Canada’s payphone companies want refund on overcharges by ILECs

Canada Payphone Corp. and FCT Communications Inc. - known as the competitive providers - have filed an application with the CRTC asking it to order the ILECs to refund overcharges that they say are not allowed. Below is an edited excerpt of the payphone providers' application. The pay telephone access line (PAL) rates in the applicable ILEC tariffs are based on a discount factor applied to the ILEC's individual business line rates. While PAL rates are supposed to be frozen during the current price cap period, business services are capped at the rate of inflation and individual rate elements within the business services basket are constrained to annual increases of not more than 10%. Thus there are two different price cap constraints that could apply to the setting of PAL rates - one directly applicable to PAL rates, and one applicable to individual business line rates which in turn directly affects PAL rates. The competitive providers note that there are several services and tariff elements identified in Telecom Decision CRTC 2003-11 that are within the competitor services basket which actually cross reference services correctly assigned to other service baskets. Clearly non-competitor service elements (hereinafter referred to as retail elements) should not be subject to the competitor services mark-up adjustment or pricing constraints when sold as retail elements just because a competitor service element references the retail element. However, the competitive providers submit that the extent to which a competitor service element should be held to the specified price cap constraint for a retail element (rather than the specified competitor service price cap constraint) must depend on the circumstances including: the extent to which the competitor service element use is different from the retail element use - thereby addressing concerns of arbitrage and negative pricing pressures on the retail element; the differences between the competitor service element price cap constraint and the pricing flexibility afforded to the cross-referenced retail element; and whether an increase to the price of a competitor service element as a result of an increase in the price of a retail element is consistent with just and reasonable pricing and the objectives set out in section 7 of the Telecommunications Act; In this case, PALs are used to provide a service (i.e., pay telephones) which is very different from the retail service (i.e., individual business line service). Thus adjusting PAL rates downward will not create arbitrage opportunities for the resale of cheap individual business line service and it will not place downward pressure on individual business line rates. In addition, the commission clearly intended to freeze PAL rates. It would make no sense to specify a rate cap of 0% for PALs only to have the ILECs increase PAL rates by as much as 35% over the current price cap period. Lastly, the competitive providers note that from a public policy perspective, pay telephones are an important service to Canadians. Thus the competitive providers' interpretation of the inter-relationship between price cap constraints involving competitor service elements and cross-referenced retail elements in the context of PALs is consistent with the objectives set out in section 7 of the Telecommunications Act.

Canada’s payphone companies want refund on overcharges by ILECs

News | March 15, 2006

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