ARCHIVED -  Telecom Public Notice CRTC 99-5

Telecom Public Notice

Ottawa, 2 February 1999

Telecom Public Notice CRTC 99-5

PROCEEDING TO REVIEW FROZEN CONTRIBUTION RATE POLICY

File No.: 8692-C12-01/99

SUMMARY

In this Public Notice, the Commission is initiating a proceeding to review the frozen contribution rate policy. The scope of this proceeding is set out in Part II of this Public Notice and the procedures are set out in Part III.

I INTRODUCTION

A. Background

1.In Local Competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8), the Commission found it appropriate to maintain contribution at a level to ensure that residence rates in high-cost areas continue to permit universality of access, while minimizing distortion of the competitive market. The Commission further concluded that toll contribution should remain the only explicit source of subsidy for basic residential local services.

2.In light of the foregoing, the Commission concluded that the interexchange (IX) contribution rates (i.e., toll contribution rates) should be frozen during the price cap period for BC TEL, Bell Canada (Bell), Island Telecom Inc. (Island Tel), Maritime Tel & Tel Limited (MT&T), MTS Communications Inc. (MTS), NBTel Inc. (NBTel), NewTel Communications Inc. (NewTel) and TELUS Communications Inc. (TCI) (the telephone companies). The IX contribution rates were frozen at the going-in rates, effective 1 January 1998 for all the telephone companies, except TCI. With respect to TCI, IX contribution rates were to be frozen 1 January 1999, consequent on the particular treatment of its shareholder entitlement.

3.In Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9), the Commission set out specific steps to establish an appropriate level of IX contribution, including establishing a target level towards which IX contribution rates would move prior to the beginning of the price cap regime.

4.On 8 September 1997, AT&T Canada Long Distance Services Company (AT&T Canada LDS) filed an application requesting that the Commission review and vary Decisions 97-8 and 97-9 with respect to the frozen contribution rate. In its 5 March 1998 letter denying AT&T Canada LDS' application (the 5 March 1998 decision), the Commission concluded, among other things, that since the industry-wide 4.5% productivity offset established in Decision 97-9 takes into account historical toll minute growth over the 1988 to 1995 period (i.e., a toll minute growth trend based on the 1988 to 1995 period, applied prospectively through the price cap period), it would amount to double-counting if contribution rates were subsequently adjusted for toll minute growth during the price cap period.

5.On 18 June 1998, NBTel Inc. (formerly The New Brunswick Telephone Company, Limited) (NBTel) filed an application to review and vary Telecom Order CRTC 98-468, dated 12 May 1998, Decision 97-9 and Implementation of Price Cap Regulation and Related Issues, Telecom Decision CRTC 98-2, 5 March 1998 (Decision 98-2). In its application, NBTel requested, among other things, that the Commission lift the freeze on IX contribution rates and allow the company to reduce its IX contribution rates by the amount necessary to meet its price cap obligations over and above the amount that can be absorbed through reductions in rates for its capped services.

6.On 17 September 1998, AT&T Canada LDS, Call-Net Enterprises Inc. (Call-Net), ACC TelEnterprises Ltd. (ACC) and London Telecom Network Inc. (London Telecom) (collectively, AT&T et al.) filed an application requesting that (1) the Commission find that a revenue-based contribution collection mechanism is in the public interest and should be implemented as at 1 January 2000; and (2) the Commission initiate a proceeding no later than November 1998 in order to implement this mechanism.

7.On 27 November 1998, AT&T Canada LDS filed an application requesting that the Commission review and vary parts of Decisions 97-8 and 97-9 and the Commission's 5 March 1998 Decision, to the extent that these decisions deal with the freezing of contribution rates payable by IX service providers during the initial price cap period from 1998 to 2001. AT&T Canada LDS also requested that the Commission make the contribution rates payable by IX service providers, as set out in the applicable tariffs, interim effective 1 January 1999.

8.On 30 November 1998, Call-Net, on behalf of itself and Sprint Canada Inc., filed an application requesting that the Commission immediately modify the current contribution rates payable by long distance service providers on a quarterly basis to reflect the unexpected growth in toll minutes reported to the Central Fund Administrator (CFA) in excess of historical growth. In the event that this could not be done immediately, Call-Net requested that the contribution rates be made interim effective 1 January 1999.

9.By letter dated 21 December 1998, the Commission issued its decision with respect to AT&T et al.'s 17 September 1998 application. In that decision, the Commission denied the application, but expressed the view that it would be appropriate to review aspects of the current contribution regime in greater detail to determine if changes are required. The Commission stated that it expected to initiate two proceedings in early 1999 to (1) determine what changes, if any, should be made to the current contribution collection mechanism, and (2) review the frozen contribution rate policy.

10.In a separate letter dated 21 December 1998, the Commission made interim, effective 1 January 1999, the contribution rates in effect in each telephone company's territory, given that it would be initiating a proceeding to examine the frozen contribution rate policy. This includes the contribution rates charged by the competitive local exchange carriers, as well as the contribution surcharges payable by the wireless service providers.

11.Based on the above, the Commission considers that the applications filed by AT&T Canada LDS and Call-Net on 27 November 1998 and 30 November 1998, respectively, have been overtaken by the Commission's decision to review the frozen contribution rate policy.

12.Accordingly, the Commission is hereby initiating a proceeding to review the frozen contribution rate policy. The scope of the proceeding is set out in Part II of this Public Notice. The Commission will also be issuing shortly a public notice to initiate a proceeding to review the contribution collection mechanism.

II SCOPE OF PROCEEDING

13.In this proceeding, the Commission will consider, in particular, the following issues:

(1) the level of contribution revenues, by incumbent local exchange carrier (ILEC) territory, that could reasonably have been expected over the price cap period, at the time of Decision 98-2, in light of determinations made in Decisions 97-8 and 97-9;

(2) whether or not the contribution revenues reported to the CFA to date, by ILEC territory, resulting from growth in toll minutes, are in excess of the revenues referred to in (1) above and, if so, to what extent;

(3) whether or not the contribution revenues for the period 1999 to 2001 are expected to exceed those referred to in (1) above and, if so, to what extent;

(4) in the event that the Commission were to determine that the contribution revenues over the period 1999 to 2001 will significantly exceed those referred to in (1) above, what remedy or remedies would be appropriate; and

(5) the appropriateness and applicability of:

(i) lifting the freeze on IX contribution rates, not only for NBTel (as proposed in its 18 June 1998 application), but also for the other telephone companies subject to price cap regulation, to allow reductions in those rates, or

(ii) adjusting consumer rates, or a combination of consumer and contribution rates, by the amount necessary to meet price cap obligations over and above the amounts that can be absorbed through reductions in rates for capped services.

14.Parties addressing the issue in paragraph 13(5) above with respect to lifting the freeze on IX contribution rates to meet the price cap obligations should address the review and vary criteria set out in Guidelines for Review and Vary Applications, Telecom Public Notice CRTC 98-6, 20 March 1998. The portion of the record related to that aspect of the NBTel 18 June 1998 application will form part of the record of this proceeding.

III PROCEDURE

15.AT&T Canada LDS, ACC, Call-Net, London Telecom, Westel Telecommunications Inc., BC TEL, Bell, Island Tel, MT&T, MTS, NBTel, NewTel, TCI, MetroNet Communications Corp. and Vidéotron Télécom ltée are made parties to this proceeding.

16.Other parties wishing to participate fully in this proceeding must notify the Commission of their intention to do so by writing to Secretary General, CRTC, Ottawa, Ontario, K1A 0N2, fax: 819-953-0795, by 12 March 1999. Parties are to indicate in the notice their Internet email address, if available. If parties do not have access to the Internet, they are to indicate in their notice whether they wish to receive disk versions of hard copy filings. The Commission will issue a complete list of parties and their mailing addresses (including Internet email addresses, if available), identifying those parties who wish to receive disk versions.

17.The Commission will address interrogatories to parties by 24 February 1999. Parties are directed to file responses to the interrogatories with the Commission, and serve copies on all other parties, by 30 March 1999.

18.Parties may file submissions regarding the issues identified in this Public Notice, serving copies on all other parties, by 30 March 1999.

19.Requests by parties for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the party or parties in question by 6 April 1999.

20.Written responses to requests for public disclosure must be filed with the Commission and served on the party or parties making the request by 13 April 1999.

21.The Commission will issue a determination with respect to requests for disclosure as soon as possible, and intends to direct that any information to be provided pursuant to that determination be filed with the Commission and served on all parties to the proceeding by 30 April 1999.

22.Parties may address interrogatories to any party which has filed submissions or responses to interrogatories. Any such interrogatories must be filed with the Commission and served on the party or parties in question by 7 May 1999.

23.Responses to interrogatories addressed pursuant to paragraph 22 are to be filed with the Commission and served on all parties by 28 May 1999.

24.Requests by parties for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out the reasons for disclosure, must be filed with the Commission and served on the party or parties in question by 4 June 1999.

25.Written responses to requests for further responses to interrogatories and for public disclosure must be filed with the Commission and served on the party or parties making the request by 11 June 1999.

26.The Commission will issue a determination with respect to requests for disclosure and for further responses as soon as possible, and intends to direct that any information to be provided pursuant to that determination be filed with the Commission and served on all parties to the proceeding by 5 July 1999.

27.All parties may file comments, serving copies on all other parties, by 19 July 1999.

28.All parties may file replies to any comments, serving copies on all parties who filed comments, by 3 August 1999.

29.The record of this proceeding may be examined, or will be made available promptly upon request, at the CRTC offices at the following addresses:

Central Building
Les Terrasses de la Chaudière 1 Promenade du Portage
Room G-5
Hull, Quebec

Bank of Commerce Building
1809 Barrington Street
Suite 1007
Halifax, Nova Scotia

Place Montréal Trust
1800 McGill College Avenue
Suite 1920
Montréal, Quebec

55 St. Clair Avenue East
Suite 624
Toronto, Ontario

275 Portage Avenue
Suite 1810
Winnipeg, Manitoba

530-580 Hornby Street
Vancouver, British Columbia

30.Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date.

31.In addition to hard copy filings, parties are encouraged to file with the Commission electronic versions of their submissions in accordance with the Commission's Interim Telecom Guidelines for the Handling of Machine-Readable Files, dated 30 November 1995. The Commission's Internet email address for electronically filed documents is public.telecom@crtc. gc.ca. Electronically filed documents can be accessed at the Commission's Internet site at http://www.crtc.gc.ca.

Secretary General

This document is available in alternative format upon request.