ARCHIVED - Order CRTC 2001-500

Order CRTC 2001-500

Ottawa, 29 June 2001

CRTC approves application to reduce toll-free look-up service charge

Reference: 8661-A4-01/00

When a customer dials an 800 or toll-free number, the customer's local exchange carrier (LEC) must find the correct toll carrier to route the call properly. The information about toll carriers is stored on an electronic database that LECs can access.

In July 1997, the CRTC approved a fee that LECs must pay every time they access the database to identify a particular toll carrier. The fee is known as the 800-database carrier-identification query charge. The LECs recover the cost of paying query charges from each respective toll carrier.

This order approves an application to the CRTC filed in March 2000 by AT&T Canada Corp. and AT&T Canada Telecom Services Company to reduce the query charge by approximately 50%. The reduction is effective 26 July 2000. The Commission also orders the LECs to provide query-charge refunds to toll carriers for the excess amounts that LECs have received during the period from the effective date of the new fee and the date of this order.

1.

On 16 March 2000, AT&T Canada Corp. and AT&T Canada Telecom Services Company (collectively, AT&T Canada) filed an application to amend the 800 database query charges for 800-number carrier identification.

2.

In its application, AT&T Canada asked the Commission to:

a) direct Bell Canada, Island Telecom Inc., Maritime Tel & Tel Limited, MTS Communications Inc., NBTel Inc., NewTel Communications Inc., TELUS Communications Inc. and TELUS Communications (B.C.) Inc. (the companies) to file updated cost studies incorporating revised demand forecasts in support of the rate charged for 800 database queries related to 800 carrier identification; and

b) establish an interim 800 database query charge set 50% below the current approved tariff rate for all the companies until the updated cost studies have been reviewed and accepted by the Commission.

3.

On 26 July 2000, the Commission issued Order CRTC 2000-683, CRTC makes 800 database query charges interim and orders updated cost studies.

4.

In Order 2000-683, the Commission ordered the companies to file updated cost studies incorporating revised demand forecasts to support the rate charged for 800 database queries.

5.

In Order 2000-683, the Commission also made interim the existing 800-database carrier-identification query charge of $0.006331 per query, effective 26 July 2000.

6.

On 30 October 2000, the companies filed the updated cost studies. Based on a 1 January 2000 to 31 December 2004 study period, the companies submitted that the Phase II cost per 800 database query is $0.003825. The companies also submitted that, if they looked solely at this cost per query, they would be inclined to propose that the appropriate 800 database query should be $0.004781 per query, which would be equivalent to the cost, plus a 25% markup.

7.

The companies further submitted that AT&T Canada's assessment of demand increases was correct. During the period between 1996 and 1999, the actual demand exceeded the demand that was forecast in the cost studies by some 37%.

8.

According to the companies, spending to support this service has also differed from the forecast estimates. While actual required capital exceeded the forecast by 66%, the actual operating and maintenance expenses were three-and-a-half times higher than expected. The companies submitted that spending during the period from 1996 to 1999 was 110% greater than forecast.

9.

The companies argued that they have not yet recovered the costs (plus 25% markup) that they incurred during the period from 1996 to 2000. Therefore, the current 800-database query charge of $0.006331 remains appropriate.

10.

AT&T Canada submitted that the companies never explained whether the requirement for additional spending was foreseen in the original cost study, if the timing had been moved forward for these expenditures, or which resource cost elements increased when the expenditures were made. AT&T Canada noted the companies' inference that the introduction of more codes to the toll-free services (888, 877, etc.) was unexpected. According to AT&T Canada, the need for more codes was widely recognized when the original cost study was conducted.

11.

AT&T Canada argued that any costs relating to platform enhancements in response to the major service outages experienced in November 1997 should be identified and removed from the elements included in the revised cost study. According to AT&T Canada, the cost of these enhancements should be borne solely by the companies, as they were obliged to design the original architecture to avoid such major service outages.

12.

The companies noted that the unforeseen growth of all carriers' toll free traffic caused the November 1997 outage. According to the companies, it is appropriate for all carriers to share the responsibility of maintaining a robust database.

13.

The companies submitted that there is no reason why they should subsidize system expansions to respond to toll-free traffic growth that was greater than originally expected. According to the companies, in the case of the 800 database query service, they have maintained query-processing rates and have incurred the additional costs. The companies also submitted that, at the very least, they are entitled to seek cost recovery at the existing rates.

14.

The Commission finds that the companies have not fully justified their reported expense increases.

15.

For example, the maintenance expenses, which were based on percentage of capital expenses, were many times greater than initially forecast. By contrast, in the revised forecast, capital estimates were approximately doubled.

16.

The Commission also considers that many of the ongoing database provisioning activities can be expected to deliver increased volume efficiencies or other productivity improvements over time.

17.

The Commission finds that it is appropriate to reduce the forecast expenses that are causal to demand, by approximately one-half.

18.

With respect to the companies' claim that capital expenses during the period from 1996 to 1999 were significantly higher than forecast, the Commission notes that most of the capital expenditures associated with two database platform enhancements were incurred during 1998 and 1999.

19.

Based on its reduction of the forecast expenses and taking account of the end-of-study terminal values associated with the revised capital cash flows, the Commission considers that the companies received adequate revenues during the period from 1996 to 2000.

20.

Based on its adjustments to the expenses forecast in the revised cost study, the demand information shown in paragraph 24 below, and to provide for a 25% mark-up, the Commission approves an 800 database query charge of $0.003259 per query, effective 26 July 2000.

21.

Accordingly, the Commission orders that the companies provide refunds to alternate providers of long distance service (APLDS) who paid the 800 database query charge of $0.006331 per query from 26 July 2000 until the effective date of this order. The refund is to be based on the difference between the charge of $0.006331 per query and the new charge of $0.003259 per query.

22.

AT&T Canada submitted that the detailed costing information submitted by the companies in confidence should be placed on the public record, since the 800 database query service is a "bottleneck" service and no harm would occur if it were disclosed.

23.

The companies noted that, should they disclose costing and demand information filed in the cost study, AT&T Canada and others could assess their call volumes, and use the disclosed data to deduce the companies' market share and cost efficiencies. Thus, AT&T Canada and others could enhance their competitiveness at the companies' expense.

24.

The Commission finds it appropriate that the total demand information for each of the years from 1996 to 2004, as shown below, be placed on the public record. In the Commission's view, the possible harm in disclosing this information is outweighed by the public interest in disclosure.

Year

Total Queries (M)

1996

1 902.3

1997

2 021.3

1998

2 159.7

1999

2 428.0

2000

2 628.8

2001

2 913.3

2002

3 144.1

2003

3 392.0

2004

3 658.1

Secretary General

This document is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca