Regulating Canadian telephone rates

 I did another blog on rate setting for Canadian utilities in general on another site.It looked at setting rates for essential services such as telephone,cable,electicity and water provision.This blog will focus on regulating telephone rates.And it will focus on the operation of the CRTC(Canadian Radio,Television and Telecommunications Commission).This blog will look at the effect on the service provider,namely,Bell Canada and Telus.
  Most essential services are provided for by a monopoly  whether it be gas or water or telephone..The equilibrium output for a monopoly is less than market equilibrium that is, less than the market demands.And the price is higher than the market equilibrium also because a monopoly sets it's own prices..That is to say, if there were several providers the rate would be lower and the output higher than with a single provider.This is where the regulator fits in;it lowers the prices and increases service to consumers over what it would be with a monopoly.The market is not at equilibrium for the monopoly nor the consumer.
      The Rate Hearing
  The process starts with an informal meeting of both parties that are fairly familiar with each other.The Commission will be informed of the utility's intentions and a rough idea of what rate increases are sought.No adverse reaction will be followed by a formal rate application which is likely to be a lengthy document.This will be followed by a notice to the public asking for interested parties to inform the CRTC that they wish to intervene in the rate making process.This will be followed by a notice to the public setting the date for the hearing and the likely length of the hearing.An agenda will be made that covers all interested topics and the time expected to hear them.
            The Allowed Rate of Return for the telcos
  This section will diverge from my other blog done on another website.It dealt with the allowed rate of return in a general sense.But a discussion of regulation has to be different when dealing with two important companies that have not only an important impact on consumers but also on the entire technology sector.Their services are not only essential  in rural communities but to many Canadian businesses. Also the resulting rates have a significant impact on a large number of Canadian investors.The CRTC,in effect has an extra variable to consider the price of Bell Canada stock and Telus stock.A decision that all consumers love and sends the price of either stock down by 10 to 20% will be frowned upon by it's boss the Minister of Communications. A healthy Bell Canada and Telus stock is very important to the entire investment community.CRTC must set rates that generate earnings that will be a positive force for these stocks. 
      The Decision
  The decision will be careful to consider any poignant points made by intervenors throughout the hearing.As always it must address the size of the investment program and certain areas that it wants to see more investment in.Here the commission must encourage and cajole rather than try to force investment in these areas.The quality of service must be addressed at length.This will bring it to the allowed rate of return that the rates generated in their test year.The CRTC will not explicitly mention the expected price of the utility stocks but they will have a firm grip on their expected price.Then lastly and importantly they will mention the reasonableness of rates generated by their decision.