ARCHIVED -  Telecom Public Notice CRTC 1986-52

Telecom Decision

Ottawa, 15 August 1986

Telecom Decision CRTC 86-16 (Continued)

...(86-16) IV SUPPORT STRUCTURES

A. Incremental Costs

1. Background

Bell identified four components of incremental costs which could form the basis for determining a recurring rate for SSO service. These components are costs due to loss in productivity, administration costs, variable common costs, and costs due to income taxes and miscellaneous taxes.

B.C. Tel identified three components of incremental costs: costs due to loss in productivity, marketing time, and unbilled costs.

Terra Nova did not identify any incremental costs.

2. Costs Due to Loss in Productivity

This incremental cost is incurred when the carriers undertake work on their own facilities when cable licensees' coaxial cable and related equipment share the carriers' support structures. It is applicable to the strand and aerial (pole and strand) configurations and to the pole configuration only when the cable licensee's strand is located below the carrier's strand. There is no loss in productivity with the conduit configuration.

As noted earlier, a significant difference between Bell's and B.C. Tel's incremental costs relates to their estimates of lost crew minutes.

Bell estimated a weighted average loss of 21.4 minutes per crew per span while B.C. Tel estimated 2 minutes per a crew per span. B.C. Tel described its estimate as somewhat low, while Bell noted that its estimate is based on a rear lot outside plant configuration. Both companies cited the significantly higher proportion of rear lot plant in Bell territory as one reason why the Bell estimate is higher. Bell, however, could not quantify the proportion of its plant which is rear lot. Another reason given for the difference was that, in B.C. Tel territory, the cable licensees themselves are required to remove and subsequently replace their drop wires whenever cable lashing is to be performed by B.C. Tel. Bell submitted that the Commission must recognize these real physical and operational differences between the companies.

Bell contended that the incremental costs due to loss in productivity were well described by various witnesses during the course of the public hearing, that there can be no doubt that the company incurs these costs and that they should be recovered in their entirety from the cable licensees.

CCTA argued that Bell's estimate of lost productivity had been inflated by the use of rear lot configurations as the norm. CCTA contended that Bell had made subjective judgments in estimating the time lost and that this accounted for most of the discrepancy between the companies' figures.

The Commission agrees with Bell and B.C. Tel that lost productivity is a legitimate incremental cost. The Commission considers B.C. Tel's estimate of 2 crew minutes per span to be inordinately small; conversely, Bell's estimate of 21.4 minutes appears to be too high, largely because it is based on the assumption of 100% rear lot plant in Bell territory. Since Bell could not provide quantitative information on the extent of rear lot plant in its territory, the Commission has exercised its best judgment and assumed that 50% of Bell's local distribution plant is rear lot. Therefore, the Commission has decided for the purposes of this proceeding that 10 minutes per crew per span is a more appropriate estimate of lost productivity due to the presence of cable licensees' coaxial cable on or below carrier aerial facilities.

3. Administrative/Marketing Costs

The incremental cost component associated with marketing and support staff directly identifiable with SSO service has been labelled "administrative" by Bell and "marketing" by B.C. Tel. It is related to such activities as billing, processing permits, and revising and updating associated operating methods. Bell submitted that the causally related administrative costs for SSO service are carefully documented and should be recovered in the recurring charges for the service.

With regard to Bell's submission, CCTA argued that most administrative work is associated with the Engineering Search Fee functions and the Make Ready and Inspection functions, all of which are billed separately on a cost plus contribution basis. CCTA also argued that the inclusion of the component of variable common costs attributable to administration results in a double counting of the administrative costs included in labour and clerical unit cost loadings.

Having reviewed the evidence on this matter, the Commission has determined that none of these costs are recovered through non-recurring charges. Accordingly, the Commission considers that an administrative/marketing cost is a legitimate component of incremental costs. With regard to the loadings in Bell labour rates, the Commission is of the view that, to maintain consistency with the Phase II decision, indirect resources and variable common costs should be included in the computation of incremental administrative/marketing costs.

4. Other Incremental Cost Components

The Commission accepts the variable common cost and tax components of the Bell submission and the unbilled costs component of the B.C. Tel submission. It views unbilled costs as those costs absorbed by B.C. Tel for relocations involving cable licensees' coaxial cable. It has also determined that inclusion of the variable common cost tax components is consistent with the Phase II methodology.

B. Fixed Structure Costs

Generally, all parties were in agreement as to the nature of the cost components to be included as fixed structure costs. The following six cost components were identified: maintenance, administration, depreciation, income tax, capital carrying charges and property taxes.

In addition, Bell identified salvage, removal costs, and variable common costs.

With respect to maintenance expenses, there were some differences in the proposed cost inclusions. B.C. Tel did not propose to include rearrangement charges from its maintenance accounts in the computation of maintenance costs, while Bell did. Further, B.C. Tel proposed to apply a standard loading percentage to the costs accumulated in the maintenance accounts of the applicable plant, so as to incorporate the costs of labour fringe benefits in the basic account data. Conversely, Bell, in addition to adding a loading for fringe benefits, proposed to include loadings for variable common costs, motor vehicle non-running expenses and group B expenses related to labour (related premises, relocation, travelling and stationery costs - see Bell's Phase II Procedures Manual: Appendix F). Terra Nova proposed to include both repair and rearrangement charges from its accounts, with no additional loading.

In the Commission's view, rearrangement costs are properly included in the computation of maintenance costs when these costs are not recovered separately from the licensee.

The Commission is of the view that Bell's additional loadings related to variable common costs, motor vehicles and group B expenses are only relevant in attempting to quantify the incremental costs of a service pursuant to the Phase II guidelines. In the context of computing fixed structure costs, the Commission considers that a basic wage loading which considers direct cost components is sufficient. (See Bell's Phase II Procedures Manual: Appendix F, for direct cost components.) The loading of indirect cost components is not considered appropriate for non-causal costs given their non-variability with the service output.

The Commission accepts all the cost components for fixed structure costs proposed by the parties except as noted above with respect to the variable common cost component identified by Bell.

C. The Recovery of Fixed Structure Costs

1. Positions of Parties

As noted earlier, Bell viewed the question of the recovery of fixed structure costs as a rating problem, where value of service criteria would be used as a basis for the recovery of a portion of fixed structure costs.

B.C. Tel proposed an approach which is based on the average ratio of cable licensees' coaxial cables to telephone cables on B.C. Tel's aerial facilities. B.C. Tel's approach results in a 33% allocation of fixed structure costs to SSO service. In B.C. Tel's view, this approach provides an adequate contribution to the common costs and meets the objective of providing rate stability.

CCTA proposed an approach based on two usage measures: for conduit and poles, the ratio of space occupied by the cable licensee to total usable space; and, for strand, the percentage of the load bearing capacity used by the cable licensee. For purposes of determining pole allocation, CCTA used a 35-foot pole with 5.5 feet buried and a clearance of 18 feet. The remaining portion of 11.5 feet, including the neutral space, was defined as the usable space. In regard to the neutral space, CCTA argued that it is usable and therefore should be considered as part of the usable space. For purposes of calculating the allocation factor, CCTA submitted that cable operators use, on average, one foot of space, resulting in an allocation factor of 8.7%. CCTA noted that the United States Federal Communications Commission adopted an allocation factor of 7.4%, based on an average of 13.5 feet of usable space.

For the strand configuration, CCTA derived its proposed allocation factor by calculating the percentage of load bearing capacity of 6M strand that would be used by the suspension of a .500 coaxial cable. This approach results in an allocation factor of 2.3%.

For the conduit configuration, CCTA derived its proposed allocation factor by calculating the percentage of the usable area occupied by a .500 coaxial cable. The usable area was estimated to be 60% of the area of a 3.5-inch duct. This approach results in an allocation factor of 4.6%.

Under Terra Nova's approach, for telephone poles jointly used by the telephone company and a cable licensee, the usable space is shared equally. Terra Nova noted that approximately 89% of its poles are used only by itself and a cable licensee. Accordingly, Terra Nova proposed a 50% allocation factor. For the strand configuration, Terra Nova proposed an allocation factor of 33% on the basis that the most common situation in its territory is to carry one cable licensee's cable and two telephone cables on the strand. Terra Nova does not offer conduit facilities this service.

2. Discussion and Conclusions

The Commission considers that an identification of fixed structure costs is required to establish the contribution ceiling for the recovery of these costs.

Further, the Commission is of the view that an identification of fixed structure costs is required which uses a formulary approach so as to assure an attribution of these fixed costs which minimizes subjective assessments. The Commission considers that the distinct advantages of a formulary approach lie in its predictability, ease of understanding and objectivity. The Commission notes that, with this approach being used to establish a contribution ceiling, a degree of flexibility will remain for the carriers and the Commission in determining rates for SSO and PSA services.

The Commission is also of the view that the method of attributing fixed costs must take into account the particular structure configurations available through the tariffs. Accordingly, the Commission concludes that a determination of fixed structure costs is required for the following configurations:

Pole alone
Strand alone
Aerial (Pole and Strand)
Conduit

The pole alone and strand alone options are not applicable in B.C. Tel territory where cable licensees are required to use B.C. Tel strand. The conduit configuration is not currently available in Terra Nova's territory.

As noted earlier, the fixed structure costs which are common costs in the study of SSO and PSA services are, within the framework of the Phase III Decision, causal costs to the access service category. The Commission notes that the Revenue Settlement Plan (RSP) based costing method, adopted in the Phase III Decision, allocates facilities used in common by services that fall within different service categories on the basis of relative.

The Commission agrees with CCTA, Terra Nova and B.C. Tel that usage is a reasonable principle to apply in the calculation of the contribution to be made to fixed structure costs.

During this proceeding, CCTA argued that no excess capacity should be apportioned to the cable licensees. CCTA submitted that, as a lessee of these facilities, the cable licensee should not be required to pay for any excess capacity costs. However, both B.C. Tel and Terra Nova suggested that excess capacity should be apportioned between users on the basis of relative usage.

The Commission notes that, in the RSP-based Phase III costing method, excess capacity is to be apportioned between services on the basis of relative use. The Commission is of the view that a fair attribution of fixed structure costs to SSO and PSA services must, at the outset, apportion excess capacity in a reasonable manner given that the Commission is using the attributed costs as the basis for establishing a contribution ceiling for the recovery of fixed structure costs.

Having reviewed the evidence before it, the Commission has concluded that the apportionment of excess capacity of support structures on the basis of relative usage is both fair and reasonable. Further, given the significant differences in excess capacity associated with each type of pole and the significantly different proportions of these two types of poles between carriers, the Commission has decided that the relative proportion of joint use and non-joint use poles must be taken into account.

(a) Pole Alone

In the pole alone configuration, the cable licensee provides its own strand. In practice, the cable licensee limits itself to one cable on its strand and the telephone company limits itself to three cables on its own strand.

The Commission finds that measuring usage on the basis of the number of cables has the following advantages:

i) it is readily measurable and understandable;

ii) it is neutral to cable size and bandwidth, commensurate with the different signals carried by
the cable and the telephone companies;

iii) it can be consistently applied to different structure configurations; and

iv) it provides a reasonable estimate of the usage of the facilities in question.

The Commission has therefore decided that this is a reasonable approach.

The Commision has therefore determined that 1/4 of the usable pole space allocated to communications should be assigned to the cable licensee. In the case of joint use poles, the space on the pole allocated to communications as opposed to electric power transmission, comprises the standard two feet of communication space and one foot of the communication working space of the neutral area of the pole.

For non-joint use poles, the communications space is equivalent to the total usable space. Noting from the carrier submissions that poles of varying height are used, and further that different proportions of joint use and non-joint use poles are used, the Commission directs Bell and Terra Nova to develop a weighted average usable space on the basis of their total pole population. The following allocation formula is to apply for the pole alone configuration:

% = No. of cable licensee cables in communication space X
Practical cable capacity of communication space

Communication space X 100 = 1 X Communication space X 100
Weighted average usable space 4 Usable space

Using the information available from the record of this proceeding, the Commission has calculated that this formula would yield a percent allocation of 15% for Bell and 22.9% for Terra Nova. The Commission has further calculated that, for joint use poles considered alone, the percent allocation would be 5.5% for Bell and 6.3% for Terra Nova.

(b) Aerial (Pole and Strand)

In the aerial configuration, the Commission has focused on the communication space on the pole, using the number of cable licensee cables over the practical cable capacity of the strand as the measure of usage. The practical cable capacity of the communication space is deemed to be three, as the installation of a second strand by the carrier is uncommon.

The allocation formula is as follows:

% Allocation =

% = No. of cable licensee cables in communication space X
Practical cable capacity of communication space

Communication space X 100 = 1 X Communication space X 100
Weighted average usable space 3 Usable space

Using the information available from the record of this proceeding, the Commission has calculated that this formula would yield a percent allocation of 20% for Bell, 12.8% for B.C. Tel and 30.5% for Terra Nova.

(c) Strand Only

In the previous two configurations, pole only and aerial, the main fixed cost component related to the pole. In this configuration, only the strand is under consideration. Accordingly, the Commission has determined that applying the ratio of the number of cables to the practical strand limit is the reasonable measure of usage. This would yield an allocation of 33%.

(d) Conduit

With respect to conduit, the Commission agrees with B.C. Tel's approach which is based on the ratio of cable licensee cables to the total number of cables in a conduit. While the Commission accepts CCTA's point that telephone company cable is significantly larger than cable licensee cable, it considers that its approach to the treatment of excess capacity should not be waived in the case of conduit. In this regard, the Commission notes the carriers' practice of having at most two cables of their own in a conduit. In consideration of these factors, the Commission has decided that an allocation of 25% is reasonable.

V PARTIAL SYSTEMS

A. Positions of Parties

Bell argued that a support structure component and a cable component should be used to determine the PSA service rate.

Ontario largely agreed with Bell on this matter. However, it noted that it would not be necessary for the cable component to make a contribution to fixed costs, given the contribution which is built into the support structure component.

CCTA argued that an approach which prices PSA service "slightly higher" than SSO service is warranted since Bell did not provide quantitative information on PSA service during this proceeding. CCTA further noted that PSA rate elements would include SSO rates for pole and strand, together with an element to reflect the unrecovered capital cost of the cable.

B. Discussion and Conclusions

The Commission does not regard the lack of quantitative data regarding PSA service as a compelling reason for establishing PSA rates at a "slightly higher" level. The Commission further notes that CCTA's comments on the general approach to be employed in determining PSA rates are similar to those of Ontario and Bell.

The Commission is in agreement with Ontario on this matter. It agrees that PSA service should be viewed as comprising two components: the support structure component and the cable component.

The support structure component should be rated as it is for SSO service. However, it should be uniformly recovered on a 'per metre of cable' basis for all PSA cable installations, including buried cable.

With regard to the cable component, the Commission considers that the determination of costs should be consistent with the methodology identified for SSO service. This methodology involves the recovery of incremental costs and a contribution to fixed structure costs. However, as noted by Ontario, the SSO component takes care of the fixed structure costs associated with the cable. The remaining costs to be identified are the causal costs of the cable, not already identified as incremental costs in the support structure component.

VI REPAIR AND MAINTENANCE RATES AND ENGINEERING SEARCH FEES

A. Engineering Search Fees

In its application of 13 August 1984, CCTA requested the Commission to reduce the rates for engineering search fees charged by Bell from $133.10 per hour to $78.52 per hour, which was the rate in effect between 1 July 1982 and 30 June 1983. CCTA also asked the Commission to direct Bell to refund the difference between that level and the amounts charged since 1 July 1983. In support of its request, CCTA submitted that Bell had failed to justify the increases beyond the generalizations that the higher rates were based on expenses incurred by the company and were calculated in accordance with the costing principles resulting from the Phase II Decision. CCTA further submitted that, during the period in question, there had been no improvement in the quality of service provided and that, given the impact of the Federal Government Restraint Program on wages and prices during this period, the rate of increase must be considered to be particularly excessive.

In reply, Bell argued that the higher rates are just and reasonable. It stated that they are based on causal costs derived using the costing principles outlined in the Bell Canada Procedures Manual. According to Bell, the costs are averages for the engineering work performed and have been derived from the company's standard accounting records.

Bell submitted that failure to set rates to recover all causal costs would create a situation in which cable companies, or other parties for whom work is to be performed, would be subsidized by Bell's other customers. Bell stated that, prior to August 1983, it had not fully recovered the causal costs because the following factors were not included in its calculations: unclassified time and associated loadings for pensions, benefits, premises, other support salaries, miscellaneous expenses, administrative services, corporate systems organization support, and general expense. Bell submitted that the addition of these causal cost components accounted for 49% of the $46.35 per hour increase effective 1 August 1983.

Bell also indicated that, prior to 1 August 1983, only one billing rate was developed for all engineering functions. After 1 August 1983, causal costs were developed for five base groups: company engineering, real estate engineering, National Systems Group (NSG) engineering, NSG provisioning, and NSG national data network. The engineering search function is performed by Bell's engineering base group which is composed primarily of management reporting engineering personnel. This refinement in classification accounts for approximately 23% of the 1 August 1983 increase.

Bell attributed the balance of the 1 August 1983 increase and the $8.23 per hour increase in 1984 to increases in its general level of costs of 12% between 1982 and 1983 and 6.6% between 1983 and 1984.

In conclusion, Bell submitted that the Commission should reject CCTA's application for relief in its entirety.

In reply, CCTA questioned the need to use management engineers in this function. It contended that engineering search functions could be performed easily by lesser trained individuals acting under an engineer's supervision.

Having reviewed the positions of the parties, the Commission has determined that the rates for engineering search fees should be based on the causal costs calculated in accordance with the costing principles outlined in Bell's Phase II Procedures Manual. Accordingly, the Commission finds the rates for engineering search fees to be just and reasonable and denies CCTA's request to reduce the rates.

B. Repair and Maintenance Rates

In Tariff Notices 1448 and 1834, Bell proposed increases to the hourly labour and material rates for repair and maintenance of Partial Cable Distribution Systems. In these tariff notices, Bell stated its intent to apply these rates for all similar custom work activities, such as engineering searches. Bell also stated that the rates were developed in accordance with its Phase II Procedures Manual, noting that rates filed prior to 1982 had not been so developed.

Finally, Bell submitted that the rates proposed for 1986 in Tariff Notice 1834 should be implemented as soon as possible.

CCTA expressed concern over the level of cost loadings to the basic hourly wages. It argued that these loadings were inconsistent with the principle of cost causality. CCTA also expressed concern about the possibility of double counting between the recurring and the non-recurring costs with respect to certain loadings. CCTA noted that time sheets were not kept by all workers and concluded that this cast doubt on the accuracy of the cost estimates.

The Commission is of the view that the rates for the repair and maintenance of Partial Cable Distribution Systems should be developed in accordance with Bell's Phase II Procedures Manual. The Commission has determined that the rates filed under Tariff Notices 1448 and 1834 conform with the procedures prescribed in the manual, and that the loadings are appropriate. Moreover, the Commission is satisfied that the rates do not reflect double counting. Accordingly, the Commission approves the rates in Tariff Notice 1834.

VII ATTACHMENT OF SERVICE DROPS TO THIRD PARTY POLES

A. CCTA'S Position

CCTA took the position that it is Bell's responsibility under the PSA service tariff to provide all necessary access to third party poles, including those to which cable company service drops are attached. CCTA argued that Decision 77-6, and the practice over the past twenty-five years, support its position.

Specifically, CCTA referred to page 31 of Decision 77-6, where, in support of its conclusion that the rate for PSA service is unduly low, the Commission made the following statement:

Second, the partial system arrangement provides cable companies with the benefit of Bell
Canada's easements, rights-of-way, and access to third party owned poles, all of which may \
require further negotiation under the support structure offering.

Secondly, CCTA noted that since the introduction of PSA service twenty-five years ago, cable licensees obtaining PSA service have always dealt only with Bell. It also argued that the appropriate tariff provided for the use of poles for all purposes, whether or not third party poles have been involved and whether or not cable licensee service drops have been attached to the Bell cable on third party poles.

CCTA also referred to an exhibit in the 1977 support structure proceeding, exhibit CCTA No. 17 in the present proceeding, which indicates that the payment by a cable licensee to Ontario Hydro under PSA service would be "nil", whether there was Bell cable along with the cable licensee cable on Ontario Hydro poles or not. Bell, in contrast, was shown as paying $3.00 per pole per year for cable licensee cable on Ontario Hydro poles.

Finally, CCTA argued that Article XII(a) of the Joint Use Agreement between Bell and Ontario Hydro, in effect at the time of the 1977 proceeding, allowed Bell to permit cable licensees to attach their service drops to electrical utility poles. This Agreement also made Bell responsible to the electrical utility for such drops. CCTA argued that Bell, having amended its Joint Use Agreement with Ontario Hydro in March 1985, should not be able to "circumvent its responsibilities under the PSA in this unilateral matter".

B. Bell's Position

Bell stated that it is uncertain as to the extent of the Commission's jurisdiction in this matter, as the issue primarily relates to negotiations with electrical utilities not subject to the Commission's regulatory control. Having expressed this reservation, Bell further noted that it is incumbent upon the cable licensee to obtain the written consent of the electrical utility which owns the poles. Bell submitted that if the electrical utilities now wish to charge specifically for cable licensee owned service drops, this would be the utilities' prerogative. It stated that this is a matter which should be resolved by each cable licensee wishing to attach its own equipment to electrical utilities' facilities.

Bell noted that if it were required to negotiate payment on behalf of the cable licensees for access to electrical utility poles, it would view the related costs as causal and incremental to the provision of PSA service. As such, the costs would have to be fully recovered through PSA service rates.

In support of its position, Bell referred to Schedule No. 2, paragraph 7 of the contract between Bell and a cable operator for a partial cable distribution system. This reads as follows:

In connection with the exercise of any rights or permission given under this contract to the
Lessee to install, inspect, test, repair, maintain, replace, disconnect and remove the Lessee's
facilities, the Lessee covenants and agrees that (1) it shall obtain at its own cost and expense
the written consent to all such activities of all persons, firms or corporations having any joint
ownership or right of joint use of any of the poles or closures proposed to be used by the
Lessee, and shall furnish the Company, at Company's request with written evidence of having
obtained such consent, and upon withdrawal of such consent will promptly remove all the
Lessee's facilities placed thereon, or cease such activities and (2) it shall be liable for and shall
indeminify the Company from all loss, costs (including legal costs), damages, expenses of
every nature or kind arising out of any suit, action or proceeding in respect of any property
arising out of the Lessee's facilities, their use and location.

"Lessee's facilities" are defined in article 4, paragraph 4 of the contract to include cable terminations.

In response to CCTA's submission regarding the practice of the last twenty-five years, Bell referred to article 7, paragraph 3 of the contract which states that failure of a party to enforce or insist upon compliance with a term of the contract shall not constitute waiver.

With reference to the Joint Use Agreements between Bell and electricial utilities, Bell submitted that a cable licensee's aerial drop wires are not covered. In this regard, Bell referred to the March 1985 amendments to its Joint Use Agreement with Ontario Hydro.

Bell maintained that the cable licensee is in the best position to negotiate its own charges for access to electrical utility owned poles for its own service drops. Bell further stated that its involvement in such negotiations would only add causal and incremental costs to the provision of PSA service.

C. Discussion and Conclusions

Prior to the 1985 amendments to the Joint Use Agreements between Bell and the electrical utilities, cable licensees could, in practice, attach their subscriber drops to the poles of the electrical utilities when they obtained PSA service from Bell. The cable licensees did not have to make any separate payment to the electrical utilities. Thus, in the Commission's view, Bell had implicitly granted permission to cable licensees to use third party support structures.

The issue that is raised by CCTA's submission is whether, under the Joint Use Agreements recently amended to delete the provision by which Bell may permit a cable licensee to use the poles of an electrical utility, Bell or the cable licensee is responsible for obtaining the consent of the electrical utility for the attachment of its service drop to the third party poles and for making any resulting payments. The contract between a cable licensee and Bell for the provision of PSA service clearly provides that it is the responsibility of the cable licensee to obtain such consent. Further, in the Commission's view, the language of this contract precludes CCTA from arguing that Bell has waived this provision of the agreement.

In the Commission's opinion, its jurisdiction does not extend to the electrical utilities. Therefore, it does not have the authority to require the electrical utilities to grant cable licensees access to their poles. Similarly, the Commission is of the view that its jurisdiction under section 320(11) of the Railway Act does not apply to the joint use agreements between Bell and the electrical utilities. Accordingly, the Commission has no power to review changes to these joint use agreements.

In the Commission's view, the provisions of the PSA service contract between Bell and a cable licensee and the Joint Use Agreement between Bell and Ontario Hydro support Bell's position on the matter of attachment of service drops to third party poles. In any event, any charge paid by Bell to electrical utilities in respect of Bell allowing a cable licensee access to electrical utility owned poles would be, in the Commission's view, a causal cost to be recovered through the rates for PSA service. The Commission agrees with Bell that the cable licensee is in the best position to negotiate the charges for attaching its own service drops to electrical utility owned poles. Accordingly, the Commission considers this to be a matter for the cable licensees to pursue directly with the electrical utilities.

VIII OTHER FACTORS

In Part II of this decision, the Commission stated that fairness to telephone and cable subscribers, rate stability and customer impact were to be considerations in its determination of a rating methodology for the SSO and PSA services.

The Commision believes that these factors are important considerations in the setting of just and reasonable rates.

A. Fairness to Telephone and Cable Subscribers

Under the existing Joint Use Agreements between Bell and Ontario Hydro and Bell and Hydro Québec, Bell has access to all poles covered by the agreements, even though Bell only owns 40% of the poles covered by the Ontario Hydro agreement and 45% of the poles covered by the Hydro Québec agreement. In effect, through these agreements, parties are sharing the costs of pole structures on a 60/40 and 55/45 basis.

In British Columbia, the B.C. Tel agreement with B.C. Hydro provides for joint ownership of all poles under the agreement on a 60/40 basis with B.C. Tel owning 40% of each pole.

The effect of the differences between the Bell and B.C. Tel arrangements as regards poles is significant when the fixed structure costs for poles on a per unit basis are compared for the two telephone companies. Because B.C. Tel's pole costs are spread over a larger number of units, the per unit pole costs are significantly lower even though the level of costs is equivalent.

In Bell territory, under the methodology adopted by the Commission, cable company is faced with a higher contribution ceiling than in B.C. Tel territory. Consequently, the Commission has determined that, for purposes of setting the contribution ceiling, only 60% of Bell's total fixed structure costs for poles should be used. This 40% reduction in the fixed structure costs is based on the fact that:

(a) 51% of Bell owned poles are jointly used;

(b) approximately 42% of the joint use poles are owned by Bell; and

(c) the application of these ratios indicates that the total number of Bell owned poles represents
60% of the total number of poles to which Bell has access.

B. Rate Stability and Subscriber Impact

The Commission has evaluated the potential impact of its decisions on the existing rates for SSO and PSA services using the quantitative data available from the record of this proceeding.

To minimize the impact on cable subscribers and to ensure a degree of rate stability, the Commission has determined that the following rules shall apply. For the SSO service offered by all carriers under all structure configurations, rates to be proposed by the carriers, using the methodologies prescribed in this decision, shall not exceed the lower of:

(a) the level which recovers the incremental costs and makes a contribution at the level of the
contribution ceiling attributed to the service; or

(b) 110% of the rates in effect at the time of filing of proposed rates.

For the PSA service offered by Bell, rates to be proposed, using the methodologies prescribed in this decision, shall not exceed the lower of:

(a) the level which recovers incremental costs and makes a contribution at the level of the
contribution ceiling attributed to the aerial support structure configuration; or

(b) 110% of the rates in effect at the time of filing of proposed rates.

IX TARIFF FILINGS

The carriers are directed to file proposed tariffs, together with supporting cost studies, for the SSO and PSA services that they offer, using the methodologies prescribed in this decision, by 31 October 1986.

Fernand Bélisle
Secretary General