VoIP ruling follows spirit of Telecom Policy Review: PIAC

The Public Interest Advocacy Centre (PIAC) is telling the CRTC that the VoIP ruling (Telecom Decision 2005-28) of May 12, 2005 is just another step toward the goal of letting market forces dictate the competitive environment as was suggested by the Telecommunications Policy Review Panel. In PIAC’s June 5 response to Cabinet Order PC 2006-305, the group urges the commission to "consider the possibility that the key elements of Decision 2005-28 accord with this viewpoint." In Forbearance from the regulation of retail local exchange services, Telecom Decision CRTC 2006-15 (Decision 2006-15), the Commission found as a fact that VoIP services were in the same relevant market, for the purposes of forbearance, as primary exchange service:49. The effect of the above is that local exchange services, including VoIP services and optional features, whether provided by the ILECs, cable LECs, CLECs, or resellers are all in the same relevant market. This is regardless of whether they are purchased as a primary or a secondary line, or as part of a bundle. The aforesaid forbearance decision continued the Commission’s efforts to create a competitive market in local exchange voice service. The decision under review, Decision 2005-28, had also found that VoIP is essentially a local service substitute. The juxtaposition of these two decisions produces a symmetrical and complementary effect upon the potential migration of local exchange service from its current regulation to reliance on market forces. By finding that VoIP was a local service substitute, and in the same product market as PES, the Commission has essentially created a situation where any competitor offering VoIP service can erode incumbent telephone providers’ market share and potentially accelerate the deregulation of the local service market. This acceleration of deregulation of the local service market will take place only in the context of the Commission’s classification of VoIP, first established in Decision 2005-28 and confirmed in Decision 2006-15. The TRP recommended in its report (Recommendation 3-6, p. 3-14):Economic regulation of retail basic transmission services should be retained or instituted only if there is a finding that a service provider has significant market power in the market for such services.The approach of the Commission in Decision 2005-28 is consistent both with increased reliance on market forces, and a perspective that attempts to address the least intrusive path towards competition in the presence of significant market power. There is nothing that appears to conflict with the TPR’s recommendations in that regard. In fact, the Commission’s consistent definition of the relevant product market within the local services market potentially shortens the distance to forbearance in that market. In Decision 2005-28, the Commission further relied upon, at para. 9, the principle of technological neutrality:"One of the underlying principles of the regulatory framework established for local exchange service competition in Local competition, Telecom Decision CRTC 97-8, 1 May 1997 (Decision 97-8) was that of technological neutrality. VoIP services should be subject to the existing regulatory framework, including the Commission’s forbearance determinations. It followed that the regulatory requirements imposed on a VoIP service provider would depend on the class of service provider into which it fell and the type of service it offered." The TPR report did not question the principle of technological neutrality as a cornerstone of regulatory policy. This principle is not in any way antithetical to competition policy. However, as recognized in Decision 2005-28, the technological neutrality principle is not satisfied by carving out a technology-specific area like VoIP for special regulatory treatment. The consumer groups also note that the TPR did not address the classification of VoIP directly in its report nor recommend a specific regulatory approach. The Commission’s analysis of market power and classification of VoIP as a functional equivalent of PES seems to be coherent within the approach recommended in the TPR report. A Commission conclusion that VoIP was not the functional equivalent to PES might be potentially troublesome. In particular, given the importance of VoIP service and the Commission’s finding of potential market power, is it reasonable to assume that such a service would simply default into deregulation because of its classification as an internet retail service and currently subject to forbearance based on Commission determination at a time when dial-up was the prevailing mode of internet services. The consumer groups suggest that the patterns of market dominance ascertained by the commission in Decision 2005-28, in relation to VoIP services may result in the necessity to de-forbear at least some aspects of Internet services particularly as IP platforms of the ILECs deliver the components of current basic wireline service. While it is not necessary to forecast the demise of the PSTN to find support for the commission decision, there is symmetry between the decision and the concept implicit in the TRP report that the most effective and efficient approach to regulation should be chosen. Economic RegulationIn the consumer groups submission, there is a real risk of abuse of dominant position in the VoIP and accompanying noncompetitive pricing and terms of service for ordinary consumers in the VoIP market, if VoIP is considered as a separate Internet-based service and a service forborne from regulation as per Forbearance From Retail Internet Services, Telecom Order CRTC 99-592 (25 June 1999). This concern is reinforced by the result in the Internet access (ISP) market, where the Commission did not regulate on the promise of robust competition from multiple start-up ISPs. In the submission of the consumer groups, the nascent consumer VoIP market is even less competitive than the ISP market was at the time of the Commission’s forbearance order on retail Internet services.

VoIP ruling follows spirit of Telecom Policy Review: PIAC

News | June 8, 2006

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