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ARCHIVED -  Telecom Decision CRTC 94-16

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Telecom Decision

Ottawa, 22 August 1994
Telecom Decision CRTC 94-16
BRAVO TECHNOLOGIES SWITZERLAND - PROVISION OF ALTERNATE PAY TELEPHONE SERVICE
I BACKGROUND
In Bravo Technologies Switzerland - Provision of Alternative Pay Telephone Service, Telecom Public Notice CRTC 94-7, 10 February 1994 (Public Notice 94-7), the Commission requested comment on issues raised by an application from Bravo Technologies Switzerland (Bravo) respecting the provision of pay telephones that would accept stored-value pre-paid cards as a means of payment. In particular, the Commission requested comment on the following issues:
(1) the extent to which the general concerns raised in Resale to Provide Primary Exchange Voice Services, Telecom Decision CRTC 87-1, 12 February 1987 (Decision 87-1), and Alternate Operator Services, Telecom Letter Decision CRTC 91-7, 6 August 1991 (Letter Decision 91-7) with respect to the competitive provision of pay telephone service and operator services apply in the specific case of pre-paid cardphones; and
(2) the merits of allowing the provision of pay telephone service using pre-paid cards, as proposed in Bravo's application.
Bravo's proposed service would require a pay telephone equipped to read a card's dollar value and write to the card to record usage. Bravo requested approval to conduct a field trial of the service at the 1994 Commonwealth Games in Victoria, British Columbia, and subsequently to place its telephones at other locations in the province.
II POSITIONS OF PARTIES
Comments were received from Bullion Reef Resources Ltd. (BNF); Canada Popfone Corporation (Popfone); Competitive Telecommunications Association (CTA); Telecomsyst Services Inc. (TSI), on behalf of TPG-Telecom Professional Group Inc.; Unitel Communications Inc. (Unitel); and Stentor Resource Centre Inc. (SRCI) on behalf of AGT Limited, BC TEL, Bell Canada, The Island Telephone Company Limited, Manitoba Telephone System, Maritime Tel & Tel Limited, The New Brunswick Telephone Company Limited and Newfoundland Telephone Company Limited. Bravo and SRCI submitted reply comments.
SRCI submitted that Bravo's proposal raised broad issues related to the competitive provision of pay telephone service. In SRCI's view, the pre-paid card aspect of the proposed service was not unique except in respect of the requirement for a special pay telephone to process calls using the pre-paid card. According to SRCI, the competitive provision of pay telephones by independent service providers such as Bravo, interexchange carriers (IXCs) or resellers would limit the Commission's ability to enforce consumer safeguards, particularly where such entities were unregulated. SRCI indicated that the competitive provision of pre-paid card telephones would also increase the provision of alternate operator services (AOS) and lead to increased regulatory involvement. SRCI was also of the view that, if pay telephone competition were permitted, it would be necessary to have regulations to ensure that users would have access to emergency services, hearing impaired services and the long distance networks of IXCs. Stentor also argued that it would be difficult to enforce such regulations.
SRCI submitted that the concerns raised by the Commission in Decision 87-1 remain valid, including those related to revenue erosion. However, SRCI acknowledged that changes such as the introduction of competitive long distance services 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), including long distance pay telephone service, and the availability of calling card and wireless services from competitors are likely to cause erosion of the revenues earned by telephone companies from their pay telephones.
In SRCI's opinion, Bravo's application should not be dealt with independently from the broader issues relating to terms and conditions for customer-owned and operated pay telephone services that provide access to the local telephone network. In SRCI's view, the issues raised by the application should be the subject of a proceeding dealing with pay telephone services in general.
CTA supported the application. In its view, approval of the application would neither cause significant revenue erosion nor involve operator services.
TSI submitted that the services proposed by Bravo are enhanced services and should not be subject to regulatory restrictions. TSI did not consider private ownership of pay telephones a relevant regulatory issue and was of the view that SRCI was attempting to delay the introduction of this service by raising broader concerns regarding pay telephone competition. BNF supported competition in the provision of pay telephone service.
Popfone submitted that it would be premature to establish terms for alternate pay telephone service prior to the Commission's decision in the proceeding initiated by Review of Regulatory Framework, Telecom Public Notice CRTC 92-78, 16 December 1992.
Unitel supported competition in the provision of pay telephone service through the use of pre-paid cards, but was of the opinion that any competitively provided pay telephones should permit access to the networks of all IXCs. Unitel also expressed concern with the potential for fraud should users be able to terminate calls on these pay telephones or charge collect calls to them.
In reply, Bravo submitted that, by increasing users' access to public telephone facilities, pre-paid card pay telephones could mitigate any erosion of pay telephone revenues that might be experienced by the telephone companies. Bravo also cited the advantages of its system over the pre-paid card approach of the Stentor companies, which relies on a central database. In particular, Bravo cited its provision of a usage indicator during and at the termination of calls, the familiarity of foreign visitors with the system and the fact that its pay telephones could be used to call all international destinations without the requirement to dial extra digits. Bravo also submitted that the pay telephones it would use are technically capable of meeting the Commission's standards with respect to emergency numbers, hearing impaired access and directory services.
In reply, SRCI submitted, among other things, that the benefits cited by Bravo are not unique to Bravo's proposal. Stentor noted that its own pre-paid card system would also reduce the possibility of fraud and could be used to place calls to all overseas locations.
III CONCLUSIONS
The Commission notes that Bravo cited several benefits that could arise from its proposal, such as reduced costs associated with not accepting coins as a means of payment, ease of use, access to all international destinations and reduced potential for fraud. The Commission agrees that such benefits could arise from the competitive provision of certain types of pay telephones. However, the benefits of permitting the type of pay telephone competition proposed by Bravo would only be realized if pay telephones capable of accepting stored-value cards were widely available. The Commission considers it likely that, in order to achieve such wide availability, the telephone companies would also have to adopt this technology and provide access to pre-paid card suppliers, or a new, more liberalized regime governing the provision of pay telephones would have to be established.
With regard to the latter, the Commission considers that it would be very difficult to establish a workable regime that would provide only for stored-value pre-paid card pay telephone competition, while continuing to prohibit other types of competitively provided pay telephones. Such a regime could come under pressure from technological innovations permitting a broad array of pay telephone services and applications that would give rise to concerns such as those underlying Decision 87-1 and Letter Decision 91-7. In order to address such concerns, the Commission would consider it necessary to place conditions on the competitive provision of pay telephone service that would limit and diminish the benefits that might otherwise be achieved from competitive supply.
In light of the above, the Commission considers it inappropriate to examine the issue of stored-value pre-paid card pay telephone competition in isolation from the issue of competitive pay telephone service in general.
The Commission first considered the issue of competition in the pay telephone service market in Decision 87-1. In that Decision, the Commission decided not to permit such competition, as the potential benefits were outweighed by the associated disadvantages. The Commission noted that it considered pay telephone service a valuable complement to basic service and that it had therefore encouraged the telephone companies to ensure its widespread availability and accessibility at affordable rates. The Commission was concerned that such availability and accessibility would be negatively affected if competitors eroded the revenues that the telephone companies derived from more profitable pay telephone locations.
In Decision 87-1, the Commission also concluded that, in order to ensure that access by the public to pay telephone service did not deteriorate, it would have to apply similar standards to both the telephone companies and competitors with respect to, for example, coinless access to emergency service, access by the hearing impaired and physically disabled, and the provision of clear operating instructions, including instructions for handling complaints. The need for safeguards with respect to matters such as these was discussed further in Letter Decision 91-7 in the context of AOS, as were issues related to the charging of excessive rates by competitive service providers. In fact, these concerns led the Commission, in Decision 92-12, to place restrictions on the provision of pay telephones used to access competitive long distance networks.
Since Decision 87-1, the emergence of new services that are substitutes for pay telephone service has served to lessen the Commission's concerns with respect to revenue erosion associated with competition in this market. However, in the Commission's view, many of its previous concerns with respect to access to service and the need for consumer safeguards are, if anything, more relevant in today's market. Therefore, competition in the provision of pay telephone service could only be permitted if mechanisms could be devised to enforce standards related, for example, to adequate signage as to rates and other matters, ability to place emergency calls without charge, access to the physically handicapped and the provision of operator service. In the Commission's view, practical mechanisms cannot be devised to permit the enforcement of such standards with respect to unregulated service providers such as Bravo.
In light of the above, the Commission finds that it would not be in the public interest to permit the competitive provision of stored-value pre-paid card local pay telephone service. Bravo's application is therefore denied.
Allan J. Darling
Secretary General
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