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ARCHIVED - Telecom Public Notice CRTC 2004-1

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Telecom Public Notice CRTC 2004-1

  Ottawa, 24 March 2004
 

Review and disposition of deferral accounts for the second price cap period

  Reference: 8678-C12-200402313 and 8678-B2-200318049
  With this public notice, the Commission initiates a public proceeding inviting proposals on the disposing of the amounts accumulated in the incumbent local exchange carriers' deferral accounts during the first two years of the second price cap period.
 

Background

1.

In Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002 (Decision 2002-34) and Implementation of price regulation for Télébec and TELUS Québec, Telecom Decision CRTC 2002-43, 31 July 2002 (Decision 2002-43), the Commission determined a price regulation framework that applied to the following incumbent local exchange carriers (ILECs): Aliant Telecom Inc. (Aliant Telecom), Bell Canada, MTS Communications Inc. (MTS), Saskatchewan Telecommunications (SaskTel), TELUS Communications Inc. (TELUS), TELUS Communications (Québec) Inc. (TELUS Québec) and Société en commandite Télébec (Télébec) (collectively, the ILECs).

2.

In Decisions 2002-34 and 2002-43, the Commission anticipated that competition would be insufficient to discipline the ILECs' service rates during the price cap period and imposed constraints on individual baskets of services. The Commission established a basket constraint equal to inflation (I) less a productivity offset (X) to the revenues in the basket of residential local services in non-high cost serving areas (non-HCSAs). The basket of residential local services in non-HCSAs was divided into two sub-baskets: a sub-basket of residential local exchange services and a sub-basket of residential optional local services.

3.

In order to mitigate potential effects on local competition from mandated rate reductions, that could result from applying an I-X constraint to the basket of residential local services in non-HCSAs, the Commission introduced a mechanism requiring each ILEC to establish a deferral account. The ILECs were directed to assign to that account, in each year of the price cap period, an amount equal to any revenue reduction that would otherwise be required under the I-X constraint for the basket of residential local services in non-HCSAs.

4.

In the case of Télébec in Decision 2002-43, the Commission decided not to permit Télébec to raise its local service rates to fund the residual going-in revenue requirement shortfall. The Commission determined that Télébec's residual going-in revenue requirement shortfall should be funded from a transitional subsidy from the national contribution fund. However, the Commission directed that, once the shortfall is fully eliminated, Télébec contribute to its deferral account an amount equal to any revenue reduction that would be required by the I-X constraint on the basket of residential local services in non-HCSAs.

5.

The Commission indicated that it intended, beginning in the second year of the price cap period, to dispose of amounts outstanding in the deferral accounts that had accrued during the previous year. The Commission also stated that it would review the amount in each ILEC's deferral account on an annual basis, no later than the second year of the price cap period, at the time of the ILECs' annual price cap filings. The Commission indicated that it intends to clear these amounts in a manner that contributes to achieving the Commission's objectives for the price cap period.
 

Contributions to deferral accounts

6.

In addition to the amounts representing revenue reductions that would otherwise be required by the I-X basket constraint, the Commission directed the ILECs to contribute certain other amounts as well.

7.

In Decision 2002-34, the Commission directed Aliant Telecom, Bell Canada, MTS, SaskTel and TELUS to transfer any revenue associated with two time-limited exogenous factors approved during the initial price cap period to the deferral accounts. The two time-limited adjustments related to the reduction of the contribution revenue-percent charge and the costs, which were one-time in nature, related to the start-up costs associated with local competition and local number portability.

8.

In Decision 2002-34, the Commission directed Bell Canada to include in its deferral account the portion of the savings associated with the Ontario gross receipts tax related to the basket of residential local services in non-HCSAs. The savings associated with the gross receipts tax resulted from the Commission's determination in Bell Canada's savings from gross receipts tax reductions,Order CRTC 2001-100, 2 February 2001.

9.

In Bell Canada 2002 Annual price cap filing, Telecom Decision CRTC 2003-15, 18 March 2003, the Commission approved Bell Canada's proposal to include amounts in its deferral account for the portion of the Quebec telecommunications, gas distribution, and electric power networks tax savings associated with the basket of residential local services in non-HCSAs.
 

Draw downs from the deferral accounts

10.

In Decision 2002-34, the Commission determined that Category I Competitor Services should be offered by each ILEC at rates equal to its service costs plus a mark-up of 15%. As in most cases this resulted in mandated reductions in Category I Competitor Services rates, the Commission further determined that Aliant Telecom, Bell Canada, MTS, SaskTel and TELUS should be compensated for these reductions from their deferral accounts, based on 31 December 2001 demand levels.

11.

In Decisions 2002-34 and 2002-43, the Commission determined that the ILECs should also recover their service improvement plan costs associated with non-HCSAs from funds accumulated in their deferral accounts.

12.

In Decision 2002-34, the Commission created an interim competitor-Digital Network Access (CDNA) service that resulted in reduced rates for competitors and reduced Digital Network Access (DNA) revenues for the ILECs. The Commission decided that Aliant Telecom, Bell Canada, MTS, SaskTel and TELUS should be compensated from their deferral accounts for the reduction in their DNA revenue, on the basis of 31 December 2001 demand from competitors for the CDNA service.

13.

In Decisions 2002-34 and 2002-43, the Commission stated that it anticipated that an adjustment to the deferral account would be made whenever the Commission approves rate reductions for residential local services that are proposed by the ILECs as a result of competitive pressures. The Commission also anticipated that the deferral account would be drawn down to mitigate rate increases for residential service that could result from the approval of exogenous factors or when inflation exceeds productivity. The Commission further stated that other draw downs could occur, for example, through subscriber rebates or the funding of initiatives that would benefit residential customers in other ways.
 

Proceedings that may affect the amounts in the deferral accounts

14.

In Competitor Digital Network Access service proceeding, Telecom Public Notice CRTC 2002-4, 9 August 2002, the Commission initiated a proceeding to determine, on a final basis, whether Aliant Telecom, Bell Canada, MTS, SaskTel and TELUS should provide DNA and certain inter-exchange services to competitors at reduced competitor service rates.

15.

In Implementation of competition in the local exchange and local payphone markets in the territories of Télébec and TELUS (Québec), Public Notice CRTC 2001-69, 14 June 2001, the Commission directed Télébec and TELUS Québec to file proposed rate band structures and identify HCSAs in their respective territories.

16.

In the proceeding initiated in Access to pay telephone service, Telecom Public Notice CRTC 2002-6, 5 December 2002, the Commission received a proposal to equip payphones with teletypewriter capability using funds drawn down from the deferral accounts.

17.

As part of its price cap filings dated 6 August 2002, Aliant Telecom proposed to draw down from its deferral account to reflect unused room carried forward from the last year of the first price cap period.
 

Scope of the proceeding

18.

The Commission hereby initiates a proceeding to review the amounts in each ILEC's deferral account and to determine how to dispose of these amounts. The Commission invites parties to submit proposals for the treatment of amounts in the deferral accounts. The Commission may also identify other uses for the amounts in the deferral accounts, in which case it will address interrogatories to parties related to such uses. The Commission will direct specific uses for amounts from the first two years of the price cap period and may direct uses for future amounts in each ILEC's deferral account.

19.

For Aliant Telecom, Bell Canada, MTS, SaskTel and TELUS, the first two years of the price cap period are from 1 June 2002 to 31 May 2004. For TELUS Québec and Télébec, the first two years of the price cap period are from 1 August 2002 to 31 July 2004.

20.

This proceeding will focus on disposing of deferral account amounts in surplus. If, in reviewing the amounts in each ILEC's deferral account, it is found that an account is negative, then the ILEC may submit a specific application to address the situation.

21.

In Decisions 2002-34 and 2002-43, the Commission stated that the deferral accounts were to be cleared in a manner that contributes to achieving the Commission's objectives for the current price cap period. Parties should use the objectives set out by the Commission as a guide when preparing their submissions. The objectives set out in these decisions are:
 

a) to render reliable and affordable services of high quality, accessible to both urban and rural area customers;

 

b) to balance the interests of the three main stakeholders in telecommunications markets, (i.e., customers, competitors and incumbent telephone companies);

 

c) to foster facilities-based competition in Canadian telecommunications markets;

 

d) to provide incumbents with incentives to increase efficiencies and to be more innovative; and

 

e) to adopt regulatory approaches that impose the minimum regulatory burden compatible with the achievement of the previous four objectives.

 

Related application

22.

The Commission received an application on 2 December 2003 from Bell Canada, filed pursuant to Part VII of the CRTC Telecommunications Rules of Procedure. In its application, Bell Canada requested approval to use funds in its deferral account to expand its digital subscriber line footprint over a three-year period into communities which presently have no high-speed broadband Internet connectivity from any provider. Bell Canada's application was suspended pending this proceeding.

23.

As Bell Canada's application deals with usage of funds in a deferral account, the Commission incorporates it by reference into this proceeding.
 

Procedure

24.

Aliant Telecom, Bell Canada, MTS, SaskTel, TELUS, TELUS Québec, and Télébec are made parties to this proceeding.

25.

Other parties wishing to participate fully in this proceeding must notify the Commission of their intention to do so, by 7 April 2004. They should contact the Secretary General by mail at CRTC, Ottawa, Ontario, K1A 0N2, by fax at (819) 994-0218 or by email at procedure@crtc.gc.ca. They are to indicate in the notice their email address where available. If parties do not have access to the Internet, they are to indicate in their notice whether they wish to receive disk versions of hard copy filings.

26.

The Commission will issue, as soon as possible after the registration date, a complete list of parties and their mailing address (including their email address, if available), identifying those parties who wish to receive disk versions.

27.

The ILECs are directed to file with the Commission, serving a copy on all other parties, by 14 April 2004, their proposed amount in their deferral accounts showing a schedule for the first three years of the price cap period. The schedule should include the source of transfers, draw downs, balance in each year, cumulative balance in each year, calculations and assumptions.

28.

Parties are invited to file their submissions with the Commission, serving a copy on all other parties, by 19 May 2004. The submissions should include a detailed description of the proposal; identify the applicable ILEC deferral accounts; provide estimates on specific amounts and timeframes; and describe the method of disposing of the amounts.

29.

Any members of the public, who wish to file written comments, without receiving copies of the various submissions, may do so by submitting their comments in writing to the Commission, at the address noted in paragraph 25, by 19 May 2004.

30.

The Commission will not formally acknowledge comments. It will, however, fully consider all comments and they will form part of the public record of the proceeding.

31.

The Commission and the parties may address interrogatories to the ILECs and to parties that filed submissions pursuant to paragraph 28. Any such interrogatories must be filed with the Commission and served on the party in question, by 23 June 2004.

32.

Responses to those interrogatories are to be filed with the Commission and served on all parties, by 7 July 2004.

33.

Requests by parties for further responses to their interrogatories, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information for which confidentiality has been claimed, setting out in each case the reasons for disclosure, must be filed with the Commission and served on the party or parties in question, by 28 July 2004.

34.

Written responses to requests for further responses to interrogatories and for public disclosure must be filed with the Commission and served on the party or parties making the request by 4 August 2004.

35.

A determination with respect to requests for further information and for public disclosure will be issued as soon as possible. Any information to be provided pursuant to that determination must be filed with the Commission and served on all parties, by 1 September 2004.

36.

All parties may file comments with the Commission on any matters within the scope of this proceeding, serving copies on all other parties, by 15 September 2004.

37.

All parties may file reply comments with the Commission, serving a copy on all other parties, by 29 September 2004.

38.

Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date.

39.

Parties can file their submissions electronically or on paper. Submissions longer than five pages should include a summary.

40.

Where the submission is filed by electronic means, the line ***End of document*** should be entered following the last paragraph of the document, as an indication that the document has not been damaged during electronic transmission.

41.

Please note that only those submissions electronically filed will be available on the Commission's web site and only in the official language and format in which they are submitted.

42.

Each paragraph of your submission should be numbered.

43.

The Commission also encourages interested parties to monitor the public record of this proceeding (and/or the Commission's web site) for additional information that they may find useful when preparing their submissions.
 

Important

44.

All information submitted, including your email address, name and any other personal information as provided, will be posted on the Commission's web site. Documents received in electronic format will be posted on the Commission's web site exactly as you send them, and in the official language and format in which they are received. Documents not received electronically will be available in .pdf format.
 

Location of CRTC offices

45.

Submissions may be examined or will be made available promptly upon request at the Commission offices during normal business hours:
  Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room 206
Gatineau, Québec J8X 4B1
Tel: (819) 997-2429 - TDD: 994-0423
Fax: (819) 994-0218
  Metropolitan Place
99 Wyse Road, Suite 1410
Dartmouth, Nova Scotia B3A 4S5
Tel: (902) 426-7997 - TDD: 426-6997
Fax: (902) 426-2721
  405 de Maisonneuve Blvd. East
2nd Floor, Suite B2300
Montréal, Québec H2L 4J5
Tel: (514) 283-6607
Fax: (514) 283-3689
  55 St. Clair Avenue East, Suite 624
Toronto, Ontario M4T 1M2
Tel: (416) 952-9096
Fax: (416) 954-6343
  Kensington Building
275 Portage Avenue, Suite 1810
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD: 983-8274
Fax: (204) 983-6317
  Cornwall Professional Building
2125 - 11th Avenue, Room 103
Regina, Saskatchewan S4P 3X3
Tel: (306) 780-3422
Fax: (306) 780-3319
  10405 Jasper Avenue, Suite 520
Edmonton, Alberta T5J 3N4
Tel: (780) 495-3224
Fax: (780) 495-3214
  580 Hornby Street, Suite 530
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD: 666-0778
Fax: (604) 666-8322
  Secretary General
  This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca

Date Modified: 2004-03-24

Date modified: