ARCHIVED - Telecom Decision CRTC 94-15
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Telecom Decision |
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| Ottawa, 12 August 1994 | |
| Telecom Decision CRTC 94-15 | |
| REGULATION OF WIRELESS SERVICES | |
| I BACKGROUND | |
| On 13 October 1993, the Commission issued Regulation of Wireless Services Provided by Canadian Carriers, Telecom Public Notice CRTC 93-64 (Public Notice 93-64), in which it stated the view that, under the Telecommunications Act (the Act), the provision of wireless telecommunications may well constitute the provision of a "telecommunications service" and that a Canadian carrier providing such services would be subject to Commission regulation, including the requirement to file tariffs for the Commission's approval. In that Public Notice, the Commission invited comment on, among other things, its preliminary view that, pursuant to section 34 of the Act, it would be appropriate to forbear from exercising some or all of its powers and performing some or all of its duties with respect to the provision of cellular service, public cordless telephone service (PCTS) and other wireless services (such as mobile radio and paging) provided by Canadian carriers. | |
| Section 34 of the Act states as follows: | |
| 34.(1) The Commission may make a determination to refrain, in whole or in part and conditionally or unconditionally, from the exercise of any power or the performance of any duty under sections 24, 25, 27, 29 and 31 in relation to a telecommunications service or class of services provided by a Canadian carrier, where the Commission finds as a question of fact that to refrain would be consistent with the Canadian telecommunications policy objectives. | |
| (2) Where the Commission finds as a question of fact that a telecommunications service or class of services provided by a Canadian carrier is or will be subject to competition sufficient to protect the interests of users, the Commission shall make a determination to refrain, to the extent that it considers appropriate, conditionally or unconditionally, ... in relation to the service or class of services. | |
| (3) The Commission shall not make a determination to refrain ... if the Commission finds as a question of fact that to refrain would be likely to impair unduly the establishment or continuance of a competitive market for that service or class of services. | |
| The sections enumerated in section 34 may be summarized as follows: | |
| (1) section 24: the offering and provision of any telecommunications service by a Canadian carrier are subject to any conditions imposed by the Commission or included in a tariff approved by the Commission; | |
| (2) section 25: among other things, no Canadian carrier shall provide a telecommunications service except in accordance with a tariff filed with and approved by the Commission, specifying the rate or the maximum or minimum rate, or both, to be charged; | |
| (3) section 27: among other things, every rate charged by a Canadian carrier for a telecommunications service shall be just and reasonable, and the Canadian carrier shall not unjustly discriminate or give an undue or unreasonable preference in relation to the provision of a telecommunications service or the charging of a rate for it; | |
| (4) section 29: no Canadian carrier shall, without the prior approval of the Commission, give effect to any agreement or arrangement, whether oral or written, with another telecommunications common carrier respecting the interchange of telecommunications, the management or operation of facilities or the apportionment of rates or revenues; and | |
| (5) section 31: no limitation of a Canadian carrier's liability in respect of a telecommunications service is effective unless it has been authorized or prescribed by the Commission. | |
| With respect to cellular services, the Commission expressed the preliminary view that the criteria set out in section 34 would be met if it were to refrain from exercising and performing some or all of the enumerated powers and duties, in that: | |
| (1) a determination to refrain would be consistent with the Canadian telecommunications policy objectives, particularly the objective "to foster increased reliance on market forces ... and to ensure that regulation, where required, is efficient and effective"; | |
| (2) the provision of cellular service is subject to a degree of competition sufficient to protect the interests of users; and | |
| (3) a determination to refrain would not be likely to impair unduly the continuance of a competitive market. | |
| However, the Commission also stated the view that any determination to refrain with respect to the approval of tariffs for cellular telephone services offered by telephone company affiliates should be conditional on the existence of adequate safeguards to ensure that the cellular activities of those affiliates are conducted at arm's length from the telephone company's regulated activities and that there is no cross-subsidization from monopoly revenues. | |
| With respect to PCTS, the Commission was similarly of the preliminary view that the criteria of section 34 would be met if it refrained from the exercise and performance of all or some of the enumerated powers and duties. | |
| With respect to mobile wireless services other than PCTS and cellular services (other wireless services), the Commission stated the preliminary view that the statutory criteria set out in section 34 would be met if it were to refrain from exercising and performing all of the enumerated powers and duties. The Commission was also of the view that, in the alternative, it would be consistent with the Canadian telecommunications policy as set out in section 7 of the Act to make an exemption order pursuant to section 9. That section provides that the Commission may, by order, exempt any class of Canadian carriers from the application of the Act, subject to any conditions contained in the order, where the Commission, after holding a public hearing, is satisfied that the exemption is consistent with the Canadian telecommunications policy objectives. Where the Commission proposes to so exempt a class of Canadian carriers, section 10 requires that the proposed order be sent to the Minister, who will lay it before each House of Parliament. | |
| The Commission received comments from Canada Popfone Corporation (Popfone), Canadian Association of Messages Exchanges Inc. (CAM-X), Canadian Business Telecommunications Alliance, Clearnet Inc. (Clearnet), Mobility Canada, RadioComm Association of Canada (RAC), Rogers Cantel Inc. (Cantel), Stentor Resource Centre Inc. (Stentor), Teleglobe Canada Inc. (Teleglobe), Telezone Corporation, TMI Communications (TMI) and Unitel Communications Inc. (Unitel). | |
| II CONCLUSIONS | |
| A. General | |
| The Commission finds that the provision of wireless telecommunications constitutes the provision of a telecommunications service within the meaning of the Act. Thus, the provision of such services by Canadian carriers, within the meaning of the Act, is subject to regulation by the Commission. The Commission notes that parties to this proceeding generally agreed with this view. | |
| Unitel submitted that the Commission should defer any consideration of refraining with respect to wireless services until after the appropriate criteria for assessing market competitiveness are established in the proceeding initiated by Review of Regulatory Framework, Telecom Public Notice CRTC 92-78, 16 December 1992. | |
| The Commission notes that subsections 34(1), (2) and (3) of the Act set out the conditions governing a determination on its part to refrain from exercising powers or performing duties under the Act. The Act does not require the Commission to delineate criteria in addition to those set out in section 34, nor in the Commission's view is it necessary to do so in order to determine whether or not to refrain with respect to the services under consideration in this proceeding. | |
| B. Cellular Service and Public Cordless Telephone Service | |
| In connection with cellular service, parties were generally of the view that the Commission should refrain with respect to all or some of the sections enumerated in section 34. Mobility Canada and Stentor submitted that the Commission should refrain with respect to all sections, stating that cellular service providers have no market power. Mobility Canada added that continued regulation would be inconsistent with the policy objectives set out in section 7 of the Act, specifically, the objectives to foster increased reliance on market forces and to respond to the economic and social requirements of users of telecommunications services. Cantel submitted that, initially, the Commission should refrain only with respect to itself and BCE Mobile Inc. It was Cantel's view that, in the case of both these service providers, a significant number of independent investors hold shares, making anti-competitive conduct unlikely. With respect to the cellular affiliates of the other telephone companies, Cantel submitted that the Commission should refrain only after examining the adequacy of competitive safeguards. | |
| Teleglobe contended that the Commission should forbear from regulating both cellular and PCTS, but should not refrain from its powers and duties under section 29, in order that it could ensure the Canadian carriage of Canadian traffic. | |
| Most parties saw a continuing requirement for safeguards against anti-competitive behaviour. RAC was of the view that the Commission should refrain only with respect to the powers and duties set out in sections 24 and 25, submitting that sections 27, 29 and 31 may be required to investigate complaints regarding such behaviour. | |
| The Commission notes that there are two licensed providers of cellular service and that four potential PCTS providers received licenses from the Department of Communications (now Industry Canada) in 1992. PCTS and other new services, such as enhanced specialized mobile radio systems, will provide substitutes for cellular service in some circumstances. Thus, these services will be subject to competition in the marketplace from each other and, in the case of PCTS, from pay telephones and certain PBX and Centrex services. Based on the above, the Commission finds it appropriate to refrain from the exercise of powers and the performance of duties with respect to cellular service and PCTS, except as described below. | |
| With regard to Cantel's submission in the context of cellular service that the Commission should refrain only with respect to Cantel and BCE Mobile, the Commission does not consider that the presence of significant independent investment ensures against anti-competitive behaviour. However, as indicated in Public Notice 93-64, the Commission does consider it appropriate that its determination to refrain should be subject to assurances that cellular activities are conducted at arm's length from the telephone company's regulated activities and that there is no cross-subsidization from monopoly revenues. Accordingly, the Commission will not refrain with respect to cellular operations carried on within a regulated telephone company (i.e., one providing primary exchange service). | |
| With respect to cellular operations carried on by telephone company affiliates, the Commission would note that appropriate safeguards were established in Cellular Radio - Adequacy of Structural Safeguards, Telecom Decision CRTC 87-13, 23 September 1987 (Decision 87-13) and in Rogers Cantel Inc. v. Bell Canada - Marketing of Cellular Service, Telecom Decision CRTC 92-13, 29 June 1992 (Decision 92-13). These safeguards apply to the conduct of the telephone companies themselves, vis-à-vis their relations with cellular affiliates. Thus, the Commission's determination to refrain with regard to the provision of cellular service by affiliates does not affect the status of those safeguards. | |
| For the reasons set out in Decisions 87-13 and 92-13, the Commission considers that the safeguards established in those Decisions should be extended to apply to the relations of the telephone companies with any affiliates in respect of the provision of PCTS. | |
| In addition, the Commission considers that all terms and conditions currently applicable to cellular service providers governing the protection of the confidentiality of customer information, whether set out in tariffs, service contracts or otherwise in Commission rulings, should remain in effect. On a going-forward basis, all such provisions are to be included in customer service contracts. In addition, these provisions will continue to apply to existing customers, whether or not they were included in the service contracts signed by those customers. Finally, the Commission considers that the same terms and conditions governing the protection of the confidentiality of customer information should apply to providers of PCTS. Accordingly, as with cellular service, PCTS providers are to include those terms and conditions in any customer service contracts. | |
| In order to maintain its ability to require conditions governing customer confidential information, and in order to place other general conditions on the provision of cellular service and PCTS should it prove appropriate to do so, the Commission will continue to exercise powers and perform duties under section 24. | |
| The Commission does not consider it necessary to continue to require providers of cellular service and PCTS to obtain the Commission's approval in order to give effect to agreements. However, in general, the Commission considers open access to telecommunications networks to be in the public interest. Consistent with this view, the Commission considers it necessary to ensure that cellular service and PCTS providers do not unjustly discriminate against other service providers or subscribers, or confer any undue or unreasonable preference, with respect to access to their networks. Further, the Commission considers that instances of unjust discrimination or undue preference in the provision of cellular service or PCTS could arise in other contexts. Accordingly, the Commission will continue to exercise powers and perform duties under subsections 27(2) and (4) in relation to these services. | |
| Based on the above, pursuant to subsection 34(1), the Commission finds as a fact that to refrain from exercising powers and performing duties under sections 25, 29 and 31 and subsections 27(1), (5) and (6) with respect to the provision of cellular service and PCTS by Canadian carriers other than the telephone companies would be consistent with the Canadian telecommunications policy objectives. Pursuant to subsection 34(2), the Commission finds that the provision of cellular service and PCTS is or will be subject to sufficient competition to protect the interests of users, so that it is appropriate to so refrain; further, with reference to subsection 34(3), the Commission finds that to so refrain would not be likely to impair unduly the establishment or continuance of a competitive market for these services. Pursuant to section 34(4), effective the date of this Decision, sections 25, 29 and 31 and subsections 27(1), (5) and (6) do not apply to the provision of cellular service or PCTS by Canadian carriers other than the telephone companies. | |
| C. Other Wireless Services | |
| With respect to other wireless services (for example, mobile radio, radio paging), the majority of parties submitted that the services in question are sufficiently competitive and that, pursuant to section 9, the Commission should exempt the carriers providing such services from the application of the Act. Parties noted that a number of the services in question (for example, radio paging) have never been regulated by the Commission, except where provided by the regulated telephone companies. However, Clearnet and RAC submitted that any order exempting carriers of other wireless services should be conditional on the implementation of adequate competitive safeguards. | |
| Several parties, including Popfone and CAM-X, submitted that it would be more appropriate for the Commission to refrain pursuant to section 34, rather than exempt under section 9. Popfone was of the view that such an approach was preferable in order to check the uncontrolled entry of foreign firms. | |
| TMI submitted that there is effective competition between all wireless services such as cellular, PCTS and new mobile satellite radio. In TMI's view, given that customers can switch from one type of service to another, there is no need to regulate mobile satellite services. | |
| With respect to entry by foreign firms, the Commission notes that the operation of facilities making use of radio spectrum requires a licence under the Radiocommunication Act, and that the applicable regulations require that the licensee be a Canadian corporation and that it be at least 80% Canadian owned. In general, the Commission considers that the regulation of providers of other wireless services, other than the telephone companies, would be unnecessary and inefficient. | |
| Based on the record of the proceeding, the Commission is satisfied that it would be consistent with the Canadian telecommunications policy objectives to exempt, pursuant to section 9, providers of existing other wireless services, other than the telephone companies, from the application of the Act with respect to the provision of those services. As noted earlier, section 9 requires that a public hearing be held. In this context, the Commission notes that a public hearing may be conducted by means of an oral or a written proceeding, depending on the circumstances of each case. In this case, the Commission is satisfied that parties had full opportunity to present their views in writing and that oral submissions were not required for that purpose. Further, in the Commission's view, the record of the proceeding is adequate for the purpose of its assessment of the relevant issues. In light of the above, the Commission considers that the current proceeding meets the requirement of section 9 that a public hearing be held. Accordingly, the Commission will send a proposed order providing for the exemption of providers of other wireless services, other than the telephone companies, to the Minister to be laid before each House of Parliament pursuant to section 10 of the Act. | |
| Based on the record of this proceeding, the Commission considers that TMI competes with other wireless carriers generally and with other satellite carriers in particular. Further, the Commission is satisfied that the findings in the previous paragraph also apply to TMI. The Commission will therefore include TMI, the only existing service provider of its class, in its proposed order. | |
| The Commission notes that an exemption order cannot become effective until it has been laid before each House of Parliament and the requirements of section 10 have otherwise been met. Accordingly, with respect to the provision of existing other wireless services by Canadian carriers other than the telephone companies and the provision of mobile satellite service by TMI, the Commission considers it appropriate to refrain unconditionally from the exercise of its powers and the performance of its duties under sections 24, 25, 27, 29 and 31 of the Act, in order that providers of such services not be subject to regulatory requirements such as the obligation to file tariffs. For these purposes, the Commission finds that to so refrain would be consistent with the Canadian telecommunications policy objectives. The Commission also finds that the services in question are subject to competition sufficient to protect the interests of users, so that it is appropriate to so refrain. Further, the Commission finds that to so refrain is not likely to impair unduly the establishment or continuance of a competitive market for those services. Pursuant to subsection 34(4), effective the date of this Decision, sections 24, 25, 27, 29 and 31 do not apply to the provision of existing other wireless services by Canadian carriers other than the telephone companies or to the provision of mobile satellite service by TMI. | |
| D. Cellular and Other Wireless Services Provided by Telephone Companies | |
| Finally, the Commission considers that, conditional upon the development and implementation of the appropriate costing and marketing safeguards, it would be appropriate to forbear with respect to the provision of wireless services by the telephone companies. The Commission is prepared to consider proposals from the telephone companies to that end. | |
|
Allan J. Darling Secretary General |
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