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Newsletter- December 1998 Vol.5 No.2

IN THIS ISSUE

Banking Mergers: Consumers Safe From Mergers For Now But Continued Vigilance Needed!
New PIAC Study Calls for Federal Funding, Better Co-ordination for Public Access to the Internet.
Benefits of long distance competition in question.
Tips to Save Money on Long Distance!
Tips for Shopping On-Line!

Banking Mergers: Consumers Safe From Mergers For Now But Continued Vigilance Needed!

Consumers could breathe a collective sigh of relief when the Finance Minister recently announced that the two bank mergers would not be allowed. We were pleasantly surprised that both the Competition Bureau and the Office of the Superintendent of Financial Institutions issued reports warning that increased concentration in the banking sector would certainly harm consumers. This stands in contrast to the situation a year ago when we published our report on consumer issues and banking; then our concerns about the level of concentration and weakness in competition in the banking market were met with incredulity. One of the benefits of this bank merger controversy is that it will be difficult to brush concerns about concentration in banking under the carpet in the future.

But what have consumers really gained? On the ground, we are stuck with the same old big banks and weak consumer protection measures. Major outstanding consumer issues in the banking sector are numerous, including: information disclosure, fair selling practices, comprehensible contracts, use of personal information, access to basic services for all, responsibility in cases of fraud, the need for independent advice for consumers and scrutiny of the costs of banking services.

However, there are indications that the upcoming overhaul of the financial services legislation offers some promise for consumers. The independent task force appointed by the federal government to study financial services sector reform made wide-ranging recommendations to increase consumer protection measures and empower consumers. Following the task force’s lead, the Finance Minister has taken on the mantle of “Public Interest Paul” (so-called by the Globe and Mail because he used the phrase “public interest” so often in his announcement about the bank mergers).

It is hard to say if this newly incarnated Public Interest Paul will come through for Canadians with substantial consumer protection measures. He will be confronting an industry ferociously opposed to consumer protection, and angry over the merger rejection. Once the mergers are out of the public eye, it will be tempting for the government to water down the reform package so as to achieve peace with the powerful banking industry.

Active vigilance is needed. This is where PIAC comes in; we will continue to promote consumers’ interest in the banking sector. We have some success with advisory bodies such as the independent task force, and the House of Commons Committee on Finance. But unfortunately, we have had less success where it really counts – with the decision-makers. While the Minister’s officials have not been completely unfriendly (we have seen photocopies of our reports floating around the Department of Finance), the doors are mostly closed to consumer representatives and the public. Until the doors open more than a crack, we can not be sure that there will be any progress at all in consumer protection in banking.

New PIAC Study Calls for Federal Funding, Better Co-ordination for Public Access to the Internet

Over the past two years, PIAC has been working in partnership with a number of other public interest and consumer organizations to develop models for sustainable community-based non-profit organizations which would provide affordable access to the Internet and, develop public content services, such as community, health, government, job and employment training, and education information. During the same period, PIAC has also been working closely with Industry Canada’s Community Access Program and the federal department Human Resources Development (HRDC), to help design access and content programs for the Internet which meet the everyday communication needs of Canadians. Much of this work, as well as other research undertaken by PIAC has now been incorporated into a new study which analyzes the public’s Internet needs and the successful models of development and funding necessary to ensure that Canadian’s everyday communication needs are included as an important component of Canada’s Information Highway. The report entitled Community Networking and Access Initiatives in Canada will be available from PIAC by mid January.

Recent research undertaken by PIAC in partnership with Ekos Research Associates found that three in ten households currently access the Internet from home. The majority of those who do not have access either have no interest or need for this service, or can’t afford it. In the past, PIAC has maintained in its arguments to government and the CRTC that new services such as the Internet should be optional services for Canadians and forced on them. Moreover, we also argued that those who actually used the new services should pay for. However, while the Internet is still not an essential communication service like local telephone, this is likely to change over the next few years as both government and companies increasingly only make information and services available on the Internet.

The report found that a large number of Canadians, particularly those in the lower income brackets, will be not be able to afford Internet and other new digital services. Research also showed that there is a widening gulf between a class of information ‘haves’ and ‘have-nots’. The report therefore concluded that until the Internet is affordable for all Canadians from the home, community-based access initiatives, such as Industry Canada’s Community Access Program and HRDC’s Community Learning Network program, among others, are vital to ensure that all Canadians have some level of access in the near term, and that for the longer term, a diverse and substantive set of information resources relating to the public’s community, education, health and related needs are also developed and made widely available on a not-for-profit basis. Among a number of recommendations intended to help government and public organizations achieve these goals, the report identifies a need for the federal government to provide at least 50 per cent of the required operating costs of not-for-profit community access organizations in order that they are able to continue providing on an ongoing basis.

The report will be available from PIAC in January 1999.

Benefits of Long Distance Competition in Question

Once the dust has settled from the recent price war in long distance service, will long distance savings be available to many more consumers than before? A recent PIAC study suggests that the answer might be “No”. In a market in transition from monopoly to competition, such as long distance, consumers have trouble benefitting from the discounts offered. The study points to low levels of consumer knowledge, aggravated by complexity and lack of comparability of long distance pricing, as key factors in the wide-spread consumer inertia found in the residential market.

When it comes to savings on long distance, residential consumers have been the poor cousins of big business users. Big-business long distance rates have plummeted between 1992 and 1996. In contrast, the study shows that many residential consumers, as much as half the population in some regions of the country, were still paying the same high rates in 1996 as they were in 1992. Less than a quarter of Canadians have reaped the full price benefits of competition by subscribing to an alternative service provider. If basic local service is taken into account, the situation is even worse, since most Canadians’ phone bills have actually gone up since long distance competition started.

This study serves as an important reminder that the transition to competition in the long distance market is not yet complete. The market is still dominated by the former monopolies, and exhibits some serious market flaws, such as consumer inertia and market segmentation. PIAC is calling upon the CRTC, and the Ministers of Industry and Heritage to take measures to ensure that residential consumer benefit more over the next five years of long distance competition than they did over the last five years. Public information programs, and better tracking of market indicators, are among the measures that PIAC is advocating.

Still A Long Distance To Go: Residential Consumers and the Transition to Competition in the Long Distance Market is available from PIAC (cost $20). To order a copy by phone, call (613) 562-4002 ext. 60.

Tips to Save Money on Long Distance!

If you are with your regional telephone company, you probably have to subscribe in order to get any discount plan at all. Many of the new discount plans will save you money even if you do not use much long distance. It is worth checking what the telephone company is offering. Also, check out the competitors; they generally try to underprice the regional telephone companies.

If you subscribe to one of the plans that offers calling unlimited calling for $20 per month, remember that the plan may only apply to evenings and weekends, which means that calls on weekdays will be an extra charge on top of the $20. Also, remember to check your old bills, to make sure the $20 flat rate actually saves you money compared to what you used to spend!

If you subscribe to one of the plans that offers 10 cents per minute (some of these are combined with the $20 flat rate plans), remember that the 10 cent rate may not offer you an advantage over other discount plans if you make a lot of short-haul calls.

The bottom line is that saving money in long distance takes some effort. Keep your eye on your long distance bill, and if it has not gone down in the past 6 months, consider trying a new discount plan.

Tips for Shopping On-Line!

Shopping on the Internet can be convenient and satisfying. But the risks are greater than with regular commerce, since anyone can establish a fancy-looking web site. You need to be sure that you are dealing with a reputable merchant who will honour the contract of sale. Here are some questions to ask if you are considering an Internet purchase:

Does the merchant tell you enough about who they are, where they are located, and how to contact them?

Is there enough information about the products or services to account for the fact that you cannot inspect the merchandise or talk to the merchant in person?

Does the merchant have a process in place which allows you to confirm, prior to payment, all aspects of your agreement to purchase, including the full price, terms and conditions, method of payment and delivery arrangements?

Can you obtain a printed record of the terms and conditions of sale at the time of purchase?

Does the merchant ask for your consent prior to collection, using or disclosing your personal information?

Does the merchant have a satisfactory policy regarding its treatment of your personal information?

Is the online payment system at the merchant’s web site secure? Can anyone, other than intended parties have access to your credit card number or other financial information?

Is there an easy and clear procedure for addressing any complaints or problems?

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