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Telecom Order CRTC 2003-349
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Ottawa, 27 August 2003
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Bell Canada
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Reference: Bell Canada Tariff Notice 6749
Bell Canada Tariff Notice 777 (National Services Tariff)
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2003 Annual price cap filing
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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 established the price regulation regime that is now applicable to the following incumbent local exchange carriers (ILECs): Aliant Telecom Inc., Bell Canada, MTS Communications Inc., Saskatchewan Telecommunications and TELUS Communications Inc. (collectively,
the ILECs).
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2.
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In Decision 2002-34, the Commission directed that, starting in 2003, the ILECs were to file their annual price cap filings by 31 March. In a letter dated 25 March 2003, the filing deadline for the year 2003 price cap filings was extended to 2 May 2003.
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3.
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The Commission received applications by Bell Canada dated 2 May 2003 proposing tariff revisions to meet its 2003 price cap commitment.
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Bell Canada's applications
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4.
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In its applications, Bell Canada proposed revisions to the following tariff items:
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- General Tariff, item 70, Exchange service - General; item 500, Direct inward dialing (DID); item 5300, Digital exchange access (DEA); and
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- Bell Canada National Services Tariff, item 301, Digital Network Access (DNA) service.
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5.
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In particular, Bell Canada proposed the following tariff revisions to services in the single and multi-line business local exchange services basket:
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- increase the monthly rates for measured line business primary exchange service (PES) in all rate bands by 9.9%;
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- increase the monthly rates for flat rate individual line business PES in bands D, E, F and G, except sub-bands E1, F1, F3 and F5, by between 1.5% and 9.7%;
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- introduce one-year and three-year minimum contract period options for flat rate individual line business PES in band D, with lower rates for customers who choose Bell Canada as their primary interexchange carrier. The proposed rate reductions range between 2.8% and 15.7%.
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6.
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Bell Canada submitted that the proposed tariff revisions would ensure that the service basket index (SBI) would not exceed the service basket limit (SBL) for the single and multi-line business local exchange services basket.
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7.
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Bell Canada proposed the following tariff changes to services within the other capped services basket:
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- decrease the monthly rate for a PSTN connectivity for DEA service from $39.95 to $29.00;
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- eliminate the $8.15 service charge for adding the DID arrangement to lines, locals or facsimile machines and for Multiple appearance directory numbers and other Direct access features when a telephone number is required;
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- decrease the monthly rate for equivalent line service in bands A through F from $2.95 to $2.55; and
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- decrease the rates for DNA service - DS-1 and DS-3 access in rate bands 0
and 1. The proposed rate decreases range between 2.4% and 23.4% for DS-1 access and between 1.0% and 19.5% for DS-3 access.
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8.
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Bell Canada submitted that the proposed tariff revisions would ensure that the SBI would not exceed the SBL for the other capped services basket.
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9.
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Bell Canada requested that the proposed tariff revisions become effective on 1 June 2003.
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10.
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Bell Canada filed imputation tests in support of the proposed rate changes.
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11.
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Bell Canada submitted that the proposed tariff revisions complied with all of the pricing constraints set out in Decision 2002-34 and would ensure that it met its price cap obligations for 2003.
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12.
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The Commission received comments from Mr. François Ménard on 9 May 2003 and 13 June 2003. Bell Canada filed reply comments on 3 June 2003.
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Mr. Ménard's comments
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13.
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Mr. Ménard noted that in Tariff Notice 777 (TN 777), Bell Canada proposed to reduce the rates for DNA services in bands 0 and 1, but not in band 3. Mr. Ménard requested that Bell Canada be required to include in its tariff pages the methodology used to assign wire centres or exchanges to specific DNA bands. Mr. Ménard submitted that, in the absence of definite criteria for the classification of markets into certain DNA bands, the Commission should suspend the approval of TN 777 until such time as the Commission issues a decision on Bell Canada Tariff Notice 748 (TN 748), in which the company proposed to identify the DNA band to which each wire centre or exchange is assigned. Mr. Ménard noted that TN 748 was filed pursuant to a Commission directive in
Decision 2002-34 that was confirmed in Competitor Digital Network Access
service proceeding, Telecom Public Notice CRTC 2002-4, 9 August 2002
(Public Notice 2002-4).
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Bell Canada's reply comments
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14.
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Bell Canada noted that the comments filed by Mr. Ménard repeated arguments filed in relation to TN 748 and submitted that they were not relevant in relation to TN 777. Bell Canada also noted that the criteria to determine the retail DNA rate band of a particular exchange have been defined and continue to apply. Bell Canada further noted that in Telecom Order CRTC 96-1219, 6 November 1996, the Commission had found that the DNA banding structure was not unjustly discriminatory as it applies to all customers in a given wire centre.
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15.
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Bell Canada submitted that, as per the current price cap regime, subject to meeting an imputation test for a service for which the company chooses to reduce prices, the choice as to which prices will be reduced to meet its price cap constraints is at Bell Canada's discretion. Bell Canada submitted that Mr. Ménard's inference that the company was acting improperly by reducing rates for DNA services in bands 0 and 1, but not in band 3, was incorrect.
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Commission analysis and determinations
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Costing issues
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16.
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The Commission notes that for a new service or a rate decrease, the proposed rates must be supported by and satisfy an imputation test. The Commission also notes that the imputation test is the accepted method, under the current regulatory regime, of determining whether the proposed rates would be anti-competitive.
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17.
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The Commission finds that the proposed rates pass the imputation test.
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Compliance with pricing constraints set out in Decision 2002-34
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18.
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In Decision 2002-34, the Commission applied a number of constraints to the rates for services in the single and multi-line business local exchange services basket and the other capped services basket, in order to provide customers of those services with price protection.
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19.
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The pricing constraints which apply to services in the single and multi-line business local exchange services basket include:
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- a basket constraint, operating through the SBL for that basket, which must be updated annually by the rate of inflation;
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- a rate element constraint limiting rate increases for a service to 10% per year; and
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- a provision, in order to prevent an ILEC from decreasing rates in more competitive areas and increasing rates in less competitive areas of the same band, that rates for business local exchange services should not generally be permitted to be further de-averaged within a band.
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20.
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The Commission notes that the proposed increases to the monthly rates for Measured line business PES and Flat rate individual line business PES service do not exceed 10%. The Commission finds that the proposed tariff revisions comply with the basket constraint requirement that the SBI not exceed the SBL for the single and multi-line business local exchange services basket.
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21.
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The pricing constraints which apply to services in the other capped services basket include:
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- a basket constraint, operating through the SBL for that basket, which must be updated annually by the rate of inflation less the productivity offset;
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- a rate element constraint limiting rate increases for a service to 10% per year; and
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- a provision, in order to prevent an ILEC from decreasing rates in more competitive areas and increasing rates in less competitive areas of the same band, that rates for other capped services should not generally be permitted to be further de-averaged within a band.
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22.
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The Commission finds that the proposed tariff revisions comply with the basket constraint requirement that the SBI not exceed the SBL for the other capped services basket. As Bell Canada proposed no price increases to other capped services, the rate element constraint limiting rate increases for a service to 10% per year is not pertinent.
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23.
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Accordingly, the Commission is satisfied that the proposed tariff revisions are consistent with the pricing constraints established in Decision 2002-34.
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24.
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The Commission notes, regarding the concern expressed by Mr. Ménard regarding Bell Canada's proposal to reduce rates for DNA service in rate bands 0 and 1 but not in rate band 3, that the current regulatory regime provides the ILECs with flexibility as to which rates to reduce to meet the pricing constraints established in Decision 2002-34, as long as those rates satisfy the imputation test.
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25.
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The Commission notes that the function of the tariffs is to reflect the terms and conditions, including the rates, under which a service is offered. The methodology and the justification for a particular rate structure are examined by the Commission in the context of economic studies filed in support of tariff filings to introduce a new service or a new rate structure and are not set out in the proposed tariff pages. Accordingly, the Commission considers that it would not be appropriate to require Bell Canada to set out the methodology it uses to assign wire centres to a specific rate band in the tariff for DNA service as requested by Mr. Ménard.
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26.
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The Commission notes that in TN 777 Bell Canada proposed reductions to the rates for DNA service but did not propose any changes to its rate structure, while in TN 748 Bell Canada proposed to list the exchanges and wire centres assigned to each rate band under that rate structure.
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27.
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Taking all of the above into consideration, the Commission is of the view that there is no need to delay approval of TN 777 until it issues a decision with respect to TN 748, requested by Mr. Ménard.
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28.
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The Commission notes that Bell Canada's rates for DNA service are to remain interim pending the completion of the proceeding initiated by Public Notice 2002-4.
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29.
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In light of the foregoing:
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- the Commission approves on an interim basis the proposed rates for DNA service;
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- the Commission approves the proposed rates for Measured line business PES, Flat rate individual line business PES, DEA, DID, and Equivalent service.
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30.
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The revisions take effect as of the date of this order.
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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: 2003-08-27