In its comments on the petition filed by the Association des Compagnies Telephone du Quebec and Ontario Telecommunications Association (the petitioners) earlier this month, EastLink stated that the petitioners’ three recommendations to the Governor in Council would harm rural consumers by restricting competition plus establish an unnecessary degree of government intervention in the telecommunications market.
In its filing dated April 5, 2012, EastLink noted that the ACTQ/OTA has proven, by their aggressive competition, expansion of multiple services, fibre to the home builds (for some SILECs), and in some cases, below-market rates, that they do not require the same substantial government intervention that they may have needed in previous decades. At the same time, many phone service providers hoping to enter the petitioners’ territories are, like EastLink, primarily rural operators and are sometimes even smaller than the SILEC whose territory they aim to enter. Requiring these rural providers to fund their own competition costs and those of the petitioners is contrary to 15 years of competition regulation in Canada and would severely discourage competition in the petitioner’s territories.
EastLink agrees with Cogeco’s comments that consumers are best served when competitive options exist and where competing service providers are incented to be innovative, operate efficiently, and to compete for market share. The ideal regulatory regime would encourage competition as much as possible while relying only on government intervention that is absolutely necessary to ensure that all customers have access to service – this is exactly the regime the CRTC has established in its decision.
The CRTC has recognized the petitioners’ decreased need for subsidies while granting new protections to ease the transition to a more efficient regime. These petitioners are aggressively competing inside and outside of their own operating areas, offering television, Internet, and phone services, with many also offering wireless phone service. In addition, the petitioners have indicated that access to local phone subsidies is, in part, supporting their investment to build IPTV networks and to offer phone and Internet in high-cost rural areas at rates below those available in even highly competitive markets like Toronto and Montreal.
Government intervention in the form of subsidies was intended to ensure basic phone service is provided, not to subsidize incumbents’ ability to expand their suite of services. The recent decision to reduce subsidies strikes a reasonable balance given all evidence put before the CRTC, the change in market conditions, and the SILECs’ success expanding their business into new markets and services.
The CRTC also provided a number of supplemental protections for the petitioners in order to ease the transition to a more efficient regime and gently reduce the subsidies. For example, the smallest of the petitioners will have all costs related to competition reimbursed by the new phone service provider. All petitioners will also continue to receive subsidies for subscribers they lose to a new competitor for the first few years of competition, and can recover ongoing costs through adjustments to their subsidies.
At the same time, the petitioners have inaccurately portrayed service providers seeking to enter SILEC markets as big, urban, deep-pocketed service providers who could easily bear the petitioners’ costs of local competition. In fact, three new entrants are actually rather small, rural operators. EastLink started a small rural cable provider in Nova Scotia and has continued to operate largely in small rural areas. Customers in the territories of five SILECs can currently subscribe to EastLink Internet and cable but have been waiting for nearly four years to bundle these services with EastLink’s local phone service.
Cablovision Warwick is in the exact same position as EastLink except that it is even smaller than EastLink – in fact, Cablovision Warwick is smaller than the SILEC whose territory it is attempting to enter as a local phone service provider.
In addition, EastLink subsidiary People’s Tel was one of the first SILECs to allow phone service competition in its territory, back in 2009. It is worth noting that the competitor who chose to enter was a fellow SILEC called Execulink – clearly not a large urban service provider. Execulink paid only for its own competition-related costs and left People’s Tel to fund its competition-related costs. This was consistent with Canada’s telecommunications policy and is consistent with the CRTC’s decision. Despite its having benefited from the existing regime as a new entrant in 2009, Execulink is now one of the petitioners asking that new entrants bear all competition-related costs.
Such a requirement would serve only to discourage competition, which may be exactly what the petitioners hope to gain. To date, the petitioners have done everything possible to delay competitive entry in their territories. These delays have harmed the new entrants who, like EastLink, have made significant network investments in the petitioners’ territories without the ability to recover these investments through new business. More importantly, these delays have denied Canadians living in the petitioners’ territories the ability to choose service providers, even while the petitioners themselves moved on to new markets in search of new subscribers.
The CRTC has issued a decision that encourages competition while providing ongoing subsidy support and supplemental benefits to the petitioners. This decision will ensure that consumers in the petitioners’ territories can enjoy similar choice and competition to consumers in all other Canadian markets. The Governor in Council should maintain the CRTC’s decision and should reject the petitioner’s recommendations as soon as possible.
Jill Laing
Manager, Public and Media Relations
EastLink
