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Newsletter – March 1996, Vol.2, No.1

IN THIS ISSUE

Pats Coalition takes on Phone Giants
“Blueprint for Action” for Phone Battle
Consumers Push for Real Competition in Telecommunications
New PIAC study: Citizen Utility Boards – Can They Work in Canada?

Ontario Government Ignores Public Process to Assist Utilities Pats Coalition takes on Phone Giants

On February 15, 1996 a report that was both historic and unprecedented was issued by PIAC on behalf of People for Affordable Phone Service (PATS). PATS is a coalition of over 60 member organizations across Canada including consumer, seniors, students, labour, and public interest groups. PATS was formed in the fall of 1994 in response to the CRTC decision increasing local telephone rates through rate rebalancing. The February 15, 1996 report urged low- volume consumers of long distance services to switch to a competitor if they were subscribing to long distance services offered by Canada’s traditional telephone companies (Bell Canada, BC Tel, AGT and others).

The PATS report came about as a result of events that occurred after the CRTC issued its rate rebalancing decision on October 3, 1995. That decision ordered local rate increases of $2.00 in the upcoming years of 1996 and 1997 and a further unspecified increase to be determined in 1998. Telephone companies were instructed to reduce their basic long distance service (DDD) rates by an equivalent amount of the benefit of the local increase. The CRTC decision meant that telephone bills for most Canadians would be going up. However, it also ensured that at least some benefits would be provided in the form of long distance rate discounts on DDD rates.

The Stentor telephone companies were not happy with this decision. They successfully lobbied the federal cabinet to allow them to keep the increases without giving customers the discounts. Needless to say PIAC and the members of the PATS coalition were very disenchanted with this result. DDD rates had scarcely come down since competition began. The cabinet decision meant that over $4.5 billion dollars of consumer money would be used to financially enhance one set of competitors, the traditional telephone companies at the expense of ordinary users of telephone service.

PIAC set to work advancing the PATS grievance. In early January PIAC filed another petition with the federal cabinet asking to limit the cancellation of the DDD discounts to a two year period. We wrote to all Stentor telephone companies and their competitors to see if they would offer a rate that would be equivalent to the reduced DDD rate that would have been offered had the federal cabinet decision not taken place. The Stentor telephone companies (with the exception of SaskTel) did not reply. However, eight new entrant long distance providers told us that they would provide rates that would be less (in some cases much less) than the DDD rates that the CRTC had ordered and the federal cabinet had overturned.

Because most Canadians do not make enough long distance telephone calls to qualify for the threshold amount under the savings plan of the Stentor telephone companies, the basic long distance or DDD rate is the most significant for the average telephone user. All eight of these companies boasted a significantly lower rate.

On February 15, 1996, the PATS report was issued recommending that most Canadian residential telephone consumers would be better off getting their long distance services from the following eight companies:

  • ACC Long Distance Inc
  • Distributel
  • Westel
  • Sprint Canada
  • Cam-Net
  • Fonorola
  • Unitel
  • CTI Telecommunications Inc.

Michael Janigan, Executive Director of PIAC, and spokesperson for PATS put it this way:

PIAC thinks that the Stentor companies will lower their rates to respond to the market signals and the PATS report is one way to put the information in the hands of the consumers. If rates come down, the billions of dollars that were supposed to bailout the telephone companies can remain in the hands of the consumers.

“The decision to cancel the discounts to basic long distance services taken by cabinet in December was the biggest corporate welfare program in Canadian history. We want to take Canada’s traditional telephone companies off of welfare and put them on workfare – they are going to have to work to get the business of ordinary Canadians”.

“Blueprint for Action” for Phone Battle

Over the past two decades, PIAC has been assisting lower income consumer groups in their fight to maintain affordable phone service. In recognition of the effects of its decisions to allow rate increases, and after repeated requests from the National Anti- Poverty Organization and other consumer groups, the CRTC finally initiated a proceeding to determine the best way of ensuring affordable phone service into the future. The proceeding is called “Local Service Pricing Options”.

At issue are such key questions as: What is “basic phone service”? At what point do rates become unaffordable? Can local service options such as pay-per-use or toll blocking solve the problem? Is a targeted subsidy a good way of addressing the problem?

After weeks of discussions with consumer group representatives from across Canada, a common position emerged: that no option proposed by any telephone company to date in Canada adequately addresses the problem of affordability and rising rates for basic phone service.

This position was based on the results of two nation-wide surveys: one, a membership/constituent survey of 294 mainly low income households conducted by the consumer groups themselves; and the other, a random survey of over 1,000 Canadians conducted by Ekos Research Associates Inc.

One message came across loud and clear from these surveys: Canadians consider both flat rate local service and access to long distance service as key elements of basic phone service. As well, low income households use local phone service more than average. In other words, pay-per-use service, or toll blocking, simply do not meet the needs of low income Canadians.

On behalf of its three client groups, the Federation Nationale des Associations de Consommateurs du Quebec (FNACQ), the National Anti-Poverty Organization (NAPO) and One Voice – the Canadian Seniors’ Network, PIAC filed a detailed submission, which included the following “Blueprint for Action”:

  1. Define “basic telecommunications service”, identify the specific components of “basic telecommunications service” in 1996, and create a process for updating the definition as technology and market forces evolve.
  2. Establish a benchmark for affordability which reflects the situations of lower income Canadians.
  3. From the list of components of basic service (identified in step #1), separate out those which are appropriately charged for on a recurring monthly basis. Ensure that this package of services is provided to lower income Canadians at a price no higher than the affordability benchmark.
  4. With respect to those components of basic service which are appropriately charged for on a lump sum basis, establish policies to ease the burden of these lump sum payments on customers in need. Such policies should include discounts on connection fees, and provisions for instalment payments.
  5. Examine all other policies of the telephone companies with a view to enhancing affordability of basic service, and revise those (e.g., security deposit policies, disconnection policies) which pose obstacles to affordability.
  6. Require telephone companies to develop and adopt policies to address specific problems faced by low income consumers in obtaining and keeping telephone service (e.g., toll blocking service, optional extended area local calling zones).
  7. Establish a competitively-neutral targeted subsidy program, based on the California model. This “Universal Connectivity Fund” should provide lower priced connection service and basic telephone service to self-certifying households with incomes below the poverty line.

For more information, or for a copy of the February 19th submissions by FNACQ/ NAPO/ONE VOICE, please contact Pippa Lawson (ext. 24) at PIAC.

Consumers Push for Real Competition in Telecommunications

While competition in the long distance telephone market has been getting off the ground, consumers are still faced with monopoly provision of local phone service. But this may change.

PIAC has been assisting consumer groups with the development of guidelines for competition in telecommunications. We have learned some lessons from the experience with long distance competition (eg: the need for clear, comparable information on offerings from different companies), but many more issues are raised by the prospect of competition in the local service market. For example, to what extent should the existing local telephone companies have to open up their networks to competitors, so as to avoid costly duplication of facilities?

How can we be sure that existing companies are charging fair rates to competitors for interconnection? Will consumers be able to keep their telephone numbers if they switch to a competitor? How can we ensure that subscribers in high cost areas continue to be served?

How can we ensure that consumers continue to get emergency (911) service and relay service (for the deaf)? Will consumers have to consult a variety of directories when looking up a number, or can we continue to have a single comprehensive directory for each local calling area? Should competitors be able to define their local calling areas as they wish? If so, how will people know if a call is local or long distance? What kinds of service standards (e.g.: quality of service, privacy protection, disconnection and security deposit policies, billing practices, prohibited fees, blocking services) should be applied to competitive local service providers? How should consumers be protected from improper solicitation and switching by new entrants? What kind of information should be provided to consumers about their competitive alternatives?

One big issue that no one seems to be addressing is how much will competition in the local telephone market cost consumers? As the price tag for each prerequisite to competition becomes clearer, consumer representatives are left wondering the same question as always: who is going to pay, and who is going to benefit? PIAC is committed to ensuring that the proper regulatory mechanisms are put in place to ensure that everyone, not just large business customers, benefits from competition in telecommunications and that costs to consumers are minimized.

All of these issues, and more, are being addressed by the CRTC in its proceeding to set the rules for local competition. PIAC is representing the National Anti-Poverty Organization and the Fédération Nationale des Associations de Consommateurs du Québec, and is working together with the Consumers’ Association of Canada, to provide an informed consumer perspective on the key issues. The three groups have jointly filed three detailed submissions with the CRTC, entitled “Consumer Safeguards under Local Competition”, “Mechanisms for Recovering Contribution”, and “Principles for the Appropriate Regulatory Treatment of Telephone Company Stranded Investment”. PIAC is also publishing a report on local telephone competition, and its implications for consumers. Call PIAC Publications phone line (613) 562-4002 ext. 50 to order your copy.

New PIAC study: Citizen Utility Boards – Can They Work in Canada?

In the early 1980’s, as a result of work done by Ralph Nader and other consumer advocates in the United States, a number of states enacted legislation that provided for the establishment of so called “Citizen Utility Boards” (CUBS) these CUBS were consumer organizations funded by monies obtained in appeals to consumers of utility services by way of materials put in the utility billing envelopes. These organizations proved successful until a US Supreme Court decision struck down the ability of straight legislators to mandate inclusion of such organizing material.

This study by PIAC looks at the US experience and makes recommendations on how it could be implemented in Canada, and in particular in the cable industry. Copies $15 ea., 115 pages, soft cover.

Ontario Government Ignores Public Process to Assist Utilities

Across North America, consumer advocates have been rightly suspicious of efforts by utilities to expand into non- regulated businesses. This usually entails the use of the resources or the good name of a utility to get into a business that would not be subject to regulation and would be operated purely for the profit of the shareholders of the utility.

The main difficulty is that such business enterprises involve risk for the utility that may impact upon ratepayers in the event of financial failure while no possibility of reward exists for the ratepayers in the event of success. Over the years in Ontario, the Ontario Energy Board has been vigilant in attempting to get utilities such as Consumers Gas, Union Gas, Centra Gas out of ancillary or external businesses operated by each utility. The experience of several of the utilities including Consumers Gas and Union Gas in the 1970’s and 1980’s with outside enterprises was close to disastrous.

Unfortunately, last year the utilities were able to persuade the Ontario Minister of Energy Brenda Elliot to agree to exempt them from their undertakings to the government not to engage in activities external to their utility operations, for the purpose of their potential participation in the York Region Water Project. To complicate matters further, the exemption was supposed to be first approved by the OEB by the terms of the undertakings themselves. It wasn’t. Finally, the Minister asked the OEB to give consideration to further exemptions to enable utilities to participate in even more projects. The OEB, decided that it would hold a consultation rather than a proceeding on the issue limiting the ability of the participants to participate fully in the process and ensuring that no money would be available to public interest groups to put forth the consumer case.

PIAC objected strenuously to the way these matters have been dealt with by the Minister and the OEB and has participated in a consumer coalition to protest such action. PIAC sees no benefits for the consumers who financially support these utilities and enable them to be in a position to bid on external work.

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