AT&T Canada appeal seen as desperate; CRTC attack called “unprofessional”

Reaction to AT&T Canada Inc.’s Cabinet appeal of the price cap decision is heated. Some suspect it is a bargaining ploy by the CLEC, while others are shocked at its attack on the CRTC. The competitive carrier announced its Cabinet appeal of Telecom Decision 2002-34 last month (NL, Aug. 27/02). Its primary focus is that the commission erred by emphasizing facilities-based competition. The Cabinet appeal is in addition to a review and vary the CRTC has established to deal with competitor DNA (NL, Aug. 27/02). "What we’re saying to the government is you do need to provide competitively neutral access to the competitors because it is about competition. It’s not just about this one model of facilities-based competition," Chris Peirce, AT&T Canada’s VP regulatory and government affairs, tells Network Letter. "And if you are going to give us competitively neutral access then tell the regulator to bring all of the network services into the competitor services basket and tell them to conduct, either broaden this review and vary they’ve already commenced or start a new proceeding to determine competitively neutral costing for all of those services." To one of the telco’s rivals, it’s all a case of déjà vu. Jim Peters, executive VP corporate affairs and general counsel at Telus Corp., says the CLEC is merely rehashing previous claims it made last fall (NL, Oct. 22/01). "It’s simply a repeat of the arguments that AT&T Canada made to the commission during the price caps hearing and I’ve been told by a number of the people that were there participating in the hearing, on cross-examination the AT&T Canada witnesses were completely discredited in their assessments of the costs and what the policy should be," he states. "And I think it’s very telling as well that at the same time that Telus was on the stand with its witnesses to talk about costing, etc. AT&T Canada declined to cross-examine any of the Telus witnesses that were available on this issue of costing. So I think the record shows from the price caps decision that what AT&T has asked for is not supported by the evidence and I firmly believe their entire appeal is without merit." What shocked Peters and other observers was the vehemence with which the competitor attacked the commission. In the actual petition to Cabinet, AT&T Canada writes, "The CRTC has refused to heed the directions of the Government of Canada that the regulatory environment matters and instead has quite explicitly divorced itself from the consequences of its decisions in the marketplace." Other parts of the petition refer to "an almost absurd finding" and an accusation the commission "dismissed out of hand" the financial problems of AT&T Canada and the other major competitor, Call-Net Enterprises Inc. A background submission filed in support of the appeal follows the same line. The competitor DNA review, the telco maintains, shows that "the CRTC has had to acknowledge that it has neither the understanding nor information needed to design a service for competitors that accurately reflects their use of the network." The company goes on to complain, "Moreover, it is clear the CRTC fails to understand the gravity of the competitive situation in Canada and the need for expeditious resolution." One veteran telecom specialist, who does not wish to be named, dismissed the telco’s filings. "The AT&T Canada appeal is greatly flawed, full of unsupportable allegations and mis-statements, and most of all, lacks a definition of competitively neutral pricing. The language attacking the CRTC is also unprofessional," he offers. Peters considers one motive for the firm’s actions. "I do believe that AT&T Canada is in such a financial mess that they’re taking such an aggressive tactic, and I think quite unprofessional attack on the commission, because they view themselves as having nothing left to lose." AT&T Canada devotes much time in the appeal to discussing financial situations, its own and others’. It writes that BCE Inc. is boasting that it is the most successful incumbent in North America. Bell Canada, it maintains, was the fourth most profitable firm in Canada, behind three of the big banks. It gives a mixed report to the other major ILEC. "The trend with respect to the other significant former monopoly, Telus, is almost as conclusive," AT&T Canada writes in its petition . "Insofar as Telus is an incumbent, its rate of return remains enviable. Insofar as it is a competitor trying to grow into Bell Canada’s eastern Canada domain through the purchase of Clearnet and the construction of new facilities it faces the same challenges as the other competitors and so, had its debt downgraded to junk status by the credit rating community. The current trend could quite conceivably yield a remonoplization scenario remarkably similar to that which occurred in the airline industry in Canada." Peters appreciates the point AT&T Canada is making, but believes the competitor has missed the greater picture. "We will benefit from the discounts that the CRTC has mandated in the price caps decision and our CLEC operations in Ontario and parts of Quebec would benefit even more if the Cabinet were to go along with AT&T Canada’s suggestion," he states. "But when we were building our business plan for Ontario and Quebec, we knew what the rules were. We knew that the CRTC was supportive of facilities-based competition and so we built our business plan and model around not having artificial subsidies or discounts put in place." The Telus executive cites another CLEC to bolster his argument. GT Group Telecom Inc. has been supportive of 2002-34. The competitor endorses the idea of facilities-based competition, while the other two major CLECs are against it. AT&T Canada says it all comes down to money. The commission has set up too many roadblocks to viable operations in the telecom sector. "Competitors have to have the opportunity to survive and prosper in order to attract the investment that you’re going to need to really drive competition forward," Peirce attests. "So one of our messages to the government is competition – the need to give competitors an opportunity to both survive and prosper is urgent." The CLEC’s bottom line is no doubt one of the factors in the launching of the appeal, Peters believes. The company has an obligation to pay out equity, leaving it only with debt. He has even heard rumblings that, should AT&T Canada lose the appeal, it would use that loss as an excuse to pull out of the Canadian market.AT&T Canada has also been at the forefront of the debate on easing foreign ownership restrictions in the telecom sector (NL, July 3/01). It was one of the prime movers to have the matter included in the final report of the National Broadband Task Force. In addition, executives with the company have raised the issue in public statements for months. "We know that John MacLennan has been a very aggressive spokesperson on behalf of AT&T Canada to have the foreign ownership rules relaxed," Peters comments. "I thought that issue had been pretty well put to bed when minister Rock indicated it was not something that was likely to happen soon. I still believe that that’s the case, that it will not happen soon." The Cabinet is expected to release a schedule soon for comments by other interested parties. AT&T Canada will then have an opportunity to respond to those remarks. A final decision from the government is unlikely to come much before the end of this year.

AT&T Canada appeal seen as desperate; CRTC attack called “unprofessional”

News | 09/10/2002 4:00 am EDT

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