July 24, 1999
Canadian Regulatory Update

Background
The CRTC has recently issued a number of decisions and letters of interest to providers of long distance services in Canada. This Update will touch on some of the most relevant matters.

Contribution on DALs
Contribution is the term used in Canada to refer to the subsidy from long distance services towards basic dial tone. The level of Contribution varies by province, however, it is generally in the order of 0.5 to 2 per minute per end of the call, charged in addition to switched access or egress charges. Dedicated Access Lines (DALs) have not attracted Contribution and on July 20, in Telecom Decision CRTC 99-9, the Commission has agreed to continue this exemption, and will continue to apply a surcharge on switched traffic charges. Further, the Commission agreed with London Telecom that carriers which attest to not using DALs should be exempt from the surcharge. The level of the surcharge will be set in the decision associated with a concurrent proceeding (Public Notice 99-5).

International Issues
On July 14, 1999, the CRTC issued a letter to all registered resellers in Canada, as a reminder of the requirement to acquire a license for the provision of international services.

An industry wide task force examined issues associated with the competitive provision of international services and a report was issued on June 23 to the CRTC. The report consists of non-binding recommendations to assist in applying the new rules consistently. Among the more significant issues addressed is an attempt to capture Contribution payments for voice traffic which leaves Canada over non-circuit switched facilities (such as Internet Protocol (IP) or Asynchronous Transfer Mode (ATM)). The task force recommended establishing a new Class C license for carriers of such traffic. Class C licensees would be required to measure the minutes at the point of conversion from circuit switched technology.

Until the CRTC acts on this report, IP and ATM services may continue to be used to carry traffic in and out of Canada, Contribution-free.

Summary
Per minute access and Contribution charges continue to be a significant issue challenging profitability for Canadian carriers. In recent months, AT&T Canada's decided to exit the residential long distance market, selling its business to Primus, and Sprint Canada continues to bleed red ink associated with carrier charges. It appears clear that further changes will be required in order to rationalize the regulatory environment - providing consumers with choice while leaving profit opportunities for carriers.

For assistance in matters related to telecommunications competition,
call Mark H. Goldberg & Associates at +1 905 882 0417.