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Ottawa, 22 July 1985
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Telecom Decision CRTC 85-14
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NORTHWESTEL INC. - RURALTEL 2 SERVICE
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InNorthwesTel Inc. - Withdrawal of Application for a General Rate Increase: Follow-up, Telecom Decision CRTC 84-17, (Decision 84-17) 11 July 1984, the Commission referred to interventions on the lack of service provided by NorthwesTel Inc. (NorthwesTel) in the Carcross Road area and the company's proposal to provide the area with basic exchange service using automatic mobile radio telephone service. The Commission directed the company to provide a report to the Commission within 30 days, setting out the details of options, including costs, considered by the company in selecting automatic mobile radio telephone service.
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Carcross Corner is 15 miles east of the Whitehorse switching centre and one mile east of the Whitehorse city limits, from which Carcross Road extends south. Included in the Carcross Road area, within 18 miles of Carcross Corner, are the areas around Annie Lake, Cowley Lake and Kookatsoon Lake in which are situated approximately 49 households. Some 45 additional households are located between them.
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In the Cowley Lake area, four customers have four-party service, using rural radio telephone units, for which installation charges ranged from $700 to $900 each and monthly rates are $16.00. Six Annie Lake customers have six-party wire line service through an open wire pair leased from the White Pass and Yukon Railway Company.
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On 10 August 1984, in response to the Commission's directive in Decision 84-17, NorthwesTel filed its report in which it set out the following three options for providing telephone service to the Carcross Road area:
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1) multi-party service using rural radio telephone service;
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2) individual line service using multi-channel radio systems for trunking and cable plant for
distribution; and
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3) individual line service using an automatic mobile radio telephone system.
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In its report, the company gave several reasons for rejecting the first option. First, it would cost NorthwesTel $256,375; second, there are no rural radio telephone systems on the market; third, there is insufficient frequency spectrum available to provide such a rural radio telephone service; and fourth, the system would not use the frequency spectrum efficiently.
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With regard to the second option, the company estimated that the capital costs involved would be $220,675. In accordance with its General Tariff CRTC 3001, the company proposed rates, including terminal equipment, of $15.25 per month and $44.00 service charge for business; $8.30 per month and $28.00 service charge for residence; and $12.00 per month for exchange line mileage as applicable. In addition, a one-time provisioning charge in excess of $6,000 per customer would be required to yield a rate of return equivalent to that of the third option.
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NorthwesTel stated that it preferred the third option, Ruraltel 2 service, due to its lower cost of $61,575. The company said that with Ruraltel 2, each subscriber would get a seven digit telephone number and direct dial access for local and long distance calls. The company proposed to provide Ruraltel 2 in the Carcross Road area on a pilot project basis. If it performed well, the company would provide it in other remote areas where conventional facilities are not feasible.
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The company reported that this option would involve a capital cost for terminal equipment of $4,400 per customer, with unit annual maintenance and operating costs at $336. NorthwesTel said that subscribers could purchase their own terminal at a unit cost of approximately $5,000 or lease terminal units from NorthwesTel based on any one of three options: $40.00 per month with a $1,000 service charge, $36.50 per month with a $1,200 service charge or $31.00 per month with a $1,500 service charge.
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On 10 August 1984, under Tariff Notice 179, NorthwesTel submitted an application for the introduction of Ruraltel 2 Service. The company proposed Ruraltel 2 residence network access rates of $6.00 per month and a $28.00 service charge and business network access rates of $12.00 per month and a $44.00 service charge. In addition, it proposed local usage charges of $.06 per minute to yield estimated average revenues of $10.80 per month per subscriber.
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On 18 September 1984, the Commission issued CRTC Telecom Public Notice 1984-52 inviting public comment on the company's proposal. Parties submitting comment included a large number of people from the Carcross Road and other areas as well as A. Falle, Member of the Yukon Legislative Assembly, Erik Nielsen, M.P., and A. Philipsen, Minister of Justice, Government of Yukon.
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Most parties said that the proposed rates are too high. Noting that residents of Tagish, 60 miles north of Whitehorse, pay basic exchange service rates, many parties argued that such rates should apply in this case. Messrs. Nielsen and Falle argued that the Carcross Road subscribers should pay the same rates as Whitehorse customers for service which, in their view, was equivalent to basic exchange service.
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Mr. Philipsen noted that the proposed rates are lower than those charged by Bell Canada (Bell) and British Columbia Telephone Company (B.C. Tel) for similar services. He argued, nonetheless, that reducing the proposed service charges would increase customer acceptance and enhance the profitability of the service. Others suggested a refundable or transferable service charge.
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Some parties, including Mr. Philipsen, favoured reducing the monthly charges and dropping the usage charge.
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In response to a request from the Commission, NorthwesTel provided further information on Ruraltel 2. The company defined specifically its proposed pilot project area, as a corridor 25 to 50 miles wide extending 150 miles from Whitehorse and including Carcross Road. It estimated that a 30 day period would be necessary to establish Ruraltel 2 compared with a one year period for multi-channel radio and cable. In addition, NorthwesTel indicated that Ruraltel 2 is based on very high frequency radio and that conversations could be monitored using reasonably inexpensive receivers.
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The company stated that the Ruraltel 2 costs, which it had detailed in its report, applied to 35 potential subscribers around Annie Lake, Cowley Lake and Kookatsoon Lake. Nevertheless, when costs are considered for the entire pilot project area, the cost advantages of Ruraltel 2 over multi - channel radio and cable systems are significant.
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Regarding the suggested elimination of usage charges, NorthwesTel said that most of the Ruraltel 2 costs are traffic sensitive and that the rates should reflect this fact.
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Regarding service access, the company reported that with the installation of Ruraltel 2, the 35 subscribers in the three areas of Carcross Road around Annie Lake, Cowley Lake and Kookatsoon Lake would have access to two or four channels and that these channels would also be available to 20 mobile radio telephone customers. In contrast, multi-channel radio and cable service of comparable size would provide 36 trunks which would permit all 35 subscribers to get service access at the same time.
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The company stated that seven Ruraltel 2 channels could support 140 customers. Each additional channel would cost $8,000 up to a system capacity of 16, after which additions to the common equipment would be required to expand the system. NorthwesTel also indicated that the Carcross Road area has subscriber growth potential which eventually could justify replacing Ruraltel 2 with a cable based system. Should that occur, the company gave assurances that no construction charges would be imposed on Ruraltel 2 customers.
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In response to reduced supplier costs for Ruraltel 2 terminal equipment, on 11 April 1985, NorthwesTel filed Tariff Notice 179A in which it refiled its Ruraltel 2 proposal with reduced service charges for each of its three leasing options. The revised service charges would be reduced from $1,000 to $200 for the $40.00 per month option, from $1,200 to $400 for the $36.50 per month option, and from $1,500 to $700 for the $31.00 per month option.
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Regarding the costs of the three options submitted by the company in its report, the Commission notes that the costs for Ruraltel 2 terminal equipment were not included in option three. When these costs are included, the overall costs of Ruraltel 2 do not differ significantly from those reported for the multi-channel radio and cable option. However, the costs reported for the three options in the report applied only to the provision of service to the 35 potential Carcross Road subscribers located at Annie Lake, Cowley Lake and Kookatsoon Lake. Further, the cost estimates for the multi-channel radio and cable option did not include maintenance and repair costs or drop costs. The drop costs were subsequently estimated to equal approximately $1,300 per subscriber.
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When the entire pilot project area is considered, the Commission considers that Ruraltel 2 would offer significant cost savings relative to the alternative options.
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The Commission notes that the proposed rates for Ruraltel 2 are lower than those charged by Bell and B.C. Tel for services offered under comparable circumstances. It also considers that, in the circumstances, a usage-sensitive rate component is appropriate. In view of the much lower level of costs of Ruraltel 2 as compared to the alternative options, the Commission therefore approves Tariff Notice 179A.
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The Commission is concerned that potential subscribers to Ruraltel 2 have not been sufficiently notified of the limited number of radio channels that the service will employ and of the resulting limitation of the number of customers who may use the service at the same time. The Commission, therefore, directs NorthwesTel to monitor radio channel use on Ruraltel 2 and expand channel capacity in the event of a capacity shortage. Further, the Commission directs the company to ensure that subscribers to Ruraltel 2 service are advised fully of these limitations prior to subscribing.
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The Commission has also concluded that, for residents of Annie Lake, Cowley Lake and Kookatsoon Lake, the additional costs of the multi-channel radio and cable option, as compared to Ruraltel 2, are significantly less than for other pilot project area residents. Accordingly, the company is directed to hold a meeting to advise the residents of Annie Lake, Cowley Lake and Kookatsoon Lake of the service features, provisioning charges and monthly rates that would apply 1) under General Tariff CRTC 3001, Items 207, 302, 306 and 307, if they should choose the multi-channel radio and cable option, and 2) for Ruraltel 2 service.
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The Commission proposes to send a representative to the meeting and, therefore, requests the company to advise it of the date and location of the meeting at the same time the residents concerned are notified.
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Fernand Bélisle
Secretary General
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