ARCHIVED - Order CRTC 2001-848

Order CRTC 2001-848

Ottawa, 28 November 2001

Interim approval of revised unbundled loop rates for reclassified bands

Reference: 8661-C12-02/00

Summary

In Decision 2001-238, among other things, the Commission set unbundled loop rates and directed carriers to reclassify the band designations for certain telephone wire centre serving areas. In this order, on an interim basis, the Commission approves revised unbundled loop rates for the reclassified bands for Bell Canada, TELUS Communications Inc. and Aliant Telecom Inc.

Background

1.

In Decision CRTC 2001-238, Restructured bands, revised loop rates and related issues, dated 27 April 2001, among other things, the Commission directed three incumbent local exchange carriers (ILECs) to change the band classifications for certain wire centres in their respective territories. The three ILECs are Bell Canada, TELUS Communications Inc. (TCI) on behalf of the former TELUS Communications (B.C.) Inc. (hereinafter referred to as TCI-B.C.), and Aliant Telecom Inc. on behalf of the former Maritime Tel & Tel Limited (hereinafter referred to as MTT).

2.

In Decision 2001-238, the Commission directed Bell Canada to indicate whether it intends to propose modifications to the unbundled loop rates adopted in Decision 2001-238 for bands A, B or C and if so, to provide proposed revised loop costs for those bands to reflect the above wire-centre classification changes. The Commission provided similar direction to TCI-B.C. concerning modifications to loop rates for TCI-B.C.'s bands B and C. The Commission also directed MTT to split the Halifax exchange (band A) into sub-band A1 (Bishop wire centre) and sub-band A2 (the rest of Halifax).

3.

Aliant Telecom Inc., on behalf of the former MTT, filed its submission with the Commission on 7 June 2001. In response, Bell Canada and TELUS Communications Inc. (for TCI-B.C.) filed submissions with the Commission on 8 June 2001.

4.

Regarding the reclassification proposals submitted by Bell Canada and TELUS Communications Inc., the Commission received comments, dated 9 July 2001, from GT Group Telecom Services Corp., on behalf of itself, AT&T Canada Telecom Services Company and AT&T Canada Corp., and Call-Net Enterprises Inc. (collectively, the competitors).

5.

Bell Canada and TELUS Communications Inc. provided reply comments on 24 July 2001.

6.

The Commission did not receive comments in response to Aliant Telecom's submission.

7.

Loop rates are calculated for Type A and Type B loops. A Type A loop is an analog transmission path between the customer network interface and the ILEC's loop termination point, and supports a voice grade signal of about 3kHz usable bandwidth; a Type B loop is a digital transmission path between the customer network interface and the ILEC's loop termination point, and supports the transmission of an integrated services digital network basic-rate, interface-type signal.

Revised unbundled loop rates for Bell Canada and TCI-B.C.

Bell Canada

8.

In Decision 2001-238, the Commission directed Bell Canada to reclassify:

9.

The competitors submitted that Bell Canada did not provide present worth of demand information for its revised costs for bands A, B and C. This made it impossible to compare the weighted average proposed loop costs across the revised bands A, B and C with average loop costs for the revised bands A, B and C that were implied by the rates set in Decision 2001-238. Nevertheless, the competitors stated that Bell Canada's updated costs exceed the costs specified in Decision 2001-238 by about 7% and should be reduced accordingly.

10.

The competitors indicated that the required changes to reclassify bands as noted in Decision 2001-238 should have involved a re-sorting of loops between the affected bands - not a change in the level of their costs. At a minimum, reclassification in accordance with the costing determinations in Decision 2001-238 requires that the weighted average loop cost across the bands, using the present worth of demand figures, should be no more than the cost implied by the rates set in Decision 2001-238.

11.

Bell Canada filed updated demand data for bands A, B and C, and noted that the data had only recently become available as a result of a more detailed loop survey in its territory.

12.

Bell Canada further submitted that in order to estimate new loop costs that would reflect the reclassifications of the central offices, it calculated the per-band loop costs using the costing methodologies and assumptions set out in Decision 2001-238. Bell Canada indicated that as expected, the band A, B and C loop costs that it calculated using this detailed analysis were different from the loop costs that the Commission mandated in Decision 2001-238, which did not reflect the wire centre reclassifications.

13.

Bell Canada noted that some of the differences are due to the approximations that the Commission would necessarily have had to make, given that full information was not available to it. When Bell Canada incorporated the detail unavailable to the Commission, slight modifications to the costs given in Decision 2001-238 resulted. Bell Canada calculated the combined weighted average loop cost for bands A, B and C to be $11.05. The company submitted that the average loop costs for these bands must be the same, with or without the wire centre reclassifications.

14.

The Commission notes that the weighted average loop cost for bands A, B and C implied by Decision 2001-238 is $10.68. The Commission confirms that in arriving at the loop rates set out in Decision 2001-238, it made several adjustments to ILEC costs to incorporate changes to the ILECs' proposed methods and assumptions. The Commission is of the view that the weighted average loop cost across the bands implied by the rates set in Decision 2001-238 should be the same with or without wire centre reclassifications. The Commission considers that if the same adjustments had been made to Bell Canada's loop cost information under the wire centre reclassifications, the weighted average loop cost for the aggregate of bands A, B and C would be expected to be the same as that determined in Decision 2001-238. Therefore, the Commission has included adjustments to bring the rates into line with Bell Canada's unbundled loop costs and rates set out in Decision 2001-238 for the aggregate of bands A, B and C.

15.

The Commission approves, on an interim basis, the revised Bell Canada loop rates set out in paragraph 20.

TCI-B.C.

16.

In Decision 2001-238, the Commission directed the reclassification of the following Band C wire centres into Band B: Kelowna, Prince George, Abbotsford, South Kamloops and Nanaimo.

17.

The competitors indicated that they agree with TCI-B.C.'s revised numbers and loop costs that incorporated the changed wire-centre classifications. According to the competitors, they have determined that TCI-B.C.'s revised loop costs for bands B and C comply, on an aggregate or averaged weighted sense, with the costing determinations in Decision 2001-238.

18.

In order to be consistent with the Commission's determinations in Decision 2001-238, the Commission has adjusted the proposed revised rates in band C for Type B loops by blending the rates for Type A and B loops. Specifically, at paragraph 69 of Decision 2001-238, the Commission determined that where Type B loop costs are less than Type A loop costs the loop costs and rates for each ILEC are to be based on the per-band weighted average unit cost of the combined Type A and B loops.

19.

The Commission finds that the weighted average loop cost for the aggregate of TCI-B.C.'s bands B and C comply with the costs adopted in Decision 2001-238.

20.

The Commission approves, on an interim basis, the revised TCI-B.C. loop rates set out as follows:

Interim revised loop rates for Bell Canada and TCI-B.C.

Band A

Band B

Band C

Bell Canada

Type A loops

$9.24

$13.25

$15.70

Type B loops

$11.59

$23.73

$36.42

TCI-B.C.

Type A loops

$18.24

$21.01

Type B loops

$19.01

$21.01

Revised loop rates for MTT's operating territory

21.

In Decision 2001-238, the Commission directed MTT to split the Halifax exchange (band A) into sub-band A1 (Bishop wire centre) and sub-band A2 (the rest of Halifax), noting that the cost differential resulting from the band A1/A2 split was sufficient to warrant the proposed change.

22.

However, the Commission also found that the cost differential that MTT reported between bands A1 and A was small, given the differences (in loop length and population density) between the Bishop wire centre and the average for the Halifax exchange. Therefore, the Commission directed MTT to provide detailed explanations for the differences in the capital costs between bands A1 and A, including a comparison of the cost per network access service (NAS), the capital cost breakdowns, and the average copper loop characteristics.

23.

With respect to the cost differential of sub-band A1 relative to band A, Aliant Telecom noted that:

24.

The Commission notes that under the band split, the per-metre loop capital cost for sub-band A1 is considerably higher than both sub-band A2 and the aggregate of sub-bands A1 and A2.

25.

The Commission considers that Aliant Telecom has not fully justified these cost differences. The Commission finds that the differences in the per-metre costs between sub-band A1, which includes the Halifax downtown core, and sub-band A2, which excludes the Halifax downtown core, are too large by comparison with the per-metre costs of other companies for similar serving areas.

26.

The Commission further notes that the weighted average loop capital cost per metre for the aggregate of sub-bands A1 and A2 is higher than that proposed by the company for band A assuming no split, which was used as the basis to determine MTT's band A loop rate set out in Decision 2001-238.

27.

In determining the revised loop costs and rates for sub-bands A1 and A2, the Commission has adjusted downwards the proposed per-metre capital costs for sub-band A1 such that the per-metre capital cost for the aggregate of sub-bands A1 and A2 is equal to that for band A assuming no split. This adjustment also includes the constraint that the weighted average total loop cost for the aggregate of sub-bands A1 and A2 is equal to the band A total loop cost implied by Decision 2001-238.

28.

The Commission approves, on an interim basis, the loop rates set out below:

Band A1

Band A2

Type A loops

$9.03

$12.64

Type B loops

$9.03

$12.64

29.

These loop rates are to replace the current band A loop rate of $11.41. The Commission notes that, with these changes, the cost differential between band A and sub-band A1 increases to 21%, by comparison with the 15% differential proposed by MTT.

30.

The Commission notes that in Decision 2001-238, identical rates were set for Type A and B loops within each band. The interim revised rates for Type B loops are likewise identical to the rates for Type A loops.

Interim rates

31.

The Commission notes that the rates set out above are approved on an interim basis, effective the date of this order, pending the conclusion of the proceeding on mark-up levels. The companies are hereby directed to issue forthwith tariff pages in accordance with the determinations in this order.

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