CRTC reduces CLEC fees

The Canadian Radio-Television and Telecommuncations Commission’s (CRTC) recent decision to lower rates for Competitor Digital Network Access (CDNA) services should boost telecom competition, according to one industry observer.

“It is a good move in the right direction,” said Roberta Fox, senior partner with Fox Group in Markham, Ont. “With the decreased pricing, [competitor telcos] should be able to provide application-based services over top of the local networks.” However, she cautioned competitors will need to be effective and efficient in selling and managing these services.

Bill Linton, president and chief executive officer of Toronto-based Call-Net Enterprises Inc., which operates Sprint Canada, said the short-term impact of the decision for his company is it reduces the cost of many services it acquires from Incumbent Local Exchange Carriers (ILECs). These services include access from end customers to an incumbent’s central offices (called the last mile) or data transport to a competitor’s location. Call-Net pays about $200 million to incumbent telephone companies for access.

Linton added the decision makes Call-Net more finanically stable and will save the company about $25 million in charges in 2005. This results in a 12 to 13 per cent reduction it has to pay to Canadian telephone companies. “[The decision] should result in us being more competitive in investing in more value-added services [and] putting us in better position to compete with the incumbent telephone companies,” he said.

The ILECs, on the other hand, will face a revenue loss as a result of the rate reduction. The decision also states imcumbents are to be compensated for these revenue losses by the CRTC.

According to Mirko Bibic, chief of regulatory affairs for Bell Canada, there are largely no financial consequences for Bell as a result of the decision.

But, from a regulatory perspective, Bibic is happy the decision has finally been made. “It’s taken two-and-half years to get to this point….It removes an element of uncertainty.” Fox added there is future opportunity for incumbents to generate revenue through network-based applications like e-mail hosting, Web hosting, videoconferencing and digital sign boards. For the end customer, said Linton, the impact of the decison is it creates a healthy competive environment.

“One way to do it is to allow us to buy certain services that are lower than retail rates and that is what this [decision] does. I don’t think anybody wants us to be digging up residential sidewalks and putting in more copper.” he said. Bibic argued competitors should be encouraged to build their own facilities when the market is competitive “rather than having every single subcomponent of a service be provided [by ILECs] on a regulated basis to a competitor. We do not agree with that decision.”

As the debate continues between competitor and incumbent telcos, Fox said the long-term winners of the decision are consumers. “Customers want alternative competitors in all areas of network services, not just long distance. By having lower prices to new competitors, there will be additional companies providing local access-based services,” she said.

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