Microcell files R&V over new expanded local calling area subsidy framework

Microcell Telecommunications Inc. has expressed serious concerns over the CRTC’s new expanded local calling area (LCA) framework that would see interexchange carriers (IXCs) compensated by ILECs and CLECs for lost revenue from an expanded ILEC LCA. On October 10, the Montreal-based wireless operator filed a review and vary (R&V) application with the commission, arguing that it made several errors in its decision in assuming that CLECs would increase local rates as would ILECs, CLECs’ ability to measure lost toll revenue, and the benefits CLEC subscribers would gain from an expanded LCA. In Telecom Decision CRTC 2002-56, released last month, the commission created a cross-subsidy pool that would be filled by ILECs and CLECs through local rate increases. IXCs would receive their compensation from this pool. In its ruling, the commission concluded that all local exchange carriers would be obligated to participate in this new cross-subsidy regime. In its R&V petition, the country’s only wireless CLEC wants the CRTC to eliminate the presumption that competitive local telephone service providers would automatically follow in lock-step rate increases imposed on consumers by ILECs in a particular geographic area. "In effect, we request that CLECs not be called upon to contribute presumed local rate increases to the LCA expansion cross subsidy pool. Only that company which benefits from an explicit rate increase – the ILEC – should be required to contribute this rate increase to the cross-subsidy pool," Microcell writes. In its application, Microcell questions the commission’s understanding of local service pricing dynamics by indicating that there are several practical barriers to the implementation of this new expanded LCA regime. It notes that rate differences between it and ILECs for both pre-paid and post-paid services make it nearly impossible for the company to match ILEC rate increases. "How does Microcell translate an ILEC local rate increase of say $0.50 per month in a particular location into a per-minute rate increase? Would we be expected to sell pre-paid calling cards at difference prices in different locations?" the company asks. The wireless CLEC also raises the question of how to effectively measure foregone toll revenue. Microcell notes that while it may not be difficult for a wireline telephone service provider, the calculation engine breaks down when dealing with a wireless carrier since the billing of wireless calls doesn’t rely solely on the originated or terminated NXX. "An entirely different calculation engine, relying on something other than NXX data, would need to be constructed," the company notes. Microcell then submits that since it doesn’t have an existing need for calculating such foregone revenue, it doesn’t have the ability "to perform a lost toll revenue traffic study at the level of granularity that would be required to make claims on an ILEC LCA expansion subsidy pool. As a result, were the commission’s model to be maintained, we would find ourselves in the unenviable position of having to contribute funds we do not have to a subsidy pool from which we are unable to make claims." The company also questions the commission’s assumption that CLECs will also be able to benefit from an expanded ILEC LCA. Microcell notes that a CLEC possessing an already larger LCA than the ILEC doesn’t get to claim from the pool, but a CLEC that waits until the ILEC expands is allowed to get compensation. "…Does there not now exist an important disincentive for CLECs to expand their LCAs in advance of the ILEC?" the wireless carrier writes. Microcell also submits that the expanded LCA framework ruling runs counter to other related decisions in the past. Telecom Decision CRTC 2000-745 decoupled contribution payments from ILEC LCA definitions, the company notes, "and in doing so took a significant step forward toward removing the disincentives that discourage CLECs from establishing their own LCAs. In the proceeding initiated by Public Notice CRTC 2001-126 proposals are on the table that would further remove these disincentives. It is disappointing to see that Decision 2002-56 may work against this positive trend." While the company has asked the CRTC to remove the obligation of CLECs to participate in the cross-subsidy regime, Microcell also recognizes that the CRTC may be concerned about CLECs profiting from the new regime without actually contributing to the pool. "Microcell submits that one possible solution would be to create an opt-in-to-both/opt-out-of-both model. Specifically, a CLEC intending to claim subsidies from the pool would be required to calculate and deduct its presumed local rate increases," it writes. Microcell is also concerned that by enabling IXCs to be compensated for lost toll revenue, these carriers have now risen to the status of financial stakeholders in ILEC LCA decisions. "Microcell has serious doubts about the wisdom of this decision, as we believe it will lead to an inevitable case of regulatory contagion where more and more industry players will find more and more situations where they too have a right to be ‘kept whole’ – a trend that cannot but ultimately do serious damage to the state of competition in Canada," it notes.

Microcell files R&V over new expanded local calling area subsidy framework

News | 10/28/2002 5:00 am EST

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