OTTAWA – Small local telephone companies operating in rural regions of Ontario and Quebec have enjoyed special protection from competition for long enough and now is the time to open up their markets to cable competitors, its competitors and potential competitors have told the Governor-in-Council.
The Ontario Telecommunications Association (OTA) and the Association des Compagnies de Téléphone du Québec Inc. (ACTQ) fear that if their markets are fully opened to competition, they will suffer severe financial impacts that could put them out of business (as they have noted on Cartt.ca). They are urging the Governor-in-Council to vary two CRTC decisions that reduces the subsidy they get from the National Contribution Fund and forces them to open their markets to competitors (the big one is the Obligation to Serve decision Telecom Regulatory Policy CRTC 2011-291).
The cable companies, both large and small, aren’t buying the small ILECs arguments that they will go out of business if competition is allowed in their markets. The doomsday scenario they present if the commission’s decisions are fully implemented are unfounded, says Cogeco Cable in comments to Cabinet. Both Cogeco and EastLink have made their objections known to Cartt.ca readers already.
That the SILECs say they “will be entering bankruptcy, or a situation very close to bankruptcy, within five years” if they face competition “is grossly exaggerated and without merit.” This conclusion “is based on nothing but fear and speculation and is not supported by the evidence,” argues Cogeco.
Bragg Communications Inc. (EastLink) agrees. Claims by the SILECs that competition would irreparably harm their business are worse than exaggerations, they are untrue. It adds that the subsidy regime is supposed to support local telephony in high-cost serving areas (HCSAs), not “fund Internet and IPTV services” and not “guarantee the financial well-being of any particular telephone service provider.”
“It is absurd that Canadian subscribers in Espanola, Chicoutimi and Saguenay should contribute to a central subsidy fund through higher service fees, so that the applicants can afford to offer their customers phone and Internet service at prices below that available in even Canada’s largest cities,” says EastLink.
Cablovision Warwick, a small cable company in Quebec, also suggests that the SILECs arguments of financial hardships resulting from competition are unfounded. “Most of them are sufficiently well financed that there is no such risk. Sogetel for example, the parent company of Téléphone Milot, announced last fall that it was investing more than $2 million in its network in our area alone. More recently they announced another $500,000 investment in a neighbouring community,” it writes.
Cogeco has for years been trying to enter the telephony market of small ILECs so it can offer a triple-play bundle of voice, video and Internet services yet has been unable to do so. Cogeco, through Telus Communications, applied four years ago to interconnect with eight SILECs in Quebec, but has been prevented from entering those markets.
“Inversely, throughout this same period, SILECs have diversified their offerings by successfully deploying and adding competitive television and Internet services to their telephone service, the whole to Cogeco’s detriment,” the company says.
Cablovision Warwick has also experienced first hand the inability to enter SILEC territories, yet has to compete against them for telephony customers. The company has been thwarted in its efforts to enter the Téléphone Milot territory. This asymmetry between cable and telecom providers needs to end, it argues.
“It is also ironic that while cable companies have been blocked from competing with the SILECs, the SILEC have been able to enter our core video business without restriction. As a result, they can offer a bundle of three services telephone, Internet and video, while we can not. Not surprisingly we are quickly losing customers to a company with which we cannot fairly compete,” the company states.
Bell Canada argues that if Cabinet varies the CRTC’s decision as requested by the OTA and ACTQ, it would lead to the perverse situation “where customers in large ILEC territories would pay more, so that customers in SILEC territories can enjoy lower rates.”
In addition, Bell says that acquiescing to the SILECs’ demand “may indefinitely delay competition by implementing barriers to entry that would discourage CLECs to enter the small ILECs local service markets.”
Suggestions that the CRTC used a cookie cutter approach for all SILECs are unfounded, according to Rogers Communications Inc. The company says the commission has studied the matters central to the appeal several times since 2006 and “that the CRTC has developed a fair regime for the SILECs that is specifically tailored to their circumstances, taking into consideration the views and needs of all parties.”
Rogers highlights a few in its comments to the Cabinet appeal: the SILEC forbearance threshold is lower giving them additional flexibility; SILECS still get access to the NCF subsidy even for lost customers; and competitive telecom providers and wireless companies have to pay competition start-up costs for SILECS with fewer than 3,000 local access customers.
“So, contrary to what the ACTQ/OTA have argued in their petition, the CRTC has not used a ‘cookie cutter’ approach,” argues the company.
