ARCHIVED - Telecom Procedural Letter Addressed to Distribution List

Ottawa, 20 January 2016

Our reference: 8638-C12-200805906

BY EMAIL

Distribution List

Re: CRTC Informational Sessions on Telecommunication Services Costing Principles & Concepts

Dear Sir/Madam

The Canadian Radio-television and Telecommunications Commission (the Commission) is dedicated to ensuring that the needs and interests of Canadians are at the centre of the Canadian communication system. To this end, the Commission is committed to ensuring that its processes are as transparent as possible and that they allow Canadians to actively and meaningfully participate in Commission proceedings.

With respect to telecommunications, one of the key duties of the Commission is to ensure that rates for non-forborne retail and wholesale telecommunication services are just and reasonable. On the wholesale side, this duty is critical to developing and sustaining a competitive marketplace that offers innovative and affordable services for Canadians.  

To assist Canadians who have an interest in rate setting proceedings for telecommunication services, the Commission will be hosting one-day information sessions on Telecommunication Services Costing Principles & Concepts as more fully discussed below.

The Commission’s general approach to setting rates for telecommunication services is based upon the use of incremental costing, which is then supplemented by a markup to establish the appropriate rate. Pursuant to the Commission’s approach, company-specific costs are generally used in the calculation of costs, which are incremental, forward-looking and causal to the provision of the service.

All Incumbent Local Exchange Carriers (ILECs) and Cable Carriers generally have to provide a cost study in support of proposed service rates. The cost study uses costing principles and concepts approved by the Commission.

The Commission relies on the cost study filed in support of the proposed rate to ensure that the rates eventually approved are (i) based on the costing principles and concepts^{Footnote 1} approved by the Commission and (ii) are just and reasonable.  Furthermore, as most company-specific costing information included in the cost studies is necessarily confidential, competitors and interveners rely on the Commission to do the necessary due diligence to ensure that the approved rates are just and reasonable.

Large ILECs^{Footnote 2} have documented, in their respective company-specific Regulatory Economic Studies Manual (ILECs Manual) ^{Footnote 3}, the costing principles and concepts approved by the Commission. In Telecom Regulatory Policy 2015-326^{Footnote 4}, the Commission determined that the existing company-specific incremental costing approach remains the appropriate approach for rate-setting for mandated wholesale services.

Cable Carriers rely on the costing principles and concepts documented in ILECs’ Manuals when conducting cost studies that are to be filed in support of their proposed rates for wholesale services.

Recently, many Small Incumbent Local Exchange Carriers (SILECs) have filed cost studies in support of their proposed Direct Connect rates. SILECs also rely on the costing principles and concepts documented in ILECs’ Manuals.

As more and more companies are filing cost studies in support of their proposed rates, the Commission intends to provide an informational session to improve the efficiency and effectiveness of the rate setting process by enhancing knowledge in the following areas:

• Costing principles and concepts documented in ILECs’ Manuals,
• Key/Critical input data,
• Cost review process conducted by the Commission to ensure that the approved services rates are just and reasonable.
• Suggestions on how companies can assist/facilitate in reducing the number of interrogatories and expediting the process.

Accordingly, the objective of the session is to provide high-level training. Participants are not to use the session to discuss the merits of past Commission determinations or matters that are currently before the Commission.

Who will benefit from attending the session (i.e. Target Audience)?

• Companies that (i) conduct their own company-specific cost studies (that are filed with the Commission), in support of proposed rates, and (ii) rely on ILEC’s Manuals for costing principles and concepts.

(e.g. SILECs and Cable Carriers)

• Interveners including individual Canadians, consumer groups and competitors that are interested in incumbent’s company-specific cost studies  filed in support of proposed rates.

The targeted audience is therefore primarily those with some familiarity with cost studies and who have participated, or have an interest in participating, in Commission proceedings involving costing issues.

An outline of the information to be presented during the one-day session is provided in Attachment 2. This information will serve to assess whether the informational session would be beneficial for you.

When and where will the one-day sessions be held?

When: One session on 2 March 2016 and a second session on 3 March 2016 (additional sessions may be provided based on demand)
Where: CRTC, 1 Prom. du Portage, Gatineau, QC J8X 4B1

Registration for the session:

Please confirm your attendance by sending an email to Sylvie.Martel@crtc.gc.ca by 1 February 2016 indicating the number of anticipated participants, names and contact information.

In order to conduct an efficient informational session, we may organize each one-day session by:

• Limiting the number of participants per company or organization, and,
• Grouping participants by company or organization based on costing expertise (to foster a more effective learning environment)

By 15 February, we will inform all participants of their respective scheduled one-day informational session (being 2 or 3 March 2016).

If you have any questions, please don’t hesitate to contact Lyne Renaud at 819-953-5414 or Mohammed Omar at 819-934-6378.

Sincerely,

Original signed by

Chris Seidl
Executive Director,
Telecommunications Sector
c.c.: Lyne Renaud, CRTC, 819-953,5414, lyne.renaud@crtc.gc.ca
Mohammed Omar, CRTC, 819-934-6378, mohammed.omar@crtc.gc.ca

Attach. (2)

Proposed Outline for Costing Principles & Concepts Session

1. Background

2. Cost Study Process

• Cost Cash Flows Included In Cost Study
• Economic & Financial Parameters
• Study Period
• Service Demand Forecast
• Capital Expenditure Estimation
• Expense Estimation
• Other Cost Estimations
• Present Worth of All Costs & Monthly Costs
•  Monthly Rate

3. Cost Study Review

Date modified:

2016-01-20