|
|
|
Ottawa, 15 November 1990
|
|
Telecom Decision CRTC 90-24
|
|
ROGERS CANTEL INC. - CELLULAR ACCESS TARIFF - RATES FOR SEVEN DIGIT TELEPHONE NUMBERS WITH OUTPULSING
|
|
I INTRODUCTION
|
|
On 3 May 1989, the Commission received an application from Rogers Cantel Inc. (Cantel) requesting that the Commission issue orders:
|
|
(1) directing Bell Canada (Bell) to include activated cellular telephone numbers in the company's "total telephone number count" for rate grouping purposes; and
|
|
(2) as a consequence of (1), reducing the rate charged by Bell to cellular service operators (CSOs) for each activated seven digit telephone number with outpulsing from $1.25 per month to $0.24 per month.
|
Cantel's application was followed by Bell's answer, Cantel's reply, Commission interrogatories to Cantel, and CRTC Telecom Public Notice 1989-56, dated 16 November 1989, which joined British Columbia Telephone Company (B.C. Tel) to the proceeding and provided for further process, including Commission interrogatories to Bell and B.C. Tel.
|
|
Comments were filed by the British Columbia Old Age Pensioners' Organization, Council of Senior Citizens' Organizations of B.C., West End Seniors' Network, Senior Citizens' Association of B.C., Federated Anti-Poverty Groups of B.C., and Local 1-217 IWA Seniors (BCOAPO et al); BCE Mobile; Canadian Business Telecommunications Alliance; Canadian Imperial Bank of Commerce (CIBC); and the Government of Ontario (Ontario). BCOAPO et al and CIBC were opposed to Cantel's application. CBTA and Ontario submitted that activated cellular telephone numbers should be included in the telephone number count for rate grouping purposes; however, they favoured maintaining the existing approach to establishing CSO telephone number rates. BCE Mobile generally supported Cantel's application, but suggested an alternative approach whereby any local network usage costs associated with public switched telephone network (PSTN) originated calls to cellular subscribers should be recovered by means of a per-message charge paid by the telephone company subscribers making such calls.
|
|
Bell and B.C. Tel filed final argument and Cantel filed reply argument. The Commission has considered all of the submissions filed in reaching its decision.
|
|
II BACKGROUND
|
In Cellular Radio Service, Telecom Decision CRTC 84-29, 19 December 1984 (Decision 84-29), the Commission found that it would not be in the public interest for the general body of subscribers to assume the costs associated with achieving interconnection between CSO networks and the PSTN. As a result, charges for activated seven digit telephone numbers with outpulsing assigned to CSOs have been designed to recover both the costs of provisioning these numbers and the incremental local network usage costs associated with delivering PSTN-originated calls to the CSOs' network.
Bell's rate of $1.25 per month for each seven digit cellular telephone number with outpulsing can be broken down as follows:
|
|
Monthly cost of provisioning and activating a telephone number: $0.19
|
|
Monthly incremental local network usage costs associated
with PSTN-originated calls to cellular users: $0.82
|
|
Total Monthly Cost: $1.01
|
|
Contribution: $0.24
|
|
Monthly Rate: $1.25
|
|
III CANTEL'S POSITION
|
In Cantel's view, the local network usage costs associated with PSTN-originated calls to cellular subscribers are not costs associated with achieving interconnection. Cantel submitted, therefore, that the Commission's determination in Decision 84-29 does not dictate that these costs be borne by Cantel. Cantel argued that these costs ought reasonably to be borne by wireline subscribers. Cantel stated that wireline subscribers originate these calls, benefit from placing them, and should therefore pay the costs of using Bell's network to transmit calls to the point of interconnection.
|
|
Cantel's view was that, based on the Commission's accepted principles, wireline subscribers should be required to pay for these calls through the inclusion of cellular telephone numbers in the total telephone number count for rate grouping purposes.
|
|
Cantel submitted that the ability to call cellular telephone numbers provides as much value to Bell local exchange subscribers as does the ability to call wireline telephone numbers. In this regard, Cantel noted that subscription to cellular service has far exceeded the original projections made in 1984 and 1985. Cantel estimated that Bell and B.C. Tel subscribers placed in excess of 216 million calls to cellular telephone numbers in 1989.
|
|
Cantel's view was that the value of local exchange service is increased because Bell subscribers have access to cellular subscribers within their free calling area, as well as to other wireline subscribers. Cantel estimated that, as of 31 August 1989, there were approximately 243,000 cellular telephones in service in Bell territory and 33,000 in B.C. Tel territory. Cantel stated that the total number of cellular subscribers in the two operating territories is expected to approach 400,000 by the end of 1990, exceed 500,000 by the end of 1991 and reach 1,000,000 by early 1994.
|
|
Cantel noted that Bell excludes public telephone numbers from the telephone number count by order of its former regulator, the Canadian Transport Commission, which considered that the unavailability of listed telephone numbers for public telephones made them essentially unreachable. Cantel also noted, however, that both Bell and B.C. Tel include unlisted telephone numbers in the rate group count despite the absence of directory listings. Cantel stated that there appears to be little consistency in the reasons for inclusion or exclusion of telephone numbers.
|
|
Cantel stated that both Bell and B.C. Tel include telephone numbers associated with optional or specialized services, such as foreign exchange lines and access arrangements for data transmission, in the rate group count. Cantel argued that it would be inconsistent and irrational to include telephone numbers associated with these specialized services, while excluding cellular telephone numbers.
|
|
Cantel noted that Bell and B.C. Tel currently recover local usage-sensitive costs from their subscribers through non-usage-sensitive local exchange rates based on the value of service rating principle. Cantel submitted that, until the approach to setting local exchange rates changes, this represents the approved method of recovering these costs from local wireline telephone subscribers. Cantel maintained that the fact that the wireline telephone companies do not charge for local calls on a usage-sensitive basis is not a valid reason for shifting the recovery of these costs to the CSOs.
|
|
Cantel submitted that, if cellular telephone numbers were added to the rate group count, the local network usage costs associated with PSTN-originated calls to cellular subscribers would be recovered through increased local exchange revenues due to faster upgrouping. Cantel argued that, therefore, the $0.82 component of the $1.25 monthly rate per CSO telephone number would no longer be necessary. Cantel submitted that for Bell to continue charging the $0.82 cost component would result in the double recovery of these costs. Cantel also noted that Bell, in response to a Commission interrogatory, expressed the view that, conceptually, there would be duplication in the rates charged if cellular telephone numbers were added to the rate group count and the rate of $1.25 per telephone number were to continue to apply. Cantel argued further that, if the $0.82 cost component was removed, it would also be appropriate to reduce the $0.24 contribution included in the $1.25 rate by a comparable amount to a new level of $0.05. This would result in a monthly telephone number rate of $0.24.
|
|
Cantel submitted that the number of calls placed over Bell's local network to the cellular network has grown to the extent that new issues in regulatory policy have been raised. Cantel submitted that its application is an application for rate revision, based on a change in circumstances that brings into question the justness and reasonableness of the existing rates for seven digit telephone numbers with outpulsing. Cantel submitted that its application demonstrates ample cause to review Bell's rates and to grant the orders requested.
|
|
IV BELL'S POSITION
|
Bell argued, among other things, that Cantel's application is merely a re-argument of issues raised by Cantel in the proceeding dealing with Bell Tariff Notice 1837, filed 29 November 1985. Bell stated that these arguments were rejected by the Commission in Telecom Order CRTC
87-35, 13 January 1987, and in a related letter to Cantel dated 23 March 1987. Bell submitted that the Commission's determination in that proceeding was based on the principle, established in Decision 84-29, that it would not be in the public interest for the general body of Bell or B.C. Tel subscribers to assume costs associated with achieving interconnection with CSOs. Bell stated that, in its letter of 23 March 1987, the Commission interpreted that principle as meaning that Bell subscribers should not bear any additional cost arising from the introduction of cellular service with access to the PSTN.
|
|
Bell submitted that the local network usage costs included in the telephone number rate are directly related to the existence of cellular service. Bell stated that, if cellular telephone numbers were included in the rate group count and the monthly rate for each number was reduced to $0.24, as suggested by Cantel, the general body of Bell subscribers would assume some of the costs of achieving cellular interconnection.
|
|
Bell argued that Cantel's proposal is inconsistent with a cost-based rating approach for cellular interconnection, since it would result in a portion of the costs arising from interconnection being recovered through rates that are based on value of service (i.e., local exchange service rates).
|
|
Bell argued that any additional value of service that might accrue to the general body of subscribers as a result of the ability to call cellular subscribers is minimal. Bell was of the view that the primary beneficiaries of the interconnection of specialized systems, such as cellular radio systems, are the subscribers to such systems. Bell submitted that the transfer of some of the costs associated with cellular interconnection from CSOs to the general body of subscribers would be to the advantage of CSOs and their customers, and to the disadvantage of the majority of basic local exchange service subscribers.
|
|
Bell noted that the treatment of cellular interconnection is similar to that for the interconnection of radio paging systems and conventional mobile radio common carriers. Bell was of the opinion that acceptance of Cantel's proposal would likely lead to similar proposals from other users of telephone numbers with outpulsing, such as paging and conventional mobile radio system operators. Bell stated that the addition of telephone numbers used by these service providers to the rate group count would put further upward pressure on local rates. The general body of local exchange subscribers would then face more frequent rate increases as a result of costs associated with specialized communications services.
|
|
V B.C. TEL'S POSITION
|
|
B.C. Tel argued, among other things, that most cellular subscribers are also wireline subscribers whose local exchange service is already included in the rate group count and who treat cellular service as a type of extension to wireline service, or as an alternative means of being reached. B.C. Tel argued that, therefore, cellular service has primarily increased the accessibility of the existing base of customers, rather than increasing the number of customers that can be reached.
|
|
B.C. Tel submitted that a consideration in determining whether the value of local exchange service has been increased is the extent to which local exchange customers can readily obtain cellular telephone number information. B.C. Tel noted that very few cellular subscribers in its territory have a white pages directory listing.
|
|
B.C. Tel also submitted that few people use cellular service other than to serve business needs. It argued that it is likely that most calling to cellular numbers originates from the cellular customer's wireline business or home telephone. B.C. Tel argued that, therefore, the community of interest served by cellular radio is small.
|
|
VI CONCLUSIONS
|
|
The fundamental issue in this proceeding is the appropriate method for recovering the incremental local network usage costs associated with PSTN-originated calls to cellular telephone numbers. One option for recovering these costs would be, as suggested by BCE Mobile, to levy a charge on the local exchange customer for each call to a cellular subscriber. Such an approach would be consistent with cost causality, but is not available at present. The Commission notes that Cantel did not propose such an approach.
|
|
Two other options were discussed in this proceeding, namely, Cantel's proposed method and the method currently in place. In the Commission's view, both of these options involve value of service pricing.
|
|
Cantel's proposed method is to include activated cellular telephone numbers in the rate group count to reflect the value of service to local exchange subscribers of the ability to call these numbers toll-free. Under this option, the costs would be recovered from local exchange subscribers, some of whom make calls to cellular subscribers and some of whom do not. In the Commission's view, this approach to the recovery of incremental local usage costs would not be consistent with cost causality because it would result in revenues unrelated to the amount of costs to be recovered and because it would generate these revenues in a manner that would not recognize whether the local exchange service subscriber made many calls or no calls to cellular subscribers.
|
|
The second value of service option is to continue to recover the incremental local network usage costs associated with PSTN-originated calls through the rate for cellular telephone numbers. Because the level of the rate is cost-based, its objective is to generate revenues equal to the incremental costs plus an appropriate contribution. The imposition of this rate on CSOs, and therefore indirectly on their subscribers, is justified by the benefit (or value of service) to the cellular subscriber of being accessible from the PSTN and by the fact that, in the Commission's view, cellular users are the primary beneficiaries of cellular interconnection. Under this option, all customers being charged the value of service rate make use of cellular interconnection.
|
|
In the Commission's view, the second value of service option is preferable because it generates revenues equal to the costs that must be recovered plus an appropriate contribution, and because it does so from a group whose members all make use of cellular interconnection. By contrast, Cantel's proposed option would generate revenues unrelated to the incremental costs to be recovered. In addition, those revenues would be generated from local exchange customers most of whom are not users of cellular interconnection.
|
|
Finally, the Commission considers that cellular access service is not a primary exchange service. The Commission recognizes that the existing rate group count currently includes services that are not primary exchange services. However, the Commission considers that, at this time, it would be preferable not to include additional non-primary exchange services in the rate group count.
|
|
Based on the foregoing, the Commission denies Cantel's application.
|
|
Allan J. Darling
Secretary General
|
|
|