Telus, Bell tussle over CRTC decision, government services contract, and ‘taxpayer overpayments’

Telus Corp. and Bell Canada are in a tussle over a big services contract with the federal government. Telus Corp. says cabinet had better overturn the CRTC’s decision on the Department of National Defence’s (DND) network services—or taxpayers could end up getting bilked for it. But rival Bell Canada says Telus has no one to blame but itself for the situation. In 2007, Telus won the $213 million DND network contract, taking the business away from incumbent service provider Bell. But the transition from Bell to Telus didn’t go smoothly. There were delays and accusations between the carriers about who was to blame for the slow work. The move was supposed to have happened by June 2008, but it came to an end last November. To ensure that DND would have connectivity during a protracted transition, the CRTC decided to allow Bell to continue to charge for certain network services for a set period of time. In April, Telus filed a petition with cabinet requesting that the federal government overturn CRTC telecom decision 2009-85. In a petition to cabinet, Telus said the transition is complete, but in accord with the decision, Bell continues to receive payment. Ted Woodhead, Telus vice-president of telecom policy and regulatory affairs, said Bell will be paid for another month for some services and another six months for a different set of services. In the petition, Telus noted that Bell offered to charge DND a discounted rate for doing the work more quickly, but according to the document, the arrangement isn’t logical. “To suggest that requiring any party to pay slightly less for services not received is reasonable reflects a perverse notion of regulatory responsibility,” reads the document. Woodhead said the CRTC’s decision could curtail competitiveness in the large-business network services market. Carriers may think twice about bidding on enterprise contracts if it’s possible they’ll face a situation like this one. He said Telus compensates DND for the money it pays Bell. “In our view, imposing these kinds of costs unnecessarily will have a chilling effect on competition,” Woodhead said. “Regardless of who pays, the carrier who lost the business, particularly when it’s dominant, should not be permitted to impose an exit tariff,” he said. Taxpayers should watch the situation carefully, he added. “If the proposition stands that carriers can be compensated for services they don’t provide, the government ... could easily find itself in a situation where it is paying for services itself that it doesn’t receive.” Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, said that over the course of three years, Telus continually missed transition deadlines. “Over 95 per cent of the network was still with us after one year,” he said. Bibic said the agreement Bell made with the government via telecom decision 2009-85 helped to compensate the company for disrupted business plans. “We were already planning to deploy our resources that we were devoting to DND to other customers and other functions in the company,” Bibic said. He added that the transition isn’t over until the very last circuit is cut. “As long as you have one circuit alive, you have to keep the whole network up and running,” Bibic said. Bibic said this combination of factors fed into Bell’s arguments before the CRTC, leading to decision 2009-85. “Telus, give us a break. You were the ones failing miserably. You can’t just give us a raft of disconnection orders and expect us to disconnect those circuits in a day. In fact, it takes a long time to process all the disconnection orders,” he said. Bibic said the transition isn’t finished since some alarm circuits remain active. Asked how many, he said he isn’t sure. “I’m not sure it’s relevant,” he added. “Even if there’s one circuit, no circuits, or 200 circuits, the fact is that we’re getting compensated at Bell for not only the period of time we provided service, we need to be compensated, as the CRTC found, for the period of time it takes to shut down the network. If this thing had unfolded the way it was supposed to, we would have been able to manage the shutdown of our network while Telus was migrating, and not have to incur those extra costs. But now we’re left holding the bag on our network that we could have decommissioned two years ago.” Asked why the transition has taken so long, Woodhead said it has a lot to do with security. “The major factor in the delays was simply getting access to military installations,” he said. “With a normal enterprise customer, you just show up and they let you into the communications room and you do what you need to do. With the military, you need to get access to military installations. There’s a very rigorous procedure that the military requires for people to get access. We had many instances where we had to make multiple trips because there was a miscommunication about that aspect. We’ve actually installed facilities in international locations where that’s an even more difficult situation,” he said, pointing to the United States, where Telus has to meet Canadian and American requirements. It’s also a different situation. “This has never occurred before,” Woodhead said. “Bell has always owned this network. No one had ever tried it.” Roberta Fox, president and senior partner at Ontario-based telecom analysis firm Fox Group Consulting, said it’s no wonder the DND contract has proven to be so challenging. “Government contracts are exceptionally complex, always, usually very customized, and they need to have the flexibility to be adapted and modified as technologies and service requirements evolve,” she said. Woodhead said the government has a year to consider Telus’ petition. He said the company has also appealed the issue to the CRTC, and that last fall, after taking it to the Federal Court of Appeal, the court gave Telus the right to review information about the deal between DND and Bell—information Bell had argued contains confidential customer details. “We’ll be appearing in Federal Court in Calgary next week arguing that there were various legal issues associated with the CRTC process in this matter that are, to say the least, irregular, and we would be seeking, no matter what happens on this decision, that the Federal Court deals with that,” Woodhead said. Public Works and Government Services Canada (PWGSC), the department that negotiated the Telus-DND deal, didn’t comment, and Industry Canada said questions should be directed to the CRTC. A CRTC official said the commission won’t be apprised of the government’s position on the petition until a decision is made, and that questions should be directed to Industry Canada. news@thewirereport.ca

Telus, Bell tussle over CRTC decision, government services contract, and ‘taxpayer overpayments’

News | June 11, 2010

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