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Ottawa, 29 October 1985
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Telecom Decision CRTC 85-23
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NORTHWESTEL INC. - GENERAL INCREASE IN RATES
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Table of Contents
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I INTRODUCTION
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II ACCESS TO AND QUALITY OF SERVICE
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A. Quality of Service
B. Service to Rural and Remote Areas
C. Services and Equipment for the Disabled
D. Advance Payments and Credit Policy
E. Late Payment Charge
F. Rebates for Service Outages
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III CONSTRUCTION PROGRAM
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A. General
B. Conversion of Central Office Switches to Digital Technology
C. Utilization
D. Replacement of Telesat Earth Stations
E. Control of Capital Expenditures
F. Conclusion
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IV FINANCIAL CONSIDERATIONS
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A. Introduction
B. Revenues
C. Appropriate Amount of Long-Term Debt Payable in United States Currency
D. Expenses
E. Rate of Return
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V TARIFF REVISIONS
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A. Introduction
B. Basic Exchange Access Services
C. Exchange Line Mileage
D. Service Charges
E. Residential Frequent Caller Discount Plan
F. Broadband Exchange
G. Mobile Telephone Service
H. Program Channels
I. Tariff Filings
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VI FOLLOW-UP ITEMS
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A. Status of Items Identified in Previous Decisions
B. Summary of Items Identified in this Decision
C. Follow-Up Procedure
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I INTRODUCTION
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On 3 May 1985, NorthwesTel Inc. (NorthwesTel) filed an application with the Commission for a general increase in its rates to be effective 1 November 1985. The company proposed rate increases for its individual and two-party local services of 15% for residence subscribers and 20% for business subscribers. It proposed to increase non-recurring service charges by 20% to 100%. Regarding basic touch-tone and rotary dial telephone set rentals, it proposed increases of 10 cents and 20 cents for residential subscribers and 20 cents and 30 cents for business subscribers. The company proposed to increase locality rates by approximately 10% and individual and two-party exchange line mileage rates, outside the base rate area boundary, by 100%. Finally, NorthwesTel proposed to increase the coin telephone rate from 10 cents to 25 cents.
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For message toll service (MTS), the company proposed a restructuring of its rates between points within NorthwesTel's operating area (Intra-area) and between routes in this area and those in British Columbia and Alberta. The company indicated that, on average, it would not expect the new rate structure to increase MTS rates for its subscribers. The proposed rate structure would include a message set-up charge for each call, a one-minute minimum charge, operator service charges to be applied to operator handled calls, and a condensed mileage band. In addition, it proposed to set back by one hour the time at which night rates are in effect on Intra-area calls. On calls to Alberta and British Columbia, the company proposed to increase the evening and night discounts to 35% and 60% respectively. Finally, on a one year trial basis, the company proposed to introduce a residential frequent caller discount plan.
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For public mobile telephone service, the company proposed to introduce a network access charge of $12.00 per month. It proposed a lower charge of $6.00 for fixed residential radio stations. These charges would replace the present minimum billing charge of $8.55 per month which applies only to subscribers who own their own radio equipment. On all manual mobile service calls, the company proposed to introduce a call set-up charge of $0.15, a $0.50 per call operator surcharge and a $0.45 per minute air time charge to replace the existing rates of $0.87 for the first three minutes and $0.06 for each additional minute.
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NorthwesTel proposed network access rate increases of approximately 13% and 40% for telex and Broadband. The company proposed a change in the structure of its rate schedule for inter-city voice circuits, which would result in rate changes ranging from a decrease of 30% to an increase of 12%, depending on circuit distance.
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The company estimated that the proposed rate changes, if approved effective 1 November 1985, would provide additional revenues of approximately $0.3 million in 1985 and $1.9 million in 1986.
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On 17 July 1985, NorthwesTel wrote to the Commission to advise that it wished to alter its financial outlook for 1985 and 1986 due to circumstances unforeseen at the time of filing. The company proposed, therefore, to file a new financial outlook together with any necessary modifications to the rates requested in its application. It filed the revised financial statements on 21 August 1985 stating that the rates of return were not significantly different from those originally proposed. Consequently, NorthwesTel did not wish to alter any of the proposed rates in the 3 May 1985 application. The Commissions the Consumers' Association of Canada (CAC) and the Government of Yukon (YTG) filed supplementary interrogatories on 30 August 1985 dealing with the revised financial evidence. The company filed responses on 6 September 1985.
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NorthwesTel subscribers, interested parties registered under section 7 of the CRTC Telecommunications Rules of Procedure and other persons identified in the Directions on Procedure issued by the Commission, were notified of NorthwesTel's application and a general notice was published in newspapers in the company's service area. Fifteen parties filed comments in response to these notices. The hearing was held in Whitehorses Yukon from 12 September to 14 September 1985, before Commissioners Jean-Pierre Mongeau (Chairman) and Louis R. Sherman.
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Representatives of the Peace River-Liard Regional District participated in the first part of the oral hearing which was held on 12 September 1985 and was devoted to representations from subscribers. CAC and YTG participated in the second part of the hearing which was held from 12 to 14 September 1985 and was devoted to a detailed review of the company's evidence.
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II ACCESS TO AND QUALITY OF SERVICE
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A. Quality of Service
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The Commission considers that an assessment of the quality of service provided by a carrier to its customers is an essential element in the determination of just and reasonable rates. Pursuant to Quality of Service Indicators for Use in Telephone Company Regulation, Telecom Decision CRTC 82-13, 9 November 1982 (Decision 82-13), NorthwesTel is required to report details of its performance, on a quarterly basis, for a number of indicators dealing with service provisioning and repair, local and long distance network performance, operator services, directory and billing accuracy, and complaints.
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The company provided results for quality of service indicators for each quarter of 1982, 1983 and 1984 and for the first two quarters of 1985. Performance data for most indicators were reported both at company and at each of three area levels (Northern British Columbia, Northwest Territories, Yukon). Further, in response to the Commission's request, NorthwesTel provided its evaluation of each of the indicator results and action plans where its evaluation indicated unsatisfactory performance.
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In Decision 82-13, the Commission directed NorthwesTel to submit a plan to develop final standards for all indicators. The final standards were to be designed to ensure that, based on the results of a subscriber survey, 90% of subscribers are satisfied with the level of service provided. In its application, the company stated that its subscriber survey began in April 1985, and that it would be in a position to recommend standards based on the results of recurring monthly surveys for each indicator by 31 July 1986. At the hearing, the company filed a summary report of its survey results for the second quarter of 1985.
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NorthwesTel stated that these survey results show the measures taken by the company to improve efficiency and quality of service. With regard to the time interval between Decision 82-13, and the filing of proposed standards, Mr. D.G. Yamkowy, the company's General Customer Services Manager, explained, under cross-examination, that time was required to establish the survey format and that analysis of 15 months of survey data is required in order to develop proposed standards.
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CAC argued that the quality of service provided by NorthwesTel does not justify any rate increase at this time; the company is neither meeting the standards established by the Commission nor the level of service provided in comparable areas by other federally regulated carriers. CAC referred to the results of the company's survey showing that less than 90% of subscribers are satisfied with repair, provisioning, operator service and complaints service. CAC filed the results of its own survey of Yellowknife subscribers showing that only 78% of Yellowknife residents are satisfied with telephone service. Finally, CAC expressed the view that the company's failure to submit final standards within the time set out by Decision 82-13 has made interveners' and the Commission's task of assessing quality of service more difficult. CAC argued that this problem is aggravated by the fact that the company has dropped indicators which might lend themselves to trend analysis in the meantime.
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The company argued that CAC's survey should be discounted for two reasons: the limited coverage of the survey (one community) and potential biases which could have arisen as a result of both prior publicity regarding the survey's content and the wording of the first question.
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The Commission has reviewed the company's quality of service performance since its Last general rate increase application in March 1984. It considers that the service quality provided by the company is generally satisfactory except for several provisioning and repair indicators described below. In certain cases, the Commission notes that performance has improved since 1984.
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With regard to NorthwesTel's and CAC's customer surveys, the Commission welcomes the submission of information which helps to bring subscribers' perceptions of the quality of service to its attention. The Commission, however, views the results of both surveys as inconclusive and considers that it would be premature to come to any conclusion on whether 90% of NorthwesTel's subscribers are satisfied with the service provided by the company.
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In reporting indicators and developing standards based on customer satisfaction, the Commission finds that NorthwesTel has acted in accordance with Decision 82-13. The Commission considers that it would be more appropriate to address concerns related to the development of these standards in the context of the follow-up process envisaged by that decision. In this regard, NorthwesTel has undertaken to provide proposed standards for the consideration of interested parties by 31 July 1986. The Commission will consider comments on the standards at that time before making its determination on the appropriate standards for all indicators.
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1. Outstanding Orders for Main Stations per 100 Main Inward Movement
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According to the company's quality of service results for the second quarter of 1985, orders for new or relocated telephone service not completed by the end of the month averaged 22% for the company as a whole, because of a lack of personnel. Also, the results for such orders were varied among the company's three operating areas.
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NorthwesTel explained that this was due to the limited accessibility to remote communities in its operating territory. To address this concern, the company indicated that it had established a mini-jacking program in these locations. In addition, it had commissioned agencies, called Arctic Community Agencies, and supplied them with inventories of telephones which could be picked up or exchanged by local customers without having to wait for a scheduled technician's visit.
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Under cross-examination, Mr. Yamkowy indicated that the less favourable results in the Northwest Territories area, as compared with the Yukon area, are due to the high number of exchanges accessible by air only (fly-in exchanges) in the former. He stated that to speed up the service schedule for these exchanges would not be cost-effective. Under the circumstances, the company regarded the current level of service in the Northwest Territories as acceptable.
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In its final argument, CAC contended that Outstanding Orders Over 30 Days are, by NorthwesTel's own admission, high and noted the failure of the company to provide an estimate of the cost of providing an acceptable level of service.
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The Commission notes the improvement in the percentage of Outstanding Orders Over 30 Days which has declined from 13.5% in the first quarter of 1984 to 3.3% in the second quarter of 1985. While the percentage of Outstanding Orders Not Completed by Month-End has also declined during the same period, it still appears to be too high. The company has attributed the current level to the large number of fly-in exchanges it serves. However, an analysis of the results for this indicator by exchange indicates results, for urban exchanges and rural exchanges which are accessible by road, similar to the results for fly-in exchanges.
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The company is, therefore, expected to continue its efforts to improve the results for Outstanding Orders for Main Stations per 100 Main Inward Movement. Further, it is directed to provide monthly reports by exchange for this indicator and for Outstanding Orders for Main Stations Over 30 Days, per 100 Main Inward Movement as the performance of each of these indicators is closely related to the other. The Commission will continue to monitor the results for these two indicators and take appropriate action where necessary.
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2. Repair Service
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The company's evidence indicates that the number of Repeated Repair Reports as a Percent of Initial Trouble Reports fluctuated greatly during 1984 and the first two quarters of 1985. Further, the Percent of Initial Out-of-Service Reports Cleared Within 24 Hours declined dramatically in the third quarter of 1984 to levels far below those cleared by Bell Canada (Bell) and British Columbia Telephone Company (B.C. Tel). Finally, the number of Subsequent Repair Reports as a Percent of Initial Trouble Reports remains far below those of the other federally regulated telephone companies.
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For Out-of-Service Reports Cleared Within 24 Hours, the company indicated that the dramatic decline was due to incorrect recording of results prior to July 1984. At the same time, NorthwesTel outlined a series of administrative changes it had implemented to improve its clearance of out-of-service troubles.
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The company could not explain, to the Commission's satisfaction, the fluctuations in Repeated Repair Reports. Under cross-examination, Mr. Yamkowy stated that the company has and will continue to improve its computer-based reporting system in order to obtain more accurate figures for Repeated Repair Reports. He also indicated that this may result in further refinements to these statistics. With regard to the results for Subsequent Repair Reports, he indicated that NorthwesTel had verified its computer programming and believes that the reported figures are correct.
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CAC, in its final argument, stated that NorthwesTel is clearing only 50 to 57 % of Out-of-Service Reports Within 24 Hours. CAC added that NorthwesTel's customer survey confirms that dissatisfaction with reliability of repair service is greater than the 10% which is the standard set by the Commission. Furthermore, CAC noted its continued concern with the level of Repeated Repair Reports in spite of the company's explanations in its evidence and testimony.
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The Commission is of the view that the accuracy of the results for Repeated Repair Reports and Subsequent Repair Reports is still in doubt. The Commission is also concerned about the lack of consistency in the statistics contained in these reports. The company is therefore directed to file further detail on the methods and procedures used to measure these two indicators. These methods and procedures should be consistent with the definitions established in Decision 82-13. Further, NorthwesTel is directed to provide an explanation for the large fluctuations in Repeated Repair Reports.
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The Commission will continue to monitor the results for Out-of-Service Reports Cleared Within 24 Hours to determine the effectiveness of the company's administrative changes.
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B. Service to Rural and Remote Areas
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In NorthwesTel, Inc. - Ruraltel 2 Service, Telecom Decision CRTC 85-14, 22 July 1985 (Decision 85-14)> the Commission approved the company's proposal to provide the Carcross Road area south of Whitehorse with individual basic exchange service through the use of automatic mobile radiotelephone service (AMTS) on a pilot project basis. In this proceeding, NorthwesTel provided a proposed schedule for the expansion of AMTS/Ruraltel. The company stated that it has allocated funds of $8.3 million for this purpose between 1985 and 1989.
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During the first part of the hearing, representatives of the Peace River-Liard Regional District, located in northeast British Columbia, expressed their concern with the quality of the telephone service provided by NorthwesTel. They stated that recurring serious problems with the radiotelephone service are experienced by many rural subscribers located along the Alaska Highway and in the remote northern areas of the district.
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These problems include lengthy out-of-service conditions due to 2 to 3 week delays for repair service, difficulty in reaching the operator, interference on calls and an insufficient number of channels. There were said to be similar problems with the pay telephone service. The representatives asserted that the present quality of service provided by the company in this area is unacceptable and must be improved to an acceptable standard.
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Mr. W.A. Dunbar, the company's Vice-President and General Manager, stated at the hearing that while the company is trying to improve service in this area, there are capacity limitations on the microwave system between major centres along the Alaska Highway. Mr. Dunbar also testified that there is only one installer-repair technician headquartered in Fort Nelson, assigned to cover the 500 mile stretch of the Alaska Highway, north and south of that community. The company had no firm plan to add more installer/repair personnel at Fort Nelson.
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NorthwesTel expressed the view that the provision of AMTS/Ruraltel by late 1986 would alleviate the concerns south of Fort Nelson. It said that it would also review what steps could be taken to improve the service north of Fort Nelson.
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YTG argued that NorthwesTel should be encouraged to ensure that the quality of service for mobile radiotelephone customers is as satisfactory as it appears to be for most other Yukon customers.
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The Commission will continue to monitor the results of the Ruraltel 2 pilot project. The Commission notes the company's schedule for expansion of AMTS/Ruraltel service. The Commission will monitor the company's progress in this expansion as well as its ability to meet the needs of its rural and remote subscribers with the AMTS/Ruraltel service.
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With respect to the service problems raised by the representatives of the Peace River-Liard Regional District, NorthwesTel is directed to report, within 60 days, on the methods and associated costs of improving service in this area. In addition, the Commission directs that the costs for improving services to business subscribers and pay telephone services along the Alaska Highway be broken out separately. The report should address the possible expansion of radio-telephone systems and the allocation of more installer/repair personnel. Further, the Commission notes NorthwesTel's undertaking to provide written responses to the questions directed to them by the Peace River-Liard Regional District and directs the company to send a copy of its responses to the Commission.
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C. Services and Equipment for the Disabled
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In its evidence, the company stated that it offers a limited number of discounts and facilities for disabled or handicapped telephone customers including:
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- amplifying handset;
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- Visual Ear, a teletype device for the deaf, sold at cost;
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- specially equipped coin telephones at airport and hospitals;
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- 50% discount on toll by certified deaf keyboard users; and
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- exemptions from directory assistance charges.
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NorthwesTel also indicated that it was prepared to offer a 50% discount on certain other services and equipment for certified disabled residential customers. It would be an offering comparable to that of the other federally regulated telephone companies.
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Under cross-examination, Mr. J.M. Williamson, NorthwesTel's Director of Marketing, testified that the company had contacted various social agencies five or six years ago to assess the demand for the Visual Ear. He stated that, at that time, the company was advised that there was a very small number of severely handicapped people living in the North. As for offering discounted services and equipment on a basis comparable to that of the other federally regulated telephone companies, he stated that the company would have no difficulty in doing so, but viewed it as a question of taxing their subscribers for social purposes.
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The Commission notes the company's position regarding the level of demand for these types of services and equipment; however, it is of the view that this demand may have increased in the time since NorthwesTel last contacted social agencies. The company is directed, therefore, to contact all organizations in its operating territory directly concerned with the needs of disabled and handicapped persons. The company is to solicit their views on the potential demand for service and equipment for the disabled and handicapped, including that proposed to be offered by NorthwesTel. The company is directed to report to the Commission within 120 days on potential demand for such service and equipment, after which the Commission will take appropriate action.
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D. Advance Payments and Credit Policy
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The company's evidence indicates that the number of advance payments or deposits requested from high risk subscribers has decreased since 1982 but that the average amount of these advance payments has increased. During the same period, the average number of monthly disconnections for non-payment and the annual uncollectible telephone revenues have increased.
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NorthwesTel explained that it has decreased the allowable time limit for payment before disconnection takes place. It stated that the increase in uncollectible revenues is due to the company's effort to clear a backlog from previous years. The company argued that a reduction in the average days of outstanding payments from 58 days in 1984 to about 29 days in 1985 demonstrates the success of its revised credit policy.
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The Commission notes that, according to an exhibit filed by the company, the percentage of subscribers for whom security deposits are held has varied around 4%. The exhibit also indicated that the average deposit has changed from $72 in January of 1984 to $219 in April of 1985 and to $160 in July of 1985. The Commission is concerned that the current deposit amounts required by the company may prevent some people from obtaining service. The Commission questions the need for such amounts given both the company's predicted decline in uncollectibles and the improvement in the economy since 1982. The company is therefore directed to provide, within 60 days, further details of its credit policy and, in particular, the precise criteria it uses to assess a security deposit, how these criteria are applied, and how the specific amounts of the deposit are determined.
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E. Late Payment Charge
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In its evidence, the company indicated that it would be willing to establish a formula to permit the Late Payment Charge to vary with the prime rate charged by commercial banks.
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The Commission accepts the company's offer and directs it to file proposed tariff revisions to implement such a charge.
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F. Rebates for Service Outages
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NorthwesTel stated in its evidence that its current policy is to rebate the applicable network access charge automatically for total community outages of greater than five days, and upon customer request for individual outages. At the same time, however, the company indicated that it would be prepared to offer automatic refunds for all outages exceeding 48 hours that are not customer created and that result in a customer reported trouble record.
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The Commission accepts the company's proposal and directs it to file the appropriate tariff revisions.
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