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Summary of the decision
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In this decision, effective 1 January 2002, the Commission
establishes the framework for long-distance competition in the area
of northeastern Ontario served by O.N.Telcom.
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The decision also approves local rate increases. O.N.Telcom asked
for increases to take effect on 1 September 2001; the Commission
considers that it is appropriate to introduce these rate increases
on 1 January 2002, when the new long-distance competition framework
comes into effect. It is expected that, with these rate increases,
O.N.Telcom's local residential and business customers will pay rates
comparable to those for services provided by carriers in other
regions of Canada.
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The following features of the regulatory framework for the area
served by O.N.Telcom reflect the Commission's careful consideration
of the technical conditions in this northern area within the context
of the regulatory regime that the Commission put in place for the
rest of Canada:
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· competitor interconnections will be permitted at either
the local or toll switch, at rates based on Commission costing
principles and carriers will only be charged for the facilities
that they use;
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· during a two-year transition period, only O.N.Telcom will
be allowed to offer host-remote toll links;
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· to encourage the use of transport facilities between
Timmins and North Bay, O.N.Telcom will be able to revise its
transport facilities rates to take into account both its costs and
competitive market conditions;
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· incumbent local exchange carriers (ILECs) will be
reimbursed for the costs of installing equal access. The
reimbursement will be calculated on the basis of a single
cost-based blended rate. This rate will apply for ten years, and
will be paid once only for each originating and terminating toll
minute. A single rate is consistent with the regulatory regimes in
the rest of Canada; it also ensures ILECs can recover their
appropriate costs; and
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· O.N.Telcom did not demonstrate that there is a
significant amount of uneconomic toll traffic, so the Commission
did not agree with the request for a special mechanism to
compensate the company for uneconomic toll traffic. The Commission
will refrain from regulating long-distance service rates.
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The Commission is very grateful to all the persons who took the
time to share their knowledge and points of view during this
proceeding.
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Background
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1. |
O.N.Telcom's toll serving area encompasses 200,000 square
kilometres in northeastern Ontario. There are 43 communities with
approximately 79,000 network access services (NAS) in this
territory. The largest community is Timmins with 22,000 NAS.
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2. |
Four incumbent local exchange carriers (ILECs) operate in this
region. The largest is Northern Telephone Limited with 66,800 NAS.
The others are O.N.Telcom with 5,400 NAS, Bell Canada with 3,700
NAS, and Cochrane Public Utilities Commission with 3,500 NAS. Since
O.N.Telcom is the sole provider of toll service, the vertically
integrated ILECs, which are characteristic of the rest of Canada, do
not exist in this territory, with the exception of O.N.Telcom's own
local serving area.
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3. |
Currently, all toll traffic from outside northeastern Ontario is
routed from the Bell Canada switch in North Bay and travels over
O.N.Telcom facilities to its digital multiplex system-200 (DMS-200)
toll switch in Timmins, where it is routed to local end offices. The
majority of the traffic terminates in Northern's local serving
territory and is routed through Northern's digital multiplex
system-100 (DMS-100) local switch in Timmins.
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4. |
O.N.Telcom is a subsidiary of Ontario Northland Transportation
Commission and shares some corporate resources and activities.
Northern is a subsidiary of Bell Canada and shares certain resources
and activities with another Bell Canada subsidiary, Télébec ltée.
Cochrane is owned by the municipality of Cochrane, Ontario.
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5. |
In Telecom Decision CRTC 98-14, Regulatory framework –
Ontario Northland Transportation Commission, dated 1 September
1998, the Commission approved toll competition. However, the
Commission delayed implementation in the area served by O.N.Telcom
until after the high cost proceeding, due to concerns about the
effect of competition on the ability of profitable toll routes to
cross-subsidize unprofitable ones. Decision 98-14 also stated that
to the extent possible, the eventual terms and conditions of
competition should be the same throughout Canada. As well, Decision
98-14 approved a split rate base (SRB) regulatory framework for
O.N.Telcom.
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6. |
This decision results from the proceeding initiated by Public
Notice CRTC 2000-107, O.N.Tel – Implementation of toll
competition and related matters, dated 20 July 2000. The
proceeding included the Commission's consideration of written
submissions in response to the public notice, as well as comments
gathered during an oral hearing that the Commission conducted in
Timmins on 30 April and 1 May 2001.
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Positions of parties
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7. |
O.N.Telcom proposed that interconnection and equal access be
restricted to its DMS-200, which is designated as an access tandem
connection. To allow interconnection at Northern's DMS-100 would
result in significant bypass of O.N.Telcom's facilities. It proposed
interconnection rates based on a "Phase II-like"
methodology. The company also claimed it requires a direct subsidy
for its uneconomic toll routes to the extent it does not recoup
these losses in its interconnection rates. Lastly, with respect to
the implementation of competition, the company wanted routing
restrictions on traffic entering its territory from Bell Canada's
territory.
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8. |
O.N.Telcom proposed to raise local residential rates to $19.85
and business rates to $45.45 per month, effective September 2001.
O.N.Telcom proposed regulatory forbearance of its toll service, and
an SRB regulatory framework with the uneconomic toll connecting
trunks and host-remote facilities allocated to the Utility segment.
Before Cochrane and Northern enter the toll market, there should be
an SRB framework in place for those companies, and O.N.Telcom should
be allowed to rebill those companies' local services so customers
would have the option of receiving only one bill.
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9. |
Northern and Cochrane (the companies) wanted interconnection at
the local or toll switch. They stated that O.N.Telcom does not
require a direct subsidy for uneconomic toll routes, and they
questioned whether O.N.Telcom has any such routes. They wanted no
routing restrictions. They argued that O.N.Telcom's proposed cost of
interconnection was too high. They also stated that their final
decision on their own entry into the toll market would depend on the
terms and conditions for interconnection.
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10. |
The companies filed an SRB proposal. They proposed that
O.N.Telcom's SRB regulatory regime should meet the requirements of
Decision 98-14 for the Utility segment and that O.N.Telcom should
file toll service tariffs that pass an imputation test.
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11. |
Bell Canada stated that there should be no routing restrictions
on traffic entering O.N.Telcom's territory. The company is prepared
to enter into an agreement with O.N.Telcom regarding the routing of
traffic that would ensure a certain amount of use of the transport
facilities between North Bay and Timmins. Bell Canada did not oppose
toll forbearance for O.N.Telcom, as long as there are no explicit
subsidies for uneconomic toll.
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12. |
AT&T Canada Telecom Services Company was of the view that
carriers should have the choice to interconnect at the local or toll
switch.
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Commission note
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13. |
The Commission notes that the two principal parties to this
proceeding, O.N.Telcom and the companies, had very different and
polarized views about the correct terms and conditions of toll
competition in northeastern Ontario. Both parties were unwilling to
meaningfully explore alternatives to their own positions. In
arriving at its decision, the Commission had to attempt to design a
solution that, while addressing the main concerns of these parties,
would put in place a competitive regime to best suit the needs of
consumers, business and the telecommunications industry in
northeastern Ontario.
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Terms and conditions – General
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14. |
As noted above, in Decision 98-14, the Commission approved toll
competition in O.N.Telcom's territory and considered that, as much
as possible, the terms and conditions of competition should be the
same throughout Canada. The Commission also stated that
modifications might be required to reflect the uniqueness of
O.N.Telcom's operating environment.
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15. |
The Commission considers that the terms and conditions for toll
competition in O.N.Telcom's operating territory should be the same
as those in the territories of the independent telephone companies (ITCs),
pursuant to Telecom Decision CRTC 96-6, Regulatory framework for
the independent telephone companies in Quebec and Ontario (except
Ontario Northland Transportation Commission, Québec-Téléphone and
Télébec ltée), dated 7 August 1996, subject to the
modifications set out below.
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Location of interconnection
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16. |
In Telecom Decision CRTC 97-6, Unbundled rates to provide
equal access, dated 10 April 1997, the Commission stated
that competitors could connect at a Stentor owner company (SOC) end
office switch, a direct connect (DC); or at a SOC toll (tandem)
switch, an access tandem connection.
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17. |
O.N.Telcom proposed that competitors should only be allowed to
interconnect at its DMS-200 toll switch in Timmins, thereby gaining
access to all 79,000 NAS. Competitors should not be allowed to
interconnect at any of the end office switches.
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18. |
The companies believe that competitors should be allowed to
connect at the end office switches and not be limited to connect
only at the toll office. The companies stated that this type of
interconnection is consistent with the framework for toll
competition in the rest of Canada.
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19. |
Bell Canada stated that competitors should be allowed to connect
at either the end offices or O.N.Telcom's toll switch.
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20. |
AT&T Canada stated that competitors should be permitted to
interconnect with O.N.Telcom for origination and termination of
traffic in its serving territory and to also be allowed the option
to directly interconnect with Cochrane, Northern and any other local
exchange carrier (LEC) in O.N.Telcom's serving area.
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21. |
The Commission's view is that mandated interconnection and
provision of equal access at solely O.N.Telcom's DMS-200 switch in
Timmins would be a regulatory barrier to toll-market entry. The
Commission, therefore, will allow interconnection at O.N.Telcom's
DMS-200, at Northern's DMS-100, at Cochrane's local switch, and at
other locations where it is technically feasible and demand warrants
it.
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22. |
Based on the Commission's experience in the rest of Canada, the
Commission is of the view that trunk-side interconnection is the
most efficient means of interconnecting networks. Therefore,
line-side interconnection will not be allowed in O.N.Telcom's
current toll-serving territory.
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Provisioning of host-remote links for toll traffic to local
exchange carriers' end offices
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23. |
Currently, some of the facilities between Northern's DMS-100 in
Timmins and Northern's remotes are shared between Northern and
O.N.Telcom. These facilities carry local traffic, in the case of
remotes, and administration circuits for Northern and toll traffic
on behalf of O.N.Telcom. Northern and O.N.Telcom have a number of
joint-use agreements that outline the terms and conditions for
sharing facilities.
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24. |
O.N.Telcom also provides facilities to
Bell Canada for administration and common channel signalling 7
(CCS7) circuits from North Bay to Bell Canada's local exchanges in
O.N.Telcom's operating territory.
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25. |
O.N.Telcom also provides facilities that carry toll traffic
between the local exchanges of Bell Canada and Cochrane, and
O.N.Telcom's DMS-200 in Timmins.
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26. |
O.N.Telcom proposed that only it would be allowed to continue to
provide the toll component of host-remote links. O.N.Telcom was of
the view that competitive access to this network segment is a local
competition issue.
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27. |
The companies stated that technically, toll competitors have the
option of provisioning their own host-remote links between the
DMS-100 switch in Timmins and the remote facilities which subtend
off of this switch. The companies noted that this arrangement is in
place today for O.N.Telcom. The companies also stated that Northern
has the capability to provide its own host-remote links for toll
traffic. Northern requested authorization to provide these links as
part of its DC interconnection proposal.
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28. |
Bell Canada stated that the jointly provided host-remote
facilities currently in place should be normalized to reflect the
industry standard that exists elsewhere in Canada. The LEC should
have the option of normalizing any links connecting its own hosts
and remotes by self provisioning, or by leasing circuits or
otherwise acquiring transport from a third party such as O.N.Telcom.
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29. |
The Commission notes that if the host-remote links were the
responsibility of the LEC and not O.N.Telcom, the latter's proposed
host-remote aggregation charge would not be required, as these costs
would be reflected in the LEC's DC rate.
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30. |
The Commission also notes that there are joint use facility
agreements between O.N.Telcom and Northern for the provisioning of
some host-remote links with two-year renewal clauses requiring six
months' notification as part of these agreements.
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31. |
The Commission finds that the LEC is entitled to the provision of
host-remote links, including those required for the carriage of toll
traffic, between its switching centres. However, for the period from
1 January 2002 to 1 January 2004, the host-remote links must
continue to be provided for toll traffic by O.N.Telcom.
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32. |
The Commission is of the view that a two-year transition period
for the host-remote links would encourage competitive entry while
allowing the parties to resolve any outstanding contractual issues.
This transition period would allow O.N.Telcom time to adjust and
develop the appropriate business strategies for a competitive
environment.
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33. |
O.N.Telcom should consider the opportunity costs of the current
host-remote links, given that the ILECs will have the right to
self-provision these links in 2004. The Commission is of the view
that the ILECs should be aware of O.N.Telcom's long-term competitive
rate for the host-remote links in advance so they may make informed
investment decisions for the longer term. Therefore, in addition to
issuing, within 30 days of this decision, a tariff for an interim
host-remote link rate, approved in paragraph 64, O.N.Telcom is to
file a proposed final tariff for the host-remote link rate to
replace the interim rate.
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Equal access
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34. |
In Decision 98-14, the Commission directed Northern and
O.N.Telcom to implement equal access in their territories by 1 July
2000 to coincide with the expected introduction of toll competition
in their territories. For those exchanges in which O.N.Telcom is the
LEC, O.N.Telcom could implement equal access through its switches at
its end offices or through its toll switch, using the local access
and transport area equal access system (LEAS).
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35. |
O.N.Telcom indicated that the LEAS software has already been
installed in the Timmins toll switch to capture toll-billing records
and to foster the implementation of feature group D equal access to
the end offices where O.N.Telcom is the local service provider.
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36. |
O.N.Telcom stated that feature group D interconnection at the
access tandem is more cost efficient inasmuch as it will provide new
entrants with access, through a single point of presence, to all the
ILECs' customers (i.e., those of Northern, Bell Canada, Cochrane and
O.N.Telcom), including the three end offices that Northern will not
have yet upgraded by 2002.
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37. |
The companies believed that equal access should be implemented in
the same manner as approved by the Commission for the other ITCs in
Decision 96-6. This approach involves the installation of feature
group D software with CCS7 signalling on the local switch.
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38. |
The companies noted that this form of equal access has already
been adopted in the serving territory of Cochrane.
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39. |
The companies also stated that the long-distance industry's
familiarity with this form of equal access will help to reduce the
technical barriers to entry in the toll market in northeastern
Ontario by ensuring that interexchange carrier/LEC interconnection
arrangements are the same as those in other parts of Canada.
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40. |
The companies stated that equal access should be mandated for all
end offices in northeastern Ontario with, perhaps, the exception of
the end offices that are located in Detour Lake, Abitibi Canyon,
Mattice, Gowganda and Opasatika. Abitibi Canyon and Detour Lake are
served by old analog switching technology and it is not clear that
the costs of implementing equal access for these two end offices
would be commensurate with the associated benefits. The companies
stated that they would not be opposed to the implementation of equal
access on demand in these locations.
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41. |
Bell Canada indicated that its five end offices in O.N.Telcom's
territory are provisioned with equal access software. Bell Canada
stated that it would expect O.N.Telcom to implement equal access,
defined as feature group D with CCS7 signalling, and that Bell
Canada would be given the flexibility to interconnect at either the
O.N.Telcom access tandem or at the end office.
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42. |
Bell Canada also stated that if the policy objective were to
promote facilities-based competition, then the toll competitor
should generally be allowed to use, at its option, its own
facilities to connect to end offices where it makes technological
and economic sense.
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43. |
AT&T Canada opposed the LEAS arrangement on the basis that,
from a toll competitor's perspective, it would be a more costly
means of obtaining equal access than through direct interconnection
with the LECs' end office (Northern and Cochrane) at the LEC's
Carrier Access Tariff (CAT) rates. The LEAS arrangement will require
the toll competitor to pay O.N.Telcom for transport, as well as for
contribution and administrative charges; the toll competitor would
not have to incur these costs under the relevant CAT.
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44. |
The Commission notes that in Decision 98-14, paragraph 79,
Northern and O.N.Telcom were directed to implement equal access in
their territories and the interconnection must provide features
equivalent or superior to feature group D with CCS7 signalling
capability.
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45. |
The Commission directs Northern to provide equal access based on
CCS7 and feature group D on the DMS-100 in Timmins, prior to 1
January 2002, and to provide the capability in other locations based
on competitor demand.
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46. |
The Commission further notes that in Decision 98-14, O.N.Telcom
was permitted to implement equal access through its switches at its
end offices or through its toll switch, using the LEAS. The
Commission reminds O.N.Telcom that the LEAS arrangement is to apply
only to O.N.Telcom facilities.
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Interconnection rates
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47. |
While Bell Canada already has interconnection rates that
have been approved by the Commission, O.N.Telcom, Northern and
Cochrane have proposed interconnection rates for the following
services, as applicable: access tandem (O.N.Telcom only), DC, equal
access start up and host-remote link (O.N.Telcom only). The access
tandem rate was proposed to recover the incremental cost associated
with switching and aggregation of interexchange carrier traffic on
the company's interexchange network at O.N.Telcom's DMS-200. The DC
rate was proposed to recover the cost of the switching of
interexchange carrier traffic at the local exchanges and the
transport of traffic, as applicable, on host-remote links in the
ILEC's local serving areas, between a host switch and a remote
switching centre. The equal access rate was proposed to recover the
start-up costs for provisioning equal access on the switches.
O.N.Telcom's host-remote link rate recovers the cost of O.N.Telcom's
toll-connecting facilities configured as host-remote links between
Northern's DMS-100 host in Timmins and Northern's remotes subtending
off the DMS-100. The proposed rates for the above services are
presented in Table 1 at paragraph 64.
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48. |
The Commission notes that with the proposed equal access service
tariffs of the ILECs (O.N.Telcom, Northern and Cochrane), an
interexchange carrier could pay as much as three equal access
charges for a toll call depending on where the call originates and
terminates. The Commission finds this to be inappropriate, and
accordingly approves a blended equal access rate of $0.001250 per
conversation minute per end, applicable to all toll traffic on the
basis of originating and terminating minutes in O.N.Telcom's toll
territory, to be paid only at the DC point (i.e. at the local
switch). A single equal access rate is consistent with other
regulatory regimes in Canada. This blended equal access rate has
been set to allow the four ILECs operating in O.N.Telcom's toll
territory to fully recover their equal access costs over a ten-year
period along with a 25% mark-up. Based on the equal access cost
incurred by each ILEC as estimated by the Commission and explained
further below, the resulting allocation is: O.N.Telcom 39%, Northern
54%, Cochrane 4% and Bell Canada 3%. The Commission further expects
these four ILECs to make arrangements to pool the equal access
revenues and to distribute them among each other.
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49. |
In arriving at its determination that the blended equal access
rate should be $0.001250, the Commission has adjusted the equal
access cost component proposed by Northern and O.N.Telcom.
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50. |
The Commission's major adjustments to the equal access costs
proposed by Northern are:
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a) the disallowance of the costs of converting the DMS-10
switches in Mattice, Opasatika and Gowganda to remotes subtending
off the DMS-100 in Timmins. Northern suggested that this would be
the cheapest way to provide feature group D and CCS7. The
Commission notes that the total number of NAS affected by these
switches is less than 1% of Northern's NAS and considers that the
conversion costs per line would be too high. The Commission
further notes that the toll customers served by these switches
would continue to have access to an interexchange carrier's toll
service connected to O.N.Telcom's DMS-200;
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b) the removal of the ongoing costs associated with circuit
rentals. The Commission finds that these costs should not be
included in the equal access costs but should be included as part
of the ongoing costs of the DC service; and
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c) a 50% reduction to Northern's proposed CCS7 and local
automatic message accounting costs. In the Commission's view,
these costs should not be assigned entirely to the equal access
service since these features will provide other benefits to the
company. The Commission considers that a 50% reduction to these
costs reflects an appropriate assignment of these costs to the
equal access service.
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51. |
For O.N.Telcom's proposed equal access costs, the Commission's
decision reflects:
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a) the reduction of the LEAS software and investment costs:
this was determined on the basis of a more appropriate average of
three years of demand (which is expected to increase over time),
rather than one year;
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b) the elimination of the ongoing primary interexchange
carrier/customer account record exchange (PIC/CARE) billing costs:
the Commission notes that these ongoing costs are generally
recovered from relevant PIC/CARE processing tariffs; and
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c) a reduction to the land and building cost factors by four
percentage points to bring these costs more into line with those
of other ILECs.
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52. |
The Commission has also considered and adjusted downward the
access tandem, DC and host-remote link costs (and thus rates) to
reflect the use of end-of-study terminal value calculations based on
the discounted service potential approach to calculate Phase II
costs. In the Commission's view, the discounted service potential
method provides an appropriate economic measure of the remaining
plant value to be used in Phase II cost studies as determined in
Telecom Decision CRTC 98-22, Final rates for unbundled local
network components, dated 30 November 1998.
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53. |
The land and building cost factor that was used in O.N.Telcom's
DC cost study has been reduced by four percentage points to bring
this cost more in line with that of other ILECs for this service.
The Commission has also reduced the capital unit costs for the
host-remote link study by an additional productivity offset of 8%
over the 1997 to 2001 period in order to reflect the productivity
improvements and price changes reasonably anticipated for this type
of plant over this period. Direct and indirect host-remote link
expenses (including, principally, the plant and network operation
costs, and rights-of-way) were reduced by approximately one third to
reflect expected operating expense levels of other ILECs. The
results of these adjustments are set out in Table 1 of paragraph 64.
The rate for the host-remote link is approved on an interim basis,
pending the finalization of O.N.Telcom's new rate, pursuant to
paragraph 33.
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54. |
Additionally, the uneconomic toll component in O.N.Telcom's
proposed access tandem rate has been eliminated, consistent with the
rationale discussed in paragraphs 66 to 75 below. O.N.Telcom's
proposed access tandem rate also reflects the reduction of the toll
switching unit costs. This reduction was determined by the
Commission on the basis of a more appropriate average of three years
of demand (which is expected to increase over time), rather than one
year.
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55. |
Northern and Cochrane proposed the use of Télébec's DC rate of
$0.007600 per conversation minute per end for their own DC service.
In its final argument, Northern stated that it is fully prepared to
develop a host-remote transport service rate that would apply as of
the first day of toll competition. In the Commission's view,
O.N.Telcom's host-remote link rate of $0.004300 per conversation
minute per end is a reasonable interim proxy rate for Northern's
host-remote link rate until Northern files its own cost-based
proposed rate for this service, which Northern may start to charge
on 1 January 2004. The Commission notes that, as per this decision,
Northern is not permitted to provision toll host-remote links until
1 January 2004. Hence, the DMS-100 host-remote rate listed in Table
1 of paragraph 64 would have to be remitted by Northern to
O.N.Telcom for each originating and terminating toll minute that
travels on these facilities as of 1 January 2002 until 31 December
2003. Furthermore, Northern's rate for DC service is to exclude the
host-remote link service. This per conversation minute rate is
obtained by subtracting the host-remote link component rate of
$0.004300 from O.N.Telcom's DC rate of $0.008000, which leaves a DC
service component rate of $0.003700. With respect to Cochrane's DC
service, the Commission notes that Cochrane provides no host-remote
link service. Accordingly, the Commission considers it appropriate
for Cochrane to adopt Northern's DC service rate of $0.003700 per
conversation minute per end.
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56. |
Bell Canada proposed the use of the DC rate of $0.003256 per
conversation minute per end and the equal access rate of $0.001194
per conversation minute per end; rates that are currently in use by
most ex-Stentor companies. Parties did not object to the use of the
proposed DC rate. The Commission finds this DC rate to be
appropriate for Bell Canada. Bell Canada would use the blended equal
access rate of $0.001250 per conversation minute per end in
O.N.Telcom's current toll territory.
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North Bay/Timmins transport
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57. |
O.N.Telcom proposed a $0.006800 North Bay/Timmins transport rate
to recover the incremental costs associated with the transport of
interexchange carrier traffic on the company's interexchange network
between the Bell Canada point of network interconnection in North
Bay and the Timmins DMS-200.
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58. |
Currently, all toll traffic to and from O.N.Telcom's toll
operating territory is routed between O.N.Telcom's DMS-200 in
Timmins and Bell Canada's facilities in North Bay.
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59. |
O.N.Telcom proposed that there be a transition period in which
Bell Canada must continue to route at least a portion of its toll
traffic to O.N.Telcom over O.N.Telcom's facilities that interconnect
with Bell Canada in North Bay. Specifically, O.N.Telcom proposed
that starting in 2002, Bell Canada is to route 100% of its traffic
to O.N.Telcom over O.N.Telcom's facilities with a 25% decline in
each subsequent year until year-end 2005.
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60. |
Bell Canada stated it does not want routing restrictions and is
willing to consider an exchange of toll minutes with O.N.Telcom
based on a proportionate return basis.
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61. |
The companies stated that they were not in a position to comment
on the impact of O.N.Telcom's proposal to retain these arrangements
during a transition period where O.N.Telcom would continue to carry
a declining portion of Bell Canada's toll terminating traffic.
However, to the extent that O.N.Telcom's proposal prevents toll
carriers, such as Bell Canada, from selecting the interconnection
arrangement of their choice (i.e., access tandem or DC), the
companies are opposed to this approach to the implementation of toll
competition.
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62. |
The Commission is of the view that O.N.Telcom's position
regarding traffic restrictions on the North Bay/Timmins route would
hinder the roll out of toll competition.
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63. |
The Commission directs O.N.Telcom and Bell Canada to renegotiate
a new agreement based on proportionate return basis for incoming
traffic. O.N.Telcom and Bell Canada are directed to file a proposed
new agreement within 30 days of this decision to be effective 1
January 2002. In the light of the Commission's determinations in
this decision, O.N.Telcom may wish to review its transport rate. In
so doing, O.N.Telcom is encouraged to accommodate interexchange
carriers that could use the Timmins/North Bay facilities and
interconnect at the DMS-100 or DMS-200 in Timmins.
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64. |
In light of the foregoing, the Commission approves the following
per conversation minute per end interconnection rates in
O.N.Telcom's toll territory, effective 1 January 2002:
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Proposed and approved rates per conversation
minute per end
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Company |
Rate element |
Proposed
rate |
Approved
rate |
|
O.N.Telcom |
Access tandem |
$0.006600 |
$0.005000 |
|
|
Direct connect (DC) |
$0.009200 |
$0.008000 |
|
|
Equal access |
$0.001300 |
$0.001250 |
|
|
Host-remote link (interim) |
$0.006400 |
$0.004300 |
|
|
Transport rate |
$0.006800 |
$0.006800
|
|
Northern |
DC (DMS-100) |
$0.007600 |
$0.003700 |
|
|
DC (DMS-100 host-remote)
(interim)
|
N/A |
$0.004300 |
|
|
Equal access |
$0.001500 |
$0.001250
|
|
Cochrane |
DC |
$0.007600 |
$0.003700 |
|
|
Equal access |
$0.001500 |
$0.001250
|
|
Bell Canada |
DC |
$0.003256 |
$0.003256 |
|
top
|
Equal access
|
$0.001194 |
$0.001250 |
65. |
The Commission directs that tariff pages implementing these rates
be issued within 30 days to be effective 1 January 2002.
|
|
Uneconomic toll
|
66. |
In Decision 98-14, the Commission stated that, with the
introduction of toll competition in O.N.Telcom's operating
territory, the subsidy from toll services would likely be
significantly eroded. In order to address the erosion of subsidy,
the Commission would have to allow O.N.Telcom to raise local rates
or establish other terms and conditions for competition that would
offset this loss of toll subsidy.
|
67. |
O.N.Telcom defined uneconomic toll to include those segments of
toll-connect routes (excluding host-remote links) and associated
toll markets where, in a competitive marketplace, toll revenues are
not forecast to recover related Phase III costs, including a rate of
return of 11.375% on the invested capital. The company also assumed
that the routing restrictions and other aspects of its proposal
would be implemented.
|
68. |
O.N.Telcom filed an uneconomic toll study that was a Phase III
type study, using embedded costs. This study generated an average
annual shortfall in uneconomic toll of $667,000.
|
69. |
The companies stated that the economic studies relating to these
alleged uneconomic toll routes both overestimate the costs and
underestimate the revenues of these routes and, as a consequence, it
is not even clear that these uneconomic routes actually exist.
|
70. |
Bell Canada stated that it is not aware of any evidence that
uneconomic toll has created a serious problem regarding end-customer
access to toll services in a competitive market. Bell Canada
believed that this is the only type of problem that would warrant
regulatory intervention with respect to uneconomic toll. Given the
potential for market distortions inherent in the use of subsidies to
address the issue of uneconomic toll, clear evidence of a serious
problem with respect to end-customer access would be required before
resorting to such a solution.
top |
71. |
The Timmins Economic Development Corporation and the City of
Timmins defined uneconomic toll as a service area or region, which
cannot support the cost of services. They suggested that the reality
is that there are areas in northeastern Ontario that cannot support
the services they require due to location and low population
density.
|
72. |
The Commission notes that the uneconomic toll study was a Phase
III type study, using embedded costs. The Commission considers that
a Phase II study would have been more appropriate under the
circumstances because such a study involves an incremental cost
approach. Further, the study did not directly include the impact of
a government grant on the Cochrane/Moosonee portion and excluded
contributions from other services using the facilities on the route.
|
73. |
The Commission notes that the revenues from what O.N.Telcom
identified as its uneconomic toll routes are a small percentage of
the company's total operating revenues.
|
74. |
The Commission also notes that if Bell Canada and Northern leased
facilities from O.N.Telcom to provide toll services to these
communities, the requirement for a toll subsidy, if any, would be
further reduced.
|
75. |
The Commission is of the view that, in consideration of the
points raised above, no explicit toll subsidy is required and
therefore denies O.N.Telcom's request for an explicit toll subsidy.
top |
|
Toll carrier of last resort/Obligation to serve
|
76. |
In Telecom Decision CRTC 99-16, Telephone service to high-cost
serving areas, dated 19 October 1999, the Commission established
a basic service objective for LECs that includes, among other items,
access to the long-distance network.
|
77. |
O.N.Telcom stated that as the incumbent toll carrier for its
toll-serving territory, it fulfils the role of toll carrier of last
resort. That is, O.N.Telcom is ready to ensure that all customers
within its territory will continue to have access to quality toll
services.
|
78. |
The companies stated that to date, no toll carrier that serves
northern Ontario or northern Quebec has ever been designated by the
Commission as a toll carrier of last resort. Indeed, despite
arguments made by Télébec and Québec-Téléphone, now known as
TELUS Communications (Québec) Inc. (TELUS Québec), in the
proceeding that led to Telecom Decision CRTC 96-5, Regulatory
framework for Québec-Téléphone and Télébec ltée, dated 7
August 1996, regarding the high costs of providing toll service to
certain northern and eastern regions of Quebec, the Commission has
chosen not to designate these service providers as toll carriers of
last resort.
|
79. |
The companies submitted that it would be contrary to Decision
99-16 and the Commission's general approach to toll competition in
the southern portions of Canada to designate a toll carrier of last
resort in the operating territory that is now served by O.N.Telcom.
|
80. |
The companies believed it would be premature to identify a toll
carrier of last resort in northeastern Ontario in the absence of any
evidence that there is a need for such an entity. If there is
evidence after the introduction of toll competition that a toll
carrier of last resort should be designated for northeastern
Ontario, then that would be the appropriate time, in the companies'
view, to address this issue.
top |
81. |
During the oral hearing, Northern stated that if O.N.Telcom
decides not to provide access to long-distance service providers,
then Northern would address the situation as a LEC with the
responsibility of providing toll access to Northern's customers.
|
82. |
Bell Canada stated that the reality of competitive toll markets
in Canada would suggest that the designation of a carrier as the
toll carrier of last resort with an obligation to provide toll
service in O.N.Telcom's toll operating territory is not required.
Bell Canada questioned why pre-emptive action would be taken in the
absence of any demonstrated problem, since after several years of
toll competition in most other regions in Canada, the issue has not
arisen.
|
83. |
Bell Canada noted that end-customer access to toll services,
first and foremost, is the responsibility of the LEC. Access to toll
is a fundamental element of basic local service and various
mechanisms and approaches have already been adopted by the
Commission to support LECs in the provision of high-quality basic
local service at fair and reasonable rates.
|
84. |
The Commission notes that access to the long-distance network is
an important element in the basic service objectives for LECs, which
were established in Decision 99-16.
|
85. |
The Commission also notes that Bell Canada and the companies both
indicated that it would be premature to designate a carrier of last
resort without any indication of problems with customers accessing
the toll network.
top |
86. |
The Commission notes that there have not been any problems with
customers accessing the toll network and the Commission does not
foresee any problems in the future. The Commission agrees with Bell
Canada and the companies that the LEC is the carrier that is
responsible for providing access to the toll network and that a toll
carrier of last resort need not be identified at this time.
|
|
Regulatory framework
|
|
Form of regulation for O.N.Telcom
|
87. |
O.N.Telcom proposed to continue the SRB regulatory framework
established in Decision 98-14 for its Utility segment. This would
include a rate of return on equity (ROE) range of 10.375% to 12.375%
for the Utility segment and a deferral account to record any Utility
segment earnings in excess of the maximum approved ROE.
|
88. |
O.N.Telcom also proposed to modify the existing Phase III costing
to include a new broad service category called Utility switching and
aggregation (SWAG). This category would include revenues generated
by its proposed SWAG access tandem and the host-remote aggregate
rates, costs for unusually long toll connecting trunks and
host-remote links, and be designed to identify any shortfall
associated with uneconomic toll. O.N.Telcom proposed that the
company's uneconomic SWAG facilities and the associated host-remote
links be treated from a costing perspective in the same manner as
the Commission treated this type of facilities for Northwestel in
Decision 99-16.
O.N.Telcom expected to recover any shortfall in this category, net
of imputed SWAG revenues from the company's own Competitive segment,
through the new national, revenue-based contribution collection
mechanism.
|
89. |
Both Bell Canada and the companies saw no need to depart from the
regulatory framework that was established in Decision 98-14 for
O.N.Telcom's Utility segment. With respect to the Competitive
segment, the companies stated that it is necessary to modify the
regulatory framework to prevent O.N.Telcom from using its dominant
position in the market to the detriment of any competitors. In the
companies' view, safeguards are needed to ensure that O.N.Telcom
does not engage in anti-competitive behaviour.
|
90. |
The Commission agrees with these parties and concludes that the
existing regime is appropriate for the Utility segment and should
continue.
top |
91. |
The companies cited the exclusion from the Utility SWAG of the
revenues and costs associated with O.N.Telcom's own usage of the
access tandem service, the exclusion of the direct revenues
associated with the provision of uneconomic toll service, and the
inclusion of the revenues from O.N.Telcom's potentially competitive
host-remote aggregation service as reasons for concluding that
O.N.Telcom's proposal to introduce the Utility SWAG broad service
category is seriously flawed and that competitive inequities will
arise if the Commission approves it.
|
92. |
The Commission shares these concerns and is also concerned with
the methodology used to develop the amount of subsidy as an
inappropriate mix of revenues and costs is included in its
calculation, and considers that the design of the category is flawed
because it ensures, inappropriately, that as O.N.Telcom's market
share increases, the subsidy also increases.
|
93. |
In light of the above considerations and the Commission's
determination that no subsidy is required for uneconomic toll, the
Commission concludes that the proposed Utility SWAG broad service
category is inappropriate and should be denied.
|
94. |
In Decision 98-14, the Commission directed O.N.Telcom to set up a
deferral account to capture any excess earnings associated with the
Utility segment, and indicated that the distribution of the amounts
collected in the account would be determined at a later date. The
Commission directs O.N.Telcom to continue to accumulate any excess
earnings from the Utility segment in a deferral account.
|
|
Form of regulation for other incumbent local exchange carriers
entering the toll market
|
95. |
O.N.Telcom stated that prospective competitors entering the
market should not be able to cross-subsidize their toll operations
from their Utility segment operations. As the SRB regime is the
accepted safeguard in other parts of Canada to ensure this does not
occur, O.N.Telcom proposed that other ILECs entering the market
should implement an SRB framework as a pre-condition to entry.
top |
96. |
Northern agreed with O.N.Telcom and submitted a request in the
proceeding to split its rate base by filing an SRB manual. Bell
Canada stated that the implementation of an SRB framework would be
desirable to allow the segregation of competitive toll assets,
revenues and expenses from the rate base.
|
97. |
The Commission agrees that in order to ensure no
cross-subsidization between the Utility and Competitive segments,
ILECs entering the market should be required to have an approved SRB
framework in place.
|
98. |
The Commission notes that the SRB manual filed by Northern in
this proceeding has not yet been approved and is of the view that a
detailed review of the manual should be delayed, particularly until
after the outcome of the process initiated by Public Notice CRTC 2001-61, New regulatory framework for small independent telephone
companies and related issues, dated 30 May 2001, is known, as
changes to the regulatory framework may make further review
unnecessary.
|
|
Outcome of the Public notice 2001-61 process
|
99. |
The Commission notes that O.N.Telcom is a participant in the PN
2001-61 proceeding and will be subject to determinations made as a
result of it. The Commission concludes that the rate base/rate of
return regime established in Decision 98-14, as modified in this
decision, should continue to be in place for O.N.Telcom until the
outcome of the PN 2001-61 process is finalized. The Commission notes
that the regulatory framework for both O.N.Telcom and other ILECs
entering the toll market may be affected as a result of its
determinations at the conclusion of that process.
|
|
Host-remote facilities
|
100. |
O.N.Telcom proposed that the final network configuration to be
considered is the unusual provisioning arrangements for host-remote
facilities that have evolved in the territory. O.N.Telcom maintained
that it should continue to have the obligation to provide
host-remote links for toll purposes and that there is insufficient
information on the record to consider competition on host-remote
links. O.N.Telcom submitted that it would not be appropriate to use
local facilities for competitive toll purposes without compensation
to the Utility segment.
top |
101. |
The companies submitted that it was not appropriate to include
the revenues and costs associated with host-remote aggregation in
O.N.Telcom's proposed Utility SWAG category. Bell Canada was of the
view that the jointly provisioned host-remote facilities that are in
place should be normalized to reflect the industry standard that
exists elsewhere in Canada. Bell Canada also took the position that
any LEC should have the option of normalizing any links connecting
its own hosts and remotes either by self-provisioning or otherwise
acquiring transport from a third party such as O.N.Telcom.
|
102. |
Notwithstanding the desire to maintain similarity with
interexchange competition in the rest of the country, the Commission
notes that the overlaying of the Northern DMS-100 and host-remote
facilities over O.N.Telcom's toll-connect facilities has resulted in
facilities that now carry both local and toll traffic. The
Commission notes that, according to currently approved Phase III/SRB
methodology, host-remote facilities are assigned to the Competitive
segment by O.N.Telcom as part of toll connect service, and to the
Utility segment by Northern and the ex-Stentor members as part of DC
access service.
|
103. |
The Commission notes that Northern is proposing to offer a
host-remote transport service that would compete directly with
O.N.Telcom's proposed host-remote aggregation service, once toll
competition is introduced in the region.
|
104. |
From a Phase III/SRB perspective, the Commission is of the view
that O.N.Telcom and ILECs in O.N.Telcom's toll operating territory
should be treated similarly for like usage of like facilities.
|
105. |
Consequently, the Commission has concluded that revenues and
costs associated with host-remote facilities in O.N.Telcom's toll
operating area that are used for the transport of toll traffic shall
be included in the Competitive segment, regardless of carrier.
top |
106. |
O.N.Telcom is directed to amend its SRB procedures manual, at the
time of its next regularly scheduled update, to reflect the
assignment to the Competitive segment of revenues and costs for
host-remote facilities that are used for the transport of toll
traffic.
|
107. |
Further, should Northern enter the toll market in O.N.Telcom's
toll territory, the Commission directs that Northern's proposed SRB
manual be amended to include the assignment to the Competitive
segment of costs and revenues of owned, or leased, or purchased
host-remote facilities used for toll traffic.
|
|
Access tandem and equal access
|
108. |
In Telecom Decision CRTC 95-21, Implementation of regulatory
framework – Splitting of the rate base and related issues,
dated 31 October 1995, the Commission noted that, in Telecom
Decision CRTC 92-12, Competition in the provision of public long
distance voice telephone services and related resale and sharing
issues, dated 12 June 1992, it determined that access tandem
connection service was a bottleneck service, although it recognized
that, from a technical perspective, competitors could interconnect
at the end office switch. Further, the Commission considered that,
in the long term, competitive alternatives to access tandem
connection service may arise from local service competitors and from
high-volume toll service competitors that use DC service, in
conjunction with their own trunking and tandem switch to provide
access tandem connection service to other toll competitors.
|
109. |
In Decision 95-21, the Commission was of the view that this
proceeding provided no persuasive reasons for changing the finding
in Decision 92-12 that access tandem service provided to
interexchange carriers is a bottleneck service. On that basis, the
Commission concluded that access tandem connection service provided
to interexchange carriers should be assigned to the Utility segment.
|
110. |
In Decision 95-21, the Commission also determined that the costs
for toll connecting trunks and related toll switching used by the
telephone companies' Competitive segment should be assigned to the
Competitive segment. In that same decision, all connections provided
to the Stentor member companies' Competitive segment toll services
are considered to be direct connections.
top |
111. |
In Decision 95-21, the Commission allowed the Stentor member
companies to exclude their use of access tandem switching services
from the calculation of the access tandem charge because it was more
likely that these companies would use end office interconnection
arrangements. The Commission noted, however, that the telephone
companies would generally use DC service. Where such connections are
used, the Commission was of the view that the costs for
toll-connecting trunks and related toll switching used by the
companies' Competitive segment should be assigned to the Competitive
segment.
|
112. |
Referencing Decision 95-21, O.N.Telcom indicated that according
to its proposal, the company's Competitive segment is using a DC
service equivalent in that the Competitive segment is charged
separately for the O.N.Telcom SWAG DC service rate, and that all
equal access costs are absorbed by the Competitive segment, in that
the segment itself is providing the equal access service to the
interexchange carriers.
|
113. |
The companies submitted that O.N.Telcom had incorrectly assigned
its own usage of the access tandem switch to the Utility segment
rather than assign the costs and revenues to the Competitive segment
in accordance with Decision 95-21.
|
114. |
The Commission is of the view that, in accordance with current
regulatory treatment of equal access costs and revenues, equal
access costs and revenues should be assigned to the Utility segment
in accordance with O.N.Telcom's approved SRB manual, similar to the
ex-Stentor member companies. With O.N.Telcom's current approved SRB
approved methodology, which is consistent with the ex-Stentor
companies, all access tandem costs and revenues are assigned to the
Utility segment.
|
115. |
The Commission is of the view that to the extent possible,
Northern, Cochrane and O.N.Telcom access tandem and equal access
facilities should be treated similarly.
top |
116. |
In view of the unique non-vertically integrated nature of the
major players in the territory, and the proximity of O.N.Telcom's
DMS-200 and Northern's DMS-100 switches, the Commission is of the
view that, contrary to the facilities positioning in the rest of the
country, O.N.Telcom's access tandem connection facilities in the
territory should be treated as non-bottleneck facilities. The
Commission has therefore determined that O.N.Telcom's access tandem
connection costs and revenues are to be assigned to the Competitive
segment. O.N.Telcom is directed to amend its SRB procedures manual,
at the time of its next regularly scheduled update, to reflect the
assignment of access tandem revenues and costs to the Competitive
segment.
|
117. |
The Commission is of the view that, should Northern enter the
toll market in O.N.Telcom's toll operating territory, then Northern
will be required to assign the revenues and costs of owned,
purchased or leased access tandem connection service to the
Competitive segment. Should Northern enter the toll market, it is to
amend its proposed SRB manual to reflect the assignment of the
access tandem connection revenues and costs to the Competitive
segment.
|
|
Official telephone service
|
118. |
O.N.Telcom has proposed a treatment of its official telephone
service (OTS) costs and revenues according to the assignment of
costs and revenues at tariffed rates on a cost-centre basis.
Revenues are recorded on the company's books and the revenues are
treated as costs for the cost centre that incurs them.
|
119. |
The Commission notes that O.N.Telcom has proposed an SRB/Phase
III treatment of its OTS costs, which differs from the methodology
used by the ex-Stentor companies and the larger independent
telephone companies. Further, the company's proposal does not comply
with the Commission directive pertaining to the treatment of OTS as
outlined in Telecom Order CRTC 99-363, In the matter of the Phase
III costing, Carrier Access Tariff (CAT) and split rate base
procedures manual filed for approval by O.N. Tel, dated 22 April
1999.
|
120. |
The Commission is of the view that O.N.Telcom's OTS adjustment
methodology for SRB purposes should be treated in a manner similar
to the rest of the country and that the prior Commission order
dealing with the company's OTS adjustment should be maintained.
Therefore, at the time of its next SRB manual update, O.N.Telcom is
directed to amend its procedures manual to reflect the assignment of
OTS costs and revenues in a manner consistent with the ex-Stentor
companies' methodology.
top |
|
Consumer/Competitive safeguards
|
|
Toll forbearance for O.N.Telcom
|
121. |
As indicated in Telecom Decision CRTC 94-19, Review of
regulatory framework, dated 16 September 1994, the key issue in
determining whether to forbear from the regulation of a
telecommunications service is whether a company has market power in
the market for which forbearance is considered. In the context of
this proceeding, O.N.Telcom would have market power if it could
raise prices above competitive levels for an appreciable period of
time.
|
122. |
The Commission stated in Decision 94-19 that determinants of
market power include:
|
|
· market share;
|
|
· economic, financial or regulatory entry barriers;
|
|
· customers' ability and willingness to switch between
suppliers;
|
|
· suppliers or service providers' ability to increase output;
and
|
|
· evidence of rivalrous behaviour, such as aggressive pricing
or marketing campaigns.
|
123. |
The Commission also noted that a large market share may not
indicate market power if there are no entry barriers, if customers
are able and willing to switch between suppliers, and if suppliers
can increase output.
|
124. |
As stated in O.N.Telcom's tariffs, and for the purposes of
forbearance in this section, the company's message toll services
include two-point, overseas, facsimile, aircraft and
800 services. No party to this proceeding submitted that there
were economic or financial barriers to entry into O.N.Telcom's
message toll market. Similarly, no party submitted that potential
entrants into the market would have difficulty increasing output in
response to market demands.
|
125. |
Bell Canada stated that if the terms and conditions of toll
competition in O.N.Telcom's territory are similar to the terms and
conditions in the rest of Canada, there would also be a competitive
market for toll services in O.N.Telcom's territory, and that it
would be appropriate for the Commission to forbear from regulation
of toll services provided by O.N.Telcom. However, Bell Canada argued
that forbearance from regulation would not be appropriate if
interconnection and provision of equal access were mandated at
O.N.Telcom's DMS-200.
top |
126. |
Both O.N.Telcom and the companies agreed that in O.N.Telcom's
service territory, users are anticipating competition in the
long-distance market. However, Northern stated that O.N.Telcom will
initially have a 100% market share, and may only see gradual erosion
of its market share. Accordingly, Northern submitted that O.N.Telcom
is dominant, and that O.N.Telcom's toll services should continue to
be regulated.
|
127. |
O.N.Telcom submitted that it is reasonable to expect large
national carriers to enter the market, pursuing aggressive pricing
with rates considerably below O.N.Telcom's current rates. O.N.Telcom
stated that customers expect benefits from toll competition, and
would likely switch to lower priced competitors.
|
128. |
O.N.Telcom stated that it is not an integrated toll carrier. The
company argued that, in its territory, Northern is the incumbent LEC,
and has the ability to present customers with the choice of one-stop
shopping. Accordingly, O.N.Telcom stated that it expects to lose
significant market share to Northern, if Northern were to enter the
toll market.
|
129. |
The Commission agrees with Northern that O.N.Telcom could
initially have a large market share in the toll market, since, in
view of Telecom Decision CRTC 99-18, Customer definition and
ownership of subscriber information in independent telephone
companies' territories, dated 1 December 1999, all message toll
users initially are O.N.Telcom's customers. The Commission also has
the view that O.N.Telcom may lose market share gradually. However,
absent any economic, financial, or regulatory barriers to entry, the
Commission is of the view that O.N.Telcom would not have market
power in the sense of having the ability to increase prices above
competitive levels for an extended period of time. The Commission
notes that Northern and Bell Canada could provide message toll
services in O.N.Telcom's territory on a forborne basis pursuant to
Telecom Decision CRTC 95-19, Forbearance – Services provided by
non-dominant Canadian carriers, dated 8 September 1995, and
Telecom Decision CRTC 97-19, Forbearance – Regulation of toll
services provided by incumbent telephone companies, dated
18 December 1997. Accordingly, the Commission is of the view
that it is appropriate to forbear from message toll services
provided by O.N.Telcom.
|
130. |
Pursuant to section 34(1) of the Telecommunications Act (the
Act), the Commission finds, as a matter of fact, that
forbearance to the extent set out below from message toll services
provided by O.N.Telcom is consistent with the Canadian
telecommunications policy objectives outlined in section 7 of
the Act.
top
|
131. |
In addition, pursuant to section 34(2) of the Act, the
Commission finds, as a matter of fact, that message toll services
provided by O.N.Telcom will be subject to competition sufficient to
protect the interests of users.
|
132. |
Pursuant to section 34(3) of the Act, the Commission also finds
that such forbearance would not unduly impair the continuance or
establishment of a competitive market for the forborne services.
|
133. |
The Commission will forbear from O.N.Telcom's message toll
services to a similar extent as in Decision 97-19. The Commission
will retain its powers under section 24 of the Act (conditions on
the offering and provision of telecommunications services) in order
to continue to deal with the confidentiality of customer
information. Accordingly, on a going-forward basis, the existing
conditions concerning customer confidentiality are to be included,
where appropriate, in all contracts or other arrangements with
customers for the provision of services forborne in this decision.
Further, the Commission will retain its powers under section 24 of
the Act to impose further conditions on O.N.Telcom in the future if
circumstances should require it.
|
134. |
In addition, to protect the interests of users, and in light of
the Canadian telecommunications policy objectives, the Commission
considers it appropriate to adopt the following additional
conditions applicable to the offering or provision of message toll
services by O.N.Telcom:
|
|
a) O.N.Telcom shall provide to the Commission, and make
publicly available, a basic toll schedule setting out the rates
for basic toll service. This schedule is to include the 50%
discount currently applicable to calls which originate from, and
are billed to, the residence service of a registered certified
hearing or speech-impaired telecommunications devices for the deaf
(TDD) user. O.N.Telcom shall update this schedule within 14 days
of any change to the rates for basic toll service;
|
|
b) annual increases in rates of the basic toll schedule shall
not exceed the rate of inflation; and
|
|
c) O.N.Telcom shall ensure that all message toll customers and
applicants for message toll services can choose basic toll
service.
|
135. |
Consistent with the Commission's approach for incumbent telephone
companies in Decision 97-19, the Commission will forbear from the
exercise of its section 27(1) powers in respect of O.N.Telcom's
message toll services, other than the continued exercise of its
powers under section 27(1) of the Act in respect of basic toll
service in order to implement the conditions on O.N.Telcom's basic
toll schedule.
top
|
136. |
Consistent with its approach in Decision 97-19, the Commission
will retain its section 27(2) powers in respect of issues related to
access to O.N.Telcom's network and resale and sharing of its message
toll services. Similarly, the Commission will continue to exercise
all its section 27(2) powers in respect of basic toll services.
Subject to the Commission's concerns regarding bundling, described
below, in all other respects, the Commission will forbear from the
exercise of its powers under section 27(2) of the Act.
|
137. |
The Commission considers it necessary to retain its powers and
duties under sections 27(3) to 27(6) of the Act to the extent that
they refer to compliance with powers and duties not forborne from in
this decision.
|
138. |
The Commission therefore orders that, pursuant to section 34(4)
of the Act, effective 1 January 2002, sections 24, 25, 27, 29 and 31
of the Act do not apply to message toll services provided by
O.N.Telcom to the extent that those sections are inconsistent with
the determinations in this decision.
|
139. |
O.N.Telcom is directed to issue, within 90 days of this decision,
tariff pages removing the tariffs for its message toll services, to
the extent prescribed in this decision. Forbearance will be
effective 1 January 2002.
|
|
Carrier Service Group for O.N.Telcom
|
140. |
Since Decision 92-12, the Commission has required that ILECs that
offer competitive services and also provide service to competitors
form Carrier Services Groups (CSGs) to protect the confidentiality
of competitor information. Through the CSG, competitors may make
interconnection arrangements without alerting the ILEC of their
plans. Decision 92-12 required the ex-Stentor companies that were
party to the decision to set up CSGs. The CSGs were patterned after
similar groups that the ex-Stentor companies formed when competition
became possible in the market for terminal equipment. The
requirement was subsequently extended to all the ex-Stentor
companies. In Decision 96-5, the Commission also required Télébec
and Québec-Téléphone (now TELUS Québec) to establish CSGs.
top |
141. |
Further, in a letter dated 31 March 2000, wherein the Commission
adjudicated a dispute between Bell Canada and O.N.Telcom, the
Commission stated that future relationships between Bell Canada and
O.N.Telcom should be handled through their respective CSGs.
|
142. |
In this proceeding, O.N.Telcom stated that it would have a CSG
for interconnection arrangements. Bell Canada submitted that the
Commission should implement the same terms and conditions for toll
competition as elsewhere in Canada. The companies stated that
O.N.Telcom requires a CSG to handle service requests from toll
competitors and resellers, and that the procedures for O.N.Telcom's
CSG should be identical to those for Télébec and TELUS Québec.
|
143. |
The Commission notes that O.N.Telcom provides several competitive
services, such as interexchange private line, Internet access and
wireless services, in addition to message toll services. Consistent
with prior decisions, the Commission directs O.N.Telcom to form a
CSG to handle interconnection arrangements, and to file with the
Commission proposed procedures for its CSG in the fourth quarter of
2001.
|
|
Quality of service
|
144. |
O.N.Telcom is currently subject to the quality of service
reporting requirements for companies with less than 25,000 NAS
(Decisions 96-6 and 98-14). Bell Canada and Northern are subject to
the regime established in Telecom Decision CRTC 97-16, Quality of
service indicators for use in telephone company regulation,
dated 24 July 1997, and Decision CRTC 2000-24, Final standards
for quality of service indicators for use in telephone company
regulation and other related matters, dated 20 January 2000. The
quality of service standards generally apply to service provided to
the companies' end customers.
|
145. |
However, specific quality of service standards apply to PIC/CARE
procedures. Normally, companies file their PIC/CARE manuals for
approval by the Commission. Further, in Order CRTC 2000-397, Altering
terms of service for competitors that are customers, dated 12
May 2000, the Commission directed changes to telephone companies'
Terms of Service to ensure competitive equity when telephone
companies provide service to customers that also are competitors.
The Commission notes that O.N.Telcom changed its Terms of Service to
comply with Order 2000-397 and issued the relevant tariff pages
effective 12 May 2000.
top |
146. |
O.N.Telcom agreed to implement quality of service standards for
PIC/CARE activation, but argued that measurement should commence
only after the ILECs have completed all arrangements required for
PIC/CARE activation. O.N.Telcom undertook to file its PIC/CARE
manual within the period determined by the Commission in this
proceeding. Bell Canada and the companies agreed with
O.N.Telcom's position. Accordingly, within 30 days of this decision,
O.N.Telcom shall file for approval its manual for PIC/CARE
activation, to be effective 1 January 2002.
|
|
Northern/Cochrane
|
147. |
An issue in this proceeding was whether competitive safeguards
would be required for Northern or Cochrane if these carriers should
enter the toll market.
|
148. |
The requirements for CSGs apply to ILECs that also offer
competitive services. ILECs that offer toll services must also have
an approved PIC/CARE manual. These requirements are intended to
achieve competitive equity between the ILEC and its competitors. The
CSGs protect the confidentiality of competitor information. The PIC/CARE
procedures permit customers to switch interexchange carriers without
alerting the ILEC before the switch is effective.
|
149. |
The companies argued that if they were to enter the toll market
in O.N.Telcom's territory, they would be entrants, and they should
not be required to implement regulatory safeguards, as the
Commission has not, until now, required entrants to form CSGs or
comply with other competitive safeguards that apply to the ILECs.
|
150. |
The Commission is of the view that, in the circumstances of the
O.N.Telcom serving territory, it would be appropriate if Cochrane
and Northern were required to form CSGs if they were to enter the
toll market. They are ILECs that dominate their respective local
markets, and a CSG and the PIC/CARE procedures are required to
prevent these companies from leveraging that dominance into the toll
market.
top |
151. |
The Commission notes that both Cochrane and Northern now offer
several competitive services, including Internet access and wireless
services. Northern also offers interexchange private-line services.
Since the companies are ILECs and offer services in competition with
other service providers, the Commission is of the view that they
should have CSGs. Accordingly, the Commission directs these parties
to establish CSGs, and to file, within 90 days of this decision, the
proposed procedures of their CSGs for approval by the Commission.
The Commission also directs Cochrane and Northern to implement the
PIC/CARE procedures, and to file their PIC/CARE manuals for
Commission approval, prior to entering the toll market.
|
|
Other matters
|
152. |
In implementing a regulatory framework that is appropriate for
increasingly competitive telecommunications markets, the Commission
developed the rules for bundling, promotions, and winbacks.
|
153. |
Among other things, in Decision 94-19, the Commission established
bundling rules governing the pricing of bundled services that
include several tariffed services, and for bundles that include
tariffed and forborne services.
|
154. |
When the Commission approved competition in long-distance
services, it did not establish any specific rules for the incumbents
to win back customers that had elected to be served by competitors.
With the PIC/CARE procedures, all service providers obtain daily
information on customer transfers. In Telecom Decision CRTC 96-7, Tariff
filings relating to promotions, dated 18 September 1996, the
Commission was of the view that consumers would obtain the most
benefits from competition if there were no rules governing customer
winbacks. However, in Decision 96-7, the Commission
implemented rules governing the marketing of competitive services on
a promotional basis.
|
155. |
Telecom Decision CRTC 98-4, Joint marketing and bundling,
dated 24 March 1998, eliminated the joint marketing restrictions for
most companies, and established rules for the bundling of tariffed
services with services of an affiliated company, with services of a
non-affiliated company and with non-telecommunications services
offered in-house by the telephone company (i.e., broadcasting
services).
top |
156. |
The Commission is of the view that the existing rules and
determinations adopted for bundling, promotions and winbacks should
apply to O.N.Telcom.
|
|
Rebilling
|
157. |
O.N.Telcom submitted that, to ensure competitive equity, it
requires the ability to rebill local services provided by Northern
and Cochrane if the latter enter the toll market now served by
O.N.Telcom.
|
158. |
In Decision 92-12, when the Commission first introduced
facilities-based competition in the long-distance market, it
recognized that the ILECs obtained an advantage from being able to
provide both local and long-distance services, and bill for both
services, on the same bill. However, the Commission did not consider
this an undue advantage.
|
159. |
Since Decision 92-12, more and more services have become
competitive. Further, the major telephone companies have introduced
tariffs for resale and sharing, and most of the services of the
telephone companies can now be resold. Of specific interest to this
proceeding, local services provided by the ex-Stentor companies can
be resold. A condition of such resale is that residential service
can only be resold to provide residential service.
|
160. |
The Commission notes that in the case of local services, resale
is equivalent to rebilling, because the facilities-based company
continues to provide the service.
top |
161. |
When services are resold, the telephone companies normally sell
them to resellers or sharing groups at tariffed rates. An exception
is that the rates for unbundled loops that are sold pursuant to
Decision 97-8 are significantly less than the tariffed rates for
local service.
|
162. |
O.N.Telcom submitted that Northern or Cochrane could provide
customers with a single bill for local and long-distance services if
they were to enter the toll market. O.N.Telcom argued that customers
prefer a single bill for local and long-distance services, and that
accordingly, O.N.Telcom would be disadvantaged unless it could also
offer the convenience of a single bill to its customers.
|
163. |
Bell Canada and the companies agreed that O.N.Telcom should be
able to rebill ILECs' local services, but were opposed to wholesale
tariffs for rebilled services.
|
164. |
The Commission considers that O.N.Telcom may obtain some of the
advantages enjoyed by an integrated telephone company if it were
permitted to rebill the local exchange services provided by other
carriers. Accordingly, the Commission directs Northern to file a
proposed tariff within 30 days of this decision for competitive toll
service providers to resell or rebill Northern's local exchange
services. To ensure competitive equity, the Commission will permit
rebilling of local exchange services provided by all local carriers
in the region. Thus, O.N.Telcom and Cochrane will also be required
to file proposed resale/rebilling tariffs within two weeks of
receiving a request for rebilling.
|
|
O.N.Telcom tariff notices 57 and
57A
|
165. |
O.N.Telcom filed TN 57 on 12 March 1999 and TN
57A on 15 May 1999
requesting approval of an interconnection charge of $0.0349 per
conversation minute for the transport of interexchange company
traffic on the company's interexchange network.
top |
166. |
By letter dated 31 March 2000, the Commission directed O.N.Telcom
to unbundle its proposed $0.0349 interconnection charge to set a
proxy DC rate of $0.007596 and $0.027304 as a proxy access tandem
rate. The Commission also directed the parties to settle using the
unbundled rates as an interim measure pending the final resolution
of TN 57.
|
167. |
O.N.Telcom submitted that the rates proposed in TN 57 were
appropriate until the commencement of toll competition in its
territory and requested that TN 57 be approved as soon as possible.
|
168. |
Bell Canada and the companies were essentially of the view that
TN 57 should be denied, on the basis that the underlying costing and
study information that was used to calculate the proposed rates
contained fundamental flaws in their design and application.
|
169. |
The Commission notes that toll competition was originally
envisaged to occur in O.N.Telcom's operating territory as early as 1
July 2000. The Commission considers that the interim rates as set
are appropriate to the circumstances and conditions in place for the
period leading up to the implementation of toll competition in
O.N.Telcom's operating territory. The Commission also notes that new
interconnection rates will become effective with the implementation
of toll competition on 1 January 2002.
|
170. |
In light of this, the Commission approves O.N.Telcom's proxy
interim access tandem rate of $0.027304 and its proxy interim DC
rate of $0.007596 on a final basis for settlement purposes up to 31
December 2001. Therefore, TNs 57 and
57A are denied.
top |
|
Contribution 1998-2001
|
171. |
In Decision 98-14, the Commission considered there was no need to
set a proxy CAT for O.N.Telcom for 1998 and 1999, given that toll
competition would not be introduced in O.N.Telcom's territory until
July 2000. The Commission stated that it intended to establish the
level of the CAT for O.N.Telcom in the proceeding to implement toll
competition in O.N.Telcom's operating territory.
|
172. |
By letter dated 31 March 2000, the Commission set a temporary
contribution rate that has been determined on the basis of another
carrier's information (a proxy interim contribution rate) for 1998
of $0.0519 per minute and a proxy interim contribution rate of
$0.0408 per minute for 1999, based on Northern's approved CATs for
1997 and 1998, respectively. This letter also indicated the 1999
rate would remain in place until a revised interim rate could be
set.
|
173. |
O.N.Telcom provided the following actual/estimated contribution
requirements, net of direct connection charges in lieu of a direct
toll rate, applicable to toll traffic originating and terminating on
the company's local exchanges:
|
|
· actual 1999 contribution requirement of $1.5 million, based
on 16.8 million minutes at $0.0874 per minute;
|
|
· an estimated 2000 contribution requirement of $1.9 million,
based on 19.2 million minutes at $0.0968 per minute; and
|
|
· an estimated 2001 contribution requirement of $1.5 million,
based on 25.5 million minutes at $0.0581 per minute.
|
174. |
The Commission notes that, consistent with the intent of Telecom
Decision CRTC 99-5, Review of contribution regime of independent
telephone companies in Ontario and Quebec, dated 21 April 1999,
contribution requirements were essentially considered to be capped
at approved 1999 levels subject to adjustments related to local rate
increases. As well, the Commission further notes that according to
Decision 99-5, the ITCs were to file with the Commission, by 1
January 2000, proposals detailing how they intended to reduce their
subsidy requirement to no more than 25% by no later than 2002.
|
175. |
The Commission notes that O.N.Telcom did not submit a proposal on
1 January 2000 as to how it would achieve the 25% target by
2002. The Commission also notes that O.N.Telcom's 2001 proposed
contribution requirement includes a proposed 1 September 2001 local
rate increase as part of this proceeding. As indicated in paragraphs
182 and 183 in this decision, the Commission is deferring the
implementation of the proposed rate increase until 1 January
2002.
top |
176. |
In consideration of the above, the Commission has determined that
O.N.Telcom's 1998 interim proxy contribution rate of $0.0519 is made
final and O.N.Telcom's 1999 interim proxy contribution rate of
$0.0408 is made final for settlement purposes to 31 December 2001.
|
|
Contribution 2002
|
177. |
In Decision CRTC 2000-745, Changes to the contribution regime,
dated 30 November 2000, the Commission established a
revenue-based contribution collection mechanism on a national basis
to be effective 1 January 2001. The ITCs were exempted from the
effective date. The Commission indicated it would, during the
transition year, initiate a process to address modifications
necessary to include the independents under the revenue-based
mechanism in 2002. This process began with the release of PN 2001-61.
|
178. |
O.N.Telcom indicated that it believed that an extended transition
period will be required prior to a move from a Phase III
contribution requirement calculation to a Phase II calculation. As a
result, for the purposes of its proposal, O.N.Telcom assumed its
contribution requirement will continue to be calculated on a Phase
III basis until at least the end of 2004. O.N.Telcom also noted that
it expected that Decision 2000-745 will apply to it except to the
extent it is varied as a result of the PN 2001-61 process.
|
179. |
The companies were of the view that O.N.Telcom's contribution
requirement should be calculated in accordance with the formula
established by the Commission in Decision 2000-745 for the
calculation of the total subsidy requirement of the ex-Stentor
companies.
|
180. |
The Commission is of the view that O.N.Telcom's 2002 proposed
contribution requirement, as calculated according to the previous
per-minute mechanism, may no longer be appropriate. However, given
the evolution of the contribution collection mechanism, as
determined by Decision 2000-745 and Decision CRTC
2001-238, Restructured
bands, revised loop rates and related issues, dated 27 April
2001, as well as the pending outcome of the PN 2001-61 proceeding,
the Commission notes that neither the length nor the circumstances
of a transition period contribution requirement for the independent
telephone companies has been determined.
top |
181. |
The Commission therefore approves a 2002 contribution/subsidy
requirement of $1,008,040 for O.N.Telcom, net of DC SWAG revenue, on
an interim basis, as a proxy subsidy requirement, subject to the
outcome of the process initiated by PN 2001-61.
|
|
Local rates
|
182. |
O.N.Telcom applied to increase monthly local rates for
single-line residential service and single-line business rates,
effective 1 September 2001.
|
183. |
The Commission approves O.N.Telcom's proposed monthly local
single-line rates to be effective 1 January 2002 to coincide with
the effective date for the terms and conditions of toll competition
in O.N.Telcom's toll-serving territory. These rates are $19.85 for
single-line residence service (including Touch-Tone) and $45.45 for
single-line business service (including Touch-Tone). Additionally,
the Commission approves O.N.Telcom's proposal to eliminate all
intra-exchange mileage charges for Temagami Lakes. The Commission
directs O.N.Telcom to issue tariff pages reflecting the proposed
rates by 15 November 2001 to be effective 1 January 2002.
|
|
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
|
top
|
Appendix |
|
Reference documents |
|
Legislation
|
|
Telecommunications Act, S.C. 1993, c.38, as amended
|
|
Public notices
|
|
Public Notice CRTC 2001-61, New regulatory framework for small
independent telephone companies and related issues, dated 30 May
2001
|
|
Public Notice CRTC 2000-107, O.N. Tel – Implementation of
toll competition and related matters, dated 20 July 2000
|
|
Public Notice CRTC 2000-107-1, O.N. Tel – Implementation of
toll competition and related matters, dated 30 November 2000 –
Amendment to PN 2000-107
top |
|
Decisions
|
|
Decision CRTC 2001-238, Restructured bands, revised loop rates
and related issues, dated 27 April 2001
|
|
Decision CRTC 2000-745, Changes to the contribution regime,
dated 30 November 2000
|
|
Decision CRTC 2000-24, Final standards for quality of service
indicators for use in telephone company regulation and other related
matters, dated 20 January 2000
|
|
Telecom Decision CRTC 99-18, Customer definition and ownership
of subscriber information in independent telephone companies'
territories, dated 1 December 1999
|
|
Telecom Decision CRTC 99-16, Telephone service to high-cost
serving areas, dated 19 October 1999
top |
|
Telecom Decision CRTC 99-5, Review of contribution regime of
independent telephone companies in Ontario and Quebec, dated 21
April 1999
|
|
Telecom Decision CRTC 98-22, Final rates for unbundled local
network components, dated 30 November 1998
|
|
Telecom Decision CRTC 98-14, Regulatory framework - Ontario
Northland Transportation Commission, dated 1 September 1998
|
|
Telecom Decision CRTC 98-4, Joint marketing and bundling,
dated 24 March 1998
|
|
Telecom Decision CRTC 97-19, Forbearance – Regulation of
toll services provided by incumbent telephone companies, dated
18 December 1997
top |
|
Telecom Decision CRTC 97-16, Quality of service indicators for
use in telephone company regulation, dated 24 July 1997
|
|
Telecom Decision CRTC 97-8, Local competition, dated 1 May
1997
|
|
Telecom Decision CRTC 97-6, Unbundled rates to provide equal
access, dated 10 April 1997
|
|
Telecom Decision CRTC 96-7, Tariff filings relating to
promotions, dated 18 September 1996
|
|
Telecom Decision CRTC 96-6, Regulatory framework for the
independent telephone companies in Quebec and Ontario (except
Ontario Northland Transportation Commission, Québec-Téléphone and
Télébec ltée), dated 7 August 1996
|
|
Telecom Decision CRTC 96-5, Regulatory framework for
Québec-Téléphone and Télébec ltée, dated 7 August 1996
top |
|
Telecom Decision CRTC 95-21, Implementation of regulatory
framework – Splitting of the rate base and related issues,
dated 31 October 1995
|
|
Telecom Decision CRTC 95-19, Forbearance – Services provided
by non-dominant Canadian carriers, dated 8 September 1995
|
|
Telecom Decision CRTC 94-19, Review of regulatory framework,
dated 16 September 1994
|
|
Telecom Decision CRTC 92-12, Competition in the provision of
public long distance voice telephone services and related resale and
sharing issues, dated 12 June 1992
top |
|
Orders
|
|
Order CRTC 2000-397, Altering terms of service for competitors
that are customers, dated 12 May 2000
|
|
Telecom Order CRTC 99-363, In the matter of the Phase III
costing, Carrier Access Tariff (CAT) and split rate base procedures
manual filed for approval by O.N. Tel, dated 22 April 1999
|
|
Telecom Order CRTC 97-1922-1, dated 5 February 1998 (Erratum to
Telecom Order CRTC 97-1922, dated 23 December 1997 – "O.N.
Tel's settlement agreement with Bell should be made interim as of 1
January 1998 in order to allow the additional revenues from these
local rate increases to be reflected in a lower negotiated revenue
settlement agreement for 1998") |
Date Modified: 2001-09-13 |