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Telecom Decision CRTC 2003-9
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Ottawa, 28 February 2003
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Request for telephone service by the community of Fort Fitzgerald, Alberta
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Reference: 8624-S55-01/02
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The Commission directs Northwestel Inc. to provide telephone service to the community of Fort Fitzgerald, Alberta.
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1.
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In a letter dated 21 February 2002, Smith's Landing First Nation (SLFN) requested that the Commission direct either Northwestel Inc. (Northwestel) or TELUS Communications Inc. (TCI) to provide telephone service to the small community of Fort Fitzgerald, in northern Alberta, as soon as possible. SLFN stated that it had informed both Northwestel and TCI that it was willing to commit funds toward installing the required infrastructure. SLFN indicated that both companies were unwilling to provide service to SLFN's community due to a difference of opinion about jurisdictional issues.
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2.
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On 27 June 2002, SLFN submitted that Northwestel currently provided telephone service to customers on the Alberta side of the Alberta-Northwest Territories border. SLFN further submitted that there was a telephone line routed in front of a section of the reserve lands that required telephone service. In SLFN's view, Northwestel could easily use the power poles already in place to provide service to the community of Fort Fitzgerald, located 32 kilometres from Fort Smith, Northwest Territories (N.W.T.), a community already being served by Northwestel.
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Public process
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3.
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On 30 August 2002, the Commission addressed a number of questions to TCI in regard to providing telephone service to Fort Fitzgerald, since Fort Fitzgerald is located in Alberta and would normally be included in TCI's serving territory.
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4.
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On 9 September 2002, TCI responded that in order for TCI to provide telephone service to this area, its telecommunications network would need to be extended from the nearest switching centre located in Fort Chipewyan, Alberta, approximately 130 kilometres south of Fort Fitzgerald. TCI estimated that the capital cost of Digital Terrestrial Radio from Fort Chipewyan to Fort Fitzgerald was $2,041,000, or $56,695 per premise, assuming service would be provided to 36 premises. TCI suggested that a more economical solution would be for Northwestel to serve the community from Fort Smith, N.W.T., which is much closer to Fort Fitzgerald than Fort Chipewyan is.
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5.
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On 7 November 2002, in view of TCI's response, Northwestel was requested to reply to a number of questions, and in particular, to comment on the following three suggested arrangements to provide telephone service to the community of Fort Fitzgerald, indicating, with justification, which plan was the best one:
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· Plan One:Northwestel would provide telephone service to Fort Fitzgerald from Fort Smith, with TCI remaining the telephone company of record. Northwestel would provide all maintenance, but TCI would reimburse Northwestel for the project, and retain customer contact and billing responsibilities;
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· Plan Two: the serving area boundary would be adjusted such that Northwestel would become the telephone company of record for Fort Fitzgerald and would provide service from Fort Smith; and
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· Plan Three: TCI would remain the telephone company of record for Fort Fitzgerald and would extend its network from Fort Chipewyan, Alberta, to provide service to Fort Fitzgerald.
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6.
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On 6 December 2002, Northwestel filed its response. On 16 December 2002, TCI filed its comments on Northwestel's response. On 16 December 2002, SLFN commented on TCI's response of 9 September 2002, and Northwestel's response of 6 December 2002. On 20 December 2002, Northwestel filed its reply comments.
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Position of parties
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Northwestel
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7.
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In response to the request that Northwestel describe any arrangements where a telephone company provided telephone service to customers in another telephone company's serving territory, Northwestel described an arrangement between Northwestel and TCI in the community of Atlin, British Columbia (B.C.). Northwestel added that although it was aware of two other possible arrangements, it did not have the details of the commercial arrangements for those examples: Hyder, Alaska and Stewart, B.C. with arrangements between Alascom and TCI; and Lloydminster, Alberta, with arrangements between Saskatchewan Telecommunications and TCI.
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8.
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In regard to the three suggested plans, Northwestel submitted that Plan One would require a network architecture in which TCI customers in Fort Fitzgerald would be served directly off lines from a Northwestel switch in Fort Smith. In Northwestel's view, this would be impractical due to complications with billing (local access and long distance), as well as with service order provisioning systems and procedures.
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9.
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Northwestel submitted that an alternate means for Plan One by which telephone service could be provided from Fort Smith involved TCI installing a Class 5 switch for Fort Fitzgerald, along with transport facilities to Fort Smith, and appropriate distribution facilities to customer locations. Northwestel stated that this arrangement would be similar to the network arrangement for Atlin, B.C., noted above.
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10.
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Northwestel submitted that although detailed studies would be required to provide accurate costs, based on its experience, it anticipated that the capital required for such a system would be in the order of $750,000. Northwestel further submitted that recurring charges for a leased DS-1 facility would cost approximately $12,000 per month. In Northwestel's view, this amount could be reduced, however, if multiple DS-0 circuits were leased, depending on traffic levels.
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11.
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In regard to Plan Two, Northwestel submitted that if the serving area boundary was adjusted such that Northwestel replaced TCI as the incumbent telephone company for Fort Fitzgerald, with service provided from Fort Smith, service could also be provided to customers located along the highway corridor between Fort Smith and Fort Fitzgerald. Northwestel advised that although a detailed cost study had not been completed during the time available to prepare its response, it estimated that the network-only costs for this plan would be approximately $550,000. Northwestel indicated that assuming the project would be carried out in 2004, the revenue requirement over the period of 2004 to 2008 would decrease from $145,900 in 2004 to $96,200 in 2008.
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12.
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Northwestel submitted that any plan whereby it became the incumbent telephone company for Fort Fitzgerald should be included in its service improvement plan (SIP)1. In its view, including this project under SIP would be the only means by which such a plan would not unduly burden the company or its subscribers.
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13.
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In regard to Plan Three, Northwestel submitted that the estimate of $2,041,000 provided by TCI to serve Fort Fitzgerald from Fort Chipewyan, appeared to be reasonable. In Northwestel's view, this plan, however, was not a reasonable solution for providing service to the area in question.
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14.
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In response to which plan was the best one, Northwestel submitted that although implementing Plan Two would be less costly than Plan One, in its view, Plan Two required supplementary funding in perpetuity. Northwestel suggested that the Commission should decide if it was appropriate to alter telephone company serving boundaries for situations where service can be offered at a lower cost by another telephone company.
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TCI
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15.
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In its comments, TCI submitted that there was no legal impediment that prevented Northwestel from serving the Fort Fitzgerald customers. In TCI's view, the Commission should approve a solution that was least costly to customers and which required the least amount of subsidy.
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16.
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TCI further submitted that since SLFN had offered to provide funds toward the capital cost of providing service to the community of Fort Fitzgerald, TCI expected that Northwestel would find serving this community more financially viable than most of its other current and planned SIP projects.
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17.
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TCI noted Northwestel's claim that service to Fort Fitzgerald would need to be subsidized in perpetuity. TCI submitted that this would apply to whatever solution was considered, given the high-cost nature of service to this area. TCI further submitted that all subsidies would ultimately be funded by the National Contribution Fund, whether paid to Northwestel as supplementary funding or to TCI as high-cost service area funding.
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SLFN
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18.
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In its comments, SLFN stated that the costs would be significant if TCI were to provide service to Fort Fitzgerald, and that this option would also be the most impractical plan in terms of infrastructure, installation and costs. In SLFN's view, Northwestel should provide telephone service to the community because it would be the least costly and the most practical option in terms of installation. SLFN stated that it was in a position to allocate $250,000, subject to further study on the work plan and costs, to install the telephone lines.
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19.
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SLFN stated that it strongly urged the Commission to direct Northwestel to provide telephone service to its community in 2003. It submitted that the lack of telephone service was a great burden that prevented SLFN from effectively establishing its community. Many projects, such as housing, economic development, and community infrastructure, were on hold awaiting the installation of telephone service. Members of SLFN needed telephone access to the health, education and other services provided in Fort Smith. SLFN stated that it would be more than willing to work with Northwestel to determine the necessary costs and work plan to install the lines, with the understanding that its First Nation would contribute money to the project.
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20.
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In a subsequent letter dated 17 December 2002, SLFN confirmed that its First Nation was prepared to contribute $250,000 to the installation of telephone lines to Fort Fitzgerald.
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Northwestel's reply comments
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21.
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Northwestel noted that all parties to this proceeding had agreed that it was not reasonable for TCI to provide service to Fort Fitzgerald by extending the TCI network from Fort Chipewyan. Northwestel submitted that the least costly solution was to include this area in its SIP, with supplemental funding provided in perpetuity to cover initial capital and ongoing operational costs.
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22.
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Northwestel stated that if SLFN provided a contribution of $250,000 towards the initial capital outlay on an upfront basis, the resource burden on the company would be significantly reduced. Northwestel indicated that as such, it should therefore be able to provision the project as part of the 2003 SIP, without risk to its currently-approved SIP and capital plan.
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23.
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Northwestel submitted that in recognition of the significant contribution to be made by SLFN, the Commission should waive the $1,000 per household contribution component2 established by the Commission under the company's SIP. In Northwestel's view, customers should continue to be responsible for regular tariff installation charges.
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24.
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Northwestel stated that the plan to begin this project in 2003 would be subject to Northwestel obtaining the necessary permits from appropriate parties to place the company's infrastructure along the route.
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25.
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Northwestel submitted that given SLFN's investment of $250,000, it had revised its estimate of the ongoing annual revenue requirement impact on a total company basis associated with the incremental SIP expenditures (net of associated revenues) to include Fort Fitzgerald in its SIP in 2003. Northwestel indicated that its estimate showed that the funding requirement decreased from $90,100 in 2004 to $64,900 in 2008.
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26.
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Northwestel stated that it was prepared to move forward with this project subject to the conditions identified in its reply, including receiving SLFN's financial contribution up front, funding in perpetuity, and obtaining all appropriate permits. Northwestel requested that at the same time, the Commission formalize the boundary between Northwestel and TCI. Northwestel proposed specific co-ordinates, set by latitude and longitude.
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Commission determination
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27.
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The Commission notes that all of the parties agreed that the least costly solution to provide telephone service to the community of Fort Fitzgerald is to have Northwestel serve the area from Fort Smith, situated in Northwestel's serving territory. In the Commission's view, this plan is the most practical and efficient option, and also meets the requirement that the ILECs' SIPs incorporate least-cost technology.
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28.
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In light of the above, the Commission considers that Northwestel should provide telephone service to the community of Fort Fitzgerald.
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29.
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The Commission has reviewed the cost studies submitted by Northwestel for this project and is of the view that the estimate of $550,000 is reasonable. The Commission considers that supplementary funding to cover the initial capital outlay and the ongoing operating costs, should be included in Northwestel's SIP. The Commission notes that the addition of the Fort Fitzgerald project to Northwestel's SIP would require an increase of about $90,000 to the 2003 subsidy, or about 0.5%. In regard to Northwestel's view that this project requires supplementary funding in perpetuity, the Commission considers that Northwestel will be adequately compensated for this project in the subsidy for its SIP.
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30.
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The Commission is also of the view that in light of SLFN's $250,000 contribution, it would be appropriate for Northwestel to waive the $1,000 per household contribution, as suggested by Northwestel.
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31.
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Accordingly, the Commission directs:
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a) Northwestel to provide telephone service to the community of Fort Fitzgerald, Alberta from Fort Smith, N.W.T.;
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b) Northwestel to adjust its service boundary as follows: the area North of 60˚ latitude (N.W.T./Alberta border) and including the area North of
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· 111˚ 55' longitude at 60˚ 00' latitude to;
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· 111˚ 55' longitude 59˚ 50' latitude to;
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· a point which is the middle of the Slave River and 59˚ 50' latitude to;
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· a point at 60˚ 00' latitude and the middle of the Slave River;
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c) TCI to adjust its service boundary to take into account the changes made to Northwestel's serving territory described above;
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d) Northwestel to include the revenue requirement for Fort Fitzgerald in its 2003 calculations for the subsidy requirement;
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e) Northwestel to include the project in its SIP; and
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f) Northwestel to carry out the project in 2003, and waive the $1,000 per household contribution, contingent upon SLFN providing up front funding of $250,000.
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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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1 All incumbent local exchange carriers not meeting the basic service objective established by the Commission in Telephone service to high-cost serving areas, Telecom Decision CRTC 99-16, 19 October 1999, which sets out the level of telephone service that the Commission considered should be extended to as many Canadians as feasible throughout Canada, must submit multi-year service improvement plans designed to extend the basic service objective to a greater number of Canadians. [back]
2 In Long-distance competition and improved service for Northwestel customers, Decision CRTC 2000-746, 30 November 2000, the Commission established a framework that Northwestel should apply when extending service to unserved premises. Specifically, the Commission approved a maximum construction allowance of $25,000 for both existing and future premises and a $1,000 customer contribution. [back]
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Date Modified: 2003-02-28