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Telecom Order
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Ottawa, 28 April 1999
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Telecom Order CRTC 99-378
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On 20 October 1998, Québec-Téléphone filed an application proposing
a restructuring of its local residence and business primary access
services as well as revisions to its Extended Area Service (EAS).
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File No.: Tariff Notice 232
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1.Québec-Téléphone's proposed restructuring sought to establish
a common rate applicable across its serving area for each of Residential
Individual Line Service, Business Individual Line Service, Multi-line
Business Service and Centrex Plus Service.
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2.Accordingly, Québec-Téléphone proposed to establish a common
monthly rate of $23.50 for Residential Individual Line Service,
$49.50 for Business Individual Line Service, $66.50 for Multi-line
Business Service and $46.00 for Centrex Plus Service. The proposed
Centrex Plus rate would remain subject to contract and volume discounts.
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3.In conjunction with the restructuring, Québec-Téléphone proposed
to introduce a limited number of new EAS links.
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4.Québec-Téléphone also proposed the adoption of new eligibility
criteria for EAS to match Bell Canada's (Bell) current criteria.
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5.Québec-Téléphone's application submitted that the proposed rate
restructuring and the establishment of the new EAS links were revenue
neutral.
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6.In support of its application, Québec-Téléphone cited current
industry trends in favour of simplification of service offerings
as well as the desirability of bringing rates closer to the costs
of providing service.
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7.Québec-Téléphone noted that its existing tariff structure included
two separate rate groups and a number of regional supplements. The
distance based regional supplements were added to a rate groups'
base rate to reflect each EAS link. As a result, very few of the
company's exchanges shared the same rate for local service. Québec-Téléphone
submitted that the proposed common rates would simplify the company's
dealings with its customers.
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8.Québec-Téléphone also noted that as a result of its existing
tariff structure, customers in its more rural exchanges generally
paid less for local telephone service than customers residing in
the more urban areas served by the company. Québec-Téléphone argued
that the cost of providing local service in urban areas was in fact
lower than in rural areas.
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9.Québec-Téléphone advised all customers of its proposal by way
of a separate mailing. The mailing invited customers to file comments
with the Commission. The Commission also issued Québec-Téléphone
- Rate Restructuring and Revisions to the Criteria for Extended
Area Service, Telecom Public Notice CRTC
98-36, 8 December 1998.
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10.Comments were received from 21 interveners including a number
of residential subscribers as well as the Municipalité Régionale
de Comté (MRC) de Matane, the Municipalité de Sainte-Paule, the
Municipalité de Grande-Vallée and the CLSC Mer et Montagnes. Of
the 21 interveners that submitted comments, only 3 supported the
application.
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11.Interveners opposing the application, including the MRC of
Matane, the Municipalité de Grande Vallée and the Municipalité de
Sainte-Paule who argued that Québec-Téléphone should be required
to expand the existing local calling areas to encompass all exchanges
within a given MRC prior to restructuring. They argued that a social
and economic dependence exists between these exchanges. They also
advocated the principle that subscribers paying the same rates should
receive the same level of service.
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12.The CLSC Mer et Montagnes made a similar request to have local
calling areas expanded. The CLSC Mer et Montagnes submitted that
the restructuring proposed by Québec-Téléphone would disadvantage
the more rural subscribers who, while paying the same local rate,
would still be required to pay long distance charges to access health
care providers usually situated in the more urban centres.
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13.A number of subscribers were critical of the local service
rate increases imposed on them in recent years. Other subscribers
submitted that Québec-Téléphone's restructuring was unfair to the
company's rural subscribers since they are being asked to pay the
same rate as in urban areas without benefiting from the same free
calling areas.
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14.Among the interveners who favoured the application was a municipality
who thanked Québec-Téléphone for proposing to expand their local
calling area and a residential subscriber who said the reduction
to his own local rate would possibly compensate for the recent rate
rebalancing increases. A business customer criticized the current
implicit subsidization of both rural and residential services by
urban areas and business, and supported the application since, in
his opinion, such subsidization would be lessened.
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15.In reply, Québec-Téléphone relied on Bell Canada - Revised
Criteria for Extended Area Service, Telecom Decision CRTC
88-15, 29 September 1988, where the Commission stated that "a
very substantial social and commercial dependency, and thus a strong
COI [community of interest], must be demonstrated in order to protect
the interests of the general body of EAS subscribers whose local
rates may ultimately be affected by further extension of EAS."
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16.Québec-Téléphone noted that the criteria applicable to the
company, established by the Régie des télécommunications du Québec
and continued by the Commission, were much less restrictive than
the criteria established by the Commission for Bell.
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17.Québec-Téléphone submitted that these more permissive criteria
had made its serving area one of the more generous areas from a
local free calling standpoint.
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18.Québec-Téléphone stated that it had studied all of the requests
made by the interveners and noted that in all cases except one,
the communities already had access to the regional commercial centre.
The calling patterns submitted by Québec-Téléphone showed that the
outlying exchanges communicated primarily with the regional centre
and that little calling occurred between the outlying exchanges.
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19.Québec-Téléphone submitted that the EAS proposal in its application
would result in local calling areas that include all areas to which
an important social and economic COI exists.
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20.Québec-Téléphone also noted that significant additional rate
increases would be necessary to offset the costs associated with
the establishment of MRC-wide free calling.
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21.The one exception identified by Québec-Téléphone was the Grande-Vallée
exchange which does not have free calling to the regional centre
of its MRC, namely, the Gaspé exchange. Québec-Téléphone submitted
that the link met the COI criterion, but that it failed to qualify
because the mileage criterion was exceeded by a few kilometres.
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22.Québec-Téléphone submitted that it would not have any objections
to establishing the Gande-Vallée to Gaspé link (as an exception
to the established EAS criteria) in addition to the links already
proposed by the company in this application. Québec-Téléphone however
requested that the Commission allow the company to adjust its proposed
rates to recover the costs of the links, as well as the foregone
local revenues resulting from the establishment of the link in question.
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23.The Commission notes that it has generally considered rate
group consolidation proposals in light of its policy of moving rates
closer to the costs of providing service. The Commission has generally
approved applications to consolidate rate groups provided that they
do not embody rate shock and do not result in inappropriate revenue
generation.
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24.The Commission notes that since 1 January 1997, it has ordered
rebalancing increases for Québec-Téléphone amounting to $8.25 per
month. Specifically, the Commission has ordered monthly increases
of $2.00, $3.25 and $3.00, effective 1 January of 1997, 1998 and
1999 respectively.
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25.The Commission however notes that, in conjunction with the
1997 and 1998 rebalancing increases, Québec-Téléphone was ordered
to reduce toll rates. The Commission also ordered the elimination
of "other line charges" (per minute surcharges that were applied
against toll calls originating and terminating in Québec-Téléphone's
more rural exchanges).
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26.The Commission is of the view that the proposed rate changes,
which increase local rates for some subscribers while decreasing
local rates for others, do not include increases of sufficient magnitude
to constitute rate shock.
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27.Further, the Commission is of the view that approval of this
application would not lead to inappropriate revenue generation.
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28.On the basis of the foregoing, the Commission considers that
the proposed rate changes are reasonable.
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29.In Telecom Decision CRTC
96-5, the Commission noted that there existed two-different
sets of EAS criteria for Québec-Téléphone, one for new links between
two of its own exchanges and a separate set for links with exchanges
served by Bell. The Commission at the time recognized that there
was merit in having uniform EAS criteria, but nevertheless accepted
the company's request to maintain its existing criteria.
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30.In Telecom Order CRTC
98-689, the Commission expressed the view that Québec-Téléphone
was free to propose changes to its EAS criteria should the company
be of the view that such changes were necessary.
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31.Given that the current proposal would harmonise the criteria
within Québec-Téléphone's operating area, the Commission is of the
view that approval of the revised criteria is appropriate.
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32.The Commission notes that Québec-Téléphone also made various
submissions relating to EAS cost recovery, including the possibility
of the company filing, on a yearly basis, an application to increase
local rates in order to offset both the costs as well as the foregone
revenues resulting from any new EAS links.
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33.The Commission considers that it would be premature to express
a view on Québec-Téléphone's recovery submissions in this proceeding.
The Commission would be prepared to consider the merits of such
submissions should the company develop them further and file them
as part of specific applications. The Commission would expect any
such applications to be supported by appropriate evidence.
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34.With respect to the matter of MRC-wide free calling, the Commission
notes Québec-Téléphone's arguments as well as the company's evidence
showing that the outlying exchanges communicate primarily with the
regional centre, while little calling occurs amongst the exchanges
themselves.
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35.In light of the apparent low demand, as well as the likely
requirement for additional local rate increases, the Commission
is of the view that it would not be in the interests of the general
body of subscribers to require Québec-Téléphone to implement MRC-wide
free calling throughout its operating territory without further
assessment of the costs and benefits.
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36.The Commission notes that Québec-Téléphone did not object to
establishing the Grande-Vallée to Gaspé link, provided that it were
allowed to recover the costs and foregone revenues.
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37.The Commission is of the view that the company should establish
the two-way Grande-Vallée to Gaspé EAS link. However, the Commission
is satisfied that Québec-Téléphone can absorb the costs and foregone
revenues without the need for additional rate increases.
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38.In light of the foregoing, the Commission approves the proposed
tariff revisions effective 1 June 1999. Québec-Téléphone is to implement
the Grande-Vallée to Gaspé EAS link within 90 days of the date of
this Order.
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Secretary General
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This document is available in alternative format upon request and may also be viewed at the following Internet site: http://www.crtc.gc.ca
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