Feds ring Bell over Nexxia

The Canadian Radio-television Telecommunications Commission (CRTC) last month gave Bell Canada a slap on the wrist in a decision that could spell significant changes for both the carrier and its enterprise clients.

The CRTC on Dec. 12 let go a report that suggests the carrier broke the government’s rules in its dealings with an affiliated firm. Bell is accused of doing an end-run around federal regulations with BCE Nexxia Inc., an associated service provider offering enterprise-class network connections, including ATM, Frame Relay and IP-VPNs.

At issue is Bell’s relationship with Nexxia. The Commission seems to think the companies work too closely for comfort.

Bell, an incumbent local exchange carrier (ILEC), is obliged to file with the government certain information about the services it offers. Some network services are “tariffed,” meaning that the CRTC wants to see pricing plans for these products before customers get a crack at buying them.

But Bell sold some of those tariffed services through Nexxia, which is not an ILEC. As such, Nexxia is not subject to ILEC rules and is not required to file with the government tariff information.

Or so Bell thought. The Commission, in its decision dubbed 2002-76, set the record straight for the confused carrier.

“When…an affiliate wishes to resell a tariffed service of the telephone company, the telephone company will be required to obtain Commission approval of a tariff setting out the rates, terms and conditions under which the service can be sold by the affiliate,” read the CRTC’s statement. The Commission adds that its decision does not apply to ILEC affiliates that sell network services to ISPs.

“In that marketplace, because it is functioning, it was decided to leave that in place,” said Charles Dalfen, the CRTC’s chairman, during an interview with Network World Canada. “It wasn’t seen as broke, so we didn’t try to fix it.”

The decision does, however, apply to the enterprise-friendly price packages Nexxia offered customers. The service provider bundled regulated and unregulated products for its clients, but did not file with the government the tariff information that is supposed to accompany some of those services.

As of press time, Bell was mulling over the decision, according to Bernard Courtois, the telco’s point person on regulatory affairs.

“We comply with the regulatory regime, and as the regulatory regime changes, we’ll comply with that as well,” he said.

Lawrence Surtees, a telecom analyst with IDC Canada Ltd. in Toronto, said the decision makes no bones about Bell’s situation.

“At a minimum, the Commission’s saying, we don’t care what you call it, if [a service is] tariffed, it’s tariffed,” Surtees said. “If it walks like a duck, if it quacks like a duck, it’s a damned duck.”

Surtees said the Commission’s decision could be a pain point for Nexxia, as well as the company’s big business customers. Enterprise clients accustomed to the service provider’s unregulated prices might not care for the ILEC-accordant pricing scheme.

“As the contracts come up, and if Bell and Nexxia have to come under tariffed rates…a customer might say, ‘I don’t like that rate. I’m going to go with a competitor,'” Surtees said. “That might cost them business.”

And it might not. The decision points out that Bell completed “imputation” tests on services sold through Nexxia, to make sure prices corresponded with government rules. During CRTC proceedings, Bell argued that only twice in 203 contracts did it sell tariffed products at below-tariff rates.

Nonetheless, the Commission said it wants to see all of the contracts up close by Jan. 27.

The Commission’s decision also takes issue with Bell’s carrier services group (CSG) – a government-mandated subset within the carrier that is meant to keep the ILEC’s business lines separate. The CSG is supposed to act as a divider between the ILEC and competitive local exchange carriers (CLECs), which lease from the incumbent various network services to provide voice and data connections. The CSG is designed to make sure ILECs deal fairly with CLECs – so companies like Bell do not favour one CLEC customer over another.

Bell’s CSG resides within Nexxia. Some CLECs – notably Group Telecom Inc. (GT) – were concerned that Nexxia, itself a Bell customer, would tamper with the arrangement and put its own interests before those of competitors. GT filed a complaint with the Commission about Bell and its relationship with Nexxia in Jan. 2002.

“For Group Telecom, the whole self-serving reason to bring about the complaint was, ‘We’re coming in as a rival hybrid carrier,'” Surtees said. “‘We may actually go to the Bell CSG as a customer. We don’t know what kind of deal we’re getting. But more importantly, we don’t know what Nexxia might be doing with the information about us.'” Surtees explained that Nexxia might be indicating to Bell who GT’s customers are and who to target for contracts.

The Commission said Bell must move its CSG out of Nexxia and into the incumbent division by Feb. 10, and invited other ILECs to show reasons why they should not have to abide the rules now clarified in the decision.

GT is satisfied with the CRTC’s ruling.

“It’s a favourable decision for Group Telecom and the other competitors,” said Eric Demirian, an executive vice-president with the company.

Bell’s Courtois said the carrier plans to bring up with the Commission its concerns about the state of competition in Canada’s telecom industry – once all the paperwork for the decision is wrapped up, that is.

“We will want to explore with the Commission how the regulatory regime could be changed to better reflect the changing market. It’s perhaps not the best to approach it with rules that stemmed from years ago. [But] there’s a lot of work to be done here – a lot of administrative work, paperwork and implementation work – so that’s going to be our first priority.”

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