Industry Committee on Feb. 7th, 2007

[Chris Peirce]

Once the government acts, and of course, as a stakeholder--and as the largest competitor in the business market in Canada, we certainly are a stakeholder--we would have to review what our options would be in response to that order once it's issued in final form.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Do you want to add anything, Mr. Parent?

[Joe Parent]

With apologies to the legal profession, we would not look forward to a legal challenge either. Our hope is that rather than the dual criteria, the presence test would be dropped, and the Competition Bureau criteria would be adopted as the forbearance test. Ruling that out, I certainly wouldn't want to pursue legal action, but I wouldn't rule it out either.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

If it goes ahead, as has been proposed by the government, I'll get some comments from each one of you as to what the consequences will be to your companies. You've all left me with the impression that you may not be in existence much longer if it goes this route. Is that too much? Are you looking at being bought out? Are you looking at going bankrupt, or just losing large market share? What will the consequences be to your three companies?

[Chris Peirce]

We don't maintain that the consequence would be us disappearing. In the latest CRTC telecom monitoring report, people talk about the accelerating pace of competition. The most recent telecom monitoring report shows that in the business market in Canada, competitor share of business revenues dropped from 14% to 12% from 2005 to 2006. There's no question that the incumbents are dominant in the business market in our market in Canada today. It is a very competitive market, because most of what they do is forborne now. Certainly the market would be even tougher for competitors. As I said, 70% of the telecom market has been forborne. The only thing that is really regulated is the local exchange rates of the former monopolies.

At any point of forbearance, that's the high-water mark for a competitor share. With long distance, data services, or any services like that, after forbearance the incumbent gains back share and competitors don't. That's the history in Canada, without exception.

You have to expect that if forbearance comes along in local retail services, you will probably see a high-water mark for a competitive market share in that. We only have a market share at this point for most competitors, as Ken Engelhart mentioned, that is approaching 25% in a number of municipalities--more in Halifax.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

You're the one who used the term, you renovate or you die.

[The Chair, Conservative, James Rajotte]

Does someone want to add to that?

[Ted Chislett]

We believe that the cable companies and the telcos will continue to have market appearance and market power, both individually and jointly, for the foreseeable future, because they have this national monopoly and access networks. For us, the key thing is to have a reasonable wholesale access regime where players like you, Vonage, and others can have access to these bottleneck facilities in the local loops, provide these services, and innovate. If you have that, you can forebear on the retail rates.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

On the Competition Bureau, earlier it was discussed that fines wouldn't be that effective. I'd like you to expand on the issue around responsiveness. In reply to Mr. Comartin's question you said it might take three months for the CRTC to respond. What would you expect the Competition Bureau response time to be on one of these issues?

[Ted Chislett]

The Competition Bureau has a very complicated two-stage process to go through. We have difficulty even getting standing in the process--it's not open. It would take years.

[Scott Brison, Liberal, Kings—Hants, NS]

So the government is trying to replace a process that would take three to four months with one that would take years.

[Ted Chislett]

That's absolutely our concern, and why we strongly believe that the ministry that regulates the CRTC has to be the one that looks after this in the future.

[Chris Peirce]

The real difference is that the bureau is intended legislatively to govern markets that are already competitive. The CRTC is there to take a market that was a monopoly and transition it to competition. That implies a whole different view of things compared to when you're looking at the possibility of anti-competitive behaviour in an already competitive market. That's why the bureau is really not geared to help facilitate the emergence of competition. It's just there to protect egregious infractions.

[Ted Chislett]

The CRTC would like them to look out and see if the actions that are happening have the potential to impede competition.

[Scott Brison, Liberal, Kings—Hants, NS]

Just to get a cease and desist, how long would it take?

[Ted Chislett]

I can't imagine how long it would take. I think it would take years.

[Chris Peirce]

It's a quasi-criminal process. As Ted says, as an applicant you don't have any control over the process. At least at the CRTC someone applies who's aggrieved and there's a process where you have some ability to influence the tribunal.

[Scott Brison, Liberal, Kings—Hants, NS]

With respect to Mr. Van Kesteren's point earlier about winback, you said it's common practice that a business would put its best offer forward automatically. It is also common business practice that offers or bids are typically sealed such that the competitors are not aware of the other bidding.

Would not the large telco companies be aware of the incoming competitor offer on the day the switch order is made by a potential consumer? Wouldn't they know right then what was being offered?

[Ted Chislett]

They know that the customer is gone. They know who the customer is. They can call the customer and find out the details. They can tailor an offer uniquely to them, which isn't available to the public at large.

[Scott Brison, Liberal, Kings—Hants, NS]

In fact, with the blackout on winback for a period, as he levels the playing field, and as he restores it to a common business practice approach in some ways, giving a capacity for a competitor to make that sort of offer—

[Ted Chislett]

Absolutely. The example I think I used the last time I was here was that if Air Canada knew who had a ticket on WestJet and called them and offered a special rate to cancel the reservation and fly on Air Canada, we'd say, hey, that's anti-competitive. That's what winbacks are. Because of the nature of the network, you know when they leave and who they are and you can target them individually.

[Scott Brison, Liberal, Kings—Hants, NS]

Go ahead.

[Joe Parent]

I was going to say that the issue of winback, from my perspective, is not so much reverting back to new business practices but the fact that the objective of the policy is to deliver the benefits of competition to the wider audience. Winback delivers cost savings to a very select group of high-risk customers without running the risk of delivering all the benefits of competition to the market at large. We feel that is the issue with winback, that it will not deliver the benefits of competition as espoused in the policy direction.

[Ted Chislett]

You end up with two different classes of customers: those who have received special offers and left, and those who don't have those offers available to them. And that's not fair.