Telus Cabinet appeal may put wireless operators on the financial hook for millions

Mobile wireless operators could be on the hook for significantly more money in contribution payments to Telus Communications Inc. if the western telco wins an appeal to the federal Cabinet over the CRTC’s controversial contribution and rebanding decisions (Decision 2000-745 and Decision 2001-238). According to a joint submission by Rogers Wireless Inc., AT&T Canada Corp. and Call-Net Enterprises Inc., collectively calling themselves the Competitive Coalition, the country’s mobile wireless carriers could be forced to ante up an additional $215 million to Telus if its petition to the Governor in Council is successful (DGTP-003-03). The Competitive Coalition states that, if the appeal is successful, the resulting regulatory environment would produce a huge financial windfall in the order of $850 million over the new four-year price cap period for Telus to subsidize local tele-phone service in high-cost serving areas. The coalition doesn’t believe that Telus’ financial health is at risk if it doesn’t get the requisite regulatory change. The coalition notes that, in fact, the reverse will actually hold true. "This could have serious repercussions for the financial health of the wireless communications industry," the Competitive Coalition writes in its March 10 comments to the Governor in Council. Moreover, the operations for which the western telco is seeking greater compensation are actually profitable, the coalition notes. "Its losses are coming in the unregulated parts of its business, such as its wireless business unit, where its purchase of Clearnet for a staggering sum of $6.6 billion has hurt the company’s overall bottom line. Canadians in other regions of Canada cannot be expected to make up the losses associated with Telus’ takeover of Clearnet or Telus’ expansion into Eastern Canada through the rates they pay for local telephone service." The Competitive Coalition notes that the wireless industry has already had to make major adjustments following the introduction of the new contribution regime in January 2001. The Nov. 30, 2000 ruling modified the contribution regime to one based on revenue from all telecommunications service providers rather than collecting money only from long distance providers as was the case under the old model. As a result, collectively wireless operators saw their contribution payments skyrocket from approximately $15 million in 2000 to about $200 million in 2001. "The wireless industry was required to help subsidize the provision of local wireline telephone service in high cost areas (principally by the ILECs) despite the fact that the wireless carriers have to bear all of their costs for providing their wireless telephone services to the public," the coalition writes. Telus believes that the CRTC was incorrect in determining the cost structure for local loops and is asking Cabinet to order the CRTC to use company-specific costs to determine rebanding rates. It filed review and vary petitions for both the contribution and rebanding decisions, which were ultimately denied by the commission in Telecom Decision 2002-67. Telus subsequently appealed that ruling, the subject of this proceeding at the federal Cabinet.

Telus Cabinet appeal may put wireless operators on the financial hook for millions

News | 03/31/2003 5:00 am EST

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