Fix wholesale regime and keep winback rules: small providers groups

The Canadian Association of Internet Providers and the Canadian Cable Systems Alliance told the House of Commons Standing Committee on Industry, Science and Technology last month that the wholesale regime needs to be fixed before the government moves to deregulate retail telephony services. They also noted that winback rules need to remain in place. Below are comments from their representatives.Kirsten Embree, counsel for the Canadian Association of Internet Providers and lawyer at Osler, Hoskin and HarcourtIn 2005, the revenues that were generated from the provision of Internet services in Canada reached $4.5 billion, which represented an 8.8% increase over the $4.2 billion generated in 2004. In 2005, the number of households with Internet access subscriptions reached eight million, which represents 64% of all Canadian households. As for the number of households with high-speed Internet access, this number reached 6.4 million households, or 51% of all Canadian households, up from 43% in the previous year. For the record, our analysis indicates that 54% of all Internet subscribers in 2004 subscribed to the cable companies' high-speed modem service, 42% subscribed to the telephone companies' high-speed DSL services, and only 4% subscribed to the high-speed services of an independent ISP. In the brief time remaining, I'd like to share with you some of CAIP's thoughts on what we believe has gone wrong with deregulation in the Internet services market and why our members hold such a paltry share – 4% – of that market. As you may know, the CRTC decided to forbear from regulating the retail Internet services of the incumbent phone and cable companies in the late 1990s. Unfortunately, there was no comprehensive regime in place at that time for independent ISPs to gain access to all of the underlying facilities and services that are needed in order to provide high-speed Internet services to their own end-user customers.The cable companies' wholesale cable modem service was only tariffed a couple of years ago, notwithstanding the fact that they had launched their own high-speed services more than ten years ago, and the phone companies have either avoided filing tariffs for their wholesale ADSL services or have priced those services so high that independent ISPs have found themselves in a classic margin squeeze.Competitors need access to essential underlying facilities and services at cost-based rates and without the exorbitant markups that the incumbents will always choose to charge, absent the regulatory oversight of the CRTC. We urge you to take this into consideration in your committee deliberations and to also take a more holistic approach to the issue of telecom deregulation, just as the Telecom Policy Review Panel has done, in order to avoid patchwork regulatory fixes that only create problems down the road.John Piercy, board member of the Canadian Cable Systems Alliance and president of Mountain CablevisionCCSA member companies are the only potential facilities-based competitors in virtually all the markets they serve. These companies have very serious concerns with the draft order. The draft order also proposes to eliminate the winback rules immediately upon its coming into force. With the winback rules removed, the incumbent’s special offers would be targeted only to those customers who inform the telephone company of their intention to move to a competitive service. Most of the telephone company's customers would not receive these offers. Few of those customers would experience lower prices or new service offerings. In no other business does a competitor have to inform the dominant player that one of its customers is discontinuing service. In the telephone business, however, the competitor almost always has to request the dominant player to transfer the customer's telephone number before it can serve that customer.During the number porting process, the incumbent telephone company could target the transferring customer with a better offer before the customer has had a chance to try the competitor’s service.While that practice currently violates agreed industry standards, we know that it happens. Without the winback rules in place, there is little prospect that a competitor could prove when the winback offers actually begin.If this order remains as currently drafted, many of our members will not enter the market; the business prospects will be just too bleak.Our recommendation to the minister is quite simple: retain the market power test for all markets outside the ten identified in the draft order. Once the incumbents can demonstrate, using the Competition Bureau's current test, that they no longer have market power, they should be forborne from regulation. Winback restrictions should be kept in place until forbearance has been granted in a particular market.Such an approach would ensure sustainable facilities-based competition in small markets across Canada. If the order is not revised, not only will residential customers not have access to competitive offerings, but small and medium-sized businesses in these communities will not have access to them either. They will continue to pay the higher prices they have always paid, and their plight may well worsen. Without a viable base of residential customers, our members will never be able to launch a sustainable competitive telephone service that can be made available to local businesses.

Fix wholesale regime and keep winback rules: small providers groups

News | March 5, 2007

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