Telecommunications Policy Review Panel:- Executive Summary

1. This is a summary of the views of the Commissioner of Competition (the Competition Bureau or the Bureau) submitted to the Telecommunications Policy Review Panel (the “Panel”) in response to the Panel’s request for comments on the issues raised in its Telecommunications Policy Review – Consultation Paper.¹

2. The Bureau commends the Panel for its work so far in aptly and comprehensively identifying the issues that will be critical to the development of sound policy objectives and an appropriate regulatory framework for telecommunications in Canada.  The Bureau is pleased to provide its views on those issues within its expertise and mandate under the Competition Act that it considers most important to the development of competitive telecommunications markets in Canada. 

3. In its submission, the Bureau provides comments on the following areas:

4. Competition issues in an ILEC vs. cable duopoly – The Bureau is well placed to provide guidance on the analysis that should be undertaken, and the factors that should play a key role, in determining the competitiveness of a duopoly market.  Accordingly, in this section of the submission, the Bureau sets out the circumstances under which two competing networks in the same market could be sufficiently competitive to protect the interests of users.  The Bureau also highlights the competitive issues that normally arise in the telecommunications environment, recognizing that the Bureau maintains authority under the Competition Act to address any anticompetitive conduct.

5. Telecommunications policy objectives – As the telecommunications sector faces unprecedented change and innovation, a review of Canada’s telecom policy objectives is in order.  The Bureau believes that in addition to being an objective in its own right, the reliance on market forces will help to achieve other policy objectives.  The Bureau proposes regulatory objectives to provide the CRTC with practical guidance in the exercise of its powers in furtherance of the overall telecommunications policy objectives.  One such regulatory objective would direct the CRTC to adopt the regulatory measure, or take the decision, that is least intrusive in the marketplace. 

6. Re-imposition of economic regulation – Given the costs inherent in regulation, 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.  The Bureau proposes that predetermined tests, thresholds or triggers for re-regulation should be avoided in favour of a rigorous review of the relevant market using the Bureau’s competition analysis.

7. Wholesale regulation in competitive retail markets – 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.  In that scenario, regulation may be beneficial.

8. Wholesale regulation as a substitute for retail regulation – 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.

9. Interconnection and access to facilities – 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.  The Bureau also submits that there may be some areas in Canada where sharing of essential facilities on a mandated basis may be necessary for the development of competition sufficient to forbear from regulation.

10. Social regulation – 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.  The Bureau believes that, to the extent possible, public policy should attempt to achieve social policy goals through the adoption of mechanisms that are least restrictive to competition.

11. Role of competition law in telecommunications regulation – As telecommunications markets become increasingly shaped by technological innovation and the advent of new services and suppliers, competition principles will need to play an ever greater role in the regulation and oversight of the industry.  The challenge for regulators and policy makers will be to establish the framework that will allow regulatory and competition authorities to work in unison.  In an environment of overlapping jurisdiction between the CRTC and the Bureau, greater certainty as to when competition principles should prevail would be beneficial.  In this regard, where the CRTC finds that rate regulation is no longer warranted, reliance on the general provisions of the Competition Act should be sufficient to address any concerns about anticompetitive conduct.  In addition to a clarification of responsibility for handling allegations of anticompetitive behaviour, the Bureau believes that its role in applying competition law analysis in telecom forbearance matters should be strengthened, given its substantial expertise in this area.

12. Competition law principles and the regulatory framework – In the view of the Bureau, the best regulatory framework will be that which makes the best use of existing knowledge and experience within our agencies; ensures timely and effective responses to industry change; is cost effective; and keeps government intervention to the bare essential.  The Bureau outlines several arrangements that may facilitate effective interaction between competition law authorities and telecom regulators based on a commissioned comparative study of other jurisdictions.  Improved information sharing and access to confidential information would enhance the effectiveness of the Bureau’s involvement in CRTC proceedings, pursuant to section 125 of the Competition Act, which grants the Bureau the right to intervene in CRTC proceedings.  In keeping with the principle of best use of expertise, it would also be appropriate to accord greater weight to the views of the Bureau in competition-related telecom matters.  The Bureau presents a range of alternatives to reach these goals.

13. Foreign investment restrictions – The Bureau submits that the foreign ownership restrictions have served their intended purpose and are no longer necessary to harmonize Canadian policy with that of our global trading partners. Furthermore, the Bureau is unaware of any articulated concerns to national sovereignty, security or economic, social and cultural well-being that the foreign ownership restrictions are needed or even well-suited to address.  Therefore, the Bureau supports the eventual removal of these restrictions in the telecommunications sector.

1. Telecommunications Policy Review Panel, Telecommunications Policy Review – Consultation Paper, dated June 6, 2005, online: Telecommunications Policy Review Panel <http://www.telecomreview.ca/epic/site/tprp-gecrt.nsf/en/rx00016e .html> (last modified: 8 August 2005) [hereinafter, Consultation Paper].