ARCHIVED - Telecom Commission Letter addressed to Dallas C. Yeulett (Northwestel)

Ottawa, 14 August 2015                                                                    

Our reference:  8622-N1-201505629

BY EMAIL

Dallas C. Yeulett
Senior Manager, Regulatory Compliance, Northwestel
PO Box 2727
Whitehorse, Yukon, Y1A 4Y4
regulatoryaffairs@nwtel.ca

Re:  Part I application to review and vary Telecom Decision CRTC 2015-78 or approve an exogenous adjustment for retail internet

Dear Mr Yeulett,

You will find attached Commission interrogatories associated with this proceeding.

Comprehensive answers, including rationale and any supporting information, to the attached interrogatories are to be filed by Northwestel with the Commission, and served on all parties to this proceeding, by 4 September 2015. Parties will have until 14 September 2015 to file their comments regarding Northwestel’s responses, to which Northwestel will have until 21 September 2015 to file its reply. Documents are to be received, and not merely sent, by these dates.

This letter and all subsequent correspondence will be added to a public record, and may be incorporated into the public record of any subsequent public proceeding initiated by the Commission.  However, information may be designated confidential pursuant to section 39 of the Telecom Act and Broadcasting and Telecom Information Bulletin CRTC 2010-961.

Yours sincerely,

Original signed by:
 Robert Martin for

Michel Murray
Director, Dispute Resolution & Regulatory Implementation
Telecommunications Sector

c.c.: Josiane Lord, CRTC, josiane.lord@crtc.gc.ca
Jean-François Léger, CAC-PIAC, piac@piac.ca
Kirk Dolphus, Charter Community of Deline, fax (867) 589-4106
Linda Maljan, Government of the Northwest Territories, linda_Maljan@gov.nt.ca
Steve Sorochan, Government of Yukon, steve.sorochan@gov.yk.ca
Samer Bishay, Iristel Inc., regulatory@iristel.com
Dean Proctor, SSi Group of companies, regulatory@ssimicro.com
Michael Hansen, mhansen@northwestel.net

Option 1: request to review and vary part of Telecom Decision 2015-78

1. In its application, Northwestel requested the Commission to review and vary its determinations with respect of the stand-alone residential DSL Internet surcharge and approve a stand-alone surcharge of $20 in band H1 communities. Northwestel stated that, without such a surcharge, the provision of its DSL services would, on the whole, be non-compensatory and the overall profitability of its retail terrestrial Internet services would be marginal. It added that, if the surcharge was reinstated, it would not only alter the business case associated with the provision of retail DSL Internet services, but also provide the company with the required revenues to justify upgrading its network so as to permit the provision of DSL Internet service at 15Mbps download speeds in the remaining 45 communities captured by its Network Modernization Plan.
   
   Justify why Northwestel, in contrast to its proposed exogenous adjustment, is proposing to limit the application of its proposed surcharge to band H1 communities.  In the reply, take into account the Commission's expressed policy considerations underlying its determinations and the Commission’s pronouncement in Telecom Decision 2015-78 that requiring Northwestel to apply the same DSL rates to consumers in high-cost serving areas (HCSA) as those in non-HCSAs would further the Commission’s goal of ensuring that Northern Canadians are provided Internet access at reasonable prices.
2. Justify, having regard for the Commission’s stated objective of advancing the ability for Northern Canadians to access online services and participate in the digital economy at rates more closely aligned to those prevailing in the South, the company’s proposal to limit the application of its proposed stand-alone DSL surcharge to residential subscribers and not to ascribe a surcharge to its retail business customers.
3. File revised proposals providing details on the methodology, assumptions and calculations of how the company would recover the same amount of money as it would with the proposed $20 stand-alone surcharge for residential customers in band H1 communities and make its service sustainable, but with the following scenarios:
1. With  a stand-alone surcharge applied equally to all residential DSL consumers, regardless of what rate band they reside in
2. With  a stand-alone surcharge applied equally to all DSL consumers, both business and residential, regardless of what rate band they reside in
3. With  a stand-alone surcharge applied equally to all residential terrestrial Internet consumers, regardless of what rate band they reside in
4. With  a stand-alone surcharge applied equally to all terrestrial Internet consumers, both business and residential, regardless of what rate band they reside in
5. With specific surcharges for business and residential DSL consumers, regardless of what rate band they reside in
6. With specific surcharges for business and residential terrestrial Internet consumers, regardless of what rate band they reside in
4. At paragraphs 36-37 of the company’s application, it states:

   While the stand-alone surcharge of $20 proposed for residence service was still less than a home phone line, we were confident that the value proposition to retain that line for everyday calling and in case of emergency was sufficient to discourage widespread adoption of stand-alone DSL Internet. (...) Removal of the stand-alone DSL surcharge will significantly increase the adoption of stand-alone DSL. (emphasis added)

1. Having specific regard to the concerns articulated by the Commission in Telecom Decision 2015-78 which served to inform its determinations with respect to rates and the application of stand-alone DSL Internet surcharges (namely providing pricing relief to attenuate the difference in rates existing between the company’s DSL Internet rates compared with Northwestel’s rates for similar cable Internet services and rates for similar services in the South; making it less expensive for Northern Canadians to subscribe to these services, advance their ability to access online services and participate in the digital economy), demonstrate why Northwestel’s surcharge proposal would be appropriate.
2. In Telecom Regulatory Policy 2013-711, the Commission directed Northwestel to provide retail DSL Internet access service independent from its PES. Why should the Commission now approve a surcharge that could discourage the adoption of stand-alone DSL Internet?

 Option 2: request for an exogenous adjustment

5. An exogenous adjustment allows an ILEC to modify its retail service prices to compensate for the financial impact of certain events beyond its control. In its application, Northwestel indicates that, if the Commission does not approve its request for a stand-alone surcharge, it is requesting an exogenous adjustment to its price cap indices for the Residential and Business Internet sub-baskets. This exogenous adjustment is to address the negative business case that results from the determinations in Telecom Decision 2015-78 for retail terrestrial DSL Internet services. However, the amount that Northwestel is requesting to recover is not the loss in revenue suffered as a result of the decision, but rather the amount required to recover the $8.5M investment in its Internet facilities in order to provide 15/1Mbps Internet service to 45 communities.
1. Explain why the Commission should consider approving an exogenous adjustment that does not correspond to the revenue impact attributable to the determinations forming the basis of the company’s application.
2. File a new proposal, including rationale and any supporting information, requesting an exogenous adjustment based solely on the estimated impact suffered by Northwestel in its retail terrestrial DSL Internet services as a result of the determinations in Telecom Decision 2015-78 (i.e. independent of Northwestel’s Network Modernization Plan).
6. In its application, Northwestel requested an exogenous adjustment to its price cap indices for the Residential and Business Internet sub-baskets only, so that the costs would be borne by customers of the retail services that are the subject of Telecom Decision 2015-78 and the net beneficiaries of the investment in high-speed Internet under Northwestel’s Network Modernization Plan. However, in Telecom Decision 2015-78 the Commission found that it was necessary and appropriate to provide DSL Internet customers with pricing relief.

Justify the assignment of the exogenous factor to the Internet basket.

7. Assume that the Commission approves an exogenous adjustment for the recovery of the amount:
1. proposed by the company in its application and justified in question 5(a) above.
2. found in its new proposal as discussed in question 5(b) above.

For both above-mentioned amounts, file the following alternative basket allocations:

1. by spreading the amount evenly amongst all basket for which an exogenous factor is allowed,
2. by spreading it proportionally to the revenues of these baskets,
3. by spreading it evenly on all allowed baskets except the Internet basket,
4. by spreading it proportionally to the revenues of all allowed baskets except the Internet basket, and
5. any other alternative basket allocation proposed by Northwestel.

8. Having specific regard to the concerns articulated by the Commission in Telecom Decision 2015-78 which served to inform its determinations with respect to rates and the application of stand-alone DSL Internet surcharges (namely providing pricing relief to attenuate the difference in rates existing between the company’s DSL Internet rates compared with Northwestel’s rates for similar cable Internet services and rates for similar services in the South; making it less expensive for Northern Canadians to subscribe to these services, advance their ability to access online services and participate in the digital economy), demonstrate why approval of the company’s proposed exogenous factor would be appropriate.

Date modified:

2015-08-14