ARCHIVED - Telecom Decision CRTC 2002-65

Telecom Decision CRTC 2002-65

Ottawa, 18 October 2002

Public Interest Advocacy Centre - Part VII application regarding alleged violations of the contribution regime

Reference: 8695-P8-01/01

In this decision, the Commission reviews and varies of its own motion Changes to the contribution regime, Decision CRTC 2000-745, 30 November 2000, by removing the restriction on showing the contribution amount as a separate line item on a customer invoice.

Application

1.

The Commission received a Part VII application from the Public Interest Advocacy Centre (PIAC), dated 2 November 2001, which alleged that several telecommunications service providers (TSPs) had violated paragraph 110 (b) of the Commission's ruling in Changes to the contribution regime, Decision CRTC 2000-745, 30 November 2000 (Decision 2000-745).

2.

Comments were received, in response to PIAC's application, from Bell Canada and Bell Mobility (collectively Bell Canada); Aliant Telecom Inc. and MT&T Mobility Inc. (collectively Aliant Telecom); TELUS Communications Inc., TELUS-MOBILE Company and TELUS Communications (Québec) Inc. (collectively TCI); Saskatchewan Telecommunications on behalf of SaskTel Mobility (SaskTel); the Canadian Wireless Telecommunications Association (CWTA); Call-Net Enterprises Inc. (Call-Net); Rogers Wireless Inc. (RWI); and Microcell Telecommunications Inc. (Microcell).

3.

Reply comments were received from PIAC and Call-Net.

Background

4.

In Decision 2000-745, the Commission required all TSPs to subsidize basic residential local service in high-cost serving areas through a revenue-based contribution regime.

5.

In paragraph 110 (b) of Decision 2000-745, the Commission made the determination that:

the contribution amount shall not be shown as a separate visible line item on customer invoices.

PIAC's position

6.

PIAC submitted that a number of TSPs had begun charging their customers a surcharge designed to recover the contribution amount. PIAC asserted that such surcharges contravened Decision 2000-745 because, in PIAC's view, that decision clearly prevents TSPs from explicitly charging contribution in a direct manner.

7.

PIAC stated that wireless service providers (WSPs) were charging their customers a specific surcharge designed to recover the new revenue charge in full. PIAC also submitted that long distance providers such as Bell Canada, Sprint Canada Inc. and Primus Telecommunications Canada Inc. had started or intended to start charging their customers a network surcharge for the purposes of recovering at least part of the contribution amount assessed on them under the new regime.

8.

PIAC submitted that these practices violated the Commission's ruling in paragraph 110 (b) of Decision 2000-745 that the contribution amount shall not be shown as a separate visible line item on customer invoices.

9.

In its application, PIAC requested that the Commission order TSPs to:

Position of the TSPs

10.

All of the TSPs, who participated in this proceeding, argued that the Commission, in Decision 2000-745, had specifically allowed TSPs to recover contribution costs. Specifically, the TSPs pointed to paragraph 135 of Decision 2000-745 where they asserted that the Commission had allowed companies under price cap regulation to recover the contribution revenue-percentage charge through an exogenous factor adjustment.

11.

The TSPs further submitted that implicit in the Commission's authorization of the exogenous factor adjustment was the understanding that TSPs could also increase the rates for forborne services not covered by price cap regulation.

12.

A number of TSPs, namely TCI, Bell Canada, Aliant Telecom, and SaskTel, and the CWTA argued that the practices of TSPs did not violate paragraph 110 (b) of Decision 2000-745.

13.

TCI argued that paragraph 110 (b) of Decision 2000-745 only prohibited carriers from identifying a separate line item on the customer's invoice that specifically attributes any rate, rate increase, surcharge or new charge as a means of collecting the contribution amount. TCI submitted that where surcharges, like TELUS Mobility's system licensing charge, recover a number of fees and charges, including contribution, then the surcharges cannot be characterized as a separate visible line item.

14.

Bell Canada, Aliant Telecom, and SaskTel submitted that the term "contribution amount", as used by the Commission in Decision 2000-745, referred to an amount calculated by multiplying the contribution eligible revenue on a customer invoice by the contribution rate. Bell Canada specifically noted that the contribution amount is not reflected on its customers' bills, but rather that it has introduced a flat network charge for residential customers subscribing to its long distance savings plans, partly to recover contribution costs.

15.

The CWTA submitted that the system access fee (SAF) charged by WSPs is a long standing component of wireless pricing in Canada to recover the significant costs related to the operation of a wireless network, including ongoing maintenance costs, new equipment, technology upgrades and government licence fees. The CWTA noted that all WSPs had increased their SAF in early 2001, partly to recover contribution costs. However, the CWTA noted that the SAF had appeared on customers' bills prior to Decision 2000-745 and is not identified on the invoice as a "contribution charged".

16.

Some TSPs, namely Aliant Telecom and RWI, and the CWTA argued that the Commission's original determination contained in paragraph 110 (b) should be changed.

17.

RWI and the CWTA argued that the Commission lacked the jurisdiction, under section 46.5 of the Telecommunications Act (the Act), to regulate the manner in which a TSP sought to recover contribution costs. RWI and the CWTA further submitted that the Commission could not, under section 46.5 of the Act, prohibit TSPs offering forborne services from identifying charges on their customer invoices.

18.

Aliant Telecom submitted that it disagreed with the position that the Commission had taken in Decision 2000-745 to not allow TSPs to show the full amount of the contribution cost as a specific and separate line item on customers' invoices. Aliant Telecom argued that, since the contribution costs can be recovered through adjustments to prices or price structures, there was no compelling reason for not allowing such a cost to be recovered by a specific charge. Indeed, according to Aliant Telecom, the customer interest would be better served by full disclosure.

19.

Call-Net argued that it had a duty to make the contribution amount as visible as possible, so that customers could easily understand all of the charges. Accordingly, it had included a surcharge related to contribution amounts as a separate item on the customer's bill and had notified its customers of the new contribution regime set out in Decision 2000-745.

PIAC's reply comments

20.

PIAC rejected the argument that the term "contribution amount", as used in Decision 2000-745, refers to an exact amount calculated by multiplying contribution eligible revenues by the percentage contribution rate. According to PIAC, it would be irrational for the Commission to permit companies to collect contribution expense directly from customers via a separate visible line item, but only where that line item is for an amount less than or more than the exact amount corresponding to the percentage contribution rate.

21.

PIAC disagreed with the claims of RWI and the CWTA that the Commission lacked jurisdiction under section 46.5 of the Act to make the restriction set out in paragraph 110 (b) of Decision 2000-745. PIAC submitted that section 46.5 of the Act in no way restricts the Commission's general regulatory powers.

22.

While maintaining that this was not the appropriate proceeding in which to argue the merits of the Commission's restriction contained in paragraph 110 (b) of Decision 2000-745, PIAC noted that some TSPs, notably Aliant Telecom, addressed the issue. PIAC, therefore, provided its arguments in support of that paragraph.

23.

PIAC submitted that there are many reasons for banning surcharges for the purpose of collecting contribution costs.

24.

In this regard, PIAC argued, amongst other things, that surcharges allow companies to hide the true price of service to customers by creating the appearance of lower usage rates instead of increasing the advertised usage rate. According to PIAC, increasing the advertised usage rate would permit market forces to operate to limit the ability of TSPs to pass through contribution costs. Moreover, surcharges inhibit comparison shopping and, hence, effective competition, and also cause unnecessary customer confusion.

25.

PIAC also submitted that the new charges are highly confusing to customers in terms of their rationale, as well as in their effect on the customer's ability to make rational choices in a competitive market.

26.

In PIAC's view, price competition should be based on the entirety of a TSP's costs of doing business, of which contribution is one element. PIAC submitted that to remove contribution from the costs on which advertised rates are based simply narrows the scope of price competition.

Commission determination

27.

Introductory to its determination of this matter, the Commission wishes to thank PIAC for refocusing the attention of interested parties and the Commission on paragraph 110 (b) of Decision 2000-745.

28.

The Commission notes that section 46.5 (1) of the Act provides as follows:

The Commission may require any telecommunications service provider to contribute, subject to any conditions that the Commission may set, to a fund to support continuing access by Canadians to basic telecommunications services.

29.

Contrary to the assertions of RWI and the CWTA, the Commission considers the phrase "subject to any conditions that the Commission may set" is quite broad and permits the Commission to set conditions on how, if at all, TSPs are permitted to show the contribution amount as a separate line item.

30.

The Commission notes that Decision 2000-745 allows TSPs to recover contribution costs from their end customers. Specifically, Decision 2000-745 states:

135. The Commission considers that companies currently under price cap regulation should be allowed to recover, in 2001, the revenue-percentage charge applicable to their capped services through an exogenous adjustment. Accordingly, each ILEC under price cap regulation is allowed to reflect, in its 2001 price cap filing, an exogenous factor adjustment of 4.5 percent to the Service Band Limit for each of the Residence Local Services and Other Capped Services sub-baskets and to the overall price cap index.

136. For those companies not under price cap regulation in 2001 (i.e., SaskTel, Télébec and Québec-Téléphone), the Commission is prepared to consider applications to recover the revenue-percentage charge applicable to utility segment revenues.

137. These measures give the companies flexibility to recover the new revenue-percentage charge by raising rates.

Pursuant to Decision 2000-745, the Commission subsequently approved a number of rate increases for tariffed services.

31.

The Commission considers that, with regard to forborne or uncapped services, Decision 2000-745 does not prevent TSPs from recovering the contribution amount through rate increases. Indeed, the Commission notes that a number of TSPs increased their rates for forborne services to recover contribution costs.

32.

The Commission considers that the record of this proceeding demonstrates that TSPs have included a number of different charges on customer invoices. The Commission notes that the record of this proceeding equally demonstrates that the purpose of these charges is not exclusively the recovery of contribution costs.

33.

The Commission notes that the parties to this proceeding have put forward varying interpretations of paragraph 110 (b) of Decision 2000-745. The TSPs have asserted that, so long as a charge is not exclusively for the purpose of recovering contribution costs, paragraph 110 (b) has not been violated. PIAC has argued that, so long as any portion of a charge is for the recovery of contribution costs, paragraph 110 (b) has been violated.

34.

The Commission considers that paragraph 110 (b) of Decision 2000-745, as demonstrated by the varying interpretations put forward by the parties to this proceeding, has created a real and on-going confusion as to how TSPs may recover contribution costs.

35.

Furthermore, the Commission considers that the consumer interest in transparency is not served by prohibiting TSPs from reflecting contribution costs on customer invoices.

36.

In light of the above, the Commission finds that there is substantial doubt as to the original correctness of paragraph 110 (b) of Decision 2000-745. Accordingly, the Commission hereby reviews and varies Decision 2000-745, of its own motion, pursuant to section 62 of the Act, to remove paragraph 110 (b) of Decision 2000-745, effective the date of that decision.

37.

The Commission notes its ongoing concerns with respect to issues of transparency for consumers. In this regard, the Commission has recently initiated several proceedings to look at potential improvements to transparency on customer invoices. For example, in Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002, the Commission:

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