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Ottawa, 15 October 1991
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Telecom Decision CRTC 91-15
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RESTRUCTURING OF RATES FOR ENVOY 100 AND iNET 2000 - INTELLIGENT COMMUNICATIONS NETWORK SERVICES>
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I BACKGROUND
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On 15 November 1989, Immédia Infomatic (Immédia) filed an application requesting that the Commission inquire into certain practices of Bell Canada (Bell) relating to the provision of electronic mail services, specifically, Envoy 100 and the messaging feature of iNet 2000, and to the rates charged for these services.
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In its application, Immédia noted that the messaging component of iNet 2000 performed the same function as Envoy 100. Immédia submitted that, in response to a call for tenders for the provision of an electronic mail system, Bell had submitted a bid based on its iNet 2000 tariff. Immédia submitted that a bid based on the Envoy 100 tariff would have been significantly higher. Immédia argued that Bell's ability to exercise discretion as to which tariff to use constituted an undue preference contrary to section 340(2) of the Railway Act.
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In Tariffs for Envoy 100 and iNet 2000, Telecom Letter Decision CRTC 90-7, 8 May 1990 (Letter Decision 90-7), the Commission found that Bell had exercised discretion to select a tariff to its own benefit and that,in doing so, had conferred upon itself an undue preference in contravention of section 340(2) of the Railway Act. The Commission directed Bell to file, by 7 August 1990, proposed tariff revisions that would eliminate its ability to give itself an undue preference in the provision of electronic messaging.
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On 7 August 1990, Bell filed Tariff Notice 3636 proposing tariff revisions for Envoy 100 and iNet 2000, as well as certain consequential revisions with respect to Government Electronic Messaging and Document Exchange Service. This application was followed by similar tariff filings by British Columbia Telephone Company (B.C. Tel) (Tariff Notice 2176), The Island Telephone Company Limited (Tariff Notice 38), Maritime Telegraph and Telephone Company Limited (MT&T) (Tariff Notice 59), The New Brunswick Telephone Company Limited (Tariff Notice 34), Newfoundland Telephone Company Limited (Tariff Notice 40) and Northwestel Inc. (Tariff Notice 383).
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On 25 October 1990, the Commission issued CRTC Telecom Public Notice 1990-96 establishing a public process for considering these applications. Subsequently, the Commission received a similar tariff filing from AGT Limited (Tariff Notice 33) and issued CRTC Telecom Public Notice 1991-35, 24 May 1991, with respect to that application. This Decision deals with all the above-noted tariff filings.
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Bell provided economic evaluation studies on behalf of itself and Telecom Canada comparing the scenario in which the services are continued at the proposed rates (the alternate plan) to the scenario in which the services are discontinued after one and a half years (the reference plan).
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The Commission received comments on the applications from Mr. J. R. Hay, Mr. J. F. Mezei of Vaxination Informatique (also representing the International Banking Security Association), and Youth with a Mission.
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II THE APPLICATIONS
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A. General
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The companies propose to bring the Envoy 100 and iNet 2000 tariffs into a common section called Intelligent Communications Network (ICN) Services, with each service retaining its own rate elements. In addition, the companies propose a major restructuring of the rates, resulting in a 2% average rate increase for Envoy 100 users and a 13% average rate increase for iNet 2000 users. The stated objectives of these filings are to align revenues more closely with underlying costs, to improve revenue performance and to achieve consistency and simplicity in rates.
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B. Account Charges
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For Envoy 100, the existing monthly customer account charge would be eliminated in order to achieve consistency with iNet 2000, for which there is no such charge. For privatemessaging systems, the initial service charge would be increased from $50 to $300, while the monthly charge would be increased from $150 to $300.
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The monthly User Accreditation charge, applicable to both Envoy 100 and iNet 2000, would be increased from $3.30 to $5.00 per individual user, with a maximum of $3,000 per Envoy 100 corporate or iNet 2000 organization account.
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C. Usage Charges
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At present, the iNet 2000 messaging usage charge is time based, while the Envoy 100 charge is volume based. Under the proposed tariff revisions, usage charges for both Envoy 100 and iNet 2000 would have time and volume components. For non-prime time usage, a 25% discount would apply.
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The Non-Interactive Option (NIO) currently part of the Envoy 100 tariff would be renamed TradeRoute and listed separately in the ICN Services tariff. The rate for this option would be increased from the current $0.45 per kilo-character to $0.50 per kilo-character. A minimum usage charge of $50 per month would apply for each account.
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Private messaging systems connected to Envoy 100 in the Electronic Data Interchange mode would also be charged $0.50 per kilo-character; when connected in messaging mode, a rate of $0.25 per kilo-characterwould apply.
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The iNet 2000 bulk transfer charge would be eliminated. The companies state that, under the proposed volume and time sensitive rates, this charge would no longer be necessary.
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Usage charges for iNet 2000 features would have the same time and volume based structure as the messaging charges. Similarly, the usage charges for access via iNet 2000 to information services in Canada, the United States and overseas would also be time and volume based. A non-prime time discount of 25% would be available for access to domestic information providers.
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D. Incremental Charges
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The current incremental charges for the various modes of accessing Envoy 100 and iNet 2000 and delivering messages to other systems would be replaced by ICN Services tariff items applicable to both Envoy 100 and iNet 2000. Except as noted below, the charges for these additional features would remain unchanged:
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(1) for access to Envoy 100 and iNet 2000 via 800 Service from areas outside a Datapac Serving Area (DPSA), the rate would increase from $.15 per minute to $0.20 per minute;
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(2) the rate for access to iNet 2000 from the United States via Datapac International Service would be increased from $0.165 per minute ($9.90 per hour) to $0.20 per minute (this charge would also become applicable for similar access to Envoy 100); and
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(3) the rate for message exchange with compatible systems in the United States would decrease from $0.55 to $0.30 per kilo-character (the companies cite improved efficiency in processing this type of data as the basis for this proposed rate reduction).
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In addition to the above, charges for the auto-delivery of messages to teletype terminals in Canada (TWX) would decrease from $0.086 to $0.05 per minute, while charges for auto-delivery to terminals in the United States would decrease from $1.15 to $0.65 per minute. The companies state that the proposed rate reductions reflect recent decreases in rates for Message Toll Service, which underlies these features.
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E. Other Charges
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The detailed usage statement and regenerated account statement features currently available for Envoy 100 customers would be available to iNet 2000 customers at the existing rates of $55.00 and $82.50, respectively. At present, the $155 charge for the provision of a detailed usage statement on magnetic tape (which allows customersto process their usage data electronically) is not covered by the companies' respective tariffs. The companies propose to tariff this charge and to increase it to $160.
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In addition, the companies propose to eliminate the protocol test charge for testing the compatibility of Teletex terminals with the Envoy 100 system. The companies state that, since Teletex Service is no longer promoted or supported by Telecom Canada, there has been no need for this feature for some time.
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F. Volume Discounts
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At present, Envoy 100 customers receive discounts based on the volume of traffic generated. For iNet 2000 customers, discounts are based on the total monthly bill. In order to achieve consistency between the two services, the companies propose that discounts for both be based on total monthly charges.
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III CONCLUSIONS
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A. The Economic Studies
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The economic studies filed in support of the applications indicate positive Net Present Values for the alternate plan (continuing to offer ICN Services at proposed rates) for both Bell and Telecom Canada. Among other things, the economic studies assumed that, if the companies were to discontinue ICN Services, demand attributable to Official Telephone Service (OTS) (the company's internal use of the services) would have to bemet through the purchase of a similar service from an outside source.
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In response to Commission interrogatories, the companies set out their respective levels of OTS usage and the alternatives available if ICN Services were to be discontinued. While Bell and B.C. Tel indicated a significant use of ICN Services for OTS, the remaining companies indicated that their use of ICN Services was small. Both Bell and B.C. Tel stated that they have in-house systems for electronic messaging. However, Bell pointed out that Envoy 100 provided public messaging and that iNet 2000 provided access to external databases, capabilities that its in-house system does not provide. Both Bell and B.C. Tel stated that, in the event that ICN Services were not available, they would have to perform economic evaluations as to what course to follow, i.e., whether to develop more extensive in-house systems or go to external suppliers.
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Based on the companies' responses to the Commission's interrogatories, the Commission is satisfied with the reasonableness of the reference plan assumption that, if ICN Services were discontinued, OTS usage would have to be purchased from an outside supplier.
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In light of the above, the Commission concludes that the companies wouldbenefit from continuing to offer ICN Services at the proposed rates, as opposed to discontinuing them.
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B. Proposed Rates and their Impact on Customers
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As stated above, the proposed rate restructuring provides for average overall increases of 2% for Envoy 100 users and 13% for iNet 2000 users. However, the impact on individual subscribers would vary over a wide range, depending on their messaging usage patterns and the extent to which they make use of various features. Some 9% of Envoy 100 and 4% of iNet 2000 customers would see decreases of more than 20%, with larger percentages of customers seeing smaller decreases or no change. On the other hand, increases for some subscribers would be substantial. Over 45% of Envoy 100 customers and over 23% of iNet 2000 customers would see increases of more than 15%.
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For iNet 2000 customers, much of the impact of the companies' proposed restructuring is attributable to the fact that, under the current time based rates, customers can benefit from using high speed lines to increase the volume of information sent over a given period of time. For extremely high volumes, a bulk transfer charge applies. However, below the point at which this charge applies, existing charges for iNet 2000 can be well below those paid by Envoy 100 users when calculated on a per kilo-character basis. The introduction of a volume based component addresses this aspect ofthe current rate structure.
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The introduction of a time based component into rates for Envoy 100 means that customers with long holding times could see considerable increases. However, at higher throughput rates, charges would actually decrease. Therefore, some Envoy 100 customers would be able to mitigate the impact of the proposed rate restructuring by making more efficient use of the service.
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The calculation of the 2% average increase for Envoy 100 customers is based on the assumption that customers would in fact modify their usage pattern to reduce the effects of the restructuring. It also takes into account the revised volume discount structure, under which discounts would apply at lower levels. Given the above-noted factors, rates for pure messaging would go down for some Envoy 100 customers.
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As the proposed usage rates for Envoy 100 and for the messaging feature of iNet 2000 are composed of the same time and volume sensitive components, they eliminate the potential for the telephone company to confer an undue preference on itself in the provision of electronic messaging. The companies' rate proposals therefore comply with the Commission's direction in Letter Decision 90-7.
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The charge of $0.15 per minute for access to Envoy 100 and iNet 2000 from outside a DPSA was introduced in Bell Canada and British Columbia Telephone Company - Competitive Network Service Rates for 1989, Telecom Decision CRTC 89-6, 15 May 1989 (Decision 89-6). On the basis of information filed in confidence in this proceeding, the Commission is satisfied that the proposed rate of $0.20 per minute would align charges for off-net access more closely with the associated costs. Furthermore, since the issuing of Decision 89-6, the availability of Datapac has been extended and fewer customers would be affected by a further increase.
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Concerns were expressed during the proceeding with respect to the lack of off-peak discounts for access to Envoy 100 and iNet 2000 from the United States. Of particular concern was the lack of off-peak discounts for Envoy 100 traffic from the United States, which would become subject to this incremental charge for the first time. In reply, Bell stated that access from the United States incurs Datapac International charges, for which there are no off-peak discounts.
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The Commission considers it appropriate, in order to maintain consistency between iNet 2000 and Envoy 100 rates, that the charge for access from the United States apply to both services. The Commission isalso satisfied that off-peak discounts are not appropriate, given that no such discounts apply for the underlying service. Based on the information filed, the Commission concludes that the proposed charge for access from the United States is justified on the basis of the underlying costs.
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Concerns were also expressed about the application of non-prime time discounts for use of Envoy 100 and iNet 2000 from overseas locations. Under both the existing and the proposed tariffs, usage charges are determined by the time of day at the originating location. Therefore, users accessing the services from overseas locations may pay prime time rates for usage outside peak periods.
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In response to these concerns, Bell stated that, given current traffic volumes, it would be too costly to develop a system that would allow customers around the world to be informed of the conversion times for prime time and non-prime time usage rates. The Commission is satisfied that the companies' approach to the application of non-prime time discounts is justified.
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The Commission also received comments on the proposed increase (from $150 to $300) in the monthly account charge for private messaging systems, the proposed increase in the initial service charge for private messaging systems (from $50 to $300), and the proposed rates for the detailed billing usage statement on magnetic tape. Based on the information filed, the Commission is satisfiedthat these proposed rates are justified on the basis of the underlying costs.
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During the proceeding, it was suggested that Bell provide an electronic invoicing system. Bell replied that there is not sufficient demand to warrant the expense of developing an electronic invoicing system. The Commission is of the view that the companies should develop electronic invoicing systems only when it becomes economically viable to do so.
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It was also suggested that a six second billing increment would be more appropriate than the current one minute increment. The Commission considers the one minute increment appropriate, in light of the fact that (as noted by Bell), the underlying service (Datapac) is billed in one minute increments.
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Concerns were also raised about the rounding procedures used in the billing system (i.e., rounding each session versus rounding the total monthly bill). Bell stated that the need to apply the tax of the province of message origin requires that each message be billed separately and that rounding procedures be applied at the message level. Given the need to account for provincial tax, the Commission finds the proposed rounding procedures acceptable.
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C. Disposition
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In light of the above, the Commission approves the applications at issue in this proceeding, with the exceptionof proposed tariff pages filed by Bell, B.C. Tel and MT&T dealing with the EXTEN feature of iNet 2000 (these companies withdrew the EXTEN feature after this proceeding was initiated). The companies are to incorporate in their final tariff pages the clarifications proposed by Bell in response to the comments of Mr. J. R. Hay concerning the application of prime time and non-prime time rates.
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The Commission's acceptance of the positive Net Present Value indicated by the economic studies and its finding that the companies would benefit by continuing to offer ICN Services are based on the rating strategy set out in the economic studies. The Commission expects the companies to file subsequent tariff revisions implementing that strategy.
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In their applications, the companies requested that five months be allowed between the date of the Commission's Decision and the effective date of the proposed tariff revisions. The companies also requested that the revisions take effect on the fifteenth of the month. Subsequently, the companies informed the Commission that they would no longer require a five month implementation period. The companies requested that the tariff revisions take effect on the fifteenth of the month, but stated that only seven days notice would be required.
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On 2 July 1991, Medinet Communications B.C. Inc. (Medinet) filed comments concerning the seven day implementation period. Medinet requested a period of 90 days. It stated that, because of the anticipated impact of the tariff revisions on its monthly bills, itrequired a 90 day period to make alternate arrangements. Bell replied on 17 July 1991. Bell stated that ten months had elapsed since customers had been advised of the proposed rate changes and that users have had sufficient opportunity to evaluate alternatives and develop contingent courses of action.
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The Commission agrees with Bell that those users who might wish to investigate alternative services have had sufficient time to do so. It therefore approves an effective date of 15 November 1991, 31 days from the date of this Decision. The companies are directed to issue, by 5 November 1991, final tariff pages implementing this Decision.
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Allan J. Darling
Secretary General
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