Thank you, sir. I had understood three minutes, so my remarks may be brief. Thank you for the invitation to appear before you today.
As you may know, in January my institute submitted comments to Industry Canada in response to the Order Varying Telecom Decision CRTC 2006-15. If I could, I'll briefly summarize our response here.
We are supportive of the proposal to replace the CRTC's market share test with the competitive facilities test or the alternative competition test, and to move to areas smaller than the local forbearance regions defined by the CRTC as the geographic basis for deregulation decisions. The framework established by the commission is too timid and unnecessarily delays the benefits of full competition to consumers.
The entire province of Prince Edward Island constitutes a single CRTC-defined local forbearance region, and it provides an interesting example on this point. The population of P.E.I. is approximately 140,000, and the population of my hometown of Charlottetown is approximately 65,000. Suppose a competitor entered the Charlottetown telephone service market and captured 51% of the customers, so that it now was the largest service provider in the city. By CRTC rules, the Charlottetown market would remain regulated and the incumbent telephone company, now the number two service provider in the city, would still have restrictions on its marketing and pricing decisions, unlike its now larger rival.
When the outcome of regulation is to hinder the number two player in its ability to compete with the market leader, then there is something wrong with the regulation. It also must be kept in mind that a large market share does not necessarily translate directly into market power. The real question is whether a large market share would survive an attempt to charge high prices and earn monopoly profits.
Given the degree of competition that we have already seen spring up in recent years, we do not believe this would occur in a market featuring three facilities-based competitors. There is more than ample evidence that consumers are willing to switch providers when they perceive better value from a competitor than what the incumbent can offer.
Getting back to the question of geography, smaller is better because it allows for a more precise and effective regulatory response. Deregulating a large region in which there are some areas with no competitors present could put some consumers at risk. Conversely, failing to deregulate a large region featuring areas in which competitors have made significant inroads denies the benefits of full competition to consumers in those areas. By drilling down to smaller areas, regulation can be kept in place where competitors are not present and the benefits of full competition can be provided where competitors are present.
We also support the removal of the win-back prohibitions. Competing offers from service providers is the very essence of competition. If competitor A knows that competitor B will be restricted in its ability to respond, it seems reasonable to think that competitor A may not sharpen its pencil quite as much as it could have.
In the Canadian communications sector, liberalization, deregulation, and the introduction of competition have too often been implemented as halting half measures. Regulatory inertia deprives consumers of the benefits of full competition. We support the proposal to accelerate the pace to a deregulated local telephony marketplace where competition has taken hold.
Thank you.