Telephony proposition riskier for small cablecos: CCSA

Small cable companies' entry into the local telephony market just got riskier, following the CRTC's decision giving incumbent telcos greater pricing flexibility for their bundles in less populated regions of the country. Chris Edwards, VP of corporate and regulatory affairs at the Canadian Cable Systems Alliance (CCSA), says while the decision wasn't unexpected, the association is still confused as to some of the commission's reasoning. He points to the CRTC's determination that ILECs are unlikely to under-price in these markets because they represent such a small part of their overall subscriber base and revenue and it would be difficult to recoup those losses after driving out the competitor. Edwards turns this conclusion around. "If it's not that big, then why would they be concerned about recovering their costs if they can spend a bit to keep out their competitors," he tells Network Letter. "We said point blank, below-cost pricing by the ILECs would be very likely to drive competitors from the market....We said existing and potential competitors in such markets would not be able to sustain the substantial and risky network investment necessary against predatory pricing," he says, referring to elements of the CCSA's original arguments in the bundling proceeding. Despite ILECs' comments that the ruling is good for competition in these areas, the CCSA believes that the bundling decision, combined with rate deaveraging from this year's price cap ruling, simply give incumbent telcos too much pricing flexibility. "They have now got substantial flexibility to set the pricing where they want to," Edwards says, noting they can get rate ranges preapproved and then adjust prices confidentially within those ranges to match what competitors are doing. "They've got a tremendous amount of flexibility. It's almost forbearance." Asked if this decision represents another nail in the coffin to competition in these smaller markets, Edwards was unsure. "These things taken together certainly make it a riskier proposition for small competitors," he says. "It's already a pretty iffy proposition for them." Edwards concedes that small cablecos have received some administrative relief from the commission in terms of registration and the like. But he adds there's still a significant amount of administrative process and costs for these small providers. "So when you look at the whole picture, there's a lot to do and the big competitors that they are facing are getting increasingly well-armed to meet them when they come in ," he says.

Telephony proposition riskier for small cablecos: CCSA

News | December 3, 2007

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