ARCHIVED -  Telecom Order CRTC 99-490

Telecom Order

Ottawa, 1 June 1999

Telecom Order CRTC 99-490

On 31 March 1999, BC TEL filed an application proposing tariff changes further to Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9). On 9 April 1999, the company amended its application under Tariff Notice (TN) 3924A.

File No.: TN 3924

1.BC TEL 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.BC TEL 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 3924, BC TEL proposed to increase the monthly rates for individual, two-party, four-party and multi-party residence services in Sub-Bands D2 and D4 by $1.00. BC TEL also proposed rate changes for single line and multi-line business services, and for customer-specific business local access service. As well, the company proposed to offer rate discounts to customers who commit to subscribing to business exchange services at specified minimum volumes for specified contract periods.

5.In addition, BCTEL proposed to (1) align the voice and data service rates in the local private line portfolio, (2) align and increase the monthly rates for voice and data foreign central office services, (3) restructure Microlink access line rates from rate group to rate band, (4) decrease the rates for Megalink Public Switched Telephone Network connections and restructure the service from rate group to rate band, and (5) reduce the rate for Internet Service Provider (ISP) connection service.

6.In Bell Canada (Bell) (NST) TN 703, Bell proposed revisions to National Services Tariff Item 30, 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.

7.The Commission notes that the proposed rate increases to residence primary exchange services are within the Residence SBL, and are under the 10% limit on rate increases for services in essential bands. The proposed increases to single line business rates in essential bands are also less than or equal to 10%.

8.The Commission notes that a portion of the rate reductions proposed by BC TEL are associated with its proposal to introduce lower prices under a contract pricing option for single line and multi-line business customers.

9.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.

10.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 (API), 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.

11.However, 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.

12.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 under the price cap regime in the past.

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

14.The Commission notes that Bell (NST) TN 703, which proposed changes to the DNA tariff on behalf of Bell and BC TEL, was approved in Telecom Order CRTC 99-489, dated 1 June 1999.

15.BC TEL filed the calculation of its API and Service Band Indices demonstrating that, under its proposed rates, it will not exceed the PCI and SBLs for 1999.

16.BC TEL included in the calculation of its API the impact of certain tariff notices approved since the company had met its 1998 price cap commitment, notably, BC TEL TNs 3851, 3873 and 3874, and Bell (NST) TNs 684 and 689.

17.The Commission considers that BC TEL TNs 3873 and 3874 and Bell (NST) TN 684 proposed rate changes to existing capped services. BC TEL TN 3851 and Bell (NST) TN 689 proposed to introduce ISP connection service and Fractional DS-1 access service, respectively.

18.ISP connection service is a new local access service where the local switch is programmed to prevent outgoing calls from being made. The Commission considers that ISP connection service provides Internet service providers with the functionality they require at markedly lower rates than alternative services. The Commission considers that, since the introduction of ISP connection service was essentially intended to provide a rate reduction for Internet service providers, unlike the new services referred to in Decision 97-9, there would not have been much uncertainty as to the potential demand for ISP connection service at its introduction. Accordingly, BC TEL would have been able to accurately predict demand for this service prior to its introduction. In these circumstances, the Commission is of the view that information need not be gathered prior to including it in the other capped services sub-basket.

19.In view of the foregoing, the Commission determines that the introduction of ISP connection service qualifies as a rate reduction under the price cap regime.

20.The Commission considers that Fractional DS-1 access service is a new service in that it provides digital functionality at below DS-1 capacity, a function that was not previously made available to BC TEL's customers. By contrast with ISP Link service, this service was not introduced to provide a rate reduction to subscribers of an existing service. Accordingly, the Commission finds that Fractional DS-1 access service is a new service and that consistent with Decision 97-9, information should be gathered prior to its inclusion in capped services.

21.The Commission further determines that in spite of the impact on the API of the above finding, BC TEL will not exceed the PCI and SBLs for 1999.

22.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 single line and multi-line business services, customer-specific business local service, Microlink, Megalink, ISP connection service and Digital Network Access DS-1 service will not be anti-competitive.

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

Secretary General

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