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ARCHIVED - Order CRTC 2000-994

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Order CRTC 2000-994

 

Ottawa, 31 October 2000

  CRTC approves contribution exemption for various TASI circuit configurations following a review of non-compliance
 

Reference: 8626-T34-01/00

 

The CRTC approves a contribution exemption for various circuit configurations provided to TELUS Advanced Services Inc. by its affiliate TELUS Communications (B.C.) Inc.

1.

By letter dated 2 February 2000, BCT.TELUS Communications Inc. (TELUS) advised the CRTC that it had discovered a second incident of non-compliance with TELUS Communications Inc.'s (TCI) tariff with respect to registration with the Commission and the payment of contribution. The case in question concerns its subsidiary, TELUS Advanced Services Inc. (TASI), formerly known as TELUS Advanced Communications (B.C.) Inc. TASI registered with the Commission and noted that it intended to settle all past outstanding contribution obligations. TASI stated that it will also file contribution exemption applications for its ongoing operations.

2.

Previously, Telecom Order CRTC 98-1257, dated 16 December 1998, found that TCI affiliate, TELUS Advanced Communications (TAC), was non-compliant with TCI's tariff (the first incident of non-compliance).

 

The exemption application

3.

By letter dated 8 June 2000, TASI applied for contribution exemption for local, dedicated, Internet, and administrative services.

4.

TASI submitted that given the intent set out in its registration letter referenced above, 2 February 2000 could properly be regarded as the date of application.

5.

With respect to the administrative circuits for which contribution exemption is sought, TASI noted that long distance calls on those circuits are routed via equal access arrangements, as can be confirmed through carrier verification.

6.

TASI provided diagrams in confidence to the Commission and TELUS Communications (B.C.) Inc. (TCBC), describing 10 configurations for which contribution exemption is sought, along with circuit lists itemizing the specific services affected. TASI also submitted affidavits in confidence and TCBC affirming the above service configurations and the actual and/or intended nature of their use.

 

Determination of contribution owed

7.

By letter also dated 8 June 2000, TCBC submitted a report, prepared in conjunction with TASI, detailing the outstanding amounts of contribution owed by TASI including late payment charges. TCBC proposed an approach under the current regulatory regime to deal with the additional contribution payments forthcoming from TASI.

8.

TASI provided details of the contribution amounts it owes for its service provisioning circuits (local, dedicated, and Internet services) for the period from 1995 to January 2000 consistent with determinations in NBTel Interactive (1994) Inc., Telecom Orders CRTC 97-648, dated 16 May 1997 and 98-1257.

9.

TASI stated that the contribution payable on the service provisioning circuits is as follows: negligible in 1995, $10.9K in 1996, $92.6K in 1997, $632K in 1998, $5.61 million in 1999, and $1.09 million in January 2000. The total amount is $7.44 million, including late payment charges and Goods and Services Tax (GST).

10.

Also, in accordance with previous Commission determinations in similar circumstances, TCBC included an assessment of the impact of the additional contribution revenues (including late payment charges and GST) from TASI on the rate of return on average common equity (ROE) of TCBC's Utility segment for the years 1995 to 1997, when ROE regulation was in effect. For those years, the Commission-approved ROE range for TCBC's Utility segment was 10.25 percent to 12.25 percent.

11.

TCBC submitted that the recalculated ROE for TCBC's Utility segment in 1995 to 1997 would be within the range approved by the Commission in each of 1995 to 1997. Accordingly, no special measure, such as a deferral account for excess earnings as prescribed by paragraph 90 of Order 97-648, is required.

12.

TASI stated that, beginning in 1998, all contribution receipts collected by TCBC are reported to the central fund administrator (CFA), which in turn disburses all such funds to eligible local exchange carriers (LECs) (i.e., those providing subsidy-eligible residential services in B.C.) in accordance with the subsidy allocation mechanism prescribed by the Commission. In summary, TCBC proposed that the following course of action be adopted:

  a) Additional 1998 contribution payments received by TCBC from settlement of TASI's 1998 outstanding contribution owing would be reported to the CFA-based on the 1998 actual CFA disbursements, these additional 1998 receipts would all accrue to TCBC.
  b) Additional 1999 contribution payments received by TCBC from settlement of TASI's 1999 outstanding contribution owing would be reported to the CFA; disbursement of these additional receipts to eligible LECs would simply follow the CFA's actual distribution of subsidy entitlements in 1999: 100 percent to TCBC for the months of January to July, shared between TCBC and eligible LECs from August to December (estimated allocation for the year: 99.95 percent to TCBC and 0.05 percent to CLECs).
  c) Additional 2000 contribution payments received by TCBC from settlement of TASI's January 2000 contribution owing would be reported to the CFA, which would include these additional receipts in the fund for disbursement to eligible LECs in accordance with the subsidy allocation mechanism that is currently in place.
 

TCBC's comments

13.

By letter dated 7 July 2000, TCBC considered that the affidavits and associated configuration diagrams provided satisfy the requirements for an exemption. TCBC concurred with TASI's requested contribution exemption application and effective dates.

 

Conclusions

14.

The Commission notes that this is the second occurrence of a TELUS subsidiary non-compliance with respect to registration and the payment of contribution. However, the Commission finds that there are mitigating circumstances in this case. TCI merged with TCBC in February 1999. TELUS stated that following its organizational restructuring on 1 January 2000, it discovered the problem in question. TELUS then advised the Commission on 2 February 2000 of the problem.

15.

The Commission finds that TELUS has acted in a timely manner and voluntarily brought the matter to the Commission's attention, rather than an intervener or competitor having to do so.

16.

TCBC confirmed by letter dated 13 September 2000 that the management controls instituted pursuant to Order 98-1257 enabled it to discover the non-compliance.

17.

Following a review of the evidence, the Commission finds that:

  a) TASI owes TCBC $7.44 million for the period 1995 to January 2000 as set out above;
  b) contribution is not payable on the administrative circuits as set out below;
  c) the contribution amounts are not material to the revenue or contribution requirements of TCBC; and
  d) TASI's contribution disbursement plans for 1998, 1999, and 2000 as set out above are acceptable. The Commission directs TASI to remit forthwith the $7.44 million as set out in its disbursement plan.

18.

TASI sought exemption for configurations used to provide local, dedicated, Internet, and administrative services. TASI provided diagrams and circuit lists representing the various network configurations as well as affidavits.

19.

The Commission has examined the diagrams and is of the view that they demonstrate that the circuits in question are used for the described purposes. The Commission is also of the view that TASI has met the evidentiary requirements (affidavits and carrier verification). Accordingly, the Commission approves TASI's application for exemption.

20.

The Commission finds that TASI's request for the effective date to be the date of installation for the administrative circuits follows the guidelines set out in Telecom Public Notice CRTC 95-26.

21.

Although TASI did not file its formal application until 8 June 2000, the Commission was made aware of its intent to file application as a result of the company's 2 February 2000 letter. The Commission is of the view that it would be appropriate to use 2 February 2000 for the remainder of the circuits in question as the date of application consistent with the Commission's general practice.

22.

In light of the foregoing, the Commission approves the application with respect to administrative circuits effective the date of installation such that no contribution is payable, and the remainder of the circuits effective 2 February 2000.

 

Secretary General

 

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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