OTTAWA — The Harper government moved yesterday to free Canada's biggest phone companies of their tightest regulatory shackles as early as next summer, raising the possibility of cheaper local phone service and a more aggressive fight for customers.
Industry Minister Maxime Bernier announced that he intends to speed up deregulation of phone services in markets where two or more big phone, wireless or cable companies operate, while also changing the way Ottawa defines a competitive market.
The new definition would cover 60 per cent of the country's population.
Mr. Bernier said the federal government intends to drop a requirement that the telephone giants must lose a big chunk of a geographic market before they're allowed to compete without the regulator's approval to set prices and bundle services.
The phone companies have argued that it's unfair that they have to operate under such restrictions, while cable companies don't.
“It is time to have the playing field level for each player,” Mr. Bernier told reporters during a press conference.
Analysts say more competition should lead to lower prices and better services.
The announcement marks Mr. Bernier's biggest step to date in his efforts to overhaul the telecom sector, particularly the competition-starved, $10-billion local services market. It also marks the latest round in his fight with the federal telecom regulator.
In April, the Canadian Radio-television and Telecommunications Commission ruled that local markets would remain regulated until the incumbent telephone provider had lost at least 25-per-cent share — much higher than the 5-per-cent threshold that governs the TV market.
Mr. Bernier overruled that decision, saying he plans to rely on the number of facilities-based phone providers — that is, phone, cable or wireless companies as opposed to resellers — that are present in a certain geographical area.
“Competitive infrastructure is a durable form of competition that disciplines the market and strengthens investment, while delivering the greatest benefits to consumers,” Industry Canada said yesterday in a statement.
Other criteria that Mr. Bernier plans to change include “streamlining” conditions for services that the big phone companies provide to smaller rivals, and an end to so-called “winback” rules that prevent the former monopolies from approaching local phone customers for three months after they leave.
The changes will be open for public comment beginning Saturday and could become official as soon as the end of February, once approved by cabinet. Phone companies could then appeal for deregulation in particular geographical markets.
Analysts initially said they expected the entire market would not be deregulated until 2008.
But now, Bell Canada and Telus Corp., Canada's largest phone companies, expect to be able to freely price their local phone services in major markets as soon as mid-2007. They argue there is significant competition in cities where they compete with cable operators, and deregulation will allow them to make their best offers to consumers.
“We don't have to lose a quarter of our customers to know it's meaningful competition,” said Janet Yale, executive vice-president of government and regulatory affairs at Telus. “Hopefully by the second quarter of 2007, we'll start to see deregulation in our major markets.”
Ms. Yale's counterpart at Bell Canada, Lawson Hunter, expects some key markets to be deregulated by the summer. “In significant markets like Toronto and Montreal, clearly there's vigorous competition from the cable industry,” said Mr. Hunter, chief corporate officer at BCE Inc., Bell's parent.
While Telus and Bell wouldn't comment directly on whether rates will fall when regulatory restraints are lifted, they said they will gain flexibility in their pricing and bundling services.
But Rogers Communications Inc., the country's largest cable operator, is concerned that lifting the marketing rules without requiring the phone companies to meet quality of service indicators will hurt new competitors. “Every single customer we win over will get a phone call the next day trying to win them back before they've even tried out our service,” said Ken Engelhart, vice-president of regulatory affairs at Rogers. “It's going to slow us down.”
Louis Audet, chief executive officer of Quebec cable operator Cogeco Cable Inc., said significant market power must be a critical issue for deregulation.
Quebecor Media Inc. welcomed the announcement last night and called for the government to “follow its own logic” and deregulate the cable and broadcasting sectors as well.
For Mr. Bernier, this latest announcement is part of a broader strategy to overhaul one of Canada's most heavily regulated industries.
Last week, he announced that he would give the Competition Bureau the power to slap fines of up to $15-million on large telephone and cable companies if they abuse their market power.
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