ARCHIVED - Telecom Decision CRTC 2004-76

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Telecom Decision CRTC 2004-76

  Ottawa, 16 November 2004

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

  Reference: 8638-C12-73/02
  In this Decision, the Commission approves TELUS Communications Inc.'s application to increase the capital cost of its service improvement plan (SIP) to $23.5 million. 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 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 a service improvement plan (SIP) of $10.6 million in capital expenditures for unserved premises in TELUS Communications Inc.'s (TCI) territory. It also approved a four-year SIP roll-out period from 2002-2005. 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.


The Commission directed TCI to begin rolling out its SIP in 2002 and 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.


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.


On 27 March 2003, TCI filed its 2003 TSR calculation, which included the recovery of costs associated with the SIP in HCSAs. In response to a Commission interrogatory,TCI based its SIP cost adjustment upon the communities identified in its submission filed on 13 September 2002, modified to reflect a three-year roll-out plan from 2003-2005.


In Follow-up to price cap Decision 2002-34: TELUS' revised service improvement plan, Telecom Decision CRTC 2003-64, 25 September 2003 (Decision 2003-64), the Commission approved a revised SIP for TCI of $21.4 million and a revised roll-out period of 2003-2006.


The Commission approved the TSR rates for SIP expenditures in British Columbia in Final 2003 revenue-percent charge and related matters, Telecom Decision CRTC 2003-84, 19 December 2003.



On 2 April 2004, TCI filed its SIP tracking report for 2003 with the Commission pursuant to Decision 2002-34, serving copies on interested parties in the proceeding leading to Decision 2002-34. The Commission issued interrogatories on 4 June 2004. On 16 July 2004, TCI provided its responses to the interrogatories, copying the interested parties. On 21 September 2004, TCI provided an update to its responses to the interrogatories. The Commission received no comments from interested parties regarding this submission.



In its revised responses to Commission interrogatories, TCI indicated that the total projected capital expenditures for its SIP had increased to $23.5 million, which reflected revised project estimates and the exclusion of projects for Penny (British Columbia Band B) and Peace Point (Alberta Band G). The company indicated that the projected capital expenditures for these two communities had exceeded the Commission-approved capital criteria set out in Decision 2002-34.


In its 16 July and 21 September 2004 submissions, TCI provided updated Phase II cost studies that reflected the removal of the Penny and Peace Point projects. Based on the cost studies, the company submitted that adjustments should be made to its current rates used in calculating its TSR in 2004. TCI also requested an annual draw-down from its deferral account for projects in non-HCSAs.

Commission's analysis and determinations


The Commission notes that TCI has excluded the Penny and Peace Point communities from the SIP since they do not meet the Commission's criteria set out above. The Commission also notes that the cost study filed on 21 September 2004 reflects the exclusion of those two projects.


As noted above, TCI indicated that the total capital cost of its SIP would increase from $21.4 million to $23.5 million, which reflected revised project estimates. The Commission notes that TCI had incorrectly credited the $1,000 customer contribution to the capital cost of its SIP, which caused the company to underestimate its SIP capital costs.


The Commission finds that TCI should treat the $1,000 customer contribution as revenue rather than a credit to the capital cost of the SIP. For purposes of calculating the TSR, TCI should take into account the amount of revenues received from the $1,000 customer contribution by subtracting this amount from the TSR that will be calculated for each year. The removal of the $1,000 credit from the capital cost of the SIP explains the difference between the $21.4 million approved in Decision 2003-64 and the current view of $23.5 million. Accordingly, the Commission approves the increase of the SIP capital cost to $23.5 million.


The Commission plans to examine TCI's application of the methodology described above during its review of the next TCI tracking report, which should be filed by 31 March 2005. The Commission expects that the company will file the necessary costing details in the 31 March 2005 tracking report to demonstrate that it has correctly credited the $1,000 customer contribution to revenues.


The Commission has reviewed TCI's cost studies of 16 July and 21 September 2004, which were filed in support of the company's requested adjustments to its funding, and finds that they are satisfactory. Accordingly, the Commission approves: (a) the associated adjustments to the TSR; and (b) the draw-down from TCI's deferral account.


The Commission notes that in Decision 2003-64 it has approved a revised roll-out period of 2003-2006 for TCI, and considers that the SIP roll-out is on track. The Commission expects the company to complete its SIP by 2006.
  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: