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Telecom Decision

Ottawa, 15 February 1994
Telecom Decision CRTC 94-3
NBTEL - APPLICATION TO REVIEW AND VARY THE COMMISSION'S DENIAL OF HEALTHNET SERVICE
I BACKGROUND
On 20 August 1993, The New Brunswick Telephone Company Limited (NBTel) filed Tariff Notice 281 proposing a Special Assembly Tariff (SAT) to introduce Healthnet Service, a data communications network for the Health Care Management Regions of the New Brunswick Department of Health and Community Services. The company indicated that, as part of a restructuring of the health care system, the province was organizing 49 hospitals into 8 Health Care Management Regions, and that Healthnet would enable the transfer of information between hospitals.
Part of NBTel's proposed service consisted of local and interexchange data channels that are available from NBTel's General Tariff. However, the company did not propose to charge for these channels pursuant to the General Tariff. Rather, the company proposed a bundled rate structure with two components: (1) an access rate, which depended on the size of the hospital as determined by the number of beds, and (2) a usage-sensitive rate, based on megabytes of use.
On 13 September 1993, the Commission addressed questions to NBTel in connection with its application. Among other things, NBTel was asked to identify any differences between the proposed Healthnet service and Hyperstream, the frame relay service offered under General Tariff by NBTel and other members of Stentor. The company filed its responses on 21 September 1993.
The Commission denied Tariff Notice 281 by letter dated 27 October 1993. In its letter, the Commission noted that the SAT provided for a customer-dedicated network to provide frame relay service. On the basis of criteria established in Enhanced Services, Telecom Decision CRTC 84-18, 12 July 1984 (Decision 84-18), the Commission found frame relay service to be a basic service, and stated that a rate structure such as that proposed by the company could be used only for an enhanced service. Otherwise, when a special assembly uses a General Tariff service as one of its components, the General Tariff rate must be charged for that component.
The Commission added that it would be prepared to consider approving Healthnet, if General Tariff rates were used for those components of the SAT that were available under the company's General Tariff.
II NBTEL'S APPLICATION
On 26 November 1993, NBTel filed an application pursuant to section 62 of the Telecommunications Act (the Act), formerly section 66 of the National Telecommunications Powers and Procedures Act, requesting that the Commission review and vary its decision denying Tariff Notice 281. In its application, NBTel requested that the Commission grant immediate approval to Healthnet or, should the Commission continue to have concerns with respect to the service, grant immediate interim approval and issue a public notice to address any remaining concerns.
The New Brunswick Minister of Transportation, Region 2 Hospital Corporation and Restigouche Health Services Corporation filed comments in support of NBTel's application.
The criteria by which the Commission determines whether or not to review and vary its telecommunications decisions (see Telecom Decision CRTC 79-1, 2 February 1979) require that, in order for the Commission to exercise its powers pursuant to section 62, the applicant must demonstrate, on a prima facie basis, the existence of one or more of the following:
1. an error in law or fact;
2. a fundamental change in circumstances or facts since the decision;
3. a failure to consider a basic principle that had been raised in the original proceeding;
4. a new principle that has arisen as a result of the decision.
In addition, notwithstanding the lack of prima facie evidence that any of the above criteria have been met, it is open to the Commission to determine that there is substantial doubt as to the correctness of its original decision and that reappraisal is accordingly warranted. This is not so much a fifth criterion, however, as it is a statement of the residual discretion that exists within section 62 of the Act.
NBTel submitted in its application that the Commission erred in the original proceeding in characterizing Healthnet service as equivalent to a frame relay service and in not taking into account the differences between the proposed service and Hyperstream. The company went on to state that, based on a review of the facts, the Commission should find Healthnet to be a basic service.
The company also called upon the Commission to use its residual discretionary power to review and vary the decision. The company referred to certain of the Canadian telecommunications policy objectives set out in section 7 of the Act. The company submitted that its service meets these objectives in that it represents the company's and the customer's response to the critical New Brunswick health care situation and that the Commission is thus obligated to use its residual discretionary power to review and vary the decision.
III CONCLUSIONS
In the economic study filed with Tariff Notice 281, NBTel described Healthnet as providing a high-speed data Wide Area Network (WAN) Service using frame relay switching, routers and 56 Kbs and T1 data circuits. In its current application, the company describes Healthnet as using a combination of private lines, packet switching and routers to provide a service and functionality that is not otherwise available to customers through a frame relay service.
In the Commission's view, the service description provided in the original proceeding, and that in NBTel's current application, are both consistent with the Commission's characterization of Healthnet as a frame relay service.
The Commission notes that its conclusion that Healthnet was a frame relay service, and thus a basic service, was not based on a comparison to Hyperstream. In fact, in its letter of 27 October 1993, the Commission made no reference to Hyperstream. Rather, the Commission relied on the service description provided by NBTel in the economic study filed with the application and in its responses to the Commission's questions.
In its current application, NBTel does not dispute the Commission's finding that Healthnet is a basic service. Indeed, NBTel states that the Commission, upon review, should find the service to be basic. The Commission notes that its finding that Healthnet is a basic service provided the grounds for its denial of Tariff Notice 281. As noted above, it is the Commission's policy that SATs for basic services should refer to the appropriate General Tariff rate for those service components available from the General Tariff. This policy is necessary in order to prevent carriers from selectively bypassing the General Tariff by packaging, as SATs, services that use General Tariff components, and charging rates that effectively provide these components below rates specified in the General Tariff. To permit such a practice would result in unjust discrimination and/or the conferring of an undue preference or advantage, in that different customers would be provided with the same service at different rates.
Thus, once the Commission had determined that Healthnet was a basic service, the issue was the proposed rate structure, which did not recognize the use of the General Tariff components.
NBTel stated that it would be prepared to file Healthnet in its Special Services Tariff (the NBTel General Tariff for the provision of data and private line services) and make it available to any customers with similar requirements. The Commission notes that, whether the service is offered as was proposed by NBTel or under the General Tariff, the same difficulty is raised, i.e., that, without terms or conditions of service sufficient to justify different rates, unjust discrimination or the conferring of an undue preference or advantage would occur as a result of different customers being provided with the same service at different rates.
The Commission notes that the company filed economic studies in support of its application. In both its original and current application, NBTel stated that the proposed service would be compensatory over the study periods in question. However, the tariff application filed by the company specified no guarantee of any minimum level of usage, nor was there any indication that the service would be provided under the terms of a contract.
With respect to those components appropriately provided under an SAT, the Commission notes that its general practice is to require that contractual arrangements be established to ensure recovery of customer-specific costs. This is necessary to ensure that costs for special assemblies are recovered from the customer who causes them to be incurred, rather than from the general body of subscribers.
In its application, NBTel also requested that the Commission use its residual discretion to review and vary its decision on the basis that the proposed service furthers certain policy objectives set out in section 7 of the Act, in that it represents the company's and the customer's response to a critical health care situation in New Brunswick. The Commission notes that the Act sets out a wide range of objectives, and that more than one of those objectives may be relevant to a consideration of any particular application. Thus, in assessing an application for a service such as Healthnet, the Commission must also be cognizant of the other objectives embodied in section 7 and the concerns that underlie them, such as possible disadvantages to competitors and the possibility of cross-subsidies from monopoly services. While the Commission recognizes that its proposed service is considered to be a vital element in the province's health care delivery system, this does not obviate the need to ensure that other equally valid customer needs are not prejudiced by unduly preferential rates.
In light of the above, the Commission finds that it did not err in fact or in law. In addition, the Commission does not find it appropriate to invoke its residual discretion and vary its decision. The Commission therefore denies NBTel's application.
As indicated in its letter of 27 October 1993, the Commission would be prepared to consider approval of Healthnet if the company were to file an application incorporating General Tariff rates for those components of the service that are available under its General Tariff. The Commission notes that General Tariff rates can be structured to permit a certain flexibility in the pricing of those components. Specifically, discounts can be given for a long term contractual commitment or a high volume of usage. Similarly, for those components not available under the General Tariff that the company thus should offer under an SAT, the existence of long-term contractual arrangements would allow NBTel considerable flexibility in structuring rates, provided those rates were compensatory over the study period.
Allan J. Darling
Secretary General
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