ARCHIVED - Order CRTC 2000-164

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Order CRTC 2000-164

Ottawa, 1 March 2000
MetroNet Communications Group Inc.
Reference: 8622-M15-04/99
Geographical diversity of shared cost facilities


On 12 March 1999, MetroNet Communications Group Inc. filed an application further to Part VII of the CRTC Telecommunications Rules of Procedure. In this application, MetroNet is seeking an order from the Commission mandating that "shared cost facilities should be implemented using geographically diverse facilities unless, on a case-by-case basis, both interconnecting local carriers bilaterally agree on an alternative."


Comments were received from AT&T Canada Corp.; Call-Net Enterprises Inc., on behalf of Call-Net Communications Inc.; Clearnet Communications Inc.; Microcell Telecommunications Inc.; Stentor Resource Centre Inc. on behalf of BC TEL, Bell Canada, Island Telecom Inc., Maritime Tel & Tel Limited, MTS Communications Inc., NBTel Inc., NewTel Communications Inc. and TELUS Communications Inc. (collectively, the companies); and Vidéotron Télécom ltée. Reply comments were filed by MetroNet on 26 April 1999. Additional submissions were received from Stentor and MetroNet on 5 and 26 May 1999 respectively.


MetroNet submitted that diverse interconnection is required in order to ensure that there is sufficient redundancy in the overall network to provide an acceptable level of reliability to all subscribers.


MetroNet noted that although Telecom Decision CRTC 97-8 mandated the equal sharing of interconnection circuits between local exchange carriers (LECs), it did not specifically mandate the sharing of "diverse" interconnecting circuits. However, MetroNet considers that if interconnecting trunks are not implemented with diverse facilities, it will result in a material degradation to the reliability of the network-of-networks that is being created as a result of the introduction of local competition.


In addition, MetroNet argued that if an interconnection facility between an incumbent LEC (ILEC) and a competitive LEC (CLEC) were to fail, the impact on the CLEC network would be much more material than the impact on the ILEC's overall operations.


MetroNet further pointed out that the ILECs do not appear to have a consistent diversity policy. While ILECs have agreed to share the cost of diverse facilities in certain cases, they refuse in others.


MetroNet submitted that since the cost of shared cost facilities would be shared, there would be no incentive for a CLEC to demand that diversity be deployed in cases where it is not warranted.


AT&T Canada, Call-Net, Clearnet, Microcell and Vidéotron (the competitors) supported MetroNet's application. In addition, Vidéotron provided some examples where it considered that the interconnections are sufficiently important to commit its resources to diversity, but where the ILEC has refused to share the costs.


Clearnet submitted that if customers believe that CLEC networks are less robust than the ILEC networks, not for any deficiency in the CLEC networks but because of the vulnerability of the interconnection links with the ILECs, those users that value robustness would inevitably be drawn to the ILECs.


While generally supporting MetroNet's application, Microcell proposed that a public notice be issued to establish fair and reasonable criteria to be used in determining the circumstances that would justify mandating diversity and cost-sharing if two interconnecting LECs disagree on the need for diversity. Microcell stated that it is important that diversity not be mandated in all cases to avoid wasting resources and exacerbating competitive inequities.


On the other hand, Stentor submitted that the companies are not generally opposed to diversity of shared cost structures and will deploy them whenever they and the CLEC agree that the benefits outweigh the costs.


Stentor noted that there are other options available to a LEC which wishes to self-provision diversity. These include establishing a direct facility to a third party that also has a facility to the LEC as well as subscription to a transiting service offered by a third party.


Stentor argued that as CLECs increase their share of the local market, and as some of the ILECs seek to establish CLECs in the market of other ILECs, the ILECs will increasingly view geographical route diversity as being as an important issue as many CLECs view it today.


Stentor was of the view that MetroNet is attempting to impose unjust costs on other LECs by insisting that geographic diversity be built on a shared cost basis whenever MetroNet's own internal requirements are satisfied.


In addition, Stentor stated that an additional route between the ILEC and CLEC points of interconnection (POIs) would increase the number of buildings passed by the CLEC's facilities, improving the CLEC'scustomer access. Therefore, Stentor noted, the equal cost-sharing approach to diversity suggested by MetroNet would encourage some CLECs to insist on diversity, even if such diversity could not be cost-effective on its own.


Stentor submitted that route diversity could be very expensive, possibly requiring construction of new facilities and acquisition of rights-of-way. For the LEC which does not agree that diversity is required in a particular instance, the expenditures associated with the provision of the diversity would constitute an inefficient use of its resources.


Furthermore, Stentor submitted that the companies' experience in competitive markets and in dealing with interconnection matters with other peer carriers is that diversity provisioning criteria are subject to considerable variation between carriers.


Stentor also stated that the companies themselves have no such rigorous criterion for diversity and that the costs and benefits in each particular instance are always considered and a degree of judgment is almost always required. Stentor added that different carriers will conduct such assessments of cost and benefits according to their own provisioning and service criteria.


Stentor argued that while the addition of diversity could increase the theoretical availability of a given transmission system, it is not true that the increase in reliability will necessarily elevate the availability of the overall system to a certain threshold, or even that the additional reliability will be meaningful.


Stentor noted that many CLECs entering the marketplace have chosen to serve vast expanses of geographic territory using a very limited number of switching facilities – in numerous cases, only one. Large cities and geographic areas are thus often served from one switching centre.


In Stentor's view, the fact that the companies have successfully interconnected with a broad variety of carriers for many years on a reliable and economical basis without a Commission mandated requirement for geographic diversity of interconnection facilities should, on its own, provide more than compelling reason why the Commission should reject MetroNet's application.


Stentor disagreed with comments that it would suffer less harm from an outage. Stentor argued that the ILECs have a strong incentive to ensure that a high degree of reliability is achieved in their interconnection arrangements with other LECs. This incentive stems from the expectation of customers that calls they originate or receive will be completed, regardless of the point of origin or of termination.


In its reply comments, MetroNet considered that it would be extremely difficult, if not impossible, to establish meaningful diversity criteria and, accordingly, a public notice process is unnecessary.


Furthermore, MetroNet submitted that if, as suggested by the ILECs, the Commission leaves it up to the ILECs and CLECs to negotiate diversity, the ILECs will use their market power to competitively disadvantage the CLECs by frustrating the establishment of shared cost diversity.


In reply to Stentor's comments that CLECs will benefit from diversified facilities, MetroNet argued that the benefits associated with implementing shared cost diversity are the same for both ILECs and CLECs. In addition, MetroNet argued that if a CLEC provisions diversity on its own at its own cost, the ILEC benefits from that diversity. Accordingly, there is no incentive for the ILEC to share these costs.


Finally, MetroNet noted that the incremental cost to implement diversity is dramatically higher for CLECs than ILECs. MetroNet noted that the ILECs often have pre-existing physical facilities in place between their POI and the CLEC POI and accordingly, do not have to construct facilities. However, CLECs generally do not have facilities in place and have to construct new facilities from scratch.


The Commission notes that there is a consensus that diverse facilities will not be constructed where both parties agree not to do so. There is also a general agreement that where both parties agree to implement shared cost facilities using diverse facilities, parties will equally share the cost to construct the facilities. What remains to be decided is what to do if one LEC desires the construction of diverse facilities, and the other does not.


Stentor submitted that since it was not mandated to diversify its interconnecting links with carriers that are not LECs, it should not be mandated to do so with CLECs. The Commission notes that although the companies were not mandated to share the cost of interconnecting facilities with non-LECs, Decision 97-8 did mandate shared cost facilities between LECs. Therefore, the Commission is of the view that it is inappropriate to draw an analogy between the companies' interconnection arrangements with CLECs and those arrangements available to other carriers.


The Commission is of the view that a balance should be established between the public interest in constructing a robust and reliable network and the public interest in constructing efficient interconnection configurations that don't impose on carriers higher costs than necessary.


The Commission believes quality of service is highly important for competition to flourish and the network to functions properly with as few outages as possible. Consistent with this view, the Commission considers that it would not be in the public interest for the building of shared cost facilities to take place only where both LECs agree. Conversely, the Commission considers that it would not be in the public interest to require the building of shared cost facilities in all cases where only one LEC wishes to do so.


The Commission notes that while the companies advocate the development of industry guidelines for diversity, they have not established such rigorous criteria for themselves. The Commission agrees with MetroNet that it would be extremely difficult, if not impossible, to establish meaningful diversity guidelines especially when those guidelines would include specific information about individual networks and the LECs' marketing and business plans.


At the same time, the Commission agrees with Stentor that route diversity could be very expensive. However, the Commission is of the view that the incremental cost to implement diversity is, in general, higher for new entrants than ILECs. Therefore, in the Commission's view, CLECs would have little incentive to install unnecessary diversity, even where costs are shared.


In light of the above, and given the imbalance in network size and the fact that any disruption in service is likely to have more impact on a CLEC than an ILEC, the Commission is of the view that where an ILEC and a CLEC are unable to agree on whether diversity should be provided, such diversity should be provisioned on a shared cost basis when requested by the CLEC.


Hence, the Commission orders as follows:
a) Subject to b) below, geographical diversity of shared cost facilities between an ILEC and a CLEC is to be provisioned on a 50/50 shared cost basis when requested by the CLEC.
b) The diversity referred to in a) above will not be required in circumstances where, based on the facts at hand, an ILEC can demonstrate to the Commission's satisfaction that it is not required.


The Commission considers that the provisioning of diverse shared cost facilities should not be mandated when requested solely by the ILEC. The Commission considers that since route diversity could be very expensive, imposing diversity of shared cost facilities on small CLECs in some cases would constitute a significant barrier to competitive entry.


The Commission further considers that the provisioning of diverse shared cost facilities between CLECs should not be mandated. The Commission is of the view that robustness of the public switched telephone network could be achieved by ensuring a high level of reliability on links between CLECs and ILECs. The Commission notes that CLECs could always agree to build diverse shared cost facilities if they both consider diverse routing to be needed.
Secretary General
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