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Ottawa, 29 July 1993
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Telecom Decision CRTC 93-11
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CONTRIBUTION CHARGES EFFECTIVE 1 APRIL 1993
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I BACKGROUND
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In 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 Commission approved the application of Unitel Communications Inc. (Unitel) to provide public switched interexchange voice services in the operating territories of Bell Canada (Bell), BC TEL, The Island Telephone Company Limited (Island Tel), Maritime Telegraph and Telephone Company Limited (MT&T), The New Brunswick Telephone Company Limited (NBTel) and Newfoundland Telephone Company Limited (Newfoundland Tel) (the respondents). The Commission also liberalized the rules governing resale and sharing and extended those rules to apply to the services of the Atlantic telephone companies.
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Based on information filed in the proceeding leading to Decision 92-12, the Commission established contribution charges applicable to facilities-based carriers and to resellers competing in the long distance voice services market. The Commission also directed that, in December of each year, the respondents provide estimates of appropriate contribution charges to come into effect on 1 April of the following year. The respondents were further directed to provide the calculations and forecast information underlying their estimates. The Commission stated that the information described above would be used to determine whether changes to the contribution charges established in Decision 92-12 were required.
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In Telecom Public Notice CRTC 92-67, 19 November 1992 (Public Notice 92-67), the Commission announced a proceeding to consider whether changes to the contribution charges of the respondents were required. The respondents were directed to file proposed contribution charges based on their 1993 Phase III (or equivalent) forecasts. This information was to be filed by 15 December 1992.
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The procedures set out in Public Notice 92-67 contemplated that the Commission would issue a decision prior to 1 April 1993 directing the respondents to file new contribution charge tariffs to take effect 1 April 1993. However, prior to 15 December 1992, the Commission received requests from the respondents to extend this initial filing date.
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By letters dated 10 and 14 December 1992, the Commission granted extensions for the filing of proposed contribution charges and supporting information by the respondents. On 11 January 1993, the Commission issued revised procedures to account for the extensions. Since the extensions made it impossible for the Commission to issue a decision by 1 April 1993, the Commission made interim, effective that date, the contribution charges approved in Decision 92-12.
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The Commission and interested parties addressed interrogatories to the respondents and to Unitel. On 30 April 1993, the respondents, B.C. Rail Ltd. (B.C. Rail), Call-Net Telecommunications Limited (Call-Net), Competitive Telecommunications Association, Government of Ontario, Smart Talk Network (STN), Teleglobe Canada Inc. and Unitel filed comments with respect to the respondents' proposed contribution charges. The respondents and Unitel filed reply comments on 15 May 1993. STN also submitted further comments on 15 May 1993.
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On 22 March 1993, Stentor Canadian Network Management (Stentor) filed an application against Unitel seeking, among other things, an order directing Unitel to pay contribution on cross-border circuits associated with VRoute Service and Broadband Exchange Service (BES). In Telecom Order CRTC 93-615, 29 July 1993 (Order 93-615), the Commission ordered that:
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In the future, Unitel shall report traffic associated with VRoute and BES and Stentor members shall include their services that are similar to VRoute and BES in any related proceeding addressing the calculation of contribution charges.
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The Commission has taken into account the impact of Order 93-615 on the proposed contribution charges filed pursuant to Public Notice 92-67.
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II NEW CONTRIBUTION CHARGES
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With the exception of Island Tel, the respondents filed proposed contribution charges that are approximately 5% to 22% less than those established in Decision 92-12. Island Tel proposed increased contribution charges. B.C. Rail, Call-Net and Unitel submitted that the respondents' proposed contribution charges were too high. No party advocated leaving the contribution charges established in Decision 92-12 in effect.
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Unitel and other parties submitted that some of the assumptions and methods used by the respondents in arriving at their proposed contribution charges are incorrect and should be adjusted. Some of the proposed adjustments were based on actual information that became available during the proceeding. The proposed adjustments would serve to reduce the proposed charges.
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For example, Unitel argued that the Phase III forecasts filed in this proceeding should not include the use of assignment methodologies that had not been approved by the Commission at the time of filing. In this context, Unitel cited (among other things) Bell's proposed treatment of Official Telephone Service (OTS). Another example is Unitel's argument that the Commission should adjust Bell's Phase III forecast to remove the impact of the company's restructured transmission studies in order that Unitel not be penalized for a methodological change designed (in Unitel's view) to increase Bell's Access Category shortfall.
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The respondents submitted that they had complied with Public Notice 92-67 by providing their best estimates based on their corporate budgets for 1993 and that adjustments should not be made to their forecasts. The respondents also argued that the Commission, if it were to make adjustments to the forecasts based on more current information, should consider all information available, and not rely solely on that identified by those parties advocating such adjustments. The respondents submitted that information available to date does not demonstrate that their contribution charge estimates should be adjusted downward, because many of the effects serve to offset each other.
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The Commission notes that the cumulative impact of all of Unitel's proposed adjustments would be to reduce the contribution charge in Bell's operating territory by approximately 34%. Almost one third of this impact is due to Unitel's proposed use of billed minutes in the calculation of contribution per minute.
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The Commission is of the view that conversation minutes provide a more appropriate measure of demand to be used in the calculation of per-minute contribution, since this approach is consistent with the method used by the Commission in Decision 92-12 in developing the contribution rate per interconnecting circuit. The Commission is not persuaded that the remaining adjustments proposed by Unitel and others are appropriate. Regarding Unitel's submission that Phase III forecasts should only include approved updates, the Commission notes that, in Bell Canada and British Columbia Telephone Company - Phase III Matters and Related Issues, Telecom Decision CRTC 89-12, 15 September 1989, it indicated that it is appropriate that Bell and BC TEL use proposed updates when forecasting Phase III results. In any event, the Commission approved Bell's proposed OTS methodology, with modifications, in Telecom Decision CRTC 93-10, 26 July 1993.
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The Commission is not of the view that Bell's restructured transmission studies, which were approved in Telecom Order CRTC 93-216, 15 March 1993, were designed for the purpose of increasing Bell's Access Category shortfall. The majority of the studies in question had not been updated since 1986. In the Commission's view, they required revision to reflect, among other things, changes in network usage and the deployment of new technologies.
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Finally, the Commission considers that the impact of the proposed adjustments is largely offset when factors not addressed by Unitel or other parties are taken into account, such as the timing related to a decision on Bell's Tariff Notice 4494 (see Bell Canada - Transfer of Inside Wire to Premises Owners, Telecom Public Notice CRTC 92-62, 9 October 1992).
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The proposed tariffs filed by the respondents in this proceeding were based on the mechanism adopted in Decision 92-12 for calculating contribution charges. However, the respondents went on to suggest revisions to that mechanism. In particular, they proposed that the Commission reduce contribution discounts, increase the number of minutes per trunk used in the conversion of the per-minute rate into a rate per interconnecting circuit, and adjust the Direct Access Line (DAL) Loading Factor and the DAL Surcharge. The Commission finds consideration of such revisions to be beyond the scope of this proceeding.
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In light of the above, the Commission considers that the per-minute contribution charges proposed by the respondents are reasonable. The Commission therefore approves the following per-minute contribution charges for interconnection with interexchange facilities to provide public long distance services:
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Respondent Cents/Minute/End
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BC TEL 5.120
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Bell 4.361
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Island Tel 5.595
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MT&T 5.901
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NBTel 5.028
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Newfoundland Tel 4.956
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The Commission directs the respondents to issue tariff pages, with rates effective 1 April 1993, based on the per-minute contribution charges shown above.
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III FUTURE PROCEEDINGS
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In this proceeding, several parties submitted that the existing process for determining appropriate contribution charges should be modified to allow for the reconciliation of the forecasted contribution rates to actuals. It was also suggested that the Commission should adjust the contribution charges throughout the year as the respondent telephone companies file unanticipated long distance tariffs that were not included in the forecasts used in determining the annual contribution charges.
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In Decision 92-12, the Commission required the respondents to file, with proposed toll reductions that were not taken into account in their annual contribution charge filings, an estimate of the change in the contribution charge that would result from approval of the toll reductions. Further, the Commission may direct the respondents to file similar information related to other applications that have not been included in the annual contribution charge filings. However, the Commission is not in favour of making adjustments to the contribution charges during the year except under extraordinary circumstances. The Commission adopted the current contribution mechanism with the intention of keeping ongoing regulatory intervention and involvement to a minimum. The Commission concludes that the various reconciliation processes proposed during this proceeding would serve to undermine this objective.
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The Commission recognizes the significant monies being paid to the respondents in the form of contribution charges and shares the concerns expressed by parties regarding forecasting error. However, the Commission agrees with the respondents that there will be deviations from their forecasts attributable to factors other than tariff revisions, and that these other factors could have the effect of either raising or lowering contribution levels. Were the Commission to adjust contribution charges during the year, it would consider it appropriate to take into account all such factors.
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In light of the above, the Commission concludes that, rather than making adjustments throughout the year, it is more appropriate to include an examination of historical variances in the forecasting of contribution charges in future proceedings to determine those charges. Accordingly, in future, the Commission will require parties to file evidence regarding their forecasting accuracy.
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Several parties submitted that the Commission should modify the existing process to require all market participants to submit demand forecasts. Bell noted that no party expressed disagreement with the proposal that all competitors report market share information. It submitted that the Commission should require the filing of information regarding not only market share estimates, but also, for example, minutes associated with DALs.
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The Commission considers it appropriate that competitors provide demand information as part of the annual contribution charge proceeding. Specifically, competitors having at least 0.5% of market share in the previous year will in future be directed, in Public Notice initiating the proceeding, to file historical and forecasted demand information.
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Finally, the Commission is of the view that proposed or anticipated revisions to the Phase III methodologies and assignment procedures that may be incorporated into the companies' forecast Phase III results each December, should be considered in the existing Phase III Update and Review processes, rather than in the context of the annual review of contribution charges. However, in future proceedings to establish contribution charges, the Commission will continue to consider arguments in support of specific proposed adjustments to the contribution charge calculation, as it did during the proceeding leading to Decision 92-12 and in this proceeding.
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Allan J. Darling
Secretary General
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