Further Telephone Deregulation

[August1991]

A defiant government is deregulating the $9.8-billion phone market and overruling the CRTC against the wishes of a parliamentary committee, with all eyes now watching what Minister of Industry Maxime Bernier will do about foreign ownership restrictions on Canadian telecommunications companies.

Mr. Bernier today followed through with his proposal, made in December, to change how phone companies can set prices. Under the previous rules, companies such as BCE Inc. and Telus Corp. had to apply to the Canadian Radio-television and Telecommunications Commission to change their prices until they could show they had lost 25% share of a given market to a cable phone competitor, such as Rogers Communications Inc. or Shaw Communications Inc.

National Post

We may have to wait for after the election to see foreign firms in the business:

A government review panel last year put forward a series of recommendations on how to update Canada's telecommunications policy, which observers said Mr. Bernier has been following to the letter. As per the panel's advice, he has instructed the CRTC to take a more hands-off approach, given more power to the Competition Bureau and proposed reserving airwaves for new cellphone entrants in an auction to be held next year.

Lifting the ownership restrictions was on the panel's list, and it's the last big obstacle left to modernizing the nation's policy, industry observers have said.

Changing the rules, however, will prove to be difficult as it will require an amendment to the Telecommunications Act and therefore unlikely with a minority government in power.

This is all good news and Maxime Bernier is turning into someone to watch.

[geoffrey]

Good move on Bernier's part, with the one condition that all regulatory barriers to market entrants are removed. I don't want a deregulated monopoly. It's ok that phone companies set their own prices, but if I have the requisite capital, I should be able to start Geoffcom tomorrow. If I can't, then deregulation is a dangerous road to go down.

It's all or nothing really.

[gc1765]

Good move on Bernier's part, with the one condition that all regulatory barriers to market entrants are removed. I don't want a deregulated monopoly. It's ok that phone companies set their own prices, but if I have the requisite capital, I should be able to start Geoffcom tomorrow. If I can't, then deregulation is a dangerous road to go down.

It's all or nothing really.

How often do phone companies actually compete? Around here, if you are looking for a landline, your choices are Telus, Telus or Telus.

Cell phones are a different story, and are the closest thing to competition. In fact, thanks to my cell phone I don't need a landline.

[geoffrey]

Where do you live?!? Inuvik? That's crazy talk. Call up your cable provider and join the revolution on that one... my family has one of those. If you do any long distance, it's worth it in a hurry (at least with Shaw).

Myself on my own, I only need a cell. I don't call long distance (any relatives worth talking to will call me, my immediate family is all within my area code). Why have two? Seems silly. Plus I hate dealing with Telus, or Shaw, as I find them nearly the two least customer focused companies out there.

[gc1765]

Where do you live?!? Inuvik? That's crazy talk. Call up your cable provider and join the revolution on that one... my family has one of those. If you do any long distance, it's worth it in a hurry (at least with Shaw).

Myself on my own, I only need a cell. I don't call long distance (any relatives worth talking to will call me, my immediate family is all within my area code). Why have two? Seems silly. Plus I hate dealing with Telus, or Shaw, as I find them nearly the two least customer focused companies out there.

As far as I know, Telus is the only company around here with the old-fashioned landlines (but I could be wrong on that). With new technology, like digital or cell phones, there is more competition. I prefer a cell phone because it is the cheapest option.

[Slavik44]

Where do you live?!? Inuvik? That's crazy talk. Call up your cable provider and join the revolution on that one... my family has one of those. If you do any long distance, it's worth it in a hurry (at least with Shaw).

Myself on my own, I only need a cell. I don't call long distance (any relatives worth talking to will call me, my immediate family is all within my area code). Why have two? Seems silly. Plus I hate dealing with Telus, or Shaw, as I find them nearly the two least customer focused companies out there.

As far as I know, Telus is the only company around here with the old-fashioned landlines (but I could be wrong on that). With new technology, like digital or cell phones, there is more competition. I prefer a cell phone because it is the cheapest option.

If you don't mind me asking where do you live? That sounds kind of odd...I am assuming western Canada, but there is generally alot of options available for landlines. Particularly because Telus owns almost all landline infrastructure in Western Canada, but is required to allow other companies to purchase the rights to use them (you might want to check me on this I am not 100% sure) if my understanding is correct...it would mean that if telus can reach you, than inherrently any phone company could offer you services, if they wanted to (again my understanding may be a little off on that rule).

As well, I believe deregulation is dependant on their being competetive options available(?)...so if that is true that your only option for phone service is Telus, I would assume that the test for the presence of competitive infrastructure would not be passed and therefore the problems you are raising not really an issue.

[gc1765]

If you don't mind me asking where do you live? That sounds kind of odd...I am assuming western Canada, but there is generally alot of options available for landlines. Particularly because Telus owns almost all landline infrastructure in Western Canada, but is required to allow other companies to purchase the rights to use them (you might want to check me on this I am not 100% sure) if my understanding is correct...it would mean that if telus can reach you, than inherrently any phone company could offer you services, if they wanted to (again my understanding may be a little off on that rule.

Vancouver. As I said before, I could be wrong, but I've never heard of any companies other than Telus offering landlines. If there are, they need to do more advertising

[White Doors]

If you don't mind me asking where do you live? That sounds kind of odd...I am assuming western Canada, but there is generally alot of options available for landlines. Particularly because Telus owns almost all landline infrastructure in Western Canada, but is required to allow other companies to purchase the rights to use them (you might want to check me on this I am not 100% sure) if my understanding is correct...it would mean that if telus can reach you, than inherrently any phone company could offer you services, if they wanted to (again my understanding may be a little off on that rule.

Vancouver. As I said before, I could be wrong, but I've never heard of any companies other than Telus offering landlines. If there are, they need to do more advertising

Residential I assume?

You can try Rogers, Shaw and Primus for a few.

Business? All those and Allstream add Bell.

If you don't know, then you haven't cared to look - it's that simple.

This is even discounting the cable reselleers such as vonage.

[August1991]

You can try Rogers, Shaw and Primus for a few.

Business? All those and Allstream add Bell.

If you don't know, then you haven't cared to look - it's that simple.

This is even discounting the cable reselleers such as vonage.

I'm intrigued by these questions.

In urban Montreal, I have a choice of Bell, Videotron and a company that buried fibre optic cables on my street - but not my neighbour's street.

IOW, I think this discussion is misplaced. Until we let people do what they want, we won't know what they can do.

I have three providers. Some Canadians may have only one telephone provider now. "Deregulation" means that the one provider will be "rich" - in the short term. Then what? We'll never know unless we try deregulation. There are few sectors changing so quickly as telecommunications.

Bernier was right to get the government out of this. If Canadian children will live well in the future, it will be because people alive now (their parents) took the chance to try something new.

[geoffrey]

Electrical deregulation was far more measured, areas of natural monopoly are highly regulated even in Alberta (transmission is a key example).

I am concerned and alot of this concern likely is from my ignorance of the telecom industry. Fortunately, one thing I understand quite well is the deregulation of the electrical system in Alberta. Like in electricity, it only makes economic sense to have one network, one transmission system if you will. Who owns this network? How are fees charged to those that borrow this network?

In Alberta, when electricity was deregulated, the main player in generation and transmission was required to spin off transmission assets as an independant company. I think I'd like to see the same thing happen in Telecom. Have an independant line owner, that charges a tariff for usage to consumers of telecom services. Have the natural monopoly portion of the industry regulated (pay the independant line owner for their maintence costs + some reasonable ROI for the owners through a usage based consumer charge), and let anyone and everyone provide the direct services to consumers.

If Telus owns all the lines in Calgary, I don't trust them to be a fair dealer when they also sell an end use product to the client in competition with others.

If the phone lines are seperate from the service providers, then I'm in for this. Otherwise, I'm very hesitent.

[August1991]

Fortunately, one thing I understand quite well is the deregulation of the electrical system in Alberta. Like in electricity, it only makes economic sense to have one network, one transmission system if you will.

Networks - not telephones or electricity - are considered a natural monopoly.

Are telephones (cell, landline) a "network"? Huh?

In any case, if networks are a natural monoply, the network creates a monopoly profit and an invitation to seek that profit. Government regulation will only delay the inevitable technological innovation.

---

Returning to this thread's OP, government bureaucrats should get as far as possible from individuals inventing something new.

[Saturn]

Good move on Bernier's part, with the one condition that all regulatory barriers to market entrants are removed. I don't want a deregulated monopoly. It's ok that phone companies set their own prices, but if I have the requisite capital, I should be able to start Geoffcom tomorrow. If I can't, then deregulation is a dangerous road to go down.

Unfortunately, that's what you are most likely to get. The telecoms are lobbying very hard for deregulation and the minister is listening to them. When he reverses CRTC decisions in favour of deregulation and you see them gloating, it's not because the customer is better off.

[White Doors]

Good move on Bernier's part, with the one condition that all regulatory barriers to market entrants are removed. I don't want a deregulated monopoly. It's ok that phone companies set their own prices, but if I have the requisite capital, I should be able to start Geoffcom tomorrow. If I can't, then deregulation is a dangerous road to go down.

Unfortunately, that's what you are most likely to get. The telecoms are lobbying very hard for deregulation and the minister is listening to them. When he reverses CRTC decisions in favour of deregulation and you see them gloating, it's not because the customer is better off.

Really? Competition is NOT good for the consumer? That's a novel concept! Have any proof to back that up?

[White Doors]

If Telus owns all the lines in Calgary, I don't trust them to be a fair dealer when they also sell an end use product to the client in competition with others.

If the phone lines are seperate from the service providers, then I'm in for this. Otherwise, I'm very hesitent.

All the major cities have redundant networks.

In Downtown Calgary for example, along with Telus, Bell, Allstream, Rogers & Shaw all have their own fibre that they use.

In Telecom there are two major areas that count as 'infrastructure'. The network and the switches.

In the above scenario, all those Telco's (except shaw) can provision telecommunications 100% on their own network with no help from Telus. This is called 'prime'

(Shaw uses Bell for the switching aspect).

In the outlying areas of Calgary and places such as Red Deer, Lethbridge etc, Bell, Allstream etc can provision via 'co-locate'. This means that they have their own switches there but are dependant upon Telus for the 'last mile' to provision a product for a customer. This is often referred to as the 'last mile' or the copper loop.

With the advent of cable (VOIP) there is now another inlet to the customer's premise. Shaw has the monopoly on that in Alberta. Instead of getting their own huge switches they are doing that through others. It is the opposite of the traditional cooperation of Telco's. They have the last mile but rely on the traditional telco's to actually have the programming for the phone.

In other regions it is not ecomically feasible to build any competing infratructure and the non-incumbent carrier has to 100% rely on the incumbents infrastructure. This is called 'rebilled' or re-sold'.

Keep in mind that this is just for 'local' scenarios. In other words a company could 100% rebill a customer's rural site but then they could also bring the LD traffic over to their networks. LD revenue is considered 'gravy' nowadays and has a good return.

Allstream, formerly AT&T Canada, formerly Metronet, inherited their nationwide network from CP Rail actually. It was built right along the railways so thay have a good 'backbone' infrastructure. The downtown cores were buil in the late '90's when it was metronet and it is in every major city right across Canada.

This company is now owned by MTS.

Bell/Telus are both former Ilec's (Stentor). Telus has the inherited network in Alberta/BC and Bell has it in PQ and ON. Also, trough Aliant, they also have it in Atlantic Canada. Telus and Bell provision the exact same way in each other's former Ilec territories.

Rogers purchased Sprint and has a foot print similar to Allstream except they also have the 'last mile' in central Canada through their cabling infrastructure.

Primus sells local. They resell from Allstream in the west. Not sure about the east.

Vonage is a 100% resold product. They have no infrastructure at all. Not even for LD traffic.

What this legislation is about is that currently the traditional ILEC carrier in a given territory, for example Telus, has to sell at a price that the government regulates. This was to encourage competition of the non-Ilec companies to set up in the ILec's territory. What the ILEC's were arguing is that telecommunications are no longer required to go on the ILEc's network and thus the regulated (ie higher) prices were not necessary to encourage competition. This is true as the VOIP scenarios can completely ignore the ILEC's footprint. It is a valid argument. The acceptance of this by the government will see lower prices for all as the ILEC's fight to keep traffic on their networks, either directly or through resellers.

There are also new technologies comoing out that will allow both the residential and business consumer to bypass these networks as well. The former legislation was basically predicated on the technology that was available 10- 15 years ago and is no longer relevant in today's telco market. Technology changes fast and the CRTC has to keep up no matter how much they seem unwilling to.

So, not sure if that answers your question, but perhaps it will give you some insight into what is going on here.

Keep in mind, this is not even getting into the wireless aspect!

[theloniusfleabag]

As with geoffrey, (I am in Calgary too) my wife and I switched to Shaw Digital Phone. Free long distance was a great offer, so our phone bill is always the same each month. However, we were told that Telus owns all the phone lines up to your house.

When we switched, we applied to keep our old phone # (which we had for over 10 yrs) but Telus refused the request. I heard that they refused some 90% of those requests. We also could not switch our business line to Shaw, as they were not allowed to offer commercial service.

Really? Competition is NOT good for the consumer? That's a novel concept! Have any proof to back that up?

Insurance and energy (where prices sky-rocketed after de-regulation) are two examples.

[White Doors]

As with geoffrey, (I am in Calgary too) my wife and I switched to Shaw Digital Phone. Free long distance was a great offer, so our phone bill is always the same each month. However, we were told that Telus owns all the phone lines up to your house.

When we switched, we applied to keep our old phone # (which we had for over 10 yrs) but Telus refused the request. I heard that they refused some 90% of those requests. We also could not switch our business line to Shaw, as they were not allowed to offer commercial service.

Shaw is VOIP so it does not go through Telus at all, it goes through the cable line and in Calgary, uses Bell's switch. With Shaw you are completely bypassing Telus. 100%. There are some issues with local number portability, so the area you are in may prevent that as a technological impossibility. Barring that, Telus is compelled by law to give up the right to that phone number to shaw and ultimately, to you.

If Shaw would not convert your business lines then that is their choice. I'm not sure that Shaw is handling business traffic. As far as I know, they only operate telephony for residential although I may be mistaken. It could be a non-compete agreement thay have with Bell to use their switches although that is pure specualtion on my part. Bell landline only sells to businesses in the west, not residential.

[White Doors]

Insurance and energy (where prices sky-rocketed after de-regulation) are two examples.

Energy is different from Telecommunications in that it went from 100% government owned to a regulated industry with private investment. As is often the case, the government had a massive infrastructure shortfall which required alot of private investment to catch up. So while there were some hiccups, especially in California, I'm not aware that my power bill is any higher now than it was pre-deregulation in Alberta. At least I cannot attribute it to deregulation.

Telecommunications has not been government owned in decades.

[Martin Chriton]

Really? Competition is NOT good for the consumer? That's a novel concept! Have any proof to back that up?

Insurance and energy (where prices sky-rocketed after de-regulation) are two examples.

Canada has extremely poor cellphone usage due to lack of competition.

Prices are way too high.

When I lived in the US for a bit, I had more choice and wasn't nickeled and dimed near as much.

[White Doors]

Really? Competition is NOT good for the consumer? That's a novel concept! Have any proof to back that up?

Insurance and energy (where prices sky-rocketed after de-regulation) are two examples.

Canada has extremely poor cellphone usage due to lack of competition.

Prices are way too high.

When I lived in the US for a bit, I had more choice and wasn't nickeled and dimed near as much.

Perhaps that is true, but I am not sure that is due to government regulation of wireless?

With the new 'local number portability' (LNP) being adopted in Canada, this should act to increase competition.

For example, I am now seeing offers of no charge airtime if you call someone on the same network as you.

I think the wireless industry has been behind that of the US, but there is not near the regulation of wireless as there is with wireline as the advent of wireless was largely after that of telco deregualtion in Canada anyways.

[geoffrey]

Lots to deal with here:

In any case, if networks are a natural monoply, the network creates a monopoly profit and an invitation to seek that profit. Government regulation will only delay the inevitable technological innovation.

I strongly disagree. The cost of implementing an entirely new telephone system (digging up all 250,000 Calgary households backyards) is prohibitively large. The owner of the physical infrastructure holds any users captive to their price pressure.

It's very far from an efficent market, and it's definitely not even close to perfect competition.

In Telecom there are two major areas that count as 'infrastructure'. The network and the switches.

In the above scenario, all those Telco's (except shaw) can provision telecommunications 100% on their own network with no help from Telus. This is called 'prime'

Are you saying that all Telco's have a line running to every house? I understand your last mile reference that you go onto later, again, we see a similar concept in electricity... Enmax owns the distribution system for Calgary, and anyone selling power in Calgary borrows Enmax's distribution network. That aspect of the electricity market is still regulated.

To be honest, I haven't really looked in great detail, but I've only seen Telus switching buildings around here... they are pretty large no?

I'm still very concerned about deregulation of an industry that has natural monopolies in some areas... ones that won't really ever have competition.

So, not sure if that answers your question, but perhaps it will give you some insight into what is going on here.

Keep in mind, this is not even getting into the wireless aspect!

It answered alot of questions, thanks. It still does little to end my concerns about the monopoly aspects of it. I can easily see that the downtown core is a pretty competitive marketplace... and I assume that's where Telco's do most of their business. But residential subscribers simply don't have the access to competition like downtown users do. This concerns me.

VoIP does through a wrench into that argument, I suppose. What are the limitations of VoIP over traditional service, and can pretty much anyone switch over (are some businesses or what not too demanding on bandwidth to do so, ect. ect.). Do we have the infrastructure in Canada to support 100% of people and business going to VoIP tomorrow?

Insurance and energy (where prices sky-rocketed after de-regulation) are two examples.

Interestingly, the aspects of energy that remained regulated private monopolies are the only areas that decreased cost to the consumer. Your transmission portion of your electric bill for example has decreased considerably since deregulation. The distribution aspect (really the distribution line tariffs to non-Enmax people) has also decreased in cost.

Generation and retail provision have both skyrocketed, though generation is dealing with some greatly increased costs.

Energy has a completely different set of problems that Teleco's don't have. Major generators can actually profit by having outages... the Enron: The Smartest Guys in the Room documentary shows how this is done in simple terms (plus I recommend the movie). I can't possibly conceive how a Teleco could profit from negatively impacting service, it doesn't make much sense. I'm a little more comfortable with Telco's from that perspective.

Energy is different from Telecommunications in that it went from 100% government owned to a regulated industry with private investment. As is often the case, the government had a massive infrastructure shortfall which required alot of private investment to catch up. So while there were some hiccups, especially in California, I'm not aware that my power bill is any higher now than it was pre-deregulation in Alberta. At least I cannot attribute it to deregulation.

The electricity market in Alberta is very deregulated outside of transmission and the specific distrubtion infrastructure charges. Generators can nearly charge what they wish, as can retailers of electricity. There is alot of active trading of electricity in Alberta.

The infrastructure wasn't all that bad in Alberta, the basic needs were met anyways. There are a few major expansions in the works on the transmission side of the next few years, but this is basically to meet future demand.