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ARCHIVED -  Telecom Order CRTC 96-130

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Telecom Order

Ottawa, 19 February 1996
Telecom Order CRTC 96-130
IN THE MATTER OF an application filed by Stentor Resources Centre Inc. (Stentor) on behalf of the federally regulated Stentor companies (the companies) related to a request for forbearance from regulation of Datapac (an X.25 packet data service), Pospac, Hyperstream (a frame relay service), Custom Packet Network services and any future packet data services that the companies may introduce.
 WHEREAS on 25 May 1995 the Commission issued Telecom Public Notice CRTC 95-25 inviting comments on the application;
 WHEREAS comments were received from Unitel Communications Inc. (Unitel), Sprint Canada Inc. (Sprint), fONOROLA Inc. (fONOROLA), the New Brunswick Cable Television Association (NBCTA), Rogers Network Services (RNS), LanSer Telecom Inc. (LanSer), Vidéotron Télécom ltée (VTL), the Alberta Consumers' Coalition (ACC), Westel Communications Ltd. (Westel), and Canadian Business Telecommunications Alliance (CBTA);
 WHEREAS Stentor's application was supported by CBTA and opposed by the other parties submitting comments;
 WHEREAS Stentor submitted analysis that follows the criteria outlined in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994, in relation to the state of competition in the provision of packet data services;
 WHEREAS Stentor identified a number of competitors that it submitted were offering both X.25 packet data and frame relay services;
 WHEREAS Stentor stated that although it currently had approximately 80% of the combined market for these services, it was losing market share as competitors were winning competitive bids;
 WHEREAS Stentor also stated that, as the packet data equipment (both X.25 and frame relay) was readily available from many different suppliers and transmission facilities were available from the companies' general tariffs or from competitors, it was relatively easy to configure a packet data network;
 WHEREAS Stentor submitted that the ease of expansion of supply, whether for competitive entry or for self supply, would ensure that no one supplier could raise prices without inviting new entrants;
 WHEREAS a number of interveners expressed concern with Stentor's request that the forbearance should extend to future undetermined packet data switched services such as asynchronous transfer mode (ATM) based services;
 WHEREAS Stentor replied that section 34 of the Telecommunications Act (the Act) provides the Commission the power to forbear from regulating a service or a class of services and that, in Stentor's view, a class of services includes current services that fall into that class as well as any future variations or new services that also fall into that class;
 WHEREAS certain interveners submitted that Stentor had failed to acknowledge the different levels of competition in the various regions of the country;
 WHEREAS Stentor replied that the principal competitors identified in its application do provide comparable services in all provinces while niche players concentrate on certain regions;
 WHEREAS LanSer expressed concern that Datapac access arrangements are part of the Datapac tariff and that forbearance from regulation of Datapac would mean forbearance from regulation of the access component as well;
 WHEREAS Stentor replied that the access components of Datapac are not bottleneck services but are a component of the service that can be configured from other local and access services offered by competitors as well as the Stentor companies;
 WHEREAS certain interveners submitted that Stentor's current market share indicates market dominance and also questioned Stentor's estimate that its market share would decline substantially in the near future;
 WHEREAS Stentor stated that market share is a necessary but not sufficient condition for a firm to exercise market power;
 WHEREAS Stentor also referred to a number of independent studies as support for its contention that its market share for packet data services would decline in the near future;
 WHEREAS certain interveners expressed concern with competitors' reliance on the Stentor companies for access facilities and private line services;
 WHEREAS Stentor submitted that, with the exception of DS-3 access service, all the digital access services that are required to provide packet data services are available from the general tariffs of the Stentor companies;
 WHEREAS LanSer raised the issue of the interconnection of packet data networks;
 WHEREAS Stentor submitted that LanSer had never asked for interconnection and that Stentor had provided an interconnection arrangement for Telesat Canada and could provide similar arrangements for others if they so request;
 WHEREAS, in the Commission's view, the companies' historic share of the X.25 packet data market is due to the fact that, until recently, there were only two participants in this market;
 WHEREAS, in the Commission's view, the X.25 packet data market is more competitive now with the arrival of new entrants and with the increased affordability of equipment and hence the greater availability of the self supply option;
 WHEREAS, in the Commission's view, any significant rate increases would invite new entrants or encourage customers to use the self supply option;
 WHEREAS, in the Commission's view, there is little risk of predatory pricing by the companies as loss of revenue from below cost pricing by a supplier could not be recovered by future price increases;
 WHEREAS, in the Commission's view, the Stentor companies' ubiquity is not an unfair advantage as there are no obstacles to the entry of competitors into markets they currently do not serve;
 WHEREAS the Commission is of the view that Datapac access arrangements are provided to meet customer needs and could be configured from existing tariffed access services outside the Datapac tariff;
 WHEREAS, in the Commission's view, as frame relay service standards are well established it is relatively easy for customers to switch suppliers with little or no additional investment in terminal equipment;
 WHEREAS, in the Commission's view, there is evidence of rivalrous behaviour in the frame relay market;
 WHEREAS, based on the above, the Commission is of the view that it would be appropriate to forbear to some extent from the regulation of Datapac and Hyperstream services;
 WHEREAS, since Pospac is essentially a packaging of the companies' Datapac services, the same considerations hold for this service;
 WHEREAS, in the Commission's view, it is not clear from the record the extent to which Custom Packet Network services are composed of private lines in addition to packet data switching equipment;
 WHEREAS the Commission accordingly is of the view that forbearing from regulating Custom Packet Network services could effectively result in forbearance from regulation of private line services;
 WHEREAS the Commission is also of the view that forbearing from regulation of Custom Packet Network services would allow the companies to circumvent the requirements for customer specific tariffs set out in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994;
 WHEREAS, based on the above, the Commission is of the view it would be inappropriate to forbear from the regulation of Custom Packet Network services;
 WHEREAS Stentor requested that its application for forbearance include future packet data services such as those based on ATM technology;
 WHEREAS, in the Commission's view, given the much greater scope and capability of ATM technology, it would not be appropriate to forbear from regulation of ATM services without examining evidence on the market characteristics and capabilities of these services;
 WHEREAS, while the Commission accepts that it is appropriate to extend forbearance to future X.25 packet data services and to future frame relay services, the Commission considers that such forbearance should be limited to those services which would otherwise have been made available under a general tariff;
 WHEREAS, upon offering any such future services, a block diagram must accordingly be filed with the Commission by the offering company showing all types of plant resources to be employed and indicating whether such resources are discrete or shared, together with a description of the general types of applications which may be handled by the service in order to demonstrate that the service meets the conditions of forbearance;
 WHEREAS Stentor requested that the Commission make a determination to forbear from the exercise of all powers and the performance of all duties under sections 24, 25, 27, 29 and 31 of the Act;
 WHEREAS, with regard to section 24, the Commission considers it necessary to retain the authority to impose certain conditions on the offering and provision of the telecommunications services forborne from in this Order;
 WHEREAS the existing conditions governing the treatment of customer confidential information shall continue to apply and existing restrictions on the bypass of Canadian services and facilities shall also still apply;
 WHEREAS, on a forward-going basis, conditions related to the above, where appropriate, are to be included in all contracts or other arrangements with customers;
 WHEREAS, 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 Stentor companies;
 WHEREAS the Commission nevertheless considers it necessary that subsections 27(2), 27(3) and 27(4) of the Act be retained with regard to issues related to access to the networks of the companies and the resale and sharing of the services forborne from in this Order;
 WHEREAS, pursuant to subsection 34(1) of the Act, the Commission finds as a question of fact that to refrain from exercising powers and performing duties under sections 25, 29 and 31 and subsections 27(1), (5) and (6), with respect to the companies' Datapac, Hyperstream, Pospac and future X.25 packet data and frame relay services, so long as such future services would otherwise have been made available under a general tariff, would be consistent with the Canadian telecommunications policy objectives;
 WHEREAS, pursuant to subsection 34(2) of the Act, the Commission finds that the provision of these services is or will be subject to sufficient competition to protect the interest of users; and
 WHEREAS, pursuant to subsection 34(3) of the Act, the Commission finds as a question of fact that to refrain from exercising the powers and performing the duties to the extent set out above would not be likely to impair unduly the establishment or continuance of a competitive market for these services -
 IT IS HEREBY ORDERED THAT:
1.  Pursuant to subsection 34(4), effective the date of this Order, sections 25, 29 and 31 and subsections 27(1), (5) and (6) of the Act do not apply to the companies' Datapac, Hyperstream and Pospac and future X.25 and packet data and frame relay services to the extent that they are inconsistent with the Commission's determinations herein.
2.  The Stentor companies are directed to issue tariff pages, within 15 days of the date of this Order, withdrawing the tariffs for Hyperstream, Datapac and Pospac services.
 Allan J. Darling
 Secretary General

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