Resellers back AT&T Canada appeal but other objections raised to Cabinet

AT&T Canada Inc. is finally getting some support in its appeal of the CRTC’s price cap decision but representatives of other groups are still urging the Cabinet to reject the overture. Comments on the appeal continue to trickle in to the government as it tries to decide what to do about Telecom Decision 2002-34. While many ILECs have criticized the AT&T Canada filing (NL, Sept. 10/02; Oct. 8/02; Oct. 21/02), Distributel Communications Ltd. endorses the call to overturn the ruling. It says its own experience in the telecom market as a reseller shows why the CRTC’s reasoning was flawed. "Distributel tends to use facilities provided by non-dominant carriers such as AT&T, Sprint and Vidéotron, thereby increasing use of Canadian facilities, while at the same time providing new entrant carriers with a high volume of much-needed business," the company writes in its remarks to Cabinet. "By reading down the statutory objectives, the CRTC is belittling the contribution made by resellers to competition in the Canadian market and potentially limited the sources of competition in the Canadian market." The company announces in its submission that it is shifting gears. "As a result of the commission’s price cap decision, Distributel is now actively planning to abandon its Centrex-based network, in favour of a switch-based IXC model," Distributel notes. This will result in Distributel changing its provider from the Centrex-based CLECs to the switched networks of Bell Canada. One of the oldest resellers takes the same tack, arguing that its investments will come to naught if the ruling is allowed to stand. Primus Telecommunications Canada Inc. is the owner of, among other subsidiaries, London Telecom Network, which began offering service in 1988. "Despite its long and successful history in Canada, the commission’s rewording of the price cap objectives does in fact belittle the investment that Primus Canada has made in Canadian telecommunications, especially since most of the success in the competitive market has been attained through resale strategies," president Edmund Chislett writes. "As the new price cap period will now only focus on promoting facilities-based-competition, Primus Canada is concerned that the regulatory process may become one-sided in order to uphold this objective and may in fact hurt competition in the long run as all TSPs use a resale strategy to some degree." A coalition of consumers’ groups dismisses these claims as nonsense. The Consumers’ Association of Canada, the National Anti-Poverty Organization and l’Union des Consommateurs have hired the Public Interest Advocacy Centre to present their case to Cabinet. PIAC asserts that facilities-based competition is a hybrid that allows resale and requires the ILECs to provide essential facilities at mandated rates. "It does not require competitors to duplicate incumbent networks," the groups write. "It is based on the notion that parallel networks already exist, in the form for example of wireless and coaxial cable transmission facilities, and that competitors can take advantage of such non-ILEC facilities to create more lasting forms of competition." Primus parries that argument by pointing out that there are only two major facilities-based network systems in the country. The ILEC grids were built over a century by monopolies and were paid for by rate of return regulation. Cablecos built their networks, with the goal of expanding services. "Each year the plans of major cable companies to offer telecom services are delayed and once touted convergence strategies make way for more pressing concerns such as consolidating market share in existing markets," Primus offers. "The cable company networks are not as ubiquitous as the ILEC networks because cable companies have had less time in which to build facilities." PIAC goes on to state that competition is a means to achieve the policy goals listed in the Telecommunications Act, not the end itself. It quotes a Decima Research study showing Canadians will not pay more for local residential telephony merely to have more choice in providers (NL, Sept. 10/02). "Consumers are not given a choice between competition and higher prices on one hand, and monopoly and lower prices on the other hand," the submission continues. "Instead, higher prices are being forced on basic ratepayers in a determined effort to achieve competition, the primary benefit of which is meant to lower prices!" The only major CLEC to adopt a facilities-based model agrees with PIAC’s assessment of the market. Nothing in the current regulatory infrastructure hinders resellers, GT Group Telecom Services Corp. maintains. "Rather than nurturing only facilities-based competition, the framework the commission has been fostering is essentially neutral with respect to CLECs’ build vs. lease decision. As a result, it is left to entrants and to the market to determine the optimal strategy for entry and the optimal combination of leased and owned facilities," the company writes. The telco, which is operating under bankruptcy protection (see story on page 1), tells Cabinet that it is not the CRTC’s responsibility to make entry strategies viable. While the commission has been active in opening up markets, it is up to the competitors themselves to manage their business affairs in the most effective manner. One unusual facet of this proceeding has been the response of the ILECs. While Bell Canada filed a submission on behalf of itself and the other major incumbents, save Telus Corp., SaskTel and Aliant Telecom Inc. took the rare move of filing their own individual comments. Now Manitoba Telecom Services Inc. has followed suit, decrying the effect any change in 2002-34 would have on its operation. "The impacts of AT&T’s petition on MTS, and hence on Manitoba, would result in significantly reduced investment in products, services and infrastructure, lower tax revenues for government and potential job losses," Peter Falk, executive VP business development, general counsel and corporate secretary for the provincial telco, writes. "These impacts would have very significant cross-impacts on other sectors as well as significant social and economic costs." The ILEC estimates that $1 billion or more of revenue would be taken out of the industry entirely as CLECs use the slashed rates proposed by AT&T Canada to move into other services they do not currently provide. Loss of revenue by the incumbents could see them heading back to the CRTC asking for rate increases, MTS speculates. Right to state case deniedDistributel cites the decision’s heralding of facilities-based competition as another reason for overturning the ruling. It notes that a procedural ruling issued during the build-up to the price cap hearings, Telecom Decision 2001-618, said having competitors own their own networks is a long-term goal, with resale and unbundling still a necessity during the transition. "The CRTC’s ultimate decision to alter its policy on these issues was extremely detrimental to Distributel, as well as to other competitors, as it essentially denied them their right to know the case that they had to meet and to comment on these issues," the reseller’s submission states. "As such, Distributel considers that the CRTC’s reversal of policy in these circumstances amounts to denial of natural justice." PIAC worries that overturning 2002-34 could set a dangerous precedent. As a rule, Cabinet does not change the rulings of its tribunals unless there has been some sort of egregious error. "The consumer groups submit that the Governor-in-Council should not interfere with the CRTC’s decision in this case unless it is convinced that the goals of Canadian telecommunication policy, taken together, will otherwise be subverted," the group opines. "It is not clear to the consumer groups that this is such a case."

Resellers back AT&T Canada appeal but other objections raised to Cabinet

News | 11/19/2002 5:00 am EST

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