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Telecom Decision CRTC 2003-85
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Ottawa, 22 December 2003
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Follow-up to Decision 2002-34 − Automatic renewal of contracts with a minimum contract period
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Reference: 8638-C12-66/02
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In this decision, the Commission directs Bell Canada and TELUS Communications Inc. to notify flat rate business service customers with minimum contract period contracts, (i) 60 days before contract expiry, that the contract may be automatically renewed, and (ii) within 35 days following automatic renewal, that the contract has been renewed, and that the customer may terminate the contract without penalty within 30 days of the date of the renewal notice.
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Background
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1.
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In Regulatory framework for the second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002 (Decision 2002-34), the Commission noted that the contracts of individual and multi-line flat rate business customers of Bell Canada and TELUS Communications Inc. (TCI) and TELUS Communications (BC) Inc. (TCBC) (collectively referred to as TCI) with minimum contract periods (MCPs) were automatically renewed unless customers notified the telephone companies.
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2.
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In Decision 2002-34, the Commission stated that it was not persuaded that the tariffs for individual and multi-line flat rate business service ensure that all customers were specifically aware of the automatic renewal provision. Accordingly, the Commission directed Bell Canada and TCI to show cause why these tariffs should not be amended to remove the automatic renewal and to add a provision requiring that positive consent to renew be obtained from the customer, not less than 30 days before expiry, such as the positive consent provision approved in Optel Communications Corporation vs. Bell Canada - CRTC clarifies contract requirements for local link service, Order CRTC 2000-250, 30 March 2000 (Order 2000-250).
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3.
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Bell Canada and TCI filed their submissions, as directed, on 17 July 2002, and copied registered parties of the proceeding that led to Decision 2002-34. The Commission received no comments from any other party.
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4.
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The tariffs for individual and multi-line flat rate business services are set out in Bell Canada, General Tariff item 70, TCBC, General Tariff item 32 and TCI, General Tariff item 425.
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5.
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Bell Canada's General Tariff, item 70, permits individual and multi-line flat rate business service customers to enter contracts with an MCP of one or three years. The tariff provides for automatic renewal of multi-year contracts for individual and multi-line flat rate business service for the length of the original term, unless customers specifically notify the company during the last 30 days of the contract period of their intention to terminate the contract.
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6.
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TCI offers long term contracts pursuant to the Local Business Contract Option (LBCO), TCI, General Tariff, item 425 and TCBC, General Tariff, item 32. TCI's customers with at least four business lines may choose between contract periods of one, three, or five years. TCI's General Tariff states that contracts will be automatically renewed for the length of the original term unless the customer indicates otherwise prior to contract expiry. TCI's tariff also states that customers may terminate an automatically renewed contract without penalty within 60 days following renewal.
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Positions of parties
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Present incumbent local exchange carrier practice
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7.
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Bell Canada noted that, in Contract pricing for business lines, Order CRTC 2000-346, 27 April 2000 (Order 2000-346), the Commission had approved contracts for individual and multi-line flat rate business service with an MCP which included an automatic renewal provision. Bell Canada referred to such contracts as self renewing agreements (SRAs). Bell Canada submitted that contacts with its MCP customers involve the following steps:
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- When first initiating a request for MCP service, the customer would be advised of the SRAs terms and conditions, including the automatic renewal provision.
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- On acceptance, the customer's call would be forwarded to an integrated voice response system (IVRS) to register the customer's formal authorisation for subscription to the service. Bell Canada included a summary of the IVRS text in its submission. The IVRS would allow the customer to choose the appropriate MCP, and would explain the terms and conditions of the MCP, including automatic renewal.
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- Following formal authorisation by the customer, Bell Canada would initiate an order for business line service. Once the order was issued, a paper copy of the SRA terms and conditions, including the self-renewal provision, would be mailed to the customer.
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- Sixty days prior to contract expiry, a reminder notice, stating: Business Lines. Renews for another XX months on [Date]. To cancel, call the Bell Canada Business Office 30 days in advance, would appear once in the Monthly Charges and Credits section of the customer's bill.
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- Bell Canada would renew the contract for the same contract period if the customer had not indicated otherwise to the company during the 30 days prior to expiry of the MCP.
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8.
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TCI noted that, in Order 2000-250, the Commission determined that signed contracts would be the best evidence that customers were fully aware of and consent to the terms and conditions of the service offering.
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9.
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TCI argued that it had taken the following measures to adequately ensure that customers were aware of the automatic renewal provision:
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- the company's policy was to have a written LBCO contract signed by the customer;
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- a customer could submit a signed letter at any time during the contract term to withdraw from the automatic renewal provisions;
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- upon expiration of the contract period, customers were deemed to have committed to another immediately succeeding contract of the same duration, unless the customer had agreed to a different period or the subscription service had been terminated; and
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- customers could terminate an automatically renewed contract within 60 days following automatic renewal.
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10.
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TCI stated that the company's sales representatives would attempt to meet with LBCO customers prior to expiry to determine customer requirements. TCI expressed the view that, for customers not contacted, the automatic renewal provision provided a convenient vehicle for customers to continue service without engaging in a sales contract.
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Customer awareness of automatic renewal
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11.
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Bell Canada argued that, since the company advised customers of their service and the available options in their bill prior to contract expiry, renewal did take place with the customer's awareness and acceptance.
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12.
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TCI argued that business customers generally were aware that, when they signed an agreement, they were presumed by the laws of contract to have understood the terms and conditions therein and to have consented to be bound by them. TCI also argued that the Commission must expect that customers would take adequate care and responsibility for themselves in any contract into which they entered and specifically signed.
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13.
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TCI also argued that automatic renewal was a common feature of business agreements, and that it was highly unlikely that the automatic renewal provision would have escaped the attention of a business subscriber.
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14.
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TCI noted that its LBCO agreements were short, one-page documents, and submitted that it was difficult to imagine how a customer would not be aware of all of the provisions, including automatic renewal, in such a short document. Accordingly, TCI argued that there was no evidence that business customers were not fully aware of the automatic renewal provision.
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Problems with the present arrangements for automatic renewal
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15.
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Bell Canada submitted that over the past few months, it had identified several irregularities, whereby some customers did not get a reminder notice 60 days prior to expiry of the contract. Bell Canada stated that in such cases, it had waived termination charges where a customer wished to terminate the MCP. Bell Canada argued that its present procedures adequately ensured that customers were specifically aware of the automatic renewal provision of SRAs.
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16.
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TCI also stated that despite best efforts, some customers might not be aware of the automatic renewal provision. TCI stated that it was aware of only some 12 complaints over a three-year period involving some 8000 contracts. TCI argued if there were frequent misunderstandings, the Commission would have been faced with a significant number of customer complaints about LBCO contracts.
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Advantages of automatic renewal vs. requiring positive consent
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17.
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Bell Canada argued that the automatic renewal provision provided the vast majority of customers who wished to renew with a convenient means to obtain lower priced MCP individual and multi-line flat rate business service, without the inconvenience of going through a formal renewal process. Bell Canada argued that this represented significant savings in time and convenience for customers. Bell Canada stated that only 20% of customers wished to change the status of their service.
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18.
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Bell Canada also argued that the present process, using voice response systems and automatic renewal provisions, was administratively efficient and was used by millions of customers.
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19.
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Bell Canada noted that in the proceeding that led to Order 2000-346, the Commission considered the arguments of Bell Canada and other parties with respect to SRAs, and that, in the Order, the Commission required prior authorization from the customer, when enrolling in a one or three year MCP, but not upon renewal. Bell Canada argued that the circumstances under which the Commission approved the automatic renewal provision in Order 2000-346 were still relevant and appropriate. Bell Canada stated that there was no compelling reason to alter the current regime which operated efficiently, minimized administrative costs for the company and was administratively convenient and efficient for customers.
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20.
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Bell Canada argued that obtaining positive consent from the customer prior to renewal would be inconvenient for the customer, and would create an unwarranted and unnecessary financial and administrative burden for the company. Bell Canada submitted that if contracts were not automatically renewed and service were to revert to monthly service, customer complaints at the time of billing would increase, leading to increased costs to customers, and subsequent reversion to an SRA. Bell Canada also submitted that SRAs were introduced to streamline and simplify the customer's experience with the company.
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21.
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Bell Canada also noted that SRAs had been used in the market for digital interexchange private lines since 1991. Bell Canada stated that this was the company's most highly contested market, and that there was no evidence that, in this market, SRAs had been rejected by customers or that such contracts had limited competitive entry.
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22.
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TCI argued that there was nothing inherently objectionable about the automatic renewal provision. TCI stated that automatic renewal provided business local exchange service subscribers with discounted rates and price stability over a fixed term. With automatic renewal, business customers could extend the discounted price protection without renegotiating the agreement. TCI stated that LBCO customers preferred the convenience of automatic renewal to having their rates revert to monthly agreements absent positive confirmation on their part.
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23.
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TCI noted that the requirement for positive consent expressed in Order 2000-250 related to a local link service (LLS) provided by Bell Canada, where Bell Canada provided customers with written notice of contract terms and conditions only after customers' service had been put in place. TCI noted that the Commission stated in Order 2000-250 that Bell Canada's practice of providing terms and conditions after subscription takes place does not sufficiently ensure that customers are making an informed choice, or that they are aware of termination charges and the renewal feature prior to entering into the contract.
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24.
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TCI argued that these passages made it clear that the positive consent requirement of Order 2000-250 with respect to Bell Canada's LLS was a remedial measure instituted to ensure that provision of LLS to any customer was predicated on both customer awareness and customer acceptance of the provisions of the LLS contract (e.g., the required minimum contract period, penalties for early termination, and the automatic renewal feature) when the service was initially contracted for. TCI submitted that it was already abiding by an equivalent positive consent requirement for TCI's LBCO services.
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25.
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TCI submitted that the concerns expressed by the Commission in Decision 2002-34 appeared to be related more to ensuring that all customers were aware of the automatic renewal provision than with the automatic renewal provision per se. TCI suggested that if that were the case, the appropriate course of action would be to institute improved measures to ensure that all customers were reasonably made aware of the automatic renewal provision.
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Commission analysis and determination
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26.
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In Decision 2002-34, the Commission expressed concern that not all customers may be specifically aware of the automatic renewal provision of contracts for individual and multi-line flat rate business service with a MCP.
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27.
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Based on the evidence presented in this proceeding, the Commission considers that both Bell Canada and TCI follow the procedures established in Order 2000-250 to inform customers of the contract provisions, including the automatic contract renewal provision, when customers first sign MCP contracts.
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28.
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Further, the Commission is of the view that business customers generally are aware of the provisions of the contracts they enter into. In the contracts at issue, this should include awareness of the automatic renewal provision and the penalties for early termination.
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29.
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Therefore, the Commission concludes that there are sufficient mechanisms in place to ensure that customers are aware of the automatic renewal provision when they first enter in the contract.
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30.
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In addition, the Commission is of the view that business customers appreciate automatic contract renewal, as it avoids the cost and inconvenience of entering into a new contract and enables them to benefit from the continued lower long-term price.
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31.
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In light of the foregoing, the Commission concludes that there is insufficient evidence to justify removing the automatic renewal provision.
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32.
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The Commission is concerned however that - particularly in the case of 3 and 5 year contracts - customers may forget when the automatic renewal will actually take place and thus may not in fact consider whether or not they want to renew the contract.
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33.
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In this context, the Commission notes that both Bell Canada and TCI stated that, occasionally, contracts have been renewed contrary to customers' wishes.
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34.
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Pursuant to their respective tariffs, Bell Canada and TCI are not required to remind their individual and multi-line flat rate business customers of imminent expiry and automatic renewal of their contracts. While TCI attempts to have sales personnel contact customers before contract expiry, the record of this proceeding shows that it does not necessarily do so. Bell Canada submitted that its practice was to remind customers 60 days before contract expiry/automatic renewal. However, as noted by Bell Canada, there have been some cases where it failed to notify customers and contracts were renewed contrary to those customers' wishes.
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35.
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The Commission also notes that there could be some confusion on the part of Bell Canada's customers as to when a customer who does not wish to renew a contract must contact the company. The notice on the customer's bill indicates that the customer must contact the business office 30 days in advance, whereas the tariff, and the customer's summary of the MCP document, state that an MCP may be terminated within the 30 days prior to contract expiry, which could be only 1 day prior to contract expiry.
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36.
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Accordingly, the Commission is of the view that both Bell Canada and TCI must remind all their individual and multi-line flat rate business service customers with MCP, at least 60 days prior to the termination of the contract, when the contract will terminate and that the contract will be automatically renewed unless, on or before the termination date, the customer indicates otherwise to the company.
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37.
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This reminder notice is to be prominently displayed on customers' monthly bills, or in a separate letter, so that it can be brought to the attention of the appropriate personnel authorized to make telecommunications purchasing decisions.
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38.
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The Commission further notes that neither Bell Canada nor TCI notify their customers when contracts have been automatically renewed. While TCI's tariff does provide for a 60-day grace period to cancel automatically renewed contracts without penalty, customers may not take advantage of this provision since they may be unaware as to when the contracts are in fact renewed. Bell Canada does not provide for any grace period in its tariffs. Accordingly, it is within Bell Canada's discretion whether or not to permit a customer to cancel without penalty when a customer realizes that its contract has been renewed contrary to its wishes.
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39.
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To minimize the possibility that contracts are renewed contrary to customers' wishes, the Commission is of the view that, within 35 days of automatic renewal, Bell Canada and TCI must inform their individual and multi-line flat rate business service customers that their contracts have been automatically renewed, and indicate that customers have 30 days from the date of that renewal notice to cancel automatically renewed contracts.
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40.
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This notice must also be prominently displayed on customers' monthly bills, or in a separate letter, so that it can be brought to the attention of personnel making telecommunications purchasing decisions.
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41.
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The Commission considers that the 30-day grace period for cancelling automatically renewed contracts is necessary, because the notice prior to termination/automatic renewal may have been missed, or may not have been seen by the personnel making purchasing decisions.
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42.
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In the Commission's view, the measures mandated above are necessary to ensure that customers have reasonable notice of renewal so as to allow them to address their minds to whether they wish to renew the contract.
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43.
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The Commission finds that these additional notification procedures provide an appropriate balance between the objectives of minimising renewals that are contrary to the wishes of customers and of allowing both the customers and the telephone companies to continue to benefit from efficiencies and lower rates of the self-renewal contracts. In addition, these measures balance the need for proper notification with the objective of minimizing the costs to the company of providing such notification.
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Conclusion
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44.
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The Commission directs Bell Canada and TCI forthwith to issue amended tariff pages for individual and multi-line flat rate business service customers indicating that:
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- all MCP or LBCO contract customers will be notified, either on their monthly bill or by letter, at least 60 days before the end of the current MCP or LBCO contract, as to when automatic renewal will take place, absent any indication by the customer to the contrary;
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- customers will be informed that automatic renewal has occurred, within 35 days following renewal; and
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- customers will be advised, either on their monthly bill or by letter, that they may cancel automatically renewed contracts without penalty within 30 days of the date of the notice of automatic renewal.
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45.
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The Commission also directs that, within 15 days of this decision, Bell Canada and TCI file the notices that they plan to send to customers: prior to contract renewal, reminding them of imminent termination/automatic renewal; and subsequent to automatic renewal, advising customers of automatic renewal and the option to cancel automatically renewed contracts within 30 days of the date of the notice of automatic renewal.
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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: 2003-12-22