ARCHIVED - Telecom Order CRTC 2002-238

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Telecom Order CRTC 2002-238

 

Ottawa, 14 June 2002

 

Téléphone Guèvremont inc. - Final 1999 and 2000 Carrier Access Tariffs and Network Access Tariffs

 

Reference: Tariff notices 25, 25A, and 26

 

Summary

 

In this order, the Commission approves, with modifications, Téléphone Guèvremont inc.'s :

  i. final 1999 Carrier Access Tariff which consists of a contribution rate of $0.0031 per minute and a direct toll rate of $0.00 per minute;
  ii. final 1999 Network Access Tariff of $0.7732 per quarter mile per month;
  iii. final 2000 Carrier Access Tariff which consists of a contribution rate of $0.00 per minute and a direct toll rate of $0.0163 per minute; and
  iv. final 2000 Network Access Tariff of $1.2348 per quarter mile per month.
 

The Commission also directs Téléphone Guèvremont inc. to file proposed final 2001 Carrier Access Tariff and Network Access Tariff.

 

The application

1.

The Commission received an application by Téléphone Guèvremont inc. (Guèvremont; the Company) dated 16 February 2001, for approval of its final 1999 Carrier Access Tariff (CAT) and Network Access Tariff (NAT). The Company also filed on 6 March 2001, revisions to its proposed final 1999 CAT and NAT. On 12 March 2001, Guèvremont filed its proposed final 2000 CAT and NAT for Commission approval.

2.

Guèvremont proposed the following contribution and direct toll amounts, total number of originating and terminating toll conversation minutes, including direct access line (DAL) minutes, and associated rates for the calculation of its 1999 and 2000 CATs:

 

1999

2000

Amount

Conversation + DAL Minutes

Rate/
min

Amount

Conversation + DAL Minutes

Rate/
min

Contribution

$

 

$

$

 

$

 

65,132

20,836,299

0.0031

0

21,582,501

0.0000

             
 

Amount

Conversation Minutes

Rate/
min

Amount

Conversation Minutes

Rate/
min

Direct toll

$

 

$

$

 

$

 

370,103

19,916,299

0.0186

338,274

20,718,501

0.0163

3.

In addition, Guèvremont proposed the following network access component, number of quarter miles (¼ miles), and associated rates for the calculation of its 1999 and 2000 NATs:

 

1999

2000

 

 

Amount

 

¼ miles

Rate/ ¼ mile/mo.

 

Amount

 

¼ miles

Rate/ ¼ mile/mo.

Network

$

 

$

$

 

$

access

135,871

14,644

0.7732

139,721

9,430

1.2348

4.

On 13 March 2001, Bell Canada filed comments on Guèvremont's proposed 1999 CAT and NAT. Following two rounds of interrogatories, Guèvremont filed final audited financial statements for the years 1999 and 2000 on 7 May 2002.

Analysis and determinations

5.

The method for calculating the CAT and NAT rates for independent telephone companies was determined in Regulatory framework for the independent telephone companies in Quebec and Ontario (except Ontario Northland Transportation Commission, Québec-Téléphone and Télébec Ltée), Telecom Decision CRTC 96-6, 7 August 1996 (Decision 96-6) and was modified in Review of contribution regime of independent telephone companies in Ontario and Quebec, Telecom Decision CRTC 99-5, 21 April 1999 (Decision 99-5).

6.

Based on the methodology outlined in Decisions 96-6 and 99-5, the Commission must consider in determining the final CAT rates, the appropriateness of the dollar amounts required and the number of originating and terminating toll conversation minutes and DAL minutes. In order to determine the final NAT rates, the Commission must consider the dollar amounts required and the distance, measured in quarter miles, of the dedicated and DAL circuits provided for their customers on behalf of other telecommunication carriers. Based on the record of this proceeding, the Commission finds it is also necessary to assess the regulatory impact of the deemed interest of an outstanding loan, the slamming of customers in 1999, and the reporting of broadband investment.

Minutes

7.

Guèvremont reported the total number of originating and terminating toll conversation and DAL minutes transported by long distance providers, Bell Canada and Maskatel Inc. (Maskatel) for 1999 and 2000, as follows:

Conversation minutes

DAL minutes

Total

1999

19,916,299

920,000

20,836,299

2000

20,718,501

864,000

21,582,501

8.

Bell Canada and Maskatel did not provide an estimate of minutes. In its submission, Bell Canada requested that Guèvremont disclose the disaggregated number of minutes by long distance provider.

9.

The Commission notes that only the total number of minutes is necessary to establish a CAT rate. Accordingly, the Commission finds that it is not necessary to require Guèvremont to disclose disaggregrated minute data at this time.

10.

The Commission considers the reported number of minutes to be reasonable and approves the number of conversation and DAL minutes as proposed by Guèvremont, for the purpose of calculating its contribution and direct toll rates.

Deemed interest on loan

11.

In Téléphone Guèvremont Inc.'s final 1998 Carrier Access Tariff, Order CRTC 2000-785, 16 August 2000 (Order 2000-785),the Commission imputed an interest rate of 13 percent for a loan of $3.5 million by Guèvremont to an affiliated company. The Commission also indicated that it would re-evaluate the regulatory treatment of this loan should it remain outstanding beyond 31 December 2000.

12.

Guèvremont identified that the loan continued to be outstanding for 1999 and 2000 and that interest, calculated at a rate of 13 percent had been included in its calculations of 1999 and 2000 CATs. In its submission, the Company also stated that the loan was repaid in full in December 2000. However, Guèvremont's non consolidated financial statements, filed 7 May 2002, indicate that there continues to be an outstanding interest-free loan of $3,048,813 as of 31 December 2000.

13.

While the Commission considers that the deemed interest for this loan has been appropriately recognized in the calculations of the 1999 and 2000 CATs, the Commission will review the regulatory treatment of this interest-free loan in Guèvremont's 2001 CAT application.

Impact of slamming customers in 1999

14.

In a letter decision dated 24 December 1999, the Commission found that Guèvremont had converted its entire local exchange customer base from Bell Canada to a different long distance service provider without the prior consent of the customers, a practice that is known as slamming. The Commission determined that the company's actions had been in violation of the equal access rules set out in the Société d'administration des tarifs d'accès des télécommunicateurs (SATAT)'s, primary interexchange carrier/customer account record exchange (PIC/CARE) Access Customer Handbook (PIC/CARE manual), approved in Telecom Order CRTC 99-841, 30 August 1999.

15.

The Commission notes that when customers choose to transfer to a different primary interexchange carrier (PIC), the tariffs of the local exchange carrier (LEC) provide for a charge associated with the activity of the transfer. This charge is also known as a PIC selection charge. In addition, all LECs have a specific tariff charge that is applicable when a customer is transferred without authorization. This charge is also known as a slamming charge. Both the PIC selection charge and slamming charge are applied against the interexchange carrier (IXC) having requested the transfer of the customer.

16.

Guèvremont noted that, in 1999, it had transferred 6,451 subscribers to Maskatel's long distance service from Bell Canada's long distance service. Guèvremont indicated that it had made the transfer on its own initiative and not as a result of an IXC request. Therefore, there was no IXC to apply the tariffs to, nor could it apply tariffs to itself.

17.

In its interrogatory, the Commission asked Guèvremont to explain why the Commission should not impute the revenues it should have received pursuant to the application of the PIC selection and slamming tariffs.

18.

In response, Guèvremont submitted that the Commission should not impute revenues for the following reasons:

· the Commission had directed Guèvremont to put equal access in place;
· only Maskatel's carrier identification code (CIC) was known to Guèvremont at that time and thus the PIC conversions were legitimate;
· pursuant to the SATAT PIC/CARE Manual, the tariff applies only to companies registered as long distance service providers and Bell Canada was not registered as a long distance service provider until just recently;
· Bell Canada never paid for PIC transactions pursuant to the tariff, and, therefore, such revenues should not be imputed to Guèvremont;
· the tariff reflects the costs associated with individual PIC transactions and not the costs associated with bulk transactions; and
· Guèvremont's subscribers suffered no financial prejudice from the conversion.

19.

The Commission notes that the equal access provisions in Guèvremont's General Tariff came into force with the implementation of equal access in Guèvremont's territory. Moreover, the implementation of equal access in other independent telephone companies' territories did not result in Bell Canada long distance service subscribers being slammed.

20.

The Commission finds that Guèvremont's claim that it had knowledge of only Maskatel's identification code is not reasonable, as Bell Canada was the default long distance provider. The Commission considers that Guèvremont could easily have contacted Bell Canada to obtain its CIC.

21.

Guèvremont also claims that Bell Canada had not registered as a long distance provider pursuant to the PIC/CARE Manual at that time and that the tariffs only apply to companies that are duly registered. The Commission sees no reason why Bell Canada, as the default long distance service provider of Guèvremont's subscribers, would have to register as a new long distance service provider pursuant to the PIC/CARE Manual.

22.

Bell Canada submitted that slamming charges should be assessed by Guèvremont against the competitive local exchange carrier and the long distance provider, to which the customers were transferred without their consent.

23.

The Commission notes that there is no evidence that Guèvremont ever transferred its customers to another local service provider. Based on the record of this proceeding, the Commission finds that Guèvremont simply transferred their customers to another long distance provider.

24.

Guèvremont further submitted that it had only incurred costs of $1.28 (two minutes of one employee's time) to make the initial conversion of all the affected customers, and an additional $1.28 to make the re-conversion.

25.

The Commission notes that Guèvremont requested and received approval of the PIC selection and slamming tariff charges based on estimated costs of the transfer activities. Although it is reasonable to expect some economies of scale would be realized when transferring all customers at once, rather than on an individual basis, the Commission notes that Guèvremont does not have an approved tariff for bulk transfers of this nature. Accordingly, the Commission finds that Guèvremont's estimated costs for the bulk transfer to be unrealistic.

26.

The Commission considers that Guèvremont should have realized revenues in 1999 in accordance with its approved tariffs from the unauthorized transfer of its customers from Bell Canada to another long distance provider, namely Maskatel Inc., and has adjusted the 1999 direct toll amounts as detailed in paragraphs 32 - 35.

Broadband Investment

27.

InDecision 99-5,the Commission directed small independents in Ontario and Quebec to file detailed information on broadband applications including investment levels and planned use for any fibre investments as part of their annual CAT filings.

28.

The Commission notes that the intent of the directives of Decision 99-5 was to ensure that independent telephone companies did not include inappropriate broadband investmentsand expenses in the calculation of their CATs.

29.

Guèvremont indicated that it has no plans to use fibre investments for broadband applications and confirmed that the investment in fibre for 1999 and 2000 were reported according to the methodology outlined in Decision 96-6 and 99-5.

30.

The Commission is satisfied with Guèvremont's acknowledgement that its fibre investment is not planned for broadband purposes and that the investment has been appropriately reported for purpose of calculating the CAT.

Commission determination - 1999 CAT and NAT

Contribution requirement and rate

31.

The Commission finds that Guèvremont's calculation of the proposed 1999 contribution requirement is in accordance with Commission directives in Decision 99-5 and Order 2000-785. Therefore, the Commission approves Guèvremont's proposed 1999 contribution requirement of $65,132 with a corresponding rate of $0.0031 per conversation minute.

Direct toll component and rate

32.

The Commission has reduced Guèvremont's proposed direct toll component by the amount of imputed revenues corresponding to the application of the relevant tariff charges for the slamming of Bell Canada's long distance service subscribers as noted in paragraph 26.

33.

The imputed revenues include $19.81 for each access line transferred from Bell Canada to Maskatel, $52.88 for each access line transferred without the subscriber's consent and $19.81 for each access line returned to Bell Canada from Maskatel.

34.

Therefore, Guèvremont's proposed 1999 direct toll component is reduced by an amount of $596,717.

35.

The Commission notes that Guèvremont's proposed direct toll component for 1999 is $370,103. The Commission considers that any reduction to the direct toll component cannot exceed the amount proposed. Therefore, the Commission approves a 1999 direct toll component of zero.

Network component and rate

36.

The Commission finds that Guèvremont's calculation of the proposed 1999 network component is in accordance with Commission directives in Decision 99-5, therefore the Commission approves Guèvremont proposed 1999 network component of $135,871 with a corresponding rate of $0.7732 per quarter mile per month.

Commission determination - 2000 CAT and NAT

Contribution requirement and rate

37.

The Commission finds that Guèvremont's calculation of the proposed 2000 contribution requirement is in accordance with Commission directives in Decision 99-5 and Order 2000-785. Therefore, the Commission approves Guèvremont's proposed 2000 contribution requirement of $0.00

Direct toll component and rate

38.

The Commission finds that Guèvremont's calculation of the proposed 2000 direct toll component is in accordance with Commission directives in Decision 99-5. Therefore, the Commission approves Guèvremont's proposed 2000 direct toll component of $338,274 with a corresponding rate of $0.0163 per minute.

Network component and rate

39.

The Commission finds that Guèvremont's calculation of the proposed 2000 network component is in accordance with Commission directives in Decision 99-5. Therefore, the Commission approves Guèvremont's proposed 2000 network component of $139,721 with a corresponding rate of $1.2348 per quarter-mile per month.

Implementation

40.

The Commission directs Guèvremont to:

a) issue revised tariff pages within 15 days as of the date of this order and to proceed with billing adjustments forthwith;

b) re-file its 1999 and 2000 actual Phase III results to reflect the Commission's determinations within 30 days as of the date of this order; and

c) file its proposed final 2001 CAT within 45 days as of the date of the order.

Secretary General

This document is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca

Date Modified: 2002-06-14

Date modified: