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ARCHIVED - Order CRTC 2000-787

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Order CRTC 2000-787

Ottawa, 17 August 2000
TELUS review and vary application denied for Northwestel interconnection agreements
Reference: 8662-T42-01/00

1.

BCT.TELUS Communications Inc. (TELUS) filed an application requesting that the Commission review and vary Telecom Orders CRTC 99-1230 and 99-1231 (the orders), dated 23 December 1999. The orders denied two interconnection agreements (between TELUS Communications Inc. (TCI) and Northwestel Inc. and TELUS Communications (B.C.) Inc. (TCBC), formerly BC TEL, and Northwestel).

2.

In the orders, the Commission:
a) noted that it had initiated a proceeding, Northwestel Inc. - Implementation of toll competition and review of regulatory framework, quality of service and related matters, Telecom Public Notice CRTC 99-21, dated 1 October 1999, to, among other things:
  • assess the level of contribution required for Northwestel to achieve the basic service objective;
  • address the terms and conditions that may permit long distance competition in Northwestel's operating territory; and
  • determine whether any supplementary funding is required to achieve the basic service objective.
b) noted that the proposed agreements would have had a negative effect on Northwestel's revenue; and
c) directed TELUS and Northwestel to continue to base their settlement payments on the current interconnection agreements (1996 agreements) until the issues in the Northwestel proceeding are addressed.

3.

TELUS requested that the Commission:
  • make the 1996 agreements interim;
  • modify the 1996 agreements on an interim basis by incorporating certain parts of the proposed agreements;
  • review the orders in light of issues to be determined in the Northwestel proceeding; and
  • clarify paragraph 4 of the orders, which states that the parties are to base their settlement payments on the 1996 agreements.

TELUS alleges commercial decision protects Northwestel revenues

4.

TELUS alleged that there is substantial doubt as to the correctness of the orders and argued that the Commission altered a commercial decision to protect the revenues of Northwestel. It also argued that the 1996 agreements are inconsistent with the trend of settlements between non-affiliated carriers in Canada. TELUS submitted that any supplementary funding for Northwestel should be established in a straightforward and transparent process.

5.

TELUS noted that, since 1996, the settlement revenues provided to Northwestel by TELUS have increased and the percentage of Northwestel's long distance operating revenue from settlement revenues has increased.

6.

In reply, Northwestel submitted that:
  • under section 29 of the Telecommunications Act, the Commission has an obligation to consider the merits and substantive effect of any agreement proposed by parties before granting any approval. Under the Act, the Commission has the obligation to exercise its judgment with regard to the interests of the parties and the broader public interest;
  • having regard to the importance of maintaining reasonable revenues for Northwestel to continue to provide service in high-cost operating areas of the north, the Commission exercised its judgment in the public interest and denied approval of all proposed new interconnection agreements with Northwestel;
  • by maintaining the 1996 agreements in place, the Commission provided certainty that, at least until early 2001, a reasonable flow of settlement revenues will be available to Northwestel to permit the company to meet its obligation to maintain and extend service to the north; and
  • the difference in settlement payments would have a material effect on the net income of Northwestel.

7.

Northwestel submitted that TELUS's settlement payments have increased because TELUS's minutes terminating in Northwestel's territory have increased significantly, whereas Northwestel originating minutes terminating on TELUS's network have declined slightly or remained constant. Northwestel stated that the increase in the percentage of total long distance revenue due to settlement revenue reflects the shift to greater northbound traffic.

8.

The Commission notes that, under section 29 of the Act, agreements for the exchange of traffic between a Canadian carrier and another carrier, whether affiliated or unaffiliated, must be approved by the Commission. In determining whether to approve an agreement, the Commission considers the public interest and the telecommunications policy objectives set out in the Act, as well as the interests of the parties.

9.

The Commission has indicated its concern about Northwestel's financial situation in a number of recent decisions. In Northwestel Inc. - Interconnection of interexchange carriers and related resale and sharing issues, Telecom Decision CRTC 98-1, dated 11 February 1998, the Commission ordered rate rebalancing in Northwestel's territory in an effort to address the problem of toll bypass. The Commission was concerned that bypass was undermining Northwestel's ability to continue subsidizing below-cost services from above-cost toll rates. In Telephone service to high-cost service areas, Telecom Decision CRTC 99-16, dated 19 October 1999, the Commission stated that it had "an immediate concern about the financial impact of toll bypass on NWTel's ability to maintain and improve telecommunications service in northern Canada."

10.

In the Commission's view, it was appropriate for the Commission to maintain the current settlement regime until the Commission has addressed the issues to be considered in the Northwestel proceeding. The Commission notes that a public hearing in connection with the Northwestel proceeding was held in June 2000 and a decision is expected in due course.

11.

The Commission further notes that Bell Canada also applied for approval of a new interconnection agreement with Northwestel. In Telecom Order CRTC 99-1232, dated 23 December 1999, issued at the same time as the orders in question in the current proceeding, the Commission denied the Bell Canada/Northwestel agreement. In light of the Northwestel proceeding, the Commission decided to maintain the current settlement framework.

12.

The Commission considers that TELUS has not demonstrated that the orders denying the proposed agreements were inappropriate on the basis that the Commission interfered with a commercial decision to protect the revenues of Northwestel, as alleged. The Commission considers that TELUS has not discharged the burden of showing that there is substantial doubt as to the correctness of the orders in this regard.

Adequacy of the process leading to the orders

13.

TELUS submitted that it did not have the opportunity to state its case as it was not given the opportunity to respond to interrogatories. TELUS stated that:
  • it did not have the opportunity to see confidential interrogatory responses filed by Northwestel;
  • the Commission did not address interrogatories to either party in the proceeding on the TCBC/Northwestel agreement; and
  • it was not a party to the inquiries made by the Commission in respect of a proposed agreement between Bell Canada and Northwestel even though such exchanges included information related to TCI and TCBC.

14.

In reply, Northwestel submitted that TELUS failed to establish that the procedure was flawed because:
  • the applicant bears the onus to put before the Commission any material facts in support of the application and to respond to any data or calculations put on the record with which it disagrees;
  • TELUS was copied on all interrogatories and responses exchanged between the Commission and Northwestel in the proceedings leading up to the orders. These responses cross-referenced the interrogatories in the Bell Canada/Northwestel proceeding;
  • TELUS was aware that the Commission interrogatories focused on the revenue impact on Northwestel;
  • TELUS could have made submissions regarding the agreements or challenged any data or statements that were on the record; and
  • the Commission has usually declined to re-open its decisions pursuant to section 62 of the Act, for the benefit of a party who had the opportunity to make its case in the earlier proceeding, but neglected to do so.

15.

The Commission notes that TELUS received an abridged version of Northwestel's responses, which indicated that Northwestel provided a comparison of its settlement revenue under the current and proposed agreement with TCI. The Commission notes that TELUS did not request disclosure of confidential information in Northwestel's responses.

16.

The Commission notes that Northwestel's interrogatory responses cross-referenced the interrogatory responses in the proceeding dealing with the proposed Bell Canada/Northwestel agreement, which was denied in Order 99-1232. As part of that proceeding, Northwestel provided the originating and terminating minutes exchanged with each carrier, as well as the settlement proceeds and settlement costs under the current and proposed agreements with Bell Canada, TCI, and TCBC.

17.

The Commission notes that TELUS, the applicant in the proceedings leading to the orders, had the onus to put before the Commission any material facts in support of its applications and to respond to any data or calculations put on the record, or referred to, with which it disagreed.

18.

The Commission is of the viewthatTELUS hasnot demonstrated that the process leading to the orders was inadequate, or leads to an error of law. Thus, there is no substantial doubt as to the correctness of the orders in this regard.

Overstatement of negative revenue impact

19.

TELUS submitted that there might have been errors in Northwestel's interrogatory responses that overstated the negative revenue impact of the proposed agreements on Northwestel.

20.

The Commission notes that TELUS agrees that the proposed agreements, as compared to the 1996 agreements, would have a negative effect on Northwestel's revenue. The Commission further notes that even if TELUS's assessment of the revenue impact were accepted, the proposed agreements would still have a significant negative effect on Northwestel's revenue.

21.

The Commission considers that TELUS has not demonstrated that there is substantial doubt as to the correctness of the orders due to an overstatement of the negative revenue impact of the agreements, as alleged by TELUS.

TELUS alleged that the 1996 agreements are "unworkable"

22.

TELUS submitted that it is prejudiced because certain parts of the 1996 agreements are "functionally unworkable." Specifically, TELUS submitted that:
  • schedule "D" (Cellular 400 Roamers) should be deleted from the 1996 agreements;
  • schedule "G" (MegaPlan Service) from the proposed agreements should be added to the 1996 agreements; and
  • the rates for U.S. and international traffic from schedule "E" in the proposed agreements should be incorporated into the 1996 agreements as these rates reflect a new agreement with U.S. carriers and a flow-through of new costs associated with Northwestel's traffic to and from the U.S. and international carriers.

23.

Northwestel stated that it would be prepared to file a new application jointly with TELUS to amend the 1996 agreements in regard to the schedules dealing with Cellular 400 service and MegaPlan service.

24.

In the Commission's view, it would be appropriate to treat the changes agreed to by the parties as new applications. The Commission approves the following modifications to the 1996 agreements and directs Northwestel to file the 1996 agreements, as amended, for the Commission's information:
  • the deletion of the Cellular 400 Roamers schedule; and
  • the addition of the MegaPlan service schedule from the proposed agreement between the same parties.

25.

Northwestel did not agree to change the rates for U.S. and international traffic.

26.

Under the 1996 agreements, the settlement rate for traffic between the U.S. and Northwestel is the settlement rate prescribed in schedule "D" of the Canada-United States Telecommunications Interconnection and Service Agreement dated 1 January 1994 (Canada-U.S. agreement). TELUS indicated that this agreement has been replaced by a new settlement arrangement between TELUS and U.S. carriers and stated that it does not know how to settle U.S. and international revenues for 1999 and 2000 under the 1996 agreements. The Commission is of the view that, pursuant to the 1996 agreements, TELUS and Northwestel are to base their settlement payments for traffic between the U.S. and Northwestel on the last rate in place that was under schedule "D" of the Canada-U.S. agreement.

27.

The Commission considers that TELUS has not shown that the 1996 agreements are "unworkable", as alleged. TELUS has not discharged the burden of showing that there is substantial doubt as to the correctness of the orders in this regard.

Clarification of the orders

28.

TELUS requested that the Commission issue a clarification regarding paragraph 4 of the orders, which requires TELUS and Northwestel to continue to base their settlement payments on the 1996 agreements. TELUS is of the view that Article 9.5 and related schedules of the 1996 agreements require TELUS and Northwestel to recalculate the settlement rates for 1999 and 2000 using updated contribution rates. However, TELUS stated that it was Northwestel's position that TELUS and Northwestel are to continue to use the settlement rates that were calculated specifically for 1998. The Commission notes that pursuant to Article 9.5 of the 1996 agreements, the parties are required to recalculate settlement rates for each settlement year using the methodologies outlined in the agreements.

Conclusion

29.

In light of the above, the Commission is of the view that there is no substantial doubt as to the correctness of Orders 99-1230 and 99-1231 and that, accordingly, the review and vary application should be dismissed. Given this conclusion, the Commission considers that the application to make the 1996 agreements interim is moot.
Secretary General
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