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Telecom Decision CRTC 2005-16
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Ottawa, 24 March 2005 |
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Call-Net Enterprises Inc. Application for a competitor tariff for
an inter-office digital transport service between Halifax and St. John's
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Reference: 8661-C25-200407462 |
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In this Decision, the Commission
denies Call-Net Enterprises Inc.'s application for a competitor
tariff for an inter-office digital transport service at OC-3 and OC-12
rates between Halifax and St. John's. |
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The application
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1. |
On 14 July 2004, the Commission received an
application by Call-Net Enterprises Inc. (Call-Net) pursuant to Part VII
of the CRTC Telecommunications Rules of Procedure. Call-Net
requested that the Commission order Aliant Telecom Inc. (Aliant Telecom)
to file a Category I competitor tariff for an inter-office digital
transport service at OC-3 and OC-12 rates between Halifax, Nova Scotia
and St. John's, Newfoundland and Labrador (Newfoundland) for
interexchange carriers. Call-Net also requested that, should the
Commission not find this service to be of an essential nature, the
service be priced at Category II Competitor rates with a reasonable
mark-up. |
2. |
Call-Net stated that since Stentor Resource
Centre Inc. Forbearance from regulation of interexchange private
line services, Telecom Decision CRTC 97-20,
18 December 1997 (Decision 97-20),
over 2000 interexchange (IX) routes had been forborne from regulation
and very few commercial centres and long-haul routes (greater
than 500 miles) remained non-forborne. |
3. |
Call-Net stated that St. John's was the
only provincial capital currently not accessible through forborne IX
routes in contrast with all other provincial capitals which
were served by forborne routes. Call-Net further stated that Aliant
Telecom's retail rates for the Halifax to St. John's route were at least
14 times higher than the market rates in forborne routes of similar
length in Eastern Canada. Call-Net stated that it had signed a Dedicated
Services Agreement (DSA) for an OC-3 service that was in Aliant
Telecom's special facilities services tariff. Call-Net submitted that it
had been unable to negotiate with Aliant Telecom for a rate that was
more consistent with rates in competitive markets following the recent
expiry of the DSA. |
4. |
Call-Net argued that despite the huge
mark-up for the route in question, no competitor had built facilities to
Newfoundland because of the high costs of construction and the
relatively small customer base. Call-Net further argued that it was not
economically and technically feasible for competitors to build on this
route. Call-Net submitted that the incumbent local exchange carrier (ILEC)
infrastructure on this route was an essential or, at minimum, a
near-essential facility. Call-Net further submitted that the current
situation on this route was affecting the ability of competitors to
deliver the full benefits of competition in Newfoundland. |
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The process
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5. |
The Commission received comments from
EastLink, dated 12 August 2004; Aliant Telecom, Benson-Myles on behalf
of Persona Communications Corp. (Persona), Canadian Cable Television
Association (CCTA), and Rogers Communications Inc. (Rogers), dated
13 August 2004; and MTS Allstream Inc. (MTS Allstream), dated 16 August
2004. Reply comments were received from Call-Net, dated 23 August 2004. |
6. |
In its 13 August 2004 comments, Rogers
submitted that the Commission should expand the relief requested by
Call-Net to include DS-0, DS-1 and asynchronous transfer mode (ATM)
services. Rogers further requested that the Commission order Aliant
Telecom to reduce rates for all routes from Newfoundland to neighbouring
provinces and to make such rates available to telecommunications service
providers other than interexchange carriers. |
7. |
The Commission received comments from Bell
Canada and Aliant Telecom, dated 13 September 2004, and Saskatchewan
Telecommunications (SaskTel), dated 15 September 2004, on Rogers'
request to expand Call-Net's application. Call-Net replied to
Bell Canada's and SaskTel's comments in a letter dated 22 September
2004. Rogers submitted reply comments on Aliant Telecom's, Bell
Canada's, SaskTel's and Persona's comments in a letter dated
24 September 2004. |
8. |
In a letter dated 8 October 2004,
Commission staff addressed the expanded relief sought by Rogers and
indicated that all matters associated with Rogers' request, with the
exception of ATM services, were to be dealt with as part of the process
initiated by Call-Net's application. In the same letter, Commission
staff addressed interrogatories to parties regarding Call-Net's
application. Parties submitted responses to these interrogatories, dated
29 October 2004 and 5 November 2004. |
9. |
The Commission received further comments
from SaskTel and MTS Allstream on 12 November 2004 and 15 November 2004
respectively. |
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Background
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10. |
In Decision 97-20
and in Telecom Order CRTC 99-434,
12 May 1999 (Order 99-434),
the Commission determined that given that the interexchange private
line (IXPL) market was route specific, it was appropriate to
grant forbearance to a route if there was at least one competitor that
provided, or that was offering to provide, IXPL services at DS-3 or
greater bandwidth on that route using terrestrial facilities other
than facilities obtained from the ILEC or an affiliate of
the ILEC. |
11. |
In Regulatory framework for second price
cap period, Telecom Decision CRTC 2002-34,
30 May 2002 (Decision 2002-34),
the Commission established two categories of Competitor Services.
A Category I Competitor Service (Category I service) was defined as
a service in the nature of an essential service and comprised
essential, near-essential or other interconnection and ancillary services
required by Canadian carriers and resellers interconnecting to the
ILECs' networks. The rate for a Category I service would be based on Phase
II costs plus a mark-up of 15 percent. A Category II Competitor Service
(Category II service) was defined as a Competitor Service that
was not a Category I service. The rate for a Category II service
would be determined on a case-by-case basis. Further, the Commission
noted that as the regulatory framework was intended to foster facilities-based
competition, mandated cost-based pricing was necessary for certain
facilities and services and must be justified on a case-by-case
basis so that it did not create a disincentive to facilities-based
competition. |
12. |
In Competitor Digital Network Services,
Telecom Decision CRTC 2005-6,
3 February 2005 (Decision 2005-6),
the Commission dealt with, among other things, the need for the ILECs
to develop Competitor Digital Network (CDN) services. The Commission
used several general considerations in determining the need for CDN
services. These general considerations included supply, constraints
on facilities construction, the state of competition and competitor
reliance on ILEC facilities. |
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Positions of parties
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Absence of forborne IX routes to St.
John's |
13. |
Aliant Telecom argued that St. John's was
not unique with respect to the absence of forborne (competitive) IX
routes and that Call-Net was making this statement to justify its
application for rate relief in the Halifax to St. John's IX route. |
14. |
Aliant Telecom submitted that it was not
aware of any previous Commission determination where the status of a
municipality as a provincial or territorial capital was used to
determine the appropriate regulatory treatment of IX routes. |
15. |
Aliant Telecom further submitted that
Canada's territorial capitals and other major commercial centres were in
similar circumstances. It noted that the three territorial capitals of
Whitehorse, Yellowknife and Iqaluit were not accessible through forborne
IX routes and that the distances from these territorial capitals to
major cities in Western Canada were over 500 miles in each case. It also
noted that, 46 percent of the 113 Canadian municipalities with a
population of 40,000 or greater were not accessible through a forborne
IX route. It further noted that 24 percent of the 42 Canadian
municipalities with a population equivalent to St. John's or
larger did not have access to forborne IX routes. |
16. |
MTS Allstream, CCTA, EastLink, Persona and
Rogers were generally in support of Call-Net's application, but these
parties did not provide specific comments on this issue. Bell Canada and
SaskTel were opposed to Call-Net's application, but did not comment on
this issue. |
17. |
In reply, Call-Net argued that Aliant
Telecom's comparison of the territorial capitals and other cities to St.
John's was irrelevant to its application. Call-Net further disputed the
number of municipalities that did not have access to competitive IX
routes. In addition, Call-Net stated that the other major municipalities
identified by Aliant Telecom as having similar circumstances to
St. John's had access to competitive IX routes in nearby exchanges. It
submitted that, in contrast, St. John's was hundreds of miles from Nova
Scotia, where the competitive supply of IX facilities was located. |
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Competitive supply and barriers to
supply of IX digital transport facilities |
18. |
Call-Net submitted that it was not
economically and technically feasible for competitors to build
IX digital transport facilities in the Halifax to St. John's IX route.
It stated that no competitor had built IX digital transport facilities
to Newfoundland despite the huge mark-up relative to the market rates
for forborne IX routes of similar length in Eastern Canada. Call-Net
argued that given the very high cost of construction, in the order of
$10 million for the Halifax to St. John's IX route, and the relatively
small market base, competitors were unable to develop a viable business
case to construct IX digital transport facilities to Newfoundland.
Call-Net also argued that competitors were discouraged to build because
if and once a terrestrial IX digital transport facility was built,
Aliant Telecom would ask for forbearance for that IX route and would
likely substantially decrease its prices for that IX route, which would
reduce competitors' ability to recover their capital investment. |
19. |
Aliant Telecom argued that Call-Net had not
provided evidence to substantiate that it was not economically and
technically feasible for competitors to build on the Halifax to St.
John's IX route. Further, Aliant Telecom stated that Call-Net's
statement was incorrect, since there was at least one large competitor,
MTS Allstream, which owned and operated its own high-capacity radio
system between Newfoundland and the rest of Canada. |
20. |
In addition, Aliant Telecom commented that
certain sections of the IX route in question were already subject to
competitive supply, such as Halifax-Antigonish, Antigonish-Port
Hawkesbury and Halifax-Sydney. Aliant Telecom argued that the supply
situation showed that there was no insurmountable barrier to competitive
supply on other sections of the IX route. |
21. |
In response to Commission interrogatories,
Aliant Telecom noted EastLink's plan to build a submarine fibre optic
cable facility from Nova Scotia to Prince Edward Island. It further
noted that it would take only two to three weeks to lay the cable. The
length of the facility would be 80 kilometres, which was marginally
shorter than the 100-kilometre distance between Newfoundland and Nova
Scotia. Aliant Telecom argued that EastLink's plan demonstrated
that there were no insurmountable technical barriers to construct a
submarine fibre optic cable on this IX route, and that given the
relatively brief time required to construct a major part of a company's
network infrastructure, there were no economic barriers for competitors
to construct their own submarine fibre optic cables between the Canadian
mainland and Newfoundland. Aliant Telecom also noted that there were a
number of submarine cables that were in close proximity to Newfoundland,
which were used for international communications. Aliant Telecom further
stated that it planned to augment its existing network between Halifax
and St. John's by adding facilities to provide additional OC-192
capacity. |
22. |
Rogers argued that Aliant Telecom had a
monopoly on the fibre optic facilities from Newfoundland to neighbouring
provinces. It noted that the only other terrestrial facility was a
microwave system operated by MTS Allstream. It also noted that the
microwave system was currently at capacity. It further notes that it had
the longest microwave hop in the world and consequently reliability had
been an issue. Rogers further argued that the barrier to competitive
supply of IX fibre optic digital transport facilities was the high cost
of laying fibre optic cable under sea and the high cost of placing that
fibre optic cable from the landing point to St. John's. |
23. |
MTS Allstream supported Call-Net's position
that competitors would be unable to economically duplicate the facility
in question given the significant costs of construction and limited
demand. With respect to Aliant Telecom's reference to EastLink's plan to
lay submarine fibre optic cable between Nova Scotia and Prince Edward
Island, MTS Allstream argued that EastLink had the expected traffic
volumes to justify the planned build. It submitted that, on the other
hand, competitors did not have the same traffic volumes in Newfoundland
at that time. |
24. |
In response to a Commission interrogatory,
MTS Allstream stated that it was currently investigating the feasibility
of increasing the capacity of its microwave facility. It submitted
that its preliminary investigation indicated that the implementation
would be high-risk given the complexity and extreme distance of the
radio span. |
25. |
EastLink, CCTA, and MTS Allstream generally
supported Call-Net's argument that competitors would be unlikely to
build a high capacity IX terrestrial digital transport facility from
Nova Scotia to Newfoundland. They also argued that if a facility was
built, Aliant Telecom would apply for, and be granted, forbearance for
that IX route. They argued, further, that Aliant Telecom would then cut
prices to the point that the competitor would be unable to recover its
costs of building the facility. |
26. |
EastLink stated that the Halifax to Sydney
IX route was forborne, and that any telecommunications traffic from
Halifax to St. John's would pass through Sydney. EastLink, supported by
CCTA, submitted that the applicable IX route for rate relief should be
Sydney to St. John's. |
27. |
Persona submitted that the
access/termination point should be both Sydney and Halifax. Rogers
submitted that Call-Net's application should be expanded to all IX
routes from Newfoundland to neighbouring provinces. |
28. |
In its comments, SaskTel stated that
Telesat Canada (Telesat) had launched its Anik F2 Ka-Broadband service
which was capable of delivering cost-effective, two-way broadband
services and intended to make it available across Canada early in
2005. It further argued that alternate supply of IX digital transport
facilities to meet Rogers' requirements was economically and
technically feasible. |
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Need for a Halifax-St. John's IX digital
transport facility |
29. |
Call-Net argued that Aliant Telecom's IX
digital transport facility between Halifax and St. John's met all the
conditions of an essential facility: (i) Aliant Telecom was the only
supplier of this facility (monopoly controlled); (ii) it was required as
an input for competitors to offer competitive services in Newfoundland;
and (iii) a competitor could not duplicate it economically or
technically given the size of the market and the extremely high cost of
building facilities. |
30. |
Aliant Telecom submitted that the Halifax
to St. John's IX digital transport facility did not meet two of the
three Commission criteria of an essential facility. It stated that MTS
Allstream provided a microwave facility between Newfoundland and the
rest of Canada and that Telesat provided an IX facility between Halifax
and St. John's. Further, Aliant Telecom noted that it was currently
leasing capacity from Telesat's and MTS Allstream's IX transport
facilities, and concluded that the IX route in question was not monopoly
controlled. Aliant Telecom further argued that it had demonstrated that
there were no economic or technical barriers which would prevent
Call-Net from providing its own IX digital transport facilities. It
submitted that, therefore, the IX facility in question also failed to
meet the Commission's third criterion of an essential facility. |
31. |
Call-Net argued that given that the existence
of a competitive high-capacity terrestrial IX facility was one of
the criteria for forbearance in Commission's determination in Decision
97-20 and Order
99-434, a similar
test should be applied when determining whether an IX facility was
monopoly-controlled. Call-Net further argued that since no competitor
had offered terrestrial IX facilities to St. John's, the IX facility
was monopoly controlled and should be considered as an essential facility.
Call-Net submitted that the Commission's three criteria established
in Local competition, Telecom Decision CRTC 97-8,
1 May 1997 (Decision 97-8),
should be used to determine whether an IX facility was essential.
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State of competition in Newfoundland |
32. |
Call-Net stated that its requested rate
relief by means of a competitor tariff would help stimulate competition
for telecommunications services and benefit Newfoundlanders by offering
better services and choice. Call-Net further stated that the current
situation in the Halifax to St. John's IX route was affecting the
ability of competitors to deliver the full benefits of competition to
Canadians in Aliant Telecom's territories. |
33. |
Aliant Telecom argued that, contrary to
Call-Net's claims, competition was well established and growing in
Newfoundland. Aliant Telecom referred to the Report to the Governor
in Council, Status of Competition in Canadian Telecommunications
Markets, Deployment / Accessibility of Advanced Telecommunications
Infrastructure and Services, November 2003 (the 2003 Competition
Report), submitting that it showed examples of significant competition
in Newfoundland. |
34. |
Aliant Telecom stated that the 2003
Competition Report demonstrated that its local market share in
Newfoundland had declined steadily during 2000, 2001 and 2002. Aliant
Telecom further commented that, in 2002, its competitors' business lines
market share of 10.3 percent in St. John's was higher than anywhere else
in Atlantic Canada and was comparable to other much larger metropolitan
centres in Canada. |
35. |
Aliant Telecom also stated that, with
respect to the long distance market, while no provincial data had been
provided in the 2003 Competition Report, competitor share of long
distance revenues was relatively unchanged at 27 percent and competitor
share of retail long distance minutes had increased by two percentage
points in 2002 over 2001. It noted that, with respect to cellular mobile
services, in locations where cellular mobile services were provided, two
or more service providers were competing for customers. With respect to
Internet service, Aliant Telecom indicated that customers in the
province had a choice of alternate providers such as Rogers or other
Internet service providers. Aliant Telecom concluded that the data from
the 2003 Competition Report demonstrated that customers in Newfoundland
had a wide range of competitive choice of telecommunications services
and that customers had already received the benefits of competition. |
36. |
Rogers argued that the high IX rates from
St. John's to the rest of Canada created a barrier to the proper
development of competition and advanced telecommunications services.
Rogers submitted that high IX rates presented business challenges to its
plans for network expansion and introduction of advanced video services.
Rogers further stated that high IX rates created an unfair advantage for
Aliant Telecom. |
37. |
Persona, MTS Allstream and CCTA generally
supported Call-Net's position that high IX rates charged by Aliant
Telecom inhibited the development and expansion of a technically
advanced and competitive telecommunications market. |
38. |
In response to a Commission interrogatory
on retail services that the parties offered in Newfoundland, Call-Net
stated that it offered business and residential long distance services
including 1+, toll-free and direct access lines (DALs), Private Line,
Frame Relay/ATM, Virtual Private Network (VPN), Ethernet and Internet
access; MTS Allstream indicated that it offered competitive
communications solutions, long distance, Private Line, ATM, Frame Relay
and Ethernet services; Rogers Cable stated that it offered high-speed
Internet services, while Rogers Wireless offered mobile wireless voice
and data services; and Persona noted that it offered high-speed Internet
access. |
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Call-Net's rate comparison |
39. |
Call-Net stated that Aliant Telecom's
retail tariff rate for a DS-3 of 591 miles would be up to $145,000 per
month, excluding the Customer Volume Pricing Plan (CVPP) discount, and
that a corresponding OC-3 route would cost three times that of a DS-3.
Call-Net argued that Aliant Telecom's tariff rate for the DS-3 was at
least 14 times greater than that of market rates of forborne routes of
similar length in Eastern Canada. This represented a mark-up from market
rates of approximately 1300 percent. |
40. |
Aliant Telecom submitted that Call-Net's
rate comparison was inappropriate and incorrect. Aliant Telecom argued
that due to reorganization and bankruptcies of certain competitors,
competitive facilities were sold in some cases at rates which were
artificially low or which were below costs. Aliant Telecom stated that,
on the other hand, it had to charge rates which appropriately recovered
the costs of providing the service, with a fair return on shareholders'
investment. |
41. |
Persona, CCTA and MTS Allstream commented
on Call-Net's application for a rate based on cost. MTS Allstream
provided additional data, which it claimed demonstrated that
Aliant Telecom's proposed rate for an OC-12 service from Halifax to St.
John's was 12 times that of average competitive rates, on a per
Mbps/mile basis. |
42. |
Rogers commented that Rogers Wireless
currently leased 13 DS-1s in the Halifax to St. John's IX route from MTS
Allstream. It submitted that Rogers Wireless currently paid rates for a
DS-1 facility at four times the market rates for DS-1 facilities where
competition existed. It submitted, further, that Aliant Telecom's quotes
for DS-3 services were 10 to 20 times the rates for comparable DS-3
routes in other parts of Canada. |
43. |
In its response to Rogers' request for
an expanded rate relief, SaskTel submitted that it was inappropriate
for Rogers to compare IX rates charged on various IX routes on the
basis of the length of that IX route alone and noted the Commission's
determination in Follow-up to Telecom Decision 2003-76:
Rogers Wireless Inc. vs. TELUS Communications Inc. Toll termination
arrangements, Telecom Decision CRTC 2004-68,
21 October 2004, that appropriate rates for a tariffed service would
depend on the costs and attributes of the carrier's network. |
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Commission analysis and determination
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44. |
The Commission notes that it used several
general considerations in Decision 2005-6
to reaffirm its determination in Decision 2002-34
regarding the need for Competitor Digital Network services. The Commission
considers it appropriate to use similar considerations in the
present analysis to determine if Aliant Telecom has provided itself
with an undue preference by requiring competitors to pay retail rates
or special facilities services rates on this IX route. These considerations,
in the context of this application, include the supply of IX digital
transport facilities between Halifax and St. John's, the technical
and economic feasibility to construct competitive IX digital transport
facilities on this route, the state of competition in Newfoundland
as well as the extent to which market forces are working to further
the Commission's policy of facilities-based competition. |
45. |
With respect to supply, the Commission
notes that Aliant Telecom owns and operates an OC-192 transport network
from Halifax to St. John's and is planning to add capacity of OC-192 on
the same IX route; Telesat owns and operates satellite facilities to
Newfoundland and has launched its Anik F2 Ka-Broadband service which is
expected to be available in early 2005; and MTS Allstream owns and
operates a microwave system between Halifax and St. John's with capacity
for 3 DS-3s and has been assessing the feasibility of augmenting its
capacity. In addition, competitive supply of IX digital transport
facilities exists between Halifax and Sydney. The Commission considers
that while there is some degree of competitive supply of IX digital
transport facilities to Newfoundland, Aliant Telecom is currently the
major supplier of IX digital transport facilities between Newfoundland
and the Canadian mainland. |
46. |
The Commission considers that competitor
self-supply of a single IX digital transport link to Newfoundland
would not involve the same complexity and cost barriers as, for example,
competitor self-supply of local access, intra-exchange and metropolitan
IX facilities into a local calling area. In the case of the latter,
the Commission found, in Decision 2005-6,
that there were significant cost barriers and constraints with respect
to acquiring a critical mass of customers to justify facility build,
obtaining municipal right-of-way approvals, and obtaining use of support
structures. The Commission considers that competitor self-supply of
a single IX digital transport link to Newfoundland would provide ready
access to an existing customer base and comparable customer reach
to what Aliant Telecom would have in Newfoundland. |
47. |
With respect to the technical and economic
feasibility of a competitive supply between Halifax and St. John's, the
Commission notes that, as competitive supply of IX digital transport
facilities exists between Halifax and Sydney, it is sufficient to assess
the technical and economic feasibility of competitive supply between
Sydney and St. John's. |
48. |
With respect to the technical feasibility
of a competitive build of IX fibre optic digital transport facilities
between Sydney and St. John's, the Commission notes EastLink's build of
an 80-kilometre submarine fibre optic facility between Nova Scotia and
Prince Edward Island as well as the existence of submarine cables in
close proximity to Newfoundland. The Commission considers that the
evidence in the proceeding does not suggest that there are
insurmountable technical barriers to constructing fibre optic digital
transport facilities from the closest landing point in Newfoundland to
St. John's. As such, the Commission is of the view that it is
technically feasible to build competitive IX fibre optic digital
transport facilities between Halifax and St. John's. |
49. |
With respect to the economic feasibility of
a competitive build of IX fibre optic digital transport facilities
between Halifax and St. John's, the Commission notes Call-Net's cost
estimate of $10 million for building IX digital transport facilities
between Halifax and St. John's. The Commission also notes that it
recently approved Aliant Telecom's application to introduce a
new special facilities service in its Tariff item 713, in which it
offers an OC-12 IX digital transport service between Halifax and St.
John's to meet the specific requirements of a single customer on a
special assembly basis. The Commission notes, further, that the rate for
Aliant Telecom's OC-12 IX digital transport service is $590,000 per
month or $7 million per year. The Commission considers the cost of
building competitive IX digital transport facilities on this route is
not prohibitive relative to the potential revenues from a high capacity
IX digital transport service. |
50. |
The Commission considers that with an IX
digital transport network between Halifax and St. John's, a competitor
would be able to aggregate its own customer traffic from the St. John's
local calling area and customer traffic from other local calling areas
in Newfoundland and transport the total customer traffic to the Canadian
mainland. In addition, a competitor may also be able to lease a portion
of its IX transport capacity to other competitors, as MTS Allstream is
doing, and thereby improve the business case of such a facility build. |
51. |
The Commission notes that Call-Net, MTS
Allstream and EastLink argued that competitors are discouraged to
build terrestrial high capacity IX digital transport facilities between
Halifax and St. John's because if such a competitive facility is built,
Aliant Telecom would be granted forbearance for that IX route and
would aggressively cut its pricing of this IX route to the extent
that competitors would be unable to recover their investment. The
Commission notes that this kind of rivalrous behaviour will not be
unique to the Halifax to St. John's IX route, if the route is forborne.
The Commission further notes that the fact that there are over 2000
forborne IX routes since Decision 97-20
and Order 99-434
demonstrates that while rivalrous behaviour in a forborne IX route
is a reality, it has not discouraged competitors from building terrestrial
high capacity IX digital transport facilities. |
52. |
In light of the above, the Commission
considers that the record of the proceeding does not support the view
that it is not feasible, both technically and economically, for a
competitor to build IX digital transport facilities between Halifax and
St. John's. |
53. |
With respect to the state of competition in
Newfoundland, the Commission finds that competitors are offering
customers voice services, advanced business data services such as VPN,
digital wireless services, cable services and high-speed Internet
services. Competition in the local wireline market in Newfoundland,
although limited and predominately in the business market, is comparable
to that in the rest of Canada. The Commission considers that the lack of
access to forborne IX routes in Newfoundland has not had a significant
impact on competitors' ability to bring advanced telecommunications
services and choice to customers in Newfoundland. |
54. |
The Commission notes that one of the
Canadian telecommunications policy objectives, as set out in section
7(f) of the Telecommunications Act, is to foster increased
reliance on market forces for the provision of telecommunications
services and to ensure that regulation, where required, is efficient and
effective. The Commission notes that a rate comparison between (i) National
Services Tariff item 307 - Inter-office digital channels (retail
tariff); (ii) Call-Net's DSA with Aliant Telecom; and (iii) Aliant
Telecom's Tariff item 713 indicates that, on a DS-0 mile basis, a
discount in the order of 25 percent is provided in the DSA relative to
the retail tariff and a discount in the order of 55 percent is provided
in Tariff item 713 relative to the retail tariff. |
55. |
The Commission notes that Call-Net alleged
that it was unable to negotiate the rate of the DSA to a rate more
consistent with competitive market rates on other routes. The Commission
notes that on 30 November 2004, it approved an application by Aliant
Telecom, dated 15 October 2004, to introduce a special facilities
service in its Tariff item 713, Large Capacity (OC-12) Digital Network,
between Halifax and St. John's. The Commission notes that Aliant Telecom
submitted that the proposed service was the result of a successful
negotiation between Aliant Telecom and the customer, who had agreed to
the proposed rates, terms and conditions of the proposed service. The
Commission further notes that the customer is a competing carrier. The
Commission is not persuaded that Aliant Telecom and Call-Net will not be
able to negotiate a reasonable rate for OC-3 service on a special
assembly basis for the Halifax to St. John's IX route. |
56. |
The Commission considers that given that
Aliant Telecom has been providing increasing discounts, on a DS-0 mile
basis, to competitors, and that given the recent successful
negotiation between Aliant Telecom and a competing carrier which led
to the approval of Aliant Telecom's Tariff item 713 market forces have
affected margins. The Commission also considers that as competitor
transport demand has increased, Aliant Telecom has offered increasing
discounts to competing carriers. |
57. |
The Commission considers that a regulated
rate relief for the Halifax to St. John's IX route could adversely
affect the competitive supply of IX digital transport between Halifax
and Sydney at this time. The Commission further considers that a
regulated rate relief would discourage any incentive for new facility
builds on this IX route and would be inconsistent with Commission's
policy of facilities-based competition. |
58. |
The Commission notes that Call-Net's rate
comparison is between forborne and non-forborne IX routes, which have
different market conditions and may have different cost structures. The
Commission further notes that the rate comparison is based primarily on
the distance between the exchanges. The Commission is of the view that
the rate for a service should appropriately reflect the underlying costs
of providing the service and a reasonable return on capital investment.
The Commission considers that, in light of different market conditions
and potentially different cost structures of these IX routes, Call-Net's
rate comparison is not persuasive in this context for determining the
need for a Competitor service on this IX route. |
|
Conclusions
|
59. |
In light of the above, the Commission is of
the view that notwithstanding that Aliant Telecom is the major supplier
of IX digital transport facilities between Halifax and St. John's,
Aliant Telecom has not provided itself with an undue preference by
requiring competitors to pay retail rates or special facilities services
rates on this IX route. As such, the Commission considers that there is
no need to order the creation of a competitor tariff for IX digital
transport facilities at OC-3 and OC-12 rates between Halifax and St.
John's. Accordingly, the Commission denies Call-Net's
application. |
60. |
For the same reasons, the Commission also
denies Rogers' request to expand Call-Net's application to include DS-0
and DS-1 services, to reduce rates to all routes from Newfoundland to
neighbouring provinces, and to make the services available to all
telecommunications service providers other than interexchange carriers. |
|
Secretary General |
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This document is available in alternative
format upon request, and may also be examined in PDF
format or in HTML at the following Internet site: http://www.crtc.gc.ca
|