Canada's universal telephone service is under seige as a result of de-regulation, increasing local service costs and now the threat of "unbundling" local services. Users may have to pay extra to access long distance services, make over 30 local calls a month, and eventually may have to pay for every local call by the minute. Telephones, one of the most democratic tools of the information age, may soon be much more expensive and less accessible.

BACKGROUND

Canada's original communication links accompanied construction of the great intercontinental railways.

In 1880, Bell Canada, a subsidiary of the American Bell Telephone Company, was given the exclusive right to manufacture telephone equipment and to sell telephone service across Canada.

Parliament withdrew the legal monopoly because Bell often neglected rural areas due to the high costs of providing the infrastructure.

Alberta and Manitoba set up government run telephone systems in 1906 and Saskatchewan followed in 1908. These publicly owned companies decided to provide universal access at affordable rates by charging higher rates for long distance rates and business use.

The Telecommunication Act instituted in the 1930's was directed towards universal service.

The federal government established the Canadian Radio-television and Telecommunications Commission (CRTC) in 1976 and charged it with regulating telecommunications in areas of federal jurisdiction as well as the broadcasting and cable television industries. While carrying out its functions independently, the CRTC is appointed by the federal government and its decisions are subject to being varied by it.

All toll charges were required to be submitted to the CRTC and to be "just and reasonable" and undue or unjust discrimination in pricing was forbidden.

CURRENT HISTORY

In the 1980's, Canadian corporations, following the American example, began to lobby for deregulation under the mask of competition.

The first attempt to de-regulate the telephone system in Canada was the 1984 CNCP application that federally regulated telephone companies be required to provide interconnection of their networks to CNCP.

Unions, library organizations, poverty and consumer groups all opposed the application. Significant price increases in local telephone services were forecast based on the US experience. Concern was also expressed that de-regulation provided an opportunity for telephone companies to rid themselves of unprofitable rural services.

In 1991, the CRTC heard a second application by Unitel and BC Rail (now Westel) to allow for competition for long distance calling services. In response, the CRTC approved long distance competition in June 1992.

The predicted pressure on local call rates was immediate and 1993 saw major rate increase applications across Canada. The CRTC responded that it would only "re-balance" local rates after carefully considering the need in the context of the competitive industry generally.

The notion of "rate re-balancing" is based on the telephone company view that local rates do not cover the cost of local service and are subsidized by the rates for long distance service. It is based on the belief that all costs of providing access to the network should be borne by local calling.

Typically, lowering long distance costs benefits the business sector while increasing local costs penalize the poor, middle-income and community groups.

PRESENT SITUATION

As a result of allowing competition, the CRTC called the Regulatory Framework hearings in the Fall of 1993 to review the way in which it would regulate a partially competitive industry.

The CRTC decided to move to a system of price regulation in 1998 but allow the telephone companies to retain their monopoly local service as well as compete for unregulated services.

Another result of the Regulatory Framework hearing was a decision to allow phone companies to impose a $2.00 per month increase in local rates This decision resulted in a public outcry. The Federal cabinet ordered the increase reversed and a reconsideration of the decision to rate re- balance by imposing such an increase.

The CRTC reconsidered re-balancing and the $2.00 per month increase in the context of the Split Rate Base hearing. It decided to re-impose the increase but the telephone companies would have to apply the increase to reducing long distance charges.

The Stentor companies subsequently petitioned the Federal cabinet which issued a reversal of part of the CRTC decision and told the telephone companies that it was not necessary to apply the $2.00 increase to long distance revenues. This is a windfall to the Stentor companies of an estimated $4.5 billion over the next 10 years.

The CRTC is now considering the impact these changes will have on local telephone rates and services. The Local Service Option hearings are under way.

The hearings will consider breaking local telephone service into separately priced services such as the possibility of implementing a form of "budget" service, targeted subsidies, or "lifeline" program. One proposal for budget services is a $4.00 reduction in monthly cost (the increase just given to the telephone companies) but a limit of 30 local calls per month. Calls beyond 30 per month would cost 25 cents each. Another budget proposal would eliminate access to long distance service except as an additional access charge.

Ultimately, telephone companies want Local Madwort Service (L S) where there is a charge for each local call as well as for the length of each call.

A recent survey conducted by EGOS found that 89% of respondents said that free local calling privileges are an essential aspect of telephone service and 85% want to keep a fixed monthly rate with unlimited local calling privileges. The same survey found that the average residential customer places 5 local calls per day and their additional charges under the budget proposal would be $318.25 per year.

Concerned individuals can write their member of parliament or Mr. Keith Spicer, CRTC, Ottawa, Ontario K1A 0M2 (Fax 819-953-0795).

This page last updated 3 March 1996.

Copyright © 1995 BCLA Information Policy Committee

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