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Telecom Order

Ottawa, 12 May 1999
Telecom Order CRTC 99-434
File No.: 8638-S1-01/98
Follow-up Proceeding to Telecom Decision CRTC 97-20: Establishment of criterion and process for considering further forbearance for High Capacity/DDS interexchange private line services.

I SUMMARY

1.The Commission will apply the following criterion when considering whether to grant further forbearance for High Capacity and Digital Data Services (DDS) interexchange private line (IXPL) services offered by BC TEL, TELUS Communications Inc., Bell Canada, MTS Communications Inc., Maritime Tel & Tel Limited, NBTel Inc., Island Telecom Inc. and NewTel Communications Inc. (collectively, "the Companies" or whenever referred to individually, "a Company" or "the Company"):
The Companies' domestic High Capacity/DDS services on a particular route will be granted forbearance upon the Commission being satisfied that one or more competitors of a Company are offering or providing, on that route, the equivalent of DS-3 bandwidth (or greater) on a private line basis to at least one customer, using terrestrial facilities from other than the Company in question or an affiliate of that Company.
2.The Commission has modified the criterion it proposed in Stentor Resource Centre Inc. - Forbearance from Regulation of Interexchange Private Line Services, Telecom Decision CRTC 97-20, 18 December 1997 (Decision 97-20), to address the situation where a former Stentor Resource Centre Inc. (Stentor) company is competing in another former Stentor company's territory. Furthermore, the Commission has accepted Stentor's submission that the criterion should apply only to domestic routes.
3.The Commission also establishes the following process for considering further forbearance for High Capacity/DDS services offered by the Companies.
4.Competitors of the Companies, including broadcast distribution undertakings (BDUs), are directed, within 90 days of this Order and subsequently on a semi-annual basis, to file with the Commission, serving copies on the relevant Companies, a report identifying their routes that meet the Commission's criterion.
5.The Commission expects to quickly issue an order, without further process, granting forbearance to the Companies in question for these particular routes, based on the criterion having been met.
6.The Companies may also file applications for forbearance on routes not identified by the competitors. Interested parties will be given an opportunity to comment on such applications prior to their disposition.

II INTRODUCTION

7.In Decision 97-20, the Commission granted forbearance to the Companies for High Capacity/DDS IXPL services on selected routes only. However, the Commission recognized that there could be adequate competition to justify forbearance with respect to other routes. Therefore the Commission initiated a proceeding in Decision 97-20 to examine the appropriate criterion and process for considering forbearance with respect to additional services on additional routes.
8.In Decision 97-20, the Commission proposed the following criterion for consideration:
"Stentor companies' High Capacity/DDS services not already forborne from will be granted forbearance on a particular route upon the Commission being satisfied that one or more competitors of the Stentor companies are offering or providing, on that route, the equivalent of DS-3 bandwidth (or greater) on a private line basis to at least one customer, using terrestrial facilities from a company other than a Stentor company or an affiliate of such a company."
9.Stentor, AT&T Canada Corp. (formerly AT&T Canada Long Distance Services Company) (AT&T Canada Corp.) and Call-Net Enterprises Inc. (Call-Net) provided comments and reply comments with respect to the criterion and the process. fONOROLA Inc. (fONOROLA) submitted reply comments only.
10.On 23 February 1998, Stentor submitted that because of the conditions surrounding international private lines, it is unlikely that these would ever meet either the Commission's or Stentor's proposed criterion. Therefore, Stentor proposed that the word "domestic" be inserted to make it clear that the criterion applies only to domestic routes.

III THE CRITERION

11.Stentor proposed the following criterion:
"Stentor companies' domestic High Capacity/DDS services not already forborne from regulation will be granted forbearance on a particular route upon the Commission being satisfied that, on that route, one or more competitors (either singly or in aggregate) own (or lease from a non-carrier) transport facilities (including facilities not currently in use for the provision of telecommunications services) which either have an aggregate capacity of at least one DS-3, or can be activated or upgraded to equal or exceed this capacity."
12.AT&T Canada Corp. proposed the following wording:
"Stentor companies' High Capacity/DDS services not already forborne from will be granted forbearance on a particular route upon the Commission being satisfied that two or more competitors of the Stentor companies are providing, or capable of providing in the immediate term (as demonstrated by a binding offer to a customer for the use of the provider-owned facilities), on that route, the equivalent of DS-3 bandwidth (or greater) throughout the entire transmission path for that route, including the interfaces at both ends, on a private line basis to at least one customer using terrestrial facilities from a company other than a Stentor company."
a) Number of Competitors
13.AT&T Canada Corp. submitted that a requirement that there be only one competitor is inconsistent with the principles established in Review of Regulatory Framework, Telecom DecisionCRTC 94-19, 16 September 1994 (Decision 94-19). AT&T Canada Corp. noted that in that Decision, the Commission found that it was premature to forbear from regulating competitive network services at that time. AT&T Canada Corp. also noted that the Commission expressed concern that the presence of only two significant national facilities-based providers, the Companies and AT&T Canada Corp., constrained the supply of facilities and that therefore there was potential for unjust price discrimination, absent tariff regulation.
14.The Commission notes that its finding in Decision 94-19 was based on an examination of the facilities-based supply of network services on a national basis. By contrast, in Decision 97-20, the Commission determined that each IXPL route constituted a separate market. The Commission is of the view that the concerns it expressed in Decision 94-19 are adequately addressed by the narrower market definition established in Decision 97-20.
15.Call-Net noted that in the proceeding leading to Decision 97-20, the competitors had argued that only AT&T Canada Corp. had a backbone facility across the less dense routes and that this system is currently over utilised. Call-Net submitted that as a pre-condition to forbearance on a particular route, the Commission must be satisfied that one or more competitors, other than AT&T Canada Corp., is the alternative supplier. Alternatively, Call-Net argued that the Commission must be satisfied that AT&T Canada Corp. has deployed additional bandwidth capacity on that route since the issuance of Decision 97-20.
16.The Commission is not persuaded by Call-Net's submission. The Commission is of the view that as long as AT&T Canada Corp. (or any other competitor) is actively pursuing customers, it is reasonable to assume that its facilities are not over utilized and that sufficient capacity is available to provide service to those customers, regardless of when the facilities were put in place.
b) Supply Characteristics
17.Stentor submitted that future IXPL forbearance determinations on specific cross-sections should be made on the basis of the supply of competitive facilities as distinct from services. Stentor submitted that reliance on the availability of services rather than on the availability of facilities is inconsistent with the principles established in Decision 94-19 and the explicit reasoning which supports the determination of Decision 97-20.
18.The Commission does not consider its proposed criterion to be inconsistent with either Decision 94-19 or Decision 97-20. While these Decisions addressed facilities-based competition, the Commission's findings were clearly with respect to competition in the supply of services. Moreover, subsection 34(2) of the Telecommunications Act (the Act) requires that the Commission be satisfied that there be sufficient competition with respect to a service or class of services, not with respect to facilities, before it may grant forbearance.
19.In the Commission's view, the mere presence of facilities does not necessarily mean that they will in fact be used to provide services. Until there is evidence that entry has occurred, the Commission considers that it cannot be assumed that the facilities in question are part of the supply base. Given the above, the Commission considers that there must be evidence that service is being offered or provided.
20.AT&T Canada Corp. proposed that the term "offering" be replaced by "capable of providing in the immediate term (as demonstrated by a binding offer to a customer for the use of the provider-owned facilities)". In the Commission's view, this requirement is too restrictive. The Commission considers that evidence that facilities are in place and that competitors are actively offering or providing services, is sufficient.
21.Stentor submitted that a minimum requirement at the DS-3 level is too restrictive. Stentor also submitted that the DS-3 bandwidth requirement in the Commission's proposed criterion could cause confusion.
22.The Commission considers that a DS-3 bandwidth equivalent or greater requirement will ensure that competitors are using facilities that can easily be expanded. The Commission also considers that such a requirement will reduce the regulatory burden by eliminating the need to monitor in detail the facilities used by competitors.
23.The Commission considers that it is reasonable to assume that if DS-3 service (individual DS-3's or the equivalent in aggregated lower speeds) is offered to customers on a particular route, optical fibre or some other large capacity system is being used to provide the service in question. In these circumstances, the Commission considers that it is reasonable to assume that a competitor has sufficient capacity, or can easily upgrade its capacity, to meet the increased demand.
24.In the Commission's view, a DS-3 bandwidth threshold applicable to at least one customer is necessary as it is possible to offer individual DS-1 service over copper facilities and these copper facilities cannot be easily expanded.
25.The Commission does not agree that the offer or provision of DS-3 capacity should be measured by aggregation over several customers. It is possible that in more mature markets, a competitor could have many customers on older (non-expandable) facilities with the total capacity offered exceeding the DS-3 level. Clearly, this situation would not meet the objectives of the criterion. For the same reasons, neither does the Commission agree that the criterion should allow for aggregation over more than one competitor.
26.The Commission notes that its proposed criterion does not require that the competitors provide or offer unchannelized DS-3 service. As noted by Stentor, many customers take the equivalent of DS-3 service in the form of multiple DS-1s and DS-0s. The Commission is satisfied that in these situations the economics would dictate that easily expandable facilities such as optical fibre would be used.
27.Stentor argued that a DS-3 minimum requirement could lead to a situation in a small market where there was sufficient competition to protect the interests of users but that such competition occurred at a lower level of supply than DS-3. In these circumstances, Stentor submitted that the forbearance conditions of the Act would be met, but that the criterion would not be satisfied.
28.However, as noted by fONOROLA, should such a situation arise, the Companies could apply for forbearance in respect of service on that route, relying not on the criterion but on otherwise having met the conditions of the Act with respect to that particular route.
29.Stentor also submitted that the criterion should consider not only the presence of fully operating facilities but also the presence of transport capabilities such as dark fibre which can easily and economically be activated to become high capacity facilities. Stentor argued that the presence of such a transport installation on a route ensures that high capacity, competitively supplied facilities can easily be made available in the near future, and that this would prevent the Companies from exercising any market power.
30.The Commission notes that while inactive facilities such as dark fibre can easily be activated to provide higher capacity IXPL services, many IXPL competitors are also toll competitors who could use inactive facilities, such as dark fibre, for their toll business. Given this, the Commission considers that it is necessary to establish that a competitor's dark fibre or other large capacity facilities will, in fact, be used to provide IXPL services.
31.fONOROLA noted that Stentor's proposed criterion omitted the reference to terrestrial facilities that was included in the Commission's proposed criterion. fONOROLA further noted the Commission's finding in Decision 97-20 that it did not consider that Telesat Canada's (Telesat) facilities constituted a major alternate source of supply. The Commission continues to be of the view that Telesat facilities do not constitute a major alternate source of supply. Accordingly, the Commission remains of the view that it is appropriate that the criterion should be restricted to the consideration of services offered or provided using terrestrial facilities only.
c) Route Definition
32.AT&T Canada Corp. submitted that there must be a clear definition of what constitutes a route. AT&T Canada Corp. proposed that the definition be stated to consist of two elements: (a) the transmission facilities; and (b) the point of presence (POP) at both ends, and that it should be characterized by the capability to offer service between these points.
33.The Commission does not consider that a separate definition of a route is needed as the definition of an interexchange (IX) route in the Companies' General Tariffs (i.e., service between 2 exchanges) adequately addresses AT&T Canada Corp.'s concerns.
34.AT&T Canada Corp. also proposed that the criterion should be modified to provide that:
"The granting of forbearance for a particular route applies to the provision of IXPL services connecting only the specific communities at the two end points by which the route has been defined."
35.In support of its proposal, AT&T Canada Corp. submitted that competitors would incur significant costs to provision POPs or add/drop facilities at additional points along the route.
36.Stentor, on the other hand, submitted that if the Commission has determined that there is sufficient competitive supply of IX facilities between exchanges at the endpoints of a route, there must also be sufficient competitive supply of IX facilities between the exchanges along that route.
37.The Commission disagrees with Stentor. Where service is offered or provided between intermediate exchanges on a particular route, that service is a separate route and must be assessed on the basis of the state of competition on that intermediate route or routes. For this reason, the Commission considers that no amendment to the criterion is needed to address AT&T Canada Corp.'s concern.
38.Call-Net submitted that there must be evidence that service is provided at every point along a route before forbearance is granted on that route. In the Commission's view, Call-Net's proposed modifications to the criterion are unnecessarily restrictive.

IV PROCESS

39.Stentor proposed the following process:
·the Companies would first identify the routes for which they sought forbearance;
·the competitors would then submit, in confidence, detailed information about their facilities to the Commission;
·forbearance would be granted within 45 days where the information submitted by the competitors showed that the criterion was met; and
·subsequent applications would be initiated by the Companies and would be subject to a different process depending on whether the Company was able to provide prima facie evidence of the presence of adequate competition.
40.Both AT&T Canada Corp. and Call-Net stated that they had based their proposals on the proposals they had submitted in the proceeding that led to Decision 97-20.
41.Call-Net and AT&T Canada Corp. proposed that Stentor should be required to file an application based on the evidence provided by the competitors. Their proposal would also require a public process allowing interested parties to provide comments and in the case of Call-Net an interrogatory phase as well.
42.The Commission notes that in the proceeding leading to Decision 97-20, and in contrast to the position they have taken in this proceeding, Call-Net and AT&T Canada Corp., among others, proposed a process for forbearance that did not include an opportunity for comments by interested parties. In the Commission's view, the process suggested by Call-Net and AT&T Canada Corp. in the proceeding leading to Decision 97-20 is the more appropriate and efficient mechanism, particularly given that forbearance would be based on evidence submitted by competitors.
43.In the process leading to Decision 97-20, the competitors' proposal called for an annual reporting by competitors of the routes where IXPL facilities had been put into service. The Commission is of the view that restricting the reporting requirement to once a year could unduly benefit competitors in situations where a service satisfying the criterion was introduced shortly after the reporting period as the presence of competition would not be required to be reported for nearly 12 months. In the circumstances, the Commission is of the view that semi-annual reporting by competitors would be more appropriate.
44.The Commission directs all competitors of a Company, including BDUs and BDU affiliates, that provide telecommunications services, to file with the Commission, within 90 days of this Order, serving copies on the relevant Companies, a report identifying all IXPL routes for which they provide or offer IXPL service that meet the criterion established in this Order.
45.The Commission expects to issue quickly an order granting forbearance to the appropriate Companies for the routes in question, based on the criterion having been met. The scope of the forbearance granted would be the same as that granted in Decision 97-20.
46.The first semi-annual report is to be submitted on 1 October 1999. In subsequent years, this information is to be submitted semi-annually, on 1 April and 1 October.
47.The Companies are not precluded from submitting applications for forbearance with respect to High Capacity/DDS services on routes not identified by competitors. If filed, such applications will be disposed of following an appropriate process.
Secretary General
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