ARCHIVED -  Telecom Public Notice CRTC 95-49

Telecom Public Notice

Ottawa, 22 November 1995

Telecom Public Notice CRTC 95-49

LOCAL SERVICE PRICING OPTIONS

I BACKGROUND

In Implementation of Regulatory Framework - Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, 31 October 1995 (Decision 95-21), the Commission stated that it did not consider local service pricing options necessary at the time, in light of the form and degree of rate rebalancing mandated in that decision. However, the Commission indicated that it would consider proposals to address concerns with respect to the affordability of local service in the context of a broad public process.

In Decision 95-21, the Commission noted the stated intentions of some of the Stentor member telephone companies to propose rate restructuring plans, designed to reduce cost/revenue imbalances within local rate schedules, or to apply for general rate increases. This could result in higher local rates, particularly for residential subscribers. The Commission considers that increases in local rates, over and above those which will result from the rate rebalancing program set out in Decision 95-21, raise concerns regarding the continuing affordability of local service. In this regard, the Commission notes that subsection 7(b) of the Telecommunications Act affirms that Canadian telecommunications policy has as one of its objectives the rendering of "...reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada".

The Commission also notes that AGT Limited (AGT) submitted Tariff Notice 686, dated 18 October 1995, in which the company set out its proposal for optional local services. AGT proposed three local service options involving varying degrees of access to long distance service: (1) full access providing unlimited access to local and long distance service; (2) selective access providing unlimited access to local service and access to long distance service subject to a Toll Link surcharge of $1.50 per toll call, to a maximum of $15 per month; and (3) basic access providing unlimited access to local service and restricted access to outgoing long distance calls.

II ISSUES

The Commission is of the view that the prospect of further local rate increases, particularly for residential subscribers, warrants an examination of how best to ensure that local service remains universally accessible at affordable rates. The Commission notes that approaches for addressing local service affordability have generally taken one of two forms: budget service or targeted subsidy programs.

In general, a budget service is made available to all subscribers and provides savings over the regular local rate in exchange for reduced levels of service. AGT's optional local services proposal offers one such approach to addressing local service affordability concerns. It provides a budget service at a reduced rate which features unlimited local calling coupled with restricted access to long distance services and full access to long distance at an additional charge.

A targeted subsidy program differs from budget service in that it makes local service available at a reduced rate only to those subscribers with low-incomes. The targeted subsidy approach has been suggested by parties in past proceedings and, most recently, in the proceeding leading to Decision 95-21.

The Commission hereby initiates a proceeding to consider whether it is appropriate to establish specific mechanisms to ensure that local service continues to be universally accessible at affordable rates, and if so, the particular approach that should be adopted to achieve this objective. The Commission will consider proposals for the structure of local service pricing options to be provided by the federally-regulated Stentor member companies and Edmonton Telephones Corporation (ED TEL).

The Commission considers that the following issues should, among others, be examined when addressing affordability concerns:

(1) the range within which rates for local service would be affordable, taking into consideration the percentage of households subscribing to local service within the current range of rates;

(2) the minimum level of service which should be made available in any local service pricing option;

(3) whether a budget service, targeted subsidy program or other approach offers the most effective means of ensuring affordability of local service, and the pros and cons of such approaches;

(4) whether local service pricing options should be uniform across all federally-regulated Stentor companies and ED TEL;

(5) specific issues related to budget services and targeted subsidy programs, including:

(i) the appropriateness of, or need for, flat-rate versus pay per use approaches to delivering local service;
(ii) the amount of discount to be provided, in percentage or dollar terms;

(iii) trade-offs between achieving a sufficient take rate while limiting potential abuse;

(iv) mechanisms for informing potential users about local service pricing options;

(v) the eligibility criteria for a targeted subsidy program (e.g., Statistics Canada Low-Income Cut-off) and whether eligibility should be determined based on means-testing or self-certification; and

(vi) the restrictions on a budget service to ensure it is used primarily by subscribers for whom it is intended;

(6) whether it is appropriate for local service pricing options to be provided in a manner which does not generate revenues in excess of the cost of providing the option, i.e., revenue-neutral;

(7) the approximate cost of delivering local service pricing options and method of funding of such options, including the source of revenues for recovering the cost and, if the cost is to be recovered from Canadian carriers, whether certain types of carriers are excluded;

(8) the administration of any program, the appropriate agency for administering a program and the percentage of total costs taken up by administration;

(9) the impact of various local service pricing options on the competitiveness of both the long distance and local services markets; and

(10) how to address other costs incurred by subscribers in obtaining local service, including security deposits, installation and related service costs, in order to assist in the delivery of affordable service.

Parties may file submissions with the Commission setting out their positions on the issues raised by this Public Notice, including any specific proposals to address local service affordability concerns, together with supporting information. Those proposals should include sensitivity analyses assuming different take rates as well as any recent survey results or other evidence indicating consumers' support or need for some form of local service pricing options.

The Commission notes that parties made submissions regarding budget service or targeted subsidy approaches in the proceeding leading to Decision 95-21. The Commission will consider in the context of this proceeding that portion of the record of the proceeding leading to Decision 95-21 that relates to alternative approaches to local service pricing. Parties who made submissions on this topic in that proceeding, and who participate in this proceeding, are directed to include such submissions with their proposals as part of their initial submissions in this proceeding. AGT's Tariff Notice 686 filed on 18 October 1995 is also made part of the record of this proceeding, as an example of a specific proposal.

The Commission will not consider as part of this proceeding issues related to the cost of providing local services in total and the size of the subsidy flowing to local services, or proposals for rate restructuring or general rate increases. The Commission considers that such issues are best considered in the context of specific applications from the telephone companies, or as part of other proceedings underway concerning toll contribution or local unbundling, of which local contribution is a part.

III PROCEDURAL AND OTHER MATTERS

A. How to Participate

In order to facilitate broad public input on the issues in this proceeding, the Commission is providing three separate options.

(i) Anyone wishing to file written comments on the issues in this proceeding may do so at any time up to the commencement of the central public hearing on 15 April 1996. These comments should be addressed to Mr. Allan J. Darling, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2 (fax: 819-953-0795).

(ii) Persons or organizations who do not wish to participate in the central public hearing but would like an opportunity to make oral submissions may do so at one of the regional consultations by registering by 15 January 1996 with the Commission. The Commission will provide further information regarding how to participate in the regional consultations, including contact information and dates and locations for the consultations in a separate public notice to be issued prior to 15 January 1996.

(iii) Persons or organizations may participate at the central public hearing by filing their notice of intention to participate by 19 December 1995 and by filing submissions addressing the issues in this Public Notice by 19 January 1996.

The specific procedures to be followed are detailed in section IV below.

B. Central Public Hearing

In determining the appropriate hearing process to consider these issues, the Commission has taken into account the nature of the issues raised by this Public Notice and the broad interest which these issues are expected to generate. The Commission notes that the objective of this proceeding is to consider the merits of various approaches to local service pricing options with a view to establishing an appropriate framework for ensuring that local service continues to be universally accessible at affordable rates. The Commission anticipates that the implementation of any specific proposals would be dealt with in subsequent tariff filings that would take the particular circumstances of individual telephone companies into account. The Commission has also taken into account the fact that there are numerous other proceedings that are taking place during the course of this proceeding.

Given the nature of the issues to be considered and the scope of the determinations to be made, the Commission has determined that cross-examination at the central public hearing will not be necessary to permit a full and meaningful discussion of the issues. Rather, in the Commission's view, a written interrogatory process will provide an efficient and effective method by which parties may address questions to other parties on the submissions, and reply submissions, that are filed. Parties will be permitted to make oral presentations at the central public hearing. Representatives will be expected to be available to respond to any questions that may be addressed to them by the Commission.

C. Disk Versions of Hard Copy Filings

In the Commission's view, this proceeding will be much facilitated if the material filed by parties is also made available in machine-readable form. Accordingly, while the paper copy will constitute the official record of the proceeding, parties are requested, where possible, to provide a disk version of any filings. Disk versions, if provided, are to be filed with the Commission and served on parties requesting them at the same time as the hard copy, or, in any event, no later than within one week of the filing of the hard copy.

Parties are requested to provide all text material in Wordperfect 5.1 or MS Word 6.0 format, on IBM compatible 1.44 Megabyte 3.5 inch disks. Where it is not possible to provide the material in Wordperfect or MS Word, ASCII or the original machine-readable format could be provided as an alternative. An IBM-compatible MS-DOS format would be preferable. It is requested that, where applicable, spreadsheets be provided in Lotus 1-2-3 WK1, Microsoft Excel or a compatible format. Electronic copies of graphs and diagrams should be provided in the default format of the software used to create them. Procedures will be issued shortly indicating how e-mail filings should be directed to the Commission. The Commission will provide a copy of these procedures to interested parties who register by 19 December 1996.

IV PROCEDURES

1. The Commission will hold a central public hearing commencing at 9:00 a.m. on 15 April 1996 in the Outaouais Room of the Conference Centre, Phase IV, Place du Portage, Hull, Quebec. The hearing is expected to last approximately two weeks.

2. AGT, Bell Canada, BC TEL, ED TEL, The Island Telephone Company Limited, Manitoba Telephone System, Maritime Tel & Tel Limited, The New Brunswick Telephone Company Limited, Newfoundland Telephone Company Limited, and Northwestel Inc. (the telephone companies) are made parties to this proceeding.

3. The Commission considers that the examination of the issues in this proceeding would be assisted by the participation of the independent telephone companies subject to the proceeding initiated by Telecom Public Notice CRTC 95-15. The Commission encourages these companies to participate in this proceeding.

4. Other persons wishing to participate in this proceeding, in a more comprehensive manner than by way of the regional consultations or comments as provided for in paragraphs 16 through 19 below, must notify the Commission of their intention to do so by writing to Mr. Allan J. Darling, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2 (fax: 819-953-0795) by 19 December 1995. The Commission will issue a complete list of parties and their mailing addresses.

5. The Commission directs the telephone companies and invites other parties, listed pursuant to paragraph 4, to make submissions which address the issues outlined in this Public Notice or other relevant issues dealing with local service pricing options. All such submissions must be filed with the Commission and served on all other parties to the proceeding by 19 January 1996.

6. The telephone companies and other parties who have filed submissions may file reply submissions by no later than 19 February 1996, serving copies on all other parties.

7. Any party may address interrogatories to any other party who files submissions or reply submissions pursuant to paragraphs 5 and 6 above. Any such interrogatories must be filed with the Commission and served on the parties in question by 4 March 1996.

8. Parties are to file responses to any interrogatories with the Commission, serving copies on all other parties, by 25 March 1996.

9. Requests by parties for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the parties in question by 29 March 1996.

10. Parties may file replies to requests for further responses and to requests for public disclosure by 3 April 1996, serving copies on the parties making the requests.

11. The Commission will issue a determination with respect to any such requests by 15 April 1996, at the beginning of the central public hearing. The Commission intends to direct that any information to be provided pursuant to that determination be filed with the Commission and served on all parties by 22 April 1996.

12. The Commission reminds all parties that claims for confidentiality should be accompanied by a detailed explanation as to why it is considered that specific direct harm would likely result from disclosure of the information in question. Parties are also reminded that, where confidentiality is claimed, abridged versions must be provided for the public file. Where an abridged version is not provided, detailed reasons must be given.

13. The telephone companies and interested parties who have filed submissions will be permitted to make an oral presentation to the Commission at the central public hearing where the Commission determines that further clarification or elaboration of their submissions is required.

14. Parties may file written argument by the conclusion of the central public hearing, serving a copy on all other parties, or as the Commission may otherwise consider appropriate. When submitting written argument, parties are to include a brief executive summary in point form.

15. Reply argument may be filed and served on all other parties within 10 days following the filing of written argument.

16. The Commission intends to conduct regional consultations, during the period from 19 February to 6 March 1996, in major centres across Canada. Specific times and locations for these consultations will be announced later.

17. Persons wishing to participate at the regional consultations are to register with the Commission by 15 January 1996.

18. The telephone companies will be directed to send senior representatives to any of the regional consultations held in their operating territories to provide points of clarification. Submissions at these consultations are not to exceed 15 minutes. Submissions made at these consultations will be transcribed and will form part of the record of this proceeding.

19. Persons wishing to file written comments on issues relevant to the proceeding may do so by writing to the Commission prior to the commencement of the central public hearing on 15 April 1996.

20. The documents made part of the record of this proceeding and submissions filed in this proceeding may be examined at the offices of the CRTC in the following locations:

Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage
Room 201
Hull, Quebec

Bank of Commerce Building
1809 Barrington Street
Suite 1007
Halifax, Nova Scotia

Place Montréal Trust
1800 McGill College Avenue
Suite 1920
Montréal, Quebec

275 Portage Avenue
Suite 1810
Winnipeg, Manitoba

800 Burrard Street
Suite 1380
Vancouver, British Columbia

21. 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