Microcell receives support for its petition to change portions of the new LCA framework

Microcell Telecommunications Inc. has found an unlikely ally in Telus Corp. in its fight to change the new local calling area (LCA) framework that forces CLECs to subsidize ILECs and IXCs for lost toll revenue (RoW, Oct. 28/02). In comments to Microcell’s October 10 review and vary application to the CRTC, Telus notes that forcing CLECs to participate in the cross-subsidy pool program presents a "disconcerting vision of local competition." Telus has made similar arguments in the follow-up proceeding to Telecom Decision 2002-56, pointing out that "the CLEC surcharge obligation would effectively limit, if not deprive, CLECs of their market freedom and flexibility to differentiate their local service calling area relative to the presiding ILEC." Telus finds itself in an interesting position within this debate as it is both an ILEC and a CLEC. "he CLEC surcharge obligation ultimately acts to put CLECs that have smaller LCAs in the position of having no choice but to follow in the ILEC’s footsteps in the event of an LCA expansion by the ILEC. And when a given CLEC yields to this force of regulatory circumstance, it will on the one hand be made effectively subject to partial commission rate regulation of its erstwhile forborne local services, while on the other being denied the opportunity within that changed regulatory regime to propose its own rate increases, more suited to its particular costing requirements and marketing objectives." The national telco also notes that mandatory participation by CLECs in the program runs counter to the basic premise of fairness and that the imposition of the obligation on CLECs is "fatally flawed." Microcell was right to ask in its submission where the benefit to its subscribers is when its LCAs are in most circumstances larger than those of ILECs, Telus writes. The CLEC surcharge obligation would also mark a departure from the principle of equity of treatment for like-service providers because Microcell, as a wireless CLEC, would have additional obligations that other wireless service providers don’t, it adds. " WSP-CLEC would therefore be doubly disadvantaged: first relative to the presiding ILEC, and then to other WSPs. If this double jeopardy to WSP-CLECs represented by the CLEC surcharge obligation is deemed to be neither undue nor unfair, then it would simply serve as just another deterrent working against the entry of WSPs into the CLEC market, to the ultimate detriment of local service consumers," Telus writes. Microcell also received support from AT&T Canada Corp., which believes that CLECs should be free to choose whether they participate in the program or not. AT&T Canada recommends that the commission amend the LCA decision to remove the presumption that CLECs will automatically hike rates to match ILEC rate increases. Besides, it notes referring to a section of the original decision that only subscribers benefiting from an expanded LCA should bear the costs associated with forgone toll revenue. "If a CLEC chooses not to expand its local calling area or already offers service to a broader local calling area, its local customers do not benefit from the ILEC expanding its local calling area and therefore, these customers should not be penalized for exercising competitive choice. "AT&T agrees with Microcell that the current mechanism would penalize the CLEC and potentially that CLEC’s customers. Indeed, the commission’s assumption provides a disincentive for CLECs to expand their local calling area in advance of an ILEC or to differentiate their local calling area," the CLEC and long distance provider notes. AT&T Canada also picks up on the burdensome administrative tasks associated with calculating forgone toll revenue. It agrees with Microcell in that a company that is not in a position to calculate its own lost toll revenue shouldn’t be expected to make modifications to fund the recovery of its competitors’ forgone toll revenue. Involving CLECs would cause delay in implementation Representing the City of Ottawa, McCarthy Tétrault communications lawyer Anthony Keenleyside agrees with Microcell that CLECs should not be required to participate in the program. He suggests that under sections 60 and 62 of the Telecommunications Act, the commission should vary the LCA decision. Keenleyside notes that while he agrees with the commission’s approach of treating all entities fairly under section 7 of the Act, the attainment of these objectives will be hampered if this aspect of the decision is not changed and clarified. "More specifically, bringing competitors into the administration of the foregone toll revenue regime on a mandatory basis contemplated in the decision will not enhance the efficiency or competitiveness of Canadian telecommunications," Keenleyside writes, adding that there are few successful CLECs operating and none asked for permission to share in foregone toll revenue during the proceedings leading up to the decision. "Instead it was the commission’s notion of equitable treatment that has captured them, in effect against their will. "Regulation in this manner in neither effective nor efficient." Arguments don’t float with Bell Canada et al. While there appears to be significant support and case law supporting Microcell’s position, Bell Canada believes Microcell has made an error in its case. Bell submitted comments on behalf of itself, Aliant Telecom Inc., MTS Communications Inc., Saskatchewan Telecommunications, Télébec société commandite and Northern Telephone Limited Partnership. Sheridan Scott, Bell’s chief regulatory officer, notes that Decision 2002-56 doesn’t provide a requirement limiting payment of the surcharge to only those who will directly benefit from an expanded LCA. "For instance, where the demand for LCA expansion follows the creation of a large amalgamated city all subscribers within the new municipality share in contributing to the surcharge, regardless of whether they receive any additional local calling capability. In particular, those customers located in the core exchange who already have local calling throughout the LCA are still deemed to benefit from the LCA expansion based on the indirect benefits which will arguable flow to the local economy," she writes. Bell also indicates that the remedy proposed by Microcell would actually create inequities in the market. "he commission concluded that both ILECs and their toll competitors should be compensated for foregone toll revenue resulting from expanded LCAs. Accordingly, such compensation should be provided regardless of a long distance provider’s status in the local exchange market," Scott writes. For more information on the LCA issue and Telus’ call to merge both the follow-up proceeding and the Microcell R&V, please refer to the Nov. 4/02 issue of Report on Wireless affiliate publication Network Letter.

Microcell receives support for its petition to change portions of the new LCA framework

News | November 25, 2002

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