It is cute to read the Allstream and the cable companies comments referring to the CRTC’s Local Forbearance Decision as ‘balanced’.
As we wrote yesterday, the real sign of balance in a Decision is an equal level of anguish being felt by all stakeholders. This decision is just a loss all around for the incumbents. Let’s look at where they are troubled. As reported by Mark Evans in today’s Post, there are 4 areas that represent missteps, from the incumbents perspective:
- The proposed 25% threshold
- The potential time lag to deregulate
- Local competition does not include mobile wireless
- The new geographic area definitions
Let’s look at them, one at a time:
- The threshold: Everyone wanted a number. Some argued for higher, others for lower. At the end of the day, the CRTC had to pick a number. While I can understand the rationale for 25%, it would be nice to see how this can be reasonably justified when put in the context of cable liberalization at 5%.
- Time lag: The issue here is partly about how fresh are the numbers that the CRTC is working with. A glaring problem was demonstrated in the Decision. Paragraph 60 cites 2004 data saying that only 2.7% of households abandoned wireline service for wireless. Unfortunately for the CRTC, Stats Can chose yesterday to release its Residential Telephone Service Survey, which showed that in Vancouver, close to 10% of all homes abandoned wireline service in favour of wireless. The other part of the time lag issue is concern that even after all the conditions are met, the ILEC still has to go back to the CRTC and apply for relief.
- Mobile Wireless: Is Bell Mobility a competitor to Bell? Is Rogers Wireless or Fido or TELUS or MiKE? Not in the CRTC’s view. The rationale for this is a little tough to follow. On one hand, the CRTC, using out-dated information, said that there wasn’t enough substitution for it to matter. They added that mobile calling plans aren’t really competitive. Even if either of these are valid, the conclusion does not necessarily follow. For example, if the CRTC wanted to stimulate more US style ‘big-bucket’ calling plans, they could have put mobile into the relevant market, encouraging Bell and TELUS mobile operations to stimulate wireless substitution in order to gain local wireless forbearance. That would have triggered an industry wide price war – and consumers win. With regard to the low substitution rate, you have to wonder how Stats Can chose the same day as the Forbearance Decision to release their survey.
- Geography: Like the threshold, the CRTC had to pick a reasonable geographic territory in which to measure the competitor entry. They picked Statistics Canada’s census areas. Why? Why not. It lets the CRTC point to another government agency. But it does introduce yet another regional separation into telephonic regulatory lexicon. We already have wire centres, exchanges, local calling, LIR, provinces, operating territories, etc. Again the issue of symmetry arises: why use something as broad as a census area when competitors enter the market exchange by exchange. While on one hand the CRTC argues that “there are economic, social and practical factors that will allow locations to be aggregated into a larger geographic area”, does the petrochemical driven economy of Sarnia really have anything more than an Area Code in common with Chatham? Given the alignment of CMAs in Ontario, we could see forbearance approved sooner in Guelph, Barrie and Oshawa than in Toronto, only because of closer alignment of the CMA to exchanges.
The real balance in the Decision is found in the CRTC’s checklist of access for competitive entry – in what looks like a nod to the FCC’s old guidelines for RBOC entry into Long Distance. They seem out of place in some ways, because the bulk of the competitor access items are primarily for non-facilities based competition. While cable-based facilities entry is not enough, was the checklist for forbearance the right place to put these requirements?
Why wouldn’t these requirements be part of a suite of wholesale service regulations independent of the forbearance of retail services? After all, that would help stimulate the retail competition in the first place.