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Telecom Order CRTC 2006-42
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Ottawa, 22 February 2006 |
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Société en commandite Télébec
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Reference: Tariff Notices 321
and 321A |
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2005 Price cap filing
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Background
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1. |
In Implementation of price regulation
for Télébec and TELUS Québec, Telecom Decision CRTC 2002-43,
31 July 2002 (Decision 2002-43),
the Commission established the price regulation regime applicable
to Société en commandite Télébec (Télébec) and TELUS Communications
(Québec) Inc. (collectively, the Companies). This regime includes
eight baskets or groups of services, some of which are subject to
a constraint of inflation less a productivity offset on an annual
basis (annual I-X adjustments). In order to implement this transitional
subsidy mechanism for Télébec, the Commission however suspended application
of the annual I-X adjustments applicable to the baskets of Residential
Services in non-high cost serving areas and Other Capped Services,
as well as Competitor Services. |
2. |
In Implementation of competition in
the local exchange and local payphone markets in the territories of Société en
commandite Télébec and the former TELUS Communications (Québec) Inc.,
Telecom Decision CRTC 2005-4,
31 January 2005 (Decision 2005-4),
the Commission restored, among other things, the annual I-X adjustments
that it had suspended effective 1 August 2002. |
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The application
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3. |
The Commission received an application by
Télébec on 17 June 2005, proposing to reduce certain rates for services
in the Other Capped Services basket and an amendment to its application
dated 19 December 2005. Télébec proposed that these tariff revisions
come into effect 1 August 2005. On 8 August 2005, Télébec filed economic
studies in support of its application. |
4. |
Télébec proposed revising the following
items of its General Tariff to include contract terms: |
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- item 2.1.8 - Basic Service Provided Outside the Company's
Serving Area;
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- item 2.6.3 - Access to switched automated private central network
equipped with direct access;
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- item 3.1.3 - Channels between buildings on continuous property;
and
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- item 8.9.2.6 - Integrated Services Digital Network (ISDN) Service
23B+D Premium Option - Terminating numbers.
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5. |
Télébec submitted that in order to comply
with directives concerning the 2005 price cap filing, it would have to
reduce revenues from the Other Capped Services basket by 4.9 percent,
which would equal $847,548. Télébec noted that by applying the proposed
rate reductions, the resulting reduction would be less than that amount.
Télébec therefore proposed to transfer annually to its deferral account
the amount required to satisfy the above directives, i.e., $355,851.
Télébec also proposed that the Commission review its use of the deferral
account at the next price cap update scheduled for 31 May 2006. |
6. |
For the services listed above, all of which
belong to the Other Capped Services basket, Télébec proposed introducing
contract options. The rate reduction percentage varies from 10 percent
to 82 percent based on the contract term selected (one, two, three, four
or five years). |
7. |
Télébec filed an imputation test in support
of each proposed rate reduction. |
8. |
Télébec noted that the proposed tariff
revisions, in addition to the transfer of revenue to the deferral
account, would ensure that the service band index (SBI) would not exceed
the service band limit (SBL) for the Other Capped Services basket. |
9. |
Télébec filed an update of its SBI and
SBL for the period 1 August 2005 to 31 July 2006, in consideration
of the directives in Decision 2002-43
and Decision 2005-4. |
10. |
Télébec requested that the proposed tariff
revisions take effect 1 August 2005. |
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Commission's analysis and determinations
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11. |
In Telecom Order CRTC 2006-13,
17 January 2006, the Commission approved on an interim basis Télébec's
application for the tariff revisions set out in Tariff Notices 321
and 321A, with the rates to take effect on the date of the Order. |
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Costs
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12. |
The Commission notes that for a new service
or rate reduction, the proposed rates must be supported by and comply
with an imputation test. The Commission further notes that under the
current price regulation regime, the imputation test is the accepted
method for determining whether the proposed rates would be
anti-competitive. |
13. |
The Commission finds that the proposed
rates for the services listed above satisfy the requirements of the
imputation tests. |
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Compliance with pricing
constraints established in Decision 2002-43
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14. |
In Decision 2002-43,
the Commission applied the following pricing constraints for services
in the Other Capped Services basket: |
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(i) a basket constraint based on the SBL to
be updated each year based on the annual I-X adjustments; |
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(ii) a rate element constraint limiting
rate increases for a service to 10 percent per year; and |
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(iii) to prevent an incumbent local
exchange carrier from reducing rates in more competitive areas and
increasing them in less competitive areas in the same band, a provision
stating that the rates should not be de-averaged within the band. |
15. |
The Commission finds that the proposed
tariff revisions are not sufficient to ensure compliance with the basket
constraint stipulating that the SBI cannot exceed the SBL for the Other
Capped Services basket. The Commission notes that as a remedy, Télébec
proposed to transfer revenues to its deferral account in addition to
those generated by the tariff revisions to comply with the basket
constraint. This proposal is considered below. |
16. |
With respect to the rate increase
constraint, because Télébec did not propose any price increases for
Other Capped Services, the Commission therefore finds that the
constraint limiting annual rate increases to 10 percent is not relevant. |
17. |
The Commission however finds that the
proposed tariff revisions satisfy the requirement prohibiting the
further de-averaging of the rates for Other Capped Services within the
same band. |
18. |
The Commission notes that in Decision 2002-43,
it also introduced a mechanism by which the Companies are required
to establish a deferral account. |
19. |
In view of the fact that Télébec submitted
that it is not able to propose and justify other rate reductions at
this time, the Commission agrees with Télébec's proposal to transfer
$355,851 into its deferral account each year. The Commission notes
that it ruled on the disposition of deferral accounts in Disposition
of funds in the deferral accounts, Telecom Decision CRTC 2006-9,
16 February 2006. |
20. |
In light of the above, the Commission finds
that the proposed tariff revisions, in addition to the transfer of
revenue into the deferral account, will allow Télébec to satisfy the
basket constraint requirement that the SBI cannot exceed the SBL for the
Other Capped Services basket. |
21. |
The Commission approves on a final basis
the proposed tariff revisions and directs Télébec to transfer the
amount of $355,851 to its deferral account on an annually recurring
basis. |
22. |
The Commission directs Télébec to file the
revised tariff pages. |
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Secretary General |
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This document is available in alternative
format upon request, and may also be examined in PDF
format or in HTML at the following Internet site: http://www.crtc.gc.ca
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