ARCHIVED - Telecom Decision CRTC 2002-48

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Telecom Decision CRTC 2002-48

Ottawa, 14 August 2002

EastLink Limited V Aliant Telecom Inc. - Non-compliance with bundling rules

Reference: 8622-E17-03/02

In this decision, the Commission finds that a service proposed to be provided by Aliant Telecom Inc. would constitute a bundled service. The Commission prohibits the company from providing the service without first obtaining prior tariff approval.


The Commission received a Part VII application from EastLink Limited (EastLink) dated 2 August 2002, alleging that Aliant Telecom Inc. (Aliant Telecom) is in non-compliance with the Commission's rules for the bundling of services, and requesting expedited relief.



On 30 May 2002, the Nova Scotia Agricultural College (NSAC), through the Procurement Branch of the Nova Scotia Government, issued a Request for Proposals (RFP) seeking various services to be offered and provided to its students as a package, including the following mandatory services: basic local telephone; high speed Internet access; television; and scheduled service support (the mandatory services).


In its RFP, NSAC stated that its goal was to begin service delivery to student residences by 15 August 2002, in time for the 2002-2003 academic fall semester.


Both EastLink and Aliant Telecom submitted proposals in response to NSAC's RFP. NSAC accepted the proposal by Aliant Telecom to provide the mandatory services for $45 per month.

Position of the Parties


In its application, EastLink submitted that Aliant Telecom offered to provide these services to NSAC at prices that are materially below those permitted under its approved tariffs. EastLink submitted that the rates proposed by Aliant Telecom would not pass an imputation test for Type 2 customer-specific arrangements (CSA), as required by Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19) and, therefore, would be in violation of section 24 of the Telecommunications Act (the Act). EastLink also argued that, had Aliant Telecom filed a Type 2 CSA tariff, the Commission's prohibition against resale by universities, as set out in Tariffs for Educational and Health Services Entities, Telecom Decision CRTC 96-9, 27 September 1996 (Decision 96-9), would have prevented Aliant Telecom from offering such a preferential rate to an educational institution reselling to students.


In its response dated 8 August 2002, Aliant Telecom submitted that its proposal did not include a bundle "from a regulatory perspective". In Aliant Telecom's view, its proposal offered a suite of individual services that were rated individually, added together and quoted as a package. Aliant Telecom further submitted that the Commission's definition of bundling does not include combinations of services where the rates of the individual services are not dependent on the usage of all services or where a discount has not been applied. Aliant Telecom argued that the individual rates quoted in its proposal to NSAC were not dependent on NSAC's taking all three services and that no discount was applied to the package.


Aliant Telecom argued that EastLink's interpretation of Decision 96-9 regarding the issue of resale would effectively prevent Aliant Telecom from bidding on many RFPs for educational institutions.


The Nova Scotia Department of Justice, on behalf of NSAC, urged a speedy resolution of the complaint in a manner that would not have a negative impact on NSAC, noting that NSAC was concerned about the cost of any delay in implementing the service as well as the impact this might have on its ability to deliver on its commitments to the student body.


In its reply comments of 12 August 2002, EastLink submitted that Aliant Telecom's interpretation of the bundling rules is incorrect. EastLink also submitted that, since one of the objectives of NSAC's RFP was to solicit proposals for services to be offered and priced on a per-package basis, it was not necessary for Aliant Telecom to make the individual rates quoted in its proposal dependent on NSAC taking any or all services.


EastLink argued that Aliant Telecom had to have set the rates for the Internet and video components of its proposed package at rates significantly lower than those generally available in the market and that Aliant Telecom would not have done so if the components had not been offered in a bundle.


EastLink further submitted that one of the basic tenets of the Commission's bundling rules is to ensure that bundles of tariffed and non-tariffed services do not include a tariffed component of the package at an implicit rate that is lower than its approved rate, thereby granting an undue preference to the provider. EastLink argued that, if arrangements similar to Aliant Telecom's proposal to NSAC were allowed by the Commission, the Commission would provide the incumbent local exchange carriers with obvious opportunities to circumvent the bundling rules outlined in Decision 94-19 and subsequent decisions, thereby rendering those rules ineffective.


EastLink also submitted that even if Aliant Telecom were to file a CSA not specifically addressed to the education and health sectors, the prohibition against resale in Decision 96-9 would, nonetheless, apply if the bundled service were to involve an educational institution reselling to students.

Commission Analysis and Determination


The Commission notes that, in Forbearance - Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997 (Decision 97-19) and Stentor Resource Centre Inc. - Forbearance From Regulation of Interexchange Private Line Services, Telecom Decision CRTC 97-20, 18 December 1997 (Decision 97-20), it described bundling as the inclusion of different services or service elements under a rate structure. The Commission noted that this rate structure might be a "single rate, a set of rates for various service elements, and/or rates for one or more service elements which are dependent on the usage of other services."


The Commission further notes that, in Joint Marketing and Bundling, Telecom Decision CRTC 98-4, 24 March 1998 (Decision 98-4), it adopted the same definition for bundling and further extended conditions to the bundling of tariffed services with services of an affiliated or non-affiliated company, and non-telecommunications services offered in-house by the major incumbent telephone companies.


With respect to the issue of resale, the Commission does not agree that the Decision 96-9 prohibition against resale would apply in this case, even though the customer is an educational institution, so long as the proposed CSA tariff does not rely on the rating principles of that decision.


The Commission notes that the package of mandatory services offered by Aliant Telecom consists of, in the words of Decision 98-4, "the inclusion of various services under a single rate structure", and that the $45 rate structure is "a single rate for various service elements" which are "dependent on the usage of other services". The Commission finds, therefore, that the package of services in question meets the Decision 98-4 definition of a bundle to which the requirements of Decision 94-19 and subsequent decisions apply.


The Commission concludes that if Aliant Telecom were to provide the service in question prior to obtaining tariff approval, it would be providing service in contravention of the Act. Therefore, if the company wishes to provide the service in question, it must file an appropriate tariff for approval, demonstrating that the conditions applicable to bundled services, including an imputation test, are met.


Accordingly, the Commission prohibits Aliant Telecom from providing the service at issue without prior tariff approval.

Secretary General

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Date Modified: 2002-08-15

Date modified: