ARCHIVED -  Telecom Decision CRTC 96-14

Telecom Decision

Ottawa, 23 December 1996

Telecom Decision CRTC 96-14

REGULATION OF MOBILE WIRELESS TELECOMMUNICATIONS SERVICES

I BACKGROUND

In Regulation of Wireless Services, Telecom Decision CRTC 94-15, 12 August 1994 (Decision 94-15), the Commission forbore from exercising certain powers in respect of cellular services and public cordless telephone services (PCTS) using the .94 GHz portion of the radio spectrum, and proposed to exempt providers of all other mobile wireless telecommunications services pursuant to section 9 of the Telecommunications Act (the Act). Pending the exemption order, the Commission forbore unconditionally from exercising its powers in respect of other mobile wireless services.

Decision 94-15 was based on the premise that cellular and PCTS services are distinct from all other types of mobile wireless telecommunications services. However, developments since that decision have cast doubt on this categorization. Also, it now appears that PCTS services will not develop as envisaged in Decision 94-15, and that new personal communications services (PCS) using the 1.8 - 2 GHz portion of the radio spectrum, recently licensed by the federal government, will supplant PCTS services, and would appear in many respects similar to cellular services.

In light of these developments, the proposed exemption order was withdrawn in August 1995, and the Commission issued Regulation of Mobile Wireless Services, Telecom Public Notice CRTC 96-2, 10 January 1996 (Public Notice 96-2). The Commission sought comment on (1) the appropriate categorization of mobile wireless telecommunications services for the purpose of regulation, (2) specific proposals for definitions of categories of mobile wireless telecommunications services and service providers, and (3) the appropriate regulatory treatment for the categories of services and service providers identified.

The Commission received comments and/or reply comments from Mobility Canada (Mobility), Rogers Cantel Inc. (Cantel), AIReach Integrated Network Limited (AIReach), Canadian Wireless Telecommunications Association (CWTA), Cancom Satellite Communications Inc. (Cancom), Clearnet Communications Inc. (Clearnet), LanSer Wireless Inc. (LanSer), Madison Telecommunications Inc. (Madison), Microcell Telecommunications Inc. (Microcell), Stentor Resource Centre Inc. (Stentor) and TMI Communications and Company, Limited Partnership (TMI).

II POSITIONS OF PARTIES

1. Categorization of Services

Most parties submitted that the appropriate categorization of mobile wireless telecommunications services should be based on the nature of the services in question, and in particular on the degree of substitution among those services. These parties submitted that services that compete with each other should be grouped together in the same relevant market. Accordingly, these parties proposed the approach adopted in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994, for the definition of the relevant market and the determination of the degree of market power of a particular service provider.

Mobility argued that the Commission should assign all wireless telecommunications services to the same market because all wireless telecommunications services, to some degree, compete with each other.

Cantel argued that there are important functional differences between different types of wireless telecommunications services. Differences in demand characteristics, the degree of substitution of one service for the other, geographic coverage and prices of different wireless telecommunications services indicate that there are several distinct markets. Cantel argued that there are four distinct mobile wireless markets: (1) cellular, PCS, PCTS and ESMR (enhanced specialized mobile radio) services; (2) paging and mobile data; (3) air to ground services; and (4) mobile satellite services, consisting essentially of TMI's mobile satellite services.

LanSer submitted that mobile wireless telecommunications services should be categorized according to whether they provide voice or data services. LanSer noted that products within each of these categories, such as PCS, PCTS and cellular services, are very similar and closely substitutable one for the other. LanSer also submitted that the Commission should consider all wireless telecommunications services, and not only mobile wireless telecommunications services, in this proceeding.

Clearnet submitted that services should be categorized based on the ability of carriers to engage in anti-competitive behaviour.

Cancom and Madison stated that the Commission should categorize wireless telecommunications services according to the radio frequency based licensing classification used by Industry Canada, since a separate categorization by the CRTC may confuse service providers.

CWTA stated that services should be classified according to the technology used to provide the services.

In summary, most parties submitted that PCS, PCTS, ESMR and cellular services are closely substitutable one for the other and should be included in the same category for purposes of regulation.

2. Appropriate Regulatory Treatment

Mobility argued that because there is sufficient competition among all mobile wireless telecommunications services to protect the interests of users, the Commission should exempt all providers of these wireless telecommunications services pursuant to section 9 of the Act. In the alternative to exemption, Mobility requested that the Commission alter the existing regulatory regime and forbear unconditionally from the regulation of all wireless telecommunications services, including forbearance from the application of sections 24, and subsections 27(2) and 27(4) of the Act in respect of cellular services.

Mobility also expressed the view that if the Commission would not change the regulatory regime applicable to cellular services, then the Commission should at least change the application of subsections 27(2) and 27(4) of the Act to shift the burden of establishing proof of any unjust discrimination or undue preference from the Canadian carrier onto the complainant. This change, according to Mobility, is important because "virtually any issue can be styled as involving discrimination, preference or advantage".

Clearnet submitted that the regulatory regime should reflect a carrier's market power, with the dominant carrier(s) being subject to a greater degree of regulation. Clearnet recommended three categories of service providers for the purposes of regulation: (1) whether a service is supplied by a monopoly wireline carrier, (2) whether it is supplied by an affiliate of a monopoly wireline carrier, and (3) whether a service is supplied by an independent carrier.

LanSer proposed that the Commission should continue to regulate carriers with market power, and impose the safeguards established in Cellular Radio - Adequacy of Structural Safeguards, Telecom Decision CRTC 87-13, 23 September 1987 (Decision 87-13) and Rogers Cantel Inc. v. Bell Canada - Marketing of Cellular Service, Telecom Decision CRTC 92-13, 29 June 1992, (Decision 92-13), on affiliates of dominant carriers, forbear from wireless voice services where the suppliers do not have market power, and exempt non-voice carriers.

AIReach submitted that the regulatory regime established in Decision 94-15 is still appropriate, except that it should be revised to apply to PCS and ESMR services rather than PCTS. AIReach argued that cellular, PCS and ESMR carriers have market power because they control access to bottleneck facilities and that the Commission should only conditionally forbear from regulating cellular, PCS and ESMR services, and not exempt such carriers. AIReach proposed that the Commission not forbear from regulating wireless telecommunications services provided by a telephone company, forbear conditionally from regulating cellular, PCS and ESMR services offered by an affiliate of a telephone company, and continue to apply the joint marketing safeguards established in Decision 87-13 and Decision 92-13 in all cases.

CWTA submitted that there has not been a fundamental change in the markets involved to warrant a review of the regulatory regime, and that Decision 94-15 is still appropriate. CWTA expressed the view that the regulatory regime applicable to mobile wireless telecommunications services should be evolving toward full deregulation. CWTA argued that wideband PCS should be regulated under the same rules as cellular, whereas narrowband PCS should be exempted from the Act because there will be sufficient competition in that market, since Industry Canada issued five narrowband licenses and is expected to issue additional licenses in the near future.

Most parties, with the exception of Mobility, recommended that the regulatory regime developed in Decision 94-15 for cellular and PCTS services should also apply to PCS services. Parties expressed the view that a regulatory regime of forbearance should be structured to ensure open and non-discriminatory access to networks of these wireless carriers. Cantel argued that regulation is required to prevent wireline carriers from using their market power in wireline markets to engage in anti-competitive behaviour in the wireless market.

With respect to ESMR services, AIReach, Cantel, and CWTA submitted that ESMR services should be regulated like cellular and PCS services, whereas Clearnet, Madison and Microcell stated that ESMR services should be considered as "other wireless telecommunications services".

Cancom and Cantel recommended that the Commission regulate TMI as a monopoly supplier. Cancom argued that TMI's services are targeted at a particular geographic market, are complementary to cellular services, and unlikely to face significant competition from wireline services. Cancom also noted that TMI likely will have a monopoly or near monopoly of L-band services using the MSAT satellite and its own satellite, and that the onset of competition from other satellite based services, such as the Iridium, Globalstar, Odyssey and similar systems for TMI services is not known. Cancom stated that the regulatory regime should ensure that satellite based carriers provide non-discriminatory access to bottleneck facilities.

TMI submitted that there has been no change in the market for mobile satellite services since the Commission proposed to exempt TMI in Decision 94-15, and therefore the Commission should proceed with the exemption order. TMI noted that while the Government of Canada assured TMI that its domestic satellite market would be protected, the company is competing in a wider market, for example in services supplied to the Caribbean and Mexico. TMI also argued that there will be competition from other satellite-based carriers in Canada in the near future.

III CONCLUSIONS

In Decision 94-15, the Commission considered that, in order to ensure against cross-subsidization from monopoly local telephone revenues, it would not be appropriate to refrain from exercising its powers and performing its duties with respect to mobile wireless telecommunications services where such services are not provided at arm's length, through a separate entity, but instead are provided within a telephone company providing primary exchange service. For this reason, the Commission's determinations to forbear, as set out below, regarding all mobile wireless services do not apply in respect of such services provided by a dominant telephone company providing primary exchange service (hereinafter referred to as "in-house dominant service providers").

In addition, the Commission notes that its determinations in this decision do not apply to telephone companies subject to Regulatory Framework for the Independent Telephone Companies in Quebec and Ontario (Except Ontario Northland Transportation Commission, Québec-Téléphone and Télébec Ltée, Telecom Decision CRTC 96-6, 7 August 1996 or to Regulatory Framework for Québec Téléphone and Télébec Ltée, Telecom Decision CRTC 96-5, 7 August 1996, or to Ontario Northland Transportation Commission, Prince Rupert City Telephones, or TELUS Communications (Edmonton) Inc.

The Commission confirms its preliminary view, as set out in Public Notice 96-2, that there has been a fundamental change in circumstance since the issuance of Decision 94-15 that calls into question the categorization of mobile wireless telecommunications services upon which the regulatory framework set out in that decision was based.

The Commission has concluded that, based on service attributes rather than underlying technology, mobile wireless telecommunications services properly fall within two categories of services for the purpose of determining the appropriate regulatory treatment: (i) mobile voice wireless telecommunications services that are connected to the public switched telephone network, such as cellular services, PCS, ESMR and satellite-based mobile services (public switched mobile voice services) and (ii) all other mobile wireless telecommunications services (other wireless services).

The Commission thus rejects the position articulated by some parties that there is only one relevant market. In the Commission's view, data and other wireless telecommunications services are not effective substitutes for public switched mobile voice services. The Commission also notes that LanSer's proposal regarding fixed wireless telecommunications services cannot properly be considered within the scope of this proceeding which, as set out in Public Notice 96-2, related solely to mobile wireless telecommunications services.

Given the different nature and functionalities of the services falling within each category, the Commission considers that the two classes of services call for different degrees of forbearance. For example, providers of public switched mobile voice services may control bottleneck or essential facilities thus requiring regulatory oversight to ensure that these facilities are made available without unjust discrimination or undue preference.

(i) Public switched mobile voice services

The Commission finds as a matter of fact that to refrain from exercising its powers and performing its duties, as set out below, with respect to the provision of public switched mobile voice services by Canadian carriers other than in-house dominant service providers would be consistent with the Canadian telecommunications policy objectives.

The Commission also finds as a matter of fact that public switched mobile voice services other than those offered in-house by dominant primary exchange telecommunications service providers are, or will be, subject to competition sufficient to protect the interests of users.

Accordingly, the Commission will refrain, pursuant to subsections 34(1) and (2) of the Act, from exercising its powers pursuant to sections 24 (in part), 25, 29, 31, and subsections 27(1), (5) and (6) of the Act in respect to public switched mobile voice services provided by Canadian carriers other than by in-house dominant service providers.

The Commission considers it necessary to continue to exercise its powers and perform its duties under section 24 of the Act in order to maintain and impose the conditions set out below, and those that may prove to be necessary in the future.

The Commission considers that all terms and conditions currently applicable to cellular service providers governing the protection of the confidentiality of customer information, whether set out in service contracts, previously in tariffs, or otherwise in Commission rulings, should apply equally to all public switched mobile voice services. On a going-forward basis, all such provisions are to be included in customer service contracts. In addition, these provisions will apply, where applicable, to existing customers, whether or not they were included in the service contracts signed by those customers.

The Commission considers open access to telecommunications networks to be in the public interest. Consistent with this view, the Commission considers it necessary to ensure that providers of these services do not unjustly discriminate against other service providers or subscribers, or confer any undue or unreasonable preference, with respect to access to their networks. While the Commission does not consider it necessary to continue to require providers of public switched mobile voice services to obtain the Commission's approval in order to give effect to agreements pursuant to section 29 of the Act, the Commission will require, as a condition of offering or providing public switched mobile voice services, that the Mobility family of companies and Cantel file agreements with their affiliated PCS carriers on the public record. Further, the Commission considers that instances of unjust discrimination or undue preference in the provision of these services could arise in other contexts. Accordingly, the Commission will continue to exercise powers and perform duties under subsections 27(2), (3) and (4) in relation to these services.

The Commission notes that in Decision 94-15, the Commission maintained the safeguards applicable to cellular operations carried on by telephone company affiliates that were established in Decision 87-13 and Decision 92-13. These safeguards include: (1) a prohibition on joint marketing and advertising, (2) a requirement for neutral customer referrals, (3) a prohibition on exchange of confidential customer information, and (4) a prohibition on the cross subsidization of a cellular affiliate by a wireline affiliate. These safeguards apply to the conduct of the telephone companies themselves vis-à-vis their relations with cellular affiliates. Thus, the Commission's determinations to refrain with regard to the provision of public switched voice services by affiliates does not affect the status of those safeguards. Pending the outcome of proceedings currently before the Commission relating to these issues, the Commission considers it appropriate to extend the safeguards set out in the two decisions referred to above to relations of the telephone companies with affiliates providing any public switched mobile voice services.

(ii) Mobile services that are not public switched mobile voice services

With respect to mobile wireless telecommunications services that are not public switched mobile voice services (other wireless services), the Commission finds as a matter of fact that to refrain from exercising powers and performing duties under sections 24, 25, 27, 29 and 31 with respect to the provision of these services by Canadian carriers, other than in-house dominant service providers, would be consistent with the Canadian telecommunications policy objectives.

Moreover, the Commission finds as a matter of fact that other wireless services provided by Canadian carriers other than in-house dominant service providers are, or will be, subject to competition sufficient to protect the interests of users. Accordingly, the Commission will refrain from exercising its powers pursuant to sections 24, 25, 27, 29 and 31 of the Act in relation to these services.

The Commission notes that in Decision 94-15 it proposed to exempt providers of many of these other wireless services from the Act. The Commission notes that it has refrained unconditionally from exercising its powers under sections 24, 25, 27, 29 and 31 in relation to these services. If providers of other wireless services were exempted from the Act, they would not have to comply with the Canadian ownership and control provisions specified therein. However, since these services are subject to licensing requirements under the Radiocommunications Act, the providers of these services will be required by Industry Canada to demonstrate that they are Canadian owned and controlled according to the applicable policy. Accordingly the Commission does not consider that it is, at this time, appropriate or necessary to exempt these Canadian carriers from the Act.

(iii) All Mobile Wireless Services

Pursuant to subsection 34(3) of the Act, the Commission finds as a matter of fact, that to refrain from exercising its powers as set out herein, in respect of public switched voice mobile wireless telecommunications services and other mobile telecommunications services provided by Canadian carriers other than in-house dominant service providers, respectively, would not likely impair unduly the establishment or continuance of a competitive market for each of these two classes of services.

In light of the foregoing, pursuant to subsection 34(4) of the Act, effective the date of this decision, sections 24, 25, 29 and 31 and subsections 27(1), (5) and (6) do not apply in respect of public switched mobile voice services provided by Canadian carriers other than in-house dominant service providers, to the extent that those sections are inconsistent with the Commission's determinations in this decision. In addition, effective the date of this decision, sections 24, 25, 27, 29 and 31 do not apply to Canadian carriers other than in-house dominant service providers in respect of the provision of other wireless services.

Notwithstanding the findings set out above, the Commission notes that it has already ruled that wireless telecommunications services fall within the scope of the proceeding initiated by Implementation of Regulatory Framework - Local Interconnection and Network Component Unbundling, Telecom Public Notice CRTC 95-36, 11 July 1995 (the Public Notice 95-36 proceeding). The Commission notes that its findings in this decision are subject to its determinations in the decision resulting from the Public Notice 95-36 proceeding, to the extent that any such determinations may apply to mobile wireless telecommunications services.

Allan J. Darling
Secretary General

DEC96-14_0