ARCHIVED - Telecom Commission Letter

 

Report on the Economic Evaluation of the Introduction/Tariff Revision of General Tariffed (GT) Service (specify) or GT Service Bundle (specify) or Competitor Service (specify)

 

Ottawa, 13 May 2005

 

1.0      GENERAL

1.1      Purpose of the Study

1.         Details on the purpose of the cost study are to be provided. For instance, this section should identify if the study is in support of a general tariffed (GT) service introduction, a GT service bundle introduction, a Competitor service introduction, or a change to an existing GT service or GT service bundle such as the introduction of a new feature or a modification to the rate structure.

2.          Details on the marketing rationale are to be provided.

3.             If the changes to an existing service (GT, GT service bundle, or Competitor service) are straight-forward changes to the existing rates, sections 2 and sub-section 3.2 below may be omitted. Furthermore, in accordance with the Commission's letter dated 27 November 1998 re: The imputation test methodology for local services (the November 1998 Commission letter), the economic study report is not required for an implicit or explicit rate increase of an existing GT service. However in such instance, the application should provide a detailed description of the initiative and the tariff revisions, and provide an estimate of the overall weighted average price change based on the demand associated with the service proposal. Such information can be provided in the tariff application filing letter.

2.0       SERVICE DESCRIPTION

4.          In the case of a new GT service, a new GT service bundle, a new Competitor service or a new tariff element of an existing GT service, a general description of the service/tariff element being introduced is to be provided.

5.          In the case of a revision to an existing service, a detailed description of the initiative is to be provided.

2.1       Service Characteristics

6.          Details about the service being introduced are to be provided.  This may include, for example, services being bundled (if applicable), specific functionalities, customer eligibility, contract options, network requirements, and any other information that provides a clear understanding of the service/tariff element being introduced. Diagrams of the network elements included in the proposed service and their interconnection are to be provided if they enhance the understanding of the service/tariff element.

2.2       Service Benefits

7.          Details about the benefits that customers will realize when they subscribe to the new service/tariff element(s) are to be provided.

2.3       Marketing Considerations

8.          Details about the target market for the new service/tariff element(s) or rate change(s) are to be provided.

3.0       TARIFF CONSIDERATIONS

3.1       Tariff Components

9.         In the case of a new GT service, a new GT service bundle, a new Competitor service or a revision to an existing service, the proposed rates and charges by major tariff component are to be provided.

Tariff Components	Recurring Rates	One-time Charges
	(e.g., monthly)	(e.g., service charges or admin.fees)
Component 1 (specify)
Component 2 (specify)

 

3.2       Rate Determination Principles

10.        Rationale for the rates being proposed is to be described in this section. This could include, for instance, statements related to pricing relative to alternative offerings. References to any regulatory directives pertaining to price levels are to be provided in this section.

3.3       Proposed Service Commencement Date

11.        The proposed launch date for the new service/tariff element(s) or revised service is to be provided.

4.0      IMPUTATION TEST

12.       An imputation test is to be filed with all tariff applications involving the introduction of a new GTservice, a new GT service bundle, a new Competitor service and/or new service features of an existing GTservice, or an implicit or explicit price decrease of an existing GTservice. The imputation test must be filed in accordance with the imputation test methodology as set out in the November 1998 Commission letter and the Commission's letter dated 5 January 2001 re: Decision CRTC 2000-150 SaskTel - Transition to Federal Regulation Imputation Test Methodology. These decisions were subsequentlyamended by Issues related to imputation test methodology - Rebanding decision follow-up, Decision CRTC 2001-737, 29 November 2001, and Review of price floor safeguards for retail tariffed services and related issues, Telecom Decision CRTC 2005-27, 29 April 2005 (Decision 2005-27), and other relevant decisions or orders.[1]

13.         Note that in accordance with Telecom Order CRTC 90-779, 24 July 1990, the filing of an imputation test is not required for a new service expected to have ten or fewer subscribers and a total monthly charge of less than $2000 or the equivalent thereof. Furthermore, in accordance with the November 1998 Commission letter, an imputation test is not required for an implicit or explicit rate increase of an existing GT service.

14.       The results of the imputation test for the GT service are to be provided in this section. The total present worth of revenues and costs within the study period and the revenue and cost per unit are to be provided. Two formats are illustrated, one for GT (stand-alone) services (refer to Tables 1 and 2 below), and one for GT service bundles (refer to Tables 3 and 4 below). A further breakdown of the Phase II cost component is to be provided by major expense and capital category in the Detailed Summary of Phase II Costs table (refer to Table 7 below). In the case of a GT service bundle, the Detailed Summary of Phase II Costs table is to be provided separately for each major service component within the bundle, whether forborne or not, that represents more than 10 percent of the total service cost, and for the costs causal to the service bundle. It is noted that the tables of this report may be provided as EXCEL attachments to the report.

15.       In the exceptional situations where providing revenue and costs per unit is not appropriate, rationale is to be provided.

16.       For local exchange services or service bundles that include local exchange services, the imputation test is to be provided at the rate band level. Further, if the service/tariff element(s) being introduced or revised is offered only in specific rate bands, then the imputation test is to be provided for the rate bands being affected by the introduction or revision of the service/tariff element.

17.         If the service contains rates differentiated by market segment and/or technology, then the imputation test is to be provided for each distinct market segment and/or technology (e.g. by service speed or bandwidth, residential or business).

18.       If the service requires the company to acquire services from third parties, then these acquisition costs and the associated demand are to be shown separately.

19.        If the service contains rates that are based on volume or length of the contract period, the lowest per unit rate element in the volume / contract period tariff grid is to be identified and an imputation test is to be provided for the lowest per unit rate element in the volume / contract period tariff in each rate band (refer to Table 2A below).

Table 1
Imputation Test Format for GT Service (specify)
Total Present Worth of Revenues and Cost within Study Period<
(20NN$)

	Present Worth of
	Revenue	Phase II Costs	Category I Competitor Services at Tariff	3rd-Party Acquisition Costs	Total Costs	Difference	% Mark-up
	($K or M)	($K or M)	($K or M)	($K or M)	($K or M)	($K or M)	(%)
	(a)	(b)	(c)	(d)	(e) = b+c+d	(f)= a - e	= f / e
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)	(Note 5)
Service*
OR
Band A*
Band B*
Band C*
Band D*
Band E*
Band F*
Band G*
Costs Causal to Service
Total for
Service
(Note 5)

*:  Includes costs causal to demand of service or costs causal to demand by rate band for local exchange services.

Notes:

1. Reflects the average total service revenue per unit (specify) per month.
2. Includes costs for all service components other than Category I competitor services (or equivalent service functionalities), excluding cross-effects as per Decision 97-8, and including the costs of incorporating the acquired 3^rd-party services as part of the service.
3. Category I competitor services as set out in Appendix 1 of Regulatory Framework for Second Price Cap Period, Telecom Decision CRTC 2002-34, 30 May 2002, and any relevant subsequent decisions or orders regarding Category I competitor services (e.g., CDN DS-0 and DS-1 accesses).
4. Costs of services acquired from 3rd-parties.
5. Totals may not balance due to rounding.

Table 2
Imputation Test Format for GT Service (specify)
Revenue & Cost per Unit per Month
(20NN $)

	Revenue	Phase II Costs	Category I Competitor Services at Tariff	3rd-Party Acquisition Costs	Total Costs	Difference	% Mark-up
	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	(%)
	per month	per month	per month	per month	per month	per month
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)	(Note5)
Service*
OR
Band A*
Band B*
Band C*
Band D*
Band E*
Band F*
Band G*
Costs Causal to Service
Total for
Service
(Note 5)

*: Includes costs causal to demand of service or costs causal to demand by rate band for local exchange services.

Notes:

1. Reflects the average total service revenue per unit (specify) per month
2. ncludes costs for all service components other than Category I competitor services (or equivalent service functionalities), excluding cross-effects as per Decision 97-8, and including the costs of incorporating the acquired 3^rd-party services as part of the service.
3. Category I competitor services are to be imputed at the applicable tariffed rates. The list of Category I competitor services is provided in Appendix 1 of Regulatory Framework for Second Price Cap Period, Telecom Decision CRTC 2002-34, 30 May 2002, as amended due to any relevant subsequent decisions or orders regarding Category I competitor services (e.g., CDN DS-0 and DS-1 accesses).
4. Costs of services acquired from 3rd-parties.
5. Totals may not balance due to rounding.

Table 2a
Imputation Test Format for Service Element offered at Term and Volume Contracts
Revenue & Cost per Unit per Month
for the Lowest Per Unit Rate in the Volume/Contract Period Tariff Grid (20NN $)

	Revenue	Phase II Costs	Category I Competitor Services at Tariff	3rd-Party Costs	Total Costs	Difference	% Mark-up
	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	(%)
	per month	per month	per month	per month	per month	per month
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)	(Note 5)
Service rate element a
OR
Band A rate element a
Band B rate element b
Band C rate element c
Band D rate element d
Band E rate element e
Band F rate element f
Band G rate element g

Notes:

1. Reflects the average total service revenue per unit (specify) per month at the lowest rate (specify).
2. Includes costs for all service components other than Category I competitor services (or equivalent service functionalities), excluding cross-effects as per Decision 97-8, and including the costs of incorporating the acquired 3^rd-party services as part of the service.
3. Category I competitor services are to be imputed at the applicable tariffed rates. The list of Category I competitor services is provided in Appendix 1 of Regulatory Framework for Second Price Cap Period, Telecom Decision CRTC 2002-34, 30 May 2002, as amended due to any relevant subsequent decisions or orders regarding Category I competitor services (e.g., CDN DS-0 and DS-1 accesses).
4. Costs of services acquired from 3rd-parties.
5. Totals may not balance due to rounding.

Table 3
Imputation Test Format of GT Service Bundle (specify)
Total Present Worth of Revenues & Cost within the Study Period

	Revenue	Phase II & Other Costs		Total Costs		Difference		% Mark-up
		Major component(s)	Other components	Major Acquired Service(s)	Other Acquired Services	Category I Competitor Service(s) at Tariff	Other Elements Imputed at Tariff
	($M)	($M)	($M)	($M)	($M)	($M)	($M)	($M)	($M)	(%)
	(Note 1)	(Notes 2,3)	(Notes 2,4)	(Note 5)	(Note 6)	(Note 7)	(Note 8)	(Notes 9,10)	(Note 10)
Bundle*
OR
Band A*
Band B*
Band C*
Band D*
Band E*
Band F*
Band G*
Costs Causal to Bundle
Total for Bundle
(Note 10)

*: Includes costs causal to demand of service bundle or costs causal to demand by rate band for service bundles that contain local exchange services

Notes:

1. Reflects the total service bundle revenue
2. Includes costs for all service components other than acquisition costs and costs for Category I competitor services (or equivalent service functionalities) and other elements imputed at the applicable tariffed rates; also includes costs associated with incorporating the acquired 3^rd-party services as part of the service bundle. These costs are to exclude cross-effects as per Decision 97-8.
3. Costs associated with each major service component (whether forborne or not) representing more than 10% of the total service bundle cost are to be provided in a separate column; a detailed cost summary is to be provided using the format of Table 7.
4. Other components should include each service component for which the cost is less than 10% of the total service bundle cost. The note should list these service components.
5. Acquisition costs of major acquired services (a major acquired service is defined as one where the acquisition cost represents more than 10% of the total service bundle cost). The table entry provides the total costs of these services.
6. Acquisition costs of services, other than those covered in note 4 that are acquired from third parties and included in the bundle. The table entry provides the total costs of these services.
7. Category I competitor services are to be imputed at the applicable tariffed rates. The list of Category I competitor services is provided in Appendix 1 of Regulatory Framework for Second Price Cap Period, Telecom Decision CRTC 2002-34, 30 May 2002, as amended due to any relevant subsequent decisions or orders regarding Category I Competitor services (e.g., CDN DS-0 and DS-1 accesses).
8. Residential local exchange services, in-territory residential local VOIP services, and non-forborne IXPL service elements are to be imputed at tariffs.
9. Costs causal to the service bundle are to be reported in the Total Costs column; a detailed cost summary is to be provided using the format of Table 7.
10. Totals may not balance due to rounding

Table 4
Imputation Test Format of GT Service Bundle (specify)
Revenues & Cost per Bundle<
(20NN $)

	Revenue	Phase II & Other Costs				Imputed Elements		Total Costs	Difference	% Mark-up
		Major Components	Other Components	Major Acquired service	Other Acquired Services	Category I Competitor Services at Tariff	Other Elements Imputed at Tariff
	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	$ per unit	(%)
	per month	per month	per month	per month	per month	per month	per month	per month	per month
	(Note 1)	(Notes 2,3)	(Note 4)	(Note 5)	(Note 6)	(Note 7)	(Note 8)	(Notes 9,10)	(Note 10)
Bundle*
OR
Band A*
Band B*
Band C*
Band D*
Band E*
Band F*
Band G*
Costs Causal to Bundle
Bundle Total
(Note 10)

*: Includes costs causal to demand of service bundle or costs causal to demand by rate band for service bundles that contain local exchange services

Notes:

1. Reflects the average total service revenue per unit (specify) per month
2. Includes costs for all service components other than acquisition costs and costs for Category I competitor services (or equivalent service functionalities) and other elements imputed at the applicable tariffed rates; also includes costs associated with incorporating the acquired 3^rd-party services as part of the service bundle. These costs are to exclude cross-effects as per Decision 97-8.
3. Costs associated with each major service component (whether forborne or not) representing more than 10% of the total service bundle cost are to be provided in a separate column; a detailed cost summary is to be provided using the format of Table 7.
4. Other Services should include each service component for which the cost is less than 10% of the total service bundle cost. The note should list the services and each service's percentage of the total costs.
5. Acquisition costs of major acquired services (a major acquired service is defined as one where the acquisition cost represents more than 10% of the total service bundle cost). The table entry provides the total costs of these services.
6. Acquisition costs of services other than those covered in note 4 that are acquired from third parties and included in the bundle. The table entry provides the total costs of these services.
7. Category I competitor services are to be imputed at the applicable tariffed rates. The list of Category I competitor services is provided in Appendix 1 of Regulatory Framework for Second Price Cap Period, Telecom Decision CRTC 2002-34, 30 May 2002, as amended due to any relevant subsequent decisions or orders regarding Category I competitor services (e.g., CDN DS-0 and DS-1 accesses).
8. Residential local exchange services, in-territory residential local VOIP services, and non-forborne IXPL service elements are to be imputed at tariffs.
9. Costs causal to the service bundle are to be reported in the Total Costs column; a detailed cost summary is to be provided using the format of Table 7.
10. Totals may not balance due to rounding.