November 30, 2000

Northwestel’s four-year Service Improvement Plan (SIP) is designed to provide its customers with a level of service consistent with the Commission's basic service objective for all Canadians. The program will extend single line service to over 500 unserved customers and upgrade the local access service to over 2,600 customers. The majority of the areas of underserved and unserved customers will be addressed in the first two years of the program. All customers will benefit from a higher quality of long distance service as Northwestel upgrades the toll network from analogue to digital technology.

The Commission considers access to the Internet an important priority and notes that there are a number of Internet service providers (ISPs) in the north with plans to extend Internet access to numerous communities over the next few years. The Commission will monitor the roll-out of Internet access to the communities in the far north. In 2002 the Commission will assess the extent that Internet access has been rolled out and may review the issue of Northwestel becoming the ISP of last resort.

The Commission has directed Northwestel to file annual progress reports of the four-year Service Improvement Plan. Revised estimates will be provided to the Commission in 2001 and for the next three years. Beginning in 2002 the company will be filing, annually, a detailed report that outlines the accomplishments and number of customers that benefited from the previous year’s activities. As well, the Commission will be issuing a public notice in January 2002, which will allow for further review of the SIP.

The Commission believes that the introduction of long distance competition in the north and the restructuring of local and long distance rates will result in rates for the north that are comparable to the south. For Northwestel’s residence customers, the approved 10 cent per minute off-peak rate, with a $25 maximum per month for up to 600 minutes, offers a rate structure similar to competitive rates in the south. The approved business rates are much lower than existing rates and are also comparable to southern rates. While telecommunications costs over long distances show reductions, costs to serve the north remain higher.

National competitors with large business customers who have a presence in the north, e.g., banks or those who already have facilities in Northwestel’s territory, will extend their market just to be national. Northwestel expects resale of its own facilities to be prevalent initially especially in the business market.

The Commission recognizes the uncertainty of long-distance revenue forecasts during the initial period of toll competition in the north. The Commission sees benefits from allowing Northwestel's supplemental funding to be adjusted in response to toll revenue variances in that the company's overall risk is reduced, possible over-funding is avoided, capital programs are more assured and further proceedings before the Commission may be avoided.

In order to have effective competition, the cost of telephone service needs to better reflect the underlying cost of providing it. Historically in the telephone industry, this hasn’t been the case. Technology has brought down the costs to provide long distance service, but local service typically remains priced below cost. In this decision the reduction in long distance rates will more than offset the increase in local rates for the majority of telephone users. The average total bill for the majority of customers will be lower as a result.

The supplemental funding is required to allow Northwestel to offer its customers in the north a level of service that is comparable to that enjoyed by southern Canada despite the vast geography of its territory. Not only is the extent of the network unlike anywhere else in Canada but the number of customers is so small that the necessary revenue cannot be generated within the territory. Because of the requirement to upgrade and extend the service in the north over the next several years, it is anticipated that the supplemental funding will continue to be required in the future.

The Commission believes service will improve due to the Service Improvement Plan. The remoteness of the 74 communities recognizes the reality of transportation difficulties in the north and thus allows the company more time to repair out of service troubles. However, with the additional time allowed, the Commission believes that a higher standard is appropriate and therefore 90% of the troubles are to be cleared within the revised time-frames, not 80%, as was proposed by the company. All other quality of service indicators have not changed.

Reference document: Decision CRTC 2000-746

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