ARCHIVED - Transcript - Iqualuit, NT- 1998/06/25
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Service téléphonique dans les zones de desserte à coût élevé/
Service to High-Cost Serving Areas
Examen des politiques relatives à la télévision canadienne/
Review of the Commission's Policies for Canadian Television
CONSULTATION TENUE À:
Iqaluit (Territoires du Nord-Ouest)
Le 25 juin 1998
CONSULTATION HELD AT:
Iqaluit, Northwest Territories
25 June 1998
Conseil de la radiodiffusion et des
Canadian Radio-television and
Transcription / Transcript
David Colville Président/Chairperson
David McKendry Conseiller/Commissioner
Steve Delaney Gérant d'audience/
Carolyn Pinsky Conseillère juridique/
Denise Groulx Secrétaire/Secretary
TENUE À: HELD AT:
Navigator Inn Navigator Inn
(Territoires du Nord-Ouest) Northwest Territories
Le 25 juin 1998 25 June 1998
- iii -
TABLE DES MATIÈRES/TABLE OF CONTENTS
Présentation par/Presentation by:
¨ Hon. Jim Antoine 11
¨ Rev. Mike Gardiner 25
¨ Ms Mary Ellen Thomas 31
¨ Baffin Regional Chamber of Commerce 40
¨ Iqaluit Chamber of Commerce 43
¨ Adamee Itorcheak 51
¨ Edward Picco 66
¨ David Lovell 77
¨ WestComm Telecommunications 86
¨ Town of Enterprise 93
¨ Town of Hay River 98
¨ Government of Nunavut 105
Réplique au nom de/Reply on behalf of:
¨ Northwestel 116
Présentation au nom de/Presentation on behalf of:
¨ First Air 135
¨ Gordon McIntosh 150
Réplique au nom de/Reply on behalf of:
¨ Northwestel 160
Iqaluit, Northwest Territories
--- Upon commencing on Thursday, June 25, 1998
at 1000 / L'audience débute le jeudi 25 juin à 1000
THE CHAIRPERSON: Good morning, everyone. Welcome to all of you to this regional consultation.
My name is David Colville and I am the Vice-Chair of Telecommunications for the CRTC. I will be the Chair for today's session.
I want to say how pleased we are, both myself and my colleagues, to be here in Iqaluit today. It is certainly my first time and I think the first time for all of us in Iqaluit, although we have been to the North before. As I say, we are certainly pleased to be here.
I was chatting with my wife in Halifax, Nova Scotia, last night. She told me that it was cold and foggy there. I told her it was nice and warm and sunny here, so she would rather be here than there.
We are here to discuss a very fundamental issue in telecommunications policy, that being to continue to provide high quality service in high cost parts of the country.
At this time I would also like to welcome the folks that are either listening in or watching, as the case may be, from Yellowknife, where we have a video link, and audio links to Cambridge Bay, Rankin Inlet, Inuvik and Hay River.
I would like to introduce my colleagues who are with me today from the CRTC. Commissioner David McKendry, our staff, Denise Groulx, who will be the Secretary for today, Carolyn Pinsky, our legal counsel, and Steve Delaney, who is the Hearing Manager and the proceeding manager for this proceeding.
As you know, this public consultation is part of a larger process called to explore issues relating to the provision of high quality telephone service in high cost serving areas.
Canadian telephone policy has as one of its objectives the provision of "reliable and affordable telecommunications services of high quality, accessible to Canadians in both urban and rural areas in all regions of Canada". We are here today to look into how, in the face of changes in the telecommunications environment, we can ensure that we achieve that policy.
I might also note that recently it has been announced as government policy to try and achieve the objective of making Canada the most connected nation in the world. It's the CRTC's view and our policy to try and ensure that that objective is achieved as well.
Some of the issues that we hope to hear your views on include the following:
What should be the obligations of the telephone companies or their competitors with respect to providing telephone service in high cost areas?
If subsidies are required for high cost serving areas, what services should be eligible for subsidies and how should any subsidy be funded?
What types of technology are acceptable for high cost or remote areas? For example, is wireless or satellite technology acceptable?
I should note that we are not trying to limit the discussion to those issues, but those are some of the issues that we are sort of framing this issue around. We are certainly open to hearing any views that anyone may have on these important issues.
To ensure that as many people as possible can participate -- my notes say we are holding two sessions today. Let me say that as far as the registration was concerned, we had a number of parties who wished to speak to us at the morning session today. We had one person registered for this evening.
We now understand that that person will be here in Iqaluit this afternoon, so subject to comments that we might get from the other sites, it would be our view to limit the remote sites to the session that we are beginning now. Since nobody has indicated an intention to appear at any of the other sites later on today, we would not fire up those sites later on again, subject to any comments we might have or any indication that there would be others appearing at those sites. Perhaps we will canvass the other sites later on in the morning.
With that, I will turn over the microphone to Carolyn Pinsky to just outline the procedure for today.
MS PINSKY: The Secretary will call upon individuals who expressed a desire to speak at this hearing through advance registration at one of the Commission's offices. If there are others in attendance today who have not registered, please speak with the Secretary and we will arrange to have you make your presentation.
Any participant who is absent when the Secretary calls them will be called again later on. In order to hear the greatest number of individual speakers today, participants will be limited to a maximum of ten minutes.
To make your representation, please come to the table at the front of the room when the Secretary calls you. Make sure the microphone is turned on when you speak so that an accurate record can be produced by recording and transcription staff. When you finish speaking, please turn off the microphone to avoid feedback.
For those participating by video or audio link, please follow the instructions of the telephone company representative in your location and please identify yourself before you begin your presentation to assist the court reporter.
The oral representations made at this consultation will be transcribed and compiled in the record of the proceeding. Anyone wishing to obtain a copy of the transcript should make arrangements with the court reporter who is seated across the table from me.
I would remind everyone that in addition to the oral representations at this consultation, it is possible to submit written comments to the Commission on the issues examined here any time prior to January 30, 1999. Like the transcripts, these comments will be added to the record of the proceeding.
When the representations are finished, we will take a short break and the telephone company representatives will then have 15 minutes to respond to any of the comments made this morning on issues related to high cost areas.
The telephone company will also have the opportunity to address any of these submissions in written comments to be filed by January 30, 199.
I would now ask the representatives of Northwestel to introduce themselves, please.
MR. PETER BOORMAN: Mr. Chairman and members of this assembly, I would like to introduce the members from Northwestel. First of all I will start with myself. My name is Peter Boorman. I am now the President of Northwestel.
It's interesting to note that this is my first week in my new capacity of this company. For those who don't know, I came up a year ago from the south, took on a position of Vice-President of Corporate. My challenge at that time was to develop the new infrastructure, to develop the new markets and services to position the company for its future. I guess I was somewhat successful for I am now running the company.
I spent all of an hour at my desk, for that is the way in the North. If you really want to be involved in this business, you have got to be outside in the business.
I would like to introduce other members who are here today. Mike Parry is our Vice-President, Customer Service and Solutions, from Yellowknife. I would also like to introduce Mark Hickey who is our Area Vice-President of Nunavut. He is here with us today.
Brian Alp is our Manager of our Call Centre. Sharon Lastiwka, who is operating our video equipment today. Mark Walker, who is our Director of Business Development and is very much active on the high cost serving area proposal that we are facing today.
From Yellowknife on video we have Don Sian who is our Director of Competition and Implementation of Competitive Services. We have in Cambridge Bay Joanne Bagstad who is one of our Sales Representatives. We have from Rankin Inlet Lyle Lastiwka who is our Account Director for Nunavut.
We have from Inuvik Karen Poitras who is our Account Director for the GNWT and in Hay River we have Claude Charlebois, who is the Acting Area Vice-President for the Northwest Territories.
I thank you.
THE CHAIRPERSON: Thank you, Mr. Boorman.
Congratulations on your appointment as President. You obviously have an interesting and challenging task in running a telephone company in this northern environment and obviously challenging in the context of the issue that we have before us today.
Welcome to our proceeding.
MR. BOORMAN: Thanks.
MS PINSKY: Finally, I would just like to note that we have someone here in the audience today to assist anyone who requires some translation facilities. I wonder, sir, if I could ask you to introduce yourself now and make yourself available to anybody.
MR. PETER: My name is Jakapusie Peter. I am a free lance interpreter/translator. I will be on standby today for those who may require my services.
MS PINSKY: Thank you.
Before I ask the Secretary to call the first participant, are there any preliminary points that anyone would like to raise?
THE CHAIRPERSON: I would. I just want to underscore that this, I guess, is the last series of the regional consultations that we have been holding on this proceeding which started three or four weeks ago now in the North. We have done a number of communities literally from one end of the country to the other.
David McKendry and myself conducted a proceeding in Deer Lake, Newfoundland, on Monday. We actually divided the Commissioners up in pairs and had a number of these regional consultations in virtually every province.
For the most part, in smaller communities we are trying to reach out to the smaller communities to get a better understanding of the concerns in those communities and of the people there, whether they be residents, small business or whatever.
Notwithstanding the microphones and the TV cameras and all of the technology in order to be able to provide the video and audio links, we are trying to do this as informally as possible. We encourage people to come forward and just express their views. We are certainly not here to try and intimidate anybody. We are genuinely interested in hearing what people have to say about this important issue and how we can in fact, as competition grows in telecommunications, actually improve the quality and level of services that are provided to communities across the country.
If people do feel uncomfortable being asked any questions -- we might want to ask a question or two of clarification of your presentation, but if people don't feel comfortable with that, that's fine. Just say so and we will go on to the next presenter.
With that I will turn it over to the Secretary to call our first presenter.
THE SECRETARY: Thank you, Mr. Chairman.
We will first go to Yellowknife, the Hon. Jim Antoine.
THE CHAIRPERSON: Good morning, Mr. Minister.
MR. GOO ARLOOKTOO (Remote): Good morning.
My name is Goo Arlooktoo. I am the Deputy Premier, Minister of Justice and Minister Responsible for Division. I had the pleasure as Minister of Public Works of making a presentation last year on the issue on the issue of long distance competition.
Although I do not carry the portfolio now, I still work closely with the present Minister of Public Works, Mr. Jim Antoine, my colleague here, who will represent the Cabinet today in putting forward our position.
I wanted to first all welcome you to the Northwest Territories and to Nunavut especially. I hope your hearings here are fruitful.
With that, I would like to turn it over to Mr. Antoine.
HON. JIM ANTOINE (Remote): Thank you, Goo.
Good morning Commissioners. Welcome to Iqaluit.
My name is Jim Antoine. I am the MLA for the riding of Nahendeh, which includes Fort Simpson and five other smaller communities in the southwest corner of the Northwest Territories. I also serve as the Minister of Public Works & Services, the Minister of Transportation and the Minister responsible for Aboriginal Affairs.
Today I speak to you on behalf of the Cabinet and the people of the Northwest Territories. Cabinet business prevents me from meeting you in person today, but my Deputy Minister of Public Works & Services, Bruce Rattray, and my Director of Systems and Communications, Peter Dunn, are representing me in Iqaluit.
We are very happy that the CRTC is in Iqaluit today. I hope that your brief visit here gives you a chance to experience a small slice of northern life. I am also pleased to have the opportunity to speak to you again on behalf of northerners, as my colleague and Deputy Premier, Mr. Goo Arlooktoo, did last year, when you travelled to Yellowknife to hear our views on long distance competition.
I understand that not many people in your regional hearing group have had the opportunity to travel to the Eastern Arctic before. Iqaluit is probably quite different from communities you have visited before. As you will have noticed, there are no trees to get in the way and you can see the land and the ocean for a very long day at this time of the year.
Iqaluit might seem small to you, but it is a major centre. It is the capital of Nunavut and it is one of the largest of the 90 communities served by Northwestel.
Most northern communities are much smaller and more isolated. There are no highways in the Eastern Arctic, of course, and few in the west, but we can fly into most communities three or four days of the week. As you would suspect, where there are no roads and limited flights, telecommunications takes on a new importance.
Although the need for telecommunications is great, the same environmental factors which make travel difficult also make it difficult to provide these services. Communities are small and far apart in a vast landscape. The climate is challenging and the terrain is rugged. The North is our home, but it is not always an easy place.
In nine months, the new Nunavut Territory comes into being. One large territory becomes two and the two new territorial governments will be trying to do more with decreased funding. This will be a time when we will need modern and reliable telecommunications service at reasonable cost.
We will need those services used routinely by Canadians in the south. If we have access only to minimum services that are priced beyond our means, it will make a poor beginning for two new territories entering a new century.
The state of the telecommunications system in the North is of great concern. It is essential that we are able to rely on computer and communications technology to help us meet the challenges we are facing. I have told you about the NWT in general. Now I would like to focus on communications environment.
In Canada as a whole, about 98 per cent of households have telephone service. The province with the lowest penetration rate is Newfoundland at just under 97 per cent. This is not the situation in the North. Only about 89 per cent of our households have phones.
On poor quality of service, as Northwestel's customers told you during the regional hearings you held in Yellowknife and Whitehorse last year, service quality in the North is extremely poor.
Among the problems cited at those hearings were overloaded circuits, delays in obtaining service and poor transmission quality. As well, the NWT government has had many occasions in the past to complain to the Commission about repeated failures by Northwestel to meet certain quality of service standards that the CRTC imposes.
On limited service offerings, many services that are commonplace to southerners, such as videoconferencing and Internet access, are available in only a few communities. Other services such as voice messaging call management services are also available in very few communities.
The absence of such services places the North at a serious social and economic disadvantage. At the Whitehorse regional hearing last month, for example, we heard from a free lance writer who lived five minutes from Whitehorse. She told of losing a contract with a Whitehorse customer to a Toronto writer just because Toronto had more reliable e-mail access to the customer.
The Yukon is a large territory with several remote communities. The Northwest Territories is much larger than the Yukon with even more remote communities. Within these communities are many companies that are trying to compete nationally and globally with other companies from the South who happen to have access to a full range of high quality telecommunications services.
All Canadians, not just northerners, would benefit from comparable telecommunications services being available in the North. In many cases southern business have trouble selling goods and services to northerners because northerners don't have the communications services necessary to find out about their products.
Costs are extremely high. In 1995, Northwestel's operating expenses for each access line were nearly three times higher than those of Island Tel. They were more double than those of Bell Canada. They were closest to the operating expenses of SaskTel, but they were still 56 per cent higher.
There's another statistic that reveals the high costs of providing service in the North. Northwestel's gross investment per access line in 1995 ranged from 50 per cent higher than that of Télébec to 115 per cent higher than that of Island Tel.
In summary, today in the North we have many households without telephones, poor quality of service, limited availability of many services and costs that are far higher than anywhere else in Canada.
The Government of the Northwest Territories does not blame this situation on Northwestel. Unlike the Stentor companies in the south, Northwestel simply does not have any low cost areas in its operating territory that are able to generate the funds necessary to solve these problems.
The government, however, does see some hope for the future. We believe that the introduction of competition is one important step towards resolving some of these problems.
In particular, competitive pressure can lead to increased productivity, lower costs and improved service performance in those areas where competition occurs. It can also help ensure that the most effective and efficient technologies are developed and used to deliver services.
Competition will not solve all the problems of the North though. It may even endanger some of the services we have now. As you know, our very high long distance rates are used to subsidize the cost for local service in most NWT communities. Competition will create strong pressures to bring low rates into line with costs. Unless new subsidy mechanisms are developed, this will result in telephone services in many communities being very expensive and perhaps beyond the means of many citizens.
Living in the North always has been and always will be a special challenge. Because of the North's remoteness and vast distances, telecommunications takes on a particular importance in meeting that challenge.
Access to high quality affordable telecommunications services is essential to permit communications between family and friends. It is also essential for the provision of health, educational, emergency and other public services. And finally, it is becoming more and more important in our efforts as northern companies try to do business more efficiently and competitively both north and south of the 60th parallel.
Commissioners, my message to you today is a simple one: We need your help. I'm afraid without that help those of us who live in the North will be excluded from participating fully in the economy of the 21st century.
The vital role played by telecommunications in remote areas, including in the North, was widely recognized in the many written submissions you received in this proceeding on May 1. We were very pleased to note that many of the submissions recognized the necessity for a national funding mechanism to address the need of the high cost areas and recognized that this mechanism would have to apply to a wide range of services.
We were far less enthusiastic about the submissions from the large industry players in the south who maintained that the problems of high cost areas are marginal at best and that any support mechanism for high cost areas should operate on an in-territory basis.
This is simply not workable in northern Canada. We do not have enough population to generate the revenues necessary. Telecommunications trying to recover the cost of installation and maintenance of necessary equipment would be out of luck.
I want to give you an idea of what could happen to rates in the North in a competitive environment if help is not provided.
Without any contribution from long distance service providers, local residential rates in the North would increase on an average of $20.33 as of this August to about $57 per month. While projected increases for local business rates from their current $34.50 are not available, they would likely be as high or higher.
With contribution at the southern level of two cents per minute, local residential rates would still need to rise to more than $50 per month. In both these cases, long distance rates would remain well above those in the rest of Canada.
If all northern rates were required to be cost-based, both long distance and local rates would need to rise in some communities. It must be remembered that the long distance rates paid here are already well above southern levels.
These figures are approximate. However, they make it clear that, even allowing for some ongoing system of competition contribution payments, rates in Northwestel's territory will by any standard become unaffordable to many unless there is external financial support.
As to what that standard should be, it is this government's view that northerners should not be expected to pay rates that are higher than those in the south.
The Telecommunications Act makes it very clear that telecommunications plays a vital role in maintaining Canada's sovereignty and requires that affordable high quality service be accessible to all Canadians whether they live in the highly populated urban centres or remote northern communities.
To date, that objective is far from being achieved. If no action is taken, even more ground will be lost in the future. I believe that telecommunications is far too important to the North and far too important to Canada to let that happen.
We propose that three critical steps must be undertaken.
First, telecommunications providers in the North must be obliged to provide a full range of high quality telecommunications services to every community in the North. A package consisting only of local and long distance services is no longer sufficient in this day and age. A similar obligation should also apply with respect to high cost areas in the south.
Second, a national fund must be established to ensure that this range of services is provided at affordable levels for both business and residence. This must apply both to the North and to any high cost areas in southern Canada where service might otherwise be unaffordable. This fund would be financed by a levy on the revenues of all telecommunications services throughout Canada.
Third, rules should be adopted that prevent telecommunications companies from charging higher rates in remote and other high cost areas than are charged elsewhere in their operating territory.
Commissioners, I would like to thank you again for coming to Iqaluit and giving this government and all northerners an opportunity to make clear to you how vital telecommunications is in the emerging north.
Mahsi cho. Thank you.
THE CHAIRPERSON: Thank you very much, Minister Antoine.
I appreciate your comments this morning and for taking time out of your busy schedule to make this presentation to us today. I must say that I agree with some of the comments that you have made this morning.
My lawyer would accuse me of perhaps prejudicing the outcome of this proceeding if I should comment on this, but in particular your comments at the bottom of page 5 and the top of page 6 where you are talking about some parties in the south who maintained that the problems are marginal at best and that any support mechanism should be on an in-territory basis.
It would certainly appear that there are areas of the south that would qualify under any definition of high cost, but certainly the North does. You know that earlier in our hearing last summer dealing with the competition issue and the issue of long distance competition and, of course, one of the things we discovered there was even in the face of the current situation, people are bypassing the system and figuring out ways to get cheaper long distance calls which ends up meaning that there is less revenue here to support the system.
We have attempted to address that issue in our decision that we rendered earlier with respect to that particular concern, but certainly the issue of providing high quality service to the North is going to be fundamental. I think it's fair to say that having heard from people all across the country that this is certainly a national issue and that you can find parts all over the country.
I take it your point though in terms of services is that we shouldn't just consider basic telephone service as something which should be eligible for some sort of a subsidy wherever this high cost serving area is defined. Would that be correct?
MR. ANTOINE: Yes, but the position that we are taking is that the type of quality of service that we envision is the full range of service. We need to provide so that we will be connected with the rest of the country.
The type of service that is enjoyed by other parts of the country we see as having that same type of service.
MR. ARLOOKTOO: If I could just add. The technology that we are using at present is one that will be relied on very heavily by the new Nunavut government. In fact, the plans for centralization of the new Nunavut government to 11 communities rides very heavily on telecommunications, this type of videoconferencing.
There is a need to ensure that the whole range of services is made available.
THE CHAIRPERSON: You gave the example of the woman who lost the contract to Toronto because of not having a good e-mail access. I would assume that would include access to the Internet as well.
MR. ANTOINE: Correct.
THE CHAIRPERSON: Thank you very much, gentlemen. I know you both have a busy schedule. We won't keep you. Again, I appreciate your taking the time out of that busy schedule to come and make a representation before us today.
MR. ANTOINE: Thank you very much.
THE CHAIRPERSON: Madam Secretary.
THE SECRETARY: Thank you, Mr. Chairman.
Our first presenter from Iqaluit is Rev. Mike Gardiner and Mary Ellen Thomas.
THE CHAIRPERSON: Good morning to you both and welcome to our proceeding.
REV. MIKE GARDINER: Thank you. We appreciate this opportunity to be heard this morning. You heard from one Minister, now you have got to hear from another of communication affairs or eternal communications, but it's good to be here.
I found that the little spiel that I prepared, a lot has already been said by the Minister, so ministers can agree from time to time, but I have other special things that I would like to add.
I think that I speak now about this northern consumer, not knowing the technical things about phones, but also as a National Board of the Consumers Union of Canada. I thought I would just say the following.
I believe that for everyone here, their main concern is that the best possible thing will be authorized by CRTC for the benefit of the consumer living in high cost areas for telecommunications services. I have every reason to believe that where there is a monopoly, the consumer loses out. This means obviously that we have to encourage competition in the North.
Our only regret is that you have imposed a long wait of a further two years before this competition can come to these areas. The reason for the delay has been quoted as being the need to consider smaller communities. However, as I shall later mention, appropriate subsidization of these communities would immediately resolve this particular problem and there would be no need for this long wait of two years or more.
It seems to the consumer that this long wait before competition is allowed is unique to the Arctic and it only really benefits the phone company and not the consumer. May I also add with due respect that you have also given previous rulings for the benefit of NWT Tel and not the consumer.
I quote from NWT Tel's letter to their customers, NWT 9820501 which says under the heading "Preparing for Competition" the following:
"NWT Tel customers can expect to see continuing changes in rates long before other companies arrive. The CRTC also gave NWT Tel the go ahead to go ahead rebalancing its rates. This will help bring rates closer to the actual costs of providing services."
May I suggest that from NWT Tel's letter it appears you have given them a blank cheque to increase local rates a further 66.7 per cent over the next year with undefined future increases beyond the 66.7 per cent whilst at the same time no decrease in long distance rates is being given to the people of Nunavut, note especially Nunavut.
It is easy to see how you have been swayed by NWT Tel's statements so that only people in the Western Arctic will benefit to a small extent. NWT Tel's excuse for wanting these large increases is, of course, that they will be ready for the time when the competition arrives.
In 1991 we were served by Bell Canada. A one line residential phone cost $5 per month. Today under NWT Tel it is $15.51, plus tax. You have still given them the authority to increase local calls yet another 66.7 per cent and a blank cheque to even go beyond that.
Long distance rates have remained the same for 1991 and 1998 for Nunavut without any long distance increase in rates to compensate for the present 300 per cent rise in local rates with more increases to come.
You might be interested to know that in 1991 when NWT Tel was just serving the west with, as they say, and I quote from them, "easier access to places there", they were then charging people in the west $7.63 for month for a residential one line phone and 91 cents a minute for a call from Yellowknife to Edmonton.
This compared with 36 cents per minute for a call in the east anywhere in Ontario and Quebec from Iqaluit and much harder circumstances than in the west. This is all there quoting.
It has always been an agreement when NWT Tel took over from Bell that rates would not go up. It was hard, concrete, engraved in stone. You have not kept NWT Tel to this part of the purchase agreement.
It has always been the policy of NWT Tel to charge customers higher rates than is justified. NWT Tel in their submission to you have made a big issue about what they have done in the North to make a good communications system, but they already inherited from Bell the basis of this system and NWT Tel has also received from Bell Canada $18 million for their part of the present telecommunications system.
The only way that long distance rates and charges can be reduced in Nunavut is by competition. At the same time, we must not have an increase in local rates. Obviously under the present setup agreed upon by yourselves and NWT Tel, this will never happen.
There is only one solution to this present situation and that is to establish a way of Nunavut local rates getting subsidized so that they do not have any further increases and, of course, to allow for the new technology and things like that that have to be done.
There is no question about it, to prepare for competition, you don't raise local rates, but instead immediately create this national fund. This fund would be immediately established by all companies in Canada paying a percentage of revenue out of which NWT Tel can withdraw in order to keep the present monthly rates with no further increases for monthly rentals.
If you do nothing and allow things to go on as they are going, consumers will soon be paying $50 or more. That's what my friend, the Minister said. I had already written this amount down. I don't know how we got the same figure, but that it what it is supposed to be per month for their residential line the way things are going.
This becomes an impossible situation for consumers in the remote areas and the consumer will be the true loser.
May I urge you on behalf of those consumers in the North that such a fund is established as soon as possible and that in the meantime, no further increases are allowed. This would include the $4 and $6 increases already approved by you to take effect over the next 14 months.
Furthermore, we would strongly recommend that you hold NWT Tel to a high level of efficiency and that when subsidies are given, they will be monitored very carefully and the consumers will be assured that they alone will benefit as a result of the subsidies given.
Please make any subsidies given from this national fund used first of all to keep local rates at the lowest level possible and then you do with the improvement technology. We desperately need competition in the North, but the competition must not be used as an excuse to have the liberty to raise local rates beyond recognition.
Canada is such a vast country and we need full telecommunications services in rural and remote areas to be affordable for all residents with the same competition allowed between companies as anywhere else in Canada.
We trust that with your co-operation ruling on this matter, it will be possible to make our wish to become a reality in the shortest time possible.
MS MARY ELLEN THOMAS: I would like to introduce myself. My name is Mary Ellen Thomas. Unlike the other two speakers, I am not the minister of anything, so I will be speaking on a slightly different topic than Mike.
I am the former NWT representative on the Consumer Association of Canada.
The realization of universal service which the Chairman spoke to, basically a phone to every home, has long been the goal of telecommunications policy in Canada. Section 7 of the Telecommunications Act states:
"Canadian telecommunications policy has as one of its objectives to render reliable, affordable telecommunications services of high quality, accessible to Canadians in both rural and urban areas in all regions of Canada."
The wording suggests that a range of telecommunications services, not merely telephone service, should be accessible in all regions of the country. Current data indicates that 98.5 per cent of all Canadian households have telephone service. This figure excludes the Yukon and the Northwest Territories, regions that would lower this average.
In the handouts that I presented to the Commission Secretary, and I believe she will be distributing them, 60 per cent of Nunavut communities have a penetration rate below the Canadian average of 98.5. Whale Cove has the lowest penetration in Nunavut with 73 per cent of households having telephone service.
If you look at the graph that has the solid bars, you see all the communities in Nunavut. The second graph breaks it down by regions, the regions of Baffin, Keewatin and "Kontikmiut". You can see penetration rates much lower in the Keewatin and "Kontikmiut".
Universal service must continue to be a fundamental goal of the CRTC. Affordable telephone service is an essential tool for participation in society. Families without affordable access to local and long distance services are cut off, not only from those they wish to communicate with but also from emergency services such as fire, police, ambulance and other services such as facsimile, electronic mail, teleshopping, telebanking and the Internet.
It is crucial to note here the importance of providing universal access to both local and long distance services. While the importance of providing universal access to affordable local services is almost universally acknowledge, in Nunavut long distance services perform an equally vital function due to the fact that the majority of communities are very small and isolated from each other.
To date the Commission had decided that it is in the public interest to introduce long distance competition in the North, but not before July 1, 2000. While I am very pleased to see the long distance competition will be introduced in the North, I am concerned about the immediate implications for the consumers of Nunavut.
Northwestel has argued that after long distance competition is introduce in July 2000, competitive forces will eliminate the high toll margins currently providing support for ongoing losses in uneconomic areas. As a result, Northwestel has been granted permission to rebalance and restructure in order to bring its current rates in line with costs.
In the short time, this means higher costs for consumers without relief from lower long distance rates until July 1, 2000. For consumers in Iqaluit, this means that the basic monthly service will increase from $15 to $25 in just over a year, an increase of 66.7 per cent.
Families on fixed incomes in this community will find this a bitter to swallow. This, in addition to the high costs that residents already pay for their long distance services.
The challenge facing the Commission is to develop an approach for serving high cost areas that is more suited to a fully competitive environment. It is my hope that the Commission will ensure that accessibility to telephone service in the North is not compromised over the next two years while this approach is being developed.
With respect to developing a long term approach for serving high cost areas, it is more suited to a fully competitive environment. I support the idea of creating a national fund to offset the high costs of telecommunications in the North.
I believe that it is possible to have universal service in a competitive market, but only by means of the support mechanism such as the national fund proposed by Northwestel and the Government of the Northwest Territories.
Just as an aside, I find this a very interesting situation to be in. The Consumers Association, consumers in the Northwest Territories, Northwestel and the Government of the Northwest Territories seem to be in agreement. This is a unique situation.
The national fund will redistribute revenues collected from telephone companies operating in profitable regions of Canada to competitors that serve high cost service areas such as Nunavut. In this approach, all Canadians and all regions are expected to contribute to the achievement of the Telecommunications Act.
It is a national funds type approach and not competition alone that will ensure that universal service in high cost areas is achieved and that all communities in Nunavut, profitable or not, are provided with a comparable menu of services at a comparable price and of comparable quality.
I would like to commend the CRTC for its efforts to ensure the delivery of telecommunications services in high cost areas. This is a very important social issue and I urge you to consider both the short and the long term implications on your approach on consumers living here.
Thank you, very much.
THE CHAIRPERSON: Thank you, Ms Thomas, Rev. Gardiner.
If you don't mind, my colleague may have a question or two for you.
MEMBER McKENDRY: Thank you very much.
Thank you for coming today to give us your presentations.
Just by way of more of a general background, given that you are both involved in the consumer movement, I am wondering if you could comment on, and this is a question to both of you, the types of complaints or comments that you are receiving from consumers that you are in contact with about telephone service.
Do they primarily focus on universal availability, price, quality of service? Do you have any thoughts in that direction?
MS THOMAS: The most common complaint I hear, and even this morning as I was getting my daily physiotherapy, a comment was made about quality of service.
Services that we would normally expect in other parts of Canada are just not available. That to me is the most common complaint. Mike may hear others.
REV. MIKE GARDINER: Yes. I fully agree. I think the complaint could be that to have the services available that you get anywhere else in Canada at a reasonable price and at the same time, as a Minister, I have heard of many people who have not been able to pay their local phone bill and things like that, maybe because of their own bad housekeeping abilities, but that seems to be becoming more of an issue, the amount they have to pay on the monthly bill. That would include, of course, local plus long distance.
They both seem rather high to a lot of people in this community because many don't have that much to spare at all, but a phone is a necessity, not a luxury.
MEMBER McKENDRY: When you refer to the availability of services, or the lack of availability, is this the same point that Minister Antoine was making earlier about the availability of services like voice messaging and call forwarding and so on in the services that we often call enhanced services?
REV. MIKE GARDINER: I haven't personally been mentioned that. The local and long distance seems to be on people's minds that I deal with, but on the other hand, I know the business community and a growing amount of people do want the enhanced services as well.
MEMBER McKENDRY: Do either of you have any comment on the availability of Internet access in the North? In other communities we visited, we have often heard concern expressed to us about the availability of Internet access through the telecommunications system.
Is that something that concerns consumers in the area that you are interested in?
MS THOMAS: For most people on fixed incomes with low education levels, Internet access is not a major priority. However, the basis of the whole Government of Nunavut and our ability to compete in a global economy is going to be dependent on telecommunications services.
Though right now people might be focused on basic services, the whole future, the one thing we have more than anything else in the North is distance and isolation. Telecommunications will allow us to bridge those.
REV. MIKE GARDINER: Yes, I agree with that. I think that we are really looking at two groups of people. This seems still to be in this area. The majority want the very basic things at an affordable rate, but there's a growing number who want the enhanced services as well at a reasonable rate and, shall we say, high technology, we have to be outward looking and forward looking as a way to improve all these things for Internet, fax, et cetera, yet to do it obviously is going to be beyond the ability of NWT Tel to pay for all the things that have to be done.
Therefore, again it comes to the need to have this subsidized money for these enhanced services.
THE CHAIRPERSON: Thank you very much.
We talked about a whole range of services. We had a good range of Ministers.
REV. MIKE GARDINER: Thank you for allowing me to speak.
THE CHAIRPERSON: Madam Secretary.
THE SECRETARY: Thank you, Mr. Chairman.
Our next group of presenters from Iqaluit are Chris Coté and Michael Haine.
THE CHAIRPERSON: Good morning, gentlemen.
Perhaps you can identify who is who here.
MR. CHRIS COTÉ: Thank you.
My name is Christ Coté. I am the President of the Baffin Regional Chamber of Commerce. With me is Michael Haine who is the President of the Iqaluit Chamber of Commerce. I will be presenting first.
I would like to first take this opportunity to thank you for allowing our organization to come and make a presentation this morning.
A basic point with the Chamber of Commerce is that we support competition, but not at a cost to -- and fair access for all. Residents should have fair access wherever they live in the country and the establishment of this fund will help ensure that this is possible.
We realize that the cost of providing service in high cost markets is increasing and the big markets have the cost to provide service decreasing. This penalizes the smaller markets as we do not have the same access to service at the same rates, especially in the long distance market.
Not only are we suffering in terms of higher long distance costs, but Internet access is becoming so important -- it is also very high or even inaccessible. We encourage any fund that is established to also provide subsidization for all telecommunications services, whether it be the Internet service or the telephone.
It is crucial that any fund that is established take regional differences into account. I would like to take NAV CANADA for example that have set a uniform rate all across Canada. However, this uniform rate affects northerners, especially in remote communities, in a much different way.
There is only way to get around here and that's by air. That includes food and what-not. The southern markets don't see the impact we would up here, so I hope this fund would be able to take that difference into account.
I guess one more comment that I would like to make is as a business person in Iqaluit, it is more expensive for a business person in Iqaluit to make a long distance phone call to a community up island, say Pond Inlet, to promote or sell services or products to those businesses in that community than a business in Ottawa or Montreal in the southern market than it is to call to Pond Inlet and pitch their product.
It inhibits regional business. You know, we all say "Buy North", but it's more expensive to deal with a community that is so much closer.
I would like to again mention the Internet. It is fast becoming a major business tool, especially in a region like Baffin where the communities are spread so far apart.
Currently, only Iqaluit has direct Internet access. This technology needs to be made more universally available. The federal government has encouraged this as a right of Canadians, to have fair and equal access to technology. We just want to be treated like the rest of Canada.
For the North to be fairly represented, we encourage the CRTC to encourage that any board or agency that is set up to administer this fund has a strong representation on it. Our needs will be different than high cost areas in the southern region and we want to make sure all concerns are heard.
In conclusion, this fund will help northern businesses remain competitive. Without it, the cost of service will become prohibitive.
MR. MICHAEL HAINE: Thank you for the opportunity of allowing me to address your Commission.
As Chris mentioned, my name is Michael Haine. I am the President of the Iqaluit Chamber of Commerce. Our Chamber represents about 90 businesses that work in or are based in Iqaluit.
As Minister Antoine pointed out, Iqaluit is the major business centre for the Eastern Arctic and provides many services and provides to the rest of the Baffin region.
Air transportation and telecommunications are basic necessities of business and for life here in the North. Any changes in the rates to either of those two sectors has immediate impact on the cost of living here.
When Bell Canada was in the process of selling this territory to Northwestel -- I think Mary Ellen mentioned 1971 -- the Iqaluit Chamber of Commerce made a presentation to your Commission, basically saying that some form of subsidy would be required in order for the rates to remain competitive with the rest of Canada. Time has proven us right in the fact that yes, the rates have gone up relative to the rest of Canada.
Needless to say, the Iqaluit Chamber of Commerce does support the creation of this fund.
We support competition, but fair competition. Opening up the long distance market only without some consideration as to what will happen with local rates does not strike us as being particularly fair. We want competition to be fair for everyone.
We also recognize that telecommunications technology is rapidly changing the way we communicate and the way we do business.
With this in mind we encourage you, the CRTC, to ensure that this fund receives contributions from all telecommunications sectors, including cable and Internet providers.
Likewise, these sectors should also receive a subsidy from the fund so that they can provide services to high cost access areas on an equal basis.
We recognize that living in the North does cost more to operate. We are prepared to pay a premium to live up here. The problem is when I open my newspaper and I see southern Canada getting seven cents a minute, fine, I don't mind paying a 50 per cent premium. That brings it up to ten cents a minute which is somewhere between one third and one fifth lower than what our best rate available is right now.
Yes, we are prepared to pay a premium. Ten cents a minute, I don't mind that as a premium. The savings that my company can realize, if we could reduce our long distance rates, is in the order of $30,000 a year which would allow us to hire a part-time person and assist with the development of the economy up here.
It is very important. Anywhere we can realize savings translates into more jobs and more business opportunities.
In conclusion, we do support the creation of this fund, but we recognize that any board or agency set up to administer this fund has to have a component from the North sitting on that board to make sure, as Christ pointed out, that regional differences living in this high cost area versus perhaps northern Saskatchewan are recognized and dealt with fairly.
Telecommunications up here is a necessity, but without some mechanism to rebalance the costs that we anticipate happening as a result of the dropping of the rates at the local level, or dropping the rates for long distance, you will end up increasing the rates at the local level. The danger is that telecommunications would become more of a luxury. That is not going to be good for anybody up here.
Thank you very much.
THE CHAIRPERSON: Mr. Coté.
MR. COTÉ: If I can just add one point I forgot to mention in my presentation.
One thing we are worried about is when a long distance service provider does come in in the year 2000, they will come in and cherry pick from the larger communities and completely ignore the smaller communities. Perhaps what we are afraid of is seeing rates in Iqaluit, as Mike said, perhaps 10 cents a minute, 15 cents a minute, whatever it may be, but yet in the community that is about 200 kilometres away, you still see the 36, 37 cents a minute.
Iqaluit is the largest centre in the region. I guess Iqaluit always gets the best deals. We don't want to see that with this again. I just wanted to point that out.
THE CHAIRPERSON: That's a good point. I guess that's largely the issue or certainly one of the issues that has triggered this whole proceeding, this notion that is often referred to, as you said, as cherry picking, not just on the long distance side but on the local side as well.
Now that we have opened up local competition in the south in particular, the concern is that some of the new entrants may only compete in some areas, driving prices to cost in those areas perhaps even lower than they are today, particularly for business at least and that that will force the rates in some of the more remote areas to rise beyond what they are.
Cherry picking not only raises a concern in respect to long distance, but in local as well. That has really prompted us to want to undertake this proceeding to take a look at that issue.
I guess it is probably fair to say we are at the stage -- I don't think it's a question of whether or not we are going to do something, it's how we are going to do something in order to address this problem, not just service to the North.
Let me ask you one question related to this issue because several people have commented on the relative level of the local rate. I guess that raises the concern for us in terms of how to put in place some sort of a solution to this problem.
That is what would one use as the bench mark for local rates. People have said "Well, our local rates shouldn't rise above where they are now". Other people have said "We shouldn't have to pay any more than people in the south do", so that would suggest that perhaps you might have a bench mark from where the subsidy starts.
How high you let the rate go on its own is simply what the telephone company or service provider would charge for the service and then beyond that level you perhaps would provide a subsidy.
Some people have said "Well, we will pay the same rate as the south". Mr. Haine, you said in long distance at least we recognize that we should pay a little more. In some cases people might argue there's a bit of a penalty to be paid, so if the rate for long distance was seven cents a minute, you might be prepared to pay ten.
If I was looking at the local rates, what kind of comment would you make in terms of what kind of a bench mark we should be considering for where one would start the subsidy, if you will.
MR. HAINE: Well, I think from the business point of view, obviously there should be -- as I said, we are prepared to pay a premium, but not a huge premium. If there is competition at local rates, there should be some benefit in terms of the rate, the cost -- the cost structure should go down with the competition coming in.
If competition comes in locally, then it's sort of hard to say. It depends on what price they are looking at.
THE CHAIRPERSON: I am thinking what if we should face the situation where in fact we have got competition in the south for local and no new entrants should arrive here and you only have one service provider. Let's say the telephone company decided to abandon a community and another entrant came in, again where there was only one service provider.
MR. HAINE: I think, as you stated a bench mark, take a look at the average rate for, you know, Toronto, Montreal, or the Bell Canada average rate and apply a 10 or 15 per cent premium on top of that. We would be prepared to have you start that as your bench mark and anything over on top of that, certainly the subsidy, that would be a good time for that to kick in.
THE CHAIRPERSON: Mr. Coté.
MR. COTÉ: Well, I would like to add that if we are going to compare rates with the south that we receive the same quality, the same technology available to the south if we are going to pay equal or a small margin above the southern rates.
THE CHAIRPERSON: Well, I want to thank you gentlemen for again taking the time to come before us. I am particularly intrigued and noted your comment that if a board is set up to administer this fund that there be representation from the North on that. I think that's an excellent suggestion.
MR. HAINE: That's a big concern. We have seen, as Christ alluded to, that NAV CANADA process which they have designed to be fair to be all of Canada but which impacts certainly on us here in the Eastern Arctic pretty much more than anywhere else in the country.
NAV CANADA comes back and says "but it's fair". It may be fair, but it's not fair at the same time and that's a concern. We recognize whatever mechanism you have to administer this subsidy that you proposed, there has to be someone representing or someone who is familiar with the specific situation that we live in here in Nunavut, just sort of guard our interests as it were.
THE CHAIRPERSON: Yes.
MR. HAINE: Thank you.
THE CHAIRPERSON: Well it's a good suggestion.
Thank you again very much, Mr. Coté, Mr. Haine.
THE SECRETARY: Thank you, Mr. Chairman.
Our next presenter will be Adamee Itorcheak from Iqaluit.
MR. ADAMEE ITORCHEAK: (Inuktitut)
Good morning. Welcome to Iqaluit. I will be mostly saying my presentation in English to try and get the point across as best as possible so that you have an idea what's happening in the North here.
My name is Adamee Itorcheak and I am the President of Nunanet Communications. I am presenting to you today as both a private citizen and a business person operating in the communications field here in Iqaluit.
I am sure you have already noticed and if not, you certainly will be by the end of your visit, that Iqaluit is full of a very proud and entrepreneurial group of people. Technological development has led to many changes in the North in recent years and we are trying to gain the greatest possible benefit from these changes.
You can tell from my age that I am not one of the community elders. However, I am fortunate to have learned from the experience of others such as my father and John Amagoalik an Tagak Curley, to name a few.
I also have extensive experience in the communications field. I first began my career with Bell Canada in 1983 while Bell Canada was still the local company serving Iqaluit and Nunavut regions.
Since then, some 15 years later, I continue to remain involved with what is now known as the information industry. I very clearly see and live on a day to day basis the convergence of telecommunications, computers and content as well as the importance of the Internet.
From a personal level, I have red with a great deal of anticipation and excitement about the agenda for Industry Canada to develop the world's most connected country and the initiatives by you, the CRTC, in pursuing a framework for competition in the North.
The federal government's last throne speech identified connecting Canadians as a key priority, to ensure that remote and aboriginal communities flourish in the global economy.
As for the Commission, I read with pleasure the comments of Madame Bertrand, the CRTC chair, at Whitehorse at the outset of this proceeding that:
"Subscribers in high-cost serving areas, like subscribers in urban areas, must be able to reap the benefits of competition in terms of price, innovation and services provided."
I hope to provide you with some helpful suggestions in the short time available to me about the importance to the North of communications and competition.
To give a brief overview of the presentation, I will introduce our community and our company, focusing on how these relate to the government's agenda for a more connected country and the Commission's own goal to ensure that regulation creates an enabling environment for business.
Next I will focus on questions highlighted by the CRTC as important to this proceeding, namely funding mechanisms for high cost serving areas and the role different technologies can play.
Finally, I will comment on the glue that can bring everything together; the need for the Commission to quickly and aggressively put in place a regulatory framework that ensures competition will thrive in the North on a technology neutral basis.
In this regard, I note how Inuit villages just to the south of us, for example Kuujjuaq, in northern Quebec that we call Nunavik, can benefit from the competitive regulatory framework established by the Commission lat year for local service and much earlier for long distance.
Funny enough, at about the same time the CRTC was introducing long distance competition in Bell Canada territory, Bell was transferring service of the High Arctic, Baffin and Keewatin regions to Northwestel.
We see what is happening in the south in terms of competition and technological development. There is no reason why Iqaluit and other communities in Nunavut cannot also benefit from the same regulatory framework as other Canadians and this should be implemented as soon as possible.
I have heard that all monopolies are in favour of competition, but they also want just one more day to get ready for it. One more day has been years in coming. We in Nunavut are ready, willing and able to compete and I hope the CRTC will recognize that one more day represents missed opportunities more than anything else.
I am sure you are all aware on April 1, 1999, Iqaluit will become the capital of a new territory, Nunavut. What you may not aware of is that the birth of Nunavut has been a very long gestation period. I first argued in a high school debate the benefits of creating a separate territory back in 1989. Nunavut has been over 25 years in its development. While I am thrilled it is now upon us, I also believe it is time.
One of the reasons why Nunavut is being established is the strength of the people here. There is a real entrepreneurial spirit and genuine support for local business. The new Nunavut government will help us take a better control over our own destiny.
To create an Inuit base for the new territory, Kakkiivak established in our region what is now known as the incubator mall or more commonly called Parnaivik. Just down the road from these hearings, work space, some minor financial assistance and guidance are provided to new businesses.
My own company, Nunanet, started off in the incubator as a small but ambitious project to bring Internet to our northern community. I am proud to say that the results today have been more than a success and have been achieved in an open and competitive market.
Along with providing related networking, software and computer sales and repair services, Nunanet now employees five full time people and provides Internet service to several hundreds of our subscribers.
The population in Iqaluit is just over 4,000 and in three years we have achieved what I believe is among the highest, if not the highest, Internet penetration rates in Canada. We also have customers outside of Iqaluit in a number of far more remote Baffin region communities.
There are no toll charges for Iqaluit customers to access Nunanet Internet services, but the links we must purchase to provide Internet connection are very costly for our company. For customers outside Iqaluit, additional toll charges are imposed.
While all the record of this proceeding is not yet in, I have had a chance to review some of the positions and believe it is important to comment on some basic principles that are import with respect to high cost serving areas like Iqaluit.
I fully support the Commission's objective of promoting universal service at affordable rates. I also support the approach adopted by the CRTC to increase reliance on competitive forces and for the North this should be sooner, not later. Finally, I strongly recommend that any funding mechanisms, new or existing, be implemented in a competitively and technology neutral manner.
Some parties to this proceeding, including consumer groups, the Government of Saskatchewan, Quebec-Tel and others suggest that a broad range of services should be subsidized.
Some of these parties argue that Internet services should be included in subsidy programs, although the details as to how the subsidy would be funded and implemented is not clearly explained. Being an Internet service provider, particularly one serving communities even more remote than Iqaluit, I suppose I should not take exception to such a proposal.
However, I would take serious exception if the regulatory framework creates a disadvantage or competitive bias based on technology or incumbency status that would exclude an ISP such as Nunanet from having access to the exact same subsidies as, for instance, the telephone companies.
To allow otherwise would clearly harm, local entrepreneurs. It would be contrary to any type of competition policy or sense of equity and eliminate many of the good initiatives you are witnessing in the North today.
Along with operating a successful Internet and information technology business, Nunanet is also hopeful to get involved in wireless as soon as possible. We have been working with Microcell Telecom of Montreal to plan how best to bring personal communication services, more commonly known as PCS, to the North.
We are excited by the possibilities for PCS to offer an attractive local alternative with the added benefit of mobility. To deliver on this, it is essential that there be no delays in obtaining proper interconnection terms with Northwestel.
We are also exploring with local groups, including Qikiqtaaluk Corporation in the Baffin region and the Director of Emergency and Protective Services how to increase the value of PCS.
This will be through leveraging community business involvement and through the provision of additional services, such as 911 calling, which are not available here yet.
Finally, it is imperative that both local and long distance markets be opened for competition in Nunavut and this is as soon as possible. If a market is able to be competitive or there is an entrepreneur such as myself who is willing to take the risk to offer competitive service, it only makes sense to allow an individual the chance to try.
To repeat my earlier comments, other Canadians expect to benefit from the competitive framework established by the Commission last year for local and much earlier for long distance. I see no reason why Iqaluit and other communities in Nunavut should not also benefit from similar rules on a timely basis.
In conclusion, we are a community looking forward to the future. We are not advancing in isolation, but fully connected with the rest of the world. We are entrepreneurial, technologically sophisticated and demanding. I do believe that a fully competitive communications environment will go a long way to delivering on the promise we have here.
I am very happy the Commission recognizes the importance of communications to the North and that you have taken the time to come and assess this firsthand. I am also hopeful that my brief may give you some guidance in your review.
Thank you very much for the opportunity to present before you today. I would be pleased to answer any questions that you may have at this time.
THE CHAIRPERSON: Thank you for your presentation, Mr. Itorcheak. As you can tell from my age, I am one of the Commission elders, at least in the sense that I am the longest serving Commissioner on the CRTC right now.
I think my colleague, Mr. McKendry, might have a question or two for you.
MS WATT: Thank you for your presentation. Congratulations on your high Internet penetration rate. I just wonder if you could comment for us on the importance of Internet access in the North and I guess in particular in this community.
Are there any unique circumstances that make access to the Internet particularly relevant to your community?
MR. ITORCHEAK: There's a whole whack of different things here. I want to just personally say that Internet only reaches certain people because of the fact that most of us -- I can only talk about what I know.
I can give you the example of my parents who don't even have a computer and what not. They go hunting on a very regular basis and things like that. PCS for me is at least a half way compromise from my point.
In the Internet portion, we have got local chat sites and things like that and to the rest of the world as well, discussion forums and things like that. When somebody talks about Internet, I still tend to go back to my parents more so than anybody else because we only touch a specific group.
I am always trying to find ways to get communication going forward. I can't bring Internet out on the land. I would like to be able to go on the weekend, but I have got to take care of business, but I can't do it out on the land because there is just no connection and things like that. So, something like that.
MEMBER McKENDRY: Thank you.
I was just interested on page 5 of your presentation. You referred to the fact that there are no toll charges for Iqaluit customers to access your Internet services. Then you say the links we must purchase to provide Internet connection are very costly.
What are those links that you purchase?
MR. ITORCHEAK: Well, at the present we have got two types. We have cable modem that is going to be in place very shortly and then we have a 128K connection frame relay from Northwestel.
Our phone lines that the customers dial into and then wireless connection that we do our own in that we can keep costs down. Just in that alone, depending on how much go, it could be running as high as $68,000 a month for that connection that we pay to Northwestel, roughly in that range.
MEMBER McKENDRY: There was a suggestion earlier today that Internet service providers should contribute to a fund to subsidize the cost of phone service in remote and rural communities.
I take it from your presentation that you favour some sort of subsidy for Internet access in the course of this undertaking. What's your view about whether or not Internet service providers should contribute to the fund?
MR. ITORCHEAK: Well, if we used some of the services, I think it's a two way street here. If we use some of the services, we should get some back and we should pay for some portions, but it's very hard to tell because -- I can't really say.
It's changing so drastically that some of the decisions that are made out of these hearings will have implications two to five years down the road. I for one am still receiving repercussions from decisions that were made in 1967 and we are in 1998. Nunavut is on our doorstep and these decisions were made by the territorial government back in 1967 and what not.
There are certain things. It's really difficult to answer that one to be quite exact. A user pay portion, what I feel comfortable with as myself because if I use the services, I should pay for it. If I don't use certain services, I shouldn't. That's what we have been moving on to for a while now.
What's it going to do to the implications in 2020? Is it going to have effects on 2020? There's a lot of different angles to look at.
One other thing. Dean just mentioned it as well. I was telling him the other day we have lost customers outside of Iqaluit because of the fact that it costs so much for them for Internet connection just to be able to get e-mail from outlying communities. On average the best connection you will get is 9600K, 9600. On average here is between 28 and 33,6 modems here.
For them to access the connections, they have to give up their Internet connections because of the fact they really couldn't afford it anymore because of the fact that the long distance charges and charges combined are outrageous. I for one have experienced that myself.
When I started Nunanet, I used to call down to Montreal to get e-mail. I remember my wife telling me that it was going to almost be cheaper at the rate I was going to start my own Internet business. There's a lot of different areas in here.
I can't really think of some because of the fact that I'm not used to doing presentations in front of people that are coming in and what not. I can only relate to something that I know, that I hear, but it's pretty hard to try and think of things in some areas because it has some implications somewhere down the road on another area that I didn't even think about.
MEMBER McKENDRY: Thank you very much. It was a very helpful presentation.
THE CHAIRPERSON: Just one question. You mentioned and others have mentioned that we should be encouraging competition here, local or long distance or indeed other competition. You mentioned that if you were willing to take the risk, you should be given an opportunity.
If you were given the opportunity and willing to take the risk and a fund was set up in order to subsidize the provision of service, do you think that you or anybody else who entered that business should incur the same obligation in terms of the size of the territory that you would provide that service would be at least equal to that which the telephone company is providing?
MR. ITORCHEAK: Yes, because if they get it, why should I not get it as a Canadian? Basically it is the only answer I can give you at the time because if they get it, why can I not receive that same subsidy that they are getting?
THE CHAIRPERSON: So you would agree that as a condition of accepting this subsidy money, you think any other competitor should accept the responsibility to provide service in the same geographic area.
MR. ITORCHEAK: Yes.
THE CHAIRPERSON: Okay. Again, thank you very much. We appreciate you taking the time to come to speak to us today.
MR. ITORCHEAK: (Inuktitut)
THE CHAIRPERSON: Madam Secretary.
THE SECRETARY: Thank you.
Our next presenter will be Edward Picco, MLA, Iqaluit.
THE CHAIRPERSON: Good morning, Mr. Picco.
MR. EDWARD PICCO: Good morning. (Inuktitut)
My name is Ed Picco and I am the MLA for Iqaluit. I guess I would like to begin by thanking the CRTC for coming to Iqaluit, the newest capital in Canada.
Here in the North communications are not a luxury. They are a necessity. We live in an environment where operating costs and living costs are considerably higher than in the south. I do not believe the service provided by the current monopoly or any monopoly is conducive to the consumer.
You are here to find out what us, the consumers and residents, feel about long distance rates, proposed subsidies and costs.
We want to pay our fair share, but we do not want to be ripped off or gouged by the provider. We need some balance between local and long distance rates. After saying that, I guess the role of the CRTC has been and is and will continue to be a watchdog for groups of people, communities and regions of the country like ours which are under stress and under pressure by the service providers in the communications industry.
I do not have the opportunity or the resources to do a lot of research that you guys do have because you do have the administration staff, so I am sure you are fully aware of the situation regarding Northwestel. You have had hearings on it. You have given them extensions for competition.
After saying that, I do support Northwestel's request for the establishment of a subsidy fund to ensure it continues to maintain quality local and long distance services for the people of the Northwest Territories and Nunavut.
I don't see Northwestel as a dinosaur. It underwrote the risk to build, establish and improve telecommunications in the North when no one else would. Of course, the forerunner being Bell Canada.
The telecommunications industry is characterized by economies of scale and scope. This is not just my opinion, but it is also the same conclusion reached by telecommunication advisers, the public sector and investment bankers.
One supplier, such as Northwestel, can and does produce a range of telecommunications services at a lower cost than multiple suppliers. To not subsidize Northwestel, a committed northern utility icon, would lead to the wasteful duplication of network facilities.
Potential losses in the economy efficiency is a very real possibility. Competition in the long distance market here in the North means that national or international companies will piggy-back on the infrastructure already in place, provided by NWT Tel and its forerunner, Bell Canada.
Telecommunications and the communities themselves here in the North have waited long enough for telecommunications services at a reasonable cost. The cost of living in the North is harsh enough already without facing a substantial increase in local phone rates.
This proposed subsidy would be needed to maintain the local telecommunications infrastructure in more remote communities. Basic service alone costs twice as much as anywhere else in Canada. These higher costs may need to be reflected in higher local phone rates.
A potential for decline in service to remote communities is now very real as we move closer to the deregulation of the telecommunication industry in Canada. I must emphasize the necessity and importance of quality communications, especially in remote communities. It is crucial to the social economic health of the North.
In conclusion, I support the development of a subsidy fund for Northwestel on the condition if that is the way to keep local rates low and allow the economies of scale to work.
When we look at the deregulation of the communities industry, the Government of Canada a few years ago did the deregulation and open skies policies for the airlines. What that has done to the North has resulted in having only one major carrier now in the Eastern Arctic and two major carriers in the western area.
Before we were serviced by Nordair, which was bought out by Canadian Airlines and, because of the economies of scale, they dropped the routes servicing Iqaluit and the Baffin area of the Nunavut region about two years ago. That has resulted in just one company or monopoly servicing us.
We have already seen the impact and the effect of deregulation here in the airline industry. Through the jigs and the reels, I guess it's safe to say when that was looked at, the deregulation of the airline industry, it wasn't anticipated at the time that our two major carriers, Canadian Airlines and Air Canada, would swallow up all the local small airlines and thereby lessening competition.
We don't know what deregulation of the telecommunication industry will do. I think, you know, looking at the economies of scale again, we only have 26,000 people in all of Nunavut which takes up one third the geographic size of Canada. We need help. If the subsidy for Northwestel is one way to keep our costs lower, then I would be supportive of that.
As I said earlier, I am not supportive of monopoly in general because we have seen what that has done to our rates. Competition is good in the marketplace. But in this case, it would be very difficult for Northwestel to continue to operate the service that they are when other companies like Sprint or whatever could come in here and piggy-back off the resources that have already been put in place. Those infrastructure costs, my friends, are very expensive.
I would ask you while you are here in Iqaluit to stop by some of our local stores just to see the price of some of our consumer goods if you want to see what I am talking about. They illustrate it very well. I'm not trying to embellish it or overamplify my point, but I think it will strike home for you when you see the price of potatoes, apples, oranges, standard consumer products.
I thank you and I am available for any questions.
THE CHAIRPERSON: Thank you, Mr. Picco. I appreciate your comments.
I would note that my colleague, Ms Pinsky, was able to buy a pair of socks yesterday at a fairly competitive rate with the south, but we did notice that food prices were a lot higher here than elsewhere.
Your comments about deregulation in the airline business. I have noted on a few occasions that I think we are trying to take a somewhat different approach in the telecommunications business because in the airline business, they started with some competition at least before they moved to dealing with deregulation.
In our case, we are trying to open up the telecommunications market with more competition. We don't intend to deregulate until we are satisfied that there is competition and sustainable competition in most areas.
I would like to just ask you really one question and that's one I have asked several others. It's this issue about, and I think this one is going to be a difficult one for us particularly in those areas of the country and largely the North, how are we going to deal with this issue about striking what is an appropriate as a bench mark above which then you would say, okay, here's what we think the telephone company or any other enterprise should sell the service for, recognizing the cost of service, and beyond that level we are prepared to subsidize it.
Some people have suggested you could have a comparable rate in the south rates for Bell in Toronto and others. It has already been suggested this morning, I think by Mr. Haine, that we could probably take a rate for an urban major centre and probably have it 10 or 15 per cent higher.
I wonder if you might comment on that issue of what you think would be the kind of thing we should be taking into account when we are striking what you think the appropriate rate should be.
MR. ITORCHEAK: Thank you, Mr. Colville. I should say to Ms Pinsky, the socks are reasonably priced, but again I would ask you to look at the produce section and the vegetable and the Pampers costs as a parent.
Mr. Colville, your question is the $64,000 question, I guess. That is, of course, in the free market or free enterprise capital system that we live in, business is in business to make money.
What the level of profit a business makes would I guess be the question and what allows them to make a profit, but a reasonable profit. We see that right now, for example, with stores and some of the services, the airline industry that we deal with.
It's very difficult for us to say what level of profit a company can get. I would hope that the CRTC would look at that and say "What is a reasonable rate of return on the dollar invested". If the reasonable rate of return on the dollar invested, for example, in the south is 20 cents on the dollar, then you would have to take in the factors of a higher cost of doing business in the North and then try to pro-rate that amount for the cost here, for the profitability.
If business is in business to make money, if they can make 80 cents on the dollar, then that's what they are going to do. We understand that in the free enterprise system. I don't know if that is a correct amount based on our needs here.
Again, we don't have the option of getting in a vehicle and driving somewhere else to shop. We don't have the option of using Sprint because of the CRTC rulings. On the other hand, we are in the unique situation that indeed if these Sprint Canada -- I'm just using them as an example -- or any of these other companies or international companies, phone service providers, are on the ground and you can just dial the 1-800 number and be reconnected to the long distance charge you are getting, it doesn't benefit our local provider.
Northwestel has employees in town. They spend money here. The employees purchase goods and services. They do provide something other than being present with the phone company.
If you look at Sprint, does Sprint Canada have technicians, workers, employees, houses based in Iqaluit? I don't think so. I think you have to factor all those things in, Mr. Colville, and see what is a reasonable rate of return on a dollar invested.
Hopefully, you will make sure that we aren't gouged which is happening right now in some of the other sectors of northern living.
Here in the North over the last couple of years we have seen a substantial decrease in the take home pay of many of our employees. Our benefits have been cut. Some of the benefits that we enjoyed previously that were not taxable benefits are now taxed by the federal government.
In some communities, Mr. Colville, for example, the community of Hall Beach, a town of 500 people, most people don't use phones any more. If you go into those communities, they are using CB radios. Almost every home has a CB radio.
If you want to reach someone, they have channel 11 on. You just phone on channel 11 and say "I want to talk to David Colville". The radio is on in the house 24 hours a day and they contact each other.
There's a reason for that. One of the reasons is because the installation cost of having a phone is very expensive and because anywhere you want to phone outside your community is long distance. Every call that we make outside of Iqaluit is long distance.
We all know that the telephone company rounds every second to the nearest minute. If I talk on the phone for 1.2 minutes, it becomes a two minute call and so on. Those types of factors should be considered and taken into effect by the CRTC as a government appointed body that helps us, the consumer, regulate that industry, regulate the telecommunication industry for our benefit.
THE CHAIRPERSON: Thank you very much, Mr. Picco. I appreciate you coming here today.
MR. PICCO: Thank you very much, Mr. Colville, and Ms Pinsky, I hope to see you at the store.
THE CHAIRPERSON: Madam Secretary.
THE SECRETARY: We will now go to Yellowknife to hear David Lovell.
THE CHAIRPERSON: Good morning, sir.
MS PINSKY: I believe you are on mute.
THE SECRETARY: We will hear now from Yellowknife, Mr. David Lovell.
MR. DAVID LOVELL (Remote): Can you hear me or is there a problem?
THE CHAIRPERSON: We can hear you now.
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MR. LOVELL: Okay. Thank you very much.
First of all I would like to begin by welcoming Commission Members to the North. I trust your stay in Iqaluit has been a pleasant one and I look forward to the opportunity in the not too distant future to welcome you to Yellowknife where we can demonstrate our hospitality also.
As the Mayor of Yellowknife, I sit before you wearing many hats. First of all, I am an elected representative of approximately 18,000 ratepayers and voters of the city, most of whom have come to Yellowknife from other parts of the country and the world to live and work and who rely on our telecommunications infrastructure to stay in touch with families, friends and business contacts in the south.
Second, I am the Chairman of a nine member elected council, each of whom brings different philosophies, ideologies and opinions to the table.
I am the Chief Executive Officer of a corporation that relies heavily on the use of technology to communicate with its clients, its suppliers, and to stay current with the state of the art and, finally, I am a resident of Yellowknife in the North who uses and pays for telecommunications systems every day.
One of the great ironies of living and working in the North is that its remoteness and challenging environment have resulted in both the highest cost for and greatest reliance upon telecommunications services in all of Canada.
In Yellowknife we have risen to meet this challenge. An excellent example of these interactive voices ... on ... or IDR watch ... coincidentally as recently mentioned by the Prime Minister of Canada in a speech to the Federation of Canadian Municipalities about smart cities.
This system allows residents to access a wide range of municipal services, including bill payment and facilities for ... over the telephone. ... to expand its virtual City Hall to the city's Internet website. This is just one example of how advanced telecommunications systems have succeeded in overcoming the difficulties of providing public service in the harsh climate of the North.
As you know, the operating area of Northwestel includes the Northwest Territories, the Yukon and northern B.C. Within this area the city of Yellowknife finds itself in a unique and problematic situation.
While there is little argument that the North is a high cost serving area, Yellowknife and Whitehorse as the two major centres are closer to the southern norm than the majority of northern communities where the cost of servicing far exceeds any potential revenue which is available.
As a result, the burden of subsidizing affordable rates in these communities has fallen largely on customers in these two cities. ... definition of high cost serving area and who should contribute to who and benefit from the subsidy program is near and very dear to the hearts of Yellowknifers.
Northwestel defines a high cost serving area in terms of distance from major centres, lack of year round road access, necessity for satellite technology, harsh operating conditions, low population densities and a low number of telephone access lines.
The problem with this definition is that it is phrased in relative terms, that is to say relative to the rest of the North. Yellowknife ... not likely be considered a high cost serving area.
I believe I speak for all Yellowknifers when I say that this conclusion is unacceptable. Any definition of a high cost serving area must be based on a pan-Canadian perspective for low cost areas ... assist in ensuring that affordable and reliable services are provided to high cost areas.
The message I want to leave you with today is that there are no low cost areas in the North. Yellowknife is simply at the lower end of a high cost sale.
I would like to state my support and the support of the City of Yellowknife to the position of the Yellowknife Chamber of Commerce and others in calling for a pan-Canadian subsidy system whereby all service providers of both long distance and local services in Canada contribute to the provision of affordable and reliable telecommunications services to all Canadians in all regions, both central and remote.
Equalization is a fundamental aspect of the Canadian political and economic landscape. In my opinion, access to telecommunications services in the 21st century will become as fundamental a part of our lives as medicare, universal education and even postal services were in the 20th century.
All Canadians should have equal access to these services and all Canadians should contribute on an equal basis to the cost of achieving this goal.
My colleague, Victor Powers, the Mayor of Timmins, Ontario, has gone as far in his submission to you as to suggest a telecommunications bill of rights to guarantee that services are available, affordable and of the highest quality possible. ... to treat this issue with a similar level of importance and urgency.
While competition in the telecommunications industry may bring many benefits to Canadians, it will undoubtedly lead to greater pressure for rates to move closer to costs. I don't think this is all bad news for Yellowknife in the absence of a comprehensive subsidy program. It will render basic services unaffordable in many northern communities.
In fact, we might get away since we are closer to Alberta, but any of the ... communities ... not be able to ... services.
It is in these communities where the role of the public sector must remain strong. As part of the Stentor group of companies, Northwestel should have access to a broad client base to assist with the subsidization of service in remote northern communities.
In the absence of a pan-Canadian subsidy system, I encourage the Commission to at the very least consider this alternative.
On a final note, I feel obliged to congratulate Northwestel ... proactive approach dealing with the introduction of the competitive marketplace. The company has been a very good corporate citizen, supporting and contributing to various organizations and events in our community, not to mention the millions of dollars they have invested to provide services to remote northern communities.
The introduction of competition must be accompanied by fair and adequate compensation to Northwestel for the investment they have made in the telecommunications infrastructure in the North. Otherwise, as one member of my council put it, it is like me planting a garden and a neighbour helping themselves to the tomatoes without having to pay for the water, soil and fertilizer.
For those of you familiar with the northern growing season, this will be a ... analogy.
Thank you for your time and efforts in allowing northern residents to express their views. I wish you the best of luck in finding a ... solution to a very important and complex ...
THE CHAIRPERSON: Thank you for your presentation, Mr. Lovell.
I think my colleague might have a question or two for you.
MR. LOVELL: Thank you.
MEMBER McKENDRY: Mayor Lovell, I was wondering if you have had an opportunity to think about the bench mark that should be established, for example in Yellowknife or perhaps more broadly in the Northwest Territories, with respect to the point at which the subsidy should become available.
Do you have any thoughts or have you had an opportunity to think about at what rate level the subsidy should become available to the residents and businesses located in your city and elsewhere in the North?
MR. LOVELL: Okay. I don't have a specific amount. We do recognize that we are remote. We do recognize that costs are higher and we do recognize that perhaps we will be paying a premium for services, but it should be fair. It shouldn't be something that prices services out of communities, the rates that we pay.
The comment that was made three presentations ago about cherry picking is particularly apt. What will happen unless there is some sort of subsidy and equalization is that the Yellowknifes of this world will be open to long distance competition and we will probably be able to support reasonable local phone rate.
The smaller communities will just lose completely on something like this. I am not going to give you a number on that. I think it will probably be something than the Canadian average, but it should be something affordable for all people.
MEMBER McKENDRY: Thank you very much.
You mentioned earlier that the City of Yellowknife has a website. I wonder if you could comment for us on the importance of Internet access to residents in the North.
MR. LOVELL: Okay. Actually what we find is Internet access ... for people from the south. I am absolutely amazed at the number of people I meet that say "Oh, I saw your website" and "I saw your picture" and actually come up to me and recognize me on the street.
It has become a window to the world for us. It has put Yellowknife next door to Toronto for communications access. Within the city, the website has the use -- you know, we have our city programs there, our city agendas, our city minutes.
It's an information out and in for citizens of the community. As I said, I think if I was going to get the very big, very great advantages, it would be to link us out.
MEMBER McKENDRY: Thank you very much for your comments.
I think that is a point we sometimes lose sight of, that it is important for people in the south to be linked to people in the north just as it is for people in the north to be linked to the rest of Canada on an affordable basis.
Thank you very much for your comments.
MR. LOVELL: Thank you.
THE CHAIRPERSON: Thank you, Mayor Lovell.
THE SECRETARY: We will now hear from Yellowknife, Paul McGrath and Brent Meswood, WestComm Telecommunications.
MR. PAUL McGRATH (Remote): My name is Paul McGrath. I am the COO, Chief Operating Officer, of WestComm Telecommunications. Unfortunately my colleague, Brent Mainwood, was not able to attend. I would like to first of all thank you for the opportunity to speak to you this morning.
WestComm Telecommunications is a national resaler which is as a result of a recent merger of WestComm Sharing Corporation, which in fact is one of the first registered sharing groups, registered very shortly after the very first decisions about long distance competition in the south, and "Mainshan" Communications Group, which is one of the most successful affinity resellers in Canada.
We have offices in Toronto, Calgary and Vancouver. We travelled here today from our Toronto office as we felt it was important for you to hear from a resaler and a sharing group on these issues.
We are keenly interested in seeing full competition come to the North. As you will be aware, WestComm is only one of many resellers and sharing groups operating in Canada. At present we receive 10 to 15 inquiries per week from northerners hoping to sign up on our service.
Our customer care operators hear from many of these consumers about just how much they are paying for their telecommunications services and the quality of those services. As somebody who comes from a large urban centre, frankly, I was surprised and a little taken aback on just what we take for granted.
I was particularly struck by just how much our friends here pay for their long distance services, especially in light of the competition in the south, how great it has come down dramatically in the past few years. In fact, it was these calls from northerners which we have been receiving steadily for the past few months that compels us to come here today.
We wanted you to know that there are some resellers who view the North as a valuable territory and a valuable market. This certainly gives us some indication of how much pressure northern consumers are under and their interest in seeing true competition arrive in their communities and to arrive very soon.
I agree with some of the earlier presenters today and from our perspective, we are keen to start off from a competitive alternative as soon as possible.
As a reseller and a sharing group, we are keenly interested in competition. I find it interesting that many of the dire arguments that the big southern companies made and gave you years ago did not happen and competition is flourishing in most areas of Canada.
While I recognize that the issues are somewhat more complex than you faced a short seven years ago, I believe that the underlying practice remained unchanged. Competition was predicted by most to be a major force in reducing overall telecommunication costs and it has. Resellers and sharing groups have been an important part of that competitive environment.
We have been on the forefront of offering a competitive package to our sharing group members. We are interested in offering a wide variety of services. Along with our current suite of residential and commercial long distance services, we also offer toll free and calling card services. We hope soon to offer PCS, local services and Internet as they become feasible.
We would hope to eventually be able to offer all of these services to all customers in Canada, not just in the large urban areas.
We are especially excited about the opportunity, for example, of wireless local service as we believe this technology holds some real promise for remote communities.
With regard to the issue of subsidy of local service, we agree with your earlier decisions where wholesale providers to resellers pay the contribution fee and there should be no additional contribution fee levied to resellers.
Finally, with regard to the earlier discussion on cherry picking of communities, I can assure you that as a reseller and a sharing group, we offer our service anywhere that EEA is available to us. In fact, WestComm is one of the few resellers in Canada who buys wholesale services from both the Stentor Group of Companies and AT&T long distance services specifically because we believe that every Canadian should have equal access to long distance competition and we intend to be there.
THE CHAIRPERSON: Thank you, Mr. McGrath.
I am somewhat reluctant to get into the issue of long distance competition since we dealt with that in the proceeding last year and rendered a decision on that. Given your obvious knowledge and expertise in this area, I'm sure you are familiar with our decisions respecting that.
With respect to the issue of the provision of local service though and your comments about your interest in getting into that business and in particular in using some of the newer technologies, I am wondering whether you have any comments about the relative cost of using some of these technologies relative to the existing wire line services, particularly in some of the more high cost parts of the country and in the North indeed as one of those particular areas and how one should go about treating this subsidy issue for some of the newer, lower cost technologies.
MR. McGRATH: Well, specifically, if you look at the issue of wireless local service as an alternative for some communities -- we heard an example earlier about the CB radio. That is in essence a wireless alternative. I think there's promise there.
Even when you granted the original PCS licences, the actual cost of implementing local cells is dramatically less than it was when you granted those original licences. That cost is dropping even more.
Although we don't actually put that technology in, we would obviously benefit as a reseller. I believe that in the next few years as that cost comes down it does provide that as an alternative.
I just wanted to let you know that we will be looking at that as an alternative.
THE CHAIRPERSON: I guess part of the reason why I asked the question is, for example, if one were to design a subsidy fund scheme that was based on today's wire line costs and somebody came in with a newer, lower cost technology, unless one was able to reflect that newer cost, one might be receiving a subsidy that in fact one might not need because the cost was in fact lower.
I am wondering what your thoughts might be on how we should address that.
MR. McGRATH: I'm not sure that is going to be an issue for some time. I am not sure at this time the wireless is necessarily a cheaper alternative. I believe that if that subsidy were extended to, for example, wireless that it might encourage more wireless to be used as an alternative.
THE CHAIRPERSON: Okay. Thank you very much for your presentation, Mr. McGrath.
I appreciate your travelling from Toronto to Yellowknife to appear today.
MR. McGRATH: Thank you
THE CHAIRPERSON: Madam Secretary.
THE SECRETARY: Thank you.
In Yellowknife we will hear from Sam Gargah.
MR. DON "SIAN" (Remote): Yes, Madam Secretary, It is Don "Sian" with Northwestel. Mr. Gargah is not in the room.
As well, I would like to make a change to the list of presenter. Bob Ellison will not be presenting. He was listed in there. There is nobody present in Yellowknife at this time.
THE CHAIRPERSON: Thank you very much for that information. We will then go on to the next presenter.
THE SECRETARY: Thank you.
We will go on to Cambridge Bay, Blayne Penrice.
CAMBRIDGE BAY (Remote): Blayne has not shown up. I have left three messages with his office and I am still waiting to hear back from him.
THE CHAIRPERSON: Okay. Thanks again for that.
THE SECRETARY: We will now go to Hay River, Larry Ronsco.
HAY RIVER (Remote): Claude in Hay River. Sandra Stanway will present instead of Larry Ronsco, but she is not in her office right now. We have one additional individual, Genevieve Clark representing Enterprise who is ready to present.
THE SECRETARY: Thank you. We will hear from Genevieve Clark.
THE CHAIRPERSON: Good morning, Ms Clark.
MS GENEVIEVE CLARK (Remote): Good morning. Genevieve Clark.
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... Deputy Chief of Enterprise Fire Department. As Peter mentioned earlier, we in the North are prepared to pay a premium to live in the North, but we also want to be able to afford telecommunication.
Enterprise is a small community located 25 miles from Hay River. A telephone call to Hay River from Enterprise is 58 cents a minute. In comparison, a call from Enterprise to Grande Prairie, Alberta, is 32 cents a minute.
In May of 1997 the Enterprise Settlement Council met with representatives of Northwestel Incorporated to address this concern. At that time they agreed to apply to the CRTC for the introduction of an extended area service to enable smaller communities such as Enterprise to have unlimited local calling into specific larger neighbouring communities.
To date, as far as we are aware, no further action has been taken by Northwestel to this end, despite continual promises by company representatives that they are still willing to provide this service.
Northwestel in that period of time has made several applications to CRTC to increase local rates. As I pointed out earlier, long distance rates are unreasonable when a call 25 miles away costs more than a call south.
Service is definitely lacking when a community is given lip service about genuine concerns but no action is taken by Northwestel to provide better service. Local rates now are being increased with no reduction in long distance rates to ... again increase local rates with no increase in service not only makes northerners pay an unreasonable premium, but makes telecommunication to many northerners unaffordable.
To our communities telecommunication is a necessity, not a luxury. We have no health services, banks, education facilities within our community. Our fire alarm is dependent on an answering service based in Hay River.
By raising rates to an unreasonable amount with no benefit to equalize this rate, we put our residents' health and safety in peril, especially for those that will no longer be able to afford a phone in their residence.
For this reason above all else, telecommunications in the North must be affordable and provide reasonable services. Providing this through a federal subsidy seems to be a reasonable direction to assume.
THE CHAIRPERSON: Is that it, Ms Clark? Are you finished? Thank you.
I think my colleague, David McKendry, may have a question or two for you.
MEMBER McKENDRY: Thank you for coming today, Ms Clark.
I just wanted to make sure I understood your comments about extended area service and discussions you have had with Northwestel. Could you just go back over that to explain to us what has happened there and what the nature of the discussions were that you had with the company.
MS CLARK: In May 1997 the ... Enterprise also met with representatives of the company at which time they said they would apply to CRTC for an extended area service so that Enterprise would have no long distance charge into Hay River.
The telco has tried several times to get an update on it and has been told it will be the end of January, the end of March. They have never actually had any progress on this application or whether it was ever put before the CRTC.
MEMBER McKENDRY: Thank you.
I don't know whether you were here at the beginning of the hearing today, but Commissioner Colville explained at the end of our hearing the company will have the opportunity to comment on some of the matters that have been raised here and perhaps at that time they will have some additional information.
I take it your primary concern is the long distance rates that you are paying for calls to Hay River. I wonder if you have any comments on the quality of the local service that you are receiving in your community. Is that something that the residents of the community are satisfied with?
MS CLARK: There are concerns on the quality, not only the quality of the phone call itself. We often get feedback on the phone. Also on the quality of service. Because of long distance rates ... the Internet users very rarely use the Internet, although the access is there, because the cost to the server is too high.
MEMBER McKENDRY: Do many people in your community have computers that they would like to attain Internet access over?
MS CLARK: Yes, quite a few do.
MEMBER McKENDRY: Thank you very much for your comments.
MS CLARK: Thank you.
THE CHAIRPERSON: Thank you, Ms Clark.
HAY RIVER (Remote): Hay River. We have Sandra Stanway representing the Town of Hay River.
THE CHAIRPERSON: Okay. Could you repeat the name, please.
HAY RIVER (Remote): Sandra Stanway.
THE CHAIRPERSON: Okay.
MS SANDRA STANWAY (Remote): Good morning, ladies and gentlemen. I apologize for not being here when my name was called. I had returned to work for a few moments.
My name is Sandra Stanway. Welcome to the Northwest Territories. I hope you are having a chance to take advantage of your time in the North and tour around the various communities you have been to during this hearing, not just in the NWT but also in the northern regions of the many provinces and territories you visited.
On behalf of the Town of Hay River, I am pleased to address the Canadian Radio-Television and Telecommunications Commission this morning.
Although we are sometimes referred to as a southern community by other NWT communities due to the fact that we have four seasons, trees and all weather roads, it is a fact that we are a northern rural community. As northerners here in Hay River, we are looking to the CRTC to help control the costs of local rates for telephone service and to perhaps come up with a suggestion or idea on subsidizing the cost of phone service throughout the North.
As you are aware, the telephone is a necessity of life in northern communities. As members of the CRTC, you are seeing this firsthand by holding this conference via phone link and video link, broadcasting to many northern communities where it would otherwise be impossible to participate.
A phone is no longer a luxury. It must be available and affordable. Yet, if local rates continue to climb, maybe we will have to consider the importance of a phone.
Being in the North, it is important that we have inexpensive access to telecommunications, that being the basic telephone service as well as fax machines and the Internet. The Internet, especially for schools, is where children can learn about other regions of the world and understand where others live.
It is nice for a child to make a new friend on the Internet where spontaneous discussions can occur about life in a new community. With increased costs all around us and decreased funding, a child in the North may not get an opportunity like that. We understand that as a result of the increase in the local rates and the decrease in long distance rates that the current phone company provider, Northwestel --
It is our opinion that any subsidy program should be a national program that will benefit all high cost areas across our nation. This national subsidy program will have to be funded possibly as a tax on long distance rates and/or by providers of long distance servers.
Some kind of a national subsidy program will have to be introduced, possibly as a tax on long distance rates, to benefit all high cost area telecommunications residents.
The proposed increases that have just been applied for by Northwestel, we would like to know if they are in any way a subsidy for high cost areas or is this the actual cost of delivering to Hay River. If not, what is the actual cost of doing business in Northwestel's area?
Being a resident in a monopoly telephone is very difficult. As an average Canadian who may not understand the ins and outs of this federal Commission, it is difficult to understand that basic rates are going to remain in place once a monopoly is broken in a couple of years. But again, even though there is a possibility that another company or an additional company will serve the North, basic rates of owning a phone will continue to increase until a cap which has been set for some companies has been put into place.
As it stands now, our local Hay River rate is $15 and change per month. Another $10 over the next two years will take us to over $25 just to be able to own a phone, a cost that many cannot afford.
With only about 89 per cent of the northern population having phones, I believe it is time the CRTC begins to ask themselves why this is happening. Is it for lack of affordability or is it for other reasons?
Businesses in the North depend upon telecommunications to send and receive information that in the past would have been mailed by a hand. In a world of faster, bigger, better, businesses here can compete on the global market, but only with the affordability and accessibility to reliable telecommunications.
We as Canadians and northerners understand how important business is and how important communications are. To the CRTC, we ask that you don't sever our communications to the outside world by allowing increases that will force us to reach deeper and deeper until our pockets, until they are empty.
We ask that you look around the NWT while you are here and think about the every day costs of products and services we have to pay. We don't believe it is necessary to have to pay top dollar for top notch communications. We ask the CRTC to consider section (b) of the Telecommunication Act which states:
"The need to render reliable and affordable telecommunications services of high quality accessibility to Canadians in both urban and rural areas in all regions of Canada is a right."
Thank you very much for your time. I look forward to the CRTC's decision in the future.
Have a good day and a safe trip home.
THE CHAIRPERSON: Thank you very much, Ms Stanway. Just to be clear, are you stepping in for Larry Ronsco?
MS STANWAY: Yes.
THE CHAIRPERSON: Maybe I could just toss the question back to you that you posed.
MS STANWAY: All right.
THE CHAIRPERSON: It is related to the 89 per cent penetration level. You posed the question is it as a result of affordability or other reasons that that penetration rate is lower than in the rest of Canada.
What would your answer be to that question?
MS STANWAY: Personally, I personally believe that it is as a result of expense. People just can't afford it.
THE CHAIRPESON: Some people have suggested that we should consider that the rates in the North should be no higher than rates in the South and in many areas of the South now residential rates are in the $20 to $25 range.
Would your answer to that first question suggest that in fact we shouldn't even let rates in the North go to the levels that they are in the South?
MS STANWAY: I believe that should be something that should be looked at. I know, having lived in the South and coming up to the North, the costs in the North are extremely high, but it is something that we do have to accept and live with.
I believe that a telephone as a necessity of life should not be high, not only in the North but in any part of the country. I don't believe that there is any reason with all the telephone users. I believe that the share of the market could still be reached by businesses if everyone could afford a telephone.
THE CHAIRPERSON: A couple of years ago we did a review of the affordability issue in Canada. It became clear that the affordability wasn't just tied to the question of the local rate but in fact was as much related to the total bill which included, of course, long distance charges.
Earlier, I think the last presenter we heard about the issue of EAS to local areas and we have also heard from others that once you get outside a small community, every call is a long distance call.
When you talk about the affordability issue, what would your view be in terms of the relative importance of the long distance rate as opposed to the local rate in and of itself?
MS STANWAY: Making as many long distance phone calls as I do, I would like to see those rates decrease. As well, I would like to see some kind of a cap put on a base rate.
THE CHAIRPERSON: I take that it's your view that the affordability issue relates to the total bottom line of the bill.
MS STANWAY: That's correct, yes.
THE CHAIRPERSON: All right. Thank you very much, Ms Stanway. I appreciate you coming today.
MS STANWAY: Thank you.
THE CHAIRPERSON: Madam Secretary.
THE SECRETARY: Thank you.
We will now hear from Iqaluit, David Kravitz.
MR. DAVID KRAVITZ: Good afternoon.
My name is David Kravitz. I am the appointed Deputy Minister for the Department of Public Works, Telecommunications and Technical Services. I am here to speak on behalf of the office of the interim Commissioner and the future Government of Nunavut.
I will have a very quick presentation. I am not here to present statistics. I think you have heard plenty of those. I think you have gotten some excellent information in terms of the impact of the question on individuals and on businesses and the general environment of what telecommunications looks like today in the North.
Where I would like to share with you to maybe give you a little bit more flavour is to give you a little bit of a sense of the future, particularly the future from the Government of Nunavut's perspective.
As you know, Nunavut is going to be a large territory. It is roughly a quarter of the size of Canada with a very small population. The Government of Nunavut is being structured in a way in order to maximize service to people. We will have major offices in 11 communities, the capital in Iqaluit, three main regional centres and a number of auxiliary centres. We will also have government employees in other communities in Nunavut.
Telecommunications, the linking of those services, the linking of government, is important in any case. To link into communities, to provide service to communities is important. They become much more complex given the kind of technologies that we have to look at, the distances between communities and all of these things, as you have heard, become much more important as to why telecommunications plays a role in Nunavut that it really doesn't play in other places in the same way.
Nunavut is going to grow. It is going to grow fairly quickly. The creation of the government, the jobs coming in, the secondary and tertiary growth that accompanies that -- we are looking at growth in the major communities of anywhere from 10 to 50 per cent additional growth to the current growth in the next four years or so.
I think that's a fairly phenomenal rate of growth. Telecommunications is going to play an important part of that.
The Government of Nunavut itself is relying on a reliable high quality communications system to be in place in the future to provide services to people.
We are designing systems now that will link the communities and the government offices with the goal of being able to offer a wholistic service to individuals so that when somebody comes into a government office in a Nunavut community, we can access the information on that individual and provide them with a full range of services.
This is something that all governments have been moving towards. I think we are in a unique situation as we develop our systems to build this thing into those things.
We want an openness to the government in public. Telecommunications is a way to do that, through the Internet, through the web, various ways that telecommunications plays a part. Of course, this all plays back into the affordability of the system as to just how far we can go with this and the willingness of the public to use this.
Needless to say, we have been in consultation with Northwestel in terms of the requirements that the government will have. Of course they will be major. There will be faxes flying everywhere in addition to e-mails and everywhere else, services that don't exist now.
Even beyond that, Nunavut is looking towards the communications system to provide us some opportunities for other improvements in the quality of life. The introduction of telemedicine I think is both potentially a cost saver and a way of improving people's lives. This is a critical service and I think you have had expressed before the kind of services that need priority are services directed towards health, education and emergencies.
Certainly distance education falls into that. We would like to be able to expand that. In our modern day, a person in Pond Inlet can access university programs in Halifax if they have the right equipment. These I think are opportunities that we would like to stress in terms of what we are looking at for our future telecommunications system.
In the Footprints II document, the second version of Footprints in the Snow, that helps guide us in our implementation plans, there is a very important focus on telecommunications, particularly recommendations as to how the Government of Nunavut can provide the backbone for a number of services that ordinary citizens can tap into in ways they can't now.
Certainly with the "Gina" routine and the order contract, this is one way that we are moving towards this direction, but we are having increasing demands, particularly from the schools and young people to link them into the world.
I don't have a lot more to say about that. We are in a dynamic situation with growth coming. I think I have heard some very good things in terms of ways to address the high cost that Nunavut means and what that means in terms of what you might do.
I would like you to be sensitive to the fact that here telecommunications is more than entertainment. It's not simply a service that links individuals, albeit that's very important. It's a service which we are relying on to be affordable and reliable, high quality, that we can provide services to people in new and innovative ways.
I will just leave it at that. If you have some questions.
THE CHAIRPERSON: Thank you very much, Mr. Kravitz. I appreciate you updating us on the developments with the creation of the foundation of Nunavut.
MEMBER McKENDRY: Thank you very much.
It is certainly very exciting. I know it can't be nearly as exciting for me as it is for people that live here, the creation of Nunavut, but it's a wonderful time for everybody in Canada, particularly people here with the creation of the new territory.
I wonder if you could just comment to the extent that the existing telecommunications network in what will be Nunavut very shortly is adequate to be able to achieve the kinds of things that you would like to achieve. For example, telemedicine. I know in the south even there are network upgrades that would have to be made in order to have a comprehensive telemedicine capability.
Have you had any time yet to think about those kinds of changes that would have to be made and do you have any idea of the magnitude of the changes?
MR. KRAVITZ: I'm really not an expert in the area. Certainly the telemedicine example is a good one. We have run into the odd challenge in doing this in terms of testing systems to be able to make this work. We are working towards that with the other people on the project.
We are planning to be as close to ready for the full implementation of our systems when the other backbone systems are ready. We are relying on Arcticom and Northwestel to be ready with their end of it. I'm really probably not the best one to give you any technical answers on that, but I do have people that are chipping away at these problems and all the challenges that incurs, and it certainly does present quite a few.
MEMBER McKENDRY: You talked about education and the importance of linking students to the world in terms of being able to draw on those resources. As I mentioned earlier and one of the participants mentioned earlier, it is also a way for students in the south to link with people in the north. I think there's a huge benefit as well.
Could you just comment briefly on the role of Internet access and the future you see for Nunavut?
MR. KRAVITZ: I think there is going to be Internet access at a number of levels. At least we are hopeful. Right now there are three Internet providers here in Iqaluit, Rankin Inlet and Cambridge Bay. They are all in the growing stages.
They have all met with some challenges, both in terms of their linkage to the outside world and their own equipment. There has been a very steep learning curve, I think, for all of these providers in coming along to provide proper service.
A number of them, particularly Iqaluit, is going to be challenged to provide for the enormous growth in demand because it will grow very quickly.
The Government of Nunavut itself, we are talking using the Internet and Internet providers for a lot of our e-mail services. They will be the backbone of that for us.
The other communities, we are hopeful that once the systems are in place, the arrangements through Arcticom group, that people in other communities will start to access these things.
I suspect like anywhere, there are people who will never be on Internet, that young people will grab hold of it very quickly and it will become increasingly important to do the business of government, education and just general information for people.
MEMBER McKENDRY: Thank you very much.
THE CHAIRPERSON: Thank you, Mr. Kravitz. We appreciate you coming today.
THE SECRETARY: Thank you.
This would conclude this morning's session. We have no other presenter registered. We will verify with all of our sites with any others.
We will begin with Iqaluit.
THE CHAIRPERSON: Is there anybody else where who wanted to make a presentation? Just by looking around the room, I think everybody who is here now has or was otherwise involved in this proceeding.
THE SECRETARY: We will go to Yellowknife. Do we have anybody in Yellowknife?
YELLOWKNIFE (Remote): No, there is no one in Yellowknife.
THE SECRETARY: Thank you.
Cambridge Bay, do we have any individual in Cambridge Bay?
CAMBRIDGE BAY (Remote): No.
THE SECRETARY: Thank you.
Hay River, do we have anybody in Hay River?
HAY RIVER (Remote): No, we don't.
THE SECRETARY: Thank you.
Inuvik, do we have anybody in Inuvik?
INUVIK (Remote): No, there are no presenters in Inuvik.
THE SECRETARY: Thank you.
RANKIN INLET (Remote): No, we don't have anybody here.
THE SECRETARY: Thank you very much.
THE CHAIRPERSON: We understand there was one more person who had registered and had intended to make a presentation later on today. As I indicated earlier, we would not turn up the remote sites as we had originally intended later on in the evening or later on in the day's session.
I thought while we had the sites up that we might provide an opportunity for Northwestel to respond to the presentations that they have heard this morning.
I would propose that we give Northwestel -- we take about a 15 minute break and provide an opportunity for them to collect their thoughts.
We will reconvene at about ten to one at which Northwestel would provide a response to presentations. If that's okay, we will take a break until ten to one.
--- Recessed at 1235/Suspension à 1235
--- Resumed at 1255/Reprise à 1255
THE CHAIRPERSON: We went about five minutes longer than we had intended. I apologize for that.
As I indicated earlier, we will now provide Mr. Boorman an opportunity to respond to some of the comments he has heard this morning on behalf of Northwestel. I thought we would do this at this time while the remote links are still up. It may be that there are only Nortwestel people at those links, but at least they can hear what their new President has to say.
Mr. Boorman, I turn it over to you.
MR. PETER BOORMAN: Mr. Chairman, Members of this meeting. I would like to thank you on behalf of Northwestel for making this visit possible.
I think this is part of your new direction. I have a copy of that new vision with me. I am really heartened by some of the directions that have been put into this document. I'm not sure everybody is aware of that, but I would like to read from your mission statement. I think it's extremely important to his hearing. You say:
"-- to ensure that Canadian communications contribute fairly and equitably to Canada's economic, social and cultural prosperity through regulation, monitoring and public dialogue."
This is an important change for all communities, all people in Canada.
In terms of my response today, I listened very, very carefully to our subscriber base in their discussions both here and at the beginning of the proceedings in Whitehorse. I have great empathy for their needs, for affordable rates and services that we have to offer to the public today in the North.
I also listened very carefully to their constructive criticisms about our lack of quality, but then when you understand the sheer size of the geography we are dealing with, we are talking about a land mass that is more than 40 per cent of the total of Canada today, in the order of 4 million square kilometres.
We are talking about 92 communities that we serve today out of which only six are profitable, only six are profitable, yet we reach those communities through two media. We use both satellite in the North and we use microwave in the South, with more than 8,000 kilometres of microwave access, much of which is not even reachable by road. It's served by helicopter. We, of course, laid that out in our proposal that we brought forward as to the extreme conditions and the environment that we are under.
As you go from the west to the east, you see in the west the highly mountainous condition terrain. It is very, very difficult to reach, often densely treed. When you come to the east, you see the Canadian shield with vast areas that are completely wide open with temperatures that range anywhere from plus 30 degrees in the summertime to minus 60 and 70 degrees in the wintertime, and that's without understanding the wind chill factors.
Today we operate with a base of about 544 employees. That's staggeringly small for the size of the geography that we cover. We are an extremely lean and efficient machine in the way that we adapt to our environment.
When we come to our proposal in the high cost serving area, we actually have six principles. I think it's very important to understand those principles.
We stated that northerners should have universal access to basic telephone service at affordable rates, but what is basic telephone service? It goes beyond the realm of dial tone. What we are hearing today is customers really want multimedia ccess. They want Internet access available to them.
It's interesting that when you read the StatsCanada response on Internet access in Canada, we have the highest access rate in Canada in the North. It says something about the infrastructure that we are trying to deliver to our customer, and yet you are hearing there is a high demand to go beyond that.
In terms of meeting that, we have looked at all mechanisms of providing that kind of access through a co-operative approach that was led by GNWT. We responded to a proposal and today through a co-operative we are providing the Arcticom service to 58 communities in the North. It is providing for a fast frame relay access over satellite using techniques that have never been tried before.
This is all being shouldered by the company today to bring this about. We have excellent engineers and technicians that are putting this in place. Iqaluit is up and running and most of the sites have already been provisioned for that.
You heard today the requirement for telemedicine, for remote learning. These capabilities were kept in mind. It is part of the vision for Canada, so why should we not forge ahead to try and make that available, and we are going to make that available. We have actually even received a grant from CANARI to promote telemedicine. We were very successful in getting that.
We are providing in the west ATM access. We have turned up those kinds of services that will provide more efficient access to the customers, to the ISPs. This will lead to ISP generation, new business for the North because we are not saying that we will just be the ISP. We are saying that we need other businesses to take off on the access we are providing.
When I heard today the gentleman that talked about his ISP approach to business, you can simply multi-duplicate that across our territory. That is the new business that these companies can get into.
The other companies are behind that with web access and so on. There is tremendous creative skills in the North that need to be tapped into that can be exported out of the North to other parts of the world. That is part of our approach, to provide for that, but it has to be done at an affordable rate.
When we talk about affordable rates, we are talking about rate rebalancing. We hear time and time again, as you do, that our LD rates are excessive, but they have to be excessive because we have an access rate that costs three times the national average to provision for and yet today we offer rates that we think are quite acceptable between the $12 and $16, but what you are hearing is it isn't, it's already too high. That's below the national average.
When we are talking about rate rebalance in the south where they are talking of $20 to $25 per subscriber and we are saying we will rebalance to that, simply people in the North cannot afford that.
By adjusting our LD rates down, we are only exacerbating the problem by jacking up the local access rates.
We already know that customers are turning down their telephone service in the North because they can't afford it. It's not a question that we don't have the coverage. It's the fact that people turn off their service because they can't pay their bills.
The question of affordable rates has to be really well understood. When we talk about a subsidy, we have put in a model for the subsidy in our response. We talked about what we thought that would cost. We questioned up to $30 million per year to provide for the shortfall.
The other interesting area that is happening here is because we are waiting to get competition involved in the North, and remember in 9710 we built a model ourselves to bring in competition. We didn't block it, we encouraged it.
What's happening in the meantime is because of disparity in rates, we have a tremendous bypass problem in the North and it has reached epidemic proportions. In fact, we very much doubt whether we can make our rate of return this year because of that.
We heard in Whitehorse one of our subscribers saying they buy calling cards from the south and are using those calling cards. We have measured that traffic and it's costing us millions at the moment in lost revenues.
Obviously that puts pressure on what is affordable because it puts pressure on the rebalance and it says that rebalance is not really enough to offset that change and we are studying that currently to make available that information to the CRTC.
In our second point on principles, we said that northern customers should pay rates that are generally comparable to southern rates, given that the product or service is equivalent. When we talk about equivalent services, we are talking about providing for multimedia access, so we cannot just simply put a line in and give it dial tone.
We are talking about providing a medium speed for Internet access. We are also talking about building up the backbone so that we can provide for the access to the Internet in the south.
Today we are taking our network, which is 86 per cent digital. It will by the end of the year be almost 100 per cent. The last portion of microwave that comes down from Yellowknife to Fort Nelson is being implemented at a cost of $8 million to Northwestel to provide for this. That is to open up communications to the south and the rest of the world for Internet access and other services.
The next point we talked about was all northern communities, regardless of size or location, should benefit from long distance competition, long distance prices, increased innovation and a broader range of services.
We are not going to impede competition. We believe that we can learn from that. We believe that true competition leads to develop new business. It stimulates the base and so all companies should profit from that.
We are not saying we would push back from that. We are welcoming that. At the same time, we have to be extremely careful to the sensitivity of cherry picking in our own serving area. There are probably only half a dozen customers that really pay back for the outflow of dollars to keep the area turned up, to keep it profitable.
If we were to lose those customers today, then we would jeopardize our position as a business.
The other point to keep in mind is we have probably a population in our northern area of probably 120,000. Thirty-one thousand homes are in that area. That's what we are serving in terms of the residential base. In that residential base the revenues expended for LD and local access are quite small.
We are saying that funding support should go to services where the rates are below the cost of providing the service. I think that we heard that in spades from the subscribers today. They cannot afford the rates that we are trying to introduce through the rebalance process, so there will have to be an offsetting subsidy to deal with this.
It has to be a national subsidy to take care of this. You cannot look at it as one area compared to another. You have got to do it from a national process. We feel also that there should be a body in the North that is supporting that process as we go forward so that the subsidy is dealt with correctly.
We have also said in one of those points that Northwestel will continue to encourage efficiency in its own organization. As we expend capital today in growing the network for future requirements, we are also putting in place brand new systems to run the business with.
This is in new forms of billing systems, new customer service systems, new network management systems to make our overall infrastructure more effective and more available. It will also then increase the efficiency and lower the cost of offering that business.
We are paying the penalty of doing that now because we are being pulled three ways: more modern network, more modern switching and more modern systems.
Also, we said in the six principles that Northwestel's continued financial viability in a competitive environment is essential to remain a northern based full service provider of telecommunications services.
When you take into account that our revenue base is in the order of $120 million today, that is our revenue stream. Out of that we expect to get a reasonable return on equity because both our owners and investors demand that.
The telecom business is a highly capital intensive business. We know that we can afford to pay $20 million or expend $20 million on capital per year, but today currently we are expending at the rate of $35 million to $40 million. That is not sustainable. Therefore, our debt to equity ratio will become out of alignment. If it becomes out of alignment, then we simply cannot get more capital.
We have to be extremely careful about that. So it is very, very important to understand the economics of how a business is run. That doesn't mean anything to the subscriber. They don't understand the financial areas that we are concerned with, but we have to understand that because if we do not take care of that side of the business, then we will cease to be in business and that is not serving the customer.
In terms of the way we go about our business today, it's a compromise. We would like to do far more. We have the knowledge and wisdom to provide the services and the capability and the quality of service that our customers are demanding, but it's a soar-off on the expenditure of providing for that.
To date, we have spent more than $400 million. We have expended that to build the infrastructure and provide the service that we have today.
We have a five year plan to spend $200 million more to take us into the future, to provide the new services that if our customers do not get those new services, then they will not be profitable.
We are dealing in an information age. In that information age we need more than dial tone. We need new voice, video and data, multimedia services. The company is positioning to provide for that.
In times of competition, we will cease to be the dominant provider. Dominance is an arrogant term. What we are looking to be is the preeminent supplier of services and we will be a full service provider.
One thing is for sure, Northwestel is here to stay and it's here to serve its customers.
THE CHAIRPERSON: Thank you, Mr. Boorman.
Perhaps I could just pose a question to you. I think of the comments that Mr. Kravitz made regarding the establishment of Nunavut and the new capital here in Iqaluit. He talked about the various services, a lot of which are going to depend on telecommunications in order for the government to be able to provide services to the public in Nunavut.
You just talked about a five year, $200 million capital program. I presume part of that program will be putting in place the infrastructure that indeed the Government of Nunavut will depend on to provide some of its telecommunications services which I would suspect would probably provide the basis for, if I can use the term, piggy-backing other services that might well be available to the more general public directly.
I'm wondering if you could comment on that. I guess in the light of the kind of partnership that you talked about earlier when you mentioned co-operation with GNWT with respect to the Arcticom project and so on.
Do you expect that this establishment of Nunavut is going to allow for the creation of infrastructure that will not only benefit the new Government of Nunavut, and indirectly the public in the region, but also more directly the public by piggy-backing other services on that infrastructure?
MR. BOORMAN: Mr. Chairman, if I understand you correctly, what we are going through is an interpretive process to understand the full requirements of Nunavut. We are looking at their proposals. We are looking at ways to provide new infrastructure so that we can do exactly that.
We don't expect to be the sole provider. We expect to provide infrastructure where it's required. We are on an accelerated program because the infrastructure has to go in very quickly.
We are looking at different ways to build it. We are very entrepreneurial in our approach to that and very much we are working very closely with the people so that we can minimize the delays.
MEMBER McKENDRY: Earlier today one of your customers in Enterprise raised with us the status of a request they had made to your company with regard to an EAS link between Enterprise and Hay River.
I was wondering if you had any information you could provide us on the status of that request.
MR. BOORMAN: We will deal with that question and we will get back to that customer. The only comments I can make to you are comments that may not be fully correct. I don't have all the information in front of me.
In terms of dealing with an EAS area, you have to take into account the distance between the two areas concerned. If you are extending an EAS, you have to understand the number of subscribers and the calling rates. I believe we did study that and it did not really show any profitable returns for providing an extended coverage. I believe that we have studies under way and they have been under way. We will go through those studies and make the people well aware of that.
MEMBER McKENDRY: Thank you.
I have another question. I think you said in your comments that some of your customers were disconnecting your service due to the affordability problems. Do you have any additional information on the number of customers that are doing that?
MR. BOORMAN: I don't have the information at my fingertips, but having sat in our call centres and listened to the customers when they are calling in, very often the hunting seasons -- as you know, they are quite seasonal. There are times when people can afford the service and other times they can't.
We try a very creative means to keep the telephone access running. Sometimes we say "Well, look, we will provide the dial tone for local access, but you won't have long distance access" because they are so far behind on their bills.
We go through that process very, very carefully with our customer base. Of course, we also have people that speak in the 14 languages that you will see in the North. We are very, very close to our customer in that respect.
I think you need to see some of the areas. When you look at this one that you are looking at now, you might be surprised at the layout.
When you get into such places as Pond Inlet to Dorcet and you see the extreme conditions that those people are living under and the fact that if it is a bad hunting season, then their resource capability is stretched to the limit. They survive.
You are talking to people who understand survival to infinite levels. They will simply cut that telephone off.
Also, we need to, as I mentioned the cultural side of this, we need to understand very closely the cultural responsibility that we have to the diverse types of communities. What you see in the south is not what you see in the north.
The access to communications is shared. That's very, very difficult to measure in terms of trying to bill a customer.
MEMBER McKENDRY: Thank you.
THE CHAIRPERSON: Thank you very much, Mr. Boorman.
I appreciate as I am sure all the parties that commented today, both indirectly and more directly, on the service that Northwestel is providing will appreciate your response.
I would like to make just a few comments. We do have one party coming back today in Iqaluit. Since we do not have any parties registered for any of the other sites, we won't turn up the other sites later on today.
I want to take this opportunity to thank all of those who took the time out of their otherwise busy schedules to come and present their views to us here today. I must say for my part, having sat in on a few of these proceedings, we were certainly impressed by the quality of the presentations.
As I said at the outset, we wanted to treat this as informal and we don't necessarily expect "professional, well researched presentations in terms of lots of statistics and so on". The reason we came here and the reason we have gone to other areas throughout the country and not the major centres is because we just wanted to hear what people had to say about this issue and how they felt about this issue and their concerns.
I know, speaking for my colleague Commissioner McKendry and myself and the staff, we have certainly got that and the feeling that we really did get a really good sense of what the problem is, certainly in this part of the North and from the people who came to the other sites. We have certainly got a good sense of the scope of the problem here. We have certainly got a major task on our hand now to figure out what the precise solution is going to be to solve this problem.
Clearly there is a problem. It will be a growing problem as competition begins to take hold in the country and as competition generally tends to drive prices towards cost. That will create major problems where the cost of providing service is high, notwithstanding the fact that new technologies may in fact lower that cost. I think we will have a problem for some time to come in this country and it must be addressed.
I want to thank the folks at Northwestel and the others who were involved in providing the video and audio links to the various centres. Again notwithstanding the problems that we talk about in communications in the North, we think this system worked well here today. Certainly there were no "Murphy didn't strike", so that certainly worked well.
I thank all of the others who participated in the proceeding here, both in providing audio and video and broadcasting for carrying -- I guess it will probably be later in the week or next week -- for carrying some of the proceedings here today and making people aware of this problem.
With that, I again will thank everybody. We will be coming back here later in the day in Iqaluit to hear one more presenter. I will certainly provide you with an opportunity to respond to that if you wish to.
With that, I think we will take a break for lunch and we will reconvene here about three o'clock.
--- Recessed at 1323/Suspension à 1323
--- Resumed at 1500/Reprise à 1500
THE CHAIRPERSON: Good afternoon, folks.
As we indicated before we took the lunch break, there was at least one if not two parties who were intending to appear this afternoon. I understand one of them is here, so I will turn over to our Hearing Secretary to call the first presenter.
THE SECRETARY: Thank you, Mr. Chairman.
We will call Gilbert Normandeau.
MR. GILBERT NORMANDEAU: Thank you.
My name is Gilbert Normandeau. I am the General Manager, Eastern Region, for First Air. We are a privately held airline that provides services throughout Northwest Territories, Yukon, Northern Quebec, Ontario. We would like to do a presentation on the matter at hand.
The territorial government supports the need for Canada's telecommunications industry to set up a national fund to subsidize high cost regions in the North. Public Works Minister Jim Antoine believes the fund is needed to protect local services in the territories' smaller communities after long distance competition is allowed in the year 2000.
The federal government agrees with this principle. In fact, our Telecommunications Act identifies as a policy objective for Canadian telecommunications the need to render:
"-- reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada."
The CRTC supports the principle. In fact, in 1996 the Commission stated that the matter of service to high cost areas included the extension of service to unserved areas and the upgrading of existing areas to be important.
Northwestel, who sees its role in future as a full service provider of all types of communications services throughout the North, supports the need for a national fund. They should know. They already lose money in 90 per cent of the region they serve.
Revenues in Whitehorse, Yellowknife, Iqaluit and Fort Nelson have to pay for all the other costs of providing service to the smaller outlying high cost serving areas.
As the spokesperson for First Air, the largest private sector employer in Canada's north, I give you our support. First Air fully supports the need for a national fund to provide the necessary telecommunications services in the North.
To the territorial government, to the federal government, to the CRTC, to Northwestel, to the residents of the north, and to us at First Air, the three fundamental principles are clear.
Northerners should have universal access to basic telephone service at affordable rates. That's what makes us Canadians.
Northern customers should pay rates that are generally comparable to southern rates, given that the product or service is equivalent.
All northern communities, regardless of size or location, should benefit from long distance competition, especially if this can result in lower long distance prices, increased technology innovation and a broader range of services.
Clearly, there is widespread support for a national fund to protect local services in the small communities after long distance competition is allowed in the year 2000. Without such a fund, competition could place a financial burden on Northwestel that could put at risk the local and long distance service charges now available in our remote areas.
The problem is that competitive long distance providers are likely to compete for business only in Northwestel's larger centres, taking up revenues that Northwestel now uses to subsidize its money losing operations in smaller communities. Some communities might lose their services altogether. Others might get reduced services. This is totally unacceptable.
What about upgrading and improving services? How will this happen?
We all know that telecommunications services throughout the North is a high cost service. That's why we call this a high cost serving area. Inevitably, northern residents place a greater dependence on long distance telecommunications services. They need these services more than any other Canadians. Their need is greater due to the fact that the majority of communities are very small and isolated from each other.
At First Air, we know this only too well. For many months of the year the most important form of transport for all people of the North is our airline routes. No other transportation is viable.
Increasing transportation and telecommunications costs in the North may be driving out many companies who could be operating here. Bell Canada would agree with this. When Bell Canada transferred to Northwestel the service territory in Eastern Northwest Territories, $18 million was deferred credit to be drawn down over ten years, reflecting the finding that servicing this area loses money.
If the Eastern Northwest Territories were found to be uneconomic, most of the communities in the west and Northwest Territories, the Yukon and northern B.C. are also uneconomic. East and west are similar in terms of small populations, low calling volumes, lack of economies of scale, remoteness, lack of road access, dependency on satellite links and the harsh climate conditions.
The case for bringing down rising costs is a strong one for all of Canada's north. As the airline serving Canada's north, we can vouch for that.
The population in the North is only about 110,000, less than 1 per cent of Canada's population. Add to that the fact that people in the North have many different cultures and 16 different languages are spoken, and you have a very deserving case.
As an airline, we have a lot in common with any telecommunications company. To both industries operating in the north of Canada does not give a company any advantage of economies of scale. We both operate in the North with substantial fixed costs.
Moreover, many technicians in small communities are part time and trained only in certain tasks. Retaining qualified technicians in small remote communities is cost prohibitive. Frequently, technical specialists located in larger centres have to fly in to perform basic tasks. The high turnover of technicians in small, remote communities further reduces productivity.
The uniquely geographical and climatic environment in the North are challenges that we face alongside Northwestel in day to day operations. These challenges not only add costs to operating expenses, they also require high capital investment.
This is why we at First Air have fought NAV CANADA over increased rates for northern flights. Every increased cost in the North hits our economy harder and it has a domino effect on every other cost.
Operating expenses in the North are extremely high. For example, the annual cost of air transportation for Northwestel is approximately $1 million, contributing to high operating costs with the long labour hours spent on commuting to these remote communities along with the cost of air transportation itself.
We both have four high cost issues: geographical remoteness, harsh operating conditions for much of the year, small communities with limited economies of scale, low density populations. Competition alone will not deliver the benefits of the information highway to the northern regions of Canada.
The Commission already notes the high cost of travel, isolation and lack of social services mean that the communications infrastructure must be updated in a timely fashion if those residing in northern and remote communities are to benefit socially and economically from the new communications services.
From this it is clear that to extend or upgrade services in all regions of the north needs additional funding, which is another reason we need a national fund. We have seen too many examples of rising costs being passed down to the residents of the North. We have seen the cost of living too easily escalating in the North. This cannot continue.
As Canadians, we owe it to the people of the North to have the same telecommunications services that are available in the rest of Canada. For that, we need a national fund. That is why the people of the North will have the full support of First Air for a national telecommunications subsidy fund.
THE CHAIRPERSON: Thank you, Mr. Normandeau.
You and many others who have appeared before us today, and indeed others at other locations, particularly those in the North who talked about long distance competition being useful if not essential on the one hand, but on the other hand people have talked about competition may only take place in some of the larger centres and in fact could end up creating problems.
I took it that long distance competition was one of your sort of three issues that you thought we should be dealing with. In the context of this whole high cost proceeding, how do you in your mind resolve this issue about on the one hand having competition to try and drive long distance rates down but on the other hand being concerned about what has been referred to here as cherry picking?
MR. NORMANDEAU: I guess it's an issue that the Commission is going to have to come to terms with in the fact that as with the rest of the population of Canada, particularly the majority int he south, competition and long distance accessibility is already in place.
In the North we should have the same advantages without having to be penalized because of our remoteness and our isolation and the small size of the communities.
The ability for some of the larger centres in the North to attract competition may prove out and we may see after July 2000 the introduction of competition in some of the larger centres, but we shouldn't preclude having the door open to other suppliers, other carriers, to provide long distance competition in the other communities if they choose and if they don't, there should be some facility for the local carrier or the incumbent carrier to provide a level of service comparable at a comparable price to the south and pricing comparable to the south.
THE CHAIRPERSON: I guess one of the problems we face with this issue, and we face it in the south actually with some of the smaller independent telephone companies too, is that even when you do allow competition to take place, but set up a structure -- somebody referred this morning to, I think it was Mayor Lovell referred this morning to planting a garden and then having your neighbour come and help themselves to the carrots, vegetables and what not and not contribute to the watering of the garden and so on.
When we introduced long distance competition, our equivalent of getting the neighbour to pay a fair contribution has been something we call contribution, which is to support the subsidy or the shortfall that the telephone company incurs in providing local service.
The problem that we faced in some of the smaller independent telephone companies is even when you open the door to competition but set the contribution at a certain level that fairly subsidizes the shortfall, that contribution payment ends up being so high that no competitor enters the market anyway.
We could satisfy ourselves if we put the rules in place, but in fact when you put those rules in place it ends up being an "equitable contribution". In fact, you still end up with the same situation. For all intents and purposes you have a monopoly still there.
That's just a comment really on some of the views we have heard on that issue.
You drew some parallels between providing telephone service and your own business of providing an airline service in the North. What would you see as being some of the differences between your business and the telephone business because I don't expect that you are able to draw upon a fund that would be based either in the North or a national fund for that matter to support the provision of airline service in the North and yet you support a fund for the provision of telecommunications services.
How would you draw a distinction between the business you are in and the business those folks sitting behind you are in?
MR. NORMANDEAU: Well, presently we are not able to draw on a fund. You present a very interesting question.
We are in the midst of having a scenario wherein Transport Canada has devolved responsibility for the air navigation system in Canada recently and formed NAV CANADA. NAV CANADA's charging principles indicate that they have to charge or apply charges, fees, that are equitable across the country. In other words, they can't charge any extra in the North which they recognize as more expensive or more costly for them to operate.
What's happened is they have applied the principle very rigidly. It's net effect has been a significantly larger impact on residents of the North as opposed to the general travelling population in the South who are actually going to see a reduction in their cost of travel to the tune of about a hundred million dollars a year for passenger travel only.
Of course, nobody mentions in the media that cargo shipping in the south is also going to become more expensive.
We are perhaps different from the telecommunications industry in the fact that where we have been deregulated, if you will, since 1987 and the marketplace is open to any competitor or operator with the wherewithal to enter the marketplace and begin service to initiate whatever scheduled or chartered services they want.
What we are hoping to achieve is through consultation process with NAV CANADA is to get some recognition that the impact of NAV CANADA in the South -- the impact of NAV CANADA fees in the North is onerous and it's unfair and that there has to be some mitigation by either NAV CANADA or the federal government to offset the extra money that is going to have to come out of the North from our own First Air group of companies in the North.
We are talking about five million new dollars a year coming out of the northern economy. We are already talking about a fragile enough economy as it is. We see that as something that presently is different between the airline and telecommunications, but we would like to see if the telecommunications industry was able to understand the difference and the uniqueness of the northern applications. Then hopefully the transportation group would also see the same uniqueness.
THE CHAIRPERSON: Maybe we should send a copy of this portion of the transcript to NAV CANADA on your behalf.
MR. NORMANDEAU: They will be hearing from us.
THE CHAIRPERSON: No doubt. Just one last question, from me at least. You wouldn't have heard this question posed to other parties this morning, of course, because you weren't here. I didn't jot down the particular reference you made to it.
One of the issues that we are going to struggle with here in arriving at a solution to this problem, should we put in some sort of a fund to support the provision of either basic telephone service or whatever definition we may arrive at, is what should one use as a bench mark. I think you made reference to comparable rates to the south.
Now, for either business or residence, can you offer some suggestions that we might be able to consider? What should one use for a bench mark? Some people have said "Well, we shouldn't pay any higher rates than major urban centres in the south". Some people have even said "Our rates have gone from $5 to $15. There has already been a huge increase. We don't think we should pay any more than that".
One or two people this morning, I think it was Mr. Haine who said "We are used to paying a little more. We can see perhaps 10 to 15 per cent more than a comparable rate in Toronto or whatever" and then you would subsidize beyond that up to the cost of whatever telephone service.
Do you have any suggestions in that regard?
MR. NORMANDEAU: It might be a little bit unfair for me to offer a comment. I would offer these suggestions.
As with everything else in the North, there is an Arctic premium to be paid. It's a recognized fact. I guess what we are concerned about is that it not become overly cumbersome or burdensome on the general public and the commercial endeavours here in the North.
The 10 to 15 per cent, if you look at basic staples, if you were to do a review of what a food basket would cost you in the North as opposed to in the South, if you were to look at other issues, fuel, home heating fuel, other commodities such as that, it may give you some place to start looking.
It may be interesting to note that presently DIAND, the federal government, provides a subsidy for nutritious perishable foods to ensure that these items are available to the general public in the North and to keep those costs in line with as near as possible with the costs in the South. That may be somewhere to look.
THE CHAIRPERSON: That's helpful.
Thank you very much, Mr. Normandeau. We appreciate your comments today.
MR. NORMANDEAU: Thank you for hearing me.
THE CHAIRPERSON: Madam Secretary.
THE SECRETARY: Thank you, Mr. Chairman.
Our next presenter will be Gordon McIntosh.
THE CHAIRPERSON: Good afternoon, Mr. McIntosh.
MR. GORDON McINTOSH: Good afternoon.
I am just here as a normal consumer, as a user of the telephone lines, in fact, and anything else that you can imagine.
Back in the old days we used to all drive a horse and buggy, but they are gone now. I don't think anybody up here owns one of them or even down south there's not too many. Getting along with that, I have been here quite a while. I was here when Bell Canada was here before Northwestel was here.
819 was our area code. That was an area code that came out of Sherbrooke. Now, if you take 819 that came out of Sherbrooke, what happened was Bell Canada, who was running this at the time, also run Ontario and Quebec, they had the same central body, as everybody knows, if you go from Quebec City to Windsor, Ontario, you are almost including half the population of Canada.
You take that half the population of Canada and they were actually helping the North out in its settlement and what it was doing. It didn't take a rocket scientist, and I am not a rocket scientist, to know that when Bell Canada was servicing us, they had this mass behind them that could help alleviate the problem that was coming.
As soon as I heard that they were going to do this, and when Northwestel came in 1991 or 1992 to take over this, I knew right away that that subsidy was going to be lost. This is the point we are at now.
That's the fun thing about Directors, just when you have got them on the hot seat, one steps on and the other one takes his place and then you are kind of at the point of well, we didn't know.
What's happened over the years I have been here, I haven't had a raise since '92. Our contract doesn't stop till '99. The only thing that keeps going up is everything else. My salary keeps going and inflation is going and believe it or not, the cost of everything, including the phone bill, has gone up.
There's more to it than what appears to be. If you take long distance carriers, and this is an affront to actually what is going on, to the local markets, it's hurting everybody in a way, in a different way.
Long distance isn't what it used to be. I will give you an example. I can snap on the Internet and I have this capability. I get into a financial account. The financial account is run out of Calgary. I want to make a business transaction on the Toronto Stock Exchange out of Toronto. I can do that all in five minutes. I could do it faster, but I can't type. My typing skills have a little bit to desire.
It shows you. Who pays for that? Why is it I can flip on the Internet, go from here to Calgary, from Calgary to Toronto in five minutes and have an interaction and there's no cost except for the cost of doing the interaction?
What's happening in long distance is down south, if you are in Toronto, you make a local phone call. That local phone call leaves your house, goes up to a satellite, comes back and goes back to your next door neighbour.
The only difference to the long distance calls is the fact that the area, the graphical area, they say well, it takes the same amount of manning to do that same local call as it does to do in many cases a long distance call. The only difference is the graphical area. "Oh, you live 50 miles out of Toronto, so therefore we are going to charge you".
The interaction was the same. That's why if you flip on the Internet and you hit the Internet and you are up there, all of a sudden somebody snaps on from Australia and you are having a conversation from Australia. Why is that happening? Because it's there. The satellites are up there. Everybody is using them.
The fact is as you snap in and out of these lines, what is happening and what is happening with the big corporations, AT&T, MCI, Sprint Canada, they're all saying "Come on with us, come on with us. We will give you cheaper long distance rates". It's because eventually what you are going to be doing, and the Internet is a little slow right now for this, but it's coming, is the fact that you are going to be able to snap into your computer, snap on the Internet and make a phone call and you can direct dial that phone call without ever having to touch a long distance carrier.
The point where the corporations are going to make their money is on the base rates, on the rates that they charge to go into your home. This is where they are getting it. This is all they have left because long distance is going down. It's the day of the horse and carriage and it's coming to an end.
Even now there's a company in the States that offers $39 or $69 anywhere in the world, long distance. So long distance is not a point of -- it's like as the long distance comes down, they want to put the base rates up. Eventually the higher they can get the base rates before the long distance is wiped out, the better off they're going to be because they don't want to see a corporate drop in their earnings.
As we all take this into perspective, what's happening is where are we going in long distance and where are we going with local rates? To cover $50 off a month per person is crazy. I will give you an example, the Montreal rate.
I got family in Chateauguay. They have split their code. Their code in Montreal is split in half. The population hasn't doubled. What's happening. Well, I will give you the example of my brother. He's got four lines going in the house. He's got one of those cordless phones he can use in his truck and his car. He's got a corporation line that he has to work with his company.
He has a line for the Internet so that if you lift up the phone, you don't get off the line. Then he also has a line for his residential area. I have in my house cable, Internet, phone and phone. One of the phone lines is basically for fax and the Internet. The other one is for just general purposes.
When you up the rates from $9 to $10 all the way up to $20, you just didn't put me up from $9 to $10, you put me up from $9 to $10 all the way from almost $20 up to $40.
What's happening is you can see as the area codes are being broken down and more and more area codes come in, it's because each individual house is multitasking now. You have got teenagers who have their own lines. You have a businessman or woman who are married and both of them may need their own lines so they don't interfere with each other.
It's not just a matter of just putting up in one. It's a matter that all of a sudden in any given house, there's a whole bunch of activity going on. At no time does the CRTC or the phone companies take into effect that you have one, two, three, four lines going in. They are all going up the same rate. It's like there's no stepping stone.
If you have one, what's the difference if you have one or two whether the cost of servicing is any greater? If something goes wrong with one, it doesn't matter which one, it's still a phone line.
All this is taking place. To me it's like we are getting squashed in the centre. It's like these corporations coming down on us and the pressure for the long distance comes on, it's like to get those base rates up a long time.
The fact that we lost Bell was a big blow to us because when we first lost Bell, the biggest thing is there's not going to be any change in the service in the North and the cost will maintain the same and now, and I heard it this morning coming, it's how are we going to service the expensive cost of doing business in the North?
It was like "Whoa, hello". To me it's like we are going back again and they are asking for something that they denied when they originally took it over and now they are admitting to it later on. This is a big blow to the North.
That's basically all I have to say.
THE CHAIRPERSON: Thank you, Mr. McIntosh.
I guess just an observation on the Bell situation is that it seems to me given what's happened with us introducing local competition, whether or not Bell had split off the northern service, we would be in the same situation today because of the fact that with local competition and now the whole market open to competition that we would be tending to drive prices to cost anyway, so whatever subsidy might have been there with Bell would begin to be wrung out of the system, so whether we would be here today addressing this issue or in another year or two, I think the issue would probably be the same.
MEMBER McKENDRY: Just a quick question for you. Obviously you thought a lot about new technology and what's happening in the communications world.
This morning a local business person told us he was exploring the introduction of wireless service here in Iqaluit. Do you see the introduction of wireless service as a potential solution to your concerns about rising local rates?
MR. McINTOSH: Again, this is just another service that the phone company is offering and it will be viable. It's like the government's coming on and then you have got doctors, lawyers, you know. There's a whole thing going on here.
It's not a question of another service. Like, if you take the phone services, you can get call answering, indirect ringing for different people in the household, you can get -- there's a whole bunch of features you can put on. ID call, like who's calling you. You can get ring back. Like if somebody called you and you didn't answer, then you pick up the phone and you push and you ring whoever the last caller was back.
All these services are extra. It's like, you know, the Volkswagen and the Cadillac. They all have four tires and a steering wheel, you know, but what you get in the meantime.
When you are dealing with the expensive add-ons for each thing, then where does it stop or where does it go? Like, nothing comes through it. In other words, every extra service you want, you are going to pay for it.
I think it's viable. You are going to have these cellular phones everywhere. It's about time it came into the North, but that is not addressing the problem of the entry into your house. The basic now is that people are getting squeezed.
It's like the airline fares when I first come up here were about $680 for a 14 day standby fare in 1990. Now I just paid $1,200 for that same 14 day standby fare. In the whole time my salary has not gone up. In many cases it has been cut back.
It goes along the same lines as the phone. The phone -- everything keeps going up, but nobody is getting a break. You know, there's going to be a time when my rent has gone up, guaranteed 5 per cent. Now, if you compound 5 per cent over the last five years, I can tell you right now what my rent has gone up. It's one huge amount. It's not 5 per cent for a total of 25 per cent. It's 5 per cent for a total of about 50 per cent if you compound it, 5 per cent on to 5 per cent which is 5 per cent on 10 per cent and then 5 per cent on that.
It shows you that my salary has not been matching it. I will tell you I'm just an average worker. Somewhere down the road I have to take a serious look at the air fares, I have to take a serious look at my rent. If much more happens, I'm going to be gone. It's just going to be straight economics. I just won't be able to afford to live here. This is a big thing.
MEMBER McKENDRY: Thank you very much.
THE CHAIRPERSON: Thank you, Mr. McIntosh. I appreciate your coming today.
Now, I think that is all the parties we have. Is there anybody else in the room who wanted to make a presentation? No. Okay.
I don't know whether in light of what we just heard I should give Mr. Normandeau a chance to respond to the level of the air fares. In any event, I will turn to Peter Boorman and see if he wants to make a response to the comments he has heard.
MR. PETER BOORMAN: Mr. Chairman, I listened to the last two speakers and I listened to Gilbert very carefully.
There is a great similarity between transportation and communications. They are both really founding industries of this great country of ours. Without them, I don't think we would have what we have today.
I think that we should also remember that the formation of Canada was to provide equal opportunity for all Canadians. That's why we hold a position whereby we don't want to segregate any particular area on the expense and show that in the prices that we are charging for the service. It should be as equal as we can make it.
Our business is to figure out how we make that equal and how we work with people like the CRTC to bring that about in Canada so it is also affordable.
Gilbert did mention a point that should be brought out. I guess the acquisition of the Eastern Arctic by Northwestel and the drawing down of $18 million, to many people today they don't really understand that. They see that as a windfall. They don't realize that it was well understood that the Eastern Arctic could not be soluble on its own and it needed a form of subsidy. Of course, we do apply to the CRTC every year as we draw down on that investment.
What should also be known is that that is almost at an end. Next year it will be curtailed. We draw down at approximately in the order of $2 million per year, which is $4 million before tax, so there is a significant expense that we are looking at very carefully.
The mention of harsh operating conditions, one of the things about First Air is they provided infrastructure. We certainly use them. They take us to where we want to go. Without them, our costs would certainly be higher because we would be inventorying more parts. We would also have more people in the field if it wasn't for the fact that we have access to airlines that can get us to places very efficiently.
We well commend them in what they are trying to do. We also understand the impacts that they have in the way they run their business because they are very, very similar to ours. The North is a very expensive place to operate.
In terms of the second speaker, Gord McIntosh, I understand what he was saying about when it was separated from the Sherbrooke area. He did mention, of course, the rising costs and things continue to rise, making it very, very difficult to live in the North.
I should point out, though, I don't think we have had a call for rates since 1993. So we are working with existing rates. The rebalance process is not a rate increase. It is really to balance one set of services against another.
It also should be brought out that local access is artificially kept low to allow Canadians to get access to telephone service at an affordable rate.
It goes back to the early days of founding the companies and getting the expansion necessary to provide for the expansion of Canada and the growth of its own domestic product from the use of those services. There's a lot of history there as to why we did these things. We have to review that.
I'm sure through this current set of scenarios, the high cost serving area, that is exactly what we are doing now. We are looking at the state of the nation, what has to be done and what would position Canada going forward in what is a very important area and that is its communications infrastructure. We lead the world in terms of what we provide because it is our very existence.
Although I appreciate what Gord is saying, we are well aware of the costs and we are doing everything we can to bring about attention to that detail so that people are not driven out of the North, that we provide better services and through those better services it would spawn more industry as we go forward.
THE CHAIRPERSON: Thank you very much, Mr. Boorman.
I think that concludes our proceeding. I actually commented at the close of our session this morning thanking people. I just want to underscore again how much we appreciate people coming out here to state their views on this important issue.
This actually closes, I think, our round of regional consultations. Between this and our television one, we have been now to 20 separate communities across Canada to hear people's views, most of those in smaller communities like this one. It has been very helpful for us in terms of addressing this issue and getting a range of views on how best we can deal with this problem.
We are still accepting written comments, I think it is to the end of January. There is a possibility that we may be addressing this on a broader scale later in the year as well and hopefully rendering a decision some time around the middle of next year.
With that, I will call this particular session, and indeed these regional consultations, to a close.
Again, I thank you very much.
--- Whereupon the hearing concluded at 1537/
L'audience se termine à 1537
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