ARCHIVED -  Telecom Decision CRTC 95-19

Telecom Decision

Ottawa, 8 September 1995

Telecom Decision CRTC 95-19

FORBEARANCE - SERVICES PROVIDED BY NON-DOMINANT CANADIAN CARRIERS

I INTRODUCTION

A. Background

On 13 October 1994, the Commission issued Forbearance - Services Provided By Non-Dominant Canadian Carriers, Telecom Public Notice CRTC 94-44 (Public Notice 94-44), initiating a proceeding to consider the appropriateness of forbearing, pursuant to section 34 of the Telecommunications Act (the Act), from exercising certain powers and performing certain duties in relation to the services of Canadian carriers, other than Teleglobe Canada Inc. (Teleglobe), Telesat Canada (Telesat), carriers that provide basic local telephone service, and mobile service providers.

Section 34 of the Act states as follows:

34.(1) The Commission may make a determination to refrain, in whole or in part and conditionally or unconditionally, from the exercise of any power or the performance of any duty under sections 24, 25, 27, 29 and 31 in relation to a telecommunications service or class of services provided by a Canadian carrier, where the Commission finds as a question of fact that to refrain would be consistent with the Canadian telecommunications policy objectives.

(2) Where the Commission finds as a question of fact that a telecommunications service or class of services provided by a Canadian carrier is or will be subject to competition sufficient to protect the interests of users, the Commission shall make a determination to refrain, to the extent that it considers appropriate, conditionally or unconditionally,... in relation to the service or class of services.

(3) The Commission shall not make a determination to refrain ... if the Commission finds as a question of fact that to refrain would be likely to impair unduly the establishment or continuance of a competitive market for that service or class of services.

The sections referred to in section 34 can be summarized as follows:

(1) section 24: the offering and provision of any telecommunications service by a Canadian carrier are subject to any conditions imposed by the Commission or included in a tariff approved by the Commission;

(2) section 25: among other things, no Canadian carrier shall provide a telecommunications service except in accordance with a tariff filed with and approved by the Commission, specifying the rate or the maximum or minimum rate, or both, to be charged;

(3) section 27: among other things, every rate charged by a Canadian carrier for a telecommunications service shall be just and reasonable, and the Canadian carrier shall not unjustly discriminate or give an undue or unreasonable preference in relation to the provision of a telecommunications service or the charging of a rate for it;

(4) section 29: no Canadian carrier shall, without the prior approval of the Commission, give effect to any agreement or arrangement, whether oral or written, with another telecommunications common carrier respecting the interchange of telecommunications, the management or operation of facilities or the apportionment of rates or revenues; and

(5) section 31: no limitation of a Canadian carrier's liability in respect of a telecommunications service is effective unless it has been authorized or prescribed by the Commission.

In Public Notice 94-44, the Commission sought comment on:

(1) whether any of the specified carriers have the ability to exercise market power with respect to services that they provide?

(2) with respect to which services or classes of services provided by those carriers should the Commission refrain from exercising powers and performing duties?

(3) for those services or classes of services identified in (2) above, which of the powers and duties enumerated in section 34 of the Act should the Commission refrain from exercising and performing?

(4) for each power or duty, should the Commission refrain in whole or in part, conditionally or unconditionally?

In Public Notice 94-44, the Commission also noted that it had received a letter from Sprint Canada Inc. (Sprint) requesting that the Commission refrain, pursuant to section 34, from the exercise of powers and the performance of duties with respect to the telecommunications services provided by Sprint. The Commission made Sprint party to the proceeding, noting that, by letter dated 7 September 1994, it had notified Sprint of its intention to initiate a broader proceeding to deal with the issues raised by its letter and had informed Sprint that it could set out its position in that proceeding.

In response to Public Notice 94-44, the Commission received comments and/or reply comments from Alberta Power Limited; Canadian Business Telecommunications Alliance; Canadian Cable Television Association; Canadian Electrical Association; CF Cable TV Inc.; Canadian Satellite Communications Inc.; the Director of Investigation and Research, Bureau of Competition Policy; fONOROLA Inc. (fONOROLA); ICG Canada; LanSer Telecom Inc.; Northline Telecommunications Inc.; Northwestel Inc.; Nova Scotia Power Inc.; Ontario Hydro; Rogers Cable T.V. Limited (RCTV); Sprint; Stentor Resource Centre Inc. (Stentor) on behalf of AGT Limited (AGT), 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; Telezone Corporation; TelRoute Communications Inc.; TransAlta Utility Corporation; Vidéotron Télécom ltée (VTL); Unitel Communications Inc. (Unitel); and Westel Telecommunications Ltd. (Westel). AGT filed comments in addition to those filed on its behalf by Stentor.

The Commission notes with regard to Teleglobe that the proceeding initiated by Review of the Regulatory Framework for Teleglobe Canada Inc., Telecom Public Notice CRTC 95-11, 10 March 1995, includes consideration of forbearance for certain services provided by Teleglobe. With regard to Telesat, the Commission has already issued decisions forbearing, under most of the sections enumerated in section 34, with respect to those services provided by Telesat that the Commission currently considers to be subject to competition sufficient to protect the interests of users (see Telesat Canada - Forbearance for Digital Video Compression Services, Telecom Decision CRTC 94-20, 3 October 1994, and Telesat Canada - Forbearance for the Sale and Lease of Earth Stations, Telecom Decision CRTC 94-23, 16 November 1994, and Telecom Order CRTC 95-892, 10 August 1995). Issues of forbearance and exemption from the application of the Act for mobile services and mobile service providers, respectively, were addressed in Regulation of Wireless Services, Telecom Decision CRTC 94-15, 12 August 1994 (Decision 94-15). The Commission notes that the mobile wireless telecommunications services provided by mobile service providers are subject to Decision 94-15, while any other services they may provide are subject to this Decision.

B. Summary of Findings

As discussed more fully below, the Commission considers it appropriate to refrain from exercising certain powers and performing certain duties in relation to the bulk of the services provided by Canadian carriers who are entering the market pursuant to various Commission decisions, in particular, 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). The carriers in question include fONOROLA, Rogers Network Services (a division of RCTV), Sprint, Unitel, VTL and Westel Network Services Ltd. The Commission's decision to forbear applies to all services offered by such carriers, with the following exceptions: (1) public switched local voice services, (2) operator services, (3) services being considered in a current Commission proceeding with regard to the provision of non-programming services by distribution undertakings within the meaning of the Broadcasting Act, and (4) video dial tone (VDT) service provided by Canadian carriers that are also cable television undertakings.

With regard to the services in question, the Commission finds it appropriate to refrain entirely from exercising powers and performing duties under section 25 (regarding the filing and approval of tariffs). In addition, the Commission is forbearing under section 31, with the exception that its decisions with regard to limitations of liability will continue to apply to provisions in existing contracts or arrangements, during their current terms. The Commission will continue to exercise powers and perform duties under section 24 and, with exceptions, under sections 27 and 29.

II CONCLUSIONS

A. Services and Carriers Subject to Forbearance

Certain parties to this proceeding questioned the Commission's jurisdiction to (1) forbear from regulating the services of certain carriers, while continuing to regulate the offering of the same services by other carriers, or (2) issue a blanket forbearance order relating to all non-dominant carriers. In the Commission's view, section 34 does authorize it to forbear with respect to services of only certain carriers. When there is a material difference in circumstances among carriers such that the conditions for forbearance in subsections 34(1) or 34(2) would not be met with respect to some carriers, it would be inappropriate for the Commission to do otherwise. Indeed, depending on the circumstances, to do otherwise may impair unduly the establishment or continuance of a competitive market. The Commission also considers that section 34 authorizes it to issue an order with respect to the services of a group of carriers, when the conditions for forbearance apply equally to the services offered by all of the carriers in the group.

Although the issue of forbearance for dominant carriers was not included in Public Notice 94-44, AGT and Stentor submitted that the Commission should forbear from regulating services of all carriers, or that it should at least apply the same treatment to all carriers. In the alternative, AGT and Stentor argued that Stentor companies should have more pricing flexibility and that ex parte tariff filing arrangements should be expanded.

The Commission does not share the view that the current circumstances warrant that it apply the same regulatory treatment to all Canadian carriers providing similar services. In the opinion of the Commission, Canadian carriers that provide, or that traditionally have provided, public switched local telephone service on a monopoly basis (hereafter, referred to as the telephone companies) are in a position to exercise a significant degree of market power. With regard to the Stentor companies in particular, Stentor has not, in the Commission's view, demonstrated that a review of the Commission's findings in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), is necessary or appropriate at this time. Specifically, the Commission finds that a degree of forbearance for the Stentor companies greater than that contemplated in Decision 94-19 would be likely, at this time, to impair unduly the continuance of a competitive market.

In this context, the Commission notes that the telephone companies, as indicated in previous decisions, have control over access to bottleneck local services, and are in a position to exercise that control in a manner that could foreclose or diminish entry to the detriment of users, including competitors. With regard to the Stentor companies, the Commission notes further that, in Decision 94-19, it stated that it would be premature to forbear from regulating the provision of basic and discount toll, 800 service and Competitive Network (CN) services. The Commission stated, among other things, that there were a number of critical conditions that would have to be met before it could refrain from regulating these services. (As provided for in Decision 94-19, the Commission currently has a number of proceedings under way in which it is considering service-specific applications for forbearance filed by Stentor and Stentor companies.) As noted by many parties, the issue of pricing flexibility and ex parte tariff filings for Stentor companies was also addressed in Decision 94-19.

Other Canadian carriers are entering the market and competing with the telephone companies as a result of various Commission rulings, in particular, Decision 92-12. Such carriers include, among others, fONOROLA, Rogers Network Services (a division of RCTV), Sprint, Unitel, VTL and Westel Network Services Ltd. The Commission finds no evidence that any advantages that such carriers may currently have, relating either to existing affiliations or to market position, are sufficient to permit them to sustain predatory prices or, with limited exceptions (addressed below), to deny access to bottleneck facilities or to otherwise exercise market power. In particular, the Commission rejects Westel's argument that Unitel can exercise market power in some private line or data markets. Accordingly, the Commission finds it appropriate to forbear from regulating the bulk of the services provided by Canadian carriers other than the telephone companies, Teleglobe and Telesat (referred to hereafter as competing carriers). The extent of that forbearance is discussed in detail below.

As indicated above, as a result of various Commission rulings, competing carriers are permitted to provide both local and long distance public switched voice telephone services. As also indicated above, the Commission does not consider that competing carriers are in a position to exercise market power. However, the Commission is concerned that there are significant issues yet to be resolved with regard to competition in the provision of public switched local voice services, including issues related to access (for example, conditions of interconnection, co-location and unbundling), obligations to serve, quality of service and access to emergency services. Accordingly, the Commission considers it premature to consider forbearance with respect to public switched local voice services, regardless of the market position of the carrier providing the services. In addition, in order to ensure that the appropriate consumer safeguards are in place, the Commission considers it to be in the public interest that it continue to exercise its powers and perform its duties in connection with operator services.

The Commission also notes that, in the proceeding established by Provision of Non-programming Services by Broadcast Distribution Undertakings, Telecom Public Notice CRTC 95-22, 9 May 1995 (Public Notice 95-22), as revised in Provision of Non-programming Services by Broadcast Distribution Undertakings - Changes to the Proceeding, Telecom Public Notice CRTC 95-34, 5 July 1995 (Public Notice 95-34), issues relating to the regulation, as Canadian carriers under the Act, of companies that are distribution undertakings as defined in the Broadcasting Act are now before the Commission. In view of this, determinations in this Decision with respect to forbearance under section 34 of the Act do not apply to any services being considered in the proceeding initiated by Public Notices 95-22 and 95-34.

Further, the Commission notes that, in its report to the government, Competition and Culture on Canada's Information Highway: Managing the Realities of Transition, 19 May 1995, it recommended that affiliates of telephone and cable companies not be permitted to hold programming undertaking licences to operate video-on-demand (VOD) services until VDT tariffs are approved by the Commission allowing non-discriminatory access to the respective networks of telephone and cable companies by any other VOD providers. Consistent with this recommendation, the Commission's determination to refrain does not apply to the provision of VDT service by either telephone or cable companies.

B. Powers and Duties - Extent of Forbearance

As to section 25 (requiring the filing and approval of tariffs specifying rates), parties generally supported forbearance with respect to services offered by Canadian carriers with no market power. The Commission finds that there is sufficient competition that it need not continue to exercise powers and perform duties under section 25 in relation to the provision of the services in question by competing carriers.

However, with regard to section 24, the Commission considers it necessary to continue to exercise powers and perform duties in order to maintain and impose certain conditions on the offering and provision of telecommunications services by competing carriers. In addition, the Commission may find it necessary to impose further conditions in the future.

First, the existing conditions governing the treatment of customer confidential information shall continue to apply. Second, in recognition of concerns expressed as to the bypass of Canadian facilities, the Commission considers it appropriate to maintain existing restrictions on the bypass of Canadian services and facilities. Finally, as described in Section D below, the Commission is also requiring registration on the part of competing carriers. On a going-forward basis, conditions related to the above, where relevant, are to be included in all contracts or other arrangements with customers.

With regard to section 27, the Commission considers that, generally, there is competition sufficient to ensure that rates are just and reasonable, and to prevent instances of unjust discrimination or undue preference, in connection with the provision of the services in question by competing carriers. Therefore, except as specified below, the Commission will not exercise powers or perform duties under section 27.

As stated in Decision 94-15, the Commission considers open access to telecommunications networks to be in the public interest. In particular, the Commission considers that access to the facilities of competing carriers will enhance the efficiency and competitiveness of the Canadian telecommunications industry. Consistent with this view, the Commission considers it necessary to ensure that competing carriers do not unjustly discriminate against other service providers or subscribers, or confer any undue or unreasonable preference, with respect to access to networks and the resale and sharing of services. Accordingly, the Commission will continue to exercise powers and perform duties under subsections 27(2) and (4), with regard to issues related to access to the networks of competing carriers and the resale and sharing of their services.

Westel argued that the Commission should continue to exercise powers and perform duties under subsection 27(3) of the Act. The Commission notes that this subsection refers to sections with respect to which the Commission will continue to exercise powers and perform duties, as well as to section 34 itself and to section 40, which is not one of the sections enumerated in section 34. Accordingly, the Commission will continue to exercise powers and perform duties under subsection 27(3).

With regard to section 29 (prior approval of agreements and arrangements), the Commission acknowledges the concerns expressed about increased bypass of Canadian facilities, should it forbear from regulating under this provision with respect to the services of competing carriers. It is partly in light of these concerns that the Commission considers it appropriate to continue to exercise powers and perform duties pursuant to section 24. In recognition of concerns with respect to bypass, the Commission also considers it appropriate to continue to require competing carriers to file for Commission approval agreements or arrangements with foreign carriers that fall within the scope of section 29. However, the Commission does not consider it necessary that competing carriers continue to file any other agreements or arrangements falling under section 29. The Commission notes that Canadian carriers not subject to forbearance pursuant to this Decision (for example, the telephone companies) are still obliged to file such agreements or arrangements with competing carriers for the Commission's approval.

As set out above, the Commission has found that forbearance is warranted with regard to competing carriers, and such carriers are being relieved of the burden of filing tariffs. Accordingly, the Commission is of the view that there is insufficient basis for the retention by competing carriers of the benefits of having their limitations of liability prescribed by the Commission pursuant to section 31. Moreover, the Commission finds, with regard to the provision of the services in question by competing carriers, that there is competition sufficient to protect the interests of users, and that to refrain is not likely to impair unduly the establishment or continuance of a competitive market. Accordingly, the Commission will not exercise powers or perform duties under section 31. However, the Commission's decisions regarding limitations of liability continue to apply to provisions in existing contracts or other arrangements, during their current terms.

D. Registration

In order to facilitate the collection of contribution charges and to help ensure that the terms and conditions of this Decision are adhered to, the Commission considers it appropriate that existing registration requirements continue to apply to competing carriers. In addition, when registering, competing carriers are to specify the categories of service that they provide, including those services subject to forbearance pursuant to this Decision (for example, basic toll, discount toll, 800 service, CN services, basic local services). Further, the list is to be kept current, i.e., competing carriers are to notify the Commission and the telephone companies in question immediately, should they begin to provide, or cease to provide, any category of service.

E. Ruling

Based on the above, pursuant to subsection 34(1), the Commission finds as a fact that to refrain from exercising powers and performing duties, as set out in this Decision, with respect to the provision by competing carriers of services other than (1) public switched local voice services, (2) operator services, (3) VDT service provided by Canadian carriers that are also cable television undertakings, and (4) services that are the subject of the proceeding established by Public Notices 95-22 and 95-34, would be consistent with the Canadian telecommunications policy objectives. Pursuant to subsection 34(2), the Commission finds that the provision of the services in question by competing carriers is or will be subject to competition sufficient to protect the interests of users, so that it is appropriate to so refrain. Further, with reference to subsection 34(3), the Commission finds that to so refrain would not be likely to impair unduly the establishment or continuance of a competitive market for the services in question. Pursuant to section 34(4), sections 25, 27, 29 and 31 do not apply, to the extent that those sections are inconsistent with the determinations in this Decision, to the provision of the services in question by competing carriers.

Allan J. Darling
Secretary General