In a wide-ranging decision on the future of telecommunications competition, the CRTC ruled Thursday that the established phone giants like Bell Canada and Telus must cut the network access fees they charge their new competitors like Call-Net (operator of Sprint Canada) and AT&T Canada by 15 to 20 per cent.

But the smaller telcos had been asking for much deeper cuts, saying they'd risk bankruptcy unless the cost of network access was slashed. AT&T Canada, for instance, had wanted the access fee slashed by 70 per cent. Call-Net had been looking for a fee cut of up to 50 per cent.

But the CRTC did not agree with their argument that the creation of a viable, competitive telecom industry depended on much lower access fees.

"The new pricing rules for local phone service rates will balance more fairly the interest of the main stakeholders customers, both business and residential; competitors and incumbent phone companies," CRTC vice-chair David Colville said.

"The new rules will distribute the benefits of efficiency gains more evenly across the system," he said.

Sprint Canada CEO Bill Linton told CBC Business News that the decision means the CRTC evidently thinks competition is not a viable option. Linton said the regulator's ruling means that "it's not going to change the regulations to promote competition. What we are going to do is just to continue to regulate rates and that's a mistake."

But Bell Canada chief strategy officer Bernard Courtois said the CRTC's decision is pro-competitive. "I'm surprised the that competitors would expect to get more than this because if they're looking for that type of competition, that's not real competition. It would be totally artificial," he said.

CRTC freezes local phone rates for 4 years

The CRTC also ruled that, on average, local residential phone rates will stay right where they are for the next four years unless inflation dramatically picks up speed.

The "on average" means there's potentially still room for increases in some local rates. The CRTC said phone companies can raise rates in some areas by up to 5 per cent as long as they're reduced in other areas by the same amount. It costs phone companies more to service their rural customers.

The freeze on local residential phone rates will be lifted only if inflation exceeds 3.5 per cent annually more than double the current rate of 1.7 per cent.

Canada's broadcast regulator, citing a need for continuing consumer protection, denied requests from Bell Canada and Telus to increase basic local phone rates across-the-board by up to $3 a month until they reached as much as $35 a month.

They were also denied permission to raise payphone rates until the commission studies the issue.

Business phone rates will be allowed to increase by the inflation rate, with a cap of 10 per cent annually.