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Telecom Order CRTC 2006-103
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Ottawa, 3 May 2006 |
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Bell Canada
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Reference: Tariff Notice 6913 |
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Bell Digital Voice
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1. |
The Commission received an application by
Bell Canada, dated 17 November 2005, proposing to waive the service
connection charge for existing Bell Digital Voice (BDV) customers who
wish to migrate back to residential primary exchange service (PES). |
2. |
Bell Canada proposed to remove a barrier
for customers who migrate their services to BDV. Bell Canada indicated
that some customers were resisting moving to BDV due to concerns that
service charges would apply should they decide to return to PES.
Bell Canada submitted that with this proposed service charge waiver,
customers would be more likely to migrate to BDV service. |
3. |
Bell Canada added that it was confident
that few customers would opt to abandon BDV service in favour of
returning to PES. Bell Canada submitted that in light of the limited
expected demand for this service charge waiver, the economic impact of
this proposed tariff change was immaterial and, accordingly, no
imputation test was provided. |
4. |
On 1 December 2005, Quebecor Media Inc.
(QMI) filed comments, and on 16 December 2005, Bell Canada filed reply
comments. |
5. |
QMI argued that if Bell Canada believed
that BDV and PES were distinct services, then a waiver of service
charges for customers migrating from BDV to PES amounted to a promotional
activity in favour of PES subscription. In QMI's view, Tariff Notice
6913 (TN 6913) must be regarded as a local service promotion
and must be considered in accordance with the framework established
by the Commission in Promotions of local wireline services,
Telecom Decision CRTC 2005-25,
27 April 2005 (Decision 2005-25),
which requires that promotions involving local wireline services
must: |
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a) be available and equally promoted across
one or more entire rate bands; |
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b) not be limited to competitors'
customers; |
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c) pass an imputation test for the service,
including the impacts of the promotion; and |
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d) have a combined enrolment and benefit
period that does not exceed six consecutive months, have no customer
lock-in requirement beyond the promotion period, and have a minimum
six-month waiting period after the expiry of the most recent previous
promotion before offering a new promotion involving the same local
wireline service. |
6. |
QMI submitted that TN 6913 failed the
first, third and fourth criteria: BDV service was not currently
available across entire rate bands, no imputation test had been
submitted, and there was no enrolment or benefit period. |
7. |
QMI requested that the Commission reject
TN 6913 and direct Bell Canada to re-file its proposal in a
manner consistent with Decision 2005-25. |
8. |
In response to QMI's position that TN
6913 was a promotion, Bell Canada submitted that the proposed
service charge waiver was not a promotion and therefore was not
subject to the promotions rules as defined in Decision 2005-25.
Bell Canada argued that the Commission's restrictions on incumbent
local exchange carrier (ILEC) promotions are and have always been
focused on promotions of limited duration. Bell Canada noted,
for example, that in the era when tariff filings for promotions
did not require an imputation test, the Commission had noted the
following in Tariff filings relating to promotions,
Telecom Decision CRTC 96-7,
18 September 1996 (Decision 96-7): |
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To date, the Commission has evaluated whether promotions are
legitimate and of a limited duration on a case-by-base basis…
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The Commission considers that the primary consideration in
assessing whether a promotion is a legitimate promotion not requiring
an imputation test is the duration of the promotion…
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9. |
Bell Canada submitted that in TN
6913, it was proposing a permanent service charge waiver, which
would be a permanent element of the General Tariff and not a promotion
of limited duration. Bell Canada argued that, accordingly,
this was not in the nature of a promotion and therefore not subject
to the promotion criteria set by the Commission in Decision 96-7,
or more recently in Decision 2005-25.
Bell Canada submitted that the Commission had approved this
type of tariff condition on many occasions. Bell Canada noted,
for example, that its BDV service proposed in Tariff Notice
6900 (TN 6900) was given interim approval in Bell Canada
proposal for VoIP service pricing in Ontario and Quebec, Telecom
Decision CRTC 2005-62,
20 October 2005 (Decision 2005-62).
TN 6900 provided, in General Tariff item 7031.6(d) Note, that: |
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The Service Connection fee applies to the establishment of a new
service or change to the customer's physical location. No Service
Connection fee applies when migrating from Bell Digital Voice Lite
service or Bell Canada Primary Exchange (Local) service to Bell
Digital Voice at the same service location.
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10. |
Bell Canada also noted that Decision
2005-62
was issued after the release of Decision 2005-25
without invoking the promotions restrictions. |
11. |
Bell Canada reiterated that in light of the
limited expected demand for this service charge waiver, the economic
impact of this proposed tariff change would be immaterial and,
accordingly, no imputation test was provided. Bell Canada submitted that
an imputation test would normally be required for tariff proposals of
this nature but, in this instance, the change in imputation provided in
support of TN 6900 would be immaterial. |
12. |
On 14 February 2006, Bell Canada filed an
imputation test at Commission staff's request. |
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Commission's analysis and determinations
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13. |
The Commission notes that QMI provided no
support for its contention that Bell Canada's application is for
a promotion. The Commission notes that different rules apply to
promotions and to permanent service offerings. The Commission, in
Decision 2005-62,
gave interim approval to, among other things, a permanent service
offering by Bell Canada that provides that no service connection
charge applies when a customer migrates from Bell Digital Voice
Lite service or Bell Canada PES to BDV at the same service
location. The Commission notes that Bell Canada's application
for the waiver of the service connection charge when a customer
returns from BDV to Bell Canada PES at the same service location
is also a permanent service offering. In light of the above, the
Commission does not consider that Bell Canada's application is for
a promotion. |
14. |
The Commission considers that Bell Canada's
proposal satisfies the imputation test. In this regard, the Commission
expects that few customers would opt to abandon BDV service in favour of
returning to PES, and that the proposal would therefore have an
insignificant impact on Bell Canada's costs and revenues associated with
connecting PES service. |
15. |
The Commission considers, however, that the
wording of the proposed tariff does not provide sufficient clarity that
the residence service connection charge would not apply to those BDV
customers who, immediately prior to migrating to BDV, were residential
PES customers. |
16. |
In light of the above and the fact that all
other proceedings on VoIP are still ongoing, the Commission approves
on an interim basis Bell Canada's application, with the following
change: |
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- modify the wording in item 100.3(13) to read:
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The Residence Service Connection charge does not apply when
migrating from Bell Digital Voice (BDV) to Primary Exchange (Local)
Residence Service (PES), where the customer was a residential PES
customer immediately prior to migrating to BDV at the same
service location.
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17. |
The dissenting opinion of Commissioner
Langford is 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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Dissenting opinion of Commissioner Stuart Langford
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I disagree with the majority
decision in this matter and would have denied Bell Canada's (Bell's)
application. To allow it is to enhance the ability of former monopoly
telephone service providers in Canada to frustrate Parliament and the
Commission's efforts "to enhance the … competitiveness … of Canadian
telecommunications."1
I reject the majority decision, as well, because it is likely to
encourage the dominant telephone companies in Canada to develop
strategies designed to circumvent the clear intent of the Commission's
competitive initiatives and policies. This cannot be in the public
interest. |
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What's it all about?
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For some time now Quebecor
Media Inc. (Quebecor), through its cable company, Vidéotron, has been
offering residents in parts of Bell's Quebec territory residential
telephone service supplied over its cable network, utilizing a voice
over internet protocol (VoIP). Clearly, consumer interest in this
product is high; Vidéotron has signed up thousands of former
Bell subscribers. |
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Equally clearly, Bell cannot
be happy about Vidéotron's successes; it has been trying different
marketing strategies designed to reverse them. One such strategy,
embodied in the application underlying today's majority decision and
this dissent, appears to be to induce residential subscribers seeking a
cheaper alternative to Bell Canada's traditional primary exchange
service (PES) not to turn to Vidéotron but to switch instead to Bell's
present version of VoIP, Bell Digital Voice. |
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The inducement takes the form
of a freebie worth $55, the price Bell charges new customers to hook up
or activate their telephones when they subscribe to Bell's PES. The
following quotation from a November 17th, 2005 letter to the
Commission from David Palmer, Bell's Director of Regulatory Affairs,
explains why: |
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The purpose of this proposed tariff change is to remove a barrier
to customers migrating their services to Bell Digital Voice.
Specifically, some customers are resisting moving to Bell Digital
Voice due to concerns that service charges will apply should they
decide they wish to return to Primary Exchange Service (PES). With
this proposed service charge waiver, customers will be more likely to
migrate to Bell Digital Voice service.
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No doubt, Mr. Palmer is correct
in his assessment. After all, if you take the risk out of something,
more people will be willing to try it. "Satisfaction or your money back"
beats "buyer beware," every time. But is it fair? Quebecor says no, and
I agree with that assessment. |
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Check the rules
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There are rules governing the
acceptability of what the former monopoly telephone companies charge for
residential goods and services. Arguably, Bell's strategy to waive a $55
hook-up fee for select customers violates every one of them. |
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Subsection 27(1) of the
Telecommunications Act (the Act) stipulates that "Every rate charged
by a Canadian carrier for a telecommunications service shall be just and
reasonable." As of today, some Quebec residents wishing to become Bell
PES customers will have to pay a $55 hook-up fee. Others will pay
nothing. How precisely both charges can be "just and reasonable" is an
interesting question. |
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Subsection 27(2) of the Act
reads as follows: "No Canadian carrier shall, in relation to the
provision of a telecommunications service or the charging of a rate for
it, unjustly discriminate or give an undue or unreasonable preference
toward any person, including itself, or subject any person to an undue
or unreasonable disadvantage." |
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It seems patently obvious that
Bell's strategy to favour one set of customers over another is to give
that select group preferential treatment while at the same time
subjecting those who must pay $55 (anyone else wishing to subscribe to
Bell's PES) to a disadvantage. Also subjected to a disadvantage is
Quebecor, which cannot offer Bell customers a similar freebie should
they be unhappy with Vidéotron's VoIP product. Whether such preferences
and disadvantages are "undue" was not argued on the record. In my
opinion, they are. |
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Finally, we come to the rules
governing promotions. There is no need to repeat these here; they are
set out in paragraph 5 of the majority decision. In my view, Bell's free
hook-up offer fails to meet the rules governing promotions on all four
counts: (1) It is not offered equally to everyone across one or more
rate bands. (2) It is targeted at those who are most likely to become a
competitor's customers. (3) It is priced below cost, free versus $55.
(4) It will almost certainly be offered for more than six months. |
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What's in a word?
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Bell's response to Quebecor's
accusation that its offer violates the rules governing promotions is
semantically grounded. Promotions, it says, are temporary; this freebie
offer to select customers is permanent. Really! That is like Elizabeth
Taylor describing marriage as permanent. What does "permanent" mean in
terms of tariff rates? Bell could change its mind on this freebie
strategy tomorrow and file another tariff application to change the rate
back to $55. There is no such thing as permanent in the world of
pricing. |
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What this Bell tariff
application amounts to is precisely what it appears to be: a transparent
attempt to avoid the rules. It is an attempt to finesse, an end run, a
blatant effort to circumvent both the letter and the spirit of the Act
and the Commission's pricing rules by finding a tiny loophole and then
trying to squeeze through it. If such a loophole has been inadvertently
overlooked in the past, the Commission's duty is to close it, not throw
up its hands, as I would argue the majority has, and say "clever you,
you beat the system." |
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The big picture
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By approving Bell's
application, the majority has fallen victim to a sophism, a clever but
fallacious argument. Bell's strategy is clear; it is spelled out on the
record. Bell has run into difficulties trying to market its
internet-delivered service. Customers sensitive to price prefer
Vidéotron's VoIP product. To sweeten its offer, Bell has proposed an
incentive worth $55 to those Quebec residents likely to try VoIP and
only to those people. That is either preferential treatment designed to
frustrate competition or a promotion. Either way it cannot and must not
be allowed. |
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By focusing on a red herring,
the argument that calling something permanent makes it so, the majority
has forgotten the big picture. Parliament has directed the Commission
"to enhance … competitiveness." Its long struggle to do so by nurturing
facilities-based competition in Canada is just now beginning to succeed.
Competitors are winning customers away from most of the former monopoly
service providers. |
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According to the CRTC's 2005
Monitoring Report, at the end of 2004, the former monopolies
still controlled 96.8% of Canada's residential lines. Even if we assume
a further erosion in market share since then of, say, 3 or 4%, that
still leaves the former monopolies in an unquestionably dominant
position. If we serve notice today, as in my opinion the majority
decision does, that these powerful companies can circumvent the rules
established to see fair play until such a time as market forces can be
given free rein, we risk throwing away over ten years of hard work. That
is a chance I am not prepared to take. Accordingly, I would deny Bell's
application. |
Foonote:
1
Telecommunications
Act [S.C. 1993, c. 38] section 7(c).
Date Modified: 2006-05-03 |