SaskTel sides with Telus over restructured band ruling, files appeal on metred costs

One of Canada’s smaller ILECs agrees with one of the biggest that the CRTC should change its decision on restructured bands, but its justification for demanding the modification is different. While Telus Corp. has tied its request to alterations in the contribution scheme (NL, Nov. 6/01), SaskTel believes commissioners miscalculated when they issued the ruling. SaskTel filed a review and vary application with the commission two days before Telus filed its own. Both telcos want to see changes to Decision 2001-238 issued last April. "What they said was our average per metre cost per cable was too high in comparison to the other phone companies," John Meldrum, SaskTel’s VP corporate counsel & regulatory affairs tells Network Letter. "And our belief is it was higher because of the lack of density that we have as a province. Our customers are spread out over hell’s half acre. When you break it down then to say well, how much does each line cost you per metre, naturally it’s going to be more per metre." Meldrum uses this argument in his filing to the CRTC. "In the decision, the commission established uniform high-cost bands, based upon the number of NAS within an exchange, the average loop length and the remoteness of an exchange, regardless of customer density," he writes. "SaskTel submits that where bands are defined using uniform characteristics, but these characteristics do not represent all of the factors that affect costs, the cost of providing service in each band should be expected to vary among the ILECs, when customer densities vary significantly." Not only does SaskTel have to service just over one million people spread out over 651,900 sq. km., it also has to deal with a large number of rural communities and smaller cities in its territory. "Forty-two per cent of our residential customers live in a high cost area. So only 58 per cent live in low-cost areas," Meldrum says. "So right away of the million people that live here, only 58 per cent are even approaching somebody’s radar screen. And then of the 58 per cent, some of those people live in places like Weyburn and Moose Jaw, which again are not going to be high on people’s list of places to go." Even though the provincial telco has filed its own appeal, it is also behind the other R&V. It is currently preparing its own remarks on the Telus submission. "We’ll be putting in comments of support because certainly the same sorts of adjustments that they made to Telus they made to us," Meldrum notes. "We weren’t happy with them but we focused on a different adjustment that they made to us, and MTS to a lesser degree." Telus is concerned that the CRTC did not take into account the servicing of remote and rural areas in its restructured bands decision. Jim Peters, Telus EVP corporate development and general counsel, worries that the commission is losing its guiding principle of unbiased, disinterested assessment of telecom procedure. "I’d say tough decisions shouldn’t create bad policy. The CRTC has had long-standing policies of competitive neutrality, that they won’t favour one player over another," he offers. " have had a huge change by going to the revenue charge, rather than the per minute." While the contribution changes did help the competitors’ bottom line, they are still skeptical about the numbers the older telcos have submitted. "I don’t think we accept the proposition that underlines the Telus view," says Chris Peirce, VP regulatory and government affairs for AT&T Canada. "I suppose that costs are what they say they are, to provide service, and we also believe as a result of the contribution decision, the regulator really gave the incumbents the ability to recover what was not going to come by the fund through rate increases." Many of the CLECs point to the collapse of other competitive firms over the last year as proof that the system is tilted unfairly toward the established players. Peters rejects that notion. "The companies with solid business plans are successful," he opines. "Those that have business plans that see kind of huge expenses without trying to establish appropriate revenue levels will suffer. And that’s what we’ve seen. I don’t think the failures we’ve seen have been a function of the regulatory governance at all." His counterpart at AT&T Canada laughs when he hears that argument. "That’s a delightful ambiguous phrase ‘bad business plans’," Peirce tells Network Letter. "There is one business plan available to competitors, and that is to invest in facilities, combine that with using incumbent facilities to offer services to a customer that has generally previously taken service from the incumbent. And do that in competition with an incumbent that has built its network with a guaranteed rate of return in a monopoly environment and continues to have millions of captive customers paying them increasing amounts of money every month. So the business model apparently is make sure you have several million captive customers." Aliant Inc., which also serves many remote and rural areas, is not planning to file a separate appeal. It will, however, submit comments on the Telus filing. The eastern telco has already slashed its workforce in an attempt to recover costs lost through the reconfigured contribution and band systems. Meldrum does not expect SaskTel will need to go through the same process. "We don’t anticipate having to do involuntary layoffs because we just look at that as a last resort," he says. "But we’re working hard at reducing our costs and certainly decisions like this contribute to the need to do that."

SaskTel sides with Telus over restructured band ruling, files appeal on metred costs

News | November 19, 2001

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