ARCHIVED - Telecom Decision CRTC 2012-425
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Ottawa, 7 August 2012
Téléphone Guèvremont inc. – Application to review and vary Telecom Decision 2012-37 regarding implementation of local competition
File number: 8662-G1-201203223
In this decision, the Commission partially approves Guèvremont’s application to review and vary Telecom Decision 2012-37.
1. The Commission received an application by Téléphone Guèvremont inc. (Guèvremont), dated 14 March 2012, in which the company requested that the Commission review and vary Téléphone Guèvremont inc. – Implementation of local competition for Cogeco Cable Inc., Telecom Decision CRTC 2012-37, 24 January 2012 (Telecom Decision 2012-37), regarding the approved local competition implementation costs for the company.
2. In Telecom Decision 2012-37, the Commission approved, subject to certain modifications, Guèvremont’s implementation plan for local competition, which was filed in response to a formal signed expression of interest from Cogeco Cable Inc. (Cogeco). The Commission also approved $180,000 in start-up costs and $70,000 per year in ongoing costs for the implementation of local competition in Guèvremont’s incumbent territory. In the Appendix to that decision, the Commission set out a summary of the adjustments it applied to the company’s proposed costs (hereafter referred to as the “summary of adjustments”).
3. The Commission received no comments regarding Guèvremont’s application. The public record of this proceeding, which closed on 14 March 2012, is available on the Commission’s website at www.crtc.gc.ca under “Public Proceedings” or by using the file number provided above.
Should the Commission vary Telecom Decision 2012-37?
4. Guèvremont submitted that the Commission’s summary of adjustments did not accurately reflect the company’s cost submissions regarding (i) the provision of carrier service group (CSG)1 services, (ii) system modifications, and (iii) personnel training and implementation of new processes for local competition. The company argued that other Commission adjustments were inconsistent with costs approved for other small incumbent local exchange carriers (ILECs). Guèvremont submitted that, as a result, there was substantial doubt as to the correctness of the local competition implementation costs approved for the company in Telecom Decision 2012-37.
5. Guèvremont argued that in Telecom Decision 2012-37, the Commission failed to consider that the company had proposed ongoing costs associated with the provision of CSG services by third parties. Guèvremont submitted that the Commission had adjusted the company’s proposed costs based on a presumption that the company would use its own personnel to accomplish ongoing CSG-related functions, thus inappropriately dismissing the company’s proposal to use two full-time employees (FTEs), each at 50 percent.
6. Guèvremont also submitted that by presuming that the proposed costs associated with the provision of CSG services were restricted to salaries, the Commission had failed to consider the company’s proposed ongoing costs associated with CSG-related accommodations and office equipment.
7. Guèvremont further submitted that the Commission had erred in its assessment of the company’s start-up costs associated with personnel training and the implementation of new processes for local competition since the Commission had approved higher costs associated with these costing elements for certain other small ILECs.
8. Guèvremont noted that the Commission included in its summary of adjustments an item associated with system modification costs. Guèvremont submitted that in its local competition implementation plan, it had not proposed such costs as a distinct costing element but had included them in the costs proposed for personnel training and implementation of new processes for local competition.
9. As a result, Guèvremont requested that the Commission vary Telecom Decision 2012-37 such that the final approved costs reflect the following: ongoing CSG salary costs for two FTEs, each used at 50 percent; CSG-related accommodation and office equipment costs equal to those approved for other small ILECs; and additional costs for personnel training and implementation of new processes for local competition.
Commission’s analysis and determinations
10. The Commission notes that the CSG salary cost adjustments were made according to the company’s size and expected number of disconnect orders. The Commission remains of the view that Guèvremont does not require two FTEs, each used at 50 percent, to perform its CSG-related functions given the expected volume of work, and considers that 50 percent of one FTE would be sufficient. The Commission notes that it is Guèvremont’s responsibility to ensure that the approved CSG resources are appropriately provisioned and managed in a manner consistent with the Commission’s standards and regulations.
11. With respect to Guèvremont’s CSG accommodation and office equipment costs, the Commission agrees that its summary of adjustments in Telecom Decision 2012-37 does not accurately reflect some of Guèvremont’s cost submissions since Guèvremont did not explicitly identify those costs in its cost study. Accordingly, the Commission agrees that some costs were inappropriately denied.
12. The Commission notes that in its analysis leading to Telecom Decision 2012-37, it approved $3,000 for Guèvremont’s start-up CSG office equipment costs. The Commission also notes that it approved a maximum of $10,000 for these costs for other small ILECs. The Commission will therefore increase these costs for Guèvremont by $7,000, for a total of $10,000. As for the ongoing CSG accommodation costs, the Commission will approve $6,000 per year, which is in line with the costs approved for other small ILECs.2
13. Regarding the company’s costs for personnel training and implementation of new processes for local competition, the Commission notes that in its analysis leading to Telecom Decision 2012-37, it approved, with adjustments, all costing elements submitted by Guèvremont, other than (i) modifying the billing files, and (ii) an information technology supervisor and changes to procedures. The Commission considered that these two costing elements were not causal to the implementation of local competition.
14. The Commission also notes that Guèvremont has not submitted any evidence demonstrating that these costing elements should be included in the costs for personnel training and implementation of new processes for local competition. Accordingly, the Commission denies Guèvremont’s request to increase the costs approved in Telecom Decision 2012-37 for personnel training and implementation of new processes for local competition.
15. In light of the above, the Commission finds that Guèvremont has demonstrated that there is substantial doubt as to the correctness of the Commission’s determinations regarding some of the costing elements included in Telecom Decision 2012-37. A summary of the updated local competition implementation cost adjustments for Guèvremont is set out in the Appendix to this decision.
16. The Commission notes that in Telecom Decision 2012-37, it approved a reduction of $1.20 in Guèvremont’s rate component used in its subsidy calculation. The Commission also notes that it approved this reduction to enable the company to recover its ongoing costs associated with implementing local competition. In light of the adjustments made in this decision, the Commission approves a reduction of $1.31 in Guèvremont’s rate component used in its subsidy calculation, effective the date that local competition is implemented.
17. The Commission notes that in Telecom Decision 2012-37, it considered that it was appropriate to permit the small ILECs to recover their local competition start-up and ongoing costs through the use of an exogenous adjustment. In Telecom Decision 2012-37, the Commission approved an exogenous adjustment of $45,000 per year over a period of five years for Guèvremont, based on the approved $180,000 in start-up costs. In light of the adjustments made in this decision, the Commission approves an exogenous adjustment for Guèvremont of $47,000 per year over a period of five years.3
Summary of local competition implementation cost adjustments for Guèvremont (changes are in bold italics)
|Proposal||Commission adjustment||Rationale for adjustment|
|1. CSG (salaries) Proposed ongoing CSG expenses based on estimate of number of FTEs and labour unit costs.||Adjusted expenses to reflect use of 50% of an FTE for CSG functions.||Proposed FTE estimate for CSG functions is unreasonable given the company’s size and the expected number of disconnect orders. Revised expenses are consistent with those proposed by other small ILECs of similar size.|
| 2. Consulting |
Proposed start-up and ongoing consulting fees based on time estimates and labour unit costs. Guèvremont’s proposed consulting fees included the preparation of two local competition implementation plans – one in 2008 and one in 2011.
|Limited the start-up consulting fees to a maximum amount of $50,000. Limited the ongoing consulting fees to $10,000 per year for the first three years and $5,000 per year for the remaining two years.||Consulting fees should generally be similar across small ILECs; revised fees are more in line with those proposed by other small ILECs. Expect greater efficiencies given the duplicative nature of the work completed by one consultant for several companies, and for two similar implementation plans produced in 2008 and 2011. Need for ongoing consulting services should decrease over time as local competition is implemented.|
| 3. Maintenance |
Proposed ongoing maintenance expenses based on a given percentage of the associated capital costs.
|Limited the maintenance expenses to a maximum of 10% of the associated capital costs.||Cost to maintain telecommunications equipment should generally be similar across small ILECs; revised expenses are more in line with those proposed by other small ILECs.|
|[text deleted]4||[text deleted]||[text deleted]|
|4. CSG (accommodation) Proposed ongoing expenses for CSG floor space.||Limited these expenses to a maximum of $6,000 per year.||Proposed annual floor space expenses apply to one location and are consistent with the expected costs of office space in rural areas.|
|5. Personnel training and processes Proposed expenses for personnel training and the implementation of new processes for local competition.||Limited these expenses to a maximum of $37,000.||Combined revised process implementation and personnel training costs are more in line with those proposed by other small ILECs.|
| 6. Neustar |
Proposed ongoing expenses for two virtual private network (VPN) accesses to Neustar, which manages the Number Portability Administration Center.
|Limited these expenses to a maximum of $16,000 for one VPN access.||Proposed number of VPN accesses is not warranted given the number of network access services (NAS) served and relative to the other small ILECs’ proposals.|
|7. Access to local number portability (LNP) database Proposed ongoing expenses for ongoing access to LNP database.||Limited these expenses to a maximum of $44,000.||Revised expenses are more in line with those proposed by other small ILECs.|
| 8. CSG (office equipment) |
Proposed expenses for office equipment for CSG functions.
|Limited these expenses to a maximum of $10,000.||Proposed office equipment expenses apply to one location and are more in line with those proposed by other small ILECs.|
 The CSG is functionally separate from a telecommunications company’s retail operations. Its role is to liaise and coordinate with competitive local exchange carriers when conducting a variety of inter-carrier activities, primarily with respect to customer transfers.
 This will result in an increase in Guèvremont’s ongoing costs from $70,000 to $76,000, and in its start-up costs from $180,000 to $187,000.
 This amount represents Guèvremont’s start-up costs of $187,000 annualized over a period of five years.
 The Commission considered the costs included under item 4 (System modifications) of the summary of adjustments for Guèvremont in its analysis of the company’s costs for personnel training and implementation of new processes for local competition (item 5). Accordingly, item 4 was inadvertently included in the summary of adjustments in Telecom Decision 2012-37.
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