Regulatory Forbearance in Canada

Introduction

The Canadian Government passed the Telecommunications Act in June 1993. The Act empowered the Canadian Radio-Television Commission to determine which services to regulate and which not to regulate. On 16 September 1994, the Canadian Radio-Television and Telecommunications Commission issued its Decision 94-19. In this decision it set out criteria for deciding when to regulate and when to forbear from regulating.

The Commission adopted the approach that it should forbear from regulating when a market is “workably competitive”. In determining whether a market meets this test, the Commission considers:

  • The market share held by the largest firm,
  • The sensitivity of customer demand to changes in prices, and
  • The contestability of the market.

The Commission has decided to forbear in the markets for:

  • Terminal Equipment (Decision 94-19)
  • Wireless Services (Decision 96-14)
  • Toll services provided by non-dominant operators (Decision 95-19)

Key features of these decisions are summarized below.

Terminal Equipment

In Decision 94-19, the Commission decided to forbear in markets for the sale, lease and maintenance of terminal equipment. The Commission found two relevant markets:

  • The market for single line equipment, and
  • The market for multiline and data equipment, for example PBX systems.

The Commission decided that the market for single line equipment was workably competitive because there were product offerings consisting of both domestic and imported product, produced and sold by many retailers in a large variety. It decided that the market for multiline and data equipment had also become workably competitive. Technological change had made entry into the market easier, and the market share of the largest firms had declined as new competitors had entered the market.

Wireless Services

In Decision 96-14, the Commission considered whether to forbear in the market for wireless telecommunications services. The Commission determined there were two relevant markets:

  • The market for mobile phones connected to the public telephone network, and
  • The market for “data and other wireless telecommunications devices”.

The Commission decided to forbear in the market for data and other wireless telecommunications devices. It found that this market was workably competitive, and that competition was sufficient to keep prices down and protect the public interest.

The Commission decided to largely forbear in the market for mobile phones connected to the public telephone network, as there was workable competition sufficient to keep prices down and protect the public interest. However it decided to preserve a requirement for the protection of confidentiality of customer information provided for the purposes of interconnection. It also preserved a requirement that operators must not discriminate between other operators in the terms on which they offer interconnection.

Toll Services Provided by Non-Dominant Operators

In Decision 95-19, the Commission decided to exercise partial forbearance in the market for long distance tolls. It decided to forbear from requiring tariff and cost filings for those carriers that did not have fixed networks. The Commission determined that these competing carriers did not have the ability to exercise market power, and that competition was sufficient to keep their prices down. It continued to require tariff and cost filings from long distance carriers that had established fixed telephone networks.

The Commission continued to impose requirements on all long distance toll providers, including:

  • Protection of confidential customer information provided for the purpose of interconnection
  • Restrictions on the bypass of Canadian network facilities.

Sources:

Canadian Radio-Television Commission Decision 94-19, Review of Regulatory Framework

Canadian Radio-Television Commission Decision 96-14, Regulation of Mobile Wireless Telecommunications Services

Canadian Radio-Television Commission Decision 95-19, Forbearance – Services Provided by Non-Dominant Canadian Carriers

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