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Newsletter – April 1998 Vol.5, No.1

IN THIS ISSUE

PIAC Advocates Stronger Privacy Laws
Telco Price Caps Now In Effect
CRTC Examines Telephone Service in High Cost Areas
Banking on Consumer Power
New Reports

PIAC Advocates Stronger Privacy Laws

The privacy of one’s personal information is becoming increasingly difficult to protect in this age of computerization and globalization. Personal information (any information about an identifiable individual) is now a valuable commodity in the private sector, but individuals’ rights to control over their own personal information have yet to be recognized in law.

Most provinces, as well as the federal government, have laws protecting personal information in the government’s possession. However, Quebec is the only province that regulates the collection, use and disclosure of personal information by private companies. Everywhere else in the country, citizens are bereft of any statutory right to control the collection, use or disclosure of their own personal information by private companies. Yet surveys show that the vast majority of Canadians are concerned about the loss of control over their personal information, and wish to regain it.

In January 1998, the federal government issued a discussion paper entitled “The Protection of Personal Information: Building Canada’s Information Economy and Society”. This paper explains why current protections are no longer enough, and invited feedback by March 27th on the design of a new federal law to protect personal information in the private sector.

PIAC provided detailed comments and suggestions in its March 27th submission to the government, calling for strong legislation and effective enforcement tools. PIAC pointed out a number of gaps in existing voluntary privacy codes, and warned against too much reliance on self-regulation by industry. PIAC recommended that a single federal agency be given the mandate and the resources to apply the new legislation, to effectively enforce it, and to inform the public about their rights and avenues of redress.

The government initiative is encouraging, and we hope that draft legislation will not be long in coming. PIAC’s submission (18 pages, single spaced) can be obtained upon request by calling (613) 562-4002 ext.60.

Telco Price Caps Now In Effect

After a long process in which PIAC represented a number of consumer groups concerned about telephone rates and service quality, a new regulatory regime took effect on Jan.1, 1998. Eight of the major phone companies in Canada (Bell, BC TEL, Telus, MTS, MT&T, NBTel, NewTel and IslandTel) are no longer subject to detailed regulatory scrutiny of their costs and revenues. Instead, they are subject to a pre-set cap on the prices that they can charge.

The cap is based on a formula, which was established by the CRTC in May 1997. This formula requires the telcos to reduce overall prices for local services by 4.5% less inflation each year. Average residential rates are permitted to increase by no more than inflation, while individual rates can be increased by no more than 10% per year. It is expected that companies will satisfy the price cap by lowering business rates – indeed, we are already seeing such reductions.

One of the more controversial aspects of price caps involved the level of “going-in” rates. Telephone companies wanted to jack up their rates before the price cap took effect. The CRTC permitted rate increases as of Jan.1, 1998 ranging from $1.33 in the case of Telus to $3.20 in the case of BC TEL. (NBTel did not request an increase) However, the Commission rejected telco requests for a more lenient price cap, and, with minor exceptions, held the line on its price cap formula. Average local residential rates for these eight companies now range from $17.64 in the case of MTS, to $25.00 in the case of MT&T.

In the wake of this dramatic change in the way that telephone service is regulated in Canada, PIAC has published a booklet entitled “Price Caps in Canadian Telecommunications: A Consumer Primer”. Copies are $6 each and can be obtained by calling (613) 562-4002 ext.60.
CRTC Examines Telephone Service in High Cost Areas

PIAC is representing a broad coalition of consumer groups in a CRTC proceeding on problems associated with providing telephone service to people and businesses in rural and remote parts of the country.

Increasing competition in telecommunications has brought more choice and lower prices to many Canadians. However, it has also put great pressure on local rates, especially those in smaller centres. As well, competition tends to concentrate in densely populated areas, leaving many rural folks without any real options.

In the past, phone bills were based on the value of service a customer received – i.e., the number of other subscribers that could be reached free of charge. That’s why rates in rural areas were so much lower than rates in big cities. It didn’t matter that the phone company’s costs were much higher in rural areas, because the same company could use its revenues from more profitable urban centres to make up the difference.

With competition, however, this “value-of-service” based pricing cannot be sustained. Competitors squeeze profit margins where they are the greatest, and thereby reduce the ability of old monopolies to cross-subsidize unprofitable services (e.g. local service in high cost areas) with revenues from profitable services (e.g., long distance, local business service in urban centres).

In brief, competitive market forces that tend to bring phone rates in line with company costs could make phone service unaffordable for many Canadians outside the major centres. This could have disastrous effects on small communities and the people who happen to live and work in them. All Canadians, however, stand to be affected by the CRTC’s ultimate decision, either as telephone ratepayers or as citizens who benefit socially and economically from the universal availability of affordable telephone service across the country.

Key issues include:

  • Should people in rural and remote areas have access to high quality telecommunications services on the same basis as other Canadians, and if so, how should this be funded?
  • To what extent should phone rates reflect the value of service received (e.g., comparable rates for comparable service), and to what extent should they reflect the cost of providing service, which can be disproportionately high in rural and remote areas?
  • What problems do telephone subscribers in rural and remote areas experience, and how should these problems be addressed?

The CRTC will be holding public consultations in locations across the country, from May 26th to June 25th. It is important that as many people as possible come out to these consultations, and make their views known. PIAC has prepared a Fact Sheet on the proceeding, which sets out the dates and locations of the meetings. For a copy, call (613) 562-4002 ext. 60.

Banking on Consumer Power

In February, PIAC released a report on consumer issues in the financial services market that explores consumer concerns regarding the banking industry with the goal of identifying future possibilities for consumer advocacy. A key concern highlighted by the report is that with current levels of concentration in the banking industry, competition in the financial services sector is to weak to protect consumers. The recent news that the Bank of Montreal and the Royal Bank intend to merge has made the report’s conclusions on the lack of competition in this sector even more pertinent.

While consumer advocates have made great efforts to influence the banks and their regulators to make the financial services industry more friendly to consumers, the industry still has a long way to go on consumer issues. In fact, according to a recent survey, the majority of Canadians think that the government should be more involved in the banking industry to protect consumers.

A major concern is that the self-regulatory approach rather than legislation is being relied upon in the areas of tied selling, access to basic financial services, and privacy. Self-regulation in this case means that consumer protection is essentially optional for the banks. The report also concluded that current service fee levels are not fair for low-income Canadians.

Consumer organizations views on the banking industry are generally supported by public opinion. A survey conducted for the report showed that: 68% of Canadians think that government should become more involved in the banking industry to protect consumers; 61% of Canadians think that a legal framework is the best way to ensure that privacy of personal information collected by banks is protected; and 40% of Canadians would like a watchdog to be created for the banking industry.

Banking on Consumer Power: The Issues for a Canadian Consumer Coalition for the Banking Industry is available at a cost of $20.00 from the Public Interest Advocacy Centre.

New Reports:

PIAC has released a new report called Criteria for Defining Essential Communication Services. The 52 page report establishes a matrix based on factors relating to market supply, user demand, and policy/public benefits to be used assess whether new communication services are basic or essential. A case study analyses the circumstances under which the Internet would become an essential service. The report is available from PIAC at $15 per copy, plus shipping.

To Order Reports by phone:

call – 613-562-4002, Ext. 60.

Communication Regulatory Agencies for Canadians was also recently released by PIAC. This study analyses the roles of Canada’s regulatory agencies, the CRTC and the Competition Bureau, in a competitive communications marketplace. The 113 page report compares the abilities of the CRTC and the Competition Bureau to address and protect the interests of consumers. The report is available from PIAC at $15 per copy, plus shipping.

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