UPDATE: CRTC snubs incumbents with new regulations

In an attempt to level the telecommunications landscape the federal government has changed the rules governing Canada’s phone companies.

The Canadian Radio-television Telecommunications Commission (CRTC) on May 30 announced new regulations in the name of greater competition – read: more choice of telephone service providers for enterprises.

“We believe the next regime is flexible and robust enough for further development of local competition,” said David Colville, CRTC vice-chair, telecommunications during a May 30 press conference.

The CRTC gave competitive local exchange carriers (CLECs) such as AT&T Canada a bit of a break. CLECs have long complained that they pay too much money to access the networks owned by incumbent local exchange carriers (ILECs) like Bell Canada and Telus Corp., and the CRTC seems to have agreed.

The Commission said ILECs would have to charge less for those interconnections. As of June 1, when the new regulatory regime begins, CLECs will pay ILECs cost-plus-15 per cent to access the networks. CLECs used to pay in the range of cost-plus-25 per cent. As well, the CRTC said ILECs would have to adhere to a carrier-class service level agreement with the CLECs.

However, the CLECs reportedly are not satisfied with the decision. AT&T Canada had asked for a 70 per cent reduction in interconnection charges.

“They were obviously shooting high,” said Mark Quigley, an analyst with Ottawa-based The Yankee Group in Canada. “If you go into any contract negotiation, you ask for a lot more than you’re going to get.”

Some of the CRTC’s decisions might make Canadian phone companies bristle. For example, the incumbents cannot raise their prices for residential phone service, the CRTC said. Bell et al. had asked to be allowed to charge more in the residential space to offset infrastructure improvement costs.

Quigley said the decision is good news for consumers, but it doesn’t necessarily address the problem of competition.

“There weren’t any mechanisms put in place to ensure that there is competition in those marketplaces… I’d still wonder if margins were sufficient to convince anyone that the residential market is one they ought to be chasing…

“The only thing they (the CRTC) could have done is grant much more relief on the (interconnection) price side – increase the margins companies have to play with so they can look at the market and say…we can justify a full bore marketing and sales effort to chase these residential consumers.”

Business customers might see an increase in the price of local telephone service, although the CRTC said any increase would match the rate of inflation.

“It isn’t really an issue,” Quigley said. “Business customers tend to get a better bargain simply because there’s more competition. I don’t think you’re going to see a tremendous increase on the business side.”

The CRTC also said it “reduced the regulatory burden by eliminating a number of reporting requirements” for the ILECS. The Commission also has “given them more pricing flexibility where sufficient competition exists; and provided appropriate compensation for Commission-imposed revenue reductions from services used by competitors.

Although the newspapers say CLECs are unhappy with the CRTC’s decision, Quigley said the Commission is concerned more with competition than the survival of companies like AT&T Canada. He added, the CRTC expects other competitors to enter the fray, such as cable companies with IP voice-over cable services. “What structure that marketplace is going to take, we don’t know.”

For more information on the CRTC’s decision, see the Commission’s Web site, http://www.crtc.gc.ca.