ARCHIVED -  Telecom Order CRTC 98-1106

Telecom Order

Ottawa, 6 November 1998

Telecom Order CRTC 98-1106

The Canadian Cable Television Association (CCTA) filed an application on 8 July 1998, pursuant to section 62 of the Telecommunications Act (the Act), requesting that the Commission review and vary Telecom Order CRTC 98-669, 7 July 1998 (Order 98-669), on the grounds that there is substantial doubt as to the correctness of the Order.

File No.: 8662-C13-03/98

1.Order 98-669 approved on a final basis BC TEL Tariff Notice (TN) 3765, amended by TNs 3765A, 3765B and 3765C and TN 3770, amended by TN 3770A. These TNs introduced two bundled service packages: BC TEL Solutions for Small Business and BC TEL Residential Package, referred to by CCTA as the "Bundled Services".

2.BC TEL Solutions for Small Business under TNs 3765/A/B/C is a limited time offer which provides business individual line customers with the opportunity to subscribe to a package offering consisting of:

(a) an individual business line;

(b) one hour of Intra B.C. customer (non-calling card) message toll; and

(c) a choice of up to three SmartTouch Services and/or Integrated Voice Messaging Services.

3.The BC TEL Residential Package filed under TNs 3770/A is a limited time offer which provides single line residential customers with the opportunity to subscribe to a package offering consisting of:

(a) an individual residential access line;

(b) an initial 60 minutes of customer-dialed station-to-station message toll calling destinations within Canada; and

(c) a choice of up to three specified SmartTouch Services and/or Integrated Voice Messaging.

4.CCTA requested that the Commission review and vary Order 98-669 so as to withdraw approval of the Bundled Services and to require BC TEL to immediately cease marketing and providing the Bundled Services.

5.CCTA noted that the Commission recently restated its test for whether to review and vary its past determinations, pursuant to section 62 of the Act. In Guidelines for Review and Vary Applications, Telecom Public Notice CRTC 98-6, 20 March 1998 (PN 98-6), the Commission stated that applicants must demonstrate that there is substantial doubt as to the correctness of the original decision and that substantial doubt as to correctness will be the primary test. The Commission also provided the following non-exhaustive list of concerns which may give rise to substantial doubt:

(a) an error in law or in fact;

(b) a fundamental change in circumstances or facts since the decision;

(c) a failure to consider a basic principle which had been raised in the original proceeding; or

(d) a new principle which has arisen as a result of the decision.

6.CCTA noted that the bundling rules and safeguards established in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), and Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8), require that:

(1) the bundled service must cover its cost, where the cost study for the bundled service includes:

(a) the bottleneck component(s) "costed" at the tariffed rate(s) (including, as applicable, start-up cost recovery and contribution charges); and

(b) the Phase II causal cost for component(s) not covered in (a);

(2) competitors are able to offer their own bundled service through the use of stand-alone tariffed bottleneck components in combination with their own competitive elements; and

(3) resale of the bundled service is permitted.

7.CCTA submitted that there is substantial doubt as to the correctness of Order 98-669 as a result of the Commission's alleged failure to apply the bundling rules established in previous decisions.

8.CCTA argued that the second of the conditions contained in Decision 94-19 is not satisfied because competitors are unable to offer their own similar Bundled Services in BC TEL's territory. In particular, CCTA argued that competitors cannot provide bundles of services which include primary local exchange services for three reasons:

(a) local number portability (LNP) has not yet been implemented in BC TEL's territory;

(b) numerous CRTC Interconnection Steering Committee (CISC) issues remain unresolved, thereby preventing finalization of necessary telephone company tariffs and proper implementation of local competition as envisioned by Decision 97-8; and

(c) it would be uneconomic to attempt to use unbundled local loops or to resell BC TEL's local exchange service to offer a competitive bundled service.

9.CCTA argued that for a competitor's Bundled Services to be viable, prospective customers must be able to retain their telephone numbers when they switch to a competitor's service. Thus, LNP must be available under both a facilities-based entry scenario as well as entry on the basis of using leased facilities.

10.CCTA argued that in order for a competitor to offer primary local exchange services using its own facilities, the following CISC interconnection issues must be resolved:

(a) principles for the selection of points of interconnections (POI);

(b) principles for the interconnection of signalling networks and the co-location of POIs and signalling points of interconnection;

(c) inside wiring: designation of a demarcation point and rules for access to facilities owned and controlled by Canadian carriers;

(d) network-to-network technical interfaces and network architecture data to be exchanged by interconnecting local exchange carriers; and

(e) network operations guidelines.

11.CCTA submitted that until these issues are resolved, competitors will not be able to compete on a level playing field with BC TEL with regard to the bundling of local exchange services with other services.

12.CCTA also noted that the Commission in Telecom Order CRTC 97-1764, dated 27 November 1997 (Order 97-1764), denied approval of a similar bundled offering by BC TEL and stated that:

"The Commission notes that arrangements have not yet been implemented to permit facilities-based local competition, and is of the view that the bundling of primary exchange service and toll service would provide the telephone companies with an undue advantage over emerging local service providers, as well as toll competitors, given that the telephone companies have established facilities in both the local and long distance markets."

13.CCTA submitted that because arrangements to permit facilities-based competition have not been fully implemented, the Commission erred when it allowed bundling of local exchange services with other services in Order 98-669.

14.CCTA also noted that in Joint Marketing and Bundling, Telecom Decision CRTC 98-4, 24 March 1998 (Decision 98-4), the Commission concluded that competitive criteria or thresholds need not be met prior to permitting bundling. However, CCTA submitted that the Commission erred when it equated competitive thresholds with the prerequisite that the conditions for local competition be in place. According to CCTA, "competitive thresholds" stipulate that certain market share or comparable measures must be satisfied as a precondition of bundling, whereas a "prerequisite" is an initial condition, not an assessment of the evolution of competition.

15.Comments on CCTA's application were received from: BC TEL; Call-Net Communications Inc. (Call-Net); Microcell Telecommunications Inc., filed on behalf of it itself and ACC TelEnterprises Ltd., AT&T Canada Long Distance Services Company, Clearnet Communications Inc. and Optel Communications Corp. (Microcell et al.); Rogers Cantel Inc. (Cantel) and Stentor Resource Centre Inc. (Stentor).

16.Call-Net, Microcell et al. and Cantel supported the application.

17.BC TEL and Stentor submitted that CCTA had not demonstrated that there are any grounds for a review and variance of Order 98-669, based on the test described by the Commission in PN 98-6. They submitted that CCTA's application did not present any new information or any arguments that were not considered by the Commission or were not specifically addressed in the proceeding that culminated in Order 98-669. Moreover, BC TEL and Stentor submitted that the issues raised in CCTA's application are the same issues, based on the same erroneous arguments, that were made in an application by Microcell, on behalf of itself and others, dated 15 May 1998, to review and vary Decision 98-4.

18.Stentor submitted that it is clear from Order 98-669 that the Commission was aware of the status of the implementation of local competition at the time it made its determinations.

19.BC TEL and Stentor submitted that the second rule for bundling contained in Decision 94-19 has been met, because BC TEL's basic local service and SmartTouch services are both available under tariffed rates on a stand-alone basis. According to Stentor the rates, terms and conditions for these services have been determined by the Commission to be just and reasonable.

20.Stentor noted that the availability of basic local service and optional local services on a stand-alone basis permits competitors, such as CCTA member companies, to utilize these underlying service elements to create their own services and service bundles. Stentor argued that whether or not it is economic for a particular competitor to create Bundled Services identical to BC TEL's depends upon that competitor's own costs, practices and operations, and that such considerations are not relevant to a determination with respect to BC TEL's tariff.

21.BC TEL submitted that the distinctions CCTA attempted to draw between a "prerequisite" and a competitive criteria or threshold are contrived attempts to re-argue issues previously raised and considered by the Commission in the proceeding leading up to Decision 98-4 and in the review process that attended TNs 3765/A/B/C and 3770/A. Stentor noted that the Commission has repeatedly permitted the bundling of utility and competitive services, and that none of the rules or safeguards require competition as a prerequisite for bundling.

CONCLUSIONS

22.The Commission notes that the issues raised in CCTA's application are substantially the same as the issues raised in the application by Microcell et al. to review and vary Decision 98-4. The Commission disposed of that application separately in Application to Review and Vary Telecom Decision CRTC 98-4: Joint Marketing and Bundling, Telecom Decision CRTC 98-20 (Decision 98-20) released today. For the reasons set out below and those contained in Decision 98-20, the Commission considers that CCTA has not demonstrated that there is substantial doubt as to the correctness of Order 98-669.

23.Regarding CCTA's position that competitors are unable to offer their own similar Bundled Services, the Commission notes that the availability of BC TEL's basic local exchange service and optional local services on a stand-alone basis permits competitors, such as CCTA member companies, to utilize these underlying service elements to create their own service bundles.

24.Regarding CCTA's argument that a number of barriers to entry to local competition have yet to be resolved, the Commission notes that the bundling rules and safeguards established in Decisions 94-19 and 97-8 do not require the removal of barriers to local entry as a precondition to the bundling of primary local exchange and other services.

25.Regarding CCTA's submission with respect to Order 97-1764, the Commission notes that Order 97-1764 did not establish any principle on bundling. The general principles concerning bundling were established in Decisions 94-19 and 97-8. As noted above, these principles do not require that local competition, or the arrangements to allow for such competition, be in place as a pre-condition for bundling.

26.The Commission notes that not only do Decisions 94-19 and 97-8 establish the general principles and competitive safeguards on bundling, but more recent Commission rulings, issued after Order 97-1764, have reaffirmed that bundling is permitted. For example, in Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997, the Commission stated that bundling of forborne toll and toll-free services with local exchange and other tariffed services is appropriate, subject to the bundling rules established in Decisions 94-19 and 97-8.

27.The Commission notes in passing that many of what CCTA characterizes as barriers to entry into the local telephony market, which it alleges still remain, have in fact been resolved. The CISC process is functioning as intended. Interim competitive local exchange carrier interconnection agreements have been signed and approved; and the portable contribution regime has been implemented. The Commission also notes that many important issues regarding the principles for interconnection have been resolved within CISC. While some issues concerning inside wiring, network-to-network technical interfaces and network operations guidelines are not entirely resolved, these are not considered to be significant deterrents to entry. In addition, LNP was available in Calgary and Vancouver on 31 July 1998 and in Toronto and Montréal on 31 August 1998. The roll-out of LNP for other exchanges is expected to progress as originally scheduled in the summer of 1997.

28.In light of the above, the Commission concludes that CCTA has not demonstrated that there is a substantial doubt as to the correctness of Order 98-669 and, accordingly, denies the application.

Secretary General

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