ARCHIVED -  Letter

Ottawa, 12 August 2013

Our Reference: 8740-M59-201309930

BY EMAIL

Mr. John Maksimow
Tariffs Manager, Regulatory Affairs
MTS Inc.
333 Main Street
Winnipeg, Manitoba R3C 3V6
john.maksimow@mtsallstream.com

Re: MTS Inc. Tariff Notice No. 742 – Request for Information

Dear Sir:

The Commission received MTS Inc.’s (MTS) Tariff Notice (TN) 742 on 28 June 2013. In its application, MTS proposed to revise its Access Services Tariff (CRTC 24006), Item 43 – Compensation per Call tariff rate from $0.2015 per call to $0.5458 per call.

Under Approval processes for tariff applications and intercarrier agreements, Telecom Information Bulletin CRTC 2010-455, 5 July 2010, interested parties may file interventions within 30 calendar days of the filing date. The Commission did not receive any comments on MTS’ TN 742 as of 29 July 2013.

Commission staff considers that the following process is required to review MTS’ proposed compensation per call cost.

Responses to the requests for information in Attachment to this letter are to be filed with the Commission by 30 August 2013. The level of disclosure of information in the responses should be consistent with the disclosure determinations in Confidentiality of information used to establish wholesale service rates, Telecom Regulatory Policy CRTC 2012-592, 26 October 2012.

Interested parties may file comments with the Commission, serving copies on other parties, by 9 September 2013.

MTS may file reply comments with the Commission, serving copies on all other parties, by 16 September 2013.

Where a document is to be filed or served by a specific date, the document must be actually received, not merely sent, by that date. Copies of the documents should also be sent to thomas.hui@crtc.gc.ca

Yours sincerely,

Original signed by

Lyne Renaud
Director, Competitor Services and Costing
Telecommunications Directorate

cc: Mohammed Omar, mohammed.omar@crtc.ca
Thomas Hui, thomas.hui@crtc.gc.ca
iworkstation@mtsallstream.com

Attach

Attachment

Requests for information

Refer to Attachment 1 and Appendix 1 of Attachment 1 to MTS’ TN 742 dated 28 June 2013.

1. Regarding the reporting of costs in the study report and tables filed in support of TN 742.

a) On page 10 of Attachment 1, the company indicated that it included Pay Telephone Basic Access Line Service (PAL) costs in its cost study and that these costs are imputed at tariff rates. In Tables 4.0-1 and 4.0-2 of Appendix 1 of Attachment 1, the company indicated that there are no wholesale services costs.

In paragraph 87 of Revised regulatory framework for wholesale services and definition of essential service, Telecom Decision CRTC 2008-17, 3 March 2008, the Commission classified PAL as a conditional mandated non-essential service.

i) Explain with supporting rationale why PAL is not considered as a wholesale service in MTS’ cost study.

ii) Provide PAL costs, major wholesale service component costs and other imputed costs in a table similar to Table 8b described on page 24 of Appendix D of the company’s Regulatory Economic Studies Manual. Further, for each of the bands A to G, provide the PAL costs imputed at tariff rates, the tariff rate(s) used to impute the costs and the percentage of in-service pay telephones located in the band.

b) In paragraph 29 of Attachment 1, the company indicated that it included 3rd party acquisition costs in its cost study. Provide the causal acquisition costs by major 3rd party service component in a table similar to Table 8a described on page 23 of Appendix D of the company’s Regulatory Economic Studies Manual.

c) On page 10 of Attachment 1, the company indicated that the forecast of in-service pay telephones is provided in Table 5.2-1 of Appendix 1 of Attachment 1. Provide revised Table 5.2-1 of Appendix 1 of Attachment 1 to include the forecast of in-service pay telephones.

d) Provide revised Tables 4.0-1 and 4.0-2 of Appendix 1 of Attachment 1 to reflect the following:

i) Include a breakdown of the total costs into “Costs Causal to Demand” and “Costs Causal to the Service” as prescribed in Tables 1 and 2 on pages 13 and 14 of Appendix D of the company’s Regulatory Economic Studies Manual, and

ii) Reclassify and report the PAL costs imputed at tariff rates under the “Costs: Wholesale Services” column as prescribed in footnote 3 to Tables 1 and 2 on pages 13 and 14 of Appendix D of the company’s Regulatory Economic Studies Manual.

e) In footnote labelled “*” to Table 7 on page 22 of Appendix D of the company’s Regulatory Economic Studies Manual, the company indicated that causal 3rd party acquisition costs and imputed costs are excluded from the table. Accordingly, provide revised Tables 6.4.5-1 and Tables 6.4.5-2 of Appendix 1 of Attachment 1 to exclude:

i) PAL costs imputed at tariff rates, and

ii) Costs reported under “Causal Acquisition Costs: 3rd party services” column in Tables 4.0-1 and 4.0-2 of Appendix 1 of Attachment 1.

f) Refer to paragraph 26 of Attachment 1 where the company listed Billing and Commissions under Other expenses causal to demand.

i) Confirm whether Billing expenses causal to demand are included in Other expenses causal to demand cost category. If yes, explain why Billing expenses causal to demand is also reported on a separate line in Table 6.4.5-1of Appendix 1 of Attachment 1.

ii) Provide a list of all major expense items included in Other expenses causal to demand.

2. On page 10 of Attachment 1, the company indicated that it included Pay Telephone Basic Access Line Service (PAL) costs in its cost study and that these costs are imputed at tariff rates.

In paragraph 2-16 of the company’s Regulatory Economic Studies Manual, the company indicated that “regulatory economic studies of wholesale services reflect causal costs associated with the use of any wholesale service component.”

a) Explain with supporting rationale why the company used the tariff rates of PAL as imputed costs instead of the causal costs associated with PAL in its cost study.

b) For each of the bands A to G, provide an estimate of the causal monthly cost per PAL.

c) Provide a revised Table 4.0-2 based on the following change in study assumption:

i) Use PAL causal monthly costs provided in the response to b) above instead of PAL tariff rates.

3. In paragraph 26 of Attachment 1, the company indicated that toll-free call volume as a percentage of total pay telephone call volume is used to prorate expenses causal to demand. In paragraph 14 of Attachment 1, the company indicated that there is a decrease in total pay telephone calls in 2014 as a result of the removal of pay telephones that are placed in prisons (refer to as inmate pay telephones).

Confirm whether inmates can make toll-free calls from inmate pay telephones. If not, provide supporting rationale for including payphone calls from inmate pay telephones to calculate the toll-free call volume as a percentage of total pay telephone call volume.

Further,

a) For each of the years 2013 to 2022, provide

i) The forecast total in-service inmate pay telephones,

ii) The forecast total toll-free calls made from in-service inmate pay telephones, and

iii) The forecast total payphone calls made from in-service inmate pay telephones.

b) For each of the years 2013 to 2017, provide revised toll-free call volume as a percentage of total pay telephone call volume excluding payphone calls made from inmate pay telephones.

c) Provide a revised Table 4.0-2 based on the following changes in study assumptions:

i) Exclude costs associated with inmate pay telephones, and

ii) Use the revised toll-free call volume as a percentage of total pay telephone call volume provided in the response to b) above to prorate the expenses causal to demand.

The response to c) should include the methodology and assumptions, with supporting rationale and data (specify vintages) used to exclude costs associated with inmate pay telephones.

4. In Table 5.2-1 of Appendix 1 of Attachment 1, the company provided a forecast of toll-free calls.

a) Confirm whether the toll-free calls provided in Table 5.2-1 of Appendix 1 of Attachment 1 include calls carried by both Interexchange Carriers and MTS. If not, explain with supporting rationale why the company excluded toll-free calls carried by MTS from the cost study and provide a revised Table 4.0-2 based on the following change in study assumption:

i) Include toll-free calls carried by MTS.

b) For each of the historical years 2010, 2011 and 2012, and each of the forecast years 2013 to 2022, provide the following:

i) Total toll-free calls carried by Interexchange Carriers (excluding MTS),

ii) Total toll-free calls carried by MTS, and

iii) Total toll-free calls.

5. In paragraph 22 of Attachment 1, the company indicated that it included the one-time costs associated with the development of the service costs and the filing package in its cost study.

In Appendix 1 of Review of certain Phase II costing issues, Telecom Decision CRTC 2008-14, 21 February 2008, the Commission determined the list of expenses to be excluded from regulatory economic studies. In that appendix, “preparation of material for filing of tariff applications” is classified as part of “Pre-Introduction Expenses” and as such, these expenses are to be excluded from regulatory economic studies.

a) Provide supporting rationale for including costs associated with the development of the service costs and filing package in MTS’ regulatory economic study filed in support of its TN 742.

b) Provide a revised Table 4.0-2 based on the following change in study assumption:

i) Exclude costs associated with the development of the service costs and filing package.

6. In paragraph 22 of Attachment 1, the company indicated that it included “costs associated with billing toll-free carriers” as part of the expenses causal to the service. In paragraph 26 of Attachment 1, the company indicated that it included “costs of processing monthly line rental bills” as billing expenses causal to demand.

In Appendix 1 of Review of certain Phase II costing issues, Telecom Decision CRTC 2008-14, 21 February 2008, the Commission determined the list of expenses to be excluded from regulatory economic studies. In that appendix, “Corporate Finance“, including expenses associated with accounts payable, is classified as part of “Fixed Common Expenses” and as such, these expenses are to be excluded from regulatory economic studies.

a) Provide detailed description of the major activities included in the processing of monthly line rental bills. The response should include a description of the lines rented and rationale for why these line rentals are causal to the provisioning of MTS’ Compensation per Call wholesale service.

b) Confirm whether the cost of processing monthly line rental bills is part of “Corporate Finance”. If not, explain why not. If yes, provide supporting rationale as to why these costs are included in MTS’ regulatory economic study filed in support of TN742.

c) Provide a revised Table 4.0-2 based on the following change in study assumption:

i) Exclude costs associated with the processing of monthly line rental bills.

7. In paragraph 26 of Attachment 1, the company indicated that it included commissions in its cost study and that this cost is estimated using a per-call cost of commissions based on total call volume and total commissions paid.

In MTS Allstream’s comments on TELUS TN 417, dated 25 November 2011, MTS submitted that a more appropriate per-call cost of commissions would be between 1.0¢ and 3.0¢.

a) Explain with supporting rationale why the company’s proposed per-call cost of commissions is significantly higher than it indicated in November 2011.

b) Provide a revised Table 4.0-2 based on the following change in study assumption:

i) Use 3.0¢ as the per-call cost of commissions.

c) For each of the historical years 2010, 2011 and 2012, for each type of pay telephones (public, semi-public, inmate and others (specify)) to which commissions were paid:

i) The total commissions paid,

ii) The total revenues,

iii) The total toll-free call volume, and

iv) The total payphone call volume.

d) For each of the historical years 2010, 2011 and 2012, for each type of pay telephones (public, semi-public, inmate and others (specify)):

i) The total revenues,

ii) The total toll-free call volume, and

iii) The total payphone call volume.

e) For each of the historical years 2010, 2011 and 2012, provide the per-call cost of commissions, and total commissions as a percentage of total payphone revenues based on the information provided in the responses to c) i), d) i), and d) iii) above.

8. In paragraph 29 of Attachment 1, the company indicated that it included 3rd party acquisition costs associated with Millennium Manager Service Bureau.

a) Provide a list of major activities provided by the Millennium Manager Service Bureau.

b) For each major activity provided in the response to a) above, provide a detailed description of the activity and indicate whether the activity is related to MTS’ Compensation per Call wholesale service and whether the activity is also related to other payphone call types (specify), with supporting rationale.

c) Provide an estimate of the percentage of activities provided in the response to a) above that are related to the provisioning of MTS’ Compensation per Call wholesale service.

d) In view of the response to c) above, explain why it is appropriate to use only the toll-free call volume as a percentage of total pay telephone call volume to assign a portion of the Millennium Manager Service Bureau costs to MTS’ Compensation per Call wholesale service without first removing a portion of the Millennium Manager Service Bureau costs that is not related to toll-free calls.

e) Provide a revised Table 4.0-2 based on the following change in study assumption:

i) Apply the percentage provided in the response to c) above and the toll-free call volume as a percentage of total pay telephone call volume to the Millennium Manager Service Bureau costs to assign a portion of this cost to MTS’ Compensation per Call wholesale service.

9. In paragraph 29 of Attachment 1, the company indicated that it included hydro costs associated with the provision of outdoor pay telephones in its cost study and that the ratio of total outdoor pay telephones to total pay telephones is used as a percentage to estimate the hydro cost.

a) Provide the ratio(s) of total outdoor pay telephones to total pay telephones used in the cost study.

b) For each of the historical years 2010, 2011 and 2012, and each of the forecast years 2013 to 2022, provide the following:

i) Total outdoor pay telephones,

ii) Total indoor pay telephones,

iii) Total pay telephones, and

iv) The ratio of total outdoor pay telephones to total pay telephones.

10. Refer to the Commission’s letter “Information to be provided in support of wholesale service tariff applications” dated 12 July 2013 where the Commission outlined detailed information to be provided at the time of a wholesale service tariff filing.

Provide detailed information associated with MTS’ Compensation per Call wholesale service tariff application TN 742 as outlined in Attachments 1 and 2 to the Commission’s 12 July 2013 letter. The response should reflect the response to question 1 above and include detailed information of the following cost items:

i) Each of the major expense items provided in the response to question 1 f) ii) above,

ii) PAL monthly causal costs by band,

iii) Processing monthly line rental bills,

iv) Commissions,

v) Millennium Manager Service Bureau, and

vi) Hydro costs.

Date modified:

2013-08-12