Search

ARCHIVED -  Telecom Decision CRTC 94-2

This page has been archived on the Web

Information identified as archived on the Web is for reference, research or recordkeeping purposes. Archived Decisions, Notices and Orders (DNOs) remain in effect except to the extent they are amended or reversed by the Commission, a court, or the government. The text of archived information has not been altered or updated after the date of archiving. Changes to DNOs are published as “dashes” to the original DNO number. Web pages that are archived on the Web are not subject to the Government of Canada Web Standards. As per the Communications Policy of the Government of Canada, you can request alternate formats by contacting us.

Archived

This page has been archived on the Web.

Telecom Decision

Ottawa, 2 February 1994
Telecom Decision CRTC 94-2
BC TEL AND BELL CANADA - TRANSFER OF INSIDE WIRE TO PREMISES OWNERS AND INTRODUCTION OF LINEGUARD SERVICE
I BACKGROUND
On 14 February 1992, BC TEL filed an application under Tariff Notice 2563 proposing tariff revisions providing for the transfer of the ownership of single-line inside wire (IW) from the company to premises owners. On 3 April 1992, the Commission issued British Columbia Telephone Company - Transfer of Inside Wire to Premises Owners, Telecom Public Notice CRTC 92-19, establishing a process for interrogatories and comments.
The Government of British Columbia (BCG) and the B.C. Old Age Pensioners' Organization, Council of Senior Citizens' Organizations, West End Seniors' Network, Senior Citizens' Association, Federated Anti-Poverty Groups of B.C. and Local 1-217 IWA Seniors (collectively known as BCOAPO et al) addressed interrogatories to BC TEL. BC TEL responded to these and the Commission's interrogatories on 22 May 1992. In addition, the Commission received a number of comments from interveners, including BCG, BCOAPO et al and Telecommunications Workers' Union (TWU). BC TEL replied on 24 June 1992.
On 22 October 1992, BC TEL filed amendments to its original application under Tariff Notice 2563A. The Commission issued further questions and directions on procedure. BC TEL filed answers on 23 November 1992. TWU filed additional comments on 4 December 1992, and BC TEL replied on 14 December 1992. On 21 December 1992, TWU filed further comments and BC TEL replied on 18 January 1993.
On 4 September 1992, Bell Canada (Bell) filed an application under Tariff Notice 4494 proposing tariff revisions providing for the divestiture/ceding of ownership of single-line IW by the company to premises owners, which was similar to BC TEL's application in many respects. On 9 October 1992, the Commission issued Bell Canada - Transfer of Inside Wire to Premises Owners, Telecom Public Notice CRTC 92-62, establishing a process for interrogatories and comment on Bell's application.
B.C. Rail Telecommunications and Lightel Inc. (BCRL), Fédération Nationale des Associations de Consommateurs du Québec (FNACQ), National Anti-Poverty Organization (NAPO), Syndicat canadien des communications de l' énergie du papier and Unitel Communications Inc. (Unitel) filed requests for disclosure of confidential information and claims of deficiency with respect to some of Bell's interrogatory responses. The Commission issued its decision on disclosure and deficiency requests, further directions on procedure and a number of supplementary interrogatories on 16 April 1993.
The Commission received comments on Bell's application from a number of interveners, including Association of Competitive Telecommunications Suppliers (ACTS), Association des Consommateurs du Québec (ACQ), Canadian Electrical Contractors Association (CECA), La Corporation des Maîtres électriciens du Québec (CMEQ), Electrical Contractors Association of Ontario (ECAO), FNACQ, Government of Ontario (Ontario), Government of Quebec (Quebec), NAPO, TWU and Unitel. Bell filed its reply to comments on 23 July 1993.
By letter dated 29 March 1993, the Commission advised BC TEL, among other things, that it intended to defer consideration of its application until it considered Bell's application because of the similarities between the two applications and apparent inconsistencies and unsupported assertions in the BC TEL application which made it difficult for the Commission to come to a determination on BC TEL's application at that time.
BC TEL responded on 29 April 1993. On 19 May 1993, the Commission advised BC TEL that it intended to continue to defer consideration of BC TEL's application until it was able to consider the Bell application. In addition to the reasons it had already set out, the Commission was of the view that prior to deciding whether BC TEL should be authorized to depart from the common regulatory policy for IW which was established in Attachment of Subscriber-Provided Terminal Equipment, Telecom Decision CRTC 82-14, 23 November 1982 (Decision 82-14), a full record on both applications was necessary. Given the similarities in the two applications and in the issues which they raise, as noted above, the Commission has chosen to release its decisions on the two applications in a single document.
II THE APPLICATIONS
In their applications, as originally filed, BC TEL and Bell proposed tariff revisions providing for:
(1) the transfer of ownership (in BC TEL's case) and the divestiture/ceding of ownership (in Bell's case) of existing single-line business and residence IW from the companies to premises owners,
(2) premises owners, at their option, obtaining single-line IW from the telephone companies or from other suppliers,
(3) single-line IW hourly installation and repair rates, currently tariffed for customer-provided equipment, and
(4) the introduction of Lineguard Service (Lineguard), as well as, in the case of Bell, Lineguard Plus which are optional maintenance plans for single-line IW.
The companies also proposed to transfer ownership of two-party and multi-party IW to premises owners, but to continue to maintain such IW at no charge until terminal attachment for two-party and multi-party service is permitted.
Under the proposed tariff revisions, as originally filed, the companies would transfer in-place single-line IW beyond their demarcation points to customers free of charge. Coincident with the transfer dates, the companies would begin to write down the net book value of single-line IW. Bell proposed to amortize its investment over a five-year period. BC TEL stated that it wished to complete this process as soon as possible within nine years, and asked that it be granted flexibility to amend the amortization period in any given year subject only to the requirement that a minimum of one-ninth of the embedded costs as of 1 July 1993 be written off each year. As well, the companies proposed to expense all future costs of installing IW.
During the course of the two proceedings, both applicants indicated (for example, in BC TEL's 29 April 1993 letter to the Commission and Bell's response to interrogatory Bell(CRTC)16Apr93-107) that they would be prepared to delete references in their proposed tariffs providing that premises owners would own IW. Both applicants submitted that their applications represented requests that the Commission relieve them of their current obligations to own or install and repair all IW. They went on to submit, however, that if the Commission approved the applications, the law of property would operate (in BC TEL's view, only after it has abandoned its ownership rights) to cause ownership of existing in-place IW to vest with premises owners.
The companies submitted that approval of the applications would eliminate anomalies in the single-line IW market. They stated that there are increasing numbers of residences in which non-telephone company IW has been installed (for example, in the course of renovations or because the house has been constructed with IW included). The companies also submitted that they receive requests from alarm and security businesses for permission to install IW and that these businesses contend that they incur additional costs and experience loss of efficiency by having to rely on the telephone companies for what they consider to be an integral part of their business.
BC TEL stated that the presence of non-BC TEL IW places it in a difficult situation: by accepting customer-placed IW, the company is accepting responsibility for the wire and is then not in compliance with its own tariffs, and by refusing to accept customer-placed IW, the company is forced to install its own wire, causing greater expense to the customer. BC TEL submitted that, if customer placement of IW is to be permitted, it should be accompanied by customer ownership.
BC TEL and Bell stated that, for the majority of their customers, there would be no immediate financial impact. They stated that certain businesses may realize increased efficiencies as they would no longer have to schedule IW installation based on a single supplier; premises owners may choose to install their own IW to avoid paying the costs of installation; and tenants renting new premises would pay less for the non-recurring charges associated with new service installations. BC TEL stated that its proposed revisions would reduce its costs and enable it to increase its revenues.
As noted above, the companies proposed to offer Lineguard, an optional single-line IW maintenance plan provided for a monthly charge of $1.00 in the case of BC TEL and $1.50 in the case of Bell. Lineguard would provide maintenance and repair for single-line IW, including non-telephone company installed IW beyond the demarcation point. Single-line IW associated with marine premises, mobile premises such as recreational vehicles and construction trailers, and IW in hazardous locations would not be eligible for Lineguard. In Bell's territory, those customers requesting Lineguard would also be eligible for Lineguard Plus (at an additional $1.00 per month) providing for, among other things, a waiver of diagnostic maintenance charges for premises visits.
For customers not eligible for, or who chose not to subscribe to Lineguard, maintenance and repair would be available on a parts and labour basis. Labour would be provided at the currently tariffed hourly rates and parts would be provided at prevailing market prices.
The companies submitted that their proposals are not new, since telephone company divestiture of IW and the competitive supply of IW installation and maintenance have been implemented in Alberta, Saskatchewan and much of the United States.
Under Tariff Notice 2563A, BC TEL clarified the application of its various service charges to parties obtaining IW maintenance or parties obtaining IW installation or maintenance. It also proposed revisions that would permit users of IW, such as tenants, to obtain installation or maintenance services. BC TEL stated that its practices would assure that customers would be advised that alternatives to BC TEL's installation and maintenance services are available and that, in the case of rented premises, customers would be advised to contact the premises owner to determine if the owner would accept responsibility for charges before proceeding.
III INTERVENERS' COMMENTS
ECAO, whose comments were endorsed by CECA, supported Bell's proposal to transfer single-line IW to premises owners. ECAO submitted that such a transfer would result in a competitive market for installation that would benefit its members and customers. ECAO stated that its members could compete in the single-line telecommunications wiring installation market. Further, installation of telecommunications wiring at the same time as electrical wiring would prevent a duplication of effort and expense by the customer. ECAO submitted that IW competition would allow IW to be included in integrated wiring technology that would permit whole-house automation and would revolutionize home technology. Also, ECAO competition would result in lower installation costs.
CMEQ did not comment on the merits of Bell's application; rather, it submitted that the Commission, if it approves the application, should establish a regime whereby Bell and CMEQ provide IW in partnership in Quebec.
Ontario stated that it recognized that, in principle, there could be benefits to IW transfer, such as the choice of suppliers for installation, maintenance and repair. However, it did have serious concerns and could not support Bell's application.
TWU, who intervened on both applications, submitted that the Commission does not have the authority to compel customers to accept ownership of IW. TWU stated that, while the Commission could relieve the telephone companies of their current obligation to own IW, thereby enabling the companies to offer IW to subscribers by way of sale or gift, the subscribers would be entitled to refuse to purchase or accept the gift of the IW. With respect to the position of the applicants that ownership of IW would vest in premises owners by operation of the law of property if the Commission relieved the applicants of their current obligation to own or install and repair IW, TWU noted that neither company had referred to an authority in which ownership has been transferred in this fashion.
FNACQ also argued that simply removing Bell's current obligation regarding IW would not affect its proprietary rights. FNACQ submitted that, for Bell to ensure that it was transferring ownership of IW to the premises owners, it must obtain their consent and have notarial documents drawn up.
Several interveners submitted that the proposals were inequitable because they involved the transfer of a liability rather than an asset. BCG contended that BC TEL subscribers who already have IW would not benefit from competition in the installation of IW. BCOAPO et al stated that offering customers the same service they used to have as part of their basic service, for an additional fee, is unfair. FNACQ made a similar point with respect to Bell customers.
FNACQ, NAPO, TWU and Unitel rejected arguments that the applications are justified because many subscribers are currently installing their own IW. They submitted that no evidence had been filed to support this assertion. TWU noted Bell's response to interrogatory Bell(CRTC)9Nov92-1 that, in its customer focus group sessions, over 15% indicated that they or someone they knew had installed or rearranged IW. TWU stated that Bell did not provide evidence on how many customers were polled or how many respondents were selected, and, moreover, that Bell ignored the fact that 85% of the respondents did not know anyone who had installed or rearranged IW.
TWU submitted that Bell has not provided any evidence to support its views that IW related technologies are expanding and that increasing numbers of Bell's customers are customizing their IW. TWU noted that, in response to interrogatory Bell(Unitel)9Nov92-14, Bell stated that it did not know how many of its residential customers have security/alarm systems. TWU submitted that, if Bell's predictions are well founded, one would have expected it to file evidence of flourishing IW related technologies in those jurisdictions where ownership of IW has been transferred to premises owners. In rejecting Bell's argument that, with approval of the application, alarm and telemetry companies would be better able to install expanded technologies while minimizing risks to the network, FNACQ and Unitel noted that such companies are presently able to attach to Bell's network through General Tariff interface devices that ensure network protection. FNACQ submitted that Bell has not quantified the demand in this area.
TWU was of the view that, in an application for a change in the telecommunications regime that would affect millions of subscribers, the applicant must demonstrate that the change would be in the public interest. TWU noted that in Decision 82-14 the Commission, in rejecting the telephone companies' arguments to transfer single-line IW to customers, stated that there was a general lack of interest expressed in the proceeding on behalf of single-line subscribers in owning their IW. TWU submitted that the public interest in the ownership of single-line IW is as relevant now as it was in 1982. TWU contended that Bell has not provided factual evidence upon which the Commission could conclude that any aspect of the public interest would be served by the transfer of IW.
ACQ, BCG, FNACQ, NAPO and Ontario were of the view that the applications to which they intervened, particularly as far as the maintenance and repair service plans were concerned, would result in a significant local rate increase. FNACQ submitted that Bell subscribers who take Lineguard would sustain a basic rate increase of over 10%, while those who do not take it would risk paying over $100 in the event of IW failure. FNACQ argued that such a basic rate increase would reduce network accessibility for low income subscribers and thus reduce the value of the telephone network. NAPO and Ontario stated that there should be a local rate decrease to offset the application of rates for a service heretofore not chargeable. NAPO argued that such an increase should be examined in the context of a revenue requirement proceeding.
BCG submitted that there would be little incentive for competitive maintenance service providers to offer a Lineguard-like service at a rate comparable to that proposed by BC TEL. In BCG's view, due to the monopoly-like nature of Lineguard (to which a large percentage of residential customers would likely subscribe), BC TEL's proposal was effectively a local rate increase and should be considered in the context of a revenue requirement proceeding.
ECAO, FNACQ and Unitel argued that healthy competition in the maintenance market would not arise under Bell's proposal. FNACQ and Unitel submitted that Bell's response to interrogatory Bell(CRTC)16Apr93103 suggests that Bell expects to keep more than half of the maintenance plan market through Lineguard. FNACQ suggested that this is supported by the fact that Bell can distribute its costs over a large customer base over time, while a competing provider must recover them right away; the substantial competitive advantage that this provides renders unconvincing Bell's argument that competition will arise.
Unitel was of the view that few, if any, competitive suppliers would enter the market and be in a position to compete with a monthly Lineguard rate as low as $1.50. Unitel stated that competitive discounts would not likely be enough to entice customers away from Bell to an unknown supplier. Further, Unitel submitted that, due to the lack of competition in the supply of maintenance services, the introduction of Lineguard is effectively an implicit form of rate rebalancing. Unitel argued that, since competitive demand would not materialize, Bell has underforecast its own Lineguard demand and resulting revenue.
Unitel submitted that Bell's use of its billing system and telephone directory to advertise Lineguard, as set out in its response to Bell(Unitel)9Nov92-19, would be a further detriment to potential entrants, would provide Bell with an unfair marketing advantage and would constitute an undue preference contrary to subsection 340(2) of the Railway Act (now subsection 27(2) of the Telecommunications Act).
ECAO submitted that Bell, with Lineguard, would have a substantial competitive advantage in the maintenance plan market because Bell could easily add the charge to each subscriber's monthly bill; electrical contractors, on the other hand, are not in a position to offer, on a competitive basis, a service similar to Lineguard because they do not have access to Bell's billing system. ECAO suggested instead that Bell be required to tender the performance of Lineguard contracts by geographic area.
Quebec submitted that customers who do not assume significant rate increases for the same service level, i.e., do not take Lineguard, risk having to pay high occasional costs should there be IW damage. FNACQ and NAPO submitted that many would be sufficiently unable to afford these charges that they would disconnect or would delay reconnection in the event of moves.
ACTS noted that there is currently no defined standard for IW, but that a proposal for CSA/SCOT standards is under consideration. ACTS further noted Bell's statement that, until standards are approved, the company's wiring requirements would be the guidelines for subscriber-owned IW. ACTS submitted that the application should not be approved until the CSA/SCOT standards for IW are available because the use of Bell's own requirements would give Bell an undue advantage in a new competitive market in that it would know of changes before competitors and competitors would have no method of seeking changes to provisions they felt onerous.
IV REPLY
In their replies, BC TEL and Bell reiterated that they are not asking that the Commission transfer ownership or require that premises owners own IW. They submitted that, rather, they are asking for tariff changes that would provide that they have no responsibility for installation and repair of IW beyond the demarcation point. The companies went on to state that if the Commission approves their applications and, in so doing, removes the requirement that the telephone company own or furnish IW, the law of property would operate to cause ownership of existing in-place IW to vest in premises owners. The companies were of the view that this effect would not be dependant on, or be the effect of, any power exercised by the Commission.
BC TEL submitted that it was not shifting a financial burden to customers, noting that the costs of single-line IW are currently borne by all customers in the rates paid for other services. BC TEL argued that the approval of its application would ensure that, in the future, costs associated with single-line IW would be borne by customers incurring such costs. BC TEL stated that it intends to address the revenue requirement impact of its proposals through revisions to selected tariffs year-to-year. The company stated that the positive revenue impact of its proposal would therefore benefit BC TEL customers through lower rates for other BC TEL services.
BC TEL argued that BCOAPO et al's view that customers are vulnerable and rely completely on the telephone company is not consistent with the growing incidence of IW installed by customers or non-BC TEL enterprises, or with the wide availability of telephone wiring products on a retail basis. BC TEL also submitted that the emergence of a competitive multi-line terminal equipment industry is evidence of the marketplace's ability to react to policy changes.
BC TEL submitted that its proposals should be evaluated in light of the numerous considerations involved, not just the one or two selected points with which interested parties have taken issue. BC TEL stated that the proposals are a logical extension of Decision 82-14, address the Commission's concerns in Decision 82-14 with respect to optional ownership, resolve the tariff compliance issues related to non-BC TEL IW, permit the installation of IW by parties other than BC TEL or the customer, and eliminate the difficulties with separate business IW policies for multi-line and single-line services, as well as the potential for similar difficulties in the residential market as residence multi-line services become more popular.
In response to the concerns of a number of interveners that approval of its application would result in a significant local rate increase, Bell stated that a minority of customers moving into new housing that had not been prewired and jacked would see a cost increase under its proposal. However, Bell stated that the majority of subscribers moving into buildings where service had been previously established would see a reduction in installation charges and that customers willing to do their own IW installation would benefit from further savings. Further, Bell stated that, rather than reducing basic service, its proposal would allow for the provision of distribution networks on a cost recovery basis to meet individual needs.
Bell stated that it would continue to provide single-line subscribers with service up to a demarcation point. Bell submitted that, beyond the demarcation point, it would continue to provide installation, maintenance and repair services, but would do so in competition with other service providers at compensatory rates. Bell submitted that this approach demonstrates its commitment to basic service continuity and that its proposals do not impact rates or universal affordability, noting that subscribers would always have access to dial tone at the demarcation point if IW failed. Bell stated that the provision of service only to the demarcation point is not inconsistent with other utilities' practices, such as power and water providers. Bell added that its proposal establishes a means of recovering the costs of installing and maintaining IW from subscribers who want to have extended access flexibility and convenience within their premises. Further, Bell stated, these services would be offered on an optional basis so that there would be no universal increase or implicit rate rebalancing.
Bell stated that FNACQ's concerns over reduced accessibility for low income subscribers are unfounded. Bell stated that Lineguard would be optional and that the proposed tariff structure would allow customers to pursue less expensive options.
Bell submitted that CMEQ's, CECA's and ECAO's submissions show that, with the approval of its application, there are competitors poised to enter the marketplace. Bell stated that Ontario and Quebec recognized that approval of the application could result in increased customer choice and that NAPO acknowledged that customers in certain situations may wish to install or rearrange IW themselves. Further, Bell stated that ECAO's evidence shows that the availability of new technologies for the home depends upon flexibility in IW supply and that electrical contractors could install IW at prices below those that Bell could offer. Bell argued that the support for competitive entry offered by the electricians' associations should be given considerably more weight than the unsupported allegations of FNACQ, NAPO, TWU and Unitel that competitive entry would not occur.
Bell submitted that the use of its billing system and telephone directory to advertise Lineguard would ensure that customers have the information needed to understand the options available and their own responsibilities with respect to IW. Bell stated that telephone directory instructions would help customers determine whether a problem is in their IW or equipment, so they could decide whether to call their wiring contractor or Bell's repair service. Bell submitted that competitors would have access to a variety of advertising media and, as they would be unregulated, would have greater flexibility in pricing and packaging their offerings.
In response to ECAO's position, Bell argued that competitive provision of a maintenance service that mirrors Lineguard would not serve the market well. Bell argued that there are alternatives to billing customers monthly on a telephone bill and customers would be better served if suppliers offered their own price, service, payment and collection packages. Bell added that it should not be forced to support its competitors in this market by providing them with billing services, especially as the competitors are unregulated.
Bell submitted that CMEQ's proposal for a partnership arrangement and ECAO's proposal for the tendering of Lineguard by area code or exchange would be prohibitively expensive and counter-competitive. Bell stated that these proposals would result in the company withdrawing from this aspect of the business, and customers would thus be restricted in their choice of suppliers, prices and service options.
V CONCLUSIONS
The Commission has sufficient concerns with respect to the proposals filed by BC TEL and Bell that it finds each of the proposals unacceptable as filed. However, based on the record of these proceedings, the Commission is not averse to modifications to the regimes currently in place for BC TEL and Bell regarding the installation, maintenance and repair of single-line IW. The Commission's concerns and comments on the record, including examples of possible future proposals that might address its concerns, are set out below.
BC TEL and Bell argued that their applications should be approved because they are a logical extension of Decision 82-14. The Commission notes, however, that Decision 82-14 focused on competition in the provision of terminal equipment, rather than IW, and provided a strong element of customer choice. Multi-line subscribers were given the option of choosing between (1) leasing terminal equipment from a carrier that would continue to provide the associated multi-line IW, or (2) purchasing terminal equipment and providing the associated multi-line IW themselves. Accordingly, only customers wanting their own multi-line terminal equipment had to assume ownership of the associated IW; those not wanting to assume ownership could continue to lease terminal equipment and IW from the telephone company. Further, since the focus was on terminal equipment competition, multi-line IW competition grew not so much as an independent market but in lock-step with, and consequent on, multi-line terminal equipment competition.
By contrast, the Commission notes that the focus of the applications in these proceedings is directly on single-line IW, and it is with respect to single-line IW alone that the companies maintain that an equally strong competitive market would grow. Based on the record, the Commission is not persuaded that this would be the case, or that the proposals represent a logical extension of Decision 82-14.
BC TEL and Bell argued that their proposals are not new. They noted that in Alberta and Saskatchewan, as well as in most of the United States, governments and regulatory authorities have approved customer ownership and competitive supply and maintenance of single-line IW. The Commission notes that, in response to interrogatories, the telephone companies provided little information on the issues that were considered in the proceedings in these jurisdictions, the terms and conditions that apply, or the effects of single-line IW transfer. The Commission considers that such detail could serve as an indicator of how the public interest might be served by approval of the companies' applications. The Commission is of the view that, without such information, arguments based on actions in those jurisdictions carry little weight.
The companies submitted that approval of the applications would eliminate the anomalies associated with customers installing their own single-line IW in contravention of current tariffs. The Commission notes that, in response to interrogatories Bell(CRTC)9Nov92-1 and BCTEL(BCOAPO)9May92-5, neither company could provide information on the number of customers with their own single-line IW.
With respect to competition in the maintenance and repair of single-line IW, ECAO and Unitel submitted that Bell would have a distinct competitive advantage in the maintenance plan market through the use of its billing system and telephone directories. The Commission is of the view that such would be the case for both telephone companies. However, the Commission considers that, if the telephone companies were not permitted to use their billing systems and telephone directories to advise of the existence of Lineguard and of repair service availability and charges, there would be little information available for customers having to deal with a very different regime.
Most interveners took the position that, with the telephone companies offering maintenance plans, competition in the maintenance plan market could not occur to any reasonable degree. BCG and Unitel argued that no one would be able to compete with the companies' proposed Lineguard rates. BC TEL and Bell took the position that the proposed rates for Lineguard would encourage competitive entry. The Commission notes that the telephone companies have a far greater base over which to spread their Lineguard costs than potential maintenance plan competitors. In the Commission's view, Lineguard rates set at a sufficiently high level to encourage competitive entry would necessarily be set well in excess of costs. On the other hand, Lineguard rates set at cost plus a sufficiently low mark-up to minimize impact on customers would deter potential competitors from entering the market.
The companies' evidence in support of their applications shows that they would enjoy, at least at the outset, a large share of the maintenance plan market and would realize substantial new revenues at the proposed rates. Moreover, the advantage that the telephone companies would have through the use of their billing systems and telephone directories would further deter potential competitors from entering the market. In light of the above considerations, the Commission is of the view that the evidence provided in support of a competitive maintenance plan market is not persuasive.
Several interveners argued that the proposals for Lineguard are, in effect, a local rate increase, or rate rebalancing. FNACQ stated that, in Bell's case, a customer would receive approximately a 10% increase in charges by subscribing to Lineguard or would risk charges of $100 or more with an IW failure, without Lineguard. The Commission notes that, although Bell's evidence shows that failure rates for single-line IW are minimal, it also indicates that substantial numbers of customers would take a maintenance plan rather than risk repair charges and would have a strong preference for Bell as the supplier. In the Commission's view, the companies' proposals would result in additional charges being applied with no apparent additional benefit to customers. Currently, the maintenance and repair of single-line IW is included as part of basic service. Competition in the provision of maintenance plans may provide benefits to customers; however, as noted above, the evidence does not support the growth of a viable competitive market. Accordingly, based on the record of these proceedings, the Commission considers that approving the companies' rate proposals for maintenance plans in these circumstances would not be in the public interest.
On the other hand, the Commission is of the view that a certain amount of competition in single-line IW installation would likely develop if the responsibility for IW acquisition were transferred to customers. In this regard, the Commission notes ECAO's evidence that its members are willing and able to compete in the single-line IW installation market. Further, while there is no quantitative evidence, the Commission considers, based on the record, that at least some customers wish to acquire their own single-line IW. Moreover, the record of these proceedings indicates that expansion of single-line IW-related technologies and consequent demand for integrated wiring for home automation may be in the offing. The Commission considers that successful expansion of integrated home wiring markets would require that customers be able to acquire the necessary IW from sources other than the telephone companies in order to be able to obtain integrated wiring packages.
Notwithstanding the change in position taken by the companies subsequent to the filing of their original applications, namely the dropping of their initial requests to specify in their tariffs that premises owners would own IW, the Commission notes that, according to the applicants, the end result of their applications remains the same, i.e., that ownership of existing business and residence single-line IW would transfer to premises owners. Having considered the arguments and authorities presented by the applicants and by TWU and FNACQ, the Commission is not persuaded that, in law, such a transfer in ownership would take place.
However, the Commission considers that it has the jurisdiction to relieve the companies of their current tariff obligations with respect to all single-line IW beyond the demarcation point. Such revisions would enable premises owners to acquire new single-line IW from the supplier of their choice, not just the telephone companies. Premises owners would be the owners of such new IW and would correspondingly have the right and responsibility to maintain it. They would be free to deal with whomever they chose in connection with such maintenance. In the Commission's view, tariff revisions such as this would remove the barriers to competition in the installation and repair of new single-line IW.
However, with respect to existing IW, the Commission is of the view that if such IW were to remain owned by the telephone companies, premises owners would have no authority to maintain it. Because the applicants have not persuaded the Commission that, in law, a transfer of ownership from the telephone companies to premises owners would take place if their tariffs were revised as suggested in the paragraph above, the Commission is of the view that such tariff revisions would not necessarily open the door to competition in the repair of existing IW.
In the Commission's view, there are alternative approaches to those proposed by the companies that could be explored. One such approach, which would authorize subscribers to repair existing, as well as new, single-line IW, would require, in addition to the tariff revisions discussed above, tariff revisions providing that subscribers are responsible for maintaining single-line IW and that they may maintain, modify or re-arrange single-line IW, including any single-line IW that the telephone company may have furnished. The tariff revisions would include compensatory rates for repair service whenever a subscriber requested repair service from the telephone company and would not contain a telephone company maintenance plan. Under this approach, ECAO members, for example, could compete in repair as well as installation and they would not face the potential telephone company competitive advantages inherent in telephone company provided maintenance plans. Given Bell's evidence of very low single-line IW failure rates for both business and residence, the need for telephone company provided maintenance plans would be minimal.
Another approach would be a regime that provides for the possibility of competition in both installation and maintenance of all new single-line IW and any existing single-line IW that has been modified, re-arranged or added to. Under this approach, premises owners acquiring new IW would own it and be responsible for its maintenance. Premises owners with existing single-line IW would not be responsible for its maintenance until such time as they modified, re-arranged or added to it. Implicit in this approach are the assumptions that premises owners would be willing to acquire ownership of such IW from the telephone company, if need be, in order to modify, re-arrange or add to it, and that the tariff revisions would provide such a choice.
The Commission notes that both companies objected to a mixed-ownership regime such as this because of its inherent administrative difficulties. The Commission notes further that the telephone company competitive advantage in maintenance plans would also be present with such an approach.
Based on the record of these proceedings, the Commission denies Bell's Tariff Notice 4494 and BC TEL's Tariff Notices 2563 and 2563A.
Allan J. Darling
Secretary General
Date modified: