ARCHIVED - Telecom Commission Letter - 8663-C12-200600066
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File Number: 8663-C12-200600066
Ottawa, 10 April 2006
Mr. Scott Roberts
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 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 1 May 2006. Responses are to be received, and not merely sent, by this date.
Original signed by
c.c.: C. Bailey, CRTC (819) 997-4557
INTERROGATORIES TO NORTHWESTEL INC.
10 April 2006
Components of a price regulation framework
1101 Refer to the response to interrogatory NWTel(CRTC)30Jan06-104, page 3 of 4. Northwestel stated that it ".has submitted its suggested methodology incorporating normalization of 1998 costs and the inclusion of SIP [service improvement plan] access expenditures in the 2006 cost base for residential PES [primary exchange service]."
1102 Refer to the response to interrogatory NWTel(CRTC)30Jan06-103, page 1 of 2. Northwestel indicated that the company is ".concerned that the GDP-PI [gross domestic product - price index] may not adequately reflect input cost increases associated with large-scale resource sector projects (which occur on a cyclical basis in the North)." Provide other appropriate measures of inflation that may be available, and explain why these measures are more representative of Northwestel's operating territory than GDP-PI.
1103 Refer to the response to interrogatory NWTel(CRTC)30Jan06-105.
Provide the company's rationale for not requiring that all criteria be met in order for the event to be considered eligible for exogenous treatment.
Capital plan, service improvement plan and quality of service
Capital plan and service improvement plan
1201 Refer to the response to interrogatory NWTel(CRTC)30Jan06-206. The company stated that it is in the early stages of evaluating the potential for Internet protocol (IP) network services, including Voice over Internet Protocol (VoIP) services in the North, and, other than for an IP virtual private network (VPN) service, no detailed deployment plans existed. Provide the results of the latest net present value (NPV) study to support the expenditures for VPN service.
1202 Refer to Northwestel Inc.'s Evidence, dated 20 March 2006, (Northwestel's evidence), Government-Induced Market Disruptions, paragraphs 46 to 62. Northwestel stated that competitors had secured funding from various sources totalling $40.4 million to provide broadband services to 56 communities in Northwestel's serving territory.
1203 Refer to the responses to interrogatories NWTel(CRTC)30Jan06-201 and NWTel(CRTC)30Jan06-203. Northwestel is forecasting negative growth for NAS. Provide justification for the capital expenditures for local growth, specifically projects 1.1.4, 1.1.5, 1.1.6, 1.1.7, 1.1.8, 1.1.10, and 1.1.12.
1204 Refer to the responses to interrogatories NWTel(CRTC)30Jan06-202 and NWTel(CRTC)30Jan06-203. Northwestel is forecasting low growth for toll traffic. Provide justification for the capital expenditures for toll growth, specifically projects 2.1.1 and 2.1.48.
1205 Refer to the response to interrogatory NWTel(CRTC)30Jan06-203. Provide justification for the capital expenditures for data growth and data modernization, specifically projects 3.1.1, 3.1.2, 3.1.5, 3.1.11, 3.1.13, 3.1.14, 3.1.15, and 3.2.2.
B) Provide the most recent NPV study for project 3.2.2, New Digital Communication Network.
1206 Refer to the response to interrogatory NWTel(CRTC)30Jan06-203, Attachment 3b. Provide justification for the capital expenditures for project 4.4.47, Software System Upgrades & Licensing.
1207 Refer to Northwestel's evidence, Appendix VIII Revised, page 6 of 7. The company stated that the total capital expenditures associated with each SIP category, by asset code, were considered as one-time capital expenditures at the beginning of the study and the present worth of annual costs (PWAC) and annual equivalent costs (AEC) were determined. Provide a detailed description of how the company determined each PWAC and AEC.
1208 Refer to Northwestel's evidence, Section 10, Service Improvement Plan Proposal, paragraphs 344 to 353.
1209 Refer to the response to interrogatory NWTel(CRTC)30Jan06-204, page 3 of 4. Provide the amount and descriptions for the increase in capital expenditures for the Fort Fitzgerald project along with supporting rationale.
Quality of service
1210 A) Provide, for the first quarter of 2006, the company's quality of service (Q of S) indicators in the same format as that provided in the response to interrogatory NWTel(CRTC)30Jan06-212.
B) If the company encountered any significant Q of S problems in the first quarter of 2006, provide detailed descriptions of the problems and solutions employed to correct these problems.
Finance, revenues and expenses
1301 In Implementation of price cap regulation and related issues , Telecom Decision CRTC 98-2, 5 March 1998 (Decision 98-2) and Implementation of price regulation for Télébec and TELUS Québec , Telecom Decision CRTC 2002-43, 31 July 2002 (Decision 2002-43), the starting point for the going-in revenue requirement was generally the financial forecast for the year prior to the implementation of price cap regulation. Furthermore, adjustments were made for items such as the impact of expenses, rate initiatives proposed or implemented during the first year of the price cap, and the estimated impact of any rate proposals implemented at the initiation of price cap regulation.
Refer to Northwestel's evidence, Appendix VI, pages 1 to 10.
1302 Refer to the response to interrogatory NWTel(CRTC)30Jan06-309, Attachment 1. Provide for each of the years 2005 and 2006, the breakdown of the toll revenues between the CAT and the other components. With respect to the 2006 CAT revenue component, provide the supporting calculations showing the minutes and the CAT rate by major components. In addition, provide the revenues and the change in revenues, with supporting calculations, that would have resulted if the proposed switch connect rate had been in effect for 2006.
1303 Refer to Northwestel's evidence, Appendix VI, page 5, and the response to interrogatory NWTel(CRTC)30Jan06-401.
1304 Refer to the responses to interrogatories NWTel(CRTC)30Jan06-309, Attachment 1 and NWTel(CRTC)30Jan06-401, Attachment 1. Restate the revenues for 2006 in the response to interrogatory NWTel(CRTC)30Jan06-401, Attachment 1, by listing the tariff number, tariff item, tariff rate description, and the 2006 revenues using the same major categories identified in the response to interrogatory NWTel(CRTC)30Jan06-309, Attachment 1, as well as total revenues for each major category. Reconcile any differences in revenues between the two responses for each major category.
1305 Refer to the response to interrogatory NWTel(CRTC)30Jan06-401, Attachment 2A. Provide detailed supporting calculations for the estimated incremental revenues for 2007 for message toll services, digital private line - transmission service, digital private lines - North customer volume pricing, carrier access tariff, and public cellular services.
1306 In Price cap regulation and related issues, Telecom Decision CRTC 97-9, 1 May 1997, the Commission determined that any depreciation reserve deficiency (DRD) would be amortized, for regulatory purposes, using the core composite average remaining service life of the company's assets. Using this approach, the amortization of the DRD would be on a straight-line basis for regulatory purposes, thus ensuring that the amount included in the going-in rates would not change relative to the amounts reflected in the rates for subsequent years of the price cap plan.
Refer to the response to interrogatory NWTel(CRTC)30Jan06-315A).
1307 Provide, in tabular format, the same information requested in interrogatory NWTel(CRTC)10Apr06-1306a) for asset code 60 - Cable - Aerial/Underground, for the five-year period commencing 1 January 2007, incorporating an average service life (ASL) of 1) 22 years and 2) 24 years, respectively.
1401 Refer to the response to interrogatory NWTel(CRTC)30Jan06-102, Attachments 1 and 2.
1402 Refer to the response to interrogatory NWTel(CRTC)30Jan06-102, page 9 of 10. Comment on the appropriateness of assigning basic toll to a separate basket that does not include basic calling features and residential voice messaging.
1403 In the response to interrogatory NWTel(CRTC)30Jan06-102, Northwestel proposed that the price constraint on residential enhanced calling features and voice mail should be a maximum rate increase of $1 per year on each service item or benchmarked to a pre-existing Commission approved rate for another phone company.
Indicate, with supporting rationale, whether Northwestel's proposal of a maximum rate increase of $1 per year would apply to a chosen benchmarked pre-existing Commission approved rate.
1404 In the response to interrogatory NWTel(CRTC)30Jan06-401, Northwestel has proposed to decrease rates for:
For each service listed above, provide an economic (Phase II) cost study and the company's proposed rates using the same format as provided in the response to interrogatory NWTel(CRTC)30Jan06-602. Provide a detailed description of the major components that are included in each specific line item for each category of costs identified in the economic study.
1405 Comment, with supporting rationale, on the appropriateness of Northwestel providing an economic study in support of applications for: 1) new services, 2) service rate reductions, 3) service bundles, and 4) rate increases above the Commission's approved rates for another company.
1406 Refer to the response to interrogatory NWTel(CRTC)30Jan06-405A)ii), Attachment 1. Provide a list of the services included in the Optional Monopoly Services component.
1501 At paragraph 341 of Northwestel's evidence, the company submitted that it would not be reasonable to impose or mandate facilities-based local service competition based on the framework developed in Local competition , Telecom Decision CRTC 97-8, 1 May 1997 , in Northwestel's operating territory. In Revised regulatory framework for the small incumbent local exchange carriers , Telecom Decision CRTC 2006-14, 29 March 2006 (Decision 2006-14), the Commission set out a framework for local competition in the operating territories of the small incumbent local exchange carriers (SILECs). In Decision 2006-14, the Commission determined, among other things, that it would permit competitive entry in the SILECs' territories by allowing the resale of their local services. The Commission also found that a SILEC should only file proposed tariffs for competitor services if the SILEC received a bona fide request from a competitor.
Comment on the appropriateness of establishing a framework for local competition in Northwestel's operating territory similar to the one set out in Decision 2006-14. Indicate what changes, if any, should be made to the framework in Decision 2006-14 to accommodate Northwestel's operating territory.
1502 Comment on the appropriateness of establishing a local competition framework in exchanges within Northwestel's operating territory with more than 2,000 NAS.
1503 Comment on the appropriateness of mandating local service competition in Northwestel's territory, in light of the increased availability of broadband services in Northwestel's territory and the ability to provide VoIP service.
1504 In Finalization of quality of service rate rebate plan for competitors , Telecom Decision CRTC 2005-20, 31 March 2005 , the Commission finalized the Q or S rate rebate plan for competitors that applied to the large ILECs.
In the event that the Commission should find it appropriate to mandate local service competition in Northwestel's territory and to require Northwestel to offer services to competitors, comment on the appropriateness of implementing a rate rebate plan similar to the one established for the large ILECs.
Long distance competition
1505 In Forbearance - Regulation of toll services provided by incumbent telephone companies , Telecom Decision CRTC 97-19, 18 December 1997 (Decision 97-19), the Commission found that toll services were comprised of the following two markets: (i) toll services and (ii) toll-free services. In its evidence, Northwestel submitted that it would be appropriate for the Commission to forbear from the exercise of its powers with regard to regulating long distance services to the same extent, and subject to the same conditions, as for the other incumbent telephone companies.
1506 In Decision 97-19, the Commission forbore from exercising its powers under sections 25 and 31 of the Telecommunications Act (the Act) with regard to the regulation of toll and toll-free services. The Commission also decided to continue exercising its powers to impose certain conditions under section 24 of the Act. The Commission further decided to continue exercising, in part, its powers in respect to just and reasonable rates and unjust discrimination under section 27 of the Act, and its powers to approve certain agreements and arrangements under section 29 of the Act.
In its evidence, Northwestel submitted that it would be appropriate for the Commission to forbear from the exercise of its powers with regard to regulating long distance services to the same extent, and subject to the same conditions, as for the other incumbent telephone companies.
With respect to toll services and, if applicable, toll-free services in Northwestel's operating territory, specify, with supporting rationale, which powers the Commission should retain under the Act, if the Commission should determine that it is appropriate to forbear from those services.
1507 In the response to interrogatory NWTel(CRTC)30Jan06-202, Attachment 3, Northwestel provided a forecast of equal access providers' total minute market share in 2006. Northwestel also provided a forecast of equal access providers' total minute market share in 2007, based on Northwestel's proposed rates.
Explain, with supporting rationale, the year over year variation in Northwestel's forecast of equal access providers' total minute market share for the years 2005, 2006, and 2007.
1508 A) Provide a list of all the licensed or exempt cable distribution undertakings owned by Northwestel Cable Inc. (Northwestel Cable), specifying which are licensed and which are exempt, together with the serving territory of the cable distribution undertakings.
B) Provide a list of all cable companies, if any, other than Northwestel Cable operating in Northwestel's territory.C) Provide a list of all the telecommunications services provided by Northwestel Cable and the associated revenues generated by those services.
Funding for provision of service to high-cost serving areas
Phase II costs
1601 Provide detailed calculations and justification for the proposed use of a 25 percent mark-up for the purpose of the subsidy calculations.
1602 Refer to the response to interrogatory NWTel(CRTC)30Jan06-407. The company proposed a cost-based switch connect rate of $0.00825 per minute for its entire operating territory, excluding the toll transport component. The proposed switch connect rate includes the switching and aggregation (S&A) costs of $0.005 per minute, plus a 25 percent mark-up on S&A costs of $0.00125 per minute, and the equal access (EA) start-up costs of $0.002 per minute.
1603 Refer to the response to interrogatory NWTel(CRTC)30Jan06-606, Attachment 1, regarding toll connect transport costs.
1604 Refer to the residential and business loop and central office equipment (COE) unit costs provided in the response to interrogatory NWTel(CRTC)30Jan06-603, Attachment 1.
1605 Refer to the response to interrogatory NWTel(CRTC)30Jan06-607. Provide the revised residential loop cost per NAS and the revised residential PES cost per NAS in the same format as in the response to interrogatory NWTel(CRTC)30Jan06-603, Attachment 2, table titled "Detailed Summary of Phase II Costs" using the HCSA bands established in Restructured bands, revised loop rates and related issues , Decision CRTC 2001-238, 27 April 2001 (Decision 2001-238), modified as follows:
1606 A) For each of the bands identified in interrogatory NWTel(CRTC)10Apr06-1605, provide the following:
B) Provide a revised Table of Wire Centre Areas and Densities in the same format as in the response to interrogatory NWTel(CRTC)30Jan06-601, Attachment 1, based on the revised banding structure.
C) Provide the total subsidy requirement for each of Bands D, E, F, and G identified above indicating each of the following components: 1) monthly cost of the band plus a 15 percent mark-up, 2) monthly $5 implicit revenues from local services, 3) the average monthly rate for the band, and 4) the total number of residential NAS in the band.
D) Provide a cost-sensitivity analysis for the revised residential loop cost per NAS and PES cost per NAS, for each of the bands identified in interrogatory NWTel(CRTC)10Apr06-1605, based on a minimum average working fill factor of 50 percent for distribution plant.
E) Provide the company's view on capping maintenance expenses at 10 percent of capital (20 percent for Band G), and operating expenses at $1.65/$2.50 per NAS for the Loop/PES, respectively, consistent with the determinations in Decision 2001-238, for the purposes of the subsidy calculation.
1607 In the response to interrogatory NWTel(CRTC)30Jan06-610, Northwestel identified its average monthly residential PES rate to be $29.50, on 31 December 2005 . In the response to interrogatory NWTel(CRTC)30Jan06-201, Northwestel proposed a $2.00 residential local rate increase in 2007.
Explain why Northwestel, in response to interrogatory NWTel(CRTC)30Jan06-612, is proposing to use $31.33 in its subsidy calculation instead of $31.50 ($29.50 + $2.00).
1608 In Decision 2000-745, the Commission determined that the use of a $5 per NAS per month common implicit subsidy target would provide local exchange carriers with an appropriate incentive to generate margins from the various residential local optional services.
In Regulatory framework for the small incumbent telephone companies , Decision CRTC 2001-756, 14 December 2001 , the Commission extended the $5 per NAS per month common implicit subsidy target to the SILECs.
1609 In Decision 2001-238, the Commission determined that subsidies would not be extended to business service in high cost serving areas (HCSAs). In its evidence, Northwestel proposed cost-based subsidies for primary exchange residence service. The company also requested $11.4 million in funding for Northwestel's recently completed SIP.
Did any non-residential customers benefit from the recently completed SIP? If so, provide the company's rationale as to why the NCF should fund that portion of the SIP that benefited non-residential customers. Provide a proposal to 1) separate the SIP between residential and non-residential customers and 2) specify how the non-residential customers' portion should be funded.
1610 In Northwestel's evidence, the company stated that it supported the application of the Decision 2000-745 subsidy update process (i.e. filing an updated subsidy calculation by 31 March of each year).
In Decisions 2002-34 and 2002-43, the Commission directed the large ILECs to file their 31 December subsidy information, including NAS, by 31 March of the following year. Subsidy is then paid based upon the monthly NAS reported to the Central Fund Administrator (CFA) with the requirement for an annual audit of the monthly NAS amounts reported to the CFA.
1611 In the event that the Commission determines that it is appropriate to allow local competition in Northwestel's operating territory, provide Northwestel's view on the subsidy reporting process that should be followed by a competitive local exchange carrier to receive subsidy. Specifically address, among other things, (a) the reporting of NAS and (b) possible changes to Northwestel's subsidy as its NAS changes.
1612 I n Decision 2001-238, the Commission determined that subsidies would not be extended to business service in HCSAs. Further, Northwestel's evidence, the company proposed cost-based subsidies for primary exchange residence service.
In the response to interrogatory NWTel(CRTC)30Jan06-606 , Northwestel provided costing information in support of its proposed toll connecting trunk funding amount.
 Remote bands contain the wire centres serving areas that have no year-around access and/or involve long travel time for purposes of maintenance (the company is to identify which criteria have been met).Date Modified: 2006-04-10
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