ARCHIVED - Telecom Decision CRTC 2002-47

Telecom Decision CRTC 2002-47

Ottawa, 9 August 2002

Application by Vidéotron ltée to review and vary Order CRTC 2001-92

Reference: 8662-V3-01/01

Vidéotron ltée (Vidéotron) filed an application requesting that the Commission review and vary Order CRTC 2001-92 such that the winback rules imposed in paragraph 15 of the Order would no longer apply, or in the alternative, by imposing the winback rules on all facilities-based retail high-speed Internet service providers in Vidéotron's operating territory. In this decision, the Commission finds that Vidéotron has failed to demonstrate that there is substantial doubt as to the correctness of Order CRTC 2001-92 and, accordingly, denies the application.

Background

1.

In Terms and rates approved for large cable carriers' higher speed access service - Follow-up to Order CRTC 2000-789, Order CRTC 2001-92, 1 February 2001 (Order 2001-92), the Commission found that it was appropriate to impose the winback rules developed in the broadcasting services market on the larger cable carriers' high-speed access services.

The application

2.

On 5 March 2001, Vidéotron ltée (Vidéotron) filed an application pursuant to section 62 of the Telecommunications Act (the Act) requesting that the Commission review and vary Order 2001-92 such that the winback rules imposed at paragraph 15 of the Order would no longer apply, or in the alternative, by imposing the winback rules on all facilities-based retail high-speed Internet service providers (ISPs) in Vidéotron's operating territory.

3.

Vidéotron argued that the Commission committed errors of fact and law and introduced new principles in coming to its determination, submitting that:

Process

4.

Comments were received from the Independent Members of the Canadian Association of Internet Providers (IMCAIP), AT&T Canada Corp. and AT&T Canada Telecom Services Company (AT&T Canada), Bell Canada, TELUS Communications Inc. (TCI), Mr. François Ménard and GT Group Telecom Services Corp. (Group Telecom). Vidéotron filed reply comments.

5.

IMCAIP submitted further comments requesting that certain parts of Vidéotron's reply be removed from the record. Vidéotron filed comments with respect to IMCAIP's request. IMCAIP filed comments in reply.

Positions of parties

6.

IMCAIP submitted that Vidéotron's argument that the Commission made errors of fact and law was without foundation because the argument was based on an analysis of the wrong service market. IMCAIP was of the view that the Commission was correct in stating, at paragraph 13 of Order 2001-92, that the appropriateness of applying the existing winback rules to the cable carriers' access services should be considered with reference to the cable carriers' market power in the high-speed access market, as opposed to the retail Internet services market.

7.

IMCAIP stated that the Commission has repeatedly found that the larger incumbent cable carriers and the incumbent telephone companies are essentially the exclusive providers of high-speed access services and that these carriers have substantial market power with respect to the provision of such services. IMCAIP submitted that Vidéotron's application discloses no evidence contradicting the Commission's conclusion that Vidéotron and the other incumbent cable carriers are dominant providers of high-speed access services, and the suggestion that the application of the winback rules is based on an error of fact is without foundation.

8.

AT&T Canada submitted that the incumbent facilities-based providers, in this case Vidéotron and Bell Canada, are the dominant service providers in the high-speed segment of the retail market and that there is insufficient competition to justify removing the winback rules.

9.

Mr. Ménard disputed Vidéotron's statement that there is no evidence that Vidéotron exercised any degree of market power in the high-speed segment of the retail Internet services market, stating that, as Bell Canada has not rolled out its digital subscriber line (DSL) service in areas which are five kilometres beyond a Bell Canada central office, the cable modem service of Vidéotron is the only underlying facility capable of providing high-speed access to the Internet in most of its territory.

10.

Bell Canada submitted that the winback restrictions should be withdrawn because imposing marketing restrictions on a single service provider is inappropriate in the competitive retail Internet services market.

11.

In addition to supporting the maintenance of the winback rules for the incumbent cable carriers, IMCAIP and AT&T Canada supported Vidéotron's alternative proposal to vary Order 2001-92 such that the winback rules would apply to all facilities-based high-speed retail Internet services providers.

12.

TCI and Bell Canada submitted that the winback rules should not be extended to all facilities-based providers. TCI submitted that the Commission imposed winback rules on the larger cable carriers because of concerns about the state of development of competition in the high-speed retail Internet services market involving ISPs who use cable carrier access services. TCI argued that none of these concerns are present when one considers the copper infrastructure-based high-speed Internet access market.

13.

In its submissions, TCI argued that, based on previous rulings, a general test for the removal of winback restrictions could be formulated. Group Telecom and AT&T Canada submitted that TCI's comments proposing a general test for the removal of winback rules went beyond the scope of Vidéotron's requested relief and should be struck from the record.

Vidéotron's reply

14.

In its reply comments, Vidéotron rejected the suggestion that the relevant product market is access services. Vidéotron argued that the winback rules were imposed on its retail Internet services, as they restrict Vidéotron's ability to winback retail Internet service customers, not access customers. Vidéotron noted that the Commission has imposed winback rules with respect to local exchange services, broadcasting distribution services and payphone services. Vidéotron further submitted that, in these cases, the Commission justified imposing the winback rules by reference to the state of competition in the retail market, not by reference to the state of competition in the market for the underlying access services used in the retail market.

15.

Vidéotron added, at paragraphs 20 and 21 of its reply, that: (i) it is no more dominant in the access services market than in the retail Internet services market and its share of the retail Internet market is approximately 20%, and (ii) it could not profitably and non-transitorily impose price increases in the access services market because its ISP customers would opt for DSL service or wireless-based alternative access services.

16.

Vidéotron submitted that there is no need to consider TCI's proposed test for lifting winback rules, since, in Vidéotron's view, the rules should never have been imposed. Vidéotron also stated that the Commission could render a decision to lift the winback rules without creating a general test that could have an impact on the local exchange market.

Comments in response to Vidéotron's reply

17.

IMCAIP requested that the Commission order that paragraphs 20 and 21 of Vidéotron's reply be removed from the record on the basis that Vidéotron improperly introduced new evidence purporting to show its market share in the access services market. IMCAIP stated that the introduction of such evidence in reply is contrary to the CRTC Telecommunications Rules of Procedure and the principles of natural justice and procedural fairness by denying interested parties the right to be fully heard.

18.

In response, Vidéotron submitted that IMCAIP did have the opportunity to comment on Vidéotron's position in the access services market because there is a direct correlation between the number of retail Internet services provided and the number of Internet access services self-supplied by a facilities-based ISP.

19.

In reply, IMCAIP submitted that the evidence relating to the high-speed access market should have been tendered by Vidéotron in its application.

Commission's determination

Procedural matters

20.

The Commission notes that Vidéotron introduced new argument and evidence at paragraphs 20 and 21 of its reply comments. As these submissions and associated evidence were provided at the reply stage of the proceeding and are untested, the Commission has given them little weight in its deliberations. Moreover, the Commission does not consider that dominance in the access market can be measured by a company's share of the retail Internet services market.

The review and vary application

21.

At paragraph 13 of Order 2001-92, the Commission found that:

22.

The Commission finds that there is no basis for Vidéotron to argue that the Commission erred in fact by declaring Vidéotron to have a dominant position in the retail Internet services market. Contrary to Vidéotron's submission, the Commission did not declare that Vidéotron was dominant in the retail Internet services market, but, rather, considered Vidéotron's dominant market power in the high-speed access market in making its determination in Order 2001-92.

23.

The Commission further finds that there is no basis for Vidéotron to argue that the Commission erred in law by applying the winback rules to the competitive retail Internet services market. In Order 2001-92, the Commission found that the winback rules were necessary despite the fact that the retail Internet services market was competitive. The Commission notes that Vidéotron is a dominant supplier of cable access facilities and services required by independent ISPs, as well as a competitor of these ISPs in the provision of high-speed retail Internet services. The winback rules apply where customers are in the process of switching their high-speed Internet business from Vidéotron to another ISP using Vidéotron's facilities to provide the service. The Commission considers that the winback rules are an appropriate safeguard to prevent potential abuses that may arise from access to commercially sensitive information under these circumstances.

24.

The Commission does not consider that it introduced two new principles in coming to its determination. Contrary to Vidéotron's view, the Commission considered and remains of the view that competition in a market is a relevant consideration in determining whether to impose winback rules. In addition, the Commission did not introduce a new principle that markets should be defined on the basis of technologies used and not services provided. In Regulation under the Telecommunications Act of certain telecommunications services offered by "broadcast carriers", Telecom Decision CRTC 98-9, 9 July 1998, the Commission defined the high-speed access market to include access services with transmission speeds greater than 64 Kbps, regardless of the underlying technology used to provide the service.

25.

As regards Vidéotron's alternative request, the Commission finds that Vidéotron did not demonstrate substantial doubt as to the correctness of the Commission's decision not to impose winback rules on other facilities-based providers. Consistent with the Commission's past practice of limiting the scope of a proceeding to particular carriers, the scope of the proceeding leading to Order 2001-92 was limited to determining the appropriate terms for the larger cable carriers' high-speed access services. However, the Commission notes that it imposed similar winback rules on Bell Canada in Independent Members of the Canadian Association of Internet Providers - Digital Subscriber Line Internet services by Bell Canada and Bell Nexxia, Telecom Decision CRTC 2002-37, 27 June 2002. In that decision, the Commission also indicated that it was of the preliminary view that these winback rules should apply to the other large incumbent local exchange carriers in their respective operating territories and initiated a proceeding to consider that view.

26.

In light of the above, the Commission finds that Vidéotron has failed to demonstrate that there is substantial doubt as to the correctness of Order 2001-92 and, accordingly, denies the application to review and vary the order.

27.

Finally, the Commission considers that TCI's proposal to create a general test for the removal of winback restrictions that are already in place is beyond the scope of this proceeding.

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