TORONTO – So what’s it like going from one side to another, is what people often want to know from Janet Yale.
She spent four years as president and CEO of the CCTA (Canadian Cable Television Association [the T now stands for telecommunications]) before bolting to Telus in late summer 2003 and is now executive vice-president, corporate affairs. 
Yale (right) tries not to see her move from one side to another, and draws similarities between cable and telecom.
However, while each are facilities-based providers, cable and telecom are clearly at each others’ throats right now. VOIP is front and centre, with cable having taken some key regulatory battles, not to mention thousands of customers. But the telcos are fighting back with every political and legal resource they can muster.
There’s more to come, as Yale outlines here in her chat with www.cartt.ca editor and publisher Greg O’Brien in Toronto at the recent Canadian Telecom Summit.
Greg O’Brien: Now that you have a few, well more than a few, months under your belt at Telus, what’s it like going up against the industry you used to represent? You’ve made many friends in the cable industry and now you’re bumping up against them. What’s that like from a personal point of view?
Janet Yale: I like to say that this is a small business and it’s all about relationships – and you have to separate the personal and the professional. So, at the end of the day, I am a hired gun who has changed clients – no different than a lawyer in private practice changing clients and people know and understand that when it comes to the business agenda, I’m going to be a very forceful advocate on behalf of the organization I represent and if you can’t do that passionately, then you shouldn’t take the job.
The first thing is, can you feel passionate about the issues you have to advocate for on behalf of the organization? If you can’t then it’s irresponsible to take on these assignments. I’m completely comfortable advocating the Telus interests. I think there’s a lot of issues that are common with the cable agenda in the sense that these are two infrastructure providers who are each entering the other’s lines of business and the terms and conditions under which that triple play finally happens are incredibly significant.
At the end of the day, they’re both about facilities-based providers really being forceful competitors with each other.
GOB: Now, when you talk about facilities-based providers, all of these will fall under the telecom review that’s coming. Can you give me a sense of what you plan to tell Industry Canada when you face that review?
JY: Our general theme – if I can say there’s a general theme – and it’s not a secret because it’s very similar to what our theme is in front of the CRTC these days, which is regulatory freedom and flexibility. It’s time to allow the incumbents greater freedom and flexibility to compete, and it’s inappropriate to regulate in the rear-view mirror, so the CRTC should be on a steady path to deregulation.
Similarly, it’s important for the government to send a signal to the CRTC that this is what it expects the regulator to do in order to position Canada, from a competitiveness perspective, in the best possible light and to really create an environment in which we’re encouraging innovation and investment in infrastructure by the organizations that are actually going to make those investments, rather than holding us back in order to favour foreign-based providers.
There’s nothing wrong with foreign-based providers, but at the end of the day, they’re not making investments in infrastructure in this country and that, it seems to me, is very important from a public policy perspective.
GOB: When it comes to the (regulatory) shackles that Telus and the other incumbents do face… at what point will (does the industry and CRTC) say ‘okay, the market is competitive’?
JY: The starting point is going to be symmetry with the cable industry. It seems to me that what we should do is start to adopt a policy framework that says if we’re now in each other’s lines of business, the regulatory treatment of the two organizations should be symmetric, unless there’s a good public policy reason for asymmetry.
GOB: So is that the 5% then? (A cable company is allowed to ask for deregulation in markets after it loses 5% of its customers).
JY: It’s not about the 5%. What it is, is making sure there’s meaningful competition in the market and the test for cable deregulation was that the (new competitive) service is available on a widespread basis to at least 30% of the homes (in an area) and then what the 5% means is that if at least 5% of customers have taken the alternative, it’s a meaningful alternative in the market and therefore it’s able to discipline the behaviour of the incumbent.
It’s not about saying you’ve lost enough market share or the competitor has gained enough market share to reach critical mass and scale because that’s about protecting the competitor and not about competition.
The competition test is whether or not there’s evidence that this is a viable competitor in the sense that customers are not afraid to try it. They know and understand the alternative exists. The fact that they may not choose the alternative doesn’t mean the competitive discipline of that price point in the marketplace doesn’t exist.
You have to think of the 5% in that it is not supposed to be evidence that the competitor has reached scale. It’s evidence from a consumer perspective that this is a meaningful competitive alternative.
GOB: How will it (telephony competition) be measured? Cable was always measured market to market because that’s how the systems were licensed. The telephone industry is a bit different because you have vast regions, so do you measure it based on customers lost in that big geographic region, do you measure it by lines to customers or by area code?
JY: I think we’re going to have to put together exactly how you would measure it … but to be honest, that’s the side show to the main show. The main show is a public policy rationale for a symmetric approach and it seems to me that whether it’s the deregulation, win-backs, promotions, all the minutiae of regulation that exists today asymmetrically, we have way more onerous requirements in telephony than the cable companies do in cable television in our incumbency area.
And, even worse, when it comes to us entering into television service, the BDU rules are actually quite time-consuming… but when the cable companies get into the telephone business, they file a letter to say they’re a CLEC now. There’s no process or regulatory hurdles. You don’t need a license and you don’t need to amend it every time you change something.
We changed the signal source for some of our Telus TV signals and the amendment itself took 14 months. All we were trying to do is change the source for the U.S. 3+1s from one city to another… and that’s a 14-month process. There were no negative interventions, the paper just takes that long.
GOB: Does that give you any negative feelings about how the Commission says it’s going to be speedy on the tariff applications?
JY: Don’t get me wrong, I’m not saying that the Commission isn’t capable of being speedier, the issue really is: are there asymmetric application of rules to different incumbents? There is, and what we’re saying is now that the cable industry is entering the telephony business, the asymmetries matter. They matter in a way they didn’t prior to that entry and we have to think that through from a public policy perspective whether that continues to be fair and reasonable.
GOB: Now that we have the VOIP decision and Shaw has launched telephony in Calgary and Edmonton, will this speed up the Telus TV roll-out?
JY: Wait and see.
GOB: How long will I have to wait?
JY: Wait and see. Nice try, though.
GOB: Back to VOIP, you’re still appealing the CRTC decision to the federal cabinet?
JY: That hasn’t changed. We have 90 days from the date of the decision to file. We will be filing jointly with Bell, Aliant and Sasktel and what we’re working through are the logistics and co-ordination of so many parties on a common appeal given that we had slightly different positions at the hearing itself.
We think it’s much more powerful if we go in together and we’re trying to come up with an approach that makes sense and is defensible given our slightly different positions.
GOB: The decision did leave an option where you could go out of market and launch VOIP…
JY: We could always go out of market.
GOB: Would Telus look at going into Toronto with VOIP, for example?
JY: The issue for us is how do we tell our customers in B.C. and Alberta that we can offer a service to everyone in Canada except them. It’s a very tricky thing to start offering consumers a product where you may be doing national advertising and with a little asterisk which says “except for our own customers”.
That’s point one. Point number two is that once there’s no difference in regulatory treatment of voice over IP in-territory, depending on whether you do it on an Internet basis or a proprietary basis, why would you do Internet-based VOIP?
If everything is going to be treated as if it’s local telephone service then to be competitive, you’d make it more like traditional telephone service than different. Whereas if it was recognized that this is different, you’d really emphasize the differences so you don’t cannibalize your own revenues.
Why would you come in at a price point, when you already have customers? What you want to do is appeal to people who aren’t your customers in-territory as well as out of territory to start building those customer relationships (like) more teenagers for second lines, where (consumers) don’t care that the quality isn’t quite as good as traditional telephone service.
The whole point that the Commission missed is that this is different – but now that they’re saying that it can’t be different, they force-fit this back into the old model with equal access obligations on a nomadic service, directory listings obligations and so on – so you’ve kind of killed the incentive for an ILEC to do it.
So, we have to re-think on what basis we enter the consumer market, given that this is a real disincentive to innovation on the part of the incumbent.
GOB: Is there fear among the ILECs that VOIP is going to grow so rapidly that it will have a very real, immediate, severe impact on the bottom lines of the companies? Because the local phone is the bread and butter of the incumbents.
JY: It depends on what kind of VOIP you’re talking about. Are the niche players like Vonage and Primus a significant threat? I think they’re a niche opportunity because they only have that single relationship with the customers because it’s only about VOIP and it’s only an Internet-based application, so that will appeal to certain subset of customers overall.
That’s not the same as cable entry, because cable entry is a true, local service alternative and they’re offering it to any of the 2.2 million customers with whom they already have relationships. They’ve already got cable and already got high speed Internet and now they’re saying to those same customers ‘here’s our well-established, well-recognized brand and we’re offering you an addition to the bundle you already enjoy.’
I think that is a pretty compelling offer and it’s why we felt it was really important for the Commission to do two things: One, let us at least on an interim basis, while on the path to deregulation, have an Internet based voice offer that would be offered on an unregulated basis and set out a clear test for forbearance as quickly as possible so that we’re not past the due date for forbearance by the time we know what the test is…
We had hoped the Commission would give us some opportunity to manage which customers leave, either through relaxation of win-back when it comes to cable VOIP providers… we had asked for unregulated, Internet–based relief on VOIP and we had asked for relief on win-back.
Now the comfort we’re supposed to take from the Commission’s determinations is that: ‘Oh well, don’t worry, if you lose market share faster because you have no tools in your toolkit to prevent customers from leaving, well, you’ll just get to deregulation much faster because you’ll have lost market share that quickly. And, that may be true, provided we have the test before we reach that point.
It makes it doubly important to get that test in place and identified as quickly as possible and have an accurate way to measure when we reach it. So, we have said to the CRTC that they have to have accurate and timely information from us on lines lost and from the competitive entrants on lines gained so that we’re not having a six-month debate about data and how you measure it and what’s the procedure we’re going to use.
So, in the forbearance proceeding, we’re going to say it has to be a bright line test just like cable – they put in one piece of paper that is an attestation with respect to the loss of customers, pursuant to the 5% test – and it’s clear what you have to show: your initial subscriber count, customers lost and so on. It’s imperative that the test be that simple.
It has to be objective, it has to be clear and we’re not going to have an eight month proceeding that follows the establishment of the test proceeding for every community where you want to be forborne (from regulation).
GOB: Has it been frustrating to see the individual complaints (over win-back, over Shaw’s antics) put off and rolled into the forbearance proceeding?
JY: I think the issue is: What kind of signals is the Commission sending? They’re sending a very clear signal that they wanted (the cable companies) to get a regulated head start. From my perspective, whatever they said about this being the same as telephone service, if you pull apart the decision, the only justification that makes sense for why they regulated ILECs is that they wanted the cable guys to get in the business and get to a serious level of market share before we had any freedom and flexibility.
GOB: Chairman Dalfen said during the media lockup leading to the VOIP decision – we were talking about the satellite and cable market and the 5% – that now the shoe’s on the other foot – almost like it’s payback time.
JY: There is really a sense that the (local telephony) competition experiment has failed to date and they want to make sure that this entry works. So they are determined to hold us back, whether it’s win-back, some of the limitations on promotions, Internet based voice over IP – there is a whole series of things that they could have done, but said they wouldn’t do, which really just hastens our loss of market share to the cable companies.
And, as I said, it’s cold comfort to know that we may be deregulated sooner because we still don’t have the test for deregulation and we’re very concerned that we’re going to be past the due date by the time we get there.
So, we are going to be pushing very hard during the forbearance proceeding that the test be simple, be clear and be announced as quickly as possible and we’re convinced that there may well be some communities by early next year where we will be in a position to get total deregulation.
