ARCHIVED -  Telecom Decision CRTC 95-4

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Telecom Decision

Ottawa, 31 March 1995
Telecom Decision CRTC 95-4
FINAL 1994 AND INTERIM 1995 CONTRIBUTION CHARGES
I FINAL 1994 CONTRIBUTION RATES
Based on the determinations in Parts V and VI of this Decision, the Commission gives final approval to the contribution charges proposed in AGT Limited (AGT) Tariff Notice 578, BC TEL Tariff Notice 3229, Bell Canada (Bell) Tariff Notice 5387, The Island Telephone Company Limited (Island Tel) Tariff Notice 363, Maritime Tel & Tel Limited (MT&T) Tariff Notice 509, The New Brunswick Telephone Company Limited (NBTel) Tariff Notice 430 and Newfoundland Telephone Company Limited (Newfoundland Tel) Tariff Notice 414, for the period 1 January 1994 through 31 December 1994. The following table provides a comparison of the interim rates approved in 1994 Contribution Charges, Telecom Decision CRTC 94-18, 14 September 1994 (Decision 94-18), to the final rates approved in this Decision.
Line 10 (Non-Discounted)
1994 Contribution Per Minute Per End ($) /
Ligne 10 (sans rabais)
Contribution par minute par extrémité ($) pour 1994
Interim Final Percentage
(Decision 94-18) / (Decision 94-24) / Change /
Provisoire Définitive Évolution en
(Décision 94-18) (Décision 94-24) pourcentage
BC TEL 0.0600 0.0621 3.6
AGT 0.0743 0.0688 - 7.5
Bell 0.0562 0.0489 -13.0
NBTel 0.0609 0.0544 -10.6
MT&T 0.0662 0.0576 -13.0
Island Tel 0.0630 0.0562 -10.8
Newfoundland Tel 0.0459 0.0349 -23.9
The calculation of final 1994 contribution charges is shown in the Attachment to this Decision.
II INTERIM 1995 CONTRIBUTION CHARGES
Unitel Communications Inc. (Unitel) and Sprint Canada Inc. (Sprint) argued in this proceeding that the calculation of interim 1995 contribution rates should incorporate the impact of Review of Phase III of the Cost Inquiry, Telecom Decision CRTC 94-24, 18 November 1994 (Decision 94-24). Accordingly, Unitel and Sprint advocated the use of the final 1994 contribution rates as the interim 1995 contribution rates, effective 1 January 1995.
As noted below, the Commission returned the proposed 1995 interim contribution rates filed on 1 December 1994 by AGT, BC TEL, Bell, Island Tel, MT&T, NBTel and Newfoundland Tel (the telephone companies). Accordingly, for telephone companies other than AGT (discussed below), the Commission considers it appropriate to use final 1994 contribution charges as the interim charges for 1995. Therefore, for telephone companies other than AGT, the Commission approves, on an interim basis effective 1 January 1995, the contribution rates made final in this Decision for 1994. These companies are to issue forthwith tariff pages setting out the new interim rates for 1995.
With respect to AGT, in recognition of the potential magnitude of the difference between the final 1994 contribution rate (which was calculated using the Phase III equivalent methodology) and any final 1995 rate approved using the Phase III/split rate base methodology, the Commission directs the company to issue forthwith tariff pages setting out new interim rates for 1995, effective 1 January 1995, based on a 24% reduction from the 1994 final per-minute rate.
The following table sets out the interim 1995 non-discounted contribution rates approved by the Commission in this Decision.
Line 10 (Non-Discounted)
1995 Interim Contribution Per Minute Per End ($) /
Ligne 10 (sans rabais)
Contribution provisoire par minute par extrémité ($) pour 1995
BC TEL 0.0621
AGT 0.0523
Bell 0.0489
NBTel 0.0544
MT&T 0.0576
Island Tel 0.0562
Newfoundland Tel 0.0349
III BILLING ADJUSTMENTS
In Decision 94-18, the Commission approved interim 1994 contribution rates lower than those that had been in effect from 1 January 1994 until the date of the Decision. The Commission directed the telephone companies to make interim adjustments, back to 1 January 1994, to amounts already billed to entrants. The Commission noted that, once final charges were established, further adjustments might be required.
As indicated above, the final 1994 contribution rates approved in this Decision differ from the rates given interim approval in Decision 94-18. The Commission notes that this will entail further adjustments, on a final basis, to amounts billed in 1994. In addition, the telephone companies are directed to apply the interim 1995 contribution rates approved in this Decision back to 1 January 1995 and to proceed with interim adjustments to amounts already billed in 1995. The telephone companies are to make these adjustments as expeditiously as possible. The Commission notes that further adjustments to 1995 billings may be required once final 1995 charges are established.
IV BACKGROUND
In Decision 94-18, the Commission approved interim contribution charges for 1994 for AGT, BC TEL, Bell, Island Tel, MT&T, NBTel and Newfoundland Tel. In Decision 94-18, the Commission stated that final contribution charges would be established following the Commission's decision with regard to the Review of Phase III, then in progress.
On 18 November 1994, the Commission issued Decision 94-24. In that Decision, the Commission (among other things) established the procedure whereby 1994 contribution charges would be finalized, taking into account the modifications to Phase III ordered in the Decision, and indicated that it would issue an order finalizing 1994 contribution charges by 20 January 1995.
Also on 18 November 1994, Unitel filed an application, pursuant to section 62 of the Telecommunications Act (the Act), requesting that the Commission review and vary Decision 94-18. In a letter dated 25 November 1994 to the parties to the proceedings leading to Decision 94-18 and Decision 94-24, the Commission stated that, in light of Unitel's application, an order finalizing 1994 contribution charges might have to be issued later than the 20 January 1995 date originally envisioned.
This Decision sets out the Commission's findings with respect to Unitel's application to review and vary Decision 94-18 and establishes final contribution charges for 1994.The Commission notes that the telephone companies and Manitoba Telephone System (Manitoba Tel) filed proposed 1995 interim contribution charges on 1 December 1994. These applications were returned by the Commission following the issuance of order-in-council P.C. 1994-2036, 13 December 1994, in which the Commission was ordered to reconsider that portion of Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), that directed the telephone companies to file rate rebalancing proposals. As noted in Part II above, in this Decision, the Commission is also setting interim contribution rates for 1995 and is directing the telephone companies to issue tariff pages implementing those charges, effective 1 January 1995.
The Commission notes that, in a letter dated 13 January 1995, Manitoba Tel noted that it had no 1995 interim contribution charges before the Commission. Manitoba Tel proposed that the final 1994 contribution charges previously approved by the Commission form the company's 1995 interim contribution charges. The Commission approved Manitoba Tel's proposal and, in Telecom Order CRTC 95-100, 30 January 1995 (Order 95-100), made interim Manitoba Tel's existing contribution charges, effective 30 January 1995.
V UNITEL'S APPLICATION TO REVIEW AND VARY DECISION 94-18
A. General
The criteria by which the Commission determines whether or not to review and vary its telecommunications decisions (see Telecom Decision CRTC 79-1, 2 February 1979) require that, in order for the Commission to exercise its power under section 62 of the Act, the applicant must demonstrate, on a prima facie basis, the existence of one or more of the following:
(1) an error in law or in fact;
(2) a fundamental change in circumstances or facts since the decision;
(3) a failure to consider a basic principle that had been raised in the original proceeding;
(4) a new principle that has arisen as a result of the decision.
In addition, notwithstanding the lack of prima facie evidence that any of the above criteria have been met, it is open to the Commission to determine that there is substantial doubt as to the correctness of its original decision and that reappraisal is accordingly warranted. This is not so much a fifth criterion, however, as it is a statement of the residual discretion that exists within section 62 of the Act.
B. Unitel's Application
In its application of 18 November 1994, Unitel submitted that Decision 94-18 should be reviewed and varied with respect to the amount of contribution paid by it and other competitors. Unitel argued that the Commission erred in law and in fact in Decision 94-18, and that there is substantial doubt as to the correctness of the Decision.
With regard to the first ground, Unitel noted that, by letter to the Commission dated 5 July 1994, it had requested clarification as to whether contribution is payable on data services using trunk-side connections. Unitel also noted that, by letter dated 28 July 1994, the Commission confirmed that all data services using trunk-side connections attract contribution, since these circuits are not covered by the exemption established 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). Unitel also cited Decision 94-19, in which the Commission stated (at page 126) that "all competitor voice/data traffic using trunk-side connections is currently subject to contribution charges." Unitel stated that, accordingly, effective 1 July 1994, it has been paying full contribution for data services using trunk-side access (in those operating territories where trunk-side access was available).
Unitel noted that, at page 220R of Decision 92-12, the Commission set out the calculation for determining the per-minute contribution rate to be paid by facilities-based carriers. Unitel noted further that this calculation was subsequently used in the 1993 and 1994 contribution charge proceedings.
Unitel argued that, in the proceeding leading to Decision 94-18, the minutes provided by the parties to be used in the denominator of the calculation represented the total number of originated and terminated Message Toll, Wide Area Telephone and 800 Service voice minutes. Unitel contended that, at no point during the proceeding leading to Decision 94-18, did the Commission request the telephone companies or any other party to include their estimates for data traffic for 1994. In Unitel's view, the exclusion of data minutes from the contribution calculation is both a mathematical error and an error in fact, which has resulted in substantial overpayment of contribution by Unitel on both switched data and voice services.
Unitel argued that, as a result of the error, since 1 July 1994, the telephone companies have received more contribution in total than is warranted under the method developed in Decision 92-12 and the calculation in Decision 94-18. Unitel also submitted that the Commission's error in excluding data minutes from the contribution calculation was so unreasonable as to constitute an error of law. Alternatively, Unitel submitted that the Commission erred in law in that it ignored relevant considerations, namely, the inequity created if competitors pay contribution on trunk-side data minutes, notwithstanding that data minutes are not included in the contribution calculation.
As noted above, Unitel also argued that there is substantial doubt as to the correctness of Decision 94-18. Unitel stated that, as confirmed by the Commission's letter of 28 July 1994 and by Decision 94-19, competitors must pay contribution for switched data services using trunk-side access. In Unitel's view, since the telephone companies' equivalent minutes are excluded from the contribution calculation, these companies are not, in effect, obliged to pay contribution on their data services.
Unitel contended that, if Unitel's data services using trunk-side connections are required to pay contribution and if the telephone companies switched data services are equivalent to Unitel's, the telephone companies' data services should also be required to pay contribution. Unitel maintained that, by excluding the telephone companies' data minutes from the contribution calculation, a competitive inequity has been created. Unitel submitted that this inequity raises considerable doubt as to the correctness of Decision 94-18.
C. Stentor's Answer
Stentor Resource Centre Inc. (Stentor), on behalf of the telephone companies, filed an answer to Unitel's application on 16 December 1994. Based on the reasons set out below, Stentor submitted that Unitel had satisfied none of the grounds for a review and variance of Decision 94-18, nor had it established that there was substantial doubt as to the correctness of the Decision. Stentor submitted that Unitel's application should therefore be denied.
Stentor submitted that it is necessary to distinguish between the appropriateness of including minutes associated with the telephone companies' switched data services and the appropriateness of including minutes for the data services of Unitel or other entrants. Stentor noted that line 6 of the contribution calculation (i.e., the contribution requirement, which forms the numerator in the per-minute contribution calculation) represents the Access category shortfall, less contribution payments, reduced by any surpluses from all other Broad Service Categories (BSCs) except Competitive Toll (Toll), with adjustments for settlement, Common Costs and Plant Under Construction. Stentor submitted that Unitel is therefore incorrect in its assertion that the telephone companies are not obliged to pay contribution on their data services, since the contribution requirement has been reduced by any surplus from the Competitive Network (CN) category, which includes data services. Thus, to the extent that a surplus exists, the companies' data services do contribute through the reduction to the Access category shortfall in the calculation of the contribution requirement.
Stentor asserted that it would be inappropriate to include the minutes associated with the telephone companies' data services in the denominator of the contribution per-minute calculation, without a commensurate adjustment to the numerator of the calculation (i.e., the contribution requirement). Stentor argued that failure to make such an adjustment to the contribution requirement would essentially result in double-counting of the contribution associated with the telephone companies' switched data services.
Stentor also argued that, due to the nature of the trunk-side access arrangements developed pursuant to Decision 92-12, it is not technically possible to route originating calls associated with data services to different (i.e., contribution-exempt) interconnecting circuits. Stentor submitted that, therefore, Unitel should have been aware that there was no contribution exemption associated with data services utilizing trunk-side access arrangements.
In Stentor's view, Unitel had ample opportunity to assess the validity of the estimates provided for the record of the proceeding leading to Decision 94-18 and to comment on the reasonableness of those estimates. Stentor submitted that Unitel's failure to address the issue of inclusion of entrant minutes associated with data services utilizing trunk-side access arrangements is no fault of the Commission's procedures.
Stentor cited Bell Canada - Application to Review and Vary Telecom Decision CRTC 86-17, Telecom Decision CRTC 86-22, 18 December 1986 (Decision 86-22), which dealt with an application by Bell requesting that the Commission review and vary Bell Canada - Review of Revenue Requirements For the Years 1985, 1986 and 1987, Telecom Decision CRTC 86-17, 14 October 1986. Stentor stated that, in Decision 86-22, the Commission concluded that Bell's failure to raise a matter that the Commission considered the company had had ample opportunity to address in the course of the proceeding should not subsequently be used to demonstrate an error in fact on the part of the Commission.
In particular, Stentor noted that the Commission stated the following in Decision 86-22:
 The interest in the finality of its decisions would be defeated if its criteria for review were to be interpreted as permitting an applicant to bring information to the Commission's attention after the decision is released that the applicant could reasonably have been expected to provide when required to do so during the proceeding.
With respect to competitive equity, Stentor argued that the imputation test applicable to telephone company switched data services such as FaxCom will ensure that rates for the services include contribution charges; further, the Carrier Access Tariff (CAT) will ensure that the Utility segment will recover explicit contribution from all services that attract contribution. Thus, in Stentor's view, Unitel's allegations are unfounded.
Finally, Stentor argued that the magnitude of the change to the contribution rate that would result from the granting of Unitel's application should be provided for the public record. Stentor submitted that Unitel's estimated contribution overpayment, provided in confidence to the Commission, had no accompanying description of methodology, assumptions or underlying data. Stentor noted that, according to its calculation, the overall impact of including Unitel's data minutes would be to decrease the contribution per-minute rate by 0.05%, an amount that Stentor considered immaterial.
D. Unitel's Reply
In its reply of 29 December 1994, Unitel stated that there are only two issues in this proceeding:
(1) whether it is an error to collect the Decision 94-18 contribution from traffic that does not enter into the Decision 94-18 contribution calculation; and
(2) the manner in which the error is corrected.
Unitel maintained that Stentor did not deny that an error exists, but was instead concerned with the timing of Unitel's application. Unitel submitted that it brought this matter to the attention of the Commission as soon as it became aware of the error.Unitel maintained that, on three separate occasions, it advised Commission staff that it was inconsistent to exclude trunk-side data minutes from the contribution calculation while requiring that Unitel pay contribution on this traffic. Unitel submitted that Commission staff advised Unitel to await the Commission's decision in the proceeding leading to Decision 94-19; however, neither Decision 94-18 nor Decision 94-19 included trunk-side data minutes in the contribution calculation for 1994. Unitel submitted that, on 7 October 1994, Commission staff confirmed that trunk-side data traffic was indeed contribution-bearing, and that data minutes would not be included in the 1994 contribution calculation.
With respect to Decision 86-22 and Bell's application to review and vary, Unitel asserted that its application deals with a mathematical error, not simply with additional information that may change the outcome.
Unitel maintained that the telephone companies' switched data traffic does not produce contribution that would even approach the levels of voice contribution set out in Decision 92-12.
Unitel submitted that almost all of the telephone companies (specifically, AGT, Island Tel, Manitoba Tel, MT&T and NBTel) showed CN category deficits rather than surpluses, which demonstrates that the telephone companies are not generating any contribution from data services. Unitel further submitted that, if the Common Costs and Official Telephone Service (OTS) adjustments were to be ignored, the CN category for all of the telephone companies would be in deficit. Unitel also stated that the majority of revenues in the CN category are derived from Private Line services, and that the CN category cannot be disaggregated in order to prove that data services produce contribution.
Unitel argued that, while it may be correct that the Phase III method for determining the ultimate contribution requirement requires that any surplus from the CN category reduce the Access shortfall, Stentor's assertion that data services already produce contribution is simply false. Unitel maintained that, in the proceeding leading to Decision 94-19, Stentor acknowledged that data services do not currently produce contribution remotely comparable to the levels produced by voice services.
Unitel requested that the Commission revise the 1994 contribution calculation to include the trunk-side data minutes of both competitors and the telephone companies. Failing this, Unitel proposed that the contribution that it paid on trunk-side data circuits during 1994 be refunded.
E. Conclusions
In Decision 92-12, the Commission determined that the target contribution (i.e., the numerator in the contribution calculation) should be the Access shortfall (excluding contribution payments), offset by surpluses from all other BSCs except Toll. Thus, as argued by Stentor, the telephone companies' data minutes are taken into account in the contribution calculation by virtue of the fact that any surplus from the CN category reduces the Access shortfall. Pursuant to the Decision 92-12 calculation, the target contribution is then divided by total market voice minutes (both telephone company and entrant minutes) to arrive at the contribution rate.
Unitel's position is that, in Decision 94-18, the denominator in the contribution calculation should have included the switched data minutes of both the telephone companies and entrants.
However, because revenues and expenses from the telephone companies' data services were already included in the numerator of the contribution calculation, the Commission considers that to have also included the telephone companies' data minutes in the denominator would have been inappropriate, as it would have been akin to double counting.
The Commission notes that entrants' data minutes, on the other hand, were not reflected in either the numerator or the denominator of the contribution calculation. In the Commission's view, the omission of these data minutes does not amount to an error in fact or in law, as argued by Unitel. However, the Commission is persuaded that, in principle, there may be an inequity associated with levying contribution on circuits, when the traffic carried on those circuits is not taken into account in the calculation of contribution charges. Accordingly, the Commission finds that a review of Decision 94-18 is warranted, on the basis that Unitel has raised substantial doubt as to the correctness of the Decision as it pertains to the mechanism by which contribution charges were calculated.
However, upon review, the Commission finds that the inclusion of entrants' data minutes in the contribution calculation for the period during which trunk-side access was available (i.e., from 1 July 1994) would have had no impact on final 1994 contribution charges. In this regard, the Commission notes that, based on Unitel's demand assumptions, the impact of including entrants' data minutes on the contribution rate per minute per end would be less than 1%. Further, the per-trunk rates derived from the per-minute rates are rounded to the nearest $5. In the conversion from the per-minute to the per-trunk rate, the impact of the inclusion of entrants' data minutes disappears entirely in the rounding process.
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