Deregulation both good and bad..CRTC sets tough guidelines to deregulate telecom industry
CATHERINE MCLEAN AND SIMON TUCK
From Friday's Globe and Mail
Canada's biggest telephone companies must lose 25 per cent of their market share in the local phone sector before the federal regulator will loosen their regulatory chains.
The big phone companies, including Bell Canada and Telus Corp., must also ensure rivals have “well-functioning access” to their networks for six months before the application, according to criteria set out for the first time yesterday by the Canadian Radio-television and Telecommunications Commission (CRTC).
Phone companies can apply for deregulation once they meet the criteria.
The local phone market, which is still largely controlled by the incumbent companies, is the last heavily regulated part of the telecom industry. The CRTC restricts how the dominant carriers market, bundle and price their services. However, it is preparing for the day when its oversight is no longer necessary as more competition develops.
“This decision reflects the CRTC's commitment to a reliance on market forces and to innovation,” CRTC chairman Charles Dalfen said yesterday in a statement.
The CRTC's criteria have already been tested by Aliant Inc., Atlantic Canada's biggest phone company.
Aliant applied for deregulation in certain markets, and did not get the relief it was seeking. While it satisfied the CRTC's market share rule, it didn't meet quality of service measures for competitor access in its markets, Mr. Dalfen said on a conference call.
“The most disappointing piece of it is the fact it shows the CRTC is not willing or ready to recognize how the marketplace in Canada is shifting,” Heather Tulk, Aliant's vice-president of residential markets, said yesterday, adding it will start working on an appeal immediately. And Aliant wasn't the only industry player unhappy with the decision.
“This decision is disappointing not only because the market share loss we have to endure is too high, but there's kind of a micro-management approach to deregulation,” said Janet Yale, executive vice-president of government and regulatory affairs at Telus.
The CRTC decision comes two weeks after the government-appointed Telecommunications Policy Review Panel called for a reliance on market forces to the “maximum extent feasible.”
The CRTC's ruling demonstrates why the federal government must follow the telecom panel review's recommendations, according to Lawson Hunter, BCE Inc.'s chief corporate officer. Bell is a division of BCE. “This is so contrary to what the panel recommended,” he said.
Aliant started pushing for deregulation in certain geographic areas two years ago. Parts of Atlantic Canada have been intensely competitive, and it lost 28 per cent of residential local phone lines in Halifax as of 2004. Eastlink, the cable operator owned by Bragg Communications Inc., has made significant inroads in the local phone market in Aliant's territory.
The local phone market was first opened to competition in 1997, but the former phone monopolies still generated 94 per cent of local land-line revenue in 2004. However, carriers are starting to lose more local phone lines as cable companies offer voice over Internet protocol (VoIP) phone services.
In order to protect these new competitors, the CRTC decided last May that it would regulate the large carriers' VoIP offers in the same way as their local phone service, a ruling the telecom companies appealed last year to the federal cabinet.
Rogers Communications Inc., the country's biggest cable operator and one of the new VoIP competitors, called yesterday's decision “fair” and “balanced.” “I thought it set a very realistic standard for when the market becomes competitive,” said Ken Engelhart, vice-president of regulatory affairs.
The cable companies were deregulated when they lost 5-per-cent share of the cable market. However, Mr. Engelhart said a quarter of homes didn't have cable TV at that time. “We argued at the hearing that our 5 was really the same as 30 when you translate it into the telcom market because everyone has a telephone,” he explained.
The CRTC also opted to ease some marketing restrictions. The big phone companies can approach local phone customers who leave for a competitor three months after their departure, instead of the current 12 months. The CRTC's move to allow the companies more freedom to try to win back lost customers is important, according to Brahm Eiley, president of Convergence Consulting Group Ltd. “They're free to fight it out,” he said.