Challenges of an increasingly competitive marketplace

Darren Entwistle, president and CEO of TELUS Communications Inc., spoke at the 2004 Canadian Telecom Summit about the need to make the CRTC function more efficiently. Following is an excerpt of his speech, edited for length.Timeliness of decisionsThe pace of technological change creates a heightened urgency for having tariff decisions as soon as is practicable. The Telecommunications Act sets out a 45-day limit for the CRTC to either approve or deny a proposed tariff, unless they make public, written reasons explaining why they have not done so. This was supposed to encourage the CRTC to dispose of tariffs in a timely fashion. Unfortunately, more often than not, the CRTC has issued a form letter and missed the deadline. Last year, only 50% of the tariffs filed by TELUS had decisions issued within the 45-day timeframe. Disappointingly, it is tracking about the same over the first half of 2004. This is unacceptable…. if your desire is to run a successful business and address effectively increasing customer requirements, rapid changes in technology and an unpredictable competitive landscape. In a fast-moving and competitive marketplace we must meet our largely unregulated and foreign-based competitors head-to-head. For decisions overall, we recognize that the quality of decision writing has improved markedly under the current Chair and we appreciate this change. We also recognize that this may explain some of the initial delay. Notwithstanding this, we believe the CRTC has to focus on rendering quality decisions in a timeframe that respects the pressures telecommunications companies face in operating effectively in a dynamic industry. Last year, the CRTC issued the decision that implements the annual price cap filing months after their effective date. That meant adjusting our customers’ rates retroactively - a very unpopular thing to do. In addition to driving calls into our customer care centres, this retroactive adjustment also impacted our billing operations, our working capital and operating expenditures and our brand and reputation. This does not have to be the status quo, however, and TELUS was thankful that this year the Commission ensured the decision was released in a timely manner. We believe more can and should be done in this regard. Consistent application of policies A second concern is the lack of consistent application of policies - and the Commission’s competition policy in particular. Since 1999, TELUS has invested more than $1.1 billion outside of our incumbent territory of B.C. and Alberta, with three-quarters of the expenditures focused on broadband infrastructure expansion. We made this investment decision based on the policy the CRTC has stated in many decisions over many years - namely that facilities-based competition is the key to a successful competitive marketplace. Unfortunately, subsequent CRTC actions seem strangely at odds with that fundamental policy. The Competitor Digital Network Access proceeding is a case in point. The net result of changes proposed by the CRTC would see TELUS and others having to resell key components of our infrastructure at less than their full cost in order to assist non-facilities-based competitors. That approach clearly creates an incentive to lease rather than build facilities.The CDNA ruling is also an example of what seems an almost automatic response when a competitor complains to the Commission … which is to adapt or circumvent the relevant Commission policy, rather than stay the course. If non-facilities-based competitors know the Commission will force TELUS and other incumbents to subsidize them, it removes their incentive to be efficient and innovative. Moreover, it creates uncertainty for all players when established CRTC policies are applied inconsistently or undermined as they are tested in subsequent proceedings or decisions. At the end of the day, TELUS is not asking for the most favourable regulatory environment, but rather a consistent application of a stated regulatory framework. Lost opportunities The third challenge to innovation and investment in Canadian telecommunications is the lost opportunities that result from delay and indecision in respect of regulatory proceedings. Two examples here: The first relates to the introduction of Direct Broadcast Satellite competition with cable. The back and forth concerning which satellites could be used and how best to structure the regulatory framework to permit competition for cable resulted in a two-year delay. Two years, when consumers could have had choice in service providers and prices; and new entrants could have been offering competitive alternatives to Canadian consumers. A second example is the deferral account set up by the CRTC in the last price cap decision. More than $800 million dollars of potential investment funds have been taking a regulated rest for the past three years. Unfortunately, we are still waiting for guidance from the CRTC on how to disburse funds parked in the deferral account. Fortunately we still have the opportunity to direct the funds towards worthy endeavours, including bridging the digital divide, and clear the deferral account in the current price cap period. To move things forward, we have proposed a number of uses for the funds in the TELUS deferral account. These proposals are pragmatic, not burdensome to the CRTC and balance the interests of all stakeholders. A large portion of the funds would be directed at the digital divide in B.C., Alberta, and Eastern Quebec - improving service to rural communities. Imagine if the application of the deferral account in this regard were implemented uniformly across all the incumbent telephone companies. We would have much of the money, and the mechanism, to help bridge the digital divide in Canada. All we need collectively is the will to make this decision, which will result in the betterment of our country. Additionally, TELUS has proposed that funds resident in the deferral account could also be used to benefit consumers directly and to improve our service to competitors - who are our customers as well. In our view, this round of proposals should be dealt with quickly, by the end of 2004 at the latest. Together, with the CRTC, we can break a long pattern of lost opportunities.

Challenges of an increasingly competitive marketplace

News | June 22, 2004

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