ARCHIVED -  Telecom Order CRTC 99-1229

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Telecom Order CRTC 99-1229

  Ottawa, 23 December 1999
  Denial of Call-Net request for new network access rates
  The CRTC denies an application from Call-Net Communications Inc. to overturn its decision to charge interexchange carriers (IXCs) for network access services at rates different from those charged to retail customers.
  The Commission disagrees that there are grounds to review and vary Telecom Order CRTC 99-340 that was released on 12 April 99. Call-Net contends that since alternative long distance carriers are themselves customers of the incumbent telephone companies, they should not be required to pay more than retail customers.
  The Commission believes that IXCs have a substantially different relationship with the telephone companies compared with retail customers. Furthermore, IXCs' rates could be different for services identical to those purchased by end-users. This is not unusual, given that business rates are higher than residential rates for essentially the same services.
  File No.: 8662-C25-02/99
  1. On 2 June 1999, the Commission received a Part VII application from Call-Net Enterprises Inc. (Call-Net) to review and vary, pursuant to section 62 of the Telecommunications Act (the Act), Telecom Order CRTC 99-340 dated 12 April 1999 (Order 99-340).
  2. On 13 August 1999, the Commission issued a letter establishing a process to consider Call-Net's application.
  3. On 3 September 1999, comments were received from AT&T Canada Corp. and AT&T Canada Telecom Services Company (AT&T Canada); Stentor on behalf of BC TEL, Bell Canada (Bell), Island Telecom Inc., Maritime Tel & Tel Limited, MTS Communications Inc., NBTel Inc., NewTel Communications Inc., and TELUS Communications Inc. (collectively, the companies); ClearNet Communications Inc. (Clearnet); London Telecom and Primus Canada (Primus); Rogers Cantel Inc. (Cantel); RSL COM Canada Inc. (RSL); and Vidéotron Télécom (1998) ltée (Vidéotron). Call-Net on behalf of Call-Net Communications Inc. (CNCI), Call-Net Technology Inc. (CTS) and Sprint Canada Inc., filed reply comments on 17 September 1999.
  4. The Call-Net application requested that the Commission vary Order 99-340 such that interexchange carriers (IXCs) are treated in a similar manner as other incumbent local exchange carrier (ILEC) customers and are allowed to terminate interexchange traffic using the ILECs' line-side connection services under the same rates, terms and conditions available to ILEC retail customers.
  5. Call-Net submitted that there is substantial doubt as to the correctness of Order 99-340, both in respect of the decision to order ILECs to charge for performing the necessary local number portability (LNP) query processing and call routing functions, and the decision to permit LECs to charge carriers for Feature Group A (FG A) interconnection at rates different from those for network access services provided to retail customers.
  6. Call-Net submitted that this review and vary is based on:
  a) an error of law – Call-Net submitted that Order 99-340 requires and authorizes unjust discrimination against IXCs, an undue and unreasonable preference in favour of both the ILECs and their retail customers and an undue and unreasonable disadvantage for IXCs using line-side connections to terminate their toll traffic, in violation of subsection 27(2) of the Act;
  b) a failure to consider a basic principle which had been raised in the original proceeding, that as a regulatory safeguard, competitors should be treated as customers of the ILECs in terms of their ability to avail themselves of similar services at the same rates as are charged to the incumbents' retail customers; and
  c) a new principle has arisen as a result of the decision, namely that it is inequitable and contrary to the public interest for IXCs to have no defined status vis-à-vis the ILECs.
  7. Call-Net submitted that, by authorizing the ILECs to charge different tariffed rates to IXCs and to retail customers, not based on different costs incurred by the ILEC in serving IXCs and these retail customers, the Commission has departed from the important principle that competitors should be treated as customers of the ILECs.
  8. Furthermore, Call-Net submitted that the Commission did not address the essential principle that IXCs should be able to receive the same services at the same rates as retail customers of the IXCs, as a regulatory safeguard.
  9. Call-Net noted that, in the mid-1980s, resellers were given full access to general tariff services, while carriers still did not have that access. Call-Net further noted that the Commission, in a letter to Bell dated 14 September 1988, ruled that any item of the incumbent carriers' General Tariff can be leased by any person, including another carrier, unless specifically precluded by the company's tariffs.
  10. Call-Net argued that, prior to Order 99-340, IXCs could operate in two different modes in order to access ILECs' networks, and hence, customers. First, they could interconnect as a carrier using the specific interconnection arrangements that are made available in the interconnection tariffs. Second, they could use any service in the general tariff that the ILEC made available to its own retail customers.
  11. Call-Net considered that this dual approach helped to ensure that competitors were not discriminated against, either by the ILECs not making the same services available to its retail customers and competitors, or by the ILECs inflating the price of services made available through the interconnection tariffs where the same functionality is available through the general tariff services.
  12. Call-Net submitted that as a result of Order 99-340, IXCs no longer have any defined status whatsoever vis-à-vis the ILECs. It was Call-Net's view that this order places IXCs in a "no-man's land" where they have none of the rights accorded to co-carriers and they have none of the protections accorded to customers.
  13. AT&T Canada, Cantel, Clearnet, Primus, and RSL supported Call-Net's application.
  14. All the supporting interveners submitted that IXCs do not have co-carrier status and now, this order has essentially removed the customer status, and the regulatory safeguards associated with that status, that IXCs have had to date vis-a-vis the ILECs.
  15. They objected to the notion that carriers which are customers of the ILECs should be subject to different rates from those rates which are charged to the ILECs' retail customers for the same services. In addition, the application of different rates to different ILEC customer segments for the same service can only inhibit the development of fair and effective competition in the Canadian telecommunications market.
  16. The supporting interveners argued that there can be little doubt that there is unjust discrimination between IXCs and retail customers where one is charged more than the other for exactly the same service.
  17. Cantel noted that although Order 99-340 was expressly concerned with the application of the LRN (Location Routing Number) Absent Charge to the line-side trunks of IXCs, the ILECs have erroneously applied the charge to the line-side trunks of wireless service providers (WSPs).
  18. Stentor submitted that Call-Net has failed to make a compelling case for the modifications it is requesting to Order 99-340 directives.
  19. Stentor submitted that Call-Net's application is merely a repetition of arguments that have been considered and addressed on a number of occasions by both the Commission and the industry in general through the CRTC Interconnection Steering Committee (CISC) process.
  20. Stentor noted that 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, the Commission imposed obligations on IXCs independent of the form of interconnection selected. Stentor argued that the obligations of IXCs, incumbents as well as entrants, are clearly different than the services and functionalities that service providers supply to their end-customers. Stentor further noted that Decision 92-12 and subsequent Commission determinations have clearly established that the privileges and obligations of IXCs may differ from those of retail customers.
  21. Stentor pointed out that there are many instances in which IXCs that interconnect with the companies on a line-side basis are subject to different requirements than the companies' retail customers. Stentor provided some examples such as arrangements concerning the provision of equal access, operator services and the payment of contribution that serve to distinguish competitive IXCs, regardless of the form of interconnection they select, from retail customers.
  22. Stentor further noted that carriers can purchase a variety of services which are marketed by the companies' carrier services groups that are not available to the companies' retail customers.
  23. Stentor submitted that IXCs are required to pay contribution charges and that such contribution is payable regardless of whether a competitive IXC interconnects using line-side or trunk-side arrangements. Stentor noted that the companies' retail customers do not pay separate contribution charges.
  24. Stentor concluded that it should be obvious that Call-Net's assertion that it is being unjustly discriminated against because it is subject to different obligations than the companies' retail customers is without substance.
  25. Stentor submitted that the use of trunk-side CCS7 interconnection arrangements should not be discouraged through the establishment of artificial incentives for line-side interconnection arrangements such as that proposed by Call-Net in its application.
  26. Stentor submitted that Call-Net's "basic principle", which is that the Commission failed to treat Call-Net as a retail customer of the companies, was considered in Order 99-340 and rejected by the Commission.
  27. Stentor added that contrary to Call-Net's belief, Call-Net's status as an IXC remains unaffected, apart from the fact that it must assume obligations as a result of the implementation of local interconnection and LNP.
  28. Stentor considered that Call-Net's comparison of itself to retail customers of the companies is completely ill-founded since substantial differences exist between the services available to IXCs and the services offered to retail customers.
  29. In its reply comments, Call-Net submitted that there can be no dispute that Order 99-340 is discriminatory on its face in that it grants a preference to the ILECs and their retail customers as compared to IXCs when they are customers of the ILECs line-side service. It was Call-Net's view that the only question to be addressed is whether this discrimination is justified.
  30. Regarding Stentor's statement that contribution is payable by IXCs and not by retail customers, Call-Net noted that this distinction does not relate to the service involved, but to the Commission's regulatory regime for ensuring the telcos remain profitable in supporting below cost local service to high-cost areas. Call-Net stated that contribution is not a service but a "tax" imposed by the regulator. As such, Call-Net concluded, it is erroneous to make a distinction in the type of service provided based solely upon whether or not the contribution tax is levied on that service.
  31. Call-Net submitted that IXCs do not prefer line-side service per se, but believe in the right to use that service when it makes business sense. Call-Net added that it is no secret that the main reason why line-side service is so crucial to IXCs is the exorbitant rate differential between line-side and trunk-side termination. Call-Net noted that those issues are subject to a separate proceeding (Call-Net's Network-of-Networks application).
  32. The Commission considered Call-Net's application in light of the criteria set out in Guidelines for review and vary applications, Telecom Public Notice CRTC 98-6 dated 20 March 1998, in which the Commission stated that for it to exercise its discretion pursuant to section 62 of the Act, an applicant must demonstrate that there is substantial doubt as to the correctness of the original decision, for example due to:
  (i) an error in law or in fact;
  (ii) a fundamental change in circumstances or facts since the decision;
  (iii) a failure to consider a basic principle which had been raised in the original proceeding; or
  (iv) a new principle which has arisen as a result of the decision.
  Re: Error of law
  33. Call-Net's first argument is that in Order 99-340, the Commission committed an error of law on the basis that the order requires and authorizes unjust discrimination against IXCs, an undue and unreasonable preference in favour of both the ILECs and their retail customers and an undue and unreasonable disadvantage for IXCs using line-side connections to terminate their toll traffic, in violation of subsection 27(2) of the Act.
  34. The Commission notes that the issues raised by Call-Net in its application are substantially the same as the issues raised in the proceeding leading up to Order 99-340.
  35. The Commission considers that carriers and retail end-users are two different classes of ILEC customers. The Commission further considers that it is not improper to charge two different classes of customer two different tariffs for the same service, e.g. the distinction between residential and business tariffs where business customers are charged more for the same basic service offered to the residential end-user.
  36. The Commission notes that subsection 27(3) of the Act states that the Commission may determine in any case, as a question of fact, whether a Canadian carrier has complied with section 27 as well as other sections of the Act.
  37. In Order 99-340, the Commission found, as a question of fact, that in purchasing line-side connections, carriers were not fulfilling their obligations as the N-1 carrier and accordingly the discrimination between a carrier using FG A termination and a retail customer is justified.
  Re: Failure to consider a basic principle which was raised in the original proceeding
  38. The second argument made by Call-Net is that the Commission, in Order 99-340, failed to consider a basic principle which had been raised in the original proceeding.
  39. The principle that competitors should have access to interconnection services at the same rate as retail customers, was raised by parties in the proceeding leading up to Order 99-340 and was addressed by the Commission in paragraphs 17 to 19 of that order.
  Re: A new principle has arisen as a result of Order 99-340
  40. Call-Net's third argument is that a new principle has arisen as a result of Order 99-340, namely, that IXCs are without any defined status vis-à-vis the ILECs.
  41. The Commission considers that the status of IXCs as well as their rights and obligations are very well defined through a series of Commission decisions and orders that deal with issues related to competition in the long distance market.
  42. In Commission's view, Order 99-340 did not create a new environment in which IXCs have no status. Indeed, it further defined their responsibilities in an evolving environment in which the introduction of new technologies such as LNP impose new responsibilities and obligations on all carriers including IXCs.
  43. The Commission considers that Call-Net has failed to make a case that a new principle has arisen as a result of Order 99-340.
  Disposition of application
  44. The Commission is of the view that Call-Net has not demonstrated substantial doubt about the correctness of Order 99-340. Therefore, the application is denied.
  45. The Commission notes that Call-Net raised an issue related to the application of the LRN Absent Charge to resellers. Also, Cantel raised the issue of the application of the same charges to WSPs. The Commission is of the view that these issues are beyond the scope of this proceeding.
  Secretary General
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