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ARCHIVED -  Telecom Order CRTC 97-471

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Telecom Order

Ottawa, 8 April 1997
Telecom Order CRTC 97-471
IN THE MATTER OF an application dated 12 April 1996 filed by Telus Communications Inc. (TCI), formerly AGT Limited, pursuant to section 34 of the Telecommunications Act (the Act), requesting that the Commission forbear from the regulation of TCI's Internet access service (Planet Service); and
IN THE MATTER OF an application dated 25 April 1996 filed by The New Brunswick Telephone Company, Limited (NBTel) pursuant to section 34 of the Act, requesting that the Commission forbear from regulating NBTel's Internet access services (NBNet).
References: 96-2199
WHEREAS TCI requested that the Commission refrain from exercising all powers and performing all duties under sections 25, 27 and 29 of the Act;
WHEREAS NBTel requested that the Commission refrain from exercising all powers and performing all duties under sections 24, 25, 27, 29 and 31 of the Act;
WHEREAS TCI's Planet Service is provided pursuant to the company's Competitive Network Services Tariff - Interexchange Data, Item 1302;
WHEREAS NBTel requested forbearance for NBNet, which is being offered pursuant to Special Services Tariff Item 3790, as well as similar services that the company may offer in the future that fall within the same class of Internet services, such as NBTel's Sympatico service;
WHEREAS on 31 May 1996, the Commission issued AGT Limited and NBTel - Forbearance from Regulation of Internet Access Services, Telecom Public Notice CRTC 96-22, seeking comment on the appropriateness of forbearing from regulating TCI's and NBTel's Internet access services;
WHEREAS TCI and NBTel argued that, for the purposes of these applications, the relevant market is the Internet Services (IS) market in their respective operating territories;
WHEREAS TCI and NBTel argued that the IS market within their respective territories is intensely competitive and dynamic, and is becoming increasingly so as cable companies become Internet Service Providers (ISPs);
WHEREAS TCI and NBTel argued that they are not dominant in their respective IS markets;
WHEREAS TCI provided copies of Internet Home Pages describing the services available from approximately 80 competing ISPs operating in Alberta;
WHEREAS NBTel provided a list of other ISPs that compete in the New Brunswick IS market;
WHEREAS TCI and NBTel argued that there are no barriers to entry into the IS market, and that entry is relatively easy, inexpensive and quick;
WHEREAS TCI and NBTel submitted that the basic requirements for entering the IS market, (i.e., modems, server, and underlying telecommunications services) are readily available;
WHEREAS TCI and NBTel argued that a large number of ISPs, including large multi-national firms, have entered the Alberta and New Brunswick markets in a relatively short period of time;
WHEREAS TCI and NBTel noted that the transmission facilities required by competitors to offer IS are readily available on a tariffed and non-discriminatory basis from local telephone companies, and interexchange carriers ("IXCs"), and that in the very near future it is expected that these services will also be available from cable companies and competitive local exchange carriers;
WHEREAS TCI and NBTel submitted that there is intense rivalry among IS competitors in terms of aggressive marketing techniques, innovative service offerings and aggressive price-cutting;
WHEREAS comments on TCI's application were received from CADVision Development Corporation (CADVision), the Canadian Federation of Independent Business in Alberta (CFIB), Cogeco Cable Canada Inc. (Cogeco), Nucleus Information Service Inc. (Nucleus), QuestNet Communications Limited (QuestNet) and Spots InterConnect Inc. (Spots);
WHEREAS Fundy Cable Ltd./Ltée (Fundy) and Cogeco provided comments on NBTel's application;
WHEREAS most interveners submitted that the Commission should deny TCI's application;
WHEREAS Fundy and Cogeco, the only interveners to comment on NBTel's application, did not submit that it should be denied;
WHEREAS CADVision, QuestNet, Spots and CFIB expressed concern that forbearance would make it easier for TCI to use revenues generated in its utility segment to unfairly cross-subsidize the provision of Planet Service to the detriment of other ISPs;
WHEREAS CFIB and Spots expressed concern that because TCI is both a supplier of underlying services to ISPs and an ISP competitor, it may not be motivated to provide IS competitors with quality and timely service;
WHEREAS CADVision and Spots argued that TCI will have access to confidential information regarding their growth plans because they must purchase services such as local service and T1 lines from TCI;
WHEREAS CADVision, Spots, Nucleus and QuestNet also argued that TCI will be in a position to bundle certain services with its Planet Service;
WHEREAS Fundy stated that the provision of IS is highly competitive and that forbearance could be granted for NBNet, but only with respect to the services currently contained in the NBNet package of services;
WHEREAS Fundy stated that the Commission should not forbear from Sympatico because it is a market trial and not an NBNet service;
WHEREAS Fundy stated that NBTel's request for forbearance from "any similar services that the company may offer in the future that fall within the same class of Internet Services" is premature and should be more appropriately addressed in a future proceeding;
WHEREAS TCI argued that forbearance from regulation of Planet Service, would not impair unduly the continuance of a competitive IS market within the meaning of subsection 34(3) of the Act;
WHEREAS TCI submitted that Phase II and Phase III costing rules, as well as future price cap regulation, make it impossible for Utility services to cross-subsidize competitive IS;
WHEREAS TCI and NBTel stated that it would not make economic sense for them to predate by pricing their IS below cost because, in a competitive market with no barriers to entry, they could not recoup losses from predatory pricing by overcharging for IS in the future;
WHEREAS TCI also noted that under the split rate base regime established by the Commission, cross-subsidization of services contained in bundled arrangements is not permitted;
WHEREAS TCI noted that all of the telecommunications access services required by ISPs are readily available on non-discriminatory terms at tariffed rates;
WHEREAS TCI submitted that allegations about poor quality service and delays in performing required maintenance for ISPs were unfounded;
WHEREAS TCI stated that all ISPs have the option of placing all their service requests through TCI's Carrier Services Group, thereby ensuring that all related information will be held in confidence and beyond the reach of TCI's marketing or sales groups;
WHEREAS NBTel submitted that the Commission should forbear from NBNet and Sympatico because these two services, although branded differently, are functionally the same;
WHEREAS the Commission is of the view that the IS markets in question exhibit all the characteristics of a highly competitive market;
WHEREAS the Commission is of the view that barriers to entry into the IS market are very low, and that many ISPs, ranging in size from small local independent operators to large multinational competitors, have entered the market in a very short period of time;
WHEREAS the Commission finds that the necessary components to enter the IS market are readily available, and that all the underlying telecommunications transmission facilities are available at tariffed, non-discriminatory rates;
WHEREAS the Commission finds that alternative sources of supply of underlying transmission facilities used by ISPs are becoming available and that cable companies are starting to roll-out Internet access services;
WHEREAS the Commission is confident that there are adequate safeguards in place to protect against cross-subsidy of IS from revenues generated by the telephone companies' monopoly services for the purpose of predatory pricing in the IS market;
WHEREAS the Commission is also of the view that predatory pricing would not be a workable strategy in light of the highly competitive and dynamic nature of the IS market and the low barriers to entry;
WHEREAS the Commission finds that it would be appropriate to forbear from TCI's Planet Service and NBTel's NBNet and Sympatico services with respect to sections 25, 29 and 31 and subsections 27(1), 27(5) and 27(6) of the Act;
WHEREAS, in the case of NBTel, the Commission will only forbear from the regulation of Internet access services as currently described in NBTel's Special Services Tariff 3790 for NBNet and Special Services Tariff 3797 for Sympatico;
WHEREAS 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;
WHEREAS 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 ISPs, to ensure that existing conditions regarding confidential competitive information continue to apply and to retain the power to impose conditions on the offering and provision of IS as may be necessary in the future;
WHEREAS, on a going-forward basis, commencing immediately, 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;
WHEREAS the Commission is of the view that it is important for it to retain subsections 27(2), 27(3) and 27(4) in regard to issues related to access to the underlying network components of the services forborne from in this proceeding;
WHEREAS the Commission is further of the view that retaining subsections 27(2), 27(3) and 27(4) of the Act would provide an additional safeguard against TCI or NBTel granting its IS any undue preference;
WHEREAS, 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) of the Act, and under section 24 to the extent set out in this decision, with respect to TCI's Planet Service and NBTel's NBNet and Sympatico services, would be consistent with Canadian telecommunications policy objectives;
WHEREAS 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; and
WHEREAS, 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 decision would not be likely to impair unduly the establishment or the continuance of a competitive market for these services -
IT IS HEREBY ORDERED THAT:
1. 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(5) and 27(6) of the Act do not apply to TCI's Planet Service and NBTel's NBNet and Sympatico Services to the extent that they are inconsistent with the Commission's determinations herein.
2. TCI and NBTel are directed to issue tariff pages, within 15 days of the date of this Order, withdrawing the tariffs for Planet, NBNet and Sympatico Services.
Allan J. Darling
Secretary General
Date modified: