ARCHIVED -  Telecom Decision CRTC 89-5

Telecom Decision

Ottawa, 1 May 1989

Telecom Decision CRTC 89-5

PARADYNE CANADA LTD. - ATTACHMENT OF SUBSCRIBER-PROVIDED TERMINAL EQUIPMENT TO DATAROUTE SERVICE

I INTRODUCTION

On 25 April 1988, the Commission received an application from Paradyne Canada Ltd. (Paradyne) requesting an order directing Bell Canada (Bell) to unbundle the rates for Dataroute Access Arrangements in order to permit the attachment of subscriber-provided terminal equipment to the Dataroute Service. Bell answered Paradyne's application on 26 May 1988; Paradyne replied on 6 June 1988.

On 27 June 1988, the Commission issued CRTC Telecom Public Notice 1988-28, in which it called for comment on Paradyne's application. The Commission also joined British Columbia Telephone Company (B.C. Tel) as a party to the proceeding. In CRTC Telecom Public Notice 1988-35, 28 July 1988, the Commission revised the procedure applicable to the proceeding in order to permit an exchange of interrogatories between Paradyne and the telephone companies.

Several parties submitted comments concerning Paradyne's application, including: Amdahl Communications Inc. (Amdahl); ACT Computer Services Ltd.; Association of Competitive Telecommunications Suppliers (ACTS); Province of British Columbia; British Columbia Systems Corporation; Canadian Business Telecommunications Alliance (CBTA); Dataline Inc.; The Depository and Clearing Corporation; Gandalf Data Limited; Glengarry Transport Limited; Hamilton Computers; IBM Canada Ltd. (IBM); Independent Data Communications Manufacturers Association, Inc. (IDCMA); New Brunswick Telephone Company, Limited (N.B. Tel); Newfoundland Telephone (Newfoundland Tel); Government of Ontario, Ministry of Culture and Communications (Ontario); Ontario Hydro; Prudential Assurance Co. Ltd.; Government of Saskatchewan; R.L. Crain Inc.; and Telecomsyst Services Inc.

II BACKGROUND

Dataroute Service has been offered by Telecom Canada since 1973. It is a private line, point-to-point, digital data service that provides for a variety of data transmission speeds. With digital services such as Dataroute, the customer-premises equipment consists of two components: (1) a data service unit, which codes and decodes the customer's data, and (2) a channel service unit, which terminates the transmission channel and interacts with telephone company equipment to perform diagnostic tests concerning network performance. Generally, these two components are combined in one piece of equipment, referred to as Digital Channel Terminating Equipment (DCTE).

III PARADYNE'S APPLICATION

In its application, Paradyne requested orders that would require Bell to (1) unbundle the rates for the four-wire channel and the DCTE that form Dataroute Access Arrangement; and (2) allow the attachment of subscriber-provided DCTE to Bell's Dataroute Service.

Paradyne submitted that the present tariff providing for Dataroute Access Arrangements is contrary to section 321(2) (now section 340(2)) of the Railway Act in that it confers on Bell an undue preference or advantage in the provision of DCTE, and discriminates against Paradyne and other suppliers and manufacturers of DCTE and puts them at a disadvantage relative to Bell and to Bell's supplier, Amdahl.

Paradyne submitted that Attachment of Subscriber-Provided Terminal Equipment, Telecom Decision CRTC 82-14, 23 November 1982, should be used as a basis for guidelines governing Bell's participation in the Dataroute terminal equipment market. Paradyne also suggested that Terminal Attachment Program Advisory Committee (TAPAC) Certification Standard CS-03 and the associated certification procedures be amended as soon as possible to include DCTE.

Paradyne was of the view that a liberalized DCTE attachment policy would lead to lower prices, to enhanced choice with respect to equipment and sources of supply, and to increased flexibility and efficiency, particularly for business subscribers.

IV BELL'S ANSWER

In its answer of 26 May 1988, Bell submitted that single-supplier accountability for end-to-end installation, testing and maintenance has been a fundamental feature of the Dataroute Service and has contributed to its success.

In response to Paradyne's submission that the Dataroute Access Arrangements confer an undue preference or advantage on Bell, the latter noted that the tariff had been approved as just and reasonable by the Commission. The company submitted that the current Dataroute Access Arrangements are still appropriate and conform to all requirements of the Railway Act. Bell submitted that Paradyne had failed to establish that the orders sought are justified in the public interest.

The company noted that network monitoring and testing capabilities are inherent in DCTE located on a Dataroute customer's premises. The company noted further that such equipment is presently classified as network equipment and that its classification as such has been addressed by the Commission in previous proceedings.

Specifically, Bell noted that, in Bell Canada and British Columbia Telephone Company - Implementation of Decision Permitting Attachment of Subscriber-Provided Terminal Equipment, Telecom Decision CRTC 84-11, 30 March 1984, it had been directed to advise the Commission of those services in which terminal equipment was bundled with access to transmission service. In response, the company filed Tariff Notice 1247, in which it stated that network equipment located on customer premises and associated with the data access arrangements for services such as Dataroute had not been considered terminal equipment. Bell stated that the Commission had approved Tariff Notice 1247 as filed.

Bell also noted that, in Participation of Bell Canada and British Columbia Telephone Company in the Multiline and Data Terminal EquiPment Market, Telecom Decision CRTC 86-5, 20 March 1986 (Decision 86-5), the Commission had determined that, at the time and for the purposes of the decision, the term data terminal equipment should be considered to refer to equipment on a customer's premises that is not integral to the operation of the channel provided by the carrier.

The company submitted that there have been no developments or changes that should alter the classification of DCTE as network equipment.

Bell noted that, when Dataroute was introduced, there was a lack of industry standards among suppliers and manufacturers. The company was therefore obliged to select a standard signalling scheme, and adopted a scheme developed by the corporate predecessor of Amdahl. Bell noted that, in order to meet the company's requirements and those of its customers, DCTE has evolved into a number of different devices. Bell stated that various types of local access facilities are used with Dataroute Service. As a result, six different types of DCTE have been developed and are in use.

Bell submitted that, when DCTE is regarded as network equipment and supplied by the carriers, the carriers are free to utilize multiple technologies in different regions of their operating territories or to vary network channel characteristics and technologies in response to new developments. In this way, the carriers can provide the most efficient and cost-effective service and any change in local access technology is transparent to the customer.

Bell stated that DCTE performs two distinct functions: (1) diagnostic and testing functions for the network; and (2) digital data set functions for the customer. Bell submitted that, if Paradyne's application was granted, these two functions would have to be performed by two separate units, one supplied by the carrier and the other by the customer. Bell submitted that the carrier-supplied device would have to be available in a variety of different models in order to be compatible with the variety of local access technologies used by it and other Telecom Canada members. Bell stated that, at present, no such units have been developed. Bell indicated that, with present technology, there is no single unit that would perform both functions, as well as be compatible with all of the various local access technologies. Bell was therefore of the view that Paradyne's proposal was not technically feasible.

The company submitted further that, if the technical problems were resolved, it would nonetheless be extremely costly to make all the changes necessary to implement Paradyne's proposal. Bell submitted that it would not make sense to require Dataroute customers to bear these additional costs in the absence of any improvement in the nature or quality of the service they receive. In conclusion, Bell submitted that Paradyne had failed to provide any evidence that the changes it proposed would provide any material benefits to Dataroute users.

V SUBMISSIONS OF INTERVENERS

A. Supporting Interveners

Supporting interveners submitted that a number of benefits would arise from the competitive provisioning of DCTE, including increased choice, lower costs, technical innovation, increased flexibility for users, increased access to current technology and more efficient use of network resources.

CBTA submitted that the benefits of customer ownership of terminal equipment are well-established, and that the unbundling and competitive supply of DCTE would make these benefits available to Dataroute customers. CBTA submitted that the Commission's finding in Decision 86-5 that Dataroute terminals are integral to the network reflected the Commission's view at that time, and that the Commission had recognized that it might be necessary in future to adjust the definition of terminal equipment.

CBTA suggested that Bell's central office equipment be modified to accept signals from equipment other than Amdahl's, or that Bell be required to publish the Amdahl signalling protocol. CBTA submitted that Challenge Communications Ltd. v. Bell Canada, Telecom Decision CRTC 77-16, 23 December 1977, is a precedent for the latter option. CBTA argued that difficulties arising from the variety of access technologies used by Bell could be alleviated if Bell would simply advise the customer of the specific access technology in place.

IDCMA noted that, in the United States, the Federal Communications Commission (FCC) had dealt with a similar application and had decided to permit customer ownership of customer-premises equipment associated with Digital Dataphone Service (DDS), the American equivalent of Dataroute. IDCMA stated that, in the American proceeding, the Bell System had advanced the same arguments put forward by the Canadian carriers. The FCC had rejected those arguments. IDCMA submitted that customer ownership of DCTE had not caused network harm, but rather had resulted in significant benefits to users.

Ontario Hydro submitted that the carriers had not justified their continued exclusive supply of DCTE. Ontario Hydro noted that the arguments advanced by the carriers were essentially the same as those advanced in previous terminal attachment proceedings. Ontario Hydro was of the view that similar arguments would be put forward in future proceedings. It suggested that the Commission render a far-reaching decision in this proceeding, in order to settle the issue of the ownership of customer-premises equipment. Ontario Hydro also contended that denial of the application would establish a dangerous precedent for new technologies, such as Integrated Services Digital Network (ISDN).

ACTS argued that Bell should not be permitted to "hide" behind proprietary specifications as a justification for discriminatory tariffs.

Ontario submitted that it is important to prevent the carriers from offering services that bundle together monopoly and competitive components. Ontario noted that, in the United States, network terminating equipment is competitively supplied. Ontario contended that the competitive supply of such equipment is not inconsistent with the proper maintenance of the network Ontario was therefore of the view that Dataroute terminal equipment should be supplied competitively, subject to appropriate certification standards.

IBM was of the view that the present Dataroute tariffs confer an undue preference and advantage on Bell and B.C. Tel, as well as on their exclusive supplier of DCTE. IBM pointed out that DCTE now manufactured can provide important network management and reconfiguration capabilities that can be tailored to individual customer needs only in a competitive environment. IBM submitted that the network functions performed by DCTE are relatively simple and could easily be performed by competitively supplied equipment.

IBM did not agree that approval of the application would lead to a number of technical problems. IBM submitted that, with current technology, four different models of DCTE could accommodate the six distinct local access technologies identified by Bell. IBM indicated that some of these models use non-proprietary technologies.

B. Opposing Interveners

Amdahl pointed out that its predecessor had designed the signalling scheme used in the Dataroute network. Amdahl was not prepared to provide access to its intellectual property without significant financial benefit to itself. Amdahl submitted that comparisons between the Canadian and American markets are inappropriate. Amdahl noted that U.S. carriers are not obliged to provide end-to-end digital service that includes diagnostic testing to the business machine interface; rather, those functions are left to the subscriber. In Canada, the Dataroute network provides diagnostic testing up to and including the DCTE. Amdahl submitted that these functions improve network availability and operational efficiency. On the basis of this and other differences, Amdahl disputed the assumption that Canadian Dataroute customers would benefit from unbundling in the same way that American DDS customers had benefited.

Newfoundland Tel and N.B. Tel presented arguments similar to those of Bell in support of the carriers' continued exclusive provisioning of DCTE. They submitted that approval of the application would not be in the public interest. The Government of Saskatchewan also opposed Paradyne's application for similar reasons.

Glengarry Transport, R.L. Crain and Hamilton Computer expressed concern over Paradyne's application. They were of the view that approval of the application could lead to service problems. They argued that the service now provided is reliable and well-managed and that its unbundling could lead to longer down-time and to repair problems, particularly if Telecom Canada could no longer provide end-to-end service.

VI ARGUMENT

A. Bell

In final argument, Bell again submitted that the current Dataroute Access Arrangements contained in its tariff and approved by the Commission continue to be appropriate. Bell repeated the view that Paradyne had failed to establish that the orders sought are justified in the public interest.

Bell contended that, for several reasons, the issues raised by Paradyne's application differ from the issues regarding the attachment of terminal equipment to the public switched telephone network (PSTN). First, Bell submitted that Dataroute is a competitive service, competing directly with analogue interexchange facilities used in conjunction with modems, as well as with Telesat Canada's Anikom 200 and 500 Services, and with CNCP's Infodat Service.

Second, Bell noted that the North American PSTN has for many years been accessed in a standard fashion. However, Dataroute was constructed with unique proprietary components developed and funded by an unaffiliated supplier, Amdahl's corporate predecessor. The signalling scheme developed by Amdahl's predecessor became the standard for the Dataroute network. Bell stated that this proprietary signalling scheme is used exclusively by Amdahl in all of its multiplexer and access products, and not just in those products used in Dataroute. Bell submitted that it is not at liberty to publish or release Amdahl's proprietary specifications.

Third, Bell noted that DCTE, unlike terminal equipment attached to the PSTN, is integral to the Dataroute network. Bell stated that there is an interdependency between DCTE and the multiplexers in the Dataroute network with respect to alarms, testing, control code transmission and fault diagnostics. The company stated that DCTE provides transparent connectivity between business machines and extends network testing capabilities to the customer's premises.

Fourth, Bell indicated that several different types of local access facilities are used in the provision of Dataroute Service. As a result, the Dataroute network employs six different types of DCTE. The PSTN, on the other hand, uses only one local access arrangement that operates with all PSTN terminal equipment.

Bell submitted that, because of the special and unique characteristics of Dataroute Service, customer ownership of DCTE would result in a number of problems and costs. Bell noted two approaches that would permit customer ownership of DCTE without the publication or licensing of Amdahl's signalling scheme. First, a public protocol could be developed for use with customer-provided DCTE. A separate device would be required on the customer's premises to translate from the public protocol to the proprietary protocol used by the network. A second approach would involve translation of the public protocol by means of a device located at the central office. Bell argued that, while technically feasible, either of these approaches would be extremely costly and would involve extensive modification of company equipment. Bell submitted that the additional costs would ultimately be borne by Dataroute customers.

Bell contended that the circumstances of this case differ substantially from those of the Challenge Communications case. Bell noted that Dataroute is not a new service, but rather a mature service upon which many customers rely. In addition, the specification in question relates to a competitive service, and not to the PSTN. Furthermore, the Dataroute specification was not designed by Bell, but rather by an unaffiliated supplier that uses the specification in all of its multiplexer and access products. Bell was of the view that it would be inappropriate for the Commission to order disclosure of the specification. Bell also submitted that the Commission lacks the authority to order the release of Amdahl's intellectual property.

Bell stated that, because it employs six different technologies in its access loop plant, customer ownership of DCTE would require the design of different DCTE units. The company's choice of access loop would no longer be transparent to the user, and additional coordination between customer and company would be required This would lengthen the provisioning process.

Bell submitted that any possible benefits flowing from customer ownership of DCTE would be outweighed g by the associated costs and disadvantages. Bell was of the view that many of the benefits of unbundlin had been exaggerated in this proceeding. Bell stated that many of the capabilities that Paradyne alleged would result from customer ownership are already commercially available by means of devices that can be connected to the Dataroute network.

Bell disputed the argument that effective network management capabilities are only possible through customer control of DCTE. Bell was of the view that network management for a service such as Dataroute can be best provided by integrated equipment that has access to network information. In fact, stated Bell, certain network management functions can be performed only by network equipment located in the central office.

Bell also disputed the contention that customer ownership of DCTE would result in technological innovation. Bell stated that no concrete examples had been provided of such innovations in the United States, where customer ownership of customer-premises equipment associated with DDS is permitted. Bell submitted that the only major innovation in the DDS network had emanated from the network provider, American Telephone and Telegraph (AT&T).

Bell noted arguments that denial of Paradyne's application might establish a dangerous precedent for services such as ISDN. Bell submitted that the Commission need not regard this case as a precedent. The company stated that it anticipated in the near future the unbundling and customer ownership of certain equipment used in its Megastream and Centrex III data services. Bell also supported both customer and carrier ownership of equipment performing NT-1 interface functions in future ISDN services. In Bell's view, each case should be evaluated on its own merits.

Finally, Bell noted IBN's submission that a standardized signalling scheme for digital network services in North America is long overdue. Bell submitted that such a standard, i.e., the ISDN standard, is presently under development.

B. B.C. Tel

B.C. Tel opposed Paradyne's application. B.C. Tel supported Bell in the view that DCTE is an integral part of the network equipment and facilities required to provide Dataroute Service. B.C. Tel also supported Bell's argument that, when carriers supply DCTE, those carriers are free to utilize different technologies in order to provide efficient and cost-effective service.

B.C. Tel submitted that it would be inappropriate for the Commission, and beyond its authority, to determine "unilaterally" the disposition of Amdahl's proprietary signalling scheme.

B.C. Tel agreed with Bell's contention that single-supplier accountability has enhanced the growth and success of Dataroute. B.C. Tel also submitted that a significant factor in the success of Dataroute has been its standing as a nation-wide service administered by Telecom Canada members under a uniform structure of rates and terms of service. The company submitted that, were the Commission to order Bell and B.C. Tel to unbundle Dataroute Service, there was no guarantee that other Telecom Canada members would follow suit. As a result, rates and terms of service could vary between bundled and unbundled Dataroute Serving Areas (DRSAs). Subscribers to the service across carrier boundaries would then be faced with technical and administrative complications. In addition, the provisioning process would be lengthened in DRSAs where service was unbundled, because of the need to coordinate each particular local loop access arrangement with each customer.

B.C. Tel argued that equipping central offices to receive signals other than Amdahl signals would involve considerable costs, which would ultimately be borne by customers. Like Bell, B.C. Tel submitted that most of the capabilities advanced as benefits of unbundling were already available through devices that users can purchase and connect to the Dataroute network. B.C. Tel therefore submitted that Paradyne's proposal, if approved, would not result in any substantial benefits not currently available through other means within the existing Dataroute Service framework. The company submitted further that the unbundling proposal entails significant costs and burdens that cannot be justified by its modest potential gains.

C. Paradyne

Paradyne noted Bell's argument that the Dataroute tariff had been approved as just and reasonable. Paradyne stated that, in Colins Inc. et al v. Bell Canada, Telecom Decision CRTC 79-12, 7 June 1979, and in Challenge Communications, the relevant tariffs had also been approved as just and reasonable. However, in light of evidence that those tariffs conferred an undue preference or advantage on Bell, they had been disallowed. Paradyne maintained that the Dataroute Access Arrangements are contrary to section 340(2) of the Railway Act.

Paradyne submitted that, pursuant to section 340 of the Railway Act, it is the company's responsibility to prove that discrimination is not unjust or that preference is not undue or unreasonable. In Paradyne's view, Bell had not done so.

Paradyne submitted that the fact that a bundled service is competitive is immaterial to the issue of whether the carrier should be permitted to provide on a monopoly basis equipment located on the customer's premises. In Paradyne's view, the relevant issues are whether competitive provisioning of customer-premises equipment is feasible and whether a carrier monopoly in provisioning creates an undue advantage for the carrier.

Paradyne submitted that the Commission's approval of Tariff Notice 1247 does not preclude a reconsideration of the list of terminal equipment that should be unbundled from network services. Paradyne argued that, in Decision 86-5, the Commission had dealt with the issue of structural separation; it had not addressed the issues of whether data equipment is integral to network operations or whether competitive provisioning of DCTE is merited. Paradyne stated that, in Decision 86-5, the Commission had expressly noted that future developments might require redefinition of the terminal equipment costing category.

Paradyne submitted that DCTE is no more functionally "integral" to network operations than are other types of customer-premises equipment for which customer attachment has been permitted.

Paradyne contended that the Commission has not, to date, precluded competitive provisioning of terminal equipment on the basis that such equipment is integral to the network. Paradyne stated that the Commission has advanced no general test as to what constitutes "network integrality" with respect to terminal equipment. In Paradyne's view, the test should hinge on whether competitive terminal equipment can be supplied according to standards that preclude network harm and that provide for "appropriate terminal/terminal and terminal/network intercommunication."

Paradyne submitted that the Commission, other Canadian telecommunications carrier regulators and the FCC have concluded that technical standards to protect the network and to provide for intercommunication have been sufficient to permit competitive terminal attachment. Paradyne contended that all that is required is the publication of an intercommunications standard. Paradyne noted that two such standards already exist: (1) the Dataroute signalling standard, and (2) the DDS Channel Interface Specifications published by AT&T.

Paradyne also noted that even the simplest customer-owned PSTN-addressing equipment must communicate with central office diagnostic equipment using a standard signalling scheme.

Paradyne also described as immaterial Bell's attempt to distinguish between Dataroute DCTE and competitively provided terminals on the basis of the fact that Dataroute employs several access arrangements. Paradyne submitted that this situation does not pose a significant barrier to customer ownership. Paradyne noted that 95% of the access arrangements use direct digital facilities equipped with one of two standard types of Amdahl DCTE. Paradyne also noted that most of the remaining access arrangements use either analogue or DDS protocols that must be translated into the Amdahl protocol by a separate device. Paradyne submitted that these access arrangements present no technical barrier to competitive supply and argued that there can be no reason not to allow competitive provisioning with the DDS and analogue arrangements, since there is standardized equipment available for these applications.

Paradyne agreed that the carriers should be free to employ multiple technologies in the provision of the service. However, Paradyne was of the view that the subscriber should be informed of the type of technology employed, in order to choose the most appropriate terminating equipment from Bell or from another supplier.

Paradyne addressed the two potential costs of unbundling cited by the carriers: (1) equipment modifications to permit translation of a public signalling standard to the Amdahl standard; and (2) increased provisioning time. Paradyne noted that the only equipment modification required would be the installation of a signalling translator. Paradyne submitted that such a translator would be required only if the Commission declined to require Bell and B.C. Tel to publish Dataroute central office signalling parameters, or if such parameters could not be determined through reverse engineering or were not provided through commercial licensing. In Paradyne's view, an appropriate decision by the Commission would not necessitate such a translation device. In Paradyne's view, such a translation device would lead to unproductive and unnecessary expenditure, would preserve the fiction that there is something in the Amdahl signalling scheme worthy of protection from disclosure, and might also prevent customers from fully utilizing the increased functionality and network management capabilities resulting from customer-owned DCTE attachment.

Paradyne disputed Bell's and B.C. Tel's contention that provisioning time would increase. Paradyne submitted that such provisioning problems that did exist were of the carriers' own creation and were readily solvable without material cost to either carrier or customer.

Paradyne also disputed arguments that the benefits of the competitive supply of DCTE had been exaggerated. In support of its position, Paradyne discussed some of the product innovations that could be provided in integrated Dataroute DCTE. Paradyne also noted certain additional benefits that might result from unbundling of the Dataroute Service.

Paradyne urged the Commission to reject arguments that to require the carriers to disclose sufficient information to permit other suppliers to manufacture terminal equipment capable of functioning as Dataroute DCTE would amount to interference with Amdahl's intellectual property. Paradyne submitted that acceptance of this argument would establish a dangerous precedent for future telecommunications competition. Paradyne submitted that such acceptance would open the door to federally regulated carriers precluding competitive terminal attachment or system interconnection in new services through contractual provisions governing confidentiality. Paradyne submitted that it is essential in the public interest that the Commission establish that carriers cannot "hide behind arrangements with third parties" to prevent the disclosure of network standards necessary to provide for network access consistent with the requirements of the Railway Act.

Paradyne submitted that, in order to provide for competitive provisioning of Dataroute DCTE, the Commission need not require Bell and B.C. Tel to provide all specifications concerning the operations of Dataroute network equipment. Potential DCTE suppliers need know only what the DCTE must do to communicate with Dataroute network equipment. Paradyne also submitted that disclosure of such information would not interfere with Amdahl's ability to compete effectively in the provision of Dataroute DCTE; nor would it interfere with Amdahl's status as exclusive supplier to Bell and B.C. Tel of Dataroute central office equipment.

Paradyne submitted that several factors in the record of this proceeding suggest that the Dataroute signalling scheme should not be regarded as "intellectual property" in the sense of a body of knowledge worth protecting in law or in public policy terms. Paradyne noted that the scheme has never been patented and that neither Amdahl nor Bell nor B.C. Tel has suggested that it is subject to copyright. Paradyne was of the view that signalling parameters cannot, in law, constitute a trade secret. Paradyne also argued that several factors indicate that the Amdahl signalling scheme, to the extent that it would have to be disclosed in a network interface standard, does not constitute anything materially or functionally different from subsequently developed and more advanced recognized DDS channel interface standards.

Paradyne submitted that, in Challenge Communications, the Commission had noted in its reasons for rejecting Bell's submission that interface standards should not be disclosed, that Bell had not obtained patent protection for the technology in question. Citing Challenge Communications, Paradyne submitted that the Commission has the jurisdiction to require carriers to provide technical standards in order to permit equipment interconnection. Paradyne submitted that the Commission should do so in this case because the information required for a public standard cannot be regarded as a valid form of intellectual property and because the confidentiality clause in Bell's contract with Paradyne should be read as subordinate to valid government regulatory action, such as a disclosure order to ensure compliance with the Railway Act

VII CONCLUSIONS

Section 340(2) of the Railway Act states as follows:

340.(2) A company shall not, in respect of tolls or any services or facilities provided by the company as a telegraph or telephone company,

(a) make any unjust discrimination against any person or company;

(b) make or give any undue or unreasonable preference or advantage to or in favour of any particular person or company or any particular description of traffic, in any respect whatever; or

(c) subject any particular person or company or any particular description of traffic to any undue or unreasonable prejudice or disadvantage, in any respect whatever;

and where it is shown that the company makes any discrimination or gives any preference or advantage, the burden of proving that the discrimination is not unjust or that the preference is not undue or unreasonable lies upon the company.

(3) The Commission may determine, as questions of fact,... whether there has, in any case, been unjust discrimination, or undue or unreasonable preference or advantage, or prejudice or disadvantage, within the meaning of this section....

The Commission established its approach to section 340(2) in the Challenge Communications case. In that case, the Commission noted that two essential elements must exist in order to found a successful claim pursuant to this section: (1) discrimination, preference, advantage, prejudice or disadvantage; and (2) the absence of justification therefor. The Commission stated, among other things, that: the term discrimination refers to differential treatment by the company of different persons who are under substantially similar conditions; sections 340(2)(a), (b) and (c) all relate to the comparative treatment by the company of different persons who may consequently benefit or suffer from such treatment; the terms advantage and disadvantage refer to the nature, extent and result of favourable or unfavourable treatment by the company; and, section 340(2)(b) is all-encompassing in terms of its prohibition of any undue or unreasonable preference or advantage in any respect whatever.

In Challenge Communications, the Commission found that the advantage that Bell had secured for itself in making itself the sole supplier of Automatic Mobile Telephone Service (AMTS) was a preference or advantage within the meaning of section 340(2)(b). In the present case, the Commission finds that Bell and B.C. Tel, in making themselves the sole suppliers of DCTE, have conferred upon themselves a preference or advantage, relative to other potential suppliers of DCTE, within the meaning of section 340(2)(b). The Commission similarly finds that, in making Amdahl the exclusive manufacturer of DCTE attached to their networks, Bell and B.C. Tel have conferred a preference or advantage on Amdahl in relation to other manufacturers of DCTE. The Commission further finds that Bell and B.C. Tel have treated differentially other suppliers and manufacturers of DCTE, although those suppliers and manufacturers, in seeking to market DCTE, were in circumstances substantially similar to themselves and Amdahl. Bell and B.C. Tel have therefore discriminated against those suppliers and manufacturers.

Having determined that Bell and B.C. Tel have conferred a preference or advantage upon both themselves and Amdahl, and have discriminated against other suppliers and manufacturers of DCTE, the Commission must consider whether the record of the proceeding establishes that the preference and advantage are not undue or unreasonable and the discrimination not unjust. That consideration must be made in light of the public interest, and requires an assessment of whether the benefits arising from the competitive supply to subscribers of DCTE would outweigh the associated costs.

The Commission has, on many occasions, commented on the benefits of competition. They include increased choice of supplier and equipment, technological innovation and lower costs. With respect to the particular case under consideration, the Commission agrees with Paradyne and supporting interveners that the competitive supply of DCTE would yield benefits. The Commission is of the view that those benefits would be similar to those resulting from competition in other areas of the terminal equipment market.

The Commission notes arguments submitted by Bell and B.C. Tel, as well as by certain interveners, that the competitive supply of DCTE would adversely affect Dataroute Service. These arguments relate primarily to: (1) increased provisioning time and increased costs; and (2) possible difficulties in the identification of network malfunctions, resulting in threats to the integrity of the network.

Specifically, the Commission notes arguments concerning the variety of access technologies used in Dataroute Service and the fact that the choice of DCTE for any particular customer depends upon the technology used to provide that customer with access. Bell and B.C. Tel argued that, if competitive supply of DCTE was permitted, this variety of access technologies would lead to provisioning problems. However, as noted by Paradyne, 95% of customers use one of two standard types of digital interface. Moreover, the Commission is of the view that the possibility of problems arising from the use of various access technologies would be significantly reduced if customers were appropriately advised of the specific technology in place.

Some interveners opposed Paradyne's application on the basis that problems might result if customers were obliged to lease network services from the carriers, while obtaining DCTE from a separate supplier. They argued that service and repair problems, and consequently longer down-time, would result if Telecom Canada could no longer provide end-to-end service. However, it has not been suggested that the carriers be prohibited from providing DCTE. If Paradyne's application were to be granted, customers who so desired could continue to receive end-to-end service from Telecom Canada members.

Bell and B.C. Tel submitted that DCTE is integral to the network and that its competitive supply would compromise network integrity and adversely affect network functioning. In the Commission's view, the basis for such arguments against competitive supply would be removed if competitively supplied DCTE were to operate on the same signalling standard as telephone company equipment.

Bell and B.C. Tel argued that significant additional costs would be incurred if, as an alternative to the publication or licensing of the present Dataroute signalling scheme, they were required to provide for competitive supply of DCTE by developing and implementing a new public protocol. The Commission accepts the carriers' arguments on this point and is of the view that such an approach would not be in the public interest in the circumstances of this case.

The carriers have argued that a Commission order for the disclosure of the Dataroute signalling scheme would be inappropriate and beyond the Commission's authority. The record of this proceeding contains numerous references to Amdahl's "proprietary" signalling scheme and to its intellectual "property". However, there is nothing on the record to persuade the Commission that the signalling scheme should be referred to as "property" or described as "proprietary"; nothing indicates that the scheme has been patented or protected by copyright.

In Challenge Communications, the Commission described as follows an argument advanced by Bell (the Respondent) as justification for discrimination or for the giving of a preference or advantage:

Finally, the Respondent suggested a more generalized justification during the course of the proceedings, namely, that AMTS was an innovative new service that had been developed at Bell's expense and it would be unfair to permit others to "reap the benefit" of this offering. Given its investment in such a new service, Bell should be permitted to realize on its investment and this justified the exclusion of other suppliers.

In its discussion of this submission, the Commission noted as follows:

If Bell has developed patentable features in its equipment ... it can benefit to this extent. But in the Commission's view, it should not prevent persons such as Challenge from offering basic equipment which meets prescribed signalling and network access requirements and thereby continuing to compete in the growth and development of [Mobile Telephone Service].

In disposing of the Challenge Communications case, the Commission ordered Bell to serve on the Commission, the Applicant, and on any other party requesting it, a copy of all specifications of Access 450 equipment and of any other equipment or facilities necessary for the design and production of compatible UHF Mobile Telephone Service equipment.

In the Commission's view, the case presently before it is directly comparable to Challenge Communications, except that the person with the alleged right to restrain disclosure, and thereby "reap the benefit" from the specification in question, is a third party, and that the specification is the subject of a contractual provision between Bell and that third party. In the Commission's view, to decline to order the release of this specification on the basis of these differences alone would create a situation in which carriers could circumvent the requirements of the Railway Act through the use of contractual provisions. The Commission does not, therefore, consider the existence of contractual provisions governing confidentiality as adequate justification for discrimination by the federally regulated carriers or for their giving a preference or advantage to themselves or others.

The Commission notes that Dataroute Service was instituted in 1973 and that Amdahl has had an opportunity to realize on its investment. As noted by Paradyne, the publication of the signalling scheme would not prejudice Amdahl's ability to compete effectively in the provision of Dataroute DCTE; nor would it interfere with Amdahl's status as exclusive supplier to Bell and B.C. Tel of Dataroute central office equipment.

While the point is not crucial to its decision, the Commission also notes that the carriers' contract with Amdahl specifies that restrictions on the use of "proprietary and confidential information" do not apply to any information that is or becomes publicly known through no fault of the "receiving party", in this case, Bell and B.C. Tel. This provision appears to contemplate circumstances such as a Commission order for the release of information.

In light of the above, the Commission determines, pursuant to section 340(3) of the Railway Act, that the present Dataroute Access Arrangements discriminate unjustly against manufacturers of DCTE other than Amdahl and against suppliers of DCTE other than Bell and B.C. Tel. Similarly, the Commission finds that those arrangements give an undue and unreasonable preference to Bell and B.C Tel and to Amdahl.

These determinations would be rendered ineffective if Bell and B.C. Tel were allowed to keep secret the specifications for connecting DCTE to the Dataroute network. Accordingly, Bell and B.C. Tel are directed to file and serve on all parties to the proceeding, by 31 July 1989: (1) proposed tariff pages providing for the unbundling of rates for Dataroute Access Arrangements in order to provide for the competitive supply of DCTE; and (2) information sufficient to permit the design of competitively supplied Dataroute DCTE. Upon the filing of these materials, the Commission will determine what further process, is required with respect to this matter.

Fernand Bélisle
Secretary General