Information
February 16, 2006
Backgrounder on the Deferral Accounts Decision
About the Deferral Account
In 2002, the Commission set out its price cap framework. This included rules governing the rates charged to residential and business consumers as well as to competitor companies by the major local telephone companies. One of the elements of the price regulation regime is the deferral account.
Price cap regulation places a ceiling on prices a company can charge its customers. At the same time, in order to avoid an adverse impact on local competition, the Commission required each ILEC to create a deferral account in conjunction with the price cap regime. ILECs were requested to place into those accounts amounts equal to the revenue reductions that would otherwise have resulted from an application of the price cap formula.
Approximately 50% of the funds in the deferral accounts to date have been used to reduce rates for competitor services. In March 2004, the Commission initiated a proceeding to address the outstanding amounts in the deferral accounts and received more than 50 proposals regarding the use of funds in the accounts.
The Commission determined that the funds in the deferral accounts should be deployed in accordance with Canadian telecommunications policy.
In assessing the various proposals, the Commission placed emphasis on the principle of competitive neutrality and on proposals that primarily provided benefits to residential subscribers in order to achieve an overall balance among stakeholders.
The funds in the deferral accounts are to be used for the expansion of broadband services and initiatives to improve accessibility to telecommunications services for persons with disabilities.
Guidelines for Broadband Expansion Proposals
Investments in broadband expansion will be guided by various policy considerations, such as:
- expansion of broadband services to communities 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 based on least cost technology; and
- “backbone” facilities made available to competitive broadband service providers at a minimal rate.
In addition, ILECs will be required 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.
Guidelines for Accessibility to Telecommunications Services
ILECs will be required to allocate a minimum of five percent of the accumulated balance in their deferral accounts to fund programs to improve accessibility to telecommunications services for persons with disabilities.
They will also be required to consult and work with the appropriate advocacy organizations for persons with disabilities prior to submitting their proposals for approval.
Updating Balances and Submitting Proposals
Based on the preliminary estimates of the deferral account balances in this decision, it is estimated that the deferral account accumulated balances for all of the ILECs in total will be approximately $650 million, subject to change based on outstanding proceedings.
By May 15, 2006, ILECs will be required to file their updated deferral account balances and their proposed rate reductions to eliminate the recurring amount in its deferral account.
The Commission also directs each ILEC to file, by June 30, 2006, its initiatives to dispose of the funds that will have accumulated in its deferral account.
Reference document: News release - CRTC directs funds in deferral accounts to expand rural broadband and services for Canadians with disabilities
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Date Modified: 2006-02-16
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