Telecom Public Notice 2006-14, Review of regulatory framework for wholesale services and definition of essential service, is one of the most important regulatory proceedings before the CRTC. It will set the stage for how competition in telecom services will evolve in an era of increasing retail forbearance.
The public notice was issued nearly a year ago and the paper process has unfolded over the course of this calendar year. (Of course, there is little actual paper these days. Virtually everything is available in electronic format on the CRTC’s website.)
Oral hearings open today in the national capital region and will continue over the coming weeks. You can listen to it live by webcast.
The opening statement from TELUS summarizes the purpose of this process, which will have taken almost two full years by the time a decision is released in mid 2008:
- To determine the extent to which regulation should mandate the provision of facilities, functions and services by some facilities-based telecommunications providers to other telecommunications service providers. In other words, to what extent and on what terms should facilities-based carriers be required by regulation to share piece parts of their networks with others.
- Two regulatory frameworks will need to be determined:
- The regulatory framework for mandated facilities sharing to be implemented at the end of the transition period.
- The regulatory framework for mandated facilities sharing to be implemented at the end of this proceeding and continue until the end of the transition period
In the view of MTS Allstream,
The Government’s goal is to create a competitive telecommunications market in Canada – a market that will deliver the greatest benefits to customers, produce the greatest level of innovation and provide the greatest incentive for investment.
TELUS seems to agree with that, and adds that the CRTC’s also has to consider a sufficient transition period to allow market participants to adapt business plans to the newly competitive market. Rogers suggests that 5 years is an appropriate duration for such a transition period.
There is contention over many issues, not the least of which is defining precisely what is meant by the terms “essential facilities” and “essential services.” Last week, the CRTC issued a letter describing 6 possible categories of facilities, in order to try to help bring a focus to the proceeding:
- Essential: Would include functionalities that meet the criteria of the Commission’s definition of essential facility and would continue to be made available to competitors via mandatory unbundling and mandated pricing (such as basic subscriber listing information).
- Conditional Essential: Would include functionalities that would meet the criteria of the Commission’s definition of essential facility, conditional on specific circumstances (such as unbundled local loops in exchanges where wire-line competitors are not yet present). These functionalities would be made available to competitors via mandatory unbundling and mandated pricing until the specific circumstances were no longer in effect.
- Non-Essential services subject to phase out: Would include functionalities that would not meet the criteria of the Commission’s definition of essential facility, and mandatory unbundling would be phased out over a specified transition period. Provisions would be made to enable annual price increases during the transition period in order to provide incentives for investment in, and construction of, competing telecommunications network facilities. Provisions would also be made for a carrier, at the end of the transition period and at its discretion, to: i) continue to offer the service pursuant to a tariff; ii) file an application for forbearance; or iii) file an application to withdraw the service.
- Conditional Mandated Non-Essential: Would include functionalities that would not meet the criteria of the Commission’s definition of essential facility, but would continue to be made available to competitors via mandatory unbundling and mandated pricing, conditional on specific circumstances (such as unbundled local loops in exchanges where local forbearance has been approved on the basis of mandated access to such loops). Mandatory unbundling and mandated pricing would continue until the specific circumstances were no longer in effect.
- Public Good: Would include functionalities that would not meet the criteria of the Commission’s definition of essential facility, but there would be general agreement that the functionalities should continue to be made available to competitors via mandatory unbundling for reasons of public benefit (such as access to 9-1-1 call routing services).
- Interconnection: Would include interconnection and certain services ancillary to interconnection that would continue to be made available via mandatory unbundling and mandated pricing on the same basis as essential facilities (such as direct connection).
Which services fit into each box? That is the essence of the next few weeks, serving to clarify the lengthy submissions. Of course, one of the challenges from such a major and lengthy proceeding is the cost for smaller competitors to participate fully. As such, it will be interesting to see the extent to which niche operators are able to preserve the core interconnection requirements for their businesses in the long term.
The debate over essential services is not just a Canadian issue. Just last week, Sprint Nextel raised the level of its fight over wholesale access to broadband lines.
Ultimately, this proceeding will play a critically important role in determining the profitability and direction of competitive communications investment in Canada. The determinations in this proceeding could impact whether certain types of competition are viable at all.
As such, the proceeding is important to all of us.
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