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< Is Underground Long Distance Network That Saves Millions `Illegal' >
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< An Upi Production 1990 >
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Reprinted In File Form On March 27, 1990
Orignally Publised In Popular Electronics Electronics Hobbyists Handbook 1990
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Secret Phone Bypassing Stirs Row
By: Mike Urlocker
THE FINANCIAL POST
An underground telecommunications network used by businesses to divert
millions of dollars from Canadian telephone companies is flourishing,
industry experts say.
And apart from cutting their rates to compete, there is little the
telephone companies can do to control it. (HAHA to Bell!! -Tomcat).
"The telephone companies are scared to death," says Frank Koelsch,
senior vice-president of Transition Group Inc., a Toronto-based market
research firm. "There's lots of people doing it. It runs the gamut from
small business to large corporations."
Companies using the system, known as "Canada-Canada Bypass," use
private lines and switches to route their domestic long-distance traffic
through the U.S., where rates are lower.
For example, a Vancouver-based company with operations in Windsor,
Ont., could bypass the Canadian long-distance network by routing its traffic
over private lines from Vancouver to a switch in Seattle, Wash. From
there, the traffi is picked up by a U.S. long-distance carrier and piped
across to Detroit. A third hop routes the calls back across the border
to Windsor.
Monopoly Carrier
Similiar methods are used to route overseas calls through the U.S.,
bypassing Teleglobe Canada Inc., the monopoly overseas carrier.
People familiar with the technique say a corperate telecommunications
manager could rig such a system so it is invisible both to employees
and the telephone companies. With U.S. long-distance rates about half
what Canadian companies charge, substantial savings are reaped.
The practice violates agreements between U.S. telephone companies and
Telecom Canada, the association of nine regional monopoly telephone com-
panies, as well as policy of the Canadian Radio-television & Telecommun-
ications Commision. Companies that bypass risk having their phones
disconnected.
Nobody knows how extensive bypassing is. But Koelsch estimates 20% of
the $12-billion-a-year Canadian long distance business is threatened.
Telecom Canada and rival CNCP Telecommunications say bypass is im-
possible to monitor but downplay the damage.
"It's probably getting worse," says Frank Degenstein, former president
of Telecom Canada. "[But] it's not that economical for companies to do
it."
The telephone companies say bypass is illegal but others disagree.
Koelsch and George Harvey, president of CNCP, say that while bypass breaks
the phone companies' agreements, it is not against the law. Further,
Koelsch argues that attempts to stop bypass could be challenged as a non-
tariff barrier under the Canada-U.S. free trade agreement.
"They have perpetuated the myth that it's impossible and illegal,"
said Koelsch, who recommends bypass to reduce domestic long-distance
bills.
Alliance Disagrees
The Canadian Business & Telecommunications Alliance, which represents
300 major telecommunication users, disagrees with Koelsch's analysis,
saying the practice is illegal.
To bypass the Canadian network, a Canadian company must lease private
lines to the border. As a result, at least peripherally, a Canadian
supplier is involved.
Telephone companies, CNCP and a half-dozen resellers, small firms that
lease bulk private lines from the carriers and resell them at a discount,
offer lines to the U.S. That is permitted as long as the traffic is not
rerouted back across the border into Canada.
CNCP's Harvey says he "absolutely guarantees" CNCP does not let its
lines be used for bypass. But, he adds, once lines are in the hands of
resellers, "we have no way of checking."
In a recent submission to the CRTC calling for increased regulation of
resellers, British Columbia Telephone Co. said two Canadian resellers
were bypassing the Canadian network. The firms were not named.
Resellers, which deny the charge, usually sign agreements with their
suppliers not to bypass the Canadian network.
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04-27-90/010 Copywrite 1990 By The Lost Avenger-All Rights Reserved
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