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Telecom Order CRTC 97-930
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Ottawa, 4 July 1997
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On 18 April 1997, Stentor Resource Centre Inc. (Stentor) filed on behalf of and with the concurrence of all federally regulated Stentor Owners with the exception of TELUS Communications Inc., an application for the approval of tariff revisions for the provision of Enhanced Prepaid Service. An amendment was filed on 2 May 1997.
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File No.: Tariff Notices 452 and 452A
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Stentor filed supporting information pursuant to 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 (Decision 94-13) and Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19).
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Stentor’s proposed tariff specifies that Enhanced Prepaid Service is a wholesale tariff similar to the existing Prepaid Service tariff; however, units will be sold on a forecast basis not requiring prepayment. When actual usage varies from forecast usage to the extent that the applied rate is incorrect, an adjustment will be made on an annual basis.
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On 16 May 1997, AT&T Canada Long Distance Services (AT&T Canada LDS) filed comments submitting that Stentor’s proposal to "true-up" customer accounts based on forecast versus actual usage is untenable, unenforceable and should be denied by the Commission. AT&T Canada LDS submitted that the Commission should direct Stentor to require full payment on the basis of the number of units ordered by the customer at the beginning of the service period.
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AT&T Canada LDS stated that the proposed service would have a negative impact on the competitive pre-paid card industry and would allow Stentor, one of the major players in the industry, to establish artificially low prices in the market.
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AT&T Canada LDS stated that it is highly unlikely that in a competitive market and on a yearly basis, Stentor would require a customer whose actual usage does not meet its forecasted usage to remit additional money.
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AT&T Canada LDS submitted that it is in a customer’s interest to provide inflated usage forecasts in order to benefit from lower per unit prices associated with large volumes and that once these cards are distributed, the customer has no control over the usage of the cards. If the customer is unable to meet the forecast and does not need to return to Stentor for additional service, there is no guarantee that the customer would be willing to retroactively reimburse Stentor for any missed usage forecasts. AT&T Canada LDS submitted that, given the above, the Commission could not possibly have any confidence in the imputation test provided.
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Stentor submitted reply comments on 28 May 1997. Stentor noted that the majority of customers for the proposed and existing Prepaid Service are well-established, reputable organizations with valuable business reputations to protect and can be expected to abide by the legal requirements associated with the approved tariff. Stentor submitted that the companies have the economic incentive and the ability to collect such payments and that the AT&T Canada LDS’ premise is unsupported by market reality.
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Stentor submitted that the companies have the ability and the incentive to minimize any problems which would arise from basing initial rates on excessively optimistic forecasts. Development of a usage forecast would be based on the customers’ and companies’ past experience and would be subject to acceptance by the companies.
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Stentor noted that the use of true-up mechanisms are not uncommon in normal commercial arrangements and submitted that AT&T Canada LDS’ proposal to require the companies to collect full payment prior to the service being provided is unreasonable and inconsistent with the telecommunications industry practice of collecting payments for services on an ongoing basis. Stentor submitted that should collection problems arise, the companies would make use of normal collection processes, including legal action, to collect outstanding balances. Stentor stated that there is no reason to expect that any significant degree of bad debt would arise from the proposed service and that in the unlikely event that a disproportionate amount of bad debt is generated, there is sufficient leeway in the imputation test results to accommodate such a situation.
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The Commission notes that, in various forms, "true-up" mechanisms have been incorporated in a number of the telephone companies’ approved tariffs for long distance services. The Commission notes that the Telecommunications Act requires the companies to provide telecommunications services in accordance with approved tariffs. As with other long distance services, normal collection procedures are at the companies' disposal should collection problems arise.
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The Commission is of the view that the assumptions supporting the imputation test submitted with the application are reasonable. The Commission notes Stentor’s submission that should a disproportionate amount of bad debt be realized, there is sufficient leeway in the imputation test results to absorb modified assumptions.
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Contrary to AT&T Canada LDS’ allegations, the Commission considers that the proposed service passes the imputation test in accordance with Decisions 94-13 and 94-19, and therefore Stentor’s proposed rates are not anti-competitive.
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In light of the foregoing, the Commission orders that:
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Tariff Notices 452 and 452A are hereby approved.
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Laura M. Talbot-Allan
Secretary General
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This document is available in alternative format upon request.
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