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Ottawa, 5 May 1998
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Telecom Order CRTC 98-433
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Application seeking a determination by the Commission as to whether or not Québec-Téléphone is required to pay additional compensation to Sogetel inc. (Sogetel) for 1995 and, if applicable, a determination as to the amount.
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File No.: 96-2350
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1. In Telecom Order CRTC 95-558 dated 11 May 1995 (Order 95-558), the Commission established an interim interconnection regime for the independent telephone companies in the Province of Quebec. Beginning on 1 June 1995, the Quebec independents were to provide interexchange carriers and resellers with the facilities required to originate and terminate their switched interexchange voice and data services based on the terms and conditions of the Bell Canada (Bell)/Association des compagnies de téléphone du Québec (ACTQ) Agreement and the ACTQ Carrier Access Tariff (CAT) approved in Telecom Order CRTC 95-75 dated 26 January 1995.
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2. In Telecom Order CRTC 96-181 dated 26 February 1996 (Order 96-181), the Commission determined that Québec-Téléphone and Sogetel were to effect revenue settlement for 1995 based on the mechanism established by the Régie des télécommunications du Québec (Régie). In Telecom Order CRTC 96-406 dated 3 May 1996 (Order 96-406), the Commission approved the revenue settlement agreement for 1995 (the agreement) filed by these companies.
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3. In its application, Québec-Téléphone stated that it had received a letter from Sogetel claiming additional compensation for the year ending 31 December 1995.
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4. Québec-Téléphone noted that 1995 is closed, since the revenue settlement was effected in accordance with the agreement approved in Order 96-406. Québec-Téléphone concluded that it was not required to pay additional compensation to Sogetel for 1995.
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5. Sogetel replied to the Québec-Téléphone application by letter dated 20 December 1996. Sogetel submitted that application of the final 1995 CAT resulted in a shortfall for the company that prevented it from earning its authorized 13% rate of return. Citing articles 3 and 4 of the agreement, the company claimed additional compensation from Québec-Téléphone and Bell for 1995.
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6. By letter dated 27 December 1996, Québec-Téléphone replied that Order 95-558 established 1 June 1995 as the effective date of the CAT. The company was of the view that the final 1995 CAT should apply from 1 June 1995 to 31 December 1995. Québec-Téléphone emphasized the interim 1995 CAT should have applied from 1 January to 1 June 1995.
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7. By letter dated 26 February 1997, the Commission established a procedure and addressed an interrogatory to Sogetel. Sogetel filed its responses on 7 March 1997.
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8. By letter dated 24 March 1997, Bell indicated that it agreed with the data provided by Sogetel with respect to toll minutes, equivalent minutes and quarter miles. Québec-Téléphone, by letter dated 3 April 1997, submitted that application of the CAT in accordance with the orders of the Commission would lead the Commission to recognize that the company has paid all monies payable to Sogetel, and that Sogetel was not entitled to recover any additional shortfall from Québec-Téléphone.
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9. On 27 July 1997, the Commission received a letter from the Société d'administration des tarifs d'accès des télécommunicateurs (SATAT) requesting that the Commission review and vary Regulatory Framework for the Independent Telephone Companies in Quebec and Ontario (Except Ontario Northland Transportation Commission, Québec-Téléphone and Télébec ltée), Telecom Decision CRTC 96-6, 7 August 1996, as amended by Telecom Decision CRTC 96-6-1 dated 17 September 1996, as it relates to the approved final CAT for 1995.
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10. Further to the application to review and vary filed by the SATAT, Québec-Téléphone, Bell and Sogetel were called to a meeting held on 7 October 1997 to collect the facts relevant to the Québec-Téléphone application. To that end, questions had been addressed to the three parties on 25 September 1997.
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11. At the meeting of 7 October 1997, Sogetel noted that its shortfall for 1995 resulted from the use of different methodologies to effect settlement between Sogetel and Bell and between Sogetel and Québec-Téléphone.
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12. Sogetel and the SATAT proposed that the compensation receivable from Québec-Téléphone be calculated based on the final 1995 SATAT CAT. Sogetel and the SATAT suggested that two adjustments be made to the amounts payable by Québec-Téléphone and Bell, one to deduct Sogetel's intra-company toll, which had not been added back into Sogetel's adjusted Phase III results for 1995, and the other to allocate to Bell the cross-subsidization (specific to an averaged CAT like that of the SATAT) of the SATAT members other than Sogetel and with which Québec-Téléphone does not interconnect.
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13. Québec-Téléphone reiterated that two CATs were in effect in 1995: the interim CAT for the first five months and the final CAT for the last seven months. The company concluded that Sogetel's outstanding shortfall was Bell's responsibility. Québec-Téléphone stated that it was not liable for any additional compensation to Sogetel for 1995.
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14. Bell was of the view that the final 1995 CAT should apply commencing 1 January 1995. Bell indicated that it agreed with the methodology proposed by Sogetel and the SATAT to try to correct Sogetel's shortfall problem.
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15. Following the meeting, by letter dated 31 October 1997, Sogetel filed an affidavit relating to the revenue settlements it had effected with Québec-Téléphone and Bell.
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16. On 7 November 1997, Québec-Téléphone filed comments. On 17 November 1997, Bell replied to those comments. On 20 November 1997, Québec-Téléphone filed further comments.
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17. The Commission notes that the terms of the Bell/ACTQ Agreement provide that the CAT will be calculated on an annual basis. Also, the Commission notes that the data (Phase III shortfall, toll minutes, equivalent minutes and quarter miles) used to calculate the final 1995 SATAT CAT covered the entire year of 1995.
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18. The Commission concludes that, contrary to the interpretation by Québec-Téléphone, the final 1995 CAT applies to the entire year from 1 January 1995 to 31 December 1995.
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19. The Commission notes that in Order 96-181, its determination that for 1995 Québec-Téléphone and Sogetel should effect revenue settlement according to the practice established by the Régie was based on the fact that the CAT was interim and on the statement by Sogetel that the end result with respect to its financial bottom line would be essentially the same using either the CAT or the revenue settlement mechanism established by the Régie.
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20. The Commission notes that the conditions which led it to determine that Québec-Téléphone and Sogetel should effect toll revenue settlement according to the practice established by the Régie for 1995 have changed.
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21. The Commission notes that the agreement approved in Order 96-406 indicates that Bell should assume 27.7% of any shortfall resulting from application of the final CAT. The Commission notes that Bell objected to paying part of the additional shortfall. Bell submitted that the remaining shortfall, after application of the final CAT, applied to toll traffic between Québec-Téléphone and Sogetel.
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22. The Commission notes that Bell did not sign the agreement and therefore is not required to assume 27.7% of any shortfall resulting from application of the final CAT. The Commission notes that, under the circumstances, the agreement approved in Order 96-406 would necessarily lead to a shortfall for Sogetel.
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23. The Commission considers that joint application of the two settlement methodologies approved for 1995, the CAT for Bell and the agreement for Québec-Téléphone, prevents Sogetel from achieving its authorized rate of return.
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24. The Commission concludes that there is real doubt as to the correctness of the determinations made in Order 96-181 with respect to the methodologies to be used to effect settlement between Québec-Téléphone and Sogetel.
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25. The Commission notes that if Québec-Téléphone had had to pay Sogetel the final SATAT CAT rate for 1995, Sogetel and the other SATAT members would have achieved their authorized rates of return.
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26. The Commission further notes that to the extent that Québec-Téléphone would have had to pay the final 1995 SATAT CAT, it would have contributed to the shortfalls of the SATAT members other than Sogetel.
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27. The Commission is of the view that it would be more equitable if Québec-Téléphone did not have to contribute to the shortfalls of the SATAT members with which it does not interconnect.
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28. Accordingly, the Commission is of the preliminary view that Order 96-181 should be varied to make Sogetel's company-specific CAT applicable to Québec-Téléphone for 1995 and 1996. The Commission notes that, under the proposed approach, Bell must assume payment of the subsidy to the other SATAT members, which would have been paid by Québec-Téléphone if it had been required to pay the SATAT CAT.
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29. Consequently, the Commission hereby initiates a proceeding to seek comments on its position as set out in paragraph 28.
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30. Sogetel, Québec-Téléphone and Bell are made parties to the proceeding.
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31. The parties may file comments with the Commission, serving copies on all other parties, by 15 May 1998.
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32. The parties may file replies to the comments filed pursuant to paragraph 31, serving copies on the parties who filed comments, by 22 May 1998.
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Laura M. Talbot-Allan
Secretary General
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This document is available in alternative format upon request.
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