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ARCHIVED - Order CRTC 2000-788

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Order CRTC 2000-788

Ottawa, 18 August 2000
CRTC orders Vidéotron to offer resellers lower rates for high-speed Internet services
 Reference: 8646-C51-01/99 and 8646-C51-01/00
This order directs Vidéotron to offer its high-speed retail Internet services for resale at $22.46 per month.
This rate for Internet service providers will apply until Vidéotron develops long-term contracts that differ from its monthly contracts. It should also obtain consent from end-users on monthly contracts before they are transferred to long-term contracts. Customer consent is to be obtained according to the methods previously identified in Order 2000-250.
Alleged non-compliance with Decision 99-11

1.

The Canadian Association of Internet Providers (CAIP), on behalf of its independent members, filed an application dated 3 April 2000 seeking Commission mediation on Vidéotron Communications Inc.'s alleged non-compliance with Telecom CRTC Decision 99-11, Application concerning access by Internet service providers to incumbent cable carriers' telecommunications facilities, dated 14 September 1999. CAIP's request for mediation was conditional on the Commission completing the process and rendering a report by 17 April 2000, without which CAIP reserved "its rights to pursue all other available avenues of redress."

2.

Vidéotron did not support CAIP's request for mediation. Given this, among other things, CAIP agreed with Vidéotron that mediation was not appropriate and requested that the Commission rule on the application by granting the relief sought.

3.

CAIP alleged that Vidéotron failed to respect the Commission's determination in Decision 99-11 to make its high-speed retail Internet services available to CAIP for resale at a 25 percent discount off the lowest monthly rate charged to Vidéotron's cable subscribers. According to CAIP, Vidéotron's non-compliance has been manifested in at least three ways:
  • prior to 3 March 2000, Vidéotron failed to offer the services at 25 percent off the lowest $29.95 monthly rate;
  • since 3 March 2000, Vidéotron has relied upon purported contracts for long-term pricing which have not changed the $29.95 that continues to be the lowest monthly rate charged to cable subscribers for the services. Vidéotron has continued to refuse to resell the service at the required lowest rate; and
  • Vidéotron continues to be in breach of its duty to file an application for a proposed alternative discount, as required by paragraph 21 of Decision 99-11, and to offer the services at the lowest rate pending the Commission's determination of the proposed alternative rate.

4.

By letter dated 13 April 2000, Vidéotron stated it set its retail rate at $29.95, which is $39.95 less 25 percent. The rate was based on its understanding of Decision 99-11 and the Commission's clarification of 10 December 1999. That letter indicated that the mandated resale pricing did not include, and is not to be computed based on, bulk-rated or long-term rated services. The company was of the view that it was compliant with all aspects of Decision 99-11 until it received a Commission staff letter dated 20 January 2000. The letter noted that the rate subject to the mandated resale discount is the net Internet services rate charged to cable customers after they receive their $10 "multiservice loyalty" rebate, which is $29.95. Immediately thereafter, Vidéotron restructured its retail rates, as follows:
  • customers on a monthly contract pay $39.95;
  • customers on six- or 12-month contracts pay $29.95;
  • customers who prematurely terminate a six- or 12-month contract are required to pay $39.95 monthly effective from the beginning of the contract (that is, a $10 charge for each month of service received). This additional $10 payment is characterized as a penalty; and
  • due to operational requirements, the new rates did not come into effect until 3 March 2000. During the period between 20 January and 3 March 2000, Internet service providers who had signed a resale contract were not charged and effectively received a resale discount greater than 25 percent during that six-week period.
Customers automatically transferred to long-term contracts

5.

Vidéotron indicated that to minimize the impact on its billing systems, end-users who had contracted for higher speed Internet access prior to 3 March 2000, and who had not already committed to a 12-month term, were automatically transferred to the six-month term, which is deemed to have begun when they first began receiving service. The six- and 12-month term contracts are automatically renewed for an identical term, and the penalty is assessed on any client that does not honour the term or contract renewal. Vidéotron stated that as of 17 April, these end-users would be contacted, either by telephone or by electronic mail, to confirm their consent to a monthly, six-month, or 12-month term contract and associated rate. Those who consent to a monthly contract will pay $39.95 per month for the service.

6.

Vidéotron stated that it would not seek the consent of the 12-month customers as they are already committed to a 12-month rate due to their acceptance of the discounted modems, which were limited to 12-month customers.
CAIP's arguments

7.

CAIP argues that based on established principles of contract law, without a party's consent, a unilateral change to the terms and conditions of a contract are invalid such that the original terms and conditions continue to apply.

8.

In its reply, CAIP relied in part on Order CRTC 2000-250 which concerned a complaint by Optel Communications Corporation that Bell Canada failed to obtain the consent of its local link service customers before migrating them from a monthly contract to a 12-month contract with termination charges. In that order, Bell Canada was directed to incorporate in its local link tariff the procedures adopted by the telecommunications industry to protect end-customers from unauthorized transfer of their service. The approved methods for obtaining customer consent are:
  • accepting a signed document as end-customer confirmation;
  • oral confirmation verified by an independent third party;
  • electronic confirmation through the use of a toll-free number; and
  • electronic confirmation via the Internet.

9.

CAIP submitted that until Vidéotron is able to demonstrate to the Commission that it has complied with one of the four methods of obtaining prior customer consent outlined in Order 2000-250, the pre-existing monthly customers continue to be subject to the month-to-month service at the original $29.95 monthly rate. CAIP further submitted that because $29.95 continues to be the lowest monthly rate available, the 25 percent discount should be computed based on $29.95, which would mean that the mandated resale rate would be, in the case of Vidéotron, $22.46 a month.
Commission concludes access should be set at $22.46

10.

Given that retail Internet services rates are forborne, the appropriateness of Vidéotron's new rate structure for Internet services is not at issue. What is at issue is which of the rates charged by Vidéotron to its end-customers is the lowest retail rate to which the 25 percent discount applies for the purpose of arriving at the resale rate that Internet service providers are required to pay Vidéotron to resell the service.

11.

The Commission notes that under Vidéotron's revised rate structure, six-month and 12-month customers who choose to prematurely terminate their contracts are no worse off than if they had originally been on monthly contracts.

12.

Based on the record of this proceeding, 12-month customers received a discount of $200 when purchasing the modem. To the extent that these customers are required to pay the full price for the modem if they prematurely terminate their contract, the Commission considers that any such obligation to pay should not be considered a penalty with respect to the service. The Commission has already clearly established, in its letter of 3 December 1999, that the modem does not form part of the service.

13.

In the circumstances of this case, the Commission considers that there is no meaningful distinction between Vidéotron's monthly contract and a long-term contract. In the Commission's view, for there to be a meaningful distinction, the penalty to be paid must be substantial enough to constitute a real deterrence to customers who may be thinking of prematurely terminating their long-term contracts. For example, the long-term contracts of the telephone companies, approved by the Commission, typically provide that a penalty of 50 percent of the balance of the contract is to be paid for early termination.

14.

The Commission directs Vidéotron to offer its Internet services for resale at the lower rate of $22.46 until it has: a) put in place long-term contracts that are meaningfully different from monthly contracts; and b) obtained the consent of its customers for the new terms using one of the methods set out in Order 2000-250.
Secretary General
This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca
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