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Telecom Decision CRTC 2003-63
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Ottawa, 23 September 2003 |
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Review of Bell Canada's customer-specific arrangements filed
pursuant to Telecom Decision 2002-76
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Reference: Tariff Notices
751,
752,
754,
754A,
755,
755A,
756, 757,
758,
758A,
759,
760,
762,
762A,
764,
765,
767,
769,
769A,
770, 771,
772,
774,
780, 781,
786,
787,
788,
789,
6732,
6733,
6734,
6735,
6736,
6736A,
6740,
6740A
and
8638-C12-80/02 |
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The Commission finds that
the tariffs accompanying the customer-specific arrangements (CSAs) filed
by Bell Canada pursuant to the Commission's direction in Regulatory
safeguards with respect to incumbent affiliates, bundling by Bell Canada
and related matters, Telecom Decision CRTC
2002-76, 12 December 2002,
do not meet the Commission's requirements in regard to the rates, terms
and conditions that should be publicly available in the tariffs. |
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The Commission sets out the
criteria in regard to the level of detail that Bell Canada must provide
in the tariffs accompanying CSAs and directs Bell Canada to resubmit the
proposed tariffs for approval. |
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The Commission finds that
Bell Canada has understated the Phase II cost components of the
imputation tests filed in support of the CSAs. In five instances the
Commission finds that, based on adjusted costs calculated by the
Commission, projected revenues do not recover the adjusted costs.
Bell Canada is directed to file, within 90 days of the date of this
decision, proposed tariffs establishing rates that will assure the
recovery of the revenues set out in the decision for each of the five
CSAs, or notify the Commission that it has discontinued provision of
service under the contract in question or that it will discontinue such
service within a further 90 days of the date of this decision. |
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The Commission considers
that Aliant Telecom Inc., MTS Communications Inc.,
Saskatchewan Telecommunications, Société en commandite Télébec, TELUS
Communications Inc. and TELUS Communications (Québec) Inc.
(collectively, the large incumbent local exchange carriers or large
ILECs) should adhere to the CSA tariff filing requirements outlined in
this decision and that the large ILECs should file with the Commission
any associated contract(s) at the same time as filing a proposed CSA. |
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The applications
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1. |
As of 7 May 2003, the
Commission had received 164 tariff applications under the above
referenced Bell Canada Tariff Notices, some filed on an ex parte
basis, pursuant to the Commission directive contained in Regulatory
safeguards with respect to incumbent affiliates, bundling by Bell Canada
and related matters, Telecom Decision CRTC 2002-76, 12 December 2002
(Decision 2002-76). The applicant sought approval of tariffs for
customer-specific arrangements (CSAs) currently being offered by it. |
2. |
Bell Canada stated that each
proposed tariff included a generic description of the terms and
conditions associated with each CSA as well as a short description of
the arrangements provided to the individual customers. |
3. |
Bell Canada provided an
imputation test for each CSA and submitted that certain information
related to the costs and revenues contained in the imputation tests was
confidential, pursuant to section 39 of the Telecommunications Act
(the Act). Bell Canada stated that, since the non-confidential
information included with the imputation test was already provided for
the public record, it had not provided abridged copies of the imputation
test results. |
4. |
Bell Canada stated that for
each CSA it was submitting a copy of the customer contract, as directed
by the Commission in Decision 2002-76. Bell Canada indicated that
pursuant to section 39 of the Act the contracts were being submitted to
the Commission entirely in confidence. |
5. |
Bell Canada further stated that
the CSAs being filed for approval were already in place. Bell Canada
submitted that, in addition to the requirement to obtain approval for
these arrangements pursuant to the Commission's determination in
Decision 2002-76, it was seeking Commission ratification, pursuant to
subsection 25(4) of the Act, for the charging of the rates for these
services prior to the date of the Commission's approval. |
6. |
By letter dated 28 January 2003
further information was requested. Bell Canada filed its reply on 10
February 2003. |
7. |
Comments were filed by AT&T
Canada Corp., now Allstream Corp., on behalf of itself, AT&T Canada
Telecom Services Company, Call-Net Enterprises Inc. and Sprint Canada
Inc. (collectively, Allstream et al.) on 21 February 2002, 3 March 2003
and 27 March 2003 and by Mr. François Ménard on 27 February 2002. Reply
comments were filed by Bell Canada on 10 March 2003. |
8. |
By letter dated 12 May 2003
further questions were addressed to Bell Canada. The responses were
filed in confidence on 26 May 2003. |
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Background
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9. |
In Bundling framework
developed for customer-specific arrangements, Order
CRTC 2000-425, 19 May 2000 (Order
2000-425), the Commission permitted
CSA bundles to include tariffed services with forborne services,
services of affiliated and
non-affiliated companies and non-telecommunications services. |
10. |
The Commission also determined
in Order 2000-425 that it was appropriate to extend the competitive
safeguards developed for Type 2 CSAs in Review of regulatory
framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision
94-19) to CSA bundles which included non-tariffed services1.
Since Type 2 CSAs involve customized bundles typically provided to large
customers through long-term service contracts, the Commission considered
that the more stringent imputation of costs was necessary to ensure
appropriate protection against unjust discrimination and undue
preference, and to avoid any potentially adverse impact of CSAs on the
evolution of telecommunications competition. |
11. |
The Commission indicated in
Order 2000-425 that a proposed CSA tariff must provide sufficient
information with respect to the rates, terms and conditions of the CSA
contract to enable a potential customer to assess whether its service
requirements might reasonably be expected to qualify for similar rates,
terms and conditions. Accordingly and consistent with Decision
94-19 and
Joint marketing and bundling, Telecom Decision CRTC
98-4,
24 March 1998, the Commission directed that any tariff proposed by a
major incumbent telephone company for a CSA involving tariffed services
bundled with forborne services, services of affiliated and
non-affiliated companies or non-telecommunications services offered
in-house be subject to the following: |
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a) provision of a study
demonstrating that the present worth of revenues under the
customer-specific contract equals or exceeds the sum of: |
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i) the present worth of revenues under general tariff rates for
those service
components available under the general tariff over the duration of
the
customer-specific contract;
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ii) the present worth of causal costs for those components not
covered by the
general tariff rates; and
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iii) the acquisition costs of any service elements in the bundle
acquired from an
affiliated or non-affiliated company;
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b) the telephone company
demonstrating in its tariff application that there is not sufficient
demand to offer any customer-specific elements of the service
through the general tariff; |
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c) in order that there be no
unjust discrimination or undue preference, the service package
and the associated rates, terms and conditions provided
under the customer-specific
arrangement being generally available to other customers; and |
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d) resale be permitted. |
12. |
In the proceeding initiated by
Price cap review and related issues, Public Notice CRTC 2001-37,
13 March 2001 (the Public Notice
2001-37 proceeding) the
relationship between Bell Canada and Bell Nexxia Inc. (Bell Nexxia) was
reviewed. In The Companies Exhibit #85, filed as part of the Public
Notice 2001-37 proceeding, Bell Canada identified 203 contracts where
Bell Nexxia included Bell Canada tariffed services in packaged or
single-source arrangements. |
13. |
On 31 January 2002, GT Group
Telecom Services Corp. (Group Telecom), now LondonConnect Inc., filed an
application pursuant to Part VII of the CRTC Telecommunications Rules
of Procedure (the Rules) requesting that the Commission investigate
the activities of Bell Canada's subsidiary, Bell Nexxia, and institute
additional safeguards for the affiliates of incumbent local exchange
carriers (ILECs) operating within the serving territory of the ILEC. |
14. |
The Commission disposed of
Group Telecom's Part VII application in Decision
2002-76. |
15. |
The Commission noted in
Decision 2002-76 that tariffs had not been filed by Bell Canada with
respect to any of the 203 contracts that were identified by Bell Canada
in The Companies Exhibit #85. The Commission found that at least 111 of
these contracts involved bundling of tariffed services by Bell Canada
and that Bell Canada was
non-compliant for each such bundle. |
16. |
The Commission accordingly
directed Bell Canada, at paragraph 74 of Decision
2002-76, to file the
following: |
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a) for every contract
identified in Appendix A to Decision 2002-76 [contracts identified
where Bell Nexxia acted as Bell Canada's agent when providing
a customer with
Bell Canada tariffed services together with other services]
that was in force on the date
of the decision, either under its original term or pursuant to a
renewal or modification of
the contract: |
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· a proposed tariff, together with an imputation test analysis
using the Commission's
imputation test framework as set out in Order
2000-425; and
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· a copy of the contract(s).
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b) for every contract
identified in Appendix B to Decision 2002-76 [contracts identified
where Bell Nexxia may be acting as Bell Canada's agent in the
provision to a customer
of Bell Canada tariffed services together with other
services] that was in force on the
date of this decision, either under its original term or
pursuant to a renewal or
modification of the contract: |
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· a proposed tariff, together with an imputation test analysis
using the Commission's
imputation test framework as set out in Order
2000-425, or an explanation
as to
why a tariff was not required; and
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· a copy of the contract(s).
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c) for every single source and
packaged arrangement that had been concluded since the
preparation of The Companies Exhibit #85, that were in force as of
the date of Decision
2002-76, either under its original term or pursuant to a renewal or
modification of the
contract, and that involved one or more Bell Canada tariffed
service elements and one
or more other services, provided pursuant to a single contract or
set of related contracts,
and offered directly by Bell Canada or through Bell Nexxia or a
successor to
Bell Nexxia or any other entity that controlled or was controlled
by Bell Canada or was
controlled by a person who controlled Bell Canada: |
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· a proposed tariff, together with an imputation test analysis
using the Commission's
imputation test framework as set out in Order
2000-425, or an explanation
as to
why a tariff was not required; and
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· a copy of the contract(s).
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17. |
On a forward going basis, the
Commission also directed Bell Canada to comply with all Commission
decisions in respect of the bundling of tariffed services, including any
bundling by Bell Nexxia acting as an agent of Bell Canada. The
Commission indicated that, in accordance with Decision
94-19 and
Price cap regulation and related issues, Telecom Decision CRTC
97-9,
1 May 1997, it was prepared to consider tariff applications on an ex parte
basis. |
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Part I – Confidentiality Issues
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18. |
Bell Canada stated that the
proposed tariffs included a generic description of the terms and
conditions associated with the CSAs as well as a short description of
each arrangement provided to the individual customers. Invoking section
39 of the Act, Bell Canada filed the associated imputation test results
and customer contracts entirely in confidence. In an attachment to
Tariff Notice 751, Bell Canada provided its supporting rationale for its
claim of confidentiality. |
19. |
Bell Canada stated that the
Commission had long recognized and supported the principle that
customer-specific information should not be released on the public
record, and submitted that Article 11 of the Terms of Service
represented the Commission's codification of this principle. Bell Canada
argued that customers had developed a reasonable and legitimate
expectation that information about their business use of
telecommunication services would not be put on the public record, and
that this expectation was reflected in industry practice, in express
contractual provision for confidentiality and in the Commission's
imposition of Article 11 of the Terms of Service, or its equivalent, on
all carriers. |
20. |
Bell Canada submitted that a
customer's confidentiality requirements cannot be met simply by removing
the name of the customer and disclosing all remaining information.
Bell Canada stated that disclosure of the configuration, location, term,
volume or usage of services including non-telecommunications services,
where applicable, would lead to the likelihood of disclosure of the
customer's identity and its business operations. Bell Canada submitted
that disclosure of the information in question would harm its business
customers because it would disclose their internal business operations,
decisions or costs to their competitors and would prejudice them in
their negotiations with other telecommunications suppliers. |
21. |
Bell Canada submitted that the
disclosure of key terms and conditions, including pricing information,
would materially harm Bell Canada by providing important information to
its competitors, prejudicing its ability to bid successfully on future
business opportunities. Bell Canada argued that the release of pricing
information would provide pricing benchmarks which would become the
ceiling for competitors' rates. |
22. |
Bell Canada further submitted
that, as a result of the sophistication and expertise in negotiations of
customers in this market segment, any public interest that would be
served through publication of details of the arrangements between itself
and any of its customers would be outweighed by the harm to the
customer, to Bell Canada and to the effective operation of the
competitive marketplace. |
23. |
Bell Canada argued that there
would be no positive value in publishing detailed descriptions of the
service arrangements, the associated pricing or other contractual
provisions, as it was unlikely that any other customer would require the
same arrangement. Bell Canada also argued that the competitive bidding
process for such business, coupled with the expertise of the customers,
ensured that the regulated telecommunications carriers that chose to
compete in this marketplace were unable to unjustly discriminate among
customers. Bell Canada submitted that market forces were sufficient to
discipline the actions of regulated carriers, rendering the public
scrutiny of their serving arrangements and the terms and conditions
under which they were provided, unnecessary. |
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Parties' disclosure request
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24. |
Allstream et al. submitted that
the proposed tariffs were not in conformity with the Act or the CRTC
Tariff Regulations (the Regulations). Allstream et al. requested
that the Commission direct Bell Canada to provide the specific rates
associated with each service component of the CSA on the public record
in the proposed tariff pages. |
25. |
Allstream et al. stated that
Bell Canada had provided nothing beyond a very general description of
the proposed CSA and that many if not all of the proposed tariffs did
not include a complete list of service components. |
26. |
Allstream et al. further
submitted that Bell Canada's proposed tariffs did not meet the
requirements of Order 2000-425. Allstream et al. argued that
Bell Canada's proposed tariffs would not permit a potential customer to
assess whether it would qualify for the CSA, and would not permit a
reseller to assess whether it could resell the service. |
27. |
Allstream et al. noted that
Bell Canada had filed the imputation tests entirely in confidence.
Allstream et al. submitted that, at a minimum, Bell Canada should be
ordered to file for each of the CSAs a template of the imputation test
so as to provide competitors with at least an outline of how the
imputation test was applied. |
28. |
Allstream et al. argued that
Bell Canada's submission that disclosure would provide a ceiling for
competitors' rates reflected the reality that Bell Canada in fact set
prices, relying on its dominance. Allstream et al. argued that
Bell Canada's resistance to disclosure should be understood as a concern
that greater regulatory scrutiny of its arrangements might threaten its
continued market dominance. |
29. |
Allstream et al. noted
Bell Canada's concerns regarding the identification of its customers and
stated that it was not asking that these customers be identified, nor
was it requesting the disclosure of details with respect to specific
network and service configurations. Allstream et al. stated that, even
if a customer could be identified through certain information filed on
the record, which Allstream et al. denied, it disagreed with
Bell Canada's submission that disclosing this information would violate
the customer's expectation of confidentiality. Allstream et al. further
stated that the customer contracts at issue are with sophisticated
corporate and government users of telecommunications services and that
these parties can be expected to be aware of the fact that the
telecommunications industry is regulated and that their arrangements may
come under regulatory scrutiny. |
30. |
Allstream et al. requested that
Bell Canada be ordered to file amended tariffs containing the following: |
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For each tariffed service: |
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· specific reference to the service including the service name, the
specific tariff item
number and rate elements for each service and/or components thereof
contained in
the contract;
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· a clear indication of all volume commitments;
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· a clear indication of the time and volume commitments in the
customer contract
and whether these matched the provisions of the tariff or were governed
by the
Customer Agreement; and
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· a clear indication of whether termination provisions in the
customer-specific
arrangement were as per the contract or as per the tariff.
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For each forborne service: |
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· a list of all services provided in the bundle and the specific
rate for each of these
services;
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· the specific terms and conditions associated with the rates
charged;
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· an indication of the contract period and volume commitments
associated with each
service; and
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· a clear indication of whether the termination provisions matched
those in the tariffs
for the tariffed services and, if not, an indication of the termination
provision and
contract renewal provisions.
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31. |
Mr. Ménard referenced and
supported Allstream et al.'s comments that the proposed tariffs were not
in conformity with the Regulations. |
32. |
Mr. Ménard disputed
Bell Canada's claim of confidentiality and requested that, when
Bell Canada or Bell Nexxia provided services to a customer as a result
of a public tender, the Commission should place the customer's name and
the relevant public tender number on the public record to permit
competitors to assess whether there is a level competitive playing field
and whether they have suffered damages. Mr. Ménard also considered that
Bell Canada should be required to place information associated with
request for proposals (RFP) on the public record. |
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Bell Canada's reply
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33. |
Bell Canada submitted that the
tariffs filed to date had complied with the requirements of Decision
2002-76 and provided sufficient detail for the Commission to grant final
approval. |
34. |
Bell Canada further submitted
that the Commission itself could ensure that the prices, terms and
conditions of the arrangements were just and reasonable, without
destroying the confidentiality protection that customers expected and
that was appropriate in a competitive environment. |
35. |
Bell Canada disagreed with
Allstream et al.'s submissions that the filing of tariffs that did not
contain specific details of rates, terms and conditions violated the Act
and the Regulations. Bell Canada submitted that its proposed tariffs had
not violated the requirements of the Act, the Regulations or the Rules. |
36. |
Bell Canada stated that the
term "tariff" was defined in the Rules as: |
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…any publication containing rates, charges, rules, regulations,
conditions, specifications or requirements relating in any way to the
furnishing by a regulated company of telecommunications services or
facilities to any person.
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37. |
Bell Canada submitted that this
definition did not prescribe that tariffs must contain any and all of
the items delineated but that it merely provided a description of the
types of information that could be contained in a document referred to
as a tariff. Bell Canada stated that the tariffs it had proposed
incorporated by reference the customer contracts and therefore contained
all material rates, terms and conditions. Bell Canada further submitted
that the fact that the contracts had been submitted in confidence did
not alter this fact. |
38. |
Bell Canada referenced
subsection 25(3) of the Act which states: |
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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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39. |
Bell Canada submitted that it
had fully complied with this requirement with its proposed tariffs.
Bell Canada stated that subsection 25(3) of the Act did not require that
any and all elements of a tariff be made publicly available and that
tariff requirements must be read in conjunction with subsection 39(1) of
the Act, which provides as follows: |
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For the purpose of this
section, a person who submits any of the following information to the
Commission may designate it as confidential: |
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a) information that is a trade
secret; |
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b) financial, commercial,
scientific or technical information that is confidential and that is
treated consistently in a confidential manner by the person
who submitted it; or |
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c) information the disclosure
of which could reasonably be expected |
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i) to result in material financial loss or gain to any person,
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ii) to prejudice the competitive position of any person, or
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iii) to affect contractual or other negotiations of any person.
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40. |
Bell Canada submitted that it
had filed certain of the information included by reference in its
proposed tariffs in confidence, pursuant to section 39 of the Act, which
was entirely consistent with the Commission's rules and directives, and
with the statutory requirements of the Act. |
41. |
In response to Allstream
et al.'s request that it file an imputation test template for each CSA,
Bell Canada stated that the results for each of the imputation tests
filed were provided using the same template. Bell Canada stated that it
had not filed an abridged version of the imputation test template since
the non-confidential information therein had been disclosed
in Attachment 2 to Tariff Notice 751 and that the blank template would
be essentially meaningless. Bell Canada provided, as Attachment 2 to its
reply comments, the template it stated it had used for each of the
imputation tests submitted. |
42. |
In reply to Mr. Ménard,
Bell Canada submitted that the suggested requirement for competitors to
assess whether it had complied with the terms of the customer's RFP was
of no regulatory interest. Bell Canada stated that it was the rates and
terms of the final contract that would be of interest to the Commission.
Bell Canada further stated that Mr. Ménard's comments appeared to be
aimed at obtaining details regarding CSAs that would be of competitive
value but of little or no value to the Commission in its deliberations. |
43. |
Bell Canada submitted that the
Commission should find sufficient the level of detail provided in the
proposed tariffs and reiterated its argument that the public interest in
further disclosure of information was outweighed by the harm that such
disclosure would cause to the competitive position of the company and of
its customers, and to the highly competitive marketplace for these
service arrangements. |
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Commission analysis and determination
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44. |
The Commission notes that the
adequacy of the information disclosed by Bell Canada in the proposed CSA
tariffs has been challenged by interested parties. Normally, requests
for disclosure of confidential information concern the information
provided in support of the rates, terms and conditions contained in a
tariff filing. In this instance, the request for disclosure relates to
the absence of those very rates, terms and conditions in the
CSA tariffs filed. |
45. |
In each of the tariff notices
under review, Bell Canada has provided an estimate of the annualized
revenues and a generic description of the terms and conditions
associated with each CSA. The Commission considers that this gives rise
to two issues related to the appropriateness of the filings. |
46. |
The first issue is whether
providing an estimated annualized revenue figure is sufficient for a
proposed tariff to qualify as a tariff. The second issue is whether the
rates, terms and conditions associated with the CSAs in question should
be disclosed. |
47. |
With respect to the first
issue, subsection 25(1) of the Act states the following: |
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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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48. |
Section 2 of the Act states
that: |
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"rate" means an amount of money or other consideration and includes
zero consideration.
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49. |
Based on the above, the
Commission considers that a rate contained in a tariff must identify the
specific amount of money or other consideration to be charged for a
service. In the Commission's view, the estimated annualized revenues
filed by Bell Canada in the proposed CSA tariffs do not identify such
specific consideration. The Commission does not, therefore, consider
that they constitute a rate, as defined in section 2 of the Act. |
50. |
With respect to Bell Canada's
argument that the definition of the term "tariff" in the Rules does not
require a tariff to contain a rate, the Commission notes that
regulations must be interpreted in light of their governing legislation.
In the present case, this requires that the definition of "tariff" in
the Rules be interpreted in light of subsection 25(1) and section 2 of
the Act, which requires that a tariff filed with and approved by the
Commission must specify a rate, that includes the specific consideration
to be charged for a telecommunications service. |
51. |
Accordingly, the proposed
tariffs filed in support of the CSAs under consideration do not in the
Commission’s view satisfy the requirements for a tariff as set out in
subsection 25(1) of the Act. |
52. |
With respect to the second
issue, the Commission notes that claims for confidentiality are assessed
in light of sections 38 and 39 of the Act and section 19 of the Rules. |
53. |
Section 38 of the Act requires
the Commission, subject to section 39, to make available for public
inspection any information submitted to the Commission in the course of
proceedings before it. |
54. |
Paragraph 39(1)(c) of the Act
permits a person who submits any of the following information to
designate it as confidential: |
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c) information the disclosure
of which could reasonably be expected |
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(i) to result in material financial loss or gain to any person,
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(ii) to prejudice the competitive position of any person, or
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(iii) to affect contractual of other negotiations of any person
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55. |
Subsection 39(4) of the Act
states that: |
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Where designated information is submitted in the course of
proceedings before the Commission, the Commission may disclose or
require its disclosure where it determines, after considering any
representations from interested persons, that the disclosure is in the
public interest.
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56. |
Subsection 19(10) of the Rules
states that where the Commission is of the opinion that no specific
direct harm would be likely to result from disclosure, or where the
public interest in disclosure outweighs any such specific direct harm,
the document shall be placed on the public record. |
57. |
Accordingly, in assessing
claims for confidentiality, the public interest in disclosure is weighed
against the specific direct harm, if any, likely to result from
disclosure. |
58. |
As indicated earlier, the
Commission determined in Order 2000-425 that in the case of CSAs that
bundle tariffed telecommunications services with non-tariffed and/or
non-telecommunications services, the proposed tariff must provide
sufficient information with respect to the rates, terms and conditions
of the CSA contract to enable a potential customer to assess whether its
service requirements might reasonably be expected to qualify for similar
rates, terms and conditions. The Commission notes that such customers
can include competitors of the regulated carrier. |
59. |
In the Commission's view the
proposed tariffs filed in support of the CSAs in the present case do not
provide sufficient information with respect to the rates, terms and
conditions to satisfy the directives of Order
2000-425. |
60. |
The Commission considers that
its determinations in Order 2000-425 demonstrate the significant public
interest in disclosure of the rates, terms and conditions of CSAs such
as those filed in this proceeding. The Commission considers further that
the public interest in providing the information requested by Order
2000-425 is underscored in light of the current state of competition in
a number of key telecommunications markets2. |
61. |
With respect to Bell Canada's
submissions regarding the harm that may be caused by satisfying the
requirements of Order 2000-425 in this case, while the Commission
acknowledges that some harm might result to Bell Canada or to some of
its customers in some circumstances, the Commission considers that
disclosure of the information would be beneficial to competition in this
market segment. Disclosure of the rates and the key terms and conditions
would provide greater transparency for customers and telecommunications
service providers, thereby removing a barrier to fair and sustainable
competition. This in turn would ultimately benefit all
telecommunications users. |
62. |
As to Bell Canada's argument
that customers have developed a reasonable and legitimate expectation
that information about their business use of telecommunication services
would not be put on the public record, the Commission considers that any
such expectations must be considered in light of sections 38 and 39 of
the Act, which clearly contemplate that any information submitted to the
Commission in the course of proceedings before it will be public, even
in the case of categories of information that may be designated as
confidential, where the Commission determines that disclosure is in the
public interest. |
63. |
Bell Canada also argued that
there would be no positive value in publishing detailed descriptions of
the service arrangements, as it was unlikely that any other customer
would require the same arrangement. However, the Commission considers it
reasonable to assume that other customers, including competitors, may
want the same or similar service configurations. The Commission notes
that it has received a number of tariff applications for CSAs where
customers were being provided with similar service bundles. |
64. |
As regards Bell Canada's
submission that market forces are sufficient to discipline the actions
of regulated carriers, rendering the public scrutiny of their serving
arrangements and associated terms and conditions unnecessary, the
Commission considers that CSAs that include tariffed service components
continue to be tariffed, precisely because market forces have proven to
be insufficient to discipline the actions of regulated carriers, and in
order to prevent unjust discrimination among customers of such carriers,
including competitors. |
65. |
On balance, the Commission
finds that the public interest in disclosure of the information required
to bring the tariffs into compliance with the directives of Order
2000-425 outweighs any specific direct harm that might result from
disclosure. |
66. |
In light of the above, the
Commission directs Bell Canada to file for the public record, or on an
ex parte basis, consistent with the manner in which the original
filing was made, within 60 days of the date of this decision, with the
exception of the five CSAs discussed in the next section, amendments to
the proposed tariffs consistent with the following: |
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· the tariff must state the
specific rate, expressed as a price per unit, including all volume
commitments and associated time periods, associated with each service or
service
component provided under the CSA regardless of whether or not the
contract stipulated
a discrete rate for the provision of the service or service components in
question; |
|
· the tariff must be
self-explanatory and must not cross-reference a contract or service
schedule separate from the tariff; |
|
· the tariff must explicitly
state that the tariff provisions prevail to the extent of any
inconsistency between the tariff and the provisions of any written or
unwritten agreement
or arrangement with the customer; |
|
· the tariff must include the
following key terms: |
|
– a description of each service and service component that is, or
may be,
provided under the contract, whether or not the service is a
forborne
telecommunications service, whether or not the service is a
telecommunications service and whether or not the service is
identified in
the contract as a service with a discrete rate;
|
|
– the terms relating to rights and obligations relating to
contract termination;
and
|
|
– the terms relating to contract renewal.
|
67. |
The Commission notes that the
proposed tariffs must also contain specific references to all general
tariff items that affect or determine the rights and obligations of
Bell Canada or the customer under the contract. |
68. |
The Commission notes that the
above list may not be exhaustive, given the unique characteristics of
any given CSA filed. |
69. |
The Commission, in determining
the appropriateness of an amended proposed tariff, will assess whether
the proposed tariff provides sufficient information with respect to the
contract's rates and key terms such that a potential customer may assess
whether its service requirements are such that it may reasonably expect
to qualify for the same or similar rates, terms and conditions. |
70. |
The Commission notes that the
CSA tariff requirements outlined above, while specific to Bell Canada in
this decision, would be expected of each of Aliant Telecom Inc.
(Aliant Telecom), MTS Communications Inc. (MTS), Saskatchewan
Telecommunications (SaskTel), Société en commandite Télébec (Télébec),
TELUS Communications Inc. (TCI) and TELUS Communications (Québec) Inc. (TELUS Québec)
when filing CSAs for approval. |
|
Part II – Imputation Test Issues
|
71. |
Bell Canada, pursuant to the
Commission's direction in Decision 2002-76, filed supporting imputation
tests for each CSA further to the imputation test framework as set out
in Order 2000-425. These imputations tests were filed entirely in
confidence. |
72. |
As indicated in Order
2000-425,
the following costs must be included in a CSA imputation test: |
|
· the cost of service components provided by third parties;
|
|
· the cost, using General Tariff rates, of service components that
are also provided
under Bell Canada's General Tariff, including Carrier Access Tariff
items; and
|
|
· the Phase II costs, without a mark-up, of service components
provided by
Bell Canada that are not subject to a general tariff.
|
73. |
The Commission notes that
Bell Canada filed relatively minimal information in support of the costs
that it included in the imputation tests. However, based on its review
of the costing information provided, the Commission considers that
Bell Canada has consistently underestimated the imputation test cost.
For instance, Bell Canada included digital network access service
components in imputation tests associated with certain CSAs at the
tariffed rates for its Competitor Digital Network Access service. The
Commission considers that these service components should have been
included in these imputation tests at retail Digital Network Access
tariff rates. |
74. |
In reviewing the CSA Phase II
cost information provided, the Commission also found a number of costing
methodology irregularities that result in an underestimation of Phase II
costs. These were identified in a confidential Commission staff letter
to Bell Canada dated 18 July 2003 (the staff letter). However, no
further information was filed by Bell Canada. These irregularities are
discussed below. For the purpose of estimating the impact of each
costing irregularity, the Commission has assumed that the capital and
related expenses account for one half of the Phase II costs, while the
operating expenses account for the other half. |
|
Study Life for capital components
|
75. |
In the response to
interrogatory Bell(CRTC)12May03-2, Bell Canada indicated that its CSA
monthly capital costs had been developed using a specified study life
that was provided in confidence to the Commission. The Commission finds
Bell Canada's study life estimate to be inappropriate, by comparison
with CSA contract lives which are typically
5 years in length or less. In the staff letter, Commission staff advised
Bell Canada that the study life used to determine CSA capital costs
should be no more than 10 years. |
76. |
Based on the cost sensitivity
information provided in the response to interrogatory
Bell(CRTC)12May03-2, the Commission estimates that Bell Canada's study
life approach will on average understate capital costs by approximately
5%, and the Phase II costs by approximately 2.5%. |
|
One-time versus ongoing capital cashflows
|
77. |
In the response to
interrogatory Bell(CRTC)12May03-2, Bell Canada submitted that its
CSA capital costs were determined assuming that the required capital
investments would be made continuously over the study period, instead of
on a one-time or non-recurring basis. The Commission expects that the
CSA demand will typically occur at the beginning of the contract, and
therefore finds Bell Canada's proposed approach to be inappropriate. |
78. |
Based on the cost sensitivity
information provided in the response to interrogatory
Bell(CRTC)12May03-2, the Commission estimates that Bell Canada's
approach understated on average capital costs by approximately 8%, and
the Phase II costs by approximately 4%. |
|
Fill at relief versus average working fill factors
|
79. |
The Commission notes that
Bell Canada generally used fill at relief factors in its CSA filings
instead of average working fill factors (AWFFs). |
80. |
In its Phase II Directive 5.2,
in Inquiry into Telecommunications carriers' costing and accounting
procedures - Phase II: Information requirements for new service tariff
filings, Telecom Decision CRTC 79-16, 28 August 1979 (Decision
79-16), the Commission stated that a current unit cost may be developed
for shared facilities using a capacity cost, and if such a technique is
employed, the unit cost shall be based on an average fill factor
determined over a time period of sufficient length to justify its
appropriateness as an average for the related facility type and use. In
the staff letter, Bell Canada was advised that in its CSA cost studies
it should use actual AWFFs for equipment that had reached provisioning
stability in the network and AWFFs of 80% for central office (CO)
equipment and 70% for outside plant equipment. |
81. |
Based on the above-specified
AWFFs for CO and outside plant equipment, the Commission estimates that
Bell Canada's approach of using fill at relief instead of AWFFs
understated on average the capital costs by approximately 17%, and the
Phase II costs by approximately 8%. |
|
Advertising expenses
|
82. |
In the response to
interrogatory Bell(CRTC)12May03-24, Bell Canada submitted that
advertising was causal to a service and since a CSA was not a service,
advertising was not considered causal to a CSA. Bell Canada indicated
that when forborne services such as Frame Relay and toll services were
provided on a stand-alone basis the company included its advertising
expenses as causal, but when these services were included as service
components within a CSA, advertising expenses were not considered causal
and were not included. |
83. |
The Commission considers that
advertising expenses should apply to the service regardless of whether
it is a component of a CSA or provided on a stand-alone basis, as the
advertising expense related to a service should be borne by the customer
or customers that utilize the service. The Commission is therefore of
the view that advertising expenses for each service component within the
CSA should be reflected in the cost study. Based on the expense
information provided in Bell Canada's 10 February 2003 letter, the
Commission estimates that Bell Canada's approach of excluding
advertising expenses for service components within the CSA understated
the Phase II costs by approximately 1%. |
|
Use of corporate-average operating expenses
|
84. |
Bell Canada indicated that
certain CSA operating expenses such as sales management expenses were
estimated based on corporate-average expenses. The Commission expects
that most operating expenses associated with Bell Canada's CSA contracts
will be greater than corporate-average expenses since these expenses
relate to the company's larger customers. In the staff letter,
Bell Canada was advised that in its CSA cost studies it should use
contract-specific unit expenses instead of corporate-average unit
expenses. The staff letter further advised Bell Canada that in the
interim, where only corporate-average unit expenses were available, such
expenses should be marked up by 25%. |
85. |
The Commission estimates that
Bell Canada's approach of using corporate-average expenses instead of
contract-specific expenses will understate the Phase II costs by
approximately 3%. |
|
Portfolio expenses
|
86. |
In TELUS Communications Inc.
– Application to review and vary Decision
2000-745 and Decision
2001-238,
Telecom Decision CRTC 2002-67, 25 October 2002 (Decision
2002-67), the
Commission discussed the treatment of portfolio expenses in Phase II
cost studies. In that proceeding, TCI referred to portfolio expenses as
non-service specific expenses causal to groupings of services of which
the service in question was a constituent. In Decision
2002-67, the
Commission determined that, on an interim basis, all ILEC Phase II cost
studies should reflect the inclusion of portfolio expenses, consistent
with earlier directives and past practice. In response to this
directive, Bell Canada is now including portfolio expenses in its cost
studies through the application of a portfolio loading factor of 9.7% on
all expense cashflows. However Bell Canada's CSA cost studies do not
reflect this portfolio expense inclusion. |
87. |
The Commission is of the view
that, consistent with Bell Canada's current costing practice, portfolio
expenses should be included in its CSA cost studies through the
application of a portfolio loading factor of 9.7% on all expense
cashflows. The Commission estimates that the exclusion of this
additional 9.7% of expenses will understate Phase II costs by
approximately 5%. |
|
Other costing issues
|
88. |
The Commission also found other
costing irregularities that may also understate the Phase II costs of
the CSAs. Although the impact of these irregularities has not been
quantified, they include the following costing irregularities which
should be addressed by the company in future CSA filings: |
|
· Property taxes, maintenance and housekeeping expenses associated
with
central office buildings and land were excluded from the CSA cost
studies.
These expenses should be estimated and included in future CSA cost
studies.
|
|
· Except in the case of Tariff Notice 6748, Bell Canada did not
provide the
pre-introductory costs for its CSA filings. Directive 5.8 of Decision
79-16
requires each company to file, in a Phase II cost study, the
pre-introductory
costs of a service on a memorandum basis. Although pre-introductory costs
do not form part of the prospective cashflows for a new service, these
costs
would be typically recovered through the mark-up. The information should
be provided on a memorandum basis for all new CSA filings.
|
89. |
In light of the above, and the
need to make a determination with respect to the CSAs filed, the
Commission considers that Bell Canada has understated the Phase II
imputation cost component by at least 20%. Accordingly, in evaluating
the imputation tests filed in support of the CSAs, the Commission has
marked up Bell Canada's Phase II imputation test costs in each instance
by 25%3 and has compared the adjusted imputation costs with
the current contract revenues provided. The Commission is particularly
concerned with five CSAs where the reported revenues do not recover the
adjusted costs. |
90. |
The Commission notes that the
five CSAs in question have an expiry date beyond the end of 2003 and the
Commission therefore considers that immediate corrective action is
required in all five cases. |
91. |
Accordingly, for each of these
five CSAs, the Commission directs Bell Canada to file, within 90 days of
the date of this decision, proposed tariffs reflecting the CSA tariff
requirements as discussed in this decision, any associated contracts and
revised imputation tests that reflect the increased monthly revenues
required from the customer as set out in paragraph 92 below, such that
the revised CSA recovers sufficient revenues to satisfy the imputation
test using the Commission's adjusted costs on a going-forward basis. In
the alternative, should Bell Canada decide not to renegotiate the CSA,
the Commission directs Bell Canada to advise the Commission within 90
days of the date of this decision that it has discontinued provision
of service under the contract in question or that it will discontinue
such service within a further 90 days of the date of this decision. |
92. |
The five CSAs and the
corresponding increase in revenues required are provided in the
following table: |
|
Contract Number |
Required Increase in Monthly
Revenues |
|
P1-38, 39, 41, 42, 44 and 49 |
$1,380,500 |
|
|
P1-54 |
$102,600 |
|
|
P1-86 |
$195,000 |
|
|
P3-109 |
$47,500 |
|
|
Tariff Notice 772 |
$2,400 |
|
93. |
The Commission notes that for
all new CSA applications, Bell Canada is required to follow the costing
methodology and reporting format provided to the company in the staff
letter. |
|
Part III – Other Matters
|
|
Expired contracts
|
94. |
The Commission notes that
Allstream et al. had requested that the Commission direct Bell Canada to
provide and disclose information related to 40 CSAs identified in
Decision 2002-76 reported by Allstream et al. to have expired as of the
date of that decision. |
95. |
Bell Canada argued that the
Commission in Decision 2002-76 had not required that it file tariffs,
imputation tests or contracts that were not in force as of the date of
Decision
2002-76. Bell Canada submitted that it would be a more efficient use of
the Commission's and parties' resources to focus on the existing
contracts captured by the filing requirements directed by the Commission
in Decision 2002-76. |
96. |
As Bell Canada is correct that
its directives in Decision 2002-76 were in relation to CSAs that were in
force as of the date of Decision 2002-76, the Commission denies
Allstream et al.'s request. |
|
Requirement to file contracts going forward
|
97. |
In Decision
2002-76, the
Commission directed Bell Canada to file the contracts associated with
the proposed tariffs to allow for a comparison of the corresponding
rates, terms and conditions. |
98. |
The Commission notes that there
currently is no requirement for the large ILECs to file contracts with a
proposed tariff with respect to a CSA. The Commission considers this
requirement appropriate in order for it to be able to assess the rates,
terms and conditions proposed in the tariffs against those provided to
the customer in the contract. The Commission further considers that it
would be able to deal more expeditiously with a complaint associated
with a CSA if the contract were filed with the proposed tariff. |
99. |
Accordingly, each of
Bell Canada, Aliant Telecom, MTS, SaskTel, Télébec, TCI and TELUS Québec
should henceforth file any associated contract(s) at the time it files a
proposed tariff with respect to a CSA. |
|
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 |