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Ottawa, 14 December 1988
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Telecom Public Notice CRTC 1988-49
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BELL CANADA AND BRITISH COLUMBIA TELEPHONE COMPANY - PHASE III MATTERS INCLUDING UPDATES TO PHASE III MANUALS AND FINAL DISPOSITION OF APPLICATIONS FROM ASSOCIATION OF COMPETITIVE TELECOMMUNICATIONS SUPPLIERS AND CNCP TELECOMMUNICATIONS
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I INTRODUCTION
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In Order and Guidelines for the Filing of Phase III Manuals by Bell Canada and British Columbia Telephone Company, Telecom Order CRTC 86-516, 28 August 1986 (Order 86-516), the Commission directed Bell Canada (Bell) and British Columbia Telephone Company (B.C. Tel) to file, by 30 September 1987, their respective Phase III Manuals for the Commission's approval, together with an initial set of results for the calendar year 1986 and certain other reports.
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In Bell Canada and British Columbia Telephone Company - Phase III Manuals: Compliance with CRTC Telecom Public Notice 1986-54 and Telecom Order CRTC 516, Telecom Decision CRTC 88-7, 6 July 1988 (Decision 88-7), the Commission accepted the Phase III Manuals filed by the companies, subject to certain amendments. Bell and B.C. Tel were directed to reflect all the amendments specified in Decision 88-7 in the 1987 Phase III study results to be submitted by 30 September 1988. In Telecom Letter Decision CRTC 88-10, 27 September 1988 (Letter Decision 88-10), the Commission extended the deadline for the filing of B.C. Tel's 1987 Phase III study results from 30 September 1988 to 31 October 1988.
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The Commission hereby announces a proceeding to consider the matters discussed below.
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II UPDATES TO PHASE III MANUALS
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In Decision 88-7, the Commission approved a procedure for the annual updating of the Phase III Manuals. Bell and B.C. Tel were directed to commence filing regular annual update reports by 30 April 1989. However, the Commission also directed the companies to identify any proposed updates to their Phase III Manuals, including all amendments specified in Decision 88-7, in a report to be submitted with their 1987 Phase III study results.
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The Commission received Bell's update report on 30 September 1988 and B.C. Tel's on 31 October 1988. In Telecom Orders CRTC 88-637 and 88-638, dated 14 December 1988 (Orders 88-637 and 88-638), the Commission accepted the modifications in the companies' reports, with the exception of those listed below.
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(1) Accumulated Deferred Income Taxes
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In Section 3.4.1 of Attachment 2 to its 2 update report, Bell proposed a modification to Broad Service Category Costing Procedure (BSCC) 73.670: Average Net Investment Base. The modification would change the assignment methodology for accumulated deferred income taxes. The company proposes to assign directly to the Competitive Terminal - Multiline and Data [CT(MD)] category the portion of accumulated deferred income taxes that can be causally attributed to rate stability contracts.
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(2) Headquarters Building Capital Investment
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During the central hearing of the current revenue requirement proceeding, B.C. Tel proposed a modification related to the treatment of headquarters building capital investment and associated expenses. This proposal was included in its 31 October 1988 submission.
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(3) Internal Use Assets
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On page 6 of Attachment 2 to its update report, B.C. Tel proposed a modification to BSCC 75.105: Official Telephone Service (OTS) - Net Impact Study. The modification would change the methodology used to determine the amount of OTS provided and has been proposed in order to accommodate the lack of OTS revenues associated with internal use assets.
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As noted in Orders 88-637 and 88-638, the Commission has concluded that these proposed modifications require further consideration and hereby invites comments in relation to them.
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III OFFICIAL TELEPHONE SERVICE
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Although Order 86-516 did not provide for any explicit recognition of OTS in the calculation of Phase III study results, the results filed in September 1987 by Bell and B.C. Tel included a net adjustment for OTS.
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In Decision 88-7, the Commission determined that it would be appropriate to recognize these costs in future Phase III study results, but found unacceptable the specific procedures filed by the companies. The Commission directed each company to submit, by 30 September 1988, a revised OTS methodology for the Commission's approval. The Commission also specified certain requirements for those methodologies. For the purpose of calculating 1987 Phase III results, Decision 88-7 prescribed interim procedures for determining the OTS adjustment.
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Bell's proposed OTS methodology was filed, along with its 1987 Phase III study results, on 30 September 1988. B.C. Tel's methodology was filed on 31 October 1988, in accordance with the amended filing date established in Letter Decision 88-10.
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As noted in Orders 88-637 and 88-638, the Commission considers that, while Bell and B.C. Tel have taken positive steps toward the development of an acceptable basis for the recognition of in their Phase III results, their proposed OTS methodologies should be considered further in this proceeding. Accordingly, the Commission hereby invites comments on these proposed methodologies.
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IV APPLICATIONS BY ASSOCIATION OF COMPETITIVE TELECOMMUNICATIONS SUPPLIERS AND CNCP TELECOMMUNICATIONS
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The Commission issued 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), in response to applications from CNCP Telecommunications (CNCP) and the Association of Competitive Telecommunications Suppliers (ACTS) dated 23 March 1988 and 7 April 1988, respectively. ACTS' and CNCP's applications followed the filing, in September 1987, of Bell's and B.C. Tel's 1986 Phase III results, as well as ACTS' and CNCP's comments in the proceeding leading to Decision 88-7. In their applications, ACTS and CNCP submitted that there were revenue shortfalls in Bell's and B.C. Tel's Competitive Network (CN) and CT(MD) Phase III categories. ACTS and CNCP requested various forms of interim and final relief with respect to those shortfalls.
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In Decision 88-9, the Commission determined that a prima facie case existed for interim relief with respect to B.C. Tel's CT(MD) category. Accordingly, the Commission directed the company to reduce its toll rates by the amount of the estimated CT(MD) shortfall for the period 1 July 1988 to 31 December 1988. The Commission stated that it would consider the dollar amount associated with these toll rate reductions to be a regulatory adjustment and would deem the amount to be revenues.
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In Decision 88-9, the Commission considered that further investigation of Bell's and B.C. Tel's CN and CT(MD) categories was required before it could deal with ACTS' and CNCP's applications for final relief. Bell and B.C. Tel were therefore directed to file, by 31 October 1988, 1988 and 1989 estimated Phase III results reflecting Decision 88-7. The Commission stated that it would determine what further procedure, if any, was appropriate for the disposition of ACTS' and CNCP's applications for final relief once the 1988 and 1989 Phase III results were submitted. In Telecom Letter Decision CRTC 88-8, 29 August 1988 (Letter Decision 88-8), and in Letter Decision 88-10, the Commission approved requests from Bell and B.C. Tel, respectively, to extend this filing date to 15 December 1988.
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In the proceeding leading to Decision 88-9, ACTS and CNCP raised the issue of requiring the CT(MD) category to make a contribution to common costs calculated using the formula set out by the Commission in Participation of Bell Canada and British Columbia Telephone Company in the Multiline and Data Terminal Equipment Market, Telecom Decision CRTC 86-5, 20 March 1986 (Decision 86-5). In Decision 88-9, the Commission expressed the view that requiring a specific level of contribution to common costs, using the Decision 86-5 approach, was a substitute for the setting of rates. Since a portion of Bell's and B.C. Tel's competitive terminal activity is conducted at non-tariffed sale prices, the Commission intends to consider in this proceeding the possibility of requiring a contribution to common costs from non-tariffed competitive terminal activity, calculated using the Decision 86-5 formula.
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Pursuant to Decision 88-7, Bell filed its 1987 Phase III results on 30 September 1988. On the basis of those results, ACTS wrote to the Commission on 6 October 1988 requesting interim relief with respect to a shortfall in Bell's CT(MD) category. ACTS requested that Bell be directed to file projected Phase III results for 1988. In addition, ACTS asked the Commission to initiate a proceeding to determine final rates for Bell's CT(MD) category and to consider any remedial action that might be required based on Bell's projected 1988 Phase III results. In Telecom Letter Decision 88-12, 7 December 1988, the Commission denied ACTS' request for interim relief.
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In this proceeding, the Commission intends 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 relevant to the approval of rates for Bell's and B.C. Tel's services. In so doing, the Commission expects to give final disposition to CNCP's application dated 23 March 1988 and ACTS' applications dated 7 April 1988 and 6 October 1988.
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V FILING OF FORECAST PHASE III RESULTS
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In Letter Decisions 88-8 and 88-10, the Commission stated that, should the submission of Phase III forward test year results become a periodic requirement, filing arrangements would have to be considered, taking into account the time that each company requires to complete its full corporate budget View and to produce Phase III forward test year results based on that View.
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The Commission wishes to consider whether the filing of forecast Phase III results should be required on a periodic basis and, if so, when those filings should occur. The Commission hereby invites comments on this issue.
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VI PROCEDURE
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(1) Bell, B.C. Tel, ACTS and CNCP are made parties to this proceeding.
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(2) Other interested persons wishing to participate in this proceeding (interveners) must notify the Commission of their intention to do so by writing to the Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, by 6 January 1989. The Commission will issue a complete list of parties and their mailing addresses.
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(3) The Commission has, by letters dated 14 December 1988, addressed interrogatories to Bell and B.C. Tel. Responses to these interrogatories must be filed with the Commission and served on other parties and interveners by 16 January 1989.
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(4) ACTS, CNCP and the interveners may address interrogatories to Bell and B.C. Tel. Any such interrogatories must be filed with the Commission and served on Bell and B.C. Tel by 30 January 1989.
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(5) Responses to the 30 January 1989 interrogatories must be filed with the Commission and served on other parties and interveners by 27 February 1989.
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(6) ACTS, CNCP and the interveners may file comments with the Commission, serving copies on other parties and interveners, by 20 March 1989.
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(7) Bell and B.C. Tel may file replies with the Commission, serving copies on other parties and interveners, by 10 April 1989.
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(8) ACTS and CNCP may file final comments with the Commission du on issues related to the final disposition of their applications, serving copies on other parties and interveners, by 24 April 1989.
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(9) The record of the current B.C. Tel revenue requirement proceeding, as it pertains to issues related to Phase III, will be considered as part of the record of this proceeding.
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(10) Where a document is to be filed or served by a specific date, the document must be actually received, not merely mailed, by that date.
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Fernand Bélisle
Secretary General
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