ARCHIVED - Telecom Commission Letter - 8652-C12-200704636

Letter

Ottawa, 10 August 2007

File No.: 8652-C12-200704636

BY E-MAIL

Mrs. Teresa Griffin-Muir
Vice President, Regulatory Affairs
MTS Allstream Inc.
45 O'Connor Street, Suite 1400
Ottawa, Ontario
K1P 1A4

iworkstation@mtsallstream.com

Dear Mrs. Griffin-Muir :

Re:   Review of certain Phase II costing issues - Telecom Public Notice CRTC 2007-4,
30 March 2007

On 30 March 2007 , the Commission issued Review of certain Phase II costing issues , Telecom Public Notice CRTC 2007-4, 30 March 2007 (Public Notice 2007-4) and initiated a proceeding to review certain Phase II costing issues.

In accordance with the procedure set out in paragraph 23 of Public Notice 2007-4, MTS Allstream Inc. is requested to provide responses to the attached interrogatories by 7 September 2007 .   Interrogatory responses are also to be served on all parties to the proceeding by the same date.

Yours sincerely,

'Original signed by P. Godin'

Paul Godin
Director General
Competition, Costing and Tariffs
Telecommunications

Attachment

cc:   Yvan Davidson, CRTC (819) 953-5414 yvan.davidson@crtc.gc.ca

ATTACHMENT

MTS Allstream Inc.

Direct/Indirect Expense

1101   Further to the response to part c) of MTS Allstream(CRTC)25May07-101, provide the company's current estimate of its per-line monthly maintenance expense used for Phase II cost study purposes for each of the following services, specifying the year.

i.  residential primary exchange service (PES)
ii.  wholesale ADSL Data Access service
iii. business PES

The response should, for each of the above services, identify in detail the direct and indirect maintenance activities that are included and the assignment methodologies used to assign the associated expenses to the service [O1] , and provide and describe the associated unit costs and factors used in the development of these maintenance expenses, if any.

1102   Refer to the response to part a) of MTS Allstream(CRTC)25May07-101 in which the company has identified the methodology for developing OE unit costs from its system of accounts.   Provide a comprehensive list and description of the company's current unit costs by service that have been developed from its system of accounts for Phase II cost study purposes; the response should provide the current unit cost values, the vintage of the underlying expense data, and the associated drivers.

1103   Refer to the response to part b) of MTS Allstream(CRTC)25May07-101 regarding other uses of system of accounts data, provide a comprehensive list and description of the company's current corporate average unit costs and associated drivers that have been developed from its system of accounts for Phase II cost study purposes; the response should provide the current unit cost values, the vintages of the underlying expense data, and the associated drivers.

Portfolio Expenses

1201   Refer to the responses to The Companies(CRTC)25May07-205 part d), TELUS(CRTC)25May07-205 part d), MTS Allstream(CRTC)25May07-205 part c) and SASKTEL(CRTC)25May07-202 part d) in which each company identified its activities that vary with the scale of a service portfolio or a group of portfolios.

Further refer to the response to Bell(Telus)25May07-5, in which Bell Canada submitted that if the Commission deems that portfolio expenses should be included in Phase II costs, then regulatory symmetry requires that portfolio expenses should be treated in the same manner across companies.

Assume that the Commission were to identify certain expenses as portfolio expenses - that are incurred on behalf of a service portfolio, or group of portfolios, but which cannot be attributed explicitly to any specific service within that group - that are to be included in the development of a portfolio expense factor to estimate portfolio expenses in Phase II cost studies in a manner that is consistent across the companies.   Comment on the appropriateness of including the expenses associated with each of the following categories of portfolio expenses in the development of the portfolio expense factor.

i.   Marketing and Sales* (e.g. development and management of marketing, promotion, and sales programs),
ii.   Maintenance and Provisioning*
iii.   IS/IT expenses* (e.g. operation and management of systems),
iv.   Network Operations* (e.g. operation and management of network including monitoring of the network),
v.   Network Design and Development* (e.g. engineering planning and   technology development)

*         Note that the above portfolio expenses are to exclude expenses already classified as direct, indirect or VCC expenses and to also exclude expenses associated with the development and testing of products/services not yet introduced.

a)   For each category of portfolio expense defined above, identify the activities and provide the associated annual expenses using the company's current expense data; further provide the expenses associated with the development and testing of new products/services that have been excluded.

b)   Provide the company's estimate of the portfolio expense factor based on the formula shown below, reflecting the portfolio expenses provided in response to part a) above:

Portfolio                                   Portfolio expenses
Expense   = _________________________________________ Factor                         Company's direct and indirect expenses

c)   Provide the company's views on whether it incurs any other types of expenses (in addition to those identified above) that it considers to also be portfolio in nature and that should also be included in the calculation of the portfolio expense factor.   If so, using the formula provided in part b) above provide a revised estimate of the portfolio factor reflecting these additional portfolio expenses.

d)   Provide the company's views with supporting rationale, on the development of portfolio factor(s) across ILECs that is(are) based on:

i. a single composite portfolio factor that includes all of the company's portfolio expenses,
ii. multiple portfolio factors i.e., portfolio factor for individual portfolios or groups of portfolios.

If the company prefers the development of multiple factors rather than a single portfolio factor, provide the company's estimate of its portfolio factors by individual portfolio or groups of portfolios in response to parts b) and c) above. The response should provide the supporting methodology and assumptions.

e)  Provide the company's view on the frequency of update of the portfolio expense factor(s).