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Ottawa, 7 August 1990
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Telecom Decision CRTC 90-16
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BRITISH COLUMBIA TELEPHONE COMPANY - INTRODUCTION OF EARS FOR NELSON ISLAND AND NORTH AND SOUTH THORMANBY ISLANDS
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Reference: Tariff Notice 1949
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I BACKGROUND
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On 24 July 1989, British Columbia Telephone Company (B.C. Tel) applied to the Commission for approval of revisions to its General Tariff providing for the introduction of Exchange Area Radiotelephone Service (EARS) on Nelson Island and on North and South Thormanby Islands.
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At present, residents of Nelson Island and of North and South Thormanby Islands receive multi-party exchange service by means of submarine cables. These cables were installed by the provincial government in the early decades of this century. The responsibility for the cables was later assumed by B.C. Tel.
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In its application, B.C. Tel noted that there are currently 34 subscribers on Nelson Island and a total of 10 subscribers on North and South Thormanby Islands. The company submitted that the submarine cables serving the three islands are in an advanced state of deterioration and could fail at any time. The company also stated that maintenance of the cable system to the islands has become a significant cost and operational burden.
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B.C. Tel stated that it had evaluated two alternatives options for maintaining service to the islands. The first was to replace the existing cable plant; the second was to install an automated radiotelephone service. The company contended that replacement of the existing network is precluded because of the ongoing problems associated with a submarine cable distribution system. It also indicated that installation of a land distribution system on Nelson Island is virtually impossible because of the high cost of construction in such rugged terrain. The company stated that replacing the cable and distribution facilities for the existing subscribers would cost almost $8 million. In the company's view, replacement of the system would place an unfair cost burden on the general body of its subscribers. B.C. Tel also noted with respect to Nelson Island that replacement of the cable would not fully address the needs of unserved residents, since they would still have to bear significant costs for the extension of plant facilities to their specific locations.
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B.C. Tel stated that the cost of its second alternative, installing EARS, would be between $800,000 and $900,000. B.C. Tel submitted that EARS is the best alternative for maintaining service to existing subscribers and for extending service to those residents who do not have it. B.C. Tel estimated that, at present, some 174 potential subscribers are unserved. Currently, EARS is tariffed at $9.25 per month for equipment rental and $0.40 per minute for air time. In addition, subscribers must assume the costs of mounting an antenna and maintaining a power supply for the operation of the equipment.
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On 8 August 1989, the Commission advised B.C. Tel that it would be appropriate for the company to notify subscribers of its application to change the existing service. On 16 August 1989, the company sent letters explaining its application to subscribers on the three islands.
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II INTERVENTIONS
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In response to B.C. Tel's letter, the Commission received interventions from several parties, including the British Columbia Government (BCG). The interveners included representatives of cottage owners, small businesses and permanent residents of the islands. While some interveners stated that the proposed service would be an improvement over the existing exchange service, many others noted that they had been receiving traditional telephone service for decades and had found the service to be largely satisfactory. They objected to the proposed service because rates would increase and because of the inconvenience of using a radiotelephone service with limited frequencies. Several interveners submitted that the telephone is an essential "lifeline" service, because of their remoteness from health and emergency services. Several interveners also submitted that they could not provide the power supply required to operate EARS equipment or that the cost of doing so would be prohibitive.
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BCG noted that, in Exchange Area Radiotelephone Service - B.C. Tel Tariff Notices 1865 and 1866, Letter Decision CRTC 89-14, 16 June 1989 (Letter Decision 89-14), the Commission had agreed that EARS should not be considered an equivalent to basic exchange service. It submitted that the proposal to replace traditional service with a less attractive alternative would set a significant precedent. BCG argued that the Commission should not accept B.C. Tel's proposal unless and until all other alternatives have been found unworkable.
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III B.C. TEL'S REPLY
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B.C. Tel replied by reiterating that the EARS system would be a significant improvement from an economic point of view, would improve service to present subscribers, and would add the option of extending service to potential new subscribers.
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The company noted that, because of the limited cable resources currently serving Nelson Island, potential customers are denied service until an existing customer terminates service. B.C. Tel also stated that, under the current rules for the extension of service, residents of Nelson Island who are presently unserved would be unlikely to receive service if the company is required to continue to provide landline service using a submarine cable system. On the other hand, the installation of EARS would allow many potential customers on Nelson Island and on North and South Thormanby Island to receive service at affordable rates.
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B.C. Tel also stated that the present service is not reliable because of the constant threat of cable breakages. B.C. Tel argued that, for the purposes of a "lifeline" service, the residents would be better off with EARS.
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In response to objections that the installation of EARS would subject residents of the islands to an additional cost burden, B.C. Tel noted that air-time charges for EARS are required in order to allocate scarce telecommunications resources. The company submitted that to offer unlimited calling on the EARS system would overload available frequencies, thereby degrading service to all customers. B.C. Tel also stated that it would provide subscribers with recommendations as to a number of relatively inexpensive options for maintaining the power supply necessary for operating the EARS equipment.
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IV CONCLUSIONS
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In interrogatories dated 31 January 1990, the Commission requested information on the other options that the company had investigated for providing service to the islands (i.e., options other than EARS and the replacement of existing cable facilities). The company was also asked to explain its reasons for rejecting those other options. The company responded that other technologies investigated included SR 100 Subscriber Radio, Mobiltel, Autotel and Cellular Radio. All options, except for the EARS system, were rejected by the company for various reasons, such as cost, limited frequency or a diminished level of service.
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The Commission has reviewed the advantages and disadvantages of the various options for continuing to provide service to the three islands. In arriving at the conclusions set out below, the Commission has been mindful of the company's concerns about the cost burden on the general body of subscribers of maintaining or replacing the existing facilities, as well as the concerns expressed by residents of the islands with respect to increased rates and the possibility of decreased value of service.
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In Letter Decision 89-14, in which the Commission approved the introduction of EARS, the Commission stated that EARS should not be considered an equivalent to basic exchange service. However, the Commission also stated in Letter Decision 89-14 that there will be circumstances where a remote community qualifies for full exchange service but cannot afford the construction charges associated with bringing in service. The Commission noted that, in these circumstances, EARS can provide a second-best alternative.
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The Commission is of the opinion that EARS should not, in the absence of compelling circumstances, be considered an equivalent or a replacement for basic exchange service. However, in the Commission's view, such circumstances exist in the case of the islands in question. Some of the residents of these islands have been able to receive full exchange service for some eighty years because of a unique set of events. Now, because of the age and vulnerability of the submarine cables in question and the increasing difficulties in maintaining service, it is imperative that an alternative means of providing service to the islands be found. In the Commission's view, the cost of replacing the existing facilities is prohibitive and would place an undue burden on the general body of subscribers.
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Furthermore, should existing facilities be replaced with a new cable installation of similar capacity, many potential subscribers would still be unable to receive service due to capacity limitations. If the company were to install a cable system of greater capacity, many potential subscribers would be unable to afford the construction charges necessary to obtain service. The Commission agrees with residents that telephone service to the islands is, in many respects, a vital "lifeline" service. The record of this proceeding indicates that, of the available alternatives, EARS is the service best able to provide that lifeline to all residents of the islands.
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Having reviewed the submissions of the parties, including the company's interrogatory responses, the Commission concludes that EARS should be approved as an acceptable replacement for the present service on Nelson Island and on North and South Thormanby Islands. However, the residents of the islands have raised legitimate concerns. All current subscribers on the islands obtain full exchange service at a multi-party rate with Extended Area Service between Pender Harbour and Sechelt. Replacing this service with EARS will upgrade the existing subscribers' multi-party service to the equivalent of four-party service and improve the reliability of telephone service to the islands. However, at the current tariffed rates for EARS, and given the need to provide and maintain power for the operation of EARS equipment, it would also significantly increase the cost of telephone service to existing subscribers.
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Therefore, in recognition of the fact that the introduction of EARS would otherwise result in a significant increase in the costs borne by existing subscribers on Nelson Island and on North and South Thormanby Islands, the Commission's approval of the introduction of EARS is conditional upon the company continuing to charge to existing subscribers the monthly rates paid for exchange service under General Tariff Item 32. In addition, existing subscribers are to be exempted from the usual air-time charges for EARS. Given the small number of subscribers involved, the Commission is of the view that this will not overload available frequencies. Finally, as required by the EARS tariff, B.C. Tel is to absorb all capital costs of converting existing customers to EARS, with the exception of the costs of installing and maintaining the power supply necessary to operate EARS equipment. New subscribers will be subject to the usual rates and conditions specified in the EARS tariff.
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Accordingly, B.C. Tel is directed to file, by 28 August 1990, proposed tariff pages implementing the Commission's decision in this matter.
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Alain-F. Desfossés
Secretary General
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