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Telecom Decision CRTC 2003-75
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Ottawa, 4 November 2003
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Northwestel Inc. - 2002 Revenue Deferral Account
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Reference: 8638-C12-200311853
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In this decision, the Commission directs Northwestel Inc. to remit the $2.8 million accumulated in its deferral account for 2002 to the Central Fund Administrator as a one-time payment by 12 November 2003.
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Background
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1.
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In Long-distance competition and improved service for Northwestel customers, Decision CRTC 2000-746,30 November 2000 (Decision 2000-746), the Commission, as a result of potential significant differences between the 2001 actual and forecast toll, settlement and Carrier Access Tariff (CAT) revenues, directed Northwestel Inc. (Northwestel) to record in a deferral account the difference between the 2001 actual and forecast revenues for toll, settlement and CAT. The Commission also determined that funds accumulated in the deferral account, in any given year, would be disposed of in conjunction with the determination of any supplemental funding requirement for the following year.
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2.
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In Northwestel Inc.- Initial annual review of supplemental funding, Telecom Decision CRTC 2003-39, 20 June 2003 (Decision 2003-39), the Commission adjusted Northwestel's supplemental funding requirement for 2002 downwards by $740,000, this being the amount by which the 2001 actual toll, settlement and CAT revenues exceeded the 2001 forecast revenues. The Commission also determined that, beginning with the year-end amount in the 2002 revenue deferral account, a separate process for the disposition of the amount in the deferral account would be implemented. As part of this separate process, the Commission directed Northwestel to file audited financial statements and detailed supporting calculations for the 2002 deferral account within 30 days of the release of Decision 2003-39.
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Northwestel's submission
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3.
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On 18 July 2003, Northwestel filed audited financial statements and supporting calculations for the 2002 revenue deferral account as part of the company's submission for the 2003 review of supplemental funding, indicating that the revenues in the deferral account amounted to $2.8 million for 2002. In a Commission staff letter dated 5 September 2003, interested parties were invited to file comments with the Commission by 12 September 2003. Northwestel was invited to file reply comments by 19 September 2003.
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4.
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The Public Interest Advocacy Centre (the Consumer Groups), Allstream Corp. (Allstream) and Northwestel submitted comments on 12 September 2003. Northwestel filed reply comments on 19 September 2003.
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5.
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Northwestel noted that the $2.8 million in the deferral account for 2002 represented excess cash received in 2002 which could be paid back to the Central Fund Administrator (CFA) as either a one-time payment or as a reduction of the company's supplemental funding payment for 2003. Northwestel stated that given that a decision on this matter was not expected until October 2003, it proposed to pay the balance in the deferral account to the CFA as a one-time immediate payment. Northwestel considered, however, that the disposition of any future deferral account balances should be made by adjusting the remaining monthly payments in supplemental funding for a particular year in the month following the receipt of the annual decision.
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6.
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Both the Consumer Groups and Allstream submitted that the $2.8 million surplus for 2002 should be used to reduce the 2003 interim supplementary funding requirement as this would be consistent with past practice. The Consumer Groups further submitted that this approach would be consistent with the accounting policies identified in Northwestel's audited financial statements and, to the extent that there were insufficient months left in 2003 to use the total amount in the deferral account, the remaining amount could be recovered from Northwestel over the first couple of months of 2004.
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7.
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In its reply, Northwestel argued that its proposed one-time payment to the CFA would result in a timelier disposition of the deferral account for 2002.
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Commission analysis and determination
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8.
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The Commission notes that the amount recorded in the deferral account results from the difference between 2002 actual and forecast revenues for toll, settlement and CAT. The Commission also notes that the forecast revenues and the deferred revenues are disclosed in Northwestel's audited financial statements. On the basis of the information provided by Northwestel, the Commission considers that the amount recorded in the deferral account for 2002 is appropriate.
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9.
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The Commission also considers that Northwestel's proposal is consistent with its accounting policy regarding the deferral account.
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10.
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With respect to the appropriate disposition of the 2002 revenue deferral account amount of $2.8 million, the Commission notes that, as a result of the adjustments to the final 2002 and interim 2003 amounts of supplemental funding set out in Decision 2003-39, Northwestel will receive considerably less than the $2.8 million from the CFA in the remaining months of 2003. Accordingly, the Commission finds that the disposition of the deferral account balance as directed in Decision 2000-746 is not possible. The Commission also finds that the suggestion of deferring the remaining balance of Northwestel's payments to the CFA into 2004 is not consistent with the Commission's determination in Decision 2000-746, which determined that the amount would be disposed of in the determination of the following year's supplemental funding amount.
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11.
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The Commission considers that it would be administratively simpler if the funds accumulated in the deferral account for 2002 were remitted to the CFA as a one-time payment in 2003 as proposed by Northwestel.
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12.
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The Commission directs Northwestel to remit the funds accumulated in its deferral account for 2002 to the CFA as a one-time payment by 12 November 2003.
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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: http://www.crtc.gc.ca
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Date Modified: 2003-11-04