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Telecom Decision CRTC 2006-1
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Ottawa, 6 January 2006 |
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TELUS Communications Inc. - Application with respect to Telecom
Decision CRTC 2005-6 - Location of competitor point of presence
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Reference: 8661-T66-200508038 |
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In this Decision, the Commission
approves a request by TELUS Communications Inc. that the Commission
clarify that a competitor must have a point of presence located in
Canada in order to be eligible for Competitor Digital Network (CDN)
services. The Commission denies Bell Canada's related request to
exempt cross-border circuits from the CDN service. |
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Background
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1. |
In Regulatory framework for second price
cap period, Telecom Decision CRTC 2002-34,
30 May 2002 (Decision 2002-34),
the Commission directed the major incumbent local exchange carriers
(ILECs) to develop a competitor digital network access (CDNA) service.
The CDNA service made the ILECs' digital network access (DNA)
and associated link facilities available to competitors at rates less
than retail DNA service rates. The Commission prohibited simple resale
of the CDNA service in order to avoid distortions in the retail DNA market.
Simple resale was defined by the Commission as resale without added
value, including rebilling. |
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2. |
In Competitor Digital Network Services,
Telecom Decision CRTC 2005-6, 3
February 2005 (Decision 2005-6),
the Competitor Digital Network (CDN) service was approved on a final
basis. The Commission maintained the prohibition on simple resale,
and the CDN service was made available to registered Canadian carriers
and all registered resellers (competitors). The Commission also noted
in that decision that if traffic carried on a CDNA access leased by
a competitor terminated at the competitor's network site within the
territory of the ILEC that provided that facility, the ILEC would
be able to determine that the competitor's traffic ultimately terminated
at the competitor's network site. |
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3. |
However, in Decision 2005-6,
the Commission did not continue to require that competitor traffic
carried on a CDNA access must terminate at a competitor's network
site within the territory of the ILEC that provided the access. Specifically,
the Commission found at paragraph 251 that "…a competitor
should not be prevented from using CDN services, notwithstanding that
the traffic may ultimately terminate at a POP [point of presence]
outside the territory of the ILEC that provides the CDN services." |
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4. |
The Commission adopted this approach for
the CDN service after noting that facilities-based competitors provided
services using facilities and services leased from ILECs and other
suppliers in combination with self-supplied facilities and services. The
Commission considered that this approach promoted facilities-based
competition and that accordingly, it would be inappropriate to restrict
the use of CDN services when the competitor network site at which CDN
traffic terminated was outside the territory of the ILEC providing the
CDN service. |
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5. |
The Commission also stated in paragraph 252
of Decision 2005-6 that if the
POP was outside the territory of the ILEC that provided the CDN services,
the ILEC would not know whether the traffic ultimately terminated
on the competitor's network. The Commission therefore determined it
would be appropriate to require that each competitor using the CDN
service provide an affidavit with respect to its compliance with the
prohibition on simple resale, and that this affidavit should include
the attestation that the route or pathway associated with each leased
access facility included as part of CDN services ultimately connects
at the POP. |
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6. |
The Commission further found that audits of
competitor compliance with respect to the simple resale prohibition
should be undertaken only where circumstances were warranted. |
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Application
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7. |
On 5 July 2005, the Commission received an
application from TELUS Communications Inc. (TELUS) requesting that
the Commission clarify that a competitor must have a POP located in
Canada to be eligible for CDN services.1
TELUS noted that in Decision 2005-6,
the Commission was silent on whether a POP was required to be located
in Canada. |
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8. |
TELUS argued that the requirement for a
competitor to have a POP in Canada was necessary to uphold the
prohibition against simple resale and to advance facilities-based
competition. |
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9. |
TELUS submitted that the requirement in Decision
2005-6 that the route or pathway
associated with each leased access facility included as part of the
CDN service ultimately connected at a competitor POP was key to the
Commission's prohibition on simple resale. |
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10. |
TELUS submitted further that without a POP
in Canada, a competitor would violate the simple resale prohibition
because it would simply re-bill and re-brand digital network services
provided by the ILECs without the addition of any value that would come
from combining ILEC facilities with its own facilities. |
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11. |
TELUS argued that if all of a competitor's
POPs were located outside of Canada, audits of compliance would be
difficult, if not impossible in foreign jurisdictions, and thus the
prohibition on simple resale could not be effectively enforced. |
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12. |
TELUS further argued that the Commission's
objective in Decision 2005-6 of
promoting facilities-based competition also required that a competitor
have a POP in Canada. TELUS submitted that, without this requirement,
foreign entities, among others, could obtain discounted CDN services
without having any facilities in Canada. TELUS submitted that such
an outcome would be inconsistent with the Canadian telecommunications
policy objective of enhancing the efficiency and competitiveness of
Canadian telecommunications. |
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13. |
TELUS submitted that section 12 of the
Interpretation Act supported the conclusion that a competitor POP
was required in Canada for CDN eligibility.2 |
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Process
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14. |
Comments were filed by Rogers Telecom on 19
July 2005, MTS Allstream Inc. (MTS Allstream) on 27 July 2005,
Bell Canada on 2 August 2005, and MCI Canada on 5 August 2005. |
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15. |
TELUS filed reply comments on 12 August
2005. |
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Positions of parties
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16. |
MTS Allstream and Rogers Telecom supported
TELUS' application. MTS Allstream argued that the ILECs should adopt and
use a common tariff definition of a competitor POP to include the
specific condition that the POP was to be located in Canada. Rogers
Telecom argued that the ILECs' CDN tariffs should include a condition
restricting CDN service to telecommunications service providers with a
Canadian POP. |
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17. |
Bell Canada and MCI Canada opposed TELUS'
application. Bell Canada argued that in Decision 2005-6,
the Commission had ruled that CDN circuits could terminate at locations
outside the territory of the ILEC that provided the CDN service without
restricting CDN circuits to originate and terminate in Canada. Bell Canada
argued further that it was not necessary for a competitor to have
a POP in Canada to uphold the prohibition against simple resale. Bell Canada
submitted that such a requirement would impose additional costs and
delays on all parties, including the ILECs, who would have to determine
the location of the competitor POP in order to ensure that the circuit
was CDN-eligible. |
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18. |
With respect to the enforcement of the
simple resale prohibition, Bell Canada argued that the existing
affidavit process was effective and sufficient. |
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19. |
Bell Canada submitted that, contrary to
TELUS' argument, requiring a POP in Canada would not promote
facilities-based competition, but would deny the benefits of competitive
choice to competitors that did not have a POP in Canada. Bell Canada
requested that, if the Commission were to find that competitors must
have a POP in Canada in order to obtain CDN services, the Commission
should also require that competitors pay retail DNA rates, not CDN
rates, for cross-border circuits, which it stated typically included an
access component and a transport component that would or would not be
forborne. Bell Canada argued this requirement would be necessary in
order to ensure that the ILEC on whose network the circuit originated
was not disadvantaged vis-à-vis other domestic competitors. |
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20. |
Bell Canada further argued that TELUS'
application was a veiled application that the Commission review and
vary Decision 2005-6, and that
TELUS had failed to demonstrate that the circumstances identified
by the Commission as examples in which there may be substantial doubt
as to the correctness of a decision, had been met.3 |
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21. |
MCI Canada argued that TELUS' application
contradicted Decision 2005-6 in
which CDN services were made available to all competitors. MCI Canada
further argued that requiring all resellers to have a POP in
Canada created an artificial and unnecessary barrier to entry for resellers. |
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22. |
MCI Canada further submitted that the
outcome sought by TELUS would be inconsistent with Canada's obligations
regarding market access under Article XVI of the General Agreement on
Trade in Services (GATS). MCI Canada argued that under Canada's Schedule
of Specific Commitments to the GATS Schedule, Canada had committed to
ensuring market access to resellers and had placed no restrictions on
the entry of these service providers in the market for circuit-switched
and packet-switched data transmission services. In MCI Canada's view,
had Canada wished to restrict reseller entry into the market, it would
have been required to include an inscription to that effect in its
Schedule. |
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23. |
MCI Canada submitted that there was nothing
in the Interpretation Act or any other statute in Canada which
required the Commission to insert a condition in the CDN tariffs that
required competitors to have a POP in Canada. |
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TELUS' reply
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24. |
TELUS submitted that Bell Canada's argument
regarding additional costs and delays ignored the Commission's finding
in Decision 2005-6 in which the
Commission required an affidavit from competitors precisely because
the ILECs would not necessarily know where a competitor's traffic
ultimately terminated. TELUS further argued that, contrary to Bell Canada's
submission, ILECs were not required to verify that a CDN circuit terminated
at a competitor POP, and that therefore no additional costs or delays
would be incurred if competitors were required to have a POP
in Canada. |
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25. |
TELUS submitted that, contrary to
Bell Canada's argument, the affidavit with respect to simple resale was
not a substitute for a competitor having a POP in Canada, but was
necessary because an ILEC could not know if a competitor's traffic
ultimately terminated on the competitor's network if its POP was outside
of the ILEC's territory. |
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26. |
With respect to the position of Bell Canada
and MCI Canada, TELUS submitted that access to CDN rates without
establishing a POP in Canada (or any other facilities) could only be a
detriment to facilities-based competition, as it would make it possible
for entities to receive CDN rates without investing in facilities in
Canada. TELUS submitted that, as a result, resellers would be permitted
to enter the market and offer service entirely on the basis of
discounted and resold ILEC inputs. |
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27. |
TELUS argued that its application was not
an application to have the Commission review and vary Decision 2005-6
as it was not requesting that the Commission reverse itself, but rather
that the Commission clarify its position with respect to the location
of a competitor's POP. |
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28. |
In reply to MCI Canada's submissions with
respect to the GATS, TELUS submitted that Article XVI of the GATS, on
which MCI Canada had relied, was broadly worded and should be read in
context. TELUS noted that GATS Article XVI:1 read as follows: |
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With respect to market access through the modes of supply
identified in Article I, each Member shall accord services and service
suppliers of any other Member treatment no less favourable than that
provided for under the terms, limitations and conditions agreed and
specified in its Schedule [of Specific Commitments].
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29. |
TELUS submitted that under GATS Article XVI,
Canada was bound to accord to foreign service suppliers treatment
no less favourable than that provided for under the terms, limitations
and conditions agreed and specified in Canada's Schedule. TELUS argued
that its interpretation of Decision 2005-6
did not offend this provision because all suppliers were treated symmetrically. |
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30. |
Further, TELUS submitted that GATS Article
XVI:1 should be read in light of GATS Article XVI:2, which provided the
following: |
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In sectors where market-access commitments are undertaken, the
measures which a Member shall not maintain or adopt either on the
basis of a regional subdivision or on the basis of its entire
territory, unless otherwise specified in its Schedule, are defined
as:
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(a) limitations on the number of service suppliers whether in the
form of numerical quotas, monopolies, exclusive service suppliers or
the requirements of an economic needs test;
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(b) limitations on the total value of service transactions or
assets in the form of numerical quotas or the requirement of an
economic needs test;
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(c) limitations on the total number of service operations or on
the total quantity of service output expressed in terms of
designated numerical units in the form of quotas or the requirement
of an economic needs test;
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(d) limitations on the total number of natural persons that may
be employed in a particular service sector or that a service
supplier may employ and who are necessary for, and directly related
to, the supply of a specific service in the form of numerical quotas
or the requirement of an economic needs test;
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(e) measures which restrict or require specific types of legal
entity or joint venture through which a service supplier may supply
a service; and
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(f) limitations on the participation of foreign capital in terms
of maximum percentage limit on foreign shareholding or the total
value of individual or aggregate foreign investment.[italics in
original]
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31. |
TELUS argued that the GATS jurisprudence on
this point provided no support for the argument advanced by MCI Canada.
According to TELUS, GATS Article XVI:2 were exhaustive of the type of
market access limitations that were not permitted. Accordingly, in
TELUS' view, it was permissible to maintain limitations other than those
mentioned in GATS Article XVI:2, and there was no legal requirement that
such limitations be inscribed in a country's Schedule. |
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32. |
TELUS argued that because a Canadian POP
restriction did not fit within any of the limitations described in GATS
Article XVI:2, it was not a limitation prohibited by GATS Article XVI:1
and the imposition of such a restriction would not be incompatible with
Canada's commitments under that GATS Article; nor was it a limitation
required to be included in Canada's Schedule. |
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Commission's analysis and determinations
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33. |
The Commission considers that TELUS' application
does not constitute an application to review and vary Decision 2005-6,
but is a request for clarification regarding the location of a competitor's
POP. |
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34. |
The Commission notes that in the proceeding
that led to Decision 2005-6, issues
with respect to the location of a competitor's POP focused on whether,
for a leased access circuit to be eligible for CDN rates, the competitor's
POP to which the circuit in question connected and the associated
circuit to the end-customer should be in the same ILEC wire centre
area and ILEC territory. |
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35. |
Bell Canada argued that requiring a POP in
Canada would impose additional costs and delays on all parties,
including ILECs, who would have to determine the location of the
competitor POP in order to ensure that the circuit was CDN-eligible. The
Commission notes, however, that TELUS correctly observed that ILECs are
not required to determine the location of the competitor POP. The
Commission further notes that, contrary to Bell Canada's submission,
ILECs would not be required to determine the location of the competitor
POP if a POP is required in Canada. The Commission, therefore, agrees
with TELUS' submission that Bell Canada's argument did not take account
of the Commission's determination that it was appropriate to impose the
affidavit requirement because an ILEC would not necessarily know whether
the traffic ultimately terminated on the competitor's network if the
competitor's POP was located outside that ILEC's territory. |
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36. |
Consistent with its finding in Decision
2002-34, the Commission prohibited
simple resale of the CDN service in Decision 2005-6
to avoid distortions in the retail DNA service market. In Decision
2005-6, the Commission defined
simple resale as resale without adding value, and noted that simple
resale included rebilling. |
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37. |
Given that the Commission's jurisdiction
is limited to Canada, the Commission considers that the prohibition
on simple resale set out in Decision 2005-6
was with respect to simple resale that occurs within Canada. |
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38. |
The Commission further considers that the
connection of a CDN facility leased by a competitor to that competitor's
POP is a key means by which the Commission may be satisfied that a
competitor is adding value to the leased facility. In this connection,
the Commission notes that the affidavit requirement associated with the
simple resale prohibition requires each competitor to attest that the
route or pathway associated with each leased access facility included as
part of CDN services ultimately connects at the POP. |
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39. |
In the Commission's view, if a reseller does
not have a POP in Canada and the relevant POP is located outside of
Canada, the process of adding value is, by definition, taking place
outside of Canada. In these circumstances, the Commission considers
that the leased facility in Canada would not be subject to added value
in Canada, and, hence, would be subject to simple resale in Canada,
contrary to the prohibition in Decision 2005-6.
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40. |
With respect to the enforcement of the
prohibition on simple resale, the Commission agrees with TELUS'
submission that, if a competitor did not have a POP in Canada, an audit
of a competitor's affidavit of compliance with the prohibition on simple
resale would be extremely difficult, if not impossible, due to, among
other things, the issue of extra-territorial jurisdiction. |
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41. |
The Commission also notes Bell Canada's
submission that requiring a competitor to have a POP in Canada would not
promote facilities-based competition because, in Bell Canada's view, a
foreign competitor would not likely establish a Canadian POP when it
could obtain resold CDN circuits from non-ILEC competitors in Canada.
However, the Commission considers that the availability of ILEC DNA
facilities at CDN rates is only one among several factors that a
competitor would consider in determining whether to establish a POP in
Canada. |
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42. |
The Commission notes TELUS' submission that
not requiring a competitor to have a POP in Canada in order to use the
CDN service would undermine the Commission's policy objective of
facilities-based competition because resellers would be permitted to
enter the market and offer service solely on the basis of discounted and
resold ILEC inputs. The Commission further notes that, when it finalized
the CDN service, it found that the requirement to offer CDN services
would advance facilities-based competition and ensure that
telecommunications services are provided in a manner consistent with the
Canadian telecommunications policy objectives in the
Telecommunications Act.4
In the Commission's view, facilities-based competition will be promoted
if competitors have a POP in Canada. |
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43. |
With respect to MCI Canada's submission
that the outcome sought by TELUS would be inconsistent with Article XVI
of the GATS, the Commission considers that TELUS' arguments in its reply
comments, as set out above, are persuasive. |
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44. |
In light of the above, the Commission
approves TELUS' application and clarifies that a competitor is
required to have a POP in Canada for the purpose of the CDN service.
The Commission further clarifies that the requirement in Decision
2005-6 that each competitor's affidavit
attest that the route or pathway associated with each leased access
facility included as part of CDN services "ultimately connects
at the POP" should read: "ultimately connects at the POP
in Canada". The Commission directs Bell Canada, Aliant Telecom
Inc., MTS Allstream and Saskatchewan Telecommunications to issue revised
tariff pages for the CDN service to reflect the requirement that a
competitor have a POP in Canada. |
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45. |
The Commission notes Bell Canada's request
that if competitors must have a POP in Canada in order to obtain CDN
services, the Commission should require competitors to pay retail DNA
rates, not CDN rates, for cross-border DNA circuits. Bell Canada argued
this requirement would be necessary in order to ensure that the ILEC in
whose territory the circuit originates was not disadvantaged vis-à-vis
other domestic competitors. |
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46. |
The Commission notes that the purpose of
the proceeding that led to Decision 2005-6
was to consider the relative competitive position of ILECs and competitors
when they provide retail customers with services that use DNA facilities
as an input. As noted, the Commission concluded in Decision 2005-6
that, in the absence of the CDN service, the ILECs had an undue or
unreasonable competitive advantage relative to competitors with respect
to the use of DNA facilities. The Commission therefore required that
ILECs make their DNA facilities available to competitors as the CDN
service. |
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47. |
Consistent with Decision 2005-6,
the Commission considers that competitors would be unduly disadvantaged
if cross-border circuits were exempted from the CDN service as proposed
by Bell Canada, and further considers that the current CDN service
does not represent an undue competitive disadvantage for Bell Canada.
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48. |
Accordingly, the Commission denies
Bell Canada's request to exempt cross-border circuits from the CDN
service. |
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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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Paragraph 169 of
Decision 2005‑6.
