Monday, December 11, 2006


Increasing telecom competition

CRTCFollowing up on last week's introduction of legislation to put oversight of abuse of dominant position in the hands of the Competition Bureau, the Minister of Industry has proposed to overturn the CRTC's local forbearance decision, recognizing some of the missteps that were identified when the decision was first released in April.

Maxime BernierToday's announcement by the Minister is at least the 4th directive to the CRTC in the past 6 months. VoIP was dealt with twice, in the context of a reconsideration order and a ruling overturning the reconsideration. On its own, the CRTC almost immediately recognized the flaws in its Local Forbearance decision and began its own reconsideration of certain details, some of which are dealt with in the Minister's announcement.

The Minister is introducing a simple presence test, rather than a market share loss threshold. In the case of business services, there needs to be at least one other facilities based wireline service provider. For residential service, there needs to be at least one more wireline provider, besides the ILEC, plus one other competitor, which could be a cellular service provider. All three must be independent of each other.

Interestingly, most people in Western Canada are able to choose between 4 facilities based players - TELUS, Shaw, Rogers wireless and Bell Mobility. In the east, Rogers cable and Rogers wireless only count once. In any case, the simple presence test will be met in most population centres in Canada.

The CRTC had been holding informal discussions in respect of its requirement for the ILECs to conform to 14 QoS metrics; today's announcement reduces the requirement to adherence to only 9 of these, including some of the more difficult QoS metrics, such as due dates met for Competitor Digital Network services. TELUS and Bell had recently tried to negotiate relief from that specific indictor.

Consumers will immediately see more vigourous competition with a relaxation of the winback rules and further relaxation of rules for promotions. The proposed order explicitly permits the waiving of service charges for residential local winbacks, among other promotions. Previously, consumers that may have wanted to try out a cable company's voice service may have been detered by the risk of having to pay a telco service charge to come back.

More vigourous price competition and moves to include wireless into the local services mix make consumers the biggest winners. We'll have more observations and comments tomorrow.

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Why on Earth would we see more vigorous competition from a consumer standpoint? All these conditions already exist in the cell industry, and it's the least competitive and most expensive sector of all for consumers.

Similarly, why is defining wireless as part of the same market good for consumers? Among other things, there is absolutely no reasoning provided with this -- so we are to presume that mobile telephones are, by Bernier fiat, henceforth substitutable for fixed lines.

On which case, good luck. My mobile sure doesn't work too well everywhere in my house. But, then, it doesn't have to meet the now 9 QoS rules. Will it have to? Or will fixed services be released from that requirement, since it constitutes unfair competition with an apparently identical service? If you thought price deregulation was bad for consumers (hello, rising cable bills), just wait till quality deregulation...
This is a good overview of the expected outcome of the announcement. Contrary to what some may think, there will be real competition, at least until the dust settles, that will benefit consumers.

The previous rules made little sense. Letting someone enter your market, but denying you a response is not competition. To think that the ILECs won't respond (now that they can) in a way that will benefit consumers shows a profound misunderstanding of competitive markets. They will be doing everything they can to keep their customers. It might even teach them a little about customer service and marketing, areas where they fall short now.

Overall, I think this is a good move on the part of the government. Lower telecommunications costs and greater innovation will be good for all, consumers and business. The regulatory model was broken and no longer served any justifiable purpose. Let them compete.
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