ARCHIVED -  Telecom Public Notice CRTC 96-26

Telecom Public Notice

Ottawa, 24 July 1996

Telecom Public Notice CRTC 96-26

FORBEARANCE FROM REGULATION OF TOLL SERVICES PROVIDED BY DOMINANT CARRIERS

The purpose of this Public Notice is to seek comment on the appropriate time and the extent to which the Commission should forbear from regulation of some or all of the long distance (toll) services offered by the Stentor member companies (except Sask Tel), the Quebec independent telephone companies and Ontario Northland.

The Commission derives its power to forbear from Section 34 of the Telecommunications Act. This section provides for deregulation, in whole or in part, conditionally or unconditionally, of a service or class of services provided by a Canadian carrier from: conditions of service (s.24), approval of rates and tariffs (s.25), ensuring just and reasonable rates and no unjust discrimination (s.27), approval of agreements (s.29) and limitations on liability (s.31).

The Commission may forbear where it "...finds as a question of fact that to refrain would be consistent with the Canadian telecommunications policy objectives." The Commission shall forbear where it finds that there "is or will be...competition sufficient to protect the interests of users." However, the Commission shall not forbear where it finds that to do so "would be likely to impair unduly the establishment or continuance of a competitive market..."

In 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, the Commission permitted the introduction of facilities-based long distance competition. In Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), the Commission concluded that while generally supportive of forbearance for the Stentor members' toll services, it would be premature to forbear from regulating toll services at that time. In this regard, there was insufficient evidence to warrant forbearance; the Stentor member companies had very high market share in toll services and there remained significant barriers to entry, limiting the ability of competitors to effectively discipline anti-competitive behaviour.

In Decision 94-19, the Commission detailed factors that it considers when assessing whether a particular market is or will be sufficiently competitive for the Commission to refrain from regulation. The Commission stated that there are "a number of critical conditions that must be met" before forbearance for toll services could take place, which included:

1. Full technical and operational implementation of equal access;

2. Resolution of issues concerning 800 access, including multi-carrier selection capability;

3. Comparable access for competitors, including the resolution of unbundling and co-location issues;

4. Implementation of the "imputation test";

5. Splitting the rate base and the implementation of the Carrier Access Tariff (CAT); and

6. Evidence of rivalry in the relevant market.

Conditions 1, 2, 4 and 5 have been addressed by the Commission and have been satisfied by the Stentor member companies. Condition 3, removing barriers to local competition (such as interconnection, unbundling and co-location), is currently being addressed in various proceedings with anticipated implementation in 1997.

With respect to condition 6, the Commission noted in Decision 94-19 that evidence of rivalrous behaviour is a critical factor in assessing whether there is sufficient competition to protect users in relevant markets (Basic Toll, Toll-free and Discount Toll services).

The Commission wishes to determine whether and the extent to which some or all of the services in the toll market are or will be workably competitive to the point where regulation is not required to protect the interests of users and forbearance will not impair unduly the continuance of a competitive market.

In Decision 94-19, the Commission stated that it was of the view that the Basic Toll market was less competitive than the Toll-free and Discount Toll markets and thus there was a reduced ability to rely on market forces to discipline prices. Accordingly, the Commission adopted the general policy that there should be no price changes that result in an overall price increase for North American Basic Toll schedules combined and that expedited interim approval would be given to Basic Toll rate revisions that:

1. Do not result in an overall price increase for North American Basic Toll schedules combined;

2. Meet the "imputation test" (to avoid below cost, anticompetitive pricing); and

3. Do not decrease the off-peak percentage discount for any given time period, except in cases where overall off-peak rates would fall (or remain unchanged) even with the discount.

With respect to the Toll-free and Discount Toll markets, the Commission decided to consider granting expedited, ex parte, interim approval to Stentor tariff filings, where certain conditions have been satisfied.

In view of the evolving competitiveness of the toll markets and the resolution of conditions noted earlier in this Public Notice, the Commission invites comments on the following issues:

1. Is there or will there be sufficient competition in each of the Basic Toll, Toll-free and Discount Toll market segments to justify forbearance and, if so, what should be the extent of forbearance and should it be conditional or unconditional?

2. Should the current "imputation test" be maintained as a test to resolve complaints in a de-tariffed environment?

3. In the event the Basic Toll market segment rates continue to be regulated, is there a continued requirement for an upward pricing constraint in this segment and, if so, what, if any, changes should be made to the current regulatory safeguards?

In addition, parties are invited to submit comments on any other matter relevant to the application of section 34 of the Telecommunications Act to the toll services of the dominant carriers.

PROCEDURE

1. Parties wishing to participate in this proceeding must notify the Commission of their intention to do so by writing to Mr. Allan J. Darling, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, fax: 819-953-0795, by 3 September 1996.

2. Parties are to file their submissions and/or proposals with the Commission, serving copies on other interested parties by 31 October 1996.

3. Parties may address interrogatories to the parties who filed submissions and/or proposals pursuant to paragraph 2. Any such interrogatories must be filed with the Commission and served on the party or parties in question by 29 November 1996.

4. Responses to interrogatories addressed pursuant to paragraph 3 are to be filed with the Commission and served on all other parties by 6 January 1997.

5. Requests by parties for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the party or parties in question by 15 January 1997.

6. Parties' replies to requests for further responses and to requests for public disclosure are to be filed with the Commission and served on the parties making the requests by 24 January 1997.

7. The Commission will issue a determination with respect to any such requests as soon as possible. The Commission intends to direct that any information to be provided pursuant to that determination be filed with the Commission and served on all parties by 28 February 1997.

8. Parties may, by 21 March 1997, file with the Commission and serve on other parties their comments.

9. Parties may, by 21 April 1997, file with the Commission and serve on other parties, their replies to the comments filed pursuant to paragraph 8.

10. Where a document is to be filed or served by a specific date, the document must be actually received, not merely mailed, by that date.

11. In addition to hard copy filings, parties are encouraged to file with the Commission electronic versions of their submissions in accordance with the Commission's Interim Telecom Guidelines for the Handling of Machine-Readable Files, dated 30 November 1995. The Commission's Internet email address for electronically filed documents is public.telecom@crtc.x400.gc.ca. Electronically filed documents can be accessed at the Commission's Internet site at http://www.crtc.gc.ca.

Allan J. Darling
Secretary General

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