ARCHIVED -  Telecom Order CRTC 97-803

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Telecom Order

Ottawa, 11 June 1997
Telecom Order CRTC 97-803
Telecom Public Notice CRTC 96-13: Bell Canada - Restructuring of Rates for Business Local Exchange Services - TelecomLink
File Nos.: Bell Tariff Notices 5665/A/B and 5795/A
1. On 22 April 1991, the Commission wrote to Bell Canada (Bell) questioning the continued relevance of price differentials between business individual lines and Private Branch Exchange (PBX) trunks, in view of the conclusion of the Terminal Attachment Program Advisory Committee (TAPAC) that PBX and key system technologies were no longer mutually exclusive.
2. In response to the Commission's letter, Bell filed a report evaluating three different approaches for restructuring the tariffs for business primary exchange service, namely, Blended Rate, Sliding Scale and Threshold Pricing.
3. In Bell Canada - Tariff Restructuring for Business Access Services, Telecom Letter Decision CRTC 93-18, 2 December 1993, the Commission concluded that Threshold Pricing was the most equitable of the three approaches and approved this approach in principle. The Commission directed the company to file proposed tariffs and related information to implement Threshold Pricing.
4. On 7 April 1995, Bell filed proposed tariff revisions under Tariff Notice 5471 (TN 5471) to restructure business primary exchange service from the current rate group structure to access bands.
5. On 31 May 1995, Bell filed proposed tariff revisions under Tariff Notice 5506 (TN 5506) to replace the flat monthly rates for business individual line service and PBX service with a single, lower, flat-rate access component and a usage-sensitive rate component applicable to completed local outgoing calls.
6. On 25 July 1995 and 26 September 1995, Bell requested the Commission's permission to withdraw TNs 5506 and 5471, respectively, and to delay the refiling until 15 December 1995 at which time the company would combine the two tariff applications. Bell stated that revisions were necessary to respond to certain customer concerns regarding the introduction of usage pricing on a mandatory basis.
7. The Commission subsequently granted Bell's request and cancelled the proceeding initiated in Bell Canada - Restructuring of Rates for Business Local Exchange Services, Telecom Public Notice CRTC 95-33, 27 June 1995.
8. In response to customer concerns raised by Bell's previous filings, Bell filed Tariff Notice 5665 (TN 5665) dated 21 December 1995.
9. In TN 5665, Bell proposed tariff revisions to be implemented in two phases to restructure the rates for business local exchange services. The tariff changes would replace the flat monthly rates for business individual line service and PBX service with a single, lower, flat rate access component and a network component. The network component would be available at an optional flat rate or on a usage sensitive pricing basis.
10. On 1 March 1996, Bell filed an amended proposal under Tariff Notice 5665A (TN 5665A) revising certain of the rates proposed in its initial tariff filing.
11. On 17 April 1996, the Commission issued Bell Canada - Restructuring of Rates for Business Local Exchange Services - Telecomlink, Telecom Public Notice CRTC 96-13 (PN 96-13) to consider Bell's applications.
12. On 17 June 1996, the Commission issued Telecom Order CRTC 96-595 (Order 96-595) granting interim approval to Phase 1 of TN 5665 with an effective date of 1 August 1996.
13. In response to interveners' comments, the Commission stated in Order 96-595 that it considered that interim approval of Phase 1 would not affect the Commission's determination with respect to Phase 2, nor would it prejudice the Commission's final determination with respect to Phase 1 based on the complete record of the proceeding.
14. On 5 July 1996, Bell filed proposed revisions to its Centrex III Service under Tariff Notice 5795 (TN 5795).
15. In response to a request from ACC TelEnterprises Ltd. on 23 August 1996, the Commission expanded the scope of the PN 96-13 proceeding to include consideration of Bell TN 5795.
16. The Canadian Bankers Association (CBA), Canadian Business Telecommunications Alliance (CBTA), Canadian Cable Television Association (CCTA), Canadian Federation of Independent Business (CFIB), Interactive Services Association and Rural Dignity of Canada provided final comments.
17. In addition, over 2,500 submissions were included by the Commission in the official record for PN 96-13.
18. The Commission notes that none of the parties supported approval of the second phase of TelecomLink as submitted by Bell under TN 5665A.
19. On 21 March 1997, Bell filed Tariff Notice 5665B (TN 5665B) reflecting modifications to Phase 2 of TN 5665A.
20. Bell stated that since completion of the public process associated with PN 96-13, and as the intended implementation date of Phase 2 approaches, it has become apparent to the company, given the pending changes in the marketplace and feedback from customers regarding the complexity of the proposed changes, that it would not be appropriate to implement Phase 2 as originally proposed. As a result, Bell amended its application with an alternative proposal for eliminating the long-standing disparity between PBX trunks and business lines.
21. Bell proposed to introduce a single, flat rate of $45.45 applicable to all individual business primary exchange service lines and trunks, and thereby eliminate the need for any references to trunks in its tariffs. To be consistent with rates for residence service in the Far North, the company proposed a rate of $40.00 for Rate Group 3A.
22. In addition, the company proposed to retain four main rate bands as originally proposed. However, it proposed to reduce the number of sub-bands from seven to six to retain future flexibility to reflect market and cost considerations such as community size and differences in underlying provisioning costs.
23. Finally, Bell estimated that the proposed tariff revisions would be revenue neutral.
24. On 10 April 1997, Bell filed Tariff Notice 5795A reflecting modifications to the Centrex III Service revisions proposed under TN 5795. Bell stated that these changes were consequential to those proposed under TN 5665B in order to maintain consistency.
25. AT&T Canada Long Distance Services Inc., CBA, CBTA, CCTA, CFIB, Mr. John E. Holt, Incotel, and the University of Guelph filed comments on TN 5665B.
26. Bell provided its reply on 1 May 1997.
27. CBA and CBTA recommended that rates (in particular, urban rates) continue to be moved closer to costs.
28. CFIB and CCTA were not opposed to rate reductions for PBX and urban customers, but argued that these reductions should not be financed through rate increases to business services in the lower rate groups which are already above costs.
29. CFIB noted that some business owners have already experienced price increases of up to $8.00 per month per line since 1 August 1996. CFIB submitted that further increases of up to $15.65 per month are entirely unjustified by any measure of fairness.
30. Mr. John. E. Holt argued that Bell should widen the local calling area for rural business customers to justify the proposed increase or maintain a reduced fee in light of the subsidy in the current long distance rates paid by rural business customers.
31. The Commission notes that Bell's proposals consist of more than the simple elimination of PBX trunk and key system line price differentials. Bell's proposals have a number of other objectives, namely, the restructuring of rate groups to access bands and the rationalization of price structures with costs.
32. The Commission notes that the assignment of exchanges to bands in the current proposal is consistent with the approach taken in Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8). Given that the follow-up proceeding to implement price cap regulation is to finalize the assignment of exchanges to rate bands, the Commission considers interim approval to the assignment proposed in TN 5665B to be appropriate at this time.
33. The Commission notes that as the local market is becoming competitive, rates can no longer be established based upon a simple comparison between local calling areas, regardless of costs.
34. The Commission considers that the most significant issue concerns the rate increases proposed in TN 5665B for rural areas. The Commission recognizes that these increases are substantial. However, given the costs of providing service in rural areas and the extent to which those costs exceed the costs of providing like service in urban areas, the Commission is satisfied that the proposed increases are justified.
35. The Commission notes that in a letter dated 16 May 1997, the CCTA indicated that Bell's current proposed rates would not meet the imputation test and requested that the Commission defer granting approval to TN 5665B until Bell files imputation test results for TN 5665B, with such results to be filed at the same time as Bell files its unbundled local loop rates pursuant to Decision 97-8.
36. The Commission considers, on a prima facie basis, that the proposed rates for Band D would not meet the imputation test identified in Decision 97-8.
37. The Commission notes that the Bell tariff filings in this proceeding predate Decision 97-8.
38. While it is less than the rates of up to $68.80 proposed in TN 5665A for Band D customers, as noted above, even the proposed rate of $45.45 would result in substantial rate increases for customers.
39. The Commission considers that to require rate changes that would meet the imputation test, reflecting local loop rates granted interim approval in Decision 97-8, would result in excessive rate increases for some rural single line business customers.
40. Moreover, the Commission considers that it would not be in the public interest to further delay the implementation of appropriate rates to address the price differentials between business individual lines and PBX trunks.
41. In light of the foregoing, the Commission is of the view that the proposed single price for business primary exchange service provides an approach that appropriately addresses the need to eliminate price differentials between line and trunk prices while giving greater recognition to costs in the pricing of these services.
42. Accordingly, the Commission: (1) approves Bell's revised proposals, with the exception of the exchange classification to rate bands, effective 1 July 1997; (2) grants final approval for the period 1 August 1996 to 30 June 1997 to the Phase 1 tariff changes that were granted interim approval in Order 96-595 with an effective date of 1 August 1996; and (3) grants interim approval to the assignment of exchanges to rate bands proposed in TN 5665B.
Allan J. Darling
Secretary general
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