Customer coalition raises its voice

Think telecom regulations have nothing to do with you? Think again. The feds help set the prices your firm pays for phone service, and recent regulatory moves could hinder access to new services, says Ian Russell, senior vice-president at the Investment Dealers Association of Canada. He’s chair of the Coalition for Competitive Commuications, a business group aiming to set the regulatory record straight. In an interview with Stefan Dubowski, Russell outlines his group’s beef with the feds and provides reasons why you should care about regulations too.

IT Focus: Why does the Coalition exist?

Ian Russell: It became apparent to many of us in the business community, consumers of business telecommunications, that the CRTC (the Canadian Radio-television and Telecommunications Commission, which sets national telecom policies) seemed to be focused more on the providers of telecommunications services and less on the users. In the policy recommendations coming out, there was very much a bias — a focus more on their idea of remedies, dealing with issues like market allocation between telecommunications suppliers, and less of a focus on where it should be: on those who consume the services.

IT Focus: Can you provide an example in which the CRTC’s focus on providers hurt business telecom customers?

Russell: The CRTC came out with a proposal, floor pricing, that would have overturned a lot of discounting for the business consumers. For example, in the securities industry we formed a co-operative called Megatrade, a group purchase plan with a telecom provider. It provides certain defined telecommunication services for those in the institutional equity markets. It’s data communication — a very attractive deal that we worked out. Now the CRTC comes and says, “We’re going to impose floor prices; we’re going to prohibit the kind of discounting going on.”

They look at discounting as being, in effect, predatory pricing, to force out the competition. In our view, that eliminated a very important benefit we had achieved as business consumers in the marketplace — not only eliminating it, but doing it for the wrong reasons. The business telecom marketplace is highly competitive. Furthermore, it goes well beyond the legacy networks that are the purview of the CRTC. It was the wrong result for the wrong reasons.

IT Focus: When do you expect a CRTC decision on price floors?

Russell: Early in the new year (2005).

IT Focus: Whose idea was the Coalition?

Russell: I think the idea came from some individuals in the business community who were familiar with the Business Telecommunications Alliance, an association of business users of telecom, which ended in 1999. Some participants (in the Coalition for Competitive Communications) were actively involved in the old Business Alliance. They had seen the CRTC continually moving forward in an intrusive manner. The business community wasn’t there to put their views forward in any kind of formal way. They’re caught up in their business objectives — their primary objectives — and less focused on telecommunications.

I think the idea percolated through a number of business associations, a number of telecommunications advisors and experts: There should be an effort to create some sort of coalition. I got calls from individuals from the former association and some of the consultants in Ottawa working for companies and dealing with this problem: “Look, we’re thinking of putting this together. Are you interested in participating?” We had just become aware of the price floor issue, so yeah, we were in.

IT Focus: Who’s in the Coalition?

Russell: The Association of Canadian Travel Agencies, the Canadian Depository for Securities…Canadian Manufacturers & Exporters, the Canadian Newspaper Association, the Insurance Bureau of Canada, the IDA, the Investment Funds Institute and the Retail Council of Canada. That’s the core group now, but we’re trying to attract companies to come in as well. Hopefully, as we gain more and more publicity we’ll resonate more and more with the business community.

IT Focus: What’s the Coalition’s take on this new telecom technology, voice over IP (VoIP)?

Russell: The group’s position is that the VoIP marketplace is developing in a very effective way. We’re seeing a lot of providers positioning themselves in Canada. There are no barriers to entry. We’re seeing products competitively priced, a lot of choice, a lot of high-brand names. All of that has developed no differently than the Internet developed or cell telephone services developed. The market responded to business needs. We’d like to see that continue.

IT Focus: Last year the CRTC suggested that perhaps VoIP should be regulated like traditional phone service. What does the Coalition think of that?

Russell: There’s no evidence or rationale for the CRTC to propose that it be a regulated service. There already are safeguards in the market to promote competition, and in our view that’s as far as it should go. We’re taking a position that’s already been taken by the FCC (the Federal Communications Commission in the U.S.) and (its chairman) Michael Powell in particular. He was giving speeches on this: Look, VoIP really is a very different paradigm of voice telecommunications than the historic, legacy hard-wired approach, and deserves to be recognized and regulated in a very different way, namely very limited regulation to allow the market to develop. Europe is taking the same approach. Our concern is the CRTC is going to get into the middle of this market and damage the competitiveness, the innovation.

IT Focus: Some might say regulation helps customers. Service providers can’t raise prices without consulting the government, for instance, nor lower them to unduly to hurt competitors.

Russell: I take the position that regulators should let markets operate to promote competition. That’s how you get innovation, product choice and lower prices. If the market is flawed, and demonstrably so, then there is a merit for regulation. Unless that can be conclusively demonstrated with a cost-benefit analysis, regulators should stay out of it. The more regulation you have, the more you start to stifle market forces, add costs and put businesses at a competitive disadvantage.

The CRTC has not demonstrated anywhere near conclusively that the VoIP market is flawed — in fact the evidence is quite the opposite; the Internet has developed effectively and VoIP is an application of the Internet….It’s surprising that the CRTC has taken this position without any substantiation. IT Focus: What do you think should happen to remedy the situation?

Russell: We’re really overdue for a review of telecom regulation in Canada. That’s another point that we’re making pretty loudly….The (Telecom) Act needs to be looked at in terms of the mandate, the regulatory powers and the objectives. Some of them are completely antiquated. One says telecom should be carried on national networks. That’s irrelevant in the age of the Internet. Long distance, local; those terms mean nothing.

IT Focus: SeaBoard Group, a telecom analyst firm, said something similar in a recent report, and warned that the CRTC was dangerously close to being out of step with reality. What do you think?

Russell: I think [the CRTC] is out of line. If the concepts of local service and long distance don’t mean anything in VoIP, then you need a different paradigm of regulation….You need to rethink it. We thought there had been a lot of rethinking going on when the government recognized that the Internet was different. They also did that for the most part in wireless. So why on Earth would they revert to this traditional notion of regulation when VoIP is nothing more than an Internet application? The old structure doesn’t apply whatsoever; clearly the old regulation doesn’t apply either.

IT Focus: What is the Coalition doing to get its message out?

Russell: We appeared at the CRTC hearings back in September on VoIP and made these points. We’ve appeared at two VoIP conferences since then, making the same arguments. We have written to the CRTC making our case; we’ve also written the Minister of Industry making the point. And we’ve written to and spoken with CRTC officials. We’ll continue to push hard on these arguments, and hopefully cause the CRTC to rethink their position.

IT Focus: How can companies join the Coalition?

Russell: They can certainly contact me (at [email protected]).

QuickLink: 056438

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