The continuing debate over AT&T Canada Corp.’s appeal of the CRTC’s price cap decision is now focusing on Phase II costing and disclosure of information by ILECs. The most recent submission to Cabinet on the appeal is from the City of Calgary, which cautions the politicians not to touch the rate freeze imposed by the CRTC. While the filing is ostensibly about AT&T Canada, the Alberta city spends most of the 20-page document complaining about Telus Corp. It downplays the dispute over facilities-based competition, a topic eagerly discussed by other players in the Cabinet appeal process (NL, Jan. 13/03). "Calgary will not pursue this matter to any great detail, except to note that it does not share AT&T’s interpretation that the CRTC considers itself bound to facilities based competition," Brand Inlow, acting general counsel for the city, writes in its submission to Cabinet. "Rather, the CRTC is open to other means including competition based on leased services. The policy statements of the government and the rulings in the two price cap decisions dealing with methodology are not inconsistent. In Calgary’s view, while the CRTC encourages facilities based competition, it is not, on a policy basis, precluding or favouring non-facilities based competition." At the basic level, the fight between the CLECs and the ILECs revolves around Phase II costing and whether the methodology is working as it should, Calgary states. Cabinet has been given different viewpoints, but little real information, the city complains. "In Calgary’s view, the Telus submission provides generalized propositions and lacks appropriate depth of analysis," Inlow writes. "The missing details have the potential to mislead the reader to believe that all is well with Phase II costing, whereas there are a number of serious concerns, which are likely having serious impact on the attempts to move towards a competitive market. Calgary agrees with AT&T that the Phase II methodology is not working." The city says customers are captive to the incumbent telcos, which are protected from financial failure by the regulator. The competitors have no such fiscal cushion, the brief adds, stating that Phase II costing cannot provide the same price signals as a competitive market would. Another problem is that Phase II costing is based on facts and figures provided by the ILECs themselves. There is no way to verify those numbers, Calgary ventures. Data should be scrutinized "The incumbent telcos were released from the obligation to provide certain key information in the recent price cap decision. In Calgary’s view that was most unfortunate for the developing local telecommunications industry," the submission, filed last month, continues. "Faced with virtual monopolies, neither end user customers nor competitors have an adequate opportunity to sufficiently scrutinize the data to ensure monopoly power is not detrimental to them or the industry overall. The regulator has lost an important tool, particularly when it comes time to assess the existing second generation price cap regime." The city also worries that ILECs have an incentive to subsidize less profitable services through the basic telephony service. This could prevent competition in newer markets, not just in local. "Two likely troublesome outcomes become readily apparent. First, local captive service customers risk subsidizing the more competitive ventures of the incumbents. Sufficient controls to prevent such behaviour are not in place," Calgary writes. "Second, competitors cannot typically avail themselves to such a solid monopoly base to launch and sustain their businesses. The result is that competitor is disadvantaged and its survival is significantly challenged." The city criticizes some provisions of the remarks from Call-Net Enterprises Inc., which claim local service is hurt by irrationally low market prices.