Telecommunications Service in Canada: An Industry Overview

Telecommunications Industry Terms

CLEC

Competitive Local Exchange Carrier. A company that has registered with the CRTC to provide local exchange services in competition to the incumbent telephone companies.

Contribution

Refers to the flow of revenues from services with rates above cost to those with rates below cost, mainly basic local residential services, specifically, the revenues that flow from toll services to subsidize residential services.

AESMR (Enhanced Specialized Mobile Radio)

A wireless telecommunications system that uses radio frequencies in the 800 MHz frequecy band to provide mobile dispatch services and access to the PSTN. ESMR uses digital technology over a multi-cell network architecture.

Essential Facility

Defined in the Decision on Local Competition to be a facility, function, process or service that meets three criteria: it is monopoly controlled; a CLEC requires it as an input to provide services; and a CLEC cannot duplicate it economically or technically. Facilities that meet this definition shall be subject to mandatory unbundling and mandated pricing. ILECs must also treat the tariffed rates for these facilities as costs in applying the imputation test.

Exchange

The basic unit for the administration and provision of telephone service by an ILEC, which normally encompasses a city, town or village and adjacent areas. Within an exchange and to other exchanges that have extended area service (EAS) or similar services with that exchange, all subscribers may place an unlimited number of calls of any duration to all other subscribers without incurring long distance toll charges. Exchanges for which EAS or similar services have been established continue, nevertheless to be separate and distinct exchanges.

Exogenous Factor (Z-Factor)

A component of the price cap formula incorporating a change, specific to the telecommunications industry, resulting from legislative, judicial or administrative actions which are beyond the control of the company.

Explicit and Implicit Subsidy

Local residential rates have traditionally been set below cost. The resulting shortfall has been funded by profits (i.e., contribution) from other services. The toll contribution is an explicit charge on long distance services and service providers. Implicit subsidies represent the internal flow of profits from certain local services, such as optional and some business services.

Gross Domestic Product Price Index (GDP-PI)

An index which measures the cost of a fixed basket of goods and services that make up the GDP in a particular base year. This is the inflation factor (I) used in the Price Cap Index.

ILEC

Incumbent Local Exchange Carrier - the existing monopoly telephone companies.

Imputation Test

A test adopted by the Commission to detect anti-competitive targeted pricing strategies. This test is to ensure that all telephone company services are priced to recover all causal costs including contribution and network access charges.

ISP (Internet Service Provider)

Sells Internet access to business and residential customers.

LEC

Local Exchange Carrier, defined in the Decision on Local Competition to mean either an ILEC or a CLEC.

Local/Access Shortfall

The term "local/access shortfall" refers to the deficit that occurs because the revenues from combined local and access services are not sufficient to cover the associated costs.

Loops

Refers to local loop(s). A term used to describe the wire that connects a business or residence to the PSTN.

Network Access Service (NAS)

A connection or line that provides customers with access to the public-switched telephone network.

Portable Subsidy

Subsidies currently going to the ILEC for a service that reverts to the CLEC when the CLEC takes over the service receiving the subsidy.

PSTN (Public Switched Telephone Network)

Refers to the worlwide dial-up telephone network made up of switching technology and transmission media that is used to communicate voice, other audio, video and data signals.

Rate Rebalancing

The term "rate rebalancing" refers to an increase in the price of local/access services in order to bring the rates for these services more closely in line with their costs and the corresponding reduction in the toll contribution rate, thereby reducing the subsidy that flows between these two classes of services.

Service Baskets

A group of services, based on criteria such as homogeneity and similarity in demand price elasticities, subject to pricing constraints under price regulation.

Toll Contribution Rates/strong>

Rates paid by providers of long distance service to subsidize the local/access shortfall.

Transit

International telecommunications traffic that does not originate or terminate in a carrier's own country. For example, telecommunications traffic carried by Teleglobe Canada between the United States and the United Kingdom.

Unbundled Local Loops

Refers to the process in which ILECs provide other telecommunications service providers with use of their local loops.

Unbundling

The policy of requiring ILECs to make available individual essential facilities on a tariffed basis.