ARCHIVED -  Telecom Order CRTC 96-583

Telecom Order

Ottawa, 14 June 1996

Telecom Order CRTC 96-583

IN THE MATTER OF an application by Canada Payphone Corporation (CPC) dated 21 December 1995, for approval to conduct a market trial of competitive pay telephone service in Vancouver.

Reference: 95-1195

WHEREAS CPC stated that its application was in response to the Commission's statement in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19) encouraging new entrants to initiate local services even prior to the follow-up proceedings on unbundling and co-location;

WHEREAS CPC indicated that its service would be targeted at the travelling public and would provide an intelligent terminal that demystifies access to competing interexchange carriers, allows for multiple payment mechanisms, and provides new local calling features;

WHEREAS CPC stated that the regulatory concerns previously cited by the Commission with respect to operator services and call-rating would be accommodated by routing operator service calls to BC TEL or other CRTC approved providers of operator services;

WHEREAS CPC stated it plans to restrict activity to a gateway function and deliver calls that require billing, by means other than coin, to the customer selected carrier, which would validate the card, monitor the duration, rate the call, and bill and collect the appropriate charge;

WHEREAS CPC indicated it would negotiate an agreement with the carrier for originating this traffic, including payment of a commission and for those customers who do not have a carrier of choice proposed that during the market trail BC TEL be the default carrier;

WHEREAS CPC stated that its application addressed each of the concerns expressed by the Commission in previous decisions and in some cases exceeded the existing standards applied to the telephone companies;

WHEREAS CPC indicated that its application avoids involvement in areas where the Commission has expressed a need for continued regulatory oversight, namely, operator services tariffs and call-rating; and, where oversight is required, it is open to the Commission to establish conditions deemed appropriate which are enforceable through access arrangements with BC TEL;

WHEREAS CPC indicated that information gathered during the market trial would be made available to the Commission and should prove helpful to the Commission in determining the safeguards required in a competitive payphone market;

WHEREAS, in its answer filed on 22 January 1996, BC TEL indicated that in its view the current competitive pay telephone regime was limited in scope to the provision of access to long distance services by regulated IXCs with approved operator services tariffs pursuant to 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;

WHEREAS BC TEL stated that the Commission explicitly indicated in York University - Provision of Competitive Local Pay Telephone Service, Telecom Decision CRTC 95-20, 18 September 1995 (Decision 95-20) that restrictions to entry in pay telephone services are an exception to the general principle set out in Decision 94-19;

WHEREAS BC TEL submitted that two aspects of CPC's proposed service, namely IXC provided long distance and operator services provided pursuant to IXC tariffs are safeguards which could be enforced by the Commission;

WHEREAS BC TEL indicated that CPC would likely be an unregulated service provider and that although the application indicated an awareness of the Commission's concerns with respect to consumer safeguards, there are no mechanisms to ensure that CPC maintains access to emergency service, access for persons with disabilities, appropriate operating instructions, a complaint resolution process and no suggestion of an enforcement mechanism for the telephone rates (local calls, coin-paid long distance calls and stored value card service) over which CPC will exercise control by virtue of the type of pay telephone terminal equipment it proposed to use;

WHEREAS BC TEL indicated that CPC's suggestion that other conditions imposed by the Commission would be enforceable through access arrangements with the company runs counter to the Commission's finding in Resale to Provide Primary Exchange Voice Services, Telecom Decision CRTC 87-1, 12 February 1987 (Decision 87-1), that monitoring and enforcement of compliance with conditions on competitors would necessarily be in large measure the responsibility of the telephone companies and would be costly and could result in disputes between telephone companies and competitors requiring resolution at the regulatory level rather than in the marketplace; moreover, monitoring of compliance would be difficult to carry out and, as a result, the currently high and relatively uniform quality of Pay Telephone Service could suffer;

WHEREAS BC TEL submitted that the Commission indicated in Decision 95-20 that it expected to initiate a proceeding, following the establishment of general certification requirements in the proceeding announced in Implementation of Regulatory Framework - Local Interconnection and Network Component Unbundling, Telecom Public Notice CRTC 95-36, 11 July 1995, to consider permitting local pay telephone competition and would seek comment on whether such requirements would be sufficient or whether other safeguards would be required as a condition of allowing competition in this market;

WHEREAS BC TEL submitted that enforcement mechanisms for unregulated local service providers, including certification requirements, have not yet been developed and, given the Commission's schedule to review the appropriateness of expanding the scope of pay telephone competition, CPC's application was premature and should not be considered at this time;

WHEREAS BC TEL considered that granting prior market entry to parties, such as CPC, on a case-by-case basis would constitute a competitive "head start" and would be unfair to other potential pay telephone competitors who had put their plans in abeyance on the basis of the Commission's stated intent to defer any further consideration of pay telephone competition until after the outcome of the pay telephone proceeding referred to in Decision 95-20;

WHEREAS in its reply CPC stated that its proposal contained solutions to all of the consumer protection issues identified by the Commission in previous proceedings, and that the market trial would provide a real test bed for consumer protection safeguards;

WHEREAS CPC submitted that it had responded to the Commission's willingness to consider applications by local service providers prior to the conclusion of the process initiated by Public Notice 95-36;

WHEREAS CPC considered that BC TEL had misinterpreted Decisions 92-12, 94-19 and 95-20 in that the Commission could not have intended to establish a blanket prohibition on all activity in the local pay telephone market as this would be inconsistent with the Commission's extensive history of permitting market trials in evolving competitive sectors of the telecommunications industry prior to establishing general conditions of entry;

WHEREAS the Commission has considered the application, answer and reply filed in this proceeding;

WHEREAS, the Commission considers CPC to be an unregulated service provider;

WHEREAS, as it noted in Decision 94-16, the Commission considers that safeguards providing consumer protection are required in a competitive pay telephone marketplace and that enforcement and monitoring of compliance through regulated carriers as CPC suggests would be costly, unwieldy and pose too much potential for carrier/service provider disputes requiring resolution at the regulatory level rather than in the marketplace;

WHEREAS in Decision 94-19, the Commission explicitly cited restrictions on entry related to consumer safeguards as an exception to the general principle that barriers to entry in telecommunications should be removed and that increased competition in the local telecommunications market would be in the public interest;

WHEREAS in Decision 95-20, the Commission stated that it was not in the public interest to permit local pay telephone competition until mechanisms, including certification requirements, were in place to ensure enforcement of consumer safeguards with respect to unregulated service providers;

WHEREAS the Commission has expressed the preliminary view that the resolution of certification issues for competing local exchange carriers, in the context of Public Notice 95-36 will be sufficient to address concerns that the Commission has identified with respect to local pay telephone service;

WHEREAS the Commission has indicated that it expects to initiate a proceeding, following the establishment of general certification requirements, to consider permitting local pay telephone competition and to seek comment on whether other safeguards would be required;

WHEREAS, in light of the above, and consistent with its previous decisions on this subject, the Commission considers that CPC has not met the fundamental test regarding enforceability of consumer safeguards; and

WHEREAS, having considered the extent and nature of the proposed trial, the Commission finds that approval of market entry on this basis, prior to the outcome of the local pay telephone competition proceeding could provide CPC an unfair competitive advantage -

IT IS HEREBY ORDERED THAT:

The application is denied.

Allan J. Darling
Secretary General