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Telecom Letter Decision
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Ottawa, 4 October 1988
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Telecom Letter Decision CRTC 88-11
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Ms. Dorothy Byrne
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Director - Revenue RequirementsRegulatory MattersBritish Columbia Telephone Company3777 Kingsway18th FloorBurnaby, British ColumbiaV5H 3Z7RE:
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In the proceeding dealing with B.C. Tel's revenue requirements for the years 1988 and 1989, B.C. Tel filed its preferred 1988 Phase III results in attachment 1 to the response to interrogatory B.C. Tel(CRTC)2Sept88-4803. These results forecast a shortfall of $6.5 million for the Competitive Network (CN) category. The Commission's policy is that rates for services within the CN category be compensatory and maximize contribution. In the Commission's view, a shortfall in the CN category indicates that the Commission's policy has been violated. In addition, the Commission notes that, if the CN category were compensatory, monopoly rates could be lower by the amount of the 1988 CN shortfall. Over the period 19 October 1988 to 31 December 1988, the Commission estimates that the CN shortfall would be in the order of $1.3 million. Accordingly, consistent with its regulatory policy, the Commission is of the view that remedial action, in the form of interim CN rate increases and interim monopoly toll rate reductions, is required, effective 19 October 1988.
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With respect to the appropriate CN rate action, the Commission notes that the company filed, in response to interrogatory B.C. Tel(CRTC)2Sept88-4701, its preferred CN rate scenario for eliminating its forecast CN shortfall for 1989. The company also submitted this rate scenario as a part of the action which it preferred in order to increase CN category contribution by $10 million in 1989. In addition, the company submitted that this rate scenario would maximize contribution for the category as a whole. The company's preferred rate scenario involved a restructuring of rates for certain services, as well as rate increases. The Commission notes that, for Dataroute Service, the preferred rate action would result in no increase in Dataroute originated revenues. For other services, such as Megaroute and Megastream, no rate action was proposed. In addition, the company proposed an unbundling of local private line service rates. B.C. Tel stated its view that local private line services within an Extended Area Service (EAS) area contain a significant amount of CN revenues which have been inappropriately allocated to Access using the current Phase III assignment procedures. The company therefore believes the revenue assigned to the CN category is significantly understated. B.C. Tel estimated that the effect of the unbundling would be to increase CN category revenues by approximately $5 million in 1989.
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With respect to the proposed unbundling of local private line rates, the Commission notes that, due to time constraints in preparing the response to interrogatory B.C. Tel(CRTC)2Sept88-4701, the company was unable to provide its preferred rate schedules for each service within the local private line portfolio. In addition, the Commission is of the view that the proposed unbundling raises issues related to revenue/cost mismatches within the CN category that are beyond the scope of this interim rate action.
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With respect to the company's preferred rate scenario, the Commission disagrees with the company that the rate scenario contained in the response to interrogatory B.C. Tel(CRTC)2Sept88-4701 would maximize contribution. Consequently, the Commission prescribes, on an interim basis, a 15% across-the-board increase in the rates from which revenues are assigned to the CN category for the following services: interexchange voice grade voice channels (item 106), analogue data (item 106), Spacetel (item 133), Tie Trunk and Tie Line Service (item 159), Datapac (item 366), Datapac International - U.S. locations (item 366), Data Access System Service (item 370), Datalink (item 375), Dataroute (item 376), Dataroute International (item 377), Multicom (item 378), Voicecom (item 380), Program Transmission (item 406), Teletypewriter Exchange Service (item 412), Teletype (item 414), Television Transmission (item 416), Teleroute 100 and 200 (item 417-A), City Link (item 417-B), Telpak (item 418), Wired-Music Transmission (item 420), Interexchange Megaroute (item 435) and Megastream (item 437). The Commission approves the rate action included by the company in the preferred rate scenario for Envoy and iNet 2000 Services, effective 19 October 1988. With respect to the company's proposed 10% rate increases for selected special assembly tariffs, the Commission orders, on an interim basis, 15%, rather than 10%, rate increases. The Commission estimates that these rate increases will result in a CN category revenue increase in the order of $1.5 million over the period 19 October 1988 to 31 December 1988.
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The company is directed to file, by noon, Eastern Daylight Time, 12 October 1988, proposed tariff pages reflecting the CN rate action prescribed. The company is directed to file, at the same time, proposed tariff pages reflecting the company's preferred rate schedules for interim reductions to Message Toll Service (MTS) usage rates that will reduce monopoly toll contribution over the period 19 October 1988 to 31 December 1988 by approximately $1.5 million. At the same time, the company is also directed to:
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(i) file information similar to that provided on page 3 of the updated response to interrogatory B.C. Tel(CRTC)15Ju188-2702, indicating separately for the last quarter of 1988 and for 1989 the revenue/cost impacts and average percentage price change under the preferred MTS rates relative to that under rate scenario F;
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(ii) provide a description of and rationale for its preferred MTS rate scenario;
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(iii) update B.C. Tel Exhibit 66 for the proposed CN rate increases and MTS rate decreases assuming these rate changes are in effect from 19 October 1988 to the end of 1989:
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(iv) update B.C. Tel Exhibit 66 for the revenue impact associated with pending and planned tariff filings set out on pages 1 and 2 of Attachment 1 of interrogatory B.C. Tel(CRTC)25Sept88-4704; and
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(v) update B.C. Tel Exhibit 66 to reflect the combined revenue and cost impact of paragraphs (iii) and (iv) above.
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The company is also directed to provide, by 24 October 1988, the following information concerning its preferred MTS usage rate reductions:
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(i) reprice ratio information, as required, similar to that provided in response to interrogatories B.C. Tel(CRTC)-6Apr88-716D) and 719C) and B.C. Tel(CRTC)15Jun88-1711C), using Scenario F rates as the reference case;
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(ii) information, as required, similar to that provided in response to interrogatories B.C. Tel(CRTC)6Apr88-716A) and 719A) and B.C. Tel(CRTC)15Jun88-1711C) and 1714I);
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(iii) information, as required, similar to that provided in response to interrogatories B.C. Tel(CRTC)15Jun88-1714B) and L), using scenario F as the reference case;
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(iv) an update to interrogatory B.C. Tel(CRTC)15Jun88-2502 Scenario G for the proposed CN rate increases and MTS rate decreases assuming these rate chances are in effect from 19 October 1988 to the end of 1989;
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(v) an update to interrogatory B.C. Tel(CRTC)15Jun88-2502 Scenario G for the revenue impact associated with pending and planned tariff filings set out on pages 1 and 2 of Attachment 1 of interrogatory B.C. Tel(CRTC)2Sept88-4704; and
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(vi) an update to interrogatory B.C. Tel(CRTC)15Jun88-2502 Scenario G to reflect the combined revenue impact of paragraphs (iv) and (v) above.
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In its filing of Phase III results on 15 December 1988, pursuant to Telecom Decision CRTC 88-9 and Telecom Letter Decision CRTC 88-10, B.C. Tel is directed to reflect the rate changes prescribed in this decision in the 1988 Phase III results. With respect to 1989, B.C. Tel is directed to file two sets of Phase III results based on the following assumptions:
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(i) the rate changes prescribed in this decision are in effect for all of 1989; and
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(ii) the rate changes prescribed in this decision are not in effect for 1989.
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Fernand Bélisle
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cc: Interveners - B.C. Tel revenue requirement proceeding
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