|
Telecom Letter Decision
|
|
Ottawa, 28 August 1991
|
|
Telecom Letter Decision CRTC 91-8
|
|
Ms. Dorothy E. Byrne Vice-President Legal and Regulatory Matters British Columbia Telephone Company 3777 Kingsway, 18th Floor Burnaby, British Columbia V5H 3Z7
|
|
Dear Ms. Byrne:
|
|
Re: B.C. Tel Tariff Notice 2342/CATV Support Structure Service
|
|
On 25 March 1991, the Commission received an application from British Columbia Telephone Company (B.C. Tel) under Tariff Notice 2342 for approval of revisions to its General Tariff to increase the aerial system, duct and buried cable rates applicable to the provision of CATV Support Structure Service. A cost study was filed in support of the application. Comments were received from the Canadian Cable Television Association (CCTA).
|
|
The Commission and CCTA noted a number of mathematical errors in the company's submission. B.C. Tel acknowledged these errors and filed the necessary corrections.
|
|
With regard to aerial system costs, the company's study revealed two major increases over the previous year. These related to the costs of joint ownership poles and messenger strand.
|
|
In the case of joint ownership poles, B.C. Tel's 1991 total annual cost calculation reflected the total cost of such poles, while the 1990 total annual cost calculation reflected the B.C. Tel share only. This yielded costs which were 251% greater when compared to the 1990 values.
|
B.C. Tel stated that the annual costs associated with jointly owned poles were adjusted to reflect the total fixed structure cost of these facilities. B.C. Tel asserted that applying the formula prescribed in Support Structures and Related Items - Public Proceeding on Rates, Telecom Decision CRTC 86-16, 15 August 1986 (Decision 86-16) to only its share of jointly owned pole costs does not accurately reflect the costs attributable to a CATV licensee. The company suggested that the total cost associated with jointly owned poles is a more appropriate basis for allocation.
|
In response to a comment from CCTA that it would be inappropriate to allow B.C. Tel to charge rentals against assets it does not own, B.C. Tel submitted that the intent of Decision 86-16 was to apply the allocation formula to the total costs of jointly owned poles. This would provide "as objective a measure as possible for recovery of fixed structure costs", free from any possible bias in agreements between B.C. Tel and B.C. Hydro. The company stated that it considers its previous practice erroneous and its current approach the correct and proper one. CCTA argued that B.C. Tel, in applying the cost allocation formula in the above-described manner, was misinterpreting Decision 86-16.
|
In the Commission's view, the intent of Decision 86-16 is to apply the allocation formula only to the telephone company's share of jointly owned pole costs. The Commission considers that this approach remains valid and fair to all parties. The Commission therefore finds it inappropriate for B.C. Tel to include costs in its study that are not associated with its share of jointly owned assets.
|
|
In the case of messenger strand costs, B.C. Tel previously estimated such costs to be 8.2 per cent of its pole costs. In 1991, B.C. Tel adopted a new method whereby it calculates messenger strand costs based on broad gauge unit costs (BGUC). The BGUC-based estimate of the per pole investment in messenger strand was 24.3 per cent.
|
|
CCTA contended that no valid argument had been made, nor evidence filed, to support a change in the historic relationship between investment in messenger strand and pole investment. CCTA suggested that the maximum allowable allocation of pole investment for messenger strand should remain at 8.2 per cent. B.C. Tel responded that the BGUC system had been enhanced to provide greater costing accuracy and now included the messenger strand cost. The new system indicated that current costs are higher for strand and lower for poles than previous estimates.
|
|
In a subsequent submission, CCTA asserted that B.C. Tel's study was invalid. CCTA stated that its preliminary studies, based on contractor quotes, suggest that messenger strand should only account for between 9.6 per cent and 10.4 per cent of total capital costs of a new pole line. CCTA suggested that the previous estimate should only be modified after an independent study to validate the results, or adequate opportunity for public review and comment.
|
|
B.C. Tel responded that the BGUC system is not a cost study per se, but is based on several data sources, including cost studies that are updated on a weekly basis for outside plant construction projects. B.C. Tel submitted that CCTA's comments on the need for a joint or independent study are inappropriate and that such a study is unnecessary.
|
|
The Commission finds that the BGUC system provides a greater degree of accuracy than using estimates, and therefore accepts B.C. Tel's new method for messenger strand annual cost calculation. Taking into account its findings regarding the costs of jointly owned poles, the Commission determines the appropriate aerial system cost to be $0.75 per 30 metres per month.
|
CCTA observed that B.C. Tel had proposed 11 per cent increases for both aerial system and D duct rates, notwithstanding that Decision 86-16 specifically limited such rate increases to 10 per cent. B.C. Tel responded that it had correctly applied a 10 per cent increase and then applied the rounding method set out in its General Tariff.
|
The current aerial system and D duct rates are $0.65 per 30 metres per month and $0.85 per 30 metres per month respectively. In the Commission's view, in calculating increases to these rates, the direction in Decision 86-16 should prevail over B.C. Tel's rounding method to the nearest cent. Accordingly, the Commission approves an aerial system rate of $0.71 per 30 metres per month and a D duct rate of $0.93 per 30 metres per month. The remaining rate increases proposed under Tariff Notice 2342 are approved as filed.
|
|
The company is directed to issue a revised tariff page forthwith, effective the date of this Letter Decision, to give effect to the tariff revisions approved herein.
|
|
Allan J. Darling
Secretary General
|
|
cc CCTA
|