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MTS Allstream was quick to trash the report of the Telecom Policy Review panel, calling it “Hopelessly Complicated and Impractical.”

Let’s look at this statement and parse it.

“In the near term, we see no practical effect on our business. ” Correct. Of course, even if MTS Allstream loved the report, it would have no effect on anybody in the near term. It is a report, not a CRTC Decision, not a new Telecom Act, etc.

“Longer term, the recommendations appear hopelessly complicated and impractical.” To start with, let’s remember that this is a panel whose mandate was:

With these objectives, we had to be expecting something more substantial than a weekend school report!

The report is 400 pages long and it uses detailed technical language. Not just geek technical terms, but economist terms, lawyer terms and social policy terminology. Of course the report is complicated. Hopelessly though?

After you get past the first look, you realize that the report contains step-by-step instructions on how to do it. How to build a 21st century policy and regulatory framework.

There are precise wording changes recommended for various sections of the Telecom Act. Details on how to open up foreign ownership. Recommendations for follow-up work to cover the issues that were beyond the scope of this panel. Complicated? Yes. Impractical? Hardly.

“They appear based on the rather implausible notion that greater bureaucracy will result in greater efficiency for Canadian consumers and businesses.” My initial read of the report led me to a similar set of thoughts. Why create new arms of government if we are trying to streamline regulation and paperwork? How is the creation of bureaucracy consistent with migration to market forces?

More than most companies, MTS Allstream should be familiar with the disruptive benefits of reorganization once in a while. Could the Telecommunications Consumer Agency exist within today’s CRTC. I think so. But those are not the major issues.

I am certain that the heartburn being felt at MTS Allstream has little to do with overall complexity and bureaucracy. Their pain is summarized in the opening statement from the panel:

In other words, the panel believes in facilities-based competition, just like the CRTC has been saying. MTS is heavily reliant on its competitors for access. It has been relying on regulated wholesale rates rather than build its own access. In fact, it sold off its holdings in Inukshuk, the one opportunity to economically control its own destiny.

MTS Allstream: Be grateful for the recommendations to relax foreign ownership restrictions. It may be just the thing to get you back on your feet.

The Canadian Human Rights tribunal has ruled against an ISP finding it liable for hate messages hosted on their site in what is believed to be a precedent setting case.

Specific findings included a determination that material sent over the Internet is a ‘communication’ within the meaning of the Canadian Human Rights Act and finding an ISP, Affordable Space.com, responsible for the illegal material that it knowingly hosted.

The CHRC levied fines of $13,000 and damages of $5,000 in connection with the case.

Warren Kinsella, a Toronto based lawyer and author of Web of Hate, says that the case shows that the CHRC has been willing to step up and apply regulation to parts of the internet despite the CRTC’s unwillingness to do so.

On one hand, it is good to see the CHRC dealing with such matters. However, their jurisdiction likely does not apply to websites hosted in Canada. In our humble view, the CRTC has to take on the role of keeping material found to be illegal out of Canada.

That viewpoint will be explored at The Canadian Telecom Summit in its special panel looking at “Illegal Content on the Internet.”

Background
“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.

The CRTC has updated Contribution rates for the year 2000, and has ruled against AT&T Canada and Call-Net’s applications to lower the subsidy even more due to the effect of increased volumes of minutes stimulated by flat rate calling plans. New rates are set out in the table below.

Contribution on DALs
As reported in the July 24, 1999 update, traffic sent over Dedicated Access Lines (DALs) continues to be exempt from paying contribution, and carriers will continue to apply a “DAL” surcharge on switched traffic charges. Further, at that time, the Commission determined that carriers which do not use DALs at all should be exempt from the surcharge. The surcharge was determined in Telecom Decision CRTC 99-20, released December 15, 1999.

International Issues
Western Canadian telephone companies had complained that international traffic patterns had been distorted because low contribution rates in Bell Canada territory created an incentive for traffic to use Ontario and Quebec as border crossings (thereby saving up to 2.5¢ per minute). In response, the CRTC has determined that all international traffic will attract the Bell Canada rates (about half a cent per minute), effective January 1, 2000.

Summary
As we have reported before, per minute access and contribution charges continue to be a significant issue challenging profitability for Canadian carriers. The competitors for voice services have not been able to convince the CRTC that there is a problem and there are signs of a credibility gap for the industry in presenting numbers to the Commission. There is a continuing proceeding to review the “per-minute” approach to contribution as well as the overall level of funding required to maintain affordable local service.

Background
On October 1, 1998, the CRTC issued Telecom Decision CRTC 98-17, outlining the process by which companies can 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 batch of licenses is expected to be announced in early January 1999. 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. Decision 98-17 also describes the reporting and contribution payment regime imposed as a condition of license. The rules for contribution for the first quarter of 1999 were unclear in the Decision. As a result, a number of competitors have collaborated in proposing the following regime, expected to be announced coincident to the first wave of licenses.

Contribution
Contribution is the term used for the subsidy paid from long distance services to maintain affordable local rates. The Decision sets out a phased approach for moving to a per-minute payment scheme. Effective January 1, 1999, Class A licensees will be responsible for reporting and paying a fee based on the number of circuits which exit Canada. For traffic using Teleglobe, carriers will continue to pay contribution based on the “overseas access circuits” connecting to Teleglobe’s switches. The rates for contribution vary based on the size of the trunk group (as a proxy for traffic carrying capacity of the trunk group), and vary based on the location of licensee’s international gateway switch.

As of April 1, 1999, the per-circuit charge will transition to a per-minute fee based on the amount of traffic on the cross-border circuits. Teleglobe will begin to pay contribution explicitly at that time, and will presumably include the cost in its rates to account for the charge.

Contribution Exemptions
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.

Reporting Requirements
Licensed carriers are required to maintain records and report inbound and outbound traffic by country, using a standardized country list. For outbound traffic, this is a routine tracking process. The CRTC will expect inbound traffic to be disaggregated to the extent the carrier knows where the traffic is coming from. It is also expected that the reported traffic will exceed the levels of contribution eligible traffic.

Summary
Licensed service providers are advised to move swiftly to establish procedures for tracking circuit quantities and traffic volumes in order to permit compliance verification.

In Telecom Order CRTC 98-28, dated January 23, 1998, the CRTC confirmed that long distance providers which use the internet as a backbone are still required to register and have to pay “contribution” on their traffic.

ShadowTel had argued that its innovative voice long distance service, using a data service backbone based on frame relay and internet, should be exempt from paying the subsidy toward affordable local rates known as Contribution. “[T]he Commission considers that ShadowTel is providing public switched interexchange voice services, albeit over the Internet and that, consistent with Order 97-590, ShadowTel is clearly required to register as a reseller and pay contribution.”

In Order 97-590, the Commission stated that, for the time being, internet data services do not yet attract contribution, but voice services using the Internet would not qualify for an exemption.

Telecom Order CRTC 98-28, reaffirms the position and clarifies the differentiation between Internet Service Providers and long distance using internet protocol: “The Commission notes that while they ride on the same Internet protocol, the services offered by ISPs are very different from the services provided by ShadowTel.”