Cablecos and ILECs at odds over use of deferral accounts

Incumbent telcos and the Canadian Cable Television Association (CCTA) have proposed significantly different ways to use hundreds of millions of dollars sitting in the deferral account created by the 2002 price cap decision (NL, March 31/04). In a filing with the CRTC as part of the regulator’s process to determine how that cash should be used (Telecom Public Notice 2004-1), the CCTA argues the funds should be used to extend fibre to communities that would otherwise not have broadband Internet access, but not to build local facilities that would bring service over the last mile. Instead, the CCTA proposes that use of the transport backbone would be competitively neutral, with cablecos and telcos exploiting it according to their own business plans. Broadband providers would undertake a short proposal process with the regulator to free up the funds. CCTA acting president Michael Hennessy tells Network Letter that a decision to extend fibre to a community would ultimately be in the hands of the regulator. He doesn’t anticipate that cable companies would own the fibre, but the determination of where and when to build wouldn’t be the ILECs’ to make."The point is, the deferral account is not the ILECs’ money," he says.The CCTA’s proposal is in stark contrast to those measures proposed by Bell Canada. In its own filing, Bell reiterates its request to use some of the money to roll out DSL service in underserved areas (NL, Dec. 8/03) and to recover revenue losses it anticipates arising from lower rates for some residential optional local services. The ILEC also wants the money to make a significant investment in overhauling its network to enable high probability of completion (HPC) calling that would improve the network’s state of emergency preparedness by ensuring more calls get through to emergency personnel in the case of crisis. Bell’s proposals as part of the 2004-1 proceeding wouldn’t completely clear its balance of the deferral account, which will likely stand at about $168 million at this time next year. Bell warns that its share is likely overstated, since the reduction of the markup associated with some competitor services and the introduction of competitor digital network access (CDNA) will see Bell make pre-approved drawdowns from the total amount to offset those costs. Other proceedings underway that could result in further dips into the cash pool include those dealing with the expansion of local calling areas, access to pay telephones, 311 service, the network of networks proceeding and others. A key difference from the CCTA’s proposal with respect to broadband service is that Bell proposes using deferral account money to extend service all the way to the user, at the same rates as those paid by other retail subscribers, with the possibility to wholesale service to competitive providers should any want to compete. Communities would be chosen for the program according to Bell’s internally chosen parameters, and not, as the CCTA proposes, by the commission.The CCTA will likely put up a strong fight to Bell’s plan since there is no provision in it for broadband in unserved areas delivered by anything but DSL. In its submission, the CCTA writes: "The funds in the deferral accounts represent revenues overpaid to the incumbent telephone companies by residential customers. These revenues would have been in the hands of residential customers in the form of lower rates, under the normal operation of the Price Cap regime. The deferral account does not represent funds for use by the incumbent telephone companies for their use alone." TELUS Communications Inc. has made $160.7 million worth of proposals, including initiatives to improve affordability and universal service ($8.2 million), upgrading and improving its network ($138.9 million) including extending higher-speed transport services to areas where they are not currently available, and improving service to competitors through an improved interface with TELUS’ services ($13.6 million). With initial filings now made, the next round of general comments are due on September 15.

Cablecos and ILECs at odds over use of deferral accounts

News | May 26, 2004

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