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OLD BOTTLES, NEW WINE |
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December 2004- IGB
Grant +1 514 849 3508
& Brian Sharwood +1
416 413 9381
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KEY HIGHLIGHTS: |
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- Canada’s communications regulator, the
CRTC, recently released its 4th annual “Report on Competition”.
SeaBoard contends this latest report is a disappointing, backward-looking
document which hasn’t measured or addressed the profound shifts
taking place in the communications industry.
- The CRTC segments the communications market into: Long Distance, Local
and Access, Mobile and Paging, Internet and Broadband, and Data, Private
Line and Other industries. The Commission contends that each segment
operates in a
distinct economic sphere - there is little interaction or cross-elasticity.
- The
two increasingly dominant segments of the Commission’s template,
the Internet and
Broadband, and the Mobile and Paging sectors, are growing not in islolation,
but, rather, they are expanding at the expense of traditional spheres like Local
and Long Distance. Newer competitive service plans include, for example, all
features ‘free’ and some offer unlimited North American calling plans.
Where is the ‘long distance market’ now?
- SeaBoard projects the wireless-only segment will be over
15% of what is now classified as the local wireline market by 2007, and
as much
as 25% within 6 years – this represents a profound shift in
market dynamics.
- Exacerbating the shift in the market will be the
impact of VoIP: We project VoIP will represent 15% of the landline
base (as a full substitute)
by
2010. This will take away not only basic connectivity revenues from the
incumbent
providers, but also the profitable calling features revenue – with
the long distance market segment that the Commission is so careful to
measure and assess being
essentially non-existent by that time.
- There is a clear danger that the Commission may invoke a heavy hand
on the market and make further adjustments to the marketplace dynamics
based
upon its blemished picture and flawed interpretation of the market. A
tainted assessment
of trends and market forces will lead to poor public policy – such
a movement could have significant implications for the industry and
the country.
- We recommend that Industry Canada convene an advisory panel, familiar
with trends in intersectoral competition, which can assist the department
and Commission to
look at the
market with a keener gaze. Such a panel could assist policy makers
to see the shifts and
recognize new patterns and new dynamics in the market. The panel could
assist government to understand the implications of these new forces
on the structure
of the industry. The present course, pretending that the Commission’s “Report
on Competition” is a valid and complete view of the market is fraught
with peril. Navigating these waters with a faulty chart will not serve
the industry
nor the public good.
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