Oct, 2001 : AT&T Canada Releases CRTC Review, Encourages Competition
📅 - AT&T Canada Inc. (attcanada.com), Canada's largest national broadband services provider and CLEC, yesterday released a statement that it is offering recommendations to the federal regulator to restore balance to the Canadian telecom market that would allow customers to continue to benefit from competition and allow new entrant competitors to compete fairly with the former monopoly telecom providers.
"With nine new telecom companies failing in the past eight months, theformer monopoly telcos getting stronger and the remaining new competitorscontinuing to struggle financially, the current model for competitionclearly needs to be addressed immediately," said John McLennan,vice-chairman and CEO, AT&T Canada.
The current regulatory structure has created a dramatic and significantimbalance that favours the former monopolies and if left unchanged threatensto return the Canadian industry to a monopoly or duopoly, AT&T Canada toldthe Canadian Radio-television & Telecommunications Commission (crtc.gc.ca)today.
"Canadian telecom is at a crossroads where the future of sustainablecompetition in the wireline portion of the business is at risk," McLennansaid. "I believe that the government's vision of competition includes morethan two former monopoly telcos."
After ten years of competition in long distance and four years ofcompetition in local services, the former monopolies still dominate themarket with at least 96 percent market share in local service - the criticalgateway to customers. By contrast, the new entrants who have investedbillions of dollars in a competitive choice have only 4 percent market shareor less in local service.
"We are presenting a constructive proposal to the CRTC to take the rightroad and restore balance between new entrants and the former monopolies tohelp fulfil the government policy goal of promoting sustainable competitionto the benefit of all Canadians," McLennan said. The key to restoring thisbalance is to neutralize the cost advantage enjoyed by the former monopolytelcos that stems from their monopoly heritage, AT&T Canada'srecommendations state.
Much of the cost advantage enjoyed by the former monopolies is based onthree factors. The first is that their network, built over more than 100years as a monopoly provider, already reaches virtually every Canadianacross the country. It is not economically feasible for new competitors tofully duplicate in four years the network reach that the former monopolieshave built in more than a century.
The second relates to the telcos' low cost of supplying themselves withnetwork access and yet they charge significantly higher prices to newentrants who require these connections. And the third advantage is theeconomy of scale inherent in a pre-existing network already paid for bycustomers in a monopoly environment.
These cost advantages are significant contributors to the extraordinaryfinancial returns that the former monopoly telcos generate on the utilityportion of their telecom businesses.
"We are asking the regulator to remove the cost advantage enjoyed by theformer monopoly telcos, " McLennan said. "The future of sustainablecompetition requires that all players have a roughly equal cost structurewith regard to customer access."
Since these network facilities and services control the vital gateway to thecustomer that all providers must access to serve customers, the formermonopolies are virtually guaranteed a competitive advantage. "AT&T Canada'sposition is that ensuring competitively neutral access to these facilitiesand services is crucial to sustaining competition and competitors in thismarket," McLennan said. In the current regulatory structure, AT&T Canadapays more than $400 million to the former monopolies for access to thesefacilities. This is significantly more than the costs the former monopoliesbear to supply themselves with the same facilities and services.
AT&T Canada believes that competition going forward, must be based on a newmodel, combining both the "facilities-based" model - one that encouragesinvestment in networks in Canada - and competitively neutral access toformer monopoly facilities and services. AT&T Canada's investment of morethan $3 billion in a national network in Canada, follows the federal policyguidelines designed to promote competition through a "facilities-based"model. Despite this significant investment, new entrants like AT&T Canadamust rely on access to portions of the networks of the former monopolies inorder to serve customers.
The AT&T Canada proposal restores competitive neutrality to the market andis a proxy for "structural separation," the very different and highlysuccessful regulatory model used to deregulate the Canadian wireless marketthat allowed all competitors to begin on an equal footing. "The regulatorhas an excellent opportunity right now to restore the balance among theinterests of consumers, the former monopoly companies like Bell Canada andTelus, and the new entrant companies, to ensure that competition in wirelinetelecom is sustainable," McLennan said.
"With nine new telecom companies failing in the past eight months, theformer monopoly telcos getting stronger and the remaining new competitorscontinuing to struggle financially, the current model for competitionclearly needs to be addressed immediately," said John McLennan,vice-chairman and CEO, AT&T Canada.
The current regulatory structure has created a dramatic and significantimbalance that favours the former monopolies and if left unchanged threatensto return the Canadian industry to a monopoly or duopoly, AT&T Canada toldthe Canadian Radio-television & Telecommunications Commission (crtc.gc.ca)today.
"Canadian telecom is at a crossroads where the future of sustainablecompetition in the wireline portion of the business is at risk," McLennansaid. "I believe that the government's vision of competition includes morethan two former monopoly telcos."
After ten years of competition in long distance and four years ofcompetition in local services, the former monopolies still dominate themarket with at least 96 percent market share in local service - the criticalgateway to customers. By contrast, the new entrants who have investedbillions of dollars in a competitive choice have only 4 percent market shareor less in local service.
"We are presenting a constructive proposal to the CRTC to take the rightroad and restore balance between new entrants and the former monopolies tohelp fulfil the government policy goal of promoting sustainable competitionto the benefit of all Canadians," McLennan said. The key to restoring thisbalance is to neutralize the cost advantage enjoyed by the former monopolytelcos that stems from their monopoly heritage, AT&T Canada'srecommendations state.
Much of the cost advantage enjoyed by the former monopolies is based onthree factors. The first is that their network, built over more than 100years as a monopoly provider, already reaches virtually every Canadianacross the country. It is not economically feasible for new competitors tofully duplicate in four years the network reach that the former monopolieshave built in more than a century.
The second relates to the telcos' low cost of supplying themselves withnetwork access and yet they charge significantly higher prices to newentrants who require these connections. And the third advantage is theeconomy of scale inherent in a pre-existing network already paid for bycustomers in a monopoly environment.
These cost advantages are significant contributors to the extraordinaryfinancial returns that the former monopoly telcos generate on the utilityportion of their telecom businesses.
"We are asking the regulator to remove the cost advantage enjoyed by theformer monopoly telcos, " McLennan said. "The future of sustainablecompetition requires that all players have a roughly equal cost structurewith regard to customer access."
Since these network facilities and services control the vital gateway to thecustomer that all providers must access to serve customers, the formermonopolies are virtually guaranteed a competitive advantage. "AT&T Canada'sposition is that ensuring competitively neutral access to these facilitiesand services is crucial to sustaining competition and competitors in thismarket," McLennan said. In the current regulatory structure, AT&T Canadapays more than $400 million to the former monopolies for access to thesefacilities. This is significantly more than the costs the former monopoliesbear to supply themselves with the same facilities and services.
AT&T Canada believes that competition going forward, must be based on a newmodel, combining both the "facilities-based" model - one that encouragesinvestment in networks in Canada - and competitively neutral access toformer monopoly facilities and services. AT&T Canada's investment of morethan $3 billion in a national network in Canada, follows the federal policyguidelines designed to promote competition through a "facilities-based"model. Despite this significant investment, new entrants like AT&T Canadamust rely on access to portions of the networks of the former monopolies inorder to serve customers.
The AT&T Canada proposal restores competitive neutrality to the market andis a proxy for "structural separation," the very different and highlysuccessful regulatory model used to deregulate the Canadian wireless marketthat allowed all competitors to begin on an equal footing. "The regulatorhas an excellent opportunity right now to restore the balance among theinterests of consumers, the former monopoly companies like Bell Canada andTelus, and the new entrant companies, to ensure that competition in wirelinetelecom is sustainable," McLennan said.
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