ARCHIVED -  Telecom Order CRTC 97-1243

Telecom Order

Ottawa, 5 September 1997

Telecom Order CRTC 97-1243

On 31 July 1997, ACC Long Distance Inc., AT&T Canada Long Distance Services Company, Call-Net Enterprises Inc. (Call-Net), Rogers Cantel Inc., the Canadian Cable Television Association (CCTA), the Canadian Wireless Telecommunications Association, Clearnet Communications Inc., fONOROLA Inc. (fONOROLA), MetroNet Communications Corp., Microcell Telecommunications Inc., Stentor Resource Centre Inc. (Stentor) on behalf of BC TEL, Bell Canada, The Island Telephone Company Limited, Maritime Tel & Tel Limited, MTS NetCom Inc., The New Brunswick Telephone Company, Limited, NewTel Communications Inc. and TELUS Communications Inc., and Vidéotron Télécom ltée, filed their comments on, among other matters, Local Number Portability funding and voting, pursuant to the Commission's letter of 17 July 1997. CCTA and Stentor filed reply comments on Local Number Portability funding and voting on 7 August 1997.

File No.: 96-2376

1. Local Number Portability (LNP) will allow subscribers to change service providers while maintaining their existing telephone number. LNP requires the establishment and ongoing administration of a database which would associate local telephone numbers and the Local Exchange Carrier (LEC) providing service to that telephone number. A Consortium of service providers has been established, the Canadian LNP Consortium Inc./Consortium canadien pour la TNL Inc. (the Consortium), which will contract with a third party for development and administration of the database. The arrangements among Consortium members will be filed for approval by the Commission pursuant to section 29 of the Telecommunications Act. The Commission has sought comment on several matters upon which the parties have been unable to agree. This Order relates to two of these matters, 1) the appropriate mechanisms for funding the establishment and operation of the Number Portability Administration Centre/Service Management System (NPAC/SMS) and 2) the appropriate voting structure within the Consortium.

2. Parties identified two principal sources of funding for the administration of the LNP database: direct charges and transaction charges. The transaction charge would be a specific charge assessed to a carrier for each network access service (NAS) that is ported to that carrier from another carrier. If the transaction charges do not cover the total cost of database administration, the remaining cost would be charged directly to the Consortium members according to a formula. Three main formulae have been proposed for the determination of direct charges:

a) based on the total number of NAS served by each service provider;

b) based on the total number of NAS served by each service provider in exchanges where portability is available;

c) based on the total number of NXXs (i.e. the three digit telephone number prefix) assigned to each service provider in exchanges where portability is available.

3. Parties have also suggested two general approaches to set the transaction charge:

a) transaction charge is set at zero or at a low or nominal level so as to not be a barrier to entry;

b) transaction charge is established at the lesser of i) the amount required to recover annual NPAC/SMS costs and ii) the amount which maximizes total usage revenue.

4. With regard to the voting structure for the Consortium, two main issues have arisen:

a) the appropriate basis for assigning votes within the Consortium;

b) whether affiliates should have equal votes.

5. Parties proposed a variety of ways to assign votes within the Consortium:

a) one vote per shareholder for each exchange in which portability is implemented and in which the shareholder provides service;

b) one vote per Numbering Plan Area (NPA) in which portability is instituted and in which a company is operating;

c) one vote per shareholder per province in which portability is implemented and in which the shareholder provides local service;

d) one vote per company in the Consortium;

e) voting based on the financial support contributed by the Consortium shareholders.

6. Furthermore, certain parties proposed voting thresholds to protect minority shareholders' rights and prevent strategic voting by affiliates and/or alliances. Similarly, a majority of parties submitted that affiliates should not have separate voting rights to prevent control of the Consortium by a minority of shareholders.

7. In the Commission's view, the transaction charge should not constitute a barrier to entry. At the same time, it should be sufficiently high to recover more than a nominal amount of the costs to implement LNP. It should also reflect the fact that the carrier porting a number through the NPAC/SMS receives value. A higher transaction charge reduces the Consortium shareholders' direct funding requirements and ensures that all carriers taking advantage of, and receiving benefit from, the NPAC/SMS pay costs proportionate to their use of the database.

8. In light of the foregoing, the Commission considers that the transaction charge to upload a ported telephone number into the NPAC/SMS should be set at $5. In the Commission's view, this amount is not sufficiently high to constitute a barrier to entry and reduces the amount recuperated through direct funding to an appropriate level.

9. With regard to additional funding that may be required for costs associated with NPAC/SMS, the Commission considers that each shareholder should contribute on a pro rata basis according to the aggregate of the total NAS it serves in each exchange where portability is available. Carriers will thus pay according to their market share. Furthermore, this mode of funding ensures that customers who benefit from the availability of LNP bear its cost.

10. The Commission agrees with the CCTA and fONOROLA that there should be no storage charge for the maintenance of a telephone number in the NPAC/SMS. In the Commission's opinion, the payment of the transaction charge is sufficient.

11. As for concerns on whether there should be a transaction charge for the downloading of information from the NPAC/SMS and, if so, what the charge ought to be, the Commission agrees with the CCTA that the CRTC Interconnection Steering Committee (CISC) LNP working group should examine this issue before the Commission rules on it.

12. With regard to the Consortium's voting structure, the Commission considers that it must reflect the recognition that all LECs are co-carriers and that LNP is being implemented to develop effective local competition. At the same time, the Consortium's voting structure must ensure that those LECs that are more active in the local telecommunications market are adequately represented, given their greater interest in ensuring that the Consortium's decisions do not adversely affect them. To attain these objectives, the Commission considers that votes within the Consortium should be allocated on the basis of one vote for each exchange in which portability is implemented and in which the shareholder operates as a LEC. The Commission thus rejects the proposal by some parties that the participation by affiliates and independent telephone companies within the Consortium, and their voting rights, be restricted. (The Commission notes that it still has to rule on whether non-LECs can join the Consortium and participate in LNP.)

13. Some parties proposed various voting thresholds for decisions on certain matters in order to protect minority shareholders. The Commission considers that, at a minimum, a 75% supermajority vote should be required for decisions dealing with matters such as those identified by Stentor and Call-Net in their Comments of 31 July 1997 to the Commission. The Commission directs the Consortium members to identify all the decisions which will require a supermajority and to set the specific thresholds required.

14. Finally, to ensure that the corporation can operate effectively prior to the implementation of LNP, and to provide for a reasonable transitional arrangement, the Commission considers that the interim voting arrangement presently in place in the Interim Unanimous Shareholders' Agreement should continue to be in effect until LNP is implemented in the exchanges serving the cores of Montréal, Toronto, Calgary and Vancouver.

15. In light of the foregoing, the Commission orders that:

a) the transaction charge to upload a ported telephone number into the NPAC/SMS be set at $5;

b) Consortium shareholders contribute on a pro rata basis according to the aggregate of total NAS served by the shareholder in each exchange where portability is available, for any additional funding that may be required for costs associated within NPAC/SMS;

c) there be no storage charge for the maintenance of a telephone number in the NPAC/SMS;

d) the CISC LNP working group examine the issue of whether there should be a transaction charge for the downloading of information from the NPAC/SMS and, if so, what the charge ought to be;

e) shareholders' votes be allocated on the basis of one vote for each exchange in which portability is implemented and in which the shareholder operates as a LEC;

f) there be no restriction on the participation by, and the voting rights of, affiliates and independent telephone companies in the Consortium;

g) at a minimum, a 75% supermajority vote be required for decisions dealing with matters such as those identified by Stentor and Call-Net in their submission to the Commission. The Commission directs the Consortium members to identify all the decisions which will require a supermajority and to set the specific thresholds required.

h) the interim voting arrangement presently in place in the Consortium's Interim Unanimous Shareholders' Agreement continue to be in effect until LNP is implemented in the exchanges serving the cores of Montréal, Toronto, Calgary and Vancouver.

Laura M. Talbot-Allan
Secretary General

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