ARCHIVED - Telecom Order CRTC 99-1107

Telecom Order CRTC 99-1107

Ottawa, 25 November 1999

Connecting to a telephone company via a co-located third party

File No.: 8622-A4-12/98

Summary

The Commission has concluded that carriers with facilities co-located in a telephone company's central office may offer access to other parties.

Previous decisions have created policy to make access to the central office competitive. Some competitive carriers have installed their own equipment inside the central office, known as co-location. The Commission has long encouraged co-location to enhance competition between new and existing service providers.

This order allows co-located third-party competitors to provide the access for other carriers, resellers or end-users seeking connection to the telephone companies' facilities. The Commission issued decisions two years ago to ensure that the competitors' primary purpose in the central office is to connect with the telephone companies.

Because the competitors are allowed to cross-connect only a minority of their traffic with one another, they won't be able to create their own large network hubs inside the central office. To confirm the majority of the third party traffic flows to the telephone company, this order clarifies how the primary purpose test is applied to those carriers.

1. AT&T Canada Long Distance Services now AT&T Canada Corp. (AT&T Canada) seeks resolution of a competitive dispute regarding the terms and conditions applicable when carriers connect to the services of the major incumbent telephone companies via a third-party's facilities co-located in the telephone companies' central offices.

2. The issues raised in this competitive dispute were discussed among the parties at the Co-location Group (CLG), a dispute resolution industry forum established by the Commission in consultation with the CRTC Interconnection Steering Committee. No consensus was reached to resolve these issues in the CLG discussions. AT&T Canada's application under Part VII of the CRTC Telecommunications Rules of Procedure was subsequently received on 27 July 1998.

3. In its application, AT&T Canada also raised issues with regard to tariff applications filed by the telephone companies related to central office link terms, conditions and rates to be used in conjunction with co-location. The Commission indicated that the central office link issues will be addressed at the time that the related tariff applications are considered.

Issue 1: Should a carrier be able to use the facilities provided by a third-party co-located carrier to connect with the telephone companies' facilities at a central office (CO)?

4. AT&T Canada noted the Commission's determinations in Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), which identified the provision of co-location as being necessary to reduce the barriers to entry for competitors. The Commission stated, "Co-location may foster increased entry by creating an additional source of supply of local channels to end-users and to resellers."

5. AT&T Canada also noted that in Co-location, Telecom Decision CRTC 97-15, 16 June 1997 (Decision 97-15), the Commission stated, "Canadian carriers who have co-location access at a CO will be able to resell their transmission capacity and, in so doing, will create a competitive market for transmission capacity for connection at the CO."

6. AT&T Canada submitted that these decisions indicate a well-established objective of the Commission that co-located carriers should be able to provide an alternative to telephone companies' transmission facilities for other carriers who need to connect with telephone companies' services at a CO.

7. Shaw FibreLink Ltd. (Shaw), Clearnet Communications Inc. (Clearnet) and Cable Atlantic filed submissions in support of AT&T Canada's position. Shaw and Clearnet made reference to a Commission letter of 24 October 1997 which stated: "… the Commission notes that its determinations in Decision 97-15 do not prevent the exchange of switched traffic between a SOC (Stentor Operating Company) and another Canadian carrier through a third party, such as Shaw."

8. Clearnet argued that, when a third-party co-located carrier is used, the co-located carrier is only providing the underlying facility for interconnection. The contracting carrier is responsible for the traffic and is only using the most efficient means to deliver the traffic to the CO. Clearnet noted that providing efficient alternatives for access to telephone companies services at the CO was a primary objective of co-location.

9. Stentor Resource Centre Inc., on behalf of the telephone companies, filed a submission objecting to the application. The telephone companies contended that AT&T Canada wants to connect to the telephone companies' services at the CO without either co-locating facilities itself or leasing telephone companies' access facilities. Where AT&T Canada uses a third party's co-located facilities, the telephone companies argued that the third party carrier is, in effect, carrying the traffic to the CO then cross-connecting the traffic to AT&T Canada in the CO, even though AT&T Canada may not have co-located facilities.

10. The telephone companies indicated that an arrangement whereby a third-party co-located carrier provides a competitive access facility to the CO for use by a contracting carrier is feasible from an operations point of view. However, the telephone companies argued that traffic using such an arrangement should be counted as traffic cross-connected between co-located carriers, i.e. between the third-party co-located carrier and the contracting carrier, for the co-location primary purpose test. The primary purpose test issue is discussed below.

11. The telephone companies noted that billing procedures would be more complex in an arrangement where a third-party carrier and a contracting carrier are customers of record for different components of the access, link and usage of services.

12. The Commission is of the view that Decision 94-19, Decision 97-15 and the 24 October 1997 letter referenced by AT&T Canada and other parties have established that a third-party carrier is permitted to use its co-located facilities to provide competitive options to other carriers, resellers or end-users for connection to telephone companies' facilities at a CO.

13. The Commission re-affirms that a co-located carrier can provide the underlying transmission capacity for other carriers, resellers or end-users seeking access to telephone companies facilities or services at a CO.

Issue 2: When a third-party co-located carrier provides facilities for access to a CO, should the transmission capacity be seen as capacity connected to the telephone companies or cross-connected to the contracting party?

14. The Commission, in Decision 97-15 and Telecom Order CRTC 97-1926 dated 23 December 1997, addressed the concern that co-location arrangements could be primarily used to create a network hub for competitive carriers. The Commission established the primary purpose test such that the telephone companies may require the co-located carrier to demonstrate that the capacity dedicated to connection with the telephone companies' facilities is greater than that dedicated to interconnecting carrier to interconnecting carrier (IC to IC) cross-connection.

15. AT&T Canada argued that when a third-party co-located carrier provides the transmission facility for the connection of traffic at a CO by a contracting carrier, the arrangement is clearly not IC to IC cross-connection since the contracting carrier does not have co-located facilities for this purpose. AT&T Canada argued that to restrict such arrangements by improper application of the primary purpose test would be contrary to the objective stated in Decision 94-19 that co-location "may foster increased entry by creating an additional source of supply of local channels to end-users and to resellers." AT&T Canada contended that if the primary purpose test is applied in a manner that restricts third-party carriage arrangements, the amount of access capacity that will be available to the contracting carrier will be severely limited.

16. The telephone companies asserted that a third-party co-located carrier should not be allowed to carry traffic into the CO for another carrier unless it is counted as traffic being cross-connected between co-located ICs.

17. The telephone companies argued that for a third-party carrier to be "interconnected" with a telephone company it must do so through an agreement or tariff which governs the terms of interconnection. The telephone companies argued that a third-party carrier providing only transmission facilities would not be a party to "interconnection" with the telephone companies.

18. The telephone companies submitted that the transmission capacity provided by the third-party carrier to a contracting carrier should be counted as IC to IC cross-connection. The telephone companies further argued that the functionality requested in AT&T Canada's proposed arrangement is outside of the mandated co-location functionality and should be provided only at the telephone companies' discretion. They also noted the more complex billing arrangements required for the AT&T Canada proposed arrangement.

19. The telephone companies argued that allowing the proposed arrangement could contribute to increased hubbing by competitive carriers in the CO contrary to the intention of the primary purpose test.

20. The telephone companies submitted that if the Commission was to determine that AT&T Canada's proposed configuration is not IC to IC cross-connection, then it should also not be counted as capacity connected to the telephone companies' facilities under the primary purpose test.

21. The Commission notes that Decision 97-15 required the quantity of a co-located IC's transmission capacity connected to another IC's facilities to be secondary to that dedicated to connection with the telephone company's facilities. The relevant issue, therefore, is the IC's quantity of facilities connected with those of the telephone company and those cross-connected with other co-located ICs at the CO. The Commission considers that IC to IC cross-connection requires a second co-located carrier with transmission capacity cross-connected with that of the first. Such is not the case in AT&T Canada's proposed arrangement. The primary purpose test was intended to address the concern of the use of the central office as primarily a network hub for competitive carriers. In the proposed arrangement there is no competitor-to-competitor hubbing. All of the co-located third-party carrier's facilities in question are connected with those of the telephone companies at the CO.

22. The Commission concludes that the transmission capacity of the third-party co-located carrier used by a contracting carrier, reseller or end-user for connection to the telephone company facilities is capacity connected to the telephone company facilities for the purpose of the primary purpose test of the co-located third-party carrier at the CO.

23. The telephone companies indicated through its scenarios provided in this proceeding that the arrangement proposed by AT&T Canada can be accommodated by the telephone companies' operating procedures and billing systems, but that the billing procedure may be more complex due to the two customers involved. The co-locating carrier would be the customer of record for the co-located transmission facilities while the contracting party would be the customer of record for the telephone companies' services accessed.

24. The Commission is of the view that the telephone companies should have the opportunity to recover any additional causal costs resulting from arrangements such as proposed by AT&T Canada in this application.

25. The Commission is open to consideration of the recovery of any additional causal costs incurred by the telephone companies resulting from the use of a third party's co-located access facilities in a future tariff notice application.

Secretary General

This document is available in alternative format upon request and may also be viewed at the following Internet site: www.crtc.gc.ca