In public, they're arch-rivals, but behind closed doors, Canada's cable and telephone industries are quietly working together, developing standards for local competitive telephone service.
The reason they're doing this—in league with other long distance and wireless telephone service providers—is because a regulator has told them to. That's because the Canadian Radio-television and Telecommunications Commission (CRTC) has decided that the fastest way to get competition opened up in both local telephony and cable is to get the players together to hammer out as many mutually-agreed upon standards as they can.
"There's an awful lot of technical stuff that has to be figured out for local competition," explains Don Bowles, the CRTC's director of Competition and Social Policy, "and it's going to take a long time to do it. So we initiated the industry working groups to work on (the issues related to) local number portability. It was considered that local number portability was the most complicated thing that had to be done for local competition."
It's worth noting that the CRTC uncharacteristically established these working groups before it released its rules on local telephone competition, says Ken Engelhart, vice president of Regulatory Law for cableco Rogers Communications Inc. "In this case, they decided to have their technical interconnection meetings start even before the decision is out—that is the carrier interfaces proceeding—which is going on right now," he says. "It's looking at how the network and operational interfaces will work for local telephony." That this unique state of affairs has even taken place is a measure of how intense the pressure is to get local competition on-line, whilegetting the rules right for governing it.
Still, this approach comes with a cost, which is that the working groups can't tackle any of the policy issues still being considered by the CRTC. However, Engelhart says that, "I anticipate the decision to be out by May, so if I take an optimistic view of the world, I'd say that between now and April we work as hard as we can on the things that we can agree on; the decision comes out in May, and then we work on those things. But yes, it would be much more logical, and better, if we had the luxury of being able to work on all of this once the decision came out. We don't have that luxury, so we can't."What they're doing
As chair of the Business Systems Working Group, Engelhart is in the thick of this process. So is Jacques Sarrazin, Stentor's general manager of Local Network Interconnection and Numbering (Stentor is the coordinating alliance formed by Canada's nine major established telephone companies), who heads up the Networks Working Group.
"The Network Working Group is really looking at the physical connection of the wires and the components of a competitive network to the phone company network," says Engelhart.
"As well as the network interface standards, they're also looking at network planning issues—how do the two carriers communicate to each other about their plans without revealing what those plans are, but at the same time, giving enough information that each one can plan appropriately—and also network operations: when something breaks, how do we decide if it's on their side of the line, or our part of the line?"
"In the business systems group, which I'm doing, we're looking not at how the networks connect together, but at how the business systems connect together," he adds. Issues being covered in the various subcommittees include operator services ("If you're calling your sister, her line is busy, and you want to barge in on a call which you can do today how does that work if you have a different phone company than she does?," asks Engelhart.), directory issues, 911 access, transferring customers between phone companies, local number portability and billing/ordering.
So how are things going? Well, when the process started last year, "There were something like 35 issues that we had identified," says Jacques Sarrazin. "We've come to consensus on about 15 of them."
He adds, "I must admit that a lot of those are technical issues such as the routing algorithm we're going to use, the switch generic document, types of components that will be included in the cost recovery, and so on. So it's primarily technical issues."
A case in point: according to Engelhart, right now, the telcos and their potential rivals can't agree as to whether the telephone company should be given advance warning when one of its clients is about to switch. The reason is simple: if Stentor is warned, it will have time to unleash its marketing people on wavering clients, begging them to stay with the promise of special deals and discounts.
"However, we can both agree that there are some circumstances where there must be communication," says Engelhart. "Three that leap to mind are where number portability is taking place, where the new entrant is a reseller, or where the new entrant is using an unbundled local loop from the phone company. In all three of those cases, there has to be coordination between the new carrier and the old carrier, so we are working out how the details of that communication will take place, while we're agreeing to disagree whether there needs to be any communication in other cases." Other areas of agreement include making sure that 911 works for all telephone customers, whatever their carrier; directory services and operator assistance. As Engelhart says, "Our operators have to be able to talk to their operators."Neutral territory
Still, there are other technical issues where the subtleties of an old monopoly fending off new competitors is hampering agreement. For instance, there's the issue of interconnection between networks: how will the old and new telephone companies link with each other? The newcomers, such as cable, favor what's known as a 'central meet point,' where everyone trunks their networks into a new and likely third-party operated neutral interconnection point. However, "Stentor doesn't really support that architecture," says Sarrazin. "I think that if you look at the efficiency of interconnection, in our view, it would be more efficient if competitors interconnected at each individual central office." Of course, the competitive carriers would have to pay for this access and pay dearly, fears Engelhart, which is why he and other potential telco rivals want neutral meeting points instead.
Obviously, this is the sort of divisive issue that could tear the working groups apart.
That's why both sides take a very hands-off approach in dealing with them.
"'Since we don't agree that there should be meet points, we don't want to talk about it'," says Engelhart, when asked to describe how the telcos have been handling this issue. "'Or, at least, if we do talk about it, we want to leave that for the last issue, so we don't give it any priority'." That's a position the other working group members are willing to accept, if only for the sake of maintaining good relations overall.How it's going
The calmness with which both Sarrazin and Engelhart discuss the differences within their groups tends to downplay a remarkable fact: namely, that the cable and telephone industries are sitting down together at all.
What makes this remarkable is the long history of bad blood between the two, one that goes back to the early days of cable and disputes over access to telephone poles for stringing coax, to the current day when both sides snipe at each other regularly in the public press. It would perhaps be overstating the situation to compare it to the Mideast peace talks, but the sense of simmering distrust that hampers those meetings exists between Canadian cable and telephony as well.
Which brings us to the big question: just how well are the two sides getting along?
"Actually, it's working very well," says Jacques Sarrazin. "I think there's been a sort of healthy discussion and healthy conflict, which was expected, but I think that it's been let me say that it's been a lot better than I thought it was going to be from the beginning."
"I don't want to tell you there haven't been any fights and arguments; there have been," says Engelhart. "There have been some good ones. There have been some differences of opinion, and there are some things we're never going to agree on, and that the CRTC has to decide. But, in the general context of my experience in negotiating these kinds of things with the phone company and with other parties, I would say the level of cooperation has been good.
"There have not been any final reports or final process maps to date, so nothing has been concluded or resolved," he adds. "However, the phone companies have been good about sharing some information on how their existing processes work, and making, I think, realistic proposals about how things should work in a competitive environment."
Sharing information doesn't come easily for Stentor, which doesn't want to tip its hand more than necessary to its competition. That's why ironing out mutually-agreed upon standards "is difficult from the perspective of information that could be sensitive in certain cases," says Sarrazin. "I think what's important, though, is to understand what could be sensitive information, and what isn't sensitive information. So once you've sorted through that process, I think it becomes a little easier."
In short, despite occasional disagreements, the consensus process is working, says Engelhart, thanks to "a good level of cooperation to date." He adds, "I think that a lot of that can be attributed to the wisdom of the government policy makers in their convergence policy, because what they've said is the phone companies can't get into cable until all of this stuff is done.
"So instead of having an incentive to perpetually drag their heels, they now have an incentive to make all this stuff happen, because they're so anxious to get into the cable business. I'm very worried that if there was ever a relaxation of the convergence policy and a relaxation of the Head Start rule, we might see the cooperation that has existed to date begin to evaporate."What's next
So far, there's no sign of the government changing its strategy, however, and so the working groups continue to make progress toward making recommendations for local telephony standards.
Ultimately, these recommendations will be tested in a unique joint industry trial. Says Engelhart, "We will be proceeding to form a consortium with the phone companies and other interested parties, and (to) issue a Request for Proposal to have a third party administrator build a number portability administration center."
"What's required in local number portability is a central database with all the telephone numbers," explains the CRTC's Don Bowles. "What they will do is (that) one company— and I don't know if we have a company yet will attempt to port a number from the telephone company's network to their network." Tentatively, this trial is slated to start sometime in mid-1997.
When this is all over, "Eventually, something will come back to the Commission for our blessing," Bowles says. "They will recommend how it should be done, and in most cases, we hope it will be a consensus position among all parties. They will bring that back to the Commission, and we will say 'yes' or 'no,' and presumably, if everyone agrees to it, we will say 'yes, that's the way it's going to be done,' and people will go ahead and go into business."
All things considered, the process of cable/telco cooperation is going remarkably well in local telephony, considering what an emotional tightrope it is for everyone involved.
But, as Ken Engelhart points out, walking the tightrope is worth it for both sides, because of what's at stake for each of them.
"There are occasionally bad feelings, there are occasionally arguments, but all in all, (for) the people who are working on this process, we both have an incentive to get it done," he says.
"(The telcos) have an incentive to get it done so they can get into cable. We have an incentive to get it done so that if there is a business opportunity in local telephony, we'll be able to take advantage of it."
Adds Stentor's Sarrazin, "Through this process, everyone has learned what each other's positions are. There's a better understanding of the various positions, because it's done in an industry process, and probably in a less formal process. I think everybody's got a better understanding of each other's issues, so from that perspective, a better decision will come out of it."