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Telecom Decision CRTC 2002-73
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Ottawa, 4 December 2002 |
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Call-Net Enterprises Inc. v. Bell Canada – Compliance
with winback rules
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Reference: 8622-C25-16/02
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In this decision, the Commission finds that Bell Canada is
in violation of the Commission's winback rules. The Commission directs
Bell Canada to: (1) cease and desist from violating the winback
rules; (2) develop internal procedures to ensure that it complies
with the winback rules from the time that a local service provider
submits a local service request; and (3) report to the Commission
within 60 days on the internal procedures it has put in place to
ensure and track compliance with the winback rules. |
1. |
On 3 May 2002, Call-Net Enterprises Inc. on behalf of itself and
its affiliated companies, including Sprint Canada Inc.,
(collectively, Call-Net), filed an application pursuant to Part VII
of the CRTC Telecommunications Rules of Procedure, requesting
that the Commission direct Bell Canada to cease and desist from
violating the Commission's winback rules and implement the
compliance program proposed in its application. |
2. |
Comments on Call-Net's application were filed by Futureway
Communications Inc. (Futureway), and by AT&T Canada Corp., on
behalf of itself and AT&T Canada Telecom Services Company
(AT&T Canada), on 3 and 4 June 2002, respectively.
Bell Canada filed its answer on 3 June 2002. Call-Net filed
reply comments on 11 June 2002. |
3. |
Bell Canada filed supplementary comments on 20 June 2002.
Call-Net filed reply comments on 24 June 2002. |
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Background
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4. |
The local exchange winback restrictions were initially
established by the Commission in a letter decision entitled Commission
Decision Regarding CRTC Interconnection Steering Committee Dispute
on Competitive Winback Guidelines, dated 16 April 1998 (the
winback letter decision). Pursuant to the winback letter decision,
an incumbent local exchange carrier (ILEC) was not to attempt to win
back a customer with respect to primary exchange service, for a
period of three months after that customer's service had been
completely transferred to another local service provider (LSP). In
that same letter decision, the Commission stated its concern that
without such guidelines, ILECs would potentially be able to win back
customers even before local service was effectively transferred to a
competitive local exchange carrier (CLEC). |
5. |
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 by expanding the type of residential
services that were subject to the restrictions. ILECs were directed
to refrain from attempting to win back residential customers, with
respect to primary exchange service or any other service, for a
period of three months after the customer's primary local exchange
service had been completely transferred to another LSP.
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Call-Net's application
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6. |
In its application, Call-Net alleged that Bell Canada was
violating the winback rules by contacting customers immediately
after receiving Call-Net's local service requests (LSR), before the
customers had migrated to the Call-Net network. Call-Net submitted
that the winback rules were explicit, and that contact for
winback purposes was prohibited until three months after a
customer's service had completely migrated to an LSP's network. In
support of its application, Call-Net filed a sample of 21
residential local exchange customers who, according to Call-Net, had
switched to Sprint Canada Inc. for local service, and had been
contacted by Bell Canada within days of Bell Canada
receiving the LSR. |
7. |
Call-Net submitted that non-compliance with the winback rules
represented a significant threat to the emergence of residential
local competition. Call-Net argued that it was critical that the
competitive momentum that was gathering in the residential local
market not be impeded by the ILECs. |
8. |
Since in its view the winback rules were explicit and
unequivocal, Call-Net submitted that it would not be sufficient for
the Commission to merely direct Bell Canada to cease and desist
from violating the winback rules. Call-Net argued that, in addition,
Bell Canada should be required to implement a program that
would demonstrate its compliance with the winback rules. |
9. |
In particular, Call-Net requested that the Commission direct
Bell Canada to implement a compliance program in which
Bell Canada would: |
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- provide comprehensive training for its sales personnel on
regulatory compliance, with specific focus on winback activities;
the training would include written communication to sales
personnel of the winback rules and any other relevant Commission
Orders; Bell Canada would then report to the Commission on
the internal processes it had put in place to track compliance on
a going-forward basis, as well as to rectify non-compliance
vis-à-vis both the CLEC and the affected customer;
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- include a billing insert for all its residential customers
that would provide:
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a) a statement that the local service market had been opened
to competition by the Commission and that, where available,
customers were free to switch to alternative LSPs, without
incurring a disconnection penalty;
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b) a statement that Bell Canada was prohibited by the
Commission from contacting the customer for three months after
the customer had chosen to switch to another service provider;
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c) a Commission general telephone number and address where
customers could report improper contact by Bell Canada
representatives;
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d) the names of CLECs currently providing residential local
exchange service and their general telephone numbers; and
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e) a statement that all residential households were free to
use any local exchange service provider of their choice.
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Comments on Call-Net's application
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Bell Canada
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10. |
Bell Canada argued that it was not violating the winback
rules because it was not attempting to win back customers after they
had been completely transferred to another LSP. Bell Canada
submitted that the winback rules did not apply until a customer's
primary exchange service had been completely transferred to another
LSP. Bell Canada further submitted that a customer was not
completely transferred when an LSR was filed with Bell Canada,
but rather, only when a customer's services had actually been
transferred to another LSP. |
11. |
Bell Canada argued that, if winback restrictions applied as
soon as an LSR was filed, the ILECs would not be able to contact
customers for a period well beyond three months, and, as a result,
CLECs would have an incentive to put forward invalid LSRs in an
attempt to delay the process. |
12. |
In addition, Bell Canada maintained that, if the winback
rules did commence at the time an LSR was filed, it would be
required to edit telemarketing lists by deleting customers
identified in the LSRs. Bell Canada argued that this editing
would impose substantial operational and financial penalties on
ILECs, and would result in the breach of the terms and conditions of
the Master Agreement for Interconnection between Local Exchange
Carriers (MALI) which prohibit the disclosure of information
relating to the migration of customers in this manner. |
13. |
Bell Canada submitted that the information provided in Call-Net's
sample of 21 residential local exchange customers who had allegedly
been contacted by Bell Canada within days of Bell Canada
receiving the LSR, was inconsistent with the information in its
databases. Bell Canada stated that it had, in four instances
contacted customers prior to the complete transfer of these customers'
services to Call-Net as a result of legitimate toll winback calls.
In its view, these contacts were in compliance with the winback
rules set out in Decision 2002-1.
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14. |
Bell Canada submitted that Call-Net had not established a prima
facie case that the proposed compliance program was warranted.
Bell Canada submitted that it already had internal procedures
in place to preclude improper winback initiatives. In addition,
Bell Canada argued that Call-Net's request for a billing insert
was nothing more than an unjustified attempt to impose an
advertising obligation on Bell Canada for the commercial
benefit of Call-Net. |
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AT&T Canada and Futureway
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15. |
Both AT&T Canada and Futureway supported Call-Net's view that
Bell Canada was in violation of the winback rules. |
16. |
Futureway submitted that there was little, if any, competition in
the residential market. In Futureway's view, winback violations by
the ILECs threatened the ability of CLECs to establish a long-term
market presence. |
17. |
Both AT&T Canada and Futureway supported Call-Net's proposed
compliance program. AT&T Canada argued that, in addition to
Call-Net's program, the Commission should, immediately order
Bell Canada to: |
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- in the case of cancellation prior to migration, pay a penalty
to the CLEC equal to the contract termination fee; and
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- rebate the CLEC for all costs associated with the migration
of the customer, including, but not limited to, all tariffed
charges paid to the ILEC and, in particular, service charges
associated with the migration from the ILEC to the CLEC.
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Reply comments
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18. |
In its reply comments, Call-Net argued that it was clear that the
winback rules had been violated, given that Bell Canada had
indicated that it had contacted some of Call-Net's customers after
LSRs had been filed with Bell Canada. Call-Net submitted that
ILEC winback campaigns continued to create significant barriers to
Call-Net's ability to successfully penetrate the local residential
market. |
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Supplementary comments submitted by Bell Canada and
Call-Net
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19. |
In its supplementary comments filed on 20 June 2002, Bell Canada
argued that AT&T Canada and Call-Net were attempting to
rewrite the winback rules and that this amounted to a review and
vary application, pursuant to section 62 of the Telecommunications
Act (the Act), without notice to other ILECs. In reply, Call-Net
submitted that its application was neither a request to review and
vary the winback rules, nor an attempt to rewrite Decision 2002-1.
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Commission analysis and determination
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20. |
The Commission does not accept Bell Canada's view that the
winback rules do not apply until a customer's primary exchange
service has been completely transferred to another LSP. The
Commission considers that the winback rules apply from the time that
an ILEC receives an LSR until three months after the customer has
been completely transferred to another LSP. |
21. |
The Commission notes that winback activities are not limited to
activities serving to convince a customer to revert to its original
service provider after their service has been transferred, but also
relate to activities aimed at convincing the customer not to change
service providers before the transfer is effected. In Decision 2002-1,
the Commission referred to the definition set out in CISC dispute
– Rules regarding communication between the customer and the broadcast
distribution undertaking, 1 April 1999 (April Letter
Decision), in which winback activities were defined as:
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…the offering to customers of discounts, free services or
other inducements in order to convince those customers not to
change service providers or to revert back to their original
service provider.
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22. |
The Commission considers that the winback rules were clearly intended
to restrict winback activities from the time a customer expresses
its intent in changing LSPs until three months after the customer's
local services have been completely transferred. In this regard,
the Commission notes that, in both the winback letter decision and
Decision 2002-1, it stated that without
the winback restrictions, the ILECs would potentially be able to
win back customers even before local service was effectively transferred
to a CLEC.
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23. |
In the April Letter Decision the Commission addressed the
rationale for winback rules in the local exchange telephone market,
and stated that: |
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[t]he rationale for imposing these restrictions is primarily
related to the time interval between ordering a customer
transfer from one local exchange telephone provider to another,
and the point at which the transfer is made. However, the
winback restrictions are also an acknowledgement of the ability
of incumbents to attempt to win back customers that have
indicated their intention to change service providers. The
Commission found that such activities would likely be an
impediment to the development of a competitive local market.
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24. |
The Commission therefore concludes that the winback rules set out
in Decision 2002-1 apply from the time
the customer's decision to change service providers is communicated
in an LSR until three months after the customer's local services
have been completely transferred. The Commission therefore
finds that Call-Net's application is not a request to review and
vary the winback rules set out in that decision.
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25. |
The Commission notes Bell Canada's admission that, in the
four instances where customers were being migrated to Call-Net and
were contacted by Bell Canada, such contacts were made prior to
the complete transfer of these customers' services to Call-Net as
a result of legitimate toll winback calls. Accordingly, the Commission
finds that Bell Canada has violated the winback rules set out
in Decision 2002-1.
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26. |
The Commission considers that measures are required to ensure
that Bell Canada complies with the winback rules on a
going-forward basis. While the incidence of the violations appears
to be low, the Commission is, nevertheless, concerned that the
violations, if they were to continue, would harm the competitive
market. |
27. |
The Commission considers it appropriate to require
Bell Canada to develop and implement internal procedures to
ensure its compliance with the winback rules, including, but not
limited to, training programs and other specific measures to ensure
that it is not contacting local customers from the time an LSP
submits an LSR, until three months after the customer has completely
transferred to another LSP. The Commission also considers it
appropriate to require Bell Canada to report to the Commission
on the internal procedures that have been put in place. |
28. |
The Commission notes Bell Canada's submission that it had
internal procedures in place to preclude improper winback activities
and that the customers cited by Call-Net were contacted as a result
of a legitimate telemarketing campaign. The Commission considers,
however, that it is essential that measures be taken to ensure that
the winback rules are not violated as a result of telemarketing
campaigns. The Commission therefore requires Bell Canada to
take the appropriate action to ensure that the names of customers
identified in LSRs are deleted from its telemarketing lists. In the
Commission's view, such measures would not constitute violations of
the confidentiality provisions in the MALI, as alleged by
Bell Canada, but rather, would be consistent with
Bell Canada's obligations under the MALI. In this regard, the
Commission notes that Schedule D of the MALI prohibits local
exchange carriers (LECs) from using any customer-specific
information disclosed by other LECs through the ordering process, to
aid in their marketing or sales efforts. Schedule A of the MALI
allows for exceptions to the confidentiality and non-disclosure
obligations in instances where the information is required to be
disclosed by any government body or agency, or rule of law. |
29. |
The Commission expects that the internal procedures that will be
put in place by Bell Canada will be sufficient to ensure
Bell Canada's compliance with the winback rules on a
going-forward basis. Accordingly, the Commission does not consider
it necessary to direct Bell Canada to implement all of the
measures proposed by Call-Net in its compliance program. In
particular, while the Commission acknowledges that billing inserts
may be an effective tool to ensure that consumers are informed about
the current regulatory and competitive environment as well as an
effective means of deterring future non-compliance, the Commission
does not consider it necessary to require billing inserts at this
time. |
30. |
Furthermore, in view of the low incidence of Bell Canada's
violations of the winback rules, the Commission considers that
AT&T Canada's proposal that Bell Canada compensate CLECs
for contract termination fees and costs associated with customer
migration is not warranted at this time. |
31. |
The Commission will consider imposing additional measures to
ensure compliance with the winback rules, such as billing inserts
and compensation mechanisms, should there be further violations. |
32. |
In light of the above, the Commission directs
Bell Canada to: |
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- cease and desist from violating the winback rules;
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- develop internal procedures to ensure that Bell Canada
does comply with the winback rules from the time that a local
service provider submits an LSR for a customer, until three months
after that customer has completely transferred to another LSP; and
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- report to the Commission, within 60 days of the date of this
decision, on the internal procedures Bell Canada has put in
place to ensure and track its compliance with the winback rules.
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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
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