questions
& answers

TELUS' telecommunications and broadcasting services are regulated under federal legislation by Industry Canada, as well as by the Canadian Radio-television and Telecommunications Commission (CRTC), which reports to Parliament through the Minister of Canadian Heritage.

Areas that TELUS investors should keep an eye on include:

• Proposed change to local forbearance rules - In December 2006, the Minister of Industry issued a proposed order-in-council that would make significant changes to the April 2006 CRTC framework for forbearance from regulation of residential and business local exchange services.
  
  The proposal would eliminate the current marketing restrictions on winbacks and most other promotions. The proposal would replace the CRTC's market share loss test with a much simpler competitive presence test. In addition, it would reduce the competitor quality of service criteria that must be met as a precondition for forbearance.
  
  The proposal is subject to a public comment period, following which the Federal Cabinet can implement the proposed framework in its present or revised form. This order must be issued by April 6, 2007. If it comes into effect substantially as proposed, we believe TELUS will be in a position to achieve deregulation in most of our urban local exchanges in 2007.


• Reliance on market forces policy direction to CRTC - Also in December 2006, the federal government issued an unprecedented direction to the CRTC that requires it to:
  • Rely on market forces to the maximum extent feasible
  • Ensure technological and competitive neutrality and enable competition from new technologies
  • Use tariff approval mechanisms that are as minimally intrusive as possible
  • Complete a review of the framework for mandated access to wholesale services
  • Publish and maintain performance standards for its various processes
  • Continue to explore new ways of streamlining its processes.
  TELUS has advocated these measures in the past and believes their implementation by the CRTC will lead to more efficient and effective regulation while enhancing industry competitiveness.
• Deferral account in limbo - The incumbent local exchange carriers (ILECs) are awaiting the outcome of two Court appeals of the CRTC's February 2006 deferral account decision.
  
  The Federal Court's decisions on the two appeals are expected by year-end. The decisions could change the way that deferral account funds are utilized.
• Price cap framework review - In May 2006, the CRTC initiated a review of the current local price regulation regime for the purpose of establishing the parameters for the next price cap period beginning June 1, 2007. TELUS proposed a single price cap for its ILEC operations in B.C., Alberta and Quebec and that there be no mandated rate reductions for regulated services in the next price cap regime. The CRTC is expected to render its decision in this proceeding by the end of April 2007.
• Wireless spectrum auction - In February 2007, Industry Canada released a discussion paper for the upcoming auction for advanced wireless services (AWS) spectrum. Comments on the consultation paper are due in May 2007, with further reply in June 2007. It is currently expected that the final auction rules will be issued this fall with an auction likely in early 2008. Existing carriers, cable-TV companies and others may be interested in acquiring AWS spectrum. TELUS supports an open and fair auction with the same rules for all participants.

TELUS supports the Canadian government's push to rely on market forces where feasible. While we are strategically focused on data and wireless, which are largely unregulated, we welcome any deregulation in our incumbent wireline markets that may enhance our competitiveness.

Janet Yale
Executive Vice-President,
Corporate Affairs
Member of the TELUS Team