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ARCHIVED - Telecom Decision CRTC 2004-51

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Telecom Decision CRTC 2004-51

  Ottawa, 28 July 2004

 

Application by Saskatchewan Telecommunications for forbearance from regulation of electronic messaging and information services

  Reference: 8640-S22-200318552
  In this decision, the Commission forbears, with some conditions, from regulating electronic messaging and information services provided by Saskatchewan Telecommunications.

1.

The Commission received an application from Saskatchewan Telecommunications (SaskTel), dated 12 December 2003, filed under Part VII of the CRTC Telecommunications Rules of Procedure, requesting pursuant to section 34 of the Telecommunications Act (the Act), that the Commission refrain from exercising any power or performing any duty under sections 24, 25, 27, 29 and 31 of the Act in relation to electronic messaging and information (EMI) services and any similar services SaskTel may offer in the future.

2.

The Commission received no comments with respect to this application.

 

Background

3.

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:
 

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.

 

(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.

 

(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.

 

(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.

4.

The Canadian telecommunications policy objectives set out in section 7 of the Act include the following:
 

.

 

c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;

 

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;

 

h) to respond to the economic and social requirements of users of telecommunications services.

5.

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. 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. The Commission established a number of criteria to be examined when determining whether a market was competitive. These criteria include the market shares of the dominant and competing firms, demand and supply conditions, the likelihood of entry into the market, barriers to entry into the market and evidence of rivalrous behaviour.

6.

In Forbearance - Services provided by non-dominant Canadian carriers, Telecom Decision CRTC 95-19, 8 September 1995, the Commission largely forbore from services provided by non-dominant carriers, which would have included EMI services. The Commission retained some or all of its powers pursuant to sections 24 and 29, and subsections 27(2) and (4) of the Act.

7.

In Telecom Order CRTC 96-1392, 2 December 1996 (Order 96-1392), the Commission forbore from sections 25, 29 and 31, and subsections 27(1), 27(5) and 27(6) of the Act in relation to EMI services provided by Bell Canada; MTS Netcom Inc. (now MTS Communications Inc.); The Island Telephone Company Limited, Maritime Tel & Tel Limited, The New Brunswick Telephone Company, Limited, NewTel Communications Inc. (now Aliant Telecom Inc.); and BC TEL and TELUS Communications Inc. (now TELUS Communications Inc.). The Commission retained its powers under section 24 of the Act to ensure the confidentiality of customer information, to deal with issues related to sharing and resale and to impose conditions on the delivery of the service that may become necessary in the future. The Commission also retained its powers under subsections 27(2), 27(3) and 27(4) of the Act to deal with issues related to the sharing and resale of the forborne services.

8.

At the time of Order 96-1392, SaskTel was regulated by the Province of Saskatchewan, thus Order 96-1392 did not apply to the company. SaskTel became subject to regulation by the Commission in 2000. In SaskTel - Transition to federal regulation, Decision CRTC 2000-150, 9 May 2000 (Decision 2000-150), the Commission granted SaskTel forbearance with respect to numerous telecommunications services, including terminal equipment, toll and toll-free services, interexchange private line services and packet data services along certain routes, as well as Internet Protocol (IP) services. However, in Decision 2000-150, the Commission did not forbear from regulation of SaskTel's EMI services.

 

SaskTel's application

9.

SaskTel submitted that, at the time of the application, it provided only one EMI service that was not a component of its forborne Internet access service, namely Fax Overflow Service (FOS), as specified in its General Tariff - Competitive Services, item 550.12. SaskTel stated that this service stored incoming fax messages for future delivery if the fax line was busy or the receiving fax terminal was unable to answer the call, and delivered the stored messages when the line became available.

10.

SaskTel noted that it did not seek forbearance for related local access service elements utilized when providing EMI services, such as Call Forwarding arrangements. SaskTel indicated that these services have been unbundled and that it intended to retain these as tariffed services at this time.

11.

SaskTel submitted that the EMI market in Saskatchewan consisted of all existing and future residential, single-line business and multi-line business customers who required the capability to send, store and retrieve text communications. The company noted that within the EMI market, FOS appealed most to business customers that still relied on fax machines attached to telephone lines. SaskTel submitted that, while fax use was declining, fax service remained viable as fax machines were widely used and allowed crossover to other messaging mediums.

12.

SaskTel submitted that the advent of EMI services provided over the Internet had made most EMI services supplied with wire-line telecommunications technology obsolete. SaskTel noted that electronic mail (e-mail) accommodated much of the demand for transmission, storage and retrieval of EMI that previously might have been provided by fax services. SaskTel also submitted that storage of e-mail messages was a substitute for FOS, and offered more functionality. SaskTel submitted that, as result, demand for FOS services had declined.

13.

SaskTel provided evidence that several alternate suppliers, including Avaya World Services Inc., NEC Unified Solutions Inc., 3Com Corporation, Comdial Corporation, j2 Global Communications Inc., and IBM Corporation were active in the Canadian market for fax services. SaskTel argued that there were no financial, regulatory or technological barriers to entry in this market, and that additional suppliers might thus enter. SaskTel also noted that EMI software and EMI-capable hardware could be purchased at numerous outlets, including department stores and regional electronic chains.

14.

With respect to competitive safeguards, SaskTel submitted that the price cap regime established in Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002, prevented the company from increasing prices of regulated services beyond the levels permitted by price cap regulation, and there was therefore no risk of cross-subsidization of forborne services by tariffed services.

15.

Further, SaskTel argued that predatory pricing in the EMI market was not possible, since the company would be unlikely to be able to drive competitors from the market by below-cost pricing, particularly since some competitors were much larger than SaskTel. Further, even if the company were to succeed in this, any increase in market prices would result in entry, since there were no barriers to entry and customers could readily switch among suppliers.
 

Commission analysis and determination

 

Application of subsections 34(1), (2) and (3) of the Act

16.

The Commission notes that while subsection 34(1) of the Act provides that the Commission may refrain from regulating a service or class of services when it finds that such forbearance is consistent with the Canadian telecommunications policy objectives, subsection 34(2) of the Act requires it to forbear where it finds that the market for the service in question is, or will be, subject to sufficient competition to protect the interests of users. The Commission also notes, however, that subsection34(3) of the Act provides that the Commission shall not forbear if it finds that to do so would be likely to impair unduly the establishment or continuance of a competitive market for that service.

17.

The Commission considers it appropriate, for the purpose of this application, to define the market for EMI services in SaskTel's territory as consisting of services providing for the transmission, storage, and retrieval of text communications. The Commission considers that this market encompasses all of SaskTel's operating territory. Participants in this market include residential and business customers who require the capability to send, store and retrieve text communications, and suppliers including SaskTel and other suppliers providing EMI services that compete directly with SaskTel's EMI services.

18.

The Commission notes SaskTel's arguments that: within this market some customers continue to rely on fax machines attached to telephone lines; while fax use has declined, fax service remains viable as fax machines are widely used and allow crossover to other messaging mediums; EMI services provided over the IP have made most EMI services supplied with wire-line telecommunications technology obsolete, and e-mail accommodates much of the demand for transmission, storage and retrieval of EMI that previously may have been provided by fax services; and storage of e-mail messages is a substitute for FOS, and often offers more functionality than SaskTel's FOS service.

19.

The Commission finds that the market for EMI services in SaskTel's territory is competitive, with many existing and potential suppliers, and no barriers to entry. Since EMI users have alternatives, and since there are no barriers to market entry, the Commission considers that below-cost pricing of EMI services by SaskTel for such customers is unlikely since, if the Commission were to refrain from regulating EMI services, SaskTel could not recoup any loss from below-cost pricing by increasing the prices in the future.

20.

Accordingly, the Commission finds, pursuant to subsection34(2) of the Act, as a question of fact that the provision, in SaskTel's territory, of EMI services is sufficiently competitive to protect the interests of users so as to warrant forbearance to the extent set out in this decision.

21.

The Commission 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, to the extent set out in this decision, with respect to EMI services provided by SaskTel in its territory, is consistent with the Canadian telecommunications policy objectives.

22.

The Commission also finds, pursuant to subsection 34(3) of the Act, as a question of fact, that refraining from regulating EMI services to the extent set out in this decision is unlikely to impair unduly the continuance of a competitive market for that class of services.

23.

The Commission does not forbear from regulation of related local access service elements utilized when providing EMI services.

24.

The Commission determinations on the extent to which it is appropriate 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 of the Act are set out below.

 

Section 24

25.

Section 24 of the Act provides:
 

24. 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.

26.

The Commission considers that it is appropriate to retain its powers pursuant to section 24 of the Act, to ensure that the confidentiality of customer information continues to be protected. Because SaskTel's Terms of Service, which ensure the confidentiality of customer information for regulated services, do not apply to forborne services, the Commission directs SaskTel, as a condition of providing EMI services, to abide by the existing conditions regarding disclosure of confidential customer information to third parties with respect to the services forborne from regulation in this decision. The Commission also directs SaskTel, on a going-forward basis, as a condition of providing EMI services, to incorporate, where appropriate, the existing conditions regarding disclosure of confidential customer information to third parties into all contracts and any other arrangements for services forborne from regulation in this decision.

27.

Finally, the Commission considers that it is also appropriate to retain sufficient powers under section 24 of the Act to specify possible future conditions for offering and providing EMI services.
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Section 25

28.

Section 25 of the Act provides:
 

25. (1) No Canadian carrier shall provide a telecommunications service except in accordance with a tariff filed with and approved by the Commission that specifies the rate or the maximum or minimum rate, or both, to be charged for the service.

 

(2) A joint tariff agreed on by two or more Canadian carriers may be filed by any of the carriers with an attestation of the agreement of the other carriers.

 

(3) A tariff shall be filed and published or otherwise made available for public inspection by a Canadian carrier in the form and manner specified by the Commission and shall include any information required by the Commission to be included.

 

(4) Notwithstanding subsection (1), the Commission may ratify the charging of a rate by a Canadian carrier otherwise than in accordance with a tariff approved by the Commission if the Commission is satisfied that the rate:

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(a) was charged because of an error or other circumstance that warrants the ratification; or

 

(b) was imposed in conformity with the laws of a province before the operations of the carrier were regulated under any Act of Parliament.

29.

Based on the record of this proceeding, the Commission considers it appropriate that SaskTel no longer be required to file and obtain the Commission's approval of tariffs for EMI services. Accordingly, the Commission will refrain from the exercise of all of its powers and the performance of all of its duties under section 25 of the Act with respect to EMI services.
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Section 27

30.

Section 27 of the Act provides:
 

27. (1) Every rate charged by a Canadian carrier for a telecommunications service shall be just and reasonable.

 

(2) No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.

 

(3) The Commission may determine in any case, as a question of fact, whether a Canadian carrier has complied with section 25, this section or section 29, or with any decision made under section 24, 25, 29, 34 or 40.

 

(4) The burden of establishing before the Commission that any discrimination is not unjust or that any preference or disadvantage is not undue or unreasonable is on the Canadian carrier that discriminates, gives the preference or subjects the person to the disadvantage.

 

(5) In determining whether a rate is just and reasonable, the Commission may adopt any method or technique that it considers appropriate, whether based on a carrier's return on its rate base or otherwise.

 

(6) Notwithstanding subsections (1) and (2), a Canadian Carrier may provide telecommunications services at no charge or at a reduced rate

 

(a) to the carrier's directors, officers, employees or former employees; or

 

(b) with the approval of the Commission, to any charitable organization or disadvantaged person or other person.

31.

The Commission considers that there is no need to apply the regulatory standards for "just and reasonable" rates to rates that are set in a competitive market. Accordingly, the Commission will refrain from the exercise of all of its powers and the performance of all of its duties under subsection 27(1) of the Act with respect to EMI services.

32.

The Commission will refrain from the exercise of all of its powers and the performance of all of its duties under subsection 27(2) of the Act with respect to EMI services.

33.

The Commission considers it necessary to retain its powers under subsection 27(3) of the Act with respect to compliance with powers and duties not forborne from in this decision.

34.

The Commission will refrain from the exercise of its powers under subsection 27(5) of the Act with respect to EMI services as that subsection relates to subsection 27(1) of the Act with respect to which the Commission is forbearing.

35.

The Commission will also forbear from all of its powers under subsection 27(4) of the Act with respect to EMI services, since it relates to subsection 27(2) of the Act with respect to which the Commission is forbearing in this decision. The Commission will also forbear from all of its power under subsection 27(6) of the Act in respect to EMI services as that subsection relates to subsections 27(1) and 27(2) of the Act with respect to which the Commission is forbearing in this decision.
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Section 29

36.

Section 29 of the Act provides:
 

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

 

(a) the interchange of telecommunications by means of their telecommunications facilities;

 

(b) the management or operation of either or both of their facilities or any other facilities with which either or both are connected; or

 

(c) the apportionment of rates or revenues between the carriers.

37.

The Commission considers it appropriate that SaskTel no longer be required to obtain the Commission's approval to enter into agreements with other telecommunications common carriers regarding EMI services. Accordingly, the Commission will refrain from the exercise of all of its powers and the performance of all of its duties under section 29 of the Act with respect to EMI services.
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Section 31

38.

Section 31 of the Act provides:
 

31. No limitation of a Canadian carrier's liability in respect of a telecommunications service is effective unless it has been authorized or prescribed by the Commission.

39.

The Commission considers it appropriate that SaskTel be able to limit its liability in respect of EMI services in the same way as may an unregulated service provider. Accordingly, the Commission will refrain from the exercise of all of its powers and the performance of all of its duties under section 31 of the Act with respect to EMI services.
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Declaration pursuant to subsection 34(4) of the Act

40.

In light of the above, the Commission declares, pursuant to subsection 34(4) of the Act, that effective two weeks from the date of this decision, sections 24, 25, 27, 29 and 31 of the Act do not apply to SaskTel's EMI services, except with respect to:
 
  • the conditions pursuant to section 24 of the Act set out in this decision with respect to the confidentiality of customer information;
 
  • any future condition that the Commission may impose, pursuant to section 24 of the Act, with respect to EMI services; and
 
  • the Commission's powers under subsection 27(3) of the Act with respect to compliance with powers and duties not forborne from in this decision.
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Tariff filings

41.

The Commission directs SaskTel to issue forthwith, revised tariff pages, effective two weeks from the date of this decision, deleting the existing tariff provisions relating to EMI services.
  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: 2004-07-28

Date modified: