario, the Commission considers that the issues raised relate primarily to provisions of Schedule A to the Connecting Agreement which are not the subject of the proposed amendments. In the Commission's view, it is neither necessary nor desirable to broaden the scope of this proceeding to include a review of such provisions. Rather, the Commission is satisfied that the proposed amendments should properly be considered on their own merits. In this regard, the Commission notes that the Connecting Agreement was approved by the Governor in Council in P.C. 1977-3152. It further notes that, notwithstanding their comments, the Director and Ontario supported the proposed amendments.
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The Commission notes that the amendments will allow Telesat to offer interconnected private line services and considers that, in offering such services, it would be appropriate for Telesat to pay contribution charges similar to those which CNCP is required to pay, pursuant to Decision 79-11. In this regard, the Commission also notes that Telesat has stated that it is prepared to pay such charges. The Commission considers, however, that the required tariffs dealing with interconnected services to be provided by Telesat should be dealt with outside the context of this proceeding.
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With respect to NorthwesTel's concerns regarding bypass of its interexchange network, the Commission notes Telesat's commitment to prohibit, by way of its private line service agreement, the use of "leaky" PBX's to bypass the carrier's network. Telesat is hereby directed to file with the Commission for approval its proposed private line service agreement.
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The Commission does not agree with NorthwesTel's position that Telesat should be limited to operate only in those areas of the country served by carriers which are parties to the Connecting Agreement. In the Commission's view, doing so would unduly detract from a principal advantage of satellite based services, namely, their ability to provide communications to widely dispersed and geographically remote areas.
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With regard to the remaining concerns expressed by interveners, the Commission considers that the replies of Telesat and Bell provide satisfactory responses.
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Fernand Bélisle
Secretary General
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