ARCHIVED -  Telecom Decision CRTC 90-18

Telecom Decision

Ottawa, 28 August 1990

Telecom Decision CRTC 90-18

INTRODUCTION OF 800 PLUS AND REVISIONS TO 800 SERVICE AND WIDE AREA TELEPHONE SERVICE RATES

I THE APPLICATIONS

On 4 May 1989, the Commission received applications from Bell Canada (Bell), under Tariff Notices 3093 and 3094, for approval of tariff revisions relating to Canada 800 Service and Canada Wide Area Telephone Service (WATS). On 29 May 1990, the Commission received similar applications from British Columbia Telephone Company (B.C. Tel), under Tariff Notices 1917 and 1918.

Under Bell Tariff Notice 3093 and B.C. Tel Tariff Notice 1918, the companies proposed General Tariff revisions providing for the introduction of 800 Plus Service.

Under Tariff Notice 3094, Bell proposed the elimination of 140 hour Canada 800 Service. The company also proposed a tapered discount schedule for additional usage involving discounts ranging from 15% to 40% in relation to the 5 hour rate during the initial service period.

Bell also proposed, under Tariff Notice 3094, that one minute average minimum billing be applied to calling volumes for each subscribed zone at each customer premises for 800 Service and WATS. In addition, the company proposed to increase the initial timing interval for each message to 30 seconds from 6 seconds.

Under Tariff Notice 1917, B.C. Tel proposed a restructuring of its 800 Service rates for Telecom Canada Zones. For Zones 3 to 6, B.C. Tel proposed a tapered discount schedule for additional usage beyond the 5 hour monthly contract period. B.C. Tel did not propose a change in the existing tapered discount schedule for Zone 1 (intra) and Zone 2 (B.C. & Alberta) 1 hour 800 Service nor for "Bulk" Class 800 Service.

On 28 July 1989, the Commission issued CRTC Telecom Public Notice 1989-36, inviting comment on the applications and joining Northwestel Inc. (Northwestel) to the proceeding on the issue of call length minimums for 800 Service and WATS. The Commission also addressed interrogatories to the companies.

Under Tariff Notices 9 and 14, dated 11 January and 14 January 1990 respectively, The Island Telephone Company Limited (Island Tel) proposed tariff revisions providing for the introduction of 800 Plus and a restructuring of the rates for 800 Service. Like Bell and B.C. Tel, Island Tel proposed to eliminate 140 hour Canada 800 Service, to establish 5 hour service as the basic service offering for Zones 2 to 4 and to introduce volume-based discounts ranging from 15% to 40% in relation to the hourly rate for the initial service period. Island Tel also proposed to move the Newfoundland Numbering Plan Area (NPA) from Zone 3 to Zone 2, so as to include coverage of all four Atlantic provinces in Zone 2. Island Tel further proposed that Zones 5 and 6 be eliminated in order to maintain rate relationships with Message Toll Service (MTS). On 14 March 1990, the Commission released CRTC Telecom Public Notice 1990-24 inviting comment on Island Tel's applications.

Under Tariff Notice 3, dated 17 November 1989, Maritime Telegraph and Telephone Company, Limited (MT&T), proposed to introduce 800 Plus. Under Tariff Notice 6, also dated 17 November 1989, MT&T proposed rate revisions for Canada 800 Service similar to those proposed by Island Tel, as well as the introduction of a Zone 1 800 Service providing coverage for calls originating within Nova Scotia and Prince Edward Island. In CRTC Telecom Public Notice 1990-7, 29 January 1990, the Commission invited comment on MT&T's applications.

Under Tariff Notice 2, dated 7 December 1989, The New Brunswick Telephone Company, Limited (NBTel), proposed tariff revisions providing, among other things, for the introduction of 800 Plus and a restructuring of 800 Service rates similar to that proposed by Island Tel and MT&T. In CRTC Telecom Public Notice 1990-33, 6 April 1990, the Commission invited comment on NBTel's application.

A number of interveners submitted comments with respect to the various applications. They include: The Canada Trust Company; Canadian Bankers' Association (CBA); Canadian Alarm and Security Association/ Ontario Region and numerous security and alarm companies in Ontario and Quebec; Canadian Association of Message Exchanges, Inc.; Canadian Business Telecommunications Alliance (CBTA); CNCP Telecommunications, now Unitel Communications Inc. (Unitel); Canadian Tire Acceptance Limited; Check Inns Limited; La Confédération des caisses populaires et d'économie Desjardins du Québec (Desjardins); Insurance Corporation of British Columbia; Marine Atlantic; Government of Ontario (Ontario); Ontario Hydro; David T. Ovens and Telecomsyst Services Inc.

II 800 PLUS

A. Interventions

The interventions filed regarding 800 Plus generally supported the introduction of the service. However, CBTA and Mr. Ovens submitted that the rates proposed for the service are too high. CBTA noted that the 800 Plus features proposed by the companies are similar to existing features offered by American Telephone and Telegraph (AT&T) in the United States, but that the rates for AT&T's services are substantially below those proposed for 800 Plus. In addition, CBTA noted that the features offered by AT&T generally allow users greater ability to manage their telecommunications operations than do the features proposed by Bell and B.C. Tel.

CBTA was of the opinion that the greater availability of enhanced 800 Services in the U.S., combined with lower rates, make it attractive for companies to locate their reservation systems and information provision services there, rather than in Canada. CBTA also suggested that lower 800 Plus rates would reduce the incentives for uneconomic entry, as a competitor in the MTS/WATS market would find it very attractive under the proposed rates to gain market share by offering enhanced 800 Services at lower rates.

CBTA noted that the proposed rates for 800 Plus were set to maximize contribution. When the benefits of decreased rates for MTS and WATS are examined, CBTA stated, it would appear more appropriate to reduce 800 Plus rates, rather than to set them to maximize contribution so as to lower MTS rates. CBTA considered that lower 800 Plus rates would have a more favourable impact on Canadian business than an equivalent reduction in MTS rates.

Mr. Ovens noted that the introduction of 800 Plus is premised on the establishment of common channel signalling (CCS7) and associated computer and database facilities. Mr. Ovens submitted that the costs of setting up these facilities should be recovered not only from 800 Plus revenues, but also from revenues from regular 800 Service and from operator services, where the telephone companies achieve certain savings and advantages from the improved method of translating and screening calls. Mr. Ovens also proposed that the charges for the features should be usage-based, as the value of 800 Plus to subscribers depends on the extent to which the service is used and on the advantage gained from the use of the features.

B. The Companies' Replies

In reply to CBTA, Bell submitted that it is misleading, and therefore inappropriate, to make a simple comparison of the proposed rates for 800 Plus features and the rates for features available from AT&T. As examples, Bell cited charges applied by AT&T for its Time Manager and Day Manager features. Bell stated that, for Time Manager, AT&T applies a $100 charge for every customer routing change in a 24 hour period. For Day Manager, a similar charge is applied for every change during a 7 day period. Bell stated that the equivalent FlexRoute charges of $300 and $100 per month would apply only once regardless of the number of routing changes. Bell also noted that a direct comparison does not take into consideration the significant difference in the rate structures of the companies' respective 800 Services and the resulting difference in the cost savings potential of the features for the customer. Bell noted its response to a Commission interrogatory in which it illustrated, for an 800 Service subscriber profile, that the purchase of SingleNumber service at $800 per month could result in savings to the customer in excess of $5,000 per month. These savings, the company stated, would not be available in the U.S. environment.

In response to CBTA's comments that other enhanced 800 features offered by AT&T are not proposed for Canada, Bell noted that the approval of 800 Plus would allow the introduction of the first enhanced 800 Service features in Canada and that it is currently planning the development and introduction of additional enhanced features for its 800 Service customers.

In response to Mr. Ovens' comments, the company indicated that the costs of provisioning database routing are recovered from both 800 Plus and operator services. Bell submitted that the costs related to 800 Service included in the supporting economic study are causal to the introduction of 800 Plus.

In reply to Mr. Ovens' assertion that the rates for 800 Plus features should be usage related, the company stated that a number of factors were considered in developing the proposed rates for 800 Plus features. In addition to cost recovery, these factors included the primary target market for each feature, the relative value of the features, the need to minimize rate structure complexity and customer ease of understanding. Bell stated that based on these considerations, it is the company's view that the proposed rate structure, which reflects both flat and usage related components, is appropriate.

C. Conclusions

The Commission notes that the interventions generally supported the introduction of the service. However, a concern was expressed that the proposed rates for 800 Plus features are too high, especially in light of rates for similar enhanced 800 features offered by AT&T.

Commission policy requires that the rates for 800 Plus be set so as to recover, over a ten-year study period, at least the causal costs of providing the service. The Bell, B.C. Tel and Telecom Canada economic evaluations filed in support of 800 Plus and the responses to various Commission interrogatories indicate that the CCS7 and database facilities are causal to the service and that the rates for the service will, under a variety of demand scenarios, more than cover causal costs. The Commission's primary concern with respect to the rates for 800 Plus has therefore been addressed.

Apart from the marketing and sales benefits, 800 Plus would afford customers the opportunity to make more efficient use of 800 Service as well as providing access to new features to enhance the flexibility and value of Canada 800 Service. The record indicates that 800 Plus offers customers the potential for substantial savings.

In light of the foregoing, the Commission approves the introduction of 800 Plus, as filed under Bell Tariff Notice 3093, B.C. Tel Tariff Notice 1918, MT&T Tariff Notice 3, Island Tel Tariff Notice 9 and NBTel Tariff Notice 2, effective 27 September 1990. The Commission directs the companies to issue final tariff pages reflecting this approval by 10 September 1990.

III REVISED RATES FOR CANADA 800 SERVICE

A. Interventions

CBTA supported the introduction of a tapered discount schedule for 5 hour Canada 800 Service, but considered it premature to eliminate 140 hour 800 Service. In CBTA's opinion, the appropriate time to remove 140 hour service would be when very few or no customers subscribe to it. Marine Atlantic and Check Inns Limited also opposed the elimination of 140 hour 800 Service. Ontario opposed this aspect of Bell's application because it would reduce both the choice available to subscribers and the maximum discounts available relative to MTS.

CBTA noted Bell's submission that it is necessary to eliminate 140 hour 800 Service because the database for 800 Plus is designed for a single class of service. CBTA commented that it would be possible to require Bell to offer 140 hour 800 Service subject to the condition that these customers could not obtain 800 Plus. CBTA noted that B.C. Tel will offer two classes of 800 Service, Canada 800 Service and "Bulk" 800 Service, and that the SingleNumber and FlexRoute features will be available in conjunction with "Bulk" 800 Service.

CBTA commented that NBTel's revised rates for 800 Service appear to be considerably higher than comparable rates proposed by Bell. CBTA submitted that NBTel has filed insufficient evidence to support its proposed 800 Service rates.

B. The Companies' Replies

Bell submitted that Ontario and CBTA have failed to recognize that the elimination of 140 hour 800 Service would not have been proposed without the introduction of the tapered discount schedule. The company stated that the combined effect of the two changes would be generally beneficial to customers. Bell submitted that 9.9% of customer accounts would experience price decreases of more than 1%, while only 0.5% of customers would experience price increases of more than 1%.

In response to CBTA's contention that it would be inappropriate to eliminate 140 hour 800 Service, especially in light of the large disparities between Canadian and American rates, Bell agreed that lower WATS and 800 Service rates would be desirable. However, Bell submitted that reductions should be directed to 5 hour 800 Service and to 10 and 5 hour WATS in order to spread the benefits of reductions to a broader base of customers, rather than only to large volume customers such as those who subscribe to 140 hour 800 Service.

The company noted that, if 140 hour 800 Service were to be retained, it would have to eliminate the practice of allowing a mix of 140 hour and 5 hour lines within the same equivalency group. In addition, the company indicated that the 800 Plus features would not initially be available to subscribers of 140 hour service. Third, Bell stated that retention of 140 hour service would necessitate billing system modifications resulting in a further delay of at least 4 months for the introduction of the revisions proposed under Bell Tariff Notices 3093 and 3094.

In response to CBTA'S comments, NBTel explained that 800 Service rates are set with the objective of maintaining a consistent relationship with MTS rates and that the relationship recognizes both the value of obtaining access to high density markets and the costs associated with the distance of transmission.

C. Conclusions

The Commission notes that Canada 800 Service provides lower implicit hourly rates for 140 hour service subscribers than for 5 hour service subscribers. In various decisions, including Bell Canada - 1988 Revenue Requirement, Rate Rebalancing and Revenue Settlement Issues, Telecom Decision CRTC 88-4, 17 March 1988 (Decision 88-4), British Columbia Telephone Company - Revenue Requirement for the Years 1988 and 1989 and Revised Criteria for Extended Area Service, Telecom Decision CRTC 88-21, 19 December 1988 (Decision 88-21), and Telecom Letter Decision CRTC 89-19, 21 September 1989, the Commission has realigned 800 Service and WATS rates, within the classes of service themselves and in relation to MTS rates. The result has been to make 5 hour 800 Service and 10 and 5 hour WATS more attractive relative to 140 hour 800 Service and 120 hour WATS, and 140 hour 800 Service and 120 hour WATS appealing to only very large-volume users. In Decision 88-4, the Commission stated:

The company's other objectives for WATS and 800 Service were to increase the usage sensitivity of rates, to encourage migration from WATS 120 and 160/140 hour 800 Service to WATS 10 and 5 hour 800 Service and ultimately to move to a single class of WATS and 800 Service. Consistent with its conclusions in Decision 86-17, the Commission considers that these objectives are appropriate for both WATS and 800 Service.

The proposed elimination of 140 hour 800 Service, in conjunction with the introduction of a tapered discount schedule, is consistent with these objectives. A single class of service for 800 Service and WATS also provides for rates that are more equitable for the broad range of customers, regardless of usage.

In light of the above, the Commission approves the 800 Service rates proposed by Bell under Tariff Notice 3094, B.C. Tel under Tariff Notice 1917, MT&T under Tariff Notice 6, Island Tel under Tariff Notice 14 and NBTel under Tariff Notice 2, effective 27 September 1990. The Commission directs the companies to issue, by 10 September 1990, final tariff pages reflecting this approval.

IV MINIMUM BILLING FOR 800 SERVICE AND WATS

A. Background

Currently, for 800 Service and WATS, the duration of calls is measured in 6 second increments. In Bell's territory, WATS and 800 Service are rated on the basis of actual measured usage. In the territories of all other Telecom Canada member companies and in the territory of Northwestel, either a one minute minimum per call or a one minute average per call minimum applies to actual measured 800 Service and WATS usage.

In recent years, the Commission has received a number of complaints from the British Columbia security and alarm industry submitting that the differences in billing practices provide an unfair competitive advantage to their counterparts in Ontario and Quebec. Security and alarm companies employ 800 Service for remote monitoring of their customers' premises. These companies stated that the typical call duration for these applications of 800 Service is less than one minute. In B.C. Tel territory, customers are billed for a minimum of one minute for each call. This does not occur in Ontario and Quebec, where 800 Service customers are billed on the basis of actual measured call duration.

In response to letters from the Commission concerning the above-noted complaints, Bell indicated that it was in the process of upgrading the WATS and 800 Service billing systems and that after these upgrades were implemented, the company intended to propose one minute average minimum billing for these services.

Under Tariff Notice 3094, the company proposed the introduction of a 30 second initial timing interval for each WATS and 800 Service message, and one minute average minimum monthly billing for WATS and 800 Service. During the course of the proceeding, Bell amended its application by proposing a phased implementation of minimum billing provisions, under which the 30 second initial interval would become effective immediately, and the one minute average minimum would come into effect in 2 years.

B. Interventions

As a consequence of the magnitude of the billing impacts, especially for credit card verification and alarm and security monitoring applications of 800 Service, there was strong opposition to Bell's proposal to introduce one minute average minimum billing and a 30 second initial interval.

Numerous security and alarm companies in Ontario and Quebec commented that the proposed billing provisions would, if approved, result in an unreasonable increase in their costs. Some of these interveners suggested that, in order to achieve uniformity, it may be more appropriate to reduce the call length minimums in other provinces, rather than increase the minimum in Bell territory. This group of interveners also submitted that migration to Datapac is not a viable alternative for them.

CBA, whose members employ 800 Service for, among other things, credit card verification, noted that the introduction of a 30 second minimum would result in increases of up to 144%, and that a 30 second minimum combined with a one minute average minimum billing would result in increases of as much as 279%. CBA stated that it would no longer be economical for banks to use 800 Service to provide point-of-sale credit card validation service to retail merchant customers if Bell's tariff proposals were approved.

CBTA stated that most credit card validation companies use Datapac Service, where available, because Datapac is far cheaper than 800 Service. However, CBTA also noted that many small communities are not located within a Datapac Serving Area (DPSA) and often rely on 800 Service for credit card verification. Canada Trust stated that it uses 800 Service for credit card verification only in those regions that are not served by Datapac. CBA submitted that retail merchant customers in those areas of Bell's operating territory not located in a DPSA would be the most adversely affected, as it would no longer be economical for the banks to provide point-of-sale credit card validation service to these customers.

CBA argued that approval of the proposed call duration minimums would result in an undue disadvantage, within the meaning of the Railway Act, for persons who originate credit card validation traffic from outside DPSAs. Desjardins submitted that the proposed rates are discriminatory and would cause costs to rise drastically for customers located in small towns.

CBA noted that one reason advanced by Bell for the proposed minimum billing requirements was to make Bell's tariffs more consistent with those of the other members of Telecom Canada. CBA suggested that the Commission has never established, as a regulatory principle, consistency of tariffs across the member telephone companies of Telecom Canada.

CBA also noted the response to interrogatory Bell(CRTC)26July89-2, in which Bell indicated that it incurs $1.23 in costs for every $1.00 in revenue generated by credit card validation applications. CBA agreed with the principle that the credit card validation segment of 800 Service should be compensatory, but expressed the opinion that the implementation of a one minute average minimum or of 30 second minimum billing was not the appropriate means of accomplishing this. In this respect, CBA submitted that, based on that cost evidence, a 23% increase in the revenues from the credit card validation market segment would be sufficient to make it compensatory. By contrast, CBA noted, the revenue increase from the establishment of a 30 second minimum alone would appear to be in the order of 150%.

Desjardins submitted that Bell has not justified its proposal and that the increase is unfair, unreasonable and exorbitant. Desjardins stated that Bell is using its monopoly position to increase its revenues without having proven the need for additional revenues, and that if such additional revenues are required they should be obtained in some way other than by further worsening situations where no alternative is available.

CBTA noted that AT&T and MCI Telecommunications Corporation (MCI) employ 30 second average minimums for their 800 Services. CBTA indicated that other U.S. carriers have call length minimums as low as 18 seconds for 800 Service. CBTA and CBA also noted that AT&T offers an 800 Service specifically designed for credit card validation, called 800 Validator, which uses 6 second timing and has no call length minimum. However, CBTA did acknowledge that 800 Validator has a requirement of monthly expenditures of $250,000.

CBTA suggested that the lower call length minimums offered by carriers in the U.S. could lead to significant contribution erosion, as credit card validation and security and alarm companies would move their operations south of the border.

CBA submitted that Bell's proposals concerning minimum billing should be denied and that the company should be directed to refile tariff proposals that would result in the credit card validation segment of 800 Service being just compensatory and that would not affect areas not located in a DPSA. CBTA proposed that, if a 30 second call minimum is approved, the carriers should be directed to offer a separate 800 Service designed especially for data applications which would encompass a substantially lower call length minimum. CBTA was of the opinion that its approach would be consistent with Commission principles, which have traditionally recognized differences in voice and data services. CBTA further submitted that, if a 30 second call length minimum is approved, Bell should be required to increase greatly the number of DPSAs.

C. The Companies' Replies

Bell stated that the immediate implementation of the 30 second minimum, followed by one minute average minimum billing 2 years later, would provide an acceptable solution to the compensatory pricing issue and a reasonable, balanced approach to the other main issues in this proceeding.

In response to CBA, Bell submitted that the issue of consistency in the tariffs of Telecom Canada members should be considered in instances where inconsistencies would place certain customers at a competitive disadvantage. In this regard, Bell cited letters from the security and alarm industry in British Columbia expressing concerns over the unfair advantage provided by Bell's 800 Service tariffs to security and alarm companies in Ontario and Quebec.

In response to the various comments questioning the justification for, or appropriateness of, call length minimums, Bell submitted that it has provided substantial evidence indicating that current 800 Service tariffs are generally not compensatory for short duration data applications. The company submitted that it is inappropriate to allow short duration applications to be subsidized by the general body of subscribers. Bell noted CBA's statement that it accepts the principle that the credit card validation segment of 800 Service should be compensatory.

In specific response to Desjardins' concerns, the company submitted that the proposed revisions are not intended to generate additional revenues and would, in combination with the other proposals in Tariff Notice 3094, result in a modest reduction in contribution from the monopoly toll category.

In response to the interveners' alternatives to the proposed call length minimums, Bell indicated that it has concerns about special treatment for these data applications over the other 800 Service applications. Bell noted that, even if unique billing solutions for credit verification could be justified, such proposals would likely have higher costs than conventional 800 Service, due to the need to develop billing systems and the requirement for voice/data discriminating equipment. Bell stated that such solutions would provide only marginal relief for short duration data applications.

The company noted that the migration of credit validation traffic to Datapac provides considerable potential to reduce the reprice impacts, since Datapac is accessible via local calling from approximately 90% of network access services within its territory and since it plans to continue to expand the availability of Datapac. Bell noted that, in 1989 and 1990, Datapac has been extended to 61 new population centres and that 20 to 30 new DPSAs per year are expected to be established for the next 3 years. In response to a Commission interrogatory, the company indicated that, assuming that credit card validation applications migrate, where economical, to Datapac, the most severe reprice impacts could be reduced from 279%, on average, to 168%. Bell also stated in response to that interrogatory that its view was that Datapac is not technically suitable for security and alarm applications involving equipment that transmits information by sending and counting pulses or tones. Bell stated that this remote-end equipment would have to be modified or replaced in order to be compatible with Datapac technology. However, Bell indicated that there are private line services, such as channels for data transmission or Dataroute, that can be used for credit card validation and security and alarm applications where compatible remote-end equipment exists.

In response to submissions that the proposed tariffs would unjustly discriminate against persons who originate credit validation traffic from outside DPSAs, Bell noted that 800 Service rates for credit validation are identical to 800 Service rates for voice calls. Any disadvantage that might arise for such customers, the company stated, is attributable to the fact that data networks have not as yet been extended to the customers' territory, and not to the proposed 800 Service rates.

Bell made several points with respect to the potential for contribution erosion from 800 Service and WATS. First, the company submitted that vulnerability to contribution erosion exists irrespective of the call length minimum proposal. Second, the company does not expect that the security and alarm and the credit validation industries will be more vulnerable to migration than other industry segments. Third, the company noted that AT&T's Validator Service has a variety of terms and conditions that do not facilitate direct comparisons, and that the most common call length minimum for U.S. 800 Services is a 30 second average minimum.

Northwestel noted suggestions that, in the interest of uniformity, the Commission should direct the other carriers to reduce their timing minimums, instead of increasing Bell's call length minimums. Northwestel expressed the view that objectives other than uniformity should be considered, such as minimizing customer and revenue impacts and maintaining consistency with other monopoly toll services, and that consideration of these objectives may require non-uniform timing minimums. Northwestel submitted that it should retain its one minute timing minimum for 800 Service in order to maintain consistency with its MTS schedules, to minimize revenue impact, to minimize customer impact and to be consistent with most other carriers across Canada.

D. Conclusions

The current rate structure for 800 Service does not reflect all components of the underlying costs of providing the service. In Bell territory, rates and revenues are based on measured time duration. However, costs associated with access and call set-up are not sensitive to call duration. Under Bell's existing tariff, there is no guarantee that, on an individual call basis, sufficient revenues will be generated to cover the associated costs. In the territories of the majority of other Canadian telephone companies, there are call length billing provisions that promote recovery of costs on an individual call basis. The record of this proceeding indicates that, for some short duration applications of 800 Service, Bell's rates are not compensatory.

The disparities between the billing practices of Bell and B.C. Tel have resulted in an advantage being conferred on 800 Service customers in Ontario and Quebec, in relation to those in B.C. Tel territory. The Commission considers that, other things being equal, uniformity in billing practices for 800 Service is desirable.

The Commission therefore considers it appropriate to implement changes in the rate structure for 800 Service in order to address the fact that some short duration applications are not compensatory in Bell territory and in order to remove or reduce the disparity in 800 Service billing practices. However, the Commission considers that the extremely large impact on the bills of certain customers that would result from Bell's proposal ultimately to implement one minute average minimum billing would not be in the public interest.

One option for ensuring cost recovery on an individual call basis would be to establish a set-up charge for each 800 Service message, in addition to duration-sensitive rates. However, Bell indicated in response to a Commission interrogatory that, if a set-up charge were established to equal the associated causal costs, in conjunction with reductions in the existing Canada WATS and proposed Canada 800 Service rates necessary to offset increased revenues from the set-up charge, the most severe reprice impact would be 161%, on average. This impact would exceed the largest average reprice impact of 144% resulting from a 30 second call length minimum and would affect twice as many accounts as the 30 second minimum. In addition, with a set-up charge equal to causal costs, 29.6% of accounts would experience a price increase of more than 5%, as opposed to 3% of accounts under the 30 second minimum.

A second option would be to establish a minimum compensatory call length which would result in currently non-compensatory calls being made just compensatory. However, it is not possible to determine a single minimum compensatory call duration, due to differences in customer calling characteristics, home NPA, service configurations and zone coverage. The Commission agrees with Bell that to establish tariffs with variable minimum call durations would result in customer confusion and administrative difficulties, and would therefore be inappropriate.

A third option, proposed by CBA and CBTA, would involve separate 800 Service rates for credit card validation. However, as noted by Bell, a specialized 800 Service would likely have higher costs than conventional 800 Service, due to the need for billing system development and the requirement for voice/data discriminating equipment.

Based on the record of the proceeding, the Commission is of the view that a 30 second minimum timing interval would be appropriate for 800 Service. Further, approval of the 30 second minimum for Bell, B.C. Tel and Northwestel would provide uniformity in those companies' billing practices, thereby eliminating any competitive advantage from differences in billing practices that Bell subscribers may enjoy in relation to those of B.C. Tel and Northwestel. At the same time, a 30 second minimum timing interval, without one minute average minimum billing, would cause less than half the bill impact of Bell's two-phased proposal. A 30 second minimum timing interval may not ensure that all calls to 800 Service will be compensatory in all companies' territories; however, it will result in the majority of 800 Service calls being compensatory, without an undue impact on revenues and on per-call cost recovery for B.C. Tel and Northwestel, and without the substantially higher bill impact of a one minute or one minute average minimum.

The Commission is also of the view that the proposed 30 second call length minimum is appropriate for WATS. Although the lack of call length minimums for WATS has not been specifically identified as a major problem, the implementation of minimum billing provisions at this time would prevent a situation like that which developed for 800 Service, where the uneconomic nature of the tariff contributed to its attractiveness for certain applications. The Commission notes that the introduction, in Bell territory, of a 30 second initial timing interval for WATS will have much smaller bill impacts than those for 800 Service; the most severe impact being an approximate 37% increase, affecting 0.1% of accounts.

The Commission recognizes that the implementation of a 30 second timing minimum will have a substantial impact on bills for certain customers. It notes, however, Bell's estimate that 58% of 800 Service credit verification messages originate from within DPSAs. As Datapac is a substitute for 800 Service for credit verification purposes, the effective rate increase for many 800 Service customers who provide credit verification services could be reduced by switching to Datapac. Telecom Canada expects to add 20 to 30 new DPSAs per year for each of the next 3 years, thus increasing the number of customers providing credit verification who will likely find Datapac economically attractive.

The expansion of the Datapac network may also mitigate the impact of rate restructuring on alarm and security monitoring applications, but to a lesser extent. Bell's view is that Datapac is not technically suitable for certain monitoring applications. Bell indicated that certain
customer-provided terminal equipment would require modification or replacement for use with Datapac. However, the Commission notes that the price increases resulting from the 30 second minimum are, on average, smaller for the security and alarm monitoring industry than those for credit card validation applications.

CBA and Desjardins argued that the proposed call length minimums would be unjustly discriminatory and subject persons who originate credit card validation traffic from outside DPSAs to an undue disadvantage. CBTA maintained that users located outside the free calling area of a DPSA should not be affected by any eventual decision. The Commission notes that the person originating such traffic is not responsible for paying the 800 Service bill. However, there is the possibility that the increased 800 Service costs associated with credit card validation may be passed on to merchants by the credit card companies. Merchants located outside DPSAs who use credit verification services may be subject to cost increases greater than those experienced by merchants located within a DPSA. While this may be a disadvantage, the Commission does not consider it to be an undue disadvantage conferred by the imposition of call length minimums. The greater impact on users of credit verification services in respect of traffic originating from outside a DPSA is caused by two factors. The first factor is that this traffic is currently subject to non-compensatory rates. The second is the fact that Datapac, a competitive network service which, in large part, uses a separate technology and network, is not yet available on a free-calling basis to all subscribers. Access to Datapac is available to locations outside of the free-calling area of a DPSA through the MTS network and the payment of additional charges.

The Commission considers that call length minimums are not unjustly discriminatory because they will apply to all users whose message duration is below the minimum for both voice and data applications of 800 Service, not just for credit card validation from locations outside a DPSA. A 30 second minimum will also eliminate the current situation in which certain 800 Service users are paying non-compensatory rates. Finally, a 30 second call length minimum will result in greater uniformity in the terms and conditions applying to 800 Service calls.

In light of the foregoing, the Commission finds that a 30 second minimum timing interval would be appropriate for both 800 Service and WATS for Bell, B.C. Tel and Northwestel, effective 27 September 1990. Bell's proposal to introduce a one minute average minimum is denied. Bell, B.C. Tel and Northwestel are directed to issue, by 10 September 1990, final tariff pages introducing the 30 second minimum.

In light of this decision, NBTel, Newfoundland Telephone Company Limited (Nfld Tel), Island Tel and MT&T are directed to indicate, by 17 September 1990, whether they consider the introduction of a 30 second call length minimum for their 800 Service and WATS to be appropriate and, if not, how a different minimum would be justified. Any such justification provided by NBTel or Nfld Tel should include an estimate of the settled revenue and expense impacts of moving from the company's current minimum billing provisions to a 30 second call length minimum.

Alain-F. Desfossés
Secretary General