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Ottawa, 6 May 2011

File No.: 8678-C12-201107714

BY E-MAIL

Dallas Yeulett
Senior Manager, Regulatory Compliance
Northwestel Inc.
P.O. Box 2727
Whitehorse, YT
Y1A 4Y4
regulatoryaffairs@nwtel.ca

RE: Review of price cap regulatory framework for Northwestel Inc. and related matters, Telecom Notice of Consultation 2011-302 – Request for information

Dear Mr. Yeulett:

Pursuant to the procedure set out in paragraph 27 of Review of price cap framework for Northwestel Inc. and related matters, Telecom Notice of Consultation CRTC 2011-302,
6 May 2011, attached are requests for information addressed to Northwestel Inc.

Reponses to these requests for information are to be filed with the Commission by
13 June 2011.

Yours sincerely,

 

Original signed by:

John Macri,
Director
Telecommunications Policy

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

 

Attachment

Components of the Price Cap Plan

101. Under the current price cap regime, the chain weighted Gross Domestic Product - Price Index (GDP-PI)1 is used as the measure of inflation and is the overall constraint applied to the Business Services basket.

a) Provide the company's view on whether the chain weighted GDP-PI remains appropriate as the measure of inflation for the next price cap period. Should the company consider that another inflation measure would be more appropriate, provide detailed information, including studies, to support the company's proposal.

b) Identify to which basket or sub-basket of services the inflation factor should apply.

102. Under the current price cap regime, an exogenous factor (Z-factor) adjustment is permitted for inclusion in the price cap formula for events or initiatives which satisfy specific conditions.

Provide the company’s views on whether including a Z-factor adjustment continues to be appropriate.

103. In Price cap regulation for Northwestel Inc., Telecom Decision CRTC 2007-5, 2 February 2007 (Telecom Decision 2007-5), the Commission determined that should Northwestel experience significant increases to its input costs resulting from large resource sector projects specific to Northern Canada, the company would be permitted to propose an adjustment to the inflation index to adjust for any such impact.

Provide the company’s views on whether using this methodology to adjust for significant increases to input costs specific to its operating territory continues to be appropriate.

Services, Baskets, Constraints and Rates

201.

a) If the company is proposing changes to its basket structure, provide the company's revised basket and sub-basket structures, as applicable, as well as basket, sub-basket, and individual rate element constraints.

b) Provide the rationale used to develop the revised basket structure and pricing constraints as well as the underlying objectives the company intends to achieve with the proposed basket structure. Indicate how the proposed regime will protect the interests of consumers, including providing appropriate price protection.

202. If the company is proposing changes to the assignment of services to baskets, provide for each of these services:

i) the service name and the tariff item number;
ii) the existing basket assignment; and
iii) the proposed basket assignment.

203. Provide the average monthly bill for residence subscribers by band (i.e. Band D and Band H1, separately), based on rates in effect for 2010, broken down into the following components:

i) basic exchange access;
ii) mandatory extended area flat-rate calling;
iii) 9-1-1 service;
iv) message relay;
v) optional services; and
vi) total.

204. Provide the current rates for each of the following primary exchange services, and indicate if the rates are currently above the Phase II costs plus a mark-up of 25%.

i) Business individual line;
ii) Business 2-party;
iii) Business multi-party; and
iv) Business multi-line.

205. Provide the total revenues for each service basket and for uncapped services under the current price cap framework for each of the years 2007 to 2010.

206. Provide the average in-service network access service (NAS), as well as the year-end NAS, for 2010 for each of the following:

i) Residential individual line;
ii) Residential 2-party;
iii) Residential multi-party;
iv) Business individual line;
v) Business 2-party;
vi) Business multi-party; and
vii) Business multi-line.

207. The Commission permitted Northwestel to recover $150,000 of its going-in revenue requirement amount (i.e. the amount for the period beginning January 2007 to the end of June 2007) through a time-limited exogenous adjustment. This amount was recovered through rate increases from services in the company’s Business Services basket by collecting an additional $50,000 per year over a period of three years starting in 2008.2

Provide the company’s view on the appropriate treatment for the expired exogenous adjustment.

Subsidy

301. Provide, by community, for Band H1 the following information as of 31 December 2010:

i) residential NAS;

ii) total NAS; and
iii) the availability of optional local services.

Local competition

401. In Telecom Decision 2007-5, the Commission permitted resale of local exchange services. Are there currently any companies reselling Northwestel’s local exchange services? If so, provide the names of the resellers, and the number of NAS they serve, specifying if they are residential or business NAS.

402. The Commission has approved the implementation of facilities-based local competition in all regions of Canada except in the operating territory of Northwestel.

a) Provide the company's views, with supporting rationale, on whether it would be appropriate to implement facilities-based local competition in Northwestel's operating territory at this time. If not, explain why not and when it would be appropriate to do so.

b) To Northwestel’s knowledge, are there any facilities-based competitors interested in entering Northwestel’s territory? If so, provide the names of the companies.

403. In Obligation to service and other matters, Telecom Regulatory Policy CRTC 2011-291, 3 May 2011 (Telecom Regulatory Policy 2011-291) the Commission modified the framework for implementing facilities-based local competition in the small ILECs’ territories. The Commission concluded that the small ILECs should be subject to special considerations with respect to the implementation of local competition in their territories in order to mitigate the financial impact. For example, small ILECs with 3,000 NAS or fewer will be reimbursed for their local competition start-up costs, and all small ILECs will be reimbursed a portion of subsidy lost due to competition for a limited period of time.

If the Commission were to determine that it is appropriate to introduce facilities-based local competition in Northwestel’s operating territory, what modifications to the local competition framework established for either the large or small ILECs would be required? Provide supporting rationale for such modifications.

Service Improvement Plan

501. In the proceeding that led to Telecom Regulatory Policy 2011-291, Northwestel submitted that the Commission should re-evaluate the company’s investment in enhanced calling features, particularly call display, as part of the next regulatory framework review for Northwestel as an additional service improvement plan (SIP).

The company also indicated that meeting the basic service objective (BSO) would continue to be a challenge for Northwestel, and that the Commission would need to consider a future SIP to meet the BSO in the North.

If Northwestel intends to propose a new SIP as part of its submission, the company is requested to provide the following information.

a) Identify each proposed SIP project providing a description, a justification for its introduction, and an implementation schedule.

b) Provide a cost study for each proposed project. The cost study should include the following information, with supporting assumptions and calculations where applicable:

i) the study life;
ii) the economic study parameters (e.g. the costs of capital, the income tax rate) used in the cost study;
iii) the demand forecast for each year of the study period as well as the methodology and assumptions of how the demand forecast was developed;
iv) the SIP capital expenditures by year, an explanation of how these capital expenditures are estimated, and the methodology and assumptions used. Further, provide the asset lives, survivor curve numbers, capital increase factors, and productivity improvement factors used in the cost study;
v) an explanation of how the end of study value is calculated in the cost study;
vi) the types of expenses included in the cost study (e.g. maintenance), an explanation of how these expenses are estimated, and the methodology and assumptions used. Further, provide the expense increase factors used in the cost study; and
vii) the additional revenues to be generated as a result of the SIP project for each year of the study period and the methodology and assumptions used to estimate these revenues.

c) If the company intends to request funding from the National Contribution Fund for some or all of the costs associated with SIP, provide the amount required and the justification for this amount.

1 Published by Statistics Canada.

2 Proposed in Northwestel Tariff Notice 847, filed on 13 June 2007, and approved in Telecom Order CRTC 2007-294, 13 August 2007.

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