|
Telecom Decision CRTC
2006-22 |
|
Ottawa, 27 April 2006 |
|
Aliant Telecom, Bell Canada,
MTS Allstream, SaskTel and TCI - Approval of rates on a final
basis for Access Tandem service |
|
Reference: 8638-C12-67/02 |
|
The Commission approves
on a final basis revised rates for the Access Tandem (AT) service
of Aliant Telecom Inc., Bell Canada, MTS Allstream
Inc., Saskatchewan Telecommunications and TELUS Communications Inc.,
retroactive to 1 June 2002. Consistent with Regulatory framework
for second price cap period, Telecom Decision CRTC 2002-34,
30 May 2002, the applicable inflation minus productivity
offset constraint is to be applied to final 2002 rates for the
AT service for each subsequent year. |
|
Introduction |
1.
|
In Regulatory framework
for second price cap period, Telecom Decision CRTC 2002-34,
30 May 2002 (Decision 2002-34),
the Commission made the Access Tandem (AT) service rates of Aliant Telecom
Inc. (Aliant Telecom), Bell Canada, MTS Communications Inc.,
now MTS Allstream Inc. (MTS Allstream),1
Saskatchewan Telecommunications (SaskTel) and TELUS Communications
Inc. (TCI) interim as of the date of the decision. The Commission
also directed these incumbent local exchange carriers (ILECs) to file
updated cost studies and revised rates for the AT service by
17 July 2002 and established a process to approve the revised AT rates
on a final basis (the AT proceeding). The AT service provides
for the exchange of originating and terminating toll traffic though
the AT connection, which is the connection between an Alternative
Provider of Long Distance Services' (APLDS) point of presence, and
the ILEC's Class 4 AT switch. |
2.
|
In Decision 2002-34,
the Commission also established two categories of Competitor Services
in order to clarify the pricing treatment of these services. Category I
Competitor Services are services in the nature of an essential service,
and Category II Competitor Services are services developed for
use by telecommunications service providers other than services in
the nature of an essential service. The ILECs' AT service was
classified as a Category I Competitor Service on a preliminary
basis in Decision 2002-34 and
on a final basis in Follow-up to Regulatory framework for second
price cap period, Telecom Decision CRTC 2002-34
- Service basket assignment, Telecom Decision CRTC 2003-11,
18 March 2003, as amended by Telecom Decision CRTC 2003-11-1,
23 May 2003. |
|
Process
and ILEC cost studies |
3.
|
The process established in
Decision 2002-34 with respect
to the Commission's review of the ILECs' rates for the AT service
was supplemented and amended by Commission letters dated 6 August
2002, 27 November 2002, 16 December 2002, 20 December 2004 and 15 February 2005. |
4.
|
Bell Canada, Aliant Telecom
and SaskTel (collectively, Bell Canada et al.), MTS Allstream,
and TCI filed updated AT cost studies and proposed revised per-connect
minute per-end (per-minute) rates dated 17 July 2002 (17 July 2002
cost studies). Aliant Telecom filed separate cost studies and
rates for each of its operating regions: Aliant Telecom operating
in New Brunswick (Aliant Telecom-NB), Aliant Telecom operating
in Nova Scotia (Aliant Telecom-NS), Aliant Telecom operating
in Prince-Edward-Island (Aliant Telecom-PEI) and Aliant Telecom
operating in Newfoundland and Labrador (Aliant Telecom-NL). TCI
filed separate cost studies and rates for each of its operating regions:
TCI operating in Alberta (TCI-AB) and TCI operating in British Columbia
(TCI-BC). |
5.
|
Bell Canada et al. filed
updates, dated 23 July 2002, to its 17 July 2002 cost studies. The
17 July 2002 cost studies as revised for Bell Canada
et al. in the 23 July 2002 cost study updates are referred to in this
Decision as "the July 2002 cost studies." |
6.
|
In Interim rates for Access
Tandem service and Direct Connection service, Telecom Order CRTC
2002-384, 24 September
2002 (Order 2002-384),
the Commission approved revised AT rates for the ILECs on an
interim basis, retroactive to 1 June 2002, based on the July 2002
cost studies.2 |
7.
|
Bell Canada et al. and
MTS Allstream filed revisions, dated 4 October 2002, to the July
2002 cost studies and proposed rates to correct errors in the July
2002 cost studies. The July 2002 cost studies as revised for Bell Canada
et al. and MTS Allstream by the 4 October 2002 cost study updates
are referred to in this Decision as "the October 2002 cost studies."
In Revised rates for Access Tandem service, Telecom Order CRTC
2002-412, 31 October
2002 (Order 2002-412),
the Commission approved, on an interim basis, revised AT rates
based on the October 2002 cost studies for Bell Canada et
al. and MTS Allstream, retroactive to 1 June 2002. |
8.
|
Bell Canada et al. and
MTS Allstream filed revisions, dated 9 and 16 December 2002 respectively,
to the October 2002 cost studies and proposed rates to correct errors
in the October 2002 cost studies (9 December 2002 cost study updates
and 16 December 2002 cost study update, respectively). TCI filed revisions,
dated 9 December 2002, to its 17 July 2002 cost study. Bell Canada
et al.'s and MTS Allstream's October 2002 cost studies, as revised
for Bell Canada et al. by the 9 December 2002 cost study update
and for MTS Allstream by the 16 December 2002 cost study
update and TCI's July 2002 cost study as revised by its 9 December
2002 cost study update are referred to collectively as "the December
2002 cost studies". |
9.
|
The ILECs responded to interrogatories
dated 30 October 2002, 16 December 2002, and 15 February 2005. |
10.
|
MTS Allstream submitted
comments on behalf of itself and Call-Net Enterprises Inc., now Rogers
Telecom Inc. (RTI), (collectively, the Competitors), dated 11 April
2005. Bell Canada et al. and TCI filed reply comments dated 28
April 2005. |
|
General
costing issues |
|
Approach
to updated costing methods and information |
11.
|
The Commission notes that
Phase II costing methods (costing methods) may require adjustment
over time. For example, in Changes to the contribution regime,
Decision CRTC 2000-745, 30 November
2000, the Commission introduced a subsidy revenue-percent charge to
be paid by certain telecommunications service providers. As a
result of the introduction of the subsidy revenue-percent charge,
the ILECs were subsequently required to include an explicit cost associated
with the subsidy revenue-percent charge in their Phase II cost
studies based on the use of this revenue-percent charge. Further,
in Primary inter-exchange carrier processing charge review,
Telecom Decision CRTC 2004-72,
9 November 2004 (Decision 2004-72),
the Commission considered it appropriate to include marketing-related
portfolio expenses in the ILECs' Phase II cost studies and required
Bell Canada, Aliant Telecom, SaskTel and MTS Allstream
to include portfolio expenses in their cost studies based on the use
of a portfolio expense factor. |
12.
|
The Commission considers that
in order to provide an accurate representation of the service cost
over a study period, cost studies should generally use the most accurate
cost information available and current costing methods, including
ongoing changes to costing methodologies. |
13.
|
Accordingly, in this Decision,
the Commission adjusts the December 2002 cost studies to reflect appropriate
cost inclusions and costing methods, as set out below. |
|
Structure
cost factors (SCFs) and technology cost factors (TCFs) |
|
Positions
of parties |
14.
|
The Competitors noted that
Bell Canada had provided updated SCFs and TCFs in its 2004 annual
update of Phase II costing parameters, dated 24 September 2004
(updated SCFs and TCFs).3
The Competitors submitted that Bell Canada's updated SCFs and
TCFs represented significant reductions in the Poles for Fibre SCF,
Conduit for Fibre SCF, Towers SCF, Power TCF and the Fibre (overall)
TCF relative to the 1998 values that Bell Canada had used in
the AT cost studies. The Competitors noted the forward-looking
nature of the Phase II costing methods and argued that Bell Canada's
final rates for the AT service should be based on the updated
SCFs and TCFs. |
15.
|
Bell Canada et al. submitted
that the AT cost studies were based on the best SCF and TCF related
information available at the time. Bell Canada et al. submitted
further that if the Commission were to implement the proposed adjustments,
the ILECs would be asked to continually update the cost studies to
reflect more recent information. |
|
Commission's
analysis and determinations |
16.
|
The Commission notes that
most of Bell Canada's updated 2004 SCFs and TCFs show significant
reductions when compared to the 1998 factors used in its 2002 cost
studies. For example, the value for Poles for Fibre SCF dropped from
0.3345 in 1998 to 0.2784 in 2004 and the value for Fibre (overall)
TCF dropped from 0.2285 in 1998 to 0.1606 in 2004. The Commission
also notes that SCF and TCF values are typically determined based
on a two- to three-year moving average of historical data results.
The Commission considers it appropriate to rely on Bell Canada's
updated SCFs and TCFs in its cost study for the 2002 to 2006 study period. |
17.
|
Accordingly, the Commission
adjusts Bell Canada's December 2002 cost study to reflect the
updated 2004 SCF and TCF values. |
|
Subsidy
revenue-percent charge |
|
Positions
of parties |
18.
|
The Competitors noted that
in Competitor Digital Network Services, Telecom Decision CRTC 2005-6,
3 February 2005 (Decision 2005-6),
the Commission determined that the final 2003 subsidy revenue-percent
charge of 1.1 percent, as determined in Final 2003 revenue-percent
charge and related matters, Telecom Decision CRTC 2003-84,
19 December 2003 (Decision 2003-84),
should apply to ILEC Competitor Digital Network (CDN) cost estimates
for the study period 2003 to 2007. The Competitors submitted that,
on this basis and given that 2004 was the midpoint of the 2002 to
2006 study period for the AT cost studies, the final rates for
the AT service should be based on the final subsidy revenue-percent
charge for 2004. |
19.
|
Bell Canada et al. submitted
that the 2002 AT cost studies were based on the best information
available at that time with respect to the subsidy revenue-percent
charge. Bell Canada et al. noted that in Decision 2005-6
the Commission adopted the final subsidy revenue-percent charge that
applied at the beginning, not the middle, of the study period. Bell Canada
et al. argued that to be consistent with Decision 2005-6,
the Commission should use the final 2002 subsidy revenue-percent charge
in the AT cost studies. |
|
Commission's
analysis and determinations |
20.
|
The Commission notes that
although it approved, on a final basis, a subsidy revenue-percent
charge of 1.3 percent for 2002 in Decision 2003-84,
it also approved, on a final basis, a reduction in the subsidy revenue-percent
charge from 1.3 percent for 2002 to 1.1 percent for 2003
and that subsequently, in Final 2004 revenue-percent charge and
related matters, Telecom Decision CRTC 2004-81,
9 December 2004, the Commission approved, on a final basis, a subsidy
revenue-percent charge of 1.1 percent for 2004. The Commission
also notes that in Final 2005 revenue-percent charge and related
matters, Telecom Decision CRTC 2005-68,
10 November 2005, it approved, on a final basis, a subsidy revenue-percent
charge of 1.03 percent for 2005. |
21.
|
The Commission notes that Bell Canada
et al. and MTS Allstream used a subsidy revenue-percent charge
of 1.3 percent, while TCI used a subsidy revenue-percent charge
of 1.4 percent, in the December 2002 cost studies. |
22.
|
The Commission considers that
the use of a subsidy revenue-percent charge of 1.1 percent represents
a suitable average value for the subsidy revenue-percent charge over
the study period of 2002 to 2006. Accordingly, the Commission applies
a revenue-percent charge of 1.1 percent in each ILEC's cost study
as the appropriate subsidy revenue-percent charge for the study period. |
|
TCI 's
inflation minus productivity (I-X) constraint |
|
Commission's
analysis and determinations |
23. |
The Commission
notes that in Commission letter, Follow-up to 18
June 2003 letter concerning Phase II costing information requirements,
dated 14 July 2003 (14 July 2003 letter), it stated that ILECs
were to file cost studies that excluded the application of inflation
and productivity factors within the study period. In this letter,
the Commission also stated that, following this approach, the resulting
Competitor Service rates would be subject to the application of the
annual I-X constraint.4
The Commission notes, however, that TCI's December 2002 cost study
included the application of the inflation and productivity factors
within the study period. |
24.
|
Accordingly, consistent with
the approach set out in the 14 July 2003 letter, the Commission adjusts
TCI's December 2002 cost studies to remove the application of the
inflation and productivity constraint. |
|
TCI's fibre
cost factor |
|
Positions
of parties |
25.
|
The Competitors noted that
although the other ILECs' fibre cost factors were based on only capital
expenditures of inter-office cable, TCI's fibre cost factor was based
on capital expenditures of all fibre cable, including the fibre in
the access or loop network. The Competitors submitted that TCI's practice
to include the fibre in the access or loop network in the calculation
of the fibre cost factor would result in an overstatement of the associated
costs. The Competitors noted that in Bell Canada costing of
inter-office fibre cable, Telecom Letter Decision CRTC 93-1,
27 January 1993 (Letter Decision 93-1),
the Commission stated that a cost factor based on only inter-office
fibre could be expected to decline over time as demand growth in the
inter-office network was increasingly met by changing or adding fibre
transmission equipment, not by adding fibre. The Competitors submitted
that a fibre cost factor that included access fibre would, therefore,
not decline as quickly as a fibre cost factor based exclusively on
inter-office fibre. |
26.
|
The Competitors proposed that
the Commission use Bell Canada's updated 2004 overall fibre cost
factor to establish final AT rates for TCI; direct TCI to revise
the calculation of its fibre cost factor on a going-forward basis
to comply with Letter Decision 93-1;
and direct TCI to develop a fibre cost factor associated with
inter-office fibre to comply with Letter Decision 93-1. |
27.
|
TCI requested that the Commission
dismiss the Competitors' proposal. TCI submitted that its fibre cost
factor was based on the combination of access fibre and inter-office
fibre for all electronic and optical equipment deployed, and as a
result, its fibre cost factor accurately reflected TCI's costs. |
|
Commission's
analysis and determinations |
28.
|
In Letter Decision 93-1,
the Commission approved Bell Canada's proposed cost factor approach
to determining the causal costs of inter-office fibre optic cable.
The Commission notes that Bell Canada had proposed the approach
for inter-office cable only, as the company considered it did not
apply to the access portion of the network. The Commission notes that
it did not, in Letter Decision 93-1,
require the other ILECs to develop a separate fibre cost factor for
inter-office cable. |
29.
|
Accordingly, the Commission
accepts TCI's fibre costs as proposed in the December 2002 cost
studies. The Commission notes, however, that it intends to address
this costing methodology issue as it relates to ILECs other than Bell Canada
in the next fiscal year. |
|
Average
working fill factors (AWFFs) |
|
Positions
of parties |
30.
|
The Competitors submitted
that Bell Canada's cost studies implicitly reflected the use
of 1993-vintage AWFFs for switching equipment and, for transmission
equipment, that Bell Canada's technology conversion factor made
use of 1997-vintage AWFFs. The Competitors submitted further that
SaskTel's cost study used Bell Canada's AWFFs as proxies and
therefore reflected the same AWFFs. The Competitors also submitted
that the switching and transmission costs provided by MTS Allstream
and Aliant Telecom reflected the AWFFs used to update their 1996
Toll Services Planning System (TSPS), and these AWFFs were not known.
The Competitors argued that it was reasonable to infer that the vintage
of the AWFFs used by MTS Allstream and Aliant Telecom were
similar to those used in Bell Canada's 1996 TSPS model. |
31.
|
The Competitors noted that
in Review of Bell Canada's customer-specific arrangements
filed pursuant to Telecom Decision 2002-76,
Telecom Decision CRTC 2003-63,
23 September 2003 (Decision 2003-63),
the Commission advised Bell Canada that it should use actual
AWFFs for equipment that had reached provisioning stability in the
network and AWFFs of 80 percent for Central Office (CO) equipment
and 70 percent for outside plant equipment. The Competitors
stated that, consistent with that decision, the Commission had requested
AT cost sensitivities using AWFFs of 80 percent for CO equipment
and 70 percent for outside plant equipment. |
32.
|
The Competitors submitted
that they supported the use of an 80 percent AWFF for CO switching
and transmission equipment. The Competitors argued, however, that
an 80 percent AWFF should be applied only as a minimum for facilities
or equipment that used an AWFF lower than 80 percent, as they
noted that TCI had forecast much higher AWFFs for switching equipment
and certain transmission equipment. The Competitors argued that MTS Allstream
and Aliant Telecom's capital costs should also be adjusted to
reflect AWFFs of 80 percent for CO switching and transmission
equipment and 70 percent for outside plant equipment even though
the AWFFs used in the 1996 TSPS were no longer available. The Competitors
proposed a methodology to adjust these ILECs' costs to reflect the
AWFFs set out in Decision 2003-63 based on the percentage
change to the relevant Bell Canada technology conversion factor
arising from the proposed modified AWFFs. |
33.
|
Bell Canada et al. submitted
that they had filed their cost studies for the AT service prior
to the date of Decision 2003-63.
Bell Canada et al. submitted that, in these cost studies, they
had used the switch-related AWFFs reflected in their 1996 TSPS model
because, in their view, their current switch-related AWFFs remained
the same as those used in that model. Bell Canada et al. submitted
further that transmission equipment-related AWFFs reflected in their
transmission technology conversion factors reflected changes in the
AWFFs where changes to AWFFs had occurred. Bell Canada et al.
also submitted that the values of the AWFFs used by Aliant Telecom
in the 1996 TSPS model were not known and that, therefore, it was
not possible to adjust Aliant Telecom's costs to reflect the
use of 80 percent AWFFs as per the Commission interrogatory that
requested a cost sensitivity. |
|
Commission's
analysis and determinations |
34.
|
AWFFs are applied to the ILECs'
capital cost estimates for equipment to recognize the spare capacity
of the equipment in Phase II cost studies, by apportioning the
average non-service producing capacity to the per unit cost of the
service producing capacity. The Commission notes that the cost of
a service varies inversely with the level of the AWFF. |
35.
|
The Commission notes that
in Decision 2003-63 it generally
established AWFF values of 80 percent for CO switching and transmission
equipment and 70 percent for outside plant equipment. The Commission
also notes that Bell Canada, SaskTel and TCI provided cost sensitivities
in the AT proceeding based on these AWFF values (Decision 2003-63
AWFF cost sensitivities). The Commission further notes that Aliant Telecom
and MTS Allstream did not provide Decision 2003-63
AWFF cost sensitivities on the basis that they could not identify
the AWFFs used in their 1996 TSPS model update. |
36.
|
The Commission notes that
Bell Canada's, SaskTel's and TCI's per-minute total capital cost estimates
in the December 2002 cost studies were less than those provided in
the Decision 2003-63 AWFF
cost sensitivity, implying that the AWFFs used in the December 2002
cost studies were greater on average than the AWFFs set out in Decision
2003-63. The Commission notes,
more specifically, that these ILECs' per-minute total capital costs
in the December 2002 cost studies were on average less than the Decision
2003-63 AWFF cost sensitivity:
specifically, by 3 percent for Bell Canada, 3.6 percent
for SaskTel, 15.6 percent for TCI-AB and 12.5 percent for
TCI-BC. Based on these results, the Commission estimates that the
composite average AWFF proxy for the overall AT capital in Bell Canada's
and SaskTel's December 2002 cost studies would be lower than those
for TCI by at least approximately eight percent. The Commission
notes that Bell Canada's and SaskTel's cost studies implicitly
reflected the use of 1993-vintage AWFFs for switching equipment, and
that TCI's cost studies did not rely on older-vintage AWFFs and unit
costs. The Commission therefore considers that it would be appropriate
to reflect greater AWFFs in the cost studies of Bell Canada and
SaskTel. |
37.
|
The Commission considers that
a reduction of approximately five percent in per-minute AT capital
costs would equate to an increase in the composite average AWFFs used
by Bell Canada and SaskTel to the mid-point between these composite
average AWFFs and TCI's composite average AWFFs. Accordingly, the
Commission reduces the per-minute capital costs in the December 2002
cost studies of Bell Canada and SaskTel by five percent
in recognition of the low composite average AWFF values relative to
TCI-AB and TCI-BC. |
38.
|
The Commission considers that
the 1996 vintage AWFF values used by Aliant Telecom and MTS Allstream
also do not reflect more current AWFF values similar to those used
by TCI. Accordingly, consistent with its AWFF adjustments made to
the December 2002 cost studies for Bell Canada and SaskTel, the
Commission reduces the per-minute capital costs in the December 2002
cost studies of Aliant Telecom and MTS Allstream by five percent.
|
|
Equipment
lives |
|
Positions
of parties |
39.
|
The Competitors noted that
the ILECs were required to use approved accounting plant lives as
equipment lives in their cost studies. The Competitors also noted
that the most recently approved accounting lives were set out in Implementation
of price cap regulation and related issues, Telecom Decision CRTC
98-2, 5 March 1998 (Decision 98-2).
The Competitors noted that, in Decision 98-2,
the Commission approved separate accounting plant lives for each of
TCI-AB and TCI-BC. |
40.
|
TCI noted in reply that its
December 2002 cost study used the accounting plant lives approved
in Decision 98-2. Bell Canada
et al. stated in reply that Bell Canada had used the life estimates
and survivor curves approved in Decision 98-2
in the AT cost studies. |
|
Commission's
analysis and determinations |
41.
|
The Commission notes that consistent
with costing practice, Bell Canada, TCI and the other ILECs used
the accounting plant lives approved in Decision 98-2
in the December 2002 cost studies. Accordingly, the Commission considers
that no adjustment is required. |
|
Capital
costing issues |
|
AT demand
and cost causality |
|
Positions
of parties |
42.
|
The Competitors noted
that TCI's and MTS Allstream's demand forecasts projected declining
demand over the study period, that Aliant Telecom's forecasts
projected declining demand for certain years of the study period and
a modest increase in demand over the study period, and that Bell Canada
and SaskTel's demand forecasts projected significant growth in demand
over the study period. |
43.
|
The Competitors submitted
that demand levels for the AT service during the period 1998
to 2001 cast doubt on the validity of Bell Canada et al.'s AT demand
forecasts over the study period because forecast demand levels did
not exceed actual demand for that period. The Competitors argued that
the following factors might have contributed to a decline in APLDS'
demand during the study period: increased use of the ILECs' Direct
Connection (DC) service as competitors' market shares grew; reduced
proportion of toll traffic associated with circuit-switched technology
as migration to voice over Internet protocol (VoIP) proceeded; and
the potential for increasing use of wireless services to make long-distance
calls. The Competitors argued that the ILECs' own use of the AT functionality
was also declining and would continue to decline. |
44.
|
The Competitors submitted further
that the all-carrier demand5
for the AT service would not grow over the study period in any
ILEC territory and would be at or below demand levels prior to that
period. The Competitors argued that, on this basis, demand growth
would not cause the relief of certain capital components over the
study period and that costs associated with certain capital components
should not be included in the ILECs' cost studies for the AT service. |
45.
|
The Competitors proposed that
all switch-related components used to provide the AT service
be excluded from the costs used to establish the final rates for the
AT service. The Competitors also proposed that appropriate reductions
should be made to other capital and expense inclusions for items with
cash flows driven by switch-related capital costs. The Competitors
submitted that switch-related components used to provision the AT service
were used only to provide AT functionality to competitors and
the ILECs. |
46.
|
Bell Canada et al. submitted
that switch-related components for the AT service, such as Spectrum
Peripheral Model (SPM), Digital Trunk Controller (DTC) and Enhanced
Network (ENet)6
had uses other than provisioning that service and that, therefore,
these AT switching facilities were fungible.7
Bell Canada et al. argued that the cost studies properly included
these switch-related components, even if it was assumed that demand
for the AT service was declining. |
47.
|
Bell Canada et al. submitted
that, contrary to the Competitors' submission, the APLDS' demand for
the AT service had increased over the years 2002 to 2004, and
that the growth was expected to continue over the remainder of the
study period. Bell Canada et al. submitted that factors such
as the shift by competitors to only use the DC service had been built
into the ILECs' forecasts. Bell Canada et al. submitted further
that VoIP was not expected to have a material impact on the demand
for the AT service in 2005 and 2006, and that the trend of using
wireless, instead of wireline, services to make long distance calls,
which was implicit in the demand forecasts, would not change materially
in the next two years. |
48.
|
TCI argued that, consistent
with the Commission's costing methodology, it had considered the total
demand for the AT service over the study period, not just the
change in demand. TCI submitted that it had applied Commission-approved
forward-looking traffic-driven costs for switch-related components
in its cost studies. TCI argued that the Competitors' rationale for
excluding switching costs was flawed, and, accordingly, the Commission
should reject it. |
|
Commission's
analysis and determinations |
49.
|
The Commission notes that Class 4
AT switch components can be used for the Class 5 end-office
switches, they can alternatively be used to provision other ILEC services
and are therefore fungible. The Commission considers that, given that
the switch-related components that ILECs use to provision the AT service
are fungible, the cost studies should include the associated costs
of these facilities. |
50.
|
Accordingly, the Commission
finds that the switch-related components used to provision the AT service
are fungible and, consistent with current costing practice for fungible
facilities, the associated capital costs should be determined
using forward-looking traffic-driven switching-related costs. |
|
Bell Canada's
1996 TSPS model |
|
Introduction |
51.
|
The Commission notes that
Bell Canada et al. and MTS Allstream submitted that they
determined their CO switching and transmission capital costs for the
AT service based on Bell Canada's 1996 TSPS model, as restated
to the year 2002 using switching and transmission technology conversion
factors. These factors reflected productivity gains due to the changes
in growth technologies and changes in equipment prices over the period
1996 to 2002. |
52.
|
Bell Canada et al. noted
that: (a) TSPS was a mainframe-based model used by ILECs to estimate
the ILEC-specific capital costs for toll services; (b) this network
costing model was last updated in 1996; (c) since then, due to the
significant effort required to conduct a full update of the systems,
updates had been performed using a proxy method to restate the 1996
TSPS results by applying switching and transmission technology conversion
factors to reflect changes in growth technologies and changes in switching
and transmission equipment prices over time; (d) detailed toll demand
characteristics for 1992 and the toll network topology for 1991 were
used in the TSPS model update; and (e) since the computer files used
for the update were no longer available, the ILECs could not provide
the detailed toll demand and network topology information used in
the 1996 model update. |
|
Switching
and transmission-related productivity improvement changes |
|
Positions
of parties |
53.
|
The Competitors noted that
Bell Canada et al. and MTS Allstream's capital cost estimates
for the AT service were derived from the 1996 TSPS model, which
was last updated in 1996. The Competitors further noted that Bell Canada
et al.'s and MTS Allstream's 1996 results were restated to 2002
amounts using technology conversion factors to reflect changes in
growth technology and equipment prices. |
54.
|
The Competitors noted that,
prior to forbearance from the regulation of toll services, the TSPS
model had been updated four times between 1990 and 1996, but noted
that it had not been updated between 1997 and 2005. The Competitors
noted that the TSPS update process allowed Bell Canada to reflect
the latest changes in service provisioning, network topology, growth
technology and updated costs. The Competitors noted that Bell Canada
had indicated that updating the TSPS model was a rigorous and expensive
process. The Competitors submitted that Bell Canada would not
have undertaken such updates if it considered that a more superficial
and less costly approach, such as the technology conversion factor
approach used in the AT proceeding, would yield satisfactory
results. |
55.
|
The Competitors noted Bell Canada
et al.'s submission that the TSPS source code and the computer files
used to update the TSPS model in 1996 no longer existed. The Competitors
argued that, accordingly, Bell Canada et al. was not in a position
to assert that the provisioning rules or network provisioning algorithms
for switching and transmission components were the same as those that
applied in 1996. |
56.
|
The Competitors submitted that,
in these circumstances, it would be reasonable to reduce the switching
and transmission costs estimated by the 1996 TSPS update by five percent
to reflect productivity improvements resulting from changes in network
topology and network provisioning algorithms between 1992 and 2002. |
57.
|
Bell Canada et al. argued
that expectations of productivity improvement in network topology
and network provisioning algorithms were not at issue in this proceeding
and that the primary relevant issue in setting the AT rate was
the change, if any, in the provisioning of toll connect trunks and
the relevant switching functionality in toll switches. Bell Canada
et al. submitted that the toll-connect trunks and the relevant switching
functionality were and had always been provisioned on the basis of
the volume of toll traffic occurring in the busy hour.8
Bell Canada et al. argued that because there had been no changes
to their provisioning rules since 1992, the Commission should dismiss
the Competitors' submission that there were productivity improvements
arising from changes in provisioning rules or network provisioning
algorithms. |
58.
|
Bell Canada et al. noted
that, since 1992, Bell Canada and Aliant Telecom had consolidated
their toll switch networks into fewer toll centres. Bell Canada
et al. submitted that, while the consolidation had increased the efficiency
of the trunk groups connecting the ILECs' toll switches with the APLDS'
point of presence, the efficiency gains had been offset by the need
to use longer toll connecting trunks to connect ILEC local switches
to ILEC toll switches. Bell Canada et al. submitted that, on
balance, this likely resulted in an increase rather than a decrease
to the cost per-minute for the AT service. Bell Canada and
Aliant Telecom submitted further that the main benefits of the
toll network consolidation related to reductions in switch software
costs that were not sensitive to toll demand and which had therefore
been excluded from the AT causal costs. |
|
Commission's
analysis and determinations |
59.
|
The Commission notes that
TCI's cost studies relied on its current toll network topology and
costs. The Commission considers, however, that Bell Canada et
al.'s and MTS Allstream's use of the 1996 TSPS model with 1992
demand patterns and a 1991 network topology may not adequately reflect
the efficiencies of their evolving toll networks and may, therefore,
result in an overstatement of costs. The Commission notes Bell Canada
et al.'s submission that the 1996 TSPS model's source code is no longer
available, implying that the appropriateness of the detailed demand
patterns and network topology inputs used in the 1996 TSPS model can
no longer be verified. |
60.
|
The Commission also notes
that, since the early 1990s, Bell Canada and Aliant Telecom
have consolidated their toll switch networks into fewer toll centres.
While this switch consolidation would lead to longer toll connecting
trunks as reported by Bell Canada et al., the Commission considers
this consolidation of the toll networks would also lead to fewer and
larger trunk groups serving a smaller number of switches. The
Commission notes Bell Canada et al.'s submission that efficiency
gains associated with consolidation would likely be offset by the
use of longer toll connecting trunks. The Commission, however, considers
that it is reasonable to assume that the added trunking efficiencies
of fewer but larger trunk groups would offset increased costs associated
with the increased trunk length. As discussed below in connection
with the significant increases in toll traffic volumes and significant
changes to toll traffic patterns since the early 1990s, the Commission
also expects that ILECs will have benefited from added trunking efficiencies
gained as a result of handling increased toll traffic volumes. |
61.
|
The Commission considers that
changes in network topology, toll traffic demand and demand patterns
since the 1990s have had a significant impact on how the ILECs generally
provisioned their toll network. The Commission notes that Bell Canada
and Aliant Telecom had initially applied a cumulative productivity
increase factor in the October 2002 cost studies. The Commission also
notes that these ILECs subsequently removed this productivity factor
in the December 2002 cost studies, arguing that the current growth
technology costs included in the technology conversion factors reflected
these productivity gains. In the Commission's view, Bell Canada
et al.'s proposal to apply a switching technology conversion factor
to capture changes in both growth technologies and switching equipment
prices over the 1996 to 2002 study period would not adequately reflect
the efficiencies associated with the evolution and changes in the
overall toll network topology from 1992 to 2002. |
62.
|
The Commission further notes
that the Competitors proposed a five percent reduction to the
switching capital costs for the AT service to reflect productivity
improvements resulting from changes in network topology and network
provisioning algorithms over the period 1992 to 2002. The Commission
considers that, in the absence of TSPS model updates since 1996, this
represents an appropriate adjustment to proposed switching capital
costs. |
63.
|
Accordingly, the Commission
adjusts Bell Canada et al.'s and MTS Allstream's December
2002 cost studies to reduce switching capital costs by five percent
to reflect expected productivity gains from changes in network topology
and network provisioning improvements since 1992 that were not captured
in these studies. |
|
Transmission
and switching technology conversion factors |
|
Positions
of parties |
64.
|
The Competitors noted that
Bell Canada et al. had indicated that Bell Canada's December
2002 cost study updated its transmission technology conversion factor
to account for changes in equipment prices from 2000 to 2002. The
Competitors also noted that SaskTel had used Bell Canada's transmission
technology conversion factor as a starting point but had decreased
the value of this factor to account for price decreases available
to SaskTel that were not captured in Bell Canada's transmission-related
costs. The Competitors submitted that Bell Canada's technology
conversion factor therefore did not fully reflect the reduced 2002
equipment prices available to both Bell Canada and SaskTel. |
65.
|
Bell Canada et al. submitted
in reply that Bell Canada's transmission technology conversion
factor fully captured the changes in transmission costs that Bell Canada
experienced between 1996 and 2002. Bell Canada et al. submitted
further that the reference to SaskTel's need to modify Bell Canada's
transmission technology conversion factor was related to the fact
that, prior to 2002, SaskTel's supplier prices for AT-related equipment
were significantly higher than Bell Canada's. Bell Canada
et al. submitted that as a result SaskTel adjusted Bell Canada's
technology conversion factor to reflect the additional price change
SaskTel experienced when its prices became equal to Bell Canada's. |
|
Commission's
analysis and determinations |
66.
|
The Commission considers that
Bell Canada et al.'s reply addresses the Competitors' concern
with respect to the appropriateness of the adjustments made to the
transmission technology conversion factors in order to reflect changes
in supplier prices between 1996 and 2002. |
67.
|
The Commission notes, however,
that its review of the switching technology conversion factors proposed
by Bell Canada et al. show an inconsistency with respect to certain
revisions to these factors proposed by Bell Canada, Aliant Telecom
and SaskTel. The Commission notes that, in their December 2002 cost
studies, Bell Canada et al. proposed revisions to their switching
technology conversion factors to correct errors and omissions detected
in their October 2002 cost studies. In particular, Bell Canada
et al. submitted that the DTC conversion factor in Bell Canada's,
Aliant Telecom's and SaskTel's December 2002 cost studies reflected
the DTC resource unit costs associated with DMS-200 switches, rather
than DMS-100 switches as assumed in these ILECs' October 2002
cost studies. |
68.
|
A comparison of the DTC resource
unit costs proposed by each of Bell Canada, Aliant Telecom
and SaskTel in the October 2002 and December 2002 cost studies reveals
significant changes to the assumed DTC resource unit costs in the
December 2002 cost studies relative to the October 2002 cost studies.
The Commission further notes that the per-minute switching capital
costs for these ILECs increased by between 50 and 100 percent
in their December 2002 cost studies relative to their October 2002
cost studies. |
69.
|
The Commission notes that
Bell Canada et al. argued that the DTC component is fungible
and can be used to provision the DC service. The Commission accepts
that the DTC component is fungible. The Commission therefore considers
that the DTC component cost should be the same whether this component
is used with a DMS-100 or a DMS-200 switch. The Commission also considers
that the DTC resource unit costs associated with the DMS-100 switch
proposed in the October 2002 cost studies of Bell Canada, Aliant Telecom
and SaskTel should not be replaced by higher DTC resource unit costs
associated with the DMS-200 switch, as subsequently proposed in the
December 2002 cost studies. |
70.
|
Accordingly, the Commission
adjusts the switching capital costs in the December 2002 cost studies
of Bell Canada, Aliant Telecom and SaskTel to reflect the
use of DTC resource unit costs proposed by these ILECs in the October
2002 cost studies. |
|
Impact
of changing traffic distributions |
|
Positions
of parties |
71.
|
The Competitors noted that,
in Bell Canada et al.'s and MTS Allstream's cost studies
for the DC service, dated 20 May 2003, filed in the proceeding
initiated by Decision 2002-34
(the DC proceeding), Bell Canada et al. and MTS Allstream
submitted they had adjusted the busy-day-of-the-month factor by assuming
that the busiest day of the month would be represented by 1/22 of
the total month's traffic instead of the traditional factor of 1/20.
The Competitors noted further that Bell Canada et al. had indicated
that this adjustment was made to acknowledge that current toll calling
demand may have been more uniform than implied by the traditional
conversion factor. The Competitors argued that, consistent with the
factor proposed in the DC proceeding, a busy-day-of-the-month factor
of 1/22 should be adopted in the ILECs' cost studies for the AT service. |
72.
|
TCI noted that Bell Canada
et al.'s adjustment to the busy-day-of-the-month factor had been made
in relation to the DC service, not the AT service. TCI argued
that a more detailed traffic study needed to be conducted before the
proposed adjustment could be applied to the demand in the AT cost
study. |
73.
|
The Competitors proposed further
that the ILECs' busy-hour-of-the-day factor should be adjusted to
reflect 15 percent growth in non-busy-hour traffic relative to
busy hour traffic since the early 1990s. The Competitors argued this
adjustment was required to reflect the changed distribution of peak
and off-peak traffic since the early 1990s due to the introduction
in 1998 of toll calling plans that initially provided unlimited, flat
rate off-peak calling and the subsequent prevalence of plans that
did not distinguish, from a rating perspective, between daytime and
evening calling. |
74.
|
Bell Canada et al. argued
that it was growth in the busy-hour traffic that would cause the requirement
for additional facilities to be provisioned. Bell Canada et al.
argued that the distribution of peak and off-peak traffic would only
be relevant if changes in distribution affected the volume of traffic
carried in the busy hour. Bell Canada et al. submitted further
that the Competitors had not presented evidence that busy hour demand
had declined relative to demand in other hours of the busy day. Bell Canada
et al. also submitted that their review of their current busy hour
traffic distribution, had found that the busy hour traffic of Bell Canada
and SaskTel continued to contribute about 1/10 of the daily traffic
volumes, and had therefore not changed since 1992. |
75.
|
Bell Canada et al. argued
that, in light of the above, the Competitors' proposed adjustment
for busy-hour-of-the-day distribution should not be adopted. |
76.
|
TCI submitted that detailed
traffic studies would have to be done for the AT service to obtain
the relevant data regarding the busy-hour-of-the-day distribution. |
|
Commission's
analysis and determinations |
77.
|
The Commission notes that
ILECs provision their networks' switching and trunking facilities
in a manner that meets growth in their peak calling periods, typically,
demand in the busy-hour and generally determine the causal incremental
capital costs associated with network services such as the AT service
by estimating the costs of additional facilities to be provisioned
to meet this demand growth in the busy hour. As part of this costing
process, annual demand for the AT service is converted into busy
hour demand by dividing the annual demand by 12 months, and then applying
the busy-day-of-the-month factor and the busy-hour-of-the-day factor. |
78.
|
With respect to the busy-day-of-the-month
factor, the Commission notes that the ILECs assumed a busy-day-of-the-month
factor of 1/20 in their cost studies for the AT service. The
Commission further notes that Bell Canada et al. and MTS Allstream
proposed a revised busy-day-of-the-month factor of 1/22 in their May
2003 cost studies that were submitted in support of revised rates
for the DC service. The Commission also notes that these ILECs indicated
in that proceeding that the current distribution of demand within
the month may be more uniform than implied by the traditional conversion
factor of 1/20. |
79.
|
The Commission further notes
that there have been significant changes in the toll market since
the early 1990s, including reductions in toll rating plans and toll
rates and, related to the rate reductions, significant increases in
both peak and off-peak toll demand. The Commission considers it reasonable
to assume there have been increases in the off-peak traffic relative
to peak traffic. The Commission considers it likely that toll traffic
patterns are more uniform across the days of the month now than they
were in the early 1990s. |
80.
|
The Commission notes that the
ILECs did not provide any evidence to demonstrate that Bell Canada
et al.'s and MTS Allstream's proposed revisions to their busy-day-of-the-month
factor in the DC service proceeding would not be appropriate for the
AT service. |
81.
|
Accordingly, the Commission
adjusts the December 2002 cost studies to reflect a busy-day-of-the-month
factor of 1/22. The Commission notes that, as a result of its change
to reflect a busy-day-of-the-month factor of 1/22, the ILECs' proposed
AT capital costs have been reduced by 9.1 percent. |
82.
|
The Commission notes that
the ILECs assumed a busy-hour-of-the-day factor of 1/10 in their cost
studies for the AT service. This factor converts the busy day
demand to the demand in the busy hour and, while a uniform distribution
of demand throughout the day would imply a factor of 1/24, demand
is not uniform throughout the day and tends to be greater during business
hours. The Commission notes that, while the ILECs have traditionally
assumed that the busy hour represented 1/10 of the day's total demand,
the Competitors submitted that demand in the busy hour would decline
relative to the total day demand if there was less growth in peak
period traffic relative to off-peak period traffic. |
83.
|
While as noted above, the
Commission considers it reasonable to assume there have been increases
in the off-peak traffic relative to peak traffic since the early 1990s,
this does not necessarily indicate that busy hour demand has declined
relative to the other hours in the busy day. The Commission notes
that the ILECs provided two recent traffic studies based on data using
busy hour volumes that supported the continued use of the traditional
busy-hour-of-the-day factor of 1/10. The Commission further considers
that the Competitors did not demonstrate that the traffic studies
submitted by Bell Canada and SaskTel do not provide a fair representation
of the current percentage of busy hour traffic relative to the
total day traffic. |
84.
|
Accordingly, the Commission
has not adjusted the busy-hour-of-the-day factor of 1/10 of the day's
traffic used by the ILECs in their cost studies for the AT service. |
|
Growth
technology costs for switch trunk terminations |
|
Positions
of parties |
85.
|
The Competitors noted Aliant Telecom's
submission in response to interrogatories that the greater per-minute
switching capital costs for Aliant Telecom-NB and Aliant Telecom-NS
relative to Aliant Telecom-NL and Aliant Telecom-PEI resulted
primarily from the difference in the trunk termination technologies
that had been assumed between regions. The Competitors further submitted
that Aliant Telecom had assumed a mix of DTC and SPM trunk termination
technologies for Aliant Telecom-NB and Aliant Telecom-NS,
while it had assumed the exclusive use of DTC technology for Aliant Telecom-NL
and Aliant Telecom-PEI. |
86.
|
The Competitors submitted
that, in an interrogatory response, Bell Canada et al. had implied
that SPM trunk termination technology had been chosen as the growth
technology because it was the least-cost technology for the expected
capacity demand. The Competitors submitted that in light of the greater
switching costs for Aliant Telecom-NB and Aliant Telecom-NS,
SPM trunk termination technology was not the least-cost technology.
The Competitors proposed that the Aliant Telecom-NL switching
costs should be used for Aliant Telecom-NB and Aliant Telecom-NS. |
87.
|
Bell Canada et al. submitted
in reply that SPM trunk termination technology performed the same
function as DTC trunk termination technology, but had significantly
greater capacity. Bell Canada et al. submitted that SPM trunk
termination technology was the growth technology for connecting Aliant Telecom's
DMS-200 switches to its DMS-100 switches, while DTC technology was
the growth technology for connecting Aliant Telecom's DMS-200
switches to the APLDS' facilities. Bell Canada et al. submitted
further that, since both DTC and SPM technologies were causal to the
provision of the AT service, both technologies were included
in the development of costs causal to the provision of this service
for Aliant Telecom-NB and Aliant Telecom-NS. Bell Canada
et al. submitted further that, while Aliant Telecom's decision
to use SPM technology in these regions resulted in greater per-minute
switching costs, this choice produced other savings, specifically,
the preservation of building space and power consumption at Aliant Telecom's
switching centres, that made the decision economic. |
|
Commission's
analysis and determinations |
88.
|
The Commission notes Bell Canada
et al.'s argument that while Aliant Telecom-NB's and Aliant Telecom-NS's
use of SPM trunk termination technology resulted in greater per-minute
AT switching costs, that choice also produced savings related
to building space and power consumption. The Commission notes, however,
that ILECs do not generally experience space constraints in their
COs, and considers that power consumption costs related to the trunk
termination components would be small relative to the total trunk
termination costs. |
89.
|
The Commission notes that
the AT switching capital costs for Bell Canada, MTS Allstream
and SaskTel were also developed based on an assumed mix of DTC and
SPM trunk termination technologies. The Commission further notes that
a comparison of these ILECs' resource unit costs for DTC and SPM technologies
indicates that the DTC unit costs are less than the SPM unit costs.
The Commission therefore considers that the trunk termination capital
costs reflected in the switching capital costs in the December
2002 cost studies of Aliant Telecom-NB, Aliant Telecom-NS,
Bell Canada, MTS Allstream and SaskTel are not appropriate
at this time. |
90.
|
Accordingly, the Commission
adjusts the switching capital costs in the December 2002 cost studies
of Aliant Telecom-NB, Aliant Telecom-NS, Bell Canada,
MTS Allstream and SaskTel to reflect the exclusive use of DTC
trunk termination technology. The Commission considers that a comparable
adjustment is not required for Aliant Telecom-NL, Aliant Telecom-PEI
and TCI. |
|
Sample
size of Bell Canada et al. and MTS Allstream's transmission
technology conversion factors |
|
Positions
of parties |
91.
|
The Competitors proposed that
Bell Canada's transmission technology conversion factor be reduced
by 25 percent on the basis that the sample size used to establish
the factor was too small. The Competitors noted that Aliant Telecom
and SaskTel made direct use of Bell Canada's transmission technology
conversion factor and, therefore, the 25 percent reduction should
also be applied in respect of these ILECs. The Competitors also noted
that MTS Allstream used Bell Canada's transmission-related
technology conversion factor in order to estimate MTS Allstream's
fibre optic transmission system (FOTS) transmission technology conversion
factor. The Competitors submitted therefore that a 25 percent
reduction in Bell Canada's transmission technology conversion
factor would also imply a reduction to MTS Allstream's FOTS transmission
technology conversion factor. |
92.
|
Bell Canada et al. argued
that although the sample size was small, the sample was randomly selected,
and there was no mathematical expectation of bias. |
|
Commission's
analysis and determination |
93.
|
The Commission considers that
Bell Canada et al.'s reply to the Competitors' proposal for an
adjustment to Bell Canada's transmission technology conversion
factor supports the approach taken by Bell Canada. Accordingly,
in the Commission's view, the costing adjustments proposed by the
Competitors for Bell Canada, Aliant Telecom, MTS Allstream
and SaskTel are not required. |
|
TCI's computer
processing unit (CPU) upgrade costs |
|
Positions
of parties |
94.
|
The Competitors submitted
that because TCI's forecast showed a decline in demand for its AT service,
demand-driven growth would not cause the provisioning of future relief
facilities or additional switches or switching capacity. The Competitors
argued that CPU upgrade costs were therefore not causal to the AT service,
but fixed and common costs. The Competitors also argued that the AT service
was an entrant-only service and that the AT service costs driven
by factors other than entrant demand, such as the annual CPU upgrade
expense, were causal to the overall AT functionality, not to
the entrants' AT service. |
95.
|
TCI disagreed that CPU upgrade
costs were fixed and common costs. TCI submitted that it considered
the manufacturer's annual CPU upgrade expense part of switching costs
of the AT service, which TCI included in its cost studies as
these costs applied to all AT traffic processed by the AT switch.
|
|
Commission's
analysis and determinations |
96.
|
The Commission considers that
CPU upgrade costs are incurred to permit the ongoing delivery of AT traffic.
The Commission notes that TCI's cost studies for the AT service
reflect an all-carrier demand approach, where the average cost is
determined based on the combined APLDS and ILEC demand. The Commission
therefore considers it appropriate to include CPU upgrade costs in
TCI's cost studies for the AT service. The Commission notes,
however, that TCI indicated that the manufacturer had discontinued
CPU upgrade charges during 2004. |
97.
|
Accordingly, the Commission
adjusts TCI's December 2002 cost study to remove CPU upgrade costs
from mid-2004 to the end of the study period. |
|
Vintage
of general purpose computer (GPC) costs |
|
Positions
of parties |
98.
|
The Competitors submitted that
Bell Canada et al. and MTS Allstream used 1989-vintage GPC
costs in their cost studies. The Competitors submitted further that
this approach was not reasonable in view of the technological changes
since 1989 and requested that these costs be excluded from the cost
studies. |
99.
|
Bell Canada et al. submitted
in reply that, if updated GPC costs were used, the GPC costs would
be lower by 5.6 percent for Aliant Telecom-NB, 7.4 percent
for Aliant Telecom-NL, 6.3 percent for Aliant Telecom-NS,
8.8 percent for Aliant Telecom-PEI, 4.3 percent for
Bell Canada, and 2.9 percent for SaskTel. |
|
Commission's
analysis and determinations |
100.
|
The Commission considers that
the GPC costs used by Bell Canada et al. should be reduced to
reflect the updated cost information provided by Bell Canada
et al. The Commission also considers that the GPC costs used by MTS Allstream
should be reduced. The Commission notes that updated GPC cost information
was not provided for MTS Allstream. The Commission therefore
considers it would be appropriate to reduce MTS Allstream's GPC
costs by five percent, based on the average percentage reduction
of the updated GPC costs for Aliant Telecom, Bell Canada
and SaskTel. The Commission notes that TCI's cost studies did not
rely on older-vintage unit costs. Accordingly, the Commission considers
that a comparable adjustment is not required for TCI. |
101.
|
Accordingly, the Commission
adjusts the December 2002 cost studies of Aliant Telecom, Bell Canada,
SaskTel and MTS Allstream to reduce the GPC costs as follows:
5.6 percent for Aliant Telecom-NB, 7.4 percent for
Aliant Telecom-NL, 6.3 percent for Aliant Telecom-NS,
8.8 percent for Aliant Telecom-PEI, 4.3 percent for
Bell Canada, 2.9 percent for SaskTel, and 5 percent
for MTS Allstream. |
|
Expense
costing issues |
|
Portfolio
expenses |
|
Commission's
analysis and determinations |
102.
|
The Commission notes that
Bell Canada et al. and MTS Allstream did not include portfolio
expenses in the cost studies. The Commission further notes that Decision
2004-72 required the ILECs except
TCI to include portfolio expenses in their cost studies through the
use of the portfolio expense factors set out in that decision. The
Commission notes that the portfolio expense factors to be applied
to their Phase II expenses are 3.6 percent for Bell Canada
and Aliant Telecom, 1.78 percent for MTS Allstream
and 8.25 percent for SaskTel. Consistent with its view that it
is appropriate for the ILECs' cost studies to reflect, to the extent
possible, the most current costing methods, including recent changes
to costing methodology, the Commission considers it appropriate to
adjust these ILECs' December 2002 cost studies to reflect the inclusion
of portfolio costs based on their respective portfolio expense factors.
|
103.
|
Accordingly, the Commission
adjusts the December 2002 cost studies of Bell Canada et al.
and MTS Allstream to apply the following portfolio expense factors:
3.6 percent for Aliant Telecom, 3.6 percent for Bell Canada,
1.78 percent for MTS Allstream and 8.25 percent for
SaskTel. The Commission notes that Decision 2004-72
did not require TCI to use a portfolio expense factor as TCI included
portfolio expenses in its direct and indirect expenses. |
|
Maintenance expenses |
|
Positions
of parties |
104.
|
The Competitors proposed that
the Commission apply a cap on maintenance expenses in respect of the
AT service in the same manner that the Commission applied a cap
on maintenance expenses for fibre-based accesses in Decision 2005-6.
The Competitors submitted that, consistent with this decision, a cap
on AT maintenance expenses equal to four percent of capital
would be appropriate. |
105.
|
Bell Canada et al. noted
that in Inquiry into telecommunications carriers' costing and accounting
procedures - Phase II: information requirements for new service
tariff filings, Telecom Decision CRTC 79-16, 28 August 1979 (Decision
79-16), the Commission directed the ILECs to include costs that were
incremental to the service under study. Bell Canada et al. argued
that capping maintenance expenses without any information that supported
such a cap would not reflect the appropriate incremental costs of
the service, and would thereby violate the principles of Decision
79-16. Bell Canada et al. argued that the maintenance factor
determined in Decision 2005-6 associated
with CDN services would not be appropriate for the AT service
since the two services did not have the same mix of assets. Bell Canada
et al. submitted, therefore, that the Commission should not adopt
the Competitors' proposal. |
106.
|
TCI submitted that it had
estimated its maintenance expenses for the AT service based on
the actual maintenance expense results from its accounting records.
TCI submitted that the use of maintenance expense factors applicable
to capital where the capital equipment was based only on traffic-driven
components would not capture the maintenance of other equipment that
was included in the costs causal to the service. TCI submitted that
the use of a maintenance factor would determine the maintenance expense
on only a portion of the equipment being maintained and would thus
understate maintenance expenses. TCI submitted further that the maintenance
factor developed in the context of the CDN service was not appropriate
for the AT service. |
|
Commission's
analysis and determinations |
107.
|
The Commission has compared
the ILECs' monthly maintenance expenses. As the maintenance expenses
relate to comparable activities undertaken by all ILECs, the Commission
considers that the significant differences in these estimates among
ILECs, as expressed on a per-minute basis and as a percentage
of capital, are not appropriate. |
108.
|
In light of the significant
differences across the ILECs' maintenance expense estimates, the Commission
considers it appropriate to apply a maintenance expense cap expressed
as a percentage of the present worth of annual capital costs
to ensure that maintenance expenses are reasonable. The Commission
notes that this approach is consistent with the approach adopted in
Decision 2005-6 where the proposed
maintenance expenses of certain ILECs were considered inappropriate
and were capped at a percentage level of the associated capital. |
109.
|
With respect to the maintenance
expense cap of four percent of capital proposed by the Competitors,
the Commission notes that this proposed cap level relies on a maintenance
expense cap established in Decision 2005-6
for fibre-based access equipment. The Commission considers that a
maintenance cap at this level would not be appropriate for the AT service
given that the AT service consists primarily of switching and
trunking equipment. |
110.
|
With respect to TCI's submission
that its maintenance expenses were based on actual accounting results
for toll switch maintenance, the Commission is not persuaded that,
in the circumstances of this case, the use for TCI of accounting-based
data reflects accurate estimates of the prospective incremental causal
Phase II costs associated with the AT service. The Commission
further notes that in TCI's cost studies for the AT service,
filed in the proceeding that led to Unbundled rates to provide
equal access, Telecom Decision CRTC 97-6,
10 April 1997, TCI estimated its maintenance expense based on percentages
of capital costs. Finally, the Commission notes that TCI's maintenance
cost estimate proposed in an earlier 2000 cost study for the DC service,
which is a comparable toll interconnection service, was significantly
lower than the estimate in this proceeding. The Commission therefore
does not consider that the maintenance expense estimates filed by
TCI in this proceeding are appropriate. |
111.
|
The Commission notes that
the maintenance expenses proposed by TCI included portfolio expenses,
while those of the other ILECs did not. The Commission notes further
that, excluding TCI, the ILECs' maintenance expense estimates, when
expressed as a percentage of capital, varied from 5.4 percent
to 9.3 percent, with an average value of 7.4 percent. The
Commission considers that a maintenance expense cap equal to an average
maintenance expense level of 7.5 percent of capital costs would
represent an appropriate maximum level of maintenance expenses for
all ILECs, subject to an adjustment in the case of TCI. |
112.
|
With respect to TCI, the Commission
considers it appropriate to adjust the maintenance expense cap for
TCI to reflect TCI's inclusion of portfolio expenses in its maintenance
expense estimates. The Commission notes that, in the context of the
Commission's ongoing general review of ILEC Phase II costing
information requirements, TCI estimated an average portfolio expense
factor of 48.65 percent.9
The Commission therefore considers it appropriate to adjust TCI's
December 2002 cost studies by applying a portfolio expense factor
of 48.65 percent to the maintenance expense cap of 7.5 percent.
The Commission notes that this adjustment has the effect of increasing
TCI's maintenance expense cap to 11 percent of capital costs. |
113.
|
Accordingly, the Commission
applies a maintenance expense cap of 7.5 percent of capital costs
for the AT service of Aliant Telecom, Bell Canada,
MTS Allstream and SaskTel and applies a maintenance expense of
11 percent of capital costs for TCI's AT service. |
|
Bell Canada's
satellite lease costs |
|
Positions
of parties |
114.
|
The Competitors noted that
Bell Canada's satellite lease costs were the only component included
in Bell Canada's service provisioning category and that
these costs represented 28.8 percent of Bell Canada's total
cost per-minute for the AT service. The Competitors noted further
that, under Bell Canada's contract, the amount of the lease costs
was fixed and did not vary with demand. The Competitors argued therefore
that Bell Canada's satellite lease costs were not causal to the
AT service or to the APLDS demand for this service. |
115.
|
The Competitors further argued
that, by stating that the satellite leases were collectively causal
to Bell Canada's and the entrants' demand, Bell Canada et
al. had acknowledged that these costs would be considered as expenses
causal to the service, not causal to demand, and then only in the
case of a cost study that considered all-carrier demand. The Competitors
therefore proposed that Bell Canada's service provisioning costs
be excluded from the cost studies. |
116.
|
Bell Canada et al. argued
that Bell Canada's satellite lease contract was negotiated based
on the combined DS-0s required to transport Bell Canada traffic
and APLDS traffic to and from communities in the far North of its
serving territory. Bell Canada et al. argued further that the
fact that the payment under this contract was fixed reflected the
form of the contract, and not the nature of the cost. Bell Canada
et al. argued that, if Bell Canada had forecast a different APLDS'
demand requirement, the total cost of the contract would have been
varied to reflect this different level of demand. Bell Canada
et al. argued therefore that the satellite lease payment was causal
to the APLDS demand and should be included in Bell Canada's cost
studies. |
|
Commission's
analysis and determinations |
117.
|
The Commission notes that
Bell Canada's satellite lease contract provides for the lease
of transponder and satellite equipment and for associated operations.
The Commission considers that a portion of the contract (e.g., a portion
of the transponder, and some of the satellite equipment) would not
vary depending on the traffic volumes. The Commission notes that services
other than the AT service, such as data and private line services,
may also make use of these facilities. The Commission considers it
reasonable to assume that Bell Canada's traffic levels to and
from communities in the far North significantly exceed the
levels of the APLDS' traffic, and thus would have primarily dictated
Bell Canada's satellite transmission requirements during contract
negotiations. |
118.
|
The Commission therefore considers
that it would not be appropriate to assume that all of Bell Canada's
satellite lease costs are sensitive to demand for the AT service
and equally causal to both Bell Canada's and the APLDS' AT demand.
The Commission also notes that Bell Canada's proposed per-minute
service provisioning cost of $0.00049 constitutes nearly a
third of its total per-minute AT cost. In the Commission's
view, this is unreasonably high for this cost element. In light of
these considerations, the Commission considers that it would be appropriate
to assume that only half of Bell Canada's satellite lease costs
are traffic-sensitive and causal to the APLDS' demand for the AT service. |
119.
|
Accordingly, the Commission
adjusts Bell Canada's December 2002 cost study to reduce the
service provisioning costs associated with its satellite lease costs
by 50 percent. |
|
SaskTel's
billing and sales management costs |
|
Positions
of parties |
120.
|
The Competitors proposed that
SaskTel's billing and sales management costs should be excluded from
its cost study on the basis that SaskTel did not establish that these
costs were causal to the AT service. |
121.
|
Bell Canada et al. argued
that SaskTel's billing costs, which represent the majority of the
costs in SaskTel's Billing and Sales Management category, were causal
to the AT service because SaskTel paid separate invoice amounts
to an external vendor for billings associated with the AT service.
Bell Canada et al. indicated that no billing costs were included
in the updated AT cost studies for Bell Canada, Aliant Telecom
and MTS Allstream since all billing-related costs were recovered
in the rate for the DC service. Bell Canada explained that since
each AT call was also billed a DC charge for which Bell Canada
incurred the billing activity costs, the incremental billing activity
costs associated with calls routed via Bell Canada's AT service
were not significant. |
|
Commission's
analysis and determination |
122.
|
The Commission considers that
Bell Canada et al.'s reply to the Competitors' proposal for an
adjustment to SaskTel's billing and sales management costs supports
the approach taken by SaskTel. Accordingly, in the Commission's view,
the costing adjustment proposed by the Competitors is not required. |
|
Aliant Telecom's
network provisioning costs |
|
Positions
of parties |
123.
|
The Competitors submitted
that Aliant Telecom included costs associated with its network
planning and provisioning activities as an expense causal to the AT service.
The Competitors noted that the costs associated with this function
were determined by using a competitor toll minute to total minute
ratio to determine network planning and provisioning costs associated
with the AT service. The Competitors further noted that Aliant Telecom's
method assumed that all minutes, whether entrant AT minutes or
ILEC retail toll minutes, caused an equal amount of toll network planning
and provisioning costs. The Competitors argued that this could not
be accurate given that ILEC minutes would use more elements of the
toll network. |
124.
|
The Competitors further noted
that, in contrast, Bell Canada had only reflected the network
planning and provisioning activities relating to the required connections
within the network to ensure that AT facilities were available
to competitors when required. The Competitors also noted that Bell Canada
had estimated these costs by estimating the resources required for
this function multiplied by the appropriate labour rate. The Competitors
argued that Aliant Telecom had neither provided evidence to justify
the existence of a causal link of the costs in question with the APLDS'
AT service nor provided a reasonable proxy method. The Competitors
further submitted that even if the costs were to be considered as
causal to demand, the method Aliant Telecom used to assign network
planning and provisioning costs to the AT service would overstate
those costs. The Competitors requested that Aliant Telecom exclude
its network planning and provisioning expenses from its cost study. |
125.
|
Bell Canada et al. submitted
that Aliant Telecom's network planning and provisioning expenses
costs were associated with the provision of both the retail and wholesale
functions collectively. Bell Canada et al. further submitted
that the volume of resources dedicated to this collective task varied
as a result of the total volume of traffic. Aliant Telecom submitted
that given that the total volume of these costs was driven by the
total volume of toll traffic, it was appropriate to apportion these
costs across the toll services on the basis of traffic volumes. |
|
Commission's
analysis and determination |
126.
|
The Commission notes that
Aliant Telecom's proposed proxy method to determine the APLDS'
network planning and provisioning costs for the AT service assumes
that all toll minutes cause an equal amount of toll network planning
and provisioning costs. The Commission considers that Aliant Telecom's
reply does not adequately respond to the Competitors' concerns that
this assumption would over-estimate the network planning and provisioning
activities caused by the APLDS' demand for the AT service. The
Commission further notes that Aliant Telecom's per-minute estimate
for costs causal to the service associated with network planning and
provisioning is $0.00015 for each of its regions, compared to $0.00005
for Bell Canada and $0 for MTS Allstream and SaskTel. The
Commission therefore considers it appropriate to adjust downward Aliant Telecom's
per-minute costs causal to the service associated with network planning
and provisioning to the level of $0.00005 per-minute for each of Aliant Telecom-NS,
Aliant Telecom-NB, Aliant Telecom-NL and Aliant Telecom-PEI
based on the per-minute cost estimate proposed by Bell Canada
for these activities. |
127.
|
Accordingly, the Commission
adjusts Aliant Telecom's per-minute costs causal to the AT service
associated with network planning and provisioning in its December
2002 cost studies for each of Aliant Telecom-NS, Aliant Telecom-NB,
Aliant Telecom-NL and Aliant Telecom-PEI by reducing them
to $0.00005 per-minute. |
|
TCI's service
provisioning costs |
|
Positions
of parties |
128.
|
The Competitors proposed that
TCI's service provisioning costs should be reduced by 50 percent
on the basis that TCI's use of an average cost per-minute for all
toll network service provisioning activities overstated service provisioning
costs causal to the AT service. |
129.
|
TCI argued that the costs in
question related only to its service provisioning activities and so
were driven by demand for the AT service. TCI argued further
that the per-minute service provisioning cost for the APLDS had been
determined on the basis of the all-carrier demand and costs, on the
assumption that the per-minute service provisioning costs for APLDS'
and TCI's demand were the same. |
|
Commission's
analysis and determination |
130.
|
The Commission considers that
TCI's reply to the Competitors' proposal for an adjustment to TCI's
service provisioning costs supports the approach taken by TCI. Accordingly,
in the Commission's view, the costing adjustment proposed by the Competitors
is not required. |
|
SaskTel's
service provisioning costs |
|
Commission's
analysis and determination |
131.
|
The Commission notes that
SaskTel's proposed per-minute service provisioning costs of $0.00020
per-minute were high compared to the per-minute service provisioning
costs proposed by the other ILECs for comparable activities, which
were between $0 and $0.00008. As the service provisioning expenses
relate to comparable activities undertaken by all ILECs, the Commission
considers that the significant differences in these estimates between
ILECs, as expressed on a per-minute basis, are not appropriate. |
132.
|
The Commission notes SaskTel's
submission that its proposed service provisioning expenses were based
on actual accounting results. The Commission is not persuaded that,
in the circumstances of this case, the use of accounting-based data
reflects accurate estimates of the prospective incremental causal
Phase II costs associated with SaskTel's service provisioning
activities. |
133.
|
Therefore, the Commission considers
it appropriate to adopt a lower service provisioning cost per-minute
of $0.00009 for SaskTel, having regard to the level of the per-minute
cost estimates proposed by other ILECs for these activities. |
134.
|
Accordingly, the Commission
adjusts SaskTel's December 2002 cost study to reduce its service provisioning
costs to $0.00009 per-minute. |
|
Final rates
and deferral account issues |
|
Final
rates and related issues |
|
Positions
of parties |
135.
|
Bell Canada et al. and
TCI requested that final rates for the AT service be approved
based on the December 2002 cost studies plus a 15 percent mark-up.
|
136.
|
The Competitors, Bell Canada
et al. and TCI submitted that rates for the AT service should
be approved on a final basis, retroactive to 1 June 2002. These parties
submitted further that AT service rates for each price cap year
going-forward should be established through the application of the
relevant I-X constraint. |
137.
|
TCI submitted that the demand
for the AT service used in its 2002 cost study did not reflect
changes to the interconnection regime in Trunking arrangements
for the interchange of traffic and the point of interconnection between
local exchange carriers, Telecom Decision CRTC 2004-46,
14 July 2004 (Decision 2004-46).10
TCI proposed that the Commission approve rates for the AT service
on a final basis only for the period 1 June 2002 to 14 July 2004.
TCI also proposed that the Commission make these rates interim effective
15 July 2004 and require each ILEC to file a new AT cost study
to reflect Decision 2004-46 so
that the Commission may determine final AT rates effective on
and after 15 July 2004. |
138.
|
The Competitors submitted
that TCI's proposal should be rejected. The Competitors noted that
rates had been approved on an interim basis for almost three years
and argued that it would be unacceptable to maintain rates on an interim
basis from 15 July 2004 on a going-forward basis. The Competitors
argued that the public interest in finality required that, after an
extensive public proceeding, a decision be made based on the record
available at that time. The Competitors noted that Decision 2004-46
had yet to be implemented or even fully specified in its final form.
The Competitors submitted that the extent and pattern of the impact,
if any, of the new regime on other existing interconnecting arrangements
was not known or would not be known until after the regime had been
implemented. The Competitors submitted that any changes in assumptions
made in the context of new AT cost studies proposed by TCI would
be speculative and that TCI's proposal would delay the finalization
of AT rates by at least 18 months. |
139.
|
TCI submitted in reply that
it did not intend to delay the implementation of new rates for the
AT service. TCI submitted further that final rates for its AT service
should be based on its cost studies for the AT service. TCI submitted
that it would monitor the need to file updated cost studies for its
AT service. |
|
Commission's
analysis and determinations |
140.
|
With respect to TCI's initial
proposal that the Commission approve interim rates with an effective
date of 15 July 2004, the Commission notes that TCI subsequently indicated
in its reply comments that it would monitor the need to file updated
cost studies for the AT service. The Commission further notes
that ILECs may propose revised AT rates at any time in the future
if cost changes associated with demand changes resulting from Decision
2004-46, or other cost changes,
warrant it. |
141.
|
The Commission notes that the
AT service is classified as a Category I Competitor Service
and that its rate is established based on its Phase II costs,
plus a mark-up of 15 percent. The Commission notes that it has
therefore established rates based on the ILECs' December 2002 cost
studies, as amended to reflect the cost adjustments in this Decision,
plus a mark-up of 15 percent. |
142.
|
Accordingly, the Commission
approves on a final basis the rates set out in the Attachment
to this Decision for each ILEC's AT service, retroactive to 1
June 2002. |
143.
|
The Commission finds that,
consistent with Decision 2002-34,
the applicable I-X constraint should be applied to adjust the
ILECs' final 2002 rates for the AT service for each year
thereafter. |
144.
|
Accordingly, the Commission
directs each ILEC to issue, with 20 days of the date of this Decision
revised tariff pages for the AT service that reflect the Commission's
determinations in this Decision. The Commission notes that TCI filed
two Tariff Notices, Tariff Notice 494 and Tariff Notice 4182, in the
course of this proceeding. The Commission directs TCI to withdraw
these Tariff Notices within 20 days of the date of this Decision. |
|
Deferral
account issues |
|
Positions
of parties |
145.
|
The Competitors submitted that
the ILECs' compensation from their deferral accounts should be limited
to revenue losses associated with the reduction in the mark-up to
15 percent. The Competitors argued further that the amount of
compensation the ILECs received from their deferral accounts for each
of 2003 to 2005 should be reduced by the applicable annual I-X constraint. |
146.
|
Bell Canada et al. submitted
that, while Decision 2002-34 compensated
the ILECs from their deferral accounts for revenue losses attributable
to the reduction in mark-up on most Category I Competitor Services
to 15 percent, it did not appear to contemplate compensation
for revenue losses attributable to cost reductions. Bell Canada
et al. submitted that this approach was not consistent with determinations
in that decision related to the treatment of exogenous events and
to the treatment of rates at the outset of the price cap period. Bell Canada
et al. submitted further that Decision 2002-34
made allowances for rate increases required to offset the negative
financial impact of exogenous events that met the specified criteria,
including Commission directives, and as an alternative to rate increases,
contemplated compensation from the ILECs' deferral accounts. Bell Canada
et al. submitted that the level of ILEC revenues at the start of the
price cap period were the appropriate overall going-in revenues and
should not be affected by administrative initiatives. Bell Canada
et al. submitted further that, if this were not the case, the Commission
would not have made provision for adjustments due to exogenous events.
Bell Canada et al. argued, therefore, that the entire amount
of revenue losses attributable to reductions in the rates for the
AT service should be eligible for compensation. |
147.
|
TCI agreed with Bell Canada
that the total revenue loss associated with reductions to the going-in
rates for the AT service should be compensated. TCI argued that
it expected that the total revenue reduction resulting from any going-in
rate changes (including rate changes for the AT service effective
1 June 2002 that would result from the Commission's determinations
in this proceeding) would be eligible for compensation from its deferral
account. TCI argued that a decision by the Commission to deny compensation
for its total revenue reductions would amount to a retroactive decrease
in its allowed going-in revenues. |
148.
|
Bell Canada et al. and
TCI also argued that the deferral account compensation amounts associated
with reductions in rates for the AT service should not be adjusted
annually through the application of the annual I-X constraint. The
ILECs submitted that these compensation amounts were based on 31 December
2001 demand levels and the change in rates for the AT service
resulting from Decision 2002-34.
The ILECs submitted further that this compensation was a one-time
event and would have no ongoing effect on the balance of the deferral
account. |
|
Commission's
analysis and determinations |
149.
|
In Decision 2002-34,
the Commission directed the ILECs to reduce rates for Category I
Competitor Services that had a mark-up of 25 percent or more
to rates that reflected Phase II costs plus a mark-up of 15 percent.
The Commission noted this would reduce the revenues ILECs derived
from the relevant services and stated that, because these changes
resulted from policy considerations as opposed to cost reductions,
it was of the view that the ILECs should be compensated for the reduction
in revenues. The Commission considered these policy considerations
and the method of compensation balanced the interests of the customers,
ILECs and competitors. In that decision, the Commission also stated,
among other things, that the deferral account would be used to offset
the reduction in revenues caused by the reduction in mark-up on Competitor
Services. |
150.
|
The Commission notes TCI's
submission that failure to compensate for revenue reductions attributable
to cost reductions associated with provision of the AT service
would amount to a retroactive decrease in the amount of their revenues
at the commencement of the price cap period established in Decision
2002-34 and Bell Canada et
al.'s position that revenues generated by the prices in place at the
beginning of the current price cap period are the appropriate going-in
revenues. |
151.
|
The Commission notes that
the concept of going-in rates related to the objective of the initial
price cap regime to provide incumbents with a reasonable opportunity
to earn a fair return for their Utility Segments and involved establishing
the appropriate Utility Segment rates at the outset of the initial
price cap period. The Commission notes that in establishing the second
price cap regime in Decision 2002-34,
it concluded that the concept of a Utility Segment no longer had relevance
given the expanded scope of the pricing constraints the Commission
had decided to impose, as well as the introduction of a Phase II-based
subsidy requirement in 2002. In Decision 2002-34 the Commission concluded
that it was neither necessary nor appropriate to retain a reference
to ILEC Utility Segment earnings in the objectives for the next price
cap regime, since the focus of price cap regulation is prices, not
earnings. Therefore, the Commission considers that in the context
of the current price cap regime the ILECs' submissions regarding going-in
revenues are without merit. |
152.
|
Bell Canada et al.
also submitted that failure to compensate the ILECs for revenue reductions
associated AT service cost reductions would be inconsistent with
the treatment of exogenous events in Decision 2002-34.
The Commission's policy with respect to Category I Competitor
Services has been that these services should generally be priced at
Phase II costs plus a specified mark-up. The Commission considers
that revenue reductions attributable to Phase II cost reductions
are not legislative, judicial or administrative actions beyond the
control of the company, and therefore do not qualify as an exogenous
event. |
153.
|
Accordingly, consistent with
Decision 2002-34, the Commission
denies the ILECs' request to be compensated from their deferral
accounts for revenue losses attributable to cost reductions for this
service and confirms that the ILECs are to be compensated from their
deferral accounts for revenue losses attributable to the reduction
in mark-up on the AT service from 25 percent to 15 percent.
|
154.
|
With respect to the Competitors'
proposal to apply the annual I-X constraint to the amount received
by the ILECs from their deferral accounts as compensation for allowed
revenue losses, the Commission notes that the deferral account mechanism
compensates ILECs for allowed Competitor Service revenue losses by
adjusting the balances in those accounts with respect to this compensation
on a one-time basis only. The Commission notes further that the I-X
constraint is used to adjust Category I Competitor Service rates
annually in order to recognize ongoing productivity improvements realized
by the ILECs in each year of the price cap period and, as such, has
a different regulatory purpose. |
155.
|
Accordingly, the Commission
denies the Competitors' proposal to apply the I-X constraint
to the amount of the ILECs' deferral account compensation related
to the revenue losses associated with the AT rates approved in this
Decision. |
|
Secretary General |
|
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|