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Telecom Decision CRTC 2003-77
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Ottawa, 19 November 2003
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TELUS' application for forbearance from section 29 of the Telecommunications Act with respect to forborne interexchange private line and long distance services
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Reference: 8640-T42-05/02
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In this decision, the Commission forbears from the exercise of its powers and duties pursuant to section 29 of the Telecommunications Act in respect of agreements or arrangements that TELUS Communications Inc. might enter into relating to forborne domestic toll and forborne interexchange private line services.
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1.
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On 28 August 2002, TELUS Communications Inc. (TELUS), in accordance with Part VII of the CRTC Telecommunications Rules of Procedure and pursuant to section 34 of the Telecommunications Act (the Act), filed an application for forbearance from section 29 of the Act in respect of agreements or arrangements that TELUS might enter into with any other telecommunications common carrier in relation to forborne domestic toll services and forborne interexchange private line (IXPL) services.
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2.
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AT&T Canada Corp. (now Allstream Inc.), on behalf of itself and AT&T Canada Telecom Services Company (collectively referred to as Allstream) intervened on 27 September 2002. TELUS replied on 7 October 2002, Allstream commented on TELUS' reply on 11 October 2002, and TELUS filed further reply comments on 16 October 2002.
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Background
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3.
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The Commission's power to forbear from regulating a telecommunications service or class of services provided by a Canadian carrier originates from section 34 of the Act, which reads as follows:
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34.(1) The Commission may make a determination to refrain, in whole or in part and conditionally or unconditionally, from the exercise of any power or the performance of any duty under sections 24, 25, 27, 29 and 31 in relation to a telecommunications service or class of services provided by a Canadian carrier, where the Commission finds as a question of fact that to refrain would be consistent with the Canadian telecommunications policy objectives.
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(2) Where the Commission finds as a question of fact that a telecommunications service or class of services provided by a Canadian carrier is or will be subject to competition sufficient to protect the interests of users, the Commission shall make a determination to refrain, to the extent that it considers appropriate, conditionally or unconditionally, from the exercise of any power or the performance of any duty under sections 24, 25, 27, 29 and 31 in relation to the service or class of services.
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(3) The Commission shall not make a determination to refrain under this section in relation to a telecommunications service or class of services if the Commission finds as a question of fact that to refrain would be likely to impair unduly the establishment or continuance of a competitive market for that service or class of services.
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(4) The Commission shall declare that sections 24, 25, 27, 29 and 31 do not apply to a Canadian carrier to the extent that those sections are inconsistent with a determination of the Commission under this section.
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4.
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The Canadian telecommunications policy objectives set out at section 7 of the Act include the following:
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(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;
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(f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective;
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(h) to respond to the economic and social requirements of users of telecommunications services.
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5.
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The Commission established a framework for considering whether or not to forbear in Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19). In that decision, the Commission noted that the first step in assessing whether it is appropriate to forbear involves defining the relevant market. The relevant market is essentially the smallest group of products and geographic area in which a firm with market power can profitably impose a sustainable price increase.
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6.
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The Commission has forborne from the regulation of domestic toll and toll free services and IXPL services in Forbearance - Regulation of toll services provided by incumbent telephone companies, Telecom Decision CRTC 97-19, 18 December 1997 (Decision 97-19) and in Stentor Resource Centre Inc. - Forbearance from regulation of interexchange private line services, Telecom Decision CRTC 97-20, 18 December 1997 (Decision 97-20), respectively.
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7.
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In Decision 97-19,, the Commission forbore from the exercise of its powers and the performance of its duties with respect to toll and toll free services under section 25, section 27, in part, and section 31 of the Act. The Commission found it appropriate to impose conditions pursuant to section 24 of the Act with respect to the protection of confidential customer information. The Commission also imposed conditions pursuant to section 24 of the Act to prevent the bypass of Canadian telecommunications services and facilities. Further, the Commission imposed conditions pursuant to section 24 of the Act with respect to the provision of basic toll service and services in non-equal access areas. In addition, the Commission retained its powers pursuant to section 24 of the Act to impose future conditions upon the forborne services.
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8.
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The Commission, in Decision 97-19,, retained its powers pursuant to subsections 27(1) and (2) of the Act with respect to basic toll service and toll and toll free services in non-equal access areas. The Commission also retained its powers pursuant to subsection 27(2) of the Act with respect to issues related to access to the Stentor companies' networks and resale and sharing of their toll and toll free services. The Commission, in addition, retained its powers and duties pursuant to subsections 27(3) to (6) of the Act to the extent that they refer to compliance with powers and duties not forborne from in that decision.
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9.
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In Decision 97-20, the Commission refrained from the exercise of its powers and duties under section 25, subsections 27(1) and (2), and section 31 of the Act. The Commission found it appropriate to impose the same conditions pursuant to section 24 of the Act as it did in Decision 97-19, with respect to the protection of confidential customer information and the bypass of Canadian telecommunications services and facilities. The Commission retained, as it did in Decision 97-19,, its powers pursuant to section 24 of the Act to impose future conditions upon the forborne services. The Commission also retained its powers pursuant to subsection 27(3) of the Act to the extent that this subsection did not refer to compliance with powers and duties not forborne from in that decision.
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10.
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The Commission, in Decisions 97-19 and 97-20, however did not forbear from the exercise of its duties and performance of its powers pursuant to section 29 of the Act, which provides:
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29. No Canadian carrier shall, without the prior approval of the Commission, give effect to any agreement or arrangement, whether oral or written, with another telecommunications common carrier respecting
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(a) the interchange of telecommunications by means of their telecommunications facilities;
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(b) the management or operation of either or both of their facilities or any other facilities with which either or both are connected; or
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(c) the apportionment of rates or revenues between the carriers.
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11.
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When the incumbent local exchange carriers (ILECs) operated as a national carrier (initially known as the TransCanada Telephone Systems alliance, later as the Stentor Alliance), a revenue settlement plan (RSP) apportioned jointly earned revenues to the different ILECs, also taking into consideration the costs each ILEC incurred in earning those revenues. With increasingly competitive markets for all telecommunications services, the RSP was replaced by interconnection agreements between the different ILECs.
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12.
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The Commission, in Decisions 97-19 and 97-20, noted that the ILECs had section 29 agreements and arrangements to act in concert as a national entity. The Commission therefore retained its powers pursuant to section 29 of the Act, with respect to forborne domestic toll and IXPL services, to monitor the settlement of jointly earned revenues among the ILECs, including whether such settlement arrangements were equitable.
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13.
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In Forbearance for agreements between domestic and foreign common carriers, Telecom Order CRTC 99-1202, 22 December 1999, the Commission forbore from the exercise of its powers and the performance of its duties under section 29 of the Act with respect to agreements between the Stentor Alliance and foreign telecommunications common carriers respecting forborne international services, and with respect to agreements between the Stentor Alliance and other Canadian carriers respecting the carriage of international traffic into or out of the country. However, the Commission did not forbear from the exercise of its powers and the performance of its duties with respect to agreements relating to forborne domestic services.
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14.
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In Regulatory safeguards with respect to incumbent affiliates, bundling by Bell Canada and related matters, Telecom Decision CRTC 2002-76, 12 December 2002 (Decision 2002-76), the Commission directed TELUS to file with the Commission a list describing all services that TELUS provides to any of its affiliates under common control (i.e., tariffed services, network services, engineering and technical support, back-office services and other services), and the terms and conditions under which those services are made available to these affiliates. A separate follow-up proceeding was initiated by the Commission to determine what further action, if any, is required with respect to services provided by TELUS and the other ILECs to each of their respective affiliates.
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The application
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15.
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TELUS requested that the Commission refrain completely and unconditionally from exercising its powers and performing its duties under section 29 of the Act in relation to agreements or arrangements relating to forborne domestic toll services or forborne IXPL services, that TELUS might enter into with any other telecommunications common carrier.
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16.
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TELUS noted, in its application, that domestic toll services referred to the services for which forbearance was granted in Decision 97-19 and that forborne IXPL services referred to the services granted forbearance in Decision 97-20. TELUS stated that IXPL services referred particularly to high capacity services and digital data systems services on routes that had been granted forbearance, and on additional routes which might be granted forbearance in the future.
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17.
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TELUS submitted that since the Commission had already determined that markets for domestic toll and IXPL services were sufficiently competitive for forbearance from rate regulation in Decisions 97-19 and 97-20, pursuant to the criteria set out in Decision 94-19, it therefore only had to demonstrate that expanding the scope of forbearance would remain consistent with the policy objectives of the Act, without unduly impairing the continuance of the existing competitive markets for domestic toll and IXPL services.
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18.
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TELUS submitted that, in Decisions 97-19 and 97-20, the Commission had retained its powers under section 29 of the Act expressly to monitor the settlement of jointly earned revenues among the ILECs, including whether such settlement arrangements were equitable.
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19.
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TELUS submitted that the concerns that led the Commission to retain its powers pursuant to section 29 of the Act in Decisions 97-19 and 97-20 are no longer relevant because TELUS "no longer ha[d] any affiliation with the other ILECs with a view to acting in concert with them as a national entity". TELUS noted that the section 29 agreements with the other ILECs were now predicated on the same competitive and market considerations that governed the company's similar agreements or arrangements with other carriers. TELUS further stated that "[s]uch agreements [we]re limited to matters relating to the interconnection, exchange, and/or termination of traffic and d[id] not involve the settlement of (what used to be) jointly incurred costs and jointly earned revenues."
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20.
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TELUS submitted that, accordingly, forbearance from section 29 of the Act was consistent with the telecommunications policy objectives of the Act and would contribute to those objectives, particularly by fostering increased reliance on market forces and ensuring that regulation, where required, was efficient and effective. TELUS also submitted that forbearance from section 29 of the Act in relation to domestic toll and IXPL services would not adversely affect the existing and expected state of competition in these markets.
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Allstream's comments
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21.
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Allstream submitted that the Commission should deny TELUS' application. Allstream first argued that the ILECs continue to have a stranglehold on the local market and therefore have the means and incentive to confer preference upon themselves when making interconnection agreements.
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22.
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Second, Allstream argued that even though the Stentor Alliance had been dissolved, it was unclear whether the joint use of the national network had been dismantled and whether TELUS and the other ILECs operated completely separate networks, platforms and intellectual property.
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23.
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Allstream noted that in Forbearance - Services provided by non-dominant Canadian carriers, Telecom Decision CRTC 95-19, 8 September 1995 (Decision 95-19), the Commission noted that the telephone companies controlled access to bottleneck local services and were in a position to exercise that control in a manner that foreclosed or diminished benefits of entry to users.
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24.
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Allstream submitted that these concerns continued to be relevant. Allstream also argued that out-of-territory provision of services by Bell Canada and TELUS did not diminish the incentives of those dominant carriers to enter into bilateral agreements with more favourable terms than those provided to competitors. On the contrary, Allstream submitted, both TELUS and Bell Canada could benefit from efficiencies gained through the others' ubiquity, ultimately resulting in a duopoly.
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25.
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Allstream also noted that under the Stentor Alliance the ILECs operated a national network, with each member having access to jointly owned networks, platforms and intellectual property, so that each member had operating economies that were not available to other competitors.
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26.
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Allstream noted that during the proceeding that led to Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002, Bell Canada indicated that it provided Calling Card, toll free and local number portability help desk functionality, trouble fault and change management services, as well as various operational support services to the other ILECs.
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27.
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Allstream submitted that, given that such arrangements were in place, the ILECs operated from an integrated platform, and TELUS had not demonstrated that the reasons for originally retaining the Commission's powers under section 29 of the Act were no longer valid.
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28.
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Thus Allstream argued that the Commission should continue to examine agreements between TELUS and the other ILECs, because of the benefits from network integration to the ILECs, and the uncertainty of the network unwind process.
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29.
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Allstream submitted that the Commission should be certain that there was no sharing of facilities, intellectual property or platforms before granting TELUS' application, and therefore requested that TELUS should submit any new interconnection agreements with ILECs to the Commission for approval.
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TELUS' reply
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30.
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TELUS submitted that pursuant to Local competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8), competitors obtain access to local customers at tariffed rates, terms and conditions as set out in the company's Carrier Access Tariff and tariffs for other interconnection services.
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31.
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TELUS submitted that these tariffs addressed the Commission's concerns, expressed in Decision 95-19, with respect to access by competitors to the ILECs' bottleneck local services, and with respect to potential barriers to entry. Accordingly, TELUS argued that the ILECs could not abuse their dominant position in the local market to confer preference upon themselves when reaching terms for interconnection.
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32.
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Further, TELUS noted that in Decision 97-19, when the Commission forbore from regulating long distance services provided by the ILECs, the Commission retained its powers under subsection 27(2) of the Act in respect of issues to access to the networks of TELUS and the other ILECs.
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33.
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TELUS submitted that granting forbearance from section 29 of the Act would not affect the regulatory framework established by Decisions 95-19 and 97-8, and that approval of the application would not affect tariffs for access to TELUS' network.
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34.
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TELUS also argued that the Commission retained its powers under section 29 of the Act for forborne domestic toll and IXPL services expressly to monitor the settlement of jointly earned revenues, and not because of conditions in local markets and alleged risks to competitors' access to local customers.
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35.
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With respect to Allstream's argument that the ILECs should operate using completely separate networks, platforms and intellectual property, TELUS submitted that this was neither necessary nor relevant to the application for section 29 forbearance in respect to forborne domestic toll and IXPL services.
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36.
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TELUS submitted, first, that in view of the long history of the TransCanada Telephone Systems alliance and the Stentor Alliance, it would be unreasonable to require that there were no sharing of facilities, intellectual property or platforms before granting TELUS' application. TELUS indicated that while the companies were moving towards network configurations and service platforms that were in their best interests, remnants of their prior working arrangements would remain for a time. Second, TELUS submitted that the Commission had approved all such prior working arrangements and that the present request related only to new arrangements or agreements. Finally, TELUS indicated that all new arrangements and agreements between TELUS and the other ILECs were limited to matters relating to the interconnection, exchange, and/or termination of traffic and did not involve the settlement of (what used to be) jointly incurred costs and jointly earned revenues.
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37.
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In response to Allstream's suggestion that the ILECs had an incentive to enter into bilateral agreements with more favourable terms than those provided to competitors, TELUS submitted that it sought business arrangements with its former partners, as with any other party, that were in the company's best interests. TELUS indicated that it provided interconnection, exchange and/or traffic termination based on rates, terms and conditions that took due account of the associated causal costs and market-based prices.
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Commission analysis and determination
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38.
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The Commission determined that the markets, in Decision 97-19 with respect to the toll and toll free services, and in Decision 97-20 with respect to certain IXPL services, were sufficiently competitive to protect the interests of users so as to warrant forbearance from regulation in those markets to the extent set out in those decisions, and that such forbearance would be consistent with the Canadian telecommunications policy objectives.
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39.
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The Commission notes that Allstream argued that forbearance from section 29 of the Act would enable the ILECs to enter into agreements with each other that would make it difficult for competitors to obtain non-discriminatory access to the ILECs' local networks.
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40.
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The Commission has established terms and conditions under which competitors obtain access to the ILECs' networks. Pursuant to Decision 97-8, the ILECs provide competitors with access to their networks at tariffed rates, terms and conditions, and competitors are able to obtain essential or near essential facilities on an unbundled basis. In Decisions 97-8 and 97-19, the Commission retained its powers and duties under subsection 27(2) of the Act to ensure that competitors obtain non-discriminatory access to the ILECs' networks.
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41.
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The Commission notes that if it was to forbear from section 29 of the Act, competitors would continue to obtain access to TELUS' network at tariffed rates, terms and conditions. Further, TELUS would still be required to comply with subsection 27(2) of the Act in providing competitors with access to its network. In addition, TELUS would continue to be required to enter into agreements with competitive local exchange carriers, the other ILECs or interexchange carriers that conform to Commission approved Master Interconnection Agreements.
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42.
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Further, the Commission notes that, with forbearance from the exercise of its powers and the performance of its duties under section 29 of the Act, TELUS would nevertheless be subject to Commission determinations arising out of the follow-up proceeding to Decision 2002-76, which was initiated by the Commission to determine what further action, if any, is required with respect to services provided by the ILECs to each of their respective affiliates.
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43.
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The Commission also notes that at the time it forbore from toll and IXPL services in Decisions 97-19 and 97-20, the ILECs benefited from joint use of their networks, intellectual properties and facilities. Therefore, the Commission considers that the joint use of such platforms, if any remains, would not prevent the development of competitive markets for toll and IXPL services.
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44.
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Accordingly, the Commission finds pursuant to subsection34(2) of the Act, as a question of fact, that the market for domestic toll and IXPL services is sufficiently competitive to protect the interests of users so as to warrant forbearance from section 29 of the Act.
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45.
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The Commission also finds, pursuant to subsection 34(1) of the Act, as a question of fact, that refraining from the exercise of its powers and the performance of its duties pursuant to section 29 of the Act with respect to domestic toll and IXPL services provided by TELUS is consistent with the Canadian telecommunications policy objectives.
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46.
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Further, the Commission finds, pursuant to subsection 34(3) of the Act, that forbearance from the exercise of its powers and the performance of its duties pursuant to section 29 of the Act with respect to forborne domestic toll and IXPL services would not impair the continuance of a competitive market for the forborne domestic toll and IXPL services.
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47.
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In light of the above, the Commission approves TELUS' application for forbearance and declares, pursuant to subsection 34(4) of the Act, that section 29 of the Act does not apply with respect to forborne domestic toll and IXPL services provided by TELUS.
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Secretary General
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This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca
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Date Modified: 2003-11-19