THERE IS SO MUCH on the docket for lawyers working the telecom file in Canada these days, it’s almost hard to keep track.
The CRTC begins its hearings into forbearance from regulating the local phone market on September 26th (same week as Cable Week) while at the same time Industry Canada is deep into its Telecom Policy Review. Then there’s the Federal Court appeal of the CRTC’s telecom win-back rules and the ILECs’ VOIP decision appeal to cabinet, among other things.
So how will a coherent national telecom policy be developed from this muddle of related issues?
Well, since the regulatory ball hasn’t exactly been bounding its way for a while, we asked Bell Canada – specifically, Bell’s regulatory chief in Ottawa, Mirko Bibic.
Bibic (right) is a rising star in Ottawa and is responsible for overseeing all activities involving the CRTC, the Copyright Board and the Competition Bureau on behalf of Bell Canada, Bell Mobility and Bell ExpressVu. Prior to joining Bell in January 2004, he was the managing partner of the Ottawa office of law firm Stikeman Elliott. He was called to the bar in 1994.
Bibic signs off on what Bell Canada says to the Commission. His voice is a crucial one as the country moves towards better (hopefully fewer) telecom regs.
What follows is an edited transcript of an interview with Bibic by www.cartt.ca editor and publisher Greg O’Brien.
Greg O’Brien: I want to talk to you about the VOIP decision and local forbearance hearings but first I want to ask you about the CCTA’s point of view that Bell’s VOIP complaints are “a contrived crisis” which is what the association’s president, Michael Hennessy, wrote for cartt.ca in July.
So, what did you think of that comment?
Mirko Bibic: I think the cable companies are, not unexpectedly, trying to keep the protected position they’re in from a regulatory point of view with respect to telecommunications. So I don’t find the comment at all surprising. It’s wrong, but not surprising.
Fundamentally, we see the VOIP decision as being more than simply an issue of filing tariffs for voice over IP services. It’s about harnessing the power of IP – and to properly harness the power of IP from a regulatory point of view, you require an understanding of the technology and its potential. The bottom line is this: There are no barriers for entry – that’s clear. We have over four major cablecos now in the marketplace offering voice over IP services and over 50 other service providers, so imposing regulation as if there were barriers to entry, as we say in our appeal, is bad for consumers, bad for competition and it’s bad public policy.
Let’s talk about the consumer side. Regulation is simply going to lead to higher prices – and it’s not only us who are saying it. Independent observers have said it. And I know the detractors are saying “well, what’s the big deal, you can file for tariffs and there’s the new streamlined tariff-approval process that the Commission has put in place and you can get approval quickly.”
GOB: Yes. Ten days. Isn’t that the promise?
MB: Yes. But again, you’ve got to look at facts. First of all, there’s no 10-day approval guarantee. Secondly, if you do get approval within 10 days, it’s always on an interim basis and final approval can take much, much longer. In the case of the service we have in the market right now (in Quebec), there is currently a proceeding under way to examine whether or not our tariffs should receive final approval.
GOB: But you have interim approval.
MB: They’ve given us interim approval… and there are a lot of issues to debate with other industry participants but we’re not going to get a decision until next year. So, there’s a perfect example of how, sure, the interim approval is there, but until final approval there’s always uncertainty hanging over us, which isn’t a good thing.
And, that’s just tariffing. What Michael (Hennessy) fails to acknowledge in his piece is that there’s a whole lot more than just tariffing. There is the whole win-back issue, the promotions issue… the win-back rule is very, very significant here.
GOB: A year-long seems a bit lengthy to me. The cable or video win-back rule was always 90 days, I believe.
MB: Let’s explore one other thing we have spent a lot of time talking about over the past 18 months: Regulatory symmetry – and the win-back situation is a perfect example of the asymmetry.
For telephone companies the win-back rule applies if a customer leaves us for traditional local service or voice over IP. It applies for one year. On the cable side, it applied for 90 days but only in multiple dwelling units and not single family homes. For us, the win-back rule applies to any service that we sell, not just the service for which the customer has left. So, if a voice over IP customer or a traditional wireline customer leaves us we can’t contact that customer directly in order to sell any other of our services, including broadcasting.
GOB: Right.
MB: Now imagine broadcasting, where the cablecos are by far the dominant entity On the cable side, their win-back rule only forbids them from – again, in multiple dwelling units – contacting a customer within 90 days (of a switch in video providers) with respect to cable TV services, not wireless, not telecom, not high speed Internet. Nothing else. So there’s an example of the asymmetry and why the VOIP decision is far broader than just the simple tariffing issue.
We’re also severely restricted in the types of promotions we can engage in. There’s also the issue of what I call postalized pricing, where our prices have to be equivalent or the same – generally speaking – across our territory, so we can’t adjust our prices to meet the competition (in a certain region).
There’s a cableco competing with us on telephone service in Montreal and there’s one competing with us in Toronto. They have different prices. (Videotron: $15.95, if you’re a bundled Internet and TV customer already; Rogers: $25.46, as a piece of a bundle), but we have to have the same price.
GOB: So, if you want to drop your prices to match Videotron’s $16, you’d have to drop your prices in Toronto too.
MB: Correct. If we want to keep the pricing at the Toronto level, then the pricing is way higher in Montreal than a competitive market would probably dictate.
GOB: Now, a lot of what the cable folks are thinking is: “turnabout is fair play” because they were held back, from their point of view, from competing effectively with Bell ExpressVu and Star Choice where there were win-back restrictions and certain regulatory road blocks that allowed the (DTH companies) to get a leg up in the video side. From Bell’s point of view, how is VOIP or the new local phone competition, different from that market?
MB: Again, that sounds to me like a distortion of fact. Let’s just look at the facts. As soon as ExpressVu came into the marketplace, cable’s basic rates became deregulated. We have that 30%-5% rule where the 30% part of the test (where a competitor had to pass 30% of homes) was met as soon as ExpressVu went live, and it wasn’t long after that that cablecos were able to meet the 5% threshold (loss of subscribers to a competitor) and obtain basic cable rate deregulation.
It was pretty much, in relative terms, instantaneous.
Compared to the situation the ILECs face on the telephony side where there’s been local competition for quite a while, and with VOIP gaining traction last year, as well as the number of competitors we have, which I mentioned earlier, including the major cablecos, we’re still engaged in the process of examining what the rules of deregulation are going to be. We have no idea yet what the tests are going to be.
GOB: That’s one of the things I’d like to address: Should the (VOIP decision be allowed to stand) what’s the threshold where the local phone market becomes competitive? With video it’s 5% of lost customers, but what is it going to be on the telecom side?
MB: You’ve got to go back to first principles with these things. You don’t measure the state of competition on (market) share alone. You can’t do that and we have a tendency to fall into that trap here. What you’ve got to do is take an economic approach to determine whether or not the market is competitive and to do that, you have to go back to the test the Commission first enunciated in 1994.
Are you familiar with the 1994-19 test?
GOB: No.
MB: You look at things like market share, you look at things like barriers to entry, rivalrous behaviour between competitors, technological innovation. You don’t just measure competition my market share because there is no hard and fast rule on how much share people need to have in the marketplace in order to suddenly define a market as competitive. That’s not what you look at. (Ed note: Cable says Bell and the other ILECs have over 95% of market share when it comes to local residential phone lines.)
If the barriers to entry are low, if you can enter and exit easily, you’re well on the road to competition. So what we say is if you look at all the factors that the Commission set out in terms of an analytical framework back in ’94, all those tests are met.
We do have low barriers to entry. VOIP is a perfect example. We do have rivalrous behaviour. Look at what’s going on in the marketplace right now with the cable companies and the telcos and how vigorous that competition is, including the access-independent VOIP providers (such as Vonage).
The pace of technological innovation and adoption is clearly rapid.
GOB: Sure. Look at the subscriber numbers that Shaw and Videotron have been reporting. People do seem ready to switch.
MB: And the technology is evolving rapidly and allowing newcomers to enter. Those are the things that point to a very competitive marketplace.
Market share is a factor you look at but it’s not the only factor and what we says is that when you combine them with all of the other factors that you have to look at in the analytical framework, 5% is a reasonable measure because not only does it indicate there is competition out there, it’s indicating that consumers perceive they have a choice because they’re actively switching over.
And it also, frankly, is symmetrical with what was experienced and sent down in the 1990s with respect to the cable industry.
GOB: Is it confusing at all for you – because it’s surely confusing for the consumer – or is it difficult from your point of view that with all the important issues which are pending, from the win-back court case and the VOIP appeal and Industry Canada’s Telecom Policy Review and the local forbearance hearing and the interim approval for your VOIP service, it just seems like there’s so much going on all at the same time that’s it’s kind of a hodge-podge. So, how do you envision a straight-ahead telecom policy from all of this?
MB: The way I look at is that we have a regulatory framework right now that we all have to live with for the moment and operate under. We have to move on and deal with the critical issues we have to deal with given the Act we have.
So, we have a voice over IP decision and we have to operate in accordance with it but we feel it’s the wrong decision, so we’ve taken an appeal to cabinet on that issue. We’ve also gone to court on the win-back portion of that decision. We have the local forbearance proceeding which examines the rules which will apply to forbearance for local services, given the Act we have today and the regulatory framework we have today.
The Telecom Policy Review is about much more than that. It’s not just about regulatory framework. It’s about access to services. It’s about adoption and use of ICT. It’s about – and I’m quoting from the government’s budget back in February – moving Canada towards a modern telecommunications framework in a manner that’s best for Canadian industry and consumers.
So the Telecommunication Policy Review is about moving forward, given the rapid pace of change that we’ve gone through in the past couple of years and probably an even more rapid pace of change that’s coming up, so we need to re-set and recalibrate and that’s what the TPR is.
I don’t see those issues as being confusing and I think it can all work together.
GOB: Maybe it’s just confusing for me then – so many things going on.
Concerning your appeal to cabinet on the VOIP decision, all of the ILECs are on board except MTS, which is in favor of the decision. Does that hurt your case at all?
MB: Not at all. If you look at the appeal you have the four major ILECs, you have a customer group that’s appealed. You have an employee group that’s appealed. And you have all small and medium-sized businesses which are represented by, for example, the Vancouver Board of Trade appeal.
You have a wide range of stakeholders – from employees to large established telephone companies to large users to small and medium sized businesses, and a common view in the appeal – so I find that aspect particularly constructive and not that MTS Allstream is not part of the appeal.
