Canadian Radio-television and Telecommunications Commission
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News release
March 3, 2008
CRTC announces new rules for
wholesale telecommunications services
OTTAWA-GATINEAU - The Canadian Radio-television and Telecommunications Commission (CRTC) today established a new framework for wholesale services that will promote competition in wholesale and retail telecommunications markets based on sound economic principles.
"Further to the government's direction that the Commission rely on market forces to the greatest extent possible, we conducted a comprehensive review of our approach to the wholesale services provided by traditional companies," said Konrad von Finckenstein, Q.C., Chairman of the CRTC. "We have now set out clear rules that are consistent with competition policy and current market conditions, and that will facilitate increased competition."
The new framework was developed with a view to ensuring that existing and new competitors continue to have access to the services they need to compete, while at the same time providing incentives for innovation and investments in competing networks.
The Commission will maintain the requirement for telephone companies to provide interconnection services to competitors. Interconnection services allow competitors to access telecommunications networks in order that their customers may call individuals who have a different service provider. The Commission will also continue to mandate the provision of wholesale services used to provide services that are in the public interest, such as 911 and message relay services.
As part of this proceeding, the Commission revised its definition of an essential service. To be considered essential, a facility, function or service must:
be required by competitors to provide a retail telecommunications service,
be controlled by a company that could use its market power to lessen or prevent competition, and
provide a functionality that would not be practical or feasible for competitors to duplicate.
The Commission has identified a number of wholesale services that should no longer be mandated. These non-essential services will be deregulated over the next three to five years to ensure a smooth transition to a reliance on market forces.
It is expected that more than a third of wholesale services will be deregulated by the end of 2012. In 2013, the Commission will conduct a review of the services that are still mandated at that time. Alternatives to conditionally mandated services may emerge as the industry evolves and new technologies are introduced, and the Commission will entertain further applications to deregulate if the stipulated conditions arise.
In 2006, wholesale services accounted for approximately $3.3 billion of overall telecommunications revenues and major telephone companies held a 65-per-cent share of this market segment. The remaining share was held by major telephone companies operating outside their established territories and other service providers.
The CRTC
The CRTC is an independent, public authority that regulates and supervises broadcasting and telecommunications in Canada.
Telecom Decision CRTC 2008-17 [.htm] [.pdf]
Reference document: Telecom Public Notice CRTC 2006-14 [.htm] [.pdf]
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Backgrounder on wholesale telecommunications services
Wholesale services
Regulated wholesale services are telecommunications services that major telephone and cable companies make available to other competitors at rates and terms that are mandated by the Commission. According to the most recent CRTC Telecommunications Monitoring Report, wholesale services accounted for approximately $3.3 billion of overall telecommunications revenues in 2006, which totalled $36.1 billion. Major telephone companies held a 65-per-cent share of this market segment.
During the past decade, the Commission's framework for wholesale services evolved on an incremental basis as competition in retail telecommunications markets increased significantly. Given the current environment, it is unlikely that competitors can duplicate in their entirety the facilities owned or controlled by the major telephone and cable companies. No major telephone or cable company today provides all of their services through their own facilities. A healthy telecommunications market should allow for competitors to provide services by using a combination of their own facilities and those leased from other service providers.
The Commission initiated a proceeding to review its framework to ensure that it is based on the appropriate definition of an essential service and current market conditions, and that is consistent with the government's policy direction (http://canadagazette.gc.ca/partII/2006/20061227/html/sor355-e.html).
Under the new framework, the CRTC has divided wholesale services into six categories: interconnection, public good, essential, conditional essential, conditional mandated non-essential, and non-essential subject to phase-out.
More than a third of wholesale services were assigned to the "non-essential subject to phase-out" category and will be deregulated by the end of 2012. In addition, services assigned to the "conditional essential" and "conditional mandated non-essential" categories could also be deregulated, upon application, if the stipulated conditions arise.
Alternatives to conditionally mandated services may emerge in the next few years as the industry evolves and new technologies are introduced. The Commission will therefore conduct a review in 2013 of the services that are still mandated following the phase-out period.
Categories of wholesale services
a) Interconnection
Interconnection services allow competitors to access telecommunications networks in order that their customers may call individuals who have a different service provider. Their provision will continue to be mandated.
These services permit interconnection between:
local networks,
local and long-distance networks, and
wireless and wireline networks.
b) Public good
Services in this category are mandated because they provide important social benefits to Canadians.
These services include:
emergency services,
message relay services, and
access to support structures.
c) Essential
To be considered essential, a service must be required by competitors to provide telecommunications services and controlled by a firm that could use its market power to lessen or prevent competition. Moreover, it would not be practical or feasible for competitors to duplicate the functionality provided by this service. Services that provide subscriber listing information are essential services.
d) Conditional essential
Conditional essential services meet the criteria for essential services and will be mandated until there are sufficient and comparable alternatives. Certain access facilities, such as unbundled local loop facilities, are conditional essential services.
e) Conditional mandated non-essential
Services in this category do not meet the criteria of an essential service, but continue to be mandated for a variety of reasons, principally because they are closely linked to conditional essential services. It may be necessary to deregulate any or all of these services at some point in the future due to changes in market conditions that would cause the link to be no longer relevant. However, these services will remain in this category until the reasons that caused them to be mandated are no longer present.
f) Non-essential subject to phase-out
Services in this category include those that do not meet the revised definition of an essential service, as well as those that fall outside the categories described above. As a result, they will be deregulated over the next three to five years. This approach will ensure a smooth transition to a reliance on market forces and give competitors time to adjust their business plans.
Date Modified: 2008-03-03
