Competition Bureau
The Regulatory Framework
Telecommunications Policy ObjectivesB.1 Should the existing policy objectives set out in Section 7 of the Telecommunications Act be changed? If so, what should they be? 35. Since the embodiment in 1992 of the set of policy objectives in section 7 of the Telecommunications Act, technological innovation and changes in telecommunications services, equipment, markets, user demographics and global trade have considerably altered the telecommunications landscape. The Bureau considers that the relevance and importance of the social and economic problems and industry activity that the Act was originally designed to address in 1992, are likely to have changed significantly as well. Therefore, as the telecommunications sector faces even more tumultuous change in the coming years, a review of Canada’s telecom policy objectives is in order. 36. Parliament’s first steps must be to anticipate the new social and economic problems that this evolution is likely to bring about, and to formulate the long-range objectives for telecommunications in Canada. Ideally, these objectives and issues should be carefully identified in the statute and, where relevant and possible, some indication of the relative importance of individual goals should be included.12 In this way, the objectives are more likely to provide useful guidance to the CRTC in its exercise of the discretion conferred on it under the Telecommunications Act. 37. Setting these objectives is a matter of public policy that should be decided on the basis of careful study, forecasting and public consultation and debate. The Bureau is best placed to comment on how the objective of a competitive telecommunications sector might be enhanced, and how competition may in turn help to achieve other telecommunications policy objectives. 38. The Bureau recognizes the complex and multi-dimensional character of the problems and objectives that the telecommunications regulatory framework must attempt to resolve and achieve. These objectives often compete with one another and it is almost always difficult, and sometimes impossible, for the regulator to reconcile or balance them. 39. The Bureau believes that in addition to being an objective in its own right, the reliance on market forces to drive telecom services provision, will help to achieve other policy objectives. For example, competition in telecom services is likely to stimulate research and development and encourage innovation in the field of telecommunications, which is the objective set out in subsection 7 (g) of the Act. Competition may also drive service providers to develop solutions for social needs (e.g., reliable and high quality emergency response services) since their ability to respond to those needs will be a competitive advantage. 40. Therefore, the set of telecommunications policy objectives that Parliament chooses to adopt would benefit from a direction to the regulator to adopt only those regulatory measures that are least intrusive in the marketplace. One way to provide such direction would be to establish separate regulatory objectives to guide the CRTC in its exercise of discretion and powers under the Telecommunications Act. 41. The Broadcasting Act provides a useful precedent. Subsection 5 (2) sets out the regulatory policies that should guide the CRTC in the performance of its regulatory functions and decisions in broadcasting matters. The Bureau considers that a similar framework could be set out in the Telecommunications Act, whereby regulatory objectives would provide the CRTC with practical guidance in the exercise of its powers in furtherance of the overall telecommunications policy objectives. 42. In this regard, the Bureau proposes the adoption of telecommunications regulatory objectives, one of which would direct the CRTC to adopt the regulatory measure, or take the decision, that is the least intrusive in the marketplace. Therefore, when the CRTC is choosing from among several regulatory tools that could achieve the same regulatory end or policy objective, it would be required to use the tool that most relies on market forces. 43. Other regulatory objectives might involve directions to the CRTC to tailor regulation, where needed, to particular segments of the telecom sector (e.g., residential or business) and to be sensitive to the administrative burdens of regulation on the regulated when choosing a regulatory measure.
Economic RegulationRe-imposition of Economic Regulation in Forborne Markets B. 6 Should economic regulation ever be re-imposed on carriers or services that have been deregulated? If so, what principles, and tests should be used to come to such a determination? 44. In weighing whether regulation should be re-imposed, the Bureau would first consider whether regulation would be warranted regardless of whether that service had previously been forborne. It is important to note that the presence of some market power in and of itself is not sufficient to justify re-regulation. Generally, before price regulation can be considered, the provider must have a “natural monopoly” in the service (i.e., it can supply the entire market at a lower cost per unit than could two or more separate suppliers). When natural monopoly conditions are present to a significant degree (i.e., when one supplier has a substantial cost advantage over potential small suppliers), one will expect that competition will provide little discipline over prices. 45. However, natural monopoly, even a substantial cost advantage, is insufficient in and of itself to justify regulation. The regulatory process is fraught with well-known difficulties. As part of their determinations, regulators require up-to-date information on cost and demand. As a public process for which opportunities for all interested parties to participate are appropriate and necessary, regulation is inherently slow and typically much less responsive to changes in market circumstances than are private firms that can make price and product design decisions independently. If processes are slow, price and demand data are likely to be inapplicable to the market going forward. 46. This is why regulation is imposed only in traditional utility sectors where one sees significant natural monopoly, consumers vulnerable to potential exploitation, and technology and demand sufficiently stable to make costs and price predictable. Even at its best, regulation is less likely to be effective the more rapidly technological advances change costs and service offerings. When the telecommunications sector consisted largely of relatively stable “plain old telephone service” supplied under clear natural monopoly conditions, the costs associated with delay may well have been worth incurring. To the extent that the sector features rapidly changing technology and service offerings, it will be harder to justify regulation.13 The existence of substitutes, even if not perfect, may make the benefits of regulation less than the cost. Moreover, as technological change plays a greater role in a sector, it becomes more difficult to balance the static benefits of low prices against the dynamic benefits associated with preserving profit-oriented incentives to innovate.14 47. Regulation brings about additional costs when imposed on specific markets within a sector (e.g., on prices paid by retail competitors for access to underlying facilities).15 If access to the facilities has not traditionally been offered (e.g., because retail service had been regulated), an entire new set of costs and demand information must be calculated to ascertain what the regulated price should be. If the facilities provider is also a participant in the related market (e.g., retailing of the service), then wholesale price regulation will create incentives to exploit market power in facilities. One such method would be discriminating against unaffiliated retailers in access provision. A second might be cross-subsidization of retail operations by misallocating costs of those operations to the facilities. Such cost misallocation can lead to “regulation-induced predation,” discussed below in our answer to B.8. Retaining or re-imposing price-regulation means either that the retail operations of the regulated firm have to be separated from the facility operations, functionally or through divestiture, or that the regulator must be vigilant about preventing discrimination and cross-subsidization.
48. Given the costs inherent in regulation noted above, the Bureau believes that economic regulation on markets previously forborne should only be re-imposed where there is compelling evidence of market failure following a full review of all relevant circumstances and market facts, including a full competition analysis. In keeping with this principle, the Bureau proposes that predetermined tests, thresholds or triggers for re-imposing economic regulation should be avoided in favour of a rigorous review of the relevant market using the Bureau’s competition analysis routinely applied for merger review. Even where the evidence suggests a need to re-impose some degree of economic regulation, it is the Bureau’s view that the regulator should adopt the least intrusive form of regulation possible.
49. In principle, the Commission has endorsed an approach to forbearance determinations in Review of Regulatory Framework, Telecom Decision CRTC 94-19, dated September 16, 1994 (Decision 94-19) that supports the kind of broad consideration of all relevant factors and prevailing circumstances that the Bureau adopts in its Merger Enforcement Guidelines and that the language of subsection 34(2) of the Telecommunications Act appears to warrant. The requirements of subsection 34(2) to forbear in circumstances where, as a question of fact, the Commission finds that there is, or will be, “competition sufficient to protect the interests of users” are best met in the context of competition analysis that entails a broad review of all relevant factors and evidence. 50. In the Bureau’s opinion, the same conclusion holds true in any consideration of whether a market or service previously determined to be sufficiently competitive to warrant forbearance ought to be subjected once again to economic regulation. While the Bureau, as noted, regards the re-imposition of economic regulation as highly undesirable, nonetheless, it is conceivable that such a step could be warranted in certain circumstances where the market has reverted to monopoly supply without reasonable prospects for new entry. However, the Bureau submits that it is equally important in the context of deciding to re-regulate a forborne market as it was in the context of the original forbearance decision to undertake a full competition analysis with the broadest possible consideration of all relevant factors and prevailing circumstances.
51. For this reason, the Bureau does not favour pre-determined tests or threshold “triggers” developed, for example, in an original forbearance decision. Reliance upon pre-determined triggers or thresholds can dictate an altogether incorrect outcome or, at least, one that is rooted more in the circumstances prevalent at the time of the original forbearance decision than the decision to re-regulate. Perhaps the simplest example occurs when a regulator determines a market structure or market share test as a basis for its original forbearance decision, and determines further that economic regulation may or will be re-imposed should in future the test no longer be satisfied. Among the problems with this approach is the fundamental one of whether the test itself is of continued relevance and usefulness given the passage of time and the developments in the market since its establishment. 52. What’s more, tests or triggers for re-regulation have the potential to create perverse incentives for incumbents with market power to keep their prices higher and quality levels lower than they might otherwise be, allowing competitors to maintain just enough market share so as not to trip the trigger for re-regulation. Therefore, an automatic trigger or pre-determined test for the re-imposition of economic regulation may be beneficial to entrants but will induce high prices and low quality to the detriment of consumers.
Wholesale Regulation in Competitive Retail MarketsB.8 If a service is sufficiently competitive at the retail level (i.e. in the market for end users) to warrant deregulation, is there a continuing need to regulate the wholesale services and facilities underlying the service? If so, under what circumstances would such regulation be required, and what form should it take? 53. Generally speaking, the Bureau believes that competition at the retail level is likely to reduce the need for continuing to regulate wholesale services and facilities, provided that retail competition is among separate facilities-based providers. However, competition only among stand-alone retailers that rely on access to a single facilities-based provider will not eliminate any market power that such a facilities supplier possesses. 54. At the outset of this discussion, the Bureau notes that the term “retail competition in the market for end users” can take one of two meanings and the chosen interpretation will affect the answers to this, and the following question, B.9. “Retail competition in the market for end users” may be characterized by:
55. The Bureau interprets “wholesale services” as the facilities needed to provide retail service on a stand-alone basis.16 Facilities-based retail competition does not require a separate wholesale market. An example would be competition at retail in broadband Internet service between a cable company and an ILEC, each of which is using its own facilities. By definition, stand-alone retail competition depends on the existence of a wholesale market whereby stand-alone retail providers can offer their services over underlying facilities. An example of this would be Internet service providers or VoIP providers that offer services at retail, but depend upon access to the facilities supplied by a cable company or ILEC.
i) Where there is facilities-based retail competition, is there a need for wholesale regulation? 56. The Bureau believes that competition at the retail level among separate facilities-based providers is likely to reduce the need for continuing to regulate wholesale services and facilities. 57. Where there is sufficient competition among facilities-based retail providers down to the end user level, consumers will benefit, as they do in other markets, regardless of whether stand-alone retailers also offer service. That said, owners of the facilities may well find it profitable to provide access at wholesale rates to other stand-alone service providers. If those stand-alone service providers can add value that the facilities-based providers cannot supply themselves, such resale will typically increase the economic value and profitability of the underlying facilities. 58. Consequently, a decision by a facilities-based retailer to deny others wholesale access indicates that the benefits of the added value of having additional stand-alone providers are less than the benefits to that facilities-based provider of going it alone. For that reason, the incremental benefits of attempting to force these carriers to provide access to stand-alone retailers, when there already is competition at the facilities level, are likely to be less than the costs associated with creating a separate wholesale market with a regulated price and terms and conditions for access. 59. One of the costs associated with creating a separate regulated wholesale market is the possibility that wholesale price regulation may induce rational predation by enabling recoupment in the regulated market. If the market power of a firm in its regulated markets is effectively controlled by cost-based regulation, a firm has an incentive to try and circumvent this restraint by entering into an unregulated or forborne market.17 The monopolist can subvert effective cost-based regulation by reallocating costs from its competitive market to its regulated markets. This has the effect of relaxing the price constraint in the regulated market and increasing profits — provided costs are only reallocated from competitive markets and not increased. Transferring costs increases the price in the regulated market and the profits from doing so are realized in the competitive market. The transferring of costs creates or widens the differential between the revenues and accounting costs of the regulated firm in the unregulated market. To the extent that prices are set independently of costs, as with ideal price cap regulation, the incentive for this predation by cross-subsidization is reduced. Breaking the link between costs and prices in the regulated market reduces the ability to recoup nominal losses incurred in the unregulated market. ii) Where there is stand-alone retail competition, is there a need for wholesale regulation? 60. The Bureau believes that regulation may be beneficial where there is competition only among stand-alone retailers that rely on access to a single facilities-based provider. In a retail telecommunications market with no facilities-based competition, stand-alone retailers or value-added providers (e.g., VoIP service companies) in and of themselves will not provide a competitive outcome. The monopoly facilities provider can set the wholesale price to exploit its market power, and the stand-alone providers will pass that high price on to consumers. 61. The benefits of stand-alone retail competition in this setting will depend on effective regulation of the price paid for wholesale services. Imposing wholesale price regulation, if the facilities-based provider also sells at retail, requires additional regulatory vigilance to prevent discrimination and cross-subsidization. In such circumstances, the facilities owner would have an incentive to engage in non-price discrimination (i.e., in the quality or timeliness of access to its facilities) against its stand-alone retail competitors. Moreover, if the regulated access price of the facilities is cost-based, the facilities-based carrier may have the ability and incentive to cross-subsidize its retail operations by misallocating retail-specific costs to the regulated facilities service.
62. The effect of such cross-subsidization would be to inflate the facility access price and create an artificial competitive advantage that distorts the retail market, but it may give the facilities-based carrier a credible predatory threat. The latter effect is the reason that cost-based price regulation is at least as likely to induce predation as it is to prevent it. If the facility monopolist is allowed to enter the retail market, vigilant regulation of cost allocation and the timeliness and quality of access will be necessary to prevent anti-competitive conduct.
Wholesale Regulation as a Substitute for Retail RegulationB.9 If a service is not sufficiently competitive at the retail level to warrant deregulation, to what extent can regulation of the underlying wholesale services and facilities be relied upon as a substitute for direct regulation of the retail service? 63. In general, the Bureau believes that regulation of underlying wholesale facilities and services can substitute for direct regulation of the retail service only if such regulation can be effectively designed to accommodate competition among separate stand-alone retail providers. If the retail market would not be competitive despite such regulation, wholesale regulation will not in and of itself produce ideal results. 64. As with the Bureau’s response to question B.8 above, the response to this question depends on whether the deficiency is in facilities-based or stand-alone retail provision. 65. To gain some insight into the question, suppose first a market has insufficient stand-alone retail competition, despite competition among facilities-based providers. For example, one could imagine a separate relevant product market at the retail level with only one provider that customers would need to use regardless of their choice in underlying facilities (i.e., DSL, cable, or wireless broadband). In such circumstances, competition among multiple facilities carriers would not eliminate any market power that the stand-alone provider might possess.18 66. The market outcome would be no different if the same monopolist stand-alone retail provider were forced to use a single upstream provider’s facilities, but where wholesale regulation took the place of competition. Even if such regulation were not subject to the flaws noted above, it would not in and of itself counteract any of the lone stand-alone retail provider’s market power. Such regulation could, however, guard against “double marginalization”, which occurs when the retail monopolist sets its price on top of the price charged by the facilities monopolist. 67. We now turn to the more likely scenario, in which the absence of retail competition arises because the retail monopolist is a single integrated facilities-based provider. In that case, wholesale competition also would not substitute for direct regulation of the retail service. The single firm would retain its retail monopoly even if regulation within the single firm at the wholesale level were feasible. The general effect would be the same as in the preceding example where a monopolist stand-alone retail provider uses the wholesale facilities of a facilities-based monopolist at a regulated rate.19 68. Wholesale regulation is a substitute for direct regulation of the retail service only if it can be designed to accommodate competition among separate stand-alone retail services competitors rather than a single facilities-based provider. The Bureau notes, however, that the primary source of the gain is not in expanding the retail sector from a single facilities based-provider to multiple stand-alone providers. Rather, the benefit comes from controlling the monopoly over the facility. Stand-alone retail competition would then extend the benefits of that regulation to consumers. 69. Again, it is important to remember the difference between benefits of wholesale regulation in theory and benefits in practice, recognizing the difficulties in implementation. As the Bureau observed in its answer to B.6, effective regulation may not be feasible if technology and demand change too quickly. In addition, a prerequisite for the practical benefit of wholesale regulation is the feasibility of vertical separation between the retail and wholesale levels of the service. Regulation may not be beneficial if maintaining a separate retail sector requires foregoing economies of scope in production and coordination. Finally, effective market performance requires here, as mentioned in the Bureau’s response to B.8, the ability to ensure the effectiveness of wholesale regulation by preventing discrimination and cross-subsidization, either by non-price regulation or more invasive forms of separation.
Technical RegulationInterconnection and Access to Facilities B. 17 Should any changes be made to the regulatory framework for interconnection? 70. Interconnection ensures that entrants do not need to have their own facilities to terminate calls to all subscribers to telecommunications services in a given region. This grant of access to parts of the ILEC network may lower barriers to entry and facilitate competition. 71. In addition, since effective competition in the telecommunications services market depends upon the ability of customers of different service providers to communicate with one another, the Bureau submits that even where a telecommunications market is competitive in all other respects, there are certain circumstances in which mandated interconnection will continue to be warranted in order to allow customers of different networks to communicate with each other. 72. For example, in principle, a group of telecommunications providers could exploit the consumer need for interconnection by charging each other mutually high rates for interconnection, raising service prices to the monopoly level. In effect, the sector as a whole could act as a cartel. 73. The current framework has resulted in zero price “bill and keep” interconnection where each carrier bills for origination and keeps all of the fees. If interconnection costs are small and demand is roughly symmetrical (i.e., A’s subscribers call B’s subscribers as much as B’s call A’s), then the outcome will be roughly efficient, particularly when the costs of administering a scheme with revenue transfers are taken into account. The Bureau is of the view that the CRTC should ensure that “bill and keep” interconnection remains in force and not reduce oversight even if the industry becomes more competitive over time.
74. The subtitle to question B.17, “Network Interconnection and Access to Facilities of Dominant Carriers”, implies that the question also relates to the framework for access to essential facilities. 75. The Bureau submits that there may be some areas of Canada where a competing service is only likely to develop through sharing of essential facilities on a mandated basis. In such cases, as noted in the Bureau’s responses to questions B.8 and B.9, getting the wholesale access price right will be critical. This is a difficult exercise that will require ongoing regulation and supervision by the Commission. 76. For example, as noted in response to question B.8 above, the benefits of stand-alone retail competition with market power at the wholesale level may well depend on effective regulation of the price paid for wholesale services. An unregulated monopoly provider of facilities used by stand-alone retail competitors could effectively subvert overall competition in charging its profit-maximizing price. However, this possibility alone does not necessitate the separate regulation of facilities prices. This is especially so considering the fact that regulation may not be effective, even with a clear natural monopoly, if underlying technology and demand conditions move too quickly to allow an administered price for an administratively defined product to be determined.
77. With respect to access, the Bureau endorses the Panel’s observation that the shift to IP may create new challenges. The Panel observed that:
78. The Bureau notes that a number of parties in the CRTC’s recent proceeding to determine the regulatory framework for VoIP21, raised concerns that high-speed Internet access providers may give preference to packets transmitted for their own VoIP services and even block consumers’ access altogether to the services of independent, third-party VoIP providers. Bell, Telus and Rogers each acknowledged that building packet prioritization abilities into the network was technologically feasible though the companies did not, at that time, have plans to do so.22 79. In light of these concerns, the Bureau considers that the application by the CRTC of conditions with respect to access, interconnection and wholesale services are warranted. Such conditions would ensure that no provider of local exchange services is permitted to offer a local exchange service which blocks or degrades access to any other service providers. 80. However, the Bureau notes that in forborne markets, the provisions of the Competition Act should be relied upon to discipline service providers that engage in anti-competitive blocking or degradation of access to the services of other providers.
Social RegulationInstitutional Roles in Social Regulation B. 30 What should be the roles of the CRTC, Industry Canada, the Competition Bureau and consumer protection agencies in dealing with consumer protection and other social regulation issues? 81. The Competition Bureau is an independent law enforcement agency responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. Headed by the Commissioner of Competition, the Bureau investigates anti‑competitive practices and promotes compliance with the laws under its jurisdiction. 82. The Bureau is not a regulator and therefore does not engage in ex ante social or consumer protection regulation. However, through the enforcement of the Competition Act, the Bureau plays an important role in protecting consumers against fraud and anti-competitive practices and ensuring that businesses provide accurate information when marketing their products and services.
83. In this regard, the Bureau has obtained successful resolutions for consumers in the telecommunications sector through its work in combating anti-competitive behaviour and fraud.
84. For example, in July 2004, the Bureau resolved a complaint relating to allegations of misleading representations by a telecommunications company in relation to its high speed Internet advertisements. A Bureau examination revealed that the company's advertisements comparing their speed of service to their competitors' could not be substantiated. In response to Bureau concerns, the company changed the offending advertisement and instituted a multi-level compliance program to ensure that its future advertising materials would respect the Act and follow the Bureau’s advertising guidelines.
85. In December 2002, the Bureau investigated a complaint alleging that a promotional contest run by a telecommunications retailer was not in compliance with the Competition Act. A Bureau examination conducted under the promotional contests provision of the Act (s. 74.06) revealed that the contest did not provide adequate and fair disclosure of the approximate value of the prize and other information relating to the chances of winning. In addition, the distribution of the prize was unduly delayed. As a result of these discussions between the Bureau and the company’s management, the company agreed to satisfy all of the information disclosure requirements in future promotional contests and supply prizes without undue delay.
86. The Bureau also conducts investigations into claims of deceptive telemarketing practices. Several of these investigations have led to key convictions of telemarketers to the benefit of Canadian consumers. For example, in June 2004, directors and employees of several Toronto‑based telemarketing firms pleaded guilty to using deceptive telemarketing practices that targeted Canadian and U.S. consumers. Over the course of three years, the telemarketers had used false and misleading sales techniques to induce U.S. and Canadian organizations to purchase various business supplies. The firms were fined a total of $100,000.
87. As part of its work combating deceptive marketing, the Bureau chairs the Fraud Prevention Forum. The Forum is a group of private sector firms, consumer and volunteer groups, government agencies and law enforcement organizations committed to fighting fraud aimed at consumers and businesses. Its mandate is to prevent Canadians from becoming victims of fraud through awareness and education, as well as to increase reporting when fraud does occur. A significant portion of the Forum’s work involves educating consumers on how to protect themselves against deceptive telemarketing, phishing and spoofing, and other fraudulent activity that occurs through the use of telecommunications networks. 88. As noted above, ex ante social or consumer protection regulation by the Bureau is not within the purview of the Competition Act. The purpose of the Competition Act is to maintain and encourage competition in Canada in order to enhance the efficiency and adaptability of the Canadian economy, expand opportunities for Canadian participation in world markets and provide businesses and consumers with competitive prices and product choices. The Act clearly favours market forces, as opposed to government intervention, as the best means of achieving these goals. As such, the Bureau considers that its current role in “consumer protection”, as set out above, is entirely appropriate. 89. The Bureau recognizes that the goals of the CRTC go beyond the promotion of competition alone and extend to social and cultural objectives which often require regulatory intervention to ensure their attainment. It is worth noting, however, that allowing market forces, rather than regulation, to dictate service considerations may in some cases ensure that social needs are met sooner than they would otherwise be if subject to regulatory controls. 90. The Bureau believes that, to the extent possible, public policy should attempt to achieve social policy goals (e.g., universal service, quality of service, affordable telephone service, emergency services, and services for the disabled) through the adoption of mechanisms that are least restrictive to competition. And, where such mechanisms are deemed to be necessary, they should apply in as neutral a manner as possible, to all suppliers provisioning over all sorts of technology platforms. In this regard, as noted in response to question B.1, regulatory policy objectives should be used to provide practical guidance to the CRTC in the exercise of its powers in furtherance of Canada’s overall telecommunications policy objectives.
12. See Ruth Sullivan, ed., Sullivan and Driedger on the Construction of Statutes, 4th ed. (Markham, Ont.: Butterworths, 2002) c. 8. for further discussion on the importance of identifying legislative purpose and principles.
13. A useful case in point may be computer operating systems. A variety of circumstances combine to suggest quite strongly that the production of computer operating systems is a natural monopoly. Economies of scale are compelling, as development costs for operating systems are very high, but the cost of producing additional units is virtually zero. In addition, operating systems are subject to “network externalities,” (i.e., the desire of most consumers to use the same system that most others are using). Finally, switching costs are very high, as consumers will not want to use a different operating system if it will not support their applications and file formats. However, computer operating systems are not regulated, in part because regulators would find it difficult if not impossible to define the product—what should go into an operating system—ascertain its production cost, and estimate demand before technological change renders the old operating system obsolete.
14. One sees this with computer operating systems and pharmaceuticals. 15. Our answers to B.8 and B.9 also highlight the costs of regulation when one attempts to impose it at a boundary between wholesale and retail service.
16. The Bureau’s answers to questions B.8 and B.9 also apply if stand-alone retail competition amounts to nothing more than resale without significant value-added capabilities (e.g., purchasing local telephone service at wholesale so as to offer it at retail, perhaps as part of a bundle of communications offerings).
17. See Church, J.R., and R. Ware, (2000), Industrial Organization: A Strategic Approach, Chapter 26 and references therein for a more detailed discussion.
18. For reasons set out in the response to question B.6, one might still not want to regulate the stand-alone monopolist.
19. Though the general effect would be the same, there may be some specific differences between the two scenarios (e.g., using separate providers may be somewhat more expensive if savings from joint production or coordination are foregone).Vertical separation could result in cost savings if the integrated facilities-based provider is not as efficient as others at being the single retail monopoly. However, if that were the case the facilities-based provider, if unregulated, would have an incentive to let the more efficient retailer into the market and capture the benefits through facilities access fees that capture, at least in part, that retailer’s competitive advantage.
20. Consultation Paper at p. 8.
21. Regulatory framework for voice communication services using Internet Protocol, Telecom Public Notice CRTC 2004-2, dated April 7, 2004 [hereinafter PN 2004-2].
22. PN 2004-2; Transcript of the proceeding at paras. 795-799 (Bell), 1461 (Telus), and 4196 (Rogers).
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Created: 2005-08-15 Updated: 2005-10-12 |
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