ARCHIVED -  Telecom Order CRTC 97-1667

Telecom Order

Ottawa, 14 November 1997

Telecom Order CRTC 97-1667

The Commission received an application by NewTel Communications Inc. (NewTel) on 7 May 1997, pursuant to section 34 of the Telecommunications Act (the Act), requesting forbearance from the regulation of its Sympatico Internet access service and a planned dedicated Internet access service.

File No.: 8640-N2-01/97

1. NewTel requested that the Commission refrain from exercising its powers and duties under sections 24, 25, 29 and 31, and subsections 27(1), 27(5) and 27(6) of the Act.

2. NewTel's Sympatico service is currently provided pursuant to the company's General Tariff, Item 395, as approved in Telecom Order CRTC 96-1566.

3. NewTel stated that the proposed dedicated Internet access service for which it also seeks forbearance would provide a permanent connection from the customer's site to the main distribution router maintained by NewTel. Dedicated Internet access customers would be able to purchase virtual domain name hosting and storage services.

4. NewTel stated that to connect to the Internet, dedicated access customers will be required to lease facilities from NewTel to connect their site to the company's main distribution router.

5. NewTel supported its application by carrying out the market analysis outlined in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19).

6. NewTel argued that the market for Internet access in its service territory is competitive, as there are no barriers to entry by new suppliers, the required facilities being available from several suppliers, including NewTel (at tariffed, non-discriminatory rates), interexchange carriers, cable companies, and soon from other local exchange carriers. Also, customers can switch easily from one supplier to another, the company's share of the Internet access market is less than 20%, and Cable Atlantic Inc. (Cable Atlantic) is a major competitor offering a wide range of services at different transmission speeds.

7. Cable Atlantic opposed NewTel's application in a letter dated 2 June 1997. Cable Atlantic alleged that NewTel is subsidizing its Sympatico service since users in many exchanges where NewTel does not have an Internet point of presence do not incur long distance charges. According to Cable Atlantic, NewTel has bundled local Internet access and long distance services without complying with the rules for bundling described in Decision 94-19.

8. Further, Cable Atlantic argued that the Commission should not forbear from the regulation of NewTel's proposed dedicated Internet access service, in the absence of a full description of the service. Cable Atlantic submitted that there is insufficient information on the record for the Commission to approve NewTel's request.

9. Finally, Cable Atlantic noted that NewTel operates in a substantially less competitive market environment than most other Stentor members, and has "greater incentive and latitude to engage in anti-competitive practices in critical market segments." In Cable Atlantic's view, the Commission should not forbear from NewTel's Internet services because of NewTel's leading position in most telecommunications markets in the region. Cable Atlantic submitted that ongoing regulatory oversight is required to ensure that NewTel does not subsidize its Internet services with monopoly revenues or otherwise abuse its dominant position in the local and long distance markets.

10. NewTel responded to Cable Atlantic's intervention on 10 June 1997. NewTel submitted that, per Tariff Notice 495, the rates for its Sympatico service recover all costs, including the costs of using dedicated interexchange facilities to connect exchanges to where Sympatico is provided.

11. With respect to the proposed dedicated Internet service, NewTel stated that it requires subscribers to lease facilities from NewTel to connect to the company's main Internet router in St. John's. NewTel argued that the proposed service was similar to NB Tel's NBNet, and that the Commission had forborne from regulation of NBNet in Telecom Order CRTC 97-471, 8 April 1997 (Order 97-471).

12. NewTel also submitted that its position in other telecommunications markets is irrelevant to this application.

13. The Commission is of the view that the Internet access market in NewTel's service territory is sufficiently competitive to protect the interests of Internet users, as required for forbearance pursuant to subsection 34(2) of the Act. The Commission agrees with NewTel that the company's position in other telecommunications markets is not relevant to this proceeding.

14. The Commission is of the view that the implementation of the split rate base provides adequate safeguards against cross-subsidies.

15. The Commission also notes NewTel's submission that the underlying transmission facilities for the provision of Internet access services are readily available, either from NewTel at tariffed, non-discriminatory rates, or from alternate suppliers. In the Commission's view, these safeguards provide sufficient protection against anti-competitive pricing by NewTel. A strategy of predatory pricing would not be a workable strategy, because existing suppliers could increase their market share and new competitors could enter the Internet access market once NewTel attempts to recoup losses from predation.

16. With respect to the proposed dedicated Internet access service for which NewTel also seeks forbearance, the Commission agrees with NewTel that it is similar to NB Tel's NBNet services, from which the Commission forbore in Order 97-471.

17. The Commission finds that it would be appropriate to forbear from NewTel's Sympatico service and its proposed dedicated Internet access service with respect to sections 25, 29 and 31 and subsections 27(1), 27(5) and 27(6) of the Act.

18. The Commission finds that it would not be appropriate to refrain from exercising all of its powers and duties under section 24 and subsections 27(2), 27(3) and 27(4) of the Act.

19. The Commission considers it necessary to retain powers with respect to section 24 of the Act in order to maintain and impose certain duties on the provision of underlying telecommunications services to Internet service providers, namely to ensure that existing conditions regarding confidential information continue to apply, and to retain the power to impose conditions on the offering and provision of Internet access services as may be necessary in the future.

20. On a going-forward basis, commencing immediately, the existing conditions concerning customer confidentiality are to be included where appropriate, in all contracts or other arrangements with customers for the provision of Internet access services.

21. The Commission is of the view that it is important for it to retain subsections 27(2) and 27(4) in regard to issues related to access to the underlying network components of the services forborne from in this proceeding.

22. The Commission is further of the view that retaining subsections 27(2) and 27(4) of the Act would provide an additional safeguard against NewTel granting its Internet access services any undue preference.

23. The Commission considers it necessary to retain subsection 27(3) to the extent that it does not refer to compliance with any of the powers and duties forborne from in this Order.

24. Pursuant to subsection 34(1) of the Act, the Commission finds as a question of fact, that to refrain from exercising powers and performing duties under sections 25, 29 and 31 and subsections 27(1), 27(5) and 27(6) and under section 24 and subsection 27(3) of the Act to the extent set out in this Order, with respect to NewTel's Sympatico service and the proposed dedicated Internet access service would be consistent with Canadian telecommunications policy objectives.

25. Pursuant to subsection 34(2) of the Act, the Commission finds as a question of fact that the provision of these services is subject to sufficient competition to protect the interests of users.

26. Pursuant to subsection 34(3) of the Act, the Commission finds that to refrain from exercising the powers and performing the duties to the extent set out in this Order would not likely impair unduly the establishment or the continuance of a competitive market for these services.

27. In light of the foregoing, the Commission orders that:

(a) Pursuant to subsection 34(4) of the Act, effective the date of this Order, sections 24 (in part), 25, 29 and 31 as well as subsections 27(1), 27(3) (in part), 27(5) and 27(6) of the Act do not apply to NewTel's Sympatico service and NewTel's dedicated Internet access service as described in NewTel's application, to the extent that they are inconsistent with the Commission's determinations herein.

(b) NewTel is directed to issue tariff pages, within 15 days of the date of this Order, withdrawing the tariffs for Sympatico Service.

Laura M. Talbot-Allan
Secretary General

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