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Canada Gazette Part I, 10 March 2012 Telecommunications Act Notice No. DGTP-001-12 Petition of Association des Compagnies de Téléphone du Québec inc. (ACTQ) and Ontario Telecommunications Association (OTA) to His Excellency the Governor in Council dated 3 February 2012 Telecom Regulatory Policy CRTC 2011-291 and/or Telecom Decision CRTC 2011-733 RESPONSE OF TELUS COMMUNICATIONS COMPANY 10 April 2012 TABLE OF CONTENTS 1.0 INTRODUCTION............................................................................................................................... 1 2.0 THE TELECOMMUNICATIONS POLICY FRAMEWORK....................................................... 3 3.0 THE ACTQ/OTA PETITION ..........................................................................................................10 3.1. THE REGULATORY FRAMEWORK WAS CUSTOMIZED FOR THE SILECS BY THE CRTC AND IS THEREFORE NOT A COOKIE-CUTTER NOR A ONE SIZE FITS ALL APPROACH ................................................................................................................................................14 3.2. THE APOCALYPTIC SCENARIOS DESCRIBED BY ACTQ/OTA ARE PURE FANTASY AND HIDE THEIR IMPRESSIVE DEVELOPMENT AND EXPANSION OVER THE LAST FEW YEARS .........................................................................................................................................................19 4.0 CONCLUSIONS AND RECOMMENDATION .............................................................................27 ii TELUS Response to ACTQ/OTA Petition 1.0 Introduction 1. On 3 February 2012, Association des Compagnies de Téléphone du Québec inc. (“ACTQ”) and Ontario Telecommunications Association (“OTA”) (collectively, the “ACTQ/OTA”), on behalf of 30 small incumbent local exchange carriers (“SILECs”) filed a Petition seeking an order from the Governor in Council to the Canadian Radio-television and Telecommunications Commission (“CRTC”) that would be anti-competitive, anti-consumer and that would ultimately subvert the long awaited introduction of competition in the local exchange telephone markets of the remaining Canadian monopolies. 2. TELUS‟ interest in this Petition is twofold. Firstly, as an advocate for facilities- based competition and as the interconnector company on behalf of Cogeco, TELUS has been trying to help provide customers served by eight SILECs in Quebec1 a competitive alternative for the last four years so that these residents can benefit from the same advantages as the other Canadians. Secondly, TELUS strongly believes that granting the ACTQ/OTA Petition would result in a major departure from fulfilling the Canadian telecommunications policy objectives. 3. ACTQ/OTA‟s Petition is based on misleading and incomplete factual information aimed at painting a series of unfounded apocalyptic outcomes and speculative scenarios. ACTQ/OTA‟s Petition is nothing more than a self-serving attempt to protect its member SILEC companies, not their customers, from competition while the majority of these same SILECs have been operating as competitors themselves for some time in other telephone companies‟ incumbent geographic markets, including TELUS‟. Granting ACTQ/OTA‟s Petition would have the ultimate effect of isolating customers living in these areas and denying them access to a choice of local exchange service provider and all of the well-known benefits that flow from competition. This unfortunate result would clearly be a 1 Guèvremont, Sogetel, CoopTel, Milot, Upton, Lambton, St-Victor and St-Ephrem. 1 major departure from the fundamental objectives of the Telecommunications Act (the “Act”) as well as successive Government policy statements favouring the evolution of Canadian telecommunications markets towards facilities-based competition. This evolution to competition for local telephone services has taken place in every geographic region in Canada except those where the members of the ACTQ/OTA are the incumbents. 4. The threshold question for the Governor in Council in considering this Petition is whether ACTQ/OTA has made its case that the CRTC has stepped outside the telecommunications policy framework set out in the Act and the Government‟s own Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives2 (the “Policy Direction”) to rely on market forces to the maximum extent possible as a means of achieving the telecommunications policy objectives set out in section 7 of the Act and when relying on regulation, use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives. 5. ACTQ/OTA argues that “the Commission‟s refusal in Decision 2011-733 to review and vary Policy 2011-291 has undermined the Canadian telecommunications policy objectives in several significant ways”. 6. In this response, TELUS demonstrates that such a decision by the Governor in Council would, in fact, represent a clear departure from the telecommunication policy framework. It would strip the Commission of a whole range of powers granted to it by Parliament and that it needs to fulfill its mandate. Granting the Petition would unnecessarily overprotect small carriers to the detriment facilities- based competition and hence to the detriment of consumers living in these areas. 7. In section 2 of this response, TELUS outlines the telecommunications policy framework set out by Parliament in the Telecommunications Act and the Policy Direction. In section 3, TELUS addresses ACTQ/OTA‟s unfounded complaints 2 Canada Gazette, SOR/2006-355, 14 December 2006. 2 and requests and demonstrates that the Commission crafted a sensitive and customized approach to regulating the SILECs that is the result of many years of fact gathering and analyses. TELUS also demonstrates that the apocalyptic scenarios described by ACTQ/OTA in its Petition are pure fantasy and hide the SILECs‟ impressive development and expansion over the last few years. 8. For all of these reasons, and as more fully explained below, TELUS urges the Governor in Council to reject the Petition in its entirety. 2.0 The Telecommunications Policy Framework 9. In order to more fully understand TELUS‟ fundamental objection to the ACTQ/OTA Petition, it is helpful to provide a brief overview of the telecommunications policy framework established by Parliament in the Act and some of the critical judicial decisions and CRTC decisions that have shaped the policy framework. 10. Prior to the introduction of competition, the incumbent telephone companies were regulated as public utilities. Their rates and services were regulated according to three fundamental principles. Rates were to be just and reasonable. Rates and services were not to be unjustly discriminatory or unreasonably or unduly preferential. Carriers had an obligation to serve all customers requesting service, limited only by statutory provisions or the terms of tariffs approved by the regulatory authority. 11. The concept of just and reasonable rates was well understood. Rates had to be just and reasonable for both the company offering the service and the customers receiving the service. To be just and reasonable, rates had to be high enough to allow the company a reasonable opportunity to recover the costs of providing its 3 services, including its cost of capital, and at the same time low enough to ensure that customers did not pay more than the company‟s cost to provide the services.3 12. The relationship between a rate-regulated company and the regulator was straightforward. The company invested its shareholders‟ capital in facilities and incurred other expenses necessary to provide service under the terms and conditions required by the regulator, with the understanding that the company would be provided with a reasonable opportunity to recover its costs. This relationship, often referred to as the regulatory bargain, is established at common law, is recognized in many regulated industries and its principles are embedded in the Telecommunications Act through the requirement that regulated rates be just and reasonable. The only new provision dealing with just and reasonable rates included in the Telecommunications Act permits the CRTC to use any method or technique that it considers appropriate to determine just and reasonable rates.4 Of course, this does not change the fundamental obligation to ensure that rates are sufficient to allow a reasonable opportunity to recover the company‟s costs of providing rate-regulated services. 13. In 1979, the CRTC issued the first in a series of decisions that gradually introduced competition into all telecommunications markets in Canada.5 This decision, which was affirmed by the Governor in Council6, permitted CNCP Telecommunications (now MTS Allstream) to interconnect its network with the switched local distribution network of Bell Canada for the purpose of providing 3 See, for example, Edmonton (City) v. Northwestern Utilities Ltd., (1961), 28 D.L.R. 125 (S.C.C.) at page 132-133, where Locke J. observes “The right of the consumers to require the respondent to supply them with gas, conferred by statute, would, in my opinion, even in the absence of any statutory provision, impose upon them an obligation at common law to pay for the services on the basis of a quantum meruit. In such circumstances, I consider that the position of the utility would be similar to that of a common carrier upon whom is imposed, as a matter of law, the duty of transporting goods tendered to him