ARCHIVED - Telecom Decision CRTC 2004-74

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Telecom Decision CRTC 2004-74

  Ottawa, 16 November 2004

Aliant Telecom Inc. - Application to increase the capital cost of its service improvement plan and related matters

  Reference: 8638-C12-81/02
  In this Decision, the Commission approves Aliant Telecom Inc.'s application to increase the capital cost of its service improvement plan (SIP) to $5.73 million for unserved premises. The Commission also approves the following related matters: (a) an increase to the company's annual SIP total subsidy requirement associated with its draw-down from the National Contribution Fund; and (b) an increase to its annual SIP draw-down from its deferral account.


In Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002 (Decision 2002-34), the Commission approved the up-front capital amount of $2.33 million as an initial amount for Aliant Telecom Inc.'s (Aliant Telecom) service improvement plan (SIP). The Commission noted that it intended to review the company's progress in implementing its SIP on a yearly basis, as reported in its tracking plan, to determine whether additional capital and funding were required.


With respect to SIP cost recovery in high-cost serving areas (HCSAs), the Commission directed each of the incumbent local exchange carriers (ILECs) to add its Phase II SIP costs for HCSAs to the costs that flow into its total subsidy requirement (TSR) calculation.


Regarding SIP cost recovery in non-high-cost serving areas (non-HCSAs), the Commission stated that it would allow the explicit recovery by the ILECs of the Phase II costs associated with their SIPs in non-HCSAs by means of a draw-down from their respective deferral accounts.


In its tracking report dated 31 March 2003, Aliant Telecom indicated that the total projected capital expenditures for its SIP had increased from $2.33 million as approved in Decision 2002-34 to $3.1 million, which reflected revised project estimates for unserved premises and the addition of new localities to the SIP in 2004 and 2005. In that tracking report, Aliant Telecom proposed to increase the total number of localities from 35 to 44, and the total number of network access services (NAS) from 265 to 304.


On 31 March 2004, Aliant Telecom filed its SIP tracking report with the Commission pursuant to Decision 2002-34. Interested parties in the proceeding leading to Decision 2002-34 received copies of this report. The Commission issued interrogatories on 4 June 2004, and the company provided its responses on 21 July 2004. The Commission received no comments from interested parties regarding this submission.


In its 31 March 2004 SIP tracking report, Aliant Telecom indicated that the total projected capital expenditures for its SIP had increased from $3.1 million (as it had proposed in the 31 March 2003 tracking report) to $5.73 million. The company submitted that the increase in its total projected capital expenditures reflected revised project estimates and the addition of new localities to the SIP in 2004 and 2005. The company proposed to increase the total number of localities from 44 to 54, and the total number of NAS from 304 to 370.


Aliant Telecom also filed Phase II cost studies to support the increases in funding it requested due to the increased capital expenditures proposed in its 31 March 2003 and 31 March 2004 tracking plans.


The company proposed an increase to its TSR in 2004 to reflect its new SIP in Newfoundland and Labrador Bands E and F, and in Nova Scotia Band E, which are located in HCSAs. Aliant Telecom proposed to draw down this increase in its TSR from the National Contribution Fund.


Aliant Telecom also proposed an increase to the draw-down from its deferral account in 2004 for additional projects located in non-HCSAs.
  Commission's analysis and determinations


In Decision 2002-34, the Commission directed Aliant Telecom and the other ILECs to start a project in a locality if it met the following criteria: (a) the maximum average cost per premises was $25,000 using a 100 percent take rate, and (b) at least one customer requested service and was willing to contribute $1,000.


The Commission finds that Aliant Telecom's SIP projects fall within the criteria specified in Decision 2002-34, with the exception of four projects discussed below.


In response to a Commission interrogatory, Aliant Telecom stated that four of the proposed projects exceeded the Decision 2002-34 criteria, but since the company had made commitments to the customers in these four projects to provide them with telephone service, it intended to include them in the SIP and proposed that the costs associated with these projects be funded through the TSR.


Except in special circumstances, Aliant Telecom and other ILECs are to exclude a project from the SIP if the project cost exceeds the capital allowance, unless customers are willing to pay the difference in the capital expenditures. If there are special circumstances, the Commission will examine each project on a case-by-case basis.


The Commission considers that Aliant Telecom made a good faith commitment to customers based on the best information available at the time it was canvassing its customers for their willingness to contribute $1,000 to receive telephone service.


The Commission has reviewed the cost studies filed in support of the requested increases in funding and is of the view that they are satisfactory.


While three projects in HCSAs (Burgoynes Cove, Churchill Falls Road, and Goose River Road in Newfoundland and Labrador) exceed the capital cost criterion of $25,000, the Commission considers that the impact of the excess capital expenditures would be immaterial on the TSR.


Similarly, the annual financial impact on the deferral account of the excess capital expenditures associated with the only project in a non-HCSA (Benton in Newfoundland and Labrador) would be immaterial.


Accordingly, the Commission finds that no adjustment is required to Aliant Telecom's proposed increases to the TSR for the three projects in HCSAs. In addition, the Commission finds reasonable Aliant Telecom's requested increase to its draw-down from its deferral account.


In light of the foregoing, the Commission approves the increase of Aliant Telecom's SIP capital cost to $5.73 million for unserved premises.


The Commission also approves (a) the associated increase in the TSR; and (b) the proposed increase in the draw-down from Aliant Telecom's deferral account.


The Commission notes that Aliant Telecom's SIP roll-out is for the period 2002-2005. Following a review of the tracking plan, the Commission finds that the SIP roll-out is on track.
  Secretary General
  This document is available in alternative format upon request and may also be examined at the following Internet site:

Date Modified: 2004-11-16

Date modified: