Decision CRTC 2001-694, released November 16, 2001, has dramatically lowered the costs of renting local lines for competitive local exchange carriers (CLECs). The CRTC has approved, on an interim basis, the service order charges, incorporating updated costing information from the phone companies. While the rates are still subject to change, it is clear that there are dramatic savings for the few remaining CLECs.
Background
Three years ago, when the CRTC unbundled the parts of the incumbent’s local phone network that competitors rent, it established two types of service order charges: per-order and per-loop (line). The rates varied based on Residential versus Business and these rates were established with one set for Bell Canada, and another set for all of the rest of the incumbent carriers, including Telus, Aliant and MTS. In June, 2000, Bell Canada filed a proposal to significantly lower the retail rates it charges consumers for service connection. The CRTC asked Bell and the other incumbents to show cause why they should not lower the wholesale service connection rates accordingly.
Interim Decision
While the new rates are still subject to change based on revised inputs from the phone companies, the rates are as likely to be adjusted slightly lower as they are slightly upwards. The CRTC has already rejected certain cost elements from Bell that it considered to be more of a “retail” nature and it will not hesitate to challenge significant increases in evidence to be filed over the next two months. The phone companies are unable to charge competitors high service order rates when they are looking at lowering their own retail charges in order to address the slowly increasing level of local service competition. As a result, we expect rates to stabilize at about half of what these rates were prior to November 16. Residential orders benefit even more, with rates set at about 65% of the business rate.
Summary
Sprint Canada, with its residential local service, is the big winner and Futureway has seen its business case improve for its rollout of services based on the C-1 acquisition. Both carriers have been expanding their emphasis on telephone and high-speed data services that use telephone company loops.
The last 18 months have witnessed the collapse of a long list of resale based competitors that would have benefited from this decision. Had the CRTC established interim rates a year ago, when it released its first “show cause” letter to the incumbents on October 3, 2000, the competitive environment in Canada would unquestionably be different.
Despite more than 10 years of competition in telecommunications services, significant levels of profitability for the industry remains in the hands of the regulator – not just in Canada, but in most other jurisdictions around the world. Waiting a year for an interim decision has cost investors real dollars, employees have lost real jobs and consumers paid higher rates with lessened choice.