ARCHIVED - Telecom Decision CRTC 2007-33

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Telecom Decision CRTC 2007-33

  Ottawa, 17 May 2007
 

Finalization of the assignment of Northwestel Inc.'s services to the service baskets

  Reference: 8638-C12-200701913
  In this Decision, the Commission finalizes the assignment of Northwestel Inc.'s services to the service baskets established in Price cap regulation for Northwestel Inc., Telecom Decision CRTC 2007-5, 2 February 2007.
 

Background

1.

In Price cap regulation for Northwestel Inc., Telecom Decision CRTC 2007-5, 2 February 2007 (Decision 2007-5), the Commission, among other things, set out the price cap regime applicable to Northwestel Inc. (Northwestel) and established a service basket structure which included six service baskets1 with associated pricing constraints.

2.

In Decision 2007-5, the Commission stated that its determinations with respect to the basket structure and pricing constraints, as well as the assignment of services to each of the baskets, took into consideration other determinations made in the Decision. The Commission stated that it relied on the service basket structure and pricing constraints set out in the Decision to provide the company with the appropriate incentives to be efficient and to provide adequate protection to consumers. The Commission considered that its approved basket structure would provide the company with adequate incentives to increase efficiencies, a degree of certainty, and a level of simplicity to the price cap framework, as well as substantially reduce the regulatory burden.

3.

Parties to the proceeding that led to Decision 2007-5 were given the opportunity to comment on the Commission's assignment of services to the six service baskets.2

4.

Northwestel filed its comments on 16 February 2007. Northwestel proposed that certain services that had been assigned to the Other Capped Services basket in Decision 2007-5 be reassigned to the Uncapped Services basket. The company also proposed assignments for services not dealt with in Decision 2007-5, but for which there were currently tariffs.

5.

Northwestel submitted that, in Price cap regulation and related issues, Telecom Decision CRTC 97-9, 1 May 1997, Regulatory framework for the small incumbent telephone companies, Decision CRTC 2001-756, 14 December 2001 (Decision 2001-756), and Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34, 30 May 2002, as amended by Telecom Decision CRTC 2002-34-1, 15 July 2002 (Decision 2002-34), the Commission took into account a number of important considerations when designing the basket structures for the large and small southern incumbent local exchange carriers (ILECs). Northwestel submitted that these same considerations should also apply to the company, with modifications to be made only to reflect the unique operating environment of the North.

6.

The Government of the Northwest Territories (GNWT) filed reply comments on 5 March 2007.

7.

The Commission considers that the submissions made by Northwestel and the GNWT raise the following issues:
 

I. The reasonableness of Northwestel's proposed reassignments of a number of services from the Other Capped Services basket to the Uncapped Services basket.

 

II. The reasonableness of Northwestel's proposed assignments for services that were not dealt with in Decision 2007-5.

 

I. Reassignment of services from the Other Capped Services basket to the Uncapped Services basket

8.

Northwestel proposed to reassign a number of services from the Other Capped Services basket to the Uncapped Services basket. Each of these proposals is discussed in detail below.
 

A. Centrex Access and Business and Centrex Optional Features

9.

Northwestel opposed the assignment of Centrex Access service and Business and Centrex Optional Features, including Business Prestige Numbers and Web listings, to the Other Capped Services basket. Northwestel argued that the pricing constraint imposed by their inclusion in the Other Capped Services basket was more stringent than the pricing constraint on services in the Business Services basket and was not consistent with the pricing constraints established for the ILECs in the South. Northwestel submitted that these services should be assigned to the Uncapped Services basket.

10.

Northwestel noted that the services in the Other Capped Services basket were constrained by the weighted average price, which cannot increase, while services in the Business Services basket were constrained by inflation overall and a 10 percent rate element constraint. Northwestel argued that Centrex Access service was a business access service with competition faced from substitute Multi-line services, including private branch exchange, key systems, and software based customer premise telephone systems. Northwestel submitted that the constraint on Centrex Access service was administratively redundant because a constraint already applied to Multi-line services and pricing of alternative services would constrain its ability to adjust Centrex Access rates independently of Multi-line services.

11.

Northwestel noted that, in Decision 2002-34, the Commission assigned Centrex service to the Uncapped Services basket. Northwestel noted that the Commission considered that Centrex service was a premium business service that was used as a substitute for single-line and multi-line business local exchange services. Northwestel also noted that the Commission determined that since business services were subject to a basket constraint and a rate element constraint, the Commission did not consider it necessary to subject Centrex services to such constraints.

12.

Northwestel submitted that, as the nature of Multi-line services and Centrex Access service were the same in the North as they were in the South, the Commission's treatment of Centrex Access service should be consistent with that applied in the South. Northwestel argued that facilities-based competition was not necessary for Centrex competition, and that the opportunity for Centrex resale in the North would be an adequate market constraint to keep pricing in line with market conditions.

13.

With respect to Business and Centrex Optional Features, Northwestel noted that, in Decision 2002-34, the Commission assigned these services to the Uncapped Services basket stating that it was not necessary to apply constraints to such services in view of the fact that there were substitutes available. Northwestel submitted that its Business Optional Features were discretionary and in many cases competed directly with high-end equipment features which could provide many of the optional features provided by switch-based technologies. Northwestel further submitted that Centrex Optional Features must be priced appropriately to compete with features provided by substitute phone systems.

14.

With respect to Business Prestige Numbers and Web Listings, Northwestel submitted that these services were highly discretionary and were not capped for any other large ILEC.

15.

The GNWT opposed Northwestel's proposal to reassign Centrex Access service and Business and Centrex Optional Features to the Uncapped Services basket. The GNWT noted the Commission's determinations that, given that facilities-based local competition would not be permitted at this time, it was appropriate to assign residential and business optional services, voice messaging services, calling features, and Centrex services to the Other Capped Services basket. The GNWT submitted that Northwestel had failed to demonstrate that the Commission's finding was in error.

16.

The GNWT noted that it was a major user of Business and Centrex Optional services and that the financial impact on it could be severe if adequate pricing constraints were not retained for these services until such time as facilities-based local competition emerged. The GNWT submitted that, until that time, it remained appropriate to assign Centrex Access service and Business and Centrex Optional Features to the Other Capped Services basket.
 

Commission's analysis and determinations

17.

The Commission notes that Centrex Access service and Business and Centrex Optional Features were assigned to the Uncapped Services basket in Decision 2002-34.3 In that Decision, the Commission was of the view that providing regulatory protection to customers of primary exchange service where market forces were not sufficient was an important consideration. The Commission noted that Centrex Access service was a premium business service that was used as a substitute for single-line and multi-line business local exchange services, and since these services were subject to a basket constraint and a rate element constraint, the Commission did not consider it necessary to subject Centrex Access services to such constraints. With respect to Business Optional Local services or to service bundles that included a business local exchange service or a business optional local service, the Commission stated that it did not consider it necessary to apply constraints given the availability of substitutes.

18.

In the case of Decision 2001-756, Centrex service and Business and Centrex Optional Features were assigned to the fourth basket for the small ILECs (SILECs). The SILECs were permitted to propose rate changes to services in this basket to match the rate approved for the same service offered by another ILEC or SILEC.

19.

The Commission remains of the view that single-line and multi-line business services would be a substitute for Centrex Access services and would serve to constrain the pricing for Centrex Access services. The Commission considers that assigning Northwestel's Centrex Access service to the Uncapped Services basket would provide the company with pricing flexibility similar to that which is available to the other ILECs and SILECs. Accordingly, the Commission finds that it would be reasonable to reassign Northwestel's Centrex Access service to the company's Uncapped Services basket. The Commission further finds that, consistent with this assignment, it is also reasonable to assign Centrex Optional Features to the Uncapped Services basket.

20.

The Commission considers that, in the absence of facilities-based local competition and with no cap on Centrex Optional Features, approval of Northwestel's proposal to uncap business optional services, such as Voice Messaging Service, Enhanced Calling Features, Business Prestige Numbers, and Web Listings, would remove any price protection and reduce the incentive for Northwestel to achieve efficiencies for these services. Further, the Commission notes that Business Prestige Numbers have been included in the Other Capped Services basket for the large ILECs.

21.

Accordingly, the Commission finds that Business Optional Features, including Business Prestige Numbers and Web Listings, are to remain assigned to the Other Capped Services basket.
 

B. Competitive equipment

22.

Northwestel noted that the Commission had included a number of equipment services in the Other Capped Services basket, which it submitted should be uncapped. Northwestel submitted that imposing a price cap on equipment was unnecessary given that the telecommunications equipment market for both residential and business equipment was extremely competitive and that there were a number of other sources where such equipment could be purchased, such as, outlets, box stores, and retail outlets. Northwestel submitted that the competitive equipment market in the North was as competitive as in the South.
 

Commission's analysis and determinations

23.

The Commission notes that, in Review of regulatory framework, Telecom Decision CRTC 94-19, 16 September 1994, it found it appropriate to forbear from the regulation of competitive terminal equipment for the large southern ILECs.

24.

The Commission considers that the equipment identified in the tariffs is generally available for purchase from competitive equipment providers. The Commission is of the view that it would be appropriate to assign such equipment to the Uncapped Services basket.

25.

However, with respect to Emergency Alerting Systems, Westcom 931 Alerting System - Multi-plan Service,4 the Commission notes that this equipment/service is used in remote sites and is related to safety issues. Accordingly, the Commission considers that it is appropriate to retain this service in the Other Capped Services basket.

26.

In light of the above, the Commission finds it appropriate to reassign the competitive equipment identified by Northwestel, with the exception of Emergency Alerting Systems, Westcom 931 Alerting System - Multi-plan Service, to the Uncapped Services basket. Emergency Alerting Systems, Westcom 931 Alerting System - Multi-plan Service will remain in the Other Capped Services basket.
 

C. Labour-based services

27.

Northwestel submitted that the residential and business inside wire market was highly competitive and that in virtually all communities there were electricians who provided this service. Northwestel argued that labour services for which the company faced significant competition, such as labour services for inside wire and maintenance of business equipment services, should therefore be assigned to the Uncapped Services basket.

28.

Northwestel submitted that core labour services associated with the provision of its local access services, which are generally not subject to competition, should continue to be included in the Other Capped Services basket.

29.

The GNWT opposed Northwestel's proposal to move inside wire labour services to the Uncapped Services basket, citing the limited availability of alternatives in some remote communities.
 

Commission's analysis and determinations

30.

The Commission notes that, in Follow-up to Regulatory framework for second price cap period, Telecom Decision CRTC 2002-34 - Service basket assignment, Telecom Decision CRTC 2003-11, 18 March 2003, as amended by Telecom Decision CRTC 2003-11-1, 23 May 2003, the Commission denied the large ILECs' proposals to reassign several labour-based services to the Uncapped Services basket from the Other Capped Services basket. In reaching its conclusions in that Decision, the Commission considered that (a) productivity improvements would be reflected in the time required to perform the associated tasks, (b) moving these services to the Uncapped Services basket was not an acceptable solution as customers often had no alternative but to go to the ILECs to obtain such services, and (c) the constraint on other capped services applied at the basket level which permitted ILECs to choose whether to adjust the rates for services rated on the basis of an hourly labour rate.

31.

In addition, the Commission noted, with respect to the inside wire market, that while competition was permitted, it was not persuaded that there was sufficient evidence to conclude that pricing constraints were not required to discipline the prices for various Jack and Plug services.

32.

In the case of Northwestel, the Commission considers that maintaining labour-based services in the Other Capped Services basket will encourage the company to improve efficiencies in offering these services to the greatest extent possible. In addition, as noted by the GNWT, there could be concerns as to availability of such services in some remote communities. In light of this, and for the same reasons outlined in Decision 2002-34 with respect to the classification of such services, the Commission determines that these services will remain in the Other Capped Services basket.
 

II. Assignment of services previously not listed

 

Commission's analysis and determinations

33.

The Commission has reviewed Northwestel's list of services for which there are currently tariffs but which were not included in the list of assigned services in Decision 2007-5. The Commission considers that the proposed assignments are consistent with the treatment of such services for the other ILECs and SILECs and are consistent with the determinations in this Decision and in Decision 2007-5. Accordingly, the Commission finds the proposed assignment of these services to be appropriate.
 

Other matters

34.

The Commission notes that it has removed from the service baskets several general items that do not require assignment as there are no rates associated with the item or the item references other tariffed items for the appropriate rates. In addition, some services have been reassigned in order to better reflect the Commission's determinations in Decision 2007-5 and this Decision.

35.

The revised assignment of Northwestel's services to baskets, reflecting the Commission's determinations in Decision 2007-5 and this Decision, is provided in the appendix.

36.

Northwestel is directed to file, within 10 business days from the date of this Decision, its service basket limits and service basket indices, with supporting calculations, formulae and spreadsheets, for each basket of services, as applicable.
  Secretary General
  This document is available in alternative format upon request, and may also be examined in PDF format or in HTML at the following Internet site: www.crtc.gc.ca
  _____________

Footnotes:

1 In Decision 2007-5, the Commission established the following service baskets for Northwestel: Residential Services basket, Business Services basket, Other Capped Services basket, Services with Frozen Rate Treatment basket, Competitor Services basket, and Uncapped Services basket.

2
Paragraph 155 of Decision 2007-5.

3 The assignment of such services remains the same in Price cap framework for large incumbent local exchange carriers, Telecom Decision CRTC 2007-27, 30 April 2007.

4 General Tariff 3001, item 1406.
 

Appendix

 

Classification of Services

  Northwestel Inc.
  Residential Services basket
  Tariff Item no. Description
  3001 202 Extended Area Service
  3001 207 Individual-line Service
  3001 207 Two-party and Multi-party Line Service
  3001 902, 903, 904 Suspension of Services
  3001 1408 Ruraltel
  3003 601 Short Term Rural Radio Telephone Service
  3003 602 Two Channel Rural Radio Telephone Service
  3006 201 Manual Mobile Service
  Business Services basket
  3001 202 Extended Area Service
  3001 207 Individual-line Service
  3001 207 Multi-Line Service
  3001 207 Two-party and Multi-party Line Service
  3001 805 Hotel Service
  3001 902, 903, 904 Suspension of Services
  3001 1408 Ruraltel
  3003 601 Short Term Rural Radio Telephone Service
  3003 602 Two Channel Rural Radio Telephone Service
  3006 201 Manual Mobile service
  Other Capped Services basket
  3000

Section 4

Sale of Northwestel Tariffs

  3001 104

Non-sufficient Funds Cheque Charge

  3001 220

Digital Exchange Access

  3001 230

Primary Link Service

  3001 302 B

Non-Recurring Charges

  3001 302 C

Non-Recurring Charges Diagnostic Maintenance Service

  3001 305 Non-Recurring Charges - Installation, Maintenance, Move, Rearrangements, Escort and Repair Service
  3001 306

Non-Recurring Charges - Construction Charges

  3001 307

Non-Recurring Charges - Construction on Public Thoroughfares

  3001 308

Interior Construction - Two-party and Multi-party

  3001 308.1

Inside Wire and Jacks

  3001 401

Directory Listings Primary - Business

  3001 402

Monthly Rates for Extra Listings

  3001 402

Directory Web Listings

  3001 404

Omission of Primary Listings - Business

  3001 405

Local Directory Assistance Service

  3001 406

Long Distance Directory Assistance (LDDA)

  3001 407

Prestige Number Service

  3001 701

Voice Channel Mileage

  3001 705

Foreign Exchange Service

  3001 806

Direct-in-Dial (DID) Service

  3001 809

Meridian Business Services - Features

  3001 1101-1102

Key Telephone Systems Intercommunication Circuit

  3001 1201

Secretarial Answering Unit Service

  3001 1203

Voice Messaging Service (Residential)

  3001 1203

Voice Messaging Service (Business)

  3001 1204

Integrated Voice Messaging Access

  3001 1406

Supplemental Equipment, Emergency Alerting Services

  3001 1407

Enhanced Calling Features - Residential

  3001 1407

Enhanced Calling Features - Business

  3001 1413

Set Replacement Charge

  3001 1501

Maintenance of Business Equipment

  3001 1502

Maintenance of Business Equipment - Vintage 2000

  3001 1503

Maintenance of IP-PBX and PBX Business Equipment

  3001 1601

Data56 Service

  3002 106 C

Duplicate Statement Charge

  3002 204 B

Time and Charges Surcharge

  3002 204 C

Operator Number Identification

  3002 303

900 Service

  3002 305

Reverse-a-call service

  3002 306

Remote Call Forwarding

  3002 311

FaxCom Service

  3002 400

Ship Service

  3002 406 INMARSAT Service (International Maritime Satellite Service) (except toll charges)
  3002 501

Teleconferencing Service

  3002 502

Video Conferencing Dial-up Service

  3003 201

Voice Channels - General

  3003 202

Voice Grade Channels

  3003 205

Mileage Charges Temporary Service

  3003 207

Channels for Signal Transmission

  3003 301-304

Data Transmission Service Arrangement

  3003 402

Teleprinter Service: Station Equipment - 5-Level

  3003 402

Teleprinter Service: Station Equipment - 8-Level

  3003 402

Teleprinter Service: Station Equipment - Infomode Equipment

  3003 403

Teleprinter Service - Miscellaneous Equipment

  3003 404

Teleprinter Service - Selector Equipment

 

3003

701, 702, 703

Private Line Telephone Service

  3003 903

Digital Direct-CommunityTM Satellite Service

  3003 1002

Program Transmission Service - Station Equipment

  3003 1003

Program Transmission Service - Local Channels

  3003 1111

Digital Private Line Services - Digital Network Access (DNA)

  3003 1112

Digital Private Line - Transmission Service

  3003 1113

Managed Digital Private Line - Transmission Service

  3003 1114

Digital Private Line Extension Access Service

  3003 1115

Digital Private Line Extension Features

  3003 1117

Digital Private Line North Customer Volume Pricing Plan

  3003 1118

Ethernet Metropolitan Area Network (MAN) Service

  3003 1119

10 Mbps LAN Interconnection Service

  3003 1120

Fractional DS-1 Access

  3006 203

Horn Relay

 

3008

502, 601, 701

Public Message Service

  3010 401

Direct Line Advertising

  3010 510 Construction Charges
  3010 601 Ancillary Services and Service Features
  3010 701 Miscellaneous Services and Service Features
  Services with Frozen Rate Treatment basket
  3001 501 Public Telephone Services
  3001 502 Customer Requested Public Telephone Service
  3001 503 Charge-a-call Telephone service
  3001 504 Payphone Analogue Cellular Network Service
  3001 505 Semi-public Pay Telephone Service
  3001 209 Relay services
 

3001

307

Special Outside Construction: Service Improvement Plan (SIP) Locality Charges - Contribution Charges
  3001 307 Construction Payment Plan
  3001 401 Directory Listings - Residential
  3001 404 Omission of Primary Listing - Residence
  3001 1407 Call Display Blocking
  3001 1410 Toll Denial
  3002 207.1 Rate for Certified Hearing and Speech Impaired Users
  3002 207.2 Rates for Certified Hearing and Speech Impaired Users in the Eastern Northwest Territories
  3010 722 9-1-1 public Emergency Reporting Service
  Competitor Services basket
  Wireless Services  
  3001

1309

Interconnection of Intra Exchange systems
 

3001

1310

Switched Access Types for Conventional Public Mobile Radio Systems
  3001

1311

Wireless Telephone Numbers
  3001

1311

Digital Access Channel
  3001

1311

Analogue Access Channel
  3001

1311

WSP Link
  3001

1311

WSP Network Access - Line-side Access
  3001

1311

WSP Network Access - Trunk-side Access
  3001

1311

Number Block Routing
  3001

1311

Wireless Telephone Numbers
  3001

1311

Digital Access Channel
  3001

1311

CCS7 Interconnection Rates
  Co-location Services
  3010 702 Occupancy Rates for Radio Sites
 

3010

706

Interconnection with the Equipment and Facilities of Telesat Canada
  3010 713 Use of Support Structures by Cable Television Undertakings and Telecommunications Carriers
  3010 725 56 Kbps and 32 Kbps ADPCM Digital Circuit
  3010 745 Central Office Co-location for ADSL Transmission Equipment
 

3010

746

Co-location Arrangements for Interconnecting Canadian Carriers - Service Order Charge
  3010 746 Entrance Conduit
  3010 746 Floor Space
  3010 746 Power Consumption
  3010 746 Riser Space
  3010 746 Application Charge
  3010 746 Power Delivery
  3010 746 Construction Fee
  3010 746 Project Management Fee
  3010 746 Site Preparation Fee
  3010 746 Escort
  3010 746 Cable Pulling/Splicing
 

3010

750

Co-Location Arrangements for Internet Service Providers - Service Order Charge
  3010 750 Floor Space
  3010 750 Power Consumption
  3010 750 Application Charge
  3010 750 Power Delivery
  3010 750 Project Management Fee
  3010 750 Site Preparation Fee
  3010 750 Construction Fee
  3010 750 Escort Charges
  Interconnection Services
 

21480

40.1

Interconnecting Circuits with Trunk-side Access - Inward Order
 

21480

40.1

Interconnecting Circuits with Trunk-side Access - Change Order
  21480 40.2 Bundled CAT
  21480 40.2 Satellite Proxy Transport Charge
  21480 40.3 Toll-free Carrier Identification Charge
  21480 40.4 PIC Processing
  21480 41 Operator Services
  21480 50 Standby Circuits
  21480 80 Facilities for Dedicated Access Lines
  21480 90 Compensation per Call
 

21480

200

Billing and Collection Service - Processing Charge: Billed to a customer
 

21480

200

Billing and Collection Service - Processing Charge: Returned prior to billing
 

21480

200

Billing and Collection Service - Processing Charge: Returned or
charged back to the IXC
  Other Competitive Wholesale Services
  3001 408 Directory File Service
  3001 409 Electronic Directory Database Access (EDDA) Service
  3003 1122 Asymmetric Digital Subscriber Line (ADSL) Access service
  Uncapped Services basket
  3001 104 Late Payment Charge
  3001 207 Centrex II Service Access Rates
  3001 807 Centrex II Service
 

3001

808

SL-1 Telephone Sets/Meridian 5000 Telephone Sets/Meridian 2000 Telephone Sets (Centrex Equipment Rental)
  3001 813 Supplemental Equipment for PBX Service
  3001 816 Mitel SX-50
  3001 817 Meridian 1
  3001 1103 Logic Type Key Telephones
  3001 1202 Automatic Call Answering and Recording Equipment
  3001 1205 Centrex Voice Messaging Service (Yellowknife)
  3001 1304 Voice Recorder Connecting Equipment
  3001 1305 Broadcast Coupler Equipment
  3001 1308 Alarm Sending Equipment
  3001 1402 Auxiliary Signals
  3001 1403 Miscellaneous Equipment and Service
 

3001

1405.3

Supplemental Equipment: Synchronous Modems, Stand-alone Terminals
 

3001

1405.4

Supplemental Equipment: Asynchronous/synchronous Modems, Stand alone and Rack Mounted Terminals
  3001 1405.5 Data Connector Equipment
  3001 1411 Loud Speaker Systems
  3002 406 INMARSAT Service - Toll Charges
  3002 302 Toll Free Service
  3006 203 Manual Mobile Equipment
  Special Services - Customer Specific Arrangement
  3010 708 Private VHF Radio Repeater Station
  3010 710 Digital Radio Facilities - Alascom
  3010 714 Eastern Northwest Territories Rate Stability Plan Contracts
  3010 716 Customer Designed Private Packet Network
  3010 717 Special Assembly Contracts
  3010 720 Digital Circuit
  3010 721 Audio Feed (Conference Bridge interface)
  3010 727 CSU/DSU for DSI Circuit
  3010 729 Comprehensive Communications Package at Ekati (Koala)
 

3010

731

Digital Communications Network Service to Ardicom Digital
Communications Inc.
  3010 732 Multi-drop Packet Network
  3010 733 Voice Grade Channels for Yukon Territorial Government
  3010 735 Centrex Automatic Call Distribution
  3010 736 Local DS-3 Access
  3010 737 Local Ring-Based Multiple DS-3 Access
  3010 741 Municipal Area Network for Indian and Northern Affairs
  3010 742 Upper Halfway Digital Circuit
  3010 743 Municipal Area Data Network Switch
  3010 744 Occasional Use Broadcast service
  3010 751 Digital High Speed Satellite Circuit

Date Modified: 2007-05-17

Date modified: