Thank you very much for inviting me here today. You probably have copies of my presentation, if you want to follow along.
Today, in the short time I have, I would like to impress upon you the need for a wholesale access regime and ongoing regulatory oversight to monitor and react to those players with market power, post-deregulation. This is necessary to ensure that a competitive retail market exists and that impediments to competition do not develop.
By way of background, Primus Canada is the largest alternative telecommunications service provider in Canada that is independent of incumbent telephone or cable companies, with approximately one million customers.
Some appearing before you may say there already is lots of competition in the local market in Canada. I say not to be misled by the extent of competition or the reasons for it. All competitors are reliant on either the telephone or cable companies' local networks to deliver local broadband and other services to their customers. The extent to which vigorous competition exists in local and broadband services from players such as Primus and others is a direct result of the current CRTC policies and its mandatory wholesale access regime.
The local access network is different from other areas of telecommunications like long distance, because it is a “natural monopoly”, like electricity, gas, and water distribution. The cost for competitors like Primus to overbuild this last mile network by digging up the streets and backyards is enormous, and it's an insurmountable barrier to facilities-based entry.
For Canadians to receive the benefits of telecom competition, we need many competitors who can innovate and compete, not a monopoly or a duopoly. A workable wholesale access regime will foster vibrant retail competition and thereby enable the reliance on market forces, eliminating the need for retail rate regulation and tariffs.
However, after retail forbearance, even with wholesale access, we are still very concerned about the continued market power of the ILECs and cable companies. We are concerned that their market power could unduly impair competitive forces in the market, resulting in higher prices, less innovation, and lower quality of service. Therefore, an ongoing oversight role is required to ensure that the actions by dominant players, either individually or jointly, will not unduly impede competition and be detrimental to the objectives of the Telecommunications Act. This oversight should normally be non-intrusive, but the CRTC needs to retain the power to step in and intervene if necessary in order to promote the telecom objectives.
Here are some examples. I think everyone would agree that if the ILEC were to call every customer who switched from their service and offered them $1,000 to switch back, this would be anti-competitive. While we haven't seen $1,000 credits yet, customers joining our competitor are called, and we have seen offers of over $400 credits. We have also seen long distance credits applied to the customer's local bill, which violates the CRTC's rules.
As another example, if service is consistently worse for wholesale customers than for the dominant player's own retail customers, potentially penalties or even institutional separation may be required.
Guidelines may also be required for promotions. Short-term service discounts or incentives are part of a competitive environment, but it would not be fair if returning customers were offered lower long-term rates not available to customers who did not leave the ILEC. This would establish two classes of customers, which would be unjust.
Intervention may also be required if retail rates are lower than the wholesale rates or if services are not made available to competitors for resale. Also, it may be necessary to mandate network neutrality, prohibit blocking of content, and define what level of packet prioritization is acceptable.
This oversight is broader and more specific than general competition law, as it is concerned with the telecom objectives and fostering an environment to stimulate innovation and competition in an industry of natural monopolies. The CRTC, as the industry's regulator, is needed to provide this oversight.
In conclusion, as the telecommunications industry moves from economic regulation to deregulation, there is a need for a workable wholesale access regime and ongoing regulatory oversight to monitor those players with market power and ensure that Canadians can benefit from competition.