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Telecom Decision
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Telecom Decision CRTC 95-11
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NBTEL - PHASE III MANUAL: COMPLIANCE WITH PUBLIC NOTICE 94-42, ORDER 92-1432 AND LETTER DECISION 94-1
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On 30 September 1994, the New Brunswick Telephone Company Limited (NBTel) filed its Phase III Manual for the Commission's approval, together with an initial set of unaudited results for the calendar year 1993 and two copies of its accounting manual, in accordance with Order and Guidelines for the Filing of the Phase III Manual by New Brunswick Telephone Company Limited, Telecom Order CRTC 92-1432, 22 October 1992 (Order 92-1432). Pursuant to that Order, NBTel attached reports on Revenue/Cost Matching, Access Studies and Official Telephone Service (OTS). In response to NBTel - Marketing of Cellular Service, Telecom Letter Decision CRTC 94-1, 16 February 1994 (Letter Decision 94-1), NBTel also filed an extract of its Cellular results.
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In its reports, NBTel requested that it be relieved of the requirements: (1) to provide a Revenue/Cost Matching Study, (2) to initiate the Detailed Definition Process (DDP) for Access studies, and (3) to provide extracts of Phase III Cellular results in 1994 and subsequent years.
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In its report on OTS, NBTel qualified the reliability of the data employed in its OTS adjustment. The company acknowledged that work is required to improve procedures and records related to OTS, and noted that a special team had been set up in that regard. The company added that all recommended improvements are expected to be reflected in the calculation of 1995 OTS adjustments.
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In NBTel - Phase III Manual, Telecom Public Notice CRTC 94-42, 7 October 1994, the Commission directed NBTel to serve a copy of its Phase III Manual and unaudited 1993 results on interested parties. On 9 December 1994, Unitel Communications Inc. (Unitel) filed comments with respect to the Manual and the related reports, addressing the following issues: (1) the application of the directions in Review of Phase III of the Cost Inquiry, Telecom Decision CRTC 94-24, 18 November 1994 (Decision 94-24); (2) the level of detail provided; (3) switching and transmission investment allocation procedures; (4) the assignment of Coin Collection Supervision expense, (5) the accuracy of OTS records, (6) the deficit in the Investment in Subsidiaries and Affiliates (ISA) reporting category, and (7) the 1993 shortfall in the Competitive Network (CN) category. NBTel filed its reply on 6 January 1995.
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NBTel's Phase III Manual sets out detailed procedures for the assignment of all of the company's revenues, investments and expenses to Broad Service Categories (BSCs) and reporting categories. The Commission examined each individual procedure in NBTel's Manual for compliance with the general and specific requirements of the Guidelines established in Order 92-1432.
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With regard to Unitel's submissions, the Commission notes that the directions in Decision 94-24 applicable to NBTel relate to the production of 1994 Phase III results. For the purposes of producing 1994 results, NBTel is to update its Manual accordingly.
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Unitel also commented with regard to the level of detail in NBTel's Phase III Manual. In particular, Unitel contended that NBTel should be required to reconcile its proposed Phase III allocation procedures with an interrogatory response regarding the separation of local and toll investment filed by the company in the 1994 construction program review (CPR). Unitel also contended that NBTel should be required to explain clearly in its Manual the procedures used for allocating switching and transmission investment that is joint to both local and toll.
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The Commission notes that CPRs are intended to examine the carriers' projected capital investment by class of plant, while Phase III focuses on embedded plant, by capital account, and allocates that investment on the basis of causality. Accordingly, the Commission sees little advantage to be gained by directing NBTel to reconcile its Phase III local and toll allocation procedures with those used in CPRs. More generally, the Commission considers that the level of detail provided in NBTel's Phase III Manual, supplemented by its accounting manual, is sufficient for audit purposes.
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In response to Unitel's comments, NBTel acknowledged that its assignment of Coin Collection Supervision expense to Access was in error. The Commission accepts NBTel's undertaking to reassign Coin Collection Supervision expense to the Monopoly Local (ML) and Competitive Toll (Toll) BSCs in proportion to originated public telephone revenues, as suggested by Unitel.
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In the Commission's view, NBTel has not responded to Unitel's concern with respect to the deficit in its ISA reporting category. Accordingly, below, the Commission is directing the company to provide an explanation for the deficit and clarify its assignment of ISA related accounts.
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With respect to the accuracy of NBTel's OTS records, the Commission notes that the company has begun to implement improvements, which will be completed for the production of 1995 results. The Commission finds NB Tel's OTS plans reasonable, but considers that the company should file a status report identifying the improvements made to date and stating the company's views as to which, if any, of these improvements could be adopted for the study year 1994.
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As to Unitel's comments with regard to the shortfall in the CN category, the Commission is directing (below) that NBTel submit a report on the specific steps taken by the company on a going-forward basis to ensure that the category does not remain in a shortfall position.
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Having examined NBTel's Phase III Manual, the Commission finds the procedures in it to be in compliance with Order 92-1432, with the exception of the items listed in the Appendix to this Decision. The procedures identified in the Appendix appear to represent alternative assignment approaches and revenue classifications, and the Commission requires further information with regard to them. These items, and the additional information required, are detailed in the Appendix.
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In light of the above, the Commission approves NBTel's Phase III Manual subject to (1) resolution of the items noted in the Appendix, and (2) NBTel's compliance with its commitments, specified in its Manual, to modify the assignment procedures for certain accounts for use in the production of 1994 results. The accounts in question are:
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(1) the investment and expense accounts contained in the following studies: (a) Transmission (Study 200.01), (b) Switching (Study 200.02), (c) Miscellaneous Telephone (Study 200.03), and (d) General Purpose Computers (Study 108); and
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(2) the expense accounts contained in the following studies: (a) Data Processing (Study 113), and (b) Operator Services (Study 114).
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In addition, the Commission notes that NBTel's Manual reflects the tariffs, accounts and procedures used to produce 1993 results. In the Commission's view, the Manual documentation must be made current in order to ensure the accuracy of the 1994 results. Accordingly, NBTel is directed to file for the Commission's approval, by 10 July 1995, an update to its Manual reflecting all revisions to its tariffs, accounts and procedures, as well as any other changes relevant to the production of 1994 results. Copies are to be served on interested parties by the same date.
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NBTel is directed to include in the same update submission: (1) the explanations required by the Appendix to this Decision, (2) amended procedures to comply with the directions and determinations in Decision 94-24 that apply to NBTel, (3) the reassignment of Coin Collection Supervision expense; (4) a status report on the improvements to the OTS records made to date, indicating which, if any, of those improvements could be adopted for 1994, (5) an explanation of the deficit in the ISA reporting category and a clarification of the company's assignment of ISA related accounts, and (6) a report on the specific steps that the company is taking on a going-forward basis to ensure that the CN category does not remain in a shortfall position.
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The Commission has reviewed NBTel's request for relief from the requirements to (1) file a Revenue/Cost Matching Study, (2) implement the DDP for the Access studies, and (3) provide extracts of Phase III Cellular results in 1994 and subsequent years.
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The Commission notes that the Revenue/Cost Matching Study may still be required once the split rate base is implemented and that NBTel's proposed method duplicates that already approved for Bell Canada (Bell). Accordingly, NBTel is directed to include its Study in its update submission of 10 July 1995, for use in the production of audited 1994 Phase III results.
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As for the DDP for Access studies, NBTel may defer its implementation pending the Commission's determinations, in the proceeding initiated by Implementation of Regulatory Framework - Split Rate Base, 1995 Contribution Charges, Broadband Initiatives and Related Matters, Telecom Public Notice CRTC 94-52, 1 November 1994, regarding categories within the Utility segment.
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Finally, with respect to the extract of cellular results required by Letter Decision 94-1, the Commission considers that, given that cellular services are provided by a division of the company, provision of the extract, at least for 1994, is required in order to ensure that NBTel's Phase III results are comparable to those of the other Stentor companies.
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The Commission considers that the requirements for the filing of actual and forecast results, and the audit, update and review processes followed by Bell, BC TEL, Northwestel Inc. and Maritime Tel & Tel Limited, should apply to NBTel. Accordingly, the Commission directs NBTel:
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(1) to file audited actual Phase III results for the calendar year 1994, together with an audit report, by 30 September 1995, and annually thereafter by the same date; (2) to file forecast results as will be prescribed by the Commission in the fall of 1995 in relation to the establishment of contribution charges; (3) to implement the 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 (Decision 88-7), as revised in Telecom Letter Decision CRTC 89-26, 1 December 1989, and in Decision 94-24; and (4) to implement the audit processes prescribed in Decision 88-7.
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With respect to the Phase III Manual review process prescribed in Decision 88-7, the Commission notes that its staff may conduct periodic reviews of the procedures contained in NBTel's Phase III Manual.
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Allan J. Darling
Secretary General
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SUPPLEMENTARY SUBMISSIONS APPENDIX
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A. Tariffed Services Classification - Part 4 - Appendix 2
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1. Answer Supervision Service (Item GT 215)
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This appears to be a network-based service, available only from the telephone company, which provides a signal from a Central Office to a customer's premises to indicate a called party has answered. Justify the proposed classification to the Competitive Terminal-Multi-line and Data (CT-MD) category.
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2. Toll Restriction Service (Item GT 230)
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Justify the proposed classification to ML, given that the revenues derived from the provision of access to the public switched telephone network (PSTN) are classified to Access.
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3. Cellular Access Service (Item GT 805)
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Clarify whether or not an ML classification should be added to capture the monthly flat rate network charge for use of the PSTN in the local calling area.
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4. Basic Call Centre Service (Item GT 174)
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Justify the proposed CT-MD classification for this service since it appears to be, in part, central office not terminal based.
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5. Cellular Telephone Service (Item SST 4030)
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Just the proposed ML classification and identify the tariff component that is considered to be ML.
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B. Block Diagrams - Part 4 - Appendix 5
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1. Cellular Access Service Diagram - Attachment 6 of 20
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The diagram should be revised to depict an ML component for Cellular Network charges for usage of the PSTN in accordance with the revision proposed in A(1), above.
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C. Studies - Part 2 - Attachment 2
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1. Study 116 - Advertising Expenses
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Identify the BSCs to which the accounts included in this study are assigned.
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2. Study 118 - Comptroller Department
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Identify, where applicable, the numbers and types of journal transactions used as drivers to assign the remainder of the "Comptroller Salaries" General Ledger Accounts (GLACs) in this study.
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3. Study 122 - Credit & Collections
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This study is used to assign Other Operating and Uncollectible revenue. Identify the nature and size of the customer sample used and the length of the study period.
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4. Study 124 - Marketing Support
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Identify and explain the support activities involved and specify what they support apart from billing.
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5. Study 202.02 - GLAC Assigned Direct to Common BSC
Study 202.06 - GLAC Assigned Direct to Other BSC
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Explain why accounts 675 000 970 and 675 000 980 for Inter-company revenue and expense appear in both studies.
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6. Study 202.03 - GLAC Assigned Direct to CN BSC
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Explain why accounts 122 000 950, 680 000 380 and 680 000 390, which appear to relate to outright sales of cellular terminal equipment, are assigned to CN.
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7. Study 202.09 - GLAC Assigned Direct to ML BSC
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(i) Explain why all public telephone commissions, account 627 700 017, are assigned to ML only rather than ML and Toll.
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(ii) Explain why all directory production expenses, account 627 000 056, are assigned to ML rather than Access and Other.
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8. Study 301.01 - GLAC Reviewed Dynamically
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Identify the BSCs to which the accounts included in this study are assigned.
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