Price cap decision completed as CRTC rules on new proposals from two Quebec telcos

The initial implementation of the new price cap regime progressed further as the CRTC released the companion decision to its earlier ruling. Telecom Decision 2002-43, which was released on July 31, brings the operations of two ILECs in Quebec closer to the system governing other major carriers in Canada.The four-year regime determines how Télébec and Telus Québec can function. The CRTC admits that many of the provisions it invoked in Telecom Decision 2002-34, which covers other ILECs and CLECs (NL, June 3/02), have been carried over to this ruling. "The commission has decided to adopt a regulatory framework which, while drawing on certain elements of the proposals of the parties, closely resembles the regime established in Decision 2002-34 for the other large ILECs," the decision states. "Specifically, the commission has decided to introduce a price cap regime that involves multiple baskets and service groups with individualized basket constraints, as well as specific rate element constraints in some cases." The underlying policy objective of the price cap regime is to ensure competition exists in the telephony market. Both Quebec companies told the commission they expected other firms to move into their area, despite the high costs of providing local service. Telus Québec said it thought Bell Canada would compete in the business market, while Cogeco Cable Canada Inc. would offer residential service. The CRTC thought the Bell scenario is likely; it dismissed the threat posed by cablecos. For its part, Télébec says it currently faces competition from Centrex resellers and resellers of digital network access and interexchange circuits. "Accordingly, the commission does not anticipate that competition will be sufficient to discipline the companies’ residential local exchange and residential optional local service rates during the price cap period," the ruling offers. As with the wider price cap decision, the telcos were denied most of the rate increases they sought. Télébec was granted hikes in its business rates, but its residential rates remain the same. "The commission notes that Télébec’s residential monthly rates increased from $16.89 in 1994 to $31.00 in 2000. Further, on 1 July 2000, residential subscribers experienced monthly basic rate increases ranging from $0.47 to $4.00," the CRTC writes. "The commission considers that Télébec’s subscribers should not be subject to further increases at this time, in light of the significant rate increases which have been approved in recent years and the current level of Télébec’s rates." The telco proposed a new structure of business rates that would see all customers paying the same rate. This would mean some would pay more, while others would pay less (see table below). Telus Québec had all its proposed rates rejected. Télébec stated in an August 8 news release that it was "generally satisfied" with the decision. It noted that the overall impact on revenues will not exceed $3 million, and this amount will be offset by several productivity and work process improvement measures already implemented by the company. The telco cautioned, however, that it will only be able to measure the full financial impact of the decision after the CRTC hands down its decision on competition in local exchange and local payphone markets in its operating territory (Telecom Public Notice 2001-69). The earlier price cap decision approved the service improvement plans (SIPs) of Bell, Telus Communications Inc. and Aliant Telecom Inc., while rejecting the proposal from SaskTel (NL, June 3/02). Manitoba Telecom Services’ plan had been handled late last year (NL, Jan. 14/02). The two Quebec telcos similarly had their SIPs dealt with as part of the price cap proceeding. Télébec filed its original SIP proposals in July 2001. It stated it had 194 unserved dwellings in high cost serving areas. The capex needed to bring service to these consumers would cost the telco $149,000. In an updated submission in November, the company changed those figures to 327 homes, at a capex cost of $344,000. Telus Québec claimed that the Régie des télécommunications du Québec, its former regulator, had obliged it to make single-line service available throughout its serving area. As a result, the firm said it has no unserved regions. "At the oral public hearing, Telus Québec acknowledged that there might be unserved premises in its territory," the CRTC stated. "The company also indicated that it had not reviewed past service requests to determine whether those persons who had requested service might wish to be included in the company’s SIP proposal." In its final decision, the commission set a capital cost criterion of $25,000 for each of the telcos, covering both permanent and seasonal premises. Subscribers are required to contribute $1,000 toward capital costs. Télébec suggested the $1,000 be paid through installments. Customers would make an initial payment of $100, with the balance due in 11 equal monthly increments. Telus Québec did not make any proposal in this regard. The CRTC agreed with Télébec and imposed the same regime on both telcos. As with the other ILECs, the commission instituted an installment plan for large construction charges. A customer may be obliged to pay an amount over the $1,000 limit should the cost of service extension pass $25,000. The CRTC example said if the cost to serve premises was $34,000, the subscriber would be on the hook for $10,000. (The formula is the $1,000 client limit plus the difference between the $34,000 cost and the $25,000 telecom limit.) The commission applied the same regime it used in 2002-34. Installments may be spread out over three years, interest is charged on the unpaid balance, a minimum deposit of 20 per cent is required, maximum construction charges of $10,000 per customer are eligible, and only residential customers may use the plan.Télébec had offered to roll out its SIP this year. But the regulator said the decision had expanded the original proposals. Therefore, it is directing the regional telco to submit a revised rollout plan. A similar directive had been made to Telus Québec in Telecom Decision 2002-16.As it has done in several earlier rulings, the commission is operating under the assumption that Internet connection should be considered a basic service. One of the parties is on thin ice in this regard."Télébec indicated that customers in some locations may not have toll-free Internet access available to them," the CRTC writes. "In the commission’s view, the company should monitor this situation. If there is no ISP providing toll-free Internet access to these locations by the second quarter of 2003, the commission will consider whether Télébec’s obligation to serve includes an obligation to provide toll-free access to the Internet." The public hearings on the Quebec telcos were a much more restrained affair than the proceedings involving the rest of the phone companies. The hearings on 2002-34 ran for three weeks and heard from 24 interested parties. By contrast, the commission met for three days in Québec City. While 20 interested parties had registered with the CRTC, the only evidence filed came from Télébec, Telus Québec and the consortium of Action Réseau Consommateur, the Consumers’ Association of Canada, Fédération des associations coopératives d’économie familiale, and the National Anti-Poverty Organization.

Price cap decision completed as CRTC rules on new proposals from two Quebec telcos

News | 08/13/2002 4:00 am EDT

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