Saskatchewan government appeals CRTC’s VoIP decision to federal Cabinet

The Saskatchewan government on July 6 launched the first of what is expected to become many more appeals to the federal Cabinet of the CRTC’s Voice over Internet Protocol (VoIP) decision. Maynard Sonntag, the provincial minister responsible for provincial government owned Saskatchewan Telecommunications (SaskTel), writes in a letter to federal government, "…The government of Saskatchewan requests that the Governor in Council direct the CRTC to ensure that all companies involved in the delivery of VoIP services within the province of Saskatchewan, including SaskTel, have the freedom to compete, have the same set of rules and have a level competitive playing field." The provincial government in its petition adds, "It is our belief that the recent decision made by the CRTC (Decision 2005-28) to regulate and ultimately impair the growth of…VoIP is but the most recent example of the CRTC’s inability to grasp the realities of our marketplace, our history, our traditions, our tools and the methods we utilize to ensure that Saskatchewan people have access to a leading edge telecommunications infrastructure." Saskatchewan also argues that the introduction of competition to the province should not be accomplished "by handicapping Canadian companies in favour of foreign-based providers and other large domestic companies." But the president of the Canadian Cable Telecommunications Association (CCTA) disagrees, telling Network Letter that there currently is no competition for SaskTel. "Here is a very interesting fact: in the local forbearance proceeding, SaskTel filed their evidence on competition – and this is backed by the things they put before the Cabinet – and they have pointed out that eight years after the CRTC’s local competition decision, there still is no local telephone competition in Saskatchewan," says Michael Hennessy. "There is no Voice over Internet provider, and the reason for that is that because no one can get access to the 306 number because there is no alternative facilities-based provider to get them from. Remember, you have to get the numbers from a CLEC." He points out that Vonage’s map of Canada, showing its rollout, has Saskatchewan marked as "not available and not-coming soon." He adds that Saskatchewan-based Access Communications, which currently provides cable service to 75,000 subscribers in Regina, Estevan, Weyburn, Yorkton, North Battlefords and other regions, is interested in introducing VoIP, but that it "recognizes the market power" of SaskTel. "Access Cable is not a huge foreign entity or a large national player; they are a co-op in the center of the provincial government of Regina. This (appeal) is not just about protecting the interests of the people of Saskatchewan. This is a play to get back the jurisdiction that was ceded to the federal government (from Saskatchewan) in the early 1990s….If you read carefully what the government of Saskatchewan is saying is that they want to go back to the regime where it, not the federal government, handles telecommunications in the province." The Saskatchewan government in its petition charges that the VoIP decision shows that the federal government has been unable to abide by the first objective of the Telecommunications Act, which directs the commission to facilitate orderly telecommunications development that "services to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions." The petition notes that in moving toward federal regulation of SaskTel in 2000, then Industry Canada minister John Manley pledged that the regulatory environment would become "more flexible and light handed" and place "greater reliance on market forces." In its appeal to the federal government, Saskatchewan charges that the CRTC’s VoIP decision, which ruled that VoIP would be regulated just like circuit-switched telephone systems and thus the incumbents would need to file for tariff approvals, doesn’t grasp the realities of the province’s marketplace, history, traditions, tools and its methods used to ensure it has a leading edge telecommunications infrastructure. "…It has become evident that current regulation is not recognizing Saskatchewan market characteristics, nor considering Saskatchewan consumer needs. Should the government of Canada, through its federal regulator, continue to be incapable of meeting its obligation to consider regional needs within its current regulatory regime, Saskatchewan remains willing and able to perform those regulatory functions on its behalf," reads the petition. The Saskatchewan government also tells the feds that the VoIP decision will likely result in higher prices for phone service. A study of the province’s marketplace by economists Michael Trebilcock, from the University of Toronto, and Andrew Tepperman, of CRA International, that was included in the petition concludes that the commission’s regulations on VoIP will lead to higher prices. "There is no reason to impose restrictions that are intended to protect competitors in markets where competition is unlikely to arise," notes the report, Regulation of SaskTel as a Large Incumbent Local Exchange Carrier: A Comment on CRTC Decision 2005-28. The report does note that Access and Shaw Communications in Saskatoon could enter the residential voice markets, as well as Bell, TELUS, and MTS Allstream that might look to providing VoIP services on an access-independent basis. "How likely is SaskTel to be able to influence the strength of these competitors in major urban residential local markets? First, note that SaskTel’s 2004 revenues from all operations equal $932.4 million, with operating income of $113.3 million. Shaw had revenue from all sources of $2,079.7 million in 2004, with operating income of $380.5 million," states the report. "By these measures, Shaw is substantially larger than SaskTel…and that by the time it enters Saskatchewan (with VoIP) it will no longer be subject to experience-related disadvantages cited by the CRTC in the VoIP decision (because it will have developed the expertise and experience of offering VoIP already in Alberta)." The report also notes that while Access is smaller in absolute size than SaskTel (with $41.9 million in revenue), its $15-million investment in its cable system over the past two years indicates that it can finance a VoIP rollout. "Since Access Communications evidently has internal funds available, and furthermore recoupment is not viable, the conditions for financial market predation…are not met." But Hennessy is adamant that consumer prices will not rise as a result of the CRTC’s VoIP decision. "I would say that is absolute nonsense. SaskTel can lower its prices; the only rule that will apply is that it can’t target an emerging competitor directly," he notes. "Not only have the telephone companies been given much more flexibility than they’re letting on, but because they are already in the market and have the ubiquitous coverage they really have a head start over most other companies," he states. He points out that the recent decision on the tariff granted to Bell for its VoIP service shows increased regulatory flexibility (see articles on pages 1-2). Bell Canada, TELUS and others are expected to shortly join Saskatchewan in pressuring the government for a chance to the CRTC’s VoIP decision (NL, May 25/05).

Saskatchewan government appeals CRTC’s VoIP decision to federal Cabinet

News | 07/09/2005 4:00 am EDT

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