ARCHIVED -  Telecom Decision CRTC 99-11

Telecom Decision

Ottawa, 14 September 1999

Telecom Decision CRTC 99-11

Application concerning access by Internet service providers to incumbent cable carriers' telecommunications facilities

File No.: 8646-C51-01/99

Summary

The Commission is issuing a direction to cable carriers with respect to the resale of retail Internet Services. Cable carriers are cable distribution undertakings that also provide telecommunications services using the same facilities that they use to provide cable service.

The Commission requires each incumbent cable carrier providing higher speed Internet retail services to make these services available for resale within 90 days of the date of this decision. This resale must be provided at a discount of 25% from the lowest retail Internet service rate charged by the cable carrier to a cable customer in its service area during any one month period.

These terms must be maintained until the cable carrier provides competing Internet service providers (ISPs) with access through interconnection according to a tariff approved by the Commission.

Introduction

1.The independent members of the Canadian Association of Internet Providers (CAIP) have asked for relief under the Telecommunications Act (the Act) against various incumbent cable carriers that offer higher speed retail Internet services (IS or retail IS). CAIP's concern is that these carriers do not provide access for competing ISPs to their higher speed telecommunications facilities even though the carriers offer their own retail IS using these facilities. CAIP considers that this is anti-competitive and allows cable carriers to establish themselves in this emerging market before they provide access to competitors.

2.CAIP requested relief against: Canadian Cable Television Association (CCTA) members including Rogers Communications Inc., Shaw Communications Inc., Cogeco Inc., Vidéotron ltée and their affiliates, or other broadcast carriers presently providing retail IS. More specifically, CAIP requested that the Commission direct cable carriers (a type of broadcast carrier) to provide access now to competing ISPs and, until access is available, to stop promoting and marketing their own retail IS. As an alternative, CAIP requested that the Commission direct cable carriers to make retail IS available for resale until access is provided.

3.The Commission addressed issues relating to access in Regulation under the Telecommunications Act of Certain Telecommunications Services Offered by "Broadcast Carriers", Telecom Decision CRTC 98-9, 9 July 1998 (Decision 98-9). In that Decision, the Commission directed that access to the higher speed telecommunications facilities of incumbent cable carriers offering higher speed retail IS be provided pursuant to a tariff approved by the Commission. Cable carriers began to offer retail IS in 1996. At the time of the proceeding leading to Decision 98-9, cable carriers did not provide competing ISPs with access to their telecommunications facilities for technical reasons. In that proceeding they undertook to implement access as soon as possible.

4.In the current proceeding CCTA stated that it expects that cable companies will be in a position to implement commercial access service by mid-2000. Representatives of CAIP and the CCTA have established the CAIP/CCTA Technical Working Group (Working Group) to achieve this objective. The Commission notes efforts made by ISPs and cable carriers, especially since 1998, to implement access and expects all parties to make every effort to ensure that access is implemented according to the current schedule.

Overview of positions of parties

5.CAIP alleged in its application that CCTA members are deliberately delaying the implementation of access. It considered that this delay is causing irreparable harm to the independent members of CAIP, and that CCTA members in the retail IS market are benefiting from the delay. CAIP further argued that CCTA members are aggressively marketing their higher speed retail IS, which CAIP argued has become a separate market, while preventing ISPs from entering this market through delay. CAIP submitted that, as a result, cable carriers are conferring an undue preference on themselves or subjecting ISPs to an unreasonable disadvantage, contrary to section 27(2) of the Act.

6.CCTA denied CAIP's allegations and argued that access cannot currently be provided in a way that meets CAIP's requirements. CCTA stated that the Commission determined in Decision 98-9 that cable carriers could offer higher speed retail IS before access is available, and that such retail IS could be offered without a requirement for resale of that service. CCTA also disagreed with CAIP's claim that the IS market has evolved into two markets at the retail level since the Commission issued Decision 98-9.

7.MTS Communications Inc., NBTel Inc., Maritime Tel & Tel Limited and Island Telecom, as well as TELUS Communications and BC TEL commented on and generally supported CAIP's position.

Characterization of the retail IS market

8.In Decision 98-9, the Commission determined that the retail IS market, regardless of speed and the facilities over which the services are carried, constitutes a single market. In that Decision, the Commission stated that it considered that lower and higher speed retail level ISs share sufficient attributes to be considered as reasonable substitutes.

9.The Commission is of the opinion that the higher speed segment of that market has increased materially in importance since the proceeding which led to Decision 98-9. The Commission does not consider that the evidence submitted by CAIP demonstrates that the retail IS market has evolved into two markets and concludes that the retail IS market remains one market.

Request that cable carriers provide immediate access

10.In support of its position that access to cable carriers' facilities be provided immediately, CAIP referred to two situations where access was, or is being, provided. One of these service offerings is a trial being conducted by a cable company in the Timmins area. The other was a trial conducted in the United States by GTE, the results of which were announced recently.

11.Among other points, CCTA submitted that the Timmins and GTE trials do not respond to CAIP's own requirements that access provide the capability to handle large volumes of subscribers in a multi-ISP environment through standard industry-wide implementation.

12.CAIP stated that the access technology used in the Timmins trial is scalable, and meets many of its members' specifications. CAIP did not elaborate and also did not specifically address operational issues such as manual versus automated billing. The Commission also notes that, through the Working Group, CAIP and CCTA have recently taken steps to trial an approach to access which will be responsive to CAIP's requirements.

13.Based on the record of this proceeding, the Commission considers that the two approaches cited by CAIP would not provide comparable alternatives to the approach to access being developed by the Working Group. In all the circumstances, the Commission denies CAIP's request that cable carriers be required to provide access immediately.

Resale of retail IS

14.The Commission forbore from regulating the rates for cable carriers' retail IS in Decision 98-9, but determined that it would not be appropriate to forbear from section 24 of the Act. It therefore retained the power under section 24 to impose such conditions on the offering and provision of retail IS services as may be necessary in the future.

15.In Decision 98-9, the Commission did not mandate resale of retail IS because it considered that the supply of underlying access services had continued to increase and had contributed to creating a workably competitive market for retail IS. In this proceeding, the issue arises as to whether resale should now be mandated because of the continued lack of access to incumbent cable carriers' telecommunications facilities. Resale is being considered in this proceeding as a proxy for a service that provides such access through interconnection with incumbent cable carriers' facilities.

16.As noted above, the higher speed segment of the retail IS market has increased materially in importance since the release of Decision 98-9. Further, a period of over three years has passed since cable carriers first offered retail IS commercially without providing access. Cable carriers first offered retail IS in 1996; in 1998 they undertook to implement access as soon as possible, and access is now expected to be available commercially no earlier than mid-2000.

17.In this proceeding CCTA argued that the supply of access services has continued to increase since the release of Decision 98-9 with, in particular, the introduction of access to telephone company Asymetrical Digital Subscriber Line (ADSL) services. In the Commission's view, considering all the circumstances, the supply of underlying access services has not increased to the extent that it continues to be in the public interest for incumbent cable carriers to offer higher speed retail IS without providing access through interconnection or resale as a proxy for access. The Commission concludes that, until cable carriers are in a position to provide access, it is in the public interest to advance the competitiveness of IS by providing for the resale of incumbent cable carriers' higher speed IS.

18.The Commission notes that resale of retail IS would allow competitor ISPs to bill and collect from their customers. It also anticipates that, as outlined by CAIP, ISPs would customize and brand the IS by providing their own customer software (browser and e-mail package) as well as the e-mail address and home page for the customer.

19.The Commission considers that, for resale to be a reasonable alternative to access for ISPs, a discount from the cable carrier's retail rate is appropriate. CAIP proposed that resale of retail IS should be made available at a discount of 25-50% from the retail rate, depending on volume. CCTA did not offer support for its opposition to resale at this rate, other than to state that the rates proposed by CAIP bear no relationship to costs. Based on the record, the Commission considers 25% to be a reasonable discount.

20.Therefore, pursuant to section 24 of the Act, the Commission imposes, as a condition of the provision of higher speed retail IS by incumbent cable carriers, the requirement that such a carrier make its higher speed retail IS available for resale to provide IS at a 25% discount from the lowest retail IS rate charged by that carrier to a cable customer in the applicable serving area during any one month period. Service charges typically charged by the cable carrier to its customer will be paid by the ISP and are not subject to the discount. Cable carriers must not establish higher service charges for ISPs than for their own IS customers. This condition will apply 90 days from the date of this Decision and will continue to apply until access is provided pursuant to an approved tariff. The specific rates charged by the cable carriers do not require Commission approval.

21.If an incumbent cable carrier wishes to charge an ISP at a different discount rate, it may file a proposed alternative discount for approval with the Commission, supported by appropriate costing information. In such cases, the Commission emphasizes that the carrier must make its higher speed retail IS available for resale at the discount set out in this Decision, until it has received approval to modify it.

Other matters

Promotion and marketing of retail IS

22.In Decision 98-9, the Commission considered that it would not be in the public interest to prohibit cable carriers from offering their own higher speed retail level IS until such time as access to their telecommunications facilities is available. As set out above, CAIP argued that cable carries should stop marketing and promoting their higher speed retail IS until access is available.

23.The Commission is of the view that it would be prejudicial to consumers and would not be in the public interest to now prohibit cable carriers from promoting and marketing their retail IS. The Commission has addressed the issue of the lack of access to incumbent cable carriers' telecommunications facilities by mandating resale of retail IS as a proxy for access.

Nature of the application

24.CCTA argued that the Commission has already addressed and rejected the arguments and requests made by CAIP with respect to the allegation of undue preference, the definition of the Internet services market, the issue of mandated resale of retail IS services, and the marketing of IS pending the provision of access to the incumbent cable companies' infrastructure. CCTA argued that CAIP did not present any evidence that suggests that the Commission's determinations should be altered, and did not address the Commission's criteria to review and vary its decision.

25.CAIP submitted that it was not challenging the correctness of the Commission's determinations in Decision 98-9 at the time it was made, but is challenging the continued correctness of the Commission's determinations in that Decision in light of the current environment.

26.Having regard to the factors identified in Guidelines for Review and Vary Applications, Telecom Public Notice CRTC 98-6, 20 March 1998, for distinguishing between a review and vary application and a new application, the Commission agrees with CAIP's characterization of its application. CAIP's application as framed does not challenge the correctness of the determinations made in Decision 98-9. Rather, in its application CAIP seeks new relief from the Commission, on a prospective basis, based on current circumstances. The Commission considers that the facts and circumstances supporting the relief granted in this Decision did not exist at the time of the proceeding leading to Decision 98-9.

Procedural issues

27.The Commission has set out its determinations on two procedural issues in a letter to CAIP and CCTA of today's date.

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