ARCHIVED -  Telecom Notice of Consultation CRTC 2012-669

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Ottawa, 6 December 2012

Notice of hearing

17 June 2013

Inuvik, Northwest Territories

19 June 2013

Whitehorse, Yukon

Review of Northwestel Inc.’s Regulatory Framework, Modernization Plan, and related matters

File numbers:   8663-C12-201215302, 8695-J64-201209578

The Commission initiates a proceeding to review the regulatory framework for Northwestel that will go into effect in 2014, as well as review other related matters, including the company’s proposed Modernization Plan, the local service subsidy regime, the local service forbearance framework, and the services used by competitors. The Commission invites comments, with supporting rationale, on the issues raised in this notice by 6 February 2013.

The proceeding will include a public hearing, which will begin on 17 June 2013 in Inuvik, Northwest Territories and will last no more than one day at that location. The public hearing will then reconvene on 19 June 2013 in Whitehorse, Yukon and is expected to last approximately two days. Further details will be provided in a follow-up to this notice.

Introduction

1. In May 2011, the Commission initiated a public proceeding¹ to review several broad policy matters regarding the provision of telecommunications services by
Northwestel Inc. (Northwestel).² This review included the company’s price cap regulatory framework³ which applies only to tariffed services.

2. In the ensuing decision, Telecom Regulatory Policy 2011-771, the Commission stated, among other things, that it was concerned that Northwestel had failed to make the necessary investments in its network, as evidenced by the company’s aging infrastructure and the unavailability of services in many remote communities comparable to those provided in the rest of Canada. The Commission also recognized that telecommunications is essential to the North, in terms of providing opportunities for people residing in remote areas, supporting Arctic sovereignty and national security, developing resources, and ensuring access to services similar to those available in the South.

3. As a result of its findings in that decision, the Commission determined that additional regulatory oversight was required and, accordingly, that it would undertake a holistic review of Northwestel’s regulatory framework, and all of the company’s telecommunications services, to ensure that the benefits of the price cap regulatory framework could be properly realized by subscribers.

4. Consequently, the Commission extended the existing price cap regulatory framework, with minor modifications, for two years, effective 1 January 2012, pending the holistic review of Northwestel’s regulatory framework. The Commission stated that the holistic review would include the examination of a comprehensive plan to modernize Northwestel’s network infrastructure (Modernization Plan).⁴ Northwestel filed its Modernization Plan on 3 July 2012.

5. In Telecom Regulatory Policy 2011-771, the Commission also determined that local competition should be introduced in Northwestel’s territory, in order to provide Canadians who reside in the North with a choice of service providers and different service options.

6. The Commission hereby initiates a proceeding to conduct the holistic review of Northwestel’s regulatory framework, and all of the company’s telecommunications services. The issues to be considered as part of this proceeding are set out in this notice. The proceeding will include a public hearing as set out below.

7. The Commission will review the matters in this proceeding in light of the policy objectives set out in section 7 of the Telecommunications Act (the Act) and the Policy Direction.⁵

Modernization Plan

8. Northwestel’s Modernization Plan outlined the details of a projected $273 million in capital expenditures over five years from 2013 to 2017. The company proposed, among other things, to

• extend wireless services to all 96 communities in Northwestel’s serving territory;

• upgrade and expand high-speed Internet services across its serving territory;

• install new switches that will support enhanced calling features and high-speed Internet services, as well as support local number portability and local network interconnection;

• support transport upgrades (both terrestrial and satellite), and increase backbone diversity; and

• replace its aging satellite voice network with an Internet Protocol based network.

9. Northwestel submitted that the funding of investments set out in the Modernization Plan would be divided into two parts: the basic foundation of $233 million, referred to as the “Base Component,” and the “Astral Component” of $40 million.⁶ In Broadcasting Decision 2012-574, the Commission denied the application by BCE Inc., on behalf of Astral Media Inc. (Astral), for authority to change the effective control of Astral’s broadcasting undertakings. Consequently, the funding for the “Astral Component” was not approved.

10. In this proceeding, the Commission intends to review Northwestel’s Modernization Plan, as well any updates that the company may wish to make to the plan in light of Broadcasting Decision 2012-574, to consider whether the plan addresses the Commission’s concerns set out in Telecom Regulatory Policy 2011-771.

Regulatory framework for tariffed services

11. Prior to 2007, Northwestel was regulated under a framework which, among other things, required the Commission to review the company’s financial forecasts annually. As part of these reviews, the Commission performed an examination of all Northwestel’s operations, including a review of its capital plan.

12. In 2007, the Commission implemented a price cap regulatory framework for Northwestel. This framework, initially set out in Telecom Decision 2007-5, involves six baskets of tariffed services with individualized basket constraints as well as, in some instances, specific rate element constraints. The baskets are Residential Services, Business Services, Other Capped Services, Services with Frozen Rate Treatment, Competitor Services, and Uncapped Services.⁷

13. In Telecom Regulatory Policy 2011-771, the Commission reviewed Northwestel’s price cap regulatory framework and was of the view that the framework had failed to produce the expected benefits (e.g. choice, reliability, and innovation) for northern customers. As noted above, the Commission required that Northwestel file its Modernization Plan in order to facilitate the examination of the existing regulatory framework.

14. In this proceeding, the Commission intends to establish a regulatory framework that fulfils the policy objectives of the Act with respect to the provision of services to Northwestel’s customers.

Subsidy regime

15. The current local service subsidy regime, along with the associated contribution regime and the National Contribution Fund (NCF), was established in Decision 2000-745 with a view to subsidizing the provision of basic residential local telephone service in rural and remote areas of Canada.⁸ The Commission’s current local service subsidy regime provides compensation only to incumbent local exchange carriers (ILECs) for the provision of their residential primary exchange service (PES) in high-cost serving areas (HCSAs).⁹ In Telecom Decision 2012-619, the Commission estimated the total 2012 national subsidy requirement for all ILECs to be $143.4 million.

16. Currently, Northwestel receives a total annual subsidy from the NCF associated with i) providing residential PES in HCSAs, as well as ii) funding the ongoing requirements of the non-access portion of Northwestel’s service improvement plan (SIP).¹⁰ In Telecom Decision 2012-619, the Commission approved a total subsidy of $20.9 million for Northwestel for 2012. This amount consists of $10.8 million to subsidize residential PES in HCSAs, and $10.1 million to fund the ongoing requirements of Northwestel’s previously approved SIP. Further, in Telecom Regulatory Policy 2011-771, the Commission confirmed that only Northwestel would be eligible to receive subsidy given that it has an obligation to serve.¹¹

17. In its Modernization Plan, Northwestel stated that its operating costs in serving its vast operating territory on a daily basis were considerable and that its ability to implement the Modernization Plan was premised on continued receipt of its existing subsidy.

18. In a Part 1 application dated 8 August 2012, Ice Wireless Inc. (Ice Wireless) and Iristel Inc. (Iristel), among other things, proposed a new approach to funding telecommunications services in Northwestel’s serving territory.¹² This approach consists of two financial support components, as described below.

19. Ice Wireless and Iristel proposed that the first funding component provide financial support for long-haul transport facilities to Southern Canada and down the Mackenzie Valley, as well as satellite capacity to serve remote communities. These companies proposed that all competitors, including Northwestel, would have access to these transport facilities at the same subsidized cost. They proposed a second funding component that would provide financial support for serving very small remote communities and that would also be available to all competitors, including Northwestel.

20. By letter dated 23 August 2012, Commission staff stated that it would be premature to consider, prior to the review of Northwestel’s regulatory framework, any changes proposed by Ice Wireless and Iristel to the subsidy regime.

21. The Commission notes that subsection 46.5(1) of the Act states that the Commission may require any telecommunications service provider to contribute, subject to any conditions that the Commission may set, to a fund to support continuing access by Canadians to basic telecommunications services.

22. The Commission acknowledges that Northwestel’s serving territory presents unique challenges in providing telecommunications services because of its size, population density, and severe climate. As stated in Telecom Regulatory Policy 2011-771, the Commission recognized the importance of telecommunications services in the North and northern residents’ desire for a telecommunications network that offers parity with the rest of the country. The Commission further recognized in that decision the requirements of northern communities for innovative solutions in order to provide telecommunications services that are comparable to those available in the rest of the country and for applications to access services such as health care, education, government programs, public safety, and banking.

23. In light of the above, the Commission intends to review in this proceeding the subsidy regime in Northwestel’s operating territory, taking into consideration subsection 46.5(1) of the Act as well as the unique challenges in providing telecommunications services in the North. The Commission intends to consider whether it is appropriate to i) maintain the existing subsidy regime for Northwestel or ii) modify the subsidy regime for funding telecommunications services in the North. Any such modifications could include, but need not be limited to, elements of the proposal submitted by Ice Wireless and Iristel in their August 2012 application referenced above.

Forbearance framework for local services

24. In Telecom Decision 2006-15 and Telecom Regulatory Policy 2009-379, the Commission established forbearance frameworks for the large ILECs and the small ILECs, respectively, regarding many regulatory requirements for retail local exchange services provided in their serving territories.¹³ In Telecom Regulatory Policy 2011-291, the Commission modified these forbearance frameworks such that subsidies would not be provided to the ILECs in forborne local exchanges, except for small ILEC exchanges where the competitive presence is less than 75 percent.

25. The Commission notes that these determinations regarding forbearance frameworks do not apply to Northwestel. Although the Commission permitted local competition to be implemented in Northwestel’s serving territory in Telecom Regulatory Policy 2011-771, the Commission also notes that it did not establish a framework for forbearing from the regulation of Northwestel’s retail local exchange services.

26. In this proceeding, the Commission intends to establish a forbearance framework for Northwestel’s retail local exchange services. In order to establish this framework, and to deal with the issues set out in this notice, the Commission intends to consider the current and future status of local competition in Northwestel’s serving territory.

Services used by competitors

27. Following the introduction of facilities-based local competition in Northwestel’s operating territory, several issues have been raised regarding Northwestel’s retail and wholesale services used by competitors to provide retail services to their customers.

28. In Telecom Decision 2012-4, the Commission considered whether Northwestel should be required to file tariffs for its V-Connect and I-Gate services.¹⁴ In that decision, the Commission determined that Northwestel was to file tariffs for its V-Connect service. As a result, the Commission determined that it was not necessary at that time to require Northwestel to file tariffs for its I-Gate service; however, the Commission stated that it would include a review of Northwestel’s I-Gate service as part of the holistic review of the company’s regulatory framework.

29. On 6 February 2012, Northwestel filed an application to, among other things, review and vary the determinations in Telecom Decision 2012-4 requiring Northwestel to file tariffs for its V-Connect service. Coincident with that application, Northwestel filed a tariff application proposing a new wholesale backbone connectivity service, Wholesale Connect.¹⁵ The Commission recently issued Telecom Decision 2012-644 which denied Northwestel’s review and vary application and required the company to file tariffs for its V-Connect service. Further, the Commission considers that the issues to be determined in Northwestel’s tariff application for a new Wholesale Connect service are not within the scope of this proceeding.

30. In addition, in Telecom Order 2012-401,¹⁶ the Commission identified local interconnection regions (LIRs)¹⁷ as an issue that it intended to explore in the context of its review of Northwestel’s Modernization Plan. In that order, the Commission noted that the rules for establishing LIRs do not apply to Northwestel and concluded that it was premature to establish LIRs given that the company had only recently filed its network Modernization Plan and that significant changes to the network were anticipated.

31. In this proceeding, the Commission intends to review services used by competitors, including whether it is appropriate to establish LIRs in Northwestel’s territory, in order to address the issues noted above.

Call for comments

32. Accordingly, the Commission hereby initiates a proceeding to conduct a holistic review of Northwestel’s regulatory framework. The proceeding will include a public hearing as set out below.

33. The Commission considers that the issues raised in this notice regarding the Modernization Plan, the regulatory framework, the subsidy regime and ongoing subsidy requirements, the local service forbearance framework, and the services used by competitors are, to varying degrees, interrelated. As such, these issues will all be assessed in the context of the holistic review of Northwestel’s regulatory framework, and all of the company’s telecommunications services.

34. As set out in paragraph 41 of this notice, Northwestel is to file an update, if Northwestel considers it necessary, to its Modernization Plan.

35. The Commission invites detailed comments, with supporting evidence and rationale, on the following:

a) whether the Modernization Plan appropriately addresses the concerns raised in Telecom Regulatory Policy 2011-771, including the needs of northern residents;

b) whether price cap regulation continues to be the appropriate form of regulation for Northwestel’s tariffed services, and, if not, what the appropriate form of regulation should be in order to address the concerns raised in Telecom Regulatory Policy 2011-771 and to meet the policy objectives of the Act;

c) if price cap regulation continues to be appropriate, what changes, if any, should be made to the framework to address the concerns raised in Telecom Regulatory Policy 2011-771 and to meet the policy objectives of the Act;

d) whether the existing subsidy regime for telecommunications services continues to be appropriate for Northwestel’s operating territory or whether any modifications to either amount of subsidy or the subsidy regime itself in the North are needed;

e) what would be the appropriate local service forbearance framework for Northwestel, including the specific criteria for granting forbearance; and

f) whether any changes are required for services used by Northwestel’s competitors to provide retail services to their customers, including

1. whether Northwestel should be required to file tariffs setting out the rates, terms, and conditions for the provision of I-Gate service or other services required by competitors;

2. whether interconnection on the basis of LIRs in Northwestel’s operating territory is appropriate in light of the expected changes to Northwestel’s network infrastructure resulting from the Modernization Plan, and, if so, when and on what basis LIRs should be established; and

3. whether there are other services that Northwestel should be providing to competitors in order to facilitate the implementation of local competition.

36. In addition, the Commission also invites detailed comments, with supporting evidence and rationale, on other relevant issues associated with the matters identified in this notice.

37. Concurrent with the release of this notice, the Commission has requested information from Northwestel in the form of interrogatories, which have been addressed by way of separate letter.

Procedure

38. The Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure (the Rules of Procedure) apply to this proceeding.¹⁸

39. The portion of the August 2012 application of Ice Wireless and Iristel regarding changes to the subsidy regime (file number 8695-J64-201209578) is made part of the record of this proceeding.¹⁹

40. Northwestel is made a party to this proceeding.

41. Northwestel is to file with the Commission any updates to its Modernization Plan, by 16 January 2013. The Modernization Plan filed on 3 July 2012, as well as any updated plan filed by Northwestel in accordance with this paragraph, will form part of the record of this proceeding.

42. Northwestel is also directed to file with the Commission its comments regarding the issues in this proceeding, as well as its responses to the requests for information that were addressed to the company in conjunction with this notice, by 6 February 2013.

43. The Commission expects Northwestel to notify its subscribers with respect to its Modernization Plan, and any other proposal that may impact the provision or prices of services, and advise them on how they may participate in the proceeding.

44. Interested persons who wish to become parties to the proceeding may do so by filing an intervention regarding the issues in this proceeding using the following link or by writing to the Secretary General (by mail: CRTC, Ottawa, Ontario, K1A 0N2; by fax: 819-994-0218) by 6 February 2013. Only those interested persons who file an intervention by this date may participate in the process set out in paragraphs 45 to 50 below.

45. The Commission and parties, including Northwestel, may request information in the form of interrogatories from any party who has filed an intervention. In accordance with sections 73 and following of the Rules of Procedure, the requesting party must file its request for information with the Commission and must serve the request on the party or parties to whom it is addressed, on or before 27 February 2013.

46. Responses to requests for information from parties or the Commission are to be filed with the Commission and served on the party or parties making the request by 27 March 2013.

47. Requests by parties for further responses to interrogatories posed in their request for information, specifying in each case why a further response is both relevant and necessary, and requests for public disclosure of information that has been designated confidential, setting out in each case the reasons for disclosure, must be filed with the Commission and served on the party or parties to whom it is addressed by 8 April 2013.

48. Written responses to requests for further responses to interrogatories and for public disclosure must be filed with the Commission and served on the party or parties making the request by 15 April 2013.

49. Determinations will be issued regarding requests for further information and public disclosure as soon as possible. Any information to be provided pursuant to such determinations must be filed with the Commission by 2 May 2013.

50. Northwestel and those parties who filed an intervention in accordance with paragraph 44 may file reply comments with the Commission by 9 May 2013. A reply must be limited to responding to Northwestel’s comments and responses to requests for information, as well as interventions filed by other parties and must not introduce new proposals.

51. Any other interested persons who did not file an intervention, as indicated above, may file an intervention regarding any issue in this proceeding. These interventions must be filed with the Commission by 9 May 2013.

52. In accordance with section 26 of the Rules of Procedure, interventions filed in accordance with paragraphs 44 and 51 must explicitly state that the person wishes to be considered an intervener. Interventions must also indicate whether the person wishes to appear at the public hearing and, if so, must state their preference of location at which they wish to appear. Only those parties whose requests to appear have been granted will be contacted by the Commission and invited to appear at the hearing.

53. The public hearing will begin on 17 June 2013 in Inuvik, Northwest Territories and will last no more than one day at that location. The public hearing will then reconvene on 19 June 2013 in Whitehorse, Yukon and is expected to last approximately two days. Further details will be provided in a follow-up to this notice.

54. Although the public hearing will be held in Inuvik, Northwest Territories and Whitehorse, Yukon, the Commission will consider providing videoconference or teleconference links in other locations should it receive such requests.

55. Persons requiring communications support such as assistive listening devices and sign language interpretation are requested to inform the Commission at least twenty (20) days before the commencement of the public hearing so that the necessary arrangements can be made.

56. An organization and conduct letter, providing directions on procedure with respect to the public hearing, will be issued prior to the commencement of the public hearing.

57. All parties who filed interventions may file final written arguments with the Commission on any matter within the scope of this proceeding by 8 July 2013. Final arguments, including an executive summary, are not to exceed 25 pages.

58. The Commission will not formally acknowledge interventions received. It will, however, fully consider all submissions, which will form part of the public record of the proceeding.

59. Parties are reminded that, in accordance with the Rules of Procedure, if a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date. A document must be filed with the Commission by 5 p.m. Vancouver time (8 p.m. Ottawa time) on the date it is due. The Commission takes no responsibility for postal delays and will not notify a party whose submission is received after the deadline date. Late submissions will not be considered by the Commission and will not be made part of the public file.

60. Parties may file their submissions electronically or on paper. Submissions longer than five pages should include a summary.

61. Each paragraph of all submissions should be numbered. In addition, the line ***End of document*** should follow the last paragraph. This will help the Commission verify that the document has not been damaged during electronic transmission.

62. The Commission expects to publish a decision on the issues raised in this notice within four months of the close of record.

63. The Commission encourages interested persons and parties to monitor the record of this proceeding and/or the Commission’s website for additional information that they may find useful when preparing their submissions.

Important notice

64. All information provided as part of this public process, except information granted confidentiality, whether sent by postal mail, facsimile, email, or through the Commission’s website at www.crtc.gc.ca, becomes part of a publicly accessible file and will be posted on the Commission’s website. This includes personal information, such as full names, email addresses, postal/street addresses, telephone and facsimile numbers, and any other personal information provided.

65. The personal information provided will be used and may be disclosed for the purpose for which the information was obtained or compiled by the Commission, or for a use consistent with that purpose.

66. Documents received electronically or otherwise will be posted on the Commission’s website in their entirety exactly as received, including any personal information contained therein, in the official language and format in which they are received. Documents not received electronically will be available in PDF format.

67. The information provided to the Commission as part of this public process is entered into an unsearchable database dedicated to this specific public process. This database is accessible only from the web page of this particular public process. As a result, a general search of the Commission’s website with the help of either its search engine or a third-party search engine will not link directly to the information provided as part of this public process.

Location of CRTC offices

68. Submissions may be examined or will be made available promptly upon request at Commission offices during normal business hours.

Toll-free telephone: 1-877-249-2782
Toll-free TDD: 1-877-909-2782

Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room 206
Gatineau, Quebec  J8X 4B1
Tel.: 819-997-2429
Fax: 819-994-0218

Regional offices

Metropolitan Place
99 Wyse Road, Suite 1410
Dartmouth, Nova Scotia  B3A 4S5
Tel.: 902-426-7997
Fax: 902-426-2721
205 Viger Avenue West, Suite 504
Montréal, Quebec  H2Z 1G2
Tel.: 514-283-6607

55 St. Clair Avenue East, Suite 624
Toronto, Ontario  M4T 1M2
Tel.: 416-952-9096

360 Main Street, Suite 970
Winnipeg, Manitoba  R3C 3Z3
Tel.: 204-983-6306
Fax: 204-983-6317

2220 – 12th Avenue, Suite 620
Regina, Saskatchewan  S4P 0M8
Tel.: 306-780-3422

100 – 4^th Avenue SW, Suite 403
Calgary, Alberta  T2P 3N2
Tel.: 403-292-6660
Fax: 403-292-6686

858 Beatty Street, Suite 290
Vancouver, British Columbia  V6B 1C1
Tel.: 604-666-2111
Fax: 604-666-8322

Secretary General

Related documents

• Northwestel Inc. – Application to review and vary Telecom Decision 2012-4 regarding V-Connect service, Telecom Decision CRTC 2012-644, 26 November 2012
• Final 2012 revenue-percent charge and related matters, Telecom Decision CRTC 2012-619, 8 November 2012
• Astral broadcasting undertakings – Change of effective control, Broadcasting Decision CRTC 2012-574, 18 October 2012
• Northwestel Inc. – Local Network Interconnection Tariff, Telecom Order CRTC 2012-401, 25 July 2012
• SSi Micro Ltd. – Application regarding Northwestel Inc.’s backbone connectivity services, Telecom Decision CRTC 2012-4, 5 January 2012
• Northwestel Inc. – Review of regulatory framework, Telecom Regulatory Policy CRTC 2011-771, 14 December 2011
• Review of price cap regulatory framework for Northwestel Inc. and related matters, Telecom Notice of Consultation CRTC 2011-302, 6 May 2011, as amended by Telecom Notice of Consultation CRTC 2011-302-1, 22 June 2011
• Obligation to serve and other matters, Telecom Regulatory Policy CRTC 2011-291, 3 May 2011, as amended by Telecom Regulatory Policy CRTC 2011-291-1, 12 May 2011
• Framework for forbearance from regulation of retail local exchange services in the serving territories of the small incumbent local exchange carriers, Telecom Regulatory Policy CRTC 2009-379, 23 June 2009
• The Canadian revenue-based contribution regime, Telecom Circular CRTC 2007-15, 8 June 2007
• Finalization of the assignment of Northwestel Inc.’s services to the service baskets, Telecom Decision CRTC 2007-33, 17 May 2007
• Price cap regulation for Northwestel Inc., Telecom Decision CRTC 2007-5, 2 February 2007
• Follow-up to Trunking arrangements for the interchange of traffic and the point of interconnection between local exchange carriers, Telecom Decision CRTC 2004-46, Telecom Decision CRTC 2006-35, 29 May 2006
• Forbearance from the regulation of retail local exchange services, Telecom Decision CRTC 2006-15, 6 April 2006, as amended by Order in Council P.C. 2007-532, 4 April 2007
• Northwestel Inc. – Supplemental funding requirements for 2004 and 2005, Telecom Decision CRTC 2005-54, 15 September 2005
• Trunking arrangements for the interchange of traffic and the point of interconnection between local exchange carriers, Telecom Decision CRTC 2004-46, 14 July 2004
• Long-distance competition and improved service for Northwestel customers, Decision CRTC 2000-746, 30 November 2000
• Changes to the contribution regime, Decision CRTC 2000-745, 30 November 2000

Date modified:

2012-12-06