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Order CRTC 2000-61

Ottawa, 31 January 2000

Commission rules on Goldiphones allegations of Bell Canada's interference in payphone marketplace

File No.: 8622-G11-01/99
The Commission has determined there is insufficient evidence to conclude that Bell Canada has engaged in anti-competitive behavior for basic pay telephone service as alleged by Goldiphones Inc.
Goldiphones' request to terminate all existing Bell Canada payphone contracts has been denied.
As noted in Decision 98-8, the Commission will launch a proceeding in the near future to examine issues arising from pay telephone competition. In the meantime, payphone service providers are encouraged to ensure all location providers are aware of any special charges that may arise from premature termination of a contract.
1. On 23 March 1999, Goldiphones Inc. filed a Part VII application relating to Bell Canada's practices in the provisioning of pay telephone basic access line service (PAL). According to Goldiphones, Bell's inappropriate contact with location providers signed with Goldiphones results in undue delays in the migration of pay telephone service from Bell to Goldiphones.
2. On 9 July 1999, Goldiphones requested that its Part VII application be amended to include that any contracts signed by Bell prior to 31 December 1998 be considered simple agreements for service, which can be terminated with 30 days written notice.

Goldiphones cites anti-competitive behaviour

3. In its application, Goldiphones outlines three specific cases to support its contention that Bell engages in anti-competitive behaviour. In the first case, Goldiphones states that Bell's payphone group uses information contained in Letters of Authorization (LOA) signed between Goldiphones and its location providers to contact customers who wish to change pay telephone service providers. Goldiphones submits that the purpose of this contact is to coerce, intimidate and dissuade the customer from switching payphone service on the pretext that the service will be inferior to that provided by Bell.
4. In the second case, Goldiphones submits that Bell rejected a work order indicating that an existing contract between the location provider and Bell was on hand. Goldiphones informed Bell, verbally and upon re-submission of all appropriate documentation, that the owner and name of the business clearly did not coincide. Goldiphones indicated that the work order was subsequently approved, however the correspondence caused undue delay.
5. In the third case, a work order was again rejected on the basis that a contract was on hand. Goldiphones noted that the contract was actually an agreement for the provision of pay telephone service with no binding clauses. Again, after undue delay, the work order was approved.
6. According to Goldiphones, Bell makes every effort to impede entry into the pay telephone market. Goldiphones states that Bell's activities contravene the spirit of Telecom Decision CRTC 98-8, Local Pay Telephone Competition, 30 June 1998 and that Bell's actions constitute an abuse of market dominance.
7. By letter dated 29 April 1999, Bell notes that the cases at issue arose at the outset of the implementation of PAL service. Bell also notes that, as with any other new service, its methods and procedures required adjustments as experience was acquired provisioning the service and in dealing with the new market participants. In particular, the installation of PAL lines has proven to be more complex than Bell initially anticipated in instances where competitive pay telephone service providers (CPTSPs) and location providers entered into an agreement when an active contract between the location provider and Bell was in place. Bell noted that greater care on the part of CPTSPs with the information they provide to their sales agents and with respect to sales and marketing practices would substantially reduce misunderstandings, the resulting delays in filling PAL orders, and the administrative costs for the company associated with the handling of such misunderstandings.
8. According to Bell, CPTSPs frequently fail to notify the location provider that charges may apply for the removal of Bell payphones as well as for the termination of an existing location provider agreement with Bell. Bell states that there is no intention on its part to intimidate or otherwise dissuade location providers from switching payphone service providers. In addition, Bell notes that it has encountered disturbing instances in which LOAs appear to have been fabricated by the CPTSP. Bell indicated that it reserved the right to test the validity of LOAs as acceptance of forged LOAs would serve neither the interests of location providers, the company or pay telephone users, or that of the competitive pay telephone industry in general.
9. Bell noted that it would not reject a PAL "in" order because of the existence of an agreement between the company and the location provider unless the location provider indicates that it does not wish to proceed.
10. Bell indicated that where there is no existing Bell payphone, its Carrier Services Group (CSG) performs all of the required operations, whether for an "in" or "out" order, and there is no contact with the payphone business office.
11. According to Bell, its policy is not to attempt to win back a location provider by offering better commission rates. In addition, Bell indicates that it has deployed efforts to ensure that employees involved in the delivery of PAL service are aware of, and abide by, the company's code of business conduct.
12. Goldiphones noted that Bell's assertion of numerous instances where CPTSPs are misleading and/or misinforming location providers as to the content of site agreements signed with Bell is inconsistent with the reality and perception harboured by location providers in general. Goldiphones submits that many location providers are unaware that the Bell agreements are binding. Goldiphones suggests that Bell's pay telephone group should ensure that they have informed customers and will continue to inform them in the future that the agreements signed are binding and for a specific term.
13. Bell contends that Goldiphones' reply fails to address the concerns expressed by Bell regarding the questionable marketing and sales practices engaged in by some CPTSPs. With respect to Goldiphones' assertion that Bell's pay telephone group should ensure that customers are informed of the fact that the agreements signed are binding and for a specific term, Bell states that in virtually all cases, location providers are business people who are familiar with the practice of executing contracts with suppliers, customers, landlords, tenants, etc. It is typical for business contracts to contain charges for early termination. The binding nature and term of the agreement are part of the contract that the location provider signs. As such, they are clearly informed of these conditions. With respect to Goldiphones' suggestion that Bell should inform location providers that termination charges might apply, Bell notes it is unaware of Goldiphones' sales activities and of a location provider's decision to terminate its agreement until the location provider so advises Bell. According to Bell, Goldiphones could easily address the problem it claims to have by providing fuller disclosure to a location provider when it attempts to entice the location provider to terminate a contract with Bell.
14. The Commission notes that Goldiphones' application was submitted as a formal complaint regarding alleged anti-competitive behaviour by Bell and that actual relief was not requested until Goldiphones filed its reply comments, some 60 days late. Bell raised concerns in respect of the lateness of the filing, concluding that the delay confirms the lack of seriousness of Goldiphones' application. As Bell filed additional comments to address these new requests, the Commission considers that Bell was not prejudiced by the delay, and has taken Goldiphones' reply comments and Bell's further comments into consideration.
15. The Commission notes Bell's statement that the cases at issue arose in late 1998 and early 1999 at the outset of the implementation of PAL service. The Commission further notes Bell's contention that, as with any other new service, its methods and procedures required adjustments as experience was acquired with the provisioning of the service and in dealing with the new market participants.
16. The Commission notes that in Order CRTC 2000-60, it imposed winback guidelines on all incumbent local exchange carriers when provisioning PAL. The Commission considers that should parties experience additional difficulties or feel that changes are required to the guidelines it is open to them to raise such issues. The Commission considers the review announced in Decision 98-8 to be a logical proceeding to consider any such concerns.
17. The Commission reminds all participants to ensure that pay telephone location providers are aware that termination charges may apply. This will help location providers to make informed decisions and will facilitate the orderly development of the pay telephone industry. Accordingly, the Commission reminds all participants to ensure that when signing up pay telephone customers, location providers are made aware of potential termination charges.

Termination of existing contracts with 30 days written notice

18. As noted above, in reply dated 9 July 1999, Goldiphones requested that its Part VII application be amended to include that any contracts signed prior to 31 December 1998 be considered simple agreements for service, which can be terminated with 30 days written notice to Bell. Should location providers desire to stay with Bell, then new agreements could be signed on that basis. Goldiphones considered that 31 December 1998 was an appropriate date as all mechanisms (including tariffs) to provide competitive pay telephone service were in place. According to Goldiphones, the agreements Bell has in place and enforces at its discretion effectively inhibit pay telephone competition.
19. In Bell's view, Goldiphones' request to amend its Part VII application raises an entirely new issue. Bell notes that the issue of long-term and exclusive contracts was extensively addressed in the proceeding initiated by Telecom Public Notice CRTC 97-26, Local pay telephone competition. Bell submits that this request should be denied and only considered after Goldiphones addresses the criteria for a review and vary of the Commission's findings in Decision 98-8. However, the Commission is of the view that the application should not be characterized in this manner. The Commission notes, in this regard, that while the issue of long-term contracts was discussed in Decision 98-8, it declined to express a view on whether they were appropriate or not.
20. The Commission notes that Goldiphones' request would apply to all existing contracts, some of which may be exclusive or long-term. The Commission further notes that in Decision 98-8 it found that long-term contracts are not necessarily counter to the public interest, as such contracts lower the costs to both parties of providing the service and that exclusive contracts may be benign or disadvantageous. The Commission considers that there is insufficient evidence on the record of this proceeding to conclude that existing contracts are a barrier to entry.
21. There are approximately 500 CPTSPs currently registered with the Commission. Some of them have been successful in securing both exclusive and long-term contracts in high traffic areas, thus demonstrating that competition is rolling out. The Commission considers that the competitive environment has influenced, and will more effectively in the future influence the financial terms and conditions of location contracts.
22. The Commission notes that the pay telephone market was opened to competition based on the assumption that, provided sufficient consumer safeguards were in place, the rules established in Telecom Decision CRTC 97-8, Local competition, 1 May 1997 would be sufficient to address competitive concerns.
23. As part of the follow-up to Decision 98-8, incumbent local exchange carriers were requested to file information with respect to long-term or exclusive contracts entered into after 1 July 1997 which had a life expectancy of five years or longer. This information has been filed with the Commission in confidence. The Commission notes that Decision 98-8 says that it will hold a review within a three-year time frame to investigate the impact competition has had on the pay telephone market. This review, now only a year and a half away, will include problem areas that have been identified through complaints, including complaints with respect to consumer safeguards and barriers to entry. The Commission considers that this would be an appropriate arena to deal with all aspects of competitive equity in the pay telephone market. However, parties are free to raise issues sooner than that if they require an earlier review.
24. To facilitate implementation issues emanating from Decision 98-8, the Commission encourages CPTSPs to participate in the CRTC Industry Steering Committee (CISC - formerly known as CRTC Interconnection Steering Committee).
25. For the foregoing reasons, the Commission denies Goldiphones' request to terminate existing contracts signed prior to 31 December 1998.
Secretary General
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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