In Telecom Order CRTC 98-486, dated May 19, 1998, the CRTC clarified the rules for transit traffic for Competitive Local Exchange Carriers (CLECs). In Decision 97-8 (May 1, 1997), the CRTC defined transit traffic as traffic received from one carrier and then switched to another. The Commission had left it to the Interconnection Steering Committees (CISC) to make recommendations on appropriate arrangements should be put in place. As a result of an impasse at the CISC level, the issue was sent to the CRTC and Order 98-486 was the outcome of the Commission’s deliberations.
Transit traffic had been viewed as an opportunity for CLECs to arbitrage Stentor switching and aggregation rates and thereby serve as a way to discipline the Stentor local access rates. Among the significant clarifications that emerged in Order 98-486 was a definition of “Bill-and-Keep” traffic to include only traffic which originates and terminates within the same exchange. Transit traffic is specifically excluded from this definition.
In addition, the competitive industry had proposed that long distance carriers should be able to interconnect with a transit CLEC in order to reduce their switching and aggregation charges. The CRTC ruled that the company whose customer either originates or receives the long distance call is entitled to receive the switching and aggregation charge. This portion of the ruling will detract from the cost advantages that integrated CLEC – Interexchange carriers, such as Sprint, may have expected.
With respect to transit as a means to expedite CLEC entry into a market, the CRTC also clarified that regardless of transit being used as the means of interconnection, each CLEC must enter into specific interconnection agreements with every other CLEC – in order to arrange the manner of exchanging traffic, whether directly or by transit. This will have the impact of adding layers of complexity to newer entrants and give and advantage to first players such as Metronet and the incumbents.
The 14 page order seems to continue to favour construction of facilities and direct connectivity between CLECs – although the CRTC has appeared to miss an opportunity to have arbitrage of rates serve to discipline the market place rather than regulation. By artificially distinguishing between sources of traffic, the CRTC is leaving itself open to difficult policing and more complex rate structures.