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Telecom Decision CRTC 2003-49
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Ottawa, 21 July 2003 |
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Call-Net Enterprises Inc. - Request to lift restrictions on the
provision of retail digital subscriber line Internet services
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Reference:
8622-C25-200300666 |
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In this decision, the Commission directs
Aliant Telecom Inc., Bell Canada, Saskatchewan Telecommunications and TELUS
Communications Inc. (the incumbent local exchange carriers or the ILECs) to
provide retail digital subscriber line (DSL) Internet services (IS) to
competitive local exchange carriers' residential local telephone service
customers, whose telephone service is provided via local loops leased from
the ILECs. The ILECs are further directed to issue, forthwith, amended DSL
access line tariffs removing the restriction that their DSL IS access
services are only available to competitive service providers in association
with an end-customer's ILEC-provided residential primary exchange service. |
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The Commission also directs MTS
Communications Inc. to show cause why it should not also be subject to the
Commission's determinations set out in this decision. |
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Introduction
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1. |
The Commission received an application filed
pursuant to Part VII of the CRTC Telecommunications Rules of Procedure,
dated 17 January 2003, from Call-Net Enterprises Inc. (Call-Net)
requesting that the Commission direct Bell Canada, Aliant Telecom Inc.
(Aliant Telecom), Saskatchewan Telecommunications (SaskTel) (collectively,
Bell Canada et al.) and TELUS Communications Inc. (TELUS), (collectively, the
incumbent local exchange carriers or the ILECs) not to refuse to provide
retail Digital Subscriber Line (DSL) Internet service (IS) to a residential
customer who chooses a competitor for local exchange service (commonly
referred to as primary exchange service (PES)) but is otherwise eligible for
the ILECs' retail DSL IS. The requested relief would apply where the
customer: |
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(a) received retail DSL IS and PES from the ILEC
and subsequently switched PES to
Call-Net; and/or |
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(b) received only PES from the ILEC but switched
to Call-Net and subsequently decided
to subscribe to the ILEC's retail DSL IS. |
2. |
The Commission received comments from EastLink
on 5 February 2003. Comments were received from Bell Canada et al., TELUS and
the Public Interest Advocacy Centre on behalf of l'Union des consommateurs
(PIAC) on 17 February 2003. Comments were also received from the Commissioner
of Competition, Competition Bureau (Competition Bureau) on 26 February 2003.
Reply comments were received from Call-Net on 27 February 2003. Additional
comments were received from the Independent Members of the Canadian
Association of Internet Providers (IMCAIP) on 28 February 2003. |
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The application
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3. |
In its application, Call-Net indicated that each
of the ILECs that provides retail residential DSL IS requires that the
customer also subscribe to the ILEC's PES in order to receive the ILEC's
retail DSL IS. Call-Net stated that when an existing ILEC residential
customer switches PES to a competitive local exchange carrier (CLEC) like
Call-Net, the ILEC unilaterally terminates the customer's existing retail
DSL IS. Similarly, when Call-Net's residential PES customers order retail
DSL IS from an ILEC, they are denied service on the grounds that they must
subscribe to the ILEC's PES in order to receive retail DSL IS. Call-Net
submitted that the ILECs' DSL access tariffs, used by independent Internet
service providers (ISPs), require that the service can only be used if the
end-user remains the ILEC's PES customer. Call-Net argued that the ILECs'
current practice significantly impairs the development of competition in the
residential local exchange market because a PES customer that also desires
retail DSL IS has no choice but to subscribe to the ILECs' PES. |
4. |
Call-Net stated that according to its own data
that it tracked and collected during 2002, |
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· 17% of customers who cancelled PES with
Call-Net indicated that they did so because
they could not receive retail DSL IS from Bell Canada, |
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· 11% of potential customers cited the
unavailability of Bell Canada's retail DSL IS as the
primary reason they rejected Call-Net's PES, and |
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· 13% of web-based sales rejections were
attributable to the ILECs' refusal to provide
retail DSL IS to customers who chose Call-Net as their PES provider. |
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Call-Net indicated that as a result, it had to
include a statement in its local service marketing information that customers
subscribing to Call-Net's PES would not be able to receive retail DSL IS from
the ILECs. Call-Net submitted that the negative impact on CLECs would
increase as the number of households subscribing to retail DSL IS grew over
the next few years, as forecast by Bell Canada. |
5. |
Call-Net also submitted that the ILECs' recent
launch of "Lite" retail DSL IS would cause many dial-up IS customers to
migrate to the ILECs' Lite DSL IS. Call-Net noted that Lite retail DSL IS is
priced considerably lower than regular retail DSL IS and available only to
customers who subscribe to the ILECs' PES. Call-Net stated that such a
migration of dial-up IS customers to the ILECs' Lite retail DSL IS would
exclude many potential PES customers from the reach of CLECs. In support of
its argument, Call-Net cited an article in the November 2002 issue of the
Network Letter, which indicated that 45,000, or almost half of the 93,000
retail DSL IS subscribers that Bell Canada added during the third quarter of
2002, chose the Lite DSL IS, and that 50% of Bell Canada's new Lite DSL IS
customers had migrated from its own dial-up IS. |
6. |
Call-Net submitted that the ILECs' current
practice of refusing to provide retail DSL IS to a residential customer who
chooses a competitor for PES is contrary to subsection 27(2) of the
Telecommunications Act (the Act), since in its submission the ILECs are
unjustly discriminating against CLECs' PES customers, or persons desiring to
switch to CLECs' PES, by not providing retail DSL IS to such customers.
Call-Net further submitted that this practice grants an undue preference
toward the ILECs by limiting the ability of CLECs to compete for the ILECs'
PES customers. |
7. |
In Call-Net's view, there are numerous
Commission determinations involving undue preference and unjust
discrimination, including determinations made under predecessor sections to
subsection 27(2) of the Act, under the Railway Act, which support its
application. |
8. |
Call-Net cited Challenge Communications Ltd.
v. Bell Canada, Telecom Decision CRTC 77-16, 23 December 1977 (Decision
77-16). Call-Net noted that, in that decision, the Commission directed
Bell Canada to discontinue the prohibition on the use of customer-owned and
customer-maintained terminal equipment in conjunction with its automatic
mobile telephone service (AMTS), on the basis that it violated a predecessor
section to subsection 27(2) of the Act. Call-Net submitted that the ILECs'
current practice of making the provision of retail DSL IS conditional upon
the customer taking ILEC-provided PES is similar to Bell Canada's impugned
practice in that case of making the provision of AMTS conditional upon the
customer using Bell Canada's equipment. |
9. |
Call-Net referred also to Telecom Order CRTC
95-250, 3 March 1995 (Order
95-250), where the Commission
determined that BC TEL's refusal to allow customers using a competitor's
information system access lines, the alternative to BC TEL's business lines,
to access the public switched telephone network (PSTN), in order to
pre-subscribe to the competitor's long distance services, conferred an undue
preference upon itself, contrary to subsection 27(2) of the Act. |
10. |
Call-Net also cited Bell Canada –
Introduction of Megalink service, Telecom Decision CRTC 92-5,
3 April 1992 (Decision 92-5), and
Bell Canada – Introduction of Microlink service, Telecom Decision CRTC
92-14, 22 July 1992 (Decision
92-14), which denied approval to
Bell Canada's proposed Megalink and Microlink tariffs. The proposed tariffs
would have required customers to use only Bell Canada's network services with
Megalink and Microlink, and for any competitors' customers either to acquire
new local accesses from Bell Canada or to replace the competitors' services
with Bell Canada's services. The Commission found that the proposed tariffs
would have conferred an undue preference toward Bell Canada and would have
unjustly discriminated against competing carriers who used Megalink or
Microlink connections to their competitive services. |
11. |
Call-Net referred also to Unitel v. Bell Canada,
AGT et al., Telecom Order CRTC 95-249,
3 March 1995 (Order 95-249),
where the Commission determined that certain ILECs had conferred an undue
preference upon themselves when they did not allow their customers, who
desired to use alternative long distance service providers, to pre-subscribe
their Remote Call Forward service to alternative long distance service
providers. |
12. |
In addition to their claims based on subsection
27(2) of the Act, Call-Net submitted that the requirement that customers must
obtain PES from the ILECs in order to be eligible to subscribe to the ILECs'
retail DSL IS constitutes bundling. Call-Net argued that the ILECs are in
violation of section 24 of the Act, since no tariffs were filed, as required
by Local competition, Telecom Decision CRTC
97-8, 1 May 1997 (Decision
97-8). Call-Net noted that the Commission
required in Decision 97-8 that when a forborne service is bundled with a
tariffed service, the rates for the bundled service are to be filed for
approval by the Commission. |
13. |
Call-Net noted that, in Review of regulatory
framework, Telecom Decision CRTC 94-19,
16 September 1994 (Decision 94-19), the
Commission defined bundling as a situation where one rate covers a number of
service elements. It also includes situations where there may be separate
rate elements for each service element, but a number of service elements are
aggregated for purposes of applying volume discounts, with the result that
the discount available is greater than it would be were the service elements
not aggregated. |
14. |
Call-Net noted that the definition of the term
"bundled services" or "bundling" was further expanded by the Commission in
Forbearance – Regulation of toll services provided by incumbent telephone
companies, Telecom Decision CRTC 97-19,
18 December 1997 (Decision 97-19); in
Stentor Resource Centre Inc. – Forbearance from regulation of
interexchange private line services, Telecom Decision CRTC
97-20, 18 December 1997 (Decision
97-20); and in Joint marketing and
bundling, Telecom Decision CRTC 98-4,
24 March 1998 (Decision 98-4). Call-Net
noted that in these decisions the Commission described bundling as the
inclusion of different services or service elements under a rate structure.
The Commission also noted in Decision 98-4
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. |
15. |
Call-Net submitted that the relief requested in
its application would be technically simple to implement. The network
configuration would remain unchanged from the configuration that the ILECs
currently use to provide DSL access service to competitive high-speed service
providers. The only significant difference, according to Call-Net, would be
that the ILEC would bill the customer only for retail DSL IS, while the CLEC
would bill the customer for PES. |
16. |
Call-Net submitted that, since the relief
requested in its application would enable the ILECs to derive DSL IS revenue
by using unbundled local loops leased and paid for by the CLEC, the ILEC
should compensate the CLECs for a portion of the costs of such loops.
Call-Net argued that this was a matter that could be easily and quickly
resolved, considering that the ILECs had already developed a model for
recovering line sharing costs from third parties that use their loops to
provide retail DSL IS to end-customers. Call-Net indicated that it was
willing to file a tariff similar to the ILECs' line sharing tariff in order
to recover this cost. It would also be prepared to postpone recovery of such
costs, or adopt any interim cost that the Commission might deem suitable, if
such postponement or interim cost were necessary for immediate and expedited
implementation of the relief sought in its application. |
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Positions of parties
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17. |
In their comments, the ILECs opposed Call-Net's
application. EastLink and PIAC supported the application, while the
Competition Bureau expressed concerns with respect to the ILECs' practice. |
18. |
The ILECs indicated that, since the retail IS
market is competitive and has been forborne from regulation, the type of
solution sought by Call-Net should properly be the subject of negotiations
between the parties. Bell Canada et al. stated that Call-Net had, to date,
not initiated any discussions with the companies to resell their retail
DSL IS. |
19. |
The ILECs submitted that they were not provided
with an opportunity to test the data filed by Call-Net. In their view, the
Commission was being asked to mandate a number of measures on the basis of
conclusions drawn from incomplete information. |
20. |
EastLink and PIAC supported Call-Net's position
that providing retail DSL IS solely to customers who subscribe to the ILECs'
PES subjects the CLECs to significant competitive disadvantage and gives the
ILECs an undue competitive advantage. EastLink and PIAC also supported
Call-Net's position that the ILECs' practice unjustly discriminates against
customers of the CLECs and limits customer choice in the local exchange
market. |
21. |
The Competition Bureau stated that the effect of
the ILECs' practice is to make it more difficult for the CLECs to gain
residential market share. The Competition Bureau proposed that the Commission
determine whether the ILECs' practice of tying DSL IS to local exchange
service represents a barrier to entry for CLECs and, if so, that the
Commission address the cost issues raised in this proceeding, and determine
how these costs should be allocated among CLECs and ILECs. |
22. |
Bell Canada et al. submitted that Call-Net's
references to the Commission's determinations regarding violations of
subsection 27(2) of the Act and the similar provisions of predecessor
legislation were misleading, and not particularly relevant, since the
circumstances in Call-Net's application were very different. Bell Canada et
al. stated that Call-Net omitted to note that Decision 77-16 and the other
terminal attachment cases it cited were instances in which the Commission
determined that there were no technical or operational reasons to justify
maintaining the then existing terminal attachment requirements. Bell Canada
et al. also argued that the other decisions cited by Call-Net raised
substantially different issues, in that in all those instances the principal
issue was the right of competitors to interconnect their services to those
provided by Bell Canada. Bell Canada et al. stated that there were no
interconnection issues raised by Call-Net's application. Call-Net had already
been provided with all the services it required to offer its own retail
DSL IS using the ILECs' local loops and, indeed, it was currently offering
high-speed IS to its business customers. |
23. |
TELUS submitted that the cases cited by Call-Net
all referred to access services for which there were no other market
alternatives and which were, accordingly, not forborne from regulation at the
time the decisions were rendered. Unlike retail DSL IS, customer-maintained
terminal equipment was not forborne until 1994, 17 years after the release of
Decision 77-16. Remote Call Forwarding remains a tariffed service. Similarly,
toll and private line services used to access the PSTN were fully regulated
at the time of Order 95-249, as
were Megalink and Microlink at the time Decisions
92-5 and 92-14
were released. |
24. |
PIAC submitted that the ILECs should in general
be required to offer each of their services, including IS, on an unbundled
basis whenever technically possible. |
25. |
EastLink concurred with Call-Net's position that
the tying of retail DSL IS to the ILECs' local exchange service constitutes a
bundle, and therefore argued that a tariff should have been filed for
Commission approval. EastLink submitted that such bundles, when combined with
promotional price discounts for retail DSL IS, could be used by the ILECs to
retain or win back PES customers. |
26. |
The ILECs argued that PES and retail DSL IS do
not constitute a bundle since the pricing of retail DSL IS is not dependent
or conditional upon the pricing of PES, and there is no umbrella price,
discount or rebate. |
27. |
TELUS submitted that Call-Net's allegations with
respect to bundling failed to make an important distinction between
"horizontal" bundles, that are, in its view, subject to the Commission's
bundling rules, and "vertical" bundles that are not. Vertical bundles,
according to TELUS, consist of services partially made up of, or delivered
through, bottleneck or essential facilities. These types of bundles could in
TELUS's view be conceptualised as vertical bundles since the underlying
facilities are part of what make up the service. In TELUS's view, residential
PES and retail DSL IS are separate vertical bundles, each consisting of the
local loop, local switching, local transport and various administrative
services. The local loop is simply split into a high-speed DSL channel and a
voice channel, so that DSL IS and voice telephony can be provided
simultaneously over the local loop. |
28. |
TELUS submitted that, unlike retail DSL IS and
PES, a horizontal bundle involves the combined offering of two services,
neither of which relies on the other for its production or delivery, and
either of which can be offered without the other being provided at the same
time. TELUS submitted that, based on the language and intent of the
Commission's bundling rules, only horizontal bundles, characterized by
service packages and prices that confer a benefit on the customer beyond the
benefits available to the customer when the services are bought
independently, should be of concern to the Commission. |
29. |
The ILECs submitted that Call-Net is able to
offer its own retail DSL IS to its local PES customers. Bell Canada et al.
noted that Call-Net already offers DSL-based services to its business
customers. Bell Canada et al. argued that, since Call-Net had already
established extensive co-location arrangements in Bell Canada's central
offices, it should be able to offer its own retail DSL IS where it leases
Bell Canada's local loops. Furthermore, Call-Net had offered a range of
dial-up IS for many years, and thus had presumably established the internal
systems and processes it needed to operate as an ISP. The ILECs submitted,
moreover, that CLEC customers have numerous alternatives, including
high-speed IS from the cable and fixed wireless companies. The ILECs
submitted that there was therefore nothing anti-competitive or unjustly
discriminatory in their decision to offer retail DSL IS solely to their own
customers. |
30. |
Bell Canada et al. stated that DSL service
providers could provide DSL IS to CLEC customers, as DSL service providers
had been granted the ability to co-locate their equipment in the ILECs'
central offices and to establish direct connections to other co-located
Canadian carriers' sites to enable such carriers to offer retail DSL IS to
their end-customers. Bell Canada et al. also submitted that sub-licensing of
co-location space provided yet another way for a Canadian carrier co-locating
within the ILECs' central offices to offer retail DSL IS. |
31. |
Bell Canada et al. stated that their decision
not to offer retail DSL IS to customers who obtained their PES from CLECs by
means of local loops leased from Bell Canada et al. was based on a number of
operational and technical concerns, including the following: |
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a) Some of the Bell Canada et al. companies
employed the end-customer's telephone
number as the basic reference in the service provisioning systems
used to support retail
DSL IS. However, since these companies did not retain records of
the telephone
numbers assigned by CLECs to their PES customers, their systems
would need to be
modified so that something other than the telephone number could
be used as a basic
reference in order to respond to service calls from retail DSL IS
customers whose
PES was provided by a CLEC. |
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b) Information regarding the equipment and
features being used by the CLEC, in
conjunction with the local loop, would have to be exchanged and
kept up to date in
order to determine whether the local loop was capable of DSL IS
provisioning, to
address service incompatibility issues on an ongoing basis, and to
respond to service
calls from the retail DSL IS customer. |
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c) The level of customer service provided to
retail DSL IS customers once they migrated
to a CLEC might be reduced since, for example, Bell Canada et
al.'s processes for
isolating DSL IS-related service troubles had been developed under
the assumption
that each of these customers would obtain PES from Bell Canada et
al. It was unclear
if these processes would operate effectively in the event that the
Commission granted
the relief sought by Call-Net. |
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d) There would likely be increased costs and
deterioration in quality of providing user
support for retail DSL IS customers. Bell Canada et al. submitted
that, since there
were no mechanisms in place to enable its call centres to respond
adequately to
queries experienced by CLECs' customers concerning service
outages, anticipated
service restoration times, or other network problems,
Bell Canada et al.'s retail
DSL IS customers would experience increased hold times at its call
centres and
increased levels of customer frustration. |
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e) Development work on billing systems would
likely be needed if Bell Canada et al.
were to offer retail DSL IS independently from their PES, since
the systems associated
with billing retail DSL IS were integrated with those for billing
PES. |
32. |
TELUS submitted that it did not provide retail
DSL IS to CLECs' PES customers since it was uncertain whether the market
would justify the additional investment that would be required. It submitted
that there would be costs associated with modifications to back office
systems in order to bill retail DSL IS customers who were not TELUS PES
customers, and to verify which customers were not TELUS PES customers in
order to perform repairs and maintenance. Also, splitters would need to be
installed in all central offices where TELUS provided DSL-based service. The
installation of splitters, either on the distribution frame or the digital
subscriber line access multiplexers (DSLAM), would enable TELUS to split
the data from the voice functionality on the loop in order to cross-connect
the voice line to the CLEC's co-location equipment. TELUS submitted that
there would be a need for inter-carrier agreements and processes for handling
trouble with, and repair of, the DSL-based service, and corresponding changes
would have to be made to TELUS's contractual liability limitations. |
33. |
TELUS argued that, while any additional costs
associated with providing retail DSL IS to a non-TELUS PES customer should
ideally be recovered from such customers, it was not feasible to establish a
higher rate for non-TELUS PES customers than the rate paid by TELUS's PES
customers for retail DSL IS. |
34. |
Bell Canada et al. objected to reimbursing
Call-Net for a portion of the rates charged for unbundled loops which,
according to Bell Canada et al., were already priced below the companies'
costs. They stated that the costs which the Commission used as a foundation
for the current unbundled loop rates did not include costs for any of the
resources required to provide DSL-based services. |
35. |
Bell Canada et al. stated that they were
prepared to pursue arrangements to provide retail DSL IS to Call-Net's PES
customers, provided that the following principles were agreed to
at the outset: |
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a) any costs that Bell Canada et al. incurred to
modify or convert existing systems to
accommodate Call-Net's request would need to be recovered
from Call-Net; |
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b) Call-Net would not be compensated for the use
of leased loops; |
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c) Call-Net and Bell Canada et al. would
establish the means of providing Bell Canada et
al. timely information regarding Call-Net's or Call-Net's
customer's equipment on
leased local loops which might impact the operation of Bell Canada
et al.'s DSL IS; |
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d) the confidentiality of any information held
by Call-Net regarding Bell Canada et al.'s IS
customers would have to be protected and not made available within
Call-Net for the
purpose of marketing competing IS; and |
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e) win-back restrictions would have to be
established to ensure that once a Call-Net
customer subscribed to a company's retail DSL IS, Call-Net was
prohibited from
winning back that customer to competing IS for a specified period
of time, consistent
with the win-back restrictions established by the Commission for
Bell Canada et al. |
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Reply comments
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36. |
Call-Net submitted that the ILECs had failed to
justify denying retail DSL IS to CLEC PES customers that were otherwise
eligible to receive the service. |
37. |
Call-Net argued that the potential ability, if
any, of competitors to build their own DSL network was irrelevant to the
issue of whether or not the current ILEC practice violates subsection 27(2)
of the Act and the Commission's bundling rules. With regard to the ILECs'
submission that Call-Net is able to offer its own retail DSL IS to its PES
customers, Call-Net went on to suggest that a number of factors had
undermined the development of a competitive DSL market in Canada. In this
respect, Call-Net argued that the ILECs' DSL access service available to
competitive ISPs is priced higher than the ILECs' retail DSL IS rate, making
it impossible for competitors to use the access service to compete in the
retail DSL IS market. Call-Net also submitted that the ILECs had greatly
oversimplified the challenges that new entrants faced in building a
competitive DSL network. According to Call-Net, the ILECs' deployment of
fibre electronics beyond the wire centres, at remotes, had a potentially
devastating effect on competitive DSL service providers. Since it is
uneconomical to co-locate DSLAMs at remotes, millions of potential retail DSL
customers are beyond the reach of competitors. Also, where the competitor is
co-located in the ILECs' wire centres, these investments are potentially
stranded as the ILECs extend their networks through remotes. In addition,
Call-Net argued that history showed that facilities-based DSL competition in
Canada had been unsuccessful, littered as it was with competitors who had
failed. Call-Net submitted that, contrary to the ILECs' suggestions, it takes
far more than installing DSLAMs in co-location spaces to roll out a viable
competitive DSL network and product. According to Call-Net, not only are
co-location capital costs and expenses exorbitant, but other critical
components remain under the exclusive control of the ILECs, including the
local loop, local transport and back-haul services. |
38. |
Call-Net disagreed with the ILECs' position that
the Commission's past determinations regarding unjust discrimination and
undue preference are irrelevant because they did not concern forborne
services. In this regard, Call-Net stated that if the Commission had found
that there was sufficient competition to discipline unjust discrimination in
relation to the ILECs' retail DSL IS, the Commission would have completely
and unconditionally forborne from subsection 27(2) of the Act. |
39. |
Call-Net submitted that Bell Canada et al. were
incorrect in arguing that the Commission decisions it cited were irrelevant
to the consideration of its application. Call-Net stated that the principal
issue in those decisions, as well as in its application, is not only the
right of competitors to interconnect with the ILECs' services, but also the
right of customers, regardless of whether they are end-customers or wholesale
customers, not to be denied a service by the ILEC. Call-Net stated that it
cited those cases as authority for the principle that refusing to provide an
ILEC service to an otherwise eligible customer, unless that customer
subscribes to another ILEC service, constitutes unjust discrimination and
undue preference. Call-Net submitted that, pursuant to past Commission
determinations, the ILECs are obliged under subsection 27(2) of the Act not
to deny services to eligible customers. |
40. |
Call-Net reiterated its position that in light
of the ILECs' current practice, retail DSL IS and PES constitutes a bundle.
It stated that TELUS's distinction between vertical and horizontal bundles is
irrelevant since none of the Commission's bundling decisions contained this
distinction. Call-Net argued that the ILECs' practice meets the criteria for
bundling since it created an incentive for a customer to subscribe to the
ILEC's PES rather than a CLEC's PES. |
41. |
Call-Net argued that the ILECs had failed to
justify that technical and operational reasons warranted denying retail
DSL IS to a CLEC's PES customers. |
42. |
Call-Net questioned Bell Canada et al.'s
concerns about not having a record of the CLEC's PES customers' telephone
numbers, as a basic reference for provisioning retail DSL IS service.
Call-Net stated that since CLECs currently provide the ILECs with each CLEC
PES customer's telephone number as part of a local service request, the ILECs
are in possession of this information even before the service request is
processed. In the case of customers who switch PES to a CLEC, but are unable
to port their existing ILEC telephone number, any new number assigned by the
CLEC would also be included in the local service request. Furthermore,
Call-Net added that the simplest solution would be that the customer provide
the ILEC with its telephone number when ordering the ILEC's retail DSL IS. |
43. |
Call-Net submitted that there is no vital
information about its telephone equipment and features that would impede the
ability of the ILECs to provide retail DSL IS over the same local loop used
by a CLEC to provide PES. In support of its position, Call-Net stated that
the equipment used by the CLECs is "plain old telephone service" (POTS)
equipment, no different than the POTS equipment used by the ILECs. Call-Net
noted that all the DSL-related equipment would be provided by the ILEC, and
the ILEC would be the repository of all relevant records and information on
loop conditions. In Call-Net's view, this situation is no different from
third party ISPs providing retail DSL IS over the same loop as one used for
POTS by the ILECs. |
44. |
Call-Net also disputed the ILECs' claim that
there would be additional costs as a result of modifications to verify DSL
capability of unbundled local loops. It submitted that where the customer
already had ILEC-provisioned DSL IS before switching its PES to a CLEC, such
loops would already be known to be DSL-capable. In situations where retail
DSL IS had not yet been provisioned on a particular loop, the ILEC would need
only to use the same processes it would use to pre-qualify the loop for its
own PES customer. |
45. |
Call-Net submitted that Bell Canada et al.'s
concerns over the potential for reduced quality and increased costs of
customer support provided to retail DSL IS customers once they migrated to a
CLEC were misplaced. Call-Net argued that the provision of retail DSL IS to a
CLEC's PES customer would not impair the ILECs' ability to troubleshoot
DSL-related problems. Call-Net submitted, moreover, that the digital loop
carrier equipment used by the CLECs to provide PES were designed and wired
such that network outages or equipment failure did not result in loop
disruptions or degradation of retail DSL IS. Furthermore, Call-Net argued
that if DSL troubleshooting was not a problem in the ILECs' existing line
sharing arrangements, then it should not be a problem with respect to retail
DSL IS provisioned by the ILECs. |
46. |
Call-Net questioned the ILECs concerns that
developmental work might be necessary on their billing systems to enable
billing for the provision of retail DSL IS to PES customers. It stated that
the ILECs already bill separately for their DSL IS offerings. For example,
pursuant to their current DSL access tariffs, the ILECs issue two separate
bills when an ISP resells the ILEC's DSL service: a wholesale DSL bill to the
ISP and a PES bill to the end-customer. Call-Net also stated that the ILECs
currently bill several consumer services on a non integrated basis. For
example, long distance, local exchange services and dial-up IS are billed
separately to customers who subscribe to them on a stand-alone basis. |
47. |
Call-Net disagreed that the ILECs would be
required to install splitters in all central offices since the ILECs already
have splitters installed in wire centres where they currently provide retail
DSL IS to their own PES customers. Call-Net submitted that, otherwise, the
ILECs would be unable to provide DSL IS on the same loop as local voice
service. Furthermore, the ILECs' tariffs stated that they had splitters
installed in their wire centres to support the provisioning of retail DSL and
POTS over the same loop by two different service providers. |
48. |
Call-Net stated that the recovery of the costs
of making the ILECs' retail DSL IS available to a CLEC's PES customers should
be treated like any other business expense where the ILECs would recover such
expenses from across their entire business. Call-Net noted that the ILECs had
not suggested that these expenses were huge. It also noted that the ILECs
would continue to derive revenue from the customer for DSL IS. |
49. |
Call-Net submitted that the ILECs' proposal to
recover from Call-Net any costs incurred to modify existing systems, plus a
reasonable mark-up, was either based on confusion or was a misrepresentation
of its application. Call-Net stated that the issue was the ILECs' obligation
to comply with subsection 27(2) of the Act. Call-Net submitted that if it was
found that the ILECs were not in compliance with the Act, any costs
associated with bringing themselves into compliance were strictly to be borne
by themselves, and not by competitors, such as Call-Net. |
50. |
Call-Net reiterated its position that the ILECs
should compensate the CLECs for providing retail DSL IS to the CLECs' PES
customer. Call-Net argued that since CLECs lease these loops from the ILECs,
the ILECs should compensate the CLECs when the ILEC uses the DSL portion of
these loops. |
51. |
In regard to Bell Canada et al.'s offer to
negotiate arrangements with Call-Net, Call-Net indicated that it had little
hope that any workable serving arrangements would be agreed to by Bell Canada
et al. that would enable CLECs to compete effectively against Bell Canada et
al. in the PES market. |
|
Additional comments
|
52. |
IMCAIP stated that it was generally supportive
of any regulatory action that would promote competition in the delivery of
telecommunications services and increase opportunities for its members to
both provide and access high-speed IS at competitive rates. IMCAIP considered
that Call-Net's application was consistent with these objectives. |
53. |
IMCAIP submitted that the ILECs' current
practice that restricts the ability of ISPs to provide services to CLECs' PES
customers has a negative impact on competition and is anti-competitive. |
54. |
IMCAIP indicated that it foresaw a time when its
members would wish to offer voice over Internet Protocol services together
with resold DSL services, and was concerned that the current ILEC
restrictions might hinder their ability to do so. |
|
Commission's analysis and determinations
|
55. |
Call-Net's first argument was that the ILECs'
current practice of providing retail DSL IS to residential customers who take
PES from the ILECs, but not to residential customers who take PES from a
CLEC, discriminates against CLECs and confers an undue preference upon
themselves, contrary to subsection 27(2) to the Act. |
56. |
The ILECs argued that since retail IS is a
forborne service, they are not subject to subsection 27(2) in respect of how
the service is provided. They argued that since the cases cited by Call-Net
pertained to regulated services they were, for this and other
reasons, irrelevant. |
57. |
The Commission agrees with Call-Net that,
although the services considered in the decisions cited were tariff-regulated
services, whereas retail IS has been forborne from tariff regulation, the
ILECs remain subject to subsection 27(2) of the Act in respect of retail IS. |
58. |
The Commission also considers that the decisions
cited by Call-Net are relevant. As in the present case, those decisions
involved ILECs requiring customers, as a condition of obtaining an ILEC
service, to obtain another service from the ILEC, rather than from a
competitive service provider. |
59. |
Subsections 27(2) and 27(4) of the Act read as
follows: |
|
(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. |
|
(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. |
60. |
The Commission's analysis of an allegation
concerning a contravention of subsection 27(2) of the Act is conducted in two
phases. The Commission first determines whether the conduct in question is
discriminatory or preferential, and where it so determines, it then decides
whether the discrimination is unjust or the preference is undue or
unreasonable. |
61. |
In this case, the Commission considers that the
ILECs' refusal to provide retail DSL IS to existing or potential CLEC PES
customers who would otherwise qualify for the service, and who would receive
the service if they were ILEC PES customers, is discriminatory
and preferential. |
62. |
Subsection 27(4) of the Act provides that the
onus of establishing that any discrimination is not unjust or that any
preference is not undue or unreasonable is on the Canadian carrier that
discriminates or gives the preference. In this connection, the Commission
notes the submission of Bell Canada et al. and TELUS regarding operational
and technical issues that would need to be addressed in making retail DSL IS
available to CLECs' PES customers. |
63. |
At the same time, the Commission notes
Call-Net's submission that the CLECs currently provide the ILECs with each
CLEC PES customer's telephone number as part of a local service request. The
Commission also notes that in the case of a customer who switches PES to a
CLEC, but is unable to port its existing ILEC telephone number, any new
number assigned by the CLEC is also included in the local service request.
Since the CLEC customer's telephone number is included in the local service
request, or can be requested by the ILEC when the customer orders the ILEC's
retail DSL IS, the Commission does not consider that significant
modifications would be required to the ILECs' systems used to support retail
DSL IS of a CLEC's PES customers. |
64. |
The Commission notes that the ILEC is the
repository of loop conditioning information and related records. Where the
customer obtained retail DSL IS from the ILEC before switching to CLEC PES,
the loop would already be DSL-capable. In cases where the customer applied to
the ILEC for retail DSL IS after subscribing to a CLEC's PES, the ILEC would
use the same processes to pre-qualify the loop as it would use if the
customer were its own PES customer. The Commission does not consider that
modifications to systems for verifying whether unbundled loops are
DSL-capable would be required. |
65. |
The Commission notes Call-Net's argument that
digital loop carrier equipment used by the CLECs to provide PES were designed
and wired such that network outages or equipment failures with respect to
local voice services did not result in disruptions or degradations of retail
DSL IS. The Commission is of the view that if DSL troubleshooting is not a
problem in the ILECs' existing line sharing arrangements where competitive
ISPs use the ILECs' DSL access service, then it should not be a problem with
respect to the provisioning of retail DSL IS to CLEC customers. The
Commission considers that the provision of retail DSL IS to CLEC PES
customers should not impair the ILECs' ability to troubleshoot DSL-related
problems or significantly increase costs associated with customer support.
Furthermore, in the event that some additional processes may be required, the
Commission considers that such processes can be readily worked out between
the carriers. |
66. |
The Commission notes that Bell Canada et al. did
not identify particular concerns with respect to the types of modifications
that may be required to their billing systems. They simply stated that issues
could arise in relation to billing and that developmental work would likely
be needed if Bell Canada et al. were to offer DSL IS independently from their
PES. The Commission considers that modifications to the billing procedures to
provide retail DSL IS to a CLEC's PES customer should not present a unique
problem to the ILECs since the ILECs already bill separately for numerous
services such as PES, toll and IS. |
67. |
The Commission notes that the ILECs already have
splitters installed in central offices where they currently provide retail
DSL IS to their own PES customers or competitive ISPs. Otherwise they would
not be able to provide DSL IS on the same loop as PES. The Commission
considers that, therefore, the ILECs will not be required to install
additional splitters in all central offices where DSL services are offered. |
68. |
In light of the above, the Commission considers
that the operational and technical reasons submitted by the ILECs do not
justify the ILECs' refusal to supply retail DSL IS to the CLECs' residential
PES customers, served by local loops leased from the ILECs, who would
otherwise qualify for the service. |
69. |
The Commission notes the ILECs' position that
competition in the PES market is not being unduly impaired since Call-Net can
pursue a number of options to provide its PES customers with retail DSL IS.
The ILECs submitted that such options include co-locating DSL equipment at
the ILECs' central offices and using the ILECs' DSL access tariffs. The
Commission considers, however, that competitive DSL IS providers, such as
Call-Net, face barriers to enter the DSL IS market as a result of co-location
costs, transport costs, and the margins available when providing retail
residential DSL IS. In addition, the ILECs' increasing deployment of fiber
electronics at remotes makes it more difficult for competitors to expand
their networks. |
70. |
The Commission is mindful of the fact that as at
the end of 2001, the incumbent local telephone companies held over 96% of
total local lines and over 97% of total local revenues.1
The Commission notes also that the incumbent local
telephone companies were successful in attracting 924,000 DSL IS customers by
year-end 2001.2 Furthermore,
the Commission notes that the marketing data filed by Call-Net demonstrates
that a significant percentage of Call-Net's customers who cancelled the
company's PES or who declined to switch to Call-Net's PES cited the
unavailability of Bell Canada's retail DSL IS as a reason. In light of the
above, and the barriers to the competitive provision of DSL IS, the
Commission considers that the ILECs' refusal to supply retail DSL IS to a
CLEC's PES customers makes it more difficult for CLECs to obtain and retain
PES customers, thereby, impairing competitive entry into the PES market
during this critical period in the transition to competition. |
71. |
In light of the above, the Commission finds that
the ILECs' refusal to provide retail DSL IS and retail DSL Lite IS to a
CLEC's PES customers served by local loops leased from the ILECs, who would
otherwise qualify for the service, constitutes unjust discrimination against
CLECs and undue preference toward the ILECs, contrary to subsection 27(2) of
the Act. |
72. |
The Commission also finds that the ILEC tariff
provisions that specify that their DSL access services are only available to
competitive service providers in association with an end-customer's
ILEC-provided residential PES, constitute unjust discrimination against CLECs
and undue preference toward the ILECs, contrary to subsection 27(2) of the
Act. |
73. |
Call-Net's second claim is that the ILECs'
practice of limiting retail DSL IS only to their respective PES customers,
constitutes a bundle since the tied provision of retail DSL IS and PES
creates an incentive for a customer to subscribe to the ILECs' PES. The
Commission also notes the ILECs' position that their provisioning of PES and
retail DSL IS does not constitute a bundle. In the ILECs' view, they do not
offer retail DSL IS and PES under a rate structure. According to the ILECs,
the price of retail DSL IS is not dependent or conditional upon the price of
PES, and they do not offer any discount, rebate or other inducement to
persuade the customer to purchase both services. |
74. |
The bundling rules currently applicable to the
ILECs were established in a number of decisions, including Decision
94-19, Decision
97-8, Decision
98-4, Decision 97-20, and Bundling
framework developed for customer-specific arrangements, Order CRTC
2000-425, 19 May 2000 (Order
2000-425). The Commission
summarized the bundling rules in Decision 98-4
as follows: |
|
... the Commission in Decision 94-19
stated that "the term bundling generally refers to a situation where one
rate covers a number of service elements", and that bundling includes
"situations where there may be separate rate elements for each service
element, but a number of service elements are aggregated for purposes of
applying volume discounts, with the result that the discount available is
greater than it would be were the service elements not aggregated". In
Decision 97-19 and Decision
97-20, the Commission also described
bundling as the inclusion of different services or service elements under
a rate structure. The Commission noted that this rate structure may be a
single rate, a set of rates for various service elements, and/or rates
for one or more service elements which are dependent on the usage of
other services.
|
75. |
The Commission generally considers that bundling
exists where a customer derives a financial benefit from acquiring more than
one service from an ILEC that is greater than the benefit that would be
available to the customer if the services were bought separately from the
ILEC. The Commission does not consider that the ILECs' current practice with
respect to the provision of retail DSL IS and PES constitutes a bundle.
Although DSL IS is provided only to ILEC PES customers, retail DSL IS and PES
are not being offered under a single rate structure, and no financial
benefits are available to customers for subscribing to both services. The
Commission, therefore, finds that the provision of retail DSL IS and PES by
the ILECs did not require tariff approval. |
|
Conclusion
|
76. |
In light of the above determinations, the
Commission directs Bell Canada, Aliant Telecom, SaskTel and TELUS,
upon request, to provide their respective retail DSL IS to any residential
CLEC PES customer, who is served by a local loop leased from any of them and
who would otherwise qualify for those services. The Commission further
directs Bell Canada, Aliant Telecom, SaskTel and TELUS to issue,
forthwith, amended DSL access line tariffs removing the restriction that
their DSL access services are only available to competitive service providers
in association with an end-customer's ILEC-provided residential PES. |
77. |
In regard to Bell Canada et al.'s request to
recover from Call-Net the costs involved in modifying the ILECs' existing
operational and technical processes and systems to implement the relief
requested by Call-Net, the Commission notes that the ILECs did not submit any
estimates of the magnitude of such costs. The Commission considers that in
light of the relatively minor modifications required to the ILECs'
operational and technical processes and systems to provide retail DSL IS to a
CLEC's PES customers, the costs to do so would not be substantial. The
Commission also notes that the ILECs will be deriving revenue from the
provision of retail DSL IS over local loops, which would be leased and paid
for by the CLECs. The Commission considers, moreover, that it is appropriate
for the ILECs to bear the costs associated with bringing themselves into
compliance with subsection 27(2) of the Act. |
78. |
In light of the above, the Commission denies
Bell Canada et al.'s request that Call-Net compensate the ILECs for any costs
that would be incurred as a result of modifications to administrative
processes and systems that would be required to implement the relief
requested by Call-Net. |
79. |
In regard to Call-Net's request that the ILECs
compensate the CLECs for the portion of the local loop that they would use to
provision retail DSL IS, the Commission notes that the rates CLECs pay ILECs
for unbundled local loops are based on the costs of providing only voice
telephony services, and not retail DSL IS. The costs which the Commission
used as a foundation for the current unbundled loop rates did not include
costs for any of the resources required to provide retail DSL IS.
Accordingly, the full cost of the local loop is allocated to local telephony
services, and competitors that lease the loop are in effect able to use the
portion of the loop on which DSL is provisioned for free. Accordingly, the
Commission does not consider it appropriate that the ILECs be required to
compensate the CLECs for a portion of the local loop that would be used to
provision retail DSL IS to the CLECs' PES customers. |
80. |
In light of the above, the Commission denies
Call-Net's request that Bell Canada et al. and TELUS compensate the CLECs for
the portion of the local loop that the ILECs would use to provision retail
DSL IS to a CLEC's PES customers served by local loops leased from
Bell Canada et al. and TELUS. |
81. |
The Commission notes that MTS Communications
Inc. (MTS) was not a party to this proceeding. The Commission considers, on a
preliminary basis, that the determinations set out in this decision should
apply to MTS. Accordingly, MTS may show cause within 30 days of the date of
this decision as to why it should not also be subject to the determinations
set out in this decision. |
|
Secretary General |
|
This document is available in alternative
format upon request and may also be examined at the following Internet site:
http://www.crtc.gc.ca |
|
1Report to the
Governor in Council : Status of Competition in Canadian Telecommunications
Markets, December 2002 (the second GIC Report), page i. [back]
2 The second GIC Report, page 50. [back] |