ARCHIVED -  Telecom Order CRTC 99-363

Telecom Order

Ottawa, 22 April 1999

Telecom Order CRTC 99-363

In the matter of the Phase III Costing, Carrier Access Tariff (CAT) and Split Rate Base Procedures Manual filed for approval by O.N. Tel.

File No.: 8654-04-02/98

1.In the proceeding leading to Regulatory Framework - Ontario Northland Transportation Commission, Telecom Decision CRTC 98-14 (Decision 98-14), 1 September 1998, O.N. Tel was requested to file its Phase III Costing, CAT and Split Rate Base Procedures Manual (Phase III/SRB Manual).

2.On 25 November 1997, following the close of the record of the proceeding leading to Decision 98-14, O.N. Tel filed its Phase III/SRB Manual.

3.In view of this, the Commission stated in Decision 98-14 that it would consider O.N. Tel's Phase III/SRB Manual in a separate proceeding.

4.The Commission also stated in Decision 98-14 that the specific methodology to calculate O.N. Tel's contribution requirement would be determined in that separate proceeding, as O.N. Tel had previously proposed inconsistent approaches for calculating its contribution requirement.

5.On 2 September 1998, the Commission issued Ontario Northland Transportation Commission - Phase III Costing, Carrier Access Tariff and Split Rate Base Procedures Manual and Related Matters, Telecom Public Notice CRTC 98-22 to consider O.N. Tel's proposed Phase III/SRB procedures and the proposed methodology for calculating its contribution requirement.

6.No comments were filed by any interested party.

7.The Commission conducted a review of O.N. Tel's proposed Phase III/SRB methodology and issued interrogatories to clarify various aspects of the company's proposals.

8.On the basis of its review, the Commission considers that, except for the modifications set out in Appendix A, the tariff classifications list in Appendix B and the SRB report formats in Appendix C, the prescribed assignment procedures generally conform to approved Phase III/SRB assignment methodology.

9.The Commission also considers that similar Phase III/SRB processes that apply to other regulated Canadian carriers should also apply to O.N. Tel, e.g., the filing of Phase III/SRB Manual and Accounting Manual updates.

10.The company is notified that, with respect to the Phase III Manual review process as set out in Bell Canada and British Columbia Telephone Company - Phase III Manuals: Compliance With CRTC Telecom Public Notice 1986-54 and Telecom Order CRTC 86-516, Telecom Decision CRTC 88-7, 6 July 1988, Commission staff may conduct periodic reviews of the procedures contained in O.N. Tel's Phase III/SRB Manual as considered necessary.

11.The company is also notified that it will be expected to submit forecast results in accordance with the process to be established by the Commission pertaining to the company's annual contribution proceeding.

12.In light of the foregoing, the Commission hereby orders that:

a) O.N. Tel's Phase III/SRB Manual is
approved subject to the implementation of the modifications contained in Appendices A, B and C.

b) The company file its amended Manual pages, serving copies on all interested parties, by 21 June 1999.

c) The company file its Phase III/SRB unaudited results by 30 September 1999.

d) The company implement the Phase III/SRB update process established in Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9), with the first update due no later than 31 March 2000.

e) The company file its most recent Accounting Manual by 21 June 1999 and file annual updates to this manual in accordance with the procedures established in Decision 97-9, with the first update due no later than 31 March 2000.

Secretary General

This document is available in alternative format upon request and may also be viewed at the following Internet site: www.crtc.gc.ca

APPENDIX A
Page 1 of 3

1.Broad Service Category (BSC) Definitions

1) Revise the company's definitions of its Access and Terminal BSCs so that all Customer Provided Equipment (CPE) provided on a monopoly basis is included in the Utility segment and not in the Competitive segment consistent with approved Phase III costing principles set out for the Access and Terminal BSCs in Telecom Order CRTC 86-516, 28 August 1986 and in Review of Phase III of the Cost Inquiry, Telecom Decision CRTC 94-24, 18 November 1994.

2. Revenues and Other Income

1) Remove the CPE (account 5050), that includes revenues provided on a monopoly basis, i.e., two-party lines, pay phones and inside wiring, from the Terminal BSC and assign them to the Access BSC as part of the Utility segment.

2) Include a description of the company's Network Access revenue accounts on page 4-4 of its Manual.

3) Identify local directory revenues associated with the company's own local exchanges and assign them to the Local BSC to ensure revenues are included in the Utility segment.

4) Assign an appropriate portion of uncollectible revenue to the Local BSC based on a representative sample of billing records.

5) Use Average Net Investment Base ratios to assign interest income across all BSCs.

6) Identify the bundled tariffed services that cause the revenue/cost mismatches and modify the company's methodology to assign the revenues to the appropriate BSCs.

7) Include a table that maps all of the company's tariffed services with its proposed revenue account assignments as an Appendix to the revenue section of the company's Manual using the table set out in Appendix B.

3. Investment

1) Assign all Local Switch investment to the Local BSC to ensure appropriate costs are reflected in the Utility segment.

2) Assign furniture and office equipment investment to the appropriate BSCs on the basis of salary & wage ratios of the personnel using the equipment.

3) Assign general computer investment to the appropriate BSCs based on the software applications being supported.

4. Investment-Related Expenses

APPENDIX A
Page 2 of 3

1) Assign depreciation expenses to the BSCs as per the company's 25 November 1997 proposal, i.e., in the same proportion as the assignment of the corresponding plant investment to the BSCs.

2) Assign furniture and office equipment related expenses to the BSCs in the same proportion as the assignment of the corresponding investment.

3) Assign general computer related expense to the BSCs in the same proportion as the assignment of the corresponding investment.

5. Non-Investment-Related Expenses

1) Assign all expenses resulting from service order activities, collecting and reporting of pay station receipts, customer account queries, and billing related expenses including postage for the company's own local subscribers, to the Utility and Competitive segments on a 50/50 basis. Refer to Implementation of Regulatory Framework - Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, 31 October 1995.

2) Use a more discrete assignment methodology for information management expenses, by using either a) Central Processing Unit time of the applications or b) billed operating revenues and computer investment study ratios.

6. Official Telephone Service (OTS)

1) Revise the company's Phase III/SRB methodology to include procedures for developing an OTS adjustment. The revised methodology is to be in accordance with that set out in Implementation of Regulatory Framework for Québec-Téléphone and Télébec ltée, Telecom Decision CRTC 97-21, 18 December 1997.

7. Split Rate Base

1) Split the company's Other BSC into Utility - Other and Competitive - Other using the allocations indicated in the company's response to O.N. Tel(CRTC)20Oct98-103. The Manual is to be updated such that any references to the Other BSC should specify Utility - Other or Competitive - Other.

2) Modify the company's Manual such that CAT expenses are included in the operating expense amounts used to allocate Common costs between the Utility and Competitive segments.

3) Assign costs and revenues for the provision of Access Tandem connection service for interexchange competitors to the Utility segment, once the costs are incurred.

APPENDIX A
Page 3 of 3

8.Presentation of Split Rate Base Results

1) Modify the company's presentation of results format in Tables 9-1 and 9-2 of its manual to reflect the format presented in Appendix C of this Order.

9. Contribution Requirement

1) Modify the company's calculation of the company's contribution requirement by using the Utility segment results following the reassignment of Common expenses to the BSCs and by ensuring that Cellular, Terminal and the Competitive portion of the "Other" category are not reflected in the Utility segment.

APPENDIX B
Page 1 of 2

O.N. Tel Phase III/SRB Manual
BSC Tariff Classification & Revenue Account Mapping

Tariff Item Description BSC Assignment Revenue Classification Method Account(s)

GENERAL
1012 Interest on Deposits
1013 Late Payment Charges
1014 Sale of Tariffs & Exchange Information
1016 NSF Cheque Charge
1017 Telephone Set Loss Charge
EXCHANGE SERVICE
2040 Rate Schedules for Primary Exchange Service - Bus/Res Single-Line, Two-Party, Four-Party, etc.
2041 Temagami Lakes - Intra-Exchange Distance Charge
2042 Telephone Number Services
2050 Jacks for Primary Exchange Service
2070 Service Charges2080Work Function Structure - MESC
2090 Construction Charges - Public/Private Property
2100 Interior Construction
2110 Directory Listings
2141 Directory Advertising
2160 Extra Listings and Omission of Listings
2161 Directory Purchase
2210 Public Telephone Service
2220 Toll Telephones
2240 Semi-Public Telephone Service
2350 PBX Service2351-53Key & ICS Telephone Systems
2354 StarTalk VoiceMail System
2355 Norstar
2390 Extra-Exchange Distance Charges (withdrawn 26-03-99)
2400 Local Channels
2410 Foreign Exchange Service
2430 Suspension of Service
2440 Exchange Radio Telephone Service
MISCELLANEOUS EQUIPMENT
2460 Jack and Plug Equipment
2470 Push-Button Dialing
2480 Calling Features
2485 Call Management Service
2490 Call Blocking Service2491Call Answer Service/Voice Mail
2495 Toll Restriction
2500 Telephone Station Equipment
2600 Cellular Access Service

APPENDIX B
Page 2 of 2

O.N. Tel Phase III/SRB Manual BSC Tariff Classification & Revenue Account Mapping

Tariff Item Description BSC Assignment Revenue Classification Method Account(s)

INTER-EXCHANGE SERVICE
3100 Message Toll - Two Point Service
3105 Real Plus Extra Rewards Plan
3110 Teleplus Subscription Service
3115 Residential Toll Promotion
3120 Teleplus Overseas Subscription Service
3130 Advantage Preferred Service
3140 TransCanada Schedule
3145 Northwest Schedule
3150 Canada-U.S. Schedule
3160 Canada-Alaska
3170 Canada-Hawaii
3190 Overseas Service
3195 FaxCom Service
3200 Aircraft Service
3230 Advantage 800 Service
3240 Canada-U.S. 800 Service
3250 Advantage 800 and Entry Service
INTER-EXCHANGE DISTANCE CHARGES
3270 Channel Measurement
3280 Monthly Distance Charges or Rentals for Inter-Exchange Channels & Associated Local Channels
3290 Digital Channel Service
Inter-Exchange Service - General
3300 Satellite Termination Charge
3310 Occasional Broadcast
OTHER SERVICES & FACILITIES
4020 Intercommunicating Channels
4040 Diagnostic Maintenance Charge
4061 Four-Wire Connecting Arrangement
4070 Channels for Signal Transmission
4100 Onlink Service (Internet)
4200 Cellular Telephone Service
4201 Cellular Call Answer/Voice Mail
DIGITAL NETWORK SERVICES
5026 Digital Network Access
5027 Megaroute Service
5030 Megastream Service
5031 Megaplan Service Extension Features
5032 Megaplan Service Extension Access Service
5040 Switch 56 Data Service
5041 Inter-Office Digital Channels
5050 O.N. ATM Service

APPENDIX C
Page 1 of 2

SRB Income Statement

Utility Segment Competitive Total Company
Segment
OPERATING REVENUES
Operating Revenues before CAT
O.N. Tel:
CAT Revenues - Contribution
CAT Revenues - Switching and Aggregation
CAT Revenues - Equal Access Start-UpEntrants:
CAT Revenues - Contribution
CAT Revenues - Switching and Aggregation
CAT Revenues - Equal Access Start-Up
Total Operating Revenues

OPERATING EXPENSES
Imputed CAT Expenses
Plant Operations Expenses
Network Operations Expenses
Access Expenses
Depreciation and Amortization
Customer Operations Expenses
Corporate Operations Expenses
Operating Taxes
OTS Adjustment
Total Operating Expenses
Net Operating Revenues
Non Operating Income
Non Operating Expenses

Net Income
APPENDIX C
Page 2 of 2

SRB Average Net Investment Base Statement

Utility Segment Competitive Total Company
Segment
Telephone Plant
Deduct: Accumulated Depreciation
Net Plant Investment

Plant Under Construction
Material and Supplies
Working Capital
Deduct: Long-Term Receivables
Other Deferred Charges - Net
Sub-Total

Average Net Investment Base

SRB Capitalization Report

Utility Segment Competitive Total Company
Segment

Average Net Investment Base
Deduct: Average Long-Term Debt
Average Invested Capital

SRB Rate of Return Report

Utility Segment Competitive Total Company
Segment