GATINEAU – The CRTC today released new pricing rules that will govern the rates charged by large telephone companies for local telephone services, until forbearance arrives, that is.
The rules, known collectively as the price cap regime, will come into effect on June 1, 2007, and apply to Bell Canada, Telus, SaskTel, MTS Allstream and Bell Aliant. It also lets the incumbent telcos increase their rates for payphone service to up to a dollar.
The new regime only applies in regions where local phone service has not been deregulated. So they will apply everywhere at first and quickly become less and less important as markets are forborne from regulation.
"The focus was on the consumer, Our intention was to make sure where carriers are still regulated, that consumers are still going to be protected from what we call ‘unsubstantiated rate increases’," Len Katz, the CRTC’s executive director, broadcasting and telecommunications, told Cartt.ca in an interview. "At the same time, we still have an obligation to regulate it in those areas where there is no competition and our goal was to make it as light-handed as possible.
"Roughly 60 to 65% of Canadians will be forborne, based on our statistics right now, according to what the phone companies are reporting right now," Katz continued. "So about 35% of Canadians will still fall under the price cap regime. And out of that, there are two sub-sectors, if I can call it that: those where services are provided above cost; and those where they’re provided below cost.
"Where they’re provided above cost, the phone companies are frozen from rate increases. Notwithstanding inflation or anything else as well, they’re rates can not go up. In those areas where they’re providing service below cost, they’re allowed to increase their rates on an annual basis by the lesser of 5% or the rate of inflation," he added.
"This third-generation price cap regime provides greater pricing flexibility for large telephone companies, while providing a ceiling for prices to individual consumers," said Richard French, the CRTC’s vice-chairman of telecommunications, in the press release.
The price cap regime is designed to ensure that residential consumers in regulated markets continue to have access to just and reasonable rates, and includes incentives for telephone companies to operate more efficiently and to offer more innovative services. The price cap regime was last reviewed in 2002, says the release.
This time around, the regime is open-ended, meaning no expiry deadline has been set.
The incumbent telcos, so used to bashing Commission releases, praised the decision. Bell Canada said today’s release reflects significant progress towards a market-based approach to regulation.
"Today’s price caps decision is a clear sign that the CRTC has taken to heart the policy direction set out by the government last December," said Mirko Bibic, Bell Canada’s chief, regulatory affairs. "Together with the government’s recent local forbearance order, and the policy direction itself, today’s move by the CRTC sets Canada firmly on the path to a modern and efficient telecom policy framework."
The direction is further reinforced by the CRTC’s announcement late last week that it will review the appropriateness of all other existing regulation in light of the criteria set out in the policy direction.
“Taken together, the recent forbearance ruling and today’s price cap decision will allow Telus to bring tremendous competitive benefits to consumers,” said Janet Yale, the western telco’s executive vice-present of corporate affairs. “The price cap framework will continue to protect customers living in areas not yet deregulated, while giving them many of the competitive benefits people living in deregulated communities will soon be enjoying.”
Some of the highlights of today’s decision include:
* Residential customers in urban areas will not see a rate increase for basic local telephone service.
* Residential customers in rural areas, where it is more expensive to provide basic local telephone service, have generally paid rates at below cost. The Commission’s policy is to move rates closer to actual costs as long as prices remain just and reasonable. The new price cap regime allows large telephone companies to raise prices in these areas by the lesser of the annual rate of inflation or 5%.
* Large telephone companies have been granted the flexibility to charge different rates to different customers for residential telephone services, including optional local services.
* The Commission will no longer impose a limit to the rates that the large telephone companies may charge for optional local services.
* The Commission has approved a request to increase pay telephone rates up to a maximum of 50-cents per cash call, and up to a maximum of $1 per non-cash call. This represents the first price increase for pay telephones in many years. Bell Canada’s rates have been the same since 1981.
