ARCHIVED - Broadcasting Public Notice CRTC 2002-13

Broadcasting Public Notice CRTC 2002-13

See also: 2002-13-1, 2002-13-2

Ottawa, 8 March 2002

Call for comments - cable inside wire lease fee

Introduction

1.

In Public Notice CRTC 1997-150 dated 22 December 1997, the Commission introduced the Broadcasting Distribution Regulations (the Regulations). At that time, the Regulations included a requirement that the licensee of a distribution undertaking offer to transfer cable inside wire to the customer, upon notice that the customer wishes to terminate basic service. This approach was intended to ensure that customers obtained the full benefits of competition in the distribution of broadcasting services by removing barriers to competitive access caused by cable company ownership of inside wire. For single-unit dwellings (SUDs), the Commission considered a flat rate of $5.00 as appropriate compensation for the transfer. For MUDs, the Commission considered that the transfer rate would be best established by a multi-party working group, i.e., a group operating under the auspices of the CRTC Interconnection Steering Committee (CISC).

2.

Following some months of discussion by a CISC working group responsible for inside wire (the CISC working group), the Canadian Cable Television Association (CCTA) announced that its members were not offering inside wire for sale to customers, as required by the Regulations, in either single or multiple unit dwellings. As a result, on 1 February 1999, new entrant licensees filed an application requesting that the Commission determine the CCTA's members to be in deliberate non-compliance with the Regulations.

3.

Subsequently, on 19 May 1999, the incumbent licensees, through the CCTA, filed a request that the Commission amend the Regulations to incorporate a "non-interference model" with regard to cable inside wire. Under this model, although the licensee/owner of the inside wire would not be obliged to transfer ownership of the wire, the licensee/owner would not interfere with a customer's use of it, or with a competitor's use of it to provide service to the customer.

4.

In Public Notice CRTC 2000-81 dated 9 June 2000, the Commission announced a revised policy concerning access to inside wire, and called for comments on proposed amendments to the Regulations that would permit a charge for the use of inside wire.
The cable industry proposal specifically excluded any request for compensation for the wiring installed in single-unit dwellings. The Commission further noted that the CISC working group, prior to the suspension of the group's activities, had been examining the matter of a rate for wiring newly or recently installed in MUDs. Accordingly, the Commission requested that the CISC working group meet to develop an appropriate rate, and that such a rate be in place within two months of the coming into effect of the proposed regulatory amendment. Alternatively, should consensus not be reached within that period, the Commission requested that the CISC submit any dispute to the Commission for resolution. The Commission added that it considered the transfer value of $15 per suite that had been proposed by the CCTA in the proceedings leading to PN 1997-150 to be a "reasonable basis for commencing negotiations" on an acceptable lease fee.

5.

In Public Notice CRTC 2000-142 dated 6 October 2000, the Commission announced certain amendments to the Regulations. The amendments, which had come into force some three weeks earlier, on 18 September 2000, were as follows:

10.(1) A licensee that owns an inside wire shall, on request, permit the inside wire to be used by a subscriber, by another licensee, or by a broadcasting undertaking in respect of which an exemption has been granted, by order under subsection 9(4) of the [Broadcasting] Act, from the requirement to obtain a licence.

(2) The licensee that owns an inside wire may charge a just and reasonable fee for the use of the wire.

(3) The licensee that owns an inside wire must not remove it from a building if a request for the use of the wire has been made and is pending under subsection (1), or while the wire is being used in accordance with that subsection.

6.

The CISC working group reconvened on 23 November 2000 to begin discussions concerning what would constitute an appropriate fee for the use of inside wire in MUDs. Subsequent meetings were held on 4 and 11 December 2000. Active participants included the CCTA, Bell ExpressVu Limited Partnership (ExpressVu), Shaw Cable Company (Shaw), Rogers Cable Inc. (Rogers), Vidéotron ltée (Vidéotron) and Cable VDN Inc. (Cable VDN). At the request of these parties for more time to complete their discussions, the Commission extended the deadline established in PN 2000-81 to 7 February 2001.

7.

By the end of the discussion period, the CISC working group had reached consensus on a number of matters. In particular, there was consensus that:

· the lease fee should be based on cost recovery, taking into account any costs that have already been recovered;

· the lease fee should apply to existing wire, new wire and rewires;

· maintenance costs should not be included in calculating a lease fee for MUD inside wire;

· administrative costs should be included in calculating a lease fee for MUD inside wire; and

· a self-reporting model should be adopted whereby the BDU leasing the wire notifies the owner of the inside wire to keep administrative costs to a minimum.

8.

In its final status report dated 5 February 2001, however, the working group stated that, while both the CCTA and ExpressVu had circulated proposals for cost-recovery templates, the CISC working group had been unable to reach consensus on an appropriate methodology for establishing a fee.

Formal proposals filed

9.

In view of the failure of the CISC working group to reach a consensus on a methodology, the co-chairs of the group issued a letter dated 19 February 2001 setting out a process for the filing of formal proposals. The CCTA and ExpressVu filed such proposals on 17 May 2001. The CCTA, ExpressVu and Cable VDN filed comments on 4 June 2001. On 23 July 2001, the Commission addressed questions to the CCTA, ExpressVu and Cable VDN seeking clarification of their proposals and comments. Replies to these questions were filed on 22 August 2001. In general, the proposals of the CCTA and ExpressVu still reflected the notion that the fee should be cost-based, although ExpressVu argued that the cable companies had already recovered their costs for the inside wire.

CCTA's proposal

10.

The CCTA proposed a single national lease fee of $2.67 per subscriber per month. This amount would be payable by a competitor for the use of inside wire owned by another broadcasting distribution undertaking. To this fee, the CCTA would add a $100 annual administrative fee payable by a competitor to a party leasing inside wire to that competitor. The CCTA submitted that its method of calculation was based on that used by the Commission to establish an access fee for exempt programming undertakings in Public Notice CRTC 1997-35 dated 2 April 1997.

11.

The CCTA also advised that its proposed lease fee was derived from accounting information filed in the annual returns of 45 cable systems owned by the four largest cable multiple system operators (MSOs), i.e., Rogers, Shaw, Vidéotron and Cogeco Cable Inc. (Cogeco). In essence, the CCTA's method entailed taking an annual depreciation expense for subscriber drop costs, adding financing costs at the rate of a 23% annual return on net fixed assets, and computing a monthly rate from that amount by dividing by the number of subscribers times 12.

12.

ExpressVu was critical of the CCTA's proposal in its submission. ExpressVu's position was that the accounting information required to establish an appropriate lease fee did not exist. ExpressVu also argued that the cable incumbents had recovered their investment in inside wire through depreciation, capital expenditure (CAPEX) costs passed through to subscribers as rate increases in the 1980s and 1990s, and through installation charges paid by subscribers.

ExpressVu's proposal

13.

ExpressVu proposed that a nominal lease fee be established for the use of inside wire. ExpressVu based this position on the Commission's statement in PN 2000-81 that it considered the transfer value of $15 per suite, as proposed by the CCTA in the proceeding leading to PN 1997-150, to be a reasonable basis for commencing negotiations on an appropriate fee. ExpressVu also noted that, in numerous proceedings, the CCTA had expressed the view that a nominal fee should apply for access to inside wire. ExpressVu therefore proposed a fee of eight cents per suite per month. This fee was derived by dividing the proposed $15 by what ExpressVu submitted was the expected useful life of the wire, namely 15 years or 180 months. ExpressVu proposed that all BDUs should charge the same lease fee for inside wire.

14.

The CCTA argued that ExpressVu's proposed nominal fee of eight cents per suite per month would not be just and reasonable and would be fundamentally inconsistent with the principles of cost recovery and fair and sustainable competition. It submitted further, that an eight-cent fee could amount to expropriation of the cable inside wire. The CCTA added that ExpressVu's submission contained serious flaws that resulted in a significant understatement of the inside wire costs in MUDs and the associated lease fee.

The Commission's preliminary view

15.

In developing its preliminary view as to what would be a just and reasonable lease fee for the use of inside wire, the Commission has sought to ensure that consumers enjoy the full benefits of competition in distribution, including the benefits of end-user choice, while taking into account the interests of incumbents and new entrants. In the Commission's view, a just and reasonable fee should not create inappropriate price incentives or disincentives that could impede the efficient delivery of programming using the most effective technologies available at a reasonable cost. Thus, the lease fee should not create a disincentive to upgrade the wire in older buildings. At the same time, it should not constitute a barrier to entry by competitors.

16.

The Commission considers that, as a basic principle, the owners of inside wire should be permitted to recover the costs of the inside wire that have not already been recovered through subscriber installation charges and CAPEX rate increases, or from other sources. In this regard, the Commission concurs with the CISC working group consensus view noted above.

17.

The Commission also agrees that there should be one lease fee applicable to existing wire, new wire and rewires. Given the difficulty and cost of maintaining records with respect to the age of inside wire, the Commission considers that a single fee would remove an unnecessary administrative burden from licensees.

18.

Based on the foregoing, the Commission does not consider that ExpressVu's proposal of a fee of eight cents per suite per month is appropriate, in that this amount is unrelated to the actual cost of the inside wire.

19.

While the CCTA proposal sought to recover the costs of inside wire, the Commission does not accept certain aspects of the CCTA's accounting methodology. It notes, for example, that the calculations are based on a cost category containing all subscriber drop assets, and not only assets relating to inside wire - the inside wire costs being a subset of the subscriber drop costs. In addition, the CCTA's methodology does not distinguish between SUDs and MUDs. The Commission considers that the costs of inside wire in SUDs and in MUDs differ. The Commission also agrees with ExpressVu that the cable companies have already recovered at least part of the cost of the inside wire. Taking these points into consideration, the Commission has adjusted the CCTA's methodology and calculations in order to arrive at a preliminary view as to a lease fee for inside wire. The detailed calculations, as amended by the Commission, are set out in Appendix 1.

20.

The CCTA's proposed lease fee is based on the annual return information of 45 cable systems, belonging to four major cable companies. In order to arrive at a fee more representative of costs nationally, the Commission has added data from an additional 22 systems, resulting in a fee based on eight systems from the Atlantic Region, nine systems from Quebec, 30 systems from Ontario, eight systems from the Prairie Region and 12 systems from British Columbia. A complete list of the 67 systems is set out in Appendix 2. In addition, the Commission has made certain adjustments to the CCTA's methodology. These are described below.

Allocation of costs between SUDs and MUDs

21.

As noted above, the CCTA's method is based on costs of subscriber drops for both SUDs and MUDs. The Commission has reallocated these costs in order to reflect more accurately the percentage of subscribers that reside in MUDS and the lower cost of the inside wire in MUDs. Statistics Canada data submitted by ExpressVu indicates that approximately 30% of Canadians live in MUDs. Based on this data, the Commission has allocated the number of total subscribers to reflect a ratio of 7:3 between the number of subscribers resident in SUDs and those resident in MUDs.

22.

ExpressVu also argued that subscriber drop costs are higher in SUDs, because wire is exposed to the elements and is more susceptible to damage. The Commission recognizes that, in certain circumstances, the per unit costs of installing inside wire in MUDs would be higher than in SUDs, for example, in older buildings, where cable has to be installed up or along exterior walls rather than simply run through internal duct work. Nevertheless, in most cases, the Commission considers that ExpressVu's argument has validity. Among other factors, unit density for SUDs is lower, resulting in longer subscriber drops. More of the wire used in a drop is also exposed to the elements and must be more durable. Further, municipal regulations often require that the installation be buried, which adds to the cost of installation. The Commission estimates that the costs of subscriber drops in SUDs generally exceed those in MUDs by 30%.

23.

Taking into account the adjustments discussed in the preceding two paragraphs, the Commission has arrived at an allocation of costs for subscriber drops between SUDs and MUDs reflecting a ratio of 75:25.

Allocation of costs within the subscriber drop category

24.

As noted above, the Commission considers that the CCTA's definition of the subscriber drop cost category includes costs that are not related to inside wire. Accordingly, the Commission requested the CCTA to itemize the costs included in that category in order to separate inside wire costs from other subscriber drop costs, and SUD costs from MUD costs. If accounting systems did not provide this itemization, the CCTA was asked to provide an appropriate methodology to allocate subscriber drop costs along the requested lines. The CCTA replied that "the accounting systems do not break down the subscriber drop assets in the sub-categories required", and did not provide the information or methodology requested. Therefore, in the absence of any information that would lead to a different allocation, the Commission has estimated that costs related to the inside wire for MUDs represent 50% of subscriber drop costs, with non-inside wire costs accounting for the other 50%.

Inside wire costs already recovered

25.

As noted earlier, ExpressVu argued that many of the costs incurred by incumbent cable companies for the installation of inside wire have already been recovered by way of subscriber installation charges, CAPEX rate increases and depreciation.

26.

With respect to subscriber installation charges, ExpressVu stated that the cable industry had acknowledged in 1997 that it used such charges to recover costs of subscriber drops and inside wire. ExpressVu also noted that a service charge is applied each time a new resident moves into a unit that is equipped with inside wire. In its critique of the CCTA's method, ExpressVu estimated that 50% of connection revenues have been applied to the recovery of subscriber drop costs.

27.

The CCTA argued that cable companies typically have three connection charges that are designed to recover costs incurred in addressing three distinct circumstances, as follows:

· If a new customer subscribes to the same services as the previous occupant and the cable remains connected, no technician visit is required. The cable company, however, incurs costs for establishing an account, such as those associated with ordering, provisioning and billing. In the case of Rogers, the charge is $29.95.

· If the inside wiring needs to be reconnected, whether to the panel box in a MUD or to a buried cable or a utility pole in the case of a SUD, a visit by a technician is required. The drop is tagged and the technician installs traps as appropriate to provide only those channels the customer has ordered. Rogers' charge for this is $59.95.

· In certain instances involving SUDs, in addition to the costs associated with either of the first two circumstances described above, a new drop must be installed. Rogers' charge for this is $75.95.

28.

The CCTA submitted that, except in the third circumstance noted above, none of these charges contributes to recouping the cost of installing inside wire. Rather, the fees go towards the recovery of other non-recurring costs, such as those associated with dispatching a technician. However, in the third circumstance, a cable company does capitalize the cost of installing a new drop. Accordingly, a portion of the revenue from this type of connection should be credited to the basic subscriber drop asset account. The CCTA submitted that revenues from this type of connection activity typically represent approximately 10% of connection and reconnection revenue. In the CCTA's view, assignment of the entire 10% overstates the actual recovery of inside wire investment. Nonetheless, the CCTA stated that it was willing to credit this amount to the asset category, assuming that no other adjustments were made to its proposed methodology.

29.

Because the third circumstance relates only to SUDs, the CCTA's position appears to be that no portion of connection or reconnection charges in MUDs contributes to the recovery of the costs of inside wire. The CCTA argued further that reconnection charges cover only other such non-recurring costs as those related to dispatching a technician and establishing the customer account.

30.

The Commission does not accept the CCTA's argument. The Commission considers that there are efficiencies associated with serving a MUD that would enable a cable company to obtain a sufficient amount of revenue from installation charges to recover all or a portion of the costs of inside wire. This would be the case whether or not such contributions are explicitly recognized by the cable company's accounting systems. In particular, it seems unlikely that a company would dispatch a technician for each individual reconnection. The more likely case is that a technician visiting a MUD would connect several customers during one visit. Most probably, this would occur at the beginning of a month in the case of rental accommodation, when new tenants are moving into their apartments. Accordingly, the Commission has adjusted the subscriber drop asset category downwards by an amount equal to 25% of connection and reconnection revenues in both SUDs and MUDs, in arriving at its preliminary view as to an appropriate monthly fee for inside wire.

31.

ExpressVu also argued that inside wire costs had been recovered through CAPEX rate increases. These increases permitted cable companies, for a period of five years, to pass on to subscribers a portion of capital expenses, such as those incurred in upgrading facilities in existing service areas. The Commission had intended to terminate these rate increases after five years. However, in Public Notice CRTC 1993-74 dated 3 June 1993, the Commission suspended implementation of the required reductions for those licensees that contributed 50% of the amount by which rates would otherwise be reduced to the Cable Production Fund (CPF). This fund was subsequently subsumed within the Canadian Television Fund.

32.

The Commission has examined ExpressVu's method for attributing portions of the CAPEX rate increases to subscriber drops, and considers this method to be appropriate. The Commission's tabulation of data submitted by ExpressVu for six representative systems in Halifax, Montréal, Toronto, Ottawa, Edmonton and Vancouver indicates that about 14% of the average CAPEX rate increases, or about 2% of average basic service rates, was applied to the recovery of subscriber drop costs. As noted by the CCTA, CAPEX revenues also generated parallel increases in operating expenses, including those associated with increased Commission licence fees and the 50% contribution to the CPF.

33.

The Commission agrees with ExpressVu that a portion of the inside wire costs have been recovered through CAPEX rate increases. Further, the Commission agrees with the CCTA that increases in CAPEX revenues have also resulted in increased operating expenditures. Accordingly, the Commission has adjusted the amount of net fixed assets in the subscriber drop category downward by 1% of direct subscriber basic service revenue to take these considerations into account.

34.

As noted above, ExpressVu also stated that the cable companies have recovered inside wire costs through depreciation. The Commission considers that, when using a method that is based on historical accounting information, it is appropriate to permit depreciation for recovering capitalized costs. Further, the Commission has generally allowed a ten-year period for depreciation, and has used this methodology in the data presented in Appendix 1.

35.

The CCTA proposed that financing charges be recovered at a rate of 23% of the pre-tax return on net fixed assets "to allow the cable companies a reasonable return on capital, interest and taxes". The CCTA stated that this rate is consistent with the rate used by the Commission to establish the access fee for exempt programming undertakings.

36.

The CCTA indicated that the 23% pre-tax return adopted by the Commission for establishing the access fee was set in 1996, when competition from alternative distribution undertakings was just emerging. The CCTA argued that vigorous competition has increased the level of risk faced by cable operators since that time. The CCTA therefore considered its proposed 23% pre-tax return to be reasonable.

37.

ExpressVu, in its comments regarding the CCTA's methodology, proposed using a figure of 7%. It assumed that "cost recovery" would be based on debt financing, not on the combination of debt and a return on equity. It noted that, "at the time (its) study was conducted, the prime business bank rate, as published by the Bank of Canada", was 7%.

38.

The Commission has also used a financing cost of 7% in arriving at its preliminary view of an appropriate lease fee for inside wire. In the Commission's view, the use of the 7% financing cost is justified by the companies' actual treatment of inside wire costs for income tax purposes, which is to expense them in the year they are incurred, rather than to capitalize and depreciate them.

39.

Finally, the CCTA proposed calculating the appropriate monthly lease fee by dividing the annual amount to be recovered by twelve, then by dividing the result by the total number of basic subscribers. ExpressVu suggested that the appropriate number to use in the denominator would be based on homes wired and not on total subscribers. The CCTA, however, argued that the number of basic subscribers is the appropriate number to use as the denominator since it is "a measure of the demand over which the costs are to be recovered." The CCTA submitted further that using homes wired would skew the fee downwards, and result in an under-recovery of costs associated with inside wire.

40.

The Commission considers that neither the number of basic subscribers nor the number of homes wired is an appropriate measure of the demand for inside wire. Rather, the appropriate number for the denominator is the actual number of subscribers served by all BDUs using cable company inside wire, including cable, DTH and MDS undertakings, since this represents the demand for the wire in question. Since this figure is not readily available, the Commission has estimated the number by calculating, on a national basis, the ratio of the total number of BDU subscribers to the number of Canadian households that are in areas served by cable. This ratio approximates the national penetration rate for BDU services. Next, the Commission applied this ratio to the number of homes wired in the licensed service areas of the 67 cable systems in question. These calculations are outlined in Appendix 3.

41.

The above adjustments to the CCTA's method and calculations, as presented in Appendix 1, result in a monthly lease fee for inside wire in MUDs of $0.44 per subscriber per month. This is the Commission's preliminary view of what would be an appropriate lease fee for inside wire.

Maintenance costs

42.

In a letter dated 5 February 2001 and signed by representatives of the CCTA, ExpressVu and Cable VDN, the CISC working group reported its consensus view that maintenance costs should not be included in calculating a lease fee for inside wire in MUDs. Under such a regime, the owner of the inside wire would not be permitted to pass along costs it might incur in maintaining the wire to another licensee using the inside wire.

43.

The CCTA's proposal did not include maintenance costs. In its comments, ExpressVu generally agreed that the BDU using the inside wire to provide service to a customer should be responsible for maintaining the inside wire, at least where such maintenance is limited to the connections to the company's distribution panel boxes or the subscriber's set top box. ExpressVu stated, however, that any inside wire that is leased should, as a minimum, be fully operational and capable of transmitting a cable television signal with minimal signal degradation, and meet cable industry standards for signal transmission and quality. Further, according to ExpressVu, any inside wire that is leased should be raised to that standard at no cost to the lessee. ExpressVu added that, if the inside wire falls into a state of disrepair through no fault of the lessee, it should be the lessor's responsibility to return it to that standard, with the same level of service that it provides to its own cable customers.

44.

The Commission would generally expect a cable company to have maintained the wire to a standard suitable to its own purposes, and considers that, in most instances, this standard would be sufficient for the purposes of another licensee using the wire. However, should the inside wire not meet a standard acceptable to the new entrant, the new entrant would generally have the option of installing its own wire.

45.

The Commission considers that the primary responsibility for investigating and repairing any problems associated with leased wire should lie with the lessee. If the lessee determines that the problem is in the lessor's locked panel box, the Commission considers it reasonable that the lessee contact the owner of the wire to address the problem. However, if the problem is traced to the inside wire itself, the lessee would generally have the option of installing its own inside wire. Accordingly, the Commission considers that there should be no obligation on the owner of the inside wire to correct such problems, or to maintain or upgrade the inside wire to any particular standard.

46.

Accordingly, the Commission's preliminary view of what would be an appropriate lease fee makes no provision for the recovery of maintenance costs by the owner of the wire.

Administration - procedures and related costs

47.

In its final report of 5 February 2001, the CISC working group reported that it had agreed that administration costs should be included in calculating a lease fee for inside wire in MUDs. As stated in the CCTA's proposal of 17 May 2001, parties also agreed to adopt a "self-reporting model" in order to keep administration costs to a minimum. Under the model, the party using the wire would be responsible for reporting on its use to the owner. The parties agreed that further discussions would assist in finalizing a format for self-reporting notification procedures.

48.

In its submission of 17 May 2001, the CCTA proposed an annual fee that would be in addition to its proposed monthly lease fee of $2.67 per subscriber. This annual fee would cover "incremental costs associated with the leasing of MUD inside wire to competing BDUs", such as the costs of developing and implementing the information and operating processes and procedures necessary to track and invoice other BDUs for the use of inside wire. The CCTA submitted that these costs would be significant and would not be incurred by the cable companies in the absence of the requirement to lease cable inside wire to other BDUs. Further, unless cable companies can recover these costs from the BDUs in question, the CCTA claimed that they would be required to recover them from their own cable customers, thus effectively subsidizing the operation of competing BDUs. The CCTA submitted that this was inappropriate in a competitive environment.

49.

The CCTA acknowledged that incremental administration costs could be minimized through the use of the self-reporting procedures noted above. Assuming the adoption of a self-reporting regime, the CCTA proposed the implementation of an annual administration fee of $100 that would be payable by each entrant to each cable company from which it leased wire. It added that the level of the fee might have to be revisited once the exact structure of the reporting regime is known.

50.

In its comments of 4 June 2001, ExpressVu agreed that administration costs for all parties should be kept to a minimum, and that a leasing regime based on a self-reporting mechanism would be best. ExpressVu added, however, that the CCTA was again "ignoring its often-repeated commitment to a nominal rate for access to inside wire." Given the CCTA's commitment to a nominal lease fee, and the agreement by all parties to keep administration costs to a minimum, ExpressVu did not consider that an attempt to identify a separate administration fee would be worth the effort.

51.

The Commission considers that the administrative burden of the leasing regime should be kept to a minimum. This would be consistent with section 5.(2)(g) of the Broadcasting Act, which states that the Commission should be sensitive to the administrative burden that is imposed on persons carrying on broadcasting undertakings. Accordingly, the Commission agrees with the position of the CISC working group that a self-reporting model is appropriate.

52.

Based on the record, the Commission is satisfied that the parties have made considerable progress toward establishing the necessary reporting procedures, with only two issues standing in the way of their finalization. These issues concern the relationship between the audit provisions for verifying inside wire reports and the Commission's winback rules, and the use of customer/competitor confidential information and the role of the customer service group (CSG) in handling such information.

53.

As to the first issue, the winback rules were established by letter dated 1 April 1999. As one requirement, the rules stipulate that an incumbent cable company must refrain, for a period of 90 days, from the direct marketing of a customer who, through a competing licensee or its agent, has notified the incumbent of an intention to cancel basic cable service. The Commission thus considers that the winback rules would prohibit the incumbent, during the 90-day period, from launching "a competitive winback campaign based on the premise of an audit". The Commission agrees with ExpressVu that an incumbent would not, in the normal course, need to contact the customer directly in order to conduct an audit of reports filed by new entrants as to inside wire use. However, after 90 days, the incumbent is free under the winback rules to contact the customer. Accordingly, the Commission sees no reason to bar contact for audit purposes after the expiry of the 90-day period, as this would, in fact, lessen competition in the distribution market.

54.

With regard to the second issue, in PN 2000-81, the Commission required Rogers, Shaw, Vidéotron and Cogeco to set up CSGs to isolate competitively sensitive customer/competitor information from the sales and marketing function. The Commission considered that, as a minimum, the following information should be handled through the CSG when received from a competing licensee or its agent:

· a customer's billing name and address;

· a customer's choice of licensee;

· date of the request for cancellation of service, and

· date of the transfer of service.

55.

The Commission also instructed other incumbent cable licensees to develop and implement a non-disclosure agreement that an incumbent would enter into with all competing licensees in respect of the handling of such information. The Commission requested parties, through the CISC process, to develop a standardized form for such agreements. Since publication of PN 2000-81, however, meetings of the CISC working group have focused exclusively on the inside wire lease fee, or on issues directly related to the lease fee.

56.

In Order CRTC 2000-317 dated 16 April 2000, the Commission ordered the "larger cable carriers" that offer both high speed retail Internet services and underlying broadband access services, namely Rogers, Shaw, Vidéotron and Cogeco, to establish CSGs to handle the broadband access service requests of other, competing Internet service providers. The Commission ordered all other incumbent cable carriers to enter into standardized non-disclosure agreements.

57.

In Order CRTC 2000-1079 dated 30 November 2000, the Commission approved a standard CSG agreement for the larger cable carriers. Subsequently, in Order 2001-701 dated 17 September 2001, the Commission approved a standard non-disclosure agreement for third-party Internet access services provided by smaller cable carriers.

58.

As noted above, PN 2000-81 stipulated that certain information, including information related to the initial transfer of a customer, be handled through a CSG in the case of the four largest cable companies, and be made subject to a non-disclosure agreement in the case of smaller cable companies. The Commission considers it reasonable that information provided by new entrants under the self-reporting mechanism should be treated as competitively sensitive, and that such information should be isolated from sales and marketing functions. The Commission considers the procedures set out and approved in Orders 2000-1079 and 2001-701 to be appropriate for the handling of information provided by competitors related to both their initial and on-going use of inside wire pursuant to section 10 of the Regulations.

59.

Accordingly, in the case of Rogers, Shaw, Cogeco, and Vidéotron, the Commission considers that such information should be directed through the CSG, subject to the provisions of the CSG agreement, as approved by the Commission. This will ensure that the information is kept confidential, is not used to the detriment of the competitor, and more specifically, is not passed on to the sales and marketing function, even after the expiry of the 90-day winback period.

60.

With respect to other incumbent cable companies, and to new entrants such as Novus Entertainment (B.C.) Inc. (Novus) and Cable VDN who have installed wiring in buildings, the Commission finds the provisions of the non-disclosure agreement approved in Order 2001-701 to be appropriate for the handling of competitor information related to the use of cable inside wire.

61.

The Commission considers that the agreements described above will assist participants in this process in finalizing the self-reporting procedures. The Commission expects that the draft procedures, once finalized, will be tabled before the full CISC working group for approval as a consensus report of that group.

62.

Given that a self-reporting procedure will be developed, and that confidentiality procedures will replicate those in place for high-speed Internet access services, the Commission considers that any administrative costs incurred by the incumbent cable companies, or by new entrants who have wired buildings, will indeed be minimal. Accordingly, there should be no explicit charges to licensees for the recovery of administrative costs.

Call for comments

The Commission invites comment on the preliminary view set out in this notice. The Commission will hold a two-stage written comment process for this proceeding. In the first stage, the Commission will accept comments that it receives on or before 8 April 2002. The Commission invites interested parties then to file replies to any of the comments submitted during the first stage. Parties will have until 22 April 2002 to do so.

The Commission will not formally acknowledge comments. It will, however, fully consider all comments and they will form part of the public record of the proceeding, provided that the procedures for filing set out below have been followed.

Procedures for filing comments

Interested parties can file their comments on paper or electronically. Submissions longer than five pages should include a summary.

Only those comments filed in electronic form will be placed on the Commission's web site at www.crtc.gc.ca, and only in the official language and format in which they are submitted. Interested parties may consult the documentsby selecting the public notice number.

Parties wishing to file their comments on paper should send them to the Secretary General, CRTC, Ottawa, K1A 0N2.

Parties wishing to file electronic versions of their comments can do so by email or on diskette. The Commission email address is procedure@crtc.gc.ca

Electronic submissions should be in the HTML format. As an alternative, those making submissions may use "Microsoft Word" for text and "Microsoft Excel" for spreadsheets.

Please number each paragraph of your submission. In addition, please enter the line ***End of document*** following the last paragraph. This will help the Commission verify that the document has not been damaged during transmission.

The Commission encourages interested parties to monitor the public examination file (and/or the Commission's web site) for additional information that they may find useful when preparing their comments.

Examination of public comments and related documents at the following Commission offices during normal business hours

Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room G-5
Hull, Quebec K1A 0N2
Tel: (819) 997-2429 - TDD: 994-0423
Fax: (819) 994-0218

Bank of Commerce Building
1809 Barrington Street
Suite 1007
Halifax, Nova Scotia B3J 3K8
Tel: (902) 426-7997 - TDD: 426-6997
Fax: (902) 426-2721

405 de Maisonneuve Blvd. East
2^nd Floor, Suite B2300
Montréal, Quebec H2L 4J5
Tel: (514) 283-6607 - TDD: 283-8316
Fax: (514) 283-3689

55 St. Clair Avenue East
Suite 624
Toronto, Ontario M4T 1M2
Tel: (416) 952-9096
Fax: (416) 954-6343

Kensington Building
275 Portage Avenue
Suite 1810
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD: 983-8274
Fax: (204) 983-6317

Cornwall Professional Building
2125 - 11^th Avenue
Room 103
Regina, Saskatchewan S4P 3X3
Tel: (306) 780-3422
Fax: (306) 780-3319

10405 Jasper Avenue
Suite 520
Edmonton, Alberta T5J 3N4
Tel: (780) 495-3224
Fax: (780) 495-3214

530-580 Hornby Street
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD: 666-0778
Fax: (604) 666-8322

Secretary General

Appendix 1