Price cap hearings force Bell Canada to defend strong market showing

The meltdown in the telecom market has led to calls for the junking of the price cap regime, but one of the prime beneficiaries of that mechanism warns that such pleas are shortsighted. Bell Canada has been the main focus of the early days of the CRTC proceedings on the price cap regime last week and this week in Hull QC. The dominant position of the ILECs in general, and Bell in particular, is cited as proof that CLECs are behind the eight ball in the competitive market. Bell executives say, however, that the situation isn’t that bleak for CLECs. Bernard Courtois, chief strategy officer for Bell, notes that his company’s western-based CLEC Bell Intrigna is expecting to turn a profit next year, while one of its competitors, GT Group Telecom Inc, is forecasting profitability by 2004. "So that says that under the existing rules some people seem to be making a go of it with a sound approach," he told Network Letter. "It’s a normal part of the competitive market. Some have the right business plan for current circumstances; some don’t. That’s life. You don’t go and change industry policies based on the performance of some." Bell’s chief regulatory officer concurs with her colleague’s assessment. "We’re fighting for facilities-based competition and affordable rates," says Sheridan Scott. "And I guess what we’re really fighting for here is that the CRTC not be distracted and make the mistake of abandoning what we think is the right approach to the introduction of facilities-based competition in the local market." That competition is stiff, the conglomerate told the CRTC hearings. Peter Nicholson, chief strategy officer of parent company BCE Inc, maintains the consumer has several options when it comes to local service. "We also see the local market as incorporating Internet access for instance," he testified. "In that respect, with respect to high-speed access, the cable companies clearly are our number one competitors and in fact have a bigger market share than we have. We also consider that the wireless market is an extremely important market, which is primarily local rather than long distance and, there, it is Rogers, it is also Telus and it is also Microcell." The numbers certainly bear out that CLECs are not a major part of the equation. Michael Ryan, appearing on behalf of AT&T Canada, presented figures that show competition is virtually non-existent in smaller markets. "We still see, as of the year-end 2000, no competition in IslandTel territory, seven per cent market share for competitors in MT&T, NBTel and NewTel still registering zero and MTS registering 3.6 per cent and SaskTel registering zero," he noted. But that shouldn’t be a surprise, the Bell contingent replied. The new entrants concentrated on large cities like Toronto and Vancouver, ignoring less populated areas. "You should say ‘are we getting facilities based competition?’ not ‘have individual companies gone out of business?’" Scott told Network Letter. "And so I’d say alright let’s look at the business market and let’s look at the residential market. And certainly in our marketplace we see all sorts of signs of competition in the business part of the local market. We’re not suggesting residential competition yet." Old numbers cited AT&T Canada’s Ryan and Bell’s Scott play dueling numbers when it comes to decline of market share. Ryan quoted numbers presented to the commission in June 1996 when breaking the monopoly was first being discussed. "Back in 1996, you projected that the market share loss to competitors by 1998, 1999 and 2000 would be in the order of 1.8 per cent, 3.6 per cent and 6.9 per cent for MTT," Ryan said when cross-examining BCE witnesses at the CRTC hearings. "The actual experience is zero for 1998, zero for 1999 and 2.8 per cent for the year 2000, which is still in the order of half or less of what was projected back in 1996." Scott prefers to use numbers from the major markets when discussing the matter with Network Letter. "If you look at Toronto, which would be of course the market where all these new entrants would like to compete, we’re looking at 23 per cent market share loss in Toronto," she offers. "And 15 per cent overall in our business services throughout our territory," Courtois adds. "So in just a couple of years, that’s a pretty strong trend." The Toronto market is shared by the major CLECs, although Futureway Communications Inc has crept into the region by purchasing the assets of defunct competitor C1 Communications (NL, July 3/01). Bell suspects the new entrants are being very parochial when bandying about tales of financial woe. The crisis in the telecom sector is not restricted to Canada, or to the North American market."The fact that there’s been a shake-out worldwide proves that it can’t be caused by the Canadian regulatory regime," Courtois asserts. "It’s not up to the Canadian regulatory regime to fix the dot-com bubble and the bursting of the bubble. And it’s certainly not up to the Canadian regulatory regime to start bailing out individual competitors." The strategy officer lays much of the blame at the feet of the competitors themselves. Some entered the market with poor blueprints. "With the money pouring in to CLECs, I don’t know that the CLECs built the most cost-effective networks and business plans. And sometimes those companies weren’t really planning to make money, they were hoping to flip their company," Courtois alleges. "I’m sure a lot of them were planning to make money and they just didn’t. You get a lot of pressure to build and build and build and you do that. And then once you’ve built, you realize you’ve got something that’s uneconomic and you’re stuck with operating that." While the CLECs are thirsting after the large metropolitan markets, the rural and remote areas have been all but ignored by the new entrants. ILECs are responsible for ensuring all Canadians receive proper tele-phone connectivity. "We begin with a universal service obligation, which is an element of social policy, and it is one that we have accepted," Nicholson told the commission. "There are a number of services that are tremendous that I suppose are more essential than others, like 911." Rural phone customers speak out Many rural subscribers took the occasion of the price cap hearings to vent their frustrations at the quality of service. On the first day of the hearings, callers from across the country lambasted Aliant, Bell, MTS, and Telus for the proposed rate increases. Many worried that pensioners and others on fixed incomes would not be able to afford the higher costs of telephony. Others accused the telcos of easing the burden on larger clients on the backs and pocketbooks of the small residential user. Still others wondered why they were charged for 911 service when they never use it. One Victoria subscriber left no doubt about her reaction to the local phone company. "Telus is the most hateful, inhumane and cruel corporation I have ever dealt with in my whole life and I am not alone in how I feel," Doreen Gee told commissioners. Seven commissioners constitute the panel hearing the applications. They will have to walk through the maze of opinions and documents laid before them before reaching a final decision. Courtois assumes some effort has been made to get the ear of the panelists, but doubts anyone can predict the final outcome. "The CRTC, if you look back over the years, has repeatedly overturned attempts to intervene in the wholesale/retail mix," he states. "I would hope they realize that their path towards competitive market forces has been extremely successful for Canadians. But you know, in human terms, if someone is in trouble and they come to you for help, sometimes it makes an impression on you."

Price cap hearings force Bell Canada to defend strong market showing

News | October 10, 2001

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