ARCHIVED -  Telecom Order CRTC 98-742

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Telecom Order

Ottawa, 29 July 1998
Telecom Order CRTC 98-742
By letters dated 6 January, 5 May, 5 June, and 3 July 1997, Telehop Communications Inc. (Telehop) filed an application for exemption from contribution charges on single-hop Centrex circuits. Telehop stated that it has contracted Centrex service from Bell Canada (Bell) in Oak Ridges, Oshawa, Ajax, Brampton, Claremont, Bethany, Toronto, Oakville and Schomberg. Telehop provided two technical audit reports to support its application for exemption for single-hop, data and administrative circuits.
File No.: 8626-T30-01/97
1.By letters dated 8 and 21 July 1997, Bell accepted the auditors reports and control procedures and agreed with Telehop's request for exemption.
2.Bell noted that Telehop had raised concerns with respect to how its account had been handled by Bell account representatives.
3.Bell noted Telehop's allegation that there were inconsistencies whereby some services have been permitted to expand without contribution charges while other systems have been billed contribution charges. Bell responded that pursuant to Telecom Orders CRTC 94-1339 dated 16 November 1994 (Order 94-1339), 96-1124 dated 10 October 1996 (Order 96-1124) and 97-604 dated 7 May 1997, Telehop has been granted contribution exemptions respecting several other Centrex systems. Bell stated that in cases where an exemption has already been granted, the practice has been to allow these systems to expand without the requirement for seeking a further exemption from the Commission. Bell stated that in such cases, it does not apply contribution charges where Telehop has provided confirmation in writing to it confirming that the new circuits should be covered under one of the existing exemptions pursuant to the Orders noted above. Bell stated that, however, in cases where a new system or configuration is the subject of a new contribution exemption application, it will assess contribution charges until an exemption is received from the Commission. Bell stated that when an exemption is granted, it will adjust the customer's account to reflect the exemption effective date approved by the Commission.
4.Bell stated that with respect to the nine systems which are the subject of this application, it is assessing contribution on all systems pending the Commission's final determination of Telehop's application. Bell submitted that should the Commission grant an exemption with respect to the Oakville system and the other systems, such exemptions should be effective 7 January 1997 (sic: should read 6 January 1997), the date of Telehop's application. Bell also noted that, pursuant to Telecom Order CRTC 97-590 dated 1 May 1997 (Order 97-590), the contribution exemption regulations with respect to administrative and data services were modified. Bell stated that in light of this, any contribution exemption granted to Telehop for administrative or data use under this current application may no longer be valid after 1 January 1998.
5.By letter dated 14 August 1997, Telehop submitted that it had special supporting circumstances and that the exemptions should apply from the date of installation. Telehop stated that it considered the special circumstances to be the confusing, contradictory and inconsistent approach Bell has taken in processing its orders for these Centrex services, and the advice Bell gave regarding when contribution exemptions apply, and the process it should follow to obtain these exemptions.
6.Telehop stated that when it initially established Centrex services, Bell advised that for single-hop services and/or for Centrex services for administrative use, contribution did not apply and that it was not required to file anything with either Bell or the Commission. Telehop stated that it was subsequently told by Bell representatives that it would be necessary to advise them how it was using the services and it was requested to file affidavits.
7.Telehop stated that when "multihopping" was subsequently approved and available, it ordered circuits, advised Bell of its planned use and agreed that contribution should be charged. Telehop stated that these orders were processed and it was advised that no affidavit was required. Telehop stated that from that point forward it indicated during the ordering process how any new sites or new circuit groups would be used (i.e., single-hop, multi-hop, or administrative), and the orders were processed appropriately. Telehop stated that, subsequently and without any notice, Bell began to apply contribution to some of its new orders but not to others. Telehop stated that the approach taken was very inconsistent and confusing. Telehop stated that Bell advised it to submit affidavits and that Bell would carry out carrier verification if necessary.
8.Telehop stated that as a result of this direction on 17 July 1996 it began to submit affidavits requesting exemption from contribution and/or carrier verification as appropriate. Telehop stated that Bell reversed its position, refused this approach and as a consequence Telehop was subsequently ordered (by Order 96-1124) to do technical audits. Telehop stated that these technical audits were completed and submitted 5 December 1996.
9.Telehop stated that Bell advised Telehop that Bell considered that none of Telehop's sites had valid exemptions and requested that Telehop do technical audits for all of the remaining sites. Accordingly, Telehop notified the Commission on 6 January 1997 that it had begun to do technical audits that culminated in the submissions of 5 June and 3 July 1997. Telehop noted that Bell stated "that Telehop should be permitted to provide an affidavit affirming that the configurations of the remaining four systems are similar to those which were the subject of the audit". Telehop stated that this contradicts what Bell had earlier advised and directed Telehop to do. Telehop submitted that this demonstrates the confusing, inconsistent and contradictory approach that Bell has taken in this case.
10.Telehop requested that the Commission grant contribution exemptions on the nine services retroactive to the date of installation. Telehop also requested that the Commission direct Bell to clarify its position and clearly advise it, in writing, of the processes to be followed for future contribution exemptions.
11.By letter dated 9 October 1997, Bell noted that it is the responsibility of Telehop, not Bell, to be aware of the requirement for contribution exemptions and the process that should be followed to obtain such exemptions and that although its sales personnel attempt to advise customers with respect to such matters, Bell cannot be held ultimately responsible for managing the process on behalf of Telehop. Bell objected to Telehop's request that the Commission direct Bell to clarify its position.
12.By fax dated 3 December 1997, Telehop provided the current billing status for each of the nine sites plus sample invoices for Oakville, Bethany and Schomberg. Having received a copy of this document, Bell did not provide any comments.
13.By letter dated 1 January 1998, Telehop stated that the circuits identified as "administrative" are not directly connected to its network and the circuits identified as "data" are used solely to carry Internet traffic. Telehop understood that from its reading of Order 97-590 that these circuits would continue to be exempt from contribution.
14.By letter dated 13 February 1998, Bell noted that it does not control Telehop's configuration and hence cannot confirm that the facilities will only be used, as appropriate, for Internet data traffic or for administrative traffic which is not routed over Telehop's network. Accordingly, Bell submitted that a technical audit, accompanied by an engineer's affidavit, are required to verify the configuration and to confirm that appropriate control procedures are in place. Thus, Bell submitted that the configuration in question should be subject to a technical audit to ensure that it qualifies for a contribution exemption as of 1 January 1998.
15.By letter dated 23 March 1998, Telehop provided a technical audit report dealing with the 22 Centrex systems in Ontario which are used to carry single-hop, multiple-hop, Internet data and administrative traffic.
16.By letter dated 27 April 1998, Bell indicated its satisfaction with the auditor's report.
17.With respect to facilities used to carry Internet data traffic, Bell noted that the auditor has, in most instances, confirmed the use of such facilities to carry Internet traffic. However, Bell noted that the Centrex systems in Alliston and Schomberg each have a single-line which apparently is used by a customer of Telehop to forward Internet data traffic between sites. Bell stated that the auditor cannot verify the use and routing of the traffic on these lines. Bell submitted that, in the absence of verification from the auditor, it would appear to be appropriate for Telehop to provide an affidavit(s) from its customer(s) affirming that the facilities are used solely to carry Internet data traffic.
18.Bell stated that with respect to administrative traffic, the auditor has apparently confirmed that such traffic is not carried on an interexchange basis over Telehop's network. Bell also submitted that the control procedures appear to continue to be appropriate in this case.
19.In light of the above, Bell agreed that Telehop has generally satisfied the requirements for a contribution exemption. Bell agreed with the requested exemption subject to the filing of an affidavit(s) from the end-customer(s), affirming that certain facilities associated with Centrex systems in Alliston and Schomberg are used solely to carry Internet data traffic.
20.By letter dated 10 June 1998, Telehop provided an affidavit dated 5 June 1998 from the single end-customer as suggested by Bell.
21.Based on the evidence, the Commission is of the view that Telehop has provided technical audits, control procedure reports, and an end-user affidavit which satisfy the Commission's evidentiary requirements according to Applications for Contribution Exemptions, Telecom Decision CRTC 93-2, 1 April 1993. The Commission notes that Bell also found the evidence to be satisfactory. Accordingly, Telehop's application for single-hop, administrative, and Internet data circuits at nine sites (Oak Ridges, Oshawa, Ajax, Brampton, Claremont, Bethany, Toronto, Oakville and Schomberg) is approved.
22.Telehop requested that the effective date for an exemption for each of its nine systems be the date of installation. In Effective Date of Contribution Exemptions, Telecom Public Notice CRTC 95-26, 12 June 1995, the Commission addressed the matter of the effective date of contribution exemptions: "contribution exemptions will generally be granted effective the later of the date of the application or the date of installation, absent special circumstances".
23.The Commission is of the view that both companies appear to have made errors in this case: (1) Bell appears to have given conflicting advice to Telehop with respect to the evidentiary requirements to support its application; and (2) Telehop failed to meet its responsibility to determine what evidence is appropriate to satisfy the Commission's requirements.
24.The Commission notes that a similar situation arose in Telecom Order CRTC 97-1566 dated 27 October 1997 which disposed of an application for contribution exemption with respect to Istar Internet by fONOROLA Inc. (fONOROLA) in BC TEL territory. The Commission found that BC TEL's behaviour in this matter was sufficient to constitute special circumstances justifying the date of installation as the effective date.
25.Similarly, based on the record, the Commission is of the view that Bell's behaviour in the Telehop case is sufficient to constitute special circumstances.
26.The Commission notes that it has already granted approval to Telehop at the following four sites: Oak Ridges, Schomberg, Toronto and Oakville. The Commission is of the view that it would be appropriate to continue the exemption to these four sites (from the date of installation of the multiple-hop circuits) for the single-hop circuits such that no contribution would be payable. The Commission is also of the view that the effective date for the exemption for the administrative and data circuits at these sites should be the installation dates such that no contribution would be payable.
27.The Commission notes that the circuits in Ajax were previously used by 600977 Ontario Ltd. (operating as Talk is Cheap) and an exemption was approved in Order 94-1339. The circuits were subsequently transferred to Telehop. The Commission is also of the view that the effective date for the exemption for these circuits should be the transfer date from Talk is Cheap, such that no contribution would be payable. For any other circuits added to this system subsequent to the transfer of the original circuits, the effective date should be the date of installation such that no contribution is payable.
28.The Commission notes that the remaining four sites (Oshawa, Brampton, Claremont and Bethany) appear to be new installations. However, based on the evidence, Bell appears to be billing in a manner that satisfies Telehop except for data circuits at Bethany. The Commission is of the view that over time, Telehop appears to have been given confusing advice by Bell representatives, and that it would be appropriate to make the effective date the date of installation of the original circuits, such that no contribution would be payable on the single-hop, administrative, and Internet data circuits at these sites.
29.Telehop requested that the Commission direct Bell to clarify in writing the processes to be followed for future contribution exemptions. The Commission is of the view that the record of this proceeding has clarified in writing the processes to be followed. Accordingly, Telehop's request is denied.
30.Consistent with the Commission's precedents in other cases, the Commission is of the view that the exemption of Telehop's application should be subject to the possibility of future random audits.
Laura M. Talbot-Allan
Secretary General
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