Manitoba Tel can offer broadcasting service without subsidy, MTS says

The incumbent telco in Manitoba denies that it will use profits from its core business to subsidize its proposed entry into broadcast distribution. MTS Communications Inc. likewise assures its critics that it will not deploy copper wire for its own use at the expense of outside wholesale customers. The company is responding to six interventions from broadcast-related groups over its application to provide broadcasting signals in Winnipeg (NL, Dec. 18/01). The Canadian Association of Broadcasters, Craig Broadcast Systems Inc., the Canadian Cable Television Association (CCTA), the Global Television Network, Shaw Communications Inc. and Westman Communications Group all submitted filings on January 10. The CCTA, Westman, and Shaw have raised concerns about MTS using its market dominance to cross-subsidize its broadcast distribution undertaking (BDU) operations with money from its telecom side. The regulatory affairs director for MTS dismisses such worries. "We believe that the split rate base process that the CRTC has put in place and the price cap regime and all of that safeguards any sort of cross subsidy of that type," Roy Bruckshaw tells Network Letter.That argument won’t likely satisfy the CCTA. "As reported in the recent proceeding on the price cap review, MTS had earnings in excess of 16 per cent on its utility segment services, well above the range that the commission contemplated for the initial price cap period," the association wrote in its intervention. "Such earnings provide MTS with the resources to subsidize its entry to the BDU market." Bruckshaw wonders why the figure of 16 per cent takes on talismanic proportions. The numbers cited by the cable lobby are out of date, he maintains. "The implication there was that those earnings were somehow or other out of line," he says. "Many of the parties at the hearings indicated that 11 per cent was some kind of a benchmark. That was the rate of return that was used when price caps was introduced four years ago." Price caps were established in order for incumbent telcos to become more efficient, he states. MTS believes the price cap regime has been successful. Shaw and the CCTA also raised the question of third-party access to local loops. By using its copper pairs for its own broadcasting distribution, MTS would be unable to provide access for outside firms. The telco denies this. "First MTS can confirm that the delivery of broadband service is not expected to affect demand for this service," the company’s reply to the CRTC says. "The only service providers that could be expected to make use of this service are ISPs using DSL to provide high-speed service to customers or DSL service providers. MTS has never had an ISP or DSL service provider wanting to share a loop on which MTS was providing voice service." The two cable companies and the two lobby groups questioned why MTS asked for a regional licence covering all three prairie provinces, when initial deployment is to be in Winnipeg, with eventual rollout to Brandon. Bruckshaw explains that the commission itself has been advocating such an approach. The MTS submission quotes CRTC PN 2001-59, which states: "Regional licensing will allow the commission to issue fewer licences, thus reducing the administrative burden both on licensees and on itself." This avoids constant appearances before the CRTC to make minor adjustments to the terms of the licence, he adds. The CRTC was in Winnipeg last week for broadcasting hearings, and the MTS application was on the roster as a non-appearing hearing.

Manitoba Tel can offer broadcasting service without subsidy, MTS says

News | 02/11/2002 5:00 am EST

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