Decision
|
Ottawa, 6 July 1999
|
Telecom Decision CRTC 99-8
|
REGULATION UNDER THE TELECOMMUNICATIONS ACT
OF CABLE CARRIERS ACCESS SERVICES
|
File No.: 8697-C12-02/98
|
I SUMMARY
|
1. The Commission will
require incumbent cable carriers to file proposed rates for higher speed access services
supported by costing information. These services will enable competitive providers of
retail Internet services (IS) to offer higher speed IS using cable infrastructure. The
Commission considers that the requirement for costing support should not delay the
roll-out of such access services.
|
II INTRODUCTION
|
2. In Regulation under
the Telecommunications Act of Cable Carriers Access Services, Telecom Public
Notice CRTC 98-14, 9 July 1998 (PN
98-14), the Commission sought comment on various issues concerning the regulation of
incumbent cable carriers higher speed access service. This service will enable
competitive providers of retail Internet services (Internet Service providers or ISPs) to
offer higher speed IS using incumbent cable carriers infrastructure.
|
3. In Regulation under
the Telecommunications Act of Certain Telecommunications Services offered by
"Broadcast Carriers", Telecom Decision CRTC 98-9, 9 July 1998 (Decision
98-9) the Commission decided that it will approve the rates and terms on which incumbent
cable companies provide higher speed access to their telecommunications facilities with
respect to competitive providers of retail Internet services. "Higher speed access
services" were defined as services which offer transmission at speeds above 64Kbps.
"Cable carrier" is used in a telecommunications context to refer to a carrier
that is also licensed as a cable distribution undertaking and which uses traditional
coaxial infrastructure (perhaps in combination with other serving technologies) to offer a
telecommunications service.
|
4. However, as noted in
Decision 98-9, while the cable industry stated it proposes to provide higher speed access
services as soon as possible, technical and related work required to implement this
service had not yet been completed. The Commission issued PN 98-14 before technical issues relating to the
provision of such access were resolved in order to avoid regulatory delays in making
access available once technical issues are resolved. A Technical Working Group of the
Canadian Association of Internet Providers (CAIP) and the Canadian Cable Television
Association (CCTA) is currently addressing these issues.
|
5. Submissions were
received from the Independent Members of CAIP, the CCTA, Fundy Cable Ltd./ltée (Fundy)
and Stentor Resource Centre Inc. (Stentor) on behalf of BC TEL, Bell Canada, Island
Telecom Inc., Maritime Tel & Tel Limited, MTS Communications Inc., and NBTel Inc.
|
III RATES FOR HIGHER SPEED
ACCESS SERVICES
|
6. CCTA proposed that rates
be "market based" and, as a result, no cost studies would be required. Stentor
and CAIP opposed this position and argued that any rates filed should be supported by a
cost study. CCTA submitted that there are no incentives for the incumbent cable carriers
to price too high or too low. CCTA stated that cable carriers have no incentive to price
ISP access at excessive levels because they want to stimulate use of their facilities by
ISPs. CCTA submitted that, because there is no incentive to under-recover costs, costing
information is not needed to demonstrate that the rates exceed a cost based floor.
|
7. However, CCTA also
stated that it does not object to filing costing studies but it considers them unnecessary
in light of the incentives facing cable carriers. CCTA stated that its members would be
prepared to file Phase II costing support for high speed access services. However, in its
view, such a requirement must reflect (a) a reasonable period of time for cable companies
individually or collectively to implement Phase II costing and (b) alternate arrangements
(such as use of proxy costing, use of prices approved for larger members, or establishing
representative, not company specific, costs or network configurations) for smaller cable
companies which do not have the resources necessary to perform Phase II cost studies.
|
8. CCTA submitted that the
provision of third party access should not necessarily await the implementation of Phase
II costing. CCTA stated that, if the Commission were to require Phase II costing studies,
it expects that tariffed rates for third party access would be established during the
period when the costing studies were not yet available.
|
9. CCTA also submitted that
its access facilities are not essential. CCTA noted that in Decision 98-9 the Commission
did not find that cable access facilities are essential.
|
10. CAIP supported the use
of the Phase II costing methodology to develop the costs required to justify any proposed
access rates. CAIP submitted that it sees no reason to apply a different costing standard
to cable carriers, and it considers that regulatory symmetry with the telephone
companies Asymmetric Digital Subscriber Line (ADSL) services requires Phase II
costing.
|
11. Stentor agreed with
CAIP that there is no reason why all parties should not be subject to the same costing
rules (although Stentor submitted that forbearance would be the better approach). Stentor
also noted that market based pricing and Phase II costing are not incompatible, stating
that it is the level of the mark-up over Phase II costs that CAIP is concerned about.
|
12. Stentor submitted that
market based pricing could mean pricing below Phase II costs because of an expectation
that customers will not pay more. Stentor noted this form of market based pricing is
usually inconsistent with Phase II costing requirements but stated that a carrier can file
for approval rates that are below cost where it believes unusual circumstances justify it.
|
13. The Commission has
considered the general issue of the basis on which rates for incumbent cable
carriers higher speed access services will be determined. It has also considered
related issues: (a) whether, if costing support is required, an approved Phase II
costing methodology is required; (b) whether, if costing is required, a different approach
is appropriate for smaller cable companies, recognizing that these companies have limited
resources; and (c) how cable carriers costs of implementing the third party
connection capability (i.e. "start-up costs") should be recovered.
|
14. The following findings
apply only to higher speed access services offered by incumbent cable carriers to enable
the provision of retail IS. In order to provide such third party access, cable carriers
must provide to ISPs the Internet Protocol (IP) data transmission capabilities they use to
provide their own retail level higher speed IS. Cable carriers must also provide
facilities to interconnect with the ISPs networks (the point of interconnection).
Cable carriers will be required to develop a rate structure that covers both of these
functions.
|
15. Some cable carriers
currently charge an additional fee (e.g. $10) to their IS customers who are not
subscribers to cable service. This charge effectively unbundles, from the rate for the
broadcast distribution (cable) service, a charge for the use of the cable carriers
distribution facilities. Because cable carriers offer their IS to customers that do not
also subscribe to their cable service, the Commission considers that it should be a
requirement that higher speed access service should also be available to an ISPs
customers who do not subscribe to the cable carriers cable service.
|
16. While the Commission
has in the past given interim approval to rates for use of the cable distribution system
without cost support, incumbent cable carriers will be required to provide cost
justification for rates currently charged and all future proposed rates for this service.
|
17. In the
Commissions view, it would not be appropriate to rely solely on the marketplace to
ensure that rates charged by incumbent cable carriers for higher speed access service are
just and reasonable, as required by subsection 27(1) of the Telecommunications Act
(the Act). The Commission therefore considers that incumbent cable carriers proposed
rates for higher speed access service should be supported by costing information.
|
18. In order to determine
appropriate service costs, cable carriers must identify all network components that are
causal to their provision of higher speed access service. In this regard, the Commission
notes that cable companies have made significant investments over the last several years
rebuilding and improving their plant and equipment. This has included increasing channel
capacity, improving the technical capabilities of their distribution systems and
implementing digital technology to facilitate delivery of broadcasting services to
subscribers and to improve the quality of their services. To further encourage cable
companies to make these expenditures and better enable them to compete with new broadcast
distribution technologies, in various decisions made under the Broadcasting Act,
the Commission created a regulatory framework which permitted cable companies to increase
basic cable rates to recover certain of the costs associated with such network
enhancements.
|
19. Advancements in the
technical capabilities of the distribution equipment used to improve the quality and
increase the quantity of broadcast services have also provided incumbent cable companies
with the two-way transmission capability and addressability which are key requirements to
allow them to offer IS. However, because the Commission previously determined these
enhancements to be causal to the provision of basic cable service, the associated costs
are being recovered from subscribers to basic cable service. Therefore, the Commission is
of the view that these costs should not be included when developing rates for higher speed
access services.
|
20. The Commission has
required incumbent cable carriers which provide retail level IS to file tariffs for the
provision of access to the carriage facilities needed to offer these services to
competitive providers of retail level IS. Further, in view of the market power of these
carriers in the provision of higher speed access services, the Commission determined that
it will approve the rates and terms on which they provide such services to competitive
providers of retail level IS. However, the Commission agrees with CCTA that the IP data
transport function is not in the nature of an essential facility.
|
Use of Proxy Costing for
Smaller Cable Carriers
|
21. CCTA noted that smaller
cable companies would not have the resources to engage in costing. However CCTA noted that
the Commission has frequently accepted costs provided by the former Stentor group (or Bell
Canadas costs) as a proxy for use by smaller companies. CAIP noted that Multiple
System Operators (MSOs) are the main suppliers of higher speed IS, and that these entities
have the staff and expertise to do any costing that might be required.
|
22. The Commission
considers that larger MSOs should develop appropriate service cost studies applicable to
their operations. These studies would be based on the prospective incremental costing
approach as set out in Inquiry into Telecommunications Carriers Costing and
Accounting Procedures - Phase II: Information Requirements for New Service Tariff Filings,
Telecom Decision CRTC 79-16 (Decision 79-16). The Commission further considers that it
would be appropriate to provide smaller cable carriers with the choice of proposing their
own rates based on their incremental costs or using one of the alternatives proposed by
CCTA.
|
23. It is the
Commissions preliminary view that, for the purposes of this Decision,
"larger" cable carriers are the seven largest MSOs, defined with reference to
the number of cable subscribers. The Commission has selected the number of cable
subscribers, not the number of higher speed access IS subscribers, as the reference point
because all cable subscribers represent the potential market for higher speed IS, even if
such customers do not now subscribe to such services. Based on information filed with the
Commission under the Broadcasting Act, the Commission considers Rogers
Communications Inc. (Rogers), Vidéotron ltée (Vidéotron), Shaw Communications Inc.
(Shaw), Cogeco Câble Canada inc. (Cogeco), Moffat Communications Limited (Moffat), Fundy
and Bragg Communications Incorporated (Bragg) to be the seven largest MSOs defined with
reference to the number of cable subscribers. In order to expedite the development of
rates for higher speed access service and because it is the Commissions view that
Rogers, Vidéotron, Shaw and Cogeco would be the largest four MSOs with reference to any
measure, the Commission requires these companies to file proposed rates supported by cost
information as set out in Part VII of this Decision.
|
Recovery of Start-up
Costs
|
24. The Commission
considers that the costs associated with the point of interconnection and its development
are the start up costs associated with the provision of higher speed third party access
service.
|
25. The Commission dealt
with start-up costs in the proceedings leading to Competition in the Provision of
Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues, Telecom
Decision CRTC 92-12, 12 June 1992, (Decision 92-12) and Local Competition,
Telecom Decision CRTC 97-8, 1 May 1997, (Decision
97-8) relating to the introduction of competition into the public voice interexchange and
local markets, respectively.
|
26. In Decision 97-8, the Commission treated new entrants i.e. the
competitive local exchange carriers (CLECs), and incumbents as peers, and determined that
each party would be responsible for recovery of its own start-up costs. On the other hand,
in Decision 92-12 the Commission considered that competitors in the interexchange market
(including the toll arm of the incumbent telephone company) were customers of the local
telephone company. In those circumstances, the recovery of the start-up costs was shared
between the entrant and the incumbent toll provider based on the projected market share of
the two groups.
|
27. The Commission
considers that the circumstances for the higher speed access services under consideration
in this Decision are similar to the circumstances for interexchange competition where a
competitor was considered to be a customer of the local telephone company. The Commission
considers it is appropriate to regard competitive ISPs as customers of cable
carriers higher speed access services.
|
28. Further, it is the
Commissions preliminary view that the start-up costs should be recovered from cable
carriers and competitive ISPs based on the projected demand for cable carriers
higher speed IS and competitors higher speed IS provided using cable carriers
higher speed access service.
|
IV COMPETITIVELY SENSITIVE
COMPETITOR INFORMATION
|
29. CCTA submitted that
cable carriers and ISPs should develop non-disclosure agreements on an as-required basis
to address concerns about the confidentiality of competitively sensitive competitor
information. CCTA preferred this option, which it describes as flexible, economical and
adaptable, to others it identified. CCTA did not favour the Customer Service Group (CSG)
option for larger cable companies, considering that it may prove to be unreasonably
expensive for these companies high-speed businesses at this time, given their
nascent state of development.
|
30. CAIP supported
establishing CSGs. It considered that issues relating to the control of access to and
information about subscribers in the cable market are analogous to those in the long
distance market, where such a model was required. Fundy Cable also supported a requirement
for CSGs.
|
31. Stentor considered that
broadcast carriers which implement a CSG will enjoy competitive advantages over those who
do not and therefore competition for the business of alternate service providers will
incent carriers to implement CSGs or other safeguards, even in the absence of a regulatory
requirement. Stentor considered that the Commission should rely on the market to incent
carriers to offer appropriate non-disclosure commitments and to implement organizational
structures to support these commitments. Stentor agreed with CAIP that most cable carriers
which now offer higher speed retail level Internet Services also have the resources to
implement CSGs, but considered that, if CSGs are required, it would be reasonable to
exempt smaller cable carriers.
|
32. The Commission
considers that the position of incumbent cable carriers that offer both access services
and retail IS is analogous to the position of incumbent telephone companies in Decision
92-12. The Commission also notes that, at present, it is predominantly the larger cable
carriers which offer retail IS and considers that a different approach to protecting
competitor confidential information is appropriate for smaller cable carriers in view of
the resources available to such carriers.
|
33. With respect to
Stentors submission, the Commission does not consider it appropriate to require a
cable carriers competitors to weigh and potentially "trade-off" measures
to protect their confidential information against the other features of a carriers
service offering.
|
34. The Commission
therefore considers that larger cable carriers that offer both higher speed retail IS and
access services should be required to create a CSG group to handle the access service
requests of competitor ISPs. All other incumbent cable carriers offering higher speed
access services and retail IS should enter into a standardized non-disclosure agreement
with ISPs for the protection of competitively sensitive ISP information.
|
35. Standardized
non-disclosure agreements are preferable to those negotiated on a case by case basis in
that more balanced negotiating strength will flow from industry-industry negotiations
around a working group table. The specifics of the agreement should be negotiated by ISPs,
cable carriers and their representatives. The Commission considers that the list of items
proposed by CAIP in its submission for such an agreement and the ILECs CSG
agreements represent a reasonable starting point for discussions.
|
36. With respect to the
issue of defining the cut-off point between "larger" and "smaller"
cable carriers, it is the Commissions preliminary view that the approach suggested
for defining larger cable carriers for rating purposes is also appropriate in this
context.
|
V TARIFFS FOR TERMS OF
SERVICE
|
37. In Telecom Public
Notice CRTC 97-40, Review of the Terms of
Service and General Regulations of Telephone Companies with respect to Services and
Facilities Provided to Competitive Providers of Telecommunications Services,
1 December 1997 (PN 97-40), the Commission is examining whether separate terms of
service should be established for ILEC competitors. Current ILEC Terms of Service, which
are tariffed, treat these competitors in the same manner as customers that are end-users.
|
38. CAIP preferred tariffs
for the rights and obligations associated with higher speed access services, and stated
that the exact terms should be negotiated by a Working Group, once a technical access
arrangement is in place.
|
39. Stentor considered that
issues in this proceeding are essentially the same as those being considered in PN 97-40, and that there should be no inconsistency
between the Commissions determinations in that proceeding and this one.
|
40. Stentor made the same
submission in this proceeding as in PN 97-40: where market mechanisms
are sufficient to protect the interests of all parties, Terms of Service are not required;
all mandatory terms should apply to similar services offered by competitors; Terms of
Service applicable to customers who are competitors should not differ from the terms which
apply to other customers; most existing terms applying to tariffed services, including
limitations on liability should remain in place.
|
41. Stentor considered
negotiated agreements to be the best approach but consistency between the
Commissions determinations in PN 97-40 and this proceeding is
paramount in its view. Stentor disagreed with CCTA that PN 97-40 is irrelevant to this
proceeding.
|
42. CAIP supported
Stentors position with respect to the relationship between this proceeding and PN 97-40 to the extent it results in terms of access that are in a General
Tariff; CAIP sees no reason to treat broadcast carriers differently than
ILECs.
|
43. CCTA generally opposed
a tariffing approach, stating that the procedures developed in the CAIP/CCTA Technical
Working Group should be used as the standard operations procedures for third party access
agreements. In CCTAs view, the issues in PN 97-40 and this
proceeding are not interdependent; for example, higher speed access will not be like a
traditional telephony service and it is possible that limits on cable carrier liability
could have a significant impact on the risks and costs of providing third party access or
the time required to implement the service.
|
44. The Commission
generally considers that it is important to take a symmetrical approach with respect to
regulating carriers which have market power, unless there are compelling reasons to do
otherwise. The Commission notes that, in Decision 98-9, it found that incumbent telephone
carriers and incumbent cable carriers have substantial market power in higher speed access
services.
|
45. This would mean that,
unless the appropriateness of doing otherwise is demonstrated, the general approach to
terms which are tariffed for ILECs and cable carriers should be the same. It is also the
Commissions view that the terms themselves would be the same, unless the
appropriateness of doing otherwise is demonstrated. The Commission is of the further view
that it is appropriate to tariff certain of the terms on which carriers with market power
provide services to their competitors. On the release of its determinations in PN 97-40, the Commission intends to seek comment as to why the approach in
that decision should not apply to cable carriers in respect of the provision of higher
speed access service.
|
VI RESALE OF HIGHER SPEED
ACCESS SERVICES
|
46. CAIP wanted mandatory
resale of all underlying facilities, network components and services used by cable
carriers to provide their own retail IS.
|
47. CCTA opposed mandatory
resale of access services, and submitted that such mandatory resale is not required for
competition in the market for high speed access to continue to develop. CCTA submitted
that resale may not be workable with the currently proposed approach to implementing
access. CCTA considered that the record shows that parties are confused about what resale
means in this context. In its view, ISPs want mandatory resale because they want to be
able to bill the end-user directly for access. Fundy submitted that resale should not be
mandatory, but supported resale if there is enough bandwidth and existing service quality
is not compromised.
|
48. Stentor stated that
"resale" may not be the most appropriate description of the use ISPs wish to
make of higher speed access services. Stentor stated that what ISPs want is the right to
use a broadcast carriers tariffed higher speed access service as a component in a
bundled, end to end IS, whether or not this arrangement is called "resale".
Stentor noted that this right appears to be inherent in the determination that broadcast
carriers will provide higher speed access services on a tariffed basis.
|
49. In Decision 98-9, the
Commission stated that:
|
"Certain parties requested that the
Commission require resale of access. With respect to CAIPs request that its members
be permitted to resell a cable carriers access service so as to retain a complete
relationship with their ISP customers, the Commission considers that there may be benefits
from such an arrangement.
|
The issue of whether the Commission should
mandate resale and sharing of carriers higher speed access services will be
addressed in Telecom PN 98-14."
|
50. In the
Commissions view, resale of higher speed access services will contribute to a
continued competitive market for retail IS. The Commission further notes that restrictions
on the resale of access services would not be consistent with the requirement imposed on
other Canadian carriers that their tariffed services be generally available for resale.
The Commission therefore considers that, consistent with its general approach of allowing
resale of tariffed services, a condition of the provision of tariffed third party access
is that it be available for resale.
|
51. With respect to
CCTAs point that dial-up access (primary exchange) is billed separately from
Internet Service, the Commission notes that, with respect to other access methods (e.g.
ADSL), ISPs have the option of including the access charge in their bills to customers.
CCTA considered "resale" to mean that without resale the end customer will pay
the cable carrier; where there is resale, the ISP will be billed for the access. The
Commission considers that ISPs should be able to provide an end-to-end IS service to their
customers. This could be effected by, for example, the end-user appointing the ISP as its
agent for the purpose of dealing with the cable carrier.
|
VII FURTHER PROCESS
|
Further Process with
Respect to Rates for Higher Speed Access Services
|
52. The Commission directs
Rogers, Vidéotron, Shaw and Cogeco to file proposed tariffs setting out rates for higher
speed access service and for the use of cable facilities required to provide that service,
within 60 days of the date of this Decision.
|
53. Carriers filing
proposed tariffs are directed to provide:
|
a) proposed rates for
higher speed access service and for the use of cable facilities; proposed rates should
include the recovery of start-up costs (point of interconnection) based on the principles
set out in the Commissions preliminary view respecting start up costs in this
Decision, and
|
b) a supporting cost study
developed using to the extent possible the incremental Phase II costing approach as set
out in Decision 79-16.
|
The costing study should
indicate clearly, for each of the network and point of interconnection, which components
are included in the costing. Specific justification must also be provided in respect of
any component that could be considered to be part of an infrastructure upgrade the cost of
which is being recovered, in whole or in part, through the framework put in place by the
Commission under the Broadcasting Act.
|
54. As noted above, it is
the Commissions preliminary view that each of Moffat, Fundy and Bragg would also be
a "larger MSO". Accordingly, at its option, each of these companies may either
(a) file, within 60 days of the date of this Decision, proposed tariffs as set out in the
preceding paragraph or provide justification as to why it wishes to use an alternate
approach to the development of rates, serving copies on all other parties, or (b) await
the Commissions final determination of the definition of a "larger"
MSO.
|
55. Each of Rogers,
Vidéotron, Shaw, Cogeco, Moffat, Fundy and Bragg may also submit proposed rates
reflecting any alternate proposed method for the recovery of start-up costs. Carriers
using an alternate approach, such as proxy costs, are requested to describe fully the
methodology of the approach used and to explain why that approach has been selected.
|
56. All interested parties
may file comments on the Commissions preliminary view regarding the recovery of
start-up costs within 60 days of the date of this Decision, and may file reply comments
with the Commission, in each case serving copies on all other parties, within a further
15 days.
|
57. On receipt of these
filings, the Commission will consider whether to approve, on an interim basis, rates for
higher speed access service and for the use of cable facilities.
|
58. After review of the
proposed rates and cost estimates filed, the Commission intends to initiate a proceeding
to consider issues relating to rate development for higher speed access services offered
by incumbent cable carriers and to approve rates for this service on a final basis.
|
Further Process - Other
Matters
|
59. As set out above, with
respect to the issue of defining the cut-off point between "larger" and
"smaller" cable carriers, the Commission is of the preliminary view that the
approach set out in respect of rating higher speed access services is also appropriate in
this context: that is, the seven largest cable MSOs, defined with reference to the number
of cable subscribers, will be considered to be "larger" MSOs.
|
60. Parties may file
comments on this view within 60 days of the date of this Decision, and may file reply
comments with the Commission within a further 15 days, in each case serving copies on all
other parties at the same time.
|
61. Moffat, Shaw, Bragg and persons
registered pursuant to the process set out in PN 98-14,
are made parties to this proceeding.
|
62. Other persons wishing
to participate in this proceeding must notify the Commission of their intention to do so
by writing to the Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, fax: (819) 953-0795,
by 5 August 1999. Parties are to indicate in the notice their Internet email address,
where available. If parties do not have access to the Internet, they are to indicate in
their notice whether they wish to receive disk versions of hard copy filings. The
Commission will issue, as soon as possible after the registration date, a complete list of
parties and their mailing addresses (including Internet email addresses, if available),
identifying those parties who wish to receive disk versions.
|
63. Where a document is to
be filed or served by a specific date, the document must be actually received, not merely
sent, by that date.
|
64. In addition to hard copy filings,
parties are encouraged to file with the Commission electronic versions of their
submissions in accordance with the Commissions Interim Telecom Guidelines for the
Handling of Machine-Readable Files, dated 30 November 1995. The Commissions
Internet email address for electronically filed documents is procedure.telecom@crtc.gc.ca.
Electronically filed documents can be accessed at the Commissions Internet site at
http://www.crtc.gc.ca.
|
Secretary General
|
This document is available in
alternative format upon request.
|