ARCHIVED - Telecom Order CRTC 96-1506
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Ottawa, 20 December 1996
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Telecom Order CRTC 96-1506
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IN THE MATTER OF an application filed by Télébec ltée (Télébec) under Tariff Notice 112 dated 19 September 1996, for approval of revisions to its General Tariff providing for $2.00 per month rate increases effective 1 January 1997 and 1 January 1998 for primary exchange services and for additional increases of $2.10 per month to be applied to the local rates of exchanges where Other Line Charges have applied, also effective 1 January 1997 and 1 January 1998.
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WHEREAS in Regulatory Framework for Québec-Téléphone and Télébec ltée, Telecom Decision CRTC 96-5, 7 August 1996 (Decision 96-5), the Commission expressed the preliminary view that annual increases of $2.00 per month per local access line should be implemented by Québec-Téléphone and Télébec effective 1 January in each of the years 1997 and 1998;
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WHEREAS in Decision 96-5, the Commission also directed Bell, Québec-Téléphone and Télébec to reduce Other Line Charges to half their current level effective 1 January 1997 and to eliminate them effective 1 January 1998;
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WHEREAS Québec-Téléphone and Télébec were further directed to file, within 45 days of the date of Decision 96-5, a proposal to recover from other sources the revenue they would forgo as a result of the elimination of Other Line Charges;
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WHEREAS Télébec proposed to recover the revenue lost as a result of the reduction and elimination of Other Line Charges from subscribers located in exchanges where Other Line Charges have applied, through local rate increases of $2.10 per month effective 1 January in each of the years 1997 and 1998;
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WHEREAS Télébec proposed that increases of $2.00 per month per local access line effective 1 January in each of the years 1997 and 1998 be applied in all but four exchanges;
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WHEREAS Télébec notified subscribers, through a billing insert, of the Commission's pronouncements and of the proposed local rate increases;
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WHEREAS comments were received from many subscribers opposing the increases and questioning the appropriateness of the increases in view of current economic conditions;
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WHEREAS on 22 October 1996, the Commission issued questions to Télébec and received the company's responses on 12 November 1996;
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WHEREAS the Commission remains of the view expressed in Decision 96-5 that local rates should continue to increase to move towards costs;
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WHEREAS the Commission is of the view that a lower contribution rate will encourage toll competition from which many of the company's subscribers will ultimately benefit;
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WHEREAS in Decision 96-5, the Commission specified that the companies would not be required to lower long distance rates unless the additional revenues from the proposed increases of $2.00 per month per access line caused their rates of return on common equity (ROEs) to go above the midpoint of their approved earnings ranges;
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WHEREAS the Commission is of the view that Télébec will not earn over the midpoint of its approved ROE range in 1997 and thus will not require the company to lower its long distance rates as a result of the proposed $2.00 per month increase in local rates effective 1 January 1997;
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WHEREAS the Commission remains of the preliminary view that an increase of $2.00 per month per local access line should be implemented by Télébec on 1 January 1998;
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WHEREAS the Commission is also of the view that an updated financial forecast for 1998 would allow it to better assess whether the proposed increase of $2.00 per month per local access line for 1998 would result in Télébec earning above the midpoint of its approved ROE range, and thus be required to lower its long distance rates;
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WHEREAS in Decision 96-5, the Commission specified that rate increases would not be required where a particular local rate could be shown to be compensatory;
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WHEREAS Télébec submitted that, on average, rates across Château-Richer, Saint-André-Avellin, Shawville and Val-des-Bois (the four exchanges) were compensatory when compared to an average cost measure for Bell Canada;
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WHEREAS the Commission is of the view that the cost/rate comparison provided by Télébec was not appropriate in that it did not address whether a particular rate was compensatory but rather whether an average of rates across services and across the four exchanges was compensatory;
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WHEREAS the Commission is of the view that the cost benchmark used by Télébec in making the cost/rate comparison was inappropriate in that it reflected average costs not only across primary exchange services but also across the entire territory of Bell Canada, a territory characterized by large cities as well as rural areas and, as such, different from Télébec's;
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WHEREAS the Commission notes that the residential rates in each of the four exchanges are less than the cost benchmark used by Télébec;
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WHEREAS the Commission finds that residential rates in the four exchanges are not compensatory;
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WHEREAS the Commission notes that, in Télébec's territory, there are 23 exchanges with rates that are the same as or higher than those in the Château-Richer exchange and which Télébec did not propose to exempt from the proposed $2.00 increases;
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WHEREAS the Commission further notes that no evidence was presented showing that the costs of providing local service in the four exchanges were any less than the costs of providing local service in those 23 exchanges;
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WHEREAS the Commission finds that exempting the four exchanges from the proposed $2.00 per month increase would be unjustly discriminatory under subsection 27(2) of the Telecommunications Act;
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WHEREAS the Commission notes that the reduction and elimination of Other Line Charges will benefit, through reduced toll rates, not only subscribers residing in exchanges where these charges have applied, but also other subscribers who make calls which terminate in those exchanges;
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WHEREAS the Commission is of the view that the revenue losses resulting from the reduction and elimination of Other Line Charges should be recovered from all of Télébec's subscribers;
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WHEREAS, in response to one of the Commission's questions, the company indicated that, to recover the revenue losses resulting from the reduction and elimination of Other Line Charges from all its subscribers, it would require increases of $1.40 per month per local access line on 1 January of each of the years1997 and 1998; and
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WHEREAS the Commission notes that by distributing the local rate increases resulting from the reduction and elimination of Other Line Charges over all subscribers, the maximum increase to individual subscribers resulting from this Order in 1997 will be reduced from $4.10 per month, applicable to subscribers in exchanges where Other Line Charges apply, to the amount of $3.40 per month, applicable to all subscribers -
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IT IS HEREBY ORDERED THAT:
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1. Tariff Notice 112 is approved subject to the following modifications:
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a) the proposed $2.00 local rate increase per access line to be effective 1 January 1997 is approved subject to the company applying it to all Télébec's exchanges including Château-Richer, Saint-André-Avellin, Shawville and Val-des-Bois;
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b) the proposed $2.00 local rate increase per access line to be effective 1 January 1998 is not approved at this time;
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c) the proposed additional local rate increases of $2.10 per month to be applied to subscribers located in exchanges subject to Other Line Charges effective 1 January 1997 and 1 January 1998 are denied; and
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d) in place of the proposed rate increases denied in c) above, local rate increases of $1.40 per month applicable across all of Télébec's exchanges effective 1 January 1997 and 1 January 1998 are approved.
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2. Télébec is to issue revised tariff pages reflecting the modifications in 1 above by 30 December 1996.
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3. Télébec is to submit by 1 October 1997:
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a) an updated financial forecast for 1998 so that the Commission can better assess whether the proposed $2.00 local rate increase effective 1 January 1998 would result in Télébec earning over the midpoint of its approved ROE range requiring the lowering of toll rates to eliminate the excess earnings as prescribed in Decision 96-5; and
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b) revisions to its proposed tariff pages reflecting the proposed $2.00 per month local rate increase per access line to be effective 1 January 1998, subject to the modifications outlined in 1 above.
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Allan J. Darling
Secretary General |
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