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Telecom Decision CRTC 2004-21
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Ottawa, 29 March 2004 |
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EastLink vs. Aliant Telecom – Compliance with bundling rules and
Public Notice 2003-1-1
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Reference:
8622-E17-200308123 |
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The Commission finds that Aliant Telecom
Inc.'s (Aliant Telecom's) value packages are bundles that require tariff
approval. The Commission directs Aliant Telecom to immediately cease
offering any bundles that include tariff services, such as its value
packages, unless and until such time as the Commission may grant tariff
approval. The Commission further directs, in the event that Aliant Telecom
wishes to offer any such bundles, the company to file, within 21 days of
the date of this decision, proposed tariffs with an imputation test for
any such bundles. Aliant Telecom may continue to provide such bundles to
existing customers who are receiving such services on the date of this
decision for 21 days following the date of this decision and, in the
event that Aliant Telecom files proposed tariffs, until the Commission
issues its decision in respect of such tariffs. Upon the expiry of the
21 day period, in the event that Aliant Telecom does not file proposed
tariffs associated with the bundles being provided to existing
customers, Aliant Telecom must cease offering and providing such bundles
to existing customers. In the event that Aliant Telecom files a proposed
tariff relating to the bundles in question, following the issuance of
the Commission's decision, Aliant Telecom may only continue to offer and
provide such services to existing customers in accordance with the
rates, terms and conditions of an approved tariff. |
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The application
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1. |
The Commission received an application on
26 June 2003 from Bragg Communications Inc. carrying on business as
EastLink (EastLink), filed pursuant to Part VII of the CRTC
Telecommunications Rules of Procedure. EastLink alleged that Aliant Telecom
Inc. (Aliant Telecom) contravened the rules established by the
Commission for bundling regulated and forborne telecommunications
services. EastLink further alleged that Aliant Telecom also contravened
Review of promotions, Telecom Public Notice CRTC
2003-1-1, 13
March 2003 (Public Notice 2003-1-1), in which the Commission suspended
incumbent local exchange carriers' (ILECs) applications for any
promotion involving local exchange service pending the outcome of the
proceeding established in Review of winback promotions, Telecom
Public Notice CRTC 2003-1, 15 January 2003 (Public Notice
2003-1). |
2. |
EastLink requested that the Commission: |
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a) order Aliant Telecom to cease offering customers any of its
services currently offered at bundled or promotional rates, including
Internet access promotions;
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b) provide a remedy that would deter any future non-compliant
activity by Aliant Telecom in offering any bundles or promotions that
included any local exchange service;
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c) investigate instances of Aliant Telecom's violations of the
Telecommunications Act (the Act) and Commission rulings in regard
to bundling and promotions that are currently being offered; and
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d) appoint inspectors pursuant to section 71 of the Act to verify
Aliant Telecom's compliance with any determination that may result
from EastLink's Part VII application.
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Process
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3. |
The Commission received comments from
Call-Net Enterprises Inc. (Call-Net) on 16 July 2003, the Canadian Cable
Television Association (the CCTA) and Allstream Corp. (Allstream) on
25 July 2003, the Independent Members of the Canadian Association of
Internet Providers (IMCAIP) and Aliant Telecom, both on 28 July 2003. |
4. |
EastLink filed reply comments on 7 August
2003. |
5. |
Aliant Telecom filed a submission on 20
August 2003 claiming that EastLink had introduced new information and
allegations in its reply comments that it wished to address. On the same
date, EastLink filed a letter with the Commission stating that Aliant Telecom's
submission was out of process and requested that the Commission disallow
it, or that EastLink be allowed to respond in full if Aliant Telecom's
submission was to be considered. On 8 September 2003, EastLink was
advised that it could respond to Aliant Telecom's submission. EastLink
filed its response on 18 September 2003. |
6. |
On 4 November 2003, Aliant Telecom was
requested to respond to an interrogatory. The Commission received Aliant Telecom's
response on 13 November 2003. |
7. |
On 24 November 2003, EastLink filed
additional comments and requested disclosure of all of the confidential
information filed by Aliant Telecom in its response to the interrogatory
posed to Aliant Telecom on 4 November 2003. Aliant Telecom responded on
4 December 2003 stating that EastLink's request for disclosure should be
dismissed. |
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Background
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8. |
In Local competition, Telecom
Decision CRTC 97-8, 1 May 1997 (Decision
97-8), the Commission permitted
local exchange service to be bundled with forborne services. These
bundles were to be submitted to the Commission for approval. |
9. |
In Joint marketing and bundling,
Telecom Decision CRTC 98-4, 24 March 1998 (Decision 98-4), the
Commission summarized the bundling rules as follows: |
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… the Commission in Review of regulatory framework, Telecom
Decision CRTC 94-19, 16 September 1994, stated that "the term bundling
generally refers to a situation where one rate covers a number of
service elements", and that bundling includes "situations where there
may be separate rate elements for each service element, but a number
of service elements are aggregated for purposes of applying volume
discounts, with the result that the discount available is greater than
it would be were the service elements not aggregated". In
Forbearance - Regulation of Toll Services Provided by Incumbent
Telephone Companies, Telecom Decision CRTC 97-19, 18 December 1997
and Stentor Resource Centre Inc. - Forbearance From
Regulation of Interexchange Private Line Services, Telecom
Decision CRTC 97-20, 18 December 1997, the Commission also described
bundling as the inclusion of different services or service elements
under a rate structure. The Commission noted that this rate structure
may be a single rate, a set of rates for various service elements,
and/or rates for one or more service elements which are dependent on
the usage of other services.
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10. |
In GT Group Telecom Services Corp. v.
Bell Canada – Non-compliance with Bundling Rules, Telecom Decision
CRTC 2002-58, 20 September 2002 (Decision
2002-58), the Commission found
that the provision by Bell Canada of long distance rebates, that are
contingent on a customer obtaining the company's local exchange service,
involves a service bundle requiring tariff approval from the Commission. |
11. |
In Call-Net Enterprises Inc. – Request
to lift restrictions on the provision of retail digital subscriber line
Internet services, Telecom Decision CRTC
2003-49, 21 July 2003
(Decision 2003-49), the Commission noted that retail digital subscriber
line (DSL) and local exchange services were not provided under a single
rate structure and there was no financial benefit to taking the two
services. |
12. |
In Public Notice
2003-1-1, the Commission
suspended consideration of ILEC promotions until a decision was issued
on the matters raised in Public Notice
2003-1. |
13. |
In Measures with respect to incumbent
telephone company regulatory compliance, Telecom Public Notice CRTC
2003-4, 10 April 2003 (Public Notice
2003-4), the Commission announced
that pursuant to section 71 of the Act, it was designating inspectors
for the purpose of verifying compliance by the ILECs with its decisions
and the Act. The Commission noted that initial verification would focus
on compliance with subsections 25(1) and 27(1) and (2) of the Act. |
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Position of parties
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EastLink
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14. |
EastLink submitted that Aliant Telecom was
providing service bundles containing regulated (or tariff) services and
services which the Commission had forborne from regulating
(forborne services) without the required tariff approval. EastLink
further submitted that Aliant Telecom's promotions of service bundles
that include high-speed Internet service, which also require a customer
to take Aliant Telecom's local exchange service, were in contravention
of the restrictions on promotions imposed by the Commission in Public
Notice 2003-1-1. In EastLink's view, Aliant Telecom's actions were
contrary to section 24, and subsections 25(1) and 27(2) of the Act. |
15. |
EastLink provided several examples of
Aliant Telecom's advertised bundles or value packages. EastLink
indicated that one example was a newspaper advertisement for two
different bundles: one bundle consisted of high-speed Internet, Mobility
Plan, unlimited calling features, and local telephone service for $79.00
per month, compared to a regular price for these services of $118.25 per
month; the other bundle consisted of high-speed Internet, unlimited
calling features, evening and weekend long distance plan, and local
exchange service for $89.00 per month, compared to a regular price of
$121.35 per month. |
16. |
EastLink noted that while Aliant Telecom's
advertising material indicated in fine print "services available on a
standalone basis, with no requirement to take Aliant Telecom's local
service and/or calling features," the advertisements always included the
provision that customers subscribing to services such as high-speed
Internet service were required to subscribe to Aliant Telecom's local
exchange service or where it is provided through a local Aliant Telecom
reseller. Furthermore, EastLink argued that Aliant Telecom had provided
no information on the discounted prices for the forborne services in
these or other advertising materials. |
17. |
EastLink submitted that the combined prices
for all the services in Aliant Telecom's bundles were much lower than
the price of each service, thus, a discount was being provided when the
services were taken as a package. EastLink further submitted that Aliant Telecom
failed to show the discounted prices for the individual services in the
advertised bundles because the price reduction only applied where the
customer selected the bundle that included the tariff services. EastLink
submitted that not only were the packages bundles, but any offer for
high-speed Internet service was also a bundle, since no person could
take the high-speed Internet service without also taking Aliant Telecom's
local exchange service. |
18. |
EastLink noted that Aliant Telecom's
advertising contained statements that the offer was available for a
limited time and subject to change without notice, or that the offer was
a special offer or was not available in all areas. EastLink submitted
that these statements illustrated that Aliant Telecom's offers were
promotions, and were therefore in contravention of the suspension on
promotions imposed by the Commission in Public Notice
2003-1-1. |
19. |
EastLink noted that one of the Internet
services listed on Aliant Telecom's website was only available to new
residential customers who committed to a 12-month contract and where
technology and availability permitted. EastLink submitted that this was
clearly a winback promotion targeted at Aliant Telecom's competitors.
EastLink also submitted that it mattered little that the promotion was
only for a forborne service since Aliant Telecom was able to tie its
local exchange service with each high-speed Internet service order. In
EastLink's view, these promotions for discounted pricing amounted to a
12-month commitment for the local exchange service as well as high-speed
Internet service. EastLink submitted that these customers were therefore
no longer accessible to EastLink for its local exchange service within
or after that year. |
20. |
EastLink further submitted that Aliant Telecom's
marketing of promotions in areas where EastLink was about to provide
local exchange service had the potential to cause direct harm to
EastLink as it pre-empted EastLink's ability to acquire local exchange
customers when its local exchange service was launched. |
21. |
EastLink stated that given Aliant Telecom's
disregard for its regulatory obligations by refusing to apply to the
Commission for approval of its tariffs for bundled services and
promotions, the only appropriate remedy was to prohibit Aliant Telecom
from offering any bundles that included local exchange service. EastLink
further submitted that the only way to ensure that Aliant Telecom
complied with the Commission's determinations, should the Commission
order the relief EastLink requested, was to perform an audit to confirm
that existing customers did not continue to receive non-compliant
bundles and promotions. |
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Intervener comments
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22. |
Call-Net, the CCTA, Allstream and IMCAIP
supported EastLink's application. |
23. |
Call-Net noted its own Part VII application
filed with the Commission on 17 January 2003. In its application,
Call-Net requested that the Commission direct ILECs to continue to
provide retail DSL service on a stand-alone basis to customers who
switched to a different local service provider where the local service
provider still utilized the ILECs' local loops1. |
24. |
The CCTA submitted that ILECs should not be
permitted to bundle forborne services that required customers to
subscribe to local exchange service, even for technical reasons. |
25. |
In the CCTA's view, any bundle that
included a local monopoly service in a manner that locked in customers
or reduced incentives for a customer to switch to another service
provider might be anti-competitive. The CCTA stated that it was no
longer appropriate to wait until the ILECs' activities had been found to
be non-compliant and/or damaging to the development of a competitive
marketplace before acting, given that the ILECs had been found in the
past to be providing services without tariff approval, or in
contravention of the Act. The CCTA urged the Commission to consider the
designation of inspectors to verify compliance with the prohibition on
bundling. |
26. |
Allstream submitted that the root of
EastLink's application demonstrated the need for Commission rulings on
the follow-up proceedings to Decision 2002-58 and Regulatory
safeguards with respect to incumbent affiliates, bundling by Bell Canada
and related matters, Telecom Decision CRTC
2002-76, 12 December
2002. |
27. |
IMCAIP submitted that Aliant Telecom's
conduct undermined competition in the local exchange service market. |
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Aliant Telecom's comments
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28. |
Aliant Telecom submitted that EastLink's
application should be dismissed. In Aliant Telecom's view, EastLink's
claims of anti-competitive behaviour on the part of Aliant Telecom were
completely unfounded. Aliant Telecom submitted that the foundation of
the EastLink complaint was either a misunderstanding, or a deliberate
misinterpretation, of the bundling restrictions imposed on the ILECs by
the Commission. Aliant Telecom submitted that its value packages and
advertising were in full compliance with the Commission's rulings. |
29. |
Aliant Telecom stated that its value
packages were really just two separate bundles being advertised under a
single price. One bundle consisted only of forborne services and the
other bundle was an approved tariff service bundle. Aliant Telecom
indicated that the advertised $79.00 per month bundle consisted of a
$37.05 per month bundle of forborne services and a $41.95 per month
bundle of regulated services. Aliant Telecom further indicated that the
advertised $89.00 per month bundle consisted of a $47.05 per month
bundle of forborne services and a $41.95 per month bundle of regulated
services. Aliant Telecom stated that the price for each of these bundles
appeared separately on customers' accounts, with no additional discount
or any other advantage. Aliant Telecom indicated that the total savings
between the advertised price of its value packages and the regular price
was the savings from the forborne services bundle added to the savings
from the regulated services bundle. Aliant Telecom submitted that there
was no aggregation of services to provide an additional discount or
any other advantage. |
30. |
Aliant Telecom indicated that its
advertisements included a note which stated that "internet, wireless and
long distance packages are available on a standalone basis with no
requirement to take Aliant's local service and/or calling features".
Aliant Telecom further indicated that the price of each bundle did not
vary with the combination of bundles taken by a customer. Aliant Telecom
stated that depending on a customer's needs, as determined during the
sales process, the best combination of tariff and forborne services
bundles is presented to a customer. |
31. |
Aliant Telecom submitted that of the
customers who had signed up to different value package combinations, a
certain number of them (number filed in confidence) had not taken the
more inclusive bundle or the local services bundle, and had simply taken
the forborne services bundle. Additionally, a number of the customers
taking the local services bundle had not taken the forborne services
bundles of high-speed Internet/mobility or high-speed Internet/long
distance. Aliant Telecom claimed this made it very clear that customers
had no misconception about Aliant Telecom's advertising and were indeed
subscribing to stand-alone packages that met their needs. |
32. |
Aliant Telecom submitted that its
advertising was intended to bring its value proposition to customers.
Aliant Telecom submitted that the consumer market in its territory was
extremely competitive and customers wanted a simple and accurate means
of comparing suppliers and evaluating purchase alternatives. Aliant Telecom
stated that its advertisements did not constitute bundles under the
regulatory rules. |
33. |
Aliant Telecom stated that the tariff
services bundle was available for resale. Aliant Telecom indicated that
customers, who subscribed to local exchange service from a reseller,
could subscribe to the forborne services bundle at the same rate as
Aliant Telecom charged its local exchange service customers. Aliant Telecom
further submitted that any competitor, including EastLink, could resell
the Aliant Telecom local exchange service combined with their own
forborne service bundle(s) under their own branding. Aliant Telecom
argued that for it to do the same did not constitute a breach of the
bundling rules. |
34. |
Aliant Telecom submitted that EastLink
misunderstood the Commission's direction on promotions in Public Notice
2003-1-1. Aliant Telecom stated that the Commission suspended
consideration of ILEC tariff filings that proposed any discount from
tariff rates in the local exchange services market. Aliant Telecom
submitted that the Commission has not prohibited the ILECs from
advertising, marketing or promoting their services as long as those
promotions were fully compliant with existing tariff rates, terms and
conditions. Aliant Telecom submitted that the terms such as "special
offer", "offer available for a limited time" and "subject to change
without notice" included in its advertisements only applied to the
forborne services bundle included in the value packages. The regulated
services bundle was offered in accordance with a tariff. |
35. |
Aliant Telecom disputed EastLink's claim
that Aliant Telecom was targeting EastLink in an anti-competitive way.
Aliant Telecom noted that EastLink had based this claim on the phrase:
"services are not available in all areas". Aliant Telecom indicated that
the full wording of this phrase was: "Customers subscribing to services
such as High-Speed Internet must subscribe to a local service that uses
the Aliant network. Not available in all areas." Aliant Telecom
submitted that this statement meant that high-speed Internet service was
not available in all areas as the roll-out of this service was based on
various economic criteria that must be satisfied. Further, where
high-speed Internet service was not available, dial-up Internet service
was offered in a forborne services bundle. |
36. |
Aliant Telecom submitted that in Decision
2003-49, the Commission determined that high-speed Internet service was
not a bundle, despite the technical requirement to subscribe to an ILEC-provisioned
local loop. Aliant Telecom noted in that decision that the Commission
further stated that although DSL was provided only to ILEC local
exchange service customers, retail DSL Internet service and local
exchange service were not being offered under a single rate structure,
and no financial benefits were available to customers for subscribing to
both services. The Commission therefore found that under such conditions
the provision of retail DSL Internet service and local exchange service
by the ILECs did not require tariff approval. |
37. |
Aliant Telecom submitted that the use of
contract rates for its high-speed Internet service was a standard
offering in competitive markets such as Internet, toll and wireless
services. Aliant Telecom stated that contracts were legitimate business
arrangements that saved both the supplier and the customer money. Aliant Telecom
contended that EastLink was free to offer one year contracts, or resell
Aliant Telecom's local exchange service until EastLink's own local
exchange service was rolled out. |
38. |
Aliant Telecom submitted that the evidence
did not support the need to appoint inspectors to verify its compliance
with Commission rulings. |
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EastLink's reply comments
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39. |
EastLink contested Aliant Telecom's
assertion that the local exchange service market in the Atlantic was
competitive given that Aliant Telecom had a 97% market share. EastLink
submitted that competition in the Atlantic provinces was not at
sufficient levels to justify giving Aliant Telecom free reign to target
competitors' local exchange customers or offer bundles that had the
effect of stalling the growth of competitors' local exchange services. |
40. |
EastLink submitted that Aliant Telecom's
bundles had the effect of binding its monopoly local exchange service to
other services in the bundle and therefore, reduced the consumer's
choice of local exchange service provider. EastLink submitted that this
tied arrangement raised the cost of entry for competitors and increased
barriers to the growth of competitive service providers. The tied
services presented a larger decision to a customer, since a customer
wishing to move to another local exchange service provider must move two
services (local plus high-speed Internet service) at the same time. |
41. |
EastLink submitted that the examples
provided in its application did not support Aliant Telecom's explanation
that the value packages were a bundle of two bundles. In EastLink's
view, this explanation was inconsistent with the plain reading of the
advertisements. EastLink argued that the advertisements supported
EastLink's position that the description of a "bundle of bundles" had
been contrived by Aliant Telecom to claim compliance with the bundling
rules. |
42. |
EastLink noted that the $37.05 and $47.05
prices for the forborne services bundles were not advertised anywhere.
EastLink submitted that Aliant Telecom had provided no information in
advertising or company brochures on the individual discounted rates for
services that comprised the bundles. In EastLink's view, this was
because the forborne services bundle did not exist. To be a forborne
services bundle, it would have to include only forborne services. |
43. |
EastLink noted that one of Aliant Telecom's
value packages included long distance service. EastLink noted that the
tariff services bundle included 30 minutes of long distance calling,
with additional per minute charges at various per minute rates depending
on time of day and destination. However, the forborne services bundle
also included long distance service. EastLink submitted that the long
distance component of the forborne services bundle overrides the long
distance component of the regulated services bundle. EastLink suggested
that it was illogical that Aliant Telecom would intentionally create a
bundle of bundles where one part of the total bundle overrides part of
the regulated services bundle. In EastLink's view, this overlap in
service offered under both parts of the "bundle of bundles" suggested
that the way Aliant Telecom characterized the offering in this
proceeding was a fabrication. EastLink submitted that consumers were
being sold a single bundle, not a bundle of bundles. |
44. |
EastLink noted that the advertisement for
the $79.00 value package, which included high-speed Internet service,
Mobility iMove plan, unlimited SmartTouch calling features and local
exchange service, included the following provision: "Must be a loyal
Aliant long distance customer". EastLink questioned which one of the two
bundles within this package required the customer to be a loyal long
distance customer. |
45. |
EastLink noted that in Decision
2003-49,
the Commission found that the combination of high-speed Internet service
with local exchange service is not a bundle if no financial benefit is
offered for the group of services. EastLink submitted that an offering
of Internet service at stand-alone market prices with a requirement to
take local exchange service in order to obtain Internet service was not
a bundle. However, if that same Internet service was offered as part of
a forborne service package at a reduced price, and local exchange
service had to be taken in order to get the reduced pricing, then such
an offering was a bundle that included a regulated service requiring
tariff approval. |
46. |
EastLink submitted that Aliant Telecom's
argument that it cannot "unbundle" its Internet service from local
exchange service for technical reasons was irrelevant. In EastLink's
view, if the Commission found that the Internet service and local
exchange service were a bundle absent any technical limitations, then it
was a bundle notwithstanding the technical limitations. EastLink
submitted that any technical limitations should not exempt Aliant Telecom
from any obligation to file a tariff where every other ILEC would be
required to file such a tariff. |
47. |
EastLink submitted that Aliant Telecom's
suggestion that EastLink resell Aliant Telecom's local exchange service
bundles was inappropriate since EastLink was a facilities-based service
provider. According to EastLink, this suggestion was inconsistent with
the Commission's interest in the growth and sustainability of
facilities-based competition. |
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Aliant Telecom's further comments
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48. |
Aliant Telecom submitted that EastLink's
contention that Aliant Telecom's forborne services bundles, specifically
those including high-speed Internet service, reduced customer choice,
was incorrect. Customers of competitive local exchange carriers (CLECs)
that do not offer high-speed Internet services had access to Aliant Telecom's
high-speed Internet service and its forborne services bundles, which
included high-speed Internet service, as long as the access line was DSL
capable. Aliant Telecom added that customers of CLECs had access to
other service providers who offered services that competed with the
components of Aliant Telecom's forborne services bundles. |
49. |
Aliant Telecom submitted that market share
information was not a factor in disposing of EastLink's application.
Nevertheless, Aliant Telecom stated the 97% market share number used by
EastLink was misleading in that it was out of date and used out of
context. In Aliant Telecom's view, this number suggested that EastLink
had only achieved a 3% share of the market in the areas where it
provided local exchange service. Aliant Telecom argued that the relevant
criteria for assessing market share numbers were the markets where CLECs
had chosen to provide service, namely, in the major urban centres in
Nova Scotia and Prince Edward Island. Aliant Telecom noted that EastLink
had mentioned in the media that it had achieved penetration rates of
25-30%. |
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EastLink's further comments
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50. |
EastLink submitted that an existing Aliant Telecom
customer with both high-speed Internet service and local exchange
service could not obtain EastLink's local exchange service without also
moving its high-speed Internet service off of the Aliant Telecom
network. EastLink further submitted that many customers were reluctant
to make this change since it would mean the loss of their current e-mail
address. |
51. |
EastLink submitted that it had not
misstated Aliant Telecom's market share across the four Atlantic
provinces. EastLink stated that the market share information came from
Aliant Telecom's summary of a presentation made to its shareholders on
14 May 2003. EastLink agreed that the issue of market share was not
relevant to the issue of whether Aliant Telecom's bundles were compliant
with the current regulatory rules. EastLink contended that market share
information did become relevant in an environment where the regulations
and Commission rulings were disregarded. In EastLink's view, it was
important that the existing rules be maintained and enforced so that
competition could continue to develop. |
52. |
EastLink submitted that while the copies of
bills filed by Aliant Telecom might show the forborne services bundle on
a separate line, they all included a tariff service. EastLink argued
that this information did not establish that the forborne services
bundle was available on a stand-alone basis. EastLink submitted that it
had not seen any evidence that customers could purchase the forborne
services bundle without also being required to take local
exchange service. |
53. |
EastLink submitted that through the
requirement to purchase local exchange service, Aliant Telecom was able
to benefit from reducing the price of its bundles, offering savings on
the basis that the local exchange service was sold with the package. In
support of its argument, EastLink indicated that the billing summary
provided by Aliant Telecom showed a line for "local and Internet current
charges" and a separate line for the mobility charges. |
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Commission analysis and determination
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54. |
EastLink argued that Aliant Telecom's
advertised bundles were one bundle that combined forborne services with
tariff services and, therefore, required Commission approval. |
55. |
Aliant Telecom argued that its advertised
packages consisted of two separate stand-alone bundles that did not,
merely because they were being offered together under one price, require
Commission approval. |
56. |
In Decision 98-4, the Commission concluded
that bundled services including one or more tariff service elements and
services that were the subject of Review of bundling and joint
marketing restrictions, Telecom Public Notice CRTC
97-21, 6 June
19972, must receive prior Commission approval. |
57. |
In Decision 2003-49, the Commission stated
that bundling exists where a customer derives a financial benefit from
acquiring more than one service from an ILEC that is greater than the
benefit that would be available to the customer if the services were
bought separately from the ILEC. |
58. |
In the Commission's view, a suite of
services is a bundle when those services are grouped together under a
single rate or a single rate structure, and there is a financial benefit
inherent in the single rate or single rate structure. As stipulated in
Decision 98-4, when such a bundle includes one or more tariff service
elements, the bundle must receive prior Commission approval. |
59. |
The Commission notes the advertising and
promotional material filed by EastLink for Aliant Telecom's value
packages offered both tariff services (local exchange service and
calling features) and forborne services (high-speed Internet, long
distance and cellular services) in various optional bundles under a
single price. For instance, EastLink provided promotional material on
several value packages priced at $79.00, $89.00 and $99.00, with a
regular price of $118.25, $121.35 and $141.35 respectively. The
Commission further notes that the single price for each suite of
services represents a significant discount from the sum of the regular
prices for the individual services included. |
60. |
Aliant Telecom argued that the prices of
its value packages are merely the sum of two separately available
bundles. The total savings between the advertised price of its value
packages and the regular price is, according to Aliant Telecom, the
savings from the forborne services bundle added to the savings from the
tariff bundle. |
61. |
In support of its argument, Aliant Telecom
noted that the wording at the bottom of its advertisements stated:
"internet, wireless and long distance packages are available on a
standalone basis with no requirement to take Aliant's local service
and/or calling features". In addition, Aliant Telecom noted that the
value packages appeared on customers' bills as two separate lines, one
for the tariff bundle and the other for the forborne services bundle. |
62. |
Aliant Telecom was asked to provide
additional documentation (such as copies of marketing material,
brochures, order or contract forms, and price lists) demonstrating that
the forborne services bundles included in Aliant Telecom's value
packages were separately available. In response, Aliant Telecom provided
a table titled "Reference Guide" that Aliant Telecom claimed is used by
its customer sales representatives. This table listed information on the
tariff bundles and the forborne services bundles that, according to
Aliant Telecom, together comprise the value packages. Aliant Telecom
also provided representations of what it referred to as internal order
screens indicating the component bundles of the value packages,
consisting of the tariff bundle3 (e.g. PrimePak, as named by Aliant
Telecom) and the forborne services bundle under the name "Aliant Telecom
Connect & Save promo". Aliant Telecom also filed several copies of
customer invoices showing separate line items for the "Connect & Save"
Internet services bundles and the "PrimePak" tariff bundles. The
Commission notes that three of the samples show that the "Connect &
Save" Internet bundles were combined with various regulated bundles. |
63. |
The Commission notes that one of the
representations referred to by Aliant Telecom as an internal order
screen appears to show that the "Connect & Save" Internet services
bundle was purchased without a PrimePak regulated services bundle. The
Commission notes that the document is not a customer invoice and it is
not clear to the Commission what the document actually represents or
demonstrates. In any event, it appears that local exchange service was
apparently ordered on that form. Further, the Commission notes that, if
there was a customer invoice demonstrating that the "Connect & Save"
Internet bundle was purchased on a stand-alone basis, for example
without a regulated services bundle or regulated service, Aliant Telecom
could have provided one. |
64. |
The Commission notes that a company might
separate the cost of a bundle of services into two component prices on
the customer invoice for any number of business or administrative
reasons. The Commission finds that the invoices provided do not
establish that the forborne "bundle" of services is in fact offered or
provided on a stand-alone basis. |
65. |
In the Commission's view, the figure filed
in confidence by Aliant Telecom representing the percentage of customers
who had taken a tariff bundle but had not taken the forborne services
bundle which included high-speed Internet service, does not demonstrate
that the forborne services are offered or provided on a stand-alone
basis. The Commission considers that it merely shows that some customers
only signed up for the tariff bundle and chose not to take high-speed
Internet services. |
66. |
Furthermore, the Commission considers that
the figure filed in confidence by Aliant Telecom for customers who had
taken a forborne service "bundle" but who did not subscribe to the
particular advertised tariff bundle is also not conclusive. This figure
only demonstrates that a certain percentage of customers did not take
tariff bundle # 3, in item 300, Residential Single-Line Access Bundle,
in combination with the forborne service "bundles". In the Commission's
view, it does not demonstrate that customers did not take one of the
other tariff bundles in item 300 or that the forborne service bundle is
offered or provided on a stand-alone basis. |
67. |
EastLink argued that there is an overlap in
the long distance service component of the tariff bundles and the
forborne bundles that apparently combine to make the value package
offerings. EastLink submitted that the tariff and forborne services
bundles are merged in the value packages and that they are not as easily
separated as suggested by Aliant Telecom. The tariff services bundle
includes 30 minutes of long distance calling within Canada, while the
value packages include 200 daytime calling minutes and free calling
within Canada on evenings and week-ends. The Commission agrees that
there is an apparent overlap in the long distance component of the value
package offerings. The Commission considers that it can be implied that
the two parts of the value packages are merged and not as readily
separated as suggested by Aliant Telecom. The Commission considers that
merging the service offerings modifies the tariff bundles in that the
200 long distance minutes included in the value packages in essence
replaces the 30 minutes long distance calling of the regulated services
bundle. This therefore modifies the tariff bundle. The Commission
considers that a modification to the tariff bundle requires Aliant Telecom
to obtain Commission approval of the bundle. |
68. |
The Commission notes that Aliant Telecom
did not provide any promotional brochures or other advertising promoting
the forborne "bundle" of services on a stand-alone basis. The Commission
notes that the "bundle" of forborne services within the value package is
priced significantly below the stand-alone prices for those services. It
appears to the Commission that this is likely because the "bundle" is in
fact only offered in conjunction with tariff services. In the
Commission's view, there is significant uncertainty that the "bundle" of
forborne services is only provided in conjunction with tariff services.
In the Commission's opinion, when all of the services are offered
together under the value packages, the services are offered at a single
bundled rate that is less than the sum of the stand-alone rates of the
services in question. |
69. |
In light of the foregoing, the Commission
considers that the evidence on the record is insufficient to support
Aliant Telecom's position that the forborne services "bundle" is in fact
offered or provided on a stand-alone basis. The Commission finds that
Aliant Telecom's value packages are bundles that consist of tariff and
forborne services with a financial benefit to the customer, and thus
require prior Commission approval. |
70. |
The Commission directs Aliant Telecom
to immediately cease offering any bundles that include tariff services,
such as its value packages, unless and until such time as the Commission
may grant tariff approval. The Commission further directs, in the event
that Aliant Telecom wishes to offer any such bundles, the company to
file, within 21 days of the date of this decision, proposed tariffs with
an imputation test for any such bundles. Aliant Telecom may continue to
provide such bundles to existing customers who are receiving such
services on the date of this decision for 21 days following the date of
this decision and, in the event that Aliant Telecom files proposed
tariffs, until the Commission issues its decision in respect of such
tariffs. Upon the expiry of the 21 day period, in the event that Aliant Telecom
does not file proposed tariffs associated with the bundles being
provided to existing customers, Aliant Telecom must cease offering and
providing such bundles to existing customers. In the event that Aliant Telecom
files a proposed tariff relating to the bundles in question, following
the issuance of the Commission's decision, Aliant Telecom may only
continue to offer and provide such services to existing customers in
accordance with the rates, terms and conditions of an approved tariff. |
|
Restrictions on promotions
|
71. |
In regard to the question of whether Aliant Telecom's
value packages are promotions and therefore contravene the suspension on
promotions imposed by the Commission in Public Notice
2003-1-1, the
Commission considers that the main compliance issue relates to whether
tariff approval is required for the value packages. In Public Notice
2003-1-1, the Commission amended its direction in Public Notice
2003-1
to read "… will suspend consideration of applications for ILEC
promotions in the local wireline market until a decision is issued on
the matters raised in this Public Notice." In other words, the
Commission will not consider approval of new tariff applications for
promotions. The Commission considers therefore, that a company would not
be in violation of the suspension order in Public Notice
2003-1-1 by
offering a promotion that the Commission had approved prior to the
issuance of the Public Notice. When Aliant Telecom files its proposed
tariffs for the bundle(s), as directed above, Aliant Telecom will need
to ensure that the tariff application could not be considered a new
promotion that is subject to Public Notice
2003-1-1. |
|
Tying local exchange service with Internet service
|
72. |
In regard to EastLink's request that the
Commission prohibit the bundling and/or tying of local exchange service
with Internet or other forborne services, the Commission notes that
EastLink's request is very similar to the issue raised by Rogers
Communications Inc. (Rogers) in its Part VII application filed with the
Commission on 27 June 2003. In its application, Rogers requested that
the Commission change the bundling rules to prohibit the large ILECs
from bundling any tariff residential local exchange service with
forborne services. The Commission reiterated in Amendments to Telecom
Public Notice CRTC 2003-8, Review of price floor safeguards for retail
tariffed services and related issues, Telecom Public Notice CRTC
2003-10, 8 December 2003 (Public Notice
2003-10) that Rogers's Part VII
application would be made part of the Public Notice
2003-8 proceeding. |
73. |
The Commission notes that the issue
of whether the ILECs should be prohibited from bundling local exchange
service with forborne services is being considered by the Commission
within the context of Public Notice
2003-10. Accordingly, the Commission
is not dealing with this issue in the context of the present proceeding. |
|
Investigating compliance
|
74. |
In regard to EastLink's request that the
Commission investigate instances of Aliant Telecom's violations of the
Act and Commission rulings with respect to currently offered bundles and
promotions, and that the Commission appoint inspectors to verify Aliant Telecom's
compliance with any order arising as a result of this application, the
Commission notes that pursuant to Public Notice
2003-4, it has
designated inspectors to verify incumbent telephone company compliance
with Commission rulings and the Act. The Commission notes that
regulatory compliance issues relative to joint marketing, bundling and
tariff filings for regulated services, including the conduct of an
independent audit, will be dealt with on a case-by-case basis. |
75. |
Accordingly, the Commission denies
EastLink's request. |
|
Disclosure of information
|
76. |
EastLink requested disclosure of all of the
information filed in confidence by Aliant Telecom. EastLink noted that
Aliant Telecom claimed confidentiality over its customer data on the
basis that it illustrated specific market segmentation. Aliant Telecom
had claimed that if its customer data were made public, existing and
potential competitors could develop more effective business and
marketing strategies, causing specific direct harm to Aliant Telecom.
EastLink indicated that Aliant Telecom also claimed confidentiality over
illustrations of specific customer orders for forborne services bundles
and tariff services bundles. EastLink submitted that Aliant Telecom had
provided insufficient explanation as to how the information could cause
harm to Aliant Telecom. EastLink argued that it was necessary for it to
review the information in order to comment on its sufficiency in
supporting Aliant Telecom's position in this application. EastLink
stated that even if there were potential competitive ramifications
associated with disclosure, these would be outweighed by the public
interest served by such disclosure. |
77. |
In reply, Aliant Telecom submitted that
EastLink's request for disclosure should be dismissed as EastLink had
not demonstrated why disclosure would be in the public interest, let
alone whether or not the public interest outweighed the competitive harm
that would accrue to Aliant Telecom from such disclosure. Aliant Telecom
further submitted that disclosing sample order entry forms would reveal
proprietary information related to its business systems and would
therefore cause direct harm to Aliant Telecom. |
78. |
In the Commission's view, the percentage
figures filed by Aliant Telecom are properly considered to be
confidential as the specific direct harm likely to be incurred by Aliant Telecom
would outweigh the public interest in disclosure of such information.
Further, the Commission considers that the entry forms could indeed
contain proprietary business system information. In addition, the
Commission considers that disclosure of the specific line items naming
the service and the related price was not required in order for EastLink
to have a meaningful opportunity to respond to Aliant Telecom's
submissions. Finally, the Commission notes that given the Commission's
determination that the value packages and any other such bundles require
tariff approval, disclosure at this stage of the proceeding would not
serve any useful purpose. |
79. |
Accordingly, the Commission denies
EastLink's request for disclosure of confidential information filed by
Aliant Telecom. |
|
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 |