Giving Bell VoIP pricing flexibility would hurt competitor development: Primus

Telephony service providers, Primus Telecommunications Canada Inc. and MTS Allstream Inc., took advantage of the CRTC’s revised timeline to comment more thoroughly on Bell Canada’s application to price its VoIP service differently in each of Ontario and Quebec. The competitors unanimously urged the commission to reject Bell’s proposal on the grounds that VoIP services shouldn’t be treated differently than local exchange services, regulation extends beyond provincial boundaries, and any pricing flexibility would represent a pre-forbearance loosening of restrictions. In rebuttal, Bell maintained its position that pricing on a provincial basis would, in fact, aid competition and consumers. "If Bell were allowed some flexibility in the pricing of their VoIP service then you would see the market getting to a point where any significant level of competition becomes elongated," Rod Warden, VP of residential marketing for Primus, tells Network Letter. "It would slow competitors ability to make inroads against what is currently a virtual monopoly." In its comments to the commission, MTS Allstream focuses heavily on the fact that the CRTC had recently confirmed that VoIP services form the same market as primary exchange services (PES) and, therefore, would be regulated as such. Bell’s Digital Voice Service, reminds MTS, falls under this umbrella. "Despite Bell’s attempts to make DVS appear to the commission as a different service than its PES offering, the two services are nearly identical," submits MTS. "In fact, in terms of marketing this service to its own customer base, Bell takes great pains to demonstrate that its DVS service is functionally identical to its PES." Primus reiterates this fact, and Warden infers that this is the main reason they are confident in how the commission will rule. "The CRTC has said they are going to treat VoIP service from incumbents the same way they treat local phone service," he says. "Our take is that incumbents are still going to be regulated." Bell argues, "The service provided by the company is clearly a VoIP service. There are significant differences in relation to the functionality provided by this service in relation to traditional primary exchange service." Bell also derided competitors’ attempts to turn the proceeding into a complex examination of rate de-averaging, saying it is simply an application to price a service differently in two provinces. The rate de-averaging argument, however, stems from the fact that Bell is concerned it won’t be able to compete with the VoIP offerings in Quebec, which are priced much lower than in Ontario. Comments MTS: "Abandoning existing pricing safeguards, such as the existing rate de-averaging restriction, at the first sign of competitive entry would be at complete odds with the intended purpose of the safeguard adopted by the commission. The restriction was not intended to be in place only as long as competitive entry remained extremely limited or even non-existent. It was intended to prevent targeting in the event of entry." Also, in light of Bell’s current application for forbearance from regulation, the competitors feel that no premature flexibility should be given. "Since this service will ultimately be eligible for inclusion in a local forbearance application, Primus opposes any additional regulatory flexibility for the ILECs over and above that which they currently enjoy." The danger of pre-forbearance leniency, submits Primus, could go beyond rate de-averaging within the proposed bands. "Primus fully expects that if were to be approved by the commission, Bell Canada would seize on this precedent and attempt to have it applied in the circuit-switched market. No doubt Bell Canada would rely on the fact that the commission had already determined that local VoIP and circuit-switched local voice services are in the same market." Although Primus seems wary of Bell’s motives, Warden understands what the incumbent is trying to do. "Bell is being aggressive in their attempt to hold their market share," he says. "If the application were approved it would open the door for more flexibility in their pricing. It would be a small win, but it sets a precedent for more gains down the road." Take into account territorial boundaries: Primus and BellAt the core of the application is the fact that Bell’s incumbent territory spans two provinces. Primus reminds the commission that rate bands have been defined by ILEC costs across their entire operating territory, and the fact that some other ILECs now serve two provinces is a very recent development. Primus adds: "With the exception of Bell Canada’s operating territory, each province has historically been served by a separate ILEC." This suggests that Bell’s territory of Ontario and Quebec should be treated as one whole. Bell, however, turns this claim around, saying: "In fact, Primus’ point supports the company’s proposal. Before the industry developments to which Primus refers, each of the major ILECs other than Bell Canada offered services in accordance with provincial boundaries. Industry change has let to a situation in which services continue to be offered by these ILECs’ successors in accordance with provincial boundaries." If this argument were valid, then why wouldn’t it apply to all services offered by Bell in the two provinces? Of course this echoes back to the competitors’ concerns over what any flexibility in pricing could lead to. "This is an attempt to get the CRTC to loosen the restrictions that are placed on the incumbents," says Warden. "Approval by the commission would set a bit of a precedent and then it becomes a move towards deregulation, which the market isn’t ready for. Having 95% of the market is not a healthy, competitive market. Without some restrictions there can’t be sustainable competition. We certainly hope the application is rejected."

Giving Bell VoIP pricing flexibility would hurt competitor development: Primus

News | 10/12/2005 4:00 am EDT

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