You are on page 1of 33

ABRIDGED

BEFORE THE CANADIAN RADIO-TELEVISION


AND TELECOMMUNICATIONS COMMISSION

IN THE MATTER OF

ROGERS COMMUNICATIONS CANADA INC. PART 1 APPLICATION


CONCERNING IRIS TECHNOLOGIES INC.

ANSWER OF IRIS TECHNOLOGIES INC.

2 DECEMBER 2016

ABRIDGED
TABLE OF CONTENTS

1.0

Background and Overview ............................................................................................................. 1

1.1

Background ................................................................................................................................. 1

1.2

The need to file an answer to the Application in the shortest delay possible and related
procedural considerations ........................................................................................................... 2

1.3

The Application should be dismissed in its entirety ................................................................... 3

1.4

Confidentiality Claim.................................................................................................................. 5

1.5

Overview of the final relief sought by Rogers and why such requests should be denied........... 6

1.6

Overview of the interim relief sought by Rogers and why such requests should be denied .... 10

1.7

Structure of submission............................................................................................................. 12

2.0

Iristel is not engaged in regulatory arbitrage ................................................................................ 12

2.1

Iristel is not providing AudioNow with DIDs in the 867 area code ......................................... 12

2.2

There is a longstanding industry practice of leveraging call termination fees to support


services that benefit consumers ................................................................................................ 14

2.3

Iristel does not commit fraud with respect to call termination fees .......................................... 15

2.4

Iristel is not comparable to Great Lakes Communication Corp. .............................................. 16

2.5

Iristel is not engaged in unjust discrimination nor is it giving an undue or unreasonable


preference or subjecting any person to an undue or unreasonable disadvantage ..................... 17

3.0

The onus is on Rogers to address excessive use of its services .................................................... 18

4.0

Iristels pattern of conduct is to innovate within the boundaries of the Commissions regulatory
framework ..................................................................................................................................... 22

5.0

Iristels IXC termination rates remain just and reasonable ........................................................... 24

5.1

Traffic volume cannot render IXC traffic termination rates no longer just and reasonable . 24

5.2

Support for the Application will be predicated on the motivation to pay less .......................... 25

5.3

Iristel incurs very high costs to provide IXC traffic termination services ................................ 25

5.4

Conclusion: Iristels IXC termination rates are just and reasonable and no retroactive
adjustments are warranted......................................................................................................... 28

6.0

Conclusion .................................................................................................................................... 28

i
# denotes filed in confidence.

ABRIDGED
1.0
1.1
1.

Background and Overview


Background
On November 16, 2016 Rogers Communications Canada Inc. (Rogers) filed a Part 1

Application (Application) alleging that Iris Technologies Inc. (Iristel) is engaged in conduct
that involves stimulating call traffic destined to its serving areas in order to profit from high IXC
termination charges. 1 Iristel is Canadas largest CLEC and the only CLEC with coast to coast to
coast coverage in all of the 10 provinces and 3 territories.
2.

The Application seeks certain final relief against Iristel relating to these allegations, as well

as an interim order to make the rates charged by Iristel for IXC traffic termination in the Northwest
Territories interim pending the outcome of this proceeding. In addition, the Application also asks
the Commission to pose a detailed series of requests for information (RFIs) to Iristel related to
the allegations made in the Application.
3.

On November 17, 2016, Iristel filed a letter with the Commission objecting to any interim

relief and to the posing of RFIs to Iristel at this stage of the proceeding (Iristel Procedural
Letter). 2
4.

Following a request made by Iristel to Rogers directly for the disclosure of as much

confidential information as possible, on November 18, 2016 Rogers filed a revised confidential
version of the Application with the Commission and copied Iristel. 3 On that same day, Rogers
replied to the Iristel Procedural Letter, reiterating its request for interim relief. 4
5.

On November 25, 2016, the Commission issued a letter in which it allowed Iristel and any

other interested party to file comments on Rogers request for interim relief by December 2, 2016,
serving a copy on Rogers (Commission Letter). Rogers was given until December 6, 2016 to
file any reply comments and copy Iristel. 5

2
3

4
5

Rogers Abridged Part 1 Application concerning Iris Technologies Inc. (Iristel) Traffic Stimulation, filed by
Rogers on November 16, 2016, CRTC File 8622-R28-201611781.
Iristel letter dated November 17, 2016, CRTC File 8622-R28-201611781.
Rogers Revised Confidential Part 1 Application concerning Iris Technologies Inc. (Iristel) Traffic Stimulation,
filed by Rogers on November 18, 2016, CRTC File 8622-R28-201611781.
Rogers letter dated November 18, 2016, CRTC File 8622-R28-201611781.
Commission staff letter dated November 25, 2016, CRTC File 8622-R28-201611781, at pg. 2.

1
# denotes filed in confidence.

ABRIDGED
6.

The Commission went on to state that the Commission may make Iristels rates interim,

but that the RJR MacDonald criteria for a stay are not material to such a request. It is more relevant
to consider whether, on a prima facie basis, based on the allegations before the Commission, the
rates may no longer continue to be just and reasonable. The matter of retroactive adjustment of
rates made interim would only be considered as part of a final decision. 6
7.

The Commission went on to state that it intended to provide revised deadlines for the filing

of Iristels answer, interventions and the Rogers reply relating to the substance of the Application. 7
1.2
8.

The need to file an answer to the Application in the shortest delay possible and
related procedural considerations
The Application overtly challenges Iristels business reputation and credibility by

associating Iristel with a pattern of conduct that is suggestive of willful disregard of


telecommunications regulatory rules or worse, wilful gaming of the regulatory scheme. 8 Rogers
even goes so far as to suggest that Iristel is committing fraud with respect to the call termination
fees that it charges to Rogers. 9 These are allegations that Iristel takes very seriously.
9.

In order to limit the damage that Rogers has inflicted upon Iristels reputation by way of

its unfounded Application, Iristel has worked diligently to conduct its own investigation and to
draft its answers to both the interim and final relief sought by Rogers for filing with the
Commission as quickly as possible. This is an unusual step that will effectively prejudice Iristel
from a procedural standpoint by enabling interveners to file comments after they have already seen
Iristels answer to the substance of the Application, instead of concurrently with the filing of
Iristels answer to that part of the Application, which would have been the normal practice.
However, since Iristel is confident that it can demonstrate that it has not engaged in any
inappropriate practices, the need to clear its name quickly outweighs any considerations related to
procedural prejudice associated with the early filing by Iristel of its answers to the final relief
sought by Rogers, concurrently with the filing of an answer to the interim relief.

6
7
8
9

Ibid.
Ibid.
Application, at paras 53-60.
Application, at paras 46 and 65(d).

2
# denotes filed in confidence.

ABRIDGED
10.

Accordingly, in this submission Iristel is submitting a full answer that addresses both the

interim and final relief requested by Rogers.


11.

For ease of reference by the Commission, Rogers and interveners, Iristel wishes to identify

Parts 1.0 and 5.0 of this document as the portions that are relevant to the interim relief portions of
the Rogers Application. The entire answer, including Parts 1.0 and 5.0, is relevant to the final relief
portion of the Application.
12.

Iristel also wishes to notify the Commission that it will file a separate letter in this

proceeding with submissions concerning further process. As noted by the Commission, revised
filing deadlines will be provided when the Commission renders its determination on Rogers
request to make Iristels IXC traffic termination rates interim. The prospect of rendering a CLECs
forborne and commercially negotiated rates interim is unprecedented and could have profound
consequences for Iristel and the industry as a whole. Thus, the nature and potential outcome of this
proceeding warrant a right of reply for Iristel to ensure procedural fairness.
1.3
13.

The Application should be dismissed in its entirety


As demonstrated in this answer, the entire factual basis underlying the Application rests on

false speculation. It is both surprising and particularly disturbing for Iristel to have to face these
allegations in a formal regulatory proceeding when these matters could have been settled by
diligent fact finding and bona fide communications between Rogers and Iristel.
14.

Instead, Rogers filed its Application one day after sending a demand letter to Iristel

regarding this matter. The Application was filed before Iristel had any chance to respond to the
allegations levied by Rogers in the demand letter. The fact that the Rogers Application (which
contains 71 paragraphs, a considerable amount of analysis and proposed requests for information
in a single spaced 14 page document) was filed so quickly after the demand letter was issued is
clear evidence that Rogers was not interested in real fact-finding or a constructive dialogue with
Iristel. The demand letter was merely pro forma, and it appears that Rogers always intended to
file the Application with, at least one primary objective being to impugn Iristels reputation.
15.

As a result, even if the Commission dismisses the Application and clears Iristel of all

wrongdoing, Iristel is concerned that the Application will have already caused irreparable damage
to Iristels business reputation. To mitigate such damages, Iristel requests that the Commission
3
# denotes filed in confidence.

ABRIDGED
explicitly express its disapproval at the abuse of process resulting from the filing, by Rogers, of
the Application under the circumstances described herein, Rogers lack of bona fide effort to
engage in a dialogue with Iristel prior to the filing of the Application, and Rogers efforts to taint
Iristels reputation based on the records of other proceedings in which the Commission has not yet
issued any final determinations.
16.

Contrary to Rogers assertions, there is no revenue sharing agreement between Iristel and

AudioNow. More importantly, Iristel is not engaged in any form of regulatory arbitrage or unjust
enrichment via exploitation of the regulatory framework for local competition. Call termination
fees have historically been leveraged by carriers to offset costs in order to offer more attractively
priced services to customers. For example, this approach has manifested itself as unlimited
inbound calling plans in the case of mobile wireless voice services. It is absurd to suggest that this
industry standard practice immediately becomes regulatory arbitrage 10 when utilized by carriers
in Canadas North, who happen to face some of the highest operational costs, including access and
transport charges, in Canada.
17.

Any unlimited retail service will naturally attract a population of consumers who intend

to use the service excessively. This is not a novel phenomenon in the telecommunications industry.
Surely, Rogers understood this reality when it introduced its Canada wide unlimited calling plan.
The onus is on Rogers, like any other carrier offering an unlimited service, either: (i) to prevent
isolated instances of excessive use by certain customers by enforcing a company anti-abuse policy;
(ii) to consciously decide to take no action with respect to customers who are using unlimited
services excessively and therefore accept the disproportionate costs associated with such conduct
in those cases; or (iii) to re-assess the terms of its unlimited service.
18.

Ironically, Iristels affiliate Sugar Mobile Inc. (Sugar Mobile 11) has enforced its own

acceptable use policies with regard to its few end-users who were sending excessive traffic to
destinations within the 867 area code. In other words, faced with the identical situation that Rogers
describes in the Application, Sugar Mobile applied a straightforward business solution to prevent
excessive calling to numbers in the 867 area code with high call termination fees.

10
11

Application, at para 2.
Sugar Mobile has authorized Iristel to provide that information in this answer.

4
# denotes filed in confidence.

ABRIDGED
19.

The manner in which Rogers deals with customers who excessively use its unlimited

service is purely a Rogers business decision. Rogers must not be allowed to avoid this business
decision via the Application, which seeks to reshape the regulatory rules so that they are more
convenient for Rogers unlimited calling service. In essence, the Application is an overt attempt
by Rogers to offload the inherent burden of an unlimited use plan on another carrier. Iristel urges
the Commission to send a clear message to Rogers that both the usage terms that apply to its
services and the consumption behavior of its customers fall uniquely within Rogers scope of
responsibility, particularly since it something that Rogers can control on its own.
20.

Although the Application relies on subsection 27(2) of the Telecommunication Act 12 (the

Act) as the authority for the relief that is being requested, Rogers has failed to demonstrate any
form of discrimination, preference or disadvantage, let alone unjust discrimination or an undue or
unreasonable preference or disadvantage. As acknowledged by Rogers, the Commission has
forborne from regulating the rates charged by IXCs for terminating long distance traffic. 13 Iristel
continues to abide by the terms of its Outbound Termination Services Agreement with Rogers in
addition to the Commissions rules and policies. The problem that Rogers faces is rooted in its
own refusal to apply the appropriate commercial tools to address the abusive usage patterns of a
small group of its retail customers.
21.

For all of these reasons, the Commission should reject all of Rogers requests for interim

and final relief.


1.4
22.

Confidentiality Claim
Certain information contained in this answer to Rogers Part 1 Application is filed in

confidence with the Commission pursuant to section 39 of the Telecommunications Act 14. The
information in question consists of commercial information related to: (1) agreements to which
Iristel or its affiliates are a party; or (2) information concerning the customers of either Iristel or
its affiliate companies. This information is confidential and is treated consistently in a confidential
manner by Iristel and its affiliate companies. Disclosure of this information could prejudice the
competitive position of Iristel and its affiliates, or expose private information of their respective

12
13
14

Telecommunications Act, S.C. 1993, c. 38.


Application, at para 43.
S.C. 1993, c. 38, as amended.

5
# denotes filed in confidence.

ABRIDGED
subscribers, thereby resulting in material loss and specific direct harm to these parties. There is no
discernible public benefit to the disclosure of the information in question. Therefore, the public
interest in disclosure does not outweigh the specific direct harm to Iristel, Iristels affiliates and
the subscribers of these companies resulting from such disclosure. An abridged version of this
answer is being filed for the public record. Throughout the abridged version, # indicates filed in
confidence.
1.5
23.

Overview of the final relief sought by Rogers and why such requests should be
denied
This section sets out each heading of final relief requested by Rogers. Under each of these

requests, Iristel has included a list of bullet points demonstrating why the Commission should deny
Rogers request.
(a)

Rogers requests that the Commission order Iristel to cease providing local
telephone service or local telephone numbers to AudioNow, or any similar
services, in its Northwest Territories local exchange; 15

This relief should be denied because:

As demonstrated in Part 2.0 of this answer, there is no situation of regulatory arbitrage


involving Iristel and either (i) AudioNow, who is not provided any Iristel DIDs associated
with NPA-867; or (ii) any of Iristels other customers;

As demonstrated in Part 3.0 of this submission, the onus is on Rogers to address situations
of excessive use of its unlimited services via anti-abuse policies that were expressly
designed to resolve such situations;

This relief would subject Iristel to an unreasonable disadvantage by arbitrarily prohibiting


it from providing services within a broad geographic area to a vaguely defined class of
customers, which would also make it very difficult, if not impossible, for Iristel to comply;
and

This relief would confer an undue and unreasonable preference to Rogers and other carriers
outside of the Northwest Territories who would not be subject to the same arbitrary

15

Application, at para 65(a).

6
# denotes filed in confidence.

ABRIDGED
restrictions that Iristel would face, thereby creating opportunities to attract customers that
would or might otherwise conduct business in the Northwest Territories;
(b)

Rogers requests that the Commission prohibit local exchange carriers from
rebating or paying customers a share of local exchange revenues in return for
offering call-in services in or through their local exchanges, or compensating
them in any other manner; 16

This relief should be denied because:

Revenue sharing agreements do not constitute regulatory arbitrage. Rogers has failed to
demonstrate any evidence of bad faith that would render Iristels revenue sharing
arrangements offside of industry norms or the Commissions rules and policies;

The relief requested by Rogers would interfere with a longstanding industry practice
whereby carriers leverage termination fees to offset costs and offer retail services at more
affordable price points. For example, unlimited inbound calling cellular plans are similarly
intended to offset costs and reduce retail prices by leveraging revenues obtained from call
termination services;

Revenue sharing agreements and other commercial arrangements involving customer


compensation are particularly important in Canadas Far North where costs are
exceptionally high and revenue sharing might be the only way for a retail customer to
justify a business case for deployment of a needed service, such as #

, in

the Northwest Territories;

It is inappropriate for Rogers to challenge the terms of Iristels commercial arrangements


when Rogers can effectively eliminate high volumes of call termination services in NPA867 by addressing situations where its own end-users use Rogers unlimited calling
services in an abusive manner;

16

Application, at para 65(b).

7
# denotes filed in confidence.

ABRIDGED

The Federal Communications Commission (FCC) denied similar prohibitions on


revenue sharing arrangements on the grounds that such restrictions would be overly
broad; 17
(c)

Rogers requests that the Commission reduce Iristels traffic termination


charges payable by Rogers for long distance traffic destined for local termination
on telephone numbers served by Iristels CLEC in the NPA 867, and to reduce
the CLECs traffic termination charges for IXCs in that NPA 18

This relief should be denied because:

Rogers has provided no compelling evidence that Iristels traffic termination rates are no
longer just and reasonable;

traffic volume does not render rates no longer just and reasonable when volume is driven
by Rogers unwillingness to articulate its anti-abuse policies to address the excessive use
of its end-users;

As explained in Part 5.0 of the submission, the rates applicable to Iristels IXC traffic
termination rates are just and reasonable based on the following considerations:
o IXC traffic termination services are forborne and the rates that apply to Rogers for
Iristels services are the result of mutual agreement between two sophisticated
business entities with experience in negotiations pertaining to terms and conditions,
including price, surrounding call termination services;
o It would be unprecedented and inappropriate to adjust the forborne interconnection
service rates of a CLEC;
o Iristel provides IXC traffic termination services to Rogers at a negotiated rate of
#

per minute;

o The rates for tariffed local termination services provided as part of the IXC traffic
termination service appropriately incorporate the costs that Iristel must incur in the
17

18

Note, at para 672 of Report and Order and Further Notice of Proposed Rulemaking (FCC 11-161), the Federal
Communications Commission explicitly stated that it would not declare revenue sharing to be a per se violation
of section 201(b) of the Communications Act. According to the Federal Communications Commission, a ban on
all revenue sharing arrangements could be overly broad.
Application, at para 65(c).

8
# denotes filed in confidence.

ABRIDGED
operating territory of Northwestel Inc. (Northwestel) so that Iristel can afford to
provide retail services in that territory.
o Iristels network relies predominantly on Northwestels Wholesale Connect Service
which has historically been subject to exorbitantly high rates for the transport of
Iristels voice and other traffic in IP form to and from Northwestels operating
territory, and the rates for Wholesale Connect Service are under review but no final
determinations have been made and it is not clear when such determinations may
occur or if they will have any retroactive effect;
o Iristel must also incur very high costs attributable to Northwestels tariffed Bundle
CAT service when its IXC traffic in Northwestels operating territory undergoes
a conversion from IP to TDM or vice-versa. These services are rated at $0.0380 per
minute. It also bears noting that the Commission is not currently reviewing the
reasonableness of this very high rate;
o Iristels other operating costs in the operating territory of Northwestel are also very
high, due to the rugged terrain, extreme weather conditions, long distances, and
limited and sparsely populated nature of that territory; and
o Iristel is forced to constantly manage and increase its network capacity to
accommodate inbound traffic, which, based on the evidence in the Rogers
Application, now appears to be predominantly driven by a select few Rogers
customers who seemingly have unfettered permission to abuse their unlimited
calling plans.
(d) Rogers states: If the Commission determines that the traffic Iristel purportedly is
carrying to and terminating in the 867 NPA is in fact being routed to other
destinations in Canada or the United States, Rogers requests the Commission order
a repayment of #
(as of September 30th, 2016), being Rogers estimate of the
extra charges paid by Rogers to terminate long distance traffic on Iristels network
in the Northwest Territories due to Iristels traffic stimulation activity; 19
This relief should be denied because:

19

Application, at para 65(d).

9
# denotes filed in confidence.

ABRIDGED

Iristel is not engaged in any manner of fraud with respect to its call termination services;

Iristel has no insight as to where AudioNow has deployed servers or whether the service
requires servers at all;

From Iristels perspective, all traffic that Iristel terminates in NPA-867 is in fact terminated
in that exchange;

1.6

24.

Overview of the interim relief sought by Rogers and why such requests should be
denied
Subparagraphs 65(e) and (f) of the Application request that the Commission make the

traffic termination rates charged by Iristel interim and for the Commission subsequently to issue
retroactive adjustments as of the date of the interim order. Iristel strongly objects to the manner in
which Rogers applied the RJR MacDonald criteria in support of these requests for interim relief. 20
However, given that the Commission has deemed the RJR MacDonald criteria as not material to a
request to make rates interim, Iristel will not elaborate with respect to its objections to those parts
of the Application.
25.

By way of the Commission Letter, the Commission determined that it would be appropriate

for the Commission to consider Rogers request to make Iristels IXC traffic termination rates
interim, pending the outcome of the proceeding.
26.

Iristel objects to rendering its IXC traffic termination rates interim on the basis that these

rates are unquestionably just and reasonable. As argued throughout this submission, Rogers
problem rests not with the rates, but rather, with its own unwillingness to apply the Rogers
Acceptable Use Policy to prevent the excessive and abusive use of a Rogers unlimited offering
by a small group of customers.
27.

Nevertheless, Iristel has provided a detailed account in Part 5.0 of this submission proving

that its IXC traffic termination rates are in fact just and reasonable. A summary is equally outlined
above in section 1.5 in response to Rogers request for reductions to Iristels traffic termination
charges on a final basis. For ease of reference, Iristel is reproducing this summary below:

20

Application, at paras 66 to 71.

10
# denotes filed in confidence.

ABRIDGED

1) IXC traffic termination services are forborne and the rates that apply to Rogers for
Iristels services are the result of mutual agreement between two sophisticated business
entities with experience in negotiations pertaining to terms and conditions, including
price, surrounding call termination services;
2) It would be unprecedented and inappropriate to adjust the forborne interconnection
service rates of a CLEC;
3) Iristel provides IXC traffic termination services to Rogers at a negotiated rate of #
per minute;
4) The rates for tariffed local termination services provided as part of the IXC traffic
termination service appropriately incorporate the costs that Iristel must incur in the
operating territory of Northwestel so that Iristel can afford to provide retail services in
that territory.
5) Iristels network relies predominantly on Northwestels Wholesale Connect Service
which has historically been subject to exorbitantly high rates for the transport of
Iristels voice and other traffic in IP form to and from Northwestels operating territory,
and the rates for Wholesale Connect Service are under review but no final
determinations have been made and it is not clear when such determinations may occur
or if they will have any retroactive effect;
6) Iristel must also incur very high costs attributable to Northwestels tariffed Bundle
CAT service when its IXC traffic in Northwestels operating territory undergoes a
conversion from IP to TDM or vice-versa. These services are rated at $0.0380 per
minute. It also bears noting that the Commission is not currently reviewing the
reasonableness of this very high rate;
7) Iristels other operating costs in the operating territory of Northwestel are also very
high, due to the rugged terrain, extreme weather conditions, long distances and limited
and sparsely populated nature of that territory; and
8) Iristel is forced to constantly manage and increase its network capacity to accommodate
inbound traffic, which, based on the evidence in the Rogers Application, now appears
11
# denotes filed in confidence.

ABRIDGED
to be predominantly driven by a select few Rogers customers who seemingly have
unfettered permission to abuse their unlimited calling plans.
1.7
28.

Structure of submission
The balance of this submission is structured as follows:

Section 2.0 addresses all aspects of Rogers claim that Iristel is engaged in regulatory
arbitrage;

Section 3.0 demonstrates why the onus is on Rogers to apply a business solution to a
problem that is uniquely the result of Rogers own business decisions;

Section 4.0 addresses the part of the Application that claims Iristel is engaged in a pattern
of conduct in which Iristel is gaming the telecommunications regulatory scheme at best,
or is wilfully disregarding the rules; 21

Section 5.0 demonstrates that Iristels IXC termination rates remain just and reasonable;
and

Section 6.0 sets out Iristels conclusions.

2.0

Iristel is not engaged in regulatory arbitrage

29.

In this part 2.0, Iristel addresses misstatements of fact in the Application and refutes all

aspects of Rogers claim that Iristel is somehow engaged in a form of regulatory arbitrage.
2.1
30.

21

Iristel is not providing AudioNow with DIDs in the 867 area code
Rogers case against Iristel claims that:

Application, at para 53.

12
# denotes filed in confidence.

ABRIDGED
1) Iristel provides local access and telephone numbers to an AudioNow provided Callto-Listen service that provides free, real-time access to international and other radio
services that are targeted primarily to immigrant populations in Southern Canada; 22 and
2) Iristel has an arrangement with the owner of AudioNow that is specifically designed to
stimulate traffic 23 in order to take advantage of the Canada-wide and unlimited calling
offered by Rogers and other carriers and to profit from the higher local termination
charges applicable in the Northwest Territories. 24
31.

The above-listed factual assumptions are the premise for the Application and the basis upon

which Rogers requests interim and final relief. These Facts, as Rogers labels them, are incorrect
and misleading. Iristel does not provide local access and telephone numbers to AudioNows Callto-Listen service in the Northwest Territories or anywhere else in NPA 867.
32.

To set the record straight, the DIDs that appear to be used by AudioNow were assigned by

Iristel to an entity called #

provides

services. 25 Presumably, AudioNow is a customer or user of #

free #
#

services. Iristel had no knowledge of this possibility until it was

presented with the Application. This is because it is Iristels policy not to scrutinize the business
model, marketing strategies and business relationships of any of its customers. In other words,
Iristel does not apprise itself of information that includes: how #

provides

its

services; where those services are provided; and to whom those services are provided. Simply put,
Iristel does not meddle in the business affairs of its customers, nor would doing so be consistent
with its obligations as a common carrier. Iristel only requires that its customers comply with
applicable laws, including the Commissions rulings. Furthermore, Iristel is not aware of whether
and AudioNow. 26

there is any possible affiliation between #


33.

22
23
24
25
26

Iristel reiterates that it has no revenue sharing arrangement with AudioNow.

Application, at para 2.
Application, at para 3.
Application, at para 2.
#
In the usual course of business, Iristel does not require its customers to disclose all of their business affiliations.
Such a requirement is unnecessary and would be inappropriate.

13
# denotes filed in confidence.

ABRIDGED
34.

#
#
#
#
35.

It therefore follows that Iristel is not engaged in any arrangement or conspiracy with

AudioNow to stimulate traffic in order to take advantage of Rogers Canada-wide and unlimited
calling plan. Based on Rogers misstatements of fact alone, the Application should be dismissed
in its entirety.
2.2
36.

There is a longstanding industry practice of leveraging call termination fees to


support services that benefit consumers
In the interest of further disclosure, Iristels service agreement with #

which appears to be providing services to AudioNow, does contemplate revenue sharing. Iristel
does not have any revenue sharing arrangement with AudioNow. However, contrary to Rogers
assertions, this practice is not a form regulatory arbitrage 27. Far from it, this practice is an
expression of a longstanding approach that has been used in different forms throughout the
telecommunications industry to reduce costs for providers and customers alike. 28 The most
obvious example is the prevalence of cellular plans with unlimited inbound calling. This type of
calling plan allows a provider to subsidize its costs through call termination revenues. In turn, the
increased revenues from call termination fees creates an opportunity for the provider to reduce the
price of its retail services. Thus, both providers and end-users benefit.
37.

The revenue sharing arrangement between Iristel and #

any differently. Through this arrangement, #

does not operate

is able to lower its operating costs to a

level that justifies a business case for deploying its conferencing service in Canadas Far North.
As a result, Iristel benefits from a new customer, #

benefits from an affordable cost

structure and Canadians benefit from the innovative service that #


38.

Canadians value the types of low cost next generation services that are offered by

companies like #
27
28

provides.

. It would be very unfortunate if Canadian consumers were

Application, at para 2.
Report and Order and Further Notice of Proposed Rulemaking (FCC 11-161), at para 672.

14
# denotes filed in confidence.

ABRIDGED
deprived of these innovative services simply because carriers like Rogers are unwilling to
implement straightforward business solutions to address situations involving customers who use
unlimited calling plans excessively.
39.

Rogers has failed to demonstrate any evidence of bad faith that would render Iristels

arrangement with #

offside of industry norms or the Commissions rules

and policies. In the United States, certain providers requested that the regulatory authority for
telecommunications prohibit revenue sharing arrangements. 29 Ultimately, the FCC refused to
implement such a ban on the grounds that it would be inappropriately broad. 30 Iristel submits that
the Commission should also refuse a far reaching prohibition on all forms of customer
compensation arrangements. Any other outcome would send the wrong signals to carriers who
offer unlimited use services.
2.3
40.

Iristel does not commit fraud with respect to call termination fees
Rogers wildly speculates that the server used by AudioNow might not be located in the

Northwest Territories, or even Canada. 31 From there, Rogers states if its theory is correct, Iristel
has been fraudulently representing to Rogers that its traffic is being terminated in the Northwest
Territories when it is in fact being terminated elsewhere. 32 On these grounds, Rogers requests a
repayment of #

, being an estimate of the extra charges paid by Rogers to terminate long

distance traffic on Iristels network in the Northwest Territories as of September 30, 2016. 33
41.

Rogers theory has no basis in reality whatsoever. It is, at best a result of recklessly poor

due diligence and at worst, a vexatious fiction intended to injure Iristels business reputation. In
either case, the Commission should reject these submissions and the corresponding request for
relief.
42.

As already discussed, Iristel does not provide telephony services to AudioNow in the

Northwest Territories. It therefore follows that Iristel has no insight as to where AudioNow has

29
30
31
32
33

Ibid.
Ibid.
Application, at para 46.
Application, at para 46.
Application, at para 65(d).

15
# denotes filed in confidence.

ABRIDGED
deployed servers or whether the Call-to-Listen service requires servers at all. Iristel has also stated
throughout this answer that it does not have any revenue sharing arrangement with AudioNow.
43.

From Iristels perspective, the traffic destined to the numbers assigned to #

is

terminated in the Northwest Territories in accordance with the Commissions call termination
framework and all other applicable laws. Iristel has not committed any form of fraud or regulatory
arbitrage or engaged in any bad faith conduct.
2.4
44.

Iristel is not comparable to Great Lakes Communication Corp.


At paragraphs 18 and 19 of the Application, Rogers attempts to draw a parallel between

the conduct of Iristel and a United States based company called Great Lakes Communication Corp.
(Great Lakes). Rogers highlights the fact that Great Lakes has been named in numerous
proceedings in the United States dealing with allegations of traffic stimulation. 34 Leaving aside
the fact that mere allegations are a far cry from a finding of culpability, that the relevant facts
relating to Great Lakes and the US regulatory and legal environment are not identical to Canadas,
we have already demonstrated that the conduct of Iristel is totally consistent with the requirements
of the Canadian regulatory regime and normal practices of carriers within that regime.
45.

It is also important to note that the conduct of which Rogers complains represents such a

small percentage of Iristels traffic, that Iristel would not even normally be concerned about
detecting it under normal business circumstances.
46.

To put this into context, Iristel is the largest independent CLEC in Canada with a presence

in almost 2000 rate centres coast to coast with over 16,000 NPA-NXXs and #

telephone

numbers deployed. The Rogers originated long distance traffic that Iristel telephone numbers
generate consists of less than # of Iristels total traffic throughout Canada, and only a fraction of
that # would involve the type of conduct giving rise to the Rogers complaint. By comparison,
Great Lakes operates in only 3 rate centres with 11 NPA-NXXs 35. The alleged traffic stimulation
over Great Lakes telephone numbers consists of over 98% of the companys total traffic

34
35

Application, at para 19.


Great Lakes Communications Corp. is assigned Operating Company Number (OCN) 345D. The Local Calling
Guide lists Milford (population 2,979), Lake Park (population 1,137) and Spencer (population 11,150).

16
# denotes filed in confidence.

ABRIDGED
throughout its operating territory. It is a fact that the reference to Great Lakes contained in the
Application is nothing more than a misleading distraction.
47.

More importantly, Rogers can easily ensure that the existing rules in Canada do not operate

in a manner that disadvantage it, by ensuring that it monitors and takes action with regard to any
end-users it believes to be engaged in abusive calling patterns. This is an issue for Rogers to resolve
as a business matter, rather than turning it into an unfounded regulatory issue.
2.5

48.

Iristel is not engaged in unjust discrimination nor is it giving an undue or


unreasonable preference or subjecting any person to an undue or unreasonable
disadvantage
Rogers failed to demonstrate that Iristel has conducted itself in a manner that is contrary to

subsection 27(2) of the Act. More specifically, Rogers has failed to make a case that Iristel is
engaged in any form of discrimination, preference or disadvantage, let alone unjust discrimination
or an undue or unreasonable preference or disadvantage.
49.

As acknowledged by Rogers, the Commission has forborne from regulating the rates

charged by IXCs for terminating long distance traffic. 36 Both Rogers and Iristel came to a mutual
agreement on the terms of service, including applicable rates, which would apply to the termination
of Rogers traffic by Iristel in the Northwest Territories. All such terms are set out in a fully
executed Outbound Termination Services (OTS) Agreement. Iristel has respected the terms of that
agreement as well as all applicable Commission rules and policies. Since the coming into force of
the OTS Agreement, a small population of Rogers customer base has started to abuse Rogers
unlimited calling service. Iristel submits that this new development concerning Rogers operations
cannot reasonably translate into a situation of discrimination, preference or disadvantage as
contemplated by subsection 27(2) of the Act. This statutory provision is not engaged against Iristel
in the present circumstances, since Iristel is not engaged in any form of regulatory arbitrage or bad
faith conduct.
50.

Iristel further submits that the relief requested by Rogers seeks to impose unreasonable

disadvantages upon Iristel with corresponding undue and unreasonable preferences to Rogers and
other carriers outside of the Northwest Territories. For example, Rogers has requested that the

36

Application, at para 43.

17
# denotes filed in confidence.

ABRIDGED
Commission order Iristel to cease providing local telephone service or local telephone numbers to
AudioNow, or any similar services, in its Northwest Territories local exchange. 37 Such a measure
would subject Iristel to an unreasonable disadvantage by arbitrarily prohibiting it from providing
services within a broad geographic area to a vaguely defined class of customers, which would also
make it very difficult, if not impossible, for Iristel to comply. Conversely, Rogers and carriers
outside of the Northwest Territories would not be subject to the same arbitrary restrictions that
Iristel would face, thereby creating opportunities to attract customers that would or might
otherwise conduct business in the Northwest Territories.
51.

As explained in the subsequent Part of this submission, the onus is on Rogers to apply a

commercial solution to ensure that it is able to continue to perform its obligations pursuant to the
OTS Agreement. Fortunately for Rogers, it has a tool at its disposable that will ensure an effective
and straightforward solution to its predicament. This tool in discussed below in Part 3.0.
3.0

The onus is on Rogers to address excessive use of its services

52.

At paragraphs 61-64 of the Application, Rogers provides a superficial overview of the self-

help options available to it and concludes that there are no conceivable solutions beyond regulatory
intervention. Astonishingly, the Application overlooks the most obvious solution to the problem
of disproportionate and excessive use of its services: application of an acceptable use policy.
53.

Rogers knows full well that it possesses the tools and the contractual rights to address

situations involving customers who use any of its unlimited services excessively. Rogers
Acceptable Use Policy applies to all of its residential services, including voice services. 38 Consider
the following excerpts of this policy:
Prohibited Activities
Without limitation, you may not use (or allow anyone else to use) our Services to:
.
(xii) restrict, inhibit or interfere with the ability of any person to access, use or enjoy
the Internet, the Services or any Equipment used to connect to the Services, or
create an unusually large burden on our networks, including, without
37
38

Application, at para 4(a.


Rogers Terms of Service, at subparagraph 1.a.i and 1.b.ii. <http://www.rogers.com/cms/pdf/en/Rogers-Terms-ofService-Acceptable-Use-Policy-and-Privacy-Policy.pdf>.

18
# denotes filed in confidence.

ABRIDGED
limitation, posting, uploading, transmitting or otherwise making available
information or software containing a virus, lock, key, bomb, worm, Trojan horse
or other harmful, limiting, destructive or debilitating feature, distributing mass
or unsolicited e-mail (spam) or other messages, or otherwise generating levels
of traffic sufficient to impede others ability to send or retrieve information, or
to use the Services in an abusive manner in connection with any unlimited
packages, options or promotions;

Bandwidth, Data Storage and Other Limitations


You must comply with the then current bandwidth, data storage and other limitations
on your applicable Services. You must also ensure that your activity does not
improperly restrict, inhibit, or degrade any other subscribers use of the Services, nor
represent (in the sole judgment of Rogers) an unusually large burden on our
networks. In addition, you must ensure that your activity does not improperly restrict,
inhibit, disrupt, degrade or impede Rogers ability to deliver the Services, and monitor
and investigate the Services, backbone, network nodes, and/or other network services
or components. 39 (emphasis added).
54.

The highlighted portions of the above excerpts are common features of acceptable use

policies in force throughout the telecommunications industry. Carriers require their customers to
comply with acceptable use policies that include such reasonable usage of unlimited services
terms for perfectly legitimate commercial reasons. Those reasons stem from the fact that new
applications for telecommunications services are constantly introduced and end-user usage
patterns can change dramatically as a result. Carriers might one day conclude that there is a positive
business case for providing a given telecommunications service on an unlimited use basis.
Thereafter, an unexpected usage trend caused by a minority of users might emerge which
compromises the underlying business case supporting the unlimited use offering to end-users
generally and presents unanticipated technical problems including congestion. In such situations,
acceptable use policies, like the one that Rogers has developed, function as a safety valve. By
enforcing the acceptable use policy, the carrier can address abusive use of an unlimited service
directly without detrimentally affecting the broader user base for that service. This contractual
protection is simple, effective and straightforward to implement and enforce.

39

https://www.rogers.com/cms/pdf/en/Unified_AUP_Eng.pdf

19
# denotes filed in confidence.

ABRIDGED
55.

Rogers finds itself in a situation where a small proportion of its Canada wide unlimited

calling service subscriber base is responsible for a disproportionately high traffic volume. To
borrow language from Rogers Acceptable Use Policy, this is a textbook case of using the
Services in an abusive manner in connection with any unlimited packages, options or promotions.
Rogers is therefore entitled to take action to address the violation of its acceptable use policy and
prevent excessive calling to select telephone numbers terminating in the Northwest Territories.
56.

Ironically, Iristels own affiliate, Sugar Mobile, has enforced the acceptable use provisions

of its terms of service against end-users who directed excessive traffic to high-cost destinations,
including Iristels operating area in the Northwest Territories. Attachment A to this submission
is an account suspension notice that Sugar Mobile issued to an end-user on October 3, 2016. Iristel
wishes to direct the Commissions attention to the stated reason for account suspension, which is
stated as follows: Your account [account number redacted] has been suspended for abuse for the
following reason(s): Excessive minutes to high-cost destinations; specifically destinations with the
867 area code.
57.

In other words, when faced with the exact same situation of which Rogers complains in the

Application, and which Rogers claims can only be addressed through regulatory intervention, 40
Sugar Mobile applied a business solution with immediate results. It is worth emphasizing the
flexibility and effectiveness of acceptable use policies to address a broad scope of customer
conduct that can be considered abusive. As an additional example, consider Ice Wireless Inc.s
(Ice Wireless), an affiliate of Iristel, submissions on the record of the follow-up proceeding to
Telecom Regulatory Policy CRTC 2015-177 41. Specifically, Ice Wireless submitted that tariffs for
wholesale roaming services provided by the national wireless carriers should not include
permanent roaming restrictions because roaming customers are subject to very strong incentives
to actively prevent instances of excessive roaming by their mobile end-users. 4243 As Ice Wireless
explained, this incentive stems from the very high cost of domestic roaming services, regardless

40
41

42
43

Application, at para 64.


Regulatory framework for wholesale mobile wireless services Follow-up process to finalize GSM-based
wholesale roaming services proposed tariffs for the National Wireless Carriers. CRTC files: 8740-T66-201513028,
8740-R28-201513010, 8740-B38-201507849 and 8740-B38-201600023. (Follow-up to TRP 2015-177)
Final comments of Ice Wireless dated 16 September 2016 in Follow-up to TRP 2015-177.
Note: Ice Wireless added that if the Commission determines that a form of permanent roaming restriction is
necessary notwithstanding this fact, then the roaming tariffs should reflect to proposed formula at paragraph 8 of
Ice Wireless intervention dated 9 May 2016 in Follow-up to TRP 2015-177.

20
# denotes filed in confidence.

ABRIDGED

of whether such services are provided pursuant to tariff or not. Thus, if presented with a situation
whereby a Sugar Mobile customer was abusing his or her roaming privileges, Sugar Mobile could,
at its sole discretion, enforce its acceptable use policy to prevent further abusive conduct. This is
exactly what Sugar Mobile did in the type of circumstances raised by the Application.
58.

As Iristel notes in the introduction to this submission, the manner in which Rogers deals

with customers who excessively use its unlimited service is purely a business decision. Moreover,
as demonstrated throughout this Part 3.0 of the submission, Rogers possesses all of the tools and
contractual rights to deal with these situations on commercial terms. It is profoundly disturbing
that Rogers has instead relied on inaccurate and misleading facts as the basis for a regulatory
application that seeks: (i) to extract substantial sums of money from Iristel; (ii) to terminate service
agreements between Iristel and its customers; (iii) preclude Iristel from conducting business with
a vaguely defined class of subscribers (which would make it very difficult, if not impossible, for
Iristel to comply); (iv) to prohibit commonplace revenue sharing arrangements that produce
valuable benefits for the industry and consumers; and (v) to alter just and reasonable termination
charges for Iristel and other IXCs in NPA-867. These extreme and unwarranted measures would
cause substantial harm to Iristel and other providers operating in the 867 NPA.
59.

The above-listed outcomes of the Application would also impair the telecommunications

policy objectives articulated in section 7 of the Act. More specifically, the Application would
impose harms on Iristel, local exchange carriers generally and Canadian consumers. Such
consequences would particularly undermine the telecommunications objectives established by
subsections 7(b), (c), (f) and (h) of the Act. In contrast, dismissing the Application in its entirety
would preserve a status quo which: (1) promotes reliable and affordable telecommunications
services of high quality for Canadians in the Northwest Territories and throughout the country,
pursuant to subsection 7(b) of the Act; (2) enhance the efficiency and competitiveness of Canadian
telecommunications at a national level, pursuant to subsection 7(c) of the Act; (3) foster increased
reliance on market forces for the provision of telecommunications services rather than to impose
unnecessary and obstructive regulation on a class of services that is currently forborne, pursuant
to subsection 7(f) of the Act; and, (4) in accordance with subsection 7(h) of the Act, respond to the
economic and social requirements of: (a) businesses who rely on revenue sharing arrangements to
deploy their services in the Northwest Territories; and (b) Canadian consumers who rely on low
21
# denotes filed in confidence.

ABRIDGED
cost next generation services that are provided by the businesses that rely on Iristels
telecommunications services to offer valuable services to the public.
60.

Likewise, the Application is not aligned with the Policy Direction 44. The relief sought by

Rogers does not rely on market forces to the maximum extent feasible as a means to achieve the
telecommunications policy objectives. 45 Instead, the Application seeks to impose regulation that
is unnecessary and obstructive, for Rogers sole benefit.
61.

For all of these reasons, Iristel urges the Commission to send a clear message to Rogers

that both the usage terms that apply to its services and the consumption behavior of its customers
fall uniquely within Rogers scope of responsibility.
4.0

Iristels pattern of conduct is to innovate within the boundaries of the


Commissions regulatory framework

62.

At paragraphs 53-60 of the Application, Rogers creates a narrative whereby a pattern of

conduct is developing in which Iristel is gaming the telecommunications regulatory scheme at best,
or is wilfully disregarding the rules. 46 These paragraphs constitute the most disconcerting parts
of the Application. The statements therein reveal an intent that is nothing short of malicious, which
manifests as a failed attempt to undermine the regulatory and business credibility of Iristel.
Between empty complaints that blatant disregard for the regulatory rules is characteristic of
Iristels modus operando 47, Rogers develops its narrative based on out of context references to
separate regulatory proceedings over which the Commission is presently deliberating.
63.

Iristel emphatically defended its positions in the regulatory proceedings surrounding

Iristels CLEC operations in Aylmer and the roaming dispute with Rogers. Out of respect for the
Commissions process and the scope of this present proceeding, Iristel will not reiterate its views
nor will it reproduce the evidence which defeats Rogers challenges to Iristels conduct. Given that
the records of the referenced proceedings are still open and the Commission has not rendered any
determinations relating to the matters in dispute, Rogers reliance on these proceedings as evidence

44

45
46
47

Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives,
P.C. 2006-1534, 14 December 2006, SOR/2006-355, Canada Gazette Part II, Vol. 140. No. 26, 27 December
2006 (Policy Direction).
Policy Direction, at subparagraph 1(a)(i).
Application, at para 53.
Application, at para 58.

22
# denotes filed in confidence.

ABRIDGED
supporting a certain pattern of conduct consists of an abuse of process. This leads to the obvious
conclusion that Rogers pattern of conduct fiction involving wilful disregard of the
Commissions rules is completely devoid of substance.
64.

Iristel is proud of its commitment to innovation in all aspects of its operations. Canadians

value the innovations that Iristel enables directly and indirectly, as is the case with the service
provided by #

over Iristels DIDs. These innovations empower Canadians with

choice. Unfortunately, incumbent carriers like Rogers stand to profit from a lack of choice. Iristel
has thus come to expect incessant regulatory challenges every step of the way. Iristel is undeterred.
It will continue to innovate and it will continue to do so in full compliance with the Commissions
regulatory rules and policies.
65.

While Rogers is entitled to exercise its right to submit a Part 1 Application in accordance

with the CRTC Rules of Practice and Procedure 48 and the Act to seek relief that it believes to be
warranted, the Application serves another purpose which is to undermine Iristels regulatory and
business reputation. Rogers does so by neglecting basic due diligence standards, conjuring
speculative and misleading claims, and referencing, out of context, matters over which the
Commission is presently deliberating. In Iristels view, this constitutes an abuse of process. Even
if the Commission dismisses the Application in its entirety and clears Iristel of all wrongdoing,
Iristel will have incurred irreparable damage to its reputation.
66.

As argued throughout this Part 4.0 of the submission, Rogers association of the Iristel

name with a pattern of conduct characterized by wilful disregard of the regulatory rules has
injured Iristels reputation and brand. To mitigate the reputational harm that Iristel has incurred as
a result of the Application, Iristel requests that the Commission explicitly express its disapproval
at the abuse of process resulting from the filing, by Rogers, of the Application under the
circumstances described herein and at Rogers lack of bona fide effort to engage in a dialogue with
Iristel prior to the filing of the Application.

48

Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure, SOR 2010277. (CRTC Rules of Practice and Procedure).

23
# denotes filed in confidence.

ABRIDGED
5.0

Iristels IXC termination rates remain just and reasonable

67.

This Part 5.0 of the submission demonstrates that Iristels IXC termination rates remain

just and reasonable and refutes Rogers attempts to argue to the contrary.
68.

In fact, it is Iristels understanding that a main reason that Rogers negotiated a schedule for

the termination of its traffic in the Northwest Territories with Iristel #


. It is not credible for Rogers now to claim that the
rate is excessive and to use an Application without any foundation to attempt to support such a
case.
5.1
69.

Traffic volume cannot render IXC traffic termination rates no longer just and
reasonable
At the outset, it is noteworthy that although Rogers complains that the per minute rates for

both IXC termination services pursuant to the OTS Agreement and Iristels tariffed local
termination rates are among the highest payable by Rogers, 49 Rogers only claims that it is the
volume of traffic handled that results in rates that are not just and reasonable. 50 To quote Rogers
directly: In addition, section 27(1) requires all rates charged by LECs to be just and reasonable
which Iristels are not given the very significant increase in volume of traffic handled. 51
70.

In response to this statement, Iristel submits that the volume of traffic handled cannot

render rates no longer just and reasonable when, as shown in Part 3.0 above, Rogers is directly
responsible for failing to address a situation of excessive use by a small population of its
subscribers. In other words, traffic volume, which is under Rogers control to maintain within
reasonable bounds, cannot render IXC termination rates no longer just and reasonable. Given that
Rogers provides no other grounds to support a claim under subsection 27(1) of the Act other than
traffic volume, the Commission should deny all interim and final relief contemplating reductions
to Iristels IXC termination rates and corresponding retroactive refunds.

49
50
51

Application, at para 7.
Application, at para 51.
Ibid.

24
# denotes filed in confidence.

ABRIDGED
5.2
71.

Support for the Application will be predicated on the motivation to pay less
It is notable that no party has challenged Iristels IXC rates until now and that the challenge

presented in the Application is entirely founded on Rogers unwillingness to properly enforce antiabuse policies that are applicable to its end-users. Iristel anticipates that other parties will intervene
in this proceeding and echo the sentiment that the rates for IXC termination services in the
Northwest Territories are too high and therefore no longer just and reasonable. Moreover, Iristel
expects that interveners will endorse a broad application of rate reductions to the IXC call
termination services provided by local exchange carriers other than Iristel and perhaps in locations
other than the Northwest Territories. This kind of industry response is predictable because
everyone naturally wants to pay less for everything that they purchase. The Commission should
disregard interventions characterized by such motivations and instead maintain its position and
underlying rationale to forbear IXC termination rates from regulation.
5.3
72.

Iristel incurs very high costs to provide IXC traffic termination services
Notwithstanding the fact that Rogers does not apply subsection 27(1) of the Act to the

actual rates that apply to Iristels IXC termination services but rather focuses on traffic volume,
Iristel rates are just and reasonable for other reasons as well.
73.

In doing so, it bears noting that Rogers complains of the commercially negotiated IXC rates

due to the fact that they are driven by one of the highest local exchange traffic termination rates
in Canada at $0.038 per minute. 52 Oddly, despite acknowledging the high cost structure of
Northwestel a cost structure that applies to Iristels operations in Northwestel territory as well
Rogers illogically concludes that Iristels cost structure is different and a lot lower than the
Northwestels cost structure. 53
74.

Although Iristels cost structure may be technically different than Northwestels, it is

certainly not a lot lower. In reality, Iristel faces extremely high costs associated with its network
architecture. While the networks of Iristel and Northwestel are undoubtedly different, their cost
structures remain analogous from a regulatory perspective given the scope of operations that both
carriers conduct in the Northwest Territories, a high cost serving area with unique characteristics.

52
53

Application, at para 7.
Application, at para 28.

25
# denotes filed in confidence.

ABRIDGED
75.

For example, Iristels voice next generation network runs completely over the Internet

Protocol. As such, the network relies primarily on Northwestels Wholesale Connect Service for
transport of voice traffic throughout Northwestels operating territory. Wholesale Connect Service
has historically been subject to exorbitantly high rates. The high cost of Wholesale Connect
Service is attributable both to high rates 54 and restrictive regulated terms and conditions. 55 The
cumulative effect of these two factors can result in wholesale rates that exceed the regulated
Northwestel retail Internet service rates 56 by orders of magnitude.
76.

As recently as November 8, 2016, the Commission directed Northwestel to file revised

Phase II cost studies for all its Wholesale Connect Service speeds. 57 The Commission noted that
these revised cost studies would result in Wholesale Connect Service rates that reflect the most
current costing information and that are expected to enable other service providers to offer more
competitive services to their customers. 58 Furthermore, the Commission made interim all of
Northwestels monthly Wholesale Connect Service rates. 59
77.

These regulatory developments concerning Wholesale Connect Service are evidence that

the rates for such services are not just and reasonable. As a direct consequence, Iristels cost
structure to deliver voice services is considerably higher than it should be, but it is not clear if and
when any Wholesale Connect Service rate reductions may occur.

54

55

56
57

58
59

Northwestel Access Services Tariff for Interconnection with Interexchange Carrier, CRTC 21480, Item 300.E and
F.
Chief among these issues is the restriction in the Wholesale Connect Service tariff requiring the aggregate of
Medium, High and Highest Class of Service (CoS) bandwidth not to exceed forty percent (40%) of the Basic
CoS bandwidth per IP VPN Service (i.e., per site). See Northwestel Access Services Tariff for Interconnection
with Interexchange Carrier, CRTC 21480, Item 300.A. This means that wholesale customers such as Iristel must
purchase 60% more bandwidth than they actually require. This effectively translates into an exorbitant mark-up
on actual useable capacity. In addition, unlike Medium, High and Highest CoS bandwidth, Basic CoS bandwidth
is not subject to a Service Level Agreement (SLA). Thus, Northwestel can charge for basic CoS links as long as
the link is up, even if other technical characteristics of the link, such as packet loss, latency and/or jitter are so
substandard as to make the link unusable from a practical perspective. This means that, in practice, competitors
like Iristel are forced to purchase massive amounts of Basic CoS bandwidth, with little or no practical use, in order
to obtain adequate CoS bandwidth to provision quality telecommunications services to their own retail customers.
This further makes the cost of Wholesale Connect Service prohibitive and uneconomic.
Northwestel General Tariff CRTC 3001, Item 1735.
Review of the rates for Northwestel Inc.s Wholesale Connect Service, Telecom Decision CRTC 2016-443, 8
November 2016. (TD 2016-443)
TD 2016-443, decision header.
TD 2016-443, at para 49.

26
# denotes filed in confidence.

ABRIDGED
78.

In addition, since Northwetels network is a legacy TDM network, whenever Iristels

inbound IP based traffic is passed to or from Northwestel, operating in its capacity as an IXC, IP
traffic must be converted to circuit switched voice traffic. At this point in the network, Iristel is
also charged Northwestels tariffed Bundled CAT service at a rate of $0.0380 per minute. 60 In
the Application, Rogers states that although Iristel has copied the Bundled CAT rate in its CLEC
Tariff, it does not bear and support any of these cost elements. 61 As explained above, Rogers
assumption is incorrect. Iristel does bear and support the Bundled CAT costs and these costs are
substantial. Additionally, while Wholesale Connect Service rates are presently under review by
the Commission, there is no ongoing proceeding dedicated to assessing the reasonableness of
Northwestels Bundled CAT rates. Therefore, even if Wholesale Connect rates are ultimately
adjusted downward by the Commission, Iristel will continue to incur substantial costs as a result
of the per minute Bundled CAT charges applicable to all IP traffic destined to a Northwestel
landline.
79.

Iristels other operating costs in the operating territory of Northwestel are also very high,

due to the rugged terrain, extreme weather conditions, long distances, and limited and sparsely
populated nature of that territory.
80.

The call termination services that Iristel provides generate critical revenues that are

essential to recovering the costs associated with Wholesale Connect Service, Bundled CAT and
other factors that result in very high costs incurred by Iristel to provide service in the Northwest
Territories. Although this proceeding is not about Northwestels rates, Iristels IXC call
termination rates cannot be scrutinized in complete isolation. These rates are carefully tailored to
be competitive while also generating sufficient revenues to offset the very high operating costs of
Iristels network in the operating territory of Northwestel. These revenues support the availability
of telecommunications services by Iristel and a number of its business customers in the Canadian
North.
81.

Ironically, excessive traffic terminating on an IP backbone creates considerable network

congestion. In turn, this congestion drives up Iristels costs. While Rogers assumes that Iristel is

60

61

Northwestel Access Services Tariff for Interconnection with Interexchange Carrier (IXCs), CRTC 21480, Item
40. 2.(a).
Application, at para 28.

27
# denotes filed in confidence.

ABRIDGED
reaping a very significant profit from this operation 62, Iristel is actually forced to carefully
manage costly network capacity to accommodate inbound traffic, which, based on the evidence in
the Rogers Application, now appears to be predominantly driven by a select few Rogers customers
who seemingly have unfettered permission to abuse their unlimited calling plans.
5.4
82.

Conclusion: Iristels IXC termination rates are just and reasonable and no
retroactive adjustments are warranted
Overall, Rogers submissions concerning Iristels cost structure are speculative and

outright wrong and should be disregarded by the Commission. Based on all of the above reasons,
the Commission should deny Rogers requests: (1) to make Iristels IXC traffic termination rates
interim 63; and (2) to reduce those rates on a retroactive basis as of the date of its interim order. If,
despite the evidence presented by Iristel, the Commission decides to make interim Iristels IXC
traffic termination rates, no retroactive adjustments should be allowed following the Commissions
final determinations.
83.

Retroactive adjustments would be inappropriate given that the current industry approach

to IXC traffic termination has been accepted by the Commission up until the date that this
submission is filed. Furthermore, the only request for retroactive adjustments stems from Rogers
unfounded Application. In addition, the termination charge of #

per minute that is

contemplated in the OTS Agreement for traffic terminating in NPA 867 in the Northwest
Territories is the product of a mutual agreement between two sophisticated business entities.
Neither court or regulator should interfere with such a bargain unless it is demonstrated that an
underlying regulated service, in this case the local call termination rate, is subject to rates that are
not just and reasonable. As we have demonstrated, this is not the case.
84.

Therefore, Iristel urges the Commission to reject the interim relief requested by Rogers in

the Application.
6.0

Conclusion

85.

The Application attempts to associate Iristel with fraud, regulatory arbitrage and willful

disregard of the Commissions rules. As noted at the outset of this submission, these are allegations

62
63

Application, at para 27.


Application, at para 65(e).

28
# denotes filed in confidence.

ABRIDGED

that Iristel takes very seriously. One would expect such weighty claims to be fully substantiated
by compelling evidence. That is not the case in the Rogers Application. Instead, Rogers relies on
speculation to challenge Iristels business and regulatory reputation. Such a careless approach
amounts to an abuse of process. Even if the Commission dismisses the Application in its entirety
and clears Iristel of all wrongdoing, damage to the Iristel name will already be done. To mitigate
the reputational harm that Iristel has incurred as a result of the Application, Iristel requests that the
Commission explicitly express its disapproval at the abuse of process resulting from the filing, by
Rogers, of the Application under the circumstances described herein and at Rogers lack of bona
fide effort to engage in a dialogue with Iristel prior to the filing of the Application.
86.

The most important takeaway from this submission is that the problem that Rogers faces,

excessive calling by a group of customers leading to correspondingly high call termination


charges, is the result of a business decision by Rogers to provide a Canada wide unlimited calling
plan. The onus is on Rogers to now apply a business solution to resolve its predicament.
Fortunately, Rogers, being a sophisticated telecommunications carrier with a long history of
experience with unlimited use plans foresaw the very risk that has now materialized and even
created a contractual tool to address such problems: the Rogers acceptable use policy. Other
carriers, including Iristels affiliate, Sugar Mobile, routinely apply similar contractual tools with
success. In these circumstances, Rogers should not be allowed to escape the consequences of its
own business decisions and worse, impose those consequences on other innocent carriers.
87.

Dismissing the Application is the only outcome of this proceeding that is consistent with

the telecommunications policy objectives and the Policy Direction.


88.

For all of the reasons set out in this submission, Iristel requests that the Commission

dismiss the Application in its entirety.

29
# denotes filed in confidence.

ABRIDGED

ATTACHMENT A

30
# denotes filed in confidence.

You might also like