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ARCHIVED - Telecom Procedural Letter Addressed to Distribution List

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Ottawa, 14 December 2015

ABRIDGED

Our reference: 8663-C12-201503160 - 8678-C12-201503160

BY E-MAIL

Distribution list

RE:   Review of Telesat Canada’s price ceiling for C-band fixed satellite services – Requests for disclosure of information designated as confidential and for further responses, and additional interrogatories addressed to Telesat

Dear Madam/Sir:

This letter addresses (1) requests for disclosure of information designated as confidential and (2) further responses to interrogatories made by Bell Canada and Telesat Canada (Telesat) in the proceeding initiated by Telecom Notice of Consultation CRTC 2015-133. These parties filed their requests on 26 November 2015 and their replies to said requests on 3 December 2015.

  1. Requests for disclosure of information designated as confidential

    Requests for disclosure of information designated as confidential are addressed in light of sections 38 and 39 of the Telecommunications Act (the Act) and sections 30 and following of the CRTC Rules of Practice and Procedure (the Rules of Procedure). In evaluating a request, an assessment is made as to whether the information falls into a category of information that can be designated confidential pursuant to section 39 of the Act. An assessment is then made as to whether there is any specific direct harm likely to result from the disclosure of the information in question and whether any such harm outweighs the public interest in disclosure. In making this evaluation, a number of factors are taken into consideration, including whether information could be reasonably aggregated and the competitive sensitivity of the information itself. The factors considered are discussed in more detail in Procedures for filing confidential information and requesting its disclosure in Commission proceedings, Broadcasting and Telecom Information Bulletin CRTC 2010-961, 23 December 2010, as amended by Broadcasting and Telecom Information Bulletin CRTC 2010-961-1, 26 October 2012.

    In consideration of the above, parties are not required, at this time, to publicly disclose the information whose disclosure was requested.

  2. Requests for further responses

    With respect to requests for further responses to interrogatories, the requirements of section 76 of the Rules of Procedure apply. The merits of arguments both for and against the filing of further responses are taken into account, as well as the general principles enunciated by the Commission in past proceedings. The major consideration is the relevance of the information requested to the matter at issue. The availability of the information requested is also a factor, which is balanced against the relevance of the information. If the provision of the information sought would require an effort disproportionate to the probative value of the information itself, further responses will not be required. Another factor considered is the extent to which an interrogatory answer is responsive to the interrogatory as it was originally asked. Generally, parties are not required to provide further responses to requests for further information from a party that did not ask the original interrogatory.
    Having regard to the considerations set out above, unless otherwise expressly indicated, the relevant parties are to file with the Commission all information to be provided pursuant to Attachment 1 in this letter by 18December 2015.

  3. Additional interrogatories addressed to Telesat

    In addition, Telesat is to respond to the additional interrogatories posed in Attachment 2 of this letter by 6 January 2015.

Should you have any questions regarding this letter, please contact Jeremy Lendvay by email at jeremy.lendvay@crtc.gc.ca or by phone at (819) 997-4946.

Yours sincerely

Original signed by

Kay Saicheua
Director, Competition & Emergency Services Policy 
Telecommunications Sector

cc:     Jeremy Lendvay, jeremy.lendvay@crtc.gc.ca
Eric MacFarlane, eric.macfarlane@crtc.gc.ca

Distribution List

Attachment 1

Request for further responses to interrogatories

Bell et al(Telesat)5Oct15-2b

Bell et al. is to provide a response to this interrogatory. Bell et al. may file its response in confidence with the Commission, providing an abridged version for the public record.

Telesat(CRTC)28Sept15-2 and Telesat(Bell)5Oct15-14

Telesat provided the original cost of Anik F3 in response to Telesat(CRTC)28Sept15–2 and Telesat(Bell)5Oct15–14. However, there appears to be a discrepancy between the two responses in that the original cost differs in each response. Explain the reason for this discrepancy, with supporting rationale.

Attachment 2

Interrogatories for Telesat

  1. Telesat provided a cost model in support of the C-band service on Anik F3. Telesat was requested to include all formulas used to calculate costs so that the Commission can understand how the cost inputs were developed. Commission staff notes that the excel file that Telesat provided does not include any of the formulas used to calculate costs. Provide a revised electronic copy of the cost model that includes all formulas used to calculate costs, as requested in Telesat(CRTC)28Sept15–4.
  2. Telesat was requested to provide a cost study and model for C-band service provided by Telesat on the Anik F2 and Anik F3 satellites.  Commission staff notes that in response to Telesat(CRTC)28Sept15–4, Telesat provided a cost study and model for only Anik F3. Provide a separate cost study and model for C-band service on Anik F2, as requested in Telesat(CRTC)28Sept15–4. The electronic copy of the cost model should include all formulas used to calculate costs.  
  3. In the cost study for C-band service on Anik F3 provided in response to Telesat(CRTC)28Sept15–4, Telesat used actual demand for 2015, and estimated future demand for 2016-2024. Telesat assumed that, as existing contracts expire, customers will not renew them. Telesat submitted that this is consistent with the assumption underlying the valuation of assets at net book value, i.e. that Telesat is phasing out the service and will not add any replacement capacity as present capacity reaches the end of its useful life. As a result, demand is assumed to fall throughout the study life.
    1. In response to Telesat(CRTC)28Sept15–1, Telesat submitted that C-band demand on Anik F3 will #. Update the cost study and model requested in Question 1 to reflect the demand forecast that Telesat provided in response to Telesat(CRTC)28Sept15–1 (i.e. that C-band demand on Anik F3 will # per year between 2015-2021) and that #.
    2. In response to Telesat(CRTC)28Sept15–1, Telesat submitted that C-band demand on Anik F2 will #. Update the cost study and model requested in Question 2 to reflect the demand forecast that Telesat provided in response to Telesat(CRTC)28Sept15–1 (i.e. that C-band demand on Anik F2 will #.
  4. In response to Telesat(Bell)5Oct15-11, Telesat submitted that its proposed 40% markup is intended to recover (i) indirect costs, (ii) variable common costs, (iii) fixed common costs, and (iv) a component intended to reflect the inherent riskiness of satellite operation.
    1. Provide a breakdown of the proposed 40% markup into each of these four categories. 
    2. Update the cost study and model requested in Questions 1 and 2 of this interrogatory to include all causal, incremental, forward-looking costs in the cost study, with the exception of fixed common costs, as opposed to including them in the proposed markup.
    3. Fixed common costs are generally included in the “operating expenses” line on the income statement of satellite operators, ILECs, and Cable carriers. Telesat’s ratio of operating expenses to plant, property, and equipment is small relative to ILECs and Cable carriers. Justify the magnitude of the portion of the markup that is designed to recover fixed common costs given Telesat’s relatively lean cost structure, with supporting rationale.
  5. Update the cost study and model requested in Questions 1 and 2 to reflect a 13.5% cost of equity.
  6. For each of the Anik F2 and Anik F3 satellites:
    1. Provide the end of study value as of 31 December 2024 of the satellite, related capital engineering, and related ground equipment. The response should explain the methodology, assumptions with supporting rationale, source, and vintage of data used to compute the end of study values.
    2. Update the cost study and model requested in Questions 1 and 2 to reflect these end of study values.
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