Fed paper ‘backward’

A recent government report on Canada’s telecom industry is so “backward-looking” that it may end up hurting the sector it aims to serve, according to one IT advisory firm — one that isn’t alone in its criticism.

Montreal-based SeaBoard Group says the Canadian Radio-television and Telecommunications Commission’s (CRTC) 2004 report, Status of Competition in Canadian Telecommunications Markets, is out of step with reality. SeaBoard believes the CRTC’s study could stifle competition in this increasingly competitive market sector. “SeaBoard contends this latest report is a disappointing, backward-looking document which hasn’t measured or addressed the profound shifts taking place in the communications industry,” reads the group’s own report, Old Bottles, New Wine, released in December.

It goes on to say: “There is a clear danger that the Commission may invoke a heavy hand on the market…based on its blemished picture and flawed interpretation.” In November, the CRTC released its competition report, noting that in 2003, wireless and Web were hot markets. On the voice side of the fence, however, “competitors in the local wireline market made little progress as incumbent telephone companies provided over 93.7 per cent of local lines.”

“More needs to be done to ensure that we achieve our goal of sustainable facilities-based competition,” said Charles Dalfen, CRTC chairman, in a statement. But SeaBoard says the Commission’s view might be askew. The analysts take issue with the CRTC dividing the industry into silos like local phone service, long-distance, mobile, and Internet.

SeaBoard says it’s no good for the Commission to consider each area alone, especially as the sectors influence each other. For instance, SeaBoard figures the wireless arena will include 15 per cent of the “local” market by 2007 as some customers replace their wireline phones with cellular handsets. But the CRTC continues to see local and wireless as separate entities.

The SeaBoard report says the ill-focused picture that the CRTC’s document presents could hurt the telecom industry. “A tainted assessment of trends and market forces will lead to poor public policy — such a movement could have significant implications for the industry and the country.”

Iain Grant, a SeaBoard analyst, described one scenario: the CRTC might decide local phone service competition is lagging, should the Commission ignore the wireless sector’s impact. In response, the CRTC could impose stricter price floors and caps on incumbent local exchange carriers (ILECs) like Bell Canada, in the ill-advised belief that ILECs command more of the market than they actually do.

Such a move would stifle the ILECs’ ability to compete, Grant contends. This, when the Commission is all about seeding the telecom space for healthy competition, doesn’t make sense. And if the CRTC’s report strays too far from reality, it could stifle a company like Bell right out of business, while giving the incumbent’s competitors an unwarranted leg up, Grant said.

He said part of the problem is the length of time it takes for the CRTC to write its annual telecom report. The most recent iteration came out just a few weeks ago, but it talks about the industry’s situation all the way back in 2003. If it takes a year for the Commission to decipher the numbers, how is it supposed to react to current market conditions? Philippe Tousignant, CRTC spokesperson, said it takes time for the regulator to digest the metrics it receives from telcos — some of which isn’t even available until mid-year. Grant suggested the Commission should focus on the big picture instead of minor details.

“You have to back off and look at the overall trends,” he said. “That way you come up with a report in 10 days instead of 18 months.”

Tousignant said the CRTC would consider taking a less granular view of competition if someone submitted a formal application to have the Commission look into the matter.

Grant said it’s also time for Industry Canada to convene a special panel to look at inter-sector competition and inform the CRTC’s future mandate. “It could be up to Industry Canada to say, ‘Perhaps we don’t need a Commission. Perhaps we need something else.’”

Judging from the CRTC’s report, the Commission is willing to change. “Specific elements of the monitoring exercise may need to change over time to take into account significant market developments,” it reads. But that sentence doesn’t mitigate Grant’s concern. “They talk about their willingness to change, but then they put the old template on it and ignore the facts in front of them.”

SeaBoard isn’t alone calling for a shift in telecom policy and CRTC mindset. Ian Russell, chair of the Coalition for Competitive Communications — a group of business telecom customers concerned about how Commission policies affect prices — said the siloed approach to market analysis doesn’t cut it anymore. For instance, Voice over IP (VoIP) technology makes moot the local versus long-distance dichotomy.

“If the concepts of local service and long distance don’t mean anything in VoIP, then you need a different paradigm of regulation,” Russell said. Representatives of ILECs and competitive local exchange carriers (CLECs) have complained that the CRTC is slow to make decisions.

Some are calling for an overarching telecom review to scrutinize the Commission. CRTC and other government representatives have said it’s difficult to develop policies that meet citizens’ needs as well as ILEC and CLEC requirements.

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