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Order CRTC 2001-299
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Ottawa, 12 April 2001 |
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Reduction to the individual line service surcharge and rural
individual line charge for an additional rural telephone line denied for
homeowners in Alberta
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Reference: 8661-T51-01/00 |
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The Commission denies a Part VII application filed by Mr. Chris
Tucker, of Bragg Creek, Alberta, on 26 January 2000, under sections 27
and 47 of the Telecommunications Act requesting that the
Commission instruct TELUS Communications Inc. to amend its General Tariff
for additional lines to rural homes [i.e., the individual line service
surcharge and the rural individual line charge] such that the
installation charges for an additional line are set to be equal for
both rural and non-rural (city) homeowners.
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1. |
In his application, Mr. Tucker noted that currently the cost to
install an additional telephone line in rural Alberta is $560 (the
individual line service (ILS) surcharge) plus the normal line charge of
$45 for a total of $605. For non-rural (city) customers, the charge is
$45.
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2. |
Mr. Tucker stated that he is advised that with the advancement in
telecommunications technology, once a physical telephone line is
installed in a home, any subsequent additional telephone lines which may
be added involve the same amount of work, costs and time, whether they
are rural or non-rural. For clarity, Mr. Tucker stated that it is
accepted that the existing costs relating to the installation of the
first physical telephone line in rural homes is not in question at this
time. Mr. Tucker therefore contended that TELUS Communications Inc. (TCI)
is not charging (for additional rural telephone lines) in a just and
reasonable manner as required by section 27 of the Act.
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3. |
Mr. Tucker stated that the CRTC recognized in a recent decision that
all Canadian citizens deserve an "equal level of basic service –
no matter how remote". In Mr. Tucker's view, it also goes to the
heart of subsection 27(1) "Every rate charged by a Canadian carrier
for telecommunications service shall be just and reasonable".
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4. |
Mr. Tucker also expressed the view that, because of the inequitable
basis of charging, rural Canadians in Alberta are placed at a major
disadvantage under the current tariff rate structure particularly as it
relates to educational access to the Internet via telephone lines.
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TCI's answer
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5. |
TCI stated that in provisioning the first telephone line to a rural
customer location, a "drop" into each service location is made,
providing the cable which runs from the pedestal (usually a green box) at
the edge of a customer's property to the building on the customer's
property where service is to be used. "Drops" are normally
designed with one, two, or six "cable-pairs", with one
"cable-pair" being dedicated to one customer line. Therefore,
where "cable-pairs" are available and when there is a
requirement for additional lines at a specific location, construction
work is not needed to provision the additional "drop". However,
the rest of the company's network necessary to support telephone service,
specifically the loop facilities between the switching centre and the
pedestal, are not dedicated to one customer line, rather they are shared.
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6. |
TCI stated that, contrary to Mr. Tucker's belief, the costs associated
with a subsequent line are the same as those of the first line. TCI
stated that this represents an average cost per line, as measured in
Phase II costs, which are long-run, incremental costs calculated in
accordance with Commission approved methodology.
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7. |
TCI stated that the switching equipment and the loop facilities
required to provision telephone service are shared among customers,
irrespective of whether it is for the first or subsequent telephone
lines. These costs represent the majority of the costs of providing
service and the costs per line are determined on the basis of the
capacity of the common facilities.
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8. |
TCI noted that at the time of the ILS program in 1986, which provided
for the conversion of all multi-party lines in the province of Alberta to
individual line service, the Alberta Government, the then Alberta
Government Telephones (AGT) and AGT's customers shared the costs of the
program. The Alberta Government contributed towards the costs of
estimated growth in these facilities over a five-year period. TCI stated
that, since then, additional investment by the company in such facilities
has been necessary to continue to meet additional service demand of rural
customers.
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9. |
TCI stated that the revenues associated with the individual line
service (ILS) surcharge and the rural individual line charge (RILC),
therefore, continue to be necessary in order to allow the company to
recover a portion of the additional costs of providing service in rural
areas. TCI stated that, in fact, the $560 surcharge does not fully
compensate the company for its costs because the costs to provide the
facilities are, on average, more than this amount. On this basis, TCI
submitted that its rates are clearly "just and reasonable", as
approved by the Commission and contained in the company's General Tariff.
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10. |
TCI surmised that the recent decision that Mr. Tucker referred to
may be Telephone service to high-cost serving areas, Telecom
Decision CRTC 99-16, dated
19 October 1999. TCI stated that in addressing the level of service
available to high-cost serving areas, the Commission determined the
following in Decision 99-16:
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- A basic service objective is established including, among other
things, the provision of individual line local service with
Touch-Tone dialing. In this regard, the Commission stated that it
does not, however, expect the industry to extend and improve service
to all areas immediately.
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- Incumbent local exchange carriers' (ILECs') obligation to service
is maintained, i.e., such carriers must provide service to
subscribers in their service territory at a reasonable price without
unjust discrimination.
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- The ILECs' obligation to serve and the terms for extension of
service are set out in their approved tariffs. The terms include the
portion of the cost for extending service to be paid by the company
and the portion to be paid by the customer. The Commission further
found that no change is warranted to the tariffs or the Terms of
Service with regard to the handling of ongoing service extension
requests.
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11. |
TCI generally supported the principle that all Canadians should have
access to an "equal" level of basic service, even in remote
areas. TCI stated that it has been and continues to provide standard
single-line Touch-Tone telephone service to its customers, both rural and
non-rural, consistent with the Commission's principle of "a
reasonable price without unjust discrimination", in accordance with
approved tariff rates.
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12. |
TCI recognized that the one-time ILS surcharge of $560 might be
onerous to some customers who desire to subscribe to an additional line
for Internet access. The availability of the payment option of $18 per
month over a three-year period should provide a reasonable alternative in
this regard. Nevertheless, TCI submitted that it is cognizant of the
concerns expressed by its rural customers over the ILS surcharge and RILC
rate structure over the years, and is evaluating other pricing
alternatives for rural areas that may better meet customer needs and that
are consistent with the Commission's pricing guidelines.
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13. |
TCI submitted that it has demonstrated that the costs to provide the
initial line and subsequent lines in rural Alberta are the same.
Therefore, the current approved rates in the General Tariff are just and
reasonable. TCI therefore asked that Mr. Tucker's request for relief
be denied.
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Mr. Tucker's reply
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14. |
Mr. Tucker noted that TCI admitted that, where additional lines are
required, no new "drop" is required and "construction work
is not needed". Accordingly, Mr. Tucker submitted that there is no
extra work beyond that which would apply to a non-rural (city) home.
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15. |
Mr. Tucker also noted that TCI confirmed that switching and loop
facilities are required for any additional line, whether rural or
non-rural. Accordingly, Mr. Tucker submitted that this work is the same
and the basis of charging should be the same.
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Comments from interested parties
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16. |
There were a number of submissions, consisting both interventions and
similar complaints, filed to this application. A number of rural
subscribers supported the application by Mr. Tucker. Among the concerns
cited by the other subscribers were:
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- ILS rate assessed rural residents for extra telephone line service
is discriminatory and exorbitant;
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- ILS rate is an unfair tax on the rural residents of Alberta;
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- Rural rate structure acts against the best interests of rural
education and children;
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- Rural rate structure acts against the best interests of small
businesses; and
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- Inappropriate application of ILS surcharges.
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The Commission's conclusion
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17. |
The $560 rate for individual line service was introduced as part of a
cost-sharing arrangement for higher cost rural service areas in Alberta
over the five-year period from 1987 to 1991. In this proceeding, TCI
stated that, since then, additional investment by the company has been
necessary to continue to meet the additional service demands of rural
customers. This consists of switching equipment and loop facilities that
are shared among customers and are required to provide telephone service
irrespective of whether it is for the first or subsequent line.
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18. |
The establishment of telephone service, whether it be a first or an
additional line, is expected to cause incremental network provisioning
costs as the use of existing network capacity is expected to cause
deployment of relief facilities to occur earlier, and thus cause costs.
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19. |
The Commission notes that rates in rural areas are generally
non-compensatory and the ILS surcharge and the RILC provide additional
revenues to aid in the recovery of the high rural service costs.
Elimination of these charges would move rates further from costs for
rural services.
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20. |
In response to a Commission interrogatory, TCI proposed three
alternatives to address the concerns of rural customers: a limited period
promotional offer; recovery from customer base through an exogenous
factor, and the offer of additional lines on different terms and
conditions.
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21. |
In Order CRTC 2000-603, dated 28
June 2000, the Commission approved an additional individual line service
promotion available from 17 July 2000 to 31 December 2000. In Order CRTC 2001-232,
16 March 2001, the Commission approved TCI's request for an extension to
the promotion available from 2 April 2001 to 14 September 2001. Under the
promotion, the ILS surcharge applicable to the provision of an additional
line to existing residential ILS customers beyond the base rate area is
waived, subject to certain terms and conditions.
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22. |
In the Commission's view, it would not be appropriate to change the
ILS surcharge and RILC in isolation. The Commission is of the view that
such a change should be considered in a broader context such that funding
alternatives may be considered.
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23. |
The Commission denies Mr. Tucker's application.
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Secretary General
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This document is available in alternative format upon request and
may also be examined at the following Internet site: http://www.crtc.gc.ca |