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Telecom Decision CRTC 2003-83
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Ottawa, 17 December 2003
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Direct Connection service
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Reference: 8638-C12-200304634
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In this decision, the Commission approves on an interim basis the revised Direct Connection (DC) rates proposed by Bell Canada, on behalf of itself and Aliant Telecom Inc., MTS Communications Inc. and Saskatchewan Telecommunications. The Commission directs TELUS Communications Inc. to file within 30 days of this decision separate DC cost studies for TELUS-Alberta and TELUS-British Columbia, including detailed information on costs contained therein. The Commission also establishes further process to review the revised DC service costs and rates.
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Background
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1.
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In Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002 (Decision 2002-34), the Commission expressed its preliminary view that revised Direct Connect (DC) service rates should be adopted for each incumbent local exchange carrier (ILEC) based on updated Phase II costs plus a 15% mark-up. The Commission further indicated that it would base the revised DC service rates on the DC Phase II cost estimates received from the ILECs in the year 2000 (the 2000 DC service cost studies). In Decision 2002-34, the Commission made all ILECs' tariffed rates interim including the DC rates.
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2.
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DC service rates were approved on an interim basis in Interim rates for Access Tandem service and Direct Connection service, Telecom Order CRTC 2002-384, 24 September 2002 (Order 2002-384). These approved rates were based on the 2000 DC service cost studies plus a 15% mark-up. Subsequently, the interim DC rates for TELUS-Alberta and TELUS-British Columbia were revised in Rates for co-location floor space, Direct Connection service, Wireless Access Service: Line-side Access services, and Wireless Service Providers Enhanced Provincial 9-1-1 Network Access service, Telecom Decision CRTC 2003-12, 18 March 2003 and 2003-12-1, 19 November 2003 (Decision 2003-12) to reflect the application of the inflation less productivity (I-X) constraint.
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3.
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The Commission notes that in the proceeding resulting in Order 2002-384, Call-Net Enterprises Inc. (Call-Net) submitted that the 2000 DC service cost studies had not been subject to detailed scrutiny and further immediate rate reductions of 20% to 30% were required. In response to Call-Net's comments, in Order 2002-384, the Commission considered that in the absence of further supporting cost information it would not be appropriate to reduce the ILECs' proposed DC rates by an additional 20% to 30%.
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4.
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In Decision 2003-12, the Commission determined that it would be appropriate to initiate a detailed review of DC service costs and directed each ILEC to file revised cost studies associated with the DC service.
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5.
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Pursuant to Decision 2003-12, Bell Canada, on behalf of itself and Aliant Telecom Inc. (Aliant Telecom), Saskatchewan Telecommunications (SaskTel) and TELUS Communications Inc. (TELUS) filed updated DC service cost studies on 20 May 2003. TELUS filed a revision to its 20 May 2003 filing on 21 May 2003. MTS Communications Inc. (MTS) filed its updated DC service cost study on 6 June 2003. These cost studies will be referred to as the 2003 cost studies.
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6.
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The Commission received comments from AT&T Canada Corp., now Allstream Corp., and Call-Net (collectively, the Competitors) on 19 June 2003 and Primus Telecommunications Canada Inc. (Primus Canada) on 20 June 2003. Reply comments were submitted by TELUS on 26 June 2003.
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Request for interim approval
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7.
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The Competitors and Primus Canada requested that the Commission grant interim approval, on a going-forward basis, to the DC rates proposed by the ILECs, with the exception of TELUS, based on their revised DC cost studies.
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Commission analysis and determination
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8.
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The Commission notes that the DC rates proposed by the ILECs under the 2003 cost studies with the exception of TELUS, are significantly lower than the current interim rates.
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9.
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In light of the significant rate reductions proposed and the anticipated length of the process to review the 2003 DC service cost studies and approve rates on a final basis, the Commission considers it appropriate to revise the interim DC rates on the basis of the rates proposed by the ILECs in their revised 2003 cost studies, with the exception of the DC rate proposed by TELUS.
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10.
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Accordingly, the Commission approves on an interim basis the following DC rates:
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Company
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DC rate per connection minute, per end
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Aliant Telecom - New Brunswick
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$0.00154
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Aliant Telecom - Newfoundland
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$0.00136
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Aliant Telecom - Nova Scotia
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$0.00132
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Aliant Telecom - Prince Edward Island
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$0.00130
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Bell Canada
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$0.00103
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MTS
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$0.00148
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SaskTel
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$0.00208
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11.
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The Commission directs Aliant Telecom, Bell Canada, MTS and SaskTel to issue revised tariff pages forthwith reflecting the above changes.
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12.
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The Commission notes that while the interim rate revisions approved herein are to take effect as of the date of this decision, in the event that rates are modified as a result of the process to review the 2003 DC service cost studies outlined below, the rates can be modified retroactively to 1 June 2002, the date when the DC rates were made interim in Decision 2002-34.
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TELUS's revised DC service cost study
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13.
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The Competitors noted that TELUS proposed to change its DC rate structure by establishing a uniform rate for both Alberta and British Columbia based on a blended cost study. The Competitors submitted that the blended rate was higher than that currently approved for TELUS-British Columbia. The Competitors argued that it was unclear whether the proposed blended rate was revenue neutral, given thelack of detail provided in TELUS's DC cost study.
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14.
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The Competitors submitted that TELUS should be required to file separate cost studies for each of TELUS-Alberta and TELUS-British Columbia and to provide a level of detail in its cost studies that would be similar to that provided by Bell Canada in its revised DC cost study. Primus Canada supported the Competitors' request to require TELUS to file separate DC cost studies for Alberta and British Columbia.
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15.
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In reply, TELUS argued that its blended rate was justified. TELUS noted that in Decision 2002-34 the Commission had determined that, in light of their respective mergers, TELUS and Aliant Telecom could blend their rates for services with frozen rate treatment. The company maintained that it was now proposing to apply this same treatment to its rates for the DC service. TELUS stated that it determined the costs of the DC service for each of Alberta and British Columbia and that its proposed blended rate was developed by weighting the demand for Alberta and British Columbia.
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16.
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TELUS stated that its operations were not divided regionally between Alberta and British Columbia and that it was the company's objective to develop a unified suite of products and services for both Alberta and British Columbia. TELUS noted that the Commission had approved a blended rate for other Category I Competitor Services such as Call Routing - Local Routing Number Absent, Central Office Link Arrangements and Basic Listing Interchange File Service, and that the company had recently filed a proposal for a blended rate for the primary inter-exchange carrier processing charge.
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17.
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TELUS maintained that its 2003 DC service cost study contained a level of detail consistent with that which it provided in other recent cost studies, including its 2000 DC service cost study. TELUS argued that its 2003 DC service cost study provided a level of detail sufficient for the Commission to establish a revised rate for the DC service. TELUS agreed with the need to provide a full service description in the case of a cost study that related to a new service. TELUS argued, however, that the DC service was a well-established tariffed service and that parties making use of this service, including the Competitors, were familiar with its service description. TELUS submitted that it had provided the assumptions of its cost study, including economic parameters, tax parameters and the all-carrier demand for the service, on the public record.
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Commission analysis and determination
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18.
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The Commission notes that TELUS's cost study did not contain the same level of detail as the DC cost studies filed by the other ILECs. While the DC service is well-established, the Commission considers that a cost study is to contain a level of information that is sufficient to describe the cost study's major assumptions and methods, comparable to the detail provided by the other ILECs in their 2003 DC cost studies.
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19.
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The Commission notes that TELUS indicated that it had performed separate cost studies for each of TELUS-Alberta and TELUS-British Columbia. The Commission further notes that the provision of separate DC cost estimates for each of TELUS-Alberta and TELUS-British Columbia will enable interested parties to comment on whether TELUS's proposed blended rate is justified and allow the Commission to make its determinations.
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20.
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In light of the above, the Commission directs TELUS to file within 30 days of this decision separate DC cost studies for each of TELUS-Alberta and TELUS-British Columbia. TELUS is to provide all the calculations used to develop the proposed blended DC rate. In its revised DC service cost studies, TELUS is to provide a level of detail in respect of the cost study methods, cost inclusions, and cost study assumptions similar to that provided by the other ILECs in their DC cost studies. TELUS is to provide more detailed explanations on how the DC costs are derived, including but not limited to: full explanations of the expense increase factors, the cost increase factors, the productivity improvement factors used to restate the historical unit costs, if any, into current dollars, the vintage of the unit cost data, and models used. TELUS is further required to exclude from its cost studies the application of the standard inflation factors and the 3.5% per year productivity factors, consistent with the costing approach to be used for Competitor Services as set out in the Commission staff's letter dated 14 July 2003 regarding Phase II costing information requirements.
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21.
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The existing interim DC rates for TELUS-Alberta and TELUS-British Columbia are to remain in effect until the review of TELUS's cost studies is concluded.
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Procedure for review of revised DC cost studies by interested parties
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22.
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The Competitors noted that the Commission had not established procedures to review the revised DC costs and rates filed pursuant to Decision 2003-12. The Competitors' comments proposed specific timelines for such a process. Primus Canada also submitted that the Commission should establish a process to review the revised DC costs and rates.
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23.
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The Commission notes that the ILECs did not oppose the request by the Competitors and Primus Canada to establish a process to review the revised DC cost studies and associated rates.
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24.
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The Commission considers it appropriate to establish a process to review the revised DC cost studies and associated rates.
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25.
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The Commission therefore establishes the following process. Aliant Telecom, Bell Canada, MTS, SaskTel, TELUS, the Competitors and Primus Canada are made parties to this proceeding. All other parties who wish to participate in this process should register with the Commission by 16 January 2004.
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- Parties may address interrogatories to the ILECs by 16 February 2004.
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- Responses to those interrogatories are to be filed with the Commission and served on all parties by 26 March 2004.
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- Requests by 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 the relevant party or parties by 13 April 2004.
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- Written responses to the requests for further responses to interrogatories and for public disclosure must be filed with the Commission and served on the party or parties making the response by 26 April 2004.
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- A determination with respect to requests for further information and for public disclosure will be issued of as soon as possible and the further process will be established at that time.
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- All material must be received, not merely sent, by the dates indicated.
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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: 2003-12-17