Newsletter – October 1998 Vol.5 No.2

IN THIS ISSUE
Telecom Service in High Cost Areas: Will it survive competition?
Privacy Protection on the Way!
Electronic Commerce and Consumer Protection
CRTC holds hearings on Canadian Television Policy
New Report: Tied Selling in Banking.
Energy Competition Act

Telecom Service in High Cost Areas: Will it survive competition?

One of the problems with a competitive telecommunications marketplace is that it doesn’t necessarily respond to need. In particular, there is no incentive for a company to serve communities where the cost of serving is higher than the potential revenues. Yet Canada contains many such “high cost areas” ­ communities who have received service in the past through large subsidies internal to the monopoly provider.
With competition, and the demise of the monopolies, such subsidies can no longer be sustained. The profit margins on long distance and business service that used to subsidize below-cost prices for rural and remote residents are being competed away. And while technological breakthroughs may provide lower cost solutions in the future, for now, the cost differences remain.
The CRTC last year initiated a proceeding to examine ways in which this problem could be addressed. On behalf of a coalition of groups, The Alberta Council on Aging(ACA), Consumers Association of Canada (CAC) Federation Nationale des Associations de Consommateurs du Quebec (FNACQ), National Anti-Poverty Organization (NAPO), Rural Dignity of Canada (RDC), the Public Interest Advocacy Centre (PIAC) filed submissions calling for a competitively-neutral explicit subsidy scheme that harnesses market forces to achieve universal availability, affordability, and quality of telecommunications services throughout the country.
Together with other public interest groups, PIAC is concerned about the maintenance of affordable service in rural areas. This concern has resulted in the evolution of a set of principles, which will be released of a consensus policy document entitled a Consumer Charter for a Connected Canada. It is our hope that the Charter will be a focus for public discussion. The Charter will be released at the end of October.

Privacy Protection on the Way!

Lack of adequate protection for personal information in the private sector is a growing problem in Canada, especially in light of the increasing use by Canadians of electronic means of communication and commercial transactions. Consumers are protected from abuse of their personal information by government, but other than in Quebec, there is no law guaranteeing them control over their personal information in the private sector. As a result, the market in personal information has been booming, while consumers find themselves bombarded by unsolicited marketing via phone, fax, post and e-mail.
Together with other privacy advocates, PIAC has been calling for legislation to protect the individual’s right to control her personal information. We have worked closely with business groups to help them develop effective voluntary codes of practice with respect to consumer privacy, but such voluntary actions won’t do the job. Many businesses choose not to adopt voluntary codes, despite the urging of other industry players. Of those who do adopt a good policy, many have difficulty translating it into practice.
It is therefore with enthusiasm that we greet the federal government’s Bill C-54, which sets out a framework for privacy protection reflecting the ten principles agreed to by business and consumer groups, and set out in the Canadian Standard Association’s Model Privacy Code (now a national voluntary standard for business). Initially, the legislation will apply only to federally regulated businesses, but after three years, it will extend to all sectors, with the exception of those already covered by similar provincial legislation. PIAC is currently reviewing the Bill, and will provide its comments to Parliament as soon as Committee hearings begin.
This Bill won’t go through without a struggle. Let your M.P. know that data protection legislation is needed!

Electronic Commerce and Consumer Protection

The Canadian government, through its agenda of “Connecting Canadians”, is striving to make Canada a global leader in electronic commerce. Given our international advantage in terms of universal telephone service, high technological literacy, and growing use of the Internet, this may be an achievable goal. However, electronic commerce brings with it numerous perils for the consumer. PIAC is working with business and government to ensure that consumer needs are met through appropriate marketplace protections.
We are developing a set of principles for consumer protection on the Internet which are intended to guide business and government in the creation of voluntary and, where appropriate, legislated, solutions to consumer problems with electronic commerce. Many existing consumer protection laws already apply to the online world, but others need to be extended to cover new forms of distance sales. New rules need to be developed to address unique aspects of electronic commerce, such as the “point and click” interface, and the ability for a vendor to disguise its location and identity.
PIAC is telling the government that consumers will not engage in electronic commerce in large numbers until they have confidence that their personal information is not being abused, that their transactions are secure, and that the merchants with which they are dealing can be trusted. Without regulations to protect consumer rights privacy and fair business practices, Canada’s goal of being the world leader in electronic commerce will not be achieved.
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.

CRTC holds hearings on Canadian Television Policy

On May 6, 1998, the CRTC announced a review of Canadian television policy. The purposes for the review are to consider policy and regulatory options which ensure a strong and viable programming industry; ensure that Canadians are able to receive a wide range of distinctive Canadian program choices; facilitate industry growth; ensure that the system meets the needs of Canadian viewers and reflects their values; and implement the public interest objectives of the Broadcasting Act.
PIAC represented the Fédération Nationale des associations de consommateurs du Québec (FNACQ), the National Anti-poverty Organization (NAPO), One Voice – the Canadian Seniors Network, and Rural Dignity of Canada (FNACQ et al) for the proceeding. The proceeding was concerned with industry structure; support for the production and broadcasting of different forms of Canadian content (e.g., entertainment, information, documentaries, etc.); the move to digital television; independent production, among others.
PIAC’s submissions on behalf of FNACQ et al focused on several core issues which were of concern to the groups’ members. First, the CRTC should reaffirm the basic nature of off-air television signals. About 25% of Canadians receive their signals this way, and not through cable. Our concerns are that some companies may see this as an unnecessary expense, where most viewers in a particular market use cable to receive television signals, and apply to the Commission to stop providing this service. As well, we were concerned that Industry Canada’s policy of moving to the auctioning of spectrum, essentially the privatization of this public resource, may be extended to broadcasting from telecommunications.
Another issue is the move in the industry to digital television. Over the next ten years or so, digital television is expected to replace current analogue sets. This will allow consumers to receive more programming, as well as Internet and multimedia through their television. Given that this new technology could cost consumers several hundred to a few thousand dollars for each unit, television signals should be available in both traditional analogue, as well as new digital formats, until at least 90% of consumer households have purchased the new digital televisions or a digital decoder. It would be thus unfair to force consumers to switch to an expensive new technology. Moreover, with the high cost of the digital technology, a number of Canadian households may have to lose their television service if they lost the analogue signal.
Support for the production and broadcasting of Canadian programming for all categories, e.g., entertainment, documentaries, etc., should be increased. It was further argued that with the development of new technologies, such as multimedia, it is important that the government and the CRTC require contributions for the development and distribution of Canadian content in these new media. Given that many broadcasters are already contributing to content development and that much of this new content is being made available on the Internet, often using telecommunications technologies. Finally the CRTC should require commercial Internet service providers and telephone carriers to contribute up to 5% of their gross annual revenues. These monies should be used, in priority for: a) to facilitate technical access to the Information Highway through assistance for basic telecommunications costs and the sustainability of community access initiatives, b) the development of not-for-profit Canadian content; and c) to augment the existing multimedia fund.

New Report: Tied Selling in Banking

PIAC’s new report, Unfit to Be Tied, discusses a number of ways that the tied selling provisions of the Bank Act, which were recently proclaimed, could be improved. Even though most people do not know what “tied selling” is, it can have a negative impact on any customer of a Canadian bank. “Tied selling” means that a bank makes a loan conditional on buying another product, so that the customer is required to buy something in order to obtain the loan. Essentially, tied selling is a misuse of the leverage a bank has over a customer in need of a loan.
It is clear that tied selling occurs often enough in banks for it to be major concern for customers. A recent survey found that 16% of Canadians who received loans in the past three years felt that the loan approval was tied to purchasing another product. Our research showed that the banking industry’s Statement on Tied Selling has not significantly improved the practices of front-line bank staff in the first six months of its implementation.
The introduction of a new provision into the Bank Act prohibiting tied selling was a positive development for consumers in the context of the lack of consumer protection measures that currently operate in the banking sector. Unfortunately, the new provision does not fully protect consumers against undesirable tied selling practices. Since the Task Force on the Future of the Canadian Financial Services Sector has recently made recommendations on how to improve it, there is a fresh opportunity to integrate consumer concerns into it.
Our report makes a number of recommendations on how the tied selling provision of the Bank Act, section 459.1, should be improved. One important recommendation is that coercion and undue pressure be prohibited in all sales situations in the banking sector, not just in tied selling situations.
Another important recommendation is that cross selling (offering package deals) should not be specifically permitted by section 459.1. Cross selling raises important consumer concerns, since the practice does not benefit all customers equally. In the present context, customers with a high level of knowledge and propensity to bargain benefit from cross selling, while customers with an average amount of knowledge and less propensity to bargain benefit less. Also, high volume customers (who tend to be high income Canadians) benefit far more than low volume customers (who tend to be medium and low income Canadians).
Our work on tied selling in the banking sector suggests that section 459.1 could be replaced by comprehensive disclosure provisions. Customers could more effectively advance their own interests if all package deal options were clearly enumerated up front, and the items in each package identified and priced individually. Also, criteria used by banks to determine adequate security for loans and credit-worthiness should be provided to customers, so they can judge whether banks’ requirements are reasonable
PIAC plans to submit this report to the House of Commons Standing Committee on Finance as part of its brief on the Task Force report. The report is available from PIAC at a cost of $15.00 plus postage.
To Order Reports by phone call – 613-562-4002, Ext. 60.

Energy Competition Act

In July 1998, the Ontario Government introduced the Energy Competition Act 1998 Bill 35. Bill 35 provides for a number of significant changes in the way in which energy markets will operate and be regulated in the future.
Ontario Hydro will be separated into three entities: 1) the Ontario Electricity Generation Corporation (Genco), 2) Ontario Electric Services Corporation (Servco), 3) an Independent Electricity Market Operator (IMO). The IMO would be responsible for managing the electricity system and duties would include ensuring a level playing field, encouraging investment and setting rules for market participants to buy and sell power across the grid. The Genco would be a commercial entity owned by the Province of Ontario and would own and operate Hydro’s generation facilities. The Servco would own and operate the transmission systems and distribution systems through one or more subsidiaries.
The 276 municipal electrical utilities serving three million customers across the province would be encouraged to amalgamate immediately to achieve cost efficiencies and economies of scale and establish local distribution utilities on a commercial footing. These new MEU distribution utilities would be required to separate the monopoly wires business from their competitive commodity business to create a level playing field. The Ontario Energy Board (OEB) would have an expanded role to regulate the tariffs for transmission and distribution wires for both these Servco and the MEU local distribution utilities. In addition they would issue licenses to all transmitters, distributors, generators purchasers and retailers of electricity.
In the field of natural gas, the OEB would obtain new powers to license energy marketers in Ontario Breach of license requirements by marketers could result in the loss of license.
In general terms, the Ontario Government has taken a cautious approach to the problems associated with the introduction of competition. The separation of Ontario Hydro’s generation assets and the restructuring of the transmission and distribution systems should encourage better accountability in individual system components and reduce cross subsidies among those components. As well the elimination of vertical integration should help attenuate market power. Most importantly, for the first time, the OEB will have real power to have cost of service regulation imposed on Ontario Hydro. Previous to Bill 35, Ontario Hydro’s Board of Directors could ignore the recommendations of the OEB with impunity.
Competition in natural gas sales has been going on for over a decade. From the consumer standpoint, there have been complaints of misrepresentation and lack of transparency in transactions. Protection of consumers has been a piecemeal process, with haphazard enforcement. The possibility of having real enforcement of consumer protection in the area of natural gas is also welcome.
However it is by no means clear that these reforms will lead, at least in the short and middle term to lower energy prices for consumers. The problem with stranded assets in electricity is not really solved by the new competitive framework, as the debt will have to be retired using money gleaned from all system participants. In natural gas, it is unclear what efficiencies, if any, will be achieved by having direct sales of the commodity as proposed.
In the meantime, the gas distribution utilities are frantically trying to position themselves as the competitive alternative through non-regulated affiliates. PIAC presented the concerns of vulnerable consumers before the Standing Committee On Resource Development Hearing in Ottawa in August of this year for a full text of PIAC’s statements to the Committee. Please call us at (613)562-4002 ext. 60 fax to (613) 562-0007 or email us at piac@web.net

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.

Newsletter – December 1997 Vol.4 No.3

IN THIS ISSUE
4-1-1 Charges Appealed
Unlisted Number Service
PIAC Commissions Special Study on Government’s Plans to Auction Spectrum
Ontario Government White Paper Proposes Change
Amendments to the Telecommunications Act
New Reports

4-1-1 Charges Appealed

In October of this year, the CRTC released a decision on a Tariff Application of Bell Canada which has gone largely unnoticed by customers and consumer reporters. Bell Canada applied to charge telephone subscribers who dial 411 for local directory assistance (LDA) for telephone numbers that do not appear in the local telephone directory. This means it will cost you .75¢ every time you try to telephone an individual who has changed his or her number, but the change is too recent to appear in the book.
The CRTC granted Bell’s request because it said a majority of customers don’t use LDA, so it is unfair for all customers to pay for the service in their basic service charge (the basic service charged won’t be lowered, however.
As well, the CRTC were concerned that there was no incentive to stop calling 411 once the telephone subscriber obtained the number.
On behalf of the Consumers’ Association of Canada (CAC) Federation Nationale des Associations de Consommateurs du Quebec (FNACQ) National Anti-Poverty Organization (NAPO), PIAC has appealed to the CRTC to vary this decision. Our appeal dismisses the idea of using frequency of use as the sole barometer of what is an essential service. It was noted that “the application of the (CRTC) reasoning to the policy choice of which medical procedures to publicly fund in medicare programs might lead to some socially unacceptable results. Treatment for leukemia, for example, might be denied coverage because it is needed by only a small percentage of the patient population.”
PIAC has suggested that if 411 cost recovery is necessary that subscribers be given the opportunity to obtain a certain number of free calls per month similar to the situation in US jurisdictions. If it is not overturned, the CRTC order is scheduled to go into effect on January 1, 1998. Our antidotal evidence seems to indicate that this new charge will be extremely unpopular with customers not to mention the detrimental effect on affordability of basic service. We are urging all groups and individuals to write to Mrs. Laura Talbot-Allan, Secretary General, CRTC, Ottawa, ON, K1A 0N2 of fax to 819-953-0795.

Unlisted Number Service

For years, consumers have had to pay a hefty sum in order to keep their personal information (name and telephone number) out of the telephone directory. First, there is a service fee to change from listed to unlisted service, ranging from $22 to $45 depending on the company (this fee doesn’t apply if you start off with unlisted service). Then, there is a monthly charge, which ranges from $1.55 in Manitoba to $5.75 in Nova Scotia (average is $4.25).
Privacy and consumer advocates have been arguing for years that people shouldn’t have to pay more in order to maintain a given level of privacy, and that in any case, unlisted service is priced well above its cost to the companies. The CRTC has finally seen fit to examine this issue, and to consider requiring the companies to lower the price of this increasingly important service.
Unlisted service has always been essential for some people – those fleeing violence or harassment, for example. It has, however, become increasingly valuable for those who wish to maintain control over their personal information. The information published in telephone directories and in directory databases is now available on the Internet and on CDS sold in retail stores across the country. This information is collected, sorted, used and traded by commercial enterprises whose sole goal is to sell you their products. The only effective way for people to avoid this use of their personal information is to keep it out of the directory.
Representing the Consumers’ Association of Canada (CAC), the Fédération Nationale des Associations de Consommateurs du Québec (FNACQ), and the National Anti-Poverty Organization (NAPO), PIAC has filed comments with the CRTC in support of the consumer position that unlisted service should be priced more fairly, that it should include automatic Caller ID blocking, and that listed subscribers should have various options in terms of how their listing appears in the directory.
It is particularly shocking to PIAC and its clients that only three companies (NBTel, MT&T, IslandTel) provide automatic Caller ID blocking with Unlisted Service. As an informal survey conducted by CAC showed, most people with unlisted service assume that their personal information is automatically blocked from appearing on the Call Display screens of the people they call. They were appalled to find out that this is not the case.
While the deadline for comments in the formal proceeding (Public Notice 97-31) has now passed, it is still worthwhile to let the CRTC know your views on this issue. Write to: Mrs. Laura Talbot-Allan, Secretary-General, CRTC, Ottawa, Ontario K1A 0N2, or fax to: (819) 953-0795.
PIAC Commissions Special Study on Government’s Plans to Auction Spectrum.
The federal department Industry Canada has been making plans to begin auctioning radio frequencies or spectrum to communication companies. Spectrum frequencies are the publicly-owned airwaves used for wireless telephone service, radio, and new Information Highway services, such as wireless Internet and wireless local cable television. Spectrum is also used for traditional over-the-air broadcasting signals. The federal government has stated repeatedly over the past few years that these wireless services will provide competitive alternatives to existing wire-based telephone and cable television services and help address the problem of providing new services to rural and remote areas.
Industry Canada’s rationale for auctioning is that it will realize more accurate economic value from companies for the public for the use of spectrum and this process will be easier to administrate.
However, in a series of recent public consultations conducted by Industry Canada, both consumers and industry have opposed auctioning. Instead, both interests prefer that the government continue to use a comparative selection process that assesses fees to companies for the use of this public resource and imposes conditions of license which provide public benefits such as employment and research and development spending in Canada. PIAC released a special study on this issue in December, called Inappropriateness of Spectrum Auctioning in a Canadian Context. The study found many problems with the proposed auction process. Spectrum is publicly owned property. Under auctioning, both companies and the financial community who will be providing loans to the companies, have indicated that they would want to treat spectrum as private property rather than public property. Contrary to rhetoric from Industry Canada, auctioning amounts to the privatization of public property. The federal government is not our real estate agent, but is supposed to act as or representative in the use of public property.
Auctioning also appears to be little more than an ideologically driven idea, largely intended to raise more money (tax) from companies. Companies and consumer groups expect that auctioning will add significant, unnecessary costs to the wireless services. Such higher costs will mean less competition and higher consumer prices. Moreover, auctioning also creates a disincentive for companies to provide traditional public benefits such as employment and R&D. These are likely to be negotiated away during the usual behind-the-scenes lobbying by any license winners. Other findings of the report include: Canadians have been provided with high quality services at affordable rates with the comparative selection process; using this traditional process Canada has developed sustainable competitive alternatives faster than other countries, including the United States; and, Canada shouldn’t blindly follow the United States in using auctions where they have not only led to massive market failures but have been subverted to the political budget balancing process.
PIAC and industry players are encouraging the Minister of Industry to publicly commit to continue using the comparative selection process rather than gut the public interest through auctions.

Ontario Government White Paper Proposes Change

In November, the Ontario Government issued its long awaited White Paper in response to the May 1996 Report of the Advisory Committee on Competition in Ontario’s Electrical System (Macdonald Report)
The report makes a number of broad ranging recommendations that are intended to establish a competitive electricity market for the year 2000 for both wholesale and retail customers. PIAC is pleased to see that the Ontario Government will give the Ontario Energy Board a greater role in regulating the activities of Ontario Hydro. The OEB’s previous function of rendering advice to the Minister was largely ineffective. There are however many questions arising concerning the future of the electricity industry in Ontario. Principally, the issue of potentially stranded debt of Ontario Hydro as a result of their under performing nuclear facilities has yet to be addressed. As well, although the report outlines a strategy for competitive access to electricity, there is no guarantee that actual competition, particularly at the retail residential level will come about.
PIAC intends to participate in the debate concerning the restructuring of this industry. For one thing, we wish to avoid the mistakes that were made in the deregulation of telecommunications were the benefits to date seem to have flowed primarily into the pockets of the largest consumers of telecommunications services.

Amendments to the Telecommunications Act

Bill C-17, An Act to Amend the Telecommunications Act and the Teleglobe Canada Reorganization and Divestiture Act is currently before Parliament. The proposed amendments are designed to permit the government to meet its commitments made to the World Trade Organization (open borders), while still maintaining control over quality and safety standards, and pursuing goals such as Canadian ownership and use of Canadian facilities.
Together with CAC and FNACQ, PIAC appeared before the legislative committee examining this bill, in order to express our support for expanded powers to the CRTC, especially those that would allow the Commission to regulate resellers directly.
At present, the CRTC is able to apply consumer safeguards (e.g., privacy protection, information to consumers, authorization rules for customer transfers) to facilities-based carriers, but has no legal jurisdiction to apply the same rules to non-facilities-based service providers, known as “resellers”. These companies buy service in bulk, then resell it to individual customers. From the consumer perspective, there is no difference between a facilities-based carrier and a reseller; they both offer the same service to the end-customer. Hence, there is no reason why resellers should not be subject to the same consumer protections as are other service providers operating in Canada.
We also pointed out a number of areas – directory assistance database; emergency 911 service; dispute arbitration between carriers – in which administration by a neutral third party will be the most appropriate solution in a competitive environment. In order for such third party administration to occur, the CRTC must be provided with statutory powers of administration and delegation.
Finally, we noted that the statutory term “basic telecommunications services” lacks a definition. We proposed the following:
“Basic telecommunications services shall be defined by the Commission from time to time, on application by an interested party or on its own motion, and shall include those services necessary for a person to participate fully in Canadian society.”
Our presentation was well-received by the Committee. The Vice-Chair of the Committee admonished responsible officials of Industry Canada for not consulting with consumer groups in advance.

New Reports

PIAC has just released Inappropriateness of Spectrum Auctioning in a Canadian Context (see story on page 1). The report was written by Max Melnyk, formerly Chief of Spectrum Policy in Industry Canada. The report is 113 pages long and is available from PIAC at a cost of $10 per copy, plus shipping (English only).

Newsletter – August 1997 Vol.4 No.2

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
New Publications

SPECIAL FEATURE: Phone Rate Battle Rages Again.

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:
CRTC
Ottawa, Ontario, K1A 0N2
Attn: Mrs. Laura Talbot-Allan, Secretary General
fax: (819) 953-0795
e-mail: public.telecom@crtc.x400.gc.ca
They need to hear from you!

DID THE CRTC BLOW IT????

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.
 

 

Proposed Cable Regulations May Leave Consumers Out of the Picture!

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.

Phase II IHAC Recommendations address Access Issues

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.

New Publications

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

Newsletter – April 1997, Vol.4 No.1

IN THIS ISSUE
CRTC Abandons and Privatizes Community Channel
Railway Abandonment Delayed
Cable Competition
Telephone Access: Key Survival Tool in Danger

CRTC Abandons and Privatizes Community Channel

On March 11, 1997, the CRTC released its much awaited new competition policy for broadcast distribution undertakings – (television broadcasting involving cable and Direct-to-Home Satellite signals). This Decision (Public Notice CRTC 1997-25) sets the policy framework for opening the cable industry to competition. Later this year, the CRTC will issue for comment draft regulations that will be used to put this new policy framework into practise. It is expected that the new regulations will come into effect in January of 1998.
While the Decision offers some benefits for consumers (see Cable Competition below), the CRTC has also abandoned the Community Channel. All companies will now have the option whether to offer a community channel or some other form of community expression, or do nothing. Existing cable companies who choose to keep the channel, can now run this as a private channel to boost their competitive advantage in the broadcasting marketplace, rather than meeting the needs of the public for participation and local expression. Cable companies now have absolute control over the content and access by the public to the community channel. Most companies will be permitted to contribute up to 2% of their gross annual revenues for local expression.
The CRTC has offered a confused explanation about this change which reflects a misunderstanding about what the “public interest” actually is, and the ability of cable companies to provide this without public oversight or direction. On the one hand the CRTC states that community programming and community expression will continue to be “vital components of components of the broadcasting system”, but continuing, says that “it does not intend to require any distributor to provide an outlet for local expression”. Then, ignoring that the “public interest” includes the interests of the public as well as cable companies, the CRTC observes that the “community channel provides cable operators with a highly effective medium to establish a local presence and to promote a positive corporate image for themselves”. This amounts to using the channel for an advertising vehicle for cable, not “community expression”. The CRTC is once again assuming that the public interest is the same as cable’s interests.
PIAC, representing FNACQ and NAPO for this proceeding, argued that in a competitive market, no one company should be in control of this important public resource, and that the community channel should not be used as competitive fodder in the battle for market share in the broadcasting market. We also argued that all existing community channels should be managed and controlled by a not-for-profit community organization run by community groups. In this way, all competitors could contribute to and work with community organizations in providing a community channel that existed to meet the public’s needs. In five years will we have to ask: what happened to the community in the community channel?

Railway Abandonment Delayed

PIAC provides ongoing legal advice to Transport 2000, a national citizen’s organization dedicated to the public interest in transportation. Most recently, PIAC has assisted Transport 2000 with efforts to preserve a historic and vital railway link running though Levis, Quebec. The Montmagny subdivision of CN’s railway system has been slated for abandonment for some time now. With PIAC’s help, Transport 2000, and local citizens have managed to delay the abandonment. They are working hard to ensure that this railway line continues to be maintained and operated for the benefit of everyone, local residents and businesses as well as tourists.

Cable Competition

The CRTC’s Decision on competition for cable television was released on March 11, 1997, in Public Notice CRTC 1997-25. Some of the highlights of this decision:

• The best part of the decision is that it opens the cable market to competition. Consumers have long been held hostage by the cable monopoly. Without extensive price regulation by the CRTC, competition is the only other option to try to get prices down and give consumers more choice.
• New competitors will be free to set prices for all levels of services. This may lead to rate reductions for some consumers.
• Under the new rules, existing cable companies will have the basic rate regulated until a competitors service is available to 30% of the households in an area (this could be made available by Direct-to-Home satellite or a land-based competitor) and the existing cable company loses 5% of its basic subscribers. Given that DTH service will apparently be priced around $35 a month, which is about the same for existing cable for many consumers, it is not clear that competition will bring down prices. Consumers may only get more choice in program packages and choice of supplier, especially in the core urban areas. The CRTC is hoping there will be real price competition as more players enter the market.
• Consumers will have the option of owning their inside wire. This will give them more choice in which company they can connect to for service.
• There will be no obligation to serve by new competitors, or by existing providers once an alternative service is available and the existing provider loses 5% of its basic subscribers. With the startup of DTH, the first condition has been met. The second condition should be easily met with some consumers switching to DTH and through market churn.

For the remaining 95% of subscribers in such markets, a number of questions are still outstanding:

• why is there no protection against prices going up, especially where a provider wants to cross-subsidize its competitive losses in another market?
• will the rural services benefit from service upgrades if most of the competition is focussed in the lucrative urban markets, or if no local competition develops?

Telephone Access: Key Survival Tool in Danger

Over the last few decades, telephone service has evolved from a luxury item to an essential service. It is now widely recognized that access to basic phone service is necessary for full participation in Canadian society, and that it is particularly important for people seeking employment, for the elderly and housebound, and in general, for the efficient and effective functioning of communities. This recognition is evident in s.7 of the federal Telecommunications Act, which lists as the first two objectives of Canadian telecommunications policy:
(a) to facilitate the orderly development throughout Canada of a telecommuni-cations system that serves to safeguard, enrich and strengthen the social and economic fabric of Canadaand its regions; and
(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada.
These policy objectives set telecommunications apart from other public utilities: that it is a network-based service. The more people that are on the network, the more valuable the network is. This justifies a more active regulatory role in ensuring accessibility and affordability to all.
Until recently, telephone service was delivered to households by a single monopoly provider in each geographical region. Rates and terms of service were usually controlled by an independent tribunal, whereby private companies were assured of a reasonable profit, while consumers were protected against excessive rates.
With competition, “hands-on” monopoly regulation no longer makes sense. Market forces need more regulatory freedom in order to operate. These market forces, however, do not always operate in the public interest. In particular, they create strong pressures to increase basic local rates, and to exacerbate geographic disparities.
“Rate rebalancing” is a term coined by the telephone companies to mean increasing monthly local rates while lowering usage-based long distance rates. Rate rebalancing benefits heavy users of long distance (such as big business), while raising overall bills for most residential customers. Despite strong consumer resistance, it has been implemented by the CRTC in order “to enhance the efficiency and competitiveness …of Canadian telecommunications” – another of the policy objectives set out in section 7 of the Telecommunications Act.
Instead of spreading the large fixed costs of the network over all services, including long distance, the CRTC decided that economic efficiency requires loading all of those costs on the basic monthly rate. Hence, the $2/month increases that all residential customers across Canada experienced first in 1996, and again in 1997. More increases are expected for 1998.
Low income consumer advocates have led to battle to stop local rate increases, arguing that the public interest is being unnecessarily sacrificed at the alter of economic efficiency, and that an increasing number of households simply cannot afford any further increases to the basic rate. In the event that further increases are allowed, they advocate the establishment of special discount rates for households with incomes below the poverty line.
While approving of this “targeted subsidy” approach should an affordability problem develop, the CRTC recently ruled that current local rates are affordable even for the poorest households. In doing so, it cited Statistics Canada figures that over 98% of Canadian households have telephone service, and promised to reconsider the issue if and when the statistics indicate that more households are doing without service for affordability reasons. In other words, the CRTC equated having telephone service with being able to afford it, rejecting the argument that many low income households maintain telephone service not because they can afford it, but rather because it is essential to survival in today’s society.
The CRTC did, however, commit to monitoring the affordability issue, and invited interested parties to inform it of the availability of any additional data, studies or surveys which could assist it in monitoring the affordability of future rates. It is important that we give the CRTC the information it needs to act – write to the CRTC, Ottawa, Ontario, K1A 0N2, or fax (819) 994-0218.
Competition is now gearing up to enter the local telephone market. Many industry players argue that local rates must rise further, in order to make local competition economically feasible. Competition ideologues are thus faced with an embarrassing conundrum: instead of leading to lower rates, competition in local phone service is raising the price to consumers! This irony appears to be lost on many of our politicians and policy makers, whose almost religious belief in market forces takes precedence over social and economic realities.
With the move to competition, the CRTC is replacing rate of return regulation with “price cap” regulation. Beginning January 1, 1998, the major phone companies will be freed from earnings regulation, but will have to keep basic rate increases below a certain level. While the CRTC has yet to set the cap, many believe that local rates will continue to rise over the next few years, possibly to the $30/month level. In the longer term, competition may bring rates back down again – but it remains to be seen whether the Canadian market can support widespread competition in this very capital-intensive industry.
In the meantime, access to communications services remains a key issue for the federal government. It knows that a free market approach may well lead to a greater gap between the “information haves” and “the information have-nots”, and has therefore stated that “where market forces fail to provide this [universal] level of access, the government is prepared to step in to ensure affordable access to essential Information Highway services for all Canadians, regardless of their income or geographic location.” (Industry Canada, Building the Information Society: Moving Canada into the 21st Century, 1996). We are left wondering how exactly the government will step in, and what it will take to prompt such action. Hopefully, not a crisis.

Newsletter – December 1996, Vol.2, No.3

IN THIS ISSUE
CRTC Rejects Phone Company “Budget Services”
Consumers make splash in CRTC Proceeding on Local Phone Competition
CRTC Price Cap Proceeding – Can A Price Cap keep down local rates?

CRTC Rejects Phone Company “Budget Services”

Consumer groups celebrated a recent CRTC decision rejecting the notion that pay-per-use telephone service is an effective solution for households with affordability problems.
In Telecom Decision CRTC 96-10, released on November 15, 1996, the Commission directed Canada’s major telephone companies to provide all residential customers with free toll blocking options and improved instalment payment plans for connection charges, tools that PIAC and its clients have been advocating for years. In rejecting the telcos’ pay-per-use options, the Commission noted that such options do not address the calling needs of most Canadians.
“Representatives of various consumer groups, agencies and associations made it clear that flat-rate local calling and access to long-distance are considered essential elements of basic telephone service”, said the new CRTC Chairperson, Françoise Bertrand.
PIAC and its clients, the Fédération Nationale des Associations de Consommateurs du Québec, the National Anti-Poverty Organization, and One Voice – The Canadian Seniors’ Network, had presented to the Commission the results of two national surveys on this point.
Consumer groups were disappointed, however, with the Commission’s failure to recognize that the affordability of basic phone service is an issue for many households now, and that the fact that a household has telephone service reflects the essential nature of that service, not its affordability.
PIAC expects to be busy over the next few months assisting the Stentor companies with the task of developing an effective program to monitor the affordability of telephone service in Canada, and to ensure that households who could benefit from toll blocking or instalment payment options are informed of those options. The CRTC has asked the telcos to submit a concrete plan of action on these matters by April 30, 1997.
In its decision, the Commission agreed with FNACQ/NAPO/ONE VOICE that a targeted subsidy program is the appropriate solution to affordability problems. However, it found that “there is currently no conclusive evidence to suggest that local rates won’t remain affordable”.

Consumers make splash in CRTC Proceeding on Local Phone Competition

The CRTC proceeding looking at what rules are needed for competition to thrive in the local phone market ended this fall after a lengthy oral hearing.
Representing the Consumers’ Association of Canada, the Fédération Nationale des Associations de Consommateurs du Québec, and the National Anti-Poverty Organization (CAC/FNACQ/NAPO), PIAC made sure that the CRTC had before it a detailed proposal for consumer-friendly competition in the local phone market. The only other proposals before the Commission were designed by and for vested commercial interests.
At the heart of the CAC/FNACQ/NAPO proposal is a streamlined, competitively-neutral contribution mechanism, through which basic local rates can remain at affordable levels in all parts of the country. Without such a mechanism, rural rates in particular would soar. The consumer coalition also pressed for a certification process under which all competing service providers would be required to meet certain minimum service standards.
The CAC/FNACQ/NAPO proposal is contained in its Final Argument, dated October 8, 1996. This document can be obtained at no charge from PIAC.

CRTC Price Cap Proceeding – Can A Price Cap keep down local rates?

Consumer groups, under PIAC=s leadership, took a front row seat in the recent CRTC proceeding on how to design effective price cap regulation for the Stentor companies. This hearing, which took place in October/November 1996, will likely be the last big proceeding of its kind, if competition does indeed develop in this market.
CAC/FNACQ/NAPO teamed up with the B.C. coalition of consumer groups to argue for a fair and efficient price cap regime, one which recognizes that the Stentor companies will have substantial market power – especially in the residential market – for some time to come. Backed by substantial expert evidence, they challenged the telcos= estimates of expected productivity improvements, the alleged need to replace narrowband facilities before originally planned, and the need for further rate rebalancing.
The Consumer Coalition pointed out that market forces will not necessarily align themselves with Canadian socio-economic objectives, and that regulatory safeguards must therefore be maintained until effective, sustainable competition is proven to exist.
They challenged the Stentor companies= proposals for a low productivity factor, accelerated depreciation, and rate rebalancing, noting that they would amount to app. $1 billion/year of artificially high consumer prices in 1998 and beyond.
The regulatory model advocated by the consumer groups would treat ratepayers and shareholders symmetrically, and would not permit either to benefit unduly from estimation erros in the formula. It would involve a price freeze on basic telephone service as of January 1, 1998, continued contribution from toll and optional service revenues toward the cost of access, and an overall cap on local services of inflation less 6.2% (the Aproductivity offset@). Those companies that do not think they can make efficiency improvements of 6.2% per year could choose a lower offset, with the corollary requirement that they share any earnings above and beyond a certain level. The plan would be reviewed and adjusted as necessary after five years.
The Consumer Coalition stressed the importance of monitoring telco profit levels, in order to judge the reasonableness of rate levels. This was a particularly sensitive point with the phone companies, who argued that their profit levels are irrelevant to the question of whether rates are just and reasonable.
Copies of the Consumer Coalition argument are available from PIAC.

Newsletter – September 1996, Vol.2, No.2

IN THIS ISSUE
Competition in Cable TV Pending!
Local Phone Service – Will You Have a Choice?
Survey Shows Importance of Telephone Service
Negative Option Marketing – Is It Dead?

Competition in Cable TV Pending!

On May 17, 1996 the CRTC issued a call for comments (CRTC 1996-69) on new rules which will permit competition in cable television. PIAC is representing the National Anti-Poverty Organization (NAPO) and the Fédération Nationale des Associations de Consommateurs du Québec (FNACQ) for this proceeding.
The new regulations are supposed to create competition in traditional cable distribution as well as with new interactive services, such as online video games, Internet, etc.. The new rules will apply to the existing cable companies and new competitors offering service using cable, telephone wires, wireless and satellite technologies.
We feel that some of the CRTC’s proposals fall well short of the necessary steps to permit the development of competition which will benefit consumers. The proposed rules do not ensure that Canadians will have choice over who they get service from or that cable service will be available at lower prices.
The CRTC has proposed moving to a regional licensing approach. For example, a company could get a license to operate on a provincial instead of a local basis. While this may be one approach to spur competition, the CRTC has failed to adequately address issues relating to:

• an obligation to serve all customers in an area, not just those in the highest profit centres;
• the possible abandonment of existing small markets which may be seen as not profitable enough by cable companies;
• ensuring that support for traditional community channels is maintained, especially by those who operate and are licensed regionally rather than locally;
• ensuring that regional licensees, if this approach is taken, carry the signals of local stations for local subscribers.

We are also asking the CRTC to define basic service. Cable companies have stretched the definition of basic to include many services that subscribers don’t want and have raised rates to pay for these. It is time that the CRTC ensures that the basic package meets users’ actual communication needs and the objectives of the Broadcasting Act. At the same time, Canadians should also have more choice over the other programming that they receive and how they pay for this.
Both the incumbent cable companies and large telephone companies are eyeing the money pot of cable profits. Both are proposing to rework the community cable tv channel into a commercial product they can use to achieve advantage in the competitive marketplace. This is a public resource that should not be used as fodder in the upcoming war between cable and new competitors. Instead, the control and management of community channels should be turned over to locally run not-for-profit organizations. The public should be in charge of this public resource!
The CRTC is also proposing that all competitors contribute a minimum of 5 per cent gross revenues to pay for Canadian content (3%) and community channels (2%). Both the cable and telephone companies would like to see more of this money go to their souped-up community channel.
We are proposing that companies be required to contribute 6 per cent of gross annual revenues. The NAPO/FNACQ position is that the money should be used to support the public not-for-profit community channels (1.5%), a neutral Canadian content production fund (2.%), and a new fund to help develop and sustain community not-for-profit computer networks (2.5%).
Most governments and many of the companies are planning to provide information and new services online. It is likely that some of these will only be available online. It is our position that these services should be accessible and affordable for all Canadians and that community networks are one means to help achieve this goal. All companies should make some contribution from revenues to help make this new form of community channel or public space available and sustainable.
The CRTC has also proposed that cable companies will continue to be regulated until a new competitor is available to 10 per cent of customers in a market area. This does not mean that a new competitor will even have that many actual subscribers, but just be available to 10 per cent of customers. We feel that this will not lead to competition for the simple reason that the cable companies will start a price war to kill competition before new companies have a chance to make it in the market.
Instead we are proposing that the CRTC adopt a proper test to determine if sustainable competition exists in each local market before the traditional cable companies are cut loose. Under the CRTC’s plan, new competitors will also likely flock to the high density urban markets and ignore the rest of Canada. Even then, they may not survive given cable’s advantage.
We have also argued on behalf of NAPO/FNACQ that the CRTC should continue to regulate pricing where competition fails to develop so these customers don’t end up paying for the competitive losses of companies elsewhere or for new services which these subscribers may not use.
The CRTC will be conducting an oral hearing on its proposals commencing October 7. NAPO and FNACQ have asked to appear at this hearing. New draft regulations will be released publicly by the CRTC for further comment in the new year.

Local Phone Service – Will You Have a Choice?

What happens to your telephone number if you decide to let the cable company provide local phone service? Will rural customers get the benefit of local phone competition?
These are just some of the questions that the CRTC is attempting to answer in the current proceeding that is now underway on the rules needed to get competition into the market for local phone service. PIAC has been active at these proceedings representing the Fédération Nationale des Associations de Consommateurs du Québec (FNACQ) and the National Anti-Poverty Organization (NAPO). PIAC is also working closely with the Consumers’ Association of Canada (CAC) to ensure that the needs and interests of ordinary residential customers are met in the new competitive environment.
We remain sceptical that competition can result in lower local phone prices, or for that matter, maintaining a consistently high quality network. The US and British experiences, to date, present a very mixed set of results.
Nevertheless, competition is currently the flavour of the day and our job is to make competition work. This is what we hope to do:

• identify where there is competition and where there is not, to ensure that adequate protection exists for those ratepayers who only have one local provider;
• show what competition can deliver and what it can’t deliver, making sure that consumer are protected where market forces are unlikely to achieve policy objectives on their own;
• suggest rules that will lay the groundwork for real competition – the kind that benefits small customers, as well as big business;
• make sure that all telephone services pay their fair share in the form of contribution. In a competitive environment, this is necessary to keep rates for the basic service and the universal network affordable to all Canadians; and
• keeping the same extent and quality of telecommunications service that Canadians are used to.

The US experience with competition in the telephone industry has resulted, to a large extent, in real problems for local networks particularly in smaller populated areas. PIAC is working to make sure that competition in local service does not simply mean more choice for high end users and higher prices for ordinary customers.

Survey Shows Importance of Telephone Service

In January of this year, PIAC together with other consumer, public interest groups, and labour unions sponsored a national survey to help with representation of consumer interests at upcoming CRTC hearings. There has been much industry hoopla concerning the need for competition and to raise local rates. PIAC was concerned that decision makers might forget that phone service is not just a commodity like any other. Not surprisingly, 86% of respondents said they could not manage without telephone services. In addition, despite the telcos enthusiasm for local measured service (pay-per- call) most Canadians came down of the side of fixed monthly rates for unlimited local calling. The majority also felt that providing services to low income households at a cheaper rate was a good idea.
The survey is thought to be the first in depth independent sample of customer attitudes concerning telephone service. The results are now available in publication form: Local Telephone Service Pricing Options For Canada $8.00 to order by phone: (613) 562-4002 ext. 40, by fax: (613) 562-0007, by e-mail: PIAC@WEB.NET, by mail: 1 Nicholas Street, Suite 1204, Ottawa, ON, K1N 7B7

Negative Option Marketing – Is It Dead?

The great Canadian cable consumer revolt of January, 1995 demonstrated the folly of the CRTC turning a blind-eye to the marketing practices of the cable company, in order to establish new Canadian channel services. In the immediate aftermath, politicians, cable operators, and bureaucrats were all wringing their hands saying this could not happen again. We wonder.
The practice of negative option marketing had been a wildly successful ploy by Canadian cable companies. In 1990, Canadian cable companies sold their Extended Basic Service package to customers through negative option marketing. All basic service cable users were provided with extended basic and billed for the same unless they called to cancel. By 1993, a survey showed that 66% of Canadian cable consumers still thought they were receiving the lowest priced basic service package, while, in reality, only 8% continued to do so.
The CRTC, for years, has been indifferent to the anti-consumer aspects of this practice, preferring to see it as something harmless that enabled Canadian programming services to be established. “What consumers didn’t know wouldn’t hurt them”, was the implicit suggestion.
This myth exploded in January 1995, when consumers lined up in droves to cancel cable service and to voice their displeasure at being treated like sheep.
A private members bill, Bill C-216 was introduced this year by Roger Galloway, M.P., that would outlaw these practices. Predictably, Bill C-216 has run into opposition from the usual sources. The cable industry claims it will freeze programming. Producers of speciality programming are afraid that it may prevent the CRTC from foisting channels without the consumers consent onto a cable package.
There is nothing wrong in ensuring Canadian content and a preponderance of Canadian programming on cable. However, to remove consumer choice by implicit exploitation of the market, is not right and should be stopped. PIAC has twice attended before the House of Commons Heritage Committee to argue for Bill C-216’s adoption.
Bill C-216 goes before the House of Commons for a third reading in September. Contact your local MP to urge that he/she support Bill C-216. The government has been quick to support competition and choice where the customers are the powerful business interests. Lets make sure they do the same when the customers are ordinary Canadians.

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.

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.