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Telecom Decision CRTC 2003-31
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Ottawa, 14 May 2003
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Call-Net's request for clarification in applying the residential variable-rate per-loop service order charge
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Reference: 8622-C25-15/02
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The Commission directs the incumbent local exchange carriers (ILECs) to apply the residential variable-rate per-loop service order charge to unbundled loop orders for residential customers located in multi-dwelling units. The Commission also revises the variable-rate per-loop service order charge rates of each ILEC.
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1.
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On 4 February 2002, Call-Net Enterprises Inc., on behalf of Call-Net Communications Inc. (Call-Net), filed an application pursuant to Part VII of the CRTC Telecommunications Rules of Procedure requesting that the Commission direct the incumbent local exchange carriers (ILECs) to revise their tariffs in order to comply with Interim approval for revised unbundled loop service order charges, Decision CRTC 2001-694, 16 November 2001 (Decision 2001-694). In Call-Net's view, the ILECs should apply the residential variable-rate per-loop service order charge set out in Decision 2001-694, regardless of whether a loop was provisioned for a residential customer located in a single-unit dwelling or in a multiple dwelling unit (MDU).
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2.
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Aliant Telecom Inc. (Aliant Telecom), Bell Canada, MTS Communications Inc. (MTS) and Saskatchewan Telecommunications (SaskTel), (collectively, the Companies), filed comments on 18 February 2002. TELUS Communications Inc. (TCI) filed comments on 6 March 2002. Call-Net filed reply comments on 20 March 2002.
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Background
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3.
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In Unbundled Local Loop Fixed-Rate Service Order Charges, Telecom Decision CRTC 99-15, 29 September 1999 (Decision 99-15), the Commission established separate business and residential rates for the fixed-rate service order charges applicable to type A and B unbundled loops. In Decision 99-15, the Commission also found that applying the business fixed-rate service order charge to requests for one or more loops from the same MDU would allow for a more appropriate recovery of the associated service order costs than that of the residential fixed-rate service order charge.
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4.
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In Decision 2001-694, the Commission approved, on an interim basis, revised fixed-rate and variable-rate service order charges applicable to type A and B unbundled loops for Bell Canada, Aliant Telecom and MTS. In that decision, the Commission considered it appropriate, among other things, to establish separate business and residential rates for the variable-rate per-loop service order charge.
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5.
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In TCI and SaskTel accept revised interim rates for unbundled loop-service order charges, Telecom Order CRTC 2002-3, 10 January 2002, the Commission also approved on an interim basis revised fixed-rate and variable-rate service order charges applicable to type A and B unbundled loops for TCI and SaskTel. These revised rates also included separate business and residential rates for the variable-rate per-loop service order charges.
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6.
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In CRTC approves revised unbundled loop service order charges for Bell Canada, Aliant Telecom Inc. and MTS Communications Inc., Telecom Decision CRTC 2002-11, 18 February 2002 (Decision 2002-11) and in Final rates for unbundled loop service order charges for TELUS Communications Inc. and Saskatchewan Telecommunications, Telecom Order CRTC 2002-158, 12 April 2002 (Order 2002-158), the Commission approved the unbundled loop service order charge rates on a final basis.
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Position of parties
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Call-Net
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7.
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Call-Net argued that while the Commission had found in Decision 99-15 that using the business fixed-rate service order charge would best approximate the fixed-rate charge for MDU loop orders, the Commission had made no such determination in Decision 2001-694 in regard to the variable-rate per-loop service order charges. Call-Net submitted that pursuant to Decision 2001-694, residential MDU orders should attract the residential variable-rate per-loop service order charge. Call-Net further submitted that in Decision 2001-694, the Commission had distinguished the variable-rate per-loop service order charge based strictly on residential/business differentiation. Call-Net stated that in spite of this clear statement, the ILECs had applied the business variable-rate per-loop service order charge to orders for residential customers located in MDUs.
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8.
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Call-Net argued that the residential variable-rate per-loop service order charge should apply to all residential customers, regardless of where they lived. Call-Net submitted that, similarly, the business variable-rate per-loop service order charge should apply to all business customers, irrespective of whether their place of business was an MDU or a stand-alone building.
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9.
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Call-Net submitted that applying the business variable-rate per-loop service order charge to loop orders for residential customers located in an MDU represented an increase of 15% in its costs, compared to the costs of migrating residential customers living in single-unit dwellings. In Call-Net's view, such a situation was obviously contrary to the letter and intent of Decision 2001-694.
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Comments of other parties
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10.
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The Companies and TCI submitted that in Decision 99-15, the Commission made a clear distinction between a residential loop extending to a single-unit dwelling and a loop that extended to a tenant's suite in an MDU, in that the latter arrangement was to be treated as a business loop in regard to service order charges for unbundled loops. The Companies argued that this distinction had been made to recognize that the costs associated with providing unbundled loops in MDUs were higher than those incurred for single-unit dwellings.
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11.
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The Companies submitted that Call-Net was wrong in suggesting that this provision only applied to the fixed-rate component of the business loop service order charge. The Companies submitted that in Decision 99-15, the Commission had referred to "business loop service order", which consisted of both the fixed-rate and the variable-rate components of the loop service order charge.
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12.
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The Companies submitted that the lack of a specific reference in Decision 2001-694 to the application of the business service charge rate to orders involving the migration of residential subscribers located in MDUs was not an oversight or an error by the Commission, as no such determination had been required. The Companies argued that Call-Net's interpretation would have required the Commission to have revised its view regarding the costs and activities associated with the provision of loops in MDUs between the time the Commission had issued Decision 99-15 and the time it issued Decision 2001-694. The Companies further submitted that there was no evidence in Decision 2001-694, nor in the information filed during the proceeding, that the Commission had revised its view, as set out in Decision 99-15, that higher costs were incurred to provision loops in MDUs. The Companies submitted that the existing tariff provision should be retained to allow for a more appropriate recovery of the associated service costs.
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13.
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The Companies noted that in paragraph 26 of Decision 2001-694, the Commission had indicated that "for the purposes of loop-service order charges, the loop demand from residential customers in multi-unit dwellings is currently classified as "business". The Companies submitted that it was clear from this discussion that the Commission had not changed its business classification of residential MDUs, and that the reference to loop charges included both the fixed-rate per-order and variable-rate per-loop charges.
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14.
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TCI submitted that Decision 2001-694 had not altered the distinction made in Decision 99-15 regarding the treatment of unbundled loop service order charges for an MDU. TCI further submitted that Decision 2001-694 was silent on issues relating to MDUs.
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Call-Net's reply
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15.
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Call-Net submitted that the Companies' submissions confirmed that there was confusion about the correct application of the variable-rate per-loop service order charge.
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16.
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Call-Net argued that the variable-rate per-loop service order charge costing methodology used by the Commission to make its determination in Decision 2001-694 allocated costs based on the nature of the customer, whether business or residential, not on the nature of the building. In regard to the variable-rate per-loop service order charge, Call-Net submitted that loops ordered for residential customers would require similar efforts to provision, whether customers were located in MDUs or other types of residential dwellings.
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Commission determination
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17.
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The Commission notes that Decision 99-15 was the outcome of a proceeding initiated by an application filed by Call-Net seeking clarification with respect to how the local loop fixed-rate service order charge applied to orders for multiple loops. In its application, Call-Net had requested that the Commission direct that this service charge apply only once when multiple unbundled local loops were ordered having the same due date, were of the same type, and originated from the same wire centre. While Call-Net's request was denied, the Commission established separate business and residential rates for the fixed-rate service order charges. The Commission also found that applying the business loop service order charge to requests for one or more loops from the same MDU would more appropriately recover the associated service costs than applying the residential loop service order charge. In that decision, the Commission considered that a loop order originating from an MDU would typically consist of multiple loops and would have a degree of complexity that more closely matched the order process associated with a business loop rather than a residence loop.
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18.
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The Commission notes that in Decision 2001-694, it considered it appropriate, among other things, to adopt separate business and residential charges for the variable-rate per-loop service order charge. The variable-rate per-loop service order charge was to be applied to each loop in an order, and was designed to recover all per-loop-driven costs, while the fixed-rate component was correspondingly revised to recover all per-order-driven costs. Examples of per-order-driven costs include costs associated with order processing, receiving inquiries, dispatching and systems support. Examples of per-loop-driven costs include costs associated with central office (CO) operations such as line assignment, distribution framework and various testing and co-ordination activities, and the costs associated with outside installation activities classified as line-driven, or loop-driven. In that decision, the Commission also noted that, for the purposes of unbundled loop service order charges, the loop demand for residential customers located in MDUs was classified as business.
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19.
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With respect to the specific issue of the appropriate variable-rate per-loop service order charge applicable to a residential MDU loop order, the Commission considers that, unlike the fixed-rate service order charge, the variable-rate per-loop activities and the associated costs for a residential single-unit dwelling and a residential MDU are not materially different. For example, the Commission considers that there is little difference, if any, with respect to the assignment of lines, CO distribution framework and CO testing activities and costs.
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20.
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The Commission further notes that during the proceeding leading to Decision 2001-694, it had estimated the outside installation loop-driven costs for the residential variable-rate service order charge by multiplying the outside installation cost per residential loop by the assumed percentage of residential loop orders requiring a visit to the premises (the residential visit rate). The residential visit rate used to calculate this estimate was based on a historical measure of Bell Canada's residential retail service orders requiring a visit. The Commission notes that these orders included service orders from both residential single-unit dwellings and residential MDUs.
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21.
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The Commission further notes that the outside installation loop-driven costs for the business variable-rate service order charge were determined based on the business visit rate. This rate was based on a historical measure of Bell Canada's business retail service orders requiring a visit, which excluded residential MDU orders.
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22.
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In light of the above, the Commission considers it more appropriate to apply the residential variable-rate per-loop service order charge to residential MDU loop orders rather than the business variable-rate charge in order to recover the associated loop-driven costs.
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23.
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The variable-rate per-loop service order charge rates are accordingly revised to reflect the Commission's finding that residential MDU demand is to be included as part of the residential loop demand for the purpose of establishing these rates.
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24.
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The Commission notes that the unbundled loop-service order charge rates approved on a final basis in Decision 2002-11 and Order 2002-158 were revised on a preliminary basis in Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002. The revised rates reflected the Commission's preliminary view that the mark-up on unbundled loop service order charge rates (e.g. Phase II costs) be reduced from 25% to 15%, and included an adjustment for an annual productivity offset. In Rates for Competitor Services, Telecom Decision CRTC 2003-13, 18 March 2003 (Decision 2003-13), the Commission approved final rates for variable-rate per-loop service order charges in accordance with its preliminary view, retroactive to 1 June 2002.
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25.
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In light of the above, the Commission approves, effective the date of this decision, the following revised variable-rate per-loop service order charge rates for unbundled loops that reflect the rate changes approved in Decision 2003-13 and the fact, stemming from the Commission's finding in this decision, that residential MDU demand should be included as part of the residential loop demand:
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a) $23.41 per business loop and $15.54 per residential loop, with respect to Bell Canada, TCI and SaskTel;
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b) $21.86 per business loop and $14.41 per residential loop with respect to Aliant Telecom; and
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c) $17.74 per business loop and $11.98 per residential loop with respect to MTS.
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26.
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The Commission directs the ILECs to issue revised tariff pages forthwith reflecting the application of the residential variable-rate service order charge to loop orders for residential customers located in MDUs and the above rate changes, effective the date of this decision.
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Secretary General
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This document is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca
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Date Modified: 2003-05-14