ARCHIVED -  Telecom Decision CRTC 97-7

 Telecom Decision

Ottawa, 23 April 1997

 Telecom Decision CRTC 97-7

 TARIFF FILINGS RELATED TO THE INSTALLATION OF OPTICAL FIBRES

 I BACKGROUND

1.  In Telecom Order CRTC 95-1305, 22 November 1995, the Commission granted interim approval to separate Bell Canada (Bell) and MTS NetCom Inc. (MTS) applications to provide optical fibres between customer locations under Special Facilities Tariffs. In that Order, the Commission indicated its intent to issue a Public Notice to consider the appropriate tariffing of such services and, since that time, the Commission has granted interim approval to optical fibre Special Facilities Tariffs.

2.  In Tariff Filings Related to the Installation of Optical Fibres, Telecom Public Notice CRTC 96-1, 9 January 1996 (PN 96-1), the Commission invited comments on the appropriateness of requiring the use of General Tariffs for the provision of optical fibre and on the appropriate factors to be taken into account in determining the rates for any such services. Stentor Resource Centre Inc. (Stentor), on behalf of its member companies and ED Tel, now TELUS Communications (Edmonton) Inc. (TCEI), were made parties to the proceeding.

3.  Stentor filed a submission on behalf of BC TEL, Bell, The Island Telephone Company Limited (Island Tel), MTS, Maritime Tel &Tel Limited (MT&T), The New Brunswick Telephone Company, Limited (NBTel), and NewTel Communications Inc. (NewTel). AGT, now TELUS Communications Inc., (TCI) and TCEI filed separate submissions. The Commission received comments from ACC TelEnterprises Ltd. (ACC), the Canadian Cable Television Association, Canadian Satellite Communications Inc. (Cancom), Clearnet Communications Inc., i-Star Internet Inc. (i-Star), the Public Interest Advocacy Centre, Rogers Network Services (RNS), Shaw Communications Inc., Sprint Canada Inc. (Sprint), Telecentre Consulting Services (TCS) and Vidéotron Télécom Ltée (VTL).

 II POSITIONS OF PARTIES

4.  As noted above, the Commission sought comment in PN 96-1 on whether the use of General Tariffs for the provision of optical fibre would now be appropriate and, if so, what factors should be considered in establishing rates for such services. During the course of parties' submissions, TCI claimed that the Commission lacks jurisdiction to order the provision of optical fibres under General Tariffs.

5.  The Commission's determinations on all of these issues are set out below.

 A. Commission Jurisdiction Over The Tariffing of Optical Fibres

6.  TCI submitted that the Commission does not have the jurisdiction to regulate its provision of optical fibre. TCI stated that it is not operating as a telecommunications common carrier, as that term is defined in the Telecommunications Act (the Act) when it provisions optical fibre and that only activities undertaken by entities acting as telecommunications common carriers are subject to a requirement to file General Tariffs. TCI submitted that the definition of a telecommunications common carrier requires that telecommunications service be provided to the public for compensation. According to TCI, this criterion is not satisfied in the case of its provisioning of optical fibre, since it supplies unique customer-initiated requests on a case-by-case basis and consequently has not provided service to the public. TCI cited cases in Canada and the United States in support of its position. VTL disagreed with TCI's submission.

7.  The Commission is not persuaded by TCI's submissions regarding "service to the public". For example, the Commission rejects TCI's suggestion that when optical fibre is provided only in response to customer-initiated requests, this does not constitute "service to the public". The Commission finds that the provisioning of optical fibre is the provisioning of a "telecommunications service" as defined by the Act. Accordingly, the Commission is of the view that it has jurisdiction to order the tariffing of optical fibre on a General Tariff basis.

 B. The Appropriateness of Requiring the Provision of Optical Fibre Under General Tariffs

8.  In general, the Stentor companies submitted that it is inappropriate to provide optical fibre as a General Tariff service. In support of its position, Stentor submitted that (1) optical fibre is not fungible, (2) there is limited demand for this service, (3) it is not an essential/bottleneck service, (4) the rate averaging inherent in a General Tariff would make it less cost-based, and (5) competitors currently offer optical fibre without any requirement to file tariffs. Stentor also submitted that in view of the limited demand, deploying fibre widely would be risky.

9.  Other parties supported the use of General Tariffs. They submitted that fibre facilities are fungible and that there is sizeable demand for such facilities.

10.  In past decisions, the Commission has expressed a preference for the use of General Tariffs under appropriate conditions. For example, in Tariffs for Radio and Television Program Channels, Telecom Decision CRTC 85-6, 3 April 1985, the Commission stated that as a general principle, services should be offered under General Tariffs whenever feasible, since the use of these tariffs ensures that customers of comparable services will be treated uniformly. The Commission has also in the past used the principle of fungibility and the size of the demand to determine if a service should be provided on a Special Facilities or General Tariff basis.

11.  With respect to fungibility, Cancom submitted that the telephone companies, whenever possible, make use of existing facilities when providing fibre to their customers, and that the only customer-specific facilities which are required to be added are drops to the customer's premises. Cancom stated that the main element of the dark fibre route uses existing optical fibre facilities that are clearly fungible.

12.  RNS submitted that in the proceeding initiated by Implementation of Regulatory Framework - Local Interconnection and Network Component Unbundling, Telecom Public Notice CRTC 95-36, 11 July 1995, Stentor filed cost information in support of its proposed unbundled local loop rates, indicating that all facilities used to provide local loops are fungible. RNS also noted that, in response to a Commission interrogatory in that proceeding, Stentor indicated that the multiplexing equipment and the fibre transmission capacity of the SONET ring are fungible.

13.  Stentor submitted in reply, that certain parties had inappropriately lumped unlit optical fibre with fibre used in more conventional ways and had incorrectly concluded that optical fibre applications are fungible.

14.  Stentor also indicated that the availability of facilities is an important consideration in formulating a General Tariff. Stentor noted that with few exceptions, the existing Special Facilities Tariffs for optical fibres are for facilities placed in major centres and as such, any general service offering should be made available only in centres where facilities are available, or where particular customer demand warrants the company's investment to provide such facilities. Stentor also submitted that construction charges should apply in those circumstances where the company, with the concurrence of the customer, has to build facilities.

15.  ACC noted that there are standard caveats in the General Tariffs of the Stentor companies that allow the telephone companies the option of providing services subject to the availability of facilities and that where extraordinary costs would be incurred in the installation of the fibre, additional charges may apply.

16.  In the Commission's view, optical fibre facilities within major centres are generally fungible. These facilities can be used for transmission systems or for direct use by customers. Thus, optical fibre is not likely to be stranded as there are alternative uses for the telephone company. With respect to the level of demand, the Commission is not satisfied that demand is as limited as claimed by the telephone companies, given the number of Special Facilities Tariffs that have been filed with the Commission. In addition, given the emerging broadband technologies and applications that were identified by parties to this proceeding that could use fibre, the Commission considers that demand for optical fibre will grow rather than diminish.

17.  i-Star and TCS submitted that requests for optical fibre are refused by the Stentor companies, but that the same facilities are routinely provided to Stentor's own unregulated affiliates. Stentor rejected these claims.

18.  Sprint indicated that it had requested quotations for optical fibre from Bell on two different occasions in the past and claimed that the prices quoted by Bell in one case were above the General Tariff rates for digital services. In both cases, it was not economical for Sprint to pursue those requests. Stentor indicated that the pricing level of dark fibre is a function of a number of factors, including routing and payment options, and that these factors may give the appearance of wide variations in prices.

19.  The Commission notes that the use of General Tariffs would eliminate concerns regarding unjust discrimination in the pricing and availability of optical fibre.

20.  On the basis of the foregoing factors, namely, fungibility, demand (actual and potential) and the need to minimize any potential unjust discrimination, the Commission is of the view that optical fibre should be provided under General Tariffs.

21.  However, where construction has to be undertaken to provide facilities to a particular customer and where facilities could have little economic reuse value, fibre facilities would not necessarily be fungible. In such circumstances, the Commission is of the view that special tariffs would be appropriate, subject to certain conditions as set out below.

22.  The Commission is also of the view that all optical fibre customers who are provided service in areas for which General Tariffs would be applicable, should be migrated to the General Tariffs by 1 January 1998.

 C. Factors To Be Considered In Developing General Tariffs For Optical Fibre

23.  Although Stentor did not support the provision of optical fibre by means of a General Tariff, as requested in PN 96-1, it commented on the appropriate factors to be considered in determining the rates for any such General Tariff service.

24.  Stentor proposed that rates for optical fibre General Tariffs should (1) be distance-sensitive, (2) recover costs, (3) be rated at a premium over other high capacity access services to protect private line revenues and to reflect the greater transmission capacity, (4) apply only to facilities in the intra-exchange network, and (5) be subject to the availability of facilities.

25.  In the Commission's view, General Tariffs for optical fibre should only be required for local applications. The Commission agrees with Stentor that the provision of service under a General Tariff should be subject to the availability of facilities. With respect to the rates, the Commission considers that distance-sensitive rating would be appropriate, as it would be more reflective of cost and minimize the effects of rate averaging.

26.  Rates for optical fibre should recover costs. Premiums may be appropriate to protect existing private line services, but too high a premium could effectively stifle demand. The level of rates and premiums, however, would appropriately be dealt with in the filing of rates by the companies in connection with the tariffing of optical fibre.

27.  In the Commission's view, where special tariffs would be appropriate, the rates for optical fibre should not be less than General Tariff rates for the same facility distance. The companies are directed to justify in Special Facilities Tariff applications why such a tariff is necessary, provide facility distances and provide details for any extraordinary costs.

28.  The Commission is also of the view that in considering optical fibre Special Facilities Tariffs, stand-alone optical fibre and optical fibre included as part of a bundled service should both be considered. The Commission finds that in the case of bundled services that employ optical fibre, there is the potential for unjust discrimination if the fibre is not available at the same price as is implicit in the bundled price. The Commission is of the view that, in the case of customer-specific tariffs that include the use of dedicated optical fibre, the cost should reflect General Tariff rates for optical fibre and, if no General Tariff rates are available, such rates should be filed at the same time as the filing of the customer-specific tariff. In the Commission's view, the foregoing requirements will adequately address concerns regarding potential unjust discrimination, including those raised by certain intervenors in this proceeding.

 D. The Applicability of Optical Fibre General Tariffs

29.  Stentor submitted that should the Commission deem it appropriate that optical fibre facilities be provided in the companies' General Tariffs, only those companies currently providing optical fibre should be subject to such an order and only if they wish to continue providing optical fibre. Stentor indicated that MT&T, Island Tel, NBTel and NewTel have a policy not to provide optical fibres and with few exceptions, have not done so. BC TEL, Bell and MTS have provided optical fibre for specific customer requirements with all such arrangements filed as Special Facilities Tariffs. TCI indicated it would cease providing optical fibres after 11 March 1996, after it has honoured orders placed before that date. TCEI indicated that it will not provide optical fibre facilities, such as dark fibre, as a separate service offering.

30.  ACC submitted that the individual members of the Stentor alliance should not necessarily be directed to offer optical fibre under General Tariffs if they do not currently offer it under Special Facilities Tariff. On the other hand, Cancom submitted that Stentor has not suggested that MT&T, Island Tel, NBTel and NewTel would not provide optical fibre, and that the opportunity for discriminatory treatment would appear to be high if telephone companies were permitted to choose whether to provide optical fibre.

31.  In the Commission's view, Bell, BC TEL and MTS have provided optical fibre and should therefore be required to file General Tariffs.

32.  The Commission notes that TCI has filed a number of optical fibre Special Facilities Tariffs. TCEI and TCI have filed Special Facilities Tariffs providing for bundled services that include optical fibre. Both companies declared their intention not to provide optical fibre in the future. The Commission notes that General Tariffs are intended to prevent unjust discrimination, both in terms of rates and availability, and the filing of a General Tariff by TCEI and TCI would address these concerns.

33.  With respect to Island Tel, MT&T, NBTel and NewTel, the Commission notes that these companies have a policy not to provide optical fibre but have, by their own admission, provided optical fibre on occasion. The Commission is of the view that prior to determining whether optical fibre should be tariffed on a General Tariff basis for one or more of these companies, further details should be obtained with respect to the extent to which these companies have already provided optical fibre. If the Commission finds that only negligible amounts of optical fibre have been provided to date, a General Tariff will not be required.

 III DISPOSITION

34.  Bell, BC TEL, MTS, TCI and TCEI are to file General Tariffs for optical fibre within 90 days of the date of this Decision. The General Tariffs are to apply to local facilities and are to be subject to the availability of facilities. Rates are to be based on distance and are to recover cost.

35.  Where facilities are not available (i.e., where construction has to be undertaken to provide service to a particular customer) or where facilities would have little economic reuse value, Special Facilities Tariffs would be appropriate. In such cases, the companies should justify in tariff applications why a Special Facilities Tariff is necessary, provide facility distances and provide details for any extraordinary costs. Special Facilities Tariff rates for optical fibre should be not less than General Tariff rates for the same facility distance.

36.  All optical fibre customers who are provided service in areas for which General Tariffs would be applicable, are to be migrated to the General Tariffs by 1 January 1998.

37.  Island Tel, MT&T, NBTel and NewTel are not required to file General Tariffs at this time, but are directed to identify the services for which optical fibre has been provided, either as a stand-alone facility or as part of a bundled special tariff, within 30 days of the date of this Decision.

38.  In the case of customer-specific services, the costing of optical fibre is to reflect General Tariff rates and, if no General Tariff rates are available, such rates must be filed at the same time as the proposed tariffs for the customer-specific tariff offering. This is to apply to all the telephone companies that are party to this proceeding.

39.  The Stentor companies and TCEI are to copy interested parties in this proceeding with any future correspondence or submissions related to the above matters.

 Allan J. Darling
Secretary General

 This document is available in alternative format upon request.

DEC97-7_0