OTTAWA-GATINEAU – A local market won’t be considered competitive until one-quarter of the households in it get their home phone from a newcomer, the CRTC said Thursday.
The 44,000-word decision made the newcomers like cable and third party VOIP providers very happy but angered the incumbent telcos, who erupted with anger and say they won’t stand for the decision.
“Aliant fully intends to appeal this decision,” said Heather Tulk, vice-president of residential markets at Aliant, the company whose application for deregulation launched the review.
There are three main aspects to the decision. 1) Competitors must gain 25% market share in designated markets. 2) There are over 80 designated markets set out in the decision and 3) Win-back restrictions have been cut from 12 months to three.
The ILECs were adamant Thursday afternoon after the decision was announced, each saying 25% is far too big of a benchmark (they were asking for 5%, which was the threshold for cable when satellite TV was introduced) and the geographic areas are far too vast for deregulation to come anytime soon.
One recent report provides a bit of supporting information to the telcos. As reported by Cartt.ca in October 2005, a study by Convergence Consulting group said that cable operators won’t pass the 25% market penetration rate in local telephone until 2009. The report’s release, however, does not contemplate the impact of other voice providers such as Vonage.
Aliant got this whole process going about two years ago when it applied for local forbearance from regulation thanks to cable company EastLink’s success in signing up phone customers. In fact, in Halifax over 30% of homes use a competitive telephony provider, so Aliant meets that part of the test.
However, according to the decision, the incumbent must have provided newcomers stable access to its network for at least six months and on this test, Aliant failed, said the decision.
"This decision reflects the CRTC’s commitment to a reliance on market forces and to innovation," said CRTC chairman Charles Dalfen. "(The decision’s) criteria will allow us to deregulate as market forces take over, while ensuring that local competition is sufficiently robust to protect consumers after deregulation."
In practice, however, the process is nowhere near as simple as the criteria, says Janet Yale, executive vice president, Telus corporate affairs. It could take more than a year from application to a market’s deregulation, she told cartt.ca.
Since the data the CRTC will use to determine market competitiveness is only compiled once a year in its Report to the Governor in Council on the Status of Competition in Canadian Telecommunications, de-reg applications will languish and ILECs will suffer.
"It means at least a one-year lag (from application to decision)," said Yale. "How, from a public policy perspective, can it take a year from when you met the test to be deregulated?
"This demonstrates the need for the government to grant our VOIP appeal as a way to send a message to the Commission immediately that the pace of change is too slow."
ILECs last year launched an appeal to Cabinet over the CRTC’s May 2005 decision to maintain regulations even when it comes to voice over IP services from the traditional telcos. They appealed to Cabinet and the deadline for a decision is May 12.
When it comes to the nation’s largest telco, Bell Canada, its senior executives are now saying that nothing short of a total regulatory overhaul, beginning with granting the VOIP appeal and by implementing the recommendations of the Telecom Policy Review, is immediately required.
Sending the VOIP decision back to the Commission is "a perfect opportunity for the federal government to start dealing with the broken regulatory system that we clearly have," Mirko Bibic, Bell’s chief of regulatory affairs told cartt.ca on Thursday. "It’s evident now that the system we have today which is 10 years out of date if not more, can not be tinkered with, can not be fixed and needs to be completely replaced."
"This is a bad day for consumers."
At least one consumer group agrees with him. "This decision makes a mockery of the notion of deregulation and is completely at odds with the Telecommunications Policy Review Report released two weeks ago," said Ian Russell, chair of the Coalition for Competitive Telecommunications, which says it represents over 12,000 Canadian companies.
"This decision continues the legacy of regulatory intervention in the telecommunications marketplace that we know is no longer needed or wanted by Canadian business. It is astonishing. The CRTC clearly needs the reality check delivered by the Telecommunications Policy Review Panel that rejected the Commission’s entire approach to regulation."
However, another consumer group, satisfied that the Commission’s decision has maintained a basic rate ceiling for those who can’t afford a fancy phone service or who just want a basic line. "We are pleased that the Commission listened to our views on the consumer safeguards that are necessary in markets which have been deemed to be competitive," said Michael Janigan, general counsel of the Public Interest Advocacy Centre, which represented consumer groups including the Consumers Association of Canada, the National Anti-Poverty Organization and Union de Consommateurs in the hearings in September.
"These safeguards include mandatory stand alone local service subject to a price ceiling, privacy protection, billing and disconnection rights and continued access to disabled services," Janigan said.
For cable operators and others though, this is a good decision. It maintains the status quo and lets them build and operate with a lighter regulatory regime than the ILECs. The decision "gives us the confidence to carry on with our roll out, our investment in the telephony project," said Ken Englehart, Rogers Communications’ vice-president, regulatory.
"It’s a balanced decision," added EastLink’s co-CEO Dan McKeen. "(But) we’re not sure it creates an environment that will allow for continued investment to roll out telephone into new areas… Another big concern is the relaxation of the win-back rules."
Those win-back rules, which had stipulated telcos could not contact lost customers for a year after they left, was cut to 90 days – the same as it is in the TV market. However, both sides are unhappy with this one. "We’re a bit disappointed that the win-back restriction was reduced from 12 months to three months. It’s going to give Bell and Telus a powerful weapon," said Englehart.
"Ninety days is the most heavy-handed win-back rule on the planet," explained Bibic, who said win-back restrictions should be eliminated on the telecom and TV markets.
"This decision will allow competition to take root in a harmonious manner, to the benefit of Canadian consumers," said Robert Dépatie, president and CEO, Videotron. " All the players in the telecommunications industry, including Videotron, agree that deregulation of local telephone service is inevitable, but it must be introduced once conditions conducive to sustainable competition exist. The measures announced by the CRTC today clearly go in the right direction."
"The forbearance decision is a good one for the telecommunications industry and for business and residential customers in Canada," added Chris Peirce, chief regulatory officer, MTS Allstream. While MTS is an ILEC, the company’s Allstream division is a national competitor and will benefit from the decision outside of Manitoba.
"Importantly, the CRTC has recognized the need to deregulate retail pricing of local services expeditiously but to not do so with ill-advised haste. The result should be continued and sustainable competition in the local market. We’re pleased that the CRTC has recognized that fair competition also requires a transitional approach to wholesale deregulation," Peirce concluded.
Over at VOIPster Vonage, they’re happy, too. "With these new rules, Vonage Canada believes all companies, regardless of size, will have an equal opportunity to compete for Canadians’ telephone business on a level playing field," said Bruce Robertson, director marketing programs, Vonage Canada.
