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Telecom Letter Decision
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Ottawa, 7 December 1988
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Telecom Letter Decision CRTC 88-12
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To: - Association of Competitive Telecommunications Suppliers
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- Bell CanadaRe:
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In an application, dated 6 October 1988, the Association of Competitive Telecommunications Suppliers (ACTS) requested interim relief based on Bell Canada's 1987 Phase III results for the Competitive Terminal-Multiline and Data [CT(MD)] category.
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ACTS noted that the 1987 Phase III results filed by Bell Canada (Bell) on 30 September 1988 indicated a CT(MD) revenue shortfall of $1.2 million. ACTS also noted that Bell's 1987 Phase III results reflected its proposed modification to the assignment methodology for accumulated deferred income taxes which had the effect of reducing the CT(MD) shortfall by $19.7 million. ACTS submitted that the Commission should take action on the basis of 1987 Phase III results adjusted so as to remove all proposed changes to Bell's Phase III Manuals, such as the proposed treatment of accumulated deferred income taxes. ACTS submitted that the 1987 revenue shortfall in Bell's CT(MD) category is prima facie evidence that the company's CT(MD) rates are non-compensatory and thereby place a burden on monopoly subscribers. ACTS was therefore of the view that interim action should be taken based on a 1987 CT(MD) shortfall of $20.9 million.
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Specifically, ACTS requested:
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(a) an interim order increasing Bell's CT(MD) rates by the amount necessary to recover an alleged CT(MD) revenue shortfall of $20.9 million;
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(b) an order requiring Bell to file estimated Phase III results for 1988; and
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(c) an order instituting a public proceeding to determine the final rates for the CT(MD) category and any remedial action required as a result of the filings made pursuant to (b).
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In its answer, dated 7 November 1988, Bell submitted that the 1987 Phase III results are not relevant to an assessment of current rates. Bell noted that, in Association of Competitive Telecommunications Suppliers and CNCP Telecommunications v. Bell Canada and British Columbia Telephone Company, Telecom Decision CRTC 88-9, 14 July 1988 (Decision 88-9), the Commission based its corrective action on the forecast shortfall in B.C. Tel's CT(MD) category for the last half of 1988. Bell stated that, accordingly, no prima facie case had been made for raising rates.
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With respect to the size of the 1987 Phase III CT(MD) shortfall, Bell submitted that the proposed Phase III Manual updates should not be ignored, even though they have not yet been approved. Bell stated that, in Bell Canada and British-Columbia Telephone Company - Phase III Manuals: Compliance with CRTC Telecom Public Notice 1986-54 and Telecom Order CRTC 86-516, Telecom Decision CRTC 88-7, 6 July 1988, the Commission clearly envisaged that changes to the Phase III Manual would occur and directed the company to identify such proposed updates to the Phase III Manual as a supplementary report to the submission of 1987 Phase III results on 30 September 1988.
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The company noted that the Commission intends to examine Bell's Competitive Network and CT(MD) categories as a result of applications filed by CNCP and ACTS, dated 23 March and 7 April 1988, respectively. Bell noted that in Decision 88-9, the Commission directed Bell to file estimated 1988 and 1989 Phase III results and that these results will be filed 15 December 1988. Bell stated that, therefore, ACTS' application, dated 6 October 1988, was redundant.
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ACTS disagreed with Bell that the historical nature of the 1987 Phase III results means that ACTS has not made a prima facie case for adjusting current rates. ACTS submitted that corrective action should be taken with respect to shortfalls in previous years and argued that the Commission has made no finding that shortfalls in past years should not form the basis of a current remedy. In addition, ACTS submitted that the issue of remedial action in respect of the 1987 CT(MD) shortfall is separate from the issue of what corrective action might be required based on the estimated 1988 and 1989 results.
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The Commission notes that item (b) of ACTS' request has been satisfied. Bell and B.C. Tel will file estimated 1988 and 1989 Phase III results on 15 December 1988, pursuant to Decision 88-9. With respect to item (c), the Commission intends to issue a public notice initiating a proceeding to examine certain proposed updates to each carrier's Phase III Manual as well as to determine what action, if any, is required based on Bell's and B.C. Tel's projected 1989 Phase III results and other considerations. The Commission expects, in the context of that proceeding, to make a final determination in respect of ACTS' applications, dated 7 April and 6 October 1988, and CNCP's application, dated 23 March 1988.
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With respect to ACTS' request for interim relief, the Federal Court of Appeal has ruled that the Commission cannot engage in retroactive ratemaking. Therefore, the Commission considers that it can only set rates on a prospective basis and in so doing cannot take rate action designed to recover past Phase III competitive category revenue shortfalls.
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Phase III results for other than future periods are relevant to the consideration of remedial action insofar as this information provides an indication of the trends and magnitudes of potential future shortfalls. In that regard, the Commission is of the view that ACTS has not made a prima facie case that a CT(MD) shortfall is likely to occur in 1988 or 1989, based on the 1987 Phase III results.
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On the basis of the foregoing, ACTS' request for interim relief is denied.
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French version to follow Version française à suivre
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Fernand Bélisle
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