ARCHIVED -  Telecom Order CRTC 97-750

Telecom Order

Ottawa, 4 June 1997

Telecom Order CRTC 97-750

The Commission received an application from E.D.S. of Canada, Ltd. (EDS) dated 5 December 1996, for exemption from contribution charges for circuits used to provide dedicated and data network configuration to EDS' customers. EDS noted that it has recently been restructured as a new company, separate from, and no longer an affiliate of, General Motors of Canada Limited. As a result of this restructure, EDS has identified the requirement to seek the appropriate contribution exemptions from the Commission.

File No.: 96-2389

1. EDS stated that at present, it is solely a dedicated and data services provider, and does not provide joint-use voice services to its customers. EDS filed in confidence an affidavit attesting to its dedicated and data businesses and attached a list of the customer networks which are the subject of this application. EDS stated that a copy of the list is being provided to Stentor Resource Centre Inc. (Stentor) since the Stentor member companies supply the majority of the network services. EDS stated that the networks in question were provisioned as dedicated and data networks prior to the corporate restructuring of EDS, and continue to be so subsequent to the restructuring of EDS.

2. Since the Stentor member companies provide and control the network configuration, EDS submitted that the relevant Stentor member companies can verify that the configurations in question are provisioned as dedicated to end-users or used for data services only, and therefore qualify for an exemption from contribution payments. EDS stated that it has conferred with Bell Canada (Bell) and understands that Bell agrees that the network configurations are dedicated to end-users, or used for data services only, and thus qualify for such exemption.

3. EDS submitted that, in recognition of the unique circumstances in this case, wherein the network in question was already provisioned as dedicated to end-users or used for data services only prior to the EDS restructure, the effective date for contribution exemptions, should be retroactive to the date EDS assumed control of the networks.

4. By letter dated 21 January 1997, Stentor commented on behalf of the respondents [BC TEL, Bell, The Island Telephone Company Limited, Maritime Tel & Tel Limited, MTS NetCom Inc., The New Brunswick Telephone Company, Limited (NBTel), NewTel Communications Inc., and TELUS Communications Inc., (collectively, the companies].

5. Stentor noted that the normal evidentiary requirement for a service configuration involving both dedicated and data services would be either carrier verification or a technical audit. In this case, Stentor stated that EDS has submitted that the companies should be able to verify the configuration. Stentor stated that the companies are investigating the possibility of carrier verification in this case. Stentor further stated that it expected to have the results of that investigation shortly, and would advise the Commission and the applicant at that time of its findings and its views with respect to the possibility of carrier verification.

6. By letter dated 21 March 1997, EDS noted that it was informed by Bell that, pursuant to Applications for Contribution Exemptions, Telecom Decision CRTC 93-2, 1 April 1993 (Decision 93-2), a technical audit of EDS' networks was necessary to satisfy the evidence requirements established by the Commission for contribution exemptions.

7. EDS enclosed a technical audit dated 25 February 1997 of certain network configurations which are the subject of the contribution exemption. EDS stated that the report concluded that: "Subject to the provision of carrier verification from the involved Stentor Companies for the portion of the networks which they maintain and control, the auditor is satisfied that there is sufficient evidence to conclude that all of the circuits in question are used to provide either dedicated voice or dedicated data services to single end customers of EDS." EDS submitted that the technical audit complies with the evidentiary requirements for contribution exemptions, as set out in Decision 93-2.

8. By letter dated 15 April 1997, Stentor stated that the circuits which are the subject of the technical audit are provided to EDS by the companies. Stentor noted that in its previous submission with respect to this application, the companies were investigating the possibility of carrier verification. Stentor stated that as a result of this investigation, the companies determined that they could not verify all of the network configurations. Stentor stated further that EDS was advised accordingly. Stentor stated that the technical audit was then commissioned by EDS to provide the additional verification and demonstrate that the networks are configured such that they are either data networks or dedicated voice networks.

9. Stentor noted that in its application, EDS stated that the networks in question "are used to provide dedicated and data network configurations to EDS' customers". Stentor stated that EDS has also provided affidavits affirming that the networks in question are not used "to permit the transmission of interexchange joint-use voice traffic".

10. Stentor stated that it has reviewed the audit report provided by EDS and agrees that the configurations reviewed by the auditor appear to satisfy the requirements for an exemption as data and dedicated services.

11. However, Stentor noted that EDS and the audit report identify the portions of the EDS networks which are maintained and controlled by the companies. Stentor stated that in these cases, the auditor has indicated that the companies should be able to provide carrier verification with respect to these network configurations.

12. Stentor submitted that the companies can confirm that the following network arrangements are maintained and controlled by the companies and that accordingly, the companies can verify that these networks are provisioned as either data or dedicated networks: (1) Centrex system associated with dedicated private line voice network #1 provided in Bell territory; (2) dedicated voice private line network #2; (3) dedicated private line data network # 1 provided in Bell territory; (4) dedicated private line data network #1 provided outside Bell territory; (5) dedicated data private line network #2; (6) dedicated data private line network #3; and (7) dedicated data private line network #4.

13. Stentor also noted that the auditor has recommended that EDS implement appropriate internal control procedures to provide ongoing verification that the portions of these networks that EDS controls and maintains continue to be configured so as to qualify for a contribution exemption. Stentor noted that such control procedures are normally required where the applicant can readily reconfigure all or certain parts of the configuration at any time. Stentor submitted that in light of the fact that certain portions of the EDS network can be reconfigured by EDS in future, it is appropriate that EDS implement such ongoing control procedures with respect to that portion of a network that it controls and maintains.

14. In light of the above, Stentor agreed that EDS has satisfied the evidence requirements with respect to the networks described in its application using a combination of technical audit and carrier verification, as appropriate. Accordingly, Stentor submitted that the networks in question should be approved for an exemption on the basis that they are restricted to dedicated and data use only.

15. However, Stentor also submitted that final approval should be subject to confirmation by the applicant that appropriate control procedures are in place to ensure the continued compliance of the configuration with the conditions for an exemption. As well, Stentor noted that, consistent with the requirements established for similar contribution exemption applications, the networks should be subject to the possibility of future random audits.

16. The Commission is of the view that EDS has filed a satisfactory technical audit and notes that the network has now been completely verified by either the independent technical audit or carrier verification. Accordingly, EDS has met the Commission's evidentiary requirements as set out in Decision 93-2, and the Commission is of the view that the application should be approved, subject to the implementation of the appropriate internal control procedures to provide ongoing verification that the portions of the network that EDS controls and maintains continue to be configured so as to qualify for a contribution exemption.

17. The Commission notes that a similar situation arose in Telecom Order CRTC 96-273, dated 27 March 1996 (Order 96-273) whereby TSB International Inc. (TSB) assumed ownership and control of existing networks from its clients. In Order 96-273, the Commission approved TSB's application effective the date on which control of each network was assumed by TSB. The Commission is of the view that EDS' application should be treated similarly.

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

(a) EDS' application is approved effective the date on which EDS assumed control of the network subject to EDS filing a report within 30 days of this Order stating that EDS has implemented the appropriate internal control procedures to provide ongoing verification that the portions of the network that EDS controls and maintains continue to be configured so as to qualify for a contribution exemption; and

(b) the portion of the network that EDS controls and maintains is subject to the possibility of future random audits.

Allan J. Darling
Secretary General

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