ARCHIVED -  Telecom Order CRTC 97-913

Telecom Order

Ottawa, 27 June 1997

Telecom Order CRTC 97-913

The Commission received a letter dated 19 February 1997 from Call-Net Enterprises Inc. (Call-Net), on behalf of Sprint Canada Inc. (Sprint) and KPMG Inc. (KPMG), requesting a review and variance of Telecom Order CRTC 96-932 dated 23 August 1996 (Order 96-932) such that Smart Talk Network's (STN) application for contribution exemption on unused bandwidth be allowed in respect of uninstalled circuits, effective the date of the application. In Order 96-932, the Commission denied STN's application for exemption from contribution charges for the circuits in question.

File No.: 97-8662-S2.01

1. Sprint stated that KPMG operated STN's business as interim receiver from 4 July 1995 to 3 August 1995, and that on 4 August 1995, Sprint purchased certain assets of STN from KPMG.

2. Call-Net submitted that there are two separate categories of circuits within STN's unused bandwidth category: Category 1 - those that were installed and physically able to carry traffic but according to STN's traffic calculations were not actually carrying traffic; and Category 2 - those circuits that were physically not able to carry traffic (either not installed or otherwise unusable). Call-Net submitted that the Commission incorrectly lumped both categories together and denied the application with respect to the entire "unused bandwidth".

3. Call-Net submitted that: (1) the Order was contrary to the evidence since Bell Canada (Bell) agreed with the second category of unused bandwidth; (2) STN was denied a right to a fair hearing since the Commission mistakenly concluded that STN was unable to provide further clarification of its evidence since it had filed for bankruptcy; and (3) there is substantial doubt as to the correctness of the Commission's decision in denying an exemption order for all of the circuits classified by STN as "unused bandwidth" when the uncontroverted evidence was that several DS-0s identified as "uninstalled" clearly qualified for exemption.

4. Call-Net stated that pursuant to the arrangement between Sprint and KPMG, and should the Commission not vary its decision, Sprint is potentially obligated to pay the contribution assessed in respect of the period 4 August 1995 to 12 October 1995 and that KPMG in turn is potentially liable, as receiver manager, for the contribution payments assessed for the period between 4 July 1995 and 3 August 1995.

5. Call-Net stated that the total contribution is $539,317, consisting of $198,049 for installed circuits and $341,268 for uninstalled circuits. Call-Net stated that these figures are consistent with the carrier monthly reports included in Attachment 1 to its application. Call-Net further stated that of the total amount, it is potentially liable for the portion accruing during the period 4 August to 12 October 1995 (being the period when KPMG operated the STN network as a going concern on behalf of Sprint) in the amount of $258,848 ($68,166 for installed circuits and $190,681 for uninstalled DS-0s). Call-Net stated that KPMG is potentially liable for the portion accruing during the period 4 July to 3 August 1995, in the amount of $102,440 ($33,529 for installed circuits and $68,910 for uninstalled DS-0s).

6. By letter dated 21 March 1997, AT&T Canada Long Distance Services Company (AT&T Canada LDS) stated that it supported Call-Net's review and vary application with regard to those STN circuits which were spare or uninstalled.

7. AT&T Canada LDS stated that according to the Commission's ruling in Order 96-932, the contribution owing for KPMG's period is $101,095. AT&T Canada LDS stated that from 4 August to 12 October 1995, the date when the transfer of STN customers to the Sprint network was complete, contribution on the Category 1 and Category 2 circuits resulted in an amount of $258,429. AT&T Canada LDS stated that at issue is a sum of $539,317, of which $199,467 is contribution associated with Category 1 circuits and $258,430 is contribution associated with Category 2 circuits.

8. AT&T Canada LDS stated that if the Commission decides to vary Order 96-932 to state that legitimately spare and uninstalled bandwidth is not contribution bearing, KPMG, Call-Net and AT&T Canada LDS have agreed to the amount of contribution owing on these circuits and will settle the matter quickly.

9. By letter dated 27 March 1997, Bell submitted that unused, uninstalled Canada-U.S. circuits provided to a reseller would qualify for an exemption from contribution charges, subject to the reseller making the required application to the Commission, and the Commission's approval, and subject to meeting the requirement for ongoing monthly reporting of such circuits. Bell stated that since it did not provide the facilities in question to STN it had no means of verifying or validating Call-Net's claim that the facilities in question were reported on a monthly basis to the underlying carrier in the format described in Call-Net's submission.

10. Call-Net filed a reply dated 2 April 1997.

11. The Commission agrees with Call-Net and is of the view that there is substantial doubt as to the correctness of its decision. Category 2, the not installed or otherwise unusable bandwidth should be contribution exempt.

12. The Commission notes that contrary to AT&T Canada LDS's statements, the parties do not appear to have agreed on the amount of contribution pertaining to the Category 2 circuits. Specifically, the relevant contribution amounts identified by Call-Net are different from those cited by AT&T Canada LDS. The Commission further notes that Call-Net provided evidence to support the period from 4 July 1995 to 12 October 1995. The Commission further notes that STN filed its original application on 2 May 1995. Therefore, there is the period from 2 May 1995 to 4 July 1995 to consider.

13. Based on Call-Net's evidence, there is an amount of $341,268 - $190,681 - $68,910 = $81,677 that is unassigned in Category 2. The Commission also notes that AT&T Canada LDS's calculations show a difference of $81,420 ($539,317 - $199,467 - $258,430 = $81,420). The Commission notes that it granted interim approval to unused bandwidth effective the date of application (2 May 1995) in Telecom Order CRTC 95-628, dated 30 May 1995, pending receipt of additional evidence. Given this, the Commission is of the view that it would be appropriate to use an effective date of 2 May 1995.

14. Based on the foregoing, the Commission orders that:

(a) Order 96-932 is varied such that for Category 2 of the unused bandwidth (those circuits that were physically not able to carry traffic [either not installed or otherwise unusable]), the application for exemption is approved effective the date of application (2 May 1995).

(b) Bell, Sprint, AT&T Canada LDS, and KPMG are directed to commence negotiation forthwith to finalize settlements with respect to contribution on Category 2 unused bandwidth.

Laura M. Talbot-Allan
Secretary General

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