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PIAC application to CRTC for disclosure by telcos of long distance rates

Ms. Diane Rheaume
Secretary-General
Canadian Radio-Television and
Telecommunications Commission
Ottawa, ON
K1A 0N2

BY COURIER AND EMAIL

Dear Ms. Rheaume:

Re: Part VII Application by PIAC for enforcement of CRTC ruling regarding Basic Toll rate disclosure by ILECs,

1. The following is an application made pursuant to sections 24, 48, 51, 55, 56, 57 and 60 of the Telecommunications Act, and filed under Part VII of the CRTC Telecommunications Rules of Procedure, on behalf of residential subscribers of telephone services offered by incumbent telephone companies (ILECs). The application is for enforcement of the CRTC order requiring that basic toll service (“BTS”) rate schedules be made publicly available, and for the payment of costs to PIAC for its investigation and pursuit of this matter.
2. Specifically, we are requesting that the CRTC:

  • make a declaration confirming that certain ILECs have been, and continue to be, in violation of its order in para.81(i) of Telecom Decision CRTC 97-19 to ”…make publicly available, rate schedules setting out the rates for basic toll service”;
  • order ILECs to comply with the above-mentioned order, and to take the following specific measures in that respect:
  1. post and maintain current BTS rate schedules on their websites, and in particular on the webpage for residential long distance services;
  2. clearly present BTS rates as an option along with other toll plans, both on their websites and in other communications with residential customers;
  3. clearly note in appropriate places and at appropriate times the time-of-day discounts and any minimum charges that apply to BTS rates, as well as the fact that further discounts apply for registered certified hearing or speech-impaired TDD users;
  4. provide BTS rate schedules to consumers upon request (including by postal mail where the individual does not have Internet access or email);
  5. where assisting consumers in identifying the appropriate toll plan given their calling patterns, ensure that those customers who may be best off under BTS rates are so advised;

(vi) take any other measures that the Commission considers appropriate in the circumstances.
3. order ILECs to rebate those customers who paid more for toll services under an ILEC “discount” toll plan than they would have under BTS rates, without prejudice to the exercise of any civil remedies that may be available to them; and

d) order the ILECs in question to pay PIAC its costs of investigating and pursuing this matter.

The facts

3. On 18 December 1997, the CRTC issued Telecom Decision 97-19, Forbearance – Regulation of Toll Services Provided by Incumbent Telephone Companies. In this decision, the Commission forbore from the regulation of ILEC toll and toll-free services, subject to certain conditions. One of the conditions was a ceiling on basic toll rates, with the corollary requirement that basic toll rate schedules shall be made “publicly available”.
4. Over the ensuing years, ILECs have offered an ever-changing array of discount toll plans to residential customers. These plans are advertised in the general media, by way of direct marketing, in bill inserts, and on the company websites. As well, many customers learn about their toll plan options primarily by speaking with company service representatives or listening to recorded information provided by the company’s customer service automated telephone system.

BTS rates vs. Discount Toll Plan rates

5. In addition to their “discount toll plans”, ILECs are required to offer toll service under regulated BTS rate schedules. Customers who are not subscribed to a discount toll plan are charged BTS rates, with applicable time-of-day discounts, for toll calls. Depending on the time of day and distance of the call, calls made under BTS rates can be less expensive than if made under a so-called “discount” plan. This has always been the case, such that some customers (e.g. those who only make short-haul toll calls during off-peak hours) have always been better off under BTS rates than under an ILEC “discount” toll plan.
6. Some discount toll plans involve a set monthly fee or minimum monthly charge; others do not. In late 2001, toll service providers began to levy a mandatory monthly $1.25 charge on their discount toll plans as a way of recovering high cost area subsidy funds from subscribers. With the exception of SaskTel, all of the major ILECs and competitors now levy a mandatory $1.25 monthly charge on their residential discount toll plans. Few discount toll plans promoted to residential customers do not now carry this fee. In early 2002, Bell Canada began to apply an additional minimum monthly charge of $4.95 for its popular First Rate plan.
7. The imposition of monthly fees and minimum charges for discount toll plans immediately increases the threshold of calling below which BTS rates make more economic sense for subscribers. In the absence of such charges, there may have been relatively few customers for whom BTS made more sense than a discount toll plan. Once mandatory monthly fees are added to discount plans, however, BTS rates become the best option for many more customers.
8. For example, a Bell customer who spends less than $6.20 per month on toll calling under BTS rates will now be better off under BTS rates than under Bell’s First Rate plan. This is because Bell’s First Rate plan now involves a minimum monthly payment of $6.20, even if no toll calls are made. From another perspective, a Bell customer calling from Ottawa to Toronto during off-peak hours, and making no other toll calls, would have to spend more than 36 minutes/mo. on such calls in order to realize any savings under Bell’s First Rate plan over BTS rates.

Customer calling patterns

9. According to data provided by Bell Canada during the recent Price Cap Review proceeding, 7.4% of Bell’s customer accounts used no long distance at all during the period January to June 2001, 25% used less than 7.5 minutes of toll calling per month, and the median customer (50th percentile) used 42.5 minutes per month.
10. TELUS provided similar data for the same period, as follows: 17.56% of customer accounts used no long distance at all; 25% used less than 4.75 minutes/mo., and 50% used less than 50.7 minutes/mo.
11. Based on this data, it would appear that a significant proportion of Bell and TELUS customers are better off under BTS rates than under discount toll plans. Yet, according to Bell in October 2001, “less than 5% of its residential customers make toll calls in a typical month yet are not signed up for a toll plan with either the Company or a competitor”.

Failure to Disclose BTS Rate Schedules

12. In June 2002, PIAC began researching long distance rates for its ten year review of competition and deregulation in the telephone industry. One of the many items researched was ILEC basic toll rates. This information is not provided in telephone directories. During the month of June, PIAC’s researcher, Michael Nesbitt, searched company websites and made numerous telephone calls to ILEC regulatory departments and customer service in order to obtain BTS rate schedules. Details of the results of his attempts to obtain this information are set out in his Affidavit of July 3rd, 2002, attached.
13. In summary, no company provided BTS rate schedules to us upon request to customer service (requests were made by both telephone and email). In no case other than Bell Canada were we able to find the BTS schedules on the company website. Bell had only recently posted this information on its website in May 2002, and only after persistent demands by a consumer advocate that the basic toll rate information be posted – see the attached Affidavit of Jean Sebastien. Even some regulatory departments had difficulty responding to our request for basic toll rate schedules, as the Supplementary Affidavit of Michael Nesbitt sets out.
14. During a meeting of the CRTC “BMT Committee” on June 17th, 2002, regulatory staff from each major ILEC were informed by PIAC counsel of this problem, and were notified that action would be taken if it was not resolved.
15. By late August, 2002, most of the ILECs in question still did not make their BTS rate schedules available upon request, and most still did not have this information posted on their websites. See the Supplementary Affidavit of Michael Nesbitt.
16. Of the three companies that now make this information available on their websites, only TELUS’s posting discloses the BTS rates as a toll option. Under the heading “Non-Plan Rates”, the service is described as: “Rates for calls that are operator-assisted or not under a TELUS Long Distance plan”. SaskTel’s BTS rate schedules are located on an obscure page of its website (“About SaskTel – Public Policy – Non-Tariffed Services”) and are not mentioned on the page listing long distance options. Bell Canada’s web posting of “base rate schedules” is presented in a manner and location that is unlikely to be noticed by consumers seeking to understand their toll options with Bell Canada. See the Supplementary Affidavit of Michael Nesbitt.
17. In addition, when low volume toll users inquire by telephone about the most appropriate toll option given their calling profile, research conducted by PIAC suggests that ILECs almost always direct them to discount toll plans, even when the customer may be better off under BTS rates. This was the case in both June and August 2002. See the Affidavit and the Supplementary Affidavit of Michael Nesbitt.

The Law

18. As noted above, basic toll rates continue to be subject to CRTC regulation. In Telecom Decision 97-19, Bell Canada, Aliant, MTS, TELUS, Sogetel, Telus(Quebec), and Telebec were ordered to “make publicly available, rate schedules setting out the rates for basic toll service”. By way of Telecom Decision 2000-150, SaskTel was made subject to the same requirement. This disclosure requirement was imposed by the Commission as a condition of toll forbearance under s.24 of the Telecommunications Act.
19. A contravention of condition referred to in section 24 is considered an offence under s.73(2)(a) of the Telecommunications Act and is punishable upon summary conviction with fines of up to $100,000 per day on which the offence is committed, for a first offence.
20. The CRTC has the powers of a superior court with respect to the enforcement of its decisions. Using this power in past cases of regulatory violations, the Commission has required companies to undergo independent audits, to file reports with the CRTC, to revise procedures, and to compensate affected customers.
21. The CRTC also has the power to order “by whom and to whom any costs are to be paid and by whom they are to be taxed….”.
22. Subscribers who have incurred unnecessary charges as a result of ILEC acts or omissions that are contrary to a CRTC decision may, subject to applicable limitations of liability, sue for and recover their damages in court.

Argument

Making BTS rate information available

23. It is clear that all major ILECs have been violating the 1997 CRTC order to make publicly available their basic toll rate schedules. Until very recently, none of the major ILECs were making this information publicly available. Only in response to pressure from consumer advocates have some companies begun now, some 4½ years after the original order, to make this information available.
24. In June, 2002, none of the major ILECs provided BTS rate schedule information to consumers upon request by telephone or email. Two months after PIAC’s notification that they were in breach of a CRTC requirement by not providing this information, most companies still do not provide BTS rate schedules to consumers upon request.
25. Only in response to persistent demands from consumer advocates did some companies (Bell, TELUS) post this information on relevant pages of their websites in the spring and summer of 2002. As of the date of this application, Bell Canada’s website posting of BTS rate schedules remains neither noticeable nor clear (although Bell has, since August 21st, removed the option “Help me pick a long distance plan”, as well as the text entitled “Bell First Rate Long Distance Plans” that specifically directed users to its discount plans). BTS rate schedules (other than for overseas rates) are still not available on the Aliant company or MTS websites. SaskTel’s BTS rate schedules continue to be posted on an obscure page of the company website that even researchers have difficulty finding.
26. Even some ILEC regulatory departments had difficulty providing BTS rate schedules to PIAC upon request. For example, it took PIAC’s researcher several days to obtain this information from the regulatory departments of TELUS and MTS (see Supplementary Affidavit of Michael Nesbitt).
27. In light of the situation described above, all ILECs should be ordered to post BTS rate schedules on their websites, in a clear and conspicuous manner.
28. Posting on websites is an appropriate method of disclosure, but it is not sufficient. Many individuals for whom this information is relevant do not have access to the Internet. ILECs should be therefore be required not only to post their BTS rate schedules on websites, but also to provide BTS rate schedules to consumers upon request by fax and postal mail.

Disclosing BTS as a toll plan option

29. It is not enough that ILECs merely provide BTS rate schedules to consumers upon request. Most consumers will not be aware of the BTS rate option in the first place, and will therefore not seek this information unless they are informed of its existence. The onus must therefore be on ILECs to present the BTS option alongside all other toll options that they make available to customers.
30. Mere posting of BTS rate schedules on a company website is insufficient insofar as it does not clearly communicate to online consumers the fact that BTS rates are an alternative to other toll plans, and the advantages of BTS rates over other options. There is little value in a website posting that is either inconspicuous or insufficiently informative. BTS rate schedules should be posted in a context and manner that makes the BTS option obvious to the online consumer seeking information on their toll options, and that clearly identifies relevant aspects of the BTS rate option in relation to other toll options (e.g., time-of-day discounts, no monthly fee). Otherwise, online consumers will not be fully informed when making decisions among the toll options available to them.
31. Nor is it sufficient that disclosure of this option is made on the company website, since many customers do not have Internet access or do not use it for this purpose. The BTS rate option should be disclosed alongside other toll options in all modes of advertising or customer communications: on websites, in print advertising, in email communications, and during telephone and in-person communications with customers.
32. The evidence further shows that many ILECs fail to inform customers of the BTS rate option, even when it is clear that the customer would be best off with this option. Consumers are repeatedly directed, both online and offline, to so-called “discount” toll plans even when they would be better off under BTS rates. For example, Bell Canada’s web-based service that purported to identify the best Bell toll plan given the user’s calling patterns did not even include BTS rates as an option.
33. Thus, not only are ILECs misleading consumers through their failure to disclose BTS rates, some are explicitly misrepresenting what the consumer’s best toll option is.
34. ILECs should therefore be required, when directing consumers to the best toll plan based on the consumer’s calling patterns, to advise those customers who may be best off under BTS rates that this is the case.

The violation has benefited ILECs at the expense of consumers

35. The regulatory violation exposed in this application has had significant consequences for ILEC subscribers. ILEC failure to disclose basic toll rate schedules, indeed the existence of a basic toll rate option, has created a situation in which many customers have paid, and continue to pay, more than they would otherwise for long distance service. By effectively concealing this information from consumers, ILECs have benefited financially, at the expense of low volume toll users who were not informed of the basic toll rate option.
36. Data available to PIAC on subscriber toll calling patters suggests that as many as 30-40% of ILEC customers could have been adversely affected by this violation. The extent of damages incurred by subscribers as a result of this failure to disclose is thus not yet clear.
37. ILECs were notified of this problem in June 2002 (and in Bell’s case, as early as April 2002). Yet, non-compliance continued to be the norm as of late August, 2002. It therefore appears that non-compliance is due not merely to ordinary negligence, but to conscious corporate strategy.
38. Clearly, there needs to be a greater regulatory incentive for ILECs to comply with CRTC orders regarding disclosure of information, where such disclosure is contrary to their financial interests. In particular, the cost of non-compliance must outweigh the cost of compliance.
39. As well, greater specificity of the disclosure requirement is needed in order to ensure that the objective of disclosure is met. ILEC responses to the CRTC’s 1997 order, and to subsequent requests from consumer advocates, suggest that the term “make publicly available” is insufficiently clear and specific to counter the strong ILEC incentive not to inform consumers of this option. If the Commission wishes to ensure that consumers are informed of the basic toll rate option, it must provide more specific guidance to the ILECs on what constitutes adequate disclosure of this information.
40. PIAC encourages the Commission to exercise the full scope of its enforcement powers in respect of this long-standing violation, so as to ensure meaningful compliance with this and other similar consumer safeguards, now and in the future.
41. Any CRTC order should explicitly leave open the exercise by aggrieved customers of their rights under s. 72 of the Telecommunications Act.

PIAC Costs

42. This application for enforcement and relief has been necessitated by the ILECs’ ongoing negligence and/or intentional disregard of regulatory requirements. PIAC’s investigation and pursuit of this issue has required a significant amount of time. It is appropriate that the ILECs pay PIAC’s costs of bringing this application.

Order Requested

43. PIAC therefore requests that the CRTC:

  1. make a declaration confirming that certain ILECs have been, and continue to be, in violation of its order in para.81(i) of Telecom Decision CRTC 97-19 to ”…make publicly available, rate schedules setting out the rates for basic toll service”;
  2. order ILECs to comply with the above-mentioned order, and to take the following specific measures in that respect:
    • post and maintain current BTS rate schedules on their websites, and in particular on the webpage for residential long distance services;
    • clearly present BTS rates as an option along with other toll plans, both on their websites and in other communications with residential customers;
    • clearly note in appropriate places and at appropriate times that no minimum charges apply under BTS rates, that time-of-day discounts do apply, and that further discounts apply for registered certified hearing or speech-impaired TDD users;
    • provide BTS rate schedules to consumers upon request (including by postal mail where the individual does not have Internet access or email);
    • where assisting consumers in identifying the appropriate toll plan given their calling patterns, ensure that those customers who may be best off under BTS rates are so advised;

vi) take any other measures that the Commission considers appropriate in the circumstances.

3. order ILECs to rebate those customers who paid more for toll services under an ILEC “discount” toll plan than they would have under BTS rates, by the difference between what they actually paid and what they would have paid under BTS rates, without prejudice to the exercise of any civil remedies that may be available to them; and
d) order the ILECs in question to pay PIAC its costs of investigating and pursuing this matter.

All of which is respectfully submitted,

Philippa Lawson
Senior Counsel
Public Interest Advocacy Centre
Attach.

cc: Bell Canada, Aliant, TELUS, MTS, SaskTel (by courier and email)
NWTel, Independent ILECs, Interested Parties PN 2001-37 (by email only)

NOTICE

TAKE NOTICE that pursuant to subsections 8(1) and 59(1) of the CRTC Telecommunications Rules of Procedure, the respondents are required to mail or deliver their answers to this application to the Secretary General of the Canadian Radio-television and Telecommunications Commission, Ottawa, Ontario, K1A 0N2, and to serve a copy of the answer on the above by 30 September 2002.

Service of the respondent’s answers on the applicant may be effected by personal delivery, e-mail or by facsimile, at the address set out above.

If the respondent does not file or serve its answer within the time limit prescribed, this application may be disposed of without further notice to it.
END OF DOCUMENT

 

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