ARCHIVED - Telecom Decision CRTC 2002-44

Telecom Decision CRTC 2002-44

Ottawa, 2 August 2002

Thunder Bay Telephone - Tariffs for partial cable-distribution system and support structure services

Reference: Tariff notices 94 and 94A

In this decision, the Commission approves an application by The Corporation of the City of Thunder Bay - Telephone Division (Thunder Bay Telephone) to revise tariff pages setting out the terms, conditions and rates for the lease of partial cable systems and support structures.

During the proceeding leading to this decision, Shaw Communications Inc. submitted that it required costing information from Thunder Bay Telephone to assess the reasonableness of Thunder Bay Telephone's proposed monthly rate for the lease of the partial cable distribution system. The Commission concludes that Thunder Bay Telephone is not required to submit costing information to support its application.

The application

1.

The Corporation of the City of Thunder Bay - Telephone Division (Thunder Bay Telephone) filed tariff notice (TN) 94, dated 6 April 2001, for approval of proposed tariff pages, Arrangements for Cable-Television Undertakings and Telecommunications Carriers, setting out the terms, conditions and rates for partial cable-distribution systems (also known as Partial Systems offering; hereinafter referred to as "PSO") and support structure services.

2.

Thunder Bay Telephone stated that the proposed tariffs were comparable to those of other telephone companies providing arrangements for cable-television undertakings and telecommunication carriers in the province of Ontario and that its proposals were consistent with the regulatory framework set out in Regulatory framework for the independent telephone companies in Quebec and Ontario (except Ontario Northland Transportation Commission, Québec-Téléphone and Télébec ltée), Telecom Decision CRTC 96-6, 7 August 1996 (Decision 96-6).

Comments on procedural matters

Shaw's comments

3.

In its 25 April 2001 comments, Shaw Communications Inc. (Shaw) stated that it was leasing cable distribution facilities from Thunder Bay Telephone and that it was the only potential customer of the proposed PSO service.

4.

Shaw noted that Thunder Bay Telephone had not filed any costing information to support its proposed PSO rates and that it required such information in order to prepare an effective response to TN 94. Shaw also noted that Thunder Bay Telephone had not filed a copy of the partial system agreement (PSA) that is incorporated by reference in the PSO tariff. Shaw requested that the Commission establish an interrogatory process to be followed by the filing of written comments.

Thunder Bay Telephone's reply

5.

In reply comments dated 2 May 2001, Thunder Bay Telephone noted that the tariffs and agreements were modelled after existing Bell Canada/Stentor arrangements. Thunder Bay Telephone stated that the draft PSA had been forwarded to Shaw for its comments in June 2000 and that the draft tariff pages had been with Shaw since 24 March 1999. In Thunder Bay Telephone's view, Shaw had ample opportunity to discuss the tariffs.

6.

Thunder Bay Telephone submitted that there was no requirement for costing information in the present case and that the information provided in its tariff filings was consistent with the filing requirements set out in Decision 96-6. In addition, Thunder Bay Telephone submitted that Shaw's proposed interrogatory process was inconsistent with Decision 96-6 and there was nothing to be added that would further the public interest.

Ruling on procedural matters

7.

In a letter dated 7 June 2001, the parties were notified that the interrogatory process proposed by Shaw was not necessary. Shaw was given 20 days to comment on TN 94 and Thunder Bay Telephone 10 days to reply.

Comments on TN 94

Shaw's comments

8.

In its submission dated 27 June 2001, Shaw stated that its comments related solely to Thunder Bay Telephone's proposed PSO service as it had no comments on the proposed support structure service. In particular, Shaw noted that Thunder Bay Telephone's proposed monthly rate of $1.00 per 30 metres of cable for its PSO service represented an increase of approximately 200% over the negotiated rate of $0.346 per 30 metres of cable that it was currently paying for the service.

9.

Shaw stated that since Thunder Bay Telephone had refused to file a cost study, it had been necessary to assess the reasonableness of the proposed rates on the basis of the costing information filed by Bell Canada for its PSO service. Shaw submitted that only certain cost elements in Bell Canada's cost study applied to Thunder Bay Telephone and that the monthly recurring cost for the elements that applied to Thunder Bay Telephone amounted to $0.71 per 30 metres of cable.

10.

Shaw noted that the PSA had not been filed with TN 94 as no consensus had been reached on the terms of the PSA. Shaw submitted that it would therefore be inappropriate to approve Thunder Bay Telephone's proposed PSO tariff prior to consideration and approval of the associated PSA. In Shaw's view, it would not be possible to define the services that Thunder Bay Telephone proposed to offer in return for the monthly PSO rate and, by implication, assess the appropriateness of that rate, without knowledge of the terms of the PSA.

11.

Shaw also stated that it was willing to purchase the PSO plant that Thunder Bay Telephone currently leases to it for fair market value and that, following purchase of the PSO plant, it would subscribe to Thunder Bay Telephone's PSO service, in accordance with the terms of its approved tariff.

Thunder Bay Telephone's reply

12.

In its reply, dated 6 July 2001, Thunder Bay Telephone stated that it was prepared to lower the monthly rate for its PSO service as it recognized that certain cost elements identified in the Bell Canada cost study were either specific to Bell Canada or would be recovered by Thunder Bay Telephone in another fashion. Accordingly, Thunder Bay Telephone filed TN 94A proposing a monthly rate of $0.710 per 30 meters of cable.

13.

Thunder Bay Telephone also stated that it had anticipated that the PSA would have been signed and forwarded to the Commission almost immediately following the filing of TN 94 as Shaw had indicated that it was not proceeding with the purchase of PSO plant. Thunder Bay Telephone submitted that it had thought that it had reached consensus with Shaw on the PSA as of June 2000 and that it would therefore be appropriate to set the effective date of its PSO tariff retroactive to 1 January 2001.

14.

Thunder Bay Telephone noted that it had received further comments from Shaw on the PSA. Thunder Bay Telephone stated, however, that it considered the PSO tariffs to be consistent with the intent of the PSA and that it believed that the tariffs could be approved in advance of the PSA.

15.

Thunder Bay Telephone also stated that, while Shaw had declined a previous opportunity to purchase PSO plant, it remained prepared to reopen negotiations regarding the sale of this plant.

Comments on TN 94A

Shaw's comments

16.

In comments dated 7 August 2001, Shaw stated that, while it was pleased with Thunder Bay Telephone's decision to reduce the monthly rate for the PSO service, it remained of the view that additional costing information was required to determine whether the proposed rate was just and reasonable. Shaw noted that, based on Bell Canada's cost study, approximately $0.31 of the Bell Canada monthly costs related to building and maintenance costs associated with pole ownership. In Shaw's view, Thunder Bay Telephone's costs differed from those of Bell Canada because Thunder Bay Telephone owns very few poles while Bell Canada owns most of the poles that support its PSO plant. In this regard, Shaw noted that most of Thunder Bay Telephone's PSO plant are attached to poles owned by Thunder Bay Hydro. In Shaw's view, the recovery by Thunder Bay Telephone of pole costs of $0.31 per month per 30 meters of cable could only be found to be just and reasonable if Thunder Bay Telephone could demonstrate that its pole costs were similar to Bell Canada's costs, despite the significantly different circumstances of the two companies.

17.

Shaw stated that it was opposed to Thunder Bay Telephone's request that its tariffs be approved retroactively to 1 January 2001. In addition, Shaw reiterated its view that it would not be in the public interest to make a determination on the proposed PSO tariff until all elements of the service, including the PSA, were submitted to the Commission for review and comment by interested parties. Shaw noted, however, that there was no reason to delay approval of the support structure service tariff, as all elements of this service were currently before the Commission.

18.

Finally, Shaw requested that the Commission consider initiating an assisted dispute resolution process to assist the parties in negotiating the sale of Thunder Bay Telephone's PSO plant, in accordance with the principles established by the Commission in respect of Bell Canada's sale of its PSO plant to PSO service customers.

Thunder Bay Telephone's reply

19.

In its reply comments dated 3 October 2001, Thunder Bay Telephone added that, while it was willing to reopen negotiations regarding the sale of its PSO plant, it was not prepared to take part in a dispute resolution process premised on events that have already occurred outside of its serving area.

Commission determination

20.

In Decision 96-6, the Commission established, for the small independent telephone companies in Ontario and Quebec, a regulatory framework that favoured minimum regulatory intervention. In keeping with this objective, the Commission found that an economic study in support of a tariff filing would only be required in the following circumstances:

· in support of filings for new services;

· when proposing rates for a service that are not comparable to rates approved by the Commission for other telephone companies for the same service;

· for rate reductions, where there are concerns that rates may not make an appropriate contribution to the local/access shortfall; and

· where there is a potential for anti-competitive pricing.

21.

The Commission notes that Thunder Bay Telephone's proposal represents a rate increase for an existing service from $0.346 to $0.71 per 30 meters of cable per month. The Commission notes further that, Thunder Bay Telephone's proposed monthly rate is not comparable to the rate of $1.28 approved by the Commission for Bell Canada's PSO service. However, since the $0.71 rate is substantially lower than the rate approved for other telephone companies offering the same service, and in particular the $1.28 Bell Canada's rate, the Commission does not consider it appropriate to require an economic study in support of the proposed rate. Such a requirement would, in these circumstances, be inconsistent both with the Commission's intent in Decision 96-6 to limit the filing requirements for small independent telephone companies, as well as with the pricing framework set out in Regulatory framework for the small incumbent telephone companies, Decision CRTC 2001-756, 14 December 2001.

22.

The Commission notes that the parties have been negotiating for an extended period of time and that no consensus has been reached on the terms of the PSA. The Commission notes, however, that the parties have modelled the PSO tariff and the PSA on existing Bell Canada/Stentor arrangements that have been approved by the Commission. Accordingly, the Commission does not find it appropriate to delay making a determination on the proposed PSO tariff pending its review of the PSA, as had been suggested by Shaw. The Commission expects that the PSA will be similar to that of Bell Canada and that it will reflect the rates, terms and conditions of TN 94 as modified by TN 94A.

23.

The Commission finds that Thunder Bay Telephone did not make a persuasive case for approving the rates retroactive to 1 January 2001.

24.

In light of the foregoing, the Commission approves TN 94, as modified by TN 94A, to take effect as of the date of this decision.

25.

The Commission notes Thunder Bay Telephone's willingness to reopen negotiations regarding the sale of its PSO plant. Accordingly, the Commission considers Shaw's request for a dispute resolution process to be premature at this time.

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