ARCHIVED - Telecom Order CRTC 2003-217

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Telecom Order CRTC 2003-217

  Ottawa, 29 May 2003

Ontario Telecommunications Association

  Reference: Tariff Notice 82

Final 2001 and interim 2002 Network Access Tariffs

  In this order, the Commission approves the Ontario Telecommunications Association (OTA) member companies' final 2001 Network Access Tariffs (NATs). The Commission also approves OTA member companies' interim 2002 NAT and caps the total compensation amount for the 2002 NAT at the final 2001 approved level.


The Commission received on 11 July 2002 proposed Tariff Notice 82 with respect to the 2001 final Network Access Tariffs (NATs) from the Ontario Telecommunications Association (OTA) on behalf of its members listed in paragraph 6.


The Commission received comments from Bell Canada on 6 September 2002 and 6 December 2002.


In Order CRTC 2001-590, 26 July 2001, the Commission approved the OTA members' 2000 final NATs and interim 2001 NATs.


In Regulatory framework for the small incumbent telephone companies, Decision CRTC 2001-756, 14 December 2001 (Decision 2001-756), the Commission determined that it would undertake a follow-up consultative proceeding to determine, among other things, a final methodology for cost recovery and allocation of network access costs for the year 2002 and beyond.


Also in Decision 2001-756, the Commission determined that each company's network access costs would be frozen at approved 2001 levels, subject to any one-time adjustments allowed for 2001, that would be removed in 2002. As well, the Commission determined that, effective 1 January 2002, the interim 2002 NAT rates of the small incumbent local exchange carriers would be the 2001 approved NAT rates.


OTA proposed the following final 2001 costs based on 2001 Phase III actual results and also proposed that the tariff rates be made interim for 2002.


2001 network access costs

2001 total DS-0 circuits at year-end

2001 proposed NAT rates

Amtelecom Inc.




Brooke Telecom Co-operative Ltd.




Gosfield North Communications Co-operative Ltd.




Hay Communications Co-operative Ltd.




Huron Telecommunications Co-operative Ltd.




Execulink Telecom Inc.




Lansdowne Rural Telephone Co. Ltd.




Mornington Communications Co-operative Ltd.




Nexicom Telecommunications Inc.




Nexicom Telephones Inc.




North Frontenac Telephone Corporation Ltd.




North Renfrew Telephone Company Limited




People's Telephone Company of Forest Inc.




Quadro Communications Co-operative Inc.




Roxborough Telephone Company Limited




Tuckersmith Communications Co-operative Ltd.




Westport Telephone Company Limited




Wightman Telecom Ltd.





OTA noted that the proposed 2001 NAT rates for each company were determined using the Phase III costs allocated to the network access category and the number of DS-0 circuits in service at year-end.


OTA further explained that the allocation of Phase III costs to the network access category was driven by basic study ratios of average plant investment and that changes in basic study ratios accounted for the majority of the changes in the network access costs.


OTA provided additional information which explained that some increases in costs for Amtelecom Inc., Hay Communications Co-operative Ltd., and Quadro Communications Co-operative Inc., were the result of an increase in the number of DS-0 circuits, while costs for Lansdowne Rural Telephone Co. Ltd. decreased mainly due to a decrease in financial expenses and income taxes.


In its comments, Bell Canada submitted that while circuit costs were generally decreasing in the competitive world, the overall costs within OTA locations were increasing. In Bell Canada's view, the explanations offered by the OTA have not adequately justified the increases requested.


Subsequently, Bell Canada stated that it would not oppose the proposed final 2001 network access costs and NAT rates of the OTA members, provided that OTA agreed that the compensation for 2002 total network access would be capped at the 2001 level.

Commission analysis and determinations


The Commission notes that the costs used for the determination of the NAT rates are the costs in the network access category of the Phase III results. Based on Phase III methodology, the costs allocated to the network access category are directly impacted by changes in the number of DS-0 circuits and level of total company expenses.


The costs allocated to the network access category are also indirectly impacted by the changes in investment ratios determined by detailed basic studies of plant investment assigned to Phase III categories. Operating expenses such as repairs, depreciation, maintenance, operating taxes, income taxes, interest on long-term debt, and other fixed charges are assigned to Phase III categories using these investment study ratios.


The Commission notes that as investment changes, i.e. purchases or write-offs of plant, the percentage of plant investment assigned to the network access category compared to the amount assigned to the other categories can change. This in turn can cause the allocation of expenses to the network access category to change even without any change to the number of DS-0 circuits for network services or without a change in the companies' total expenses.


In light of the above, the Commission considers that the explanations provided by OTA are reasonable and consistent with Phase III methodology.


The Commission further notes that Bell Canada, the payer of OTA's NAT, agreed not to oppose OTA's proposal provided that the 2002 total network access requirements were capped at 2001 levels. The Commission notes that in Decision 2001-756, it determined that for 2002, the amount of network access costs would be frozen at the levels of approved 2001 final NAT. The Commission considers that this will satisfy Bell Canada's concerns.


The Commission approves OTA's proposed final 2001 NATs as filed. The Commission also approves OTA's interim 2002 NATs and caps the total network access costs for 2002 at the 2001 final approved level.


The Commission notes that final determination for 2002 network access costs will be addressed in the consultative process mandated by the Commission in Decision 2001-756.
  Secretary General
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