Canadian Government Faces Off Against Its Own Telecom Regulator

October 15, 2006 - 0 Comments

OTTAWA, ONTARIO, CANADA – Convergence is rapidly changing the space in which internet, telecommunications, and broadcasting sectors operate throughout the world. With the realization of quad-play (convergence of data, voice, video, and mobility), the Canadian federal government is on the verge of having a regulatory body that is ineffectual and irrelevant through an inability to keep up with evolving market forces. Evidence of this potential irrelevance is no more apparent than in Canada’s burgeoning VoIP marketplace. Last month in a surprise decision, the Canadian Radio-television and Telecommunications Commission (CRTC) issued a decision on VoIP that reaffirmed its original May 2005 order to limit deregulation of this sector. This decision completely ignored the government’s request for the CRTC to reconsider the earlier ruling. Without the deregulation of local VoIP services, the Canadian government is concerned that market forces will be hampered, preventing healthy competition.The original CRTC order (May 2005 – almost two years ago) recommended local service deregulation of the dominant phone companies occur only after their market share had fallen by 25%, their barriers to entry were eliminated, and they could demonstrate that competitive behaviour was in place. The ruling effectively established price floors for the major phone companies, while their domestic upstart rivals are free to charge any price. The only major difference in last month’s new ruling was the statement that the CRTC would consider lowering the 25% threshold to 20%.Both the original and subsequent appeal decisions of the CRTC were unwelcomed by the large telcos (Bell Canada and TELUS), and the status quo remains. Meanwhile, internet/phone/cable companies such as ROGERS or SHAW, now worry about current regulations being transformed before there is an opportunity to increase their market share. It is a rather rare occurrence for a Canadian regulatory body not to take into consideration the comments of the government when the government refers a decision back to a regulatory body for reconsideration. Per regulations, the government’s Cabinet now has 90 days (December 2006) to respond to the CRTC’s ruling, although avenues exist to delay a decision.What options does the government have in its play book? The most immediate lever the government seems to have is replacing the current CRTC Chairman. The current chairman was appointed by the previous government in 2002 with his term due to expire December 31st of this year. Already the government is publicly soliciting resumes for those who would be interested in the position. Appointing a new Chairman would send a strong message to the remaining CRTC Commissioners to seriously reconsider the government’s recommendations.It remains to be seen what the government will ultimately decide, but the Minister responsible for the CRTC has indicated that major changes are forthcoming.

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