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In this Decision, the
Commission determines the guidelines for the disposition of funds
remaining in the deferral accounts for the following incumbent local
exchange carriers (ILECs): Aliant Telecom Inc., Bell Canada, MTS
Allstream Inc., Saskatchewan Telecommunications, TELUS Communications
Inc., Société en commandite Télébec (Télébec), and TELUS Communications
(Québec) Inc. (collectively, the ILECs). |
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The Commission determines
that initiatives 1) to expand broadband services to rural and remote
communities and 2) to improve accessibility to telecommunications
services for persons with disabilities are appropriate uses of funds in
the deferral accounts. |
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The Commission considers
that expanding broadband services into rural and remote communities will
enhance their social and economic development, and is an effective way
to reduce the disparity that exists with urban communities. |
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The Commission considers
that accessibility to telecommunications services for persons with
disabilities is an important public policy objective and that using
funds from the deferral accounts will help provide telecommunications
services to these Canadians without discrimination. |
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The Commission directs the
ILECs (except Télébec) to file their proposals for these initiatives by
30 June 2006. |
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The Commission considers
that to ensure that funds do not continue to accumulate in the deferral
accounts, the ILECs (except Télébec) will be required to implement rate
reductions. The Commission directs these ILECs to file, by 15 May 2006,
proposed rate changes to monthly primary exchange services and optional
services for residential subscribers in non-high-cost serving areas. |
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The Commission anticipates
that Télébec will have a recurring shortfall in its deferral account and
sets out directions to address this shortfall. |
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Finally, the Commission
determines the methodology to calculate the balances in the deferral
accounts and provides preliminary estimates of the ILECs' deferral
account balances. The Commission directs each ILEC to file, by 15 May
2006, an updated deferral account schedule. |
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A dissenting opinion of
Commissioner Cram is attached. |
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Background
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1. |
In Regulatory framework
for second price cap period, Telecom Decision CRTC 2002-34,
30 May 2002 (Decision 2002-34)
and Implementation of price regulation for Télébec and TELUS Québec,
Telecom Decision CRTC 2002-43,
31 July 2002 (Decision 2002-43)
(collectively, the price cap decisions), the Commission set out the
price regulation frameworks that apply to the following incumbent
local exchange carriers (ILECs): Aliant Telecom Inc. (Aliant Telecom),
Bell Canada, MTS Communications Inc. (MTS Allstream),1
Saskatchewan Telecommunications (SaskTel), TELUS Communications
Inc. (TCI), Société en commandite Télébec (Télébec), and
TELUS Communications (Québec) Inc. (TELUS Québec)2
(collectively, the ILECs). |
2. |
In the price cap decisions, the
ILECs' services were grouped into baskets and sub-baskets, and pricing
constraints were placed on the baskets of services as well as certain
individual services. The pricing constraints applied to a basket or
sub-basket and were based, in large part, on an assessment of the extent
to which competition was sufficient to discipline prices. These price
cap decisions were intended to cover a four-year period. |
3. |
At the time the price cap
decisions were issued, the Commission stated that, among other things,
it anticipated that competition would be insufficient to discipline the
ILECs' rates for residential local services in non-high-cost serving
areas (non-HCSAs) during the price cap period. Accordingly, the
Commission considered it appropriate to subject these services to a
productivity offset (X). The Commission established a basket constraint
equal to inflation (I) less this productivity offset and applied it to
revenues in the basket of Residential Local Services in non-HCSAs. When
I was less than X, rate reductions generally would have been required to
satisfy this constraint. |
4. |
However, the Commission was
concerned that these mandated rate reductions could have had an adverse
effect on competition. The Commission considered that residential local
rate reductions that flowed from market forces would generally be
preferable to mandated rate reductions. Therefore, it introduced a
mechanism in the price cap decisions that required each ILEC to
establish a deferral account. The ILECs were directed to assign to that
account, in each year of the price cap period, an amount equal to any
revenue reduction that would otherwise be required under the I-X
constraint for the basket of Residential Local Services in non-HCSAs.
The Commission also directed the ILECs to include certain other amounts
in the deferral accounts. |
5. |
The Commission considered that
the creation of a deferral account for residential local services would
assist in achieving the price cap objective of balancing the interests
of customers, competitors, and ILECs - the three main stakeholders in
telecommunications markets. |
6. |
In the price cap decisions, the
Commission stated that an adjustment to the deferral accounts could be
made whenever the Commission approved rate reductions for residential
local services proposed by the ILECs as a result of competitive
pressures. The Commission also stated that the deferral accounts could
be drawn down to mitigate rate increases for residential service that
could result from the Commission's approval of exogenous factors or when
inflation exceeded productivity improvements. The Commission further
stated that other draw-downs could occur, for example, through
subscriber rebates or funding initiatives that would benefit residential
customers in other ways. |
7. |
In addition, the Commission
stated that it would review the amount in each ILEC's deferral account
on an annual basis, no later than the second year of the price cap
period, at the time of the ILECs' annual price cap filings. The
Commission further indicated that it intended to dispose of amounts
outstanding in the deferral accounts that had accrued during the
previous year, beginning in the second year of the price cap period.3
The Commission indicated that it intended to clear these amounts in a
manner that contributed to achieving its objectives for the price
regulation frameworks. |
8. |
The Commission initiated a
proceeding to address the outstanding amounts in the deferral accounts
in Review and disposition of deferral accounts for the second price cap period,
Telecom Public Notice CRTC 2004-1,
24 March 2004 (Public Notice 2004-1).
In Public Notice 2004-1,
the Commission stated that it would direct specific uses for amounts
from the first two years of the price cap period and that it might
direct uses for future amounts in each ILEC's deferral account. |
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Process
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9. |
The Commission received
submissions from each of the ILECs; ARCH: A Legal Resource Centre for
Persons with Disabilities (ARCH); the British Columbia Public Interest
Advocacy Centre (BCOAPO et al.); Call-Net Enterprises Inc. (Call-Net);4
the Canadian Association of the Deaf (CAD); the Canadian Cable
Television Association (the CCTA);5
the Public Interest Advocacy Centre, the Consumers' Association of
Canada, the National Anti-Poverty Organization, and l'Union des
consommateurs (collectively, the Consumer Groups); Microcell
Telecommunications Inc., on behalf of Microcell Solutions Inc.6
and Inukshuk Internet Inc. (Microcell); Rothschild & Co. on behalf of
RipNET Limited (RipNET); and Xit telecom inc., on behalf of itself and
Xittel telecommunications inc. (Xit telecom). |
10. |
Other parties that participated
in the proceeding, by providing comments and/or responding to
interrogatories, included: Barrett Xplore Inc. (BXI); Bragg
Communications Inc., carrying on business as EastLink (EastLink);
Industry Canada; the Ministry of Economic Development and Trade on
behalf of the Government of Ontario (the Government of Ontario);
NetWork B.C.;7
and Telesat Canada (Telesat). |
11. |
The Commission also received
comments from Anishinabek First Nations in Ontario/the Union of Ontario
Indians; the Canadian Centre for Emergency Preparedness; the Canadian
Red Cross; Elginconnects, a subsidiary of the Elgin Community Futures
Development Corporation; Raymond Mailhot; the Ontario Chamber of
Commerce; Public Safety and Emergency Preparedness Canada; and Chris and
Marie Stark. |
12. |
Parties filed comments at
various stages of this proceeding, with final reply comments being filed
on 27 June 2005. |
13. |
In an application dated 2
December 2003, Bell Canada requested approval to use funds in its
deferral account to expand its digital subscriber line (DSL) footprint.
The Commission suspended Bell Canada's application pending the
commencement of this proceeding. |
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Overview of parties' proposals
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14. |
The Commission received more
than 50 proposals from 16 parties regarding the disposition of the funds
in the deferral accounts. It has assigned the proposals to seven broad
categories: broadband service expansion, proposals to improve
accessibility to telecommunications services, price reductions,
proposals primarily benefiting competitive local exchange carriers
(CLECs), network improvements, cost recovery, and miscellaneous
proposals. |
15. |
A significant number of
proposals focused on the expansion of broadband services to areas that
did not have access to high-speed Internet service. Bell Canada, TCI,
the CCTA, Microcell, and RipNET submitted proposals that fit within this
category. Several other parties expressed support for using the funds in
the deferral accounts in this manner. |
16. |
Despite the widespread support
for broadband expansion, opinions differed regarding how this should be
achieved. Some parties suggested using the deferral accounts to fund
only backbone facilities, while others advocated using them to fund both
backbone and access facilities. Bell Canada and TCI proposed to recover
from the deferral accounts only the uneconomic portion of the initiative
to expand broadband services. The CCTA proposed that the deferral
accounts cover all costs to build a backbone network and that service
providers that committed to providing broadband access services in
unserved communities be allowed to use the network without additional
charge. Some parties favoured employing a competitive bidding process to
determine who should build the facilities. |
17. |
With respect to submissions
assigned to the category of proposals to improve accessibility to
telecommunications services, ARCH proposed to create a fund to eliminate
discrimination faced by persons with disabilities, while CAD proposed a
variety of accessibility programs for deaf users, which it noted
included hard-of-hearing consumers and those with serious speech
disabilities who could not use, or had difficulty using, a standard
telephone. TCI proposed to create a bill payment assistance program and
to provide public telephone cards for people without phones. BCOAPO et
al. proposed that voicemail be offered free to several economically
disadvantaged groups of consumers. Several parties suggested that Call
Screen service be offered free of charge. |
18. |
Proposals assigned to the price
reductions category included, for example, Aliant Telecom's request for
compensation for rate reductions due to competitive pressure; Bell
Canada's request for price reductions to a number of its residential
optional local services; and the Consumer Groups' and BCOAPO et al.'s
proposals for consumer refunds. |
19. |
With respect to submissions
assigned to the category of proposals that would primarily benefit
CLECs, Call-Net proposed funding activities such as implementing on-line
access to ILEC operational support systems (OSS), implementing revisions
to the Canadian Local Ordering Guidelines (C-LOG), and upgrading the
electronic file transfer system. MTS Allstream proposed that the costs
of new initiatives involving system and infrastructure changes that
directly supported competitive entry and greater consumer choice be
recovered as draw-downs from its deferral account. TCI proposed to
develop or improve systems that would enhance competitors' interface
with TCI's delivery systems and to develop the interface required to
provide CLECs with access to TCI's OSS. |
20. |
Proposals assigned to the
network improvement category included, among other things, several
suggestions to upgrade enhanced 9-1-1 (E9-1-1) service and message relay
service (MRS); Bell Canada's suggestion to recover a portion of the
costs associated with upgrades to support the High Probability of Call
Completion feature in its network; and TCI's proposed network
modernization initiative. |
21. |
The following proposals, among
others, were included in the cost recovery category: Aliant Telecom's
requests to recover costs associated with damage caused by Hurricane
Juan and to mitigate losses stemming from several of the Commission's
decisions; Call-Net's proposal to fund operating costs associated with
various industry consortia; and MTS Allstream's request for compensation
for revenue loss associated with deferred rate increases. |
22. |
Proposals assigned to the
miscellaneous category included, for example, Call-Net's proposal to
implement a national voice information system and TCI's proposal to fund
the replacement of fuel storage systems that did not meet appropriate
industry standards. |
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Objectives and criteria for the disposition of funds in the deferral
accounts
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23. |
The Telecommunications Act
(the Act) seeks to ensure, among other things, that Canadians have
access to reliable telephone and other telecommunications services at
reasonable prices. The Commission notes that section 7 of the Act sets
out the Canadian telecommunications policy objectives and that in this
proceeding, as in others, the Commission is obliged to exercise its
powers with a view to implementing those objectives. The Commission
notes, further, that the objectives set out in the price cap decisions
are derived from the objectives set out in section 7 of the Act. |
24. |
In the price cap decisions, the
Commission stated that the deferral accounts were to be cleared in a
manner that contributed to achieving the Commission's objectives for the
current price cap period, namely: |
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(a) to render reliable and
affordable services of high quality, accessible to both urban and rural
area customers; |
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(b) to balance the interests of
the three main stakeholders in telecommunications markets (i.e.
customers, competitors and incumbent telephone companies); |
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(c) to foster facilities-based
competition in Canadian telecommunications markets; |
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(d) to provide incumbents with
incentives to increase efficiencies and to be more innovative; and |
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(e) to adopt regulatory
approaches that impose the minimum regulatory burden compatible with the
achievement of the previous four objectives. |
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In Public Notice 2004-1,
the Commission indicated that parties should use these objectives
as a guide when preparing their submissions. |
25. |
In filing their proposals, many
parties addressed these objectives. With respect to the objective of
balancing the interests of the stakeholders, most parties emphasized two
issues for consideration: the requirement for competitive neutrality
between ILECs and competitors, and who should benefit from the
disposition of funds that remained in the deferral accounts. |
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Competitive neutrality
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Positions of
parties |
26. |
Some parties raised the
principle of competitive neutrality in relation to the objectives set
out above and the disposition of funds in the deferral accounts. |
27. |
The CCTA submitted that the
competitive neutrality concept was a logical and necessary extension of
the objectives of the Act and the Canadian telecommunications policy
objective "to enhance the efficiency and competitiveness, at the
national and international levels, of Canadian telecommunications." |
28. |
The CCTA submitted that the funds
in the ILECs' deferral accounts should be used in a manner that was
competitively neutral. It argued that a competitor or group of competitors
should not benefit from an artificial advantage created through the
use or distribution of the funds in the deferral account. The CCTA
also submitted that the use of the deferral accounts should be competitively
neutral, even though this was not one of the objectives explicitly
identified in Public Notice 2004-1
as a factor to consider when developing proposals. |
29. |
Aliant Telecom submitted that
the Commission had not stated anywhere in Public Notice 2004-1
that any proposal to be funded from the ILEC deferral accounts must
be "competitively neutral." Aliant Telecom also submitted
that even though the Commission had not made competitive neutrality
a requirement for deferral account funding, one of the objectives
of the second price regulation regime was to balance the interests
of the various stakeholders. |
30. |
The principle of competitive
neutrality was also raised by many other parties when presenting their
proposals to dispose of the funds in the deferral accounts or when
providing comments regarding the evaluation and implementation of
specific proposals. While the principle of competitive neutrality was
raised in the discussion of various submissions regarding rebates and
price reductions, most parties considered this principle to be very
important with respect to the proposals for the expansion of broadband
services. Parties' specific comments on the various proposals are
summarized later in this Decision. |
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Commission's
analysis and determinations |
31. |
The Commission notes that,
based on parties' comments in this proceeding, the principle of
competitive neutrality was an important factor in guiding the
preparation of their respective proposals, as well as their evaluations
of the other parties' proposals – in particular, proposals for the
expansion of broadband services. |
32. |
The Commission considers that
competitive neutrality is a principal part of the objectives set out in
the price cap decisions and should be balanced against all relevant
factors when applying these objectives to the evaluation of the
proposals. |
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Who should benefit from the remaining funds in the deferral
accounts?
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Positions of
parties |
33. |
The ILECs submitted that the
majority of the funds disbursed to date from the deferral accounts had
benefited competitors. In general, they submitted that a balanced
approach would require that residential customers also derive certain
direct immediate benefits from these funds. |
34. |
ARCH submitted that any funds
spent must be applied to meet the interests of all customers, including
persons with disabilities. BCOAPO et al. and CAD were of the view that
it would be inappropriate to use funds in the deferral accounts to
provide further benefit to CLECs. BCOAPO et al. and the Consumer Groups
were of the view that funds accumulating in the deferral accounts should
be restored to residential subscribers. |
35. |
Call-Net submitted that the
greatest portion of the funds should be disbursed to provide benefits to
subscribers in non-HCSAs that had contributed the greatest portion to
the deferral accounts through forgone rate reductions. Call-Net argued
that proposals that extended the benefits of competition to these same
subscribers should be implemented. It submitted that the ILECs had
already reaped significant benefits since the deferral accounts had been
used to fully compensate them for mandated rate reductions to Competitor
Services. |
36. |
The CCTA submitted that the
Commission's treatment of the funds in the deferral accounts to date
supported the view that neither the ILECs nor consumers had a
predetermined claim on them. |
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Commission's
analysis and determinations |
37. |
The Commission notes that almost
all of the draw-downs from the deferral accounts to date have been
applied to reduce rates for Competitor Services, which has resulted
in lower costs for competitors. The Commission also notes that the
ILECs that reduced these rates were compensated by draw-downs from
the deferral accounts, in accordance with Decision 2002-34.
The Commission considers that funding proposals that primarily provide
further reductions to Competitor Services rates or other benefits
to competitors would fail to appropriately balance the interests of
all stakeholders. |
38. |
Accordingly, the Commission
considers that, based on an overall balanced approach among the three
main stakeholders, residential customers should primarily benefit from
the funds remaining in the deferral accounts. |
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Conclusions
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39. |
In light of the above, the Commission,
in its evaluation of the proposals in the following sections,
has used the objectives set out in the price cap decisions and
reiterated in Public Notice 2004-1.
The Commission has placed more emphasis on the principle of competitive
neutrality in the evaluation of the various proposals, where applicable,
and on proposals that primarily provide benefits to residential subscribers
in order to achieve an overall balance among stakeholders. |
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Other considerations
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40. |
In addition to their comments
on the objectives for the disposition of funds in the deferral accounts,
parties raised two other related matters: 1) whether funds from the
deferral accounts should be allocated to national programs or applied
only within each ILEC territory, and 2) the need to clear the balances
and eliminate the deferral accounts. These matters are addressed below. |
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Funding of national programs
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Positions of
parties |
41. |
While some parties suggested
that the Commission could allocate funds in the deferral accounts to
activities that were national in scope, the majority of parties,
including the ILECs, disagreed with this approach. |
42. |
In general, the ILECs argued
that funds in their deferral accounts were paid by their customers and
should benefit those same customers. They further argued that section
46.5 of the Act only provided the Commission with the statutory
authority to create a fund to support continuing access by Canadians to
"basic" telecommunications services. |
43. |
Call-Net submitted that it was
reasonable that subscribers who funded the deferral account in a
particular ILEC territory should receive most of the benefit from the
disposition of that account. It submitted, however, that the Commission
could contemplate national projects that would benefit subscribers
throughout the country and suggested that it would be appropriate to
draw down proportionately from each of the ILECs' deferral accounts for
these projects. |
44. |
Microcell supported allocating
a portion of each ILEC's deferral account directly to Industry Canada's
Broadband for Rural and Northern Development (BRAND) program and/or the
National Satellite Initiative (NSI), since it considered that
accumulated surpluses in the deferral accounts should be dedicated to a
competitively neutral national subsidy program to promote deployment of
broadband facilities in unserved and underserved regions. |
45. |
The CCTA submitted that there
was merit to distributing the benefits of its broadband proposal
nationally since this would ensure that communities selected were not
constrained by the availability of funds in the deferral account in a
specific ILEC territory. The CCTA acknowledged, however, that there
might be constraints on the Commission's statutory authority to dispose
of funds on a national basis. |
46. |
BCOAPO et al., the Consumer
Groups, and RipNET objected to using funds in the deferral accounts as a
revenue source for projects that were national in scope. They submitted
that deferral account monies should be used to benefit consumers
residing in the ILECs' territories since these consumers had contributed
to create the deferral accounts. |
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Commission's
analysis and determinations |
47. |
Section 46.5 of the Act
states: |
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The Commission may require any
telecommunications service provider to contribute, subject to any
conditions that the Commission may set, to a fund to support continuing
access by Canadians to basic telecommunications services. |
48. |
The Commission notes that the
price cap decisions did not establish a collective or single national
deferral account to which all ILECs would contribute, nor did the price
cap decisions contemplate applying funds outside of the ILEC territory
in which each account was created. |
49. |
The Commission considers that
since most of the funds in each ILEC's deferral account flow from the
fact that residential subscribers in that ILEC's territory did not
benefit from lower local service rates, it would be inappropriate to
have these funds benefit customers outside of that ILEC's territory. The
Commission also considers that the ILECs' deferral accounts are not
funds that would fall within the scope of section 46.5 of the Act since
they were not created to support continued access to basic
telecommunications services and cannot be re-characterized as such.
Rather, they are an integral part of the Commission's framework for
ensuring that rates charged by Canadian carriers for telecommunications
services are just and reasonable. |
50. |
In light of the foregoing, the
Commission determines that draw-downs from each ILEC's deferral account
must be applied within its own territory. |
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Clearing balances and closing the deferral accounts
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Positions of
parties |
51. |
Several of the ILECs were of
the view that continuing to add funds to the deferral accounts would not
be appropriate and that the Commission should eliminate the deferral
accounts. |
52. |
MTS Allstream submitted that
the Commission should consider closing out each ILEC's deferral account
as of the end of the fourth year of the current price cap period. The
company suggested that the deferral account mechanism had failed as an
efficient means of addressing regulatory adjustments and that the length
and complexity of the current proceeding was testament to that fact. It
also suggested that the deferral account mechanism had failed to
mitigate any regulatory or financial market uncertainty. |
53. |
Bell Canada indicated that it
supported MTS Allstream's view that, in essence, the deferral account
mechanism should be eliminated. It submitted that should the Commission
determine that this proposal had merit, it would not object to the
current proceeding addressing the balances in the ILECs' deferral
accounts at the end of the third and fourth price cap years, as MTS
Allstream had suggested. Bell Canada submitted that adding to the
current amounts in the deferral accounts could only exacerbate the
situation. In Bell Canada's view, there was already sufficient
information on the record of the proceeding to allow the Commission to
render a determination on what initiatives should be put in place to
address the balances at the end of the third and fourth price cap years. |
54. |
SaskTel also supported MTS
Allstream's proposal to close the deferral accounts. It submitted that
having potentially large sums of money with no specific stated purpose
accumulating in the accounts resulted in inefficiencies and
uncertainties that were not consistent with the minimum regulatory
burden objective of the current price regulation framework. |
55. |
The CCTA submitted that MTS
Allstream's proposal was self-serving and benefited only the ILECs, to
the detriment of consumers and competitors. The CCTA further submitted
that the deferral account mechanism was a fundamental component of the
current price regulation regime and the pricing of non-HCSA residential
local services, and that changing these elements of the current price
regulation regime, as proposed by MTS Allstream, would fundamentally
alter the existing price regulation regime and the balance achieved by
the Commission in establishing that regime. |
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Commission's
analysis and determinations |
56. |
The Commission indicated in the
price cap decisions that it intended to dispose of amounts outstanding
in the deferral accounts. Further, the Commission indicated in Public
Notice 2004-1
that it would direct specific uses for amounts from the first two
years of the price cap period and might direct uses for future amounts
in each ILEC's deferral account. |
57. |
The Commission notes that the
current price regulation regimes were scheduled to end for Aliant
Telecom, Bell Canada, MTS Allstream, SaskTel, and TCI on 31 May 2006,
and for Télébec and TELUS Québec on 31 July 2006. In Extension
of the price regulation regime for Aliant Telecom Inc., Bell Canada,
MTS Allstream Inc., Saskatchewan Telecommunications and TELUS Communications
Inc., Telecom Decision CRTC 2005-69,
16 December 2005, and Extension of the price regulation regime
for Société en commandite Télébec and TELUS Communications (Québec)
Inc., Telecom Decision CRTC 2005-70,
16 December 2005, the price regulation regimes were extended
without changes for one year. |
58. |
The attachment to this Decision
provides preliminary estimates of the deferral account balances as of
the end of the fourth year of the current price cap period in 2006. The
Commission notes that the deferral account balances are expected to be
very large for some ILECs. It also notes the concern that allowing funds
to continue to accumulate in the accounts would create inefficiencies
and uncertainties. |
59. |
In light of the above, the
Commission considers that the continued accumulation of funds in the
deferral accounts during the one-year extension period, without further
disposition, would result in unnecessary uncertainty for stakeholders. |
60. |
Accordingly, the Commission
considers it appropriate not only to provide directions on the
disposition of all the funds that will have accumulated in the ILECs'
deferral accounts by the end of the fourth year of the price cap period
in 2006, but also to provide directions to address amounts recurring
beyond this period in order to prevent further accumulation of funds in
the deferral accounts. The Commission will provide directions and
guidelines for disposing of these amounts later in this Decision. |
61. |
The Commission considers that
the issue raised by parties regarding eliminating the deferral account
mechanism is beyond the scope of this proceeding. |
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Evaluation of proposal categories
|
62. |
The Commission's evaluation
of the various categories of proposals is set out in the following
sections. |
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Broadband service expansion
|
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Positions of
parties |
63. |
Bell Canada submitted that
broadband services had been identified in various studies and policy
analyses as a critical component of infrastructure development for the
future. In this regard, the company cited a recent report by the
National Selection Committee (NSC) for the BRAND program, in which the
NSC expressed the view that both developed and developing countries saw
broadband as essential infrastructure for achieving goals such as
creating jobs, enhancing productivity and competitiveness, building
stronger societies, achieving long-term sustainable economic
development, maintaining cultural diversity, and improving national
security. |
64. |
Bell Canada also submitted that
broadband connections in a community would enable households,
businesses, educational institutions, hospitals, and governments at all
levels to leverage the power of information technologies to achieve
numerous goals. |
65. |
Bell Canada suggested that
households could use broadband services for educational, informational,
transactional, and other purposes, and that for remote households these
connections became a powerful tool for overcoming the disadvantages
normally associated with remoteness. It noted that educational
institutions could draw upon the vast array of information available on
the Internet for research and other purposes as well as to develop
distance learning applications, and that health organizations had
developed tele-health applications whereby consultations, diagnostics,
and other information could be made available – saving time and travel
for all participants. The company noted, further, that governments could
provide many basic services over the Internet and facilitate
communications to the public about other government services by
providing this information on websites. Bell Canada submitted that for
each of these sectors, access to broadband services had demonstrated a
powerful capacity to allow organizations and households to attain
objectives more effectively and efficiently. |
66. |
Bell Canada submitted that
while broadband had quickly become pervasive in urban areas, its
deployment in rural areas faced significant challenges arising from the
dispersion of rural residents over a very large geographic area. Bell
Canada noted that using the funds in the deferral accounts to extend the
availability of broadband services to areas where such services were not
currently available, and would not be made available in the longer term
without economic incentives, had been the theme of many parties'
submissions. |
67. |
TCI proposed to extend
higher-speed backbone facilities to rural and remote areas of
British Columbia that did not currently have the capability to access
high-speed services. The company submitted that this broadband
initiative would assist the Government of British Columbia in meeting
its goal of bridging the digital divide within the province and the
federal government in meeting its objective to expand broadband access
in rural and remote communities in Canada. TCI further submitted that
this initiative also directly addressed and furthered Parliament's
telecommunications policy objectives as found in subsections 7(a), 7(b),
and 7(h) of the Act. |
68. |
The CCTA submitted that
customers, competitors, and ILECs would benefit from the use of the
funds in the deferral accounts to finance the roll-out of broadband
services, since these services would bring Canadians closer together,
strengthen rural communities, help reduce the isolation of rural and
remote communities and enhance their economic and social development,
and enable all service providers to share facilities while engaging in
facilities-based competition. |
69. |
Microcell submitted that ready
access to broadband Internet services was widely recognized across
Canada and around the world as a vital enabler of economic and community
development in the new century. RipNET submitted that it was in the
public interest to build the facilities needed to provide high-speed
broadband and other telephony services to low-density rural and remote
communities. Telesat submitted that broadband expansion to all regions
of Canada was a laudable public policy objective, and that using funds
from the deferral accounts for this purpose was appropriate and
beneficial. |
70. |
SaskTel noted that Internet
protocol (IP)-based technologies had the potential to greatly enhance
the ability of persons with disabilities to use existing and new
telecommunications services. However, SaskTel submitted that the
expansion of broadband services into non-economic areas was not an
industry obligation, and that the federal government should continue to
take a leadership role in the success of this national endeavour. Bell
Canada acknowledged SaskTel's comments regarding the potential of
IP-based technologies to assist persons with disabilities and submitted
that implementation of its broadband proposal would facilitate the
development of such applications. |
71. |
The Consumer Groups were of the
view that, while some benefits of broadband services had the character
of a public good and might benefit the user community at large, the
overlap between those who financed the deferral accounts and those who
would benefit from them was likely very limited. |
72. |
MTS Allstream indicated that it
was generally opposed to the subsidization of broadband services through
the use of funds in the ILECs' deferral accounts. The company submitted
that if funding were to be allocated to the subsidization of broadband
services in rural and remote areas, it was not clear where the
Commission's role and responsibility would start and stop, especially
given the many existing federal and provincial programs that were
designed for the same purpose. |
|
Commission's
analysis and determinations |
73. |
Canada's vast geography and
relatively dispersed population makes telecommunications an essential
link, both socially and economically, in the everyday life of Canadians.
It provides the foundation for Canada's participation in the global
information market and greater opportunities for Canadians to
participate in the "new economy." |
74. |
There has been a significant
shift towards high-speed Internet and broadband access over the past
several years. Although Canada is a global leader in the deployment of
broadband infrastructure, it ranked sixth in June 2005 in terms of
broadband penetration rate per 100 inhabitants when compared to the more
than 30 member countries of the Organization for Economic Co-operation
and Development (OECD), slipping from its second-place standing in
December 2003. |
75. |
Broadband service is available
to most Canadians living in urban areas; however, the same cannot be
said of those living in rural and remote communities. The Commission
notes that one of the objectives set out in the price cap decisions was
to "render reliable and affordable services of high quality, accessible
to both urban and rural area customers," an objective that was, in turn,
derived directly from section 7(b) of the Act. The Commission considers
that expansion of broadband services is an initiative that would meet
this objective since it would improve the quality of telecommunications
services to customers, particularly in those communities. |
76. |
The Commission further
considers that the social and economic development of rural and remote
communities would be enhanced through the establishment of broadband
services. In addition, the Commission considers that committing funds in
the deferral accounts to assist in the expansion of broadband services
would be an effective way to reduce the disparity that exists between
urban communities and most rural and remote communities. |
77. |
The Commission notes that some
parties have indicated that IP-based technologies, accessed via
broadband, could enable persons with disabilities to use existing and
new telecommunications services. The Commission considers that increased
broadband service availability would also promote community development
by providing access to the same services and products for all
subscribers, including persons with disabilities and those living in
isolated areas. |
78. |
The Commission agrees that
considerable benefits would accrue to subscribers from the greater
availability of broadband services, such as expanding Canadians'
capacity to access, create, communicate, and share information,
knowledge, and entertainment. Other benefits to subscribers could
include improved access to health care, education, and electronic
services, and the potential for enriched relationships between
individuals and among communities. |
79. |
The Commission notes that the
federal and provincial governments have initiated or participated in
several broadband expansion projects over the past few years. The
Commission considers that subsidizing broadband expansion through the
funds in the deferral accounts would provide an important complement to
existing government initiatives to extend broadband services to a
greater percentage of the population. |
80. |
In light of the above, the
Commission concludes that enabling Canadians to have access to broadband
services, wherever they live, is an important goal. The Commission
therefore concludes that expansion of broadband services is an
appropriate use of the funds remaining in the deferral accounts.
Guidelines for the implementation of this initiative are provided later
in this Decision. |
|
Proposals to improve accessibility to telecommunications services
|
|
Positions of
parties |
81. |
Parties' submissions in this
category included proposals to improve accessibility to
telecommunications services for persons with disabilities, including
those with hearing, speech, and vision disabilities, as well as
economically disadvantaged subscribers. |
82. |
ARCH and CAD submitted that the
funds in the deferral accounts should be used to fund initiatives to
remedy and prevent discrimination against persons with disabilities in
their use of telecommunications products and services. They submitted
that Canadian law required that telecommunications services be provided
in a non-discriminatory manner and that this obligation was based on the
Act, the Canadian Human Rights Act (the CHRA), and the
Canadian Charter of Rights and Freedoms (the Charter). |
83. |
ARCH submitted that there had
been a lack of attention to the barriers faced by persons with
disabilities such as speech, mobility, agility, pain, learning, memory,
and intellectual disabilities. In ARCH's view, it was essential that the
Commission provide direction that all barriers in telecommunications
services should be removed. |
84. |
CAD submitted that the funds in
the deferral accounts should be used to correct a wide range of
discriminatory situations and that this could be done with minimal, if
any, hardship to everyone involved. |
85. |
Chris and Marie Stark requested
that the Commission direct that part or all of the money in question be
used to enhance equipment and service usability for persons with
disabilities in general, and for persons who were blind in particular. |
86. |
Bell Canada submitted that ARCH
and CAD had overstated the Commission's legal obligation to address
discrimination, to the exclusion of all other priorities. TCI argued
that the invocation of the Charter and the CHRA by ARCH and CAD
did not extend the Commission's jurisdiction to deal with the funds
currently in the deferral accounts. |
87. |
Bell Canada acknowledged that
promoting accessibility was an important public policy objective and
indicated that it was committed to working with consumers with
disabilities to improve access both within and outside of the deferral
account process. The company noted that it had already initiated and
been party to a number of projects that focused on improving the
accessibility of telecommunications products and services for consumers
with disabilities. Bell Canada submitted that when balancing ARCH's and
CAD's proposals against the full range of other proposals, the
Commission should consider the activities the company had already
undertaken to ensure that persons with disabilities had equal and full
access to telecommunications products and services. |
88. |
MTS Allstream submitted that,
while it thought the objectives of ARCH's and CAD's proposals to be
laudable, they were too ill-defined to be considered as feasible
deferral account draw-downs. It also submitted that to the extent that
further study and consultation was required to determine what measures
might be necessary and feasible in order to alleviate existing barriers
faced by persons with disabilities, funding for such activities should
come from sources other than the ILECs' deferral accounts. |
89. |
SaskTel indicated that it had a
special needs program that offered a wide variety of telephone equipment
for customers with sight, hearing, motion, or speech limitations. The
company also referred to the ongoing relationship it had with the
disabled community in Saskatchewan to address their specific needs and
provide them with the most advanced communications services available.
However, the company was of the view that issues of public good or
social policy associated with ARCH's and CAD's requests were best left
to the government for evaluation in consultation with the general
public, and thus suggested that it was premature to allocate funds from
the deferral accounts to these initiatives. |
90. |
TCI noted that it had
undertaken a number of initiatives to provide services for persons with
disabilities and that it strived to continually improve all of its
products and services, including services for deaf subscribers. The
company submitted that should the Commission determine that there was a
requirement to further address access for subscribers with disabilities,
it would be willing to examine alternative sources of funding other than
the deferral accounts. In TCI's view, such funding initiatives would be
required of all telecommunications service providers, not just the
ILECs. |
91. |
The Consumer Groups submitted
that while the public policy objectives of ARCH's proposals were
praiseworthy, they were concerned about the assumption that funds
contributed by residential subscribers from over-collection of rates
were available for purposes independent of contributor benefit. |
92. |
TCI submitted three proposals
to enhance affordability and universal service: a bill payment
assistance program to help low-income customers; public telephone cards
for the homeless and people without telephone service in their homes;
and free Call Screen service. TELUS Québec also proposed free Call
Screen service. Under TCI's proposal, the draw-down from its deferral
account for Call Screen service would be calculated based on forgone
revenue for the service plus the Phase II cost for customers who chose
to add Call Screen to their local service. |
93. |
BCOAPO et al. proposed that all
residential customers, regardless of geographic location, should be
provided with Call Screen service and that recipients of certain
government assistance benefits should be provided with free voicemail
service. BCOAPO et al. considered that the deferral accounts should be
drawn down by the marginal cost to the ILEC for providing these
services. |
94. |
BCOAPO et al. submitted that
the Commission should give conditional approval to TCI's bill payment
assistance program and public telephone card proposals, but that it
should require TCI to file and receive approval for a proposed mechanism
to administer the programs. However, BCOAPO et al. was of the view that
it was inappropriate to permit TCI to draw down its deferral account by
the amount of forgone revenue attributable to the company's free Call
Screen service program. CAD agreed with BCOAPO et al.'s position. The
Consumer Groups suggested that it was uncertain whether public demand
required TCI's proposed free Call Screen service program. Microcell
submitted that the provision of Call Screen services had been a
long-standing demand on the part of numerous social agencies and nothing
in this proceeding had changed that demand in any way, nor had any issue
been raised in the proceeding that would merit such a proposal on the
part of TCI. |
95. |
Call-Net indicated that TCI's
three initiatives had merit, but raised concerns about competitive
neutrality. The CCTA submitted that TCI's and TELUS Québec's proposals
to offset lost revenues by giving away services would largely result in
the funds being returned to the ILECs as revenue replacement, would not
be competitively neutral, and would provide the ILECs with the added
benefit of increased consumer and general public goodwill. Microcell
argued that TCI's three proposals would provide it with a significant
competitive advantage, in that it would allow the company to access
funds it would not normally have in order to continue to provide service
to customers with doubtful payment records. |
96. |
Bell Canada questioned whether
it was appropriate to assume that all residential subscribers, or a
subset identified by BCOAPO et al., were interested in the free services
proposed by BCOAPO et al. The company submitted that, as with exogenous
adjustments, if the Commission were to mandate the ILECs to implement an
initiative that met the criteria for exogenous treatment, then the ILECs
should be permitted to recover the entire loss of revenue associated
with those initiatives. |
|
Commission's
analysis and determinations |
97. |
The Commission considers that
insufficient evidence was provided in this proceeding to warrant the
provision of discretionary services, such as Call Screen and voicemail
services, at no charge. The Commission also considers that these types
of proposals could provide the ILECs with an undue competitive
advantage. Accordingly, the Commission determines that proposals to fund
discretionary services at no charge should not be funded from the
deferral accounts. |
98. |
The Commission notes that in
Bill management tools – Debt repayment plans, Telecom Decision
CRTC 2005-38, 29 June 2005, the
Commission directed most ILECs to conduct an 18-month pilot program
regarding bad debt repayment. Since these pilot programs are just
starting, the Commission determines that it would not be reasonable
to fund bill payment assistance proposals at this time. |
99. |
The Commission notes that the
ILECs generally supported the public policy objective of improvement of
accessibility to telecommunications services for persons with
disabilities and referred to their past activities and/or commitment to
working with customers with disabilities to address their needs.
However, most of the ILECs submitted that the deferral accounts should
not be used to fund such initiatives. |
100. |
The Commission considers that
funding programs aimed at improving accessibility to telecommunications
services for persons with disabilities would be consistent with section
7 of the Act, and particularly sections 7(b) and 7(h). The Commission
further considers that these programs would provide direct benefits to
residential subscribers. |
101. |
In light of the above, the
Commission concludes that proposals that focus on improving
accessibility to telecommunications services for persons with
disabilities are an appropriate use of the funds remaining in the
deferral accounts. Guidelines for the implementation of this initiative
will be provided later in this Decision. |
|
Price reductions
|
102. |
The Commission notes that while
parties may not have distinguished between "rebates" and "rate
reductions" in their comments, it has subdivided the category of "price
reductions" into these categories since they would require different
treatments from the deferral accounts, as explained below. |
|
Rebates
|
|
Positions of
parties |
103. |
According to the Consumer
Groups, the best way to draw down the deferral account balances was via
consumer refunds. They submitted that the disposition of the funds must
benefit the customers who had created the deferral accounts by paying
rates that were in excess of the Commission's determination of what was
just and reasonable. In support of their position, the Consumer Groups
presented evidence prepared by Dr. Johannes Bauer. |
104. |
BCOAPO et al. submitted that
the funds accumulating in the deferral accounts were contributed by
overcharging residential consumers for local service. It proposed that
the balance of funds in the deferral accounts, after funding certain
initiatives, should be rebated to residential customers in non-HCSAs via
a lump-sum credit or rate reduction. |
105. |
Bell Canada, Télébec, TCI,
Call-Net, and the CCTA expressed concerns that rebates could be complex
to implement and administer due to changes to the customer base and
customer information over time. However, TCI also submitted that it
would not be difficult to administer a rebate in the form of a one-time
bill credit as long as the rebate was given to the current customer base
rather than one that had existed at some time in the past. |
106. |
Bell Canada and MTS Allstream
submitted that a one-time credit could be misunderstood by customers as
a significant rate reduction, when it was only a one-time rebate. MTS
Allstream argued that to order that deferral account balances be
disposed of through consumer rebates would be, in essence, to
retroactively amend final rates that the Commission had previously
confirmed as being just and reasonable. |
107. |
TCI submitted that the
Commission had made a determination concerning just and reasonable rates
for residential local exchange service in non-HCSAs and, as such, had
determined that the rate charged was fair both to the company and the
customers. TCI further submitted that because rates for residential
local exchange services had been finalized by the Commission and
subscribers had not been overcharged, there was no scope for the
argument that subscribers should receive funds in the form of consumer
refunds or reduced prices. |
108. |
Call-Net submitted that a
rebate would defeat the policy objectives that had led the Commission to
suspend the application of the basket constraint in the first place, and
that it would be administratively difficult to implement. It submitted
that fairness among subscribers would require that the refund to a
subscriber be proportionate to the extent to which that subscriber had
contributed to the deferral accounts. Call-Net argued that consumer
refunds did not balance all stakeholder interests, in that Call-Net and
other competitors would suffer irreparable harm if consumer prices were
reduced prematurely. The company also argued that for any refund to be
competitively neutral, it should apply to both ILEC and CLEC
subscribers, making it even more difficult to manage. |
109. |
CAD was of the view that
subscriber rebates would be equivalent to lowering the price of the
ILECs' primary exchange service, and, therefore, would defeat the
original purpose of establishing the deferral accounts. |
110. |
The CCTA submitted that it did
not support the Consumer Groups' proposal to refund deferral account
balances to residential local service customers, since they had not
demonstrated how this would serve the objectives identified by the
Commission. |
111. |
Microcell argued that a
one-time rate reduction was unlikely to foster facilities-based
competition in Canadian telecommunications markets, and that it was
unlikely to provide the ILECs with incentives to increase efficiencies
and to be more innovative. |
|
Commission's
analysis and determinations |
112. |
The Commission notes that in
the price cap decisions, rebates to consumers in non-HCSAs were
identified as a possible use for the funds in the deferral accounts. The
Commission considers that subscriber rebates would be consistent with
section 7 of the Act and the objectives set out in the price cap
decisions. |
113. |
The Commission does not
consider that providing one-time rebates to subscribers would be
equivalent to lowering the ILECs' primary local exchange service rates
or that it would defeat the purpose of establishing the deferral
accounts. The Commission considers that a one-time rebate will not have
a sustained impact on the development of competition in the residential
local services market. |
114. |
However, the Commission has
concerns with respect to the implementation of any rebates and the
potential inter-generational inequity issues associated with the
disposition of the funds in the deferral accounts. The Commission
considers that it would be overly complex and not cost-effective to try
to estimate a rebate amount proportionate to the amount contributed by
an individual subscriber to the deferral accounts. The Commission also
considers that the cost of attempting to locate those residential
subscribers who were customers during the current price cap period but
are no longer customers would likely outweigh any benefits that might be
derived from such an exercise. |
115. |
As indicated earlier in this
Decision, the Commission intends to clear the funds in the deferral
accounts in a manner that contributes to achieving the objectives of the
current price regulation framework, including balancing the interests of
the three main stakeholders in the telecommunications markets. The
Commission considers that initiatives to expand broadband services and
to improve accessibility to telecommunications services for persons with
disabilities will provide longer-term and more permanent benefits than a
one-time rebate. |
116. |
Accordingly, the Commission
concludes that each ILEC should, to the greatest extent possible, use
funds in their deferral accounts for initiatives to expand broadband
services to rural and remote communities and to improve accessibility to
telecommunications services for persons with disabilities. The
Commission also concludes that should any accumulated balance remain in
the ILEC's deferral account after these initiatives have been approved
by the Commission, this amount will be rebated to the ILEC's residential
local subscribers in non-HCSAs. |
|
Rate reductions
|
|
Positions of
parties |
117. |
Aliant Telecom argued that a
permanent rate reduction was preferable to a one-time credit in that a
rate reduction provided a simple-to-administer, fair, easily understood,
and ongoing benefit to customers; better reflected market conditions in
Atlantic Canada; and provided the benefits of a competitive market to
customers. |
118. |
Aliant Telecom submitted that
competitive price decreases should be the primary vehicle to clear the
ILECs' deferral accounts where local service competition existed, for
the benefit of residential customers. The company indicated that it
faced intense competition in its territory from EastLink, and submitted
that it was necessary for it to reduce prices in order to be competitive
in the marketplace. |
119. |
Bell Canada was of the view
that price changes were more equitable than rebates since they provided
greater benefits to the customers who spent more on telecommunications
services, while rebates provided the same benefit to all customers. |
120. |
Télébec submitted that the
amounts that had accumulated in the deferral accounts had resulted from
the application of the I-X constraint and represented possible rate
reductions from which the ILECs' customers should benefit. In Télébec's
view, using the amounts that had accumulated in the deferral accounts
for purposes other than rate reduction kept rates artificially high. |
121. |
Call-Net submitted that since
the objective of the deferral accounts was to prevent premature retail
price reductions, the Commission should not consider any proposals that
reduced prices since they would negate the potential benefits of the
deferral accounts to the telecommunications industry and all its
stakeholders combined. |
122. |
The CCTA disagreed with the
proposals put forward for rate reductions. It viewed rate reductions as
offering only small and temporary benefits to customers, at no cost to
the ILECs. The CCTA submitted that nothing about these proposals would
foster facilities-based competition, increase efficiencies, encourage
innovation, contribute broadly to the affordability of services, or
strike an appropriate balance among the interests of customers,
competitors, and incumbent telephone companies. |
123. |
Microcell submitted that rate
reductions would direct significant funds away from other initiatives,
such as the expansion of broadband deployment, and would provide less
benefit to consumers in the long run. It also submitted that providing
rate reductions to consumers was merely a short-term benefit, and was
not in the spirit of the objectives enunciated by the Commission at the
outset of this proceeding. |
|
Commission's
analysis and determinations |
124. |
As stated earlier in this
Decision, the Commission considers that the continued accumulation of
funds in the deferral accounts would result in unnecessary uncertainty
for stakeholders. |
125. |
The Commission notes that,
based on the methodology for calculating the deferral account balances
approved later in this Decision, funds will continue to accumulate in
the deferral accounts beyond the current price cap period in the absence
of rate reductions to eliminate the net recurring amounts. The
Commission also notes that several parties recommended that deferral
account balances should be eliminated as of the end of the fourth year
of the current price cap period. The Commission considers that
eliminating the recurring amounts in the accounts would address the
concerns pertaining to the continued growth of funds in the deferral
accounts. |
126. |
The Commission considers that
rate reductions for residential subscribers meet the established
criteria for use of the funds in the deferral accounts by providing an
immediate, direct, and ongoing benefit to residential subscribers in the
ILECs' territories. In addition, the Commission considers that these
rate reductions will not be a deterrent to the development of
competition in the residential local market. |
127. |
Accordingly, the Commission
concludes that rate reductions are an appropriate initiative to clear
recurring amounts in the ILECs' deferral accounts. Guidelines for the
implementation of this initiative will be provided later in this
Decision. |
|
Proposals that primarily benefit CLECs
|
|
Positions of
parties |
128. |
MTS Allstream submitted that
its proposed system and infrastructure changes would support competitive
entry and greater consumer choice. It also submitted that offering
consumers more competitive choice would safeguard and respond to the
social requirements of consumers and telecommunications users throughout
Manitoba. |
129. |
TCI submitted that developing
the interface required to provide CLECs with access to its OSS would,
among other things, eliminate manual interfaces with ILEC service
representatives, thereby increasing efficiency and eliminating errors. |
130. |
Call-Net submitted that its
proposed system improvements would increase the efficiency of both the
ILECs and CLECs, thereby benefiting subscribers and making their
competitive choices quicker and more transparent to implement. It
suggested that in achieving these system improvements, facilities-based
competition would also be enhanced. Call-Net also submitted that its
proposal to fund certain common elements was designed to promote
competition in general, and specifically to promote competition beyond
the urban cores of major Canadian cities. |
131. |
The ILECs submitted that the
majority of the funds used to date from the deferral accounts had
benefited competitors and, in general, they submitted that a balanced
approach would require that residential customers also derive certain
direct immediate benefits from these funds. In addition, BCOAPO et al.
and CAD submitted that it would be inappropriate to use funds in the
deferral accounts to provide further benefits to CLECs. |
|
Commission's
analysis and determinations |
132. |
The Commission notes that in
Competitive local exchange carrier access to incumbent local exchange
carrier operational support systems, Telecom Decision CRTC 2005-14,
16 March 2005, it considered that requiring each party to
pay its own costs for implementing CLEC access to an ILEC's OSS would
focus parties on implementing only what was necessary to provide CLECs
with the required functionality and, therefore, the development and
implementation process would be less costly and time consuming. Accordingly,
the Commission did not consider that recovery of these costs from
the ILECs' deferral accounts would be appropriate. |
133. |
In addition, as discussed
earlier in this Decision, the Commission notes that almost all of the
funds drawn down from the deferral accounts to date have been allocated
to reduce rates for Competitor Services, which has resulted in lower
costs for competitors. Accordingly, the Commission considered that,
based on an overall balanced approach among the three main stakeholders,
residential customers should primarily benefit from the funds remaining
in the deferral accounts. Therefore, the Commission concludes that
proposals that primarily benefit CLECs are not an appropriate use of the
funds remaining in the deferral accounts. |
|
Network improvements
|
|
Positions of
parties |
134. |
The Commission notes that
Aliant Telecom and Call-Net proposed to fund upgrades to E9-1-1 service,
while Bell Canada submitted that its proposal to fund a portion of the
cost of the upgrades required to support the High Probability of Call
Completion feature would provide a significant improvement in the
network's state of emergency preparedness. |
135. |
TCI submitted that its network
modernization initiatives would provide customers in rural and remote
areas of British Columbia and Alberta with access to the full range of
call management services and higher-speed Internet access, and would
give them a level of service comparable to that of most urban customers. |
136. |
MTS Allstream submitted that
using the deferral accounts to fund ILEC capital costs and operating
expenditures that would otherwise likely be incurred in the normal
course of business would not provide ILECs with incentives to increase
efficiencies and be more innovative, and would potentially provide them
with a competitive advantage rather than fostering competition. The
company suggested that asking whether the proposed investment or
expenditure initiative would otherwise satisfy the criteria for
treatment as an exogenous factor adjustment should provide clear
indication as to whether it should qualify as a draw-down. |
137. |
SaskTel submitted that it had
no objections to Aliant Telecom's proposal to fund upgrades to wireline
E9-1-1 services in Atlantic Canada, but that it did not support using
revenues received from wireline customers to fund wireless E9-1-1
initiatives. SaskTel suggested that the industry's wireless sector
should assume responsibility for funding such service improvements. The
CCTA noted that the ILECs, including Aliant Telecom in areas other than
Newfoundland and Labrador, charged end-users and other service providers
tariffed rates for recovering the costs of their E9-1-1 platforms and
submitted that this was the more appropriate method of recovering
associated costs. |
138. |
BCOAPO et al. submitted
that network modernization proposals would be unrelated to the reasons
for the creation of the deferral accounts. The Consumer Groups submitted
that network modernization proposals raised competitive concerns and
that they would improve an ILEC's network and likely make it more
difficult for competitors to enter these markets. |
|
Commission's
analysis and determinations |
139. |
The Commission considers that
network improvement initiatives, for the most part, would be considered
as part of the normal cost of doing business. Accordingly, the
Commission concludes that initiatives related to network improvements
are not an appropriate use of the funds remaining in the deferral
accounts. |
|
Cost recovery and miscellaneous proposals
|
|
Positions of
parties |
140. |
Proposals in these categories
included, among others, Aliant Telecom's proposals to recover costs
related to damage by Hurricane Juan and to recover costs and/or losses
associated with a number of Commission decisions and orders; MTS
Allstream's proposal to offset the revenue loss it had incurred as a
result of a deferred rate increase; TCI's proposal to replace
approximately 200 fuel tanks that did not meet new environmental
standards; and Call-Net's proposals to fund operating costs associated
with the Canadian Local Number Portability Consortium Inc., the Canadian
Portable Contribution Consortium Inc., and the Canadian Numbering
Administration Consortium Inc., and to fund a national voice-based
information system. |
141. |
With respect to TCI's proposal,
BCOAPO et al. and NetWork B.C. submitted that the fuel tank Code of
Practice applied to all businesses within federal jurisdiction, not just
those in the telecommunications industry, and therefore this did not
qualify as an exogenous adjustment. BCOAPO et al. and Call-Net submitted
that upgrading fuel storage facilities was part of the cost of doing
business and not a legitimate use of funds in the deferral accounts.
However, the Consumer Groups suggested that this proposal might qualify
as an exogenous adjustment and that potential adverse rate consequences
could be buffered by funds from the deferral accounts. |
142. |
Bell Canada submitted that
using deferral account monies to fund consortia, as Call-Net had
proposed, would place a disproportionate burden on the ILECs and their
residential subscribers, and would be inequitable and contrary to
existing approved funding mechanisms. It also submitted that joint
funding gave all parties incentive to ensure that the consortia
conducted operations in a cost-effective manner. |
143. |
Bell Canada also submitted that
in the absence of a valid funding model, Call-Net's national voice
information system was unlikely to have any application beyond providing
access to the types of databases that were currently available on a
toll-free basis. It submitted that since users could already access this
content free of charge, the new system would provide little, if any,
additional functionality and would be a waste of time and money. |
|
Commission's
analysis and determinations |
144. |
The Commission concludes that
proposals in the cost recovery and miscellaneous categories, similar to
those in the network improvement category, would generally be considered
as part of the normal cost of doing business. Accordingly, the
Commission concludes that proposals assigned to the cost recovery and
miscellaneous categories are not an appropriate use of the funds
remaining in the deferral accounts. |
|
Conclusions
|
145. |
The Commission concludes that
it is appropriate to use funds in the deferral accounts to fund the
expansion of broadband services, initiatives to improve accessibility to
telecommunications services for persons with disabilities, and rate
reductions. |
|
Guidelines for the disposition of funds in the deferral accounts
|
146. |
The Commission outlines below
parties' positions regarding the implementation of broadband service
expansion, proposals to improve accessibility to telecommunications
services for persons with disabilities, and rate reductions. The
Commission then provides its conclusions and guidelines for the
disposition of funds from the deferral accounts for these initiatives.
Based on the preliminary estimates of the ILECs' deferral account
balances set out in the attachment to this Decision, the Commission
considers that these conclusions and guidelines will likely apply to all
ILECs except Télébec. Disposition of Télébec's deferral account will be
dealt with later in this Decision. |
|
Broadband service expansion
|
147. |
The Commission notes that
parties' submissions and views varied widely regarding how broadband
service expansion should be implemented. Some parties suggested using
the deferral accounts to fund only backbone facilities, while others
submitted that both backbone and access facilities should be funded.
Some were in favour of recovering from the deferral accounts only the
uneconomic portion of the initiative to expand broadband services, while
others proposed funding all costs to build a backbone network and
permitting service providers to use it free of charge. Some parties
proposed that a competitive bidding process be used to determine who
should build the facilities. Parties' views on these issues are
summarized below. |
|
Bell Canada's
submission |
148. |
Bell Canada proposed to expand
the availability of its broadband services to areas where it was
uneconomic to provide such services, provided that it was able to
recover the costs incurred for this expansion in a competitively neutral
fashion by means of a draw-down from its deferral account. The company
submitted that broadband deployment in those areas would be based on the
least-cost technology that would provide the same quality of service
that it currently provides via its commercial broadband expansion
program based on DSL technology. Bell Canada indicated that its proposal
would complement existing government-funded programs in that it would
only cover areas where high-speed broadband capability was not available
and where communities had not been successful in obtaining funding for
the deployment of broadband services through those programs. |
149. |
Bell Canada indicated that it
would consider expansion to those areas where the average estimated
capital cost per DSL-eligible line ranged from $300 to $2,500. The
company proposed to recover from its deferral account all costs incurred
to provide wholesale DSL service to the areas included in the program,
less the revenue it anticipated from the provision of wholesale DSL to
Internet service providers (ISPs) in those regions, including the
imputed revenue generated from its retail ISP business as a user of the
facilities. In the company's view, funds in the deferral accounts should
only be used to finance the uneconomic portion of the initiative to
extend broadband services to areas that qualified. |
150. |
Bell Canada proposed that once
the Commission had approved the company's roll-out plan for the first
year of the program, Bell Canada's Carrier Services Group (CSG) would
send a list of suggested areas, along with maps showing geographic
coverage of areas and associated municipality boundaries, to all
registered telecommunications carriers operating in its serving area.
The company's CSG would request that these carriers identify any area
where they already provided broadband service, or planned to provide
such service over the next 12 months. Parties would have three weeks to
respond; if an alternate provider were to indicate that it served or had
a definite commitment to serve a particular area, then that area would
be removed from Bell Canada's program. |
151. |
BXI submitted that Bell Canada,
by accessing its deferral account, would be able to enter markets that
otherwise would not be commercially viable. In BXI's view, these were
the same markets that competitive broadband providers, such as BXI,
would target. BXI submitted that should Bell Canada be able to access
these markets on a subsidized basis, it would become much more difficult
or impossible for emerging providers to achieve the critical mass needed
to establish a sustainable business. BXI also submitted that the
administration of such a program would be difficult and would be an
ongoing regulatory burden for the Commission and interested parties. |
152. |
BXI submitted that many
technologies employed by alternative broadband providers, such as fixed
wireless, WiFi, and WiMAX, required a much lower investment in
infrastructure than the DSL technology proposed by Bell Canada. BXI
argued that if the funds in the deferral accounts were directed towards
a program similar to the NSI or BRAND, the community would receive the
benefit of determining the most efficient means of extending broadband
coverage, and might qualify for funds to supplement investments by
alternative providers. |
153. |
Call-Net was of the view that
Bell Canada's proposal would have merit if it were modified to allow any
service provider the same option of recovering capital from the deferral
accounts, and if facilities were then made available to all providers at
rates without a capital recovery component. Xit telecom submitted that
funds in Bell Canada's deferral account should also be made available to
other competitors on the same terms and conditions as Bell Canada. |
154. |
The CCTA considered that the
administrative approach associated with Bell Canada's plan might have
merit. However, it did not support Bell Canada's proposed manner of
funding because, in the CCTA's view, it would give the company an undue
advantage. The CCTA submitted that Bell Canada's proposal was not
competitively neutral since the company would be able to draw on funds
to finance investments in its own local networks. In the CCTA's view,
this would provide Bell Canada with an immediate recovery of capital
investments at zero risk, increasing the company's asset value and
expanding its ability to generate new revenue streams. |
155. |
In the CCTA's view, the
fundamental flaw in Bell Canada's proposal was that it would impede
facilities-based competition. The CCTA noted that since the cable
companies used a technology that was entirely different from Bell
Canada's DSL technology, there would be no opportunity for Bell Canada's
access facilities to be used by other facilities-based competitors. In
the CCTA's view, Bell Canada's proposal would effectively restrict entry
to a single broadband service provider and/or serving technology, which
would produce outcomes that were neither competitively nor
technologically neutral. |
156. |
The Consumer Groups also
submitted that funding Bell Canada's broadband expansion proposal would
have potential negative effects on the development of facilities-based
competition in broadband markets. In the Consumer Groups' view,
implementation of a bidding process for broadband expansion represented
a minimum standard of competitive fairness that should be applied if
Bell Canada's proposal were to be implemented. |
157. |
Microcell argued that Bell
Canada's proposal did not respect the principle of competitive
neutrality, in that it did not involve all types of access technology,
did not allow access to all ISPs and broadband operators, and was not
independent of a particular access provider or class of providers. |
|
TCI's
submission |
158. |
TCI proposed to use a portion
of the funds in its deferral account for its digital divide initiative.
This initiative would extend high-speed backbone facilities using a
combination of fibre and digital radio facilities to 154 communities, or
approximately 70,000 customers, in rural and remote areas of British
Columbia that did not currently have the capability to access high-speed
services. TCI indicated that all of these communities were in high-cost
serving areas (HCSAs) and almost half of them were in very remote
regions of the province, with limited accessibility. TCI indicated that
it would consult with the Government of British Columbia to prioritize
the routes to be served. |
159. |
TCI submitted that funds from
its deferral account should be used to fund the uneconomic portion of
the capital investment so that the rates for access to broadband
services in HCSAs would be the same as the rates in non-HCSAs. TCI also
submitted that the construction costs for facilities should only be
subsidized to a level that made the investment economic, that is, to the
level where the balance of the investment could be recovered through
rates over the useful life of the facilities. TCI proposed that the
deferral account draw-down be determined by calculating the present
worth of the uneconomic portion of these digital divide initiatives on
an annual basis at the end of each construction season. |
160. |
TCI noted that under its
proposal any service provider would be able to connect to TCI's
broadband backbone facilities to provide service on a competitively
neutral basis. |
161. |
BCOAPO et al. was strongly
opposed to TCI's digital divide broadband expansion proposal since it
viewed the proposal as a thinly disguised effort to fund provincial
government initiatives that were incomplete or for which the government
itself was not willing to pay. |
162. |
Call-Net was of the view that,
if the Commission were to consider TCI's proposal, all interested
parties should have the opportunity to participate in the capital
program and to gain access to completed backbone facilities at rates
that did not include any capital recovery component. |
163. |
The CCTA argued that if TCI's
proposal to charge competitors for the use of backbone facilities
financed from its deferral account were approved, the magnitude of the
costs would continue to preclude competitors from providing broadband
services in unserved markets. The CCTA submitted that TCI's proposal
would require broadband access competitors to pay standard tariffed
rates to use services for which the company would have been paid
up front using funds from its deferral account. |
164. |
The CCTA submitted that TCI's
proposal to use funds to put in place improved backbone facilities did
not include a commitment to actually provide broadband services to rural
and remote communities. The CCTA also submitted that while TCI had
suggested a tracking mechanism consisting of periodic reports to the
Commission, it would not contain any details of specific projects or
future plans to provide broadband services. |
165. |
The Consumer Groups were of the
view that TCI's proposal raised competitive concerns in that TCI's
network would be improved, likely making it more difficult for other
competitors to enter these markets. |
166. |
NetWork B.C. indicated that it
was prepared to work with TCI to identify unserved and underserved
communities in British Columbia. NetWork B.C. requested that the
Commission direct TCI to: |
|
- prepare, with NetWork B.C., a plan to expend funds in TCI's
deferral account in a manner that would provide broadband connectivity
to all of the unserved communities in British Columbia and upgrade
other underserved communities to broadband capacity standards;8
|
|
- develop a plan and expend the necessary funds in TCI's deferral
account to allow local entrepreneurs and other carriers to easily
access open network points located within communities to provide local
broadband; and
|
|
- submit to the Commission evidence that TCI's proposed plan met the
objectives of the Government of British Columbia to bridge the digital
divide and foster affordable access to local entrepreneurs and other
competitors.
|
167. |
NetWork B.C. submitted that
installation of backbone facilities without local access, while perhaps
technically "bridging the digital divide" to communities, did not
address the fundamental issue of providing broadband access to remote
residents, local businesses, schools, health care facilities, or
government offices. NetWork B.C. requested that a reasonable portion of
the funds in TCI's deferral account be allocated to provide actual
broadband services in all of the underserved and unserved parts of the
province. |
|
The CCTA's
submission |
168. |
The CCTA proposed that
draw-downs from the deferral accounts should be used to finance the
installation of dark fibre backbone facilities to rural and remote
communities that had no broadband service from any service provider. The
CCTA submitted that the ILEC from whose deferral account the funds were
drawn could be responsible for constructing and maintaining the backbone
facilities. It also submitted that costs associated with local network,
any upgrades, or equipment would be ineligible under its plan. The CCTA
suggested that cable operators and other service providers that
committed to provide broadband access services in the unserved community
should be permitted to use these backbone facilities without additional
charge. |
169. |
The CCTA submitted that under
its proposal, it expected that the majority of funded backbone
facilities would be developed by the ILECs and remain in their
possession. In the CCTA's view, this would provide the ILECs with the
opportunity to sell telecommunications services –including high-speed
private line services – in areas they would not otherwise serve, without
incurring the associated costs. The CCTA indicated, however, that the
party selected to construct the facilities could be chosen through a
competitive bidding process. |
170. |
The CCTA submitted that the
party constructing the backbone facilities should fully recover all
capital costs and expenses. It also submitted that because there would
be no unrecovered costs, no rates or charges for the use of the backbone
facilities should be levied. The CCTA proposed that if services were
leased from ILECs to supplement a service provider's local facilities,
these services would be leased at tariffed rates. |
171. |
The CCTA submitted that its
proposal was competitively neutral and promoted facilities-based
competition. It also submitted that its proposal was designed to
maximize the benefit of funding broadband access from the deferral
accounts by limiting the types of costs that were recoverable. This, in
turn, would allow a greater number of unserved communities to benefit,
minimize regulatory intervention, and help ensure competitive
neutrality. The CCTA submitted that communities that were not served
with broadband access by any service provider as of the date that the
community's name was put forward for consideration should be eligible to
have backbone facilities constructed and maintained using funds from the
deferral accounts. It also submitted that communities that had been
awarded provincial or federal funding under a broadband program, such as
BRAND, should be excluded from any proposed facilities. |
172. |
Bell Canada noted that under
the CCTA's proposal, the subsidized facilities would be limited to
backbone facilities, rather than covering all of the facilities and
equipment necessary to provide broadband services. The company argued
that under the CCTA's proposal, the broadband service provider would not
be required to provide any assurances or commitments concerning the
actual delivery of broadband services to end-customers. In Bell Canada's
view, without such commitments and assurances, the CCTA's proposal could
exhaust the funds in the deferral accounts without substantially
affecting the availability of broadband services in rural areas. |
173. |
MTS Allstream argued that the
CCTA's proposal was not competitively neutral, given that the onus to
build and maintain the backbone facilities fell on the ILECs. MTS
Allstream also indicated that it would be difficult to determine when an
ILEC should provide access to these facilities for free, as contemplated
by the CCTA under its scheme, versus applying charges for the use of
facilities and/or including these costs in the determination of rates
for services relying on these same facilities. |
174. |
TCI argued that the CCTA's
broadband proposal was administratively complex, in that it involved a
detailed process that relied heavily on the Commission to establish and
manage the framework for the broadband expansion program. |
175. |
The Consumer Groups submitted
that the CCTA's proposal to fully fund backbone facilities and make them
available for free to all service providers would not appear to distort
competition. However, they suggested that the CCTA's proposal would use
the funds in an uneconomic way, since wholesale users should contribute
to the cost of the platform. The Consumer Groups submitted that if
wholesale users were not willing to pay, it would not be a wise
investment. |
176. |
Telesat was of the view that
the CCTA's proposal to limit funding to backbone facilities was neither
competitively neutral nor likely to allow more communities or
individuals to connect to broadband. Telesat argued that the CCTA's
proposal showed bias against direct-to-user solutions now available with
the company's Ka-band satellite service. |
177. |
Xit telecom submitted that the
Commission should reject the CCTA's proposal since it was not clear that
it would improve access to the backbone facilities needed to extend
broadband services. |
|
Microcell's
submission |
178. |
Microcell proposed that the
funds in the deferral accounts be used for a competitively neutral
national subsidy program to promote the deployment of broadband Internet
access services in unserved or underserved regions of Canada. The
company indicated that it supported allocating a portion of each ILEC's
deferral account directly to Industry Canada's BRAND program and/or the
NSI. Microcell submitted that for the program to be competitively
neutral, eligibility must be on a non-discriminatory basis to projects
involving all types of Internet access providers using all types of
broadband technologies. Microcell submitted that any subsidy program
dedicated exclusively to funding ILEC broadband deployments, or which
assigned decision-making authority over project selection to the ILECs,
would fail the test of competitive neutrality. Microcell argued that
decision-making authority for selecting winning projects must be
independent of any one access provider or class of providers. |
179. |
Bell Canada submitted that the
particulars of Microcell's submission were not clear regarding a
possible bidding process, selection criteria, amounts to be assigned
from specific ILEC deferral accounts, or cost recovery mechanisms. Bell
Canada argued that Microcell had not discussed how the success of its
program would be monitored or mentioned the commitments, if any, that
would have to be made by parties to ensure that these initiatives were
delivering the benefit of broadband to customers in a timely fashion. |
180. |
The CCTA submitted that
Microcell had not provided the Commission or parties with an explanation
as to how its proposal should be administered. |
|
RipNET's
submission |
181. |
In RipNET's view, the public
interest would be served best if funds in the deferral accounts were
only available to non-ILECs, such as RipNET, to subsidize the cost of
building facilities to provide high-speed broadband and competitive
local telephony services in rural and remote communities. RipNET was of
the view that these funds should be administered and managed by an
independent agency that could establish the criteria for eligibility,
invite proposals from companies, and select the companies that would
receive subsidies. |
182. |
Bell Canada submitted that the
particulars of the competitive bidding process that RipNET supported
were not clear in many respects, including selection criteria, cost
estimates, implementation plans, and administration. |
183. |
Bell Canada submitted that
RipNET's premise of encouraging facilities-based competition as the
reason to exclude the ILECs from being able to use funds from the
deferral accounts for broadband expansion to unserved areas had no
merit. The company argued that there was no market potential for
facilities-based competitive high-speed broadband or telephony services
in the rural and remote areas, which was why subsidies were required to
provide such facilities in the first place. Bell Canada suggested that
the policy issue was not how to get competing facilities in place, but
how to get some facilities in place which could then be used to provide
end-user broadband services, possibly by more than one retail service
provider. |
|
Other
parties' comments |
184. |
MTS Allstream argued that
in-region programs were not competitively neutral, noting that what
should be considered was the level of subsidy required, if any, to
attract competitive entry in a currently unserved or underserved area.
MTS Allstream submitted that any subsidy program should be left to the
government to be administered on a national scale rather than on a
piecemeal basis through the use of funds in the deferral accounts.
However, MTS Allstream submitted that on the basis of the information on
the record of this proceeding, there was no justification, legal or
otherwise, for transferring funds in the ILECs' deferral accounts to
BRAND or NSI. |
185. |
SaskTel submitted that any use
of funds in the deferral accounts should ensure that the roll-out of
technology by industry participants was efficient and guided by market
demand, not simply by the availability of an unused source of funds.
SaskTel further submitted that broadband expansion to rural and remote
locations using funds from the deferral accounts should be done on a
competitively equitable basis, ensuring accessibility to all service
providers that might wish to serve customers in those locations. |
186. |
The CCTA argued that the
Commission should consider the following factors when determining
whether a broadband proposal, funded from the deferral accounts, was
competitively neutral: |
|
- initiatives should be technologically neutral;
|
|
- facilities to support broadband expansion should be equally
available to all broadband service providers;
|
|
- facilities should be chosen based on economic and technical
efficiency;
|
|
- facilities should provide sufficient capacity for potential
providers;
|
|
- facilities that were required to provide broadband service access
and which would not be commercially constructed were those that should
be eligible; and
|
|
- use of the deferral accounts should promote facilities-based
competition.
|
187. |
The Consumer Groups argued that
subsidizing DSL expansion was only an efficient strategy if it was the
least-cost option. They noted that alternative technology platforms,
especially terrestrial wireless networks and satellite-based services,
might offer cheaper opportunities to serve rural areas than DSL. The
Consumer Groups submitted that if it was determined that it was a goal
to subsidize broadband expansion to uneconomic areas, there should be a
proceeding to determine the nature of the requirement, the number of
customers served, the revenue to be generated, the total cost, the
company to supply such access, and who or what should contribute to its
funding. |
188. |
In Telesat's view, satellite
technology could help provide least-cost solutions for broadband
roll-out into rural and remote areas, either on its own, in tandem with,
or as an adjunct to one or more of the broadband proposals put forward
in this proceeding. Telesat noted that satellite had two major
advantages over alternative technologies when it came to serving rural
and remote regions: ubiquitous coverage and distance-insensitive costs.
Telesat submitted that Ka-band service performance and monthly prices to
all rural and remote areas of Canada would be comparable to that of
terrestrial alternatives in urban areas, but the associated Ka-band
equipment and installation prices could be higher. In Telesat's view,
funding from the deferral accounts could be used to mitigate the higher
equipment and installation costs, with no draw-down required for
backbone facilities. |
|
Commission's
analysis and determinations |
189. |
As indicated earlier,
competitive neutrality is a principal part of the objectives to be
considered when implementing the initiatives to be funded from the
deferral accounts. Some parties suggested that a competitive bidding
process would be required to give effect to this objective, so that
other service providers, in addition to the ILECs, would have an
opportunity to build broadband facilities to rural and remote
communities. The Commission considers that a competitive bidding
process, while assisting in the achievement of competitive neutrality,
would add a significant layer of complexity, delay the implementation of
broadband expansion, and result in substantial administrative and
regulatory burden. |
190. |
The Commission notes that some
parties submitted that only backbone facilities should be funded from
the deferral accounts and that these facilities should be made available
to all broadband service providers. The Commission considers that an
important aspect of competitive neutrality is that alternative providers
of broadband services are able to use any backbone facilities
constructed with funds from the deferral accounts on the same terms as
the ILECs, so that end-customers have access to the widest possible
choice of service providers. |
191. |
However, the Commission
considers that constructing only backbone facilities in rural and remote
areas is not likely to provide sufficient economic incentive to
broadband providers to offer broadband services in those communities.
The Commission considers that proposals that would provide broadband
services to the end-customer, similar to the one submitted by
Bell Canada, would be the most effective way to expand broadband
services to those communities. The Commission generally agrees with the
approach outlined in Bell Canada's submission, which is likely to be
much less administratively burdensome than a competitive bidding
process. |
192. |
The Commission agrees with the
view raised by parties that least-cost technology should be used in the
expansion of broadband services. The Commission considers that this
would be a more efficient use of funds in the deferral accounts,
allowing a greater number of rural and remote communities to benefit
from the availability of these services. |
193. |
The Commission considers that
only the uneconomic portion of the initiative to expand broadband
services should be recovered using funds in the deferral accounts. The
Commission considers that these funds should be used to recover the
total cost to build the backbone and access facilities less all revenues
generated from retail and wholesale services that will use these
facilities. The Commission will require detailed cost studies to be
filed to support the use of these funds for broadband expansion. |
194. |
As indicated above, the
Commission considers that any backbone facilities constructed with funds
from the deferral accounts should be made available to alternative
broadband service providers on the same terms as the ILECs. The
Commission considers that allowing all providers to use backbone
facilities on the same terms will encourage competition while also
providing direct benefits to consumers. The Commission further considers
that, since the ILECs would be compensated from the deferral accounts
for the uneconomic portion of these initiatives, all service providers
should have access to these backbone facilities at a minimal rate. The
Commission considers that the maintenance rate applicable to dark fibre
backbone facilities could be a reasonable proxy rate in these
circumstances. This rate will be established when the Commission
approves each ILEC's broadband expansion proposal. |
195. |
The Commission considers that
ILECs should ensure that communities selected for expansion of broadband
services would be those communities that would be unlikely to receive
such services from any service provider in the near future. The
Commission also considers that this would be consistent with the
principal of competitive neutrality. Accordingly, the Commission
considers that the ILECs should expand broadband services to the
customer premises in communities located primarily in Bands E and F in
HCSA exchanges, where service is not available from any service provider
and is not part of their existing commitments or planned roll-out. In
addition, the Commission considers that all communities that have
received funding, or that have been approved for funding, from any
government broadband expansion programs are to be excluded. |
196. |
The Commission notes that some
ILECs offer bundled broadband services on a wholesale basis to
alternative service providers - for example, Bell Canada's Gateway
Access Service. The Commission considers that these services should also
be offered in any community where broadband services are extended using
funds from the deferral accounts. |
197. |
In light of the above, the
Commission directs those ILECs that pursue broadband expansion within
their serving territory to file, by 30 June 2006, detailed proposals in
compliance with the following conditions: |
|
- the ILEC must submit a proposal to provide broadband service to
the customer premises in communities located primarily in Bands E and
F in HCSA exchanges, where:
|
|
(1) broadband service is not available from any service provider
and is not part of their existing commitments or planned roll-out,
and
|
|
(2) the community has not received funding, or approval for
funding, from any government broadband expansion programs;
|
|
- deployment must be based on least-cost technology;
|
|
- proposals must include backbone and access facilities;
|
|
- backbone facilities must be made available to alternative
broadband service providers at a minimal rate that will be approved by
the Commission when reviewing the broadband expansion proposals for
approval;
|
|
- any wholesale broadband service offered by the ILEC, such as
Bell Canada's Gateway Access Service, must be made available in all
funded communities; and
|
|
proposed funding must cover only the uneconomic portion of the
project.
|
198. |
The Commission also directs the
ILECs to consult with provincial government agencies responsible for
broadband initiatives before submitting their proposals, to ensure that
their expansion plans take into account identified provincial
priorities. |
199. |
The Commission will issue a
letter shortly outlining the requirements for filing broadband expansion
proposals. These requirements will include, among other things, the
broadband expansion roll-out schedule, a detailed cost study including
all assumptions, number of homes passed, expected take rate, and
technology description. |
200. |
The Commission notes that Bell
Canada's submission in this proceeding included a proposal to expand its
broadband coverage that was very similar to the proposal in its 2
December 2003 application. Accordingly, the Commission concludes that it
is not necessary to rule on Bell Canada's 2 December 2003 application. |
|
Proposals to improve accessibility to telecommunications services
|
201. |
With respect to programs that
focus on accessibility to telecommunications services for persons with
disabilities, advocacy groups proposed various activities that could be
funded through draw-downs from the deferral accounts. Parties'
submissions are summarized below. |
|
Positions of
parties |
202. |
ARCH proposed to create a new
fund to eliminate discrimination faced by persons with disabilities in
their use of telecommunications products and services. ARCH outlined a
number of suggestions for potential allocations from its proposed fund,
including: conducting consultations with persons with disabilities to
determine the barriers that needed to be addressed; providing rebates to
persons with disabilities who encountered higher costs than persons
without disabilities to access telecommunications products and services;
and expanding telecommunications infrastructure to accommodate equipment
for persons with disabilities. |
203. |
ARCH indicated that under its
proposal, a standing committee would be established to work in
conjunction with Commission staff to make ongoing decisions regarding
the distribution and uses of funds held in the deferral accounts. |
204. |
CAD outlined a number of
suggestions for the potential allocation of funds in the deferral
accounts, including: using affirmative action hiring to place some deaf
persons in positions of significance with the ILECs or the Commission;
bringing MRS up to the standard provided in the United States; providing
teletypewriters (TTYs) for deaf users at no charge; making services such
as voicemail, call display, and call forwarding accessible to deaf users
or providing parallel services for TTY users; and resolving the issue of
access to 9-1-1 for deaf users. |
205. |
CAD accepted ARCH's proposal to
set up a fund administered by a standing committee as a possible way to
start to address inequalities. CAD submitted that the funds could also
simply be retained by the ILECs and that the Commission could then
direct the use of these funds to focus on addressing access barriers
experienced by the deaf and people with disabilities. CAD also submitted
that the Commission could determine each application on a case-by-case
basis. |
206. |
Bell Canada, MTS Allstream,
SaskTel, TCI, and Call-Net stated that many of ARCH's and CAD's
suggestions lacked specific details, which made them difficult to
evaluate or to implement. |
207. |
Bell Canada indicated that,
should the Commission deem it appropriate, the company would not be
opposed to the establishment of a committee that would undertake to
define activities and initiatives that would improve the accessibility
to services for persons with disabilities in each ILEC's serving area. |
|
Commission's
analysis and determinations |
208. |
The Commission agrees with
parties' comments that there is insufficient evidence on the record of
this proceeding to evaluate the appropriateness of ARCH's or CAD's
proposals. However, the Commission considers that consultations between
the ILECs and advocacy organizations for persons with disabilities would
allow these and other proposals to be examined in further detail and
would allow the interests of all affected parties to be represented
appropriately. |
209. |
With respect to the amount of
money from the deferral accounts that should be allocated to improve
accessibility to telecommunications services, the Commission notes that
this amount is difficult to estimate since requirements may vary by ILEC
territory based on existing programs and/or the economic, social, and
political environments in different provinces. In addition, the amount
of funds in each ILEC's deferral account varies as shown by the
preliminary estimates in the attachment to this Decision. The Commission
also notes that the balance in an ILEC's deferral account could be drawn
down substantially if the ILEC proposes to expand broadband services as
previously discussed. |
210. |
The Commission considers,
however, that each ILEC that has a positive accumulated balance in its
deferral account should allocate funds to improving accessibility to
telecommunications services for persons with disabilities. The
Commission considers that, at a minimum, five percent of each ILEC's
accumulated deferral account balance should be allocated to this purpose
before any of the other draw-downs in this Decision. |
211. |
Accordingly, the Commission
directs each ILEC, except Télébec, to allocate a minimum of five percent
of the accumulated balance in its deferral account to fund programs to
improve accessibility to telecommunications services for persons with
disabilities. The Commission further directs these ILECs to consult and
work with the appropriate advocacy organizations for persons with
disabilities prior to submitting their proposals for approval. The
Commission directs these ILECs to file their proposals by 30 June 2006. |
|
Rate reductions
|
212. |
The Commission notes that the
directions provided above are intended to eliminate the funds that will
have accumulated in the deferral accounts by the end of the fourth year
of the price cap period in 2006. However, based on the methodology
approved later in this Decision for calculating the deferral account
balances, it is estimated that the ILECs, except Télébec, will have
recurring positive amounts in their deferral accounts, which will result
in funds accumulating in the deferral accounts beyond the fourth year of
the price cap period. To ensure that funds do not continue to accumulate
in the deferral accounts in the future, these ILECs will be required to
implement rate reductions to eliminate these recurring amounts. |
213. |
The parties' positions
summarized below do not specifically address the disposition of the
recurring amounts in the deferral accounts. However, the Commission
considers it appropriate to review their proposals to determine their
feasibility in light of the required rate reductions. |
|
Positions of
parties |
214. |
Aliant Telecom submitted that
it needed to reduce prices in order to be competitive, given the extent
of competition in its local residential wireline market and the gap
between its residential service prices and its competitor's prices. The
company also proposed to extend the local calling area for the Halifax
Regional Municipality and to draw down its deferral account by $0.9
million per year for three years for this initiative. Aliant Telecom
indicated that this amount represented the forgone toll estimated by it
and its toll competitors. |
215. |
SaskTel supported Aliant Telecom's
proposal. It noted that using funds in Aliant Telecom's deferral account
to offset rate reductions required by Aliant Telecom to provide it
with a reasonable opportunity to compete against EastLink would be
consistent with the Commission's determination in Decision 2002-34. |
216. |
The Consumer Groups submitted
that the proposal to pay Aliant Telecom for competitive rate reductions
was, at best, a violation of the normal regulatory principles of
generational equity in cost allocation and rate design and that, at
worst, it was effectively an anti-competitive subsidy to Aliant Telecom
that would further distort the market and compromise potential
competition benefits to consumers. |
217. |
Bell Canada proposed to reduce
monthly prices for seven of its residential optional local services and
to recover the resultant revenue loss from its deferral account. The
company submitted that these reductions would yield direct benefits to
over three million residential customers, representing more than 40
percent of Bell Canada's residential subscriber base. |
218. |
Call-Net was of the view that
Bell Canada's proposal was unnecessarily one-sided. It submitted that if
the proposal were modified so that all local exchange carriers offering
optional local services were also eligible to recover the discount from
the deferral accounts, then Bell Canada's proposal would have merit. The
CCTA submitted that the proposal appeared to be financing a competitive
response by Bell Canada, rather than satisfying the objectives regarding
affordable rates. |
219. |
The Consumer Groups noted that
while Bell Canada's proposed reductions for local optional services
could permanently eliminate the need for a deferral account, the
customers benefiting were not necessarily the same as those who had
forgone rate reductions. The Consumer Groups also noted that Bell
Canada's proposal provided greater benefits to customers that spent more
on telecommunications services, which rewarded the large
telecommunications users at the expense of the small. |
220. |
MTS Allstream proposed that the
remaining balance of its deferral account be used to eliminate or refund
charges for residential installation service charges, Manitoba Relay
Service, and province-wide E9-1-1 service for the remainder of the price
cap period. It submitted that the benefits related to Manitoba Relay
Service and E9-1-1 charges would also be extended to competitors since
the tariffed rates would be reduced to zero for the period of the
draw-down. |
221. |
Call-Net submitted that MTS
Allstream's proposal to waive local order service charges, 9-1-1, and
Manitoba Relay Service fees might have merit as long as CLEC customers
were also eligible to get credit from the deferral accounts. The CCTA
submitted that, as with Bell Canada's proposal, MTS Allstream's proposal
to eliminate or rebate charges to subscribers would largely result in
funds being returned as revenue to the ILECs. |
222. |
EastLink proposed that removing
9-1-1 fees charged by the ILECs to all telephone subscribers, including
the fees charged to competitors, until the deferral accounts were
depleted would be a competitively neutral use of funds that would
achieve a balance among all parties. |
223. |
Bell Canada, SaskTel, and TCI
submitted that EastLink's proposal concerning 9-1-1 fees would be unfair
to ILEC customers. More specifically, Bell Canada submitted that
adoption of EastLink's proposal would place the entire burden of funding
the 9-1-1 system on ILEC residential subscribers in non-HCSAs, even
though the benefits of the system were much more broadly based. |
|
Commission's
analysis and determinations |
224. |
The Commission agrees with the
Consumer Groups' view that reducing rates on optional services alone
would disproportionately reward customers that spent more on
telecommunications services and would not benefit all non-HCSA
subscribers. |
225. |
With respect to 9-1-1 fees, the
Commission considers that using the deferral accounts to eliminate 9-1-1
fees charged by the ILECs to all subscribers and competitors would place
an unfair burden on ILEC residential subscribers in non-HCSAs who
originally contributed to the deferral account balances, since the
benefits of 9-1-1 service are enjoyed by the broader base of telephone
subscribers – residential and business customers of both ILECs and CLECs
in HCSAs and non-HCSAs. |
226. |
The Commission is concerned
that, in the absence of any specific guidelines, the ILECs may target
rate reductions solely in specific geographic markets or subscriber
segments where competition exists, or where competitors will soon be
entering. Consequently, to prevent any such targeting by ILECs, and to
distribute the benefits more evenly to all non-HCSA subscribers, the
Commission concludes that the recurring amounts to be eliminated by rate
reductions should be assigned to the Residential Local Services in
non-HCSAs basket and proportionally allocated, based on revenues, to the
Residential Local Exchange Services in non-HCSAs and the Residential
Optional Local Services in non-HCSAs sub-baskets. The Commission further
concludes that all residential subscribers in non-HCSA bands should
benefit from these rate reductions. |
227. |
Accordingly, the Commission
directs all ILECs, with the exception of Télébec, to file, by 15 May
2006, proposed changes to monthly rates for primary exchange services
and optional services in the Residential Local Services in non-HCSAs
basket in order to eliminate the recurring amounts in their deferral
accounts. These rate changes are to become effective 1 June 2006 for
Aliant Telecom, Bell Canada, MTS Allstream, SaskTel, and TCI, and
1 August 2006 for TELUS Québec. |
228. |
As noted earlier, the price
cap period for the ILECs was extended by one year in Decisions 2005-69
and 2005-70. The Commission notes
that during this period, the application of the I-X constraint
will result in an additional recurring amount, either positive or
negative, being added to the deferral accounts. The Commission considers
that it may be appropriate to eliminate this recurring amount and
that ILECs may propose to combine these two recurring amounts when
filing the proposed rate reductions discussed above. |
|
Télébec- and TELUS Québec-specific issues
|
|
Télébec's residual shortfall
|
229. |
In Decision 2002-43,
the Commission determined that Télébec had a going-in revenue requirement
of $15.7 million. The Commission also determined that the company
would receive funding of $8.1 million from the National Contribution
Fund (NCF) as a subsidy for its HCSAs, leaving the company with a
going-in revenue requirement shortfall of $7.6 million. In Decision
2002-43, the Commission decided
not to permit Télébec to raise its local service rates to recover
the residual going-in revenue requirement shortfall, but concluded
that the $7.6 million would be funded through a transitional subsidy
from the NCF. |
230. |
In Decision 2002-43,
the Commission determined that until the transitional subsidy was
eliminated, the application of the I-X constraint to the baskets of
Residential Local Services in non-HCSAs and Other Capped Services
would be suspended. The application of the I-X constraint to the rates
of certain Competitor Services was also suspended. |
231. |
In addition, the Commission
directed that once the shortfall was fully eliminated, the I-X basket
and rate element constraints were to be reinstated. Accordingly, Télébec
was to contribute to its deferral account an amount equal to any revenue
reduction that would be required by the application of the I-X
constraint to the basket of Residential Local Services in non-HCSAs. |
232. |
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 determined the banding structure and related Phase
II primary exchange service costs for Télébec and TELUS Québec. Based
on these determinations, the Commission recalculated the funding that
Télébec would receive from the NCF to be $14.88 million. Since this
amount was less than the going-in revenue requirement of $15.7 million
calculated in Decision 2002-43,
this left the company with a shortfall of $0.82 million. The Commission
determined that this shortfall should be accounted for through the
deferral account, similar to the treatment of exogenous factors in
the price regulation regime established in Decision 2002-43. |
233. |
In Decision 2005-4,
the Commission also determined that Télébec should apply the I-X constraint
to the revenues associated with its baskets of capped services, effective
1 August 2002. In addition, the Commission determined that it
would be appropriate to transfer the I-X constraint revenue reductions
for the period from 1 August 2002 to 31 July 2005 to the
company's deferral account. |
|
Télébec's and TELUS Québec's revenue deferral accounts
|
234. |
The Commission notes that Télébec's
revenue deferral account resulted from two related Commission orders.
First, in Télébec ltée – Rate restructuring, Order CRTC 2000-531,
9 June 2000 (Order 2000-531),
the Commission approved, effective 1 July 2000, a residential rate
restructuring proposal for Télébec. Then, in CRTC approves an application
to review and vary Order CRTC 2000-531
- Télébec ltée - Rate restructuring, Order CRTC 2001-216,
14 March 2001, the Commission directed that the rate restructuring
approved in Order 2000-531
be maintained, and that as of 1 July 2000, funds generated by this residential
rate restructuring be placed in a revenue deferral account to be used
to benefit Télébec's residential subscribers to mitigate future rate
increases that would otherwise have been approved by the Commission. |
235. |
In Implementation of regulatory
framework for Québec-Telephone and Télébec ltée, Telecom Decision
CRTC 97-21, 18 December 1997, the
Commission directed TELUS Québec to place excess earnings in a revenue
deferral account, should the Utility segment achieve earnings above
the upper limit of the allowed rate of return on its average equity
during the split rate base regime. In the proceeding leading to Québec-Telephone
1999 final contribution rate approved, Order CRTC 2000-860,
19 September 2000, TELUS Québec reported excess earnings in 1998.
The Commission directed TELUS Québec to place these earnings in a
revenue deferral account to mitigate any future residential local
rate increases during the transition period or at the start of the
price regulation regime. |
236. |
In Decision 2002-43,
the Commission directed Télébec and TELUS Québec to amortize their
revenue deferral accounts equally over the four-year price cap period
for the purpose of establishing the going-in revenue requirement,
in order to minimize fluctuations in local rates and maintain the
integrity and uniformity of the price regulation regime. |
237. |
The Commission notes that in
its proposed price cap deferral account schedule, Télébec included the
amounts that had accumulated in the revenue deferral account and the
related annual amortization during the current price cap period, thus
combining the two deferral accounts. The Commission notes that TELUS
Québec did not include the impact of the revenue deferral account in its
price cap deferral account. |
238. |
The Commission considers that
it is not appropriate to combine the revenue deferral account with the
price cap deferral account since they were created for different
purposes. However, the Commission considers that at the end of the
fourth year of the current price cap period, when the revenue deferral
accounts are fully amortized, the companies should be allowed to recover
the revenue reduction resulting from the revenue deferral accounts being
fully drawn-down. |
239. |
The Commission notes that, pursuant
to Decision 2005-4, TELUS Québec
receives approximately $3 million per year of additional contribution
from the NCF, with no corresponding adjustment to its revenue requirement.
The Commission concludes that this additional contribution more
than adequately compensates TELUS Québec for the $2.2 million
revenue reduction associated with the expiration of the amortization
of the revenue deferral account. |
240. |
The Commission notes that the
additional contribution that Télébec receives pursuant to Decision
2005-4 would not allow the company
to be compensated adequately for the expiration of the amortization
of its revenue deferral account. Accordingly, the Commission considers
that Télébec should be allowed to recover the $1.9 million associated
with the expiration of the amortization of the revenue deferral account.
As a result, the Commission concludes that a draw-down of $1.9 million
should be included in Télébec's price cap deferral account starting
on 1 August 2006. |
|
Other issues
|
|
Recovery of local number portability and local competition start-up
costs
|
241. |
The Commission notes that in
its proposed price cap deferral account schedule for the price cap
year ending 31 July 2006, Télébec proposed to draw down from the deferral
account $2.3 million per year for the recovery of local number
portability (LNP) and local competition start-up costs. In Follow-up
to Decision 2002-43 - Société
en commandite Télébec's request to recover the start-up costs for
local competition and local number portability, Telecom Decision
CRTC 2005-76, 22 December 2005,
the Commission determined that Télébec could recover $1.6 million
per year for its LNP and local competition start-up costs over a four-year
period, starting on 1 August 2005. Télébec's deferral account schedule
reflects the recovery of LNP and local competition start-up costs
for the price cap year ending on 31 July 2006. |
|
Recovery of the costs for teletypewriter upgrades to pay telephones
|
242. |
In Follow-up to Access
to pay telephone service, Telecom Decision CRTC 2004-47
- Société en commandite Télébec request to recover costs associated
with upgrading pay telephones with teletypewriter units, Telecom
Decision CRTC 2005-75, 22 December
2005, the Commission determined that Télébec could draw down $0.16
million per year over a seven-year period from its deferral account,
starting with the price cap year ending on 31 July 2006,
for the recovery of the costs for TTY upgrades to pay telephones. |
|
SIPs in non-HCSAs
|
243. |
The Commission notes that in
Société en commandite Télébec – Follow-up to Decision 2002-43
– Service improvement plan, Telecom Decision CRTC 2004-77,
18 November 2004 (Decision 2004-77),
the Commission determined that Télébec would be able to recover costs
related to its SIPs in non-HCSAs. In this proceeding, Télébec proposed
to draw down from its deferral account $276,285 for the first year
of the price cap period and $365,000 thereafter to recover its SIP
in non-HCSAs. The Commission considers that these draw-downs are appropriate
and has included them in the attachment to this Decision. |
|
TELUS Québec - Residential optional service bundles
|
244. |
The Commission notes that in
TELUS Communications Inc. – COMM Residential Optional Service
Bundles, Telecom Order CRTC 2004-411,
8 December 2004 (Order 2004-411),
it approved TELUS Québec's proposal to include the revenues resulting
from the non-compliant rate increases in the company's deferral account.
However, the Commission notes that TELUS Québec has not included
these revenues in its deferral account schedules. Accordingly, the
Commission directs TELUS Québec to reflect these revenues in its deferral
account as per the directions set out in Order 2004-411. |
|
Summary of considerations regarding Télébec- and TELUS
Québec-specific issues
|
245. |
In light of the above, the
Commission estimates that TELUS Québec will have a recurring amount of
$1.5 million and an accumulated balance of $5.4 million in its deferral
account at the end of the fourth year of the current price cap period. |
246. |
In addition, the Commission
estimates that Télébec will have a recurring shortfall of $1.4 million
and an accumulated balance of $0.5 million in its deferral account at
the end of the fourth year of the current price cap period. The
Commission further notes that with the expiry of the amortization of the
revenue deferral account discussed above, Télébec's recurring shortfall
will increase to $3.3 million by the end of the extension year of the
current price cap period. |
247. |
The Commission considers that
Télébec should be allowed to recover the recurring shortfall in its
deferral account through an exogenous adjustment since the shortfall
results from Commission-mandated actions. Accordingly, the Commission
directs Télébec to file an exogenous factor proposal for the recovery of
the recurring shortfall in its deferral account coincident with its 2006
annual price cap filing. |
248. |
The Commission notes that
Télébec's subscribers already pay the highest rates for local exchange
services in Canada. The Commission considers that it is important to
minimize the potential rate increases to these subscribers. Accordingly,
the Commission directs Télébec to suspend the application of the I-X
constraint, if I is less than X, on its Competitor Services and on the
Other Capped Services basket effective 1 August 2006. The Commission
also directs Télébec to place the revenues associated with the
suspension of these constraints in its deferral account effective 1
August 2006. |
|
Calculation of deferral account balances
|
|
Positions of
parties |
249. |
Parties proposed two
methodologies for calculating the deferral account balances. Under the
first methodology (Methodology 1), the impact of annual cumulative
additions and draw-downs would be treated as cash flows from company
revenues in a given year if no action were taken to dispose of the funds
in that year. Aliant Telecom, Bell Canada, and MTS Allstream proposed
this methodology. |
250. |
Under the second methodology
(Methodology 2), the impact of annual additions and draw-downs would
accumulate for the duration of the price cap period. SaskTel, TCI,
TELUS Québec, and Télébec proposed this methodology. The Consumer Groups
and the CCTA supported using Methodology 2. |
251. |
Aliant Telecom submitted that
Methodology 2 would be appropriate only if one considered that the
initiatives used to clear the deferral accounts had no impact outside
the price cap period. The company argued that Methodology 1 ensured that
there was no impact outside the price cap period, as could be seen from
the relationship of accruals to the deferral accounts, the normal
working of the price regulation regime, and the permanent nature of
draw-downs already approved. |
252. |
Bell Canada submitted that its
representation of its deferral account balance, and therefore the
amount that should be addressed in this proceeding, reflected the
Commission's description of the deferral accounts set out in Decision
2002-34. The company also submitted
that its deferral account balance represented the cumulative annualized
values of price changes that had been deferred as a result of not
introducing mandated price changes to residential services in non-HCSAs.
Bell Canada stated that, as such, the balance at the end of a given
price cap year represented the annualized value of initiatives, beginning
in the next price cap year, that would be required to eliminate the
balance owed. |
253. |
MTS Allstream noted that the
deferral accounts had been established to offset rate reductions that
might otherwise have been required for the ILECs' residential exchange
services in non-HCSAs, given that the I-X price cap formula applied to
those services. It also submitted that to clear the deferral account net
balance, rate reductions, program expenditures, or other approved means
with a total annual equivalent value equal to the net annualized value
of these rate reductions would be required. |
254. |
The Consumer Groups noted that
Methodology 1 "zeroed out" annual reductions associated with the
operation of the price regulation regime and started each year
unencumbered by the rate reductions produced in the previous period. In
the Consumer Groups' view, this approach was lucrative for the companies
employing it. |
|
Commission's
analysis and determinations |
255. |
The Commission notes that under
the price regulation regimes set out in the price cap decisions, if
rates are changed to account for the impact of the I-X component or for
exogenous factors in a given year, the resultant rate changes and
revenue impacts are reflected indefinitely for subsequent years. The
Commission also notes that the pricing constraints on certain baskets –
such as Other Capped Services and Competitor Services – operate in this
manner. The Commission considers that, in the absence of the deferral
accounts, the constraints for the Residential Local Services in
non-HCSAs basket would have operated in a similar manner. Therefore, the
Commission considers that accounting for the funds in the deferral
accounts should follow these same principles. |
256. |
On that basis, the Commission
considers that the net additions/draw-downs from various factors, such
as the I-X component and exogenous factors, not used in any given year
should accrue in the deferral accounts. This would result in an
accumulated balance and a net recurring amount at the end of each year
in the deferral accounts for which an accounting would be required. The
Commission considers that even if the balance that will have accumulated
by the end of the price cap period were eliminated, funds would continue
to accumulate in the deferral accounts beyond the price cap period due
to the net annual recurring amount. Accordingly, the Commission
considers that the deferral account schedules must show both an
accumulated year-end balance as well as a net annual recurring amount
for each year of the price regulation regime. |
257. |
The Commission notes that
Methodology 1 only accounts for the net recurring amounts and does not
take into consideration the balance that would have accumulated in the
deferral accounts at the end of any year during the price cap period.
The Commission considers that Methodology 1 does not follow the
principles underlying the price regulation regimes noted above.
Accordingly, the Commission rejects the use of Methodology 1 to account
for funds in the deferral accounts. |
258. |
The Commission considers that
Methodology 2 follows the principles underlying the price regulation
regimes noted above, and accounts for both the recurring and accumulated
amounts in the deferral accounts. Accordingly, the Commission directs
each ILEC to use Methodology 2 to determine the funds in its deferral
account. |
259. |
In the attachment to this Decision,
the Commission estimates, on a preliminary basis, the ILECs' deferral
account balances at the end of the fourth year of the current price
cap period using this methodology. The Commission notes that the deferral
account balances cannot be finalized at this time due to certain outstanding
proceedings that may have an impact on these balances. For example,
the Commission notes that the ILECs and competitors have not yet identified
all of the circuits that qualify for Competitor Digital Network (CDN)
rates from the determinations of Competitor Digital Network Services,
Telecom Decision CRTC 2005-6, 3 February
2005 (Decision 2005-6). In addition,
the Commission has received several applications related to the implementation
of either Competitor Digital Network Access (CDNA) or CDN service
that may affect the deferral accounts. In each case, the impact on
the ILECs' deferral accounts will depend on the Commission's disposition
of these applications. Therefore, the Commission is able to provide
only preliminary estimates of the deferral account balances at this
time. |
260. |
Based on the methodology
approved above, the Commission estimates, on a preliminary basis, that
the ILECs' deferral account balances at the end of the fourth year of
the current price cap period in 2006 will be as follows: |
|
Deferral Account Summary by Company
Preliminary Balances
Price Cap Year Ending in 2006
($ millions)9 |
|
ILEC |
Accumulated balance |
Recurring amount |
|
Aliant Telecom |
21.8 |
2.2 |
|
Bell Canada |
480.5 |
81.5 |
|
MTS Allstream |
18.0 |
3.0 |
|
SaskTel |
1.5 |
0.9 |
|
Télébec |
0.5 |
-1.4 |
|
TCI |
125.1 |
8.6 |
|
TELUS Québec |
5.4 |
1.5 |
|
Total |
652.7 |
96.3 |
|
Refer to the attachment for
detailed preliminary schedules for each company. |
|
Updating schedules and submitting proposals
|
261. |
The Commission directs each
ILEC to update its deferral account schedule in a format similar to the
attachment of this Decision. The schedule should include the extension
year of the price cap period and reflect all decisions that impact the
balance in the company's deferral account. In addition, the Commission
directs each ILEC to provide supporting calculations for any new or
revised figures included in its schedule. The ILEC is to also provide
any assumptions or rationale, including the rate of interest on
accumulated balances, used to derive these figures. |
262. |
The Commission directs each
ILEC to file, by 15 May 2006, its updated deferral account schedule and
its proposed rate reductions to eliminate the recurring amount in its
deferral account. The Commission also directs each ILEC to file, by 30
June 2006, its initiatives to dispose of the funds that will have
accumulated in its deferral account by the end of the fourth year of the
price cap period. These submissions should take into consideration the
determinations made in this Decision as well as any subsequent decisions
that will impact the amounts in the company's deferral account. Once
these proposals have been filed, the Commission will determine what
process or processes will be required to consider these submissions. |
263. |
The dissenting opinion of
Commissioner Cram is attached. |
|
Secretary General |
|
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
|
|
Footnotes:
The first two years of the current price cap
period were from 1 June 2002 to 31 May 2004 for Aliant Telecom, Bell
Canada, MTS Allstream, SaskTel, and TCI, and from 1 August 2002 to 31
July 2004 for Télébec and TELUS Québec.
On 8 November 2004, Rogers Wireless Inc. acquired Microcell
Telecommunications Inc. Subsequently, Microcell Solutions Inc. became
known as Fido Solutions Inc. (Fido). Responses to interrogatories dated
8 April 2005 and final comments dated 10 June 2005 were submitted by
Fido (as successor to Microcell). All references to Microcell in this
Decision refer to submissions made by Microcell and subsequently Fido.
|