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Telecom Order CRTC 2003-350
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Ottawa, 27 August 2003
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MTS Communications Inc.
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Reference: MTS Tariff Notices 503, 503A and 504
Bell Canada Tariff Notice 778 (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. (MTS), 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 MTS and by Bell Canada on behalf of MTS, dated 2 May 2003, and amended on 27 May 2003, proposing tariff revisions to meet its 2003 price cap commitment.
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MTS's applications
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4.
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In their applications, MTS and Bell Canada proposed revisions to the following tariff items:
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- General Tariff, item 475.2, Individual semi-public business primary exchange service (PES); item 1990, Digital exchange access (DEA); item 1995.3.A, Microlink service; item 2000.3, Megalink service; 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, MTS proposed the following tariff revisions to services in the single and multi-line business local exchanges services basket:
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- increase the rates for Individual semi-public business PES in bands D, E1, E2, F, GA, G1 and G2 by between 4.2% and 9.3%.
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6.
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MTS 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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MTS and Bell Canada proposed the following tariff changes to services within the other capped services basket:
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- decrease the monthly rates charged for non-contract and minimum contract period options in rate bands A, B and C for Megalink service by between 6.7% and 8.7%; increase the monthly rates for access in excess of 23 B+D or 24 Channel systems by either 8.0% or 9.9%; and increase the service charge associated with software and/or PSTN changes by 9.1%;
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- increase the non-contract rates for DEA service by between 7.3% and 10%; introduce contract pricing options which result in rate decreases ranging between 1.1% and 17.1% from the non-contract rates; increase the monthly rates for each access in excess of the first full DEA access by between 5.4% and 7.8%; and increase the charge for rearrangements or modifications for each group of 24 trunks by 10%;
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- decrease the monthly rates charged for the minimum contract period options for Microlink service in bands A and B by between 3.8% and 9%; increase the monthly non-contract rate by 1.3%, and the associated service charge by 10%;
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- decrease the rates for DNA service - DS-1 access service provided under multi-year contract periods in bands 0 and 1 by between 2.4% and 23.4% and introduce contract pricing options for DS-1 and DS-3 links in all bands reflecting rate decreases ranging between 5% and 35%.
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8.
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MTS 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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MTS requested that the proposed tariff revisions become effective on 1 June 2003.
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10.
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MTS stated that it had filed imputation test results with previous price cap filings at various times, which confirmed that the services for which it proposed price reductions were compensatory and had adequate margins at the rates currently proposed by MTS. MTS stated further that it was intent on updating its cost studies and prepared to file updated imputation test results for these services if required by the Commission.
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11.
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MTS 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 no comments with respect to these applications
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Commission analysis and determinations
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Costing issues
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13.
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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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14.
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The Commission is satisfied that the proposed rates pass the imputation test as recent imputation test results filed by MTS for the services for which it has proposed rate reductions confirm that there is adequate margin. However, the Commission would generally expect MTS to file updated cost studies and imputation test results with future filings.
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Compliance with pricing constraints set out in Decision 2002-34
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15.
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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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16.
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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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17.
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The Commission notes that the proposed increases to the monthly rates for Individual semi-public business PES 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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18.
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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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19.
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The Commission notes that the proposed increases to the components of DEA service, Microlink service and Megalink service do not exceed the rate element constraint of 10%. 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.
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20.
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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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21.
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The Commission notes that MTS's rates for DNA service are to remain interim pending completion of the proceeding initiated by Competitor Digital Network Access service proceeding, Telecom Public Notice CRTC 2002-4, 9 August 2002.
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22.
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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 Individual semi-public business PES, DEA service, Microlink service and Megalink service.
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23.
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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