Decision CRTC 2001-23

Ottawa, 25 January 2001

Ledcor/Vancouver - Construction, operation and maintenance of transmission lines in Vancouver

Reference: 8690-C12-01/99

This proceeding arose as a result of a disagreement between the City of Vancouver (Vancouver) and Ledcor Industries Limited (Ledcor) relating to the terms and conditions under which Vancouver would grant Ledcor consent to construct a fibre optic transmission system in Vancouver.

In this majority decision, the Commission is resolving the dispute between Vancouver and Ledcor. The Commission is granting permission to Ledcor to construct, maintain and operate transmission lines that Ledcor has constructed in 18 street crossings in Vancouver, and is prescribing terms and conditions related to that permission.

Background

Initial applications

1. On 19 March 1999, Ledcor Industries Limited filed a Part VII application requesting relief pursuant to sections 43 and 61(2) of the Telecommunications Act (the Act), naming the City of Vancouver (Vancouver) as respondent. Ledcor requested that the Commission issue interim and final orders granting it, its affiliate (Worldwide Fiber (F.O.T.S.) Ltd.), and its customers permission to access street crossings and other municipal property in Vancouver to install, operate and maintain Ledcor's fibre optic transmission lines. Ledcor stated that it had not been able to obtain the consent of Vancouver, required by section 43 of the Act, for access to the street crossings and other municipal property on terms acceptable to it.

2. Ledcor stated that Vancouver had proposed a number of conditions for granting access that Ledcor found unacceptable, including:

distance-based access (licence) fees that far exceed the costs of providing access;
additional licence fees that would require Ledcor to pay Vancouver a share of its telecommunications revenues in Vancouver;
a requirement to give Vancouver exclusive use of four fibre strands on its fibre optic system in the Vancouver area;
a requirement that Ledcor provide Vancouver with information on its customers, in order that Vancouver could impose additional revenue-sharing licence fees on Canadian carriers that had purchased fibres, indefeasible rights of use (IRUs), or similar capacity on its fibre optic system; and
numerous other restrictions and requirements that were far more costly and onerous than those imposed by other municipalities, railways and other property owners with which Ledcor had successfully negotiated access agreements.

3. With its application, Ledcor provided copies of the Municipal Access Agreement (MAA) and Street Crossing Agreement (SCA) advanced by Vancouver during the negotiations.

4. Ledcor stated that it had continued to construct its fibre optic system, including segments of the system located in Vancouver, while discussions with the city had proceeded.

5. In a ruling dated 8 April 1999, the Commission denied a request from Vancouver to suspend Ledcor's application pending disposition of an application to be filed by the city. The Commission noted that the two applications would, in essence, raise the same issues, namely, the terms and conditions of access to municipal property in Vancouver for the purpose of constructing, maintaining and operating transmission lines. The Commission concluded that it would be in the public interest to deal with both applications concurrently. The Commission also stated that, following closure of the record on the two applications, it would issue a public notice initiating a proceeding to consider the issues raised.

6. Pursuant to the Commission's ruling of 8 April 1999, Vancouver filed a Part VII application on 17 May 1999. In its application, Vancouver stated that Ledcor had constructed a fibre cable in the city's streets without obtaining the city's consent or permission. Vancouver further stated that, according to press reports, strands on this cable had been acquired by MetroNet Communications Group Inc., Call-Net Enterprises Inc., Bell Canada and Canadian Pacific Railway (CPR), while BCT.TELUS Communications Inc. (TELUS) had either already acquired strands or was in negotiations to acquire strands. Vancouver named TELUS, Call-Net and Bell Canada as respondents to its application, stating that none of these carriers had obtained the city's consent or permission prior to taking ownership of the fibre, or permitting Ledcor to install it on their behalf.

7. Vancouver requested an order to establish the terms and conditions of access by the respondents to street crossings and other municipal property to construct, maintain and operate transmission facilities. Vancouver also requested that the Commission make an interim order for a zero rate of consideration, to enable the Commission to make its final order in this matter take effect on the date of the interim order.

8. On 27 October 1999, the Commission granted Vancouver's request for an interim order, pending its final determination. The Commission ordered, as a condition of access, that each of the respondents forthwith pay $1 to Vancouver.

Initiation of the proceeding

9. On 3 December 1999, the Commission issued Terms and conditions for access to municipal property in the City of Vancouver, Telecom Public Notice CRTC 99-25, to consider the appropriate terms and conditions of access by Canadian carriers and distribution undertakings (collectively, "carriers") to municipal property in Vancouver for the purpose of constructing, maintaining and operating transmission lines. The Commission stated that, while the proceeding would be limited to the terms and conditions of access in Vancouver, it expected that the principles developed in the proceeding may inform the Commission's consideration of any disputes that may arise elsewhere.

10. In PN 99-25, the Commission invited parties to comment on:

the scope and nature of the Commission's jurisdiction to set the terms and conditions of access in light of sections 42 to 44 of the Act, and any other provisions of the Act that may be relevant;
the terms and conditions, including whether some form of monetary compensation could and should be ordered as a condition of access;
what form any monetary compensation should take, including submissions as to costing methodology; and
whether any terms and conditions imposed by the Commission in relation to the agreements for access in Vancouver that are in dispute could and should replace the terms and conditions in existing agreements that are not in dispute, relating to municipal access in Vancouver.

11. Ledcor, Vancouver, TELUS, Call-Net, Bell Canada, AT&T Telecom Services Company Inc., GT Group Telecom Services Corp. (Group Telecom), BC TEL, and all affiliates of these entities that are Canadian carriers with any part of their transmission facility located on municipal property within Vancouver, were made parties to the proceeding.

12. Pursuant to the procedure established in PN 99-25, the following parties filed submissions on 28 January 2000: Alberta Urban Municipalities Association; Bell Canada and MTS Communications Inc.; City of Calgary (Calgary); Call-Net; Canadian Cable Television Association (CCTA); Canadian Institute of Public and Private Real Estate Companies and Building Owners and Managers Association; City of Edmonton (Edmonton); Federation of Canadian Municipalities (FCM); Halifax Regional Municipality (HRM); Ledcor; Regional Municipality of Ottawa Carleton (RMOC); Corporation of the City of New Westminster and the City of Richmond (New Westminster/Richmond); TELUS; City of Toronto (Toronto) and Vancouver.

13. Interrogatories were addressed to those filing submissions on 28 February 2000, and responses were filed on 29 March 2000.

14. On 5 June 2000, the Commission issued a letter ruling on requests for further responses to interrogatories and for disclosure of information filed under claim of confidence. In addition, the Commission addressed supplemental interrogatories to Vancouver and set out the procedure for the rest of the proceeding.

15. Vancouver filed its responses to the Commission's supplemental interrogatories on 17 July 2000.

16. On 14 August 2000, the following parties filed comments: AT&T Canada Corp.; Bell Canada/MTS; Calgary; Call-Net; CCTA; Edmonton; FCM; Futureway Communications Inc.; Group Telecom; New Westminster/Richmond; RMOC; TELUS; Toronto; WFI Urbanlink Ltd. and Ledcor and Vancouver.

17. The Commission also received 33 letters, primarily from municipalities and counties, essentially expressing support for the Rights-of-Way Principles advanced by FCM in the proceeding.

18. On 5 September 2000, the following parties filed replies: AT&T Canada; Bell Canada/MTS; Calgary; Call-Net; CCTA; Edmonton; FCM; HRM; Ledcor; RMOC; TELUS; Toronto and Vancouver.

19. At pages 1 and 2 of its reply in this proceeding, FCM submitted that, in the comment phase, certain carriers introduced new allegations contrary to municipal interests. FCM stated that these carriers could have provided evidence as to these allegations in their initial submissions of 28 January 2000. FCM submitted that it is not able to respond to these allegations on the basis that the procedure established for this proceeding does not allow FCM to obtain particulars or to test the allegations. Accordingly, FCM submitted that it would be inappropriate for the Commission to take any such allegations into account in rendering its decision.

20. The Commission notes with respect to FCM's objections that it has not taken the allegations in question into account in rendering this decision, as they are not relevant to the issues being determined.

Vancouver's proposal

21. In its submission of 28 January 2000, Vancouver argued that competition in the communications industry is making space in municipal streets an increasingly scarce societal resource. In addition, other uses (electricity, gas, storm and sanitary sewers, underground malls, etc.) increase the demand for space allocation.

22. Vancouver stated that, in a monopoly environment, access to public property was accorded on a first-come, first-served basis. In such an environment, the subscriber base to a utility service such as telephony was virtually identical to the taxpayer base. Therefore, the exercise of allocating costs to cost-causers was scarcely justified, since the result would be merely to transfer cost from one bill to another in a virtually identical customer base.

23. Vancouver submitted that, in the current competitive environment, a carrier's customer base and the taxpayer base are no longer the same, and the previous regime no longer makes sense. It further submitted that the most efficient way to allocate such a scarce resource is to assign the full costs of the resource to the cost-causer. In this way, users of public property will have an incentive to make as efficient use as possible of public property, and those applications that are of the greatest societal benefit will be more likely to achieve access to public property.

24. Vancouver argued further that, when public property is scarce and has market value, it is equitable that the owner be compensated for its use by others in proportion to its value to others; to do otherwise would be to subsidize users, such as carriers and their shareholders and customers, at the expense of the city and its taxpayers.

25. Vancouver proposed that it recover all costs causally incurred by it as a result of the use and occupation of its public property by carriers. Vancouver submitted that there are a variety of one-time and on-going causal costs incurred by the city due to the presence or placement of telecommunications plant in its streets. Vancouver proposed to recover one-time costs through up-front charges based on actual incurred or estimated costs. This category would include costs for the approval of applications and plans, inspections, costs of transit delays due to construction, lost parking meter revenues, pavement restoration, etc. Vancouver proposed to recover on-going costs through annual linear charges (per metre of transmission line). This category would include costs of pavement degradation due to cuts during the construction of transmission facilities, and lost productivity in the city's own operations in street resurfacing and in sewer and waterworks construction, etc., due to the presence of transmission facilities in the street.

26. In addition to the above, Vancouver proposed an annual linear "land" charge, based on the value of adjacent lands.

27. Vancouver also proposed to apply to its direct and indirect costs:

a "multiplicative factor" to recover variable common costs, and
a contribution to fixed and common costs at a suggested rate of 25%.

These two factors would apply to all but the annual linear land charge.

28. Vancouver also proposed, among other things, that carriers be responsible for the full cost of relocating their facilities, whenever such relocation was required for bona fide municipal purposes (including municipal beautification programs). As well, Vancouver maintained that it should not be held liable for damage to the plant of carriers and distribution undertakings resulting from municipal operations in the street.

29. Vancouver also argued that only the city has the resources and expertise to co-ordinate the various requirements for, and uses of, rights-of-way. Vancouver submitted that it should be given the ability "to facilitate greater co-ordination among the various carriers that locate in the street." In this context, it stated that it must have the ability

to require carriers to provide extra duct capacity when the street is dug up initially; and
to require this extra capacity and other third party duct capacity to be used by other carriers wanting to use the same alignments.

30. Vancouver argued that confirming its mandate to facilitate sharing and co-ordination would not only maximize the efficient use of crowded municipal property, but would also minimize duplication of effort and costs (e.g., cuts to municipal pavement would be reduced, road surfaces would last longer, and disruptions to the public, business and municipal works would be decreased).

31. The Commission notes that Vancouver's submission of 28 January 2000 made no mention of the provision of dark fibre or percentage of revenue fees. In response to interrogatory Vancouver(CRTC)28Feb00-2, Vancouver confirmed that its January submission constituted the entirety of its proposal, and that the quantum of payment required from carriers in Vancouver would be based on the costing methodology it proposed. However, Vancouver added that, once the quantum is established, the form of compensation should be freely negotiated between the parties. Vancouver submitted that some carriers prefer payment to be in the form of percentage of revenue fees or the provision of dark fibre.

The Commission's jurisdiction and the scope of the Commission's decision

Municipal consent

32. In the following section, the Commission addresses its constitutional and statutory jurisdiction. It is important to note at the outset that Parliament has provided in section 43(3) of the Act that "no Canadian carrier or distribution undertaking shall construct a transmission line on, over, under or along a highway or other public place without the consent of the municipality or other public authority having jurisdiction over the highway or other public place". Where carriers cannot obtain the consent of the municipality or other public authority (the "municipality") on acceptable terms, they may apply to the Commission for permission pursuant to section 43(4) of the Act. In addition, municipalities can apply to the Commission to settle disputes under section 44 of the Act.

The Commission's jurisdiction

33. With respect to constitutional jurisdiction, municipalities argued that the Commission should only intervene pursuant to sections 42 to 44 of the Act to the extent that the actions of a municipality are sterilizing a vital part of a federal undertaking. This argument is not supported by the applicable constitutional principles. The entering on and breaking up of any highway or other public place by a carrier for the purpose of constructing, maintaining or operating its transmission lines is subject to exclusive federal constitutional jurisdiction.

34. In the Commission's view, sections 43 and 44, and this decision, relate in pith and substance to telecommunications. Any effects on property and civil rights in the province are incidental. All matters that are a vital part of the operation of a federal undertaking are within the exclusive legislative control of Parliament. Whether to construct and where to construct transmission lines (a vital part of a telecommunications undertaking) are matters of exclusive federal concern, as are the design of the transmission lines, the material to be incorporated and other similar specifications. All terms and conditions that will be permanently reflected in the structure of the transmission lines, or have a direct effect on the operational qualities of the transmission lines, are within exclusive federal jurisdiction. Finally, the use of property (such as a municipal highway) for the purposes of a transmission line cannot be divorced from the exclusive federal constitutional jurisdiction over telecommunications.

35. In the Commission's view, the Act sets out a detailed statutory code with respect to construction issues involving carriers and municipalities. In establishing this framework, Parliament has required that consent be obtained by carriers from such authorities, but has recognized that carriers may not be able to obtain that consent on acceptable terms. It has therefore provided mechanisms for the Commission to resolve disputes regarding appropriate terms and conditions.

36. During this proceeding, carriers asserted that they have an independent statutory right to enter on and break up a highway for the purpose of constructing, maintaining or operating their transmission lines. In the Commission's view, the Act provides carriers a qualified right to enter on and break up highways for these purposes, i.e., subject to not unduly interfering with the public use and enjoyment of the highway and to the requirement for municipal consent (or the permission of the Commission).

37. Carriers also argued that sections 43 and 44 do not create additional powers for municipalities beyond those that they would otherwise have. They further submitted that the Commission can do no more under subsection 43(4) than a municipality could do under subsection 43(3). Subsection 43(4) provides that, where consent on acceptable terms has not been obtained from a municipality, the Commission may grant the permission "subject to any conditions that the Commission determines". The only qualification in the subsection is that the Commission must have due regard to the use and enjoyment of the highway or other public place by others. The carriers' argument is untenable. The statute clearly provides the Commission full discretion to determine the conditions.

38. Carriers submitted that the Commission's authority under sections 43 and 44 for access charges is limited to ensuring that such charges are subject to the concurrence of the carrier and recover only clearly identified direct out-of-pocket expenses. As noted above, subsection 43(4) provides that, where a carrier cannot obtain the consent of the municipality on acceptable terms, the carrier may apply to the Commission, and the Commission "may, having due regard to the use and enjoyment of the highway or other public place by others, grant the permission subject to any conditions that the Commission determines" (emphasis added). In the Commission's view, this phrase is sufficiently broad to include conditions as to compensation (costs and otherwise). Carriers further argued that a series of older decisions, by various bodies, determine that the Commission cannot in this proceeding make compensation a condition of its order. In the Commission's view, however, these cases are not determinative of the issues at hand. In any event, in addition to the possibility of jurisdiction with respect to compensatory conditions being located in sections 43 and 44 themselves, section 42 explicitly gives the Commission jurisdiction to make conditions relating to compensation. The suggestion that the scope of section 42 is somehow limited to the scope of the powers under sections 43 and 44 (if in fact these sections do not support conditions as to compensation in and of themselves) is also to be rejected. Such a suggestion is contrary to the very purpose of section 42, which is to complement powers that the Commission has under other provisions.

39. Municipalities also raised the question of expropriation. In the Commission's view, this decision does not give rise to expropriation. Rather, it forms part of a valid regulatory scheme that relates in pith and substance to telecommunications.

The Commission's decision

40. During the course of the proceeding, several parties urged the Commission to establish clear principles governing the terms and conditions under which carriers may be granted access to public property for the purposes of constructing, maintaining and operating transmission lines. Some urged the Commission to adopt a standard "template" agreement with respect to such access.

41. Other parties, notably Toronto, argued that the Commission has no jurisdiction to rule on terms and conditions of access to public property for these purposes with respect to non-parties to the proceeding, or on anything other than the actual dispute before it.

42. In this decision, the Commission, by majority, is granting Ledcor permission to construct, maintain and operate transmission lines in 18 street crossings in Vancouver, and is establishing terms and conditions related to that permission. In light of the Commission's conclusions with respect to Third party issues (see below), the relief sought by Vancouver against the respondents to its initial application is not required or appropriate; nor is the municipality's consent or the Commission's permission necessary for the mere presence of Ledcor's transmission lines in the conduit of another carrier, such as TELUS.

43. With regard to any future activities (excavation, installing fibre, etc.) that Ledcor may undertake in relation to the transmission lines in the 18 street crossings, the Commission considers that the requirement to obtain consent from Vancouver should be related to Ledcor's obligation to ensure that there is no undue interference "with the public use and enjoyment of the highway or other public place." Therefore, where Ledcor's activities would entail disruption (for example, if excavation or a disruption to traffic is involved), it is to obtain Vancouver's consent for those activities. However, the Commission considers that there is no requirement for prior written consent for excavation or other disruption in the case of an emergency, provided that Ledcor notifies Vancouver as soon as possible of the emergency and of Ledcor's activities in respect of it. In such instances, if excavation is involved, Ledcor should restore the surface to its original condition, or as close as possible to its original condition, to the reasonable satisfaction of Vancouver (see Pavement restoration, below).

44. The Commission is not, in this decision, prescribing terms and conditions related to the future construction by Ledcor, or any other carrier, of transmission lines in Vancouver or elsewhere. However, the Commission has developed principles, as set out in this decision, in addressing the dispute currently before it. The Commission anticipates that these principles will also assist carriers and municipalities in negotiating the terms and conditions under which municipalities will grant carriers consent to construct, maintain and operate transmission lines on or in municipal property, without having to resort to an application pursuant to section 43 or 44. The Commission is not persuaded that it is appropriate for it to adopt any particular model or standard agreement to serve as a starting point for discussions between municipalities and carriers.

45. Section 47 of the Act requires the Commission to exercise its powers and perform its duties with a view to implementing the Canadian telecommunications policy objectives set out in section 7 of the Act. Section 43(4) of the Act specifies that the Commission may grant permission for a carrier to construct transmission lines, subject to any conditions that the Commission determines, having due regard to the use and enjoyment of the highway or other public place by others. Accordingly, in rendering this decision, the Commission has considered the policy objectives set out in section 7 of the Act, while taking into account the concerns of municipalities and others.

46. The Commission notes, as argued by Group Telecom, that greater demand for rights-of-way derives from a competitive telecommunications market and the expanded roll-out of modern, high-speed networks. The benefits of a competitive telecommunications market and greater access to modern, high-speed networks are not enjoyed solely by the shareholders and customers of carriers. The economic base that such facilities support will provide generalized benefits throughout the municipality, attracting industry, creating jobs, increasing tax revenue, etc.

Joint planning issues

The importance of joint planning

47. Vancouver argued that an important dimension of its stewardship of public property is its ability to encourage sharing and co-ordination, not only among competing carriers, but all present and future users of public property.

48. Bell Canada/MTS proposed that the Commission strongly encourage municipalities and users of municipal rights-of-way to enter into co-operative joint planning and co-ordination arrangements. Several carriers submitted that many, if not most, of the concerns identified by Vancouver regarding the alleged impacts upon road construction and maintenance costs could be substantially addressed through the establishment of improved joint planning processes between municipalities and users of municipal rights-of-way.

49. Bell Canada/MTS provided a template outline of the mandate, goals and structure of a typical Public Utility Coordinating Committee (PUCC). The template described the activities of such a committee as:

communication;
co-ordination of projects and capital works plans (with a requirement for all members to provide long range plans for major capital works, road modification, paving programs, and major maintenance programs);
standardization (including the development of standards and specifications for joint infrastructure builds);
damage prevention;
resolution of conflicts; and
development of an integrated mapping system.

50. In reply, Vancouver stated that it is moving to set up a co-ordinating committee. However, Vancouver, other municipalities and FCM expressed the view that joint planning alone could not address all municipal rights-of-way management issues.

51. The Commission recognizes that municipalities have an important role to play in the co-ordination of all parties seeking to occupy and use municipal rights-of-way, especially the larger municipalities whose downtown cores are experiencing the highest demand for space. In particular, the Commission agrees with those carriers who advocated increased reliance on joint planning and co-ordination arrangements such as PUCCs, involving all users of municipal rights-of-way, not just carriers.

52. The Commission notes the submissions of municipalities that improved joint planning is not a "panacea". Nonetheless, the Commission agrees with parties who argued that the joint planning and co-ordination process could help to minimize many of the concerns raised by Vancouver, other municipalities and FCM regarding excessive road cuts, pavement degradation, congestion, need for relocations, potential liability, etc.

53. Among other things, the Commission considers that a PUCC or similar body

would provide the municipality with a forum to announce its long range plans as to road construction and maintenance, affording carriers and other users an opportunity to co-ordinate their construction plans with those of the municipality;
could set up a communications process to advise all carriers that a particular carrier is installing duct structure or other buried facilities; and
could provide a mechanism for carriers to exchange information as to the availability of spare capacity.

54. The Commission expects carriers to participate in joint planning and co-ordination committees, such as the one discussed by Bell Canada/MTS, in municipalities in which they have, or plan to have, a significant presence. The Commission also expects that carriers will be able, in the context of such committees, to exchange information at a sufficient level of detail to facilitate the co-ordination process, without compromising competitively crucial information. Finally, the Commission would consider it reasonable for carriers to contribute to the costs of any such committees.

55. The Commission does not consider it necessary to adopt Group Telecom's approach and establish a task force to consider whether PUCCs could be made more effective or whether the operations of the most effective PUCCs might serve as a model for PUCCs elsewhere.

Extra duct capacity

56. In its submission of January 2000, Vancouver stated that it must have the ability

to require carriers to provide extra duct capacity when the street is dug up initially; and
to require this extra capacity and other third party duct capacity to be used by other carriers wanting to use the same alignments.

In response to interrogatory Vancouver(CRTC)28Feb00-3 PN 99-25, Vancouver stated that the amount and allocation of extra capacity would be determined jointly by carriers and the city.

57. Several carriers commented that all carriers will provision, as a matter of course, duct capacity which is designed to meet their future needs. Thus, it is most certainly the case that carriers will provision duct space which is surplus to their current needs. They added that a mandated requirement to provision capacity that is materially in excess of that required in the future by all carriers will impose costs on carriers that cannot be recovered.

58. The Commission accepts the submissions of municipalities that the demand for space in rights-of-way in downtown core areas of major urban centres is likely to increase. The Commission therefore encourages the sharing of facilities and support structures to the greatest extent possible in such areas. However, the Commission does not consider it appropriate that municipalities impose on carriers a requirement to construct capacity beyond their needs, or require other carriers to use this capacity rather than constructing their own facilities. In the Commission's view, Vancouver's proposal of 28 January 2000 would intrude on areas under the Commission's jurisdiction, would improperly affect a "vital part" of the federal undertaking, and would (as argued by TELUS) add another layer of regulation to the question of access to support structures.

Vancouver's costing proposal

General

59. In its submission of 28 January 2000, Vancouver proposed that it recover all costs causally incurred by it as a result of the use and occupation of its public property by carriers.

60. Vancouver asserted that its specific costing proposals were based on Phase II costing principles, initially established in Phase II of the cost inquiry, Telecom Decision CRTC 79-16, dated 28 August 1979. The city also stated (in response to interrogatory Vancouver (Bell/MTS)28Feb00-10) that it had adopted the philosophy set out at page 28 of the Bell Canada Phase II costing manual that "the cost and effort expended on the cost estimation activity should be commensurate with the size and significance of the study."

61. The Commission notes that, for costs to be included under Phase II principles, they must be prospective (i.e., forward-looking, in that "sunk" costs are not included) and incremental (i.e., only costs that change as a result of the project are considered). These prospective incremental costs are referred to as causal costs. The Commission considers it appropriate that Vancouver recover the causal costs it incurs when carriers construct, maintain and operate transmission lines in municipal rights-of-way.

62. In its second revised response to interrogatory Vancouver(Bell/MTS)28Jan00-6, Vancouver applied its costing proposal to an example of a construction project in its downtown core to derive the charges that would apply. In calculating these charges Vancouver estimated its direct costs, and then applied a 62% loading to take into account indirect costs, variable common costs and fixed common costs. The specific loading for fixed common costs was 25%.

63. The Commission notes that fixed costs, by definition, do not vary with a particular project. Thus, they are not incremental costs, as defined above. The Commission has allowed telephone companies to include a mark-up on their Phase II costs, representing a contribution to fixed common costs, in the prices they charge for their services. A municipality differs from a business in that it derives its revenues primarily from taxes, and the fixed common costs of running the municipality are appropriately covered by this tax revenue. Therefore, the Commission considers that fixed common costs should not be recovered through charges to carriers. Accordingly, the Commission considers it appropriate to exclude the 25% component for the recovery of fixed common costs from Vancouver's proposed 62% loading. The Commission finds acceptable Vancouver's proposed 29.6% loading on direct costs to estimate indirect and variable common costs.

64. For some of Vancouver's cost elements, the causal costs are small and the process to determine them accurately would be disproportionately difficult or complex. The Commission considers it appropriate to recognize such costs by way of a further 15% loading on plan approval and inspection costs, which can be more readily estimated.

65. The various types of costs that Vancouver proposed to recover are examined below with regard to the above costing principles.

Elements of the proposal

a) Plan approval and inspection costs

66. Vancouver submitted that costs relating to plan approval and inspections depend on the number of plans received and the length of the plant installed. Vancouver calculated a base cost of $230 for projects of 20 metres or less, and a base cost of $760 plus a base per-metre cost of $6 for projects in excess of 20 metres. Vancouver proposed to apply its 62% loading to these costs to arrive at the applicable charges.

67. The Commission agrees that plan approval and inspection costs are causal to the specific construction project.

68. The Commission notes that Vancouver's proposed fee structure is based on the premise that project approval and inspection is less complex for projects not requiring plant installations greater than 20 metres. The Commission considers it reasonable that there be a distinction between simple and complex projects. While using the trench length of 20 metres as the delineation between simple and complex projects may be somewhat arbitrary, it has the advantage of administrative simplicity. The Commission also notes Vancouver's submission that approvals for projects of 20 metres or less do not require all of the activities necessary for larger projects (for example, inspections).

69. The Commission therefore finds Vancouver's proposed fee structure reasonable, but considers that the level of the fees should be adjusted. First, as noted above, the Commission considers that the 25% loading for fixed common costs should be removed. Second, as noted above and discussed further below, the Commission considers that there are costs associated with the construction process that could be disproportionately difficult or costly to estimate with reasonable accuracy, such as

net revenue losses when parking meters are put out of service; and
costs associated with transit operating delays.

The Commission considers that these costs should be recognized through a 15% loading on the plan approval and inspection costs. Should the municipality be able to estimate these costs with reasonable accuracy, the Commission would consider it appropriate to include them explicitly.

70. In the case of Vancouver, when the 25% loading for fixed common costs is removed and the 15% loading is added, the applicable charges for plan approvals and inspections are:

a flat fee of $341.55 for a project of 20 metres or less; and
for projects in excess of 20 metres, a flat fee of $1,127, plus a per metre charge of $8.67. 71.

71. With regard to the distance-based component of the above charges, the Commission notes that Vancouver also proposed an annual per-metre charge intended to recover the market-based value of the land occupied by carriers in municipal rights-of-way. As discussed below, the Commission considers such charges inappropriate. The Commission notes that any distance-based plan approval and inspection charges must be causally related to the plan approval and inspection process.

72. As discussed above, the Commission encourages Vancouver, and other municipalities, to establish utility co-ordinating committees, involving the municipality and all users of rights-of-way. The Commission would consider it appropriate that carriers contribute to the costs of any such committees. In addition, the Commission considers that the activities of such committees would likely reduce the causal costs that municipalities would otherwise incur in the plan approval and inspection process.

b) Construction disruption costs

(i) Traffic signing costs

73. Vancouver stated that it incurs traffic signing costs to clear parking in areas affected by construction, etc. (e.g., to hood traffic meters and post related signage). The Commission considers that these one-time costs are causal to the project and that Vancouver should recover them from the carrier.

(ii) Parking meter revenue

74. Vancouver indicated that, when parking meters are taken out of service due to construction, it loses revenue that would otherwise have been deposited in the meters.

75. Vancouver submitted that the amount of lost revenue is dependent on the hourly rate charged, which varies across the city, and the percentage utilization of the available parking meter time.

76. Vancouver proposed that carriers such as Ledcor be billed directly for this lost revenue, at the time the construction work takes place. Vancouver submitted that it does not currently charge utility companies for this lost revenue, but does charge moving companies, construction companies, film companies and others that require clearance of parking.

77. For its example construction project, Vancouver calculated an applicable charge of $27,631.

78. While the Commission expects that the city would experience some loss of revenue when parking meters are taken out of service, a reasonable estimate of the causal impact must represent the net loss, and not the gross loss. The base cost calculated by Vancouver in its example represented the gross loss.

79. In the Commission's view, it may be difficult to reliably estimate the net loss due to parking meters being taken out of service for a particular construction project. Should this prove to be the case, the Commission would consider it a suitable alternative to recognize the causal impact through the 15% loading on plan approval and inspection costs.

(iii) Pavement restoration

80. There was general agreement that carriers should be responsible for restoring the road surface to substantially its original condition. The cost of pavement restoration is a causal cost that municipalities should be able to recover from carriers placing facilities in municipal rights-of-way, where the carrier does not perform the work itself to the reasonable satisfaction of the city.

81. Vancouver stated that the type of repair depends on the existing pavement material and the traffic loading of the street. It stated that it has developed a schedule of rates (per square metre) for the various types of repair, and that these rates are based on its actual costs.

82. In its example, Vancouver applied its schedule of rates, with the addition of its proposed 62% loading, to calculate an applicable charge of $124,554.

83. The Commission considers it reasonable that Vancouver rely on a standard rate schedule for pavement restoration, provided that the schedule reflects the causal costs of restoration and is applied on a routine and non-discriminatory basis to all parties performing construction in the street.

84. In addition, the Commission considers it appropriate that carriers have the option of having their own contractors restore the pavement, with the proviso that the work must meet any reasonable standards set by the municipality as to time and quality of work.

(iv) Transit operating delays

85. Vancouver proposed a charge intended to recover the cost of delays to the public transit system resulting from construction activities. In its example construction project, Vancouver calculated the applicable one-time charge to be $3,538.

86. In the Commission's view, transit operating delay costs would be disproportionately difficult or complex to determine accurately. The Commission therefore considers that these costs should be recognized as part of the 15% loading on plan approval and inspection costs.

(v) Public delays

87. Vancouver proposed that it recover costs of delays to the public in cases of inordinately lengthy telecommunications construction.

88. As acknowledged by Vancouver, delays to the public do not entail a cost to the municipality. Therefore, the Commission considers that the municipality should not be permitted to recover any amount for such delays.

c) Lost productivity for city operations

89. Vancouver proposed to charge an annual amount intended to recover the additional costs it incurs as a result of lost productivity in city operations due to carriers' occupancy and use of municipal rights-of-way (e.g., additional costs in street resurfacing, costs of working around carriers' facilities in the street).

90. In its example construction project, Vancouver calculated the applicable annual charge to be $478.

91. The Commission notes that it has previously accepted loss of productivity costs proposed by Bell Canada in the context of determining rates for support structures.

92. In the Commission's view, if significant additional costs are incurred by Vancouver that are identifiable with the presence of Ledcor's facilities, Vancouver should recover those additional costs directly from Ledcor, with appropriate documentation and itemized invoicing of costs. The Commission also considers that there may be instances where it would be appropriate for Ledcor to perform any required additional work itself. However, routine lost productivity costs that cannot be directly linked to a specific carrier should be recognized through the 15% loading on plan approval and inspection costs.

d) Drainage of telecommunications company vaults

93. Vancouver noted that, as part of the installation of fibre optic networks, carriers place access vaults along their networks. As these vaults must be accessed from the street surface, removable lids flush with the street level are placed on these structures. These lids cannot be made watertight, and drainage from the vaults to nearby sewer drainage pipes must therefore be provided.

94. Vancouver stated that the cost of installation of drainage facilities provided by the city is currently recovered from the company that requests the drainage. It proposed to continue to recover this up-front cost based on its actual costs.

95. Vancouver also submitted that another cost component relates to the runoff from the access vault. The regional government in Vancouver is responsible for the collection of storm water drainage and allocates its costs to member municipalities through a volumetric charge. Vancouver stated that it currently charges the companies an on-going fee related to this runoff based on the amount charged by the regional government in Vancouver. It proposed to continue to recover this on-going cost through annual drainage fees.

96. The Commission considers that, to the extent that the city pays the regional government in Vancouver a volumetric charge for draining water, the costs are causal and can be passed through (i.e., with no loadings or mark-ups) to the relevant carrier. Further, when the municipality incurs costs to connect the vaults to the sewers, these costs can be passed on to the carrier.

e) Pavement degradation

97. Vancouver submitted that cuts in the pavement for utility construction cause additional on-going repairs to pavement surfaces (e.g., to fill cracks around utility cuts and to patch pavement). In addition, the road requires more frequent full-width grind and overlay repairs. Vancouver presented a study relating to Ottawa-Carleton to support its claim for the recovery of the related costs from carriers such as Ledcor.

98. In Vancouver's example construction project, the charge would amount to $859 annually (including the full 62% loading).

99. The Commission accepts that utility cuts contribute to the degradation of pavement. Conceptually, the causal costs would be

those associated with additional repairs (e.g., crack-filling), and
the cost of the advancement of the grind and overlay procedure.

100. With regard to on-going repairs, the Commission considers that Vancouver has provided insufficient justification for its allocation of the associated costs among the various utilities. Further, costs associated with grinds and overlays should be limited to the costs of advancement, and be properly substantiated by a study related to the municipality in question or to a municipality where conditions are demonstrably similar. Finally, for the sake of ease of application and administrative simplicity, the Commission considers that these costs should be recovered through one-time charges, if such charges can be developed.

f) Agreement and Utility Management Costs

101. In discussing its example construction project, Vancouver noted that it had stated in its initial application that there were certain administrative costs that could not be related to specific projects, such as time spent negotiating agreements. It had therefore proposed that these costs be included through the use of a multiplicative factor applied to direct and indirect costs. Vancouver stated that it became apparent that these costs can be readily identified and, in some cases, assigned to individual companies causing them. Vancouver therefore proposed that a new direct cost category be created called Agreement and Utility Management Costs, broken down into up-front negotiating costs and on-going utility management costs.

102. Vancouver stated that negotiating costs would be based on staff time spent in meeting with telecommunications companies and reporting to City Council, and on clerical support for these functions. Vancouver proposed to bill these costs to the carrier in question based on a detailed accounting of staff time spent on each agreement and the various hourly rates that Vancouver pays for that staff time.

103. Vancouver stated that a charge for negotiating costs would not apply in its example construction project, since an agreement has already been established.

104. Vancouver stated that utility management costs relate to high level decisions made reviewing and interpreting existing agreements, developing policies related to the administration of agreements, etc. It added that, in future, these costs would include administration of joint municipal/utility committees to develop better coordination mechanisms between various activities in the streets, and the management of duct and trench sharing. Vancouver calculated a base utility management cost of $0.035 per metre. In its example construction project, the applicable charge would amount to $39 per year.

105. In its reply, Vancouver noted its intention to create, at the completion of this proceeding, a new municipal access agreement that it would wish to become, in the medium term, a standard for all carriers. In the longer run, Vancouver stated that it intends to create a by-law to which all users of street space could refer for all relevant provisions for their use of street space. Vancouver argued that, by recovering its costs of negotiation, it would provide an incentive to carriers to decline to seek terms particular to themselves. In addition, any costs that were incurred by Vancouver as a result of such negotiations would be borne by the carrier seeking exceptional treatment, rather than by the taxpayer.

106. In the Commission's view, negotiating and utility management are common costs of operations. Some of these costs would be variable common costs, and would therefore be recognized through a related loading on direct costs (for example, Vancouver's proposed 62% loading, minus the component for fixed common costs).

107. With regard to explicit negotiating costs, the Commission also considers that permitting Vancouver to recover such costs would remove an incentive for it to make reasonable concessions and to bring negotiations to a timely conclusion. With regard to utility management costs, the Commission notes Vancouver's intention to set up a municipal/utility co-ordinating committee. As discussed above (see Joint planning issues), the Commission encourages such efforts and considers it appropriate that carriers contribute to the costs of any such committee. The Commission considers that there is merit to the suggestion that participants in such committees should have flexibility to determine how best to share these costs.

108. Accordingly, the Commission does not consider it appropriate that Vancouver explicitly recover costs associated with Agreement and Utility Management.

g) Land charges

109. Vancouver and other municipalities were of the view that they should be entitled to recover "access" fees based on the "market value" of the rights-of-way occupied and used by carriers.

110. Vancouver argued that a market-based mechanism is the best way to ensure that this scarce resource is used efficiently and effectively. Vancouver submitted that municipal property space suitable for the placement of telecommunications facilities is limited, and that not charging for space encourages excessive use of it. Vancouver submitted that this puts subsurface space at a premium, and results in excessive disruption of traffic as one competitor after another cuts new trenches down the street.

111. Vancouver proposed to charge any competitive commercial user the cost of the space occupied through an annual charge comparable to what would be charged if the space were private property. Vancouver added that charging others for the use of the space will provide an incentive for it to not be wasteful in its own use, because to do so would block use by others who would pay.

112. Vancouver proposed an annual per-metre charge to carriers for the use and occupancy of rights-of-way based on the value of adjacent lands. Vancouver's proposed formula is as follows:

Linear Rate = Land Value (based on land sales data for adjacent lands)

x Rate of Return (Vancouver's borrowing rate)

x Occupied Width (includes horizontal clearances)

x Alienation Factor (adjustment to reflect the actual use, i.e., the degree to which the land is "alienated" from other uses).

113. Vancouver stated that, if telecommunications companies co-located their facilities in a trench, the fee would be calculated in the same way, but would be shared by the various users of the trench. This would support the objective of encouraging more efficient use of public space, as there would be an incentive for telecommunications companies to co-locate their facilities.

114. Municipalities and FCM argued generally that failure to charge market-based rates would constitute a subsidy from taxpayers. They added that such charges constitute an opportunity cost, in that other users of right-of-way space are willing to pay such fees.

115. Carriers argued, among other things, that many of the concerns identified by Vancouver would be addressed by proper joint planning processes. While endorsing joint planning, FCM and municipalities responded that it has its limitations, and is no substitute for sending "proper price signals".

116. The Commission notes that the land charges in the example discussed in response to Vancouver(Bell/MTS)28Feb00-6 would amount to $24,480 annually, for a 680 metre installation in the downtown area, representing a per-metre annual charge of $36.

117. The Commission considers that, in most instances, it would be extremely difficult to establish a "market-based" rate for the use of municipal property, as there is no "free market", consisting of totally willing buyers and sellers, for municipal consent to occupy and use municipal rights-of-way. The Commission is not satisfied that Vancouver's reference to adjacent lands is appropriate in these circumstances, given that the land in which the right-of-way is situate is a public street and in most instances will remain dedicated to that purpose. By contrast, adjacent lands are largely privately owned, are dedicated to diverse and essentially private uses and are freely traded. In addition, the Commission notes that much of the value of the adjacent land derives from the fact that the land is serviced by "utilities" such as communications carriers.

118. Further, the Commission considers that, provided the municipality's causal costs are recovered from carriers, as discussed above with regard to other elements of Vancouver's costing proposal, there is no issue of taxpayers "subsidizing" carriers, in that additional costs imposed by the construction, maintenance and operation of transmission lines would be absorbed by carriers, not taxpayers.

119. Finally, the Commission considers that many of the arguments and concerns raised by Vancouver and other municipalities in support of such fees (scarcity, congestion, etc.) can be addressed through improved planning (see Joint planning issues, above).

120. In light of the above, the Commission concludes that the blanket imposition of "market-based" charges is not necessary or appropriate.

121. The Commission considers that percentage of revenue fees raise the same concerns as land-based charges.

122. Accordingly, the Commission is not including a requirement for Ledcor to pay a land-based charge in the terms and conditions of its permission to Ledcor to construct, maintain and operate the transmission lines in question.

Application to the 18 street crossings

123. The record with regard to Ledcor's construction of transmission lines in the street crossings at issue indicates that no pavement was breached. Further, Ledcor stated in its initial reply of 27 May 1999 that it had applied to Vancouver to obtain consent to construct its transmission lines under one city street that crossed the railway right-of-way where it was placing its facilities, and that the other 17 "street crossings" are actually municipal road allowances across that right-of-way. Accordingly, based on the record, the Commission considers that many of the cost elements proposed by Vancouver do not apply to the specific Ledcor case.

124. Applying the approach set out above to the facts of the particular case, the Commission concludes that Ledcor should pay Vancouver for the plan approval and inspection charges that would result from the application of Vancouver's proposal, with the adjustments discussed earlier, to the 18 street crossings in question. The resulting charges are a flat fee of $1,127, plus a per-metre charge of $8.67, for a total of $7,613.

125. Given the Commission's conclusion that no pavement was breached, or to the extent that Ledcor has satisfactorily carried out any repairs itself, no charges for pavement restoration should apply.

126. Based on the record, it appears that traffic signing was not necessary for Ledcor's construction in the 18 street crossings. Accordingly, no charges for traffic signing should apply.

127. Similarly, based on the record, it appears that no drainage facilities were provided by Vancouver. Therefore, no charges for such connections would apply.

128. In its comments, Vancouver requested that the Commission order Ledcor to pay interest, from the date of the Commission's interim order in this proceeding, on any amount that the Commission might order Ledcor to pay to the city. The Commission does not consider that interest is warranted in the circumstances of this case. Accordingly, the Commission denies Vancouver's request.

129. As discussed above, the plan approval and inspection charges that Ledcor will pay to Vancouver pursuant to this decision recognize any routine losses of productivity that Vancouver may experience due to the presence of Ledcor's transmission lines in the 18 street crossings. If in future Vancouver incurs significant additional costs that are identifiable with the presence of Ledcor's transmission lines, it may recover those additional costs directly from Ledcor, upon presentation of the appropriate documentation including an itemized invoice of costs. Alternatively, it may be appropriate for Ledcor to perform any required additional work itself.

Relocation costs

130. Vancouver submitted that it should not be responsible for the cost of relocating telecommunications facilities if relocation is required for municipal purposes. Vancouver added as a caveat on the application of this principle that the municipal government must act reasonably in co-ordinating the many uses of the public property in a manner that does not cause unnecessary or premature disruptions to telecommunications plant.

131. Vancouver proposed that relocation costs be incurred directly by the carrier if it undertakes the work, or be invoiced to the carrier if the city undertakes the work. It stated that these costs are project-specific and should be invoiced on a project-by-project basis.

132. Vancouver stated that much of the work that takes place on city streets is related to redevelopment of private property for which the city cannot fully plan or give advance notification. Vancouver also stated that redevelopment of private property, for example, for a shopping development, sometimes requires reconfiguring the adjacent street to accommodate changed traffic patterns. It noted that, in this case, it requires the developer to pay for the street changes and that it would be appropriate for the private developer to pay for costs of relocating the carrier's facilities.

133. FCM and municipalities supported Vancouver's position on relocation costs. FCM stated that, where relocation or adjustment is required for bona fide municipal purposes, the utility should be 100% responsible for the costs. In response to interrogatory FCM(CRTC)28Feb00-5, FCM stated that a bona fide municipal purpose is any purpose that is authorized at common law or by statute, for example, bridge reconstructions, improvements such as road widenings and municipal landscaping, infrastructure replacements, transit lane relocations, and the burial of aerial lines for safety, municipal redevelopment, security or other reasons.

134. Carriers objected to Vancouver's proposal, arguing, among other things, that:

Vancouver's approach would eliminate an incentive to municipalities to behave reasonably and consult properly with respect to relocation matters; and
a satisfactory approach to the allocation of relocation costs should be sensitive to the facts of a particular situation.

135. Bell Canada/MTS submitted that they have not traditionally been required by municipalities, as of right, to assume costs to relocate their plant located in public rights-of-way when a municipality requires it, but have generally negotiated the assumption of such costs on a case-by-case basis, or if applicable, adopted mechanisms set out in provincial legislation or regulations. They added that their experience with case-by-case negotiations is that the process is administratively burdensome, for themselves as well as for the municipality. They considered that the existing process could be streamlined to the benefit of both themselves and the municipalities. Therefore, in their model municipal consent agreement filed in this proceeding, Bell Canada/MTS proposed an alternative mechanism which, they stated, Canadian carriers and municipalities could choose to adopt. They described that mechanism as follows:

As municipalities have in place planning "windows" which typically span five or more years for projects of a scale which would require the relocation of underground utilities, relocations in the first five to ten years after construction of Canadian carrier plant are unusual. After this period, the allocation of relocation costs has typically been subject to negotiations. The mechanism put forward by the Companies in the model agreement codifies, on a going forward basis, such arrangements. Within an initial period which is well within municipal planning time frames, costs associated with relocation at the initiative of the municipality are allocated to the municipality. Following this period, a sliding scale is applied for a period of five years. Following the 9^th year, the Canadian carrier would henceforward assume all the costs associated with the relocation of its plant. Since equipment is typically operated in rights-of-way for a period of decades once installed, the result is that for most of the useful life of its equipment, the Canadian carrier will be responsible for all costs associated with the relocation of its equipment in municipality initiated relocations. The Companies believe that the mechanism they have codified in the model agreement is fair to all parties, provides certainty as to the specific terms thereby simplifying administration and provides an incentive to municipalities to conduct advance planning. The Companies reiterate that such advance planning by municipalities is routinely conducted today.

136. The Commission considers that sections 42 to 44 of the Act give it the jurisdiction to impose conditions relating to relocation matters, whether at the time of construction or afterwards. The Commission also notes that its predecessor bodies have generally declined to impose terms and conditions relating to relocation at the time of construction, preferring instead to consider the matter at the time the requirement for relocation arises, having regard to the circumstances then applicable.

137. Consistent with the above, the Commission is not prescribing a mechanism governing the allocation of the cost of any future relocation of Ledcor's transmission lines. If Vancouver requires the relocation of these lines at some time in the future, the Commission considers that the parties should negotiate the allocation of costs, taking into account the factors noted below, or adopt some administratively simple mechanism such as that advanced by Bell Canada/MTS. Failing an agreement, either Vancouver or Ledcor could apply to the Commission to resolve the dispute.

138. The Commission would generally consider it appropriate to take into account the following factors in allocating costs between the municipality and the carrier:

who has requested the relocation, i.e., the municipality, the carrier, or a third party;
the reason for the requested relocation (e.g., safety reasons, aesthetic reasons, to better serve customers); and
when the request is made vis-à-vis the original date of construction (e.g., whether the request is made a considerable length of time after the original construction, or very shortly after that time).

Fixed term of agreement, termination provisions, termination on default

139. The SCA attached to Ledcor's original application provided that the rights granted to Ledcor under the agreement would expire in 20 years, unless cancelled prior to expiry pursuant to provisions related to default (Article 2.3). The agreement also provided for perpetual renewal for successive 10-year periods. However, Vancouver could decline to renew the agreement on written notice to Ledcor.

140. The MAA provided by Ledcor also specified a 20-year term.

141. Under the SCA (Article 12), neither party could make use of the fibre in question where:

the city cancelled the agreement for default;
the agreement had expired and the company breached a surviving obligation; or
no new agreement had been reached within one year of the expiry of the old agreement.

In addition, the city could require removal of the fibre. If the company did not remove it within one year, the fibre would be deemed abandoned and title would vest in the city. The MAA contained similar provisions (Article 12), with certain changes specific to Ledcor's grant of dark fibre to the city.

142. In its application, Ledcor stated that it requires secure access for a minimum of 40 years (a 20-year term plus two automatic renewals of 10 years), consistent with the useful life of the telecommunications system being installed.

143. Carriers objected to provisions that would limit the term of the municipality's consent. Generally, they argued that municipal consent, once granted, cannot be withdrawn. Further, if an agreement were to have a fixed term, it should be very clear that the expiry of the agreement would not affect a distribution undertaking's right of access.

144. As discussed earlier, the Commission considers that carriers do not have an unqualified right to enter on and break up any highway or other public place for the purpose of constructing, maintaining or operating their transmission lines. Similarly, the Commission does not consider that they have an unqualified right to "remain there for as long as necessary" for that purpose. The carrier's rights are subject to both an obligation not to unduly interfere with public use and enjoyment and to a requirement for municipal consent (or the Commission's permission).

145. In the Commission's view, changes in circumstances may require that agreements entered into by municipalities and carriers be renegotiated periodically. Accordingly, it is reasonable for municipalities to take the position that any consent for carriers to occupy and use municipal rights-of-way should be limited to a fixed term.

146. In the Commission's view, the more important consideration is the consequence of the expiry of an agreement, of a termination notice or of a cancellation for default. The Commission agrees with parties who argued that municipalities must not interfere with the operation of the carrier's network (e.g., require the carrier to cease operations or remove its facilities) when an agreement has expired or been terminated or cancelled, and parties are unable to agree on new terms and conditions. The Commission notes that such interference could result, among other things, in an unnecessary interruption of service to the carrier's customers. The Commission further agrees with those parties who argued that the appropriate recourse under such circumstances is for one party or the other to seek the Commission's assistance.

147. In the case of the 18 street crossings, it is this decision, rather than an agreement between the parties, that sets out the terms and conditions under which Ledcor may construct, maintain and operate its transmission lines. Should changed circumstances require a change to the terms and conditions of that permission, one or both of the parties may apply to the Commission.

Liability, indemnity, insurance

148. In its initial application of 19 March 1999, Ledcor stated that Vancouver's proposed SCA and MAA provided that Ledcor would be obliged to indemnify Vancouver against all forms of injury, loss and damage (including economic losses) arising from Ledcor's activities under the agreement, while Vancouver would be absolved from liability for all forms of injury, loss and damage (including economic losses) arising out of Vancouver's activities, even where the injury or loss occurred as a result of "the negligence or willful acts or omissions of the city or its employees." Ledcor submitted that such provisions are one-sided and unfair, and are not acceptable to Ledcor.

149. Vancouver argued that protection from liability for city interference with telecommunications facilities is clearly in the public interest. FCM and the municipalities expressed similar views.

150. The Commission rejects arguments by FCM (and others) as to limitations on the Commission's jurisdiction under sections 42 to 44 of the Act to prescribe terms and conditions relating to limitations of liability. As noted earlier, where a carrier cannot obtain consent from a municipality on acceptable terms, the Commission may grant the permission "subject to any conditions that the Commission determines" (section 43(4) of the Act). The only qualification in the subsection with respect to the scope of the Commission's jurisdiction is that the Commission must have due regard to the use and enjoyment of the highway or other public place by others.

151. The Commission notes that, under section 43, carriers have a qualified right to enter on and break up any highway or other public place for the purpose of constructing, maintaining or operating their transmission lines, subject to a duty not to unduly interfere with the public use and enjoyment of the highway or other public place. The Commission agrees with TELUS that one-sided liability provisions such as those proposed by Vancouver are not necessary in order to ensure that carriers fulfill this duty. The Commission also considers that there is merit to the arguments of TELUS, CCTA and others that the ordinary provincial principles of liability for negligence should apply to encourage all users of rights-of-way, including municipalities, to take care and ensure that their activities do not harm others.

152. The Commission notes Vancouver's argument that damage to carriers' facilities is often occasioned by inadequate protection, such as wooden ducts placed by BC TEL that are rotting away but are still in use in many locations in city street space. The Commission considers that such concerns should also be addressed pursuant to the ordinarily applicable provincial principles of liability.

153. The Commission considers conditions 27 and 28 of the Bell Canada/MTS model municipal consent agreement to be appropriately balanced. The Commission also notes that several participants in this proceeding argued that parties may wish to exclude consequential or economic losses, which is the effect of Bell Canada/MTS' proposed condition 29. The agreement between Group Telecom and Calgary, advanced as a model by Group Telecom, contains generally mutual liability provisions and excludes damages for consequential losses, but also adds the following:

The City shall not be liable to, nor indemnify and save harmless, Group Telecom, pursuant to subsection (2) where:

the City has not been advised in writing of Group Telecom's Installations being placed in a Highway and Group Telecom has, following a request by the City or any other Party, failed to identify the location of its Installations; or
the City has corrected a default of Group Telecom's pursuant to the provisions of this Agreement provided the City is not negligent in its corrective action.

154. The Commission sees no reason to object to the inclusion of such provisions.

155. In light of the above, the Commission is not prescribing terms and conditions related to liability in this decision. The Commission would have no objection if Vancouver and Ledcor were to agree to provisions similar to those in Bell Canada/MTS's model municipal consent agreement or in Group Telecom's agreement with Calgary. Absent such agreement, provincial principles of liability for negligence would apply.

156. In light of the above, the Commission would consider it reasonable for each party to seek assurance from the other that it is adequately insured or can self-insure, in light of its potential liability.

General security agreements, letters of credit

157. The SCA advanced by Vancouver during its negotiations with Ledcor would have required Ledcor to execute a General Security Agreement (GSA) with respect to its network in favour of the city.

158. In addition, it contains a requirement that, in order to obtain the city's permission for "new work" (e.g., construction), Ledcor must submit a letter of credit, valid for at least one year, equal to 100% of the estimated cost of the relevant restoration work, as determined by City Engineer (applying generally applicable formulas and principles).

159. The SCA further specifies that the letter of credit be renewed and replaced as required during the time the work is on-going. After the new work is satisfactorily completed, the letter of credit would be replaced with a new letter of credit equal to 20% of the value of the initial work. This subsequent letter of credit would be valid for at least one year.

160. Ledcor argued the following with respect to these requirements:

The Applicant considers these security obligations to be unduly burdensome, costly and restrictive requirements for municipal consent to cross a few streets on an existing railway right-of-way. Proper cost-based municipal access fees for access to such street crossings should be nominal, and security obligations minimal or non-existent. In fact, the applicant would consider prepaying the whole of a reasonable cost-based access charge in advance.

161. The Commission considers a requirement to enter into a GSA to be unduly onerous, and unnecessary to ensure that Ledcor will meet its obligations under the terms and conditions of the Commission's order.

162. With regard to letters of credit, the Commission considers it reasonable that municipalities would request some assurance that construction work (e.g., pavement restoration) will be completed satisfactorily. In the Commission's view, that assurance could be provided by various means, including a letter of credit or, for example, the deposit of a reasonable sum of money to ensure the satisfactory doing of the work.

Applicable law

163. In its original application, Ledcor stated as follows:

Various provisions of Article 13 of the proposed [street crossing] agreement would impose provincial legal jurisdiction over matters that are properly subject to federal telecommunications law. In particular, disputes over access to municipal property by a Canadian carrier are subject to CRTC jurisdiction under sections 43 and 44 of the federal Telecommunications Act.

Notwithstanding the CRTC's clear jurisdiction over municipal access disputes with Canadian carriers, Article 13.7 purports to make the entire SCA subject "in all respects" to the laws of British Columbia. Article 13.8 provides that disputes under the agreement will be settled by the courts of British Columbia rather than the CRTC. Article 13.6 establishes a detailed dispute resolution procedure that is one-sided (in the City's favour) and purports to require access disputes to be resolved by audit and arbitration proceedings rather than by the CRTC under the Telecommunications Act.

164. The Commission considers it inappropriate to include in agreements provisions stating that disputes will be settled only by the courts of a particular province and only according to the laws of a particular province. In the Commission's view, relevant provisions should state that the agreement will be governed by, and construed in accordance with, the laws of the province in which the municipality is situate and the laws of Canada applicable thereto.

Third party issues

165. As described earlier, the MAA advanced by Vancouver in its negotiations with Ledcor contained provisions requiring Ledcor to pay an annual licence fee, based on Ledcor's gross revenues from telecommunications services provided to customers whose equipment or other apparatus was connected to Ledcor's network in Vancouver and reasonably allocable to that network (the Vancouver portion of gross revenues).

166. In support of these provisions, the MAA required that Ledcor provide information, by affidavit, regarding the Vancouver portion of gross revenues, including audited financial statements, particulars as to the calculation of the gross revenues, and a schedule of published rates charged to customers.

167. Under the MAA, Ledcor would also be obliged to permit Vancouver's auditors to inspect all Ledcor's financial record, profiles, contracts, etc., relating in any way to any matter governed by the agreement.

168. The SCA contained provisions which would require Ledcor to provide extensive details as to parties to whom it granted a "sub-licence" of its rights and obligations under the agreement (i.e., a "sub-licence" to acquire IRUs with respect of the fibre, or to own, operate or use any part of the fibre). Any such sub-licence would have to provide that the sub-licensee would be bound by Ledcor's obligations under the agreement, to the same extent as Ledcor. Ledcor would be required to provide annual reports, by affidavit, as to the current status of all sub-licences.

169. In its initial application, Ledcor stated that its fibre optic system in Vancouver consists of fibre optic cable installed in

conduits constructed by Ledcor in a CPR right-of-way that intersects city streets, and
TELUS ducts along a route between the CPR right-of-way and the Oak Street Bridge in south Vancouver (pursuant to the support structure tariff).

170. The MAA advanced by Vancouver would require the city's prior written licence for the installation of Ledcor lines and facilities in the existing conduit of third parties. Further, it would appear to require the extension of the terms of the MAA, including percentage of revenue fees, to lines and facilities that Ledcor had already installed in conduit owned by BC Hydro and Power Authority or by British Columbia Telephone Company prior to February 1999.

171. Ledcor objected to these provisions.

172. In its submission of 28 January 2000, Vancouver stated that it would not require information about purchasers, lessees or other third parties using fibre or duct space owned by the carrier, unless such parties would be undertaking work on city streets outside of the duct structures of the carrier with whom the city has an agreement. Vancouver stated that, whenever a third party wishes to undertake work on the streets, it would require a further agreement with that third party.

173. Under the terms and conditions established by the Commission in this decision, Ledcor is not obliged to pay percentage of revenue fees. Accordingly, there is no need for Ledcor to provide Vancouver with information related to the calculation of such fees, or for related audit requirements.

174. The Commission considers that parties merely occupying Ledcor's support structures or (like some of the respondents to Vancouver's initial application) merely acquiring strands on Ledcor's fibre optic system should not be obliged to pay separate fees to Vancouver. Further, such parties should not be obliged to seek Vancouver's consent, unless they are undertaking excavation in the streets or some other activity that would cause disruption, for example, to traffic. Accordingly, there is no reason to require Ledcor to provide information to Vancouver with respect to such parties.

175. Similarly, the Commission finds that Ledcor should not be obliged to pay separate fees to Vancouver merely by virtue of the presence of its transmission lines in the support structures of other parties, such as TELUS.

176. Bell Canada/MTS's model municipal consent agreement (Article 30) contained the following provision:

the Company's Support Structure License Agreement requires the third party to comply, at the third parties' sole expense, with all laws, statutes, by-laws, codes, ordinances, rules, orders and regulations of all governmental authorities in force, and that the third party shall obtain and maintain any and all permits, licenses, official inspections or any other approvals and consents necessary or required for the placement or operation of the third party's equipment structures ..

177. The Commission considers that, should Ledcor make its support structures available to others, it is sufficient that its agreements with those third parties include a provision similar to that cited above, modified

to reflect the fact that Ledcor does not have a support structure tariff, and
by the insertion of the word "applicable" before the phrase "laws, statutes, by-laws, codes, ordinances .".

178. As noted above, the MAA and SCA also contained extensive limits on Ledcor's ability to assign the agreement, in whole or in part. The Commission sees no reason for the inclusion of limitations as extensive as those in the MAA and SCA. Rather, the Commission considers that assignment provisions more consistent with other agreements would be appropriate. For example, the Commission considers that conditions 36 to 38 of the Bell Canada/MTS model municipal consent agreement would be sufficient to protect the interests of the municipality, without unduly constraining the activities of the carrier.

Existing agreements

179. In PN 99-25, the Commission requested comment on whether any terms and conditions imposed by the Commission in relation to the agreements for access in Vancouver that are in dispute could and should replace the terms and conditions in existing agreements that are not in dispute, relating to municipal access in Vancouver.

180. As indicated earlier, the Commission considers that, in enacting sections 43 and 44 of the Act, Parliament has provided a mechanism whereby disputes can be resolved when carriers and municipalities cannot agree on the terms and conditions under which carriers will be granted consent to construct transmission lines. Consistent with this view, the Commission considers it inappropriate to replace the terms and conditions of agreements that are not in dispute before it by virtue of an application brought pursuant to section 43 or 44.

Disposition

181. The Commission, by majority, grants Ledcor, and any of its affiliates currently operating as Canadian carriers in Vancouver, permission to construct, maintain and operate the transmission lines at issue in this proceeding in the 18 street crossings in question.

182. Ledcor is directed to pay forthwith to Vancouver the sum of $7,613.

183. Ledcor is directed to provide to Vancouver, as soon as practicable, "as-built" drawings sufficient to accurately establish within the street crossings the exact location, elevation and distance of the transmission lines, in both paper and electronic form.

184. Vancouver and Ledcor are directed to exchange forthwith lists of emergency contacts.

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

Date modified:: 2001-01-25

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