CRTC opens door slowly to deregulating telcos

Canadian businesses won’t see any changes in their phone or data rates soon because the Canadian Radio-television and Telecommunications Commission has opened the door to deregulating essential services incumbent phone companies sell to competitors.

That’s the opinion of people in the industry after the release of the decision late Monday that Bell, Telus and other incumbents will have to stop selling some former essential services at regulated wholesale rates to competitors.

The new non-essential services will be deregulated over the next three to five years, during which providers – such as MTS Allstream or even municipal utilities – are expected to race to build facilities that they’ve been held out of. The commission expects more than a third of wholesale services will be deregulated by the end of 2012.

“It’s pretty much status quo until three years out,” said Ted Chislett, president of Primus Telecommunications Canada, which sells local, long distance and wireless services across the country.

The first services to be deregulated in three years are intra-exchange transport services across cities in three years.

However, in five years high-speed Ethernet access circuits will be deregulated, which could change the picture.

Chislett’s concern is whether new transport facilities can be built within three years or Ethernet circuits within five years. “Certainly there will be many buildings where they’ll be high-speed Ethernet access people can build into and there’ll be multiple suppliers they can negotiate with, but certainly not all of them.”

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Bell, which had pushed the commission to deregulate as many services as possible so it could negotiate rates at market prices, was disappointed the CRTC didn’t go further than it did.

“It falls quite short of the government-issued policy direction to the CRTC from late 2006,” said Mirko Bibic, Bell’s chief regulatory officer. That ordered the CRTC to develop a framework that would increase incentives for alternate network construction, he said.

“I think the commission missed an opportunity here to have a slightly bolder decision that would create incentives for competitors to build their own networks” rather than continue to buy services from Bell at rates forced upon it.

Bell does like the fact that CDN and Ethernet services will be eventually deregulated, he said, but he added, “in my opinion these are ripe for deregulation right now.” Instead for all other services things won’t change for at least another six years, when the CRTC says it will revisit its decision.

Telus spokesman Shawn Hall sounded more positive. The commission’s ruling “sends a strong signal in favor of a greater reliance on market forces, specifically on where mandatory access ends and reliance on market forces begins. That’s good for competition and good for customers.”

“It provides greater certainty with respect to network planning, investment and innovation,” he said. “It makes it easier (for Telus) to plan.”

“There are some facilities still declared essential, but this decision gives all carriers including Telus market-based incentives to continue investing in our network.”

But telecommunications consultant Iain Grant of the SeaBoard Group said only the “low-speed stuff” – DS0 and DS1 – remains essential, while higher-speed service where there’s competition from, for example, cable companies, was declared non-essential.

In the end, the ruling might give service providers less choice, Grant said. On the other hand, he said, in six years, when the CRTC revisits its decision, high-speed wireless may well have changed the landscape.

The commission estimates that wholesale services accounted for about $3 billion of overall telecommunications revenues. Of that major telephone companies held 65 per cent of the market. The rest was held by major phone companies operating outside their established territories and other service providers.

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