Industry Canada

Industry Canada

April 04, 2007 17:20 ET

Canada's New Government Accelerates Deregulation of Local Telephone Service to Benefit Canadian Consumers

OTTAWA, ONTARIO--(CCNMatthews - April 4, 2007) - The Honourable Maxime Bernier, Minister of Industry, today announced that Canada's New Government is moving ahead to accelerate deregulation of local telephone services (http://strategis.ic.gc.ca/epic/internet/insmt-gst.nsf/en/sf08752e.html). This finalizes the proposed changes made last December to the Canadian Radio-television and Telecommunications Commission (CRTC) Telecom Decision CRTC 2006-15, "Forbearance from the regulation of retail local exchange services."

"Canada's New Government is pursuing an ambitious policy agenda for the telecommunications sector, the essence of which is a new regulatory framework that is more modern, flexible and efficient," said Minister Bernier. "Canada's New Government has changed the CRTC decision to accelerate deregulation of retail telephone prices of the traditional telephone companies. Consumers should benefit from more choices, improved products and services and lower prices. The revised decision also increases reliance on market forces, which will further encourage innovation and competition in the telecommunications industry," added Minister Bernier.

"Forbearance from the regulation of retail local exchange services," issued last year, laid out a framework for price deregulation of local telephone service provided by traditional telephone companies. Minister Bernier reviewed the decision and proposed to replace the CRTC's market-share test with one that emphasizes the presence of competitive infrastructure within a local telephone exchange. Minister Bernier also proposed to end restrictions on "win-back" offers and other promotions and marketing practices in all markets across Canada, bringing Canada in line with the practices of other major industrialized nations.

"Canada's New Government believes that reliance on market forces and competition benefits Canadian businesses and consumers. Given the current state of competition in the Canadian telecommunications market, Canada's New Government is of the view that accelerated deregulation is appropriate and that win-back rules are no longer required," said Minister Bernier. "In a competitive sector, there is no reason to prevent consumers from getting the best offers."

Following public consultations, the proposal was amended by clarifying and strengthening the criteria of the forbearance test, providing an 18-month head-start rule where forbearance is based on competition from a small competitor (expected to apply primarily in small rural markets), and changing the wording to ensure that the CRTC retains some flexibility in considering forbearance applications. In addition, existing safeguards that protect consumers, such as a price ceiling for stand-alone residential service and continued price regulation in regions where there is little competition, will be maintained.

Canada's New Government has taken further steps to safeguard consumer interests by providing the Competition Bureau with an additional $10.5 million over five years to strengthen its ability to address anti-competitive issues in newly deregulated markets. Canada's New Government calls on Parliament to consider and pass Bill C-41, An Act to Amend the Competition Act, to further ensure that consumers' interests are protected. The Commissioner of the Competition Bureau has also indicated her support for the introduction of administrative monetary penalties to deter anti-competitive behaviour in the telecommunications market.

Canada's New Government is calling on the industry to work with the CRTC to establish an independent telecommunications consumer agency (http://strategis.ic.gc.ca/epic/internet/insmt-gst.nsf/en/sf08753e.html), and is ordering the CRTC to monitor consumer complaints and concerns until such an agency is established.

Canada's New Government believes that an independent agency with a mandate to resolve complaints from individual and small business retail customers is an integral component of a deregulated telecommunications market.

Until the agency is established, Canada's New Government has tasked the CRTC with monitoring and analyzing trends and issues in the telecommunications market, and to report to the Governor-in-Council at least once a year on the services provided by the telecommunications service providers.

Backgrounder

Government Changes CRTC's Local Forbearance Decision

Competition is essential for a vibrant, healthy telecommunications sector. The importance of competition in a telecommunications policy framework was underscored in the recommendations of the Telecommunications Policy Review Panel (TPRP) when it released its final report in March 2006. The Panel recommended that Canada modernize its telecommunications policy framework to allow market forces and competition to guide the growth of the industry.

The policy direction to the Canadian Radio-television and Telecommunications Commission (CRTC), issued by the Minister of Industry last year, followed the advice of the TPRP, directing the CRTC to take a more market-based approach to implementing the Telecommunications Act and regulating only when necessary.

In Telecom Decision CRTC 2006-15, "Forbearance from the regulation of retail local exchange services," the CRTC laid out its criteria for determining when it would forbear, or refrain, from regulating local telephone service provided by the former monopoly telephone companies. It determined that forbearance would occur only after the former monopoly telephone company had lost 25 percent market share in a defined geographic area, provided access to certain services to competitors, filed rates for certain competitor services, and met 14 quality-of-service standards for services provided to competitors. The CRTC also maintained regulations on marketing until the former monopoly telephone company had lost 20 percent market share in a defined geographic area.

In response to this decision, the Governor-in-Council received a joint petition from Aliant Telecom, Bell, SaskTel and TELUS as well as separate petitions from the Government of Saskatchewan and the Coalition for Competitive Telecommunications. These appeals argued that sufficient competition already existed in the market and that deregulation should proceed more rapidly.

Minister Bernier consulted on these appeals and reviewed this decision, proposing to replace the CRTC's market-share test with one that emphasizes the presence of competitive infrastructure within a local telephone exchange.

On December 16, 2006, the proposal to change the CRTC decision was published in the Canada Gazette for a 30-day public comment period. A total of 179 comments were received during the consultation period, with 35 coming from companies and organizations and another 144 from individuals.

During the consultation process, concerns were expressed about premature deregulation under the proposed competitive infrastructure test. To address these concerns, the proposed order-in-council was amended and the wording changed to ensure that the CRTC retains some flexibility in considering forbearance applications.

The government is replacing the CRTC's market-share test with one that emphasizes the presence of competitive infrastructure. Infrastructure-based tests identify the presence of more than one facilities-based network in a given geographic area. The presence of competitive infrastructure is a durable form of competition that delivers the greatest benefits to consumers, disciplines the market and strengthens investment.

In addition, the variance will mean that smaller and more appropriate geographic areas (local telephone exchanges) will be used as the basis of determining deregulation. The variance will also streamline conditions that require the former monopoly telephone companies to meet standards for services they provide to competitors, by reducing the number of standards to nine and averaging the results over all competitors.

Existing safeguards that protect consumers, such as a price ceiling for stand-alone residential service and continued price regulation in regions where there is little competition, will be maintained. As well, safety and social requirements, such as 9-1-1 obligations and services for persons with disabilities, will remain in place.

The variance also includes the immediate removal of "win-back rules." These rules were introduced by the CRTC to prevent the former monopoly telephone companies from targeting new customers of competitors with win-back offers, which, in the CRTC's view, could threaten competition in local telephone markets.

The government believes that reliance on market forces and competition benefits Canadian businesses and consumers. Given the current state of competition in the Canadian telecommunications market, the government is of the view that accelerated deregulation is appropriate and that win-back rules are no longer required.

Based on public consultations, the proposal was amended by clarifying and strengthening the criteria of the forbearance test so that deregulation will occur where competitors are serving the market and are capable of serving 75 percent of the number of lines that the incumbent can serve. This will ensure that there is consumer choice. There is a new provision for an 18-month "head start" where an application for forbearance is based on competition from a small competitor (expected to apply primarily in small rural markets). As well, the order-in-council was revised to ensure that the CRTC retains some flexibility in considering forbearance applications.

The government has taken further steps to safeguard consumer interests by:

- calling on the industry to work with the CRTC to establish an independent telecommunications consumer agency

- ordering the CRTC to monitor consumer complaints and concerns until an agency is established

- providing the Competition Bureau with an additional $10.5 million over five years to strengthen its ability to address anti-competitive issues in newly deregulated markets

The federal government considers that an independent agency with a mandate to resolve complaints from individual and small business retail customers should be an integral component of a deregulated telecommunications market.

The CRTC invited the industry, in its original forbearance decision, to bring forward a proposal for a self-regulatory system. The CRTC also noted that an appropriate system would be designed in consultation with groups representing customers, set out clear rules and standards, and provide a reliable mechanism for expeditiously resolving customer complaints. The government expects that all interested parties will work together with the CRTC toward establishing an independent, industry-funded consumer agency as soon as possible.

Until such time as a proposed agency has been established, the CRTC must provide the Governor-in-Council with reports at least once a year, outlining complaints regarding services provided by telecommunications service providers. Each report will outline complaints received from individuals and small business customers regarding services provided by telecommunications service providers and will include statistical information - for each service provider and in total - on the nature and number of complaints received and the standing of these complaints when the report was compiled. The CRTC may also report on issues that may warrant further attention by the CRTC or by the government, such as the availability of consumer choice, the impact of marketing strategies and practices, consumer billing and contracts.

In its report of March 2006, the TPRP recommended the creation of an ombudsman mandated with responding to consumer complaints about telecommunications service providers. The TPRP recommended that the ombudsman be self-financed, independent, industry-led and subject to CRTC oversight.

Consumers should benefit from this variance through more choices and improved products and services. For the telecommunications industry, innovation will be encouraged as a result of more intense competition between traditional telephone companies and their competitors. The decision reduces unnecessary regulation as well as increases reliance on market forces and encourages competition in telecommunications.

Contact Information

  • Office of the Honourable Maxime Bernier
    Minister of Industry
    Isabelle Fontaine
    (613) 995-9001
    or
    Industry Canada
    Media Relations
    (613) 943-2502