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Telecom Public Notice
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Ottawa, 16 December 1992
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Telecom Public Notice CRTC 92-78
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REVIEW OF REGULATORY FRAMEWORK
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In recent years, the telecommunications industry has been characterized by significant technological changes in both switching and transmission. These changes have allowed the telephone companies within the Commission's jurisdiction that provide local exchange telephone service (the telephone companies) to develop a wide range of new audio, video and high speed data services to satisfy business and residence consumer demands in local and long distance markets. In addition to fulfilling the basic communications requirements of all subscribers, telecommunications has evolved into a tool for modern information management and a productivity enhancer for business. In an information-based service economy, a modern and efficient telecommunications infrastructure is a fundamental component of, and vehicle for, both the production and consumption of goods and services.
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Since the late 1970s, the Commission has addressed a number of issues related to this changing environment and has responded with decisions that have not only permitted the telephone companies to provide a wide range of new services, but also have changed the structure of the industry by allowing a greater degree of competition in a number of market segments. However, while the telephone companies are operating in an increasingly competitive environment, and thus may be subject to a greater degree of market discipline, they continue to maintain effective control of the provision of network access and local services and to dominate the public long distance market.
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The changing telecommunications environment raises questions as to whether the current regulatory framework is the most appropriate or effective to serve the public interest. For example:
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- Is the Commission's historical form of monopoly regulation still the most appropriate?
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- Are there alternatives to traditional rate-base rate of return regulation that would permit telephone companies greater flexibility to innovate and compete while maintaining a balance among the interests of subscribers, shareholders and competitors?
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- Should there be increased regulatory flexibility for the telephone companies in competitive markets?
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Having raised these general questions, the Commission wishes to stress its view that any changes to be made to the current framework in order to enhance the efficiency and effectiveness of regulation must at the same time be conducive to the attainment of the following objectives:
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(1) universal accessibility to basic telephone services at affordable prices;
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(2) opportunity for telephone company shareholders to earn a reasonable return on their investment;
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(3) equitable treatment of subscribers in terms of service and price;
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(4) assurance that telephone companies do not unfairly take advantage of their monopoly or dominant market positions in dealings with competitors; and
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(5) encouragement of the development and widespread availability of new technology and innovative services to respond to the needs of business and residence customers.
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The Commission considers it timely to examine whether the existing regulatory framework for the telephone companies can or should be modified. Accordingly, the Commission hereby initiates a proceeding, which will include an oral public hearing, and invites submissions from the telephone companies and other interested persons. Any such submissions should be consistent with the regulatory goals set out above. The Commission provides the following by way of guidance as to areas in which it is particularly interested.
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(1) Regulation should continue to protect subscribers and service suppliers from abuse of monopoly or dominant power by the telephone companies. Where there is sufficient competition, more emphasis could be placed on the market to discipline service providers and satisfy user needs. Accordingly, parties are asked to make submissions regarding ways to streamline or eliminate regulatory requirements in light of changes in industry structure. In this regard, parties should address what modifications to regulatory safeguards may be necessary to protect against abuse of dominant power in competitive markets.
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(2) Regulatory policy has promoted the maintenance of universal access at affordable rates. Revenues from public long distance services and, to a lesser extent, from local services are used to offset the costs of providing subscriber access. While the Commission accepts a continuing need for a subsidy from long distance services to offset the combined local and access shortfall, it considers that the shortfall could be reduced, without compromising affordable access, with proper incentives both to introduce cost efficient technologies in the local network and access plant and to deploy innovative contribution-generating local services. The Commission further considers that the current system of pricing local service may result in some residence and business subscribers benefitting from a significantly greater subsidy than others and that the distribution of this subsidy could be made on a more efficient and equitable basis. Accordingly, parties are asked to make submissions regarding ways to reduce the combined local and access shortfall in order to encourage economic efficiency and stimulate investment in network infrastructure and services so as to provide benefits to residence as well as business subscribers in terms of price, choice and supply of innovative services.
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(3) Finally, there may be regulatory alternatives to the existing rate-base rate of return approach that better balance the interests of subscribers, shareholders and competitors in an increasingly competitive and technology dynamic environment, while providing the telephone companies with better incentives to increase their operating efficiency and with greater flexibility regarding the establishment of rate levels. Accordingly, parties are asked to make submissions regarding alternatives or modifications to traditional rate-base rate of return regulation.
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In order to permit a proper examination of any proposals to change the current regulatory framework, the Commission will require supporting information in sufficient detail to permit a reasonable assessment of the impact on rates, revenues and expenses. However, the Commission does not propose to examine specific applications to alter rates in the context of this proceeding. Should a new framework be given general approval, the detailed aspects of implementation would be dealt with in subsequent proceedings that could take the particular circumstances of individual telephone companies into account.
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Finally, the Commission recognizes that during the course of this proceeding there may be specific applications filed that relate directly or indirectly to one or more of the subject matters raised in this Public Notice and that propose to affect rates. Should it receive any such applications, the Commission will assess each on a case by case basis in order to determine whether it would be more appropriate to proceed to consider the application or to defer consideration until a decision is rendered in this proceeding.
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Procedure
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1. AGT Limited, Bell Canada, British Columbia Telephone Company, The Island Telephone Company Limited, Maritime Telegraph and Telephone Company Limited, The New Brunswick Telephone Company, Newfoundland Telephone Company Limited and Northwestel Inc. (the companies) are made parties to this proceeding.
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2. Other persons wishing to participate as parties to this proceeding must notify the Commission of their intention to do so by writing to Mr. Allan J. Darling, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, by 15 March 1993 (fax: 819-953-0795). The Commission will issue a complete list of parties and their mailing addresses.
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3. An oral public hearing is scheduled to begin at 9:30 a.m., 1 November 1993, in the Outaouais Room of the Conference Centre, Phase IV, Place du Portage, Hull, Quebec.
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4. Persons who wish to comment on relevant issues but who otherwise do not wish to participate actively in this proceeding may do so by writing to the Commission any time prior to the completion of the oral public hearing.
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5. Parties may file submissions with the Commission setting out their positions on issues raised by this Public Notice, including any specific proposals to change the current regulatory framework, together with supporting information. All such submissions must be filed with the Commission and served on all other parties to the proceeding by 13 April 1993.
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6. Parties who file submissions pursuant to paragraph 5 above and who plan to make available one or more witnesses for cross-examination at the oral public hearing are to notify the Commission of their intention to do so, serving a copy of such notice on all other parties, also by 13 April 1993. The Commission notes that in rendering its decision in this proceeding it may place greater reliance upon, and give greater weight to, submissions from parties who have provided an opportunity for cross-examination.
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7. Any party may address interrogatories to any party who filed submissions pursuant to paragraph 5 above. Any such interrogatories must be filed with the Commission and served on the party or parties in question by 31 May 1993.
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8. Parties are to file responses to any interrogatories with the Commission, serving copies on all other parties, by 12 July 1993.
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9. Requests by parties 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 with the Commission and served on the party or parties in question by 21 July 1993.
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10. Written responses to requests for further responses to interrogatories and to requests for public disclosure of information must be filed with the Commission and served on the party making the request by 30 July 1993.
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11. The Commission will issue a determination with respect to requests for disclosure and for further responses as soon as possible. The Commission intends to direct that any information to be provided pursuant to that determination be filed with the Commission and served on all parties to the proceeding by 27 August 1993.
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12. Parties wishing to file any amendments to their submissions filed pursuant to paragraph 5 above may do so, serving copies on all other parties, by 17 September 1993. To the extent that responses to interrogatories filed pursuant to paragraphs 8 and 11 above require material revision as a result of these amendments, such revised responses must also be filed and served by 17 September 1993.
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13. Parties who provide notice of their intention to make one or more witnesses available for cross-examination at the oral public hearing pursuant to paragraph 6 above must notify the Commission of the names of such witnesses, serving copies on all other parties, also by 17 September 1993. The notice is to specify the subject matter to which each witness would be prepared to testify, cross-referenced to the relevant pre-filed material, as well as the proposed order of presentation of witnesses and whether they would appear individually or as a panel.
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14. Parties planning to conduct cross-examination of witnesses at the hearing must notify the Commission of their intention to do so, serving copies on all other parties, also by 17 September 1993.
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15. Where a document is to be filed or served by a specific date, the document must be actually received, not merely mailed, by that date.
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Allan J. Darling
Secretary General
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