ARCHIVED - Telecom Order CRTC 96-862
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Telecom Order |
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Ottawa, 9 August 1996
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Telecom Order CRTC 96-862
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IN THE MATTER OF the Phase III Manual Update Reports filed by BC TEL on 12 January 1996, by AGT Limited (AGT), Bell Canada (Bell), The Island Telephone Company Limited (Island Tel), MTS NetCom Inc. (MTS), Maritime Tel & Tel Limited (MT&T), The New Brunswick Telephone Company Limited (NBTel) and NewTel Communications Inc. (NewTel), on 15 January 1996 (collectively, the telephone companies).
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WHEREAS the telephone companies filed their Phase III Manual Update reports, with explanations, in accordance with the Proposed Revisions to the Phase III Manual Update Procedure, Telecom Letter Decision CRTC 89-26, 1 December 1989 (Letter Decision 89-26), Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), Review of Phase III of the Cost Inquiry, Telecom Decision CRTC 94-24, 18 November 1994 (Decision 94-24) and Implementation of Regulatory Framework - Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, 31 October 1995 (Decision 95-21);
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WHEREAS on 5 February, 1 March and 9 April 1996, MT&T and Island Tel submitted additional updates and information to their 15 January 1996 Update reports;
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WHEREAS on 7 February 1996, NewTel submitted additional information related to its 15 January 1996 Update report;
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WHEREAS on 9 February 1996, the Canadian Cable Television Association (CCTA) and Unitel Communications Company (Unitel) filed comments on the telephone companies' Update Report submissions and CCTA filed further comments on 15 and 28 February 1996;
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WHEREAS on 1 March 1996, the telephone companies responded to the interested parties' comments and AGT provided a further response on 15 March 1996;
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WHEREAS the Commission issued interrogatories to all telephone companies on 25 March 1996 requesting explanations and clarifications concerning certain aspects of their update reports;
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WHEREAS Bell, BC TEL and MTS responded to the interrogatories on 4 April 1996, while Island Tel, MT&T, NBTel and NewTel responded on 8 April 1996 and AGT responded on 9 April 1996;
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WHEREAS CCTA and Unitel commented that Bell's proposal to allocate the costs associated with the 800 data base and the 800 directory assistance currently provided to the Interexchange Carriers IXCs as part of the $0.011 rate for switching and aggregation (S&A), to the Utility segment in BSCC 75.620 does not agree with the Commission's directive in Decision 95-21;
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WHEREAS Unitel submitted that Decision 95-21 specified that these services should only be assigned to the Utility segment when unbundled rates for these services were approved;
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WHEREAS Bell responded that in Decision 95-21 the Commission's directive refers to imputed revenues and not to the split of costs related to these services;
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WHEREAS in Decision 95-21, the Commission stated that 800 directory services should be assigned to the Utility segment only when the services are unbundled in the process announced in Equal Access, Telecom Public Notice CRTC 94-26, 24 May 1994 (Public Notice 94-26);
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WHEREAS the Commission considers Bell's proposal to be acceptable but, consistent with the requirements of Decision 95-21, until the rates are unbundled, the costs related to 800 listings are to be assigned to the Competitive segment;
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WHEREAS Unitel commented that Bell revised the assignment methodology
in BSCC 75.640.04 Customer Provisioning, Business Office Expenses for function code 41AC (Service Order Activities) based on an annual statistical sample but failed to provide any details as to how the statistical sample will be conducted for in, out and changes of address orders; |
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WHEREAS Unitel commented that Bell had failed to provide any details on the proposed revised methodology to assign function codes 41AC, 41FX and 41GX (Customer Instruction) to the Utility and Competitive segments based on ratios developed from a service order study;
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WHEREAS Unitel also commented that the telephone companies have generally failed to propose clear methodologies for allocating expense items associated with joint use activities, related to business operations and in particular have not proposed to alter the assignment of the recording of customer profile information;
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WHEREAS Bell responded that the assignment of function codes 41AC, 41FX and 41GX remains unchanged except for the Customer Profile Information (name and address) contained in 41AC that relates to expenses incurred for in, out and change of address service orders;
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WHEREAS Bell stated that the methodology is based on a modification to the existing annual statistical sample survey used primarily to assign Customer Account Queries to the appropriate segments;
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WHEREAS Bell stated that as a result of this modification, more discrete observations are now obtained for service order activities and the recording of Customer Profile Information;
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WHEREAS the Commission considers that the expenses related to business office operations and clerical support activities are of a general administrative nature and do not directly involve Customer Profile information;
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WHEREAS the Commission is of the view that Bell's proposed update relating to BSCC 75.640.04 Customer Provisioning Business Office Expenses is acceptable;
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WHEREAS Unitel commented that in Bell's BSCC 75.696 Data Processing and Information Systems Expense, the company proposed to assign the bill printing costs on a 50/50 basis and the residual 27CX expenses using the existing methodology;
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WHEREAS Unitel commented that it is not clear why these residual expenses should not be assigned on a 50/50 basis between the Utility and Competitive segments in the same manner proposed by Bell to assign bill printing costs;
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WHEREAS Bell responded that the primary expenses captured in function code 27CX (98%) are not bill printing costs but rather are the expenses related to all of Bell's data processing requirements that are performed by Bell SYGMA;
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WHEREAS Bell also responded that the bill printing expenses (2%) would be assigned on a 50/50 basis;
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WHEREAS the Commission is of the view that the proposed update submission is acceptable;
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WHEREAS CCTA and Unitel commented that Bell proposed to assign the switching equipment investment associated with IXC traffic and a portion of its access tandem switches to the Utility segment;
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WHEREAS CCTA also commented that AGT, MTS and NewTel proposed to assign a portion of the switching and transmission investment associated with IXC Access Tandem (AT Connection Service) traffic to the Utility segment contrary to the directives contained in Decision 95-21;
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WHEREAS CCTA and Unitel commented that until unbundled S&A rates are approved in the proceeding announced in Public Notice 94-26, the costs of facilities between end office switches and toll office switches as well as the costs associated with toll office switches should continue to be assigned entirely to the Competitive segment;
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WHEREAS AGT and Bell responded that CCTA and Unitel had provided no evidence to suggest that the proposed update was incorrect;
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WHEREAS AGT and Bell also submitted that CCTA and Unitel had misinterpreted the Commission's directive in Decision 95-21 with respect to the assignment of costs associated with AT Connection Service S&A;
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WHEREAS Bell stated that there is no change in the cost assignment methodology for AT Connection Service S&A provided to IXCs which was assigned to Access Contribution (Utility segment) in the 1994 study and directly to the Utility segment as directed in Decision 95-21 for the 1995 study;
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WHEREAS Bell submitted that the Commission's directive in Decision 95-21 refers to the split of the imputed revenues associated with the provision of AT Connection Services S&A within the company and not to the split of the cost for AT Connection Services and other equal access services provided to IXCs;
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WHEREAS in Decision 95-21, the Commission noted that there were no persuasive reasons for changing the previous finding that the proposed AT Connection Service to be provided to IXCs is a bottleneck service and concluded that this service should be assigned to the Utility segment;
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WHEREAS in Decision 95-21, the Commission stated that until unbundled rates are approved in the Public Notice 94-26 proceeding, the costs for facilities between end office and toll office switches and the costs associated with toll office switches are to remain in the Competitive segment;
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WHEREAS the Commission is of the view that the proposals submitted by AGT, Bell, MTS, Island Tel, MT&T and NewTel with respect to the Access Tandem methodology are acceptable but, consistent with Decision 95-21, implementation is not to take place until equal access rates are unbundled;
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WHEREAS the Commission considers that until these rates are unbundled, the telephone companies' costs for facilities between end office and toll office switches and the costs associated with toll office switches are to be assigned to the Competitive segment;
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WHEREAS CCTA stated that BC TEL, NBTel, MTS and AGT modified the Commission's directive in Decision 95-21 with respect to the allocation of common costs by including the Official Telephone Service (OTS) adjustment;
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WHEREAS CCTA stated that according to Decision 95-21, common costs are to be allocated between the Utility and Competitive segments on the basis of operating expenses, with the only adjustment permitted being the inclusion of Carrier Access Tariff (CAT) payments in these expenses for the purposes of this allocation;
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WHEREAS CCTA submitted that the OTS adjustment should not be included as part of operating expenses as there was no discussion of this issue in the proceeding leading to Decision 95-21;
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WHEREAS AGT responded that in Decision 94-24 the Commission stated that the OTS adjustment is a valid transfer of costs;
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WHEREAS MTS submitted that Net OTS is by definition an operating expense and should be included as part of the allocation of common costs;
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WHEREAS BC TEL responded that the inclusion of the OTS adjustment in operating expenses is consistent with Decision 95-21, Decision 94-24 and with Unitel Communications Inc. v Bell Canada and British Columbia Telephone Company - Official Telephone Service and Phase III Competitive Network Category Results Telecom Decision CRTC 91-18, 28 November 1991;
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WHEREAS BC TEL also submitted that there is no merit to CCTA's contention that its proposed update involving OTS should be rejected because it was not specifically discussed in Decision 95-21;
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WHEREAS NBTel also included the OTS adjustment as an operating expense which, in their view, is a legitimate cost of doing business;
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WHEREAS the Commission is of the view that Decision 95-21 does not preclude the treatment of OTS as an operating expense for the purpose of assigning common costs;
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WHEREAS the Commission notes that the companies may submit proposals to change any previously approved methodology for consideration by the Commission at any time through the Phase III Update process;
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WHEREAS the Commission notes that the past decisions cited by AGT and BC TEL have acknowledged that the OTS expense is a legitimate cost and that the OTS adjustment is a valid transfer of costs which recognizes that the telephone company is both a provider and user of telecommunications services;
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WHEREAS the Commission concurs with BC TEL, NBTel, MTS and AGT that the OTS adjustment should be included as part of total operating expenses for the purposes of calculating common costs;
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WHEREAS the Commission is also of the view that the OTS adjustment should appear as a separate line item in the operating expense section of the Split Rate Base (SRB) Surplus/Shortfall Report and that the calculation of OTS Provided and OTS Consumed is no longer required;
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WHEREAS CCTA and Unitel commented that, in general, the telephone companies' Phase III update filings disregard the Commission's Decision 95-21 directives and represent a substandard presentation of the detail required by the Commission's rules;
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WHEREAS CCTA and Unitel noted that Decision 94-24 required that the Phase III Manual Update submissions, as well as any revisions, should be accompanied by a supplementary discussion paper identifying all significant changes, with a full discussion of the rationale and a statement as to the directional impact of each item;
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WHEREAS CCTA submitted that until the telephone companies refile these submissions to comply with the Commission's directives and to present the necessary level of detail, the CCTA's, and other parties' comments on these updates will be incomplete;
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WHEREAS CCTA requested the right to file additional comments on these proposed updates upon receipt of this information;
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WHEREAS CCTA also requested the Commission to direct the telephone companies to provide the information if it is not made available through the telephone companies' reply comments;
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WHEREAS the telephone companies responded that the directives from the Commission as well as the companies' proposals in response to those directives are both clear and understandable;
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WHEREAS the telephone companies stated that, in particular, the definitions provided in the proposals allow for a significant level of scrutiny of the general methodologies proposed to be included in the 1995 update report submissions of the Phase III Manuals;
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WHEREAS BC TEL noted that its 12 January 1996 filing consisted of nearly four hundred pages of very detailed information including nearly fifty pages of an overview of the updates;
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WHEREAS the Commission notes that the process to consider the January Updates is the process that applies to all updates and is consistent with the requirements of Decision 94-24;
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WHEREAS the Commission considers that, given their nature, these updates do not require supplementary detail and is satisfied that sufficient information has been put on the record to enable interveners to make meaningful comments;
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WHEREAS the Commission also notes that an extension to the process contemplated by Decision 94-24 would only prolong the proceeding and make it even more difficult to dispose of the updates in a timely fashion;
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WHEREAS the Commission denies CCTA's request to file future comments with respect to the telephone companies' responses to the comments of interested parties;
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WHEREAS CCTA commented that none of the telephone companies provided sufficient details on how the joint use procedural changes will be implemented;
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WHEREAS the telephone companies, except for AGT, BC TEL and MTS, stated that they have complied with Decision 95-21 in that the costs related to postage and centralized mail remittance as well as the costs of recording Customer Profile Information for name, address, billing information and bill printing costs are to be assigned on a 50/50 basis to the Utility and Competitive segments for 1995;
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WHEREAS AGT, BC TEL and MTS each proposed a modification to the 50/50 allocation determined to be appropriate in Decision 95-21 based on the companies' ability to identify subscribers who did not utilize competitive services;
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WHEREAS the companies proposed to assign the expenses related to subscribers who only use utility services to the Utility segment and those who use utility and competitive services to both segments on a 50/50 basis;
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WHEREAS NBTel advised the Commission that the requested general methodology for the assignment of costs of a joint nature relating to the service order expense associated with the recording of customer profile information for in, out and change of address service order activities that are common to both the Utility and Competitive segments would be submitted when complying with Customer Account Queries, Telecom Public Notice CRTC 95-55, 19 December 1995 (Public Notice 95-55);
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WHEREAS the Commission is of the view that the methodology proposed by AGT, BC TEL and MTS is inconsistent with the Decision 95-21 directive to use a 50/50 ratio and is not acceptable for use in the production of 1995 SRB results;
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WHEREAS the Commission considers that Decision 95-21 is explicit in determining that a 50/50 ratio will be applicable to costs such as: the recording of billing information related to bill printing costs, postage and centralized mail remittance and Customer Profile Information in 1995;
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WHEREAS the Commission considers that NBTel's statement that it would file its general methodology in the proceeding initiated by Public Notice 95-55 is inconsistent with the directive in Decision 95-21;
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WHEREAS AGT, BC TEL and MTS are to file update procedures for 1995 which assign the recording of billing information related to bill printing costs, postage, centralized mail remittance and Customer Profile information on a 50/50 basis to the Utility and Competitive segments in accordance with Decision 95-21;
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WHEREAS the Commission requires NBTel to file a copy of its general methodology filed in response to Public Notice 95-55 for inclusion as part of its 15 January 1996 update report;
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WHEREAS CCTA commented that AGT did not follow Decision 95-21 sample formats for its proposed SRB results and that BC TEL's proposed SRB reporting format is inconsistent with the Commission's directive regarding the presentation of such results and does not separate out operating expenses into line items in accordance with its current presentation of Phase III results;
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WHEREAS CCTA also noted that MT&T and Island Tel's proposed format for the SRB Surplus/Shortfall Report is inconsistent with the Commission's directives in Decision 95-21;
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WHEREAS CCTA also commented that NBTel filed its representation of the SRB results by only showing the Utility segment which is also not consistent with Decision 95-21;
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WHEREAS CCTA further noted that NewTel failed to provide a sample format of its proposed SRB reports and should be directed to provide such a copy;
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WHEREAS AGT stated that it saw no need to attach a sample report to its application but provided a sample in its reply to further assist CCTA in its understanding of AGT's proposal;
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WHEREAS, in its reply, BC TEL stated that the move to a SRB regime and reporting system involves more than a rearrangement of existing Phase III line items;
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WHEREAS BC TEL submitted that the move to a SRB regime refers to some very fundamental changes in the nature of the telecommunications industry resulting from 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), and in the regulatory framework the Commission has (and will) put in place through Decision 94-19, Decision 95-21 and eventually the introduction of price caps;
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WHEREAS BC TEL responded that as a result of these developments, the company's Competitive segment is to be subject, as much as possible, to the operation of market forces;
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WHEREAS BC TEL submitted that a more discrete desegregation (to line item detail) of its Competitive segment SRB results would harm the company in that marketplace, and confer an undue advantage on its competitors;
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WHEREAS MT&T and Island Tel responded that their individual account structures are different from that of Bell and therefore they cannot produce identical detail to match that of Bell;
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WHEREAS NBTel responded that in its 15 January 1996 submission it clearly stated that it will file its Competitive SRB results in confidence with the Commission, and if deemed necessary by the Commission, the full model and both its Competitive and Corporate results;
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WHEREAS NBTel submitted that there is no need to submit either its actual or forecast Corporate or Competitive SRB results to public scrutiny with price regulation of its competitive activities and the increasingly competitive environment in which it operates;
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WHEREAS NBTel responded that to continue to do so, can only place an unfair and onerous burden on the Company and its shareholders both through the resources consumed and through the revelation of details of its competitive plan and successes;
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WHEREAS NewTel responded that in its 15 January 1996 submission, it clearly stated that it would file the required SRB reports as outlined in Attachment B of Decision 95-21 and that in the circumstances, the filing of a sample would be unnecessary;
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WHEREAS, in Decision 95-21, the Commission directed the telephone companies to report their SRB results in a format set out in Attachment B of the decision;
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WHEREAS the Commission notes that the statement formats in Attachment B are based on Bell's accounting system terminology as an illustration;
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WHEREAS the Commission notes that Decision 95-21 specified that the other telephone companies may make modifications where their terminology differs from that of Bell;
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WHEREAS the Commission notes that NBTel indicated its intent to file its Competitive segment SRB/Phase III results in confidence;
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WHEREAS the Commission notes that, consistent with the normal rules, if a telephone company wishes to file information in confidence, such filing should be accompanied by a letter claiming confidence and an abridged version, both of which should be placed on the public record;
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WHEREAS the Commission has not yet disposed of the proposed Beacon and Broadband services' procedures included in the January 1996 Update Report submissions of the telephone companies;
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WHEREAS the Commission expects to issue its decision concerning the Beacon and other Broadband services in the near future;
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WHEREAS in a letter dated 11 June 1996, the Commission advised the telephone companies that it was extending the 30 June and 30 September filing dates for their respective submissions of amended manual pages and actual 1995 SRB/Phase III results by a minimum of 45 days; and
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WHEREAS the Commission will issue further directives with respect to these filing dates at the time it makes its determinations with respect to Beacon and other Broadband services -
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IT IS HEREBY ORDERED THAT:
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1. The proposed Phase III Update Reports filed by the telephone companies in January 1996, except for the Beacon and Broadband procedures, which will be the subject of a separate Commission determination, are approved with the following modifications:
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(a) Bell's 800 Directory Listing methodology is approved but, consistent with the requirements of Decision 95-21, until rates are unbundled, the costs related to 800 listings are to be assigned to the Competitive segment;
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(b) AGT, MT&T, Island Tel and NewTel's Access Tandem methodology is approved but consistent with the requirements of Decision 95-21, until rates are unbundled, the costs for facilities between end office switches and toll office switches and the costs associated with toll office switches, are to be assigned to the Competitive segment;
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(c) the telephone companies are directed to include the OTS adjustment as part of the total operating expenses by segment for purposes of allocating common costs;
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(d) the companies are directed to revise the SRB Surplus/Shortfall Report by including the OTS adjustment in the Operating Expenses and eliminating the lines reporting OTS Provided and OTS Consumed from the 1995 SRB Surplus/Shortfall Report;
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(e) AGT, BC TEL and MTS are directed to file, within 30 days, update procedures for 1995 which assign the recording of billing information related to bill printing costs, postage, centralized mail remittance and Customer Profile Information on a 50/50 basis to the Utility and Competitive segments in accordance with Decision 95-21;
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(f) the telephone companies are directed to comply with the directive in Decision 95-21 by filing their SRB/Phase III results in accordance with the format set out in Attachment B of that decision with appropriate modifications to terminology and, where a company wishes to file information on a confidential basis, such filing should be accompanied by a letter claiming confidentiality and an abridged version, both of which should be placed on the public record; and
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(g) NBTel is directed to submit, within 10 days, a copy of its general methodology concerning Customer Account queries, filed in response to Public Notice 95-55.
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2. CCTA's request to file further comments with respect to the companies' responses to interested parties' comments is denied.
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3. The amended pages to the telephone companies' Phase III Manuals which are to include all updates approved in this Order that are relevant to the production of the 1995 SRB results, are to be filed on a date to be specified when the Commission issues its order with respect to the proposed Beacon and Broadband services' procedures.
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4. Copies of the amended pages to the telephone companies' Phase III Manuals are to be served on their respective Phase III interested parties by the same date.
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Allan J. Darling
Secretary General |
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- Date modified: