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Ottawa, 12 May 1998
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Telecom Order CRTC 98-467
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On 31 March 1998, MTS Communications Inc. (MTS) filed an application relating to the treatment of the company's residual shortfall established in Implementation of Price Cap Regulation and Related Issues, Telecom Decision CRTC 98-2, 5 March 1998 (Decision 98-2), proposing to introduce exogenous factors in the company's price cap formula and proposing rate revisions further to Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9).
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File No.: Tariff Notice 321
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1. Further to Decision 98-2, MTS proposed to implement an across the board rate increase of $0.49 to Basic Residential Local Service rates effective 1 January 1998. The Commission considers that this aspect of MTS' proposal is compliant with Decision 98-2.
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2. Pursuant to Decision 97-9, MTS updated its Price Cap Index (PCI) and respective Service Band Limits to incorporate the Gross Domestic Product-Price Index and the productivity offset of 4.5% stipulated in Decision 97-9.
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3. MTS also proposed that an exogenous factor be incorporated into the PCI for 1998 relating to future tax expenses and that it be implemented only at the level of the total basket of capped services. MTS further proposed the implementation of eight annual exogenous adjustments, commencing 1 January 1999, that would provide for the gradual recovery of future tax expenses. These exogenous adjustments would be incorporated into the PCI, both at the level of the total basket of capped services and at the level of the Basic Residential Local Services Sub-basket.
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4. The Commission notes that comments were received opposing aspects of MTS' application. MTS filed a reply to those comments.
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5. The Commission notes that it will be establishing a public process to examine MTS' proposed exogenous adjustments for future income taxes. In light of the significance of the issues associated with MTS' proposal, the Commission is of the view that it would be premature and inappropriate to proceed with the proposed 1998 exogenous factor.
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6. MTS proposed to increase, on 1 May 1998, Basic Residential Local Service rates by $0.11 in Bands A, B and C and by $0.26 in Bands D and E. In addition, MTS proposed to restructure Multiline Business Service rates to meet its PCI.
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7. The Commission notes that the proposed residence rates comply with the Basic Residential Local Service pricing constraints in Decision 97-9.
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8. The Commission notes that, by letter dated 21 April 1998, MTS provided responses to Commission interrogatories which requested the company to provide, assuming the exclusion of consideration of the proposed exogenous factor for 1998, i) the rates for Multiline Business Service which would reflect the full reductions required to meet the PCI in 1998, and ii) the company's preferred rate scenario which would reflect the full reductions required to meet the PCI in 1998.
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9. In response to i) above, the company indicated that it would not propose any further changes to the rates for Multiline Business Service since, among other things, it would be inappropriate for the rates for this service to move to levels that approach current individual line business service rates. In response to ii) above, the company indicated that it does not have a preferred rate scenario that would exclude an exogenous adjustment for 1998 but would, if requested, consider a number of options.
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10. In light of the company's responses and the exclusion of the proposed 1998 exogenous factor, the Commission is of the view that it is appropriate to reduce Multiline Business Service rates in Bands A, B and C to meet the company's 1998 PCI.
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11. The Commission is satisfied that, on the basis of the imputation test information required by Local Competition, Telecom Decision CRTC 97-8, 1 May 1997, the approved rates specified below will not be anti-competitive.
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12. In light of the foregoing, the Commission orders that:
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(a) The proposed across the board increase of $0.49 to Basic Residential Local Service rates is approved, effective 1 January 1998.
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(b) The proposed increase of $0.11 to Basic Residential Local Service rates in Bands A, B and C and the proposed $0.26 rate increase in Bands D and E are approved, effective 19 May 1998.
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(c) A Multiline Business Service rate of $42.43 is approved for Bands A, B, and C, effective 19 May 1998.
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(d) MTS' proposed Multiline Business Service rates in Bands D and E are approved, effective 19 May 1998.
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(e) The company is to file, by 19 May 1998, the calculation of its Actual Price Index and Service Band Indices reflecting the foregoing determinations.
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(f) The company is to issue tariff pages by 19 May 1998 reflecting the foregoing determinations.
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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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