SIGNIFICANT. MARKET. POWER.
Those three words appear all through the Telecom Policy Review Report, which Cartt.ca has covered at length. According to my search of that document, the three words appear together 62 times, and a further 65 as its SMP acronym.
When reading that huge report, it’s easy to see how SMP was and is a very big deal to its authors. The Telecom Policy Review Panel was very conscious of the concept and how the companies with SMP might still have to be watched. It’s a key concept of the report.
But you wouldn’t know it from the proposed policy directive the Conservative government tabled in the House of Commons in June. Which is odd when you think about it because in Industry Minister Maxime Bernier’s speech to the Canadian Telecom Summit the day the directive was tabled, he said the federal government placed enormous confidence in the recommendations of the TPR report. In that context, to completely ignore such a large part of that report seems inconsistent.
But as I’ve written before, the government has left out mention of SMP on purpose. The policy directive parrots key sections of the TPR report, except the passages on significant market power. The feds seem to clearly want deregulation and the ILECs are extraordinarily glad to hear that.
Wednesday was the deadline for interested parties to submit comments on the proposed legislation to Industry Canada and the submissions were, of course, predictable.
The positions of the parties haven’t changed since June. The cable companies fear what the minister has proposed because it would give Bell and Telus and the other ILECs free rein to compete – and for that reason, the incumbent telcos are very, very pleased.
Bell points out in its submission filed Wednesday how much market share it has already lost to cable companies and others and says "it is widely agreed that telecommunications regulation in Canada is urgently in need of reform."
This policy directive is just a first step, says Bell, adding that next up should be changes to the Telecommunications Act because "changes to legislation are required to remove the presumption in favour of regulation," reads its letter.
On this, Bell is in agreement with Canadian cable operators. The big four – Rogers, Shaw, Videotron and Cogeco – filed a joint submission and they, too, pointed out that the CRTC is bound by the Act, no matter what sort of policy directive it is given. And since the Act presumes there will be regulation, that must be the Commission’s course until Parliament makes it say something else.
But beyond that, the cable companies say the government must allow the TPR report’s thoughts on significant market power to creep into the final wording of the policy directive. The directive does call for the CRTC to rely on market forces "to the maximum extent feasible," but that’s way too vague for local telephony’s newcomers.
"We agree with both the TPRP’s overall proposals for regulatory reform, as well as its suggestion for a policy direction. We also agree that the focus when deciding whether economic regulation is required should be an assessment of whether or not a service provider has SMP," reads the cable submission.
What’s also interesting (at least to me) is that the CRTC’s VOIP decision – which cabinet referred back to the Commission for a re-think (the results of which are due the first week of September) – and its local forbearance decision – which the Canadian ILECs have appealed – significant market power has been contemplated by the commissioners when making their original decisions.
So you could say that the TPR report’s Recommendation 3-3 which says, in part, that the Telecom Act should change and that economic regulation should then only remain "if there is a finding that a service provider has significant market power," has already been addressed by the Commission in those recent decisions.
For example, in the local forbearance decision, the CRTC said markets would be considered competitive when the incumbent loses 25% of its market share and then would be deregulated. That figure, whether you agree with it or not (and it seems a bit too steep to me), says the Commission believes the incumbents have significant market power and wants to give nascent competitors an ongoing leg up via win-back restrictions, tariff filing and other impediments.
Also frightening for the ILEC’s competitors is the proposed policy directives thoughts on wholesale access. MTS Allstream, whose Allstream division spends $250 million a year on wholesale fees to access the ILEC’s wires in order to serve businesses across Canada wants no part of the wholesale directive portion of the government’s proposal. The order, "if implemented as currently drafted, will actively undermine achievement of the government’s goals and jeopardize competition," says the MTS submission.
The incumbents already act unfairly, says MTS, and can’t be allowed carte blanche when it comes to negotiating wholesale access to their wires. Speaking of Bell and Telus – "the twin Leviathans," says the MTS submission, "(a)t turns they have refused to negotiate broadband access and extracted usurious margins before affording competitors access to critical inputs, and even then provided competitors with inferior quality of service, at each turn guaranteeing themselves a preference over competitors in relation to the retail customers."
In a separate submission, Rogers, too, says a review of the wholesale services sector is not needed.
What might be most perplexing of all with this proposed policy directive is that anyone who’s ever negotiated or mediated a dispute between two parties has heard the rule of thumb where if both sides are grumbling somewhat at the resolution, then it’s probably the right thing, or pretty close to it
Can we judge the federal government’s proposed policy direction with that rule of thumb? If we can, then there may be a problem because the ILECs are very pleased with it while the competition sure isn’t.
The independent Public Interest Advocacy Centre, in its submission to the feds, put it succinctly, saying: "(T)he objectives in the proposed policy direction are uniformly those that favour incumbent telecommunications providers over both consumers and competitors, in contrast with the more comprehensive and balanced approach of the TPR report…
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The House of Commons is adjourned until September 18th. It’s not known when the proposed policy direction will come before members of parliament.
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