The CRTC issued a Decision yesterday that allows increased price flexibility for the incumbent telephone companies for services other than VoIP.
Earlier this year, the CRTC granted substantial pricing flexibility for ILEC VoIP services.
Yesterday, the CRTC added conventional local phone service.
The Commission notes that the use of rate ranges will permit an ILEC to change rates within an approved range, at any time, without delay and without the requirement to file a tariff application and obtain Commission approval, thus reducing regulatory burden for both the ILECs and the Commission.
Rate reductions will be subject to CRTC restrictions on price de-averaging, so the telephone companies cannot target price changes.
Consumer groups were concerned about the impact on contracts. The groups asked for consumers to be given an opportunity to terminate their contracts if rates increased. In denying this request,
The Commission notes that there is no such requirement in the case of price changes applicable to single-rate tariffs.
I think the CRTC forgot an important point. Under the former single-rate tariffs, the process included notice of a price change, especially price increases, and often an opportunity for consumer groups to intervene.
Under the new framework, consumers apparently will just have to accept a price change with no recourse.
Let’s look at a potential scenario.
Assume a current service is $30 per month, but has costs of only $20. Now, the telephone company drops rates down to the floor. People love the service and love the rate even more. They sign-up in droves. The contract says rate is subject to CRTC approved tariffs. With a big piece of the market now under contract, the telco decides to raise the price. If the customers are lucky, ther service falls into the category of capped services, so there is an upper limit on the price range. Uncapped services will have no upper pricing constraint. Rates could go through the roof and consumers are stuck with substantial price increases.
You might try to argue that consumers will simply switch providers when the contract comes due. Don’t forget – this is happening in a market that is not subject to sufficient competition to justify forbearance. So it certainly isn’t going to discipline such behaviour by the ILEC.
Take a look at what happened with Centrex this past summer. Look at 25% system access fee hikes.
Long terms contracts for consumers are looking more like signed blank cheques. Where are the consumer safeguards?