Order CRTC 2001-184, released March 1, 2001, has determined that the level of local competition is not yet where the Canadian Radio-television and Telecommunications Commission (“CRTC”) had hoped when the market was opened up in May of 1997. As a result, the CRTC has ordered the incumbent local exchange carriers (“ILECs”) to continue to provide “near-essential” facilities for an indeterminate period, until the CRTC finds that competition has reached a level that warrants lifting the designation.
Background
On May 1, 1997, in Decision 97-8, the CRTC determined that certain facilities (such as local loops and signaling) belonging to ILECs were limited in supply and as such, mandated that the ILECs make such facilities available to the competitive new entrants (“CLECs”) at a rate based on the ILEC cost plus a 25% mark-up. The near essential designation was originally set for a five-year period – after which, a sunset was supposed to take effect and CLECs were expected to have built their own networks. CLECs had been concerned that due to the slow rollout of Local Number Portability and other pre-requisites for competition, there had been insufficient time for competition to evolve to the point that alternate supply of facilities were available.
What’s a Near Essential Facility?
Under the original decision, to be considered essential, a facility must meet all three of the following criteria: (a) it is monopoly controlled; (b) a CLEC requires it as an input to provide services; and (c) a CLEC cannot duplicate it economically or technically. As a result, central office codes, subscriber listings and local loops in certain high cost bands met the definition of an essential facility. Other “near essential” facilities did not meet all three criteria, but were found to have limited competitive supply: local loops in low cost bands, transiting of switched local traffic and signaling networks (i.e., common channel signaling system 7 (CCS7) transiting), and extended local area delivery of CLEC-originated traffic. These were to be provided until May 1, 2002 under the same terms as essential facilities.
Summary
Almost all carriers recognized the inevitability of an extension to the so-called sunset clause. However, certain CLECs, such as Group Telecom and Futureway, had joined the ILECs in opposing an open ended period for the extension. Resale based carriers and those investing significantly in collocation space, such as Axxent and AT&T Canada, are major winners.
Much of the original Local Competition decision in 1997 was elegantly prepared to set in place a regime of the industry regulating itself. By leaving the sunset period in place indefinitely, the CRTC is looking for the industry to continue to evolve to be more self-governing. Opportunities exist now for the ILECs to recognize the under utilized potential of their loops as a revenue opportunity – collocated CLECs, regardless of their size, are channel partners to exploit the sunk cost of existing local loops – and advance the removal of the “near-essential” designation. Although this approach may seem counter-intuitive, the sooner the ILECs respond, the sooner the sun will finally set.