ARCHIVED - Order CRTC 2000-860
This page has been archived on the Web
Information identified as archived on the Web is for reference, research or recordkeeping purposes. Archived Decisions, Notices and Orders (DNOs) remain in effect except to the extent they are amended or reversed by the Commission, a court, or the government. The text of archived information has not been altered or updated after the date of archiving. Changes to DNOs are published as “dashes” to the original DNO number. Web pages that are archived on the Web are not subject to the Government of Canada Web Standards. As per the Communications Policy of the Government of Canada, you can request alternate formats by contacting us.
Order CRTC 2000-860
|
|
|
Ottawa, 19 September 2000 |
|
|
Québec-Téléphone 1999 final contribution rate approved |
|
|
Reference: 8695-C12-10/99 |
|
|
The Commission approves a final 1999 contribution rate of $0.0298 per minute for Québec-Téléphone, effective 1 January 1999. |
|
|
1. |
In Québec-Téléphone and Télébec ltée - 1999 contribution rates, Telecom Public Notice CRTC 99-27, dated 23 December 1999, the Commission directed Québec-Téléphone to file its proposed final 1999 contribution rate. |
|
2. |
Québec-Téléphone filed its proposed 1999 contribution rate on 25 February 2000. In its assessment of Québec-Téléphone's proposal, the Commission considered the treatment of excess earnings, the international contribution process, and the capping of the contribution requirement. This order also deals with Québec-Téléphone's application for changes in depreciation life characteristics for certain accounts. |
|
3. |
The Commission has addressed the final 1999 contribution rate for Télébec in a separate order. |
|
Québec-Téléphone 1999 contribution rate proposal |
|
|
4. |
Québec-Téléphone filed a proposed final 1999 contribution rate of $0.0331 per minute based on a forecast contribution requirement of $35.7 million. |
|
Treatment of excess earnings |
|
|
5. |
In Implementation of regulatory framework for Québec-Téléphone and Télébec ltée, Telecom Decision CRTC 97-21, dated 18 December 1997, the Commission directed Québec-Téléphone to accumulate excess earnings in a deferral account should its Utility segment achieve earnings above the upper limit of the company allowed rate of return on average equity range during the split rate base regime. |
|
6. |
In Telecom Order CRTC 99-942, dated 30 September 1999, the Commission indicated that the disposition of any 1998 excess earnings would be addressed in the proceeding to finalize the 1999 contribution rates. |
|
7. |
In this proceeding, Québec-Téléphone reported that its Utility segment achieved excess earnings amounting to $10.2 million in 1998. |
|
8. |
The Commission considered various options for the disposition of excess earnings including those filed by Québec-Téléphone and Télébec ltée, in accordance with PN 99-27. |
|
9. |
Québec-Téléphone proposed to repay any excess earnings to the various long distance carriers on a pro-rata basis of the contribution paid. |
|
10. |
Consistent with the approach adopted for the major incumbent companies in Implementation of price cap regulation and related issues, Telecom Decision CRTC 98-2, dated 5 March 1998, the Commission has determined that the excess earnings be returned to the subscribers. |
|
11. |
The Commission has determined that the most efficient way to return the excess earnings to the subscribers is to mitigate any future residential local rate increases during the transition period or at the start of the price cap regime. |
|
12. |
Accordingly, the Commission directs Québec-Téléphone to continue to hold the excess earnings in a deferral account. |
|
13. |
The Commission also considers it appropriate, effective immediately and on a going forward basis, to impute interest on the excess earnings held in the deferral account, at a rate equivalent to the redeemable Guaranteed Investment Certificate annual interest rate with a three-year maturity date. |
|
14. |
Should Québec-Téléphone request and substantiate a residential local rate increase during the transition period prior to the introduction of price caps, the Commission may consider allowing the use of excess earnings and imputed accumulated interest to defer or reduce the need for residential local rate increases. |
|
15. |
In the absence of such a requirement, any excess earnings would be used at the start of the price cap period to reduce any required residential local rate increases. |
|
16. |
This approach is to be used for all excess earnings realized prior to the introduction of price caps. |
|
International contribution |
|
|
17. |
In PN 99-27, the Commission directed Québec-Téléphone to provide comments, with supporting evidence, on the process and mechanism needed to ensure that the appropriate contribution charges are applied to international traffic carried by Québec-Téléphone, and to ensure that its contribution regime reflects any necessary changes to account for the international minutes and associated contribution revenues. |
|
18. |
Québec-Téléphone stated that it has entered into contract agreements with other carriers to carry its international traffic and that Québec-Téléphone itself does not carry international traffic. |
|
19. |
On the basis of the information provided and in the context of the current international contribution regime, the Commission is of the view that the approach used by Québec-Téléphone to carry its international traffic has no impact on the contribution requirement of Québec-Téléphone. |
|
20. |
The Commission notes that there is no provision in the current international contribution regime for international minutes that originate or terminate in the territory of independent telephone companies. Therefore, the Commission is of the view that some aspects of the international contribution mechanism with respect to the independent telephone companies need to be reviewed. |
|
21. |
The Commission will await the results of the proceeding initiated by Review of contribution collection mechanism and related issues, Telecom Public Notice CRTC 99-6, dated 1 March 1999, before determining what process, if any, is required to address the issue of international contribution with respect to the independent telephone companies. |
|
Capping the contribution requirement |
|
|
22. |
In the past, the Commission has imposed some form of contribution cap on both the major incumbent telephone companies and the small independent telephone companies. |
|
23. |
In PN 99-27, Québec-Téléphone was directed to show cause as to why its contribution requirement should not be capped at its approved 1999 level. |
|
24. |
In reply, Québec-Téléphone indicated that it was opposed to a capping mechanism. The company argued that 1) it has demonstrated in the past that it has been efficient by achieving reductions in its contribution rate; 2) its contribution rate is quickly approaching the rates of the major incumbent telephone companies at the time their price cap regime was implemented; and 3) its shareholders would be required to absorb any extraordinary expenses. |
|
25. |
The Commission is of the view that, although Québec-Téléphone demonstrated fiscal responsibility in the past by reducing its contribution rate, a cap mechanism is still appropriate to ensure a contribution rate in line with the Commission's expectation in connection with the implementation of price cap regulation. This expectation was articulated in Time-frame for the implementation of price cap regulation and rate rebalancing for Québec-Téléphone and Télébec ltée, Telecom Decision CRTC 99-19, dated 10 December 1999, prior to the implementation of a new regime. |
|
26. |
The Commission determined in Regulatory framework for Québec-Téléphone and Télébec ltée, Telecom Decision CRTC 96-5, dated 7 August 1996, that the same basic framework that applies to the major incumbent telephone companies will apply to Québec-Téléphone. In Review of regulatory framework, Telecom Decision CRTC 94-19, dated 16 September 1994, the Commission imposed a cap on the contribution rates of the major incumbent companies. |
|
27. |
In light of the above, the Commission approves a mechanism that caps the contribution rate, effective with the year 2000, at the approved rate of the previous year minus an adjustment to reflect the impact of any rate increases specifically approved to reduce the contribution requirement. |
|
Depreciation |
|
|
28. |
Québec-Téléphone filed an application to revise the average service lives (ASLs) of 40 accounts. In a letter dated 8 March 2000, the Commission informed Québec-Téléphone that a determination on its depreciation application would be made at the same time as the determination on the company's final 1999 contribution rate. |
|
29. |
The Commission notes that Québec-Téléphone's depreciation filing generally meets all of the Phase I directives, with the exception of the use of proper curve matching techniques. |
|
30. |
The Commission directs that, effective immediately, any applications made by Québec-Téléphone seeking changes in the depreciation life characteristics are to be filed in complete compliance with the current Phase I directives, including the use of curve matching techniques. |
|
31. |
The Commission has reviewed and analyzed the rationale and documentation supporting the proposed changes to the ASLs of the 40 accounts for which Québec-Téléphone proposed changes. |
|
32. |
The Commission is of the view that the respective proposed ASLs are reasonable with the exception of the following accounts for which the Commission has modified the ASLs as follows: |
| C201 | Digital switching | 12 years | |
| C207 | Switching software | 5 years | |
| C601 | Poles | 24 years | |
| C631 | Underground cable | 19 years | |
| C671 | Underground conduit |
44 years |
|
33. |
The Commission has determined, based on the evidence presented by Québec-Téléphone such as the rates of retirement, the average age, the impact of technological innovations and the level of competition, that the ASLs for the above noted accounts are more reasonable and more in line with the industry norms. |
|
34. |
In particular, in modifying the proposed ASL for account C207, Switching software, the Commission notes that it has directed all the companies to amortize switching application software over five years in Accounting for switching machine software expenditures, Telecom Decision CRTC 91-14, dated 27 September 1991. |
|
35. |
In light of the above, the Commission approves the ASLs and the related dispersion curves for the accounts listed in the Appendix to this order. |
|
36. |
The Commission's modifications to the ASLs of the five above noted accounts reduce the company's proposed 1999 Utility segment depreciation expense by $3.5 million. |
|
Final 1999 contribution rate |
|
|
37. |
In light of the above adjustment, the Commission approves, effective 1 January 1999, a final 1999 contribution rate of $0.0298 per minute. This represents a $0.0258 reduction from the 1998 approved contribution rate of $0.0556. |
|
38. |
The company is to issue tariff pages reflecting its approved contribution rate within 10 days of the date of this order. |
|
Filing of the final 2000 contribution rate |
|
|
39. |
Québec-Téléphone is directed to file, within 45 days of the date of this order, its proposed final 2000 contribution rate based on the company's forecast 2000 split rate base results and forecast 2000 minutes. |
|
Secretary General |
|
|
This document is available in alternate format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca |
|
Appendix |
|||
|
QUÉBEC-TÉLÉPHONE |
|||
|
APPROVED AVERAGE SERVICE LIVES (ASL) |
|||
|
Account |
Description |
Dispersion |
ASL |
|
C121 |
Buildings |
GM 3.5 |
27 |
|
C122 |
Radio huts |
Iowa L-5.0 |
27 |
|
C123 |
Towers |
Iowa L-5.0 |
26 |
|
C124 |
Access roads |
Iowa R-5.0 |
36 |
|
C201 |
Digital switching |
Iowa S-4.5 |
12 |
|
C203 |
Datapac network |
Iowa R-3.5 |
7 |
|
C207 |
Switching application software |
RECT. |
5 |
|
C213 |
TOPS positions |
Iowa L0.5 |
6 |
|
C214 |
Alarm system |
Iowa L-0.5 |
6 |
|
C216 |
Power equipment |
Iowa L-0.5 |
15 |
|
C217 |
Supervision software |
RECT. |
4 |
|
C242 |
Circuit - Other |
Iowa L-2.0 |
10 |
|
C243 |
FOTS |
Iowa L-3.0 |
8 |
|
C245 |
Digital multiplexer |
Iowa L-3.0 |
8 |
|
C254 |
Exchange radio |
Iowa L-2.5 |
12 |
|
C255 |
Digital radio |
Iowa R-2.5 |
10 |
|
C257 |
Transmission software |
RECT. |
4 |
|
C401 |
Public telephones |
GM 0.5 |
8 |
|
C406 |
Data transmission equipment |
Iowa L-0.5 |
6 |
|
C471 |
Outside wiring |
Iowa L-0.5 |
11 |
|
C601 |
Poles |
Iowa L-2.0 |
24 |
|
C621 |
Aerial copper cable |
Iowa L-0.5 |
18 |
|
C623 |
Aerial fibre cable |
Iowa R-5.0 |
17 |
|
C631 |
Underground copper cable |
Iowa L-2.5 |
19 |
|
C633 |
Underground fibre cable |
Iowa R-5.0 |
17 |
|
C643 |
Buried fibre cable |
Iowa R-5.0 |
17 |
|
C671 |
Underground conduit |
Iowa L-1.0 |
44 |
|
C811 |
Furniture & office equipment |
Iowa L-0.0 |
16 |
|
C812 |
Computers - Other |
Iowa L-3.0 |
5 |
|
C814 |
Network computers |
Iowa L-3.0 |
5 |
|
C821 |
Vehicles |
Iowa L-0.5 |
8 |
|
C831 |
Automotive equipment |
Iowa L-3.5 |
16 |
|
C841 |
Tools |
GM 1.5 |
16 |
|
C842 |
Test equipment - Outside plant |
GM 2.0 |
8 |
|
C843 |
Test equipment - Mobile radio |
GM 2.0 |
8 |
|
C844 |
Test equipment - Other |
GM 2.0 |
8 |
|
C861 |
Official service - Telephone sets |
Iowa L-2.0 |
8 |
|
C863 |
Official service - Cellular |
Iowa L-2.0 |
8 |
|
C868 |
Official service - Information systems |
Iowa L-4.0 |
5 |
| C869 | Official service - Other |
Iowa L-2.0 |
8 |
- Date modified: