Archived — Notice No. DGTP-008-95

Industry Canada

Telecommunications Act and Radiocommunications Act

Notice No. DGTP-008-95 (July 1995)

Review of Canadian Overseas Telecommunications and Specifically Teleglobe Canada's Role

The purpose of this notice is to invite public comment on various issues related to the carriage of telecommunications between Canada and countries overseas. In particular, the notice will address Teleglobe Canada's future role. Public comment on the specific issues set below is solicited, as are comments on any other issues which are believed to be of relevance to the provision of international telecommunications services.

1. Background

Teleglobe Canada Inc. (Teleglobe) provides intercontinental telecommunications services for Canadians by routing calls to and from approximately 230 countries and territories, excluding the United States. It is presently Canadian policy that such traffic must be routed through Teleglobe facilities. The company is a wholly owned subsidiary of Teleglobe Inc.

Teleglobe was first established in 1950 as a crown corporation to acquire, operate and maintain the overseas telecommunications services of Canada. Teleglobe is now a privatized corporation which was established, in April 1987, pursuant to the Teleglobe Canada Reorganization and Divestiture Act. Under the Act, Teleglobe has a mandate to provide public telecommunications services between Canada and overseas countries and to coordinate telecommunications services between Canada and overseas carriers or administrations. Teleglobe offers a variety of international telecommunications services including telephone, telex, telegraph, specialized data communications, and radio and television program transmission.

Teleglobe's major network facilities consist of undersea cables, INTELSAT and INMARSAT satellite earth station facilities and associated equipment such as switching equipment which connects Canadian gateways to its international network. Teleglobe is designated as the sole signatory for Canada to INTELSAT and INMARSAT, which are international treaty organizations which were established to provide international and marine fixed and mobile satellite telecommunications services.

In 1986, prior to the sale of the government's holdings in Teleglobe, the government issued a policy statement on Teleglobe's role. The statement announced that Teleglobe would continue to be "the sole provider of facilities for the provision of overseas telecommunications services at least until March 31, 1992". The policy also noted that "Teleglobe occupies a position of strategic importance within the Canadian telecommunications industry, providing our principal communications links with the world outside North America. The services provided by Teleglobe are essential and increasing in economic importance as Canada's dependence on foreign trade continues to grow. Moreover, by providing the people of Canada with communications links to the rest of the world Teleglobe also performs an important social function."

In March 1992, after a government review, the Minister of Communications announced a five-year extension of Teleglobe's mandate, and indicated that this policy would be reviewed in 1995. Teleglobe's sole provider status is maintained through the Minister of Industry's ability to restrict the issuance of international submarine cable licences under Section 19 of the Telecommunications Act and international earth station licences under Section 5 of the Radiocommunication Act to Teleglobe for purposes of Canada-overseas telecommunications.

In light of the 1992 statement, the government has decided to undertake a review of its policy with respect to Canadian overseas telecommunications, and specifically, Teleglobe's role in providing Canadian overseas telecommunications services. The review will address the corporation's performance as well as economic, international and domestic policy issues.

It should be noted that on December 21, 1994, Teleglobe filed an application with the Canadian Radio-television and Telecommunications Commission (CRTC) containing proposals for a future regulatory framework for the company. The company is proposing a regulatory regime that would include a new form of price regulation, streamlined procedures for the approval of rates, and conditions under which their services are offered, complete forbearance from regulation of the carriage of traffic that neither originates nor terminates in Canada, and reduced reporting and filing requirements. In Public Notice CRTC 95-11 dated March 10, 1995, the CRTC initiated a public proceeding to consider the appropriateness of the regulatory framework proposed by Teleglobe. The government takes note of the CRTC proceeding and is of the view that the two processes can be conducted in parallel.

2. Discussion of Issues

A) Teleglobe's Performance

The government firmly believes that an advanced telecommunications infrastructure is essential to Canada's role in the global information society and that telecommunications constitute an important economic and social development tool.

Support for the decision to renew Teleglobe's monopoly in 1992 came from the fact that Teleglobe was making good progress in moving its prices closer to American rates, was introducing new services at a reasonable rate, and was increasingly responding to users' needs.

Telecommunications users' comments are specifically sought on the following questions:

  • Has Teleglobe continued to improve the quality of its services and the prices that are offered to domestic service providers?
  • How should Teleglobe's performance be measured? Should its rates be benchmarked with those of similar U.S. carriers? Are other comparisons of rates and services more appropriate?

It should be noted that in responding to the questions set out in this notice or in commenting on any issue, respondents to this notice should, to the extent possible, provide in support of their arguments, documentation and data where available.

B) Competition Considerations

One of this Government's objectives is the transition to a truly competitive telecommunications market in Canada. Section 7 of the new Telecommunications Act contains the objective to "foster increased reliance on market forces for the provision of telecommunications services". The expectation of this objective is that it will lead to a broader range of services and lower prices. This has been borne out through experiences to date in Canada.

The establishment of the Canadian Information Highway is a major initiative whose development will be based on the operating principle of competition in facilities, products and services. It has been recognized that the Highway will not be a unitary infrastructure, but a "network of networks" including global links that will provide services to Canadians in a competitive market. The government has requested the CRTC to report on a number of matters related to the development of the Information Highway.

On October 8, 1994, Order in Council P.C. 1994-1689 announced new policy initiatives related to telecommunications and broadcasting for the Information Highway, and directed the CRTC to hold public hearings and to report on questions related to implementation of these policies. The CRTC submitted its report to the government on May 19, 1995. The government has referred the report to the Information Highway Advisory Council (IHAC) for comments. The government is expected to make a policy announcement in the Fall of 1995.

In addition there are a number of other initiatives that have contributed to the development of Canadian telecommunications. The Government's introduction of a competitive framework for cellular mobile telephone service in Canada has resulted in the development of a strong nation-wide competitive market.

To permit competition in voice telephone services, the CRTC allowed the resale of domestic private line services in 1990 and in 1991 it allowed the resale of Teleglobe's private line services. In June 1992, the CRTC released its decision allowing Unitel Communications and resellers to offer long-distance telephone services in competition with the federally regulated telephone companies. In 1993, the CRTC approved Teleglobe's gateway access tariff by which the company became a wholesaler of its services. This allowed both facilities-based carriers and resellers to retail intercontinental telecommunications services. This arrangement allows the provision of intercontinental long distance telephone service on an "international simple resale" basis (ISR).

In September 1994, the CRTC adopted a new regulatory framework for telephone companies. The Commission found that competition, in virtually all services, is in the public interest and specifically stated that all local services are open to competition by cable companies, wireless carriers, or any other service provider.

With the recent liberalization of licensing for local and intercity microwave radio systems, Industry Canada confirmed the "open entry" policy for such facility-based carriers in Canada. Companies wishing to enter the domestic or Canada-U.S. telecommunications service market need only meet the Canadian ownership eligibility requirements of the Telecommunications Act and spectrum availability and possible tariff approvals by the CRTC.

The Department has announced a policy framework for the introduction of wireless personal communications services (PCS) in the 2 GHz frequency band, and invited companies to submit applications to offer these new services. Initial restrictions on the PCS spectrum to be licensed to existing carriers afford innovative entrepreneurs the opportunity to compete with established service providers.

Today, the government is moving on all fronts to develop a truly competitive market place for telecommunications services that will benefit all Canadian users. In addition to the social aspect of telecommunications, access to high quality, low-cost telecommunications services is an essential tool for Canadian businesses. The review of Teleglobe's role is undertaken in this context and one of the issues will be to determine the best course of action to strengthen Canada's international competitiveness.

  • Given that international telecommunications is of great importance to the competitiveness of Canada, would a single independent Canadian overseas carrier continue to serve the best interests of Canada and Canadians?
  • Would the entry of additional facilities-based overseas carriers stimulate job creation, innovation and investment? Would this entry further reduce costs and prices and increase consumer choice for Canadian users including domestic service providers?
  • If facilities-based competition were to be introduced, are there specific services that should continue to be provided on a monopoly basis?
  • What models could be viable alternatives to the single carrier model? What conditions of entry should apply and who should be excluded, if anyone? What should be the role of other carriers currently operating in Canada?

C) Traffic Routing Considerations

Technological improvements such as digital transmission and switching have reduced the barriers to entry and competitive international networks have begun to appear. Digital technology allows the integration of voice, video and data communications services which previously required different transmission techniques. Digital technology also encourages the development of new systems using the most efficient combination of satellite, cable or microwave facilities. Some carriers are pursuing aggressive global strategies to capture the opportunities presented by the current trend toward globalization in telecommunications. Major users of international telecommunications services are exploiting their inherent buying power and are seizing the opportunities presented by increased competition among carriers and the reduced costs of establishing leased telecommunications networks.

The overseas services market as a whole is being affected by competitive forces. The liberalization of domestic and international telecommunications has led to increasing competition in international markets generally. Major sources of present or potential competition include competing satellite systems, international resellers and the emergence of competing international carriers within Canada's major trading partners, including the United States, the United Kingdom and Japan. Competition from these sources has put downward pressure on international rates.

The rapid growth in the provision of international services means that international considerations are an increasingly important component in the development of policies for most sectors of national economies. The role of telecommunications as a tradeable service and as the essential infrastructure for the delivery of other information-based services makes this sector a key element in present and future trade agreements. An overall objective in trade negotiations is to ensure present and future compatibility between national telecommunications policy and regulatory objectives, and international objectives and commitments contained in binding trade agreements.

Since the North American and overseas telecommunications markets are becoming increasingly integrated, Teleglobe is facing growing competition. From an international perspective, the strategic importance of world class telecommunications services has gained recognition as their relationship with competitiveness in global markets becomes more understood. An issue to be considered is whether Canada should pursue trade agreements which would permit North American carriers to operate freely throughout North America. This could imply pursuing an open North American market in telecommunications.

Both Canada and the United States have explicitly favoured the use of their own facilities for international traffic originating in/or terminating within their respective territories as well as for domestic traffic that both originates and terminates in their own country. However, Canadian businesses and resellers may be increasingly attracted to the routing of their international traffic to Europe and Asia through the United States thereby bypassing Canadian facilities.

The Telecommunications Act contains the objective of Canadian telecommunications policy, and s.7(e) states the following: "to promote the use of Canadian transmission facilities for telecommunications within Canada and between Canada and points outside Canada". In accordance with this objective, the CRTC has imposed specific traffic routing conditions in the service tariffs of all interexchange carriers that provide international services, i.e. intercontinental traffic is to be routed over Teleglobe facilities.

  • Are there alternative models which would respect the Telecommunications Act objective (s.7(e)) concerning traffic routing, but allow more flexibility than presently exists?
  • Should the specific traffic routing conditions imposed by the CRTC be lessened or eliminated allowing the emergence of a more integrated North American market. What would be the likely consequence of this and how could it be accomplished while respecting the statutory objectives quoted above?

D) International Considerations

The Teleglobe Canada Reorganization and Divestiture Act designates Teleglobe Canada as the Canadian Signatory to two international, intergovernmental, treaty-binding, satellite operating organizations: INMARSAT (the International Maritime Satellite Organization) and INTELSAT (the International Telecommunications Satellite Organization). The Act also specifies that such designation and appointment does not prevent the designation or appointment of another person as a new signatory or representative in substitution for Teleglobe. An initiative to appoint another, or an additional, signatory would however, not be consistent with Teleglobe's present mandate as sole provider of facilities for the provision of overseas telecommunications services.

INMARSAT operates, on a commercial basis, an international network of satellites to provide communications services to the maritime community, including distress and safety services for the preservation of life at sea. Its mandate has over the past few years been expanded to include the provision of aeronautical and land mobile satellite communications. INTELSAT owns and operates a global satellite system for the provision of international telecommunications satellite services.

Under the INTELSAT and INMARSAT intergovernmental Agreements, Parties (governments) are responsible for general policy and long-term objectives of the Organizations. The Signatories are responsible for making contributions to the capital requirements of these Organizations in proportion to their investment share, which in turn is linked to their use of the satellite systems. Through the Board of Governors of INTELSAT and the INMARSAT Council, Signatories are responsible for managing their joint investment, which includes implementation and operation of the space segment facilities, and for all matters of a commercial nature.

As part of its exclusive mandate to provide overseas telecommunications services, Teleglobe operates licensed earth stations which communicate with satellites operated by these organizations. Both INTELSAT and INMARSAT will be affected by the rapid development of new technologies and the emergence of competing systems. The Government of Canada, as Party to both Organizations, has been supporting the evolution of these organizations to a more business-like structure and functioning, including the legal authority for countries to adopt multiple national Signatories in both Organizations.

In Canada, policy has been formulated to allow the introduction of competing global and regional mobile satellite services where, among other things, Canadians own an equity share in the global mobile satellite system at least proportional to Canadian usage of that system. In the event of any inconsistencies between this policy and Teleglobe's sole provider role, it should be noted that the provisions of Teleglobe's exclusive mandate must be respected while they remain in place.

  • Should Teleglobe remain the sole Canadian signatory to INMARSAT and INTELSAT?
  • If there were to be multiple signatories or another signatory other than Teleglobe, on what basis should signatories to organizations such as INMARSAT and INTELSAT be selected?
  • Are the objectives of the global and regional mobile satellite policy attainable given the current Teleglobe mandate? Are changes required to the mandate and/or policy to best assure attainment of these objectives?

E) Ownership Considerations

One of the objectives of Canadian telecommunications policy is to promote Canadian ownership and control of telecommunications infrastructures, while enhancing the ability of the Canadian telecommunications industry to successfully meet competition in an integrated North American market. The purpose of this policy is to ensure that Canadian telecommunications carriers are competitive domestically and internationally, and to guarantee Canadians access to secure, competitive and high-quality telecommunications services.

When Teleglobe was privatized in 1987, the government stated that designated Canadian telecommunications carriers and their corporate parents could not own more than one-third of voting shares of Teleglobe Inc. Foreign carriers were not permitted to hold any voting shares. Non residents are prohibited from owning or controlling more than 20 percent of Teleglobe's voting shares as the case with all Canadian Carriers. These policies are given effect by the Teleglobe Canada Reorganization and Divestiture Act. At the time of passage of the Teleglobe Canada Reorganization and Divestiture Act, there were general policies in effect regarding ownership of all Canadian Carriers. These policies were formalized with the passage of the Telecommunications Act in 1993. In 1987, this ownership policy was consistent with the overall direction of Canada's telecommunications policy which was to foster a strong domestic market through limited competition in the supply of telecommunications facilities and unlimited competition in the provision of value-added and other services. One of the objectives was also to create an environment enabling Canada to remain competitive internationally and to provide Canadians with the best possible conditions for economic, social and cultural development.

  • Should current restrictions on the ownership of Teleglobe by Canadian Carriers be modified or removed?
  • Should the current prohibition on the ownership of Teleglobe by foreign carriers be modified or removed?
  • Should Teleglobe be subject only to the foreign ownership provisions of the Telecommunications Act?

3. Conclusion

Today, many Canadians rely on instant information exchange. The growth of telecommunications technology is a direct consequence of the need for fast, efficient information exchange at a time of rapidly changing markets for services and products. Canadian businesses are increasingly becoming multinational in scope, and the recent NAFTA and GATT agreements reinforce that trend. Both domestic and foreign operations are increasingly part of a single process, stretching to many countries, and competitiveness constitutes a key requirement to success. This suggests that global networks are a critical component for Canadians competing in world markets.

Comments are invited on the specific questions raised in this notice, the following general questions, and any other issues that are relevant to the future role of Teleglobe.

  • Which measures or policies should be implemented to insure that the Canadian-based, overseas service market grows and achieves the necessary economies of scale to sustain long-term domestic and international competitiveness?
  • Should competition in providing intercontinental facilities be permitted in Canada after April 1997? What transitional measures, if any, should be introduced?
  • What competitive model for the provision of intercontinental facilities and services should Canada adopt to ensure viable and sustainable competition as well as to reinforce Canadian sovereignty? Should new facilities-based competitors be required to provide service to all overseas points or should they be permitted to select which destinations they will provide service to?

In responding to the questions set out in this notice or in commenting on any issue, respondents to this notice should, to the extent possible, provide documentation with specific information and data where appropriate.

4. Invitation to Comment

Submissions in response to this Gazette Notice should be addressed to the:

Director General of the Telecommunications Policy Branch
Industry Canada
300 Slater Street
Ottawa, Ontario
K1A 0C8

and must be received on or before October 27, 1995 to receive full consideration. All representations should cite the Canada Gazette Part I Notice publication date, title, and the Notice reference number.

Comments are also invited on all initial submissions received under this Notice. All such comments must be postmarked on or before December 11, 1995 or delivered by other means by the same date.

Written comments received in response to this Notice will be made available for viewing by the public two weeks after each closing date noted above, during normal business hours, at the Industry Canada Library, 365 Laurier Avenue West, Ottawa, Ontario and at the regional offices of Industry Canada at Moncton, Montreal, Toronto, Winnipeg and Vancouver, for a period of one year from the close of the comment period.

Review of Canadian Overseas Telecommunications and Specifically Teleglobe Canada's Role is available electronically via the Internet at the following addresses:

Anonymous file transfer (FTP)
info.ic.gc.ca/pub/ic-data/regulatory/gazette/dgtp

Gopher
info.ic.gc.ca port 70/Industry Canada Documents/Regulatory Information and Documents/Gazette/dgtp

World Wide Web (WWW)
http://info.ic.gc.ca/ic-data/regulatory/gazette/dgtp

Copies of the subject document are also available from the:

Communications Branch
Industry Canada
235 Queen Street
Ottawa, Ontario
K1A 0H5
613-947-7466

and from the offices of Industry Canada at Moncton, Montréal, Toronto, Winnipeg and Vancouver.

Dated at Ottawa, this 12th of July, 1995.

Michael Helm
Director General
Telecommunications Policy Branch

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