ARCHIVED -  Telecom Public Notice CRTC 97-34

Telecom Public Notice

Ottawa, 2 October 1997

Telecom Public Notice CRTC 97-34

COMPETITION IN THE PROVISION OF INTERNATIONAL TELECOMMUNICATIONS SERVICES

File no.: 8622-C12-01/97

Introduction

1. In recent years, the market for international telecommunications has become increasingly open and competitive. This trend is expected to accelerate significantly with the implementation of the General Agreement on Trade in Services (GATS) covering basic telecommunications recently negotiated under the World Trade Organization (the WTO Agreement). The WTO Agreement involves 69 countries and is scheduled to take effect 1 January 1998. Consistent with this newly competitive environment, the government has announced that it will end, on 1 October 1998, the monopoly of Teleglobe Canada Inc. (Teleglobe) over the provision of facilities-based overseas telecommunications services.

2. The Commission requests proposals and comments on the regulatory regime that should apply to the provision of international telecommunications services, effective 1 October 1998 when Teleglobe's monopoly terminates. In their proposals and comments, parties are requested to address the issues described below, including the appropriate degree of forbearance, as well as any other relevant matters. In addressing the issues, the Commission requests that parties consider the Canadian telecommunications policy objectives set out in section 7 of the Telecommunications Act, including those relating to the efficiency and competitiveness of Canadian national and international telecommunications (subsection 7(c)), to the promotion of Canadian transmission facilities (subsection 7(e)), and to fostering increased reliance on market forces and ensuring that regulation, where required, is efficient and effective (subsection 7(f)). In particular, parties are asked to discuss how the Commission might best contribute to the attainment of the section 7 objectives in a competitive environment.

Licensing Regime

3. Industry Canada announced by press release dated 4 February 1997 that the Commission, by way of a new licensing regime, would establish conditions of operation applicable to all international service providers. By letter dated 5 May 1997, Industry Canada informed the Commission that "to attain [its] telecommunications policy objectives in a manner that is consistent with Canada's commitments under GATS, the Government intends to table a bill which, among other things, would amend the Telecommunications Act to provide the Commission with the statutory authority to require all members of any class of service providers to obtain a licence and to impose terms and conditions in such licences." The Commission considers that the statutory authority described in Industry Canada's letter would not be limited to "Canadian carriers" under the Telecommunications Act.

4. In light of the above, the Commission requests proposals and comments as to which classes of international services and international service providers, if any, should be subject to licensing requirements. The Commission notes that resellers are not considered "Canadian carriers" under the Telecommunications Act. The Commission therefore specifically requests comment on whether resellers should be considered a separate class of service providers, with special conditions of licence, given the limitations on the Commission's jurisdiction over them.

5. The Commission considers that licence conditions should not constitute a barrier to entry, but rather ensure that the regulatory regime put in place with regard to international services is respected by service providers. In this context, the Commission requests comment on the conditions to be incorporated into licences, bearing in mind the issues set out in this Public Notice and other issues that the parties may consider relevant.

Application of the Telecommunications Act to International Service Providers

6. Under the Telecommunications Act, a service provider must, among other things, own or operate transmission facilities in order to be considered a telecommunications common carrier. A Canadian carrier, defined as a telecommunications common carrier subject to the legislative authority of Parliament, is subject to regulation by the Commission. In particular, section 29 of the Telecommunications Act specifies that certain agreements between Canadian carriers and other telecommunications common carriers require Commission approval before they can take effect.

7. In this context, the Commission requests comment on whether the acquisition, by a service provider who would otherwise be considered a reseller, of indefeasible rights of use (IRUs) or other similar types of rights in an international cable, landed (a) in Canada, or (b) elsewhere (for example, an IRU on an international cable landed in the United States), would make the service provider acquiring those rights, and offering telecommunications services to the public for compensation in Canada, a "telecommunications common carrier" as defined in the Telecommunications Act. The Commission also requests comment on whether the acquisition of similar rights in cables located entirely within one jurisdiction outside Canada (for example, the United States), used in the course of providing telecommunications services to the public for compensation in Canada, would be sufficient to make that service provider a "telecommunications common carrier".

8. Paragraph 7(e) of the Telecommunications Act specifies that an objective of Canadian telecommunications policy is to promote the use of Canadian transmission facilities for telecommunications within Canada and between Canada and points outside Canada. The Commission requests comment on whether facilities such as IRUs on international cables landed outside of Canada or similar rights in facilities located entirely within one jurisdiction outside Canada, and used in the course of providing telecommunications services to the public for compensation in Canada, should be considered Canadian transmission facilities for the purposes of paragraph 7(e).

Interconnection

9. The Commission requests comment on whether international carriers should be obliged to interconnect with domestic carriers on a non-discriminatory basis. The Commission notes that, through Canada's Schedule of Final Commitments in the WTO Agreement, the government has announced its intention to permit, as of 1 October 1998, foreign investment of up to 100% for operations conducted under an international submarine cable licence. The Commission requests comment on whether foreign entities acquiring such licenses should be subject to the same obligation to interconnect on a non-discriminatory basis.

International Settlements

10. Historically, the interexchange of traffic between international service providers has required agreements between service providers in the originating and terminating countries. The Commission requests comment on whether, and in what circumstances, international service providers should be obliged to enter into correspondent relations for the termination of traffic in other countries, including formal transit arrangements for routing traffic through intermediary countries.

11. Although other arrangements exist and are increasingly used, international service providers have traditionally compensated each other for the termination of traffic through the accounting rate system. Under this system, a service provider in the originating country pays a settlement rate (usually, half of a mutually agreed upon accounting rate) to the operator in the country where the call is terminated.

12. In the context of international settlement arrangements, mechanisms have been put in place in other jurisdictions to address problems associated with distortions in traffic patterns and settlement flows that can arise between countries with liberalized telecommunications markets and countries where there is a monopoly or dominant supplier. In particular, the United States and other countries have imposed requirements for proportionate return and parallel accounting. Under a proportionate return system, the amount of traffic a Canadian service provider would terminate on behalf of a foreign operator would be linked to the proportion of total Canadian traffic that the service provider sent to the foreign operator. Under parallel accounting, Canadian service providers would charge uniform rates for the termination of international traffic.

13. Proportionate return is regarded as aimed at addressing the problems associated with one-way International Simple Resale (ISR), while parallel accounting is intended to address the problem of "whip-sawing" (i.e., in competitive jurisdictions, the playing off of one carrier against another with respect to termination rates).

14. The Commission requests comment on (a) whether it should require proportionate return and/or parallel accounting for international service providers, (b) if so, what the specific requirements should be, and (c) whether it should require the equal division of accounting rates.

15. The Commission requests comment on whether or not it should establish benchmarks for accounting rates, as was recently done by the Federal Communications Commission (FCC) in the United States (relevant FCC documents include the Report and Order entitled International Settlement Rates, IB Docket No. 96-261, released 18 August 1997, and the Order and Notice of Proposed Rulemaking entitled Rules and Policies on Foreign Participation in the U.S. Telecommunications Market, IB Docket No. 97-142, adopted and released 4 June 1997).

Resale/Use of Facilities

16. The Commission requests comment on whether or not resale of Teleglobe's services and facilities should continue to be mandated in a competitive environment, and, if so, under what terms and conditions. The Commission also requests comment on whether resale of the overseas services and facilities of new entrants (including any foreign entity acquiring an international submarine cable licence) should be mandated, and, if so, under what terms and conditions.

17. In order to promote the use of Canadian transmission facilities, the Commission has imposed rules as to the routing of traffic originating and/or terminating in Canada.

18. Teleglobe's current Resale and Sharing Rules Tariff states as follows:

Except where alternate routing has been agreed to by all countries or operating agencies involved, it is prohibited to route Canadian originating or terminating joint-use voice traffic to or from a third country over international private line services leased between Canada and the country where the international private line service terminates.

19. The tariffs of the domestic telephone companies contain provisions similar to the following Bell Canada provision:

Services or channels provided between one or more exchanges or rate centres of the Company and one or more rate centres in the United States may not be used, either directly or indirectly, to carry basic service traffic which originates in Canada to points in Canada or overseas, or to carry basic service traffic which originates outside the United States to points in Canada ...

20. Similar conditions are currently imposed with regard to the transborder facilities of non-dominant facilities-based domestic carriers by virtue of Forbearance - Services Provided by Non-dominant Canadian Carriers, Telecom Decision CRTC 95-19, 8 September 1995 (Decision 95-19).

21. The Commission notes that Canada's final offer in the GATS negotiations on basic telecommunications specified that routing of basic telecommunications between points within Canada, and between Canada and points outside of Canada, is regulated to promote the use of Canadian transmission facilities, subject to certain exceptions. Among the exceptions noted is that, as of 31 December 1999, all international services will be unrestricted, except for fixed satellite services between Canada and points in the United States (with the latter to be unrestricted as of 1 March 2000). The Commission notes that Canada's final offer made no commitment to change the existing Canada-Canada bypass restrictions.

22. The Commission requests comment on the appropriate routing rules (a) for the period 1 October 1998 to 31 December 1999, and (b) for the period commencing 1 January 2000.

23. At present, Teleglobe's Resale and Sharing Rules Tariff states as follows:

Any resale and sharing arrangements between persons in Canada and persons in another country are conditional upon such arrangements being allowed in both countries.

24. The Commission requests comment on (a) whether or not this tariff provision will remain appropriate, and (b) if not, whether it should be amended with respect to all other countries or only with respect to other WTO members.

25. The Commission notes that the current tariff provision serves to help prevent one-way ISR, which can lead to imbalances in traffic patterns and settlement payments to the detriment of Canada. Parties who consider that the tariff provision should be changed or eliminated are asked to suggest appropriate alternative provisions for addressing this and related problems. In particular, the Commission requests comment on whether a condition of licence providing that no international service provider in Canada may confer upon itself an undue preference or advantage by virtue of its affiliation or participation in a joint venture with a dominant or major service provider, would be sufficient to address possible abuses.

Contribution Issues

26. The contribution mechanism established pursuant to Competition in the Provision of Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues, Telecom Decision CRTC 92-12, 12 June 1992, requires Teleglobe to collect contribution for overseas calling and remit it to the telephone companies. The Commission requests comment on how this mechanism should apply in a competitive environment.

Forbearance

27. The Commission requests comment on whether it should exercise its powers under section 34 of the Telecommunications Act with respect to services provided by Teleglobe, once its monopoly has ended. In particular, the Commission requests comment on whether, and to what extent, it should forbear under section 25 of the Telecommunications Act with regard to services and facilities provided by Teleglobe (a) to other service providers, and (b) to end-users (should Teleglobe seek its own end-user customer base).

28. In this context, the Commission notes that, by virtue of Decision 95-19, non-dominant carriers are not obliged to file tariffs under section 25 of the Telecommunications Act for the bulk of their services. In addition, in Forbearance from Regulation of Toll Services Provided by Dominant Carriers, Telecom Public Notice CRTC 96-26, 24 July 1996, and in Stentor Resource Centre Inc. - Forbearance from Regulation of Interexchange Private Line Services, Telecom Public Notice CRTC 96-35, 18 November 1996, the Commission requested comment on whether, and to what extent, it should forbear pursuant to section 34 of the Telecommunications Act from the exercise of powers and the performance of duties under sections 24, 25, 27, 29 and 31 with respect to toll services provided by Stentor members and other telephone companies and interexchange private line services provided by Stentor members.

29. In Decision 95-19, the Commission required non-dominant carriers to continue to file for approval agreements or arrangements with foreign carriers that fall within the scope of section 29 of the Telecommunications Act. At present, section 17 of the Teleglobe Canada Reorganization and Divestiture Act (the Teleglobe Act) specifies that contracts, agreements and arrangements between Teleglobe and any foreign telecommunications carrier or foreign communications administration respecting international telecommunications facilities, operations or services are not subject to the Commission's approval.

30. Parties are asked to address whether or not the Commission should exercise its forbearance powers with respect to section 29 agreements between new facilities-based entrants and foreign telecommunications carriers, assuming that section 17 of the Teleglobe Act remains in place.

31. Based on the assumption that the legislative amendments contemplated by the government include the deletion of section 17 of the Teleglobe Act, the Commission requests comment on whether or not forbearance under section 29 should be extended to (a) Teleglobe, and (b) new facilities-based entrants.

Other Issues

32. The Commission requests comment on what information should be filed with the Commission, should it decide to implement a system of proportionate return and/or parallel accounting while forbearing with regard to the filing of international agreements under section 29 of the Telecommunications Act.

33. The Commission requests comment on the appropriate measures, including reporting requirements, audits and the filing of affidavits, to ensure compliance with routing restrictions (including Canada-Canada routing restrictions) and any other possible conditions of licence. Should the Commission find it appropriate to impose reporting requirements, the Commission requests comment on the content, form and frequency of those reports.

34. With regard to licences, parties are invited to comment on issues such as:

(1) the appropriate term of the licence;

(2) the information that should be provided upon application for a licence; and

(3) procedures for issuing and renewal of licences.

35. Parties are also invited to comment on whether the Commission should distinguish between WTO members and non-members with regard to (a) the terms and conditions under which foreign-owned entities and their affiliates may operate in the Canadian market, and (b) the rules applicable to relations between Canadian service providers and foreign carriers and administrations.

36. Finally, the Commission requests comment on any issues related to Intelsat, Inmarsat and the International Telecommunications Union. The Commission notes that it does not have jurisdiction to designate any party signatory to either Intelsat or Inmarsat.

Procedure

37. Teleglobe is made party to the proceeding. Other persons wishing to participate in the proceeding must notify the Commission of their intention to do so by writing to Mrs. Laura M. Talbot-Allan, Secretary General, CRTC, Ottawa, Ontario, K1A ON2, fax: 819-953-0795, by 30 October 1997. For this proceeding, parties may file notices of intention to participate by email alone at the Commission's Internet email address noted in paragraph 48. The Commission will issue a complete list of parties and their mailing addresses.

38. The Commission is placing the GATS on the record of the proceeding, including various related schedules, annexes, and decisions concerning telecommunications services, the Fourth Protocol of the GATS, and Canada's final offer in the GATS, dated 15 April 1997 (GATS/SC/16/Suppl. 3). The Commission is also placing on the record the letter from Industry Canada dated 5 May 1997. These materials are available for inspection, under file number 8662-C12-01/97, Item 2 and 6, at the Commission's public examination rooms in the following locations:

Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage
Room 201
Hull, Quebec

Bank of Commerce Building
1809 Barrington Street
Suite 1007
Halifax, Nova Scotia

Place Montréal Trust
1800 McGill College Avenue
Suite 1920
Montréal, Quebec

275 Portage Avenue
Suite 1810
Winnipeg, Manitoba

580 Hornby Street
Suite 530
Vancouver, British Columbia

39. Teleglobe is directed to file proposals and supporting rationale with regard to the issues raised in this Public Notice, serving copies on all other parties to the proceeding, by 13 November 1997. Other parties may also file proposals and supporting rationale, serving copies on all other parties, by the same date.

40. Parties may address interrogatories to any parties filing proposals pursuant to the preceding paragraph. Any such interrogatories are to be filed with the Commission and served on the parties in question by 4 December 1997.

41. Responses to interrogatories are to be filed with the Commission and served on parties to the proceeding by 5 January 1998.

42. Requests by parties for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the party or parties in question by 12 January 1998.

43. Written responses to requests for further responses and for disclosure must be filed with the Commission and served on the parties making the requests by 19 January 1998.

44. The Commission will issue a determination with respect to requests for further responses and for disclosure as soon as possible. The Commission intends to direct that any information to be provided or placed on the record pursuant to that determination be filed with the Commission and served on parties by 9 February 1998.

45. Parties may file comments, serving copies on all other parties, by 23 February 1998.

46. Parties may file replies to any comments, serving copies on all those who file comments, by 13 March 1998.

47. Documents are to be actually received, not merely sent, by the dates specified.

48. In addition to hard copy filings, parties are encouraged to file with the Commission electronic versions of their submissions in accordance with the Commission's Interim Telecom Guidelines for the Handling of Machine-Readable Files, dated 30 November 1995. The Commission's Internet email address for electronically filed documents is public.telecom@crtc.gc.ca. Electronically filed documents can be accessed at the Commission's Internet site at http://www.crtc.gc.ca.

This document is available in alternative format upon request.

Laura M. Talbot-Allan
Secretary General

Appendix

Telecommunications Act

7. It is hereby affirmed that telecommunications performs an essential role in the maintenance of Canada's identity and sovereignty and that the Canadian telecommunications policy has as its objectives:

(a) to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions;

(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;

c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;

(d) to promote the ownership and control of Canadian carriers by Canadians;

(e) to promote the use of Canadian transmission facilities for telecommunications within Canada and between Canada and points outside Canada;

(f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective;

(g) to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services;

(h) to respond to the economic and social requirements of users of telecommunications services; and

(i) to contribute to the protection of the privacy of persons.

24. The offering and provision of any telecommunications service by a Canadian carrier are subject to any conditions imposed by the Commission or included in a tariff approved by the Commission.

25. (1) No Canadian carrier shall provide a telecommunications service except in accordance with a tariff filed with and approved by the Commission that specifies the rate or the maximum or minimum rate, or both, to be charged for the service.

(2) A joint tariff agreed on by two or more Canadian carriers may be filed by any of the carriers with an attestation of the agreement of the other carriers.

(3) A tariff shall be filed and published or otherwise made available for public inspection by a Canadian carrier in the form and manner specified by the Commission and shall include any information required by the Commission to be included.

(4) Notwithstanding subsection (1), the Commission may ratify the charging of a rate by a Canadian carrier otherwise than in accordance with a tariff approved by the Commission if the Commission is satisfied that the rate
(a) was charged because of an error or other circumstance that warrants the ratification; or
(b) was imposed in conformity with the laws of a province before the operations of the carrier were regulated under any Act of Parliament.

27. (1) Every rate charged by a Canadian carrier for a telecommunications service shall be just and reasonable.

(2) No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an under or unreasonable disadvantage.

(3) The Commission may determine in any case, as a question of fact, whether a Canadian carrier has complied with section 25, this section or section 29, or with any decision made under section 24, 25, 29, 34 or 40.

(4) The burden of establishing before the Commission that any discrimination is not unjust or that any preference or disadvantage is not undue or unreasonable is on the Canadian carrier that discriminates, gives the preference or subjects the person to the disadvantage.

(5) In determining whether a rate is just and reasonable, the Commission may adopt any method or technique that it considers appropriate, whether based on a carrier's return on its rate base or otherwise.

(6) Notwithstanding subsections (1) and (2), a Canadian carrier may provide telecommunications services at no charge or at a reduced rate
(a) to the carrier's directors, officers, employees or former employees; or
(b) with the approval of the Commission, to any charitable organization or disadvantaged person or other person.

29. No Canadian carrier shall, without the prior approval of the Commission, give effect to any agreement or arrangement, whether oral or written, with another telecommunications common carrier respecting
(a) the interchange of telecommunications by means of their telecommunications facilities;
(b) the management or operation of either or both of their facilities or any other facilities with which either or both are connected; or
(c) the apportionment of rates or revenues between the carriers.

31. No limitation of a Canadian carrier's liability in respect of a telecommunications service is effective unless it has been authorized or prescribed by the Commission.

34. (1) The Commission may make a determination to refrain, in whole or in part and conditionally or unconditionally, from the exercise of any power or the performance of any duty under sections 24, 25, 27, 29 and 31 in relation to a telecommunications service or class of services provided by a Canadian carrier, where the Commission finds as a question of fact that to refrain would be consistent with the Canadian telecommunications policy objectives.

(2) Where the Commission finds as a question of fact that a telecommunications service or class of services provided by a Canadian carrier is or will be subject to competition sufficient to protect the interests of users, the Commission shall make a determination to refrain, to the extent that it considers appropriate, conditionally or unconditionally, from the exercise of any power or the performance of any duty under sections 24, 25, 27, 29 and 31 in relation to the service or class of services.

(3) The Commission shall not make a determination to refrain under this section in relation to a telecommunications service or class of services if the Commission finds as a question of fact that to refrain would be likely to impair unduly the establishment or continuance of a competitive market for that service or class of services.

(4) The Commission shall declare that sections 24, 25, 27, 29 and 31 do not apply to a Canadian carrier to the extent that those sections are inconsistent with a determination of the Commission under this section.

The Teleglobe Act

17. All contracts, agreements and arrangements between the new corporation and any foreign telecommunications carrier or foreign communications administration respecting international telecommunications facilities, operations or services shall be submitted to the Commission if required by the Commission, but they are not subject to the approval of the Commission and come into force in accordance with their terms.

AVI97-34_0