ARCHIVED -  Telecom Public Notice CRTC 97-41

Telecom Public Notice

Ottawa, 18 December 1997

Telecom Public Notice CRTC 97-41

REVIEW OF THE CONTRIBUTION REGIME OF INDEPENDENT TELEPHONE COMPANIES IN ONTARIO AND QUEBEC

File No.: 8695-C12-03/97

BACKGROUND

1. Traditionally, the financial support for local independent telephone companies in Ontario and Quebec (the independents) was derived from toll revenue settlement agreements between the independents and their monopoly toll carrier. Under these agreements, toll carriers such as Bell Canada (Bell), Ontario Northland Transportation Commission (the telecommunications operating division of which is now known as O.N. Tel) and Québec-Téléphone contributed to the recovery of the local/access shortfall of the independents thereby enabling them to maintain their local rates below cost and to earn a reasonable rate of return.

2. Through settlement agreements, Bell also subsidized the services of O.N. Tel, Québec-Téléphone and Télébec ltée (Télébec).

3. With the advent of competition in the toll market, financial support for the recovery of the local/access shortfall in the independents' operating territories in Ontario and Quebec gradually switched from toll settlement agreements to company specific carrier access tariffs (CAT) for most of the independents. The CAT rates are levied on all toll minutes and are paid by all toll service providers who originate and terminate in the independent's territory.

4. 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 (Decision 96-6), the Commission established company-specific CATs that included a contribution component and provided for the inclusion of a switching and aggregation charge and start-up costs associated with Equal Access. Accordingly, toll contribution derived from the CAT is, at this time, the only explicit subsidy to maintain affordable basic local rates.

5. Similarly, in Regulatory Framework for Québec-Téléphone and Télébec ltée, Telecom Decision CRTC 96-5, 7 August 1996 (Decision 96-5), the Commission established company-specific CATs applicable to alternative providers of long distance service (the APLDS) in order to ensure that APLDS contribute towards the companies' local/access shortfalls.

6. Following the issuance of Decisions 96-5 and 96-6, a number of parties, including the APLDS, have commented that the CAT rates in the independents' territories are too high. The Ontario independents have claimed that high CAT rates were preventing their subscribers from having a choice of long distance providers. According to some, the problem of high CAT rates is associated with the existing contribution regime.

7. By letter dated 12 September 1997, the Commission invited the independents in Ontario and Quebec, including Québec-Téléphone and Télébec, AT&T Canada Long Distance Services Company (AT&T Canada LDS) Bell, fONOROLA Inc. (fONOROLA) and Sprint Canada Inc. (Sprint) to participate in a two-day round table discussion in Hull, Quebec on 21 and 22 October 1997. La Fédération nationale des associations de consommateurs du Québec, Vidéotron Télécom and Northwestel Inc. also made observations at this meeting.

8. An important aspect of this consultative process was to seek clarification and industry input on the extent of the problems associated with the current contribution mechanism, and to identify alternative solutions, if required, that would foster competition and, at the same time, maintain both affordable basic local service and the reasonable financial health of the independents. The Commission noted that it intended the round table to be a consultative rather than a decisional process and that it intended to initiate this proceeding subsequently, wherein all interested parties would be invited to participate and make submissions.

9. During the round table discussion, a number of matters related to the existing contribution regime in the independents' territories were identified including alternatives to the existing CAT regime; the independents' settlement agreements with Bell; urban to rural subsidies; local rate parity with Bell rates; toll bypass; the verification and control of the independents' costs; productivity improvements; and extended area service in the independents' territories.

10. In order to consider matters associated with the present contribution regime, the Commission hereby initiates a public proceeding to review the contribution mechanism in the independents' territories.

11. The record of the round table discussion, including the written submissions and the transcripts, forms part of the record of this proceeding.

12. The Commission invites comments on, but not limited to, the following issues: (i) what barriers or disincentives have discouraged the entry of APLDS in the independents' territories and how can such barriers or disincentives be addressed; (ii) what measures could be implemented by the independents to reduce their costs such as further productivity improvements, cost controls and cost sharing initiatives; (iii) to what extent, if any, should the CAT go toward subsidizing expenditures related to broadband facilities and expenditures associated with the preparation for local competition; (iv) should there be further audits of the independents (other than for Québec-Téléphone and Télébec) and if so, what should be the scope and form of such audits; (v) is there a need for further rate rebalancing in the territories of the independents (other than for Québec-Téléphone and Télébec) and what should be the criteria for such rate rebalancing; (vi) what should be the level and implementation timeframe of such rate rebalancing (other than for Québec-Téléphone and Télébec); (vii) to what level of detail should the Commission scrutinize the revenue requirements of the independents (other than for Québec-Téléphone and Télébec); and (viii) what mechanisms could be used to reduce the CAT rates in order to foster toll competition while continuing to implement the other objectives of the Canadian telecommunications policy.

13. The scope of this proceeding does not include a review of the CAT mechanism for telephone companies across Canada and it only pertains to those independents located in Ontario and Quebec. Rate rebalancing initiatives for Québec-Téléphone and Télébec do not form part of this proceeding. Rather, these are addressed in Implementation of a Regulatory Framework for Québec-Téléphone and Télébec, Telecom Decision CRTC 97-21, 18 December 1997.

14. In Decisions 96-5 and 96-6, the Commission expressed the preliminary view that local competition should be allowed in the territories of the independents. The Commission intends to issue a public notice in the winter of 1998-1999 to consider the preliminary view and to determine, if appropriate, the terms and conditions for local competition in the territories of the independents.

15. In a related matter, today the Commission also issued Service to High-Cost Serving Areas, Telecom Public Notice CRTC 97-42, 18 December 1997 (Public Notice 97-42).

PROCEDURE

16. Bell, all the independents in Ontario and Quebec, AT&T Canada LDS, fONOROLA and Sprint are made parties to this proceeding. Others wishing to participate in this proceeding must notify the Commission of their intention to do so by writing to Mrs. Laura M. Talbot-Allan, Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, fax: 819-953-0795, by 19 January 1998. Parties are to indicate in the notice their Internet email address, where available. If parties do not have access to the Internet, they are to indicate in the notice whether they wish to receive disk versions or hard copy filings. The Commission will issue a complete list of parties and their mailing addresses (including Internet email addresses if available), also identifying those parties who wish to receive disk versions.

17. Those wishing to comment in this proceeding, but who do not wish to participate otherwise or to receive the various submissions, may do so by writing to the Commission by 16 February 1998. The Commission shall place those comments on the public record of this proceeding.

18. Those made parties to this proceeding are directed to file their submissions, serving copies on all other parties, by 27 February 1998. Other parties wishing to file submissions may do so by filing their submissions with the Commission and serving copies on all parties by 27 February 1998.

19. Parties may address interrogatories to any party who filed submissions pursuant to paragraph 18 above. Any such interrogatories must be filed with the Commission and served on the relevant parties by 30 March 1998.

20. Responses to interrogatories addressed pursuant to paragraph 19 are to be filed with the Commission and served on all parties by 29 April 1998.

21. Requests by parties for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the relevant parties by 8 May 1998.

22. Responses to requests for further responses to interrogatories and for public disclosure must be filed with the Commission and served on the party making the request by 15 May 1998.

23. The Commission will issue a determination with respect to requests for further responses and for disclosure as soon as possible, and intends to direct that any information to be provided pursuant to that determination be filed with the Commission with a copy served on all parties to the proceeding by 5 June 1998.

24. Parties may address supplemental interrogatories to any party who filed submissions pursuant to paragraph 18. Any such interrogatories must be filed with the Commission and served on the relevant parties by 15 June 1998.

25. Responses to interrogatories addressed pursuant to paragraph 24 are to be filed and served on all parties by 8 July 1998.

26. Requests by parties for further responses to their supplemental interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the relevant parties by 15 July 1998.

27. Responses to requests for further responses to interrogatories and for public disclosure must be filed with the Commission and served on the party making the request by 22 July 1998.

28. The Commission will issue a determination with respect to requests for further responses and for disclosure as soon as possible, and intends to direct that any information to be provided pursuant to that determination be filed with the Commission with a copy served on all parties to the proceeding by 14 August 1998.

29. Parties may file final comments with the Commission, serving copies on all other parties, by 4 September 1998.

30. Parties may file final reply comments with the Commission, serving copies on all other parties, by 18 September 1998.

31. The record of this proceeding may be examined during normal business hours at the offices of the Commission in the following locations:

Central Building
Les Terrasses de la Chaudière
1 Promemade du Portage
Room 201
Hull, Quebec

Tel: (819) 997-2429
Fax: (819) 953-0795
TDD: (819) 994-0423

Place Montréal Trust
1800 McGill College Avenue
Suite 1920
Montréal, Quebec

Tel: (514) 283-6607
Fax: (514) 283-3689
TDD: (514) 283-8316

32. Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent by that date.

33. In addition to hard copy filings, parties are encouraged to file with the Commission electronic versions of their documents in accordance with the Commission's Interim Telecom Guidelines for the Handling of Machine-Readable Files, dated 30 November 1995. The Commission's Internet email address for electronically filed documents is public.telecom@crtc.gc.ca. Electronically filed documents can be accessed at the Commission's Internet site at http://www.crtc.gc.ca.

This document is available in alternative format upon request.

Laura M. Talbot-Allan
Secretary General

AVI97-41_0