Ottawa accelerates deregulation of local phone service

Canada's established phone companies have won their longstanding fight for less regulation of their local phone business, a change they say will benefit consumers.

Canada's established phone companies have won their longstanding fight for less regulation of their local phone business — a move the telcos say will benefit consumers.

On Monday, Industry Minister Maxime Berniergave BCE (Bell Canada), Telus and the country's other incumbent telcos the power to set their own prices, as long asthere is sufficient competition in the local area.

Current policy has prevented the big telcos from charging what they want for local phone service.

In a directive released last April, the CRTC declared that deregulation of the local phone business would not be allowed as long as the established phone companies held at least 75 per cent of the market in a particular region. As of 2005, they had 92 per cent of the market nationally.

The broadcast regulator was worried that without a minimum foothold in the marketplace, "new entrant" competitors could be driven out of business by price-cutting incumbents.

But the former phone monopolies have been lobbying for more deregulation for years. They say they've lost hundreds of thousands of customers to rival providers of local phone service — especially the cable companies — who can charge what they want for phone service.

Monday's move throws out the old CRTC threshold policy andfurther reinforces Bernier's reputation as a minister who favours free-market solutions to telecom issues.

The new proposal "replaces the CRTC's market-share test withonethatemphasizes the presence of competitive infrastructure in a given geographical area," a release from Industry Canada said.

60 per centof Canadians will benefit: Bernier

At a news conference, Bernier estimated that 60 per cent of Canadians, mainly in urban markets, would benefit from the change in policy. In rural areas where there is little competition, it would be "status quo" for now, he said.

"Where consumers have access to telephone service from a traditional telephone service company, a cable company offering telephone service, and at least one unaffiliated wireless provider, deregulation will occur," Bernier said.

But will consumers see dramatically lower local phone rates? Some analysts were doubtful.

"As a stand alone service, there may be a slight movement downwards, but I don't think you're going to see price slashing," said telecom analyst Kevin Restivo. "That's not the Canadian service provider way, quite frankly."

Last week, amendments were introduced to the Competition Act designed to "deter anti-competitive behaviour" in deregulated markets.

Bell, Telus welcome change

Telus welcomed the policy change, calling it a "positive development" for consumers and the industry.

"By giving the market more freedom to determine outcomes, we can begin to unleash the full benefits of competition for our customers, and foster enhanced innovation and investment in the Canadian economy,"said Darren Entwistle, Telus president and CEO, in a release.

Bell Canada also praised Bernier's announcement, saying it "catches up to market reality."

"He is trying to give consumers more choice and Canada a telecom framework that is internationally competitive — and that is a most welcome development both in terms of the Canadian economy and in termsof Canada's productivity and competitiveness," Michael Sabia, president and CEO of BCE and Bell Canada, said in a release.

In June, Bernier told the CRTC to rely more on market forces and less on regulatory fiat when drafting policy for the phone industry. That followed the March release of a major federal panel report that "Canada should rely primarily on market forces" and a drastic deregulation of the rules that govern the country's phone, cable TV and internet services.

Last month, Bernier also overruled the CRTC on the regulation of internet phone service (VoIP), saying there is no reason to regulate some telephone services offered through broadband internet connections.