The CRTC is going to issue its decision on the 3rd Price Cap period, today at 4pm. There is a ‘lock-up’ being offered to allow people to get an advance look at the Decision. I am not joining the lock-up so you’ll have to wait until later this evening to catch my initial impressions.
Price caps have been in place for the past 10 years and allow incumbents limited pricing flexibility within a ‘basket’ of products. The ceiling or ‘cap’ in changes to the price of the services basket is adjusted each year by a factor of inflation less productivity gains and other adjustments. In the case of many services, the cap should have led to price declines because productivity exceeded inflation.
Over the past 10 years, rather than having prices drop, the CRTC had ordered incumbents to put the excess revenues into a fund known as the deferral account. It is expected that the CRTC will make the deferral account a historical artifact with today’s Price Cap decision.
We’re also going to watch for rulings on rate de-averaging and the duration (eg. 3 years, 5 years?) of this next price cap regime, among other issues.
Watch this space later today for updates.
Update: [April 30, 4:25 pm]
The Decision is out. Highlights:
- basic residential rates in urban areas are capped at existing levels (a price ceiling);
- basic residential service rates in rural areas are permitted to increase by up to 5% annually;
- local optional service and bundled service rates are no longer subject to pricing constraints;
- telcos are able to de-average rates local residential and optional local services;
- business and other capped service rate increases are limited to the rate of inflation overall and a maximum increase of 10% per year for individual rates;
- pay telephone service rates are permitted to increase to $0.50 per cash call, and $1.00 per non-cash call; and
- rates for public safety and social services (e.g. 9-1-1 service, Message Relay Service) remain frozen.
The Commission’s policy is to move rates closer to costs. The new regime allows telephone companies to raise basic local prices in rural areas by the lesser of the annual rate of inflation or 5 per cent.
Once again on a major decision, Commissioner Langford has dissented from the majority. In his opinion, there are consumers left vulnerable by the new regime. He offers an alternative, which was rejected by his colleagues.
Technorati Tags:In its quest for administrative efficiency, the majority appears to have abandoned its responsibilities to balance the interests of all stakeholders: customers, competitors and incumbent telephone companies.
CRTC, price caps, deferral account