Order Varying Telecom Decision CRTC 95-21 (SOR/96-8)

Whereas, on October 31, 1995, the Canadian Radio-television and Telecommunications Commission rendered Telecom Decision CRTC 95-21 entitled “Implementation of Regulatory Framework — Splitting of the Rate Base and Related Issues”, in which the Commission, under the heading “IV Rate Rebalancing” adopted a plan of local rate increases accompanied by offsetting reductions in long distance rates and specifically directed the Stentor companies affected by the Decision (other than Maritime Tel & Tel Limited) to file, in the form of tariff applications, rate rebalancing proposals consisting of local rate increases of $2 per month and related long distance reductions, to take effect on January 1 in each of the years 1996 and 1997;

Whereas petitions have been filed by the Stentor companies affected by the Decision (other than Manitoba Telephone System), requesting that the Governor in Council vary the Decision to eliminate the reduction of long distance revenues and rates as part of the rate rebalancing program;

Whereas, in its petition, AGT Limited also requested that the Decision be varied to specify that the rate of return on equity employed to calculate the amount of subsidy paid by long distance services to local services at the time of the initial split of the rate base be the actual company-wide forecast rate of return rather than the rate of return specified by the Commission;

Whereas in response to the above-noted petitions, the People for Affordable Telephone Service (PATS) filed a petition requesting that the rate rebalancing portion of the Decision be rescinded;

Whereas, in accordance with subsection 12(4) of the Telecommunications ActFootnote ^*, a notice of receipt of the petitions filed by the Stentor companies was published by the Minister of Industry in the Canada Gazette Part I on December 9, 1995;

Whereas, in accordance with section 13 of that Act, the Minister of Industry has provided an opportunity for provincial consultation;

And Whereas the Governor in Council, having considered the AGT Limited petition, the PATS petition and the petitions of the Stentor companies,

• (a) agrees with the Commission that it is appropriate to reduce the subsidy that flows to local and access services from long distance services and that, therefore, a form of rate rebalancing is appropriate,

• (b) considers that use of the actual company-wide forecast rate  of  return  rather  than  the  rate  of  return  specified by the Commission would fail to break the link between, the Competitive and Utility segments, thereby frustrating the fundamental objective of the split-rate base approach,

• (c) considers it is essential that a lifeline program be introduced for telephone subscribers in order to ensure universal access at affordable rates to Canadians everywhere,

• (d) considers that it is not desirable or necessary to require reductions in long distance rates, as the long distance market is in transition to a competitive market and such reductions would detract from the increased reliance on market forces, and

• (e) considers that, in the transition to a competitive market, significant price reductions in the long distance market have already occurred and further price reductions would compromise the ability to sustain required investment in the telecommunications system, including investment in research and development and innovative telecommunications services, which would have a negative impact on the objectives of the Canadian telecommunications policy, and in particular the objectives set out in paragraphs 7(a), (b), (c), (f), (g) and (h) of that Act;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Industry, pursuant to section 12 of the Telecommunications ActFootnote ^*, hereby

• (a) varies Telecom Decision CRTC 95-21

  • (i) by replacing the second complete paragraph on page 24 with the following:

    “In light of the above considerations, the Commission finds it appropriate that the telephone companies proceed with a rate rebalancing plan. As in Decision 94-19, the contribution component of the CAT should be reduced by an amount equivalent to the revenues derived from the local rate increases contained in the rebalancing plan.”,

  • (ii) by replacing the third complete paragraph on page 25, wherein the Commission directed the filing of rate rebalancing proposals (local rate increases and long distance reductions), with the following:

    “The Stentor companies (other than MT&T) are directed to file, in the form of tariff applications, rate rebalancing proposals consisting of local rate increases of $2 per month, to take effect January 1 of each of the years 1996 and 1997, and a new proposed CAT, reflecting a reduced contribution charge equivalent to the revenues derived from the local rate increases. These proposals are to be filed no later than seven days after the making of this Order and December 1, 1996, respectively.”, and

  • (iii) by replacing the third and fourth paragraphs on page 26 with the following:

    “The Commission would expect to give expeditious approval to rate rebalancing proposals”; and

• (b) declines

  • (i) to rescind the rate rebalancing portion of Telecom Decision CRTC 95-21 as requested in the petition filed by PATS, and

  • (ii) to vary Telecom Decision CRTC 95-21 in the manner requested in the petition filed by AGT Limited, with respect to the calculation of the rate of return.

• Return to footnote ^*S.C. 1993, c. 38