ARCHIVED - Order CRTC 2000-162

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Order CRTC 2000-162

Ottawa, 29 February 2000
Northern Telephone Limited
Tariff Notice 118
Service Improvement Program
The Commission approves a $4 local rate increase for most Northern customers effective 1 March 2000. The increase will allow Northern to go ahead with Phase I of its Service Improvement Program (SIP). The increase will also allow the company to eliminate mileage charges. The Commission however denies Northern's proposal for expanded local free calling areas based on natural calling centres.


In Telephone service to high-cost serving areas, Telecom Decision CRTC 99-16, dated 19 October 1999, the Commission established basic service objective for all telephone companies in Canada. Northern filed Tariff Notice 118 in response to Decision 99-16 on 31 December 1999.


Tariff Notice 118 provides for Phase I of Northern's SIP. Northern proposed to upgrade 1,654 party line subscribers to individual line service. Northern also proposed to extend service to 126 unserved residents. Northern plans to complete Phase I by the end of the year 2000.


Northern plans to convert all two-party and four-party lines to individual line service and expand service availability to areas that do not have telephone service by the end of its proposed two-phase, four-year SIP. Northern stated that it would file Phase II of its SIP by 1 March 2000.


Northern requested that the Commission consider its application on an expedited basis. Northern has made this request in light of the need to start its SIP as soon as possible.


Phase I of Northern's SIP will necessitate a $6.4 million investment. Northern also proposed to eliminate mileage charges and introduce expanded local free calling areas based on natural calling centres.


Northern proposed to increase most of the business and residential local service rates within its serving area by $5 effective 1 March 2000. A significant portion of the proposed increase will help pay for the SIP while the remaining portion would be applied against the elimination of mileage charges and the introduction of the expanded free calling areas.


Ontario Northland Transportation Commission (O.N. Tel) supported interim approval of the SIP only. O.N. Tel was concerned that it could pay for a portion of Northern’s overall plan through a higher carrier access tariff (CAT). O.N. Tel was also concerned with its own loss of revenues resulting from the expanded free calling areas.


The Commission also received comments from numerous subscribers, groups and town councils. Interveners from the more urban areas, where individual line service was already available, generally opposed the application. Interveners in the more rural areas generally favoured the application.


Northern's staff conducted several town hall meetings in order to present and explain its plan to its subscribers.
Commission determinations
a) Service Improvement Program


The Commission approves Phase I of Northern’s SIP. Northern has approximately 4,700 underserved and 1,100 unserved customers. The Commission is of the view that Northern must begin upgrading the level of service provided to these customers as soon as possible.


The Commission is satisfied that the SIP will not be funded through higher CAT rates. The Commission is of the view that the special reserve account proposed by Northern provides an appropriate safeguard in this regard.


The Commission therefore directs Northern to establish the special reserve account. Northern is directed to track separately a portion of the revenues associated in the approved rate increase (e.g., $2.56 of the $4 increase), and other revenues, expenses and investments associated with the SIP.


Northern will file Phase II of its SIP shortly. The Commission intends to further examine all aspects of both phases (including the special reserve account) of Northern’s SIP plan at that time.
b) Mileage Charges


In keeping with the basic service objective, the Commission approves, effective 1 March 2000, the elimination of mileage charges. The Commission is of the view that the remaining portion of approved local rate increases (i.e., $1.44) would recover all foregone revenues associated with the elimination of mileage charges. The elimination of mileage charges would therefore not have an upward impact on the CAT.
c) Expanded local free calling areas


The Commission denies Northern's proposal for expanded local free calling areas at this time. The Commission has accordingly reduced the proposed rate increases by $1 to reflect this denial.


Northern's proposed expansion of local free calling areas would benefit customers including those in communities that do not have toll-free access to the Internet. The Commission however notes that a number of customers were of the view that lower toll rates associated with toll competition would reduce the value of this service enhancement for many others.


The Commission also notes the significant impact that the proposed expanded free calling areas would have on O.N. Tel.


The Commission intends to address the issue of expanded free calling areas in the proceeding to establish toll competition in O.N. Tel’s territory. That proceeding is scheduled to start later in the year 2000. The Commission is nevertheless prepared to consider proposals for expanding local free calling areas where these proposals help meet the basic service objectives as stated in Decision 99-16.
d) Increases to two-party rates


The Commission denies Northern’s proposal to increase two-party line service rates by the same amount as individual line service rates. Therefore, the approved $4 local rate increase will not apply to two-party and four-party service rates. The Commission is of the view that it would be inappropriate to apply the increase to customers who cannot have access to individual line service. The Commission, however, directs that individual line service be the basic grade of service in Northern's territory and that two and four-party service will no longer be provided where single line service is available.
e) O.N. Tel’s request to have additional information on the public record


The Commission denies O.N. Tel's request that Northern file additional information on the public record of this proceeding. The Commission, however, directs Northern to place on the public record, as part of its Phase II application, the financial information provided in
Attachment 5 of Tariff Notice 118 and similar information with regards to the components of its Phase II SIP application.


The approved revisions will take effect on 1 March 2000. Northern is to issue, forthwith, revised tariff pages reflecting the above approval.


In light of the determinations made above, the Commission extends the deadline for Northern to file Phase II of its SIP from 1 March 2000 to 15 March 2000.
Secretary General

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