Call-Net complains that Aliant is charging too much on St. John’s-Halifax route

Call-Net Enterprises Inc. is calling on the CRTC to force Aliant Inc. to lower the rate it charges third party providers for the use of its telephone lines between Halifax NS and St. John’s NF. In a Part VII application filed with the CRTC on July 14, Call-Net argues that the route should be considered an essential facility as defined in Decision 97-8 and should therefore be priced at the much lower Category I competitor tariff rates for an inter-office digital transport service. "In order for the CRTC to assist Newfoundlanders in getting a more competitive choice of telecommunication services, the monopoly rents charged to transport services to and from Newfoundland must be eliminated by recognizing and treating them as ‘essential’ or ‘near essential’," reads the complaint. Call-Net made the move in the hope of securing a lower rate for the route after failing to re-negotiate a new dedicated services agreement following the expiration of its recent three-year deal. Call-Net contends Aliant is charging 14 times more for the St. John’s-Halifax corridor than the market rates for similar length routes in Eastern Canada, representing a markup from other market rates of 1300%. In its application, Call-Net tells the CRTC that it pays up to $145,000 a month for the 591-mile route with a DS-3 and up to $435,000 a month with an OC-3. In comparison, the current market rate for a DS-3 for the 491-mile route between Montreal and Halifax and the 504-mile route between Charlottetown and Montreal is $10,000 a month. The rates for a DS-3 from Montreal to Moncton, Fredericton, or St. John NB are $5,000 per month. "…A comparison of market rates for similar cross-sections with the Halifax-St. John’s route demonstrates that there is an exorbitant mark-up being paid by competitors in order to provide competitive telecommunications services to Newfoundland," writes Call-Net to the CRTC. "The fact that no competitor has built facilities to Newfoundland, despite the huge markup, since the inception of competition speaks volumes to the necessity for essential pricing for this route. Competitors have not been able to make a viable business case for the construction of facilities to Newfoundland given the very high cost of construction, on the order of $10 million, and the relatively small market of approximately half a million people in Newfoundland, 175,000 of which live in metropolitan St. John’s. The reality of the existing Halifax-St. John’s facility we would argue is consistent with the conditions the commission established for classifying a facility as essential." Those conditions include that the route is monopoly controlled (Aliant is the only supplier of the facility), competitors wishing to offer service to Newfoundland must have transport to and from there, and a competitor cannot duplicate it economically or technically, given the size of the market and the extremely high cost of building facilities. Aliant argues that competitors are further discouraged from building facilities between the two cities because, once the facility is constructed, Aliant would likely then ask for forbearance, causing the rate to plunge and thereby eliminating any opportunity for capital recovery by the competitor for the cost of constructing the facilities. So far though, Call-Net notes that Aliant has not filed for forbearance, as it can on any cross-section for which a competitor offers service, for any route to St. John’s. Call-Net officials examined biannual reports filed with the CRTC over the past five years that show all inter-office digital channel routes on which DS-3 service is offered, and noted that there had been 2,000 cross-sections forborne and that few long-haul routes over 500 miles remain regulated. "In fact, all other provincial capitals (except St. John’s) are currently accessible through forborne cross-sections…," notes Aliant in its submission. If the CRTC deems that the route is not essential, then Call-Net wants the commission to issue an order for Aliant to file a Category II competitor tariff for an inter-office digital transport service between Halifax and St. John’s at a rate "with a reasonable markup that is a fraction of the current 1300%."

Call-Net complains that Aliant is charging too much on St. John’s-Halifax route

News | August 4, 2004

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