ARCHIVED - Telecom Commission Letter - 8638-C12-200715493

Letter

Ottawa, 7 December 2007

File No.:   8638-C12-200715493

By E-mail

Mr. Mirko Bibic
Chief, Regulatory Affairs
Bell Canada
110 O'Connor Street, 14 th Floor
Ottawa, Ontario
K1P 1H1

Bell.regulatory@bell.ca

Dear Mr. Bibic

RE:   Follow-up to Telecom Decision CRTC 2007-88, Bell Canada - Application seeking exogenous treatment of wireline-related costs associated with the implementation of wireless number portability

On 30 October 2007, the Commission received a submission by Bell Canada filed pursuant to the directives in Bell Canada - Application seeking exogenous treatment of wireline-related costs associated with the implementation of wireless number portability , Telecom Decision CRTC 2007-88, 14 September 2007 (Decision 2007-88)

In Decision 2007-88, the Commission considered that Bell Canada's wireline-related costs of $8.83 million associated with the implementation of wireless number portability (WNP) qualified for exogenous treatment. The Commission determined that the costs should be allocated to the Residential Services basket (high-cost serving area (HCSA) and non-HCSA baskets), the Business Services basket, the Uncapped Services basket, and services that are forborne from regulation on the basis of single-line residential and business NAS attributed to these baskets or services. (para.48) The Commission directed Bell Canada to file updates to its 2007 Price Cap models to reflect the allocation of these costs to the appropriate baskets. (para. 51)

In its submission, Bell Canada noted that its 2007 price cap filings were based on 2006 revenues and revenue weights and that the allocation of the exogenous amount associated with the affected capped categories (i.e. Residential Services baskets in non-HCSA and HCSA and Business Services basket) must be based on the 2006 average single-line residence and business network access service (NAS) in-service base.  

With respect to the share of recoverable costs assigned to the residential basic services in non-HCSA, Bell Canada noted that it currently has an annualized recurring amount of $23.7 million in its deferral account as of 1 June 2007, pertaining to the Residential Services in non-HCSA basket. Bell Canada noted that Disposition of funds in the deferral accounts , Telecom Decision CRTC 2006-9, 16 February 2006, (Decision 2006-9), required this amount to be cleared through rate reductions for residential basic local service and residential optional services.  

Bell Canada noted that the permissible rate increases for residential local services in non-HCSA resulting from the WNP exogenous adjustment would serve to reduce the amount of the deferral account-related residential rate reductions in non-HCSAs that would have otherwise been required. Bell Canada stated that it would use the $6.44 million of WNP-related recoverable costs attributed to residential basic service in non-HCSAs to reduce the recurring annualized amount in its deferral account.  

Commission staff notes that Bell Canada has not allocated costs to the Uncapped Services basket nor to forborne services, as directed in Decision 2007-88. Commission staff confirms that for the 2007 Price Cap Model there were no service bundles which included primary exchange service (PES) in the Uncapped Services basket. Accordingly, the residential and business PES services would have been captured in the respective service baskets.

With respect to the allocation to forborne services, forbearance from the regulation of residential and business PES has only recently been approved. As the Price Cap Models were filed in May 2007 and are based on 2006 revenues and demand; the 2007 Price Cap Models would not reflect the impact of forbearance. Accordingly, it would not be possible to allocate the exogenous adjustment to forborne services in the revised Models.  

Commission staff has reviewed Bell Canada 's updated Price Cap Models and, in light of the above, is satisfied that the exogenous amount has been appropriately allocated to the service baskets.

Commission staff notes that Bell Canada has stated that it would use the permissible rate increases for residential local services in non-HCSAs to reduce the recurring amount in its deferral account.  

In Regulatory framework for second price cap period , Telecom Decision CRTC 2002-34, 30 May 2002 , the Commission implemented the deferral account mechanism. The Commission anticipated that the deferral account would be drawn down to mitigate rate increases for residential service that could result from the approval of exogenous factors.

Further, in Telecom Decision 2006-9 the Commission noted that, based on the methodology for calculating the deferral account balances, funds would continue to accumulate in the deferral accounts beyond the current price cap period in the absence of rate reductions to eliminate the net recurring amounts. The Commission concluded that rate reductions are an appropriate initiative to clear recurring amounts in the ILECs' deferral accounts.  

Accordingly, Commission staff is of the view that Bell Canada's use of the exogenous amount allocated to the Residential service basket to reduce the recurring amounts in its deferral account is appropriate.

Yours sincerely,

Original signed by Suzanne Bédard

Suzanne Bédard
Senior Manager, Tariffs
Telecommunications 

cc: C. Bailey, CRTC, (819) 997-4557, christine.bailey@crtc.gc.ca