ARCHIVED -  Telecom Decision CRTC 99-14

Telecom Decision

Ottawa, 28 September 1999

Telecom Decision CRTC 99-14

Teleglobe Canada Inc. - Forbearance for GlobeaccessTel and Related Matters

File No.: 8640-T2-01/98

Summary

Under section 34 of the Telecommunications Act (the Act), the Commission may forbear, or refrain, from applying all or part of sections 24, 25, 27, 29 and 31 of the Act to a telecommunications service or class of services provided by a Canadian carrier. The Commission may forbear where it finds as a question of fact that to refrain from applying these sections would be consistent with the Canadian telecommunications policy objectives set out in the Act. Further, the Act specifies that the Commission shall forbear where it finds that competition for the service or class of services in question is or will be subject to competition sufficient to protect the interests of users.

The Commission has decided that it will refrain completely and unconditionally from applying sections 25, 27 (except 27(3)) and 31 of the Act with respect to the provision of GlobeaccessTel by Teleglobe Canada Inc. (Teleglobe). GlobeaccessTel, which is Teleglobe's most significant generator of revenues, is a service that allows customers to connect with Teleglobe's international network so that they can provide an outgoing direct dial telephone service. The Commission will also refrain from exercising its powers under these sections of the Act for any comparable retail Canada-overseas international direct dial (IDD) services that Teleglobe may choose to offer.

The Commission will, however, retain its powers under section 24 of the Act to prescribe conditions relating to the confidentiality of customer information and to be able to impose future conditions on Teleglobe's provision of these services.

This decision means that, for GlobeaccessTel and any comparable Teleglobe retail Canada-overseas IDD service, the Commission will forbear from, among other things, regulating rates and authorizing limits on Teleglobe's liability.

Further, the Commission has decided that it is appropriate to forbear from applying section 29 of the Act, which requires prior approval of certain agreements between carriers, as it relates to all services offered by Teleglobe.

The decision also deals with matters related to the regulation of the price of Teleglobe's services, in light of the Commission's decision to forbear from applying certain sections of the Act to GlobeaccessTel.

This summary is for the convenience of the reader and is not part of the Decision.

Teleglobe's request for forbearance

The application

1.On 14 January 1999, Teleglobe Canada Inc. (Teleglobe) filed an application requesting that the Commission forbear from regulating its GlobeaccessTel service and that sections 24, 25, 27, 29 and 31 of the Telecommunications Act (the Act), in their entirety, no longer apply to GlobeaccessTel.

2.GlobeaccessTel is one of four services offered under Teleglobe's International Globeaccess Service Tariff CRTC 9015. As stated in that Tariff, the GlobeaccessTel option allows customers to interconnect with Teleglobe's international network for the purpose of providing an outgoing direct dial telephone service.

3.Teleglobe stated that the arguments in favour of forbearance for GlobeaccessTel would apply with even greater force to retail service offerings in the overseas international direct dial (IDD) market. Accordingly, the Commission's forbearance declaration should include all overseas IDD traffic, whether wholesale or retail. Finally, Teleglobe's request for forbearance with respect to section 29 of the Act was not limited to agreements in respect of GlobeaccessTel. Rather, Teleglobe submitted that "it would be appropriate for the Commission to forbear completely and unconditionally from the exercise of its section 29 powers in respect of Teleglobe."

4.BC TEL and TELUS Communications Inc. (BCT(TELUS) and the Competition Bureau filed comments on 19 March 1999. Both submissions supported Teleglobe's request for forbearance. Teleglobe filed a reply dated 24 March 1999.

Conclusions

General

5.In Regulatory Regime for the Provision of International Telecommunications Services, Telecom Decision CRTC 98-17, 1 October 1998 (Decision 98-17), the Commission denied a request by Teleglobe for complete and unconditional forbearance pursuant to section 34 of the Act with respect to all of its services. The Commission considered that Teleglobe had not provided the kind of evidence or arguments that the Commission's usual forbearance analysis, established in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), would require in support of a finding that competition is sufficient to warrant forbearance. In particular, it had not provided sufficient information for the Commission to properly identify and assess the relevant product markets.

6.The analytical framework generally applied by the Commission in assessing requests for forbearance requires a definition of the relevant market, as well as an assessment of market share, supply conditions, demand conditions and the extent of rivalrous behaviour in the marketplace. In its application of 14 January 1999, Teleglobe provided a description of the current environment for international telecommunications in general, as well as a market analysis of GlobeaccessTel. The Commission is satisfied that Teleglobe has addressed the analytical framework established in Decision 94-19.

7.The Commission agrees with the Competition Bureau that the relevant market for an assessment of Teleglobe's request for forbearance for GlobeaccessTel is wholesale direct dial overseas telephone services accessible by customers located in Canada. As indicated by Teleglobe in its application, with the removal of restrictions on the routing of international traffic, Canadian GlobeaccessTel customers no longer face regulatory barriers with respect to access to similar services in other countries, most notably, in the United States.

8.In Decision 98-17, the Commission stated that the key issue to address with regard to forbearance for Teleglobe is the question of the availability, now or within the time frame contemplated by the Decision 94-19 analysis (i.e., one or two years), of alternatives to Teleglobe's services.

9.In its application, Teleglobe provided descriptions of the activities of service providers that, it submitted, provided competition to GlobeaccessTel. In addition, it provided documentation (e.g., promotional materials) in support of those descriptions. In all, more than 50 competitors or potential competitors are noted. Teleglobe also described Internet marketplaces through which service providers can obtain capacity and transmission services to virtually all the destinations served by GlobeaccessTel. While the service providers described vary in size and in the scope of their operations, the Commission is persuaded, based on the record of the proceeding, that there are switched services available from other service providers that constitute sufficient alternatives to GlobeaccessTel. Similarly, the Commission is persuaded that supply and demand conditions are such that Canadian retail service providers are in a position to avail themselves of those alternative services.

10.Based on the above, the Commission finds that there is competition to GlobeaccessTel sufficient to protect the interests of users of the service. Further, to forbear with respect to GlobeaccessTel is not likely to impair the establishment or continuance of a competitive market for the service. The Commission therefore concludes that forbearance is warranted. In particular, the Commission considers it appropriate to refrain completely and unconditionally from exercising powers and performing duties under sections 25, 27 (other than section 27(3) in part) and 31 of the Act in respect of GlobeaccessTel.

11.The Commission is retaining its powers under section 24 of the Act to prescribe conditions relating to the confidentiality of customer information and to maintain the ability to impose future conditions.

12.The Commission also considers it appropriate to refrain from exercising powers and performing duties to the extent described above with respect to comparable Canada-overseas IDD services that Teleglobe may wish to offer at the retail level (i.e., to end-users). Since the Commission is satisfied that the market for wholesale direct dial overseas telephone service is competitive, i.e., that there are alternative sources of the underlying service available, there is no reason for the Commission to continue to fully exercise powers and perform duties with respect to Teleglobe's provision of comparable services at the retail level.

13.The Commission also refrains completely and unconditionally from the exercise of powers and the performance of duties under section 29 of the Act with respect to agreements between Teleglobe and other telecommunications common carriers.

14.The Commission's findings with regard to Teleglobe's request for forbearance are discussed in greater detail below.

Section 24 - Conditions on the offering and provision of service

15.Teleglobe submitted that the Commission has generally elected not to forbear under section 24 for one or more of the following reasons:

(1) where the Commission has determined that there are market segments manifesting evidence of less intense rivalrous competition;

(2) in order to impose conditions prohibiting the bypass of Canadian facilities;

(3) to protect customer confidential information; and

(4) to be in a position to impose certain conditions, as circumstances warrant, in the future.

16.Teleglobe argued that none of the foregoing concerns applies in respect of its offering and provision of service in the relevant market.

17.With regard to the first situation noted above, the Commission agrees with Teleglobe that the market is sufficiently competitive that there is no need to impose conditions such as those imposed in Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997 (for example, requirements to make basic toll rate schedules available to the public and to give subscribers written notice of rate increases).

18.With regard to conditions related to the bypass of Canadian facilities, the Commission notes that restrictions on the routing of traffic through the United States were eliminated in Decision 98-17, along with the associated section 24 condition imposed in previous forbearance rulings.

19.However, the Commission will continue to exercise powers and perform duties under section 24 in order to impose conditions regarding the confidentiality of customer information.

20.In this regard, the Commission notes that Decision 98-17 directed Teleglobe to file a proposed agreement relating to a Carrier Services Group (CSG). The Commission stated in that Decision that it considered the establishment of a CSG a basic protection for competitively sensitive information that other service providers may have to provide to Teleglobe in order to obtain services required as inputs for their businesses.

21.Teleglobe subsequently filed a proposed CSG agreement and related tariff revisions, which were approved with modifications in Telecom Order CRTC 99-906, 17 September 1999. The agreement contains basic provisions related both to Teleglobe's disclosure of information to outside parties and to its internal treatment of information provided by its customers related to interconnection and the resale and sharing of its services and facilities.

22.The Commission notes that, in the proceeding leading to Decision 98-17 and again in this proceeding, Teleglobe has indicated that it may wish to enter the retail market. If it does, it will be competing directly against service providers who are using its wholesale services. In addition, with the end of Teleglobe's monopoly, service providers who are also Teleglobe customers are beginning to compete in Teleglobe's traditional market.

23.In light of the above, the Commission requires as a condition of Teleglobe's offering and provision of GlobeaccessTel, that the CSG agreement and related tariff provisions continue to apply, just as they do to Teleglobe's provision of other services to customers who are themselves service providers.

24.The Commission notes that Teleglobe's arguments regarding the sophistication of its GlobeaccessTel customers would not necessarily apply to retail IDD customers that Teleglobe may acquire. Therefore, the Commission requires that the conditions set out in Article 15 of Teleglobe's Terms of Service regarding the confidentiality of customer records continue to apply.

25.As to the need to retain section 24 with regard to the future imposition of conditions, Teleglobe submitted that any remaining concerns that the Commission has cited in the past as a reason for retaining section 24 powers have been rendered irrelevant, given the Commission's recently implemented licensing regime. It argued that, should the need arise to impose future conditions on Teleglobe, the Commission could do so via conditions of licence.

26.While the Commission could use the licensing power to impose conditions on Teleglobe's offering of both GlobeaccessTel and retail IDD services, the Commission notes that an effort was made in Decision 98-17 to keep the licensing regime as simple and straightforward as possible. To this end, the Commission imposed certain basic conditions on all service providers, with some additional conditions applicable only to those service providers responsible for actually transporting traffic into or out of Canada. While the Commission did state in Decision 98-17 that it might impose individual conditions on particular service providers, it envisioned such conditions as remedies for a contravention of the basic licence condition prohibiting conduct that unduly lessens, or is likely to unduly lessen, competition in Canada. The Commission therefore considers that licensing conditions are not intended, and should not be used, as a complete substitute for the Commission's power to impose conditions under section 24 of the Act.

27.In addition, Teleglobe may wish to offer domestic services at some point in the future, and the licensing power does not apply to such services. Thus, the Commission has no alternative but to rely on section 24 to impose conditions on Teleglobe's provision of domestic services.

28.The Commission therefore retains the power under section 24 of the Act to impose conditions as future circumstances may warrant.

Section 25 Approval of tarrifs

29.The Commission considers that competition for GlobeaccessTel is sufficient for the Commission to forbear completely and unconditionally with respect to section 25 as it would apply to GlobeaccessTel and to Teleglobe's provision of comparable retail Canada-overseas IDD services, should it choose to enter this market.

Section 27 - Just and reasonable rates, no unjust discrimination or unreasonable preference

30.Generally, when the Commission has found that there is competition sufficient to permit forbearance under section 25 of the Act, it has also forborne under section 27(1), which specifies that rates charged by a Canadian carrier must be just and reasonable. Teleglobe submitted that the competitive market for wholesale IDD services is sufficient to ensure that rates will be just and reasonable.

31.The Commission considers that competition to Teleglobe's GlobeaccessTel service is sufficient that the Commission need not retain powers under section 27(1) of the Act. The Commission therefore refrains completely and unconditionally from the exercise of powers and the performance of duties under section 27(1) of the Act as it pertains to GlobeaccessTel and as it would pertain to comparable Canada-overseas IDD services Teleglobe might wish to offer on a retail level.

32.Teleglobe noted that the Commission has generally forborne partially under section 27(2), retaining jurisdiction only with respect to access to networks and resale and sharing. Teleglobe considered that, since it does not provide local exchange services, the rationale underlying the retention of section 27(2) powers does not apply in its case. Teleglobe submitted that no concerns regarding the effects of preferential access to its facilities arise, because of the many network configurations available to its customers to route their overseas traffic to and from the Canadian public switched telephone network (PSTN). Teleglobe also submitted that, as an international licensee, it is subject to conditions of licence precluding it from engaging in conduct that has, or is likely to have, the effect of preventing or lessening competition unduly in Canada. Thus, the licensing regime effectively addresses any potential anti-competitive conduct by Teleglobe that would otherwise be prevented under section 27(2).

33.Teleglobe also submitted that it would be appropriate for the Commission to forbear under related parts of section 27 (e.g., section 27(4), which states that, once it is shown that discrimination has occurred, the onus is on the carrier in question to show that it is not unjust).

34.The Commission notes that the instances in which it has retained powers under section 27(2) are not limited to services offered by local exchange carriers.

35.The condition of licence referred to by Teleglobe reads as follows:

The licensee shall not engage in anti-competitive conduct in relation to the provision of an international telecommunications service or services. For the purposes of this condition, anti-competitive conduct includes entering into or continuing to participate in an agreement or an arrangement that has or is likely to have the effect of preventing or lessening competition unduly in Canada, or otherwise providing telecommunications services in a manner that has or is likely to have the effect of preventing or lessening competition unduly in Canada.

36.On balance, the Commission considers that the above condition of licence would likely prove adequate to deal with any instance of anti-competitive behaviour by Teleglobe in respect of its provision of GlobeaccessTel. In addition, the licensing regime clearly contemplates the imposition of carrier-specific licence conditions regarding competitive abuses. Therefore, it would not be inconsistent with the licensing regime to rely on the Commission's powers to amend Teleglobe's conditions of licence, rather than on section 27(2), in the context of possible competitive abuses.

37.The Commission therefore refrains completely and unconditionally from the exercise of powers and the performance of duties under section 27(2) of the Act as it relates to GlobeaccessTel and as it would pertain to comparable Canada-overseas services Teleglobe might wish to offer on a retail level.

38.The Commission also refrains from exercising powers and performing duties under related sections 27 (3), (4), (5) and (6) to an extent consistent with the above.

Section 29 - Prior approval of agreements

39.Teleglobe noted that, prior to recent amendments to the Act and the Teleglobe Canada Reorganization and Divestiture Act, the Commission had no jurisdiction to approve Teleglobe's international agreements. Teleglobe submitted that, although these agreements were executed with no regulatory supervision, its market share eroded by 40% prior to that date. Teleglobe argued that there is no need for prior approval of its agreements when market activity has shown that no protection is necessary.

40.Teleglobe also submitted that, given the pace of the international market, it is unworkable to require Teleglobe to slow down its operations to allow for prior approval of all its agreements. It noted that it is obliged, by condition of licence, to file lists of agreements that it enters into for the purposes of interconnection, exchange of traffic or termination of traffic in respect of Canadian originating or terminating basic international traffic. Teleglobe stated that, under this condition, it is obliged to inform the Commission of the foreign jurisdictions in question, the parties and the nature of the agreement. Thus, the Commission will have all the information it needs to protect the interests of users.

41.The Commission notes that Teleglobe is not obliged by condition of licence to provide the Commission with information as to its agreements with Canadian carriers. Further, Teleglobe's domestic agreements have been subject to Commission approval ever since the Commission assumed jurisdiction over the company upon its privatization.

42.The Commission considers that there is a relationship between Teleglobe's domestic agreements and the Globeaccess tariff. Prior to Restructuring of Overseas Message Toll Service and a New Interconnecting and Operating Agreement between Teleglobe and Stentor, Telecom Decision CRTC 93-15, 27 September 1993 (Decision 93-15), terms related to Teleglobe's carriage of outbound overseas traffic were set out in interconnection agreements, and not in tariffs. Further, the Globeaccess tariffs are referenced in Teleglobe's interconnection agreements with Canadian carriers. In the Commission's view, in order to give effect to a determination not to supervise the rates Teleglobe charges for GlobeaccessTel, it is also appropriate to forbear under section 29 with respect to its domestic agreements as those agreements relate to that service.

43.In addition, the Commission does not consider it necessary in order to protect the interests of users to retain powers with regard to Teleglobe's domestic agreements as they might pertain to other services.

44.The Commission was granted authority over Teleglobe's international agreements when Teleglobe's monopoly was ended. Under the statutory amendments in question, agreements entered into by Teleglobe prior to that date were deemed to have been approved by the Commission.

45.In the proceeding leading to Decision 98-17, parties expressed concern that Teleglobe may have entered into agreements with anti-competitive effects, for example, agreements with exclusivity provisions. In Decision 98-17, the Commission directed Teleglobe to file its existing international agreements for the Commission's review. The Commission has reviewed the documents filed by Teleglobe and has found no exclusivity or similar provisions. In November 1998, Teleglobe filed some 22 international agreements or amendments to such agreements for the Commission's approval. Similarly, the Commission found no anti-competitive provisions, and approved the agreements and amendments in question.

46.Further, based on its examination of the documents in question, the Commission is of the view that requiring prior approval of Teleglobe's agreements and arrangements would in many instances merely delay the effective date of accounting rate reductions.

47.Accordingly, the Commission does not consider it necessary or desirable to continue to require that Teleglobe's international agreements be approved prior to taking effect.

48.In light of the above, the Commission refrains completely and unconditionally from the exercise of powers and the performance of duties under section 29 of the Act with respect to agreements or arrangements between Teleglobe and other telecommunications common carriers, including foreign carriers, non-dominant Canadian carriers and the former Stentor companies.

49.The Commission notes that, while all licensees are required to file certain information as to international agreements, there is no requirement to provide specific information as to the content of those agreements. However, should the Commission require information from Teleglobe in any instance as to the particulars of its arrangements with either foreign or domestic carriers, it has the power to require that Teleglobe provide that information or file the agreements themselves for the Commission's information.

Section 31 - Limitation of liability

50.The Commission is generally of the view that retention of the power to approve limitations of liability is inconsistent with a competitive market in which a substantial degree of forbearance is warranted. The Commission therefore refrains completely and unconditionally from the exercise of powers and the performance of duties under section 31 of the Act as it pertains to limitations of liability on Teleglobe's provision of GlobeaccessTel and of comparable retail Canada-overseas IDD services.

Declaration

51.Pursuant to subsection 34(4) of the Act, the Commission declares that: (1) sections 24, 25, 27 and 31 of the Act do not apply to Teleglobe's provision of GlobeaccessTel or to its provision of comparable retail Canada-overseas IDD services to the extent that these sections are inconsistent with the Commission's determinations in this Decision; and (2) section 29 does not apply to agreements or arrangements between Teleglobe and other telecommunications common carriers.

52.In light of the above, Teleglobe is directed to issue forthwith revised tariff pages, effective the date of this Decision, consistent with Annex 1 of its application of 14 January 1999.

Form of regulation - Impact on the current price reduction regime

53.The regulatory regime currently applicable to Teleglobe was established in Teleglobe - Review of the Regulatory Framework, Telecom Decision CRTC 96-2, 2 February 1996 (Decision 96-2). In Decision 96-2, the Commission stated that this regulatory regime would be in effect from 1 April 1996 to 31 December 1999, barring any exceptional changes to the company's operating environment. Under the regime, Teleglobe was required to reduce rates for a basket of services referred to as the Telephone Services basket by specified annual percentages, less the most recent twelve-month percentage change in the Consumer Price Index. In order to ensure compliance with the annual price reduction commitment, Teleglobe was required to calculate and file with the Commission the Average Revenue Per Minute (ARPM) for this single basket of Telephone Services.

54.In Decision 96-2, the Commission also established price ceilings for each of Teleglobe's regulated Non-Telephone Services (except for International Teleprinter and International Telegraph) based on approved rates in effect 1 March 1996. Thus, Teleglobe cannot, on average, increase the rates it charges for each of these services.

55.GlobeaccessTel service, which is Teleglobe's most significant generator of revenues, is included in the Telephone Services basket under the regime established in Decision 96-2. Teleglobe submitted that, without GlobeaccessTel, the ARPM method applied to the Telephone Services basket would be rendered unworkable, since there would be too few services with too few customers remaining in the basket. Teleglobe stated that the remaining services in the Telephone Services basket (i.e., Canada Direct and Operator services, Globe 800, GlobeTEL, and Globeaccess VPN) are more akin, with respect to volumes and numbers of customers, to its Non-Telephone services. Teleglobe therefore proposed that, for these remaining services, the ARPM method of regulation be replaced with the price ceiling regime that currently applies to the majority of its Non-Telephone Services.

56.BCT(TELUS objected to Teleglobe's proposal for the regulation of the services remaining in its Telephone Services basket. They argued that Teleglobe did not raise the issue of abolishing the ARPM method of regulation in a manner that would allow parties to address the issue in detail. BCT(TELUS stated that there was no suggestion in Teleglobe's 17 December 1998 letter, in which Teleglobe notified the Commission of its intention to file its application, or in the Executive Summary, Introduction or Relief Sought portions of Teleglobe's application, that Teleglobe was seeking what amounts to a review and variance of Decision 96-2 and the ARPM method of regulation.

57.BCT(TELUS also argued that the removal of one service, even the largest service in the basket, does not render the ARPM method unworkable. BCT(TELUS proposed that the request to abolish the ARPM method be denied and be reconsidered when suitable evidence is presented.

58.The Commission does not accept BCT(TELUS' contention that the issue of abolishing the ARPM method of regulation was not raised in a manner that would allow parties to address the issue in detail. Teleglobe's proposal was clearly set out in its application, which was served on all parties to the proceeding leading to Decision 98-17, as well as on GlobeaccessTel customers who were not party to that proceeding.

59.The Commission also rejects BCT(TELUS' assertion that Teleglobe's application constitutes a request for a review and variance of Decision 96-2. The Commission notes that, as at 31 December 1998, Teleglobe had already exceeded the price reduction commitments for the years 1996 through 1999 established in Decision 96-2.

60.Given the substantial degree of forbearance granted for GlobeaccessTel in this Decision, and in particular the Commission's determination to refrain from exercising powers and performing duties under section 25 of the Act with respect to this service, the Commission considers it appropriate to remove GlobeaccessTel from the Telephone Services basket.

61.Taking into account the fact that all of the price reduction commitments established in Decision 96-2 have already been met, the Commission considers reasonable the company's proposal that rates for the services remaining in the Telephone Services basket be capped. The Commission therefore caps the individual services remaining in the Telephone Services basket at the 31 December 1998 actual rates.

Secretary General

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