Phone companies line up against Bell Aliant’s proposed ‘huge rate increases’

GATINEAU—A proposal from Bell Aliant to uniformly raise price caps for phone services in Canada’s rural and remote areas to $36 per month is drawing criticism from competitors who say the price increase wouldn’t be fair to consumers. “Today, most high-cost service area residents do not understand the magnitude of the impact this hearing could have on them. You would need to bring this issue beyond the realm of regulatory experts,” John Meldrum, SaskTel’s chief privacy officer and vice-president of corporate counsel and regulatory affairs, said at a CRTC hearing on basic telecom services Wednesday. Last week, Bell Aliant said the commission’s subsidy regime is “broken.” Under the regime, telecom companies pay a contribution rate of 0.73 per cent on voice services. The funds collected are then redistributed to small incumbent phone companies, which are obligated to serve local and remote areas. Bell Aliant told the commission that phone companies in Eastern Canada are receiving six times less in subsidies than phone companies in the West. The company suggested reviewing the subsidy regime on several fronts, including eliminating subsidies in all but the most remote areas and increasing price caps. Price caps have traditionally been a controversial problem for the telecom industry because maximum prices vary from one region to the next—sometimes resulting in one region paying more for phone services than a neighbouring one. Bell Aliant said all price caps, which fall in the $20-to-$38 range, should be equalized at a standard, maximum affordable cost level of $36.20, as now accepted by the commission. But throughout the hearing interveners have argued that many areas with high price caps are occupied by affluent cottagers from urban areas, not low-income families. In response, Bell Aliant provided Thursday an example of two communities where the pricing situation is reversed. In Calstock, Ont., a First Nations community with average incomes below the national average, the price cap is $34.20, Bell Aliant said. But in Bala, Ont., a community known for its cottages, the price cap is $23.58. “It is difficult to explain to customers in Calstock why, under the current system, they are paying over $34 for local service while customers in the Muskokas or in Saskatchewan and Alberta, for example, are paying far less and are being subsidized to keep prices low,” Denis Henry, Bell Aliant’s vice-president of legal, regulatory and government affairs, said. “But one thing seems obvious to us: prices should move to the highest affordable level before even thinking about whether and how to subsidize them. We think that price could be $36, and in any event well above $30.” Henry added that averaging the prices would put a stop to the “totally unjustifiable” practice of some customers paying more so others pay less. Bell Canada also supported the suggested price cap increase Thursday, saying that the move should be done over a two-to-three year transition period. “There is no evidence and no reason to think that such rates would not be just, reasonable and affordable for all regulated, high-cost serving areas,” Jonathan Daniels, Bell’s vice-president of regulatory law, told the commission. But CRTC chairman Konrad von Finckenstein questioned why the commission should raise prices if no extra benefit is passed on to consumers. “What do we say to the consumer in those affected areas, who sees for the next three years their price going up without any change in service, without any improvement, without anything?” he said. Henry said consumers will ultimately gain from Bell Aliant’s continued capacity to serve the communities. “Most importantly, I think what consumers get is our continued ability to invest in both the urban areas, which will we need to do to remain financially viable, and in the rural areas as well,” he said. Mirko Bibic, Bell Canada’s senior vice-president of regulatory and government affairs, added that the companies are looking to raise caps to increase pricing flexibility. “We’re not asking you to order us to raise those prices … where subsidy is needed. We’re saying give us the flexibility, and it’s up to the carrier to decide whether it wants to increase price,” he said. The Public Interest Advocacy Centre (PIAC) told the commission Thursday that increasing prices would be a “profound rate shock,” and that Bell Aliant failed to demonstrate the increase would be affordable to consumers. “This stupendous rise in price would be justified only on the Bell companies’ bare word that they would like a raise, that rates are too low, and that captive customers, with no real notice this was going to happen, will just have to pay it,” John Lawford, PIAC counsel, said. PIAC also argued that many people with low incomes would have to accept the rate increase because telephony is an essential service—but that doesn’t make the rates affordable. The Association des companies de telephone du Québec (ACTQ), an association of Quebec phone companies, said Bell Aliant’s proposal to increase prices would negatively affect small phone companies that cannot afford to increase their rates due to competition. SaskTel told the commission Wednesday it is also opposed to increasing price caps. “Bell and Bell Aliant have stated that increasing residential rates by some 50 per cent and redistributing costs would have no impact on any company and we would all be winners under this type of ‘rough justice,’” Meldrum said. “We agree it would be ‘rough,’ but there would be no justice for the customers—the residents of high-cost serving areas who would be most affected by their proposals.” Meldrum said the general public must consulted about the proposal before a decision is made. “SaskTel would go further to say that if the commission were to consider such huge rate increases, then the general public must have an opportunity to comment on the impact it would have on their lives,” he said. MTS Allstream also opposed the plan during Wednesday’s hearing, arguing that Bell Aliant’s proposal would mean a price increase of up to 71 per cent for its subscribers. The Ontario Telecommunications Association and TBayTel said Wednesday that increasing rural rates would deepen the divide between them and profitable areas where customers pay around $22 per month for phone services. But CRTC commissioner for Quebec Suzanne Lamarre said the tone of the debate suggests an eventual rate increase. “I need to echo the chairman’s earlier allusion to some kind of discomfort in the discussions that we’ve been having for the past few days … I sense we’re not going to be able to get out of this hearing without increasing rates for everybody in the country,” she said. The commission’s access to basic services hearing will wrap up Friday in Gatineau. kfournier@thewirereport.ca

Phone companies line up against Bell Aliant’s proposed ‘huge rate increases’

News | November 4, 2010

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