OTTAWA – The VOIP decision will stand, with a "but".
Today the CRTC re-affirmed its May 2005 decision on voice over Internet protocol. Federal cabinet told the Commission in May of this year to reconsider that decision after all but one of Canada’s ILEC’s filed an appeal.
However, because of the sheer speed in which Canada’s incumbent local exchange carriers are losing customers, the Commission did signal it’s prepared to alter course when it deems necessary and will already re-examine its March 2006 decision on local forbearance.
Specifically, it "declared that competition in local telephone service is taking hold more firmly than anticipated," said this morning’s press release. "As a result, the CRTC is taking steps to reassess certain aspects of its local forbearance framework. These rulings foster an increased reliance on market forces, and ensure that Canadian consumers continue to receive the benefits of competition, including greater choice and lower prices."
So while this morning’s much-anticipated announcement reaffirmed the VOIP decision (which was a decision to keep existing regs in place), the CRTC also used it to launch a review of its four-months-young local forbearance decision (which the ILECs appealed), saying its new rule that ILECs must first lose 25% market share in certain regions before complete deregulation may be too high. It also said the 20% customer loss threshold before win-back rules go away may also be too large a hurdle.
Nowhere near good enough, say those ILECs. "We’re very disappointed," said John Meldrum, SaskTel’s vice-president of regulatory affairs in an interview with Cartt.ca. "The biggest problem are the marketing restrictions on us… which look as though they are going to remain in effect for some period of time."
He added the 90-day wait period for attempting to win-back a customer is excessive, long-term price promotions are limited by the Commission, and "if you want to bundle (voice) with other things, you need Commission approval," he said.
Crown Corp. SaskTel offers wireless, voice, video and data in Saskatchewan, however, it does not yet face cable telephony competition in either of its largest markets. "Surprisingly, neither of the local cable companies (Access Communications in Regina and Shaw Cable in Saskatoon) offer local service yet," said Meldrum. "We think Shaw has picked a date, though."
"We’re disappointed with the decision because we feel the Commission hasn’t been responsive to the direction they were given," added Janet Yale, EVP corporate affairs at Telus. "Why would government send the decision back for reconsideration if they liked it?"
"Clearly there was a message there to do something different," she added.
Plus, with a policy directive to the CRTC to let market forces direct its decisions still before the House of Commons, it’s pretty obvious which way the government is leaning, added Yale. "Practically speaking, the government has made it clear what it wants."
According to CRTC vice-chair, telecom, Richard French, the Commission did, and is, listening. "Officially, the policy directive is not valid until the whole process of consultation and the issuing of a finally worded decision by the government has occurred," he said in an interview.
"But obviously, the Commission is not oblivious to the environment."
The VOIP decision was reaffirmed because voice is voice, regardless of the technology delivering it – a decision which is in line with one of the Commission’s most important positions: to be technology-neutral. So, rules like the local forbearance decision apply under those continuing regulatory guidelines.
March’s local forbearance decision will be re-examined because the Commission says it recognizes the changing nature of local telephony. Indeed, the figures released in today’s decision paints an alarming picture for Canada’s ILEC community (and a nice growth curve for cablecos). The numbers are a compilation of what the ILECs and competitors submitted to the Commission.
In 2004, there were 29,700 non-ILEC VOIP subscribers. At the end of May there were 729,400.
(Ed note: Public companies like telephone and cable operators are notoriously conservative with their projections, whether they be losses or gains, and the 2007 figures are likely to be somewhat higher)
When making the local forbearance decision, however, commissioners were using the data from 2004, so today’s announcement to review that decision is a reflection of where the market has gone since 2004 and not March 2006.
When asked if today’s announcement is a correction of a mistake, French wouldn’t go that far, adding: "We’re being asked right and left to adapt as rapidly as possible to the evolving marketplace. We’ve got new data – 18 months of it – which suggested to us that it would be appropriate to revisit the 25% parameter."
When asked if ILECs are losing their significant market power (SMP), which is what the CRTC is most concerned about (as well as the Telecom Policy Review Report), that topic will be central to the discussions.
"That will be at the core of the proceeding we’re opening to the degree that it addresses the 25% parameter," explained French. "The issue will be: At what point, given the particular configuration of competitive market share that we’re now observing, can we conclude that the ILEC’s significant market power has waned to the point where it is no longer significant and can be forborne."
Deregulation isn’t necessarily something the telco newcomers are afraid of, as long as the timing is right, said Vonage Canada president Bill Rainey, and that the ILECs lose their SMP so they can’t abuse it to thwart competition.
"Our only concern is that as they re-examine components of it, and as they start digging down into local forbearance and the framing of it that it doesn’t lead them to premature forbearance where we don’t have truly sustainable competition," he said. "We want to have a deregulated world as quickly as possible but not at the cost of sustainable competition."
"I’m glad they kept the VOIP decision intact but it’s a bit disappointing that they’re doing the forbearance decision," added Rogers Communications VP regulatory Ken Englehart. "It’s in response to this non stop public relations and lobbying campaign of terror that Bell and Telus are waging."
So what’s next? One supposes it’s up to Industry Minister Maxime Bernier, who issued the policy directive and asked the CRTC to re-examine the VOIP decision in the first place, and who wasn’t available for comment Friday. Will the Telecom Act be rewritten? Will the policy directive be rammed through the House and put into action?
Says industry observer Brian Sharwood of The SeaBoard Group: "At this point the minister may have to roll up his sleeves step in and legislate, because they obviously aren’t listening to him, Bernier, as he confirmed during the Canadian Telecom Summit, is a free-market kind of guy. This doesn’t speak to that at all."
