ARCHIVED -  Telecom Decision CRTC 94-17

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Telecom Decision

Ottawa, 24 August 1994
Telecom Decision CRTC 94-17
On 16 December 1992, the Commission issued Review of Regulatory Framework, Telecom Public Notice CRTC 92-78 (Public Notice 92-78), initiating a proceeding (the Regulatory Framework proceeding) to examine whether the existing regulatory framework should be modified in light of a variety of changes in industry structure that were taking place as a result of technological change and increased competition.
One issue raised by parties in that proceeding was the marketing advantages that accrue to the telephone companies due to their vertically integrated nature as suppliers of both local and long distance services. This constitutes the Commission's decision with respect to that issue.
In the Regulatory Framework proceeding, Unitel Communications Inc. (Unitel) noted that the issue of joint marketing had been addressed 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). In that Decision, the Commission directed the respondent telephone companies to provide to customers information with respect to the existence of alternative suppliers if, in the provision of access services, they actively promoted their own toll services. The respondents were also directed to handle any questions or referrals at their business offices on an impartial basis and to provide alternative suppliers with weekly reports, on a tariffed basis, listing the names and addresses of all new subscribers and those changing their addresses.
Unitel submitted that, in the period following the release of Decision 92-12, there had not been sufficiently detailed procedures instituted to ensure compliance with the spirit of this policy. In Unitel's view, there is a need to implement procedures at telephone company business offices and phone centres to guarantee that impartial treatment of competing interexchange carriers is, in fact, achieved. This should include Commission-approved scripted responses for business office personnel and a requirement that any referrals should be to all competitive carriers. Unitel also argued that customers requesting the telephone companies' long distance services should be referred to a separate telephone number and that local business offices should maintain lists of telephone numbers furnished by competitors, so that similar referrals could be made to customers requesting a specific carrier.
In Unitel's opinion, the same principles extend to joint advertising of local and long distance services, either through bill inserts sent to local telephone subscribers or through other media. According to Unitel, the use of bill inserts to promote long distance services gives the telephone companies an unfair economic advantage over their competitors, who do not have access to ubiquitous local telephone billing to cut their advertising costs. Unitel submitted that the telephone companies should either make this service available to competing interexchange carriers on similar terms, or cease the practice. Unitel also submitted that local telephone operations, including business offices and phone centres, should be prohibited from engaging in joint promotions or advertising of competitive services.
The Competitive Telecommunications Association, the National Anti-poverty Organization (NAPO) and the Government of Quebec (Quebec) were in general support of Unitel's position.
In particular, Quebec argued that alternative suppliers of toll services should be allowed to insert advertising fliers for their services in the telephone companies' monthly bills, as long as they paid a fee. NAPO argued that the procedures proposed by Unitel would guarantee equitable treatment of competitors and fair treatment of consumers. These safeguards, in NAPO's view, were neither burdensome nor revolutionary, and no different from those that the Commission had already established in the cellular market. NAPO further submitted that Stentor's unwillingness to recognize the need for marketing safeguards underlined its intention to continue to exploit the advantages available to its members due to the vertical integration of their monopoly and competitive businesses.
British Columbia Public Interest Advocacy Centre (on behalf of B.C. Old Age Pensioners' Organization, Council of Senior Citizen's Organization, West End Seniors' Network, Senior Citizens' Association, Federated Anti-Poverty Groups of B.C. and Local 1-217 IWA Seniors) submitted that concerns with respect to joint marketing would be eliminated if structural separation were adopted. It argued that, under the current industry structure, the only way to avoid anti-competitive practices is to prohibit activities that would be considered legitimate if the telephone companies were not vertically integrated.
AGT stated it would adopt appropriate arrangements regarding such matters as joint marketing of monopoly and competitive services, competitive service access to monopoly information and use of customer propriety network information. AGT noted that the Commission had in past decisions developed rules relating to such matters. To the extent that such matters involve the use of essential local services and facilities, AGT agreed that some rules may be appropriate and that the Commission should continue to adjudicate any disputes that cannot be resolved by the parties.
Stentor submitted that the requirements proposed by Unitel were neither necessary nor appropriate. Stentor argued that Unitel's approach would add significant costs, notably to the local business office by eliminating cost-sharing with the toll business, and exacerbate the local/access shortfall. Stentor also argued that these kinds of restrictions totally ignore customers and respond only to the narrow interests of competitors. Stentor was of the view that the Commission had adequately addressed similar arguments in Decision 92-12, and that there was no evidence in this proceeding to indicate that additional requirements or safeguards are necessary.
Stentor further submitted that the Commission had established in past decisions that the practice of using bill inserts does not confer an undue advantage on the companies. Stentor noted that, in Enhanced Services, Telecom Decision CRTC 84-18, 12 July 1984, the Commission stated that it had not been persuaded that any advantage the carriers received from the use of billing inserts was an undue one. Further, in Unitel Communications Inc. - Application for Extension of the Contribution Discount Period and Other Matters, Telecom Decision CRTC 93-5, 19 April 1993, the Commission concluded that it was unnecessary to require the telephone companies to permit access to their billing facilities on a non-discriminatory basis, or to prohibit them from using billing inserts to promote their long distance services.
The Commission agrees with Unitel and other parties to this proceeding that the vertically integrated nature of the telephone companies provides them with an opportunity to use their position as providers of local services to enhance their marketing of competitive toll services. Consistent with this view, the Commission stated in Decision 92-12, that it expected the telephone companies to handle questions and referrals at their business offices on an impartial basis. More specifically, the Commission required that the telephone companies provide information as to the existence of alternative suppliers if, in the provision of access service, they actively promoted their own long distance services. The Commission also required that the telephone companies provide alternative suppliers with weekly reports, on a tariffed basis, listing the names and addresses of all new subscribers and those changing their addresses.
The Commission remains of the view that competitive safeguards of the nature described above are needed to address any undue advantages that may accrue to the telephone companies by virtue of their vertical integration. However, in considering any particular safeguards, such as those proposed by Unitel, the Commission must balance a number of concerns related to the nature of the behaviour in question and the measures suggested with regard to that behaviour.
With respect to the former, the Commission considers it clear that not every advantage that may accrue to the telephone companies can be considered undue. Certain advantages may accrue to the telephone companies through economies of scale and scope. In order for the Commission to find that such advantages were undue, it would require evidence that the establishment or continuance of a competitive market was being unduly impaired.
With regard to the latter, the Commission considers that safeguards should bear a relationship to the seriousness of the harm to the competitive market likely to result from the behaviour in question. In addition, they must be effective and workable, in the sense that they do not unnecessarily increase the regulatory involvement of the Commission.
As to Unitel's submissions in this proceeding, the Commission does not consider the behaviour cited by Unitel to be such that it constitutes anti-competitive behaviour or the conferring by the telephone companies of an undue advantage upon themselves. As noted earlier, the Commission has already, in Decision 92-12, established certain safeguards. The Commission does not consider it necessary in order to ensure the establishment or continuance of a competitive market to also prohibit the telephone companies from engaging in all promotions of toll services in their business offices, to prohibit the companies from using billing inserts or alternatively to permit competitors to have access to regular bill mailings, to require business office personnel to follow a predetermined script, or to require the telephone company to provide referrals to all long distance competitors.
Moreover, the Commission considers some of the measures proposed by Unitel to be unworkable and impractical, and to require an unreasonable degree of involvement by the Commission in the day-to-day affairs of the telephone companies.
In particular, Unitel's proposed requirement that the telephone companies use a script in the business offices would oblige the Commission to approve the content of the script. This would require it to rule as to which companies should be referenced, any description of how they should be contacted, and the circumstances under which the script should be used. Further, the Commission would be expected to arbitrate complaints, for example, as to whether or not the script had been followed. In general, the Commission is not willing to undertake this kind of involvement in the day-to-day affairs of the telephone companies' business offices, absent a substantiated need to do so in order to ensure the competitiveness of the market.
Another area of concern raised by Unitel was the telephone companies' exclusive access to billing inserts for the promotion of their toll services. In the Commission's view, there would be similar difficulties associated with permitting competitors to place inserts in the telephone companies' bills. In particular, a system to permit competitor access to telephone company mailings would be cumbersome and difficult to administer, given the limitations on the telephone companies' ability to include materials in bill mailings. Further, it would be difficult for both the companies and the Commission to ensure equitable access for all competitors, and it is likely that the Commission would have to involve itself extensively in complaint resolution. Accordingly, as with the case of scripted responses for the business office, the Commission finds that it is impractical to require the telephone companies to provide competitors with the option of including their own billing inserts in telephone company regular bill mailings.
Further, as indicated above, the Commission does not consider it appropriate to prohibit the telephone companies from using bill inserts to promote their own toll services, as it would impose additional costs on the telephone companies and undermine economies of scale and scope to an extent not justified by the benefits that could be achieved.
In light of the above, the Commission will not require the telephone companies to implement the additional safeguards proposed by Unitel.
The Commission notes that long distance service providers, including the telephone companies, have increased their marketing efforts in recent months and have also been providing information regarding equal access. However, in the current competitive environment, the Commission considers that it would be helpful to consumers if the Commission itself were to provide information concerning equal access and how to go about contacting and selecting a long distance service provider. The Commission also considers that the provision of such information would go some way towards addressing the concerns raised by Unitel. Accordingly, the Commission directs AGT Limited, BC TEL, Bell Canada, The Island Telephone Company Limited, Maritime Tel & Tel Limited, The New Brunswick Telephone Company Limited and Newfoundland Telephone Company Limited to include a bill insert from the Commission to their customers providing a message informing them about equal access and their ability to select an alternate toll service provider.
The bill insert is to be included in the telephone companies' regular billings during the fall of 1994. The costs associated with the insert are to be borne by the telephone companies. The Commission has prepared the text and general format of the bill insert, and it is appended to this Decision. The telephone companies may insert their names in place of "telephone company", and should insert the appropriate "1-700" telephone number. AGT may make reference to 1993, as opposed to 1992, as the date that competition was introduced in its territory.
Allan J. Darling
Secretary General
Long Distance Competition and Equal Access
In 1992, the Canadian Radio-television and Tele-communications Commission (CRTC) permitted companies other than the telephone companies to compete in the provision of long distance service in most areas of Canada. Because of the CRTC's decision, you have a choice in the company you use to carry your long distance calls.
Until recently, if you wanted to place long distance calls using a competing company, you had to dial extra digits before you dialled the long distance number you wished to reach.
Recently, through a process called "Equal Access", many of these competing companies began providing long distance services that do not require you to dial any extra digits.
Equal Access means that you can decide to continue to have the telephone company carry all your long distance calls or you can select one of the competing companies, with no difference in the number of digits you have to dial.
Under Equal Access, if you select a competing company to carry your long distance calls, you simply dial 1 + the area code + the telephone number, as is the case when you select the telephone company.
Equal access is (or will be) available this year in most regions of Canada, except Saskatchewan, Manitoba, Yukon and Northwest Territories. Some competing long distance companies may not offer equal access service in all regions.
Selecting a Long Distance Company for Equal Access
Your long distance calls will continue to be carried by your telephone company as before if you do not select one of the competing long distance companies to be your Equal Access company.
Any Equal Access company you select will automatically carry all your long distance calls. You can have only one Equal Access company at a time for each of your telephone lines.
You can select a different company to carry your long distance calls by simply contacting that company. That company should be able to provide you with relevant details as to the rates for its services, the places you can call using its services and any terms and conditions that may apply to the use of its service.
The long distance company will ask for your authorization to notify your local telephone company of your decision to switch to another company's long distance services.
You do not need to contact your existing long distance company.
The competing long distance companies can be identified by advertisements in the mail, in newspapers, on television or radio, or in telephone directory or yellow page listings.
The long distance company you choose will send you a bill for your long distance calling.
Selecting a competing long distance company will not affect your local telephone service. Your local telephone company will continue to send you a separate bill for any charges associated with your local telephone service.
You can verify which company is carrying your long distance calls by dialing 1-700 NXX-XXXX. There is no charge for this call.
If you discover that your long distance calls are being carried by a company that you did not authorize to be your Equal Access company, you may contact that company or the company you wish to have as your Equal Access company to get your service switched.
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