ARCHIVED -  Telecom Order CRTC 97-1566

Telecom Order

Ottawa, 27 October 1997

Telecom Order CRTC 97-1566

By letter dated 4 April 1997, fONOROLA Inc. (fONOROLA) filed an application with respect to exemption from contribution charges for six cross-border circuits in BC TEL territory which are leased to I*Star Internet (I*Star).

File No.: 8626-F1-01/97

1. fONOROLA stated that four of the six circuits were audited by BC TEL and found to be physically cross-connected on the patch panel to I*Star. fONOROLA stated that the fifth circuit was not found by BC TEL and was explained later as either having been overlooked or accidentally missed due to circuit mislabelling. fONOROLA stated that the sixth circuit was not audited because it had not been installed at the time of the audit. I*Star stated in its affidavit that it does not, nor did it ever, carry voice services on the circuits in question.

2. BC TEL filed letters on 18 April, 2 June, 28 August (2 letters), and 29 August 1997. fONOROLA filed additional letters on 28 May, 18 August and 11 September 1997.

3. The Commission finds that there are actually seven circuits to be considered. The following are dates requested by fONOROLA in its letters of 4 April and 28 May 1997: one DS-3 circuit 07HIUT163439 installed 30 May 1996, still in service; three DS-1 circuits 07DHAT161197, 98, 99 for the period 15 January 1996 to 10 July 1996; one DS-1 circuit 07DHAT138866 for the period 15 August 1995 to 10 July 1996; one DS-1 circuit 07DHAT145222 for the period 9 September 1994, still in service; and one DS-1 circuit 07DHAT145220 for the period 3 February 1994 to 6 September 1996.

4. Based on the evidence, the Commission is of the view that there are four issues.

5. The first issue is the filing of an additional affidavit. fONOROLA acknowledged that it had not filed an affidavit to support contribution exemption for circuit 07DHAT145220. The Commission expects fONOROLA to submit within 30 days of this Order an appropriately worded affidavit to support contribution exemption for circuit 07DHAT145220.

6. The second issue is the form of application. BC TEL stated that it indicated to fONOROLA that it would be necessary for an application to be made in order that an exemption be granted. BC TEL stated that it, however, did not discuss the form of application with fONOROLA and did not indicate that an end-user affidavit was required. BC TEL stated that in fact, I*Star is not an end-user. BC TEL submitted that the form of application, which has been accepted by the Commission in the past, would be an application by I*Star as the service provider and reseller of the circuits in question. BC TEL stated that the appropriate form of evidence would be an affidavit by I*Star affirming that it is a data-only service provider and it does not provide voice services.

7. fONOROLA submitted that I*Star, while also a service provider, is the end-customer of fONOROLA. fONOROLA further submitted that as the contribution in question was paid by fONOROLA and not I*Star, it is fONOROLA's responsibility to apply for the exemption. fONOROLA stated that in addition, BC TEL should be aware that fONOROLA attached to its application for contribution exemption an affidavit from I*Star as suggested by BC TEL.

8. BC TEL submitted that, consistent with the practice under the contribution regime in effect prior to Telecom Order CRTC 97-590 dated 1 May 1997 (Order 97-590), the applicant should be I*Star. BC TEL stated that however, given that this is an issue of form and given the effect of Order 97-590 with respect to Internet Service Providers (ISPs), it would not object to the Commission granting interim or, if appropriate, final approval effective the date of fONOROLA's application. However, BC TEL maintained its view that an exemption should not be granted for the circuits in question for periods prior to fONOROLA's application.

9. The Commission notes that where cross-border circuits are provided by an Interexchange Carrier (IXC), other than one of the Stentor operating companies, the IXC is responsible for remitting the contribution payable to the telephone company. Given that the IXC is responsible for making such payment, the Commission considers that the IXC (i.e., in this case fONOROLA) is properly the applicant for the contribution exemption that is the subject of this Order. However, the Commission further notes that, consistent with Applications for Contribution Exemptions, Telecom Decision CRTC 93-2, 1 April 1993 (Decision 93-2), the appropriate evidentiary requirement in this case to support the contribution exemption is an affidavit by I*Star as the lessee of the circuits in question.

10. The third issue is whether the application in question should be approved and, if so, whether there are special circumstances to justify the effective date being the date of installation of the circuits. BC TEL noted that exemptions from contribution are being requested for prior periods and that the request for a contribution exemption is prospective only for the DS-3 circuit. BC TEL stated that in Effective Date of Contribution Exemptions, Telecom Public Notice CRTC 95-26, 12 June 1995 (PN 95-26), the Commission stated that absent special circumstances, contribution exemptions should generally not be made effective back to the date that the circuits were first installed but should be effective the date of application. BC TEL submitted that no case has been made that special circumstances exist such that contribution exemptions should be granted for prior periods. Therefore, BC TEL submitted that approval of any exemption from contribution for the circuits in question should be effective from the date of the application forward.

11. BC TEL stated that contrary to fONOROLA's submission, BC TEL is not in agreement with the use of the attestation process in the fashion which fONOROLA has described. BC TEL stated that to ensure that attestations are not accepted prior to an exemption being granted, BC TEL has informed its staff of the proper use of the attestation process and that, with the exception of attestations regarding unused capacity, contribution is payable in the absence of an exemption granted by the Commission (i.e., a telecom order granting an exemption). BC TEL stated that the use of the attestation process appears to be a fundamental point of disagreement between fONOROLA and it with respect to the contribution exemption process.

12. BC TEL stated that the process referred to by fONOROLA appears to be that set out in Decision 93-2, for the use of attestations to add or delete circuits to or from a configuration which has already been granted an exemption from contribution by the Commission. BC TEL stated that it has no record of fONOROLA receiving an exemption from contribution from the Commission for a configuration in British Columbia of dedicated or data circuits such that fONOROLA could add or delete circuits through this attestation process.

13. BC TEL submitted that while its staff should not have acted upon fONOROLA's interpretation of the contribution exemption process, fONOROLA also has a responsibility to understand and observe the contribution regime. BC TEL submitted that the fact that there are points of disagreement between fONOROLA and BC TEL with regard to the contribution exemption process does not constitute special circumstances.

14. BC TEL submitted that while Order 97-590 suggests the possibility of a different process applying to Internet services, it does not believe that automatic or blanket exemptions would be appropriate for Internet services particularly where, as in this case, such services involve the use of Canada-U.S. private line services or where such services are provided from the same premises as services which attract contribution.

15. fONOROLA submitted that the 19 March 1996 audit performed by BC TEL coupled with the signed affidavit from I*Star satisfy the evidentiary requirements for approval of the contribution exemption application.

16. With respect to the issue of the effective date of the contribution exemption, fONOROLA submitted that special circumstances have historically characterized its relationship with BC TEL. fONOROLA submitted that these circumstances are most notably evident through the reporting relationship that fONOROLA had with BC TEL prior to 22 August 1995. fONOROLA stated that prior to this date, fONOROLA provided monthly reports of its circuit usage to BC TEL indicating those circuits used for voice, those for data, those that were dedicated and those that stood unused. fONOROLA stated that in each monthly invoice submitted by BC TEL to fONOROLA, the appropriate contribution exemptions were reflected for the circuits fONOROLA had indicated in its report were exempt. fONOROLA stated that, until recently, BC TEL refrained from invoicing fONOROLA for many circuits that remain exempt.

17. fONOROLA stated that, in August 1995, BC TEL revoked the informal process and began invoicing fONOROLA for the full amount of contribution on almost every exempt circuit fONOROLA had in BC TEL territory. fONOROLA stated that in response to the new requirements outlined by BC TEL in its 22 August 1995 letter, fONOROLA submitted an application on 26 September 1995 for contribution exemption on its circuits dating back to 1993. fONOROLA stated that it also experienced numerous problems with under and overcharging by BC TEL and has attempted on numerous occasions to reconcile these errors.

18. fONOROLA submitted that in abstaining from applying the contribution regime to ISPs, the Commission was essentially recognizing that Internet Services, as data services, do not attract contribution. fONOROLA submitted that this being the case, it would be illogical to assume that as data services, Internet services would have attracted contribution prior to the issuance of Order 97-590. fONOROLA submitted that therefore, based on a reading of Order 97-590, neither it nor I*Star need make an application to the Commission for contribution exemption for I*Star's circuits carrying Internet services. fONOROLA submitted that BC TEL appears to recognize this point by its statement that: "this is an issue of form and given the effect of Order 97-590 with respect to ISPs, the Company would not object to the Commission's granting interim or, if appropriate, final approval effective the date of fONOROLA's application."

19. fONOROLA submitted that notwithstanding the above, it has satisfied on three fronts the evidentiary requirements to warrant a contribution exemption of I*Star's circuits back to the date of installation: (1) fONOROLA included an end-user affidavit with its 4 April 1997 exemption application. In Decision 93-2, the Commission stated that an end-user affidavit would, in some cases, "constitute sufficient proof to warrant an exemption" and therefore satisfy the Commission's evidentiary requirements; (2) based on BC TEL's audit of 19 March 1996, I*Star's circuits were physically cross-connected to the patch panel to I*Star; and (3) fONOROLA maintains that the operating relationship it had with BC TEL staff, and the change thereto, gives rise to special circumstances between the two companies.

20. fONOROLA stated that in its letter dated 28 May 1997, it described an informal process by which its operations staff reported, on a monthly basis, exempt circuits to BC TEL. fONOROLA stated that on the monthly invoices received from BC TEL, several of the circuits reported exempt were not billed. fONOROLA stated that on this point it noted that in response to BC TEL, it was not fONOROLA's position that "once an application has been made, contribution should not be billed", but rather it was BC TEL's practice. fONOROLA stated that if this were not the case then it would not have just recently received an invoice for contribution on circuits dating back to 1994, nor would BC TEL have mentioned the credit that "was prepared" but not applied to fONOROLA's accounts. fONOROLA noted that in addition, BC TEL had stated at page 3 of its letter: "the Company notes that some of its staff may not have been aware of this requirement at the time, (that contribution applies until a Commission order approves an exemption), and [BC TEL staff] may have accepted fONOROLA's position". fONOROLA noted that BC TEL has stated that "the Company has since advised its staff of the correct procedures in such cases".

21. fONOROLA submitted that the process described above was employed by BC TEL's operating staff, as it is used in other operating territories. fONOROLA submitted that it is because of BC TEL's change in operating practice, and failure to train and properly inform its staff, that has given rise to special circumstances between the two companies. fONOROLA stated that this change in operating practice can be further demonstrated by BC TEL's own admissions in its comments wherein it states: "To ensure that attestations are not accepted prior to an exemption being granted, the Company has now informed its staff of the proper use of the attestation process" and "... BC TEL staff should not have acted upon fONOROLA's interpretation of the contribution exemption process..."

22. fONOROLA submitted that BC TEL should not be permitted to have it both ways. fONOROLA submitted that BC TEL cannot implement one system, then change it and expect to reap the benefit to another's detriment. fONOROLA submitted that these actions on the part of BC TEL would result in a contribution windfall for BC TEL and essentially reward it for its inability to apply a contribution collection policy in a consistent manner.

23. fONOROLA acknowledged that it has not been without some element of fault in dealing with the timing of contribution exemption applications in BC TEL territory. However, fONOROLA noted that it has worked diligently with BC TEL staff and has been completely forthcoming regarding the circuits discussed to date. fONOROLA stated that together the two companies have resolved several items that, in effect, have reduced the workload of the Commission. fONOROLA stated that overall, many of the peripheral issues have been successfully resolved. fONOROLA stated that in addition, it has engaged additional staffing resources to deal with contribution issues on a going-forward basis, particularly in BC TEL territory. fONOROLA stated that to this end, it is in the process of engaging independent auditors to perform the technical audit on other circuits applied for on 30 July 1997.

24. The Commission is of the view that the affidavit filed by I*Star meets the evidentiary requirements for data circuits set out in Decision 93-2.

25. The Commission also considers that, based on the record of this proceeding, there are special circumstances which make the date of installation the appropriate effective date of the contribution exemption.

26. The Commission disagrees with fONOROLA that Order 97-590 relieved applicants of the requirement to file contribution exemption applications in respect of Internet services.

27. Accordingly, fONOROLA's application is approved effective the date of installation for the circuits in question subject to, in the case of circuit 07DHAT145220, fONOROLA filing an appropriately worded affidavit within 30 days of this Order.

28. The fourth issue is the requirement to pay contribution. BC TEL stated that fONOROLA appears to take the position that, once an application has been made, contribution should not be billed. BC TEL submitted that such a position is contrary to BC TEL's tariffs which require that contribution applies until the Commission approves, by way of a telecom order, an application for a contribution exemption. BC TEL noted that some of its staff may not have been aware of this requirement at the time and may have accepted fONOROLA's position. BC TEL stated that it has since advised its staff of the correct procedure in such cases.

29. The Commission considers that BC TEL's view is consistent with the company's tariffs.

Laura M. Talbot-Allan
Secretary General

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