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Dr. Roger Ware
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CRTC Review of regulatory framework for wholesale services and definition of essential service (2007)

In a major Hearing conducted in October 2007 the issues, in brief, were:

  • a)  What definition should the CRTC adopt for "essential services"?
  • b)  What facilities, functions and services should be considered essential?
  • c)  What pricing principles should apply to essential services?
  • d)  When should future reviews be conducted?
  • e)  What regulatory regime should apply to non-essential services?

I was retained by Rogers Communications to prepare and file a report entitled “The Proper Application Of The Essential Facility Concept In Canadian Telecommunications” . I also testified at the hearing.

In its Telecom Decision CRTC 2008-17 (“the Order”), released on March 3, 2008, the CRTC overhauled its rules governing competitive access to ILEC wholesale services in Canada. In particular, the Order adopted new categories for determining which ILEC facilities and services will be subject to mandatory wholesale provision to competitors. The new framework established by the Order is expected to primarily benefit competitive carriers seeking to enter into the Canadian telecommunications marketplace by mandating access to more facilities and services controlled exclusively by the ILECs. These ILECs can take advantage of the new wholesale rules, but only if they enter into competition outside their dominant markets.

Under the new framework established in the Order, the CRTC expanded the definition of “essential facilities” originally set forth in Telecom Decision CRTC 97-8 because it felt that the old framework for determining wholesale availability, which was predicated on a finding of monopoly power, was unduly strict and effectively lessened substantial competition in many Canadian telecommunications market areas.

Based upon this new standard, the CRTC determined that to be “essential”, a facility must satisfy all three of the following conditions:

  • (i) The facility is required as an input by competitors to provide telecommunications services in a relevant downstream market;
  • (ii) The facility is controlled by a firm that possesses upstream market power such that withdrawing mandated access to the facility would likely result in a substantial lessening or prevention of competition in the relevant downstream market; and
  • (iii) It is not practical or feasible for competitors to duplicate the functionality of the facility.

The revision of second prong represents the most significant change made by the CRTC. This prong now focuses on the market dominance, as opposed to the monopoly control, of upstream carriers in a market. Thus, the threshold for determining whether a facility is essential has been greatly reduced.

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