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Telecom Decision CRTC 2006-53
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Ottawa, 1 September 2006 |
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Reconsideration of Regulatory framework for voice communication
services using Internet Protocol
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Reference: 8663-C12-200605587
and 8663-C12-200402892 |
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In this Decision, the Commission
reaffirms the regulatory regime for local voice over Internet Protocol
services established in Regulatory framework for voice communication
services using Internet Protocol, Telecom Decision CRTC 2005-28,
12 May 2005, as amended by Telecom Decision CRTC 2005-28-1,
30 June 2005. |
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The Commission considers,
however, that based on evidence presented during this proceeding,
it would be appropriate to reassess the market share forbearance criterion
threshold of 25 percent for local exchange services set in Forbearance
from the regulation of retail local exchange services, Telecom
Decision CRTC 2006-15, 6 April 2006 (Decision
2006-15). In light of this determination,
the Commission considers that it would also be appropriate to reassess
the 20 percent market share loss threshold applicable to the transitional
measure related to the local winback rule that was established in
Decision 2006-15. |
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Accordingly, coincident
with this Decision, the Commission is issuing Proceeding to reassess
certain aspects of the local forbearance framework established in
Decision 2006-15, Telecom Public
Notice CRTC 2006-12,
1 September 2006. |
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The dissenting opinions
of Commissioners Cram, Langford, and Noël are attached. |
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Background
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The VoIP decision
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1. |
In Regulatory framework
for voice communication services using Internet Protocol, Telecom
Decision CRTC 2005-28, 12 May
2005, as amended by Telecom Decision CRTC 2005-28-1,
30 June 2005 (Decision 2005-28),
the Commission set out the details of the appropriate regulatory regime
applicable to the provision of voice over Internet Protocol (VoIP)
services. |
2. |
The Commission used the term
"VoIP services" to refer to voice communication services using
Internet Protocol (IP) that use telephone numbers that conform to the
North American Numbering Plan (NANP) and provide universal access to
and/or from the public switched telephone network (PSTN). The
Commission confirmed that peer-to-peer services, which are IP-enabled
voice communication services that do not connect to the PSTN and do
not generally use NANP-conforming telephone numbers, were not subject
to regulation. |
3. |
To the extent that VoIP
services provided subscribers with access to and/or from the PSTN and
the ability to make or receive calls that originated and terminated
within an exchange or local calling area as defined in the tariffs of
the incumbent local exchange carriers (ILECs), they were referred to
as local VoIP services. |
4. |
In Decision 2005-28,
the Commission found and confirmed that local VoIP services as defined
in that Decision were not retail Internet services and did not fall
within the scope of forbearance determinations made for existing retail
Internet services. The Commission determined that local VoIP services
were part of the same market as local exchange services, that it would
not be appropriate to forbear from the regulation of local VoIP services,
and that the regulatory framework governing local competition, set
out in Local competition, Telecom Decision CRTC 97-8,
1 May 1997 (Decision 97-8),
and subsequent determinations, applied to local VoIP services, except
as otherwise provided in Decision 2005-28. |
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The local forbearance decision
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5. |
In Forbearance from the
regulation of retail local exchange services, Telecom Decision
CRTC 2006-15, 6 April 2006 (Decision 2006-15),
the Commission established a framework for assessing applications
for forbearance pursuant to expedited procedures. Specifically, according
to the framework: |
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- the relevant product market comprises all local exchange
services, including VoIP services;
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- the relevant geographic market is the local forbearance region;
and
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- forbearance will be appropriate where an ILEC has lost at least
25 percent market share, demonstrated evidence of rivalrous
behaviour in the relevant market, met the competitor quality of
service indicators for the previous six months, put in place the
necessary competitor tariffs, and implemented competitor access to
its operational support systems.
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The Order in Council
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6. |
On 4 May 2006, Order in Council
P.C. 2006-305 (the Order in Council) was issued pursuant to subsections
12(1) and 12(5) of the Telecommunications Act (the Act), referring
Decision 2005-28 back to
the Commission for reconsideration. The Commission was directed to
complete its reconsideration of Decision 2005-28
within 120 days of the date of the Order in Council. |
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Process
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7. |
On 10 May 2006, the Commission
issued Reconsideration of Regulatory framework for voice communication
services using Internet Protocol, Telecom Decision CRTC 2005-28,
Telecom Public Notice CRTC 2006-6
(Public Notice 2006-6).
A copy of the Order in Council was appended to Public Notice 2006-6. |
8. |
In light of the Order in Council,
the Commission invited comments pertaining to the reconsideration
of Decision 2005-28, as well as
any other matters that might be pertinent to the regulatory framework
for VoIP services. Comments from parties were due on 5 June 2006,
and reply comments from parties were due on 15 June 2006. |
9. |
The Commission noted that
the record of the proceeding initiated by Regulatory framework
for voice communication services using Internet Protocol,
Telecom Public Notice CRTC 2004-2,
7 April 2004, as amended by Telecom Public Notice CRTC 2004-2-1,
22 July 2004, would form part of the record of the Public Notice 2006-6
proceeding. |
10. |
The Commission issued
interrogatories to a number of parties on 31 May 2006. Responses to
those interrogatories were to be filed by 15 June 2006. |
11. |
The Commission received
comments, reply comments, and/or responses to interrogatories from
Access Communications Co-operative Limited (Access Communications); a
combined submission from Aliant Telecom Inc. (Aliant Telecom),1
Bell Canada, Saskatchewan Telecommunications (SaskTel), and Société en
commandite Télébec (Télébec) (collectively, the Companies);2
ARCH Disability Law Centre; the British Columbia Public
Interest Advocacy Centre on behalf of the British Columbia Old Age
Pensioners' Organization et al.; the Canadian Cable Systems Alliance
Inc. (CCSA); the City of Calgary; the Coalition for Competitive
Telecommunications (the Coalition); a combined submission from Cogeco
Cable Inc. (Cogeco), Quebecor Media Inc. (QMI), and Rogers
Communications Inc. (RCI) (collectively, the Competitors);3
Comwave Telecom Inc.; Cybersurf Corp. and its subsidiaries
(collectively, Cybersurf); FCI Broadband, a division of
Futureway Communications Inc.; (FCI Broadband); James Bay Cree
Communications Society; l'Union des consommateurs; MTS Allstream Inc.
(MTS Allstream); Nortel; OneConnect; Primus Telecommunications Canada
Inc. (Primus); the Public Interest Advocacy Centre as counsel for the
Consumers' Association of Canada and the National Anti-Poverty
Organization (collectively, the Consumer Groups); the Quebec Coalition
of Internet Service Providers (QCISP); Rothschild & Co. on behalf of
RipNET Limited; Shaw Communications Inc. (Shaw); Shift Networks
Inc. (Shift); TELUS Communications Company (TCC); Vonage Canada Inc.
(Vonage); Yak Communications (Canada) Inc. (Yak); and the Yukon
Government. |
12. |
While the positions of the
interested parties have necessarily been summarized in this Decision,
the Commission has carefully reviewed and considered the submissions
of all parties. |
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Overview of issues raised in this proceeding
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13. |
The Companies, TCC, and the
Coalition requested that the Commission change its original
determination and forbear from the economic regulation of local VoIP
services. The remainder of the interested parties, which included
competitive local exchange carriers (CLECs), VoIP resellers,4
consumer organizations, and government bodies, among others, supported
maintaining the status quo. |
14. |
In Part A of this Decision,
the Commission sets out its determinations regarding its reconsideration
of Part III of Decision 2005-28
related to parties' forbearance requests. |
15. |
In Part B of this Decision,
the Commission sets out its determinations regarding its reconsideration
of certain issues arising from Part IV of Decision 2005-28
related to the VoIP regulatory framework. In particular, the Commission
reconsiders the issues raised by parties regarding local number portability
(LNP), reseller access to numbers, directory listings, equal access,
contribution, and the VoIP access condition. In addition, the Commission
considers a proposal for a new technical framework. |
16. |
In Part C of this Decision,
the Commission sets out its determinations regarding certain
information that was filed in confidence as part of this proceeding. |
17. |
Finally, the Commission sets
out its overall conclusion regarding its reconsideration of Decision
2005-28. |
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Part A: Reconsideration of forbearance requests
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Positions of parties
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18. |
With respect to the subject
of market definition, all parties that commented on this issue were of
the view that local VoIP services and circuit-switched local exchange
services were or could be considered to be in the same relevant
market. |
19. |
Shaw submitted that the
fundamental purpose of the two services was the same. It also
submitted that VoIP service was marketed and offered in the same
manner as local exchange service. It submitted, further, that they
were used in the same way and were purchased as substitutes or
replacements for one another. The CCSA and the Competitors noted that
there was widespread agreement that VoIP service was a close
substitute for traditional circuit-switched telephone service. The
Competitors submitted that, as a result, it was consistent with
economic and competition law principles to treat them in the same
manner for regulatory purposes. Several other parties agreed with this
view. |
20. |
The Competitors submitted
that in Decision 2006-15, the Commission
had conducted an extensive review of the state of competition in the
local exchange market in Canada, and that it had embraced principles
of analysis that were commonly used in economics and competition law. |
21. |
The Competitors further
submitted that until the Commission's tests for forbearance could be
satisfied, it was not appropriate to consider forbearance with respect
to VoIP services. They suggested that if VoIP hastened the loss of
significant market power (SMP), forbearance applications would follow;
if not, there was no justification for forbearance. The Competitors
also suggested that there was significant risk in granting premature
forbearance, since it might freeze competition at existing levels and
never permit it to reach levels sufficient to protect consumers from
the negative effects of ILEC market power. |
22. |
The Companies and TCC were
of the view that the Commission should forbear from regulating local
VoIP services pursuant to section 34 of the Act. The Companies noted
that section 34 of the Act referred to forbearance from a "service or
class of services." They submitted that simply because two services
were in the same market did not mean they had to be regulated in the
same manner. The Companies noted that mobile wireless services,
Internet services, and satellite telephone services were not subject
to the same regulatory regime as local exchange services, even though
they could be in the same market. |
23. |
TCC submitted that ILEC
residential and business access-independent VoIP services should be
forborne on a service-wide basis, while ILEC residential and business
access-dependent VoIP services should be forborne in those areas where
users had access to competing services provided over the network of at
least one other full facilities-based provider. |
24. |
The Companies and TCC noted
that the Commission had allowed for greater pricing flexibility for
local VoIP services in Bell Canada proposal for VoIP service pricing
in Ontario and Quebec, Telecom Decision CRTC 2005-62,
20 October 2005 and Bell Digital Voice Service, Telecom Decision
CRTC 2006-11, 9 March 2006 (Decision 2006-11),
without altering its finding that VoIP and local exchange services
were in the same market. |
25. |
TCC submitted that
forbearance under subsection 34(1) of the Act would be consistent with
the Telecommunications Policy Review Panel report (the TPR report)5
recommendation that new services be presumptively forborne. TCC also
submitted that local VoIP services should be forborne pursuant to
subsection 34(2) of the Act, since the facts supported a finding that
competition for ILEC local VoIP services was sufficient to protect the
interests of users. |
26. |
The Companies submitted that
they were not incumbents in the provision of local VoIP services or
Internet services, and that they had no SMP in relation to such
services. TCC also submitted that it lacked market power with respect
to the provision of local VoIP services. The Coalition suggested that
since there were many VoIP service providers and barriers to entry
were low, no VoIP service provider, including the ILECs, had SMP. |
27. |
TCC submitted that while
section 25 of the Act required that ILEC services be tariffed,
section 34 of the Act gave the Commission significant discretion to
maximize reliance on market forces to protect the interests of users.
It suggested that the Commission should use this discretion to let
market forces operate in the VoIP environment. |
28. |
The Companies noted that in
2005, Cogeco, RCI, Shaw, and Videotron Ltd. had together expanded
their VoIP footprint to over 50 percent of Canadian homes and had
reported having 460,000 VoIP customers among them. |
29. |
TCC noted that Shaw had
deployed VoIP in all major areas of British Columbia and Alberta, and
suggested that Shaw will have deployed VoIP across all of its systems
in Western Canada by the end of 2006 or early 2007. TCC submitted that
when the deployment was complete, Shaw would address 88 percent of
households in British Columbia and Alberta. TCC also submitted that
Shaw had approximately 150,000 subscribers to its digital phone
service and was enrolling another 2,500 to 3,000 per week. TCC
referred to a report prepared by its expert witness, Dr. Crandall,
which noted that RCI and Shaw had a combined market value of
US$30 billion, with increases in their stock prices of 135 and 64
percent, respectively. |
30. |
The Coalition was of the
view that there was no justification for regulation of local
VoIP services. It submitted that ILECs did not have the ability to
force customers to subscribe to their local VoIP services and to pay
higher than market prices to do so. The Coalition also submitted that
a significant number of the new local VoIP service providers were
large, well-funded organizations that had publicly stated that they
were in the market for the long haul and would not exit regardless of
what regulations were applied to ILEC VoIP services. |
31. |
The Coalition submitted that
in order to comply with the TPR report's conclusions on economic regulation,
the Commission should grant the ILECs the same level of forbearance
as had been provided to all other service providers in Decision
2005-28. |
32. |
The British Columbia Public
Interest Advocacy Centre on behalf of the British Columbia Old Age
Pensioners' Organization et al. submitted that VoIP technology had
finally provided a way for facilities-based competition to enter
the market and that the Commission should confirm its determinations
in Decision 2005-28. |
33. |
L'Union des consommateurs
suggested that the conclusion reached by the Commission to make local
VoIP services part of the same relevant market as wireline local
services and the rationale used to arrive at this conclusion were
still valid. |
34. |
The Consumer Groups
submitted that the Commission's analysis of market power appeared to
be consistent with the TPR report's recommended approach. The Consumer
Groups also submitted that in accepting that VoIP was a functional
equivalent to local exchange services for the purposes of market
share, the decision to apply economic regulation to ILECs that
provided VoIP services was consistent with the Commission's finding of
SMP in the local services market. The Consumer Groups further
submitted that the approach of the Commission in Decision 2005-28 was
consistent with increased reliance on market forces and a perspective
that attempts to address the least intrusive path towards competition
in the presence of SMP. |
35. |
Access Communications, the
Competitors, and Shaw noted that the TPR report recommended that
economic regulation be maintained in those markets where SMP was found
to exist. Access Communications submitted that it was apparent that
the ILECs were dominant in the local telephony services market and,
therefore, must continue to be regulated in a way that fostered the
development of facilities-based competition in that market. |
36. |
MTS Allstream submitted that
TCC had offered no means for the Commission to distinguish between the
various incarnations of the services for regulatory/forbearance
purposes. |
37. |
MTS Allstream submitted that
the ILECs' approach to market power analysis, which dismissed market
definition as unnecessary or irrelevant in the case of local VoIP
services, must be rejected. MTS Allstream noted that the TPR report
acknowledged that market definition in testing for SMP was consistent
with standard competition law practices, and the Competitors noted
that this approach to market power assessment was sanctioned by the
Competition Bureau. |
38. |
MTS Allstream was of the view
that there were no significant differences between the TPR report's
recommended framework for determining when deregulation or forbearance
from price regulation should take place and the framework employed
by the Commission in Decisions 2005-28
and 2006-15. |
39. |
Shaw submitted that once one
accepted that local VoIP services and local exchange services were in
the same market, there was no basis for forbearance under section 34
of the Act as long as the ILECs possessed SMP. |
40. |
The Yukon Government submitted
that there was no new evidence to suggest that the Commission's determination
in Decision 2005-28 was incorrect.
It suggested that the Commission's approach in Decision 2005-28
was not an extension of regulation, nor a retrograde step on the path
to deregulation through reliance on market forces. It submitted that,
instead, it was a prudent exercise of the responsibility to balance
the interests of various economic and social constituencies, and,
given the Commission's track record, by no means precluded future
relaxation of regulatory requirements on VoIP. |
41. |
The Companies submitted that
there was no need for economic regulatory distinctions between VoIP
categories. They noted that network operators were combining IP
technology with their facilities according to their network
topologies, with some providers using combinations of existing
transmission facilities and, in some cases, circuit-switching
equipment in conjunction with IP technology. They submitted that the
Commission should promote the deployment of network innovations by
allowing market forces to determine the nature and roll-out of IP
technology-related innovations. |
42. |
The Competitors and Shaw
submitted that the regulatory regime for local telephone service in
Canada had been established to apply to this service in a
competitively and technologically neutral manner. |
43. |
The Competitors submitted
that VoIP was an exciting new technology that was enabling new entry
into the local telephone market and that it would erode the ILECs'
dominance in the local market. They also submitted, however, that the
technology should not define the service. The Competitors and Primus
shared the view that the issue of whether or not to regulate a service
depended on whether a carrier had SMP in a relevant market, not on the
underlying technology. |
44. |
MTS Allstream submitted that
technological neutrality ensured that services that were functionally
similar were treated the same, and that no service or service provider
was accorded a regulatory advantage simply because it used a different
technology to provision its services. MTS Allstream also submitted
that the TPR report clearly stated that economic regulation should be
applied symmetrically to all service providers based on whether they
had SMP and regardless of the technology they used. |
45. |
Shaw submitted that the
principle of technological neutrality was an important part of the
Canadian regulatory framework that encouraged use of least-cost
technology to spur innovation, competition, and customer choice. The
company suggested that in an environment in which technologies no
longer defined services, technology no longer formed an appropriate
basis for distinct regulatory regimes. Shaw submitted that the
defining characteristic of local VoIP services was not the technology
being used, but the nature of the service being provided to consumers.
It also submitted that VoIP could be dressed up to look like
circuit-switched local services and circuit-switched local services
could be dressed up to look like VoIP. |
46. |
Shaw submitted that local
VoIP services were not the same as IP technology. It suggested that
all carriers were deploying IP technology to some extent in their
networks in order to reduce costs and improve efficiency, and that
this should not be equated with the provision of VoIP services. |
47. |
In reply, the Companies
submitted that the principle of technological neutrality should not
replace the analysis the Commission performs when determining whether
two services should be regulated in the same manner. They submitted,
further, that the fact that the service in question might have
functional similarities to another service that the Commission
regulated should be irrelevant in relation to the Commission's
decision to forbear. |
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Commission's analysis and determinations
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Introduction
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48. |
In Decision 2005-28,
the Commission denied ILEC requests for forbearance from the regulation
of local VoIP services. The Commission determined that local VoIP
services should be regulated as local exchange services, and that
the regulatory framework governing local competition as set out
in Decision 97-8 and subsequent determinations
applied to local VoIP service providers, except as otherwise
provided in Decision 2005-28. |
49. |
Pursuant to the Order in
Council, the Commission has reconsidered these determinations. |
50. |
The Commission stated in Decision
2005-28 that in considering the
requests for forbearance, it must determine that forbearance
would be consistent with section 34 of the Act. In applying that section
in Decision 2005-28, the Commission
used two separate approaches: one within the framework set out in
Review of regulatory framework, Telecom Decision CRTC 94-19,
16 September 1994 (Decision 94-19),
and one outside of that framework. |
51. |
The first approach used an
analytical framework based on principles commonly used in economics
and competition policy. Under this approach, referred to in Decision
2005-28 as the Decision 94-19
framework, the determination of whether or not to forbear from regulating
a service or class of services was based on a determination of the
relevant market in which the service(s) is (are) offered and on whether
the ILECs have market power in that market. |
52. |
The second approach considered
the arguments presented by parties seeking forbearance under section 34
of the Act that were not necessarily advanced within the Decision
94-19 framework. |
53. |
The Commission notes that
all parties to this proceeding that addressed this matter were in
favour of the Commission using one or both of these approaches. |
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Decision 94-19 approach
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54. |
Decision 94-19
sets out a three-step analysis for considering forbearance applications. |
55. |
The first step in assessing
competitiveness is identifying the relevant market. The relevant
market is the smallest group of products and geographic area in which
a firm with market power can profitably impose a sustainable price
increase. The identification of the relevant market is based on the
substitutability of the services in question. |
56. |
The second step involves
determining whether a firm has market power with respect to the
relevant market. Market power can be demonstrated by the ability of a
firm to raise or maintain prices above those that would prevail in a
competitive market. |
57. |
The third step is to
determine whether, and to what extent, forbearance should be granted. |
58. |
With respect to the substitutability
of the services in question, the Commission notes that in Decision
2005-28 it identified four factors
that would assist in determining whether or not local VoIP services
met the same general user requirements as circuit-switched local exchange
services. These factors were: the fundamental purpose of the services;
the manner in which local VoIP services were marketed and offered;
whether or not consumers perceived, or could be expected to perceive,
local VoIP services as close substitutes for circuit-switched
local exchange services; and whether or not local VoIP services
and circuit-switched local exchange services were, or would be, purchased
as replacements for one another. |
59. |
After considering these four
factors based on the record of the proceeding leading to Decision 2005-28,
the Commission concluded that local VoIP services satisfied, or would
satisfy, the same general requirements of customers of circuit-switched
local exchange services. The Commission therefore found that local
VoIP services were close substitutes for circuit-switched local exchange
services and, as a result, that they were part of the same relevant
market as circuit-switched services. |
60. |
As the ILECs were dominant
in the local exchange services market, the Commission determined in
Decision 2005-28 that it would
not be appropriate to forbear from regulating local VoIP services
offered by ILECs. |
61. |
The Commission notes that
service descriptions provided in responses to interrogatories in this
proceeding indicate that many local VoIP services are virtually the
same as circuit-switched local exchange services with respect to
functionality and price. Furthermore, the Commission notes that local
VoIP services are being marketed as an alternative for
circuit-switched local exchange services. |
62. |
The Commission notes that
quantitative information filed in response to interrogatories shows
that a significantly high proportion of VoIP customers have ported
their local numbers to their VoIP services. The Commission considers
that this indicates that a high proportion of VoIP customers are using
local VoIP services as a replacement for local exchange services. The
Commission also notes that the cost to consumers of switching services
or suppliers is low. |
63. |
The following table shows
the percentage of customers who subscribed to non-ILEC VoIP service
and who ported their telephone number.6 |
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2004 |
2005 |
May 2006 |
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Percentage of numbers
ported |
25.9% |
55.7% |
67.6% |
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64. |
The Commission considers
that customers, in general, perceive circuit-switched local exchange
services and local VoIP services to be interchangeable, and a large
proportion are purchasing the latter as replacements for the former.
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65. |
Given the evidence in this
proceeding, the Commission finds that local VoIP services and
circuit-switched local exchange services are sufficiently close
substitutes that they continue to form part of the same relevant
market. |
66. |
The Commission notes that
all parties to this proceeding who commented on the issue agreed that
local VoIP services and circuit-switched local exchange services are
or could be considered to be part of the same relevant market. |
67. |
The Commission notes that
pursuant to the Decision 94-19 approach,
given its finding that local VoIP services and circuit-switched local
exchange services continue to form part of the same relevant market,
market power must be examined with regard to the entire local exchange
services market. The Commission also notes, however, that this exercise
is beyond the scope of this reconsideration. Indeed, the examination
of market power with respect to local exchange services was the focus
of Decision 2006-15, in which the Commission
established a framework for assessing forbearance applications. |
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Separate section 34 analysis
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68. |
In Decision 2005-28,
the Commission determined that it was inappropriate to forbear from
regulating VoIP services under section 34 of the Act. |
69. |
In addition, the Commission
stated: |
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The Commission considers that if forbearance were granted
prematurely, the ILECs' ability and incentive to engage in the
combination of targeted below-cost pricing of local VoIP services,
as well as bundling strategies, prior to the entry and roll-out of
other facilities-based competitors, would have a material negative
impact on the potential for sustainable competition in the provision
of local VoIP services, and therefore on the protection of the
interests of users. These strategies would unduly impair the
competitive abilities of all potential market participants, and not
just those market participants who depend upon the ILECs for
required services and facilities.
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70. |
In the present proceeding,
the ILECs' principal argument was that although VoIP is or could be
considered to be in the local exchange services market, under section
34 of the Act the Commission could treat VoIP as a separate service or
class of services and could regulate that class differently, or
forbear from regulating it, even as other local exchange services
remained regulated. |
71. |
In support of that argument,
the Companies argued that mobile wireless, Internet, and satellite
telephone services were forborne even though they could be part of the
same market. They also argued that the Commission had already
subjected VoIP services to different regulatory treatment even though
they were part of the same market as local exchange services. The
Commission notes that the ILECs argued that there were, among other
things, low barriers to entry and sufficient competition in the VoIP
market. |
72. |
The Commission notes that to
date it has not considered mobile wireless, Internet, and satellite
telephone services to be part of the same relevant market as wireline
local exchange service and has consistently treated these services,
for regulatory purposes, as part of separate markets. Indeed, the
Commission's determinations to forbear from regulating these services
were necessarily based on the assumption that they were not part of
the local exchange service market at the time those determinations
were made. |
73. |
The Commission also notes
that in the case of Bell Digital Voice (BDV) and similar services, it
approved different tariffing treatment based on economic analysis of
those offerings and their different underlying costs. |
74. |
With respect to the
suggestion that it treat local VoIP services differently from other
local exchange services for the purpose of forbearance, the Commission
notes that IP is being integrated into telecommunications networks
gradually, with different services relying on varying proportions of
circuit-switched and VoIP technology. In the Commission's view, to
define a service or a class of services based on the use of a
particular technology, such as IP, which could be implemented wholly
or partially in a network, would lead to disputes regarding whether
each service made sufficient use of IP technology to be considered
part of the service or class of services that qualified for
forbearance. |
75. |
The Commission considers
that such disputes would result in a significant ongoing regulatory
burden for both the Commission and interested parties and, in the end,
would require the Commission to be overly prescriptive in determining
precisely how technology was to be implemented in order for the
service to be eligible for forbearance. |
76. |
Furthermore, the Commission
considers that the introduction of IP technology to the local exchange
services market represents the latest in a series of network
innovations in an increasingly competitive and dynamic market. The
Commission also considers that if it were to forbear from regulating
either access-independent or access-dependent VoIP service, or both,
based on the particular implementation of IP technology, any such
determination would provide artificial incentives for the ILECs to
invest in that technology, which could in turn distort the competitive
market. The Commission considers that it is more consistent with the
policy objectives set out in section 7 of the Act, including the one
in paragraph 7(f),7
to maintain a technologically neutral approach to forbearance, and to
focus not on the underlying technologies employed to provide
telecommunications services but rather on the services themselves. |
77. |
The Commission notes that
various parties referred to the regulatory treatment of VoIP services
in other countries in support of their arguments regarding forbearance
with respect to local VoIP services in Canada. The Commission notes
that market conditions and statutory obligations of regulatory
authorities vary widely around the world, and therefore it is
impossible to draw meaningful parallels to the market conditions and
statutory obligations existing in the Canadian market. The Commission
considers that its determinations in this Decision are consistent with
its statutory obligations and with current conditions in the Canadian
local exchange services market. |
|
Conclusion
|
78. |
In light of all the above,
the Commission reaffirms its finding that it would not be appropriate
to forbear from regulating local VoIP services without an examination
of the entire relevant market for local exchange services. |
|
Market share loss criterion in Decision 2006-15
|
79. |
The Commission notes that
the record of this proceeding demonstrates that competition in the
residential local services market has developed rapidly in the last
year and a half. Information supplied in responses to interrogatories
in this proceeding by non-ILEC providers of local VoIP services
indicates that total revenues associated with their residential local
VoIP services in Canada were $3.5 million at 31 December 2004, had
risen to $93.2 million by 31 May 2006, and are forecast to reach $323
million by year-end 2006 and $597 million by year-end 2007. |
80. |
In addition, the Commission
notes that low churn rates associated with new services can be an
indicator of customer willingness to retain those new services. The
Commission considers that average churn rates for VoIP services in
2005 and 2006 of 1.4 percent and 1.3 percent, respectively, indicate
that a very large proportion of subscribers to VoIP services are
retaining their new services and their service provider. |
|
|
Non-ILEC VoIP Connections, Revenue, and Average
Monthly Churn8 |
|
|
|
|
2004 (actual) |
2005 (actual) |
May 2006 (actual year-to-date) |
2006 (forecast) |
2007 (forecast) |
|
|
|
Connections
(000) (year end) |
29.7 |
418.8 |
729.4 |
1,075.1 |
1,763.1 |
|
|
|
Revenue ($M) |
3.5 |
58.8 |
93.2 |
322.5 |
596.5 |
|
|
|
Average
monthly churn |
4.2% |
1.4% |
1.3% |
NA |
NA |
|
81. |
The record of the proceeding
resulting in Decision 2006-15 was focused
largely on year-end 2004 figures. Based on those figures, the Commission
set a 25 percent threshold for ILEC market share loss as one of the
criteria for forbearance. The Commission indicated in that Decision
that setting this threshold was not a precise scientific exercise,
but one that sought to balance the need for competition in a relevant
market to be sustainable and the desire to ensure that customers reap
the benefits of competition in that market without undue delay. |
82. |
The Commission considers that
the data provided in this proceeding, which included actuals up to
May 2006, indicate that growth in residential local VoIP services
is resulting in significantly stronger competition in the local exchange
services market. Furthermore, the Commission notes that a large proportion
of the competitive share of the local exchange services market is
facilities-based. The Commission considers, therefore, that local
exchange competition in the residential market is more deeply rooted
than it had appeared to be based on the record of the proceeding that
led to Decision 2006-15. Given these changes
in market conditions, the Commission considers that it would be appropriate
to reassess whether or not the market share forbearance criterion
threshold of 25 percent with respect to residential services set out
in Decision 2006-15 continues to strike
the appropriate balance between the competing interests identified
in that Decision. |
83. |
While the evidence in this
proceeding has focused substantially on the residential local services
market, the Commission notes that competition in the business services
market has also continued to grow and might manifest similar
characteristics. The Commission considers that it would therefore also
be appropriate to reconsider the 25 percent market share forbearance
criterion with respect to business services. |
84. |
In Decision 2006-15,
the Commission stated that it was prepared to consider applications
from an ILEC requesting the removal of the local winback rule9
in a relevant market when the applicant ILEC could, among other things,
demonstrate that it had lost 20 percent of its market share in that
relevant market. In light of its determination to reassess the 25
percent market share forbearance criterion, the Commission considers
that it would also be appropriate to reassess the 20 percent market
share loss threshold applicable to the above transitional measure
related to the local winback rule established in Decision 2006-15. |
85. |
Accordingly, coincident with
this Decision, the Commission is issuing Proceeding to reassess
certain aspects of the local forbearance framework established in
Decision 2006-15, Telecom Public Notice
CRTC 2006-12 to reassess
these aspects of Decision 2006-15. |
|
Part B: Reconsideration of VoIP regulatory framework
|
86. |
In Part IV of Decision 2005-28,
the Commission reviewed and stated its determinations regarding a
number of issues related to the regulation of local VoIP services.
In this proceeding, a number of these issues were raised by different
parties for reconsideration. Positions of parties regarding LNP, reseller
access to NANP numbers, directory listings, and equal access are grouped
together to better reflect the parties' comments; however, the Commission
reconsiders these issues separately. Subsequently, the Commission
reconsiders the issues of contribution and a VoIP access condition,
and considers a proposal for a new technical framework. |
|
LNP, reseller access to NANP numbers, directory listings, and
equal access
|
|
Background
|
87. |
In Decision 2005-28,
the Commission made the following determinations: |
|
- that the Decision 97-8 requirement
that all local exchange carriers (LECs) implement LNP would also
apply to LECs providing local VoIP services;
|
|
- that local VoIP resellers, like resellers of circuit-switched
local services, were able to obtain numbers and LNP from any number
of LECs in the marketplace and were not unduly constrained by the
lack of direct access to either; and given the Commission's
determination that local VoIP services should be regulated as local
exchange services, the existing rules with respect to access to
numbers and LNP should apply equally to local VoIP service
resellers;
|
|
- that the existing directory listings requirements for ILECs,
CLECs, and resellers would also apply when they provided local
VoIP services, and that directory listings should appear in the
local directory where calls to and/or from that number were local
calls, regardless of the geographic location of the customer's
service address; and
|
|
- that the existing equal access obligation would apply to all
LECs providing VoIP services.
|
|
Positions of parties
|
88. |
The Companies requested that
the Commission remove the requirements associated with equal access
for VoIP services, LNP for secondary numbers, and directory listings
that had been imposed on local VoIP services provided by LECs in Decision
2005-28. |
89. |
The Companies submitted that
virtually all VoIP providers offered bundles that included long distance,
and that by subscribing to a bundle the customer chose their long
distance provider – effectively removing the incentive for customers
to use equal access. They also noted that Bell Canada had submitted
in the proceeding leading to Decision 2006-11
that providing equal access for access-independent VoIP service would
require Bell Canada to make substantial and costly changes to the
network architecture used to provide the service. |
90. |
The Companies were of the
view that, since there was no incentive for customers of
access-independent VoIP services to make use of equal access, there
was no market requirement for that functionality. They suggested that
if demand for equal access arose from customers, market forces would
ensure it became available. The Companies noted that an application
from the Canadian Cable Telecommunications Association (CCTA)10
was currently before the Commission, requesting that the CCTA's
smaller members be permitted to offer VoIP services without having to
support equal access. |
91. |
The Companies submitted that
the availability of LNP for local VoIP service secondary numbers
should be driven by market forces. They also submitted that LNP of
secondary numbers added costs and complexity to the design of a VoIP
service and, further, that the Commission's requirement for secondary
number LNP would reduce the availability of secondary numbers. |
92. |
The Companies were of the
view that the choice of directory in which a number would be listed
should be driven by market forces, not by regulation. They submitted
that some customers might prefer to have their primary number listed
in the directory associated with their physical location, even though
this number might be associated with another location. The Companies
noted that a directory listing was included with wireline service,
while the default listing for wireless service was an unlisted number.
They were of the view that VoIP customers should be able to obtain a
listing in the directory associated with their location instead of the
location associated with their telephone number, as they were able to
in the case of wireless services. |
93. |
The Companies submitted that
a customer with several telephone numbers could be listed in many
directories, and that establishing listings in several directories was
unnecessarily costly for the service provider and the local ILEC. |
94. |
Shift submitted that local
VoIP service providers registered as resellers should be granted
direct access to NANP numbers and should be subject to LNP
regulations. Shift also submitted that lack of direct access to NANP
numbers and the LNP database seriously eroded resellers' ability to
market their products by reinforcing consumer perception that the
ILECs ultimately controlled telephony resources. |
|
Reply comments
|
95. |
Cybersurf and MTS Allstream
submitted that the Commission should reject the Companies' request to
remove the requirements associated with equal access for VoIP
services, LNP for secondary numbers, and directory listings of local
VoIP services. |
96. |
Cybersurf submitted that
equal access, LNP, and directory listings of VoIP numbers constituted
important access requirements, and that the removal of these
requirements would be a major setback for competition. The company
also submitted that there were markets in which it could not provide
its VoIP service at all, or the nature of the service was limited
because of the unavailability of local numbers, LNP, or access to ALI
(Automatic Location Identification) databases for the purpose of
providing enhanced 9-1-1 service. Cybersurf submitted, further, that
it could only obtain these functions from CLECs in those geographic
areas in which CLECs operated, since CLECs were much more willing to
enter into arrangements to provide these functions and features using
their arrangements with ILECs. |
97. |
MTS Allstream was of the view
that the implementation of equal access and LNP for a local VoIP service
was no more complex than for circuit-switched local services and,
if anything, the associated costs might be considerably less. It submitted
that the cost of establishing directory listings was minimal. MTS
Allstream noted that Decision 2005-28
indicated that the Decision 97-8
obligations should apply equally to LECs providing local VoIP services
and that to do otherwise would result in the creation of artificial
distinctions between equivalent local services based purely on technological
considerations. |
98. |
Yak submitted that the Companies'
request to remove the equal access requirement should be denied, and
that the Companies had not offered any new evidence or arguments in
favour of removing it. Yak also submitted that the Commission should
affirm the directive in Decision 2006-11
that Bell Canada must implement equal access capabilities for its
BDV Lite service within one year. |
99. |
Yak submitted, further, that
in addition to enabling a local telephone service customer to select a
preferred interexchange carrier long distance provider, equal access
provided dial-around service, which enabled any local telephone
service customer to dial a number to access the network of a long
distance service provider other than the customer's preferred
interexchange carrier. Yak argued that these features were absolutely
essential in order for it to provide long distance services. The
company also argued that market forces and competitors' negotiating
power had never been sufficient in Canada to compel incumbent
telephone companies to offer equal access to competitors. |
100. |
Primus submitted that equal
access and LNP were key features of the local competitive market, and
that the Companies' proposal to remove the requirement for equal
access and their proposed limits on LNP would increase the ILECs'
ability to stifle competition. |
101. |
Vonage submitted that the
Companies had not offered any evidence in support of their request to
eliminate the availability of LNP for secondary numbers. It also
submitted that from the outset of local competition, the inability to
port a number had been recognized as a fundamental barrier to entry.
Vonage requested that the Companies' proposal with respect to removing
the requirement for LNP and directory listings be rejected. |
|
Commission's analysis and determinations
|
|
LNP |
102. |
Subsequent to its ruling with
respect to LNP for VoIP services in Decision 2005-28,
the Commission examined this issue in the context of Bell Canada's
access-independent BDV Lite service in the proceeding leading to
Bell Digital Voice Lite service, Telecom Order CRTC 2005-397,
2 December 2005. |
103. |
The Commission considers
that the Companies' comments in the current proceeding have not
provided any new evidence on this issue. The Commission notes that,
with respect to providing LNP for secondary numbers for
access-independent VoIP services, the Companies have not provided any
quantitative information regarding customer demand or any specific
additional evidence regarding difficulties and costs. The Commission
further notes that no other LEC in this proceeding stated that the
provision of LNP would be problematic. |
104. |
The Commission considers that
eliminating the requirement for LECs to provide LNP for LEC VoIP services
would treat some providers of local exchange services in a preferential
way based solely on the underlying technology that is used to provide
that service. The Commission remains of the view, expressed in Decisions
97-8 and 2005-28,
that it is necessary to impose equivalent LNP obligations on all LECs,
regardless of the technology used. |
105. |
Accordingly, the Commission
denies the Companies' request for removal of the requirements
for LNP for secondary numbers associated with local VoIP services. |
|
Reseller
access to NANP numbers |
106. |
With respect to Shift's request
that resellers be granted direct access to NANP numbers and be subject
to LNP requirements, the Commission considers that Shift has not demonstrated
that circumstances have changed materially since the issuance of Decision 2005-28.
The Commission considers that its determinations in Decision 2005-28
remain appropriate and, therefore, the current rules regarding access
to NANP numbers established in Decision 97-8
should continue to apply. |
107. |
Accordingly, the Commission
denies Shift's request that VoIP service providers registered
as resellers be granted direct access to NANP numbers and be subject
to LNP requirements. |
|
Directory
listings |
108. |
Under the current rules for
directory listings, a telephone company lists telephone numbers in the
directory associated with that number's exchange, and customers can
choose to not have their numbers listed. |
109. |
The Commission considers
that the current rules for directory listings remain appropriate for
VoIP services, since the purpose of a VoIP secondary number is often
for the customer to have a local presence in another market. The
Commission further considers that customers often will have their VoIP
secondary numbers listed in the directory associated with that
number's exchange, customers can choose to not have their secondary
number listed, and service providers may offer customers the choice of
having their secondary numbers listed elsewhere, where there is
sufficient demand. |
110. |
Accordingly, the Commission
denies the Companies' request to remove the requirements
associated with directory listings imposed on local VoIP services
provided by LECs. |
|
Equal
access |
111. |
Subsequent to Decision 2005-28,
the Commission examined the issue of equal access for VoIP services
in the proceeding leading to Decision 2006-11.
In Decision 2006-11, the Commission reiterated
its concern regarding the possibility of a LEC conferring undue or
unreasonable preference with respect to access to its networks. It
considered that consumers should continue to have options by being
able to select interexchange carriers when subscribing to a VoIP service
from a LEC. As a result, the Commission considered that Bell Canada
should implement equal access capabilities for BDV Lite service within
one year. |
112. |
The Commission considers
that the Companies have not provided any specific additional evidence
regarding the difficulties and costs associated with the provision of
equal access for access-independent VoIP services. |
113. |
The Commission notes that no
other LEC in this proceeding stated that the provision of equal access
would be problematic. The Commission further notes that MTS Allstream
submitted that provision of equal access was no more difficult for
local VoIP service than it was for circuit-switched local services. |
114. |
The Commission considers that
eliminating the equal access requirement for LECs in relation to the
provision of VoIP services would result in artificial distinctions
based on technology. The Commission remains of the view, expressed
in Decisions 97-8 and 2005-28,
that it is necessary to impose equivalent equal access obligations
on all LECs, regardless of the technology used. |
115. |
Accordingly, the Commission
denies the Companies' request to remove the requirement that
LECs providing local VoIP services must provide equal access. |
|
Contribution issues raised by SaskTel
|
|
Background
|
116. |
In Decision 2005-28,
the Commission determined that residential local VoIP service providers
were eligible to receive a subsidy from the National Contribution
Fund (NCF) if they provided both the underlying access and local service
components, and met all the other criteria established by the Commission
in order to be eligible for a subsidy. The Commission also determined
that residential local VoIP service providers would receive the same
subsidy amount per residential network access service (NAS) that was
being paid to LECs providing residential local service in high-cost
serving areas (HCSAs) using circuit-switched technology. |
117. |
In a letter dated 13 October
2005, SaskTel requested clarification regarding its proposal that the
physical location of the VoIP access, not the location associated with
the telephone number, be used to establish the amount of the subsidy
entitlement. In a letter dated 1 May 2006, Commission staff provided
its view that both the telephone number and the physical location of
the subscriber's network access should be used to make this
determination, and that both the telephone number and the physical
access must be associated with the same ILEC wire centre in order for
a residential local VoIP service to be eligible for a subsidy. |
|
Positions of parties
|
118. |
SaskTel submitted that the
VoIP contribution regime should require a VoIP CLEC to provide
residential local VoIP services that met the Basic Service Objective
in the entire ILEC exchange or wire centre coverage area in order to
be eligible for a subsidy from the NCF. SaskTel submitted that if a
local VoIP service provider only offered service in the urban areas of
an HCSA exchange, the current subsidy per residential NAS amount would
overcompensate the service provider, since the costs to serve the
urban areas of an HCSA exchange were significantly less than the
average cost to serve the entire exchange. |
119. |
SaskTel also submitted that
the Commission should reject the Commission staff opinion provided in
the 1 May 2006 letter and should rule that the amount of subsidy to be
received by the VoIP service provider be determined based upon the
location where an access was situated, irrespective of the location
normally associated with the telephone number. |
120. |
In SaskTel's view, one
feature that made many VoIP services attractive to customers was the
ability to eliminate the traditional association of telephone number
and physical location. SaskTel submitted that endorsement of the
Commission staff opinion could lead VoIP service providers to require
residential customers in HCSAs to obtain a primary telephone number
associated with the ILEC wire centre in which they were physically
located, thus denying this subset of residential customers one of the
many innovative service features that VoIP technology would normally
make available to them. SaskTel suggested that such an outcome would
be a direct contradiction of the objectives set out in paragraphs 7(f)
and 7(g) of the Act. |
|
Reply comments
|
121. |
With respect to SaskTel's
first request, MTS Allstream noted that the current subsidy mechanism
had been established in Decision 97-8,
not Decision 2005-28, and submitted
that SaskTel's request was therefore outside the scope of the present
proceeding. MTS Allstream also submitted that the current subsidy
mechanism had never been intended to be recalibrated on a competitor-by-competitor
basis, and that the subsidy mechanism as it currently stood was technologically
neutral. |
122. |
With respect to SaskTel's
second request, MTS Allstream submitted that the subsidy eligibility
criteria for local VoIP services provided in the staff opinion were
equivalent to those established for circuit-switched local services,
and that, as a consequence, the subsidy was provided on a
technology-neutral basis. MTS Allstream noted that under SaskTel's
proposal, a local VoIP service provider that provided a local VoIP
service and the underlying network access to a residential customer in
an HCSA could be eligible several times over for HCSA subsidies – for
each primary number and for each secondary number provided within the
ILEC HCSA exchange where the access was physically located, and for
each "virtual number" located in a foreign exchange that was provided
to the same residential customer. |
123. |
Access Communications
submitted that SaskTel's proposals would hinder the development of
competition in HCSAs in Saskatchewan. |
|
Commission's analysis and determinations
|
124. |
The Commission notes that
in Decision 97-8 it did not impose
either a requirement for CLECs to serve every NAS within a wire centre,
or a requirement for them to serve every NAS in the entire ILEC exchange,
in order to be eligible to receive a subsidy. The Commission further
notes that the issue raised by SaskTel regarding the costs to serve
the urban areas of an HCSA exchange relative to the average cost to
serve the entire exchange for local VoIP service providers is no different
than for non-VoIP CLECs. The Commission considers that SaskTel's request,
if approved, would result in a subsidy mechanism that would not be
technologically neutral. The Commission notes that modification of
the subsidy mechanism for non-VoIP service providers is beyond the
scope of this proceeding. |
125. |
Accordingly, the Commission
denies SaskTel's request that the contribution regime require a
VoIP CLEC to provide service in the entire ILEC exchange or wire
centre coverage area in order to be entitled to receive a subsidy. |
126. |
With respect to SaskTel's
second request, the Commission notes that customers of
circuit-switched local voice services receive access to both the
network and the local service – a component of which is the local
telephone number – and that the determination of the HCSA band is
based on both the physical location of the access and the location
associated with the telephone number. The Commission further notes
that the amount of subsidy per residential NAS varies by HCSA band. |
127. |
The Commission considers
that the determination of the HCSA band associated with a given
residential local VoIP service should be based upon both the
subscriber's telephone number and the physical location of the
subscriber's network access component. In addition, given that there
are instances in which wire centres in HCSAs may form part of a local
calling area that includes wire centres that are not in an HCSA, both
the telephone number and the physical access must be associated with
the same ILEC wire centre in order for a residential local VoIP service
to be eligible to receive a subsidy. |
128. |
Accordingly, the Commission
denies SaskTel's request that the physical location of the
VoIP access, not the location associated with the telephone number, be
used to establish the amount of the subsidy entitlement. The
Commission determines that both the telephone number and the physical
access must be associated with the same ILEC wire centre in order for
a residential local VoIP service to be eligible for a subsidy. |
|
VoIP access condition
|
|
Positions of parties
|
129. |
Vonage and Cybersurf
submitted that the Commission should re-examine the need for an access
condition that would prohibit a Canadian carrier from restricting its
broadband customers from dealing with an alternative service provider
of the customer's choice. Vonage cited the Part VII application filed
by Cybersurf, dated 4 November 2005 (Cybersurf's Part VII
application). Vonage noted that the TPR report called for this type of
condition, in the absence of a provision preventing unjust
discrimination pursuant to subsection 27(2) of the Act. |
130. |
TCC submitted that the issue
of access conditions in favour of access-independent local
VoIP service providers had been raised, but that no party had alleged
any problems in Canada. TCC further submitted that creating an access
condition for access-independent VoIP providers with no evidence to
justify its adoption would be contrary to the provisions of paragraph
7(f) of the Act. |
131. |
The Companies submitted that
until the Act was amended, subsection 27(2) of the Act remained
the appropriate mechanism for resolving access disputes. |
|
Commission's analysis and determinations
|
132. |
In Decision 2005-28,
the Commission considered that it could rely on subsection 27(2)
of the Act, where appropriate, to prohibit a Canadian carrier from
restricting its broadband customers from dealing with an alternative
service provider of the customer's choice. The Commission also considered
that any such issues could be addressed on a case-by-case basis using
expedited procedures and denied parties' requests for the imposition
of an access condition. |
133. |
The Commission notes that
the only specific complaint related to access conditions identified in
the current proceeding is Cybersurf's Part VII application. The
Commission considers that under the Act, the current mechanism remains
appropriate for resolving access disputes. |
134. |
Accordingly, the Commission
denies the requests of Vonage and Cybersurf to re-examine the
need for an access condition at this time. |
|
QCISP-proposed technical framework
|
135. |
QCISP proposed a framework,
involving 11 technical components, to provide greater flexibility for
the provision of local services over retail Internet services or wide
area networking services. |
136. |
In Decision 2005-28
the Commission ruled that the CRTC Interconnection Steering Committee
(CISC) was the appropriate venue to resolve technical issues pertaining
to the provision of VoIP services. Subsequent to that Decision, CISC
working groups analyzed various VoIP-related technical issues and
have provided reports to the Commission. The Commission notes that
QCISP has been an active participant in these working groups. |
137. |
In IP-to-IP interconnection
– Follow-up to Decision 2005-28,
Telecom Decision CRTC 2006-13, 16
March 2006, the Commission approved a CISC consensus report on IP-to-IP
interconnection interface guidelines. The report also indicated that
CISC planned further consideration of technical documentation on IP-to-IP
interconnection guidelines produced by various standards-writing bodies
and other organizations, in order to provide additional guidelines
for IP-to-IP interconnection. |
138. |
Accordingly, the Commission
concludes that the technical issues raised by QCISP in this proceeding
should continue to be resolved in CISC working groups. |
|
Part C: Determinations regarding information filed in confidence
|
|
Introduction
|
139. |
In letters dated 26 July and
10 August 2006, the Commission requested that companies that had
provided data in confidence as part of this proceeding show cause as
to why the Commission should not publish certain information on a
nationally aggregated basis. |
140. |
The Commission requested
that the companies comment on the release of the following information
on a nationally aggregated basis: |
|
a) actual and forecast of total number of customers, total number
of connections, and total revenues for access-dependent and
access-independent VoIP services;
|
|
b) actual and forecast of total number of customers, total number
of connections, and total revenues for business and residential VoIP
services;
|
|
c) actual and forecast of total number of customers, total number
of connections, and total revenues for VoIP services supplied by
ILECs, cable companies, and VoIP providers;
|
|
d) average monthly churn rates, averaged across non-ILEC service
providers based on connections; and
|
|
e) percentage of telephone numbers that were ported to a VoIP
service, averaged across non-ILEC service providers based on
connections.
|
141. |
Responses were received from
Bell Aliant Regional Communications, Limited Partnership (Bell Aliant)
and Bell Canada (collectively, Bell Canada/Bell Aliant); SaskTel; TCC;
RCI; Shaw; Cogeco; MTS Allstream; FCI Broadband; Primus; and James Bay
Cree Communications Society. |
|
Positions of parties
|
142. |
MTS Allstream, Primus,
SaskTel, FCI Broadband, and James Bay Cree Communications Society did
not object to the release of the information listed above on a
nationally aggregated basis. |
143. |
Bell Canada/Bell Aliant and
TCC objected to the disclosure of certain information with respect to
ILECs. |
144. |
RCI submitted that,
generally, it provided year-end guidance publicly for the current year
in January of that year and it did not provide multiple-year guidance.
RCI also submitted that it did not believe it was appropriate to
disclose any aggregated numbers for years beyond the year for which
companies had provided guidance. |
145. |
In RCI's view, the proposed
disclosure of confidential information would permit public insight
into the overall pricing intentions of the cable industry, since
average prices could be derived from the total revenue and total
number of connections data that the Commission had proposed to place
on the public record. RCI submitted that, consequently, disclosure
would cause it direct and specific harm by providing information of
great competitive value to the company's competitors on the public
record. Further, RCI submitted that the public interest that would be
served by the release of the data would be minimal, if any, and that
it did not outweigh the direct harm that might result from the
disclosure. |
146. |
Cogeco submitted that it
concurred with RCI's view that it would not be appropriate to disclose
any aggregated numbers for years beyond the fiscal year for which
companies had provided public guidance to the financial community. |
147. |
Shaw submitted that it did
not offer, on a regular basis, specific forecasts on anticipated
growth in Shaw Digital Phone subscribers or associated revenue. Shaw
submitted that, instead, its approach to guidance was generally
limited to consolidated, company-wide financial metrics. Shaw further
submitted that it was concerned that the Commission's disclosure of
VoIP forecasts in the manner proposed could permit parties to derive
company-specific information about Shaw – notably its subscriber
forecasts, revenue projections, and pricing intentions – beyond what
was possible through the company's normal reporting and disclosure
procedures. |
148. |
Shaw submitted that public
disclosure of even nationally aggregated VoIP forecasts served no
public interest purpose and could cause the company specific and
direct harm. It therefore opposed the Commission's proposal to publish
VoIP forecasts. |
149. |
Shaw contended that ILEC
out-of-territory VoIP services should be aggregated into the non-ILEC
VoIP service metrics, both to provide a complete picture of VoIP
development and to reduce the possibility that individual competitor
churn statistics might be derived through the Commission's disclosure. |
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Commission's analysis and determinations
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150. |
The Commission notes that
disclosure of information for which confidentiality has been claimed
must be assessed in light of sections 38 and 39 of the Act and
section 19 of the CRTC Telecommunications Rules of Procedure. |
151. |
The Commission considers
that the expectation that specific direct harm might result from
disclosure is not, by itself, sufficient to justify maintaining a
claim of confidentiality. In certain circumstances, the Commission
considers that substantial harm from disclosure may still be
outweighed by the public interest in disclosure. |
152. |
The Commission considers
that there is significant public interest in the disclosure of
information concerning the status of competition in the local exchange
services market. The Commission notes that the objectives of the Act
as set out in section 7 include the following: "to foster increased
reliance on market forces for the provision of telecommunications
services and to ensure that regulation, where required, is efficient
and effective." In the Commission's view, the disclosure of specific
information pertaining to VoIP competition would provide
the Commission and stakeholders with an efficient and effective tool
to assess the extent to which the Commission's regulatory frameworks
and determinations are fulfilling the Canadian telecommunications
policy objectives set out in section 7 of the Act. In particular, the
Commission notes that disclosure of such information is required for
the purposes of its determinations in this proceeding. |
153. |
The Commission considers
that the data set out in paragraph 154 below is aggregated to a level
that is sufficient to prevent the derivation of specific data points
that the parties have argued are sensitive. The Commission also
considers that disclosure of data at this level of aggregation would
result in little direct harm to the parties that have provided
information. |
154. |
In the Commission's view,
the public interest in disclosing the information set out below on a
nationally aggregated basis outweighs any specific direct harm that
may result from such disclosure. In light of the above, the Commission
determines that it is appropriate to release the following information
that was filed in this proceeding, aggregated on a national basis: |
|
- actual and forecast connections and revenue, aggregated to the
level of non-ILEC VoIP service providers;
|
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- average monthly churn rates, averaged across non-ILEC service
providers based on connections; and
|
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- percentage of telephone numbers that were ported to a VoIP
service, averaged across non-ILEC service providers based on
connections.
|
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Overall conclusion
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155. |
In light of all the foregoing,
the Commission reaffirms the regulatory regime for local VoIP services
established in Decision 2005-28. |
156. |
The dissenting opinions of
Commissioners Cram, Langford, and Noël are attached. |
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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 |
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Footnotes:
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