ARCHIVED -  Telecom Order CRTC 99-625

Telecom Order CRTC 99-625

Ottawa, 9 July 1999

In the matter of Internet service forbearance granted to Northwestel Inc. (Northwestel) in Telecom Order CRTC 98-619, 23 June 1998 (Order 98-619).

File No.: 8640-N1-01/97

1. In Order 98-619, the Commission forbore from regulation of Northwestel’s Internet Service (IS) conditional on the establishment of an approved accounting separation for IS revenues, investment and expenses from its rate base and Phase III shortfall determinations.

2. On 12 March 1999, Northwestel filed information with the Commission to demonstrate that the company had established the required accounting separation for IS.

3. No comments were submitted by any interested party.

4. In its submission, Northwestel stated that its IS includes Sympatico service, the company’s planned dedicated IP Gateway Service and its High Speed IS Service and that its IS assets, revenues and expenses associated with these services will be separated from the Competitive Network (CN) Broad Service Category and reported to a sub-category called IS.

5. More specifically, Northwestel stated that all plant assets and expenses associated with the provision of IS are either directly attributed to the IS sub-category or relate to shared facilities used by various services.

6. Northwestel stated that those facilities that are directly attributable to IS will be specifically identified as IS assets for reporting purposes while shared facilities will be prorated, as applicable, to the IS sub-category based on (a) the prior aggregate assignment of related investment, (b) the prior assignment of the employees/departments (salary and wage expense) who use the equipment or (c) in the case of employee occupied buildings, the prior assignment of the employees who occupy the space.

7. With respect to shared facilities, Northwestel stated that no transmission investment will be assigned directly to the IS sub-category due to the difficulty of determining an appropriate methodology for the assignment of this investment.

8. Since Northwestel’s IS uses DS3-ATM (Asynchronous Transfer Mode) facilities, the company stated that it will assign the estimated cost of these facilities to the IS sub-category based on a market rate for a DS3 channel and its average utilization by IS.

9. Northwestel stated that revenues will be uniquely identified with specific revenue accounts and directly assigned to the IS sub-category.

10. Northwestel stated that some expenses can be directly assigned to IS since they can be identified by studying/tracking invoice details while expenses related to the use of shared facilities will be either (a) prorated on the basis of the average IS utilization of a DS3 channel in the same manner as transmission plant, (b) allocated based on time spent supporting IS, or (c) assigned to IS on the basis of the prior aggregate assignment of main plant assets.

11. In the Commission’s view, the company’s proposed accounting separation for IS conforms to the cost causality principles embodied in its Phase III procedures and is consistent with the procedures used by other carriers to separately identify and assign IS assets, revenues and expenses.

12. Therefore, the Commission is satisfied that the company’s proposed accounting separation appropriately addresses any concern with respect to the potential for cross-subsidization of IS with revenues generated in Northwestel’s monopoly sector.

13. On the basis of the foregoing, the Commission considers that Northwestel’s proposed accounting separation for IS satisfies the condition for IS forbearance set out in Order 98-619.

14. Accordingly, the Commission approves Northwestel’s accounting separation for IS and directs the company to issue forthwith, tariff pages that withdraw their tariffs for IS in accordance with Order 98-619.

Secretary General

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