ARCHIVED -  Telecom Decision CRTC 94-12

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Telecom Decision

Ottawa, 8 July 1994
Telecom Decision CRTC 94-12
On 28 April 1993, Unitel Communications Inc. (Unitel) filed an application against AGT Limited (AGT), BC TEL, Bell Canada, The Island Telephone Company Limited, Maritime Telegraph and Telephone Company Limited, The New Brunswick Telephone Company Limited and Newfoundland Telephone Company Limited (the telephone companies). Unitel requested: (1) an interim order directing the respondents to cease the promotion, marketing and sale of their public switched long distance services to existing and potential sharing groups, and (2) a final order directing the respondents to revise their respective resale and sharing tariffs to require agreements between sharing groups and the respondents indicating that the members of the group actually share facilities and are jointly and severally liable for all charges payable.
Unitel submitted that the respondents were marketing their Advantage Plus Services to sharing groups under terms whereby each member of the group would receive an individual long distance bill and yet be eligible for the maximum discount on Direct Distance Dial rates based on the group's aggregate long distance usage. Unitel argued that this arrangement was a discriminatory pricing mechanism used to provide a telecommunications service to individual members who would otherwise be ineligible to receive the volume discount. Unitel submitted, among other things, that a sharing group administrator should, at least, be liable and assume responsibility for payment.
In Sharing Groups, Telecom Letter Decision CRTC 93-13, 19 August 1993 (Letter Decision 93-13), the Commission found it appropriate that a sharing group, like a reseller, be treated as a single customer for the purposes of billing, collection and liability for services rendered. The Commission directed that the telephone company must bill a representative of the group directly for all services obtained by the group's members and, in turn, the representative of the group must be responsible for billing and collecting from its members; in its dealings with a sharing group, the telephone company should not retain responsibilities vis-à-vis the individual members of the group that are characteristic of its relationship with an individual customer with respect to billing.
The respondents were given 60 days to ensure that existing sharing groups conformed to the above (this deadline was subsequently extended in Telecom Letter Decision CRTC 93-15, 22 October 1993). In addition, the Commission directed that no new groups that did not conform be established and no new members be added to existing groups that did not conform (AGT was not included in this direction as it was not possible at the time to resell bulk-discounted toll services in AGT's territory).
Coincident with the release of Letter Decision 93-13, the Commission issued Sharing Groups, Telecom Public Notice CRTC 93-51 (Public Notice 93-51) initiating a proceeding to examine issues related to the appropriate regulatory treatment of sharing groups in the environment brought about by 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 Public Notice 93-51, the Commission invited comments as to (1) the appropriate definition of a sharing group in the post Decision 92-12 environment, (2) the extent of telephone companies involvement in sharing groups, (3) possible limitations as to the size of sharing groups or requirements as to common interest among members, (4) the need to re-introduce a requirement for joint and several liability, and (5) the possible need to adjust competitor contribution levels in light of sharing group activities.
The Commission received comments from Stentor Resource Centre Inc. (Stentor) on behalf of the telephone companies, Unitel and a number of resellers, sharing groups and interest groups. Their positions on the various issues, and the Commission's conclusions, are set out below.
The resale and sharing tariffs of the telephone companies generally define "sharing" as the use by two or more persons, in an arrangement not involving resale of telecommunications services leased from the company; a "sharing group" is generally defined as a group of persons engaged in sharing.
The majority of parties who commented on the issue of the appropriate definition of a "sharing group" expressed the view that the existing definition is satisfactory. Most comments focused on whether or not a meaningful distinction exists between resellers and sharing groups. The Retail Council of Canada submitted that sharing groups are distinguished from resellers by a motivation factor, i.e., resellers are in business to make a profit, while a sharing group's interest is to confer economic advantage on its members. Fonorola Inc. and Optinet Télécommunications were of the view that the relationship between the reseller or sharing group and the carrier is different because sharing does not involve subsequent sale or lease or transfer of services shared by the members. Stentor agreed with these distinctions, particularly the non-profit nature of sharing groups.
Stentor and a number of sharing groups opposed treating resellers and sharing groups in the same way. Stentor submitted that Letter Decision 93-13 was inconsistent with Decision 92-12 and argued that the effect of Letter Decision 93-13 would be to encourage the formation of switchless resellers or rebillers, which, in turn, would have the effect of eroding contribution. Stentor and the sharing groups that participated in this proceeding argued that the relationship between a sharing group and the telephone company should closely approximate the telephone company's relationship with any other customer having multiple locations or departments.
Unitel and the resellers maintained that sharing groups should be treated by the telephone companies as a single customer. Unitel also argued that telephone company affiliates should not be permitted to act as an administrator or representative of a sharing group.
All parties to the proceeding submitted that limitations on sharing groups based on size or common interest would be difficult to establish, administer or enforce. Similarly, parties generally agreed that there was no need to re-introduce a requirement for joint and several liability.
As to the possible need for adjustments to contribution charges, Unitel suggested that the telephone companies be required to file forecasts of their expected sharing group revenues in the Commission's annual contribution charge proceeding, with quarterly updates, revisions, and adjustments to competitor contribution charges. Stentor maintained that the calculation of contribution rates in the annual contribution proceeding is adequate; furthermore, the reduction of contribution is an inevitable consequence of reductions in long distance prices. The majority of parties were satisfied with the existing annual adjustment process.
Based on the record of the proceeding, the Commission considers that the current definition of a sharing group is satisfactory and that no modification of the definition is required.
Based on the submissions received both in this proceeding and in response to Unitel's original application, the Commission remains of the view that, from an economic perspective, there is no reason to distinguish between resellers and sharing groups. Although sharing groups are not profit-oriented, both resellers and sharing groups seek to obtain an economic advantage from the shared use of discounted services by their customers or members. Accordingly, the Commission remains of the view expressed in Letter Decision 93-13 that a sharing group, like a reseller, should be treated as a single customer for the purposes of billing, collection and liability for services rendered.
Consistent with the above, the Commission is of the view that, if the telephone companies bill and collect from individual members of a sharing group, the concept of a sharing group has no meaning, in that the telephone company continues to have a direct customer relationship with each member.
In this context, the Commission notes that the tariffs of the telephone companies generally provide for the provision of service to a "customer" or an "applicant". By way of example, Bell's General Tariff Item 20 defines a "customer" as "a person for whom equipment or services have been installed and/or furnished ..., upon his application or request ...". The Tariff goes on to define a "person" as including "a partnership, firm, body corporate or politic, government or department thereof and the legal representatives of such persons."
The effect of such provisions, in conjunction with the Commission's findings in Letter Decision 93-13 and in this Decision, is to require that the sharing group designate a member or other representative to be liable, vis-à-vis the telephone company, for any charges incurred by the group and/or its members for services rendered, as well as for any applicable bill minimum.
In light of the above, the Commission is of the view that there is no need to re-introduce a requirement for joint and several liability; indeed, as indicated in Letter Decision 93-13, such a requirement may have the effect of excessively limiting sharing arrangements. Thus, sharing group members may make whatever arrangements they consider appropriate as to liability among group members and/or to the person designated by the group as the "customer". Such arrangements may include indemnification by a thirdparty, other than the telephone company or an affiliate thereof, of the person chosen as the "customer".
The Commission considers the above sufficient to make the concept of a "sharing group" meaningful and to address the difficulties related to contribution referred to in Letter Decision 93-13. The Commission therefore finds that further conditions as to the formation of sharing groups, related, for example, to size or to common interest among members, are neither necessary nor desirable.
The Commission does not consider it inappropriate for sharing groups to obtain third-party assistance to perform billing and collection functions, provided that the conditions specified in Letter Decision 93-13 are met: i.e., that the telephone company bills a representative of the group, who is liable to the company for the bill and, in turn, is responsible for billing and collecting from the members. As to Unitel's arguments with respect to telephone company affiliates, the Commission notes that, under the affiliate rule (recently reviewed in Affiliate Rule, Telecom Decision CRTC 94-6, 4 March 1994), the telephone company cannot provide interexchange services to an affiliate or to a sharing group that involves one or more persons who is an affiliate, where such services would be resold on a joint-use basis or shared to provide interexchange interconnected voice services, except where such services would be used only to provide portable communications services. In the Commission's view, it would not be appropriate to restrict an affiliate from providing billing and collection services to sharing groups, provided that the terms of this Decision and the affiliate rule are respected. Thus, in most circumstances, an affiliate of the telephone company providing service to the sharing group may not be a member of the group and may not function as the "customer" on behalf of the sharing group, although it may be retained by the group to perform billing and collection services.
As to Unitel's suggested changes to the annual contribution charge proceeding, the Commission considers that, with the sharing rules as explained above, the existing process is adequate and that no further filing requirements need be imposed on the Stentor companies. The Commission further notes that its approach to the annual calculation of contribution charges is under consideration in the proceeding initiated by Review of Regulatory Framework, Telecom Public Notice CRTC 92-78, 16 December 1992.
Allan J. Darling
Secretary General
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