ARCHIVED -  Telecom Decision CRTC 98-9

Telecom Decision
CRTC 98-9

Ottawa, 9 July 1998

REGULATION UNDER THE TELECOMMUNICATIONS ACT OF CERTAIN TELECOMMUNICATIONS SERVICES OFFERED BY "BROADCAST CARRIERS"

Reference: 8697-C12-01/98

I SUMMARY

1. A "broadcast carrier" is a company or other person which is a Canadian carrier under the Telecommunications Act (the Act) and which also holds a broadcasting distribution undertaking (BDU) licence under the Broadcasting Act.

2. The Commission will not regulate the rates at which broadcast carriers offer retail level Internet services, and certain other telecommunications services (e.g. security services) to their customers. However, the Commission will approve the rates and terms on which incumbent cable and telephone companies provide access to their telecommunications facilities with respect to competitive providers of retail level Internet services.

II INTRODUCTION

3. In this Decision, the Commission addresses issues on which it sought comment in Regulation of Certain Telecommunications Services Offered by Broadcast Carriers, Telecom Public Notice CRTC 96-36, 6 December 1996 (Telecom PN 96-36). The proceeding begun by Telecom PN 96-36 followed the Commission’s determinations in Regulation of Broadcasting Distribution Undertakings that Provide Non-Programming Services, Telecom Decision CRTC 96-1, 30 January 1996 (Telecom Decision 96-1).

4. Notably, in Telecom Decision 96-1, the Commission found that companies which are BDUs may also in certain circumstances be Canadian carriers within the meaning of the Act when they distribute telecommunications services on their broadcasting distribution infrastructure. In that Decision, the Commission referred to Canadian carriers which also hold a BDU licence as "broadcast carriers". This term is used for descriptive convenience only, and does not appear in either the Telecommunications Act or the Broadcasting Act.

5. As used in the Public Notice which accompanied the Broadcasting Distribution Regulations, Public Notice CRTC 1997-150, 22 December 1997 (PN 1997-150), the term "cable distribution undertakings" includes incumbent cable television systems, as well as new wireline distributors. This Decision uses the term "cable carriers" to refer to such cable distribution undertakings when they are also Canadian carriers under the Act. In addition to cable distribution undertakings, PN 1997-150 identified two other distinct types of BDUs: Direct-to-home (DTH) satellite distribution undertakings, and radiocommunication distribution undertakings (notably, wireless systems using multipoint distribution system (MDS) technology and local multipoint communications systems (LMCS) technology. This Decision adopts this categorization of BDUs.

6. In this Decision the Commission considers the appropriate regulatory approach under the Act to certain telecommunications services provided by a broadcast carrier using distribution facilities it also uses to provide a broadcasting service. Only telecommunications services provided using these facilities are within the scope of this proceeding.

7. In this Decision, the Commission considers retail level Internet services (ISs), security, telemetry, videoconferencing, local area network (LAN) and wide area network (WAN) services offered by broadcast carriers and, in particular, by cable companies. The Commission also considers issues related to the provision of access to the underlying telecommunications facilities used by cable carriers to provide retail level ISs.

8. With respect to DTH satellite undertakings in Regulation of Full Channel TV Services, (e.g. alphanumeric services), Telecom Decision CRTC 97-2, 5 February 1997, the Commission stated that it considered a DTH undertaking would be a Canadian carrier to the extent that it owns or operates the type of facilities included in the definition of "transmission facilities" in the Act and the undertaking provides non-broadcasting services to the public for compensation by means of "telecommunications facilities". No DTH undertaking made submissions in this proceeding, and parties did not discuss the issues with specific reference to DTH undertakings.

9. The Commission notes that its determinations in this proceeding do not apply to a DTH satellite undertaking that may be found to be a Canadian carrier. The appropriate regulatory approach with respect to a DTH satellite undertaking to the issues under consideration in this proceeding will be determined if, and when, the Commission finds such an undertaking to be a Canadian carrier.

10. In arriving at the determinations set out in this Decision, the Commission has taken into account the submissions of parties responding to Telecom PN 96-36. Submissions were received from: ACC TelEnterprises Ltd., Association des câblodistributeurs du Québec (ACQ), Cable Regina, CADVision Development Corporation (CADVision), Consumers’ Association of Canada/Fédération nationale des associations de consommateurs du Québec (CAC/FNACQ), Canadian Association of Internet Providers (CAIP), Canadian Cable Television Association (CCTA), Canadian Newspaper Association (CNA), Fundy Cable Ltd./Ltée, Information Technology Association of Canada (ITAC), Interlog Internet Services (Interlog), MaxLink, Province of Saskatchewan, Shaw Communications Inc. (Shaw), Stentor Resource Centre Inc. (Stentor), Torstar Corporation, TotalNet Inc. (TotalNet), WIC Connexus Inc. (WIC).

III RETAIL LEVEL TELECOMMUNICATIONS SERVICES PROVIDED BY BROADCAST CARRIERS

11. CAC/FNACQ submitted that, since telecommunications services are changing rapidly and new services are likely to be developed in the future, it would be premature to categorize services at this time for the purpose of forbearance. The Commission agrees, and its determinations below are made only with reference to the specific services described below. The Commission will consider, on application, the appropriate regulatory treatment for other services.

12. While the discussion in this Part focuses on the issues as they apply to cable carriers, the Commission’s findings with respect to retail level telecommunications services apply equally, except where otherwise stated, to retail level ISs offered by broadcast carriers other than DTH BDUs.

Retail Level Internet Services

13. A key issue with respect to retail level ISs is whether the terms on which such services are offered should continue to be tariffed (including prior Commission approval of rates) or whether the Commission should forbear from its power to approve rates and other terms. ISs are currently offered by broadcast carriers pursuant to tariffs which have received interim approval pending the Commission’s determinations in this Decision.

Definition of the Market

14. In Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994, the Commission set out its approach to evaluating situations in which it would be appropriate to refrain, under section 34 of the Act, with respect to exercising certain of its powers and performing its duties with respect to a service or class of services. The analysis requires a definition of the relevant market or markets, taking into account substitutes and other features of the market in question, and an assessment of whether the service providers have market power in the relevant market.

15. Many of the comments submitted with respect to the definition of the IS market focused on whether lower speed and higher speed retail level ISs represent distinct markets. In general, Internet service providers (ISPs) which compete with cable carriers submitted that lower and higher speed ISs are separate markets, whereas cable companies considered that they are not.

16. Consistent with its overall approach to telecommunications regulation, the Commission is of the view that it is not appropriate to define the market for telecommunications services with reference to technology. Instead, service attributes should be the focus of analysis.

17. The various retail level ISs currently available generally permit users to upload and download information from the Internet, and to use applications such as electronic mail. ISPs differentiate their services by, for example, pricing strategies, ratio of access lines to modems, and user support. The Commission considers this to be fully consistent with the workings of a competitive market, and further considers that lower and higher speed retail level ISs share sufficient attributes to be considered as reasonable substitutes. The Commission therefore defines the retail level ISs market to include all ISs, independent of speed, and the facilities over which the services are carried.

The Level of Competition

18. The relative market power of service providers is a function of a number of variables which affect both the demand and the supply of the service(s) under consideration.

19. In a number of decisions, the Commission has found the ISs market to be highly competitive (for example, Telecom Orders CRTC 97-471, 8 April 1997 and 97-928, 30 June 1997, the "NBNet/PLAnet Forbearance Orders"). The Commission notes that at the time the NBNet/PLAnet Forbearance Orders were made, the cable industry had begun to offer higher speed retail level ISs. These ISs were therefore competing in the market at the time. The Commission has considered whether the further penetration of such cable and other broadcast carrier ISs has altered significantly, or may be expected to alter significantly, the competitiveness of the retail level ISs market, having particular reference to the fact that other service providers cannot currently access cable carrier facilities to offer competitive higher speed ISs.

20. On the demand side, ISs customers face a market where switching ISPs is relatively easy, pricing packages are varied and there are numerous substitutes for this service. On the supply side, the Commission notes CCTA’s submission that cable modem access services currently represent less than one percent of the ISs market, and further notes that parties did not dispute this estimate. The Commission accepts that cable companies serve a small percentage of the total ISs market. It is also the Commission’s view that the retail level ISs market is characterized by rapid and significant innovation, minimal barriers to entry and minimal restrictions on competitors’ ability to increase supply in response to a non-transitory price increase.

21. In light of the above, the Commission considers that cable carriers offering ISs do not have substantial power in the retail level ISs market. The Commission further considers that the more recent entry of additional service providers into the ISs market has not changed the fundamental dynamics of that market, and concludes that the market remains rivalrous, innovative and sufficiently competitive to protect the interests of users. The Commission therefore finds that retail level ISs are subject to competition sufficient to protect the interests of users, pursuant to subsection 34(2) of the Act, and that it would be appropriate to forbear from exercising its powers pursuant to section 25 of the Act with respect to the rates and terms on which broadcast carriers offer retail level ISs.

22. However, because access to cable carrier’s underlying telecommunications facilities is not yet available to competitive providers of retail level ISs, the issue arises as to whether, pursuant to subsection 34(3) of the Act, forbearance from broadcast carriers’ retail level ISs in this circumstance would be likely to impair unduly the continuance of a competitive market for retail level ISs.

23. In light of the discussion in Part IV with respect to access to cable carriers’ underlying telecommunications facilities and retail level ISs, the Commission concludes pursuant to subsection 34(3) of the Act that a decision to forbear to the extent noted in this Decision, in the absence of immediate access to the cable carriers’ telecommunications facilities with respect to ISs is not likely to impair unduly the continuance of a competitive retail level ISs market.

Security, Telemetry, Videoconferencing, LAN and WAN Services

24. There was a general consensus amongst the parties who commented on this issue that the Commission should forbear with respect to the regulation of certain other telecommunications services, specifically security, telemetry, videoconferencing, LAN and WAN services. CCTA, one of the parties which supported forbearance of non-ISs, submitted that it would be appropriate to apply the same regulatory treatment to all such services because, in its view, the market conditions are common for these services. CCTA added that cable companies are non-dominant in these markets and face competition from the established telephone companies, other telecommunications carriers and resellers in the provision of these services. CCTA concluded that, as cable companies do not possess power in these markets, competition will be sufficient to protect the interests of users and forbearance would not be likely to impair the development or continuance of competitive markets. Consequently, CCTA recommended that the Commission forbear pursuant to sections 25, 29 and 31 and subsections 27(1) and 27(5) of the Act but that it may wish to retain its powers under section 24 to address privacy concerns as well as under subsections 27(2), (3) and (4) to adjudicate any access disputes that may arise.

25. Most parties commenting on this issue did not dispute the CCTA’s comments. Nevertheless, CNA indicated that forbearance from the regulation of all other telecommunications services offered by broadcast carriers would be premature, and CAIP submitted that it would be inappropriate to forbear unconditionally.

26. In view of the Commission’s historic approach to the regulation of security and telemetry services, and in view of the fact that the Commission has already forborne with respect to the regulation of videoconferencing, LAN and WAN services offered by non-dominant carriers using telecommunications facilities which are not associated with broadcasting facilities, the Commission finds, pursuant to subsection 34(1) of the Act, that it would be consistent with Canadian telecommunications policy objectives to forbear to the extent discussed below from regulating security, telemetry, videoconferencing, LAN and WAN services when offered by broadcast carriers using facilities which are within the scope of this proceeding. The Commission further finds, pursuant to subsection 34(3), that a determination to refrain would not be likely to impair unduly the establishment or continuance of a competitive market for these classes of services.

Terms of Forbearance

Competitive Safeguards

27. Various parties requested a number of other safeguards or conditions of forbearance in the context of cable carriers’ retail level ISs, including the implementation of price caps and imputation tests, safeguards to prevent cross-subsidization, predatory pricing and joint marketing and the cost-justification of rates.

Competitive Safeguards at the Corporate Level

28. Cable industry interveners were of the view that there was no need for competitive safeguards beyond those already in place. They submitted that the markets are, or will be, competitive; that mechanisms are in place under the Broadcasting Act to ensure that cross-subsidization or predatory pricing do not occur, including price cap regulation of basic cable rates, cost separation rules and defined circumstances in which basic cable rates may be increased; and that there are minimal or no barriers to entry.

29. ISPs generally disagreed. CADVision proposed that further safeguards were required to prevent the offering of cable modem service for free, to prevent bundling and to guard against cross-subsidization. CADVision and TotalNet proposed a safeguard (such as a "carrier services group") to prevent the passing of confidential information such as client lists between the broadcast carrier and its ISP operation.

30. CAIP and TotalNet requested a separation of telecommunications and broadcasting activities. CADVision and Interlog further requested that ISs be offered through structurally separate business units. Interlog considered a price imputation test to be the most important safeguard in respect of bundled service offerings. TotalNet was of the view that the billing, financing and marketing conducted for the cable carriers’ ISP business should be separate from the cable business. CAIP submitted that the offering of mixed broadcasting and telecommunications services should be allowed when the telecommunications service is resold on a wholesale basis, and if no unjust preference is shown by a cable carrier toward its own IS.

31. MaxLink supported the imposition of restrictions on joint marketing and advertising, and on bundling and proposed restrictions on customer referrals and access to customer information similar to those imposed on the telephone companies’ affiliates. MaxLink, along with WIC and ITAC, also supported the implementation of safeguards to prevent cross-subsidization. CAC/FNACQ was of the view that an imputation test and price caps should be introduced if needed. CAC/FNACQ also submitted that structural separation would be the preferred safeguard, but submitted that it does not appear practical at this time.

32. Stentor submitted that there is no need for any safeguard beyond those required to ensure the protection of confidential customer information and to ensure fair access to inside wire, which, in its view, is the only essential facility. Stentor further submitted that preventing cross-subsidization would require the implementation of price caps and an imputation test to telecommunications services. However, in Stentor’s view, the resources required would outweigh the benefits, and the risk is best addressed by eliminating regulatory barriers to entry in the broadcast market and relying on the remedies available under the Competition Act.

33. Parties’ comments on the issue of competitive safeguards generally focused on the issue as it applies to incumbent cable companies. With respect to broadcast carriers which are incumbent telephone companies, the Commission notes that it has established, under the Act, a regulatory framework to deal with competitive safeguards, including issues relating to the potential for cross-subsidization from services in markets in which such carriers have market power. The Commission further notes that, with respect to broadcast carriers which are not incumbent telephone companies or cable companies, concerns do not arise in this area because of their non-dominance.

34. Cable companies that provide retail level telecommunications services are non-dominant providers of these services. The Commission notes that it has not required other companies which are non-dominant providers of retail level telecommunications services to offer such services on a structurally separate basis, and that it has not put accounting separations in place for such service providers. The Commission does not consider that cable companies’ market position in the broadcasting distribution market warrants different regulatory treatment for such carriers in this respect under the Act. The Commission further notes that this determination is consistent with the regulatory treatment described in Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Telecom Decision 97-8), for a cable distribution undertaking which is a competitive local exchange carrier (CLEC).

35. Under the Broadcasting Act, the Commission has established a regulatory framework for cable carriers, including those which are incumbent cable distribution undertakings. The Commission considers it appropriate to continue to address issues relating to the market power of such undertakings in broadcasting distribution under the Broadcasting Act. The Commission further notes that it has already stated, in PN 1997-150, its intention to conduct a general review of the Broadcasting Distribution Regulations after two years. At that time, the Commission will consider whether further refinements to its broadcasting regulatory framework are appropriate, having regard to the objectives of the Broadcasting Act.

36. The Commission notes certain parties’ proposals that a Carrier Services Group should be established to act as an interface between customers for cable carrier facilities in the areas of access and interconnection. In Regulation Under the Telecommunications Act of Cable Carriers’ Access Services, Telecom PN CRTC 98-14, 9 July 1998 (Telecom PN 98-14), the Commission seeks comments on, amongst other things, the appropriate way to address competitive concerns that may be expected to exist in this area.

Competitive Safeguards at the Retail Service Level

37. In Joint Marketing and Bundling, Telecom Decision CRTC 98-4, 24 March 1998 (Telecom Decision 98-4), the Commission set out its conclusions with respect to bundling of telecommunications and non-telecommunications services by a Stentor telephone company. The Commission concluded that the Stentor telephone companies may continue to bundle services, subject to the conditions respecting tariffing and costing set out in that Decision.

38. In this proceeding, the Commission considered the regulatory requirements, if any, that should be put in place in connection with: (a) the bundling of telecommunications and non-telecommunications services by broadcast carriers which are not Stentor telephone companies, and (b) the joint marketing of telecommunications and non-telecommunications services offered by all broadcast carriers.

39. The Commission notes that, with its determinations in this Decision, retail level telecommunications services offered by broadcast carriers which are not incumbent telephone companies will not be tariffed: the Commission has previously decided it will not regulate, under the Act, retail rates for toll and local telephone services and most other telecommunications services offered by non-dominant carriers (Forbearance - Services Provided by Non-Dominant Canadian Carriers, Telecom Decision CRTC 95-19, 8 September 1995 (Telecom Decision 95-19) and Telecom Decision 97-8). This would include a cable company which offers a local or toll service. As set out in this Decision, a broadcast carrier which is not an incumbent cable company or an incumbent telephone company (e.g. BDUs which use MDS technology) will not be required to file tariffs for its telecommunications services.

40. CCTA, ACQ and certain individual cable companies argued that bundling or joint marketing safeguards are not required because cable companies cannot cross-subsidize, have little market power in broadcast distribution, and there is no strong link in customers’ minds between ISs and entertainment services.

41. ISPs generally expressed strong concerns that cable companies should not be allowed to bundle or engage in cross-service pricing and promotions, particularly in the absence of access to their telecommunications facilities by other ISPs. CAC/FNACQ indicated that conditions on bundling do not appear to be necessary at this time, but that the Commission should be prepared to impose them if required. Stentor submitted that no additional condition need be imposed on the telecommunications service elements in bundled packages beyond those applied to those services when offered separately.

42. The Commission considers that, consistent with its approach in its Telecom Decision 98-4, all broadcast carriers should be permitted to bundle ISs with cable services.

43. However, until a broadcast carrier which is an incumbent cable company or an incumbent telephone company provides tariffed access to its underlying telecommunications facilities with respect to competitive ISPs, as discussed in this Decision, the Commission requires, pursuant to section 24 of the Act as a condition of the provision of telecommunications services, such a carrier to provide customers with specific rate information. The carrier is to provide the following information on each bill to a customer of both telecommunications and broadcasting services: (a) the rate charged for any IS in the package, and (b) the total rate charged for all other forborne telecommunications services in the package. This information will assist all parties in making better-informed decisions until tariffed access is available.

44. There is currently no restriction in place under the Act with respect to joint marketing by broadcast carriers of telecommunications and non-telecommunications services (e.g. broadcasting). The issue therefore is whether it would be appropriate to impose such restrictions, as certain parties requested.

45. The Commission considers that joint marketing and advertising will permit broadcast carriers to meet consumer demand, including demands for one-stop shopping and integrated service offerings, and that it will lead to more innovation and cost effective provisioning of telecommunications services through economies of scale and scope. The Commission also notes that the market for ISs and forborne telecommunications services is competitive, and that competition has been introduced into the market for cable services. Further, incumbent cable companies do not have market power in terms of advertising vehicles and, in the Commission’s view, consumers are generally aware that there are competing ISPs and emerging competitors for cable. The Commission is therefore of the view that it is not appropriate to impose joint marketing restrictions with respect to broadcast carriers’ forborne telecommunications and their non-telecommunications services. The Commission further considers that joint marketing of such services would not generally result in the granting of an undue preference under subsection 27(2) of the Act.

46. The Commission notes CADVision’s submission, made in respect of Shaw, to the effect that Shaw’s ownership of advertising media and fibre networks, as well as Shaw’s relationships with its customers are sources of market power. The question of whether Shaw derives an undue advantage from its relationship with its existing cable clients involves a consideration of the issues of joint marketing and bundling. These issues have been addressed above.

Resale

47. A related issue is whether the Commission should require resale of retail level ISs as a condition of forbearance. CCTA, among others, opposed the request put forward by certain ISPs for the right to resell cable carriers’ ISs. CCTA submitted that, in the past, the Commission has mandated resale of a carrier’s services only as a means of stimulating competition in a monopolistic environment, where the barriers to facilities-based entry were considered to be great. CCTA considered that such circumstances do not exist here.

48. The Commission notes that, in previous decisions in which it forbore with respect to the regulation of retail level ISs, it did not mandate resale of these services. The Commission considers that the supply of access services has continued to increase, and has contributed to create a workably competitive market for retail level ISs. In all the circumstances, the Commission declines to mandate resale of retail level ISs as a condition of forbearance.

Privacy

49. Certain parties proposed that the Commission retain its authority under section 24 of the Act to address privacy concerns. The Commission agrees and considers that broadcast carriers must enforce privacy policies which adequately protect the customer information they collect, and, on a going forward basis, should include their policy with respect to the confidentiality of customer information in all ISs customer contracts.

Summary of Conclusions with respect to Retail Level Telecommunications Services

50. Pursuant to subsection 34(1) of the Act, in relation to broadcast carriers’ retail level ISs, security, telemetry, videoconferencing, LAN and WAN services: the Commission finds as a question of fact that to refrain from exercising powers and performing duties with respect to sections 25, 29, and 31 and subsections 27(1), 27(5) and 27(6) of the Act would be consistent with the Canadian telecommunications policy objectives.

51. With respect to broadcast carriers’ retail level ISs, the Commission further finds, pursuant to subsection 34(2) of the Act, that these services are subject to competition sufficient to protect the interests of users.

52. However, the Commission considers it would not be appropriate to refrain from exercising all of its powers and duties under section 24 and subsections 27(2), 27(3) and 27(4) of the Act with respect to these services.

53. The Commission considers it necessary to retain powers with respect to section 24 of the Act in order to maintain and impose certain conditions on the offering and provision of underlying telecommunications services to competitive service providers, to provide rate information as set out below, to ensure that appropriate provisions regarding confidential information apply and to retain the power to impose conditions on the offering and provision of these services as may be necessary in the future.

54. A broadcast carrier which is an incumbent cable company or an incumbent telephone company and which cannot provide tariffed access to its underlying telecommunications facilities with respect to competitive service providers, as discussed below in this Decision, must provide customers with specific rate information. The carrier is to provide the following information on each bill to a customer of both telecommunications and broadcasting services: (a) the rate charged for any IS in the package, and (b) the total rate charged for all other forborne telecommunications services in the package.

55. The Commission is of the view that it is important to retain subsections 27(2) and 27(4) of the Act in regard to issues related to access to the underlying network components of the services forborne from in this proceeding. The Commission is further of the view that retaining these subsections will provide an additional safeguard against broadcast carriers granting any undue preference to their own services.

56. The Commission directs broadcast carriers to include, on a going forward basis, their policy with respect to the confidentiality of customer information in all ISs customer contracts.

57. Pursuant to subsection 34(3) of the Act, the Commission finds that to refrain from exercising the powers and performing the duties to the extent set out in this Decision would not be likely to impair unduly the establishment or the continuance of a competitive market for the services to which this Decision applies.

58. The Commission declares, pursuant to subsection 34(4) of the Act, that sections 25, 27, 29 and 31 of the Act do not apply to a Canadian carrier to the extent these sections are inconsistent with the determinations of the Commission in this Decision.

59. The Commission grants final approval, under section 25 of the Act, to all broadcast carrier tariffs for ISs which have been granted interim approval pending the Commission’s determinations in this proceeding. In view of its determinations herein, the Commission further directs the carriers in question to issue forthwith tariff pages withdrawing the tariffs for their retail level ISs and, if applicable, for their telemetry, security, videoconferencing, LAN and WAN services.

IV ACCESS TO UNDERLYING TELECOMMUNICATIONS FACILITIES

60. Various ISPs that are not associated with cable carriers expressed their interest in this proceeding in offering retail level services, in this case higher speed ISs, in competition with cable carriers. In order to do so, they stated that they require access to cable carriers’ telecommunications facilities.

61. Through the CCTA and in individual submissions, certain cable companies stated that they propose to provide access to their facilities to competitive retail level providers as soon as possible. The industry proposes to do so using a "source-based" routing approach. This approach to access would mean, for example, that an ISP’s "home page", not the home page associated with any retail level IS offered by the cable company, would appear on the customer’s screen. However, software must be developed to implement this approach and, while work is ongoing in this area, it has not yet been concluded.

62. Generally, the cable industry and Stentor submitted that forbearance, not tariffing, is appropriate with respect to the rates and other terms on which access to underlying telecommunications facilities is provided. ISPs and certain other parties submitted that access should be made available on a tariffed basis.

63. IS customers access ISPs in various ways, including through the use of switched voice grade services, cable modems, asymmetrical digital subscriber line (ADSL) services and dedicated access services. For example, most residential IS customers currently use switched voice grade services to access their ISP.

64. For the purpose of this Decision, "access services" refer to services which connect customers to a network through which they may reach the service provider of their choice. The Commission considers that there are two markets for access services: the lower and higher speed access service markets. In the Commission’s view, lower speed and higher speed access services are not substitutes, given the limited availability of the latter, the fact that higher speed access services are in the earlier stages of development, and the price differential between lower and higher speed service offerings.

Lower Speed Access Services

65. "Lower speed access" allows for data access using a voice grade line (currently, up to 56 Kbps capability) and various modem technologies. Integrated services digital network (ISDN) services provide capacity in 64 Kbps increments, and each increment can be used individually for voice or data, or grouped to achieve higher speeds. The Commission defines the lower speed access market as including those services that provide transmission at speeds no greater than 64 Kbps. The higher speed access market therefore consists of services which offer transmission at speeds above 64 Kbps.

66. The incumbent telephone companies are currently the dominant suppliers of lower speed access services. The Commission approves, through tariffs, the terms on which such services are provided. The Commission also regulates and approves tariffs, as appropriate, for elements relating to access provided by incumbent telephone companies to competitive providers of switched local telephony services. In contrast, the Commission has not required new entrants into the switched local voice market to file tariffs for access to their underlying facilities (Telecom Decision 97-8). The Commission also regulates wireless service providers as non-dominant service providers, and does not require them to obtain prior approval of tariffs for the provision of access to their underlying facilities (Regulation of Mobile Wireless Telecommunications Services, Telecom Decision CRTC 96-14, 23 December 1996). Further, the Commission has forborne from exercising its power to approve tariffs with respect to most other services offered by non-dominant carriers (Telecom Decision 95-19).

Higher Speed Access Services

67. As noted, ADSL and ISDN services above 64 Kbps are higher speed access services. Currently, incumbent telephone companies offer such services using traditional copper facilities. The Commission’s description of the lower speed and higher speed access markets does not alter the current regulatory treatment of such services.

68. With respect to the market for higher speed access services, the Commission considers that different demand and supply conditions prevail than in the market for lower speed access services.

69. There are various higher speed access service options (for example, cable modem and ADSL services) which are still evolving, and are only now becoming more widely available to IS customers. The incumbency of both telephone and cable companies in their respective core businesses also provides them with the infrastructure to continue to establish themselves in the higher speed access market.

70. On the other hand, companies offering higher speed access services using wireless technology (such LMCS or MDS) are not in this position. Two holders of LMCS spectrum licences from Industry Canada, MaxLink and WIC, made submissions in this proceeding. They noted that the outcome of this proceeding will not apply to them because they do not hold BDU licences. MaxLink requested that the Commission forbear unconditionally from regulating its services, given its lack of market power.

Access to Underlying Telecommunications Facilities and Forbearance from Cable Carrier Retail Level IS

71. The Commission notes the position of companies whose services compete against cable carriers’ higher speed retail level ISs that it would not be appropriate to forbear with respect to the regulation of such services before access to the underlying facilities used to offer these services is available. The Commission also notes the comments made by certain interveners to the effect that, by failing to implement access before offering their own ISs, cable companies are conferring an undue advantage upon themselves, contrary to subsection 27(2) of the Act.

72. The Commission notes that currently cable-modem based retail level ISs are not ubiquitously available in urban areas, and that such services are not expected to be available in rural areas in the short term. With respect to the issue of access to facilities required to offer retail level ISs at lower speeds, the Commission notes that lower speed access service availability is currently ensured through tariffed access to incumbent telephone company facilities, and that higher speed access services offered by such carriers are available on a tariffed basis as they are rolled-out. The Commission further notes that cable companies have undertaken to implement access to the telecommunications facilities which are the subject to this Decision as soon as possible.

73. The Commission notes the position of various parties that cable carriers should not be permitted to continue to offer higher speed retail level ISs until such time as access to their telecommunications facilities is available to competitive service providers. In light of its conclusions respecting the market in which such ISs are offered, the Commission considers that it would not be in the public interest to restrict the development of higher speed ISs in this way. The Commission also does not consider that it would be in the public interest to tariff cable carriers’ higher speed retail level ISs on a cost-justified basis, in circumstances in which it would not otherwise do so, solely for the purpose of addressing access issues.

74. Finally, the Commission notes competitive ISPs’ concerns that, if the Commission forbears from regulation of broadcast carriers’ ISs rates, a cable company might charge a rate for its retail level higher speed IS that is less than the rate it charges to competitive suppliers of such services for access to its telecommunications facilities. The Commission considers that, given developing competition in the cable companies’ core business, and the existing competitive safeguards applicable to cable distribution undertakings under the Broadcasting Act, it would be uneconomic for cable carriers to engage in such activity. Therefore, in the Commission’s view, it would be more appropriate to deal with such issues as they may arise in the context of undue preference under subsection 27(2) of the Act.

Summary of Conclusions with Respect to Access to Underlying Telecommunications Facilities

75. Notwithstanding that competitors to incumbent cable companies and incumbent telephone companies may be poised to provide such higher speed access services, or have begun to do so, higher speed access services are now supplied almost exclusively by these carriers. The Commission considers that incumbent telephone companies and incumbent cable companies have substantial market power with respect to higher speed access services, and that this market is not yet sufficiently competitive to justify forbearance with respect to the rates and terms on which these carriers provide higher speed access services.

76. Moreover, the Commission considers that a potential increase in competitive supply should not be accepted as a basis for forbearance with respect to higher speed access services given the current state of technological development with respect to the provision by cable companies of higher speed access services, and the importance of higher speed access services to the continued development of retail level telecommunications services. The Commission finds that to forbear from exercising its power to approve tariffs with respect to higher speed access services offered by a broadcast carrier which is an incumbent telephony company or an incumbent cable company would unduly impede the development of a competitive market for these services. With respect to Stentor’s submission that facilities which provide similar functionality should be treated symmetrically with incumbent cable carrier services from a regulatory perspective, the Commission notes that ADSL services are currently tariffed.

77. The Commission therefore concludes, with respect to higher speed access services provided by a broadcast carrier which is an incumbent cable company or an incumbent telephone company, that it is appropriate to tariff the rates and other terms on which such services are provided, once the carrier has the ability to provide such access in respect of competitive service providers. Broadcast carriers which are affiliates of incumbent carriers will not be required to provide such access on a tariffed basis. The Commission further considers that a competitive retail level service provider should not be restricted with respect to the company it selects to deliver its service to the incumbent cable or telephone carriers.

78. With respect to the provision of higher speed access services by non-dominant service providers using wireless technology such as MDS and LMCS, the Commission notes that in Telecom Decision 95-19 it forbore from exercising certain of its powers in respect of such services when they are provided using telecommunications facilities which are not also used to provide a broadcasting service.

79. With respect to higher speed access services provided using the facilities of a non-dominant broadcast carrier licensed as a BDU to provide a broadcasting service using wireless technology, the Commission finds, pursuant to subsections 34(1) and 34(2) of the Act, that to forbear to the extent set out in Telecom Decision 95-19 would be consistent with the Canadian telecommunications policy objectives, and that the services offered by these carriers are subject to competition sufficient to protect the interests of users. Pursuant to subsection 34(3) of the Act, the Commission finds that to refrain from exercising the powers and performing the duties to the extent set out in Telecom Decision 95-19 would not be likely to impair unduly the establishment of the continuance of a competitive market for higher speed access services offered by these carriers. The Commission notes that it will therefore retain, amongst other powers, its powers under subsection 27(2) of the Act to deal with issues relating to network access. The Commission declares, pursuant to subsection 34(4) of the Act, that sections 25, 27, 29 and 31 do not apply, to the extent these sections are inconsistent with the determinations of the Commission in this Decision.

80. The Commission notes that distribution facilities used by a broadcast carrier to provide a broadcasting service may also be used to provide a telecommunications service which falls within the scope of, Telecom Decision 97-8. Telecom PN 96-36 excluded issues relating to such local telecommunications services, including local public switched voice services, from consideration in this proceeding. The Commission’s determinations in this Decision do not, therefore, alter its determinations with respect to local competition.

81. CCTA is to report to the Commission, within 30 days of the date of this Decision, on the status of the implementation of access, including a detailed report on issues of a technological nature. CCTA is to continue to report quarterly, or more frequently as required, as significant developments occur on the status of the implementation of access.

82. CCTA is to provide a detailed report, within 45 days, on the feasibility of alternative methods of providing access, including a discussion of the advantages and disadvantages of these alternative approaches to the provision of access.

83. The Commission also notes its intention to initiate a proceeding under the Act to consider issues relating to the methodology by which rates for access to facilities should be developed. Other issues relating to access will also be considered in that proceeding (e.g. confidentiality of competitor information).

84. The Commission requested comments in Telecom PN 96-36 with respect to "the appropriate approach to interconnection between the telecommunications facilities of broadcast carriers and those of other facilities based providers, including points of interconnection and other technical aspects". Parties did not provide detailed comments on this issue. In light of this and given that technical issues associated with access generally are still under development, the Commission considers it is premature to pursue this issue further at this time.

85. The Commission agrees with the submission of the CNA that carriers should not grant an undue preference to themselves in providing navigation through the Internet or in providing gateways through which customers can gain access to remote databases and networks.

86. Certain parties requested that the Commission require resale of access. With respect to CAIP’s request that its members be permitted to resell cable carrier’s access service so as to retain a complete relationship with their ISP customers, the Commission considers that there may be benefits from such an arrangement.

87. The issue of whether the Commission should mandate resale and sharing of carriers’ higher speed access services will be addressed in Telecom PN 98-14.

88. With respect to the submission of Interlog that cable carriers should be required to make sufficient technical disclosure, including terminal to network interface, in order that third parties may provide competing ISs (in accordance with Telecom Letter Decision CRTC 94-11), the Commission agrees that this issue must be addressed once technical arrangements have been developed further.

V BROADCAST CARRIER INVOLVEMENT IN TELECOMMUNICATIONS CONTENT

89. Section 36 of the Act states that "Except where the Commission approves otherwise, a Canadian carrier shall not control the content or influence the meaning or purpose of telecommunications carried by it for the public."

90. Pending the completion of this proceeding, in Telecom Decision 96-1, the Commission granted interim approval under section 36 of the Act to any such broadcast carrier involvement in the content of the non-programming services other than full channel TV services (e.g. alphanumeric services); that is, the Commission granted interim approval to carrier involvement in the content of ISs and other telecommunications services.

91. Parties’ submissions in this proceeding did not focus on, or raise concerns with respect to, ongoing broadcast carrier involvement in these service offerings. The Commission understands this involvement to include selection of any content for a carrier’s own IS. The retail level services which are the subject of this Decision are offered in a competitive market, and markets for access services are subject to regulation.

92. The Commission therefore grants final approval, under section 36 of the Act, to broadcast carrier involvement in the content of the telecommunications services in respect of which it has forborne from exercising certain of its powers in this Decision.

VI RELATIONSHIP BETWEEN THE BROADCASTING ACT AND THE TELECOMMUNICATIONS ACT WITH RESPECT TO USE OF THE COMMUNITY CHANNEL

93. In the context of resolving certain complaints against Cogéco Câble Canada (Cogéco) filed by QuébecTel Communications (QuébecTel), in which QuébecTel alleged that Cogéco was advertising its IS on one of its community channels, the Commission indicated it would address this issue in its Decision in this proceeding (Application of Telecom Decision CRTC 96-1: QuébecTel Communications and Cogéco Câble Canada Inc., Telecom Decision CRTC 96-8 dated 18 September 1996). Cogéco took the position that its practice was in conformity with the Broadcasting Act, and that the Broadcasting Act is the relevant legislation with respect to such issues. In Telecom PN 96-36 the Commission sought comment on whether, where a broadcast carrier packages a telecommunications and broadcasting service or uses a broadcasting service in conjunction with its telecommunications service, such activities could be examined pursuant to the Act and, in particular, pursuant to subsection 27(2).

94. The Commission intends to address the issue of advertising ISs on a community channel under the Broadcasting Act. It would be the Commission’s intention to issue a public statement in this regard in the near future.

This document is available in alternative format upon request.

Laura M. Talbot-Allan
Secretary General