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Order CRTC 2001-500
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Ottawa, 29 June 2001
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CRTC approves application to reduce toll-free look-up
service charge
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Reference: 8661-A4-01/00
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When a customer dials an 800 or toll-free number, the customer's
local exchange carrier (LEC) must find the correct toll carrier to
route the call properly. The information about toll carriers is
stored on an electronic database that LECs can access.
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In July 1997, the CRTC approved a fee that LECs must pay every
time they access the database to identify a particular toll carrier.
The fee is known as the 800-database carrier-identification query
charge. The LECs recover the cost of paying query charges from each
respective toll carrier.
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This order approves an application to the CRTC filed in March
2000 by AT&T Canada Corp. and AT&T Canada Telecom Services
Company to reduce the query charge by approximately 50%. The
reduction is effective 26 July 2000. The Commission also orders the
LECs to provide query-charge refunds to toll carriers for the excess
amounts that LECs have received during the period from the effective
date of the new fee and the date of this order.
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1.
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On 16 March 2000, AT&T Canada Corp. and AT&T Canada
Telecom Services Company (collectively, AT&T Canada) filed an
application to amend the 800 database query charges for 800-number
carrier identification.
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2.
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In its application, AT&T Canada asked the Commission to:
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a) direct Bell Canada, Island Telecom Inc., Maritime Tel &
Tel Limited, MTS Communications Inc., NBTel Inc., NewTel
Communications Inc., TELUS Communications Inc. and TELUS
Communications (B.C.) Inc. (the companies) to file updated cost
studies incorporating revised demand forecasts in support of the
rate charged for 800 database queries related to 800 carrier
identification; and
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b) establish an interim 800 database query charge set 50% below
the current approved tariff rate for all the companies until the
updated cost studies have been reviewed and accepted by the
Commission.
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3.
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On 26 July 2000, the Commission issued Order CRTC 2000-683, CRTC
makes 800 database query charges interim and orders updated cost
studies.
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4.
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In Order 2000-683, the Commission ordered the companies to file
updated cost studies incorporating revised demand forecasts to
support the rate charged for 800 database queries.
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5.
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In Order 2000-683, the Commission also made interim the existing
800-database carrier-identification query charge of $0.006331 per
query, effective 26 July 2000.
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6.
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On 30 October 2000, the companies filed the updated cost studies.
Based on a 1 January 2000 to 31 December 2004 study period, the
companies submitted that the Phase II cost per 800 database query is
$0.003825. The companies also submitted that, if they looked solely
at this cost per query, they would be inclined to propose that the
appropriate 800 database query should be $0.004781 per query, which
would be equivalent to the cost, plus a 25% markup.
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7.
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The companies further submitted that AT&T Canada's assessment
of demand increases was correct. During the period between 1996 and
1999, the actual demand exceeded the demand that was forecast in the
cost studies by some 37%.
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8.
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According to the companies, spending to support this service has
also differed from the forecast estimates. While actual required
capital exceeded the forecast by 66%, the actual operating and
maintenance expenses were three-and-a-half times higher than
expected. The companies submitted that spending during the period
from 1996 to 1999 was 110% greater than forecast.
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9.
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The companies argued that they have not yet recovered the costs
(plus 25% markup) that they incurred during the period from 1996 to
2000. Therefore, the current 800-database query charge of $0.006331
remains appropriate.
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10.
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AT&T Canada submitted that the companies never explained
whether the requirement for additional spending was foreseen in the
original cost study, if the timing had been moved forward for these
expenditures, or which resource cost elements increased when the
expenditures were made. AT&T Canada noted the companies'
inference that the introduction of more codes to the toll-free
services (888, 877, etc.) was unexpected. According to AT&T
Canada, the need for more codes was widely recognized when the
original cost study was conducted.
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11.
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AT&T Canada argued that any costs relating to platform
enhancements in response to the major service outages experienced in
November 1997 should be identified and removed from the elements
included in the revised cost study. According to AT&T Canada,
the cost of these enhancements should be borne solely by the
companies, as they were obliged to design the original architecture
to avoid such major service outages.
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12.
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The companies noted that the unforeseen growth of all carriers'
toll free traffic caused the November 1997 outage. According to the
companies, it is appropriate for all carriers to share the
responsibility of maintaining a robust database.
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13.
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The companies submitted that there is no reason why they should
subsidize system expansions to respond to toll-free traffic growth
that was greater than originally expected. According to the
companies, in the case of the 800 database query service, they have
maintained query-processing rates and have incurred the additional
costs. The companies also submitted that, at the very least, they
are entitled to seek cost recovery at the existing rates.
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14.
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The Commission finds that the companies have not fully justified
their reported expense increases.
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15.
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For example, the maintenance expenses, which were based on
percentage of capital expenses, were many times greater than
initially forecast. By contrast, in the revised forecast, capital
estimates were approximately doubled.
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16.
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The Commission also considers that many of the ongoing database
provisioning activities can be expected to deliver increased volume
efficiencies or other productivity improvements over time.
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17.
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The Commission finds that it is appropriate to reduce the
forecast expenses that are causal to demand, by approximately
one-half.
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18.
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With respect to the companies' claim that capital expenses during
the period from 1996 to 1999 were significantly higher than
forecast, the Commission notes that most of the capital expenditures
associated with two database platform enhancements were incurred
during 1998 and 1999.
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19.
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Based on its reduction of the forecast expenses and taking
account of the end-of-study terminal values associated with the
revised capital cash flows, the Commission considers that the
companies received adequate revenues during the period from 1996 to
2000.
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20.
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Based on its adjustments to the expenses forecast in the revised
cost study, the demand information shown in paragraph 24 below, and
to provide for a 25% mark-up, the Commission approves an 800
database query charge of $0.003259 per query, effective 26 July
2000.
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21.
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Accordingly, the Commission orders that the companies provide
refunds to alternate providers of long distance service (APLDS) who
paid the 800 database query charge of $0.006331 per query from 26
July 2000 until the effective date of this order. The refund is to
be based on the difference between the charge of $0.006331 per query
and the new charge of $0.003259 per query.
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22.
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AT&T Canada submitted that the detailed costing information
submitted by the companies in confidence should be placed on the
public record, since the 800 database query service is a
"bottleneck" service and no harm would occur if it were
disclosed.
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23.
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The companies noted that, should they disclose costing and demand
information filed in the cost study, AT&T Canada and others
could assess their call volumes, and use the disclosed data to
deduce the companies' market share and cost efficiencies. Thus,
AT&T Canada and others could enhance their competitiveness at
the companies' expense.
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24.
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The Commission finds it appropriate that the total demand
information for each of the years from 1996 to 2004, as shown below,
be placed on the public record. In the Commission's view, the
possible harm in disclosing this information is outweighed by the
public interest in disclosure.
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Year
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Total Queries (M) |
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1996 |
1 902.3 |
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1997 |
2 021.3 |
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1998 |
2 159.7 |
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1999 |
2 428.0 |
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2000 |
2 628.8 |
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2001 |
2 913.3 |
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2002 |
3 144.1 |
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2003 |
3 392.0 |
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2004 |
3 658.1
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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
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