ARCHIVED -  Telecom Order CRTC 99-378

Telecom Order

Ottawa, 28 April 1999

Telecom Order CRTC 99-378

On 20 October 1998, Québec-Téléphone filed an application proposing a restructuring of its local residence and business primary access services as well as revisions to its Extended Area Service (EAS).

File No.: Tariff Notice 232

1.Québec-Téléphone's proposed restructuring sought to establish a common rate applicable across its serving area for each of Residential Individual Line Service, Business Individual Line Service, Multi-line Business Service and Centrex Plus Service.

2.Accordingly, Québec-Téléphone proposed to establish a common monthly rate of $23.50 for Residential Individual Line Service, $49.50 for Business Individual Line Service, $66.50 for Multi-line Business Service and $46.00 for Centrex Plus Service. The proposed Centrex Plus rate would remain subject to contract and volume discounts.

3.In conjunction with the restructuring, Québec-Téléphone proposed to introduce a limited number of new EAS links.

4.Québec-Téléphone also proposed the adoption of new eligibility criteria for EAS to match Bell Canada's (Bell) current criteria.

5.Québec-Téléphone's application submitted that the proposed rate restructuring and the establishment of the new EAS links were revenue neutral.

6.In support of its application, Québec-Téléphone cited current industry trends in favour of simplification of service offerings as well as the desirability of bringing rates closer to the costs of providing service.

7.Québec-Téléphone noted that its existing tariff structure included two separate rate groups and a number of regional supplements. The distance based regional supplements were added to a rate groups' base rate to reflect each EAS link. As a result, very few of the company's exchanges shared the same rate for local service. Québec-Téléphone submitted that the proposed common rates would simplify the company's dealings with its customers.

8.Québec-Téléphone also noted that as a result of its existing tariff structure, customers in its more rural exchanges generally paid less for local telephone service than customers residing in the more urban areas served by the company. Québec-Téléphone argued that the cost of providing local service in urban areas was in fact lower than in rural areas.

9.Québec-Téléphone advised all customers of its proposal by way of a separate mailing. The mailing invited customers to file comments with the Commission. The Commission also issued Québec-Téléphone - Rate Restructuring and Revisions to the Criteria for Extended Area Service, Telecom Public Notice CRTC 98-36, 8 December 1998.

10.Comments were received from 21 interveners including a number of residential subscribers as well as the Municipalité Régionale de Comté (MRC) de Matane, the Municipalité de Sainte-Paule, the Municipalité de Grande-Vallée and the CLSC Mer et Montagnes. Of the 21 interveners that submitted comments, only 3 supported the application.

11.Interveners opposing the application, including the MRC of Matane, the Municipalité de Grande Vallée and the Municipalité de Sainte-Paule who argued that Québec-Téléphone should be required to expand the existing local calling areas to encompass all exchanges within a given MRC prior to restructuring. They argued that a social and economic dependence exists between these exchanges. They also advocated the principle that subscribers paying the same rates should receive the same level of service.

12.The CLSC Mer et Montagnes made a similar request to have local calling areas expanded. The CLSC Mer et Montagnes submitted that the restructuring proposed by Québec-Téléphone would disadvantage the more rural subscribers who, while paying the same local rate, would still be required to pay long distance charges to access health care providers usually situated in the more urban centres.

13.A number of subscribers were critical of the local service rate increases imposed on them in recent years. Other subscribers submitted that Québec-Téléphone's restructuring was unfair to the company's rural subscribers since they are being asked to pay the same rate as in urban areas without benefiting from the same free calling areas.

14.Among the interveners who favoured the application was a municipality who thanked Québec-Téléphone for proposing to expand their local calling area and a residential subscriber who said the reduction to his own local rate would possibly compensate for the recent rate rebalancing increases. A business customer criticized the current implicit subsidization of both rural and residential services by urban areas and business, and supported the application since, in his opinion, such subsidization would be lessened.

15.In reply, Québec-Téléphone relied on Bell Canada - Revised Criteria for Extended Area Service, Telecom Decision CRTC 88-15, 29 September 1988, where the Commission stated that "a very substantial social and commercial dependency, and thus a strong COI [community of interest], must be demonstrated in order to protect the interests of the general body of EAS subscribers whose local rates may ultimately be affected by further extension of EAS."

16.Québec-Téléphone noted that the criteria applicable to the company, established by the Régie des télécommunications du Québec and continued by the Commission, were much less restrictive than the criteria established by the Commission for Bell.

17.Québec-Téléphone submitted that these more permissive criteria had made its serving area one of the more generous areas from a local free calling standpoint.

18.Québec-Téléphone stated that it had studied all of the requests made by the interveners and noted that in all cases except one, the communities already had access to the regional commercial centre. The calling patterns submitted by Québec-Téléphone showed that the outlying exchanges communicated primarily with the regional centre and that little calling occurred between the outlying exchanges.

19.Québec-Téléphone submitted that the EAS proposal in its application would result in local calling areas that include all areas to which an important social and economic COI exists.

20.Québec-Téléphone also noted that significant additional rate increases would be necessary to offset the costs associated with the establishment of MRC-wide free calling.

21.The one exception identified by Québec-Téléphone was the Grande-Vallée exchange which does not have free calling to the regional centre of its MRC, namely, the Gaspé exchange. Québec-Téléphone submitted that the link met the COI criterion, but that it failed to qualify because the mileage criterion was exceeded by a few kilometres.

22.Québec-Téléphone submitted that it would not have any objections to establishing the Gande-Vallée to Gaspé link (as an exception to the established EAS criteria) in addition to the links already proposed by the company in this application. Québec-Téléphone however requested that the Commission allow the company to adjust its proposed rates to recover the costs of the links, as well as the foregone local revenues resulting from the establishment of the link in question.

23.The Commission notes that it has generally considered rate group consolidation proposals in light of its policy of moving rates closer to the costs of providing service. The Commission has generally approved applications to consolidate rate groups provided that they do not embody rate shock and do not result in inappropriate revenue generation.

24.The Commission notes that since 1 January 1997, it has ordered rebalancing increases for Québec-Téléphone amounting to $8.25 per month. Specifically, the Commission has ordered monthly increases of $2.00, $3.25 and $3.00, effective 1 January of 1997, 1998 and 1999 respectively.

25.The Commission however notes that, in conjunction with the 1997 and 1998 rebalancing increases, Québec-Téléphone was ordered to reduce toll rates. The Commission also ordered the elimination of "other line charges" (per minute surcharges that were applied against toll calls originating and terminating in Québec-Téléphone's more rural exchanges).

26.The Commission is of the view that the proposed rate changes, which increase local rates for some subscribers while decreasing local rates for others, do not include increases of sufficient magnitude to constitute rate shock.

27.Further, the Commission is of the view that approval of this application would not lead to inappropriate revenue generation.

28.On the basis of the foregoing, the Commission considers that the proposed rate changes are reasonable.

29.In Telecom Decision CRTC 96-5, the Commission noted that there existed two-different sets of EAS criteria for Québec-Téléphone, one for new links between two of its own exchanges and a separate set for links with exchanges served by Bell. The Commission at the time recognized that there was merit in having uniform EAS criteria, but nevertheless accepted the company's request to maintain its existing criteria.

30.In Telecom Order CRTC 98-689, the Commission expressed the view that Québec-Téléphone was free to propose changes to its EAS criteria should the company be of the view that such changes were necessary.

31.Given that the current proposal would harmonise the criteria within Québec-Téléphone's operating area, the Commission is of the view that approval of the revised criteria is appropriate.

32.The Commission notes that Québec-Téléphone also made various submissions relating to EAS cost recovery, including the possibility of the company filing, on a yearly basis, an application to increase local rates in order to offset both the costs as well as the foregone revenues resulting from any new EAS links.

33.The Commission considers that it would be premature to express a view on Québec-Téléphone's recovery submissions in this proceeding. The Commission would be prepared to consider the merits of such submissions should the company develop them further and file them as part of specific applications. The Commission would expect any such applications to be supported by appropriate evidence.

34.With respect to the matter of MRC-wide free calling, the Commission notes Québec-Téléphone's arguments as well as the company's evidence showing that the outlying exchanges communicate primarily with the regional centre, while little calling occurs amongst the exchanges themselves.

35.In light of the apparent low demand, as well as the likely requirement for additional local rate increases, the Commission is of the view that it would not be in the interests of the general body of subscribers to require Québec-Téléphone to implement MRC-wide free calling throughout its operating territory without further assessment of the costs and benefits.

36.The Commission notes that Québec-Téléphone did not object to establishing the Grande-Vallée to Gaspé link, provided that it were allowed to recover the costs and foregone revenues.

37.The Commission is of the view that the company should establish the two-way Grande-Vallée to Gaspé EAS link. However, the Commission is satisfied that Québec-Téléphone can absorb the costs and foregone revenues without the need for additional rate increases.

38.In light of the foregoing, the Commission approves the proposed tariff revisions effective 1 June 1999. Québec-Téléphone is to implement the Grande-Vallée to Gaspé EAS link within 90 days of the date of this Order.

Secretary General

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