New technologies and fair regulation seen as pillars of telecom competition

Struggling CLECs see the need to adopt new technologies and products in order to remain competitive, but they also note that there needs to be a level regulatory playing field. The ILECs assert, however, that the adoption of other communications technologies is creating greater competition. Those were the underlying themes of two sessions at a telecom conference in Toronto earlier this month.The Canadian Telecommunications Forum featured discussions of competition in the local residential telephony market and the local business market. Representatives from ILECs, CLECs and other players presented their views on the contentious issue. Ken Engelhart, VP regulatory at Rogers Communications Inc., maintained that cable is a much more competitive industry than telephony. He compared Bell Canada, which serves 98% of the homes passed in its territory, with Rogers, which serves 71% of the homes in its area, and Vidéotron ltée, which serves 61% of homes passed in its region. He quoted figures from the ILECs themselves, which show that Bell has lost only 212,000 residential lines, while Aliant has only 35,000 fewer lines today than it did four years ago.But Willie Grieve, VP public policy and regulatory affairs at Telus Corp., said much of the debate on competition involves verbal sleight of hand. "We are only measuring the entry of ILEC clones," he told delegates. "We should measure other things." He quoted from the recent Bell Canada-Decima Research Inc. survey on device substitution (NL, Oct. 15/03), saying the results echo similar findings from research commissioned by Telus. Younger people, who will be the next generation of consumers, are more likely to substitute wireless for wireline service, Grieve said. A chart accompanying his presentation showed how wireless subscriptions increase as the school semester starts. The president and COO of Sprint Canada Inc. stated his company is looking at new technologies to bolster its share of the market. Duncan McEwan said the firm, which currently offers local and LD bundles in five major cities, hopes to soon offer DSL service. Sprint would prefer to build out its own network, although dealing with resellers is a second option. The company currently has a regulatory fight before the CRTC over ILECs using DSL to protect their local service. McEwan admitted the company is considering getting into Voice over IP (VoIP), the hot topic at the conference. But he denied that Sprint would consider using an American partner to enter the market.Engelhart asserted that VoIP is the only way that most cablecos will be able to offer telephony. The margin on circuit-switched systems is too small to be worthwhile, he added, while packets already exist in cable networks for IP. He marvelled that EastLink Cable Systems is able to offer circuit-switched telephony in competition with Aliant Telecom Inc. "The fact they haven’t gone under puts them in the Hall of Fame," he joked. In the business panel, Bernard Courtois, executive counsel of BCE Inc. and Bell Canada, toed the new Bell line that competition is rampant. There are CLECs such as Sprint and Allstream Corp.; resellers such as Primus Telecommunications Canada Inc. and Distributel Communications Ltd.; wireless service providers such as Rogers Wireless Inc. and Microcell Telecommunications Inc.; and utels such as Telecom Ottawa and Hydro One Telecom Inc. He then went on to offer others that compete in the telecom field: Cap Gemini Ernst & Young, IBM, Cisco Systems, Microsoft and CGI, among others. This raises uncertainty in the business market, he said. Too many players could lead to rationalization, while reduced enterprise spending may result in cutthroat competition. Suspicious business models present the risk of down-pricing and regulatory intervention could discourage investment and push retail prices up. Mark-up on Ethernet Teresa Muir, Allstream’s VP of regulatory affairs, accused the ILECs of following a policy of either refusing to deal with the competition or squeezing the margins when they do. As examples, she noted that Bell’s wholesale DSL offerings include mark-ups of up to 800% while Bell and Telus both sell their Ethernet access to CLECs at a price that is 20%-60% higher than ILEC retail prices. When Courtois challenged that assertion, Muir said Ethernet access costs $15-$20 from Bell, while Bell charges Allstream $109 for the same service. She stated that competition will not evolve if regulation does not keep pace with changing technology. The regulator should shift its focus in order to be ahead of the game in promoting innovation and choice. She reminded delegates that ILECs have a long history of deploying new technologies after CLECs adopted them. "In each case as demand for the latest ‘new’ service grew, the former monopolies put up roadblocks to competitor access while moving their local access networks to that ‘next generation’ of technology," Muir said. She pointed to the migration of voice mail from a stand-alone product to an integrated one. At one time, answering machines were separate devices attached to telephones while today most people use a system from their telecom carrier. The ability to offer an add-on product is a boon to LECs.

New technologies and fair regulation seen as pillars of telecom competition

News | 11/24/2003 5:00 am EST

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