Obligation to serve

Last week, I touched on the obligation to serve in a post about the challenges of providing telecom services in high cost serving areas.

I thought it would be worthwhile exploring that concept a little more.

In the file discussed last week, the CRTC asked TELUS a number of questions. One of them started with, “Given that TELUS is currently subject to an obligation to serve in terms of the provision of basic primary exchange service, explain how the company intends to continue to meet this obligation”.

What is this obligation? Back in 2011, the CRTC issued a policy determination on precisely that issue. The operative paragraphs in that document is paragraph 6: “The obligation to serve requires ILECs to provide telephone service to existing customers, new customers requesting service where the ILEC has facilities, and new customers requesting service beyond the limits of the ILEC’s facilities.4” What did that footnote [4] say? “The terms and conditions associated with such service extensions are set out in the ILECs’ respective General Tariffs.”

More recently, the CRTC confirmed this in 2020, saying “In exchanges that continue to be regulated, the obligation to serve includes the provision of tariffed local voice services and related services (e.g. optional features) throughout the ILECs’ serving territories, subject to any limitations set out in the general terms of service.”

As it turns out, that is a very important caveat. The obligation to provide services is not an absolute one. If the potential customer is beyond the limits of the service provider’s facilities, then we need to examine the General Tariffs to see what terms apply.

Item 103 of the General Terms of Service for TELUS is entitled “The Company’s Obligation to Provide Service”. In section 103.1 (c), we find “The Company must provide service to all customers who apply except when… the Company cannot acquire or maintain the equipment, facilities, rights-of-way, rights-of-access, or space in or on buildings that are necessary to provide service”.

It is important to note that these terms of service are CRTC approved.

There are other interesting precedents to explore. For example, there are CRTC requirements for de-standardization or withdrawal of a service. The rules say that the carrier must provide notice to each affected customer, as well as information on how to participate in the Commission’s process. The CRTC encourages (but no longer requires) companies to identify any substitute services, where available, in the customer correspondence.

Let’s tie these provisions back to last week’s post, examining the challenges of providing phone service to 110 residential subscribers in 8 small communities with limited commercial power, located in mountainous geography. TELUS has identified an alternate service provider for customers to use as a substitute when its services are discontinued.

The commercial business case for serving these communities simply doesn’t work without a substantial subsidy. The CRTC no longer operates a fund for high cost serving areas, but the regulator could choose to designate these communities as eligible for its Broadband Fund. The two funds are fundamentally different. The CRTC used to fund the shortfall in annual operating expenses for high cost areas; the Broadband Fund is a one time injection to correct the projected business case for unserved areas.

Should a subsidy program trigger an open competition for the funding? What is appropriateness of funding a new network, when another service provider is already present?

A reminder that the CRTC re-opened its consultation on the Broadband Fund, inviting comments until June 5.

In a competitive marketplace, what is meant by the obligation to serve?

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