Telecom Order

Ottawa, 9 August 1996

Telecom Order CRTC 96-863

IN THE MATTER OF the Phase III Manual Update Reports filed by BC TEL on 27 March 1996, by Bell Canada (Bell), The Island Telephone Company Limited (Island Tel) and Maritime Tel & Tel Limited (MT&T) on 29 March 1996, by AGT Limited (AGT) and The New Brunswick Telephone Company, Limited (NBTel) on 31 March 1996, by NewTel Communications Inc. (NewTel) on 10 April 1996 and by MTS NetCom Inc. (MTS) on 17 April 1996, (collectively, the telephone companies).

WHEREAS the telephone companies filed their Phase III Manual Update reports, with explanations, in accordance with the Proposed Revisions to the Phase III Manual Update Procedure, Telecom Letter Decision CRTC 89-26, 1 December 1989 (Letter Decision 89-26), Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94-19), Review of Phase III of the Cost Inquiry, Telecom Decision CRTC 94-24, 18 November 1994 (Decision 94-24) and Implementation of Regulatory Framework - Splitting of the Rate Base and Related Issues, Telecom Decision CRTC 95-21, 31 October 1995 (Decision 95-21);

WHEREAS Unitel Communications Inc. (Unitel) filed its comments with respect to Bell and BC TEL's Update Reports on 22 April 1996 and on 8 May 1996, Unitel filed comments on MTS's Update report;

WHEREAS on 2 May, 15 May and 22 May 1996, BC TEL, Bell and MTS respectively responded to Unitel's comments;

WHEREAS on 31 May 1996, Bell and Island Tel submitted further proposed updates for inclusion in their respective Phase III Manuals for 1995;

WHEREAS Unitel commented that in the overview of BC TEL's update report, to its Central Office Equipment Switching Study (BSCC 73.005), the proposed assignment of various Central Office Equipment investment accounts to the Utility segment should in fact be assigned to both the Competitive and Utility segments since the accounts contain costs related to toll investment or have a shared functionality;

WHEREAS BC TEL responded that while the wording of the overview may leave the impression that the accounts are being assigned solely to the Utility segment, the filed draft pages relating to BSCC 73.005 make it clear that these accounts are in fact assigned to the access, local and toll broad service categories (BSCs);

WHEREAS the Commission agrees with BC TEL that the company has assigned the investment recorded in these accounts to both the Utility and Competitive segments;

WHEREAS the Commission finds that such an assignment is appropriate;

WHEREAS Unitel commented that in BC TEL's Land and Buildings Study (BSCC 73.080),
the company is proposing to assign the costs for a vacant office to the Common BSC and then, subsequently, divide the Common BSC between the Utility and Competitive segments on the basis of total operating expenses;

WHEREAS Unitel also noted that when vacant space is subsequently rented, BC TEL proposes to assign the revenues and expenses associated with that space to the Competitive Other BSC only;

WHEREAS UNITEL submitted that it is inappropriate for vacant space to be assigned entirely to the Competitive segment only at the time when it begins to generate compensatory revenue for the company;

WHEREAS Unitel further submitted that once rented, building or other space should be assigned to both the Utility and Competitive segments on the same basis as it was while still assigned to the Common BSC;

WHEREAS BC TEL responded that vacant space cannot be causally assigned to a floor space use category and therefore the initial assignment to the Common BSC is the correct methodology;

WHEREAS BC TEL further responded that where vacant space is available for rental, the revenues and costs are competitive in nature and should be assigned to the Competitive segment;

WHEREAS the Commission agrees with BC TEL that vacant space without current potential to rent should be initially assigned to the Common BSC;

WHEREAS the Commission notes that this approach is in accordance with Order and Guidelines for the Filing of Phase III Manuals by Bell Canada and British Columbia Telephone Company, Telecom Order CRTC 86-516, 28 August 1986 (Order 86-516);

WHEREAS the Commission is also of the view that BC TEL's proposed assignment of subsequently rented vacant space to the Competitive segment is appropriate, given that the associated revenues are derived and the expenses generated, in a competitive real estate environment;

WHEREAS Unitel commented that it was unclear why Bell's Tariff items 75 and 4960 - Inside wire and jacks continue to be assigned to the Utility segment since customers are now responsible for installations, rearrangements, additions, moves, repairs and maintenance of single-line inside wiring on the customer's side of the demarcation point;

WHEREAS Unitel submitted that since this is now a competitive service, it should be assigned to the Competitive segment;

WHEREAS Bell responded that tariff items 75 and 4960 refer to single-line jacks and inside wire associated with subscribers to two and four party line services who, under the present Terms of Service, are not allowed to own their own telephones, and that, therefore, it is appropriate that the rented equipment be classified as Utility;

WHEREAS the Commission considers that Bell's Tariff Items 75 and 4960 are correctly assigned to the Utility segment;

WHEREAS Unitel also commented that it was unclear why, in Bell's case, any portion of Stentor tariff item (NST 224) - Switched Call Completion and Tariff Item (NST 225) - Advantage Long Distance Plan, which are competitive long distance services, should be assigned to the Utility segment, noting that BC TEL had assigned NST 224 to the Competitive segment;

WHEREAS Bell responded that the Utility classification referred to in NST 224 and 225 relates to the provisioning of Access Arrangements under NST Item 224.4 (a)
of the Switched Call Completion Service and NST 225.3(a) for the Advantage Long Distance Plan;

WHEREAS the Commission considers that all Stentor (NST) tariffs should be classified to the same segments by each Stentor member;

WHEREAS the Commission notes that both NST 224 and 225 include rates for the provision of access arrangements;

WHEREAS the Commission is of the view that in order to capture the access component, BC TEL should revise its proposed classification of these services from the Competitive segment only to both the Utility and Competitive segments;

WHEREAS, in a letter dated 6 May 1996, Bell requested, in the absence of a decision in the proceeding announced in Customer Account Queries, Telecom Public Notice CRTC 95-55, 19 December 1995 (Public Notice 95-55), that the Commission approve, as a stop gap measure, the use of its annual study approach for the assignment of Customer Account Query expenses for the 1995 Split Rate Base results;

WHEREAS on 13 and 14 May 1996 respectively, the Canadian Cable Television Association (CCTA) and Unitel commented that it would be unreasonable for the Commission to permit Bell to assign Customer Account Query expenses for 1995 on the same basis as 1994 given the comments submitted in the Public Notice 95-55 proceeding and the Commission's past concerns with respect to the treatment of activities of a joint-use nature;

WHEREAS both CCTA and Unitel recommended an approach that would have Bell use its 1994 sampling methodology modified to allocate certain types of account queries or activities on a 50/50 basis which CCTA and Unitel stated was an approach that Bell had already undertaken and closely resembles what Bell proposed in its Public Notice 95-55 submission;

WHEREAS, in its reply of 22 May 1996, Bell stated that the methodologies proposed by CCTA and Unitel are similar to the one discussed, and rejected by the company in its Public Notice 95-55 submission, since they rely on an arbitrary 50/50 splitting of various categories of expense;

WHEREAS the Commission considers that a final determination on the future use of billing operations ratios must await final disposition in the Public Notice 95-55 proceeding;

WHEREAS the Commission considers Bell's proposed methodology to assign Customer Account Query expenses in 1995 is acceptable on an interim basis, without prejudice to its final disposition in the Public Notice 95-55 proceeding;

WHEREAS Unitel commented that in MTS's Advertising Expense Study (BSCC 75.640.02) it was not clear how any of the payments made by MTS to Stentor to cover advertising costs, which are assigned to the Competitive and Utility segments based on Split Rate Base ratios, could legitimately be assigned to the Utility segment;

WHEREAS MTS responded that its account, 631K Competitive Toll - Business, captures advertising costs for competitive toll services in addition to payments made to Stentor for advertising campaigns of both Competitive and Utility services;

WHEREAS the Commission considers that because MTS's advertising expenses contain payments made to Stentor for programs of a Utility nature, the MTS update of BSCC 75.640.02 is appropriate;

WHEREAS Unitel also commented that in MTS's Billing and Collection Expense Study (BSCC 75.640.05) the assignment of Customer Payment processing, Credit and Collection and Customer Billing Mail Room expenses is not in accordance with the 50/50 assignment to the Utility and Competitive segments as directed in Decision 95-21;

WHEREAS the Commission notes that in Telecom Order CRTC 96-862, 9 August 1996, MTS was directed to file update procedures for 1995 which assign the recording of billing information related to bill printing costs, postage, centralized mail remittance and Customer Profile information on a 50/50 basis to the Utility and Competitive segments in accordance with Decision 95-21;

WHEREAS in a letter dated 11 June 1996, the Commission advised the telephone companies that it was extending the 30 June and 30 September filing dates for their respective submissions of amended manual pages and actual 1995 SRB/Phase III results by a minimum of 45 days; and

WHEREAS the Commission will issue further directives with respect to these filing dates at the time it makes its determinations with respect to Beacon and other Broadband services -

IT IS HEREBY ORDERED THAT:

1. The proposed Phase III Update Reports filed by the telephone companies at the end of the first quarter in 1996, except for the Beacon and Broadband procedures which will be the subject of a separate Commission determination, are approved with the following modifications:

(a) BC TEL's Tariff Items NST 224 - Switched Call Completion and NST 225 - Advantage Long Distance Plan are to be assigned to both the Utility and Competitive segments;

(b) Bell's proposed methodology to assign Customer Account Queries expense to the Utility and Competitive segments for the 1995 results is granted interim approval without prejudice to a final determination in the proceeding announced in Public Notice 95-55.

2. The amended pages to the telephone companies' Phase III Manuals which are to include all updates approved in this Order that are relevant to the production of the 1995 SRB results, are to be filed on a date to be specified when the Commission issues its order with respect to the proposed Beacon and Broadband services' procedures.

3. Copies of the amended pages to the telephone companies' Phase III Manuals are to be served on their respective Phase III interested parties by the same date.

Allan J. Darling
Secretary General