CRTC postpones decision on new regulatory framework for small ILECs

Canada’s 36 small telcos will have to wait a bit longer to find out if the CRTC will grant them financial relief to make up for revenues they lose to large established telcos that move into their territories. The small incumbent local exchange carriers (SILECS) from Ontario, Quebec and British Columbia were hoping to have a new four-year regulatory framework in place for Jan. 1, 2010, to replace the current framework which expires Dec. 31. But the CRTC has decided that it must first complete a separate review related to the local service subsidy regime, the obligation to serve and the basic service objective. Details on that proceeding will be released in January. “The Commission considers that the existing regulatory framework for local competition in small ILEC territories may no longer be appropriate and, accordingly, concludes that the small ILEC local competition framework should be reviewed,’ the CRTC states in Telecom Regulatory Policy CRTC 2009-788. As such, it says “it would not be appropriate at this time to develop a new regulatory framework for the small ILECs for the next four years. Rather, the Commission considers that the existing regulatory framework for the small ILECs should be extended.” The notice puts off any decision on a proposal from the SILECS, filed in July by the Canadian Independent Telephone Company Joint Task Force, to create a new price cap regime for small local telcos, including a new subsidy pool to help fund them. According to the JTF, the new regime is required to set the rules for greater long distance competition in the SILECs’ regions. A key part of the JTF proposal is to lower long distance interconnections rates – fees charged to telephony providers interconnecting to the small ILECs in their markets – closer to actual costs. This loss of revenue would be funded by additional subsidy payments from other telephony providers and would be administered in a manner similar to the National Contribution Fund. Competitors entering the small ILECs’ markets would pay into the new fund, but would be able to draw from it if they had fewer than 20,000 subscribers. “If the proposal is adopted, long distance competition in SILEC territories will be encouraged through lower interconnection rates, SILECs will be able to use their additional pricing flexibility to compete more effectively with cable companies and other competitors who offer telephony services in SILEC territories,” the JTF told the CRTC in July. The proposal has the support of Bell Canada, Bell Aliant and NorthwestTel but has drawn criticism from MTS Allstream Inc., Rogers Communications Inc., Bragg Communications (EastLink) and Telus Corp. which contend the proposal will only serve to line small ILECs’ pockets with money from the other telephony providers. EastLink and Rogers say if SILECS are given access to contribution subsidies, then so should they when competing in rural areas. “Given the value to consumers of bringing competition to these high cost serving areas, it is inappropriate for the commission to deny CLECs who plan to enter into these areas the right to this subsidy,” EastLink wrote. “It is particularly inappropriate given that EastLink is a TSP (telecom service provider) that pays into this fund and therefore indirectly will finance the SILECs’ ability to compete with EastLink in these serving areas.” Telus points out in its intervention that the JTF proposal provides “unwarranted protection of the SILECS to the detriment of all other parties”. As expected, the JTF disagrees pointing out that most competitive local exchange carriers are large companies that can well afford to compete in high-cost areas, even without access to a contribution subsidy.

CRTC postpones decision on new regulatory framework for small ILECs

News | December 17, 2009

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