Length of reimbursement period major concern in local calling area debate

All sides in the debate over expanding local calling areas (LCAs) disagree with the CRTC’s suggestion of a three-year compensation period for lost LD revenues. Whether that period is too long or too short depends on whether one is making the calls or carrying them. The CRTC set the process in motion when it established a new framework for LCAs in Telecom Decision 2002-56 (NL, Sept. 23/02). The commission mandated that incumbents and competitors should be compensated for foregone revenues for three years. The City of Ottawa, which has been a major player in the issue since the amalgamation of 11 communities in January 2001, suggests the CRTC set a margin of 33 per cent of eligible toll calls as a standard for the compensation. "Using a one-third margin as a starting point, Ottawa recommends that the monthly surcharge should therefore be payable over a one-year period and not a three-year period as proposed in the decision," lawyer Anthony Keenleyside of McCarthy Tétrault writes on behalf of the city. "This will adequately compensate all toll service providers affected by the introduction of an expanded LCA and will not drag out the collection period. This in turn will pass on to affected consumers the full benefits of expanded LCA as soon as possible." If the CRTC insists on a three-year period, the city proposes that half the payment be collected the first year, with 25 per cent being assessed in each of the following two years. The City of Sudbury also endorses the idea of a one-year term. It claims a longer period is punitive and does not factor in the costs of generating the revenue. "It is the general principle of damages that in the event that someone is injured, in any fashion, they should be put back to the position they were before the injury occurred, not into a better position," Harold Beaudry of the Desmarais Keenan LLP law firm writes on behalf of the city. "On that simple principle, anyone who suffers a loss of revenue, should only be entitled to the profit they would have achieved. In this case, or in the vision of the commission, the toll providers have achieved a windfall, in that they are paid for loss of revenue, rather than loss of profits." Telcos disagree The phone companies, not surprisingly, take the opposite tack. Bell Canada urges a regime that would see reimbursement made based on actual changes in toll prices. "Under the proposed three-year compensation period, customers would pay a surcharge amount unrelated to the cost of the service they are receiving or the long-term financial impact of the toll revenues foregone by toll providers," regulatory matters director David Palmer writes. "After the three-year period is over, the customer would continue to receive the service without directly paying for it." John Meldrum, VP corporate counsel and regulatory affairs for SaskTel, states that establishing a fixed term for payment across the country doesn’t consider the unique traits in smaller markets. Instead, core principles should be set and the new framework should guide the future expansion of LCAs. "Three years is, in our view, a highly unreasonable short period of time, given that the long distance business of the ILEC and the other long distance companies providing service between the two exchanges included in the expanded local calling areas is being wiped out." Some resellers caution that rapid expansion of the LCAs could force them out of business. B.C.’s Kitkatla First Nations Band Council and the municipality of Barnston-Ouest in Quebec both endorse the expansion of LCAs in their region without addressing economic issues. For more on the local calling area filings, see the next edition of NL affiliate publication Report on Wireless.

Length of reimbursement period major concern in local calling area debate

News | October 21, 2002

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