Copyright 2003 Sun Media Corporation

Winnipeg Sun (Manitoba, Canada)

July 22, 2003 Tuesday Final Edition

Canada's major telephone companies must make their high-speed Internet services available for sale to the residential customers of competitors, the federal telecommunications regulator ordered yesterday.

The Canadian Radio-television and Telecommunications Commission said the country's established local phone service providers — Bell Canada, Aliant Telecom, SaskTel and Telus — must end restrictions making their high-speed Internet access available only to their own residential clients.

The decision "is about removing the obstacles to fair competition," stated commission chairman Charles Dalfen.

"Making the incumbents' high-speed Internet services available to the competitors' subscribers will give customers more choice when it comes to choosing local telephone service providers and should enhance competition."

The CRTC found that by refusing to provide digital subscriber line service to competitors' customers, the telephone companies "are unjustly discriminating against their competitors and giving themselves an undue preference."

"Obviously, we're thrilled," reacted Bill Linton, president and CEO of competitive provider Call-Net Enterprises Inc., whose shares (TSX:FON.B) rose 9.5 percent after the CRTC announcement, gaining 40 cents to close at a 52-week high of $4.60.

"What it means immediately is that the 20 percent of potential customers that we could not provide our local service to because they took the telephone company's DSL are now available to us to sell," Linton said.

"This is quite a critical ruling," said Lawrence Surtees, Internet and telecommunications analyst at IDC Canada.

"The decision goes a long way toward making it more viable for some of these players," he said, referring to alternative phone providers such as Call-Net, EastLink in Atlantic Canada and GT Group Telecom (TSX:GTG.A).

Surtees suggested the ruling might also attract new entrants to the home-phone market.

It also requires Bell (TSX:BCE) to open up its DSL service to Telus in Ontario, and Telus (TSX:T) to provide similar access to Bell's incursion in the West.

Manitoba Telecom Services (TSX:MBT) was not directly involved in Monday's decision, but the commission said MTS will be covered by it on a preliminary basis and must show cause within a month why it should not be subject to the ruling.

The decision came in response to an application in January by Call-Net, which said 17 percent of customers who cancelled their home phone service with Call-Net indicated that they did so because they could not receive DSL Internet access through Bell Canada.

Toronto-based Call-Net also said many potential customers who rejected Call-Net's local phone service cited the unavailability of DSL as the main reason.

Call-Net also predicted the negative impact on it and other competitive local exchange carriers would increase as more households subscribe to DSL and as lower-cost broadband services lure away dial-up customers for Internet access.

Bell, Telus and the other incumbents, in opposing the Call-Net application, submitted that Call-Net could offer its own DSL to its residential customers — as it already does to business clients.

From a competitive point of view, Bell and others added that there are alternatives to high-speed Internet access by phone, including cable and fixed wireless services.

And they insisted there was nothing anticompetitive or unjust about selling DSL only to their own customers.

The commission discounted those arguments, as well as suggestions that there could be technical problems in providing DSL access to competitors' customers. The CRTC added that the incumbents must cover any network costs arising from the decision.

"There's a window of opportunity, I would argue, for Sprint Canada to latch onto this ruling and put together an attractive and innovative bundle which the telcos can't really match right now," said IDC's Surtees.

He added that Monday's ruling bodes well for a similar complaint by small Internet providers who have asked the CRTC to make it easier for them to offer high-speed service.

"This could potentially inject a bit more competition, not only in the local (telephone) space, but the retail Internet space."