Regulation & Policy: Federal budget backs deregulation

It seems the governing Conservative Party of Canada believes that it can do more to create a healthier economy by making sure market forces, rather than regulations, discipline industry sectors. The government announced its March 19 budget with this vision in mind. The Conservatives noted that the party already started this process, highlighting a few examples. The government adopted the policy direction to the CRTC that the commission should take a light approach to telecom regulation, and the feds proposed to bring local phone service deregulation sooner to Canadians. The government also tabled Bill C-41, proposing to bestow on the Competition Bureau of Canada the authority to fine telecommunications carriers for anti-competitive behaviour. With this budget, the government reinforced its commitment to relying on market forces as much as possible. "The government will task an expert independent panel to undertake a comprehensive review of Canada's competition policies and report, before budget 2008, to the Minister of Industry on options for future legislative amendments," reads the budget.Dissent among telecom policy ranksBut as the government charts another path in its pro-competition policies, the House of Commons Standing Committee on Industry, Science and Technology continues to study the issue of deregulating the telecommunications sector. Telemanagement believed the committee had heard from all witnesses by the end of February, but additional groups appeared near the end of March. The Standing Committee seemed to be making headway on delivering some recommendations to Industry Minister Maxime Bernier, but a meeting on February 28 revealed deep divisions within the committee. The Bloc Québécois had put forth some key issues that it believed needed to be settled, such as deciding where to draw market boundaries, but Liberal MP Gerry Byrne derailed progress by tabling a motion. It read, "I move that the committee report to the House recommending that the Minister of Industry withdraw the order varying Telecom decision CRTC 2006-15 and table in Parliament a comprehensive package of policy, statutory and regulatory reforms to modernize the telecommunications services industry." Decision 2006-15, issued April 2006, outlined the CRTC's original forbearance regime. It required that incumbents must lose 25% market share in a particular area before their local services are forborne from regulation. Bernier's proposed variance requires only that three facilities-based service providers are operating in a region. If that's the case, incumbent services will be forborne.The motion didn't go forward because some members left, and the committee didn't have quorum. The meeting automatically adjourned.Will the three-player facilities test work?Small cable providers already in the local telephony market looking to expand and those contemplating entry highlighted the deficiencies of Industry Minister Maxime Bernier's three-player presence test for forbearance during a recent appearance in front of the committee. Tim Stinson, president of Bluewater TV Cable Ltd., said during his opening remarks that the company had started testing telephony services in its footprint near Clinton ON, but since the minister's announcement, "we have suspended all of our efforts due to the uncertainty the order creates in our rural markets." Regina serves as a good example of what's wrong with the minister's three-player facilities test. When Access Communications Co-operative Ltd. launched telephony service in Regina in the middle of February, it became the second wireline facilities-based provider in the market. Add in wireless competition from Telus Mobility and Rogers Wireless and the ingredients for forbearance have largely been met. But this is where the formula's logic comes into question. According to Access CEO Jim Dean, his company has yet to capture a single customer; nonetheless, SaskTel would meet the forbearance criteria. That means the incumbent could use targeted promotions to keep customers, and, should a client or two defect, SaskTel could use a winback campaign to entice them to return. Access doesn't stand a chance under this model.Just as Stinson said, entry into telephony is now in doubt. Access has suspended the plan to expand its local telephony service to other smaller markets in the province as a result of this decision. This can't be what Minister Bernier envisioned when he proposed his three-player facilities test approach. Wholesale insanityAs the CRTC begins its massive review of the wholesale and essential services regime, it came to what some would describe as an odd conclusion: it ordered mandatory access to competitors for some ILEC wholesale services. The orders, which were released on January 25, created a stir among the major incumbent telephone companies, which have since appealed the rulings. They also asked for a stay in implementing the decisions. Bell Canada, Bell Aliant Regional Communications, Telus Corp. and SaskTel have all asked the CRTC to set aside the rulings until the commission completes its review of the wholesale services regime. They believe the decisions run counter to the government's policy direction, which calls for a less-heavy regulatory hand. As well, the incumbents believe the services in question could actually be deemed non-essential in the future by the commission.Xplore's appeal explodesThe CRTC has ruled that monies paid by urban subscribers into the incumbent telephone companies' deferral accounts should be used to expand the reach of ILEC broadband networks in rural and remote regions of the country. The decision denies an appeal by Barrett Xplore Inc., a rural New Brunswick service provider that said giving the money exclusively to the ILECs would hurt its competitive offering in the market. Interestingly, CRTC commissioner Barbara Cram dissented on the ruling, reiterating her opposition to the original deferral account ruling (Telecom Decision 2006-9). She noted that while broadband would be extended to rural parts of the country, she contended that competition wouldn't result from the ruling. "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?" she wrote in her opinion.

Regulation & Policy: Federal budget backs deregulation

News | April 1, 2007

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