DSL Tariff & Special Access Considerations

33  Download (0)

Full text

(1)

DSL Tariff & Special Access

Considerations

(2)

The material appearing in this presentation is for informational purposes only and is not legal or accounting advice. Communication of this

information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials may have been prepared by professionals, they should not be used as a substitute for professional services. If legal, accounting, or other professional advice is required, the services of a professional should be sought.

(3)

Agenda

DSL Rates

• New DSL Rate Band Assignments

• Rationale For Band Assignments

• Rate Band Reassignments

Special Access & DSL Issues

• New Special Access Rates

• NECA Pool Basics

• Rate Developments

Procedures For Exiting The Pool

(4)
(5)

New DSL Rate Bands

NECA Issued New DSL Rate Bands & Rates

Effective 7/1/2015

Before: 17 Rate Bands

Now: 50 Rate Bands

675 Companies Continue to Participate

53 Companies Exited NECA’s DSL Tariff in 2015

(6)

New DSL Rates

Wide Range of Rates

• WPP 3 Yr

Was Now

1/6 Voice/Data $9.27 $1.15 Rate Band 1 $26.64 $29.22 Rate Band 17 $NEW $118.68 Rate Band 50 1/6 Data Only $50.54 $6.27 Rate Band 1

(7)

New DSL Rates

Wide Range of Rates

• WPP 3 Yr

Was Now

3/15 Voice/Data $13.73 $1.70 Rate Band 1 $36.51 $43.29 Rate Band 17 $NEW $175.80 Rate Band 50 3/15 Data Only $53.36 $6.62 Rate Band 1

$141.92 $168.29 Rate Band 17 $NEW $683.44 Rate Band 50

(8)

DSL Band Assignments

Wide Assignment of Rate Bands

• No Company Assigned to RB1 or RB2

• One Company Assigned to RB3

• Bulk of Companies Assigned to RB9-18

• No Company Assigned beyond RB25 For Voice/Data

(9)

Rationale For Band Assignment

Reassigned Costs from Special Access to DSL

Examined Costs and Demand to Make Band Assignments

• Forecast vs. Historical

• Rate Band Previously Assigned On Forecast

• Under forecasting

• Stress On Pool

• Trending from Historical Reporting 2011 to 2013

• “Right Sized” Band Assignment

• Moved Companies Closer to Actual Costs

(10)

Band Reassignment

Limited Number Telcos Offered Band Reassignment –

• Contributor vs. Recipient

• Very Limited Offer – Around 13 Companies

Rate Band Buy Down

• Allows Company to Offer DSL at Lower Banded Rate

• Reduced Rate of Return

• Company’s Proposed Rates & Direct Costs

(11)
(12)

Special Access & DSL Issues

Traffic Sensitive Actual Pool Rate of Return

• 2007 – 2011 avg. = 10.78%

• 2012 = 7.49%

• 2013 = 7.11% (final true-up pending in 2015)

• 2014 = 8.87% (true-up pending in 2016)

• 2015 = 9.79% (and declining)

What is the actual revenue impact to companies of a rate of

return below the authorized level?

(13)

Rate of Return Impact

Current ROR Authorized ROR Variance

Access Lines 6,000 6,000

DSL Lines 1,500 1,500

Interstate Special Access

Circuits 250 250

SA/DSL Interstate Rate

Base 2,000,000 2,000,000

Rate of Return X 7.50% X 11.25%

Return on Rate Base 150,000 225,000

(75,000)

(14)

Special Access Issues

Special Access Interstate Tariff Rate Changes

• NECA Tariff effective 7/1/15 produced drastic reductions in many services and rate bands

• Total Special Access Revenue Requirement

• Significant reduction in Special Access offset by increases in DSL Transmission

• More accurate forecasts of costs

• NECA is taking a closer look at member forecasts, and requesting adjustments where costs have varied

(15)

New Special Access Rates

Wide Range of Rates

• DS1 Rates

Was Now

Chan Term $56.37 $20.46 Rate Band 1 Chan Mileage $3.49 $1.27 63% Decrease

CMT $18.09 $6.57

Chan Term $286.80 $250.28 Rate Band 9 Chan Mileage $17.75 $15.49 12% Decrease

CMT $92.06 $80.34

Chan Term $632.45 $654.58 Rate Band 21 Chan Mileage $39.14 $40.51 3.5% Increase

CMT $203.01 $210.11

(16)

New Special Access Rates

DS1& DS3- Average of approximately

• RB1 -63.7% RB11 -7.7% RB21 +3.5% • RB2 -56.9% RB12 -5.8% RB22 -13.4% • RB3 -46.1% RB13 -4.2% RB23 -26.8% • RB4 -42.7% RB14 -2.8% RB24 -32.9% • RB5 -32.6% RB15 -1.5% • RB6 -25.5% RB16 -.50% • RB7 -20.2% RB17 +.50% • RB8 -16.0% RB18 +1.3% • RB9 -12.7% RB19 +2.15%

(17)

New High Cap Rates

Ethernet Rate – Average of approximately….

• RB1 -74.0% RB11 -36.4% RB21 -27.7% • RB2 -66.9% RB12 -35.1% RB22 -40.3% • RB3 -62.9% RB13 -34.0% RB23 -49.5% • RB4 -60.5% RB14 -33.0% RB24 -53.8% • RB5 -53.6% RB15 -32.1% • RB6 -48.7% RB16 -31.4% • RB7 -45.0% RB17 -30.7% • RB8 -42.1% RB18 -30.1% • RB9 -39.8% RB19 -29.6% • RB10 -38.0% RB20 -29.1% 17

(18)

Special Access Issues

Special Access Interstate Tariff Rate Changes

• Historically, costs had continued to increase

• Demand shifts from high volume TDM circuits to High Capacity Ethernet Circuits, decreasing overall demand

• Company shifted between rate bands

(19)

Current Issues with Special Access

The Challenge……Rate Development based on Prospective

demand and costs

• February forecasts need to be accurate ……they have not been…..because its hard to be accurate

Demand for special circuits often changes beyond our control

- timing and circuit type

• Trading T-1’s for Ethernet significantly impacts the amount of revenue generated for the pool

(20)

NECA Pool Basics

Special Access DSL

Interstate Rate Base $1,250,000 $750,000

Authorized Rate of Return X 11.25% X 11.25%

Return on Rate Base $140,625 $84,375

Interstate Expenses $1,359,375 $515,625

(21)

NECA Pool Basics

Special Access DSL

Interstate Service 250 Circuits 1,500 Customers

Tariff Rate $750/circuit $20/End User

Months 12 months 12 months

Revenue Generated $2,250,000 $360,000

Revenue Requirement per cost

study $1,500,000 $600,000

Net Pool Recipient/(Contributor) ($750,000) $240,000

(22)

NECA Pool Basics

Special Access DSL

Interstate Service 150 Circuits 1,500 Customers

Tariff Rate $750/circuit $40/End User

Months 12 months 12 months

Revenue Generated $1,350,000 $630,000

Revenue Requirement per cost

study $1,500,000 $600,000

(23)

NECA Pool Participation Analysis

Things to consider about NECA Pool participation:

• What is your forecasted revenue requirement and projected revenue to be reported to the pool

• Consider which of the pools the company is net contributor versus net recipient

• Consider who the company’s major customer is and rate impacts

• Special access – is it a subsidiary?

• DSL – primary customer of the ILEC is the ISP

(24)

Special Access Tariff Analysis

When filing a company specific tariff, we transfer the risk of changes in our company from the pool to ourselves

• Change in Costs

• Change in Demand

• We need to accurately forecast for at least the next 2 years to make sure we understand the risks

(25)

Things to Consider

Net Recipient vs. Net Contributor

• No need to consider Switched Access

Forecasts – Level of Risk

• Revenue Requirement

• Demand

Regulatory burden of maintaining company specific tariff or

RT&C

Default position should be to stay in the tariff/pool

(26)
(27)

NECA Traffic Sensitive (TS) Pool Exit

Notify NECA of TS Pool exit by March 1

st

Exit becomes effective July 1

st

TS Pool exit impacts:

Switched Access Rates

Special Access Rates

Wholesale DSL Rates

ARC Rates

Does NOT impact NECA Section 17.1 rates:

SLC, FUSC, Line Ports

(28)

Individual Interstate TS Access Tariff

FCC Rule 61.39 (if less than 50,000 access lines)

Requires rate development based on historical costs and

historical demand

Tariff terms and conditions reference applicable NECA tariff

sections

Tariff Section 17 contains company-specific rates based on rate

development calculations

(29)

Individual Interstate TS Access Tariff

Switched access rates based on current NECA rates

times NECA provided factor per FCC Rule 51.909(a)

Special access rates based on latest annual revenue

requirement divided by latest annual demand units

Wholesale DSL rates, if not de-tariffed, based on

latest annual revenue requirement divided by latest

annual demand units

ARC rates set per FCC Transformation Order

(30)

Individual Interstate TS Access Tariff

Switched access terminating end office rate updated annually

based on FCC Transformation Order

• $0.0050 effective July 1, 2016

• $0.0007 effective July 1, 2019

• $0.0000 effective July 1, 2020

Special access rates, including Wholesale DSL if not

de-tariffed, updated every other year (odd years) based on

(31)

NECA DSL Tariff Exit

Allowed by FCC Wireline Broadband Order

1

Can be done without exiting NECA TS Pool

Notify NECA of DSL Tariff exit by March 1

st

Exit becomes effective July 1

st

Notify following parties by May 15

th

FCC

Governor’s Office

State Commission

Department of Defense

Send copies of notification letters to NECA

1CC Docket No. 02-33 released September 23, 2005

(32)

NECA DSL Tariff Exit

Create Terms, Conditions, and Rates document to be

published on Company website and available in business

office

Wholesale DSL rates based on current annual revenue

requirement

Wholesale DSL rates cannot produce more revenue than

revenue requirement (i.e., cannot over-earn)

(33)

Figure

Updating...

References

Related subjects :