Municipalities call on feds to amend Telecom Act, warn of network costs

OTTAWA—Opening the door to foreign investment in the telecom sector will “add millions more” to the annual costs that municipalities pay to expand and manage network infrastructure, the Federation of Canadian Municipalities (FCM) has told Industry Canada. In a submission for the department’s public consultation on opening the telecom sector to foreign investment, the FCM is continuing its push to amend the Telecommunications Act and require telcos to sign access agreements with municipalities before they can build, expand and maintain local network infrastructure. “While increased competition will likely have a positive impact on pricing and service quality, the cost implications for municipalities must be given consideration to determine the most effective and efficient option,” FCM president Hans Cunningham wrote in a June 17 letter to Industry Minister Tony Clement, which was submitted to Industry Canada for its consultation on foreign ownership. Cunningham wrote that telecommunications companies install and maintain network infrastructure on or underneath municipal land, such as roads, sidewalks, and parking lots, known as “rights of way.” Telcos expand or build networks using municipal rights of way without paying the full cost, which amounts to “a subsidy by local property taxpayers to for-profit telecoms,” he wrote. The letter alludes to a 2008 FCM report, “Highway Robbery: How Federal Telecom Rules Cost Taxpayers and Damage Public Roads,” saying that the existing regulatory framework “undermines” the ability of municipal governments to manage their property and that that, nationally, municipalities are subsidizing telecom companies by more than $107 million per year. The 2008 report recommended that the federal government amend the Telecommunications Act to include a provision saying that telecom companies must negotiate agreements with municipal governments to gain access to municipal rights of way. Michael Buda, director of policy and research at the FCM, said in an interview that the government’s plan to amend the Telecom Act to loosen the foreign ownership restrictions creates a window to move forward with the FCM’s proposal. In a new report on foreign ownership released in April, called “Perfect Storm: How New Technologies and Foreign Investment in Canada’s Telecommunications Industry will Affect Municipalities,” the FCM said that the 1993 Telecommunications Act gave the CRTC jurisdiction over access to municipal rights of way, but that a 2001 court decision, Ledcor v. Vancouver, shifted responsibilities and part of the cost of installing telecom infrastructure to municipalities. In CRTC telecom decision 2009-150, the commission granted MTS Allstream access to rights of way in Vancouver, but under certain conditions. Buda said the 2009 commission decision laid out principles that municipalities and telcos now use to negotiate access rights agreements. Although access agreements are standard practice, the landscape is becoming more competitive, and there’s nothing in the law that says telecos must sign agreements with the municipalities, Buda said. As Canada prepares to loosen its foreign ownership restrictions in the telecom sector, he added, extra capital is expected to increase investment in networks, and new entrants may emerge on the scene that don’t understand the traditional bargain struck between municipalities and the incumbent telcos. Buda said that if a telecom company feels a municipality is making unreasonable demands, it can go to the CRTC for a decision, but the commission is relying on unclear legislation. “Every single time, you basically have to litigate common sense,” he said. “If it’s clarified in legislation, new entrants will know what the rules of the game are before they even get here.” Greg Burch, a spokesman for MTS Allstream, wrote by email Wednesday that the company believes it pays all relevant costs related to network management and expansion. Burch said CRTC decisions have taken into consideration a process for municipalities to recover “casual costs related to infrastructure.” “We do not support the FCM’s position,” Burch wrote. Lynn Meahan, a spokeswoman for Industry Minister Tony Clement, said by email Wednesday that the department will be considering all submissions received for the consultation. sdoyle@thewirereport.ca

Municipalities call on feds to amend Telecom Act, warn of network costs

News | June 23, 2010

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