Telecom Decision CRTC 2020-268
Ottawa, 14 August 2020
Public record: 8663-J64-201806019 and 8663-T66-201805722
Iris Technologies Inc. and TELUS Communications Inc. – Applications for final relief regarding the termination of traffic to certain 867 numbering plan area telephone numbers
The Commission concludes that regulatory intervention is required to curb traffic stimulation activities with respect to Iristel Inc.’s (Iristel) 867 numbering plan area (NPA) telephone numbers.
Iristel has granted itself an undue advantage, contrary to subsection 27(2) of the Telecommunications Act (the Act), by allowing the use of 867 NPA telephone numbers by certain customers based in distant locations, thus increasing the connection costs for other carriers and causing economic harm, while generating revenue for itself through the resulting long distance call termination charges.
Accordingly, the Commission modifies Iristel’s long distance call termination rate, which becomes final 90 days from the date of this decision, to take effect retroactively to 23 November 2018. The Commission considers that this modification will significantly reduce the incentive for traffic stimulation in relation to 867 NPA telephone numbers.
The Commission also concludes that TELUS Communications Inc.’s (TCI) actions of reducing the capacity of certain toll circuits, between approximately 29 May 2018 and 28 November 2018, unjustly discriminated against Iris Technologies Inc. and its affiliate Ice Wireless Inc., their customers, and TCI’s own customers, contrary to subsection 27(2) of the Act, by deliberately reducing the ability to complete calls to telephone numbers in the 867 NPA.
Both Iristel and TCI acted in a way that was self-serving. Such behaviour, which undermines the establishment of an orderly telecommunications system in Canada and the efficiency and competitiveness of that system, cannot be tolerated.
Because both TCI and Iristel violated subsection 27(2) of the Act, the Commission is issuing Telecom Notice of Consultation 2020-269 concurrently with this decision to examine whether it would be appropriate to impose administrative monetary penalties (AMPs) on both companies and, if so, what the appropriate AMP amounts would be.
- In Telecom Decision 2017-456, the Commission found that Iris Technologies Inc. (Iris Technologies) and Iristel Inc. (Iristel) were in violation of subsection 27(2) of the Telecommunications Act (the Act) in relation to regulatory arbitrage activities involving 867 numbering plan area (NPA)Footnote 1 telephone numbers.
- In that decision, the Commission considered the following:
- calls from Rogers Communications Canada Inc.’s (RCCI) customers destined to AudioNow’s Call-to-Listen service were being routed, extremely inefficiently, to the United States via the 867 NPA;Footnote 2
- there was no clear reason for the use of the 867 NPA telephone numbers, absent revenue-sharing arrangements that were in place between Iris Technologies and Iristel and Free Conference Call Global (FCCG),Footnote 3 and between Yakfree LLC and AudioNow; and
- the parties involved in the revenue-sharing arrangements had an incentive to stimulate traffic to AudioNow’s Call-to-Listen service simply for the higher revenues that could be garnered from call termination.
- In the same decision, the Commission directed Iris Technologies and Iristel, and any of their affiliates, to (i) terminate any agreement that assigns to FCCG any 867 NPA telephone numbers that are ultimately used by AudioNow, and not re-enter into provisions of such an agreement with FCCG or any of its affiliates; and (ii) file a report with the Commission confirming compliance with this directive.
- The Commission received a letter from Iristel, dated 19 January 2018, in which the company submitted that it had met the requirements set out in Telecom Decision 2017-456. Specifically, Iristel indicated that it had informed FCCG by letter that (i) by 19 January 2018, FCCG must cease supplying AudioNow with any 867 NPA telephone numbers that might ultimately confer undue preference on Iristel or any other party; and (ii) effective 19 January 2018, revenue sharing associated with 867 NPA telephone numbers would be terminated. Iristel added that FCCG acknowledged receipt of the aforementioned letter and indicated its intention to immediately comply with Telecom Decision 2017-456.
- The Commission received an application from TELUS Communications Inc. (TCI), dated 3 August 2018, in which it requested relief regarding alleged new traffic stimulation activities involving Iristel’s 867 NPA telephone numbers in Northwestel Inc.’s (Northwestel) incumbent serving territory.Footnote 4 TCI argued that the traffic stimulation activities that led to Telecom Decision 2017-456 stopped only briefly after the issuance of that decision, and that the new traffic stimulation activities conferred an undue preference upon Iristel and subjected TCI to a corresponding undue disadvantage.
- TCI requested that the Commission (i) initiate a public proceeding to review the new traffic stimulation activities involving Iristel’s 867 NPA telephone numbers, and (ii) direct Iristel to file a tariff application to establish a new rate for long distance call termination for its customers in the North.Footnote 5 In the interim, TCI requested that the Commission make interim Iristel’s current tariffed rate for long distance call termination in the North.
- The Commission subsequently received an application dated 7 August 2018 from Iris Technologies, on behalf of itself and its affiliate Ice Wireless Inc.,Footnote 6 alleging that TCI had reduced capacity on certain toll transit circuits that carry TCI’s traffic to Iristel’s 867 NPA telephone numbers. Iristel argued that the reduced capacity was causing congestion, such that calls from TCI’s end-users to certain Iristel end-users could not be completed.
- Iristel requested that the Commission (i) confirm that TCI must maintain its network so that calls to Iristel’s customers are consistently terminated, and (ii) direct TCI to maintain an adequate capacity on its network for Iristel to properly terminate calls that originate from TCI’s end-users, or that transit through TCI’s network and terminate on Iristel’s network. In the interim, Iristel requested that the Commission order TCI to restore its network capacity to the state it was in before 29 May 2018he date that TCI reduced capacity, and to take whatever measures are necessary to ensure that calls from TCI’s end-users to Iristel’s end-users are terminated correctly.
- The Commission received interventions regarding Iristel’s and TCI’s applications from the Canadian Network Operators Consortium Inc. (CNOC), Mr. Marc Lange, the Public Interest Advocacy Centre (PIAC), and RCCI, as well as responses to requests for information (RFIs) from FCCG, Generic Conferencing LLC, ZenoRadio, and one wholesale customer of Iristel whose name was filed in confidence.
- In Telecom Decision 2018-432, the Commission addressed the requests for interim relief in both applications. The Commission stated that, even though further process and a thorough review of the submissions would be required to address the requests for final relief, the issue of calls not being completed needed to be addressed in an expeditious manner.
- Consequently, in that decision, the Commission
- approved, in part, Iristel’s interim relief request and directed TCI to
- take the necessary measures to ensure that, within 10 calendar days of the date of the decision, calls from TCI’s end-users to Iristel’s end-users in the 867 NPA, or calls that transit through TCI’s network and terminate on Iristel’s network in that NPA, reach Iristel’s network so that they can be consistently terminated correctly; and
- file a report with the Commission confirming compliance with this directive and detailing the measures it has taken within 10 calendar days; and
- approved, in part, Iristel’s interim relief request and directed TCI to
- approved TCI’s interim relief request and made interim, as of the date of the decision, the rate applicable to the Northwest Territories, Nunavut, and Yukon in Iristel’s Access Services Tariff item 302.2.4, Trunk-side Access – Switching and Aggregation.
- The Commission has identified the following issues to be addressed in this decision:
- Is further Commission intervention warranted to curb traffic stimulation activities with respect to 867 NPA telephone numbers?
- Should Iristel’s rate for long distance call termination in the 867 NPA be revised?
- Should a further proceeding be initiated to review potential new traffic stimulation activities involving Iristel’s 867 NPA telephone numbers?
- How should the Commission dispose of Iristel’s application for final relief?
- Has the conduct of either TCI or Iristel violated the Act and, if so, what measures should the Commission take?
Is further Commission intervention warranted to curb traffic stimulation activities with respect to 867 NPA telephone numbers?
Positions of parties
- TCI argued that the Commission’s direction in Telecom Decision 2017-456 was narrow, in that it ordered the termination of the then-existing agreement between Iristel and FCCG, but did not make a general statement against traffic stimulation in order to prevent its resumption through alternative financial arrangements with the same parties, or the same financial arrangements with different parties.
- TCI noted that while Iristel claimed, in its letter to the Commission, that it had met the requirements of Telecom Decision 2017-456, the company did not explain why, instead of complying with the Commission’s plainly stated instruction to terminate any agreement that assigns FCCG any 867 NPA numbers that are ultimately used by AudioNow, it only terminated its revenue-sharing arrangement with FCCG.
- TCI provided data that showed the volume of traffic from TCI to Iristel’s telephone numbers in the North for the period from January 2015 to August 2018. TCI noted that in early 2018, immediately following the issuance of Telecom Decision 2017-456,Footnote 8 TCI’s traffic to Iristel’s 867 NPA telephone numbers and the average length of calls dropped back to “pre-stimulation” levels; however, such traffic began to increase and by May 2018 it was at a level four or five times higher than normal, and still climbing.
- TCI submitted that there had been no changes to its retail offerings, nor any changes in population, that could account for such dramatic increases in traffic and the length of calls. TCI submitted that its traffic to other carriers serving the North remained relatively steady over the same period, so the increase in traffic to Iristel could not be attributed to customer migration. In TCI’s view, the increase in traffic could be attributed only to the actions of Iristel or the users of Iristel’s telephone numbers.
- TCI submitted that its investigations of the frequently called telephone numbers or telephone numbers with unusually long hold times revealed the same types of calling patterns to the same types of services as were found in Telecom Decision 2017-456 as follows (the telephone numbers were filed in confidence):
- an Iqaluit telephone number is the Canadian dial-in number for FreeConference.com and a Whitehorse telephone number reaches another conference calling service;
- an Iqaluit telephone number and a Yellowknife telephone number reach Lyft, a ride-sharing service which, according to its website, does not serve Iqaluit or Yellowknife;
- an Iqaluit telephone number connects to a listen-only service for Punjabi Radio USA; and
- a Whitehorse telephone number connects to Zeno Radio, a listen-only radio service of Zeno Media.
- TCI submitted that the current traffic is different from that addressed in Telecom Decision 2017-456, in that evidence suggests the adoption of a screening mechanism.
- TCI noted that at the time that Telecom Decision 2017-456 was issued, the telephone numbers to which high volumes of traffic were destined could be called by anyone, which led to the discovery of the nature of the audio services that drew some of that traffic, whereas, currently, calls to many of the numbers in question are met with an announcement: “The subscriber you are calling is currently not reachable.” TCI submitted that this can occur even if calls from other parties to the same numbers are successfully completed, and that calls that were of nearly identical duration were to numbers with that announcement. TCI submitted that if all callers had been met with that announcement, there would have been no calls lasting more than 30 seconds, when in fact there have been hundreds of calls that lasted 45 minutes. TCI submitted that it determined that callers from certain numbers did not receive the message but were instead connected to a radio program, and concluded that either the end-customer or one of the telecommunications service providers (TSPs) involved in completing the call was screening calls based on the number of the caller.
- According to TCI, out of the 59 numbers that it suspected to be associated with traffic stimulation, 30 are being used for listen-only audio programs located in the United States.
- TCI submitted that one such program is Punjabi Radio USA, which further investigation confirmed to be a client of Zeno Media, a service that puts broadcasters on call-to-listen services and shares carrier revenues with them. TCI noted that Zeno Media does not publish a call-in telephone number, but rather assigns each listener a unique telephone number to call.
- TCI submitted that it suspects that lines featuring the aforementioned screening announcement connect to either Zeno Media or another service provider with the same practice of assigning unique call-in telephone numbers to each subscriber, arguing that it would be easy for such a provider to screen each telephone number and allow only designated subscribers to be connected. TCI acknowledged that there could be a legitimate reason for screening calls, but argued that such screening makes it difficult to establish whether it is part of a traffic-stimulating service, and may be used to deter investigation into regulatory arbitrage.
- RCCI submitted that following the effective date of Telecom Decision 2017-456, 20 January 2018, its traffic to Iristel’s telephone numbers in the 867 NPA dropped to 5% of its previous level, and then increased by over 295% between February and August 2018.
- RCCI agreed with TCI’s assessment that, because of the assignment of unique telephone numbers to calling parties and the screening mechanism described in TCI’s submission, it has become more difficult to validate the source of this traffic.
- Nevertheless, RCCI stated that around 90% of its traffic destined to Iristel’s telephone numbers in the 867 NPA was being routed to radio listening services and conference call services that, by all appearances, are not located in the North. RCCI made note of one such service, ZenoRadio, based in New York City.
- RCCI submitted that, like TCI, it believed that the registration method described in TCI’s submission is designed to prevent the detection of the traffic stimulation mechanism. RCCI submitted that although there may be no express revenue-sharing mechanism between Iristel and its customers, the effect is the same.
- RCCI submitted further that although Iristel may have terminated its relationship with FCCG, effectively it seems to be continuing to do business with AudioNow, which appears to have been sold to ZenoRadio in June 2018.
- RCCI noted that Iristel has 27 central office codes in the 867 NPA, which means that it could serve up to 270,000 customers, triple the population of the Northwest Territories and Yukon. RCCI also noted Iristel’s statement, in response to an RFI, that it had no information on the physical location of destination Internet Protocol addresses for traffic routed by the Internet. RCCI submitted that Iristel does not need to have a physical address in the North; therefore, there is no reason to use telephone numbers from the 867 NPA, except as part of a design to artificially stimulate traffic to a high-cost destination.
- Iristel submitted that neither it nor its affiliates were stimulating traffic to its 867 NPA telephone numbers, nor is it or any of its affiliates a party to a revenue-sharing agreement; it follows that there cannot be any traffic stimulation involving Iristel as claimed by TCI.
- Iristel argued that the data clearly demonstrates that it is strictly adhering to the Commission’s determinations in Telecom Decision 2017-456. It argued that it did not take any action regarding any service being provided to ZenoRadio, given that it was not identified in Telecom Decision 2017-456. Iristel also submitted that current traffic levels from TCI to Iristel’s 867 NPA telephone numbers are lower than they were in early 2015. Further, RCCI traffic levels to 867 NPA telephone numbers over Iristel’s trunk have not returned anywhere close to the level recorded on 19 January 2018. As an example, Iristel noted that traffic levels for RCCI to 867 NPA on Iristel’s trunk on 19 January 2018 were higher than what Iristel recorded on 21 June 2019.Footnote 9
- Iristel submitted that neither it nor its affiliates have any knowledge of the screening announcement that TCI claims is being used to screen callers, or what its purpose might be. Iristel argued that it would be inappropriate for it to scrutinize the business activities of its end-users based on traffic content. Iristel submitted, however, that to the extent that the screening mechanism is designed to prevent people who have not paid for the service in question from accessing it, it is equivalent to entering a password to use a conference call service, and there would not appear to be any nefarious intent or regulatory issues. Iristel submitted that the existence of the screening mechanism is further evidence that Iristel and its affiliates are not part of any revenue-sharing arrangements; absent a revenue-sharing arrangement, service providers must find a way to recover their costs, such as through a subscription mechanism that requires paying customers to be authenticated.
- Iristel submitted that TCI relied on poor examples to prove that traffic stimulation is occurring, and that the data proves otherwise. It argued that TCI appears to believe that a company using a number in the 867 NPA without carrying on business in the same area is a clear instance of traffic stimulation. For example, Iristel analyzed one of the telephone numbers for Lyft cited by TCI in this regard, and found that from 1 January to 31 July 2018 there were a mere number of minutes of calls to that number from all sources, not just TCI.Footnote 10
- CNOC submitted that it had the opportunity to review the abridged version of Iristel’s answer to TCI’s application and, based on the traffic data it presents, which appears to be conclusive, there is no evidence of any traffic stimulation by Iristel.
Commission’s analysis and determinations
- In Telecom Decision 2017-456, the Commission found that Iristel had been involved in regulatory arbitrage activities in contravention of the Act. On the record of the current proceeding, TCI and RCCI have alleged that Iristel is again engaging in traffic stimulation activities. These activities rely on the unlimited nation-wide calling plans of both TCI and RCCI.
- TCI submitted data that showed that the volume of its traffic to Iristel’s telephone numbers in the 867 NPA dropped in February 2018 after the issuance of Telecom Decision 2017-456, but then traffic volumes started to increase. By May 2018, the volume of traffic had increased to levels similar to the volume of traffic levels that existed prior to the effective date of Telecom Decision 2017-456. Data submitted by Iristel confirmed this.
- From May to June 2018 there was a sharp drop in traffic, because TCI began to control the amount of traffic to Iristel’s 867 NPA numbers. From November 2018 to September 2019, traffic appears to have remained at a consistent level, lower than in January 2018 but higher than in February 2018. Regarding Iristel’s claim that the level of traffic from RCCI to the 867 NPA on Iristel’s trunk was higher on 19 January 2018 than it was on 21 June 2019, the Commission notes that its directive in Telecom Decision 2017-456 only came into effect on 20 January 2018.
- Although Iristel and FCCG indicated, in response to RFIs, that they do not have revenue-sharing agreements with each other, Iristel submitted that it does have an agreement with FCCG to assign it 867 NPA telephone numbers. Iristel also stated that, since ZenoRadio was not mentioned in Telecom Decision 2017-456, it did not take any action regarding any service provided to ZenoRadio, and that it does not have a contract with ZenoRadio. In the Commission’s view, this is an overly narrow interpretation of Telecom Decision 2017-456.
- TCI indicated that AudioNow has since been sold and now operates as ZenoRadio.Footnote 11 TCI provided uncontested evidence that there are calls placed to ZenoRadio. In view of this, the Commission considers that Iristel’s interpretation of Telecom Decision 2017-456 is at odds with the direction set out in that decision, since Iristel was to terminate any agreement that assigns FCCG any 867 NPA telephone numbers that are ultimately used by AudioNow. In addition, Iristel’s interpretation of Telecom Decision 2017-456 is inconsistent with the Canadian telecommunications policy objectives set out in section 7 of the Act, as referenced in that decision, and is therefore not supportable.
- The Commission notes that out of the 59 numbers that TCI suspected are associated with traffic stimulation, TCI indicated that 30 are being used for listen-only audio programs located in the United States, which Iristel neither confirmed nor denied. In Telecom Decision 2017-456, the Commission stated that calls to such listen-only services, which technically terminate in the 867 NPA but are then routed to a location in a different NPA, are routed extremely inefficiently.
- There is no regulatory restriction as to whom a local exchange carrier such as Iristel may provide 867 NPA telephone numbers. However, the Commission is of the view that Iristel’s approach for providing 867 NPA telephone numbers to customers, such as conference bridge providers, who then resell those numbers to end-users who could use them for audio listening services and other services that attract one-way calls, is different than what the Commission contemplated when setting rates for long distance call termination. Rather, the Commission expected that toll traffic would terminate in the operating territory associated with the NPA telephone number, not be immediately rerouted to a distant exchange or another country. Further, the interexchange (IX) interconnection regime was established prior to the advent of unlimited long distance calling plans.
- Iristel’s overly narrow interpretation of Telecom Decision 2017-456, combined with the fact that there was a significant increase in traffic destined to Iristel’s telephone numbers in the 867 NPA after an initial dramatic drop immediately after the issuance of that decision, suggests that traffic stimulation is still occurring. The Commission considers that if the financial incentive for traffic stimulation is not removed or reduced, this trend will continue. Furthermore, it will likely expand to involve more services of the same nature and potentially entice other service providers to want to take advantage of arbitrage opportunities in areas with high long distance call termination rates.
- Accordingly, the Commission concludes that regulatory intervention is required to curb traffic stimulation activities with respect to Iristel’s 867 NPA telephone numbers.
Should a revised rate be established for Iristel for long distance call termination in the 867 NPA?
Positions of parties
- TCI submitted that Iristel’s tariffed rate of $0.038 per minute for long distance call termination in the North is significantly higher than Iristel’s cost for the termination of such calls; that this creates the incentive for traffic stimulation; and that by reducing this rate to the true incremental cost, plus the normal markup for mandated interconnection services, the incentive for traffic stimulation would be eliminated. Further, TCI submitted that, regardless of the Commission’s determinations with respect to traffic stimulation, Iristel’s current rate is neither just nor reasonable in accordance with subsection 27(1) of the Act.
- TCI submitted that in Telecom Regulatory Policy 2011-771, the Commission reaffirmed that Northwestel’s Carrier Access Tariff (CAT) rate,Footnote 12 the charge applicable to interconnecting interexchange service providers (IXSPs), must recover the costs of satellite toll connect links. In that decision, the Commission considered that a CAT rate of $0.038 per minute per end (i.e. originating or terminating) was reasonable for Northwestel, and approved that rate effective 1 January 2012. TCI summarized the costing of Northwestel’s CAT rate as follows:Footnote 13
Toll connect (terrestrial and satellite) $0.024
Switching and equal access $0.007
Total cost $0.031
25% markup (excluding equal access portion) $0.007
Total CAT $0.038
- TCI noted that when Iristel, as a competitive local exchange carrier (CLEC), added a rate for long distance call termination in the North in its Tariff Notice 11, it referenced the tariff item number of Northwestel’s bundled CAT rate.
- TCI submitted that Northwestel’s bundled CAT rate cannot be directly applied to CLEC tariffs because it is a special rate set for the specific purpose of supporting Northwestel in serving its customers. TCI added that it is a blended rate based on the assumption that a certain proportion of toll calls would be to remote areas served by terrestrial or satellite toll connect links, and the rest would be to less costly areas, such as Whitehorse and Yellowknife. According to TCI, the bundled CAT rate would be valid only as a CLEC rate if that CLEC were to terminate the same proportion of calls to remote customers as does Northwestel.
- TCI submitted that even if a CLEC provides service in a remote exchange that Northwestel serves with terrestrial or satellite toll connect links, the CLEC may not incur transport costs for all calls to telephone numbers associated with that exchange. TCI noted that, in particular, Iristel’s retail voice offerings are access-independent voice over Internet Protocol (VoIP) services with which Iristel’s customers can connect to the Iristel network through their own Internet access; Iristel incurs no satellite or terrestrial costs for calls to those customers because those customers are paying for the Internet access in the remote exchange. TCI submitted that to complete a call to such a customer, Iristel need only send the call onto an Internet connection in a convenient location, and incurs no costs related to transport to the remote exchange.
- TCI submitted that, similarly, a CLEC could agree to deliver all of a customer’s calls to a single location, including calls to satellite-served locations or other remote exchanges, which could be the case if a customer maintains a private network to reach all of its locations; in such a case, the CLEC would not be incurring satellite costs to terminate a call to the customer’s satellite-served locations.
- TCI submitted that Iristel’s true cost of long distance call termination in the North is significantly below the tariffed rate of $0.038 per minute, even for connection at Iristel’s switch in Toronto. To demonstrate its point, TCI compared (i) Iristel’s negotiated rates with TCI (Comparisons 1 and 2, which were filed in confidence), and (ii) existing tariffed rates or their underlying costs (Comparisons 3 and 4, which ranged from $0.0166 to $0.00088).Footnote 14
- RCCI submitted that Northwestel’s bundled CAT rate should not be used as a proxy for Iristel’s costs because the companies’ networks in the North differ greatly. It indicated that even a cursory examination of Iristel’s network in the North reveals that it is nothing like that of Northwestel. RCCI added that, based on the Local Exchange Routing Guide, Iristel’s network has no switches in the North; it uses its switch in Toronto to commute traffic in the North.
- In RCCI’s view, the true cost of a direct connection to Iristel’s switch for traffic destined to the North should be around $0.007 per minute, or approximately $0.008 per minute after a markup of 25%, not the full $0.038 per minute.
- Iristel submitted that the question of whether rates for IXSP interconnection in the North are appropriate was before the Commission in the proceeding that led to Telecom Decision 2017-456. Iristel stated that in that proceeding, RCCI asserted, as TCI argued in the current proceeding, that Iristel’s rate was not just and reasonable because Iristel does not incur costs comparable to those incurred by Northwestel.
- Iristel submitted that it had fully rebutted this argument by discussing in detail its costs of operating in the North. In particular, Iristel referred to its answer to RCCI’s application in the proceeding that led to Telecom Decision 2017-456, in which it stated that
- the rates for tariffed local termination services incorporate costs that Iristel must incur in Northwestel’s serving territory so that Iristel can afford to provide retail services in that territory;
- Iristel’s network relies predominantly on Northwestel’s Wholesale Connect Service; and
- Iristel’s other operating costs in Northwestel’s serving territory are also very high, due to the rugged terrain, extreme weather conditions, long distances, and the sparsely populated nature of that territory.
- Iristel submitted that the costs of operating in the North are so high that no carrier interconnecting with Iristel has established local points of presence in the North that would enable traffic exchange using a bill-and-keep regime established for local interconnection,Footnote 15 thereby eliminating the need to pay commercially negotiated long distance call termination charges.
- Iristel submitted that it used Northwestel’s tariff as a proxy for its own CLEC tariff in the North, in accordance with the Commission’s long-standing policy, established in Telecom Decision 97-8. Iristel argued that there are sound policy reasons why the Commission chose to allow CLECs to use incumbent local exchange carriers’ (ILECs) tariffs as proxies, even though there may be differences in the exact costs incurred by CLECs and ILECs. Iristel added that a requirement for each CLEC to file its own tariffs, supported by cost studies for each ILEC territory in which it wished to offer IXSP interconnection, would be an immense regulatory undertaking that would have delayed the introduction of local competition for years. Iristel submitted that such analysis is beyond the capabilities of most CLECs and that costing resources remain a scarce commodity in the telecommunications industry. Nevertheless, Iristel submitted that its cost structure in the North is high, and that the use of Northwestel’s rate as a proxy is therefore reasonable.
- Iristel submitted that for the Commission to direct Iristel to file a tariff application to establish a rate for long distance call termination for its customers in the North would potentially open the regulatory floodgates for ILECs to demand that CLECs file cost studies whenever they detect slight differences in cost structures between the CLEC and the ILEC. Such an outcome would not be the efficient and proportionate regulation required by subparagraph 1(a)(ii) of the 2006 Policy Direction.Footnote 16
- Iristel further submitted that if the Commission were to proceed against Iristel in isolation, it would be upending a policy that has existed since the issuance of Telecom Decision 97-8. Iristel argued that, if the Commission doubts the costs of operating in the North, far more efficient and proportionate regulation would be for the Commission to require Northwestel to file a new cost study, and to continue to allow Iristel to use whatever costs stem from that cost study as a proxy for its own tariff.
Commission’s analysis and determinations
- In the previous section of this decision, the Commission concluded that its intervention is required to curb traffic stimulation activities involving 867 NPA telephone numbers. The Commission considers that the incentive for traffic stimulation is Iristel’s IX termination rate of $0.038 per minute per end (originating or terminating) for calls to the 867 NPA, which provides a significant arbitrage opportunity. If that incentive is not removed or significantly reduced, it is likely that traffic stimulation will continue and expand to attract other services of the same nature and possibly other service providers with similar behaviour.
- When the Commission decided, in Telecom Decision 97-8, to allow a CLEC to use an ILEC’s long distance call termination rate as a proxy, local competition was not yet contemplated in Northwestel’s serving territory. It was not until the issuance of Telecom Regulatory Policy 2011-771 that the Commission allowed such competition, and established for Northwestel a long distance call termination rate using the bundled CAT rate of $0.038 per minute per end (originating or terminating).
- The Commission notes that Iristel did not provide evidence that it serves all of Northwestel’s serving territory or provides service to the extent that Northwestel does. In light of the nature of the traffic that has emerged involving Iristel’s 867 NPA telephone numbers and its unnatural growth, the Commission no longer considers Iristel’s current long distance call termination rate of $0.038 per minute per end (originating or terminating) to be just and reasonable, not only because it clearly overcompensates Iristel but also because it provides an incentive for stimulation of traffic to those numbers. Therefore, it is appropriate and warranted at this time to establish a different long distance call termination rate for Iristel in the 867 NPA. If Iristel wishes to file a tariff notice for an alternative rate, along with a cost study justifying that rate, it may do so.
- While Iristel has not provided input specifically concerning what a new just and reasonable long distance call termination rate might be, the issue was raised in TCI’s application, and it was therefore open to Iristel to do so.
- To establish a just and reasonable long distance call termination rate for Iristel in the North, the Commission has considered the rate comparisons put forward by TCI. In the Commission’s view, none of the specific rates in those comparisons would be appropriate for a number of reasons, including reliance on confidential information and assumptions or implications that make those specific rates unsuitable to the present situation.
- The Commission considers Northwestel’s bundled CAT rate to be an appropriate starting point to establish a new long distance call termination rate for Iristel in the North, because both Iristel and Northwestel have a presence in the North.
- As noted in TCI’s submission, Northwestel’s bundled CAT rate of $0.038 per minute is made up of a $0.007 and a $0.024 component, plus a 25% markup. The $0.007 component comprises switching and aggregation and equal access costs.Footnote 17 The Commission considers that Iristel should be entitled to recover this component.
- The $0.024 component comprises the terrestrial and satellite toll connect rate. In the Commission’s view, Iristel is not entitled to the full amount of this component, because it does not serve the North to the same extent as Northwestel. Northwestel serves approximately 36 remote communities by satellite and 60 remote communities by terrestrial facilities, whereas Iristel serves only some of those communities using Iristel’s own facilities.
- Accordingly, the Commission determines that Iristel’s long distance call termination rate is to be adjusted to $0.0098125 per minute per end (originating or terminating). This represents (i) the switching and aggregation and equal access costs of $0.007 per minute; (ii) a portion of the terrestrial and satellite toll connect costs that is proportionate to the number of communities that Iristel currently serves; and (iii) a 25% markup, except on equal access costs. The Commission considers this rate to be just and reasonable based on the information provided by Iristel about the communities it serves.
- The Commission determines that the revised long distance call termination rate for Iristel will apply to all traffic destined to Iristel’s 867 NPA telephone numbers, whether terminated in the 867 NPA, or transited through and terminated outside the 867 NPA. For traffic destined to customers of Northwestel or other TSPs and terminated in the 867 NPA, the rate of $0.038 per minute per end (originating or terminating) will apply.
- Further, the Commission determines that Iristel’s new long distance call termination rate will be interim for a period of 90 days as of the date of this decision. If Iristel has not filed, by 16 November 2020, a tariff notice supported by a cost study consistent with the information to be provided in support of wholesale service tariff applications, the rate of $0.0098125 per minute per end (originating or terminating) will be made final, retroactive to 23 November 2018, the date on which the current rate of $0.038 per minute was made interim with the issuance of Telecom Decision 2018-432.
- Setting a long distance call termination rate specific to Iristel within Northwestel’s serving territory represents a departure from the Commission’s usual approach to rate setting for CLECs. However, the Commission considers its determination to be justified in light of the specific circumstances noted in this proceeding: the pattern of inefficient routing; unnatural traffic growth; and the nature of the market that has developed and continues to develop in the North. Furthermore, the Commission notes that, while CLECs have been allowed to reference ILEC rates, the Commission’s policy in Telecom Decision 97-8 has always been that a CLEC can have a different rate from an ILEC as long as it is justified.
Should a further proceeding be initiated to review potential new traffic stimulation activities involving Iristel’s 867 NPA telephone numbers?
Commission’s analysis and determinations
- With respect to TCI’s request for a further public proceeding to review traffic stimulation activities involving Iristel’s 867 NPA telephone numbers, the Commission considers that it has the information required to render a decision to address TCI’s application as part of the present proceeding.
- In addition, as set out in the CRTC Forecast 2020-2021, the Commission intends to undertake a review of wholesale wireline services and interconnection, in which the broader question of traffic stimulation incentives could be addressed as necessary. Therefore, the Commission considers that a separate further proceeding is not required at this time.
How should the Commission dispose of Iristel’s application for final relief?
Commission’s analysis and determinations
- The Commission considers that, given that TCI has complied with the Commission’s directions in Telecom Decision 2018-432 regarding Iristel’s request for interim relief, and has restored all trunks used to route traffic to Iristel’s telephone numbers in the 867 NPA to their state prior to 29 May 2018, the issue of final relief for Iristel is moot and no further action is required.
- The Commission reminds TSPs that it expects them to work together to resolve disputes among themselves, including with the help of the Commission’s informal dispute resolution process where necessary, rather than taking unilateral actions that contravene the Act or Commission policies.
Has either TCI or Iristel violated the Act and, if so, what measures should the Commission take?
Applicable regulatory framework
- Subsection 27(2) of the Act prohibits Canadian carriers from unjustly discriminating or giving undue or unreasonable preference toward any person, including themselves, or from subjecting any person to an undue or unreasonable disadvantage.
- Section 36 of the Act provides that except where the Commission approves otherwise, Canadian carriers shall not control the content or influence the meaning or purpose of telecommunications carried for the public.
- Section 72.001 of the Act creates a framework within which persons can be held liable for AMPs for contraventions of the Act, or of regulations or decisions made by the Commission under the Act. In Telecom Decision 2018-432, the Commission notified both Iristel and TCI that it would consider using these powers if necessary to promote compliance.
- The Commission responds to non-compliance using the most appropriate tool or tools available. AMPs are a tool that the Commission can use to promote compliance with the Act and with Commission regulations and decisions. As stated in Compliance and Enforcement and Telecom Information Bulletin 2015-111, AMPs are not used to punish and will be used where they are the most appropriate tool to obtain compliance and deter future non-compliance.
Has TCI violated the Act?
Positions of parties
- Iristel submitted that TCI had intentionally reduced capacity on certain toll transit circuits that carry TCI traffic to Iristel telephone numbers, which resulted in an overwhelming amount of congestion that caused the majority of calls from TCI end-users to certain Iristel end-users with 867 NPA telephone numbers to fail.
- In Iristel’s view, TCI’s conduct in blocking calls to those telephone numbers was an abuse of its dominant position and a violation of subsection 27(2) and section 36 of the Act; therefore, the Commission should impose AMPs on TCI to signal its disapproval of TCI’s conduct and to deter other TSPs from engaging in similar tactics.
- With respect to subsection 27(2) of the Act, Iristel submitted that TCI is discriminating unduly against Iristel, Iristel’s customers, and TCI’s end-users by using its dominant position, without fear of any consequence in the marketplace, to prevent the completion of calls to Iristel’s 867 NPA telephone numbers. Iristel noted that TCI is not blocking traffic to non-Iristel 867 NPA telephone numbers.
- Iristel submitted that section 36 of the Act prohibits a carrier from controlling content or influencing the meaning or purpose of the telecommunications it carries for the public. It argued that by blocking calls TCI is effectively making the content of those calls meaningless and is thus in contravention of section 36. Iristel noted that in Telecom Regulatory Policy 2009-657, the Commission analysed the scope of section 36 and found that, if an Internet traffic management practice resulted in the outright blocking of the delivery of content to an end-user without prior Commission approval, it would be prohibited under that section of the Act. Iristel submitted that, while the subject of its application relates to voice calls as opposed to Internet traffic, the application of the principle is the same in both cases.
- PIAC agreed with Iristel that to limit the ability of consumers to call telephone numbers in Iristel’s serving territory constitutes an exercise of control over the content of communications that is contrary to section 36 of the Act and its requirement for prior consent from the Commission.
- PIAC added that TCI has a contractual obligation to connect calls from customers with unlimited nationwide calling to all telephone numbers in Canada, including those in Iristel’s serving territory, free of charge. PIAC noted that TCI has not amended its terms of service to permit the throttling of traffic to Iristel’s territory. PIAC submitted that TCI is constrained by both federal and provincial law in when and how it can amend the terms of wireless service agreements, should it attempt to do so; furthermore, under the Commission’s Wireless Code, nationwide calling is among the “services included in the contract” and therefore cannot be changed without the customer’s informed and express consent.
- TCI submitted that its control of traffic was justified, given the renewal of traffic stimulation activities and the associated costs that it would incur if it ceased that control.
- TCI added that Iristel provided no explanation as to the nature of TCI’s alleged discrimination towards its own customers; in the absence of an explanation to which TCI might respond, Iristel’s argument must be disregarded on the grounds of procedural fairness. TCI asserted that it had treated all of its customers equally, and added that none of its customers have alleged discrimination by TCI.
- TCI submitted that it would be absurd to interpret subsection 27(2) of the Act as requiring one carrier to facilitate another carrier’s violation of subsection 27(2); yet in seeking to prevent TCI from taking measures to respond to illegal traffic stimulation, this is what Iristel has asked of the Commission.
- TCI submitted that control of interconnecting traffic and management of interconnection capacity for interconnection is consistent both with the rules for voice interconnection and with regulatory precedent regarding management of harm caused by traffic stimulation. TCI added that this is particularly true for interexchange carriers (IXCs),Footnote 18 in which capacity it purchases Iristel’s wholesale services.
- TCI submitted that (i) the long distance industry is highly competitive; (ii) IXCs have always been permitted to balance their interconnection costs with the quality of service that best positions them to compete; and (iii) there are no regulatory requirements for IXCs to meet a particular grade of service, because consumers decide, in consideration of price, what grade of service is satisfactory; in short, that market forces have made Commission scrutiny of IXC networks and interconnections unnecessary. In TCI’s opinion, if there had been such requirements for IXCs, they may not have had the freedom to experiment with developments that have served to increase competition and reduce prices for consumers. TCI added that indeed, in Telecom Decision 2017-456, the Commission relied on forbearance from the regulation of the long distance market as justification for not making Iristel repay IXCs, despite having found Iristel to be in violation of the Act.
- TCI argued that an IXC’s ability to manage its network interconnection capacity is crucial for competition and the consumer benefits it brings. TCI submitted that its actions were therefore within the rights of an IXC under normal network conditions, without artificially stimulated traffic. It argued that it is important that these rights not be compromised, even more so in the case of stimulated traffic.
- TCI submitted that its actions in response to the latest round of traffic stimulation to Iristel’s 867 NPA numbers were consistent with the practice of country code blocking, which, according to TCI, the Commission endorsed as a remedy to the problem of modem hijacking in Telecom Decision 2005-13.Footnote 19 Both in the case of modem hijacking and in the present case of traffic stimulation,
- traffic is artificially stimulated to areas with high call termination rates to the detriment of consumers and service providers;
- traffic to the destination of the stimulated traffic is controlled as a means to mitigate damage until the underlying problem is resolved; and
- consumers are temporarily inconvenienced but are not prevented from completing calls.
Commission’s analysis and determinations
- In Telecom Decision 97-19, the Commission forbore from the regulation of toll services provided by certain incumbent telephone companies but retained certain of its powers under subsection 27(2) of the Act, as prescribed in respect of the non-dominant carriers in Telecom Decision 95-19, to ensure that continued access to the incumbent telephone companies’ toll and toll-free services would be available on a non-discriminatory basis for resale and sharing.
- Under the Commission’s general approach to allegations of unjust discrimination or undue preference against a carrier, the party making the allegation must first establish the discrimination or preference. Once this is done, the onus then shifts to the respondent carrier to establish that the discrimination or preference is not unjust or undue, as required by subsection 27(4) of the Act.
- In Telecom Decision 2018-432, regarding requests for interim relief, the Commission noted that the evidence of TCI’s reduction of the capacity of some circuits used to transport traffic to Iristel’s 867 NPA telephone numbers was not in dispute.
- The Commission considers that in reducing the capacity of certain toll circuits, TCI was acting in a discriminatory manner towards Iristel, Iristel’s customers, and its own customers. Because of its actions, some TCI customers who placed calls to the 867 NPA were able to have those calls completed while others were not; and some Iristel customers were able to receive calls from TCI customers while others were not.
- With respect to TCI’s argument that its control of traffic was consistent with the blocking practices related to modem hijacking, the Commission considers that the two types of cases are not the same. In cases of modem hijacking, calls were made illegally from customers’ telephones, whereas in the case of TCI’s traffic controls, customers were making legitimate calls to telephone numbers in the 867 NPA.
- The Commission considers that TCI’s actions in reducing the capacity of certain toll circuits were unjust. While 9-1-1 calls were not affected, long distance emergency calls and long distance personal, family, or work-related calls may have been affected, particularly in view of the dependence of citizens in the North on services offered from elsewhere in Canada. A carrier’s concern that a wholesale customer is not using the service as set out in the tariff or is otherwise violating a Commission provision does not give that carrier licence to affect the traffic of its customers. There are provisions in the tariff for the cancellation of an agreement or the disconnection of a service, and there are avenues available for Commission direction to stop the offending activity. It is not open to TCI to take matters into its own hands. If carriers were permitted to do so, it could easily be done in an anticompetitive manner by carriers who have tariffs in place only because they have market power. As such, TCI has not discharged its burden of establishing that such discrimination was not unjust or undue, as required by subsection 27(4) of the Act. Therefore, the Commission finds that TCI has unjustly discriminated against Iristel, Iristel’s customers, and its own customers, contrary to subsection 27(2) of the Act.
- Given the conclusions above with respect to a violation of subsection 27(2) of the Act, the Commission can address TCI’s behaviour without exploring section 36 in this instance.
Has Iristel violated the Act?
Positions of parties
- RCCI submitted that if the Commission finds that Iristel is engaged in traffic stimulation activities in contravention of the Commission’s determinations in Telecom Decision 2017-456 or of subsection 27(2) of the Act, or if the Commission determines that Iristel has been attempting to hide such traffic stimulation activities, then circumstances exist that should give rise to a significant AMP against Iristel.
Commission’s analysis and determinations
- In Telecom Decision 2017-456, the Commission stated that when considering subsection 27(2) of the Act and the telecommunications policy objectives set out in paragraphs 7(a), (b), (c), and (h),Footnote 20 it has an interest in ensuring that traffic is efficiently routed and that the Commission’s regulatory rules are not being used for arbitrage purposes, which would be contrary to the Act.
- The Commission considers that, notwithstanding the lack of evidence of revenue-sharing agreements on the record of this proceeding, calls from TCI customers destined to radio streaming and other services that are located in the United States or elsewhere are being routed via the 867 NPA. The inefficient routing of such traffic within the forborne toll interconnection regime is not consistent with the policy objectives cited above.
- The Commission stated in Telecom Decision 2017-456 that traffic stimulation may be acceptable; however, depending on the circumstances, this may give certain parties an undue preference and subject others to a corresponding undue or unreasonable disadvantage, in contravention of subsection 27(2) of the Act. Regarding Iristel’s argument that there is nothing wrong with an end-user choosing to have an Iristel 867 NPA telephone number, the Commission notes that, in allowing the use of 867 NPA telephone numbers by customers based in distant locations, Iristel is increasing the connection costs of other carriers and causing economic harm, while generating revenue for itself through the resulting long distance call termination charges. In the Commission’s view, Iristel is thus granting itself an advantage and subjecting IXCs to a corresponding unreasonable disadvantage. As such, the Commission considers that Iristel has not provided justification to discharge its burden of establishing that such advantage is not undue, as required by subsection 27(4) of the Act. Accordingly, the Commission finds that Iristel is again granting itself an undue advantage, contrary to subsection 27(2) of the Act.
- As a result of TCI’s and Iristel’s violations of subsection 27(2) of the Act, the Commission is initiating a follow-up proceeding, in Telecom Notice of Consultation 2020-269, to consider the appropriateness of imposing AMPs on both companies.
- In arriving at the determinations in this decision, the Commission has considered the 2006 Policy Direction and the 2019 Policy Direction.Footnote 21
- The 2006 Policy Direction requires that the Commission rely on market forces to the maximum extent feasible and regulate, where there is still a need to do so, in a manner that interferes with market forces to the minimum extent necessary to meet the policy objectives of the Act; and that the Commission, when relying on regulatory measures, specify the policy objective that is advanced by those measures. The Commission considers that that its determinations in this decision serve to further the achievement of the policy objectives set out in paragraphs 7(a), (b), (c), (f), and (h) of the Act.Footnote 22
- With respect to regulatory measures that are of a social or non-economic nature, the 2006 Policy Direction requires that the Commission should, to the greatest extent possible, implement measures in a symmetrical and competitively neutral manner. In compliance with subparagraph 1(b)(ii) of the 2006 Policy Direction, the Commission considers that the measures set out in this decision would neither deter economically efficient competitive entry into the market nor promote economically inefficient entry.
- The 2019 Policy Direction provides that when the Commission is exercising its powers and performing its duties under the Act, it should consider how its decisions can promote competition, affordability, consumer interests, and innovation.
- In compliance with subparagraph 1(a)(iii) of the 2019 Policy Direction, the Commission considers that the regulatory measure set out above, specifically, the setting of an interim long distance call termination rate for Iristel, ensures that affordable access to high-quality telecommunications services is available in all regions of Canada and advances the policy objectives referenced above, and furthermore, that an orderly telecommunications system which allows all calls to be routed and completed in an efficient manner is in the public interest.
- Iris Technologies Inc. and TELUS Communications Inc. – Applications for interim relief regarding the termination of traffic to certain 867 numbering plan area telephone numbers, Telecom Decision CRTC 2018-432, 23 November 2018
- Rogers Communications Canada Inc. – Allegation of traffic stimulation by Iris Technologies Inc. and Iristel Inc., Telecom Decision CRTC 2017-456, 20 December 2017
- Guidelines regarding the general administrative monetary penalties regime under the Telecommunications Act, Compliance and Enforcement and Telecom Information Bulletin CRTC 2015-111, 27 March 2015
- Northwestel Inc. – Review of regulatory framework, Telecom Regulatory Policy CRTC 2011-771, 14 December 2011
- Review of the Internet traffic management practices of Internet service providers, Telecom Regulatory Policy CRTC 2009-657, 21 October 2009
- Union des consommateurs, Public Interest Advocacy Centre and Option Consommateurs – Automatic dialers and modem hijacking, Telecom Decision CRTC 2005-13, 9 March 2005
- Forbearance – Regulation of Toll Services Provided by Incumbent Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997; as amended by Telecom Decision CRTC 97-19-1, 9 March 1998
- Local competition, Telecom Decision CRTC 97-8, 1 May 1997
- Forbearance – Services Provided by Non-Dominant Canadian Carriers, Telecom Decision CRTC 95-19, 8 September 1995
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