GATINEAU – The small telephone companies and their larger competitors are seeing eye-to-eye on some aspects of proposed changes to the regulatory framework for small incumbent local exchange carriers (SILECs). But on others, they remain at loggerheads.
When it comes to giving SILECs the same flexibility as the ILECs in market trials and promotions, and the use of rate ranges, there is broad consensus among interveners. The same goes for maintaining the basket of services structure. Telus is an outlier on this issue. It wants the creation of a fifth basket that would group all competitor services – interconnection and other wholesale services.
Where the two groups of telecom providers are divided is on the local service subsidy regime and how to allocate the subsidy for lost residential customers, or lost NAS. The Ontario Telecommunications Association and the Association des Compagnies de Téléphone du Québec, jointly filing as the Canadian Independent Telephone Company Joint Task Force (JTF), argue that they should still have access to a 50% subsidy rate for all lost NAS customers in a deregulated market or one where wireless number portability (WNP) has been introduced as the commission had previously determined.
The JTF points to previous comments from Bragg Communications (EastLink) on this. The company says that there may be situations where a NAS customer is lost as a result of competition, but that customer may not port their number to a competing carrier.
“EastLink notes that the 50% on lost NAS subsidy was put in place to help SILECs transition into operating in a competitive market, including market share reduction and the possible reduction in their own rates to compete,” the company writes. “On this basis, it does not make sense to limit the 50% on lost NAS only to NAS that have been ported to another carrier.”
Telus argues that the JTF position takes this measure out of context. This 50% provision was intended as a transition mechanism to support SILECs when local competition or WNP was introduced in their territory. There is no justification for this, says the company, arguing that losses from attrition would result in no subsidy being paid and “therefore the 50%-subsidy transitory measure only makes sense if applied to NAS lost to CLECs (if local competition is implemented) or WSPs (if WNP is implemented).”
The company does, however, agree that in certain circumstances when a SILEC loses a customer to a competitor (CLEC or WSP) may not involve the porting of the number and the 50% subsidy rate should be paid in these situations.
The JTF’s proposal on how the 2011 and 2012 and beyond subsidy level should be calculated was a point of contention for the large ILECs. The SILECs say that the “fixed subsidy amounts should not reflect the maximum allowable rate increase…unless a SILEC actually took the rate increase in consideration of its specific circumstances.”
Bell Canada argues this approach isn’t appropriate. It notes that a result of this proposal would be an inequitable distribution of subsidies and would reward SILECs that didn’t increase rates as of August 1, 2011. In addition, the JTF position doesn’t address those SILECs that increased rates in 2011, but after August 1.
“It would be inappropriate for these SILECs to benefit from both a rate increase and a fixed subsidy amount that does not reflect the rate increase,” Bell writes.
Telus adds in its comments that this point has been argued before, and three times the JTF lost – once at each the Commission, the Governor in Council and the Federal Court of Appeal. In Telecom Regulatory Policy 2011-291-1, the CRTC stated that maximum rate increases will be “imputed for the calculation of the rate component” regardless if the small or large ILEC actually increased rates.
"The JTF’s proposal in this proceeding is nothing more than yet another attempt to vary the very same determination that has already been summarily dismissed at every turn,” writes Telus.
Shaw Communications notes the goal of the proceeding is to find ways to efficiently and cost-effectively rollout local and toll competition in SILEC territories that would benefit consumers in those regions. It adds, however, that the JTF is “resist competition and market forces” in order to “protect and prioritize the SILECs at the expense of consumers.”
The cable and media company agrees with many of the arguments by the ILECs regarding the subsidy regime, but also says JTF positions on local interconnection and new toll subsidies are inappropriate.
Reply arguments are due today (November 8).
