ARCHIVED - Order CRTC 2001-502

Order CRTC 2001-502

Ottawa, 29 June 2001

CRTC gives final approval to changes to 976 service

Reference: 8740-B2-6391/99 and 4760-388/14162

The Commission approves, on a final basis, the following changes to the 976 service providers and accounts receivable management (ARM) agreements:

· an increase in the ARM fee for 976 service from 5% to 10%;

· the introduction of Program Content Guidelines;

· the introduction of deposit requirements that would not exceed 30% of the accounts receivable for each billing cycle; and

· the clarification that 976 service programs, which operate at chargeback levels of 25% or more for three consecutive months, are subject to immediate termination.

The approved provisions are similar to those that apply to 900 service.

The Commission denies the introduction of a provision in the ARM agreement that would have precluded 976 service providers from collecting debts using in-house resources. However, the Commission directs Bell Canada to amend the ARM agreement to include provisions that reflect the codes of conduct set out in Ontario and Quebec collection agency laws.

On 31 August 1999, Bell Canada filed Tariff Notice 6391 to ask for the approval of changes to the 976 service provider (SP) and accounts receivable management (ARM) agreements to align the terms and conditions of 976 service with 900 service.

In aligning the agreements, Bell Canada proposed to introduce the following new attributes to 976 service:

· deposit requirements;

· program content guidelines;

· business/government exchange programs; and

· provisions requiring service providers to use collection agencies that are provincially licensed.

Moreover, Bell Canada proposed to clarify the application of the attributes associated with initial disputes, repeat disputes and bad-debt charge-back provisions, and with the charge-back criterion for program termination.

Bell Canada also proposed to increase the ARM fee from 5% to 10%.

On 12 October 1999, in Telecom Order CRTC 99-980, the Commission approved the changes proposed by Bell Canada in TN 6391.

On 26 October 1999, 934691 Ontario Inc., operating as First Media Group Inc., requested that the Commission rescind Order 99-980 and initiate a proceeding to consider the changes proposed by Bell Canada in TN 6391. In the alternative, First Media asked that the Commission stay Order 99-980 and in the further alternative, make interim the changes approved in Order 99-980, pending completion of a public process to assess the amendments to 976 service proposed by Bell Canada in TN 6391.

In a letter dated 23 December 1999, the Commission dismissed the review and vary application. However, the Commission stated that it considers it desirable and appropriate to provide for fuller public participation on the changes to 976 service. Pending the outcome of that process, the Commission made interim the approval of Bell Canada's application in Order 99-980.

On 9 February 2000, the Commission issued Public Notice CRTC 2000-23, Bell Canada - Changes to 976 service provider and accounts receivable management agreements, to initiate a proceeding to examine the appropriateness of the changes to 976 service.

Comments were received from First Media, 851653 Ontario Inc. and the Aziza Group Inc. Reply comments were received from Bell Canada.

The Commission notes in passing that, as a result of a separate proceeding held pursuant to Public Notice CRTC 2000-114, Seeking comments on proposed safeguards associated with Advantage 900 subsequent value programs, dated 8 August 2000, Order CRTC 2001-208, CRTC approves changes proposed by Bell Canada to broaden the scope of 900 service, dated 9 March 2001, broadened the scope of 976 service by permitting the provision of subsequent value programs.

Proposed changes to 976 service

a) Increase ARM fee from 5% to 10%

In TN 6391, Bell Canada explained this proposed change by noting that the 900 service fee is 10% of caller charges, whereas the ARM fee for 976 service was only 5%. Bell Canada noted that its billing and collection activities included in the management of the accounts receivable for 976 service are at least as onerous as for 900 service. Bell Canada added that higher chargeback levels are generally associated with 976 service programs than 900 service programs, because of the higher proportion of adult and other entertainment programs. Bell Canada stated that, for each service to adequately contribute to the recovery of its corresponding costs, it was necessary to increase the 976 service ARM fee, at least to the level of 900 service (the industry standard).

The Commission considers that the billing and collection activities associated with the ARM agreement for 976 service are at least as onerous as they are for 900 service. Bell Canada's comments showed that substantially the same activities are performed by the same staff for both services. However, since there is a higher proportion of adult and other entertainment programs for the 976 service and in view of the fact that the level of chargebacks associated with 976 service is significantly higher than 900 chargebacks, the Commission considers that the increase in the ARM fee is appropriate. The Commission also notes that the 976 ARM fee has been the same since 1986.

b) Introduction of content guidelines

In TN 6391 Bell Canada proposed to introduce schedule B of the 976 service ARM agreement to include the Program Content Guidelines (the Guidelines). These Guidelines are referred to in the new article 2.4 of the amended 976 service ARM agreement, which states that Bell Canada will not purchase, and the service provider will not sell, its accounts receivable for any programs that do not comply with the Guidelines. The 976 service Guidelines are identical to those contained in schedule C of the approved 900 ARM agreement, except that items 1, 5, 7 and 8 of the 900 service Guidelines were not reproduced for the 976 service Guidelines. According to Bell Canada, these proposed 976 Guidelines would provide a reasonable safeguard against the negative impact that such programs impose on callers, reputable 976 SPs and the company. Bell Canada suggested that most of the 976 Guidelines serve to establish and clarify that programs of an illegal, inflammatory or fraudulent nature are not permitted on 976 service. Breach of the Guidelines by a service provider may lead to Bell Canada taking steps to terminate the ARM agreement.

First Media alleged that the Guidelines raise the issue of carrier involvement in content and impair 976 SPs' right to freedom of expression. It alleged that limitations on freedom of expression such as those proposed by Bell Canada will only be upheld if found to be "such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society".

In the Commission's view, the purpose and effect of the inclusion of the Guidelines in the 976 ARM agreement should not be considered to breach freedom of expression (if any) of service providers. Any service provider who is denied access to 976 service should be able to use local access lines or 900 service with alternate billing arrangements such as the use of credit cards.

Any service provider who is currently using 976 service will not be terminated with regard to existing programs as a result of the introduction of the Guidelines. The types of services offered by the parties who intervened in this proceeding would still be allowed on Bell Canada's 976 facilities after adoption of the Guidelines.

c) Debt collection to be governed by provincial collections legislation

In TN 6391, Bell Canada stated that it continues to receive persistent complaints from callers about collection practices associated with 976 program calls that have been previously charged back and absorbed by a 976 SP. Complaints include attempts to collect on amounts that are not owed (such as chargebacks associated with initial disputes and amounts that were previously settled), attempts to collect a $40 mark-up on the amounts allegedly owed, and excessive provocation (e.g., calling as many as 12 times a day, and using threatening and abusive language).

Bell Canada noted that such collection activities are not permitted by existing provincial legislation; however, such legislation does not apply to all collection activity. Much of Ontario's Collection Agencies Act and Quebec's An act respecting the collection of certain debts do not apply to collection activity carried out by a creditor in-house. Accordingly, to help ensure that consumers are protected against unsavoury collection practices associated with 976 program caller charges, Bell Canada proposed to introduce article 9.5 into the 976 service ARM agreement, which would ensure that all collection activity regarding 976 programs (i.e., associated with repeat-dispute and bad-debt chargebacks) would be conducted by registered collection agents that are governed by provincial collections legislation, thus precluding 976 SP from collecting debts on an in-house basis.

In addition, Bell Canada stated that it has received a number of complaints from callers who are being pursued by collectors with respect to stale accounts. Where the accounts are several years old, neither Bell Canada nor the caller may any longer possess a record of such a call. In such a case, neither is able to confirm that the charges are, in fact, owed, or have been paid or otherwise waived. In order to protect callers from unscrupulous service providers or their agents, article 9.5 would require that collection activity must commence within a reasonable time period.

The Commission considers that the requirement to use registered collections agents (and consequently to prohibit in-house collection activity) is an overly broad restriction. In the Commission's view, Bell Canada has not demonstrated a pressing need for such a broad restriction and the records of complaints handled by the Commission do not provide support for such a restriction.

The Commission notes that all parties agreed that the objective sought by Bell Canada - preventing undesirable collections practices - could be achieved by amending the ARM agreement to include a definition and description of unacceptable practices.

The Commission notes that the Collections Agency Act of the Province of Ontario, An act respecting collection of certain debts of the Province of Quebec, and associated regulations, contain provisions setting out prohibited practices and methods for the collection of debts. The Commission also notes that where a party, such as a 976 SP, refers accounts receivable to a collection agency, the collection agency or collector must not engage in any of the prohibited practices.

The Commission considers that in-house collection activities by a 976 SP should follow the same practices in the provinces of Ontario and Quebec as those set out in the respective acts and regulations for third-party collection activities.

Accordingly, the Commission considers it appropriate to deny, in part, the inclusion by Bell Canada, of the proposed article 9.5. The Commission also considers it appropriate to direct Bell Canada to amend the ARM agreement to include separate provisions for use in the provinces of Ontario and Quebec that contain the same list of prohibited practices, with necessary changes, as exist in the above-noted provincial collection agency legislation and regulations.

In addition, the Commission approves Bell Canada's amendment of article 9.5 of the ARM agreement to specify that collection activities must begin within six months of the date of the report contemplated by articles 9.3 and 9.4 of the ARM agreement that first includes the charges in question.

d) Introduction of deposit requirements

Bell Canada proposed to introduce deposit requirements to the 976 ARM agreement. The deposit required would not exceed 30% of the accounts receivable for each billing cycle. The deposit requirement for 900 service is 25%.

Bell Canada expected that these new deposit requirements would deter the operations of some 976 SPs, who plan to leave the 976 service market shortly after entering to avoid having to pay chargeback amounts to Bell Canada.

In the Commission's view, the introduction of a deposit requirement is appropriate.

e) Introduction of business/government exchange

Bell Canada proposed to introduce business/government exchange to 976 service. Previously, Bell Canada introduced such a program as a 900 attribute following the Commission's approval in Telecom Order CRTC 96-1120. Programs that meet the business/government focus and low chargeback levels will receive the benefit of offering 976 programs with a $50 per call maximum charge limitation. A business/government program must clearly have a non-profit, business or government focus and comply with all of the current standard 976 program application criteria. Bell Canada stated that the 976 service proposal recognizes that, due to the low chargeback ratios associated with programs of a business/government nature, these business/government programs can support a higher maximum caller charge, with little or no adverse affect on subscribers or on Bell Canada.

In the Commission's view, the introduction of a business/government exchange to 976 service is appropriate.

f) Chargeback clarification

Bell Canada proposed to insert into the 976 service ARM agreement, article 7.7 (similar to an existing provision in the 900 ARM agreement) which clarifies that 976 service programs which operate at chargeback levels of 25% or more for three consecutive months are subject to immediate termination.

According to Bell Canada, this article provides a reasonable safeguard against the negative impact that "poor value" programs impose on callers, reputable 976 SPs and Bell Canada.

In the Commission's view, the introduction of this chargeback clarification is appropriate.

Disposition

In light of the above, the Commission approves, on a final basis, the amendments to 976 service proposed by Bell Canada in TN 6391, with the following exception:

The Commission denies the part of the proposed article 9.5 that specifies the use of registered collection agencies to collect debts incurred through 976 programs.

The Commission directs Bell Canada to amend the ARM agreement to include separate provisions for use in the provinces of Ontario and Quebec that contain the same list of prohibited practices, with necessary changes, as exist in the above-noted provincial collection agency legislation and regulations.

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