ARCHIVED -  Telecom Public Notice CRTC 99-3

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Telecom Public Notice

Ottawa, 19 January 1999

Telecom Public Notice CRTC 99-3


File No.: 8643-S1-01/98


1.On 16 March 1998, Stentor Resource Centre Inc. (Stentor), pursuant to Part VII of the CRTC Telecommunications Rules of Procedure, filed, on behalf of BC TEL, Bell Canada, Island Telecom Inc., Maritime Tel & Tel Limited, MTS Communications Inc., NBTel Inc., NewTel Communications Inc. and TELUS Communications Inc., an application to eliminate the affiliate rule, as currently stated in the tariffs of the Stentor companies. Teleglobe Canada Inc. (Teleglobe); Mobility Canada (Mobility); Call-Net Enterprises Inc., on behalf of itself and fONOROLA Inc. (Call-Net); Rogers Cantel Inc. (Cantel) and Microcell Telecommunications Inc. (Microcell) filed comments on Stentor's application.

2.Stentor submitted that the underlying rationales for establishing the affiliate rule no longer exist or have been adequately addressed by other mechanisms established by the Commission.

3.The affiliate rule was imposed in Resale and Sharing of Private Line Services, Telecom Decision CRTC 90-3, 1 March 1990 (Decision 90-3), on all facilities-based interexchange carriers. In Decision 90-3 the Commission concluded that permitting a facilities-based carrier to lease services to an affiliate for the provision of voice services on a joint use basis would be analogous to permitting facilities-based entry, which was not permitted at that time. There was also concern that such use of affiliates could lead to contribution erosion.

4.The affiliate rule was retained 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, and in Affiliate Rule, Telecom Decision CRTC 94-6, 4 March 1994 (Decision 94-6), in part, to prevent contribution erosion.

5.In Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997 (Decision 97-19), the Commission found that the toll market was sufficiently competitive to protect the interests of users, and forbore from regulating the prices of the Stentor companies' long distance services.

6.Stentor submitted that in light of the degree of competition in the long distance market, the Commission's concerns set out in Decision 94-6, as summarized above, no longer apply with regard to Stentor companies' long distance reseller affiliates.

7.Further, Stentor argued, among other things, that with the implementation of the carrier access tariff pursuant to Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994, contribution rates are explicitly identified for the companies' services. Stentor submitted that, accordingly, any potential that may have existed for the companies' affiliates to avoid or reduce contribution no longer exists.

8.Mobility and Teleglobe supported Stentor's application.

9.Microcell and Cantel opposed Stentor's application on the grounds that the affiliate rule is required to prevent unjust discrimination and undue preference by the Stentor companies and their affiliates, and to reduce the opportunity for abuse of their dominance in the market for long distance services.

10.Microcell and Cantel argued that the Stentor companies could use affiliates to circumvent the intent of regulatory rules; for example, by bundling basic exchange services with forborne services and selling the bundled services at a lower price than permitted under the bundling rules and safeguards, most recently discussed in Joint Marketing and Bundling, Telecom Decision CRTC 98-4, 24 March 1998. Microcell and Cantel also argued that affiliates of the Stentor companies would be in a position to engage in predatory pricing, since the return earned by an affiliate would be immaterial to the combined return of a telephone company and its affiliate.

11.Call-Net acknowledged that the original reasons for establishing the affiliate rule no longer exist, in view of forbearance from regulation of the Stentor companies' toll activities in Decision 97-19 and the elimination of contribution discounts for new entrants and line-side access.

12.However, Call-Net argued that an affiliate rule is required to prevent the Stentor companies from using affiliates to resell local services, and that the Commission should retain the current affiliate rule until an affiliate rule for local services has been established, to ensure compliance with the bundling rules.

13.The Commission agrees with Stentor and Call-Net that the original reasons for which the affiliate rule for interexchange voice services was established no longer exist, or have been addressed by other mechanisms established by the Commission.

14.However, as described below, the Commission is of the view that further comment is needed on whether an affiliate rule is required in local markets to ensure that the Stentor companies comply with the bundling rules and safeguards. In the interim, to ensure compliance with these rules and safeguards, the Commission will retain the current affiliate rule until it makes its decision on the issues raised by this Public Notice.


15.Call-Net, Cantel and Microcell submitted that an affiliate rule is needed for local services in order to prevent the Stentor companies from using unregulated reseller affiliates to delay the development of competition in these markets.

16.Stentor argued that an affiliate rule for local services was not required. It also noted that the Stentor companies have been permitted to resell local services since Resale to Provide Primary Exchange Voice Services, Telecom Decision CRTC 87-1, 12 February 1987.

17.The Commission notes, however, that circumstances have changed since 1987, in that the Commission has established a regulatory regime for facilities-based competition in the provision of local services, and has forborne from regulating long distance service prices. In view of these developments, the Commission invites comment on whether an affiliate rule is required in local markets for reasons such as ensuring compliance with the bundling rules and safeguards.


18.Call-Net applied on 5 June 1998 to make Teleglobe subject to an affiliate rule. By letter dated 3 July 1998, the Commission denied Call-Net's request for an expedited process, and stated that Call-Net's application should be considered after the release of the decision pursuant to the proceeding initiated by Competition in the Provision of International Telecommunications Services, Telecom Public Notice CRTC 97-34, 2 October 1997.

19.Bill C-17, An Act to Amend the Telecommunications Act and the Teleglobe Canada Reorganization and Divestiture Act, which received assent on 12 March 1998, amended the Telecommunications Act to, among other things, empower the Commission to license international resellers. In Regulatory Regime for the Provision of International Telecommunications Services, Telecom Decision CRTC 98-17, 1 October 1998 (Decision 98-17), the Commission determined that, as a condition of licence, resellers of international services are prohibited from engaging in anti-competitive conduct in the provision of telecommunications services. Such conduct would include entering into agreements or engaging in activities that would unduly lessen competition.

20.The Commission invites comment on whether, with this licence condition, an affiliate rule for Teleglobe is necessary.


21.The Commission invites comment on the following issues:

(1) Whether an affiliate rule prohibiting affiliates of Stentor companies from reselling local services is required to ensure development of effective competition in markets for local exchange services, including comment on the effects both on the Stentor companies and on competitors.

(2) What form such a rule should take. For example, should there be outright prohibition of Stentor companies' affiliates reselling local exchange services, or alternatively, would limits on the activities of the Stentor companies' affiliates suffice to ensure the development of competition in local services. If the latter, parties should describe and discuss the nature of the limits on the activities of affiliates that, in parties' views, are required.

(3) Parties are also invited to discuss whether an affiliate rule for local services is required to ensure that the Stentor companies comply with the bundling rules.

(4) Finally, parties are invited to comment on whether an affiliate rule for Teleglobe is required to ensure that Teleglobe complies with the company's remaining regulatory requirements, or whether the conditions of licence discussed in Decision 98-17 would be sufficient.


22.The Stentor companies and Teleglobe are made parties to this proceeding.

23.Other persons wishing to participate in this proceeding must notify the Commission of their intention to do so by writing to Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, fax: 819-953-0795, by 19 February 1999. Parties are to indicate in their notice their Internet email address, where available. If parties do not have access to the Internet, they are to indicate in their notice whether they wish to receive disk versions of hard copy filings. The Commission will issue a complete list of parties and their mailing addresses (including Internet email addresses, if available), identifying those parties who wish to receive disk versions.

24.Parties may file comments with the Commission, serving copies on all other parties, by 12 March 1999.

25.Parties may file reply comments with the Commission, serving copies on all other parties, by 24 March 1999.

26.Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date.

27.The record of this proceeding may be examined, or will be made available promptly upon request, at the Commission's offices in the following locations:

Bank of Commerce Building
1809 Barrington Street
Suite 1007
Halifax, Nova Scotia

Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage
Room G-5
Hull, Quebec

Place Montréal Trust
1800 McGill College Avenue
Suite 1920
Montréal, Quebec

55 St. Clair Avenue East
Suite 624
Toronto, Ontario

580 Hornby Street
Suite 530
Vancouver, British Columbia

275 Portage Avenue
Suite 1810
Winnipeg, Manitoba

28.In addition to hard copy filings, parties are encouraged to file with the Commission electronic versions of their submissions in accordance with the Commission's Interim Telecom Guidelines for the Handling of Machine-Readable Files, dated 30 November 1995. The Commission's Internet email address for electronically filed documents is Electronically filed documents can be accessed at the Commission's Internet site at

Secretary General

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