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The federal telecommunications regulator has caught the industry off-guard by announcing a two-week hearing to look changing the basic telecommunications services carriers have to provide to all Canadians.

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The wide-ranging hearing by the Canadian Radio-television and Telecommunications Commission (CRTC), which starts Oct. 25, will cover the services offered by large and small incumbent phone and cable carriers, from voice to data services, landline, wireless and high-speed Internet access.

Most controversially, the hearing will re-open the question of whether the commission should oversee mobile wireless data through traffic management, which it decided against only last year. However, at the time it said the situation would be reviewed.

The biggest impact changing the obligations of wireless and wireline carriers will have will be on people living in high cost, outlying areas.

Since 1999, the goal local exchange carriers have to meet has been is simple: touch-tone voice service with access to low-speed Internet service (no definition how fast), enhanced calling features and long-distance.

It’s easy to provide basic service to densely populated areas, where carriers can recoup their capital costs. But in high-cost, outlying areas the more services that are mandated the higher the expenses.

If high speed access is mandated, industry figures wonder, will that push telecom costs up in cities?

“Any subsidization of rural services has to come from somewhere,” said Tom Copeland, chairman of the Canadian Association of Internet Providers (CAIP). “The phone companies aren’t going to take it out of their profits.”

“It’s a fundamental hearing,” said telecommunications consultant Mark Goldberg, who is based in Thornhill, Ont. “Two weeks is a long hearing.”Right now basic telecom services to certain rural and northern communities are paid for by a series of what one industry analyst calls “elaborate cross-subsidies.”

If the commission says basic telecom service goes beyond voice to include high speed Internet access who would pay the subsidy? Service providers – which could result in higher prices – or taxpayers? According to one carrier, in 2008 big telecom service providers paid $214 million to subsidize local phone service to outlying areas.

The announcement of the basic services hearing comes just weeks before Industry Canada will outline how it will parcel out some $225 million over three years set aside by Ottawa.in the last budget to help bring broadband to outlying areas.

Carriers were quick to fire off letters to the commission objecting to the hearing’s broad mandate. BCE Inc.’s Bell Canada, Telus Corp. and the Canadian Wireless Telecommunications Association, which speaks for all wireless operators – said a separate hearing should be held into wireless traffic management. However, Ken Engelhart, vice-president of regulatory affairs at Rogers Communications Inc., said he’s not as exercised about the hearing as others.

In December 2006 the federal cabinet asked the CRTC to ensure its regulations were consistent with market forces, he said, so a hearing is reasonable.He also said fears the commission will mandate carriers to take high speed access to build in to underserviced areas is “a bit of a stretch …They know they can’t mandate anything because it would cost all kinds of money.

”As for bringing in mobile wireless regulation, he thinks the commission wonders if it should have the same power to oversee equal access to wireless data as it does with wireless voice service.“A lot of people are reading a lot into that, and there’s not much to read in,” he said. “Quite frankly they (the commission) never do anything when they get these unjust discrimination complaints about voice or data , so I don’t see it as a big deal.”

Iain Grant, who head the Montreal-based SeaBoard Group telecommunications consultancy, also wonders why it should intrude into wireless when the country is about to have the most competitive wireless market in its history. “One can only ask, ‘Where have they been in the past five years?’  – that is, when they were needed, not now.” On the other hand, he believes a re-think of the duties and obligations of carriers and operators the privileges they get in return is a good thing.

“I don’t think the CRTC intends to turn the world upside down,” Goldberg said. “I think that they are raising serious questions that need serious examination because there are people who have been calling for a bold national vision, perhaps in response to what we see in other jurisdictions such as Australia, where they are spending billions of dollars under their national broadband vision.”

“So we need a serious examination of what’s our vision for digital connectivity, and who pays for it.”Because final written submissions can be filed by Nov. 12, the commission isn’t expected to make a decision until next year.

Why hold a hearing now?As several industry analysts noted, the commission is recognizing this is a time of great competition in telecommunications. A decade ago or so, many telcos had monopolies over local service. Not any more.

Canadians are dropping their landlines in droves and switching to cellphones or voice over IP (VoIP) service from cable companies. That, of course, means incumbent phone companies such as BCE Inc.’s Bell Canada and Telus Corp. are seeing their landline revenues dropping, revenues that help subsidize phone service to businesses and consumers in outlying areas. At the same time the number of wireless carriers is about to jump from five (Bell, Rogers Communications, Telus, MTS Allstream and SaskTel) to eight this year with the addition of Wind Mobile and the launch by summer of Toronto-based Public Mobile and Mobilicity, and Quebecor Inc.’s Videotron cable. By next year that will total 10 with the addition of wireless service from two cablecos, Calgary’s Shaw Communications and Halifax’s Bragg Group through its Eastlink cable service.

Telecom operators are trying to fulfill exceed the CRTC obligations on Internet access to underserved areas in several ways: Using a so-called deferral account set up in 2006 after the CRTC found phone companies had overbilled consumers, telcos can get a subside to bring in higher speed ADSL capability. After buying competitors, Bell and Rogers were forced into the Inukshuk partnership to bring wireless access to areas that can’t be served by DSL. However, there are still dozens of areas that are still stuck on dial-up. Meanwhile, densely populated area still get the fastest wireline and wireless technology.

By comparison, Goldberg said, Saskatchewan, through provincially-owned SaskTel, is using a wide mix of technologies including satellite to enable it to boast that everyone in the province has access to broadband.

Telcos are beginning to think that their newest high speed wireless data networks, rolled out for their cellular networks, are a better way to bring broadband to underserved areas than DSL. Bell, for example, applied recently to the CRTC to do just that to 102 communities.

Goldberg says that rather than a hearing on technical questions, this one will look at social and economic issues – what should be regulated, how much and, if subsidies are extended to bring new services to certain areas, who will pay? “Do we have a shrinking base of (landline) subscribers to get the subsidy from?” he asked. If so and prices increase, will it merely drive subscribers faster to other telecom services? He added that one of the challenges the commission faces if it adds to the number of basic services Canadians are entitled to is creating a neutral subsidy system that doesn’t favor or impair one technology over another.

To frame the hearing, the commission has listed 22 questions that it wants answered. These include–is the basic service obligation still necessary? If so, what should it include? Can alternatives to wireline service (such as wireless) be enough to satisfy the requirements?–where and to what extent should there be an obligation to deliver telecom services? Should a particular class of service provider be obligated to deliver service? How should a provider be compensated? Should providers have to meet performance standards?–can competition be brought in to communities with only one small incumbent carrier? What about local or wireless number portability in competitive small communities?

Last September the commission signaled it was about time to review the basic service obligation and asked for comments.

In a written submissions Bell and Telus agreed the commission should review the obligation of carriers to serve all communities within their territories and the local subsidy because of the recent increase in competition. However, they saw no need to upgrade the 1999 basic service objectives.



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