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Telecom Public Notice
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Ottawa, 25 February 1992
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Telecom Public Notice CRTC 92-9
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FLOOR PRICE FILING REQUIREMENTS FOR THE SALE OF TERMINAL EQUIPMENT
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In Attachment of Subscriber-Provided Terminal Equipment, Telecom Decision CRTC 82-14, 23 November 1982 (Decision 82-14), the Commission established requirements as to the participation of Bell Canada (Bell), British Columbia Telephone Company (B.C. Tel), Northwestel Inc. (Northwestel) and Unitel Communications Inc. (Unitel) in the terminal equipment market. Those requirements specify, among other things, that:
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(1) sales of each model type of new terminal equipment are to be at a price not less than a floor
price to be filed in confidence with the Commission;
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(2) floor prices for new terminal equipment must be shown to the Commission to be not less than
the associated costs; and
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(3) reports must be filed with the Commission showing, for each model type, the number of units
sold, the associated revenues and costs, and an assessment of the continuing validity of the
floor price.
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Unlike tariffs of tolls, the Commission does not approve sale prices or, for that matter, floor prices. While sales of each type of new terminal equipment must not be below the floor price, there is no requirement regarding a contribution to fixed common costs, as is the case with optional or competitive tariffed services.
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The Commission stated in Decision 82-14 that its purpose in establishing the floor price regime was to safeguard against the potential for cross-subsidization of competitive terminal offerings with revenues from the carriers' monopoly operations. However, the Commission also stated that it was mindful of the fact that the question of appropriate costing methods and related information requirements for competitive services was then under review in Phase III of the Cost Inquiry (Phase III).
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Decision 82-14 was subsequently appealed by Unitel Inc., then CNCP Telecommunications. In upholding the Commission's jurisdiction to establish the floor price regime set out in Decision 82-14, the Federal Court of Appeal stated (among other things) that, pending the implementation of new costing methods pursuant to Phase III, it is a reasonable and proper exercise of the Commission's power to require that sales of terminal equipment not be below a floor price. The Court also stated that, once Phase III is complete, the filing of floor prices for specific model types may no longer be seen to be the most efficient means of ensuring that tolls from monopoly services are not used to cross-subsidize competitive activities.
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Bell, B.C. Tel and Northwestel are now furnishing annual audited Phase III results to the Commission. Among other things, these results serve to identify any cross-subsidization of competitive categories.
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In CNCP Telecommunications - Application for Exemption from Certain Regulatory Requirements, Telecom Decision CRTC 87-12, 22 September 1987, the Commission determined that Unitel should be exempted from Phase III requirements. The Commission found that Unitel does not have the ability to engage in any material cross-subsidization among its various service offerings.
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In light of the above, the Commission considers that it may be appropriate to relieve Bell, B.C. Tel, Northwestel and Unitel of the requirement to file floor prices for new terminal equipment. The Commission recognizes that the potential for individual instances of below-cost pricing remains. The Commission considers, however, that the complaints process may suffice to bring such instances to its attention and that they could be satisfactorily investigated, provided that mechanisms remain in place whereby each company could be required to furnish the floor price for a particular item. Accordingly, the Commission proposes to eliminate the floor price regime established in Decision 82-14. The Commission initiates this proceeding to consider the issues raised by its proposal.
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Procedure
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1. Bell, B.C. Tel, Northwestel and Unitel (the carriers) are made parties to this proceeding.
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2. Other persons wishing to participate in this proceeding (interveners) must file a notice of intention to participate by writing to Mr. Allan J. Darling, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, by 24 March 1992. The Commission will issue a complete list of parties and their mailing addresses.
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3. Carriers and interveners may file comments with the Commission, serving copies on each other, by 7 April 1992.
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4. Carriers and interveners may file reply comments with the Commission, serving copies on each other, by 21 April 1992.
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5. Where a document is to be filed or served by a specific date, the document must be actually received, not merely mailed, by that date.
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Allan J. Darling
Secretary General
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