A European perspective on how Canada’s long distance market is evolving

Network Letter recently sat down with Michael Ryan, a lawyer with Coudert Brothers' global telecommunications practice in London England. Up until 1994, Ryan had worked as VP law at Unitel Communications Inc (now AT&T Canada). After fighting to open up Canada's long distance market to competition, he says the industry has become a victim of the CRTC's preoccupation with providing universal service to the small fraction of citizens still without telephone service. While the regulator's concern is legitimate, he says the cure has put Canada's long distance industry on life support. An edited transcript of that conversation follows. NL: Now that you've been working outside of Canada for a few years, is there one particular issue that strikes you as continuing to trouble the Canadian telecom market? MR: There are one or two things that I find discouraging. There's still a crisis in the long distance industry over the profitability of the competitors. It's not a situation you see replicated in other countries that have introduced long distance competition. I think the question that has to be asked - and it has been for some time but never authoritatively answered - ‘is this problem caused by the actions of the competitors themselves, and their aggressive pricing, as has sometimes been suggested. Or is there something structurally wrong with the Canadian market or the Canadian regulatory framework that is making it difficult for competitors to become profitable?' I have long thought that the Canadian approach to contribution is a major impediment to competition becoming properly established. NL: Is contribution an issue in Europe? MR: No. The provision for access charges (something like contribution payments) is maintained at an artificially low level by government policy. Absent that sort of situation, then (ILECs) have no right to demand contribution payments. NL: Do you see a solution for Canada? MR: I think the whole Canadian approach to the issue requires a fundamental overhaul. Canada is preoccupied with universal access at a time when we're probably four or five full percentage points above the United Kingdom. I suppose as a public policy concern, Canada can justify its preoccupation with providing universal access to the other .1 or .2 per cent of the population that is not on the telephone network. But what Canada has done in the process is distorted the whole system of contribution payments, and therefore the economics of providing all this telephone service in a way to address what is a very minor and peripheral problem. NL: Should Canada reduce or eliminate its contribution levels? MR: I could live very easily with the idea that contribution payments should be non-existent. The cure has been worse than the disease. NL: The question of foreign ownership limits is another major issue these days. Does Canada need these limits to maintain a Canadian-owned telecom system? MR: I wish that creating a truly Canadian industry were a simple as devising a foreign ownership rule. But it isn't. I think the foreign ownership rule hasn't contributed in any meaningful or identifiable way to the health of the Canadian industry. In fact, it may be damaging to it. Maintaining a foreign ownership limit is not the way to go. It's a protectionist measure, and it's not even clear what is being protected. It appears what we are losing is access to capital. If these companies are going to thrive, then they need that clout at an international level. If we're really concerned about Canadian ownership, then we should devote our energies to what we're really concerned about, and that is Bell Canada and the other large telephone companies. My own preference is to get rid of (the ownership limits) entirely. If they don't, they have to realize they are a distortion, and limit that distortion.

A European perspective on how Canada’s long distance market is evolving

News | 05/23/2000 4:00 am EDT

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