ARCHIVED - Telecom Order CRTC 2002-348

Telecom Order CRTC 2002-348

Ottawa, 22 August 2002

Bell Canada
Reference: Tariff notice 6659

Flex Bundles - SmartTouch services and maintenance plans

The Commission has examined the application on a de novo basis in light of the comments received from Call-Net Enterprises Inc. The Commission affirms Telecom Order CRTC 2002-129.

1.

The Commission received an application by Bell Canada (the Company), dated 1 March 2002, to revise its General Tariff to introduce item 2221, Flex Bundles, for residential customers.

2.

The Commission issued Telecom Order CRTC 2002-129, approving Bell Canada's application on 5 April 2002 (tariff notice 6659 (TN 6659)). Comments filed by Call-Net Enterprises Inc. (Call-Net) on 2 April 2002 and inadvertently, had not been taken into account prior to the decision approving Bell Canada's application. On 23 April 2002, Call-Net filed supplementary comments. Bell Canada filed reply comments on 11 April and 6 May 2002. The Commission therefore considers the application by Bell Canada on a de novo basis in this Order.

The Application

3.

Bell Canada proposed to offer Flex Bundles, a package consisting of residential access and the choice of either six SmartTouchä calling features or five SmartTouchä calling features and a maintenance plan, to single line residential customers. The eligible calling features are: Call Answer, Call Answer Message Manager, Call Display Name and Number, Visual Call Waiting, Three-way Calling, Call Privacy, Call Waiting, Call Screen, Call Forwarding, Call Return and Ident-a-Call. The eligible maintenance plans are: WireCare or PhoneCare. Bell Canada stated that the proposed rate for the Flex Bundles would be $24.95 plus the monthly rate for the residential individual line. There would be no service charge to make changes to calling features within the bundle.

4.

In its application, Bell Canada also proposed to charge a $25.00 fee for cancellation of a maintenance plan within the first twelve months of subscription. The Company indicated this was intended as a deterrent against abuse of the plan whereby customers could subscribe to the plan, take advantage of its benefits in the short term and cancel the subscription, leaving the Company with a significant shortfall.

5.

In addition, Bell Canada proposed two promotions of Flex Bundles for eligible customers. With the first promotion, Flex Bundles INWARD, the Company proposed an introductory monthly rate of $19.95 for the first two months of subscription to Flex Bundles for new customers of residential primary exchange service and for residential primary exchange service customers who are moving.

6.

Bell Canada proposed to make a second promotional offer, Flex Bundles Coupon Offer, available to existing residential primary exchange service customers who choose to subscribe to Flex Bundles during the promotional period. Under the promotional offer, Bell Canada would provide these customers with two rebate coupons valued at $10.00 each. Coupons could be redeemed after the first and sixth consecutive months of subscription respectively and the promotion would run for a period of eight months.

Call-Net's position

7.

Call-Net submitted that the proposed bundle, as well as the associated promotions, would have a significant adverse impact on the newly emerging competitive residential local exchange services market and that, therefore, it should be denied.

8.

In support of its position, Call-Net argued that TN 6659 undermines local competition in the residential market. Call-Net argued that Bell Canada was seeking to retain its market share by making the two $10.00 rebate coupons available to customers only at the end of the first and sixth month and by imposing a cancellation fee during the first twelve months.

9.

Call-Net submitted that TN 6659 was a winback promotion targeted in part at residential local customers who switch to a new entrant. As the promotion is available to "new customers to Bell Canada and moving customers", Call-Net argued that it was intended to induce competitive local exchange carrier customers to move back to Bell Canada as "new" customers and to induce customers who move their residence not to take services from new entrants in their new locations.

10.

Call-Net submitted that TN 6659 was a direct response by Bell Canada to Call-Net's recently launched product - "Sprint Canada Local Home Phone Service" - which provides single line residential customers with the choice of a local line plus one optional feature for $19.95 per month for the first three months.

11.

Call-Net also submitted that the Commission should deny Bell Canada's application until rules relating to the incumbent local exchange carriers' (ILECs) promotions are established for the local exchange market in general. In this regard, Call-Net noted that the Commission had approved different and more restrictive rules for the residential as opposed to the business local exchange markets in Application of the Winback Rules with Respect to Primary Exchange Service, Telecom Decision CRTC 2002-1, 10 January 2002 (Decision 2002-1).

Bell Canada's reply

12.

In its 11 April 2002 comments, Bell Canada submitted that Call-Net's concerns were unfounded and arose largely from its fundamental misunderstanding of the pricing and intent of the promotion.

Bell Canada stated that its tariff relating to Flex Bundles clearly indicated that the rate for Flex Bundles would be composed of two elements: $24.95 for the optional features as well as the applicable rate for local exchange access. Further, Bell Canada stated that Call-Net's claims of anti-competitive activity were unwarranted, noting that Sprint Canada Inc. (Sprint Canada) offers local exchange access and six optional features at a rate of $31.95 monthly to customers already subscribing to a Sprint Canada's Long Distance Calling Plan. Bell Canada argued that Sprint Canada's regular price is substantially lower than Bell Canada's proposed short-term promotional price for similar services.

Bell Canada stated that Call-Net has erroneously suggested that Bell Canada would levy a penalty of $25.00 if the customer cancelled their subscription to the Flex Bundles within the initial twelve-month period. Bell Canada submitted that its tariff clearly indicated that the $25.00 cancellation fee would apply only to customers subscribing to one of the maintenance plans as part of their Flex Bundles selection. It clarified that customers may cancel any of the other Flex Bundles components without a charge.

Supplementary comments

In its supplementary comments of 23 April 2002, Call-Net reiterated its comments of 2 April 2002 and stated that Bell Canada has mischaracterized Call-Net's submission with respect to the Flex Bundles.

In its reply to the supplementary comments on 6 May 2002, Bell Canada stated that Call-Net's additional comments did not introduce any substantive arguments or new evidence that should cause the Commission to alter its decision with respect to Flex Bundles. Bell Canada further stated that Call-Net refuses to acknowledge the fact that it misunderstood Flex Bundles.

Commission's analysis and determination

The Commission notes that notwithstanding the rate for the Flex Bundles at $24.95 or at the promotional rate of $19.95, the rate for Residence Individual Line Service is not discounted. The customer would still pay the tariffed rate for residential local service for the rate band in which the customer resides.

In the Commission's view, the $10.00 coupons provided to the customers under the Flex Bundles Coupon Offer are a benefit to customers under a legitimate promotion. Moreover, the Commission notes that a customer is free to cancel the subscription at any time.

The Commission notes that the $25.00 cancellation fee would apply to customers who cancel a maintenance plan offered under Flex Bundles within the first twelve months of subscription and that customers may cancel any of the other Flex Bundles components without a charge. The Commission finds that the cancellation fee is an appropriate measure to address potential abuse of these maintenance plans.

With respect to Call-Net's submission that TN 6659 should be denied at least until rules are established in respect of ILEC promotions in the local exchange market in general, the Commission notes that its guidelines for promotions apply equally to both the business local exchange services and residential local exchange services.

The Commission finds that the imputation test filed in support of the service Flex Bundles is met.

Accordingly, the Commission approves on a de novo basis Bell Canada TN 6659.

Secretary General