Telecommunications Service in Canada: An Industry Overview

Section 3:  Communication Paths and Convergence

3.2 Wired Long Distance Services

Over the past twenty five years, the market for long distance services has undergone several stages of liberalization. In 1979, the Canadian Radio-television and Telecommunications Commission (CRTC) eliminated the wireline incumbent carriers' monopoly on leased private lines by allowing CNCP (later renamed Unitel; now Allstream (a division of MTS)) to offer such services. In 1990, the CRTC began permitting the reselling of long-distance voice services. (Footnote 1) The year 1992 saw the biggest step towards competition in the long distance segment: the CRTC eliminated the incumbent telecommunications carriers' monopoly in the provision of public interexchange voice services (long distance voice services). (Footnote 2)

Competition in the resellers' market segment continued to increase as recent entrants, including HappyCall and TelMax Télécom, entered the market, increasing the total number of operators registered with the CRTC from 577 in June 2003, to 632 as of December 31, 2003. (Footnote 3) For example, Primus Canada, a wholly owned subsidiary of Primus Telecommunications Group Inc., provides telecommunications services on a resale basis to its customers by purchasing network and access capacity from other facilities-based telecommunications service suppliers. These services include voice, data, Internet, e-commerce and Web hosting. Primus Canada is one of the largest telecommunications resellers in Canada with about 900,000 customers at the end of 2003, of which approximately 60,000 were Internet subscribers.

The wireline long distance market is composed primarily of revenues earned from the provision of inter-exchange communication services to residential and business customers. Long distance voice services generated revenues of close to $4.3 billion in 2003, a decrease of 2.1 percent as compared to 2002. Another way of examining the long distance market is to look at the revenues as reported by the companies, which may also include revenues from the provision of private lines and data networking services to business customers. (Footnote 4) Under this definition, long distance revenues in 2003, as reported by the companies, were $5.1 billion, a decrease of 7.7 percent when compared to 2002 (Figure 3.2-1 and Figure 3.2-2).

The decline in long distance revenues affected all of the long distance segments almost equally in 2003. Long distance revenues for Bell Canada decreased by 7.6 percent, year-over-year, while the other ILECs saw a 10.5 percent revenue decline. The wireline competitive service providers did not fare any better, with a 10.3 percent decline in their long distance revenues (Figure 3.2-1).

Figure 3.2-1

A more complete picture of the long distance segment can be revealed by examining long distance traffic. With intensifying competition in the long distance market, market prices for services significantly declined while annual revenues tended to increase. Although long distance revenues began to decline in 2000, there continued to be increased usage, as total long distance minutes had grown consistently since 1997. However, for the first time in 2003, total long distance minutes declined, by 4.1 percent (Table 3.2-1). These results suggest that wireline services for long distance communications are being replaced by alternative communication technologies, such as wireless, e-mail, and instant messaging, and to a lesser degree internet telephony (VoIP - see Section 3.1 for a more detailed discussion of VoIP and its service providers).

Figure 3.2-2

International Telecommunications Market

As part of the wireline long distance market, the international long distance telecommunications market accounts for approximately 27 percent of total long distance revenues. The international segment has experienced considerable change due to primarily two factors - technological improvements and the liberalisation of the international telecommunications services. Technological improvements have made transmission infrastructures more efficient. The increased competition that has resulted from industry liberalisation, both domestically and abroad, has worked to erode a system where many countries charged high rates in the international segment. This has led to a gradual decline in these previously high rates. (Footnote 5)

The effects of the liberalisation of Teleglobe's monopoly on Canada's overseas telecommunications facilities were seen relatively quickly. Initially, other companies were permitted to offer overseas service on lines through leasing arrangements with Teleglobe, who remained the sole owner of facilities. On October 1, 1998, Teleglobe's monopoly on overseas facilities ended, and several companies have since taken advantage of the opportunity to enter the market. (Footnote 6)

In addition, the CRTC eliminated restrictions on the routing of traffic and instituted a licensing system for international service providers (facilities-based providers, and resellers). (Footnote 7) By December 1998, the CRTC had issued 70 licences for the provision of international telecommunications services. The number of licences increased to 258 as of December 31, 2003. (Footnote 8)

Table 3.2-2 displays international long distance revenues and the market share of the incumbent carriers versus the competitors for 2001 and 2002. (Footnote 9) Total international long distance revenues saw a decline of 1.5 percent, or approximately $20 million, between 2001 and 2002. This decline stemmed from the 5.5 percent decrease in the international long distance revenues accruing to the incumbent providers, down to approximately $877 million in 2002. This loss was partially offset by an 7.3 percent increase in the international long distance revenues earned by the competitive providers, to $448 million. As such, the competitors' share of international long distance revenues increased to 34 percent in 2002, from 31 percent in 2001.

Figure 3.2-3

Footnotes

1. CRTC Telecom Decision 90-3.

2. CRTC Telecom Decision 92-12.

3. The CRTC and Industry Canada do not verify the accuracy of information provided by the resellers.

4. Data, included in long distance, may include revenues from competitive network services, national and regional IP data, the sale of inter-networking equipment and cabling, and Internet related services.

5. Source: CRTC, Report to the Governor in Council: Status of Competition in Canadian Telecommunications Markets, November 2003, (Source: CRTC, Report to the Governor in Council: Status of Competition in Canadian Telecommunications Markets (Section 4.2), November 2003.

6. As of October 1, 1998, the distinction between the overseas and the Canada-U.S. telecommunications markets also ended, and a common set of rules began to apply to international telecommunications services, irrespective of the country involved in the transmission.

7. See CRTC Telecom Decision 90-2 and CRTC Telecom Decision 98-17.

8. See the CRTC Web site for International Telecommunications Services Providers Licensed by the CRTC (Class A) at http://www.crtc.gc.ca/ENG/public/Iplists/Class-A.htm and for Class B http://www.crtc.gc.ca/ENG/public/Iplists/Class-B.htm.

9. Source: CRTC, Report to the Governor in Council: Status of Competition in Canadian Telecommunications Markets, November 2003. International long distance services are considered here as long distance services that terminate outside of Canada.