International licenses granted in Canada

On October 1, 1998, the CRTC issued Telecom Decision CRTC 98-17, outlining the process by which companies could obtain licenses to offer international telecom services for Canada. As of January 1, 1999, all companies providing international telecom services to the public must be licensed. The first licensees were just announced. There are two classes of licenses: Class A for service providers which have leased or owned facilities that cross a border; and Class B, for service providers which hand all of their international traffic over to another licensed service provider. Class A licensees are liable for regular reporting of traffic and remittance of contribution. There seems to be confusion about who needs each type of license and inconsistencies are emerging in the apparent interest of administrative efficiency. As will be discussed below, this could lead to holes in the contribution collection mechanism.

Who needs licenses?
It is interesting to begin with an examination of who did not obtain licenses. Many of the companies that had registered as resellers in Canada have not yet obtained licenses, in violation of the Decision. Decision 98-17 explicitly called for licensing switchless resellers, although, as the attached list indicates, many have not yet filed. There are also gaps in the licensing of international pre-paid card providers.

The CRTC has instructed paging companies and independent local telephone companies that there is no need to obtain either type of license, despite the fact that independent telcos are switch-based firms selling international long distance services to their subscribers. This is confusing in light of statements in the October 1 Decision and a previous supreme court ruling that the inter-provincial long distance service being provided by independents was sufficient justification to bring the independents under CRTC regulation. As such, why are Class B licenses not required?

SaskTel has neither applied for nor been granted either class of license, apparently believing that it remains exempt from any application of federal telecommunications law.

Metronet applied for and received a class B license, apparently indicating that it does not operate telecommunications facilities that carry any basic service over the border. This was a surprise in light of its press releases announcing existing and planned cross border fibre routes to major US business centres. This does not seem to have been raised during the CRTC review.

Conditions have changed
No contribution applies on circuits which are unused and not connected, dedicated to transit service (not connected to the Canadian PSTN), dedicated to a private line application, or dedicated to data services. Exemptions from the obligations of contribution require approval from the CRTC on a case-by-case basis.

Basic versus Enhanced Services
It is unclear about how or whether the CRTC will regulate international ATM and Frame Relay services under the licensing regime. The international licenses call for reporting of traffic in “minutes” which is a term that cannot be applied to these technologies. The Commission is also hesitant to regulate Internet Protocol (“IP”) traffic and as such, ISPs are exempt from the regime. This leaves open the possibility for a company to use a contribution-exempt data cross-border service that takes already converted packets from other service providers. Such traffic may continue to be exempt from the cross-border contribution element unless the CRTC clarifies and then enforces its rules.

Administrative ease may be at the root of the CRTC’s decision not to license local telcos and paging companies. Clarification is required for re-billers and card companies. It would appear that a more inclusive policy, coupled with clear rules would provide better understanding for all industry participants.

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