Bernier rewrites CRTC’s forebearance ruling

The local telecommunications market should be deregulated according to the physical presence of services providers rather than their perceived market share, Industry Canada proposed Monday. 

In a move to accelerate his desire to deregulate telecommunications in favour of market forces, Industry Canada Minister Maxime Bernier outlined new criteria for determining when the CRTC should forbear, or refrain, from regulating local telephone service provided by the former monopoly telephone companies. Business customers, for example, would have to have access to at least two fixed-line facilities-based service providers for forbearance to occur – an incumbent, for example, and a cable company — while consumers would also have to have access to at least one wireless service provider.

“Competitive infrastructure is a durable form of competition that disciplines the market and strengthens investment, while delivering the greatest benefits to consumers,” Bernier’s office said in a statement released late Monday afternoon. “The proposal also suggests using smaller, more appropriate geographic areas, streamlining deregulation conditions that require the former monopoly telephone companies to meet standards for services they provide to competitors, and proposes to end the marketing restrictions.”

In contrast, the CRTC earlier this year said forbearance would occur only after the former monopoly telephone company had lost 25 per cent market share in a defined geographic area, provided access to certain services to competitors, filed rates for certain competitor services and met 14 quality of service (QoS) standards for services provided to competitors. Industry Canada proposed only nine QoS standards, and did not identify which ones it deemed irrelevant.

“It’s an entirely different ideological mindset,” said Ian Angus, principal analyst with Angus Telemanagement in Ajax, Ont. “The CRTC had said a market is competitive when there are successful competitors – companies that have achieved enough success to survive in business. The minister is saying if there is facilities-based competition, then it’s competitive and we will deregulate.”

One of the areas left out of the proposal is any provision for re-establishing regulation if various geographic zones return to a monopoly, Angus added. “What happens in five years down the line if we have competition in most cities and the cable companies decide they can’t survive, that it’s just too expensive?”

Forbearance has a big impact on the kind of pricing companies such as Bell and Telus can set for their services. Mark Goldberg, an independent telecom consultant and owner of the industry blog Telecom Trends, said the shift from a market-share loss threshold to a presence-based test might mean the same expected relaxation in pricing restrictions, but that they could occur faster.

“The biggest question left outstanding is, what does it take in terms of facilities for a wireless service provider to qualify?” he asked. “Does Telus have to have already have established facilities or is it enough to be roaming on Bell or Aliant facilities in Eastern Canada?”

Analysts said Bernier’s moves were foreshadowed last week when he tabled legislation in the House of Commons that will allow the Competition Tribunal to levy fines of up to $15 million on telecommunications firms that abuse their market power. Yet startup VoIP companies such as Vonage Canada aren’t sure those fines will be much of an anti-competitive safeguard.

“On the surface, it sounds fantastic,” said Joe Parent, vice-president of business development at Toronto-based Vonage Canada, who added that enforcement of the fines is a different matter. “If fines are imposed after the infraction, their ability to act as a deterrent is less effective than something to prevent (anti-competitive) action.”

The definition of anti-competition is much more strict in the Competition Act, Parent added, than the Telecom Act.

Incumbents such as Telus immediately praised the decision. “By giving the market more freedom to determine outcomes, we can begin to unleash the full benefits of competition for our customers, and foster enhanced innovation and investment in the Canadian economy,” Telus president Darren Entwistle said in a prepared statement.

The decision was also applauded by the Coalition for Competitive Telecommunications, which represents more than 12,000 firms. “As a group representing business telecom users, this is certainly a positive step,” said Ian Russell, chair of the coalition, in a statement. “The Minister is correcting the deeply flawed CRTC Local Forbearance decision which was hindering full competition. Today’s announcement clearly recognizes that competition in local telephone service markets is good for business, good for competition, and good for the Canadian telecommunications industry.”

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