Primus says unbundled loop decision forces rate increases on customers 13 months back

The CRTC’s decision this year on a rate increase for the leasing of unbundled loops would force Primus Telecommunications Canada Inc. to chase down current and former customers and apply retroactive rate increases, the company says. “The issue we take with that is that it’s impossible for us to manage,” Matt Stein, vice-president of network services at Primus, said in an interview. If the retroactive rate increases are maintained, the competitor company would have to contact customers of home phone, business phone, and DSL Internet services provided on the loops and inform them of higher, retroactive rates, he said. “It’s unfair to competitors. We have to go back to those customers 13 months later to make up for the change in rates, and some customers are not even Primus customers anymore.” An unbundled loop is a wireline service that incumbent telcos provide to small competitors, allowing them to lease the lines that lead to customers’ homes. The lines are known as “unbundled” because they are available for competitors to connect to their own networks. They lease the incumbents’ “loops” to reach customers. Primus has filed an application with the CRTC requesting a review of telecom decision 2011-24, issued in January, which set new rates for small competitor telcos to lease unbundled loops. Primus said in its application it is appealing the CRTC decision in response to a Bell notice sent to its wholesale unbundled loop customers, on April 28, 2011, which advised them that the incumbent will charge new rates retroactively in its coming June invoices. The retroactive charges go back 13 months. “What we’re asking the CRTC to do is limit Bell’s period of retroactive rates or do away with it altogether,” Stein said. According to Primus’ application, Bell’s rate increases ranged from 25 per cent to 156 per cent for monthly recurring unbundled loop charges for competitors. Primus said Bell announced that the increases reflected various cost factors such as the updated information on cost inputs, differences in cost characteristics between the operating territories of Bell Aliant and Bell Canada, and revisions to Bell’s Regulatory Economic Studies Manual. On June 2, 2009, Bell Aliant filed tariff notices 269 and 7205 with the commission in which it proposed increases to the monthly recurring rates and one-time service charges associated with its unbundled loops. The commission issued a telecom order on Dec. 14, 2009, in which it decided to make Bell’s then existing unbundled loop rates “interim,” meaning they are not final and can be altered at a later date. “When we set rates for wholesale services to competitors, it’s typically based on costs and some mark ups,” Lynne Fancy, director general of competition, costing and tariffs at the CRTC, said in an interview Wednesday. “Bell Canada then came in saying that its costs have changed, so its rates should change.” Primus has asked that Bell’s rates only be applicable on a prospective basis, to begin when the commission makes a final decision upon the issues raised by another review and vary application on the same decision filed by MTS Allstream Inc. in March. Bell Aliant and Bell Canada are also requesting a review of commission decision 2011-24, saying the CRTC’s approved unbundled loop rate increases are too low. Bell is asking the CRTC to adjust the costs upon which the approved monthly recurring rates for the unbundled loops were based, and use those adjusted costs to determine the final rates. Bell said in its application that the CRTC should adjust costs upon which approved rates were based by treating the “net book values” used in the calculation of the costs as “salvage cash flows instead of capital expenditure cash flows.” Bell said the commission should revise the approved rates so that they are based on “maintenance and removal expenses calculated as a function of Installed First Costs” rather than a function of net book values. “ rates for unbundled loops that were the subject of the Loop Decision are not just and reasonable,” Bell wrote in its application. Fancy said after parties reviewed the decision, some of Bell Canada’s unbundled loop rates were lowered and some went higher, which led to a source of debate. “Now a competitor like Primus has different rates that they must buy their services at,” Fancy said. “So they need to make their decisions because their costs have increased. They have to decide what they want to do with respect to their own customers and to the pricing in regards to them.” Primus noted in its application that, “since Bell, itself, believes that there is substantial doubt as to the correctness of Decision 2011-24, it is not clear why it has served this notice on its customers.” MTS Allstream, which is also contesting the CRTC decision with an application filed in March, also disagrees with the rate increases. Chris Peirce, chief corporate officer of regulatory affairs for MTS Allstream, said in an interview that Bell’s application “is a pretty transparent effort to try to ride a different horse to higher costs.” He added: “Once the Commission has deemed rates to be final, then it’s very difficult to go back and retroactively compensate someone for something wrong with that rate.” Jacqueline Michelis, a spokeswoman for Bell, said the rates hadn't changed for a decade, despite rising costs. "We filed an updated application on May 13th, 2011, including revised prices for unbundled local loops offered by Bell Aliant in Ontario and Québec," Michelis wrote by email. "Prior to the CRTC’s January 2011 decision, prices for unbundled local loops had not changed since 2001 despite significant increases to our costs." dgrenier@thewirereport.ca

Primus says unbundled loop decision forces rate increases on customers 13 months back

News | May 12, 2011

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