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Telecom Letter Decision
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Ottawa, 6 August 1991
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Telecom Letter Decision CRTC 91-7
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To: . British Columbia Telephone Company. Bell Canada. The Island Telephone Company Limited. Maritime Telegraph and Telephone Company Limited. The New Brunswick Telephone Company Limited. Newfoundland Telephone Company Limited. Northwestel Inc.. Interveners
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Re: Alternate Operator Services
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Background
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On 2 May 1990, the Commission received an application from British Columbia Telephone Company (B.C. Tel) under Tariff Notice 2080B for approval of revisions to its General Tariff applicable to the provision of Alternate Operator Services (AOS). AOS providers are resellers that offer operator services to institutions that aggregate a large number of operator-assisted calls (call aggregators), for example, hotels, motels, airports, hospitals and universities. AOS providers are prevalent in the United States, but have not entered the Canadian market to any significant extent.
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B.C. Tel stated in its application that, with the liberalization of the resale and sharing rules in Resale and Sharing of Private Line Services, Telecom Decision CRTC 90-3, 1 March 1990 (Decision 90-3), an opportunity has been created for the entry of AOS providers in the Canadian market. B.C. Tel stated that experience in the United States indicates that safeguards are needed in order to protect the public from certain negative practices in the provision of AOS. B.C. Tel indicated that problems that have developed in the United States include the charging by AOS providers of rates that exceed those charged by the interexchange carriers, charges for uncompleted calls, a lack of information as to the rates charged by AOS providers and the blocking of access to long distance carriers.
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In its application, B.C. Tel proposed safeguards that it stated are based on those adopted in the United States. The company's proposed safeguards include amendments to its General Tariff to prevent blocking of access to its operator-handled long distance services. The company also proposed measures that would (1) require AOS providers to identify themselves at the start of each call and provide rate information upon request, (2) require the posting of the AOS provider's identity and rates near any telephone served, (3) require that AOS providers register with the Commission in the same fashion that resellers must register under Decision 90-3, and (4) eliminate any billing discrepancies resulting from "call splashing".
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B.C. Tel noted in its application that "call splashing" occurs when an AOS provider transfers a call to another carrier at the caller's request. In such cases, the call is tranferred to an interexchange carrier in the city where the AOS provider's switching centre is located. If the location of the switching centre differs from that of the caller, the call may be billed from the location of the centre, rather than from the location where the call originated. As a result, the bill may confuse the customer or be higher than the caller expected.
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On 16 July 1990, the Commission issued CRTC Telecom Public Notice 1990-64 in connection with B.C. Tel's application, joining the other telephone companies then under its jurisdiction to the proceeding and calling for public comment. The Commission received submissions from a number of parties, including Bell Canada (Bell); Call-Net Telecommunications Ltd. (Call-Net); Canadian Business Telecommunications Alliance (CBTA); Communications Competition Coalition (CCC); Competitive Telecommunications Association (CTA); International Telecharge, Inc. (ITI); The Island Telephone Company Limited (Island Tel); Maritime Telegraph and Telephone Company Limited (MT&T); The New Brunswick Telephone Company Limited (NBTel); Newfoundland Telephone Company Limited (Newfoundland Tel); Northwestel Inc. (Northwestel); Telecommunications Workers' Union (TWU); and Unitel Communications Inc. (Unitel).
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Positions of Parties
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TWU submitted that it is not sufficient to discuss the terms on which AOS should be introduced without having first determined that the provision of AOS is in the public interest. TWU disagreed with the assumption underlying B.C. Tel's application, i.e., that the provision of AOS is permitted under Decision 90-3. TWU submitted that the definition of "resale" in that Decision applies to company-provided services and not to alternate services. TWU submitted that B.C. Tel's application should be denied until such time as the Commission receives applications to provide AOS. Finally, TWU submitted that all resellers should be required to file tariffs and that any company that offers operator services is a "company" within the meaning of the Railway Act.
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Bell expressed support for B.C. Tel's application. Bell noted that Resale to Provide Primary Exchange Voice Services, Telecom Decision CRTC 87-1, 12 February 1987, is a serious barrier to entry for AOS providers in the Canadian marketplace, since it prohibits the resale of public pay telephone service. However, Bell stated that it nevertheless expects AOS providers to find a significant market potential in Canada. Bell submitted that, in previous proceedings (such as the one dealing with automatic dialing and announcing devices), the Commission instituted consumer safeguards before the market became established. Bell also proposed a number of tariff provisions, similar to the safeguards proposed by B.C. Tel, to address the problems of blocking and call splashing.
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MT&T, Island Tel, Newfoundland Tel, NBTel and Northwestel supported the tariff provisions proposed by B.C. Tel and Bell.
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Many interveners expressed support for practices designed to protect consumers, including "call branding" (whereby the AOS provider would identify itself at the beginning of the call), the provision of on-line rate information at the caller's request and the posting of rate and service information by both
B.C. Tel and AOS providers.
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However, not all interveners agreed that the safeguards proposed by B.C. Tel should be included in the telephone company's tariffs. CCC opposed B.C. Tel's application on the grounds that it represented a form of regulation of resellers. CTA submitted that price regulation was not required, since those who engaged in price gouging would be disciplined by the market. CBTA agreed with B.C. Tel's suggestion for a code of conduct for AOS providers, but stated that the approval of tariffs setting out such a code would place the company in the position of policing the code, a situation that would be disadvantageous to AOS providers. Call-Net stated that, in the absence of evidence that AOS practices are negatively affecting the public, the industry should regulate itself through voluntary standards.
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Several interveners expressly disapproved of call splashing. However, CCC and CBTA were of the view that further examination was required before the Commission could rule on the question. Call-Net suggested that problems associated with call splashing could be eliminated if calls transferred by AOS operators were billed to reflect the location where the call originated. CTA recommended that the Commission require the carriers to develop proposals for dealing with the technical and economic reasons for splashing. ITI stated that splashing problems could be eliminated by guaranteeing access to credit and calling card validation databases. ITI recommended that the Commission require the telephone companies to offer billing and validation services at reasonable costs, terms and conditions.
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Several interveners stated that customers should not be denied access to the telephone company's operator services, but suggested that this principle should also apply to ensure that the telephone companies do not block access to AOS or to the operator services of alternate long distance service providers.
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The Commission received reply comments from B.C. Tel, Bell and Newfoundland Tel. B.C. Tel submitted that billing or credit card validation agreements are not necessary to avoid call splashing. B.C. Tel agreed that prohibitions on the blocking of access should apply to all providers of operator services, including itself, and stated that it would undertake not to block access to any AOS provider or to the operator services of any alternate long distance service provider. Newfoundland Tel submitted that the consumer should have the ultimate choice as to service provider.
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Bell noted the support expressed by a number of interveners for its proposed tariff provisions. Bell maintained that amending the tariffs of all facilities-based carriers to ensure consumer protection and choice is the only course open that provides some assurance of enforcement. Newfoundland Tel supported Bell's proposed tariff provisions.
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Conclusions
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With respect to TWU's submissions, the Commission notes that there is nothing in Decision 90-3, or elsewhere, to prevent AOS providers from entering the Canadian market. Accordingly, a reseller is free to offer AOS, provided that it does so in accordance with the rules set out in that Decision. As to the status of resellers under the Railway Act, the Commission ruled in Interexchange Competition and Related Issues, Telecom Decision CRTC 85-19, 29 August 1985, that resellers are not "companies" within the meaning of that Act. This question is again before the Commission in the context of an application filed by TWU pursuant to section 66 of the National Telecommunications Powers and Procedures Act (see CRTC Telecom Public Notice 1991-55, 19 July 1991).
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The Commission agrees that Decision 90-3 has increased the opportunities and incentives for AOS providers to enter the market in Canada. Bell provided evidence as to one AOS provider operating in the Toronto area. However, there is no evidence that AOS providers have as yet entered the Canadian market to any significant degree.
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The tariff provisions proposed by B.C. Tel and Bell are based on the experience in the United States. Canada and the United States differ considerably in terms of the regulatory environment, the structure of the telecommunications industry and the nature and extent of resale activity. In the Commission's opinion, the combined effect of the prohibitions on pay telephone competition, the absence of billing and collection agreements with the telephone companies, and the fact that the liberalized resale rules set out in Decision 90-3 apply only in the operating territories of Bell and B.C. Tel, is to substantially lessen opportunities for AOS entry in Canada relative to those in the United States. As a result, the development of the AOS industry in Canada may differ significantly from that of its counterpart in the United States, and the problems experienced in the United States may not arise. Therefore, the responses adopted to deal with those problems may be neither necessary nor appropriate here.
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While problems similar to those in the United States may not develop in Canada, other unforeseen problems or abuses may arise. However, the Commission cannot, at this time, predict what mechanisms may be required to deal with such problems or abuses, should they arise.
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While the Commission supports the broad principle of developing tariff provisions to ensure that customers have access to the public switched telephone network and a choice as to supplier in competitive markets, in light of the above, the Commission considers it premature to attempt to formulate safeguards with respect to the provision of AOS. B.C. Tel's application is therefore denied. The Commission will monitor the provision of AOS in Canada and will re-examine the question of safeguards, if warranted by future developments.
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Several interveners in this proceeding requested that the Commission consider requiring that carriers either guarantee access, or negotiate access, to calling card and validation databases. ITI requested that the Commission approve open access arrangements. The Commission considers the questions of open access interconnection arrangements and access to telephone company databases to be beyond the scope of this proceeding. However, the Commission notes that related issues are being examined in the context of the proceeding dealing with the applications of Unitel and B.C. Rail Telecommunications/ Lightel Inc. to provide public long distance voice telephone services.
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Allan J. Darling
Secretary General
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