ARCHIVED -  Telecom Order CRTC 98-1157

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Telecom Order

Ottawa, 20 November 1998
Telecom Order CRTC 98-1157
On 19 May 1998, Northern Telephone Limited (Northern) filed an application under Tariff Notice (TN) 85, amended by TN 85A on 26 August 1998, requesting final approval of the 1998 Carrier Access Tariff (CAT) and, on 2 February 1998, Northern filed an application seeking approval of proposed depreciation life characteristics to be implemented in 1998 for fifteen accounts.
File Nos.: TN 85 and 8630-N3-02/98
1.In its amended application filed on 26 August 1998, Northern requested final approval of a 1998 CAT of $0.0585 per minute with a Contribution rate of $0.0408 per minute and a Direct Toll rate of $0.0177 per minute.
2.Northern estimated that the number of originating and terminating toll minutes for 1998 would be 243.9 million.
3.Northern calculated its Toll Settlement/CAT Revenue Requirement to be $14.3 million made up of a Contribution requirement of $10.0 million and a Direct Toll requirement of $4.3 million.
4.On 11 March 1998, the company filed additional material with respect to its proposed depreciation life characteristics.
5.In a letter dated 16 April 1998, the parties were advised that the Commission intended to make a determination on the depreciation life characteristics, for implementation in 1998, as part of the application to finalize Northern's 1998 CAT.
6.The net impact of the proposed life changes to six of the fifteen accounts that were studied increased Northern's depreciation expense by approximately $1.0 million.
7.In its comments filed on 18 June 1998, Ontario Northland Transportation Commission (O.N. Tel), argued that the Commission should require Northern to provide explanations and justifications supporting its Direct Toll requirement forecast if it exceeds the previous year's requirement.
8.O.N. Tel also expressed concern that Northern's program to increase the speed of downloading information from the Internet will be funded by O.N. Tel through Northern's CAT.
9.In reply, Northern noted that, 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 required the independent telephone companies to provide explanations and justifications supporting their revenue requirement forecast and contribution calculations if, after accounting for local rate increases mandated by that decision, their contribution requirement exceeded the previous year's approved contribution requirement. By contrast, the Commission did not direct the telephone companies to provide justification supporting any increase over the previous year's forecast Direct Toll requirement.
10.With respect to Internet services being funded by the CAT, Northern replied that it is seeking forbearance for its Internet services in Internet Forbearance, Telecom Public Notice CRTC 98-17, 22 July 1998. Northern proposed to assign all investments, revenues and expenses associated with its Internet services to a competitive Phase III category.
11.The Commission is of the view that Northern's proposed life characteristics contained in the attached Table of depreciation life characteristics are fully supported by the historical retirement data supplemented by future expectations for the accounts in question, are within industry norms and are in compliance with the Commission's Phase I Depreciation Directives.
12.The Commission notes that although the proposed depreciation life characteristics increased depreciation expense for 1998 by approximately $1.0 million, Northern's overall contribution requirement decreased by $0.5 million from the previous year, after accounting for the $2 local rate increase that was effective 1 January 1998.
13.The Commission notes that, in spite of the increase to the Direct Toll requirement from the previous year, the Toll Settlement/CAT Revenue Requirement decreased from the previous year, thereby resulting in a lower 1998 CAT. The Commission also notes that Northern's CAT and Toll Settlement/CAT Revenue Requirement have steadily decreased since the CAT mechanism replaced the Traffic Interconnection Agreement between O.N. Tel and Northern in 1995.
14.As set out in Decision 96-6, the Commission considered it necessary for the independent telephone companies to provide justification of the revenue requirement forecast and associated proposed contribution rate when the companies' contribution requirement, net of the impact of any local increases for the year in question, exceeds the previous year's approved contribution requirement.
15.Accordingly, the Commission finds that Northern's estimated 1998 Toll Settlement/CAT Revenue Requirement of $14.3 million is reasonable. This amount includes the impact of the increased depreciation expense resulting from the approved depreciation life characteristics.
16.In light of the foregoing, the Commission orders that:
(a) the final 1998 Northern CAT is approved at $0.0585 per minute with a Contribution rate of $0.0408 per minute and a Direct Toll rate of $0.0177 per minute, effective 1 January 1998;
(b) Northern issue, forthwith, revised tariff pages to reflect its final 1998 CAT; and
(c) the accounts listed in the attached Table be depreciated using the depreciation life characteristics contained therein.
Secretary General
This document is available in alternative format upon request.
Account Description Dispersion ASL
2211 Power Iowa - R1 16 yrs
2215 Fibre Optics - Circuit Iowa - R3 10 yrs
2216 Radio Iowa - S2 12 yrs
2221 C.O. - DMS10 Digital Switching Iowa - R3 14 yrs
2222 C.O. - DMS100 Digital Switching Iowa - R3 14 yrs
2312 Telephones Iowa - S4 8 yrs
2340 Large PBX Iowa - O1 5 yrs
2421 Outside Plant - Aerial Cable Iowa - L1 18 yrs
2421 Fibre Optics - Aerial Cable Iowa - R3 20 yrs
2422 Outside Plant - Underground Cable Iowa - S1 22 yrs
2423 Outside Plant - Buried Cable Iowa - L1 21 yrs
2423 Fibre Optics - Buried Cable Iowa - R3 20 yrs
2610 Furniture & Office Equipment Iowa - S0 17 yrs
2641 Vehicles - Cars & Small Trucks Iowa - R4 7 yrs
2641 Vehicles - Line Trucks Iowa - R2 9 yrs
ASL: Average Service Life

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