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Ottawa, 31 July 1987
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Telecom Decision CRTC 87-10
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TERRA NOVA TELECOMMUNICATIONS INC. vs. BELL CANADA AND TELESAT CANADA
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I INTRODUCTION
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On 3 November 1986, Terra Nova Telecommunications Inc. (Terra Nova) filed with the Commission an application seeking relief against Telesat Canada (Telesat) and Bell Canada (Bell) under Part VII of the CRTC Telecommunications Rules of Procedure pursuant to the Railway Act, the National Transportation Act and the Canadian Radio-Television and Telecommunications Act. In its application, Terra Nova applied for orders
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a) directing Telesat to disconnect satellite facilities at the Hope Brook mine site near Grand Bruit,Newfoundland
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b) directing Bell to disconnect facilities at the Hanover, Ontario telephone exchange at which two telephone lines are linked via satellite to the Hope Brook mine site in Newfoundland;
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c) directing Telesat not to provide interconnected private line satellite services before obtaining tariff approval; and
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d) directing Telesat to include in its interconnected private line service tariff filing provisions to prohibit "off-ending" to the public switched telephone network (PSTN) at either end of the service through the use of "leaky" PBXs.
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Answers to the Terra Nova application were filed by Telesat and Bell (collectively, the respondents) on 3 December 1986. Terra Nova filed its reply on 12 December 1986.
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II THE TERRA NOVA APPLICATION
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In its application, Terra Nova stated that Telesat has provided a satellite link from the Hope Brook mine site to Allan Park, Ontario where it is connected to Bell's PSTN. Terra Nova stated that the service was provided commencing on or about 23 September 1986.
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Terra Nova referred to Telesat Canada and Bell Canada - Amendments to Connecting Agreement Between Telesat Canada and Telecom Canada, Telecom Decision CRTC 86-9, 8 May 1986 (Decision 86-9) in which the Commission noted that Telesat had committed itself to prohibit, by way of its private line service agreement, the use of "leaky" PBXs to bypass the PSTN of a terrestrial carrier. Terra Nova submitted that the satellite service provided to the Hope Brook mine site bypasses Terra Nova's PSTN and that therefore Telesat has not honoured its commitment. In Terra Nova's submission, this bypass of its PSTN will lead to a lower contribution from Message Toll Service (MTS) revenues to the cost of local telephone service, and, as a result, Terra Nova will be required to seek increases to its local telephone service rates to offset the loss of contribution. Terra Nova argued that, in these circumstances, it would not be in the public interest for the Commission to permit such services to be offered by Bell and Telesat.
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Terra Nova also pointed out that neither Bell nor Telesat had filed the appropriate tariffs for approval of the Commission prior to offering the service.
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III THE RESPONDENTS' ANSWERS
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Bell answered the application stating that its involvement in the service is limited to the provision of two Foreign Exchange (FX) lines and that, when Telesat requested these facilities, Bell was unaware that they were to be used to provide interconnected private line service. Bell stated that it had provided the facilities pursuant to the existing tariffs for FX service.
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Bell also noted that Telesat's right to interconnect with Bell had been addressed in Decision 86-9 and that the appropriate interconnection tariffs were subsequently filed pursuant to SED Systems Inc. vs. Telesat Canada, Bell Canada, British Columbia Telephone Company, NorthwesTel Inc. and Terra Nova Telecommunications Inc., Telecom Decision CRTC 86-21, 28 November 1986 (Decision 86-21).
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(The Commission notes that the tariffs providing for the interconnection of Telesat and Bell were granted interim approval on 5 February 1987.)
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Telesat, in its answer, stated that the circuits in question are only interconnected to Bell's PSTN and that there is no such interconnection in Newfoundland. Telesat argued that the service is in accord with Decision 86-9 and that the service does not constitute bypass of MTS facilities in the sense that Terra Nova alleges.
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Telesat submitted that Terra Nova's reference to "leaky" PBXs is incorrect in that a "leaky" PBX in this case would be one located at the Hope Brook mine site which would permit individuals in Bell's serving territory to use private lines to call the Hope Brook PBX and, in contravention of Terra Nova's tariffs, to be interconnected through this PBX to Terra Nova's PSTN. This type of arrangement is not in place at Hope Brook, according to Telesat.
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With respect to the rates being charged, Telesat stated that the customer had requested service on an urgent basis and that the appropriate tariffs would be filed shortly.
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IV THE APPLICANT'S REPLY
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In reply, Terra Nova noted that both Bell and Telesat had admitted to offering service without an approved tariff and that, that fact alone is grounds for the disconnection of Bell's and Telesat's facilities.
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Terra Nova also took issue with the respondents' claim that they were acting in accordance with the Commission's intent in Decision 86-9. Terra Nova argued that previous interconnection decisions apply to only two parties and that if those decisions were to apply in situations where there were three parties, one of which is not a party to the agreement, that party would always be at a competitive disadvantage. Terra Nova argued that this is such an instance.
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Terra Nova pointed out that it serves mainly rural and remote areas, and that it is therefore particularly vulnerable to competition from Telesat. While supporting competition, Terra Nova stated its belief that it should be placed on an equal footing in order to compete. Under the existing conditions where there is neither an interconnection agreement nor negotiated compensation for revenue loss, Terra Nova submitted that it is at a competitive disadvantage which is not in the public interest.
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V CONCLUSIONS
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A. The proposed service
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1. Telesat's area of operation
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In Decision 86-9, the Commission rejected a submission by Northwestel Inc. that Telesat should be limited to operating only in those areas of the country served by carriers that are members of Telecom Canada. In approving amendments to the Connecting Agreement between Telesat and Telecom Canada, the Commission indicated that to restrict Telesat in this manner 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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The Commission remains of the view that it is in the public interest that the unique advantages offered by satellite communications be available throughout Canada and especially in the more remote areas of the country.
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2. Bypass
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It is Terra Nova's position that the service being provided by Telesat bypasses Terra Nova's MTS service and should therefore be prohibited by the Commission. In the Commission's view, a finding that the service offered by Telesat bypasses the service provided by Terra Nova does not, by itself, provide a basis for prohibiting the service. The issue to be addressed in this case is whether it is in the public interest for the Telesat service to be offered.
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As stated above, the Commission has concluded that it is in the public interest for Telesat to be able to offer services throughout Canada. It is the Commission's view, therefore, that it is appropriate that Telesat be permitted to offer the service to the Hope Brook mine that is the subject of Terra Nova's application.
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3. Compensation
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In previous decisions where the Commission has allowed carriers to interconnect with telephone companies for the purpose of providing competitive service, the competitor has been required to pay interconnection surcharges to compensate the telephone company for lost contribution. In this case, however, since Telesat is not seeking interconnection facilities from Terra Nova, and since the Commission has concluded that Telesat should be able to provide services anywhere in Canada, the Commission considers that compensation charges to Terra Nova are not appropriate.
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B. Offering of Service without an approved tariff
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The Commission is concerned that both Bell and Telesat offered service prior to the approval of the tolls by the Commission. The record of this proceeding indicates that Telesat did not negotiate the appropriate interconnection agreement with Bell and did not even inform Bell that it was planning to offer an interconnected service for which an inter-carrier agreement would be necessary. Bell might well have anticipated the need for such an agreement, however, since the most likely reason for Telesat to order an FX line would be for use in offering interconnected service.
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Bell and Telesat are reminded that the Railway Act clearly specifies that tolls have no legal status prior to their approval by the Commission. The Commission understands that there are occasions where operational considerations require an accelerated approval process and, to this end, the Commission has, where appropriate, used the interim approval process. In the present situation, every effort should have been made to obtain approval of the appropriate tariffs prior to service being offered. The Commission expects that Bell and Telesat will take whatever steps are necessary with a view to avoiding a recurrence of this type of situation.
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VI DISPOSITION OF THE APPLICATION
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In light of the above, the application submitted by Terra Nova is denied.
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Fernand Bélisle
Secretary General
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