ARCHIVED - Telecom Public Notice CRTC 2002-1

Telecom Public Notice CRTC 2002-1

Ottawa, 1 March 2002

Northwestel Inc. - Initial annual review of supplemental funding

Reference: 8695-C12-19/02

Summary

In Decision CRTC 2000-746, the Commission decided to continue regulating Northwestel Inc. (Northwestel) on a rate of return basis, and established the terms and conditions for long distance competition. The Commission also approved a four-year service improvement plan (SIP) to extend and improve the existing telecommunications network in the Yukon, the Northwest Territories, Nunavut and northern British Columbia.

In that decision, the Commission approved rate increases for Northwestel's residential and business subscribers. The Commission also approved supplemental funding totalling $15.1 million for 2001, which would be collected from certain telecommunications service providers in southern Canada. The rate increases and supplemental funding would pay for, among other things, the SIP.

The Commission noted that it would conduct a limited annual review of Decision 2000-746's impact. This review would assess the progress made towards the roll out of competition and the implementation of Northwestel's SIP. The review would also establish the amount of supplemental funding for the company in 2002.

With this public notice, the Commission begins the process for the first annual review that was outlined in Decision 2000-746. This review will also consider several related issues that Northwestel has recently identified.

Introduction

1.

In Decision CRTC 2000-746, Long-distance competition and improved service for Northwestel customers, dated 30 November 2000, the Commission, among other things, decided to continue regulating Northwestel Inc. (Northwestel) on a total company, rate of return basis for an additional two-year period ending 31 December 2002. The Commission also established the terms and conditions for the introduction of long distance competition, effective 1 January 2001.

2.

In addition, the Commission determined that Northwestel's supplemental funding requirement for 2001 should be $15.1 million. The Commission directed the company to accumulate, in a deferral account, the difference between the forecast 2001 revenues of $43.4 million and the company's actual revenues in 2001. This was due to the potential significant differences between forecast and actual toll, settlement and carrier access tariff (CAT) revenues in that year.

3.

The Commission noted that in any given year, any amount accumulated in the deferral account would be dealt with by the Commission in conjunction with the determination of any supplemental funding requirement for the following year.

4.

The Commission also approved a four-year service improvement program (SIP), and a bundled CAT rate of seven cents per minute. This rate includes switching and aggregation, contribution and equal access start-up rates.

5.

In Decision 2000-746, the Commission indicated that in early 2002, it would issue a public notice to initiate a limited review of Northwestel's funding requirement. The public notice would outline the scope and the specific issues to be considered.

6.

In Order CRTC 2001-876 , Interim 2002 revenue-percent charge, national subsidy requirement and procedures for the revenue-based contribution regime, dated 14 December 2001, the Commission approved, on an interim basis, a 2002 supplemental funding requirement of $18.7 million for Northwestel. The Commission also noted that the final 2002 supplemental funding requirement would be adjusted to reflect the Commission's determination in the first annual funding review proceeding for Northwestel.

7.

In the Order 2001-876 proceeding, Northwestel indicated that the growth of the required funding amount (i.e., from $15.1 million to $18.7 million) was primarily due to the carrying costs associated with the company's SIP. At that time, the company indicated that it did not anticipate any other significant changes to its estimated supplementary funding requirement for 2002.

8.

However, Northwestel noted that its 2002 depreciation expense estimate did not assume any changes in its depreciation life characteristics. The company indicated that, early in 2002, it intended to file proposed changes in depreciation life characteristics for Commission approval as part of the first supplemental funding review.

Scope of the proceeding

9.

The initial filing requirements of the company for this proceeding are outlined in appendix 6 of Decision 2000-746. The scope of this proceeding will include the determination of the company's supplemental funding requirement for 2002, as well as an assessment of the roll out of the company's SIP, the progress made towards competition and the level of competitive entry and the progress made concerning the roll out of equal access. Other issues to be addressed in this proceeding will include the disposition of any amounts in the company's revenue deferral account, productivity improvements made by the company, an assessment of the company's recent quality of service results, variances in the company's construction program, the impact of any depreciation life changes proposed by the company, the availability of Internet service by community and an assessment of the Phase III results for the competitive categories, including accounting separation for Internet service.

10.

In a letter dated 5 November 2001, Northwestel proposed revising, effective 1 January 2002, the revenue deferral account mechanism that was established in Decision 2000-746. The company proposed including all the elements of long distance competition: toll, settlement and CAT revenues, as well as leased circuit revenues from interexchange competitors. The company also proposed that, while a decision on this matter could be deferred until the initial review, any changes to the deferral account should be made effective as of 1 January 2002.

11.

On 9 January 2002, Northwestel provided some comments on the scope and specific issues to be considered in this initial review. Both of the company's letters have been placed on the public record of this proceeding.

12.

The company indicated that, as directed in Decision 2000-746, it would file a SIP progress report, which would include actual expenditures for 2001 and revised estimates for the next three years. Northwestel also indicated that it wanted to review the scope of the SIP, in particular the provision of enhanced calling features and local (toll-free) access to the Internet. In its request, the company noted that in 2001, it had received requests for these basic services in letters and comments from community representatives. The company requested that the initial review consider the feasibility of including the provision of these services as part of the SIP.

13.

Northwestel also noted that the current terms and conditions of long distance competition, including the seven-cent CAT rate, should be maintained as competition evolves. In addition, the current regulatory regime should be maintained for at least three more years until long distance competition has further developed in the North. Parties to this proceeding are invited to comment on these proposals made by the company in light of the fact that the contribution collection mechanism for the other telephone companies is now revenue-based, as established in Decision CRTC 2000-745, Changes to the contribution regime, dated 30 November 2000.

14.

Given recent changes in the Canadian Institute of Chartered Accountants' rules relating to the treatment of deferred taxes and the recognition of foreign exchange gains/losses, Northwestel indicated that it would like to address these accounting matters in the initial annual review.

15.

On 30 January 2002, Northwestel filed depreciation studies that include both the 2000 and 2001 depreciation study results. These studies have been placed on the public record of this proceeding and will be addressed as part of this initial supplemental funding review. In its 9 January 2002 letter, the company noted that it would request Commission approval, for implementation in 2002, of proposed changes in depreciation life characteristics for both sets of studies.

16.

Today, initial interrogatories are being sent to Northwestel. The intent of these interrogatories is to acquire basic information required by the Commission and parties. This basic information will allow for an assessment of the company's information in its submission as specified in appendix 6 of Decision 2000-746, as well as the specific issues noted in paragraphs 9 to 15 above. The responses to the interrogatories will form part of the public record of this proceeding.

Procedure

17.

Northwestel is made a party to this proceeding.

18.

The Commission directs Northwestel to notify its subscribers of this proceeding, and outline the scope, the issues and the deadlines for public comments. Subscriber notification is to take the form of newspaper notices to be published no later than 3 May 2002. The Commission also directs Northwestel to file by 12 April 2002 its proposed newspaper notices for approval.

19.

Other parties wishing to participate fully in this proceeding must notify the Commission of their intention to do so, by 15 March 2002. They should contact the Secretary General by mail at CRTC, Ottawa, Ontario, K1A 0N2, by fax at (819) 953-0795 or by email at procedure@crtc.gc.ca. They are to indicate in the notice their email address where available. If parties do not have access to the Internet, they are to indicate in their notice whether they wish to receive disk versions of hard copy filings.

20.

The Commission will issue, as soon as possible after the registration date, a complete list of interested parties and their mailing addresses (including their email addresses, if available), identifying those parties who wish to receive disk versions.

21.

Any party who wishes merely to file written comments, without receiving copies of the various submissions, may do so by writing to the Commission, at the address noted in paragraph 19, by 19 July 2002.

22.

Northwestel is directed to file with the Commission responses to the initial interrogatories sent on the date of this public notice, and serve copies of these responses on all interested parties, by 12 April 2002.

23.

Northwestel is to file with the Commission, serving copies on all parties, its evidence on all matters within the scope of this proceeding, including the filing requirements outlined in appendix 6 of Decision 2000-746. In light of the filing date for the responses to the Commission's initial interrogatories pursuant to paragraph 22, all such material is to be filed with the Commission and served on all parties, by 12 April 2002.

24.

Interested parties may address interrogatories to Northwestel. Any such interrogatories must be filed with the Commission and served on the company, by 10 May 2002.

25.

Responses to those interrogatories are to be filed with the Commission and served on all interested parties, by 7 June 2002.

26.

Requests by interested parties for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out in each case the reasons for disclosure, must be filed with the Commission and served on all interested parties, by 14 June 2002.

27.

Written responses to requests for further responses to interrogatories and for public disclosure must be filed with the Commission and served on all interested parties, by 21 June 2002.

28.

A determination with respect to requests for further information and for public disclosure will be disposed of as soon as possible. Any information to be provided pursuant to that determination must be filed with the Commission and served on all interested parties, by 12 July 2002.

29.

Northwestel and interested parties may file arguments with the Commission on any matters within the scope of this proceeding, serving copies on all other parties, by 19 July 2002.

30.

All parties may file reply arguments with the Commission, serving a copy on all other parties, by 26 July 2002.

31.

Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date.

32.

Parties can file their submissions on paper or electronically. Submissions longer than five pages should include a summary.

33.

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

34.

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 to verify that the document has not been damaged during transmission.

35.

Only those submissions 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.

36.

The Commission also encourages interested parties to monitor the record of this proceeding (and/or the Commission's web site) for additional information that they may find useful when preparing their submissions.

Location of CRTC offices

37.

Submissions may be examined or will be made available promptly upon request at the 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

Suite 520 - 10405 Jasper Avenue
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

This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca