ARCHIVED -  Telecom Order CRTC 97-1174

Telecom Order

Ottawa, 25 August 1997

Telecom Order CRTC 97-1174

On 4 June 1996, Québec-Téléphone filed for approval its draft Phase III Manual and on 2 July 1996 submitted modifications to its draft Manual to correct minor errors in its original submission.

File No.: 96-2191

1. In Regulatory Framework for Québec-Téléphone and Télébec ltée), Telecom Decision CRTC 96-5, 7 August 1996 (Decision 96-5), the Commission directed Québec-Téléphone to amend its proposed Phase III Manual by including: (1) a Competitive Terminal category to capture 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 Under Construction (PUC) and Investments in Subsidiaries and Affiliates reporting categories.

2. In Decision 96-5, the Commission also directed Québec-Téléphone to file its actual 1995 Phase III results by 31 October 1996 and, coincident with that filing, updated pages to its Phase III Manual which reflect the above-noted changes and to resubmit it for Commission approval.

3. On 29 October 1996, Québec-Téléphone filed its unaudited actual 1995 Phase III results and on 29 November 1996, submitted the required revisions to its Phase III Manual, except for the inclusion of a PUC reporting category, and revised its presentation of results to reflect these changes.

4. No comments on Québec-Téléphone's proposed Phase III Manual were submitted by interested parties.

5. In its review of Québec-Téléphone's Phase III Manual, the Commission notes that the description of study approaches was generally limited to a list of assignment drivers used to develop the ratios to assign investment and expense to Phase III categories.

6. The Commission further notes that the details underlying the Phase III assignment drivers, noted above, remain at the working level within the company.

7. The Commission notes that consistent with the directives originally enunciated in Order and Guidelines for the Filing of Phase III Manuals by Bell Canada and British Columbia Telephone Company, Telecom Order CRTC 86-516, 28 August 1986, the Phase III Manual is to be designed to meet audit standards.

8. The Commission recognizes that there are specifications of the processes required to derive Québec-Téléphone's Phase III revenue and cost information at the working level within the company which need not be included in the Manual.

9. The Commission considers, however, that it is essential that Québec-Téléphone's Phase III Manual describe the assignment procedures relating to the company's revenues, plant investment and expenses in a manner that is suitably documented to permit validation of the Phase III results as required.

10. In this regard, the Commission considers that in the future, when there is a requirement to re-issue Phase III Manual pages for a specific study, the company should include a description of the study processes which describe the drivers used to calculate assignment ratios to ensure that, over time, its Phase III Manual is revised to reflect the appropriate level of detail and the actual assignment processes.

11. The description should also provide the basis of assignment, the investment or activities involved identified by account code, the derivation of the ratios used in each study as well as a list of specific ratios used from other studies or activities.

12. The Commission has reviewed Quebec-Telephone's Phase III Manual and, with the exception of PUC, finds that the company has appropriately incorporated the revisions in accordance with Decision 96-5.

13. The Commission notes that Québec-Téléphone does not have a PUC reporting category in its Phase III results because the company uses Maritime Tel & Tel Limited's mechanized system which was designed to produce Split Rate Base results and which assigns PUC by relating the elements of plant in PUC with the associated Phase III investment ratios.

14. As a result, the allocations that would have been made to the PUC reporting category are made directly to the other Phase III categories.

15. The Commission considers that since the level of overall PUC in the company is modest, inclusion of PUC in the other Phase III categories is not likely to have a material impact on its Phase III results.

16. In light of the foregoing, Québec-Téléphone's proposed Phase III Manual, which was used in the production of its unaudited 1995 Phase III results, is approved.

17. The Commission notes that Québec-Téléphone will file, for the first time, audited Phase III results for the calendar year 1996 by 31 October 1997 based on the approved Phase III Manual in accordance with Decision 96-5.

18. In the event that comments or recommendations are received from either the company's external auditor or the Commission's audit consultant, Québec-Téléphone is directed to file for approval revisions to its Phase III Manual, in accordance with those comments or recommendations which would then be used in the production of the company's 1996 audited Phase III results.

19. On a going forward basis, as updates to its Phase III Manual are filed, the Commission directs Québec-Téléphone to submit more detailed descriptions of the study processes in its Manual, as specified in paragraphs 9, 10 and 11 above, and to provide the company's rationale for any proposed study revisions in accordance with the update process established in Decision 96-5.

20. The revisions and updates approved in this Order are to be used in the production of Québec-Téléphone's 1996 audited Phase III results to be filed with the Commission by 31 October 1997.

Laura M. Talbot-Allan
Secretary General

This document is available in alternative format upon request.