ARCHIVED - Telecom Decision CRTC 2003-15

Telecom Decision CRTC 2003-15

Ottawa, 18 March 2003

Bell Canada

2002 Annual price cap filing

In this decision, the Commission approves, in part, applications filed by Bell Canada, proposing rate changes pursuant to Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002 and directs Bell Canada to file further rate changes so as to meet its 2002 price cap commitment. The Commission also approves, with some exceptions, the remainder of Bell Canada's rates on a final basis.

Introduction

1.

In Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002 (Decision 2002-34), the Commission established the price regulation regime that is now applicable to the following incumbent local exchange carriers (ILECs): Aliant Telecom Inc. (Aliant Telecom), Bell Canada, MTS Communications Inc., Saskatchewan Telecommunications and TELUS Communications Inc. (collectively, the ILECs).

2.

In Decision 2002-34, the Commission directed the ILECs to file their 2002 annual price cap filings, including updates to the price indices, on 1 August 2002. In Decision 2002-34, the Commission also made all of the ILECs' tariff rates interim, effective 1 June 2002, to ensure that the annual price cap period for 2002 would reflect a full year, with the expectation that any rate changes approved for the ILECs to meet their price cap commitment would become effective retroactive to that date.

3.

In Decision 2002-34 the Commission noted that the Ontario government had been reducing the Ontario gross receipts tax (Ontario GRT) by 1% per year since 1999. The Commission directed Bell Canada to include the Ontario GRT savings in its 1 August 2002 price cap filing as an exogenous adjustment to the appropriate service baskets for 2002. In Decision 2002-34, the Commission also noted that the Quebec government had proposed to reduce the rate of the telecommunications, gas and electric (TGE) tax. The Commission noted that the Quebec TGE tax also qualified as an exogenous event under the criteria established for the next price cap period.

4.

Pursuant to Decision 2002-34, Bell Canada filed applications, dated 1 August 2002, which proposed tariff revisions to meet its 2002 price cap commitment and reflected the impact of the two exogenous factor adjustments relating to the Ontario GRT and the Quebec TGE tax.

5.

Call-Net Enterprises Inc. (Call-Net) filed comments on 15 August 2002, the Canadian Cable Television Association (CCTA) filed comments on 21 August 2002 and AT&T Canada Corp., on behalf of itself and AT&T Canada Telecom Services Company (collectively, AT&T Canada) filed comments on 3 September 2002.

6.

Bell Canada filed reply comments on 23 August 2002 and 13 September 2002.

7.

In part I of this decision, the Commission addresses Bell Canada's exogenous factor proposal. In part II of this decision, the Commission addresses the proposed tariff revisions. Lastly, in part III of this decision, the Commission addresses specific requests made by AT&T Canada and Call-Net.

Part I - Bell Canada's exogenous factor proposal

8.

In its application, Bell Canada stated that in Decision 2002-34 the Commission had identified two exogenous events, specific to the company, which had to be considered during the second price cap period. The first was related to the elimination of the Ontario GRT in 2003 and the second to changes in the Quebec TGE tax which were announced in late 2000 but had not, at the time of Decision 2002-34, been approved by the Quebec legislature.

9.

Bell Canada stated that, in Decision 2002-34, the Commission had determined that a final adjustment to reflect the savings resulting from the elimination of the Ontario GRT was required at the beginning of the second price cap period. Bell Canada noted that the Commission had directed it to include these savings in its 1 August 2002 price cap filing as an exogenous adjustment to the appropriate service baskets for 2002, and to include the portion related to residential services in non-high cost serving areas (HCSAs) in the deferral account established by the Commission in Decision 2002-34 (the price cap deferral account).

10.

Bell Canada estimated that the one percentage point reduction in the Ontario GRT for 2002 would result in savings of $34.9 million at the corporate level. Bell Canada proposed to apportion the Ontario GRT savings between capped and uncapped services and between the capped services baskets based on the extent to which the services in these baskets were subject to the Ontario GRT. Bell Canada submitted that its proposal would result in $17.9 million of the 2002 corporate Ontario GRT savings being allocated to capped services.

11.

Bell Canada indicated that the Quebec legislature passed a bill on 7 June 2002 approving the changes to the Quebec TGE tax legislation with an effective date of 1 January 2001.

12.

Bell Canada noted that in Harmonization of thresholds and tax rates on telecommunications networks in the Province of Quebec, Decision CRTC 2001-773, 21 December 2001 (Decision 2001-773), the Commission had directed it to record any Quebec TGE tax savings pertaining to capped services in a deferral account effective 1 January 2001 (the TGE deferral account). Bell Canada noted that the Commission, in Decision 2001-773, also directed it to propose plans to dispose of any amounts in the TGE deferral account and to address how any on-going savings should be reflected in the price regulation formula.

13.

Bell Canada estimated that the reduction in the Quebec TGE tax had resulted in savings of $40.5 million at the corporate level in 2001. Bell Canada proposed to allocate these savings between the Utility and Competitive segments using the procedures described in its Split Rate Base (SRB) manual. Bell Canada noted that, pursuant to these procedures, $31.5 million of the Quebec TGE tax savings would be assigned to the Utility segment. Bell Canada proposed to further allocate the Quebec TGE tax savings apportioned to the Utility segment between capped and uncapped services based on revenues. Bell Canada submitted that its proposal would result in $17.1 million of the 2001 corporate Quebec TGE tax savings being allocated to capped services.

14.

Bell Canada indicated that it had placed the corporate Quebec TGE tax savings on capped services for the calendar year 2001 of $17.1 million in the TGE deferral account. Bell Canada proposed to impute interest of $0.25 million on the portion of the Quebec TGE tax savings associated with residential local exchange services in non-HCSAs for the period 1 January 2001 to 31 May 2002 using its short-term cost of debt as the effective interest rate.

15.

Bell Canada submitted that $22.6 million in Quebec TGE tax savings should be allocated to capped services in 2002. Bell Canada noted that in Decision 2002-34 the Commission had expanded the base of capped services to include residential optional local services. Bell Canada proposed the Quebec TGE tax savings that should be allocated to capped services in 2002 be $17.1 million based on the amount it proposed to allocate to capped services in 2001 plus an additional $5.5 million to account for the TGE tax savings associated with residential optional local services.

16.

Bell Canada proposed to place the portion of the Ontario GRT and Quebec TGE tax savings associated with residential local services in non-HCSAs in the price cap deferral account.

17.

Bell Canada noted that as no service basket limit (SBL) was applicable to residential local services in HCSAs, or to residential optional local services in HCSAs, the exogenous factor adjustments for the Ontario GRT and the Quebec TGE tax savings could only be applied to the SBL for residential local exchange services in HCSAs.

18.

Bell Canada argued that the exogenous factor adjustments for the Ontario GRT and the Quebec TGE tax savings should not be applied to the SBL for residential local exchange services in HCSAs. Bell Canada submitted that applying these adjustments to the SBL for residential local exchange services in HCSAs would force it to reduce rates that are set below cost.

19.

Bell Canada further proposed that no exogenous factor adjustment be applied to the SBLs with respect to the Ontario GRT and the Quebec TGE tax savings associated with the single and multi-line business local exchange services and the other capped services baskets.

20.

Bell Canada stated that in Decision 2002-34, the Commission recognized that decreases in business rates during the first price cap regime had acted as an impediment to the development of local competition. Bell Canada submitted that the application of exogenous factor adjustments for the Ontario GRT and the Quebec TGE tax savings to the SBL for the single and multi-line business local exchange services basket would serve to mitigate the potential for rate increases to services in the business services basket. Bell Canada argued that such a development could adversely affect the development of local competition.

21.

Bell Canada stated that the other capped services basket was already subject to a basket constraint equal to inflation less productivity. Bell Canada submitted that further rate reductions required as a result of the application of exogenous factor adjustments associated with the Ontario GRT and the Quebec TGE tax savings would have an adverse impact on the development of local competition.

Parties' comments

22.

AT&T Canada argued that the entire amount of both the Ontario GRT and Quebec TGE tax savings associated with capped services should be transferred to the price cap deferral account, not just the savings related to residential local services in non-HCSAs. AT&T Canada submitted that these savings could be used to offset service improvement plan costs, competitor service rate reductions, or other initiatives.

23.

The CCTA argued that Bell Canada's proposal, to refrain from applying the Ontario GRT and Quebec TGE tax savings to either the single and multi-line business local exchange services or the other capped services baskets, was inconsistent with the Commission's directions in Decision 2002-34. The CCTA submitted that Bell Canada should be directed to apply the Ontario GRT and the Quebec TGE tax savings to the single and multi-line business local exchange services and other capped services baskets.

Bell Canada's reply comments

24.

Bell Canada stated, in response to AT&T Canada's comments, that consistent with Decision 2002-34, it had only included the portion of the Ontario GRT and Quebec TGE tax savings associated with residential local services in non-HCSAs in the price cap deferral account. Bell Canada argued that directing other amounts to the price cap deferral account would be contrary to Decision 2002-34.

25.

Bell Canada submitted, in response to the CCTA's comments, that its proposal not to adjust the SBLs for the single and multi-line business local exchange services or the other capped services baskets for the Ontario GRT and the Quebec TGE tax savings was consistent with the Commission's concern expressed in Decision 2002-34 that any further reductions to local business prices would have an adverse effect on the development of local competition.

Commission analysis

Allocation methodology

26.

The Commission notes that Bell Canada's proposal to apportion the Ontario GRT savings between capped and uncapped services, based upon the extent to which capped and uncapped services in the various baskets were subject to the Ontario GRT, differs from the methodology it used in its 2001 price cap filing. In Bell Canada's savings from gross receipts tax reduction, Order CRTC 2001-100, 2 February 2001 (Order 2001-100), the Commission approved Bell Canada's proposal to allocate the Utility segment Ontario GRT savings to capped and uncapped services and among the capped services sub-baskets based on revenues.

27.

The Commission considers that Bell Canada's revised methodology has two distinct advantages over the previous allocation method. First, it more closely tracks the basis on which Bell Canada pays the Ontario GRT, and second, it is consistent with the new basket structure approved in Decision 2002-34. Accordingly, the Commission considers that Bell Canada's revised methodology for determining the 2002 Ontario GRT savings associated with the capped services baskets is appropriate.

28.

The Commission considers that Bell Canada's proposal to allocate the corporate Quebec TGE tax savings for 2001 to the Utility and the Competitive segments using the procedures described in its SRB manual is acceptable as it is consistent with the regulatory regime in effect at that time. The Commission further considers that Bell Canada's proposal to use the methodology approved in Order 2001-100 to allocate the Utility segment Quebec TGE tax savings for 2001 between capped and uncapped services is appropriate as the Quebec TGE tax applies to revenues.

29.

The Commission, in Decision 2002-34, extended the price regulation regime to non-forborne services that were in the Competitive segment and, as a result, the distinction between the Utility and Competitive segments is not relevant to the current price regulation regime. The Commission therefore considers that Bell Canada's proposal to allocate the corporate Quebec TGE tax savings for 2002 using the same procedures that it used to allocate corporate Quebec TGE tax savings for 2001 is not consistent with the basket structure approved in Decision 2002-34. In the Commission's view, the Quebec TGE tax savings for 2002 should have been estimated by making reference to the calendar year 2001 capped services revenues and the basket structure established in Decision 2002-34. Accordingly, the Commission finds that $26.1 million in Quebec TGE tax savings should be allocated to capped services in 2002.

Application of the exogenous factor adjustments

30.

With respect to Bell Canada's proposal not to apply an exogenous adjustment for the Ontario GRT and Quebec TGE tax savings associated with residential local exchange services in HCSAs, the Commission finds that reducing the rates associated with these services would not be appropriate, as they are generally set below Phase II costs. The Commission considers, however, that the impact of these savings should be reflected in the Phase II costs of residential local exchange services in HCSAs used to calculate the subsidy per line in HCSAs, pursuant to Changes to the contribution regime, Decision CRTC 2000-745, 30 November 2000.

31.

The Commission approved in Final 2002 revenue-percent charge and related matters, Telecom Decision CRTC 2002-71, 22 November 2002, among other things, the 2002 subsidy per residential network access service (NAS) for the territories of the large ILECs. The Commission notes that the Phase II costs used to calculate the subsidy per line in Bell Canada's HCSAs for 2002 did not include the Ontario GRT expense although the Ontario GRT will not be eliminated until 2003. In contrast, these Phase II costs did not incorporate the impact of the Quebec TGE tax savings for 2002. The Commission considers that, as the Ontario GRT expense almost entirely offsets the Quebec TGE tax savings for residential local services in HCSAs in 2002, an adjustment to the Phase II costs used in the calculation of the 2002 subsidy per line is not required. The Commission directs Bell Canada to reflect the reduction in the Quebec TGE tax in its Phase II cost estimates for residential local exchange services in HCSAs used in the calculation of the subsidy per line starting in 2003.

32.

The Commission, in Decision 2002-34, established a deferral account in conjunction with the application of a basket constraint equal to the rate of inflation less a productivity offset to all revenues from residential services in non-HCSAs. The Commission considers that AT&T Canada's proposal to allocate the Ontario GRT and the Quebec TGE tax savings associated with all capped services to the price cap deferral account is inconsistent with that determination. The Commission finds that Bell Canada's proposal to include the Ontario GRT and Quebec TGE tax savings associated with the residential local services in non-HCSAs basket in the price cap deferral account is consistent with that determination.

33.

The Commission determined in Decision 2002-34 that exogenous adjustments should be assigned to the appropriate baskets. The Commission notes that the reductions in the Ontario GRT and the Quebec TGE tax represent cost savings that competitors offering service in Ontario and Quebec would also realize. Moreover, insofar as the ILECs' competitors are customers of the ILECs' services in the other capped services basket, they would benefit from the rate reductions associated with reductions in the Ontario GRT and the Quebec TGE tax. The Commission is therefore not persuaded by Bell Canada's argument that the application of exogenous factor adjustments for the Ontario GRT and Quebec TGE tax to the SBL for these baskets would be adverse to competition. Accordingly, the Commission finds that the Ontario GRT and Quebec TGE tax savings related to single and multi-line business local exchange services and other capped services should be included as exogenous factor adjustments to reduce the SBLs for these service baskets.

The TGE deferral account

34.

In Decision 2001-773, Bell Canada was directed to accumulate the potential Quebec TGE tax savings in the TGE deferral account starting in January 2001. The Commission notes that the legislation approved the reduction in the Quebec TGE tax effective 1 January 2001, and that pursuant to Decision 2002-34, the second price cap regime is to become effective 1 June 2002. Accordingly, the Commission considers that the TGE tax savings that Bell Canada realized over the seventeen-month period from 1 January 2001 to 31 May 2002 should have been placed in the TGE deferral account.

35.

The Commission notes that Bell Canada transferred the estimated 2001 Quebec TGE tax savings on capped services of $17.1 million to the Quebec TGE tax deferral account. The Commission concludes that Bell Canada should increase this amount to $24.2 million in order to reflect seventeen months of Quebec TGE tax savings realized on capped services during the first price cap regime.

36.

The Commission notes that Bell Canada proposed to adjust the $17.1 million added to the TGE deferral account to reflect imputed interest of $0.25 million accrued on the portion of the estimated 2001 Quebec TGE tax savings associated with residential local exchange services in non-HCSAs. The Commission concludes that Bell Canada should increase this amount to $0.59 million to reflect interest calculated on the entire Quebec TGE tax savings in the TGE deferral account of $24.2 million.

37.

The Commission considers that the funds in the TGE deferral account should be amortized over four years commencing in 2002 to correspond with the second price cap regime and should be assigned to the capped services baskets using the basket definitions set out in Decision 2002-34. The Commission notes that this will allow for the elimination of the TGE deferral account at the end of the term of the second price cap regime.

Conclusion

38.

The Commission finds that the savings associated with the Ontario GRT and Quebec TGE tax savings for 2002 are to be allocated to the capped services baskets in accordance with the table presented below:

For the year 2002 (millions)

GRT savings

TGE deferral account amortization

TGE tax savings

Total GRT and TGE tax savings

Total Capped Services

$ 17.9

$ 6.2

$ 26.1

$ 50.2

Residential Services

$ 13.3

$ 3.8

$ 15.8

$ 32.9

Residential Services in non-HCSAs

$ 11.7

$ 3.3

$ 14.1

$ 29.1

Basic residential services

$ 10.5

$ 2.0

$ 8.2

$ 20.7

Residential optional services

$ 1.2

$ 1.4

$ 5.9

$ 8.5

Residential Services in HCSAs

$ 1.6

$ 0.4

$ 1.7

$ 3.7

Basic residential services

$ 1.5

$ 0.3

$ 1.1

$ 2.9

Residential optional services

$ 0.1

$ 0.1

$ 0.6

$ 0.8

Business Services

$ 4.4

$ 1.0

$ 4.1

$ 9.5

Other Capped Services

$ 0.2

$ 1.5

$ 6.2

$ 7.8

Note: Totals may not balance due to rounding

Part II - Bell Canada's pricing proposal

39.

In its applications, Bell Canada proposed revisions to General Tariff, item 70.2, Primary exchange (local) service - Business service, item 70.3, Primary exchange (local) services - Equivalent service, and item 5201, Megalink service, as well as to National Services Tariff, item 301, Digital Network Access (DNA).

40.

In particular, Bell Canada proposed the following tariff changes to services within the single and multi-line business local exchange services basket:

41.

Bell Canada submitted that the proposed tariff revisions would ensure that the service basket index (SBI) does not exceed the SBL for the single and multi-line business local exchange services basket.

42.

Bell Canada also proposed the following tariff changes to services within the other capped services basket:

43.

Bell Canada submitted that the proposed tariff revisions would ensure that the SBI does not exceed the SBL for the other capped services basket.

44.

Bell Canada requested that the proposed tariff revisions become effective on 1 June 2002, with the exception of the proposed contract options for the link component of DNA service, for which the company proposed an effective date of 3 September 2002.

45.

Bell Canada submitted that the proposed tariff revisions complied with all of the pricing constraints set out in Decision 2002-34. Bell Canada also submitted that the proposed tariff revisions would ensure that it met its price cap obligations for 2002.

Parties' comments

46.

Call-Net and AT&T Canada submitted that all of the proposed reductions should be made retroactive to 1 June 2002. Call-Net and AT&T Canada noted that in Decision 2002-34, the Commission had stated that it expected that rate changes approved for the ILECs to meet their 2002 price cap commitment would be effective as of 1 June 2002.

47.

AT&T Canada submitted that one clear objective of the ILECs' annual price cap proposals appeared to have been to obstruct competition. AT&T Canada stated that the ILECs have proposed price increases for business local exchange services in rural areas where there was little, if any, competition. AT&T Canada stated that in contrast the ILECs have proposed significant rate reductions to the access and link components of DNA service and, in some cases, to Megalink, Digital Channel and Digital Exchange Access services. AT&T Canada argued that the ILECs have targeted the required rate reductions in such a way as to undermine any potential advantage the creation of competitor-DNA service might have offered competitors. AT&T Canada submitted that the proposed rate reductions would squeeze the margins available to competitors through the use of the newly established competitor-DNA service.

Reply comments

48.

Bell Canada stated that only the proposed contract options for the link portion of DNA service would have an effective date different from 1 June 2002. Bell Canada argued that customers could only realize benefits from these options going forward from their commitment to the contract option and that such a commitment could not precede approval of the proposed contract option.

49.

Bell Canada argued, with respect to AT&T Canada's concerns that the ILECs' rate proposals were anti-competitive, that the proposed DNA rates are supported by documentation demonstrating that they satisfy the imputation test. Bell Canada stated that the imputation test was the accepted basis to determine whether a rate change is anti-competitive. Bell Canada submitted that the proposed DNA rates could therefore not be considered to be anti-competitive.

Commission analysis

Costing Issues

50.

The Commission notes that for a new service or a rate decrease, the proposed rates must be supported by and satisfy an imputation test. The Commission considers that the imputation test is the accepted method, under the current regulatory regime, of determining whether the proposed rates would be anti-competitive.

51.

The Commission finds that the proposed rates for the PSTN connectivity component of Megalink service and the DS-1 access and the link components of DNA service pass the imputation test.

Compliance with the pricing constraints set out in Decision 2002-34

52.

In Decision 2002-34 the Commission applied a number of constraints to the rates for services in the single and multi-line business local exchange services basket and the other capped services basket, in order to provide customers of those services with price protection.

53.

The pricing constraints which apply to services in the single and multi-line business local exchange services basket include:

54.

The Commission notes that the proposed increases to the monthly rates for business measured line service, business individual line service and the monthly contract rates for business individual line service do not exceed 10%. The Commission determined in Part I of this decision that to properly account for reductions in the Ontario GRT and the Quebec TGE tax, exogenous factor adjustments must be applied to the SBL for the single and multi-line business local exchange services basket. The Commission notes that, in the absence of any rate increases, these exogenous factor adjustments leave the updated SBL only marginally higher than the SBI for the single and multi-line business local exchange services basket. Accordingly, the Commission finds that the proposed rate increases would drive the SBI above the updated SBL for the single and multi-line business local exchange services basket, in contravention of the basket constraint set out in Decision 2002-34. The Commission is therefore not prepared to approve the proposed increases to the monthly rates for business measured line service, business individual line service and the monthly contract rates for business individual line service at this time.

55.

The pricing constraints which apply to services in the other capped services basket include:

56.

The Commission notes that Bell Canada proposed a rate increase to Equivalent service under the assumption that it was part of the single and multi-line business local exchange services basket. In Follow-up to Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34 - Service basket assignment, Telecom Decision CRTC 2003-11, 18 March 2003, the Commission rejected Bell Canada's proposal to move Equivalent service from the other capped services basket to the single and multi-line business local exchange services basket. Accordingly, the Commission has considered the proposed rate increase to Equivalent service as part of Bell Canada's proposal for other capped services.

57.

The Commission determined in Part I of this decision, that to properly account for reductions in the Ontario GRT and the Quebec TGE tax, exogenous factor adjustments must also be applied to the SBL for the other capped services basket. The Commission finds that with these adjustments, the proposed rate decreases to Megalink service and DNA service are insufficient to reduce the SBI to a level that is at or below the updated SBL for the other capped services basket in contravention of the basket constraint for other capped services. The Commission also finds that while the proposed rate increase to Equivalent service does not exceed 10%, it would further increase the SBI above the SBL, thereby exacerbating the extent to which the basket constraint for other capped services would be violated. The Commission is therefore not prepared to approve the proposed rate increase to Equivalent service at this time.

Part III - AT&T Canada and Call-Net's requests

AT&T Canada's request for a fixed margin between retail and wholesale rates

58.

AT&T Canada submitted that price reductions applied to services with retail and wholesale counterparts, such as DNA service, should be similar in magnitude so as to protect against anti-competitive targeted pricing strategies by the ILECs aimed at squeezing or eliminating the margins available to their competitors.AT&T Canada argued that such a link between retail and wholesale pricing would ensure that the ILECs could not use the price cap formula to squeeze the competitors' margins.

59.

Bell Canada submitted that the Commission should reject AT&T Canada's proposal. Bell Canada stated that Decision 2002-34 specified that rates for competitor-DNA service should be based on Phase II costs plus a 15% mark-up. Bell Canada submitted that retail rates were based on margins determined by market conditions and conformity with the price cap rules, including the imputation test.

60.

Bell Canada argued that AT&T Canada's proposal to link the pricing of wholesale and retail rates would inhibit competition between retail providers of DNA service because it would prevent the ILECs from responding to competitive pressures.

61.

The Commission notes that it explicitly required the ILECs to file rates for a competitor-DNA service based on Phase II costs plus a 15% mark-up. The Commission considers that AT&T Canada's request to establish a link between price reductions to services with retail and wholesale counterparts is inconsistent with Decision 2002-34.

Call-Net and AT&T Canada's request for DNA and Digital Channel services rates to remain interim

62.

Call-Net and AT&T Canada requested that the rates for DNA service and related services in the other capped services basket be approved on an interim basis. Call-Net and AT&T Canada argued that until a decision has been issued in the proceeding initiated by Competitor Digital Network Access service proceeding, Telecom Public Notice CRTC 2002-4, 9 August 2002 (Public Notice 2002-4), the precise components and configurations that will make up the final competitor-DNA service and potentially related services are unknown. Call-Net and AT&T Canada submitted that the retail DNA service and related services could serve as the basis for the competitor-DNA service. Call-Net and AT&T Canada submitted that interim approval would allow any associated rate reductions that might result from the Public Notice 2002-4 proceeding to apply on a retroactive basis to 1 June 2002.

63.

In reply, Bell Canada argued that, as competitor-DNA service rates will not be linked or dependent on retail rates, the retail DNA service rates should be approved on a final basis.

64.

The Commission notes that among the issues being considered in the proceeding initiated by Public Notice 2002-4, are whether specific rate elements of DNA service and Inter-Office Digital Channels should be included in the newly established competitor-DNA service, and whether the reduced rates for any additional service components that might be added to competitor-DNA service at the conclusion of the proceeding should be approved retroactive to 1 June 2002. The Commission further notes that, in the meantime, competitors will be subscribing to potential competitor-DNA service components at DNA service and Inter-Office Digital Channels rates. Accordingly, the Commission finds that it would not be appropriate to grant final approval to the retail rates for DNA service and Inter-Office Digital Channels at this time.

Commission directions

65.

In light of the foregoing:

- include the $29.1 million in savings allocated to residential local services in non-HCSAs in the price cap deferral account;

- include the $9.5 million in savings allocated to business services as a downward exogenous adjustment to the SBL for the single and multi-line business local exchange services basket; and

- include the $7.8 million in savings allocated to other capped services as a downward exogenous adjustment to the SBL for the other capped services basket;

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