Major ILECs appeal VoIP decision, say economic regulation unwarranted

The four major incumbent telephone companies launched a joint appeal of the landmark CRTC ruling on Voice over IP – a move that should take no one by surprise. They noted that the CRTC "got it wrong" when it opted to regulate in-territory ILEC VoIP services as traditional circuit-switched voice, while at the same time allowing the cable companies unfettered access to customers without imposing similar regulatory constraints. During a news conference last week in Ottawa, Bell Canada, TELUS Corp., Aliant Inc. and Saskatchewan Telecommunications (SaskTel) (collectively, the Companies) unanimously voiced their opposition to the CRTC’s May 12 decision, and asked the federal Cabinet to overturn the ruling by the end of the year. "In choosing to impose old telecom rules on what is essentially a new Internet driven application, the CRTC has failed to recognize the realities of the technology and of the market. Regulating prices and limiting marketing initiatives for some competitors only is, to put it simply, a bad decision. It is bad for consumers. It is bad for competition and bad for public policy," Lawson Hunter, executive VP and chief corporate officer at BCE Inc. and Bell Canada, proclaimed during the media conference. The telcos take dead aim at the commission’s decision to regulate price and other price-related aspects of VoIP, referred to by the ILECs as economic regulation. "These regulations (which apply in both residential and business markets) include the requirement to seek and obtain prior commission approval of VoIP prices, terms and conditions of service, restrictions on flexibility to offer service bundles to customers (even where these bundles include non-regulated services), restrictions on the flexibility to offer attractive VoIP promotions to customers, and prohibition on the Companies from direct marketing to customers for a period of one year from the time a former local residential customer takes VoIP service from a competitor," reads the July 28 petition to the federal Cabinet. The four telcos doubt that competition in local telephony will develop as a result of the commission’s VoIP decision. Mobile telephony and Internet access are two examples, they said, of markets where healthy competition developed without the CRTC having to impose regulatory restrictions on certain parties. The cause of this, said Hunter, is "the commission kept its regulatory hands off." High-speed Internet access services in Canada are for the most part divided between DSL provisioning offered by the telcos and cable modem service provided by the cablecos. Recent figures from the Canadian Cable Telecommunications Association (CCTA) indicate that there were approximately 2.8 million broadband cable modem subscribers at the end of 2004 in Canada, and that high-speed cable service passes about 11 million homes. In comparison, there were approximately 2.8 million DSL subscribers in Canada at end of the first quarter of 2005, according to Point Topic (NL, June 23/05). Highlighting the significant share that cable companies hold in the Canadian broadband market, the telcos indicated this is a sign that they don’t hold market power in the provision of VoIP services. Janet Yale, executive VP of government and regulatory affairs at TELUS, said Shaw Communications Inc.’s position in the market is particularly enlightening. "Shaw has over one million high-speed Internet customers and is the dominant provider of broadband in Alberta. TELUS can hardly use anti-competitive strategies to dislodge our well-funded competitor in this situation even if the playing field was level," she said. The appeal to Cabinet follows a similar petition filed with the government by SaskTel last month (NL, July 9/05). The CCTA noted in response to the SaskTel appeal that there aren’t any competitive alternatives to the provincial ILEC "eight years after the CRTC’s local competition decision" and therefore no reason to grant the company’s request. Michael Hennessy, president and CEO of the CCTA, said, "There is no Voice over Internet provider, and the reason for that is because no one can get access to the 306 numbers because there is no alternative facilities-based provider to get them from. Remember, you have to get the numbers from a CLEC." He highlights Vonage Canada not rolling out in Saskatchewan. Responding to Hennessy’s comments, SaskTel’s director of corporate communications Michelle Englot wrote in an email to Network Letter, "First, there are today, competitive VoIP providers in Saskatchewan providing either 306 numbers or numbers from other parts of Canada. Secondly, a VoIP provider can obtain 306 numbers either from the ILEC (SaskTel) or from either of two WSPs (Rogers or Telus). The existence of a local CLEC is not an essential requirement in order to obtain numbers. The reasons that Vonage chooses not to rollout its service in Saskatchewan are therefore unrelated to the availability of numbers." Analysts previously contacted by Network Letter noted that the incumbent telephone companies could face some significant hurdles as they try to appeal the VoIP ruling. But the companies themselves seem to believe that the government is on their side. The appeal quotes Industry Canada minister David Emerson from a speech he made at the National Manufacturing Summit of the Canadian Manufacturers and Exporters in February 2005 on the need for smart regulation in the telecommunications industry. "We need to make sure that regulation in this area is streamlined, efficient and adapted to changes that are rapidly reshaping this industry. The trick will be to unleash the power of competition, innovation and technological empowerment that will drive business competitiveness and consumer choice," he said. A group led by Emerson will analyze the Cabinet petition. He will report back to Cabinet with his recommendations. The government has one year to respond to the appeal.

Major ILECs appeal VoIP decision, say economic regulation unwarranted

News | 08/04/2005 4:00 am EDT

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