ARCHIVED -  Telecom Order CRTC 97-958

Telecom Order

Ottawa, 11 July 1997

Telecom Order CRTC 97-958

On 26 February 1997, BC TEL filed an ex parte application for approval of tariff revisions to the Real Plus Extra Savings Plan to introduce an overseas loyalty discount component.

File No.: Tariff Notice 3598

1. The proposed tariff revisions to become effective 3 April 1997 were granted interim approval on 27 March 1997 under Telecom Order CRTC 97-450. The revisions provide the opportunity to earn additional discounts on eligible overseas calls as well as unique rates to certain overseas locations.

2. On 2 May 1997, Call-Net Enterprises Inc. (Call-Net) filed comments submitting that when the highest discount (40%) was applied to the new base rates for China, Hong Kong and Taiwan, the resulting rates appeared to be lower than Teleglobe's Globeaccess rates to those countries. Call-Net submitted that this indicated that BC TEL employed Globeaccess promotional rates in the imputation test. Given that the promotion ended on 31 May 1997, Call-Net submitted that Tariff Notice 3598 (TN 3598) should be denied final approval or BC TEL should be directed to submit an imputation test that includes the non-promotional Globeaccess rates.

3. Call-Net noted that the overseas loyalty discount plan is not available to customers who have selected a reseller or sharing group for the billing of message toll services. Call-Net submitted that this restriction was inconsistent with the Commission's policy that directed competitive services, including discount toll, to be available for resale and sharing.

4. On 5 May 1997, AT&T Canada Long Distance Services Company (AT&T Canada LDS) filed comments submitting that the Commission should deny TN 3598 because it provides service to customers at below-cost levels and, contrary to subsection 27(2) of the Telecommunications Act (the Act), gives an undue preference to customers making calls to these destinations at the expense of BC TEL's general long distance subscriber base.

5. AT&T Canada LDS noted that in NBTel - Application to Review and Vary the Commission's Denial of Healthnet Service, Telecom Decision CRTC 94-3 (Decision 94-3), 15 February 1994, the Commission reaffirmed the requirement that similar customers should be treated the same, explaining that safeguards were in place to prevent unjust discrimination and/or the conferring of an undue preference or advantage.

6. AT&T Canada LDS noted that the rates provided under TN 3598 are significantly below the rates provided by the Teleglobe Globeaccess tariff and submitted that BC TEL is engaged in a sustained form of predatory pricing to specific market segments that makes competitors' services to these destinations not viable. AT&T Canada LDS requested that the Commission not permit BC TEL to continue its predatory pricing activities submitting that these actions hinder competition and the Commission's efforts to preserve cost-based pricing through the use of the imputation test.

7. In reply comments dated 15 May 1997, BC TEL stated that the imputation test accompanying TN 3598 reflected basic Globeaccess toll rates and not the promotional rates. BC TEL confirmed that with the 40% discount for eligible customers, the per minute rates to China, Hong Kong and Taiwan were below Teleglobe's wholesale rates. BC TEL noted that the imputation test requirement set out 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 and Review of Regulatory Framework, Telecom Decision CRTC 94-19 (Decision 94-19), 16 September 1994, specified that non-promotional tariff filings must pass a "service-specific" imputation test.

8. BC TEL noted that the proposed rates are not the lowest prices available in the market and that the rates prior to the introduction of the overseas loyalty discount plan were substantially above those of competitors, resulting in unprecedented market share loss in the Asian market.

9. BC TEL noted that TN 3598 passed the imputation test and submitted that the overseas long distance service is not required to pass the imputation test for each individual overseas route, but is required only to pass the test for the service as a whole. BC TEL submitted that Call-Net and AT&T Canada LDS' assertions that the proposed revisions do not fully meet all aspects of the imputation test requirements are unfounded and should be rejected.

10. BC TEL submitted that, given that the plan is open to any BC TEL long distance customer, there is no basis in fact for AT&T Canada LDS' claim that BC TEL is in violation of subsection 27(2) of the Act. BC TEL noted that the available discounts are volume driven and are consistent with Decision 94-3 which stated that discounts can be given for a long term contractual commitment or a high volume of usage.

11. With respect to Call-Net's request that the plan should be available for resale, BC TEL submitted that the condition that customers of resellers and sharing group members are not eligible for enrollment in the proposed plan reflects the Commission's determinations with respect to sharing groups in Telecom Letter Decision CRTC 93-13, and Telecom Decision CRTC 94-12, which specified that customer's of resellers and sharing groups are not to be regarded or treated as customers of BC TEL.

12. BC TEL requested that the Commission grant final approval to TN 3598.

13. In Decision 94-13, the Commission considered that a service-specific imputation test is the preferable means to achieve a fair competitive environment. In Decisions 94-13 and 94-19, the Commission considered that the application of the appropriate imputation test was sufficient to ensure that rates are not anti-competitive, and as long as telephone company toll prices recover costs, imputed contribution, start-up cost recovery and bottleneck service charges, targeted pricing would not be anti-competitive. The Commission is of the view that although rates for specific routes provided under the proposed overseas loyalty discount plan are priced below cost, the proposed rates are not anti-competitive as the overall service passes the imputation test and is in compliance with the Commission's determinations in Decisions 94-13 and 94-19.

14. The Commission notes that the proposed service offering is available to any residential customer of BC TEL that enrolls in the plan and does not confer an undue preference on customers who place calls to specific long distance destinations and is therefore not in violation of subsection 27(2) of the Act.

15. The Commission agrees with BC TEL that the condition that customers of resellers and sharing group members are not eligible for enrollment in the plan reflects the determination of the Commission with respect to the treatment of customers of resellers and sharing groups and does not specifically preclude resale of discount toll services.

16. In light of the foregoing, the Commission approves the proposed tariff revisions on a final basis.

Laura M. Talbot-Allan
Secretary General

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