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From Intelligent to Irrelevant Networks

A teenager sits in front of his computer screen, engaged in an instant messaging conference with friends and relatives around the world. A cousin participates from his mobile phone, a girlfriend is in the school library. Questions are sent to parents about dinner plans. The teens agree to meet (on-line, of course) for a computer game while music files are exchanged in the background. Six people have been involved in this session, with six different network providers and terminal types.

Their choice of terminals was made without regard to the network; the network providers had been selected without even conceiving that such a messaging session could take place. The home-based teens used high speed internet access from their phone company in one instance and from their cable company in the other. The third teen connected via their own pre-paid mobile service in Europe. The parents were connected by office LANs and WANs and mobile PDAs.

These teenagers are unknowingly demonstrating the increasing irrelevance of the network: the evolution from Intelligent Networks to Irrelevant Networks. As terminal devices become smarter in their own right and networks evolve to a unified IP standard, users have less of an interest in the provision of network intelligence. Indeed, the migration of intelligence to the edge of the network means that user applications are finding increased levels of network transparency: the choice of network is expected to be irrelevant by most applications. Over the past five years, users began communicating without the active involvement of communications carriers!

A Brief Perspective in Time

The first telephone exchange, introduced into Hartford Connecticut in 1877, was the first implementation of centralized, intelligent routing. The central processor at that time was a bank of human operators. In 1891, the first automated telephone exchange began a move to put routing control into the hands of the user. With the invention of the rotary dial phone, users controlled each step of the call. Every click from every digit dialed moved the call closer toward its destination. User control reached its apex in 1951 with the introduction of Direct Distance Dialing – long distance calling without operator intervention.

In the 1930-1950’s, electromechanical, common-control switches were introduced, beginning the return of intelligence to the core of the network. The 1963 introduction of tone dialing allowed users to signal network processors in the middle of calls for advanced features.

The mid-1980s through year 2000 marked the pinnacle of centralized network intelligence. Voice networks began to offer services with routing decisions powered by centralized databases. Users traded private business exchanges for telephone company Centrex, in order to outsource the management of complex features and to automatically access the latest software upgrades. The core of the networks became the centres of power – not only were telephones made dumb, the primary local telephone exchanges do not even know how to route certain types of phone calls, such as toll-free “800” numbers or local competitors’ calls, without assistance from a central routing database.

Yet, regional and national control of routing and network intelligence was not seen as sufficient to meet their users’ needs, since high quality global connectivity was a rare commodity. At great cost, global alliances were created to leverage the premiums associated with the long-haul bottleneck. Most of these alliances have come crashing apart, as international cultures clashed. Global One, formed from Sprint, France Telecom and Deutsche Telekom, and Concert, anchored by AT&T and British Telecom, are two examples of failed alliances. In the case of Concert, $7 B (U.S.) was written down by AT&T and BT, coupled with 2,300 jobs lost. Other companies, from Worldcom to 360 Networks, Qwest to Global Crossing, chose to control their own destinies, with equally dismal results. Billions of dollars of investor capital have been lost in search of the elusive recipe to satisfy multi-national customers.

The Democratization of Network Intelligence

Partly due to the low cost of powerful microprocessors and in part due to very low cost global bandwidth, a return of intelligence to the edges of the network has been underway. Aided by a migration from various circuit switched protocols to a more uniform Internet Protocol (IP), networks witness a democratization of network intelligence, supplanting the supremacy of network providers. With self-actualizing interconnectivity, IP services will be able to more easily operate across disparate networks. This leads to an interesting ironic result: the emergence of a “network of networks” model of communications connectivity will lead to the supremacy of local access providers, rather than global network carriers.

The customer carrier selection criteria in the future will be in the provision of “on-ramps” rather than the highway itself. Once a user has gained high-speed access onto the backbone network, their bits will flow in blissful ignorance of the underlying carriers and infrastructure, with a presumption that the only other bottle-neck of interest is at the distant end of the communications link. A gigabit Ethernet access connection has very limited value if the ISP does not provide gigabit connectivity to the Internet cloud as well. Due to the low cost of long haul capacity, successful carriers will be able to meet expectations of highly available, robust interconnectivity at major internet exchange points.

While carriers are spending billions of dollars differentiating their global network solutions, customers are acquiring edge devices that encourage network transparency, enabling users to become more carrier-neutral. As customer premises equipment continues to be more intelligent, customers gain independence. In effect, Internet Protocol may be seen as a universal protocol. Electrical appliances are sold to consumers without knowledge of the supplier of electricity. The universality of IP allows communications based appliances to be used and “plugged-in” without knowing the supplier of telecom services.

To the dismay of the leviathans of the industry that created networks with vastly improved overall quality and with expanded and optimized connectivity, customers actually lose their need to be bound to their carriers. Instead, customers may be able to select local niche providers and turn to their supplier of IP terminal equipment for global one-stop support. It may be that carrier investment has led, not to a competitive advantage in possessing resources, but rather in the commoditization of the resource itself!

Service Provider Implications

For the purposes of this article, we look at an expanded definition of service providers. In the near future, we see the potential for systems integrators, network and business process outsourcers and customer premises equipment or system suppliers to expand their offerings to include communications services. In the near term, we believe opportunities exist to acquire massive long haul capacity from insolvent or nearly insolvent global carriers. A return to more traditional pricing models is likely to meet resistance caused by the current capacity glut and the debt burden that overhangs virtually all industry participants. Until these factors are resolved, the value of long haul infrastructure and bandwidth services will remain low, with a resultant diminished barrier to entry.

Commodity Bandwidth Services

The implications of the Irrelevant Network theory are far-reaching. Global carriers have invested billions of dollars expanding their own capabilities and capacities to serve multi-nationals. In some cases, global alliances have been built; in other cases, under-sea fiber optic cables have been laid. Thanks to advancements in opto-electronics, some estimates suggest that there is more than 20 years of global capacity already available. In effect, it is precisely the rush to build capacity that created an oversupply, which in turn has created the irrelevance of networks.

While carriers are wrestling with the danger of commodity pricing for bandwidth services, they have sought to move up the value chain and are increasingly facing the threat of non-traditional providers of managed services. Local access is now the critical bottleneck service in the provision of IP connectivity. Indeed, reliable and robust local access is the only communications service that clients typically find as a bottleneck in serving their requirements. Since local access services were rarely provided by the global carrier itself, many multi-national customers may have been frustrated in looking to a global carrier for provision of their integrated services. As a result, customers may become equally likely to look to their customer premises supplier (eg. router or IT infrastructure provider) for global communications support. Given the interaction between software applications and the communications protocols, customers may look to their systems integrators for one-stop shopping, further exacerbating the commoditization by aggregators and value added suppliers and bundlers of software and communications services.

Billing, Bundling and Single Point of Contact

The attraction of single billing may be somewhat mythical – while single billing sounds good in theory, it tends to provide less than ideal results when implemented.

Smaller customers, when receiving bills for their total communications services (e.g. local and long distance phone service, coupled with data and mobile service) begin to question the size of the bill and look for ways to lower their costs. Many small business and residential customers already have monthly charges applied to credit cards in order to write fewer cheques or benefit from the cash flow management of their bank in any case.

Larger businesses generally want their bills broken down by department or cost centre in any case – meaning that they want more bills, not just one. As certain customers buy on a global scale, there are limits to the usefulness of single points of contact for purchasing. Most often, billing is sought in local currency since charges must be accounted for as incurred by the local business unit. Such customers are as likely to want to know the local representatives for trouble escalation. Billing is likely required in local currency because the costs are incorporated into the local unit’s profit and loss statements.

So, while many customers are certainly after the discounting associated with spending more money with a single carrier (ie. bundling and bulk purchase discounting), it is not clear exactly who, if anyone, is asking for a “single bill.”

With low commodity pricing from a number of industry participants, increasingly, corporations are purchasing communications services in the same manner as other goods and services, with pressure on pricing and service performance.

The benefits of local network optimization may prove to outweigh any benefits of single billing. Coupled with the increased commoditization of communications services pricing that may remove specific financial incentives for bundling, other non-traditional channels may help customers to derive the lower costs with better overall control of service quality. The key differentiator may be found in customer service: providing points of contact to match the requirements of the buyer. Winning service providers, whether carriers or systems integrators, will be those that can match user requirements for supplier interaction – ordering, moves, adds and changes, performance monitoring, trouble reporting and billing. These interactions are captured under a banner of managed services.

Managed Solutions

Carriers are attempting to provide global managed services to their clients in an attempt to “move up the value chain” away from commodity bandwidth services. Such management includes single points of contact, service level agreements and guarantees, monthly reporting, storage and server hosting, among other services.

Customers may be somewhat skeptical about the carriers’ abilities to deliver on these services. In some cases, carrier sponsored data hosting is at odds with an ability to have diversity. Carrier diversity may be required for serious high-availability applications and in order to maintain leverage for service and pricing responsiveness.

In addition, applications continue to increase in complexity, which challenge the ability of a carrier to provide complete outsourced communications management. To the extent that applications interact with communications protocols, such as with non-IP based legacy networks, such as Frame Relay, SNA or ATM, carriers will be unable to fully diagnose failures, without the participation of the systems integrator. Complexity may paradoxically be increased during the transition to an IP network as formerly stable networks are reconfigured to adopt lower cost IP-based communications links.

As a result, customers may look to their IT infrastructure providers to act as the prime contractor for communications services. Carriers may find that their competition is coming from less traditional channels.

Summary

In the era of Intelligent Networks, carriers spent their resources developing and promoting the core network. Global alliances helped to extend these capabilities to provide “seamless” services to customers everywhere in the world. With the migration of intelligence to the edge of the network, core network capabilities may become less relevant: users will provide their own capabilities through applications resident on their own equipment. As a result, customers may have become more concerned about local service issues rather than global services.

The global telecommunications industry is in the midst of a painful restructuring, working through massive levels of long haul overcapacity and the burden of debt. Its traditional value chain has eroded and carriers are searching for new formulae for success.

In the coming era of Irrelevant Networks, service providers need to focus on achieving greater excellence in the provision of local access, rather than global services. Customers will challenge communications providers seeking excellence in customer support, excellence in network performance reporting, excellence in guaranteed quality access transport services, with measured availability and well-managed throughput and inter-connectivity to multiple major network backbones and interchange points.

It is possible that competition for carriers will come from providers of IT infrastructure, which may seek to provide managed network services as a means to increase the value they bring to their clients. Such challengers may serve as resultant opportunities for partnerships, extending the managed network service capabilities of carriers and providing development resources for customer and applications support technologies. As customers become more empowered to control their own networks, success will come from being seen as the very best local supplier, allied with similar minded technology providers.

In an era of Irrelevant Networks, the winners will be customers. Customers will be better served by competition to provide managed services. As intelligence increasingly migrates to the edge, customers benefit from increased empowerment and choice.

In the near future, will carriers recognize and respond to their potential for network irrelevance, in order to succeed in meeting these changing customer requirements?

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It’s a Green Light to Local Competition: But the Parking Brake May Not Release!

Summary
The Commission saw three barriers to new local competitive entry: (1) certain technical restrictions; (2) a number of tariff restrictions originally designed for regulation in a monopoly environment; and (3) cross-subsidized pricing policies implemented in respect of residence exchange service rates. The May 1st Decisions were intended to remove these 3 barriers. In doing so, the Commission believes that it has cleared the way for the ILECs to be permitted into the cable business. As such, the CRTC has announced that January 1, 1998 is the start day for Stentor Cable.

There is one fundamental flaw in the CRTC’s reasoning. The Commission states that it is confident that progress will continue to create the right environment for telephony competition. It will be removing the subsidy barriers and expects to have the tariff barriers removed by January 1, 1998. In respect of technical restrictions, it is unclear that the Commission understands the difference between trial and working environments. In particular, the CRTC states that it expects to have a number portability trial by the fall of 1997 with the objective of availability in early 1998.

Yet the Commission offers unrestricted and unconditional broadcast distribution undertaking (BDU) rights to the telephone companies as of January 1, 1998. At the very least, under the headstart rules, the CRTC should only allow BDU rights in those places where number portability has been introduced. In this way, the phone companies have the correct incentive to: (1) continue to work cooperatively in the industry forums; and (2) actively encourage a speedy roll out of portability.

Absent this restriction, May 1st was a great day to be Stentor company, and a sorry day to be a prospective new entrant. Cellular and wireless companies appear to be winners, but many long distance companies were hurt by this decision, notably Sprint Canada and Fonorola. The cable companies are severely threatened with their core revenues as of January 1, 1998.

Local competition – Telecom Decision CRTC 97-8, May 1, 1997
The Commission gets it right philosophically – but will new entrants come to the table?

Introduction
The single most important philosophical statement in May 1st Decisions comes in Paragraph 7 of Decision 97-8:

In this Decision, the Commission has adopted the principle that CLECs [competitive Local Exchange Carriers] are not simply customers of ILECs [incumbent Local Exchange Carriers] but are carriers equal in stature to the ILECs in the local exchange market. In accordance with this principle, the framework for local exchange competition must allow for the transition from the single ILEC’s network to a network of fully interoperable networks permitting subscribers of any local exchange carrier (LEC), i.e., ILEC or CLEC, to complete calls with at least the same ease and efficiency as at present. Only with this degree of interoperability can there be the true local exchange competition necessary to fulfil the promise of local price and service innovation.

Background
In Review of Regulatory Framework, Telecom Decision CRTC 94-19, 16 September 1994 (Decision 94 19), the CRTC determined that there should be increased competition in the local telecommunications market, and on 11 July 1995, the Commission issued Implementation of Regulatory Framework – Local Interconnection and Network Component Unbundling, Telecom Public Notice CRTC 95 36 (PN 95 36) in order to establish principles and procedures that would permit competitive entry into the local exchange market. This Decision is the result of PN 95-36.

Historically, local exchange services have been provided on a monopoly basis by the ILECs . Changes in wireline and wireless technologies have developed to a point where interconnection of competing networks is fully feasible in a manner that is transparent to the user. In addition, the advent of broadband networks gives rise to the capability of carriage of voice, high speed data, broadcasting and video on common facilities. These developments in technological convergence have led to fundamental changes in market on competitive entry into the local market.

Local competitive entry, although limited, has already been seen to stimulate innovation in service and prices. Clearly, the Commission is confident that the May 1st Decisions will continue to stimulate competition in the local exchange market, thereby furthering service innovation and total market revenues. However, it remains to be seen whether the financial aspects of the Decisions allow for viable new entrant business cases.

Who will be the new entrants? The CRTC has set out certification requirements. As a condition of offering service, a CLEC must provide:

  1. Access to other carriers and services, including wireless companies;
  2. LEC-to-LEC interconnection with approved tariffs and agreements as appropriate. In addition, all LECs will be required to implement local number portability as approved by the Commission;
  3. Access to 9-1-1 and Message Relay Service.
  4. Privacy protection;
  5. Protection of carrier information where a CLEC is affiliated with a long distance service provider;
  6. Serving area maps filed with the CRTC as well as miscellaneous information as requested by the CRTC from time to time;
  7. Consumer service information prior to accepting an order;
  8. File an attestation with CRTC that it will abide by these rules.

Resale
Although the CRTC recognizes the value of resale in creating a competitive environment, it states that facilities based entry is its primary goal for the full benefits of competition to materialize. The CRTC will permit unrestricted resale of all ILEC services, except subscriber listing (excluded for consumer safeguard reasons).

The CRTC completely rejected Sprint Canada’s proposal for the development of a wholesale tariff and also Sprint’s proposal for a new entrant reseller special discount similar to that introduced in the original long distance decision. A similar request for a “quality of service“ discount was rejected. As well, the CRTC did not accept that the ILECs should be required to “brand” services for resellers.

The sole item thrown to resellers is the permission to resell residential services. Although there would be no margin it would allow integrated service provision.

Facilities Based Interconnection
The Commission is correctly requiring that so-called industry standard interfaces be used for interconnection. It is also requiring all carriers to interconnect with each other.

The Commission decided that local exchange boundaries should be maintained. Some parties thought that new entrants should be allowed to create more flexible free calling areas. However, given that local subsidies (Contribution) are based on the classic definition of local exchanges, the CRTC is requiring that these remain in place.

In respect of costs of interconnection, the CRTC is entrenching a principle of equality by an equal sharing of costs. This is a departure from the current practice of parties paying the ILECs for the privilege of connecting regardless of the direction of traffic flow. This also holds true for CCS7 signaling links. The Commission took a further positive step for competition by mandating the establishment of local tandems. In an exchange area such as Toronto, this means that one point of connection may be all that is required rather than needing to connect to almost 100 local Bell switches. It refers the determination of these tandems to committee.

The CRTC has also ordered the establishment of new signaling points of interconnection: at least one per area code in order to permit more economic entry than that dictated by the current signal interconnection points in Calgary and Toronto. It asks the technical committee to determine what messages make up the minimum set of CCS7 messages to be exchanged.

In establishing unbundled tariff components, the CRTC has directed that new entrants be shielded from discrimination on the basis of the incumbents choice of underlying technology. For example, the costs for the incumbent providing a local loop using one technology versus another technology may be included in developing a rate to be charged, but the new entrants will pay one price, regardless of the underlying technology.

Compensation for Traffic Termination
The CRTC is implementing a regime of “Bill and Keep” compensation for traffic that is “local” in the sense of the current ILEC boundaries. This regime has no exchange of money between interconnecting parties. Whoever generates the call, keeps all of the revenues. However, where a sustained imbalance is shown to exist, fees will be paid to compensate the terminating carrier. The rate of compensation will be capped at the ILEC rate. This may create an interesting opportunity for CLECs to actively pursue high volume inbound local calling customers (such as pizza order bureaus) in order to generate inbound settlement. This prospect may help discipline the initial rates to be established by Stentor.

Essential Facilities and Mandatory Unbundling
The Commission concluded that for a facility, function, or service to be considered essential, it must meet all three of the following criteria: (1) it is monopoly controlled; (2) a CLEC requires it as an input to provide services; and (3) a CLEC cannot duplicate it economically or technically. Facilities that meet this definition are subject to mandatory unbundling and mandated pricing. As well, the tariffed rates for these facilities shall be treated as costs in the imputation test. The CRTC also determined that CLEC facilities could not be considered essential (therefore, this safeguard applies only to the Stentor companies). Essential facilities are initially defined as Central Office codes (NXXs), subscriber listings and local loops. Over time (defined as five years), as supply of alternate loops emerges, the Commission expects local loops in certain areas to cease to be considered essential.

It is important that local switching is not considered to be an essential facility. This is a significant blow to the Sprint Canada proposed resale model for early entry into competitive local business.

In addition, transit service (ie. the ability for a CLEC to route calls to another CLEC via a third LEC) was determined not to be essential, but only after a five year period. The CRTC correctly expects that a competitive transit business will emerge to assist smaller CLECs which may not have interconnection with all other LECs. Similarly, a five year transition has been introduced for signaling transit service including signaling transit to interexchange carriers.

There are numerous other support services that the CRTC chose not to designate as essential, even for a transition period. The CRTC could have sent a more positive competitive message had these details (such as directory services, rights of way, emergency service, message relay services, etc.) been designated as essential.

In respect of costing, the CRTC took Stentor’s side in accepting that Phase II costs plus a 25% markup is appropriate. In a fashion more characteristic of its double negative approval of Construction Program Reviews, the CRTC stated: “the Commission finds that a 25% mark-up is not excessive. Accordingly, based on the record of the proceeding, the Commission concludes that rates for essential facilities based on Phase II costs plus a 25% mark-up are appropriate.”

Rates and Costs
As to the issue of how to pay for the cost of introduction of competition, the CRTC continues to apply its new “all-carriers” cost model established in Decision 97-6, and therefore Stentor will have to impute the same costs charged to competitors in justifying its own tariff filings.

In another pro-competition move, startup costs are to be paid by each carrier on its own, including those incurred by the ILECs to enable competition.

The CRTC released its expected price cap Decision 97-9 which implements the reime set out in Decision 94-19 (16 September 1994). This decision will limit price increases to a maximum of 10% for basic residential service and business services (except in areas where local competition is expected to be flourishing). Overall baskets of services will be limited to inflationary levels of increases.

Consumers will have another monthly rate increase January 1, 1998 of up to $3, to be reduced if this would result in Contribution rates falling to less than 2 cents per minute. The Commission expects the full $3 increase to apply in most cases but there will be no further mandated rate rebalancing in the future. The CRTC appears to want to ensure that a reasonable pool of contribution is maintained to share among new entrants in high cost serving areas. This would seem to create incentives for new entrant wireless companies in remote territories.

Emergency and Message Relay Services have rates frozen.

Other Price Cap Details
With limited exceptions, the CRTC accepted most of Stentor’s proposals for the implementation of Price Cap adjustment factors. These are adjustments to the prices in order to ensure consumer dividends from ongoing productivity improvements. The Commission did not accept Stentor’s “competitive entry” reductions to the dividend. The Commission arrived at a total “X-Factor” adjustment of 4.5%.

Reduction of regulation is a key benefit of Price Caps, but it is critical that the CRTC gets the baskets of capped services right in order to safely remove their oversight from pricing cross subsidies. A large number of onerous reporting requirements are eliminated for the Stentor members including Phase III reporting , the largely ineffective Construction Program Reviews (including separate Broadband spending tracking , and financial reporting is also steamlined to a semi-annual basis (from its current quarterly requirement).

The price cap system will be in place for 4 years, to allow a period for stabilization, but still leave an opportunity to correct the process if required. The Commission noted that a longer price cap period would have provided a greater opportunity for the benefits of price cap regulation to materialize, while a shorter price cap period would reduce the cumulative effects of any error in setting the price cap parameters.

In a win for Stentor shareholders, it appears that subscribers will pay for what is termed the Depreciation Reserve Deficiency: the diference between what has already been depreciated and the remaining useful life of equipment due to technology change and other factors.

Obligation to Serve
Despite Stentor’s call for extra compensation in order to maintain its obligation to serve less desirable region, the CRTC determined that it already is compensated adequately through the costing mechanisms in place.

Contribution
The area of contribution subsidy is important to new LEC entrants and existing interexchange competitors. These decisions have fundamental shifts in the definition of the contribution requirement. The shortfall is redefined as residential local costs plus residential local optional services costs less associated revenues. This removes business service shortfalls from the pool and acknowledges the high profit margins from optional services. Costs continue to get inflated by a 25% markup (no justification other than it is not found to be excessive!). However, the CRTC rejected Stentor’s request to include costs of downsizing.

Interexchange (long distance) remains the sole source of contribution cash flow. In order to ensure that there is an adequate pool of contribution to maintain affordable service in high cost areas, the CRTC is freezing contribution at the going in rate January 1, 1998. Many LD competitors would have incorporated continuing reductions in their business planning processes. The total quantum of contribution will be paid into a fund and distributed to all LECs (existing and new entrants) by cost band based on their share of residential subscribers. In the interim, the ILECs will administer the fund, although the CRTC will seek an independent administrator.

In order to remove the incentives for contribution bypass, the CRTC is changing the collection mechanism to weight more cost on the terminating end. This removes some of the incentives for dedicated line bypass. Carriers such as Fonorola and ACC which have a significant portion of their revenue based on inbound settlement from US carriers will find their costs have increased. In addition, resellers appear to lose their special discounts.

In the Price Cap Decision, Contribution will not be permitted to fall below 2 cents per minute.

Competitive Safeguards
The CRTC is requiring Equal Access to be made available by all new local competitors and further, is requiring that Stentor offers long distance services to CLEC customers. Further, all CLECs must provide for access to all wireless service providers.

The CRTC is not imposing a “fresh look” requirement on the ILECs in order to allow customers to escape from long term contracts. This is another place where the CRTC could have sent a more positive “pro-competitive” message. In a move which will discourage landlords from striking special arrangements on behalf of all tenants, the CRTC is requiring that all LECs provide for open alternate LEC access to end users.

Imputation tests will continue as a principal safeguard. The CRTC will permit a variety of bundling options subject to appropriate cost imputations.

Consumer Safeguards The CRTC will not regulate new entrants except with respect to matters of consumer safeguards and undue discriminatory practices. The CRTC is not giving new entrants the protection of limited liability to consumers that is afforded the incumbents. This could create some huge risks in the case of mishandled 9-1-1 emergency calls. This is a significant instance where the CRTC could have sent a more pro-competitive message. The CRTC is limiting liability in the case of CLEC services provided to other carriers. This again seems to weaken the “green-light” signal which the CRTC wants to herald.

Consumers will have the ability to reach all other local customers thanks to mandated interconnection between all LECs .

The Stentor companies had hoped to introduce a speedier tariff approval process by setting a maximum review period before the filing is “assumed” to be approved. The CRTC rejected this (perhaps conscious of the cable industry experience with “negative option” marketing) and will retain positive approval rights prior to tariff implementation. The CRTC has introduced more liberalized use of the ex-parte process, to include uncapped services.

Directories
ILECs will be required to provide a universal directory. CLECs are invited to begin a more competitive environment but have no obligation to do so. The CRTC foresees the ILECs continuing in their dominant role for some time to come and therefore it is reasonable that ILECs continue to be the provider of directories. However, the ILECs will not be required to provide general information about CLEC services in the front pages of their directories.

Conclusion
The Commission saw three barriers to new entry: (1) technical restrictions; (2) tariff restrictions designed for regulation in a monopoly environment; and (3) subsidized pricing policies implemented in respect of residence exchange service rates. The May 1st Decisions are intended to remove these 3 barriers. In doing so, the Commission believes that it has cleared the way for the ILECs to be permitted into the cable business. As such, the CRTC has announced that January 1, 1998 is the start day for Stentor Cable.

There is a fundamental flaw in the CRTC’s reasoning. The Commission states that it is confident that progress will continue to create the right environment for telephony competition. It will be removing the subsidy barriers and expects to have the tariff barriers removed by January 1, 1998. In respect of technical restrictions, it is unclear that the Commission understands the difference between trial and working environments. In particular, the CRTC states that it expects to have a number portability trial by the fall of 1997 with the objective of availability in early 1998.

There is considerable work that must still be undertaken in order to implement the May 1st Decisions. The CRTC’s industry technical committees have a considerable number of tasks assigned to them. There is still much definition work to be performed in the Price Cap follow-up proceeding.

Yet the Commission offers unrestricted and unconditional broadcast distribution undertaking (BDU) rights to the telephone companies as of January 1, 1998. At the very least, under the headstart rules, the CRTC should only allow BDU rights in those places where number portability has been introduced. In this way, the phone companies have the correct incentive to: (1) continue to work cooperatively in the industry forums; and (2) actively encourage a speedy roll out of portability.

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