Results of the Fact-Finding Process on the Role of Payphones in the Canadian Communications System

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26 February 2015

Summary

On 16 July 2013, the Commission initiated a fact-finding process to clarify the current role of payphones in the Canadian communications system. The purpose of this fact-finding process was to collect information on the extent to which Canadians rely on payphones, and the effects, if any, that further payphone removals and possible rate increases may have on Canadians. The Commission collected data and views from Canadians, community and consumer organizations, local and provincial governments, and payphone service providers. In addition to this report, the Commission had a third-party study prepared by RedMobile Consulting (the RedMobile Study) in order to evaluate the role of payphones in emergency preparedness, as well as alternatives to payphone service.

The results of this process clearly show that payphone service is a technology that is declining in usage and availability. When the Commission last reviewed access to payphone service in 2004, 50% of Canadians indicated that they had used payphones on occasion. Today, only 32% of Canadians indicated that they had used a payphone at least once per year. While many participants in the fact-finding process submitted that payphone service continues to fulfill an important role that has social benefits and is in the public interest, the service is not relied upon to the same extent as in prior years.

For the majority of Canadians who participated in this process, payphone service is an important complementary or convenience service and is valued because it provides public access to the voice telecommunications system that is

• unmetered for local and toll-free calls;
• pay-per-use; and
• able to accept coin payment.

Payphone service is generally used for reasons of affordability, access, and reasonable choice. It is sometimes used as a last resort in times of inconvenience and emergency. Payphone rate increases are viewed to have the greatest impact on Canadians who are economically or socially disadvantaged and who also appear to be the most frequent users of payphone service.

Overall, the annual payphone removal rate is expected to increase, from approximately 6% in 2008 to 15% in 2016, in response to declining usage and revenues. However, independent of payphone removals, annual payphone call volumes continue to decline at a higher rate of 24%.

Payphones with little or no usage continue to be maintained by payphone service providers. For example, in 2013, Bell Aliant Regional Communications, Limited Partnership and Bell Canada submitted that they were currently maintaining 636 payphones that have had no usage in the previous 13 months and 10,501 payphones with revenues of less than $0.50 per day during the same period. These particularly low-usage payphones account for 15% of the companies’ total payphone base.

According to the information provided by payphone service providers, the cost of providing payphone service exceeds revenues. In general, payphone service providers attribute the negative margins to the fact that payphones are currently over-provisioned with respect to present demand.

Payphone service providers demonstrated that it is not within their sole discretion to determine where payphone service is made available, since all payphones require contractual agreements with location providers (e.g. private businesses, public sector sites, and municipalities). The vast majority of annual payphone removals, on average 75%, are initiated by location providers and not payphone service providers for a variety of reasons.

This is not to suggest that payphones are expected to be entirely redundant in the foreseeable future. Payphone service providers have indicated that many payphones continue to be viable at current rates, and that these payphones will remain in service for the foreseeable future. As of 2016, it is expected that approximately 55,000 payphones will remain in service across Canada. Moreover, location providers have invested in alternatives to payphone service that include semi-public payphone service (i.e. the location provider pays a monthly fee to maintain the payphone terminal), public courtesy phones (i.e. a regular business telephone line with toll denial that is accessible to the public), and, in some instances, competitive payphone service. A few payphone service providers have also converted traditional payphones into “courtesy payphones” by disabling the coin feature to allow community members free access to local, toll-free, and 9-1-1 calls. According to the payphone service providers, they have yet to remove the last payphone in any community.

Some payphone service providers in other countries have reported that payphones are being repurposed to make them more attractive to a wider audience (e.g. by adding Wi-Fi hotspots or leveraging advertising to increase revenues). Such attempts in the past by Canadian payphone service providers have been limited and unsuccessful.

Regulatory context

Payphone service in Canada

Payphone service provides Canadians with access to public telephones for the purpose of making local, toll-free, and long-distance calls, and is offered at various indoor and outdoor locations throughout Canada. Payphone service is offered by incumbent local exchange carriers (ILECs), competitive local exchange carriers, and competitive payphone service providers. Payphones accept various means of payment including coins, credit cards, calling cards, or prepaid phone cards. Some payphone calls, such as 9-1-1 and calls to toll-free numbers, are free of charge to the user.

Competition

Prior to 1998, payphone service was provided only by ILECs within their respective operating territories. At that time, payphone service was considered to be a valuable complement to basic telephone service, and the Commission encouraged the ILECs to ensure the widespread availability and accessibility of payphone service at affordable rates. In Telecom Decision 98-8,^{Footnote 1} the Commission established a regulatory framework that allowed for competition in the local payphone market to stimulate service innovation and increase customer choice.

In that decision, the Commission considered that ILECs would remain dominant in the local payphone market for the foreseeable future. Today, ILECs continue to be the primary providers of payphone service across Canada and, as a result, the Commission continues to regulate the ILECs’ local payphone rates under the price cap regime.^{Footnote 2}

Rates

Currently, ILECs have the flexibility to charge up to a maximum rate of $0.50 for a local cash call, and up to a maximum rate of $1.00 for a local non-cash call. Long-distance charges are unregulated for all payphone service providers.

Access

The Commission last reviewed access to payphone service in Telecom Decision 2004-47.^{Footnote 3} The Commission concluded at that time that although demand for payphone service was declining, it was still an important public service that wireless services had not yet rendered obsolete.

The Commission found that although wireless service could be considered an alternative for many consumers, it was not an affordable option for all. In 2004, the wireless penetration rate was measured at 58.9%.

Access to payphone service was also seen to be particularly crucial in rural and remote communities, where consumers may not have access to basic and residential service and where telecommunications service providers may not offer wireless service. Accordingly, the Commission determined that it was necessary to impose a notification requirement for when the last payphone in a community is targeted for removal. The notification requires

• a 60-day written notification to the location provider and to the local government;
• a notice posted on the payphone scheduled for removal at least 60 days prior to removal; and
  • The notice must clearly indicate the pending removal in large enough format to attract users’ attention and must include the date of removal, the ILEC’s name, address, and toll-free number, as well as directions to, and the location of, the nearest payphone.
• a notice placed in the local newspaper at least 60 days prior to removal.

At the time, the Commission recognized the difficulty in precisely describing what constitutes a community when applying the above-mentioned notification requirement. The Commission noted that the ILECs have established geographic administrative areas within their territories, which are used to define local exchanges. Within an exchange, there are one or more wire centres. The Commission considered that, as a minimum rule, the ILECs must undertake public notification in all cases where the last payphone in the area served by a wire centre is to be removed.

The public notification requirement currently applies only to Bell Aliant Regional Communications, Limited Partnership (Bell Aliant); Bell Canada; MTS Inc. (MTS); Saskatchewan Telecommunications (SaskTel); Télébec, Limited Partnership (Télébec); and TELUS Communications Company (TCC).

Scope of the fact-finding process

Telecom Notice of Consultation 2013-337

On 16 July 2013, the Commission issued Telecom Notice of Consultation 2013-337,^{Footnote 4} in which parties were invited to provide data and evidence, including social, economic, and geographical factors, on the following topics:

• the extent to which Canadians use and rely on payphones;
• the purposes for which Canadians use payphones (e.g. basic, complementary, convenience, and emergency);
• the demographic profile of Canadians who rely on payphones;
• the availability of payphones [including payphones equipped with teletypewriter (TTY) capabilities] to meet Canadians’ needs;
• the impact of payphone removals on Canadians;
• the impact of past or potential payphone rate increases on Canadians’ usage of payphone service; and
• the barriers that Canadians may experience in accessing payphone service.

The Commission also invited parties to provide comments and evidence on whether there are other technologies and services that are substitutes for payphone service, and, if so, the extent to which they meet the needs of Canadians who use payphones.

The Commission received more than 400 interventions from individuals; municipalities; consumer and community organizations; the Yukon Government; the Minister of Manitoba Healthy Living, Seniors and Consumer Affairs; and all ILECs that were made party to the above-referenced notice of consultation. The record of this process is publicly available. A list of participants is available in Appendix A of this report.

In addition to the topics listed above, the Commission obtained observations from parties to this proceeding relating to

• operating observations;
  • declining call volumes
  • flexibility for payphone removals and installations
  • installation and removal considerations, and
  • other challenges
• alternatives to payphone service;
• modernized payphone service; and
• the importance of local coin calls.

Further, the Commission reviewed payphone service in other countries and had a third-party study prepared on the role of payphones in emergency preparedness, as well as alternatives to payphone service (the RedMobile Study).

Telecom Regulatory Policy 2013-708

At the time of the launch of the fact-finding process, the Commission considered that it was not clear whether its policy on the removal of the last payphone in a community continued to ensure access to payphones to meet the requirements of Canadians. Consequently, the Commission initiated a consultation in Telecom Notice of Consultation 2013-338^{Footnote 5} to consider whether it should prohibit all ILECs, on an interim basis, from removing the last payphone in a community pending the conclusion of its fact-finding process. The Commission announced a moratorium on the removal of the last payphone in a community in Telecom Regulatory Policy 2013-708.^{Footnote 6} The record of the Telecom Notice of Consultation 2013-338 proceeding is also publicly available.

Both the fact-finding process and the moratorium were initiated as a result of Telecom Decision 2013-336,^{Footnote 7} in which the Commission denied an application from Bell Aliant, Bell Canada, and Télébec to increase the price ceiling for local payphone rates.

Key observations

Note: For the purpose of this report, “Consumer views” refer to the views of consumer organizations, community organizations, provincial and municipal representatives, and individuals. “ILEC views” refer to the views of the ILECs made party to this process. “Wireless service” refers to mobile wireless service.

Stakeholder views

The extent to which Canadians use and rely on payphones

Consumer views

All consumer parties recognized that payphone demand is not the same as it was in prior years. The Public Interest Advocacy Centre, the Consumer’s Association of Canada, and the Council of Senior Citizens’ Organization of British Columbia, (collectively, PIAC et al.) submitted a quantitative study entitled Payphone Use in Canada: 2013 (the PIAC general study). According to this research, which came from a survey of 1,001 adults aged 18 and over living across Canada, 32% of respondents stated that they had used a payphone at least once in the past year. When similar research was conducted for the Commission’s last review of access to payphone service in 2004, 50% of respondents had answered that they had used payphone service at least on occasion in the past year.

All consumer parties submitted that the general decline in payphone demand should not, however, be interpreted to mean that payphones are declining in importance for all Canadians. Consumer parties rejected arguments that wireless service is a substitute for payphone service, particularly for Canadians who are economically disadvantaged. These parties submitted that access to payphone service continues to fill gaps in the communications system that wireless services do not fill.

• For those who are facing economic hardships or who are a part of socially vulnerable groups (e.g. the homeless, those suffering from mental illness, and victims of abuse), payphones play a critical role in facilitating communication with government, employment, social, and medical services.
• The importance of payphone service is not limited to economically and socially disadvantaged Canadians. Payphones continue to serve the needs of Canadians in rural areas that experience sporadic wireless service; Canadians who choose not to own a mobile device; Canadians whose mobile device has failed; and Canadians in distress because either wireless or wireline service is inaccessible due to power outages or weather-related events.

Consumer parties, community organizations, and individuals indicated that locating a working payphone is, however, becoming more difficult.

I really need payphones. I am on a low pension and have MS. I need to use a payphone to call a friend to pick me up from doctors’ appointments. I am unable to afford a cellphone. If I could get one, I could put ten dollars on it and use it whenever I need, it would be great but you have to keep adding money to it every month and there is the cost of buying the phone. I am finding it hard to even find a payphone anymore. I have to go to the hospital and it is a long walk to the only one they have and walking is a problem for me. Not everyone makes thousands of dollars and I only get $16,000 a year and with rent of $915.00 a month. Every dollar left is for food.

ILEC views

All ILECs submitted that Canadians are relying less and less on payphones to make calls, and attributed this trend to the increased adoption of wireless services and preferences for on-the-go and varied communication tools [e.g. email and short message service (SMS), as well as messaging and voice over Internet Protocol (VoIP) apps]. In their view, Canadians have developed an expectation that their personal telephone service should be accessible not only while at home or another fixed location, but that it should be a portable service that can be used from nearly anywhere.

Bell Aliant and Bell Canada submitted that in 2004, the wireless penetration rate in Canada was measured at 58.9%,^{Footnote 8} leaving many areas of the country without reliable access to wireless service. At that time, devices were simple mobile telephones, capable of only basic calling and texting functions. As of 2012, 99.4% of the Canadian population has access to wireless service, including 72% of Canadians who have access to long-term evolution (LTE) wireless networks.^{Footnote 9}

The purposes for which Canadians use payphones

Consumer views

In the PIAC general study, of those who responded “yes” to using a payphone in the last year, 61% made calls in situations where they were unable to use a mobile device. For those who earned less than $30,000 per year, payphones were most used for casual personal calls and calls to transportation services.

PIAC et al. also submitted a qualitative study entitled Payphone Use Among Low Income and Socially Vulnerable Canadians (the PIAC LISV study). According to this research, in which 22 front-line community workers working directly with low-income and socially vulnerable individuals were surveyed, wireless services are widespread. However, the ability to continuously maintain wireless service can be difficult for affordability and credit reasons.

PIAC et al. further submitted that many Canadians who are low-income earners subscribe to metered prepaid or time-restrictive mobile plans with rates that are considerably higher during the daytime. Consequently, these individuals use a collection of tools, including payphone service and courtesy phones, to meet their basic telecommunications needs. Payphone service is a relied-upon tool used in these scenarios:

• when minutes of users’ prepaid wireless service run out;
• when making long-distance calls with toll-free calling cards;
• when placing collect calls;
• in situations where anonymity is required (domestic abuse, individuals in crisis, etc.); and
• when making calls to government service agencies, offices that are open during weekday hours, or other toll-free calls that may entail lengthy wait times and/or lengthy conversations.

My pay as you go cellphone plan with Presidents Choice charges .50 a minute for long distance. As I only call my Mom in Thunder Bay, I use a calling card at .04 a minute and call her from a phone booth every other day. I would have to lock into a more expensive long term contract if there were no easily available public phones…

Many [clients] have debts to Telus etc. and can’t afford a landline. They often have cellphones, but can’t afford to top them up and sometimes shut them off to save money. Some check in with us regularly by payphone and we have no other way to be in touch with them…a big reason to use payphones is because of the VERY long wait to get through to government offices. If one of my clients makes a call to a government office (e.g., EI) and has to wait 35 or 48 minutes, they can blow their entire phone budget while on hold. If my client knows there will be a long wait, they will often search out alternative phones, such as payphones, to complete these calls.

ILEC views

All ILECs submitted that payphones were intended to provide a convenience service and not basic service. Given Canadians’ increased adoption of wireless service and data applications, the need and utility of payphones has lessened dramatically. In the case of a time-sensitive emergency, many ILECs noted that the user is more likely to locate a stranger or business with a functioning telephone service than to locate a payphone.

The demographic profile of Canadians who rely on payphones

Both consumer parties and ILECs noted that Canadian penetration rates for wireless and wireline service indicate that wireless service reliance is the highest among the lowest-income quintiles. However, based on the PIAC LISV study, qualitative evidence indicates that Canadians who are low-income earners are also the most frequent users of payphone service because it is a valuable complement to basic wireless plans in certain instances.

Consumer views

Consumer parties pointed out that the lowest quintiles have the highest subscriber rates for wireline-only service as well. For many Canadian families, multiple wireless subscriptions per household are often not feasible for affordability reasons; thus, it is more economical to subscribe to wireline service which, because it is unmetered, can be shared among all family members on multiple telephone lines. For these individuals, payphones are relied upon for communications purposes outside the home.

I don't have a cellphone and neither do my children as I can't afford to provide that for each member of my family. I use a payphone at least a few times a month and think that they are definitely a safety item. I would support a law prohibiting retailers from removing payphones and a requirement for new development, like Walmart or grocery stores to provide at least one.

I speak as a mother of four children. We are a low income family with two working parents. Two of our children have part time jobs. One pays for a cellphone himself but the other chose to spend her earned money on school and other priorities. We cannot afford to provide cellphones to our children. We do however have a phone plan which allows our children to call home from anywhere in North America from a payphone, or any phone, using a 1-800 number. This has been invaluable to their safety in situations. For example, my 18 year old daughter finished work and missed the last bus home. She was locked out of the bus depot and was able to call us from a payphone and wait at a restaurant for a ride. (She travelled 40 km for her part time job) I truly feel public payphones are necessary for public safety and are currently used by those who cannot afford a cellphone or land line. I feel it would be discriminatory against the poor to remove public payphones.

Consumer parties also noted that not all Canadians who use payphones are economically disadvantaged. Canadians who live in rural and remote areas with “patchy” wireless service, as well as Canadians who choose not to obtain wireless service, continue to view the widespread provision of payphones to be in the public interest.

I live on Vancouver Island - north of Campbell River there is no cellphone service - and I am sure this is the case for many northern/remote areas of our country. Having reasonable, inexpensive access to phones for all Canadians should be a guaranteed service these companies provide. To keep in touch with family while travelling recently I had to abandon my smartphone, buy a calling card and find phone booths. Despite the expense, the opportunity saves lives (I wondered how on earth would I have gotten help if the car broke down…), keep people in contact, please keep payphones for airports, remote communities, people who do not use cellphones or computers.

My husband and I, Canadians in our 30s who live in a major Canadian city and are heavy computer users, are both in support of ensuring there are payphones. We do not have cellphones by choice. When we move homes (Internet and home phone service interruption) or are traveling, we rely on payphones. Payphones are important in the case of emergencies. We are worried that there are fewer payphones available to Canadians.

La Coalition pour le service 9-1-1 au Québec submitted that payphones continue to play an important role in emergencies for persons of all socio-economic status, particularly in Quebec where wireless penetration rates are lower than in the rest of the country. A payphone is useful for emergency purposes during an extended power outage, in communities where wireless service is not offered, where telephone service is unavailable (e.g. subways), for individuals who by choice do not have a mobile phone (e.g. for economic reasons), to contact emergency services discreetly and anonymously, and for travellers who are visiting from abroad.

DiversityCanada Foundation, as well as several individuals, also noted the relevance of payphone service to Canadians of all socio-economic groups in emergencies, such as natural disasters, or in instances where mobile networks have failed.

ILEC views

Most ILECs submitted that no direct data was available on the demographic profile of Canadians who rely on payphones.

Bell Aliant and Bell Canada noted that, within their operating territories, payphones are only designated to place outgoing calls and are unable to receive incoming calls. Therefore, it is very difficult for Canadians to rely on payphones as a substitute for a personal wireline or wireless service. The inability to receive calls does not allow consumers to respond to calls from potential employers or other service representatives. They noted that the assumption that payphone service cannot be relied upon for basic service has been recognized by anti-poverty organizations.

As an example, Bell Aliant and Bell Canada submitted that the B.C. Welfare Food Challenge, an organization that advocates for increases to British Columbia welfare rates, has developed exemplary budgets for welfare recipients in that province. In these budgets, the organization has considered a cellphone to be an essential monthly expense for welfare recipients to enable them to look for work.

The availability of payphones [including payphones equipped with teletypewriter (TTY) capabilities] to meet Canadians’ needs and the impact of payphone removals on Canadians

Consumer views

In the PIAC LISV study, many front-line workers expressed concern about payphone removals. However, some respondents believed that there were already so few payphones available in their communities that the impact of total payphone removals would be minimal. Respondents noted that, in some cases, the lack of payphone availability drives lower-income individuals to greater cellphone use by virtue of simple necessity.

In particular it is very distressing to not be able to locate a working payphone when you need assistance out in the community. There is almost an assumption that everyone has a cellular phone, and people who do not have cellphones are somehow stigmatized.

Many individuals expressed the same concerns and frustration, noting that locating a working payphone is becoming more challenging.

There is a negative effect to removal of payphones. Right now in Vancouver payphones are very few and some have receivers with cut wires which makes them useless. I am unemployed and don't have the funds to pay for the exorbitant costs of mobile phone use and when I'm out and about I use a payphone if I can find one, which isn't often. It's my only form of communications away from my home.

The Canadian Association of the Deaf recognized that the decline in the role of payphones is inevitable and irreversible. However, the fact that pay TTYs continue to be maintained by Deaf service agencies and schools - where Deaf people and especially lower-income Deaf people congregate - suggests that they are being used in these locations in sufficient numbers to justify their existence. There has been, and still is, at least implicitly, sufficient demand to rule out pay TTY removals from these locations. Payphones equipped with TTY capabilities are especially important for Deaf Canadians who cannot afford wireless service or Internet.

Le Centre québécois pour la déficience auditive submitted similar views, noting that costs of providing payphone service could be reduced by minimizing the number of payphones in one particular location rather than augmenting local rates, which would have negative effects on consumers who continue to use this service regularly.

Jim Rondeau, Minister of Manitoba Healthy Living, Seniors, and Consumer Affairs submitted that vulnerable individuals and families will be among the hardest hit by the removal of payphones, including those living on low incomes and receiving social assistance. In the 32 Manitoba Aboriginal and Northern Affair communities, payphones are a scarce resource. Further, replacing payphones with cellphones is not feasible in these communities as there is limited cellular coverage, which many low-income families cannot afford. For cost and accessibility reasons, it is very common for Northern residents to purchase long-distance cards for use on a payphone. The removal of payphones may create further barriers to vital services and supports, reduce capacity for self-reliance, and contribute to the marginalization and social exclusion of low-income individuals and households.

The Yukon Government expressed similar concerns, noting that payphone access may be more acute in Yukon, and elsewhere in northern Canada where wireless service may not be available or is unreliable. The economic and geographic realities of remote and rural communities mean that the opportunity for the competitive provision of any service, including payphone service, is limited or non-existent, which accentuates reliance on Northwestel Inc. (Northwestel) as the primary provider of payphone service in the North.

The Consumer Association of Saskatchewan submitted that it is not always practical to seek out a courtesy phone, as many people or businesses are reluctant to allow others to use their phones.

ILEC views

The ILECs argued that Canadians are choosing not to use payphones. The overall decline in demand for payphone service is attributed to consumers “voting with their feet.” Bell Aliant and Bell Canada submitted that projected negative margins are attributed to the fact that payphones are currently over-provisioned with respect to present demand, and that the full base of payphones that was originally provisioned to meet a much greater level of demand from a pre-wireless world is no longer required.

Bell Aliant and Bell Canada submitted their operating data, which indicated that payphone call volumes in Ontario and Quebec have decreased at a rate of 19%, on average, from 2008 to 2013. At the same time, the number of payphones has decreased at a rate of only 5%, on average, during the same period, thus demonstrating that payphone call volumes are dropping significantly each year on an independent basis, regardless of the removal of certain payphones.

Note:  Average in-service payphones and call volume, consisting of local, non-local, 1-800 and directory assistance calls, reflect the total aggregated actual data from 2008 to 2012, and the 2013 forecast for Bell Aliant and Bell Canada in their Ontario and Quebec operating territories, as provided in Attachments 1 and 2 of the response to the interrogatory entitled The Companies(CRTC)16Jul13-103 TNC 2013-337.

Other ILECs submitted similar views. TCC noted that, while some decrease in call volumes can be attributed to payphone removals, substantial decreases in calls per payphone are noted (i.e. for payphones that remain in its operating territory, the volume of usage is still deceasing). In 2012, a payphone in TCC’s operating territory was used, on average, to make only 2.36 calls per day.

The impact of past or potential payphone rate increases on Canadians’ usage of payphone service

Consumer views

All consumer groups indicated that rate increases, particularly for local coin calls, would marginalize Canadians who earn lower incomes and have greater sensitivities to costs. According to the PIAC LISV study, Canadians who earn lower incomes have greater sensitivities to costs and tend to use a collection of communications tools and services as they attempt to meet their needs. For these consumers, payphones provide an important and affordable tool to communicate.

A few individuals submitted that they would support a rate increase to ensure guaranteed access to payphones.

I am a disabled mother of 5 living on CPPD disability. We can barely afford our rent and utilities… My family owns ONE prepaid phone, and enough money is kept on it only for emergency (10 dollars per month). We cannot afford to actually 'use' it for real communication purposes…

As my husband is primary caregiver to me as I am mostly bedridden, he often needs to check in during the day to discuss things like groceries or banking, duties which he is out in the 'real world' doing. We live on an island, in rural Ontario, and days in 'town' (i.e. for groceries and such) require significant time planning. Also, our teenage son (who hates not having a smartphone) needs to use the payphone at the ferry to let us know when to come and pick him up. When [the rates] doubled from 25 to 50 cents, it was noticed in our budget. If you go to $1.00, it will only reduce our disposable income further…

We budget tightly every month, and often have to access food banks. (Nevertheless, we have two university graduates and three post secondary students; no stereotyping here please, and I was a medical researcher working at a large Canadian university before my illness and disability)… We are already struggling under difficult financial times, but Bell's profits are so staggering that it makes no sense that they 'need' such revenue…

Finally, we do note that most of the payphones we go to now are BROKEN and UNSERVICED, another ploy to let the payphone die. Not everyone enjoys a middle class life; many of those who enjoyed middle class life are now suffering a life of increasing poverty. You need to keep this demographics’ interest in mind when making this, purely for profit, decision.

My wife is a disabled wheelchair user. Nobody in the family drives. Access to a taxi service is essential and cellphones are beyond our pockets. In most places, we either ask staff to call for us (not always practical…); use the direct free phones linked to the taxi companies or call from a payphone when there's no direct phone. There are times when a payphone is the only available option.

There's certainly a case for increasing the 25c charge. But to have to get taxis for reasons of disability is bad enough. To pay extra taxi fees due to the caregiver (additional passenger) and the van necessary to ensure room for the chair and THEN have to pay $1 for each call on top (sometimes a second or third call is needed for non arrival) is just too much.

Many of the people who really need payphones are those who do not have the means to make a submission to you: homeless people and people who cannot afford internet service. They and those who cannot afford a minimum $15 a month for basic cellphone service, such as myself, need payphones. We may not use payphones often, but when we do, the need is urgent, for example, calling 911, calling a taxi, contacting a potential employer, calling local transit for information…

I am in a lower income situation as are many people in my neighbourhood in Mimico. I do not own a cell. My only way of contacting family, friends, emergency calls are by public telephone when not at home. If those phone calls increase in price or are removed, how does one make those important calls without a public telephone and still make it affordable? I find it upsetting the nation assumes "everyone" owns a cell. I do not, could not afford it even if I wanted one…

Like many people of my generation (62), I have no need for a cellular telephone. Well, I didn't until the only [payphone] in Oilphant was removed last year. This was done because cellular service had apparently improved. Because service on the offshore islands is rarely usable, we relied on the on-shore pay phone. I don't object to the cost going up to $1. However, there is no argument for a $1 surcharge for using plastic. It costs the phone company far less to process card charges than it does to collect and deal with the coins.

ILEC views

ILECs were generally unable to assess the impact that past rate increases have had on Canadians’ usage of payphones or to predict what the impact would be if rates were to be increased in the future.

When rates were permitted to increase in 2007, Bell Aliant and Bell Canada noted that a localized decline in payphone service was experienced that can likely be attributed to the payphone rate increase; however, they were unable to determine whether the rate increase resulted in any ongoing impact.

TCC submitted that it does not consider the price of a call to be a true barrier to accessing payphones. The affordability of payphone calls has always been part of its considerations. While it is possible that for some persons, a $0.50-per-call rate might seem expensive, the fact remains that regulated firms must be given a reasonable opportunity to recover the cost of providing service. Payphone service is in massive and irreversible decline because consumers have chosen to meet their on-the-go communications needs by other means. The best option, in these circumstances, is to preserve the current payphone regime without changes.

The barriers that Canadians may experience in accessing payphone service

Consumer views

All consumer parties submitted that the most common barrier to accessing payphone service is payphone removals.

DiversityCanada Foundation further submitted the following as specific barriers that Canadians may experience: no payphone in close proximity to their home; no or few payphones to accommodate special needs (i.e. TTY); payphone locations that are inaccessible at certain hours of the day because the building in which payphones are housed is closed; inadequate lighting; surroundings that are perceived to be unsafe; vandalized payphones that are not fully functional or not operational at all; and poorly maintained or unsanitary payphones.

ILEC views

ILECs submitted that the barriers to accessing payphone service are minimal and the same as they have always been: buildings that are not open 24/7 and vandalized payphones that render the service unavailable.

Technologies and services that are substitutes for payphone service and the extent to which these services meet the needs of Canadians who use payphones

Consumer views

Consumer parties rejected arguments that wireless service is a complete substitute for payphone service.

PIAC et al. submitted that for users on a strict budget, wireless services present significant challenges in a variety of circumstances. Most wireless services meter usage. The rate at which lower-cost wireless service is typically sold provides usage for a fixed number of minutes over a set interval of time (for example, monthly). Wireless customers also typically pay for airtime for incoming and outgoing calls. Usage that exceeds the specified allowance is then typically billed at a per-minute rate, which is often higher than the assumed per-minute rate for usage included in the customer’s monthly service rate.

Calls for medical or other appointments, to government service agencies, for assistance in locating employment, to arrange for transportation, for legal services, to toll-free numbers for a wide range of services, etc., which may entail significant on-hold times or lengthy conversations, effectively render mobile service a potentially unaffordable luxury. In many instances, a consumer can quickly consume the allotted calling time associated with a wireless service if the consumer uses his/her wireless service for such calling.

L’Union des consommateurs (l’Union) submitted that payphones are an affordable and reliable form of access to the communications system. L’Union emphasized PIAC et al.’s view that as access to payphone service continues to diminish annually, Canadians who are struggling are at risk of being “left behind” and further marginalized by the effects of the digital divide.

Consumer parties submitted that the Commission should consider permanent regulation against the decommissioning of an adequate supply of payphones. PIAC et al. suggested that the provision of payphone service could be an element of the incumbents’ basic service obligation in the Commission’s upcoming basic service review proceeding. L’Union and DiversityCanada Foundation noted that the provision of payphones falls under the universal service obligation in other jurisdictions. 

ILEC views

ILECs submitted that many alternatives are widely available to Canadians, including the following: prepaid plans; pay-as-you-go; courtesy phones; short message service (SMS); data messaging apps; email; free Wi-Fi at coffee shops, libraries, and other establishments; and VoIP applications.

ILECs submitted that wireless products, services, and offerings will continue to evolve to meet the needs of all Canadians.

Operating observations

Declining call volumes

Data submitted by ILECs indicated that some payphones are simply not used at all by Canadians, or are used only on the rare occasion, and that therefore, the estimated costs of providing payphone service currently exceeds revenues across all providers. For example, in 2013, Bell Aliant and Bell Canada submitted that they were currently maintaining 636 payphones that have had no usage in the previous 13 months, and 10,501 payphones with revenues of less than $0.50 per day during the same period. These particularly low-usage payphones account for 15% of their total payphone base. Bell Aliant and Bell Canada submitted that low-usage payphones are prioritized for removal in the following types of locations because alternatives to payphone service are easily available or are not required:

• educational institutions of all types in both rural and urban settings (universities, high schools, elementary schools, etc.);
• rural churches, nursing homes, apartment buildings, and recreation sites; and
• urban recreation sites.

Given that payphone demand and revenues are declining annually, ILECs have forecasted payphone removals to accelerate. Although some decline in call volume can be attributed to payphone removals, the number of calls per payphone is declining on an independent basis and at a significantly higher rate. However, this is not to suggest that all payphones are unprofitable. The ILECs submitted that many payphones generate sufficient revenues to cover their costs at current rates and that these payphones will remain in service for the foreseeable future. The following graph reflects data provided by the ILECs.

Sources: Bell Aliant, Bell Canada, MTS, Northwestel, SaskTel, Télébec, and TCC

Flexibility for payphone removals and installations

All ILECs submitted that flexibility is required in determining where payphone service is made available. The placement of any payphone requires entering into contracts with location providers that represent both private sector entities (e.g. entities that own retail locations, commercial buildings, hotels, gas stations, and entertainment venues) and entities, such as municipalities, that own/manage public sector sites (e.g. provincial and federal government buildings, hospitals, transit/subway/rail/bus stations, and airports).

ILECs stated that location providers are critical in the provision of payphone service because they provide essential floor or street space and appropriate lighting. In some cases, location providers assume additional responsibilities, such as cleaning the telephone and enclosure, providing electricity, reporting service problems, and assisting customers with change or dialing problems.

According to the ILECs, the vast majority of annual payphone removals, on average 75% of all payphone removals, are initiated by location providers and not by ILECs for a variety of reasons, including

• business closures, renovations, and reduced commission payments due to lack of usage;
• a preference to offer courtesy telephones and/or free Wi-Fi instead of payphone service;
• reductions in the total number of payphones on site (e.g. removals of payphones from banks or from multiple locations within a single building); and
• a desire to minimize unwanted traffic (e.g. loitering, illegal activities, and acts of vandalism).

For example, the City of Barrie recently stated its intention to remove certain payphones in its downtown core. City councillors voted to remove the payphones because of reports that they were being used for illegal activities and were encouraging loitering, which was having a negative impact on local business owners. It was noted that other payphones would still be available at the nearby bus terminal.^{Footnote 10}

Installation and removal considerations

Beyond anticipated or actual usage and requests from location providers, the ILECs consider multiple variables relating to market considerations for each location to determine if a payphone should be installed or removed.

Installation considerations (for an existing location provider)

Overall value of the entire contract with the location provider; average revenues/profitability of existing payphones at the location requested; location and proximity of the new payphone to existing payphones; potential for the new payphone to become profitable (e.g. expected usage) without impacting usage on the existing telephone base at the location in any significant way; expense impacts of placing the payphone at the location desired (e.g. assessing if the location is prone to vandalism, which would result in increased expenses); forecasted installation costs and return on investment; and increases in business activity for the location provider (e.g. expansion, new locations, or new area of the business).

Installation considerations (for a new location provider)

Type of business as compared to experience with similar types of businesses within the same industry; reasons for the request; accessibility of the payphone (e.g. hours of operation of the business, is the business seasonal or year round); size of the business and the potential volume of payphone users; legality (is the requester the property owner or the business owner); the availability of wiring, electrical service to power the payphone, and lighting; and the availability of wireless service in the community.

Removal considerations

Revenues generated and usage; profitability (considering factors such as revenue, repair costs, hydro, maintenance costs, and vandalism); proximity to the nearest payphone; location (indoors or outdoors); needs of the location provider (e.g. requests to reduce the number of payphones at one location versus all payphones); and the availability of wireless service in the community.

Alternatives to payphone service

In the case that a payphone removal is initiated by an ILEC because of non-usage or low-usage, location providers are offered the option of semi-public payphone service, which allows the payphone terminal to remain on the premises in exchange for a monthly fee paid by the location provider.

Payphone removals that are not offered the option of semi-public service occur in instances of excessive vandalism, excessive repair costs, or damage to booths due to vehicular accidents, whereby the maintenance or replacement costs have been deemed excessive. 

If the location provider requires an alternative for an indoor location, but does not want to maintain the payphone terminal, the ILEC can provide a courtesy phone. A courtesy phone is defined as a regular business line service equipped with toll denial and is paid for by the location provider.

On occasion, small ILECs may also consider converting existing payphones into courtesy payphones. For example, WTC Communications and Tuckersmith Communications, in consultation with the communities in their operating territories, have turned off the coin-collection mechanism in certain payphone units and now offer free local calls and access to 9-1-1 in recognition of the fact that public telephone service is an important feature of local community life.

Location providers also have the option of seeking a competitive payphone service provider. For example, WiMacTel, an independent telecommunications company based in California and Calgary, recently announced that it has acquired refurbished payphone assets from the U.S. and Canada, and now offers payphone service in British Columbia, Alberta, Quebec, and Ontario. It differentiates itself from ILECs by offering location providers more attractive contractual agreements and business models.^{Footnote 11}

Evidence indicates that location providers have invested in the above-mentioned alternatives. For example, TBayTel, which operates approximately 375 payphones in northern Ontario, submitted that approximately 60% of its payphones are classified under semi-public payphone service.

For some location providers, including government institutions and community organizations, whose payphone traffic is not expected to be high but where publicly accessible telecommunications is needed, a courtesy phone is often viewed as a more cost-effective and efficient solution.

Other challenges

MTS, like many other ILECs, submitted that although it has removed more than 25% of its total payphone base during the last five years, it has never removed the last payphone in a community. While all attempts to avoid the removal of the last payphone in a community will be exhausted, other factors must be considered, such as the lack of adequate facilities or power to maintain older payphones, and the inability to find alternate locations in a community.

SaskTel noted that there are challenges with repairing and maintaining Millennium payphone platforms, since there are currently a very limited number of vendors still providing access to the supply of spare parts and specialized software required to service these payphones.

The Canadian Independent Telephone Company Joint Task Force, on behalf of the small ILECs, submitted that, without subsidy, it is only prudent to allow small providers the ability to exit lines of business that are no longer profitable.

Modernized payphone service

Consumer views

Many consumer groups recognized the challenging business case for payphones and suggested that ILECs take initiatives to improve their profits by making payphone service more attractive to a wider range of users, including wireless subscribers. Media reports have indicated that some metropolitan cities are “re-inventing” their public access telecommunications systems (e.g. modernizing their payphones to include the functionality of Wi-Fi, and generating revenues from advertising). The examples they submitted include the following:

• In New York City (U.S.), city authorities recently announced the revival of payphones to include the functionality of free Wi-Fi, as well as an interactive portal for information, goods, services, and an open infrastructure for future applications.^{Footnote 12}
• In Boston (U.S.), city authorities are trying to maximize the utility of payphones by generating advertising revenues and offering free Wi-Fi in high-traffic areas. City officials are also hoping to install Wi-Fi payphones in low-income neighbourhoods, where not all residents can afford to pay for Internet service.^{Footnote 13}
• In Melbourne (Australia), PieNetworks, a marketer of Internet kiosks, is working with Telstra to provide Internet-capable payphones in high-traffic and urban areas, such as shopping centres and airports.^{Footnote 14}

ILEC views

The ILECs submitted that initiatives to leverage technological enhancements in Canada have been attempted in the past with no success. For example,

• Bell Canada introduced text messaging payphones and multi-media terminals that provide access to the Internet. Initially, these initiatives were successful; however, consumers’ preference for personal Internet-capable devices lessened usage of these alternatives to the point where all units have now been decommissioned.
• SaskTel experienced similar issues. In 2008, Wi-Fi hotspots were offered as part of its payphone portfolio and were installed in high-traffic areas (airports, truck stops, campgrounds, etc.). The decision to exit the Wi-Fi hotspots service was made after numerous businesses requested that the hotspot be removed due to the installation of their own Wi-Fi offerings.

Other ILECs did not consider repurposing their payphones to be economically viable.

The importance of local coin calls

Approximately 10% of in-service payphones do not accept coins.^{Footnote 15} Consumer parties recognized that payphone providers could in fact reduce service capabilities by eliminating the option of coin payment, or alternatively, by beginning to meter calls. Consumer parties indicated that this would significantly burden consumers who rely on payphones, since the pay-per-use and unmetered features of payphone service are their most attractive features.

Other countries

Decline in payphone demand is a global trend that has resulted in various developments. The Commission has assembled the following chart to identify notable differences between the payphone systems in other countries and in Canada.

The RedMobile Study

In recognition of concerns expressed over payphone availability for emergency purposes and about the availability of alternatives to payphone service, additional research was commissioned by Commission staff to assess these issues. The full RedMobile Study is publicly available today. Outlined below are some notable findings.

The role of payphones in emergency preparedness

While payphones offer the benefits of reliable location data and resiliency in disaster situations, the functionality provided by payphone terminals during power outages may be limited. Contrary to consumer beliefs, newer types of payphone terminals, which represent upwards of 65% of all payphones, have limited functionality during power outages. While all payphones have access to 9-1-1 emergency services when there is no power to the terminal, other types of calls may be restricted (e.g. the payphone may be able to dial 9-1-1, but is unable to connect a local call).

Regarding access to 9-1-1, the overall number of calls received by public safety answering points (PSAPs) from payphones is considerably low. In most regions, these account for approximately 1-5% of total  9-1-1 calls. Moreover, PSAPs indicated that they are trained to treat 9-1-1 calls from payphones with greater scrutiny as the number of inappropriate calls made to 9-1-1 is higher from payphones due to their public exposure.

For example, both ILECs and public safety agencies report instances where schools have requested the removal of payphones from their premises due to the abuse of 9-1-1. In these situations, 9-1-1 calls have been supported through increased availability of office phones and students’ own mobile devices.

The study further elaborates on the consumer trend that the majority of calls made to 9-1-1 originate from mobile devices. The study indicates that the greater challenge for public safety agencies is not in the removal of payphones but in consumer education about expectations for accurate location data when dialing emergency services from a mobile device.

Alternatives to payphone service

Consumer groups and individuals also expressed significant concerns over the availability of affordable wireless service as an alternative to payphone service. The study highlights that payphone service offers specific benefits, such as cost advantages for infrequent users, unmetered calling, no credit requirement for use, and anonymous voice access in public places.

The study further demonstrates that all carriers offer prepaid, pay-as-you-go, and postpaid plans at different monthly rates or per-minute rates that are equivalent to, or cheaper than, the cost of a $35 wireline home phone subscription. The study also confirms that all of the lowest-priced plans meter usage either by the minute or according to the specific time of day.

The study did not, however, indicate whether these plans are considered affordable or sufficient to meet the communications needs of Canadians of all demographics.

Appendix A

Participants in the fact-finding process

Consumer groups and community organizations

L’Union des consommateurs; PIAC; the Consumers’ Association of Canada, the Council of Senior Citizens’ Organization of British Columbia; DiversityCanada Foundation; the Consumer Association of Saskatchewan; la Coalition pour le service 9-1-1 au Québec; le Centre québécois pour la déficience auditive; the Canadian Association of the Deaf; l’ACEF de l’Outaouais; le Service budgétaire Lac-Saint-Jean-Est; The Royal Client Empowerment Council; St. Mark’s Extreme Weather Response Shelter; the Red Bear Healing Home Society; and the Community Counseling and Resource Centre

ILECs

Bell Aliant; Bell Canada; MTS; SaskTel; Télébec; TCC; Northwestel; TBayTel; Bell Canada on behalf of DTMS, KMTS, and Northerntel; Bragg Communications Incorporated (Eastlink) on behalf of Amtelecom Limited Partnership and People’s Tel Limited Partnership; The Canadian Independent Telephone Company Joint Task Force on behalf of CoopTel; La Cie de Téléphone de Courcelles inc.; Groupe Maskatel LP; La Compagnie de Téléphone de Lambton inc.;  Téléphone Milot inc.; Le Téléphone de St-Éphrem inc.; La Compagnie de Téléphone de St-Victor; Sogetel inc.; La Compagnie de Téléphone Upton inc.; Brooke Telecom Co-operative Limited; Bruce Telecom; CityWest Telephone and Cable Corp.; Cochrane Telecom Services; Execulink Telecom Inc.; Gosfield North Communications Co-operative Limited; Hay Communications Co-operative Limited;  Huron Telecommunications Co-operative Limited; The Lansdowne Rural Telephone Company Limited; Mornington Communications Co-operative Limited; Nexicom Telecommunications Inc.; Nexicom Telephones Inc.; North Frontenac Telephone Corporation Limited; North Renfrew Telephone Company Limited; Ontera; Quadro Communications Co-operative Inc.; Roxborough Telephone Company Limited; Tuckersmith Communications Co-operative Limited;  WTC Communications; and Wightman Telecom Limited

Municipal and provincial representatives

La Ville de Saint-Raymond; le Village de McCreary; the Municipality of Wawa; la Municipalité de la Doré; la Municipalité de Courcelle; the Yukon Government; and the Manitoba Minister of Healthy Living, Seniors, and Consumer Affairs

Individuals across Canada

See public record

Date modified:

2015-02-26