ARCHIVED - Telecom Decision CRTC 2002-5

Telecom Decision CRTC 2002-5

Ottawa, 1 February 2002

CRTC sets deadlines for co-location common cost rebates

Reference: 8622-A4-16/01

Summary

The Commission establishes deadlines and associated conditions for the administration of the co-location cost rebate process by incumbent local exchange carriers (ILECs). Specifically, deadlines are to be implemented by ILECs for invoicing common costs to subsequent co-locators, notifying primary co-locators who are entitled to a rebate, and paying co-locators; an ILEC can withhold co-location site access from a subsequent co-locator until payment of common costs is received.

Background

1.

On 24 September 2001, AT&T Canada Corp. and AT&T Canada Telecom Services Company (collectively, AT&T Canada), filed a Part VII application on behalf of the Coalition for Better Co-location (the Coalition), a group of competitive telecommunications service providers. The Coalition is comprised of AT&T Canada, Call-Net Enterprises Inc., GT Group Telecom Services Corp., and Futureway Communications Inc.

2.

In this application, the Coalition requested changes to the terms and conditions governing the common cost rebate process. The Commission established the process in Telecom Decision CRTC 97-15, Co-location, dated 16 June 1997. Common costs are incurred when, in the course of building a co-location space for a customer, the incumbent local exchange carrier (ILEC) creates common space or infrastructure within a central office that will be shared by any subsequent co-locators. The construction fee or common costs may include, but are not limited to, costs for such items as perimeter walls, additional riser requirements, lighting and environmental conditioning. All the common costs are initially billed to the first co-locating customer. When subsequent customers co-locate in the same central office, they are assessed and billed for their proportionate share of these common costs. This recovered amount is reimbursed equally to the interconnecting carriers with Type 1 co-location already in that central office.

3.

In July 2001, the Co-location Working Group of the CRTC Interconnection Steering Committee reached consensus (consensus report CLRE019) with respect to the common cost rebate process. The Commission approved the consensus report in Decision CRTC 2001-511 on 20 August 2001. The Coalition indicated in CLRE019 that it disagreed with Section 3.2 of the report and would file a Part VII application with the Commission to resolve its concerns. Section 3.2 requires ILECs to issue common cost rebates to co-location tenants within 60 days of receipt of payment from subsequent co-locators. The Coalition's Part VII application sought orders from the Commission to replace section 3.2 with specific timeframes for:

a) invoicing all common costs within 30 days after completion of the build, and payment within 30 days after receiving the invoice;

b) notifying the primary co-locators of a rebate within 30 days after completion of the build;

c) reimbursing the primary co-locators regardless of whether the subsequent co-locator has paid the ILEC within 90 days after completion of the build;

d) levying late payment charges on the ILEC if the rebate is not received within the timeframe sought by the Coalition; and

e) an interim order directing the respondents to immediately file revisions to their associated co-location tariffs to reflect the requirements set out in c) and d) above.

4.

Bell Canada, on behalf of itself, Aliant Telecom Inc., MTS Communications Inc. and Saskatchewan Telecommunications (collectively, Bell Canada et al.), and TELUS Communications Inc. (TCI), (collectively, the ILECs) were named as respondents. Among other things, the ILECs opposed the Coalition's provision that common cost rebates be issued regardless of whether payment of the rebate has been received by the ILEC. Bell Canada et al. proposed instead to reserve the right to withhold access to co-location sites until payment for any "non-recurring" co-location costs were received.

5.

The Commission notes that non-recurring costs are separate and distinct from common costs. Non-recurring co-location charges are separate from common costs as they relate only to any charges for work done to meet the requirements of a subsequent co-locator. Primary co-locators are not rebated for a subsequent co-locator's non-recurring costs.

6.

The principles underlying the current common cost rebate process are:

• the ILEC issues an invoice to the new or subsequent co-locator for common costs;

• the ILEC informs or notifies the primary co-locators that, with the arrival of a subsequent co-locator, they are entitled to a rebate for a portion of the initial common co-location costs;

• the subsequent co-locator pays the invoice; the ILEC processes the proportionate amount of the common costs and issues a rebate to the primary co-locators; and

• the subsequent co-locator pays late payment charges if the account is overdue.

The Coalition's request

7.

The Coalition submitted that the common cost rebate disbursement process in CLRE019, Section 3.2, does not provide a fair or reasonable basis for disbursement of rebates. It shields the ILEC from any risk or inefficiency inherent in the ILEC processes at the expense of the primary and subsequent co-locators. There is no substantial motivation for the ILEC to ensure that co-locators are invoiced for services in a timely manner, are paying invoices on time, and are receiving rebates accordingly. While the ILEC alone determines how many co-locators to prepare a common area for, and how much construction costs will be, it is the primary co-locators alone who must assume all the risks and costs associated with any prolonged delays.

8.

In the Coalition's view, ILECs have, on numerous occasions, avoided issuing rebates on the basis of the complexity and confusion inherent within a process that they themselves designed. While CLRE019 provides, for the first time, a reasonable means of documenting and communicating co-location activity, it does not adequately address the financial requirements of this industry. It is unfair for primary co-locators to bear the cost and risk of waiting to receive rebates when delays are caused by the ILEC who has no incentive to administer the rebate process efficiently. To date, the rebate disbursement process has been random at best. There is currently no timeframe within which the ILEC must bill subsequent co-locators or rebate primary co-locators.

9.

The Coalition's monitoring of the ILEC invoicing process showed, in its view, inconsistencies in billing practices and no accountability for rebate administration. For example, as of the date of the Coalition's application, TCI had yet to issue invoices to AT&T Canada for a significant amount of estimated one-time charges from a number of projects completed in 2000 and only 5% of one-time project charges for 2001. According to the Coalition, TCI issued rebates to AT&T Canada in mid-2000 for four co-locates in spite of the fact that multiple co-locators had space since as early as mid-1999. The Coalition stated that similarly, Bell Canada has taken up to nine months or more to issue rebates.

10.

In order to ensure that ILECs have sufficient incentives to invoice and collect payments promptly, the Coalition proposed specific timeframes and consequences for parties who do not respect the proposed timeframes.

The ILECs' proposals

11.

Bell Canada et al. strongly opposed the suggestion that common cost rebates be issued regardless of whether or not payment of the amount to be rebated has been received by the ILEC. According to Bell Canada et al., this would result in unreasonable financial risk for the ILEC. Bell Canada et al. proposed that these risks could be mitigated and the Coalition's suggested payment intervals could be met by ILECs if they could reserve the right to withhold access to co-location sites until they received payment for any non-recurring co-location costs. In Bell Canada et al.'s view, the onus would then be on the ILEC to ensure that the invoice for any non-recurring co-location charges identified in the Secondary Report (prepared by the ILEC, which confirms details about costs and timeframes for a co-locator applicant) was issued at least 40 calendar days in advance of the co-location effective date. The onus would be on co-locators to ensure that payment was made to the ILEC prior to transfer of responsibility for the co-location space. In short, if an ILEC issues the appropriate invoice at least 40 calendar days in advance of the established co-location effective date, then any failure by the co-locator to provide payment would result in delays to the co-location effective date until the ILEC was able to confirm receipt of payment. Bell Canada et al. proposed that if the ILEC failed to issue the invoice to the subsequent co-locator within the 40 days before the co-location effective date, it would issue the rebate to the primary co-locators within 90 days of a subsequent co-locator's co-location effective date, regardless of whether the invoice is issued, and regardless of whether the subsequent co-locator had paid, after which late payment charges would apply.

12.

TCI indicated that the Coalition's request is a one-sided approach that does not take into account the administrative costs borne solely by the ILEC to administer, process, bill, collect and disburse common cost rebates.

13.

TCI submitted that any process adopted for common cost rebates must incorporate sufficient incentives for a subsequent co-locator to pay its portion of the common costs in a timely manner. This would facilitate processing rebates to primary co-locators, without imposing an undue level of financial risk on TCI caused by:

a) the high incidence of late payments and bad debts associated with co-location arrangements;

b) issuing rebates before receiving payment from the subsequent co-locator; and

c) imposing late payment charges on TCI.

14.

TCI stated that if the Coalition's request to process rebates whether or not the subsequent co-locator pays is adopted, it would need to introduce an administrative fee to cover its administration costs, in particular, bad debt expenses associated with charges for common costs. TCI did not expand on the magnitude of administrative costs but proposed an alternative arrangement that would avoid such a requirement while at the same time, would facilitate the timely processing of rebate credits.

Coalition reply comments

15.

In a supplemental reply, the Coalition acknowledged that Bell Canada et al.'s counter proposal provides for rebates to be issued to primary co-locators regardless of the invoicing practices of the ILEC. Also, it would ensure that the primary co-locators are notified within 30 days following the subsequent co-locator's co-location effective date.

16.

The Coalition opposed the suggestion that the ILEC should wait to issue rebates until a subsequent co-locator pays the ILEC, and in Bell Canada et al.'s case, until a subsequent co-locator submits all non-recurring co-location costs in addition to the common costs, prior to the co-location effective date. Also, in its view, although the TCI proposal may offer an incentive for the co-locator to pay invoices in a timely manner, there is no incentive that would ensure that TCI issues the rebates in a timely manner (i.e. no late payment charges). The Coalition submitted that TCI's proposal does not inform primary co-locators of build completion; therefore, primary co-locators would have no way of knowing if a subsequent co-locator has occupied space and, hence, no way of knowing if a rebate is forthcoming.

17.

The Coalition submitted that considering the implication of Bell Canada et al.'s proposal that the co-location common costs would be fully known and invoiced 40 days before the co-location effective date, it is not clear why it would take the ILEC so long to issue the rebates (90 days after the co-location effective date).

Commission's determinations

18.

The Commission notes that the common cost rebate process is associated solely with the upfront construction charges required to cover the costs of central office building modifications, which are required to provide Type 1 co-location to all interconnection carriers in a particular central office. These common costs are paid in total by the first co-locator(s) accessing the central office. Non-recurring costs are associated only with the specific requirements of a subsequent co-locator, and are irrelevant to what is owed to the primary co-locators. With respect to Bell Canada et al.'s proposal to include all non-recurring co-location costs, the Commission notes that these costs were not part of the discussions that led to consensus report CLRE019 dealing solely with common cost rebates and are not within the scope of the Part VII application. In the Commission's view, it is not necessary or appropriate to deal with any issues relating to non-recurring costs in this proceeding. Therefore, this determination does not deal with non-recurring costs but with common costs only.

19.

The Commission notes that the ILECs did not dispute the Coalition's views about the invoicing process, which noted lengthy delays in the administration of the rebate processes. All parties to this proceeding agreed that timeframes should be established in the common cost rebate process to invoice new co-locators, collect payment and issue rebates to primary co-locators in a timely manner. Each party contributed its own proposal on the timeframes they felt should be adopted. The Commission notes that until the primary co-locators receive a rebate, they bear the total costs of the co-location space created by the ILEC for them and any subsequent co-locators. As primary co-locators have made the initial investment, in the Commission's view, they should not be penalized with unnecessary delays.

Invoicing the subsequent co-locator

20.

The Coalition proposed that the common costs invoice be issued within 30 days of the completion of the build (i.e. 30 days after the co-location site is built) while Bell Canada et al. proposed invoicing non-recurring charges 40 days prior to the co-location effective date. TCI proposed to invoice common costs 30 days prior to the co-location effective date.

21.

The Commission considers that using the completion of the build as a target date does not necessarily represent access to the co-location site. Therefore, using the co-location effective date would be more appropriate. The co-location effective date is entered into the Secondary Report and represents the planned date when a subsequent co-locator would like to have its co-location arrangement come into effect. The Commission notes that using the co-location effective date as a benchmark would provide subsequent co-locators with lead time before taking possession of the co-location site (i.e. 40 days) to inspect and accept the space, and to ensure accurate invoicing. The Commission notes that common costs would not be the likely source of billing disputes as these costs are known and subsequent co-locators are permitted to conduct pre-selection site visits before filing an application for co-location space. Invoicing 40 days before the co-location effective date with payment within 30 days as discussed below provides an additional 10-day window to resolve any billing discrepancies.

22.

The Commission therefore directs that ILECs issue invoices to subsequent co-locators for common costs 40 days prior to the co-location effective date.

Notifying the primary co-locators

23.

The Coalition requested that the primary co-locators be notified of a rebate simultaneously within 30 days after completion of the build, while Bell Canada et al. proposed notifying the primary co-locators of a rebate within 30 days after the co-location effective date, and TCI did not propose any notification process. The Commission notes industry consensus at Section 2.3 of CLRE019 that all co-locators entitled to a rebate be notified by the ILEC by distributing to them a copy of the Common Cost Disbursement Form from the Secondary Report. While the consensus report does not establish a deadline for the ILEC to send the form, the Commission sees no reason why primary co-locators should not be informed promptly that a subsequent co-locator will occupy the space.

24.

The Commission considers that the primary co-locators would receive sufficient notification of a rebate if the ILEC notified them of a subsequent co-locator application 10 days after the co-location effective date. On the date of build completion, the subsequent co-locator may not have accessed the co-location site, whereas the co-location effective date reflects possession of the site. Until the applicant occupies the co-location site, the co-location effective date may not be accurate, as the subsequent co-locator could possibly abandon plans to co-locate. As of the co-location effective date, the subsequent co-locator will have taken possession of the site and the ILEC would have the common costs invoice information at hand to inform the primary co-locators that a rebate is forthcoming.

25.

The Commission therefore directs ILECs to notify the primary co-locators of a rebate within 10 days after the co-location effective date.

Payment timeframes and consequences

26.

Although all parties agreed to a 30-day period for payment to the ILEC of the subsequent co-locator's invoice, the Coalition requested that the 30-day period be after receipt of the invoice while the ILECs proposed that it be no later than the co-location effective date. In addition, both Bell Canada et al. and TCI proposed withholding access to a subsequent co-locator's co-location site until payment is received. Bell Canada et al. and the Coalition proposed applying late payment charges to a subsequent co-locator's overdue account.

27.

The Commission notes that with the Coalition's proposal that payment is due after the completion of the build, this date could be very close to, or coincide with, the co-location effective date, bringing payment due after the co-location effective date. The ILEC would therefore, not be in a position to withhold access to the site as the subsequent co-locator would presumably have taken possession of the site on the co-location effective date. As a consequence, the incentive for a subsequent co-locator to pay before entering its co-location site would not be as strong.

28.

The Commission notes TCI's concerns that late payments and bad debts associated with co-location impose an undue level of financial risk on ILECs. Withholding access to co-location space until payment of common costs is received by the ILEC should motivate subsequent co-locators to pay promptly, which in turn should accelerate the rebate process.

29.

The Commission notes the Coalition's criticism of TCI's billing practices and the Coalition's belief that TCI will not improve its practices to the point of ensuring that the subsequent co-locators are actually invoiced 30 days prior to the co-location effective date. The Commission considers that TCI's proposal does not provide any consequences to the ILEC if invoices are not issued within a specific timeframe. For example, TCI could potentially cause the co-location effective date to be postponed until it issued the invoice and the subsequent co-locator paid, thus placing subsequent co-locators at a disadvantage by delaying access to their co-location site.

30.

The Coalition disagreed with Bell Canada et al. that the non-recurring co-location costs be paid within the proposed timeframe of 40 days before the co-location effective date, as these charges have nothing to do with the initial co-locators and are irrelevant to this dispute. Bell Canada et al. clarified in a further reply that it proposed a "right to require" payment of non-recurring co-location charges prior to the co-location effective date. They indicated that there were instances in which they will be unable to issue invoices 30 days prior to the co-location effective date. As noted in paragraph 18, the primary co-locators do not receive a rebate for a subsequent co-locator's non-recurring charges. The issue at hand is related strictly to the common co-location costs and rebates of those costs only. The Commission considers that the primary co-locators should not have to wait for a rebate if the subsequent co-locator pays its proportionate share of the common costs on time.Rebates should be issued as soon as possible after the ILEC receives payment of the common costs and access to the site should not be withheld if non-recurring costs are in arrears.

31.

The Commission directs that payment of common costs is due 30 days from the invoice and the ILEC should first apply any partial payments to common costs (i.e. before applying to non-recurring costs). Where the ILEC invoices common costs to the subsequent co-locator 40 days in advance, access to the co-location site can be withheld from the subsequent co-locator until payment of common costs is received, thus delaying the co-location effective date. Late payment charges should not apply when access to the co-location site is withheld. In those cases where the ILEC does not issue an invoice for common costs at least 40 days in advance of the co-location effective date, access to the co-location site should not be withheld, but late payment charges would apply.

Timeframes to issue rebates and consequences

32.

Parties in this proceeding have proposed different rebate due dates: 30 days from receiving payment (TCI), 90 days from the co-location effective date (Bell Canada et al.) and 90 days from completion of the new co-location build whether the ILEC receives payment from the subsequent co-locator, or not (the Coalition).

33.

In Decision 97-15, the Commission approved the approach whereby the initial construction costs are to be charged in whole, without a markup, to the primary co-locators requesting Type 1 co-location. This approach provided for primary co-locators to receive a proportionate rebate if subsequent co-locators use Type 1 co-location service in that same central office. The common costs are to be administered by the ILEC. The Commission notes that requiring the ILEC to issue rebates, in all circumstances, regardless of whether they have received payment of the common costs from a subsequent co-locator would put a financial burden on the ILEC for a service that it is required by the Commission to provide to competitors.

34.

However, the Commission considers that it is unfair for primary co-locators to wait lengthy periods of time to receive rebates. The Commission notes that instead, there should be incentives for the ILEC to administer and issue rebates as soon as possible after receiving payment of the subsequent co-locator's share of common costs. That is why the Commission directed above that subsequent co-locators be allowed to access their site if the ILEC fails to invoice common costs 40 days prior to the co-location effective date.

35.

The Commission considers that issuing rebates 30 days from the co-location effective date appears to be reasonable. The ILEC will have the necessary information to determine the amount of the rebate and should have received payment for common costs by the co-location effective date, unless the invoice was not issued 40 days before the planned co-location effective date. Furthermore, the Commission directs that, where the ILEC doesn't issue the invoice at least 40 days prior to the co-location effective date, the ILEC still must issue the rebate within 30 days of the co-location effective date. As noted above, in these cases, the ILEC could assess late payment charges against the subsequent co-locator.

36.

With respect to late payment charges, currently co-locators cannot assess such charges to the ILEC for delays in issuing rebates, but in turn are assessed late payment charges by the ILEC when an invoice is overdue. The Commission considers that without set deadlines by which the ILEC is required to pay rebates to primary co-locators, there is no incentive for the ILEC to issue rebates promptly. The Commission is of the view that all parties will be ensured fair and equal treatment if specific timeframes are established to issue rebates and if both parties are permitted to assess late payment charges at the late payment charges rates set out in ILEC tariffs.

37.

In view of the above, the Commission directs that an ILEC be subject to the same late payment charges as tariffed when rebates to primary co-locators are overdue, i.e. not issued within 30 days from the co-location effective date.

Summary of determinations

38.

The Commission makes the following determinations:

a) the determinations made in this decision deal only with common costs and not non-recurring charges;

b) the ILEC will invoice common costs to subsequent co-locators 40 days prior to the co-location effective date;

c) the ILEC will notify the primary co-locators of the rebate within 10 days after the co-location effective date;

d) payments of common costs are due 30 days from the date of the invoice. Where the ILEC issues the invoice at least 40 days prior to the co-location effective date, access to the co-location site can be withheld from the subsequent co-locator until payment of common costs is received. Late payment charges should not apply when access to the co-location site is withheld. Where the ILEC issues the invoice less than 40 days prior to that date, access to the co-location site may not be withheld but late payment charges would apply on overdue accounts. In all cases, the ILEC is directed to apply partial payments to common costs first, and rebates are not dependent on payment of non-recurring charges;

e) rebates to primary co-locators are to be issued 30 days after the co-location effective date, in all circumstances. The ILEC is subject to late payment charges where rebates are issued past 30 days from the co-location effective date, at the same rates as are tariffed; and

f) the Commission directs the respondents to the Part VII application to file revisions to their associated co-location arrangement tariffs within 30 days of the date of this Decision to reflect the determinations listed above.

Secretary General

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