Fireworks erupted during the first day of testimony at the CRTC’s local service forbearance proceeding in Gatineau QC this week, with Aliant Telecom Inc. harshly criticized by commissioner Stuart Langford for pinning its competitive hopes on achieving forbearance. During a lengthy interrogatory period, Langford accused the Atlantic Canadian incumbent telephone company of reacting in the market as opposed to fighting proactively for customers. "I don’t see anything you are doing to fight back. I don’t get a sense that there is a battle going on here and I want to know why that is. I want to know why you have put so much on this one particular proceeding," he said. "It seems to me that…you have thrown up your hands and you have said, ‘We can’t do anything. Until you lift the rules, we can’t win.’" Heather Tulk, VP of broadband for Aliant, noted in response to Langford’s comments that the company is fighting to win customers but is hampered by the system of current regulatory restrictions. " stands and places hoops one after another, after another, after another that you have to jump through in order to react to something like this," she said in reference to a recently introduced EastLink bundle offering local service for $9 per month, including all optional services such as voice mail and call forward. "How do we respond to that?" Tulk asked in her opening remarks. "In our case, a large part of our response has to be: will the commission let us respond in that way? What has to be filed with the commission? Does it meet the bundling rules and imputations tests? Does it meet the promotion rules? Can we file something without the details being made available to our competitors? Can we get it approved fast enough? And on it goes." It is difficult for Aliant to compete against its primary rival EastLink, which Tulk said is an example of a company having unfettered access to customers and not having to stickhandle through the commission’s regulatory regime, a regime that Aliant is subject to. The regulatory environment doesn’t allow Aliant to respond to the offers that EastLink brings to the market in an effective manner, she said. Langford insists the company can respond in a more proactive manner and has the flexibility to do so: Aliant could lower the prices of local service optional features or could bring in new innovative products like Bell has, he said. Langford downplayed the negative impact of a "few regulatory hoops to jump through" and the 10-day tariff change process, and even questioned the benefits to Aliant of achieving forbearance.  "But if you put together a proactive plan rather than a reactive one, it seems to be me that there is very, very little left that forbearance is going to offer you…It seems to me that you have got too much riding on what isn’t going to offer you what you want," Langford said. "It just seems to me you want it easier and it seems to me that if you get it easier, the consumers might end up paying a very big price." Mike Roberts, VP of regulatory and government affairs at Aliant, noted that there have been some positive changes at the CRTC in addressing ILEC tariff filings, but there are still some "fairly prohibitive" rules governing the way incumbent telephone companies operate.  "We have see over this period of time, these several years, the commission at every turn wrench up the rules and make it more difficult to compete, whether we talk about the winback rules which went from a 90-day to a one-year . We have seen applications for tariffs take up to two years to get approved. We have seen nothing but discouragement by the commission of reducing prices," he said.  Testing the appropriate markets Of the many issues explored during the first day-and-a-half of testimony, much of the focus was on the appropriate product and geographic markets to be considered under a forbearance test, and appropriateness of using the 5% rule as a litmus test for price deregulation, and the level required before forbearance of a market would be considered. The 5% comes from the cable deregulation test established by the CRTC. Tulk said, "The 5% test is not with the expectation that that is where competition stops. The 5% test establishes a signal that competition has fully started." Rick Stephen, Aliant’s director of regulatory affairs, added, "In our minds, as soon as the competitor gets into a new exchange and demonstrates that they are offering service, it doesn’t require a great big number of loss simply to indicate that they are going to be successful." Aliant suggested under questioning that the local exchange and not the local calling area (LCA) is the most appropriate geographic reference point to begin with when considering a forbearance test. Tulk explained that using the LCA as the base could skew the competitive test by including areas that aren’t competitive into the market share loss calculations. "This is why we believe that keeping it at the exchange level prevents that type of occurrence and makes sure that areas outside of a competitive footprint aren’t in fact pulled in through the local calling area," she said in response to a question from commissioner Elizabeth Duncan. TELUS Corp. also believes that only by using competitive areas will the commission be able to determine forbearance properly. Janet Yale, executive VP government and regulatory affairs at the ILEC, stated that if larger areas are used as the baseline geographic area, pockets where competition doesn’t exist will serve to lower actual market share losses, thus making it more difficult to attain forbearance status. Some controversy arose when discussions switched to what should be considered in the relevant geographic markets test. While Aliant didn’t include wireless subscribers in their calculation of market share loss, the company suggested that wireless subscribers, even their own, should be counted as lines lost. Tulk noted that according to Statistics Canada figures from 2004, 4% of Halifax homes have already gone wireless only. "So if customers are choosing then presumably that would tell you that there is a substantive portion of the population that believes it is an acceptable alternative and a reasonable product alternative that is available to them," she said in response to question from commissioner Duncan.