ARCHIVED -  Telecom Order CRTC 94-630

Telecom Order

Ottawa, 9 June 1994

Telecom Order CRTC 94-630

IN THE MATTER OF applications by AGT Limited (AGT) under Tariff Notice 240 dated 30 September 1992 and Tariff Notice 241 dated 30 September 1992 proposing revisions in its tariffs for Public Cellular Mobile Radio Systems - Network Access (Cellular Access) and Radio Paging - Network Access (Radio Paging Access).

WHEREAS in AGT Limited - Revenue Requirement for 1992, Telecom Decision CRTC 92-9, 26 May 1992 (Decision 92-9), the Commission directed AGT to file resource cost studies indicating the current causal costs by rate component, along with any proposed rate revisions considered by the company to be appropriate;

WHEREAS AGT filed Tariff Notices 240 and 241 in response;

WHEREAS, by Telecom Order CRTC 92-1549, the Commission granted Tariff Notice 240 interim approval on 5 November 1992;

WHEREAS, by Telecom Order CRTC 92-1560, the Commission granted Tariff Notice 241 interim approval on 5 November 1992;

WHEREAS, following requests for disclosure from Citipage Ltd. (Citipage) and Rogers Cantel Inc. (Cantel), and interrogatories by Cantel and the Commission, Citipage and Cantel filed comments and AGT filed reply comments;

WHEREAS, in determining the proposed telephone number rates, AGT used a working fill factor of 0.31 to calculate the expected average number of assignable telephone numbers within an NNX;

WHEREAS AGT indicated that it viewed this factor as reflecting efficient use of telephone numbers because AGT must accept its current telephone number distribution and the company is actively attempting to extend the life of remaining NNX codes by recovering unused blocks of telephone numbers wherever possible;

WHEREAS Cantel submitted that AGT's own average working fill factor is not relevant to the cost of provisioning cellular telephone numbers and results in an overstatement of the cost;

WHEREAS Cantel maintained that either no provisioning cost is justified because of very low existing number utilization in NNXs, or, in those exchanges in which a higher utilization is achieved, and a new NNX might have to be provisioned, a much higher working fill factor of 0.93, rather than 0.31, should be used to calculate the cost of cellular and radio paging telephone numbers;

WHEREAS the Commission considers that the use of a 0.31 working fill factor would imply that the causal cost of providing a telephone number in AGT territory is essentially zero;

WHEREAS the Commission also considers that the demand for telephone numbers by Radio Common Carriers (RCC) in AGT territory is likely to be in larger centres where telephone numbers can be expected to be in higher demand;

WHEREAS, in the Commission's view, the demand for telephone numbers by RCCs in AGT territory does advance the provisioning of new NNXs;

WHEREAS the Commission's view is that the use of a working fill factor of 0.93 is appropriate in this case;

WHEREAS AGT included the costs of advancement of NNX exhaust in the cost of provisioning a telephone number;

WHEREAS AGT stated that, without the demand for RCC numbers, the growth in demand from all other sources could be accommodated for a longer period before NNX exhaust was reached;

WHEREAS Cantel submitted that it is AGT's own inefficient use of the 403 area code that is causing NNX exhaust in advance of what more efficient number allocation would have warranted;

WHEREAS, in the Commission's view, the inclusion of the NNX exhaust advancement cost in the cost of provisioning a telephone number is consistent with cost causality and with the Commission's previous finding that subscribers should not bear any additional costs arising from the introduction of cellular service with access to the public switched telephone network;

WHEREAS the Commission considers that AGT calculated the cost of advancement of NNX exhaust improperly in its economic studies filed in support of the proposed rates;

WHEREAS the Commission considers the present worth method of calculating the explicit cost of advancement of NNX exhaust to be more accurate;

WHEREAS, in response to a Commission interrogatory, AGT calculated the explicit cost of advancement using this method;

WHEREAS the Commission has included the explicit cost of advancement for purposes of establishing rates;

WHEREAS AGT included a Sales and Sales Support Factor in its costing calculations for RCC Access services;

WHEREAS AGT derived the Sales and Sales Support Factor by comparing its expenses required to sell and maintain products and services to its gross operating revenues;

WHEREAS the Commission is of the view that Sales and Sales Support expense would vary greatly from service to service depending on the complexity of the service, the degree of competition in the provision of the service, etc;

WHEREAS the Commission considers that these expenses are more appropriately estimated explicitly based on the specific circumstances of the service in question rather than through the use of a revenue-based factor;

WHEREAS the Commission has excluded the Sales and Sales Support expenses for the purposes of establishing rates in the current proceeding;

WHEREAS the Commission would be prepared to consider the inclusion of Sales and Sales Support expenses for RCC Access in the future if those expenses were explicitly estimated based on the specific circumstances of the service;

WHEREAS the level of markup included in the rates proposed by AGT varied by rate component;

WHEREAS AGT stated that it developed the rates based on an aggregate view of customer requirements and that while costs were a dominant consideration, it also considered historical rate levels, rates relative to other telephone companies and rates equivalent to access services using trunks;

WHEREAS Cantel submitted that the varying levels of markup embodied in the interim rates have the effect of defeating the development of cost-based rates and reverting to value of service rating principles;

WHEREAS Cantel also submitted that the interim rates bear little or no relationship to underlying costs and that the contribution embodied in the principle elements of AGT's interim rates are excessive and out of line with the levels sanctioned by the Commission in other cellular access proceedings where a 25% contribution markup over costs has been the norm;

WHEREAS Cantel considered that the level of markup should be 25%;

WHEREAS Citipage was also of the view that a fixed level of markup should be embodied in AGT's rates for RCC Access;

WHEREAS Citipage considered that AGT should be required to use the markup level it used for Radio Paging Reserve telephone numbers of 29.3%;

WHEREAS AGT submitted that in Decision 92-9, it was not directed to file cost-based rates, only to file resource cost studies identifying the current causal costs;

WHEREAS AGT submitted that it has conformed fully to the directives of the Commission and has provided detailed support for its rating principles for RCC Access throughout this proceeding;

WHEREAS, in Radio Common Carrier Interconnection With Federally Regulated Telephone Carriers, Telecom Decision CRTC 84-10, 22 March 1984, (Decision 84-10) the Commission stated that where rates are not based on existing General Tariff rates, rates should be cost-based;

WHEREAS the Commission is of the view that a markup of 25% over costs is appropriate;

WHEREAS Citipage submitted that paging systems should not be limited to accessing the network via analogue circuits;

WHEREAS Citipage requested that network access for all RCC users requiring digital access should be through the Cellular Access tariff Item 315, using the rates determined from the resource cost study;

WHEREAS AGT indicated that it allows digital access for RCCs under Public Radio Common Carriers - Network Access Service tariff Item 320 at very similar terms, conditions and rates to those under Item 315;

WHEREAS the Commission is of the view that digital access for radio paging operators should be offered pursuant to the Radio Paging Access tariff Item 330;

WHEREAS AGT's proposed radio paging tariff structure differs from the radio paging tariff structure approved by the Commission for other federally regulated telephone companies;

WHEREAS the Commission has traditionally approved radio paging tariff structures which include a link charge, a General Tariff private line charge, and a telephone number charge;

WHEREAS Cantel submitted that there is no reason, in the current circumstances, to depart from what has become a standard rate structure;

WHEREAS Cantel submitted that since the technology and the nature of the access service are standard across Canada, the only variances in rates should be related to cost differentials, or other circumstances peculiar to the telephone company in question;

WHEREAS AGT submitted that to reject a rate structure simply because it does not conform to rate structures employed elsewhere would ignore the relationship of this service to other AGT services;

WHEREAS the Commission considers that a number of benefits would be derived if the terms and conditions for radio paging interconnection were similar for all telephone companies under its jurisdiction;

WHEREAS the Commission is of the view that the costs of PSTN-originated local usage should be recovered in the radio paging telephone number rate;

WHEREAS AGT supported the adoption of radio paging link charges and General Tariff private line charges;

WHEREAS the Commission considers that the adoption of General Tariff private line charges is appropriate;

WHEREAS AGT provided both analogue and digital radio paging link costs, but did not provide any support for those costs;

WHEREAS the Commission is of the view that AGT's costs for digital radio paging link are reasonable;

WHEREAS the Commission is of the view that AGT's costs for analogue radio paging link are not adequately supported;

WHEREAS, in the absence of support for the analogue radio paging link cost, the Commission considers that AGT's analogue radio paging link rate should be based on the cellular link costs provided by AGT;

WHEREAS the Commission would be prepared to reconsider the analogue radio paging link rate if AGT provides adequate costing support;

WHEREAS Citipage submitted that the rate for wide area paging should be based on cost;

WHEREAS Cantel was concerned that AGT's rate for wide area paging numbers was based on foregone toll revenue and not cost-based;

WHEREAS Cantel submitted that AGT should be required to calculate the cost of wide area paging numbers and apply a 25% markup to produce a cost-based rate;

WHEREAS AGT submitted that the use of projected foregone toll revenue is an appropriate method for rating wide area paging numbers;

WHEREAS the Commission notes that AGT has demonstrated that its wide area paging rates are compensatory;

WHEREAS the Commission notes that wide area paging is a potentially competitive service in Alberta;

WHEREAS the Commission considers that AGT's proposed rates are reasonable;

WHEREAS AGT proposed to recover the local network usage costs associated with delivering PSTN-originated calls to the Cellular Service Operators' (CSO) network in the Cellular Service Network charge;

WHEREAS the Commission has traditionally approved telephone number charges which recover both the costs of provisioning telephone numbers and the incremental local network usage costs associated with delivering PSTN-originated calls to the CSOs' networks;

WHEREAS the Commission considers that a number of benefits would be derived if the terms and conditions for cellular interconnection were similar for all telephone companies under its jurisdiction;

WHEREAS the Commission is of the view that the costs of PSTN-originated local network usage should be recovered in the telephone number charge;

WHEREAS AGT stated that the cost of advancement to add Local Automatic Message Accounting (LAMA) to switches particular to cellular service has been included in the Cellular Link cost;

WHEREAS AGT indicated that the implementation of LAMA had been advanced by one year;

WHEREAS Cantel noted that LAMA is not the only way to provide answer supervision to CSOs;

WHEREAS Cantel submitted that AGT has been furnishing CSOs with answer supervision since 1987 without LAMA investment being advanced;

WHEREAS Cantel stated that, until LAMA was available, a non-LAMA solution for answer supervision would suffice for CSOs;

WHEREAS Cantel stated that AGT indicated that its plans for introducing LAMA, absent a cellular requirement, are based on the requirement for toll Call Management Services, detailed billing capabilities and network modernization for future services;

WHEREAS Cantel submitted that the costs associated with the advancement of AGT's LAMA deployment should be excluded from the resource cost calculations;

WHEREAS AGT claimed that were it currently establishing a new cellular interconnection within its network, the most cost effective method to provide answer supervision would be through advancing the introduction of LAMA;

WHEREAS AGT submitted that LAMA was introduced in 1987 coincident with the roll-out of cellular service in Alberta by Cantel and AGT Mobility and the LAMA was introduced specifically for cellular service, years in advance of when it would otherwise have been provided, in order to accommodate the needs of cellular providers;

WHEREAS the Commission considers that in the absence of the use of LAMA, other costs would have to be included in the Cellular Link charge in place of the LAMA advancement costs;

WHEREAS the Commission is of the view that the inclusion of the LAMA advancement costs in the Cellular Link charge is reasonable;

WHEREAS AGT's service charge for the provisioning of cellular telephone number is a charge per 100 telephone numbers ordered;

WHEREAS AGT stated that the costs per service order do not vary significantly with the number of telephone numbers ordered provided the numbers are obtained from the same serving central office at the same time on a single order transaction;

WHEREAS AGT indicated that it would be prepared to assess the service charge on a per order basis provided that the telephone numbers are obtained from the same serving central office at the same time;

WHEREAS Cantel indicated that it would welcome a restructuring of AGT's service charge for the provisioning of cellular telephone numbers on this basis;

WHEREAS the Commission considers that the restructuring of AGT's service charge for the provisioning of cellular telephone numbers is desirable; and

WHEREAS the Commission notes that the revenue impact of rates below the levels proposed in Tariff Notices 240 and 241 was reflected in the revenue requirement determinations in AGT Limited - Revenue Requirements for 1993 and 1994, Telecom Decision CRTC 93-18, 29 October 1993 -

IT IS HEREBY ORDERED THAT:

1. AGT Tariff Notices 240 and 241 are approved, effective the date of this Order, incorporating the following amendments: i) rates as set out in Attachment 1 to this Order for both Public Cellular Mobile Radio System - Network Access, Item 315, and Radio Paging Network Access, Item 330; ii) the provision of analogue access facilities for Radio Paging - Network Access, Item 330, at rates set out in Competitive Network Services tariff items 1245 and 1815; iii) the provision of digital access facilities for Radio Paging - Network Access, Item 330, at rates set out in the Digital Network Access facilities charge, Competitive Network Services tariff Item 1406 for digital access facilities.

2. AGT is directed to file within 30 days proposed revisions to the Public Cellular Mobile Radio System - Network Access, Item 315, Telephone Numbers Service Charge, such that the service charge would be assessed on a per order basis.

Allan J. Darling
Secretary General