Search

ARCHIVED - Telecom Decision CRTC 2004-32

This page has been archived on the Web

Information identified as archived on the Web is for reference, research or recordkeeping purposes. Archived Decisions, Notices and Orders (DNOs) remain in effect except to the extent they are amended or reversed by the Commission, a court, or the government. The text of archived information has not been altered or updated after the date of archiving. Changes to DNOs are published as “dashes” to the original DNO number. Web pages that are archived on the Web are not subject to the Government of Canada Web Standards. As per the Communications Policy of the Government of Canada, you can request alternate formats by contacting us.

Archived

This page has been archived on the Web.

 

Telecom Decision CRTC 2004-32

  Ottawa, 14 May 2004
 

Application by Westman alleging failure by MTS Communications Inc. to comply with tariff filing requirements

  Reference: 8622-W28-01/02
  In this decision, the Commission (a) finds that services that constitute the Provincial Data Network and that are provided by MTS Communications Inc. (MTS) to the Government of Manitoba (Manitoba) under three separate agreements are not wide area network services in respect of which the Commission has forborne; (b) finds that the arrangements provided by MTS pursuant to the Network Services Agreement and Access Services Agreement respectively are each Type 2 customer-specific arrangements; and (c) directs MTS to file separate tariffs in respect of each such agreement. MTS is also directed to file a separate tariff if it is providing, or intends to provide, service to an entity that does not come within the definition of a single customer as it applies to Manitoba or to show cause why such a tariff is not required.
 

Application

1.

The Commission received a Part VII application from Westman Communications Group (Westman), dated 13 February 2002, alleging that MTS Communications Inc. (MTS) failed to comply with the filing requirements in various Commission decisions with respect to a Provincial Data Network (PDN) provided by MTS to the Government of Manitoba (Manitoba) following a request for proposal (RFP) process initiated by Manitoba on 16 March 2001. Westman requested that MTS be ordered to file a tariff, supported by an imputation test.
 

Process

2.

On 11 March 2002, MTS filed its answer on Westman's application, and on 21 March 2002 Westman filed reply comments.

3.

On 23 May 2002, the Commission established further process and addressed interrogatories to MTS. MTS filed its response to the Commission interrogatories on 14 June 2002. By letter dated 3 July 2002, the Commission extended the relevant deadlines with respect to the further process in response to requests dated 5 June 2002 and 20 June 2002 by MTS and Westman respectively.

4.

Westman filed supplementary comments on 26 June 2002. MTS filed reply comments on 4 July 2002. Westman filed supplementary reply comments on 16 July 2002.
 

Regulatory context

5.

In Forbearance granted for telcos' wide area network services, Order CRTC 2000-553, 16 June 2000 (Order 2000-553), the Commission forbore from regulating wide area network (WAN) services that were interfaces to customer-provided equipment at various locations of a customer and enabled the exchange of information among those locations. The Commission further stated that WAN services included the following elements: service provider hardware and software which may be located at the customer's premises to provide Ethernet, token ring or asynchronous transfer mode protocols at the interface to the customer's network; access transport for the transport of packets and cells between the interface at the customer's premises and the service provider's network; and transport and routing or switching of packets or cells within the service provider's network for the purpose of transmitting data among access points of a single customer.

6.

In Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), the Commission described two types of customer-specific tariffs for customer-specific arrangements (CSAs): (a) those providing, via a Special Facilities Tariff or Special Assembly Tariff, a service that involved service features or technology that differed from those covered by the General Tariff; and (b) those providing a bundle of services tailored to a particular customer's needs, primarily involving elements available from the General Tariff, where the purpose was to customize the offering in terms of rate structure or levels (for example, distance sensitive/insensitive, usage sensitive/insensitive, one-time charges and which are referred to as Type 2 CSAs).

7.

In Bundling framework for customer-specific arrangements, Order CRTC 2000-425, 19 May 2000 (Order 2000-425), the Commission set out rules for CSAs that bundle non-forborne services with forborne services, services of affiliated and non-affiliated companies and/or non-telecommunications services. The Commission required that the Type 2 CSA filing requirements described in Decision 94-19 be adhered to for Type 2 CSA bundles described in Order 2000-425. The Commission also extended the filing requirements developed for Type 2 CSAs in Decision 94-19 to CSA bundles that included forborne services.

8.

In Definition of customer, Telecom Decision CRTC 97-4, 26 February 1997 (Decision 97-4), the Commission considered that the determination of whether an entity was part of a single customer, as opposed to being part of a resale or sharing arrangement, should generally be based on a control test and that, in the case of government customers, a single government customer should include only those entities that had been declared by statute to be part of the government in question, or those entities with respect to which the government had the obligations of employer. The Commission further stated that government entities that did not meet either of these criteria will be required to contract for telecommunications services in their own right. The Commission also stated that it considered that assumption of liability should be the primary component of the definition of customer, and that if a government chose not to be liable for certain of its departments, those departments would be required to become customers of the company in their own right, and would pay for services based solely on the volume of traffic that they themselves generate.
  SIZE="3">

Westman's application

9.

In its application, Westman submitted that Manitoba had structured its RFP so that a potential service provider could submit a proposal in respect of one or more of the three service components identified in the RFP. Westman stated that each service component was the subject of a separate agreement: the Network Services Agreement, Access Services Agreement, and the Network Management and Hardware Services (NMHS) Agreement (collectively, the PDN agreements).

10.

Westman stated that the PDN provided access and data sharing services amongst Manitoba offices throughout the province of Manitoba. Westman submitted that the PDN comprised a combination of intra-exchange and inter-exchange services, telecommunications and non-telecommunications services and equipment and tariffed and non-tariffed services, and that this combination caused the PDN to be a CSA in respect of which MTS was required to file a tariff, accompanied by an imputation test, consistent with the Commission determinations in Decision 94-19 and Order 2000-425. Westman argued these decisions required MTS to file a tariff as a safeguard against unjust discrimination and undue preference.
  SIZE="3">

MTS's answer

11.

On 11 March 2002, MTS submitted that the PDN was a WAN service that was forborne pursuant to Order 2000-553. MTS argued therefore that Commission approval was not required.

12.

MTS stated that the PDN comprised three components, each of which was the subject of a separate agreement: a network services component, an access services component, and a network management and hardware services component. MTS stated that the Network Services Agreement covered the provision of high-speed network services and included the provision and management of a data facility between a shared network access point (SNAP) located in an MTS central office and a network access point (NAP) which was a customer end site; or between a SNAP and a SNAP; or a NAP and a NAP and that the Network Services Agreement also provided for the provision of a dedicated digital facility with a router with a 10 Mbps Ethernet interface that provided speeds of 56 Kbps, 128 Kbps or 1.544 Mbps to certain specified end sites. MTS stated that the Access Services agreement covered data facilities and management of high-speed service or analog service between a SNAP and a customer end site. MTS stated further that the NMHS Agreement covered the monitoring of, and reporting on, the network services and high-speed access services and the provision, configuration, installation, repair, monitoring, management and operation of SNAPs and end site terminal equipment or hardware.

13.

In support of its position that the service components that constituted the PDN were forborne, MTS argued that they were identical to the Commission's description of WAN services set out in Order 2000-553. Specifically, MTS submitted that the description of WAN services in Order 2000-553 with respect to the location of a service provider's network hardware and software on the customer's premises was covered under the NMHS Agreement, that the description with respect to access transport between the customer's premises and the service provider was covered under the Access Services Agreement, and that the description with respect to the transport and routing or switching of packets or cells with the service provider's network was covered by the Network Services Agreement.

14.

MTS submitted that the PDN did not consist of the bundling of non-forborne and forborne services that would require the filing of a tariff, as Westman had argued, because the PDN was an end-to-end WAN service that was forborne. MTS submitted further that the services provided under the PDN were an integrated end-to-end service that were the subject of three agreements, and not a single overall contract, because of Manitoba's decision to divide the PDN into three components to make it possible for different suppliers to bid for one or more of the three elements.

15.

MTS submitted that the only non-forborne services provided within the overall PDN service were used to connect a legacy network element known as the Drug Pharmacy Information Network (DPIN) to the PDN. MTS stated that it was at Manitoba's request that the DPIN was included in the Network Services Agreement, because the customer did not want it to be the subject of a separate agreement. MTS submitted that the arrangement was not a CSA, and the filing requirements set out in Order 2000-425 did not apply, because no bundling of these services was involved and that the DPIN-related connection services were provided at Commission approved rates.
  SIZE="3">

Westman's reply

16.

On 21 March 2002, Westman reiterated its previous arguments and submitted that the elements that constituted the PDN did not fall within the definition of WAN services in respect of which the Commission forbore in Order 2000-553, either individually or collectively.

17.

Westman argued that MTS was not providing WAN services within the meaning of Order 2000-553 because Manitoba's RFP provided that different suppliers could bid on one or more of the three service elements, and because the services were proposed, priced and contracted as three separate and distinct sets of services. Westman submitted that the MTS's position effectively amounted to an argument that, if a customer used a tariffed MTS service in the creation of its own WAN, the tariffed service that was a component of the WAN should be a forborne service.

18.

Westman argued that the RFP contemplated that the PDN services were to be offered to multiple customers, and that this was not consistent with the definition of forborne WAN services in Order 2000-553 whereby forborne WAN services were to be provided to a single customer only. Westman submitted that the various customers contemplated by the RFP, which included hospitals, pharmacies, schools, libraries, municipalities, colleges and universities, failed to satisfy the single customer criterion.
  SIZE="3">

Westman's supplementary comments

19.

On 26 June 2002, Westman submitted that, based on MTS's responses to Commission interrogatories, the provision of tariffed services were included in both the Access Services Agreement and the Network Services Agreement, but not in the NMHS Agreement. Westman asserted that the Access Services Agreement and the Network Services Agreement were both CSAs because these agreements contemplated the provision of tariffed services and involved the bundling of tariffed and non-tariffed services, for which a tariff, supported by a cost study, was required. Westman argued that, in the absence of such a filing, MTS could be conferring an undue preference on Manitoba, contrary to subsection 27(2) of the Telecommunications Act (the Act). Westman further submitted that the information provided by MTS in response to the Commission interrogatories reinforced Westman's argument that the PDN did not meet the definition of forborne WAN services set out in Order 2000-553 because each agreement involved unique prices, terms and conditions which justified them being treated as separate CSA bundles for regulatory purposes.

20.

Westman noted that MTS could provide an entity other than Manitoba with PDN services using one of two methods. Westman submitted that neither method was consistent with the single customer requirement in the definition in Order 2000-553 of forborne WAN services. The first method was that, with Manitoba's consent, another entity would contract directly with MTS for PDN services and Manitoba would not accept liability for the other entity's use of MTS's services. The second method was that, with Manitoba's consent, the other entity could obtain PDN services from MTS, but Manitoba would assume liability for that entity's use of MTS's services. Westman argued that, if MTS provided services to another entity using the second method, Manitoba would cease to be a customer within the meaning set out in Decision 97-4. Westman stated that the Commission found in Decision 97-4 that a single government customer should include only those entities that had been declared by statute to be part of the government in question or those entities with respect to which the government had the obligations of employer.
  SIZE="3">

MTS's supplementary response

21.

On 4 July 2002, MTS submitted that the provision for tariffed services in the Network and Access Services Agreements did not cause these arrangements to be CSAs involving bundles that required Commission approval.

22.

On the matter of the number of contracts, MTS argued that the language in all three agreements was virtually identical and that the three agreements could have been combined into a single agreement with minimal modification. In MTS's submission, the existence of three contracts was irrelevant to the issue of whether or not the PDN was a WAN. MTS further argued that the Commission's definition of WAN services in Order 2000-553 consisted of three elements, and that, given this, it was appropriate for an agreement or agreements for a WAN service to differentiate these three elements. MTS submitted further that Order 2000-553 did not require that WAN services must be provided pursuant to a single agreement for forbearance to apply.

23.

With respect to Westman's arguments regarding the single customer requirement, MTS submitted that, under the first method of contracting with another entity, the other entity would not be included in the PDN service provided by MTS to Manitoba, but would be the subject of a separate contract with MTS and, therefore, would not be a customer for the purpose of the WAN service. Given this, there would be no violation of the single customer requirement in the definition of forborne WAN services in Order 2000-553. MTS stated that no entities had contracted with MTS using this method. Under the second method, MTS considered that only those entities that were part of Manitoba would be added to the PDN and would be covered by the agreements providing for Manitoba's WAN. In these circumstances, the entity would simply become part of Manitoba, which would remain a single customer. MTS stated that no entities had been added to Manitoba's PDN agreements using this method.
  SIZE="3">

Westman's supplementary reply

24.

On 16 July 2002, Westman submitted that Manitoba had the option of issuing a RFP for a WAN service, but had chosen not to do so, preferring to have three contracts for separate services and equipment that, in Westman's view, were not forborne. Westman argued that, in order to come within the definition of forborne WAN services in Order 2000-553, MTS must demonstrate that it provided a WAN service, and not simply telecommunications elements used by the customer to construct a WAN. Westman submitted that MTS had failed to do this.
 

Commission analysis and determination

25.

The Commission first considers whether the services that constitute the PDN are collectively forborne pursuant to Order 2000-553. The Commission then considers the regulatory status of services provided pursuant to each agreement.
  SIZE="3">

Whether the services that constitute the PDN are collectively forborne

26.

The Commission notes that Manitoba chose to structure the PDN RFP as three distinct components because it wished to solicit bids from different suppliers for each component. MTS was chosen as the sole service supplier with respect to all three components, notwithstanding that Manitoba could have selected different suppliers for one or more components of the PDN given the structure of the PDN RFP. The Commission further notes that the compartmentalized approach reflected in the PDN RFP was, in turn, translated into the legal documentation between Manitoba and MTS, which consisted of three separate and distinct agreements. The Commission notes that each agreement exists independently and is an exhaustive and self-contained statement of the rights and obligations of the parties with respect to the subject of the agreement. The compartmentalized nature of the arrangements between Manitoba and MTS is reinforced by the fact that each agreement provides separate and independent termination regimes that, if implemented, could lead to a situation where MTS could continue to provide certain components of the PDN, but not others. In addition, the Commission notes that the rates set out in each agreement are independent of the rates and the services set out in the other agreements. In the Commission's view, the significantly compartmentalized nature of the arrangements between Manitoba and MTS with respect to the PDN is fundamentally inconsistent with the integrated nature of the WAN services that were the subject of the forbearance determination by the Commission in Order 2000-553. Given this, the Commission finds that, collectively, the services provided by MTS to Manitoba that constitute the PDN are not WAN services subject to the Commission's forbearance determination in Order 2000-553.
  SIZE="3">

Whether the network services component should be tariffed

27.

The Commission notes that MTS submitted in an interrogatory response that the network services component constituted WAN services that were forborne pursuant to Order 2000-553, and, hence, were not subject to regulatory approval.

28.

The Commission notes that MTS stated that the network services component of the PDN required the interconnection of NAPs, which Manitoba identified as government offices located in Winnipeg. Manitoba also requested that respondents to its RFP recommend suitable locations to implement SNAPs, which served as community access points for the rural communities identified by Manitoba. The Commission notes that MTS implemented that SNAPs in its central office locations.

29.

The Commission further notes that the Network Service component, as described in the Network Services Agreement between MTS and Manitoba, includes the provision of packet based network connectivity between NAPs and SNAPs.

30.

In Order 2000-553, the Commission described WAN services as services that link the customer's local area networks at the customer's various locations. The Commission considers that, while the NAPs are Manitoba locations and, hence, customer locations, the SNAPs are not customer locations but, rather, are MTS locations. In the Commission's view, the location of the SNAPs reflects a significant inconsistency with the description of forborne WAN services contemplated by Order 2000-553. Accordingly, the Commission finds that the network services component does not constitute a WAN service that is forborne pursuant to Order 2000-553.

31.

The Commission notes that the Network Services Agreement provides for access services, intra-exchange services, and other services. The Commission further notes that the access and intra-exchange services are not forborne services, but that some of the other services may be forborne. The Commission further notes that the Network Services Agreement did not identify the specific tariff references applicable to the services that are not forborne. Based on the record of this proceeding, the Commission considers that the network services component consists of services that are provided at rates, terms and conditions that have been customized with respect to Manitoba.

32.

As noted above, it is not clear whether MTS is providing forborne services pursuant to the Network Services Agreement. To the extent that MTS is not providing forborne services, the Commission considers that the network services component constitutes a Type 2 CSA as contemplated by Decision 94-19. To the extent that MTS is providing forborne services as part of the network services component, the Commission considers that such an arrangement constitutes a Type 2 CSA as contemplated by Order 2000-425. In either case, the Commission finds that MTS's Network Services Agreement constitutes a Type 2 CSA.

33.

Accordingly, the Commission directs MTS, within 30 days, to file a separate tariff for the network service component as a Type 2 CSA, accompanied by an imputation test, and to identify all forborne services that are included.
  SIZE="3">

Whether the access services component should be tariffed

34.

The Commission notes that MTS stated in its description of the PDN that the access services component required point-to-point connectivity between SNAP locations and Manitoba customer end sites. Manitoba specified that it required two types of access services: high-speed access service offering data transfer rates in excess of 2 Mbps and analog access services for stand-alone personal computers.

35.

The Commission further notes MTS's response to Commission interrogatories in which MTS stated that, if it had been selected by Manitoba to provide the access service component only, MTS would have provided such services using services currently available in its tariffs. Based on this response, the Commission concludes that MTS's position is that the services coming within the access services component consist of tariffed services only.

36.

While the services falling within the access services component are tariffed services, the Commission notes that the rates specified in the Access Services Agreement have been customized to the needs of Manitoba in terms of rate structure. Given this, the Commission finds that the access service component is a Type 2 CSA within of the meaning of Decision 94-19.

37.

Accordingly, the Commission directs MTS to file within 30 days of the date of this decision a separate tariff for the access service component as a Type 2 CSA accompanied by an imputation test, and to identify all forborne services that are included.
  SIZE="3">

Whether the NMHS component should be tariffed

38.

The Commission notes that MTS stated in its description of the PDN that the NMHS component required the supply, maintenance, repair and installation of the hardware and associated software for the SNAPs and the customer end sites. Manitoba further required that the NMHS component include network management and network monitoring of the PDN.

39.

The NMHS component is comprised of two elements: hardware and network management services. In Decision 94-19, the Commission forbore from regulating the sale, lease and maintenance of terminal devices. However, the Commission notes that, according to the NMHS Agreement between MTS and Manitoba, the hardware services element also included equipment installation, management, removal and repair. The Commission further notes that the network management services element included network monitoring of the PDN, reporting, configuration management, fault management, security management and order management functions.

40.

The Commission considers that some of the functions that MTS provides to Manitoba pursuant to the NMHS Agreement may constitute the provision of telecommunications services within the meaning of the Act. The Commission also notes that the issue of whether certain services are telecommunications services within the meaning of the Act is the subject of a follow-up proceeding to Regulatory safeguards with respect to incumbent affiliates, bundling by Bell Canada and related matters, Telecom Decision CRTC 2002-76, 12 December 2002 (the follow-up proceeding).

41.

Accordingly, the Commission will consider the requirement for MTS to file a tariff for the services offered under the NMHS Agreement in light of the determinations to be made in that follow-up proceeding.
  SIZE="3">

Contracts between MTS and other entities

42.

As previously noted, in Decision 97-4, the Commission defined a single government customer to be a customer that purchased services from the telephone company for use by departments, agencies, crown corporations or other entities declared by statute to be part of the government in question or in respect of whose employees the government has the obligations of employer.

43.

Westman argued that hospitals, pharmacies, schools, libraries, municipalities, colleges and universities in Manitoba do not fall within this definition of a "single government customer". The Commission notes that MTS did not dispute Westman's submission that these particular entities listed in the PDN agreements would fall outside the Commission's definition in Decision 97-4 of a "single government customer". The Commission also notes MTS's submission that such entities would contract with MTS through separate arrangements.

44.

The Commission further notes MTS's reply comments of 4 July 2002 that, as of that date, there were no independent contracts in place between itself and such other entities.

45.

The Commission considers that tariffs would be required if MTS is providing the services contemplated by each of the Network or Access Services Agreements to such other entities.

46.

To the extent MTS is providing the services contemplated by each of the Network or Access Services Agreements to such other entities, the Commission directs MTS, within 30 days of the date of this decision, to either file proposed tariff(s), or to demonstrate that a tariff is not required, with respect to such services. To the extent MTS intends to provide such services to other entities, MTS is to file proposed tariffs or to demonstrate that a tariff is not required in respect of such service prior to the provision of service.
  Secretary General
  This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca

Date Modified: 2004-05-14

Date modified: