Foreign telco experts push Canada to give competitive law powers to CRTC

Aprominent lawyer in the United Kingdom is urging Canada to give the CRTC competition law-style powers so that telcos can react more quickly to market conditions. Michael Ryan, a partner at Arnold & Porter LLP, said that such powers as those held by the Competition Bureau of Canada would allow the regulator to set the rules, and then have the power to enforce them if a company was offside on such things as tariff setting. Because the commission doesn’t currently have those powers, each telco must now apply to the CRTC to get approval before proceeding with a price change. He cited examples of long delays in telcos receiving CRTC approval for rates, and notes that the tariff process "applies even where the price changes fall within the range already approved by the commission under its price cap rules." Speaking December 9 at the Canadian chapter of the International Institute of Communications conference in Ottawa, he pointed out, "Since the freedom to respond promptly to changing market conditions is essential if competition is to be effective, the CRTC should be processing applications for price changes promptly. But in 2003, 50% of TELUS (Corp.) tariff applications for price changes remained outstanding after 45 days. Bell Canada reports that in 2004 it took an average of 110 days to obtain decision on its tariff filings." Along with urging the CRTC to do away with the requirement of prior approval of tariff changes, Ryan recommends that the CRTC step back from other areas. "The CRTC should also eliminate the winback restrictions, and it should vow not to regulate the pricing of VoIP," he said. "Such measures would inject some new competitive vigour into the market; but the reform process should not end there. There should be a comprehensive examination of the entire regulatory framework, with a view to devising an approach to regulation that makes good on the promise of ‘increased reliance on market forces.’" Competition rule powers would allow the CRTC to transition to a more liberalized market, Ryan added. "Remarkably, the CRTC was given no express competition law powers. It, therefore, remains unable to directly tackle anti-competitive behaviour, such as abuses of dominant position - except to the extent that there is a also a violation of section 27. I believe that serious study should be given to investing the CRTC with competition law powers." (Section 27 of the Telecommunications Act states that the commission has to ensure rates are just and reasonable, and do not unjustly discriminate or give an undue or unreasonable preference toward any person, including itself). Bernard Courtois, president and CEO of the Information Technology Association of Canada and the moderator of the same session, agreed. "I think if we are going to evolve to a competitive environment, we need a second wind…We are sort of stalled in our movement to competition. I think it would help if the CRTC had competition-type powers," he told Network Letter. Ryan suggests that Canada turn to the U.K. as an example of using competition law to regulate. He stated that Canada’s Telecommunications Act as it stands now is deficient because it fails to spell out an unambiguous commitment to competition, it is biased in favour of regulatory versus market solutions, and it withholds from the CRTC some of the key tools it needs to successfully manage the transition to a fully competitive environment. While in Canada, everything is regulated unless and until the CRTC decides to forbear, the European Union in its new regulatory framework for electronic communications in contrast reverses the presumption and permits regulation only a lack of effective competition can be demonstrated. Henry Ergas, VP of Network Economics Consulting Group/Charles River Associates in Australia, and Reed Hundt, a former Federal Communications Commission chair and currently senior advisor at McKinsey & Company, agreed that investing regulators with competition law powers was beneficial. Ergas noted that the two pillars of Australian telecom regulations were antitrust legislation and competition rule, and a wholesale regulatory framework and access policy. The objective of the polices was to improve the competitiveness and flexibility of the Australian economy and deliver higher living standards. Market outcomes so far have included price reductions, quality improvements, and increased choice of suppliers, he stated. Other impacts of these telecom reforms include about 54,000 more jobs being created, and the telecommunications industry’s output increasing by 97%. "The Australian economy is estimated to be more than $12 billion larger than it otherwise would have been without the 1997-98 telecommunications reforms," he said. Hundt agreed that cheaper, faster communications can drive productivity gains. The former FCC chair added that deregulated pricing can increase productivity two to three times current rates. Courtois told NL that, "It’s been proven now in countries like the U.S., the U.K., Australia and New Zealand that (competition law powers) actually work (for a regulator). We actually heard that Australia compared itself to its neighbour, New Zealand, and found that New Zealand had less burdensome price regulation, and it was getting lower prices and more competition. So for Canada, I think we need a new push, a new movement toward competition and that’s one of the ways we could do it." Ryan pointed out that Canada’s current approach wrongly assumes that there will be a "seamless transition" to competition. "In retrospect, the naivety of this approach is apparent. Experience in Canada and elsewhere shows that there can be no ‘flash-cut’ to competition. The transition is a gradual one. During the period of transition, there is inevitably uncertainty about where and when the responsibility of the CRTC ends and that of the bureau commences. There is also a danger that the policy vision of the two institutions will not completely coincide," he notes.

Foreign telco experts push Canada to give competitive law powers to CRTC

News | December 22, 2004

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