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Telecom Decision CRTC 2018-250

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Ottawa, 20 July 2018

Public record: 8663-S4-201800061

Sogetel inc. – Implementation of local competition for Iristel Inc. in the exchanges served by the local interconnection regions of Lac-Etchemin, Nicolet, and St-Liboire, Quebec

The Commission approves Sogetel inc.’s implementation plan for local competition, including local number portability, for Iristel Inc., in the exchanges served by the local interconnection regions of Lac-Etchemin, Nicolet, and St-Liboire, Quebec. The Commission’s decision enables customers in these exchanges to have a greater choice of telecommunications services.

Background

  1. The regulatory framework for local competition in the serving territories of the small incumbent local exchange carriers (ILECs) is set out in Telecom Decision 2006-14. That decision includes directives that the small ILECs must follow when submitting their implementation plans. The implementation of local number portability (LNP) is one of the key requirements of that framework.
  2. The Commission reviewed the framework and determined, in Telecom Regulatory Policy 2011-291, that local competition should continue to be introduced in the serving territories of the small ILECs based on the existing framework, subject to the modifications set out in that decision. For example, although the Commission considered that the small ILECs’ customers should have the opportunity to benefit from local competition, it determined that the small ILECs should be subject to special considerations regarding the recovery of costs.

Application

  1. The Commission received an implementation plan for local competition, including LNP (the implementation plan), dated 8 January 2018, from Sogetel inc. (Sogetel). In accordance with the framework set out in Telecom Decision 2006-14 and modified in Telecom Regulatory Policy 2011-291, the implementation plan was submitted in response to a formal signed expression of interest from Iristel Inc. (Iristel), which indicated that Iristel wished to interconnect with Sogetel to provide local services as a competitive local exchange carrier in the exchanges served by the local interconnection regions (LIR) of Lac-Etchemin, Nicolet, and St-Liboire, Quebec (referred to hereafter as the affected exchanges), located in Sogetel’s serving territory in Quebec.
  2. In its implementation plan, Sogetel indicated that in previous decisions, the Commission had already approved the terms associated with the implementation of local competition and LNP in these LIRs. Accordingly, Sogetel specified that the plan submitted as part of the present application was limited to additional elements that were required given Iristel’s request. Sogetel indicated that Iristel’s request would generate additional costs related to shared-cost circuitsFootnote 1 (e.g. materials, installation, and maintenance) and to LNP (e.g. portability and research costs).  
  3. The Commission did not receive any interventions regarding Sogetel’s application.

Issues

  1. The Commission has examined the following issues in considering Sogetel’s proposed implementation plan:
    • Which interconnection methods and options would be appropriate for implementing local competition for Iristel in the affected exchanges?
    • Are new wholesale tariffs required to allow for the implementation of local competition for Iristel in the affected exchanges?
    • What additional costs would be incurred related to the implementation of local competition for Iristel in the affected exchanges, and what mechanisms are available to Sogetel to recover its costs?
    • What would be a reasonable time frame to implement local competition for Iristel in the affected exchanges?

Which interconnection methods and options would be appropriate for implementing local competition for Iristel in the affected exchanges?

Positions of parties

  1. In the implementation plan, Sogetel proposed to respond to Iristel’s request by using the default point of interconnection (POI)Footnote 2 located in the central office of each LIR of Lac-Etchemin, Nicolet, and St-Liboire. Sogetel proposed to undertake all necessary discussions with Iristel to establish the exact number of interconnecting trunks that will be required and any other necessary information on POIs. Sogetel expected a need for shared-cost circuits between each of the company’s LIRs and Iristel’s point of presence.Footnote 3 In addition, for LNP, Sogetel expected to use the terms and systems already approved in previous Commission decisions.

Commission’s analysis and determinations

  1. In Telecom Decision 97-8, in which the Commission established the regulatory framework for local competition in the large ILECs’ serving territories, the Commission stated that competitors should be permitted to interconnect using shared-cost facilities to minimize interconnection costs. The Commission was seeking to promote competitive equity and interconnection efficiency by reducing or eliminating any incentive to impose on competitors costs for interconnection facilities that are higher than necessary.
  2. In Telecom Decisions 2006-14 and 2008-122, in which the Commission established the framework for local competition in the small ILECs’ serving territories, the Commission indicated that the frameworks for interconnection and wireless number portability that applied to the large ILECs should apply to the small ILECs.
  3. The principles of competitive equity and interconnection efficiency should prevail in the interconnection between Sogetel and Iristel to enable the parties to reduce their interconnection costs and, consequently, the impact on their subscribers.
  4. Accordingly, the Commission expects the two parties to negotiate the proposed terms and technologies, and to interconnect using the most efficient configuration possible, while minimizing the costs to be incurred.

Are new wholesale tariffs required to allow for the implementation of local competition for Iristel in the affected exchanges?

Positions of parties

  1. Sogetel indicated that in Telecom Order 2012-297, the Commission approved tariffs to implement local competition in Sogetel’s serving territory. The company did not expect that it would need to file additional tariffs associated with Iristel’s request.

Commission’s analysis and determinations

  1. Sogetel already has an Access Services Tariff that the Commission approved during the implementation of local competition in Sogetel’s serving territory. However, in the current proceeding, Iristel did not identify which services it may need.
  2. Accordingly, the Commission determines that Sogetel’s proposal to rely on its existing Access Services Tariff is acceptable. The Commission encourages the parties to come to an agreement on which services should be provided. If a change is required to the services that Sogetel offers, it must file a new tariff notice with the Commission to reflect the change.

What additional costs would be incurred related to the implementation of local competition for Iristel in the affected exchanges, and what mechanisms are available to Sogetel to recover its costs?

Positions of parties

  1. Sogetel submitted a cost study to justify the start-up costs and recurring costs related to the implementation of local competition for Iristel. Sogetel noted that in Telecom Decisions 2012-42, 2013-176, 2016-182, and 2017-233, the Commission authorized exogenous adjustmentsFootnote 4 of $71,000, $31,000, $28,431, and $2,500 per year, respectively, for the recovery of start-up costs, with corresponding reductions of $0.64, $0.11, $0.39, and $0.03 in the rate component Sogetel used to calculate its subsidy amount for the recovery of its ongoing costs.
  2. Sogetel identified $80,000 in start-up costs and $68,261 in ongoing costs over the five-year study period. The company submitted that these amounts represent an additional exogenous adjustment of $20,128 per year over a period of five years for the recovery of its start-up costs, as well as an additional reduction of $0.17 in the rate component used to calculate its subsidy amount for the recovery of its ongoing costs.Footnote 5
  3. Sogetel indicated that its forecasted start-up costs are based on an estimate of the consultation costs to prepare the implementation plan and the costs for materials to be installed at the three POIs. The forecasted ongoing costs are based on an estimate of additional portability costs related to the loss of network access services (NAS) and an estimate of additional LNP research costs related to NAS.

Commission’s analysis and determinations

  1. In previous decisions regarding local competition, the Commission recognized that the implementation of local competition could be costly for small ILECs, but determined that customers in the small ILECs’ serving territories should not be deprived of the advantages of local competition.Footnote 6 The Commission has consistently recognized that local competition should continue to be implemented in the small ILECs’ serving territories. In this case, local competition has already been established in the affected exchanges; however, the implementation plan in the present application deals with additional costs related to shared-cost circuits and to LNP.
  2. The Commission has reviewed the cost study and the breakdown of costs, taking into account the regulatory framework and costs approved in the past. It considers the proposed costs to be reasonable and comparable to costs submitted in previous applications for local competition implementation.
  3. Regarding Sogetel’s proposed start-up costs, these costs can be partially recovered through an exogenous adjustment, should Sogetel decide to take advantage of it.
  4. Regarding Sogetel’s proposed ongoing costs, in Telecom Regulatory Policy 2011-291, the Commission allowed for the recovery of ongoing costs related to the implementation of local competition through access to the National Contribution Fund, finding that the imputed $30 rate component used in calculating the subsidy requirement would be lowered by an amount equal to the lesser of the approved ongoing local competition costs on a per-NAS, per-month basis, or $2 per NAS per month.
  5. In light of the above, the Commission approves Sogetel’s proposed costs of (a) $80,000 in start-up costs over a period of five years, and (b) $68,261 in ongoing costs over a period of five years, which corresponds to an additional reduction of $0.17 in the rate component used to calculate the subsidy amount for the recovery of Sogetel’s ongoing costs.

What would be a reasonable time frame to implement local competition for Iristel?

Positions of parties

  1. Sogetel proposed to carry out its implementation plan within 160 days of the Commission approving the plan. In addition, Sogetel indicated that if certain issues are not resolved within the proposed time frame, the company would inform the Commission and, if required, propose another solution.

Commission’s analysis and determinations

  1. The framework governing local competition applicable to the small ILECs did not set out a specific time frame to establish each element of the implementation plan.
  2. Nonetheless, even if several activities related to the implementation of local competition for Iristel must be carried out separately from those carried out in the past, Iristel already has several elements in operation, such as basic POIs that have already been established in the exchanges served by the LIRs of Lac-Etchemin, Nicolet, and St-Liboire. In addition, Sogetel now has the experience to successfully complete the implementation of local competition. Accordingly, the Commission considers that the 160-day time frame proposed by Sogetel is appropriate.

Conclusion

  1. In light of all the above, the Commission approves the implementation of local competition for Iristel for the exchanges served by the LIRs of Lac-Etchemin, Nicolet, and St-Liboire, Quebec, within 160 days of the date of this decision.
  2. In Telecom Regulatory Policy 2018-213, the Commission determined that the local service subsidy would be phased out over a period of three years, from 1 January 2019 to 31 December 2021, through semi-annual reductions. The Commission also determined that the total 2018 subsidy amounts would be used to calculate the subsidy amounts to be paid during the transition period from 2019 to 2021. Accordingly, the reduction in the rate component used to calculate the subsidy amount for the recovery of ongoing costs approved in this decision will be included in the 2018 subsidy amount that will be used as the starting point for the phase-out.

Secretary General

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