|
Decision CRTC 2000-150
Ottawa, 9 May 2000
SaskTel - Transition to federal regulation
Reference: 8663-S22-01/99
Table of contents
Paragraph
Introduction |
1
|
|
|
Transitional regulatory framework |
3
|
Transitional period and
pricing commitments |
4
|
Tariffs and agreements |
12
|
Request for final approval
|
12
|
Interconnection agreements
|
14
|
Provincial E-911 and Saskatchewan relay services
|
16
|
Customer-specific agreements
|
18
|
Support structure agreements
|
22
|
Imputation test |
26
|
Terms of service |
28
|
|
|
Safeguards against cross-subsidization |
30
|
Split rate base methodology |
31
|
Intercorporate transaction
policies |
38
|
|
|
Competitive services |
44
|
Contribution rates and
calculation methodology |
45
|
Direct connection rate |
57
|
Other competitive services |
59
|
|
|
Forbearance |
60
|
Terminal equipment |
62
|
Toll and toll-free services |
71
|
Interexchange private line and
packet data services |
84
|
Interexchange private line services
|
94
|
Packet data and frame relay services
|
98
|
Internet services |
101
|
Wireless services |
112
|
|
|
Other reporting requirements |
130
|
|
|
Appendix |
|
Saskatchewan Telecommunications (SaskTel) will join Canada's
other major incumbent telephone companies under the Commissions jurisdiction on 30
June 2000. This decision provides the parameters for an 18-month transitional regulatory
framework to federal regulation that expires 31 December 2001.
The Commission accepts SaskTels commitment not to increase utility service rates
above the established tariff level at 30 June 2000 during the transition period.
However, the Commission finds the companys proposal to freeze the contribution rates
inappropriate as its transitional regulatory regime is somewhat different from the other
major incumbent telephone companies price cap regime. The timing of a review
of SaskTels financial situation is likely to coincide with the price cap review of
these other telephone companies.
Acceptance of SaskTels pricing commitment will not preclude the Commission from
conducting a review of certain tariffs that require examination. In addition, if the
company wishes to introduce new services, seek rate reductions for existing services, or
bundle other services with utility services, it will be required to file cost studies as
part of its tariff applications.
The Commission believes that sufficient safeguards against cross-subsidization should be
in place prior to granting forbearance for specific competitive services. Accordingly, it
considers appropriate SaskTels proposal to align its accounting separation
methodology with that of the other major incumbent telephone companies. Further, the
Commission has established reporting requirements to monitor SaskTels financial
performance and to ensure that no unreasonable preference is granted to an affiliate of
the company.
The Commission requires that SaskTel bring its competitor interconnection tariffs and
agreements more closely in line with those approved for the other major incumbent
telephone companies.
An assessment of the appropriateness of SaskTels agreements, terms, conditions and
rates will be conducted once they are filed by the company before 30 June 2000.
SaskTel and SaskTel Mobility are granted forbearance effective 30 June 2000
similar to that of the other telephone companies for services found to be subject to
competition, consistent with the objectives of the Telecommunications Act. Forbearance is
conditional on SaskTels proposal to align some of the terms and conditions for its
services with those of the other major incumbent telephone companies.
Introduction
- On 21 September 1999, SaskTel filed an application pursuant to Part VII of the CRTC
Telecommunications Rules of Procedure proposing a transitional regulatory framework
for a period of 18 months, to become effective when SaskTel becomes federally regulated on
30 June 2000.
- To consider SaskTel's application and seek comments from interested parties, the
Commission issued SaskTel Application for transition to federal regulation,
Telecom Public Notice CRTC 99-22, dated 4
October 1999. A list of interested parties to this proceeding is provided in the appendix
to this decision.
Transitional regulatory framework
- The Commission approves an 18-month transitional regulatory framework for
SaskTel, during which the company will not increase its utility service rates above the
levels established on 30 June 2000. SaskTel will align its tariffs, agreements and
terms of service with those of the other major incumbent telephone companies as described
below and file them for Commission approval before 30 June 2000. A full review of
SaskTel's financial situation is expected to be initiated coincidental to the price cap
review for the other major incumbent telephone companies.
Transitional period and pricing commitments
- SaskTel submitted that eventually it can be subject to a regulatory framework consistent
with that applied to the other major incumbent telephone companies. SaskTel further
submitted that a full review of its financial situation should be conducted in conjunction
with the upcoming proceeding to review the current price cap regime for the other major
incumbent telephone companies.
- SaskTel proposed a transitional regulatory framework for the period 30 June 2000 to
31 December 2001, during which SaskTel committed not to increase the rates for any of
its utility services above the levels established on 30 June 2000 and approved by the
Commission. Consistent with the Commission's previous directives applied to the other
major incumbent telephone companies, SaskTel proposed to freeze the rates for 911 and
Saskatchewan relay service throughout the transition period.
- Interested parties generally opposed the pricing commitments and requested that
SaskTel's rates and policies be given only interim approval on 30 June 2000. Some
parties were of the view that immediately upon coming under federal regulation, SaskTel
should file the standard studies and cost evidence supporting its proposed rates,
particularly for contribution and essential competitor services. Parties also had concerns
regarding the delay of a full review of SaskTel's financial situation.
- In that respect, the Commission notes that it is not unusual for it to approve rates for
a company coming under federal regulation and initiate a review at a later date, as it did
in the case of MTS Communications Inc. (MTS). Further, a request by SaskTel for local rate
increases would have required a full review of SaskTel's financial situation. SaskTel's
commitment not to increase rates for any of its utility services above the levels
established on 30 June 2000 obviates the need for a full review at this time.
- In light of the above and SaskTel's commitment to align with federal telecommunications
policies similar to those applied to other major incumbent telephone companies, the
Commission is of the view that the proposed 18-month transitional regulatory framework is
reasonable.
- Given the length and the purpose of the transition period, the Commission believes it
appropriate to accept SaskTel's commitments not to increase rates for any of its utility
services above the levels established on 30 June 2000. However, the Commission
denies SaskTel's request to freeze the rates for 911 and Saskatchewan relay service during
that period. SaskTel's proposal to freeze its contribution rates is dealt with later in
this decision. The Commission considers that acceptance of SaskTel's pricing commitment
for all utility services will not preclude it from conducting a review, on a case-by-case
basis, of certain tariffs that it considers require examination.
- The Commission intends to initiate a full review of SaskTel's financial situation within
the 18-month transition period. The Commission expects that the timing of the review will
coincide with the price cap review of the other major incumbent telephone companies.
- The Commission notes that a number of important issues other than financial issues may
need to be addressed after 30 June 2000, including the roll-out of local number
portability, establishment of a portable subsidy mechanism, implementation of a central
fund and the recovery of start-up costs. In addition to the above, the Commission notes
that in Telephone service to high-cost serving areas, Telecom Decision CRTC 99-16,
dated 19 October 1999, it indicated that it would consider how that decision should
apply to SaskTel in a future proceeding once it comes under the Commission's jurisdiction.
Tariffs and agreements
Request for final approval
- SaskTel requested final approval of all rates, terms and conditions for services
provided on 30 June 2000 and approval of all agreements in effect on that same day.
- SaskTel's tariffs and agreements were not filed for approval in this proceeding. The
Commission will not, therefore, make a determination in this decision on whether to
approve tariffs and agreements either on an interim or final basis. The Commission will
make that determination after SaskTel has filed its tariffs containing all terms,
conditions and rates for services (excluding those which are forborne) to be provided on
30 June 2000 and its agreements in effect on that same day.
Interconnection agreements
- SaskTel indicated that the interconnection agreements that it has with
other carriers have been filed with the Commission. SaskTel stated that it may enter into
agreements with other carriers before 30 June 2000 and that it will submit for the
Commission's approval all agreements with other carriers that have not previously received
approval.
- The Commission directs SaskTel to file before 30 June 2000, all other
interconnection agreements that have not been previously approved by the Commission.
Provincial E-911 and Saskatchewan relay services
- SaskTel indicated that it will file all Provincial E-911 Service
Agreements with the Commission by 30 June 2000. Further, Saskatchewan relay service
is provided under terms and conditions which are consistent with Commission decisions.
SaskTel stated that the tariffs associated with this service will be filed for Commission
approval prior to 30 June 2000.
- The Commission directs SaskTel to file before 30 June 2000,
Provincial E-911 Service Agreements and to make the terms and conditions for the provision
of Saskatchewan relay service consistent with those approved for the other major incumbent
telephone companies, as it indicated it would do in this proceeding.
Customer-specific agreements
- SaskTel noted that the Saskatchewan Telecommunications Act permits
it to enter into a special agreement with a customer for the provision of
telecommunications services where the terms and conditions are at variance with those of
SaskTel's tariffs. SaskTel stated that it intends to replace these customer-specific
agreements (CSAs) with tariffed services by 30 June 2000.
- However, SaskTel noted that it will not be possible to obtain customers'
consent to vacate three of the CSAs without a significant financial liability. In view of
this, SaskTel stated that it did not intend to make these three CSAs part of its tariffs.
Pursuant to subsection 25(4)(b) of the Telecommunications Act, SaskTel requested
final approval of these three CSAs, on 30 June 2000, with the restriction that the
agreements may not be made available to new subscribers, or in additional quantities or at
additional locations to current customers, and may not be renewed.
- The Commission accepts SaskTel's proposal to file for approval the three
CSAs noted above which will be allowed to expire and not be renewed.
- The Commission directs SaskTel to file, before 30 June 2000, the
three CSAs and tariffs for all telecommunications services not forborne from in this
decision.
Support structure agreements
SaskTel stated that the only support structure agreements currently in place are
between SaskTel and cable operators. SaskTel stated that there are essentially two forms
of agreement, one which was negotiated as part of the multi-million dollar sale of
SaskTel's cable television plant to the local cable television operators in 1986, and the
other which has been offered to cable television operators that were not part of the sale
transaction.
The Canadian Cable Television Association (CCTA) stated that it has several concerns
respecting the provisions for support structures currently in place in SaskTel's
territory. The CCTA argued that these issues could be resolved by requiring SaskTel to
adopt the same support structure tariffs and agreements as required for the other major
incumbent telephone companies. The CCTA submitted that SaskTel should be directed to put
forward a proposed tariff for joint use pedestals and the tariff should be consistent with
those of the other major incumbent telephone companies.
In reply, SaskTel stated that it has developed a draft support structure agreement, to
be amended according to Telecom Order CRTC 2000-13, dated 18 January 2000. It intends to
put a support structure agreement in place prior to 30 June 2000 and make it
available to eligible entities requesting access to support structures on a going-forward
basis. However, SaskTel objected to the CCTA's attempts to have the Commission order
existing permits to be transferred to the new agreement under the same terms and
conditions. SaskTel stated that the cable companies, having obtained valuable benefits as
a result of the sale of SaskTel's cable plant to them in 1986, should not be permitted to
escape their responsibilities under the agreement as part of this proceeding.
In light of the above, the Commission directs SaskTel to file for approval, before
30 June 2000, its current support structure agreements signed with cable operators.
Issues regarding these agreements can be raised with the Commission on a going-forward
basis. The Commission further accepts SaskTel's proposal and directs it to file, before
30 June 2000, its support structure agreement for future services consistent with
Order 2000-13 and to make this agreement available on a going-forward basis.
Imputation test
- SaskTel submitted that should the company introduce any new services or wish to lower
rates of any of its existing services, it would submit tariff applications, supported by
the necessary documentation and costing information. SaskTel stated that it is in the
process of developing Phase II costing capabilities to support its future tariff filing
requirements. In this regard, the Commission notes that in this proceeding SaskTel stated
that its imputation test methodology will be the same as that prescribed by the
Commission.
- The Commission directs SaskTel to file for approval its imputation test methodology by
31 October 2000. Until such approval, SaskTel must include cost studies as part
of its tariff applications where an imputation test would be required. Filings requiring
cost studies would include new services, rate reductions, and services bundled with
utility services.
Terms of service
- SaskTel indicated that prior to 30 June 2000, it will adopt the terms of service
consistent with those currently in force for the other major incumbent telephone
companies.
- The Commission directs SaskTel to file before 30 June 2000 and to align its terms
of service applicable to competitors as well as the terms of service applicable to all
customers with those approved by the Commission for the other major incumbent telephone
companies.
Safeguards against cross-subsidization
- The Commission considers that the Split Rate Base (SRB) methodology and intercorporate
transaction reports are appropriate tools to safeguard against cross-subsidization from
the utility segment of a telephone company. In this regard, it accepts SaskTel's proposed
SRB methodology along with its proposed changes and directs the company to report its
intercorporate transactions on a quarterly basis.
Split Rate Base methodology
- SaskTel indicated that the methodology used in its SRB reporting system did not evolve
from Phase III methodology as did that of the other telephone companies. SaskTel
submitted that its SRB methodology assigns revenue, expense and investment amounts to the
utility and competitive segments according to its definition of these segments. SaskTel
identified two differences between its methodology and that of the other incumbents:
a) the treatment of customer profile information; and
b) the lack of empirical evidence that all costs identified as common are fixed in
nature.
- SaskTel indicated that it planned to address these two differences by 30 June 2000.
- Parties submitted that, as SaskTel's SRB methodology is not based on Phase III
costing methodology, it is difficult to assess its reasonableness. They also submitted
that SaskTel will be the only major incumbent telephone company that has not had its SRB
methodology reviewed and approved by the Commission. Parties also expressed concern
regarding how SaskTel reflects its use of direct connection service and the implied costs
for the service in its SRB methodology.
- SaskTel replied that, although its methodology did not evolve from Phase III
methodology, it did employ the Phase III costing principles and methodologies to
develop its SRB manual. The company noted that the audits performed by Deloitte &
Touche confirmed that these procedures are substantially consistent with Phase III
methodology. SaskTel submitted that it has an accounting separation in place consistent
with appropriate SRB methodology and sufficient for the purpose of providing the
competitive safeguards necessary for forbearance.
- With respect to the direct connection service, SaskTel submitted that its treatment of
switching and aggregation revenues and costs is completely consistent with Commission
directives in Implementation of regulatory framework - splitting of the rate base and
related issues, Telecom Decision CRTC 95-21, dated 31 October 1995.
- After reviewing SaskTel's specific switching and aggregation assignments to the SRB
segments, the Commission considers that SaskTel's treatment of its switching and
aggregation revenues and costs is in compliance with Commission directives in Decision
95-21.
- The Commission finds SaskTel's definition of its utility and competitive segments, in
its SRB methodology, to be consistent with current directives. The methodology used by
SaskTel is reasonably in line with those of the other telephone companies, with the
exception of the two differences noted by SaskTel. Therefore, the Commission accepts
SaskTel's proposed SRB methodology for the proposed transition period and directs that, by
30 June 2000, it provide empirical evidence to support its assignment of costs
to the common category and modify its assignment methodology as it applies to customer
profile information in compliance with the directives in Decision 95-21.
Intercorporate transaction policies
SaskTel filed a copy of its intercorporate transaction policies as part of this
proceeding. In addition, SaskTel proposed to file, during the transition period,
intercorporate transaction reports as provided by other major incumbent telephone
companies operating under price regulation. SaskTel indicated that it is the company's
understanding that services provided to SaskTel Mobility through SaskTel's Carrier
Services Group (CSG) are not required to be included in intercorporate transaction
reports.
The Commission considers that the general principles outlined in SaskTel's policy are
consistent with those set out in Review of intercorporate transactions policies, rules and
procedures, Telecom Decision CRTC 97-5, dated 21 March 1997.
Intercorporate transaction reports are an effective tool to ensure that no undue or
unreasonable preference is granted to an affiliate of the telephone companies, and can
help to identify any potential cross-subsidies to an affiliated company.
Although SaskTel has an accounting separation system, the Commission has not yet been
through a full review of SaskTel's financial situation. Therefore, total company
intercorporate transactions and a quarterly basis reporting requirement would be more
beneficial in monitoring SaskTel's operations during the transition period.
Consistent with previous decisions, as the CSG is a division of SaskTel, the Commission
is of the view that transactions between this division of SaskTel and affiliated companies
should be reported as intercorporate transactions.
The Commission approves SaskTel's intercorporate transaction policy as submitted and
directs the company to include, as part of its reporting requirement, all transactions
which combine to exceed $100,000 annually, between the total company (including the CSG)
or integral affiliates and all its non-integral affiliates. Furthermore, the Commission
directs SaskTel to report intercorporate transactions on a quarterly basis, within 90 days
of the end of the quarter commencing on 1 October 2000.
Competitive services
- The Commission considers it appropriate for SaskTel to align its
competitor interconnection tariffs in a manner consistent with those approved for other
major incumbent telephone companies. SaskTel's proposal to freeze its contribution rates
during the transition period is hereby denied. The company is directed to show cause as to
why it should not adopt the $0.003/minute/end rate for direct connection service approved
for other major incumbent telephone companies.
Contribution rates and calculation methodology
In its application, SaskTel proposed that its interexchange
contribution rates be approved on a final basis and be frozen until the end of the
transition period, or until the Commission implements changes to the contribution
mechanism as a result of the proceeding pursuant to Review of contribution collection
mechanism and related issues, Telecom Public Notice CRTC 99-6, dated 1 March 1999.
SaskTel estimated that its average contribution rate would be $0.0184/minute/end effective
30 June 2000. SaskTel indicated that this rate would decrease to approximately
$0.0125/minute/end, if its application to the Government of Saskatchewan for local rate
increases were approved.
Parties submitted that only interim approval should be given to
SaskTel's contribution rates, pending a full review of SaskTel's studies and cost evidence
that supports its contribution rates.
The Commission notes some differences between SaskTel's contribution
calculation methodology and that of the other major incumbent telephone companies:
- a wireless service provider (WSP) surcharge has not been established;
- contribution is applied on direct access line (DAL) minutes for alternative providers of
long distance services (APLDS) rather than the use of a surcharge on contribution-eligible
minutes;
- toll-free dial-up Internet service carried on the public switched network in
Saskatchewan for its rural and remote customers is subsidized through contribution; and
- a contribution exemption regime is not in place.
- SaskTel proposed that it use a per-circuit surcharge for WSPs, as a proxy of one of the
other major incumbent telephone companies that has similar operational and service
environments and similar contribution requirement until a decision is issued for PN 99-6.
- Rogers Wireless Inc. (RWI) submitted that a traffic study similar to that performed by
WSPs, as a result of Telecom Order CRTC 97-590, dated 1 May 1997, would be a superior
method of determining the level of the WSP surcharge to SaskTel's proposal of arbitrarily
adopting a surcharge of another service provider.
- The Commission notes that conditions have changed since the 1997 WSP traffic study was
performed in the other major incumbent telephone companies' territories, i.e., change in
number of WSPs and growth in minutes. In the Commission's view, it would be difficult to
produce comparable results for SaskTel. Therefore, the Commission considers SaskTel's
proposal of adopting a proxy rate to be acceptable, given the circumstances and the length
of the transition period. Further, the Commission is of the view that the service
environment of MTS would more closely resemble that of SaskTel than those of other major
incumbent telephone companies and considers it appropriate that SaskTel use MTS'sWSP
surcharge of $9.27 per-circuit during the transition period. The Commission expects
SaskTel to include the impact of the WSP surcharge in its contribution requirement
calculation and to file tariffs to reflect the surcharge effective 30 June 2000.
- With respect to SaskTel applying contribution on APLDS' DAL minutes, the Commission
considers that this approach should result in a more accurate reflection of market minutes
in the calculation of the contribution rate. Accordingly, this approach is acceptable for
SaskTel during the transition period.
- With respect to SaskTel's toll-free access to Internet service, SaskTel proposed to
include the minutes attributed to the toll-free dial-up to the Internet in the calculation
of its contribution rates. The Commission considers that it is appropriate that SaskTel
include these minutes in the base for determining the contribution rates, consistent with
the methodology approved for other major incumbent telephone companies.
- The Commission accepts SaskTel's undertaking to implement a contribution exemption
regime on 30 June 2000 consistent with other major incumbent telephone companies.
- The Commission considers SaskTel's proposal to freeze the contribution rates to be
inappropriate since SaskTel's proposed regulatory framework is somewhat different from the
price cap regime of the other major incumbent telephone companies and therefore it is
denied. The Commission expects that the contribution rates approved on 30 June 2000
will remain in place for the duration of the transition period.
- With respect to the level of SaskTel's contribution rates, the Commission notes that,
although there are some differences in SaskTel's contribution calculation methodology,
SaskTel's contribution rates are comparable with those of the other major incumbent
telephone companies. The Commission accepts SaskTel's contribution calculation methodology
for the transition period. Given the local rate increases recently approved by the
Government of Saskatchewan, the Commission expects SaskTel to reduce its average
contribution rate to $0.0125/minute/end at 30 June 2000, as per its proposal.
- The Commission directs SaskTel to adopt a proxy per-circuit WSP surcharge of $9.27, the
equivalent of that applicable to MTS, modify its contribution calculation to include
SaskTel's toll-free access minutes to the Internet and implement a contribution exemption
regime by 30 June 2000.
Direct connection rate
SaskTel proposed to unbundle its current switching and
aggregation rate of $0.017/minute/end and offer a $0.007/minute/end rate for direct
connection service by 30 June 2000. The Commission notes that by letter dated 9 March
2000, a $0.003/minute/end rate for direct connection service was approved for the other
major incumbent telephone companies.
The Commission directs SaskTel to file unbundled tariffs for
the provision of switching and aggregation services. The Commission further directs
SaskTel to show cause by 30 June 2000, as to why SaskTel should not adopt the
$0.003/minute/end rate approved for the other major incumbent telephone companies in the
Commission's letter dated 9 March 2000.
Other competitive services
The Commission directs SaskTel to align, on a going-forward basis,
its competitor interconnection tariffs in a manner consistent with those approved by the
Commission for the other major incumbent telephone companies. SaskTel is to file a tariff
for the provision of billing and collection service and to adopt the technical
specifications in the technical guideline approved by the Commission as a basis for
providing the service, to modify the terms for its wireless interconnection tariffs to
bring them in line with other companies' tariffs, and to adjust its local loop rates
consistent with Commission decisions.
Forbearance
- The Commission grants SaskTel forbearance, effective 30 June 2000, from the
regulation of terminal equipment, toll and toll-free services, interexchange private line
and packet data services, retail end-user Internet services and wireless services, to the
extent described below and conditional on the terms established in this decision.
- Pursuant to subsection 34(4) of the Telecommunications Act, sections 24, 25, 27,
29 and 31 of the Act do not apply to SaskTel (or SaskTel Mobility in the case of wireless
services) to the extent that these sections are inconsistent with the Commission's
determinations in this decision.
Terminal equipment
- SaskTel requested that the Commission forbear, effective 30 June 2000, from
regulating the sale, lease (rental) and maintenance of terminal equipment provided by the
company. More specifically, SaskTel requested forbearance from sections 24, 25, 27, 29 and
31 of the Act, to the same extent granted the other major incumbent telephone companies in
relation to terminal equipment in Review of regulatory framework, Telecom Decision
CRTC 94-19, dated 16 September 1994.
- SaskTel sells, rents and maintains various types of single-line and multi-line terminal
equipment (e.g., voice terminals, wireless terminals, Centrex terminal sets, key systems,
private branch exchange systems and data terminal equipment for business customers). The
Commission forbore from regulating these types of terminal equipment for other major
incumbent telephone companies in Decision 94-19.
- Terminal interconnection was permitted for all businesses with single-line services and
residential customers in Saskatchewan starting in November 1989. This permitted all
customers with single-line services to provide their own inside wire and jacks and to
install and connect their own terminal equipment to SaskTel's network. Similarly, in
January 1990, businesses with multi-line services were allowed to connect their own
terminal equipment to SaskTel's network.
- SaskTel's bills list equipment rental and service charges separate from network access
charges.
- The company stated that it provides a demarcation point (i.e., modular connection
device) located as close as possible to the location at which SaskTel's cable enters the
customer's premises. All wire and cable beyond that point is the customer's
responsibility.
- The Commission notes that, while a number of interveners raised concerns about the
granting of forbearance in general, none of them raised concerns or questioned the
evidence provided by SaskTel on the terminal equipment market in Saskatchewan.
- The Commission considers that the terminal equipment market in Saskatchewan exhibits all
the characteristics of a competitive market. There are numerous competitive suppliers, low
barriers to entry, aggressive pricing and customers are able to easily switch equipment
suppliers in both the single-line and multi-line segments of the market.
- In light of the evidence filed by SaskTel, the Commission considers the sale, lease and
maintenance of single-line and multi-line terminal equipment in Saskatchewan to be
sufficiently competitive to warrant forbearance pursuant to subsection 34(2) of the Act.
In particular, the Commission considers that it is appropriate to forbear from exercising
its powers under sections 24 (in part), 25, 27, 29 and 31 of the Act and retain its powers
under section 24 to ensure that SaskTel maintains procedures for the handling of
confidential customer information.
- However, since SaskTel submitted that 65% of households and 79% of businesses continue
to lease at least one telephone set from the company, the Commission directs SaskTel to
notify its customers through a bill insert that they may provide their own telephone jacks
and use their own telephone sets. The Commission directs SaskTel to submit a draft copy of
its notification to the Commission, before 30 June 2000, for review prior to sending it to
its customers.
Toll and toll-free services
- SaskTel requested that the Commission forbear, effective 30 June 2000, from
regulating SaskTel's current and future toll and toll-free services, consistent with the
forbearance granted to the other telephone companies in Forbearance - Regulation of
toll services provided by incumbent telephone companies, Telecom Decision CRTC 97-19,
dated 18 December 1997. In particular, SaskTel requested forbearance from sections 25, 27
(in part) and 31 of the Act. SaskTel submitted that, consistent with Decision 97-19, toll
services for the purpose of this application include basic toll and discounted toll
services and toll-free services (i.e., 800/888/877 services).
- SaskTel also requested that the Commission forbear from exercising all of its powers and
duties under section 29 of the Act. It noted that in the proceeding initiated by letter
dated 9 August 1999 to consider Forbearance for section 29 international agreements of
the former Stentor member companies, many of those companies requested that the
Commission forbear from section 29 for all agreements with other telecommunications
carriers that relate exclusively to forborne services, whether domestic or international.
- In Decision 94-19, the Commission identified specific areas of concern relevant to toll
forbearance that must be met in addition to the general forbearance criteria identified in
section 34 of the Act. SaskTel believes that it has met the additional competitive
safeguards for toll forbearance identified in that decision.
- In Decision 97-19, the Commission determined that the filing of an imputation test,
requiring that toll and toll-free services are priced above the floor level prescribed by
the Commission, was not necessary for forborne toll and toll-free services. In this
regard, it noted, among other things, that retaining its powers under subsection 27(2)
would reduce the incentive to engage in below-cost pricing by ensuring that the terms and
conditions under which forborne services are made available for resale and sharing are not
unjustly discriminatory or unduly preferential.
- Parties generally opposed granting SaskTel forbearance from the regulation of toll
services. They identified the lack of an approved SRB methodology, the need for a ceiling
on basic toll rates to prevent cross-subsidization of highly competitive toll services by
less competitive toll services, and past restrictive interconnection rules as some
elements to be addressed prior to granting forbearance.
- Based on the evidence provided, the Commission is of the view that the toll and
toll-free markets in Saskatchewan exhibit the characteristics of a competitive market. The
Commission notes that consistent with its determinations in Decision 97-19, these markets
are national in scope. There are no significant barriers to entry in toll markets in
Saskatchewan, and a number of competitors, including facilities-based suppliers, have been
providing long distance services in the province for some time. There also appears to be
considerable price competition and movement in market share.
- With respect to parties' concerns regarding SaskTel's SRB methodology, the Commission
states in this decision that it accepts its methodology for the proposed transition
period.
- Further, SaskTel has committed to remove prior to 30 June 2000 any barriers
identified by interveners. As such, the Commission notes that SaskTel committed to revise
its Access Services Tariff and interconnection arrangements in order to align its
procedures to be consistent with those of the other major incumbent telephone companies.
SaskTel stated that interconnection through trunk-side direct connect facilities to
SaskTel's local switches will be made available prior to the company coming under federal
regulation on 30 June 2000, and that line-side interconnection will be available on
30 June 2000. In addition, SaskTel stated that coincident with the introduction of
line-side interconnection, it will be expanding the scope of services available to
resellers and that it will be prepared to enter into billing and collection arrangements
with APLDS that require such services. SaskTel submitted that interconnection facilities
will continue to be available to APLDS through its CSG, which has been established
consistent with the Commission's determinations in Competition in the provision of
public long distance voice telephone services and related resale and sharing issues,
Telecom Decision CRTC 92-12, dated 12 June 1992.
- The Commission notes that SaskTel has a co-location policy in place and considers that
its co-location terms are generally consistent with those approved for the other major
incumbent telephone companies. The Commission also notes that SaskTel stated that it would
completely align any remaining differences in its co-location terms with those of the
other major incumbent telephone companies prior to 30 June 2000.
- The Commission considers that toll and toll-free markets in Saskatchewan are
sufficiently competitive to warrant forbearance pursuant to section 34 of the Act, and
that the additional conditions identified for toll forbearance in Decision 94-19 have been
met to the Commission's satisfaction.
- In light of the foregoing, and subject to the conditions below, the Commission forbears
from regulating under sections 24 (in part), 25, 27 (in part), 29 (in part) and 31 of the
Act the provision of toll and toll-free services by SaskTel. The Commission retains,
consistent with Decision 97-19, its powers:
- under section 24 to impose certain conditions governing confidential customer
information and to impose future conditions on the offering of toll and toll-free services
by SaskTel, if necessary;
- under subsection 27(1) in respect of basic toll services in order to implement the cap
on the North American basic toll schedules and for areas without equal access;
- under subsection 27(2) in respect of issues related to access to networks and resale and
sharing of toll and toll-free services and with respect to basic toll services;
- under subsections 27(3) to 27(6) to the extent that they refer to compliance with powers
and duties not forborne from in Decision 97-19; and
- under section 29 (in part), with the exception of agreements which were forborne for the
other major incumbent telephone companies in Forbearance for agreements between
domestic and foreign common carriers, Telecom Order CRTC 99-1202, dated 22 December
1999.
- Consistent with Decision 97-19, the Commission imposes the following section 24
conditions on the offering and provision of toll and toll-free services by SaskTel:
- SaskTel shall file with the Commission, and make publicly available, rate schedules
setting out the rates for basic toll services, including the 50% discount applicable to
calls originating from and billed to the residence service of registered or certified
users of Telecommunications Devices for the Deaf;
- subscribers shall be provided reasonable advance notice in writing of any increase to
basic toll rates;
- basic toll rates shall not be route de-averaged;
- the cap on overall North American basic toll rates implemented in Decision 97-19 shall
apply. Changes within any of the North American basic toll schedules will be permissible,
provided any rate increases within a schedule are offset by corresponding decreases within
the same schedule such that there is no change to that schedule's weighted average rate;
and
- SaskTel shall ensure that all toll customers and applicants for toll services in their
respective serving territories can choose basic toll service at the rates set out in the
rate schedules noted above.
- In addition to the above, the Commission also imposes the following section 24
conditions on the offering of toll and toll-free services. Forbearance will be conditional
on SaskTel having the following in place by 30 June 2000:
- interconnection through trunk-side direct connect facilities to SaskTel's local
switches;
- line-side interconnection; and
- alignment of its co-location arrangements with those approved for the other major
incumbent telephone companies.
Interexchange private line and packet data services
- SaskTel requested forbearance, effective 30 June 2000, from
regulation of its current and future interexchange private line (IXPL) services of
bandwidth DS-0 or higher where there is evidence of the presence of facilities-based
competition and access to facilities. The company contends that such forbearance is
consistent with the principles established in Stentor Resource Centre Inc. -
Forbearance from regulation of interexchange private line services, Telecom Decision
CRTC 97-20, dated 18 December 1997.
- SaskTel further requested that it be added to the process initiated by
Telecom Order CRTC 99-434, dated 12 May 1999, which required competitors to file
semi-annual reports identifying all IXPL routes on which they provide or offer IXPL
service at speeds of DS-3 or greater on a private line basis to at least one customer
using terrestrial facilities from other than the incumbent local exchange carrier (ILEC)
or an affiliate of that ILEC. SaskTel requested that the Commission indicate in its
decision that SaskTel is entitled to forbearance on all such routes identified.
- With respect to packet data services, SaskTel requested forbearance from
sections 25, 29, 31, and subsections 27(1), (5) and (6) of the Act. SaskTel noted that
such forbearance would grant SaskTel the same level of forbearance afforded to other data
service providers in Canada.
- SaskTel stated that for the purposes of this application, IXPL services
include high capacity (bandwidth DS-0 or higher) telecommunications transport services
including those services offered in conjunction with the other telephone companies under
the names Megaplan (Megaroute and Megastream), High Capacity 45, VideoRoute, as well as
other dedicated digital data services (DDS) at 56 kbps. IXPL services are generally used
by customers to transport large volumes of data, or to form the backbone for a large
corporation's own national wide area networks.
- Packet data services are offered in conjunction with the other major
incumbent telephone companies and include Datapac, HyperStream, Pospac and any future
packet data and frame relay services offering essentially the same functionality. Packet
data and frame relay services are used by small, medium and large businesses to enable
data to be transferred and processed between various types of computer configurations
(i.e., host-to-host, host-to-remote, LAN-to-LAN, LAN-to-WAN, etc.).
- In response to a Commission letter dated 7 January 2000, Call-Net
Communications Inc. stated in an 11 February 2000 letter that its operating company Sprint
Canada is capable of currently providing DS-3 (or greater) bandwidth IXPL services between
Regina and Saskatoon, thereby meeting the criteria established in Order 99-434.
- SaskTel contends that competitors have made substantial in-roads into
IXPL, frame relay and packet data markets in the province. It currently holds 82% of the
IXPL market in the province and about 66% of the packet data and frame relay market. The
interveners did not provide specific comments relating to the degree of competition in
these markets in Saskatchewan. No specific comments on market share, level of rates or
barriers to entry were provided.
- IXPL and packet data services in Saskatchewan tend to be offered on a
national level in conjunction with the other major incumbent telephone companies. The
rates for these services in Saskatchewan tend to be the same as those offered by the other
companies, which are determined at the more competitive national level.
- The Commission notes that SaskTel's request for forbearance for IXPL
services pertains only to intra-provincial IXPL since any route originating or terminating
in Saskatchewan which meets the forbearance criteria set out in Decision 97-20 would
already be forborne pursuant to that decision.
- The IXPL, packet data and frame relay markets in Saskatchewan generally
exhibit the characteristics of competitive markets. There do not appear to be any
significant barriers to entry, a number of competitors have entered the markets in
question (particularly the packet data and frame relay markets), and major
facilities-based competitors such as AT&T Canada, Sprint, Bell Nexxia and TELUS
Communications Inc. operate large capacity fibre routes across the province with
termination points in Regina and Saskatoon. In this regard, the Commission notes that
Sprint currently provides IXPL services between Regina and Saskatoon at a DS-3 or greater
bandwidth. In addition, Shaw Communications offers ATM-based services in the province
advertised as alternatives to frame relay services. The Commission considers that these
competitors are well positioned to provide competitive IXPL and packet data services, and
expects that they will be a source of increasingly greater competitive pressure in the
near future.
Interexchange private line services
- In light of the above, forbearance is granted from regulating the
provision of current and future High Capacity (bandwidth DS-0 or greater) and DDS (or
equivalent) IXPL services by SaskTel, on the same terms and conditions governing the other
incumbents in Decision 97-20. Consistent with that decision, the Commission will
forbear from the exercise of its powers under sections 24 (in part), 25, 27 (except for
27(3)), 29 (in part) and 31 of the Act for the provision of current and future High
Capacity (bandwidth DS-0 or greater) and DDS (or equivalent) IXPL services by
SaskTel.
- The Commission will retain its powers under section 24 to impose the same
conditions protecting confidential customer information as are currently imposed on the
other major incumbent telephone companies. These conditions are to be included, where
appropriate, in all contracts or agreements with customers for the provision of these
services. Also, it will retain its powers under section 24 to impose any future conditions
that become necessary.
- The Commission will retain its powers under subsection 27(3) with respect
to powers and duties not forborne in this decision. Also, the Commission will retain its
powers under section 29 since SaskTel and the other major incumbent telephone companies
have agreements and arrangements to offer services at a national level. However, the
Commission will not retain its powers under section 29 in respect of those agreements
which were forborne in Order 99-1202.
- The Commission considers that SaskTel should be added to the process
initiated by Order 99-434 for identifying routes that should be subject to forbearance,
and that where the conditions for forbearance set out in that order are met, forbearance
on the routes which qualify should be extended. In light of Call-Net's letter dated
11 February 2000 stating that Sprint offers IXPL services in SaskTel's territory that
meet the criteria established in Order 99-434, the Commission herein forbears, to the
extent outlined above, from regulating the provision of IXPL services between Regina and
Saskatoon.
Packet data and frame relay services
- In light of the degree of competition in the packet data and frame relay
markets, the Commission considers it appropriate to forbear from regulating the provision
of current and future packet data and frame relay services by SaskTel on the same terms
and conditions and under the same sections of the Act as granted the other major incumbent
telephone companies in Telecom Order CRTC 96-130, dated 19 February 1996. In particular,
the Commission will forbear from exercising its powers under sections 24 (in part), 25, 29
and 31 and subsections 27(1), (5) and (6) of the Act for the provision of Datapac, Pospac,
Hyperstream and any future packet data switched services and frame relay services offering
essentially the same functionality.
- Consistent with Order 96-130, the Commission will retain its powers under
section 24 to require that conditions governing the treatment of customer confidential
information are put in place and to impose certain conditions in the future, if necessary.
Similarly, the Commission will retain its powers under subsections 27(2), 27(3) and 27(4)
of the Act regarding issues related to access to the networks and the resale and sharing
of forborne packet data and frame relay services.
- Also, consistent with Order 96-130 for the provision of future
packet data or frame relay services on a going forward basis, SaskTel is directed to file
with the Commission a block diagram showing all types of plant resources to be employed.
It should indicate whether such resources are discrete or shared, together with a
description of the general types of applications which may be handled by the service in
order to demonstrate that the service meets the conditions of forbearance.
Internet services
- SaskTel requested that the Commission forbear, effective 30 June
2000, from regulating retail end-user Internet services provided by SaskTel, including
those it may offer in the future.
- SaskTel requested forbearance from the same sections of the Act and
essentially on the same terms and conditions granted to other major incumbent telephone
companies in Forbearance from retail Internet services, Telecom Order CRTC 99-592,
dated 25 June 1999. In particular, SaskTel requested forbearance from sections 24 (in
part), 25, 27 (in part), 29 and 31 of the Act for the provision of retail end-user
Internet services.
- SaskTel also requested that it be granted an exemption from section 36 of
the Act with respect to involvement in the content of its own Internet services,
consistent with that granted to the other major incumbent telephone companies in Stentor
- Request for approval under section 36 of the Telecommunications Act, Telecom
Decision CRTC 99-4, dated 31 March 1999.
- SaskTel stated that its CSG provides digital subscriber line (DSL)
capability to allow competitors to provide high-speed Internet services to customers. In
addition, SaskTel's CSG provides unbundled call forward busy for Internet call waiting
service for Internet service providers (ISPs) or alternate providers of Internet call
waiting.
- Some parties submitted that it would be inappropriate to forbear from
SaskTel's Internet services until after the Commission has conducted a review of SaskTel's
SRB procedures, practices and results.
- The Commission considers that the Internet services market in
Saskatchewan is intensely competitive. Based on the evidence filed in this proceeding,
there is significant price rivalry and movement of market share. Barriers to entry appear
to be quite low, considering that numerous competitive ISPs (including small local and
large national service providers) have entered the provincial market in a relatively short
period of time. Moreover, based on the market share information submitted, the cable
companies have a large share of the Internet services market, particularly in the major
centres in the province. In Regina and Saskatoon, the cable companies are the largest
service providers. The Commission notes that the Internet market share data and other
evidence on competitiveness submitted by SaskTel were not disputed by other parties.
- SaskTel stated that all of the underlying telecommunications facilities
necessary for the provision of Internet services are readily available at tariffed rates,
and alternative sources of transmission facilities are emerging. The Commission further
notes that major cable companies in Saskatchewan were ordered by the Commission to provide
non-discriminatory third-party access to their high-speed networks.
- In light of the high degree of competition in the retail Internet market
in Saskatchewan, the Commission considers that forbearance from regulating the provision
of retail end-user Internet services by SaskTel on the same terms and conditions and from
the same sections of the Act as granted other major incumbent telephone companies in Order
99-592 would be appropriate.
- Consistent with Order 99-592, the Commission will forbear from the regulation
of SaskTel's retail end-user Internet services pursuant to sections 24 (in part), 25, 27
(in part), 29 and 31 of the Act.
- Also, the Commission will retain its powers and duties under section 24
to impose conditions regarding confidential customer information as are currently imposed
on the other major incumbent telephone companies. These conditions are to be included,
where appropriate, in contracts or agreements with customers for the provision of these
services. The Commission will also retain its powers under section 24 to impose conditions
on the provision of retail end-user Internet services that may be necessary in the future.
Similarly, the Commission will retain its powers under subsections 27(2), 27(3) in part,
and 27(4) to provide an additional safeguard against any undue preference.
- Further, consistent with Decision 99-4, the Commission hereby grants
SaskTel approval under section 36 of the Act, for involvement in the content of SaskTel's
Internet services.
Wireless services
- SaskTel Mobility, an affiliate of SaskTel, requested that the Commission
forbear, effective 30 June 2000, from regulating mobile wireless services it
provides, including future mobile wireless services, to essentially the same degree as in Regulation
of mobile wireless telecommunications services, Telecom Decision CRTC 96-14, dated 23
December 1996.
- SaskTel stated that it does not currently offer competitive mobile
wireless services in-house but requested forbearance from regulation of future in-house
mobile wireless services, as defined in Decision 96-14, and from the same sections of the
Act as in that decision.
- In particular, SaskTel Mobility and SaskTel requested forbearance from
sections 24 (in part), 25, 29, 31 and subsections 27(1), (5) and (6) of the Act for the
provision of public-switched mobile voice services, and from sections 24, 25, 27, 29 and
31 of the Act for other mobile wireless services.
- SaskTel stated that it is not seeking forbearance for exchange radio
telephone service, general mobile telephone service and northern radio telephone service,
which it is providing in the far north and remote areas.
- SaskTel Mobility currently offers both analog and digital cellular
services as well as enhanced specialized mobile radio (ESMR), wireless data and paging.
SaskTel Mobility also has a licence and spectrum from Industry Canada to provide personal
communications service (PCS) at 1.9 GHz and intends to introduce this service in
2000.
- Parties generally opposed granting forbearance for SaskTel's wireless
services. Issues related to SaskTel's dominance in the market and its unapproved SRB
methodology have been raised by parties. The Commission notes that as discussed previously
in this decision, safeguards against cross-subsidization and the scrutiny of costing
studies have been identified as essential prior to granting forbearance.
- Regarding the relevant geographic market for forbearance purposes, RWI
submitted that SaskTel is incorrect to say that the market is national, since SaskTel
operates only within the province of Saskatchewan and cannot influence prices set in the
rest of Canada. It further stated that SaskTel's relatively high market share indicates a
lack of competition in mobile wireless services in Saskatchewan.
- RWI raised a number of concerns about several conditions contained in
SaskTel's wireless network access tariff which it considers must be addressed before
forbearance for mobile wireless services can be considered.
- The Commission notes that concerns regarding terms of services for WSPs
are addressed in a previous section of this decision.
- The Commission considers that, based on the information provided, the
mobile wireless market in Saskatchewan is sufficiently competitive to warrant forbearance.
The Commission notes that SaskTel indicated that Rogers Cantel Inc. (now RWI) has 23% of
the cellular market in Saskatchewan. However, given the much larger geographic coverage of
SaskTel Mobility's network, which covers a much larger part of the remote rural area of
the province than RWI's network, RWI's market share in major centres in the province
probably exceeds its 23% province-wide share.
- Microcell Telecommunications Inc. and Clearnet Communications Inc. are
now marketing their PCS in the province. Microcell plans to build its network and TELUS to
expand its mobile wireless services in the province. It appears that the mobile wireless
market in Saskatchewan will become considerably more competitive.
- The Commission also considers that the mobile wireless market in
Saskatchewan is competitive in the wake of major advertising campaigns and low rates for
mobile wireless service (which SaskTel submitted are similar to those offered in the rest
of Canada). The Commission notes that none of the interveners disputed SaskTel's
submissions in this regard.
- There are sufficient competitive safeguards in place to ensure against
anti-competitive cross-subsidies and predatory pricing, particularly at present, since
mobile wireless services are being offered through a structurally separate affiliate. The
Commission notes that SaskTel Mobility will adopt the same conditions of forbearance
mandated by the Commission for other wireless carriers in past decisions. All support
services provided by SaskTel to SaskTel Mobility must be provided pursuant to support
services agreements at rates set above costs. SaskTel Mobility's and other WSP's
telecommunications requirements must be handled through SaskTel's CSG to ensure a level
playing field.
- In the event that SaskTel starts to offer mobile wireless services on an
in-house basis, the Commission considers that adequate safeguards are also in place to
ensure against anti-competitive cross-subsidies. These are addressed in a previous section
of this decision.
- In light of the above, the Commission considers it appropriate to forbear
from regulation of mobile wireless services by SaskTel Mobility and future in-house
services by SaskTel under the same terms and conditions and the same sections of the Act
which apply to the other major incumbent telephone companies in Telecom Order CRTC 99-991,
dated 13 October 1999.
- The Commission will forbear from exercising its powers and performing its
duties under sections 24 (in part), 25, 29 and 31, and subsections 27(1), 27(3) (in part),
27(5) and 27(6) of the Act for the provision of public-switched mobile voice services, as
defined in Decision 96-14, by SaskTel Mobility and by SaskTel (in the event it provides
these services on an in-house basis).
- Similarly, the Commission will forbear from sections 24, 25, 27, 29 and
31 of the Act for the provision of other wireless services, as defined in Decision 96-14,
by SaskTel Mobility and by SaskTel (in the event it provides these services on an in-house
basis).
- In addition, the Commission directs SaskTel Mobility and SaskTel to
comply with the following competitive safeguards:
- all of SaskTel Mobility's and competitors' telecommunications requirements must be
handled through SaskTel's CSG to ensure a level playing field; and
- all support services provided by SaskTel to SaskTel Mobility must be provided pursuant
to support services agreements.
Other reporting requirements
- The Commission considers that an appropriate level of reporting
requirement is needed in order to monitor SaskTel's financial performance in a timely
fashion.
- SaskTel proposed to file, during the transitional period, actual
financial results for the utility and competitive segments on a semi-annual basis, as
provided by other major incumbent telephone companies subject to price cap regulation.
- SaskTel will be coming under the Commission's jurisdiction through a
transitional regulatory framework without a prior extensive review of its financial
situation and without the same regulatory framework that applies to the other telephone
companies. In light of the above, the Commission considers that a more frequent level of
reporting would be more appropriate for SaskTel.
- The Commission notes that SaskTel currently has no SRB forecasting
methodology and no plan to develop one. SaskTel should be expected to provide a financial
forecast in a future proceeding to look at its financial situation.
- Other reporting requirements normally associated with rate of return
regulation, such as Phase I depreciation studies, are required to be filed by
telephone companies requesting to change their depreciation parameters. Under these
circumstances, SaskTel would also be required to file these studies during a full review
of its financial situation.
- The Commission directs SaskTel to file SRB results on a quarterly basis,
45 days after the end of each quarter, annual audited results by 31 October of the
following year, and SRB manual updates annually by 31 March of each year.
- The Commission also expects SaskTel to develop the ability to produce:
a) SRB forecast results for the purpose of establishing the company's revenue and
contribution requirement in a future proceeding to review SaskTel's financial situation;
and
b) Phase I depreciation studies, should it request a change in depreciation
parameters.
Secretary General
This document is available in alternative format upon request, and may also be examined
at the following Internet site: http://www.crtc.gc.ca
Appendix
Interested parties
Aliant Telecom Inc., Angus TeleManagement Group Inc., AT&T Canada Corp., AT&T
Canada Telecom Services Company, Bell Canada, Mr. Andrew Briggs, Brulyn Consulting,
Call-Net Enterprises Inc., Canadian Cable Television Association (CCTA), Clearnet
Communications Inc., Consumers' Association of Canada (CAC), G. Pizante Consulting, Inc.,
Government of Saskatchewan, Industry Canada, Microcell Telecommunications Inc., MTS
Communications Inc., NBI/Michael Sone Associates, NelliganPower, NewTel Communications
Inc., O.N. Tel, Primus Telecommunications Canada Inc., Quadrant Newmedia, Rogers Wireless
Inc. (RWI), RSL COM Canada Inc., Telesat Canada, TELUS Communications (B.C.) Inc., TELUS
Communications Inc., Vidéotron Communications Inc.
Français
|