Canadian firms: Investigation could raise telecom rates unless you act



On April 10, 2003, the Canadian Radio-television and Telecommunications Commission (CRTC) announced that it would send inspectors to incumbent carriers to determine whether they had violated tariff pricing schedules. CRTC inspectors will visit each incumbent carrier after June 9, 2003.

First Take

CRTC took this action after receiving complaints from competitive carriers that the incumbent carriers were selling network services below tariffed rates or selling bundles pairing tariffed and non-tariffed services at low rates. Incumbent carriers found in violation could face fines up to $100,000. The CRTC will send in the inspectors to investigate the incumbent carriers’ business practices to ensure the telecom market remains competitive. Since 2001, the number of competitors has shrunk as many new entrants merged or sought creditor protection.

Enterprises benefit from incumbent carriers bending the rules on tariffed services, so they have no incentive to report these actions to the CRTC. However with the CRTC going directly into the incumbent carriers’ files, the secret may come out. Enterprises should therefore review their contracts for tariffed services. The most likely concerns will focus on local and Centrex services as well as private line networks serving non-urban locations. These tariffed services could be part of the investigation. Enterprises should get assurance from the carrier that the services meet tariff requirements. If the services do not, enterprises should demand that the incumbent carriers file a customer-specific pricing plan with the CRTC so that enterprises’ rates will not increase as a result of the investigation. Whether the CRTC will approve these pricing plans remains unclear, but unless they are filed, rates could go up unexpectedly in the middle of a contract. Finally, enterprises should inform their financial departments that the CRTC investigations are occurring and could cause telecom budgets to rise.

Analytical Source: Bob Hafner, Gartner Research

Recommended Reading and Related Research

“Canada’s Competitive Carriers Start Redoing Business Plans” – Without more substantial cuts in the wholesale rate, the fierce competition and rapidly falling prices in the telecom market make it difficult for challengers to gain ground on the incumbents. By Bob Hafner and Elroy Jopling

“Bell Canada Deal Yields Near-Term Clarity, Long-Term Debt” – The deal will have no immediate impact on enterprises, but the debt encumbrance it entails could weaken BCE in the long term. By Bob Hafner and Elroy Jopling

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