Wireless operators consider appealing CRTC’s overhaul of contribution regime

Canada’s wireless operators say they’re frustrated by recent CRTC decisions that radically increase what they pay into the contribution pool, while at the same time allowing independent telcos to raise local rates. WSPs are also upset that the new regime will begin January 1, effectively eliminating any transition period. Dawn Hunt, VP of inter-carrier relations at Rogers AT&T Wireless Inc, describes the commission’s final rulings on contribution as a major disappointment for the wireless industry. "There was an opportunity for the commission here to make some fundamental changes to the contribution regime which (it) saw fit to do for the independent (telephone companies), but not for the rest of the country," she told Report on Wireless. Under the current regime, the wireless industry is expected to pay between $13-$15 million this year towards contribution, says Peter Barnes, president/CEO at the Canadian Wireless Telecommunications Association. Under the new rules, he estimates that figure will jump to about $200 million in 2001. According to its decision, all telecommunications service providers with revenue greater than $10 million will be levied an interim rate of 4.5 per cent of eligible revenue that will go into the contribution pool which will subsidize the cost of providing local telephone service to high-cost serving areas. That figure will be adjusted depending on the actual filings of revenue and deductions of all the different telecommunications carriers. Once the actual contribution rate is determined, it will be applied retroactively to January 1. Companies now required to pay contribution include WSPs, incumbent telcos, long distance companies, competitive local exchange carriers, international licensees, satellite service providers, pay phone providers, and data and private line service providers. In Decision 2000-745, "the commission notes that applying contribution against the broadest possible range of telecommunications services would spread the contribution burden across various sectors of the marketplace. This approach would be competitively equitable, result in a lower revenue-percentage charge being applied to each service, and be more administratively efficient by eliminating the need for a detailed review and classification of all telecommunications services." David Colville, vice-chair of telecom at the CRTC, says the old regime wasn’t fair in a competitive market. With the growth in Internet and IP telephony, measuring the number of minutes under the old system would have become increasingly difficult, he notes. "We thought a fairer, more technology neutral, more competitively neutral approach was to levy the fee against all telecommunications service providers," he told RoW. The CRTC also rejected a WSP proposal that they should receive a deduction for the spectrum licence fees paid to Industry Canada. "The commission considers these fees to be a cost of doing business and therefore, no deduction is allowed in determining contribution eligible-revenues," the commission writes in its Nov. 30 decision. Wireless operators say they haven’t decided whether to appeal the decision to the federal Cabinet, although insiders speculate it’s a real possibility. Hunt suspects everybody in the telecommunications industry is looking at the decision very closely, except for AT&T Canada and Call-Net Enterprises Inc, the net beneficiaries of this decision. Barnes indicates that all options are still open. "We’re looking at all of them to see if anything can be done because to us, it’s not a good decision and we really want to look at it very seriously." Separate item not allowed on billAnother major concern of the wireless industry is that the commission has prohibited the creation of a separate line item on customer bills that would indicate how much they are paying to subsidize high-cost serving areas. While the commission didn’t provide much rationale for this decision, it writes that "requiring companies to show the amount of contribution as a separate line item on the customer’s invoice would add an unnecessary complexity to a revenue-based mechanism." Hunt counters by saying that "if there’s going to be a new tax imposed on wireless customers, then the customer should be able to see that clearly. It looks like (the CRTC) wants us to hide the contribution subsidy from our customers … I think it should be made clear to our customers what that amount is and what it’s for." The commission also excluded certain services from the new contribution regime, such as Internet and paging. But there is a growing trend in the telecommunications industry to bundle services and if some of those excluded services are bundled with a service that falls under contribution then it too becomes part of the eligible revenue. Customers want bundled services because it keeps the price of those services lower, Barnes explains.

Wireless operators consider appealing CRTC’s overhaul of contribution regime

News | December 11, 2000

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