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Telecom Order CRTC 2003-213
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Ottawa, 28 May 2003
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Bell Canada
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Reference: Tariff Notice 6721
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Mini Flexibility Bundle Market Trial
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The Commission denies Bell Canada's proposal for a Mini Flexibility Bundle Market Trial as the offering does not qualify as a legitimate market trial.
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1.
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The Commission received an application by Bell Canada filed under Tariff Notice (TN) 6721, dated 9 January 2003, to introduce a market trial entitled Mini Flexibility Bundle Market Trial, General Tariff item 6101. The Mini Flexibility Bundle consists of a single residential access line and a choice of up to four SmartTouchä services (STS). Bell Canada proposed to market the trial bundle of services from 17 February 2003 to 30 April 2003. The sample of residential customers subscribing to the trial bundle would be eligible to retain the bundle until 31 December 2003.
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2.
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Bell Canada stated that each service was presently available on an individual basis and through bundles, but they had never been sold together in a flexible bundle of this size. Bell Canada submitted that it required the market trial to measure the market acceptability for this type of service packaging. It stated that although it had offered bundles previously, these bundles were of a limited nature, usually involving a fixed suite of services. Bell Canada submitted that it had limited experience with a customizable bundle with six STS and an access line, but had no data that accurately represented market acceptance of a bundle with four STS and an access line. Bell Canada claimed that from an operational standpoint, the market trial would also provide it with detailed information on the impact of selling, providing and billing the service, as well as responding to post sale customer issues. Bell Canada stated that it had addressed in its application the market trial filing requirements specified in Telecom Order CRTC 95-453, 12 April 1995 (Order 95-453).
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3.
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The Commission received comments from Call-Net Enterprises Inc. (Call-Net) dated 27 January 2003, reply comments from Bell Canada dated 30 January 2003, additional comments from Call-Net dated 31 January 2003, and further reply comments from Bell Canada dated 7 February 2003.
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Call-Net's comments
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4.
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Call-Net submitted that TN 6721 should be denied in light of Review of winback promotions, Telecom Public Notice CRTC 2003-1, 15 January 2003 (Public Notice 2003-1). Call-Net noted that, in that public notice, the Commission suspended consideration of applications for winback promotions, and other promotions that had the effect of targeting customers of competitors in the local wireline market, until a decision was issued on the matters raised in the public notice.
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5.
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Call-Net submitted that, although Bell Canada had described TN 6721 as a market trial, it was, in reality, a promotion. Call-Net stated that TN 6721 and the accompanying information was identical to Bell Canada's TN 6659, Flex Bundles. Flex Bundles was billed as a promotion, except that it included more optional features and a maintenance plan. In Call-Net's view, the only difference between the two offerings was that TN 6721 was a "mini" version of TN 6659, noting that Bell Canada itself had made this same characterization in the cover letter accompanying TN 6721. Call-Net submitted that TN 6721 was unlikely to yield any significant market information that Bell Canada did not already have from its Flex Bundles promotion and, therefore, TN 6721 was not a legitimate market trial but a disguised promotion.
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6.
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Call-Net submitted that, in any event, the Commission traditionally treated market trials and promotions in the same way. For example, in Review of regulatory framework - Targeted pricing, anti-competitive pricing and imputation test for telephone company toll filings, Telecom Decision CRTC 94-13, 13 July 1994 (Decision 94-13) and Local Competition, Telecom Decision CRTC 97-8, 1 May 1997, the Commission exempted market trials and promotions from the application of the imputation test on the condition that sufficient information was provided by the incumbent local exchange carriers (ILECs) to demonstrate that the offering was a legitimate market trial or promotion of limited duration. Call-Net submitted that as such, the concern expressed by the Commission in Public Notice 2003-1 regarding the impact of promotions on competitive entry in the local exchange market applied equally to market trials. According to Call-Net, market trials targeted at winning back customers from new entrants, or which have the effect of targeting new entrants' customers, are no less damaging than promotions which have the same effect.
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7.
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Call-Net noted that the proposed market trial would be targeted at new and existing customers. Call-Net defined new customers to include customers currently subscribed to competitors, as well as new customers who have no current service provider but could potentially subscribe to a competitor's service. Call-Net further submitted that TN 6721 should be denied even if it was revised to target only existing customers. Call-Net argued that considering the dominance of Bell Canada in the residential local service market, a promotion directed at its existing customers, as opposed to new customers was just as damaging, if not more so, to competitors as if the promotion was designed to lure back customers from competitors. Call-Net noted that the Commission had recognized in the recent Report to the Governor in Council: Status of Competition in Canadian Telecommunications Markets, that Bell Canada had virtually 100% of the residential local market in its operating territories. Call-Net submitted that a promotion targeted at existing customers was in fact a promotion targeted at all customers.
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8.
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Call-Net argued that competitors could only grow primarily by gaining from Bell Canada's existing share of customers, and that an offer such as TN 6721 was targeted at preventing that growth by giving the customer an incentive through lower rates to remain with Bell Canada. According to Call-Net, TN 6721 raised the very same concern that led to Public Notice 2003-1, namely the impact of ILEC promotions on new entrants' ability to acquire market share from an ILEC that holds virtually 100% of the market. Call-Net submitted that such an offer defeated the very purpose of Public Notice 2003-1.
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9.
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In light of the foregoing, Call-Net submitted that TN 6721 should be suspended until the determination of Public Notice 2003-1.
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Bell Canada's reply
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10.
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In Bell Canada's view, Call-Net's request to delay consideration of TN 6721 was premised on the misconception that the proposed market trial was a disguised promotion targeted at competitor customers and, consequently, was covered by the interim suspension order set out in Public Notice 2003-1.
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11.
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In support of its position that TN 6721 was a legitimate market trial of a new service, Bell Canada submitted that it met all of the requirements for market trial filings established by the Commission in Order 95-453. Further, the scope of the market trial was limited, it would be offered for a period of only six weeks to a limited number of potential customers, and only via a limited number of customer representatives in its inbound customer care centre. Bell Canada further submitted that the proposed service was priced at a rate intended to reflect a final rate for the service, so that customer reaction to the service offering could be measured in a meaningful way.
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12.
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Bell Canada submitted that Call-Net was mistaken to suggest that TN 6721 was a promotion because it was similar to the TN 6659 Flex Bundles filing. While the service in TN 6721 had similarities to the service offering of TN 6659, it contained none of the promotional elements, i.e., an introductory rate for the first two months of subscription for new and moving residential customers, and rebate coupons for existing non-moving customers.
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13.
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Bell Canada submitted that the proposed market trial in no way conflicted with the purpose or intent of Public Notice 2003-1. Given that the proposed trial would be offered to a limited number of new and existing customers and only through inbound call centres, it would be difficult to conceive of a less effective way of targeting competitors' customers. Bell Canada argued that it would only be by sheer happenstance that a competitor's customer would call a Bell Canada call centre during the trial, and randomly be connected to one of the few designated customer care representatives able to present the market trial offer.
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14.
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Bell Canada stated that Public Notice 2003-1 specifically dealt with promotions only, and that Call-Net's attempt to broaden the suspension order set out in the public notice to cover market trials was, in effect, an inappropriate collateral attack on an order of the Commission. Bell Canada submitted that, even if the Commission had specified market trials in Public Notice 2003-1, TN 6721 clearly did not have the effect of targeting customers of competitors.
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15.
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Bell Canada stated that it incurred significant costs and risks when it introduced a new service. The market trial mechanism enabled it to test a proposed offering without incurring the costs and risks associated with the full launching of a new product. Bell Canada argued that the limited experience it had with the existing Flex Bundles was not a sufficient basis for determining whether and, if so, how to offer this new service to residential customers with telecommunications needs that were less feature-intense than customers that subscribed to Flex Bundles.
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Call-Net's additional comments
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16.
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Call-Net submitted that Bell Canada made potentially misleading comments about its intervention and its analysis of the objective and purpose of Public Notice 2003-1. In its view, the intent of Public Notice 2003-1 was to suspend promotional offers that impaired new entrants' ability to compete fairly and effectively, pending the Commission's conclusion of the proceeding initiated by Public Notice 2003-1. Public Notice 2003-1 would have little or no value in fostering competition if it did not apply to promotions directed at ILECs' existing customers. In Call-Net's further view, promotions targeted at protecting or incenting existing ILEC market share hurt competitors more than promotions targeted at customers that already switched over to competitors.
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17.
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Call-Net submitted that the Commission had traditionally applied the same regulatory treatment to promotions and market trials, and therefore, market trials that had the same impact as promotions on new entrants' ability to compete were, in its view, included in the suspension order set out in Public Notice 2003-1. According to Call-Net, to hold otherwise, would be to simply open a gaping hole for the ILECs to circumvent the intent and purpose of Public Notice 2003-1 by describing an offer as a market trial as opposed to a promotion.
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Bell Canada's further reply comments
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18.
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Bell Canada submitted that Call-Net had continued its attempt to expand the scope of the Public Notice 2003-1 suspension order relating to ILEC winback promotions. The company noted that the offer contained in the proposed market trial would not be advertised, and the trial itself was restricted to a limited number of customers who called the inbound customer service centre, for a limited period of time. Bell Canada submitted that the filing met the requirements of a legitimate market trial, and consideration of this filing was not suspended by Public Notice 2003-1.
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Commission determination
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19.
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The Commission notes Call-Net's submission that although Bell Canada filed TN 6721 as a proposed market trial, in its view, it was a promotion. The Commission considers that TN 6721 is not a promotion as it is more limited in scope than a promotion would be. Accordingly, the Commission finds that TN 6721 is not suspended by operation of Public Notice 2003-1.
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20.
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The Commission notes that in Decision 94-13, it exempted market trials from the application of the imputation test, on the condition that sufficient information was provided by the telephone companies to demonstrate that the offering was a legitimate market trial. The Commission agrees with Call-Net's position that TN 6721 is a "mini" version of TN 6659 which also bundled a residential access line and various STS. The Commission considers that Bell Canada's proposal under TN 6721 in essence amounts to a repackaging of existing tariffed services. In the Commission's view, Bell Canada has not adequately demonstrated that a trial is necessary in this case, and considers that the offering does not qualify as a legitimate market trial. Accordingly, the Commission denies TN 6721.
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Secretary General
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This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca
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Date Modified: 2003-05-28