Thank you.
MTS Allstream is a leading national communications solutions provider. In Manitoba, we are the incumbent, and we now face competition from Shaw. We are unique among the former monopoly providers in that over half our revenues come from having committed to a growth strategy defined by expansion from coast to coast, where we have none of the clear advantages of incumbency. Nationally, we are the leading provider of competitive solutions to Canadian businesses, whether they be small, medium, or large.
By definition, then, we endorse the objective of achieving fully competitive markets as serving the best interests of Canadian customers. Competitive market forces will bring faster innovation, customer choice, and competitive pricing. Market forces that are not competitive, where one dominant player is free to exercise its market power, will slow innovation, bringing less customer choice and inflated pricing. Importantly, we also support the policy direction issued in December by the government. In its final form, that policy direction responded positively to the concerns we raised before this committee.
We cannot support, however, the proposed order dealing with forbearance. In its current form, that proposed order strikes at the very core of the conditions under which the CRTC may or must not grant forbearance, per the Telecommunications Act.
The proposed order offers a choice of two tests to an applicant seeking retail deregulation. The first is the test referred to Monday by Sheridan Scott, the Commissioner of Competition. It is multi-pronged and, while ambiguous, at least considers the presence of market power, including reference to market share, the number of competitors offering service, and active rivalry, all to determine if competitive market forces are present. But the second choice is a test that ignores all of these attributes of competitive market forces and merely calls on the regulator to count the number of providers apparently offering service: two facilities-based providers and, for residential markets, an additional wireless provider.
Clearly, no former monopoly in its right mind will choose Ms. Scott's test. To be deregulated in the local market without having one's market power even considered, as per the second test, is manna from heaven for the former monopolies, not for consumers.
Just as clearly, the second test, which I'll call the mere presence test, is contrary to the approach specifically recommended by the telecom policy report, that deregulation should only occur where significant market power was found not to exist.
The mere presence test is also inconsistent with the policy direction, which recognized the ability of the former monopolies to exercise market power in the retail market, absent an updated essential facilities regime for competitors, and which directed the CRTC to put such a regime in place, a task that won't be completed until 2008.
Our detailed comments submitted to the government in response to the proposed order point out that the mere presence test is fundamentally incompatible with competition law. Nowhere else in the world, save in the now re-monopolizing U.S., would regulators consider deregulating an incumbent without looking at the actual state of competition in the market. Further, and as was alluded to Monday by Richard French, the mere presence test is unworkably vague.
Most importantly, we are concerned with the legality of the proposed order, which supplants the statutory obligations of the CRTC with the mere presence test. The proposed order effectively repeals subsections 34(1) and 34(3) of the Telecommunications Act.
Obviously, cabinet cannot itself amend the statute. In our respectful view, the measure proposed will not withstand judicial scrutiny.
Despite our wholehearted endorsement of the objective of competitive market forces and attendant retail deregulation, we can't support the proposed order. The existing forbearance decision offers more certainty and is, frankly, more streamlined.
Thank you.