FINANCE AND ADMINISTRATIVE COMMITTEE
	TO:	Mayor and Members of Council
	FROM:	James Allen, Chief Information Officer
	PREPARED BY:	Krishna Sookrit, Lead, Telephony & Desktop Integration Francis Poon, Manager, Technology
	DATE OF MEETING:	June 14, 2004
	SUBJECT:	Transfer of 905 Region Long Distance Telephone Service Provider

RECOMMENDATION:

THAT the report dated June 14, 2004 entitled “Transfer of 905 Region Long Distance Telephone Service Provider” be received;

AND THAT the current arrangements for local telephone and long distance services remain unchanged.

PURPOSE:

This report provides Council with information regarding the proposal to transfer the 905 region long distance telephone service from Bell Canada to FCI Broadband (FCI), formerly known as Futureway Communications Inc. The report summarizes the evaluation of this proposal by Information Technology Services.

The market place for local carriers is evolving, and this is not considered a strategic priority at this time, therefore, it is recommended that the current arrangements for local telephone and long distance services remain unchanged at this time.

BACKGROUND:

Under the Canadian Radio-Television & Telecommunications Commission (CRTC) regulations, FCI operates a telecommunications network as a Competitive Local Carrier in direct competition with Bell Canada. As a Competitive Local Carrier, FCI is able to offer free local calling throughout York, Durham and Peel Regions, and they are able to offer local lines at a lower cost than Bell Canada. Meanwhile, Bell Canada is not permitted to offer the same services at a lower cost based on CRTC regulations.

In 2003, FCI approached Information Technology Services (ITS) to discuss the services they could provide to the Town. FCI initially offered a proposal to transfer all seven of the Town’s Primary Rate Interface (PRI) lines to FCI. These are the communication lines which make up the core of the Town's telephone (voice) services and provide incoming and outgoing connectivity. These lines are currently contracted with Bell Canada. After ITS assessed the proposal and consulted with FCI, it was mutually agreed that in order for the Town to potentially achieve more favourable savings and reduced risks, an alternative approach would be more appropriate. FCI’s revised proposal involved the transfer of only two of the PRI lines to FCI. These two lines would be used to service local long distance telephone calling needs within the 905 region. The other five PRI lines would remain with Bell Canada to provide incoming and Canada Wide Long Distance calls. Both vendors would act as backup for each other in the event that the service from one vendor was not available.

OPTIONS/DISCUSSION:

In evaluating the revised FCI proposal, ITS considered potential benefits, costs and risks.

The proposed transfer of services to FCI could result in combined gross savings of up to $1,080 per month, as shown below:

• The proposal outlined cost savings achievable through FCI’s Extra-Large Local Calling Area (XLCA), which covers most of the 905 region (see Appendix A). Telephone calls from the Civic Centre and 10 of the Town’s remote facilities to anywhere within the XLCA would be considered no-charge local calls on FCI’s network. Since close to 70% of current long distance calls placed from these Town facilities fall within this calling area, the FCI proposal would be expected to generate savings from reduced long distance charges in the order of $700 per month.
• To take advantage of the XLCA benefits, two of the existing seven PRI lines would need to be transferred to FCI. The other five would remain with Bell Canada to provide incoming and Canada Wide Long Distance calls. FCI is able to offer PRI lines at a cost saving per line of approximately $190 per month. Utilizing two PRI lines from FCI would provide approximately $380 in additional savings per month.

However, in addition to the benefits discussed above, the following potential risks and additional costs associated with the transfer have been identified:

• FCI does not provide support for software and peripheral equipment, so Bell Canada would have to be retained to provide support for the telephone system at the Civic Centre. The requirement to deal with two vendors creates a two-layer problem solving arrangement. Resulting coordination issues could lengthen the time taken to restore service, potentially extending the duration of future outages and affecting the current customer service level provided by ITS.
• Since Bell Canada would no longer be the single provider of our telephone services and solutions, the customized service the Town currently receives from Bell for both voice and data services could be affected, and associated discounts currently received on charges for system upgrades and maintenance performed by Bell could be negatively affected.
• The proposed transfer would result in a one-time $1,000 installation fee from FCI for the PRI lines, and a one-time $3,000 charge from Bell Canada for required telephone system programming. FCI has indicated that its $1,000 installation fee would be waived if the Town contracted their service for 3 years.
• This would be an unplanned and unbudgeted project that would require a dedicated Town resource for a limited time to ensure a successful implementation. This project would affect the resource allocation for currently planned projects and could impact the timing on some major initiatives, such as: IT Strategic Planning, and Unified Messaging Feasibility Study.

· At present, there is a limited number of other municipalities available to provide feedback on services similar to FCI’s proposal. The City of Vaughan is the only municipality currently using FCI’s PRI lines to provide outgoing long distance telephone services for the 905 region through their Civic Centre facility. The Region of York is currently implementing PRI lines from FCI for local communication between facilities (expected completion late Summer, 2004), but at this time this project is not intended to provide outgoing long distance telephone services from the central Region of York facility.

· Recently, other major communication companies, like Rogers Communications Inc., have expressed interest to compete in the local calling marketplace in the near future. This will certainly change the landscape of the local calling market and provide the Town with other opportunities to further the potential savings and/or benefits in the short-term future. Therefore, it may be to the Town’s advantage to monitor the market place and reconsider its options at the appropriate time.

After reviewing FCI’s proposal and comparing the potential savings, effort and associated risks in changing providers for the long distance telephone services for the 905 region, ITS has concluded that, based on current resources available, major projects planned for this year and the other considerations discussed, we should not proceed with this transfer.

FINANCIAL CONSIDERATIONS:

Potential Savings:

The following table summarizes the current costs and expected savings associated with the transfer of long distance telephone services for the 905 region from Bell Canada to FCI:

Current 905 region long distance telephone services by Bell Canada
2 PRI Lines (Monthly Charges)	$1,860
Estimated Monthly Long Distance Charges within the XLCA	$700
Current Monthly Operating Cost (excluding tax)	$2,560

New 905 region long distance telephone services by FCI Broadband
2 PRI Lines from FCI (Monthly Charges)	$1,480
Estimated Gross Monthly Operating Cost Savings (excluding tax)	$1080

The savings identified in the table above does not include any of the additional one time staff time costs, or reductions of Bell discounts that would result from the transfer of services to FCI as discussed above.

Based on ITS assessment, it is recommended

THAT the report dated June 14, 2004 entitled “Transfer of 905 Region Long Distance Telephone Service Provider” be received;

AND THAT the current arrangements for local telephone and long distance services remain unchanged

BUSINESS UNITS CONSULTED AND AFFECTED:

None

ATTACHMENTS:

Appendix “A” – FCI Broadband’s Extra-Large Local Calling Area (XLCA) Map

James Allen Chief Information Officer

Andy Taylor Commissioner, Corporate Services

Appendix A: FCI Broadband’s Extra-Large Local Calling Area (XLCA) Map

The following map is extracted from FCI Broadband’s promotional material on their Website.