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Telecom Public Notice
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Ottawa, 3 July 1986
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Telecom Public Notice CRTC 1986-42
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TARIFF REVISIONS RELATED TO RESALE AND SHARING
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Background
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On 24 February 1986, the Commission issued CRTC Telecom Public Notice 1986-17 (Public Notice 1986-17), CRTC Telecom Public Notice 1986-18 (Public Notice 1986-18) and CRTC Telecom Public Notice 1986-19 (Public Notice 1986-19). Public Notice 1986-17 invited comment on an application filed under Bell Canada (Bell) Tariff Notice 1896. Public Notice 1986-18 invited comment on applications filed under British Columbia Telephone Company (B.C. Tel) Tariff Notices 1234 and 1239. Public Notice 1986-19 invited comment on applications filed under the following Tariff Notices: CNCP Telecommunications (CNCP) Tariff Notice 325; NorthwesTel Inc. Tariff Notice 209; Terra Nova Telecommunications Inc. Tariff Notice 327; and Telesat Canada (Telesat) Tariff Notice 122.
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These tariff revisions were filed by the federally regulated carriers pursuant to Interexchange Competition and Related Issues, Telecom Decision CRTC 85-19, 29 August 1985 (Decision 85-19) to introduce resale and sharing to provide all services other than message toll service (MTS), wide area telephone service (WATS) and primary exchange voice service. The tariff revisions also contained proposals to permit sharing to provide primary exchange service and the sharing of MTS to provide MTS.
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The Commission also requested comments on proposed rate revisions for competitive network services included in the tariff notices filed by Bell and B.C. Tel. These rate revisions had been filed in response to the Commission's invitation to the carriers, in Decision 85-19, to file rate revisions which they believed to be necessary prior to the introduction of resale and sharing. The Commission had directed that any such rate revisions should be designed to have no effect on the net revenue of the competitive network services category.
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The following parties filed comments in response to these public notices: C3 Communications; Cam-Net Communications Inc. (Cam-Net); Canada Systems Group (CSG); Canadian Business Telecommunications Alliance, Association of Competitive Telecommunications Suppliers, Canadian Association of Data processing Organizations, Canadian Bankers' Association and Canadian Business Equipment Manufacturers Association, (collectively, CBTA et al); Canadian Manufacturers' Association; Canadian Satellite Communications Inc. (Cancom); Cantel Inc. (Cantel); CNCP; Mr. Carlyle Gilmour; and LDA Long Distance Access Corporation.
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Rate Revisions for Competitive Network Services
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Bell and B.C. Tel proposed rate revisions to competitive network services for their intra-company tariffs and their Trans-Canada tariffs. For interexchange voice grade (IXVG) channels, they proposed rate increases for short-haul circuits and rate decreases for long-haul circuits. For Telpak services, they proposed rate changes having the effect of reducing the volume discounts relative to IXVG channel rates. With regard to Dataroute service, Bell and B.C. Tel proposed rates designed to maintain the existing rate relationships between Dataroute service and analogue services.
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With regard to Canada-U.S. private line channels, B.C. Tel proposed that a minimum charge based on a rate distance of 27 miles should apply to the Canadian portion of these channels.
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Several parties argued that Bell and B.C. Tel had not filed supporting cost information and that, without it, the Commission should not approve these proposed rates. Bell replied that information filed during the proceeding leading to Decision 85-19 showed that transmission costs decline with distance and provided information on average IXVG channel costs over various mileage bands in further support of its position. In support of its proposed reductions in Telpak discounts, Bell again referred to cost information filed during the proceeding leading to Decision 85-19.
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With regard to B.C. Tel's proposed minimum rate distance of 27 miles for the Canadian portion of Canada-U.S. IXVG and Telpak channels, Cam-Net argued that variance between airline distance and route distance is inherent to route-average pricing and it pointed out that B.C. Tel had not proposed any change in its intra-company private line schedule to reflect such variance. In reply, B.C. Tel argued that the proposed minimum rate distance of 27 miles represents a cost-based approach which reflects the fact that route diversity of Canada-U.S. circuits is much more limited than that of intra-company circuits.
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With regard to the filing of tariff revisions for competitive network services, the Commission indicated in Decision 85-19 that present rate differentials between individual services within the competitive network services category may not be sufficiently close to the associated cost differentials. The Commission expressed concern that introducing resale and sharing in such a context would encourage uneconomic entry into the market and place the carriers at a competitive disadvantage. As stated above, the Commission, in its invitation to file tariff revisions for competitive network services, directed that any such rate revisions should have no effect on the overall net revenue of the competitive network services category.
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The Commission is satisfied that the rate revisions proposed in Bell Tariff Notice 1896 and B.C. Tel Tariff Notice 1239 are consistent with the intent expressed in Decision 85-19. However, the Commission considers B.C. Tel's proposed minimum rate distance of 27 miles to be a selective application of route distance rating. Accordingly, with the exception of this particular aspect of B.C. Tel's proposed rates, Bell's and B.C. Tel's proposed rates are approved. These rates are to come into effect coincident with the effective date of the tariff revisions permitting resale and sharing.
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CNCP, rather than filing rate revisions, requested that it be permitted to file rates 60 days after Bell and B.C. Tel had filed theirs. CNCP stated that it needed to take account of Bell's and B.C. Tel's rate proposals in designing its own. The Commission granted this request on 10 January 1986. CNCP responded by letter, dated 18 March 1986, that it intends to match the proposed Bell and B.C. Tel rates, subject to the 5% and 10% discounts for interconnected private line rates which are permitted by CNCP Telecommunications - Rates for the Provision of Interconnected Private Line Voice Services, Telecom Decision CRTC 83-10, 26 July 1983 (Decision 83-10).
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In their submissions, Bell and B.C. Tel stated that, with the advent of resale and sharing, they are even more opposed to the 5% and 10% discounts which CNCP is permitted to offer pursuant to Decision 83-10. They argued that resellers would perceive no difference in the value of service because the resellers will be able to offer only non MTS/WATS services and only within and among the operating territories of the federally regulated carriers. Bell and B.C. Tel submitted that, therefore, there is no basis for discounts which would only serve to put them at a competitive disadvantage in the resale market.
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Cam-Net and CBTA et al argued that differences in value of service remain and that therefore the discounts are still justified.
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Based on the record of this proceeding, the Commission is satisfied that the considerations which led it to establish the 5% and 10% discounts in Decision 83-10 continue to be applicable with regard to the interconnected private line market.
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Tariff Revisions to Permit Resale and Sharing
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In Public Notices 1986-17, 1986-18 and 1986-19, the Commission stated that the carriers' proposed tariff revisions to permit resale and sharing to provide services other than MTS/WATS and primary exchange voice service could result in varying interpretations of the resale and sharing permitted by Decision 85-19.
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In calling for comment on these filings, the Commission indicated at page 7 of Public Notice 1986-17 that a consistent interpretation of resale and sharing permitted by Decision 85-19 would be desirable and it noted the current restrictions on the interconnection of CNCP's facilities with the public switched telephone network which prevent CNCP from offering MTS/WATS.
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Parties generally agreed that a consistent interpretation of resale and sharing permitted by Decision 85-19 should be reflected in the carriers' tariffs. There was disagreement, however, as to whether resale and sharing restrictions should be facilities-based or service-based. CNCP argued that any restrictions necessary to prevent competition in the provision of MTS/WATS should apply equally to CNCP and to resellers and sharers.
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In its reply, Bell suggested specific wording for resale and sharing restrictions, utilizing facilities- based restrictions as described in CNCP Telecommunications: Interconnection with Bell Canada, Telecom Decision CRTC 79-11, 17 May 1979 (Decision 79-11) with modifications for resale and sharing. In letters dated 20 May 1986, CSG and CBTA et al requested an opportunity to file comments on these restrictions.
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Having considered the submissions of all parties, the Commission is satisfied that, in order to provide a clear framework for the early introduction of resale and sharing in the non MTS/WATS market, it is desirable for the resale and sharing restrictions to be facilities-based. Further, the Commission considers that restrictions of the type set out in Bell's reply would be responsive to the Commission's desire to introduce resale and sharing in the non MTS/WATS market on a consistent basis for all the carriers. The Commission has decided that examination of such facilities-based restrictions by interested persons, as requested by CSG and CBTA et al, can be best achieved by first requiring the telephone companies to file specific tariff provisions which will then be the subject of comments.
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Accordingly, the Commission directs the carriers to file proposed tariffs to implement facilities-based restrictions for resale and sharing using the restrictions described in Decision 79-11 suitably modified for resellers and sharers. The Commission considers that this should permit, in accordance with Decision 85-19, resale and sharing to provide interconnected and non-interconnected data services, non-interconnected voice services and certain interconnected voice services. Interested persons will be afforded an opportunity to comment on the proposed tariffs in accordance with the procedure set out below.
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In its Tariff Notice 325, CNCP proposed tariff revisions for resale and sharing, but only regarding services connecting points in British Columbia, Ontario and Quebec. It argued that it would be at a disadvantage if it allowed resale and sharing in the Prairie provinces and the Atlantic provinces while the provincially regulated telephone companies did not.
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With regard to CNCP's proposal, CBTA et al argued that there is no reason to limit the resale and sharing benefits described in Decision 85-19 to certain territories where CNCP faces competition from federally regulated carriers.
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The Commission notes that CNCP is a national carrier whose operating territory includes most of the country. In Decision 85-19, when the Commission concluded that resale and sharing should be permitted in the territories of the federally regulated carriers, it did not provide for restrictions with regard to any federally regulated carrier's territory. Based on the record of this proceeding, the Commission has not been pursuaded that CNCP should be permitted to so limit such resale and sharing. Accordingly, CNCP's proposed tariff revisions are to permit resale and sharing of its services throughout its operating territory.
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Sharing of Centrex
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In its Tariff Notice 1239, B.C. Tel proposed tariff revisions allowing the sharing of centrex but it included a requirement that in any given sharing arrangement, each sharer should be obliged to pay the centrex line bill minimum. Bell did not propose such a requirement.
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CBTA et al stated that, because the centrex station line rates are lower than individual business line rates, there is every incentive for users to obtain centrex station lines instead of individual business lines if this can be arranged. CBTA et al stated further that allowing the centrex station line bill minimum to apply to sharers as a group, rather than to each sharer within a group, will have a definite impact on the market for PBX's with which centrex competes.
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CBTA et al proposed that there be a proceeding dealing specifically with centrex to determine the various factors which should be considered in connection with the sharing and resale of centrex.
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Regarding B.C. Tel's proposed requirement that, within a group of centrex sharers, each sharer pay the bill minimum, the Commission does not find, based on the record of this proceeding, that any additional burden would be placed on B.C. Tel that would justify the application of the bill minimum in this manner. With regard to the effect of centrex sharing on the PBX market, the Commission notes that, since it regulates centrex rates, it can ensure that the bill minimum remains appropriate and that centrex rates are just and reasonable.
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Based on the foregoing, the Commission has concluded that it would be more appropriate to consider concerns related to centrex in the context of general rate proceedings and, accordingly, denies CBTA et al's proposal. In addition, the Commission denies B.C. Tel's proposed bill minimum for each centrex sharer. B.C. Tel's proposed tariff revisions to permit sharing are to be amended accordingly.
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Joint Sharing Arrangements
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In its Tariff Notice 122, Telesat submitted its proposed tariff revisions for resale and sharing. It also proposed that sharers be required to submit a formal sharing arrangement to Telesat and that the parties to a sharing arrangement be jointly and severally liable.
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Cancom argued that these requirements should be applicable only when each sharer wants to be billed by Telesat but not in cases where one sharer is appointed to represent others in dealing with, and being billed by, Telesat.
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Telesat replied that its proposed requirements are needed to ensure that, if a sharer in a given arrangement defaults, Telesat can recover from the others without unnecessary litigation.
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The Commission is of the view that this issue may be relevant to other carriers where there are joint sharing arrangements under which a carrier bills each sharer directly. Accordingly, the Commission has decided to invite comment on this issue in accordance with the procedure set out below.
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Resale and Sharing to Provide WATS
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In their submissions, Cam-Net and CBTA et al suggested that the Commission reconsider resale and sharing to provide WATS, which it had not permitted in Decision 85-19. CBTA et al argued that there is no service or combination of services, other than WATS, through which WATS equivalent services could be provided, and that, therefore, only the resale and sharing of WATS could provide WATS. CBTA et al argued further that there is little incentive to resell and share WATS and that therefore there would be minimal reduction in contribution. Bell, in reply, submitted that CBTA et al's comments are not relevant to the current proceeding.
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In Decision 85-19, the Commission concluded that, under current conditions, WATS resale could put upward pressure on local rates through erosion of MTS/WATS revenues. The Commission has not been persuaded that, in its implementation of Decision 85-19, there should be any change in the prohibition against resale and sharing to provide WATS.
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Resale of MTS to provide MTS
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Cam-Net and CBTA et al submitted that resale of MTS to provide MTS should be permitted. CBTA et al pointed out that hotels, motels, hospitals and universities resell MTS now, pursuant to agreements with telephone companies. Parties pointed out that this specific form of resale would not result in any loss of contribution and submitted that, therefore, there is no reason to prohibit it. In its reply, Bell stated that it has no objection.
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The Commission agrees that no MTS revenue erosion would result from the resale of MTS to provide MTS. It notes that the sharing of MTS to provide MTS is permitted by Decision 85-19.
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The Commission notes the relationship of this issue with the issue of resale to provide primary exchange voice services. The Commission has concluded, therefore, that it will deal with this issue in the context of the proceeding on resale to provide primary exchange voice services commenced by CRTC Telecom Public Notice 1986-8. The Commission expects to issue its decision in that proceeding later this year.
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Procedure
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The procedure to be followed in connection with this proceeding is as follows:
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1. Pursuant to the Commission's directives set out above, the carriers are directed to file
proposed tariff revisions providing for resale and sharing restrictions to permit:
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i) sharing to provide primary exchange voice service;
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ii) sharing of MTS to provide MTS; and
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iii) resale and sharing to provide all services other than MTS/WATS and primary exchange voice service. The carriers are to file these tariff revisions, and serve copies on the other carriers and on all
other parties who submitted comments in response to Public Notices 1986-17, 1986-18 and 1986-19, by 18 July 1986.
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2. The carriers are invited to file submissions on the appropriateness of a joint sharing
agreement to be applicable when a carrier bills each sharer of a service which is provided by
that carrier, with copies to the other carriers and to all parties who submitted comments in
response to Public Notices 1986-17, 1986-18 and 1986-19, by 18 July 1986.
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3. Persons wishing to comment on the carriers' proposed tariff revisions and on their submissions
in respect of the appropriateness of a joint sharing agreement, may do so by writing to Mr.
Fernand Bélisle, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, with copies to all the
carriers at the addresses shown below by 18 August 1986.
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4. Replies by the carriers shall be filed by 2 September 1986.
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5. The carriers' submissions may be examined at their respective business offices or at the
offices of the CRTC, Room 561, Central Building, Les Terrasses de la Chaudière, 1
Promenade du Portage, Hull, Quebec; or Complex Guy Favreau, East Tower, 200 Dorchester
Blvd. West, 6th floor, Montreal, Quebec; or 700 West Georgia Street, Suite 1130, Vancouver,
British Columbia. A copy of each carrier's submission may be obtained by any person upon
request directed to the carrier at the appropriate address:
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Mr. E.E. Saunders, Q.C.
c/o Mr. Peter J. Knowlton
Assistant General Counsel
Bell Canada 25 Eddy Street, 4th floor
Hull, Quebec
J8Y 6N4
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Mr. K.D.A. Morrison
Secretary
British Columbia Telephone Company
3777 Kingsway
Burnaby, British Columbia
V5H 3Z7
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Mr. A.G. Duncan Director
Regulatory Matters - General
CNCP Telecommunications
Suite 1907, West Tower
3300 Bloor Street West
Toronto, Ontario
M8X 2W9
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Mr. J.M. Williamson
Director Marketing
NorthwesTel Inc.
301 Lambert Street
P.O. Bag 2727
Whitehorse, Yukon
Y1A 4Y4
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Mr. T. Moss
Director, Regulatory Matters and Corporate Policy
Telesat Canada
333 River Road
14th floor, Tower "A"
Ottawa, Ontario
K1L 8B9
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Mr. B.A. Fulcher
Director Marketing
Terra Nova Telecommunications Inc.
3 Terra Nova Drive
P.O. Box 3000
Gander, Newfoundland
A1V 2K6
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Fernand Bélisle
Secretary General
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