ARCHIVED -  Telecom Order CRTC 99-489

Telecom Order

Ottawa, 1 June 1999

Telecom Order CRTC 99-489

On 31 March 1999, Bell Canada (Bell) filed applications proposing tariff changes further to Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9).

File Nos.: Bell Tariff Notice (TN) 6339 and
Bell (NST) TN 703

1.Bell filed its Price Cap Index (PCI) and Service Band Limits (SBLs) for 1999, incorporating an exogenous adjustment related to the recovery of local competition start-up costs.

2.The Commission considers that this exogenous adjustment is in compliance with Local Competition Start-up Costs Proceeding, Telecom Public Notice CRTC 98-10, Telecom Order CRTC 99-239, 12 March 1999.

3.Bell updated its PCI and respective SBLs to incorporate the Gross Domestic Product - Price Index and the productivity offset of 4.5% stipulated in Decision 97-9.

4.In TN 6339, Bell proposed to restructure the Megalink tariff to simplify it, to offer customers the option of buying the service at reduced rates on a contractual basis and to reduce or eliminate a number of service charges. Bell also proposed reductions in the rates for Internet Service Provider (ISP) Link Service, Direct-Inward Dialing, and Digital Channel Service.

5.In TN 703, Bell proposed revisions to National Services Tariff (NST) Item 301, Digital Network Access (DNA), pertaining to the introduction of a new rate band for DS-1 access in the operating territories of Bell and BC TEL wherein lower rates would be provided. The company also proposed to change the DS-1 rate band classification for numerous wire centres resulting in rate reductions for many customers. Finally, Bell proposed to reduce the monthly rate for low-speed digital access to interexchange service.

6.Bell filed the calculation of its Actual Price Index and Service Band Indices demonstrating that, under its proposed rates, it will not exceed the PCI and SBLs for 1999.

7.On 30 April 1999, MetroNet Communications Group Inc. (MetroNet) filed comments noting that Bell had not provided an access serving area list, which specifies the rate band classification by exchange and corresponding wire centres. MetroNet submitted that the DNA tariff was confusing owing to the absence of this information, and could be subject to competitive gaming.

8.MetroNet requested that Bell be directed to provide an access serving area list, which specifies the rate band classification, by exchange and corresponding wire centres for both DS-1 and DS-3 Access services. MetroNet submitted that this list should be integrated into the NST.

9.MetroNet stated that in its 30 March 1999 submission to Proceeding to Review Frozen Contribution Rate Policy, Telecom Public Notice CRTC 99-5, 2 February 1999, Bell had noted that the total unforeseen cost associated with the ice storm was over $101 million. Despite the significance of the financial impact, Bell concluded that unexpected outcomes of this nature are not intended to be addressed through the price cap formula and accordingly the company had not sought relief from the Commission.

10.MetroNet submitted that the financial impact of the ice storm created a cost increase caused by circumstances beyond the company's control. MetroNet submitted that the Commission might want to consider this unforeseen cost as an exogenous factor and, accordingly, that the rate decreases proposed by Bell to meet its price cap obligations might not be entirely necessary.

11.In reply, Bell noted that the purpose of the DNA tariff is to identify the terms and conditions under which DNA service is offered. Bell added that the information in the tariff, in conjunction with the customer-specific rate band that can be readily obtained through company customer interfaces such as a business office, enables the customer to determine the rate that applies for DNA service at a specific location.

12.The Commission notes that serving area lists are not part of the tariffs for competitive services such as DNA in view of the frequency of additions to the serving areas for these services. The Commission considers that including the lists in the tariff would introduce a significant degree of regulatory burden, which is not outweighed by the benefit of identification of the serving areas within the tariffs.

13.With respect to MetroNet's comments regarding the costs that it incurred as a result of the ice storm, Bell stated that if the Commission were to consider these costs as qualifying for an exogenous adjustment, the company would be willing to submit an application requesting such an adjustment.

14.The Commission notes that the ice storm would not satisfy the first criterion, specified in paragraph 105 of Decision 97-9, for the inclusion of an exogenous factor, i.e., events or initiatives that are legislative, judicial or administrative actions which are beyond the control of the company.

15.The Commission notes that a significant portion of the rate reductions proposed by Bell are associated with its proposal to introduce lower prices under a contract pricing option for Megalink Access service.

16.In Inquiry into Telecommunications Carriers' Costing and Accounting Procedures - Phase II: Information Requirements for New Service Tariff Filings, Telecom Decision CRTC 79-16, 28 August 1979, the Commission noted that the definition of a new service includes substantial additions and alterations to existing services.

17.The Commission notes that contract pricing exhibits at least one characteristic of a new service in that, in order to determine the impact of a new contract pricing option on the actual price index, it is necessary to make use of demand forecasts. In Decision 97-9, the Commission agreed with Stentor Resource Centre Inc. that information would need to be gathered prior to the inclusion of new services in the capped sub-baskets.

18.The Commission notes that Centrex and DNA services have long included both a contract and a non-contract option under a single tariff item. The Commission considers that it would be difficult to conclude that the addition of a contract pricing option to the tariff for an existing service constitutes a new service.

19.The Commission considers that the introduction of contract pricing to the tariff for an existing service is best characterized as a rate restructure and notes that it has found other types of rate restructuring to be acceptable rate reductions for the purposes of the price cap regime in the past.

20.The Commission is of the view that the introduction of the proposed contract pricing option for Megalink Access service by Bell is acceptable as a revenue reduction under the price cap regime.

21.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 proposed rates for Megalink, ISP Link Service, Digital Channel Service and Direct-Inward Dialing will not be anti-competitive.

22.In light of the foregoing, the Commission approves the proposed tariff revisions effective 1 June 1999.

Secretary General

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