ARCHIVED -  Telecom Order CRTC 99-529

Telecom Order

Ottawa, 14 June 1999

Telecom Order CRTC 99-529

On 3 November 1998, Northwestel Inc. (Northwestel) filed an application proposing to increase its local calling rate for its public pay telephones from the current rate of $0.25 to $0.35. Northwestel planned to roll-out the rate increase over a six-month period.

File No.: Tariff Notice 682

1.In support of its application, Northwestel cited the high cost of its public payphone service. Northwestel submitted revenue and cost figures to show that its service will still not be compensatory at the new proposed rate. Northwestel stated that in addition to network access costs, it incurs significant capital, operational (i.e. maintenance and installation) and other costs for its public payphones.

2.On 21 December 1998, the Commission issued Northwestel Inc. - Proposed Increase to Local Calling Rate for Public Pay Telephones, Telecom Public Notice CRTC 98-42. On the same day, the Commission issued a press release and also distributed an information note to public interest groups and government departments.

3.Comments were submitted by Paytel Canada, Inc. (Paytel), a registered competitive pay telephone service provider; the Utilities Consumers' Group (UCG); the Consumers' Association of Canada (CAC) and the National Anti-Poverty Organization (NAPO); and the Public Internet Advocacy Centre, on behalf of the British Columbia Old Age Pensioners' Organization, Consumers' Association of Canada (B.C. Branch), Council of Senior Citizens' Organizations of B.C., federated anti-poverty groups of B.C., Senior Citizens' Association of B.C., West End Seniors' Network, End Legislated Poverty, B.C. Coalition for Information Access and Tenants Rights Action Coalition (collectively BCOAPO et al.). Northwestel filed reply comments.

4.Paytel supported the proposed increase, based upon Northwestel's evidence that Northwestel's public payphone service is not and will not be compensatory at the proposed rate.

5.Paytel expressed a concern that Northwestel has an opportunity to lock up exclusive contacts with the more profitable pay telephone sites and that it would have an unfair competitive advantage if it is permitted to cross-subsidize its pay telephone operations with revenues from other services. Paytel submitted that the Commission should move pay telephone operations to a compensatory level, with an additional increase to take effect over the period 1 January 2000 to 1 July 2000.

6.UCG and CAC/NAPO submitted that the application should be denied. They submitted that the subsidy for below cost payphone service is appropriate, and indeed necessary, in order that access to basic telephone service remains affordable for low income Northerners.

7.CAC/NAPO cited Stentor's statistics for 1997 which show overall penetration rates in the Northwest Territories and Yukon to be 91.9% and 95.4%, both of which are significantly below the Canadian average of 98.8%. CAC/NAPO submitted that anecdotal information supports these findings, indicating that people without telephones in their homes are much more prevalent in the North than elsewhere in Canada.

8.BCOAPO et al. stated that low income consumers who cannot afford telephone access in their own homes will be affected enormously by the proposed increase. BCOAPO et al. noted that the area served by Northwestel includes some of the more remote areas of Canada and as such, many communities would qualify as high cost serving areas. BCOAPO et al. assumed that there are people in the Northwest area who cannot afford telephone access in their own homes and are forced to rely on pay telephone service.

9.UCG submitted that the main use of payphones for local calls are for emergency purposes or messages. UCG stated that students and children will be disadvantaged by the rate increase.

10.In its reply comments, Northwestel noted that emergency assistance is available from all payphones, through dialing "911", where available, or "0", and is available to all customers at no charge.

11.Northwestel submitted that the rate currently charged for payphone use is well below cost. Consistent with Commission objectives of bringing rates closer to cost, Northwestel stated that it is seeking a realistic rate increase that does not unfairly injure customers. For this reason, Northwestel suggested only a slight increase in the payphone rate to recoup some of the high cost of providing this service. Northwestel submitted that the suggestion by Paytel to adjust payphone rates to a fully compensatory level is unrealistic at this time.

12.Northwestel agreed that telephone penetration rates in the Northwest Territories and the Yukon are below Canadian rates. However, Northwestel disagreed with claims that the rate increase would most adversely affect people who cannot afford individual line phone service, that is, those who rely to the greatest extent on payphones. Northwestel argued that this very point makes the rate increase necessary. In order to provide continued and increased payphone service in this non-compensatory environment, Northwestel submitted that the proposed increase is essential.

13.Northwestel submitted that the number of phones will not diminish under its proposal. The company stated that an increase in rates would enable Northwestel to provide better service to payphone customers.

14.The Commission notes that there is agreement among parties that the current rates are subsidized, telephone penetration rates in the north are below the Canadian average and better service for Northern customers is required.

15.The Commission notes that local or toll pay telephone competition has not been allowed in Northwestel's territory. In most areas of Canada where there is competition, the approved tariff is still $0.25.

16.Further, as telephone penetration rates in Northwestel's operating territory are lower than those for the rest of the country, the Commission is of the view that the Northwestel payphone rate should remain at this time at its current level.

17.In light of the concerns identified in this proceeding and based on the particular circumstances of this proceeding, the Commission therefore denies Tariff Notice 682.

Secretary General

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