ARCHIVED - Telecom Decision CRTC 2002-1

Telecom Decision CRTC 2002-1

Ottawa, 10 January 2002

Application of the winback rules with respect to primary exchange service

Reference: 8622-C25-12/01

Summary

The Commission amends the local winback rules by directing incumbent local exchange carriers not to attempt to win back a business customer with respect to primary exchange service, and, in the case of a residential customer, with respect to primary exchange or any other service, for a period of three months after that customer's primary local exchange service has been completely transferred to another local service provider.

Background and relief requested

1.

Call-Net Enterprises Inc., on behalf of itself and its affiliated companies, including Sprint Canada Inc., submitted an application on 11 June 2001 under Part VII of the CRTC Telecommunications Rules of Procedure and pursuant to sections 48(1), 55, 60 and 70 of the Telecommunications Act requesting that the Commission clarify the application of the local winback rules to ensure that they cannot be circumvented through the use of bundled offerings. Specifically, Call-Net requested that the Commission direct that where a residential customer has switched local services from an incumbent local exchange carrier (ILEC) to a competitive local exchange carrier (CLEC), the ILEC be prohibited from making any type of winback calls (e.g., Internet, long distance service) to the customer until at least three months after that customer's local service has been transferred to a CLEC.

2.

Call-Net submitted that where local services are bundled with other services such as long distance and Internet, the ILECs have the incentive and opportunity to approach a customer on the basis of attempting to win back their long distance or Internet service and, at the same time, effectively make a local service winback, contrary to the winback rules.

3.

Call-Net argued that the ILECs' activities in the local exchange market, including their winback practices, are a significant contributing factor to the impairment of local competition.

Comments on the application

4.

Comments on Call-Net's application were received from TELUS Communications Inc. (TCI) and from Bell Canada on behalf of itself, Aliant Telecom Inc., MTS Communications Inc. and Saskatchewan Telecommunications (Bell Canada et al.), as well as from Futureway Communications Inc. and EastLink Telephone.

5.

Bell Canada et al. and TCI submitted, among other things, that at no time have they contravened the Commission's winback rules. Bell Canada et al. and TCI argued that Call-Net's application is based solely on conjecture without any evidence that harm is actually occurring.

6.

Bell Canada et al. submitted that Call-Net has in effect requested that the scope of the Commission's existing local exchange winback restrictions be expanded significantly.

7.

Bell Canada et al. and TCI argued that Call-Net's proposal to impose winback restrictions in respect of all services offered by the ILECs would effectively re-regulate the offer and delivery of services that the Commission has already found to be competitive and for which it has issued forbearance decisions (e.g. long distance, Internet). Further, TCI and Bell Canada et al. argued that it is not necessary to extend the winback restrictions to every area to protect Call-Net's residential local market operations.

8.

TCI stated that it is in agreement with Call-Net that, where a residential customer has switched local services from an ILEC to a CLEC, the ILEC should be prohibited from making a winback call to that customer for the purposes of offering the customer local exchange service (whether on a stand-alone basis, or via a bundled offering), for at least three months after the customer's local service has been completely transferred to the CLEC.

9.

Bell Canada et al. argued that Call-Net's proposal is unworkable because the companies currently have no reasonable means of determining, other than communicating directly with the customer, what (if any) other CLEC services (other than local exchange service) a customer might have purchased. Thus, any mandated changes to the local winback restrictions that result in a wider internal distribution of CLEC customer information would require the development of new databases and control procedures.

10.

Futureway and EastLink agreed with Call-Net that the use of bundled service offerings provide the ILECs with the opportunity to convert a long distance or Internet sales call into a winback call for local service.

Conclusions

11.

The Commission notes that the local exchange winback restrictions were first imposed on the ILECs in a letter decision, Commission Decision regarding CRTC Interconnection Steering Committee dispute on competitive winback guidelines, dated 16 April 1998.

12.

In this letter decision, the Commission stated, among other things, that:

... [A]n ILEC is not to attempt to win back a customer for a period of three months after that customer's service has been completely transferred to another local service provider, with one exception: ILECs should be allowed to win back customers who call to advise them that they intend to change local service provider.

13.

The Commission stated that without such guidelines, ILECs would potentially be able to win back customers even before local service is effectively transferred to a CLEC because ILECs control and have access to customer specific information.

14.

Subsequently, in another letter decision, CISC dispute - Rules regarding communication between the customer and the broadcast distribution undertaking, dated 1 April 1999, the Commission imposed winback rules on incumbent cable operators in respect of customers who have chosen to subscribe to the services of a competing broadcast distribution undertaking. Winback activities were defined as:

... the offering to customers of discounts, free services or other inducements in order to convince those customers not to change service providers or to revert back to their original service provider.

15.

More recently, in Order CRTC 2001-92, Terms and rates approved for large cable carriers' higher speed access service - Follow-up to Order CRTC 2000-789, dated 1 February 2001, the Commission imposed winback restrictions on Rogers Communications Inc., Cogeco Cable Canada Inc., Shaw Communications Inc. and Vidéotron ltée in respect of their high-speed (cable modem) Internet access services.

16.

The Commission notes that circumstances have changed since the winback rules were first applied in 1998. In particular, there has been an increase in the marketing of bundled service offerings. In this regard, the Commission notes that an attempt by an ILEC to sell a bundle that included optional local services to a lost residential primary exchange customer would generally constitute a winback activity for primary exchange service since its acceptance would generally mean that the customer, for technical reasons, would be obliged to switch back to the ILEC's primary exchange service.

17.

In the case of the bundling of other services such as Internet and long distance with primary exchange service or optional local services, the Commission notes that a winback of a long distance or Internet customer would also inevitably repatriate the primary exchange service, despite the fact that such service might not be the target of the winback in question.

18.

The Commission is persuaded that in order to ensure the effective operation of the winback rules in the residential primary exchange market, the ILECs should not be permitted to attempt to win back, with respect to any service, any customer for a period of three months after that customer has transferred its residential local exchange service to another local service provider.

19.

The Commission notes that such a measure would only apply to subscribers that have recently transferred their residential primary exchange service to another service provider. In these circumstances, the ILECs would not be prevented from continuing to attempt to win back customers who have switched only services other than residential primary exchange service. In addition, given the very small number of subscribers that, to date, have chosen to switch their residential primary exchange service to another service provider, the Commission considers that the impact of the restriction resulting from this decision will not unduly constrain the marketing efforts of the ILECs. Moreover, the Commission notes that the ILECs will be free to continue to market their residential primary exchange service and other services through various other means such as radio, print and television.

20.

The Commission disagrees with Bell Canada et al. that Call-Net's proposal would be unworkable. The Commission notes that primary exchange sales personnel are provided with lists of customers who have switched to a CLEC. The Commission considers that the ILECs will be able to implement this decision by circulating these lists to the sales personnel who market other services, with a direction that they are not to initiate contact with these customers.

21.

In light of the above, the Commission orders that the local winback guidelines be amended to read as follows:

... an ILEC is not to attempt to win back a business customer with respect to primary exchange service, and in the case of a residential customer, with respect to primary exchange or any other service, for a period of three months after that customer's primary local exchange service has been completely transferred to another local service provider, with one exception: ILECs should be allowed to win back customers who call to advise them that they intend to change local service provider. (Amendments in bold.)