OTA appeals CRTC decision on deregulation for small ILECs

The Ontario Telecommunications Association (OTA) is telling the CRTC that its new deregulation rules for small local telephone companies won’t work. A large percentage of the companies will never be able to take advantage of deregulation under the regime established last summer, says the association’s executive director Jonathan Holmes. “Over half of the exchanges where there is cable company presence wouldn’t be able to use the decision, ever,” Holmes tells Tech Media Reports. “So if it’s over half, then we need to do something to make this more potentially usable for our members.” Last June, the CRTC determined in Telecom Regulatory Policy 2009-379 that the small incumbent local exchange carriers (SILECs) should follow the same deregulation model as was established for the large incumbent telcos. A key plank for large ILEC deregulation was the presence of three competitors capable of serving at least 75 per cent of the customers in an exchange. (This is known as the competitor presence test.) The commission applied the same methodology to the small ILECs but allowed them to file for deregulation when the 50 per cent level is met. This would be done on a case-by-case basis. In a Part VII appeal of the new SILEC forbearance framework, the OTA argues that the CRTC got it wrong when it applied, albeit with some minor modifications, the same deregulation model as is used by the large telcos. The association wants the commission to remove any mention of percentages in the competitor presence test. “In the same way that the 75% competitor threshold ‘is unlikely to ever be achieved,’ the 50% threshold is also unlikely to ever be achieved in the majority of OTA member exchanges (in both the residential and business markets) even if some cable companies manage to attract 100% of potential customers covered by their footprint in these exchanges,” the OTA states in its appeal. Appended to its Part VII is a spreadsheet highlighting the competitor presence thresholds of the cable companies in small ILEC serving territories. Of the 51 municipalities mentioned, only 12 have exceeded the 50 per cent level in residential markets. Instead, the association proposes the following as the competitor presence test for small ILECs: “Forbearance should be granted to the incumbent SILEC in the residential or business markets, or both, on the date that a competitive local exchange carrier (CLEC) receives its authorization from the commission to offer services in the exchange.” The small ILECs’ lack of ability to effectively gain deregulation could have devastating effects, according to Holmes. OTA members could find themselves stuck selling local telephony at regulated rates unable to compete with the cable companies’ low-cost telephony and bundled offerings. “We’ll watch them take a comparatively large chunk of our customer bases,” he says, noting that the cable companies “have the network installed, can come in reasonably quickly and easily and offer a good bundle of services – voice, video, Internet – in our serving territories and almost hollow out the centre of some of our exchanges and leave a number of companies just to serve the outer lying areas. We call that the donut effect.” While the OTA argues for an approach void of competitor presence percentages, the association recognizes that the commission may want to see an alternative figure and proposed a 20 per cent level. Holmes notes though that this is a “distant second choice.” The appeal was filed December 22 and interested parties have 30 days to reply. Perry Hoffman is a freelance writer. He can be reached at perry@messagingmechanics.com.

OTA appeals CRTC decision on deregulation for small ILECs

News | January 11, 2010

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