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In this Decision, the Commission renders
its determinations in the proceeding initiated by Regulatory framework
for voice communication services using Internet Protocol,
Telecom Public Notice CRTC 2004-2,
7 April 2004 (Public Notice 2004-2).
The Commission sets out the details of the appropriate regulatory
regime applicable to the provision of VoIP services, which it
defines as voice communication services using Internet Protocol (IP)
that use telephone numbers that conform to the North American Numbering
Plan, and that provide universal access to and/or from the Public
Switched Telephone Network (PSTN). To the extent that VoIP services
provide subscribers with access to and/or from the PSTN along with
the ability to make or receive calls that originate and terminate
within an exchange or local calling area as defined in the incumbent
local exchange carriers' (ILECs') tariffs, they are referred to in
this Decision as local VoIP services. |
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Consistent with Public Notice 2004-2,
peer-to-peer voice communication services using IP (P2P services),
as defined in this Decision, are not subject to regulation. |
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In the proceeding initiated by Public
Notice 2004-2, some
of the large ILECs requested that the Commission confirm that a certain
category of VoIP services was subject to existing forbearance
determinations for retail Internet service (IS). The Commission denies
this request. |
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The Commission also received requests
for forbearance from the regulation of VoIP services, under section
34 of the Telecommunications Act (the Act). In considering
these requests, the Commission uses two separate approaches. The first
is based on the analytical framework initially set out in Review
of regulatory framework, Telecom Decision CRTC 94-19,
16 September 1994 (Decision 94-19),
and the second approach considers parties' arguments without the use
of the Decision 94-19 framework.
Under both analytical approaches, the Commission reaches the same
conclusion: that it would be inappropriate to refrain, at this time,
from the exercise of any power or the performance of any duty under
sections 24, 25, 27, 29 and 31 of the Act, in relation to local VoIP services
provided by the ILECs. |
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The Commission determines that local
VoIP services should be regulated as local exchanges services
and that the regulatory framework governing local competition, set
out in Local Competition, Telecom Decision CRTC 97-8,
1 May 1997 (Decision 97-8)
and subsequent determinations, applies to local VoIP service
providers, except as otherwise provided in this Decision. In particular,
the Commission addresses the following matters with respect to implementation
of this regulatory framework: registration of VoIP resellers,
access to numbers and local number portability, directory listings,
equal access, winbacks, access for the disabled, message relay service,
privacy safeguards, tariff filing requirements, regulation of non-dominant
carriers, regulation of VoIP services in territories where local
competition is not permitted, and IP interconnection. |
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Further in the Decision, the Commission
determines that VoIP services are contribution-eligible and that
existing subsidies are available to VoIP service providers that meet
existing rules and requirements. The Commission also determines that P2P
services, which are not being regulated, are not contribution-eligible.
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The Commission then addresses issues
related to access. It directs the large cable carriers to remove a
restriction in their third-party Internet access (TPIA) tariffs in order
to allow TPIA customers to provide VoIP services, in addition to retail
IS, and directs the ILECs to remove a restriction in their tariffs in
order to allow digital subscriber line service providers that obtain
unbundled loops, connecting links, and co-location to provide VoIP services,
in addition to retail IS. The Commission denies a request to impose an
access condition on the ILECs and cable carriers. |
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Finally, the Commission
determines that the provision of VoIP services is subject to all
existing applicable forbearance determinations, such that ILECs are not
required to file tariffs in relation to, for example, their long
distance VoIP services. Dissenting opinions by Commissioners Wylie and
Noël are attached. |
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I. Introduction
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1. |
On 6 November 2003, Bell Canada submitted
an application requesting that the Commission commence a proceeding to
address the rules, if any, which govern the provision of
telecommunications services by cable companies and other service
providers that offer voice over Internet Protocol services. On 12
January 2004, Call-Net Enterprises Inc. (Call-Net) submitted a letter
asking what regulatory requirements would apply to the provision of such
services. |
2. |
In response, the Commission issued
Regulatory framework for voice communication services using Internet Protocol,
Telecom Public Notice CRTC 2004-2,
7 April 2004 (Public Notice 2004-2),
setting out a number of preliminary views on the regulatory regime
applicable to the provision of VoIP services, which it defined
as voice communication services using Internet Protocol (IP) that
use telephone numbers that conform to the North American Numbering
Plan (NANP), and that provide universal access to and/or from the
Public Switched Telephone Network (PSTN). The Commission initiated
a public proceeding, including an oral consultation, inviting comments
on its preliminary views and on any other pertinent matters. |
3. |
The process initially set out in Public Notice
2004-2 was subsequently
expanded to allow for an interrogatory stage. The oral consultation
took place 21-23 September 2004 and the public process concluded with
reply comments, filed by 13 October 2004. |
4. |
In response to Public Notice 2004-2,
the following parties filed comments, reply comments and/or responses
to interrogatories: Aliant Telecom Inc., Bell Canada, Saskatchewan
Telecommunications (SaskTel), and Société en commandite Télébec (Télébec)
[collectively, the Companies1], Alcatel Canada Inc. (Alcatel),
ARCH: A Legal Resource for Persons with Disabilities (ARCH), Association
des centres d'urgence 9-1-1 du Québec, AT&T Global Services Canada
Co. (AT&T), Bell West Inc. (Bell West), British Columbia
Public Interest Advocacy Centre on behalf of the British Columbia
Old Age Pensioners' Organization, the Council of Senior Citizens'
Organizations of B.C., Federated Anti-Poverty Groups of B.C., the Senior
Citizens' Association of Canada, End Legislated Poverty, and the Tenant
Rights Action Coalition (BCOAPO et al.), Call-Net, the Canadian Association
of Chiefs of Police, the Canadian Association of Internet Providers,
the Canadian Cable Telecommunications Association (CCTA) [formerly
known as the Canadian Cable Television Association], the City of
Calgary (Calgary), the Coalition for Competitive Telecommunications
Pricing (CCTP), Cogeco Cable Canada Inc. (Cogeco), the Communications,
Energy and Paperworkers Union of Canada (CEP), Comwave Telecom Inc.
(Comwave), Cybersurf Corp. (Cybersurf), Bragg Communications Inc.
doing business as EastLink, Edmonton Police Service, Futureway Communications
Inc., doing business as FCI Broadband, the Greater Vancouver Regional
District, on behalf of itself and the other members of the British Columbia
9-1-1 Service Providers Association, The Greenlining Institute, Microcell
Solutions Inc., on behalf of itself, and its affiliate, Inukshuk Internet
Inc. (Microcell2), the Ministry of Economic Development
and Trade on behalf of the Government of Ontario (Ontario), MTS Allstream
Inc. (MTS Allstream), New North Networks Ltd. (New North), Nortel
Networks (Nortel), Northwestel Inc. (Northwestel), the Ontario 9-1-1
Advisory Board (OAB), Ontera (formerly known as O.N.Telcom), the Public
Interest Advocacy Centre on behalf of the Consumers' Association of
Canada, the National Anti-Poverty Organization, and l'Union des Consommateurs
(the Consumer Groups), Primus Telecommunications Canada Inc. (Primus),
pulver.com (Pulver), Québécor Média Inc. (QMI) on behalf of Vidéotron
Télécom ltée and Vidéotron ltée, RipNET Limited (RipNET), Rogers Communications
Inc. (Rogers), Shaw Cablesystems GP (Shaw), the Telecommunications
Workers Union (TWU), TELUS Communications Inc. (TCI) on behalf of
itself and TELUS Communications (Québec) Inc. (collectively TELUS),
l'Union des municipalités du Québec, UTC Canada (UTC), Vonage Holdings
Corp. and Vonage Canada Corp. (Vonage), WorldCom Canada Ltd., doing
business as MCI Canada, Xit télécom inc. on behalf of itself
and Télécommunications Xittel inc. (Xit), Yak Communications (Canada)
Inc. (Yak), and the Yukon Government (Yukon). A number of these
parties also participated in the oral consultation. In addition, seven
individuals submitted comments. |
5. |
In this Decision, the positions of the
interested parties have necessarily been summarized; however, the
Commission has carefully reviewed and considered the oral and written
submissions of all parties. |
6. |
Due to concerns for public safety related
to access to emergency services by users of VoIP services, the
Commission addressed the matter of 9-1-1 and Enhanced 9-1-1 (E9-1-1)
service in advance of the other issues in this proceeding. The Commission
disposed of this matter in Emergency service obligations for local
VoIP service providers, Telecom Decision CRTC 2005-21,
4 April 2005 (Decision 2005-21). |
7. |
The issues raised in the proceeding initiated
by Public Notice 2004-2
are discussed below under the following headings: |
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Section II – Background
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Section III – Forbearance requests
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Section IV – Regulatory framework
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II. Background
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The Commission's preliminary views
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8. |
In Public Notice 2004-2,
the Commission set out a number of preliminary views with respect
to the regulation of VoIP services. The Commission noted that
VoIP services utilize telephone numbers that conform to the NANP
and allow subscribers to call and/or receive calls from any telephone
with access to the PSTN, anywhere in the world. The Commission was
of the preliminary view that these characteristics of VoIP services
were functionally the same as those of circuit-switched voice telecommunications services. |
9. |
One of the underlying principles of the
regulatory framework established for local exchange service competition
in Local competition, Telecom Decision CRTC 97-8,
1 May 1997 (Decision 97-8)
was that of technological neutrality. Consistent with the principle
of technological neutrality, the Commission expressed its preliminary
view in Public Notice 2004-2
that VoIP services should be subject to the existing regulatory
framework, including the Commission's forbearance determinations.
It followed that the regulatory requirements imposed on a VoIP service
provider would depend on the class of service provider into which
it fell [e.g., incumbent local exchange carrier (ILEC), competitive
local exchange carrier (CLEC), non-dominant Canadian carrier, mobile
wireless service provider, local service reseller] and the type of
service it offered. |
10. |
To the extent that VoIP services provide
subscribers with access to and/or from the PSTN along with the ability
to make and/or receive calls that originate and terminate within an
exchange or local calling area as defined in the ILECs' tariffs, the
Commission was of the preliminary view that these services should be
treated as local exchange services. They were referred to as local VoIP services. |
11. |
ILECs providing local VoIP services
in their incumbent territories would be required to adhere to their
existing tariffs or to file proposed tariffs, in conformity with applicable
regulatory rules. CLECs (including wireless CLECs) and ILECs out-of-territory
would not be required to file tariffs for retail local VoIP services;
however, they, and to a certain extent resellers providing local VoIP services,
would be required to meet the regulatory obligations imposed pursuant
to Decision 97-8
and subsequent related determinations. ILECs, non-dominant Canadian
carriers, and mobile wireless service providers that were not CLECs
would not be required to file tariffs for VoIP services that
fell within the scope of applicable forbearance determinations. |
12. |
In Public Notice 2004-2,
the Commission also recognized that certain local VoIP service
providers may not initially be able to provide 9-1-1, E9-1-1, Message
Relay Service (MRS), or privacy safeguards. The Commission considered
that it was of fundamental importance that subscribers to local VoIP services
be made aware of the nature and terms of the service being offered
to them. The Commission stated that it expected all local VoIP service
providers to advise potential and existing subscribers specifically
and clearly of such information. Further, in the Commission's preliminary
view, it should become mandatory for all local VoIP service providers
to provide 9-1-1/E9-1-1 service, MRS, and the privacy safeguards as
soon as practicable. As noted above, the Commission addressed the
issue of access to 9-1-1/ E9-1-1 service in Decision 2005-21. |
13. |
In Public Notice 2004-2,
the Commission noted that the CRTC Interconnection Steering Committee
(CISC) was already dealing with a significant number of issues related
to VoIP service. The Commission considered that CISC would be
the appropriate forum to address issues related to providing local
VoIP service subscribers with 9-1-1/E9-1-1 service, MRS, and
the privacy safeguards. In addition, the Commission considered that
CISC should also consider issues relating to access to VoIP services
by persons with disabilities. |
14. |
In Decision 97-8,
the Commission established a central fund for the subsidization of
high-cost residential local services in rural and remote areas. In
Changes to the contribution regime, Decision CRTC 2000-745,
30 November 2000 (Decision 2000-745),
the Commission introduced a national contribution collection mechanism,
under which all telecommunications service providers (TSPs) that exceed
a certain revenue threshold are required to contribute to the fund
based on a percentage of the total contribution-eligible revenues
from Canadian telecommunications services. Revenues from retail
Internet services (IS) are not contribution-eligible. Definitions
for the purposes of determining contribution-eligible revenues were
subsequently approved by the Commission in Industry Consensus
Reports submitted by the Contribution Collection Mechanism (CCM) Implementation
Working Groups, Order CRTC 2001-220,
15 March 2001 (Order 2001-220). |
15. |
As VoIP services provide access to and/or
from the PSTN, it was the Commission's preliminary view that they
are not retail IS, as that term was defined in Order 2001-220,
and that the revenues from VoIP services are accordingly
contribution-eligible. It was also the Commission's preliminary view
that peer-to-peer (P2P) services, defined in the following section,
are retail IS and that the revenues from P2P services are accordingly
not contribution-eligible. |
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VoIP services
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16. |
The Commission notes that the term "VoIP services"
may be used by some, for non-regulatory purposes, to include P2P services,
which are IP-enabled voice communications services that do not connect
to the PSTN and do not generally use NANP-conforming telephone numbers;
however, the term "VoIP services" will be used in this
Decision to refer only to those services that use NANP-conforming
telephone numbers and that provide universal access to and/or from
the PSTN. Consistent with Public Notice 2004-2,
and the record of this proceeding, P2P services are not subject
to regulation. Further, to the extent that VoIP services provides
subscribers with access to and/or from the PSTN along with the ability
to make or receive calls that originate and terminate within an exchange
or local calling area as defined in the ILEC's tariffs, they will
be referred to in this Decision as local VoIP services. |
17. |
IP can be described as a standardized
method of transporting information in voice, video and data packets over
the same network, including the Internet or a managed IP network. While
packet-based networks were originally designed for the transmission of
data, advances in IP technology allow these packet-based networks to
also carry high-quality voice traffic on an efficient basis. |
18. |
The introduction of IP technology into the
PSTN marks another step in the evolution of telecommunications networks.
Examples of earlier evolutionary steps include electromechanical
step-by-step switching and digital switching technologies. In each case,
technological advances have increased the ability of networks to carry
greater amounts of voice traffic at lower per unit costs. This has
reduced the per unit capital and operating costs of TSPs; this reduction
in costs has in turn reduced prices of telecommunications services for
consumers. |
19. |
Traditional circuit-switched services
involve the dedication of one or more specific circuits to each call
that connect the calling and called parties until the call is
terminated. This gives rise to potential inefficiencies, in that no
other use can be made of the entire circuit throughout the duration of
the call, regardless of whether or not any content is actually being
transmitted over the circuit at any given instant. |
20. |
In contrast, IP technology involves
packet-switching, which breaks down the content of a call into discrete
packets, each of which contains the destination address. These packets
are then transmitted over a network along with other packets and the
content of each call is reassembled at the destination. One of the major
efficiencies of an IP network is that it does not require the dedication
of switching and transport infrastructure to particular types of voice
or data traffic. This allows the network to handle far more traffic in a
more efficient manner. |
21. |
Until recently, generally available voice
communication services using IP only allowed subscribers to make and/or
receive calls from a computer, and communications could only take place
when all parties to the call used the same telephony application
software. These services are referred to as P2P services. |
22. |
VoIP services, by contrast, allow
subscribers to make calls over a broadband connection, for example with
a conventional telephone attached to an adaptor or with an IP telephone,
using NANP-conforming telephone numbers and providing universal access
to and/or from the PSTN. |
23. |
While the Internet itself is a broadband
network, residential users were initially limited to accessing the
Internet via slow-speed, dial-up connections. The advent of cable modems
and digital subscriber line (DSL) and other technologies, however, has
allowed for high-speed broadband access to the Internet. In turn,
high-speed Internet access and other broadband connections have allowed
for the delivery of high-quality VoIP services. |
24. |
VoIP technology has allowed for the
introduction of new features to consumers, including being able to send
voice messages as an e-mail attachment, having a "softphone" on a
personal computer to make and receive calls when travelling, and being
able to configure all these features over a web-based interface. For
service providers, VoIP technology allows considerable savings in the
network equipment required to offer voice services and allows the rapid
deployment of such features as a telephone number assigned to the
customer's VoIP service from an exchange outside of the user's exchange,
and a single telephone number that simultaneously rings multiple
telephone numbers. Large business enterprises have for some time used
IP technology or other packet-based technology over their private
networks to provide for cost-effective voice communications and enhanced
features for their businesses. |
25. |
Based on evidence filed during this
proceeding, it is evident to the Commission that there is widespread
interest on the part of major ILECs, CLECs, cable companies and other
service providers in providing a variety of VoIP services, with a range
of different features, to residential and business customers. At the
time of the oral consultation, Bell Canada, TELUS, SaskTel, Call-Net,
Woods Lake Cable, Primus, Vonage, and Yak, for example, were all
offering one or more types of VoIP service. Many other participants also
indicated their intention to begin offering VoIP services. It is evident
to the Commission, from parties' responses, that current and potential
service providers anticipate significant growth in VoIP services. |
26. |
The Commission notes that the promise of
IP, in achieving more efficient networks and new features for consumers,
has prompted telecommunications companies throughout the world to
dedicate significant capital expenditures to transform their networks. |
27. |
The Commission welcomes this evolution and
expects that Canadian TSPs will seize the advantages offered by IP-based
technology, to enhance their efficiency and competitiveness, to extend
accessible, reliable and affordable telecommunications services of high
quality throughout Canada and to stimulate research and development into
new telecommunications services. |
28. |
The Commission notes that the Canadian
telecommunications policy set out in the Telecommunications Act
(the Act) encourages such developments. The Commission notes further
that its price cap approach to regulation, which has been in place for
nearly eight years in Canada, encourages regulated Canadian carriers to
introduce new technologies into their networks that increase efficiency,
by permitting them to retain the benefits of such increased efficiency. |
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VoIP service categories
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29. |
In Public Notice 2004-2,
the Commission referred to VoIP services (which did not include
P2P services) as a broad category. In this proceeding, the Companies
referred to P2P services as Category 1 services and submitted that
VoIP services should be seen as falling into three categories,
as follows: |
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- Category 2 VoIP services: VoIP services that operate over a
broadband Internet connection obtained by the customer from a supplier
of choice and that enable the customer to make and receive calls to or
from the PSTN and, typically, as well as to and from other broadband
connected users;
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- Category 3 VoIP services: IP services that provide the ability to
make and receive voice calls to and from the PSTN, as well as to and
from other connected users and that are supplied with an underlying
connection, other than a retail Internet connection, to the service
provider's network; and
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- Category 4 VoIP services: IP business services offered over
network access facilities (LAN, WAN), either provided by the service
provider or by another party, connected to the service provider's
IP network and which do not utilize retail Internet services for
connection to the service provider's network. The Companies submitted
that Category 4 VoIP services offer, at a minimum, functionality
analogous to that of existing business telephony services provided
over circuit-switched networks and may offer additional functionality
not available over circuit-switched networks.
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30. |
TELUS divided VoIP services into two
categories (that did not encompass P2P services), which it described as
follows: |
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- Access-independent VoIP services: services that do not require
that the service provider provide the underlying network on which the
service rides, nor do they require the service provider to obtain the
permission of the network provider to offer the service application to
customers on that network; and
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- Access-dependent VoIP services: IP-based voice services in which
access and service are necessarily linked, as they are provided by
simply changing the underlying technology of the local access network
from circuit-switched to packet-switched.
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31. |
The Companies and TELUS agreed that the
Companies' Category 2 VoIP services were equivalent to TELUS'
access-independent VoIP services and that Category 3 VoIP services were
equivalent to access-dependent services. The Commission will use these
two sets of terms interchangeably in this Decision. With respect to
Category 4 VoIP services, TELUS took the view that these fell within its
concept of access-dependent services. By contrast, the Companies stated
that TELUS' access-independent classification could include Category 4
VoIP services. |
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The legislative framework
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32. |
The basic scheme of the Act provides that
all telecommunications services3 provided by Canadian
carriers must be provided under tariffs approved by the Commission,
subject to criteria set out in the Act. The Act also gives the
Commission the authority to refrain from requiring carriers to file
tariffs for approval (and from the exercise of other of its powers and
duties), in respect of certain services or classes of services, based on
certain findings of fact that the Act authorizes the Commission to make.
The Commission notes that the focus of the Act is on telecommunications
services rather than on the underlying technologies that are used to
provide the services. |
33. |
Subsection 25(1) of the Act sets out the
basic tariffing requirement as follows: |
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(1) No Canadian carrier shall provide a telecommunications service
except in accordance with a tariff filed with and approved by the
Commission that specifies the rate or the maximum or minimum rate, or
both, to be charged for the service.
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34. |
Subsections 27(1) and (2) of the Act set
out the main criteria governing carriers' rates and practices as
follows: |
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(1) Every rate charged by a Canadian carrier for a
telecommunications service shall be just and reasonable.
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(2) No Canadian carrier shall, in relation to the provision of a
telecommunications service or the charging of a rate for it, unjustly
discriminate or give an undue or unreasonable preference toward any
person, including itself, or subject any person to an undue or
unreasonable disadvantage.
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35. |
Section 34 of the Act provides for
forbearance from regulation as follows: |
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(1) The Commission may make a determination to refrain, in whole or
in part and conditionally or unconditionally, from the exercise of any
power or the performance of any duty under sections 24, 25, 27, 29 and
31 in relation to a telecommunications service or class of services
provided by a Canadian carrier, where the Commission finds as a
question of fact that to refrain would be consistent with the Canadian
telecommunications policy objectives.
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(2) Where the Commission finds as a question of fact that a
telecommunications service or class of services provided by a Canadian
carrier is or will be subject to competition sufficient to protect the
interests of users, the Commission shall make a determination to
refrain, to the extent that it considers appropriate, conditionally or
unconditionally, from the exercise of any power or the performance of
any duty under sections 24, 25, 27, 29 and 31 in relation to the
service or class of services.
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(3) The Commission shall not make a determination to refrain under
this section in relation to a telecommunications service or class of
services if the Commission finds as a question of fact that to refrain
would be likely to impair unduly the establishment or continuance of a
competitive market for that service or class of services.
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36. |
Other legislative provisions referred to in
section 34, include the following: |
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24. The offering and provision of any telecommunications service by
a Canadian carrier are subject to any conditions imposed by the
Commission or included in a tariff approved by the Commission.
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25(3) A tariff shall be filed and published or otherwise made
available for public inspection by a Canadian carrier in the form and
manner specified by the Commission and shall include any information
required by the Commission to be included.
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27(3) The Commission may determine in any case, as a question of
fact, whether a Canadian carrier has complied with section 25, this
section or section 29, or with any decision made under section 24, 25,
29, 34 or 40.
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27(4) The burden of establishing before the Commission that any
discrimination is not unjust or that any preference or disadvantage
is not undue or unreasonable is on the Canadian carrier that
discriminates, gives the preference or subjects the person to
the disadvantage.
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27(5) In determining whether a rate is just and reasonable, the
Commission may adopt any method or technique that it considers
appropriate, whether based on a carrier's return on its rate base
or otherwise.
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III. Forbearance requests
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The Companies' and TELUS' forbearance requests
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37. |
The Companies and TELUS either sought
confirmation that certain VoIP services were already forborne under
previous Commission determinations or sought forbearance on a going
forward basis. More specifically, they requested forbearance with
respect to local VoIP services as follows: |
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(a) The Companies requested that the Commission
confirm that, pursuant to subsections 34(1), (2) and (3) of
the Act, Category 2 VoIP services, including services
of the same class that the Companies may offer in the future are
forborne in relation to sections 25, 29, 31 and subsections
27(1), (5) and (6) of the Act, in accordance with determinations
reached in a series of Commission orders, culminating in Forbearance
from retail Internet services, Telecom Order CRTC 99-592,
25 June 1999 (Order 99-592)
and determine that these services are forborne in relation to subsections 27(2),
(3) and (4);
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(b) SaskTel requested, if the Commission did not confirm that
Category 2 VoIP services are forborne, as requested in (a) above, that
the Commission determine that Category 2 VoIP services, including
services of the same class that SaskTel may offer in the future, are
forborne.
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(c) The Companies requested that the Commission determine that
Categories 3 and 4 VoIP services, including services of the same class
that the Companies may offer in the future, are forborne in relation
to sections 25, 27, 29 and 31 of the Act;
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(d) TELUS requested that the Commission find that
access-independent VoIP services are covered by the Commission's
existing forbearance orders regarding retail IS; and
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(e) TELUS requested, if the Commission does not make the finding
requested in (d) above, that the Commission forbear from economic
regulation of access-independent VoIP services.
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38. |
In the following sections, the Commission
deals first with the Companies' and TELUS' requests under items (a) and
(d) of the previous paragraph, that it confirm that Category 2 VoIP services
are forborne. It then turns to the requests, under items (b), (c) and
(e) of the previous paragraph, that the Commission forbear from the
regulation of VoIP services under sections 25, 27, 29 and 31 of the Act. |
39. |
As most VoIP services, other than local
VoIP services, would be forborne under the Commission's preliminary
view, which is confirmed below, this Decision focuses principally on
local VoIP services. |
40. |
The Commission notes that both the
Companies and TELUS clearly stated that they were not seeking
forbearance with respect to the local exchange services market
generally. Accordingly, that broader issue is not addressed and does not
form part of this Decision. |
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Applicability of existing retail IS forbearance determinations
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Positions of parties
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41. |
The Companies and TELUS submitted that Category 2
or access-independent VoIP services are IS, delivered over retail
Internet connections. They contended that, like other retail IS, these
VoIP services are forborne pursuant to Order 99-592,
in which the Commission forbore from rate-regulating retail IS provided
by carriers that were not already subject to a retail IS forbearance
decision. More specifically, they submitted that the Commission forbore
conditionally or unconditionally, depending on whether the carrier
in question had the appropriate accounting separations in place. They
further submitted that the Commission noted that it had not forborne
from regulating the underlying transmission facilities. |
42. |
TELUS described its access-independent VoIP service
as similar to that of Vonage and Primus, that is, a service that rides
over any high-speed retail Internet connection, be it DSL provided by
TELUS or an independent DSL service provider (DSLSP), cable modem
provided by a cable company or independent third party, or wireless
broadband. The Companies described their Category 2 VoIP services as
delivered over an Internet connection, in a manner that parallels the
way in which Internet service providers (ISPs) provide applications such
as e-mail, messaging, video and audio content, virus protection,
firewall services, downloadable games and interactive games. |
43. |
TELUS and the Companies argued that
access-independent or Category 2 VoIP services were not simply primary
exchange service (PES) delivered over an alternative technology, because
subscribers procure the voice service separately from the high-speed
retail IS. |
44. |
TELUS stated that access-independent VoIP services
shared many characteristics with other Internet applications, such as
Microsoft's Hotmail and other e-mail and instant messaging services
(many of which feature voice capabilities). In TELUS' view, a VoIP service
was one of many applications that resided at the edge of the network and
that could be accessed by means of high-speed Internet access. |
45. |
From a functional standpoint, the Companies
supported this position, stating that Category 2 VoIP services were
applications that complemented Internet connection services. The
Companies submitted that services offered by Vonage, Primus, BabyTEL,
Call-Net, and Navigata Communications Inc. (Navigata) were marketed as
Internet applications, not as telephone services. |
46. |
Xit stated that VoIP services offered by
ILECs and incumbent cable carriers would be part of the local telephone
services market, but that VoIP services that transit the networks of
ISPs unaffiliated with the ILECs or incumbent cable carriers through
public Internet peering points would be considered to be part of the
retail IS market. |
47. |
Cybersurf submitted that to the extent that
VoIP services were transported over the public Internet without any
routing constraints that require the transporting of such calls over
proprietary networks, such services (Category 2 and access-independent
services) could be considered to be Internet applications. |
48. |
Most of the parties disagreed with the
ILECs' contention that VoIP service was retail IS because it was
delivered over a retail Internet connection. These parties generally
argued that use of an Internet connection alone does not qualify VoIP service
as retail IS. |
49. |
The Consumer Groups observed that several
parties sought to categorize VoIP service as retail IS, or an
Internet-based application, simply in the hopes of applying the
Commission's current forbearance of retail IS to VoIP services. In the
Consumer Groups' view, this categorization confused elements of VoIP operation
with the meaningful issue of the functional equivalence of VoIP and
circuit-switched telephone service. |
50. |
Call-Net and MTS Allstream submitted that
VoIP was simply a voice service using IP over a packet-switched network
instead of traditional circuit-switched infrastructure. Call-Net, the
CCTA, UTC and the Consumer Groups submitted that the most important
feature of a VoIP service was the ability to make calls to and receive
calls from any PSTN subscriber, which is the defining feature of PES.
UTC also submitted that both PES and VoIP subscribers could access other
networks (such as wireless or long distance networks) which are
interconnected with the PSTN. |
51. |
In Call-Net's view, the service provided
was essentially the same as PES, although it enabled more features and
Internet connectivity because of the difference in the underlying data
network. MTS Allstream and the CCTA stated that from the perspective of
the end-customer, "VoIP" was merely a new word for a familiar service –
a service which allowed one party to talk to another party in real time.
The underlying technology which was used to achieve this result was
irrelevant to the parties who were participating on the call or to the
customer who paid the bill. The CEP expressed a similar view. |
52. |
The CCTA submitted that VoIP services did
not necessarily use the public Internet, nor were they properly
characterized as IS. The CCTA disagreed with the Companies' and TELUS'
position that VoIP services were like other Internet applications. It
argued that the service was called voice over IP for the very reason
that it was used to place voice calls, not surf the Internet or exchange
e-mails. |
53. |
MTS Allstream noted that the Companies and
TELUS emphasized the need for a retail broadband Internet connection to
access VoIP services, but did not focus on the need for a call to
traverse the public Internet to the VoIP provider's platform. MTS Allstream
submitted that it was unlikely that the VoIP call of an ILEC high-speed
Internet subscriber would go over the public Internet. In MTS Allstream's
opinion, such calls could be provisioned utilizing the DSL Internet
connection to provide a fully dedicated quality-of-service-enabled voice
path directly from the customer's premises to the PSTN gateway, without
using the public Internet. MTS Allstream concluded that it might even be
impossible to detect when such calls were carried over the Internet and
when they were provided as a managed IP or access-dependent VoIP service. |
54. |
The Companies argued that the Commission
recognized Category 2 VoIP to be retail IS when it carved
out "PSTN Voice" in Order 2001-220
from the exemption to pay contribution granted in respect of other
retail IS. In the Companies' view, differentiating PSTN Voice in such
a manner proved that the Commission considered VoIP to be retail
IS in fact and law, as there would otherwise have been no reason to
carve out VoIP in this manner. |
55. |
A number of parties disagreed with the
Companies' position. The Consumer Groups stated that the definition
of "retail Internet services" in Order 2001-220
excluded "PSTN voice services" solely for the purpose of
determining the scope of the contribution exemption for revenues from
retail IS. Call-Net pointed out the Chairman's statement in the public
consultation that Order 2001-220
was very clear that "PSTN voice services refer to real-time voice
communication via the Internet to or from a telephone set or other
equipment." Thus in Call-Net's view, the argument presented by
the Companies in this regard ignored the clear definition of these
services in Order 2001-220. |
56. |
The Companies further suggested that in
New Media, Telecom Public Notice CRTC 99-14,
17 May 1999 (Public Notice 99-14),
the Commission recognized that VoIP services which piggyback
on customer-supplied Internet connections should be treated in the
same manner as other Internet applications for regulatory purposes.
The Companies pointed out that the Commission included IP telephony
in a list of new media services and stated that such services could
be provided over "more traditional means of distribution"
and over "networks interconnected on a local or global scale."
The Companies argued that the Commission had recognized, in Public
Notice 99-14, that retail
IS had evolved and would evolve over time in unexpected ways, making
it impractical to list all retail IS. The Companies claimed that the
Commission stated that forbearance of new media services would encourage
Internet applications. They further claimed that since the new media
decision, they and other ISPs had launched many new Internet applications
that had not been tariffed. In the Companies' view, VoIP services
were the evolutionary developments or enhancements of high-speed retail
IS, which were already forborne. |
57. |
Call-Net disagreed with the Companies' position.
In particular, Call-Net submitted that the Companies' interpretation
of Public Notice 99-14
was without merit, as that Public Notice was concerned with whether
or not Internet content that qualified as programming services should
be regulated under the Broadcasting Act. |
58. |
The Companies and TELUS also submitted that
in the Commission's Report to the Governor in Council: Status of
Competition in Canadian Telecommunications Markets –
Deployment/Accessibility of Advanced Telecommunications Infrastructure
and Services, 27 November 2003 (2003 Competition Report), VoIP was
listed as a component of the emerging stand-alone business Internet
application market. They cited the following passage: |
|
ISPs and other telecommunications companies do participate in
emerging stand-alone business Internet applications markets which
include services such as premium Web hosting, Internet data centres
and off-site data storage, security, firewall, and network management;
audio, video, and Web conferencing, VoIP, IP-PBX, and Internet fax
services; and domain name registration, among others.
|
|
Commission's analysis and determinations
|
59. |
The Commission has issued a number of forbearance
orders relating to IS. In 1997 and 1998, the Commission issued
several company-specific Orders in which it forbore from regulating
the applicants' tariffed Internet access service (e.g., Telecom Order
CRTC 97-928, 30 June 1997,
for TCEI PLAnet Service). |
60. |
In 1999, the Commission issued Order 99-592
as an omnibus forbearance order in relation to "retail end-user
Internet services" provided by all Canadian carriers that were
not, at the time, already subject to forbearance determinations with
respect to retail IS. |
61. |
The Commission considers that the facts
cited by the Companies and TELUS, namely that Category 2 or
access-independent VoIP services are delivered as retail IS over a
high-speed Internet connection, that they may make use in whole or in
part of the public Internet, and that they reside at the edge of the
network, are not determinative of the question as to whether the
existing retail IS forbearance determinations apply to these VoIP services.
The Commission considers that the issue is not the technology being
used, but rather the nature of the service being provided. |
62. |
The Commission notes that most parties
generally disagreed with the Companies' and TELUS' position that some
types of Category 2 VoIP services shared many of the characteristics of
other Internet applications, or complemented Internet connection
services. These parties argued that VoIP services were not used to
exchange e-mails or surf the Internet, but to provide real-time voice
communications. |
63. |
As noted by many parties, the Commission
considers that the defining characteristic of VoIP services, which
distinguishes them from retail IS, is that, while they may share some
portion of the underlying transmission infrastructure – the Internet –
in order to connect users, their points of origination and termination
are addressable by NANP numbers and their international equivalents,
allowing for the ability to connect to anyone on the PSTN. In the
Commission's view, the primary function of Category 2 VoIP services is
not accessing the Internet, but rather is accessing the PSTN in order to
make and receive telephone calls. |
64. |
The Commission does not accept the arguments
that it has in the past determined that VoIP service is retail
IS. As previously noted, the term "VoIP services" includes
only those services that allow access to and/or from the PSTN and
use NANP-conforming numbers (i.e. not P2P services). The Commission
clearly distinguished PSTN-connected voice services from retail IS
in Order 2001-220. |
65. |
In that Order, the Commission stated the
following: |
|
Retail Internet service includes all Internet Services (IS),
independent of speed and the facilities over which the services are
carried. For greater certainty retail IS includes, but
is not limited to, all IS that permit the users of those services to
upload and/or download information from the Internet and to use
applications such as electronic mail, but it does not include
Public Switched Telephone Network (PSTN) Voice services or other
contribution-eligible telecommunications services, nor does it include
goods or services the revenues from which fall within the definition
of the Canadian Non-Telecommunications Revenues. (Emphasis added)
|
66. |
Contrary to the Companies' argument that
the exclusion of PSTN Voice services from the contribution exemption
for retail IS means that VoIP must be seen as retail IS, the
Commission notes that the sentence beginning with the words "for
greater certainty" is included precisely to clarify the point
that PSTN Voice services are not considered retail IS under Order
2001-220. |
67. |
As regards Public Notice 99-14,
the Commission cannot find support in that Public Notice for the Companies'
submission that VoIP services are retail IS. Furthermore, in
that Public Notice, the Commission did not make any forbearance determinations
in relation to telecommunications services. What the Commission did
state in Public Notice 99-14
was that it would exempt undertakings providing broadcasting services
over the Internet from the licensing requirements of the Broadcasting
Act. |
68. |
With respect to the passage quoted by the
Companies from the 2003 Competition Report, the Commission notes that
this excerpt is part of an annual report on state of competition across
the Canadian telecommunications sector. In the Commission's view, the
passage cannot be regarded as the equivalent of a Commission finding
resulting from a regulatory process regarding the classification and
treatment of local VoIP services. |
69. |
In summary, the Commission considers that
the forbearance orders relating to retail IS did not - nor were they
ever intended to – capture voice services that connected to the PSTN. |
70. |
In light of the above, the Commission finds
and confirms that VoIP services are not retail IS contemplated
by Order 99-592
and associated forbearance determinations. Accordingly, Category 2
local VoIP services do not fall within the scope of existing
retail IS forbearance determinations. |
|
Requests for forbearance from regulation
|
71. |
In considering the requests for
forbearance, the Commission must determine that forbearance would be
consistent with section 34 of the Act. In applying that section in the
present proceeding, the Commission has utilized two separate approaches. |
72. |
The first approach uses an analytical framework
based on principles commonly used in economics and competition policy.
This framework was initially set out by the Commission in Review
of regulatory framework, Telecom Decision CRTC 94-19,
16 September 1994 (Decision 94-19).
Under this approach, referred to in this Decision as the Decision
94-19 framework, the determination
of whether or not to forbear from regulating a service or class of
services is based on a determination of the relevant market in which
the service(s) is (are) offered and on whether the ILECs have market
power in that market. |
73. |
The second approach considers the arguments
presented by parties seeking forbearance under section 34 of
the Act that were not necessarily advanced within the Decision 94-19
framework. |
|
Analysis based on Decision 94-19
framework
|
|
Background
|
74. |
Decision 94-19
sets out a three-step analysis for considering forbearance applications.
The first step is identifying the relevant market. The relevant market
is the smallest group of products and geographic area in which a firm
with market power can profitably impose a sustainable price increase.
The identification of the relevant market is based on the substitutability
of the services in question. |
75. |
The second step in the analysis involves
determining whether a firm has market power with respect to the relevant
market. As indicated in Decision 94-19,
there cannot be sustainable competition in a market in which a firm
possesses substantial market power. Market power can be demonstrated
by the ability of a firm to raise or maintain prices above those that
would prevail in a competitive market. |
76. |
The third step in the analysis is to
determine whether, and to what extent, forbearance should be granted. |
|
Positions of parties
|
77. |
TELUS stated that |
|
…in determining if two products or services are sufficiently close
substitutes to be in the same economic market, the underlying issue is
whether or not the price of one product or service is affected by the
price of the other product or service…The prices do not need to move
together in lock-step, but they will generally move together.
|
78. |
TELUS stated that to be considered close
substitutes, two products or services did not need to be identical;
rather, TELUS suggested, the issue was whether the services would be
sufficiently similar so as to satisfy the same general need of consumers
and would, therefore, be sufficiently good substitutes to be in the same
economic market. |
79. |
The Companies submitted that the relevant
market for Categories 1, 2 and 3 VoIP services was the residential local
communications services market, which in their view also included the
full range of wireline local communications services, wireless services
and certain Internet data services, such as Instant Messaging. In
addition, the Companies submitted that the relevant market for
Categories 2, 3, and 4 was the business local communications services
market, which also included numerous other services that provided
business customers with internal voice communications and with voice
access to and from the PSTN. |
80. |
TELUS argued that VoIP services and
traditional circuit-switched voice were close enough substitutes to be
in the same economic market. TELUS further stated that customers with
high-speed retail Internet access could and would readily shift between
access-independent VoIP and traditional circuit-switched voice service
in response to changes in relative prices. With respect to
access-independent service, TELUS submitted that although this service
along with high-speed retail Internet access was not a service that was
identical to traditional circuit-switched voice service, the two
services seemed sufficiently similar so that enough customers would
consider them to be reasonable substitutes. TELUS stated that
access-dependent VoIP services resembled traditional telephone service
from a user's perspective because voice and access services were only
available together from the same firm. TELUS further submitted that
customers would compare the various characteristics of VoIP and
traditional telephone service and select the one that they preferred.
|
81. |
A number of other parties, including BCOAPO
et al., Call-Net, the CCTA, the Companies, the Consumer Groups, MTS Allstream,
Primus, and QMI, agreed that VoIP services could be considered close
substitutes for local exchange services. The CCTA and QMI also submitted
that local VoIP services should be included in the same relevant market
as local exchange services. |
82. |
The CCTA submitted that the decision of
customers to use VoIP was based on the need for basic voice
functionalities and that consumers did not care whether a voice service
was circuit-switched or IP-based or access-dependent or
access-independent. The CCTA submitted that consumers would not
distinguish between access-dependent VoIP services and existing
circuit-switched local exchange services. Moreover, the CCTA stated that
consumers were unlikely to know that the managed telephone or
access-dependent service was relying on IP-based technology, rather than
traditional circuit-switched technology. The CCTA added that most
Category 3 and 4 VoIP service providers would rely on both IP-based
managed networks and circuit-switched facilities. The CCTA and Rogers
stated that current VoIP limitations would not prevent customers from
taking the service in place of PES; rather, customers may be prepared to
make trade-offs in terms of price and additional features. |
83. |
Call-Net argued that the introduction of a
new IP-based technology to access the PSTN did not lead to the
conclusion that VoIP was in any material way different from PES.
Call-Net further submitted that the most important feature of a VoIP service
was the ability to make calls to and receive calls from any PSTN
subscriber, which in its view was the defining feature of traditional
PES service. Call-Net stated that access-independent VoIP was in effect
PES with additional features, which allowed subscribers to access their
service from any high-speed connection. In Call-Net's view, how
subscribers augment their existing service with VoIP would depend on the
relative importance of limitations and features, as well as cost.
Call-Net stated that the extent to which this replacement would occur
was mere speculation at this time. |
84. |
CEP submitted that the functionality of
VoIP was equivalent to circuit-switched telecommunications service and
that their use of the PSTN was what mattered. In its view, "voice is
voice." CEP submitted that whether a voice communication service was
network-managed, decoupled, provided through a third party or bundled
with other services was irrelevant. |
85. |
The Consumer Groups submitted that VoIP was
simply a new technology for voice carriage. In their view, the fact that
VoIP had additional capabilities that functioned as Internet-delivered
services did not negate the central reality that it was primarily
designed for voice services. They argued that voice services would be
the core feature of VoIP services for some time to come. |
86. |
MTS Allstream submitted that regardless of
how a VoIP service was configured, the end-product was essentially the
same – a voice service that enables a subscriber to access the PSTN and
to make and/or receive calls which originated and terminated within an
ILEC's exchange or local calling area. MTS Allstream submitted that, but
for the fact that Categories 3 and 4 VoIP services were not accessed via
the public Internet, there was really nothing to distinguish these
services from Category 2 VoIP services. MTS Allstream submitted that for
third-party provisioned VoIP services, voice quality issues may arise
because of shared Internet transmission capacity. However, MTS Allstream
anticipated that as voice prioritization capabilities were deployed,
service quality levels should be comparable and perhaps even superior to
existing standards. In MTS Allstream's view, all categories of VoIP services
and traditional PSTN-based local voice services such as PES should be
considered to be part of a single product or service market, both
business and residential. |
87. |
MTS Allstream submitted that VoIP services
did not constitute a distinct service or product market since, all else
being equal, a VoIP service customer could readily substitute a
conventional local exchange voice telephone service for VoIP service if
the price of VoIP service was increased on a non-transitory basis. MTS Allstream
submitted that the reverse also held in the case of a non-transitory
increase in the price of conventional local exchange voice telephony
service, although to a lesser degree, since only those subscribers with
high-speed Internet access would be in a position to subscribe to VoIP service.
MTS Allstream also submitted that the relative prices of voice services
delivered over different technologies, including the costs associated
with switching to VoIP service, would ultimately play an important role
in terms of the rate of adoption of the service in Canada. |
88. |
Primus stated that even in-territory
access-independent VoIP services were, from the customers' perspective,
a substitute for PES. They noted that approximately 70% of their
customers used the service in a fixed fashion on either a primary or
secondary line basis. In Primus' view, this strongly suggested that
customers considered it and were using it as a substitute for PES
service. Primus submitted that from a customer's perspective, features
of Category 2 VoIP services were identical to, or closely aligned with,
those traditionally available through PES. |
89. |
QMI argued that just because a given VoIP service
offering provided more or less call management features than traditional
PES, or permitted some of its customers to select a phone number from a
non-native area code, or incorporated flat-rate long distance calling
did not in any way imply that the general population would fail to
consider the offering a substitute for traditional PES. QMI stated that
substitutes for much of this supposedly new functionality already
existed in the pre-VoIP world, through services such as foreign exchange
lines, and call forwarding features. QMI stated that, in the end,
consumer perceptions would decide what services occupied the same
relevant market space. |
90. |
UTC acknowledged that PES and VoIP had some
different features, but argued that this did not alter the fact that the
core service was essentially the same. It stated that users of PES and
VoIP services could communicate orally in real time with the universe of
local exchange subscribers using NANP telephone address for incoming and
outgoing calls and could access other networks that interconnected with
the PSTN. In UTC's view, while the additional features of VoIP and PES
may differ, this basic communications function was equivalent. UTC
submitted that the fact that most VoIP service providers were offering
their customers local number portability (LNP) suggested that customers
may be prepared to drop PES when they take VoIP service. |
91. |
Yak asserted that service attributes, not
technology, should be the primary focus when assessing the appropriate
market for VoIP-related telecommunications services. Yak stated that the
relevant product market was non-mobile voice telephone services,
subdivided into local services and long distance services, whereby VoIP was
one product within this broader market definition. Yak agreed that,
simply because VoIP did not have some of the service attributes of PES,
it did not necessarily mean that the service should not be characterized
as PES. Yak stated that its observation, informed by its development of
its own VoIP service offering, was that the key product attributes that
appeal to VoIP services customers were essentially similar to those
exhibited by existing PES. For example, Yak submitted that many
consumers used cordless telephones, which do not function in a power
outage, yet are still considered to be a part of PES despite this
limitation. Yak therefore stated that it only intended to address this
issue if customers indicated that it was a significant concern. Yak
stated its intention to monitor voice quality, including any degradation
caused by downloading, to determine what measures, if any, needed to be
taken to maintain voice quality. In developing its own VoIP service, Yak
determined that the key product attributes which appealed to VoIP customers
were essentially similar to those of PES. |
92. |
Ontario stated that it was unclear whether
VoIP services would be viewed by current telephone subscribers as a
perfect substitute at this time. They noted that VoIP technology offered
unique features that may be attractive to certain subscribers. |
93. |
The CCTP argued that VoIP was a distinct
new service, which operated in a separate market from traditional PES.
The CCTP argued that the functional differences between VoIP services
and PES were so significant that the two services could not fairly be
said to be functionally the same. |
94. |
Northwestel stated that VoIP was a new and
different service from traditional PES, offering more features and
capabilities than PES. In its view, in the early stages of VoIP adoption,
consumers would be primarily attracted to VoIP applications as an
inexpensive alternative to toll. |
95. |
The CCTA stated that the cable companies
intended to launch VoIP services that met or exceeded the reliability of
and quality of traditional voice services of the telephone company. |
96. |
The Companies submitted that numerous
competitors were pricing their VoIP services to win over existing
customers of local exchange services. The Companies stated that they
expected Category 3 services to be marketed by cable companies as a
substitute for ILEC PES. The Companies also stated that Category 3 VoIP services
would likely have some form of power backup, so as not to be affected by
Internet outages, they may have specific or guaranteed quality, or they
may be offered at a lower price on a best-efforts basis. |
97. |
With respect to the manner in which VoIP were
and would be marketed, MTS Allstream referenced Primus' and Vonage's
websites, submitting that they demonstrated how their services could be
used in place of existing phone service: |
|
Whether you have DSL and use TalkBroadband as a second phone line,
or have cable High Speed Internet and want to go even further and
replace your existing home line, Primus will send you everything you
need. All you have to do is plug it in and start talking. (Primus web
site)
|
|
Vonage is an all-inclusive phone service that can replace your
current phone company. (Vonage web site)
|
98. |
MTS Allstream pointed out that the
Companies and TELUS had publicly stated their intention to market
IP-based voice services as direct substitutes for PES. MTS Allstream
cited paragraph 3 of the covering letter to Bell Canada's Tariff Notice
6813, 10 May 2004 which stated that Bell Canada's Managed Internet
Protocol Telephony (MIPT) service would be offered as an IP alternative
to Centrex service (a conventional local telephone service): |
|
MIPT is being offered as an IP alternative to the Company's
Centrex III service. It will also meet customer demand for an
IP-based business telephony service compatible with Centrex III.
The Company proposes to offer MIPT in a manner which enables
customers to deploy MIPT side-by-side with their existing Centrex III
locals without disruption and without termination charges as
Centrex III locals are migrated to MIPT ports. (Emphasis added by MTS Allstream.)
|
99. |
TELUS argued that it was clear that
access-independent VoIP service providers viewed their service as a
substitute for traditional circuit-switched telephone service, as they
offered number portability and promoted their services as an alternative
to the traditional telephone service. |
100. |
The Companies submitted that the rate of
consumer adoption for Category 2 VoIP services might be affected by a
number of limitations, including emergency calling and service
availability during power outages. However, the Companies stated that
several service providers had already announced their intention to
introduce VoIP services that addressed these limitations. They also
stated that they anticipated that the benefits offered by VoIP services
would promote the adoption of high-speed IS by Canadian consumers and
ultimately provide further opportunities for Category 2 VoIP service
providers. |
101. |
The Companies asserted that a difference
between Category 2 and Category 3 VoIP services was that the price paid
by the customer for a Category 3 service necessarily included access to
the service provider's underlying IP network from the terminal equipment
at the customer's location. |
102. |
QMI stated that the ILECs would bundle
their in-territory access-independent VoIP offerings with their
in-territory high-speed Internet offerings, such that the two purchase
decisions would very quickly collapse into one. |
103. |
Call-Net submitted that when an ILEC
offered VoIP services over its own broadband facilities, there may be
little if any technical distinction between Category 2 and 3 VoIP services. |
|
Commission's analysis and determinations
|
|
Relevant market
|
104. |
As indicated above, the first step in the
Decision 94-19 framework involves
identifying the relevant market for local VoIP services. The
Commission notes that most parties, including TELUS, MTS Allstream,
the CCTA and Yak, agreed that VoIP services are in the same relevant
market as circuit-switched local exchange services. The Companies
took a broader view of the relevant market. |
105. |
A key question that must be answered with
respect to the identification of the relevant market is whether local
VoIP services and circuit-switched local exchange services are, or are
not, sufficiently close substitutes. |
106. |
The Commission agrees with TELUS that in
determining if two products or services are sufficiently close
substitutes to be in the same economic market, the underlying issue is
whether or not the price of one product or service is affected by the
price of the other product or service. As noted by TELUS, the prices
need not move together in lock-step, but they will generally move
together. |
107. |
In this regard, the Commission considers
that the extent of substitutability (or lack thereof) of services can be
demonstrated by way of statistical evidence in relation to the
willingness of consumers (or lack thereof) to replace one service with
the other in response to changes in prices of the services in question. |
108. |
The Companies and TELUS indicated that new
entrants are pricing VoIP services in order to compete for
circuit-switched local exchange customers. However, the Commission
considers that due to the fact that VoIP services are at a very early
stage of development, there is insufficient statistical evidence on the
record regarding demand responses to changes in the relative prices of
local VoIP services and circuit-switched local exchange services. |
109. |
In the absence of sufficient statistical
evidence, the Commission has assessed whether or not the services are
close substitutes based on the evidence in relation to whether or not
local VoIP services meet the same general user requirements as
circuit-switched local exchange services. As suggested by TELUS, in
order for two services to be close substitutes, they need not be
identical; rather, the issue is whether the services are sufficiently
similar so as to satisfy the same general need of consumers and will,
therefore, be sufficiently good substitutes to be in the same economic
market. |
110. |
Based on the submissions of parties with
respect to the substitutability of the services in question, the
Commission has identified four factors that will assist in determining
whether or not local VoIP services meet the same general user
requirements that circuit-switched local exchange services satisfy: the
fundamental purpose of the services; the manner in which local VoIP services
are marketed and offered; whether or not consumers perceive, or can be
expected to perceive, local VoIP services as close substitutes for
circuit-switched local exchange services; and whether or not local VoIP services
and circuit-switched local exchange services are, or will be, purchased
as replacements for one another. |
111. |
The Commission considers that the use of
IP does not define the fundamental purpose of the service; rather, it
defines the underlying technology used to provide and transport the
service. As noted above, transmission and switching technologies have
been evolving and changing since the earliest days of telephony. From a
consumer's perspective, the key question is not what technology is used
to provide a service, but rather what use the service is to the
consumer. |
112. |
As Dr. Crandall, an expert witness for
TELUS, testified in response to a question regarding how the consumer is
to perceive the difference between access-dependent and
access-independent VoIP services, |
|
I don't know why they have to…all they need to know is what the
service delivers. They don't need to know technically how it's
delivered.
|
113. |
In the Commission's view, the fundamental
purpose of circuit-switched local exchange services is to provide
two-way, real-time voice communications to and/or from anyone on the
PSTN. The Commission considers that the fundamental purpose of local
VoIP service, whether Category 2, 3 or 4, is the same. |
114. |
The Commission notes that both local VoIP services
and circuit-switched local exchange services feature a variety of
options, some of which are common and some of which may be unique to
each service. Both local VoIP and circuit-switched local exchange
services offer, for example, call display and voicemail, whereas local
VoIP service also allows, for example, online access to call details and
nomadic capability. In addition, local VoIP service allows subscribers
to obtain a telephone number from an exchange outside their geographic
area. In the Commission's view, however, while such features enhance the
respective services, they are not core attributes of the services, the
fundamental purpose of which remains the same. |
115. |
This conclusion is reinforced by the manner
in which the services are marketed and offered. The Commission notes
that a number of parties referred to the fact that VoIP services were
being marketed and offered as a replacement for circuit-switched local
exchange services. |
116. |
As noted by MTS Allstream, the websites of
Primus and Vonage indicate that their services can be used as
replacements for customers' existing circuit-switched telephone
services. |
117. |
With respect to Category 3 VoIP services,
the Commission notes that these services utilize a managed network, are
integrated with a broadband access service, can guarantee quality of
service, allow for the provision of 9-1-1/E9-1-1 capabilities, and can
have some form of back-up power. |
118. |
The Commission further notes that a number
of the cable companies indicated that they will be offering VoIP services
that would meet the CLEC requirements of Decision 97-8.
|
119. |
The Commission notes that Bell Canada's
MIPT service4 and TELUS' IP Evolution service5 are
examples of Category 4 VoIP services. The Commission notes the
Companies' statement that MIPT is offered as an alternative to Bell
Canada's Centrex III service and TELUS' statement in Tariff Notice 150,
23 August 2004 that IP Evolution is similar to TELUS' current Centrex
service and is being offered as either an enhancement or an alternative
to Centrex service. The Commission notes further that Bell Canada's and
TELUS' tariffs for their respective Category 4 VoIP services allow
customers to migrate their users from Centrex locals to Category 4 local
VoIP service individually, while remaining in one Centrex group.
Clearly, these services are, or will be, used as replacements for
existing Centrex services. |
120. |
TELUS took the position that Categories 3
and 4 VoIP services are in essence the same as their circuit-switched
counterparts, regardless of the difference in technology. As a TELUS
witness stated, |
|
TELUS does not seek to escape local exchange regulation in its
traditional incumbent territories merely by changing the technology
inside our networks. [Translation] It is not by simply replacing its
Class 5 switches with packet routers that an ILEC can justify
forbearance from regulation. That would be merely a change in the
technology used.
|
121. |
In regard to Category 2 local VoIP services,
a number of parties argued that the fact that there are two "purchase
decisions" involved, in that Internet access service must be obtained
separately from local VoIP service, differentiates the service from
circuit-switched local exchange service, as well as Category 3 VoIP services.
The Commission notes, however, that for those customers who already have
high-speed Internet access service, there is only one purchase decision
required for Category 2 local VoIP service, just as for circuit-switched
local exchange service. Moreover, an ILEC could offer a bundle,
consisting of high-speed Internet access and Category 2 local VoIP service
as a single purchase, for a single price. In the Commission's view, the
fact that Category 2 services may be offered separately from the access
service will not be a determinative factor in whether or not Category 2
VoIP service will be marketed and offered by the ILECs, and perceived by
consumers, as a replacement for circuit-switched local exchange
services. |
122. |
Some parties argued that Category 2 local
VoIP services have certain limitations, regarding service and voice
quality, security, reliability (e.g. lack of back-up power) and lack of
E9-1-1 capabilities, which could affect the rate of substitution by
consumers. The record of this proceeding indicates, however, that as
VoIP services evolve, VoIP service providers will improve service
offerings, as a result of regulatory requirements (e.g. E9-1-1),
consumer demand and competitive pressures. |
123. |
Furthermore, the Commission notes that, as
submitted by some parties, when an ILEC provides Category 2 VoIP services
over its own access facilities, the ILEC has the ability to control and
manage the underlying infrastructure that delivers the service.
Accordingly, in these circumstances, the ILEC is in a position to
address many, if not all, of the limitations associated with Category 2
VoIP service, and offer a service that is essentially the same as a
Category 3 VoIP service. Moreover, to the extent that quality
deficiencies remain, the Commission considers, as noted by many parties,
that, in making purchase decisions, customers will weigh the limitations
against the relative price for the service and the advantages of VoIP services
as compared with circuit-switched local exchange services. |
124. |
The Commission considers that neither the
additional features nor the limitations of local VoIP services define or
modify the fundamental purpose of the service nor will they prevent
consumers from perceiving local VoIP service a replacement for
circuit-switched local exchange service. |
125. |
Indeed, the Commission notes that several
local VoIP service providers have indicated their intention to provide
LNP, which is only required if customers intend to replace their current
telephone service with the local VoIP service. In fact, the Commission
notes that Primus indicated, on a confidential basis, the proportion of
its residential and business customers that are currently porting
numbers. While VoIP services are still in the early stages of
development and there is minimal empirical evidence available with
respect to porting numbers to VoIP services, the Commission considers
that Primus' numbers regarding LNP are materially significant, and
indeed a clear indication of the replacement of circuit-switched local
exchange service with local VoIP service. |
126. |
Based on the record of this proceeding, the
Commission concludes that local VoIP services satisfy, or will satisfy,
the same general user requirements of consumers of circuit-switched
local exchange services. The Commission therefore finds that local VoIP services
are close substitutes for circuit-switched local exchange services, and
therefore are part of the same relevant market as these circuit-switched
services. |
127. |
The Commission notes that the Companies
stated that the relevant market includes local wireline and wireless
services, as well as other Internet data services (such as Instant
Messaging among PC users), submitting that their usage is often a
substitute for voice communication. However, the Commission does not
consider that the Companies have presented evidence to support this
position. The Commission considers that it is not sufficient to argue
that some usage of one service has been replaced by the usage of
another. |
128. |
The Commission considers that the Companies
have not presented sufficient evidence to demonstrate that Internet data
services, such as Instant Messaging, are offered, purchased or used as
substitutes for local exchange service, let alone as close substitutes.
With respect to mobile wireless service in particular, the Commission
notes that this service has been treated as a separate market for
regulatory purposes since its introduction two decades ago. Further, the
Commission further notes that in its Report to the Governor in
Council: Status of Competition in Canadian Telecommunications Markets –
Deployment/Accessibility of Advanced Telecommunications Infrastructure
and Services, 25 November 2004 (2004 Competition Report), indicated
that as of 2003, less than 2% of Canadian households had wireless
service only. In the Commission's view, this suggests that Canadian
users do not regard mobile wireless as a close substitute for wireline
telephone service. The Commission therefore finds that the Companies'
definition of the relevant market is untenable at this time. |
|
Market power
|
129. |
Under the Decision 94-19
framework, the second step is to determine the market power of a given
firm with respect to the relevant market. |
130. |
As noted above, forbearance with respect to
local exchange services was not requested by any of the ILECs in this
proceeding.6 |
131. |
While market share may not always be
determinative of market power, it is clear that the ILECs are the
dominant providers of local exchange services in Canada. The
Commission's 2004 Competition Report indicated that the ILECs accounted
for 98% of local residential revenues and 92% of local business revenues
in 2003 and that competitors, including ILECs out-of-territory,
accounted for 2% of local residential revenues and 8% of local business
revenues. The Commission notes that there was no evidence presented in
this proceeding to demonstrate that those market shares have altered
materially since the end of 2003 or that the ILECs do not have market
power in relation to local exchange services. |
132. |
The Commission therefore determines, based
on the Decision 94-19 framework,
that it would not be appropriate to refrain, at this time, from the
exercise of any power or the performance of any duty under sections
24, 25, 27, 29 and 31 of the Act in relation to local VoIP services
offered by the ILECs. |
|
|
133. |
As indicated above, the Commission considers
that in order to fully consider the arguments of parties seeking forbearance
for VoIP services in this proceeding, it is appropriate to conduct
two separate analyses: one within the Decision 94-19
framework, and one outside of that framework. With respect to the
latter, as subsection 34(2) of the Act requires the Commission
to forbear from regulation where the terms set out in that section are
satisfied, the Commission turns to it first. |
|
Subsection 34(2)
|
134. |
Subsection 34(2) of the Act reads as
follows: |
|
Where the Commission finds as a question of fact that a
telecommunications service or class of services provided by a Canadian
carrier is or will be subject to competition sufficient to protect the
interests of users, the Commission shall make a determination to
refrain, to the extent that it considers appropriate, conditionally or
unconditionally, from the exercise of any power or the performance of
any duty under sections 24, 25, 27, 29 and 31 in relation to the
service or class of services.
|
|
Positions of parties
|
135. |
In the Companies' view, the ILECs did not
have market power in the provision of VoIP services, and would therefore
not be able to introduce a successful VoIP service priced above
competitive levels. They argued that there was already vigorous
competition for Category 2 VoIP services, that cable companies in
particular would be formidable facilities-based competitors in the
provision of Category 3 VoIP services, and that Bell Canada was the only
ILEC that had launched an in-territory Category 4 VoIP service, which it
did only after others had launched Category 4 VoIP services in Bell
Canada's territory. The Companies also submitted that customers who
subscribed to VoIP services had the safety net of regulated local
exchange services and of wireless services to meet their communications
needs if VoIP services proved unsatisfactory. |
136. |
With respect to the claim that there was
already vigorous competition in the provision of VoIP services, the CCTP
submitted that the current roll-out and development of VoIP services in
Canada was responding well to customers' needs. It argued that there
were now and would continue to be wider choices available to Canadians
with respect to VoIP services than there were currently available in
wireless, a market in which the Commission did not apply economic
regulation. |
137. |
The Companies argued that many years of
actual industry experience invalidated claims that the ILECs could
leverage market power in one area to eliminate competition in another.
They stated that over the last 25 years, the various segments of the
telecommunications service industry had been opened to competition, and
that the ILECs had never eliminated competition; in fact, all sectors
that had been opened to competition, and where the Commission had
forborne from regulating the ILECs, remained vibrantly competitive. They
cited wireless, retail IS, long distance, private lines, switched data
services, and terminal devices as examples. |
138. |
The Companies submitted that some parties
might argue that prices for ILEC VoIP services should be regulated to
prevent ILECs from lowering prices to force competitors from the market.
The Companies and TELUS submitted that this argument had no economic
rationale, in that a low pricing strategy would not be effective in
driving competitors from the market, because the barriers to entry were
low, the number of market entrants was high, and the size of some
anticipated entrants was large. Several other parties supporting the
Companies' and TELUS' position agreed that barriers to entry were low. |
139. |
TELUS argued that neither functional
equivalence nor substitutability was the relevant test for determining
whether or not price regulation was required for access-independent VoIP service.
It submitted that the correct test was whether or not TELUS could exert
market power to act anti-competitively. TELUS argued it had no market
power to act anti-competitively in the provision of access-independent
VoIP service because it was not dominant in the provision of
in-territory high-speed retail IS service, as the Commission had
recently affirmed. Second, TELUS stated it could not prevent its
high-speed Internet customers from purchasing access-independent VoIP services
from numerous new entrants. Finally, TELUS submitted that it did not
have control over any essential facilities that competitors needed in
order to provide access-independent VoIP service. |
140. |
Additionally, TELUS stated that with respect
to access-dependent VoIP services, it generally supported the
Commission's preliminary view that they should be subject to the existing
local exchange carrier (LEC) regime established in Decision 97-8
and subsequent determinations. As noted above, TELUS emphasized that
it was not seeking forbearance from economic regulation of PES, nor
any PES-like access-dependent VoIP service not carried over the
Internet that it might offer in the future. TELUS acknowledged that
simply changing the underlying technology of the local access network
from circuit-switched to packet-switched would not change the network
or its basic associated service. |
141. |
Alcatel submitted that the Commission
should forbear from economic regulation of VoIP services, consistent
with the need to maintain a high rate of innovation and rapid market
deployment for the next generation of broadband services. In Alcatel's
submission, new entrants would effectively provide a price cap for VoIP services. |
142. |
Most other parties disagreed with the
Companies' and TELUS' views concerning their lack of market power in
respect of local VoIP services. They argued that granting forbearance
would run counter to the Commission's goal of facilities-based
competition and that it would offer the incumbents advantages that would
result in anti-competitive behaviour on their part and higher rates for
users. |
143. |
Cybersurf stated that if the Companies and
TELUS actually offered a Category 2 VoIP service, as opposed to a
Category 3 or 4 VoIP service, it did not object if forbearance was
granted. However, Cybersurf stated that it would be very easy for ILECs
to route their own VoIP traffic packets on their own IP-based networks
to ensure a superior quality of service and greater PES functionality
for their own end-users, while allowing competitor traffic to be routed
along the Internet without special treatment. Cybersurf submitted that
it would be difficult to ensure that the ILECs actually were offering
Category 2 VoIP services, as opposed to Category 3 or 4. Therefore,
Cybersurf submitted that forbearance granted to Category 2 VoIP services,
offered by an ILEC or cable carrier in-territory, must include a
condition prohibiting such behaviour and must be backed up by a method
of verification to ensure that such conduct does not occur. |
144. |
MCI Canada argued that if the ILECs' VoIP services
were functional substitutes for PES (a matter which they stated the
ILECs conceded), and that the ILECs were dominant in the market for PES
(a matter that they stated the ILECs did not attempt to refute), then it
logically followed that the ILECs were dominant in the provision of VoIP services.
MCI Canada submitted that given the ILECs' 97% share of the PES market
and their virtual monopoly in the provision of broadband access
services, it was ludicrous to think that the ILECs would not use their
dominance and control in these markets to engage in anti-competitive
behaviour. It stated that simply because the ILECs might choose to
deliver PES over a different or evolving technology platform did not
make them any less dominant in the retail market for voice services or
in the wholesale markets for local access and transport services.
Therefore, MCI Canada submitted, deregulation of the ILECs' VoIP services,
at this stage of competition in the local market, would not only spell
disaster for competitive VoIP service providers, but would also
seriously damage the fledgling industry of CLECs, which had been trying
to establish themselves in the market ever since it was first opened to
competition. |
145. |
The CCTA submitted that for the ILECs, VoIP service
was a threat to their monopoly in the local exchange services market and
that they would therefore have an incentive to lose money on VoIP service,
in order to preserve their monopoly for as long as possible. |
146. |
The Consumer Groups submitted that without
economic regulation for ILECs, these providers could price VoIP below
cost, create barriers to access to their networks by competitive VoIP providers
and bundle unregulated Internet access services with VoIP in an
anti-competitive fashion. QMI also stated that the ILECs had the
financial means and incentive to pursue below-cost pricing practices to
destroy competition. |
147. |
UTC asserted that in a forborne
environment, an ILEC could: use VoIP to circumvent the winback rules
whenever a PES customer was lost to a competitor, avoid the tariff
requirements and bundling rules for customer-specific contracts by
substituting VoIP for traditional PES service elements, and engage in
targeted pricing initiatives on a selective basis, using VoIP to
undercut competitors wherever it faced competition, while recouping
higher PES rates from captive customers. |
148. |
MTS Allstream submitted that, as the
dominant providers of both PES and DSL Internet access services in their
respective serving territories, the Companies and TELUS had both the
incentive and the opportunity to use their market power and incumbency
status in each of these markets to steer as much voice traffic as
possible over their fully ubiquitous, managed IP networks. MTS Allstream
suggested that the Companies and TELUS knew that fully managed VoIP services
would have a much greater chance of success in the market because these
services were private and secure and had a higher quality of service
than access-independent VoIP services, which were accessed over the
public Internet. |
149. |
Yak listed several specific types of
behaviour that the ILECs could contemplate, in order to lever their
existing market power and thus stifle choice. Yak suggested that the
ILECs could: |
|
a) Increase the price of stand-alone DSL (a forborne service under
the current rules), while reducing the price of a bundle comprising
VoIP plus DSL and keeping steady the pricing for PES plus DSL. In
doing so, the ILECs would destroy the market for independent VoIP operators
over their DSL service, and entrench their position;
|
|
b) Encourage PES customers to migrate to a VoIP offering which is
indistinguishable from PES, and indeed, has some additional features
or improvements in service quality which might provide a migration
inducement. Once done, the ILECs could deny equal access, including
1010 dial-around service and number portability, thus undermining the
long distance, local and VoIP business of competitors;
|
|
c) Introduce a premium broadband IS and make this service available
only to their own VoIP customers. The premium service could have
better service options in terms of download or upload speeds,
increased bandwidth capacity, and/or superior repair and response
times. Again, the availability of such a restrictive product would
deter many customers from using an alternative VoIP provider; and
|
|
d) Seek to enter into multi-year contracts with customers in all of
these activities, a conduct which is permitted for forborne
activities. New entrants would thus be foreclosed from gaining these
customers for a lengthy period.
|
150. |
The CCTP submitted that the concern
expressed by some parties that ILECs would be able to price below cost
to eliminate competitors was unfounded, given the number of existing and
anticipated suppliers offering VoIP services and the evidence and
history of forborne services. |
151. |
Yak suggested that the Commission may want
to entertain early forbearance for ILEC "access non-accompanying" VoIP,
where the ILEC wishes to offer VoIP service to cable company broadband
customers; however, Yak noted that the difficulty was to ensure that the
ILECs' VoIP service was not sold to the ILECs' own DSL customers except
in accordance with tariff requirements. |
152. |
The CCTA submitted that the ILECs'
ownership and control over the existing infrastructure gave them the
ability to gain advantages in offering in-territory access-independent
VoIP services that were not available to their competitors. It suggested
that the ILECs could self-supply all of the critical inputs necessary to
provide an in-territory access-independent VoIP service, while any non-ILEC
access-independent VoIP service provider would need to obtain at least
some of these inputs from the ILECs or another LEC. |
|
Commission's analysis and determinations
|
153. |
The Companies' arguments regarding the
competitive environment for local VoIP services included the following
points: |
|
- cable companies will emerge as strong competitors for the
provision of local VoIP services;
|
|
- barriers to entry for local VoIP services, especially Category 2
services, are low; as a result, Category 2 operators are already
providing vigorous competition and offering low prices;
|
|
- because of the low barriers to entry, it would be irrational for
the Companies to engage in predatory practices, given the
unrecoverable revenue losses that such practices would entail;
|
|
- experience with forbearance in other sectors of the
telecommunications service industry, such as long distance, wireless
and IS, has demonstrated that the ILECs cannot leverage market power
in one area to eliminate competition in another; and
|
|
- customers who subscribe to VoIP services have the safety net of
regulated local exchange services and of wireless services to meet
their communications needs if VoIP services should prove to be
unsatisfactory in a forborne environment.
|
154. |
TELUS advanced similar arguments in support
of its request that tariffs not be required for access-independent VoIP services,
including: |
|
- access-independent VoIP services are highly competitive and ILECs
would have no market power;
|
|
- ILECs would have no opportunity to leverage local exchange
services market power;
|
|
- ILECs would have no other opportunity to act anti-competitively;
and
|
|
- forbearance would not harm the interest of users or competition.
|
155. |
With regard to arguments concerning the
capacity of cable companies to emerge as strong competitors in VoIP services,
the Commission recognizes that cable companies possess certain strengths
comparable to those of the ILECs. These include large and established
customer bases, experience in operating an IP network infrastructure,
and access connections to households. |
156. |
The Commission notes, however, that cable
companies face certain obstacles that the ILECs do not, and that the
ILECs have certain advantages not shared by the cable companies. For
example, the cable companies' existing shared cable network must be
upgraded in order to offer quality local exchange service currently
offered by the ILECs and expected by customers. Furthermore, the
Commission notes that cable companies – with the exception of EastLink –
have virtually no experience in either the residential or business
market for local exchange services, and will therefore have to build
expertise in serving telephone customers. Processes related to customer
transfer, including number portability, directory listings, operator
services, E9-1-1, and billing, will have to be implemented successfully.
|
157. |
Alone among existing and potential VoIP service
providers, the ILECs own and operate a ubiquitous PSTN network,
including the access and underlying infrastructure, that encompasses
both business and residential customers. PSTN access is an integral
component of any local VoIP service and the ILECs are the only provider
with ubiquity. |
158. |
Furthermore, the Commission notes that the
ILECs have the ability to migrate existing circuit-switched local
exchange service customers to a fully managed VoIP service that is both
owned and operated by them. For example, the ILECs' Category 4 VoIP tariffs
allow for the incremental migration of a particular customer's
circuit-switched Centrex locals to Centrex IP service. The Commission
considers that the ILECs' ability to migrate their existing customers so
easily represents a significant barrier to entry for competitors, as
competitors would not be able to migrate, to their Category 4 VoIP service,
an ILEC Centrex customer's locals one at a time. |
159. |
With regard to the argument that Category 2
providers are already providing vigorous competition for local VoIP services
at low prices, the Commission is of the view that it is too early to
draw conclusions about the state of competition, given the fledgling
stage of the development of Category 2 VoIP services. Evidence presented
in this proceeding was, in the Commission's view, persuasive regarding
the competitive difficulties that Category 2 service providers were
likely to face in a forborne environment. |
160. |
The Commission considers that the ILECs
possess the relative advantage of their strong incumbent position in
local exchange services. Facilities-based competition in local services
has been in place in Canada for nearly eight years and yet, as of the
end of 2003, the ILECs accounted for 98% of local residential revenues
and 92% of local business revenues across the country. The Commission
also notes that even in the long distance service market, which has been
fully competitive for thirteen years, only 41% of residential
subscribers have tried a long distance provider other than an ILEC.7
In the Commission's experience, customers of local exchange service are
very reluctant to change local service providers. This inertia –
particularly with respect to residential customers – has proven to be a
significant hurdle for competitors. |
161. |
With regard to the arguments about the
competitive environment in Category 2 services, the Commission agrees
that barriers to entry for Category 2 services are low. However,
Category 2 VoIP service providers are dependent on service components
purchased from LECs such as numbers and PSTN connections. In areas where
there are no CLEC alternatives available, these service providers would
rely solely on the ILEC for these components. The ILECs, by contrast,
with their ubiquitous components and facilities, including access
facilities, are in a position to self-supply all that is needed to offer
local VoIP services. |
162. |
The Commission considers that the ILECs
would have both the incentive and the ability to offer unregulated
Category 2 local VoIP services to their own high-speed retail Internet
access customers with superior quality of service to that offered by
their competitors. Moreover, while a Category 2 local VoIP service would
on its face involve two purchase decisions, where the ILEC provided both
the DSL and a Category 2 local VoIP service it could, as indicated
above, offer a combined bundle with the result that the two purchase
decisions would quickly collapse into one. The Commission considers,
therefore, that the ILECs would be able, with relative ease, to
transform their Category 2 local VoIP service, where they also provided
the Internet access connection, into a service that was
indistinguishable from a Category 3 local VoIP service. The Commission
accordingly considers that it would be difficult for Category 2 local
VoIP service providers to compete against an ILEC in these
circumstances. |
163. |
With regard to the argument that it would
be irrational for the ILECs to engage in below-cost pricing because,
given the low barriers to competitive entry, it would not be possible
for the ILECs to recapture the foregone revenues, the Commission
considers that the evidence presented in this proceeding was not
convincing on this point. No persuasive arguments were presented to the
effect that, in a forborne environment, the ILECs would not have the
motivation, the means and the opportunity to engage in below-cost
pricing that would have the effect of stifling competition. Indeed, the
Commission considers that it would be rational to expect the ILECs, in a
forborne environment, given their current dominance in the provision of
local exchange services, to seek to protect their dominant position. |
164. |
The Commission considers that it can be
expected that the revenue stream provided by their dominant position in
local services would make it feasible for the ILECs to provide local
VoIP services below cost (on a stand-alone basis, and particularly when
bundled with DSL) in the short term. This would be likely, in the
Commission's view, to stifle competition, which in turn would make it
possible for the ILECs, in the medium to long term, to raise or maintain
prices above those that would prevail in a competitive market. |
165. |
Moreover, the Commission would expect that,
in a forborne environment, the ILECs' ability to target competitors'
customers would also permit the ILECs to control the migration of
circuit-switched local exchange service customers to their own and to
competitors' local VoIP services, thereby allowing them to preserve, as
much as possible, their existing customer base. |
166. |
The Commission considers that if
forbearance were granted prematurely, the ILECs' ability and incentive
to engage in the combination of targeted below-cost pricing of local
VoIP services, as well as bundling strategies, prior to the entry and
roll-out of other facilities-based competitors, would have a material
negative impact on the potential for sustainable competition in the
provision of local VoIP services, and therefore on the protection of the
interests of users. These strategies would unduly impair the competitive
abilities of all potential market participants, and not just those
market participants who depend upon the ILECs for required services and
facilities. |
167. |
With regard to the Companies' arguments
concerning the competitive markets that emerged following forbearance in
other sectors of the telecommunications service industry, the Commission
considers that the precedents cited by the Companies were not helpful to
their case. In respect of long distance, private lines, switched data
services and terminal devices, when the Commission issued its
forbearance determinations, it was satisfied, based on the evidence
presented to it, that there was sustainable competition in each market
and that the incumbents did not possess market power. The evidence
presented in this proceeding has not persuaded the Commission that
comparable conditions are present with respect to the provision of local
VoIP services. |
168. |
With respect to wireless, at the start of
mobile wireless deployment, the advantages of incumbency were far less
significant than they are in respect of VoIP services currently. The two
licensed service providers had to construct new networks, interconnect
to the PSTN, and overcome a number of other challenges related to
quality of service, coverage and service features. With respect to
retail IS forbearance, at the time of the forbearance determinations,
the ILECs had even fewer advantages of incumbency and even less
incentive and opportunity to engage in anti-competitive activity.
Moreover, in the case of both mobile wireless and IS, these were new and
distinct services for both ILECs and competitors. |
169. |
With regard to the Companies' argument that
customers who subscribe to VoIP services have the safety net of
regulated local exchange services and of wireless services to meet their
communications needs if VoIP services proved unsatisfactory, the
Commission does not consider that this argument has a direct bearing on
the issue of whether, in the case of VoIP services, there is sufficient
competition to protect the interest of users, as required under
subsection 34(2) of the Act. |
170. |
Based on the record of this proceeding, the
Commission is unable to find, at this time, as a question of fact, that
local VoIP services provided by the ILECs are or will be subject to
competition sufficient to protect the interests of users. |
171. |
Accordingly, the Commission considers that
it would not be appropriate, at this time, to refrain pursuant to
subsection 34(2) of the Act, from the exercise of any power or the
performance of any duty under sections 24, 25, 27, 29 and 31 of the Act
in relation to local VoIP services provided by the ILECs. |
|
|
172. |
Subsection 34(1) of the Act reads as
follows: |
|
The Commission may make a determination to refrain, in whole or in
part and conditionally or unconditionally, from the exercise of any
power or the performance of any duty under sections 24, 25, 27, 29 and
31 in relation to a telecommunications service or class of services
provided by a Canadian carrier, where the Commission finds as a
question of fact that to refrain would be consistent with the Canadian
telecommunications policy objectives.
|
173. |
The Canadian telecommunications policy
objectives referred to in subsection 34(1) (the telecommunications
policy objectives) are found in section 7 of the Act, which reads
as follows: |
|
It is hereby affirmed that telecommunications performs an essential
role in the maintenance of Canada's identity and sovereignty and that
the Canadian telecommunications policy has as its objectives
|
|
(a) to facilitate the orderly development throughout Canada of a
telecommunications system that serves to safeguard, enrich and
strengthen the social and economic fabric of Canada and its regions;
|
|
(b) to render reliable and affordable telecommunications services
of high quality accessible to Canadians in both urban and rural
areas in all regions of Canada;
|
|
(c) to enhance the efficiency and competitiveness, at the
national and international levels, of Canadian telecommunications;
|
|
(d) to promote the ownership and control of Canadian carriers
by Canadians;
|
|
(e) to promote the use of Canadian transmission facilities for
telecommunications within Canada and between Canada and points
outside Canada;
|
|
(f) to foster increased reliance on market forces for the
provision of telecommunications services and to ensure that
regulation, where required, is efficient and effective;
|
|
(g) to stimulate research and development in Canada in the field
of telecommunications and to encourage innovation in the provision
of telecommunications services;
|
|
(h) to respond to the economic and social requirements of users
of telecommunications services; and
|
|
(i) to contribute to the protection of the privacy of persons.
|
|
Positions of parties
|
174. |
Parties made a number of submissions with
respect to how forbearing from regulating VoIP services might assist in
contributing to investment, innovation, risk-taking, a greater reliance
on market forces and the international competitiveness of the Canadian
telecommunications industry. |
175. |
The Companies and a number of other parties
submitted that if regulation forced some market participants to obtain
tariff approval before introducing new services or improving existing
ones, there would be a strong disincentive to take risks and to invest,
which would affect the level of innovation and associated job creation.
These parties claimed that regulated Canadian carriers would be unable
to respond quickly to changing market conditions, to introduce new VoIP services
and to modify or withdraw existing ones in response to changing market
conditions. Moreover, a requirement to file tariffs on the public record
would provide valuable marketing information to competitors, which the
Companies claimed would dampen the incentives of non-regulated
competitors to obtain their own market knowledge and to be innovators in
the development of products and pricing options. |
176. |
The Companies suggested that forbearance
would, by contrast, provide a regulatory framework conducive to the
development and offering of VoIP services, by the Companies, thereby
promoting innovation, and the competitiveness of Canadian
telecommunications internationally. |
177. |
The CCTP agreed that the effect of tariff
regulation of VoIP services would be to undermine innovation,
investment, choice and competitiveness for Canada. Alcatel also
supported forbearance in economic aspects of VoIP regulation, expressing
its concern that an unfavourable regulatory environment relating to VoIP for
ILECs would materially reduce investment plans. |
178. |
Other parties disagreed with these views.
For its part, MTS Allstream suggested that the key to encouraging
investment, innovation and choice remained the elimination of barriers
to entry. MTS Allstream agreed with the CCTA's position that premature
deregulation of the ILECs' local VoIP services would allow them to raise
the cost of entry or diminish the likelihood of successful entry of
others by locking up existing customers or by offering artificially low
prices to defend their market position. MTS Allstream considered that
this would reduce competition and innovation. |
179. |
Cogeco agreed that facilities-based
competition in local telephony had to remain the final objective,
because only that would provide lasting benefits to customers in the
form of lower rates, better service and innovation, which it asserted
was the key to economic growth and investment. |
180. |
Comwave submitted that VoIP innovation had
not come from the ILECs at all. It suggested that innovation would come
from companies such as itself, which would only emerge in an environment
that did not see VoIP services marginalized by larger players imposing
"triple plays." |
181. |
Call-Net submitted that innovations had
co-existed with important social and economic regulatory policies,
designed to protect consumers from abuse of market dominance and to
encourage the development of a competitive telecommunications market in
Canada, in the face of market failure and structural biases in the
market. Call-Net submitted that innovation could occur and had occurred
"within the type and extent of social and economic regulations
highlighted by the Commission in its preliminary views." |
182. |
The Consumer Groups submitted that VoIP was
simply an incremental, technological change in the delivery of voice
communications and the Commission normally did not abandon regulatory
requirements due to simple technological improvements in the name of
fostering innovation. In support of this view, they stated that the
implementation of digital-switching by LECs in the 1990s had occurred
without any forbearance to aid in implementation of this technological
improvement. |
|
Commission's analysis and determinations
|
183. |
While parties did not for the most part,
specifically address the telecommunications policy objectives in the
Act, the Commission will address their arguments in light of these
objectives, whenever this is appropriate. |
184. |
The parties that supported forbearance
focused on the argument that forbearance would encourage investment,
innovation and risk-taking, would mean minimal regulation and would
stimulate the international competitiveness of the Canadian
telecommunications industry. These parties also argued that regulation
would deter investment and innovation because the process associated
with regulation – principally disclosure of market-sensitive
information, regulatory lag and resulting competitive disadvantage –
would hamper the competitive position of the regulated company and
advantage its competitors. |
185. |
The Commission recognizes that the
successful pursuit of the Canadian telecommunications policy objectives
requires substantial investments to be made in the Canadian
telecommunications sector. As far as the ILECs are concerned, the record
shows that they are already making the investments necessary to migrate
their networks to IP technology and will continue to do so. The
Commission is of the view, moreover, that the existing price cap
regulatory regime continues to provide the ILECs with incentives to
invest in IP facilities and services, even if they continue to be
required to file tariffs, in that the benefits of the network
efficiencies that they derive by implementing IP can be passed on to
ILEC shareholders. |
186. |
In addition, however, the Commission
considers that the attainment of the telecommunications policy
objectives also requires considerable investment from competitors. The
Commission considers that premature forbearance in respect of local VoIP services
would significantly reduce the ability and/or incentive of competitors
to make the necessary investments to achieve these objectives. |
187. |
With respect to innovation, the Commission
notes that the ILECs have been innovators in the provision of
telecommunications services in Canada where competition has been
permitted and they have continued to be regulated. The Commission
considers that regulated competition in areas where the ILECs have
remained dominant has allowed the entire Canadian telecommunications
industry to achieve high levels of innovation, investment and
efficiency. The Commission is of the view that there is nothing in the
current regulatory environment that impedes ILECs from using the
opportunities provided by IP to offer new and innovative services.
Indeed, competition from cable carriers and other service providers who
use IP will provide an incentive for ILECs to innovate. |
188. |
The Commission has considered the arguments
presented as to how forbearance would be either consistent or
inconsistent with a number of the other telecommunications policy
objectives, including achieving affordable telecommunications services
and fostering increased reliance on market forces for the provision of
telecommunications services. In the end, the Commission considers that
premature removal of the tariffing requirements for ILECs' local VoIP services
and a premature reliance on market forces would diminish the likelihood
of sustainable competition and its attendant benefits to consumers of
lower rates, new services, and innovation. |
189. |
Based on the record of this proceeding, the
Commission is unable to find, as a question of fact, that to refrain at
this time from exercising any power or performing any duty under
sections 24, 25, 27, 29 or 31 of the Act in relation to local VoIP services
provided by the ILECs would be consistent with the Canadian
telecommunications policy objectives. |
190. |
In regard to the Companies' arguments about
regulatory lag leading to competitive disadvantage, the Commission
has recognized that timeliness in disposing of ILEC tariffs was a
concern that needed to be addressed. In response to this concern,
the Commission has recently released Introduction of a streamlined
process for retail tariff filings, Telecom Circular CRTC
2005-6, 25 April 2005
(Circular 2005-6),
which sets out how ILEC tariff filings will be disposed of in a timely
manner. The Commission intends to address all compliant ILEC retail
tariff filings within ten days of receipt of application. This will
include any ILEC local VoIP tariff filings. The Commission also
notes that the ILECs can request ex parte treatment of
their tariff filings, provided they are able to demonstrate that the
competitive harm that they may incur from disclosure outweighs the
traditional public interest in disclosure, as outlined in Decision
94-19. Filings made on an ex parte
basis allow the ILECs to enter the market with a new service or
make changes to an existing service without granting their competitors
prior knowledge of such service offerings. The Commission considers
that these measures will help to ensure that regulation of ILECs is
efficient and effective, consistent with the telecommunications policy
objectives. |
|
Subsection 34(3)
|
191. |
Subsection 34(3) of the Act reads as
follows: |
|
The Commission shall not make a determination to refrain under this
section in relation to a telecommunications service or class of
services if the Commission finds as a question of fact that to refrain
would be likely to impair unduly the establishment or continuance of a
competitive market for that service or class of services.
|
192. |
Based on the Commission's determinations
above, that it would not be appropriate to forbear pursuant to
subsections 34(1) and 34(2) of the Act, it is unnecessary to consider
subsection 34(3) of the Act, in this case. |
|
Conclusion
|
193. |
In light of the foregoing, the Commission
denies the Companies' and TELUS' requests for forbearance from
the regulation of local VoIP services. |
194. |
The Commission determines that local VoIP services
should be regulated as local exchange services, and that the regulatory
framework governing local competition as set out in Decision 97-8
and subsequent determinations applies to local VoIP service providers,
except as otherwise provided in this Decision. |
|
IV. Regulatory framework
|
|
Application of the regulatory framework for local competition
|
195. |
In this section of the Decision, the
Commission addresses matters regarding the implementation of the
regulatory framework for local competition as it applies to local VoIP service
providers. Specifically, the Commission addresses those aspects of the
regulatory framework to which parties argued specific attention was
required, in order to accommodate the provision of local VoIP services. |
|
Registration of VoIP resellers
|
|
Background
|
196. |
The Commission stated, in Interexchange
competition and related issues, Telecom Decision CRTC 85-19,
29 August 1985, that resale is the subsequent sale or lease on a commercial
basis, with or without adding value, of communications services or
facilities leased from a carrier. |
197. |
In Competition in the provision of public
long distance voice telephone services and related resale and sharing
issues, Telecom Decision CRTC 92-12,
12 June 1992 (Decision 92-12), the Commission
required resellers and sharing groups to register with the Commission
prior to receiving service. |
198. |
In Telecom Order CRTC 97-590,
1 May 1997 (Order 97-590),
the Commission noted that, where the Internet was used as the underlying
transmission facility by a service provider to provide public
switched IX voice or data services, the service provider was to register
as a reseller. |
|
Positions of parties
|
199. |
The Companies noted that Vonage and other
VoIP service providers offering voice applications in Canada were not
listed on any of the Commission's registration lists. |
200. |
Vonage submitted that it did not resell
local PES and, accordingly, should not automatically be subject to
regulatory restrictions that flow naturally from a reseller's shared
network and contractual relationship to a LEC. Vonage stated that it
should be classified for what it was, namely a VoIP provider. |
201. |
Yak submitted that VoIP service providers
should be required to register with the Commission. |
|
Commission's analysis and determinations
|
202. |
In Order 97-590,
the Commission determined that service providers that used the Internet
to provide public switched IX voice or data services were required
to register as resellers. The Commission considers that this determination
applies to IX VoIP service providers that are not Canadian carriers. |
203. |
Furthermore, with respect to local VoIP service
providers (other than Canadian carriers), the Commission considers that
since they lease services or facilities from LECs, such as PSTN access
and numbers, that are used in the provision of local VoIP services, they
operate as local VoIP resellers. |
204. |
Accordingly, the Commission directs that
all local VoIP service providers that are not operating as Canadian
carriers are to register with the Commission as resellers, as a
condition of obtaining services from a Canadian carrier or other TSP.
|
|
Access to numbers and local number portability
|
|
Background
|
205. |
In Decision 97-8,
the Commission permitted CLECs direct access to numbering resources
and required all LECs to implement LNP. In Telecom Order CRTC 99-5,
8 January 1999 (Order 99-5),
which dealt with the issue of porting numbers by non-LECs, the Commission
concluded that extending access to the portability database to non-LECs
in the absence of the corresponding obligations on the part of LECs,
would alter the terms of the framework established for local competition
in Decision 97-8,
in a manner which was contrary to the public interest. |
206. |
In a letter dated 8 April 1999, the
Commission approved CISC Consensus on Adherence by Resellers
to LEC Obligations relating to 9-1-1, Message Relay Service (MRS) and
Number Retention, which required resellers to release telephone
numbers for porting where customers moved to other service providers. |
|
Positions of parties
|
207. |
Yak requested that the Commission clarify
that local VoIP service resellers would be permitted to obtain numbers
directly from the Canadian Numbering Administrator (CNA), submitting
that obtaining numbers from LECs was expensive. It submitted that
numbers were a valuable national resource and that there was no reason
to prevent legitimate operators from gaining access to the numbers they
needed in order to conduct their business. |
208. |
Cybersurf submitted that access to
numbering resources and to LNP must be made available to VoIP service
providers. |
209. |
TELUS submitted that making central office
codes available to any IP-based service providers not subject to the
regulatory constraints that apply to LECs and wireless service providers
would create numbering inefficiencies, leading to premature area code
exhaust and the early exhaust of the current NANP. |
210. |
FCI Broadband submitted that all VoIP service
providers should be required to provide LNP and that the current rules
regarding access to numbers should continue to apply. |
211. |
The CCTP, AT&T, MCI Canada, and the
Consumer Groups submitted that all VoIP service providers should have
direct access to telephone numbers from the CNA. AT&T argued that the
ability to obtain the numbering resource directly would provide
flexibility to service providers and constraints, if necessary, on the
conduct by LECs providing the resource. MCI Canada and the Consumer
Groups also submitted that all VoIP service providers should have to
provide LNP. |
212. |
The Companies, the CCTA, Rogers, Cogeco,
MTS Allstream, Microcell, Primus, QMI, TELUS, UTC, and Xit submitted
that the existing framework regarding direct access to numbers and
requirement to provide LNP should continue to apply. |
|
Commission's analysis and determinations
|
213. |
In Decision 97-8,
the Commission accorded certain rights, along with accompanying obligations,
to LECs. Included among the obligations was the requirement that all
LECs implement LNP. The Commission considers that this ruling applies
to LECs providing local VoIP services. |
214. |
Included in the rights accorded in Decision
97-8 to CLECs,
but not to resellers, was the right to directly access NANP numbers
from the CNA, as well as the LNP database. Local VoIP resellers,
like resellers of circuit-switched services, are able to obtain numbers
and number portability from any number of LECs in the marketplace,
and are not unduly constrained by the lack of direct access to either.
Given the Commission's determination that local VoIP services
should be regulated as local exchange services, the Commission considers
that the existing rules should apply equally to VoIP service
resellers. |
|
Directory listings
|
|
Background
|
215. |
In Decision 97-8,
the Commission determined that there should be at least one complete
directory made available in each local calling area, so that
any user of the local network is able to obtain the information needed
to use the local network. ILECs are therefore required to provide
complete directory listings to each subscriber. CLECs are required
to provide the telephone numbers of their subscribers to the ILECs
for that purpose. However, there is no such requirement for resellers,
who must pay tariffed rates for the inclusion of the telephone numbers
of their subscribers in the local telephone directory. |
|
Positions of parties
|
216. |
The Companies argued that directory
listings should be driven by customer demand. They submitted that for
Category 2 VoIP services particularly where the customer's 10-digit
telephone number did not correspond to the customer's location, it may
be difficult to determine which directory constitutes the customer's
local directory. TELUS expressed a similar view, highlighting that
access-independent services were nomadic and not geographically based. |
217. |
The Companies also contended that if a
service provider did not know what telephone numbers particular
subscribers had from one day to the next, it would become difficult to
prepare a directory with phone numbers linked to those persons and their
addresses. |
218. |
Call-Net stated that while the ability to
change a telephone number easily might be a feature of VoIP, it was not
clear why anyone would want to do so, because it would then become more
difficult for anyone to call that person. |
219. |
Yak submitted that CISC was the appropriate
body to deal with directory issues. |
220. |
FCI Broadband stated that directory
listings constituted a fundamental dimension to telephone service in
Canada and that this would not change with the displacement of
circuit-switching by packet-switching. FCI Broadband further stated that
although resellers that provided circuit-switched telephony were not
currently subject to any directory listing requirements, this was a
clear example of a requirement that should be imposed on local VoIP service
providers in the public interest, and that to determine otherwise would
be to risk serious erosion in the usefulness of the directory. Xit also
submitted that the current obligations with respect to directory
listings should be maintained. |
|
Commission's analysis and determinations
|
221. |
With respect to the Companies' submission
that directory listings would be difficult to prepare if customers
changed telephone numbers from one day to the next, the Commission notes
that customers can change their numbers with circuit-switched local
exchange service, and considers that VoIP does not raise any new concern
in this respect. |
222. |
With respect to TELUS' and the Companies'
comments that access-independent services are nomadic and not
geographically based, the Commission considers that phone numbers are in
fact geographically based and associated with particular local calling
areas. The Commission considers that directory listings are beneficial
to customers whether or not they are using the nomadic feature of VoIP services,
since it assists others to call them regardless of their location. |
223. |
Given the Commission's determination that
local VoIP services should be regulated as local exchange services, the
Commission considers that the same reasons for requiring ILECs to
provide a comprehensive directory of local telephone numbers in each
local calling area, and for requiring CLECs to provide their local
listings to ILECs for that purpose, apply in the case of local VoIP services.
The Commission does not consider that there is anything specific to
local VoIP services that would justify modifying the existing rules for
ILECs and CLECs, nor does it consider that there is anything specific to
local VoIP services to justify imposing new obligations, either on local
VoIP resellers or on ILECs, with respect to local VoIP service
providers' directory listings. |
224. |
Regarding directory listings for local VoIP services,
there was a question as to which directory would carry a listing when a
local VoIP service customer has a telephone number in an exchange that
is different from the one in which his or her service address is
located. Consistent with what the Commission regards as the main reason
that a customer selects such a telephone number, the Commission
considers that the number should be included in the directory of the
local calling area where the customer can be reached, and can reach
other listed numbers, as a local call. |
225. |
Accordingly, the Commission determines that
existing directory listings requirements for ILECs, CLECs and resellers
will also apply when they provide local VoIP services. Directory
listings should appear in the local directory where calls to and/or from
that number are local calls, regardless of the geographic location of
the customer's service address. |
|
Equal access
|
|
Background
|
226. |
In Decision 92-12,
the Commission introduced competition in public long distance voice
telephone services and required ILECs to provide equal access to interexchange
carriers (IXCs). This allowed telephone subscribers to determine which
IXC they wished to use for their long distance calls when they dialled
1+. In Decision 97-8,
the Commission required CLECs to provide equal access to all IXCs,
at terms and conditions equivalent to the terms and conditions contained
in the ILECs' tariffs. This obligation did not extend to resellers. |
227. |
In Telecom Order CRTC 99-379,
29 April 1999 (Order 99-379),
the Commission rejected a request to extend the equal access obligation
to resellers. The Commission stated that, in light of the fact that
local service resellers have none of the rights of CLECs pursuant
to Decision 97-8,
it would be inappropriate to impose on such resellers such a fundamental
LEC obligation as equal access. |
|
Positions of parties
|
228. |
The CCTA, Cogeco, MTS Allstream, Microcell,
Primus, Rogers, and UTC submitted that the existing requirements for
equal access should apply to local VoIP service providers. Call-Net
noted that its VoIP service offering, which provides an equal access
capability for long distance, incurred no significant additional costs
compared to providing equal access over its regular CLEC service. |
229. |
Call-Net noted that, through contractual
arrangements, resellers were obtaining the rights of CLECs in respect
of access to LNP, bill and keep interconnection arrangements and unbundled
local loops used to provide DSL access services. Call-Net stated that
in an environment in which resellers of VoIP services can offer
the full functionality of a LEC to their customers, they should be
required to assume the CLEC obligations, most notably equal access.
Call-Net submitted that the Commission's rationale in Order 99-379
no longer applied in the new VoIP environment, since resellers
now appeared able to contract most of the rights previously thought
to be only available to CLECs. |
230. |
The Companies noted that equal access was
established to provide PES customers a choice of long distance service
providers at a time when local exchange service was provided by the
ILECs on a monopoly basis. The Companies argued that equal access was
unnecessary since VoIP customers dissatisfied with their long distance
services had the ability to choose another VoIP service provider. TELUS
expressed similar views. Comwave also submitted that VoIP service
providers should not be required to provide equal access. |
231. |
The Companies noted that the systems of existing
long distance service providers were designed to operate in conjunction
with circuit-switched LEC networks; these systems would need to be
supplemented in order to support equal access for VoIP services.
They questioned whether any long distance provider would be willing
to implement such changes, given the current flat-rate pricing structure
of VoIP services. The Companies further submitted that providing
equal access to VoIP customers would present an extremely costly
and complex challenge and the Companies expected there would be no
demand for equal access from VoIP customers. The Companies noted
that in General Tariff approved on an interim basis with modifications
for Microcell Connexions Inc., Order CRTC 2000-831,
8 September 2000, the Commission relieved the ILECs of their obligation
to interconnect their IX networks with that of a wireless CLEC, based
on technical difficulties and costs associated with implementing equal
access. |
232. |
Yak stated that Canadians want access to
alternative long distance suppliers, and argued that the wireless
experience had shown that the absence of equal access leads to higher
long distance charges. It further submitted that if customers perceived
that taking VoIP service would restrict their choice of long distance
provider, and thus increase the cost of long distance calling, they
would be less likely to switch to VoIP service. |
233. |
Yak urged the Commission to continue its
equal access rules and to extend them to resellers, arguing that the
technical and logistical issues were not sufficiently burdensome to
outweigh the undeniable benefits of equal access. Yak suggested that the
issues could be submitted to CISC for consideration and recommendation.
FCI Broadband submitted that all VoIP service providers, including
resellers, should be obliged to provide equal access. In addition, MCI
Canada stated that resellers should be required to provide equal access
to the extent that they were capable. |
234. |
Vonage did not believe it necessary to
allow its VoIP customers to choose their IXC, noting that customers
wishing to have separate providers for local and toll services could
choose to subscribe to traditional telephone service, or access other
communications services through calling cards. |
235. |
Nortel stated that from a technology
perspective, there was no reason why the LECs could not provide equal
access, as long as the call came into a switching system that was
integrated into the PSTN. However, Nortel submitted that VoIP would
present some unique regulatory challenges because of its inherently
non-location specific nature which made it impossible to distinguish
between local, long distance and international services. Nortel's
research indicated that less than 5% of broadband households would pay
for a broadband phone service that did not include long distance or any
additional next-generation services. |
236. |
TELUS submitted that a requirement for
equal access would simply not make sense in the VoIP environment, if it
were even possible to implement. TELUS noted that there was often no
distinction between local and long distance calling using
access-independent VoIP services. |
|
Commission's analysis and determinations
|
237. |
In Decision 94-19,
the Commission was of the view that open access was essential to creating
a ubiquitous public infrastructure, a network of networks to meet
the evolving communications needs of Canadians. |
238. |
The Commission notes that the equal access
obligation originally applied to ILECs in order to ensure that competitive
IXCs would be able to provide services to their customers on the same
footing as the incumbent IXCs. The Commission notes further that the
equal access obligation was extended to CLECs, pursuant to Decision
97-8, to prevent
limiting competition through exclusive agreements between CLECs and
IXCs. More specifically, the Commission considered it necessary, in
Decision 97-8,
to impose equal access obligations on CLECs so that CLECs would not
confer any undue or unreasonable preference with respect to access
to their networks on any person, including IXCs. |
239. |
In the Commission's view, undue preference
to oneself and unjust discrimination against competitive IX service
providers remains a concern, and arises regardless of the underlying
technology being used to provide the local service. The Commission
considers that access by IXCs to end-users remains an important
objective. |
240. |
The Commission disagrees with Call-Net that
the rationale for Order 99-379
does not apply in the new VoIP environment. The Commission considers
that the issues concerning the ability of resellers to engage in contractual
arrangements with CLECs are no different now than they were at the
time that local competition was first permitted. |
241. |
While the Companies submitted that the
implementation of equal access for VoIP services would be extremely
costly and complex, they did not provide evidence to support this claim.
In contrast, Call-Net noted that there were no significant additional
costs in providing equal access with its VoIP product. |
242. |
A number of parties to this proceeding
submitted that equal access should not be required in a VoIP environment,
arguing that a dissatisfied VoIP customer could choose from another VoIP provider,
or could subscribe to a circuit-switched offering, in order to obtain
more satisfactory service. The Commission considers that maintaining the
equal access obligation on LECs providing VoIP service is consistent
with the principle of technological neutrality. In the Commission's
view, it would be inappropriate to relieve LECs offering local VoIP service
from providing equal access when their circuit-switched competitors are
subject to the obligation. Indeed, as ILECs are migrating their
circuit-switched networks to IP, to relieve them of their equal access
obligation with respect to local VoIP services, would allow them
ultimately to abandon the obligation entirely. The Commission considers
that the possibility of a LEC conferring undue or unreasonable
preference with respect to access to its networks continues to be a
valid concern and further considers that consumers should continue to
have options by being able to select IXCs, when selecting VoIP service
from a LEC. Accordingly, the Commission determines that the existing
equal access obligation will apply to LECs providing VoIP services. |
|
Winback rules
|
|
Background
|
243. |
In a Letter Decision entitled Commission
Decision regarding CRTC Interconnection Steering Committee dispute in
competitive winback guidelines issued on 16 April 1998, the
Commission stated that it was of the view that asymmetrical winback
guidelines for ILECs would help protect consumers and ensure effective
competitive entry. |
244. |
In that Letter Decision, the Commission
directed that an ILEC was not to contact a customer in an attempt to win
back that customer for a period of three months after that customer's
local exchange service had been completely transferred to another local
service provider. The one exception to that prohibition was that ILECs
were allowed to win back customers who called to advise them that they
intended to change local service providers. The Commission noted that it
considered that such occurrences would be the exception rather than the
rule, since CLECs generally dealt with ILECs on behalf of customers. |
245. |
In Application of the winback rules
with respect to primary exchange service, Telecom Decision CRTC
2002-1, 10 January 2002 (Decision
2002-1), the Commission amended
the winback rules, to read as follows: |
|
…an ILEC is not to attempt to win back a business customer with
respect to primary exchange service, and in the case of a residential
customer, with respect to primary exchange or any other service, for a
period of three months after that customer's primary local exchange
service has been completely transferred to another local service
provider, with one exception: ILECs should be allowed to win back
customers who call to advise them that they intend to change local
service provider.
|
246. |
The Commission noted that ILECs would not
be prohibited from attempting to win back customers who had switched
services other than residential PES, and that ILECs would continue to be
free to market their residential PES and other services through various
other means such as radio, print and television. |
247. |
In Call-Net Enterprises Inc. v. Bell Canada
– Compliance with winback rules, Telecom Decision CRTC 2002-73,
4 December 2002, the Commission reiterated that it considered that
the winback rules applied from the time that an ILEC received a local
service request until three months after the customer had been completely
transferred to another local service provider. The Commission noted
that the prohibited winback activities did not commence only once
a customer's service had been transferred, but also related to activities
aimed at convincing customers to change service providers before the
transfer had been effected. |
248. |
In Call-Net Part VII Application – Promotion
of local residential competition, Telecom Decision CRTC 2004-4,
27 January 2004 (Decision 2004-4),
the Commission determined that it was appropriate to extend the no-contact
period from three to twelve months, noting that it would allow CLECs
a reasonable opportunity to demonstrate the quality and reliability
of their services and that it should have minimal impact upon the
marketing ability of the ILECs. |
|
Positions of parties
|
249. |
Several parties submitted that
winback rules should be implemented to prevent ILECs from targeting
local services customers that switch to a new VoIP service provider.
Ontera stated that winback rules should apply unless, at some point in
the future, competition had taken hold to such an extent that a
reasonable case could be made that they were no longer required. FCI
Broadband stated that the winback rules, as they are currently
formulated, should apply to ILECs and cable carriers when using their
own access facilities. |
250. |
The Companies submitted that it was not
necessary or appropriate for the Commission to impose winback
restrictions on ILECs and cable carriers or any other service providers
providing broadband access because VoIP services were applications
provided in a competitive environment. TELUS argued that VoIP and retail
IS were subject to a high degree of competition and also noted that a
retail IS provider that was also a VoIP service provider might have no
way of knowing where its former VoIP service customers took their
business, nor how to contact them, for the purposes of trying to win
them back. |
251. |
SaskTel submitted that restrictions
on winback activity would greatly restrict its ability to market its
VoIP service effectively. |
252. |
The CCTP stated that it did not consider it
appropriate to apply winback rules to VoIP services, as they were, in
its view, a type of Internet application that was not a replacement for
PES. |
253. |
Rogers did not believe that winback rules
would be possible, as there was no need for the customer or the service
provider to contact Rogers in the event that the customer was using a
broadband connection to obtain Internet telephony. Rogers also suggested
that the Commission had only imposed winback rules against incumbents to
date and since cable carriers were new entrants in the telephone market,
it made no sense to impose telephone winback rules on them. |
|
Commission's analysis and determinations
|
254. |
The Commission has considered winback rules
to be necessary and appropriate to prevent anti-competitive behaviour.
In Decision 2004-4, the Commission
stated that although winback activity could be a feature of mature
competitive markets, the local services market was far from being
a mature competitive market. The Commission considers that the same
concerns regarding the potential for anti-competitive conduct by ILECs
arise in the case of winning back local VoIP customers. The Commission
considers that, absent the winback rules, the ILECs could use the
same incumbency advantages to win back local VoIP customers as
they could use to win back PES customers. |
255. |
For example, the Commission considers that
since most local VoIP customers will be former ILEC PES customers, the
ILECs will have knowledge of the customers' telecommunications needs,
preferences and calling patterns. Winback rules will prevent ILECs from
attempting to win back former PES or local VoIP service customers before
they have sufficient experience with a competitor's VoIP service in
order to be in a position to evaluate the service fairly. The Commission
considers that winback rules allow competitive VoIP service providers an
appropriate period of time to demonstrate the reliability and quality of
their services, before the ILEC can attempt to regain the customer. |
256. |
Some parties submitted that winback rules
should apply to cable incumbents' VoIP offerings. The Commission
considers that the ILECs are the dominant providers of local exchange
services, and therefore considers that it is not necessary to apply
winback rules for VoIP services to cable incumbents. |
257. |
With respect to TELUS' argument that retail
IS is competitive and thus no winback rules are needed for VoIP, the
Commission is of the view that the fact that there is competition in the
provision of retail IS does not diminish the need for winback rules for
local VoIP service. |
258. |
The Commission notes that applying winback
rules to VoIP services would not mean that customers could not
switch back to an ILEC if they were dissatisfied with their service.
As noted in Decision 2004-4, winback
rules merely prevent the ILECs from contacting customers who have
decided to switch their local residential services to win them back.
The winback rules do not apply where customers contact the ILEC. |
259. |
In addition, the winback rules would not
apply where customers cancel local phone service and then purchase local
VoIP service from any other provider without the ILEC knowing or being
involved in the changeover. The rules will only be triggered when a VoIP service
provider contacts an ILEC to notify the ILEC of a change of service,
which would typically occur with the initiation of a local service
request. |
260. |
Accordingly, the Commission determines that
the reasons for which the winback rule for PES was established apply
equally in relation to the provision by ILECs of local VoIP services.
The Commission therefore extends the winback rules to apply to local
VoIP service as follows: |
|
…an ILEC is not to attempt to win back a business customer with
respect to primary exchange service or local VoIP service, and in the
case of a residential customer of local exchange service (i.e. PES or
local VoIP service), with respect to any service, for a period
commencing at the time of the local service request and terminating 12
months after that customer's primary local exchange service or
local VoIP service has been completely transferred to another local
service provider, with one exception:
ILECs should be allowed to win back customers who call to advise them
that they intend to change local service provider.
|
|
Access for the disabled
|
|
Positions of parties
|
261. |
ARCH submitted that it would be a breach of
the Charter, subsection 27(2) of the Act, and section 5 of the
Canadian Human Rights Act to offer VoIP technology to the public in
a manner which fails to accommodate the needs of persons with
disabilities. |
262. |
ARCH submitted that the Commission should
require carriers to include a number of specific features on telephones
in order to provide accessibility for persons with disabilities. ARCH
also submitted that since a person who was blind could not see or feel
the virtual keypad, it was essential that softphones provided
alternative interface mechanisms, as well as instructions on their use.
ARCH further submitted that it was important that the software used in
softphones be compatible with screen-reading software. |
263. |
BCOAPO et al. submitted that standards for
access by persons with disabilities were not issues to be parked for
future consideration. In BCOAPO et al.'s view, it might be more
efficient to build such standards into VoIP services from the outset
than to retrofit an established system at a later point; more
significantly, accessibility ought not to be regarded as an
afterthought. They argued that the Commission should establish a
deadline for full implementation of an appropriate set of accessibility
standards. |
264. |
The Consumer Groups, Yukon, UTC and CEP
submitted that VoIP service providers should be required to accommodate
disabled consumers as did other telecommunications providers offering
voice and related services. |
265. |
The Companies, TELUS and Vonage each
submitted that Commission regulation was not required in order for users
with special needs to benefit from IP technology. They argued that
software and peripherals had been developed without the imposition of
regulation and that regulatory intervention would more likely result in
one-size-fits-all solutions, which would deny users the benefits of
choice and stifle innovation. In their view, the Commission should rely
to the greatest extent possible on market forces to promote
accessibility to VoIP services by users with special needs. |
266. |
Yak submitted that the unique nature of
VoIP services demanded specific regulatory treatment and that it might
not be possible or practical to meet some of the current regulatory
requirements. In Yak's view, the Commission should not insist on these
requirements while CISC looked for solutions. The Companies, TELUS, MTS Allstream,
Cybersurf, the CCTP and the CCTA agreed that CISC would be an
appropriate forum to develop solutions which would permit VoIP service
providers to meet their social obligations. |
267. |
ARCH submitted that CISC should be required
to establish an Accessibility Working Group which would investigate and
assess the types of features which could be incorporated with VoIP services,
as well as any other IP-enabled services which may be developed in the
future, in order to ensure their ongoing accessibility to persons with
disabilities. In ARCH's view, it would be appropriate for the
Accessibility Working Group to report to the Commission on a semi-annual
basis regarding any new accessibility features or any modifications to
existing features for VoIP services, as well as on accessibility
features for any other IP-enabled services which would warrant
consideration by the Commission. |
268. |
ARCH also submitted that it would be
appropriate for the Commission to direct the Accessibility Working Group
to examine accessibility issues related to VoIP and other IP-enabled
services. In ARCH's view, this group could also report to the Commission
on a semi-annual basis regarding VoIP technologies such as text-to-text,
Video Relay Service, adjustable voice quality and multi-mode
communications (involving video, audio and text) so that they could be
implemented as they become available. |
|
Commission's analysis and determinations
|
269. |
The Commission considers that the record of
this proceeding is not sufficient to examine the reasonableness of
ARCH's requests with respect to VoIP services. However, it views these
as important issues which require further investigation. |
270. |
The Commission considers that IP technology
has great potential to provide innovative communication tools for
disabled consumers. It considers that one of the greatest problems in
accessibility for the disabled is a general lack of attention to their
needs when new technologies and services are first being developed. The
Commission also considers that VoIP service providers should address
issues regarding accessibility for the disabled to IP services and
ensure that applications and technologies are being developed. In the
Commission's view it is more cost-effective to make these technologies,
applications and services accessible early in the development process. |
271. |
Accordingly, the Commission requests CISC
to assess the accessibility needs of people with disabilities with
respect to the development of VoIP technologies. The Commission requests
that CISC ensure that VoIP service providers, experts in
techno-accessibility, consumer groups such as ARCH, BCOAPO et al., and
all other relevant parties have the opportunity to participate in these
discussions. |
272. |
The Commission also requests that CISC
provide the Commission with a report, within six months, which: |
|
- identifies the telecommunications needs of persons with
disabilities;
|
|
- investigates solutions which meet these needs in the VoIP environment;
and
|
|
- provides a plan for the implementation of these solutions.
|
|
Message relay service
|
|
Background
|
273. |
MRS allows hearing-impaired subscribers to
communicate with others connected to the PSTN by providing operator
intermediation. A hearing person who wishes to communicate with a
hearing-impaired person dials a toll-free number to be connected to an
operator who contacts the hearing-impaired user and relays the
communication using a teletypewriter (TTY). Conversely a
hearing-impaired person, with a TTY, contacts a hearing person through
the relay operator by dialling 711. |
274. |
In British Columbia Telephone Company
– voice relay service centre, Telecom Decision CRTC 85-29,
23 December 1985 (Decision 85-29),
the Commission determined that B.C. Tel should provide MRS in its
operating areas. The Commission determined that since hearing-impaired
subscribers paid full rates for PES, they should be provided with
the same ability as any other subscriber to communicate with other
subscribers. The Commission stated that this was not a question of
ordering a telephone company to provide a service enhancement or discount,
at its own cost, due to the disability of a particular class of customer.
Rather, it was the provision by a telephone company, to rate-paying
subscribers, of the means to use the telephone on a basis that attempted
to provide access comparable to that of other subscribers. The Commission
also considered that the cost of the service should be supported by
the general body of subscribers. |
275. |
Subsequent decisions considered that the
determinations made with respect to MRS in British Columbia were
applicable in all of the ILEC operating territories. Decision 97-8
extended MRS obligations to CLECs and resellers by virtue of underlying
LEC obligations. |
|
Positions of parties
|
276. |
Call-Net, Primus and QMI submitted that the
technology neutral social obligations imposed on circuit-switched
voice communications service providers in Decision 97-8
should apply to all providers of residential voice communications
services where provisioning involved the traditional PSTN. Call-Net
noted that it currently offered MRS over VoIP for hearing-impaired
subscribers and that original development and implementation costs
were substantial. |
277. |
TELUS, the CCTP, Nortel, Microcell, and MTS Allstream
were of the view that it should be mandatory for all VoIP service
providers to provide MRS as soon as it is practicable to do so, although
some parties submitted that the development of VoIP services should not
be delayed or limited while MRS issues are resolved. The TWU submitted
that VoIP service providers should be required to cease selling their
services until their customers have these protections. |
278. |
Cogeco and the CCTA were of the view that
MRS should only become mandatory to the extent that workable and
practical solutions were found in the context of the VoIP technology. In
their view, the technology neutral principle did not mean that identical
solutions were applicable to similar services provided by different
technologies without consideration of constraints or limitations related
to the particular technology used. |
279. |
The Companies requested that the Commission
determine that service providers shall not be required to provide MRS as
defined in the ILECs' tariffs, but may instead provide access to
services by hearing-impaired customers in accordance with minimum
service standards established by the Commission. The Companies submitted
that they were currently testing TTY technology for compatibility with
IP phones. They stated that if these tests were successful they would
open up the existing MRS to consumer VoIP subscribers. The Companies
also noted that the marketplace was currently providing functionally
superior IP-based alternatives to mandated services such as MRS. They
noted that there were sophisticated text-to-voice and voice-to-text
applications which showed promise in providing access to disabled
consumers. In the Companies' view, requiring VoIP service providers to
offer MRS as it was currently offered by LECs may only hamper the
development and roll-out of superior IP-based alternatives. |
280. |
TELUS submitted that it would seek to meet
or exceed PES-related standards related to MRS when it entered the
access-independent VoIP services world. |
281. |
ARCH submitted that all service providers
offering services that use VoIP technology must provide MRS from the
outset. ARCH submitted that, at present, there was a problem with the
transformation of a TTY signal into a VoIP signal, in that an excessive
number of packets were lost, resulting in garbling of the TTY message.
In ARCH's view, the key point was that service providers be given the
proper incentive to resolve this technical issue in an expedited manner. |
282. |
The Consumer Groups noted that while the
promise of enhanced access facilities for disabled users was a positive
thing, some disabled users might be slow to adopt new technologies for
telephone access. In their view, any promised increased functionality
with VoIP for those with disabilities should overlap with a requirement
to provide traditional access technologies, such as TTY and MRS, until
they have been proven reliable and are generally accepted. |
283. |
Vonage submitted that one of the benefits
of the open architecture of IP technology was that it allowed
participants other than service providers, who had expertise in
programming software for the disabled, to create solutions which might
be superior to those which are currently mandated. |
|
Commission's analysis and determinations
|
284. |
Since Decision 85-29,
the Commission has consistently determined that hearing-impaired subscribers
must have access to a telephone service that is comparable to the
telephone service provided to hearing-abled subscribers. Further,
the Commission has determined that this obligation is met by the provision
of MRS to hearing-impaired subscribers. |
285. |
The Commission considers that the
requirement to provide hearing-impaired subscribers telephone services
that meet their needs applies regardless of the technology being used to
provide the service. |
286. |
The Commission notes that some parties
argued it would be preferable for service providers to offer
hearing-impaired consumers services that were technically different from
MRS but similar in function. An example is text-to-voice and
voice-to-text technology that would perform the same function as a voice
relay system, but would be implemented in a different manner. |
287. |
The Commission considers that these
alternatives to MRS could provide the hearing-impaired with some
communications choices and that it might be possible to replace
traditional MRS with a service that performs the same function using
different methods. However, many hearing-impaired Canadians are familiar
with the current MRS system and already own equipment that is compatible
with this system. The Commission therefore concludes that in the
interest of these consumers, any VoIP solution must be compatible with
the current MRS system and related TTY equipment and further, that any
new service must provide, at a minimum, quality of service comparable to
that currently provided by the MRS system. |
288. |
However, because these alternatives are not
yet fully developed and it is not yet known how well they will function
or what their cost will be to consumers, the Commission considers that
these alternatives cannot be considered replacements for MRS at the
present time. |
289. |
Accordingly, the Commission concludes that
local VoIP service offerings must function with the existing MRS system
and the related TTY equipment. |
290. |
The Commission appreciates, however, that
there may still be some technical issues which prevent MRS from being
offered initially. The Commission considers that it would not be in the
public interest to prevent VoIP service providers from entering the
market or to require existing VoIP service providers to cease providing
service until the provision of MRS is technically feasible. Rather, the
Commission considers that it would be a reasonable balancing of
interests involved to allow VoIP service providers to provide service
and to focus on ensuring that MRS is provided as soon as it is
technically feasible, allowing some time for parties to resolve
technical problems. The Commission therefore requests that CISC
investigate these issues, to ensure that VoIP service providers do not
delay in resolving these technical problems and that industry solutions
are found. |
291. |
In light of the foregoing, the Commission
concludes that existing obligations to provide MRS apply with respect to
local VoIP service offerings, to the extent technically feasible. The
Commission directs all LECs to provide access to MRS throughout its
operating territory, to the extent technically feasible, and as a
condition of providing telecommunications services to local VoIP service
providers, to include in their contracts or other arrangements with the
service provider, the requirement that the latter provide access to MRS
throughout its operating territory. |
292. |
In addition, the Commission requests that
CISC provide a report to the Commission within three months, addressing
the circumstances under which MRS can currently be provided over VoIP,
any problems which prevent MRS from being provided over VoIP, possible
solutions for the provision of MRS functionality over VoIP where it is
not currently technically feasible and the time required for existing
VoIP service providers to implement those solutions. |
|
Privacy safeguards
|
|
Background
|
293. |
In Decision 97-8,
specific regulatory requirements regarding privacy were imposed on
LECs, and were subsequently extended to local service resellers. By
letter dated 1 February 2000, the Commission required all LECs, as
a condition of providing services to resellers of local services,
to include in their service contracts with resellers of local services
the requirement that such resellers provide the consumer safeguards
described in a consensus report entitled Application of Consumer
Safeguards to Resellers, filed on 2 September 1997, with the Commission. |
294. |
The privacy safeguards that were the
subject of specific comments by parties in this proceeding, and that are
dealt with in this section, include the following: (1) delivery of the
privacy indicator when invoked by an end-customer; (2) provision of
automated universal per-call blocking of calling line identification;
(3) provision of per-line call display blocking to qualified
end-customers; (4) disallowance of Call Return to a blocked number; (5)
enforcement of the Commission's restrictions on Automatic
Dialling-Announcing Devices, Automatic Dialling Devices, and unsolicited
facsimiles applicable in the ILEC territory where they operate; and
(6) provision of universal Call Trace. |
|
Positions of parties
|
295. |
Call-Net submitted that it already provides
the privacy safeguards outlined in Decision 97-8
as part of its VoIP offering. In Call-Net's view, the social
regulations which were imposed on circuit-switched voice communications
service providers in Decision 97-8
should apply to all providers of residential voice communications
where provisioning of the service involved the PSTN. |
296. |
Several parties submitted that VoIP service
providers should be subject to the same privacy standards as regulated
telecommunications service providers. The TWU submitted that VoIP service
providers should be required to cease selling their services until their
customers have these privacy safeguards in place. |
297. |
Several parties submitted that while there
are some technical challenges associated with implementing privacy
safeguards in a VoIP environment, these safeguards should be
mandatory as soon as practicable. However, the Companies, Cybersurf,
and Yak submitted that the deployment of VoIP services should
not be delayed or limited until privacy safeguards were available.
The Companies submitted that they expected that their VoIP services
would meet the privacy safeguards outlined in Decision 97-8,
either at launch or as soon as possible after launch, based on the
availability of required underlying technologies. TELUS submitted
that it would seek, to the best of its ability, to meet or exceed
the PES-related standards relating to privacy protections when it
entered the VoIP services world. |
298. |
Vonage stated that while it was likely to
be technically possible to deliver privacy features such as those
described in Decision 97-8
via VoIP, it did not consider it wise for the Commission to require
VoIP service providers to deliver such services. Vonage submitted
that competitive market forces would deliver new technological solutions
that would improve the level of privacy for customers, potentially
beyond that which was currently available on circuit-switched systems. |
299. |
The Consumer Groups submitted that VoIP opened
new threats to consumer privacy including voicemail spam and the
potential abuse of the Automatic Location Information (ALI) system
required for E9-1-1, including the possibility that such information
might be requisitioned under lawful access rules. They noted that
voicemail boxes attached to VoIP telephones relied on IP addressing,
using CNA/NANP numbers as "identifiers" or "aliases" and that each VoIP subscriber
would have a discrete IP address. They stated that voicemail spam, or
Spam over Information Technology (SPIT), would become more obtrusive in
a VoIP system than it had been on the circuit-switched network, as
spammers using IP-based software could deliver messages instantly to
millions of voicemail boxes at their specific addresses. It was the
Consumer Groups' position that the Commission ought to ban the delivery
of unsolicited voicemail messages to VoIP subscribers and make VoIP service
providers follow regulations to intercept and filter out such messages.
They also submitted that there was a risk to privacy from VoIP and
wireless E9-1-1, in that consumers could unwittingly broadcast their
location information where it could be picked up and used as a part of
covert surveillance or for location-based marketing. They submitted that
the Commission should mandate that the location information generated by
eventual E9-1-1 solutions for VoIP be used only for E9-1-1 purposes and
not be available for secondary uses such as marketing. |
300. |
The Companies, Cybersurf, the CCTP and
TELUS agreed that CISC was the appropriate forum for addressing
technical and operational issues associated with the provision of
privacy safeguards. |
|
Commission's analysis and determinations
|
301. |
The Commission considers that, in order to
meet the objective set out in section 7(i) of the Act,
telecommunications services must be provided in a manner that "contribute[s]
to the protection of the privacy of persons." The Commission notes that,
with the exception of Vonage, all parties were in favour of requiring
VoIP service providers to provide some privacy safeguards. In addition,
several parties suggested that the privacy standards that apply to
circuit-switched network service providers should apply equally to VoIP service
providers. |
302. |
The Commission notes that Vonage submitted
that privacy standards should be determined by the market which, in
its view, could provide privacy protections superior to those now
offered on the circuit-switched network. The Commission considers
that it is possible that VoIP developers may create new technologies
which provide a level of privacy protection which exceeds the standards
established in Decision 97-8.
However, the Commission notes that there is no information on the
record of this proceeding indicating that such technologies are currently
available or are even under development. |
303. |
The Commission is of the view that the
market, while having great potential for innovation, offers no
assurances to consumers with respect to this issue. In the Commission's
view, concerns relating to the privacy of users of telecommunications
services are the same, regardless of the underlying technology of the
service. In the Commission's view, users of VoIP services should, at a
minimum, be afforded the same level of privacy protection as is extended
to users of circuit-switched services. |
304. |
However, the Commission considers that
there may be technical reasons why certain VoIP service providers may
not be able to meet the requirements for privacy safeguards as of the
date of this Decision. Therefore, requiring all VoIP service providers
to meet the privacy safeguards immediately could mean that some may not
be able to enter the market and others may be required to cease offering
services. In the Commission's view, it would be a reasonable balancing
of interests involved to allow VoIP service providers to provide service
even if full implementation of the privacy safeguards is currently not
technically feasible. The Commission considers it necessary, however, to
ensure that technical solutions are developed without delay. |
305. |
In addition, the Commission considers it
appropriate that during the interim period, until all privacy safeguards
are made available to end-users, VoIP services providers must obtain,
prior to service commencement, the customer's express acknowledgement of
any service limitations with regard to mandated privacy safeguards. |
306. |
The Commission concludes that the existing
regulatory requirements designed to protect customer privacy apply to
all local VoIP service providers, to the extent technically feasible.
The Commission directs all LECs to comply with these requirements, to
the extent feasible, and as a condition of providing telecommunications
services to local VoIP service providers, to include in their contracts
or other arrangements with the service provider, the requirement that
the latter make the privacy safeguards in question available to
consumers, to the extend technically feasible. |
307. |
The Commission requests that CISC assess
technical issues associated with implementing those privacy safeguards
that cannot be implemented immediately, and that CISC report to the
Commission within three months. CISC should identify and report on
solutions for these technical issues, and provide a timeframe for the
implementation of these safeguards. |
308. |
The Commission directs all LECs, as a
condition of providing local VoIP services, to obtain, prior to the
commencement of service, the customer's express acknowledgement of the
extent to which the privacy safeguards are not available with their
local VoIP services. In addition, the Commission requires LECs, as a
condition of providing telecommunications services to a local VoIP service
provider, to include in their service contracts or other arrangements
with these service providers the requirement that the latter obtain the
customer's express acknowledgement of the extent to which privacy
safeguards are not available with their local VoIP services. |
309. |
For the purpose of fulfilling the
requirement set out in the paragraph above, express acknowledgement
may be taken to be given by a customer where the customer provides: |
|
|
|
- oral confirmation verified by an independent third party;
|
|
- electronic confirmation through the use of a toll-free number;
|
|
- electronic confirmation via the Internet;
|
|
- oral acknowledgement, where an audio recording of the
acknowledgement is retained by the carrier; or,
|
|
- acknowledgement through other methods, as long as an objective
documented record of customer acknowledgement is created by the
customer or by an independent third party.
|
310. |
The Commission notes that the Consumer
Groups have identified several potential privacy issues, including SPIT
and abuse of the 9-1-1 ALI system, which may require further attention.
There is no information on the record indicating that these abuses of
consumer privacy are likely to occur or even if they are technically
possible. Nonetheless, the Commission considers that privacy concerns
are likely to become increasingly important in an IP world. The
Commission expects that such privacy issues could be presented to CISC
for review and resolution on an ongoing basis. |
|
|
|
Background
|
311. |
In accordance with the requirements of the
regulatory framework for local competition and the determinations noted
above, when ILECs provide local VoIP services in their incumbent
territories, they are required to adhere to their existing tariffs or to
file proposed tariffs as appropriate, in conformity with applicable
regulatory rules. |
312. |
This section addresses tariff filing
requirements, including the issue of the circumstances under which an
ILEC is considered to be providing local VoIP services in-territory. |
|
Positions of parties
|
313. |
TELUS submitted that there appeared to be
no reliable and reasonable criteria for making an in/out-of-territory
distinction. It suggested that possible criteria could include: (i) the
subscriber's home address, (ii) the subscriber's billing address, (iii)
the subscriber's area code and telephone number, or (iv) the location
where the retail box for the service was purchased. However, in each
case, TELUS saw no logical connection between the location and the
provision of the service. TELUS noted that many VoIP service providers
allowed customers to choose their area code from a range of exchanges in
which the service provider has access to numbers. TELUS further noted
that some VoIP service providers might offer telephone numbers from
other countries or subscribers themselves might move and bring their
VoIP service and associated number(s) with them. Ontera agreed with
TELUS' position. Northwestel, the CCTP, and Cybersurf also submitted
that none of the four criteria were appropriate or useful. |
314. |
The Companies also argued that there were
no reliable criteria for deciding whether a local VoIP service
subscription was in- or out-of-territory. They submitted that the
imposition of regulatory rules based on geographic considerations would
undermine the delivery of innovations made possible by IP technology and
that there was no place for the establishment of differentiated
regulatory treatment based on geographic considerations. Furthermore,
any attempt to do so would likely create an administrative nightmare for
the Commission and the Companies themselves and would disadvantage the
Companies' VoIP services customers. |
315. |
FCI Broadband and MCI Canada submitted that
all four criteria were relevant in determining whether a service was
provided in-territory or not. |
316. |
MTS Allstream submitted that the main
consideration related to whether the local VoIP service provided by the
ILEC to the subscriber should be considered in- or out-of-territory was
the local telephone number associated with each individual VoIP service.
In the company's view, the exchange associated with the area code and
telephone number was where the local connectivity to the PSTN must be
provided by the ILEC. MTS Allstream also suggested that the Commission's
existing bundling rules would apply in cases where an ILEC bundled
in-territory tariffed services and out-of-territory retail VoIP services.
The company argued that an ILEC discounted out-of-territory retail VoIP services
together with in-territory local exchange services (including
conventional circuit-switched local telephony and/or VoIP services)
would be subject to existing tariff requirements and associated
regulations. |
317. |
QMI submitted that the area code and
telephone number would be the appropriate indicia because the vast
majority of local telephony end-users would continue to request a
telephone number associated with the locale in which they lived. |
318. |
Alcatel also submitted that the area code
and telephone number was the most reliable method for determining
whether an ILEC VoIP service was being provided in-territory or
out-of-territory (only where the ILEC also provided the broadband DSL
line). |
319. |
Call-Net considered that for the purposes
of determining the distinction between in-territory and out-of-territory
service provision, both the service address and the location of the
NPA-NXX were determinative. It stated that if either the service address
and/or the NPA-NXX were located within an ILEC serving territory, then
the ILEC VoIP service should be considered in-territory: in this case,
the service address would be the subscriber's normal place of residence. |
320. |
The CCTA, Cogeco, Shaw, EastLink and Rogers
submitted that the subscriber's billing address and telephone number
would indicate in many cases where the service was being provided. In
their view, another possible indicator would be the 9-1-1 subscriber
location information provided to the ILEC by the subscriber. |
321. |
BCOAPO et al. submitted that local VoIP service
was in-territory if the access transmission facility which provided
connectivity to the fixed or nomadic VoIP end-point was located in
territory – irrespective of the end-customer making use of the VoIP end-point
at any point in time. In UTC's view, the location of the customer's
high-speed access facility used to access the VoIP service should be
determinative of where the VoIP service was provisioned as that was the
primary location where calls would be placed or received by the customer
as well as the location where the access facility was located for
contribution purposes. |
322. |
Some parties submitted that the home and/or
billing address could serve as the indicia. Other parties suggested that
the IP address of the local VoIP service could be used. |
|
Commission's analysis and determinations
|
323. |
The Commission notes that in Decision 97-8
an exchange was defined as the basic unit for the administration and
provision of telephone service by an ILEC. The Commission further
notes that the boundaries of the ILECs' exchanges have traditionally
been used to determine whether an ILEC's services are in- or out-of-territory.
Local VoIP services, by definition, utilize NANP-conforming telephone
numbers, which include an area code and telephone number that correlate
to an ILEC's exchange within a geographic area. The Commission therefore
does not agree with the proposition that local VoIP service is
not tied to a geographic location. |
324. |
Some parties submitted that the
determination as to whether an ILEC's local VoIP service is in- or
out-of-territory should be based on the geographic location of the
subscriber's home address, billing address and/or IP address, while
other parties asserted that it should be based on the location of the
user on a per-call basis. The Commission considers that the geographic
location of the user on a per-call basis would be neither appropriate
nor practical for determining whether or not local VoIP service is being
offered in-territory. The Commission considers further that since a
subscriber's home address, billing address or IP address may not be
associated with the geographic area where local calling is available,
these indicia would not be appropriate to make an in- or out-of
territory distinction. |
325. |
Instead, the Commission finds that the
relevant criterion for determining whether the provision of local VoIP service
is within an ILEC's traditional geographic operating territory, or
outside the territory, is the area code and telephone number provided to
the customer, because that telephone number indicates in which exchange
local calling is available. Accordingly, where an ILEC provides a
customer with a telephone number associated with an exchange within that
ILEC's territory, it must do so in accordance with an approved tariff.
Where an ILEC provides local VoIP service with an out-of-territory
telephone number, the service would not require a tariff, unless it is
provided as part of a tariffable bundle (e.g. in combination with
in-territory local VoIP service). |
326. |
With respect to local VoIP service
tariff filing requirements, ILEC tariffs must be filed in accordance
with all existing regulatory requirements applicable to local exchange
services, including the pricing safeguards set out in Review of
price floor safeguards for retail tariffed services and related issues,
Telecom Decision CRTC 2005-27, 29 April
2005. ILECs will be permitted to offer promotions involving local
VoIP service, subject to the rules set out in Promotions of
local wireline services, Telecom Decision CRTC 2005-25,
27 April 2005, |
327. |
The Commission notes that local VoIP tariffs
will be treated in accordance with the new procedures described in
Circular 2005-6. In
that Circular, the Commission announced a number of recently implemented
initiatives, which will help streamline the tariff filing process.
|
|
Regulation of non-dominant carriers that provide local VoIP service
|
|
Background
|
328. |
As set out above the Commission has found
that local VoIP services are to be regulated as local exchange
services and therefore subject to the regulatory framework established
in Decision 97-8.
In that Decision, the Commission set out the rights and obligations
of ILECs and CLECs, and exercised its powers to forbear, to the extent
set out in that Decision, from regulation of retail telecommunications
services provided by CLECs. In addition, the Commission noted that
resellers providing local exchange services would meet certain of
the service requirements that the Commission imposed on LECs, such
as 9-1-1 and MRS, by virtue of the underlying LECs' obligations. |
329. |
In Forbearance – Services provided by
non-dominant Canadian carriers, Telecom Decision CRTC 95-19,
8 September 1995 (Decision 95-19),
the Commission forbore, to the extent set out in that Decision, from
regulating telecommunications services provided by non-dominant Canadian
carriers, with the exception of (1) public switched local voice services,
(2) operator services, (3) video dial tone (VDT)
service provided by Canadian carriers that are also cable television
undertakings, and (4) services that were the subject of the proceeding
established by Provision of Non-programming Services by Broadcast
Distribution Undertakings, Telecom Public Notice CRTC 95-22,
9 May 1995, as revised in Provision of Non-programming Services
by Broadcast Distribution Undertakings - Changes to the Proceeding,
Telecom Public Notice CRTC 95-34,
5 July 1995. |
|
Positions of parties
|
330. |
The CCTA did not consider it necessary
or appropriate to mandate that cable carriers register as CLECs and
suggested that some cable carriers may consider offering local VoIP service
as resellers. The CCTA further stated that the Commission should permit
those cable carriers that operated as CLECs in part of their territory
to fulfill the CLEC obligations only where they chose to operate as
CLECs. They argued that, consistent with the Commission's findings
in Telecom Order CRTC 98-1,
7 January 1998 (Order 98-1),
cable carriers should not be required to fulfill CLEC obligations
in areas where they did not operate as CLECs. |
331. |
The CCTA argued that matters concerning
ownership and operation of transmission facilities were relevant to a
provider's entitlement to status as a Canadian carrier but were not
determinative of that provider's decision to participate in the local
market as a reseller or a CLEC. The CCTA argued that it was the resale
of a LEC's PSTN services that made a cable carrier a reseller in the
local exchange services market. |
332. |
In the CCTA's view, Decision 97-8
did not contemplate a regime whereby a Canadian carrier engaged in
resale would be obliged to assume CLEC status as a consequence of
using its facilities. The CCTA argued that consistent with that regime,
the Commission should continue to permit entry in the local exchange
services market on a resale basis by service providers that commit
to fulfilling the obligations of resellers. |
333. |
The CCTA argued that it would be consistent
with fostering increased competition to permit these service providers
to operate using a resale/partnership model which could expand the
benefits of competition to smaller centres, encourage the expansion of
broadband IS and provide smaller cable carriers with another revenue
stream that would help to offset the high costs of transport necessary
to provide broadband Internet in more rural and remote areas. |
334. |
The CCTA further stated that cable carriers
were, for the most part, treated as non-dominant carriers and were
forborne from regulation pursuant to Decision 95-19.
|
335. |
QMI stated that the regulatory requirements
imposed on local VoIP service providers should depend on the class of
service provider and the type of service being offered. Accordingly, QMI
submitted that cable carriers using their own infrastructure should have
the option of becoming CLECs themselves, or of becoming resellers of LEC
services. Yak stated that cable companies should not be required to
become CLECs in order to provide VoIP services. |
336. |
The Consumer Groups and FCI Broadband
submitted that cable carriers should be required to adhere to regulatory
requirements of CLECs in all territories where they operate. The
Consumer Groups argued that this blanket safeguard was required as cable
carriers, like ILECs, were one of only two truly established broadband
service providers. The Consumer Groups stated that since broadband is a
prerequisite for many VoIP services and all of the new competitive VoIP services,
the Commission must be vigilant to ensure cable carriers did not exploit
the bottleneck of broadband access. |
337. |
UTC considered that cable carriers that
used their networks to provide local VoIP services should have to
register as CLECs, but agreed that the regulatory treatment of cable
carriers' local VoIP services should be the same as for other new
entrants, since the cable carriers did not have market power in the
local exchange services market. |
|
Commission's analysis and determinations
|
338. |
The Commission notes that Decision 97-8
established a regulatory framework setting out the rights and obligations
that applied to ILECs, CLECs and resellers in the provision of local
exchange services. The Commission notes that the regulatory framework
set out in that Decision does not contemplate the provision of local
exchange services by a Canadian carrier that is operating neither
as an ILEC or a CLEC. |
339. |
With respect to the CCTA's comments that
cable carriers operate as non-dominant providers subject to Decision
95-19, the Commission notes that
its forbearance determinations in Decision 95-19
do not apply to the provision of public switched local voice services.
Rather, the forbearance determinations contained in Decision 97-8
apply to the provision of local exchange services by new entrants.
Those forbearance determinations apply only to CLECs. |
340. |
The Commission notes that the term "reseller"
has consistently been used in contradistinction to "Canadian
carrier", throughout its regulatory framework. In Exemption
of resellers from regulation, Telecom Public Notice CRTC
93-62, 4 October 1993,
the Commission found that resellers are telecommunications service
providers that do not own or operate their own (non-exempt) transmission
facilities. The Commission therefore stated that "resellers would
not be subject to the provisions of the Act applicable to Canadian
carriers, including the requirement to file tariffs for prior Commission
approval." |
341. |
The Commission considers that the fact that
a Canadian carrier may resell certain services and functionalities of
other carriers in the provision of their local VoIP services does not
transform them into resellers. All of the telecommunications services
provided by a Canadian carrier are subject to the provisions of the Act,
including the obligation to file tariffs in the absence of an applicable
forbearance order. |
342. |
In light of the foregoing, the Commission
does not accept the argument made by cable carriers that they can
choose whether or not to become CLECs when they provide local exchange
services in Canada. The Commission notes that cable carriers are only
required to fulfill CLEC obligations in areas where they provide local
exchange service. With respect to the CCTA's argument regarding Order
98-1, the Commission
notes that its determinations in that Order focused on the issue of
service requirements of wireless service providers. The Commission
considers that this Order does not constitute a precedent for the
cable carriers in this situation. The Commission considers that cable
carriers, like all CLECs, can define their own local serving areas
and are only required to fulfill CLEC obligations in areas where they
provide local exchange service. |
343. |
With respect to the CCTA's argument that
it would be consistent with fostering increased competition to permit
cable carriers to operate using a resale partnership model, the Commission
notes that the regulatory framework set out in Decision 97-8
does not preclude CLECs from relying on the facilities of third parties
to provide services and to meet their obligations pursuant to that
Decision. For example, in Transiting and points of interconnection,
Telecom Order CRTC 98-486,
19 May 1998, the Commission accepted the argument that the facilities
of a third party can be considered as being the CLEC's designated
facility for the purposes of meeting certain obligations in Decision
97-8. |
344. |
The Commission concludes that the rights
and obligations of Canadian carriers providing local exchange services
are set out in Decision 97-8
and that it would not be appropriate to modify those rights and obligations
in respect of the provision of local VoIP services. Accordingly,
the Commission determines that, in order to provide local exchange
services in Canada, non-dominant Canadian carriers must fulfill the
requirements of a CLEC and conform to the entry procedures set out
in Decision 97-8.
|
|
Regulation of ILECs providing local VoIP services in territories
where local competition is not yet permitted
|
|
Background
|
345. |
Local competition is not yet permitted in
the territories served by Northwestel and the small ILECs. |
346. |
In Long-distance competition and improved
service for Northwestel customers, Decision CRTC 2000-746,
30 November 2000 (Decision 2000-746),
the Commission set out its determinations to improve telecommunications
services in Canada's Far North, the territory served by Northwestel.
However, Decision 2000-746
did not address the issue of local competition for Northwestel. Instead,
the Commission determined that competition in local access services
in Canada's Far North remained a matter for future consideration. |
|
Positions of parties
|
347. |
Northwestel stated that the introduction of
VoIP would likely have a significant effect on its revenue streams. It
submitted that VoIP applications originating in, terminating in and
transiting the North would in many cases avoid contribution to the
underlying networks that these services would continue to use. The
company further stated that because these services were Internet
applications in most cases, it would not incur carrier access or
settlement costs. Northwestel also stated that to the extent carrier
access and settlement costs could be bypassed, further market
distortions and unfair distribution of the contribution burden among the
contribution payers would result. |
348. |
Northwestel also submitted that as the
company had not yet entered the VoIP market, it would be appropriate to
forbear from the economic regulation, of VoIP services. |
349. |
Yukon submitted that the competitive
framework for Northwestel must be adapted to the new reality of VoIP service
competition. However, Yukon also noted that the existing regulatory
framework had effectively shielded Northwestel's long distance revenues
from the full brunt of market-based prices. Yukon further submitted that
Northwestel's concern of further revenue erosion through the
introduction of VoIP competition would be better addressed by making
those services subject to the current framework, instead of excluding
them from regulation as Northwestel had proposed. |
350. |
Yukon also stated that it was concerned at
the prospect of Northwestel offering VoIP services, especially on an
unregulated basis, in competition with small independent ISPs. Yukon
submitted that there must be rules developed to ensure that when VoIP competition
was allowed, small operators had an equivalent opportunity to compete
with the incumbent. |
351. |
Ontera requested that the Commission specifically
address the circumstances of the small ILECs by extending, in principle,
those aspects of the Decision 97-8
regime necessary for the competitive roll-out of VoIP services
to the territories in question. In Ontera's submission, this could
be accomplished through the initiation of expedited processes, on
a request basis, where any service provider, including the ILEC, indicated
an intention to provide local VoIP services in the territory. |
352. |
Ontera noted that it would likely be
sufficient if the Commission made provisions for the competitive
offering of Category 2 VoIP services by new entrants in the territories
of small ILECs. It also submitted that, except where special
considerations were present with respect to 9-1-1 services, small ILECs
should be subject to the same terms and conditions as other ILECs in
this proceeding. |
|
Commission's analysis and determinations
|
353. |
The Commission notes that Northwestel
requested that the Commission forbear from economic regulation of its
local VoIP services. It also notes Ontera's submission that it should
deal with competitive roll-out of local VoIP services by initiating an
expedited process, on a request basis. |
354. |
The Commission considers that dealing with
the above requests specific to the provision of VoIP services in the
local exchange services market, before addressing and evaluating the
local competition framework in relation to ILECs not yet subject to
local competition, would be inappropriate and would have significant
future impact on the regulatory framework associated with these
companies. |
355. |
Accordingly, the Commission denies
the above requests by Northwestel and Ontera. |
356. |
The Commission therefore determines that
Northwestel and the small ILECs are required to file, for Commission
approval, proposed tariffs for any local VoIP service they wish to
provide. |
357. |
The Commission defers its determination on
the regulatory framework for competition in the provision of local VoIP services
in territories of ILECs not yet subject to local competition, until the
issue of local competition in these territories is addressed. |
|
IP interconnection
|
|
Background
|
358. |
In Decision 97-8,
the Commission encouraged efficient, technologically neutral interconnection
arrangements of competing networks to the benefit of all subscribers. |
|
Positions of parties
|
359. |
The Companies and Northwestel submitted
that, prior to being able to define applicable IP-based arrangements and
to develop tariffs that would be used for IP traffic interchange, an
interface standard for use in Canada should be developed. The Companies
stated that this task should be undertaken at CISC. TELUS argued that
IP interconnection was outside the scope of this proceeding, but agreed
that CISC was the best forum for standards and practices to be
collaboratively developed. The CCTA submitted that the Commission should
mandate CISC to address this issue. |
360. |
MTS Allstream stated that under the
existing LEC interconnection regime, entrants were forced to convert
IP traffic to TDM traffic and this would result in growing
inefficiencies and potential voice service quality concerns. MTS Allstream
submitted that the Commission should immediately initiate a proceeding
to address the need for mandated IP-based interconnection arrangements,
since the existing interconnection regime dealt solely with the exchange
of circuit-switched or TDM-based traffic. The company also stated that
the issue of IP interconnection should not simply be delegated to CISC,
but that the Commission should be directly involved in the process and
that it should establish clear timelines for its conclusion. The CCTA,
Cogeco and QMI agreed that the current interconnection regime did not
provide for the efficient and cost-effective solutions that an
IP interconnection regime would offer new entrants. |
361. |
MTS Allstream further submitted that the
Commission should provide clear direction to CISC that such
interconnection was mandatory for all incumbent carriers, including both
the ILECs and the cable carriers, to the extent that these latter
companies operate as "broadcast carriers." MTS Allstream also submitted
that the Commission must ensure that all incumbent service providers
adopt open network standards which would support the interoperability of
IP-based networks and services, in order to prevent the incumbents from
designing their services in a proprietary manner. |
362. |
Call-Net submitted the Commission should
mandate interconnection if the industry failed to develop the
appropriate interconnection arrangements. Call-Net also submitted that
various tariffed services were available for interconnection to the ILEC
PSTN, including Bell Canada's tariff filing for VoIP service provider
interconnection. |
363. |
Microcell submitted that the Commission
might want to establish explicit trigger criteria (e.g. related to
internal ILEC deployment of VoIP equipment) at which ILECs were required
to begin offering direct IP-to-IP interconnection arrangements as an
option to interconnecting CLECs and resellers. Microcell also stated
that the Commission should set clear policy direction and timeframes to
CISC for this task to be successful. |
364. |
Yak submitted that it was not necessary at
this time to extend the LEC interconnection arrangements to non-LEC VoIP service
providers. According to Yak, service providers could either implement
arrangements with LECs, through which the interconnection to other LECs
could be obtained or they could become CLECs directly. |
|
Commission's analysis and determinations
|
365. |
The Commission notes that resellers
offering local VoIP service obtain access to the PSTN using services
from LECs. |
366. |
Given that the ILECs and other service
providers are already deploying VoIP technology and that this trend is
expected to continue, the Commission considers that, for reasons
including improved network efficiency, standardized
IP-to-IP interconnection is an important issue that needs to be resolved
as IP becomes more prevalent in the market. |
367. |
The Commission considers that CISC is the
appropriate forum to deal with IP-to-IP interconnection issues. In this
regard, the Commission notes that CISC has already undertaken the task
of developing IP-to-IP interconnection interface guidelines. |
368. |
While MTS Allstream has requested that
instead of delegating this issue to CISC, the Commission be directly
involved in matters related to IP interconnection, the Commission is of
the view that it should first review the guidelines issued by CISC and
then determine any further course of action, as required. |
369. |
Accordingly, the Commission requests CISC
to file, by November 2005, IP-to-IP interconnection interface
guidelines, along with a report detailing its progress as well as any
outstanding issues. The Commission will determine what, if any, further
course of action may be required at that time. |
|
Contribution
|
|
Background
|
370. |
In Decision 2000-745,
the Commission established a revenue-based contribution regime to
subsidize residential telephone service in rural and remote parts
of Canada. Under this contribution regime, all TSPs are required to
report annually based upon their previous year's financial year-end.
TSPs, or groups of related TSPs, with $10 million or more in Canadian
telecommunications service revenues are required to contribute based
upon their contribution-eligible revenues. Contribution-eligible revenues
are calculated by subtracting the Commission-approved deductions,
including retail Internet revenues and retail paging revenues, from
the company's Canadian telecommunications service revenues. |
371. |
With respect to the deduction for retail
Internet revenues, the Commission determined that, while retail Internet
and retail paging service revenues were not contribution-eligible, any
revenues generated by such service providers from the provision of any
other telecommunications services would be contribution-eligible. In
addition, any revenue generated by another telecommunications service
provider supplying underlying telecommunications facilities to
retail Internet and paging service providers (for example,
interconnecting circuits used by Internet and paging service providers)
would be contribution-eligible. |
372. |
As noted above, in Order 2001-220,
the Commission approved the following definition for retail IS: |
|
Retail Internet service includes all Internet Services (IS),
independent of speed and the facilities over which the services are
carried. For greater certainty, retail IS includes, but is not limited
to, all IS that permit the users of those services to upload and/or
download information from the Internet and to use applications such as
electronic mail, but it does not include Public Switched Telephone
Network (PSTN) Voice services or other contribution-eligible
telecommunications services, nor does it include goods or services the
revenues from which fall within the definition of Canadian
Non-Telecommunications Revenues.
|
|
For the purposes of this definition, "PSTN
Voice" services refers to "real-time" voice communication
via the Internet to or from a telephone set or other equipment
where the conversion for carriage on the Internet is performed
at the service provider's (i.e., the ISP's) equipment as defined
in Telecom Order CRTC 98-929.
|
|
Contribution-eligibility of VoIP services
|
|
Positions of parties
|
373. |
Parties generally agreed that VoIP services
should be contribution-eligible. Parties also generally agreed with the
Commission's preliminary view that P2P services were retail IS and
should not be contribution-eligible. |
374. |
With respect to the contribution treatment
of P2P services when they were offered as part of a VoIP service,
parties either proposed that the possibility of accessing the PSTN
should make all calls contribution-eligible or that call-by-call
analysis should be done to ensure that only calls that originated or
terminated on the PSTN (i.e., not P2P calls) were contribution-eligible.
|
375. |
The CCTP was concerned that if a service
capable of accessing the PSTN (i.e., a VoIP service), including 'on-net'
traffic, was contribution-eligible, this would lead to widespread
contribution evasion and abuse. Ontera submitted that all VoIP services
should be contribution-eligible, because doing a call-by-call analysis
would be onerous. |
|
Commission's analysis and determinations
|
376. |
In Decision 2000-745,
the Commission determined that retail IS revenues would not be contribution-eligible.
The Commission notes that almost all parties agreed that VoIP services
should be contribution-eligible. Consistent with its determinations
above to the effect that VoIP is not retail IS, the Commission
determines that revenues associated with VoIP services are contribution-eligible. |
377. |
Further, all parties agreed that P2P
services are retail IS and are not contribution-eligible. The Commission
notes that P2P services do not connect to the PSTN and do not generally
use telephone numbers that conform to the NANP. End-users make P2P calls
using their computer or other terminal equipment and the call is
generally treated similarly, by an ISP, as other forms of Internet
traffic, such as e-mail. |
378. |
The Commission determines that revenues associated
with P2P services, as defined in this Decision, can be deducted on
the retail Internet revenue line of the annual revenue report required
to be filed pursuant to Decision 2000-745.
|
379. |
The Commission considers that the objective
of an easily understood contribution regime contemplated in Decision
2000-745
would be undermined by requiring service providers to perform a call-by-call
analysis in order to differentiate between P2P and VoIP calls.
In the case of calls being handed off between service providers, all
service providers involved in the call would have to take part in
the analysis. |
380. |
Accordingly, the Commission determines that
if the service allows for access to and/or from the PSTN, the service is
to be considered contribution-eligible, even if the customer also uses
the service to make P2P calls. |
|
Retail Internet deduction
|
|
Positions of parties
|
381. |
In their initial comments, the Companies
submitted that the definition of retail IS required refinement to
reflect current and, to the extent possible, future market conditions.
The Companies proposed the following definition for PSTN Voice: |
|
'PSTN Voice' services refers to 'real-time' voice communication
via the Internet to or from a telephone set or other equipment where
the conversion for carriage between the Internet and the PSTN is
performed in Canada, under the direction of the VoIP service provider
(changes from the current definition are underlined).
|
382. |
With respect to the proposed "in Canada"
change, the Companies submitted that the change would ensure that
service providers are under the Commission's jurisdiction and would make
the regime more manageable. They also submitted that service providers
that use Canadian telephone numbers typically use gateways and
associated facilities in Canada to minimize costs, so the conversion
would be done in Canada. |
383. |
With respect to the proposed "under the
direction of the VoIP service provider" change, the Companies submitted
that the change would ensure that, regardless of who did the actual
conversion, the VoIP service provider would be required to contribute. |
384. |
Several parties made submissions that
addressed the two proposed changes and their potential implications.
Primus and Yak submitted that the Commission should consider eliminating
the retail Internet deduction altogether. |
385. |
TELUS submitted that it would be easier to
replace the term "PSTN Voice" with the term "VoIP services." The CCTA
and MTS Allstream shared this view, arguing that this would clarify that
VoIP services are contribution-eligible. |
|
Commission's analysis and determinations
|
386. |
The Commission considers that if the
definition of PSTN Voice is based on the manner in which the service is
provided, as opposed to the service being provided, TSPs could devise
ways to provide their service in a different manner, to exclude them
from the definition. The Commission also notes that the definition of
PSTN Voice was developed prior to the use of the term VoIP services. |
387. |
The Commission considers that, without a
change to the current definition of retail Internet revenue, parties
could become confused by the mixing of the old term (PSTN Voice) and the
new term (VoIP services). Therefore, to avoid confusion, the Commission
considers that it would be preferable to use only one term, VoIP services. |
388. |
Modifying the definition for the retail
Internet deduction to refer only to VoIP services would mean that
contribution-eligibility would be based on whether the service allows
for access to and/or from the PSTN and uses NANP numbering resources and
would no longer refer to any requirement for conversion for carriage
over the Internet. In addition, the issues of modifying the definition
of PSTN Voice to specify "in Canada" and/or "under the direction of the
service provider" would become moot. This would also ensure that all
VoIP services provided in Canada would be contribution-eligible,
regardless of whether the conversion occurred inside or outside Canada,
and/or whether it occurred on the customer's premises, on the service
provider's premises or on the premises of a contracted third party. |
389. |
Accordingly, the Commission changes the retail
Internet deduction definition contained in Order 2001-220
by replacing the term 'PSTN Voice' with the term 'VoIP services'.
The retail Internet deduction will then read as follows: |
|
Retail Internet service includes all Internet Services (IS),
independent of speed and the facilities over which the services are
carried. For greater certainty, retail IS includes, but is not limited
to, all IS that permit the users of those services to upload and/or
download information from the Internet and to use applications such as
electronic mail, but it does not include VoIP services or other
contribution-eligible telecommunications services, nor does it include
goods or services the revenues from which fall within the definition
of Canadian Non-Telecommunications Revenues.
|
|
For the purposes of this definition, VoIP services are defined as
voice communication services using IP that use NANP-conforming numbers
and provide access to and/or from the PSTN.
|
|
Bundled services
|
|
Positions of parties
|
390. |
Comwave submitted that the cable carriers
and telephone companies could bundle a low-priced VoIP service, with
high-speed Internet, in order to minimize contribution payments. |
|
Commission's analysis and determinations
|
391. |
In Attachment B to Order 2001-220,
the Commission established the rules for treating a bundle of contribution-eligible
and non-contribution-eligible services. |
392. |
The Commission considers that Order 2001-220
covers a bundle containing a VoIP service with a high-speed IS,
and that no change to the rules is required. |
|
Eligibility of VoIP services to receive subsidy from National
Contribution Fund
|
|
Background
|
393. |
In Decision 97-8,
the Commission determined that all LECs would be entitled to receive
a contribution, or subsidy, based upon the number of residential network
access service (NAS) served in each ILEC band. |
394. |
In Decision 2000-745,
the Commission determined that subsidy would be specific to residential
NAS in the high-cost bands and that the subsidy amount would be paid
on a subsidy per residential NAS basis, effective 1 January 2002. |
395. |
In Restructured bands, revised loop
rates and related issues, Decision CRTC 2001-238,
27 April 2001, as amended by Decision CRTC 2001-238-1,
dated 28 May 2001 and Decision CRTC 2001-238-2,
dated 7 August 2001 (Decision 2001-238),
the Commission determined, that: |
|
- the residential PES costs used to calculate the subsidy
requirement were appropriate to ensure that the national subsidy fund
would operate in a manner consistent with the objectives of the Act;
and
|
|
- subsidies would not be extended to single-line business service
provided in high-cost service areas.
|
|
Positions of parties
|
396. |
Parties generally agreed that the rules for
eligibility established in Decision 97-8
should be followed for the provision of local VoIP services.
In addition, most parties supported local VoIP service providers
being eligible to receive subsidy, from the National Contribution
Fund, subject to one or more of the following conditions: |
|
- provision of the underlying access;
|
|
- compliance with Decision 97-8
rules for local competition; and
|
|
- meeting the basic service objective.
|
397. |
Northwestel was opposed to providing
subsidies to LECs providing local VoIP services; it submitted that as
local competition was not allowed in its territory, the issue should be
dealt with during a local competition proceeding. |
398. |
Most parties generally agreed that the
service provider must supply both the local VoIP service and the
underlying access, to be eligible to receive a subsidy. |
399. |
The CCTA submitted that those parties that
argued that subsidies should not be available to service providers that
did not provide the access portion of the service were taking an overly
narrow interpretation of the Commission's previous determinations with
respect to services eligible to receive subsidy. The CCTA also submitted
that, if an access-independent VoIP service provider could successfully
implement all of the necessary obligations to become a registered CLEC
and provide residential local service in a subsidy-eligible band, then
it would be appropriate to permit the service provider to seek a
subsidy. |
400. |
The CCTA referenced Order 98-1,
and submitted that VoIP services were functionally equivalent
to exchange service and, therefore, should be eligible for a subsidy. |
401. |
FCI Broadband submitted that local VoIP service
providers should not be entitled to receive a subsidy because the
customer was supplying the loop, not the service provider. |
402. |
Yak submitted that local VoIP service
providers that met the basic service objective would have a strong case
for access to subsidy. The Companies submitted that only local VoIP services
that met the basic service objective should be eligible to receive
subsidy. |
|
Commission's analysis and determinations
|
403. |
In Order 98-1,
the Commission defined the residential NAS, in respect of which a
LEC is eligible to receive contribution, as the NAS used by the LEC
to offer residential switched two-way local voice services in the
exchanges within which it operates as a LEC. |
404. |
The Commission notes that when a customer
is provided PES using circuit-switched technology, the customer receives
both access to the network and the local service. Consistent with
Order 98-1, the Commission
concludes that in order for a residential NAS, whether associated
with PES or local VoIP service, to be eligible for subsidy, the
customer must be provided with both the underlying access and the
local service components. |
405. |
In Telephone service to high-cost serving
areas, Telecom Decision CRTC 99-16,
19 October 1999 (Decision 99-16),
the Commission established the following basic service objective for
LECs: |
|
- individual line local service with touch-tone dialling, provided
by a digital switch with capability to connect via low-speed data
transmission to the Internet at local rates;
|
|
- enhanced calling features, including access to emergency services,
Voice Message Relay service, and privacy protection features;
|
|
- access to operator and directory assistance services;
|
|
- access to the long distance network; and
|
|
- a copy of a current local telephone directory.
|
406. |
The Commission went on to note that the
basic service objective was independent of the technology used to
provide service. |
407. |
In Decision 99-16,
the Commission also determined that, after 1 January 2002, a subsidy
would be made available to ILECs with an approved service improvement
plan indicating how they would achieve the basic service objective,
and CLECs would be eligible to receive a subsidy for those customers
receiving a level of service which met the basic service objective. |
408. |
Accordingly, the Commission determines that
local residential VoIP service providers are eligible to receive
the existing subsidy per residential NAS from the National Contribution
Fund, in those circumstances in which the service provider provides
both the underlying access and the local services components, and
meets all of the criteria established by the Commission in Decision
97-8 and subsequent
related determinations for receiving subsidy. Such criteria include,
among others, the requirement that the service provider comply with
all LEC obligations and that it meet or exceed the basic service objective.
|
|
Amount of subsidy to be paid from the National Contribution Fund
|
|
Background
|
409. |
In Decision 2000-745,
the Commission determined the components of each ILEC's subsidy per
residential NAS calculations. In Regulatory framework for second
price cap period, Telecom Decision CRTC 2002-34,
30 May 2002, the Commission determined that the large ILECs would
be required to file annual subsidy calculations. The Commission established
a similar process for Télébec and the former TELUS Communications
(Québec) Inc. (TCQ) in Implementation of price regulation for
Télébec and TELUS Québec, Telecom Decision CRTC 2002-43,
31 July 2002, although the subsidy per residential NAS approval process
only began in 2005, after the release of Implementation of competition
in the local exchange and local payphone markets in the territories
of Société en commandite Télébec and the former TELUS Communications
(Québec) Inc., Telecom Decision CRTC 2005-4,
31 January 2005 (Decision 2005-4). |
|
Commission's analysis and determinations
|
410. |
The Commission notes that the same per
residential NAS per ILEC band subsidy is paid to all LECs that provide
service to residential customers in that ILEC band in high-cost serving
areas, regardless of their individual revenue/cost structure and the
technology used to provide their service. |
411. |
To the extent that a LEC can increase its
revenues or reduce its costs, the LEC is allowed to retain the benefits
of its efforts. While the introduction of IP technology in the provision
of residential PES may result in a different cost structure from the
existing circuit-switched technology, the Commission does not consider
that this justifies departing from the existing subsidy calculation
process. |
412. |
Accordingly, the Commission determines that
the existing subsidy per residential NAS amounts are to be paid to
a LEC providing residential local VoIP services in high-cost
areas, as long as the LEC meets all of the conditions required to
receive subsidy, including provision of both the access and service
components, meeting the requirements of Decision 97-8
and subsequent related determinations and providing a service which
meets or exceeds the basic service objective. |
|
Access
|
413. |
A number of parties made the following
requests, submitting that they were necessary to facilitate competitive
entry for VoIP services providers: |
|
- removal of the restriction in Third-Party Internet Access (TPIA)
service offered by the incumbent cable carriers, which prohibits the
use of TPIA service for the provision of IP-based telephony service;
|
|
- removal of the restriction on the use of unbundled
loops/co-location for the provision of switched local voice services
by DSLSPs that are not CLECs; and
|
|
- imposition of a VoIP access condition on broadband services
provided by ILECs and cable carriers.
|
414. |
The Commission addresses these specific
requests by the parties in the following sections of this Decision. |
|
Removal of VoIP restriction on third-party Internet access
|
|
Background
|
415. |
In Terms and rates approved for large
cable carriers' higher speed access service, Order CRTC 2000-789,
21 August 2000 (Order 2000-789),
the Commission approved terms and rates for the provision of higher-speed
access services to ISPs by the cable carriers. In that Order, the
Commission also confirmed that Regulation under the Telecommunications
Act of certain telecommunications services offered by "broadcast
carriers", Telecom Decision CRTC 98-9,
9 July 1998 (Decision 98-9)
and Regulation under the Telecommunications Act of cable carriers'
access services, Telecom Decision CRTC 99-8,
6 July 1999, required a cable carrier to make higher-speed access
service available to ISPs to permit them to offer high-speed retail
IS. For this purpose, the Commission stated that high-speed retail
IS did not include IP-based voice telephony service, multi-casting,
virtual private networks or local area networks. |
416. |
In Decision 98-9,
the Commission determined that it would approve the rates and terms
under which incumbent cable carriers provided higher-speed access
to their telecommunications facilities to competitive providers of
retail IS. The proceeding associated with Decision 98-9
excluded from consideration issues related to local telecommunications
services, including local public switched voice services. |
417. |
In Order 2000-789,
the Commission stated that the terms on which access is provided to
ISPs and on which the cable carrier uses its facilities to provide
its own high-speed retail IS must not result in a preference or discrimination
that is contrary to subsection 27(2) of the Act. |
|
Positions of parties
|
418. |
Several parties opposed the removal of the
existing TPIA restriction. The CCTA argued that removal would force
the cable carriers to provide mandated access for the provision of
voice services, contrary to the Commission's policy framework established
in Decision 97-8
and confirmed in its rulings regarding TPIA service. The CCTA submitted
that this could result in demands on cable carriers to support an
access-dependent or managed telephony service. According to the CCTA,
this requirement was beyond the intent and purpose of the TPIA service.
The CCTA also submitted that mandating cable carriers to provide access
to their facilities would have the effect of stifling the development
of facilities-based competition. |
419. |
The CCTA further argued that the TPIA
restriction may not limit the ability of TPIA customers to offer their
end-users access-independent VoIP service, which allows voice calls to
be transmitted over the public Internet, since the VoIP service was
independent of the access obtained under the TPIA tariff. The CCTA also
submitted that the lack of access to cable facilities did not represent
a barrier to entry, as a number of VoIP service providers including
Primus, Vonage, and Navigata, had launched VoIP services in a number of
markets without mandated access to cable carriers' facilities. QMI,
Cogeco, EastLink, Rogers, and Shaw adopted similar positions. |
420. |
TELUS strongly opposed the removal of the
restriction on the TPIA tariff if it resulted in ISPs being permitted to
provide local voice services over unbundled facilities on an
access-dependent basis. TELUS submitted that the existing participants
in the Canadian telecommunications market had made significant
investments in the industry and the removal of the TPIA restriction
would amount to a repudiation of the Commission's local competition
model which was designed to promote self-sustaining, facilities-based
competition. However, TELUS also stated that it would be inequitable and
unfair to prevent ISPs from offering an access-independent VoIP service,
like the many other service providers today who are offering those same
services over the high-speed IS of ISPs. |
421. |
A number of parties supported the removal
of the existing TPIA restriction. These parties generally submitted that
the current TPIA restriction was an anti-competitive practice that would
impede emerging VoIP competition. The Companies submitted that a
prohibition on the use of the cable carriers' TPIA service to provide
VoIP services would be an obstacle to the development of VoIP services
that utilized cable carriers' underlying facilities. MTS Allstream
expressed similar views. |
422. |
Call-Net submitted that in the proceeding
leading to Order 2000-789,
the Commission was dealing with the narrow issue of mandatory third-party
ISP access to the cable carriers' infrastructure to provide competitive
retail high-speed Internet access service. Call-Net did not interpret
the TPIA restriction as permitting cable carriers to prevent or otherwise
restrict or disadvantage VoIP service providers from serving
their high-speed Internet customers with VoIP service and stated
that the Commission might wish to confirm this understanding. |
423. |
Primus submitted that the prohibition on
the provision of VoIP services via the cable carriers' TPIA services was
a key obstacle currently facing competitors. Primus noted that while its
TalkBroadband customers were able to use the service on any high-speed
IS connection, competitors were currently not permitted to use the cable
carriers' networks via the TPIA service to provide their own bundle of
high-speed Internet and VoIP services. Primus also submitted that the
cable carriers should not be permitted to enter the local telephony
market unless or until this restriction was eliminated from the
agreements/tariffs. |
424. |
Cybersurf submitted that there was no
public interest in preventing an ISP or other competitor dependent on
underlying services obtained from a cable carrier from using those
services to provide access-independent VoIP services, when other parties
that were not dependent on the cable carrier could access the network of
the cable carrier for that purpose without the party's consent. |
|
Commission's analysis and determinations
|
425. |
The Commission notes that parties were in
general agreement that ISPs that use TPIA to provide their Internet
access service should be permitted to offer their customers
access-independent VoIP services. While the CCTA submitted that the TPIA
restriction may not prohibit ISPs who use TPIA to provide their Internet
access service from also offering VoIP services on an access-independent
basis, the Commission considers that the wording of the restriction is
not clear, and could be interpreted as restricting this type of service
offering. |
426. |
Further, while the Commission notes the
CCTA's submission that the removal of the existing restriction could
result in demands on cable carriers to support an access-dependent or
managed telephony service, the Commission does not consider that removal
of the restriction would have such a result. In the Commission's view,
removing the restriction would ensure that TPIA customers are not
prevented from offering VoIP service bundles to their customers merely
because they use TPIA to provide Internet access services. This would
enhance competitive equity and reduce the likelihood of cable carriers'
TPIA customers wishing to offer VoIP services to their customers from
being subject to an undue competitive disadvantage, compared with other
VoIP service providers. By promoting competition, it would thereby
encourage further innovation by service providers and increase choice
for consumers. |
427. |
With regard to the CCTA's and TELUS' submission
that removing the restriction would undermine facilities-based competition,
the Commission considers that allowing service providers to offer
voice services over cable would further facilitate competition in
the local exchange services market. In this respect, the Commission
notes that in Decision 97-8,
it expressed the view that resale of telecommunication services could
promote the development of a competitive market while allowing competitors
time to construct their own facilities. The Commission considers
that allowing ISPs to use the services in question to provide voice
services would also allow these service providers to establish a customer
base, which in turn would make it viable for them to gradually invest
in related equipment, consistent with the Commission's objectives.
|
428. |
The Commission notes TELUS' position that
the restriction should be retained in order to prevent the offering of
VoIP service on an access-dependent basis, but that it should not
prevent the provisioning of VoIP service over cable facilities on an
access-independent basis. In the Commission's view, however, not only
would any such restriction be difficult to enforce, but forcing local
VoIP service providers who are TPIA customers to offer
access-independent services only would constitute an artificial and
inappropriate constraint in the market. |
429. |
Accordingly, the Commission determines that
the TPIA restriction should be removed, and directs Rogers, Vidéotron
ltée, Shaw and Cogeco to issue, within 20 days of this Decision, revised
TPIA tariffs to remove the existing restriction in order to allow TPIA
customers to provide VoIP services, in addition to retail IS. |
|
Removal of VoIP restrictions on DSLSPs
|
|
Background
|
430. |
In Digital subscriber line service providers'
access approved for unbundled loops and co-location, Order CRTC
2000-983, 27
October 2000 (Order 2000-983),
the Commission determined that DSLSPs that are not CLECs should have
access to ILEC tariffs for unbundled loops and connecting links and
for co-location, provided they do not use these services to provide
switched local voice services. The Commission also directed all ILECs,
and any CLECs providing such services to DSLSPs, to ensure that DSLSPs
did not use them for the provision of switched local voice services. |
|
Positions of parties
|
431. |
A number of parties requested that the
Commission continue to require the ILECs to provide co-location services
and access to unbundled loops to DSLSPs, but without any restrictions
relating to the provision of local VoIP services over the same loops.
Certain parties also submitted that this restriction should be removed
only if the DSLSPs complied with the obligations imposed upon CLECs. |
432. |
The Companies and Bell West submitted that
VoIP service offerings were not switched local voice services, but
rather IS provided in a competitive environment and, in their
submission, therefore the above restriction did not apply to VoIP service
providers, and thus there was no reason to modify or remove it. |
433. |
TELUS strongly opposed DSLSPs being
permitted to provide local voice services over unbundled facilities on
an access-dependent basis. In TELUS' view, removing the restriction
would severely undermine the Commission's local competition model which
was designed to promote self-sustaining, facilities-based competition.
However, TELUS submitted that the Commission should make the
restrictions symmetrical as between TPIA services taken by ISPs and the
unbundled loop and co-location service provided to DSLSPs. According to
TELUS, the restriction should relate to the provision of voice telephony
services that are either circuit-switched or access-dependent VoIP.
TELUS also stated that it would be inequitable and unfair to prevent the
competitive service providers from offering an access-independent VoIP service. |
434. |
Several parties supported removal of the
restrictions. MTS Allstream submitted that the existing VoIP restrictions
on ILEC unbundled loops provided to DSLSPs be eliminated. MTS Allstream
stated that the restriction would only serve to artificially limit
competition in the provision of local voice telephony services. AT&T and
Microcell supported this view. |
435. |
The CCTA, Cogeco, EastLink, Rogers, and
Shaw submitted that it would be appropriate to remove the restriction
relating to the provision of local VoIP services over leased unbundled
loops. These parties generally submitted that the DSLSPs that wished to
offer VoIP service should commit to the obligations of local service
resellers. |
436. |
Cybersurf supported the removal of the
restriction and submitted that there was no public interest in
preventing an ISP or other competitor dependent on underlying services
obtained from an ILEC or cable carrier from using those services in
order to provide access-independent VoIP services, when other parties
that were not dependent on the ILEC could access the network of the ILEC
for that purpose without that party's consent. |
437. |
Primus noted that VoIP was not a switched
service, as it did not use the analogue base-band portion of the copper
loop. Primus therefore supported removing the restriction on the
provision of voice services over loops leased by DSLSPs on the analogue
base-band portion of the loop or on the digital stream which travels
over the same loop at a higher frequency. According to Primus, this
would enhance the competitive opportunities for new and innovative non-LEC
suppliers of VoIP services to enter the market with their own services
and new service bundles. |
438. |
Call-Net, MCI Canada, and the TWU submitted
that the restriction on DSLSPs could be removed, provided that they
complied with all of the obligations which the Commission enforces on
CLECs. |
439. |
Most of the remaining participants,
including FCI Broadband, Pulver, Vonage, Yak, UTC, RipNet, ARCH, the
CCTP, Ontario and the Consumer Groups, submitted that there should be no
restriction on VoIP service delivery via unbundled DSL loops. In
general, these parties stated that removing the restriction would
increase local competition and choice for consumers. The Consumer Groups
submitted that since a great percentage of consumers accessed broadband
IS via DSL connections, any restrictions on VoIP traffic via DSL loops
perversely would have the effect of lessening competition in the VoIP market. |
|
Commission's analysis and determinations
|
440. |
As was made clear earlier in this Decision,
the Commission does not agree with the position of the Companies and
Bell West that VoIP service offerings are not switched local
voice services. The Commission notes that the term "switched"
is not limited to "circuit-switched" and therefore can be
read to include both circuit-switched and packet-switched. In the
Commission's view, therefore, the restriction in Order 2000-983
would preclude the offering of any local VoIP services over the
facilities in question. |
441. |
The Commission notes TELUS' position that
the restriction should be retained to prevent the offering of VoIP service
on an access-dependent basis, but that it should not prevent the
provisioning of VoIP service over DSL on an access-independent basis. |
442. |
The Commission considers, however, that a
rule preventing a local VoIP service provider from providing
access-dependent services would not only be difficult to enforce, but
would constitute an artificial and inappropriate constraint in the
market. |
443. |
With regard to TELUS' submission that removing
the restriction would undermine facilities-based competition, the
Commission considers that allowing resellers to offer voice services
over DSL would further facilitate competition in the local exchange
services market. In this respect, the Commission notes that in Decision
97-8 it expressed
the view that resale of telecommunication services could promote the
development of a competitive market while allowing competitors time
to construct their own facilities. The Commission
considers that allowing DSLSPs to use the services in question to
provide voice services would also allow these service providers to
establish a customer base, which in turn would make it viable for
them to gradually invest in related equipment, consistent with the
Commission's objective of increasing competitiveness. |
444. |
The Commission considers that the removal
of this restriction would remove the market distortions caused by not
allowing DSLSPs to offer VoIP services over DSL as well as service
bundles. The Commission considers that the resulting competitive market
would encourage further innovation, investment and would provide an
increased choice of local service suppliers to consumers. |
445. |
The Commission does not agree with the
submissions of Call-Net, MCI Canada and the TWU that DSLSPs wishing to
offer VoIP service should be subjected to CLEC obligations. The
Commission considers that, while removal of the restriction would allow
DSLSPs access to tariffs for unbundled loops and connecting links and
for co-location to offer VoIP service, it would not grant them access to
other benefits, such as access to numbers or subsidy, that are currently
available to CLECs. Therefore, the Commission considers that it
is not necessary to impose additional CLEC obligations on DSLSPs
offering VoIP services. |
446. |
Accordingly, the Commission modifies the
restriction in Order 2000-983
in order to now allow DSLSPs that are not CLECs and that obtain unbundled
loops, connecting links and co-location from the ILECs, to provide
VoIP services, in addition to retail IS. ILECs are directed to
issue, within 20 days of this Decision, revised tariffs to remove
the existing restriction in order to allow DSLSPs that are not CLECs
and that obtain unbundled loops, connecting links and co-location
to provide VoIP services, in addition to retail IS. |
447. |
With respect to Primus' proposal to remove
the restriction on the provision of voice services on the analogue
base-band portion of the loops leased by DSLSPs, the Commission
considers this issue to be outside the scope of this proceeding. In the
Commission's view, it is only the IP transmission of voice service over
the higher frequency portion of the loop and transmitted on a digital
basis that is subject to review in this proceeding. |
|
Access providers' condition
|
|
Background
|
448. |
Yak submitted that the Commission should
take specific measures to guard against anti-competitive activity by the
ILECs and cable carriers, in their capacity as the underlying Internet
access providers, by imposing a VoIP access condition pursuant to
section 24 of the Act. According to Yak, the objective of the VoIP access
condition would be to ensure that consumers can have access to the VoIP services
provider of their choice on reasonable and non-discriminatory terms and
conditions. |
449. |
Yak submitted that its VoIP access
condition would prohibit the following: |
|
- a contract of a broadband service provider or an affiliate which
restricted a customer from dealing with any VoIP service provider
[referred to below as "contract restrictions"];
|
|
- the intentional impairment of broadband service used by a VoIP service
provider, or its customer [referred to below as "service impairment"];
and
|
|
- the failure, except with prior Commission approval, to make
available to a VoIP service provider, or its customer, broadband
service of a quality which is equivalent to that which the broadband
service provider makes available with its own VoIP service, or
charging an extra amount for any service, without prior Commission
approval [referred to below as "equivalent quality of service"].
|
|
Positions of parties
|
450. |
The Companies, Bell West and Xit submitted
that it was not necessary or appropriate for the Commission to impose an
access condition on ILECs and cable carriers or any other service
providers providing broadband access. According to the Companies, since
VoIP services and the underlying access services were provided in a
competitive environment, market conditions and competition law would
ensure against anti-competitive conduct on the part of broadband service
providers. TELUS and the CCTA expressed similar views. |
451. |
The competitive service providers and most
of the remaining parties supported the access condition proposed by Yak. |
|
Contract
restrictions |
452. |
Yak submitted that there was ample evidence
to demonstrate the value of a condition, which prohibited ILECs and
cable carriers from misusing their broadband access to prevent a
customer from using its preferred VoIP service provider. Yak noted the
example of TELUS imposing a contract provision on a long distance
customer prohibiting the customer from using a dial-around service and
enforcing this prohibition by blocking calls to the dial-around
operators. |
453. |
Most parties generally submitted that a
broadband service provider should not restrict a broadband customer from
dealing with an alternative service provider of the customer's choice. |
454. |
AT&T supported Yak's proposal and stated
that the Commission should forbid any network owner providing broadband
access from impeding access to the Internet content of another
application provider, except where such access would threaten the
integrity of the network or where required by law. |
455. |
Call-Net submitted that it would be
inappropriate for any underlying service provider to restrict access to
a VoIP service provider of the subscriber's choice where that access was
provided over the public Internet. |
456. |
The CCTP submitted that in those geographic
markets where there were two or fewer high-speed access providers, the
Commission should prohibit such access providers from blocking, by
contract or technical means, customer access to an independent VoIP service
provider. |
457. |
While the CCTA agreed that neither LECs nor
ISPs should interfere with a broadband user's choice of VoIP service
providers and with a consumer's fair use of broadband service, any
concerns that might arise could be addressed under the Commission's
existing rules. |
|
Service impairment |
458. |
Yak submitted that although no party could
point to examples of intentional degradation having occurred to date,
the technology was available to accomplish service degradation. In its
submission, given the incentives and history of incumbent
anti-competitive behaviour, the Commission should curtail such conduct
through the VoIP access condition. |
459. |
Primus requested that the Commission impose
a new section 24 condition of service on all Canadian carriers expressly
prohibiting them from engaging in the intentional degradation of a
competitor's service via packet dropping. Primus submitted that, as a
reseller which has to rely heavily on the underlying networks of its
carrier service providers, it had concerns about packet prioritization
and the potential for packet loss, intentional or otherwise, in the
context of wholesale services available from the ILECs. Primus submitted
that while it did not have direct evidence of intentional packet
dropping by carriers at the present time, changes in telecommunications
technology would make it simple for carriers to identify voice packets
and, through a process called "deep packet inspection" effectively
impair the voice quality of competitors' service offerings. |
460. |
Primus noted that subsection 27(2) of the
Act provided the company with the ability to present any evidence it had
against a carrier and to seek relief from the Commission. However, the
company submitted that the most significant drawback to this approach
was that the competitive damage would already have been done and would
continue through the course of the application process. |
461. |
The Companies stated that they would only
block voice IP packets upon receipt of an order from a competent court
or legal authority or in instances in which the traffic interfered with
the use of the service by subscribers in cases, for example, of spam,
dissemination of viruses and other harmful traffic. The CCTA, Cogeco,
EastLink, and Shaw expressed similar views. |
462. |
TELUS submitted three reasons as to why
there was no need for the Commission to impose this access condition.
First, TELUS submitted that the Commission, in its retail Internet
forbearance orders, retained the subsection 27(2) prohibition on unjust
discrimination. According to TELUS, this prohibition included the
deliberate degradation of the quality of a given access-independent VoIP service.
Second, TELUS submitted that no party had offered any evidence that the
potential problems referred to had ever happened in North America.
According to TELUS, any such issues could be dealt with in the future,
should they arise. Third, TELUS submitted that it had committed not to
do anything to deliberately degrade the service experienced by an
end-user of any access-independent VoIP service. |
463. |
The CCTA submitted that its members did
not, nor did they intend to impede, alter or otherwise restrict the
ability of a VoIP service provider to provide services to a cable
carrier's retail high-speed IS customers. The CCTA observed that neither
Yak nor any other access-independent VoIP provider had alleged or
offered evidence of cable carrier interference with its VoIP services or
with the broadband service used by its customers. |
464. |
QMI and Xit also submitted that it was not
necessary for the Commission to impose an access condition on any
service providers providing broadband access. |
465. |
Nortel submitted that it was technically
possible for any access provider to degrade a competitor's traffic.
However, the company also added that this approach could also degrade
the traffic from the access provider's own customers and thus the
broadband access providers would have no incentive to use a technology
solution to degrade packet flows. |
|
Equivalent quality of
service |
466. |
Yak suggested that any quality of service
enhancements introduced by the ILECs and cable carriers in their
capacity as the underlying Internet access provider, such as packet
prioritization, should be made equally available to all VoIP service
providers, on an unbundled basis. Yak submitted that the Commission
could not expect a competitive outcome if the dominant broadband
suppliers were able to grant themselves preferential treatment via their
managed networks. Yak also submitted that there was no technical reason
why a competitive VoIP provider's voice packets could not be sent over
the same route that was used by the ILEC or cable carrier. |
467. |
The Companies argued that other VoIP service
providers would be able to offer the same quality of service as the
Companies provided the VoIP service providers followed the same
standards as the Companies. TELUS stated that, with respect to
access-independent VoIP service traffic, it did not believe it was
technically possible to implement packet carriage priority for its own
VoIP service, but not for a competitor's service. |
468. |
The CCTA submitted that its members offered
the same quality of service to all customers that subscribe to a given
level of retail high-speed IS, but argued that there was no policy basis
for mandating cable carriers to make third-party access available to the
additional functionality of managed network service. It also stated that
mandating access to the cable carriers' managed network services would
be inconsistent with the Commission's regulatory framework, that did not
require the mandated unbundling of CLEC facilities. The CCTA added that
the technological improvements and innovations associated with cable
carriers' deployment of IP-based phone services would be discouraged if
such access were mandated, contrary to the objectives of the Act. |
469. |
The CCTP did not agree with Yak with regard
to this element of Yak's proposal. In its view, features such as packet
prioritization were software-defined and it was this very form of
dynamic innovation that the Commission should be striving to encourage
and protect in any regulatory framework developed for VoIP services. The
CCTP also stated that such an access condition would undermine service
innovations that would be a benefit to customers. |
470. |
Rogers submitted that Internet telephony
services might not be able to provide the same quality of service as an
IP-based service over a managed network. Rogers stated that if quality
of service was provided for the voice packets running on the cable
network, but not while they were on the public Internet, the overall
voice communication might not be greatly improved. Accordingly, Rogers
opposed Yak's proposal to the extent it would prevent cable carriers
from providing managed telephone services, which had higher quality of
service than Internet telephony services. |
471. |
MTS Allstream submitted that the Commission
should mandate the unbundling of the voice quality of service
capability. MTS Allstream also stated that the Commission should treat
cable companies and ILECs in an equal manner with respect to unbundling
requirements. |
472. |
Primus submitted that if the cable carriers
or ILECs offered their own customers a service feature that ensured any
level of quality treatment of VoIP traffic they should be required to
unbundle that functionality at reasonable cost for use by competitors.
With respect to service quality issues, Primus submitted that if the
underlying network service provider implemented incremental
functionality that enhanced the carriage of voice packets over either a
managed network or a non-managed network, this "positive treatment"
functionality should be made available to those competitors that might
offer those services over these networks. |
473. |
Microcell submitted that the ILECs must be
required to provide services necessary for the offering of competitive
VoIP services to others on an unbundled and non-discriminatory basis. As
an example, if an ILEC made available its own broadband facilities with
prioritization of voice packets, the same capabilities should be offered
to all other service providers. However, Microcell was also of the view
that cable carriers (and anyone other than the ILECs) did not currently
hold a dominant position in the local exchange services market and hence
the same degree of regulatory oversight as was required for the ILECs
was not necessary. |
|
Commission's analysis and determinations
|
474. |
The Commission notes that none of the
parties objected to customers having access to the VoIP service
providers of their choice, independent of their underlying access
service provider. |
475. |
The Commission considers that it is
unnecessary to impose the proposed contract restrictions on broadband
service providers. The Commission considers that it can rely on
subsection 27(2) of the Act, where appropriate, to prohibit a Canadian
carrier from restricting its broadband customers from dealing with an
alternative service provider of the customer's choice. This issue can
therefore be addressed by the Commission on a case-by-case basis, should
it arise. Such competitive disputes are likely to be resolved by the
Commission in a timely manner, using its expedited procedures. |
476. |
With respect to the proposed service
impairment prohibition, the Commission notes the submissions of Primus
and Yak that the current technology would allow providers of broadband
access to degrade the VoIP services of competitors, but observes that no
party, including Primus and Yak, filed any evidence regarding the
impairment of broadband services or of intentional packet dropping by
the service providers. |
477. |
The Commission has also considered the
submissions of Nortel that, while it is theoretically possible to
degrade the VoIP services of competitors, an attempt to do so could also
degrade the traffic from the access providers' own customers. In
addition, the Commission considers that given that alternative sources
of supply for broadband access exist, market forces can be relied upon
in this regard. |
478. |
Furthermore, even if such an issue were to
arise, the Commission considers that it can rely on subsection 27(2) of
the Act, where appropriate, to prohibit Canadian carriers from
intentionally degrading traffic. In the Commission's view, the existing
regulatory framework is sufficient for dealing with such
anti-competitive behaviour by a broadband service provider. As in the
case above, such competitive disputes would likely be resolved by the
Commission, in a timely manner, using its expedited procedures. |
479. |
With respect to the proposed equivalent
quality of service requirement, the Commission notes that the broadband
providers submitted that they offer the same quality of service, in
terms of packet carriage priority, to all VoIP service providers
subscribing to the same high-speed service. The request was concerned
with ensuring that any quality of service improvements provided by
broadband providers for their own VoIP service offerings are made
available to competitors as unbundled capabilities at a reasonable cost. |
480. |
The Commission considers that VoIP service
providers should be encouraged to develop their own quality of service
improvements and capabilities, which can best be provided through
facilities-based competition or through a service provider subscribing
to TPIA or an unbundled loop. The Commission considers that mandated
unbundling of quality of service improvements available from broadband
providers would result in competitors having less incentive to invest in
order to provide their own managed VoIP service. The Commission further
considers that ISPs, DSLSPs and CLECs have the ability to offer their
own forms of managed VoIP service through TPIA, DSL over unbundled
loops, wholesale high-speed IS or through facilities-based competition. |
481. |
In this regard, the Commission also concurs
with the CCTP that enhanced quality of service and features should be
developed by the service providers themselves to encourage innovation,
competition and consumer choice. |
482. |
In light of the foregoing, the Commission
concludes that it would not be appropriate to impose a general
obligation on all broadband access providers to unbundle quality of
service capabilities that these providers offer to their own customers
at this time. |
483. |
Accordingly, the Commission denies
the request for the imposition of an access condition. |
|
Applicability of existing forbearance determinations
|
484. |
As noted above, in Public Notice 2004-2,
the Commission set out its preliminary view that VoIP service
providers should be subject to the existing regulatory framework,
including the Commission's forbearance determinations. ILECs, CLECs,
non-dominant Canadian carriers, and mobile wireless service providers
would not be required to file tariffs for VoIP services that
fall within the scope of applicable existing forbearance determinations.
Under this preliminary view, ILECs would not be required to file tariffs
in relation to, for example, their long distance VoIP services. |
485. |
While many parties supported the
Commission's preliminary views in general, they did not specifically
comment on the above view. |
486. |
The Commission accordingly determines that
the provision of VoIP services is subject to applicable existing
forbearance determinations. |
487. |
The dissenting opinions of Commissioners
Wylie and Noël are attached. |
|
Secretary General |
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This document is available in alternative
format upon request, and may also be examined in PDF
format or in HTML at the following Internet site: http://www.crtc.gc.ca
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