No telco wars in ’01

If you think competition in Canadian telecom is supposed to yield lower prices and improved communication services, you might have considered 2001 a terribly disappointing year.

According to a government report cataloguing the state of the industry, “competition did not advance substantially in 2001,” confirming that all was not well with the sector. The Canadian Radio-television Telecommunications Commission (CRTC) says market forces failed to upset the status quo.

Released in December 2002, the Commission’s Report…Status of Competition in Canadian Telecommunications Markets points out that incumbent local exchange carriers (ILECs) like Bell Canada and Telus Corp. controlled the industry as tightly as ever. By 2001 the incumbents held 96 per cent of local communication lines in the country. ILECs also took 97 per cent of total local service revenues that year.

“Fundamentally we found that competition, particularly in the local exchange telecom market, has not moved much at all from the slight amount it had already,” said David Colville, the CRTC’s vice-chair, telecommunications, in an interview with Network World Canada.

That’s bad news for telecom managers and the companies for which they work. Competition is supposed to bring good things to the enterprise: “Good quality, excellent service with innovation,” said Lis Angus, vice-president of Angus TeleManagement Group Inc. in Ajax, Ont. “(And) good prices so businesses can use the services.”

Analysts and insiders agree that the lack of competition forestalls benefits such as innovative service and low prices. But when it comes to deciding how to improve the situation, opinions vary widely.

For the most part, competitive local exchange carriers (CLECs) argue that the CRTC could do more to foster competition. Chris Peirce, president of AT&T Canada Inc. said the Commission’s “price cap” decision last spring represented a “missed opportunity” to improve things. Although it lowered some of the costs CLECs must pay to access incumbent networks, the CRTC’s decision didn’t go far enough, he said.

But Peirce added that recent Commission decisions “seem to recognize and speak with a far greater urgency to the problems of competition.”

The CRTC in January temporarily barred incumbents from continuing programs designed to win customers back from CLECs, pending a review of the practice. In December the CRTC clarified the rules governing incumbents and their relationships with affiliated firms.

But Bell Canada’s Bernard Courtois fears the CRTC is in danger of regulating competition out of existence, rather than helping the situation. The winback injunction and the affiliate decision suggest to him that the Commission is prescribing the “wrong medicine.”

According to Courtois, what ails the industry isn’t so much a lack of competition, but a necessary shakeout that began at the end of 2000 and continued into 2001. If the shakeout were left alone, it would yield a competitive market, he said, adding that the CRTC in 2002 delayed that hallowed state, sustainable competition.

“Instead of letting the market operate, the regulator is stepping in to run the market,” Courtois said. “I think perhaps the CRTC is not as aware of the competitive dynamics as they should be.”

Colville from the Commission said myriad factors – an economic downturn, service provider debt loads and too many players chasing too few customers – yielded challenges. But today, “I think we have entrenched to a situation that’s probably going to be more sustainable,” he said, suggesting that although 2001 was a poor year for competition, data from 2002 and 2003 should spell good things for enterprise customers.