DEREGULATING LOCAL PHONE in major urban centres in 2007 seems to me to be the right thing to do.
"The idea that somehow the cable guys are at a disadvantage to the telcos has not been proven so far in the entry of the cable industry in local voice," Lawson Hunter, Bell’s chief corporate officer said to me Wednesday. I agree with him. To a point.
Setting aside the unprecedented use of the provision in the Telecom Act that let’s the government issue policy directives to the CRTC (until 2006, it just hadn’t been done), it’s time to let the players kick sand at each other and hope the consumer benefits with good service and low rates. Shaw and Videotron are in general agreement on this. (although they also are campaigning for deregulation in most other areas of their businesses and know it would be inconsistent to call for deregulation on one side and regulation on another).
Telecom is just another retail product now, no different than, say, windowcoverings. A set of mini-blinds might be $10.97 at Wal-Mart and $10.96 at Zellers or $12.15 at Best Service Windowcoverings. The consumer can go with the lowest price or maybe justify paying more because of the extras provided at Best Service.
The likes of Rogers, Shaw, Videotron, Cogeco and EastLink are very, very good at what they do on the voice side (the thousands of customers they’re adding each week is a testament to that). Their growth has been nothing short of spectacular and apart from some rules on competitor interconnections, which can be sticky, competition is ripe enough to de-regulate the local market in places like Toronto, Hamilton, Montreal, Vancouver and Halifax.
There are going to be headaches, of course, but the market will sort most of them out. For example, when Sprint Canada came to Hamilton with a local service offering a few years ago, I made the switch. Saved me a bundle. So much I wonder how Sprint made any money off my service then. But once the win-back waiting period was up, Bell called offering me 100 bucks and other incentives to switch back.
So I said sure, went through the long process on the phone of switching back and was then told my C-note was actually a Bell World store credit. Not what I had in mind. So, after using the credit to buy a phone at the store a few months later, and still bitter and nursing my petty little grudge, I switched back to Sprint.
Then, during a move a year or so after that, I went back to Bell when Sprint’s installation contractors left me in the lurch. The fact I appear to be a fickle twit was expensive for both companies and is a hallmark of a competitive market. There are a lot of fickle twits out there causing customer acquisition costs to climb.
If I wished, I could now switch to Cogeco’s Digital Phone, or Vonage or Primus or even Rogers’ out-of-market Home Phone product, which they acquired when they purchased Sprint. I could even go wireless-only.
However, if I didn’t live in Hamilton but instead, say, Markdale, Ont., where Markdale Cable TV is the service provider, I don’t have the same kind of choice. If the local forbearance decision is instead left to stand, Markdale Cable would be far more likely to launch a phone service than under the proposed policy directive. (I’m using Markdale because I am a part-time customer of the company that serves the agricultural community as well as part of ski country.)
The new proposed test under the directive – three facilities-based competitors = deregulation – will mean that the local cable concern would be committing financial suicide by committing thousands of dollars to launching a local phone service because it would be forced to go up against a company like Bell or Telus who can now fight with the gloves off.
And there are dozens of examples like this because there are still 100 or so small cable outfits out there serving about a million Canadians.
Let’s say Markdale launches VOIP. It builds its facilities to enable the service and then lets the regional Bell managers know it needs an interconnection to the PSTN. Now the competition knows Markdale will soon begin competing on voice. Any good Bell manager would surely take steps to minimize the impact of new competition which will take local lines away from him.
I don’t mean to insinuate such steps taken would be anti-competitive or illegal. Just look at my $100 scenario. If a customer chooses to switch and is contacted the next day by a Bell rep offering them cash – even Bell World cash – to stay, can Markdale compete with that, offering each customer a hundred bucks? Hardly.
And even though there will be expensive competitive protections under the Competition Tribunal to fine behaviour that might be considered anti-competitive, such processes take months to wind their way through the various bureaucracies, necessitating lawyers and such. All the while, that small cable operator’s nascent VOIP product simply withers while he pays Ottawa lawyers to pursue the matter.
And as far as wireless being a viable facilities-based competitor beyond urban centres? Let me just say I defy anyone with a cell phone to drive from Toronto to Markdale on a few of the county roads. If you have a useable network the whole way, I’ll give you a hundred dollars.
The Conservative government is thought of as one that was elected on the backs of rural voters. If any party knows the difference between urban and rural, it’s the Tories. They should consider this constituency when writing the final policy directive so that it addresses rural markets served by facilities-based operators not named Rogers, Shaw, Videotron or Cogeco.
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