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Order CRTC 2000-1093
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Ottawa, 4 December 2000
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The South Bruce Rural Telephone Company Limited - Local rate increases to reduce the reliance on subsidies
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Reference: Tariff Notices 17 and 17A
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The Commission approves rate increases to local residential and business services effective 1 January 2001 in order to bring local rates closer to costs and reduce the independents' reliance on subsidies from long distance service providers.
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1.
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In Review of contribution regime of independent telephone companies in Ontario and Quebec, Telecom Decision CRTC 99-5, dated 21 April 1999, the Commission directed the independent companies whose contribution requirement exceeded 25% of their total revenue requirement to file proposals detailing how they intended to reduce their subsidy requirement to no more than 25% by the year 2002.
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2.
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On 1 March 2000, South Bruce filed its proposal as well as Tariff Notice 17 on 28 February 2000, amended under TN 17A on 14 July 2000. In TN 17A, South Bruce requested an increase to monthly residential service rates of $2.50 effective 1 October 2000 in order to reduce its subsidy requirement towards the 25% contribution objective.
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3.
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South Bruce also planned to request additional increases totalling $5 to monthly residential service rates in 2001.
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Comments
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4.
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South Bruce issued billing inserts informing residential customers of the proposed rate increases. The billing insert notified customers of their right to provide comments on the company's proposal.
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5.
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All comments received from customers opposed the proposed rate increases. Customers noted that local rates had increased on many occasions in the past few years. Customers also noted that they did not benefit from the same choice of toll providers and toll rate options available to customers in more urban areas.
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Commission determinations
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Local rate increases
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6.
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Decision 99-5 noted that reliance on high levels of toll contribution by the independents is generally due to residential and, in some cases, business local access rates that do not recover their costs.
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7.
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Decision 99-5 stated, among other things, that the independents should consider increasing local rates to bring rates closer to costs and reduce their reliance on contribution subsidies.
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8.
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To encourage the independents to increase their revenues from sources other than residential local rates, Decision 99-5 capped proposed increases to monthly local residential service rates at $5 in 2000 and an additional $5 in 2001.
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9.
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The Commission is of the view that services that are below costs should share the burden of attaining the contribution objective set out in Decision 99-5.
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10.
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South Bruce did not propose to increase its business rates. South Bruce submitted that its business service was compensatory when taking revenues from options, features, and service charges into consideration.
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11.
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In order to determine whether a specific service is compensatory or not, the Commission considers that revenues from other services (such as options, features and service charges) should not be included.
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12.
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Since South Bruce does not currently have Phase II costing to compare to service-specific revenues, the Commission considers that average total local and access broad service category Phase III costs, compared to service-specific revenues, are an appropriate means to measure whether or not business service rates are compensatory.
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13.
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Based on Phase III cost information provided by South Bruce, the Commission determines that business service rates are not compensatory. The Commission considers that it would be in the public interest to increase South Bruce's business rates by the same amount as residential rates, or up to the level where business rates are compensatory, to recover the cost of providing that service.
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14.
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The Commission notes that South Bruce did not advise its business customers of possible rate increases. The Commission is of the view that business customers should have an opportunity to provide any comments before any increase in business rates are determined on a final basis.
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15.
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The Commission notes South Bruce's proposal to increase monthly rates for residential services by $2.50 in 2000 and a further $5 in 2001. Since only one rate increase will be implemented as a result of Decision 99-5 in 2001 and because the Commission considers that rates should be moved closer to costs, the Commission determines that a $5 increase to monthly residential service rates is appropriate.
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16.
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The Commission also considers it appropriate that monthly business service rates be increased by $5, on an interim basis.
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17.
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The Commission notes that the proposed effective date for South Bruce's proposed rate increase has passed. The Commission is of the view that rate increases should be implemented as soon as practically possible.
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18.
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The Commission directs South Bruce to increase monthly local residential service rates by $5 effective 1 January 2001. In addition, the Commission directs South Bruce to increase, on an interim basis, monthly local business service rates by $5 effective 1 January 2001.
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19.
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The Commission directs South Bruce to file forthwith, revised tariff pages that reflect the determinations made above.
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Proceeding to finalize business rate increases
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20.
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South Bruce is directed to inform its business customers forthwith, by way of billing insert, of the interim rate increase. The billing insert is to explain the reasons for the interim increase and provide all business customers with a 30-day comment period.
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21.
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South Bruce will then have 10 days to provide reply comments.
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Changes to the contribution regime
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22.
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The Commission notes that Changes to the contribution regime, Decision CRTC 2000-745, dated 30 November 2000, changes the subsidy requirement calculation for the small independent telephone companies. Starting in 2002, the subsidy requirement will no longer be calculated on a Phase III basis. Decision 2000-745 will target subsidies to the high-cost serving areas based on Phase II costing principles.
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23.
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The Commission nevertheless considers that the independents should continue to bring rates closer to cost and reduce their reliance on subsidies.
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24.
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The Commission will consider what further local rate increases, if any, are needed to reduce subsidy requirements for the independents in the context of the proceeding to implement the new contribution collection regime for such companies.
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Secretary General
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This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca
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