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Newsletter – September 1995, Vol.1, No.2

IN THIS ISSUE

CRTC Convergence Report: Is GoodBad News for Consumers!
Basic and Essential Service
Consumers Make Waves at CRTC Hearing
Local Competition Rules Next on Agenda
Bell Canada Raises Prospect of Pay-as-you-go Local Service
Deposit Insurance Report Released
PIAC-Fights Telephone Company fee hikes.
Consumer Protection Report Released.

Information Highway Update!

CRTC Convergence Report: Is GoodBad News for Consumers!

In May, the CRTC released its report on convergence issues in telecommunications entitled “Competition and Culture on Canada’s Information Highway: Managing the Realities of Transition.” (Convergence means the increasing ability of the telephone, cable, and computer networks to deliver the same services).

The report came about as a result of a federal government Order in Council in the fall of 1994, requesting that the CRTC study and report on how Canada could best develop policies that would provide for the new communications technologies and services that comprise the “Information Highway”.

PIAC was pleased to see that the report acknowledges that services on the Information Highway cannot be simply market-driven and that the public must have affordable and non discriminatory access to all information systems. The report outlines sensible standards for the licensing of programming service to ensure that future producers have sufficient resources to produce quality Canadian programming.

The CRTC report also concludes that telephone companies should not be allowed to compete directly with cable companies until all barriers to local telephone competition are removed. While PIAC has no quarrel with this equality of treatment for the telephone and cable companies, we are concerned that the CRTC has decided to do nothing in the meantime to rein in the consumer practices of the cable industry. PIAC wants reasonable profitability and quality controls on the cable monopoly while we await competition.

As well, real local telephone competition may not appear for some time. In the United States, local competition in telephone services has been a goal for almost a decade in some states. No significant local telephone competition has yet developed in those states. Canadian cable consumers want effective control over cables unregulated monopoly over most of the services it now delivers.

If you agree write to – no postage required:

Honourable Michel Dupuy, P.C. M.P
Minister of Canadian Heritage
Room 230 Confederation Bldg., House of Commons
Ottawa, Canada, K1A 0A6
or fax (819) 957-2956

Basic and Essential Service

Government policies on basic and essential services have been cornerstones in the development of affordable telephone service and the availability of Canadian television programming. Canadians in most areas of Canada are able to use their phones for a number of necessary activities. These include contacting family and friends, volunteer and community activities, allowing communication for the disabled and housebound; and to contact doctors, social agencies and for emergency services, among other activities. For cable and broadcasting, federal policy has made sure that viewers have access to a wide range of Canadian and international programs, educational, cultural and community channels for their entertainment and personal needs.

There are no guarantees that existing basic and essential services in telephone or broadcasting/cable will continue to be available the same way or at the affordable prices many of us have today.

Some companies would like to change the rules so customers not only pay more for a basic connection but also for each of the services or channels which they now get in a flat rate package. This “unbundling” could cost people more money to get the same services they have now! It also means Canadians may have to pay a lot more just to get access to publicly funded services which are put on the Information Highway.

Basic and essential services must remain affordable and be offered in a package or basket of services at a flat rate so all Canadians can access and use our communications networks. If traditional subsidies can no longer be used to help keep these costs low and affordable then new funding mechanisms must be found. Those companies who are going to benefit from these networks – cable, telephone and new content competitors – should contribute to the cost of accessing our homes. Like subscribers, they should pay their fair share!

To make sure that all Canadians have affordable access we believe that the federal government should direct the CRTC to hold hearings to define an affordable basket of basic and essential services for cable, telephone and satellite systems. The public should be included as these decisions are made. If you agree please write or fax:

no postage required

Honourable John Manley, P.C. M.P.
Minister of Industry
Room 356 Confederation Bldg.,
House of Commons,
Ottawa, Canada, K1A 0H5
or Fax: 613-992-0302

or,

Honourable Michel Dupuy, P.C. M.P.
Minister of Canadian Heritage
Room 230 Confederation Bldg.
House of Commons,
Ottawa, Canada, K1A 0A6
or Fax: 613-957-2956

Consumers make waves at CRTC Hearing

In one of the most wide-ranging proceedings on telecommunications, PIAC led consumer forces opposing local rate increases and challenging the telephone companies’ plans for multi-billion dollar network upgrades. Representing the Fédération des Associations de Consommateurs du Québec (FNACQ) and the National Anti-Poverty Organization (NAPO), PIAC worked closely with the Consumers’ Association of Canada (CAC) and consumer coalitions from B.C, Alberta and Manitoba to make sure that the voices of ordinary residential subscribers were heard, in the face of tremendous pressure from the telecommunications industry for local rate increases.

PIAC called several experts to the witness stand, who explained why rate rebalancing is not necessary at this time, and who suggested rules by which the CRTC can promote competition (the new religion) without harming residential customers. The telephone companies seemed most rattled by evidence that their costs of local service may be greatly overstated – their cost claim of $27 per line was challenged by PIAC’s independent expert calculations of app.$17 to $21 for three representative communities.

In addition, PIAC filed the results of a survey of almost 900 lower income Canadians, showing among other things that the price of local service is more important to these people than are long distance rates, and that poor people use the telephone as much, if not more, than others.

While the Commission’s decision is not expected until later this fall, there is no question that consumer interests cannot be ignored. PIAC’s intervention in this hearing was much larger in scale than ever before, and included original testimony never before considered by the CRTC. Consumer groups were unanimous in their positions on the major issues in this hearing, and in their support of the evidence submitted by PIAC – all agree that ordinary Canadians should continue to receive high quality telephone service at affordable rates.
Local Competition Rules Next on Agenda

Following on its decision last fall to open up the local telephone market to full competition, the CRTC is now examining what rules are necessary in order to ensure that real competition develops in this highly-monopolized sector. PIAC is once again representing consumer groups in this important process.

Bell Canada Raises Prospect of Pay-as-you-go Local Service

After an abortive first attempt, to introduce mandatory measured rate local business service, Bell Canada is expected to resubmit its application to the CRTC, this time making the new pay-as-you-go service optional. “Measured rate” service means that each call would be billed according to time spent on the phone. The same way long distance calls are billed. While this proposal only affects business customers, a number of public interest groups (including the Coalition for Public Information, Telecommunities Canada, the Ontario Library Association, and the Fédération des Associations de Consommateurs du Québec) are concerned that it is only the first stage of a longer term strategy to eliminate affordable flat rate local calling.

At the same time, Bell has proposed to restructure rural and urban local business rates, so as to better align them with costs. This means, according to Bell, higher rural rates and lower urban rates for businesses. Again, PIAC is helping a coalition of groups, including Rural Dignity of Canada, who are concerned that this will mean similar restructuring for residential customers and will further diminish and isolate rural communities.

Deposit Insurance Report Released

The Canadian Deposit Insurance Corporation (CDIC) is a federal crown agency that insures deposits in banks and trust companies up to a maximum of $60,000. In the wake of some spectacular flameouts in the financial world and huge payouts to insured depositors, the government is examining ways of preventing financial failures.

A study commissioned by PIAC, written by social policy consultant, Dr. Martin Loney, concludes that deposit insurance has primarily benefited wealthy Canadians seeking to secure maximum interest rates on deposits. Wealthy investors buy into deposit taking institutions (primarily trust companies) and access much larger sums of capital for speculative investment, knowing that their money is fully insured.

The result is that all consumers are subsidizing a small number of investors compensated by large payouts on claims arising from financial institution failures. The CDIC has accumulated a debt of $1.65 billion dollars and has paid out over $3.7 billion dollars on claims arising from trust company failures over the last 4 years. CDIC insurance premiums have risen tenfold, a cost passed on to all bank and trust company customers. Loney concludes “the consumer therefore bears a direct burden from the existing system by ordinary Canadians being asked to pay higher service charges to fund a system which provides higher earnings for trust company owners or sophisticated depositors seeking to maximize their income.”

Loney believes that making depositors responsible for 5% of their existing deposit will cause the large depositors to be wary of institutions which are not appropriately managed and to demand sufficient information prior to making investments. This would likely result in fewer failures and lower CDIC premiums. The study is available at a cost of $25.00 from the Public Interest Advocacy Centre.

PIAC-Fights Telephone Company fee hikes.

Sometimes telephone companies are clever enough to realize that it is easier to persuade the CRTC to increase charges related to telephone use than to get an increase in basic local rates. That’s why you pay a $2+ fee for the touch tone. The problem for consumers is that this ploy simply means having to pay more for the same service.

Recently, PIAC has had to deal with a number of different attempts by the telephone company to charge consumers for services that were once included in the basic package:

In June, on behalf of the National Anti-Poverty Organization, (and together with FNACQ) PIAC appealed the decision of the CRTC to allow Bell Canada to charge $96.00 per hour for installing and repairing inside telephone wiring. This means a whopping repair and installation bill when your wiring breaks down or to install wiring, if it is needed when you get a phone.

Two years ago, the telephone companies won a questionable decision to allow them to charge for providing information services for long distance telephone calls. Now they want to increase that fee by 50%. How anyone is supposed to be able get a long distance number without calling information is a question left unanswered by the CRTC. PIAC is opposing the new charge.

PIAC believes that it is time to ensure that basic service is not eroded by telephone company manouvering. If the telephone companies ran supermarkets, we would likely be charged for the use of the grocery cart, the weigh scales, the cashier’s services, the bags, and parking on the theory that these things are not part of buying groceries!

We believe Canadians want to pay a basic charge that includes the normal expectations of telephone use. PIAC intends to continue the fight against “the death of a thousand cuts” approach in telephone bills.

Consumer Protection Report Released.

Enforcement of Federal Consumer Protection Law: We Can Do Better (1995), written by Bill Jeffrey, observes that the problems of marketplace misconduct will never be properly addressed in Canada until three developments in consumer protection law occur:

  1. consumers are empowered to, on their own initiative, enforce legislation designed to protect them;
  2. the quasi- criminal legislative regime is replaced by a less cumbersome, decriminalized civil compensation-based scheme;
  3. a class action scheme is introduced to more evenly balance the economies of scale of enforcing prohibitions against dangerous and fraudulent marketplace misconduct.

It is an essential reading for anyone concerned with the consultations related to planned amendments to the federal Competition Act and the anticipated revisions of many of the other consumer protection statutes.

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