ARCHIVED - Order CRTC 2000-883

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Order CRTC 2000-883

Ottawa, 27 September 2000
Northern Telephone Limited
final 2000 Carrier Access Tariff approved
Reference: Tariff Notice 128
The Commission approves Northern Telephone Limited's proposed final 2000 Carrier Access Tariff (CAT). The CAT is paid to incumbent telephone companies by long distance service providers who use the incumbents' networks.


On 31 March 2000, Northern filed Tariff Notice 128 which proposed its final 2000 CAT rate of $0.0441 per minute, consisting of a contribution rate of $0.0313 per minute and a direct toll rate of $0.0128 per minute. The total 2000 CAT was based on a contribution requirement of $8,959,000, a direct toll component of $3,654,000 and contribution-eligible minutes of 286,325,585. The Commission approves Northern's 2000 CAT as filed.


Telecom Order CRTC 99-1068, dated 16 November 1999, approved new depreciation life characteristics for Northern and directed it to advise the Commission when it has implemented or plans to implement the approved depreciation life characteristics at the same time it filed its proposed final 2000 CAT.


Northern has elected to continue to delay the implementation of the approved depreciation life characteristics to a future year.


In light of the significant impact new depreciation life characteristics would have on Northern's contribution requirement, Northern must advise the Commission when it implements or plans to implement the depreciation life characteristics approved in Order 99-1068, for CAT calculation purposes, when it files its proposed 2001 CAT.
Business transformation savings


Telecom Order CRTC 98-119, dated 6 February 1998, approved Northern's business transformation program.


Telecom Order CRTC 98-317, dated 3 April 1998, noted that Northern's interexchange carrier (O.N. Tel) would ultimately benefit from Northern's business transformation program savings in future years. Northern had indicated that the costs related to the final payouts of termination and early retirement payments would be amortized over a five-year period and therefore savings would not be realized until three to five years following this period.


The Commission is satisfied that savings resulting from Northern's business transformation program have been realized to date and that further savings resulting from completion of the amortization of termination and early retirement payments will begin in 2001.
Toll billing and collection


Telecom Order CRTC 99-1218, dated 23 December 1999, approved Northern's billing and collection tariff, effective 1 January 2000.


O.N. Tel submitted that with the approval of Northern's, none of the billing and collection costs should be included in Northern's 2000 contribution requirement and/or direct toll costs because all costs are being recovered through its billing and collection tariff.


The Commission is satisfied that Northern has reduced the direct toll component of its proposed 2000 CAT by the revenues associated with its billing and collection activity. In addition, Northern's estimated direct toll component includes a one-time termination expense of $342,000 based on O.N. Tel terminating its arrangement with Northern and commencing its own billing and collection service.


The Commission directs Northern to exclude the one-time termination expense of $342,000 from its 2000 contribution base when comparing
year-over-year direct toll component increases for its 2001 CAT.
Transfer of assets to Cochrane


On 1 March 2000, Northern transferred approximately 870 network access services and related assets to Cochrane Public Utilities Commission.


In response to an interrogatory, Northern provided details on the 2000 incremental revenues and expenses associated with the Cochrane transfer.


The Commission finds that the adjustment made by Northern to its 2000 contribution requirement resulting from the Cochrane transfer is appropriate.
Switching equipment modernization


Telecom Order CRTC 98-780, dated 11 August 1998, directed Northern to file annual switching equipment modernization (SEM) progress reports concurrent with the company's annual CAT filings.


Northern reported 1999 SEM investment expenditures of $2,837,500. Northern's status report included progress made by exchange in terms of installation of outside plant fibre cable, building renovations and/or reinforcements, and the installation of digital switching equipment.


The Commission directs Northern to continue filing SEM status reports with its annual CAT filings. The status reports are to include progress reports on the number of customers within modernized exchanges versus those remaining to be modernized, along with projected completion dates, until the SEM program is completed.
Broadband investments


Review of contribution regime of independent telephone companies in Ontario and Quebec, Telecom Decision CRTC 99-5, dated 21 April 1999, directed that, on a going-forward basis, the small independents should file, with their annual CAT filings, detailed information on broadband applications including investment and planned use for any fibre investment.


Northern provided a summary of its fibre investment for the Utility and Competitive segments as of 31 December 1999, as well as the amount of planned investment for 2000. The company confirmed it currently does not have any broadband investment in the Utility segment and it does not have any plans for broadband expenditures beyond the locations of electronic remotes or in the distribution portion of the plant in the Utility segment.


The Commission finds Northern's 1999 broadband investment report to be in accordance with Decision 99-5 and directs it to provide an updated report on broadband investment with the filing of its final 2001 CAT.
Contribution-eligible minutes


Northern provided an estimate of 286,325,585 contribution-eligible minutes for 2000, representing an increase of 4.7 percent over the 1999 approved level.


Northern's forecast of contribution-eligible minutes is provided by O.N. Tel and it includes an adjustment to reflect the transfer of 870 network access services to Cochrane.


In light of the above, the Commission finds Northern's forecast of contribution-eligible minutes to be reasonable.
Contribution requirement and rate for 2000


Decision 99-5 concluded that the 2000 contribution requirement would be capped at the final 1999 requirement minus an adjustment to reflect the annualized impact of the rate adjustments derived from the 1999 rate rebalancing. The Commission has reviewed and deems appropriate Northern's proposed 2000 contribution requirement and finds that it is less than its adjusted 2000 contribution base.
Direct toll component and rate for 2000


The Commission agrees with Northern's proposed 2000 direct toll component of $3,654,000, which reflected a reduction of $306,000 from its approved 1999 direct toll component. The reduction in the direct toll component is mainly due to a reduction in costs equivalent to the revenues resulting from Northern's billing and collection tariff.
CAT for 2000


In light of the above, the Commission approves a combined CAT of $0.0441 per minute, effective 1 January 2000.
Northern action required


The Commission directs Northern to:
a) issue forthwith revised tariff pages reflecting its final 2000 CAT; and
b) proceed with billing adjustments, if required, as expeditiously as possible.


Northern is further directed to file a proposed 2001 CAT by 31 January 2001, which should include an explanation for any increase to the direct toll component in excess of five percent.
Secretary General
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