ARCHIVED -  Telecom Decision CRTC 98-21

Telecom Decision
CRTC 98-21

Ottawa, 20 November 1998

EX PARTE FILING PROCESS FOR COMPETITIVE SEGMENT SERVICES

File No.:  8657-C12-01/97

SUMMARY

1. In this Decision, the Commission extends the ex parte process to applications for price reductions to High Capacity and Digital Data Systems (High Capacity/DDS) services that meet the Commission’s tariff criteria (e.g. the imputation test) and raise no issues related to bottleneck services, consumer safeguards, or privacy. The Commission considers confidentiality to be generally appropriate for the specific details of such applications during the interval from interim approval to the effective date of the application. Further, the Commission considers that maintaining confidentiality for the specific details related to ex parte High Capacity/DDS filings that have been denied is generally in the public interest.

INTRODUCTION

2. On 16 June 1997, the Commission issued Ex parte Filing Process for Competitive Segment Services, Telecom Public Notice CRTC 97-24 seeking comments on whether it would be appropriate to extend to all remaining Competitive Segment Services, (i.e., basic toll and competitive network services), the ex parte filing process established in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19) and Tariff Filings Relating to Promotions, Telecom Decision CRTC 96-7, 18 September 1996 (Decision 96-7).

3. Comments were received from Stentor Resource Centre Inc. (Stentor) on behalf of and with the concurrence of BC TEL, Bell Canada, Island Telecom Inc. (formerly The Island Telephone Company Limited), Maritime Tel & Tel Limited, MTS Netcom Inc., NBTel Inc. (formerly The New Brunswick Telephone Company, Limited), NewTel Communications Inc., Québec-Téléphone, and TELUS Communications Inc. (the telephone companies); as well as from Call-Net Enterprises Inc. on behalf of itself and Sprint Canada Inc. (Call-Net), fONOROLA Inc. (fONOROLA), AT&T Canada Long Distance Services Company (AT&T Canada LDS) and Westel Telecommunications Ltd. (Westel). Reply comments were received from Stentor, Call-Net, AT&T Canada LDS, The British Columbia Public Interest Advocacy Centre on behalf of its clients (BCOAPO et al.) and fONOROLA.

4. Since in Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997, the Commission forbore from regulating the tariffs for, among other things, basic toll service, this Decision does not address the issue of whether it is appropriate to extend the ex parte process to basic toll service as it is now moot.

5. In Stentor Resource Centre Inc. - Forbearance from Regulation of Interexchange Private Line Services, Telecom Decision CRTC 97-20, 18 December 1997 (Decision 97-20), the Commission found that High Capacity/DDS services on certain routes satisfied the criteria under section 34 of the Telecommunications Act (the Act) for a forbearance determination.

6. This Decision, therefore, is limited to addressing the appropriateness of extending the ex parte process to the remaining services of the Competitive Segment that are still subject to rate regulation.

BACKGROUND

7. In Decision 94-19, the Commission stated that its power to make ex parte decisions in subsection 61(3) of the Act allows it to deal with applications that are not placed on the public record prior to interim disposition.

8. In that Decision, the Commission also articulated some of the considerations to be balanced in any determination to permit ex parte tariff filings, such as public interest and competitive harm considerations.

10. The Commission also expressed the view that maintaining confidentiality for the specific details of denied ex parte filings for discount toll and 800 service promotions was generally in the public interest.

11. In Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997, the Commission considered it appropriate for ex parte tariff filings for uncapped services to be considered under a process similar to that established in Decision 96-7, if they met all the Commission’s criteria concerning matters such as the imputation test, consumer safeguards and privacy.

POSITION OF PARTIES

12. Stentor submitted that the Commission’s conclusions with respect to the ex parte process have been based fundamentally on an assessment of the degree of competition in the relevant market, which in turn determines the degree to which market forces will operate to ensure that no party is unduly prejudiced by the ex parte treatment. Stentor indicated that in the competitive network service markets, there is now more than sufficient competition to protect the interests of customers, and other parties, and that it is appropriate for the Commission to extend the ex parte process to each of the Stentor companies’ Competitive Segment services.

13. Stentor submitted that the institution of an ex parte tariff approval process for all services in the Competitive Segment which are still subject to rate regulation is consistent with the Canadian telecommunications policy objectives set out in paragraph 7(f) of the Act; i.e., to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective. An ex parte process would permit the parties to examine proposed changes and additions to the Stentor companies’ competitive services after interim approval, but would not provide competitors with an unreasonable opportunity to develop and implement counter strategies while the Stentor companies await the approval of their initiatives.

14. Stentor however submitted that the most effective process for customers and the companies is one in which the entire tariff filing for any service in the Competitive Segment could be filed in confidence, and that no document included in the filing would be provided on the public record before the approved effective date of the tariff notice.

15. The interveners (AT&T Canada LDS, Call-Net, fONOROLA, Westel and BCOAPO et al.) were all of the view that circumstances do not exist which justify ex parte treatment for competitive network service tariff filings. The interveners submitted that these services are not sufficiently competitive and that the potential competitive disadvantage to the telephone companies of placing tariff filings on the public record does not outweigh the traditional public interest considerations supporting the normal, open regulatory process.

16. AT&T Canada LDS considered that the tariff approval process is critical to ensuring that the statutory requirements of just and reasonable rates and no unjust discrimination are satisfied and that implementation of Stentor’s proposal would be akin to forbearance, despite the fact that there has been no determination that the forbearance requirements in section 34 of the Act have been satisfied. AT&T Canada LDS submitted that this result would contravene the express requirements of sections 27 and 34 of the Act, as well as the policy objectives that regulation, where required, is efficient and effective.

17. AT&T Canada LDS submitted that Stentor’s position is premised on a perceived requirement for regulatory symmetry and noted that in Forbearance - Services Provided by Non-Dominant Canadian Carriers, Telecom Decision CRTC 95-19, 8 September 1995, the Commission specified that it is not appropriate to apply the same regulatory treatment to carriers with and without market power.

18. Call-Net expressed concern about the Commission extending the period of time during which an ex parte application is not placed on the public record, from the date on which interim approval is granted, to the effective date of the application and questioned the Commission’s jurisdiction to do this. In Call-Net’s view, the balance that the Commission struck in Decision 94-19, between giving meaning to the ex parte process and observing principles of procedural fairness, should not be modified.

19. Call-Net submitted that there is no precedent for keeping confidential the record on which an interim ex parte decision is based once the decision has been made. The Commission’s jurisdiction to make ex parte decisions has to be read in conjunction with the other provisions of the Act. Call-Net also submitted that any confidentiality that is not strictly necessary to support the ex parte process must meet the procedural and substantive requirements of section 39 of the Act. Call-Net submitted that the Commission could not maintain the confidentiality of details of the tariff filing after making an interim disposition, except pursuant to section 39 of the Act.

20. AT&T Canada LDS submitted that the Commission’s ability to enforce the statutory requirements of the Act and to rectify non-conforming tariffs is severely constrained by an approval process which permits telephone companies to implement tariffs before they have been vetted fully by the Commission and interested parties.

21. Call-Net submitted that there is great potential prejudice to competitors in not being able to comment on an interim approval of an ex parte filing before it comes into effect. Call-Net expressed concern that if a competitor or interested person is unable to learn the details of a tariff filing given interim approval until it comes into effect, it will not even have a limited opportunity to alert the Commission to concerns with respect to the filing which the Commission might have failed to appreciate during the interval between interim disposition and the effective date.

22. Call-Net and AT&T Canada LDS submitted that, once a tariff filing becomes effective, there is a much greater burden placed on an intervener in having the Commission’s interim decision stayed pending final disposition because the telephone company is able to argue that the balance of convenience and status quo favour not removing the service from the public.

23. Stentor submitted that the requirement for the Stentor companies to file tariffs on the public record for the introduction of new Competitive Segment services or to revise existing services provides the companies’ competitors with a significant and undue competitive advantage. Stentor argued that competitors can develop and introduce marketing programs to counteract the companies’ initiatives before they have received approval from the Commission to execute their own plans.

24. Stentor also submitted that the normal tariff approval process gives competitors an incentive to intervene in response to the companies’ filing for the purpose of delaying the implementation of the companies’ plans, thus allowing competitors more time to implement their own initiatives, which they can do without any need to await regulatory approval.

25. Stentor noted that the ex parte process would reduce this form of anti-competitive behaviour and enable the marketplace to better deliver the benefits of competition.

26. Call-Net submitted that the telephone companies’ private lines are a very important component of the networks of other carriers and service providers; hence the public interest in a competitive marketplace should not weigh exclusively in favour of ex parte treatment of these services. Call-Net also submitted that the ex parte process may be very damaging to the competitive process by preventing competitors from having an opportunity to comment and/or respond to changes to their own costs prior to interim approval or implementation of the changes.

27. Stentor submitted that in fully competitive industries, firms generally do not receive advance notice of cost changes as a result of some regulatory mandate. Stentor submitted that under an ex parte process, competitors will generally continue to have the opportunity to review and oppose the Stentor companies’ tariff filings before they take effect and before final approval.

28. Stentor submitted that even if the Commission determines as a result of the current proceeding that the ex parte process will be extended to all the Stentor companies’ non-forborne Competitive Segment services, it will still be necessary, pursuant to section 39 of the Act, for the companies to provide sufficient justification whenever they request confidentiality to be maintained from the date the tariff received interim approval to its effective date.

29. Stentor submitted that demand for interexchange private line services arises principally from medium and large business operations and governments, and that these operations tend to be concentrated in or around major metropolitan areas, and to a lesser degree in various regional centres. Stentor noted that competitors tend to concentrate their marketing efforts in such areas. Stentor submitted that the fact that competitors choose not to offer services or products to particular sectors does not confirm the absence of competition, rather it reflects the fact that competitors in the marketplace choose where it is most effective for them to compete.

30. Stentor noted that when the Commission granted forbearance from the regulation of the Stentor companies’ packet switched services in Telecom Order CRTC 96-130, dated 19 February 1996, the Commission concluded that the companies’ ubiquity of service deployment is not an unfair advantage as there are no obstacles to the entry of competitors into markets they currently do not serve.

31. Stentor maintained that none of the parties provided any evidence to support their contentions that an opportunity for anti-competitive behaviour would arise if an ex parte process were applied to all of the Stentor companies’ competitive interexchange services.

32. Call-Net and fONOROLA were of the view that should the Commission give these tariff filings ex parte treatment, the Commission should require that they be placed on the public record once interim approval is granted, or provide adequate reasons in the event interim approval is denied. AT&T Canada LDS considered that it is essential that the Commission provide reasons for the denial of tariff filings which permit interested parties to understand the underlying principles and rationale for decisions.

33. Call-Net considered Stentor’s suggestion, that the Commission’s ruling should apply to all future telephone company offerings that are designated as part of the Competitive Segment for accounting purposes, to be completely inappropriate.

CONCLUSIONS

34. In determining the appropriateness of extending the ex parte filing process for all remaining competitive segment services, the Commission has sought to balance a number of considerations. These include traditional public interest concerns such as the procedural rights of parties adverse in interest to be notified, the public interest in an open regulatory process and the benefit to the regulatory decision-making process derived from comments by interveners. Other considerations include concerns related to the public interest in the effective operation of the competitive marketplace. The latter include (1) the desirability of relying to a greater extent on market forces, minimizing the extent to which the regulatory process provides market participants with a competitive advantage and permitting the telephone companies to benefit from superior performance, new service/marketing ideas, etc. to the greatest extent possible, and (2) the potential for harm or prejudice to the competitive position of the telephone companies.

35. In Decision 97-20, the Commission found that voice grade and other analogue (VGA) services constitute markets separate from the markets for High Capacity/DDS services. The Commission noted that VGA services are older, lower capacity services that have traditionally been offered only by the telephone companies, AT&T Canada LDS and Westel. The Commission found that there was insufficient competition to protect the interest of users and that, therefore, VGA services did not satisfy the requirements of the Act for granting forbearance.

36. The Commission considers that the potential for harm to the Stentor companies flowing from greater advanced knowledge of their initiatives in the VGA services markets is limited. The Commission is of the view that traditional public interest concerns, such as the benefit to the regulatory decision-making process derived from interveners’ comments, outweigh the potential harm to the Stentor companies given the relative lack of competition in the VGA services markets. Therefore, the Commission finds that it would not be appropriate, at this time, to extend the ex parte process to VGA services.

37. In Decision 97-20, the Commission found that there was generally greater competition in the case of High Capacity/DDS services than in the case of VGA services. Indeed, the Commission determined that High Capacity/DDS services on certain routes satisfied the criteria under section 34 of the Act for a forbearance determination.

38. The Commission however expressed concerns regarding the extent to which customers would be protected in those areas where competitive facilities are not sufficiently available to provide an alternative supply of High Capacity/DDS services.

39. The Commission is not persuaded that the ex parte process should be extended to tariff applications related to rate increases on non-forborne High Capacity/DDS service routes. The Commission considers that the ability to raise prices is generally evidence of a situation where there is little or no competition. The Commission is of the view that, in such cases, traditional public interest concerns, such as the benefit to the regulatory decision-making process derived from interveners’ comments, outweigh the potential harm to the Stentor companies in situations where there is little or no competition.

40. Conversely, the Commission considers that a proposed price decrease on High Capacity/DDS service routes that are not forborne would be evidence of a degree of competition such that concerns with respect to the public interest in the effective operation of the competitive market, including the potential harm to the competitive position of the telephone company, would outweigh traditional public interest concerns. Accordingly, the Commission finds that it is appropriate to extend the ex parte process, established in Decisions 94-19 and 96-7, to tariff applications for price reductions with respect to the High Capacity/DDS service routes that are not forborne.

41. The Commission notes that, consistent with Decisions 94-19 and 96-7, the ex parte process would only apply to those applications that meet all of the Commission’s tariff criteria (such as the imputation test) and which raise no issues related to bottleneck services, consumer safeguards or privacy. With respect to concerns regarding anti-competitive pricing, the Commission notes that application of the imputation test is generally sufficient to ensure that rates are not anti-competitive.

42. The Commission considers confidentiality to be generally appropriate for the specific details of such applications during the interval from interim approval to the effective date of the application. Further, the Commission considers that maintaining confidentiality for the specific details relating to such denied ex parte filings is generally in the public interest.

43. With respect to Call-Net’s jurisdictional concerns, the Commission notes that, when allowing material to remain confidential during the period between interim disposition and implementation, the Commission is, in fact, exercising its discretion pursuant to section 39 of the Act.

Secretary General

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