Return no-contact provision in winback rules to 12 months: Primus

One of Canada’s main competitive telephone companies is telling the CRTC that it made a mistake when it returned the no-winback period to three months from 12 months in the local forbearance ruling (Telecom Decision 2006-15). Primus Telecommunications Canada Inc. says while it agrees with the commission’s approach to forbearance, the company is concerned that a three-month no-winback rule isn’t long enough to allow for competition to take hold. The company is worried that the ILECs will use targeted winback activities to lure customers back to them. "Primus is extremely concerned that if the ILECs are allowed to engage in targeted winback activities, offering special deals to customers who have decided to try a competing supplier’s service, after waiting just three months following a customer’s decision to change carriers, competition will not take hold and forbearance will be delayed," reads Primus’ June 6 Part VII application, which was prepared by noted telecom law firm Johnston & Buchan. Primus Canada wants the commission to reverse its decision to reduce the no-winback period and to consider applications to remove winback restrictions entirely once an incumbent telephone company has lost 20% market share and has satisfied quality-of-service indicators with respect to providing essential facilities to competitors. The company notes in its application that it suffers a substantial negative impact when a customer leaves after receiving service for three months. While not providing specific dollar values, Primus says that if a customer decides to switch to another provider in the fourth month it loses 81% of its investment to get that customer compared to only 8% if a customer leaves in the thirteenth month. Correctness of decision in doubtThe competitive provider notes that there is reason to doubt the correctness of the decision because of the way the CRTC decided to determine market dominance and the winback rules. Primus explains that the commission set the market dominance test on a market-by-market basis, but didn’t use the same approach when setting the no-winback period. In its submission, Primus Canada notes that the commission set the new no-winback period on a national basis – simply reducing it from 12 to three months regardless of the state of the market – rather than using the market-by-market approach. "This aspect of the decision makes no sense from the perspective of competition law analysis and it flies in the face of the commission’s knowledge that competition in the residential local exchange market varies greatly from local market to local market," reads the application. Primus suggests that the CRTC’s decision to reduce the no-winback period contradicts its own policy of assessing the competitiveness of a relevant local market prior to regulating less in that market. While the commission rightly determined to measure significant market power on a market-by-market basis, it failed to use this same approach in deciding whether winback rules would still apply. "It appears that the commission’s decision ignores both its own determination that the relevant markets for local exchange service are to be defined on a regional basis, and that little or no competition exists in many such markets. The decision to reduce the no-winback period to three months is premature and could delay forbearance," reads the Johnston and Buchan brief. "Since the purpose of the no-winback rule was to protect new entrants from the ILECs’ dominance in the local market, and to give them the opportunity to establish a relationship with new customers prior to being targeted with new promotions from the ILECs, it is difficult to fathom how removal of this competitive safeguard could possibly be justified in any of the markets identified…let alone on a national basis." The no-contact period under the winback rules used to be three months but was extended to 12 months following a successful application from Call-Net Enterprises Inc. (now Rogers Telecom) a couple of years ago. In May 2003, the company asked the commission to consider upping the no-winback period because three months was not a sufficient length of time to establish a relationship with the customer before being subjected to winback campaigns. The CRTC agreed with Call-Net that three months didn’t give competitive providers enough time to develop a stable customer base and increased the no-winback period to 12 months. Primus says in its application that not much has changed since the CRTC issued Telecom Decision 2004-4. According to the most recent market data at the time of the forbearance decision, incumbent telephone companies still controlled 96.8% of the market, notes the Primus filing. What has changed, the company says, is the introduction of VoIP services by a number of competitors including the cable companies. Primus notes, however, that despite cableco entry into the telephony market the incumbent telephone companies’ share of the local market hasn’t "eroded to any significant degree." The competitive provider suggests that it wouldn’t take issue with what it considers "legitimate winback activity" on the part of the ILECs. "If all the ILECs were doing was marketing their approved local rates to customers, Primus would have less trouble with winbacks. It is the targeted use of special bundles, built on the knowledge of the customer’s usage patterns, coupled with perfect knowledge of when a customer is making a new purchase decision, that gives rise to the anti-competitive impact of the activity," writes the company.

Return no-contact provision in winback rules to 12 months: Primus

News | 06/22/2006 4:00 am EDT

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