piac 2010 43 evidence final

8/9/2019 Piac 2010 43 Evidence Final

1/50

Telecom Notice of Consultation CRTC2010-43

Obligation to serve and other matters

(Formerly Proceeding to review access to basictelecommunication services and other matters)

Comments of Canada Without Poverty, Optionconsommateurs and Rural Dignity of Canada

("The Consumer Groups")

April 26, 2010

John LawfordCounselPublic Interest Advocacy CentreOne Nicholas Street, Suite 1204Ottawa, Ontario K1N 7B7

(613) 562-4002 [email protected]


2/50

Telecom Public Notice CRTC 2010-43Obligation to serve and other matters

(Formerly Proceeding to review access to basic telecommunication services and other matters)April 26, 2010

2

TableofContentsExecutive Summary ............................................................................................................ 3Introduction ......................................................................................................................... 5Part 1 Canadas Telecommunications Accessibility Plan ................................................ 6

Access to Voice Service and Access to Broadband Internet .......................................... 6 Deferral Accounts Follow-Up and Double-Dipping ................................................... 7First, Do No Harm (Preserving Ubiquitous Telephone Service) .................................... 8Broadband Internet Access The Time Has Come ........................................................ 9The Statutory and Regulatory Context ......................................................................... 10

Part 2 Responses to the Commissions Questions ......................................................... 12Obligation to serve ........................................................................................................ 12

Extension of Obligation to Serve to Broadband Carriers ......................................... 14Should Wireless Satisfy the Obligation to Serve? .................................................... 14Service Improvement Plans ...................................................................................... 27

Local service subsidy .................................................................................................... 32Basic service objective .................................................................................................. 35

Preserve the Basic Service Objective Basics ............................................................ 35Extend the Basic Service Objective to Include Broadband ...................................... 38

Local competition and WNP in the territories of the small ILECs ............................... 48Mobile wireless data services ....................................................................................... 50

Appendix A Evidence of John Todd, Elenchus Research Associates Inc. .................... 50Appendix B Evidence of Heather E. Hudson ................................................................ 50


3/50



3

Executive Summary

Introduction

Canada lacks a path to universal broadband access. This proceeding providesan opportunity for the Commission to follow the U.S. National Broadband plan.Such access to broadband should not reward recipients of Deferral Accountsfunds twice, should preserve access to the legacy telephone network for theforseeable future and responsibly promote universal access to broadband.

Obligation to Serve

All classes of local exchange service providers when operating in a non-HCSAshould have an obligation to serve in their serving territory. Thus, the time hascome to extend the obligation to serve to CLECs to achieve regulatory symmetry,as per the Policy Direction.

Market forces are sometimes inadequate to render reliable and affordable highquality telecommunications services to Canadians in all areas of Canada, evenwhere there is competition, thus the obligation to serve must be preserved.

The obligation to serve exists independently of statute and contract and arisesfrom a broader common law duty to serve, which cannot be removed. Theexistence of competition does not change or remove the common law obligationto serve.

If the Commission expands the basic service obligation to include broadbandaccess, the obligation to serve should be imposed on the first mover ISP underthe Consumer Groups broadband subsidy plan.

Wireless service cannot satisfy the obligation to serve unless there is nofunctional difference between the wireless and wired broadband, the price iswithin 15% more (or is less) and an acceptable quality of service is achievedunder all conditions of normal use.

Local Service Subsidy

The Consumer Groups have prepared a model contribution regime for thesupport of broadband expansion in High Cost High Speed Internet ServiceAreas (HCHSISAs) in Canada should the Commission consider addingbroadband connectivity to the basic service objective. The present HCSAsubsidy would remain largely intact and similar, with only minor adjustment.

Basic Service Objective


4/50



4

The present basic service objective (BSO) has been a success, ensuring basicservice that is accessible, affordable and functional. The Commission mustmaintain all elements of the BSO with regard to voice service or providers willeither seek to eliminate them or charge customers a separate fee for them.

The basic service objective needs to be modernized to include broadbandaccess. Broadband is available to and used by a majority of consumers but thelack of availability to a minority of consumers can result in social exclusion andpublic intervention is warranted.

To match universal broadband plans being rolled out in other countries and inparticular the U.S., the Commission should mandate an actual speed target of 4Mbps download/1 Mbps achievable by 2020 to all Canadians with an interimrequirement of 2 Mbps/800 Kbps by 2015.

For wireless broadband to satisfy the BSO, there must be no functionaldifference between the wireless an wired broadband, the price within 15% more(or is less) and an acceptable quality of service achieved under all conditions ofnormal use.

Local Competition and WNP in the Territories of Small ILECs

Small ILECs should maintain their obligation to serve throughout their incumbentserving territory and any territory that they enter as a competitor, in line with ourproposal to make all LECs have an obligation to serve in areas where they offerservice.

Local number portability (LNP) and wireless number portability (WNP) are ingreat demand by consumers, as they increase competition in the local market bystimulating carriers to offer lower prices and better services and increasingconsumers ability to exercise real choice in a competitive market.

The requirements that small ILECs implement LNP should be maintained.Carriers refusing to port should demonstrate that there are truly disproportionatecosts or technical difficulties to connect customers to port them into their carrierssystem.

Mobile Wireless Data Services

The Consumer Groups will file their comments on mobile data servicesforbearance under the separate written process.


5/50



5

Introduction

1. Canada Without Poverty, Option consommateurs and Rural Dignity ofCanada ("The Consumer Groups") by their counsel the Public InterestAdvocacy Centre (PIAC) are pleased to provide the Commission with

comments on the issues raised by Telecom Public Notice CRTC 2010-43,Obligation to serve and other matters (Formerly Proceeding to review accessto basic telecommunication services and other matters), 25 October 2010(PN 2010-43) as modified in TNC 2010-43-1 and TNC 2010-43-2.

2. The Commission has called for comments regarding twenty-two (now twenty-one)1 questions grouped into the broad categories of Obligation to serve;Local service subsidy; Basic service objective; Local competition and WNP inthe territories of the small ILECs; and, in a separate written proceeding,Mobile wireless data services forbearance. In regards to this latterproceeding, the Consumer Groups understand that parties are able to

address issues in this proceeding that may revolve around the regulation ornot of wireless data services without concern that such submissions will beruled out of scope and we proceed with our comments accordingly.

3. Part 1 of our comments discusses the Consumer Groups overall plan foraccess to telecommunications (including access to broadband) in the publicinterest. Part 2 of our comments addresses the Commissions questions,starting with the obligation to serve, the local service subsidy, including a newmodel of that subsidy regime that includes a broadband subsidy andpreservation of the local service subsidy for basic, the basic service objective,and small ILEC and WNP issues. PIAC will file comments on the wireless

data forbearance questions later this week.

1 As modified by TNC 2010-43-2.


6/50



6

Part 1 Canadas Telecommunications Accessibility

Plan

Access to Voice Service and Access to Broadband Internet

4. Canada lacks a clear path to broadband access for all Canadians.2 TheConsumer Groups propose that the Commission use this proceeding toensure all Canadians have access not only to basic service (formerly awireline telephone) but to broadband Internet access and improved access towireless telephone and wireless Internet service.

5. In this effort, the recently released U.S. National Broadband Plan (USNBBP)is a guide and an inspiration.3 In the absence of a Canadian plan, it makessense for the Commission to have serious regard to the USNBBP as many ofthe market characteristics of wireline voice, wireless voice and data, andbroadband (via cable, DSL, fibre, satellite or wireless technologies) in bothcountries are very similar. In short, it makes no sense for the Commission tore-invent the wheel.

6. The Consumer Groups discuss below their vision for the results of thisproceeding before we turn our attention to the specific questions posed by the

Commission in each of the related areas of the obligation to serve, the basicservice objective, reform of the local service subsidy, small ILEC competitionand wireless number portability and forbearance from mobile data servicesregulation.

2 Some may say, not for lack of trying. The National Broadband Task Force reported in June 2001and made recommendations to achieve basic broadband access by 2004; likewise, the Telecom PolicyReview Panel in 2006, in Recommendation 8-1, called for a broadband plan:

As a key part of its national ICT strategy, the federal government should

(a) ensure that Canada remains a global leader in the deployment of broadband networks,and

(b) immediately commence a program to ensure that affordable and reliable broadbandservices are available in all regions of Canada, including urban, rural and remote areas,by 2010 at the latest.

3 See FCC, Connecting America: The National Broadband Plan (March 16, 2010). Online:http://download.broadband.gov/plan/national-broadband-plan.pdf Please also see the summary of theplans key provisions in the Evidence of Dr. Heather Hudson, Appendix B, at p. 12-13.


7/50



7

7. In addition, the Consumer Groups also discuss preliminarily the complicationof the Commission proceeding regarding broadband Internet roll-out forcertain ILECs as a result of the Deferral Accounts Decision.

Deferral Accounts Follow-Up and Double-Dipping

8. One difference between the Canadian and American situations4 is theDeferral Accounts Decision.5 This decision now confirms the Commissionsclear jurisdiction to make orders transferring funds raised bytelecommunications service providers of any telecommunications service toany other service (for example, from wireline to broadband) in the context ofratemaking, writ large, in order to achieve the public interest policy goalsembodied in s. 7 of the Telecommunications Act.6

9. Interestingly, however, the Deferral Accounts Decision, and the build-out ofbroadband to be ordered by the CRTC under that decision,7 parallels the one-time broadband funding supplied by the American Recovery andReinvestment Act of 2009(ARRA)8 and raises some similar problems.

10. As discussed below in the Consumer Groups discussion of their proposedrevised local service subsidy and Contribution Fund, one cardinal tenet of theCRTCs decision in this proceeding should be that funds approved throughthe Deferral Accounts Follow-Up proceeding should be deducted from anysubsidy that the same parties might otherwise receive under the proposedContribution Fund in the future. In short, the Commission should not permit

these ILEC ISPs to double-dip into funds made available for broadbandexpansion under this proceeding and the Deferral Accounts Follow-up

4 Note the uncertainty involving the jurisdiction of the FCC to regulate cable-based ISPs since theD.C. Court of Appeals decision invalidating its Title I ancillary jurisdiction in Comcast Corp. v. FCC,April 6, 2010. Online: http://pacer.cadc.uscourts.gov/common/opinions/201004/08-1291-1238302.pdf5 SeeBell Canada v.Bell Aliant Regional Communications, 2009 SCC 40. Online:http://csc.lexum.umontreal.ca/en/2009/2009scc40/2009scc40.html6 Bell Canada v.Bell Aliant Regional Communications, 2009 SCC 40. See esp. para. 72: And thepolicy objectives in s. 7, which the CRTC is always obliged to consider, demonstrate that the CRTC neednot limit itself to considering solely the service at issue in determining whether rates are just and

reasonable. The statute contemplates a comprehensive national telecommunications framework. It doesnot require the CRTC to atomize individual services. It is for the CRTC to determine a tolerable level ofcross-subsidization.7 See Follow-up to Telecom Decision CRTC 2008-1 -ILECS are to file detailed plans rolling outbroadband service to the approved communities by 31 December 2013 (including construction start dateand service introduction date), revised cost studies, and estimated drawdowns for approved broadband

proposals, CRTC File No. 8638-C12-200817505. Ongoing. Online:http://www.crtc.gc.ca/PartVII/eng/2008/8638/c12_200817505.htm(hereafter Deferral Accounts Follow-up Decision).8 American Recovery and Reinvestment Act of 2009, Pub L. No. 111-5, 123 Stat. 115 (2009).


8/50



8

proceeding.9 To do otherwise would be to make residential telephonesubscribers of the ILECs pay twice, an additional burden on this group thatcannot be justified by the end of broadband expansion.

First, Do No Harm (Preserving Ubiquitous Telephone Service)

11. The Commissions first goal in this proceeding should be to preserveCanadas commitment to achieving universal and affordable voice (telephone)service. Therefore, whatever other adjustments are made for example to thebasic service objective, obligation to serve or the local service subsidy, theCommission should ensure that such service is accounted for and protected.

12. Canadians rely heavily on the functionality and reliability of the telephonenetwork for crucial aspects of their daily life. As this proceeding progresses,suggestions that we are entering a new era should be tempered with an

appreciation of the telephone network in Canada and a commitment topreserving the universal access goals for this baseline service. In particular,residential voice service subscribers who do not want nor need broadbandservice should not, by the present process, be forced into taking suchservice.10

13. The Consumer Groups answers to the issues raised by the Commission inthis proceeding are designed to continue this universal voice (telephone)service, but in addition, responsiblyto promote a new telecommunicationsobjective, namely broadband Internet access.

9 The USNBBP specifically deducts amounts paid under other broadband grant programs, includingthe ARRA, from subsidies to be paid under the new broadband Connect America Fund. See USNBBP,at ch. 8, p. 145: Revenues should include all revenues earned from broadband-capable network in-frastructure, including voice, data and video revenues, and take into account the impact of other regulatoryreforms that may impact revenue flows, such as ICC, and funding from other sources, such as RecoveryAct grants. and at footnote 73: See, e.g., Florida Public Service Commission Comments in re NBP PN#19, filed Dec. 15, 2009, at 5 (carriers should not be able to double dip from different federal agencies forthe same project); US Cellular Comments in re NBP PN #19, filed Dec. 7, 2009, at 15; CenturylinkComments in re NBP PN #19, filed Dec. 7, 2009, at 27.10 The Consumer Groups here cite the submission of the National Association of State UtilityAdvocates (NASUCA) before the FCC in matters GN Docket Nos. 09-51, 09-47 and 09-137 (National

Broadband Plan proceeding; Broadband Data Improvement Act proceedings), dated January 27, 2010 atpage 9 (online: http://www.nasuca.org/archive/DA10-61%20Reply%20Comments1-27-10%20FINAL.pdf):

In the end, AT&T is seeking to abandon the customers who do not have, and may not want orneed, broadband. This is what the [c]onsensus building in Washington that the subsidies fortelecommunications should be invested in broadband infrastructure, not telephony misses: thatis, the consumers who continue to rely on traditional telephone service, and should not be forcedinto broadband with its additional costs, both for initial access and on-going service. [originalfootnotes omitted]


9/50



9

Broadband Internet Access The Time Has Come

14. The time has come for Canada to ensure all of its citizens have access tobroadband Internet telecommunications. Many comparable countries havebegun such efforts, notably Australia,11 the United Kingdom,12 Finland,13

France14 and the United States under the National Broadband Plan.

15. As noted above, studies and reports have urged successive Canadian federalgovernments to undertake a comprehensive Internet broadband plan, yetnone has seen fit to promote the project politically, despite the oft-stated needfor such a plan.

16. In this context, the Commission should be both cautious about applying U.S.solutions in their entirety yet should be open to the concepts and argumentsexpressed in the USNBBP and the Federal Communications Commission(FCC) proceedings leading up to it,15 as well as implementation processes.16

11 The Australian Broadband Guarantee is an initiative of the government to help residential andsmall businesses access a metro-comparable broadband service regardless of where they are located. TheGovernment has allocated $250.8 million over four years to 2012 to fund the Broadband Guarantee. OnApril 7, 2009, the Australian Government announced it would establish a company to build and operate anew high speed National Broadband Network to complement the Broadband Guarantee. Online:http://www.dbcde.gov.au/broadband/australian_broadband_guaranteeandhttp://www.dbcde.gov.au/broadband/national_broadband_network.12 The Digital Britain Bill received Royal Assent in 2010 and became theDigital Economy Act 2010 .This Act created the Digital Britain project, which is overseeing many projects to update Britains digital

laws and infrastructure. The Next Generation Fund is a fund overseen by the project and the Departmentfor Business Innovation and Skills worth 1 billion pounds of investment. This will be used to help roll outbroadband to 90% of the country. Online: http://interactive.bis.gov.uk/digitalbritain/2010/01/next-generation-fund-launched/13 In October 2009, Finlands Minister of Communications announced that Finns everywhere wouldbe getting 1Mb/s service by July 1, 2010. Finland is also mandating that "the average speed of downstreamtraffic must be at least 75 per cent of the required speed in a measuring period of 24 hours. In a four-hourmeasuring period the speed must be at least 59 per cent of the required speed." Finlands parliament beganthe debate on a national broadband policy in 2004, when it adopted a resolution on the national broadbandpolicy. Please see online:http://arstechnica.com/tech-policy/news/2009/11/finland-spain-bring-1mbps-broadband-to-everyone.ars and http://www.laajakaistainfo.fi/english/index.php14 The President of France, Nicolas Sarkozy, says the government intends to invest EUR4.50 billion(USD6.59 billion) to underpin the deployment of ultra-high speed broadband networks in the country, as

well as the development of innovative services, as part of a EUR35 billion bond issue known as the grandemprunt. The program was funded through a bond issue. France also named a public servant chargedspecifically with modernizing their infrastructure called le Premier Ministre du secrtariat dtat charg dela prospective, de lvaluation des politiques publiques et du dveloppement de lconomie numrique.Please see online: http://www.epractice.eu/files/media/media2298.pdf15 Please see the heading and chart Broadband Contributions to National Development detailed inEvidence of Dr. Heather Hudson, Appendix B, p. 2 and p. 13 which16 Please see Federal Communications Commission. Notice of Inquiry and Proposed Rulemaking:In the Matter of Connect America Fund; A National Broadband Plan for Our Future; High-Cost UniversalService Support. Washington, DC, April 21, 2010.


10/50


11/50



11

There is a clear direction provided to the Commission by way ofthese [s. 7] objectives: rural and remote regions of Canada arenot be ignored. The delivery of reliable and affordabletelecommunications service to these areas is no less important

than the delivery of such service to urban areas. Nor is it to becompromised by the desire to rely more on market forces. Indeed,market forces are to be supplemented by efficient and effectiveregulation wherever they are incapable, on their own, of achievingthe other stated objectives. [Emphasis in original].

21. Canada lacks a comprehensive strategy for ensuring such access in rural andremote regions, however. Dr. Heather Hudson, whose evidence is attachedat Appendix B to these comments, summarizes the U.S. E-rate program thatoffers broadband connectivity to schools and libraries in these regions in theU.S. at subsidized rates.20 Dr. Hudson notes that such connections can

create focused demand and providers may have incentives to expand intopreviously unserved or underserved communities as has apparentlyhappened in far-north communities in Alaska.21

22. The Commission therefore has an opportunity to develop a framework todeliver this connectivity to Canadians in rural and remote areas of Canada.

23. The Consumer Groups submit (see further below) that despite the edicts ofthe Policy Direction, that these objectives are not changed and that rather thePolicy Direction only affects to some extent the Commissions possiblechoices in how to achieve the goals of ensuring affordable and reliable

telecommunications services are accessible to all Canadians.

24. The Consumer Groups now comment upon the specific questions posed bythe Commission in Telecom Notice of Consultation 2010-43.

generally considered to include rate bands A and B; rural areas rate bands C to F; and remote areas, rateband G. For Northwestel Inc. only, remote areas are those locations where there are fewer than two full-time technicians normally based there, and the community is accessible only by air, or a techniciantravelling to the community by road would normally take three hours or more for the round trip from wherethe technician is normally based.20 See Evidence of Dr. Heather Hudson, Appendix B, at pp. 10-11.21 Ibid.


12/50



12

Part 2 Responses to the Commissions Questions

Obligation to serve

Q1. In which market(s) (for example, forborne, non-forborne, high-cost) and to whatextent, if any, is an obligation to serve necessary? Specify what type(s) of service(s), ifany, should be subject to an obligation to serve. Explain whether the provision of servicethrough alternate technologies, for example wireless service, should satisfy an obligationto serve regarding local voice service.

25. The Consumer Groups submit that the Commission must affirm and maintainan obligation to serve in all markets, both forborne and non-forborne as wellas in high cost serving areas.

26. The Policy Direction requires the Commission to rely on market forces to themaximum extent feasible as the means to achieve Parliamentstelecommunications policy objectives.22 Section 7(b) of theTelecommunications Actstates that one of the objectives oftelecommunications policy in Canada is to render reliable and affordabletelecommunications service of high quality accessible to Canadians in bothurban and rural areas in all regions of Canada.

27. Once again, the Consumer Groups point out that the Policy Direction edictsare not an end in themselves but a direction as to the preferable means to theend of the policy objectives.

28. The Consumer Groups submit that market forces cannot always be reliedupon to render reliable and affordable high quality telecommunicationsservices to Canadians in urban and rural areas in all regions of Canada, thusthe obligation to serve must be maintained in a competitive environment. Forsome areas, competitive forces are inadequate to provide basic service.

29. The Policy Direction requires regulatory measures to be efficient andproportionate to their purpose and to interfere with the operation ofcompetitive market forces to the minimum extent necessary to meet the policyobjectives.23 No doubt, some of the parties in this proceeding may argue

that this requirement of the Policy Direction should prompt the removal of theobligation to serve from forborne areas, limiting the obligation to serve to onlyexchanges that are not forborne. The Consumer Groups submit that theobligation to serve must be preserved in forborne exchanges as there arescenarios where market forces may fail in forborne exchanges.

22 Policy Direction, section 1(a)(i).23 Policy Direction, section 1(a)(ii).


13/50



13

30. One such scenario is in low-income areas within forborne exchanges. These

low-income areas are currently provided with service, but without anobligation to serve, they would not wield sufficient financial incentive for aLEC to continue to provide service at an affordable price. Thus, service in

these pockets within forborne areas may be at risk,

24

as they may becomeunderserved or lose access to basic service despite the existence ofcompetitive forces.

31. Likewise, there are certain groups of customers who may be unattractive toall local service providers and in particular ILECs. These customers arethose presently on stand-alone service,25 as well as groups that may makeup a larger proportion of stand-alone users, namely persons with disabilitiesand the elderly. Without an obligation to serve, it is possible that suchcustomers will be shunned by all carriers or dropped when the opportunitypresents itself.

32. Another scenario where market forces may fail is in uncontested areas withinforborne exchanges. For example, market forces are less effective in ruralareas, which are still primarily served by ILECs.26 However, because of theaggressive local forbearance rules under the Decision 2006-15 criteria, manyof these rural exchanges now are forborne. Preserving the obligation to servein uncontested and rural areas ensures that these customers will continue tohave access to affordable and reliable telecommunications services.

24 The Commission acknowledged the possibility of pockets of uncontested residential and businesscustomers in forborne markets in creating stand-alone primary exchange service (stand-alone PES) in

Telecom Decision 2006-15, as amended, at para. 355.25 The Commission specifically carved out the stand-alone service exception to forbearance in TelecomDecision 2006-15 because of concerns with both the status of vulnerable customers (who have affordabilityconcerns even in a competitive market) and the possibility of uncontested pockets of customers (at para.355):

The Commission recognizes that for some customers, particularly residential customers, theoperation of market forces after forbearance may result in either a loss of services on which theyare reliant or potential increases in prices for services which are essential to their daily lives. TheCommission also considers that there may be pockets of uncontested residential and businessconsumers in forborne markets. The Commission is also cognizant of the arguments raised byARCH and the Consumer Groups regarding the position of vulnerable customers, includingpersons with disabilities, and their unique needs with respect to telecommunications services. The

Commission considers that market forces alone may not be sufficient to protect the interests ofthese customers.

26 See SaskTels 13 November 2009 Comments in TNC 2009-575, Call for comments --Identification, scope, and prioritization of issues regarding obligation to serve, basic service objective, andlocal service subsidy regime at para. 8: The drivers which caused the Commission to introduce theobligation to serve continue to exist. Rural areas, where market forces are least likely to be effective, arestill served primarily by ILECs. As market forces are less effective in rural areas, the right of residents ofthose areas to access reliable and affordable telecommunications services must be protected through thecontinued existence of the obligation to serve and of certain other regulatory measures.


14/50



14

33. Looking further ahead, it is conceivable that former incumbent telephony-based carriers may abandon or remove copper facilities to premises withoutfirst replacing them with fibre connections. Alternatively, these companiesmay simply not roll-out fibre to the home in certain areas (such as poorneighbourhoods in urban areas, or disadvantaged suburban neighbourhoods)

and once traffic is moved to fibre facilities only, these customers will no longerbe served. Without an obligation to serve, this possibility may become areality for the types of customers in the areas described above or indeed inany area where the business case for upgrading service does not match withthe service provisioning costing (if for example, running connections onlegacy copper loops becomes expensive to an otherwise mostly fibre-basedtelephony carrier).27

Extension of Obligation to Serve to Broadband Carriers

34. Should the Commission consider expanding the basic service objective asrecommended by the Consumer Groups below to include broadband access,the Consumer Groups submit that, in accordance with the high speed Internet(broadband) subsidy plan proposed in the evidence of John Todd, that thefirst mover ISP who obtains an access subsidy under the plan should bear acorresponding obligation to serve in the relevant geographical area.28

35. As broadband high cost areas began to support the entrance of ISPs, theCommission could, on an ad hoc basis, consider proceedings to apply theobligation to serve upon competing ISPs, in particular, once the first moverISPs access subsidies had been reduced to zero.

Should Wireless Satisfy the Obligation to Serve?

36. There is no theoretical reason why a wireless local service telephoneconnection could not satisfy an obligation to provide local voice service oreven voice and broadband Internet access. The Consumer Groups supportthe principle of technological neutrality in the Commissions decisions andsubmit it is an important though not overriding principle in the design ofthe obligation to serve.29

27 The Consumer Groups consider that this was the scenario imagined by the Telecom PolicyReview Panel (2006) in ch. 6, where the Panel recommended (Recommendation 6-1) a positive statutoryenactment requiring all ILECs to be obliged to serve unless relieved therefrom in an application to theCommission.28 See Evidence of John Todd, Appendix 1, at p. 9 (heading 2.1(6)(d).29 The USNBBP states that technological neutrality is a principle of the U.S. internationaltelecommunications agenda: The policies contained in the plan form the basic foundations of the U.S.international telecommunications agenda. These principles include support for regulatory frameworks thatare pro-competitive, transparent and technology-neutral. See USNBBP at 60.


15/50



15

37. In theory, there is no difference between practice and theory; however, inpractice, there is. So while the Consumer Groups support increased accessto telecommunications via wireless or any technology, such systems must becapable of maintaining the high quality of telecommunications in Canada, aquality that is part of the subs. 7(b) policy objective under the Act.

38. Wireless still is not a good substitute for local voice service as its connectionsare less reliable than a wireline connection. Very simple practical challengesto connectivity still bedevil wireless voice and data service from a homeconnection perspective. For example, wireless signals are disrupted by treecover, uneven terrain, interference from other signals and the occupantsposition in a dwelling, to name but a few.

39. Secondly, wireless voice service (especially post-paid) consistently is onaverage more expensive than wireline basic local service.30 This raises theissue of affordability of local service, should the Commission declare that

wireless can satisfy the obligation to serve. Wireless is typically billed on aper call basis or where offered as part of a plan, may have a limit to airtime(above which the user pays per call) or have billed and non-billed periods.This contrasts with local wireline voice service pricing, which is typically lessexpensive and is billed on a flat rate basis at any time of the day or week.

40. Wireless broadband services can also be more expensive, on average, thancomparable speed wireline broadband. Wireless data plans are typicallysimilar in base price per month, but require a concomitant subscription to avoice plan and can increase substantially should a use exceed their includeddata allotment. Thus, while seemingly promising, the Commission should, if it

were to include broadband access in the basic service objective, assuggested by the Consumer Groups below, carefully consider the affordabilityof such access, when it is used in a typical fashion by a consumer.

41. Fixed wireless may present a more stable solution, particularly in the farnorth.31 However, connection issues continue to challenge even this mode.

42. The Consumer Groups therefore submit that alternate methods of deliveringvoice service (and of delivering broadband Internet) can only be substituteswhere there is no functional difference between the services, the price iswithin 15% more (or is less) and an acceptable quality of service is achievedunder all conditions of normal use.32 However, for the reasons given below inreference to question 15,33 this premium (15%) should be charged only for 12months to permit the wireless provider to recoup some capital costs without

30 See CRTC, Navigating Convergence Report (February 2010) at App. 6.31 See Evidence of Dr. Heather Hudson, Appendix B, at p. 6.32 These criteria are also discussed more fully in answer to the Commissions question 15, below.33 In the answer to Q15, see also our comments on the appropriate definition of wireless and wirelinemarkets.


16/50



16

unduly burdening these customers such that service remains permanentlyless affordable than wireless service offered in urban and non-HCSA areas.

43. These requirements are dictated by a practical and purposeful reading of thepolicy objectives of subss. 7(a), (b), (f) and (h) as well as market realities,34

including the fact that most of Canadas major wireless providers are alsomajor wireline providers of Internet and voice telephony, thereby permittingthem to leverage considerable economies of scope.35

Q2. Should any particular class of service provider (for example, ILECs, competitivelocal exchange carriers) be subject to an obligation to serve and, if so, how should theybe selected?

44. The Consumer Groups submit that all classes of local exchange serviceproviders, when operating in non-HCSAs, should be subject to an obligation

to serve within their service territories.

45. The Consumer Groups note that the Policy Direction requires non-economicregulatory measures to be implemented in a symmetrical and competitivelyneutral manner.36 Currently, only ILECs have an obligation to serve.Extending the obligation to serve to all LECs within their serving territorieswould result in regulatory symmetry in a competitively neutral manner.

46. Symmetry and competitive neutrality in non-economic regulatory measureshave already been pursued elsewhere by the Commission. For example, inTelecom Regulatory Policy 2009-156, the Commission eliminated some

regulatory requirements to provide information to customers, but also in somecases extended the requirement to provide information to customers to allTSPs in order to achieve regulatory symmetry.37 The Commission in thiscase extended the general obligation to inform consumers about their policiesregarding annoying and offensive telephone calls and the requirement toprovide alternative formats for billing statements and inserts to visuallyimpaired customers to all TSPs to make the requirement symmetrical.38 TheCommission also maintained the existing information requirements about 9-1-

34

Note that in Alaska a wireless service provider promised wireless broadband to remote Alaskanvillages at a rate not to exceed the rate in Anchorage: Evidence of Dr. Heather Hudson, App. B, p. 10.35 For an in-depth description of these economies of scope, please see the evidence of TrevorRoycroft, July 10, 2006, paras. 22-25, filed as Evidence of the Consumer Groups in proceeding PN 2005-2,which led to the Commissions decision in Telecom Decision 2007-27 (the Third Price Cap decision).Online: http://www.crtc.gc.ca/public/partvii/2006/8678/c12_200605553/643090.zip36 Policy Direction, section 1(b)(iii).37 Telecom Regulatory Policy CRTC 2009-156,Revised regulatory requirements to provideinformation to customers (24 March 2009).38 TRP CRTC 2009-156 at paras. 49 and 82.


17/50



17

1 services and noted that the requirements were as symmetrical as possiblegiven the technological limitations of various 9-1-1 service providers.39

47. The most recent example of achieving symmetry and competitive neutrality innon-economic regulatory measures by imposing regulation on all LECs was in

the recent review of terms of service for disconnection and deposits.

40

InTelecom Regulatory Policy 2009-424, the Commission found that policies fordisconnection and deposits are required for regulated markets, since marketforces are generally minimal or non-existent in these areas. The Commissiondirected the Commissioner for Complaints for Telecommunications Services(CCTS) to develop an industry code for disconnections and deposits anddetermined that the CCTS should have the ability to recommend an industrycode that was as symmetrical as possible to all LECs operating in forbornemarkets.41 Above, the Consumer Groups submitted that similar todisconnection and deposit policies, market forces alone are not adequate toensure that consumers have access to basic telephone service, especially

low-income consumers in rural areas and customers in uncontested areas.

48. The Consumer Groups consider that the time has now come for theCommission to extend the obligation to serve to CLECs to achieve regulatorysymmetry. The Consumer Groups note that as detailed in the latestTelecommunications Monitoring Report, numerous markets now have somesignificant market share in the local cable carrier CLEC. As these marketsbecome increasingly dominated by the ILEC/CLEC-cableco duopoly, that it isincongruous that only ILECs be subject to an obligation to serve. It also isunfair to the customers who may be refused service in a territory by acompetitive choice CLEC, thereby defeating the benefits of competition.

49. Extending the obligation to serve to CLECs is also appropriate becausemarket forces may not be sufficient to ensure that all areas (both forborne andregulated, non-high cost) are served. Therefore the potential customers ofthat CLEC in that non-HCSA should be able to enjoy a guarantee that servicewill be offered to them on reasonable terms and without discrimination in thesame manner as a customer in an urban region.

50. Should the Commission consider that such a requirement would be undulyburdensome on smaller CLECs, the Consumer Groups would support asimilar rule to that for membership in and contribution to the CCTS, namelythat LECs with telecommunications services revenues in excess of $10million a year be obligated to serve in their service territories.

39 TRP CRTC 2009-156 at para. 69.40 Telecom Regulatory Policy CRTC 2009-424,Revised regulatory requirements for management ofcustomer accounts (17 July 2009).41 In Telecom Regulatory Policy CRTC 2010-27 deciding on an application submitted by the CLECsto review and vary TRP 2009-424, the Commission found that a request to the CCTS does not impose alegal obligation on CLECs, thus it did not assert regulation over CLEC deposit and disconnection policies,denying the CLECs application.


18/50



18

Q3. What legal considerations exist, for example the Bell Canada Act, which wouldprevent a modification or the removal of the obligation to serve?

51. Only Bell Canada has an explicit statutory obligation to serve. Since 1902,

Parliament has imposed a duty on Bell to provide telephone service andtelephones, upon request in any locality in which it provided a generalservice, and telephone service to premises fronting upon any highway, etc. orsituated no further than 200 feet from such highway, etc. upon tender orpayment of the lawful rates therefor semi-annually in advance.42 Thisobligation to serve has survived as subs. 6(1) of the present day version ofthe Bell Canada Actand reads as follows:

6. (1) Where a telephone service is requested by anyperson or organization for any lawful purpose in amunicipality or other territory within which a generaltelephone service is provided by the Company, the

Company shall, with all reasonable dispatch,

(a) furnish the service; and

(b) subject to any order of the Commission under section13 that restricts the right or ability of the Company to be asupplier of telephones, furnish telephones of the latestimproved design then in use by the Company in themunicipality or territory.43

52. With the establishment of the Commission in 1976, universal service emerged

as a distinct objective of federal regulatory policy, as the Commission focusedon the maintenance of universal availability of basic phone service ataffordable rates. The Commission stated that it must ensure that allsegments of the public have reasonable access to telephone service.44 TheCommission viewed an assessment of accessibility to phone services as anecessary ingredient in determining the justness and reasonableness ofrates.45

53. Thus, the Commission has expressed the view that there is a duty upontelephone companies to serve. In Decision 79-11, the Commission definedsome parameters of the obligation to serve, stating that Bell and CNCP, in

respect of their monopoly services public telephone service and PMS

42 S.C. 1902, c. 41, s. 2.43 S.C. 1987, c. 19, s. 6.44 Decision 77-7,Bell Canada, Increase in Rates at pp. 8-9. Universal service was also discussed bya task force appointed by Canadas Minister responsible for communications in 1986. See the 1986 Reportof the Federal-Provincial Examination of Telecommunications Pricing and the Universal Availability ofAffordable Telephone Service.45 Michael H. Ryan, Canadian Telecommunications Law and Regulation at 6-68.


19/50



19

respectively have the obligation to serve anyone seeking service in theirentire operating areas irrespective of location at prices that are, in regard tolocal telephone service, similar for similar sized local populations, and inregard to long distance telephone and telegraph services at prices that arerelated to distance between points and not to particular routes.46 However,

the Commission stated that competitive services do not always operate on auniversal basis.

54. In Telecom Decision 86-7, the Commission formalized the obligation to servein the draft Terms of Service of the telephone companies.47

55. In 1992, the present Telecommunications Actwas passed, with thetelecommunications policy objectives, including subs 7(b), in place.

56. In Decision 99-16, the Commission took the view that all incumbent localcarriers have an obligation to serve in their territories. This means that an

ILEC must provide service to subscribers in its service territory at areasonable price without unjust discrimination. The Commission found thatthe concept of an obligation to serve developed within the context of atraditional, regulated monopoly in telecom services, and defined the contentof the obligation in terms of the provision of basic telephone services. TheCommission contemplated whether the obligation to serve should be alteredwhere competition is present and concluded that effective local servicecompetition would not likely occur in the short term, thus ILECs must retaintheir obligation to serve.48

57. In Decision 2006-15, as amended by OIC 2007-532, the Commission

considered that in order to ensure that residential stand-alone PES isavailable to all residential customers in forborne markets, it was necessary toretain in forborne markets the ILECs obligation to serve with respect to stand-alone PES, as set out in Decision 99-16.49 Thus, the Commission confirmedthat ILECs retain their obligation to serve, at least in relation to these stand-alone customers, in forborne areas.

46 Decision 79-11, CNCP Telecommunications: Interconnection with Bell Canada at p. 226-7.47 Decision 86-7,Review of the General Regulations of the Federally Regulated TerrestrialTelecommunications Common Carriers at Appendix I, arts. 4.1 and 4.3. The telephone companies are BellCanada, British Columbia Telephone Company, NorthwesTel Inc., and Terra Nova Telecommunications

Inc. The obligation to serve was stipulated in the draft Terms of Service as Article 3.1, which only allowedcarriers to refuse service in certain cases where applicants owed amounts that are past due or refused toprovide reasonably required deposits, or refused to assume unusual expenses which the carriers would haveto incur. Unfortunately, the final text implied the obligation to serve by listing the events which wouldexcuse performance. The draft text discussed prior to the final decision was clearer in expressing the duty:The Company must provide service to all who apply for it, except where . . .48 Decision 99-16, Telephone Service to High Cost Serving Areas at paras. 31-36.49 Decision 2006-15, Forbearance from the regulation of retail local exchange services at para. 381. TheCommission noted that any existing exceptions or limitations to the obligation to serve would also continuein a forborne market.


20/50



20

58. The Consumer Groups contend that, despite the protestations of the ILECs tothe contrary in their unregulated terms of service that it is not conclusivelyestablished that they do not have an obligation to serve despite theCommissions unconditional forbearance from price regulation under s. 25 ofthe Act, as confirmed in Decision 2006-15.

59. This is because the obligation to serve exists independently of statute orcontract and arises from a broader common law duty to serve. This commonlaw duty flows from the special nature of the carriers position. This commonlaw duty requires telecommunications carriers to supply service to all thosewho seek it at a reasonable price and without undue discrimination.50

60. Canadian cases imposing a duty to supply an essential facility can be tracedback to 1860.51

61. Dr. Barbara A. Cherry extensively studies the legal regime of common

carriage as it applies to telecommunications service providers. Dr. Cherrytraces the history of the regulatory regime for common carriers under thecommon law in the United States, noting that the common law imposedunique obligations on common carriers:

These status-based tort obligations evolved as anearly form of consumer protection to protectindividuals from economic coercion, exploitation andthe illegal wielding of bargaining power in commercialtransactions by those engaged in public callings. Acustomers economic vulnerability was deemed to

arise, not on the basis of the existence of monopolypower, but on the nature of the circumstancesprevailing between the provider and the customer.52

50 Michael H. Ryan, Telecommunications Law and Regulation at 3-16.2. Telegraph and telephonecompanies, like suppliers of electricity, gas and water, are sometimes described as public utilities, whichhas no precise definition in law, but apply to enterprises that hold themselves out to the public at large assuppliers of a service or commodity that is essential, or in widespread demand, and that is typicallyprovided on a monopoly or quasi-monopoly basis. Note that the carriers common law duty to supplyservices is limited to the supply ofexisting services along existing lines of supply. A carrier has no duty tointroduce new services or to extend its lines into territory outside that which it professes to serve. Thecarrier may be required to build extensions of its line to serve new customers within its existing service

territory or to enlarge its plant where that is necessary to alleviate unjust discrimination (LaChance v. BellTelephone Co. (1958), 77 C.R.T.C. 294).51Commercial Bank v. London Gas Co. (1860), 20 U.C.Q.B. 233, 1860 CarswellOnt 311 (U.C.Q.B.).52 Evidence of Dr. Barbara A. Cherry filed on behalf of The Consumer Groups in Telecom PublicNotice CRTC 2008-19,Review of the Internet traffic management practices of Internet service providers.Dr. Cherry also notes that this vulnerability exists between the customer and carrier of electronictransmission of information under later developed forms of electronic technologies. See Barbara A.Cherry, Maintaining Critical Rules to Enable Sustainable Communications Infrastructures (2008) 24 Ga.St. U. L. Rev. 947 at p. 967, where she argues: Furthermore, without the protection of the traditional exante rules embedded in common law common carriage obligations, myriad forms of discrimination are


21/50



21

Dr. Cherry notes that the historical evolution of common carriage in Canada,both under the common law and its subsequent statutory codification issimilar to that of the United States. She argues that failure to enforcecommon carriage principles under the Telecommunications Actostensibly to

increase reliance on competitive market forces may create legal gaps andpolicy sustainability problems.

62. The Consumer Groups submit that the obligation to serve cannot beremoved. Even if the statutory obligation to serve were removed from boththe Telecommunications Actand Bell Canada Actand if the contractualobligation to serve were removed from the Terms of Service of the telephonecompanies, the common law duty to serve would still apply.53

63. Furthermore, the existence of competition does not change the common lawobligation to serve, just as the presence of monopoly is not a precondition for

the duty. The duties such as obligation to serve are rooted in tort duties thatdo not rely upon the monopoly status or otherwise of the legal person with theduty.54

64. The Consumer Groups contend that the explicit inclusion of the defined termtelecommunications common carrier in subs. 2(1) of theTelecommunications Actis intended by Parliament to import the common lawduties of common carriage to telecommunications carriers, if there is evenany doubt that they are subject to common carriers duties generally.

65. However, the Consumer Groups understand that a major unresolved issue is

whether the obligation to serve should continue in forborne areas (given ourview of the common law); should continue to apply to stand-alone servicecustomers under Decision 2006-15; or even be removed in non-forborneexchanges (often also HCSAs).

66. ILECs (other than Bell Canada) have preserved their obligation to serve incompetitive exchanges under Decision 2006-15, as amended. Theirunregulated terms of service reflect this.55 The Consumer Groups contend

legally permissible and threaten consumers ability to have access at reasonable prices and underreasonable terms and conditions.53 For more on common carriage in telecommunications, see: LIABILITY OF TELEGRAPH

COMPANIES FOR FRAUD, ACCIDENT, DELAY AND MISTAKES IN THE TRANSMISSION ANDDELIVERY OF MESSAGES, (1884), 32 Am. L. Reg. 281 at 285: But in reality, such statutes are onlydeclaratory of the common law. Telegraph companies are bound to serve the public faithfully, skilfully andimpartially, whether any statute commands it or not. Their duty to do so arises from the very nature of theiremployment [citations omitted].54 Barbara A. Cherry, Misusing Network Neutrality to Eliminate Common Carriage Threatens Free Speechand the Postal System, 33 N. Ky. L. Rev. 483, 501 (2006) at 492.55 See, for example, MTS Allstream, Terms of Service - Unregulated:

ARTICLE 2: OBLIGATION TO PROVIDE SERVICE


22/50



22

that this is because their view of the law confirms an obligation to serve or atthe least betrays a large uncertainty whether the Commissions forbearanceorder can affect this duty.

67. Bells Unregulated Terms of Service are similarly ambiguous, but

necessarily so given the clear wording of subs. 6(1) of the Bell Canada Act.Bells Unregulated Terms of Service have a parallel section to art. 4.1 of Item10 of its General Tariff 6716, but the wording does not directly address theunderlying obligation to serve, only the circumstances in which service maybe refused, which are largely similar to the old tariff language.56

68. TELUS frankly states that: the precise limits and jurisdictional basis of theobligation to serve have never been fully explained by the Commission.57We agree. The Commission must make a clear legal finding on the basis ofits jurisdiction and the scope of this fundamental duty.

69. Without this determination, it is difficult to judge if competition plays a role. Ifcompetition does not, then the discussion of the Policy Direction is irrelevant.Likewise, the forbearance order in Decision 2006-15 cannot affect it. Finally,discussions of the effect of the competitive and technological environmentas suggested by TELUS are of no consequence unless they are made tolegislators who ultimately amend the common law obligation to serve in an

2.1 MTS is not required to provide service to an applicant in certain circumstances, includingwhere:

(a) MTS would have to incur unusual expenses which the applicant will not pay; for example, forsecuring rights-of-way or for special construction;(b) the applicant owes amounts to MTS that are past due other than as a guarantor;(c) the applicant does not provide a reasonable deposit or alternative required pursuant to theseTerms; or(d) MTS cannot acquire or maintain the equipment, facilities, rights-of-way, rights-of-access, orspace in or on buildings that are necessary to provide service.2.2 Applications for service or for additional service and/or equipment in connection with servicealready established may be made orally or shall be in writing if MTS so requires in order toestablish the identity of the applicant or customer in circumstances where MTS has reasonablegrounds for believing that the applicant or customer intends to defraud MTS or to evade payment.2.3 Where MTS does not provide service on application, it will provide the applicant with awritten explanation upon request.

56 See Bell Canadas Unregulated Terms of Service, art. 7, which reads:

7. Obligation to Provide Service. Bell may refuse, at any time and without liability, toprovide Services to you where Bell would have to incur unusual expenses such as, but not limitedto, securing rights of way or for special construction. Bell may provide such Services if, uponBells request and agreement, you agree to pay an amount for these unusual expenses. Agreementson such matters shall be in writing and signed by you and Bell.

57 Comments of TELUS Communications Company in Telecom Notice of Consultation 2009-575(13 November 2009) at para. 27.


23/50



23

amendment to the Telecommunications Actor otherwise legislate the rightaway.58

70. If competition or monopoly status do play a role, then the discussionssuggested in this question about the modification or elimination of the

obligation to serve and TELUSs submissions on the new competitive andtechnological environment, the Policy Directions effect, regulatory symmetry,etc. can be undertaken.

71. Nonetheless, as the Consumer Groups see few opportunities to expressthemselves (there is no written reply stage before the oral hearing) we arecompelled to express our opinion on these matters, even if we are of the viewthat the obligation to serve cannot be abrogated without legislativeenactment.

72. First, we must discuss obligation to serve in competitive areas. Because of

the test for price forbearance articulated by the Cabinet modification ofTelecom Decision 2006-15, namely two facilities-based competitors (one ofwhich can be a wireless carrier) serving at least 75% of an exchange, it is theConsumer Groups view that there is a risk that there will be pockets ofcustomers who may be nominally served by a competitor, but will not be in adesirable area for the ILEC, or will be in the 25% of the exchange not servedby competitors, with the result that the ILEC will no longer be required toprovide service and competitors will not provide service either at all or at thelevel required by the BSO.

73. If there is no obligation to serve, therefore, there is a risk ILECs will pull out of

unprofitable neighbourhoods or refusal to provision with latest service (e.g.fibre). This appears to have been the situation sought to be avoided by theTelecom Policy Review Panel Recommendation 6-1. The Commissionshould consider if competitors should be permitted to buy facilities in thissituation, as raised for discussion in the TPRP Report.

74. In such a scenario, the Consumer Groups would support the TPRP Reportrequirement of an application to drop an obligation to serve no matter whetherthere is regulatory forbearance from price regulation or not, wherever an ILEC(or both ILEC and CLECs, if the Commission were to consider our proposal toclothe CLECs in an obligation to serve) has facilities.

75. Overall, any modification of the obligation to serve should be contemplatedwith caution. The Consumer Groups submit that if the obligation to serve ismodified to include the obligation to provide basic broadband service, assuggested below, that the original obligation to provide basic telephone

58 The Consumer Groups note that the legislators could just as well confirm the obligation to serveand make this explicit in the Telecommunications Act, as recommended in Recommendation 6-1 of theTelecom Policy Review Panel Report.


24/50



24

services not be abandoned. Stated differently, support for legacy voice-onlynetworks must be maintained in the obligation to serve, as traditional voiceservice remain important for rural customers and broadband services cannotreplace traditional telephone service. 59 Thus, the Commission must makeclear, at least, that ILECs remain subject to their obligation to provide basic

telephone services even as they provide IP-based networks. Further, shouldthe Commission extend the obligation to serve to CLECs, it should likewiseensure, that CLECs retain obligation to serve for voice services even as theyroll out their IP-enabled networks. That is, once CLECs have becomeestablished as voice service providers, their users should not be stranded bya change in emphasis at these companies from phone service to integratedIP service simply as it is higher margin or more in line with business priorities.Once undertaken for voice service, a customer should not be abandoned.

Q4. Should a service provider that has the obligation to serve be compensated and, if

so, in which market(s)? What should be the criteria, for example the cost of service, fordetermining whether compensation is required? Specify the appropriate compensationmechanism.

76. There should be no compensation for a telecommunications service providerbased solely on their designation as having an obligation to serve. Asdescribed above, the Consumer Groups propose that all TSPs serving aslocal exchange carriers (as defined under the modified BSO) in non-HCSAs60be required to have the obligation to serve,61 in accordance with the BSO,which makes a compensation factor unnecessary and likely to distort themarket.

77. Under the Consumer Groups proposed model for broadband subsidy, thefirst mover ISP will attract an obligation to serve, as the Consumer Groupsmodel is based on competitive factors and the formula for access subsidies isdesigned to increase competition amongst ISPs to serve HCHSISAs withbroadband Internet service, while ensuring access to broadband for allcustomers in a particular HCHSISA.

59 See Reply Comments of NASUCA, footnoted supra, dated 27 January 2010,In the Matter of A

National Broadband Plan for Our Future, GN Docket No. 09-51.60 Unless the LECs territory was already all or substantially all a HCSA, such as Northwestel, inwhich case the obligation to serve would apply despite the HCSA.61 The Consumer Groups realize that their proposal does not provide an answer to the question ofensuring there is an obligation to serve on at least one provider in a HCSA, however, the Consumer Groupsare confident that their proposed subsidy regime would help fill this hole. Should the Commission detect areluctance on the part of ILECs, for example, to build the necessary access infrastructure (which nowwould enable broadband competition, since by definition under the new BSO, it would be broadband-capable) even given the continuing HCSA subsidies, the Commission could address this in a separatehearing.


25/50



25

78. The Consumer Groups generally oppose a compensation factor for anobligation to serve for three additional reasons. Firstly, the Consumer Groupsbelieve that there is a common law duty on common carriers which requiresthem to serve all customers and that normally, there is no need tocompensate a party, even in a regulatory scheme, for simply following a

legal duty.

79. Secondly, such a charge would amount to a simple rate increase for servicethat ILECs in most cases would provide service at their own cost or with asubsidy under the Consumer Groups proposed contribution mechanism.

80. Thirdly, building such a compensation scheme into a regulatory schemepresents a moral hazard to carriers and encourages gaming of the system bycarriers who again would claim compensation for the burden of servingcustomers they would normally serve in any case.

Q5. Should there be limits to the obligation to serve and, if so, what should thoselimits be? Indicate whether the current service extension charges and parameters (forexample, distance from the network, amount paid by the customer and/or the serviceprovider) remain appropriate. Should these charges and parameters be made generallyconsistent across relevant service providers?

81. Generally, there are limits on the common law obligation to serve. Thecarriers common law duty to supply services is limited to the supply ofexistingservices along existinglines of supply. A carrier has no duty tointroduce new services or extend its lines into a territory outside that which it

professes to serve.

82. A similar limit is contained in Bell Canadas statutory obligation to serve. TheSupreme Court of Canada held that Bell Canadas statutory obligation toserve is not intended to impose a requirement upon Bell to extend its servicesinto new areas or to enter a territory already served by another telephonecompany.62 This limit is specified in s. 6(2) of the Bell Canada Actand readsas follows:

6(2)Nothing in subsection (1) requires the Companyto furnish the service or a telephone where:

(a) the premises for which the service is requestedare not fronting on a highway, street, lane or otherarea along, over, under or on which the Companyhas a main or branch telephone service or system;

62 Metcalfe Telephones Ltd. v. McKenna, [1964] S.C.R. 202.


26/50



26

(b) the telephone on the premises would be situatedmore than 62 metres or such other distance as theCommission may specify from the highway, street,lane or other area; or

(c) if the Commission has not otherwise specified, theCompany has not received therefor a tender orpayment of the lawful rates semi-annually inadvance.

83. The obligation to serve of all ILECs is further limited by the CRTC-approvedTerms of Service. The Terms of Service represent an effort by theCommission to balance the rights and obligations of individual customers,those of the general body of customers as well as those of the carriers.63

84. The ILECs Terms of Service limit the scope of their obligations to serve in

some additional ways and generally read like Bell Canadas art. 3 of its Termsof Service, which is as follows:

Article 3: Obligation to Provide Service

Note: Continues to apply for residential stand-alone primary exchangeservice in forborne exchanges, as identified in Item 60.

3.1. Bell Canada is not required to provide service to an applicant where:

(a) Bell Canada would have to incur unusual expenses which the

applicant will not pay; for example, for securing rights of way orfor special construction;

(b) the applicant owes amounts to Bell Canada that are past dueother than as a guarantor; or

(c) the applicant does not provide a reasonable deposit oralternative required pursuant to these Terms.

3.2. Where Bell Canada does not provide service on application, it mustprovide the applicant with a written explanation upon request.64

63 Decision 86-7,Review of the general regulations of the federally regulated terrestrialtelecommunications common carriers at p. 9.64 Bell Canada Terms of Service, Approved in Order 86-476, amended in Order 2000-265 and Order2003-319, online: http://www.bell.ca/en/corp/aboutbell/tariffs/. This Article was issued/published onSeptember 4, 2007 under Telecom Order CRTC 2007-434. Note that as per Article 7 (Deposits andAlternatives), the total amount of all customer deposits and alternatives to deposits cannot exceed threemonths charges for all services, including anticipated long distance charges. MTS obligation to serve intheir Terms of Service read similarly in the General Tariff under Item 200 athttp://www.mts.ca/tariffs/pdf/GeneralItem200.pdf. SaskTels obligation to serve in their Terms of Service


27/50



27

85. The Consumer Groups are generally content with these geographic and

monetary limits to the obligation to serve.

86. The Consumer Groups note that they are not privy to, and generally are

unaware if the Commission is aware,

65

of the number of customers who arerefused service for any of the above three reasons.

87. It is therefore possible that the present limitations on the obligation to serveare indeed a barrier to obtaining telephone service for certain Canadians.

88. The Consumer Groups do support a survey of the limitations of the obligationto serve on each ILEC with a view to standardizing them and in preparationfor the imposition of an obligation on all CLECs as well in accordance with oursubmissions.

Service Improvement Plans

89. As noted, this obligation to serve is limited in geographic scope to the areaactually served by the ILEC. The Terms of Service generally require paymentof all service debts, a service deposit and the right to refuse service if thecompany must incur unusual expenses. However, consideration of theeffect of these limits is somewhat informed by examining the ServiceImprovement Plans for HCSAs, as similar limits are placed on therequirement to extend service under SIPs.

90. In addition, the limits on SIPs are similar to the limits on the obligation toserve for a reason, as they are simply setting reasonable limits on the samegoal, namely providing affordable universal service. For this reason, althoughthe Commission has not explicitly called for commentary on the SIPs, sinceSIPs are so bound up with the concept of universal service, is parallel to thelimits on obligation to serve, and since SIPs are an integral aspect to theConsumer Groups proposed reform of the local service subsidy regime, weintend to treat them in some detail below.

read similarly under Item 53 of the General Tariff, at: http://www.sasktel.com/about-us/company-

information/legal-and-regulatory/tariff-indices/attachments/basic-services-attachments/gen-terms-svc.pdf.TELUS obligation to serve in their Terms of Service read similarly under Item 103 of the General Tariff,at: http://about.telus.com/publicpolicy/tariffs/docs/CRTC214_6/General_8/Section_11/items100-124.pdf.65 The Consumer Groups recommend that the Commission request that the CCTS track allcomplaints of a failure to serve as a distinct category and log all reasons (such as the limits above) given bycomplainants and TSPs. This would provide the Commission with evidence upon which to base aninformed decision if the present limits are unreasonable or present barriers to certain Canadians. This isespecially important since the Commission eliminated the regulatory requirement to file affordabilityreports in Telecom Regulatory Policy CRTC 2009-183,Regulatory requirements pertaining to themonitoring and reporting of certain data (8 April 2009).


28/50



28

91. When the Commission implemented the basic service objective, it also setthree goals for service improvement in HCSAs. To implement these goals,the Commission directed all ILECs to file Service Improvement Plans (SIPs)for approval. The Commission approved SIPs for Aliant, Bell Canada, MTSAllstream, NorthwesTel, Tlbec and TELUS.

92. In the design of the SIP, the Commission decided that where construction istaking place in a specific area pursuant to the approved SIP, the customerscontribution to the costs shall not exceed $1,000 per premise.66 TheCommission found that requiring the customer to pay the $1,000 contributionin an up-front payment could be a disincentive to take service.67 TheCommission thus directed ILECs providing service to unserved areas toinstitute an installment plan.

93. However, if the potential customers unserved premise does not qualify forservice because the cost of building out would exceed the capital cost limit of

$25,000, the Commission found it appropriate for the ILEC to offer a planwhere the customer was willing to pay an amount over the $1,000contribution to a maximum of $10,000 to bring the companys costs within the$25,000 allowance.68 These costs are described as large constructioncharges. The Commission directed the companies to provide an installmentplan for these construction charges to be paid over a reasonable period oftime.69

94. The Commission also directed the companies with approved SIPs andSaskTel to provide an annual tracking plan, to include requirements such asthe number and location of new customers requesting service, the number of

customers requesting service who do not qualify because of cost, and thenumber of customers who have been offered service but refuse due to thecost.

95. The Consumer Groups submit that the customer contribution of $1,000 is abarrier to achieving affordable telecommunications services accessible to allCanadians, particularly for low-income consumers that reside in rural andisolated regions. In their Tracking Reports for 2003 through 2005, Aliantreported a total of 36 customers refused service due to cost.70 In BellCanadas Tracking Reports for 2003 through 2007, a reported number of3,992 customers refused service, and 143 of these customers specificallyindicated their refusal was due to cost.71 MTS Allstream in their Tracking

66 Decision 99-16, Telephone service to High-Cost Serving Areas at para. 52.67 Decision 2002-34,Regulatory framework for second price cap periodat para. 849.68 Decision 2002-34 at para. 853.69 Decision 2002-34 at para. 855.70 Aliant reported that in 2003, 11 customers declined due to cost; in 2004, 11 customers declined; in2005, 15 customers declined.71 Bell Canada reported that in 2003, 123 premises refused services and 10 customers indicatedrefusal due to cost; in 2004, 1,102 premises refused service, 34 customers indicated refusal due to cost; in


29/50



29

Reports for 2003 through 2010 reported that 211 requests for service weredeclined after receiving the quote for cost.72 In their Tracking Reports filed in2004 to 6, TELUS noted that 252 customers either declined service afterreceiving quotes for service or let the offer expire after receiving a quote. In2007, TELUS reported that 120 offers were outstanding they had neither

received acceptance nor rejections for service quotes.

73

96. Further, it is clear that some areas of Canada remain unserved because thecost of building extensions to these premises exceeds the capital costallowed by the Commission. For example, in their Tracking Reports, Aliantnoted 7 areas that they could not provide service to because the cost wouldexceed the capital cost criteria.74 Bell Canada in their 2003 through 2007Tracking Reports noted that a total of 15,645 localities did not qualify forservice because they exceeded the capital allowance.75 MTS in their 2003through 2010 Tracking Reports noted that 30 requests for service did notqualify because they exceeded the spending limit.76

97. The Commission should conduct a diligent study as to howtelecommunications services can be made affordable and accessible forthese Canadians that have declined service due to the cost. In particular, the

2005, 1,376 premises refused service, 84 customers indicated refusal due to cost; in 2006, 1,138 premisesrefused service, 10 customers indicated refusal due to cost, in 2007, 253 premises refused service, less than5 customers indicated refusal due to cost.72 MTS does not specify whether a customer declined service due to cost. In 2003, 61 requests weredeclined; in 2004, 61 requests were declined; in 2005, 21 requests were declined; in 2006, 16 requests weredeclined; in 2007, 16 requests were declined; in 2008, 18 requests were declined; in 2009, 12 requests weredeclined; and in 2010, 6 requests were declined.73 TELUS 2004 Tracking Report notes that 96 quotes declined or expired. The 2005 TrackingReport notes 139 quotes declined or expired and the 2006 Tracking Report notes 17 declined or expired.TELUS did not indicate how many customers declined due to cost because no further response wasreceived from the customer. TELUS SIP program formally ended on December 31, 2006 but theycontinued to provide Tracking Reports for SIP commitments that commenced or were committed to prior to2006 and outstanding.74 Aliants 2003 Tracking Report noted that service could not be provided to Smiths Pond, SouthBrook and Square Pond. The 2004 Tracking Report noted that service could not be provided to WinterTrickle. The 2005 Tracking Report noted that Greenspond Highway could not be served. The 2007 SIPCompletion Report noted that Beothuck Trail Farm and Goose Berry Cove could not be served.75 Bells 2003 Tracking Report noted 2,380 premises in 572 unserved localities did not qualify forservice because they exceeded the capital allowance. The 2004 Tracking Report noted 2,448 premises in603 unserved localities did not qualify for service. The 2005 Tracking Report noted 3,028 premises in 693

unserved localities that did not qualify for service. The 2006 Tracking Report noted 3,844 premises in 811unserved localities that did not qualify for service. The 2007 Tracking Report noted 3,945 premises in 821unserved localities that did not quality for service.76 MTS 2003 Tracking Report noted 2 requests that did not qualify for service because theyexceeded the spending limit. The 2004 Tracking Report noted 2 requests that did not qualify for service.The 2005 Tracking Report noted 7 requests that did not qualify for service. The 2006 Tracking Reportnoted 5 requests that did not qualify for service. The 2007 Tracking Report noted 5 requests that did notqualify for service. The 2008 Tracking Report noted 3 requests that did not qualify for service. The 2009Tracking Report noted 4 requests that did not qualify for service. The 2010 Tracking Report noted 2requests that did not quality for service.


30/50



30

$1,000 customer contribution is too high for low-income consumers living inrural or isolated areas of Canada.

98. As well, the Commission should undertake a study to determine whether thethreshold for maximum capital cost allowed by the Commission is too low, as

several rural and isolated premises remain unserved.

99. Similarly, there are still a number of consumers that do not have telephoneservice that meets the basic service obligation that is, they are underserved.For example, SaskTel in their 2010 Tracking Report reported that there werestill, some ten years since the first SIP identified them, 30 underservedresidents in Garson Lake and Descharme Lake.

100. The Consumer Groups note that the apparent barriers to receiving serviceunder SIPs remain the high customer contribution of $1000 and the lowcapital cost threshold. These limits will only further retard growth of

broadband availability in the most remote parts of Canada.

101. The Consumer Groups therefore call upon the Commission to remove the$1000 contribution from the customer and to revise the capital cost thresholdto a higher figure. For example the capital cost figure has not even beenadjusted upward for inflation. The Consumer Groups suggest that theCommission simply double the figure to $50,000.

102. Finally, the Consumer Groups call upon the Commission to investigateand to closely monitor complaints regarding refusal to serve in non-HCSAs incase the amounts required under the deposit rule or the ILECs interpretation

of unusual expenses is unreasonable in case such limits are serving as abarrier to service as similar limits appear to be barriers in SIPs.

Q6. Should the obligation to serve be subject to service standards, for examplespecific time frames for service delivery? If so, specify the standards and circumstances.

103. Many of the quality of service indicators used in the past by theCommission for local service could be used for, or adapted to, a use thatwould greatly aid the Commission in ensuring the obligation to serve imposedon LECs by the Commission were indeed effective. The need for QoSstandards would appear to be even more important should the Commissionextend the obligation to serve to all CLECs, some of whom may be unfamiliarwith the importance of QoS indicators and to provide evidence of the actualexperience of customers, which is the true gauge of whether an obligation toserve actually results in customers being served.

104. Simply receiving service when ordered is a first step and one that must bemonitored for timeliness and successful completion. Installations that are


31/50



31

delayed, late or do not work properly engender inconvenience, anxiety andoccasionally large expense or other disruptions to customers who hadexpected to be connected to voice or broadband service. To this end, theConsumer Groups propose that the Commission continue to apply thefollowing QoS indicators to ILECs and to extend them to all CLECs:

(a) 1.2 Installation appointments met;(b) 2.1 - Out-of-service trouble reports cleared within 24 hours; and(c) 2.2 - Repair appointments met.77

105. The Consumer Groups note that the ILECs already are reporting on suchQoS indicators in non-forborne exchanges. The Consumer Groups contendthat if broadband access is made a part of the basic service objective that, atleast for the opening years of the broadband roll-out (until 2020) theCommission should have QoS evidence to determine if the broadband that isrolled out actually is of high quality.

106. In order to add broadband QoS indicators an in-depth look at the sorts ofproblems customers are likely to experience with broadband service shouldbe undertaken. The Consumer Groups suggest that the Commission requestthe CCTS to deliver to it in-depth descriptions of all reported broadbandservice quality issues in order allow all parties to craft appropriate QoSstandards and indicators for all ISPs.

107. Based on the anecdotal complaints of customers received at PIAC, thecomplaints expressed by users of bulletin boards such as DSLreports.org andthe public online consultation in this proceeding to date,78 and the prior PN

2008-19 proceeding,

79

the Consumer Groups nonetheless propose thefollowing additional QoS indicators for broadband.

Advertised speed not consistently achievable at customerslocation;

Late delivery of company supplied CPE (broadband modem); Failure of company supplied CPE (broadband modem); Internet traffic management practices interfering with activities or

applications that are not explicitly mentioned in ISPs

piac 2010 43 evidence final

Documents