ARCHIVED -  Telecom Decision CRTC 98-6

This page has been archived on the Web

Information identified as archived on the Web is for reference, research or recordkeeping purposes. Archived Decisions, Notices and Orders (DNOs) remain in effect except to the extent they are amended or reversed by the Commission, a court, or the government. The text of archived information has not been altered or updated after the date of archiving. Changes to DNOs are published as “dashes” to the original DNO number. Web pages that are archived on the Web are not subject to the Government of Canada Web Standards. As per the Communications Policy of the Government of Canada, you can request alternate formats by contacting us.


Ottawa, 7 May 1998

Telecom Decision CRTC 98-6


Reference: 8638-C12-08/97


By letter dated 1 May 1997, the Commission requested TELUS Communications (Edmonton) Inc. (TCEI) (formerly ED TEL Communications Inc.) to show cause why some or all of the Commission's determinations in (1) Unbundled Rates to Provide Equal Access, Telecom Decision CRTC 97-6, 10 April 1997 (Decision 97-6), (2) Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8), and (3) Responsibility for Carrier Specific Costs for the Provision of Local Number Portability, Telecom Order CRTC 97-591, 1 May 1997 (Order 97-591), should not apply to it. The Commission indicated that interested parties would be given an opportunity to comment on TCEI’s submission.

On 13 May 1997, TCEI submitted that these Decisions, as well as Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9) and Applications by Telephone Companies to Carry on Broadcasting Distribution Undertakings, Public Notice CRTC 1997-49, 1 May 1997, should be implemented in its territory on the same date as for TELUS Communications Inc. (TCI), namely, 1 January 1998.

By letter dated 27 May 1997, the Commission informed TCEI that the Directive to the Canadian Radio-television and Telecommunications Commission on the Regulation of Edmonton Telephones Corporation and ED TEL Communications Inc., P.C. 1994-1779, 25 October 1994 (the Directive), requires it to regulate TCEI on a rate base/rate of return basis until 25 October 1998. Accordingly, price cap regulation could not be implemented for TCEI any earlier than 26 October 1998.

In TELUS Communications (Edmonton) Inc. - Local Competition and Related Issues, Telecom Public Notice CRTC 97-17, 2 June 1997 (PN 97-17), the Commission sought comments on whether Decisions 97-6 and 97-8 and Order 97-591 should apply to TCEI in advance of the implementation of a price cap regime.

On 10 June 1997, TCEI submitted that, as a result of the Commission’s finding that the Directive precludes price cap regulation before 26 October 1998, it would be unreasonable to introduce local competition in TCEI’s territory prior to that date. In TCEI’s view, rate rebalancing, rate restructuring and the establishment of the terms of price cap regulation were all necessary to provide for a smooth introduction of local competition in Edmonton on 26 October 1998. With respect to Decision 97-6, TCEI noted in the same letter that AT&T Canada Long Distance Services Company (AT&T Canada LDS) had filed a review and vary application on 5 June 1997. TCEI indicated that time was required to consider the implications of the relief requested by AT&T Canada LDS as it could potentially increase TCEI’s shortfall.

By letter dated 26 June 1997, the Commission notified interested parties to the PN 97-17 proceeding that, in light of TCEI's restated position, there was a requirement for new directions on procedure. On 21 July 1997, the Commission issued TELUS Communications (Edmonton) Inc. - Local Competition and Related Issues, Telecom Public Notice CRTC 97-28, requesting comments on whether or not the three rulings should apply to TCEI, effective 1 January 1998 or another date in advance of 26 October 1998.

The Commission received comments and reply comments from the following parties: AT&T Canada LDS; Canadian Cable Television Association (CCTA); Canadian Wireless Telecommunications Association (CWTA); the Consumers’ Association of Canada (Alberta Branch) (CACAlta); and MetroNet Communications Group Inc. and Call-Net Enterprises Inc. (MetroNet/Call-Net).


A. Introduction of Local Competition/ Alternate Form of Regulation

TCEI submitted that the Commission, in its letter of 27 May 1997, indicated that absent the Directive, it considered that an appropriate form of price cap regulation could have been applicable to TCEI effective 1 January 1998. According to TCEI, a new regulatory approach was required which should include four essential components: i) rate rebalancing; ii) rate restructuring; iii) pricing flexibility; and iv) certainty of regulatory treatment.

TCEI submitted that it would be prejudicial to the company and wrong in principle to proceed with the introduction of local competition under a form of traditional rate base/rate of return regulation. In TCEI’s view, there were three measures which needed to be adopted before the Commission rulings could be applied in Edmonton, namely: (1) the establishment of an alternate form of regulation consistent with the Directive; (2) a holistic review of TCEI’s tariffs; and (3) compliance with the terms of the Directive. Furthermore, TCEI noted several areas of direction in Decision 97-8 which were not readily applicable due to the fact that TCEI was a local exchange carrier (LEC). However, the company considered that these differences could be resolved through participation in the CRTC Interconnection Steering Committee (CISC) process.

TCEI proposed an action plan in order to avoid any undue delay in bringing the benefits of competition to Edmonton. Specifically, TCEI would file, within 90 days of a Commission ruling in favour of the TCEI approach, a complete proposal to (1) update and revise TCEI’s tariffs, (2) rebalance and restructure local rates, and (3) implement pricing flexibility during the period that the Directive remained in force.

AT&T Canada LDS supported the introduction of local competition in TCEI’s territory and noted that it was not opposed to allowing TCEI an opportunity to make adjustments in its rates in order to foster a more efficient and effective form of local competition. However, according to AT&T Canada LDS, the financial impact of rate changes should not result in an unnecessary burden of risk being borne by subscribers or competitors relative to that borne by shareholders.

In CACAlta’s view, TCEI should submit a general rate application to allow examination of its cost structure and to permit disposition of a number of issues requiring resolution before local competition was introduced. CACAlta considered that neither TCEI nor potential local competitors would be adversely affected by delaying local competition until 26 October 1998, whereas the delay would give the Commission time to establish going-in prices for TCEI which recognized its uniqueness.

CWTA urged the Commission to reject outright TCEI’s action plan. It submitted that the time needed for reviewing proposals to restructure rates and introduce more rate rebalancing would delay a decision until well into 1998. CWTA supported TCEI’s initial position and submitted that the Commission should move immediately to introduce the benefits of local competition to the citizens of Edmonton effective 1 January 1998.

CCTA submitted that local competition need not be delayed until TCEI is under price cap regulation. CCTA noted that when the Commission concluded in Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19) that increased competition in the local market was in the public interest, it had neither assumed nor required that there be a link between the date for the initiation of competition and the implementation of price caps. CCTA also noted that both Stentor Resource Centre Inc. (Stentor) and TCI, in the proceeding leading to Decision 94-19, had expressed conditional support for local competition, but had not identified the implementation of price caps as a condition. CCTA concluded that TCEI had not provided substantive reasons why the Commission should not proceed to implement local competition.

MetroNet/Call-Net considered the Edmonton market to be a vital component of their expansion plans. As such, they emphasized that the implementation of local competition should be timed to coincide as closely as possible with that in other Canadian markets, preferably 1 January 1998. MetroNet/Call-Net stated that there is no evidence that local competition could not be implemented in the absence of price cap regulation. In addition, MetroNet/Call-Net noted that other telecommunications regulators in North America did not simultaneously implement local competition and price cap regulation.

MetroNet/Call-Net submitted that a number of the conditions contained in TCEI’s plan are not required for the implementation of local competition in Edmonton. In particular they noted there is no need, for example, for the terms and conditions of price cap regulation to be established in advance of local competition, nor is there a compelling argument to be made in favour of a shortened timetable for the implementation of a third round of rate rebalancing. Insofar as TCEI’s proposal to restructure its rates is concerned, MetroNet/Call-Net considered that TCEI need not await a decision in this proceeding to file a proposal with the Commission and that any rate restructuring which is actually required can be implemented after local competition is introduced. With respect to regulatory certainty, holistic tariff review and determination of the total shareholder entitlement, MetroNet/Call-Net submitted that each of these would be better addressed in a separate proceeding.

MetroNet/Call-Net submitted that both consumers and competitors would benefit by the early implementation of local competition, and the public interest would be best served by the establishment of an interim regime to be effective 1 January 1998. This regime should include all the terms and conditions established in Decision 97-8; set the rates TCEI charges for unbundled network components and interconnection services to match the interim or final rates for the appropriate corresponding services and rate bands in TCI’s operating territory; a requirement that Order 97-591 be applicable and that local number portability (LNP) roll-out in Edmonton occur on 31 July 1998. In addition, should it be determined that TCEI belonged to a rate band to which TCI had not allocated any portable contribution, then TCEI’s toll contribution rate should be set to zero.

The Commission notes that all parties supported the introduction of local competition in TCEI’s territory, but differed as to the appropriate date or conditions of introduction.

The Commission considers that there is no compelling evidence on the record of this proceeding to require the introduction of local competition and price cap regulation at the same time. The Commission notes that it implemented competition in other segments of the telecommunications service market in Canada, such as the private line market, while these segments were included in the Stentor-member companies’ rate bases under rate of return regulation. Furthermore, the Commission notes that in a number of jurisdictions in the United States, the introduction of local competition has proceeded in advance of price cap regulation.

The Commission notes that Edmonton, as the fifth largest city in Canada, is a large market. TCEI has a network access service (NAS) count that is as large as some, and larger than the smallest of the Stentor-member companies.

The Commission is of the view that the implementation of local competition as early as is practicable is in the public interest. As stated in Decisions 94-19 and 97-8, the local competition framework is intended to balance and serve the interests of consumers, competitors and incumbents. In the Commission’s view, TCEI has not provided persuasive evidence that the introduction of local competition in advance of price cap regulation would adversely affect the balance contemplated in Decision 97-8. Accordingly, the Commission directs that the local competition framework specified in Decision 97-8 be introduced in Edmonton effective 1 July 1998. In particular, those determinations applicable to incumbent local exchange carriers will apply to TCEI, except as provided below and those determinations applicable to competitive local exchange carriers (CLECs) will apply to CLECs entering the Edmonton market.

TCEI has indicated in this proceeding its intention to use TCI’s Phase II costs for the purposes of its proposed streamlined tariffing. In light of this, the Commission directs TCEI to use TCI’s Phase II costs as a proxy for its own costs in developing the tariffs required to be filed to implement local competition pursuant to Decision 97-8.

Furthermore, TCEI is directed to file, within 30 days, interim tariffs based on TCI’s interim inter-carrier tariffs, pursuant to Decision 97-8, for unbundled and inter-carrier network components, effective as of 1 July 1998.

TCEI will be required to develop a rate band structure in order to permit application of the Decision 97-8 framework. The Commission is of the view that, on an interim basis, it would be appropriate to adopt the TCI rate band structure approved for Calgary for use in TCEI’s territory. Accordingly, TCEI, within 30 days of this Decision, is directed to file proposed tariffs for this purpose.

At the Commission’s request, CISC undertook to resolve outstanding issues related to the implementation of the Decision 97-8 framework. In view of the conclusions set out above with reference to the implementation of this framework in TCEI’s territory, the company is directed to show cause, within 30 days of this Decision, why CISC recommendations and the disposal of disputes by the Commission should not apply to the provision of competitive local exchange services in TCEI’s operating territory.

B. Rate Rebalancing

TCEI noted that the Commission had declined in Decision 94-19 to introduce price cap regulation and local competition until a transitional period, which included three rounds of rate rebalancing, was completed. TCEI noted that the second phase of the three-phased program had been implemented on 1 August 1997. According to TCEI, the third phase of rate rebalancing could, as proposed in the follow-up proceeding for price caps, reduce the blended Alberta contribution rate. TCEI considered that the third phase of rate rebalancing, which the Commission decided would precede the introduction of the rules for local competition elsewhere in Canada, should also precede the application of the Commission’s three local competition rulings in the City of Edmonton. TCEI noted that the last rate rebalancing occurred on 1 August 1997 and that generally a one-year period falls between each rate rebalancing phase. TCEI proposed that the one-year interval need not apply in this case.

AT&T Canada LDS noted that TCEI had already implemented two rounds of rebalancing, each involving increases of $2 for residential rates. According to AT&T Canada LDS, TCEI’s suggestion that the third round would occur on 1 January 1998 and be up to a maximum of $3 would be consistent with Decision 97-9, in which the Commission stated that it would permit a third round of rate rebalancing for other incumbent telephone companies of up to $3, on a weighted average basis.

AT&T Canada LDS noted that the final round of rebalancing for these companies was intended to lower long distance contribution rates to $0.02 per minute per end, but that TCEI/TCI’s contribution requirement resulted in a blended contribution rate of $0.0364 per minute per end in 1997. AT&T Canada LDS considered it unreasonable to continue to recover contribution in support of local residential service in major urban centres such as the city of Edmonton and, in its view, local competition could proceed without establishing a specific dollar value for the subsidy requirement. AT&T Canada LDS submitted that in the interim period prior to the establishment of the going-in prices under the price cap regime, the amount of any contribution remaining after rebalancing could be allocated entirely to residential lines in TCEI’s Band B.

Although MetroNet/Call-Net did not object to a third round of rate rebalancing in advance of 1 August 1998, they noted that TCEI’s contribution rate was lower than any other members of the Stentor alliance. MetroNet/Call-Net also noted that the rates which TCEI currently charges for local telephone service in Edmonton are lower than the restructured rates that TCI is proposing to charge in Calgary when local competition is introduced in its operating territory on 1 January 1998. MetroNet/Call-Net were of the view that it is not clear that the need to rebalance TCEI’s local telephone service rates in advance of local competition is as urgent as TCEI claims.

MetroNet/Call-Net stated that, given that TCEI’s contribution rate does not need to be decreased pursuant to the formula in Decision 97-9, the only reasons why TCEI would need to increase its local telephone service rates would be to address any additional revenue requirements that it may have. According to MetroNet/Call-Net, TCEI had not demonstrated such a requirement exists, nor has it shown why such a requirement, if it could even be said to exist, must be addressed in advance of the introduction of local competition. MetroNet/Call-Net also submitted that should TCEI demonstrate a need for a local rate increase, then it may apply to the Commission in the normal course, or in the context of a price cap proceeding, for such an increase.

In reply comments, TCEI stated that adherence to the $0.02 per minute contribution freeze, which was never developed with urban-centred local exchange companies in mind, would impair economic efficiency for no rational public policy purpose. TCEI submitted that, of all the components of its action plan, the implementation of the third stage of rate rebalancing was the most critical. Rate rebalancing would ensure that local competition developed in Edmonton with the proper economic signals in place and that local rates are not artificially kept too low by subsidies paid by long distance service providers.

In light of the importance of lowering the contribution rate to the target level throughout Alberta, and given the fact that TCEI’s shortfall contributes to the overall contribution requirement for the province, AT&T Canada LDS maintained that it would be appropriate to require TCEI to direct the increased revenue from a third round of rate rebalancing entirely towards reductions in the contribution rate. This would assist in lowering the blended contribution rate for Alberta to the Commission’s target level of $0.02 per minute per end.

As to whether a further round of rate rebalancing must precede the introduction of local competition, the test is not necessarily that such was the case in the other telephone companies’ territories. Rather, the Commission will consider whether it would be in the public interest, in light of the particular circumstances surrounding the issues under examination.

The Commission is of the view that, in the particular circumstances dictated by the Directive, it would not serve the public interest to adopt TCEI’s proposed sequence of rate rebalancing and price cap regulation. Specifically, the Commission finds that a third round of rate rebalancing is not a necessary pre-condition to the introduction of local competition in TCEI territory.

The Commission notes that, among other things, the question of a third round of rate rebalancing will be considered in the proceeding established in Form of Regulation for TELUS Communications (Edmonton) Inc., Telecom Public Notice CRTC 98-3, 23 February 1998 (PN 98-3).

For the purpose of implementing Decision 97-8, TCEI’s residence subsidy requirement will be based on TCI’s costs and TCEI’s revenues, by band, as: residential exchange costs (Phase II plus 25%), plus residential optional local costs (Phase II plus 25%), minus the associated revenues. The residential subsidy requirement will be finalized in the proceeding initiated by PN 98-3.

C. Rate Restructuring

TCEI submitted that, under price cap regulation, the Stentor-member companies were permitted to restructure business rates at the outset of the implementation of local competition in order to reduce the implicit subsidy paid towards residential rates. TCEI stated that, as a result of the price cap formula, there is a ready means to reduce high margin business services to more sustainable levels over the price cap period. According to TCEI, it would be damaging if its business rates were maintained at the levels reached through monopoly regulation unrelieved by an initial restructure and price path to further reductions as local competition takes hold. Additionally, the improper signals which these high priced business rates would send to competitors would encourage uneconomic entry. TCEI considered that, before the rulings are imposed, it should have the opportunity to restructure its business rates effective the date of the third round of rate rebalancing.

AT&T Canada LDS indicated its support for initiatives that moved rates closer to costs as they are part of the process to eliminate the implicit cross-subsidies that are generally unsustainable with the introduction of competition. AT&T Canada LDS noted that the incumbent telephone companies, subject to price cap regulation, will have the opportunity to make such changes. However, it noted that in the price cap regime, the Commission established conditions which, when combined with the requirement for an imputation test, should limit the opportunity for anti-competitive rate restructuring, whereas, under rate of return regulation and absent imputation test provisions, the opportunity and incentives to engage in anti-competitive pricing would remain.

In AT&T Canada LDS’ view, it is important that the restructuring of business rates be revenue neutral and not result in increases in the contribution requirement. In this regard, AT&T Canada LDS considered that it would be appropriate to consider any specific request for restructuring of business rates at the same time as rebalancing initiatives. According to AT&T Canada LDS, should restructuring be permitted, any resulting reductions in revenues should be offset first by increases in rates for business services which are below cost and, second, by increases in other below-cost rates. However, any increase in residential exchange rates should be in addition to, rather than in place of, increases necessary to implement rate rebalancing.

CACAlta disagreed with TCEI’s implication that its rate structure was out of balance due to the political or social objectives of its previous owner. According to CACAlta, TCEI’s rates may be just and reasonable based on its unique cost structure, and that any rate restructuring may raise residential rates to the point where uneconomic local service competition in Edmonton would result. On the other hand, TCEI could be correct that its present rates would attract uneconomic competition. CACAlta considered that there was not sufficient information to determine how reasonable TCEI’s present rates might be. Moreover, CACAlta considered that, if TCEI desired the form of price cap regulation applicable to companies of comparable size, it should submit to the same procedures as those companies and not one of its own invention. In CACAlta’s view, a general rate application was a reasonable forum for setting proper going-in rates for TCEI.

MetroNet/Call-Net did not oppose TCEI’s proposal to restructure its local business rates, but did not agree that it was required prior to local competition. According to MetroNet/Call-Net, it had been open to TCEI, since its rates were first approved by the Commission in 1994, to file rate restructuring proposals. According to MetroNet/Call-Net, TCEI should be given the opportunity to restructure its rates and that the Commission should direct TCEI to identify the rates it wished to restructure immediately. Once TCEI has done so, the Commission can direct that these rates be made interim until it has had an opportunity to consider and render a decision on any rate restructuring proposals that TCEI files.

TCEI stated in reply comments that the other Stentor-member companies had been given the opportunity to restructure their business rates before competition was initiated. According to TCEI, there was no reason to deprive it of a similar opportunity.

The Commission notes that parties did not oppose rate restructuring per se. The Commission is of the view that TCEI should be permitted, as have the other Stentor members, to restructure its rates. In the Commission’s view, the issue is one of timing and sequence of events. TCEI’s position is that the introduction of local competition must not occur until rate restructuring has been completed. The Commission notes, however, that the other Stentor-member companies restructured their rates over a multi-year period. TCEI could have taken similar steps, well in advance of the introduction of local competition.

The Commission also notes that TCEI would be using TCI costs for proxy purposes given that, at present, TCEI does not have in place comprehensive Phase II and Phase III costing systems. In addition, the Commission notes that TCEI is unable to accurately determine its true costs in order to accurately restructure its rates.

The Commission is of the view that it would not be in the public interest to compel TCEI to maintain business local rates well in excess of costs in the face of competitive entry. However, given the considerations in the preceding two paragraphs, the Commission considers that TCEI has not demonstrated that this is, in fact, the case at present.

In light of the above, the Commission is of the view that there is no requirement to provide for a process for rate restructuring in advance of the introduction of local competition.

D. Pricing Flexibility

TCEI proposed pricing flexibility which would allow (1) changes to business rates up to 10%, (2) reductions to rates for services priced to maximize contribution and obtaining interim approval without public input, and (3) ex parte price changes for services similar to those classified as uncapped under price cap regulation.

AT&T Canada LDS submitted that this level of pricing flexibility was inappropriate while TCEI continued to enjoy the guaranteed rate of return afforded under the Directive. Such a regime would insulate shareholders from any under earnings by shifting all of the associated risk to subscribers, whereas, in a price cap regime there is a balancing of interests. Moreover, AT&T Canada LDS considered it premature to allow TCEI the opportunity to apply for price reductions when it cannot demonstrate compliance with the predatory pricing test.

MetroNet/Call-Net considered that it was appropriate to allow flexibility in the pricing of local services subject to two caveats. First, it had to be accompanied by an interim regime for local competition in Edmonton, and second, it had to be consistent with the approach adopted in Decision 97-9, recognizing that some adjustments might have to be made to the process in order to take into account the regulation of TCEI on a rate of return basis during the period of the interim regime.

With respect to AT&T Canada LDS’ concern, TCEI noted there would be less than a year to run in the Directive by the time this proceeding was completed. According to TCEI, it was difficult to conceive how the company could reduce rates to a level which would drop its earnings below its allowed range and gain a general rate increase under the terms of the Directive, bearing in mind the procedures established by Part III of the CRTC Telecommunications Rules of Procedure.

The Commission is of the view that, while the introduction of local competition could result in market share and revenue loss, there would also likely be some reduction in costs. The Commission is of the view that a pricing flexibility scheme is not appropriate prior to the establishment of going-in rates and contribution rates appropriate to a price cap regime for TCEI.

In light of these considerations, the Commission considers that TCEI’s arguments and evidence supporting the need for its pre-price cap pricing flexibility scheme are not persuasive and, therefore, its request for the implementation of such a scheme at this time is denied.

E. Certainty of Regulatory Treatment

TCEI submitted that certain aspects of the rulings could potentially cause TCEI to incur additional expenses or loss of revenue which would lower its earnings. TCEI noted, for example, that Decision 97-6 could be reviewed and varied such that the company would not be able to earn the rate of return level contemplated by the Directive.

In connection with Order 97-591 respecting LNP, TCEI stated that it had not been a party to the CISC discussions with respect to the establishment of rollout criteria. However, TCEI noted that, given the Commission’s determination that LNP is required for effective competition, TCEI’s assumption of related costs and the establishment of a roll-out timetable would be necessary, given the advent of local competition within its operating territory. TCEI also noted that it will be added as a party to the cost recovery proceeding to be initiated by the Commission, as identified in the Order, given a rollout of LNP in its operating territory. TCEI stated that cost recovery for LNP costs, particularly during the term of the Directive, ought to be provided for up front.

AT&T Canada LDS stated that any impact on TCEI’s revenues resulting from implementing the rates as established in Decision 97-6, or as they may be varied by the Commission, will not affect the company’s overall financial performance. According to AT&T Canada LDS, it is not necessary to delay the implementation of Decision 97-6 by TCEI.

MetroNet/Call-Net submitted that the issue of regulatory certainty should be addressed through the adoption of an interim regime which allows for the introduction of local competition in Edmonton at the earliest possible date while at the same time recognizing that a further proceeding or proceedings may need to be conducted to address other matters relating to the regulation of TCEI after the expiry date of the Directive. MetroNet/Call-Net stated that there is no reason why local competitors and customers in Edmonton should be forced to await the day on which TCEI achieves greater regulatory certainty before they can reap the benefits of competition.

In reply comment, TCEI noted that in regard to AT&T Canada LDS’ comments respecting implementation of Decision 97-6 for TCEI, AT&T Canada LDS characterized TCEI’s concern as that of by-pass of the TCEI Access Tandem switches. TCEI noted its concern of the potential adverse effect that application of the Decision 97-6 rates or any subsequent modification of those rates will have on TCEI’s shortfall. In TCEI’s circumstances, as a LEC only, any increase in TCEI’s shortfall must be recovered through increased contribution rates. Such an increase in the contribution rates seems to be contrary to the Commission’s approach with the Stentor-member companies.

With regard to LNP, the Commission, in its 19 May 1995 report entitled Competition and Culture on Canada’s Information Highway, stated that solutions for LNP must be sought to facilitate local competition. With particular regard to Order 97-591, the Commission notes that there is no evidence on the record of the present proceeding to suggest that carrier specific costs for LNP should be treated in the Edmonton market differently from all other markets covered by the Decision 97-8 framework.

The Commission also notes TCEI’s concerns that its shortfall could increase if equal access rates are unbundled pursuant to Decision 97-6. However, the Commission notes that the tariff rates for equal access filed by the Stentor-member companies reflected a fulfilment of its expectation that the Stentor-member companies would disaggregate the $0.011 per minute bundled rate to better reflect the nature of their costs. The Commission also considers that applying the unbundled rates in Decision 97-6 to TCEI is as fair and appropriate in the provision of equal access to competing long distance carriers in TCEI territory as it is in the other Stentor-member companies’ territories, and finds that these rates, as they apply to TCEI, are just and reasonable.

F. Tariff Review

TCEI indicated that, due to the recent existence of privatization and the current Directive, it has not brought its operations and tariffs in line with those of the rest of the industry such as to permit the introduction of local competition. It stated that the tariffs approved by the Commission on 14 June 1994 were, in large measure, the by-product of a municipally-owned local telephone company operating in a monopoly environment. Many of the changes required of the other telephone companies by the Commission, such as resale, ownership of inside wiring, and the manner of provisioning of terminal equipment, have not yet been undertaken in Edmonton. In TCEI’s view, introducing changes on a piecemeal basis would be time consuming, burdensome and potentially create incentives for uneconomic entry or artificial arbitrage opportunities. TCEI indicated that, within 90 days from the Commission’s decision arising from this proceeding, it would file a comprehensive proposal to update its tariffs in a manner which would address customer needs and expectations, the company’s contribution levels and which would facilitate the introduction of local competition.

MetroNet/Call-Net submitted that TCEI’s proposal to conduct a general review of its tariffs was a thinly-veiled attempt to delay the implementation of local competition in Edmonton until very near the expiry date of the Directive, given the process involved in which interested parties would have an opportunity to pose interrogatories to TCEI, to file deficiency and disclosure requests, to submit comments and reply comments on the application and the time required by the Commission to issue a decision. MetroNet/Call-Net also submitted that, the preferred approach of most carriers in Canada (including the members of Stentor) historically was to apply to the Commission for tariff changes on a service-by-service or item-by-item basis. This approach focused attention on tariff applications which raised specific regulatory concerns, while providing for expedited approval of other tariff proposals which do not raise the same concerns.

The Commission agrees with TCEI that, currently, in areas such as resale, the transfer of responsibility for inside wire and terminal equipment provisioning, it is not subject to the same rules as the other Stentor-member companies. TCEI’s proposal for a comprehensive review, with the necessary process, of tariffs before local competition is implemented, however, would likely take many months, if not longer, to complete.

The Commission is of the view that such a comprehensive proceeding would not be appropriate. The Commission notes, for example, that the Decision 97-8 framework will require that residence and business services offered by TCEI be made available for resale.

Regarding inside wire, the Commission notes that, in Decision 97-8, it required that each LEC ensure that its end-users are able to have direct access, under reasonable terms and conditions, to services provided by any other LEC serving in that area.

In the Commission’s view, TCEI has not provided persuasive evidence in support of its position that a comprehensive tariff review is a necessary pre-condition to the introduction of local competition. Further, the Commission is of the view that delaying its introduction until the completion of the TCEI proposed proceeding would not be in the public interest.

G. Directive Compliance

TCEI submitted that under section 5(c) of the Directive, it is mandatory that the Commission approve a recovery schedule for the Total Shareholder Entitlement. TCEI stated that it would file an application for approval in the immediate future. TCEI acknowledged however that, strictly speaking, compliance with the Directive did not directly relate to the introduction of local competition.

In the view of MetroNet/Call-Net, the approval of a schedule for the recovery of the Total Shareholder Entitlement is a matter which, like many of the other elements of TCEI’s action plan, need not be determined in advance of the introduction of local competition. The establishment of a recovery schedule can be determined at the same time that the Commission renders a decision on the terms and conditions applicable to TCEI under a price cap scheme of regulation.

The Commission notes that the determination of the recovery schedule for the Total Shareholder Entitlement will be dealt with in the proceeding initiated by PN 98-3.

H. Other Matters

With respect to CWTA’s request to establish an interconnection regime for Alberta common to TCEI and TCI, the Commission notes that this matter is outside the scope of this proceeding and is presently a dispute under consideration in the CISC process.

Laura M. Talbot-Allan
Secretary General

This document is available in alternative format upon request.

Date modified: