ARCHIVED -  Telecom Order CRTC 99-379

Telecom Order

Ottawa, 29 April 1999

Telecom Order CRTC 99-379

On 12 January 1998, the Customer Transfer Sub Working Group (CTSWG) of the CRTC Interconnection Steering Committee filed a dispute with the Commission on whether local service resellers should be required to offer equal access to all long distance service providers, similar to the requirements in Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8) for Competitive Local Exchange Carriers (CLECs).

File No.: 96-2376

1.Comments and reply comments were received from ACC TelEnterprises Ltd. (ACC), AT&T Canada Corp. (formerly AT&T Canada Long Distance Services Company) (AT&T Canada), Sprint Canada Inc. (formerly fONOROLA Inc.) (fONOROLA), London Telecom Network Inc. (London Telecom), Microcell Connexions Inc. (Microcell), Navitar Communications Inc. (formerly TelcoPlus Services Inc.) (TelcoPlus), Public Interest Advocacy Centre (PIAC) on behalf of CAC/FNACQ/NAPO, Stentor Resource Centre Inc. (Stentor) on behalf of BC TEL, Bell Canada, Island Telecom Inc. (formerly The Island Telephone Company Limited), Maritime Tel & Tel Limited, MTS Communications Inc., NBTel Inc. (formerly The New Brunswick Telephone Company, Limited), NewTel Communications Inc. and TELUS Communications Inc., and Vidéotron Télécom ltée (Vidéotron).

2.Generally all parties, with the exception of Stentor and PIAC, provided comments to support local service resellers not being subjected to the rules for equal access.

3.Decision 97-8 concluded that, in the interests of consumer protection and competitive equity, certain obligations should apply to Incumbent Local Exchange Carriers (ILECs) and CLECs. These obligations include CLECs being required to provide equal access to all Interexchange (IX) service providers at terms and conditions similar to those in the ILEC's tariffs.

POSITIONS OF PARTIES

A. Parties Favouring Equal Access Obligation

1. Customer Choice and Safeguards

4.Stentor submitted that the principles of customer choice and consumer safeguards were established in Decision 97-8 and in Competition in the Provision of Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues, Telecom Decision CRTC 92-12, 12 June 1992. Local competition should not restrict customer choice of IX service providers. The provision of equal access by local service resellers will keep the market place open and can also be used to create new services.

5.PIAC submitted that customer choice and minimized customer confusion will not be achieved unless the same consumer safeguards and access requirements are applied to all local service providers, regardless of whether they own and operate their own facilities or resell the services of others.

2. Customer Confusion

6.Stentor submitted that, while competition provides a wider range of customer choice, it can also cause customer confusion. Stentor submitted that the lack of local service reseller mandated equal access will create additional unnecessary confusion, especially in the area of local service reseller transition to CLEC status. Stentor further submitted that the customer will be unaware that the local service reseller is not obliged to offer equal access and that no method has been outlined for ensuring customer awareness of local service resellers' restrictions.

7.PIAC submitted that consumers do not distinguish between resellers and facilities-based carriers. Undesirable confusion and market distortion could result, when a company operates as a local service reseller in one location and as a Local Exchange Carrier (LEC) in another location.

3. Inequity and Impracticality of Exemption

8.Stentor submitted that the lack of local service reseller mandated equal access will restrict the IX provider service market because there may be exclusive arrangements between a local service reseller and an IX service provider. According to Stentor, this is inconsistent with the Commission's expectations in Decision 97-8 for facilities-based carriers and will provide an incentive for companies to resell rather than become CLECs.

9.PIAC submitted that the same regulatory requirements should apply to all service providers. PIAC stated that allowing local service resellers to enter into exclusive arrangements with IX service providers will limit customer choice. The ability to deny equal access to IX service providers is not necessary for local service resellers to compete in the local market.

B. Parties Opposing Equal Access Obligation

10.Companies opposing the mandating of local service reseller equal access submitted the following positions:

1. Customer Choice and Safeguards

11.Microcell submitted that the requirement for local service resellers to provide equal access will reduce the number of resellers and thus reduce customer choice. Local service reseller equal access will reduce cost margins, may jeopardize the innovation of affinity services and will add administrative complexity.

12.ACC submitted that customers make a choice when the service is purchased.

13.fONOROLA submitted that mandated equal access will eliminate local resale and restrict consumer choice.

14.London Telecom submitted that while customer choice is vital, customers have sufficient choice among LECs.

15.Vidéotron submitted that not requiring local service resellers to provide equal access will not reduce or jeopardize customer choice since equal access offered to IX service providers will remain an option that is available to the customer through the LEC's obligations.

2. Customer Confusion

16.AT&T Canada submitted that customers are aware of, and accept the conditions of, the resold local service that they are purchasing, including restricted choice of IX service providers. The requirement for the customer to authorize a reseller's IX service provider, and other consumer safeguards, will minimize customer confusion. AT&T Canada submitted that the customer would authorize and accept the entire bundle.

17.Microcell submitted that the minimization of customer confusion is not, and should not, be a Commission policy. Microcell suggested that notices to customers would minimize customer confusion as between resellers and CLECs with regard to the offering of equal access. Microcell noted that the CTSWG has developed customer awareness and authorization provisions that have been agreed upon by the group.

18.ACC and Vidéotron submitted that any increase in diversity of choice brings confusion. ACC stated that a regime to minimize customer confusion is unattainable or can only be obtained by having any choice limited to innovative pricing plans. ACC submitted that the CTSWG has developed procedures to ensure customer protection. fONOROLA also submitted that the customer is aware of the IX service provider when the decision is made to purchase the service and noted that the Letter of Authorization indicates the name of the IX service provider.

19.London Telecom submitted that the subscriber makes a conscious and informed choice when the services are purchased.

3. Inequity and Impracticality of Exemption

20.AT&T Canada submitted that there would be significant local service reseller administration costs associated with mandated equal access. AT&T Canada stated that resale results in very little profit, and resellers need to bundle services to add value. AT&T Canada submitted that mandated local service reseller equal access would impose new obligations on existing resellers, such as Centrex resellers, that may not be possible to implement. AT&T Canada stated that equal access would undermine any opportunity for resale in the local market and simply add to the disadvantages already faced by local service resellers.

21.Microcell submitted that local service resellers will appear in the market based on profit margins and that equal access will degrade those margins. Microcell was unaware of any established principle that there must be "competitive parity" between LECs and local service resellers. ACC noted that, pursuant to Decision 97-8, there is not parity between CLECs and local service resellers regarding rights and obligations.

22.fONOROLA noted that where a local service reseller chooses not to offer equal access, alternate providers of long distance services will still be able to target affected customers. fONOROLA stated that a resale market without equal access will increase marketing efficiencies by providing the opportunity for exclusive arrangements. fONOROLA added that allowing companies to enter as local service resellers to develop knowledge, expertise and a customer base is essential to permit them to evolve into CLECs.

23.London Telecom submitted that competitive equity should be maintained by ensuring that there is no exclusive arrangement that would limit access to IX services other than the selection of a Primary Interexchange Carrier (PIC).

24.Vidéotron submitted that exclusive bundled arrangements would have the effect of increasing competition and ensuring competitive equity.

25.TelcoPlus submitted that offering the same service on the same terms and conditions is not competition, but is rather another form of monopoly. TelcoPlus stated that to extend mandated equal access to local service resellers would affect price margins and reduce the number of local service resellers in the market.

CONCLUSIONS

26.The Commission notes that the imposition on local service providers of an equal access obligation currently applies only to LECs. This obligation originally applied to ILECs in order to ensure that competitive interexchange carriers (IXCs) would be able to provide services to their customers through the monopoly ILECs on the same footing as the incumbent IXCs. The equal access obligation was extended to CLECs, pursuant to Decision 97-8, to prevent the limiting of competition through exclusive agreements between CLECs and IXCs.

27.The equal access obligation was one of a number of obligations that the Commission, in Decision 97-8, set out for Canadian carriers that become CLECs. Undertaking these obligations allows a Canadian carrier, wishing to become a CLEC, access to several privileges including access to unbundled facilities at mandated rates, bill-and-keep arrangements and portable subsidies.

28.In the Commission's view, Decision 97-8 is clear that mandated provision of equal access is a CLEC obligation. The Commission did not impose this obligation on local service resellers.

29.The Commission is of the view that in light of the fact that local service resellers have none of the rights of CLECs pursuant to Decision 97-8, it would be inappropriate to impose on such resellers such a fundamental LEC obligation as equal access.

30.Moreover, with regard to the opportunity of local service resellers' customers to choose among IX service providers, the Commission notes that local service resellers' customers, absent mandated local service reseller equal access, are in the same position as they were before Decision 97-8 was issued. During the period following the Commission's mandating of ILEC-provided equal access for competitive IXCs, including trunk-side long distance resellers, ILEC customers could choose their preferred IXC and obtain "1+" access to the services of that carrier (the PIC selection process). These customers could choose to change their preferred IXC and select another such carrier through the PIC selection process.

31.Customers of local service resellers, on the other hand, generally took the IX service provider that the reseller had selected. Once the local service resellers' customers had "signed on", their ability to select another IX service provider was constrained, particularly if the customers had signed contracts.

32.The Commission does, however, require resellers to comply with certain consumer safeguards to ensure that, before contracting with the reseller, customers are advised of, and authorize, their assignment by a reseller to a particular IX service provider. Further, when resellers change IX service providers, they must obtain their customers' authorization.

33.If the customer does not authorize the reseller, the customer can move from that local service reseller to a LEC and select directly the IX service provider that they prefer, or they can move to a local service reseller that employs that IX service provider.

34.Some parties suggested that not mandating local service reseller equal access would be inequitable, as local service resellers could engage in exclusive deals with IX service providers and that this would be an incentive for potential CLECs to remain local service resellers. The Commission notes, as described above, that local service resellers do not benefit from the rights and privileges given to CLECs in Decision 97-8. To impose the CLEC obligation of mandated equal access on local service resellers without any of the CLEC rights would itself be inequitable and, in the Commission's view, to a greater degree than the inequity that these parties allege.

35.As for the incentive for a local service provider to remain a local service reseller, the Commission notes that the resellers that intervened in the proceeding leading to ACC TelEnterprises Ltd. - Application dated 26 September 1997 to Review and Vary Telecom Decision CRTC 97-8, Local Competition, 1 May 1997, Telecom Decision CRTC 98-12, 7 August 1998 largely supported ACC's position. They made clear their interest in taking on CLEC obligations, including mandated equal access, if they could have CLEC rights. In the Commission's view, the absence of an obligation to provide equal access is not an incentive to refrain from becoming a CLEC.

36.For the reasons set out above, the Commission considers that Decision 97-8 requires only CLECs and ILECs to provide equal access, and does not require local service resellers to do so. The Commission considers that this approach remains appropriate.

Secretary General

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