CRTC rules make no sense

It looks like Canadian enterprises (and consumers) will be lining the pockets of competitive local exchange carriers and cable companies with cash for a bit longer than expected.

Last month, when the Telecommunications Policy Review Panel unveiled recommendations calling for greater deregulation to the Minister of Industry Maxime Bernier, it looked like the days of the Canadian Radio-Television and Telecommunications Commission (CRTC) forcing incumbent carriers to charge customers more than the incumbents wanted for some services were nearing an end.

The CRTC forces above-market rates on the incumbents to make sure competitive carriers and the cable companies have a chance to build up their market share without being undercut by the incumbent carriers. This policy made sense when the competitive carriers were starting out, but with cable companies alone set to hit the million customer mark by the end of 2006 it’s time the CRTC looked to begin relaxing its regulatory stranglehold.

Unfortunately the CRTC doesn’t see it that way.

This month the CRTC issued a stringent set of criteria incumbent carriers must meet before they can apply to have the CRTC lift its price controls in a given market.

Firstly, incumbent carriers must lose at least 25 per cent market share. For the purposes of this calculation the CRTC has divided the country into 86 market areas it will track. In those markets consumer and business services will be considered separately.

Secondly, incumbent carriers must have met all of their competitor quality of service measures for the previous six months within the market area in question (the competitor quality of service figures are a measuring stick to ensure incumbent carriers are giving competitors timely access to those network elements the incumbents are forced to resell to the competitors) and the incumbents must have wholesale ADSL tariffs available for competitors.

The most significant part of the requirements is the 25 per cent figure.

If the incumbents were competing solely against cash-strapped startups, the CRTC requirements would make some sense. The problem is the main beneficiaries of the CRTC’s rules aren’t the competitive carriers, but the cable companies. The cable companies are anything but cash-strapped. And if the CRTC imposes its newly proposed rules the cable companies will be able to pad their existing cable monopoly coffers with the artificially inflated revenues they get from their telecom services arms.

It’s time for the Minister of Industry to step in and force the CRTC to back off. The Canadian telecom market is already well on its way to being competitive. It doesn’t need the CRTC giving the cable companies an unnecessary boost.

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