CRTC may deregulate local competition if CLECs get 25 per cent market share

The Canadian Radio-television and Telecommunications Commission said last month it could deregulate 86 of Canada’s markets on a case by case basis, depending on the level of competition within each area.

Following the Telecom Policy Review Panel’s report to the federal government, released in March, that recommended deregulation of the telecommunications market, the CRTC has set the wheels in motion to deregulate local exchange telephone services – the last regulated telecommunications market in Canada.

The CRTC issued a decision that requires two things before it will deregulate an incumbent local exchange telephone carrier (ILEC): Competitors in the region must have a minimum of 25 per cent market share; and the incumbents must provide access to their networks for six months.

Ronald Gruia, a telecom analyst with Frost & Sullivan in Toronto, said the ruling could potentially give the cable companies like Rogers free rein on the market.

“It’s almost like the incumbents are being constrained, while the cablecos can do whatever they want,” he said. “The small guys will have a window there but after a while who’s to prevent what the ILECs could do? Who’s to say the cablecos won’t do the same to the smaller guys?”

Bell Canada immediately released a statement calling the CRTC’s ruling a “profound disappointment.”

The decision “underscores the urgent requirement for the government to act on the recommendations of the Telecom Policy Review panel,” Bell’s chief corporate officer, Lawson Hunter, in the statement. Hunter identified the review panel’s recommendations which had called for a more laissez faire approach to regulation – particularly the rules around promotional activities for incumbents.

“What we received was a framework for a continued, heavy handed and costly regulation,” said Mirko Bibic, Bell’s director of regulatory affairs in an interview.

The CRTC has put in place several safeguards to protect customers should the incumbents be eligible to apply for deregulation of rates on the local services. ILECs, for example, will be required to provide basic residential service to customers who do not have a competitive alternative for service or those who are disabled.

The regulator also weighed in on the “win back rule,” by reducing the timeframe before an incumbent can contact a competitor’s new customer after they have left the incumbent from 12 to three months. Once competitors have achieved a 20 per cent market share, the Commission will remove the winback rule.

“The only gravy in it for the incumbents is the win-back rule,” said Brian Sharwood, analyst with The Seaboard Group who noted that once an incumbent has seen its market share dip by 25 per cent, it could be a while before they’re able to adapt to the shift market forces.

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