NL Update – Special Edition

Consumers winners in CRTC’s new price cap regime The CRTC price cap decision released this afternoon featured something to disappoint everyone – Telecom Decision 2002-34. It denied rate increases for the ILECs, but gave the CLECs a smaller reduction in the fees they pay incumbents to use their networks than they had wanted. The new price cap regime, like the old one, will last four years. The new markup for access to ILECs’ facilities will be Phase II plus 15 per cent, down from the current 25 per cent hike. Each ILEC's new direct connect rate will also be set at a 15 per cent markup. One big change will see the productivity offset mandated to residential service. Previously, telcos could allot savings to whatever basket they wanted. The commission has decreed that both residential and business decreases must be passed on. Based on the relatively low level of local competition and the continued dominance of the incumbent telephone companies, the CRTC concluded that pricing rules are still needed to protect customers. "The new pricing rules for local phone service rates will balance more fairly the interests of the main stakeholders – customers, both business and residential; competitors; and incumbent telephone companies," David Colville, CRTC vice-chair of telecommunications, said in a media release. "The new rules will distribute the benefits of efficiency gains more evenly across the system. They will also protect consumers both in terms of price and quality of service, while continuing to promote competition." Appeals likely Given the importance of the price cap decision to bottom lines, the decision is likely to be appealed by several of the interested parties, which could drag out the implementation process. For example, the commission’s ruling on contribution, Telecom Decision 2000-745, was issued in November 2000; the latest appeal (a Cabinet appeal) of its provisions was dismissed on May 28 (NL Special Update, May 28/02). The effect of the price cap decision on each competitor should be different. It is estimated the new regime will save CLECs 15 to 20 per cent. That is close to what GT Group Telecom was seeking.Bell Canada had been seeking a rate increase of $2 per year for high-cost areas or at the rate of inflation in urban districts, for a four-year term. Telus Corp. asked for a $3 hike across the board. Bell would cap the rates at $30, while Telus sought to set the limit at $35. Consumer groups considered this a cash grab and wanted the CRTC to deny any increase (NL, Sept. 24/01). The Public Interest Advocacy Centre (PIAC) maintained that local residential service has remained a monopoly, despite the best intentions of the commission. That has led to ILECs paying more attention to the concerns of their shareholders than of their subscribers, PIAC stated. On the access side, AT&T Canada wanted rates set at 70 per cent under retail, virtually at cost (NL, Nov. 6/01). Call-Net sought a 50 per cent reduction from the current rates. GT Group Telecom argued against any reduction in access fees. It prefers facilities-based competition, rather than piggybacking on ILECs’ backbones. The importance of the price cap decision is perhaps highlighted by the fact that the commission took the unusual step of hiring outside legal counsel to help write the massive decision. Sources tell Network Letter that well-known Ottawa-based communications lawyer Chris Taylor was retained for the job. Decision 2002-34 is the result of an extensive review of the first price cap regime. The comprehensive regulatory process included 14 days of public hearing, at which over 53 intervenors participated. As well, 34 individuals made presentations. A total of 1,935 letters and emails were submitted to the proceeding. Network Letter will have more on the price cap decision, including initial reaction from industry players, in its next edition to be published early next week. For background on the price cap proceeding, see the Oct. 22/01 and Oct. 10/01 editions of Network Letter. More details: CRTC news release CRTC speech by David Colville

NL Update – Special Edition

News | May 30, 2002

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