| |
Telecom Public Notice CRTC 2006-5
|
| |
Ottawa, 9 May 2006 |
| |
Review of price cap framework
|
| |
Reference: 8678-C12-200605553 |
| |
In this Public Notice, the Commission
initiates a proceeding to establish the price cap regime that will go
into effect in 2007, in the operating territories of Aliant Telecom
Inc., Bell Canada, MTS Allstream Inc., Saskatchewan Telecommunications,
and TELUS Communications Company. The proceeding will include an
oral hearing to be held in Gatineau, Quebec in October 2006. |
| |
Introduction
|
|
1. |
In Extension of the price regulation
regime for Aliant Telecom Inc., Bell Canada, MTS Allstream
Inc., Saskatchewan Telecommunications and TELUS Communications Inc.,
Telecom Decision CRTC 2005-69,
16 December 2005 (Decision 2005-69),
the Commission extended the current price cap regime without changes
for Aliant Telecom Inc. (Aliant Telecom), Bell Canada,
MTS Allstream Inc. (MTS Allstream), Saskatchewan Telecommunications
(SaskTel) and TELUS Communications Company (TCC)1
for a period of one year, to 31 May 2007. |
|
2. |
In Extension of the price regulation
regime for Société en commandite Télébec and TELUS Communications
(Québec) Inc., Telecom Decision CRTC 2005-70,
16 December 2005 (Decision 2005-70),
the Commission extended the current price cap regime without changes
for Société en commandite Télébec (Télébec) and TELUS Communications
(Québec) Inc. (TCQ)2
for a period of one year, to 31 July 2007. |
|
3. |
In Decisions 2005-69
and 2005-70, the
Commission stated its intention to initiate a proceeding to review
the existing price cap regime following the release of the decision
in the proceeding initiated by Forbearance from regulation of local
exchange services, Telecom Public Notice CRTC 2005-2,
28 April 2005. Forbearance from the regulation of retail local
exchange services, Telecom Decision CRTC 2006-15
(Decision 2006-15)
was issued by the Commission on 6 April 2006. |
| |
Existing price cap regime
|
|
4. |
In Regulatory framework for second price
cap period, Telecom Decision CRTC 2002-34,
30 May 2002 (Decision 2002-34),
the Commission set out the price cap regime, effective 1 June
2002, for Aliant Telecom, Bell Canada, Manitoba Telecom
Services Inc.,3
SaskTel and TCC. In Implementation of price regulation for Télébec
and TELUS Québec, Telecom Decision CRTC 2002-43,
31 July 2002 (Decision 2002-43),
the Commission set out the price cap regime, effective 1 August 2002,
for Télébec and TCQ which was similar to the general regulatory regime
as set out for the other large incumbent local exchange carriers (ILECs)
in Decision 2002-34. |
|
5. |
The Commission designed the price cap
regime to achieve the following objectives: |
| |
1) to render reliable and affordable services of high quality,
accessible to both urban and rural area customers;
|
| |
2) to balance the interests of the three main stakeholders in
telecommunications markets, i.e., customers, competitors and incumbent
telephone companies;
|
| |
3) to foster facilities-based competition in Canadian
telecommunications markets;
|
| |
4) to provide incumbents with incentives to increase efficiencies
and to be more innovative; and
|
| |
5) to adopt regulatory approaches that impose the minimum
regulatory burden compatible with the achievement of the previous four
objectives.
|
|
6. |
Based on, among other things, the state
of competition identified in the proceedings leading up to Decisions
2002-34 and 2002-43
(collectively, the price cap decisions), the current price cap regime
involves multiple baskets and service groups with individualized basket
constraints, as well as, in some instances, specific rate element
constraints. |
|
7. |
The price cap regime includes eight baskets
or groups of services: residential local services in high cost serving
areas (HCSAs); residential local services in non-high cost serving areas
(non-HCSAs); business services; other capped services; Competitor
Services; services with frozen rates; public payphones; and uncapped
services. Each of these baskets or service groups is subject to pricing
constraints. |
|
8. |
The individual basket constraints rely on
an inflation factor (I), a productivity factor (X) and an exogenous
factor (Z), as appropriate. The Commission selected the chain weighted
Gross Domestic Product – Price Index (GDP-PI) published by Statistics
Canada as the inflation measure and it set the productivity offset at
3.5 percent. In addition to basket constraints, a variety of rate
element constraints were imposed on specific services which provide
customers with additional price protection. |
|
9. |
In the residential market, the Commission
applied a basket constraint equal to inflation less the productivity
factor to the basket of residential services in non-HCSAs. The
Commission did not impose a basket constraint on the basket of
residential services in HCSAs as such a constraint would have forced
down local exchange rates in HCSAs which were already set below cost. |
|
10. |
In order to ensure that rates were just and
reasonable, the Commission implemented a deferral account mechanism to
mitigate the adverse effects on local competition for residential
services in non-HCSAs that might have resulted from mandated rate
reductions. With a deferral account mechanism, an amount equal to the
revenue reduction required by the residential non-HCSA basket constraint
is assigned to the deferral account and retained in that account,
instead of reducing the revenues of the basket by means of rate
reductions. |
|
11. |
In addition, in the sub-baskets for
residential services in HCSAs and non-HCSAs, the Commission applied
basket constraints and a number of service-specific rate element
constraints in order to provide adequate price protection to subscribers
where local competition was expected to develop slowly. |
|
12. |
In the business market, given the extent to
which market forces were present and the extent to which business rates
were reduced in the initial price cap regime, the Commission did not
consider it necessary to subject business services to a productivity
offset. |
|
13. |
With respect to other capped services, the
Commission considered that market forces could not be relied upon to
sufficiently discipline the prices of these services and anticipated
that the ILECs would continue to achieve productivity and efficiency
gains in respect of these services. Accordingly, these services were
made subject to the productivity offset. |
|
14. |
The Commission established two categories
of Competitor Services. Category I Competitor Services are those
services found to be in the nature of an essential service. These
services comprise interconnection and ancillary services required by
Canadian carriers and resellers interconnecting to the ILECs' networks.
Since there were few, if any, competitive alternatives for services
assigned to Category I Competitor Services and having regard to the
expectation that ILECs would experience productivity and efficiency
gains in respect of these services, the Commission considered that rates
for Category I Competitor Services should reflect productivity gains on
an ongoing basis. |
|
15. |
Category II Competitor Services are
Competitor Services that are not in the nature of an essential service.
The Commission considered it appropriate not to apply a productivity
offset to the rates for these services. |
|
16. |
The rates for 9-1-1 service and Message
Relay Service were frozen. Also, public and semi-public pay telephones
were placed in a separate category and their rates were frozen.
All tariffed services not assigned to one of the previous baskets or
service groups were classified as uncapped services and are not subject
to any upward pricing constraints. |
|
17. |
In keeping with the ongoing effort to
streamline and improve the efficiency of regulation, in the price cap
decisions, the Commission revised the reporting requirements of the
ILECs by eliminating the filing requirements of both Phase III/Split
Rate Base and intercorporate transaction reports. The Commission
considered that the concept of a Utility Segment no longer had
relevance. This was due, in part, to the introduction of a Phase
II-based determination of the subsidy requirement starting in 2002 and
the structure of the current price cap regime. |
| |
Scope of the proceeding
|
|
18. |
The Commission hereby initiates a
proceeding to establish that price cap regime that will go into effect
in 2007, in the operating territories of Aliant Telecom, Bell Canada,
MTS Allstream, SaskTel, and TCC (the telephone companies). |
|
19. |
By letter dated 20 April 2006, Télébec
submitted that the price cap regime applicable to the company should not
be reviewed as part of this proceeding. Télébec proposed that subsequent
to a decision in this proceeding it would file a submission with the
Commission indicating whether the regime set out was appropriate to the
company going forward, noting any changes it would prefer. |
|
20. |
The Commission considers Télébec's request
to be appropriate. Accordingly, the Commission will not make Télébec a
party to this proceeding. Coincident with the issuance of a decision in
this proceeding, the Commission will request Télébec to indicate why the
regime set out in the decision resulting from this proceeding should not
be applicable to it. |
|
21. |
In order to streamline this proceeding, the
Commission is limiting the issues to be considered to those which it
considers directly related to a price cap regime. |
|
22. |
The Commission is inviting comments on what
changes, if any, should be made to the price cap regime with regard to
the following: |
| |
- objectives of the regime;
|
| |
- basket structure and assignment of services, except for
Competitor Services;
|
| |
- constraints for basket(s) of services (e.g., I-X);
|
| |
- constraints for individual services or rate elements (e.g., the
percentage increase per year allowable for basic residential
services), except for Competitor Services;
|
| |
- rate deaveraging within a band;
|
| |
- components of the price cap formula (e.g., I, X, and Z);
|
| |
- the continuing need for a deferral account for the residential
non-HCSA basket; and
|
| |
- the length of the next price cap regime, including whether the
regime should be of a fixed duration.
|
|
23. |
In addition, the Commission will also consider
in this proceeding how the price cap regime should be modified pursuant
to the framework set out in Decision 2006-15. |
|
24. |
This proceeding will strictly focus on
issues directly related to those identified above and will not include
the following: |
| |
- proposals for new Competitor Services or new categories of
Competitor Services;
|
| |
- examination of Phase II costs for existing Competitor Services;
|
| |
- existing assignments of Competitor Services between Categories I
and II;
|
| |
- definition of Category I and Category II Competitor Services;
|
| |
- safeguards for promotions, bundling rules and the winback rule;
|
| |
|
| |
- other forms of regulation (e.g., earnings overlay);
|
| |
- "re-initialization" of prices at the start of the next regime;
|
| |
- review of the basic service objective; and
|
| |
- review of competitor and retail quality of service indicators,
including standards, and rate adjustment/rebate plans.
|
|
ILEC reorganizations
|
|
25. |
TCC assumed all rights, entitlements,
liabilities and obligations relating to the provision of
telecommunications services in the territory previously served by TCQ.
In addition, BCE Inc. announced in February 2006 and in March 2006, that
it would create a "regional trust" containing some 3.4 million lines
that would include: |
| |
1) Bell Canada's rural wireline operations in Ontario and Quebec;
|
| |
2) Aliant Telecom's wireline operations in Atlantic Canada; and
|
| |
3) BCE Inc.'s 63.4 percent interest in Bell Nordiq.
|
|
26. |
The Commission notes that these ILEC
reorganizations will have an impact on the price cap regime under
consideration in this proceeding. Aliant Telecom, Bell Canada and TCC
are to propose what changes are necessary to the existing price cap
regime to reflect these reorganizations. These changes should address
the issues set out in paragraph 22 above as they relate to the new
corporate structures. |
| |
Procedure
|
|
27. |
Aliant Telecom, Bell Canada, MTS Allstream,
SaskTel, and TCC are all made parties to this proceeding. |
|
28. |
Other persons interested in participating
in this proceeding (including receiving copies of all submissions)
must notify the Commission of their intention to do so by filling
out the on-line form, or by writing to the Secretary General, CRTC,
Ottawa, Ontario, K1A 0N2, or by faxing at: (819) 994-0218 by 9
June 2006 (the registration date). Parties are to provide their
e-mail address, where available. If parties do not have access to
the Internet, they are to indicate in their notice whether they wish
to receive disk versions of hard copy filings. |
|
29. |
The Commission will issue on its website,
as soon as possible after the registration date, a complete list of
interested parties and their mailing addresses (including their e-mail
addresses, if available), identifying those parties who wish to receive
disk versions. |
|
30. |
Any person who wishes merely to file written
comments in this proceeding, without receiving copies of the evidence
filed or appearing at the hearing may do so by writing to the Commission,
at the address or fax number noted in paragraph 28, or by filling
out the on-line
form, by 26 October 2006. |
|
31. |
The Commission will not formally
acknowledge comments. It will, however, fully consider all comments and
they will form part of the public record of the proceeding. |
|
32. |
The Commission will shortly address
interrogatories to the telephone companies regarding issues set out in
this Public Notice. The telephone companies are directed to file
responses to the interrogatories with the Commission and serve copies on
all parties by 10 July 2006. |
|
33. |
Parties are to file with the Commission,
serving copies on all parties, their evidence on all matters within the
scope of this proceeding. All such material is to be filed with the
Commission and served on all parties, by 10 July 2006. |
|
34. |
Parties may address interrogatories to any
party who files evidence pursuant to paragraph 33. Any such
interrogatories must be filed with the Commission and served on the
relevant party or parties by 8 August 2006.
|
|
35. |
Responses to interrogatories addressed
pursuant to paragraph 34 are to be filed with the Commission and served
on all parties by 6 September 2006. |
|
36. |
Requests by parties for further responses
to their interrogatories, specifying in each case why a further response
is both relevant and necessary, and requests for public disclosure of
information for which confidentiality has been claimed, setting out in
each case the reasons for disclosure, must be filed with the Commission
and served on the relevant party or parties by 13 September 2006. |
|
37. |
Written responses to requests for further
responses to interrogatories and for public disclosure must be filed
with the Commission and served on the party or parties making the
request by 20 September 2006. |
|
38. |
A determination will be issued with respect
to requests for further information and public disclosure as soon as
possible. Any information to be provided pursuant to that determination
will be filed with the Commission and served on all interested parties
by 4 October 2006. |
|
39. |
An oral hearing will take place in
Gatineau, Quebec commencing on 10 October 2006 at the Conference
Centre, Phase IV, Outaouais Room, 140 Promenade du Portage, Gatineau,
Quebec and is expected to last approximately two weeks. |
|
40. |
Interested parties wishing to appear at the
oral hearing shall file notice of their intention to participate no
later than 11 August 2006. An organization and conduct letter,
providing directions on procedure with respect to the oral hearing,
including the scope of the issues to be examined during the oral
hearing, will be issued prior to the commencement of the oral hearing. |
|
41. |
Persons requiring communications support
such as assistive listening devices and sign language interpretation are
requested to inform the Commission at least twenty (20) days before the
commencement of the oral hearing so that necessary arrangements can be
made. |
|
42. |
All parties may file argument with the
Commission on any matter within the scope of this proceeding, serving a
copy on all other parties, by 26 October 2006. |
|
43. |
All parties may file reply argument with
the Commission, serving a copy on all other parties, by 6 November
2006. |
|
44. |
The Commission intends to issue a decision
by 30 April 2007. |
|
45. |
Where a document is to be filed or served
by a specific date, the document must be actually received, not merely
sent, by that date. |
|
46. |
Electronic submissions should be in the
HTML format. As an alternative, those making submissions may use
"Microsoft Word" for text and "Microsoft Excel" for spreadsheets. |
|
47. |
Each paragraph of all submissions should be
numbered. In addition, please enter the line ***End of document***
following the last paragraph. This will help the Commission verify that
the document has not been damaged during transmission. |
|
48. |
The Commission also encourages parties to
monitor the record of this proceeding (and/or the Commission's website)
for additional information that they may find useful when preparing
their submissions. |
| |
Important notice
|
|
49. |
Note that all information that you provide
as part of this public process, except information granted
confidentiality, whether sent by postal mail, facsimile, e-mail or
through the Commission's website at www.crtc.gc.ca, becomes part of a
publicly-accessible file and will be posted on the Commission's website.
This information includes your personal information, such as your full
name, e-mail address, postal/street address, telephone and facsimile
number(s), and any other personal information you provide. |
|
50. |
Documents received electronically or
otherwise will be posted on the Commission's website in their entirety
exactly as you send them, including any personal information contained
therein, in the official language and format in which they are received.
Documents not received electronically will be available in PDF format.
|
|
51. |
The personal information you provide will
be used and may be disclosed for the purpose for which the information
was obtained or compiled by the Commission, or for a use consistent with
that purpose. |
| |
Location of CRTC offices
|
|
52. |
Submissions may be examined or will be made
available promptly upon request at the Commission offices during normal
business hours: |
| |
Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room 206
Gatineau, Quebec J8X 4B1
Tel: (819) 997-2429 - TDD: 994-0423
Fax: (819) 994-0218 |
| |
Metropolitan Place
99 Wyse Road, Suite 1410
Dartmouth, Nova Scotia B3A 4S5
Tel: (902) 426-7997 - TDD: 426-6997
Fax: (902) 426-2721 |
| |
205 Viger Avenue West, Suite 504
Montréal, Quebec H2Z 1G2
Tel: (514) 283-6607 |
| |
55 St. Clair Avenue East, Suite 624
Toronto, Ontario M4T 1M2
Tel: (416) 952-9096 |
| |
Kensington Building
275 Portage Avenue, Suite 1810
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD: 983-8274
Fax: (204) 983-6317 |
| |
Cornwall Professional Building
2125 - 11th Avenue, Suite 103
Regina, Saskatchewan S4P 3X3
Tel: (306) 780-3422 |
| |
10405 Jasper Avenue, Suite 520
Edmonton, Alberta T5J 3N4
Tel: (780) 495-3224 |
| |
580 Hornby Street, Suite 530
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD: 666-0778
Fax: (604) 666-8322 |
| |
Secretary General |
| |
This document is available in alternative
format upon request, and may also be examined in PDF
format or in HTML at the following Internet site: http://www.crtc.gc.ca
|
