Telecom Decision

Ottawa, 7 August 1996

Telecom Decision CRTC 96-5

REGULATORY FRAMEWORK FOR QUÉBEC-TÉLÉPHONE AND TÉLÉBEC LTÉE

Table of Contents

OVERVIEW

I INTRODUCTION

II METHOD OF REGULATION

III INTEREXCHANGE COMPETITION AND RELATED ISSUES

A. Interexchange Competition

B. Equal Access

C. Other Line Charges

IV RATE ADJUSTMENTS

V TOLL REVENUE SETTLEMENT MECHANISM

A. Contribution Charge

B. Calculation of the Contribution Requirement

C. Recovery of the Start-up Costs for Equal Access

D. Recovery of Switching and Aggregation Costs

E. 1995 and 1996 Carrier Access Tariff

VI PHASE III METHODOLOGY

A. Status and Use of Phase III Manuals and Procedures

B. Phase III Results

C. Other Filing Requirements

VII LOCAL COMPETITION

VIII TARIFF FILING REQUIREMENTS AND TERMINAL EQUIPMENT FORBEARANCE

A. Tariff Filing Requirements

B. Terminal Equipment Forbearance

IX EXTENDED AREA SERVICE

A. Extended Area Service Criteria

B. Method for Recovering the Cost of New Extended Area Service Links

C. Resale of Extended Area Service

X QUALITY OF SERVICE

XI TERMS OF SERVICE

A. General

B. Additional Provisions

XII CELLULAR ISSUES

A. Forbearance

B. Costing and Marketing Safeguards

C. Access to Cellular Towers and Antennas

OVERVIEW

(Note: This overview is provided for the convenience of the reader and does not constitute part of the Decision. For details and reasons for the conclusions, the reader is referred to the various parts of the Decision.)

In this Decision, the Commission, among other things:

(1) found that the same basic framework set out in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), including a price cap method of regulation, should apply to Québec-Téléphone and Télébec ltée (Télébec) following a transitional period of earnings regulation;

(2) expressed the preliminary view that Québec-Téléphone and Télébec should implement annual increases of $2.00 per month per subscriber per line for local rates effective 1 January in each of the years 1997 and 1998 in order to reduce their individual contribution requirements, but that these companies would not be required to lower long distance rates unless the additional revenues cause the companies to earn over the midpoint of their allowed rates of return on common equity;

(3) stated its intention to issue a public notice to determine the terms and conditions for local competition in the territories of Québec-Téléphone and Télébec but not until a decision has been issued with respect to the terms and conditions of local competition in the territories of the Stentor-member companies;

(4) found that economic studies would not be required for tariff filings for market trials or promotions but would be required under specified conditions for other tariff filings, such as new services or rates;

(5) made a determination to forbear with respect to the sale, lease and maintenance of terminal equipment but not with respect to terminal equipment provided to two-party, four-party or multi-party services, and inside wiring;

(6) approved the use of Bell Canada's (Bell) Terms of Service, allowing for minor variations;

(7) approved, except for one revision, the Phase III Manual filed by Télébec and delayed approval of Québec-Téléphone's Phase III Manual pending the review of certain required revisions;

(8) directed Bell, Québec-Téléphone and Télébec to eliminate Other Line Charges over a two-year period, with rates to be reduced to half the current level effective 1 January 1997 and eliminated effective 1 January 1998;

(9) directed Québec-Téléphone and Télébec to file a proposal to recover from other sources the revenue they will forego as a result of the elimination of Other Line Charges;

(10) approved the filing, on an ex parte basis, of certain toll services tariffs for Québec-Téléphone and Télébec under the same conditions as described in Decision 94-19; and

(11) directed Québec-Téléphone to either, as indicated in Regulation of Wireless Services, Telecom Decision CRTC 94-15, 12 August 1994, submit a proposal for forbearance, or comply with the safeguards in Cellular Radio - Adequacy of Structural Safeguards, Telecom Decision CRTC 87-13, 23 September 1987 and Rogers Cantel Inc. v. Bell Canada - Marketing of Cellular Service, Telecom Decision CRTC 92-13, 29 June 1992.

$TEXTENG>I INTRODUCTION

On 26 April 1994, as a result of the Supreme Court of Canada's decision in Attorney-General of Quebec et al. v. Téléphone Guèvremont Inc., the independent telephone companies (the independents) in Canada were brought under the Commission's jurisdiction.

In May 1994, the Commission hired two consultants to review the regulatory regimes for the independents in Ontario and Quebec and to provide recommendations on how to facilitate the transition from provincial to federal jurisdiction. The consultant engaged with respect to Quebec independents was the late Mr. Jean-Pierre Mongeau who filed his final report with the Commission on 30 September 1994.

On 23 March 1995, the Commission issued Regulatory Framework for the Independent Telephone Companies in Quebec and Ontario (Except Ontario Northland Transportation Commission), Telecom Public Notice CRTC 95-15 (Public Notice 95-15), initiating a proceeding to deal with the regulatory framework for the independents in Quebec and Ontario with the exception of the Ontario Northland Transportation Commission (ONTC).

For Québec-Téléphone and Télébec ltée (Télébec), the Commission proposed using the same basic framework that applies to the Stentor Resource Centre Inc. (Stentor) member telephone companies under the Commission's jurisdiction.

The Commission also outlined, in Public Notice 95-15, the key features of a suggested regulatory framework for the Ontario and small Quebec independents. The Commission's determination for those independents is found in Regulatory Framework for the Independent Telephone Companies in Quebec and Ontario (Except Ontario Northland Transportation Commission, Québec-Téléphone and Télébec ltée), Telecom Decision CRTC 96-6, 7 August 1996 also released today.

The following were made parties to this proceeding: Association des Compagnies de téléphone du Québec inc. (ACTQ); Ontario Telephone Association (OTA); the Ontario independents - Abitibi-Price Inc., Amtelecom Inc., Brooke Telecom Co-operative Limited, Bruce Municipal Telephone System, Cochrane Public Utilities Commission, Coldwater Communications Inc., Dryden Municipal Telephone System, Durham Telephones Ltd., Gosfield North Communications Co-Operatives Limited, Hay Communications Co-operative Limited, Huron Telecommunications Co-Operative Limited, Hurontario Telephones Limited, Keewatin Municipal Telephone System, Kenora Municipal Telephone System, The Lansdowne Rural Telephone Co. Ltd., Manitoulin Tel Inc., Mornington Communications Co-operative Limited, North Frontenac Telephone Corporation, North Norwich Telephones Limited, North Renfrew Telephone Co. Ltd., Northern Telephone Limited, Otonabee Telephones Ltd., South Bruce Rural Telephone Company Ltd., People's Telephone Co. of Forest Ltd., Quadro Communications Co-operative Inc., Roxborough Telephone Company Limited, Thunder Bay Telephone, Tuckersmith Communications Co-operative Limited, Westport Telephone Co. Ltd., and Wightman Telephone Ltd.; and the Quebec independents - Co-op de téléphone de Valcourt, La Cie de Téléphone de Courcelles Inc., La Compagnie de Téléphone de Lambton Inc., La Compagnie de Téléphone de St-Victor, La Compagnie de Téléphone Upton Inc., La Compagnie de Téléphone de Warwick, Le Téléphone de St-Liboire de Bagot Inc., Le Téléphone de St-Éphrem Inc., La Corporation de Téléphone de la Baie (1993), Québec-Téléphone, Télébec, Téléphone Guèvremont Inc., Téléphone Milot Inc., Compagnie de Téléphone Nantes Inc. and Sogetel Inc.

The following parties (interveners) participated in this proceeding: l'Association des câblodistributeurs du Québec Inc., Bell Canada (Bell), CF CABLE TV Inc., Cogeco Cable Canada Inc. (Cogeco), fONOROLA Inc. (fONOROLA), Gouvernement du Québec - Ministère de la Culture et des Communications, Mr. Gilles A. Marion, Rogers Cantel Inc. (Cantel), Sprint Canada Inc. (Sprint) and Unitel Communications Company (Unitel) (formerly Unitel Communications Inc.).

II METHOD OF REGULATION

In Public Notice 95-15, the Commission proposed that Québec-Téléphone and Télébec be regulated using the same basic framework that applies to the Stentor-member companies. The Commission stated that in applying this framework, it would take into account that these companies do not have the same human and financial resources available to them as the larger Stentor-member companies under the Commission's jurisdiction. Québec-Téléphone and Télébec were directed to file comments as to why the regulatory framework set out in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19) or any particular aspect of that framework should not apply to them. The companies were also asked to include any comments as to the start and duration of any transitional period before the implementation of price caps.

Québec-Téléphone, while supporting price cap regulation, submitted that a process of rate rebalancing must be implemented (in 1996 and subsequent years) prior to instituting such a regime. Further, Québec-Téléphone agreed with the principle of a split rate base and proposed to apply Phase III costing procedures to the sector which is presently regulated.

Notwithstanding the foregoing, Québec-Téléphone considered it premature to make a final statement on its regulatory framework and stated that it would like to be given six months from the release of Implementation of Regulatory Framework - Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, 31 October 1995 (Decision 95-21) to comment on issues such as splitting the rate base, a 50 basis point reduction to its rate of return on average common equity (ROE) range and the widening of the ROE range.

Télébec recognized the theoretical advantages of a price cap regime, but submitted that the details of such a regime would have to be defined in a separate regulatory proceeding. Further, Télébec submitted that, before price cap regulation is implemented, rates would have to be rebalanced.

In May 1995, Télébec advised the Commission that it was in the process of developing a Phase III type costing methodology to accommodate a split rate base. (As noted in Part VI, Section A, Télébec filed a proposed Phase III Manual during the course of the proceeding.) However, Télébec considered that a subsequent proceeding following the issuance of Decision 95-21 should determine the precise terms of application. Télébec believed that such a proceeding could commence following the release of a decision on Public Notice 95-15.

Télébec submitted, however, that, due to the size of its local/access shortfall, a longer transition period than that set out in Decision 94-19 for the implementation of price caps was essential. Télébec proposed that the transition period last until the year 2000.

Télébec further recommended that its Utility ROE be re-evaluated to reflect the recent condition of financial markets. The company considered a range of 12.5% to 14.5%, with a midpoint of 13.5%, to be appropriate.

Bell, Cogeco, fONOROLA, Sprint and Unitel supported the Commission's proposal to regulate Québec-Téléphone and Télébec in the same manner as the Stentor companies.

The Commission finds that the same basic framework that applies to the Stentor-member companies should be applied to Québec-Téléphone and Télébec. This includes a price cap method of regulation applied to their Utility segment. However, recognizing the rate rebalancing that needs to take place, and given the timing of the release of this Decision, the Commission considers that the implementation plan for a transitional period, and associated issues, should be considered in a future proceeding.

Accordingly, the Commission invites Québec-Téléphone and Télébec to file a proposed implementation plan for a transitional period, which is to set out the duration of the transitional period, ROE range for the Utility segment, the split rate base methodology, the calculation of the Carrier Access Tariff (CAT) under a split rate base regime, etc. If either company plans to file a revenue requirement application in 1997, the implementation plan for a transitional period could be filed with that application. Where no such application is planned, each company shall file its plan no later than 1 May 1997. The plan should also include rebalancing proposals for years beyond 1998.

III INTEREXCHANGE COMPETITION AND RELATED ISSUES

A. Interexchange Competition

1. General

The Commission notes that parties were generally in favour of the competitive regime proposal set out in Public Notice 95-15.

The Commission is of the view that resellers and interexchange carriers (IXCs) should be allowed to compete in the territories of Québec-Téléphone and Télébec. Accordingly, the Commission approves, effective 1 January 1997, a competitive interexchange regime in the territories of Québec-Téléphone and Télébec, based on the terms and conditions 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) and Decision 94-19, subject to the modifications detailed below.

IXCs and resellers are required to register with the Commission and with the telephone companies in whose territories they intend to operate. IXCs and resellers are to be prepared, if requested to do so by either telephone company, to provide pertinent traffic statistics that may be required for billing purposes and for calculating the CAT rates.

2. Application of the Carrier Access Tariff

The Commission notes that the magnitude of the contribution requirements of Québec-Téléphone and Télébec will result in contribution charges that will be significantly higher than the contribution charge for Bell. Therefore, the Commission is of the view that there is merit in recovering the local/access shortfall from as much traffic as possible in order to reduce the per-minute contribution rate. Accordingly, the Commission is of the view that contribution should be paid on all switched voice and data traffic that is interconnected to the Public Switched Telephone Network (PSTN).

With respect to the collection of contribution from interexchange competitors, the Commission is concerned with contribution being paid twice on services which are being resold. Therefore, where Québec-Téléphone and Télébec already collect/impute contribution or receive revenue settlement on the underlying resold services used by a reseller to carry traffic, that reseller need not pay contribution to originate and/or terminate traffic in Québec-Téléphone's and/or Télébec's operating territories.

Accordingly, the Commission approves the payment of contribution on all interexchange public switched voice and data traffic that is interconnected to the PSTN. Canadian carriers providing wireless services are not required to pay contribution on such services. Where a reseller resells switched long distance services for which contribution is paid, those resold minutes will be exempt from contribution. Competitors are to make use of the existing Commission contribution exemption process for situations where they are not required to pay contribution on their traffic.

In Revisions to the Mechanism to Recover Contribution Charges, Telecom Decision CRTC 95-23, 4 December 1995 (Decision 95-23), the Commission directed Stentor members to file de-averaged contribution rates. In light of the Commission's conclusion that the same basic framework that applies to the Stentor-member companies should be applied to Québec-Téléphone and Télébec, the Commission directs that the companies show cause as to why a de-averaged contribution rate, as approved in Decision 95-23, should not apply in their territories as part of their 1997 contribution filings (see Part V, Section A below).

3. Adjustments to the Carrier Access Tariff - Contribution Discounts and Direct Access Line Loading Factors

The Commission is of the view that, at this stage in the development of the interexchange market, the existing IXCs are well established and that discounts are not necessary to promote competition in the territories of Québec-Téléphone and Télébec. With respect to resellers, the Commission is of the view that a 15% discount is appropriate for line-side access in light of the inferior quality of this service.

With respect to the treatment of traffic stimulated by competition, any mechanism that reduces contribution-eligible traffic will increase the contribution rate. The Commission notes that for the reasons outlined in subsection 2 above, the contribution rates of Québec-Téléphone and Télébec will be significantly higher than that of Bell. In order to achieve the Commission's objective of reducing the contribution rate, the Commission favours contribution from as much traffic as is reasonable. Therefore, the Commission is of the view that all switched traffic, including stimulated traffic minutes, should be included in the contribution rate calculation.

With respect to the treatment of Direct Access Lines (DALs), the Commission is of the view that since the appropriate means to apply the contribution mechanism is based on a per-minute charge, it is appropriate for Québec-Téléphone and Télébec to impute a usage figure for DALs as is currently done by the OTA and ACTQ in their contribution rate calculations. The imputed figure for DALs is to be included in the total minute count of switched interconnected traffic. With respect to the proxy figure to use, the Commission is of the view that 8,000 minutes per month per DAL is a reasonable approximation at this time.

B. Equal Access

The interim competitive regime established by the Commission in Telecom Order CRTC 95-558, 11 May 1995 (Order 95-558), did not address the issue of equal access. While parties were in support of providing equal access, there were differing views with respect to the timing of its implementation and the responsibility for recovering the associated cost.

The Commission is of the view that equal access is important to encourage the spread of competition and that it should be implemented where technologically feasible (as per Decision 92-12). As well, the Commission notes that equal access may be achieved in certain cases through the use of Bell facilities, with a probable reduction in the cost of implementing equal access. Accordingly, by 1 January 1998, Québec-Téléphone and Télébec are directed to implement equal access, defined as Feature Group D with CCS7 signalling, where technologically feasible. Each company is to file an equal access roll-out plan with the Commission by 1 January 1997, indicating in which exchanges equal access will be implemented and by what date. For those exchanges that will not be converted by 1 January 1998, Québec-Téléphone and Télébec are to provide a reason why equal access will not be implemented by that date and when it is expected to be.

Further, the Commission is of the view that it is necessary to establish Primary Interexchange Carrier (PIC) and Customer Account Record Exchange (CARE) procedures, and a Carrier Services Group (CSG), similar to those established for Stentor-member companies, prior to the implementation of equal access. Accordingly, Québec-Téléphone and Télébec are directed to establish the PIC/CARE procedures and a CSG like those that are in place for the Stentor-member companies, prior to implementing equal access. Québec-Téléphone and Télébec are also directed to file by 1 August 1997, for approval, the appropriate tariffs and a PIC/CARE Access Customer Handbook associated with the PIC/CARE process.

C. Other Line Charges

Other Line Charges are additional per minute charges applied to toll calls that originate from, or terminate in, designated remote locations in the territories of Québec-Téléphone and Télébec. Other Line Charges are tariffed by Bell, Québec-Téléphone and Télébec. Under the terms of its settlement agreements with Québec-Téléphone and Télébec, Bell remits all Other Line Charges it collects to Québec-Téléphone and Télébec for calls made from Bell's territory to the two companies' respective territories.

Québec-Téléphone submitted that it could not continue to bill Other Line Charges to its customers when its competitors were not subject to this obligation. In Tariff Notice 73, Québec-Téléphone proposed to eliminate the Other Line Charges from its General Tariff, and to offset the resulting revenue loss through a $1.00 per month local rate increase, productivity improvements and expense reductions.

Québec-Téléphone also proposed to include the Other Line Charges revenue lost as a result of competitors gaining market share in the calculation of the contribution requirement and hence the calculation of the contribution rate.

Bell submitted that Other Line Charges should be eliminated, and that local rates should be increased to cover the cost of service. Bell argued that, until local rates have been rebalanced, the shortfall should be part of the contribution rate to be paid by all providers of long distance originating and terminating traffic in these two companies' serving areas.

fONOROLA and Unitel also argued for the elimination of Other Line Charges.

The Commission concurs with Unitel that Québec-Téléphone's proposal is unduly discriminatory in that competitive toll providers would be required to pay a higher contribution on all minutes while Bell would continue to collect a $0.10 per minute surcharge on calls to designated remote locations. In light of this, the Commission denies Québec-Téléphone's Tariff Notice 73.

Further, to address the competitive equity concerns expressed by a number of parties, the Commission is of the view that Other Line Charges should be eliminated from the General Tariffs of Bell, Québec-Téléphone and Télébec. In view of the size of the revenue impact resulting from the elimination of Other Line Charges on Québec-Téléphone and Télébec, the Commission considers that it is appropriate for the companies to eliminate Other Line Charges over a two-year period.

Therefore, Bell, Québec-Téléphone and Télébec are directed to reduce Other Line Charges to half their current level effective 1 January 1997 and to eliminate them effective 1 January 1998. The companies are to issue, within 30 days of the date of this Decision, revised tariff pages which reflect the foregoing.

Québec-Téléphone and Télébec are further directed to file, within 45 days of the date of this Decision, a proposal to recover from other sources the revenue they would forego as a result of the elimination of Other Line Charges.

IV RATE ADJUSTMENTS

The Commission notes that Québec-Téléphone and Télébec, both providers of long distance services, commenced rate rebalancing prior to the introduction of long distance competition in their territories. The Commission is of the preliminary view that Québec-Téléphone and Télébec should continue to increase local rates, in order to move rates closer to cost and to reduce the contribution rate.

The Commission is also of the view that, consistent with the variation of Decision 95-21 as per Order-in-Council P.C. 1995-2196 dated 19 December 1995 with respect to the Stentor companies, mandated toll reductions should not apply. However, the Commission notes that, by not mandating a revenue-neutral toll reduction, there is a risk that the companies could earn more than their allowed ROEs because the respective revenue base of these two companies has not yet been split into the Competitive and Utility segments, as is the case for the Stentor-member companies. In order to prevent this from happening, the Commission is of the view that a condition on over-earning is necessary. Specifically, to the extent that their ROEs are projected to go above the midpoint of their allowable range (i.e., 11.8% for Québec-Téléphone and 11.9% for Télébec), the companies will be obligated to lower toll rates to eliminate the excess earnings.

Accordingly, the Commission is of the preliminary view that annual increases of $2.00 per month per subscriber per line for local rates should be implemented by Québec-Téléphone and Télébec effective 1 January in each of the years 1997 and 1998. Further, the Commission notes that (1) the companies will not be required to lower long distance rates unless the additional revenues cause their ROEs to go above the midpoint of their allowable earnings ranges and (2) rate increases will not be required where a particular local rate can be shown to be compensatory. Québec-Téléphone and Télébec are directed to notify subscribers, through a billing insert, of the proposed local rate increases and to outline the procedures to be followed by subscribers who wish to comment and for company replies. The companies are directed (1) to file the proposed text of the billing insert by 23 August 1996 and (2) to file, by 1 September 1996, proposed tariff pages for local rate increases that are consistent with the above, to take effect 1 January of each of the years 1997 and 1998. The companies are also directed to distribute the billing inserts by 30 September 1996. Following an assessment of comments received, the Commission will make its final determination.

V TOLL REVENUE SETTLEMENT MECHANISM

A. Contribution Charge

Québec-Téléphone proposed different contribution rates on originating and terminating minutes, with the objective of protecting its revenue settlement with Bell.

The Commission is of the view that Québec-Téléphone's proposal for a lower contribution rate on originating minutes than on terminating minutes should be rejected on the grounds that (1) it is inconsistent with the procedures set out in Decision 92-12, and (2) it unduly discriminates in favour of carriers whose toll calls predominantly terminate outside Québec-Téléphone's territory, i.e., the company itself.

The Commission concurs with Télébec's proposed method for calculating contribution requirement.

The Commission directs Québec-Téléphone and Télébec each to file a single contribution component applicable to both originating and terminating minutes. For 1997 and subsequent years, in the absence of a revenue requirement proceeding for a given year for Québec-Téléphone and Télébec, the Commission intends to include them in an annual contribution charge proceeding.

B. Calculation of the Contribution Requirement

The Commission considers that as toll carriers, Québec-Téléphone and Télébec should calculate their contribution requirement for purposes of the CAT in a manner that is consistent with that used by other toll carriers. Accordingly, Québec-Téléphone and Télébec are directed to calculate their contribution requirements starting from their respective forecast Phase III results as set out below.

The Commission notes that as a result of its decision to forbear from the regulation of terminal equipment (see Part VIII of this Decision), the surplus/shortfall in the Competitive Terminal Broad Service Category (BSC) must be excluded from the contribution requirement calculation.

The Commission further notes that to be consistent with previous decisions it has made with respect to the Stentor-members' cellular operations, Québec-Téléphone should also exclude revenues, investment and expenses from cellular operations, including an attributable portion of common costs, from the contribution requirement calculation. Since Québec-Téléphone provides cellular service as part of its operations, it is directed to provide details on the methodologies used to exclude cellular operations from the contribution and revenue requirement calculations at the time of its 1997 contribution filing.

Québec-Téléphone and Télébec are directed to determine their contribution requirements as follows:

1. Allocate the Common BSC expenses across all other BSCs in proportion to the operating expenses previously assigned to the other BSCs, and allocate the Common BSC investment in proportion to the Average Net Investment Base (ANIB) previously assigned to the other BSCs;

2. Remove all revenues, investment and expenses associated with cellular and terminal operations from the appropriate BSCs as directed above and calculate the revised surplus/shortfall for the applicable BSC; and

3. Add the surplus/shortfall of the Access and Local BSCs.

In addition, Québec-Téléphone and Télébec are to include the regulatory adjustment for directory services in the calculation of the contribution requirement.

C. Recovery of the Start-up Costs for Equal Access

To provide interconnection to the toll carriers, Québec-Téléphone and Télébec will have to modify their networks, systems and procedures which will cause additional costs to be incurred. Start-up costs, such as the cost of modifying switches, will occur once, near the outset of competitive entry.

The Commission directs Québec-Téléphone and Télébec to file rates along with supporting cost information, by 1 August 1997, to recover equal access start-up costs over a ten-year period. The Commission considers that these costs should be recovered from all participants in the toll market including the incumbents in accordance with their estimated share of that market. The proposed rates should be based on Phase II causal costs.

Further, the Commission notes that only trunk-side originating and terminating minutes should be used in the calculation of the equal access charge since equal access functionality is not used by resellers who access the switch from the line side. The rates are to be calculated in accordance with the principles set out above.

D. Recovery of Switching and Aggregation Costs

Switching and aggregation costs are ongoing costs primarily associated with aggregating and terminating competitors' traffic for delivery to and from the toll carriers' networks. Other ongoing cost components are associated with customer and operator services and carrier billing functions.

The Commission is of the view that Québec-Téléphone and Télébec should file rates for the recovery of switching and aggregation costs (direct connection and access tandem) based on Phase II causal costs. While both companies stated that they were not able to estimate such costs at present, the Commission is of the view that they should develop these capabilities.

Québec-Téléphone and Télébec are directed to file unbundled rates for the recovery of switching and aggregation costs based on Phase II causal costs and to advise the Commission when they expect to file these rates. The Commission notes that the switching and aggregation per minute costs are to be calculated on the basis of trunk-side originating and terminating minutes. The proposed charge should only be applied to trunk-side traffic.

Should the companies not be able to file rates for switching and aggregation prior to the effective date for implementation of equal access on 1 January 1998, the Commission approves a switching and aggregation charge of $0.011 per minute on an interim basis.

E. 1995 and 1996 Carrier Access Tariffs

1. Québec-Téléphone

In Order 95-558, the Commission required that the Quebec independents, including Québec-Téléphone and Télébec, provide IXCs and resellers with the facilities required to originate and terminate their switched interexchange voice and data services based on the terms and conditions in the Bell/ACTQ Agreement and the ACTQ CAT. In the case of Québec-Téléphone, the Order made additional provisions: (1) it allowed IXCs and resellers to establish a point of presence in order to interconnect at toll offices, including those of Bell where appropriate, using the ACTQ CAT, and (2) it stated that the resale regime approved in Telecom Order CRTC 94-682, 17 June 1994 was to remain in effect. As a result of these Orders, the CAT applicable to Québec-Téléphone consisted of two rates: $0.1791 per minute for interconnecting traffic and $0.0635 per minute for resold traffic.

On 31 January 1996, Québec-Téléphone filed forecast Phase III results for the years 1995 and 1996, and proposed contribution rates on originating and terminating minutes for 1996. The contribution rates were calculated according to the company's proposal for different contribution rates on originating and terminating minutes. As noted in Part V, Section A of this Decision, the Commission rejected that approach to the calculation of contribution rates.

The Commission finds that the information filed by the company provides sufficient evidence to cast doubt on the appropriateness of the interim CAT currently in place. In order to finalize Québec-Téléphone's contribution rates for 1995 and 1996, the company is directed to file proposed contribution rates and supporting documentation within 30 days of the date of this Decision. The company is to serve, at the same time, a copy of the filing on any person which requests it. The company is also to provide forthwith a copy to any person which requests it after the filing date. Interested persons have 30 days to comment, serving a copy on Québec-Téléphone. Québec-Téléphone has 10 days from the final date for comments to reply, serving a copy on those who filed comments.

The Commission further directs that Québec-Téléphone use the methodology outlined in Part V, Section B of this Decision to calculate its contribution requirement.

2. Télébec

In the case of Télébec, the Commission, in Order 95-558, (1) allowed IXCs and resellers to establish a point of presence in order to interconnect at toll offices, including those of Bell where appropriate, using the ACTQ CAT, (2) allowed IXCs and resellers to use Télébec's facilities to access Îles-de-la-Madeleine and the northern regions served by Télébec, and (3) prohibited the resale of switched interexchange voice and data services in Télébec's operating territory. As a result of this, the CAT applicable to Télébec was $0.1791 per minute for interconnecting traffic.

On 16 October 1995, Télébec filed forecast Phase III results for the year 1995. The Commission finds that this information casts doubt on the appropriateness of the interim CAT currently in place.

In order to finalize Télébec's contribution rates for 1995 and 1996, the company is directed to file proposed rates and supporting documentation within 30 days of the date of this Decision. The company is to serve, at the same time, a copy of the filing on any person which requests it. The company is also to provide forthwith a copy to any person which requests it after the filing date. Interested persons have 30 days to comment, serving a copy on Télébec. Télébec has 10 days from the final date for comments to reply, serving a copy on those who filed comments.

VI PHASE III METHODOLOGY

A. Status and Use of Phase III Manuals and Procedures

During the course of this proceeding, Télébec filed its proposed Phase III Manual. Québec-Téléphone filed its Phase III Manual on 10 June 1996.

The Commission concurs with the view of most parties that a Phase III type costing methodology should be used by all independents as the basis for calculating a CAT for each company on a consistent basis. The Commission considers that the Phase III procedures currently used by Télébec for CAT development purposes generally parallel those established by the Commission for the Stentor-member companies. Except for one revision, the Commission finds the procedures contained in Télébec's Phase III Manual acceptable for use in the production of its Phase III results. Accordingly, the Commission grants final approval of Télébec'sPhase III Manual subject to one revision set out below.

In the case of Québec-Téléphone, the Commission will make a determination concerning the acceptability of its Phase III procedures soon after the company files its Phase III Manual, amended as directed below.

The Commission is also of the view that any approved change to the Stentor members' basic Phase III costing concepts for investment and expenses should generally be adopted by Québec-Téléphone and Télébec. In this regard, the Commission notes that with respect to the directives on switching procedures specified in Review of Phase III of the Cost Inquiry, Telecom Decision CRTC 94-24, 18 November 1994 (Decision 94-24),Télébec indicated itwas prepared to make the necessary changes, while Québec-Téléphone had already included them in its preliminary 1994 Phase III results.

The Commission considers that switching investment, which is a major cost component, should be assigned consistently by all telephone companies, in accordance with the switching assignment procedures specified in Decision 94-24.

The Commission also considers that a consistent format should be used in the presentation of the actual Phase III results of Québec-Téléphone and Télébec in order to ensure that the results equate to the companies' audited financial statements.

Therefore, in order to achieve consistency in the format of Phase III results, Québec-Téléphone is directed to include (1) a terminal category which captures the revenue, investment and expenses associated with the provision of its deregulated terminal products and services; (2) cellular services revenues, investment and expenses derived from its Cellular Mobile division in the Competitive Network category; and (3) the Plant Construction and Investments in Subsidiaries and Affiliates (ISA) reporting categories. Similarly, Télébec is directed to include, in its ISA reporting category, the investment in its cellular affiliate, Télébec Mobilité Inc.

The Commission notes that the format requirements for the reporting of Phase III results are not intended to reflect each company's regulated rate base for the purpose of assessing revenue requirement.

The Commission finds that the changes to the Phase III Manuals described above should be reflected in the production of Québec-Téléphone's and Télébec's actual 1995 Phase III results. Therefore, Télébec is directed to file, coincident with the filing of its actual 1995 Phase III results, updated pages to its Phase III Manual which reflect the changes noted above. Québec-Téléphone is directed to reflect the same revisions, as applicable, in its proposed Phase III Manual, and resubmit it for Commission approval.

B. Phase III Results

The Commission notes that Québec-Téléphone and Télébec have both demonstrated the ability to file detailed Phase III forecasts similar to the Stentor-member companies and the Commission directs these companies to continue this practice.

Québec-Téléphone and Télébec are directed to file their respective actual Phase III results, for the calendar year 1995, by 31 October 1996.

C. Other Filing Requirements

The Commission notes that the Stentor companies file updates to their respective Accounting and Phase III Manuals. The Phase III Manual updates are subject to a public process in accordance with 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 amended by Proposed Revisions to the Phase III Manual Update Procedure, Telecom Letter Decision CRTC 89-26, 1 December 1989 and by Decision 94-24.

Similarly, the Commission considers that Québec-Téléphone and Télébec will be required to update their respective Accounting and Phase III Manuals. With respect to their Accounting Manuals, Québec-Téléphone and Télébec are directed to file, within 30 days, two copies of the most recent edition of their respective Manuals and file updates on a quarterly basis, if necessary thereafter, to ensure the Commission's copies are current.

Québec-Téléphone (after Commission approval of its Manual) and Télébec are directed to file updates to their Phase III Manuals in accordance with the procedures approved for the Stentor-member companies as determined in the Decisions noted above.

The Commission notes that annual audits of Phase III results are required for Stentor companies. Having considered the parties' comments on this matter, the Commission directs Québec-Téléphone and Télébec to file audited Phase III results, commencing with the year 1996 and every year thereafter, on or before 31 October of the following calendar year, and to follow the audit process outlined in Decision 88-7.

VII LOCAL COMPETITION

In Decision 94-19, the Commission endorsed the principle of local competition for the Stentor-member telephone companies, expressing the view that local competition will lead to benefits such as productivity improvements and the introduction of even more innovative services. Consistent with this view, the Commission, in Public Notice 95-15, proposed that local competition be permitted in the territories of all independents, noting that issues such as unbundling and co-location would have to be considered.

Most parties agreed with the Commission's proposal in principle, subject to certain concerns being addressed. Accordingly, the Commission is of the preliminary view that local competition should be allowed in the territories of Québec-Téléphone and Télébec.

However, the Commission notes that there is currently a proceeding underway to determine the terms and conditions of local competition as it relates to the Stentor-member telephone companies (Implementation of Regulatory Framework - Local Interconnection and Network Component Unbundling, Telecom Public Notice CRTC 95-36, 11 July 1995). The Commission considers that it would not be appropriate to commence a proceeding to deal with the issues of local competition in the territories of Québec-Téléphone and Télébec until a decision has been issued with respect to the terms and conditions of local competition in the territories of the Stentor-member telephone companies. Following the release of such a decision, the Commission intends to issue a public notice to determine the applicability of those terms and conditions for local competition in the territories of Québec-Téléphone and Télébec.

VIII TARIFF FILING REQUIREMENTS AND TERMINAL EQUIPMENT FORBEARANCE

A. Tariff Filing Requirements

The Commission notes that the Telecommunications Act (the Act) provides that no Canadian carrier shall provide a telecommunications service except in accordance with a tariff approved by the Commission. In this Decision, the Commission has set out the conditions for forbearance from the regulation of cellular services and terminal equipment. Therefore, for telecommunications services other than those which the Commission has determined meet the conditions for forbearance, Québec-Téléphone and Télébec are required to continue to file tariffs, for approval, but will only be required to file economic studies (1) in support of filings for new services; (2) when proposing rates for a service that are not similar to rates approved by the Commission for other telephone companies offering the same service; (3) for rate reductions, where there are concerns that rates may not make an appropriate contribution to the local/access shortfall; and (4) where there is a potential for anti-competitive pricing.

To ensure that the content of economic studies is well-defined, Québec-Téléphone and Télébec are to file resource cost study manuals similar to those provided by Stentor-member companies. These filings are to be received by the Commission within six months of the date of this Decision.

The Commission notes that, while tariffs will continue to be required for market trials and promotions, it is open to the consideration of market trial and promotion tariffs which provide a degree of flexibility for such offerings. Economic studies will not be required for market trials or promotions and the Commission will also endeavour to deal with such filings on an expedited basis.

Québec-Téléphone and Télébec argued that because there is competition in the provision of toll services in their territories, they should be allowed to file ex parte toll rate applications, similar to those of Stentor-member companies. The Commission concurs with Québec-Téléphone and Télébec and notes that, in Decision 94-19, it found ex parte filings to be appropriate for discount toll and 800 service filings where the applicant demonstrates that competitive and non-discrimination safeguards are met and no bottleneck service, consumer safeguard or privacy issues are raised. Therefore, the Commission will accept ex parte tariff filings for such toll services from Québec-Téléphone and Télébec under the conditions described above.

In Review of Regulatory Framework - Targeted Pricing, Anti-Competitive Pricing and Imputation Test for Telephone Company Toll Filings, Telecom Decision CRTC 94-13, 13 July 1994, and Decision 94-19, the Commission established for the Stentor-member companies an imputation test to determine that inter-exchange rates, including toll rates, recover costs, imputed contribution, equal access start-up costs, and bottleneck service rates. Consistent with the development of a competitive market for toll services in the territories of Québec-Téléphone and Télébec, the Commission requires that these companies provide an imputation test calculation. The Commission requires that Québec-Téléphone and Télébec file a methodology for the calculation of an imputation test applicable to new toll services or toll rate reductions within 60 days of this Decision.

B. Terminal Equipment Forbearance

In Forbearance - Sale of Terminal Equipment by Canadian Carriers, Telecom Decision CRTC 94-14, 4 August 1994 and in Decision 94-19, the Commission made a determination to forbear, for the Stentor-member companies, with respect to the sale, lease and maintenance of the Competitive Terminal - Other (CT-O) category (single-line telephones and accessories) and the Competitive Terminal - Multiline & Data (CT-MD) equipment category (includes key systems, PBXs and data equipment). The Commission noted the concern about possible cross-subsidies from monopoly services to terminal equipment services and anti-competitive pricing. In Decision 94-19, however, the Commission noted that, once the rate base has been split, the ability of the Stentor companies to cross-subsidize or engage in anti-competitive pricing initiatives with revenues from monopoly services will be largely eliminated.

With confirmation that Québec-Téléphone and Télébec have established accounting separations which effectively eliminate the opportunity to cross-subsidize or to engage in anti-competitive pricing of terminal equipment, the Commission finds, pursuant to subsection 34(1) of the Act, that to forbear from regulating, as specified below, with respect to the sale, lease and maintenance of CT-O and CT-MD equipment is consistent with Canadian telecommunications policy objectives. Further, pursuant to subsection 34(2) of the Act, the Commission finds that these services are subject to sufficient competition to protect the interest of users, so that forbearance is appropriate. Finally, with respect to subsection 34(3) of the Act, the Commission finds that to forbear is unlikely to impair unduly the continuation of a competitive market for these services.

Accordingly, pursuant to section 34 of the Act, the Commission hereby refrains, with respect to the sale, lease and maintenance of CT-O and CT-MD equipment, from the exercise of powers and the performance of duties with respect to sections 24, 25, 31, and subsections 27(1), (2), (4), (5), and (6) of the Act.

The Commission's decision to forbear does not apply to (1) terminal equipment supplied on a monopoly basis, more specifically to equipment required by tariff to be supplied by the telephone companies in conjunction with the provision of two-party, four-party or multi-party primary exchange services and (2) single-line residence and business inside wiring.

Québec-Téléphone is directed to file tariffs deleting reference to the sale, lease or maintenance of terminal equipment, as described above, upon approval by the Commission of a filing by the company indicating that it has complied with the requirement to separate competitive terminal equipment assets, revenues and expenses from its rate base and shortfall determination. The Commission notes that Télébec has filed Tariff Notice 44 which complies with these requirements. Accordingly, Tariff Notice 44 is hereby approved.

IX EXTENDED AREA SERVICE

A. Extended Area Service Criteria

As with respect to the small Quebec independents, the Commission notes that there are currently two Extended Area Service (EAS) standards within the territories of Québec-Téléphone and Télébec, depending on whether the company is linking to a Bell exchange or to another independent's exchange.

In the case of an EAS link between an independent and Québec-Téléphone or Télébec, the criteria established in Télébec ltée - Development Plan for 1995-1999 and Revenue Requirement for 1995, Telecom Decision CRTC 94-26, 29 November 1994 (Decision 94-26) and in Québec-Téléphone - Development Plan for 1995-1999 and Revenue Requirement for 1995, Telecom Decision CRTC 95-1, 25 January 1995 (Decision 95-1) apply. The Commission accepted for the purposes of those Decisions: a distance not greater than 40 miles between the exchanges; the Community of Interest (COI) levels approved by la Régie des télécommunications du Québec (la Régie) of 50% for one-way EAS links and 60% two-way COI for two-way links; and a vote when (among other things) the COI criterion is met two months out of 12, but not where the associated individual-line residential rate increase would be a dollar or less per month, in order to mitigate the potential for a larger exchange defeating an EAS vote.

In the case of an EAS link between a Québec-Téléphone or a Télébec exchange and a Bell exchange, the Bell criteria apply as modified by the "one dollar" voting rule approved in Decision 94-26 and Decision 95-1. The criteria are:

(1) at least 60% of subscribers in one exchange must call customers in the other exchange at least once a month, for two months in a twelve-month period;

((2) the distance between the exchanges' switching centres must not exceed 40 miles or 64 kilometres; and

((3) a simple majority of subscribers experiencing a rate increase as a result of a new EAS link must agree to the implementation of EAS.

Québec-Téléphone and Télébec supported the continuation of the existing dual criteria in their territories. In this regard, the Commission notes that it approved for Télébec in Decision 94-26 and for Québec-Téléphone in Decision 95-1 five-year plans which included specific EAS links based on la Régie's criteria as modified by the Commission. As a result, there are customer expectations that EAS links will be established based on those approved five-years plans and the associated underlying criteria. In view of this, the Commission considers that there is merit in keeping the two sets of criteria, as modified by the one dollar voting rule. While there is merit to having uniform EAS criteria for the independents in the Province of Quebec, the Commission notes that there is a wide range of EAS criteria among the Stentor members. Therefore, the Commission approves the EAS criteria currently in place for Québec-Téléphone and Télébec.

The Commission notes that Québec-Téléphone, unlike other companies, measures COI based on line count rather than subscriber count. The Commission therefore directs Québec-Téléphone to measure COI based on subscriber count rather than line count.

B. Method for Recovering the Cost of New Extended Area Service Links

In the case of Québec-Téléphone and Télébec, the cost of the EAS link is recovered through the application of an EAS surcharge and rate upgrouping with the shortfall, if any, being paid for by the general body of subscribers. The Commission concludes that these practices should continue.

In Bell Canada - Neighbourhood Calling Plan, Telecom Decision CRTC 92-22, 9 December 1992, the Commission stated that while it would be prepared to consider departures from the EAS criteria for the creation of toll-free calling areas, it was of the view that the incremental costs of any such departures should be borne primarily by subscribers within the affected regions.

There have been cases in Quebec where the EAS criteria have not been met and where the Commission approved the total cost of the new link, both Bell's cost and the independent's cost being paid only by the subscribers benefitting from the new link. The Commission concludes that this practice can continue.

C. Resale of Extended Area Service

In Bell's territory, resale of EAS involving only "one-hop" is permitted without the payment of contribution. The resale of EAS for the provision of long distance services by "one-hoppers" is permitted only in Québec-Téléphone's territory. EAS links are used to originate long distance traffic (i.e., non-one-hop long distance services) in the territories of the independents on a case-by-case basis in accordance with an agreement between the parties in question. In all cases involving EAS resale in Québec-Téléphone's territory, contribution is paid.

Most independent companies were of the view that the resale of EAS to points outside the EAS territory should be prohibited to prevent contribution erosion. Sprint supported a ban on this type of resale until the Commission is sure that there would be no adverse effect on the smaller independents.

The Commission is of the view that to the extent possible, competition should be expanded. There is a concern however with the financial impact on Québec-Téléphone and Télébec. EAS can be used to bypass contribution payable to the independents both by long distance competitors who take advantage of EAS where the EAS link involves a Bell exchange and by local "one-hoppers". In Decision 92-12, the Commission did not allow long distance competitors to use Bell switches to originate traffic in the territories of parties who were not in the proceeding that led to that Decision. Competing long distance carriers were required to negotiate with the independents if they made use of Bell's EAS arrangements. In the case of Québec-Téléphone, the carriers paid contribution to resell EAS in order to originate traffic from within that company's territory.

Accordingly, the Commission approves the resale of EAS and directs that resellers of such services not be differentiated from resellers of long distance services and, therefore, that they be required to pay contribution. The payment of contribution on resold EAS recognizes the financial vulnerability of Québec-Téléphone and Télébec. Resellers must register with the Commission and the relevant telephone company and provide, if requested to do so by the telephone company in question, traffic statistics to the telephone company for billing purposes and for calculating the CAT.

X QUALITY OF SERVICE

The Commission notes that, among other things, the appropriate quality of service regulation for the largest of the independents, including Québec-Téléphone and Télébec, is being considered in the proceeding initiated by Review of the Quality of Service Indicators, Telecom Public Notice CRTC 94-50, 21 October 1994, which is still in progress.

XI TERMS OF SERVICE

A. General

In Public Notice 95-15, the Commission proposed that the independents be required to adopt the Terms of Service of either Bell or The Island Telephone Company Limited, allowing for some minor variations to account for particular operating requirements, i.e., where such differences respond to particular operating requirements and unique service characteristics. The Commission further stated that it is its policy that a telephone company's Terms of Service, or a summary thereof, be published in its telephone directory.

The Commission notes that, with the exception of a limited number of specific provisions, Québec-Téléphone and Télébec were generally not opposed to adopting Bell's Terms of Service. Accordingly, the Commission directs the two companies to adopt Bell's Terms of Service, with the exceptions noted below.

The Commission agrees with Québec-Téléphone that Bell's Articles 6.1 and 6.2 (Two-Party and Four-Party Service) cannot be applied to its territory, as two-party and four-party lines have been eliminated from Québec-Téléphone's territory for approximately five years.

With respect to Télébec's request not to adopt Bell's Article 6, the Commission notes that it was recently informed by Télébec that, due to unforeseen circumstances, the planned upgrades to single-party service had not been completed. In light of this, the Commission directs Télébec to include Bell's Articles 6.1 and 6.2 in its Terms of Service to address the fact that Télébec has not completed its upgrading program.

With respect to Bell's Article 7.6 (Deposits and Alternatives), the Commission notes Québec-Téléphone's comment to the effect that it is currently not in a position to adopt Article 7.6 and that it is not able to say if the company will be able to do so in the future, as Québec-Téléphone is in the process of implementing a new billing system. The Commission further notes the comments of other parties to this proceeding that complying with Article 7.6 may force them to make significant investments in their billing systems. In this regard, the Commission notes that in AGT, NBTel and Newfoundland Tel - Amendments to the General Regulations, Telecom Decision CRTC 95-6, 27 April 1995 (Decision 95-6), it approved, for NewTel Communications Inc. (NewTel) (formerly Newfoundland Telephone Company Limited) and The New Brunswick Telephone Company, Limited, modifications to Article 7.6 based on similar arguments. As a result, the companies were directed to provide, on the monthly bills, the telephone number of a company representative to whom any inquiry regarding the deposit may be directed. The Commission directs that the same requirements are to apply to Québec-Téléphone.

Télébec proposed a modification to Bell's Article 7.7 (Deposits and Alternatives) to provide for a review of the continued appropriateness of deposits on an annual basis rather than at six-month intervals because of the associated costs. The Commission notes that in Decision 95-6 it approved, for NewTel, a proposal whereby service deposits were to be reviewed "at ten month intervals, or sooner upon customer request", rather than every six months, to take into consideration the operational changes that would be required if some telephone companies were obliged to conform to Bell's Article 7.7. The Commission directs that these requirements also apply to Télébec.

B. Additional Provisions

1. Implementation and Filing Requirements

The Commission notes that Télébec indicated that it was in the process of implementing a new billing system which would only be operational at the end of 1996 and consequently requested a delay in the implementation of its new Terms of Service.

The Commission remains of the view, expressed in Review of the General Regulations of Federally Regulated Terrestrial Telecommunications Common Carriers, Telecom Decision CRTC 86-7, 26 March 1986 (Decision 86-7) and in Decision 95-6, that companies can be reasonably expected to implement new Terms of Service if provided with a six-month lead-time. Further, the Commission is of the view that Québec-Téléphone and Télébec should have two months to file with the Commission their revised Terms of Service. The Commission notes that, although Québec-Téléphone and Télébec are to implement their Terms of Service within six months, they are only required to update their directories at the next planned issue date.

2. Notice of New Terms of Service

The Commission directs Québec-Téléphone and Télébec to advise their subscribers, through a billing insert, that new Terms of Service have been approved and that the Terms or a summary thereof will be published in the next telephone directory. The Commission further directs the two companies to file the text of the billing insert, for Commission approval, within two months of the date of this Decision. Finally, the Commission directs Québec-Téléphone and Télébec to notify their subscribers, in both official languages, that copies of the Terms of Service are available in either language upon request and that further information can be obtained from each company's respective business offices.

3. Inclusion of the Terms of Service in the Directories of Québec-Téléphone and Télébec

The Commission considers that it would be in the subscribers' interest that the publication of information concerning the Terms of Service be made mandatory and consistent across the territories of Québec-Téléphone and Télébec.

In Decision 86-7, the Commission made a determination concerning the requirements applicable to Stentor members pertaining to the inclusion of the Terms of Service in their directories. The Commission considers that those requirements could also reasonably be applied to Québec-Téléphone and Télébec. Accordingly, the Commission directs Québec-Téléphone and Télébec to publish, in the introductory pages of their directories, either a summary or the full text of the Terms of Service, in both official languages where significant numbers of both language groups warrant such inclusion. Where a directory contains a summary or text in only one language, the Commission directs that a statement in the other official language be inserted stating that the Terms of Service are also available in the other official language and that the Terms have equal force in both official languages.

XII CELLULAR ISSUES

A. Forbearance

The Commission notes that Télébec and Québec-Téléphone currently are involved in the provisioning of cellular services: Télébec provides unregulated service through a separate affiliate, while Québec-Téléphone provides regulated service through a division of the company.

In Regulation of Wireless Services, Telecom Decision CRTC 94-15, 12 August 1994 (Decision 94-15), the Commission decided to forbear from regulating the provision of cellular service or public cordless telephone service by Canadian carriers other than the telephone companies. However, this determination did not affect the status of the costing and marketing safeguards that were established in Cellular Radio - Adequacy of Structural Safeguards, Telecom Decision CRTC 87-13, 23 September 1987 (Decision 87-13), and Rogers Cantel Inc. v. Bell Canada - Marketing of Cellular Service, Telecom Decision CRTC 92-13, 29 June 1992 (Decision 92-13). The Commission further determined that, conditional upon the development and implementation of the appropriate safeguards, it would be prepared to consider telephone company proposals to forbear with respect to the provision of wireless services.

In this proceeding, the Commission notes that, in general, parties agreed with the findings of Decision 94-15 and with the requirement to apply the costing and marketing safeguards developed in Decisions 87-13 and 92-13.

In light of the above, the Commission directs Québec-Téléphone to either (1) as indicated in Decision 94-15, submit a proposal to the Commission, including appropriate costing and marketing safeguards, requesting forbearance from regulation; or (2) comply with the safeguards established in Decisions 87-13 and 92-13.

B. Costing and Marketing Safeguards

In Decisions 87-13 and 92-13, the Commission established marketing and costing safeguards to be applied to the provisioning of cellular services by Stentor-member telephone companies. These safeguards include: (1) mechanisms to ensure that no cross-subsidization from monopoly telephone to cellular revenues takes place; (2) a prohibition on joint marketing and advertising of telephone company and cellular services; (3) restrictions on customer referrals by the telephone company; and (4) a prohibition on access to telephone company monopoly and competitive customer information by a cellular affiliate or by a division.

The Commission considers that the concerns expressed in Decisions 87-13 and 92-13 regarding the need for effective safeguards to ensure against cross-subsidization and undue preference, in cases where telephone companies offer cellular services through a division of a company that provides monopoly services, remain valid. The Commission therefore agrees with Cantel that Québec-Téléphone, which falls into this category, should be subject to all of the safeguards established in Decisions 87-13 and 92-13, as it is a monopoly provider of local services in its territory. Accordingly, the Commission directs that all safeguards established in Decisions 87-13 and 92-13 be applied to Québec-Téléphone.

With respect to Télébec which provides service through a separate cellular affiliate, the Commission notes that most parties supported the implementation of the safeguards established in Decisions 87-13 and 92-13. The Commission further notes that Télébec has already implemented these safeguards as a requirement of its cellular forbearance regime.

C. Access to Cellular Towers and Antennas

Presently, Stentor-member companies and their affiliates that own cellular towers and antennas are subject to two principal requirements. First, in AGT Limited - Revenue Requirement for 1992, Telecom Decision CRTC 92-9, 26 May 1992, and in Access to Telephone Company Support Structures, Telecom Decision CRTC 95-13, 22 June 1995, the Commission determined that when a telephone company provides access to cellular towers and antennas to an affiliate company, it must provide the same access to third parties. Second, in Notification of Network Changes, Terminal-to-Network Interface Disclosure Requirements and Procedures for the Negotiation and Filing of Service Arrangements, Telecom Letter Decision CRTC 94-11, 4 November 1994, the Commission determined that when a telephone company provides tower space to itself, and a party requires access to that space, the company is required to either file a non-discriminatory tariff arrangement or to indicate why such a service request is impractical.

The Commission agrees with Cantel's proposal that access to microwave towers owned by Québec-Téléphone and Télébec should be governed by the same policy of non-discriminatory access which currently applies to Stentor members.

However, as the owners of these structures are monopoly suppliers in their respective territories such that there exists potential for them to confer an undue advantage on some parties, the Commission will not forbear from regulating access to Québec-Téléphone and Télébec support structures. The Commission is of the view that the requirements applicable to the Stentor members would ensure that access to their cellular towers and antennas is not restricted and is available on a non-discriminatory basis.

In light of the above, where Québec-Téléphone or Télébec provide access to cellular towers and antennas to an affiliated company, the telephone company is directed to provide the same non-discriminatory tariffed access to third parties. Further, where either Québec-Téléphone or Télébec provides tower space to itself, and a party requires access to that space, each is directed to file either a non-discriminatory tariff arrangement, or demonstrate why such a service request is impractical.

Allan J. Darling
Secretary General

DEC96-5_1