Cabinet upholds CRTC rulings, suggests others could start paying contribution

The federal cabinet is suggesting that changes to the long distance contribution regime are warranted, and that other telecom companies may have to start paying into the $800-million subsidy fund. But rather than overturn Telecom Decision 99-20, the government believes the CRTC is best equipped to deal with the concerns in a broader proceeding that begins this week in Hull QC on contribution (Telecom PN 99-6). On June 28, Industry Minister John Manley announced that the government is upholding three appeals related to a review of the contribution rate policy (Telecom Decision 99-20), unbundled local loop fixed rate service charges (Telecom Decision 99-15), and service to remote and northern areas (Telecom Decision 99-16). While upholding the CRTC decision, the minister did sound warnings about the contribution scheme. "It's also important to ensure that subsidies intended to maintain affordable local service are not a competitive advantage to the former monopoly telephone companies," Manley told delegates at CANARIE Inc's Net2000 conference last week in Ottawa. "There is no room for subsidies to tilt the playing field." To help ensure this balance, the cabinet has directed the CRTC to conduct annual reviews over the next five years "on the status of competition in Canadian tele-communications markets and of the deployment and accessibility of advanced telecommunications infrastructure and services across Canada." Manley said this review will also help determine whether or not contribution is still "doing the job". "If not, it may be necessary, in order to ensure that there is adequate service ... to find other sources, other than long distance to provide that additional subsidy," Manley told reporters. The minister's words provided some comfort to the losing appellants. "The only good news is I think the government has sent a pretty clear message to the CRTC that they're not totally satisfied with the job they're doing and they have some concerns," Jean Brazeau VP of regulatory affairs for Call-Net Enterprises Inc explained to Network Letter. "We've been expressing those concerns for the last year, year and a half. And we're hoping that people at one Promenade du Portage in Hull have understood the message." While disappointed with the government's decision, Brazeau says it was not entirely unexpected. "It's very difficult for people who are not in the industry to sit back and judge these petitions," he says. "If I were a politician and someone brought me an issue on order processing or contribution, I'd say ‘why are you coming to me with these issues?'. So I can understand their reluctance to deal with this and also there's always a reluctance to second guess an independent tribunal in this country." Call-Net had appealed 99-15 and 99-20. As expected, the major ILEC was happier with the vindication. "We think it's excellent that the government and the CRTC are lined up," Sheridan Scott, Bell Canada's chief regulatory officer, told Network Letter. "They seem to have a clear area of responsibility between policy and regulation, that they're all pulling for the development of a competitive environment." The government's inference that the controversial system should be revised or abandoned is even finding acceptance among the subsidy's traditional supporters. "I think all of us in the industry share their view that we should be trying to push these subsidies out of the system. The fewer subsidies, the better," Scott says. The CRTC has suggested it would take a leisurely look at amending the subsidies - something Brazeau believes would be a mistake. "The competitive industry cannot support the subsidy program that exists today and to delay any decision to 2002 is totally unacceptable to us," he maintains. "We need a new contribution collection mechanism now and we've argued and will be arguing that they can do it today if they wanted to." Brazeau may not have to wait two years to get his wish. A senior government insider paints a clear picture when he bluntly states, "Contribution is toast." Opponents of the contribution regime will have a few more opportunities to argue their case. The CRTC is currently conducting another review of the subsidy system. The Senate subcommittee on communications will include contribution rates in the second phase of its hearings. That second phase is scheduled for this fall."I'm just hoping that understand that it is the government's policy to promote competition and in order to promote competition you need competitors," the Call-Net VP offers. "It can't just be a theoretical exercise." When the Senate subcommittee announced its plans to study telecom concerns, the industry was delighted (NL, April 25/00). The five-member panel will look at such topics as LD competition, rural service, the amount of competition between new entrants and the older telcos, and whether competition is sustainable. If it's not found to be sustainable, the Senate will look at ways to increase competition. However, discussions of technical matters like contribution and local loops tend to get bogged down in contradictory detail. "We raised some pretty complicated issues and the dark side is always very effective in rebutting a lot of these issues and confusing the issues," Brazeau says. Sharing the subsidy pie The appeal on remote service was filed by the governments of Manitoba and Saskatchewan. Over 88 interventions were filed, from telcos, school boards and libraries. At the time of the original decision last fall, smaller companies like QuebecTel were demanding the right to the same type of subsidy being proposed for BCE Inc subsidiary Northwestel (NL, Nov. 1/99). There was even a dissent filed by one CRTC commissioner. That cut no ice with the cabinet and Bell's Scott endorses the view taken by Manley and his colleagues. "The minister has indicated that he believes the CRTC has it right," she notes, "that they have understood that there's a balance or trade off to be made between competition and ensuring affordable service in areas where competition would not bring about that result. I think that's exactly the right emphasis." The current reviews of contribution and other changes in regulation rumoured to be in the offing, suggest that relief for new entrants could be coming soon. Call-Net's Brazeau tries to be optimistic, but he does get mugged by reality. "I was going to say hope springs eternal but I've been in this business for too long," he laughs. "We were hoping to see signs that the CRTC is concerned about the economic welfare of all the players in the marketplace not just a privileged group and I haven't seen it yet."

Cabinet upholds CRTC rulings, suggests others could start paying contribution

News | July 4, 2000

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