ARCHIVED - Telecom Order CRTC 96-1393
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Telecom Order |
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Ottawa, 3 December 1996
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Telecom Order CRTC 96-1393
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IN THE MATTER OF applications filed by The New Brunswick Telephone Company, Limited (NBTel) under Tariff Notice 427 dated 2 December 1994 and Tariff Notice 519 dated 23 February 1996, proposing revisions in its tariffs for Cellular Access, Radio Paging Access and Mobile Radio Network Access services (wireless access services), to move towards cost-based rates through phased-in rate reductions under a three-year transition plan.
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WHEREAS, under Telecom Order CRTC 94-1457, the Commission granted interim approval, effective 16 January 1995, to the Phase 1 wireless access rate revisions filed under Tariff Notice 427;
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WHEREAS following requests for disclosure from Rogers Cantel Inc. (Cantel) and interrogatories from Cantel and the Commission, Cantel filed comments and NBTel filed reply comments;
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WHEREAS the Phase 2 wireless access rates for the year 1996 were filed under Tariff Notice 519, to become effective retroactively on 1 January 1996;
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WHEREAS NBTel justified its proposed three-year transition plan to phase-in its new rates for wireless access on the basis of the adverse revenue impact that rate reductions associated with an immediate move towards cost-based rates would have on the general body of subscribers;
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WHEREAS Cantel submitted that the proposed rates include mark-ups well in excess of the 25% rate specified by the Commission in other proceedings and that, given these mark-ups, the proposed rates cannot be considered cost-based;
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WHEREAS Cantel noted that under NBTel's phased-in approach, cost-based pricing would be postponed until 1997, and, even then, the proposed rates would include a 105% mark-up;
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WHEREAS Cantel submitted that the proposed phased-in rate reductions were contrary to other recent telephone company wireless access rate applications (in which no phased-in rate reductions were sought), were inconsistent with the Commission's rate philosophy for wireless access services, and were therefore inappropriate;
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WHEREAS Cantel claimed that the cellular and paging service providers were over-contributing to NBTel's cost structure and requested that the Commission move towards cost-based pricing and approve the new rates retroactive to 15 December 1994;
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WHEREAS Cantel further submitted that based on the current market trends, the cellular access demand should grow by 30% to 40% in each of the next two years and should help to offset the impact of moving to cost-based rates;
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WHEREAS NBTel submitted that the proposed mark-up was appropriate and that the phased-in approach presented a balanced and equitable approach to substantially reduced rates for these services while at the same time mitigating, to the extent possible, the impact on the company and its general body of subscribers;
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WHEREAS the Commission has traditionally approved wireless access rates based on incremental costs plus 25% mark-up;
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WHEREAS the Commission is of the view that a mark-up of 25% over costs is appropriate;
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WHEREAS the Commission considers the application of the cost-based wireless access rates set out in Attachment 1 retroactive to 1 January 1996 to be appropriate;
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WHEREAS in determining the wireless telephone number provisioning costs, NBTel used a working fill factor (WFF) of 27% to calculate the costs of provisioning a new NXX;
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WHEREAS Cantel indicated that the WFF of 27% used to calculate the costs of provisioning a new NXX, represented NBTel's own average working fill factor of all telephone numbers in service and was inappropriate for calculating the cost of provisioning cellular telephone numbers;
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WHEREAS Cantel noted that the utilization of numbers within an NXX by cellular providers can approach 100% and is currently in excess of 90%, and that with NBTel's high penetration of digital switches, it should be able to achieve 100% utilization of new NXXs;
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WHEREAS Cantel submitted that at the very least, NBTel's monthly equivalent cost (MEC) should be derived using Bell Canada's (Bell) average WFF for cellular telephone number usage of 93%;
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WHEREAS NBTel did not object to the use of Bell's average WFF of 93% for its wireless telephone number usage;
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WHEREAS the Commission considers that the use of a 27% WFF would imply that the causal cost of providing a wireless telephone number in NBTel territory is essentially zero;
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WHEREAS the Commission considers that the demand for wireless telephone numbers will mainly be in large centres where telephone numbers can be expected to be in greater demand and advance the provisioning of new NXXs;
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WHEREAS the Commission is of the view that the 93% WFF used to calculate the provisioning of cellular telephone numbers in Bell territory represents a reasonable WFF estimate for NBTel;
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WHEREAS in determining the wireless telephone number provisioning costs, NBTel included the costs of implementing Interchangeable Number Plan Area (INPA) codes which reflect the costs associated with required software upgrades in NBTel's digital toll switch, additional memory cards in NBTel's local switches and translation changes required on the digital switches;
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WHEREAS NBTel indicated that INPA implementation costs were incurred to increase the capacity of the North America Numbering Plan;
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WHEREAS Cantel argued that the costs to implement INPA codes are not caused by demand for cellular telephone numbers in New Brunswick and should be considered as part of the overall cost of providing basic telephone service in that province;
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WHEREAS NBTel did not respond to Cantel's claim that INPA implementation costs were not caused by the demand for cellular telephone numbers in New Brunswick;
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WHEREAS in determining the wireless telephone number provisioning costs, NBTel included administration costs associated with the management and administration of telephone numbers;
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WHEREAS NBTel's administration costs were derived based on the company's annual costs to manage and administer telephone numbers and the update and use of various databases, reference material and administration groups in New Brunswick and in various locations in North America;
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WHEREAS Cantel submitted that NBTel's telephone number administration costs would be incurred regardless of whether cellular or paging access services were offered by NBTel and that none of the other company cost studies, relied on in the past by the Commission, included such a large component for number administration;
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WHEREAS Cantel submitted that Bell's entire cost of provisioning cellular telephone numbers, after removal of the Numbering Plan Area (NPA) split advancement costs and the step-by-step routing modification costs, amounts to less than $0.03 and that there is insufficient material on the public record to justify NBTel's administration cost of $0.1495 per number;
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WHEREAS NBTel did not respond to Cantel's concerns regarding the level and inclusion of the telephone number administration costs;
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WHEREAS the Commission notes that the wireless telephone number provisioning costs included in other company studies have not included such a large component for telephone number administration;
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WHEREAS the Commision considers that NBTel has failed to adequately support the magnitude of its wireless telephone number provisioning costs;
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WHEREAS, in the absence of such support, the Commission finds it appropriate to substitute a cellular telephone number provisioning cost of $0.03 per number for NBTel's wireless telephone number provisioning costs;
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WHEREAS Cantel raised a number of concerns regarding the development of NBTel's wireless network channel costs;
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WHEREAS Cantel claimed that the supporting traffic study was based on only a 19-day sample during October of 1994, reflected a traditionally high usage season for cellular service, and likely overstated NBTel's costs;
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WHEREAS the Commission notes that network provisioning is designed to meet traffic requirements during the peak periods within the year and that therefore it is appropriate to determine causally-related network costs on the basis of traffic data for high usage periods;
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WHEREAS Cantel submitted that NBTel's use of higher busy hour call attempt per CCS calculations and higher trunk capacity calculations than used by MTS NetCom Inc. contributed to a higher cost per trunk;
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WHEREAS the Commission notes that NBTel's wireless network channel cost estimates were lower than those of most other companies;
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WHEREAS the Commission considers the wireless network channel costs submitted by NBTel to be appropriate;
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WHEREAS NBTel service charges are applied for orders of wireless telephone numbers and orders of wireless network channels;
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WHEREAS NBTel indicated that two elements of the Standard Service Charge apply in each instance: an Order Processing Charge (OPC) of $7.50 for issuing orders and cost of billing to the customer and a network connection charge (NCC) of $10.00 for work involved in switch translations to activate the network channels or telephone numbers;
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WHEREAS the OPC charge is to be applied on a per order basis while the NCC charge is to be applied on a per circuit basis for wireless network channels and on a per number block basis (i.e., 100 for cellular or 50 for paging) for wireless telephone numbers;
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WHEREAS Cantel submitted that only one OPC charge should apply to each order regardless of the quantity of network channels or telephone numbers ordered and regardless of the combination of these services ordered;
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WHEREAS Cantel claimed that the provision of wireless telephone numbers does not involve the connection of any access lines to the network and the NCC charge should therefore not apply to the provision of wireless telephone numbers;
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WHEREAS Cantel submitted that it was inappropriate to apply the NCC charge for cellular network channels since cellular access service was provided pursuant to NBTel's Megaplan tariff for which Cantel already pays a service charge per T-1 for installation;
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WHEREAS the Commission considers that the proposed OPC charge is intended to address the recovery of the cost of issuing orders and billing the customer and is appropriately applied on a per order basis;
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WHEREAS the Commission considers that NBTel's proposed NCC charges associated with the activation of wireless network channels are intended to address the recovery of channel connection costs and are appropriately applied on a per channel basis;
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WHEREAS the Commission notes that NBTel's proposed NCC charges associated with the activation of wireless telephone numbers are applicable on a per number block basis and are different from the cost-based rates of Bell which are applicable on a per order basis; and
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WHEREAS, while the proposed rate structure for service charges associated with the activation of wireless telephone numbers differs from that of Bell, on the basis of the record of this proceeding, the Commission finds this aspect of NBTel's proposed rate structure to be acceptable -
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IT IS HEREBY ORDERED THAT:
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1. The wireless service charge rates filed under NBTel's Tariff Notice 427 are approved.
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2. Phase 1 wireless access rates filed under NBTel's Tariff Notice 427 are approved on a final basis from 16 January to 31 December 1995.
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3. Phase 2 wireless access rates filed under NBTel's Tariff Notice 519 are denied.
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4. NBTel is directed to issue, within 14 days, tariff pages incorporating the rates as set out in Attachment 1 to this Order for Cellular Access Service Item 805.2, Mobile Radio Network Access Service Item 840.4 and Radio Paging Access Service Item 820.2.
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5. The final rates, as referred to in 4 above, are approved effective 1 January 1996. NBTel is directed to make the necessary billing adjustments back to 1 January 1996 forthwith.
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Allan J. Darling
Secretary General |
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- Date modified: