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Order CRTC 2000-351
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Ottawa, 28 April 2000
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Bell Canada – Construction charges
Reference: Tariff Notice 6233
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The CRTC refuses to change Bell Canada's General Tariff relating to construction charges and orders Bell Canada to file a tariff giving its customers the option to pay for extensions on a reasonable instalment basis.
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1.
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By majority decision, the CRTC denies Bell Canada's application to revise its construction charges tariff to: (1) change the standard free allowance for new service connections from a distance-based formula to a standard dollar amount; and (2) allow additional incremental costs to be subject to cost recovery by the new customer/applicant. By unanimous decision, the Commission requires Bell Canada to file a proposed tariff, within 60 days of the date of this order, giving customers the option to pay for extensions on a reasonable instalment basis.
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2.
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The application, filed by Bell Canada on 29 May 1998, proposed:
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i. to change the standard free allowance for new service connections from a distance-based formula (165 meters) to a standard dollar amount ($1000); and
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ii. to change the basis for determining the costs for construction such that, in addition to costs incurred to extend existing facilities, any other incremental costs such as cable reinforcement costs extending back to the serving switching centre, would be subject to cost recovery.
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3.
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Bell Canada indicated, among other things, that:
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i. the request to revise its current General Tariff Item 150 – Construction charges – is necessary given the current competitive climate and the company's renewed focus on cost reduction;
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ii. the revisions would be consistent with the Commission's policy of moving rates closer to their costs;
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iii. the current construction charge tariff is: (a) confusing for people applying for service in unserved areas which stems from the fact that the tariff results in a unique free allowance for each request; and (b) structured so that it is financially imprudent to quote a price to the customer in some cases due to the cost burden associated with the cable reinforcement back to the switching centre;
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iv. the proposal of having a standard free allowance will serve to simplify and expedite the process of providing service, for both the applicant and the company; and
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v. in order for Bell Canada to provide service on an economically viable basis, it should be allowed to charge all incremental costs for the provisioning of facilities minus a standard allowance of $1000 per applicant.
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4.
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Interveners opposing the proposal indicated, among other things, that it constituted a shedding by Bell Canada of its obligation to serve.
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5.
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The Public Interest Advocacy Centre (PIAC) stated, on behalf of Consumer's Association of Canada/Fédération nationale des associations de consommateurs du Québec/National Anti-Poverty Organization, that it does not object to the replacement of the 165 meter allowance with a $1000 allowance for construction of new facilities provided, among other conditions, that Bell Canada is required to accept reasonable instalment payments for service extension.
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Commission determinations
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6.
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With regard to changing the standard distance-based free allowance to a standard dollar allowance, the Commission is of the view that:
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i. although adopting a standard dollar amount could simplify the determination of the free allowance it would be, on average, less generous for the applicant(s);
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ii. moreover, it would be moving away from the service extension provisions approved for the majority of other telephone companies.
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7.
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Accordingly, the Commission denies Bell Canada's proposal to change the standard free allowance for new service connections from a distance-based formula to a standard dollar amount.
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8.
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With regards to the inclusion of reinforcement costs, the Commission notes that in Local Competition, Decision 97-8, dated 1 May 1997, the Commission determined that it is appropriate to maintain some level of contribution to provide an adequate subsidy source to maintain affordable basic service for all customers including those situated in high cost areas. To achieve this objective, the Commission took specific steps to set and maintain a certain level of contribution which involved the freezing of interexchange contribution rates. Further, network reinforcement costs may very well include facilities which benefit both existing customers as well as future customers in the locality being served.
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9.
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In light of the above, the Commission denies Bell Canada's proposal to change the basis for determining the costs such that, in addition to costs incurred to extend existing facilities, any other incremental costs such as cable reinforcement costs extending back to the serving switching centre, would be subject to cost recovery.
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10.
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The Commission notes that in the High-Cost Serving Areas decision (Telecom Decision CRTC 99-16, dated 19 October 1999), it has allowed for the possibility of the recovery, by all incumbent local exchange carriers (ILECs), of future network costs incurred subsequent to the end of the 4 year price cap period. Under the approach in Decision 99-16, such costs would not be recovered solely from the service extension subscriber. ILECs are permitted to address the funding of such expenses as part of their Service Improvement Plans (SIPs).
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11.
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The Commission notes that in Decision 99-16, it required carriers to file, with their SIP, proposed tariffs giving customers the option to pay for extensions on a reasonable instalment basis. The Commission considers that if a customer requesting service extension is required to pay the full cost of the extension upfront or in full when the account is rendered, this may be a significant disincentive to requesting an extension.
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12.
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In light of the above, the Commission is of the view that a reasonable instalment option for service extensions not covered by a SIP would be appropriate. Consequently, the Commission directs Bell Canada to file, within 60 days of the date of this order, a proposed tariff giving customers the option to pay for extensions not covered by a SIP on a reasonable instalment basis.
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Secretary General
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This document is available in alternate format upon request and may also be viewed at the following Internet site: http://www.crtc.gc.ca
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