CRTC changes a blow to local phone companies

Jeff Green | Jun 01, 2012

Photo: North Frontenac Telephone, serving the 279 and 375 exchanges in Sharbot Lake. 

There are about 20 small phone companies still operating in Ontario, including North Frontenac Telephone Company, which serves the 279 and 375 phone exchanges (Sharbot Lake and Parhanm/Tichborne), and Westport Telephone (273)

They all serve rural areas and in recognition of the fact that they serve remote clients, they receive some remote service subsidy dollars as well.

A change in the rules around subsidies for SILECs (small incumbent local exchanges) was recently approved by the CRTC (Canadian Radio and Telecommunication Commission). The change was brought in response to requests from cable companies who are planning to compete in the areas covered by some of the larger independent Ontario telephone companies in south-central Ontario, but they will affect all of the independents, including Westport and North Frontenac Telephone, potentially forcing rates up for basic service by $3 per month in the short term.

“We don’t want to be put in that position”, said Dave Smith, the General Manager of North Frontenac Telephone Company (NFTC).

Of perhaps even greater concern, the changes might open up what Smith considers unfair levels of competition, allowing companies to enter small markets and offer service to larger clusters of people in hamlets, but not to households living on remote back roads.

The Ontario Telecom Association represents 23 independent telephone companies in Ontario, and they have been fighting against the changes at the federal level. They have filed a stay with the CRTC, so the new rules will not come into effect before they are considered again by the commission and perhaps the federal cabinet.

OTA Executive Director Jonathan Holmes described the impact of these rule changes in a media release:

“When the cable companies come in, typically their plant is focused in the core area of an exchange, where there are a lot of customers, and that’s the only place that we anticipate that they’re going to offer service,” Holmes said. “So they’ll come in and probably be able to win a fair share of customers based on that, but they won’t be able to offer their services outside of the core – we call that the doughnut effect. So potentially what could happen is that those customers outside of the core won’t get a competitive offer, and they may be dealing with a weakened SILEC who won’t be able to serve them as well because they’re going to have to focus their efforts and resources on competing in the core – and that may lead to an erosion of service in the fringe of the doughnut.

“That’s a key concern for us, that hollowing out of the doughnut.”

While the small phone companies based in Westport and Sharbot Lake are not dealing with cable companies wanting to get into the market, Dave Smith is concerned that other large players might enter into the NFTC market and have an unfair advantage.

“We have nothing against competition. We face competition every day from the large cell companies and everyone else, but this is creating an un-level playing field for us. We have to serve our entire territory and we have invested money in order to do so, both in telephone and Internet service, but someone who comes in will not have the same constraints. That’s not a level playing field.”

Smith said that as of yet no one has indicated they are planning to offer service in the 279 or 375 exchange areas, but the new rules raise that possibility and could impact on North Frontenac Telephone Company’s ability to invest in equipment upgrades.

NFTC will be launching a 100-channel television package later this year to customers in certain locations.

“The television service will roll out in a similar manner as our DSL Internet service did back in 2004,” said Smith, “to certain customers, based on the proximity of their location to our equipment, and building out from there over time.”