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Eliminating Phonelessness in Canada: Possible Approaches Second Edition

Full report is available as a PDF [pdf file: 0.28mb]

EXECUTIVE SUMMARY

Phonelessness: The Problem

Phonelessness is a social policy problem that needs to be addressed by the federal government. In particular, it has serious implications for employment, skills development, and the delivery of social services, all of which are central components of HRDC’s mandate.

While overall household telephone penetration rates in Canada are high (98-99%), they are significantly lower among low income households (95-96%). The predominant characteristic of phonelessness in Canada is low income.

Based on Statistics Canada data, it can be conservatively concluded that at least 0.8% of Canadian households, or over 100,000 households, do not subscribe to residential telephone service because they can’t afford it. How many more can’t afford phone service is not clear, given important gaps in Stats Can survey samples.

Those without telephone service for affordability reasons constitute the mere “tip of the iceberg”; many more Canadian households are struggling to keep phone service in the face of ever-increasing basic rates.

Responses to the problem of phonelessness

In Canada

  • the CRTC has required telephone companies (a) to offer toll restriction and instalment payment options, and (b) to monitor penetration rates, disconnection rates and related data in order to track the affordability problem;
  • some companies offer bad debt repayment plans, aimed at helping customers pay off outstanding debts while still receiving phone service;
  • some communities offer free or low-cost voice mail for the homeless or those without telephones at home; and
  • a private company offers prepaid local-only phone service, as an alternative for those who face large security deposits and/or debt repayment in order to regain service from their local service provider.

In the USA

  • there is an extensive system of subsidies designed to assist low income households get on and stay on the telephone network, most of which fall under the FCC’s “Low Income Program”. The key programs, offered throughout the USA, are Lifeline (monthly rate discounts), Link-Up (installation fee discounts), and Toll Limitation Service (free blocking of toll service). Additional benefits and/or alternative discount rate plans are available in many states.

Eliminating Phonelessness in Canada: Possible Approaches

  • These programs are generally funded by revenue-based charges levied on telecommunications companies, and to some extent by end-user surcharges.
  • In 2000, an estimated 5.9 m. US households paid reduced local rates under the Lifeline program. App. 10.6 m. low-income customers have benefited from the Link Up program since its inception in 1987.
  • prepaid local service is available in at least one state (Texas);
  • metered service is an alternative option in many states;
  • some states offer equipment subsidies for visually and hearing impaired customers.

In the UK, -local service is metered, and mobile service is very popular; -local phone companies are required to offer customers “the option of a more restricted package at low cost”; such services include incoming-only service (not popular), prepaid local service with access code, and a
“light user scheme” which is attractive for those making little use of local phone service;

  • service providers are also required to provide alternative payment options, including pre-payment options.

The impact of assistance programs on subscribership

Targeted subsidies in the USA appear to have had at least some success in raising penetration levels. A recent study concludes that the Lifeline program “has raised penetration rates and the sizes of the increases are related to the amount of assistance provided”.

While phonelessness in the UK has dropped significantly over the past two decades, it is difficult to attribute this to any particular cause.

Penetration rates in Canada appear not to have been affected by the minimal efforts made to date to facilitate subscribership in this country.

Lessons to date

Phonelessness is inextricably linked to income. Any program designed to combat phonelessness should therefore focus on low income households.

There are at least three different aspects of the affordability problem, each of which requires its own solution:

  • inability to afford the up-front costs of connection or reconnection;
  • inability to afford the ongoing cost of basic phone service; and
  • inability to control the use of one’s phone.

Eliminating Phonelessness in Canada: Possible Approaches

The more generous the assistance, and the more effort that goes into promoting it, the more successful it will be in improving the affordability of phone service.

Challenges in designing and implementing a telephone assistance program in Canada

A preliminary challenge is a perception of many that no such program is needed in Canada, given our relatively high telephone penetration rates.

If the goal of the program is to close the phonelessness gap, rather than to make basic phone service more affordable for low income Canadians, a dilemma exists: making benefits available only to the phoneless will create a perverse incentive for subscribing households to disconnect.

If the goal is to make phone service more affordable for low income Canadians and to thereby bridge the phonelessness gap, the key challenge lies in targeting the program at those who need it while minimizing administrative costs.

Conclusions and Recommendations

In order to achieve the goal of truly universal telephone service in Canada, more effort is needed to close the phonelessness gap.

A program designed to reduce phonelessness cannot simply focus on the phoneless; it must focus on all those experiencing telephone affordability problems.

Lower-value, unsubsidized, “budget services” do not respond to the needs of all those experiencing affordability problems, and hence do not offer a full solution.

The two main options for funding a targeted subsidy program are (a) direct taxpayer-funded subsidies, or (b) a subsidy scheme administered via telephone companies, as in the USA. Providing subsidized service through telephone companies, rather than social assistance agencies, is likely to be the most efficient method.

Each of the three problems identified above (connection fees, monthly rate, toll bills) needs to be addressed if phonelessness in Canada is to be eliminated. Currently, only one of these three problems is being effectively addressed, through the CRTC-mandated toll restriction service. Statistics suggest that the other two problems are more significant, and therefore worthy of further attention.

Key elements of an effective program to combat phonelessness in Canada include:

  • income-based eligibility (self-certified), combined with automatic enrolment of social assistance recipients;
  • a variety of benefits designed to address each particular problem;
  • sufficiently generous benefits to attract non-subscribers;
  • ongoing promotional and outreach efforts; and -oversight by a multi-stakeholder Advisory Committee.

Public Interest Advocacy Centre March, 2002

 

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