MTS Allstream, Call-Net say they are in compliance with rules after mergers

MTS Allstream and Call-Net Enterprises Ltd. contend that they are following CRTC rules and say they are perplexed by a Part VII application filed by TELUS regarding tariff obligations arising out of recent mergers. "I don’t know what they are trying to achieve. I can see what the application asks for. We do think that we should comply with the regulation in Manitoba, but maybe they weren’t expecting us to say that. I have no idea. I can’t speak for TELUS," Teresa Griffin-Muir, MTS Allstream VP of regulatory affairs tells Network Letter. "Even the relief sought is vague, because (TELUS) asked us to show cause why we shouldn’t be compliant. But we think we should be compliant and we are compliant, so I’m a bit confused." TELUS’ Part VII filed late last year asked the CRTC to clarify the conditions under which companies must operate as a spate of acquisitions in Canada makes it harder to differentiate between incumbent and competitor (NL, Dec. 22/04). The Part VII in particular questions whether MTS is treating the Allstream customers it acquired in Manitoba as it should under rules governing ILECs, and are thus subject to tariff filing requirements. It also questions the relationship between Call-Net and Bell Canada with regard to the division of assets of 360networks Corp. TELUS contends that Bell, not Call-Net, is actually servicing the customers in eastern Canada since it owns the infrastructure; Bell is an ILEC in that region, while Call-Net isn’t. "I think that TELUS’ allegation is that this is a transaction of convenience for Bell Canada, and our position is that it certainly is not. That position is without merit. What we’re arguing is that we have acquired all of the customers in eastern Canada – east of the Manitoba border – and that significantly strengthens us as a competitor even vis-à-vis Bell Canada. This is a very unique transaction with a limited time frame," said Jean Brazeau, Call-Net senior VP of regulatory and strategic partnerships. He added that Call-Net will not acquire the infrastructure to service those customers from Bell Canada for two years for tax reasons. He explained that Bell Canada must hold onto the infrastructure assets for two years in order to be able to qualify for tax losses. "If they would have sold us the assets right away, then they would not have had access to those tax losses," he said. "The only thing I can say is if there weren’t any tax considerations during this transaction, we would have bought all of the assets that day. And our intent is certainly to buy all of the assets." Brazeau further pointed out that the CRTC has approved the unique arrangement in agreeing to an interworking agreement (IWA) between the two parties under section 29 of the Telecommunications Act. "TELUS is suggesting that the commission should have suspenders and a bell. They’re saying, well, even though you approved this agreement under section 29, (Bell) should also be required to file tariffs for those services," he stated. "Why have a section 29 then? So the commission has given its approval. It’s a unique situation that lasts two years and then it goes away. There were some very specific circumstances that led us to file a section 29 application, and the commission agreed."He added, "If people didn’t think that was the appropriate mechanism to use to get approval, then they should have said so during the time that we were seeking commission approval of our interworking agreement." But Ted Woodhead, director of regulatory matters at TELUS, doesn’t buy Brazeau’s argument and disagrees with the position being presented by MTS Allstream. "That is not an answer (that the infrastructure will be acquired in two years). My position is that the Telecom Act is very clear, and regulation is all based around the facilities," he said. "Bell owns those facilities, manages those facilities, operates those facilities, and in my view Call-Net acts as a simple rebuilder for services offered to those customers. They are sending out bills, and that’s about it. Bell keeps the lion’s share of the revenues from those customers, and is operating those facilities. Therefore, they are ILEC facilities and they should be tariffed." Woodhead disagreed also that approval of the IWA under section 29 means that tariffs no longer apply. "I find that a ludicrous position," he said. "Section 29 is there because of the old TransCanada telephone system days, and then later Stentor. These were agreements that were signed between provincially based ILECs." He noted that agreements under section 29 traditionally allowed provincial ILECs, such as British Columbia Telephone Company, SaskTel, and MTS, to pass phone traffic through each other’s networks across the country. "What Bell is trying to say – and perhaps the commission overlooked it – is that that’s all they’re doing here. But I don’t agree," said Woodhead. "My position is that Bell purchased all of the assets of 360networks and GT Telecom and then in a separate auction transaction rented the customers, but not the facilities to Call-Net. If Bell still owns and operates those facilities, they are ILEC facilities and they should be tariffed." TELUS received some support in interventions submitted in the process for its position – namely from Primus Telecommunications Canada Inc., and the Canadian Cable Telecommunications Association (CCTA). "CCTA has reviewed the argument and evidence advanced by TELUS and agrees that the circumstances described raise concerns that should properly be the subject of commission review," stated CCTA president Michael Hennessy in a letter to the commission. "In the case of the Bell Canada acquisition, Primus agrees with TELUS when it states that ‘it cannot reasonably be said that the telecommunications services in question are provided by Call-Net. Rather, for practical and, TELUS submits, for regulatory purposes, they are provided by Bell and/or its affiliates.’ Primus agrees with TELUS that the arrangement should be investigated and if the commission ultimately determines that Bell and/or its affiliates are providing the services, tariffs should be required," wrote Primus’ Jonathan Holmes in a February 1 submission to the CRTC. Holmes further noted that the case of Allstream’s services within the traditional operating territory of MTS is "an open and shut case." Primus added that the commission should let current contracts expire before tariffed rates are applied. Woodhead said that MTS Allstream’s contention that they are in compliance isn’t so cut and dried. "MTS Allstream filed them (the tariffs) after we filed the (Part VII) application…I’m happy they’re indicating that they agree with us, but I would just like to see that there’s a measure of compliance." The TELUS executive added that the Part VII is about "enforcement and compliance."

MTS Allstream, Call-Net say they are in compliance with rules after mergers

News | March 16, 2005

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