ARCHIVED - Telecom Commission Letter - 8695-S22- 200512105

Letter

Our file: 8695-S22-200512105

Ottawa, 1 May 2006

BY E-MAIL

Mr. Stan Rowe
Saskatchewan Telecommunications (SaskTel)
2121 Saskatchewan Drive , 12th Floor
Regina , Saskatchewan
S4P 3Y2  

Dear Mr. Rowe:

Subject:   Request for a Commission staff clarification on the assignment of                     fixed VoIP NAS for subsidy purposes

In Regulatory framework for voice communication services using Internet Protocol , Telecom Decision CRTC 2005-28, 28 May 2005 (Decision 2005-28), the Commission determined the regulatory framework that would apply to Voice over Internet Protocol (VoIP) services in Canada.

SaskTel's Request

By letter dated 13 October 2005 , Saskatchewan Telecommunications (SaskTel) requested a Commission staff clarification on the rules that should be used to determine the location of fixed VoIP network access services (NAS) for contribution purposes.

SaskTel noted that, in Decision 2005-28, the Commission determined that the existing subsidy per residential NAS amounts would be paid to a local exchange carrier (LEC) providing residential VoIP services in high-cost areas, as long as the LEC met all of the conditions required to receive subsidy.   However, the Commission did not provide any direction on how a LEC providing residential VoIP services would determine in which incumbent local exchange carrier's (ILEC's) serving territory the service is being provided, whether the service is provided in a high-cost area or in which rate band the service is provided.

SaskTel also noted that the only references to location were associated with which directory a customer's telephone number should be listed in and whether a local VoIP service offered by an ILEC would be considered "in-territory" for tariff filing purposes, both of which use the telephone number assigned to the VoIP service.

SaskTel submitted that it had significant concerns regarding the appropriateness of also using the telephone number to assign VoIP services for eligibility of subsidy and/or the amount of subsidy to which a LEC would be entitled.

SaskTel identified that in Restructured bands, revised loop rates and related issues , Decision CRTC 2001-238, 27 April 2001 (Decision 2001-238), the Commission defined high-cost serving areas (HCSAs) based upon the geographic areas where the physical plant was located and that the subsidy per residential NAS amounts for each HCSA band was derived by an examination of the costs of providing service on a geographic basis.

SaskTel submitted that in the case of a local VoIP service and if the telephone number is used to determine eligibility for subsidy, then a LEC providing a fixed VoIP service, meeting all of the criteria in Decision 2005-28, to a subscriber in a non-HCSA location with an HCSA telephone number would be eligible to receive subsidy, even though the service is being provided in a non-HCSA area.

In SaskTel's view, in this situation, the VoIP service is being provided in a non-HCSA and should not be eligible for subsidy.   Conversely, a fixed VoIP subscriber in an HCSA area with a non-HCSA telephone number is receiving service in an HCSA area, however the LEC providing the service would not be eligible for subsidy.

SaskTel submitted that it would be more appropriate and consistent with Changes to the contribution regime , Decision CRTC 2000-745, 30 November 2000, (Decision 2000-745), and Decision 2001-238 to base the VoIP location determination, for contribution purposes, upon the subscriber's location (i.e., the physical location of the customer's access and not the assigned telephone number).

Xit telecom's comments and the SaskTel request

By letter dated 13 October 2005 , Xit telecom inc. on behalf of itself and 9141-9077 Quebec Inc., submitted that it was in full agreement with SaskTel's request and assessment.

Decision 2005-28 and eligibility to receive subsidy

Staff notes that, in Decision 2005-28, the term local VoIP services referred to those services that used North American Numbering Plan conforming telephone numbers, provided subscribers with access to and/or from the public-switched telephone network (PSTN) and provided the ability to make or receive calls that originate and terminate within an exchange or local calling area as defined in the large ILECs tariffs.

Staff also notes that, in Decision 2005-28, the Commission considered that the use of Internet protocol did not define the fundamental purpose of the service; rather, it defined the underlying technology used to provide and transport the service.

The Commission concluded that local VoIP services satisfy, or will satisfy, the same general user requirements of consumers of circuit-switched local exchange services and, therefore, found that local VoIP services were a close substitute for circuit-switched local exchange services.

With respect to the eligibility of VoIP services to receive subsidy from the National Contribution Fund, the Commission determined that local residential VoIP service providers would be eligible to receive the existing subsidy per residential NAS amounts from the National Contribution Fund, in those circumstances where the service provider:

a)  provided the customer with both the underlying access and the local service components;

b)  met all of the criteria established by the Commission in Local competition , Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8) and subsequent related determinations for receiving subsidy; and

c)  provided a level of service that met or exceeded the basic service objective established by the Commission in Telephone service in high-cost serving areas , Telecom Decision CRTC 99-16, 19 October 1999 (Decision 99-16).

Commission staff notes that the above criteria matches the criteria that a local service provider using circuit-switched technology would have to meet to be eligible to receive subsidy from the National Contribution Fund.

Determination of the location of a VoIP service for contribution purposes

Given the Commission determined, in Decision 2005-28, that the regulatory framework that applied to circuit-switched local exchange services would also apply to local VoIP services, Commission staff is of the opinion that the determination of where a local VoIP service is being provided, for contribution purposes, should be based upon the same rules that apply to circuit-switched local exchange services.

In Decision 99-16, the Commission established a basic service objective that included "individual line local service with touch-tone dialling." ( emphasis added ).

In Decision 2001-238, the Commission assigned the large ILECs' wire centres to bands and determined the residential primary exchange service (PES) costs, which are used for subsidy calculation purposes, for the high-cost bands based upon the cost of providing the physical service in the high-cost areas.

Commission staff notes that, for local exchange services that use circuit-switched technology, the subscriber's telephone number and the physical location of the subscriber's network access component would both be within the same ILEC wire centre, and, therefore, the same ILEC band, because the wire centre is made up of specific telephone numbers.

In Decision 2005-28, the Commission determined that, to the extent that VoIP services provide subscribers with access to and/or from the PSTN along with the ability to make or receive calls that originate and terminate within an exchange or local calling area as defined in the ILEC's tariffs, they will be referred to as local VoIP services.   The Commission went on to find that the relevant criterion for determining the location of the local VoIP service, for tariff and directory listing purposes, was the area code and telephone number because that is what indicated in which exchange local calling was available.

Based upon the above, Commission staff is of the view that the band determination for a local residential VoIP service should be based upon both the subscriber's telephone number and physical location of the subscriber's network access component.   The subscriber's telephone number is required because this is where the local service occurs (Decisions 99-16 and 2005-28) and the physical location of the subscriber's network access component is required because this is the basis for determining the amount of subsidy to be received (Decision 2001-238).

In the event that both the subscriber's telephone number and the physical location of the subscriber's network access are in the same ILEC HCSA wire centre, then the NAS would be considered to be in the related ILEC HCSA band for contribution purposes and, therefore, eligible for subsidy.

For example, a customer with a physical network access in an ILEC's Band E wire centre using a telephone number also associated with the same ILEC's Band E wire centre would be considered to be a Band E NAS for that ILEC for contribution purposes and, therefore, the ILEC would be eligible to receive Band E subsidy for that NAS.

If the network access component and the subscriber's telephone number are not in the same ILEC's HCSA wire centre, then the NAS would not be eligible for subsidy.

Yours sincerely,

Original signed by

Stephen Delaney
Director, Industry Analysis and Regulation
Telecommunications

c.c.   Robert Thompson, CRTC, 819-994-2484
         Interested parties to Telecom Decision CRTC 2005-28
         ILECs, SILECs, CLECs and Proposed CLECs