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Chapter 9. Telecom Reform in Other Countries
- Brookings Institution Press
- Chapter
- Additional Information
Telecom liberalization has now spread to virtually every developed country in the world and even many developing countries. Although the United States has had perhaps the most aggressive policy of encouraging local entry and has had long-distance competition for several decades, other countries have also opened their telecom markets to competition in recent years. The United Kingdom began by privatizing British Telecom in 1984 and opening entry into telecom services in 1985.1 Japan opened its national and international calling markets to competition in 1985, and Canada liberalized its long-distance market in 1992 and its local telecom markets in 1997.2 The European Union’s Telecommunications Directive opened all EU telecommunications markets to competition in January 1998.3 Canada Canada was much slower than the United States in opening its telecom markets to competition. Several telephone companies were owned by provincial governments, and the federal government did not have regulatory authority over the entire country until 1992. Regulatory Policy Canada admitted facilities-based entrants into long distance at the end of 1992 and required the incumbent carriers to provide equal access (that 133 Telecom Reform in Other Countries 9 09-1617-6 CH09 3/8/05 7:17 PM Page 133 134 Telecom Reform in Other Countries is, equal quality connections) to all long-distance carriers. Incumbent telephone companies retained their integrated operations and were allowed to respond to entry by lowering their retail rates. In 1997 the Canadian Radio-Television and Telecommunications Commission (CRTC) opened local telecommunications markets to competition by requiring incumbents to interconnect with new entrants, provide “essential services” for resale, and lease unbundled network elements.4 The CRTC did not require a mandatory discount for the offering of services at wholesale prices, and unbundled elements were to be leased at estimated cost plus a 25 percent markup. Unlike the U.S. Federal Communications Commission (FCC), the CRTC extended unbundling only to “essential network facilities,” such as local loops in suburban and rural areas, central office codes, and subscriber listings. Loops in urban areas, interoffice transit (transmission), and electronic signaling were not deemed essential facilities and were therefore to be unbundled for only an “interim” period of five years. Local switching was not unbundled at all, even over the five-year transition period. Because local competition has been slow to develop in Canada, the CRTC was subsequently persuaded to extend the deadline for the “interim ” requirement of local loop unbundling in urban areas. In addition, it recently reduced the markup on unbundled element costs from 25 percent to 15 percent, but it rejected a proposal by AT&T Canada to emulate the U.S. UNE-P requirement by forcing the incumbents to offer their entire service platform at a 70 percent discount from retail.5 Although the CRTC has not mandated line sharing, the incumbents, led by Bell Canada, now offer line sharing to digital subscriber line (DSL) entrants at rates of $5 a month per line and even less. By allowing integrated incumbent carriers to compete aggressively with the new entrants and by limiting the entrants’ access to incumbent facilities at low, wholesale rates, the CRTC has been much less aggressive in promoting or even “subsidizing” entry than has its U.S. counterpart. This more conservative approach has allowed competition to develop at a more modest rate without creating the stock market frenzy that gripped the United States. The Results of Liberalization: Narrowband Competition in long-distance services increased rapidly after 1992. By 2002 the new entrants, principally Call-Net (Sprint) and Allstream (AT&T Canada), accounted for 30 percent of long-distance revenues (see 09-1617-6 CH09 3/8/05 7:17 PM Page 134 [44.221.81.212] Project MUSE (2024-03-29 15:24 GMT) Telecom Reform in Other Countries 135 table 9-1).6 The result was a rapid decline in the average price of longdistance services to levels that are very close to U.S. rates or perhaps slightly lower, despite the fact that competition in U.S. long-distance services began almost twenty years before Canada liberalized its market.7 By contrast , local competition in Canada has grown very slowly. In 2003 the new competitors accounted for 5 percent of access lines and only 4 percent of revenues, most of it coming from business service. Industry Canada listed 117 “alternate providers of long distance,” 497 resellers, and just 20 competitive local exchange carriers (CLECs) in 2002, but only three major national entrants—Call-Net, Allstream (formerly AT&T Canada), and GT Group—have...