Small phone companies are facing pressures from wireline and wireless competitors hoping to move into the lucrative parts of their territories.
However, a suggested plan from a group of Ontario small telcos to protect some of their members drew a sharp rebuke Thursday at a public hearing from the head of the federal telecommunications regulator.
The Ontario Telecommunications Association, representing 19 small incumbent local exchange carriers (SILECs) in the province, wants the Canadian Radio-television and Telecommunications Commission to sharply limit the number of small exchanges it will allows competitors to move into.
SILECs should be divided into two groups, it said: Category 1 for carriers with less than 2,500 customer phone lines, and Category 2 for those with more. The larger group would be open to competition based on established commission rules.
But Category 1 carriers would be competitor-free monopolies unless they meet three criteria: the size of the market justifies competition, how much the SILEC would have to pay to meet competition, and the ability of the carrier to remain financially viable in the face of competition.
The association admits the scheme would put the commission into the position of approving Category 1 competition applications on a case-by-case basis. That didn’t sit well with commission chair Konrad von Finckenstein.
“I don’t like case by case,” he said quite firmly, “I want rules, not special deals for special companies … I want a formula, I want a principle you apply.”
“All of these criteria are qualitative… there’s nothing objective here,” he complained. “What SILEC with less than 2,500 customers would fail to pass these three?”
If no competitor will be allowed into the market of a carrier with less than 2,500 phone lines, at least that’s a rule, von Finckenstein said.
Commission vice-chair Len Katz noted there are legitimate concerns subscribers could be hurt if an incumbent carrier goes out of business. But, he said, if the commission maintains a monopoly and props up a carrier through subsidies that prevents a takeover, acquisition or merger that would create a stronger operator — and thus benefit subscribers.
“That’s a trade-off we’ve got to make in this commission,” he added.
One member of the association team said the group’s big fear is a competitor offers service in the SILECs towns, leaving the small carrier responsible for the more expensive outlying areas where customers are spread out. The SILEC could go out of business, leaving rural customers without any phone service.
But, said von Finckenstein, if a SILEC goes “belly-up” its operations would be bought by another provider. “It seems to me [total loss of service] to be a theoretical possibility, but not a realistic one.”
The association’s members includes the Hay Communications Co-operative of Zurich, Ont., Execulink Telecom of Burgessville, Nexicom Telephone Inc. of Millbrook and others.
TBayTel, based in Thunder Bay and the biggest association member, is one of the few SILECs to have commission-approved competition. Rather than follow the association’s two-category suggestion for managing competition, it suggested the CRTC use its template for approving SILEC competition applications.
The commission is holding hearings into whether it should update its rules obliging incumbent carriers to offer basic services even if competitors move into their territories.
One basic service is dialup Internet access, which the commission wonders should be increased to broadband – particularly in rural areas. A number of large carriers say this should not be added to their burdens.
The Ontario Telecommunications Association joined with them, saying their members are moving to spread broadband to subscribers. It estimates 94 per cent of the people its members cover are able to get speeds faster than dialup and there are a number of provincial and federal subsidy programs to help them.
However, the association added, if the commission does set a target incumbents have to meet the regulator would have to figure out where the money will come from.
Noting that Manitoba Telecom Services Inc. has put the cost of extending broadband to all outlying areas in the billions of dollars, the assocation said “the telecommunications industry cannot and should not be asked to bear this burden through the existing tax on contribution eligible revenues of telecom service providers,” it said.
But the hearing also heard Thursday from several Quebec regional municipalities that urged the commission to ensure rural areas have access to the same Internet speeds as people in cities.
The hearing continues Nov. 2 with presentations from Telus Corp., BCE Inc.’s Bell Canada, major cable companies and several independent Internet providers.