SaskTel joins chorus of companies opposing Bell’s appeal of contribution

SaskTel is taking Bell Canada to task for its attempt to reduce how much incumbents and wireless carriers will pay this year toward local phone subsidies. The two business partners are now finding themselves on opposite sides of the regulatory fence as Bell and some non-traditional allies attempt to convince the CRTC that its new contribution regime is coming too fast, and at too high a cost. So far 17 groups have filed reactions to Bell’s review and vary (R&V) application over the commission’s changes to the contribution regime (NL, Dec. 20/00). Backed by Microcell Telecommunications Inc and Rogers Wireless Inc, Bell wants the 4.5 per cent revenue charge mandated for this year reduced to 2.7 per cent. The filing also asks that wireless service providers (WSPs) have their assessment lowered to 1.5 per cent for the introductory year. Some respondents support both measures, some oppose both, while still others back the reduction to 2.7 per cent but reject giving WSPs special status. Telus, which has already filed an appeal with the Federal Court of Canada over other provisions of 2000-745 (NL, Jan. 15/01), submitted a new plan entirely. Treating all carriers equal The most contentious issue in the Bell filing is the idea of setting a lower rate for WSPs. CLECs such as Call-Net Enterprises Inc and Primus Telecommunications Canada Inc oppose the deal, as do the government of Saskatchewan and a consortium of public interest groups. Support or dismissal of the proposal seems to depend on whose ox is being gored. CLECs, who will see their contribution rate tumble, want the same rules applied to all. The WSPs, which face skyrocketing costs, desperately want a change to the system.The Saskatchewan government-owned ILEC dismisses the plan. "SaskTel notes that the WSPs are not the only Canadian telecommunication service providers with customers under service contracts at fixed prices," the company writes in its Jan. 11 comments to the CRTC. Later in the same document, the rural-centric telco slams its larger colleague for flip-flopping on the issue of equal treatment for all carriers. "In its final arguments in the PN 99-6 proceeding, Bell Canada and its associates argued that the WSPs should be treated no differently than wireline service providers with respect to their contribution obligations," the prairie company writes. "SaskTel has been of the view throughout the PN 99-6 proceeding, and continues to be of the view, that all telecommunications service providers should be treated equivalently with the adoption of a national revenue-based contribution collection mechanism." As expected, Microcell dismisses that view. "SaskTel’s comments, while correct on their face, conveniently miss the more fundamental point made by the application," the WSP states. "That is, the onerous impact of Decision 2000-745 on wireless carriers, particularly in its first year of application, is unjust to wireless carriers. Accordingly, the decision should be varied to establish a more gradual transition to the new regime for such carriers. Perhaps wireless carriers will not be alone in having difficulties in raising the additional funds required to meet a thirteen-fold increase in the payments required under this form of contribution. However, it is clear that only this segment of the industry is subject to an increase of this magnitude." RSL COM Canada Inc concurs with SaskTel, quoting the commission’s policy objectives from 2000-745. "Granting WSPs a lower contribution charge would undermine these objectives, particularly the objectives of technological neutrality and competitive equity, by favouring wireless technology and TSPs over wireline technology and TSPs," the CLEC tells the CRTC. "This would, in turn, undermine the pursuit of fairness, economic efficiency, and ultimately ratepayer equity." The commission was right to ignore wireless carrier complaints about the costs involved in buying spectrum in the current Industry Canada auction, RSL says, and market conditions faced by the mobile companies should not be used as a justification for a lower levy. "Many of the challenges to which WSPs are subjected, such as high elasticity of demand for services, lack of positive net income, long-term fixed price contracts, and high capital costs are market driven and not unique to WSPs," RSL writes. "Alternate providers of long distance services, such as RSL have, until now, borne the entire contribution burden despite also suffering from the same disadvantages and enabling other TSPs, including WSPs, to enjoy an ‘extended holiday’ from having to bear their fair portion of subsidizing the provision of service to high-cost serving areas. RSL, as a stand-alone long-distance carrier has faced these disadvantages without even having had the benefit that comes from also selling significant amounts of other non-contribution paying services." SaskTel’s parent in Regina is the most vehement in its denunciation of the Bell R&V. It argues that the commission’s decision attempts to come up with a national solution to a national problem, rather than responding to the interests of one industry group. As such, the decision should be implemented quickly, writes Robert Hersche of the provincial government’s Information Technology Office. He also had few kind words for the largest telco in the nation. "The basic premise used by the Bell companies in this application is that the commission has somehow penalized them for having the lowest contribution rates in Canada," he states, adding later, "Decision CRTC 2000-745 levels the playing field for all telecommunications providers, regardless of technology, corporate structure, serving territory or location of head office." Telus pursues court appeal Telus has chosen to take its appeal of Decision 2000-745 to the Federal Court, but it’s still wading in with its comments on Bell’s review and vary. In its response to the CRTC, the western telco once again pushes its case for an alternative to the commission’s final decision, and to Bell’s proposed modifications. "In Telus’ view, if the commission were to adopt Bell’s approach, foregone contribution revenues should be recovered only from capped services, and not from non-capped services as also suggested by Bell in its application," the company writes to the CRTC. "Most non-capped services are priced at levels that reflect the competitive environment. Unilaterally increasing one company’s rates for these services as a means of recovering forgone contribution will result in a loss of revenue, market share or both for that company. In other words, there would not be a reasonable opportunity for recovery." Telus wants the revenue charge set at three per cent in 2001, making it applicable to both wireline and wireless carriers. Telus believes setting a rate slightly above that suggested by Bell would reduce the impact on WSPs but reduce the size of the exogenous adjustment required by ILECs. Telus proposes hiking the revenue charge for LD services, although it does not provide a figure. "The long distance service revenue charge would be estimated by determining the amount of foregone contribution after implementation of lower revenue charges on wireline/wireless services," the company writes in documents filed with the commission. Telus also offers rate restructuring as an alternative. CLECs side with original decision The CLECs don’t agree with those suggestions. Primus Canada states flatly that the three per cent charge and the higher LD charge run contrary to the intent of 2000-745. Restructuring is dismissed as "unacceptable", adding, "Primus Canada questions whether an undertaking as complex as rate restructuring, as proposed by Telus, could proceed within the urgent timeframe identified by Bell Canada." Another CLEC is skeptical as well. "In AT&T Canada’s view the magnitude of the required exogenous adjustments, taken in conjunction with the level of residential services rates in (Telus) territory, raises questions about the level of the 2001 subsidy requirement and underscores the need for a rigorous assessment of the costs associated with provision of basic residential service to high-cost areas," the firm says. "Even if AT&T Canada were to accept that Telus’ 2001 subsidy requirement is accurate, AT&T Canada could only support recovery of any difference between that requirement and a reduced revenue charge through an exogenous adjustment." Even one of Bell’s corporate affiliate firms is lukewarm in its support. "The Aliant Telecom Companies do not support any capping of the exogenous adjustment nor do the Aliant Telecom Companies support apportioning any part of the foregone contribution revenues to services other than basic residence services," the eastern ILEC states in its filing. Aliant will only support a reduction in the revenue charge and a special deal for WSPs on the condition that it is given an opportunity to fully recover the financial impact of the change. The CRTC issued its interrogatories to specific parties last December. The responses were filed mid-month, with comments due on January 22 and replies on January 29. Bell will submit its final comments by February 5. A final ruling is not expected for several months.

SaskTel joins chorus of companies opposing Bell’s appeal of contribution

News | 01/29/2001 5:00 am EST

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