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TELECOM DECISION
Ottawa, 15 May 1992
Telecom Decision CRTC 92-8
BELL CANADA - 1991 CONSTRUCTION PROGRAM REVIEW
Table of Contents
I INTRODUCTION
II 1991 VIEW OF THE CONSTRUCTION PROGRAM
A. Usage Categories
1. General
2. Demand Category Expenditures
3. Programs Category Expenditures
4. Replacement Category Expenditures
5. Suppport Category Expenditures
B. Nature and Scope of the CPR Process
C. Fibre Optic Provisioning
D. Utilization of Fibre Facilities
E. Switching Equipment Modernization Program
F. Access to Service
G. Bell's Plan to Split NPA 416
1. Background
2. Code Capacity and Demand
3. Code Conservation Measures
4. RCI's Proposals to Defer the Split
5. Adequacy of the Consultation Process and Proposal for a Separate Proceeding
H. Conclusions
I INTRODUCTION
In CRTC Telecom Public Notice 1991-11, 14 February 1991 (Public Notice 1991-11), the Commission announced that it would conduct a review of the construction program (CPR) of Bell Canada (Bell). On 22 March 1991, Bell filed the January 1991 View of its construction program for the years 1991 to 1995, inclusive (the 1991 View), along with other information that the Commission had requested. The review meeting was held on 16, 17 and 18 July 1991. It followed a preliminary meeting at which Bell gave presentations on its current and long term plans for the provisioning of fibre optic transmission system (FOTS) facilities and on utilization for FOTS feeder facilities.
Participants in the 1991 CPR included the Government of Ontario (Ontario), the Government of Quebec (Quebec), Rogers Cable T.V. Limited (RCTV), the Canadian Cable Television Association (CCTA), Rogers Cantel Inc. (RCI) and the Public Interest Advocacy Centre on behalf of the Consumers Fight Back Association, the Ontario Coalition Against Poverty and the National Anti-Poverty Organization (collectively referred to as CFBA). These parties filed comments regarding the reasonableness of the construction program on 30 August 1991. Bell filed its reply on 27 September 1991.
II 1991 VIEW OF THE CONSTRUCTION PROGRAM
A. Usage Categories
1. General
The following table summarizes Bell's construction program by usage category:
1991 1992 1993 1994 1995

Usage Category

($ millions)
Demand 1386.8 1313.6 1346.0 1382.0 1434.0
Programs 494.1 469.9 480.0 490.0 491.0
Replacement 119.2 124.9 128.0 137.0 146.0q
Support 213.8 205.0 201.0 204.0 207.0
Total 2213.9 2113.4 2155.0 2213.0 2278.0
On 28 June 1991, Bell filed an update to the 1991 View (the 1991 View Update). The 1991 View Update indicated variations in forecast expenditures for the year 1991, reflecting a reallocation of capital funds from the demand category to the programs category and increased funding in the programs category. The revised expenditure estimates are as follows:

1991
($ millions)
Demand
    1991 View
    1991 View Update


1386.8

1290.9
Programs/Programmes
    1991 View
    1991 View Update
    


494.1

616.1
Total
    1991 View
    1991 View Update


2213.9

2240.0
A review of demand for the latter part of 1990 and early 1991 indicated that actual demand was weaker than anticipated in the January 1991 View, pointing to approximately 16% lower Network Access Services Net Gain (NASNG) in 1991. Consequently, Bell reduced the projected 1991 demand expenditures by an amount of $95.9 million (6.9%).
In addition, Bell advanced some Switching Equipment Modernization (SEM) expenditures (300,000 additional working lines during 1991 and 1992) in order to take advantage of special discounts offered by Northern Telecom Ltd. (Northern Telecom) on the purchase of digital switching equipment in excess of forecasted quantities. Bell filed with the 1991 View Update the results of an economic evaluation supporting this acceleration. Northern Telecom agreed to ongoing price discounts as long as Bell continues to purchase switching products at an average of 660,000 working lines per year after 1991.
2. Demand Category Expenditures
The 1990 View Update and the 1991 View Update forecasts of capital expenditures allocated to the demand category for the years 1991 and 1992 are as follows:

1991

1992

Total

($ millions)
1990 View Update 1600.3 1619.0 3219.3
1991 View Update 1290.9 1313.6 2604.5
In the 1991 View Update, the total expenditures forecast for the years 1991 and 1992 are 19.1% less than in the 1990 View Update. These planned expenditures represent 59.8% of the total expenditures forecast for this two-year period and are 14.8% lower than the actual expenditures in the demand category for the years 1989 and 1990.
For the two-year period 1991-1992, the 1991 View forecast of NASNG is 13.8% less than in the 1990 View, and the forecast of Long Distance Message volume is 9.8% less. In the 1991 View Update, there was a further reduction of 16% in forecast NASNG for the year 1991. Therefore, for the two year period 1991-1992, the updated forecast of NASNG is 20.4% less than in the 1990 View. The expenditure reductions correspond to lower demand projections.
3. Programs Category Expenditures
The 1990 View Update and the 1991 View Update forecasts of capital expenditures allocated to the programs category for the years 1991 and 1992 are as follows:

1991

1992

Total

($ millions)
1990 View Update 524.0 512.0 1036.0
1991 View Update 616.1 469.9 1086.0
In the 1991 View Update, the total expenditures forecast for the years 1991 and 1992 are 4.8% greater than in the 1990 View Update. These planned expenditures represent 25% of the total expenditures forecast for this two-year period and are approximately 13.1% higher than the actual expenditures in the programs category for the years 1989 and 1990. The expenditure increase is largely due to the proposed SEM acceleration.
4. Replacement Category Expenditures
The 1990 View and the 1991 View forecasts of expenditures allocated to the replacement category for the years 1991 and 1992 are as follows:

1991

1992

Total

($ millions)
1990 View 124.5 136.0 260.5
1991 View 119.2 124.9 244.1
In the 1991 View, the expenditures forecast for the years 1991 and 1992 are 6.3% less than in the 1990 View. These planned expenditures represent 5.6% of the total expenditures forecast for this two-year period and are 13.5% higher than the actual expenditures in the replacement category for the years 1989 and 1990.
5. Support Category Expenditures
The 1990 View and the 1991 View forecasts of expenditures allocated to the support category for the years 1991 and 1992 are as follows:

1991

1992

Total

($ millions)
1990 View 222.0 224.0 446.0
1991 View 213.8 205.0 418.8
In the 1991 View, the expenditures forecast for the years 1991 and 1992 are 6.1% less than in the 1990 View. These planned expenditures represent 9.6% of the total expenditures forecast for this two-year period and are 2.8% lower than the actual expenditures in the support category for the years 1989 and 1990.
B. Nature and Scope of the CPR Process
The 1991 CPR included a detailed review of the nature and scope of the existing process. A similar review is being undertaken in the 1992 British Columbia Telephone Company (B.C. Tel) CPR, which is currently in process. The Commission's decision with respect to the CPR process will be based on the combined record of these two proceedings and will be issued after the record of the 1992 B.C. Tel CPR is complete.
C. Fibre Optic Provisioning
In Bell Canada - 1990 Construction Program Review, Telecom Decision CRTC 90-27, 30 November 1990 (Decision 90-27), the Commission noted the concerns of certain parties regarding the proposed deployment of fibre optic technology, particularly in the access network. In light of these concerns, the Commission directed Bell to provide, at the preliminary meeting of the 1991 CPR, a presentation on its policy and plans for fibre provisioning.
The 1991 View forecast expenditures for fibre facilities are as follows:
1991 1992 1993 1994 1995

($ millions)
Access Facilities 59.7 55.0 61.8 66.6 72.2
Metro Interoffice Facilities 68.5 69.7 59.4 62.5 65.4
Inter-City Facilities 67.3 43.9 51.0 52.1 50.0
Total 195.5 168.6 172.2 181.2 187.6
The 1990 View and 1991 View forecast expenditures for fibre access facilities are as follows:
1991 1992 1993 1994 1995

($ millions)
1990 View 53.6 26.0 31.0 36.0 N/A
1991 View 59.7 55.0 61.8 66.6 72.2
RCTV submitted that fibre placement for "strategic" routes has expanded well beyond the original intent and that related spending accounts for a large portion of access network expenditures. RCTV further submitted that these expenditures will continue to increase in future, despite the lack of economic justification. RCTV stated that these expenditures should be allocated to the programs category. In support of its position, RCTV referred to Bell's Construction Program Management System document of 23 March 1989, and suggested that the strategic fibre program is similar to the SEM program, which has been justified by economic evaluations required by the Commission.
RCTV submitted that, at least on an aggregate basis, strategic fibre access expenditures should be recovered from the revenues for Megaplan services in order to ensure that Bell does not offer competitive services at below-cost rates.
In reply, Bell stated that the actual and forecast expenditures for fibre access facilities were $53.9 million and $59.7 million for 1990 and 1991, respectively, which represents approximately 10% of total access network expenditures for those years. Bell submitted that RCTV has no basis for suggesting that strategic fibre expenditures account for a large portion of access network expenditures and noted that, at year-end 1990, only 1.6 % of all cable expenditures were attributable to fibre deployment in the access network. Bell further submitted that the cross-over point between selecting fibre over copper is moving gradually but consistently towards increased fibre deployment.
In response to RCTV's submission that strategic fibre expenditures should be recovered from Megaplan service revenues, Bell stated that fibre installed on strategic routes is used to provide a range of services in addition to Megaplan services. Bell submitted that the attribution of all expenditures for fibre routes, strategic or otherwise, to one service or a special group of services, such as Megaplan, would contravene the principles established by the Commission in Phase II of the Cost Inquiry. Bell noted that cost and revenue information filed in confidence with the Commission as part of the tariff filing for Megaplan services demonstrates positive contribution levels.
In the Commission's view, the primary issue to be determined is whether the capital investment in strategic fibre routes should be categorized as programs expenditures and thus require economic justification in the form of net present value (NPV) studies. The Commission considers that the allocation of these expenditures to the demand category is justified, since installation is generally triggered by demand for new, high bandwidth services. This does not resemble the SEM program, since the older copper is not replaced, except where the existing facilities cannot accommodate service demand and overbuilding or replacement of existing copper with fibre is the most cost-effective and practical approach. Generally, the Commission does not require economic justification of demand-driven expenditures with NPV studies, but does expect cost justification in the form of Present Worth of Annual Costs (PWAC) studies. Based on the evidence provided in this CPR, the Commission considers the existing types of studies used to support demand expenditures adequate to justify strategic fibre expenditures.
Furthermore, the Commission agrees with Bell that fibre deployment in lieu of copper is increasingly economical. The Commission notes Bell's evidence that annual expenditures on fibre access facilities currently amount to only about 10% of total access network expenditures and that strategic routes make up only a minor portion of access fibre. The Commission also notes that access fibre expenditures currently represent about 2.7% of the total annual construction program expenditures.
Based on the evidence provided, the Commission finds Bell's forecast expenditures for fibre access facilities to be reasonable.
Since other services besides Megaplan are delivered on strategic routes, the Commission is of the view that cost recovery should be on a shared facilities basis in accordance with Phase II costing principles. The Commission notes that the relevant Phase II Directive on cost estimation requires that the costs of fixed common resources be estimated on the basis of the proportion of the demand by a new service relative to the demand by all services employing the resource. The Commission considers that shared facilities costs should be recovered on the same proportional usage basis. Therefore, the costs associated with the provisioning of strategic fibre access routes should not be recovered entirely from Megaplan service revenues. The Commission notes that information included in the tariff filing demonstrates positive contribution levels for Megaplan services.
The Commission considers Bell's responses to the other concerns and suggestions of RCTV to be adequate. Although Bell did not respond directly to the comments of CCTA and CFBA, the Commission notes that their concerns and submissions were similar to those of RCTV.
D. Utilization of Fibre Facilities
In the 1989 CPR, Ontario questioned the effectiveness of the existing utilization measure for fibre facilities and suggested that Bell should develop measurements that would more accurately reflect the total capital investment. Bell replied that the existing measure used for the trunk network, which is based on the ratio of assigned to energized channel-kilometres, accurately and appropriately reflects the capital investment, since the dominant cost is for electronics. Bell pointed out that the equivalent capacity of a spare fibre pair is not readily definable, since it depends on the multiplex equipment employed and is steadily increasing as the technology evolves. Bell was of the view that it would be inappropriate to include all fibre cables in the utilization measurement. In Bell Canada - 1989 Construction Program Review, Telecom Decision CRTC 90-8, 20 April 1990, the Commission agreed with Bell's submission, but expressed the view that additional measures, based on the ratio of energized to total installed fibre, might be useful in providing an indication of flexibility for the future use of such facilities. The Commission therefore directed Bell to report on the feasibility of developing a measure expressing the proportion of energized to installed fibre-kilometres.
Bell subsequently filed a report addressing the feasibility of introducing a Fibre-Kilometre Utilization measurement (defined as the ratio of assigned to total fibre-kilometres). Bell reported that it does not have sufficient data to determine such a measure in the access network, and submitted that the topology of the access network inhibits the production of data sensitive to cable length. Bell reported that such a measure could be produced for the trunk network, but that it would not be meaningful, since it would not yield an effective indication of the future flexibility of fibre facilities. Bell submitted that its existing measure, based on Equivalent Voice Frequency (EVF) channel-kilometres, is the most effective and meaningful indicator of investment efficiency.
In commenting on Bell's report, interested parties contended that additional measures, even if imprecise, are warranted and necessary. Specifically, RCTV contended that Bell has the data required to measure fibre-kilometre utilization in the access network. RCTV submitted that the fibre-kilometre measure is relevant and necessary to enable the Commission to assess whether Bell is provisioning fibre in an optimal manner. Ontario acknowledged the problems of measuring fibre-kilometre utilization in the access network, but submitted that the deployment of fibre in the feeder portion of the access network is sufficiently important to require monitoring and reporting of the relative mix of fibre and copper facilities. Bell responded that it was continuing to investigate additional fibre utilization measurements.
Following receipt of the report and comments, the Commission announced that, although it found the current measure effective and useful, it intended to explore possible complementary measures. The Commission stated that it expected Bell to continue to develop such measures and that it would review the company's progress in the 1991 CPR. Accordingly, the Commission deferred its decision on the requirements for fibre utilization measures pending the company's presentation in this CPR on fibre provisioning and further review of the related issues.
In its presentation, Bell addressed specific proposed utilization measures for FOTS feeder facilities. Bell stated that its established EVF channel-kilometre measure for interoffice trunks is a composite indicator that is both attainable and practical. Bell noted that it is independent of technology and indicates the proportion of energized fibre in service to the total energized fibre available, although it does not account for installed unenergized (dark) fibre facilities. All of the information required to evaluate this indicator can be extracted from the company's existing trunk network databases.
Bell pointed out that the established access network "utilization" measurement (defined as the ratio of assigned to available pairs, measured at the Central Office (CO) wall) excludes both FOTS facilities and remote units. Because of the increasing base of customers served by FOTS and remote facilities, Bell acknowledged the need to examine new measures.
Bell proposed a composite access utilization measure based essentially on the ratio of assigned to available EVF channels. Bell considered the CO wall still a valid point for Voice Frequency (VF) pair measurement, but was of the view that the measurement of assigned and available EVF channels for both LD-1 and FOTS carrier facilities should be made at the jumper wire interface, where the feeder and distribution facilities are interconnected. Bell stated that, if the proposed measure were accepted, it would begin to develop detailed procedures and provide measurements based in 1992 on a manual count and in 1993 on a mechanized count.
RCTV stated that the proposed composite measure is inadequate since it accounts for neither the amount of dark fibre nor the total potential capacity of energized fibres. RCTV proposed the adoption of a technology penetration measure, such as the ratio of energized to total fibre-kilometres, to monitor fibre penetration in the access network and indicate the availability of dark and energized fibre. RCTV submitted that a technology penetration measure is necessary to determine whether Bellis over-provisioning access fibre in order to increase the use of Megaplan services and advantageously position the company for future competitive service offerings. RCTV further submitted that Bell has overstated the proportion of electronic equipment costs and the level of complexity associated with measuring fibre penetration in the access network.
CCTA argued that the proposed composite measure is deficient because channels assigned are virtually the same as channels available (due to the modular addition of capacity to a remote switch) and because it does not indicate the amount of dark fibre installed. CCTA noted that the number of available EVF channels on a DMS-1U remote facility depends on the quantity of plug-in units, and submitted that Bell's proposed measure should be modified to account for the ultimate capacity of the DMS-1U or equivalent. CCTA further submitted that Bell should be required to provide a measure indicating the relative proportions of energized and dark fibre-kilometres.
Ontario suggested that a reasonable approach would be to measure the ratio of fibre pairs to total pairs at the CO wall and to indicate the relative amounts of energized and dark fibre.
Quebec considered a fibre penetration measure essential. While acknowledging possible difficulties with measuring fibre-kilometre utilization in the access network, Quebec argued that the strategic importance of fibre deployment necessitates monitoring the relative proportions of fibre and copper cable facilities, as well as some indication of the relative proportion of energized to total fibre facilities. Quebec submitted that Bell should be required to re-assess its position with respect to a fibre-kilometre measure and report in detail the difficulties associated with collecting the necessary data.
In reply, Bell argued that an effective utilization measure should reflect all relevant capital expenditures and be useful in making decisions on attainable investment choices. It also argued that RCTV's proposed penetration measure would ignore most FOTS access network expenditures and would therefore be virtually meaningless. Bell noted that, because only a limited number of discrete fibre cable sizes are available, properly planned provisioning inevitably results in some unused fibres in any fibre cable at some point in time. Bell submitted that, because feeder routes have a complex architecture, the resources required for comprehensive measurements of all fibre cable spans to calculate the fibre-kilometre ratio would outweigh any possible benefit that might accrue.
In response to CCTA's submissions, Bell stated that it does not expect the value of the proposed composite measure to approach 100%. Bell noted that, when a DMS-1U facility is employed as a pair gain system, the capability to adjust utilization is quite limited because of the restricted number of available unit sizes. Bell also noted that the ultimate capacity of a DMS-1U depends on the type of traffic carried.
Bell submitted that considerable manual effort would be required to collect the data to compute Ontario's suggested measure. Bell stated, however, that it is reviewing enhancements to its Plant Assignment and Inventory Record System that would allow recording the ratio of energized to dark fibre strands at the CO wall. Bell noted that, if such data were compiled, the ratio of fibre pairs to total pairs would provide one possible indication of fibre penetration. However, Bell questioned the value of such a measure, since it would not reflect the significant differences in the traffic carrying capacity of fibre and copper pairs. Bell considered the percentage of assigned VF channels carried by fibre facilities a more meaningful indication of fibre penetration in the feeder portion of the access network. Bell submitted that, if a fibre penetration measure is considered necessary, it would be appropriate to separate LD-1 and FOTS EVF channels in order to measure channels on fibre relative to total access channels, rather than establishing a penetrationmeasure based on the ratio of fibre to total pairs at the CO wall.
In response to the request for a report on the difficulties in capturing distance-sensitive data in the access network, Bell submitted that the problems have been fully documented and explained.
In the Commission's view, the composite access measure would be useful, since it would reflect the major expenditure components and would also provide a more comprehensive indicator than the current access network measure, which does not track either FOTS or remote facilities. This measure would combine data covering both fibre and copper facilities and thus would indicate provisioning efficiency for all access facilities, rather than just fibre. Accordingly, the Commission considers the proposed composite access network utilization measure reasonable. Bell is directed to commence implementation of the necessary procedures to measure and report such information in future CPRs. The Commission considers the reporting of two-year actual and two-year forecast information appropriate, with reporting to commence upon the implementation of measurement capability. Actual data is to be reported as it becomes available.
The Commission agrees with Bell that a distance-sensitive utilization measure for the access network would not be meaningful or practical. The Commission also agrees that the topology of the access network seriously inhibits the production of distance-sensitive data and that existing access network assignment records currently do not contain such data. The Commission considers a report addressing the difficulties in the collection of distance-sensitive data unnecessary. The Commission is of the view that a fibre-kilometre utilization measure would not be meaningful or useful, even in the trunk network, since spare capacity and the measure itself would vary significantly with the multiplexing equipment chosen to serve growth or to upgrade existing systems to higher capacity. Accordingly, the Commission will not require the development and reporting of a fibre-kilometre utilization measure.
The Commission is of the view, however, that additional reporting on access fibre, complementing the composite measure, would be useful. The Commission agrees with Bell that the most meaningful indication of fibre penetration in the feeder portion of the access network would be a measure reflecting the percentage of total assigned VF channels carried by fibre facilities. Hence, the Commission considers it appropriate to separate LD-1 and FOTS EVF channels to indicate the proportion of channels on fibre relative to total access channels. Accordingly, Bell is directed to develop and report in future CPRs, separately for the access and interoffice trunk networks, a measure indicating the ratio of EVF channels on fibre to total EVF channels at the CO wall. The Commission considers the reporting of two-year actual and two-year forecast information appropriate, with reporting to commence upon the implementation of measurement capability. Actual data is to be reported as it becomes available.
The aforementioned measure would be useful for tracking the extent of fibre deployment in the access network, but it would not provide any indication of the relative amounts of energized and dark fibre, nor would it reflect the major portion of the capital invested in FOTS access network installations. Bell is directed to develop and report in future CPRs, separately for the access and interoffice trunk networks, a measure indicating the relative proportions of energized and dark fibre strands at the CO wall. Again, the Commission considers the reporting of two-year actual and two-year forecast information appropriate, with reporting to commence upon the implementation of measurement capability. Actual data is to be reported as it becomes available.
The Commission considers Bell's responses to CCTA's other specific concerns to be adequate.
E. Switching Equipment Modernization Program
CFBA noted that $1.4 billion has already been expended on the SEM program and that, when it is completed in 1995, the total cumulative expenditures will be approximately $2.8 billion. CFBA questioned whether these expenditures have been sufficiently justified in this and previous CPRs. CFBA stated that the disclosure and scrutiny of cash flow data are necessary for the ongoing examination and testing of key study assumptions.
CFBA further submitted that economic studies for major capital programs, such as SEM, should be updated regularly and should include information relating to annual cash flows, expected annual depreciation for the project, accelerated depreciation of replaced equipment and the incremental revenue requirement impact of the project.
CFBA analyzed the projected cash flows for Bell's 450 Plan (increased from 316,000 to 450,000 analogue working lines replaced annually) and the further accelerated 660 Plan (increased from 450,000 to 660,000 analogue working lines replaced annually) and critiqued the ancillary economic studies. CFBA developed and submitted, for each Plan, various cash flow and revenue requirement impact data. Based on these data, CFBA concluded that, although customers would benefit with either Plan, break even in revenue requirement terms will not occur until 1994 for the 450 Plan and not until 1996 for the 660 Plan. CFBA submitted that, without a more detailed assessment of the implicit assumptions regarding the future cost of switching equipment, the actual revenues generated by new digital services relative to projected revenues, the actual expense savings, and the accelerated depreciation impact on revenue requirement, it is not possible to determine whether or not the current level of investment in SEM is reasonable. CFBA also contended that additional, unstated assumptions made in the 1989 study could not be identified except by examining projected cash flows. Specifically, CFBA stated that the company's assumptions regarding the downward trend in the price of digital equipment and the magnitude of post-2004 expense savings are revealed by the cash flow information, but not by the original study material provided.
Bell stated that, since the SEM study results were based on net projected cash flows of two mutually exclusive alternatives, there are no "actual" cash flows to compare with study projections. Bell stated that the rejected alternative has no associated cash flows, and that actual cash flows for the selected alternative may not be readily identifiable due to the company's accounting systems and practices.
Bell submitted that the results of the 1989 SEM study are still valid. Bell noted that its general methods and procedures, as prescribed by the Commission, are described in the Procedures Manual for Economic Studies of New Services. Bell further submitted that CFBA's analysis and criticism of the economic study is not based on the application of these procedures and that, consequently, most of the data produced by CFBA are inconsistent and misleading.
The Commission notes that the ongoing provision of actual cash flow data is not feasible, since there are only relative cash flows for further SEM acceleration and these cannot be readily identified. The Commission notes that projected annual maintenance costs for the various switching technologies were provided in interrogatory responses in previous CPRs; therefore, the actual results can be compared with the original projections. The Commission also notes that, in 1990, the actual maintenance cost savings achieved through the deployment of DMS switching technology were greater than SEM study projections. As indicated in the company's reports, revenues for Call Management Services (CMS) have significantly surpassed the initial demand forecasts and, although CMS is the only digital-dependent service considered in the SEM study, other services will add further SEM revenues. The Commission is of the view that SEM expenditures are being adequately scrutinized and that the 1989 study results remain valid.
The Commission is of the view that Bell has correctly noted errors and omissions in CFBA's cash flow analysis, which led to erroneous conclusions on the part of CFBA regarding the SEM study assumptions. In its decision on the CPR process, the Commission will address CFBA's submission that economic studies for major programs should include certain specific additional information and should be updated regularly.
The Commission finds the forecast expenditures for the SEM program reasonable.
F. Access to Service
In the 1990 CPR, Bell described its plans to extend service to 146 communities of 30 or more dwellings in the Ontario and Quebec regions that were not provided with primary exchange service. In Decision 90-27, the Commission expressed concern that, while Bell planned to serve 97 of these communities by year-end 1991, one-third of them would remain without service at that time.
Bell updated its serving plans in this proceeding, indicating that it did not now expect to serve, by year-end 1991, about one-third of the 97 communities originally scheduled for the provision of service. Service for 24 of these communities is now re-scheduled to 1992. However, Bell noted that, in 1990, it served numerous communities of less than 30 dwellings.
Bell stated that its plans for unserved areas may change considerably, given the process for establishing serving priorities, and that extension of service also depends upon other factors such as customer acceptance of construction charges, the number of requests for service and the cost of service provision. Bell stated that the dates identified in the 1990 CPR did not represent firm commitments to extend service, but were based on the field engineering plans for the next year.
In this proceeding, Bell identified about 135 communities of 30 or more dwellings that do not have primary exchange service. These include the 35 communities previously identified for the extension of service, but not yet served, and 40 additional communities not identified in the 1990 CPR. Bell suggested that these 40 unserved locations may not have been identified to the Commission because the company inventories communities on a three-year cycle, because some may be new developments, and because some may be communities that had less than 30 dwellings but have since grown in size.
Bell plans to serve about half of these communities by the end of 1992 (this includes communities that remain scheduled to receive service in 1991). Bell also provided information in this proceeding on 161 unserved communities of less than 30 dwellings that have requested service. Bell has provided service, or plans to provide service by year-end 1992, to about half of these 161 communities. Of the communities that Bell does not plan to serve by the end of 1992, all those with 30 or more dwellings, and about three-quarters of those with less than 30 dwellings, were characterized as seasonal.
The estimated cost to serve communities scheduled to receive service ranges from $20,000 to over $2 million per community, and from $500 to $28,600 per dwelling. The estimated average cost per dwelling is $4,000. Bell stated that, because of the extreme variations in the costs of service provision, these estimates do not necessarily represent the cost to serve communities for which engineering designs have not been produced.
Bell suggested that Citizens Band (CB) radio (with emergency channels monitored by provincial police) is a viable way for unserved communities to access public emergency services. Bell considered toll telephone service only an interim alternative to primary exchange service, and noted that requests are generally for primary exchange service. The company's preferred serving option for virtually all unserved communities is primary exchange service.
The Commission continues to have the concerns it expressed in Decision 90-27 regarding extension of service. Bell has no current plans to provide service by the end of 1992 to about half of the unserved communities of 30 or more dwellings. The Commission does not consider CB radio a viable means by which to access public services in an emergency, given its limited range of reliability.
The Commission notes that Bell identified 40 additional communities of 30 or more dwellings in this proceeding. The Commission also notes that, in information submitted in response to an undertaking, Bell re-characterized the nature of several communities (from predominantly annual to predominantly seasonal), and indicated that one community, Matinenda Lake, Ontario, has exchange radio-telephone service available to it, although this was not identified at the time of the company's initial response.
The Commission considers it important that a comprehensive inventory of all unserved areas in the Ontario and Quebec regions be developed. Accordingly, the Commission has, by letter dated 13 May 1992, directed Bell to file and to serve on the parties to this proceeding and to the 1992 CPR, by 10 September 1992, a report providing detailed information with respect tothe provision of service to unserved and underserved communities. The Commission intends to continue to pursue, through the CPR process, the issue of access to service for unserved areas.
G. Bell's Plan to Split Number Plan Area 416
1. Background
In March 1991, Bell announced its plan to split the 416 area code around Toronto, effective 4 October 1993. Bell's projected capital expenditures for the split are $6.5 million. Although no separate capital allocation for this project has been made, the 1991 view includes the required funding. Based on 1990 forecasts, Bell determined that the available CO codes in Number Plan Area (NPA) 416 would exhaust in 1994, by which time the NPA must be split. Bell proposes to retain the NPA 416 designation for Metropolitan Toronto and use NPA 905 for the balance of the current NPA 416 territory. Bell submitted that this approach would ensure adequate capacity for growth in both Toronto and surrounding areas for at least another 20 years. In December 1990, NPA 905 was assigned to Bell by Bell Communications Research (Bellcore), which coordinates NPA code assignments in North America. This new NPA is to be allocated in October 1993 to allow a period of permissive dialing and special intercept of misdialed numbers.
2. Code Capacity and Demand
RCI challenged Bell's assumptions on the number of available codes and the forecast demand for new ones. According to RCI, Bell has significantly overestimated the point at which NPA 416 will be exhausted.
Bell stated that, of the 792 NXX codes theoretically available in NPA 416, only 755 are usable.
The Commission considers Bell's response to RCI's concerns regarding code capacity and demand to be adequate.
3. Code Conservation Measures
RCI submitted that additional use by Bell of the 12 Bellcore code conservation measures could further forestall the exhaustion of NPA 416 codes and defer the need for the split. RCI contended that, although no new codes have been opened for rate determination purposes since the 1970s, 10 such codes still exist, and that the recapture of these codes could further defer NPA 416 code exhaust by as much as six months.
Bell filed documents outlining, for each of the Bellcore code conservation measures, the actions taken by the company to conserve CO codes. Bell stated that the 10 codes referred to by RCI are required for rate determination in COs in the Metropolitan Toronto, Brampton and Mississauga areas. Bell submitted that these codes are efficiently used and that recapture, even if possible, would not appreciably change the expected exhaust date.
Based on the evidence provided, the Commission is of the view that Bell has properly considered and applied the Bellcore code conservation measures.
4. RCI's Proposals to Defer the Split
RCI submitted that the split could be deferred by creating a separate NPA for mobile service providers, to include all cellular, paging and personal communications numbers throughout Canada.
RCI submitted that deploying NPA 905 for mobile service exclusively would provide a long term solution to the code exhaustion problem, meet Canadian requirements, satisfy Bellcore, and alleviate the inconvenience of mobile service subscribers undergoing more than one number change. RCI offered to negotiate an agreement with Bell on issuing telephone numbers in the 905 area code to its cellular and paging subscribers. RCI envisaged all cellular and paging growth, within Bell's proposed boundaries for NPA 905, being placed on NPA 905 well before NPA 416 exhaust. RCI stated that the cellular industry would also consider gradually converting existing subscribers to NPA 905 to reclaim CO codes currently in use. RCI anticipated that this deployment approach could defer the split by as much as one year.
RCI contended that Bellcore guidelines concerning the assignment of new codes offer considerable flexibility, provided that such codes are efficiently used. RCI argued that Bell portrays the guidelines more stringently than Bellcore intended. RCI stated that the three available NPA code relief alternatives, as set out by Bellcore, are to realign NPA boundaries, split the existing NPA, and introduce or overlay a new NPA on the same geographic area as an existing NPA. RCI noted that the Bellcore guideline for assessing code relief alternatives requires that the option chosen should provide relief for at least seven to 10 years. RCI conceded that its proposed separate NPA for mobile service would not provide relief for seven to 10 years, but submitted that it is entirely consistent with the intent of this guideline. RCI argued that the only end users affected by such a change would be mobile service subscribers and that they would experience no anticipated need for future number changes.
RCI stated that contrary to Bell's suggestion, there is no outright prohibition on non-geographic NPAs and that the overlay technique for code relief permits the use of a new NPA over more than one existing area code. RCI expressed the view that a nationwide mobile NPA or special access code would also decrease customer confusion associated with mobile services.
RCI noted that the North American Numbering Plan (NANP) is currently undergoing a major review in anticipation of the availability of 640 new NPA codes in 1995. RCI submitted that the benefits of a separate NPA would outweigh other concerns, especially in light of the availability of new area codes in 1995.
RCI also argued that, without supporting economic justification of the expenditures associated with the split, the Commission cannot assess the reasonableness of the company's plan. RCI submitted that the Commission should reject the plan as presented and require Bell to provide a detailed analysis of the alternatives and their associated costs. RCI suggested that Bell should have determined the most cost-effective method of code relief by considering the short and long term costs incurred by the company, subscribers and other users. RCI submitted that Bell made no attempt to quantify the financial impact of its plan, or the alternatives, on customer groups. In RCI's view, this would require an extensive canvassing of the options and meaningful consultations with affected parties. RCI further submitted that numbers are a public resource and, as such, their allocation and usage should be subject to thorough public scrutiny.
RCI concluded that the most cost-effective method was not chosen because Bell has not aggressively used available conservation measures, has not considered reductions in CO code demand, and does not intend to maximize the use of all available codes in NPA 416. In RCI's view, corrective action in these areas would permit deferral of the split to at least 1995 and would save approximately $4 million. RCI stated that customers would also realize substantial savings.
Bell stated that the CPR record gives no indication that other Canadian mobile service providers consent to or support RCI's proposal that a separate NPA be created for mobile service providers.
Bell stated that it designed its plan to adhere to the guidelines; otherwise, Bellcore probably would not have approved its proposed split and assigned NPA 905. Bell asserted that, contrary to RCI's contention, all telephone and mobile service users would be affected by the creation of a separate NPA for mobile service, since 10 digit dialing would be required for all calls from a landline to a mobile line or, vice versa, and every mobile customer in Canada would receive a new number. Bell contended that RCI overlooked the fact that mobile service NXX codes are not protected between NPAs and that code changes would thus be necessary where the same NXX codes were used for mobile services in different metropolitan areas. Bell also contended that RCI's approach would increase rather than decrease customer confusion, since landline customers calling a mobile customer might incur long distance charges without being aware of their applicability. With respect to the suggestion that Bellcore could consider service-specific approaches to NPA assignment if certain prerequisite conditions were satisfied, Bell submitted that there is no evidence in this proceeding to indicate that any of these conditions have been, or soon would be, met.
Bell asserted that a prime consideration in developing its plan was the customer impact. Bell stated that it found no feasible alternative that would result in fewer customer number changes and still provide seven to 10 years relief. Bell noted that a distinct mobile service NPA would involve the introduction of two new NPAs in the existing 416 area within a relatively short period and would require a number change (new NPA and possibly NXX) for every mobile customer in Canada. Bell asserted that all options were fully considered to ensure selection of the most cost-effective solution. This included discussions with representatives in other NPAs with similar situations and with the NANP Administration Organization.
Bell submitted that the possibility of long term numbering plan changes is no reason to delay implementing its plan to address the immediate NPA 416 exhaust problem under current Bellcore guidelines.
Bell pointed out that demand forecasts vary over time and there must be a reasonable margin to meet the growth requirements for landline and mobile numbers. Bell submitted that deferral of the split to 1995 is simply not feasible because the number of available NXX codes is below the January 1994 requirement. Bell further submitted that October 1993 is already somewhat late for relief in light of the recommended margin of a one-year contingency for demand volatility.
In the Commission's view, RCI has failed to demonstrate that Bell has incorrectly interpreted the Bellcore criteria. The Commission agrees with Bell that corrective action cannot be delayed based on the possible development of post-1995 Bellcore guidelines or future numbering plan changes.
The Commission notes that utilization of a service-specific NPA would require extensive coordination among all service providers, and considers that significant customer confusion could still result. The Commission does not find RCI's arguments concerning the Bellcore guidelines convincing. Although Bellcore guidelines may change in the future, the proposed NPA 416 conforms to the current guidelines, which is not the case with a separate NPA for mobile service. Accordingly, the Commission does not accept RCI's arguments with respect to the interpretation and application of the guidelines.
In light of the above, the Commission rejects RCI's proposals for the creation of a separate NPA for mobile services. In addition, the Commission considers RCI's suggested short term deferral, based on code conservation, reductions in code demand and maximized use of codes, to be unrealistic. Accordingly, the Commission does not accept RCI's submission in this regard.
5. Adequacy of the Consultation Process and Proposal for a Separate Proceeding
RCI expressed concern that Bell did not adequately canvass alternatives to its proposed split and consider the impact on its customers. While acknowledging that certain consultations prior to completing the network plan in June 1990 may have been intended to solicit input, RCI contended that subsequent consultations, particularly those that took place after the December 1990 assignment by Bellcore, were clearly educational in intent.
RCI argued that, although the change implies inconvenience and expense for all telephone subscribers, only cellular subscribers must incur additional costs for reprogramming their telephones for the new area code. RCI noted that Bell's plan envisages a very limited period to convert cellular telephone numbers, compared to the four to six years permitted in New York. RCI suggested that Bell should permit a similar interval.
RCI also stated that, although it was made aware that code relief would be required in the 1990s, it was not advised until February 1991 that this would occur in 1993.
RCI submitted that a separate proceeding is warranted, in light of shortcomings in the consultation process, limited input from affected parties, and the lack of evidence from expert witnesses during this proceeding. RCI suggested that this issue may lie outside the scope of the CPR since there is a need to solicit input from various affected parties and to hear testimony from several witnesses, including Bellcore.
Bell noted that, although the split was not publicly announced until March 1991, advance information was provided to the Radiocom Association in April 1989 and further information was provided to cellular companies in February 1991. Bell also noted that the proposed split was first raised in the 1988 CPR in the context of original plans to accelerate SEM. In addition, Bell stated that RCI did not avail itself of opportunities presented by the 1989 and 1990 CPRs to express any concerns or attempt to present evidence in support of its proposed alternative. Bell noted that the majority of RCI's cellular customers in NPA 416 are served from switches in Toronto and will have no number change or equipment modification costs. Bell stated that only cellular customers served from the company's Hamilton and Oshawa switching centres will be required to change their area code.
Based on the evidence submitted, the Commission cannot draw any conclusions on the adequacy of the consultation process. However, in the Commission's view, the evidence does not indicate that Bell failed to consider alternative approaches. Furthermore, the Commission considers Bell's response to RCI's concerns regarding customer impact to be adequate. The Commission considers the initiation of a separate proceeding to address numbering issues unnecessary. Any further review of the associated expenditures can be undertaken in the CPR process.
H. Conclusions
Having considered all of the evidence before it, the Commission finds Bell's 1991 View of the construction program, as modified by the 1991 View Update, reasonable.
Allan J. Darling
Secretary General
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