ARCHIVED -  Telecom Decision CRTC 95-8

Telecom Decision

Ottawa, 9 May 1995

Telecom Decision CRTC 95-8

COMPLAINTS BY UNITEL AND CANTEL REGARDING MT&T CONTRACT WITH THE PROVINCE OF NOVA SCOTIA - CONSENT TO PROSECUTION

I BACKGROUND

By letter dated 4 November 1994, Unitel Communications Inc. (Unitel) alleged that a contract between Maritime Tel & Tel Limited (MT&T) and the Province of Nova Scotia (the Province) contained illegal rebates and concessions and bundled services in a prohibited manner. Unitel stated that it had previously obtained a valuable contract with the Province for the provision of long distance service. Unitel stated that it had recently been advised by the Province that it would terminate its contract with Unitel. Unitel submitted that MT&T had obtained the Province's business through the offering of illegal rebates and improper bundling of telephone company services.

In support of its submissions, Unitel provided a copy of an Agreement in Principle between MT&T and the Province, dated 26 September 1994 (the Agreement), and the associated Addendum and "Addendum Explanation". Unitel identified a number of specific aspects of the Agreement that raised concerns. These concerns included:

(1) a $100,000 rebate on unspecified services;

(2) a $50,000 rebate on call detail recording service (CDR);

(3) a $40,000 service request charge discount;

(4) a $60,000 discount on cellular services; and

(5) pay telephone revenues.

Unitel requested that the Commission issue an Order:

(1) declaring the proposed arrangement between MT&T and the Province to be in violation of subsections 25(1) and 27(2) of the Telecommunications Act (the Act);

(2) disallowing the proposed arrangement between MT&T and the Province; and

(3) prohibiting MT&T from providing service to the Province under the terms of the Agreement.

Unitel also requested that the Commission provide its consent, pursuant to subsection 73(5) of the Act, to criminal prosecution of MT&T and of Mr. Ron Smith, an officer of MT&T and one of the signatories to the Agreement, for contraventions of subsections 25(1) and 27(2) of the Act.

MT&T commented by letter dated 10 November 1994. MT&T indicated, among other things, that it had, with the permission of the customer, deferred cut-over of the services until Unitel's complaints are addressed by the Commission. Unitel replied by letter dated 17 November 1994. Further comments, dated 24 November 1994, were filed by MT&T.

On 15 December 1994, Rogers Cantel Inc. (Cantel) filed a complaint against MT&T and MT&T Mobility Inc. (MT&T Mobility) in respect of the same arrangement that was the subject of Unitel's complaint. Cantel alleged that MT&T and MT&T Mobility are jointly marketing cellular services in contravention of Rogers Cantel Inc. v. Bell Canada - Marketing of Cellular Service, Telecom Decision CRTC 92-13, 29 June 1992 (Decision 92-13). Specifically, Cantel stated that it appears that MT&T has offered discounts to the Province on MT&T Mobility's cellular services, as part of a package of wireline and cellular services. In addition, Cantel alleged violations of the Commission's policies with respect to customer referrals by telephone companies in response to requests for cellular service and with respect to the exchange of information by telephone companies and cellular affiliates.

MT&T commented on Cantel's complaint by letter dated 12 January 1995. Cantel replied by letter dated 20 January 1995.

In response to Unitel's complaint, MT&T stated that, in general, Unitel has misinterpreted and mischaracterized the documents in question. MT&T's view was that Unitel fails to understand the context of the relationship between MT&T and the Province, in which these documents were prepared.

MT&T stated that it is a major contributor to the economic development of Nova Scotia, and cooperates extensively with the Province in a number of ways. In recognition of this, MT&T and the Province entered into a Memorandum of Understanding Regarding an Alliance for Economic Renewal (MOU), dated 11 March 1994, which built upon a similar agreement reached with the previous government in 1993. MT&T indicated that this document provides for a number of joint initiatives, including promotion of electronic highway services and support for a process of "re-engineering of the Government program and service delivery processes through the use of telecommunications and information technologies". MT&T stated that the Addendum to the Agreement was intended to make specific some of the general principles which had previously been discussed in the context of the MOU.

MT&T stated that, in attempting to win back a portion of the Province's long distance telephone business, previously given to Unitel, it sought to have the Province make its procurement decision in the context of the overall relationship. MT&T stated that it was on that basis that the MT&T proposal highlighted for the Province the various benefits provided by the MT&T group of companies, such as the payment of income taxes in Nova Scotia, the employment of a large number of Nova Scotians in technological positions, joint promotions to encourage technology-based industries to locate in the province, and a variety of discounts made available to the Province. MT&T stated that none of these benefits was contingent on any other, and in particular, none was contingent on the use of MT&T long distance facilities for the long distance business that was the object of the proposal. MT&T stated that there was no bundling of any service with any other service, or of any offer with any other offer.

MT&T submitted that Unitel and Cantel appear to have been misled by the form of the Agreement, and indicated that it would be willing to resubmit this agreement to the Province making clear that the various "added value" elements provided by MT&T, as a corporate citizen of Nova Scotia and pursuant to its strategic partnership with the Province, are not contingent on the Province's use of MT&T's long distance services.

MT&T argued that any alleged offence has not taken place. MT&T noted that, while its representatives proposed, in error, certain deviations from the tariff, these were identified and withdrawn before the deviations went into effect. MT&T submitted that Unitel's and Cantel's complaints disclose no violation of the Act or of the principles enunciated by the Commission in Decision 92-13, and ought to be dismissed.

II GENERAL CONCLUSIONS

The Commission considers that there are six types of potential violations of regulatory policy or of the Act in the present case:

(1) Rebates or discounts that have the effect of applying rates other than in accordance with an approved tariff;

(2) unjust discrimination between customers of services subject to forbearance with respect to the approval of tariffs, but not with respect to unjust discrimination [subsection 27(2)];

(3) bundling in violation of the policies established in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19);

(4) joint marketing of cellular services;

(5) inappropriate exchange of customer information by MT&T Mobility and MT&T; and

(6) customer referrals in respect of cellular service.

The Commission's specific findings with regard to these six types of violations are set out in detail in Part IV below.

The Commission notes that a violation of the type noted in paragraph 1 (i.e., rebates or discounts that have the effect of applying rates other than in accordance with an approved tariff) would involve a violation of subsection 25(1) of the Act, and would require, by definition, that the services in question be subject to rate regulation. Further, the Commission considers that there are a number of criteria that must be met in order for a rebate to be considered an illegal tariff rebate, where the term "rebate" refers to the provision of something of value, other than the tariffed service, to the customer. In particular, in order to be an illegal tariff rebate, a rebate must, at a minimum:

(a) not be provided for by the tariff;

(b) be available to the customer only if the customer takes the tariffed service; and

(c) not take the form of a quantity of a non-tariffed service, unless it is demonstrated that there is a practice of using the provision of non-tariffed services to circumvent tariffs.

Criterion (a) is self-explanatory. With respect to criterion (b), the Commission considers that there is no violation of the tariff, provided that the "rebate" is not conditional on the customer taking the tariffed service. For example, if a carrier makes a charitable donation to a customer, and if the donation is forthcoming regardless of whether the customer takes the service, the payment required on the part of the customer to obtain the service will be the tariffed rate, and there will thus be no violation of the tariff.

Criterion (c) is intended to address those situations in which tariffed and non-tariffed services are provided together and where parties might argue that the provision of non-tariffed services at a zero or "low" price represents an attempt to circumvent the requirement to charge tariffed rates for the tariffed services. If arguments of that nature were to be accepted, it would require an assessment of the reasonableness of the unregulated price and of the current "market" price for de-tariffed services at the time of the transaction. Acceptance of such arguments would also require an equivalent exercise with respect to services that are not captured by the Act (i.e., are not "telecommunications services"), but that may be offered under the same contract as tariffed services. In the Commission's view, such exercises would amount to a form of price regulation in de-tariffed or non-tariffed markets, and would represent a level of regulatory intervention inconsistent with reduced regulation in de-tariffed markets.

The Commission notes that the above discussion with regard to criterion (c) relates only to the question of pricing of de-tariffed or unregulated services to circumvent tariffed rates for tariffed services. Thus, it relates to violations of subsection 25(1) of the Act. The provision of de-tariffed services under certain arrangements may nonetheless constitute a violation of the Act for other reasons; for example, it may entail a violation of subsection 27(2) of the Act with regard to unjust discrimination, etc., or of section 24, which provides that the offering and provision of telecommunications services are subject to conditions imposed by the Commission (rules with respect to the bundling of services, joint marketing restriction, rules governing the exchange of customer information, etc.).

Finally, the Commission notes that a violation of subsection 25(1) would require that service actually be provided, not merely offered (or quoted), at rates that vary from those in the approved tariff. In this respect, subsection 25(1) differs from the comparable sections of the Railway Act, which made it a violation to offer or provide a service at rates other than those in an approved tariff. However, section 24 of the Act requires that telecommunications services must be offered, as well as provided, in conformity with tariffed conditions of service other than rates and in conformity with any conditions imposed by the Commission. Thus, a violation of section 24 may arise from the mere offering of a service.

Applying the above to the present case, the Commission considers that there have been no violations of subsection 25(1) of the Act, because service was not actually provided under the terms of the Agreement. However, had service been provided under the terms specified in the Agreement, there would have been two violations of subsection 25(1), i.e., with respect to the $50,000 CDR rebate and with respect to the $40,000 service request charge discount. In addition, the Commission considers that the Agreement was inappropriately worded and could have resulted in a further violation of subsection 25(1) because it does not explicitly rule out the use of the $100,000 "rebate" for tariffed services. Further, the Commission is not persuaded that those aspects of the Agreement that could have resulted in violations of subsection 25(1) were purely the result of oversight on the part of the company, and considers that violations would likely have occurred had Unitel not brought this case to the Commission's attention.

The Commission also considers that, with respect to the $40,000 service request charge rebate, and to the extent that the $100,000 amount described above could have been used for terminal equipment, the Agreement amounted to an offer to bundle terminal equipment and network services, contrary to the rules established in Decision 94-19 regarding the bundling of network services. Consequently, these aspects of the Agreement represent violations of section 24 of the Act.

Finally, the Commission finds that there was a violation of one of the conditions applying to MT&T Mobility (in particular, the condition regarding disclosure of confidential customer information), which also represents a violation of section 24.

The Commission views violations of section 24 and actual or potential violations of subsection 25(1) with extreme concern. The fact that the violations in this case occurred in the context of an attempt by the dominant provider in Nova Scotia, i.e., MT&T, to win back the toll business of one of the largest customers in the province raises particularly grave concerns. The circumstances of this case raise serious doubts about MT&T's commitment to regulatory compliance and to appropriate behaviour in a competitive marketplace. In the Commission's view, such anticompetitive behaviour is simply not acceptable.

III REMEDIAL ACTION

Where inappropriate behaviour is found, the Commission does not have the authority itself to impose penalties or compensate those harmed. However, harmed parties can, pursuant to section 72 of the Act, generally sue for damages where the loss or damage suffered is the result of any act or omission that is contrary to the Act or to any decision made by the Commission.

In addition, the Commission can, pursuant to section 63 of the Act, make a decision an order of the Federal Court by registering a copy of the decision with the Court. The decision can then be enforced as if it were an order of the Court, with violations treated as contempt of court.

In light of its findings with regard to the conduct of MT&T, and MT&T Mobility, the Commission gives its consent to Unitel's commencement of any prosecution in relation to offences arising from this case. Further, MT&T and MT&T Mobility are provided 30 days to show cause why this Decision and all other Commission rulings containing policies relevant to this case should not be registered with the Federal Court, pursuant to section 63.

The Commission will regard MT&T's demonstrated ability and willingness to comply with regulatory requirements as relevant to any future consideration as to whether or not to forbear pursuant to section 34 of the Act with respect to the company's services, particularly in the event that conditional or partial forbearance is considered.

MT&T Mobility is directed to:

(1) comply immediately with all requirements of Regulation of Wireless Services, Telecom Decision CRTC 94-15, 12 August 1994 (Decision 94-15), including those requirements relating to the protection of the confidentiality of customer information; and

(2) file, within 45 days, a report (a) identifying all instances of disclosure of confidential customer information without the customer's consent occurring since 1 January 1993, specifying the date of the disclosure, the customer's name or, the nature of the information disclosed, the purposes for which the information was disclosed, the recipients of the information and whether the customer was informed of the disclosure after the fact, and (b) describing the safeguards employed to ensure compliance with provisions protecting customer confidential information and the procedures used to track instances of non-compliance.

MT&T and MT&T Mobility are each directed to file, within 45 days:

(1) a report detailing each company's internal procedures for identifying and preventing instances of non-compliance with regulatory requirements and requirements of the Act, and identifying the officer in each company responsible for ensuring compliance; and

(2) a sworn affidavit from the officer responsible for ensuring compliance affirming that the internal procedures detailed in the report have been implemented and that all management, marketing, sales and any other relevant personnel (to be specified) of MT&T and MT&T Mobility have been informed of the internal procedures.

MT&T is prohibited from providing service to the Province under the terms of the Agreement. In the event that MT&T proceeds with any of the initiatives covered by the Agreement, MT&T is prohibited from providing service under any new arrangement until:

(1) MT&T has filed a description of the new arrangements, along with any associated agreements or contracts, and a sworn affidavit from the officer responsible for ensuring regulatory compliance, demonstrating that the arrangement complies with regulatory requirements and attesting to that fact; and

(2) the Commission has confirmed that the terms of the arrangements are consistent with the Commission's regulatory policies.

In the event that MT&T Mobility proceeds with the cellular initiative covered by the Agreement, it is directed to file a description of any such arrangement, along with any associated agreements or contracts, and a sworn affidavit from the officer responsible for ensuring regulatory compliance, demonstrating that the arrangement complies with regulatory requirements and attesting to that fact.

As noted above, and as discussed in greater detail below, the Commission considers that the Agreement that is the subject of this case was inappropriately worded. For instance, the documents should have made clear whether certain aspects of the contract/proposal were or were not contingent on other aspects, and what limitations were placed on the use of the $100,000 amount. Further, on the basis of the record of this proceeding, the Commission considers it desirable that all Canadian carriers' agreements and contracts with customers, and proposals to customers, be in explicit compliance with regulatory requirements. Consequently, the Commission directs that all such agreements, contracts and proposals are to be in explicit compliance with all regulatory requirements.

Finally, as discussed below, the Commission has formed the preliminary view that the bundling or packaging of cellular service or public cordless telephone service (PCTS) with other services offered by the telephone company should in all cases be considered contrary to the Commission's restrictions with respect to joint marketing by the telephone companies and their cellular/PCTS affiliates or operations, including those instances where the aim or result is to use a customer relationship or position in the cellular or PCTS markets to gain an advantage in competitive wireline markets. The Commission intends to issue a public notice calling for comment on this preliminary view.

A detailed discussion of the violations arising out of this case is set out below.

IV SPECIFIC FINDINGS RE: VIOLATIONS

A. $100,000 Rebate Off Services

As noted by the parties, the Addendum Explanation provides that, in order to support the re-engineering of government and encourage the delivery of government services through telecommunications technology, MT&T will provide the Province with $100,000 in the form of hardware and/or services.

The $100,000 amount, as described in the Addendum Explanation, does not appear to be limited to non-tariffed services and, in fact, "can be utilized at the discretion of the Government". The Addendum Explanation implies that the $100,000 could be used to cover tariffed services, if the Province chose to use the amount in that fashion. Use of the $100,000 amount for tariffed services would clearly amount to a violation of subsection 25(1) of the Act in respect of such services.

MT&T stated that the $100,000 does not refer to tariffed telecommunications services, but rather to engineering or consulting services invested in the development of projects contemplated in the MOU. Notwithstanding MT&T's assurances, the Commission considers that the Agreement is inappropriately worded, and that it could have resulted in a violation of subsection 25(1), because it does not explicitly rule out the use of the $100,000 for tariffed services.

With respect to non-tariffed services, the Commission notes the following ways in which the $100,000 might have been applied:

(1) for services not subject to the Act (i.e., note "telecommunications services"), such as consulting services;

(2) for services subject to the Act (i.e., "telecommunications services"), but subject to forbearance with respect both to approval of tariffs and subsection 27(2) (unjust discrimination); and

(3) for services subject to the Act, subject to forbearance with respect to approval of tariffs, but not subject to forbearance with respect to subsection 27(2).

In any of the three circumstances noted above, there would be no violation of subsection 25(1) of the Act, since there is no requirement for an approved tariff. In addition, there would be no violation of tariffed rates for toll services, given criterion (c) in Part II, above. In cases (1) or (2), above, there would also be no violation of subsection 27(2) in respect of those services, since the services would not be subject to that subsection. While case (3) could potentially involve a violation of subsection 27(2) regarding unjust discrimination and undue preference, the Commission finds, as discussed below in the context of the discount offered on cellular services, that no such violation has been demonstrated in this case.

However, with regard to section 24 of the Act, the Commission finds that violations have occurred. In this context the Commission notes that, in Decision 94-19, it refrained (pursuant to section 34 from the Act) from the regulation of the sale, lease or maintenance of terminal equipment by MT&T. Nonetheless, use of the $100,000 for terminal equipment products would not be permitted if the amount was contingent on the Province taking MT&T's toll service, since use of the $100,000 for terminal equipment would amount to the bundling of terminal equipment and network services, contrary to the rules in Decision 94-19 regarding the bundling of network services.

MT&T indicated that the $100,000 would be available to the Province regardless of whether the Province used MT&T's toll services. However, given that the $100,000 amount is contained in the Agreement (by reference to the Addendum), and given that the Agreement requires the Province to use the MT&T network for all toll traffic, the Commission considers it reasonable to conclude, based on the Agreement, that the $100,000 was contingent upon the Province switching to MT&T's toll services. Therefore, given that the Agreement did not rule out the use of the $100,000 for terminal equipment, the Commission finds that the Agreement amounted to an offer to bundle terminal equipment and network services, in violation of the rules in Decision 94-19 regarding the bundling of network services. Consequently, in this respect, the Agreement entails a violation of section 24 of the Act.

Further, use of the $100,000 for cellular service (or PCTS) would be contrary to the Commission's policy prohibiting the joint marketing of cellular services, if the money could not be used for Cantel's services, as well as for MT&T Mobility's services, since this could be viewed as a promotion of MT&T Mobility's products and services. However, as the Agreement was not implemented, this form of joint marketing did not take place.

B. $50,000 Rebate Off CDR

As noted by Unitel, the Addendum Explanation states that "MT&T agrees to eliminate the current annual charge of $50,000 for CDR service."

In its comments, MT&T agreed that it would not be possible to waive the tariffed charge for this service, as contemplated by the Agreement. Had MT&T provided service under such terms, it would have been in violation of subsection 25(1) of the Act. MT&T stated that its original offering of this rebate was an error. However, given the wording of the Addendum Explanation, the Commission is not persuaded that the original offering of the rebate was an oversight or was made in ignorance of the illegality of such an arrangement.

C. $40,000 Service Request Charge Discount

As noted by the parties, the Addendum Explanation provides for a $40,000 discount on service request charges, "based upon our strategic partnership, significant volumes and the recent de-regulation CRTC decision."

MT&T indicated that, on review, it had determined that the amount of the discount was calculated, in error, on the full amount of the service request charges paid by the Province for both regulated network services and "soon-to-be forborne" terminal services. MT&T stated that the Province has been advised that it will not be possible for the company to extend a discount with respect to tariffed service request charges.

Even if the Commission were persuaded that there was an oversight on the part of the company in first offering to the Province a discount amount that included a discount from tariffed rates, the Commission is not confident that the oversight would have been discovered had it not been for Unitel's intervention. In any event, the Commission is sceptical of the company's characterization of the offering of the discount from tariffed rates as an error, given the questionable nature of other aspects of the Agreement. As in the case of the waiver of the CDR charges, had MT&T provided service under the terms of the Agreement, it would have been in violation of subsection 25(1) of the Act.

With respect to a discount on charges related to terminal equipment after 1 January 1995, the Commission notes that this would not, in and of itself, involve violations of either subsection 25(1) or subsection 27(2), given that MT&T's provision of terminal equipment would no longer be subject to either subsection and in light of criterion (c) in Part II, above.

With respect to the bundling of charges related to terminal equipment with charges for network services, the Commission notes that it decided in Decision 94-19 that its general policy against the bundling of terminal equipment with network services, either Utility or Competitive, should continue. MT&T argued that the service request charge discount is based on volume of terminal business, and is not contingent on the Province's use of MT&T toll services. If that statement is true, the discount would not amount to the bundling of terminal equipment and network services. If that statement is not true, the discount would amount to the bundling of terminal equipment and network services.

The Addendum Explanation states that the service request charge discount was based upon the parties' strategic partnership, significant volumes and forbearance by the Commission. However, the service request charge discount is part of an Agreement that requires the Province to use the MT&T network for all toll traffic. Therefore, notwithstanding MT&T's assurances to the contrary, the Commission considers that, as in the case of the $100,000 rebate described above, it is reasonable to conclude, based on the Agreement, that the service request charge discount was contingent upon the Province's use of MT&T's toll services and that, therefore, the Agreement amounted to an offer to bundle terminal and network services, contrary to the rules in Decision 94-19 regarding the bundling of network services. Consequently, the Commission finds that this aspect of the Agreement represents a violation of section 24 of the Act.

D. Cellular Discount

1. Unjust Discrimination

Unitel noted that the Addendum Explanation contemplates a $60,000 cellular long distance usage discount. Unitel submitted that the discount is unjustly discriminatory and violates subsection 27(2) of the Act. Unitel noted that, pursuant to Decision 94-15, the Commission continues to exercise powers and perform duties under subsection 27(2) in relation to cellular services.

The Commission notes that compliance with subsection 25(1) is not a concern, given criterion (c) in Part II, above, since approved tariffs are not required for the cellular services of MT&T Mobility. Rather, the issue is whether the discount and its inclusion in an Agreement covering telephone company services amount to either unjust discrimination vis-à-vis other customers or raise concerns with respect to joint marketing, customer referrals, inappropriate exchange of customer information or bundled pricing.

With respect to unjust discrimination vis-à-vis other customers, the Commission would expect, given that the decision to forbear from cellular services was based in part on a finding that competition in the cellular market is sufficient to protect the interests of users, that rate differences among customers would reflect different market circumstances and would not be unjustly discriminatory. An important basis for forbearance from prior tariff approval is that competitive market forces reduce the potential for unjust price discrimination by creating incentives not to engage in this behaviour, and that prior tariff approval is therefore not necessary to limit unjust discrimination.

The Commission considers that, in the cellular market, the major concern with respect to subsection 27(2) is access to the cellular networks. Consequently, the Commission's expectation is that rate differences between customers will not generally be unjustly discriminatory, unless they raise issues related to unjust discrimination or undue preference with respect to access to the cellular networks. In the Commission's view, it has not been demonstrated that the cellular discount at issue in the present case is cause for concern with respect to subsection 27(2).

2. Joint Marketing, Bundling and Customer Referrals

Cantel noted that, in Decision 92-13, the Commission extended the safeguards it established in Cellular Radio - Adequacy of Structural Safeguards, Telecom Decision CRTC 87-13, 29 June 1987 (Decision 87-13), to MT&T. Cantel noted that these safeguards involve restrictions on joint marketing, customer referrals and the exchange of information by telephone companies and their cellular affiliates or operations.

Cantel submitted that MT&T should not have included cellular services or a cellular discount in its telecommunications bid to the Province. Cantel stated that, if the Province had sought a cellular bid from MT&T, MT&T's correct course should have been either to refer the Province to both MT&T Mobility and Cantel, or to advise the Province that MT&T does not provide cellular service. Cantel stated that, instead, MT&T and MT&T Mobility appear to have made a joint service bid, in violation of the restrictions on joint marketing contained in Decision 92-13.

MT&T stated that the proposed discount for cellular services was developed by MT&T Mobility quite separately from MT&T's negotiations. MT&T stated that no bid for cellular service was sought by the Province from MT&T, nor was one made by MT&T; rather, MT&T Mobility, in recognition of the pricing freedom granted it through forbearance and of the significance of the Province as a customer, proposed to offer a discount. MT&T submitted that this discount is not related to the Province's use of MT&T's long distance services, and that Unitel's characterization of this discount as an "inducement to use MT&T's competitive long distance service" is in error. MT&T stated that there was no referral of business by MT&T, nor was MT&T Mobility's service bundled or jointly marketed with services of MT&T.

MT&T stated that, when it wished to enumerate the benefits provided to the Province by the MT&T organization, it was told by MT&T Mobility that it could refer to this impending discount proposal.

In reply, Cantel submitted, among other things, that there is no doubt that MT&T marketed both its own and MT&T Mobility's services to the Province in order to "enumerate the benefits provided to the Province by the MT&T organization". Cantel argued that it is clear from MT&T's statements that MT&T was offering the Province a total package of services, including cellular service. Cantel submitted that it is irrelevant whether MT&T's service offerings are viewed as complementing those of MT&T Mobility, or vice versa. Cantel stated that there is no merit in attempting to make such a distinction, since it would only invite telephone companies to disguise their marketing activities in the hopes of evading regulatory constraints. Cantel submitted that MT&T's proposal to the Province is joint marketing, and, as such, is prohibited by Decision 92-13.

MT&T indicated that the cellular discount is not related to the Province's use of MT&T's toll services. The Commission notes that, if that is true, the discount would not amount to the bundling of MT&T Mobility's cellular services and services offered by the telephone company. If that is not true, the discount would amount to bundling of MT&T Mobility's cellular services and services offered by the telephone company. However, the cellular discount is part of an Agreement that requires the Province to use the MT&T network for all toll traffic. Therefore, notwithstanding MT&T's assurances to the contrary, the Commission considers it reasonable to conclude, based on the Agreement, that the cellular discount was contingent upon the Province switching to MT&T's toll services and that, therefore, the Agreement amounted to an offer to bundle MT&T Mobility's cellular service and services offered by the telephone company.

With regard to the issue of joint marketing, the Commission notes MT&T's statement that, in attempting to win back a portion of the Province's long distance telephone business given to Unitel, MT&T sought to have the Province make its procurement decision in the context of the overall relationship. The Commission considers that MT&T presented to the customer the image of a provider of both cellular and wireline services for the purposes of gaining an advantage in the marketing of toll services.

In Decision 92-13, the Commission indicated that telephone company involvement in the joint marketing and promotion of cellular products and services was inappropriate, based on concerns that a telephone company might confer on a cellular affiliate an undue competitive preference or advantage through joint marketing. In the Commission's view, the Decision 92-13 restrictions on joint marketing, referring as they do to the provision of an undue advantage to the cellular affiliate, would not, strictly speaking, prohibit the bundling of cellular and toll services where the aim or result is to use a customer relationship or position in the cellular market to gain an advantage in competitive wireline markets. Rather, the focus of Decision 92-13 was to limit joint marketing that capitalized on positions or relationships in the wireline market in order to confer an advantage in the cellular market.

In the Commission's view, however, a joint marketing policy that permits bundled pricing where the apparent aim or result is to use a customer relationship or position in the cellular/PCTS market to gain an advantage in competitive markets for other telephone company services, while limiting bundled pricing (as a form of prohibited joint marketing) where the apparent aim or result is to use a customer relationship or position in the wireline market to gain an advantage in the cellular or PCTS market, would be open to abuse, given (1) the ease of obscuring the aim of the bundling, and (2) that customers would be primarily concerned about the total bundled price, not the distribution of the price between cellular service and PCTS and components related to competitive services offered by the telephone company. Therefore, the Commission's preliminary view is that the bundling or packaging of cellular service or PCTS with other services offered by the telephone company should, in all cases, be considered contrary to the Commission's restrictions with respect to joint marketing of cellular service and PCTS by the telephone companies and their cellular/PCTS affiliates or operations.

On the question of customer referrals, the Commission's policy, as enunciated in Decisions 87-13 and 92-13, is that, when responding to customer inquiries about cellular products and services, the telephone companies should refer to both cellular providers, in a neutral fashion, or to neither. In the present case, the policy would require that MT&T, where a customer requested a bid from it, either (1) refer the customer to both MT&T Mobility and Cantel, or (2) indicate that MT&T does not provide cellular service and refer the customer to neither MT&T Mobility nor Cantel.

MT&T stated that no bid for cellular service was sought by the Province from MT&T, and that there was no referral of business by MT&T. The Commission considers that the record does not provide any direct evidence of a violation by MT&T of the customer referrals policy. While, as discussed above, the Agreement implies that the cellular discount was contingent upon the Province switching to MT&T's toll services, and that MT&T was involved in the preparation of a coordinated bid, this does not necessarily imply a violation of the customer referrals policy.

3. Exchange of Information

Cantel submitted that there must have been an exchange of confidential customer information between MT&T and MT&T Mobility in order for MT&T Mobility to have participated in this bid by MT&T. Cantel stated that it is not, however, clear from the documents on the public record precisely what information had been exchanged.

MT&T submitted that, when the Commission concluded in Decision 92-13 that the staff of cellular affiliates should not have access to telephone company customer information, it was referring to confidential information related to monopoly telephone services, and not to other sorts of information. MT&T argued that, accordingly, disclosure by MT&T Mobility to MT&T of information concerning competitive cellular services would not be a violation of the Commission's directives.

The Commission notes that the restrictions regarding information exchange, established in Decision 87-13 and applied to MT&T in Decision 92-13, require that the telephone companies not provide their cellular affiliates with any access to either their competitive or their monopoly customer information. Therefore, MT&T's characterization of the restrictions as referring to confidential information related only to monopoly telephone services is incorrect.

Further, while MT&T is correct in stating that the information restrictions in Decision 87-13 and 92-13 do not address the provision of information by the cellular affiliate to the telephone company, such an exchange of customer information would be subject to the Commission's restrictions on the disclosure of confidential customer information, which were maintained in Decision 94-15. Specifically, Decision 94-15 stated that all terms and conditions applicable to cellular service providers, at the time of the Decision, governing the protection of the confidentiality of customer information should remain in effect. The Commission notes that tariff revisions incorporating protections for confidential customer information were proposed in MT&T Mobile Tariff Notice 57 and approved in Telecom Order CRTC 94-725, dated 23 June 1994. Thus, those protections were in effect when Decision 94-15 was issued.

MT&T submitted that, in any case, no exchange of any confidential information in either direction occurred. The Commission does not agree with this assessment. MT&T stated that, when it wished to enumerate the benefits provided to the Province by the MT&T organization, it was told by MT&T Mobility that it could refer to this impending discount proposal. The Commission considers that the information provided by MT&T Mobility to MT&T concerning the cellular discount was confidential customer information of a type that can only be disclosed with the customer's consent. The Commission presumes that no customer consent was requested, given the company's view that no exchange of any confidential information in either direction occurred. Therefore, the Commission considers that MT&T Mobility has violated one of the conditions applicable to cellular service providers, and therefore has violated section 24 of the Act.

E. Pay Telephone Revenues

Unitel stated that MT&T used pay telephone commissions as an inducement to win back the Province's long distance telephone business. Unitel noted that pay telephone revenues and commissions are derived in part from the provision of monopoly local service. Unitel characterized MT&T's approach as the bundling of pay telephone commissions derived from the provision of local services with the provision of competitive long distance service. Unitel submitted that this amounts to an undue preference conferred by MT&T on its long distance operations, in violation of subsection 27(2) of the Act.

MT&T stated that this is simply a representation of the additional revenue available to the Province, under MT&T's generally available terms, if it signs a five-year contract. MT&T indicated that this is not contingent on use of MT&T long distance services.

The Commission considers that the pay telephone provisions of the Agreement, given their general availability, do not amount to bundling of pay telephone services and other services. In other words, those pay telephone revenues would be available to the Province regardless of whether it chose to remain with Unitel or switched to MT&T for toll services. Consequently, their inclusion in the Agreement does not constitute the granting of an undue preference to MT&T.

Allan J. Darling
Secretary General