Speech
GREEN LIGHT TO LOCAL TELEPHONE COMPETITION
Notes for an address by Françoise Bertrand, Chairperson
Canadian Radio-television and Telecommunications Commission
News Conference
Ottawa, Ontario
May 1, 1997
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Ladies and Gentlemen, good afternoon,
My name is Françoise Bertrand; I am the Chairperson of the CRTC, and beside me
is David Colville, Vice-Chairman, Telecommunications.
As everyone was expecting, today we are releasing a series of decisions that
will have a major impact on Canada's telecommunications industry. They will
enable Canada to become one of the world's most competitive countries in this
sector.
The basic goal of these decisions is certainly to introduce competition to the
local exchange market. This is accompanied by price cap regulation for all the
major Canadian telephone companies, that is, most of the members of Stentor.
Finally, since the local competition telephone market will now be fully open to
competition, convergence can indeed occur between the telecommunications and the
broadcast distribution industries.
Here is some background information. When long distance competition was
introduced in 1992, it became essential to review the regulations in depth in
order to meet public needs and interests more adequately. Today's decisions mark
the culmination of the review process begun by the Commission in 1994.
First, it was absolutely necessary to eliminate the obstacles to local
competition arising out of the existing monopoly in the telephone industry. Also,
the Commission was determined to set the rules of the game so as not to unduly
harm the present telephone companies. Finally, the Commission wanted to ensure
that while competition is being implemented, consumers would be protected and
would continue to receive the level of service to which they are accustomed.
The aim of these decisions is therefore to strike a fair balance between the
interests and needs of consumers, the new competitors and the telephone
companies, while maintaining universal access to affordable telecommunications
services.
The decision on local competition sets the rules of the game so as to favour
the early entry of new suppliers into the residential and business local service
market. Until the new competitors can invest in their own networks, the existing
telephone companies must make certain components of their local networks
available to them at reasonable rates. In addition, local number portability is
being implemented in order to allow consumers to maintain their telephone numbers
when transferring from one competing distributor to another.
The subscriber rates established by the new competitors will not be regulated,
since they have no market power. However, it is clear that the new players will
have to honour certain obligations toward consumers, such as access to long
distance providers, 9-1-1 emergency services and respect for privacy and
confidentiality of information. They will also be required to provide information
to customers on prices, billing policies and service options.
Finally, the new competitors will have access to a contribution fund now
available to the telephone companies. In the Commission's Scope of Contribution
Order, also released today, additional interexchange services will be
contributing to this fund.
In the component that affects the industry, these decisions essentially favour
the entry of new competitors into the telephone market by offering them a number
of incentives. From that point of view, the existing telephone companies must
cooperate to permit access to their networks and services. We are aware that this
will involve changes and some expenditures on their part. However, they will have
greater flexibility in setting rates, although they will not be completely free
to do so until competition is fully established. Moreover, they will not be
required to "subsidize" the introduction of competition, as was the case for long
distance service, as the Commission has not required them to provide access to
their networks at discounted rates.
As for price cap regulation, the new regime will come into force January 1,
1998, for a period of four years. This system concerns only the major telephone
companies that are now members of Stentor; their prices will continue to be
monitored by the Commission, but in a new form based on prices, not telephone
company revenues. Price cap regulation is aimed essentially at sectors in which
competition has not yet been fully established, that is basic residential and
business local service. These services will be capped and will form a single
"basket" subject to a price cap index. This price cap index generally limits
increases in prices to the rate of inflation minus an adjustment for productivity
gains of 4.5%.
On the one hand, the telephone companies will have more flexibility in setting
their rates, and on the other hand, consumers will be protected against excessive
increases.
The Commission accordingly notes that these decisions as a whole remove all
barriers to true competition and promote convergence between the
telecommunications and broadcasting distribution industries. In this spirit, the
telephone companies will be able to submit broadcasting licence applications
beginning on June 16, 1997, and similarly, cable distributors will have access to
the local exchange market.
Before speaking further about the impact of these decisions, I want to
announce some news that is of interest to all consumers. As you know, monthly
local rates were increased in 1996 and in 1997. A third increase of up to $3 per
month on a weighted average basis will be permitted as of January 1, 1998. The
final amount of this increase will be established only following a public
proceeding where consumers and other interested parties will have the opportunity
to comment.
In the longer term, we are convinced that competition will be cost-effective
for all Canadians. In what way will it be more cost-effective, you may ask.
First, because the experience of recent years in the long distance market has
shown us that competition is profitable for everyone. As you know, at present
more than 80% of subscribers are benefiting from the various rate reductions
offered by long distance service suppliers, resulting in savings of 20% to 30% on
their long distance bills.
Other factors have convinced us that ultimately the consumers will be the
winners. We will be able not only to select our long distance provider, but also
the provider who offers us the most suitable local services. Competition will
encourage the companies to innovate more, and we will therefore have a greater
choice of services, at competitive prices.
We believe that the more robust and real the competition, the more the
industry will be stimulated to offer new services that will better meet the
consumers' needs.
In conclusion, these decisions will have direct and profound impact, not only
economically, socially and culturally, but also in most people's homes and their
lives.We now belong to a worldwide community, without boundaries, particularly in
the field of telecommunications. The information highway is a reality, and Canada
must play an active part in it, taking advantage of the expertise and services we
have always been able to develop. Through all these decisions, the Commission
wanted to establish all the conditions necessary to make Canada one of the
world's most competitive countries in the telecommunications sector.
Thank you.
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Contact: CRTC Public Affairs, Ottawa, Ontario K1A 0N2
Tel.:
(819) 997-0313, TDD: (819) 994-0423, Fax: (819) 994-0218
This document is available in alternative format upon request.
Date Modified: 1997-05-01 |
