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The decision in brief
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In this decision, the Commission approves revised unbundled loop
rates that competitive local exchange carriers will pay for the use
of the incumbent local exchange carriers' (ILECs) unbundled loops.
It also addresses the costs to be used as the basis for establishing
the subsidy requirement under the recently-approved national subsidy
mechanism. This includes the adoption of a uniform approach to
identify high-cost serving areas (HCSAs) in the ex-Stentor ILEC
territories and a more consistent set of costing methodologies by
which ex-Stentor ILECs are to determine the costs for the loop and
residential primary exchange services. The percentage revenue charge
to be imposed on telecommunications service providers for the year
2002 is expected to be reduced to approximately one-third of its
current level of 4.5%. The Commission finds that subsidies should
not be extended to single-line business service provided in HCSAs.
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Background |
1. |
On 18 February 2000, the Commission issued Public Notice CRTC 2000-27, entitled Restructured bands, revised local loop rates
and related iIssuesissues, which initiated a proceeding to,
among other things, establish revised banding structures, determine
revised loop costs and rates under these revised bands, and consider
extending subsidies to single-line business service provided in
HCSAs.
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2. |
Comments were filed on 25 January 2001 by TELUS Communications
Inc., (the amalgamation of the former TELUS Communications Inc.
(TCI) operating in Alberta and TELUS Communications (B.C.) Inc. (TCBC)
operating in British Columbia), Bell Canada on behalf of itself, MTS
Communications Inc., and Aliant Telecom Inc. (formerly Island
Telecom Inc., Maritime Tel & Tel Limited (MTT), NBTel Inc., and
NewTel Communications Inc.) (collectively, Bell Canada et al.),
Saskatchewan Telecommunications, AT&T Canada Corp. on behalf of
itself, AT&T Canada Telecom Services Company, Call-Net
Enterprises Inc., and C1.com Inc. (collectively, AT&T et al.),
Microcell Telecommunications Inc., Rogers Wireless Inc. (RWI), and
Action Réseau Consommateur, the Consumers' Association of Canada,
Fédération des associations coopératives d'économie familiale du
Québec, and the National Anti-Poverty Organization (collectively,
ARC et al.). Reply comments were submitted by most of the above
parties on 7 February 2001. In addition, reply comments were
submitted by GT Group Telecom Services Corp.
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Banding structure |
3. |
In PN 2000-27, the Commission stated that two benefits are
expected from restructured ILEC rate bands: subsidies to achieve the
basic service objective will eventually be targeted only to
high-cost areas, and the rates for local loops in less-remote areas
should decrease. Pursuant to these objectives, the Commission
received three different rebanding proposals from (a) Aliant, MTS
and SaskTel, (b) Bell Canada, and (c) TELUS.
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The Aliant companies, MTS and SaskTel exchange/switching centre
approach
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4. |
The Aliant companies proposed to re-define their existing bands
based on the following exchange-based banding structure:
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Band A: Halifax |
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Band B: Other major urban centres,
namely Charlottetown, St. John's, Saint John, Moncton and
Fredericton |
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Band C: Other exchanges with more than 1,280 network access
services (NAS) |
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Band D:
Exchanges with less than or equal to 1,280 NAS |
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Band E: Exchanges serving remote areas with no year-round
road access
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5. |
The Aliant companies submitted that in the smaller exchanges, the
companies are unable to take advantage of economies of scale in the
provisioning of service to customers, and the average cost of
serving exchanges having lower NAS counts is markedly higher than
the cost of serving other areas.
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6. |
MTS proposed to use its existing exchange/switching centre-based
rate band structure. MTS' current Band E contains exchanges with
less than 1,500 NAS. MTS selected the threshold of 1,500 NAS for
high-cost exchanges based on its analysis of costing information for
exchanges of various sizes. Exchanges with less than 1,500 NAS are
generally higher-cost exchanges because of the higher proportion of
longer rural loops in the exchange.
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7. |
SaskTel proposed the use of its existing band structure defined
by exchange and base rate area (BRA) boundaries, but modified to
include two additional bands, resulting in seven bands.
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8. |
SaskTel submitted that its proposed banding structure would
isolate high-cost areas into unique bands, would be cost-effective
and easy to administer and would result in reduced loop rates in
more densely-populated areas, thus encouraging competitive local
exchange carriers (CLECs) to provide local telephone service.
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9. |
Microcell noted that SaskTel has proposed a banding methodology
that has already been expressly rejected by the Commission (i.e., an
earlier TELUS banding proposal using BRA boundaries), and submitted
that there are no compelling reasons for considering it again.
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Bell Canada's enumeration area approach
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10. |
Bell Canada took the position that its existing
exchange/switching centre-based rate band structure (Bands A to D)
reflects the broad cost characteristics of providing basic local
access service, and that the identification of high-cost areas
within its territory requires analysis below the switching centre
level. Bell Canada determined that two selection parameters best
enabled it to achieve this objective: (a) low population density,
and (b) remoteness.
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11. |
With respect to the first criterion, Bell Canada extracted
pockets of low-density high-cost areas from its switching centre
serving areas, based on Statistics Canada enumeration areas (EAs)
having 35 or less persons per square kilometre. The extraction
process involved the use of overlay software and digital mapping
capability.
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12. |
Under the selection parameter of remoteness, Bell Canada
classified all switching centres in Rate Group 3A as being
high-cost. These switching centres serve remote communities in the
far north, which are generally inaccessible by road. Maintenance
expenses per NAS in these communities are generally very high as
technicians and supplies must be flown into these locations.
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13. |
Bell Canada's proposed high-cost bands contain approximately 11%
of Bell Canada's residence NAS.
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14. |
Aliant and SaskTel noted the cost and complexity of the EA method
of sub-exchange definition. Aliant and MTS further noted that they
do not have EA-level data. SaskTel further submitted that the EA
approach would not produce significantly different results, and is
not warranted.
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15. |
Microcell submitted that other than Bell Canada, all ILECs
seemingly reject the use of an EA-based approach, largely because of
its cost of implementation and administration, among other concerns.
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16. |
TELUS submitted that TCBC earlier dismissed EAs for banding
purposes due to the very poor correlation between switching centres
and EAs. TELUS further submitted that even if it were able to devote
the resources required to update the costing information for EAs in
the territory of TCI, it would not support a band structure based on
EAs in TCI and a band structure based on an alternative banding
methodology in TCBC.
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TELUS' allocation area approach
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17. |
TELUS proposed a common band structure for TCI and TCBC based on
allocation areas (AAs). TELUS submitted that AAs are a standard
outside-plant engineering concept used to engineer and maintain
outside-plant facilities. TELUS further submitted that AAs contain a
high degree of internal homogeneity, are a very stable component of
telephone company infrastructure, and have clearly-defined
boundaries.
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18. |
TELUS used cluster analysis in the development of its band
proposal. Cluster analysis is a statistical technique that was used
to determine natural groupings of AAs with similar costs. Cluster
analysis was also used to determine the optimum number of AA bands,
which resulted in eight bands. Under this proposal, more than half
of the residence NAS would be designated as high-cost.
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19. |
When asked about the feasibility and validity of a facilities
provisioning approach to banding such as that proposed by TELUS,
Bell Canada et al. provided a number of reasons why this would not
be feasible. These include the view that the AA concept is generally
not used today, Bell Canada et al. companies do not maintain or
track information at this level, and disaggregated input data for
cost estimates at this level are not available and would be very
costly to develop. AT&T et al., among other concerns, raised
doubts concerning the reliability of TELUS' AA-level cost estimates,
due to problems arising from data availability affecting such
critical elements as loop length and make-up.
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Uniform banding structure
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20. |
In this proceeding, through the interrogatory process, the
Commission identified and sought comments on an alternative method
for refining bands.
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21. |
The approach consists of a uniform definition of three HCSA bands
that are extracted from the ILECs' existing bands. The three HCSA
bands are based on the following wire centre and/or exchange
classifications:
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a) wire centres or exchanges with less than or equal to 1,500
total NAS;
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b) wire centres or exchanges with greater than 1,500 and less
than 8,000 total NAS, and where the average loop length is
greater than four kilometers; and
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c) remote wire centres or exchanges (e.g., without year-round
road access or found in remote parts of a company's serving
territory).
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22. |
The uniform definition of HCSA bands relies on cost-proxying
criteria to capture elements of remoteness, low exchange density and
long loops which have been identified by the ILECs as relevant
indicators of high-cost service provision, and would apply uniformly
across ILECs.
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Banding structure considerations |
23. |
The ILECs generally submitted that:
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a) their proposed banding reclassifications segregate areas
into separate high-cost bands to ensure that subsidies are better
directed to high-cost areas;
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b) each of the ILECs' proposed banding classification meets the
criteria specified by the Commission in PN 2000-27;
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c) the parameters that each ILEC has selected enable it to
identify the high-cost portions of its territory based on an
assessment of the unique nature of that territory, the data
availability, and the ease and cost-effectiveness of administering
subsidies on the basis of the proposed bands; and
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d) while there is a need for a common calculation of the total
subsidy requirement (TSR) based on the Phase II costs for each
high-cost band, this does not necessitate adoption of a common
methodology for determining band structures across ILECs; on the
contrary, providing for a common banding methodology that would
result in a less accurate identification of Phase II costs for
high-cost areas of some ILECs would defeat the very purpose of the
new TSR calculation.
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24. |
Bell Canada submitted that it has demonstrated that its proposed
banding classification is much more effective at isolating high-cost
areas and thus reducing the cost heterogeneity that exists within
its current Bands C and D than the alternative uniform banding
structure. TELUS submitted that it has demonstrated that its
proposed AA banding classification leads to significantly less
cost-averaging within bands than does the current banding approach
or the alternative uniform approach, noting that AAs are much
smaller than exchanges, resulting in service provisioning
characteristics and cost information that are much more precise than
similar information for exchanges. SaskTel also submitted that its
proposed banding structure effectively separates the high cost
serving areas from the areas that are less costly to serve while the
uniform banding structure creates bands that contain a mixture of
low and high cost serving areas.
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25. |
AT&T et al. submitted that the new band structures should be
based on the use of publicly explained and relatively systematic and
objective criteria. Confidence in the regulatory regime requires
that interveners have some degree of confidence in, and understand
the basis for, any new band structures implemented.
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26. |
AT&T et al. submitted that the alternative uniform band
structure identified by the Commission is the only scenario on the
record conforming to these requirements, as it provides a reasonable
basis for the segregation of potential high-cost areas, and captures
the elements which have been identified by the ILECs as likely
indicators/drivers of high-cost service provision. It also takes
account of the constraints on data availability that exist in some
companies and which could only be overcome at significant cost.
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27. |
ARC et al. submitted that a national HCSA contribution system,
which is based on at least three distinct sets of criteria and
methodologies as proposed by the ILECs, not only poses
administrative challenges for the regulator, but also creates risks
of inequities among companies with different internal methodologies.
Moreover, the benefits of a common methodology for regulatory
purposes are significant, and do not appear to be appreciated by the
ILECs.
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28. |
RWI submitted that there should be a uniform approach to banding
across the country, as this would facilitate the appropriate level
of checks and balances throughout the system. RWI futher submitted
that any means to minimize the contribution requirement to the
greatest extent possible should be explored and used. RWI
recommended that the Commission adopt a methodology that uses the
number of NAS per exchange to determine band boundaries. |
29. |
The Commission notes that the uniform banding structure relies on
cost-proxying criteria that take account of data availability
constraints, and has the following advantages: (a) it does not
require an identification of technology or costs; (b) it is a
banding system with universal definition and uniform criteria across
all ILECs; (c) it is simple to understand, easy to implement and
administer; (d) it has easily identifiable boundaries; and
(e) it provides a reasonable degree of cost homogeneity.
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30. |
The Commission further notes that the uniform band structure
would provide a segregation of each ILEC's territory into HCSA and
non-HCSA bands such that there is no residence subsidy requirement
(under the subsidy requirement formula) over the aggregate of the
remaining non-HCSA bands.
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31. |
In light of the foregoing, the Commission approves the use of the
uniform banding structure for each ILEC participating in this
proceeding. The Commission finds that the bands approved in this
decision will ensure that the loop rates in both HCSA and non-HCSA
bands are just and reasonable, and consistent with the Telecommunications
Act (the Act), and will also ensure that the national subsidy
fund established in Changes to the contribution regime,
Decision CRTC 2000-745, dated 30 November 2000, will operate in a
manner consistent with the objectives of the Act. For purposes of
the TSR calculation, the Commission directs that the HCSA bands
(i.e., Bands E, F and G identified as items (a), (b) and (c),
respectively, in paragraph 21) are to be used effective
1 January 2002, pursuant to its determinations in Decision 2000-745. For the year 2001, the distribution of subsidies will
continue to be based on the allocation factors and the existing
bands as determined in Implementation of price cap regulation and
related issues, Telecom Decision CRTC 98-2, dated 5 March 1998.
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32. |
The Commission notes that, overall, by comparison with the ILECs'
proposals, this uniform banding structure would reduce the number of
NAS considered to be high cost from 23% to 15%. |
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Low-cost bands
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33. |
In their comments, AT&T et al. argued that the companies have
not addressed the issue of cost homogeneity in the lower-cost bands
and that these bands should be further disaggregated in order for
the loop costs to be de-averaged between the downtown cores and
non-downtown cores of major urban centres.
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34. |
AT&T et al. submitted that, in practical terms, the most
pressing need for a revised low-cost band structure would be in Bell
Canada's and MTT's territories. In the case of Bell Canada, AT&T
et al. submitted that it is reasonable to expect that the downtown
cores of the larger Band B exchanges, such as Ottawa-Hull, would
have cost characteristics similar to Band A, and that, similarly, it
would be reasonable to expect that the most dense business districts
of Band C exchanges would exhibit lower costs than other Band C
areas or most Band B residential areas.
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35. |
With respect to MTT, AT&T et al. recommended that the
Commission split Band A into Bands A1 (Bishop wire centre) and A2
(remaining wire centres in the Halifax exchange) consistent with the
scenario contained in the response to interrogatory
The Companies(CRTC)30Oct00-13.
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36. |
With respect to Bell Canada, AT&T et al. submitted that they
are perplexed as to why the scenarios in which Bands B and C are
split into sub-bands do not demonstrate greater differences in loop
costs across these bands. AT&T et al. noted the lower rates
filed for the enhanced exchange-wide dial (EEWD) service filing and
the statements made by Bell Canada in that proceeding that (a) it is
not unreasonable to expect that the provision of a large number of
lines to a single customer, which are concentrated in a limited
number of service locations, in combination with the use of
technologies most suitable for the serving of customers located in
large single-customer high density commercial premises would result
in lower than average costs, and (b) further economies may be
expected where such buildings are located in high density areas,
where, generally, much shorter loops are required than the average
loop serving the band as a whole.
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37. |
MTT submitted that disaggregating Band A (into Bands A1 and A2)
is not warranted. Under that scenario, MTT determined the cost of
Type A loops in Band A1 to be 15% lower than the average cost of
Type A loops in the overall Band A. MTT submitted that it would
expect that competitors offering service in Halifax would not
restrict their coverage to the Bishop area alone but would offer
service in at least the entire Halifax market, and that, therefore,
de-averaging of prices in such narrow geographic areas is not
warranted.
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38. |
Bell Canada submitted that the split of Band B into Bands B1 and
B2 areas produces two new sub-bands whose average Type A loop cost
is within 3% to 4% of the Band B average, while the disaggregation
of Band C into Bands C1 and C2 areas produces two new sub-bands
whose average cost is within 2% to 3% of the Band C average. Bell
Canada noted that these differences are very small and do not
support the disaggregation of the company's proposed Bands B and C.
Bell Canada further submitted that any further disaggregation of its
proposed bands would require it to undertake a comprehensive study
of the cost characteristics below the level at which its current
costs are derived, and since the disaggregate input data needed to
undertake such a study is not readily available and would be
extremely time consuming and costly to develop, it has chosen not to
pursue the disaggregation of its current bands below the level that
is being proposed.
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39. |
Under their proposals, most ILECs except TELUS chose not to
modify their existing band structures in the lower-cost bands. In
the case of TELUS, the proposed monthly per NAS loop cost for its
lowest-cost Band A under the disaggregated AA approach (which relies
on a banding structure at the sub-exchange level) is in fact higher
than either of TCI's or TCBC's current Band A monthly per NAS loop
cost (implied by the current loop rates).
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40. |
With respect to MTT, the Commission finds the cost differential
resulting from the Band A1/A2 split to be sufficient to warrant the
proposed change. The Commission, however, finds the cost
differential that has been reported between Bands A1 and A to be
small given the differences in loop length and population density
between the Bishop wire centre and the average for the Halifax
exchange. The Commission therefore directs MTT to provide detailed
explanations for the differences in the capital costs between Bands
A1 and A, and serve a copy of its submission on all interested
parties to this proceeding by 8 June 2001. This analysis
should include a comparison between Bands A1 and A of the cost per
NAS, the capital cost breakdowns, and the average copper loop
characteristics, as per Attachments 2, 3 and 5, respectively, of the
response to interrogatory The Companies(CRTC)30Oct00-3.
Interested parties, may, by 9 July 2001, file comments,
serving a copy thereof on MTT. MTT may by 24 July 2001,
file a reply thereto, serving a copy on those interested parties who
filed submissions.
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41. |
With respect to Bell Canada, the Commission disagrees with the
company's claim that further disaggregation of Bands B and C is not
warranted. However, given the cost and administrative complexities
of further disaggregating these bands, the Commission considers it
more appropriate to address this issue by re-classifying the
following wire centres as set out below. These changes re-classify
wire centres in Bands B and C that are expected to have cost
characteristics similar to Bands A and B, respectively.
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42. |
Upon review of Bell Canada's NAS and average loop length
information, the Commission directs that:
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a) the Ottawa-O'Connor, Toronto-Eglington and
Montreal-St-Dominique Band B wire centres be re-classified into
Band A; and
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b) the following Band C wire centres be re-classified into Band
B: Oshawa, Windsor-Goyeau, Sherbrooke, Barrie, St. Catharines-King,
Brampton-John, Guelph, Kingston-Princess, Streetsville-Pearl,
Burlington-Brant, Peterborough, Brantford, Brampton-Walker, Sault
Ste. Marie-Queen, Oakville-Balsam, Sudbury-Minto, Chicoutimi,
North Bay, Newmarket, and Sarnia-Lochiel.
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43. |
In addition, upon review of TCBC's NAS and average loop length
information, the Commission directs that the following Band C wire
centres be re-classified into Band B: Kelowna, Prince George,
Abbotsford, South Kamloops, and Nanaimo.
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44. |
In light of the above, Bell Canada and TELUS are directed to file
with the Commission and serve a copy thereof on all interested
parties to this proceeding by 14 May 2001, a letter
indicating whether they intend to propose modifications to the loop
rates adopted in this decision for Bands A, B, or C in order to
reflect the above wire-centre classification changes. If so, Bell
Canada and TELUS may file and serve a copy thereof on all interested
parties to this proceeding, proposed revised loop costs for Bell
Canada and TCBC, respectively, for these bands based on the above
wire-centre changes, the cost parameters and assumptions used in the
response to interrogatory (CRTC)30Oct00-3 issued to Bell Canada et
al. and TELUS, and this decision's costing determinations, by 8 June
2001. The costing information furnished is to be consistent with
the information provided in response to parts (b) to (g) of the
interrogatory (CRTC)30Oct00-3. Interested parties may, by 9 July
2001, comment on any such proposed revisions, serving a copy
thereof on the ILEC in question. Bell Canada and/or TELUS may, by 24 July
2001, file a reply thereto, serving a copy thereof on those
interested parties who filed submissions.
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The proposed TELUS amalgamation
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45. |
In this proceeding, TELUS filed its restructured band proposal on
an amalgamated basis, reflecting the amalgamation of TCI and TCBC.
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46. |
TCBC's loop costs are in general significantly higher than TCI,
especially for the HCSA bands where TCBC costs are typically double
those of TCI's.
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47. |
TELUS submitted that it would not be appropriate to combine the
cost per NAS for TCI and TCBC under the uniform band structure
proposal.
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48. |
In light of the foregoing, the Commission considers it
inappropriate to combine and approve loop rates on a combined TCI
and TCBC basis at this time. The Commission further considers that
the TSR should not be calculated on an amalgamated basis. TELUS is
therefore directed to calculate its subsidy requirement by
calculating the TSRs separately for TCI and TCBC (based on costs and
rates specific to each of TCI and TCBC), and by then combining these
separate TSRs.
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The proposed Aliant amalgamation
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49. |
Earlier this year, Aliant announced the amalgamation of the
former Island Tel, MTT, NBTel and NewTel. In this proceeding, the
Aliant companies have not proposed to restructure their bands on an
amalgamated basis. Instead, each Aliant company proposed to
restructure its existing rate bands for purposes of identifying
high-cost areas using a consistent set of selection parameters.
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50. |
The Commission accepts this proposal. However, the manner in
which the unbundled loop service is currently provisioned to a CLEC
in NBTel territory differs from that of the other Aliant companies.
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51. |
Pursuant to Final rates for unbundled local network components,
Telecom Decision CRTC 98-22, dated 30 November 1998, and contrary to
all other ILECs, NBTel was relieved of the obligation to provide
unbundled loops to CLECs at the wire centre if the loop is served
off an integrated digital loop carrier (IDLC) system within a wire
centre serving area. At paragraph 95 of that decision, noting
that NBTel's solution would involve a much larger cost due to the
extensive IDLC system overlay network builds required in its
territory, the Commission stated that it "accepts NBTel's
proposal at this time to allow the provision of CLEC access to IDLC
loops at the remote site within its serving territory."
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52. |
The Commission considers that, in light of the following
developments since that decision, a review of NBTel's loop service
provisioning approach is warranted.
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a) Under the Aliant amalgamation, there may be a need for the
loop rate structure to be consistent across the Aliant companies.
Also, there may be a need for the rates to be amalgamated in the
future. Currently, there is a different service definition and
rate structure for NBTel compared to the other Aliant companies.
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b) The general ILEC view in this proceeding is that there are
numerous uncertainties and impracticalities associated with the
provisioning of loops at IDLCs located within a wire centre
serving area. For example, TELUS stated that the cabinets that
house IDLC systems are relatively small and are not designed to
accommodate co-location of CLEC equipment.
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c) It would be highly desirable to have consistent and uniform
banding, loop and residential primary exchange service (PES)
definitions across ILECs in light of the adoption of a national
subsidy mechanism in Decision 2000-745. Under the national subsidy
mechanism, the per NAS subsidy amount provides compensation for
the entire retail residential service in each HCSA band.
Currently, the loop service which would be provided to a CLEC in
NBTel territory does not include the provision of the portion of
the loop between IDLC systems and the host switch.
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d) To date, there is no evidence of local competition in NBTel
territory via the provision of unbundled CLEC loops.
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53. |
In light of the above, the Commission directs Aliant, on behalf
of NBTel, to file and serve a copy thereof on all interested parties
to this proceeding by 29 May 2001, justification as to
why NBTel should not be required to modify its provision of loops to
CLECs such that loops served off IDLC systems within a wire centre
serving area be provided at the host switch consistent with the
other Aliant companies and other ILECs. Interested parties may file
comments in response, serving a copy on Aliant, by 28 June 2001.
NBTel may, by 13 July 2001, file a reply, serving a copy
thereof on those interested parties.
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54. |
If Aliant considers this change to be appropriate, it should
indicate in its 29 May 2001 response that loops will be offered
on this basis, and should file, serving a copy on all interested
parties to this proceeding, a revised loop cost study for NBTel by 30 July
2001. The revised cost study is to reflect the cost parameters
and assumptions used in the response to interrogatory The
Companies(CRTC)30Oct00-3, the uniform banding structure and the
costing determinations of this decision. The costing information
furnished is to be consistent with that provided in response to
parts (b) to (g) of the interrogatory
The Companies(CRTC)30Oct00-3 and is to show separate estimates
of maintenance and capital. Interested parties may, by 29 August
2001, file comments on the revised loop cost study, serving a
copy thereof on NBTel. NBTel may, by 13 September 2001,
file a reply, serving a copy thereof on those interested parties who
filed submissions. The Commission will then determine appropriate
loop rates based on the Commission's review of the loop cost study. |
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Provision of maps
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55. |
RWI submitted that under Bell Canada's and SaskTel's banding
proposals, maps will have to be purchased from the ILECs in order to
ascertain the band boundaries.
|
56. |
AT&T et al. submitted that, regardless of the criteria or
methodology used to define bands under the revised band structure,
mapping information for all bands and all exchanges should be made
available in digital MapInfo format 120 days prior to the
effective date of the new band structure. |
57. |
Bell Canada et al. submitted that irrespective of the definition
used to create high-cost bands, maps that delineate the boundaries
of such bands will be required. Bell Canada et al. further
submitted that such maps will be made available to CLECs. |
58. |
The Commission considers that the ILECs should be prepared to
furnish mapping information for all bands and all exchanges/wire
centres in electronic format, upon request.
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Loop pricing issues
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Mark-up
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59. |
AT&T et al. submitted that a 25% mark-up is no longer
appropriate for the purposes of establishing prices for unbundled
loops due to the following: |
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a) No reliable cost justification for the 25% mark-up has been
provided by the ILECs despite ample opportunity and the many years
of debate surrounding this issue. Given the significant
competitive impact of the mark-up, the approach that has been used
in the past to justify the 25% mark-up is no longer sufficient to
demonstrate that a mark-up at that level is appropriate;
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b) The available quantitative evidence suggests that no
additional mark-up beyond the 15% level is required for the
recovery of embedded costs; and
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c) Achievement of the Commission's objectives with respect to
residential market entry in high-cost areas necessarily requires
that loop prices embody a mark-up no higher than 15%. In
supporting this assertion, AT&T et al. cited Decision 2000-745, which found that, in calculating the TSR, Phase II costs
should be subject to a mark-up of 15%, rather than 25%.
|
60. |
TELUS submitted that this issue is outside the scope of this
proceeding. Bell Canada et al. submitted that the 25% level should
be retained. In reply to AT&T et al.'s request to employ a
mark-up of no more than 15% to determine loop prices based on
conclusions drawn from Decision 2000-745, Bell Canada et al.
submitted that: (a) the 15% explicitly excludes the difference
between embedded and current costs for purposes of the subsidy
calculation; (b) the Commission has not found that this cost
difference does not exist, nor has it found that its recovery is not
appropriate; (c) it has merely found that explicit subsidies are not
to be one of the sources of recovery; and (d) the cost difference
still has to be recovered, and this necessarily means that it must
be recovered from telecommunications services sold to end-users and
to competitors.
|
61. |
The Commission notes that, in light of the following developments
since the issuance of PN 2000-27, a review of this rating approach
is warranted.
|
|
a) In Decision 2000-745, the Commission indicated that (i) it
is not persuaded that a level of 25% is required to provide an
appropriate recovery of the ILECs' fixed and common costs, (ii) it
expects the ILECs' fixed and common costs to decline in a
competitive local environment, and (iii) the 15% level explicitly
excludes the difference between embedded and current Utility
segment costs for purposes of the subsidy calculation.
|
|
b) Evidence filed by Bell Canada in the proceeding leading to
Decision 98-22 (response to interrogatory SRCI(CRTC)18Aug97-24 TN
516) showed that, for this company, there are no significant
differences between embedded and current costs for the local loop
outside plant.
|
62. |
Accordingly, in approving loop rates in this decision, the
Commission has adopted the use of the current mark-up of 25% only on
an interim basis.
|
63. |
Each ILEC may, by 8 June 2001, file comments, serving
a copy on all interested parties to this proceeding, as to why a
mark-up of 15% should not be used in place of 25% to determine loop
rates. Interested parties may, by 9 July 2001, file
comments serving a copy on each ILEC. ILECs may by, 24 July
2001, file a reply, serving a copy on those interested parties
who filed comments. Justification to support the continued use of
25% should include evidence that demonstrates the differences
between embedded and current costs for local loop outside plant.
|
64. |
At a minimum, each ILEC's analysis is to include a comparison of
the estimated loop plant value between the embedded plant investment
(i.e., 1 January 2000 net book value) and current capital
expenditures included in the 30 June 2000 submission restated as at
1 January 2000 (with supporting calculations to explain how
these capital cash flows are restated to 1 January 2000) associated
with the local loop outside plant for copper and fibre, consistent
with the type of information provided in the response to
interrogatory SRCI(CRTC)18Aug97-24 TN 516. The analysis should
further provide the annual capital additions and deductions for
these outside plant accounts over the previous three years (each of
1997, 1998 and 1999), along with the percentage estimates of the
plant additions associated with the deployment of higher-speed
networks, with supporting rationale.
|
65. |
In the absence of a response by an ILEC or should there be
insufficient quantitative evidence to justify the 25% mark-up, or
some lower mark-up, within the process provided herein, the
Commission will use a mark-up of 15% to determine final loop rates.
In the event that the current mark-up of 25%, or some lower mark-up
above 15%, is shown to be justified (to compensate for the
differences between embedded and current costs), the issue of
whether that mark-up level will remain after the price cap review
proceeding will be dependent on the pricing policy established for
competitor services in that proceeding.
|
|
Pricing of Type B loops
|
66. |
The ILECs proposed that where a Type B loop rate is less than the
Type A loop rate, the Type B loop rate be set using the
corresponding Type A rate as a lower limit. The ILECs submitted that
this is necessary to ensure that there are no uneconomic incentives
for carriers to order Type B loops to provide services that could be
accommodated with Type A loops.
|
67. |
AT&T et al. noted that in bands subject to the proposed
treatment, the ILECs' proposal will result in Type B prices that
embody a mark-up exceeding the mandated level, which is inconsistent
with cost-based pricing. Furthermore, this proposal is asymmetrical
and unfair since the ILECs support Type B prices based on Type B
costs when those costs exceed Type A costs.
|
68. |
AT&T et al. submitted that if the Commission agrees with the
ILECs that setting Type B prices below Type A prices in a given band
is inappropriate, the solution could be to aggregate the costs of
Type A and B loops to establish prices common to both types of
loops, and that this would ensure that the level of mark-up embodied
in loop rates would, overall, be no higher than the mandated level
of mark-up.
|
69. |
The Commission agrees with the objective of the ILECs' proposal.
The Commission further considers that AT&T et al.'s proposed
modification, as discussed in paragraph 68, is appropriate to
achieve that objective. The Commission therefore has determined the
loop costs and rates for each ILEC based on the per-band weighted
average unit cost of the combined Type A and B loops where Type B
loop costs are less than Type A loop costs.
|
|
Loop costing issues
|
|
Plant service lives
|
70. |
In PN 2000-27, the Commission stated that it expected the ILECs
to develop revised loop costs for each proposed band in accordance
with the costing methodologies used to determine the rates approved
in Decision 98-22.
|
71. |
This was further emphasized in a Commission letter dated
12 May 2000 which stated: "Bell Canada et al. is
directed to revise and re-file its 31 March 2000 submission with the
Commission by 30 June 2000, to reflect all costing related
determinations in Decision 98-22, applied to proposed bands,
including the use of economic lives equal to the accounting service
lives approved in Decision 98-2. TELUS is directed to apply the same
approach in developing its 30 June 2000 submission. The Commission
considers that its direction to parties in PN 2000-27
included the
use of accounting service lives of the length approved in Decision 98-2."
|
72. |
Bell Canada et al. observed that the Commission noted that the
present proceeding would determine costing parameters, including
life estimates, that will be used to establish both loop rates and
residential PES costs for purposes of estimating the subsidy
requirement, and that this implies that the lives that will be used
to determine loop rates, and residential PES costs for purposes of
subsidy calculations need not be those determined in
Decision 98-2. Bell Canada et al. further submitted that
since revised loop rates based on the new banding structures will
only come into effect after the price cap period, as will subsidy
requirements based on the new bands, the life estimates that should
be used to determine the underlying costs should reflect the ILECs'
updated asset lives, and it is only in this way that they will
reflect the true costs going forward.
|
73. |
AT&T et al. submitted that, in compliance with
Decisions 98-22 and 2000-745
and PN 2000-27, the ILECs are
required to use equipment lives equal to accounting lives, and, in
particular, the accounting lives approved in Decision 98-2. ARC et
al. also submitted that the depreciation lives set out in Decision 98-2
are appropriate and that a review of those lives was not an
issue in this proceeding.
|
74. |
AT&T et al. noted that while TELUS has complied with the
requirement to use the Decision 98-2
lives in the loop costing
studies, Bell Canada et al., to varying degrees, have not complied.
AT&T et al. submitted that one of the attractions of using the
Decision 98-2 lives is that, in addition to their proper conceptual
basis, the lives had been subject to extensive scrutiny and approved
by the Commission.
|
75. |
AT&T et al. further submitted that even if the Commission
were to entertain the possibility of approving changes in average
service lives (ASLs) from the approved levels in this proceeding,
which it should not, Bell Canada et al. have not provided the
justification for the use of lives other than the Decision 98-2
lives. AT&T et al. noted, among other things, that: (a) there
have been no changes in competitive market conditions in the
relatively short time since Decision 98-22 that would warrant a
change in ASLs (as facilities-based local competition has not
progressed as originally expected), (b) the ILECs' forecast of a
dramatic increase in the substitution of copper outside plant
facilities has not materialized; and (c) in many cases, the driver
for the forecast technology substitution in the loop, and the
resulting claimed shorter lives for existing technology, is the
satisfaction of demand for high-bandwidth services.
|
76. |
The Commission has clearly stipulated in PN 2000-27
and
subsequent correspondence in this proceeding that the revised loop
cost studies are to rely on the approved accounting service lives.
The Commission notes that TELUS and SaskTel filed revised loop cost
studies based on the approved accounting service lives while Bell
Canada et al. filed proposed loop cost studies based on proposed
economic lives. These economic lives take a more aggressive view of
obsolescence and are considerably shorter than the accounting lives.
Further, Bell Canada proposed updates to its accounting lives for
several accounts.
|
77. |
In light of the foregoing, the Commission is of the view that, in
the context of this proceeding, the accounting lives approved in
Decision 98-2 are appropriate for purposes of determining the ILECs'
revised loop costs and subsidy requirements.
|
|
Expense productivity
|
78. |
AT&T et al. submitted that it is obvious that there are
productivity improvements in the provision of telecommunications
services, and that excluding the impact of such improvements on
causal expense cash flows would thus overstate those cash flows and
the overall costs of providing the service in question. AT&T et
al. further submitted that the ILECs have provided no persuasive
evidence that productivity increase factors of less than 3.5% should
be used, and recommended that loop rates set as a result of this
decision reflect productivity increase factors of at least 3.5%,
consistent with Decision 98-22.
|
79. |
Bell Canada et al. submitted that it estimates the impact of
future productivity improvements on costs by explicit application of
ILEC-specific total implied productivity (TIP) factors to all
expenses incurred in the provision of the service. In the absence of
any other information, on a company-wide or service-specific basis,
each of the ILECs used its corporate average TIP to estimate the
productivity improvement associated with the provision of unbundled
loops. The value of the TIP factors reflect company-specific
expectations of year-over-year changes in operating expenses,
adjusted for the rate of inflation and NAS growth.
|
80. |
TELUS submitted that if the Commission determines that
productivity is to be explicitly recognized in Phase II cost
studies, there are implications for the price cap regime that must
be considered.
|
81. |
The Commission notes that the method of including expense
productivity factors in determining the loop expense forecasts was
established in Decision 98-22.
|
82. |
In this decision, the Commission has set limits on expenses as
set out in paragraphs 120 to 129. The Commission notes that
expense productivity improvements are implicitly recognized in these
expense limits. The method of incorporating productivity in the
residential PES cost studies for purposes of the TSR calculation is
different, and is discussed in paragraphs 156 and 157.
|
|
Average working fill factors and the
inclusion of capital productivity
|
83. |
AT&T et al. recommended that, based on the evidence filed in
this and other proceedings, the loop capital cost and
capital-related costs should be reduced by 15% to properly reflect
capital productivity. AT&T et al. submitted that the studies
appear to reflect no change in current growth technologies or
provisioning practices, or improvements in the capacity or
functionality of capital equipment, and that the problem is further
exacerbated by the fact that, even though the study period runs from
2002 to 2006, capital costs have not been adjusted for productivity
for year 2001 over year 2000 or year 2002 over year 2001.
|
84. |
Bell Canada et al. submitted that the ILECs' Phase II capital
costs consider only high-capacity, cost-efficient growth
technologies (i.e., they capture the improvement in productivity
which is achieved through the replacement of older, less-efficient
technology by new technology of a more efficient and effective
kind), the resultant capital cash flows include expectations of
future productivity changes, and thus cash flows for capital and
capital-related items are not adjusted by a productivity factor. In
addition, the application by the ILECs of prospective values of cost
parameters such as structure factors, fibre factors and fills
throughout the study period at long-term values also reflect
productivity gains.
|
85. |
TELUS submitted that AT&T et al.'s proposal on this matter is
different from the current approved methodology, and is outside the
scope of this proceeding.
|
86. |
The Commission continues to be of the view that the use of
cost-efficient growth technologies provide adequate consideration of
the increase in productivity for these investments, and that the
capital costing methodologies approved in Decision 98-22 continue to
be appropriate.
|
87. |
However, by contrast with the methodology used to restate
expenses, the ILECs proposed to restate their 2000 capital costs to
the year 2002 without recognition of explicit productivity
improvements. The Commission notes that, for example, while Bell
Canada has indicated that the material price of cable has dropped
since its cost study filed in the proceeding leading to Decision
98-22 (hereinafter referred to as the 1997 cost study), it has
assumed that its 2000 cable costs will increase over the 2000 to
2002 period. The Commission has reduced the forecast capital costs
in an amount equal to each ILEC's assumed capital cost increase
factors, to take account of likely efficiency improvements and
outside plant price reductions over this two-year period.
|
88. |
The loop capital costs are in general determined using the
capacity costing approach. Through the use of the average working
fill factor (AWFF), the capacity costing approach builds in spare
capacity (which can include network inefficiencies) by apportioning
the average non-service producing capacity to the per unit cost of
the service producing capacity.
|
89. |
AT&T et al. submitted that fill factors should reflect the
most efficient provisioning practices among the ILECs, rather than
company-specific practices. AT&T et al. recommended that loop
prices flowing from this proceeding reflect the higher of
(a) Bell Canada's fill factors and (b) each ILEC's
company-specific fill factors. In the case of Island Tel, MTT and
NBTel, whose costing data apparently makes no distinction between
feeder and distribution cables, AT&T et al. recommended that
their costs reflect the higher of (a) the company-specific fill
factor applying to the combined distribution and feeder, and (b) a
blended fill factor based on Bell Canada's fill factors and Bell
Canada's proportions of feeder and distribution capital.
|
90. |
Aliant submitted that while it is not surprising that AT&T et
al. would suggest the use of the highest possible fill factors
because this lowers the rates they would have to pay for unbundled
loops, this is not an acceptable reason for the Commission to
abandon its long-standing approach to fill factors. Aliant stated
that the approach should be entirely consistent with the
Commission's determination in Inquiry into Telecommunications
carriers' costing and accounting procedures - Phase II:
Information requirements for new service tariff filings, Telecom
Decision CRTC 79-16, dated 28 August 1979 (Phase II costing
directives) and subsequent approval of costing studies submitted by
the ILECs with respect to the capacity cost method, and that the
appropriate fill factor must be based on the actual average working
fill.
|
91. |
Aliant also submitted that a "fill at relief" fill
factor (as initially proposed by Bell Canada) is inappropriate since
it only applies to a relatively small subset of the total installed
base of units, i.e., those assets that are just about to have
additional plant installed for relief purposes. Aliant further
submitted that the types of plant under discussion, such as outside
plant cables, require additional capacity to be added in unit sizes
that are many times larger than an individual demand unit (cable
pair) basis.
|
92. |
Bell Canada et al. submitted that the adoption of a more explicit
definition of fill values for capacity costing and the mandated use
of this definition across all ILECs will ensure that differences in
the values of fill factors across ILECs reflect only differences in
their respective provisioning practices and operating conditions.
|
93. |
While initially proposing "fill at relief" estimates
based on long-run provisioning practices, Bell Canada submitted
that, should the Commission determine that measured actual AWFFs are
the appropriate measures of long-term fill for Phase II costing
purposes, then Bell Canada's loop and residence PES costs should be
estimated on the same basis as other ILECs. Bell Canada further
provided updated estimates of measured Bell Canada's AWFFs. These
AWFF updates were lower than the "fill at relief"
estimates. Bell Canada's AWFF results also revealed that the fill
measures for HCSA bands were lower than non-HCSA bands.
|
94. |
TELUS submitted that, contrary to AT&T et al.'s proposal, no
one set of fill factors represents the most efficient provisioning
practice, and each ILEC adopts the most efficient provisioning
practices for its circumstances. TELUS further submitted that if the
Commission were to require TELUS to retain the current quality of
service standards and still raise the fill factors used for costing
purposes, it would, in effect, be ordering the provision of service
at a specific quality standard without providing any reasonable
opportunity for TELUS to recover its costs through the rates
produced by the wrong costing information.
|
95. |
With respect to the ILECs' proposed use of average working fills,
the Commission notes that this is the common methodology that has
been used over the years to develop Phase II capacity costs as
prescribed by the Commission's Phase II costing directives. Since
the outside plant under discussion requires additional capacity to
be added in unit sizes that are many times larger than an individual
demand unit (cable pair) basis, the determination of the average
long-run fill factor based on the theoretical "fill at
relief" limit would not be appropriate.
|
96. |
For purposes of developing the loop and PES cost studies, the
Commission therefore considers that the ILECs' capacity costs should
continue to use measures of average working fills, consistent with
most ILECs' proposals. However, the Commission is concerned about
the wide range of AWFFs across ILECs proposed in this proceeding.
|
97. |
Several discrepancies in the definitions of AWFFs were reported
across ILECs. For example, TCBC proposed a distribution AWFF based
on a measure at the cross-connect box in the distribution plant
while that of the feeder based on a percentage of the in-service
pairs at the central office's (CO's) main distribution frame (MDF).
Bell Canada proposed the use of a single measure based on the
percentage of working copper pairs at the CO's MDF, applicable to
both feeder and distribution plant.
|
98. |
Various other discrepancies exist regarding measures taken and
the timing of the data. For example, TCI's proposed feeder fill was
assumed to be constant across bands and based on updated 1999
measured data, while TCI's distribution AWFF was based on a proxy
for its long-term expected fill based on provisioning guidelines
rather than measured data. NBTel and NewTel indicated that their
proposed AWFFs represent long-term averages over several years,
i.e., they were initially developed in 1993 or 1994, and were
subsequently reviewed and determined to be still relevant for the
year in question.
|
99. |
The Commission notes that the AWFF for distribution plant is
typically lower than for feeder plant. By contrast with feeder
plant, distribution plant is generally designed with a higher level
of spare capacity. Evidence of such differences in the ILECs'
provisioning practices were observed in the lower AWFF values filed
for distribution plant.
|
100. |
The Commission is further concerned with the revised AWFF
proposals of Bell Canada, NBTel and NewTel, which do not distinguish
between feeder and distribution plant. The use of a common AWFF
measure for feeder and distribution plant, by comparison with a
method that relies on separate measures, could result in some loss
in the accuracy of the corresponding capital cost estimates.
|
101. |
In light of the foregoing, to determine the loop costs, the
Commission adopts national long-run average estimates of 60% and
77%, respectively, for distribution and feeder AWFFs, for each
ILEC's non-HCSA bands, and 56% and 72%, respectively, for each
ILEC's HCSA bands.
|
102. |
The use of these uniform national AWFF measures, although higher
than most AWFFs proposed by the ILECs, recognize, among other
things: (a) the apparent lack of consistency in the AWFF
definitions; (b) the differences in the measures filed by most ILECs
compared to 1997 cost studies; (c) Bell Canada et al.'s request for
consistent AWFF definitions across ILECs; (d) the need to revise the
ILECs' proposed average historic AWFF values to reflect longer-run
measures of AWFFs, i.e., those expected over the 2002-2006 study
period; and (e) the Commission's prior determination in Decision
98-22 to increase TCBC's proposed AWFF value for distribution plant
for purposes of determining its loop costs, in order to be more
consistent with the distribution AWFFs of other ILECs.
|
103. |
In some cases, the approved changes could result in some of the
spare capacity in the network (implicit to the use of the AWFF)
being disallowed for causal costing purposes under the view that it
is in excess to that which should be reflected in the Phase II
costs. This excess may be reflected in the company's embedded costs.
The issue of compensation related to the difference between embedded
and current costs for competitor services will be examined through
the mark-up policy, as discussed in paragraph 65.
|
|
Integrated digital loop carrier system
overlay solution costs
|
104. |
The ILECs proposed two types of solutions to provide CLEC loops
within a wire centre serving area for customers served by an IDLC/remote
system, namely hairpin and facility overlay solutions. Both
arrangements require the addition of digital channel banks via DS-1
cabling and DX-1 cross-connections at the remote and/or at the host
switch location, along with the use of a fibre umbilical link
between the host and the remote.
|
105. |
AT&T et al. submitted that the loop costs
should be limited to those necessary to make a physical connection
between the customer and the host, that traffic on a loop arises
from the use of that loop for retail services, not from the mere
connection of the customer to the host, and, therefore, the costs
included in the loop study for remotes and umbilical links in
respect of both CLEC and ILEC demand should be limited to
line-driven costs.
|
106. |
Bell Canada et al. submitted that the approach proposed by
AT&T et al. is correct only in situations where the facilities
for which costs are being estimated are dedicated to the
end-customer. This is not the case for loops served by remotes where
the size and cost of shared umbilical links are driven by a
combination of access demand and usage demand. Most of the remote
equipment costs are access demand driven but after the placement of
the minimum number of DS-1 connections required to connect the
remote to the switch, additional connections are driven by the
amount of usage that the remote carries.
|
107. |
The umbilical link is shared by both CLEC and ILEC loops. The
size of the umbilical link is driven by the total amount of traffic
placed on it by both CLECs and ILECs. The loop rate must therefore
recover both the cost of the physical connection and the usage
expected to be generated on the loop.
|
108. |
For certain ILECs, the forecasts of the IDLC overlay capital
costs and capital-related costs were many times greater than those
forecast in the 1997 cost study. The ILECs submitted that the
increases were primarily due to the increased CLEC demand forecast
over the 2002-2006 time period and to increases in the assumed
proportions of CLEC loops to be carried on overlays (as a
consequence of the recent increases in the roll-out of remote
technology).
|
109. |
The Commission considers that an ILEC's increase in its roll-out
of remote technology does not mean that the proportions of CLEC
loops carried on overlays should necessarily increase. This
phenomenon was explained by Bell Canada in response to a Commission
interrogatory, where it stated that the overlay CLEC demand in Band
A is down significantly as Bell Canada expects to be able to
accommodate most of the CLEC loop demand in this band by
re-assigning Bell Canada's retail customers to the IDLC systems and
freeing up copper loops to meet CLEC requirements.
|
110. |
The Commission also notes that for many ILECs, the CLEC loop
demand forecast for the first year of the proposed cost studies
(i.e., year 2002) was several times more than the corresponding
current CLEC loop demand.
|
111. |
The Commission also notes that the IDLC overlay costs per NAS
forecast by SaskTel were considerably higher compared to any other
ILEC.
|
112. |
In light of the foregoing, the Commission has reduced by 30% the
IDLC overlay system costs forecast for TCBC, TCI, MTT, Bell Canada
and SaskTel.
|
|
Loop length estimation
|
113. |
In responding to interrogatory TELUS(CRTC)11Aug00-118, TELUS
stated that, for TCI, the average loop lengths by proposed band are
"calculated from the average loop length for each AA" but,
"as the average length for each AA is not available for TCBC,
the calculations for TCBC are similar except that the length is
based on the longest loop lengths for each AA."
|
114. |
The Commission considers this assumption to be clearly
inappropriate as it does not reflect the average loop length. The
Commission has therefore included a downward cost adjustment to both
TCBC's loop and PES cost studies, equivalent to a 10% reduction to
the average loop length, for all bands.
|
115. |
In light of this, the Commission has reviewed the wire centre
classifications using the revised average wire centre loop lengths,
and requires that the Castlegar, Cedar, Kitimat and Revelstoke wire
centres be removed from TCBC's HCSA band of between 1,500 and 8,000
total NAS and be re-classified into TCBC's non-HCSA bands.
|
|
Loop maintenance and functional operating
expenses
|
116. |
AT&T et al. submitted that it is obvious that the
Commission's intention was that the revised loop rates proposed in
the current proceeding would reflect the determinations of Decision 98-22. In this manner, the PN
2000-27 proceeding could build upon,
rather than duplicate, the exhaustive 15-month proceeding that
culminated in Decision 98-22. Accordingly, AT&T et al. submitted
that, for cost elements that were the subject of modification in
Decision 98-22 (i.e., billing and collection, maintenance expenses,
and product management and advertising), the present worth amounts
per NAS used to set rates in this proceeding should be no higher
than those dictated by Decision 98-22.
|
117. |
Bell Canada et al. submitted that this claim is unfounded, that
the ILECs' cost estimates precisely adhere to the costing
methodologies applied in Decision 98-22, and that the
quantification of costs for these elements is not identical to the
findings of Decision 98-22, which is to be expected given the
need to reflect more current information.
|
118. |
At paragraph 71 of Decision 98-22, the Commission stated: "[w]ith
respect to the proposed maintenance expenses, the Commission finds
MTS' and TCI's maintenance expense forecasts to be too high compared
to those of other ILECs. The Commission is of the view that MTS' and
TCI's maintenance expense forecast, expressed as a percentage of the
total capital loop plant, should not exceed 10%. Accordingly, where
MTS' and TCI's proposed maintenance expense forecast exceeds 10% of
the total capital loop plant, the Commission finds it appropriate to
reduce this maintenance expense estimate to a level of 10% of the
total loop plant capital."
|
119. |
The Commission notes that the ILECs' proposed maintenance expense
and functional operating expense (FOE) forecasts are generally
higher than those proposed in the 1997 cost studies. The Commission
finds this result to be counter to that which is expected,
especially in light of the ILECs' past productivity performance
improvements and given the incentives provided under the price cap
regime to reduce costs.
|
120. |
Furthermore, under the proposals in this proceeding, most ILECs
have forecast per NAS maintenance expense levels that exceed the
threshold set in Decision 98-22 (i.e., 10% of the capital loop
costs). In this particular proceeding, the ILECs were requested to
revise their loop cost studies and to incorporate the costing
determinations made in Decision 98-22.
|
121. |
For certain ILECs such as Bell Canada and TCBC, the expense
changes stem from changes in the sources of data (e.g.,
activity-based costing data or company maintenance expense actuals
with adjustments). For TCI and MTS, the proposed maintenance
expenses are similar to those proposed in the 1997 cost studies,
which were rejected in Decision 98-22.
|
122. |
With the exceptions set out below, the Commission finds no
persuasive evidence to support a departure from the maintenance
expense threshold determined in Decision 98-22.
|
123. |
In light of the foregoing, the Commission considers that, with
the exception of the remote bands, the per NAS maintenance expense
for each ILEC and in each band is not to exceed 10% of the per NAS
total loop capital cost. Bell Canada's and NewTel's per NAS
maintenance expenses for the remote band are limited to $18 per NAS,
while those for the other ILECs' remote band are limited to 20% of
the per NAS total loop capital cost. While the ILECs' remote band
captures the more remote areas, which have limited access and are
more costly to serve, those proposed by Bell Canada and NewTel show
higher maintenance costs by comparison with other ILECs and which
were reported to be limited to areas that are generally served by
air or boat.
|
124. |
Under its new loop cost study, NBTel indicated that: (a) its
maintenance expense is embedded in the capital cost and is no longer
identified separately, and (b) its outside plant capital has
decreased (due to reduced average loop lengths), while its
maintenance expense has increased (due to the use of NBTel's own
maintenance factors rather than Bell Canada's unit costs). Yet,
despite the reductions in the outside plant capital, the combined
capital plus maintenance loop costs per NAS proposed by NBTel show a
significant increase compared to the cost levels approved in
Decision 98-22. The Commission has therefore included a 10%
reduction to NBTel's proposed combined capital and maintenance cost
estimates in order to bring the cost levels for these cost
categories more in line with Decision 98-22 cost levels.
|
125. |
AT&T et al. submitted that the ILECs have not complied with
the Commission's directives and that their loop expenses do not
reflect the determinations of Decision 98-22. In particular,
AT&T et al. submitted that the ILECs' estimation of costs
associated with billing and collection, product management and
advertising expenses do not reflect the determinations of Decision 98-22. AT&T et al. further submitted several comments regarding
the use of retail versus wholesale costs and suggested that the
ILECs' loop cost studies have overestimated these expenses and
should be rejected.
|
126. |
AT&T et al. argued that: (a) the costs included in the loop
costing study in respect of ILEC demand should exclude any costs of
retail-related activities that may be embodied in cost estimates
based on or derived from retail proxies; (b) there are a variety of
expense inclusions for which the use of retail proxies could result
in an overstatement of costs; (c) since the loop is only a portion
of the retail exchange service, only a portion of the FOEs are
applicable to unbundled loops; and (d) therefore the expense levels
in the 2000 studies are based on a methodological approach that is
inconsistent with the approach adopted by the Commission in Decision
98-22.
|
127. |
Bell Canada et al. submitted that this claim is unfounded, that
the ILECs' cost estimates precisely adhere to the costing
methodologies applied in Decision 98-22, and that the fact that the
quantification of costs for these elements is not identical to the
findings of Decision 98-22 is to be expected given the need to
reflect more current information. Bell Canada et al. further
submitted that the update of unit costs is essential to derive
accurate updated estimates of unbundled local loop costs, and
consequently, the ILECs have included the best information available
within the loop cost studies filed in this proceeding, including
updated expense unit costs.
|
128. |
FOEs included in the loop cost studies primarily consist of
service provisioning, and other FOEs such as sales management,
billing and collection, product management and advertising.
|
129. |
The Commission finds the proposed ILECs' total FOE levels to be
consistently higher than the Decision 98-22 levels. Consistent with
the objectives enunciated in PN 2000-27
and in the light of the
Commission's findings above in paragraph 119 regarding the
anticipated expense levels, the Commission accordingly caps the
total FOE loop expenses for each ILEC and in each band to an amount
equal to the national FOE average of $1.65 determined in Decision 98-22, except for Bell Canada. The expense ceiling for Bell Canada
is set higher at $1.95 to recognize a change in the reporting of
certain service provisioning expenses that were previously captured
in the capital category. These expense limits are set to include the
costs of in-building wire associated with the multi unit dwellings
where in-building wire continues to be controlled by an ILEC.
|
|
Revenue charge costs
|
130. |
In Decision 2000-745, the Commission directed that a national
revenue-based subsidy mechanism be implemented effective 1 January
2001. Under the new mechanism, carriers are required to contribute
to a national subsidy fund based on a percent charge on
contribution-eligible telecommunications service revenues. The cost
of contributing to the national subsidy fund has not been included
in any of the costs filed in this proceeding but should be included
in the costs of the unbundled loop service used to set the loop
rates. Because the loop revenues are included in the calculation of
contribution-eligible revenues, the additional Phase II costs
resulting from the implementation of the new subsidy regime should
be estimated.
|
131. |
The ILECs proposed that the impact of the revenue charge should
be reflected in both the loop and PES cost studies. The ILECs
proposed that these costs be included by multiplying each of the
band-level cost estimates filed in this proceeding by 1/(1-RC),
where RC is the revenue percentage charge used to compute the
contribution payable.
|
132. |
The Commission considers it appropriate to include the above
proposed adjustment to account for the revenue charge in respect of
the loop service. While the current RC is 4.5%, the RC to be used in
the loop study should be that which is reflective of the 2002 to
2006 period. Based on preliminary calculations, the RC for the year
2002 using the Phase II cost methodologies is estimated at
approximately 1.5%. The Commission has accordingly made adjustments
to reflect the RC costs based on this updated value. By contrast
with the loop cost methodology, the RC costs to be included in the
residential PES costs for purposes of the TSR calculation are to be
determined separately each year based on the expected average
residential revenue per NAS per band for that year, and added
explicitly to the Phase II costs (within the TSR formula).
|
|
SaskTel return on equity
|
133. |
By contrast with other ILECs, SaskTel proposed the use of a rate
of return on equity (ROE) of 12.87% in this proceeding. SaskTel
noted that prior to coming under federal regulation, it utilized an
ROE of 12.87% in calculating its rates that were established based
on costs, which reflected the use of 11% adjusted upwards to reflect
a 17% provincial income tax cost.
|
134. |
Recognizing that it is not required to explicitly pay the 17%
provincial tax at this time, SaskTel indicated that it was prepared
to eliminate this adjustment from its ROE calculation. For the
purpose of calculating Phase II cost-based rates and the subsidy
requirement, SaskTel further indicated that the use of an 11% ROE
would be appropriate. SaskTel further noted that, should its tax
status change in the future, the company would file an application
with the Commission to have the cost of such taxes incorporated into
its cost-based rates and subsidy requirement.
|
135. |
The Commission considers it appropriate for SaskTel, like all
other ILECs, to use an ROE of 11% to determine loop and PES Phase II
cost estimates. Should SaskTel's tax status change in the future,
the Commission would be prepared to review the changes in loop costs
and residential PES costs due to this tax change.
|
|
Adjustments to SaskTel's and MTS'
proposed loop costs
|
136. |
By comparison with other ILECs, the Commission notes that it has
examined SaskTel's detailed cost assumptions and methods for the
first time.
|
137. |
With respect to SaskTel's proposed loop and PES cost studies, the
Commission notes that contrary to other ILECs, SaskTel's cost
studies exclude income tax costs since the company is
provincially-owned. However, SaskTel's proposed loop and residence
PES cost estimates per NAS were significantly higher than all other
ILECs. Based on the alternative uniform banding structure, SaskTel's
per NAS non-IDLC feeder capital costs showed significant cost
variations across the bands, and are several times greater than
those reported by other ILECs. The Commission finds that these
differences are primarily caused by the per-metre unit cost
estimates of buried copper cable assumed in each band.
|
138. |
In setting the rates for SaskTel in this decision, the Commission
has made significant reductions to SaskTel's per-band per-metre unit
cost estimates of buried copper cable to levels which are more in
line with the per-metre unit costs proposed by other ILECs, and
which are also more uniform across bands.
|
139. |
The Commission also finds that the cost levels for the IDLC
feeder capital costs are significantly higher than those of other
ILECs having comparable roll-out levels of remote technologies. The
Commission expects the utilization of this shared facility to
improve over time. Accordingly, the Commission has reduced by 30%
SaskTel's IDLC feeder capital costs which bring the per NAS costs to
levels that are more consistent with those of other ILECs, and which
recognize future potential efficiency improvements.
|
140. |
For most bands, SaskTel's proposed loop capital costs are not
significantly less than the levels proposed for its residence PES
cost study. The Commission finds that SaskTel has not justified its
loop capital costs, by comparison with its residence PES capital
costs. As demonstrated by the other ILECs' submissions, the capital
costs for the loop service are generally significantly lower than
those for the PES service. This result is explained by the
additional switching, inter-office trunking, and possible back-haul
transport investments (between the wire centre and the host switch
if the host switch is located outside the wire centre serving area)
which are required to provision PES but are not part of the loop
service. In light of the above, the Commission has adjusted
SaskTel's per-band loop capital costs such that they do not exceed
80% of this decision's corresponding residence PES capital costs.
|
141. |
The Commission has also made a cost adjustment to MTS' proposed
loop costs in Band E. MTS' costs for this band are more than
double the costs for any other MTS band and even exceed the loop
costs for its remote band. While the company indicated that the loop
costs in Band E are higher because of disproportionately longer
loops consistent with the low NAS density in rural areas, the
Commission considers that only part of the proposed cost differences
between this band and other bands are justified. The adjustment to
the costs brings the per-metre capital cost for Band E in line with
that of MTS' Band D.
|
|
Subsidies to business service
|
142. |
AT&T et al. and Microcell submitted that there is no need to
subsidize single-line business service and that it would be
completely inappropriate for other users of telecommunications
services to finance, through a mandated subsidy, one of the costs of
doing business for enterprises geared to making a profit. Microcell
strongly opposed any explicit subsidy mechanism extended to business
services, noting that there is simply no public policy justification
for the Commission to implement an explicit subsidy for the
provision of business local access service in an increasingly
competitive marketplace.
|
143. |
Bell Canada et al. submitted that, as a matter of public policy,
the rates for single-line business access services should be
expected to recover the costs of providing the service. Where rates
for single-line business access services are not already
compensatory, the ILECs should be provided with the flexibility to
increase such rates to compensatory levels. If not, the providers of
non-compensatory single-line business service NAS should also be
eligible to collect subsidies on those NAS.
|
144. |
TELUS maintained its position that subsidies should not be
provided to single-line business customers in high-cost areas.
|
145. |
By contrast with other ILECs, SaskTel urged the Commission to
include business single-line service in bands that meet the
definition of a high-cost area into the portable subsidy allocation
calculations. SaskTel submitted that it continues to believe that it
is unrealistic, in the short to medium term, to expect single-line
business customers operating in high-cost areas to pay rates that
would be required to totally eliminate the subsidy requirement in
these bands.
|
146. |
SaskTel also submitted that it is inappropriate to expect it to
internally fund the significant annual revenue shortfalls associated
with providing single-line business service in high-cost bands, and
for these reasons, subsidy eligibility should be extended to
single-line business service provided in high-cost areas.
|
147. |
The Commission is of the view that the cost of telephone service
is not a major driver in the viability of businesses, even in remote
areas. In most cases, the costs of telephone service for a business
accounts for only a small percentage of operating costs. Businesses
recoup the costs of doing business, including the cost for telephone
service, in the prices they charge for the goods and services they
provide. Moreover, unlike residential subscribers, business
subscribers can deduct telephone service costs as an income tax
deduction.
|
148. |
In view of the foregoing, the Commission finds that subsidies
should not be extended to single-line business service provided in
high-cost service areas.
|
|
Residence service costing issues
|
|
General costing assumptions
|
149. |
In Decision 2000-745, the Commission stated that local loop rates
and high-cost serving area bands for the ILECs will be determined in
this proceeding based on the ILECs' Phase II costs and that, to the
extent applicable, various costing parameters (for example, study
period, productivity factors, life estimates) used to determine the
loop rates in this proceeding should also be used to determine the
residential PES costs for purposes of calculating the subsidy
requirement.
|
150. |
ARC et al. submitted that consistency and fairness in the
administration of the portable subsidy regime call for a uniform set
of criteria and methodology, to the extent possible, among ILECs,
and that a national subsidy regime requires that all ILECs use a
nationally uniform methodology to determine HCSAs and to determine
the subsidy requirements relating thereto.
|
151. |
Bell Canada et al. submitted that under the national subsidy
pool, subsidy payments would be estimated on the basis of Phase II
costs. Since these payments are financed from all telecommunications
service providers, this in turn will lead to payments between ILECs.
Bell Canada et al. argued that where such payments result from
differences in costing methodology, rather than in operating
conditions or provisioning practices, they are completely
unacceptable. Hence, the Commission must ensure that the costing
approaches, including calculation of working fill factors, are based
on a consistent methodology across ILECs.
|
152. |
TELUS also submitted that it supported the use of a common
methodology for calculating the subsidy requirement in each band.
|
153. |
The Commission notes that a number of common costing assumptions
have in general been proposed between the loop and PES cost studies
filed by each ILEC, i.e.: (a) the same study period (2002-2006); (b)
similar unit cost inputs and methods to restate the 2000 unit costs
into 2002 unit costs; (c) similar cost and expense increase factors
and productivity offsets; (d) the same financial parameters; and (e)
similar ILEC demand forecasts. The Commission considers it
appropriate to apply, wherever possible, common costing methods and
assumptions between the loop and PES cost studies, consistent with
the stated objectives of Decision 2000-745.
|
154. |
With the exception of the expense category, which will be
discussed below, the Commission further considers that the following
cost assumptions approved in this decision for the loop cost study
should also apply to the PES cost studies, i.e., use of the approved
accounting plant lives, the national uniform AWFFs for feeder and
distribution, the adjustments to restate the 2002 capital unit cost,
TCBC's loop length adjustment, and the changes made to SaskTel's and
MTS' loop capital unit cost assumptions. The Commission finds that
the residential PES costs determined in this decision for the
purpose of calculating the subsidy requirement are necessary and
appropriate to ensure that the national subsidy fund established
persuant to Decision 2000-745 will operate in a manner consistent
with the objectives of the Act.
|
155. |
The Commission further considers that for purposes of the annual
TSR calculation, as discussed in paragraph 132, an adjustment
to the PES costs for each ILEC and each band will have to be made
each year to reflect the additional cost of the new revenue charges
associated with residential PES.
|
|
Removal of productivity and inflation
factors from the residential primary exchange service cost
studies
|
156. |
The ILECs agreed to a methodology whereby the PES costs are to
exclude both annual cost/expense increase factors and annual
productivity offsets, and are adjusted annually for productivity and
inflation for purposes of the TSR calculation.
|
157. |
The PES costs determined in this decision for each ILEC exclude
both the annual cost/expense increase factors and productivity
offsets, and further exclude the costs associated with the revenue
charge. These residence PES costs are being provided separately to
each ILEC by letter (due to the potential confidential nature of the
information). These costs are to be used as the basis to calculate
the annual TSR. The exact amounts of the productivity and inflation
factors to be applied in the TSR formula are to be determined in the
price cap review proceeding. The components associated with
inflation, productivity and the revenue charge are to be added
explicitly to the PES costs each year.
|
|
Residential primary exchange service
expense inclusions
|
158. |
The Commission considers it appropriate to apply expense
restrictions to the residence PES cost studies that are similar to
those applied to the loop cost studies. The Commission therefore
finds that the ILECs' PES maintenance expense forecast, expressed as
a percentage of the total capital loop plant, not exceed 10% for all
ILECs and all bands except for the remote Band G. Consistent
with the loop cost adjustments, the per NAS maintenance expense for
the ILECs' remote band should not exceed 20% of the total capital
costs, except for Bell Canada's and NewTel's remote band, which is
to be limited to $20 per NAS. This latter expense level for Bell
Canada's and NewTel's remote band has been set higher than for the
loop service to account for the higher expenses expected for the
residential PES service.
|
159. |
The categories of FOE expenses for the residence PES studies
include primarily service provisioning, sales management, billing
and collection, product management and advertising.
|
160. |
Similar to the loop FOE adjustments, the Commission considers it
appropriate to cap the total FOE associated with the residence PES
at $2.50 per NAS, uniformly across all ILECs and across all bands.
By contrast with the loop service, the higher approved FOE levels
recognize the additional FOE activities and expenses expected for
the retail PES service.
|
|
Adjustments to SaskTel's and MTS'
proposed residential PES costs
|
161. |
With respect to SaskTel's residence PES cost study, the
Commission has carried forward the adjustments made to SaskTel's
loop capital cost estimates. The adjustments include the uniform
expense limits applied to each ILEC, as discussed above. The
Commission notes that by contrast with SaskTel's proposal, the
adopted residence PES costs exclude the costs associated with
service connection activities. These latter costs are associated
with the company's service connection charges.
|
162. |
With respect to MTS, the Commission considers it appropriate to
make adjustments to the Band E PES capital costs, consistent with
the adjustments adopted for MTS' loop capital cost estimates for
that band.
|
163. |
With respect to MTS' remote Band G, the Commission notes that the
company's proposed per NAS residence PES capital cost is much higher
than its corresponding per NAS loop capital cost. MTS explained that
this is caused by the high back-haul transport costs (i.e., radio
technology facilities between IDLCs and the host switch covering
long distances) which are not included in the loop costs. The
Commission notes that these transport capital costs are more than
double the total loop capital costs for that band. The Commission
expects the utilization of this shared facility to increase over
time. In setting the MTS rates in this decision, the Commission has
therefore included a 30% reduction to these additional transport
costs in MTS' Band G in recognition of the unusually high transport
capital costs by comparison with the other ILECs and the potential
efficiencies associated with these shared facilities.
|
|
Imputation
test issues |
164. |
During the proceeding, in response to a Commission interrogatory,
Bell Canada et al. proposed that a process should be initiated to
identify which of the new bands are considered to be essential
following the adoption of a new banding proposal. Bell Canada et al.
further proposed that, on an interim basis, those new bands for
which all or the majority of demand is drawn from the existing
essential bands also be considered as essential.
|
165. |
By contrast, TELUS proposed that the imputation test be modified
so that all bands are treated as non-essential for costing purposes.
For imputation test purposes, TELUS submitted that all tariffs that
include non-essential components must calculate the cost of the
non-essential components based on Phase II costs plus a mark-up of
25%. TELUS submitted that this modification to the imputation test
would recognize actual costs in relation to proposed rates for all
tariffed services.
|
166. |
Bell Canada et al. later indicated that the imputation test
should continue to be applied at the level of the existing retail
rate bands.
|
167. |
AT&T et al. objected to Bell Canada et al.'s proposed
approach since this would permit the ILECs to pass the imputation
test where the test would not be passed if it were applied on the
new HCSA bands separately. With respect to TELUS' proposal,
AT&T et al. submitted that it is not worthy of serious
consideration since the company has provided no evidence to support
the view that loops no longer meet the essential services definition
in any band.
|
168. |
AT&T et al. further submitted that the following should be
considered to be essential: (a) loops remaining in existing
essential bands after band re-structuring; and (b) loops in new
bands for which all or a majority of demand is drawn from the
existing essential bands. AT&T et al. indicated that the ILECs
have presented no evidence to suggest that any loops currently
designated as essential should no longer be so designated.
|
169. |
The Commission considers that with the definition of new bands,
essential facilities such as loops in the current essential bands
should continue to be included in the imputation test based on
tariffed rates. The Commission notes that additional HCSA bands are
being created as a result of the adoption of the alternative uniform
band structure. The loops in these new HCSA bands are for the most
part being drawn from the existing essential bands. The Commission
therefore finds that all bands that were considered to be essential
prior to this decision should continue to be essential. Furthermore,
the new HCSA bands are also considered essential.
|
170. |
Effective the date of this decision, the following imputation
test rules are to apply.
|
|
a) Retail exchange service price reductions (implicit or
explicit) or new service introductions (including bundled
services) will have to meet the imputation test under the new rate
band structure from now on.
|
|
b) No rate changes to current retail rates will be required in
light of the new band structures.
|
|
c) For residence retail exchange service rates that are below
costs, the ILECs will not be permitted to reduce rates, since this
would imply that rates would be moved further away from costs.
|
171. |
AT&T et al. submitted that given the essential nature of
loops, it is important that the new pricing for unbundled loops and
the rules for ILEC pricing of retail services be compatible.
Ultimately, if the prices CLECs pay for essential services are such
that CLECs are not able to compete with the market prices
established by ILECs, there will never be sustainable competition.
|
172. |
AT&T et al. expressed concerns that Bell Canada's imputation
tests filed in support of narrowly targeted retail services will
continue to reflect estimates of highly disaggregated costs
notionally applicable to the loops used for a specific location,
service or customer, or any aggregation below the band level. For
example, the experience of the EEWD filing suggests that the costs
included in support of such filings do not reflect the high degree
of homogeneity that Bell Canada claims is exhibited by loop costs in
band B and that they can be significantly below the band-average
costs upon which loop prices are based.
|
173. |
AT&T et al. further submitted that imputing the loop price in
all bands would be a more effective means to ensure that amounts
included in the imputation test price floor for loops are in all
cases consistent with the costs used to establish unbundled loop
prices. AT&T et al. submitted that this would ensure that ILEC
retail services bear the same amount of mark-up on near-essential
facilities that is imposed on local competitors through loop prices.
Given the CLEC reliance on ILEC loops, the current imputation rules
provide the ILECs with an artificial cost advantage. Therefore,
imputing loop prices in all bands better accords with competitive
equity and avoids unjust discrimination vis-à-vis CLECs.
|
174. |
The Commission recognizes the competitive equity issues that may
arise under the current retail imputation test methodology which
allow the disaggregation of costs for loops. In this decision, the
Commission is addressing this issue in part through its banding
refinements to re-classify several downtown core wire centres for
Bell Canada and TCBC into lower-cost bands. Moreover, the Commission
directs the ILECs to show cause, by 8 June 2001, as to
why the ILECs' imputation tests for retail exchange services in
non-essential bands should not be changed to impute the average
per-band loop cost in order to increase fairness and competitive
equity. In responding, the ILECs should also comment on the
appropriateness of relying on the costing methodologies and
parameters approved in this decision for future imputation tests of
retail exchange services.
|
175. |
Furthermore, in light of the explicit subsidies that are
currently received from the Central Funds Administrator (CFA)
associated with the provision of residential service in the HCSA
bands, the Commission is of the preliminary view that, from now on,
any imputation test involving residential PES in HCSA bands should
be modified to take account of the explicit subsidies to be received
from the CFA. The ILECs are directed to submit their proposals on
this matter along with the above show cause request.
|
176. |
The ILECs shall serve a copy of their show cause and other
submissions pursuant to the above two paragraphs on all interested
parties to this proceeding by 8 June 2001. Interested
parties may by 9 July 2001, file comments, serving a
copy on the ILECs. The ILECs may by 24 July 2001 file a
reply, serving a copy on those interested parties who filed
comments. |
|
Quality of service issues |
177. |
ARC et al. submitted that, in light of restructuring the bands,
the Commission should undertake a follow-up proceeding to review the
existing quality of service indicators and the subdivision of
"rural" into "remote" and "general
rural".
|
178. |
The ILECs submitted that the restructuring of bands involving the
segregation of high-cost areas into separate bands would not
necessitate any changes to the current model of monitoring quality
of service. They submitted that, if quality of service information
was required for high-cost areas, it would be appropriate to use the
existing complaint process already approved for the independent
telephone companies, with less than 25,000 total NAS, in Regulatory
framework for the Independent Telephone Companies in Quebec and
Ontario (except Ontario Northland Transportation Commission,
Québec-Téléphone and Télébec ltée), Telecom Decision CRTC 96-6, dated 7 August 1996.
|
179. |
Currently, the proposed high-cost area bands are part of
"rural" for the ILECs which are required to report on the
existing quality of service indicators in rural and urban areas
separately.
|
180. |
The Commission therefore directs the ILECs that are currently
required to report on the existing quality of service indicators to
include the proposed high-cost bands in their reporting on
"rural".
|
|
Approval of loop rates
|
181. |
The Commission finds that the loop rates as approved on an
interim basis based on the loop costs adopted in this decision are
just and reasonable, and consistent with the objectives of the Act. |
182. |
In PN 2000-27, the Commission indicated that any revisions to
bands and local loop rates would be expected to become effective 1
January 2002. In accordance with PN 2000-27, the ILECs proposed
that their revised loop rates under the revised band structures
would be implemented as at 1 January 2002. |
183. |
AT&T et al. submitted that it would be inconsistent with the
intent of the essential services pricing principle to wait until 1
January 2002 to reduce loop prices under the existing band structure
to reflect any cost reductions. AT&T et al. proposed that
revised loop rates under existing bands reflecting the Commission's
determinations in this proceeding be implemented coincident with
this decision.
|
184. |
None of the ILECs objected to this proposal.
|
185. |
The Phase II loop costs filed by the ILECs in this proceeding are
generally lower than the current loop costs (implied by the current
loop prices). Under the essential services pricing principle, when
costs change, prices are generally expected to be revised to reflect
the changes in costs, especially if they are significant.
|
186. |
In light of the foregoing, the Commission approves, on an interim
basis, effective 27 April 2001, the Type A and B loop
rates set out in Attachment 1, pending the resolution of certain
follow-up processes. The ILECs are hereby directed to issue revised
tariff pages in accordance with the determinations in this decision,
by 29 May 2001.
|
187. |
All documents required to be filed by a specific date must be
received, and not merely mailed, by the dates indicated. |
|
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
|