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Telecom Decision CRTC 93-2
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APPLICATIONS FOR CONTRIBUTION EXEMPTIONS
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In Competition in the Provision of Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues, Telecom Decision CRTC 92-12, 12 June 1992 (Decision 92-12), the Commission established the terms and conditions governing the competitive offering of public switched long distance voice services. Among other things, the Commission required that competitive providers pay contribution charges to Bell Canada, British Columbia Telephone Company, The Island Telephone Company Limited, Maritime Telegraph and Telephone Company Limited, The New Brunswick Telephone Company Limited and Newfoundland Telephone Company Limited (the telephone companies) to assist in the support of local/access service. However, the Commission also determined that, in the case of dedicated, data and local services, an exemption from the requirement to pay contribution might be granted upon application to the Commission. The Commission indicated that exemptions would be granted where a competitor provides evidence satisfactory to the Commission that, by reasons of the technical, economic or operational characteristics of the service, it is unlikely that connections will be used significantly for joint-use interexchange voice service.
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Beginning in August 1992, the Commission received numerous applications from resellers for contribution exemptions. Various submissions from the telephone companies and other carriers were received in response to these applications. By letter dated 29 October 1992, the Commission called for additional comments and replies, which were to be filed on 30 November 1992 and 11 December 1992, respectively.
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In this Decision, the Commission sets out a general framework for dealing both with the applications before it and with future applications for contribution exemptions. The appendix provides the Commission's rulings with respect to the individual applications.
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A number of specific service configurations have been examined in this proceeding. These configurations fall into two general categories: (1) those where the carrier is in a position to verify that an exemption is warranted because its facilities are used and because of the technical nature of the arrangement, and (2) those where the carrier is not in a position to know if the use of the circuits in question would attract contribution.
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Where the carrier is in a position to verify that an exemption is warranted (for example, certain dedicated private line services and arrangements involving Centrex Service), the Commission considers that the most practicable way to proceed is to base its disposition on such verification.
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Where the carrier is not in a position to know if the circuits in question would attract contribution (for example, voice grade connections used to carry facsimile traffic and Canada/USA circuits), the applicant will be required to provide one or more of the following forms of evidence or methods of proof in order to satisfy the Commission that its use of the carrier's circuits warrants a contribution exemption:
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(1) Affidavit by Applicant
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This form of evidence was prescribed in Resale and Sharing of Private Line Services, Telecom Decision CRTC 90-3, 1 March 1990. The Commission considers that it constitutes sufficient proof in some situations.
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(2) Affidavit by the End-user
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The Commission will grant an exemption in some cases on the basis of an end-user affidavit. For example, an end-user attesting to the fact that carrier circuits are being used by the competitor to provide the end-user with a dedicated service would constitute sufficient proof to warrant an exemption.
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(3) Technical Audit by an Independent Third Party
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In some cases, the Commission will require evidence of a third party technical audit of a competitor's configuration. The audit should be conducted by an independent registered professional engineer, who should furnish the audit report to the Commission together with an affidavit attesting to the accuracy of the competitor's application.
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(4) Attachment of Equipment
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Satisfactory proof in some situations may require that the competitor attach equipment to its network to restrict usage to non-voice applications. Where the Commission determines that the attachment of equipment is required, a technical audit might also be required to verify the placement and operation of such equipment.
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The Commission considers that the applicant for the exemption should bear the cost of furnishing satisfactory forms of evidence and methods of proof. In the case of (3) and (4) above, significant expenditures could be required. Accordingly, the Commission has attempted to confine the requirement for technical audits and/or attachment of equipment only to cases where other means of justifying an exemption are inadequate or unavailable.
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III SPECIFIC CONFIGURATIONS
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In Decision 92-12, the Commission stated that, without an exemption, contribution charges would apply to the following:
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(1) a circuit between a competitor's facility and a telephone company's switch to provide access to the public switched telephone network;
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(3) Canada/Overseas circuits; and
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(4) circuits terminating on a Centrex.
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The Commission indicated that contribution payments would not be required, and that applications for exemptions would not be necessary, for either a direct access line (DAL) between a competitor's switch and a customer location or for circuits used solely to access the telephone company's MTS/WATS services (MTS/WATS encompasses all switched long distance services, including those such as Advantage and 800 Service). The applications filed in this proceeding identified a number of other specific arrangements. The Commission's conclusions with respect to these arrangements are set out below.
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As noted above, where a circuit is used solely by a competitor to access MTS/WATS, no contribution is payable. The telephone companies have indicated that, in most situations, MTS/WATS access circuits can also provide access to the local network. Since circuits accessing the local network do require contribution payments (where they terminate traffic from interexchange channels), the telephone companies have argued that contribution is payable for any circuit that can access both MTS/WATS and the local network, unless the competitor can demonstrate that the circuit is used only to access MTS/WATS.
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The Commission notes that the telephone companies are in a position to block access to the local network from MTS/WATS access circuits. Accordingly, where a competitor orders MTS/WATS access circuits, the Commission does not consider it necessary to require that the competitor demonstrate, either to the telephone company or to the Commission, that those circuits will be used solely to access MTS/WATS. Consistent with Decision 92-12, competitors shall be exempt from paying contribution on such circuits, and no application for exemption shall be required.
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(2) MTS/WATS and Local Access
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In one configuration identified in this proceeding, a competitor has access to both MTS/WATS and local services from a switch, but has no interexchange private lines connected to the switch. Since, in this configuration, competitors do not have an interexchange private line network, they should not be required to pay contribution on the local access channels.
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Applications for exemptions for this configuration are to be supported by an affidavit by the applicant attesting to the fact that there are no interexchange private lines connected to the switch.
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Bell argued that a circuit between a reseller switch and a Centrex Service dedicated to a customer of the reseller should be exempt from contribution, provided that access to the local network through the Centrex is blocked.
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The Commission is of the view that a circuit between a reseller switch and a Centrex, where both the circuit and the Centrex are dedicated to the end-user, is in fact a DAL. As such, it is exempt from contribution charges pursuant to Decision 92-12. Furthermore, consistent with Decision 92-12, no application is required for such an exemption.
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(4) Multiplexed Centrex Circuits
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An arrangement has been identified where a 64 kbps channel terminating on a Centrex is carrying two voice circuits (using 32 kbps coding, instead of the usual 64 kbps). At issue is whether such channels should be subject to contribution charges for one circuit or for two. Decision 92-12 specifies that contribution is payable on circuits and defines a circuit as a 64 kbps channel. Accordingly, the Commission finds that such channels are subject to only one contribution charge.
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(5) Administrative Circuits
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Where interconnecting circuits are used solely for a competitor's own administrative traffic, no contribution charges are applicable. In general, applications for exemptions for administrative circuits will be granted where those circuits are separated from circuits carrying competitive traffic and where the Commission is satisfied in the circumstances that the number of such circuits is reasonable.
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The Commission received several applications dealing with traffic that is picked up and terminated outside of Canada. The Commission finds that exemptions should be granted for such configurations, provided that satisfactory evidence is furnished to support a claim that there is no connection to the domestic networks.
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Decision 92-12 specifies that contribution charges are applicable to Canada/USA circuits. Such circuits are typically grouped into wideband channels. The Commission is of the view that contribution should not be paid on unused circuits within a wideband channel. Therefore, provided that the competitor reports to the carrier supplying the channels, on a monthly basis, the total cross-border capacity and the number of circuits in use, the carrier shall assess contribution only on the circuits in use.
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(8) Data Service Providers
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In Decision 92-12, the Commission determined that interconnecting circuits carrying only data traffic would be exempt from contribution. Where a competitor provides both switched voice and data, an exemption for data-only circuits will be granted provided that the competitor can satisfy the Commission that the voice and data traffic are carried on different networks. Alternatively, competitors may, in certain circumstances, choose to attach equipment to its network that precludes voice usage. The Commission is of the view that, in both cases, competitors should support any application for contribution exemption with a technical audit report and an engineer's affidavit.
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For data-only providers, a contribution exemption will generally be granted where the applicant attests in an affidavit that no voice services are provided.
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A. Treatment of Applications
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The Commission will consider future applications for exemptions either after the facilities in question have been supplied or where the applicant wishes to have a ruling prior to ordering facilities. The Commission is prepared to grant expedited interim approval where exemptions can be found on a prima facie basis to be warranted. Final disposition will be made following the answer and reply process set out in Part VII of the CRTC Telecommunications Rules of Procedure.
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With respect to the initial group of applications at issue in this proceeding, the Commission considers that it would not be appropriate to require competitors to pay contribution charges for configurations that have now been found to be exempt. Accordingly, in addition to the exemption applications denied in this Decision, the exemption applications approved shall be effective from the date the circuits were first installed.
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B. Comment by Telephone Companies
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The telephone companies submitted that they should be permitted to comment on all applications with respect to facilities that will be operational in their respective operating territories, even when they are not a respondent to the application. The Commission agrees, and therefore will not grant exemptions unless it is satisfied, amongst other things, that copies of the applications for exemptions have been served on the telephone company in whose operating territory the circuits are located.
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C. Additions/Deletions to an Exempted Configuration
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Where a competitor seeks to add or delete circuits to or from an existing service configuration that has been granted an exemption, the Commission is of the view that a simple method should exist to extend the exemption to the revised configuration. The Commission considers it adequate that an officer of the competitor send an attestation to the carrier describing the configuration for which the exemption was originally granted, identifying the circuits being added or deleted, and setting out the reasons why the rationale upon which the Commission based the original exemption continues to apply.
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V POLICING AND ENFORCEMENT
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A number of parties stated that the Commission should take the primary role in the policing of the exemption process. Unitel Communications Inc. submitted that the carriers should not be responsible for policing and monitoring suspected violations, because of their dual role as both suppliers and competitors to resellers. However, the Commission is of the view that it is the responsibility of all of the regulated carriers to ensure compliance with their tariffs. This includes the obligation to collect contribution charges.
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Certain parties to this proceeding proposed that random audits be used as a means to ensure compliance with any rules governing a contribution exemption. The Commission is of the view that such audits may be appropriate in certain circumstances and will decide upon their use on a case-by-case basis.
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Where the Commission has determined that a condition of a contribution exemption has been violated, or that the basis for obtaining the exemption in the first place was invalid or no longer applies, the Commission will assess remedies as may be appropriate to the circumstances. In the Commission's view, the determination of specific remedies associated with violations of contribution exemptions should be determined on a case-by-case basis. As a general rule, the Commission considers that, at a minimum, all legitimate back charges and interest should be paid to the telephone company regardless of any limitation expressed in its Terms of Service. The Commission may also impose penalties, such as a requirement for deposits beyond that specified in the Terms of Service, the imposition of more stringent conditions for contribution exemptions, or even suspension or termination of service in circumstances beyond those contemplated in the Terms of Service.
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As noted earlier, the appendix provides a list of the individual applications that are the subject of this proceeding, together with the Commission's rulings with respect to those applications. The Commission has granted final approval where an application has met the evidentiary requirements set out in this Decision, and denied the application where it considers that the circuits in question are properly subject to contribution. Where an applicant's configuration is one for which the carrier is in a position to verify that an exemption is warranted, and where the carrier has not yet provided such verification, the Commission has granted interim approval. In such cases, the carrier may examine the applicant's configuration and report to the Commission by 3 May 1993. Finally, in those cases where the filing of further evidence is required of the applicant, disposition has been deferred until the required evidence is filed. Applicants are to file any such evidence by 3 May 1993, serving copies on the carrier or carriers in question. The carriers are to file any comments by 14 May 1993.
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Allan J. Darling
Secretary General
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