ARCHIVED - Order CRTC 2000-38

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Order CRTC 2000-38

Ottawa, 21 January 2000
This order concerns a competitive dispute with respect to contribution payments, pursuant to Part VII, CRTC Telecommunications Rules of Procedure, between La Compagnie de Téléphone de Warwick (Warwick) and Distributel Communications Limited (Distributel).
File No.: 8692-W2-01/98
1. This competitive dispute is being disposed of concurrently with a similar dispute between Hurontario Telephones Limited (Hurontario) vs. London Telecom Network Inc. (London Telecom) dated 24 November 1998. See Order CRTC 2000-37 dated 21 January 2000.
2. By letter dated 24 December 1998, Warwick informed the Commission about a competitive dispute between Warwick and Distributel. Warwick claimed that Distributel was not paying the appropriate Carrier Access Tariff (CAT) amount for terminating traffic in its territory, as required 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).
3. Further, Warwick claimed that traffic statistics from Distributel would be required for the calculation of the appropriate level of the CAT in Warwick's territory, and for billing purposes. Distributel claimed that it pays Bell Canada (Bell) for the use of Bell's services in an exchange that is adjacent to Warwick's territory, and the manner in which it operates does not attract contribution charges from Warwick.
4. The Commission notes that Warwick has three exchanges: Kingsey Falls, Warwick, and St. Albert (area code 819, NXX 363, 358, and 353, respectively). At issue in this dispute are the links between Bell's Victoriaville Centrex switch and the three exchanges.
Liability for contribution payment
5. Warwick submitted that Distributel is operating in Warwick territory because it terminates toll calls from its customers into Warwick territory using Extended Area Service (EAS) trunks that are in place between the operating territories of Bell and Warwick.
6. Warwick submitted that the Commission made it very clear that resale using EAS links into the territories of the independent telephone companies (ITC) is subject to payment of contribution. Warwick stated that the Commission has noted its concerns that contribution payable can be bypassed by long distance competitors who take advantage of EAS links involving Bell exchanges.
7. Warwick submitted that Distributel is using EAS between the Bell exchange of Victoriaville and the Warwick exchanges of Kingsey Falls, Warwick and St. Albert to avoid contribution payments to Warwick. Warwick, in support of its position, provided a one-week study in 1998 that revealed that toll minutes were terminated in the territory of Warwick from Victoriaville. Warwick stated that this figure could be extrapolated to yield a total for the year 1998. Warwick provided an estimate of the contribution due from Distributel.
8. Warwick submitted that Tariff Item 24.4(d) of Bell's General Tariff (GT) does not apply in this case because Distributel is terminating its toll traffic using EAS links and, therefore, the Commission's approach respecting resale of EAS as set out in Decision 96-6 applies.
9. Bell noted that the issues in the Warwick vs. Distributel dispute are essentially the same as those raised in the Hurontario vs. London Telecom dispute. Bell stated that the comments it made in the latter proceeding apply equally to the issues raised in this current proceeding.
10. Bell rejected the suggestion that the mechanism provided for in Bell's "flow-through" tariff, i.e., GT Item 24.4(d), be used to collect and remit contribution charges applicable to traffic originated by resellers, such as London Telecom or Distributel, and terminating on ITC facilities by means of EAS trunks.
11. Bell submitted that such an application would contravene the Commission's determination, as set out in Decision 96-6, that resellers should report their minutes to the independents and remit the relevant CAT charges directly to the ITC. Bell submitted that, if the Commission were to adopt the position taken by Distributel, this would, in effect, amount to a review and vary of this particular element of Decision 96-6.
12. Moreover, Bell submitted that provision of this additional capability to resellers would contravene the intention of the approved tariff provisions of its GT Item 24.4(d), in that the tariff would serve not as a "flow-through" mechanism but, rather, as an alternate collection mechanism for resellers.
13. Similarly, Bell also rejected any suggestion that resellers are exempt from past charges due to the 150 days limitation on unbilled non-recurring charges provided for in Bell's Terms of Service (the Terms). Bell submitted that the Commission should reject any attempts to shift the cost burden to Bell of the legitimate Carrier Access charges in question, particularly in light of the extensive attention previously given to these same issues in the proceeding leading to Decision 96-6.
14. With respect to its traffic reporting and billing systems, Bell noted that this dispute relates to the use of Bell's facilities and services – in particular, traffic from Centrex service carried over EAS trunks. Bell submitted that as Centrex service is a local access service and EAS is also a local service, the traffic from Centrex service carried over EAS trunks becomes part of that local service.
15. Bell stated that local service traffic is not measured today and the development of an appropriate reporting mechanism to accommodate the specific service configuration in question would be cost prohibitive. Accordingly, Bell submitted that it should not be required to implement systems and procedures to track such traffic.
16. As noted above, Bell stated that it does not process call records between resellers' customers and independents' customers over EAS trunks, since such calls are local calls. Indeed, Bell stated that it was only recently that Warwick stated that Distributel was terminating minutes in its territory without reporting such minutes, contrary to the Commission's determinations in Decision 96-6.
17. Bell stated that its security group carried out a one-time monthly study in order to determine the volume of traffic exchanged on EAS trunks between Bell's Victoriaville exchange and the Warwick exchanges of Kingsey Falls, St. Albert and Warwick. Bell stated that it was through this specific analysis that it was able to determine the number of minutes over EAS trunks attributable to Distributel. Bell stated that this information was forwarded by Warwick to Distributel and copied to the Commission.
18. In conclusion, Bell submitted that:

(1) Distributel customers can send toll calls to, and receive toll calls from, Warwick's customers using Bell's EAS trunks interconnecting with Warwick. As such, Distributel is, in effect, operating in Warwick's territory;

(2) Distributel should be required to report such minutes to Warwick, in accordance with Decision 96-6, and to remit relevant independent CAT charges directly to the independents; and

(3) the commencement date for the CAT to be paid by the resellers to the independents should be 1 January 1997, consistent with the effective date of Decision 96-6.

19. Distributel provided its network schematic for connections to Warwick's network. Distributel submitted that it does not operate in Warwick territory within the meaning of Decision 96-6. In this regard, Distributel noted the following passage from Decision 96-6: "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."
20. Distributel submitted that this passage makes it clear that in Decision 96-6 the Commission was concerned with the resale of EAS in order to originate traffic from an ITC's territory. Distributel stated that in such a case, the reseller would be required to register with the ITC, provide traffic data, if requested, and be liable to pay contribution directly to the company. Distributel stated that it does not operate in this manner.
21. In its reply comments, Distributel submitted that it was not doing anything in Warwick's territory, and therefore it was not "operating" in Warwick's territory. Distributel stated that it is a customer of Bell and it is Bell – not Distributel – which terminates traffic in Warwick territory.
22. Distributel stated that it does not obtain any services or facilities from Warwick. However, Distributel stated that it does use Bell's Centrex services in the Victoriaville exchange, adjacent to Warwick territory. Distributel stated that it is registered as a reseller with Bell and pays the contribution charges levied by Bell under Item 24 of Bell's GT, including those charges levied on calls terminating in Warwick territory via Bell's EAS. Distributel did not believe that it was obliged to pay the contribution charges identified by Warwick.
23. Distributel noted Bell's argument that Item 24.4(d) does not apply to traffic carried over EAS trunks. Distributel noted Bell's suggestion that Distributel is effectively asking the Commission to review and vary Decision 96-6 by advancing this position. Distributel submitted that there is no merit to Bell's arguments. Distributel reiterated that it does not operate in Warwick territory and, therefore, does not come within the Decision 96-6 regime. Consequently, Distributel submitted that there is no question of Distributel asking for a review and variance of Decision 96-6.
24. Distributel submitted that the real reason for Bell's position on Item 24.4(d) is Bell's claim that it would incur significant costs if it were required to modify its traffic reporting and billing systems in order to properly implement Item 24.4(d). Distributel submitted that Bell made a deliberate choice not to make these system modifications and now finds itself facing potential liability for its failure to collect the required flow-through charges. Distributel submitted that Bell's decision to avoid the required system modification costs does not change the wording of Item 24.4(d) and cannot relieve Bell of its obligations under that provision.
25. Distributel submitted that Bell's claim that the cost of modifying its traffic reporting and billing system would be expensive and might even exceed the contribution collected is not credible. Distributel submitted that the exact quantum of such costs has no bearing on the proper interpretation of Item 24.4(d). Distributel submitted that the rules of statutory interpretation require that Item 24.4(d) be given its plain meaning. Distributel submitted that on a plain reading of this provision, it applies to Centrex facilities.
26. Distributel submitted that Bell and Société d'administration des tarifs d'accès des télécommunicateurs' (SATAT's, representing Warwick) position that the burden of traffic reporting should fall to Distributel is clearly inappropriate. Distributel noted Bell's admission that it can measure the relevant traffic if it chooses to do so. In contrast, Distributel stated that it must rely on its station message detail recorder (SMDR) to measure traffic.
27. In addition, Distributel submitted that there are doubtless other Centrex resellers, including numerous single-hop Centrex resellers, who terminate traffic into the territories of independents via Bell's EAS. Distributel stated that these service providers may not subscribe to Bell's SMDR service and may not be capable of self-reporting. As between Bell and Distributel, Distributel submitted that there can be no doubt that the appropriate party to measure contribution-eligible minutes should be Bell.
28. Distributel noted London Telecom's submission in the Hurontario vs. London Telecom contribution dispute that, in previous submissions to the Commission, Bell has interpreted Item 24.4(d) in exactly the same manner as proposed by Distributel. Distributel stated that in the cover letter to Tariff Notice 5894, dated 13 December 1996, Bell indicated that Item 24.4(d) would be applied to all traffic originating or terminating in the territory of the ITCs via the resale of Bell's facilities and services.
29. Distributel noted that Bell expanded upon its position in a letter dated 12 February 1997; Bell noted that Item 24 ensures that CAT charges are passed through to competitors who resell Bell's Megaroute and Centrex services.
30. Distributel submitted that these statements are clear and unambiguous. Distributel submitted that Item 24.4(d) applies to traffic carried over interconnecting circuits with Centrex facilities, such as Distributel's Victoriaville Centrex.
31. Distributel reiterated that it is a customer of Bell and has applied all contribution charges levied by Bell pursuant to Item 24. In particular, Distributel stated that it has paid contribution on all calls terminating to the Public Switched Telephone Network via its Centrex in Victoriaville, including those calls terminating in Warwick territory via Bell's EAS. Moreover, Distributel stated that it does not have an obligation to ask Bell to impose additional charges that Bell may have failed to bill. In such a case, Distributel submitted that it is open to Bell to correct that failure which is discovered, subject to the limitations imposed by Bell's Terms.
32. The Commission notes that Bell originated and terminated toll traffic in the Warwick exchanges at a final rate of $0.1292/minute ($0.1081 contribution plus $0.0211 direct toll = $0.1292 total) payable to Warwick (the final 1998 Warwick CAT). Distributel terminated 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 companies to deliver toll traffic to the exchanges in question.
33. Contrary to Distributel'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 Distributel is not reselling a toll service. Also, contrary to Distributel'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, Distributel would have a major competitive advantage over Bell as described above.
34. The Commission notes that Decision 96-6 clearly sets out the process for an Alternate Provider of Long Distance Services (APLDS) who take advantage of EAS links to terminate traffic in Independent territories:

"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."

35. The Commission is of the view that, Distributel delivers toll traffic via EAS links as set out in Decision 96-6 and it should have reported its traffic minutes directly to Warwick for billing purposes.
36. In light of the foregoing, the Commission:

(1) finds that Distributel, by delivering toll traffic over an EAS link, is reselling EAS as contemplated in Decision 96-6 and that it must pay the appropriate contribution; and

(2) directs Distributel to register with, and report originating and terminating contribution eligible toll minutes to, Warwick in compliance with Decision 96-6.

37. The Commission is seriously concerned that Distributel ignored warnings and consciously operated its system with a view to avoiding the payment of proper contribution charges.
The billing period
38. Warwick requested Distributel to indicate the number of minutes of Distributel toll traffic that originated from or terminated in Warwick's operating territory from 1 January 1997 to 30 August 1998, and to estimate this traffic from 1 September 1998 to 31 December 1999 for budgetary purposes.
39. Distributel disagreed with Bell and SATAT's argument that the commencement date for any liability Distributel may face for unpaid Warwick CAT charges should be 1 January 1997.
40. Distributel submitted that any liability, which may arise, would be based on Item 24.4(d) of Bell's GT. Accordingly, Distributel submitted that it would be subject to Article 18 of Bell's Terms.
41. Distributel stated that contribution charges are levied on a per-minute basis and qualify as a non-recurring charge. Consequently, pursuant to Article 18.1(b) of Bell's Terms, Distributel submitted that its liability for unbilled or underbilled flow-through contribution extends back to no further than 150 days from the date on which such charges are correctly billed.
42. Distributel noted that even if it were incorrect in its interpretation of Decision 96-6, the Terms of Warwick would still apply. Following Decision 96-6, Distributel stated that those Terms are the same as Bell's. Consequently, Distributel submitted that the analysis set out above would remain applicable.
43. Distributel submitted that it remains entitled to reply on Article 18 of Bell's Terms. Distributel stated that Article 18 was established to provide parties with a reasonable degree of certainty on billing matters. Distributel stated that it has operated its business under the assumption that its potential liability for unbilled for underbilled contribution is limited by Article 18.
44. Distributel acknowledged that it may be liable to pay flow-through charges to Bell pursuant to Item 24.4(d) of Bell's GT. Distributel stated that such charges would apply on a going-forward basis. In accordance with Article 18 of its Terms, Distributel stated that Bell could also bill Distributel for unbilled flow-through charges for a period of 150 days prior to the date of a corrected bill.
45. Distributel stated that the potential liability of Bell to Warwick for flow-through charges that Bell has failed to collect is a matter that does not directly concern Distributel and is presumably governed by the interconnection agreement between these two companies. Distributel stated that it would appear reasonable for Bell and Warwick to attempt to reach a negotiated settlement on this point, in light of that agreement.
46. 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 Distributel 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. As to whether Distributel is a Bell customer (and thus Bell's Terms, not Warwick's Terms, should be applied), as argued above by Distributel, 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 Warwick (or Bell) attempted to collect a previously unbilled amount, under Article 18 of the Terms.
47. The Commission notes that Distributel provided an estimate which started in September 1997 (when it commenced operation over the EAS link) and concluded in April 1999. Since Distributel continues to terminate traffic via Bell EAS routes, the Commission finds that the billing period is ongoing from 1 September 1997.
The appropriate traffic estimate and billing process
48. The Commission notes that only Distributel filed a comprehensive traffic estimate in this case. Warwick was able to provide an extrapolation for the year 1998 based on a study of only a one-week period. As noted above, Distributel's estimate was for the period of September 1997 to April 1999 and was based on SMDR records from Distributel's Centrex switch in Victoriaville (leased from Bell). The Commission notes that Distributel's estimate is the best available in the circumstances of this case. The Commission also notes that Distributel's 1998 SMDR measurement is similar to Warwick's 1998 extrapolated estimate.
49. In the Hurontario vs. London Telecom case, Hurontario submitted that London Telecom's terminating traffic estimate should be increased by 25% to include origination traffic. In this case, there is no evidence on the record that a similar situation exists. Therefore, the Commission is of the view that no adjustment should be made to Distributel's estimate.
50. The Commission is of the view that Distributel's estimate is reasonable and authorizes Warwick to bill for the period of the estimate. Furthermore, Warwick may bill on an ongoing basis, as ongoing traffic statistics become available from Distributel.
51. The Commission notes that:

(1) Bell has not asked Distributel to reimburse it for the unpaid contribution; and

(2) Bell submitted that, in this case, the appropriate mechanism to be used for EAS traffic into Warwick, as outlined in Decision 96-6, would be for Distributel to report the applicable traffic to Warwick and to pay the relevant independent CAT rate to Warwick.

In light of the above, the Commission is of the view that in this case Warwick should bill Distributel for the contribution in question
52. The Commission considers that, had the amounts been paid in the appropriate years, Warwick 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 Warwick should not impact the CAT calculation in the year in which Warwick records the payment (i.e., Warwick should remove the amount from the calculation of the CAT in the year it receives the money).
53. In light of the foregoing, the Commission:

(1) authorizes Warwick in this case to bill Distributel forthwith for the period and traffic amounts set out above;

(2) directs Distributel to pay Warwick within 30 days of receiving Warwick's invoice;

(3) authorizes Warwick to bill on an ongoing basis as traffic statistics become available from Distributel; and

(4) finds that the back payment to Warwick should not impact the CAT calculation in the year in which Warwick records the payment.

Retroactive contribution payments with respect to other ITCs
54. The Commission notes that Distributel may have been or may be originating and terminating traffic to other ITCs using EAS links similar to that for Warwick.
55. In light of the foregoing, the Commission directs Distributel to file a report within 30 days to:

(i) list any other ITCs to which it connects or has connected using EAS links; and

(ii) provide its plan to reimburse any underpayment of contribution in circumstances similar to the terms of this order, copying the relevant ITCs and Bell.

Secretary General
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