ARCHIVED - Telecom Order CRTC 2002-238

4.

On 13 March 2001, Bell Canada filed comments on Guèvremont's proposed 1999 CAT and NAT. Following two rounds of interrogatories, Guèvremont filed final audited financial statements for the years 1999 and 2000 on 7 May 2002.

Analysis and determinations

Deemed interest on loan

11.

In Téléphone Guèvremont Inc.'s final 1998 Carrier Access Tariff, Order CRTC 2000-785, 16 August 2000 (Order 2000-785),the Commission imputed an interest rate of 13 percent for a loan of $3.5 million by Guèvremont to an affiliated company. The Commission also indicated that it would re-evaluate the regulatory treatment of this loan should it remain outstanding beyond 31 December 2000.

12.

Guèvremont identified that the loan continued to be outstanding for 1999 and 2000 and that interest, calculated at a rate of 13 percent had been included in its calculations of 1999 and 2000 CATs. In its submission, the Company also stated that the loan was repaid in full in December 2000. However, Guèvremont's non consolidated financial statements, filed 7 May 2002, indicate that there continues to be an outstanding interest-free loan of $3,048,813 as of 31 December 2000.

13.

While the Commission considers that the deemed interest for this loan has been appropriately recognized in the calculations of the 1999 and 2000 CATs, the Commission will review the regulatory treatment of this interest-free loan in Guèvremont's 2001 CAT application.

Impact of slamming customers in 1999

14.

In a letter decision dated 24 December 1999, the Commission found that Guèvremont had converted its entire local exchange customer base from Bell Canada to a different long distance service provider without the prior consent of the customers, a practice that is known as slamming. The Commission determined that the company's actions had been in violation of the equal access rules set out in the Société d'administration des tarifs d'accès des télécommunicateurs (SATAT)'s, primary interexchange carrier/customer account record exchange (PIC/CARE) Access Customer Handbook (PIC/CARE manual), approved in Telecom Order CRTC 99-841, 30 August 1999.

15.

The Commission notes that when customers choose to transfer to a different primary interexchange carrier (PIC), the tariffs of the local exchange carrier (LEC) provide for a charge associated with the activity of the transfer. This charge is also known as a PIC selection charge. In addition, all LECs have a specific tariff charge that is applicable when a customer is transferred without authorization. This charge is also known as a slamming charge. Both the PIC selection charge and slamming charge are applied against the interexchange carrier (IXC) having requested the transfer of the customer.

16.

Guèvremont noted that, in 1999, it had transferred 6,451 subscribers to Maskatel's long distance service from Bell Canada's long distance service. Guèvremont indicated that it had made the transfer on its own initiative and not as a result of an IXC request. Therefore, there was no IXC to apply the tariffs to, nor could it apply tariffs to itself.

17.

In its interrogatory, the Commission asked Guèvremont to explain why the Commission should not impute the revenues it should have received pursuant to the application of the PIC selection and slamming tariffs.

18.

In response, Guèvremont submitted that the Commission should not impute revenues for the following reasons:

19.

The Commission notes that the equal access provisions in Guèvremont's General Tariff came into force with the implementation of equal access in Guèvremont's territory. Moreover, the implementation of equal access in other independent telephone companies' territories did not result in Bell Canada long distance service subscribers being slammed.

20.

The Commission finds that Guèvremont's claim that it had knowledge of only Maskatel's identification code is not reasonable, as Bell Canada was the default long distance provider. The Commission considers that Guèvremont could easily have contacted Bell Canada to obtain its CIC.

21.

Guèvremont also claims that Bell Canada had not registered as a long distance provider pursuant to the PIC/CARE Manual at that time and that the tariffs only apply to companies that are duly registered. The Commission sees no reason why Bell Canada, as the default long distance service provider of Guèvremont's subscribers, would have to register as a new long distance service provider pursuant to the PIC/CARE Manual.

22.

Bell Canada submitted that slamming charges should be assessed by Guèvremont against the competitive local exchange carrier and the long distance provider, to which the customers were transferred without their consent.

23.

The Commission notes that there is no evidence that Guèvremont ever transferred its customers to another local service provider. Based on the record of this proceeding, the Commission finds that Guèvremont simply transferred their customers to another long distance provider.

24.

Guèvremont further submitted that it had only incurred costs of $1.28 (two minutes of one employee's time) to make the initial conversion of all the affected customers, and an additional $1.28 to make the re-conversion.

25.

The Commission notes that Guèvremont requested and received approval of the PIC selection and slamming tariff charges based on estimated costs of the transfer activities. Although it is reasonable to expect some economies of scale would be realized when transferring all customers at once, rather than on an individual basis, the Commission notes that Guèvremont does not have an approved tariff for bulk transfers of this nature. Accordingly, the Commission finds that Guèvremont's estimated costs for the bulk transfer to be unrealistic.

26.

The Commission considers that Guèvremont should have realized revenues in 1999 in accordance with its approved tariffs from the unauthorized transfer of its customers from Bell Canada to another long distance provider, namely Maskatel Inc., and has adjusted the 1999 direct toll amounts as detailed in paragraphs 32 - 35.

Broadband Investment

27.

InDecision 99-5,the Commission directed small independents in Ontario and Quebec to file detailed information on broadband applications including investment levels and planned use for any fibre investments as part of their annual CAT filings.

28.

The Commission notes that the intent of the directives of Decision 99-5 was to ensure that independent telephone companies did not include inappropriate broadband investmentsand expenses in the calculation of their CATs.

29.

Guèvremont indicated that it has no plans to use fibre investments for broadband applications and confirmed that the investment in fibre for 1999 and 2000 were reported according to the methodology outlined in Decision 96-6 and 99-5.

30.

The Commission is satisfied with Guèvremont's acknowledgement that its fibre investment is not planned for broadband purposes and that the investment has been appropriately reported for purpose of calculating the CAT.

Commission determination - 1999 CAT and NAT

Contribution requirement and rate

31.

The Commission finds that Guèvremont's calculation of the proposed 1999 contribution requirement is in accordance with Commission directives in Decision 99-5 and Order 2000-785. Therefore, the Commission approves Guèvremont's proposed 1999 contribution requirement of $65,132 with a corresponding rate of $0.0031 per conversation minute.

Direct toll component and rate

32.

The Commission has reduced Guèvremont's proposed direct toll component by the amount of imputed revenues corresponding to the application of the relevant tariff charges for the slamming of Bell Canada's long distance service subscribers as noted in paragraph 26.

33.

The imputed revenues include $19.81 for each access line transferred from Bell Canada to Maskatel, $52.88 for each access line transferred without the subscriber's consent and $19.81 for each access line returned to Bell Canada from Maskatel.

34.

Therefore, Guèvremont's proposed 1999 direct toll component is reduced by an amount of $596,717.

35.

The Commission notes that Guèvremont's proposed direct toll component for 1999 is $370,103. The Commission considers that any reduction to the direct toll component cannot exceed the amount proposed. Therefore, the Commission approves a 1999 direct toll component of zero.

Network component and rate

36.

The Commission finds that Guèvremont's calculation of the proposed 1999 network component is in accordance with Commission directives in Decision 99-5, therefore the Commission approves Guèvremont proposed 1999 network component of $135,871 with a corresponding rate of $0.7732 per quarter mile per month.

Commission determination - 2000 CAT and NAT

Contribution requirement and rate

37.

The Commission finds that Guèvremont's calculation of the proposed 2000 contribution requirement is in accordance with Commission directives in Decision 99-5 and Order 2000-785. Therefore, the Commission approves Guèvremont's proposed 2000 contribution requirement of $0.00

Direct toll component and rate

38.

The Commission finds that Guèvremont's calculation of the proposed 2000 direct toll component is in accordance with Commission directives in Decision 99-5. Therefore, the Commission approves Guèvremont's proposed 2000 direct toll component of $338,274 with a corresponding rate of $0.0163 per minute.

Network component and rate

39.

The Commission finds that Guèvremont's calculation of the proposed 2000 network component is in accordance with Commission directives in Decision 99-5. Therefore, the Commission approves Guèvremont's proposed 2000 network component of $139,721 with a corresponding rate of $1.2348 per quarter-mile per month.

Implementation

40.

The Commission directs Guèvremont to:

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