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ARCHIVED -  Telecom Order CRTC 97-545

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 Telecom Order

 Ottawa, 23 April 1997
 Telecom Order CRTC 97-545
 The Commission received an application by Stentor Resource Centre Inc. (Stentor) under Tariff Notice 374 dated 8 November 1996, as amended by Tariff Notice 374A dated 18 December 1996, on behalf of and with the concurrence of all federally regulated Stentor owner companies, for approval of tariff revisions to the National Services Tariff Item 202, proposing to modify the rating structure for HELLO! Phone Pass Service.
 File No.: Tariff Notices 374 and 374A
1.  Under Telecom Orders CRTC 96-1432 dated 12 December 1996 and 96-1610 dated 31 December 1996 (corrected by Telecom Order CRTC 96-1610-1 dated 7 January 1997), the Commission granted the proposed tariff revisions interim approval.
2.  Under letter dated 6 December 1996, ACC TelEnterprises Ltd. (ACC) noted that Stentor justified the proposed rate reduction on the grounds that competitor prepaid card rates are priced significantly lower than HELLO! Phone Pass rates.
3.  ACC submitted that the competitive rating examples provided by Stentor represented those of products priced well below the average rates.
4.  ACC stated that the companies possess a competitive advantage by virtue of the fact that Stentor prepaid cards have swipe access capability and noted that under Telecom Order CRTC 96-1157 (Order 96-1157) dated 18 October 1996, the Commission acknowledged that the non-price advantage of swipe access available to the Stentor members calling cards represented a major disadvantage for competitors.
5.  ACC submitted that the companies have national name recognition and a monopoly on the payphones over which the cards are used.
6.  ACC submitted that the Commission should ensure that all of the causal costs of marketing the product are adequately reflected in the imputation test, given that Stentor is employing aggressive and expensive marketing strategies for its HELLO! Phone Pass cards.
7.  ACC considered that the proposed revisions are anti-competitive on the grounds that the existing rates are reasonable given the major disadvantage that the lack of swipe access provides competitors.
8.  ACC submitted that the application should be denied or held in abeyance pending the implementation of terms and conditions that will allow competitors equity in the availability of swipe access in marketing their cards.
9.  Stentor submitted that the proposed rate revisions are not anti-competitive as the service passes the imputation test under the proposed rates.
10.  Stentor noted that the proposed rate restructuring is necessary in order to allow companies to reduce the price gap which exists with prepaid card products of competitors in an attempt to retain existing market share.
11.  Stentor submitted that, contrary to ACC's allegations, the examples of competitor prepaid card rates are representative of the Canadian prepaid market.
12.  Stentor noted that the HELLO! Phone Pass is available for use from all telephones, not solely pay telephones with swipe capability, and that card swipe capability represents only a negligible proportion of completed HELLO! Phone Pass calls.
13.  Stentor further noted that the current payphone monopoly provides no competitive advantage as all competitor cards can currently provide service by means of the companies' payphones.
14.  Stentor submitted that all of the causal costs of marketing the product are included in the imputation test.
15.  In Review of Regulatory Framework - Targeted Pricing, Anti-Competitive Pricing and Imputation Test for Telephone Company Toll Filings, Telecom Decision CRTC 94-13 (Decision 94-13), 13 July 1994, the Commission stated that the application of the appropriate imputation test will ensure that rates are not anti-competitive.
16.  The Commission considers that the imputation test filed under Tariff Notices 374 and 374A meets the requirements of Decision 94-13, and Review of Regulatory Framework, Telecom Decision CRTC 94-19 (Decision 94-19), 16 September 1994.
17.  In Order 96-1157, the Commission considered that swipe card access constitutes a bottleneck service component, and directed Bell Canada and the other Stentor companies to file a tariff to provide competitive swipe card access, or to show cause why such access is impractical to offer.
18.  On 16 January 1997, Stentor submitted Tariff Notice 409 which proposed competitive swipe card access service.
19.  The Commission notes that Stentor has submitted that the card swipe capability represents only a negligible proportion of completed HELLO! Phone Pass calls and that all competitor cards can currently be used from the companies' payphones.
20.  The Commission notes that the prepaid card market is competitive and considers that the initiative proposed by Stentor under Tariff Notices 374 and 374A does not constitute an undue advantage to the companies.
21.  In light of the foregoing, the Commission orders that:
22.  The proposed tariff revisions are approved on a final basis.
 Allan J. Darling
Secretary General
 This document is available in alternative format upon request.

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