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Telecom Public Notice
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Ottawa, 24 December 1991
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Telecom Public Notice CRTC 1991-89
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TELESAT CANADA - GENERAL AND INTERIM RATE INCREASES FOR SPACE SEGMENT SERVICES, PHASE III COSTING MANUAL, APPLICATIONS TO REVIEW AND VARY CERTAIN PORTIONS OF TELECOM DECISION CRTC 90-28
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I TELESAT'S PRESENT APPLICATIONS
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On 20 December 1991, Telesat Canada (Telesat) filed an application with the Commission for (1) final approval of the rates approved on an interim basis in Telesat Canada - General Rate Increase for 6/4 GHz and 14/12 GHz Space Segment Services, Phase III Costing Manual, Telecom Decision CRTC 90-28, 18 December 1990 (Decision 90-28) as varied by Order-in-Council P.C. 1991-1145, dated 20 June 1991, and (2) final approval of general rate increases for 6/4 GHz and 14/12 GHz Space Segment services of 15% effective 1 July 1992 and of 5.2% effective 1 July 1993.
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Telesat also applied, pursuant to section 66 of the National Telecommunica0tions Powers and Procedures Act (NTPPA), to have the Commission review and vary the following three aspects of Decision 90-28:
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1. The finding at page 80 of the Decision that Telesat's annual escalation factor should be limited to the projected rate of inflation;
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2. The finding at page 86 of the Decision that only 50% of the compensation component of space segment O&M Engineering expense, which would otherwise have been capitalized, should be recoverable from RF channel services rates; and
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3. The finding at page 156 of the Decision that once Anik E is in service, aggregation of usage over different transponders and the charging of a full period RF channel rate should be precluded.
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II BACKGROUND AND SCOPE OF PRESENT PROCEEDING
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In Decision 90-28, the Commission granted interim approval to rate increases of 2.67% effective 1 January 1991 and 1 January 1992 for Telesat's RF channel services. The Commission considered that it would not be appropriate to grant final approval of the rates for Telesat's RF channel services for the entire 10 year study period, from 1991 to 2000, in light of the
considerable uncertainties associated with the launches of Telesat's Anik E satellites, the associated launch insurance and the in-orbit insurance, until such time as more information were to become available to significantly reduce the uncertainty surrounding these and other items. The Commission therefore set out a framework for granting final approval of the rates for the entire study period, stating in particular at page 135 of Decision 90-28 that it would examine further information relating to the following uncertain items (the uncertain items):
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- satellite in-service dates
- launch insurance
- in-orbit insurance
- performance warranty payments
- allowance for funds used during construction
- end-of-study salvage values
- additional demand if the Telecom Canada contract for satellite restoral services is to be
extended
- capitalized engineering directly attributable to lengthy delays.
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In addition, the Commission directed Telesat to file a revised Phase III Costing Manual by 18 March 1991 incorporating, among other things, the changes to the Manual set out in Decision 90-28 and any other changes that the company considered appropriate. Telesat was directed to provide the basis for any proposed improvements to the expense methodologies adopted by the Commission.
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On 28 June 1991, Telesat filed an application, pursuant to s.66 of the NTPPA, requesting that the Commission review and vary those portions of Decision 90-28 relating to the Commission's treatment of radio licence fees and the company's headquarters building. In Telesat Canada-Request to Review and Vary Portions of Telecom Decision CRTC 90-28, Telecom Decision CRTC 91-22, 19 December 1991, the Commission denied Telesat's application with respect to the treatment of the company's headquarters building. The Commission had earlier decided to defer its disposition of Telesat's request to review and vary the treatment of radio licence fees and to consider this matter in the context of the upcoming RF channel service proceeding.
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B) Order-in-Council P.C. 1991-1145 and Telesat's Response
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On 1 March 1991, Telesat submitted a petition to the Governor in Council, pursuant to section 67 of the NTPPA, seeking to vary Decision 90-28 by replacing the interim rate increase of 2.67% set by the Commission with a final rate of 13.8% for 1991 with no further increase for 1992.
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Order in Council P.C. 1991-1145 (the Order) varied Decision 90-28, establishing a new interim rate increase of 5.41% effective 1 January 1991, with no further increase for 1992. The Order provided that the new interim rate increase be reviewed as soon as new information is made available to the Commission and as early as possible in 1992, and that the Commission set final rates within the context of the following four considerations:
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1. In view of the long term cyclical and capital intensive nature of the satellite communications industry, whether alternative rate structures should be considered to allow greater stability in the year to year returns on investment, with particular emphasis on the advantages of a flat rate model rather than a uniformly escalating rate model over a multi-year period;
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2. In view of the important national role of the Canadian satellite communications industry and the single provider role of Telesat, whether regulation should be based more on financial performance of the entire corporation rather than the space segment services by themselves;
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3. Whether different approaches should be used to establish rates for competitive and monopoly services; and
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4. To what extent research and development and related expenditures for future satellite services should be included in the monopoly rate base.
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By letter dated 6 August 1991, Telesat advised the Commission of its intention to file a complete application for new RF channel service rates. As the basis for this application, Telesat stated that the Order directed Telesat to prepare a new rate application for long-term rates as soon as possible. In a further letter, dated 8 August 1991, Telesat added that its rate application is based upon "substantial change in circumstances since the last proceeding". Telesat indicated that its application would incorporate the additional costs associated with the successful deployment of Anik E2 as well as the transfer costs associated with the redeployment of traffic from the Anik C's and D's to the Anik E satellites.
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C) The Commission's 6 November 1991 Letter
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In response to a request for comments regarding the scope of the proposed proceeding, the company informed the Commission, by letter dated 24 September 1991, that it anticipated its application would be limited to RF channel service offerings under Tariff CRTC 8001 and identified several specific aspects of the evidence expected to be filed. Telesat also advised the Commission of its intention to request that the Commission review and vary the three additional
aspects of Decision 90-28 outlined in section 1 of this Public Notice.
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By letter dated 15 October 1991, Telesat asked the Commission to consider these requests for review and variance as part of the public proceeding relating to its application for new RF channel service rates.
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In a letter dated 6 November 1991, the Commission determined that, by virtue of the Order, the scope of the proposed proceeding must extend beyond a consideration of the uncertain items. The Commission stated that Telesat will be allowed to file updates, using the methods approved in Decision 90-28, for any elements of costs as well as any revisions it considers appropriate regarding the rate and rate structure for any of Telesat's RF channel services. The Commission also directed Telesat to provide costs using its proposed Phase III methodology for any elements of costs it proposes to update where the Phase III methodology differs from that used in Decision 90-28.
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In addition, the Commission accepted Telesat's request to have the review and variance of the three aspects of Decision 90-28 outlined in section 1 of this Public Notice considered in the context of the proposed proceeding.
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In light of the Commission's determination as to the scope of the proposed proceeding, the Commission directed Telesat to submit the following information with its application:
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1. Further information with respect to the uncertain items.
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2. The company's position on each of the four considerations raised in the Order and how this position affects its proposed RF channel rating approach.
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3. Information requirements set out at pages 140 and 141 of Decision 90-28.
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4. Evidence on an accounting basis showing the impact that each of Telesat's Phase III service categories has on the company's overall corporate performance for each of the years during the period of 1991 to 1995.
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5. Evidence concerning the impact that intercorporate transactions and investments in affiliated companies have on Telesat's overall corporate performance for each of the years during the period of 1991 to 1995.
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6. Financial evidence.
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7. Evidence in support of proposed changes in rates and the rationale for any proposals to exempt other tariffed services from rate changes.
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D) Phase III Manual proceeding
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In its 6 November letter, the Commission also sought comments from Telesat and interveners in the current Phase III Costing Manual proceeding as to whether the Commission should consider the proposed manual in the context of the proposed RF channel service rates proceeding.
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On 18 December 1991, following receipt of comments from Telesat and the Canadian Satellite Communications Inc., the Canadian Broadcasting Corporation, and the Canadian Satellite Users Association, the Commission decided to consider Telesat's proposed Phase III Costing Manual in the context of the proposed rate proceeding.
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III PROCEDURE
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1. In addition to those persons entitled to a copy of the application under the CRTC Telecommunications Rules of Procedure, Telesat shall mail or deliver a copy of all material furnished to the Commission under section 38 of those Rules, together with any additional information to be filed pursuant to the Commission's letter of 6 November 1991 regarding the scope of this proceeding and directions on procedure, and a copy of that letter, to the following parties:
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- persons who have filed notices of intention to participate in the hearing, immediately upon Telesat being served with such notices.
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2. Telesat shall, by 10 January 1992, file its responses to the Commission's initial set of interrogatories issued on 27 November 1991. Telesat shall serve a copy of these responses on all interveners to the 1990 Anik E proceeding, as well as to persons who file and serve notices of intention to participate at the hearing, immediately upon Telesat being served with such notices.
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3. Persons who wish to participate at the public hearing to be held in this proceeding (interveners) must file a notice of intention to participate with the Commission, and serve a copy on Telesat, by 17 January 1992. The Commission will distribute a complete list of the parties and their mailing addresses.
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4. Persons who wish to file written comments in this proceeding but who do not wish to participate at the public hearing may do so by filing their comments with the Commission, and serving a copy on Telesat, up until the adjournment of the upcoming public hearing. Such persons need not file a notice of intention to participate.
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5. Interveners may address interrogatories to Telesat relating to any issue to be considered in the context of this proceeding. These interrogatories must be filed with the Commission, and served on Telesat, by 3 February 1992.
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6. Telesat shall file and serve on interveners, by 6 March 1992, its responses to interrogatories received by 3 February 1992.
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7. Requests by interveners for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed and served on Telesat by 16 March 1992.
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8. Telesat's replies to requests for public disclosure and to requests for further responses must be filed and served on the party making the request by 23 March 1992.
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9. The Commission has decided not to conduct a pre-hearing conference. Instead, the Commission will issue a decision, as quickly as possible, with respect to requests for disclosure and for further responses. The Commission intends to direct Telesat to file and serve on interveners, by 7 April 1992, any material required by that decision.
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10. A copy of the evidence of any of the interveners' witnesses must be filed and served on Telesat and interveners, by 14 April 1992.
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11. Provided the application has been completed to its satisfaction, the Commission will hold a public hearing into Telesat's application at Phase IV, Place du Portage, Hull, Quebec, commencing 21 April 1991 at 9:00 a.m.
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12. Where a document is to be filed or served by a specific date, the document must actually be received, not merely mailed, by that date. In order to facilitate the exchange of documentation, parties may utilize facsimile and other means of electronic communication to fulfil filing and service requirements, provided that both the sender and recipient agree and that the appropriate number of hard copies is made available for the purposes of the record of this proceeding. It is the responsibility of the applicant to advise the Commission of its specific arrangements with individual interveners.
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13. Documents to be filed with the Commission may be sent to:
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Mr. Allan J. Darling
Secretary General
CRTC
Ottawa, Ontario
K1A 0N2
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14. Documents to be served on Telesat may be sent to:
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Mr. R. Renner
Director, Regulatory Matters and Corporate Policy Division
Telesat Canada
1601 Telesat Court
Gloucester, Ontario
K1B 5P4
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15. A copy of the application may be obtained by an interested person upon request directed to Telesat at the address set out in paragraph 15.
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16. Telesat's application is available for public examination during regular business hours at any of Telesat's sales offices, or at the offices of the CRTC in the following locations:
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Room 201
Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage
Hull, Quebec
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Suite 1007
Bank of Commerce Building
1809 Barrington Street
Halifax, Nova Scotia
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Complex Guy-Favreau
East Tower
200 René-Lévesque Blvd. West
Room 602
Montréal, Quebec
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Suite 1810
275 Portage Avenue
Winnipeg, Manitoba
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Suite 1380
800 Burrard Street
Vancouver, British Columbia
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Allan J. Darling
Secretary General
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