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IN THIS ISSUE
SPECIAL FEATURE: Phone Rate Battle Rages Again.
DID THE CRTC BLOW IT????
Proposed Cable Regulations May Leave Consumers Out of the Picture!
Phase II IHAC Recommendations address Access Issues
As if consumers haven’t been hit hard enough already by a series of increases to the price of basic residential service, another round of applications to raise the price of phone service is now before the CRTC. This time, telephone companies across the country are going for broke. In response to an invitation by the CRTC, the companies are asking for another round of basic rate increases: $3 per month, on average, as of January 1, 1998. On top of this, they want the opportunity to raise rates by up to 10% per year over the next four years, “in response to competition”.
It’s a strange form of competition, that leads to rate increases. Yet that is the one tangible outcome of local competition that consumers can expect to see, at least in the short term. In our view, these applications are proof in and of themselves that competition is still a long way off for ordinary consumers.
What we are seeing is a last ditch effort by the companies to jack up their basic rates before consumers have competitive alternatives. Would we be seeing this if the companies thought that they might lose customers as a result? You be the judge.
In its May 1st decision, the CRTC invited the phone companies to raise local rates by an average of $3/mo. on January 1, 1998, after which time average residential rates would be allowed to rise by no more than inflation each year. According to the company proposals filed today, the $3 increase is not enough. While some are not taking full advantage of the Jan.1st allowed increase, they are all asking for the right to continue to raise local rates by up to 10% per year during the price cap period, which runs to 2002, citing a need to increase shareholder profits, and to recover the costs of past and future network modernization.
How do the companies justify these rate increases? Some companies say they need the money from the local side, in order to fund past long distance rate reductions. Some say they need it to pay for past network investments. And all of them say they need it in order for their shareholders to make a tidy profit – 12.75% returns, to be specific. On top of the basic rate increases are proposals to increase and expand directory assistance charges, and potential further increases to cover the costs of a system to allow subscribers to keep their phone numbers when they move between competitors.
PIAC is representing a coalition of consumer groups in the CRTC proceeding to examine these requests, now underway. The Alberta Council on Aging, the Consumers’ Association of Canada, the Fédération Nationale des Associations de Consommateurs du Québec, and the National Anti-Poverty Organization have joined together to fight these proposals and to maintain universal access to affordable basic phone service for all Canadians.
PIAC is particularly concerned about the lack of a full and proper process to deal with these proposals. In the past, the Commission looked at each company separately, and held a public hearing to hear consumer concerns and to allow interested parties to cross-examine companies on their proposals. In the rush to get everything done by January 1st, all the companies are being examined together, and we have been refused the opportunity to cross-examine company witnesses, without any compensating procedural changes. If ever there was a proceeding that called for oral hearings, this is it.
If you think these increases are unjustified and should be stopped, write to the CRTC at:
Ottawa, Ontario, K1A 0N2
Attn: Mrs. Laura Talbot-Allan, Secretary General
fax: (819) 953-0795
They need to hear from you!
In 1992, the CRTC said that long distance competition should not lead to significant increases in local rates. Were they right?
This table shows local rates when long distance competition began in 1992 for selected locations across Canada and current rates. The 1998 figure has been proposed by the telephone companies. They have also requested increases over the next five years that, with normal (3%) inflation, could cause further increases over the 1998 levels of 20% – 30% by 2002.
In the spring of this year the CRTC issued its new policy for cable television competition. This broad policy framework was designed to create new rules for establishing competition in the provision of broadcasting (cable) services to Canadians. On July 2, the CRTC issued for public comment the proposed detailed regulations necessary to implement this new policy (Public Notice CRTC 1997-84). While in general these regulations establish a fairly straightforward framework for competition, the CRTC has made some decisions and proposals which are not in the best interest of consumers. PIAC will be representing the National Anti-Poverty Organization, FNACQ and the Consumers Association of Canada in this proceeding.
The CRTC has decided that the cable television community channel will no longer be mandatory. The community channel is an important means of local expression for many Canadians. The CRTC has left it up to each company to decide whether or not to provide such a service. It expects that the possibility that other companies may be competing in the market will be sufficient incentive to convince companies to offer some form of local community channel. However, the CRTC has not taken into account that after the expected competitive market shake-out, whereby only one or two companies are likely to be left in a market, there will be no incentive for cable providers to continue to spend millions of dollars on community expression. Instead, companies may pocket this money. The CRTC should continue to require that community channels and community expression be mandatory.
The CRTC has also proposed that the price for basic cable service for existing cable companies be deregulated after a competitor has drawn away 5 % of its customers. In no other sector is a five per cent market share considered a state of healthy competition. To remove controls over the price of basic service before real competition has developed leaves the door open for existing cable companies to jack cable rates up and down in different locations to suit their own interests as they battle new companies for market share. This approach risks the existing monopoly cable companies wiping out any competition before it gets established.
The proposed regulations do not provide any obvious, transparent mechanism for consumers to challenge or overturn the marketing practices of cable companies. Under competition, consumers may be faced with problems relating to quality of service, price hikes, service upgrades, market dominance by a company or even companies leaving markets (no cable service). The CRTC needs to amend the proposed regulations such that a clear and effective process exists for individuals or consumer organizations to apply for a review of the market activities of any service provider. Such a review should also include a public process – an above board approach will ensure that consumers are given a fair chance in the emerging competitive market. As well, the CRTC should conduct a review in five years time to assess whether a competitive market in cable services has developed which has actually benefitted consumers and not just the cable, telephone and satellite companies.
PIAC was a representative on the Federal Government’s Information Highway Advisory Council’s Access Steering Committee for the Phase II deliberations. The Council acknowledged that many Canadians face barriers to access to new communication services, such as the Internet, on the Information Highway.
Recommendations on access in the final report call for government initiatives to support the development of not-for-profit community networks for such purposes as access to government information and services, access and training for those who face affordability and other challenges, and the ability for individuals to get information in paper and electronic formats in order to ensure that no one is precluded from participation in society.
PIAC is working with a number of other consumer and public interest organizations, as well as the federal government, to help develop sustainable community networks in Canada.
PIAC’s report LMCS in Canada is now available. LMCS is a wireless technology capable of delivering television, telephone and data services, such as the Internet, to the home. The report explains how LMCS works and cost and service implications for consumers. Report findings include: higher income consumers are likely to benefit first for new services and, competition will likely result in a few companies dominating the market. 55 pages long. Copies are available from PIAC for $20.00 each