ILECs and CLECs give CRTC their opinions on proposed co-location regime

The next stage of the CRTC’s price cap proceeding is unfolding as telcos file their comments on co-location floor space and direct connection (DC) service. This is the first of several aspects of Telecom Decision 2002-34 that will come under further scrutiny. In one section of the price cap ruling, the CRTC suggested a co-location floor space rate of $14.90 per square metre. This was based on the Phase II costs of Manitoba Telecom Services, with a mark-up of 15 per cent. In the same paragraph, the commission proposed Telus Communications Inc. should be subject to half-bay rates of $12.95 per square metre for Category I, $10.36 for Category II, and $6.48 for Category III. (Telus reminded the CRTC that those half-bay rates are only applicable in its Alberta colo sites.)MTS is part of a consortium made up of Aliant Telecom Inc., Bell Canada, and SaskTel that frequently files in tandem on important matters. The group is not impressed with the CRTC’s offerings."While the commission’s proposed rate of $14.90 per square metre might serve as a suitable proxy for cost recovery purposes, the companies are of the view that a more appropriate basis for determining future rental rates would be to consider market-based rates for equivalent floor space in each ILEC territory," David Palmer, Bell’s director of regulatory matters, writes. It would be more appropriate, the ILECs believe, to look at what the market bears for data storage. They point to the example of storage centres, carrier switching centres, carrier hotels, and other hubs and suggest these commercial activities serve as a better model for setting collocation rates. "The setting of ILEC specific rates based upon the prices charged for these alternatives would also serve to encourage the growth of carrier hotels," Palmer adds. The CLECs, not unexpectedly, take a different view. One company thinks the CRTC’s rates are too high and dismisses the incumbents’ proposals. "AT&T Canada submits that the proposed rates reflect the upper limit as to what should be charged for co-location floor space," Teresa Griffin-Muir, VP regulatory affairs, writes. She points out that MTS uses vacant central office space for its own workers. If it makes the space available for colo, it would have to rent other premises for its employees. "AT&T Canada notes that co-location floor space really represents a revenue stream that would not have otherwise existed for the ILECs since, with perhaps the exception of MTS, the floor space would generally have been vacant. Usually CO space is not well suited for office space without substantial modification and as such, AT&T Canada submits that MTS’ incremental cost estimates could be over-inflated," Muir states. "While AT&T Canada supports any modification to rates for competitor services which more closely approximate actual costs, AT&T Canada considers that the proposed rates are still too high as there is no incremental cost to the ILECs associated with leasing this space." The most detailed response to the commission’s views in 2002-34 is from Call-Net Enterprises Inc. While most telcos’ submissions ran only two or three pages, the Sprint Canada parent submitted an 18-page filing, complete with tables to bolster its argument. "Call-Net considers that MTS’s Phase II cost is not a valid proxy," Don Bowles, VP regulatory affairs, offers. "Call-Net proposes that floor space rates for ILECs other than MTS be based on the operating expense per square metre filed in the proceeding leading to Decision 97-15. In this way, floor space rates would make a contribution to fixed and common costs equal to entrants’ proportionate share (based on occupied floor space) of the ongoing costs of building operation even though entrants’ presence in the building would have no effect on the size of those operating expenses in total." Muir makes a similar point. "AT&T Canada submits that these rates should therefore be considered the upper bound and should remain interim pending a full review of the ILECs’ cost studies."Telus plans to file revised tariff pages using the $14.90 benchmark. But it wants to discontinue its tiered rate in Alberta. "To adopt the proposed rates would in effect allow full bay rates to exceed the physical co-location floor space rate of $14.90 per square metre with the exception of Category III space where the full bay rate is approximately 87 per cent the cost of a full equipment bay," Willie Grieve, VP government and regulatory affairs, submits.Bowles and Grieve spar over the DC charges. Call-Net agrees with the 15 per cent mark-up formula, but it worries that DC rates have not been subject to the same detailed examination that loop costs were. Therefore DC rates, even when set at $0.003, featured high levels of mark-up (see table). "Modifying DC rates solely to reflect the new mandated level of mark-up is, in Call-Net’s view, not sufficient to ensure that such rates are appropriately cost-based," Bowles writes. "Therefore, modifying DC rates for changes in the mandated level of mark-up is necessary but not sufficient to ensure that such rates are consistent with the new pricing policy for Category I competitor services." Telus maintains that were it to change its DC rates to reflect termination charges similar to the end-office termination rates, local service rates would need to be amended to include costs that had been excluded. Those costs would be the expenditures associated with terminating transport for the host switch to a remote switch and the use of that remote switch. Grieve cites Telecom Decision 97-8, which states that the competitors were obligated to provide equal access rates to all IX service providers at terms similar to the ILECs’ tariffs. "It is Telus’ position that the commission should direct the CLECs to revise their rates consistent with this policy following the commission’s final determination on direct connect rates or alternatively the CLECs could issue a tariff amendment justifying any departures from the determination in this proceeding." Wireless companies are also affected by co-location rates. Rogers Wireless Inc. and Microcell Telecommunications Inc. have both submitted filings endorsing the CRTC proposals.Palmer has filed a submission on behalf of Bell regarding another section of Decision 2002-34. The telco rejects the suggestion that a large construction charge installment payment plan be introduced.Such a move would have implications for both sides, Bell argues. Some clients have no credit history with Bell and the company could find its investment stranded should the customers dash off. On the other hand, the extension of credit over a long period time could be regarded as a loan to the customer.

ILECs and CLECs give CRTC their opinions on proposed co-location regime

News | July 15, 2002

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