The CRTC leaves its calling card

I have a quarter in my pocket. It may only be worth 25 cents, but that’s enough to make a local phone call anytime I want from a public pay phone. As such, you could almost call it my access tool to the voice network.

Now that the Canadian Radio-television and Telecommunications Commission

(CRTC) has decided to freeze pay phone rates pending a review, my “”investment”” in voice technology is relatively secure. For incumbents, and particularly competitive local exchange carriers (CLECs), the future is not nearly as certain.

There was no clear front-runner when the CRTC began its price cap review hearings last October. The incumbents like Bell and Telus wanted to charge more for service, while the up-and-comers like AT&T and Call Net wanted to level the playing field by paying the incumbents less for use of their networks. You could gauge the desperation in the air by the willingness of the various players to talk to reporters as they made their case to the regulator. The phone companies are normally far from responsive when we contact them for comment on a controversial story; this time, almost everyone returned our calls.

The CRTC’s decision is quintessentially Canadian in its attempt to offer compromise and consequently anger almost all parties. The exception here is consumers, who will at least feel a short-term sense of comfort. This was the least-expected outcome when the price cap review started. When talk turns to furthering competition, the competitors routinely tout the potential savings to individual customers, then squeeze them dry once deregulation occurs. Though it did grant some 15 to 20 per cent reductions on rates for use of incumbent networks, the promise of a consumer bill of rights emphasized the obvious. The CRTC believes consumers, not CLECs, are the only ones who will be left standing to hold it accountable in a few years.

There is, sadly, plenty of evidence to support this line of thinking. At least nine new entrants crashed and burned over a six-month period. Though it could be argued that these companies aren’t operating in an environment that gives them the ability to succeed, some experts say many dead CLECs went to the dot-com school of business plan writing. Right now, the CRTC will be the whipping-boy for an industry that is down on its luck. However its decisions to open up the long distance market in 1992 and then, five years later, local service, the regulator took the cautious steps necessary to get the ball rolling. A smart government will not promote competition by undermining the position of established players, or by giving those established players the latitude that will exorbitantly increase costs to consumers outside rural areas. Yes, these are high-cost pockets for companies like Bell, but in the current economic climate the company will elicit little sympathy.

Overcapacity and the flameout of many customers suggests the market can’t support that many carriers anyway. Without the necessary financing, getting breaks from the CRTC wouldn’t have much of an effect. Instead, the regulator is doing its job by protecting consumers first and pushing the industry to sink or swim. A lot of them have already sank, and over the next year those left in the pool will be treading water. If and when that changes, it is not impossible to imagine the CRTC loosening its grip.

The CRTC will also be lambasted for such a prolonged process that led to Thursday’s decision. In fact, the CLECs and incumbents might have been better off if the regulator hadn’t had the time to see the uncertainty and volatility in that has characterized the carrier industry for the last year and a half. Either way, it doesn’t usually take 15 months to maintain the status quo.

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Jim Love, Chief Content Officer, IT World Canada

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Shane Schick
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