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Ottawa, 19 April 1993
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Telecom Decision CRTC 93-5
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UNITEL COMMUNICATIONS INC. - APPLICATION FOR EXTENSION OF THE CONTRIBUTION DISCOUNT PERIOD AND OTHER MATTERS
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I BACKGROUND
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On 14 August 1992, the Commission received an application from Unitel Communications Inc. (Unitel) raising certain issues related 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 to the judicial stay of that Decision as a result of the appeals filed with the Federal Court of Appeal by Bell Canada (Bell), British Columbia Telephone Company (B.C. Tel), The Island Telephone Company Limited (Island Tel), Maritime Telegraph and Telephone Company Limited (MT&T) and Newfoundland Telephone Company Limited (Newfoundland Tel). In addition to the above-noted companies, Unitel named The New Brunswick Telephone Company Limited (NBTel) as a respondent to its application.
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In its application, Unitel noted that the Federal Court had stayed those aspects of Decision 92-12 requiring the respondents in the proceeding leading to that Decision to take steps necessary to provide trunk-side access to Unitel and other interexchange carriers. Unitel noted that Decision 92-12 had established a fixed period (1993 to 1998) over which it and other interexchange carriers would be entitled to contribution discounts. Unitel argued that, since the effect of the stay was to delay trunk-side access, the Commission should adjust the discount schedule to reflect the number of months that the stay remained in effect.
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Second, Unitel noted that Decision 92-12 had directed Unitel and the respondents to establish Joint Technical Committees (JTCs) to negotiate technical aspects of interconnection; however, as a result of the judicial stay, the formation of these committees had been delayed. In the absence of the JTCs, Unitel expressed concern as to the appropriate forum in which to resolve problems related to line-side access.
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Third, Unitel noted that Decision 92-12 had ordered the respondents to set up Interexchange Carrier Groups in order to ensure the confidentiality of information provided by competitors to the local monopoly carriers. Unitel noted that the stay had delayed the creation of such groups by Bell, B.C. Tel, Island Tel and MT&T. Unitel submitted that these companies should nonetheless adopt safeguards to maintain the confidentiality of information while the stay remained in effect and requested that the Commission direct them to indicate the procedures that they have adopted to ensure that confidentiality.
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Fourth, Unitel raised concerns related to the use of billing inserts by the respondent telephone companies and, in particular, to a billing insert entitled Questions and Answers on Long Distance Competition that B.C. Tel had circulated to its customers.
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Finally, Unitel raised issues related to the use for promotional purposes of the LED display in certain pay telephones.
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The Commission received comments on Unitel's application from Bell, B.C. Tel, Island Tel, MT&T, NBTel and Newfoundland Tel. Unitel filed reply comments dated 24 September 1992.
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The Commission notes that, on 23 December 1992, the Federal Court of Appeal upheld Decision 92-12, thus allowing its full implementation to proceed. As a result, the only outstanding stay-related issue raised in Unitel's application is the request for an extension of the contribution discount period. Technical interconnection issues are being resolved through the JTCs, while the treatment of competitively sensitive information is being addressed by the creation of Interexchange Carrier Groups.
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II THE CONTRIBUTION DISCOUNT PERIOD
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As noted above, Unitel requested that the Commission adjust the contribution discount schedule established in Decision 92-12 to reflect the number of months that the stay remained in effect.
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Unitel argued that, because the discount schedule has fixed start and termination dates, the onus is on competitors to enter the market as early as possible in order to maximize the discount that will apply. Unitel stated that, as a result of the stay, its ability to take full advantage of the discounts has been prejudiced. Unitel submitted that its requested change would prevent prejudice to competitors, without compromising the Commission's objective in setting contribution discounts of limited duration.
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In reply, Bell, B.C. Tel, Island Tel, MT&T, NBTel and Newfoundland Tel noted that the stay did not affect the ability of Unitel to offer long distance services using line-side access. Bell and MT&T argued that Unitel's request to adjust the contribution schedule amounted to a request to review and vary Decision 92-12 pursuant to section 66 of the National Telecommunications Powers and Procedures Act. NBTel noted that Unitel had not planned to market its long distance services in New Brunswick until 1994; accordingly, there was no reason to extend the contribution discount period with respect to it.
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The Commission agrees with Unitel that the contribution discount schedule should be extended with respect to those companies who sought and obtained a stay of the implementation of Decision 92-12. In Decision 92-12, the Commission found that the respondents had a market advantage over competitors in the long distance voice market as a result of their control of the local networks and their historically dominant position. In light of that advantage, and in order to limit contribution erosion, the Commission found a contribution discount of limited duration, commencing on 1 January 1993, to be appropriate. Under the scheme adopted by the Commission, the discount is phased out as the disadvantages faced by competitors are reduced and they have an opportunity to capture market share.
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While the judicial stay did not effect the ability to obtain line-side access, Unitel and any other potential competitors will, as a result of the stay, obtain trunk-side access in the operating territories of certain companies approximately six months later than contemplated in Decision 92-12. Unitel's ability to take full advantage of the contribution discount period contemplated by Decision 92-12 has been compromised. Accordingly, the Commission's objectives in establishing the contribution discount period have been prejudiced.
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In light of the above, the Commission considers it appropriate, with respect to Bell, B.C. Tel, Island Tel and MT&T, to extend by six months the contribution discount periods established in Decision 92-12. Thus, for contribution payable to those companies, the 25% discount will apply to 30 June 1996, the 15% discount will apply from 1 July 1996 to 30 June 1997, and the 10% discount will apply from 1 July 1997 to 30 June 1998.
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The Commission notes that NBTel did not participate in the appeal of Decision 92-12. While Newfoundland Tel did appeal the Decision, it did not request a stay pending the outcome of that appeal. As a result, Unitel's ability to obtain trunk-side access and, accordingly, its ability to take full advantage of the contribution discounts, was not prejudiced in the operating territories of these two companies. Accordingly, the Commission does not consider it appropriate to amend the schedule of contribution discounts established in Decision 92-12 with respect to either NBTel or Newfoundland Tel.
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III USE OF BILLING INSERTS
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With its application, Unitel filed a copy of a B.C. Tel billing insert entitled Question and Answers on Long Distance Competition. Unitel submitted, among other things, that the insert included statements intended to cast doubt on the wisdom of Decision 92-12 and that it calls into question Unitel's "capacity to deliver on the commitments it made during the proceeding leading up to Decision 92-12." Unitel stated that, "while there are many ways in which the content of the B.C. Tel billing insert is objectionable..., it is not the role of the Commission to censure the expression of offensive or wrong-headed views by the carriers it regulates." Rather, Unitel objected to B.C. Tel's expression of its views by means of a billing insert directed to local subscribers, which Unitel described as "a serious abuse of the privileged position that B.C. Tel occupies as a monopoly supplier of local services." Unitel also submitted that the costs associated with the billing function, such as the envelope and postage, are included in B.C. Tel's Phase III Access Category, to which Unitel and reseller contribution payments are directed.
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Unitel argued that subsection 340(2) of the Railway Act requires that the telephone companies treat their competitors on an impartial basis. Unitel stated that, in Decision 92-12, the Commission discussed the regulatory safeguards necessary to ensure that the telephone companies do not have an unfair competitive advantage by virtue of their control over access to subscribers. In particular, Unitel cited the following statement from Decision 92-12:
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... the respondents should only have to provide information as to the existence of alternative suppliers if in the provision of access service (new subscribers, moves, changes) they actively promote their own long distance services. Meanwhile, the Commission expects questions and referrals at respondents' business offices to be handled on an impartial basis.
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Unitel submitted that, in the case of customer bills, another monopoly service, the telephone companies would be conferring an undue preference on themselves if they were able to promote their competitive services through a billing insert without providing a similar opportunity to competitors. Unitel requested that, "in order to set the record straight", B.C. Tel be directed to enclose a Unitel billing insert with its next mailing. Unitel also submitted that, on a prospective basis, the telephone companies should make their billing facilities available on a non-discriminatory basis to all competitors, or that they should be prohibited from enclosing further billing inserts that promote their long distance services or attack the quality of competitors' services.
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B.C. Tel stated that the billing insert was not a promotion of its toll services. B.C. Tel contended that the billing insert was strictly informational and only summarized public knowledge, and that Unitel could not claim competitive harm as a result of it. Generally, the respondents argued that, in Enhanced Services, Telecom Decision CRTC 84-18, 12 July 1984 (Decision 84-18), the Commission determined that telephone companies need not give competitors access to their billing systems in order to place inserts. The respondents also noted that Decision 92-12 did not permit Unitel access to the respondents' billing systems, but rather stated that they must provide information about competitors' toll services only if they promoted their own toll services. Finally, the respondents also stated that the incremental costs of the insert were charged to B.C. Tel's toll operations, so that Unitel cannot argue that there were cross-subsidies flowing from local services to toll services.
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In the Commission's view, B.C. Tel's billing insert was essentially informational in nature and is unlikely to cause competitive harm to Unitel. Based on this determination, the Commission finds that, in distributing the insert, B.C. Tel did not confer an undue preference or advantage on itself relative to other competitive suppliers of toll services. Accordingly, Unitel's request that B.C. Tel be directed to circulate a Unitel billing insert is denied.
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The Commission concurs with the view expressed by Unitel that it is not the role of the Commission to censure the expression of views by the carriers that it regulates. In addition, while the Commission agrees with Unitel that the competitive circumstances have changed substantially since Decision 84-18, it does not agree with Unitel's submission that, at this time, it must either require the respondents to permit access to their billing facilities on a non-discriminatory basis, or prohibit the respondents from using billing inserts to promote their long distance services.
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IV TELEPHONE COMPANY LONG DISTANCE ADVERTISING ON PAY TELEPHONES
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Unitel stated that Bell had been using pay telephones in public locations to promote its long distance calling cards, specifically, through the use of the LED display on certain telephones. Unitel noted that, in Decision 92-12, the Commission stated that toll calling cards have been developed primarily for long distance calling and could be characterized as a competitive tool. Unitel submitted that the use of pay telephones to promote telephone company calling cards is anti-competitive and constitutes an undue preference contrary to subsection 340(2) of the Railway Act, and that the respondents should not be permitted to take advantage of their role as a provider of monopoly services or facilities (pay telephones) to promote their competitive service offerings. Unitel requested that the respondents be prohibited from promoting calling cards or other long distance services on pay telephones, or be required to provide non-discriminatory access to these facilities.
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Bell stated that the pay telephones in question have a visual display primarily to provide instructions on how to use Bell calling cards in conjunction with long distance calling, but that the respondents should be able to advertise their services on their facilities. B.C. Tel noted that it does not use pay telephones to promote its toll services. Finally, the respondents noted that, pursuant to Decision 92-12, Unitel can operate its own pay telephones, albeit limited to long distance services, provided that it files tariffs for the provision of operator services.
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The Commission notes the limited nature of the visual display in question and, consequently, the limited impact of any promotional messages presented by means of it. Accordingly, the Commission finds that any preference that Bell may have conferred upon itself in using the display to promote its calling cards or other long distance services is not undue. Unitel's request is therefore denied.
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Allan J. Darling
Secretary General
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