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NorthwesTel loses monopoly over telephone service
Scathing rebuke from CRTC denies company's request for $2 increase to land line rates

Thandiwe Vela
Northern News Services
Published Friday, December 16, 2011

NorthwesTel's monopoly over telephone service in the North is over.

The Canadian Radio-television and Telecommunications Commission ruled to open the telecommunications market to competition following a review of the Whitehorse-based regional service provider's regulatory framework.

NNSL photo/graphic

Founder and CEO of the SSI Group of Companies Jeff Philipp, left, is all smiles while seated next to SSI Group chief development officer Dean Proctor at the Canadian Radio-television and Telecommunications Commission's NorthwesTel hearing in October. The commission has ended NorthwesTel's monopoly of local telephone service in the North, opening the market to competition. - NNSL file photo

The ruling has cleared the way for Yellowknife-based Internet service provider SSI Micro to begin operating its own telephone service as early as spring. The company was previously barred from competing against NorthwesTel despite assurances from CEO Jeff Philipp that SSI was ready to launch voice services in the North.

"To begin with, NorthwesTel didn't want to have anything to do with phone competition," said Dean Proctor, the SSI Group of Companies chief development officer.

"They thought it was a dumb idea, the time hadn't come, it couldn't be done, nobody was interested, et cetera. The commission clearly saw through that and said, 'No, there is interest in local competition and the North deserves local competition and it should be everywhere. So the entire North is now open and available."

The decision released Wednesday follows a two-day hearing held in Yellowknife in October, which included interventions from several parties such as consumers, businesses and the territorial governments. The commission "came to the conclusion that there needed to be some changes and relatively quickly as well, because the services that were being offered in the North were not on par with the services in the rest of Canada," said Leonard Katz, the CRTC's vice-chairman of telecommunications.

"Obviously when you have a monopoly there isn't as much of an urgency to provide the latest services but there is an obligation on these carriers as well. If they've got a monopoly, they have to make sure they're providing some of these services or risk the market being opened to competition, which, in this case, we felt was the more appropriate vehicle."

One factor in the decision to grant NorthwesTel a monopoly over area code 867 phone numbers was that there was no intervener with the capability to provide telecommunication services in competition with NorthwesTel when regulations were put in place in 2007.

NorthwesTel warned earlier that if it lost its monopoly other companies could come in and cherry-pick the most profitable communities, namely Yellowknife and Whitehourse, but Proctor said SSI is interested in providing telephone service in smaller communities as well.

"We are in close to 60 communities across the North," he said. "We have facilities there.

"We could be ready to go in those communities fairly rapidly," Proctor added, noting the company will still have to negotiate interconnection arrangements with NorthwesTel. Its ability to provide competitive phone service is also dependent on another decision pending from the CRTC, regarding SSI's complaint against NorthwesTel for "unjust discrimination" relating to its backbone connectivity services to the south.

"Whether it's Internet or phone service, it's the same pipe out of town," Proctor said. "If the charges are too high, the charges are too high, which means that you can't compete locally."

The commission also denied NorthwesTel's request to raise land line rates across the North by $2, stating, NorthwesTel has "insufficiently invested in its network despite its strong financial performance during the past few years."

Citing revenues in the order of $225 million and NorthwesTel's near doubling of its annual income to $69.3 million in 2010 from operations since the rate of return regulation was left behind in 2007, the commission "is concerned that NorthwesTel's shareholders have benefited from the price cap regulatory framework to a far greater extent than its customers," the ruling stated. Despite the healthy earnings, NorthwesTel has failed to make necessary investments in its network, the commission said, raising concern that the company's "ageing infrastructure" is affecting the quality and reliability of its service.

"We are disappointed that NorthwesTel, which has until now been the sole provider of local telephone service in the North, has not made a greater effort to improve its services," Katz said, citing service outages in many communities and basic features not widely available to customers such as three-way calling and caller display. "Northern residents deserve to have access to reliable and high-quality services comparable to those offered in the rest of the country."

The commission has ordered NorthwesTel to provide a plan detailing how it will modernize its network within the next six months, which will form the basis of a two-year comprehensive review.

The decisions can be appealed to the courts or federal government, but it is not yet known if NorthwesTel, which had no comment on the commission's ruling as of press time, will pursue any of these avenues.

"We are reviewing it internally right now, but we do need some time to examine it from the regulatory perspective," said NorthwesTel spokesperson Emily Younker.

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