July 31 — Canada's federal telecommunications regulator has concluded that unjust discrimination and undue preference in some mobile wireless roaming agreements entered into by Rogers Communications Partnership warrants a prohibition on the use of exclusivity clauses in any roaming agreements involving Canadian wireless carriers.
A comparison of roaming rates charged by Rogers Communications Partnership (RCP) in agreements with domestic and U.S.-based wireless carriers showed wide variances that constitute discrimination and/or preference as defined by Canada's Telecommunications Act, the Canadian Radio-television and Telecommunications Commission (CRTC) said on July 31.
In addition, Rogers has entered into exclusive wholesale roaming agreements with certain new wireless market entrants, but not with other wireless carriers, the regulator said in Telecom Decision CRTC 2014-398. “The Commission concludes that the inclusion of exclusivity clauses in RCP's wholesale roaming agreements with certain new entrants constitutes discrimination and/or preference,” it said.
While discrimination or preference in itself is not contrary to the Act, the fact that new entrants can only compete effectively with national wireless carriers that have broad network coverage by entering into wholesale roaming agreements with those carriers potentially creates a significant imbalance in bargaining positions in reaching such agreements, the CRTC ruled.
In particular, following Industry Canada's auction of advanced wireless services (AWS) spectrum in 2008 and 2009, new market entrants had no choice but to enter into wholesale roaming agreements with Rogers because it was the only national network available in Canada on which new entrants' customers could obtain roaming services, it said.
The rates charged by Rogers to certain new entrants were significantly higher than those it charged many large U.S.-based mobile wireless carriers and other Canadian carriers, it said. While factors such as reciprocity, timing of the agreement, geographic coverage, and traffic volume could explain some of the differences, those factors do not justify the magnitude of the differences, it said.
The inclusion in agreements with new entrants of exclusivity clauses, which are not common in wholesale roaming agreements, was the result of Rogers' stronger bargaining position, it said. “These clauses have prevented mobile wireless carriers from being able to negotiate more favorable rates, terms, and conditions with other mobile wireless carriers,” it said. “The Commission finds that, contrary to Section 27(2) of the Act, RCP engaged in unjust discrimination and undue preference.”
The regulator, however, declined to award a remedy against Rogers on the basis that the implementation of the new Section 27.1 of the Telecommunications Act, passed by the Canadian Parliament in June 2014 and which establishes caps on wholesale mobile wireless roaming rates, mitigates the risk of future unjust discrimination.
The prohibition on exclusivity provisions in roaming agreements will further enhance sustainable competition in Canada's wireless telecommunications market, CRTC Chairman Jean-Pierre Blais said on July 31. The CRTC remains concerned that situations involving unjust discrimination do not promote fair and sustainable competition, Blais said in a statement.
“Competition in the wireless industry benefits society and the economy by providing innovative communications services at reasonable prices. But that is only the case when true and sustainable competition is at play,” he said. “Today's decision will help promote fairness and a better consumer experience with wireless for Canadians.”
The current ruling follows on a proceeding launched in December 2013 based on a fact-finding exercise conducted in mid-2013 by CRTC staff. The CRTC is also reviewing the broader state of competition in Canada's wireless market in a second proceeding that was launched in February 2014 and that includes a public hearing scheduled to start Sept. 29, 2014.
Rogers Communications did not respond to a July 31 request for comment from Bloomberg BNA.
The CRTC noted in the ruling that several new entrant mobile wireless firms requested an interim remedy to protect them against irreparable harm until the broader proceeding on wireless competition is completed. They specifically asked for wholesale mobile wireless roaming rates to be set at retail rates for access to a national wireless carrier's network, the CRTC said.
Several parties suggested a permanent remedy in the form of a regulated wholesale tariff or rate cap, but other parties argued that any remedy for a finding of unjust discrimination against one carrier should be limited to that agreement only, while regional wireless carriers argued that universally applied caps would significantly disadvantage them, it said.
“The Commission considers that the implementation of Section 27.1 of the Act reduces the risk of future unjust discrimination,” it said. “It also provides most new entrants with relief that is similar to the interim remedy they proposed. Therefore, the Commission concludes that, for the purposes of this proceeding, it will not put in place a remedy for unjust discrimination with respect to wholesale mobile wireless roaming rates.”
The regulator also declined to address some parties' claims of unjust discrimination or undue preference in other terms and conditions of wholesale roaming agreements, including seamless roaming, and suggestions that wholesale mobile wireless roaming rates should be regulated. Those issues are being considered in the broader wireless competition proceeding, and it would be more appropriate to address them in that context, it said.
The ruling noted that, while the CRTC has since the mid-1990s forborne from regulating mobile wireless services, including not requiring carriers to obtain prior consent for rates, terms, and conditions for services such as wholesale roaming, it has retained the power to impose conditions on the offer and provision of services and to make findings of undue preference or unjust discrimination.
Rogers Communications said on July 31 that it is “surprised and disappointed” by the CRTC's ruling.
The exclusivity clauses with some new wireless market entrants were put in place four to five years ago, and the firms that chose to sign exclusive agreements did so because they received a discounted rate, the company said in a statement provided to Bloomberg BNA.
“We're also surprised by the rate decision,” it said. “Our agreements are based on a number of factors, including volume. As with any sales agreement across any industry, the higher the volume the lower the rate. U.S. carriers have far greater roaming volume than Canadian carriers. In addition, there's mutual benefit. Our customers get to roam broadly on these U.S. networks. Our customers don't roam on new entrants' networks in Canada.”
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Telecom Decision CRTC 2014-398 is available at http://www.crtc.gc.ca/eng/archive/2014/2014-398.htm.
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