ARCHIVED -  Telecom Decision CRTC 92-21

Telecom Decision

Ottawa, 27 November 1992

Telecom Decision CRTC 92-21

BRITISH COLUMBIA TELEPHONE COMPANY - 1992 CONSTRUCTION PROGRAM REVIEW

Table of Contents

I INTRODUCTION

II PRELIMINARY MEETING ITEMS

A. Fibre Provisioning Plans

B. Measurement of Fibre Utilization

C. Construction Program Review Process

1. Adequacy of the CPR Process

2. Quality of Evidence Presented at the 1992 Meeting

III 1992-1997 CAPITAL PLAN

A. Overview

B. Fibre in the Network

C. GTD-5 Redeployment

D. Service Extension Program

E. Local Growth Expenditures

F. Toll Switch Replacement Expenditures

G. U.S. 800 Number Portability

H. Overall Conclusions

I INTRODUCTION

In Telecom Public Notice CRTC 1991-85, 26 November 1991 (Public Notice 1991-85), the Commission announced that it would conduct a review of the construction program (CPR) of British Columbia Telephone Company (B.C. Tel). On 20 December 1991, B.C. Tel filed its 1992-1997 capital plan (1991 View), along with other relevant information that the Commission had requested. The preliminary meeting was held on 17 March 1992 in Vancouver, British Columbia, and the review meeting, which commenced on 17 March 1992 at the conclusion of the preliminary meeting, concluded on 19 March 1992.

Parties participating in the meetings included the Government of British Columbia (BCG); B.C. Old Age Pensioners' Organization, Council of Senior Citizens' Organizations, West End Seniors' Network, Senior Citizens' Association, Federated Anti-Poverty Groups of B.C. and Local 1-217 IWA Seniors (BCOAPO et al); Rogers Cable TV Limited (RCTV); and Unitel Communications Inc. (Unitel). These parties filed comments on the reasonableness of the company's construction program on or before 21 April 1992. B.C. Tel replied to these comments on 7 May 1992.

II PRELIMINARY MEETING ITEMS

A. Fibre Provisioning Plans

In its presentation on fibre provisioning plans, B.C. Tel indicated that, at the present time, it uses fibre only in the feeder portion of the access network. The decision as to whether to use copper or fibre is based on a Present Worth of Annual Costs (PWAC) study. At present, 30% of host-remote link facilities are fibre. Use of fibre in the distribution portion of the network is contemplated in the 1992-1997 Capital Plan (see section III, below).

B. Measurement of Fibre Utilization

1. Company Presentation

B.C. Tel stated that the purpose of the utilization measure is, among other things, to track the efficiency in utilization of capital expenditures as they relate to outside plant facilities and to assist the company in optimizing utilization. For the trunk network (inter-city and inter-office), the company proposed using the ratio of equivalent voice frequency channel-kilometres (EVF-CH-KM) assigned to EVF-CH-KM available. The company maintained that this measurement is the most effective one for trunk routes. For the access network, the company evaluated four possible measures:

(1) the ratio of fibre pairs assigned to fibre pairs available measured at the central office (CO)
wall;

(2) the ratio of fibre-kilometres assigned to fibre-kilometres available;

(3) the ratio of EVF-CH-KM assigned to EVF-CH-KM available; and

(4) the ratio of EVF-CH assigned to EVF-CH available.

B.C. Tel maintained that all of these measures had disadvantages, and that the usefulness of any one was dependent on the network architecture chosen. The company stated that it is still evaluating access architectures, including point-to-point, star and ring, and contended that it is therefore premature to select a utilization measure. The company stated that it would continue to seek meaningful utilization measurements for fibre in the access portion of its network.

2. Positions of Parties

BCG stated that the company should provide the following information on fibre deployment:

(1) total sheath-kilometres in each of the inter-city, inter-office and access portions of the
network;

(2) the number of systems, by capacity and technology used, and the total circuit-kilometres
installed for each system type; and

(3) an indication of the segment of the access network in which the systems are deployed.

BCG also stated that the information should include planned annual increments as well as aggregated totals. BCG maintained that this information is necessary to track and allocate the costs of fibre.

B.C. Tel maintained that measurements directly related to the fibre cable, such as sheath-kilometres of energized and unenergized fibre, focus on the smaller portion of the capital expenditure and would therefore provide no assistance to the Commission in its evaluation of the capital plan. The company further submitted that details regarding capacity and technologies, the choice of one vendor's equipment over another's, and the locations of the equipment would not assist the Commission. The company's position continues to be that a utilization measure should account for the most costly component, in this case the electronics, in order to be useful in evaluating capital expenditures.

BCOAPO et al maintained that the Commission's ability to assess the reasonableness of fibre expenditures is related to its ability to determine the extent of fibre deployment in the network. BCOAPO et al contended that the company had only provided cursory information and, accordingly, submitted that the Commission is not sufficiently apprised of the company's progress with regard to utilization measurements.

B.C. Tel replied that it provided an update on its progress, as requested in Public Notice 1991-85, which included an evaluation of various utilization measures.

RCTV contended that the Commission needs information on how fibre and associated equipment have been utilized after being installed in order to determine whether the expenditures were reasonable. RCTV submitted that B.C. Tel should be required to track EVF-CH-KM for the access network, as well as the number of kilometres of unenergized fibre sheath. RCTV contended that measuring EVF-CH-KM involves measuring the distance between terminals and observing the number of channels energized. RCTV also contended that, since some fibre routes are shared by both the feeder and inter-city portions of the network, B.C. Tel would have to determine and subtract the EVF-CH-KM for some of the feeder portion of the access network in order to calculate the EVF-CH-KM for the inter-office network.

In reply, B.C. Tel reiterated that an access utilization measurement should be suited to the architecture, which has not yet been selected. B.C. Tel also reiterated that it is premature to finalize utilization measurement for the access network but that it is appropriate to continue evaluating such measurements.

3. Conclusions

The Commission agrees with B.C. Tel that the additional information requested by BCG with respect to the trunk network would not assist in evaluating the reasonableness of the capital plan. In the Commission's view, the utilization measurement proposed by B.C. Tel, the ratio of EVF-CH-KM assigned to EVF-CH-KM available, is the appropriate utilization indicator for fibre in the trunk network. The Commission notes that Bell Canada (Bell) uses the same indicator to measure utilization of fibre in its trunk network.

The Commission does not agree with B.C. Tel that it is premature to designate a utilization indicator for fibre in the access network. In Bell Canada - 1991 Construction Program Review, Telecom Decision CRTC 92-8, 15 May 1992 (Decision 92-8), the Commission directed Bell to implement the necessary procedures to measure the ratio of EVF-CH assigned to EVF-CH available in the feeder portion of the access network. In the Commission's view, the same indicator should be used by B.C. Tel.

In Decision 92-8, the Commission also directed Bell to develop and report two additional measures:

(1) the ratio of EVF-CH on fibre to total EVF-CH at the CO wall, separately for the access and
inter-office trunk networks; and

(2) the relative portions of energized and dark fibre strands at the CO wall, separately for the
access and inter-office trunk networks.

The Commission notes that the adoption of these measures would alleviate the concerns of BCOAPO et al and many of the concerns of RCTV.

Accordingly, the Commission directs B.C. Tel to implement the necessary procedures to measure and report, upon request, the following utilization indicators:

(1) for the trunk network, the ratio of EVF-CH-KM assigned to EVF-CH-KM available;

(2) for the feeder portion of the access network, the ratio of EVF-CH assigned to EVF-CH
available;

(3) for each of the trunk network and the access network, the ratio of EVF-CH on fibre to total
EVF-CH at the CO wall; and

(4) for each of the trunk network and the access network, the relative proportions of energized
and dark fibre strands at the CO wall.

C. Construction Program Review Process

1. Adequacy of the CPR Process

This proceeding included a detailed review of the adequacy of the CPR process. A similar review was undertaken in the 1991 Bell Canada CPR. The Commission will issue a separate decision based on the combined record of both proceedings.

2. Quality of Evidence Presented at the 1992 Meeting

BCOAPO et al submitted that there is an obligation on the company to provide information in an open, reasonable and understandable fashion in order to enable the Commission to assess the reasonableness of the capital plan. BCOAPO et al also submitted that, because not all interested parties have the technical exposure and facility of company representatives, there is an even clearer obligation on the company to provide clear, cogent and full answers in the CPR. BCOAPO et al contended that the exchange between it and the company regarding the comparison of the capabilities of the DMS-100 and GTD-5 switches and redeployment of the GTD-5 equipment was less than full and forthright.

The company submitted that it attempts to respond to questions in simple and non-technical terms that can be understood, particularly when the questioner may have little or no technical background.

While the Commission is generally satisfied with the quality of B.C. Tel's answers to questions during the preliminary and review meetings, and is of the view that there was no intent on the part of B.C. Tel to be evasive, there were times that the company (1) did not directly answer the question posed, but rather chose to provide related or supporting information, or (2) answered using vague terms or jargon unfamiliar to the person asking the question. The Commission encourages the company to adhere to the established practice of a free and open exchange of information.

III 1992-1997 CAPITAL PLAN

A. Overview

The following table summarizes the capital plan by category. Expenditures are stated in millions of dollars.

Category 1992 1993 1994 1995 1996 1997

Primary Telephone Service 324.1 297.8 304.7 295.8 281.1 286.5

Modernization 44.4 52.8 98.1 85.3 88.0 83.9

Service Improvement 7.8 15.8 12.8 29.5 11.2 10.7

Operating Improvements 25.2 13.1 9.4 8.8 5.5 4.6

Administrative Support 31.0 25.0 39.0 38.3 60.1 44.0

Total 432.5 404.5 464.0 457.7 445.9 429.7

B.C. Tel submitted that this capital plan reflects:

(1) its commitment to develop and maintain the most appropriate telecommunications network to
meet the diverse demands of its customers - both residence and business; and

(2) its current view of the capital expenditures required to permit it to provide reliable, quality
service to its customers through the effective application of technology, while taking
advantage of opportunities to minimize costs whenever they are available.

The issues raised during the proceeding included the replacement of GTD-5 switches with DMS-100 switches and the consequent redeployment of GTD-5 equipment; the extension of service under the Service Extension Program (SEP); the variations in planned expenditures between the 1990 and 1991 capital plans; the forecasting process and the calculation of customer demand; the fibre provisioning plan; the deferral of the GTD-3 switch replacement; and 800 number portability.

B. Fibre in the Network

1. The Company's Plan

Expenditures (in $ millions) on fibre in the network are estimated to be as follows:

Category 1992 1993 1994 1995 1996 1997

Access 2.5 8.3 10.1 10.0 11.6 12.4

Metro Inter-office 2.5 5.3 6.6 5.4 3.5 3.5

Inter-city 25.7 21.2 22.8 16.3 21.2 34.5

Total 30.7 34.8 39.5 31.7 36.3 50.4

Of the access expenditures, the Concord Pacific Development accounts for $385,000 in 1992, $100,000 in 1993 and $350,000 in 1995, and Special Services accounts for $500,000 in 1992, $4,500,000 in 1993 and $6,600,000 in 1994. B.C. Tel did not have detailed estimates for the outer years.

2. Positions of Parties

BCG maintained that B.C. Tel was not able to provide sufficient data on the extent, capacity and expenditures on fibre optic systems in the various segments of its network. BCG had particular concerns relating to the Concord Pacific Development, in that the developer would not be responsible for any of the fibre costs.

BCOAPO et al submitted that the company ought to identify customers' needs, including the needs of residential customers as articulated by residential customers, in making determinations about fibre provisioning. BCOAPO et al also submitted that the company ought to provide more substantive plans regarding fibre provisioning because it is a major company expenditure. BCOAPO et al reiterated its opinion that the Commission's ability to assess reasonableness of fibre expenditures would be enhanced by, and possibly predicated upon, knowing the extent of the network that will be provisioned with fibre and the reasons underlying decisions to provision parts of the network with fibre.

RCTV noted that fibre is used 30% of the time in host-remote links. RCTV maintained that the Commission needs some way to test whether the PWAC studies have been performed sensibly. RCTV also maintained that B.C. Tel lacks information on fibre in its access network and consequently, the Commission has no way to assess the reasonableness of the associated expenditures. RCTV contended that even a review of a single PWAC study performed by B.C. Tel would not allow the Commission to determine whether the expenditures were reasonable. RCTV submitted that the Commission needs to begin now to review fibre expenditures in the access network to ensure that B.C. Tel is not beginning to install a ubiquitous fibre-to-the-home network without either Commission approval or an indication that its subscribers desire the services from such a network.

With respect to the identification of customers' needs, B.C. Tel indicated that all customer demands are projected through a variety of forecasts, which it uses to identify the best method of provisioning. B.C. Tel noted that, as indicated in its presentation on fibre provisioning, the higher bandwidth services, which are primarily required by business customers, drive the economics and therefore the installation of fibre. The company also stated that residential customer service forecasts do not yet include such services.

With respect to the adequacy of data on fibre, the company submitted that the data provided, except for an inter-office utilization measure which it has stated it is willing to develop, is similar to data provided on copper. B.C. Tel also submitted that it has straightforward planning processes for the selection of copper or fibre, as described in its Planning Guidelines. B.C. Tel stated that PWAC studies are performed to indicate the most economic facilities to provide service prior to a possible fibre installation. The company submitted that its adherence to this process ensures that individual fibre installations are economically justified. The company noted that what RCTV described as a ubiquitous single-wire fibre-to-the-home network is very much a long-term vision that is not now on its planning horizon or reflected in the capital plan.

3. Conclusions

The Commission agrees with B.C. Tel that the higher bandwidth services required primarily by business customers drive the installation of fibre in the access network. The Commission notes it has found B.C. Tel's forecasting process, described in its Capital Plan, Planning and Methods document, reasonable.

The Commission also agrees with B.C. Tel that a PWAC study is the appropriate method to determine whether to provide fibre-based or copper-based facilities. However, the Commission shares the concerns of interested parties with respect to the adequacy of current data on fibre. The Commission expects the information that B.C. Tel will be providing on fibre utilization (see Section II above) to ameliorate this deficiency.

C. GTD-5 Redeployment

1. The Company's Plan

The company's capital plan includes new DMS-100 growth switches for Prince George and Vancouver Mutual (advanced from 1993) in 1992, Steveston in 1993, Nanaimo in 1994, Victoria in 1995 and Cloverdale, Cranbrook and Cypress in 1996. The GTD-5 equipment at these locations will be redeployed to provide growth at other GTD-5 locations. B.C. Tel used the following criteria to determine which GTD-5 switches would be replaced:

(1) the need to provide appropriate GTD-5 equipment at growth sites;

(2) the need to deploy a DMS-100 switch to serve as a host for step-by-step office conversion to
a remote switching module; and

(3) the opportunity to resolve a site-specific problem, such as GTD-5 exhaust.

B.C. Tel did not perform a specific economic analysis for each GTD-5 replacement, but rather conducted a representative economic analysis based on Prince George. This study compared two plans:

(1) meeting growth on existing GTD-5 switches and remotes by purchasing new GTD-5
equipment; and

(2) meeting growth on existing GTD-5 switches by replacing the Prince George GTD-5 cluster
with DMS-100 equipment and redeploying the removed GTD-5 equipment at other GTD-5
sites for growth.

Over a ten-year period, the DMS-100 net present value (NPV) was better by $791,000. When this study was applied to the redeployment requirements over a three-year period, the DMS-100 NPV was better by $2.7 million.

2. Positions of Parties

BCG contended that B.C. Tel could have extended the life of the Mutual GTD-5 by installing a newer version of software (SVR 1.6.4.1). Unitel also expressed concern about B.C. Tel's decision not to update its GTD-5 software to the newer version.

Both BCG and Unitel contended that the economic study did not adequately justify capital expenditures of this magnitude. BCG also maintained that the view-over-view decrease in local growth expenditures attributed to Other Switching Equipment should be greater. Unitel maintained that extrapolating the specific study network-wide was highly questionable. Unitel questioned B.C. Tel's assumption that the Prince George GTD-5 equipment would be redeployed within an 18-month period, given the downward revisions in the growth forecast. Unitel submitted that the study should have reflected the fact that the purchase of new GTD-5 equipment would allow for efficient provisioning on a just-in-time basis, whereas the replacement of GTD-5 switches with DMS-100 switches requires a larger up-front investment of DMS-100 equipment and redeployment of GTD-5 equipment over a longer period. Unitel also questioned the exclusion of Common Channel Signalling System 7 (CCS7) and Call Management Services (CMS) costs, noting that this was appropriate for Prince George because CCS7 and CMS had not been installed, but that CCS7 and CMS were installed on the Steveston and Mutual switches.

Unitel requested that the Commission direct B.C. Tel to provide the
following information:

(1) a copy of the initial analysis conducted by the company in the summer of 1991; and

(2) supporting cash flows by site for each alternative, for which results were provided on page 5
of the economic study.

Unitel submitted that B.C. Tel should submit a further economic analysis of its GTD-5 redeployment program, including specific costs relating to the Steveston and Mutual switches, the six GTD-5 sites that would be reduced in size and the remaining 200 sites to which the equipment would be redeployed over the 1992-1994 period.

B.C. Tel noted that the cost to install SVR 1.6.4.1 would be approximately $1 million per switch. The company contended that the costs and the reasons for its decision not to install this SVR were given in the proceeding leading to Competition in the Provision of Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues, Telecom Decision CRTC 92-12, 12 June 1992 (Decision 92-12).

The company maintained that the study included all causal costs, including associated capital costs, engineering costs, rearrangement costs, installation costs and removal costs. B.C. Tel also maintained that, had the costs for CMS and CCS7 been included, the NPV would have been lowered by approximately $75,000, which would not have turned it negative.

B.C. Tel submitted that the conclusion reached by BCG on the view-over-view decrease in local growth expenditures attributable to Other Switching Equipment was incorrect. The company noted that the view-over-view comparison was made before it was known that the Prince George and Mutual spending would be advanced from 1992 to 1991 due to unanticipated line growth.

With respect to the extrapolation of the Prince George study, the company stated that it validated the economics on a site-by-site basis to ensure that they were consistent with that study. With respect to the 18-month redeployment period, B.C. Tel noted that GTD-5 growth requires 50,000 lines per year and that Prince George would only release 37,000 lines. The company concluded, therefore, that the Prince George lines would likely be redeployed within one year. The company also noted that, in the study, the equipment released from Prince George was to be redeployed to 20 sites. The company stated that it had performed a sensitivity analysis with respect to the number of sites, and that the associated causal costs did not significantly affect the study results.

With respect to the additional information requested by Unitel, B.C. Tel submitted that the October 1991 study is adequate without supporting cash flow information, since incremental revenue was not included. The company observed that Unitel had not identified how this cash flow information would be of assistance to the Commission. The company reiterated that it will assess each possible redeployment situation and decide whether or not to redeploy GTD-5 equipment on the basis of the specific economics. B.C. Tel submitted that filing the evaluations proposed by Unitel should not be necessary, since the Prince George study justifies the general redeployment approach and individual assessments would be made.

3. Conclusions

The Commission notes that, in Decision 92-12, it stated that it would not compel B.C. Tel to implement SVR 1.6.4.1 on its GTD-5 switches. The Commission sees no evidence in this proceeding that would persuade it to change its position with respect to SVR 1.6.4.1. The Commission is satisfied that B.C. Tel's redeployment of GTD-5 switching equipment has been justified economically by the Prince George study. However, the Commission is of the view that tracking information is required, and directs the company to report, commencing in the 1993 CPR:

(1) the number of lines released and the number of lines redeployed on an annual basis; and

(2) on a site-by-site basis, those locations where the economics of redeployment are not
consistent with the Prince George study.

D. Service Extension Program

1. Background

In British Columbia Telephone Company - Extension of Service to Remote Communities, Telecom Decision CRTC 90-11, 6 June 1990 (Decision 90-11), the Commission approved B.C. Tel's proposal to deliver exchange service to remote communities. SEP was designed to reduce the cost to subscribers of extending basic exchange service to remote communities that were either unserved or received only minimal service.

SEP established a formula for distributing the costs of providing service between subscribers within a community and the company. Some subscribers would also be able to receive Exchange Area Radiotelephone Service (EARS) without any contribution, if they were covered by an existing VHF footprint.

Subsequently, B.C. Tel identified an additional approach to delivering service, the EARS/Autotel option. This uses capacity on the Autotel network, freed up from phasing out Mobiltel, to carry EARS traffic. In a letter to the company dated 1 October 1991, the Commission noted that this option could reduce the per-subscriber contribution, but that some communities might not benefit from it. The Commission directed B.C. Tel to explore other options in locations where the per-subscriber contribution would be substantial and to report its findings in the 1992 CPR.

2. The Company's Plan

B.C. Tel identified ten communities to which it has provided full exchange service under SEP and one community that has been served at no charge using EARS. The company identified five additional communities that it expects to serve in whole or in part under SEP in 1992, using the EARS/Autotel option. The company stated that it has also provided quotations of construction charges to 14 communities under SEP. The remaining 49 unserved or underserved communities identified, as well as some scheduled for EARS, have not been scheduled for service until 1994 or later.

B.C. Tel indicated that it was exploring additional serving options such as subscriber radio, spread spectrum radio, Spacetel-switch-spread spectrum, Spacetel-switch-cable and Mobile Satellite. However, the company noted that some of these options would have limited applications, and might also incur significant costs.

3. Positions of Parties

BCG recommended that the Commission continue to monitor the quotations for subscriber contribution in order to determine if the SEP formula is sufficient. In BCG's view, there have been significant variations in the per subscriber contribution as the program has been implemented. B.C. Tel explained that such variations are part of the planning process. The capital costs vary dramatically depending on the results of detailed engineering studies and the type of service requested. B.C. Tel also noted that changes in the number of potential subscribers may affect per-subscriber contributions.

BCG recommended that B.C. Tel develop a schedule for providing quotations to all communities on the SEP list over the next three years. B.C. Tel contended that it is both impractical and inappropriate to demand quotations within this period. It argued that, due to the volatility of cost estimates, the quotations could either bind the company or require the customers to pay more than quoted.

BCG also suggested that, for high cost communities, a program based on population and density criteria be implemented. B.C. Tel stated that this would not achieve the desired goals, since customer contributions tend to be higher in low density areas.

BCG also suggested that the Commission examine increasing the amount that B.C. Tel contributes to the capital costs. B.C. Tel disagreed, and reiterated its position that it would not be appropriate to increase its contribution because this would place an extra burden on the general body of subscribers.

BCG noted that the EARS/Autotel option creates a serious anomaly where only part of a community is eligible for free EARS, while the remaining residents outside the EARS footprint are faced with construction charges for an additional repeater. BCG suggested two possible ways to handle such a situation:

(1) B.C. Tel could calculate the subscriber contribution using all potential subscribers, but only
those outside the existing VHF coverage area would pay; or

(2) B.C. Tel could cover the construction costs, including the repeater, for the entire community.

B.C. Tel recognized this anomaly, but claimed that the suggestions were not tenable. In particular, it noted that the first option would contravene Tariff Item 98, which sets out the SEP cost-sharing formula. As well, it pointed to the difficulty in defining the meaning of "community" in large areas where population is widely dispersed. B.C. Tel argued that the increased costs associated with either option would unduly burden the general body of subscribers.

BCG recommended that the Commission direct B.C. Tel to continue to explore other serving options for those communities that face subscriber contributions in excess of $1,000. BCG acknowledged that the Spacetel system is now unacceptably expensive but considered that, given major recent changes in Very Small Aperture Terminal (VSAT) technology, the satellite-switch-cable option could be the most cost effective method of extending service in certain cases. B.C. Tel expressed its commitment to pursue VSAT further if it were to become capable of providing a community with an economical voice service of satisfactory quality.

4. Conclusions

The Commission notes that the funding formula for SEP established in Decision 90-11 has been in operation for less than two years. The Commission is of the view that the program must be monitored for a longer period before the suitability of the formula can be assessed. The Commission does not agree with BCG that specific criteria for population and density should be developed for reducing the per- subscriber cost in some high cost remote communities. The Commission notes that SEP was designed to eliminate such criteria because many unserved communities would not qualify, under even very low population and density criteria. The Commission notes that the majority of the high cost communities currently identified under SEP have fewer than 20 potential subscribers.

The Commission considers that further information on the quotations provided to communities, and the responses of those communities, would assist in evaluating the effectiveness of SEP and its contribution formula. Accordingly, the Commission directs B.C. Tel to provide, as part of the information filed on SEP in future CPRs, the quotation levels and the responses of the communities in question (acceptance or rejection of the quotation).

The Commission does not consider it practical to have B.C. Tel provide quotations to all communities currently identified under SEP within three years. The Commission considers that this could result in the company quoting figures one to two years before service could be provided. B.C. Tel indicated that its quotations are generally valid for only six months. Circumstances could change in the interval between the quotation and the provision of service, which could affect the cost and per-subscriber contribution. A new quotation might be needed, resulting in confusion and disputes between the community and the company. The Commission is also concerned that generating such quotations might detract from the resources available for providing service. The Commission agrees with B.C. Tel's plan to focus attention on serving larger communities and those with an identified interest in service.

The Commission acknowledges that, under the EARS/Autotel option, providing service to a portion of a community at no charge creates a difficulty when members of the same community are not eligible to receive the service without charge. However, the Commission maintains that the additional costs associated with extending EARS/Autotel coverage to subscribers not eligible to receive the service at no charge should be recovered from such subscribers under the SEP formula. The suggestions of BCG are inconsistent with the underlying principle of SEP to balance the cost incurred between the general body of subscribers and those receiving the service.

However, for such situations, the Commission directs B.C. Tel to identify any potential serving alternatives, and their associated costs, and to discuss with the communities the most appropriate alternative in view of the costs. The Commission further directs B.C. Tel to report on these consultations in the 1993 CPR.

B.C. Tel has explored other options for extending service to locations that are unable to afford full exchange service. It indicated that it prefers to extend EARS beyond the VHF coverage areas using spare Autotel capacity, building new UHF Autotel sites where no such facilities currently exist.

The Commission notes that, even taking the EARS/Autotel option into account, 25 communities would face per-subscriber contributions in excess of $1000. B.C. Tel identified several other potential options, but most have limited application in remote areas or provide a substandard level of service. The Commission notes that B.C. Tel has previously indicated that it is pursuing the use of satellite technology and spread spectrum radio, but that promising options are not yet forthcoming.

The Commission agrees with BCG that the company should continue to investigate serving technologies for remote areas. The Commission also notes that B.C. Tel has indicated that, should VSAT prove useful for economical voice service of satisfactory quality, it would pursue its application.

Accordingly, the Commission directs B.C. Tel to report in the 1993 CPR its findings on serving technologies that could be appropriate in areas where conventional and EARS/Autotel technologies are not likely to be available at a reasonable cost; in particular, the use of VSAT technology should be explored.

Finally, the Commission notes that the tracking information filed in this proceeding was useful for assessing SEP. Accordingly, the Commission directs B.C. Tel to continue to file such information in future CPRs.

E. Local Growth Expenditures

1. The Company's Plan

The local growth expenditure variances (in $ millions) between the 1990 View and the 1991 View are shown in the table below.

1992 1993 1994 1995
1992-1997 Plan 137.7 129.1 139.1 146.4

1991-1995 Plan 111.6 118.1 116.1 104.4

Variance/Écart +26.1 +11.0 +23.0 +42.0

The increase in the 1991 View (1992-1997 Plan) over the 1990 View (1991-1995 Plan) is mainly due to software capitalization, creation of a second switching centre in downtown Vancouver, the installation of new feeder routes in the Fraser Valley and Kelowna areas, and the installation of new concentrators to provide relief in long loop areas in the Interior.

The capacity of the Mutual switching centre in downtown Vancouver is exhausting. A second switching centre is proposed to provide the required capacity relief and, at the same time, improve reliability by providing switching and route diversity.

2. Positions of Parties

BCG maintained that the company had not adequately explained the significant increase in expenditures between the Views, given the decrease in the company's forecast line growth. BCG expressed a desire for some indication of the projected financial impacts of the increased expenditures. While BCG recognized that contractors may approach the company requesting installation before the company expected, it had difficulty understanding why the company missed so many projects when it submitted its 1990 capital plan. BCG also contended that B.C. Tel treated new subdivisions inconsistently with communities on the SEP list.

BCOAPO et al contended that the second downtown Vancouver switching centre is a major program and should be the subject of a demand forecast. BCOAPO et al suggested that such a forecast be made available to the Commission to assist it in determining the reasonableness of that expenditure. Unitel submitted that, because this project is being considered for diversity reasons rather than growth reasons, an economic analysis of the different approaches to providing diversity should be provided to interested parties prior to the commitment of funds to this project, if necessary, in advance of the next CPR.

The company did not respond directly to the comments from BCG. With respect to the second downtown Vancouver switching centre, B.C. Tel stated that growth and outside plant requirements triggered consideration of a second wire centre in downtown Vancouver. The company also stated that, here, as in other network planning situations, diversity is a major consideration in selecting a plan to meet growth. The company maintained that, when it completes its review of alternatives for meeting growth, any new project for diversity would be supported by economic analysis and would be reflected in the Capital Plan. B.C. Tel argued that Unitel's request for such an analysis is premature.

3. Conclusions

The Commission is satisfied with the company's explanations of the view-over-view variance in local growth expenditures. In the Commission's view, the company's decision to construct a second downtown Vancouver switching centre was primarily motivated by growth forecasts; therefore, the Commission will not require the company to produce a separate economic study.

F. Toll Switch Replacement Expenditures

1. The Company's Plan

B.C. Tel has deferred replacing the Vancouver and New Westminster GTD-3 switches from 1992 to 1993. These switches will be phased out over five years by transferring trunks to co-located DMS-200 switches. The company has also deferred replacing the Kelowna and Prince George GTD-3 switches until 1996 and 1997. Toll capability will be added to the DMS-100 switches at these locations. The deferral was occasioned by reprioritizing capital expenditures, placing greater emphasis on the local area.

2. Positions of Parties

Unitel submitted that there are compelling reasons, largely related to CCS7 compatibility, for phasing out the GTD-3 switches in 1992 as originally planned. Unitel also maintained that B.C. Tel's suggested higher priority for local switching is unsubstantiated and inconsistent with the company's growth projections. Unitel contended that the reasonableness of this deferral can only be established using cost-benefit analysis. Accordingly, Unitel requested the Commission to direct B.C. Tel to file a full economic evaluation study on the costs of deferring the Prince George and Kelowna GTD-3 switches, and to quantitatively compare these costs with new or advanced programs in the local category (such as the new Vancouver switching Centre) deemed to have a higher priority.

B.C. Tel maintained that its plan to phase out the GTD-3 switches was developed to minimize the impact on the deployment of CCS7 based services, and noted that the continued presence of GTD-3 switches in its network had not stopped it from providing CCS7 based services. The company also noted that it plans to accommodate toll growth on DMS switches. B.C. Tel maintained that the economic evaluation requested by Unitel was not warranted because GTD-3 replacement and local growth are addressed under separate programs and have different drivers. The company maintained that deferring the GTD-3 phase-out would not sacrifice substantive new benefits. B.C. Tel submitted that its decision to establish different priorities was responsible and reasonable and does not require further analysis.

3. Conclusions

The Commission is of the view that B.C. Tel's decision to defer replacement of its GTD-3 switches is reasonable. The Commission agrees with B.C. Tel that its decision would have minimal impact on the deployment of services based on CCS7, which would be provided from co-located DMS-200 machines or co-located DMS-100/200 machines.

G. U.S. 800 Number Portability

Unitel expressed surprise that the capital plan contained no expenditures related to U.S. 800 number portability in 1993. Unitel submitted that B.C. Tel should be directed to provide parties to the 1992 CPR with an explanation of its plans to accommodate U.S. 800 number portability, and any associated capital expenditures, prior to making commitments to its suppliers.

B.C. Tel stated that implementation of U.S. 800 number portability in Canada would require increased database capacity in the Stentor Communications Inc. (Stentor) 800 databases and that enhanced administration capabilities would be required in the Service Management System to interface with U.S. carriers. The company also stated that it was not responsible for these requirements and that it would only have to update the translations in the DMS-200 switches to correctly route 800 queries. B.C. Tel stated that Stentor has not yet indicated whether additional signalling links will be required. B.C. Tel submitted that, based on its plans to accommodate U.S. 800 number portability, Unitel's request is groundless.

The Commission notes that B.C. Tel has not yet identified any capital expenditures associated with implementation of U.S. 800 number portability. However, should the company identify any such capital expenditures, the Commission expects them to be identified in the capital plan.

H. Overall Conclusions

Having considered the evidence before it, the Commission finds B.C. Tel's 1992-1997 capital plan reasonable.

Allan J. Darling
Secretary General