ARCHIVED - Order CRTC 2001-119

Order CRTC 2001-119

Ottawa, 7 February 2001

Review of Order CRTC 2000-788 - Resale of Vidéotron's retail high-speed Internet service

Reference: 8646-C51-01/00

With respect to the resale of Vidéotron's high speed Internet services, the Commission removes the positive subscriber consent requirement from Order CRTC 2000-788.

In Order CRTC 2000-788, dated 18 August 2000, following an application by the Canadian Association of Internet Providers (CAIP), the Commission directed Vidéotron Communications Inc. to offer its high-speed Internet services for resale at the monthly rate of $22.46 until it had (a) put in place long-term contracts that are meaningfully different from its monthly contracts; and (b) obtained the consent of its customers for the new terms using one of the four methods set out in Order CRTC 2000-250 (Bell Canada's local link service), namely:

• 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.

The key events, which formed the backdrop to Order 2000-788 are set out below:

• in Telecom Decision CRTC 98-9, the Commission forbore from regulating the higher speed retail Internet service provided by cable companies;

• in Telecom Decision CRTC 99-11, acting pursuant to section 24 of the Telecommunications Act (the Act), the Commission ordered cable carriers to permit resale of their higher speed retail Internet service at a 25% discount from the lowest retail Internet service rate charged to a cable customer in comparable serving areas during any one month period;

• in a clarification dated 10 December 1999, the Commission stated that the mandated resale pricing does not include, and is not to be computed based on, bulk-rated or long-term rated services; and

• in a letter of 20 January 2000, the Commission clarified the issue of whether the 25% Internet service provider discount should be applied to Vidéotron's generally prevalent retail Internet service rate ($39.95) or to the net Internet service "multiservice rate" charged to cable customers after they receive their $10 "multiservice loyalty" rebate. The Commission found that although the $29.95 rate is characterized as $39.95 less a rebate, it does not change the fact that, in substance, the retail price that cable customers ultimately pay is $29.95. Accordingly, as $29.95 is the lowest retail rate that Vidéotron Internet service cable customers pay, that is the rate to which the mandated resale discount applies.

Following issuance of the order, it came to the attention of the Commission that, contrary to the CRTC Telecommunications Rules of Procedure, Vidéotron had not been served with a copy of the CAIP reply of 8 May 2000. Given this, and given that CAIP's reply had contained new material, the Commission, by letter dated 15 September 2000, established further process to give Vidéotron an opportunity to address the new material in CAIP's reply. The Commission indicated it would review Order 2000-788 in light of these submissions.

Vidéotron responds

By letter dated 25 September 2000, Vidéotron submitted that the sufficiency of the customers' notice of terms, the adequacy of their consent to these terms, or the efficacy of any penalties must be determined by the laws of Quebec - not by the standards applied by the Commission to Bell Canada's regulated services. To apply these standards to a service that has been forborne from regulation is, in Vidéotron's submission, tantamount to re-regulation of Vidéotron's terms and conditions of service and constitutes a review and vary of Decision 98-9 entitled Regulation under the Telecommunications Act of certain telecommunications services offered by "broadcast carriers", dated 9 July 1998.

Vidéotron submitted that its contracts comply with the civil law of Quebec, which the company argued contemplates that consent may be either express or tacit, and that silence may signify consent in certain circumstances, such as usage. According to Vidéotron, its Internet service customers receive three e-mail messages the first time that they log on to Vidéotron's Internet service. The first is a welcome message, the second is the current Internet service contract in French, and the third is the English-language version of the same contract. Vidéotron also submitted that the following statement appears at the top of the first page of the contract in bolded capitalized letters: "Please read carefully. This contract contains the terms and conditions pursuant to which Vidéotron's Internet access service is provided to you. This contract cancels and supersedes any other prior contract. By accessing the Internet through Vidéotron's Internet access service at any time after the receipt of this contract, you agree to be bound by its provisions."

Vidéotron stated that it had decided in January to implement changes to its rate structure and introduced a discount for customers that committed to a long-term service contract. In order to implement these changes, Vidéotron, in accordance with sections 7 and 8 of the old contract, sent an e-mail to all of its existing month-to-month customers, specifically notifying them that they would be switched to a six-month contract if they did not call or write to Vidéotron within 10 days objecting to the change, pursuant to section 14 of the old contract. The e-mail contained links to a web site setting out Vidéotron's new prices for its Internet service and to the new service contract. No e-mail was sent to existing 12-month customers, as these customers were already bound by a long-term service contract, and the company was not proposing to alter the rates payable by these subscribers.

Vidéotron stated that customers who continued to use the service without requesting changes, effectively signaled their consent to a six-month service contract, and became bound by the new terms and conditions set forth in the new contract pursuant to articles 1385 and 1434 of the Civil Code of Quebec. Therefore, CAIP's allegation that Vidéotron's six- and 12-month customers had not consented to the term is wrong as a matter of law.

Vidéotron submitted that similar customer service contracts and notification processes are used throughout the Internet service provider industry in Quebec. To illustrate this, Vidéotron provided excerpts from service contracts utilized by other Internet service providers operating in Quebec namely, Sympatico Quebec, Cogéco Câble, AT&T Canada, Total.Net, AOL, Look, ColbatNet, and eisa.com, most of which are members of CAIP.

Vidéotron also addressed the issue of penalty clauses for prematurely terminating long-term contracts and what is, in law, a long-term contract. However, in the Commission's view, these issues are clearly not within the scope of the proceeding initiated by the Commission's letter of 15 September 2000.

CAIP's responds to Vidéotron's comments

In its reply of 29 September 2000, CAIP effectively disagreed with the Commission's decision to allow Vidéotron to make further submissions and requested that the Commission not consider them. However, in the event that the Commission denied CAIP's request, CAIP provided reply comments addressing some of Vidéotron's arguments.

In particular, CAIP argued that Vidéotron had made a number of contradictory statements in the further proceeding regarding the procedures it followed in purporting to convert those subscribers who prior to March 2000 were month-to-month subscribers to six- or 12-month contracts. For example, in its 10 April 2000 answer, Vidéotron stated that the month-to-month converted subscribers would be contacted in the future (i.e., in the next week), either by telephone or by e-mail, to confirm their consent to a monthly contract and associated rate. Vidéotron also stated that the final version of its new contract was not yet available for filing. In contrast, the 25 September 2000 submission states that an e-mail was sent in January to all of its existing month-to-month customers notifying them of the change to the six-month contract and providing electronic links to the new service contract.

CAIP also argued that contrary to Vidéotron's assertions, the Commission's directive in Order 2000-788 requiring Vidéotron to resell its higher speed retail Internet service to Internet service providers at $22.46 per month, subject to the conditions therein does not vary the forbearance determination in Decision 98-9, and is not tantamount to re-regulation of Vidéotron's higher speed Internet service. To the contrary, the mandatory discount resale directive in Decision 99-11 and Order 2000-788 does not preclude Vidéotron from changing the prices of its higher speed retail Internet service offerings nor does it require approved tariffs.

Commission determinations

As previously mentioned, Order 2000-788 directed Vidéotron to offer its Internet service to Internet service providers for resale at the rate of $22.46 ($29.95 less 25%) until it had fulfilled two conditions. The first was to put in place long-term contracts that were meaningfully different from monthly contracts. The second was to obtain the consent of its customers for the new longer terms using one of the methods set out in Order 2000-250.

Meaningfully different contracts

The Commission rejects Vidéotron's suggestion that Order 2000-788 amounts to re-regulation of the company's high speed Internet services. As was expressly stated in the order, the Commission was not examining the appropriateness of Vidéotron's retail rates, but rather which retail rate should be used for the purpose of calculating the 25% resale discount. Order 2000-788 was addressing Vidéotron's clear attempt to avoid giving resellers the rate contemplated by the Commission's resale regime by unilaterally transferring their existing monthly customers to long-term contracts which were not meaningfully different from the revised monthly contracts. The long-term contract provided for a penalty of $10 per month for early termination effective from the beginning of the contract, i.e., monthly customers who had been unilaterally migrated to those contracts and who terminated them prematurely would be no worse off than if they had chosen to remain monthly customers.

Vidéotron subsequently advised the Commission, in a letter dated 10 October 2000, that it had implemented long-term contracts, which provide that a penalty of 50% of the balance is to be paid for early termination. The Commission notes that this is the same penalty provision it had identified in Order 2000-788 as illustrative of what would make a long-term contract meaningfully different from a short-term contract.

CAIP, however, in a submission dated 11 October 2000, argued that the Commission should not consider this information from Vidéotron because it was contained in a submission not contemplated by the Commission's process letter and the information could have been included in the company's 25 September 2000 pleading. The Commission, nonetheless, considers that because this information is purely factual, and does not involve argument, it should be considered. Moreover, the letter is of assistance to the Commission in narrowing the issues.

In the Commission's view, Vidéotron has now complied with the aspect of Order 2000-788 that refers to the requirement for a meaningful distinction between the monthly contract and the long-term contract.

Obtaining consent

The Commission notes Vidéotron's assertion that the Commission could not properly direct Vidéotron to offer the rate of $22.46 to Internet service providers for resale until Vidéotron had obtained the consent of its customers for the new terms using one of the methods set out in Order 2000-250.

The Commission, in Decision 98-9, retained its powers with respect to section 24 of the Act in order to (a) maintain and impose certain conditions on the offering and provision of underlying telecommunications services to competitive service providers, and (b) to impose conditions on the offering and provision of these services as may be necessary in the future.

In Decision 99-11, the Commission mandated that incumbent cable carriers offer their higher speed retail Internet service to Internet service providers for resale, under certain specific conditions, as a proxy for the interconnection with underlying broadband services until the latter was available.

The Commission was acting pursuant to section 24 of the Act, the original legal basis for the imposition of the discounted resale regime, by placing additional conditions on Vidéotron given the latter's anti-competitive conduct. The Commission was not purporting to dictate to Vidéotron what means of obtaining consent it should use in its dealings with its own customers with respect to the retail service. The Commission was merely specifying that to the extent that Vidéotron wished to avoid having to offer its Internet service to Internet service providers for resale at $22.46, it must first satisfy certain conditions to ensure that the resale regime is not in fact being circumvented.

The Commission notes that Vidéotron, in its 10 October 2000 letter, informed the Commission that it had decided to amend the Internet service agreement to reflect the termination charges contemplated by Order 2000-788. Vidéotron indicated that it proposed to send an e-mail message containing a copy of the new agreement to all of its high speed Internet service subscribers on record as of 23 September 2000 (as distinct from the company's previous notification practice of referring subscribers to Vidéotron's website for the text of the retail contract). By letter dated 18 October 2000, Vidéotron stated that all of its high-speed Internet service customers on record as of 23 September 2000 had received the new agreement and are legally bound by it. According to Vidéotron, the notification process it followed is even more rigorous than the legally sanctioned process and represents the norm and usage in the industry. New subscribers, i.e., those who first receive service on or after 23 September, are bound by the terms of this new agreement and receive a copy of it consistent with the process indicated in the company's 25 September 2000 submission.

The Commission further notes that in a pleading dated 11 October 2000, CAIP objected to the Commission considering the above information. Consistent with the view expressed with respect to termination charges, the Commission considers that this information is of a factual nature and does not modify Vidéotron's argument that the Commission is without jurisdiction to impose the means of obtaining consent identified in Order 2000-250. Accordingly, this information has been considered.

The Commission finds that based on the record of the proceeding initiated by the Commission's letter of 15 September 2000, the positive consent requirement imposes a significant burden on the company and that, on reconsideration of this matter, is not necessary given that there is now a meaningful distinction between Vidéotron's short and long-term contracts. Consequently, the Commission removes the positive subscriber consent required in Order 2000-788.

Secretary General

This document is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca