ARCHIVED -  Telecom Order CRTC 97-1764

Telecom Order

Ottawa, 27 November 1997

Telecom Order CRTC 97-1764

On 10 September 1997, BC TEL filed an application under Tariff Notice (TN) 3689, for approval of proposed revisions to its General Tariff for the introduction of Item 500, Solutions for Small Business Promotion, as amended on 15 October 1997 under TN 3689A. On 17 September 1997, BC TEL filed an application under TN 3697, for approval of proposed revisions to its General Tariff for the introduction of Item 274, SmartTouch/Long Distance Win-Back Promotion.

File Nos.: Tariff Notices 3689 and 3697

1. TNs 3689/A proposed the introduction of the Solutions for Small Business Promotion which would provide business customers with the opportunity to subscribe to a core package consisting of one individual business line, one hour of Intra B.C. customer-dialed long distance calling, plus a choice of up to three SmartTouch services and/or Integrated Voice Messaging Services (IVMS) for a period of three months. TN 3697 proposed the introduction of the SmartTouch/Long Distance Win-Back which provided eligible residential customers with one free SmartTouch feature for up to six months when they returned to BC TEL as their provider of long distance service.

2. On 25 September 1997, AT&T Canada Long Distance Services Company (AT&T Canada LDS) filed comments requesting that the Commission deny the tariff filings submitting that the bundling of long distance services with optional local services, or the bundling of services that includes primary exchange service in the bundle, would impede the development of local competition if such bundled service offerings were approved prior to the establishment of terms and conditions which would allow competitors to duplicate the proposed bundle.

3. AT&T Canada LDS submitted that, if approved, these forms of bundling would allow BC TEL to leverage its monopoly in the optional local services market in order to confer upon itself a preference to the detriment of all alternate providers of long distance services and potential local competitors.

4. AT&T Canada LDS submitted that the proposed bundled services do not comply with the Commission's directives on the bundling of services pursuant to Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19). AT&T Canada LDS asserted that BC TEL is seeking to avoid application of a form of the imputation test by claiming an exemption for a short term competitive promotion campaign. AT&T Canada LDS submitted that the condition of Decision 94-19, which stipulates that bundling is only permitted where competitors are able to offer their own bundled service through use of stand-alone tariffed bottleneck components in combination with their own competitive elements, has not been complied with.

5. AT&T Canada LDS stated that while Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8), established a general framework for the introduction of local competition, it did not specify particular arrangements designed to permit the resale of bundled services. AT&T Canada LDS submitted that the necessary practical arrangements are not yet in place to implement unbundling and resale of local services, including primary exchange services.

6. AT&T Canada LDS also submitted that the TNs do not comply with the conditions established by the Commission in Telecom Order CRTC 97-1345 dated 22 September 1997 (Order 97-1345) as BC TEL does not specify that it will allow competitors to offer stand-alone optional local services via resale as part of the TNs. This issue was also raised by Call-Net Enterprises Inc. in its submission dated 15 October 1997.

7. AT&T Canada LDS asserted that the proposed bundled local and long distance service packages are unjustly discriminatory and clearly give BC TEL an undue preference vis-à-vis competitors who are unable to replicate BC TEL's offerings and that this violates subsection 27(2) of the Telecommunications Act (the Act).

8. BC TEL, in its response dated 6 October 1997, submitted that it has met all of the Commission's requirements for bundling of local and long distance services and requested approval of TNs 3689/A and 3697. BC TEL noted that it had provided sufficient information in the TNs to demonstrate that they are legitimate promotions of limited duration, and that they are accordingly exempt from the application of any imputation test.

9. BC TEL submitted that the tariff provisions and processes are currently in place to permit BC TEL's SmartTouch services to be resold on a stand-alone basis, without the need to also resell the associated primary exchange service, and noted that these services can be activated on an end user's primary exchange line and billed to an alternate service provider. BC TEL argued that, given this fact, and the fact that business and residential primary exchange services are also available for resale on a stand-alone basis, it is possible for competitors to provide bundled service offerings similar to those proposed in the TNs.

10. BC TEL noted that AT&T Canada LDS has been offering a bundle of primary exchange lines, line features and long distance services and that this contradicts AT&T Canada LDS' assertions regarding the absence of the necessary practical arrangements. BC TEL submitted that its existing tariff provisions and operational processes and AT&T Canada LDS' own marketing practices establish that BC TEL has met the criteria for the bundling of services as set out in Decisions 94-19 and 97-8 and Order 97-1345.

11. BC TEL submitted that AT&T Canada LDS' assertion that the TNs violate subsection 27(2) of the Act is without merit given that the Commission's finding of undue preference in the Bell Canada filings was predicated on the Commission's understanding that the line features involved were not available to other service providers on a stand-alone basis. The circumstances in BC TEL's case do not support making a similar finding with respect to TNs 3689/A and 3697.

12. BC TEL submitted that AT&T Canada LDS' assertions of undue preference go beyond the scope of issues addressed in Order 97-1345 and noted that there is nothing inherently anti-competitive in bundling local services with long distance services prior to the development of competition in the local market; the fact that Decision 94-19 specified conditions to govern such bundling constitutes express Commission recognition of that fact.

13. BC TEL noted that the promotions do not impose a term commitment on participating customers, or a penalty in the event of early termination of customer participation, and cannot be viewed as a pre-emptive strike against potential local competitors prior to the development of competition in the local market.

14. In Decision 97-8, the Commission determined that with the introduction of competition in the local exchange market, certain modifications to the bundling regime in Decision 94-19 are appropriate. The Commission also stated in Decision 97-8 that, consistent with the treatment of market trials and promotions in Review of Regulatory Framework - Targeted Pricing, Anti-Competitive Pricing and Imputation Test for Telephone Company Toll Filings, Telecom Decision CRTC 94-13, 13 July 1994 (Decision 94-13), market trials and promotions were exempt from the application of the imputation test on the condition that sufficient information is provided by the incumbent local exchange carrier (ILEC) to demonstrate that the offering is a legitimate market trial or promotion of limited duration.

15. The Commission notes that in Order 97-1345, it stated that until interconnection agreements are in place to permit facilities-based local competition in accordance with Decision 97-8, prior to approving future applications that involve the bundling of optional local and toll services, the companies should be required to make the optional local services available for resale at residential rates on a stand-alone basis. With any such future applications, the companies are to address whether the resale of the local service being bundled is available such that the resale of the primary line is not required.

16. The Commission is of the view, given the information provided by BC TEL in its submission, that the condition for bundling of optional local and toll services as set out in Order 97-1345 has been complied with by BC TEL.

17. The Commission notes that arrangements have not yet been implemented to permit facilities-based local competition, and is of the view that the bundling of primary exchange service and toll service would provide the telephone companies with an undue advantage over emerging local service providers, as well as toll competitors, given that the telephone companies have established facilities in both the local and long distance markets.

18. The Commission is of the view that promotions which bundle primary exchange service with toll services would not be appropriate until the barriers to facilities-based local competition are largely eliminated.

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

(a) the proposed revisions filed under TNs 3689 and 3689A are denied; and

(b) the proposed revisions filed under TN 3697 are approved.

Laura M. Talbot-Allan
Secretary General

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