ARCHIVED - Telecom Decision CRTC 2003-23

Telecom Decision CRTC 2003-23

Ottawa, 10 April 2003

GT Group Telecom Services Corp. v. Aliant Telecom Inc. - Tariff violations and contraventions of the Telecommunications Act

Reference: 8622-G7-03/02

In this decision, the Commission finds that Aliant Telecom Inc. (Aliant Telecom) contravened sections 25(1) and 27(1) and (2) of the Telecommunications Act (the Act) when:

The Commission considers that Aliant Telecom's actions in this instance are non-compliant and anti-competitive and undermine fair and sustainable competition in its territory. The Commission is thus taking measures to address Aliant Telecom's behaviour and with a view to ensuring that it complies with its tariffs and the Act.

The application

1.

On 26 April 2002, GT Group Telecom Services Corp. (Group Telecom) filed an application alleging that Aliant Telecom Inc. (Aliant Telecom) had violated its tariffs and the Telecommunications Act (the Act) by:

2.

To address Aliant Telecom's alleged anti-competitive conduct and to ensure that any services provided to Memorial by Aliant Telecom complied with applicable tariffs and the Act, Group Telecom requested that the Commission:

The process

3.

On 8 May 2002, Memorial filed an intervention. Aliant Telecom filed its answer on 9 May 2002, and Group Telecom filed its reply on 14 May 2002.

4.

To clarify the record, in a Commission staff letter dated 17 June 2002, Aliant Telecom was requested to file additional material and to provide comments on issues related to its compliance with its regulatory obligations. Aliant Telecom filed the additional material and comments on 21 June 2002, and Group Telecom filed its reply on 26 June 2002.

5.

To complete the record, by in a Commission staff letter dated 8 November 2002, Aliant Telecom was requested to provide further information, including identifying other customers who were treated similarly to Memorial. Aliant Telecom filed the information on 22 November 2002. Group Telecom filed comments on 28 November 2002. Aliant Telecom filed an answer on 3 December 2002 and Group Telecom filed a reply on 6 December 2002.

Background

6.

NewTel Communications Inc. (NewTel) (which on 1 January 2001 amalgamated with Island Telecom Inc., Maritime Tel & Tel Limited and NBTel Inc. to become Aliant Telecom Inc.) and Memorial entered into an agreement for the provision of PCS that came into effect on 1 April 1997 (the Agreement). Memorial had approximately 3,000 PCS lines. The Agreement stated that it was a 10-year agreement with an MCP of 42 months. NewTel charged Memorial a rate of $27.00 per Centrex line per month.

7.

On 1 April 1997, NewTel's tariffed PCS monthly rates, throughout its territory, for customers with 2,501 to 5,000 lines were as follows:

8.

In Order CRTC 2001-123, 8 February 2001 (Order 2001-123), following a tariff application by Aliant Telecom on behalf of NewTel, the Commission approved Band-specific PCS rates in NewTel's territory. The Commission approved the following monthly rates for NewTel customers in Band A with 2,501 to 5,000 PCS lines:

The customers referred to in this decision are located in Band A in the former NewTel territory.

9.

Order 2001-123 did not modify the 10-year MCP monthly rate of $27.00, which continues to be available to PCS customers with a minimum of 1,000 lines, regardless of the Band in which the lines are located.

10.

Pursuant to NewTel's tariff, business customers are charged the monthly business rate for primary exchange service lines, including modem pool lines. The applicable tariffed Band A rate for individual lines is $32.00 per month. Prior to 15 May 2001, for residence customers throughout NewTel's territory the rate for individual lines was $19.95 per month. In Order CRTC 2001-374, 10 May 2001, following a tariff application by Aliant Telecom on behalf of NewTel, the Commission approved a revised residence rate for individual lines of $21.95 per month, effective 15 May 2001.

Compliance with regulatory obligations in providing PCS to Memorial

Position of parties

Group Telecom

11.

Group Telecom submitted that Aliant Telecom had violated its tariff and sections 24, 25(1) and 27(2) of the Act by (a) transferring Memorial from the 10-year MCP rate of $27.00 per month to the revised 5-year MCP Band A rate of $25.30 per month approved in Order 2001-123, without requiring Memorial to pay the applicable termination charges, and (b) giving an undue preference to itself.

12.

Group Telecom submitted that Aliant Telecom's actions raised serious concerns about Aliant Telecom's commitment to regulatory compliance.

Aliant Telecom

13.

Aliant Telecom stated that the Agreement provided that, while the parties committed, in principle, to a 10-year business relationship, Memorial's total enforceable commitment for PCS was for an MCP of 42 months. Aliant Telecom further stated that, at the time of signing the Agreement, Memorial wanted the very best PCS rates available but did not want a long-term commitment because it wanted to have sufficient flexibility to seek telecommunications services from an alternate service provider following the introduction of local competition.

14.

Aliant Telecom stated that Memorial had paid the 10-year MCP rate of $27.00 per month per PCS line and submitted that this rate was consistent with the terms of the Agreement. Memorial paid this rate until February 2001. Aliant Telecom further stated that, effective 8 February 2001, the rate charged to Memorial was reduced to the 5-year MCP rate of $25.30 per month per Centrex access line, approved in Order 2001-123. In addition, Aliant Telecom stated that it had changed the term of the Agreement to five years but had retained 1 April 1997 as the commencement date.

15.

Aliant Telecom submitted that the Agreement advanced the interests of competition because Memorial was not locked into a longer-term agreement and could choose an alternate service provider for its voice services after only 42 months. The intent of the Agreement was also to respond to Memorial's needs, should Memorial become justifiably dissatisfied with the service.

16.

Aliant Telecom stated that, in hindsight, the characterization of the MCP as 42 months, and the structuring of the Agreement in those terms, were inaccurate and inappropriate. Aliant Telecom submitted, however, that the issue of the length of the MCP in the Agreement was hypothetical since the 42-month MCP was never acted upon. Moreover, if Memorial had been dissatisfied with the service after 42 months, Aliant Telecom submitted that Memorial could not have terminated the Agreement unless Aliant Telecom had filed a tariff permitting such termination. Absent such a tariff, if Memorial had unilaterally terminated the Agreement without reasonable cause or justification, the Agreement provided that the applicable tariff prevailed in case of conflict between the Agreement and the tariff. Aliant Telecom submitted that, in that event, Aliant Telecom could have taken legal action to enforce the 10-year commitment.

17.

Aliant Telecom submitted that the concept of allowing a customer to avoid completion of an MCP, where that customer agrees to enter into another service, was permitted by the Commission in circumstances such as those contemplated by NewTel's Terms of Service, Item 10, Article 21.2(e), and Bell Canada's National Services Tariff (NST), Section 3, 301.2(e) (Bell Canada's NST).

18.

Aliant Telecom further submitted that in the current competitive market, the rigid application of the 10-year MCP rate, without contemplating the possibility of review, was very unattractive to many customers. Aliant Telecom submitted that the structure of the Agreement complied with the tariff and addressed Memorial's concerns by creating an obligation on NewTel to take steps to ensure that its service remained competitive. Aliant Telecom submitted that it should be permitted to decide whether to enforce the penalty provision in its tariff for early termination, taking into consideration the customer's reasons to terminate the Agreement prematurely.

Group Telecom's further comments

19.

Group Telecom disagreed with Aliant Telecom's submission that the issue of the length of the MCP was hypothetical, given that the Agreement clearly stated that the MCP was 42 months. Group Telecom also disagreed with Aliant Telecom's reliance on Bell Canada's NST to justify the avoidance of applying termination charges. Group Telecom noted that Bell Canada's NST allowed Bell Canada to waive termination charges when a customer committed to another MCP. Group Telecom submitted that Aliant Telecom's relevant tariff did not have such a clause, and that approved tariffs always superseded a contract unless specific Commission approval had been obtained to the contrary.

Commission analysis and determinations

20.

The Commission notes that Aliant Telecom, as well as other major incumbent local exchange carriers, provide PCS with specific MCPs, pursuant to approved tariffs. An MCP is the minimum time period during which a customer agrees to subscribe to a service and for which a particular rate will be in effect. The Commission further notes that, in general, the longer the MCP, the lower the rate per month per Centrex line. Once customers have entered into an agreement for PCS with a specific MCP, they cannot shorten the MCP without paying termination charges, unless otherwise provided for in the applicable tariffs or in Commission determinations. In this regard, the Commission notes that NewTel's PCS tariff does not allow early termination without termination charges being applied. After an MCP has elapsed, a customer can enter into another agreement with the same or a different MCP or transfer to a month-to-month rate. Customers on a month-to-month rate can also enter into agreements with longer MCPs without incurring termination charges.

21.

The Commission notes that Item 10, Article 21.2(e) of NewTel's Terms of Service provides as follows:

where a customer replaces any Newfoundland Telephone service with another Newfoundland Telephone service, the termination is effective from the date of replacement, subject to the terms of Newfoundland Telephone's tariffs and, notwithstanding Article 1.3(c), the terms of the contract for the service in question;

22.

With respect to Aliant Telecom's reliance on Item 10, Article 21.2(e) of NewTel's Terms of Service, the Commission notes that this provision only applies in circumstances where a customer replaces a service with a different service. In the present case, the Commission notes that there was no substitution of one service for another. Instead, Memorial continued to receive the same service, namely PCS, but at a lower rate. Accordingly, the Commission considers that Article 21.2(e) of NewTel's Terms of Service has no application in the circumstances of this case.

23.

The Commission notes that while Aliant Telecom argued that the Agreement was effectively a 10-year MCP, clause 2 of the Agreement stated as follows: "This Ten Year Agreement has a Minimum Contract Period ("the MCP") of 42 months, commencing on the date that PCS is first activated for the Customer." The Commission further notes that NewTel's PCS tariff does not provide for a 42-month MCP. Instead, it stipulated that customers could enter into agreements with month-to-month, 3-year, 5-year or 10-year MCPs. Given this, the Commission considers that Memorial did not qualify for either a 5-year or a 10-year MCP rate. Instead, the Commission considers that, pursuant to the Agreement's MCP of 42 months, Memorial qualified for a 3-year MCP. Accordingly, consistent with the tariff and the Agreement, the Commission finds that Aliant Telecom should have charged Memorial the 3-year MCP rate applicable at that time, which was $30.65 per month, for the first three years of the Agreement.

24.

The Commission notes that item 190.1(c)(ii) of NewTel's General Tariff states that "[a]t the expiry of the 3-year, 5-year or 10-year MCP all locals will revert to one month rates unless the customer enters into a new 3-year, 5-year or 10-year MCP." In this case, Aliant Telecom and Memorial did not enter into a new agreement after the expiry of the 3-year MCP. Accordingly, the Commission finds that, consistent with the relevant tariff and the Agreement, Aliant Telecom should have charged Memorial the month-to-month rate after the expiry, in March 2000, of the 3-year MCP.

25.

The Commission notes that section 25(1) of the Act prohibits a Canadian carrier from providing a telecommunications service except in accordance with a tariff filed and approved by the Commission. The Commission further notes that section 27(1) of the Act provides that every rate charged by a Canadian carrier shall be just and reasonable and that section 27(2) of the Act provides that no Canadian carrier shall, in relation to the provision of a telecommunications service, give an undue or unreasonable preference to any person, including itself. The Commission considers that for services provided pursuant to a tariff, just and reasonable rates are those set out in the tariff approved by the Commission.

26.

The Commission finds that in the circumstances of this case, Aliant Telecom contravened sections 25(1) and 27(1) of the Act by charging Memorial rates other than the applicable approved rates set out in the tariff for PCS. Further, the Commission finds that Aliant Telecom, by charging Memorial less than the applicable rates set out in the tariff, conferred an undue preference upon Memorial and itself and subjected competitors and potential competitors to an undue disadvantage, all contrary to section 27(2) of the Act. Accordingly, the Commission directs Aliant Telecom to charge forthwith Memorial the approved tariff rate, if it has not already done so.

Compliance with regulatory obligations in providing PCS to customers other than Memorial

Position of parties

27.

In response to the 8 November 2002 letter requesting additional information to complete the record of this proceeding, Aliant Telecom stated that, following Commission approval of the lower 5-year MCP rates for PCS in Order 2001-123, it had transferred all NewTel 10-year MCP customers who, in its view, qualified for the lower 5-year MCP rate, to the new 5-year MCP rate approved in Order 2001-123. Aliant Telecom submitted that customers would naturally have migrated their service to the new tariff, and argued that it was implicit in the tariff, that customers that met the conditions and qualified for the lower rate should benefit from that lower rate. Aliant Telecom submitted that customers who signed contracts before the effective date of the new rate should also have been entitled to the benefit of those lower rates.

28.

Group Telecom noted that despite Group Telecom being charged a 10-year MCP rate, Aliant Telecom did not advise it of its eligibility for, nor did it transfer Group Telecom to, the lower 5-year MCP rate. Group Telecom submitted that Aliant Telecom deliberately omitted to offer Group Telecom the lower rate because it was a competitor of Aliant Telecom. Group Telecom further submitted that NewTel's PCS tariff neither permitted the company to provide PCS for less than the applicable MCP rate, nor did it allow Aliant Telecom to move, at will, customers from a 10-year MCP to a 5-year MCP. Group Telecom argued that Aliant Telecom's actions demonstrated a deliberate pattern of wilful ignorance of its regulatory obligations to the detriment of Group Telecom and competition.

29.

In its response, Aliant Telecom stated that, when the lower 5-year MCP Band A rate for PCS was approved in Order 2001-123, it was unclear to Aliant Telecom, because of the distribution of Group Telecom's Centrex lines, whether Group Telecom would benefit significantly from a transfer of its services to the lower 5-year MCP rate. Aliant Telecom stated that, accordingly, the lower 5-year MCP rate was not applied to Group Telecom. Aliant Telecom further stated that, as a result of Group Telecom's application to the Commission, it had re-examined the distribution of Group Telecom's access lines in light of the 5-year MCP rate, and determined that Group Telecom did qualify for the reduced rate. Aliant Telecom stated that it would retroactively credit Group Telecom for any billing differential.

Commission analysis and determinations

30.

The Commission notes that item 190.1(c)(iv) of NewTel's General Tariff provides that where a 10-year MCP is terminated prior to the scheduled expiry date, the customer is required to pay the total of the monthly access rates applicable to the unexpired portion of the MCP. The Commission considers that transferring a customer from a 10-year MCP to a 5-year MCP effectively terminates the 10-year MCP, since the original terms and conditions of the 10-year MCP are no longer in effect and are replaced by the terms and conditions of the 5-year MCP. The Commission notes that Aliant Telecom transferred customers with 10-year MCPs to the lower, 5-year MCP rate prior to the expiry date of their contracts without the customers paying the applicable early termination charges. The Commission therefore finds that Aliant Telecom contravened its tariff and sections 25(1) and 27(1) of the Act by failing to charge Memorial the applicable rates set out in the tariff. The Commission further finds that in so doing, Aliant Telecom conferred an undue preference upon its customers with 10-year MCPs and itself and subjected competitors and potential competitors to an undue disadvantage, all contrary to section 27(2) of the Act. Accordingly, the Commission directs Aliant Telecom to migrate forthwith those customers, including Group Telecom if applicable, back to the rates, terms and conditions that applied immediately before the transfer of their services to the 5-year MCP rate.

Regulatory compliance with respect to modem pool lines

Position of parties

31.

In its application, Group Telecom stated that it suspected that Aliant Telecom was providing Memorial with 239 modem pool lines at the monthly residence rate for individual lines rather than the monthly business rate for individual lines in Band A. Group Telecom submitted that, if its suspicions were correct, Aliant Telecom would be in violation of its tariffs.

32.

In its response, Aliant Telecom confirmed that the lines in question were being provided as modem pool lines. Aliant Telecom submitted that the lines were originally billed to Memorial at the monthly business rate but were subsequently changed to the monthly residence rate by mistake. Aliant Telecom stated that, upon verification, it had rectified the billing error and had applied the proper monthly business rate for those lines.

33.

Group Telecom replied that Aliant Telecom's response confirmed its suspicion that Aliant Telecom had violated its General Tariff by charging Memorial the monthly residence rate, and not the monthly business rate for the modem pool lines in question, and had done so knowingly. Group Telecom submitted that in light of Aliant Telecom's tariff violations and anti-competitive behaviour, Aliant Telecom's claim that it had mistakenly billed the lines was not credible.

Commission analysis and determination

34.

The Commission notes Aliant Telecom's admission that it had improperly charged Memorial the monthly residence rate for individual lines, instead of the monthly business rate for individual lines in Band A, for the modem pool lines. The Commission finds that by failing to charge Memorial the applicable rate set out in the tariff, Aliant Telecom contravened its tariff and sections 25(1) and 27(1) of the Act. Further, the Commission finds that Aliant Telecom, by charging Memorial less than the applicable rate set out in the tariff, conferred an undue preference upon Memorial and itself and subjected competitors and potential competitors to an undue disadvantage, all contrary to section 27(2) of the Act. The Commission directs Aliant Telecom to forthwith charge Memorial the appropriate monthly business rate for individual lines in Band A for the modem pool lines, if Aliant Telecom has not already done so.

Aliant Telecom's response to Memorial's RFP

Position of parties

35.

Group Telecom stated that, prior to the purported expiry of the Agreement, Memorial had issued an RFP for the provision of its local voice services, including its Centrex services. Group Telecom stated that after having been informally advised on 12 April 2002 that it had been awarded the contract, it was later informed, by a letter dated 23 April 2002, that Memorial had awarded the contract to Aliant Telecom.

36.

Group Telecom submitted that its proposal was priced substantially lower than the approved rates that Aliant Telecom could have legitimately offered to Memorial. Group Telecom submitted that the rates in Aliant Telecom's proposal could not have satisfied an imputation test applicable to such an arrangement. Group Telecom submitted that the imputation test specified by the Commission for such arrangements required that the price for the service be designed to recover General Tariff rates applicable to the components of the service available through the General Tariff as well as the Phase II costs of the other components of the service. Group Telecom argued that Aliant Telecom must have offered discounts on these approved rates, which was not permitted by Aliant Telecom's General Tariff. Group Telecom submitted that, accordingly, Aliant Telecom's proposal was made in contravention of section 24 of the Act, and was priced to ensure that Aliant Telecom would continue to be Memorial's service provider.

37.

Memorial denied Group Telecom's allegations with respect to the events in connection with the bidding process. Memorial submitted that it chose Aliant Telecom because it proposed a 3-year agreement, while Group Telecom had offered a 5-year term. Memorial stated that it preferred Aliant Telecom's 3-year term because it gave Memorial the maximum flexibility in its communications strategy.

38.

In response to Group Telecom's allegations set out above, Aliant Telecom stated that: (i) its proposal to Memorial explicitly provided that it was subject to Commission approval; and (ii) it had filed a tariff application with the Commission that set out proposed rates for PCS consistent with those offered in response to Memorial's RFP, supported by the appropriate imputation test information. In response to the letter dated 8 November 2002, Aliant Telecom further stated that it had billed Memorial the rate of $25.30 per month since 8 February 2001 and had not, at any time, charged Memorial the rate proposed in its tariff application.

Commission analysis and determination

39.

The Commission notes that section 24 of the Act states that the offering and provision of any telecommunications service by a Canadian carrier are subject to any conditions imposed by the Commission or included in a tariff approved by the Commission.

40.

Based on the record of this proceeding, the Commission concludes that Aliant Telecom never provided PCS to Memorial at the rate proposed in its tariff application.¹ The Commission also notes that the offering of PCS, as distinct from its provision, is not subject to any conditions. Accordingly, the Commission finds that Aliant Telecom did not offer PCS to Memorial in contravention of section 24 of the Act.

Relief

41.

As noted in paragraph 2 above, Group Telecom requested that:

42.

Aliant Telecom submitted that the relief requested by Group Telecom was not warranted and requested that the application be dismissed in its entirety.

Commission analysis and determinations

43.

The Commission considers that Aliant Telecom's actions in this instance are non-compliant and anti-competitive and undermine fair and sustainable competition in its territory. The Commission considers that measures are required to address Aliant Telecom's behaviour with a view to ensuring that Aliant Telecom complies with its tariffs and the Act.

44.

The Commission notes that under section 51 of the Act, the Commission may order a person to do anything the person is required to do under the Act and may forbid a person to do anything that the person is prohibited from doing under the Act. The Commission further notes that, pursuant to section 63 of the Act, a decision of the Commission may be made an order of the Federal Court by registering a copy of the decision with the Court. The decision can then be enforced as if it were an order of the Court, with violations treated as contempt of court.

45.

In light of the circumstances in this proceeding, the Commission considers that the measures set out below are necessary and appropriate:

46.

The Commission considers that the additional relief sought by Group Telecom is not necessary at this time.

47.

In Measures with respect to incumbent telephone company regulatory compliance, Telecom Public Notice CRTC 2003-4, 10 April 2003,the Commission announces additional measures with respect to compliance by incumbent telephone companies, including Aliant Telecom, with the Act, applicable tariffs and Commission decisions.

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

Footnote: ¹ Aliant Telecom's tariff application was denied in Telecom Order CRTC 2002-344, 19 August 2002.