Telecom Public Notice CRTC 2006-10 Ottawa, 7 July 2006 Continued need for the regulatory constraints applicable to toll and toll-free services Reference: 8661-C12-200608672 and 8661-B2-200605719 In this Public Notice, the Commission initiates a proceeding and invites comments on discontinuing certain regulatory constraints with respect to the basic toll services of Aliant Telecom Inc., Bell Canada, MTS Allstream Inc., Ontera, Saskatchewan Telecommunications, Société en commandite Télébec, Sogetel inc., and TELUS Communications Company. Application 1. The Commission received an application dated 9 May 2006 by Bell Canada, filed under Part VII of the CRTC Telecommunications Rules of Procedure (Bell Canada's Part VII application), seeking an order discontinuing the application of the regulatory constraints applicable to the company's basic toll schedules in its traditional Ontario and Quebec serving territories. 2. Bell Canada noted that in Forbearance – Regulation of toll services provided by incumbent telephone companies, Telecom Decision CRTC 97-19, 18 December 1997, as amended by Telecom Decision CRTC 97-19-1 dated 9 March 1998 (Decision 97-19), the Commission generally forbore from regulating certain incumbent telephone companies'1 toll and toll-free services, but, pursuant to section 24 of the Telecommunications Act (the Act), made the offering and provision of toll services subject to the basic toll constraints set out below (the basic toll constraints): • these telephone companies were to provide to the Commission, and make publicly available, rate schedules setting out the rates for basic toll service. These schedules were to include the 50 percent discount applicable to calls which originated from, and were billed to, the residence service of a registered certified hearing or speech-impaired Telecommunications Devices for the Deaf (TDD) user. The telephone companies were to update their respective schedules within 14 days of any change to the rates for basic toll service; 1 These telephone companies were BC TEL (now part of TELUS Communications Company (TCC)); Bell Canada; MTS NetCom Inc. (now MTS Allstream Inc. (MTS Allstream)); The Island Telephone Company Limited, Maritime Tel & Tel Limited, The New Brunswick Telephone Company Limited and NewTel Communications Inc. (now Aliant Telecom Inc. (Aliant Telecom)); TELUS Communications Inc. (now part of TCC); Québec-Téléphone (now part of TCC); Télébec ltée (now Société en commandite Télébec (Télébec)); and Sogetel inc. (Sogetel). • these telephone companies were to provide reasonable direct notice in writing to subscribers in advance of any increases to the basic toll rates; • these telephone companies were not to route de-average basic toll rates; • the cap on overall North American basic toll rates implemented by the Commission in Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994, was to continue to apply in modified form. Changes within any of the North American basic toll schedules were permissible, provided any rate increases within a schedule were offset by corresponding decreases within the same schedule such that there was no change to that schedule's weighted average rate; and • these telephone companies were to ensure that all toll customers and applicants for toll services in their respective serving territories could choose basic toll service at the rates set out in the rate schedules noted in Decision 97-19. 3. Bell Canada noted that the Commission had maintained the basic toll constraints in Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002, as amended by Telecom Decision CRTC 2002-34-1 dated 15 July 2002 (Decision 2002-34). 4. Specifically, Bell Canada requested that the Commission issue an order: • immediately discontinuing the application of the basic toll constraints to the company in their entirety; or • in the alternative, immediately discontinuing the application of the basic toll constraints to the company in their entirety, except for the requirement to retain the 50 percent discount currently applicable to calls which originate from, and are billed to, the residence service of a registered certified hearing or speech-impaired TDD user, provided this condition applies to all long distance service providers in respect of long distance services offered or provided within the company's traditional Ontario and Quebec serving territories; • irrespective of whether the Commission granted the above-noted relief, an order that credit card surcharges should no longer continue to be included in the calculation of the average basic toll schedule rate; and • such other relief as the Commission considered appropriate in the circumstances. 5. Bell Canada argued that its application was not a request to review and vary Decisions 97-19 and/or 2002-34 relative to the basic toll constraints. Rather, Bell Canada submitted that fundamental changes had occurred since the release of these Decisions that had significantly increased the competitiveness of the long distance market, including the basic toll segment, which, in turn, had increased the level of protection afforded to all toll subscribers in the company's Ontario and Quebec serving territories. 6. Bell Canada noted that these changes included the ubiquitous roll-out of equal access capable switches, and the presence of numerous competing service providers offering stand-alone and bundled long distance services that are often priced lower than the company's long distance services. Another change identified by Bell Canada was the availability of multiple alternative substitute services for traditional wireline long distance service such as voice over Internet protocol (VoIP) services, peer-to-peer (P2P) services, wireless services, dial-around long distance services, and prepaid phone cards. 7. Bell Canada submitted that the continued application of the basic toll constraints to the company was inconsistent with subsections 34(1) and (2) of the Act as the competitive market forces have obviated the need for any of the basic toll constraints. Bell Canada further argued that the discontinuance of the basic toll constraints would be consistent with the telecommunications policy objectives prescribed under sections 7(b), (c), and (f) of the Act, and with the recommendations included in the Telecommunications Policy Review Panel Final Report, released on 22 March 2006. Parties' comments 8. The Commission received comments from the Public Interest Advocacy Centre on behalf of the National Anti-Poverty Organization and the Consumers Association of Canada (collectively, the Consumer Groups), dated 5 June 2006, Aliant Telecom, dated 7 June 2006, TCC, dated 9 June 2006, and Yak Communications (Canada) Inc. (Yak), dated 9 June 2006. 9. The Consumer Groups and Yak opposed Bell Canada's Part VII application. The Consumer Groups submitted that they did not have the information required to assess whether the current market for long distance services sufficiently provided competitive alternatives accessible by the customers served by the basic toll rates provided by Bell Canada such that the current protections provided by the basic toll constraints were not needed. Yak disagreed with Bell Canada that, among other things, the competitiveness of the long distance market, particularly with respect to the residential long distance market, had increased significantly since Decisions 97-19 and 2002-34 were issued. 10. In addition, the Consumer Groups submitted that Bell Canada's Part VII application should be dealt with by way of a Public Notice which should include the opportunity for the Commission and parties to address interrogatories and to obtain access to pertinent confidential information. 11. Aliant Telecom and TCC supported Bell Canada's Part VII application. 12. Bell Canada did not file reply comments. Basic toll constraints 13. The Commission notes that when it forbore from regulating the toll and toll-free services of certain telephone companies in Decision 97-19, and of Saskatchewan Telecommunications (SaskTel) in SaskTel - Transition to federal regulation, Decision CRTC 2000-150, 9 May 2000, it made the offering and provision of toll services subject to the basic toll constraints to protect the interests of users, including users in high-cost remote areas, in light of the Canadian telecommunications policy objectives as set out in section 7 of the Act. 14. In O.N.Telcom - Implementation of toll competition and related matters, Decision CRTC 2001-583, 13 September 2001 (Decision 2001-583), the Commission forbore from O.N.Telcom's (now Ontera) toll and toll-free services to a similar extent as in Decision 97-19. In the case of Ontera, the basic toll constraints set out in Decision 2001-583 were: a) Ontera was to provide to the Commission, and make publicly available, a basic toll schedule setting out the rates for basic toll service. This schedule was to include the 50 percent discount applicable to calls which originated from, and were billed to, the residence service of a registered certified hearing or speech-impaired TDD user. Ontera was to update this schedule within 14 days of any change to the rates for basic toll service; b) annual increases in rates of the basic toll schedule were not to exceed the rate of inflation; and c) Ontera was to ensure that all message toll customers and applicants for message toll services could choose basic toll service. 15. As set out below, the Commission considers that it is appropriate to initiate a Public