By Ahmad Hathout
Small landline service providers are asking the CRTC to forbear from regulating the wireline voice service in their operating territories because they say it is getting harder for them to compete on regulated rates when alternatives exist.
The Independent Telecommunications Providers Association (ITPA), a trade group representing those providers, filed an application published last week that argues the market for those services has changed since the commission last made a major change to the forbearance framework on landline service in 2009.
The ITPA argues that a combination of declining landline subscribers over the years and the substitution with internet-based voice services (VoIP) and mobile wireless service provided by the extensive coverage of large national players and satellite providers like Starlink make it unreasonable for the commission to continue to dictate rates to them based on outdated regulatory criteria.
“These larger, better resourced competitors are not subject to the same regulatory burden and restrictions imposed on SILEC local exchange services, with the result that their substantial existing competitive advantages are magnified, and SILECs are less able to compete against them,” the ITPA says in its application.
“If local exchange services are forborne it would increase the pricing flexibility available to ITPA members in the face of their far larger competitors,” the ITPA continues. “While SILECs are generally unable and unwilling to compete with the larger national wireless carriers and other TSPs on price alone, the ability to adjust their responses to competitive threats on a real-time, dynamic basis would be of great assistance to their efforts to retain customers.
The group says their members are dealing with “incredibly aggressive retail promotional pricing” from larger national and regional players and, without forbearance, they “cannot mount an effective defence to their promotions, which are temporary and ultimately may not be to the long-term benefit of customers.” It says forbearing in the residential and business markets would level the playing field.
“Approving the ITPA’s application would also increase reliance on market forces by default, leaving pricing decisions in the hands of ITPA members, as opposed to the Commission, as they compete against their larger market rivals,” the ITPA continues. “It would also increase the level of Canadian telecommunications revenues that are generated by forborne services.”
The group argues that mobile wireless uptake has been aided by the elimination of data caps and declining prices, suggesting that there is extensive competition in that space.
And while the ITPA argues the incumbents together cover over 97 per cent of the population of the country, the CRTC has never required 100 per cent voice service coverage to forbear from regulation.
The CRTC forbears from regulation only when there is sufficient competition in any given market. The last time the regulator made a major change to the SILEC forbearance framework was in 2009, when it reduced the threshold for forbearance by allowing competitors to cover just 50 per cent – from 75 per cent – of the areas already covered by SILEC residential and business lines.
Crucially to the ITPA, it left untouched the criterion that the residential market must have at least two competitors to compete with the exchange – one could be a mobile wireless service provider and, like the business market, the other must be a wireline CLEC.
The ITPA said there have been few instances in either of those markets where the SILECs could show the entrance of a wireline competitor to serve the exchange, meaning the policy “has had the unintended consequence of preventing successful applications for local forbearance by SILECs.”
The regulator last said it would review the price cap and local forbearance regimes in February 2020, saying that it would “initiate a follow-up proceeding to seek comments on what changes, if any, should be made…” But no such proceeding has been launched yet, despite the changes to the industry that the ITPA argues has caused distress for smaller service providers.
