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Telecom Order
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Ottawa, 31 May 1999
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Telecom Order CRTC 99-475
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In the matter of the filing of the 1997 Phase III/Split Rate Base
(SRB) results by Bell Canada, BC TEL, TELUS Communications Inc.,
MTS Communications Inc., NBTel Inc. (NBTel), Maritime Tel & Tel
Limited (MT&T;), Island Telecom Inc. (Island Tel) and NewTel Communications
Inc. (the companies).
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File No.: 8638-C12-01/97
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1.In accordance with various Commission decisions, the companies
are required to file their Phase III/SRB results by 30 September
of the following calendar year.
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2.The companies were unable to file their 1997 Phase III/SRB results
on or before 30 September 1998, because, among other things, the
Commission had not disposed of their proposed assignment procedures
for costs associated with broadband-capable equipment and facilities,
as the record with respect to the issue of transfer prices was not
complete.
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3.These procedures, set out in Implementation of Regulatory Framework
- Splitting of the Rate Base and Related Issues, Telecom Decision
CRTC 95-21, 31 October
1995 and in Telecom Order CRTC
97-144, 31 January 1997 (Order 97-144), provide that the companies
are to assign all costs associated with joint-use broadband-capable
equipment and facilities, such as Fibre Optics Transmission Systems
(FOTS), to the Competitive segment and to use transfer pricing to
reflect usage by the Utility segment.
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4.In a letter dated 30 October 1998, comments were sought on the
appropriateness of using the assignment procedures for costs associated
with broadband-capable equipment and facilities approved in Order
97-144 for use in 1996 for purposes of finalizing the companies'
1997 Phase III/SRB results.
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5.The companies, except MT&T;, Island Tel and NBTel, responded
that the production of 1997 Phase III/SRB results using the approved
1996 SRB ratios could be accomplished without a material impact
on their SRB results and would permit them to file these results
without further delay.
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6.MT&T;, Island Tel and NBTel submitted that they would prefer
to continue using their proposed inter-segment transfer pricing
in the production of their 1997 Phase III/SRB results.
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7.The Canadian Cable Television Association submitted that there
is no reason to finalize the 1997 Phase III/SRB results using inappropriate
methodologies and that finalizing the results should be delayed
until the correct methodologies, including transfer pricing, are
approved and in place.
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8.Because the record with respect to the determination of the
transfer prices remains incomplete, the Commission is concerned
that the finalization and filing of the companies' 1997 Phase III/SRB
results have been significantly delayed and this delay complicates
the companies' administration of the 1998 and 1999 Phase III/SRB
results.
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9.The Commission notes that the launching of new broadband initiatives,
as originally envisaged by the companies, has not materialized.
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10.The Commission further notes that increases in the annual assignment
of FOTS costs to the companies' Utility segments for the years 1995
through 1997 have not been material.
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11.Further, the Commission notes that the companies' 1997 Phase
III/SRB results will not be used for contribution rate setting.
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12.The Commission is satisfied that, with respect to the companies'
1997 Phase III/SRB results, the usage-based cost assignment methodology
approved for use in 1995 and 1996 will protect Utility subscribers
from bearing any undue costs associated with the deployment of broadband-capable
equipment and facilities.
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13.The Commission further notes that the use of the approved 1996
SRB ratios would permit the timely finalization and filing of the
companies' 1997 Phase III/SRB results.
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14.In light of the above, the Commission directs the companies
to:
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a) use their approved 1996 SRB ratios to produce their 1997 Phase
III/SRB results; and
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b) file their 1997 Phase III/SRB results within 30 days of this
Order.
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Secretary General
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This document is available in alternative format upon request and may also be viewed at the following Internet site: http://www.crtc.gc.ca
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