Deregulation of business telecom market at root of TELUS Part VII filing

TELUS Corp. hopes a small Part VII application filed December 16 with Canada’s telecom regulator will lead to a broader discussion of the CRTC’s role in regulating the business telecommunications market. The company filed an application asking the regulator to clarify the conditions under which companies must operate as a spate of merger and acquisition activity in Canada makes it increasingly difficult to differentiate between incumbent and competitor. While the filing takes square aim at MTS Allstream Inc., and also takes an in-depth look at the relationship between Call-Net Enterprises Ltd. and Bell Canada as those two divide the assets of 360networks Corp., senior company executive Janet Yale tells Network Letter the real issue is the need for deregulation. Yale, senior VP of government and regulatory affairs at the western ILEC, says the Part VII - while ostensibly about bringing Allstream to heel in the territory of its new parent company MTS - could spur the commission to re-examine its approach to regulating what she characterizes as a highly competitive business telecom arena."There’s two points. That we’ve been of the view for some time that the CRTC has to be serious about enforcement and compliance - as serious about that as they are about setting the rules in the first place. Because, if the rules are observed in the breach, then people have no incentive to behave. We believe that you have to devote the resources that are necessary to compliance and enforcement. Is (MTS Allstream) one of the most egregious kinds of scenarios you could come up with? Perhaps not. But, on the other hand, if the real message is that the rules don’t matter anymore, then change the rules for everybody." She says the line is becoming increasingly blurred between ILEC and CLEC, especially in the provision of business services. The market, she notes, is being fought over by incumbents, new entrants, and even unregulated systems integrators that cherry-pick from various telco offerings to provide services. "These markets are increasingly competitive and perhaps in the business market we should start to have a serious conversation about whether or not we really need to have these services subject to tariff requirements. If the response is why do we need tariffs for this? Well, fine. Then everybody can be relieved of tariff filing requirements… This evolution in the business market is really what’s at stake. And, perhaps…what we should really be looking at is starting to think about the appropriateness of whether or not we need regulation at all in the business market, given how competitive it is. And, if consideration of that is an outcome of this exercise, I’d be happy to have that dialogue." In its filing, TELUS argues that Allstream’s business in Manitoba should now be considered ILEC activity, subject to the same tariff filing requirements as parent MTS. TELUS writes: "In summary, the commission has ruled that forbearance determinations that otherwise remove tariff obligations on non-dominant carriers do not apply in respect of services provided by a Canadian carrier in the territory of an affiliated ILEC (nor, obviously, by an ILEC itself), and that, as a general matter, there is no meaningful distinction between the activities of an ILEC and a Canadian carrier with which it is under common control." While the facts of the MTS/Allstream merger speak for themselves, TELUS has, in the filing, undertaken a thorough analysis of the public facts of the Bell/Call-Net division of 360’s assets. TELUS argues that many of the services being offered by Call-Net under a services agreement with Bell are de facto being offered by Bell, with the ILEC earning the lion’s share of revenues from the agreement, and has the greater share of responsibilities in the arrangement. "In fact, all of the publicly-available information regarding this transaction - most notably the fact that Bell is entitled to between 70 and 90% of the total revenues - suggests that during the two-year ‘transitional period’ the role played by Call-Net and its affiliates is so minor - perhaps limited to simply sending out bills - that it cannot be reasonably said that the telecommunications services in question are provided by Call-Net. Rather, for practical and, TELUS submits, for regulatory purposes, they are provided by Bell and its affiliates." Chris Peirce, senior VP of regulatory and government affairs at Allstream, says that what TELUS is asking for isn’t onerous, and that the company doesn’t disagree with the thrust of the application. He’s disappointed, however, if the application has been filed as something other than a straightforward Part VII. "If it’s intended as a first move to deregulate the business market, then it’s disingenuous. The application is pretty directly stating that on a go-forward basis, incumbents need to offer regulated services at regulated rates in-territory, and are not required to do so out of territory. If (TELUS is) asking for the exact opposite of that, then I think it would have been incumbent upon them to indicate that. But, in terms of the application as its written, on its face, which is how I would interpret it, we agree with most of the themes right through it: that for MTS Allstream it’s important now on a go-forward basis to understand that on national accounts that rates that are being offered in Manitoba need to comply with the…act," Peirce says. "We just need to make sure that our sales forces are organized and apprised that for new arrangements going forward, like the ones (the application has) referenced, which are two national contracts we’ve announced recently, that we’re handling that properly in-territory. I don’t think it’s rocket science to handle that. It’s interesting, though, that TELUS picked this point in time to bring this up. Because, you know that we have been…certainly for two years trying to have Bell come into compliance with respect to the Nexxia contracts, which would be a much more obvious place at some point along the way for TELUS to have surfaced on this point. Of course, they haven’t. Nothing about those well over a 100 contracts that are obviously not in compliance that were entered into in a non-compliant way, and that the regulator has found to be non-compliant. So, this point in time is an interesting one to pick to point out what is clearly true and would have been no secret to anybody. That, in territory you’re regulated and out of territory you’re not."

Deregulation of business telecom market at root of TELUS Part VII filing

News | December 22, 2004

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