Thunder Bay wins long fought battle for relief from local phone regulation; delayed on business side

Nearly 500 communities across Canada have been effectively deregulated when it comes to local phone competition. Now, after several years of trying, TBayTel has won approval from the CRTC to operate its residential local exchanges services free from regulatory oversight. It wasn’t as successful on the business side though. Forbearance has emerged as one of the most well used tools in the CRTC’s competition toolbox. It demonstrated this again on Friday when in Telecom Decision 2009-597 it granted TBayTel’s application for forbearance from regulation of residential phone service. Robert Olenick, regulatory analyst at TBayTel, says the ruling will level the playing field in competing with its main rival, Shaw Communications Inc. “This gives us a greater ability to respond to any action that Shaw takes without having to go to the commission each time for approval,” he tells Tech Media Reports. Primarily, it will enable TBayTel to offer more targeted bundled packages and win back promotions. It also gives the incumbent the freedom to lower local phone rates. “How much lower the rates will go it’s hard to say, but at least the ability is there to respond quickly,” he adds. Although Shaw opposed forbearance in Thunder Bay for both residential and business services, the company’s senior VP of regulatory affairs agrees the CRTC’s decisions “are reflective of where the marketplace is today in Thunder Bay”. Jean Brazeau says he doubts, however, that the decision will have a significant impact on competition in the market because TBayTel has already been actively involved in both bundling and winback promotions. “Forbearance certainly gives TBayTel the opportunity to lower its basic phone rates but we haven’t seen that in the past by the incumbents,” says Brazeau. “Remember, TBayTel had a monopoly on all the residential phone lines so for them to lower the rates of all their customer bases is not something I think they’ll contemplate.” What does Brazeau expect will change? “What we’ll probably see is more targeted bundled packages, as was allowed with the winbacks and promotions in the past. I think this decision will not really change much in the marketplace.” Continuing regulation for business services TBayTel failed to convince the commission, however, that Shaw is a big enough player in Thunder Bay’s business market to warrant defacto deregulation. One of the key tests for forbearance is demonstrating that one or more of ILEC competitors are capable of serving at least 75% of the local market – the so-called “competitor presence test”. TBayTel argued that Shaw easily meets this threshold; the CRTC disagreed. “While the Commission considers that Shaw does offer business local exchange services in the Thunder Bay exchange via its SOHO (small office-home office) service, it concludes that information provided by the parties does not indicate that Shaw is capable of serving at least 75 percent of the number of business local exchange service lines that TBayTel is capable of serving in the Thunder Bay exchange,” the states Telecom Decision 2009-596. Shaw provides its telephone services over coaxial cable plant leased from TBayTel, noting that this infrastructure was designed to reach residential units more so than businesses. The CRTC concurred saying “it is inappropriate to use residential coverage a proxy for business coverage.” “We have a much smaller footprint when it comes to covering businesses in most of our markets. That’s changing but it takes time,” says Brazeau. Olenick says TBayTel is currently reviewing its options, including a review and vary of the decision or reapplying. “We have to go back and present a better case.” The CRTC left the door open for a subsequent review noting that the competitor presence test threshold can be lowered to 50% if an applicant can demonstrate that the competitor is cherry picking downtown businesses at the expense of those on the outskirts of the serving territory. In its reply comments, Shaw said it is capable of serving 65% of the business local exchange lines within Thunder Bay. Brazeau concedes that it’s a matter of time when the local business market in the region will be forborne from regulation. “I’m ready to bet that the market will be forborne before we get to the 75% test,” he suggests. “If I was Thunder Bay I’d make the application based on a different set of criteria. As I’ve said the commission is predisposed to forbearance.”

Thunder Bay wins long fought battle for relief from local phone regulation; delayed on business side

News | September 28, 2009

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