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Order CRTC 2000-353
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Ottawa, 28 April 2000
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Prince Rupert City Telephones -Final 1999 Carrier Access Tariff
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Reference: Tariff Notice 40
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The Commission approves Prince Rupert City Telephones' (CityTel) final 1999 Carrier Access Tariff (CAT) at $0.0357 per minute. This includes an adjusted contribution requirement of $922,472, for a rate of $0.0192 per minute, and an adjusted direct toll component of $789,365, for a rate of $0.0165 per minute. This tariff is effective 1 January 1999. The Commission directs CityTel to issue revised tariff pages reflecting its final 1999 CAT and to proceed with billing adjustments as expeditiously as possible.
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Background
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1.
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In Telecom Order CRTC 99-904, the Commission approved a final 1998 CAT for CityTel of $0.0509 per minute. It consisted of a contribution rate of $0.0315 per minute and a direct toll rate of $0.0194 per minute. The total CAT was based on a contribution requirement of $1,302,129, a direct toll component of $801,869 and actual contribution-eligible minutes of 41,323,954.
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2.
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On 4 November 1999, CityTel filed Tariff Notice 40, pursuant to Telecom Order CRTC 99-904, requesting approval of a 1999 CAT of $0.0430 per minute.
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Parties
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3.
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BCT.TELUS Communications Inc., Société d'administration des tarifs d'accès des télécommunicateurs, Bell Canada, Nelligan Power, The Corporation of the City of Thunder Bay – Telephone Division, and RSL COM Canada Inc. were parties to this proceeding. No comments were received.
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Contribution-eligible minutes
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4.
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CityTel estimated contribution-eligible 1999 minutes at 48,000,000. This represented an increase of 16.2% over actual 1998 minutes of 41,323,954.
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5.
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Based on CityTel's previous year-over-year increase in contribution-eligible minutes, the Commission considers CityTel's increase in its 1999 minutes to be of the same order of magnitude as the prior year. The Commission finds CityTel's estimate of its 1999 minutes of 48,000,000 to be reasonable.
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1999 Contribution requirement and rate
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6.
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The company proposed a contribution requirement of $1,245,349 with a rate of $0.0259 per minute.
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Calculation of the rate of return
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7.
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In Regulatory Framework - Prince Rupert City Telephones, Telecom Decision CRTC 98-5, dated 4 May 1998, the Commission set CityTel's midpoint return on average capital (ROR) at 11.375%. In addition, the Commission directed CityTel to use a rate of return 50 basis points less than the midpoint of the approved range (i.e., 10.875%) for calculating its CAT. The Commission considers that this ROR is intended to provide an allowed return on both debt and equity.
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8.
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The Commission reviewed CityTel's submission and determined that both an ROR on average capital as well as $322,877 of interest expense had been included in the proposed 1999 contribution requirement.
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9.
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CityTel argued that since the Commission had stated in Decision 98-5 that its risk was comparable to that of the four smaller Ontario Public Utilities Commissions (PUCs), and that the ROR of the PUCs includes a debt component of zero or near zero, the ROR defined in Decision 98-5 was not intended to pay for both the cost of debt and the cost of equity. CityTel also stated that the assignment of interest expense to the Phase III Broad Service Categories (BSCs) had been identified in its Phase III Costing and CAT Procedures Manual (Phase III Manual).
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10.
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The Commission disagrees with CityTel that its allowable ROR range was set assuming the company had little or no debt. In the proceeding that culminated in Decision 98-5, the Commission was aware that the Ontario PUCs had little or no debt and ultimately adopted an ROR range for CityTel that considered, among other things, CityTel's capital structure. The Commission also notes that the Phase III Manual is primarily designed to assign expenses and revenues among the BSCs and not to set the CAT. The actual setting of the CAT is accomplished through specific CAT applications.
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11.
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The Commission is of the view that CityTel's application of Decision 98-5 in calculating its ROR leads to a double recovery of interest expense. The Commission has therefore reduced CityTel's proposed 1999 contribution requirement of $1,245,349 by $322,877, which is equivalent to the amount of interest expense noted above.
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12.
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In light of the above, the Commission has determined that CityTel's final 1999 contribution requirement will be $922,472, with a corresponding rate of $0.0192 per minute.
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1999 Direct toll component and rate
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13.
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CityTel proposed a 1999 direct toll component of $816,636. Consistent with the Commission's findings above regarding the proper calculation of the company's ROR, the Commission has reduced CityTel's direct toll component by $27,271, which is equivalent to the amount of interest expense allocated to the Toll BSC.
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14.
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CityTel's 1999 direct toll component will therefore be $789,365, with a corresponding rate of $0.0165 per minute.
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Implementation
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15.
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In light of the foregoing, the Commission orders that:
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(a) The final 1999 CAT for CityTel is set at $0.0357 per minute. It includes a contribution rate of $0.0192 per minute and a direct toll rate of $0.0165 per minute. It is approved effective 1 January 1999;
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(b) CityTel is to issue forthwith revised tariff pages reflecting its final 1999 CAT;
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(c) CityTel is to proceed with billing adjustments as expeditiously as possible;
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(d) CityTel is to issue revised tariff pages setting its interim 2000 CAT, effective 1 January 2000, at the approved 1999 CAT level; and
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(e) CityTel is to file its proposed final 2000 CAT within 45 days of the date of this order including supporting calculations and information. CityTel is to serve copies to all parties registered in the 1999 CAT proceeding.
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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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