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Ottawa, 11 June 1992
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Telecom Decision CRTC 92-11
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APPLICATION BY TWU - STATUS OF RESELLERS UNDER THE RAILWAY ACT
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I BACKGROUND
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In Interexchange Competition and Related Issues, CRTC Telecom Decision 85-19, 29 August 1985 (Decision 85-19), the Commission held that resellers were not "companies" within the meaning of section 334 of the Railway Act. On 11 April 1991, the Telecom-munications Workers' Union (TWU) filed an application pursuant to section 66 of the National Telecommunications Powers and Procedures Act (NTPPA) requesting that the Commission review and vary this finding. On 19 July 1991, the Commission issued CRTC Telecom Public Notice 1991-55, inviting comments on TWU's application.
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In Bell Canada, Request to Review that Part of Telecom Decision CRTC 78-7 of August 10, 1978 Dealing with the Saudi Arabian Telephone Project, Telecom Decision CRTC 79-1, 2 February 1979, the Commission adopted criteria by which it determines whether to review and vary its telecommunications decisions. Those criteria require that, in order for the Commission to exercise its powers pursuant to section 66 of the NTPPA, the applicant must demonstrate, on a prima facie basis, the existence of one or more of the following:
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1. an error in law or in fact;
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2. a fundamental change in circumstances or facts since the decision;
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3. a failure to consider a basic principle that had been raised in the original proceeding;
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4. a new principle that has arisen as a result of the decision.
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In addition, notwithstanding the lack of prima facie evidence that any of the above criteria have been met, it is also open to the Commission to determine that there is substantial doubt as to the correctness of its original decision and that reappraisal is accordingly warranted. This is not so much a fifth criterion, however, as it is a statement of the residual discretion that exists within section 66.
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TWU submitted in its application that the Commission erred in law in three ways: (1) by failing to rule that resellers are within the legislative authority of Parliament; (2) in interpreting the definition of "company" as being restricted to "those companies ... that may be considered to be operating a telephone or telegraph system", thereby effectively deleting the words "or line" from the definition in the Railway Act; and (3) by basing its legal determination on policy issues.
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TWU also argued that there have been fundamental changes in circumstancessince Decision 85-19. Specifically, TWU pointed to (1) the Supreme Court of Canada's ruling in AGT v. CRTC, [1989] 2 S.C.R. 225, (2) the growth of the resale industry since 1985, and (3) the decision of the Federal Court of Appeal in TWU v. CRTC and CNCP, [1989] 2 F.C. 280.
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In support of its argument, TWU filed a copy of the response to interrogatory Bell(CALL-NET)1May89-1Resale (Call-Net 1), filed by Bell Canada (Bell) in the proceeding leading to Resale and Sharing of Private Line Services, Telecom Decision CRTC 90-3, 1 March 1990 (Decision 90-3). This response provides a description of Bell's local and interexchange facilities and the steps involved in using them to route an interexchange call. TWU also filed promotional and other documents of four resellers, namely ITN Corporation (ITN), Cam-Net Communications Inc. (Cam-Net), Call-Net Telecommunications Ltd. (Call-Net) and Optinet Telecommunications (Optinet), providing information on the services offered by these resellers and a description of some of their operations.
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The Commission received comments in support of TWU's application from the Government of Alberta, the Government of Saskatchewan, Alberta Government Telephones Commission, Bell, the British Columbia Old Age Pensioners' Organization and other groups, British Columbia Telephone Company, Maritime Telegraph and Telephone Company Limited and The Island Telephone Company Limited, and Newfoundland Telephone CompanyLimited.
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The Commission received comments opposed to TWU's application from ACC Long Distance Ltd., British Columbia Systems Corporation, Call-Net, Canadian Business Telecom-munications Alliance (CBTA), Cam-Net, Canadian Satellite Communications Inc., Competitive Telecommunications Alliance (CTA), fonorola Inc., Motorola Information Systems, Rogers Cable T.V. Limited, Teleglobe Canada Inc. and Unitel Communications Inc.
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II CONCLUSIONS
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In reaching its conclusion in Decision 85-19 that resellers are not "companies", the Commission drew heavily on the legal argument advanced by the Canadian Industrial Communications Assembly and other groups (CICA et al) in the proceeding leading to Enhanced Services, Telecom Decision CRTC 84-18, 12 July 1984 (Decision 84-18). Relying on various judicial interpretations of the words "telegraph" and "telephone" and on the Commission's interpretation of "telegraph and telephone system" in CNCP Telecommunications: Interconnection with Bell Canada, Telecom Decision CRTC 79-11, 17 May 1979, CICA et al concluded that the term "telephone system" is generally limited to a system designed or intended for the transmission of public voice or "public record" traffic on a utility basis, utilizing public rights of way, i.e., a system capable of providing "plain old telephone service". The Commission stated in Decision 84-18 that it agreed with CICA et al that its jurisdiction extended only to thosecompanies considered to be operating telephone systems. The Commission therefore determined that it was not required to regulate service providers who make use of underlying telecommunications services for the provision of their service offerings. In Decision 85-19, the Commission relied on this reasoning to conclude that it was not required to regulate resellers.
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In assessing TWU's application, the Commission has re-examined its earlier reasoning in light of the specific evidence filed in this proceeding. The Commission first considered the nature of the systems currently operated by resellers, specifically, those systems described in TWU's application.
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According to the second edition of Telephony's Dictionary, a "system" is "a collection of personnel, machines, and methods organised to accomplish a set of specific functions". The Telecommunications Dictionary and Fact Book (Centre for Communications Management, Inc., 1984) defines a "system" as "an organized assembly of equipment, personnel, procedures and other facilities designed to perform a specific function or set of functions".
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The Commission is of the view that resellers such as those described in TWU's application have systems that consist of leased or owned access lines that link, either directly or by means of the public switched telephone network (PSTN), thesubscriber's premises to the reseller's switch, which is in turn attached to leased transmission facilities. These transmission facilities are connected to local facilities, which then carry the call to its destina-tion. This is reflected in the diagrams provided in Bell's response to Call-Net 1.
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The Commission has further considered whether such a system is designed or intended for transmis-sion of public voice or public record traffic.
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The types of telecommunications services provided by the four resellers were described as follows in the materials filed by TWU.
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The order form of ITN indicates that its customers can obtain "Loop Start DDD", "Loop Start DDD and Local", or "Ground Start DDD and Local", and Faxworld. A copy of a proposal prepared for a prospective client indicates that ITN can provide U.S. 800 Service and World 800 Service, and that it can provide long distance calling in Canada, to the U.S. and Overseas at a rate less than "Telephone Company rates."
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TWU filed advertising material that indicates that Cam-Net offers discounted long distance telephone service in Canada, to the U.S. and Overseas. Meanwhile, in its annual report, Cam-Net states that its objectives have been to build an infrastructure that can effectively provide Canadian business with relieffrom excessive long distance rates and to maintain a leadership role in the discount alternate long distance telecommunications service industry in Canada.
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TWU filed promotional literature indicating that Call-Net offers its customers reduced long distance charges for calls in Canada and to the U.S., and that it provides a service that expands the local calling area, thereby eliminating long distance charges.
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Finally, TWU filed a copy of an advertisement from the Globe and Mail, in which Optinet indicated that it provides cost effective integrated voice, data and video transport capabilities to Canadian businesses.
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In light of the evidence, the Commission and concludes that circumstances are now such that the systems of at least those resellers whose operations fall within the descriptions contained in the evidence filed by TWU are designed or intended for the transmission of public voice or public record traffic comparable to the interexchange telecommunications services provided by federally regulated carriers.
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Some of the interveners opposing TWU's application went beyond the reasoning in Decision 84-l8 to argue that resellers must operate a telephone system or line before they would fall within the definiton of "company". Specifically, CTA and CBTA both argued that the words "to operate a telephone system or line" in the definition of "company" refer to the working or management oftransmis-sion lines or systems; they submitted that it is the telecom-munications carriers, not the resellers, that manage and work the physical facilities.
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According to CTA, the operation of the telephone system or line involves the installation, construction, maintenance, provision, management and working of any transmission lines employed, and that the carriers, not the resellers, perform these functions. CTA submitted that, while the reseller may determine which carrier facility or service it will use to transmit a particular message, this is no more than is done by other business customers of the telephone companies.
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CTA argued that this is true even in cases where certain transmission services are said to be dedicated to the reseller's use. According to CTA, a full-time dedicated circuit or bandwidth can and is provided over a variety of physical facilities, and the carrier may decide from time to time to reroute the circuit on to different transmission facilities between two cities.
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CTA also argued that the role of a reseller is similar to that of a shipper who makes use of, but does not operate, a railway.
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The basic premise of CTA's argument appears to be that carriers, not resellers, are the operators of transmission facilities or lines, since it is the carriers who allocate traffic to particular physical transmission lines and who maintain these transmission lines.
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The Commission is not persuaded that it is only carriers who are responsible for the operation of telecommunications systems. In the Commission's view, resellers may determine which services or facilities to lease in order to provide their services and may aggregate and switch the traffic to be sent over their systems. Furthermore, in certain circumstances, resellers do control the routing of messages over their leased services or facilities. Resellers typically lease services and facilities from carriers and program their switches to determine how to route their traffic over these services and facilities. In such cases, it is the reseller, not the carrier, who determines the routing, thereby operating the system carrying the traffic.
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The Commission therefore concludes that, where a reseller offers end-to-end basic telecommunications service by means of interprovincial services or facilities that it configures, and where it exercises control over the carriage and routing of its traffic, it falls within federal jurisdiction and is operating a telephone system or line. Accordingly, it is a "company" within the meaning of section 334 of the Railway Act.
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The Commission directs those resellers who have registered with the Commission pursuant to Decision 90-3 and Telecom Order CRTC 91-380, 19 March 1991, to file, by 9 October 1992, proposed tariffs for the Commission's approval, or to show cause, in light of this Decision, why they should not be required to do so. All other resellers who, in light of this Decision, fall within the definition of "company" are also directed to file, by 9 October 1992, proposed tariffs for the Commission's approval.
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Allan J. Darling
Secretary General
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