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Telecom Decision CRTC 2002-58
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Ottawa, 20 September 2002 |
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GT Group Telecom Services Corp. v. Bell Canada – Non-compliance with Bundling Rules
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Reference: 8661-G7-01/02 |
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In this decision, the Commission finds that a Bell Canada
promotion offering business customers a rebate of long distance
charges contingent on the customer obtaining local exchange services
from Bell Canada is a bundled service that requires tariff
approval. |
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The Commission directs Bell Canada to cease providing this
service and any similar service that is provided without an approved
tariff. |
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The Commission also directs Aliant Telecom Inc.,
Bell Canada, MTS Communications Inc., Saskatchewan
Telecommunications, Société en commandite Télébec, TELUS
Communications Inc. and TELUS Communications (Québec) Inc. to file
information with the Commission relating to similar services no
later than 21 October 2002. |
1. |
On 19 April 2002, GT Group Telecom Services Corp.
(Group Telecom) filed an application pursuant to Part VII of
the CRTC Telecommunications Rules of Procedure alleging that
a promotion offered by Bell Canada did not comply with the
Commission's determinations in Joint Marketing and Bundling, Telecom
Decision CRTC 98-4, 24 March 1998 (Decision
98-4) regarding the
bundling of tariffed and forborne services. Specifically,
Group Telecom submitted that Bell Canada's promotion
offering business customers a rebate of long distance charges
contingent on a customer obtaining local exchange services from
Bell Canada qualified as a bundled service and that, contrary
to Decision 98-4, Bell Canada had not obtained tariff approval
prior to offering this service. |
2. |
Group Telecom requested that the Commission direct
Bell Canada to (a) cease offering the promotion that was the
subject of its application and all similar non-tariffed promotions
or offerings that involved the bundling of tariffed and non-tariffed
services unless and until the Commission approved a tariff providing
for any such arrangements; and (b) file a report that included
information on other Bell Canada non-tariff rebate or incentive
plans. Group Telecom also asked that, on receipt of this
report, the Commission initiate a public proceeding to determine the
appropriate remedies. |
3. |
AT&T Canada filed comments in support of Group Telecom's
application on 21 May 2002. Bell Canada filed its
answer to Group Telecom's application on 21 May 2002.
Bell Canada filed further comments on 30 May 2002 in response
to AT&T Canada's submission. Group Telecom filed reply
comments on 7 June 2002. |
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Positions of parties
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Characterization of the service
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4. |
Group Telecom submitted that the promotion offered by
Bell Canada was a bundled service since it required a business
customer to take both local exchange and long distance service from
Bell Canada in order to receive a per-line rebate.
Group Telecom argued that, prior to being provided to
customers, this service required approval by the Commission pursuant
to the bundling rules established by the Commission and, therefore,
subsection 25(1) of the Telecommunications Act (the Act).
Group Telecom submitted that Bell Canada was in violation
of the Act because it had not received this prior approval. |
5. |
AT&T Canada supported Group Telecom's
characterization of Bell Canada's promotion as a bundled
service for which tariff approval is required. AT&T Canada
argued that it was clear the rebate offered by that promotion
depended on the customer migrating both local and long distance
service to Bell Canada. AT&T Canada further argued
that it was therefore reasonable to conclude that Bell Canada
had, at a minimum, misinterpreted the bundling rules and had
employed this misinterpretation to offer, for some time, on a non-tariffed
basis, winback promotions that should be tariffed. |
6. |
Bell Canada stated that it targeted the promotion to
businesses that were not its customers for local or long distance
service. Bell Canada further stated that the service, which it
described as a winback promotion, provided a customer with a rebate
of $140 on charges for long distance service for each local business
line in respect of which the customer returned to the company. To
receive the rebate, the customer had to satisfy two qualifying
criteria. The customer had to take local service from
Bell Canada and spend a minimum of $50 per month on
Bell Canada's long distance service. Bell Canada stated
that it had offered this service as a promotion since October 2001.
It also stated that it had periodically offered similar promotions
of lesser amounts in the past. |
7. |
Bell Canada argued that the rebate did not bundle tariffed
local and forborne long distance services because Bell Canada
had not aggregated service elements for the purpose of applying
volume discounts that would not be available on a disaggregated
basis. Bell Canada further argued that the terms of the rebate
did not create a bundle because the rate of one or more service
elements did not depend on the customer's usage of other services.
Bell Canada stated that the promotion involved two qualifying
criteria and that a customer that met these criteria was entitled to
the promotion independent of any tariffed service. Bell Canada
submitted that the benefit to the customer was fixed and did not
vary with the type of local service. |
8. |
Bell Canada noted that Group Telecom attached to its
application a copy of a fax that a Bell Canada sales
representative had sent to a potential customer. In that fax, the
sales representative deducted from the rebate of $140 per local line
the service charge that Bell Canada would require the customer
to pay for the connection of such line. Bell Canada stated that
its sales representative had done this to demonstrate to the
potential customer the net effect of taking both its local and long
distance services from Bell Canada. |
9. |
Bell Canada emphasized that its sales representative's
presentation of the rebate as a credit in respect of local service
connection charges was contrary to company policy and the training
received by its sales representatives. Bell Canada described
the remedial actions it had taken to ensure that its sales
representatives described the promotion to potential customers as a
long distance promotion that was independent of any other tariffed
service. |
10. |
Bell Canada stated that, if a customer's long distance
charges on its first bill amounted to at least $140, the rebate
would be credited to those charges. Bell Canada stated,
however, that if a customer's first month of long distance charges
were not large enough to absorb the full amount of this credit, it
would apply the credit to the customer's total bill.
Bell Canada also indicated that it was investigating
modifications to its billing system that would permit it to apply
the rebate against a customer's long distance charges as those
charges accrued over time. Bell Canada added that it was
investigating these modifications because it was concerned that
crediting the rebate to a customer's total bill might give to a
customer an impression not intended by Bell Canada with respect
to the nature of the promotion. |
11. |
In reply, Group Telecom submitted that Bell Canada's
interpretation, that a rebate notionally provided in respect of
forborne long distance service must vary with the type or usage of
local service before a bundle resulted, was not consistent with
Decision 98-4. In essence, Group Telecom argued that all that
was necessary for a bundle to exist was for the rebate to be
contingent on the customer taking both local and long distance
service from Bell Canada. |
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Remedies
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12. |
Bell Canada argued that the remedies requested by
Group Telecom and AT&T Canada were not necessary
because its service was not a bundled service. Bell Canada
submitted that, because it had taken prompt remedial action, there
would be little point in initiating the public proceeding requested
by Group Telecom. |
13. |
In its reply comments, Group Telecom requested additional
remedies that it described as marketplace remedies. These remedies
included the termination, without penalty to the customer, of all
contracts between Bell Canada and its business customers
relating to the allegedly illegal bundled service. Bell Canada
did not provide comments on these proposed remedies. |
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Commission analysis and determination
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14. |
The Commission notes that bundling rules were first established
in Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994 in which the Commission addressed the
regulatory approach to the bundling of tariffed services. In Local
Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision
97-8) these rules were adapted to the bundling of tariffed local
service with forborne services. The main thrust of these rules is
that all bundled services that include a tariffed service component
must receive prior Commission approval. |
15. |
The Commission further notes that in Forbearance –
Regulation of Toll Services Provided by Incumbent Telephone
Companies, Telecom Decision CRTC 97-19, 18 December 1997,
and Stentor Resource Centre Inc. – Forbearance from Regulation
of Interexchange Private Line Services, Telecom Decision CRTC 97-20, 18 December 1997, the Commission described bundling as the
inclusion of different services or service elements under a rate
structure. The Commission noted that this rate structure could be a
"single rate, a set of rates for various service elements
and/or rates for one or more service elements which are dependent on
the usage of other services." In Decision 98-4, the Commission
adopted this same description of bundling. |
16. |
In the present case, a long distance customer would receive a
rebate only if it also subscribes to Bell Canada's tariffed
local service. The Commission considers that, as a result of this
requirement, the rates for long distance service depended on the
usage of local exchange service. |
17. |
In light of the above, the Commission finds that
Bell Canada's promotion meets the definition of a bundled
service to which the requirements of Decision 97-8
and subsequent
decisions apply. The provision of this service without prior tariff
approval is therefore in contravention of subsection 25(1) of the
Act. |
18. |
The Commission considers that Bell Canada's non-compliance
with the Act is unacceptable and inconsistent with fair and
sustainable competition. |
19. |
The Commission considers that Bell Canada knew, or ought to
have known, that it has been and continues to be in contravention of
the Act, even if its stated interpretation of these rules is
applied. In this regard, the Commission notes Bell Canada's
acknowledgement that, if the customer's long distance charges for
the first month of service are not great enough to absorb the full
amount of the rebate, the rebate is applied to the customer's total
charges, including charges for tariffed local service. |
20. |
The Commission also notes Bell Canada's statement that it is
investigating modifications to its billing system to change this
practice. However, the Commission considers that Bell Canada's
promotion would remain a bundle even if Bell Canada were to
change its billing practice to attribute the rebate entirely to a
customer's charges for long distance service because the rate for
long distance service would still be dependent on the usage of
another service. |
21. |
The Commission directs Bell Canada to immediately cease
providing the bundled service at issue. The Commission also directs
Bell Canada to immediately cease providing, except pursuant to
an approved tariff, any other service, including any promotion, that
involves a Bell Canada tariffed service and one or more
forborne services of the company, where a reduction, discount,
rebate, incentive or any other benefit in respect of any of those
services is conditional on the customer obtaining one or more of the
other services from Bell Canada. |
22. |
The Commission further directs Bell Canada to file by 21
October 2002 a report, serving a copy on Group Telecom and
AT&T Canada, identifying, separately in respect of each of
its business, Centrex and residential services, each service,
including a promotion, offered as of the date of this decision
without an approved tariff, where the service involves a tariffed
service and one or more forborne services of the company and the
customer is offered a reduction, discount, rebate, incentive or any
other benefit depending on the customer's use of any of those
services. The Commission also directs Bell Canada to include in
that report the following information in respect of each service: |
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· a description of the service; |
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· the conditions a customer or potential
customer must satisfy to receive the service and the associated
reduction, discount, rebate, incentive or other benefit; |
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· the date when the service was first
offered; |
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· whether the service is offered, or
described to, customers or potential customers as a
"promotion"; |
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· if the company considers that it does
have regulatory authority for providing the service in question, the
specific regulatory authority under which it is provided; and |
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· the number of customers to whom each
of the rebates, credits, discounts, benefits or incentives has been
provided. |
23. |
The Commission notes that, in its answer to Group Telecom
dated 21 May 2002, Bell Canada referred to a second
promotion that represented a 10% credit on a customer's annual long
distance charges. Although Bell Canada characterized this
second promotion as a long distance promotion, it did not describe
the conditions a customer must satisfy to receive the credit. The
Commission directs Bell Canada to provide, with the report, the
information required under paragraph 22 of this decision with
respect to this promotion. |
24. |
The Commission further directs Aliant Telecom Inc., MTS
Communications Inc. Saskatchewan Telecommunications, Société en
commandite Télébec, TELUS Communications Inc. and TELUS
Communications (Québec) Inc. to each file a report setting out the
information referred in paragraph 22, serving a copy on
Group Telecom and AT&T Canada, no later than 21
October 2002. |
25. |
Group Telecom and AT&T Canada may file comments
with respect to the reports filed pursuant to this decision, serving
a copy on the telephone company on whose report it is commenting, no
later than 4 November 2002. The Commission invites
Group Telecom and AT&T Canada to include their views
as to appropriate remedies. Each telephone company in respect of
whose report Group Telecom or AT&T Canada filed
comments may file reply comments, including comments with respect to
remedies, serving a copy on Group Telecom or
AT&T Canada, no later than< 12 November 2002. |
26. |
On receipt of the telephone companies' reports and parties'
comments, the Commission will determine what further action, if any,
is appropriate. |
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Secretary General |
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This document is available in alternative format upon request and
may also be examined at the following Internet site:
http://www.crtc.gc.ca |