ARCHIVED - Order CRTC 2001-761

Order CRTC 2001-761

Ottawa, 3 October 2001

Commission approves terms and conditions for local exchange and local payphone competition in the territories of TELUS Communications (Québec) Inc. and Télébec ltée

Reference: 8622-C12-13/01

The Commission finds that it is appropriate to make use of the terms and conditions for local exchange and local payphone competition that apply in the large ILEC territories to TELUS Québec and Télébec.

1.

In Public Notice CRTC 2001-24, Competition in the local exchange and local payphone markets in the territories of Québec-Téléphone and Télébec ltée, dated 9 February 2001, the Commission set out to establish the terms and implementation date of competition in the local exchange and local payphone markets in the territories of TELUS Communications (Québec) Inc. (formerly known as Québec-Téléphone) and Télébec ltée.

2.

PN 2001-24 named TELUS Québec and Télébec parties to this proceeding. Bell Canada was subsequently made party to this proceeding as determinations made in this proceeding could possibly affect the company.

3.

The Commission received comments from the James Bay Cree Communications Society (JBCCS), la Fédération des associations coopératives d'économie familiale du Québec and Action Réseau Consommateur.

Terms and conditions for local competition

4.

TELUS Québec and Télébec agreed that, in general, the terms and conditions that exist for local exchange and local payphone competition in the territories of the large incumbent local exchange carriers (ILECs) in Canada should also apply in their territories. However, Télébec expressed some concerns regarding:

These concerns are discussed below.

Exchanges where service is provided by DMS-10 switches in Télébec's operating territory

5.

Télébec identified six exchanges (four in the James Bay region, one on the Quebec/Labrador border and one on Îles-de-la-Madeleine) where DMS-10 switches, which are not equipped to provide equal access and are not connected to the common channel signalling 7 (CCS7) network, are used to provide local exchange services. The company proposed that local competition not be allowed in these exchanges until it had the opportunity to upgrade the facilities. Télébec submitted that it planned to upgrade its DMS-10 switch in Radisson in 2006 and its Wemindji switch between 2004 and 2006, but did not forecast the replacement of the remaining four DMS-10 switches. The JBCCS submitted that it is concerned that competition will be prevented in the communities served by DMS-10 switches.

6.

The Commission is of the view that the remote locations and low population densities in these particular exchanges make them unlikely targets for potential local competitors. To require Télébec to upgrade its DMS-10 switches would require a significant investment that would not necessarily result in local competition in these exchanges.

7.

The Commission notes that it is possible to implement local competition in Télébec's exchanges where local service is provided by DMS-10 switches, notwithstanding that certain functions such as local number portability (LNP) and certain advanced calling features will not be available in these exchanges.

8.

The Commission is of the view that competition should be permitted in these exchanges. In the event that a competitive local exchange carrier (CLEC) proposes to compete in a Télébec exchange where service is provided by a DMS-10 switch, the Commission will examine, on a case-by-case basis, any supplemental terms and conditions that would foster competition.

Exchanges where service is provided by a Télébec remote linked to a host switch that is owned by another ILEC

9.

In its evidence, Télébec noted that in some of its exchanges, local service is provided by a remote switch linked to a host switch that is owned by another ILEC.

10.

Télébec generally agreed with the terms and conditions that apply in the territories of the large ILECs (former Stentor companies) for interconnection with a CLEC for the purpose of exchanging traffic, and for CCS7 interconnection. Télébec submitted that because these remotes are linked to a host switch owned by another ILEC, the process to conclude an interconnection agreement would be a three-party negotiation. Télébec noted that the increased complexity could cause delays beyond the established time intervals for local competition in the territories of the large ILECs.

11.

In addition, Télébec submitted that since 9-1-1 services are provided through Bell Canada facilities, a CLEC would have to make arrangements with Bell Canada. Télébec also noted that a CLEC would have to make arrangements to obtain local, toll and CCS7 transiting functions, and message relay services with either the owner of the host switch or a third party that can provide these types of services.

12.

In the event the Commission required the company to provide any of the above-noted services and/or functions, Télébec submitted that the company should be allowed to recover its costs from the CLEC making the request.

13.

The Commission considers that the terms and conditions for interconnection between an ILEC and a CLEC that apply in the large ILEC territories should also apply in the case of a CLEC that wants to compete in a territory served by a Télébec remote that is linked to a host switch owned by another ILEC. As the ILEC serving the exchange, Télébec would be responsible for negotiating a co-carrier interconnection agreement with the CLEC. This could include, but would not be limited to, the provision of a point of interconnection within the exchange for the interchange of traffic and the provision of a signalling point of interconnection in the numbering plan area for purposes of CCS7 interconnection. The Commission considers that Télébec and the CLEC should develop the most efficient interconnection agreement possible that fully serves their needs. This could involve Télébec and the CLEC agreeing to alternative arrangements for the provision of a point of interconnection at a location outside of the exchange and alternate arrangements for the provision of signalling points of interconnection.

14.

The Commission further considers that Télébec must respect the service intervals put in place for the implementation of local competition in the territories of the large ILECs, even where it provides service through the use of a remote linked to another company's host switch.

15.

With regard to the functions and/or services provided to remotes by the host-switch owner that CLECs require to compete with Télébec, the Commission is of the view that these functions and/or services should be made available to CLECs at terms and conditions that are no less favourable than those that apply to Télébec.

16.

The Commission notes that the costs Télébec incurs as a result of having these responsibilities are part of the local competition implementation costs, which are being considered in the proceeding initiated by Public Notice CRTC 2001-36, Implementation of price cap regulation for Québec-Téléphone and Télébec, dated 13 March 2001.

Local competition in the amalgamated exchange of Rouyn-Noranda

17.

In its evidence, Télébec explained that the Rouyn-Noranda exchange comprises five amalgamated exchanges where telephone service is provided by 23 remote units. If, for example, a competitor interconnected at the Rouyn-Noranda remote needed some local loops from among the 23 remotes in the amalgamated exchanges, Télébec submitted that it would incur extra costs that it should be allowed to recover from the CLEC.

18.

The Commission notes that, among other things, the purpose of the proceeding initiated with the release of Public Notice 2001-69, Implementation of competition in the local exchange and local payphone markets in the territories of Télébec and TELUS (Québec), dated 14 June 2001, is to establish rates to permit the purchase of the local network components that CLECs might need to provide local exchange service in Télébec's operating territory. The Commission considers that the local loop cost issue will also be addressed in the PN 2001-69 proceeding. Therefore, the Commission will not address this issue in this order.

Local competition - conclusion

Reports justifying removal of payphones

19.

Télébec proposed not to provide an annual report justifying the removal of its payphones as required by Telecom Decision CRTC 98-8, Local pay telephone competition, dated 30 June 1998. Télébec submitted that it has sufficient safeguards to ensure that payphones will not be removed without proper justification. These safeguards include its service contracts with location providers and its policy of installing at least one payphone for emergency purposes in each municipality where the company provides local exchange service.

20.

The Commission is of the view that in remote communities, the use of local service payphones plays a more important role in providing reliable and affordable telecommunications of high quality to the general population than in urban communities. The Commission also notes that wireless alternatives are not available in remote communities to the same extent as they are in urban centres.

21.

In Decision 98-8, the Commission indicated that, in a future proceeding, it would consider whether or not there was a need for public interest payphones. The Commission noted that the analysis would include, among other things, complaints received by the Commission and the reports submitted by telephone companies to justify the removal of their payphones.

22.

The Commission is of the view that it is in the public interest that both TELUS Québec and Télébec conform to the directives in Decision 98-8, including the need to file a yearly report justifying the removal of payphones from their operating territories. The Commission notes that TELUS Québec did not file any representations concerning the directives in Decision 98-8.

23.

Therefore, the Commission directs Télébec and TELUS Québec to conform to the directives in Decision 98-8. This includes filing an annual report to justify the removal of payphones from their respective operating territories.

Tariff matters

Recovering expenses to implement local competition and local number portability

24.

In PN 2001-24, the Commission asked TELUS Québec and Télébec to file justifiable proposals to recover the costs of implementing local competition and LNP.

25.

In response, TELUS Québec submitted that it wanted the same treatment that is provided to the larger ILECs. The company proposed that the recovery of these costs should form part of the revenue requirement calculation associated with PN 2001-36.

26.

By contrast, Télébec proposed that the expenses associated with the implementation of local competition and LNP be recovered from the Central Fund. Télébec stated that its operating territory is among the highest-cost territories with some of the highest local rates in the country. As the Central Fund is the mechanism used to subsidize high-cost territories, Télébec submitted that it was logical that the Central Fund pay for local competition in its operating territory to protect its customers from more rate increases.

27.

The Commission notes that the large ILECs raised similar concerns when the Commission considered how to recover the costs of implementing local competition in the large ILEC territories. The Commission concluded that each carrier would be responsible for recovering its own costs.

28.

The Commission is of the view that the customers in Télébec's and TELUS Québec's territories will benefit from local competition. Therefore the Commission, by majority vote, considers that the companies should recover their own respective costs and accordingly, finds that these costs should not be recovered from the Central Fund.

29.

In order to reduce the size of these costs, the Commission considers that both TELUS Québec and Télébec should incur expenses only as they are required.

Cost of implementing local competition and LNP

30.

In their submissions and responses to Commission interrogatories, both companies provided estimates of costs to implement local competition and LNP.

31.

Télébec updated its costing information on 13 July 2001. On the same day, Télébec filed reply comments, which was the last stage of the PN 2001-24 proceeding. The Commission notes that due to the late date of filing, the interested parties did not have an opportunity to provide comments on the costing information that Télébec provided.

32.

TELUS Québec proposed to provide further information about the costs of implementing local competition and LNP in the proceeding initiated by PN 2001-36.

33.

On the basis of the record of this proceeding, the Commission considers that it cannot make a determination on the total cost of implementing local competition and LNP in the operating territories of TELUS Québec and Télébec. Therefore, this issue will be addressed during the proceeding initiated by PN 2001-36.

Co-location tariffs

34.

TELUS Québec filed tariff notice 299 on 23 March 2001. Télébec filed tariff notice 262 on 11 May 2001. Both proposed rates, terms and conditions allowing co-location of competitors' transmission facilities in their respective central offices. The proposed rates, terms and conditions were similar to those that the Commission had already approved for Bell Canada.

35.

The Commission approves TELUS Québec's TN 299 and Télébec's TN 262.

36.

Recently, the Commission has issued a letter decision and an order on the issue of co-location. The Commission is of the preliminary view that TELUS Québec and Télébec should reflect these Commission determinations on co-location in their respective tariffs. These determinations are contained in Decision CRTC 2001-204, The Commission, by majority decision, approves the Coalition for Better Co-Location - Part VII application for expedited relief with respect to the current co-location regime, dated 30 March 2001, and Order CRTC 2001-695, CRTC reduces co-location space restriction - Show cause to ILECs other than Bell Canada, dated 10 September 2001. TELUS Québec and Télébec are directed to provide their comments within 30 days of this order.

37.

In establishing terms and conditions for local competition in the territories of the large ILECs, the Commission sought to achieve a balance among the interests and needs of consumers, new entrants in the markets of local exchange and local payphone services, and the incumbent telephone companies. The Commission finds that it is appropriate to make use of the terms and conditions for local exchange and local payphone competition that apply in the large ILEC territories in the case of TELUS Québec and Télébec.

Timing for the introduction of local competition

38.

In PN 2001-24, the Commission expressed the preliminary view that local exchange and local payphone competition should begin in 2002. Both TELUS Québec and Télébec submitted that local competition should begin in late 2002. The companies argued that after the determinations are made in this proceeding, the many issues that would remain unresolved should be addressed before the introduction of local competition in their operating territories.

39.

For example, in PN 2001-69, among other things, the Commission seeks to:

40.

The Commission considers that permitting competition in the fall of 2002 will ensure that all the required components for local exchange and local payphone competition would be in place.

41.

Therefore, the Commission finds that competition in the local exchange and local payphone markets should be permitted in Télébec's and TELUS Québec's operating territories as of 1 September 2002.

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

Minority opinion of Commissioner Andrée Noël

From the outset, I would like to confirm that I concur with most of the terms and conditions approved by the Commission in this order relating to competition in the local exchange and local payphone markets in the territories of TELUS Communications (Québec) Inc. and Télébec ltée.

In fact, it is only with respect to recovering expenditures incurred in implementing local competition and local number portability (LNP) (paragraphs 24 to 29, inclusively, of the majority decision issued in this proceeding) that I wonder whether a final conclusion should be reached at this stage of the proceeding.

The Commission recognizes, in paragraphs 30 to 33, inclusively, of the order, that the record of this proceeding does not contain enough information to determine the costs associated with implementing local competition and LNP. As a result, the Commission refers to the proceeding initiated by Public Notice 2001-36 to determine these costs.

Since the Commission is unable to determine total costs, I feel it is too early to make a final decision on who will bear these costs. In my opinion, it is somewhat like putting the cart before the horse.

As a result, I would also have referred consideration of this matter to the proceeding initiated by Public Notice 2001-36.

I concur with all other terms and conditions of this order.