ARCHIVED - Telecom Commission Letter - 8663-C12-200600066

Letter

File Number: 8663-C12-200600066

Ottawa, 30 January 2006

By E-mail

REGULATORYAFFAIRS@nwtel.ca

Mr. Scott Roberts
Assistant Vice-President, Carrier and Regulatory Affairs
Northwestel Inc.
P.O. Box 2727
Whitehorse, YT
Y1A 4Y4

Re: Review of regulatory framework for Northwestel Inc., Telecom Public Notice CRTC 2006-1

Dear Mr: Roberts

Pursuant to the procedures set out in Review of regulatory framework for Northwestel Inc., Telecom Public Notice CRTC 2006-1, 17 January 2006, attached are the interrogatories associated with this proceeding.

Reponses to these interrogatories are to be filed with the Commission, and served on the interested parties to this proceeding, by 20 March 2006. Responses are to be received, and not merely sent, by this date.

Yours sincerely,

Original signed by

John Macri
Director, Financial and Regulatory Matters

Attachment 1

INTERROGATORIES TO NORTHWESTEL INC.

30 January 2006

Regulatory framework

Components of a price regulation framework

101    In Review of regulatory framework for Northwestel Inc., Telecom Public Notice CRTC 2006-1, 17 January 2006 (Public Notice 2006-1), the Commission stated that it wished to examine whether Northwestel's current rate base/rate of return regulatory framework should be replaced with a price regulation framework. The company is to provide its views, with supporting rationale, on the appropriateness of implementing a price regulation framework in 2007.

102    If the company proposes to implement a price regulation framework, provide the following information, with supporting rationale:

a) the objectives of that framework; and

b) the company's proposed price regulation parameters, including:

i)  the tariffed services that the company proposes would be subject to price regulation;
ii)  the company's proposed basket structure for these services, and
iii) the pricing constraints applicable to each service basket and/or the rate element constraints applicable within each service basket.

103     In Regulatory framework for second price cap period , Telecom Decision CRTC 2002-34, 30 May 2002 (Decision 2002-34), the Commission determined that it was appropriate to use the annual chain-weighted Gross Domestic Product - Price Index (GDP-PI) published by Statistics Canada as the inflation index for the second price regulation regime for the large incumbent local exchange carriers (ILECs).

a)   Provide the company's views on whether or not it would be appropriate to use the annual chain-weighted GDP-PI should the company propose a price regulation framework in 2007.

b)   If the company considers that it would not be appropriate to use the annual chain-weighted GDP-PI, provide the various measures of inflation that the company considers to be appropriate, with supporting rationale, should the company propose a price regulation framework for 2007.  

104      In Decision 2002-34, the Commission determined that the basic productivity offset for the large ILECs for the second price regulation regime should be based on service-specific marginal costs in order to reflect the actual productivity gains that would likely be achieved for individual capped baskets. The Commission concluded that the basic productivity offset should be 3.5 percent on the cost component of the subsidy calculation and for the pricing constraints, as applicable.

a)   If Northwestel proposes a price regulation framework, provide the company's views on whether or not it would be appropriate to incorporate a productivity offset. If so, provide the company's views on adopting the methodology for calculating the productivity offset that was approved in Decision 2002-34 for the large ILECs.

b)  If Northwestel considers that the methodology used for the large ILECs would be appropriate, provide, with supporting calculations, the company's productivity offset.

c)   If Northwestel considers that the methodology used for the large ILECs would not be appropriate, provide, with supporting rationale and calculations, the company's proposed productivity offset.

105     In Price cap regulation and related issues , Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9), the Commission established an exogenous factor as a component of the price cap formula. Adjustments were considered for events or initiatives which satisfied the following criteria:

a)  they are legislative, judicial or administrative actions which are beyond the control of the company;

b)  they are addressed specifically to the telecommunications industry; and

c)  they have a material impact on the Utility segment of the company.

In Decision 2002-34, the Commission concluded that the criteria for exogenous events set out in Decision 97-9, modified to measure materiality in relation to the total company, remained appropriate.

Provide the company's views on wh ether or not an exogenous factor should be a component of a price regulation framework. If so, indicate whether the criteria and process for applying for an exogenous adjustment established in Decision 2002-34 for the large ILECs would be appropriate for Northwestel.

Self-correcting mechanism

106    In Decision 97-9, the Commission considered that, rather than implementing an earnings sharing mechanism, the length of the price cap plan would be used as the only self-correcting mechanism to allow the benefit of a true price cap plan to be realized. Provide the company's views on the appropriateness of relying solely on the length of the price regulation framework as the self-correcting mechanism.

107    A) Provide the company's views on whether or not any approved price regulation regime should provide for a mechanism which would trigger a review of the regime during its period.

           B) Indicate whether the Commission, the company and/or other parties could initiate such a review and what the review process would entail.

           C) Provide a detailed description of the circumstances and/or criteria that should trigger such a review (e.g. financial viability).

108     Provide the company's views, with supporting rationale, on the appropriate length of time for the initial period of a price regulation regime if the company proposes such a regime.   The response should provide the company's views on the advantages and disadvantages of choosing a relatively shorter period versus a longer period.

Ancillary regulation and reporting requirements

109    A) Provide the company's views, with supporting rationale, as to which of the current financial monitoring and reporting requirements should be maintained, modified or eliminated as part of the company's proposed regulatory framework.

           B) Indicate any new reporting requirements that should be introduced under the company's proposed regulatory framework. Specify the filing frequency of any new reports.

110    Assume the Commission determines that it is appropriate to implement a price regulation framework. Provide the company's views on what filing requirements (e.g., financial statements, Phase III and/or split rate base results) would be appropriate for monitoring and evaluating the effectiveness of such a framework during the price regulation period.

Capital plan, service improvement plan and quality of service [1]

Capital plan and service improvement plan

201    A) Update the response to interrogatory NWTel(CRTC)23Nov04-1 [Network Access Services (NAS) forecast] for the years 2003 to 2007 (the year 2007 should be based on rates currently in effect). The response should also include i) detailed explanations for the variances between the year 2004 and 2005 forecasts and actual growth in NAS for both years, and ii) detailed rationale for the years 2006 and 2007 forecast growth in NAS, for each of residence, business, and Centrex service.

          B)  For the year 2007, provide the information requested in part A) i) above based on rates proposed to be in effect in 2007, if applicable.

202    A) Update the response to interrogatory NWTel(CRTC)23Nov04-3 (toll forecast) for the years 2003 to 2007 (the year 2007 should be based on rates currently in effect). Also, provide i) the company's forecast of competitor's toll traffic by year, ii) the company's forecast of competitive toll traffic that will use the company's facilities for transport, iii) detailed explanations for variances between the forecasts and actual 2004 and 2005 toll traffic, and iv) detailed rationale for the 2006 and 2007 estimates of toll traffic.

          B) For the year 2007, provide the information requested in part A) above based on rates proposed to be in effect in 2007, if applicable.

203    Provide the 2006 View of Northwestel's capital plan in the same format as that provided in the response to interrogatory NWTel(CRTC)23Nov04-4. The response should include the years 2005 to 2007.

204    A) Refer to the response to interrogatory NWTel(CRTC)23Nov04-7. Provide an update to the table setting out service improvement plan (SIP) capital expenditures for the years 2001 to 2005, if required. Provide a detailed description and justification for any increase to the $84.5 million in SIP expenditures approved in Northwestel Inc. - Supplemental funding requirements for 2004 and 2005, Telecom Decision CRTC 2005-54, 15 September 2005 (Decision 2005-54).

          B) Refer to the response to interrogatory NWTel(CRTC)03Feb05-112, Attachment 1.   Provide an update to the table if there were any changes to the 2005 SIP roll-out, including any projects that were delayed to 2006. If any projects were delayed until 2006, provide a detailed explanation and a new table for 2006 in the same format as Attachment 1 to that interrogatory response.

205    Refer to the response to interrogatory NWTel(CRTC)23Nov04-8. Update the SIP revenue requirement provided in Table 1 to that interrogatory response, if required. The company's response should also include two columns for the ten-year revenue requirements for the 2004 and 2006 Views of the SIP.

206    Refer to the response to interrogatory NWTel(CRTC)23Nov04-11 regarding the future provision of voice over Internet protocol (VoIP) services.   Provide an update to that interrogatory response.

207    In Decision 2005-54, the Commission directed Northwestel to file net present value (NPV) studies for six discretionary p rojects in the regulatory framework proceeding. Provide the six NPV studies referred to in Decision 2005-54. [2]

208    In Decision 2005-54, the Commission directed Northwestel to review the forecasted level of total capital expenditures for the years 2006 and 2007 with a view to reducing the total capital expenditures in each year. In reviewing these expenditures, the company was to take into consideration its obligation to maintain the required quality of service (Q of S) standards and the fact that the SIP would have been completed. The Commission further directed Northwestel to file the results of this review in the upcoming regulatory framework proceeding.   Provide a table showing a comparison of the 2004 View and the 2006 View of the total capital expenditures for the years 2006 and 2007.

209    In Decision 2005-54, the Commission stated that it intended to consider whether a new SIP would be required in the upcoming review of Northwestel's regulatory framework.

a) Provide the company's view on whether or not a new SIP is required, along with a schedule, description and justification for each of the projects and the associated capital expenditures.

b) Refer to the responses to part a) above. Provide a ten-year revenue requirement spreadsheet for the projected SIP capital expenditures in a format similar to that provided in the response to interrogatory NWTel(CRTC)23Nov04-8.

210    In the response to interrogatory NWTel(PIAC)03Feb05-07, the company stated that it had engaged in preliminary discussions with Telesat Canada (Telesat) regarding the potential to distribute Anik F2 Ka-Band satellite service. Provide the results of these preliminary discussions with Telesat and, if available, any detailed economic analysis associated with this service (in particular, the potential to implement broadband data service via Anik F2).

211   In the proceeding initiated by Regulatory framework for voice communication services using Internet Protocol, Telecom Public Notice CRTC 2004-2, 7 April 2004, Northwestel provided an attachment entitled "Quick Facts". Provide an update to this attachment for the year 2006.

Quality of service

212    A) Provide, for the years 2004 and 2005, the company's Q of S indicators in the same format as the response to interrogatory NWTel(CRTC)23Nov04-26.

          B) If the company encountered any significant Q of S problems in the years 2004 and 2005, provide detailed descriptions of the problems encountered and solutions employed by the company to correct these problems.

Finance, revenues and expenses

Financial review

301    For each of the years 2004 to 2006, provide Northwestel's actual/forecast results for the following, on a non-consolidated basis:

a) Income Statement, Balance Sheet, Statement of Retained Earnings and Statement of Changes in Financial Position as at 31 December;

b) Return on average common equity (ROE), with detailed supporting calculations;

c)  Phase III results, including accounting separation for Internet services;

d) a schedule, with supporting calculations and analysis of the contributed surplus. The analysis should show all the components and related amortizations for each component; and

e)  a schedule, with supporting calculations, of depreciation and amortization.   The schedule should show for each year, depreciation and amortization expenses by major category.

302    For the year 2005, provide a comparison of forecast to actual results for the company's Income Statement, Balance Sheet, Statement of Retained Earnings, Statement of Changes in Financial Position, and ROE calculation.

303   In Public Notice 2006-1, the Commission stated that, given that long distance competition was present in Northwestel's operating territory, the company was to provide its view as to whether it would be appropriate to split the company's rate base between Utility and Competitive segments in assessing the company's financial position.

a)  Provide the company's views on whether or not it would be appropriate to split the company's rate base between Utility and Competitive segments.

b) If Northwestel considers that it would be appropriate to split its rate base, provide the company's views on whether the methodology used to split the rate bases of the large ILECs, as approved in Implementation of regulatory framework - splitting of the rate base and related issues, Telecom Decision CRTC 95-21, 31 October 1995, would be appropriate for the company.

c) If Northwestel considers that the methodology used to split the large ILECs' rate bases would be appropriate, provide the company's split rate base results for the year 2006 using this methodology.

d) If Northwestel considers that the methodology used to split the large ILECs' rate bases would not be appropriate, provide a proposed methodology for splitting the company's rate base, including supporting rationale, and the split rate base results for the year 2006.

e ) Provide the computer model, including all formulas, used to generate the response to part c) or d) above, as applicable.

304    For each of the years 2004 to 2006, provide a detailed breakdown of actual/forecast interest expense in the same format as the schedule provided in the response to interrogatory NWTel(CRTC)03Feb05-130. Explain how interest expense would be allocated between the Utility and Competitive segments if a split rate base regime is proposed.

305     For each of the years 2004 to 2006, provide the actual/forecast amount and rate for each component of the statutory income tax, and a reconciliation to the effective income tax.   Explain how income tax would be allocated between the Utility and Competitive segments if a split rate base regime is proposed.

306    Refer to Bell Canada 2004 Financial Information, page 43, Employee Benefit Plans, (ii) Defined Contribution Plans, where Bell Canada stated that "some of our subsidiaries offer defined contribution (DC) plans that provide certain employees with pension benefits.   In January 2005, Bell Canada introduced a DC pension plan for its employees. Current employees had the option of retaining their DB [defined benefit] coverage or switching to the new DC coverage. Going forward, most employees will participate in the DC Pension arrangement."

a) Specify whether Northwestel has introduced or plans to introduce a DC pension plan for any of its employees. If yes, provide the percentage of employees that will be affected and the impact on the company's estimated pension expense for 2006. If not, in view of Bell Canada's changes to its pension benefit for its new employees, explain why it would continue to be appropriate and cost effective for Northwestel to continue to provide a DB pension for its employees.

b) If the company were to introduce a DC plan for its new employees similar to the DC plan provided by Bell Canada, provided the impact on the company's pension expense using 2006 as the base year.

307    In Decision 2005-54, the Commission considered that it would be appropriate for Northwestel to investigate whether any of its higher-cost, long-term debt could be refinanced.   Provide the results of that review, including any benefits and costs of refinancing.

Revenues

308   A)  Provide, for each of the years 2004 to 2006, the actual/estimated revenues related to the bundled carrier access tariff (CAT) rate approved in Long-distance competition and improved service for Northwestel customers, Decision CRTC 2000-746, 30 November 2000 (Decision 2000-746). The response should include detailed calculations and explanations for year-over-year variances.

          B) For each of the years 2004 and 2005, provide a schedule comparing forecasts to actual revenues for toll, settlement, and CAT categories. The response should include detailed supporting calculations, as well as explanations of any significant variances.

          C) Provide the company's views as to whether there is a continued need for the revenue deferral account mechanism established in Decision 2000-746.

309    Provide a breakdown of actual/estimated revenues by major category as indicated below, as applicable, for each of the years 2004 to 2006 (for the year 2006, provide the information for each of the Utility and Competitive segments, if applicable). Provide detailed explanations for year-over-year variances and all supporting assumptions. If necessary, reconcile the total to the revenue amount in the response to interrogatory NWTel(CRTC)30Jan06-301.

Primary Exchange
           Residence
           Business
           Total Primary Exchange

Options and Features
            Residence
            Business
            Total Options and Features

Centrex (or Centrex-like)

Network (identify major service categories, including message toll and private lines)

Terminal (identify major service categories)

Directory Assistance

Uncollectibles

Other (identify major service categories, including directory advertising)

Total

Operating expenses

310    A)   Provide a schedule showing the actual/estimated operating expenses, for each of the years 2004 to 2006 (for the year 2006, provide the information for each of the Utility and Competitive segments, if applicable), according to the following categories (with a breakdown of each category to the greatest extent possible):

i)      Corporate;
ii)     Customer Service;
iii)     Finance;
iv)     Network;
v)      Operating Taxes (excluding income taxes [see note]);
vi)     Sub-total Operating Expenses (excluding Depreciation & Amortization);
vii)     Depreciation & Amortization; and
viii)    Total Operating Expenses.

Note:   If Operating Taxes are included in the various operating expense line accounts, such as Network, the portion of Operating Taxes should be removed from the line account.

          B) Provide detailed explanations for the year-over-year changes related to each of the expenses in part A) above.

          C) Confirm that all expenses related to "uncollectibles" in the response to interrogatory NWTel(CRTC)30Jan06-309 are reflected in the customer service category of operating expenses in response to part A) above.

311    In Northwestel Inc. - Supplemental funding requirement for 2003, Telecom Decision CRTC 2004-64, 30 September 2004, as amended by Northwestel Inc. - Supplemental funding requirement for 2003, Telecom Decision CRTC 2004-64-1, 18 October 2004 (Decision 2004-64), the Commission accepted Northwestel's proposal to apply a unique growth factor to that portion of transponder expenses attributable to data services on a provisional basis. The Commission considered that this adjustment should be reviewed as part of the proceeding to review the company's regulatory framework.

a) Provide the company's views, with supporting rationale, on the requirement to continue to apply a unique growth factor to that portion of transponder expenses attributable to data services.

b) Provide details regarding term and price commitments on transponders contracted to provide voice and data services, comparing each of the years 2004 to 2006.

c) Provide, for each of the years 2004 to 2006, actual/forecast transponder expenses split by costs attributable to voice services and data services. The response should include (i) detailed assumptions and rationale to support the company's forecast, (ii) any differences between transponder expenses based on the total contracted expenses versus those used in the load/price/productivity formula, and (iii) detailed explanations for the variances between the forecast and actual results for the years 2004 and 2005.

312    In Decision 2004-64, the Commission accepted Northwestel's proposal to adjust the growth factor to add back the estimated NAS units displaced by asymmetric digital subscriber lines (ADSL) on a provisional basis.

In Decision 2005-54, the Commission considered that it would be appropriate for Northwestel to provide a study to estimate the additional operating expenses to provision ADSL over its NAS in the proceeding to review the company's regulatory framework.

a)  For each of the years 2003 to 2007, provide a table for the actual/forecast second line NAS and ADSL service. The ADSL service actual/forecast should be segregated into business and residence lines. Provide detailed assumptions and rationale to support the company's data.

b)  For each of the years 2003 to 2005, provide actual second line NAS displaced by the introduction of ADSL service.

c) For each of the years 2006 and 2007, provide the forecast for second line NAS which the company anticipates will be displaced by ADSL service. Provide detailed assumptions and rationale to support the company's forecast. The response should include an update to the study for NAS displacement which the company conducted in the proceeding that led to Decision 2004-64.

d) Provide the study, referenced above in Decision 2005-54, to estimate the additional operating expenses to provision ADSL over its NAS.

Depreciation

313    For each of the years 2004 to 2006, provide the following information for the total company and, if applicable, for the Utility segment, for each asset account:

a)   asset code & description;
b)   class of plant;
c)   value of depreciable Plant in Service (PIS) as of 31 December;
d)   actual/estimated depreciation reserve as of 31 December;
e)   reserve variance expressed as a percent of actual/estimated reserve as of 31 December;
f)    unadjusted depreciation rate;
g)   unadjusted depreciation accrual;
h)   method and amount of any adjustment;
i)    total depreciation accrual;
j)    depreciation life characteristics for each asset account; and
k)   depreciation expense by account, accompanied by a brief explanation of the year-over-year change.

314    If the 2006 depreciation expense estimates are based upon depreciation life characteristics that have not been previously filed with the Commission, provide the required studies pursuant to the Commission's Phase I depreciation directives. Provide the electronic spreadsheets used to estimate the information filed above, if available. The spreadsheets should include formulas where applicable.

315    A) Provide the company's views as to what changes may be required, prior to the implementation of the company's proposed regulatory framework, to the company's currently-approved depreciation life characteristics. The company's response should include:

i)   a detailed explanation of the assumptions used to develop the new service life estimates with supporting actuarial and estimation data;

ii) the magnitude of any over/under accrual resulting from any proposed change in depreciation life characteristics; and

iii) the methods for recovering (including an appropriate time period for recovery) any depreciation deficiencies identified in part A) ii), in the rates to be effective in 2007.

          B) Provide the estimated financial impact (excluding salvage) of any service life changes, including the impact of any changes identified in part A) ii) above, by asset account for the five-year period commencing 1 January 2007.

Rates

401    A) Identify all services for the following Northwestel tariffs:

i)   General Tariff CRTC 3001;
ii)  Message Toll Service Tariff 3002;
iii) Private Wire Service CRTC 3003;
iv) Mobile Telephone Service CRTC 3006;
v) Special Services CRTC 3010 (other than terminal equipment and special assembly related elements); and
vi) Carrier Access Tariff CRTC 21480,

          B) For each item identified in part A) above, provide the estimated revenue at existing rates for the years 2005 and 2006.

          C) If the company intends to propose rate changes in the year 2006, provide, for each proposed monthly rate change, the existing rate, the proposed rate, and the estimated revenues for the years 2006 and 2007 under the rates proposed to become effective in the year 2006.

          D) If the company intends to propose rate changes in the year 2007, provide, for each proposed monthly rate change, the existing rate, the proposed rate and the estimated revenues for the year 2007 under rates proposed to become effective in the year 2007 based on the 2006 demand quantities.

          E)  Provide as applicable, for each of the monthly rate changes referred to in parts C) and D) above, the weighted-average percentage price change relative to existing rates based on the rates proposed to be effective in i) 2006 and ii) 2007.

          F) For terminal equipment, provide total estimated revenues at i) existing rates and, if applicable, ii) proposed rates, disaggregated (as available) by residence and business customers, for the years 2006 and 2007 based on 2006 demand quantities.

          G) For Special Assembly Items, provide total estimated revenues at i) existing rates and ii) if applicable, proposed rates for the years 2006 and 2007 based on 2006 demand quantities

402    A) Provide, for each of the years 2005 and 2006, the estimated revenues and average in-service quantities, based on the applicable existing monthly rates, for each residential and business primary exchange service. The information should be disaggregated by individual line, two-party line, multi-party line and multi-line services and, if available, for each rate group currently in effect. Identify the corresponding tariff items and rates.

          B) Provide the information requested in part A) above, as applicable, arising from any rates proposed to become effective in the year 2006.   Identify the proposed rate and effective date.

          C)  Provide the information requested in part A) above for the year 2007, as applicable, arising from any rates proposed to become effective in the year 2007 and based on the year 2006 demand quantities. Identify the proposed rate and effective date.

          D) Provide, for each of the General Tariff Items provided in the response to part A) above, the weighted-average percentage rate change relative to existing rates under the rates proposed to become effective in year i) 2006 and ii) 2007.

          E)  Reconcile any differences between the estimated primary exchange service revenues provided in the responses to parts A), B) and C) above and the estimated primary exchange service revenues provided in the response to interrogatory NWTel(CRTC)30Jan06-401.

403    A) Provide, for the years 2005 and 2006, the estimated General Tariff service charge revenues resulting from primary exchange services under existing rates, broken down between residential and business for each service charge element. Identify the rate and tariff item for each service charge element.

          B)  Provide the information requested in part A) above, as applicable, arising from any rates proposed to become effective in the year 2006. Identify the proposed rate and effective date.

          C)  Provide the information requested in part A) above, as applicable, arising from any rates proposed to become effective in the year 2007 based on the year 2006 demand quantities. Identify the proposed rate and effective date.

404    A)  Identify all tariff filings with a net revenue impact in excess of $50,000 which 1) have been disposed of in the year 2005 for implementation in the year 2006, 2) the company has filed in the year 2005 and are pending approval, or 3) the company plans to file in the year 2006 to be effective in that year.

For each tariff filing, provide:

i)   the year 2006 estimated revenue impact;
ii)  the year 2006 expense impact (in revenue requirement terms);
iii) the year 2006 estimated net revenue impact; and
iv) the effective date(s) assumed for items 1) to 3) above.

          B)  For each tariff filing identified in the response to part A) above, indicate whether the revenue and expense impacts identified were included in the company's year 2006 supplemental funding requirement application. If the revenue and expense impacts included in that application differ from those set out in parts A i) and A ii) above, indicate the amounts and the reason for the difference.

          C) For each of the tariff filings identified in response to part A) above, provide the information requested on an annualized basis.

          D) As available, provide similar information requested in parts A), B) and C) above for any tariff initiatives to take effect in the year 2007.

405    A) Provide the average monthly bill at existing rates for residence individual line subscribers for each operating region and overall, broken down into the following components:

i) basic exchange access;
ii) optional monopoly services (specify);
iii) terminal equipment rental; and
iv) message toll services (including impact of all discounts).

          B) Provide average bill information similar to that requested in part A) above under any proposed rates to be implemented in each of the years 2006 and 2007.

          C)  For each of the years 2006 and 2007, provide distributions of the percentage and monthly dollar impacts of proposed rates on residence subscribers' total monthly bills, using billings under existing rates as the reference case.

406    A) Provide the company's views with regard to the need to further rebalance or restructure the company's rates for primary exchange service. The company's response should:

i)   provide the maximum increase to residence and business primary exchange service rates that the company would consider implementing in the year 2007;
ii) address issues related to the affordability of local residential service and possible rate shock; and
iii) provide the cost of providing the service(s) in question.

        B)    If the company proposes any rate rebalancing/restructuring initiatives for the year 2007, provide the estimated revenues, with detailed supporting calculations and assumptions that would result from these initiatives.

407    Assume the Commission determines that it is appropriate to unbundle the CAT into separate rate elements for contribution, switching and aggregation, and equal access start-up costs in the year 2007.

a) Provide, with supporting rationale, the rates that Northwestel would consider to be the appropriate for each element.

b) Provide, for the 2007, the associated revenue amounts for each rate element showing all calculations and assumptions.

Competition

Local competition

501    In Public Notice 2006-1, the Commission sought comments as to whether local competition should be permitted in Northwestel's operating territory and under what conditions.

a) Provide the company's views, with supporting rationale, on whether or not it would be appropriate to permit local competition in Northwestel's operating territory. If not, explain why not and when it would be appropriate to do so.

b) If Northwestel is of the view that it would be appropriate to permit local competition, provide its views as to w hat form of local competition framework (i.e. resale, facilities-based, hybrid) would be appropriate in Northwestel's operating territory. Provide supporting rationale for the company's views.

502    A)  Assuming the Commission permits facilities-based local competition in Northwestel's operating territory, specify how the following network elements should be made available to competitors: interconnection, co-location, unbundled network elements, and local number portability.

          B)   Provide the company's views as to who should pay for these network elements identified in part A) above and whether their availability should be i) on similar terms as those of the large ILECs, or ii) mandated by the Commission based on a request from the competitive local service provider.

Long distance competition

503    A)   Provide, for each of the years 2004 to 2006, the company's actual/estimated originating and terminating voice (conversation) and public switched telephone network (PSTN) data minutes, by peak and off-peak periods, and by domestic and non-domestic categories, along with supporting assumptions for the year 2006. Originating and terminating minutes should be provided separately, as well as in total.

          B)   Provide for the year 2007, a forecast of the information requested in part A) above, if applicable, based on the impact of any rates proposed to be effective in the year 2007.

          C)   Provide a list of all data services which have been included in the estimate in the response to part A) above. Identify each service not included, the amount of originating and terminating traffic (by peak and off-peak periods), associated with that service, and provide the rationale for excluding the traffic in the estimates provided in the response to part A) above.

          D)   Provide, by domestic and non-domestic categories, the originating/terminating call ratio used to develop the minute forecasts provided in response to part (A) above.

504    Provide, for each of the years 2004 to 2006, the actual/estimate market share percentages by i) peak and off-peak periods, separately and in total, and ii) settlement category (e.g. domestic, U.S., and overseas), held by the company and by other service providers. The response should include the total market minutes as well as the market minutes for facilities-based carriers, resellers (include separately resellers of calling cards), and the company.   Provide all supporting assumptions, calculations, and underlying data.

505    Provide a list of all facilities-based long distance service providers and registered resellers operating in Northwestel's territory, together with the geographic area in which they operate and when they commenced providing service.

506    In Decision 2005-54, Northwestel submitted that while two competitors were also providing long distance service in its territory using Northwestel's equal access service, prepaid cards continued to be the primary form of toll competition in its territory. Provide an estimate of the portion of the long distance market captured by service providers offering long distance service through prepaid cards in Northwestel's territory. Provide all supporting assumptions, calculations, and underlying data.

507    A)   Provide a cost study for the CAT with a breakdown of switching and aggregation, and equal access costs on a cost per-minute basis. Indicate the contribution levels applicable over the study period.

          B)   For the information provided in response to part A) above. provide i) a hard copy of the model's cost inputs; ii) the models used for the calculations in computer format; iii) the assumptions for the model including forecast minutes for the study period; and iv) the details of the methodology used to derive the costs for each component.

508    For the CAT cost study provided in the response to interrogatory NWTel(CRTC)30Jan06-507 above, provide a discussion of the major cost components including the rationale as to their inclusion.

Funding for provision of service to high-cost serving areas

Phase II cost information

601    Refer to Attachment 12b of the response to interrogatory NWTel(CRTC)23Nov04-04.   In addition to the information contained in the attachment to that interrogatory response, provide the following as of 31 December 2005:

a)  number of residential NAS;
b)  number of non-residential NAS (business and other);
c)  the size of the area served by the wire centre in square kilometres;
d)  population of the area served by the wire centre;
e)  population density per square kilometre;
f)  the residential NAS per square kilometre;
g)  the average wire centre loop length in kilometres; and
h)  the current designation of each wire centre by rate group.

Note that for the purpose of this interrogatory, the population information is to be determined based on the most recent available Statistics Canada census data.

602    For each rate group or proposed rate band, provide Phase II cost studies for primary exchange and loop costs providing details of i) costs as indicated in Appendix 1 to these interrogatories and ii) components included in each category identified in Appendix 1, for the following services:

a)  Residence service; and

b)  Business service.

603    Refer to the Phase II cost studies provided in the response to interrogatory NWTel(CRTC)30Jan06-602.

a) Provide a hard copy of the model's unit cost inputs used to determine the Phase II costs;

b) Provide the vintage of data and cost increase factors used to estimate the unit cost for the first year of the study period (i.e., 2006).

c) Provide the equipment/facilities life estimates, survivor curve, fill factor assumptions, vintage of maintenance costs, and operating expenses used in the study.

c)  Provide the models used for the calculations in computer format.

d) For each cost study, identify the major technologies, initial costs and vintage of data used.

e) Discuss the factors that would cause these costs to vary by rate group and the potential magnitude of the variations.

604    For each rate group or proposed rate band provided in the response to interrogatory NWTel(CRTC)30Jan06-602, provide the revenues applicable for the period of the study for:

a)  Residence optional features; and

b) Business optional features.

605    Provide details of methodology, assumptions and supporting rationale used to derived the maintenance costs by rate group or rate band relating to the primary exchange and loop costs studies provided in the response to interrogatory NWTel(CRTC)30Jan06-602 above. Where the monthly maintenance cost exceeds the average monthly maintenance cost of all communities by 20 percent or more, provide explanations for these cost differences. These explanations should include a discussion of the differences in cost methods, cost driver estimates and unit costs.

606    A) Provide a Phase II cost study of the toll connecting trunks for each rate group in the company's operating territory.

          B)  Refer top the cost study provided in response to part A) above.

i)   Provide a hard copy of the model's unit cost inputs used to determine the Phase II costs.

ii) Provide the vintage of data and cost increase factors used to estimate the unit cost for the first year of the study period (i.e., 2006).

iii) Provide the equipment/facilities life estimates, survivor curve, fill factor assumptions, vintage of maintenance costs, and operating expenses used in the study.

iii) Provide the models used for the calculations in computer format.

iv) For each cost study, identify the major technologies, initial costs and vintage of data used.

v) For each rate group, indicate whether these toll connecting trunks are used for other services and the percentage of toll connecting costs assigned to other services, with support supporting details, including forecast of demand and revenues.

Subsidy calculation

607   In Changes to the contribution regime, Decision CRTC 2000-745, 30 November 2000 (Decision 2000-745), the Commission considered that it would be appropriate to calculate the annual total subsidy requirement for the high-cost serving areas (HCSAs) of the large ILECs using a cost-based approach.

In Restructured bands, revised loop rates and related issues, Decision CRTC 2001-238, 27 April 2001, as amended by Restructured bands, revised loop rates and related issues, Decision CRTC 2001-238-1, 27 April 2001 and Restructured bands, revised loop rates and related issues, Decision CRTC 2001-238-2 (Decision 2001-238); Decision 2001-238, the Commission, among other things, established the following HCSA bands for the large ILECs:

Band E - wire centres or exchanges with less than or equal to 1,500 total NAS;

Band F - wire centres of exchanges with greater than 1,500 and less than 8,000 total NAS, and where the average loop length is greater than four kilometres; and

Band G remote wire centres or exchanges (e.g. without year-round road access or found in remote parts of a company's serving territory).

Provide the company's proposal concerning an appropriate rate band structure, taking into account the need to identify HCSAs in its territory in view of the Commission's conclusions in Decision 2001-238 and the subsidy calculations based on the formula set out in Decision 2000-745.

608    In Regulatory framework for the small incumbent telephone companies, Decision CRTC 2001-756, 14 December 2001, the Commission approved a modified band structure for Bands E, F, and G for the small ILECs. Comment on the appropriateness of Northwestel using this band structure for the purposes of its subsidy calculation.

609    In Decision 2000-745, the Commission determined that, in general, the subsidy requirement for HCSAs would consist of the following: annual primary exchange residential service revenue, plus an annual target implicit contribution amount from other local residential services, less the annual Phase II costs plus an appropriate mark-up.

Comment on the appropriateness of Northwestel using the subsidy formula set out in Decision 2000-745 to determine its local service subsidy entitlement and specifically address, among other things, each of the following subsidy components:

a)  average primary exchange residential service revenue;
b)  a deemed $5 per NAS per month implicit contribution amount from other local residential services;
c)  a 15 percent mark-up on the primary exchange service (PES) cost component to recover fixed and common costs; and
d)  adjusting the PES costs annually for inflation less productivity.

610    Provide, for each of the HCSA bands noted above in interrogatories NWTel(CRTC)30Jan06-607 and NWTel(CRTC)30Jan06-608, Northwestel's average monthly residential PES rate and the associated residential NAS counts, as at 31 December 2005.

611    In the event that Northwestel does not have Phase II costing for its residential service, comment on the appropriateness of using, as a proxy for its local service PES costs, the following national weighted-average Phase II PES costs of the large ILECs, which were determined from the Phase II PES costs approved in Decision 2001-238:

Band E:       $35.85
Band F:       $29.17
Band G:       $53.08

612    Provide the detailed calculation of Northwestel's subsidy requirement based upon the methodology in Decision 2000-745, using i) the proxy costs identified in NWTel(CRTC)30Jan06-611 and ii) the costs established from cost studies in NWTel(CRTC)30Jan06-602.

613     In Telephone service in high-cost serving areas, Telecom Decision CRTC 99-16, 19 October 1999, the Commission found it appropriate that a portion of Northwestel's switching and aggregation facilities be considered an extension of its local network.

In the event that Northwestel considers that a portion of its switching and aggregation facilities should be considered an extension of its local network, explain i) why these facilities should receive subsidy, ii) how the amount of subsidy should be determined, and iii) the amount of subsidy, with supporting calculations.

614   Provide an Annual Revenue Report based on Northwestel's 2005 financial statements, in the format used by telecommunications service providers to file their statement of contribution-eligible revenues as part of the revenue-based mechanism approved in Decision 2000-745.   Northwestel's calculation of its contribution-eligible revenue should include a breakdown of its non-Canadian revenues, Canadian non-telecommunications revenues, and inter-carrier payments.

Appendix 1

Detailed Summary of Phase II Costs

Present Worth                                             
within                    $ Per Subscriber       
Study Period                    Per Month           

[1] The 23 November 2004 and 3 February 2005 interrogatory responses refer to responses filed in the proceeding initiated by Northwestel Inc. - Annual review of supplemental funding for 2004 and 2005, Telecom Public Notice CRTC 2004-6, 23 November 2004.

[2] In the response to interrogatory NWTel(CRTC)03Feb05-101, Northwestel listed six discretionary projects: Projects 1.1.56, 1.2.7, 1.2.9, 1.3.2, 3.1.17, and 4.1.5.

c.c.:   C. Bailey, CRTC (819) 997-4557