ARCHIVED -  Telecom Order CRTC 99-908

Telecom Order CRTC 99-908

Ottawa, 20 September 1999

Reference No.: Tariff Notices 3894/A/B

Summary

In this Order the Commission denies BC TEL's application for extended local calling. However, BC TEL is invited to file an amended application based on the framework in this Order.

Introduction

1.BC TEL filed Tariff Notice (TN) 3894 on 18 December 1998 (with two subsequent tariff amendments) proposing to create a common local calling area for all residents and businesses in the Greater Vancouver Region (GVR) of British Columbia, effective 1 May 2000. The serving area affected by this proposal is forecast to comprise over 1.3 million telephone lines in 19 separate telephone exchanges within 20 separate municipalities. BC TEL proposed to convert three existing one-way extended area service (EAS) routes into two-way EAS routes, and to add 81 new two-way EAS routes to the existing 87 two-way EAS routes in the GVR.

2.BC TEL proposed to apply surcharges of $0.40 per month to residential customers in the Vancouver, New Westminster and Richmond exchanges. For residential customers who are served from the remaining 16 exchanges in the GVR, BC TEL proposed a surcharge of $1.50 per month. BC TEL also proposed surcharges for business local access services of $1.80 per line or per channel and $0.60 per station line for Centrex services.

3.BC TEL proposed to conduct a referendum under the guidelines set out in BC TEL - Expansion of Toll-Free Calling and Restructuring of Local Rates in the Lower Mainland, Telecom Decision CRTC 93-7, 29 June 1993 (Decision 93-7), to seek customer approval for the proposed surcharges. In Decision 93-7, the Commission stated that it would require that prior to implementation, a simple majority of subscribers participating in the referendum (which was limited to those subscribers where the residential individual line rate would increase by more than $1.00 per month) vote in favour of the proposal. Prior to conducting the referendum, BC TEL stated that it would submit for the Commission's approval, the proposed wording of the question to be put before subscribers in the referendum.

4.BC TEL noted that its proposal addresses a long standing customer demand for improved local calling in Greater Vancouver by eliminating the inconsistencies and inequities in local calling areas. BC TEL submitted that the proposal is also in response to a request by the Greater Vancouver Regional District (GVRD) to find a solution for local calling in Greater Vancouver that will assist in the implementation of its "Liveable Region Strategic Plan". One of the key elements of the Strategic Plan is the creation of Regional Town Centres which will allow for the development of diverse, yet complete, centres of commercial and cultural activity. The objective of Regional Town Centres is to disperse commercial and cultural activity throughout Greater Vancouver, thereby lessening the demand on transportation infrastructure by reducing the need for people to regularly commute to the four central (or core) municipalities (Vancouver, Burnaby, New Westminster and Richmond) where business activities are currently concentrated.

5.BC TEL submitted that the need for expanded local calling in the GVR has been fuelled by high population growth and movement in a region which has rapidly evolved from a collection of independent communities into a single community with a common economic interest. BC TEL noted that there is a continuing shift of population to the suburban communities such as Delta, Surrey, Langley, Port Moody, Coquitlam, Pitt Meadows and Maple Ridge.

6.BC TEL is under price cap regulation. BC TEL proposed to treat the surcharge as a new element in the price cap model such that the proposed charges apply only to those customers receiving expanded local calling. Accordingly, BC TEL proposed to make a one-time adjustment to the overall Price Cap Index (PCI) and Service Band Limits (SBLs) equivalent to the amount of change in the respective Actual Price Index (API) and Service Band Indices (SBIs).

7.BC TEL proposed to implement the common local calling area on 1 May 2000, coincident with the price cap rate adjustments.

8.On 28 January 1999, the Commission initiated a public proceeding under BC TEL - Proposed Expansion of the Greater Vancouver Local Calling Area, Telecom Public Notice CRTC 99-4, to consider BC TEL's application. In response, comments were submitted by the general public, small businesses, various business and consumer associations, local governments and various toll and wireless service providers. Comments received included those from Call-Net Enterprises Inc. (Call-Net), Canadian Wireless Telecommunications Association (CWTA), The British Columbia Public Interest Advocacy Centre on behalf of a group of interveners consisting of BC Old Age Pensioners' Organization, Council of Senior Citizens' Organizations of BC, federated anti-poverty groups of BC, Senior Citizens' Association of BC, West End Seniors' Network, Consumers' Association of Canada, BC Coalition for Information Access, End Legislated Poverty, and Tenants Rights Action Coalition (BCOAPO et al.), AT&T Canada Corp. (AT&T Canada), Clearnet Communications Inc. (Clearnet), Small Islands Research Centre, Microcell Telecommunications Inc. (Microcell), the City of New Westminster, the City of Richmond, The Corporation of Delta, RSL COM Canada Inc. (RSL COM), 777 Long Distance Inc., Call-Link Telesolutions Ltd., and Toll Free Calling Association.

Positions of Parties

9.Major issues raised in the course of the proceeding include: the impact of the proposal on competitive service suppliers and on subscribers' rates; how an EAS surcharge proposal can be implemented in the context of the price cap regime; the determination of the appropriate compensation for BC TEL to proceed with the increased local calling capability; and whether a plan for increased local calling capability should be subject to a vote by some or all of the affected subscribers in the GVR.

10.Generally, subscribers, businesses and municipalities in the non-core areas supported BC TEL's proposal. BCOAPO et al. supported the expansion of the calling area in principle, but expressed concerns that acceptance of BC TEL's cost recovery mechanism would establish a precedent that would undermine the fundamental principles of the price cap regime.

11.Local and toll competitors, some of the municipalities in the core of the GVR, and a small number of subscribers voiced their opposition to BC TEL's proposal. Alternate Providers of Long Distance Service (APLDS) opposed the proposal. They stated that optional calling plans represent a better solution to expanding EAS and that forbearance from regulation of toll services should provide BC TEL with a unique ability to satisfy customer needs through optional plans. APLDS submitted that the expansion of the free calling area addresses the needs of some customers but will be detrimental to others. APLDS noted that competitive toll solutions provide the opportunity to offer customers more choice and flexibility. Local and toll competitors submitted that BC TEL's proposal is anti-competitive as it will inhibit rather than foster competition, especially local competition. Call-Net submitted that BC TEL's proposal would restrict consumer choices available under local competition, limit the ability of competitive local exchange carriers (CLECs) to distinguish themselves in the local market and result in increased entry costs for CLECs in the GVR local market. RSL COM stated that it expected that approximately 15 competitors offering short-haul toll services within the GVR would lose their business entirely since a short-haul toll call would become a local call.

12.BC TEL noted that, to date, no solutions of any kind appear to have been accepted by the public at large as satisfactory alternatives to an expanded toll-free calling area in the GVR. BC TEL submitted the optional calling plans currently available in the market are limited in scope in that they are not available to business customers, do not offer flat-rate calling during weekday daytime hours, are subject to being restricted or limited by suppliers and can be withdrawn from the marketplace at any time, leaving customers with no assurance that their continuing need for flat-rate calling within a community will be met. BC TEL argued that the Commission cannot rely on market forces to provide the service requested by the GVRD.

13.The City of New Westminster and the City of Richmond urged the Commission, if a referendum were required, to allow affected customers to vote in the referendum, regardless of the surcharge rate.

Determinations

A) General

14.The Commission notes that BC TEL has previously proposed expanded local calling for the Vancouver area. While the company's 1993 proposal, as revised, was approved by the Commission in Telecom Order CRTC 93-722 dated 27 August 1993, it was narrowly defeated in a customer referendum.

15.The Commission also notes that BC TEL's current application is in response to a specific request by the GVRD for expanded local calling in the GVR.

16.On balance, the Commission considers it appropriate, given the public interest considerations discussed later, to permit extended local calling capability. However, the Commission finds, as set out below, that the rates proposed by BC TEL would yield revenues in excess of what the Commission considers to be reasonable compensation. Accordingly, the applications are denied. However, the Commission invites BC TEL to file an amended application based on the framework set out in this Order.

B) Assessment of Extended Local Calling Capability

17.In Price Cap Regulation and Related Issues, Telecom Decision CRTC 97-9, 1 May 1997 (Decision 97-9), the Commission required that each of the telephone companies' PCIs be adjusted annually to reflect the inflation rate and an annual productivity offset of 4.5%, adjusted for limited exogenous factors arising from events which are beyond a telephone company's control. In Decision 97-9, the Commission envisaged annual price cap filings that would be submitted by 31 March to address the requirement to reduce net revenues from the capped services. During the remainder of the year, the telephone companies would have the flexibility to increase or decrease prices for individual services provided that, in aggregate, they meet certain price cap parameters (for example, the annual average increase to the residence service rates is limited to inflation).

18.In paragraph 176 of Decision 97-9, the Commission outlined procedures for expedited treatment of tariff applications relating to proposed price changes under the price cap regime. Specifically, the Commission stated that, subject to certain considerations such as imputation test requirements and any other concerns such as those relating to unjust discrimination, consumer safeguard or privacy issues and issues relating to essential/bottleneck facilities, it would grant final approval to tariff filings, without waiting for comments from interveners, where it is satisfied that the corresponding price cap parameters are met.

19.BC TEL argued that the surcharge was for a new service and, as a result, it should have a neutral impact on the price cap formula. While BC TEL proposed to make a one-time adjustment to the overall PCI and SBLs equivalent to the amount of change in the respective API and SBIs, BC TEL stated that it did not intend to suggest that the proposed EAS rate changes should be treated as "exogenous" as contemplated in Decision 97-9.

20.In BC TEL's view, new rate elements are warranted in the case of TN 3894 in the specific context of providing a new service as its proposal will afford local calling of greater scope than previously available to the exchanges in the GVR.

21.BCOAPO et al. viewed BC TEL's proposal for a one-time adjustment to the price cap mechanism for "new rate elements" as a precedent that would lead to significant anti-competitive abuse. For example, BCOAPO et al. noted that Incumbent Local Exchange Carriers (ILECs) may offer other possible service enhancements if the principle of increasing the PCI and SBLs to reflect revenue from new rate elements is accepted by the Commission (e.g., upgrade service in areas likely to be targeted by new entrants to increase guaranteed data transmission speeds).

22.In response to Commission interrogatory BCTEL (CRTC) 1Feb99-14 EAS, BC TEL defined a "new service" to be an offering that provides service features or capabilities not previously available to customers. The company submitted that for price cap purposes, a new service can generally be distinguished from an existing service offering or combination of offerings by the introduction of some new technology or added functional capability and would result in a new source of revenue. If price is the only difference between a proposed offering and an existing offering or combination of offerings, the proposed offering would not be considered a new service.

23.The Commission considers that this EAS proposal, and any EAS proposal in general, constitutes a restructuring of existing local service rather than a new service. As a result, the Commission considers that the proposal amounts to a change to existing local rates.

24.Based on the above, the Commission notes that BC TEL's proposal would likely result in the Basic Residential Local Service SBI exceeding the rate of inflation. For tariff filings for capped services, Decision 97-9 required the telephone companies to demonstrate compliance with the price cap indices. In the event of non-compliance, the Commission required justification to be submitted with the filings.

25.The Commission notes that BC TEL's proposed expansion of flat-rate local calling in the GVR was in response to a request by the GVRD Board of Directors to find a solution to address the long standing customer demand for improved local calling in the GVR by eliminating the inconsistencies and inequities in the local calling area.

26.In assessing whether the increased local calling capability is in the public interest, the Commission considered the interests of subscribers, the company and competitors.

27.The Commission concurs with BC TEL that the general public has demonstrated overall support for this proposal. Specifically, the Commission notes that the record reflects customers' needs and local government support for a more representative and uniform local calling area which better meets the needs of the GVR community. Further, with respect to the anti-competitive concerns raised by several parties, the Commission considers that while the extension of the local calling area would reduce the size of the toll market available for competitors, this reduction would be minimal. As noted in BC TEL's response to BCTEL(CRTC) 1Feb99-18 EAS, the long distance calling within the GVR represents a very small percentage of total long distance minutes billed to customers in the GVR. With respect to local competition, the Commission considers that, to the extent local rates within the GVR would increase, this would create a greater incentive for new entrants in the local market.

28.Further, the Commission considers that extension of the GVR local calling area, subject to appropriate compensation, is consistent with Canadian telecommunications policy objectives, particularly to respond to the economic and social requirements of users of telecommunications services.

29.Accordingly, the Commission considers that on balance, the benefits to be derived from the implementation of extended local calling capability outweigh the anti-competitive concerns.

30.The Commission finds that it would be appropriate for BC TEL to provide for extended local calling capability compensated through a surcharge. The Commission determines that it would be appropriate for BC TEL to make a one-time price cap adjustment. The amount of this adjustment is outlined below.

C) Determination of Appropriate Compensation

General Approach

31.BC TEL submitted that its proposal ensures that the cost of approximately $17 million associated with the expansion of the Greater Vancouver local calling area is recovered from customers in the GVR. BC TEL also claimed that its economic study was financially neutral in the year of implementation.

32.There were two approaches discussed in this proceeding for the assessment of the appropriate compensation. The first approach, as proposed by BC TEL, is to compensate the company for expenses incurred and revenues foregone. The second approach is to only compensate the company for the incremental impact on its Utility segment.

33.BC TEL proposed that surcharges related to its proposal should include compensation for Competitive segment long distance revenues that the company would forego as a result of implementing the expanded free calling area. BC TEL maintained that the purpose of the split rate base and price cap regimes is to prevent Utility segment subscribers from funding revenue losses in the Competitive segment where those losses are competitive losses. In other words, BC TEL noted that Utility segment subscribers should not be required to pay more in order to fund market share losses for, primarily, toll services. BC TEL submitted that the EAS application before the Commission does not propose that Utility customers fund competitive losses in the Competitive segment. Rather, the company proposed that a portion of the Competitive segment revenues are being converted into local revenues and are being assigned to the Utility segment, which is itself now open to competition. Therefore, in BC TEL's view, the EAS application does not offend the purposes for which the Commission implemented a split rate base or price cap regulation.

34.BC TEL further noted, in response to interrogatory BCTEL (CRTC) 1Feb99-9 EAS, that in developing and introducing new services in the Utility segment, the company should be entitled to consider the cross-impacts that such introduction might have on revenues from the full range of its service offerings (whether Utility or Competitive), just as it would do in an unregulated competitive marketplace.

35.Both AT&T Canada and Call-Net maintained that to establish the surcharges which would compensate the company for foregone toll revenues is inconsistent with the principles of split rate base and price cap regulation of Utility segment rates. AT&T Canada noted that rates set under price caps are expected to provide the telephone company with an opportunity to achieve a reasonable rate of return for its Utility segment only.

36.BCOAPO et al. stated that BC TEL's proposed price cap treatment would, in effect, enable BC TEL and other ILECs to enhance their capped services in locations where they are most vulnerable to competitive entry by adding new rate elements, while recovering the cost of those enhancements from customers in areas where the risk of competitive entry is much lower.

37.RSL COM submitted that it is no longer appropriate for EAS proposals merely to be "neutral on a net revenue basis". RSL COM noted that BC TEL's proposal attempts to convert long distance revenues, which are at high competitive risk, to local revenues -- which is contrary to the interests of both end-user consumers and alternative providers of long distance services presently operating in the GVR.

38.The Commission notes that BC TEL's current application has been developed by BC TEL in response to persistent demand over many years and, in particular, to a specific request by the GVRD to develop another proposal. BC TEL's proposal was presented to and endorsed by the GVRD Board of Directors on 27 November 1998. The Commission further notes that the subscribers within the GVR represent more than 50% of BC TEL's subscribers. In these specific circumstances, the Commission finds that it is appropriate to compensate BC TEL for the impact of this proposal on the company as a whole for expenses to be incurred and revenues foregone.

Assessment of Revenue and Cost Estimates

(a) Foregone Long Distance Revenues

39.In estimating its foregone toll traffic minutes and revenues, BC TEL proposed to use a two-month study period of December 1997 and January 1998. The Commission considers that the study period of December 1998 and January 1999 is more reasonable as this study period, unlike the proposed study period, captures the impact of the company's residential flat-rate long distance calling plan.

40.The Commission accepts BC TEL's estimates of the change in toll minutes and revenues to reflect the study period of December 1998 and January 1999, and accordingly has adjusted the revenues for toll as well as the estimates provided for APLDS for both contribution and switching and aggregation.

(b) Network Expenditures (Depreciation Expense)

41.BC TEL proposed a three-year capital recovery period in estimating the total capital expenditures required to implement its proposed local calling area expansion. BC TEL submitted that it is prudent to recover its investment over a shorter period in highly-competitive areas such as the GVR.

42.BCOAPO et al. submitted that BC TEL did not provide evidence to support its assumption that a shorter period is prudent in highly-competitive areas, or evidence to justify a decrease of this magnitude.

43.In Implementation of Price Cap Regulation and Related Issues, Telecom Decision CRTC 98-2, 5 March 1998 (Decision 98-2), the Commission examined the depreciation life characteristics for capital assets as to their appropriateness during the price cap period. In particular, the Commission determined the depreciation life characteristics for the former Stentor-member companies at the outset of their respective price cap regimes, based on a historical view of plant as well as a prospective view that included the impacts of future competition. Furthermore, in Telecom Order CRTC 99-239 dated 12 March 1999, the Commission determined that the depreciation life characteristics approved in Decision 98-2 remain appropriate estimates of the plant lives of local competition start-up and local number portability assets.

44.The Commission concurs with BCOAPO et al. that BC TEL did not provide any persuasive arguments as to why the incremental network costs associated with its EAS proposal should be treated differently from the capital assets already embedded in BC TEL's rate base. The Commission is of the view that the depreciation life characteristics approved in Decision 98-2 remain appropriate estimates of the plant lives of the assets required to implement the company's EAS proposal, and accordingly has recognized the resulting depreciation expense in calculating the appropriate compensation.

(c) Operating Expenses

45.The Commission notes that parties did not file any comments related to maintenance expenses, advertising/plebiscite expenses, or the fibre usage expenses as submitted by BC TEL. The Commission is of the view that each of the estimates is reasonable and has reflected their respective amounts in calculating the appropriate compensation.

46.In the event that a referendum is necessary to implement this proposal, the Commission maintains the same view that it expressed in Decision 93-7 that it would permit the recovery of the costs of holding a referendum. The criteria for any such referendum are discussed later.

(d) Switching and Aggregation Expense Savings

47.BC TEL estimated that it would benefit from certain cost savings that would result from the re-use of inter-office toll facilities. BC TEL submitted that calls that were classified as toll and were carried over circuits from the local switch to the toll switches will now be carried over the local network. BC TEL submitted that these inter-office toll facilities would be available for re-use in carrying other local or toll messages, thus delaying the purchase of additional facilities.

48.The Commission concurs with BC TEL in that the re-use of these facilities to handle the growth in other local traffic would result in savings by delaying additional capital expenditures. The Commission notes that BC TEL estimated the savings using engineering costs. The Commission considers that the expense savings should be estimated as consistent with the approach adopted for the determination of network expenditures, rather than reflecting engineering cost cash flows. Accordingly, the Commission has recognized the depreciation expense savings calculated consistent with the depreciation life characteristics approved in Decision 98-2.

Amount of Cost Recovery

49.The Commission has calculated the average impact for the company over the two years of 2000 and 2001 (the remainder of the price cap period), also allowing BC TEL a reasonable opportunity to recover costs that it will incur in 1999 in preparation for the implementation of the EAS proposal.

50.In light of the above, the Commission has determined that it will allow BC TEL to recover the incremental costs of $11.3 million (assuming no referendum is required) related to the expanded local calling proposal.

D) Other Matters

Passage Island - Comments of Small Islands Research Centre

51.Small Islands Research Centre submitted that the residents of the GVR, and more specifically those of Passage Island, who are serviced by Exchange Area Radio Telephone Service (EARS) should be exempted from the rate per minute for radio network usage for all calls within the GVR. Small Islands Research Centre submitted that this would result in toll-free calling within the GVR for EARS subscribers.

52.BC TEL stated that the per-minute airtime charges for EARS are, in fact, a component of the local rate structure for EARS customers and would not change with the implementation of TN 3894. If BC TEL's application is approved, residents of Passage Island would add Bowen Island to the list of exchanges which such residents could call subject to the flat rates and airtime charges set out in the EARS tariff.

53.The Commission agrees with BC TEL that the per-minute airtime charges set out in the EARS tariff are not long distance or toll charges.

Rate Centre Consolidation

54.CWTA, Microcell and Clearnet argued that the Commission should examine rate centre consolidation (RCC) at the same time as it considers BC TEL's application to expand the Greater Vancouver local calling area.

55.There are 19 exchanges affected by the expanded Greater Vancouver local calling area proposal. However, the Commission is of the view that the issue of RCC should not be addressed in this proceeding. The Commission considers that this issue would be more appropriately addressed in a proceeding involving telephone companies operating elsewhere in Canada.

Wireless Service Providers Contribution Surcharge

56.CWTA, Rogers Cantel Inc. and Clearnet supported decreases to the wireless per-circuit contribution surcharge to reflect the increase in the size of the new GVR local calling area. They submitted that Wireless Service Providers (WSPs) should not continue to pay contribution on assumptions that were based on the previous, smaller local calling area. CWTA noted that BC TEL and alternate providers of long distance services would no longer be paying contribution on minutes previously considered long distance minutes in the GVR as these would now be local minutes.

57.The Commission notes that the WSP surcharge was established in Decision 98-2, was based on a four-week study from June 1997 and was annualized for 1997.

58.The Commission also notes that there is no record of whether there is more or less contribution-eligible traffic now. In order to adjust the surcharge, the Commission considers that a new study would be required.

59.Accordingly, the Commission finds that it is not appropriate at this time to make any change to the WSP surcharge to account for the new GVR free local calling area.

Foregone Portable Local Subsidies

60.In Local Competition, Telecom Decision CRTC 97-8, 1 May 1997, the Commission determined that there should be a portable contribution approach in which all local exchange carriers (LECs) would have access to sources of subsidy and in which contribution would be provided to any LEC that serves a subsidized subscriber. The Commission was of the view that providing access to subsidy sources would substantially reduce barriers to entry by CLECs into high cost areas, thereby ensuring that the benefits of competition are made available as widely as possible.

61.Parties submitted that approval of BC TEL's application would remove a source of contribution revenues for local subsidies. Call-Net and AT&T Canada stated that this would have a negative impact on CLECs by reducing the amount of portable subsidy available to CLECs. Call-Net argued that approval would allow BC TEL to convert some of that subsidy into a source of local revenue available only to itself.

62.The Commission has reviewed the information provided by BC TEL in the December 1998 - January 1999 study period, the foregone subsidy to the central fund due to the expansion of the free local calling area in the GVR and the resultant subsidy per band per month.

63.The Commission estimates that the loss of subsidy per Network Access Service associated with the expanded local calling area is not material, and would not therefore have a material impact on the continued roll-out of local competition.

64.Accordingly, the Commission considers that no change is needed to the local subsidy mechanism at this time.

Conclusions

65.In light of the foregoing, BC TEL's current applications are denied. However, the Commission invites the company to file an amended application, with revised rates, based on the framework set out in this Order. In particular:

(a) BC TEL is permitted to recover $11.3 million (assuming no referendum is required) related to the expanded local calling proposal. In arriving at this reduced amount, the Commission is of the view that, if BC TEL were to adjust its proposed surcharges approximately in proportion to the amount of compensation determined above, surcharges can be proposed such that the monthly residential rate increases will be no more than $1.00.

(b) The Commission considers that if proposed rate increases for residence customers are in excess of $1.00, a referendum will be required consistent with the referendum guidelines set out in Decision 93-7. The Commission would require that, prior to implementation, a simple majority of subscribers participating in the referendum vote in favour of the proposal. The Commission would also require that BC TEL submit, for the Commission's prior approval, the proposed wording of the question(s) to be put before subscribers in the referendum. In the event that the amended proposal is accepted by customers, the Commission further considers that BC TEL should be compensated for the costs of the referendum.

Secretary General

This document is available in alternative format upon request and may also be viewed at the following Internet site: www.crtc.gc.ca

Dissenting Opinion by Commissioner Stuart Langford

I disagree with the majority's finding that it would be appropriate for BC TEL to provide extended local calling capability to the Greater Vancouver Region (GVR). Consequently, I disagree, as well, with the invitation to BC TEL to file an amended application shifting more of the financial burden for extending Vancouver's local calling area from the company's subscribers to its shareholders. I would have denied the application outright.

The joining of all residents and businesses in the GVR into one common local calling area may be both desirable and inevitable. If so, it will evolve as the product of competing market forces. To create it by Commission fiat at the behest of the GVR's predominant service provider is, in my view, precisely the wrong way to proceed. It deprives competitive service providers with ambitions to acquire and expand market positions in the GVR of a key strategic tool now available to them, the development of attractive local and long distance service packages intended to appeal to subscribers. If BC TEL is successful both in recrafting its application to meet the requirements stipulated by the majority and in persuading a majority of relevant subscribers to approve its proposal should a referendum be required, BC TEL's hold on its customer base living in the GVR will be made that much stronger.

Increasingly in Canada, new entrants are challenging still dominant former monopolies for market share. They do so, generally speaking, by offering customers what they see as more attractive telephone service packages. Sprint Canada, for example, recently announced a package giving customers the opportunity to telephone anyone anywhere in their province for $.10 per minute to a maximum of $20 per month. To allow BC TEL to eliminate all toll charges in the GVR is to provide it with a competitive advantage that other service providers may find difficult to match or improve upon. The anti-competitive fallout from such a decision may be felt both immediately and, quite possibly, for years to come.

One intervenor in this application, RSL COM Canada Inc. indicated that 15 short haul toll competitors would be put out of business instantly if BC TEL's application were successful. Such an outcome, were it to come to pass, hardly seems compatible with the Commission's competition policy.

Granted, competition is not the only goal underlying the Telecommunications Act or the pertinent regulations and precedents that form the basis of telecommunications policy in Canada. In paragraph 28 of the majority decision, reference is made to social and economic objectives. Paragraph 29 expresses the view that in this application such objectives "outweigh the anti-competitive concerns".

With respect, this comparative exercise is unnecessary. In this instance there is no need to weigh the benefits of competition against social and economic objectives. Given the facts underlying this application, there is no incompatibility between the two broad policy categories. Both can be realized by allowing market forces to run their course. The evolution of 19 separate telephone exchanges into one will certainly not proceed as quickly as it would if BC TEL is eventually allowed to establish a common local calling area following a re-application to the Commission, but the transition is virtually inevitable and, left to market forces, is less likely to come at a cost to any of Canada's telecommunications policy objectives.

It is competitive forces upon which this Commission has largely relied as it seeks to benefit end-users by moving this once monopolistic, once minutely regulated industry towards something more closely resembling a free-market environment. If this is the Commission's strategy, its vision of the future, as I believe it to be, then the majority decision may impede rather than enhance that strategy's effectiveness.

In my view, the fatal flaw with BC TEL's proposal, a flaw noted by a number of parties to this proceeding, is that it will impede rather than promote competition. I agree with this sentence in paragraph 11 of the majority decision: "They (competitors) stated that optional calling plans represent a better solution to expanding EAS and that forbearance from regulation of toll service should provide BC TEL with a unique ability to satisfy customer needs through optional plans." I sympathize with the frustrations 19 separate telephone exchanges in what is essentially one urban area must cause telephone users. In the long run, however, I believe that they and the competitive vision of the Commission will be better served not by further entrenching an already dominant service provider but by encouraging the market forces that will inevitably lead incrementally to the creation of one common local calling area for all GVR residents. Conceivably, such a gradual expansion could include those living on Passage Island who will not benefit from BC TEL's proposal along with their mainland neighbours.