ARCHIVED - Letter

Ottawa, 20 June 2011

Our Ref.: 8662-M59-201104398
8680-P11-201107699
8662-P11-201107673
8662-B54-201107285

BY E-MAIL:

Parties to Telecom Decision 2011-24

Dear Madam/Sir:

Re:  Process for applications regarding Telecom Decision CRTC 2011-24 –

Bell Aliant Regional Communications, Limited Partnership and Bell Canada – Monthly recurring rates and service charge rates for unbundled loops in Ontario and Quebec

The Commission has received correspondence from Bell Aliant Regional Communications, Limited Partnership and Bell Canada (the Bell companies), dated 10 June 2011, seeking a four week extension to the procedure set out in the Commission’s correspondence dated
17 May 2011.  Under their proposal, the Bell companies would file their responses to interrogatories and revised evidence on 8 July 2011.  The Bell companies submitted that the workload involved in completing the Commission interrogatories and the revisions to its evidence required the additional time requested.

The Commission has also received correspondence from MTS Allstream Inc. (MTS Allstream), dated 14 June 2011, and Primus Telecommunications Canada (Primus), dated 16 June 2011.

MTS Allstream opposed the Bell companies’ request for an extension, submitting that it is unfair and contrary to the public interest to grant an extension, as it would delay a resolution of the MTS Allstream review and vary application of Telecom Decision 2011-24, the record for which is now complete.

Primus submitted that competitors must be granted a full and complete opportunity to test the arguments, assumptions and costing information now being relied on by the Bell companies in support of their review and vary application, including any new information that was never filed in the proceeding that led to Telecom Decision 2011-24.  
Commission staff notes that the information to be provided in response to the interrogatories is vital to the assessment of the appropriate revised unbundled loop rates that are the subject of both the MTS Allstream and Bell companies review and vary applications.

In the circumstances, the Commission agrees to grant an extension for responses to interrogatories and revised evidence to 8 July 2011.  Comments on the Bell companies’ may be filed by 22 July 2011 and the Bell companies may file reply comments by 29 July 2011.

Consistent with the guidelines set out in Broadcasting and Telecom Information Bulletin CRTC 2010-959, copies of comments and interrogatory responses are to be served on parties to the proceeding that led to Telecom Decision 2011-24. Yours truly,

Original signed by

Yvan Davidson
Senior Manager, Competitor Service and Costing
Telecommunications Directorate

c.c.: Daphne Fry 819-953-5373; daphne.fry@crtc.gc.ca

Distribution: Parties to Telecom Decision 2011-24

bell.regulatory@bell.ca;
regulatory@bell.aliant.ca;
regulatory@brucetelecom.com;
pllard@cooptel.qc.ca;
regulatory@distributel.ca;
Regulatory.Matters@corp.eastlink.ca;
regulatory@execulink.com;
jboutros@globility.ca;
grubb@hurontel.on.ca;
rbanks@mornington.ca;
iworkstation@mtsallstream.com;
NRTC Communications c/o regulatory@execulink.com;
pdowns@nexicom.net;
tracy.cant@ontera.ca;
regulatory@primustel.ca;
vp.technique@sogetel.com;
sachuter@tcc.on.ca;
regulatory@teksavvy.com
regulatory.affairs@telus.com;
pwightman@wightman.ca;
steve@wtccommunications.ca
Interrogatories to the Bell companies

Average Remaining Life

1. Refer to Table 3 of the Bell companies’ updated Review and Variance of Telecom Decision CRTC 2011-34 dated 13 May 2011 (the Bell companies’ R&V submission) where the Bell companies proposed Average Remaining Lives (ARLs) of copper cable using pair-meters as drivers.  Indicate whether these ARLs have been used to develop the Bell companies’ financial statements.  If not, explain what ARLs have been used to develop the Bell companies’ latest financial statements.

2. Refer to the response to The Companies(CRTC)23Dec09-2 f) where the Bell companies proposed the following methodology and assumptions to be used to develop revised unbundled loop costs based on the copper cable Net Book Value (NBV) estimates (the NBV costing approach) instead of copper cable cost new at the start of the 2009 cost study: i) adjust the life estimates associated with the existing copper cable NBV to reflect proposed Average Remaining Life (ARL) estimates, ii) at the end of the copper cable ARL, include capital cash flows based on cost new for the in-service demand forecasted for the following year, and iii) use in-service percentage of loops provisioned using remotes.

Further refer to Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2 where the Bell companies provided revised unbundled loop costs based on the NBV costing approach and using copper cable ARLs from their 2005 depreciation studies.

a) For each company, for each band, for each of the following copper cable capital cash flow groups, provide the values of each of the capital parameters (as identified in section 2.5.4 of Attachment to Appendix W of Bell Canada’s Regulatory Economic Studies Manual) used to calculate the capital monthly equivalent costs (MECs) included in Tables 6 of Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2:

i) Copper feeder aerial cable
ii) Copper feeder buried cable
iii) Copper feeder underground cable
iv) Copper distribution aerial cable
v) Copper distribution buried cable
vi) Copper distribution building cable
vii) Copper distribution underground cable.

b) Confirm that the capital parameters provided in response to a) above are the same as those used in the Bell companies’initial 2 June 2009 cost submission (Bell companies’ 2009 cost submission), except for the life estimates.  If not, provide the values of each of the associated capital parameters used as inputs to calculate the copper cable capital MECs provided in the Bell companies’ 2 June 2009 cost submission; further provide justification for the changes, if any, to the capital parameters used.

c) If any of the Percent Replacement Factors provided in response to a) above are not zero, explain if and how additional copper cable capital cash flows are generated to replace retired copper cable plant and included in the cost studies by the Bell companies’ IVA model, with supporting rationale.  The response should indicate whether these additional copper cable capital cash flows are based on copper cable IFC or other costing approach (specify) and should specify the associated survivor curves and life estimates.

d) Further to the response to part c), if any of the Percent Replacement Factors provided in response to a) above are 100%, provide the supporting rationale.  Further explain why it is appropriate to assume that the copper cable plant will be maintained at the year-end 2008 level given that i) the demand for unbundled loop is declining, ii) the indication by the Bell companies in other proceedings that they are deploying alternate access technologies (e.g. FTTN, FTTH, wireless broadband).  The response should further discuss the differences in the Bell companies’ replacement and / or deployment plans between those for copper feeder cables and those for copper distribution cables.  Further, taking account of the declining demand and alternative access technology deployment, provide an estimate of the percentage of copper cable plant relative to the in-service base that is expected to be replaced at the end of 2011 and 2013, with supporting assumptions and rationale.

e) Provide revised Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2 based on the following change in assumption: use of the revised copper cable ARLs provided in Table 1 of the Bell companies’
26 April 2011 comments on MTS Allstream’s Review and Variance of Telecom Decision CRTC 2011-24.

f) Provide revised Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2 based on the following changes in assumptions:

i) ARLs reflect the revised copper cable ARLs provided in Table 1 of the Bell companies’ 26 April 2011 comments on MTS Allstream’s Review and Variance of Telecom Decision CRTC 2011-24.

ii) Copper cable replacement costs are based on cost new

iii) Life estimates of replacement copper cables reflect those in Table 8 of Attachment to Appendix V of the Bell companies’ Regulatory Economic Studies Manual; and

iv) Percent Replacement Factor is 90%

Describe the capital parameters that the Bell companies have used to implement the above changes in assumptions, with supporting rationale.

g) Provide a revised response to part f) above but where the Percent Replacement Factor in part f)iv) is assumed to be 80% instead of 90%.

3. In Decision 2011-24, the Commission assessed the value of the existing copper cable plant based on the NBV and determined that the existing copper cable plant would have life estimates equal to the Bell companies’ ARLs from their 2005 depreciation studies.

a) Comment on a revised costing approach whereby the existing copper cable plant is costed as follows: i) going-in value of existing copper cable plant is based on the NBV costing approach, ii) use of rectangular survivor curves and iii) study period of the cost study is equal to the life of the existing copper cable plant (equal to the ARL). 

b) Provide revised Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2 for each of the following changes in assumption:

i) Use of rectangular survivor curve for existing copper cable plant, ARLs reflect the revised copper cable ARLs provided in Table 1 of the Bell companies’ 26 April 2011 comments on MTS Allstream’s Review and Variance of Telecom Decision CRTC 2011-24 and study period of 6.5 years (which is approximately the average of the above noted ARL values).

Salvage Value Approach

4. In Table 2a and 2b of the Bell companies’ the Bell companies’ R&V submission, the Bell companies provided the proposed adjusted Bell companies’ Phase II costs for unbundled local loops by rate band based on a salvage value approach.  For each band, provide a breakdown of these Phase II costs using the format of Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2. Further,

a) Describe in detail how the Bell companies implemented their salvage value approaches, with supporting rationale.  Further specify the capital parameters used as inputs to calculate the salvage value MECs.

b) Confirm that the Bell companies have included no copper cable replacement capital costs in their proposed adjusted Phase II costs based on a salvage value approach.  If no copper cable replacement capital costs were included, explain why.

c) In the event the Commission approves the Bell companies’ proposed salvage value approach, comment on the reasonableness of adjusting the unbundled loop monthly recurring rates downward at the end of the study period to reflect the fact that since the copper cable NBVs are assumed to be fully recovered over the study period, there is no need to further recover these NBVs in the monthly recurring rates after the study period.  Further provide revised Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2  that excludes the cost associated with the copper cable NBVs.

Maintenance Costs

5. At paragraph 43 of the Bell companies’ R&V submission, the Bell companies indicated that the copper-based maintenance costs included in their cost studies are categorized into three classes:  (1) maintenance costs that vary with the number of loops but not with loop lengths; (2) maintenance costs that vary with loop lengths; and (3) maintenance costs that are related to the total Phase II costs for copper.  At paragraph 45 of the Bell companies’ R&V submission, the Bell companies indicated that they inadvertently calculated the third category of maintenance cost by applying their maintenance factors to the copper cable NBV, as opposed to the copper cable IFC cash flows.

a) For each company, for each band, provide a breakdown of the copper cable maintenance MECs provided in Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2 into the three maintenance cost categories identified above.

b) For each company, for each band, provide a breakdown of the copper cable maintenance MECs included in Table 2a and 2b of the Bell companies’ R&V submission into the three maintenance cost categories identified above.

c) For each company, for each band, provide the copper cable maintenance factors used to calculate the third category of maintenance costs; further provide the methodology and assumptions, including the vintage of the data used by each company to estimate their respective maintenance factors, with supporting rationale.  The response should indicate whether the maintenance factors are derived using historical copper cable plant in service (PIS) as denominators. 

d) Refer to the year-end 2008 copper cable PIS provided in the response to The Companies(CRTC)12Aug09-3.  For each company, for each band, provide a breakdown of the PIS into the following asset accounts:

i. Copper feeder aerial cable
ii. Copper feeder buried cable
iii. Copper feeder underground cable
iv. Copper distribution aerial cable
v. Copper distribution buried cable
vi. Copper distribution building cable
vii. Copper distribution underground cable.

If the above breakdown is not readily available, provide a breakdown by apportioning the year-end 2008 copper cable PIS using the respective Integrated Mapping, Accounting and Provisioning (IMAP) copper cable pair-meter information.

e) Provide revised Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2 for the following change in assumption – maintenance factors are applied to year-end 2008 copper cable PIS provided in response to d) above.  Further, for each company, for each band, provide a breakdown of the copper cable maintenance MECs included in the revised tables into the three maintenance cost categories identified above.  Comment on the appropriateness of applying the copper cable maintenance factors to historical copper cable PIS to estimate the maintenance costs associated with the existing copper cable plant.

Removal Costs

6. At paragraph 50 of the Bell companies’ R&V submission, the Bell companies indicated that they inadvertently applied the removal factors to the copper cable NBVs as opposed to the copper cable IFC cash flows.

a) For each company, for each band, provide the copper cable removal MECs included in Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2; identifying under which cost line item it is included.

b) For each band, provide the copper cable removal MECs included in Table 2a and 2b of the Bell companies’ R&V submission.

c) For each company, for each band, provide the copper cable removal factor for each of the following asset account:

i. Copper feeder aerial cable
ii. Copper feeder buried cable
iii. Copper feeder underground cable
iv. Copper distribution aerial cable
v. Copper distribution buried cable
vi. Copper distribution building cable
vii. Copper distribution underground cable.

d) For each company, for each copper cable asset account, provide the methodology and assumptions, including the vintage of the data used by each company to estimate their copper cable removal factors provided in response to c) above, with supporting rationale.  The response should indicate whether the copper cable removal factors are derived using historical copper cable PIS as denominators.  If so, comment on the appropriateness of applying the copper cable removal factors to historical copper cable PIS to estimate the copper cable removal costs.

e) Provide revised Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2  for the following change in assumption – copper cable removal factors are applied to copper cable PIS provided in response to
1 d) above.  Further, for each company, for each band, provide the copper cable removal MEC included in the revised tables.

Order Fulfillment – Technical Support Cost

7. At paragraphs 58 and 59 of the Bell companies’ R&V submission, the Bell companies indicated the ILEC loop expenses in the loop cost study reflect the loop-related portion of the primary exchange services and none of these expenses include the ISP installation help desk costs or retail marketing.  At paragraph 60, the Bell companies indicated that the expense associated with Order Fulfillment – Technical Support is added as an expense loading and claimed that since the loading was not applied in the loop cost study to any retail marketing activities, no adjustment is necessary to remove expenses associated with the ISP installation help desk costs or technical support provided to marketing activities.

a) For each company, for each band, provide the Order Fulfillment – Technical Support  MECs included in Tables 6 in Attachments 2 and 3 of the response to The Companies(CRTC)28May10-2 and the corresponding Order Fulfillment – Technical Support loading factor used.  Further indicate the pages where these loading factors are identified in the Bell companies’ Regulatory Economic Studies Manual.

b) Confirm that the Order Fulfillment – Technical Support loading factors used in estimating the Order Fulfillment – Technical Support costs included in Table 2a and 2b of the Bell companies’ R&V submission are the same as those provided in response to a) above.  If not, explain why different loading factors are used with supporting rationale and provide the loading factors along with methodology and assumptions, including the vintage of the data used by each company to calculate these loading factors.

c) For each company, for each band, provide the methodology and assumptions, including the vintage of the data used by each company to estimate their Order Fulfillment – Technical Support loading factors provided in response to a) above, with supporting rationale.  The response should identify the activities and the associated costs included in each of the numerator and denominator used in the calculation of these loading factors.  Indicate whether costs associated with ISP installation help desk and technical support provided to marketing activities are excluded from the numerators.  If so, describe the process used by the Bell companies to exclude these costs with supporting rationale.  If not, provide supporting rationale as to why the application of these loading factors to the unbundled loop expenses would not apportion some of the costs associated with ISP installation help desk and technical support provided to marketing activities to the unbundled loop service.

Date modified:

2011-06-20