Regulatory framework needed before local service deregulated: CLECs

CLECs urged the CRTC to adopt appropriate market criteria and institute a framework for the future before proceeding with any forbearance from regulation of local exchange services. While the Competition Bureau insists that forbearance is "critical to the development of competitive local phone services in Canada," those who would be competing with the ILECs feel the market does not yet warrant deregulation. "The incumbent local exchange carriers’ dominance in the market for local exchange services has proven the most resilient to competitive entry of all of the ILECs’ former monopolies," commented Call-Net Enterprises Inc. "And still today, with more than eight years’ work to introduce competition, the ILECs nationally retain a full 98% of all residential local exchange revenues and 92% of all business local exchange revenues." Before moving ahead with forbearance, establishing guidelines for geographic and competitive markets are crucial. "In Call-Net’s view it is relatively easy to provide answers with respect to the appropriate service and geographic market, however, it is readily apparent that the criteria for determining that there is sufficient competition permits no easy formulae." Indeed, the geographic market seems easily defined as a local calling area, exchange or operating territory, whereas a sufficiently competitive market is more open to interpretation. Cybersurf Corp. feels that an ILEC’s competitors should hold at least a 35% market share before forbearance is allowed. However, Cybersurf continued: "Even if competitors hold a market share equal to or greater than 35% in a relevant local exchange service market, an assessment of related demand and supply conditions is also required before a determination regarding forbearance should be made." FCI Broadband stated that criteria for deregulation should include less than 70% market share for the ILEC, three or more facilities-based competitors providing service in the market, and an increase in the competitors’ market share of at least 5% per year for the past two years. A lengthy list of specific market criteria could help the CRTC easily decide when to forbear, as long as most the measurements are quantitative. The Coalition for Competitive Communications warned against involving qualitative judgements when deciding whether to deregulate. Wrote the Coalition: "The commission, customers and the industry will be faced with the near certain prospect of lengthy proceedings and arguments over qualitative issues in numerous local exchange markets across Canada. The delays, uncertainty and regulatory costs to all parties, including the commission, would burden the whole sector needlessly and divert resources away from more worthwhile goals, such as investment in and marketing of new, advanced telecommunications services for Canadian customers." Primus Telecommunications Canada Inc. also cited a 65-70% market share figure as a starting point for deregulation, along with other concessions. "Primus submits that one of the criteria that must be adopted to determine whether or not to grant forbearance would be the existence of a workable wholesale access regime that would permit competitors to offer stand alone and bundled services similar to those offered by the dominant service provider(s)." Currently, resellers can’t compete with the bundled packages that are offered by the ILEC and CLEC (most often a cable company), and they would be at a further disadvantage in the case of forbearance. The make-up of a deregulated landscape is something the other competitors considered as well. FCI Broadband submitted a list of 12 services that must continue to be regulated after forbearance, which included resale, telephone listings and directories, access to multi-unit buildings, and competitors digital network services. FCI added that "if it appears that the ILEC has regained market power so that the market is no longer workably competitive, the Commission ‘de-forbear.’" De-forbearance, or re-regulation, was touched on by all competitors as a key to ensuring a competitive telecommunications landscape in the case of deregulation. Cybersurf also submitted that incumbents should not be able to use their status in deregulated calling areas to increase their market power in areas that are still regulated. On the prospect of imposing a transitional regime that would provide ILECs more regulatory flexibility prior to deregulation, the competitors were resoundingly against it. "In Primus’ view, any additional flexibility over and above that recently provided to the ILECs would be inappropriate given current market conditions." Exactly when the market allows for forbearance, however, will likely remain the hottest point of debate. When that time arrives, the telecommunications competitors hope the market can sustain the effects of deregulation. Cybersurf commented: "Since the harm to competition and to the Canadian economy associated with premature forbearance can be very serious and potentially irreparable, the onus of proof should be beyond a reasonable doubt."

Regulatory framework needed before local service deregulated: CLECs

News | July 9, 2005

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