ARCHIVED - Letter

Ottawa, 7 August 2009

File Number: 8663-C12-200910829

By Electronic mail

To: Attached distribution list.

Re: Regulatory framework for the small incumbent local exchange carriers

Pursuant to the procedures set out in Call for comments - Regulatory framework for the small incumbent local exchange carriers, Telecom Notice of Consultation CRTC 2009-464, 30 July 2009, as amended by Telecom Notice of Consultation CRTC 2009-464-1, 5 August 2009, attached are interrogatories addressed to the small incumbent local exchange carriers that were made parties to this proceeding.

Responses to these interrogatories are to be filed with the Commission, and served on all interested parties to this proceeding, by 28 August 2009.

Yours sincerely,

Original signed by

John Traversy

Executive Director, Telecommunications

c.c.: Canadian Independent Telephone Company Joint Task Force

Attachments

Distribution List

Small incumbent local exchange carriers:

paul.frappier@telmilot.com ;   pdowns@nexicom.net ;   pwightman@wightman.ca ;   a.schneider@hay.net ;   alain.duhaime@sogetel.com ;   steve@wtccommunications.ca ;   gcordeau@maskatel.qc.ca ;   rbanks@mornington.ca ;   nfrontenac@kw.igs.net ;   wagrier@1000island.net ;   grubb@hurontel.on.ca ;   tracy.cant@ontera.ca ;   gosfield@gosfieldtel.com ;   j-fmathieu@telupton.qc.ca ;   telvic@telvic.net ;   dreynard@kmts.biz ;   scoffey@dryden.ca ;   telstep@telstep.net ;   m.baron@brktel.on.ca ;   regulatory@brucetelecom.com ;   nantel@tellambton.net ;   dave.baxter@quadro.net ;   pallard@cooptel.qc.ca ;   jpatry@telcourcelles.qc.ca ;   sachuter@tcc.on.ca ;   roxboro@ontarioeast.net ;   lisa.marogna@cwct.ca ;   rob.olenick@tbaytel.com ;   rroy@telwarwick.qc.ca ;   regulatory@execulink.com ;   deborah.shaffner@corp.eastlink.ca ;   reglementa@telebec.com ;   dougt@puc.net ;   steve@wtccommunications.ca ;

Canadian Independent Telephone Company Joint Task Force:

jonathan.holmes@ota.on.ca ;   sdesy@actq.qc.ca ;   sbray@deloitte.ca ;   regulr@bmts.com ;   rob.olenick@tbaytel.com ;

Interrogatories to the small incumbent local exchange carriers

1.    At paragraph 23 of its submission, the Canadian Independent Telephone Company Joint Task Force (CITC Joint Task Force) proposed that the next regulatory framework for the small incumbent local exchange carriers (ILECs) should have a four-year term, in part to allow the Commission to conduct a proceeding to examine the national local subsidy regime.   In Telecom Decision 2007-27 the Commission determined that that the current price cap regime for the large ILECs would not have a fixed duration.   Assume that the Commission examines the local subsidy regime within the next two years.   Explain, with supporting rationale, why the next regulatory regime for the small ILECs should not be open-ended, as is currently the case for the large ILECs' framework, which would allow for modifications, if any, resulting from the Commission's review of the local subsidy regime.

2.    At paragraphs 29 through 31 of its submission, the CITC Joint Task Force proposed an approach to residential primary exchange service pricing for the small ILECs, comparable to the one established for the large ILECs in Telecom Decision 2007-27.

a.   Comment on whether the proposed pricing flexibility for residential primary exchange service would be applicable only in high-cost serving areas (HCSAs) served by small ILECs and, if not, explain why not.

b.  If the Commission was to determine that the proposed pricing flexibility is to be allowed only in HCSAs, what would be proposed with regard to pricing for residential primary exchange service in non-HCSAs?

3.    At paragraph 31 of its submission, the CITC Joint Task Force proposed that, from 2011 until the end of the regime, prices for residential primary exchange service should be permitted to increase effective 1 June each year by the lesser of the previous year's inflation rate or 5% per year, up to a $30 price target.   At paragraph 34, the CITC Joint Task Force proposed that residential primary exchange service prices should be permitted to increase above the $30 price target as a result of exogenous factors.   Confirm whether it is proposed that the application of any exogenous factor should be constrained by the maximum 5% per year increase and, if not, explain why not.

4.    At paragraph 37 of its submission, the CITC Joint Task Force proposed that, if the rate for business primary exchange service is less than $45.45/month, beginning 1 January 2010, it should be allowed to increase up to $45.45/month but not by more than $5/month in any one year.   Once the rate for business primary exchange service reaches $45.45/month, it then should be allowed to increase by the previous year's rate of inflation.   At paragraph 35 of its submission, however, the CITC Joint Task Force stated that Bell Canada's business line rates currently range from $50.10/month to $68.55/month, and a target price of $45.45/month is below rates already accepted by the Commission as just and reasonable.   Comment on why a target rate for business primary exchange service that is equal or closer to the large ILECs' rates for these same services should not be considered for the small ILECs.   If a higher target rate is considered to be reasonable, what target rate would be proposed?

5.   At paragraph 41 of its submission, the CITC Joint Task Force proposed that the small ILECs should be able to price services in the Other Services basket up to any rate approved by the Commission for the same service offered by another company, or at any forborne rate for the same service offered by another company in Canada.

a.   In the case of using a forborne rate, comment on how the Commission would be able to determine whether a rate established in a forborne market would be just and reasonable for application in a small ILEC territory.

b.   In the event that a small ILEC is required to provide unbundled loops, comment on whether a small ILEC's loop rates should be capped at the loop costs built in to its subsidy calculation plus a mark-up of 25%. If not, explain why not.

6.    At paragraph 45 of its submission, the CITC Joint Task Force stated that the small ILECs are sensitive to requests from long distance service providers to lower direct connection (DC) and toll trunk rates to prevailing industry rates.   Provide details with regard to specific requests that have been received from long distance service providers for lower DC and toll trunk rates.

7.    At paragraph 46 of its submission, the CITC Joint Task Force proposed that a small ILEC Funding Pool should be established and administered using the same process and mechanisms as the National Contribution Fund (NCF), and that telecommunications service providers would contribute to the small ILEC Funding Pool on the same basis that they contribute to the NCF.

a.   Indicate whether the proposed small ILEC Funding Pool would be distinct from or part of the NCF.

b.   The Commission established the NCF pursuant to section 46.5 of the Telecommunications Act, to support continuing access by Canadians to basic telecommunications services.   Explain, with supporting rationale, under what authority the Commission could determine that toll interconnection services for the small ILECs should be eligible for funding from the proposed small ILEC Funding Pool.

c.   In Decision 2001-238, the Commission found that subsidies should not be extended to single-line business service provided in high-cost service areas.   Since toll interconnection services can be used in support of retail business toll services, explain why these services should be subsidized from the proposed small ILEC Funding Pool.

8.    At paragraph 47 of its submission, the CITC Joint Task Force proposed that only 75% of any residential local rate increases should be used to reduce subsidy.   In the event that the Commission does not approve this aspect of the proposal, explain how the CITC Joint Task Force's proposal would change.

9.    At paragraph 49 of its submission, the CITC Joint Task Force proposed that Bell Aliant's and Bell Canada's DC and competitor digital network (CDN) metropolitan inter-exchange channel service (metro-IX) rates should be adopted for the small ILECs' DC and toll interconnection trunk rates, which would result in decreased revenue for the small ILECs regarding toll interconnection arrangements.

a.   Provide separately the DC and the toll interconnection trunk revenues received by your company for the year 2008.

b.   Provide separately the DC and the toll interconnection trunk revenues that would have been received by your company for the year 2008 if Bell Aliant's and Bell Canada's DC and CDN metro-IX rates had been in effect.

c.   Assuming the CITC Joint Task Force's proposal is approved, what is the estimated dollar amount for your company of the DC revenue reduction to be funded from the small ILEC Funding Pool for each year of the proposed four-year term?

d.   Assuming the CITC Joint Task Force's proposal is approved, what is the estimated dollar amount for your company of the toll interconnection trunk revenue reduction to be funded from the small ILEC Funding Pool for each year of the proposed four-year term?

10.    At paragraph 52 of its submission, the CITC Joint Task Force proposed to use 31 December 2008 network access services (NAS) information and current residential local rate information to determine their annual subsidy entitlement.

a.  Comment on why NAS counts should be frozen at the 31 December 2008 levels.

b.   In the event that the Commission does not approve CITC Joint Task Force's proposal, comment on the following options for calculating the small ILECs' subsidy entitlement, and provide an assessment of any additional regulatory burden that a small ILEC would incur:

1)   Monthly subsidy amounts would be calculated based upon filing residential local rate information with the Commission by 31 March of each year to determine subsidy per residential NAS amounts, and filing actual monthly NAS information with the CFA and the corresponding NAS audit outlined in Section 7 of Telecom Decision 2007-98 (i.e., prepared in accordance with Generally Accepted Auditing Standards as defined by the Canadian Institute of Chartered Accountants by an external auditor and based on either Section 5805 or 9100 of the Handbook of the Canadian Institute of Chartered Accountants).

2)   The same as option 1), but with no audit.

11.    In the event the Commission does not approve the proposal to use 31 December 2008 NAS information and current residential local rate information to determine their annual subsidy entitlement, provide your company's views on using the Decision 2001-756 model to pre-determine annual subsidy amounts for each of the next four years.

12.    Assume that the Commission adopts the method discussed in question 11 to calculate subsidy amounts for the small ILECs.

a.   What would your company consider to be a reasonable annual residential local rate increase. In particular, address separately the possibility of:

(i)   An annual fixed percentage (e.g., 2%), identifying what percentage would be proposed; and

(ii)   An annual fixed dollar amount (e.g., $0.50), identifying what amounts would be proposed.

b.   Provide your company's views on having residential local rate increases come into effect on either 1 January or 1 July of each year to streamline the subsidy calculations.

c.   What adjustments should be made to account for competitive local exchange carrier (CLEC) entry into small ILEC territories and why?

13.    At paragraphs 55 through 57 of its submission, the CITC Joint Task Force proposed that CLEC access to contribution subsidy in small ILEC territories be limited to small CLECs, in part so as to minimize demands on the NCF from two subsidy payments being made for a single residential line – one to the small ILEC and one to the CLEC.   Comment on why subsidy payments for residential primary exchange service should be made to a small ILEC for NAS that the small ILEC no longer serves.

14.    At paragraph 59 of its submission, the CITC Joint Task Force proposed that rate ranges for tariffed services should be allowed.   Confirm whether a price ceiling is being proposed in relation to rate ranges and, if so, what that ceiling would be.

15.    At paragraph 60 of its submission, the CITC Joint Task Force proposed that, in the absence of a cost study, a small ILEC should have the option of using the lowest demonstrable rate available in the market as the price floor for a rate range.

a.   Comment on whether it is proposed that a rate from a forborne market could be used to establish the price floor.

b.   Notwithstanding the response to question 5a above, indicate how a small ILEC would confirm to the Commission that a rate from a forborne market for a service would not be set below the cost of providing that service.

c.   Explain how the Commission would validate that the forborne rate is in effect.

16.    In Telecom Decision 2006-14, the Commission determined that the small ILEC subsidy calculations were to be based upon the higher of their actual residential local rates or $22.75.   Confirm that the minimum rate used for small ILEC subsidy calculation purposes under the CITC Joint Task Force proposal would continue to be the higher of the actual residential local rate or $22.75. If not, explain why not.

17.   In Telecom Decision 2007-90, the Commission determined that the cap on residential local rates for the large ILECs in HCSAs, at the time that forbearance is granted, is to be changed from the tariffed rate to the rate being imputed for subsidy calculation purposes.   The Commission also determined that the large ILECs were to impute HCSA residential local rate increases after forbearance is granted for subsidy calculation purposes, until the band no longer receives subsidy or the individual residential local rate is above $30.   Confirm that the small ILECs would follow a similar approach in their subsidy calculations (i.e., the capped rate would be the rate used for subsidy calculation purposes in place of the actual residential local rate after forbearance is granted). If not, explain why not.

18.    For each wire centre/exchange within your company's serving territory, provide the following information, as of 31 December 2008, in table format using Microsoft Excel:

a.   Wire centre name;

b.   Number of residential NAS;

c.   Total NAS; and

d.   Band/sub-band classification as applicable.

Date modified:

2009-08-07