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Letter
File Number: 8678-C12-200605553
Ottawa, 8 August 2006
By Electronic mail
Mr. Terry Connolly
Director, Regulatory Matters
TELUS Communications Company
10020 - 100 Street N.W.
31 st Floor
Edmonton , AB T5J 0N5
Email: regulatory.affairs@telus.com
Re: Review of price cap framework, Telecom Public Notice 2006-5
Dear Mr. Connolly:
Pursuant to the procedures set out in Review of price cap framework, Telecom Public Notice CRTC 2006-5, 9 May 2006 , attached are interrogatories associated with this proceeding.
Responses to these interrogatories are to be filed with the Commission, and served on all the interested parties to this proceeding, by 6 September 2006 .
Yours sincerely,
(Original signed by John Macri)
John Macri,
Director, Financial and Regulatory Affairs
Telecommunications
Attachment
cc: Bob Noakes, CRTC, 819-997-4429 bob.noakes @CRTC.gc.ca
Attachment
Components of Price Cap Plans
1101 Refer to the response to interrogatory TELUS(CRTC) 24May06-102. TELUS states that its proposal does not contemplate an explicit X factor. In the event that the Commission considers it appropriate to continue the use of an explicit X-factor, provide TELUS' comments on the continued appropriateness of using the 3.5% productivity factor. Should TELUS consider that another productivity level would be more appropriate, provide detailed information including studies, to support the company's view. Indicate to which basket(s) the productivity factor should apply.
Services, Baskets and Pricing Constraints
1201 Refer to paragraph 57 of TELUS' submission which states the following:
TELUS proposes that no changes should be made to the price cap regime for Category I Competitor Services until two key reviews are completed: a review of the Phase II costing methodology and a review of wholesale mandated access rules.
Further, refer to paragraph 61 of TELUS' submission which states the following:
.in TELUS' view, it is no longer necessary for the Commission to continue to reduce the rates for Category I Competitor Services by an annual productivity adjustment. TELUS believes that the rates for these services are already artificially low and that they should accordingly be frozen at current levels pending the completion of a review of the Commission's Phase II costing methodology.
a ) Confirm whether the application of the existing pricing constraints would continue to apply (i.e., I-X) until the completion of the reviews referenced above or whether rates would be frozen at current levels, meaning I-X would no longer apply.
b) Refer to the Commission staff letter dated 14 July 2003 regarding Phase II costing information requirements, where it was indicated that all ILECs would be expected to file Competitor Service cost studies that exclude the application of inflation and productivity factors within the study period and that under this approach, the revised Competitor Service rate resulting from the revised cost study would be subject to the annual I-X pricing constraint. If TELUS' response to part (a) above is to freeze rates for Competitor Services, explain with supporting rationale, why it would no longer be necessary to reflect ongoing rate changes to capture the effects of annual inflation and productivity related to Category I Competitor Services.
c) If the Commission was to determine it appropriate to continue to apply a pricing constraint equal to inflation less the productivity offset (I-X) to ILEC services assigned as Category I Competitor Services, provide TELUS' comments on the continued appropriateness of using the 3.5% productivity factor for Category I Competitor Services. Should TELUS consider that another productivity level would be more appropriate for Category I Competitor Services, provide detailed information, including studies, to support this view.
1202 Refer to paragraphs 44 and 45 of TELUS` submission. TELUS proposed that its competitive presence test would be met where a facilities-based competitive local exchange carrier ("CLEC") provides residential local exchange service in the exchange, and a wireless alternative for primary exchange service is present
Provide a list of alternate providers of residential PES by exchange, including its Quebec exchanges. Indicate the technology employed by the alternate provider to serve the exchange.
1203 Provide a revised response to interrogatory TELUS(CRTC)24May06-204c) in a similar format to that provided in Attachment 1 to the response to interrogatory MTS Allstream(CRTC)06May23-204c).
1204 A) For each of the years 2005 to 2007, provide the following information:
i) the number of actual projected subscribers of stand-alone primary exchange service (PES) per applicable local forbearance region (LFR as defined in Decision 2006-15) including subscribers within your ILEC operating territory as well as those served by affiliates outside your ILEC operating territory; and
ii) the number of actual or projected subscribers of bundles of services that contain PES per applicable LFR.
B) For each of the years 2008 to 2010, provide the information requested in A) above to the extent available. If not available, provide your best assessment of the market conditions for these services for the specified timeframe.
1205 At paragraphs 45 and 46 of its submission, TELUS described its proposed approach to applying its competitive test:
" TELUS recognizes that in exchanges that pass the competitive presence test, not all residential customers may have access to local exchange service from a facilities based CLEC. This will result from mismatches between the serving area of the ILEC and the serving area of the CLEC. In addition, some CLECs may choose to enter some exchange areas selectively, leaving some customers in an exchange without a competitive alternative.
Consequently, as an additional consumer safeguard, TELUS proposes that residential customers in exchanges that pass the competitive presence test who do not have access to a competitive alternative (wireline or wireless) can request and obtain service at the same price as local exchange service in the nearest exchange that does not pass the competitive presence test. This safeguard is designed to protect users in otherwise competitive exchanges that live in pockets that competitors do not serve."
Does the proposed consumer safeguard described above imply that an area larger than the exchange would be more appropriate for the competitive test? Provide supporting rationale.
1206 A) At paragraph 119 of its evidence, TELUS states the following:
TELUS proposes that the next price cap regime should be left open ended, with the option for the Commission to initiate a review of any aspect of the regime, after a period of four years. A review could be initiated by the Commission on its own motion or on application by an ILEC or by another party.
Confirm that the company's proposal would not envision a review by the Commission during the first four years of the regime.
B) TELUS further proposes in paragraph 120 of its evidence that any further review should generally be restricted to the review of price constraints attached to a specific company.
Indicate what company specific circumstances, and in particular the market conditions in each of the residential and business markets that could result in future price cap review being restricted to a specific company.
Rate De-Averaging
1301 Refer to the table provided in paragraph 21 of the company's submission. TELUS proposes that rate de-averaging be permitted within a band and within an exchange for both the Residential Services basket and the Business Uncapped Services basket (which combines the current Business Services Basket and Other Capped Services Basket).
a) For each of the baskets noted above, how does the company propose to demonstrate that the market conditions for these services warrant further rate de-averaging within:
• i. a rate band,
• ii. a rate sub-band, and
• iii. an exchange.
b) Explain how the company's proposed rate de-averaging would be implemented, tracked and reported, including the impact on specific rate elements and basket constraints.
1302 Refer to the paragraph 71 of the company's submission. The company states that in residential exchanges that do not meet the competitive presence test, ILECs should be permitted to de-average rates within an exchange, subject to review by the Commission to ensure there is no unjust discrimination.
a) Describe the specific information (i.e., qualitative and/or quantitative supporting information) that the company would propose filing to substantiate its assertion that there would be no unjust discrimination.
b) Describe the process that the company envisages the Commission should take with regard to ensuring that there would be no unjust discrimination in residential exchanges that do not meet the competitive test. In particular, does the company consider specific guidelines could be established in advance to help streamline the review? Is the company proposing to file ex ante the information to ensure that no unjust discrimination is present at the same time of the tariff page filing or to file ex post the information once a complain of unjust discrimination is presented to the Commission after the new rates are in force?
1303 Forbearance from the regulation of retail local exchange services, Telecom Decision CRTC 2006-15, 6 April 2006, paragraph 488, the Commission indicated that it was '' .prepared to consider applications from an ILEC requesting the removal of the local winback rule in a relevant market when the applicant ILEC can demonstrate that it has lost 20 percent of its market share in that relevant market.''
Provide TELUS' view on a similar transitional measure with respect to the prohibition on rate de-averaging based on , among other things, a per cent market share loss in that relevant market. Identify, with supporting rationale, the percentage market share loss level to justify this transitional measure.
Date Modified: 2006-08-08
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