ARCHIVED - Order CRTC 2001-834

Order CRTC 2001-834

Ottawa, 16 November 2001

Compagnie de Téléphone Nantes inc. - Service improvement plan

Reference: Public Notice CRTC 2000-54

Summary

The Commission approves the two $6 rate increases requested by Nantes for 2002 and 2003. The Commission is of the opinion that both increases are sufficient to defray all costs incurred by Nantes to purchase and install a digital switch. The rate increases also include administrative costs of $4,568 incurred by Nantes to file its service improvement plan.

1.

In Telecom Decision CRTC 99-16, Telephone service to high-cost serving areas, dated 19 October 1999, the Commission set a basic service objective for all telephone companies in Canada. Pursuant to that objective, local service companies must provide:

2.

To ensure that telephone companies can provide a level of basic service that achieves the basic service objective, the Commission directed incumbent local exchange carriers (ILECs) to file service improvement plans (SIPs) for Commission approval, or to demonstrate that the basic service objective has been and will continue to be achieved in their territory.

3.

In Public Notice CRTC 2000-54, Independent telephone companies' service improvement plans, dated 17 April 2000, the Commission initiated a proceeding to review the SIPs of Northern Telephone Limited, Amtelecom Inc., North Frontenac Telephone Corporation Ltd., O.N.Telcom and Compagnie de Téléphone Nantes inc. On 4 December 2000, pursuant to Orders CRTC 2000-1096, -1097, -1099 and -1100, the Commission approved the SIPs of only the first four aforementioned companies, respectively.

When Nantes filed its initial SIP on 1 June 2000, the company proposed to pay for the purchase and installation of a standalone digital switch with a rate increase and subsidy from the national contribution fund. The Commission notes, however, that Nantes was the only company to propose using the national contribution fund to finance its SIP. In Decision 99-16, the Commission determined that all ILECs in southern Canada (including Nantes) were able to finance their SIPs within the existing regulatory framework without additional subsidy. Under the circumstances, Nantes was encouraged to re-examine all available options before the Commission rendered a determination on its application.

5.

On 20 August 2001, Nantes filed a revised SIP with the Commission, in which it still proposed purchasing a standalone digital switch, but at a lower cost. Nantes estimated that it could defray the costs of its SIP by increasing its local residential and business rates by $12 per month, spread equally over two years, i.e., $6 on 1 January 2002 and $6 on 1 January 2003. Nantes also stated that a subsidy from the national contribution fund should be used to make up the shortfall in the first year of its SIP, i.e., the difference between the $12 required for its SIP and the proposed $6 increase.

6.

On 7 September 2001, Nantes informed its subscribers of its SIP via a billing insert and asked for their comments. On 2 October 2001, the Commission received a petition objecting to Nantes' proposed rate increases. The signatories pointed out high rate increases for basic residential service since 1997, and asked for rate and service parity with Bell Canada.

7.

After examining the Nantes SIP, the Commission is convinced that the company's preferred option, as modified below, is the most reasonable, and uses less expensive technology while still allowing Nantes to achieve the basic service objective.

8.

The Commission notes that Nantes has to replace its step-to-step switch to achieve the basic service objective. Of all the options available, the installation of a standalone digital switch is the least expensive, in both the short and long terms. The Commission also finds that this is the most viable option, and is the most effective and financially-viable way to meet the needs of subscribers and the company. The Commission notes that with the new digital switch, Nantes subscribers will have access for the first time to a host of new optional services and new functions that are currently not available via Nantes' step-to-step switch.

9.

The Commission considered the objections of some subscribers to the proposed rate increases. However, the Commission is of the opinion that rate increases are required to allow Nantes to improve its system and provide a level of service that is comparable to that of other telephone companies, and achieves the basic service objective. The Commission also notes that Nantes' rates are comparable to the rates of certain other telephone companies.

10.

In its application for approval of its Carrier Access Tariff for 2000, Nantes proposed recovering administrative costs of $4,568 incurred to file its SIP from the contribution. In Order CRTC 2001-813, SATAT - 2000 and 2001 Carrier Access Tariffs and Network Access (¼ mile) Tariffs, dated 5 November 2001, the Commission denied Nantes' application and stated that it would examine that issue in this proceeding. According to the Commission, the administrative costs of $4,568 incurred by Nantes to file its SIP are intrinsic to its application.

11.

The Commission examined the SIP proposed by Nantes, in accordance with the methodology and conclusions adopted by the Commission to examine the SIPs of other independent telephone companies. For example, the Commission used the same amortization period for switch installation costs and Nantes' switch purchasing costs rather than two different periods. The Commission approves both monthly increases of $6 for Nantes' local residential and business services for 2002 and 2003. According to the Commission, these two rate increases cover all the costs associated with the purchase and installation of the digital switch, as well as the additional administrative costs of $4,568 incurred by Nantes for its SIP. The Commission is of the opinion that Nantes does not require additional subsidy from the national contribution fund, and notes that this is the approach that the Commission adopted in approving the SIPs of other independent telephone companies, pursuant to Decision 99-16.

12.

The first rate increase will take effect 1 January 2002. However, if Nantes is unable to offer a service that achieves the basic service objective as of 1 January 2002, the $6 rate increase shall take effect only once subscribers have access to a level of service that achieves the basic service objective. The second increase shall take effect 1 January 2003, provided that Nantes has achieved the basic service objective by that time.

13.

The Commission directs Nantes to file immediately the revised tariff pages reflecting the above findings.

Secretary General