ARCHIVED -  Telecom Decision CRTC 97-13

Telecom Decision

Ottawa, 4 June 1997

Telecom Decision CRTC 97-13

ROGERS CANTEL INC. v. BELL CANADA AND BELL MOBILITY: JOINT MARKETING AND BUNDLING OF WIRELINE AND CELLULAR SERVICES

I THE APPLICATION

1. On 14 August 1995, Rogers Cantel Inc. (Cantel) filed an application pursuant to Part VII of the CRTC Telecommunications Rules of Procedure (the Rules), in which it alleged that Bell Canada (Bell) and Bell Mobility Cellular Inc. (Bell Mobility) had engaged in joint marketing and bundling of cellular and wireline services to a potential customer (the Customer), contrary to Cellular Radio - Adequacy of Structural Safeguards, Telecom Decision CRTC 87-13, 23 September 1987 (Decision 87-13), Rogers Cantel v. Bell Canada - Marketing of Cellular Service, Telecom Decision CRTC 92-13, 29 June 1992 (Decision 92-13) and Complaints by Unitel and Cantel Regarding MT&T Contract with the Province of Nova Scotia - Consent to Prosecution, Telecom Decision CRTC 95-8, 9 May 1995 (Decision 95-8).

2. Cantel requested that the Commission investigate the alleged instances of joint marketing and bundling and issue orders directing Bell to cease participating in any form of cellular marketing and directing Bell Mobility to cease bundling wireline and cellular services. Cantel further requested that the Commission prohibit Bell Mobility from providing service to the Customer under the terms of any contract that bundles cellular services with wireline services offered by Bell.

3. On 14 September 1995, Bell filed an answer to Cantel's application in confidence, with an abridged copy provided to Cantel. On the same date, Bell Mobility filed its answer to the application in confidence, with an abridged copy provided to Cantel.

4. Cantel filed its reply comments on 25 September 1995.

II BACKGROUND

5. In November 1994, the Customer issued a Request for Proposal (RFP) seeking bids from potential suppliers for 11 lots of service, with each lot representing a specific product or service category, such as digital services, call detail, long distance, 800 and paging and cellular services.

6. The Customer requested potential bidders to submit "stand-alone proposals" for each individual lot and "alternate pricing proposals" for groups of lots that would produce better pricing than that proposed for individual lots.

7. In response to the RFP, Bell and Bell Mobility each submitted alternate pricing proposals. Bell responded to the voice and data lots, while Bell Mobility responded to the paging and cellular services lot. Cantel submitted a stand-alone proposal for the paging and cellular services lot.

8. Bell stated that its initial proposal did not include any response to the cellular services lot, nor did it contain any instances of bundling of cellular and wireline services. Bell acknowledged, however, that the proposal suggested that it was contingent on the Customer awarding its cellular services lot to Mobility Canada.

9. In April 1995, the Customer selected the alternate pricing proposals of Bell and Bell Mobility over Cantel's stand-alone proposal.

10. After the Customer had advised Bell that its initial proposal had been selected, but prior to the process of settling all of the terms of the contract with the Customer, Bell conducted an internal review of its initial proposal and determined that it might be misconstrued as not complying with existing regulatory requirements. Bell subsequently amended its initial proposal, advising the Customer that no inference should be made from its initial proposal that the Customer was under any obligation to select Bell Mobility's proposal in order for Bell to go forward with the commitment it made in its initial proposal.

11. In May 1995, the Commission issued Decision 95-8, in which it expressed 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 regarding joint marketing of cellular service and PCTS by the telephone companies and their cellular/PCTS affiliates or operations.

12. Following a consideration of Decision 95-8, Bell Mobility also amended its initial proposal in a letter to the Customer, which was received by the Customer prior to the final negotiation and execution of any contract with Bell Mobility.

13. Following further negotiations, the Customer signed separate contracts with each of Bell and Bell Mobility. These contracts were filed in confidence with the Commission, with abridged copies filed on the public record.

III POSITION OF PARTIES

14. Cantel stated that in discussions with representatives of the Customer in "post-bidder" meetings, Cantel was advised that a contributing factor to the loss of the Customer and the loss of the RFP was Cantel's failure to bundle its cellular and paging services with long distance and high speed data services. Cantel added that the Customer's representative stated that Bell and Bell Mobility had responded to the Customer's request for a bundled quote and offered their services on a bundled basis.

15. In light of this information, Cantel stated that it was apparent that Bell and Bell Mobility had collaborated in their bids to the Customer and had offered cellular and wireline services on a bundled basis. Accordingly, Cantel submitted that it was apparent that Bell and Bell Mobility had breached the Commission's policies regarding joint marketing, access to confidential customer information and neutral customer referrals established in Decisions 87-13 and 92-13. Cantel further submitted that Bell and Bell Mobility appeared to be in breach of the preliminary view of the Commission, set out in Decision 95-8, that the bundling of cellular and wireline services should be considered contrary to the Commission's restrictions regarding the joint marketing of cellular services by the telephone companies and their cellular affiliates.

16. Both Bell and Bell Mobility denied any non-compliance with the Commission's directives regarding joint marketing of cellular and wireline services.

17. Bell submitted that it was apparent from the manner in which the RFP was drafted and from the subsequent information provided by the Customer to bidders that the Customer expected Bell to cooperate with allied suppliers in preparing its response. Bell stated that the ability to review the Customer's requirements with Bell Mobility facilitated the offering of the service arrangement. Bell further noted that Decision 95-8 had not yet been issued at the time that it made its initial proposal.

18. Bell Mobility submitted that the Customer encouraged alternate, volume pricing proposals for groups of lots at its own initiative, and not in response to the marketing of Bell Mobility.

19. While Bell acknowledged that its initial proposal referred to acceptance by the Customer of Bell Mobility's bid for the cellular services lot, Bell submitted that the agreement that was ultimately reached with the Customer makes no reference to Bell Mobility's proposal for cellular services and complies in every respect with all existing legal and regulatory requirements.

20. With regard to Cantel's allegation that Bell breached the Commission's directive regarding the use of confidential customer information, while Bell did not admit to breaching the directive, it noted that the Customer clearly expected suppliers submitting joint proposals to cooperate in the preparation of their proposals.

21. With regard to the Commission's directive regarding neutral customer referrals, Bell submitted that the circumstances of this complaint do not fall within the Commission's directive concerning customer referrals.

22. In reply, Cantel submitted that it was not acceptable for Bell and Bell Mobility to inform the Customer, after the bid had been awarded to Bell Canada and Bell Mobility, that no tying of wireline and cellular services had been intended. At this point, Cantel argued, the anti-competitive preference had been conferred.

23. Cantel further submitted that the prohibition on the sharing of telephone customer information, as set out in Decisions 87-13 and 92-13, is absolute. While a customer may provide information directly to any cellular service provider, a telephone company may not share customer information with a cellular affiliate. Cantel argued that a customer requesting bids should therefore provide all relevant information in its RFP.

24. Cantel noted its agreement with Bell that the circumstances of the complaint do not fall within the Commission's directive regarding neutral customer referrals.

IV CONCLUSIONS

25. The Commission considers that customer acquiescence to a telephone company's non-compliance with a Commission directive is not sufficient to justify that non-compliance. The joint marketing safeguard was designed to guard against a telephone company using its dominant position to benefit its cellular affiliate at the expense of its cellular affiliate's competitors. In the Commission's view, customer instigation is not relevant in this case.

26. Bell acknowledged that its initial proposal to the Customer suggested that the proposal was contingent on the Customer awarding its cellular services lot to Mobility Canada. Bell also acknowledged that it allied itself with Bell Mobility in the preparation of its initial proposal. In the circumstances, it appears that Bell jointly marketed and/or offered to bundle cellular and wireline services in its initial proposal.

27. Bell's subsequent proposal, however, clearly stated that the Customer was not required to select Bell Mobility's proposal or to purchase any specific lots from Bell. Similarly, Bell Mobility's subsequent proposal confirmed that the Customer was under no obligation to purchase wireline services from Bell.

28. In the Commission's view, the evidence suggests that Bell was neither jointly marketing nor offering to bundle cellular and wireline services at the time it negotiated the contract that was ultimately signed with the Customer. Moreover, the Commission notes that when the Customer was presented by Bell and Bell Mobility with fresh proposals, the Customer was at liberty to accept or reject the revised proposal in favour of proposals from other competitors, such as Cantel.

29. The Commission has reviewed the contracts that Bell and Bell Mobility each signed with the Customer and is satisfied that they contain no evidence of joint marketing or bundling of cellular and wireline services.

30. With respect to Cantel's allegation concerning the sharing of confidential customer information, the Commission is unable to conclude that Bell contravened Decisions 87-13 and 92-13 in this respect. While Bell acknowledged that it collaborated with Bell Mobility in the preparation of its initial proposal, the record does not clearly establish that any confidential customer information was actually provided by Bell to Bell Mobility. The Commission reiterates, however, that customer acquiescence does not justify a breach of Commission directives, and Bell is reminded that it is expected to adhere to the directives set out in Decisions 87-13 and 92-13, as modified by the Commission's letter of 15 November 1996 regarding the provision of Liberti sets in Bell Phonecentres and Téléboutiques, for as long as the directives continue to apply. The Commission notes in this regard that in Review of Joint Marketing Restrictions, Telecom Public Notice 97-14, 25 April 1997, the Commission initiated a proceeding to examine the continued appropriateness of the joint marketing restrictions set out in Decisions 87-13 and 92-13.

31. With respect to the issue of neutral customer referrals, the Commission agrees with Bell and Cantel that the circumstances of this complaint do not fall within the Commission's directives on this matter.

32. With regard to Bell Mobility's compliance with the Commission's preliminary view in Decision 95-8 that bundling of cellular and wireline services should, in all cases, be considered to be contrary to the Commission's joint marketing restrictions, the Commission notes that this preliminary view is not a binding determination. In any event, as noted above, the Commission has reviewed Bell Mobility's contract with the Customer and has concluded that it does not contain any bundling of cellular and wireline services.

33. In light of the above considerations, the Commission is satisfied that the provision of services by Bell and Bell Mobility under their existing contracts with the Customer does not contravene the joint marketing safeguards set out in Decisions 87-13 and 92-13, nor does it constitute bundling of cellular and wireline services. In all of the circumstances, the Commission considers that no undue preference is being conferred on either Bell or Bell Mobility contrary to subsection 27(2) of the Telecommunications Act. Accordingly, Cantel's application is denied.

Allan J. Darling
Secretary General

This document is available in alternative format upon request.

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