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Telecom Decision CRTC 2015-445

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Canadian Telecommunications Contribution Consortium Inc. – Application to revise the operating procedures of the National Contribution Fund, effective 1 October 2015Canadian Telecommunications Contribution Consortium Inc. – Application to revise the operating procedures of the National Contribution Fund, effective 1 October 2015
The Commission approves Canadian Telecommunications Contribution Consortium
Inc.’s request to amend the Procedures for the Operation of the National Contribution
Fund (NCF) (a) to make the payments to the Canadian Administrator of VRS (CAV), Inc.
a priority charge on the NCF and (b) to increase the audit/affidavit thresholds for annual
contribution-eligible revenues and subsidies paid on a per network access service basis. These latter changes will contribute to the efficient operation of the NCF.
Background
1. During the 1990s, through a series of proceedings and decisions, the Commission
opened up various telecommunications markets, including the local telephone market,
to competition to enhance the Canadian telecommunications system to the benefit of
Canadians. The Commission also established a subsidy regime, pursuant to which
certain telecommunications companies are required to contribute to a central fund,
from which payments are made to subsidize residential telephone service in rural and
remote areas. This subsidy regime allows residential local telephone service rates in
those areas to be just and reasonable, as required by subsection 27(1) of the
Telecommunications Act. Canadian Telecommunications Contribution Consortium
Inc. (CTCC) was established to oversee the subsidy regime. Subject to Commission
approval, CTCC is responsible for, among other things, the Procedures for the
Operation of the National Contribution Fund (NCF)1 [the Procedures] and contracting
a company to act as the Central Fund Administrator (CFA).2
2. In Telecom Regulatory Policy 2014-187, the Commission determined that video relay
service (VRS) is a basic telecommunications service, and required
telecommunications service providers (TSPs) to fund VRS nationally via the existing
NCF.
1 CTCC is responsible for establishing the procedures necessary for the efficient operation of the NCF. The
current Procedures for the Operation of the NCF were approved in Telecom Decision 2014-180.
2 The CFA is responsible for (i) maintaining the system used by telecommunications service providers to
report contribution-eligible revenue and by incumbent local exchange carriers to report high-cost subsidy-
eligible network access services, (ii) calculating monthly contribution payments and monthly subsidy
entitlements, and (iii) collecting contributions and paying out subsidies.
Application
3. The Commission received an application from CTCC, dated 6 May 2015, requesting
that the Commission approve revised Procedures for the Operation of the NCF.
4. Specifically, CTCC proposed amendments to
section 5.9 of the Procedures to make the payments to the Canadian
Administrator of VRS (CAV), Inc. (CAV)3 a priority charge on the NCF;
section 7.2 of the Procedures to reflect an increase in the audit/affidavit
threshold from $100 million to $200 million of annual contribution-eligible
revenues; and
section 7.3 of the Procedures to reflect an increase in the audit/affidavit
threshold for subsidies paid on a per network access service (NAS) basis from
$0.5 million to $1 million.
5. In addition, as a result of its proposed amendment to section 5.9 of the Procedures,
CTCC proposed a number of housekeeping changes that would be required should the
Commission approve this proposed amendment.4
6. The Commission received no interventions regarding CTCC’s application. The public
record of the proceeding, which closed on 5 June 2015, is available on the
Commission’s website at www.crtc.gc.ca or by using the file number provided above.
Proposed amendment to section 5.9 of the Procedures concerning payments to the CAV
7. In Telecom Regulatory Policy 2014-659, the Commission determined that the CAV
should receive its funding for VRS before TSPs, and directed CTCC to operate based
on the following revised priority charges list:
Central Fund Administrator payments;
Consortium [CTCC] costs;
Payments to the CAV as prescribed by the Commission; (emphasis added)
Subsidy payments to Northwestel Inc. as prescribed by the Commission;
3 Details concerning the structure and mandate of the VRS administrator are set out in Telecom Regulatory
Policy 2014-659.
4 CTCC identified changes that would be required to sections 2.1 and 5.12 of the Procedures should its
proposed amendment to section 5.9 of the Procedures be accepted.
Subsidy payments to small incumbent local exchange carriers as prescribed by
the Commission;
Unpaid subsidies to the remaining local exchange carriers relating to prior
periods; and
Any amount required to restore the NCF cash reserve to its minimum balance.
8. Given that the change proposed to section 5.9 of the Procedures is consistent with the
Commission’s determination in Telecom Regulatory Policy 2014-659 regarding the
priority charge with respect to CAV, the Commission approves the proposed
amendment to section 5.9 of the Procedures. Further, the Commission approves the
other related changes to the Procedures that are housekeeping in nature, as identified
by CTCC in its application.
Proposed amendments to sections 7.2 and 7.3 of the Procedures concerning increases to audit/affidavit thresholds
9. In the context of the NCF, an audit is an official examination by an independent entity
(typically an accounting firm) of the TSPs’ accounts and the data filed with the CFA.
An affidavit is a written legal document sworn by two officers of the organization,
one of those officers being the chief financial officer (or equivalent) attesting to the
accuracy of the information provided.
10. CTCC stated that it had obtained the agreement of the NCF’s auditors, Ernst &
Young LLP, to increase the audit/affidavit thresholds set out in the Procedures in
efforts to reduce compliance costs for TSPs that are required contributors to the NCF
or eligible recipients of subsidy. In this regard, CTCC estimated that these increases
would result in 13 additional TSPs submitting affidavits instead of audits in order to
attest to the accuracy of the data filed with the CFA.
11. CTCC’s request to increase the audit/affidavit thresholds would allow some TSPs to
reduce their regulatory compliance costs by providing affidavits instead of being
subject to audits to attest to the accuracy of the data filed with the CFA. The
Commission considers that the small number of TSPs to which the new thresholds
would apply does not present a significant increase in risk to the NCF. Further, the
NCF auditors agreed to the proposed increases to the audit/affidavit thresholds. As
such, the Commission approves the proposed amendments to sections 7.2 and 7.3 of
the Procedures.
Revised Procedures for the Operation of the NCF
12. Given its determinations above, the Commission approves the attached revised
Procedures for the Operation of the NCF, effective 1 October 2015.
Secretary General
Related documents
Structure and mandate of the video relay system administrator, Telecom
Regulatory Policy CRTC 2014-659, 18 December 2014
Video relay service, Telecom Regulatory Policy CRTC 2014-187, 22 April 2014
Canadian Telecommunications Contribution Consortium Inc. – Revised
Procedures for the Operation of the National Contribution Fund, effective 1 May 2014, Telecom Decision CRTC 2014-180, 16 April 2014
PROCEDURES
NATIONAL CONTRIBUTION FUND
INDEX
SECTION
4 Reporting and Payment Responsibilities of TSPs to the CFA
5 Responsibilities of the CFA
6 Changes to the Revenue-Percent Charge or Subsidy Amounts Payable
7 Audit and Affidavit Requirements of TSPs to the NCF Auditor
APPENDICES
2 Sample Affidavit
Introduction
1.1 This document comprises the Procedures for the purposes of the National
Contribution Fund Administration Agreement dated 1 January 2001 (the ‘National
CFA Agreement’). These Procedures are the ‘Procedures’ referred to in the
National CFA Agreement and form part of the contractual obligations entered into
by the signatories of that contract.
1.2 The National CFA Agreement is between Canadian Telecommunications
Contribution Consortium Inc. (‘CTCC’), of the first part, Welch Fund
Administration Services Inc., in its capacity as the Central Fund Administrator (the
‘CFA’) of the National Contribution Fund (the ‘NCF’), of the second part, each
telecommunications service provider (‘TSP’) as shall be determined by the CRTC
from time to time to be a Required Contributor and which shall have become a
party to the National CFA Agreement through execution and delivery to the CFA of
a Required Contributor Accession Agreement in the manner provided in Section
10.14(a) of the National CFA Agreement, of the third part, and each TSP as shall be
determined by the CRTC from time to time to be an Eligible Recipient and which
shall have become a party to the National CFA Agreement through execution and
delivery to the CFA of an Eligible Recipient Accession Agreement in the manner
provided in Section 10.14(b) of the National CFA Agreement, of the fourth part.
1.3 The purpose of these Procedures is to prescribe the rules for the operation of the
National Contribution Fund, established by the CRTC in Decision 2000-745.
1.4 These Procedures have been established through a consultative process overseen by
the CRTC. The consensus reports of this consultative process were filed with, and
approved by, the CRTC. Certain points on which a consensus could not be achieved
were filed with, and resolved by, the CRTC.
1.5 For administrative convenience, it has been agreed that CTCC has the power to
amend these Procedures from time to time subject to the approval of the CRTC.
Those TSPs that elect or are required to become shareholders of CTCC will be
given adequate notice of proposed changes through the distribution of the agenda
and minutes of directors’ meetings of CTCC.
1.6 Decision 2000-745 stated that the CRTC would perform certain tasks. For
completeness, the tasks undertaken by the CRTC have also been described in
these Procedures.
1.7 Headings: The division of these Procedures into Sections and the insertion of
headings are for convenience of reference only and shall not affect the construction
or interpretation of these Procedures. The terms ‘hereof’, ‘hereunder’ and similar
expressions refer to these Procedures and not to any particular Section or other
portion hereof and include any agreement supplemental hereto. Unless something in
the subject matter or context is inconsistent therewith, references herein to Sections
and Appendices are to Sections of, and Appendices to, these Procedures.
1.8 Extended meanings: In these Procedures, words importing the singular number also
include the plural and vice versa; words importing any gender include all genders
and words importing persons include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
1.9 Accounting principles: Wherever in these Procedures reference is made to a
calculation to be made or an action to be taken in accordance with generally
accepted accounting principles, such reference shall be deemed to be to the
generally accepted accounting principles from time to time approved by the
Canadian Institute of Chartered Accountants (‘CICA’), or any successor institute,
applicable as at the date on which such calculation or action is made or taken or
required to be made or taken in accordance with generally accepted accounting
principles.
1.10 Interest calculations and payments: Unless otherwise stated, wherever in these
Procedures reference is made to a rate of interest ‘per annum’ or a similar
expression is used, such interest shall be calculated on the basis of a calendar year
of 365 days or 366 days, as the case may be, and using the nominal rate method of
calculation, and will not be calculated using the effective rate method of calculation
or on any other basis that gives effect to the principle of deemed reinvestment of
interest. All late payment charges and interest to be payable hereunder will be paid
both before and after default and/or judgment, if any, until payment thereof, and
interest will accrue on overdue interest, if any, compounded monthly.
1.11 Currency: All references to currency herein are to the lawful money of Canada.
1.12 Action on business day: Whenever pursuant to these Procedures an action is to be
taken by a specific date and such specific date is not a business day, such action
shall be taken on the first business day following such specific date.
SECTION TWO
Definitions
2.1 In these Procedures, unless something in the subject matter or context is
inconsistent therewith:
“Auditor” means Ernst & Young LLP, or such other firm of chartered accountants
licensed to practice as public accountants in each of the Provinces of Canada as
may be appointed by the Consortium from time to time as Auditor for purposes of
the National Contribution Fund and these Procedures.
“Banded NAS” means a geographic area (including a number of non-contiguous
geographic areas) within the Incumbent Local Exchange Carrier’s (“ILEC”)
operating territory in which the CRTC has found the costs of providing telephone
exchange service to be reasonably homogenous for the purpose of the distribution
of the National Contribution Fund and which the CRTC has designated as a Band
pursuant to Decision 2001-238, as varied or amended by the CRTC from time to
time.
“Bundled services” is part of the annual revenue report form contained in
Appendix 1 and shall have the meaning ascribed thereto in Orders 2001-220 and
2001-221.
“Business Day” means any day of the week other than Saturday, Sunday or other
day on which banks operating in the province where the office of the CFA
administering this Agreement shall be located from time to time are authorized by
law to close.
“Canadian Non-Telecommunications Revenues” is part of the annual revenue
report form contained in Appendix 1 and shall have the meaning ascribed thereto in
Order 2001-288.
“Canadian Telecommunications Services Revenues” or “CTSR” is part of the
annual revenue report form contained in Appendix 1 and shall have the meaning
ascribed thereto in Order 2001-220.
“CAV” means Canadian Administrator of VRS (CAV), Inc., the video relay service
administrator approved by the CRTC, and any successor entity that is approved by
the CRTC as the video relay service administrator.
“CFA” means Welch Fund Administration Services Inc., including any
replacement third-party administrator of the National Contribution Fund appointed
by the Consortium from time to time and designated as such by the CRTC pursuant to the Telecommunications Act (Canada).
“CFA Payment” means the amount payable to the CFA out of the National
Contribution Fund at any time for services performed and expenses incurred by the
CFA hereunder or pursuant to the contract under which the CFA is appointed, as
amended from time to time, such amount to be determined as provided in such contract or these Procedures.
“Consortium” or ‘CTCC’ means the Canadian Telecommunications Contribution
Consortium Inc., a corporation incorporated under the provisions of the Canada
Business Corporations Act, established, inter alia, to contract with, and oversee the administration of the National CFA Agreement and these Procedures, by the CFA.
“Consortium Costs” means costs and expenses incurred by the Consortium in
fulfilling its mandate with respect to the National CFA Agreement and these
Procedures.
“Contribution payments received” is part of the annual revenue report form
contained in Appendix 1 and shall have the meaning ascribed thereto in Order 2001-220.
“Contribution-Eligible Revenues” means, with respect to each TSP, and in
respect of each year, the Contribution-Eligible Revenues of such TSP calculated on
the annual revenue report form contained in Appendix 1 and calculated in accordance with Commission directives.
“CRTC” means the Canadian Radio-television and Telecommunications Commission.
“Decision 97-8” means Local competition, Telecom Decision CRTC 97-8, dated
1 May 1997, and references in these Procedures to such decision shall be deemed to
include, as appropriate, such decision as varied, amended, refined and/or
supplemented by the CRTC in proceedings, decisions, orders or interpretations made or issued thereafter and/or arising therefrom.
“Decision 99-16” means Telephone service to high-cost serving areas, Telecom
Decision CRTC 99-16, dated 19 October 1999, and references in these Procedures
to such decision shall be deemed to include, as appropriate, such decision as varied,
amended, refined and/or supplemented by the CRTC in proceedings, decisions,
orders or interpretations made or issued thereafter and/or arising therefrom.
“Decision 2000-745” means Changes to the contribution regime, Decision CRTC
2000-745, dated 30 November 2000, and references in these Procedures to such
decision shall be deemed to include, as appropriate, such decision as varied,
amended, refined and/or supplemented by the CRTC in proceedings, decisions,
orders or interpretations made or issued thereafter and/or arising therefrom.
“Decision 2001-238” means Restructured bands, revised loop rates and related
issues, Decision CRTC 2001-238, dated 27 April 2001, and references in these
Procedures to such decision shall be deemed to include, as appropriate, such
decision as varied, amended, refined and/or supplemented by the CRTC in
proceedings, decisions, orders or interpretations made or issued thereafter and/or
arising therefrom.
“Decision 2005-28” means Regulatory framework for voice communication
services using Internet Protocol, Telecom Decision CRTC 2005-28, dated 12 May
2005, and references in these Procedures to such decision shall be deemed to
include, as appropriate, such decision as varied, amended, refined and/or
supplemented by the CRTC in proceedings, decisions, orders or interpretations
made or issued thereafter and/or arising there from.
“Decision 2005-32” means Accutel Conferencing Systems Inc. - Definition of
terminal equipment revenues within the contribution regime, Telecom Decision
CRTC 2005-32, dated 2 June 2005, and references in these Procedures to such
decision shall be deemed to include, as appropriate, such decision as varied,
amended, refined and/or supplemented by the CRTC in proceedings, decisions,
orders or interpretations made or issued thereafter and/or arising therefrom.
“Effective date” means 1 January 2001.
“Eligible NAS” means a residential network access service (NAS) in a high-cost
serving area that meets all of the CRTC criteria necessary to be eligible to receive
subsidy from the National Contribution Fund, as varied or amended by the CRTC
from time to time, including (a) having both the underlying access and the local
service components being provided by the same local exchange carrier (“LEC”), (b)
that the LEC meets all of the criteria established in Decision 97-8 and (c) the level
of service being provided meets or exceeds the basic service objective established
in Decision 99-16.
“Eligible Recipient” means (i) each TSP that has been determined by the CRTC
from time to time to be entitled to receive payments from time to time out of the
National Contribution Fund, and (ii) CAV.
“Eligible Recipient Accession Agreement” means a document by which a TSP
that is an Eligible Recipient shall become a party to the National CFA Agreement,
such agreement to be substantially in the form of Schedule ‘B’ to the National CFA
Agreement.
“Inter-carrier payments” is part of the annual revenue report form contained in
Appendix 1 and shall have the meaning ascribed thereto in Order 2001-220.
“Late Payment Charge” means, with respect to any amount to which such a
charge is applicable in accordance with the provisions of these Procedures, a charge
equal to one percent (1%) per month (12.68% per annum) applied to the amount in
question commencing as from the due date of the relevant payment, compounded
monthly.
“National Contribution Fund” or “NCF” means the National Contribution Fund
required to be created by the CRTC pursuant to Decision 2000-745, and established
by the National CFA Agreement and these Procedures.
“National Subsidy Requirement” or “NSR” means, in respect of each year, that
amount, as determined by the CRTC from time to time, to be the total of the Total
Subsidy Requirements for all LEC territories in such year.
“Non-Canadian Revenues” is part of the annual revenue report form contained in
Appendix 1 and shall have the meaning ascribed thereto in Order 2001-220.
“Order 2001-220” means Industry consensus reports submitted by the
Contribution Collection Mechanism (CCM) Implementation Working Groups,
Order CRTC 2001-220, dated 15 March 2001, and references in these Procedures to
such order shall be deemed to include, as appropriate, such order as varied,
amended, refined and/or supplemented by the CRTC in proceedings, decisions,
orders or interpretations made or issued thereafter and/or arising therefrom.
“Order 2001-221” means Disputed issues submitted by the Contribution Collection
Mechanism (CCM) Implementation Working Groups, Order CRTC 2001-221, dated
15 March 2001, and references in these Procedures to such order shall be deemed to
include, as appropriate, such order as varied, amended, refined and/or supplemented
by the CRTC…