ARCHIVED - Order CRTC 2001-299

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Order CRTC 2001-299

 

Ottawa, 12 April 2001

 

Reduction to the individual line service surcharge and rural individual line charge for an additional rural telephone line denied for homeowners in Alberta

Reference: 8661-T51-01/00

 

The Commission denies a Part VII application filed by Mr. Chris Tucker, of Bragg Creek, Alberta, on 26 January 2000, under sections 27 and 47 of the Telecommunications Act requesting that the Commission instruct TELUS Communications Inc. to amend its General Tariff for additional lines to rural homes [i.e., the individual line service surcharge and the rural individual line charge] such that the installation charges for an additional line are set to be equal for both rural and non-rural (city) homeowners.

1.

In his application, Mr. Tucker noted that currently the cost to install an additional telephone line in rural Alberta is $560 (the individual line service (ILS) surcharge) plus the normal line charge of $45 for a total of $605. For non-rural (city) customers, the charge is $45.

2.

Mr. Tucker stated that he is advised that with the advancement in telecommunications technology, once a physical telephone line is installed in a home, any subsequent additional telephone lines which may be added involve the same amount of work, costs and time, whether they are rural or non-rural. For clarity, Mr. Tucker stated that it is accepted that the existing costs relating to the installation of the first physical telephone line in rural homes is not in question at this time. Mr. Tucker therefore contended that TELUS Communications Inc. (TCI) is not charging (for additional rural telephone lines) in a just and reasonable manner as required by section 27 of the Act.

3.

Mr. Tucker stated that the CRTC recognized in a recent decision that all Canadian citizens deserve an "equal level of basic service - no matter how remote". In Mr. Tucker's view, it also goes to the heart of subsection 27(1) "Every rate charged by a Canadian carrier for telecommunications service shall be just and reasonable".

4.

Mr. Tucker also expressed the view that, because of the inequitable basis of charging, rural Canadians in Alberta are placed at a major disadvantage under the current tariff rate structure particularly as it relates to educational access to the Internet via telephone lines.

 

TCI's answer

5.

TCI stated that in provisioning the first telephone line to a rural customer location, a "drop" into each service location is made, providing the cable which runs from the pedestal (usually a green box) at the edge of a customer's property to the building on the customer's property where service is to be used. "Drops" are normally designed with one, two, or six "cable-pairs", with one "cable-pair" being dedicated to one customer line. Therefore, where "cable-pairs" are available and when there is a requirement for additional lines at a specific location, construction work is not needed to provision the additional "drop". However, the rest of the company's network necessary to support telephone service, specifically the loop facilities between the switching centre and the pedestal, are not dedicated to one customer line, rather they are shared.

6.

TCI stated that, contrary to Mr. Tucker's belief, the costs associated with a subsequent line are the same as those of the first line. TCI stated that this represents an average cost per line, as measured in Phase II costs, which are long-run, incremental costs calculated in accordance with Commission approved methodology.

7.

TCI stated that the switching equipment and the loop facilities required to provision telephone service are shared among customers, irrespective of whether it is for the first or subsequent telephone lines. These costs represent the majority of the costs of providing service and the costs per line are determined on the basis of the capacity of the common facilities.

8.

TCI noted that at the time of the ILS program in 1986, which provided for the conversion of all multi-party lines in the province of Alberta to individual line service, the Alberta Government, the then Alberta Government Telephones (AGT) and AGT's customers shared the costs of the program. The Alberta Government contributed towards the costs of estimated growth in these facilities over a five-year period. TCI stated that, since then, additional investment by the company in such facilities has been necessary to continue to meet additional service demand of rural customers.

9.

TCI stated that the revenues associated with the individual line service (ILS) surcharge and the rural individual line charge (RILC), therefore, continue to be necessary in order to allow the company to recover a portion of the additional costs of providing service in rural areas. TCI stated that, in fact, the $560 surcharge does not fully compensate the company for its costs because the costs to provide the facilities are, on average, more than this amount. On this basis, TCI submitted that its rates are clearly "just and reasonable", as approved by the Commission and contained in the company's General Tariff.

10.

TCI surmised that the recent decision that Mr. Tucker referred to may be Telephone service to high-cost serving areas, Telecom Decision CRTC 99-16, dated 19 October 1999. TCI stated that in addressing the level of service available to high-cost serving areas, the Commission determined the following in Decision 99-16:

 
  • A basic service objective is established including, among other things, the provision of individual line local service with Touch-Tone dialing. In this regard, the Commission stated that it does not, however, expect the industry to extend and improve service to all areas immediately.
 
  • Incumbent local exchange carriers' (ILECs') obligation to service is maintained, i.e., such carriers must provide service to subscribers in their service territory at a reasonable price without unjust discrimination.
 
  • The ILECs' obligation to serve and the terms for extension of service are set out in their approved tariffs. The terms include the portion of the cost for extending service to be paid by the company and the portion to be paid by the customer. The Commission further found that no change is warranted to the tariffs or the Terms of Service with regard to the handling of ongoing service extension requests.

11.

TCI generally supported the principle that all Canadians should have access to an "equal" level of basic service, even in remote areas. TCI stated that it has been and continues to provide standard single-line Touch-Tone telephone service to its customers, both rural and non-rural, consistent with the Commission's principle of "a reasonable price without unjust discrimination", in accordance with approved tariff rates.

12.

TCI recognized that the one-time ILS surcharge of $560 might be onerous to some customers who desire to subscribe to an additional line for Internet access. The availability of the payment option of $18 per month over a three-year period should provide a reasonable alternative in this regard. Nevertheless, TCI submitted that it is cognizant of the concerns expressed by its rural customers over the ILS surcharge and RILC rate structure over the years, and is evaluating other pricing alternatives for rural areas that may better meet customer needs and that are consistent with the Commission's pricing guidelines.

13.

TCI submitted that it has demonstrated that the costs to provide the initial line and subsequent lines in rural Alberta are the same. Therefore, the current approved rates in the General Tariff are just and reasonable. TCI therefore asked that Mr. Tucker's request for relief be denied.

 

Mr. Tucker's reply

14.

Mr. Tucker noted that TCI admitted that, where additional lines are required, no new "drop" is required and "construction work is not needed". Accordingly, Mr. Tucker submitted that there is no extra work beyond that which would apply to a non-rural (city) home.

15.

Mr. Tucker also noted that TCI confirmed that switching and loop facilities are required for any additional line, whether rural or non-rural. Accordingly, Mr. Tucker submitted that this work is the same and the basis of charging should be the same.

 

Comments from interested parties

16.

There were a number of submissions, consisting both interventions and similar complaints, filed to this application. A number of rural subscribers supported the application by Mr. Tucker. Among the concerns cited by the other subscribers were:

 
  • ILS rate assessed rural residents for extra telephone line service is discriminatory and exorbitant;
 
  • ILS rate is an unfair tax on the rural residents of Alberta;
 
  • Rural rate structure acts against the best interests of rural education and children;
 
  • Rural rate structure acts against the best interests of small businesses; and
 
  • Inappropriate application of ILS surcharges.
 

The Commission's conclusion

17.

The $560 rate for individual line service was introduced as part of a cost-sharing arrangement for higher cost rural service areas in Alberta over the five-year period from 1987 to 1991. In this proceeding, TCI stated that, since then, additional investment by the company has been necessary to continue to meet the additional service demands of rural customers. This consists of switching equipment and loop facilities that are shared among customers and are required to provide telephone service irrespective of whether it is for the first or subsequent line.

18.

The establishment of telephone service, whether it be a first or an additional line, is expected to cause incremental network provisioning costs as the use of existing network capacity is expected to cause deployment of relief facilities to occur earlier, and thus cause costs.

19.

The Commission notes that rates in rural areas are generally non-compensatory and the ILS surcharge and the RILC provide additional revenues to aid in the recovery of the high rural service costs. Elimination of these charges would move rates further from costs for rural services.

20.

In response to a Commission interrogatory, TCI proposed three alternatives to address the concerns of rural customers: a limited period promotional offer; recovery from customer base through an exogenous factor, and the offer of additional lines on different terms and conditions.

21.

In Order CRTC 2000-603, dated 28 June 2000, the Commission approved an additional individual line service promotion available from 17 July 2000 to 31 December 2000. In Order CRTC 2001-232, 16 March 2001, the Commission approved TCI's request for an extension to the promotion available from 2 April 2001 to 14 September 2001. Under the promotion, the ILS surcharge applicable to the provision of an additional line to existing residential ILS customers beyond the base rate area is waived, subject to certain terms and conditions.

22.

In the Commission's view, it would not be appropriate to change the ILS surcharge and RILC in isolation. The Commission is of the view that such a change should be considered in a broader context such that funding alternatives may be considered.

23.

The Commission denies Mr. Tucker's application. 

 

Secretary General

 

This document is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca 

Date Modified: 2001-04-12

Date modified: