Competition won’t develop in rural areas: commissioner Cram

CRTC commissioner Barbara Cram is again dissenting on a decision regarding the deferral accounts. This time, however, she is responding to the CRTC’s March 14 decision denying Barrett Xplore’s review and vary application. Below is her dissenting opinion.Once again I disagree with my colleagues in the majority on this issue and I reiterate my dissent from Telecom Decision CRTC 2006-9 in its entirety. I continue to believe that my concerns stated therein remain valid and unanswered. And upon having the ability to once again reflect on the majority decision, I have further concerns. Everything is on hold until the commission decides…againFirst, it is over one year since the original decision was issued. The commission started its process in review of proposals to dispose of the funds accumulated in the deferral accounts, Telecom Public Notice CRTC 2006-15, 30 November 2006. The CRTC is now in the position of being a project manager for one of the largest, if not the largest, build-outs in Canada. Notwithstanding our excellent and hard-working staff, I question the ability of the commission to do this in a nimble fashion. We are after all a quasi-judicial tribunal and natural justice and process are required, but it is these very requirements that mean the commission is not nimble. Further, notwithstanding the prodigious abilities and aptitudes of staff, there is a limit to the number of staff and the amount of time they can devote to this particular file. It is no secret that this next year for the commission will be very demanding – the essential services proceeding, many applications for forbearance (regardless of the criteria), completing the telemarketing process (a vast undertaking in and of itself); these all in addition to the normal load of tariffs, Part VIIs, competitive disputes, completing the Monitoring Report, etc. Now, the commission has received the responses by the parties to the proposals of the ILECs in response to Telecom Notice CRTC 2006-15. The file shows there are many and substantial objections to the ILEC proposals. It is now that substantial staff time is required on the file. I envisage many issues will have to be canvassed: relative capacities of proponents and respondents, relative coverage areas, quality of service issues, and what circumstances would be sufficient to approve or not approve proposals. Further, if the respondent claims it intends to build out in the near future, in addition to the issues above, there is the task of assessing the credibility of this intention and whether it is fair to the citizens of a particular town to have to wait and see if they will get high-speed service while their neighbours 50 miles away will be receiving it next year. Judgment calls will be required of the commission, which means the accumulation of huge briefing books after a fulsome round of interrogatories, responses, and arguments, and finally, a decision will have to be drafted. Based on my eight years of experience at the commission, industry will receive a decision approximately 18 to 24 months after the initiation of the proceeding.And what will happen in the interim until our decision on Telecom Notice CRTC 2006-15 is issued? Will banks be willing to lend money to competitors for builds? Not likely. And if the bank does lend the money, will a competitor actually expand now in order to own the customer in a certain area knowing of the distinct likelihood of an ILEC expansion into that area in the near future on a subsidized basis? Not likely.There will be no competition in the targeted remote areasI assert that this is not the end of the problem. The majority has not answered and, in fact, cannot address the concern of the CCSA that the ILECs’ exclusive subsidy will inhibit cable’s growth in the long term. In the target areas of the ILEC build, what bank would finance infrastructure capital for any competitor knowing that its competitor, the incumbent telephone company with deep pockets, will enter its market with zero risk, subsidized capital and the ability to undercut prices for two out of the three services it will be offering? Internet and video services are unregulated by the commission, meaning the commission would have little if any ability to ensure a level playing field. It is likely that the small cable company or other new competitor would not obtain financing for its infrastructure. The majority would then say that this competitor company would have access to the ILEC’s infrastructure at a subsidized cost. This, it should be noted, only applies to competitors in the remote area being the target of the ILEC build. Thus the competitor may have stranded capital, and we would have competition based on reselling – a business that has limited margins and no hope of growth. Again, there is little to no protection against the ILEC simply undercutting its prices on its unregulated services.And competitors are worse off where competition may have otherwise been viableIt is worse still for the competitor in the middle bands, those with a denser population that may have a better ability to support a business case for entering the market. The ILEC subsidized infrastructure will go through these bands to reach the remote area. The ILEC’s business case for providing enhanced services to these bands is subsidized. Competitors have no status to object to an ILEC proposal on that basis and neither do they have the same right to access the ILEC infrastructure on a subsidized basis as would their counterparts in the target areas of the ILEC build. Consider the banker looking at the competitor’s proposal for infrastructure upgrades in the middle bands knowing full well that its competitor, the ILEC, is subsidized, and there is little protection against price cutting. Rural canada will have broadband but no competitionAs a result of the majority’s decision, I confess I cannot see sustainable competition developing anywhere in Canada save for the larger cities. In an effort to provide high-speed access to remote areas, a matter not within our mandate, I believe the majority has gone against our statutory mandate – that of promoting and developing sustainable competition in telecommunications.

Competition won’t develop in rural areas: commissioner Cram

News | March 19, 2007

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