New Contribution Rates and Rules

“Contribution” is the term used in Canada to refer to the subsidy from long distance services towards basic dial tone. The level of Contribution varies by province, however, it is generally in the order of 0.5¢ to 2¢ per minute per end of the call, charged in addition to switched access or egress charges.

The CRTC has updated Contribution rates for the year 2000, and has ruled against AT&T Canada and Call-Net’s applications to lower the subsidy even more due to the effect of increased volumes of minutes stimulated by flat rate calling plans. New rates are set out in the table below.

Contribution on DALs
As reported in the July 24, 1999 update, traffic sent over Dedicated Access Lines (DALs) continues to be exempt from paying contribution, and carriers will continue to apply a “DAL” surcharge on switched traffic charges. Further, at that time, the Commission determined that carriers which do not use DALs at all should be exempt from the surcharge. The surcharge was determined in Telecom Decision CRTC 99-20, released December 15, 1999.

International Issues
Western Canadian telephone companies had complained that international traffic patterns had been distorted because low contribution rates in Bell Canada territory created an incentive for traffic to use Ontario and Quebec as border crossings (thereby saving up to 2.5¢ per minute). In response, the CRTC has determined that all international traffic will attract the Bell Canada rates (about half a cent per minute), effective January 1, 2000.

As we have reported before, per minute access and contribution charges continue to be a significant issue challenging profitability for Canadian carriers. The competitors for voice services have not been able to convince the CRTC that there is a problem and there are signs of a credibility gap for the industry in presenting numbers to the Commission. There is a continuing proceeding to review the “per-minute” approach to contribution as well as the overall level of funding required to maintain affordable local service.

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