O.N. Telcom wins contribution portion of review and vary, loses on other rates

An independent telco scored a victory last week as the CRTC agreed to overturn a section of its original decision on contribution levies. The decision means that O.N. Telcom will now see an increase in its subsidy pool. Slightly more than a year ago, the Ontario carrier filed a review and vary application over Decision 2001-756, the regulatory framework for small incumbent telcos, and Decision 2001-583, relating to toll competition for O.N. Tel (NL, Mar. 25/02). It believed the CRTC made a mistake by using the contribution rate of Northern Tele-phone Ltd. (now NorthernTel LP) as the basis for O.N.Tel’s contribution levy. The regulator agreed, noting that O.N. Tel had initially estimated its 2002 subsidy requirement would be $770,000. The final determination was set at $1,008,040. "In Decision 2001-756, the commission determined that O.N. Telcom’s annual subsidy would be reduced over the four-year transition period. Because the subsidy requirement for 2002 was incorrect, the commission finds that the subsidy for each of the years 2002 to 2004 should be adjusted upwards," the CRTC ruled in Telecom Decision 2003-21, released on April 4. "Consequently, an additional $435,290 in subsidy is due to O.N. Telcom over the four-year transition period." Under the revised regime, the Ontario company is now entitled to a subsidy of $913,880 for 2002, $806,835 for 2003, $712,675 for 2004, and $631,400 for 2005. This fulfilled the relief O.N. Tel had sought in the R&V, although it had wanted the figures approved immediately rather than waiting for the disposal of the entire application. The commission had established the contribution rate using NorthernTel’s numbers as a proxy even though O.N. Tel had not completed its Phase III calculations. It submitted the numbers three weeks before the release of the contribution decision. The independent telco was not so lucky when it came to direct connect (DC) and equal access (EA) rates and host-remote (HR) toll links. The commission denied the sections of the R&V dealing with these aspects of the original decisions. The DC and EA rates were established under 2001-756 and were coincident for O.N. Tel, NorthernTel and the Cochrane Public Utilities Commission. O.N. Tel thought this was unfair, since it was the only independent offering both local and toll services at the time. (NorthernTel, which provided only local in 2001, has since added toll service. Cochrane does not offer toll service.) The telco maintained that its financial viability was at risk if the decision was allowed to stand. It would lose market share in the toll sector at record speed, O.N. Tel asserted. The CRTC rejected that argument, pointing out that it had turned down NorthernTel’s DC tariff request last year (NL, Aug. 13/02). Financial hardship was also the criterion used to justify the overturning of 2001-583. O.N. Tel said competition in HR toll links would hurt it unless the commission provided relief. The telco, which plans to leave the HR market after a four-year transition, wanted the CRTC to prohibit competition in the HR field, extend the transition period by another two years until December 2005, and increase the HR toll link rate, among other remedies. Bell Canada, a BCE Inc. subsidiary like NorthernTel, said there was no basis to change the original decision. O.N. Tel may have disagreed with 2001-583, Bell maintained, but had presented no solid evidence that the ruling was wrong. The independent’s HR links would not become stranded because Bell is prepared to pay O.N. Tel compensation for the toll links between the northern Ontario communities of Temiscaming and North Bay. The CRTC concurred, saying, "The commission does not consider that the distinct HR toll link rates should be eliminated and that Northern should be required to file a DC rate that would include HR toll link components."

O.N. Telcom wins contribution portion of review and vary, loses on other rates

News | 04/07/2003 4:00 am EDT

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