ARCHIVED -  Telecom Public Notice CRTC 1994-16

Telecom Public Notice

Ottawa, 16 March 1994

Telecom Public Notice CRTC 94-16

REVIEW OF PHASE III

I INTRODUCTION

A. General

In the proceeding initiated by Review of Regulatory Framework, Telecom Public Notice CRTC 92-78, 16 December 1992 (the Regulatory Framework proceeding), matters relating to Phase III of the Cost Inquiry were among the subjects considered in detail. In final and reply argument, a number of parties submitted that the Commission should initiate a review of certain aspects of Phase III prior to the issuance of a decision in the Regulatory Framework proceeding. A number of other parties indicated their willingness to participate in such a review.

The Commission considers it appropriate at this time to review certain aspects of Phase III. The Commission also considers it appropriate, pursuant to section 70 of the Telecommunications Act, to appoint Commissioner David Colville as Inquiry Officer to conduct the review and report his findings to the Commission. The procedures and deadlines established for the review in Part IV of this Public Notice have been designed to expedite the process as much as possible. The review will include an oral meeting at which parties will be able to pose questions without the degree of formality normally present in a telecommunications oral public hearing. Representatives of the parties designated to answer questions at the meeting will not be sworn.

B. Unitel's Request for Interim Reduction in Contribution Rates

In final argument in the Regulatory Framework proceeding, Unitel Communications Inc. (Unitel) requested that the Commission grant it an interim reduction of 35% in its contribution payments to the telephone companies in order to correct what Unitel submitted were misallocations of costs between the Access/Monopoly Local and Competitive Toll Categories. The Commission is not persuaded, on a prima facie basis, that such an interim reduction is warranted. Accordingly, Unitel's request is denied.

The Commission notes that, in AGT, BC TEL, Bell, Island Tel, MT&T, NBTel and Newfoundland Tel - 1994 Contribution Charges, Telecom Public Notice CRTC 93-66, 3 November 1993, it initiated a proceeding to consider whether changes to contribution charges will be required for 1994 (the 1994 contribution proceeding). In that Public Notice, the Commission made existing contribution charges interim effective 1 January 1994. Because the Phase III review proceeding initiated in this Public Notice will consider the issue of possible cost misallocations, the Commission intends to make the contribution charges established in the 1994 contribution proceeding interim only. The Commission will make modifications to those charges, if required, following its decision with respect to the Inquiry Officer's report concerning this Phase III review proceeding.

II SCOPE OF THE REVIEW

A. General

The Commission considers that this review should focus primarily on the application of the broad causality principles established in Inquiry into Telecommunications Carriers' Costing and Accounting Procedures: Phase III - Costing of Existing Services, Telecom Decision CRTC 85-10, 25 June 1983, and that the general scope of the review should consist of the following:

(1) the Phase III misallocations suggested by Unitel in its Exhibit 107 submitted in the Regulatory Framework proceeding;

(2) the appropriateness of the existing Phase III definition of Access, and the implications of this definition for the allocation of investment and expense to the Access Broad Service Category (BSC);

(3) the appropriateness of certain specific Phase III procedures, with particular reference to existing assignments to the Access BSC; and

(4) the appropriateness of the existing Phase III Manual update process established in Bell Canada and British Columbia Telephone Company - Phase III Manuals: Compliance with CRTC Telecom Public Notice 1986-54 and Telecom Order CRTC 86-516, Telecom Decision CRTC 88-7, 6 July 1988.

B. Specific Agenda Items

More specifically, the proceeding will address the agenda items listed below. Position paper outlines (the outlines) for each of these items are attached to this Public Notice.

(1) Digital Switching Investment

(2) Business Sales Expense

(3) Advertising Expense

(4) Billing and Collection Expense

(5) Stentor Expense

(6) Business Office Expense

(7) Record Bureau Clerical Activities

(8) Order Preparation for Service (Assistance)

(9) Official Telephone Service Adjustment

(10) Risk-Adjusted Cost of Capital

(11) Assignment Approaches Related to Organizational Analysis

(12) Existing Phase III Manual Update Process

The Commission notes that Phase III issues relating to analog switching and transmission equipment referred to in Unitel Exhibit 107 will be considered in this review in the context of the examination of the broad causality principles applicable to digital switching equipment.

The Commission considers that the MCI Alliance expense issue identified in Unitel Exhibit 107 need not be considered in this review. The Commission notes that, in final and reply argument, Stentor Resource Centre Inc. (Stentor) referred to (1) the previous acknowledgement by the telephone companies represented by Stentor during the Regulatory Framework proceeding that this expense should have been assigned to the Competitive Toll Category in the 1993 forward test year results of Bell Canada (Bell); and (2) the fact that this expense was appropriately assigned to the Competitive Toll Category in Bell's filing of its actual 1992 Phase III results in September 1993. Accordingly, the Commission considers that this issue has been resolved.

III ISSUES NOT WITHIN THE SCOPE OF THIS PHASE III REVIEW

In final argument in the Regulatory Framework proceeding, a number of parties submitted that certain other issues related to Phase III should be addressed. In the Commission's view, it is not appropriate to consider these issues in this review, for the reasons set out below.

A. Split Rate Base Modifications

Stentor proposed certain modifications to the Phase III assignment procedures as part of its proposal that the rate base be split between a Utility and a Competitive segment. The Commission considers that an examination of such modifications at this time would be premature, as it is contingent on the Commission's decision in the Regulatory Framework proceeding. Furthermore, if the Commission were to approve a split rate base approach, modifications to the Phase III procedures would be more appropriately addressed in a subsequent proceeding to implement that split rate base.

B. Revenue Cost Matching

The Competitive Telecommunications Association submitted that Phase III cost allocation rules should be verified to ensure that there is consistency in the treatment of bundled tariffs between the Phase III block diagrams appearing in Phase II studies and the requirements of Bell Canada and British Columbia Telephone Company - Improving the Match Between Revenues and Costs Associated with the Phase III Competitive Network and Access Categories, Telecom Decision CRTC 90-13, 14 June 1990 (Decision 90-13). The Commission considers that the application of the Decision 90-13 revenue assignment processes, designed to improve the match between revenues and costs, is best addressed on a case-by-case basis in the context of specific tariff filings and the companies' Phase III Update submissions.

C. Start-up Costs

Unitel submitted that it and other contributing carriers are paying more than the 30% share of start-up costs assigned to them 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), because start-up costs are assigned to the Access Category. The Commission notes that this is an issue to be considered in the 1994 contribution proceeding. In that proceeding, it will be necessary to examine both start-up costs and ongoing costs to ensure that their treatment for the purpose of calculating 1994 contribution rates is in accordance with the intent of Decision 92-12.

D. Adequacy of Phase III Control Processes

Unitel submitted that the Phase III control processes are inadequate. The Commission notes that the Phase III Manual Update process will be examined in this review. However, the Commission considers that it would be more appropriate to address the other aspects of the control processes, such as specific internal control and external audit arrangements, in its decision in the Regulatory Framework proceeding.

E. Inclusion of Proposed Changes to Phase III Methods in Phase III Forecasts

Unitel submitted that, because projected Phase III results may include proposed changes to specific Phase III assignment methodologies on which the Commission has not yet ruled, the telephone companies are in a position to influence the Phase III results in a manner that artificially inflates contribution payments from competitors. The Commission considers that the inclusion of proposed changes increases the accuracy of the telephone companies' forecast Phase III results. Furthermore, the inclusion of proposed changes does not necessarily lead to an increase in contribution charges to be paid by competitors. Accordingly, the Commission is not persuaded that the existing guidelines for the preparation of Phase III forecasts require examination in this review.

F. Overview Comparisons of Phase III Results with Costing in the United States

In the Regulatory Framework proceeding, Unitel submitted that serious Phase III misallocations exist. Unitel based its submission on comparisons between certain Canadian carriers' costs using Phase III allocations and the costs reported by certain U.S. carriers that provide only Access or Toll services. In the Commission's view, the effort required to arrive at meaningful comparisons of Canadian and U.S. category costing data, judged to be acceptable by all parties, would divert this review from its primary focus, which is to address specific concerns with existing Phase III assignment methodologies. Accordingly, the Commission considers that it would not be helpful, in this review proceeding, to address the various comparisons of Canadian and U.S. costing data presented during the Regulatory Framework proceeding.

IV PROCEDURE

1. Bell and BC TEL, who have approved Phase III Manuals and in whose territories MTS/WATS competition has been approved, are made parties to this review. Unitel is also made party to the review. Other persons intending to participate in the review must notify the Commission of their intention to do so by writing to the Commission at the address noted below, serving copies on Bell and BC TEL, by 6 April 1994. Parties who were not provided with copies of Bell's "Desk Guides" in the Regulatory Framework proceeding may request in their notices of intention to participate that Bell serve them with a copy, pursuant to paragraph 4, below. The Commission will issue a complete list of parties and their mailing addresses.

2. The mailing addresses to be used in connection with this proceeding are:

Mr. Allan J. Darling
Secretary General
CRTC
Ottawa, Ontario
K1A 0N2
Fax: 819-953-0795

Ms. Sandra Hertz
Director
Regulatory Matters
BC TEL
18th Floor
3777 Kingsway
Burnaby, British Columbia
V5H 3Z7
Fax: 604-430-9653

Mr. B.A. Courtois
Vice-President
Corporate & Legal Affairs
Bell Canada
105 Hôtel-de-Ville Street
6th Floor
Hull, Quebec
J8X 4H7
Fax: 819-778-3437

3. The oral meeting to review Phase III is scheduled to begin at 9:00 a.m., 4 July 1994, in the Outaouais Room of the Conference Centre, Phase IV, Place du Portage, Hull, Quebec, and to end on 8 July 1994.

4. Bell and BC TEL are directed to file with the Commission and serve all registered parties, by 13 April 1994, the documents identified in the outlines attached to this Public Notice. By the same date, Bell is also to serve on all registered parties who request a copy of the abridged version of its Phase III "Desk Guides", submitted by Stentor on 23 December 1993 in the Regulatory Framework proceeding, together with the claim by Stentor for confidentiality.

 The Commission will incorporate the "Desk Guides" into the record of this proceeding and will place on the public record the abridged version of the "Desk Guides" filed by Stentor on 23 December 1993.

5. Requests for public disclosure of those parts of the "Desk Guides" filed in confidence, and of any other material filed by Bell and BC TEL in confidence on 13 April 1994, must be filed with the Commission and served on Bell and BC TEL by 20 April 1994.

6. Bell and BC TEL are to file written responses to requests for public disclosure by 27 April 1994, serving copies on those parties requesting disclosure.

7. The Inquiry Officer will issue a determination with respect to requests for public disclosure as soon as possible thereafter. It is expected that the Inquiry Officer will direct that any information to be provided pursuant to that determination be filed with the Commission and served on all parties by 11 May 1994.

8. Bell and BC TEL are directed to file and serve on all parties, by 25 May 1994, position papers on each agenda item in accordance with the outlines. By the same date, Unitel is to file and serve on all parties a position paper in accordance with the attached outline identified as applicable to it. Other parties, including Unitel, wishing to file position papers on any agenda items are to do so by 25 May 1994, serving a copy on all parties. Parties may include any information that they consider relevant to the specific agenda items. Parties are to attach supporting documentation, including any portion of the record of the Regulatory Framework proceeding or other material that they consider relevant.

9. Any party filing position papers must, at the same time, file with the Commission and serve on all parties a list of any representative(s) who will be available for questioning at the review meeting on the matters addressed in its position papers, including the subject matter in respect of which each representative will be prepared to respond to questions.

10. With respect to the agenda items identified in the position papers, parties may request of the party who filed the particular position paper: (1) further information that they consider to be both relevant and necessary; and (2) public disclosure of information for which confidentiality has been claimed. Such requests must be filed with the Commission and served on the party or parties in question by 3 June 1994.

11. It is intended that the Inquiry Officer chair a preliminary oral meeting of the parties, scheduled to be held on 20 and 21 June 1994 in the Pontiac Room of the Conference Centre, Phase IV, Place du Portage, Hull, Quebec, to consider requests for further information and for public disclosure, and issue a determination as to what additional information, if any, should be placed on the public record. Parties will be advised of the process to be followed. It is intended that the Inquiry Officer direct that any information to be provided pursuant to that determination be filed with the Commission and served on all parties by 27 June 1994.

12. It is expected that, following the conclusion of the review meeting scheduled to commence on 4 July 1994, parties will be given an opportunity to present written final argument and, thereafter, written reply argument.

13. Following the filing of reply argument, the Inquiry Officer will submit his report to the Commission in the form of a series of recommendations. Parties will have an opportunity to submit comments on this report prior to its consideration by the Commission.

14. 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.

Allan J. Darling
Secretary General

ANNEX

Position Paper # 1: Digital Switching Investment

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1.SCNM AP 73.005 (as filed on 15 November 1993).

2.List of Accounts recording the investment and description of the contents.

Objective(s)

*To establish the functions of Central Office Equipment (COE) components assigned to the Phase III Broad Service Categories (BSCs).

*To review the appropriateness of the existing Phase III BSC definitions provided in Telecom Decision CRTC 85-10, maintaining the principle of causality as established in that decision.

Specific Details to be Included

1. SWITCHES

a) For each type of digital switch which the company employs in its network provide block diagram(s) accompanied with a detailed list of the hardware elements or subsystems at a level of detail similar to that in the attachment. For each item in the list, include:

(i) the manufacturer's description of its function(s); (ii) the manufacturer's description of the method used to calculate the required quantity of the listed item; and (iii) the company's rationale for and method of assignment to Phase III BSC(s).

b) Provide by switch type, the manufacturer's description of the software packages the company has installed in its digital switches. For each package provide:

(i) a description of the functions and features; (ii) the company's rationale for and method of assignment to Phase III BSC(s) currently used; and (iii) the assignment method the company may consider appropriate if each package is assigned independently.

2. REMOTES

a) For each type of digital remote which the company employs in its network provide (a) block diagram(s) accompanied with a list of the hardware elements or subsystems of detail similar to that described above for switches. Also provide a detailed description of the range of capabilities of each type of remote and indicate which capabilities are used by the company. For each item in the list, include:

(i) the description of its function(s) clearly describing its stand-alone capabilities and the extent to which this stand alone capability is used by the company; (ii) the manufacturer's description of the method used to calculate the required quantity of the listed item; and
(iii) the company's rationale for and method of assignment to Phase III BSC(s).

b)Provide by remote type, the manufacturer's description of the software packages the company has installed in its digital remotes. For each package provide:

(i) a description of the functions and features;
(ii) the company's rationale for and method of assignment to Phase III BSC(s) currently used; and
(iii) the assignment method the company may consider appropriate if each package is assigned independently.

3. PRICING

Provide details of the pricing mechanisms utilized by the suppliers in terms of bundling packages of hardware, basic operating system software, call control software and supplementary software for additional capabilities, applications and features for switches and remotes. Provide details of pricing mechanisms used by the supplier for hardware and software additions to an existing switch or remote and the impact, if any, on cost of existing hardware and software.

4. SWITCHING and AGGREGATION

Identify the hardware and software items for switches and remotes listed above which, the company considers should be included in its switching and aggregation charge.

Position Paper # 1: Bell and BC TEL

Attachment

DMS100 Subsystems
Single Line Card
Party Line Card
Line Concentrating Module
Line Concentrating Module - Equipment Frame
Line Group Controller - Host
Line Group Controller - Remote
Line Group Controller - Equipment Frame
Subscriber Carrier Module
Digital Trunk Controller - (Terminates Local & Toll Trunks)
Digital Trunk Controller - Equipment Frame
Analogue Trunk Package
Conference Circuits
Conference Slots
Line Test Unit Slots
Metallic Test Access for Line Test
Metallic Test Access for R-CALRS
Trunk Test Unit Slots
Metallic Test Module Slots
Maintenance Trunk Module
Digital Recorded Announcement Machine
Software
Operating System Software
Basic Call Processing Software
Billing Software
Local Software
Centrex Software
Data Software

Position Paper # 1: Digital Switching Investment

Parties Required to Submit: Unitel

Documents to be Attached

1.List and description of Unitel's accounts recording the investment and expense associated with the costs identified in its response to this question.

Objective(s)

*To evaluate the causality assumptions of Phase III assignments to the Competitive Toll (CT) category by examining the assignment of integrated carrier digital switching costs which are similar to costs incurred by an Inter-exchange Carrier (IXC).

Specific Details to be Included

1. Identify each type of cost associated with digital switching incurred both by Unitel and either Bell or BC TEL which the Phase III methodology does not assign to the telephone companies' CT BSC, and for each such cost:

a) provide a detailed description of the cost;
b) provide Unitel's views regarding the causality of the cost;
c) identify the Phase III methodology which Unitel considers should be modified and provide details of the modification envisaged; and
d) provide Unitel's views regarding the inclusion of this cost in the development of the per minute rate for Switching and Aggregation.

Position Paper # 2: Business Sales Expense

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Bell BSCC 75.640.01/BC TEL BSCC 75.080.

2.Pages from each carrier's Accounting Manual which describe the pertinent accounts.

Objective(s)

*Examine the types of business sales expense assigned to Access and the rationale which supports the expense as being causal to the provision of access.

*Examine the rationale which is used to support the assignment of coin sales to Access.

Specific Details to be Included

1. Examples of service offerings and products where the business sales expense is causal to the provisioning of different types of access arrangements e.g., sales expense associated with the sale of local channel service or datapac access which have an Access and Competitive Network (CN) component. Provide the rationale which supports the business sales expense as being causal to the provision of access for each example cited.

2. Description of the involvement, if any, of the business sales staff in activities such as the interface with engineering and/or other departments to enable customer needs to be met with respect to special facilities, intercity co-ordination and design considerations involving access arrangements.

3. Indicate the role of the business sales staff in the preparation of orders that establish new service and/or rearrangements etc., for both existing and new customers which provide access to the public switched telephone network (PSTN) and/or CN services.

4. A description of the rationale for using the inward movement service order study for voice and data (excluding residence and coin movement) for business sales expense.

5. Status of current procedures for assigning business sales expense by product/service code.

6. Address whether the sales activities expended to negotiate the placement of coin phones relate to the provision for the capability of access to the PSTN or whether the expense is causal to the Monopoly Local and Competitive Toll services to which access is provided.

Position Paper # 3: Advertising Expense

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Bell BSCC 75.640.02/BC TEL BSCC 75.080.

2. Pages from each carrier's Accounting Manual which describe the pertinent accounts.

Objective(s)

*Define what advertising expense is causal to the provisioning of access.

Specific Details to be Included

1. A list of all the types of advertising activity assigned to Access and the rationale which supports this expense as being causal to the provisioning of access.

Position Paper # 4: Billing and Collection Expense

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Bell BSCC 75.640.05/BC TEL BSCC 75.050.

2.Pages from each carrier's Accounting Manual which describe the pertinent accounts.

Objective(s)

*Determine whether postage expense is causal to the provision of access.

*Determine whether activities associated with centralized mail activities (bill payment) are causal to the provision of access.

Specific Details to be Included

1. Expand on the rationale that postage expense is causal to the number of bills issued to customers.

2. Expand on the rationale that centralized mail activities related to payment receipt such as verifying the amount of payment, crediting customers accounts and deposit of receipts relate to the number of bills and the expense is causal to the provision of access.

3. What is the percentage of customers on average who make no toll calls in a particular month?

4. Clarify whether any of the centralized mail activity involve any posting of payments specific to Access, Monopoly Local, Toll, Competitive Terminal and/or Competitive Network services.

Position Paper # 5: Stentor Expense

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

None

Objective(s)

*To Determine the broad types of activities performed by Stentor on behalf of the member companies.

*To confirm whether or not the activities are confined to activities causal solely to Competitive services and/or to all BSCs.

Specific Details to be Included

1. Provide a brief overview which explains the functions of Stentor Telecom Policy Inc., Stentor Canadian Management and Stentor Resource Centre Inc.

2. Provide a list of the types of activities performed by Stentor Telecom Policy Inc. and Stentor Resource Centre Inc. which were previously performed in-house by the member companies in sufficient detail to illustrate why costs are not assigned solely to the Competitive BSCs.

3. Provide a general overview which explains how an expense which is a result of contracting out is handled for accounting and assignment purposes.

Position Paper # 6: Business Office Expense

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Bell BSCC 75.640.04/BC TEL BSCC 75.070.

2. Pages from each carrier's Accounting Manual which describe the pertinent accounts.

Objective(s)

*To determine whether queries of a general nature are causal to the provisioning of access.

*To determine whether the activities and products associated with special needs of the disabled are causal to the provisioning of access.

Specific Details to be Included

1. Expand on the types of queries of a general nature that are treated as causal to Access and the rationale for the assignment to Access.

2. Describe how these types of queries are tracked to determine the level of expense to be associated with Access and the proportion of time spent responding to such queries.

3. Describe the nature of the activities and products involved with providing Special Needs for the Disabled and the requirement of such products for the provision of access to the PSTN.

4. Confirm whether these products are sold at cost.

5. Explain the treatment of costs associated with personnel who are responsible for discussions with outside agencies for the disabled and indicate the BSC to which these expenses are assigned.

Position Paper # 7: Record Bureau Clerical Activities

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Bell BSCC 75.620/BC TEL BSCC 75.060.

2. Pages from each carrier's Accounting Manual which describe the pertinent accounts.

Objective(s)

*Re-evaluate Telecom Order CRTC 86-516 which stated that directory expenses of the record bureau staff who maintain and update the telephone number databases for both directory assistance and intercept functions are to be assigned to the Access BSC.

Specific Details to be Included

1. Confirm that the function of the Records Bureau staff is to reflect changes to telephone numbers resulting from new service and disconnects which have occurred subsequent to the issuance of public telephone directories.

2. Provide supporting rationale for treatment of this expense as causal to the provision of access.

Position Paper # 8: Order Preparation for Service (Assistance)

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Bell BSCC 75.640.06/BC TEL BSCC 75.070.

2. Pages from each carrier's Accounting Manual which describe the pertinent accounts.

Objective(s)

* To determine if the assistance rendered to individuals with respect to completing the form to request local service is causal to the provision of access to the PSTN or to Monopoly Local service only.

Specific Details to be Included

1. Provide the rationale which supports the assignment of this activity to the Access BSC.

2. Address the extent to which manually-prepared forms exist and will continue to exist to initiate service orders which in turn are processed to get a pair and number assigned, a circuit connected and to create or change a customer master file for maintenance and billing functions.

3. With the mechanized capability in a digital environment to perform all the activities in item 2 from a remote terminal to initiate the service, address whether or not these mechanized activities would be causal to the provision of Access.Sous-systèmes DMS100

Position Paper # 9: Official Telephone Service (OTS) Adjustment

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Telecom Decision CRTC 88-7, pages 23-24.

Objective(s)

* To determine whether the OTS adjustment is a valid transfer of costs.

Specific Details to be Included

1. Address the appropriateness of the OTS adjustment concept approved in Telecom Decision CRTC 88-7 in which the Commission said that, "to whatever extent the carriers use their own services and equipment in the administration and operation of their businesses, they will incur costs". The Commission also noted that it agreed that, "to whatever degree these costs are identified in one BSC while the associated services are utilized by a different BSC, an inappropriate cost allocation will exist."

2. Contrast the merits of employing a causal cost transfer approach versus billing each BSC for OTS on a tariffed basis and treating the bill as an accounts payable which could be coded by department and would flow through as an operating expense.

3. Address the general impact on CN/CTMD/CTO rates for services/products provided by these BSCs if these services/products were to bear all the costs for the provision of all a company's requirements for these service/products that each of the other BSC's use versus recognizing OTS on the basis of causality (usage).

Position Paper # 10: Risk Adjusted Cost of Capital

Parties Required to Submit: Bell and BC TEL

Documents to be Attached

1. Telecom Decision CRTC 88-7, pages 32-34.

2. Bell and BC TEL Reports 5 filed by the respective carriers as directed in Telecom Decision CRTC 85-10.

3. Responses to CRTC interrogatories/undertakings filed in connection with this subject in the Regulatory Framework proceeding.

Objective(s)

* To re-examine whether Monopoly and Competitive Categories should include a divisional cost of capital.

Specific Detail to be Included

1. Whether the determination of a risk-adjusted cost of equity capital by BSC or type of BSC (e.g., monopoly versus competitive) would be appropriate given the impact that recent developments in competition may have on the risk/return relationship by BSC or type of BSC.

2. The feasibility of estimating a risk-adjusted cost of equity by BSC or type of BSC based on a risk adjustment to the company's overall cost of equity capital and if so, how this could be done and what the risk differential should be.

3. The implications that a risk-adjusted cost of equity capital would have for the capital structure and/or cost of debt by BSC or type of BSC.

4. A numerical example of the estimated risk-adjusted cost of capital with all detailed supporting calculations, using the 1992 Phase III results, including the impact on the company's Local/Access shortfall and contribution charge.

Position Paper # 11: Assignment Approaches Related to Organizational Analysis

Parties Required to Submit: Bell

Documents to be Attached

1. Bell BSCC 75.640.03.

2. Pages from each Bell's Accounting Manual which describe the pertinent accounts.

Objective(s)

* To provide an illustrative example of a study assignment approach which is based on an analysis of the work output of an organizational group(s) for which accounting data is available to assign Phase III costs.

* To determine the level of detail required in the Phase III Manuals for this frequently used assignment approach.

Specific Details to be Included

1. Provide a brief overview which expands on the outline of activities which are defined in the Accounting Manual as being included in account 23GA that relate to product development expense indicating whether such functions are all performed within the same VP organizational unit.

2. Indicate the extent to which staff are dedicated to specific products/services which permits the direct assignment of expenses by organization code.

3. Provide a brief description which explains how specific groups in multi-locations report their expenses to account 23GA indicating whether the expenses are identifiable by organizational code to facilitate the identification of expense by product/service.

4. Provide an illustrative example of how expenses related to product development are compiled by organization and assigned by BSC.

Position Paper # 12: Existing Phase III Manual Update Process

Parties to Submit: Bell and BC TEL

Documents to be Attached

1. Telecom Decision CRTC 88-7, pages 48-54.

2. Telecom Letter Decision CRTC 89-26.

3. Update Submissions and associated Commission Orders for the annual cycle which culminated in the June 1993 edition of both the Bell and BC TEL Phase III Manuals.

Objective(s)

* To review the administrative procedures now used by the Commission in a yearly cycle for the consideration and disposition of a carrier's proposed updates and changes to its Phase III Manual.

* To consider amendments to these procedures which would allow for public comment on all significant updates and changes without jeopardizing the Commission's ability to deal with such updates in a timely fashion and thereby allow a carrier to implement, if approved, the requisite studies and mechanization arrangements.

Specific Details to be Included

1. Brief description of the existing administrative procedures now being employed by Bell and BC TEL to identify and implement, if approved, the proposed updates and changes to their respective Phase III manuals.

2. Identification of operational criteria which could be used to select the significant updates and changes in a specific update submission.

3. Proposed process which could be used by the Commission to seek comment on such updates.

4. Using the update submissions which culminated in the company's June 1993 edition of the Phase III Manual, apply the criteria proposed in item 2 and identify those significant updates that would have been open to public comment.

5. Discuss the implications for the Phase III update process of a new procedure whereby, on a going forward basis, Stentor Canadian Network Management (SCNM) is expected to document the administrative practice (AP) for each investment study in these distinct parts: the primary study, the Stentor Settlement Plan (SSP), and the Phase III study (i.e. the first example of this new procedure was the submission of the SCNM AP 73.005 on 15 November 1993).

6. Discuss the implications of a Phase III update process with allowance for public comment on all significant updates on the company's existing administrative processes to identify and implement such updates.