Telus will seek Cabinet appeal if CRTC doesn’t amend contribution ruling

Telus Corp. is appealing two CRTC decisions affecting the contribution scheme and will ask for Cabinet help if it is not successful in the first round. The company emphasizes it needs a rapid decision so it can begin making financial plans. The western-based telco filed a review and vary application on Decision 2000-745 and Decision 2001-238 on September 14. The first ruling is the new contribution mechanism, issued in November 2000; the second is the restructured bands pronouncement from last April. "The two decisions, we believe, should be reversed in part in one principal aspect and that is in both decisions the CRTC changed its policy from recognizing the ILECs were entitled to recover their actual costs associated with providing service to rural and remote communities," Jim Peters, EVP corporate development and general counsel, tells Network Letter. "And in place of our actual costs, they have replaced those actual costs with average costs based on the companies across Canada." Telus, while still supporting the idea of a revenue charge for contribution, wants to see the commission amend the formula. If it loses the petition, it will proceed to a Cabinet appeal. It worries that the provisions of the two decisions change the CRTC’s long-standing policy of competitive neutrality. The commission has operated under the theory that contributions should not affect one service provider over another. The problem, as the telco sees it, is that it and other incumbents have to spend large amounts of money to provide service to rural and remote areas. CLECs cherry pick the large cities, using the facilities already in place by the established firms. The telco is proposing that outside observers be brought in to guarantee proper numbers are maintained. "n order to expedite the review of ILECs’ Phase II costs, Telus would be prepared to engage a recognized auditing firm familiar with the telecommunications industry for the purpose of auditing its application of Phase II cost methodologies and its cost sources to ensure that the actual Phase II costs of Telus are reported," the firm writes in its filing. Telus had proposed replacing the old per-minute contribution charge with a revenue assessment, a recommendation the CRTC ultimately accepted. Peters is hopeful this proposal also finds favour with the regulator. "The independent auditor is new. It’s something that Telus has asked for because we feel very strongly an independent audit will convince the commission that in fact they have understated our costs by using a national average," he says. Telus is something of a hybrid when it comes to telephony. It is an ILEC in Alberta and British Columbia, but has CLEC status in eastern Canada. So while it pays into the contribution pool, it also draws from it. It has profited from that exercise in the past, but may not in the future, the vice-president warns. "In the year 2000 Telus received net of what it paid in over $100 million. In 2001, Telus expects to get more than $200 million out of the fund. That’s the net," Peters reports. "And in 2002, there’s the very real potential that Telus will be a net payer into the fund." He predicts similar problems will be felt by other ILECs that have remote regions to serve, such as Aliant Inc. and SaskTel. Already Aliant has announced plans to lay off 800 workers to make up for the projected shortfall in revenues from the new contribution regime. Bell Canada and Manitoba Telecom Services Inc. should not be affected as greatly. For their part, the CLECs have been pointing to the crash of several competitors lately as proof the playing field is uneven. Peters doesn’t buy that argument."There have been a number of bankruptcies – Axxent, Norigen – but if you look at the number of similar failures in the United States, you can see that it’s not a function of the Canadian regulatory environment," he notes. "It’s very much a function of finances that were wildly available two years ago drying up. People are reluctant to invest in telecoms given the turndown in valuations." Group Telecom heralded Competitors are quick to use the example of failures, but they fail to cite successes, Peters says. And too often companies lay blame for their problems with the regulator when they should be looking internally. "Group Telecom is a good example of a well-funded business that has focused on a specific market niche. They are not out buying equipment that they can’t use. They’re doing it in a structured way," Peters states. "It’s a good example of a company, well-financed, with a clear strategy and focus, being able to succeed. And AT&T Canada’s been around for over 15 years and they’ve lost money, large amounts of money, the last while. I think they have a faulty business plan." Peters points to the commission’s Status of Telecom Competition in Canada report (NL, Oct. 10/01) to bolster his argument. He interprets the figures to show that competition is healthy in most aspects of telecom, with the notable exception of local service. He notes that cablecos are also entering the field, especially in the provision of high-speed Internet services. The CRTC has extended the filing period for the R&V application due to the increased workload caused by the price cap hearings. Telus, which supports the delay, is hoping for a quick decision on its application.

Telus will seek Cabinet appeal if CRTC doesn’t amend contribution ruling

News | 11/06/2001 5:00 am EST

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