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CNAC Funding Mechanism


The Canadian Numbering Administration Consortium Inc. ("CNAC") has been mandated by the Canadian Radio-television and Telecommunications Commission ("CRTC") to supervise the administration of numbering resources in Canada. The CRTC has also directed that the telecommunications industry fund the costs of this administration. For additional information on the CRTC's creation of the CNAC and approval of the CNAC Funding Mechanism see:

http://www.crtc.gc.ca/cisc/eng/cisf3f1h.htm

The CRTC has directed that any telecommunications service provider ("TSP") which is an Eligible Person is required to assist in the funding of the administration of numbering. An Eligible Person is basically a TSP that falls within the definition of Canadian Carrier under the Telecommunications Act. Eligible Persons that are obligated to fund the CNA are those who fulfill the "Eligibility Criteria for Shareholders" as defined in the CNAC USA. Pursuant to the USA, the Eligibility Criteria for Shareholders means:

"a Person that is an ILEC, a CLEC, an Independent Telephone Company, a Canadian International Carrier, an Interexchange Carrier or a Wireless Service Provider".

Eligible Persons are obligated to fund the CNA by making a payment equal to its share of the costs of number administration determined by its percentage share of the industry's gross telecommunications service revenues, subject to an annual minimum charge, plus an annual base-line fee. Pursuant to article 1.1 of the USA, Telecommunication Services is defined as:

"services which are provided over the PSTN by Eligible Persons and which utilize Numbering Resources including, for greater certainty and without limitation, local exchange services, long distance services, wireless telephony services, and international long distance services; but shall exclude enhanced services (e.g. call answer, speed dialing, three-way calling), the sale or lease of terminal equipment (e.g. telephone sets, PBX's, key systems, answer-record machines, computers), the sale or lease of private lines, other private line and private network services, internet services, and paging services".

Revenue from these services constitutes Telecommunication Service Revenue as defined in the Service User Agreement.

Welch LLP has been appointed by CNAC to act as its Billing and Collection Agent ("B&C Agent") for the purposes of determining and collecting the applicable annual fee from each Eligible Person. Based on information maintained by the CRTC, companies are investigated and determined to be an Eligible Person. Such Eligible Persons are required to submit a reporting worksheet and other documents setting out the company's telecommunications service revenue for each calendar year (e.g., 2009) to Welch LLP by April 1 of the following year (e.g., 1 April 2010). This revenue data will be used to determine the applicable annual fee to be paid by each company to fund the administration of numbering resources in Canada for the CNAC fiscal year which starts July 1 of each year and ends on June 30 of the following year. Following such calculation, the B&C Agent will send an invoice to each company setting out the applicable fee to be paid along with the applicable payment dates depending on the method of payment that each company selects on the filing of the reporting worksheet and related documents. If any entity believes that the designation of eligible person is not correct, the entity is required to complete and submit an exemption request form to the B&C Agent by no later than April 1 each year. Following receipt of a completed exemption request form, CNAC will make a determination as to each company's status. In the event that the exemption request is denied, the company will be required to submit the reporting worksheet and other related documents within 30 days of CNAC's decision and the company will be required to pay an annual fee. Failure to submit an exemption request form to the B&C Agent by the required due date will result in a company being deemed to be an Eligible Person for that year and the company will be required to pay an annual fee. Please note that if a company is incorrectly included on one of CRTC's lists used to determine Eligible Person (i.e. Non-Dominant Carrier List, CLEC List, WSP List, etc.) it is that company's responsibility to have its name removed from such list. CNAC will consider such lists as conclusive proof as to a company's status as an Eligible Person and a company will be considered to be an Eligible Person and be required to pay an annual fee until the lists are revised and the company's name is removed.

The minimum charge and annual base-line fee is determined by the following table, which is based upon a consensus agreement from the CSCN on August 28, 1998.

Annual Gross Revenues from Telecommunications Services(1)

Percentage Share of Funding Costs(2)
(A)

Baseline Fee
(B)

Annual Fee
(A+B)(3)

Less than $5,000,000
 
% of Funding Costs
($50 Minimum)
 
$50 % of Funding Costs + $50
($100 Minimum)
$5,000,000 or greater
 
% of Funding Costs
($1,250 Minimum)
 
$1,250
 
% of Funding Costs + $1,250
 ($2,500 Minimum)
 
Notes:
  1. As set out on Reporting Worksheet.
  2. Percentage is determined by dividing the Eligible Person's Revenues by total of revenue reported by all Eligible Persons on all Reporting Worksheets filed.
  3. Annual Fee is subject to GST.

Additional Fees

In addition to the annual fee, Eligible Entities may be subject to the following additional fees in order to compensate the B&C Agent and/or CNAC for additional processing:

  1. If the above documentation, properly completed, is not delivered to the B&C Agent by the April 1 due date, an additional fee of $375 is payable.
  2. If a payment of the annual fee is not made by the applicable due date, an additional fee of $275 per late payment is payable. In addition, late payments will be subject to interest at an interest rate of prime plus 2% p.a from the due date until fee is paid in full.
  3. If the quarterly payment option is selected, an additional fee of $85 per payment (total annual cost $340) is payable.
  4. If the monthly payment option is selected, an additional fee of $85 per payment (total annual cost of $1,020) is payable.

Any additional fees will be invoiced to the Eligible Entity and such invoices are due upon receipt.


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