It doesn't seem that long ago that getting phone service was pretty simple. You called up the one phone company that was allowed to operate in your part of the country and asked that it set you up.

You paid the price they were allowed to charge. That price was likely really high if you lived in an area that was easy to service — like a big city. But the phone company was probably taking a loss on you if you lived in a remote part of its territory.

That began to change in 1997 when the Canadian Radio-television and Telecommunications Commission (CRTC) established a framework to open the local market to competition. The commission had already deregulated most telecommunications services, including cellular and long-distance phone services, and the internet.

But competition in local phone service evolved slowly, mainly due to the high cost new companies faced before they could deliver the service. However, by 2004, the pace of competition began to pick up significantly, as cable companies were able to gain reliable access to the telephone infrastructure of the big companies and companies offering internet-based phone services began attracting customers in greater numbers. Still, the traditional phone companies — the old monopolies — held 94 per cent of the local market.

On March 22, 2006, the Telecommunications Policy Review Panel — appointed a year earlier by the previous Liberal government — recommended that the federal government should drastically deregulate its rules governing telecommunications companies, including for local phone service, which today is a $9.8-billion industry.

Just over two weeks later, the CRTC came down with its decision.

That was followed by a proposal from the government in December 2006 that was a compromise between the CRTC's decision and what the incumbents sought.

What did the CRTC decide?

Basically that deregulation of rates for local services should go ahead — but with several conditions. The key one is that the old monopolies — what the CRTC refers to as incumbent local telephone companies (TELUS, SaskTel, MTS Allstream, Bell Canada, Telebec and Aliant) — won't be allowed to charge what they want until companies which have recently started offering local phone service obtain 25 per cent of the market.

Another condition imposed on the incumbents is that they must have provided competitors with well-functioning access to their networks for six months.

The CRTC and a parliamentary committee dominated by the opposition had opposed the government proposal, but some compromises were reached.

What was the government's policy?

The new policy, announced by Industry Minister Maxime Bernier on April 4, is in line with a proposal he made in December 2006. It takes effect April 18, 2007.

Competition will be opened where there are at least three phone carriers.

A consumer agency will be created to resolve complaints from individuals and small business customers. It would be funded by the industry and report its findings to the government.

Until it is formed, the CRTC will field customer complaints.

The CRTC will also "retain some flexibility" in regulating prices in rural markets by giving small cable companies 18 months of lead time. Other protections that already exist, such as price ceilings for stand-alone residential phone services and price regulation, will continue in areas where there is little competition.

The federal Competition Bureau will be given a further $10.5 million over five years to investigate anti-competitive practices by the big telephone companies should they occur.

So what does that mean for my local phone service?

It depends on where you live. If you've been a long-time customer of Bell Canada in Montreal, you'll be able to switch to a cheaper package offered by Videotron. Bell won't be allowed to cut its rates to match those of Videotron — at least not yet.

Companies new to the local game can undercut the incumbents — but the incumbents can't use their control of the majority of the market to undercut the new players. They also can't use local phone service as a "loss leader" as part of a bundle of services — they can't offer low-cost local calling to get you to sign on to long-distance, cellular and satellite TV, for instance.

How does a new company offer telephone service?

The incumbent phone companies invested heavily in building the infrastructure that provides phone service across the country. The "new" companies have to pay for access to that infrastructure so they can sell phone service to their customers.

Companies offering internet-based phone service don't face that.

What's stopping the incumbents from charging what they want to the competitors?

The CRTC. It has established the Price Regulation Regime, which governs the rates the incumbents can charge to residential and business consumers as well as to competitor companies.

As far as consumers are concerned, the Price Regulation Regime means that residential rates shouldn't go up unless the annual inflation rate surpasses 3.5 per cent.

As far as the competitor companies are concerned, it means wholesale access to the infrastructure at a stable price.

For the incumbents, it means the more efficient they get, the more they will make selling access to their infrastructure to the competitors.

Was there anything in the CRTC decision that the incumbents liked?

Bell Canada said it was "profoundly disappointed" in the ruling. Aliant said the decision "prevents customers in Atlantic Canada from receiving the full benefits of a freely competitive market." Telus said the decision shows that the CRTC is "out of step with the telecommunications industry's current situation."

But the incumbents did welcome one aspect of the ruling. It allows them to try to win back customers who switch to competitors three months after they leave. Under the old rules, incumbents had to wait a year before trying to win back old customers.

Bernier's announcement in April was welcomed by Telus, which said it will apply to the CRTC to initiate deregulation in markets across British Columbia, Alberta and eastern Quebec.

The CRTC will have 120 days to review the applications, so the effect of the changes won't be seen until the fall of 2007.

Will deregulation mean lower residential phone rates?

Again, it depends on who you ask. The CRTC says yes. So do the incumbent phone companies and the new competitors.

Consumers groups aren't so sure.

The Public Interest Advocacy Centre represented several consumer groups — including the Consumers' Association of Canada, the National Anti-Poverty Organization and the Union de Consommateurs — at the hearings leading up to the CRTC decision. Michael Janigan, a lawyer with PIAC, told CBC News that competition will likely mean a duopoly in most markets.

"You might see the same kinds of price differences you see between cable and satellite. Is one cheaper than the other? Do you see a lot of difference in prices for cellphone packages?"

Janigan also isn't moved when incumbent phone companies complain they'll have to wait until competitors capture 25 per cent of a local market before they can deregulate services.

"One company with 75 per cent of the market is still dominant. I'm just amazed that some of the media reports suggest the CRTC imposed a large barrier on the big phone companies."

He points out that under the government's rules governing mergers, the government must approve any merger that would give the new company control of 35 per cent of the market.

Janigan is also concerned about some of the protections offered consumers under deregulation, especially when it comes to rules governing the quality of service, requirements to deliver affordable service to lower income people, and the process of monitoring a company should it become dominant in a local market.

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