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Order CRTC 2000-37
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Ottawa, 21 January 2000
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This order concerns a competitive dispute with respect to contribution payments, pursuant to Part VII, CRTC Telecommunications Rules of Procedure, between Hurontario Telephones Limited (Hurontario) and London Telecom Network Inc. (London Telecom).
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File No.: 8692-H2-01/98
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1.
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This dispute is being disposed of concurrently with a similar dispute between La Compagnie de Téléphone de Warwick and Distributel Communications Limited dated 24 December 1998. See Order CRTC 2000-38 dated 21 January 2000.
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2.
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By letter dated 24 November 1998, Hurontario requested that the Commission order London Telecom to abide by Regulatory Framework for the Independent Telephone Companies in Quebec and Ontario (Except Ontario Northland Transportation Commission, Québec-Téléphone and Télébec ltée), Telecom Decision CRTC 96-6, 7 August 1996 (Decision 96-6) and to pay contribution retroactive to 7 August 1996.
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3.
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Hurontario noted that it had already attempted to get London Telecom to pay contribution, but its efforts had failed. Hurontario stated that London Telecom refused to provide traffic statistics or pay contribution for the traffic it terminates and originates in Hurontario territory as required by Decision 96-6.
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4.
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The Commission notes that Hurontario and North Norwich Telephones Ltd. (North Norwich) merged in 1998 and that Hurontario's operating territory currently comprises that of both Hurontario and North Norwich. North Norwich had three exchanges: Woodstock (456), Burgessville (424), and Norwich (468). Hurontario has two exchanges: Thedford (296), and Port Franks (243). At issue in this dispute are the links between Bell Canada's (Bell) Woodstock Centrex switch and the 456, 424, and 468 exchanges.
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Liability for contribution payment
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5.
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Hurontario noted that London Telecom terminated a significant volume of traffic via Extended Area Service (EAS) links prior to blocking in October 1998. Hurontario stated that London Telecom terminated traffic via EAS links for more than two years after Decision 96-6 was issued (7 August 1996 until October 1998). Hurontario requested that the Commission order London Telecom to:
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(1) pay contribution on all originating and terminating traffic terminated via EAS;
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(2) provide the requested traffic statistics; and
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(3) register with Hurontario before terminating or originating any traffic in Hurontario exchanges so as to comply with Decision 96-6.
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6.
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Bell submitted that, based on the record of this dispute, the essential issue relates to the use of the term "operate". Bell noted the Commission's statement in Decision 96-6 that "IXCs [interexchange carriers] and resellers are required to register with the Commission and with the telephone companies in whose territories they intend to operate."
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7.
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Bell stated that London Telecom acknowledged that its customers could send toll calls to Hurontario's customers using EAS trunks that are in place between Bell's serving territory and Hurontario. Bell stated that this was confirmed by the traffic statistics provided by London Telecom in this proceeding.
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8.
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Bell submitted that London Telecom is operating in the territories of Hurontario and therefore should report the minutes to Hurontario for billing purposes and for calculating the Carrier Access Tariff (CAT).
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9.
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Bell noted that Decision 96-6 (page 52) clearly sets out the process for Alternate Providers of Long Distance Services (APLDS) who take advantage of EAS links to terminate traffic in independent territories.
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10.
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Bell submitted that resale using EAS links into the territories of the independent telephone companies (ITCs) is subject to payment of the Independent's contribution rate, and therefore would constitute operating in that territory. Indeed, London Telecom is providing toll service to its customers to Hurontario's territory and presumably to that of other ITCs. Therefore, Bell submitted that London Telecom should be required to register with each of the ITCs where London Telecom is originating or terminating traffic and report the minutes to the ITCsfor billing purposes and for calculating the CAT.
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11.
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Bell noted that the Commission has requested the parties to this proceeding to address the relevance of Telecom Orders CRTC 97-568, 98-307 and 98-1073-1 (Orders 97-568, 98-307 and 98-1073-1). Bell submitted that these orders dealt with the use of the company's, and other Stentor members' toll services originating from or terminating in the territories of the independents. Furthermore, in Order 97-568, the Commission stated that "… the resale of Bell toll services to, in effect, reduce the contribution obligations of APLDS at Bell's expense does not achieve competitive equity." (emphasis added)
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12.
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Bell stated that EAS is not a toll service, nor in any tariff notice filed with respect to the above-noted orders was it ever contemplated that the flow-through tariff would serve as an alternative collection mechanism. Bell submitted that the flow-through billing mechanism provided for in the above-noted orders is not applicable to EAS traffic. Bell submitted that the appropriate mechanism to be used for EAS traffic into the independents' territory, as outlined in Decision 96-6, would be for the APLDS to report the applicable traffic to the independent and to pay the relevant independent CAT rate to the independents.
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13.
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London Telecom provided its network schematic for connections to Hurontario's network for the period August 1996 to September 1998. London Telecom noted that since October 1998 it has ceased to terminate traffic to Hurontario exchanges via EAS links.
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14.
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London Telecom submitted that:
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(1) it has not engaged, and currently does not engage in the resale of EAS;
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(2) it does not resell the underlying services of Hurontario for the purpose of facilitating "one-hop" calling as described in Decision 96-6;
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(3) it does not have any customers within the exchanges of Hurontario;
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(4) it should not have to pay contribution for interexchange traffic terminating in Hurontario territory;
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(5) it is not obligated to provide Hurontario with traffic statistics pursuant to Decision 96-6;
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(6) it does not pay contribution directly to Hurontario; and
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(7) any contribution owing is paid indirectly by virtue of terminating contribution charges assessed and collected by Bell.
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15.
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London Telecom submitted that, if Hurontario is entitled to any compensation for EAS traffic, compensation is payable by Bell pursuant to the interconnection agreement between these two companies and to Bell's General Tariff (GT) Item 24.4(d).
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16.
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London Telecom noted the Commission's request for comments on the relevance of Orders 97-568, 98-307, and 98-1073-1. London Telecom understood that these orders deal with the flow-through by Bell and TELUS Communications Inc. (TCI) of ITC CAT charges when an APLDS terminates traffic in the territory of an ITC via Bell or TCI retail toll services. London Telecom stated that since it does not resell the toll services of either of these companies, the orders are not directly relevant to the present matter. London Telecom noted that the flow-through of the CAT charges is relevant to the resale of Bell EAS to terminate long distance traffic in the territory of an ITC.
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17.
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London Telecom stated that Bell attempted to bolster its argument by quoting two paragraphs from Decision 96-6. London Telecom submitted that however, these paragraphs do not support Bell's position. London Telecom submitted that the clear focus of these paragraphs is the use of EAS to originate traffic from a competitor's customers in the territory of an ITC.
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18.
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The Commission notes that Bell originated and terminated toll traffic in Hurontario exchanges at a final rate of $0.1197/minute ($0.0921 contribution plus $0.0276 direct toll = $0.1197) payable to Hurontario (the final 1998 Hurontario CAT). London Telecom was terminating toll traffic in those same exchanges at a contribution rate of $0.005/minute payable to Bell (Bell's contribution rate). The Commission is of the view that, among other things, there is a competitive inequity in this situation, as demonstrated by the large difference in contribution payable by the two competing companies to deliver toll traffic to the exchanges in question.
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19.
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Contrary to London Telecom's argument, the Commission is of the view that Bell's GT 24.4(d) applies to contribution flow-through with respect to the resale of Bell's toll services, and not to the delivery of toll traffic over EAS routes. EAS is not a toll service; therefore London Telecom is not reselling a toll service. Also, contrary to London Telecom's argument, the Commission is of the view that Decision 96-6 applies to terminating traffic as well as originating traffic. If it did not, London Telecom would have a major competitive advantage over Bell as described above. In any case, based on the record, London Telecom was both originating and terminating traffic in Hurontario's territory.
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20.
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The Commission notes that Decision 96-6 clearly sets out the process for APLDS who take advantage of EAS links to terminate traffic in independent territories:
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"The Commission is of the view that to the extent possible, competition should be expanded. There is a concern, however, with the financial impact on the independent companies. EAS can be used to bypass contribution payable to the independents both by long distance competitors who take advantage of EAS where the EAS link involves a Bell exchange and by local "one-hoppers". In Decision 92-12, the Commission did not allow long distance competitors to use Bell switches to originate traffic in the territories of parties who were not in the proceeding that led to that Decision. Competing long distance carriers were required to negotiate with the independents if they made use of Bell's EAS arrangements. Accordingly, the Commission approves the resale of EAS and directs that resellers of such services not be differentiated from resellers of long distance services and, therefore, that they be required to pay contribution. The payment of contribution on resold EAS recognizes the financial vulnerability of the independents. Resellers must register with the Commission and the relevant telephone company and provide, if requested to do so by the telephone company in question, traffic statistics to the telephone company for billing purposes and for calculating the CAT."
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21.
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In light of the foregoing, the Commission finds that London Telecom, by delivering toll traffic over an EAS link, was reselling EAS as contemplated in Decision 96-6 and that it must pay the appropriate contribution.
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22.
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The Commission is seriously concerned that London Telecom ignored warnings and consciously operated its system with a view to avoiding the payment of proper contribution charges.
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The billing period
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23.
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The parties have suggested that, if the Commission orders London Telecom to pay contribution in this case, there are a number of options with regard to the effective date of any Commission order (and thus the billing period for which Hurontario be allowed to collect contribution from London Telecom). The Commission notes that on 22 October 1998, London Telecom blocked all traffic heading to Hurontario exchanges via EAS links. Therefore, no terminating traffic was carried after this date.
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24.
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In its initial application, Hurontario requested that the Commission order London Telecom to pay contribution retroactive to 7 August 1996, the effective date of that decision.
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25.
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In its response, London Telecom challenged the above date, and submitted two alternative dates. Firstly, London Telecom submitted that the competitive regime for the independent telephone companies, including Hurontario, came into effect on 1 January 1997 not on 7 August 1996, when Decision 96-6 was issued. Thus, London Telecom submitted that the Commission's order should go back only to 1 January 1997.
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26.
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Secondly, London Telecom maintained that Hurontario's Terms of Service (the Terms) should apply. Thus, London Telecom submitted that under Article 18 of the Terms, a telephone company can send out a bill for previously unbilled and underbilled non-recurring charges (such as per-minute contribution) for a period of time extending back no further than 150 days.
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27.
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Bell submitted that the effective date of resale in the independent territories and the process of registration with the independents were outlined in Decision 96-6. Therefore, Bell submitted that the commencement date for the contribution to be paid to the independents would be the effective date of Decision 96-6 which was 1 January 1997.
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28.
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In reply comments dated 9 July 1999, Hurontario submitted that the Commission should order contribution retroactive to 8 June 1992, the date that Ontario Telephone Service Commission (OTSC) Order 5846 was issued. Hurontario noted that OTSC Order 5846 provided that "the independent telephone systems subject to its jurisdiction take all steps necessary to ensure that EAS links are used only for the purposes of establishing end-to-end communications within the approved EAS areas, except as may be otherwise authorized." Hurontario noted that the Commission ratified OTSC Order 5846 in Telecom Order CRTC 94-883, 29 July 1994.
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29.
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Hurontario added that on 16 April 1993, North Norwich, (which as noted above, now forms part of Hurontario), asked London Telecom to stop originating or terminating traffic from its exchanges using EAS. Hurontario noted that the Terms set out the basic rights and obligations of Hurontario and its customer. Accordingly, Hurontario maintained that if London Telecom was a customer of Hurontario, the 150 days retroactive limit should be counted from the date of 16 April 1993, when Hurontario first notified London Telecom of its obligations.
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30.
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In its reply comments of 16 July 1999, London Telecom disputed Hurontario's submission that OTSC Order 5846 entitles it to compensation from London Telecom. London Telecom submitted that there is nothing in the order granting Hurontario a right to such compensation. On the contrary, London Telecom submitted that OTSC Order 5846 is directed at Hurontario, not London Telecom, and makes it Hurontario's responsibility to block any inappropriate EAS calls. London Telecom submitted that Hurontario is not entitled to compensation from London Telecom for Hurontario's own failure to obey this order. Therefore, London Telecom maintained that, if the Commission were to order contribution payments, they should not retroact to either of 1992 or 1993.
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31.
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London Telecom submitted that even if Hurontario was entitled to compensation from London Telecom, which it denied, any charges which were not correctly billed within 150 days of the date they were incurred could no longer be recovered.
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32.
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London Telecom submitted that the same limitation period applies in respect of any charges which would have been payable to Bell pursuant to Item 24.4(d) of its Terms. London Telecom argued that it was not a customer of Hurontario, but rather of Bell. London Telecom added that since terminating traffic between London Telecom's network and Hurontario's network has been blocked since October 1998, there has been no terminating traffic in the past 150 days which should be subject to charges under Item 24.4(d) of Bell's tariffs.
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33.
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The first issue is Hurontario's suggestion that the Commission's order should retroact to a time in 1992, 1993 or even 1994.
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34.
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The Commission notes that OTSC order 5846 required the ITCs subject to OTSC jurisdiction to take all the steps necessary to ensure that EAS links are used only for the purposes of establishing end-to-end communications within the approved EAS areas.
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35.
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The Commission agrees with London Telecom that the OTSC Order does not grant Hurontario a right to compensation. Therefore, the Commission considers that an Order should not retroact to either of 1992 or 1993. Moreover, the Commission notes that it merely ratified OTSC Order 5846 in July 1994; the OTSC Order thereby gained no different or greater significance at that time. Accordingly, the Commission is of the view that the effective date for compensation should not retroact to the ratification date of July 1994.
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36.
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The second issue is London Telecom's argument that the Commission's order should retroact to 150 days from when Hurontario (or Bell) attempted to collect a previously unbilled amount, under Article 18 of the Terms.
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37.
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In the Commission's view, the 150-day limitation period of Article 18 does not apply to the present situation. What is at issue is non-compliance by London Telecom with the registration and payment of contribution provisions of Decision 96-6. A party in non-compliance with a Commission decision should not be able to take advantage of a section of the Terms. Such non-compliance could amount to "customer deception – in which case, the 150-day limitation period does not apply. In any event, both Hurontario and London Telecom agree that the latter is not a customer of Hurontario, and so Hurontario's Terms would not apply to London Telecom. As to whether London Telecom is a Bell customer (and thus Bell's Terms, not Hurontario's Terms, should be applied), as argued above by London Telecom, the Commission reiterates that the issue at hand is non-compliance with Decision 96-6 (and not Bell's Tariff Item 24.4(d)). Therefore, the Commission dismisses the argument that its order should retroact to 150 days from when Hurontario (or Bell) attempted to collect a previously unbilled amount, under Article 18 of the Terms.
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38.
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The third issue is the effective date of the resale of EAS provisions of Decision 96-6 for the purposes of this dispute.
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39.
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In the Commission's view, it is clear from Decision 96-6 that certain provisions (such as individual CATs for the independents) were only to come into effect on 1 January 1997. Decision 96-6 clearly established a competitive interexchange regime (including resale) in the territories of the independents effective 1 January 1997. The Commission considers that, for the purpose of this dispute, the effective date is 1 January 1997.
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40.
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In light of the foregoing, the Commission finds that the billing period is 1 January 1997 to 22 October 1998.
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The appropriate traffic estimate and billing process
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41.
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London Telecom provided its estimate for the number of minutes terminated in the exchanges in question in confidence. London Telecom noted that the information provided for that period is unreliable, having in effect derived estimates from estimates.
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42.
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Hurontario noted that the traffic minutes provided by London Telecom for 1996, 1997 and 1998 are estimated yearly totals only. Hurontario stated that London Telecom did not provide any information on how it estimated the traffic minutes. Hurontario submitted that from a statistical reference, very little reliability could be attached to estimates without knowledge of the methodology used. Hurontario stated that inasmuch as, prior to October 1998, London Telecom terminated traffic intermixed with EAS traffic, Hurontario cannot precisely determine the number of minutes terminated by London Telecom.
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43.
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Hurontario provided its estimate for the number of minutes terminated by London Telecom, which was substantially higher than the estimate provided by London Telecom. Hurontario stated that it was unable to estimate the originating minutes. Hurontario acknowledged the originating minutes would be fewer than terminating minutes due to blocking of access numbers as they became known. Hurontario advocated that the appropriate estimate of originating minutes would be 25% of terminating minutes. In light of the foregoing, Hurontario provided an adjusted estimate for 1998.
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44.
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The Commission also requested Bell to provide any actual or estimated traffic statistics that would assist in this proceeding. In response, Bell stated that single-hop EAS traffic cannot be readily distinguished from other local traffic and therefore the company does not have any statistical information, which would be of assistance to the Commission. Also, the tracking of such information on a going-forward basis would represent a significant modification to the company's operation.
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45.
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In reply comments, London Telecom submitted that Hurontario's estimates have no merit and should not be relied upon by the Commission for any purpose whatsoever.
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46.
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The Commission notes that there is a large difference between the two companies' estimates. The Commission notes that Hurontario's estimates did not take into account the growth in network access services experienced in its territory, and overestimated London Telecom's market share. Accordingly, the Commission finds that London Telecom's traffic estimate is a more reasonable one, and should be used as the basis for any billing in this case.
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47.
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London Telecom's estimate does not include originating traffic, but there is evidence that originating traffic was carried. Generally, the ratio of originating traffic to terminating traffic is 1:1. Since London Telecom claimed (and Hurontario did not dispute) that it did not solicit customers in Hurontario's territory, this ratio would be too high. In the circumstances, the Commission finds that London Telecom's estimate should be increased by 25% to reflect originating traffic.
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48.
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The Commission notes that London Telecom's traffic estimate covers a period up to September 1998. Therefore, there is the period 1 to 21 October 1998 that must be added to the estimate, since London Telecom commenced blocking on 22 October. The Commission is of the view that the traffic in this 21-day period can be estimated by using London Telecom's September 1998 minute estimate, and multiplying by a factor of 70% (21 days/30 days). To this should be added originating traffic for 21 days, calculated at 25% of terminating traffic. The question of originating traffic from 22 October 1998 to the present is covered in the next section.
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49.
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The Commission notes that Bell has already paid all the contribution for long distance traffic to and from Hurontario's territory for the past periods in question.
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50.
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The Commission notes that:
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(1) Bell has not asked London Telecom to reimburse it for the unpaid contribution; and
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(2) Bell submitted that, in this case, the appropriate mechanism to be used for EAS traffic into Hurontario, as outlined in Decision 96-6, would be for London Telecom to report the applicable traffic to Hurontario and to pay the relevant independent CAT rate to Hurontario.
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In light of the above, the Commission is of the view that in this case Hurontario should bill London Telecom for the contribution in question.
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51.
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The Commission considers that, had the amounts been paid in the appropriate years, Hurontario would not have earned in excess of its approved rate of return range in each of the years. The Commission is of the view that the payment to Hurontario should not impact the CAT calculation in the year in which Hurontario records the payment (i.e., Hurontario should remove the amount from the calculation of the CAT in the year the money is received).
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52.
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In light of the foregoing, the Commission:
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(1) authorizes Hurontario in this case to bill London Telecom forthwith for the period and traffic amounts set out above;
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(2) directs London Telecom to pay Hurontario within 30 days of receiving Hurontario's invoice; and
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(3) finds that the payment to Hurontario should not impact the CAT calculation in the year in which Hurontario records the payment.
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Blocking after October 1998
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53.
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Hurontario stated that:
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(1) one of its customers advised the company recently that it has been a customer of London Telecom for more than two years, using an access number not identified by London Telecom to Hurontario in London Telecom's letter of 23 November 1998;
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(2) there were a number of access numbers (on London Telecom's home page) that customers could access that were not included in the directory provided by London Telecom; and
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(3) there were London Telecom customers who reside in Hurontario exchanges contrary to the statement by London Telecom.
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54.
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Hurontario noted London Telecom's statement: "Customers of London Telecom, whether from Ottawa or London, could possibly use their travel Card in Hurontario territory if the local number for Woodstock is not properly blocked."Hurontario submitted that it is not its responsibility to block access to London Telecom's network. Hurontario stated that it started blocking access in 1993 after discussions with London Telecom. Hurontario further submitted that it is London Telecom's responsibility to track and report all of its traffic that either originates from or terminates into the network.
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55.
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Hurontario stated that the number that was not blocked was not provided to Hurontario prior to April 1999. Hurontario stated that it decided not to block about that time to determine if there were customers of London Telecom living in Hurontario's territory contrary to London Telecom's assertions. Hurontario stated that there are five such customers who regularly and frequently access London Telecom's network. Hurontario stated that it would provide details to the Commission, if requested.
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56.
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Hurontario stated that for over six years London Telecom has claimed it would not sign up customers in Hurontario's serving territory, but appears to have nevertheless continued to do so. Hurontario submitted that London Telecom should register and provide actual traffic data to Hurontario as required in Decision 96-6.
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57.
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London Telecom noted Hurontario's concern that the regular network access numbers were not included in the directory. London Telecom submitted that they were in fact provided along with other access numbers, including the travel card access numbers.
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58.
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London Telecom maintained that all of its local access numbers have always been publicly available (e.g., at its website, through its corporate literature, through disclosure by call centre representatives, and the like) and therefore easily accessible by any person requiring them. London Telecom stated that in past years, it has been common for ITCs to use this publicly available information to program their switches accordingly to block these access numbers.
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59.
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London Telecom stated that the access numbers are, after all, local numbers and thus require blocking in such instances. London Telecom submitted that this is neither an onerous task nor one that should be the responsibility of London Telecom. Moreover, London Telecom noted that it always co-operated with such requests from ITCs in the past. Nevertheless, although London Telecom believed that it had already sent all of the access numbers, a listing of the travel card access numbers had since been forwarded.
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60.
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London Telecom noted Hurontario's argument that it has no obligation to block calls placed from Hurontario's territory to London Telecom's Woodstock travel card access number. London Telecom submitted that OTSC Order 5846 cited directly contradicts this position by Hurontario. London Telecom submitted that based on Hurontario's own argument, it has a clear obligation to block such calls.
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61.
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The Commission notes that both parties had already agreed to block traffic via EAS links between Hurontario and Bell territory. However, Hurontario acknowledged that it did not block certain numbers it was aware of.
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62.
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The Commission is of the view that if the arrangement between the parties is that all originating and terminating traffic is to be blocked, then the arrangement should be fully carried out. In the context of such an arrangement, the Commission considers that Hurontario must block calls placed from Hurontario's territory to London Telecom's Woodstock travel tard access number via EAS links to comply with this arrangement.
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63.
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As noted, Hurontario acknowledged that it did not block certain originating numbers it was aware of. A question remains regarding liability for contribution on originating minutes during the period of 22 October 1998 to the present. In the circumstances, the Commission considers that London Telecom should not be held liable for such contribution.
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64.
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In light of the foregoing, the Commission:
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(1) finds that given that Hurontario did not fully block originating traffic it was aware of during the period of 22 October 1998 to the present, London Telecom should not be responsible for such contribution;
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(2) reminds the parties that where the arrangement between the parties is to block all terminating and originating calls, Hurontario must block calls placed from Hurontario's territory to London Telecom's Woodstock travel card access number;
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(3) directs London Telecom to inform Hurontario on an ongoing basis of all numbers that should be blocked by Hurontario; and
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(4) reminds London Telecom for the future that (unless it registers, reports traffic statistics and pays contribution to Hurontario, as contemplated in Decision 96-6) it must continue to block all long distance calls that could connect to Hurontario's territory via EAS routes.
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Retroactive contribution payments with respect to other ITCs
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65.
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The Commission notes that London Telecom may have been or may be originating and terminating traffic to other ITCs in Ontario and Quebec using EAS links similar to that for Hurontario.
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66.
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In light of the foregoing, the Commission directs London Telecom to file a report within 30 days to:
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(1) list any other ITCs to which it connects or has connected using EAS links; and
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(2) provide its plan to reimburse any underpayment of contribution in circumstances similar to the terms of this order, copying the relevant ITCs and Bell.
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Confidentiality
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67.
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London Telecom stated that despite its repeated insistence that Hurontario treat London Telecom's traffic information on a confidential basis, Hurontario has failed to do so. Instead, London Telecom stated that Hurontario has publicly disclosed its own estimates of London Telecom's traffic volumes. London Telecom submitted that this is grossly inappropriate behaviour that deserves immediate censure by the Commission. London Telecom requested that the Commission direct Hurontario to take appropriate steps to ensure that confidential information relating to London Telecom is adequately protected.
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68.
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The Commission notes that in this proceeding, it directed London Telecom to disclose the total traffic minutes for each of the years 1996, 1997, and 1998 in confidence to Bell and Hurontario only, and not to release the information to any other party.
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69.
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However, the Commission also notes that, as a general rule, parties are required to place traffic estimates on the public record during public proceedings to determine a regulated company's CAT. Thus, London Telecom would normally be required to place its traffic estimates on the public record. Given this, and that the Commission considers London Telecom's traffic estimates more reasonable in this case, the Commission considers that London Telecom would not have suffered harm by Hurontario's disclosure. Accordingly, the Commission finds no reason to censure Hurontario for this disclosure.
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Secretary General
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This document is available in alternative format upon request and may also be viewed at the following Internet site: http://www.crtc.gc.ca
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