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TRANSCRIPT OF PUBLIC CONSULTATION
FOR THE CANADIAN RADIO-TELEVISION AND
TELECOMMUNICATIONS COMMISSION
TRANSCRIPTION DE LA CONSULTATION PUBLIQUE
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
MTS COMMUNICATIONS INC. MECHANISM TO RECOVER FUTURE INCOME TAX
EXPENSE / MÉCHANISME DE RECOUVREMENT DE IMPÔTS FUTURS DE MTS
COMMUNICATIONS INC.
HELD AT: TENUE À:
Delta Winnipeg Delta Winnipeg
288 Portage Avenue 288, avenue Portage
Winnipeg, Manitoba Winnipeg (Manitoba)
November 7, 1998 7 novembre 1998
tel: 613-521-0703 StenoTran fax: 613-521-7668
Transcripts
Transcription
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
StenoTran
Canadian Radio-television and
Telecommunications Commission
Conseil de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
Public Consultation / Consultation publique
MTS Communications Inc. mechanism to recover future income tax
expense / Méchanisme de recouvrement de impôts futurs de MTS
Communications Inc.
BEFORE / DEVANT:
David Colville Chairperson / Président
Vice-Chairperson,
Telecommunications /
Vice-président,
Télécommunications
David McKendry Commissioner / Conseiller
Martha Wilson Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Geoff Batstone Commission Counsel /
Avocat du Conseil
Prospero Vito Hearing Manager / Gérant de
l'audience
Gary Krushen Secretary / Secrétaire
HELD AT: TENUE À:
Delta Winnipeg Delta Winnipeg
288 Portage Avenue 288, avenue Portage
Winnipeg, Manitoba Winnipeg (Manitoba)
November 7, 1998 7 novembre 1998
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TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE
Presentation by / Présentation par:
Mr. Steve Ashton 7
Ms Gloria Desorcy 21
Mr. Charles Cruden 29
Canadian Association of the Non-Employed 37
Manitoba League of Persons with Disabilities 41
Consumers' Association of Canada, Manitoba Branch / 47
Manitoba Society of Seniors
Ms Judy Wasylycia-Leis 56
Retired Teachers' Association of Manitoba 65
Manitoba Federation of Union Retirees 72
Ebb and Flow School 75
Ms Marlene Vieno 79
Mr. Edward Natiation 83
Ms Helen Christopher 85
Mr. A.C. Swain 94
Telecommunications Employees' Association of Manitoba 105
Mrs. Anne Skuba 108
Credit Union Central Manitoba 111
Ms Iola Nicklas 115
Ms Emile Clune 117
Mr. Wignall 124
CHOICES 133
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TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE
Presentation by / Présentation par:
Mr. Broughton 144
Mr. Gaston Boulanger 146
First Nations Buying Group 149
Mr. Eric Robinson 150
Manitoba Chamber of Commerce 160
KLINIC 163
Ms Trujillo 166
Ms Rosemary Miguez 167
Ms Jo Wright 173
Mr. Kenneth Emberley 177
Ms Elizabeth Semkiw 189
Reply on behalf of / Réplique au nom de
Manitoba Telecom Services 192
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1 Winnipeg, Manitoba / Winnipeg (Manitoba)
2 --- Upon commencing on Saturday, November 7, 1998
3 at 0900 / L'audience débute le samedi
4 7 novembre 1998 à 0900
5 1 THE CHAIRPERSON: Order, please,
6 ladies and gentlemen. I would like to say good morning
7 to all of you and welcome you to this public
8 consultation.
9 2 My name is David Colville. I am
10 Vice-Chair, Telecommunications, for the CRTC and I will
11 be the Chair for today's session. Seated next to me
12 are Commissioners David McKendry and Martha Wilson.
13 3 Also seated here are a number of our
14 Commission staff, including our hearing secretary,
15 Mr. Gary Krushen, from our Winnipeg CRTC office here,
16 legal counsel Geoff Batstone sitting in the middle, and
17 our team leader for this issue, Prospero Vito. I
18 invite you to call upon any of these people for any
19 questions or help or assistance you may have with
20 respect to the process, the procedure for today's
21 consultation.
22 4 Before we begin a more formal process
23 today, I would like to say that we are happy to be here
24 in Winnipeg and are pleased to have this opportunity to
25 hear your views on this important issue with respect to
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1 the MTS application. As you know, this public
2 consultation is part of a written process designed to
3 explore the appropriateness and timing of MTS
4 opportunity to recover costs associated with income
5 tax. You may also be aware that the original procedure
6 for this application did not include an oral hearing,
7 but after receiving a number of letters from
8 subscribers and other groups requesting that we hold an
9 oral hearing, the Commission looked at the procedure
10 again and concluded that a public hearing or public
11 consultation should be held in Manitoba. I was saying
12 to some of my colleagues I noticed a card in the room
13 at the hotel here that says, "You talk. We listen." I
14 guess it could apply to our being here today.
15 5 I should note also that I guess we
16 decided to do this on a Saturday because of the fact
17 that there were a lot of individuals and consumer
18 groups who were requesting that we conduct this
19 consultation and felt that a Saturday might be more
20 appropriate than a weekday and provide an opportunity
21 for people to come out for this rather than have to
22 take time off from work or indeed not be able to appear
23 because they couldn't take time off from work. So
24 that's why we chose a Saturday, and we hope that's not
25 too inconvenient for people to give up time on your
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1 Saturday to be here.
2 6 So I want to take this opportunity to
3 thank all of those who did write and request that we
4 have this public consultation. I think it is an
5 important part of the dialogue. We appreciate the fact
6 that you did request it and we are certainly happy to
7 be here to hear what your concerns are.
8 7 We will sit this morning until about
9 12:30; we don't want to interrupt somebody's
10 presentation, so it will be around 12:30 depending on
11 the appropriateness of the presentation at the time.
12 We will take a break for lunch -- and I think we will
13 probably only take about a half-hour break for lunch --
14 reconvene at about one o'clock, and we will sit until
15 5:00.
16 8 My understanding is we in fact only
17 have this room until five o'clock -- I believe there is
18 another event going on -- and we have 33 people who are
19 going to be appearing or who have registered to appear
20 today. I might note those people who have registered
21 will be called by Mr. Krushen by name. If there is
22 anybody else here in the audience who wishes to make an
23 oral submission but who has not already registered, I
24 would ask that you give your name to Mr. Krushen,
25 advise him, and, time permitting, we will try to fit
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1 you into the schedule before the day is over.
2 9 Any participant who is not in
3 attendance when Mr. Krushen calls their name, we will
4 call later in the day should they arrive a little later
5 on. We want to give everybody an opportunity to be
6 heard.
7 10 In that respect, again, there are 33
8 people who want to appear, and that really works out to
9 about 10 minutes per presentation. We want to make
10 sure that everybody does get an opportunity to be
11 heard, so, with a little regret, I think we are going
12 to have to be fairly strict and rigid in terms of the
13 time lines here in order to provide an opportunity for
14 everybody to be heard. So I hope you will bear with us
15 with respect to that.
16 11 We may wish to ask a question or two
17 of clarification on your presentation. I want to
18 emphasize, from our point of view, despite the somewhat
19 formality of appearance here, with microphones and all
20 this electronic equipment, we are trying to make this
21 informal and make you feel welcome to express your
22 views before us. But, if you are uncomfortable about
23 answering any questions, just say so; we are not here
24 to embarrass you or to try to trip you up or trick you
25 or anything. We just want to hear what you have to say
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1 about the issues here today.
2 12 So I guess at this point, with those
3 opening comments, I will turn it over to Mr. Batstone
4 to make a few comments on process for the day.
5 13 MR. BATSTONE: Thank you,
6 Commissioner Colville.
7 14 As Commissioner Colville has already
8 mentioned, the Secretary will call out the names of the
9 presenters, starting with the parties that have
10 registered in advance. When your name is called, just
11 come forward to the table upfront here, to one of the
12 microphones.
13 15 The submissions at today's
14 consultation will be transcribed and will form part of
15 the record of this proceeding. So, to ensure that the
16 court reporter is able to produce an accurate
17 transcript, we would ask you, when you are speaking, to
18 please ensure that the microphone is turned on. If you
19 would like to purchase a copy of the transcript, you
20 should make the arrangements with the court reporter
21 who is sitting behind us here on the raised platform.
22 16 In addition to your oral submissions
23 at this consultation, I would just like to remind
24 everybody that written comments on the issues that are
25 being considered in this proceeding may be submitted to
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1 the Commission by November 20th. Like the transcript,
2 those comments will also form part of the record for
3 this proceeding.
4 17 After everyone is finished with their
5 presentations we will take a short break, after which
6 representatives from MTS will be given an opportunity
7 to respond to any comments raised in the course of
8 today's session. Of course, MTS may also address any
9 comments raised during this consultation in the course
10 of its final argument, which is to be filed by
11 November 24th.
12 18 THE CHAIRPERSON: Thank you very
13 much.
14 19 I know that Mr. Bill Fraser from MTS
15 is here and I would just like to give him an
16 opportunity to perhaps introduce some of his colleagues
17 who are with him.
18 20 Mr. Fraser.
19 21 MR. FRASER: Thank you, Mr. Chairman.
20 22 I am Bill Fraser, President and Chief
21 Executive Officer of Manitoba Telecom Services. With
22 me today I have Cheryle Barker, who is our Chief
23 Financial Officer, Roy Bruchshow, who is our Director
24 of Regulatory Affairs, and June Kirby, who is our
25 Director of Communications.
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1 23 Thank you.
2 24 THE CHAIRPERSON: Thank you very
3 much.
4 25 As indicated, Mr. Fraser will have an
5 opportunity to comment on any of the submissions that
6 he has heard through the day at the end of the day; we
7 will provide an opportunity for that.
8 26 With that, Mr. Secretary,
9 Mr. Krushen, perhaps we will turn to our first
10 submission.
11 27 MR. KRUSHEN: Thank you, Commissioner
12 Colville.
13 28 The first presentation this morning
14 will be by Mr. Steve Ashton, Member of the Legislative
15 Assembly for Thompson.
16 29 Mr. Ashton.
17 30 THE CHAIRPERSON: Good morning,
18 Mr. Ashton. I expect, with this Christmas tree we have
19 over here, those are probably not letters to Santa
20 Claus.
21 31 MR. ASHTON: But they are letters and
22 resolutions to the CRTC, and we are hoping you will
23 give us a Christmas present and rule favourably given
24 our concerns about the proposed rate increases.
25 PRESENTATION / PRÉSENTATION
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1 32 MR. ASHTON: I just, by way of
2 introduction, want to indicate that, in addition to
3 being the MLA for Thompson, I am also the
4 telecommunications critic for the opposition, for the
5 NDP, including MTS critic. I know there is some
6 feeling sometimes that MTS, now that they have been
7 privatized, don't have to be accountable to individuals
8 such as myself and Manitobans, but I think the CRTC
9 hearings today show that there is a level of
10 accountability, and that's what I am going to be
11 addressing my comments to.
12 33 I will try to keep my comments fairly
13 brief. I understand the number of presenters. I would
14 like to indicate, though, that I have some
15 resolutions -- not the verbatim resolutions, but
16 resolutions from about 30 or 40 municipalities; so it
17 may take me a little bit longer just to be able to read
18 those into the record.
19 34 THE CHAIRPERSON: If I can just
20 interrupt, we would be certainly happy to take those in
21 writing too.
22 35 MR. ASHTON: Okay. In fact, many of
23 the resolutions have been sent in, but I know some of
24 the resolutions may not have been forwarded, and some
25 of the municipalities asked me to pass that on.
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1 36 I just want to begin by a brief
2 comment, which is to indicate that there is a clear
3 message I have got from many individuals and municipal
4 councils throughout Manitoba, and that is that they
5 feel very clearly that MTS should pay its own taxes;
6 they feel that MTS is receiving a significant profit,
7 and I notice the third quarter statement confirms that.
8 Quite frankly, one of the comments I heard time and
9 time again is that people in this province don't expect
10 someone else to pay their taxes; in this case, they say
11 the same should apply to MTS.
12 37 I want to give a bit of background on
13 it as well because you have to put this in the context
14 of what has happened to MTS in the last number of
15 years, particularly the privatization. What I find
16 ironic, as someone who was very involved in fighting
17 the privatization of MTS -- the government had never
18 campaigned on that as a mandate, never once had support
19 from the people of Manitoba; in fact, 80 per cent of
20 the population of Manitoba opposed the privatization of
21 MTS. What I found ironic was, when we raised issues,
22 in the Manitoba Legislature, or concerns about the
23 impact on rates of privatization, we were told at the
24 time that there would not be any impact on rates
25 because of privatization. I can show you quotes from
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1 the Premier, I can show you quotes from the Minister
2 responsible for MTS at that time.
3 38 Not only that, Mr. Nugent, who I know
4 you will be quite aware of from presentations to the
5 CRTC, who was counsel for the CRTC, made comments to
6 the CRTC at the time which we quoted in the Legislature
7 which indicated concern over potential for a rate
8 shock. One of the issues was indeed, in terms of
9 taxation, the very issue you are dealing with today.
10 39 Mr. Nugent was disowned by the
11 Premier at the time, his comments were disowned I
12 believe by MTS -- highly unusual given Mr. Nugent's
13 excellent reputation as counsel. I don't have the
14 newspaper article here, but I do note that when this
15 application came in I believe Mr. Nugent -- I don't
16 think he used the exact words "I told you so", but they
17 were very close to that.
18 40 I want to put on the record, quite
19 frankly, that there are a number of people in this
20 province who owe an apology to Mr. Nugent for not
21 listening to his comments back then. I suspect part of
22 it was the political agenda at the time, and I do want
23 to put that on the record because I think that's fairly
24 clear.
25 41 I also want to indicate my
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1 frustration that the provincial government has chosen
2 not to make a presentation. I can explain, there may
3 be a slight problem in that Mr. Jules Benson, who
4 represents the government, at times, with the golden
5 share -- the government still has a golden share in
6 MTS -- has been suspended by the Premier. We are not
7 sure from reports whether it is because he lied to the
8 Premier or didn't, but he has been suspended for his
9 role in the current scandal that's part of the
10 Commission of Inquiry on Vote Splitting.
11 42 But I do want to indicate on the
12 record I think it is just incredible that the
13 provincial government, which in many ways set in motion
14 the hearings today by privatizing MTS and raising this
15 whole question of taxation on MTS, has chosen not to be
16 one of the 31 presenters. I can understand why because
17 I am sure many of the presenters would probably want to
18 ask the government questions why it said one thing when
19 it was selling off the company and we are seeing
20 something completely different.
21 43 I want to begin by saying, in terms
22 of the communities -- I can read through some of the
23 communities, and I have been asked to do this by a
24 number specifically. If you ever get a chance to get a
25 map, there are many of these communities -- I am from
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1 northern Manitoba and I am not sure where all of the
2 communities and RMs are. You need a map to track it,
3 but I can tell you they represent a cross-section of
4 the communities of Manitoba.
5 44 The resolution states:
6 "WHEREAS MTS is seeking another
7 increase in local rates of 40
8 per cent over five years; and
9 WHEREAS the CRTC application is
10 for local rates to be raised to
11 pay the entire federal and
12 provincial income tax bills of
13 MTS; and
14 WHEREAS MTS has already received
15 numerous rate increases in
16 recent years; and
17 WHEREAS a further increase would
18 make it difficult for many
19 people to be able to afford
20 keeping their basic telephone
21 service;
22 THEREFORE, BE IT RESOLVED... the
23 CRTC to reject the Manitoba
24 Telephone Notice 1998-12
25 Application and any further
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1 dramatic increases in local
2 rates." (As read)
3 45 That resolution was passed by the RM
4 of Blanchard, Oak River, the RM of Park -- that's rural
5 municipality -- the Rural Municipality of Birtle, the
6 City of Dauphin, the God's Lake Narrows Community
7 Council, the Dallas Red Rose Community Council, the
8 Rural Municipality of Shoal Lake, the Town of The Pas,
9 the Rural Municipality of Kelsey, which is in the
10 surrounding area around The Pas, the Village of
11 McCreary, the Village of Winnipegosis, the Village of
12 Cartwright, the Town of Grandview, the Town of Roblin,
13 the Rural Municipality of McCreary, the Village of
14 St. Lazare, the Rural Municipality of Ellice -- I am
15 about one-third of the way through -- the Municipality
16 of Saskatchewan; there is a Municipality of
17 Saskatchewan in Manitoba, by the way, just so it
18 doesn't get confused; the Village of Glenboro, the
19 Rural Municipality of Russell, the Rural Municipality
20 of Rossburn, the Rural Municipality of St. Jean, the
21 Manitowogan Community Council, the Rural Municipality
22 of Lansdown, the Village of Binscarth, the Rural
23 Municipality of St. Laurent, the Municipality of North
24 Norfolk, the City of Steinbach, the Rural Municipality
25 of Ochre River, the Rural Municipality of Armstrong,
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1 the Rural Municipality of Ste. Anne -- I am about
2 halfway through -- the Rural Municipality of
3 Springfield, the Town of Morris, the Rural Municipality
4 of Shellmouth, the Rural Municipality of Broken Hat,
5 the Rural Municipality of Holton, the City of Brandon,
6 the Rural Municipality of Strathclair, the Rural
7 Municipality of Grandview, the Rural Municipality of
8 Rosser, the Rural Municipality of Roblin, the Rural
9 Municipality of Ellice -- I'm getting there -- the
10 Rural Municipality of Swan River, and I can indicate
11 the City of Thompson has also passed a resolution like
12 that. These, by the way, are just resolutions of which
13 I received a copy; you may have received other
14 resolutions that were sent to you directly.
15 46 I want to indicate that's pretty well
16 a cross-section of the province: the second largest
17 city, the third largest city, most of the regional
18 cities and towns, some of the smaller rural
19 municipalities. I also have received resolutions, I
20 should mention, from a number of First Nations
21 communities, including Norway House.
22 47 The clear message from Manitobans is
23 concern about the kind of rate increases we are looking
24 at.
25 48 If you look at the impact, I find it
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1 interesting in a way that MTS in its own documentation
2 I think points to the fact that, if you approve this in
3 its entirety, you will be moving us from a position a
4 number of years ago where we had some of the cheapest
5 rates in North America to where we will have some of
6 the highest local rates.
7 49 When we raise concerns about rates --
8 MTS issued "Telephone Rates Still a Bargain". I found
9 this rather ironic, by the way, because, if one takes
10 the rate structures they use -- and, by the way, they
11 are a bargain because we had a publicly-owned phone
12 company that did an excellent job at keeping rates
13 affordable in this province for many years. But, if
14 you simply add in the kind of rate increases that are
15 being requested to cover the income taxes, you will see
16 in each and every one of these communities, by the way
17 MTS' own argument -- you will not see a similar sort of
18 increase in terms of other phone companies, but it will
19 move us in most cases to the top end of the scale.
20 50 I can indicate one of the concerns,
21 why so many rural municipalities are concerned. We
22 have already had a rate restructuring within the
23 province, we have had a number of increases. I know
24 the CRTC did say "no" to the recent rate increase of
25 $3; it was rolled back fairly significantly. It will
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1 have a real impact.
2 51 I have comments from many
3 individuals. Once again I could spend probably all day
4 reading it, but out of respect to the many other
5 presenters I won't; but I am hearing from many
6 individuals who are absolutely frustrated. I thought I
7 would just read a couple of them because it will give
8 you some sense of why people are concerned.
9 52 Mary Cooper in northern Manitoba, who
10 is a business person, wrote:
11 "No one paid my taxes when I was
12 in business. The investors of
13 MTS took their chances when they
14 invested in MTS, just as I do
15 when I invest in stocks.
16 People, particularly on fixed
17 incomes, will not be able to
18 afford this increase. Maybe
19 that's what MTS wants."
20 53 Another one from an MTS employee who
21 does not want the increase:
22 "Forty per cent over five years?
23 I don't get that as an
24 employee."
25 54 That's typical of many, that kind of comments.
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1 "MTS should pay their own bill,
2 all of it."
3 "I am tired of the last three
4 rate hikes. I believe the
5 Premier should pay it
6 personally."
7 55 I guess that's relating to the fact
8 that it was -- I think I will save that for the
9 legislative session.
10 "This is bordering on stupidity.
11 I will reduce my MTS bill by
12 $300 because my property taxes
13 went up that much."
14 56 There are some other comments I don't
15 want to read here; they are not too appropriate.
16 "You know, it is particularly
17 bad for people on fixed income."
18 57 One other one thinks the Premier
19 should pay the taxes.
20 58 I could read you dozens, hundreds of
21 comments from people:
22 "Phone bill hikes are already
23 too frequent."
24 59 You have to put it in the context
25 that most of these people have already seen their phone
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1 rates in some of the smaller communities more than
2 double, local rates, over the last number of years, and
3 even in larger centres they have seen several
4 significant increases. I can tell you many of these
5 people do not benefit from any of the rate reductions
6 in long distance; there are a lot of people who can't
7 afford any kind of long distance, by the way, that's
8 happened from the deregulation over the last number of
9 years. We run a real risk, if we have further rate
10 increases, of having many people, particularly seniors,
11 people on fixed incomes, being unable to afford phone
12 service. This is the kind of frustration we are
13 hearing from people.
14 60 I want to just conclude on a couple
15 of things. I think I have given you a flavour of the
16 response of many people. Whether they be the rural
17 municipalities, towns and cities, Northern Affairs
18 communities and reserves, I have many individual
19 comments here, but what I want to suggest to you is
20 that when you are looking at MTS' application, when MTS
21 was privatized the expectation was given by the
22 Premier -- and this is an expectation that the
23 shareholders clearly should have understood -- that the
24 kind of process we are seeing right now, this kind of
25 application, would not be the case. I can show you in
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1 the Legislature where those comments were made.
2 61 When shareholders bought shares in
3 MTS they knew what the risks were, and quite frankly
4 they have done quite well in terms of the bottom line
5 because of the rate increases that had already been
6 approved. I note for example from the third quarter
7 report -- and I won't go into details because you will
8 have this information available, but I think members of
9 the audience here, the presenters, should know that in
10 the last report, the third quarter report, the net
11 income was $23.4 million, up 10.9 per cent from the
12 third quarter of 1997. MTS is already benefitting from
13 those rates.
14 62 Quite frankly, when MTS has suggested
15 in their application that they are somehow doing people
16 a favour by phasing in these rates, I can tell you no
17 one thinks it is any kind of favour at all to have a 40
18 per cent rate increase phased in or brought in
19 immediately. They don't see those kind of increases as
20 being fair.
21 63 The shareholders knew what they were
22 buying, statements were made very clearly at the time.
23 I think they have to accept some element of the risk.
24 MTS profits are already up significantly from when it
25 was in public ownership, largely because of the rate
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1 increases. I believe that there is no justification
2 for this 40 per cent rate increase.
3 64 I want to stress again that we are
4 talking about the shareholders -- I believe 70 or 80
5 per cent of the shares are owned out of province, by
6 the way, mostly institutional investors and large
7 investors on Bay Street. We are not talking about a
8 company that's widely held within Manitoba; we lost
9 control within about a week of it being sold off.
10 These are people who invest on a regular basis, they
11 know the kind of risks they face.
12 65 What I am asking on behalf of these
13 many municipal councils and many Manitobans is, just
14 simply say to MTS -- the shareholders knew the risks
15 they were going to take when they purchased the shares,
16 MTS has received a number of rate increases already,
17 their profit picture is a good one for the investors;
18 in terms of the impact of the proposed rate increases
19 it would move Manitobans in many cases to the higher
20 levels of rates.
21 66 I would ask the CRTC to do what I
22 would say most Manitobans want and just say, in this
23 particular case, to MTS, "You knew what you were
24 getting into. Pay your own taxes. Don't expect the
25 people of the province to pay those taxes for you."
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1 67 Thank you.
2 68 THE CHAIRPERSON: Thank you very
3 much, Mr. Ashton. Because you represent quite a lot of
4 people, probably most of Manitoba there -- you read off
5 the names of those towns and communities -- I gave you
6 a little leeway on the time, and I think in the
7 interest of moving along and hearing from everybody we
8 will just move to the next presenter.
9 69 MR. ASHTON: Thanks very much.
10 70 THE CHAIRPERSON: Thank you.
11 71 MR. ASHTON: I will provide copies of
12 all the resolutions.
13 72 THE CHAIRPERSON: Good, and to MTS as
14 well, if you could, please.
15 73 Mr. Krushen.
16 74 MR. KRUSHEN: Thank you, Commissioner
17 Colville.
18 75 Our next presenter is Ms Gloria
19 Desorcy.
20 76 THE CHAIRPERSON: Good morning.
21 PRESENTATION / PRÉSENTATION
22 77 MS DESORCY: Good morning and welcome
23 to Manitoba. My name is Gloria Desorcy and I would
24 like to thank you, first of all, for the opportunity to
25 have this in-person meeting on this important topic
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1 today.
2 78 Although I work for the Manitoba
3 Branch of the Consumers' Association of Canada, I am
4 not here to speak on behalf of CAC this morning. I am
5 here to speak on my own behalf as an MTS residential
6 subscriber.
7 79 My work puts me in contact with
8 Manitobans from many walks of life and many parts of
9 the province. During the last few months one topic
10 that seems to be on everyone's mind is MTS' proposal
11 to, once again, raise local residential phone rates.
12 80 Usually, on every given subject, my
13 job can be counted on to expose me to the entire gamut
14 of public opinion in about the course of a month. On
15 the subject of this proposed rate increase, however, I
16 am greeted over and over again with one emphatic and
17 unwavering response: "I don't want to pay it ahead of
18 time and I don't want to pay at all." As an MTS
19 subscriber, I echo that sentiment.
20 81 Why not pay ahead of time? MTS makes
21 this sound like the rational choice, but there are a
22 couple of points the company conveniently doesn't
23 mention.
24 82 Right now MTS' income tax is being
25 covered by some additional tax deductions relating to
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1 pre-privatization pension funds. If the corporation
2 increases its revenue by pre-collecting for income tax,
3 it is going to use up those tax deductions faster, and
4 we, residential consumers, will have to pay its income
5 tax sooner.
6 83 Secondly, 2001 is still pretty far
7 away. How do we know how much income tax MTS will
8 really have to pay? How do I know I will still be
9 living in Manitoba by then? How do I know I will still
10 be an MTS subscriber by then? After all, local
11 telephone competition is possible now.
12 84 This brings me to the next point:
13 freedom of choice. If I prepay MTS' income tax for the
14 next three years, I will have to forfeit something like
15 $115 if I move away or switch to a competitor.
16 Suddenly, the right to choose costs me money. If I
17 chose, I could invest my heard-earned dollars for the
18 next three years instead and get a much better rate of
19 return than I would get from MTS.
20 85 MTS claims that a $4.80 increase in
21 2001 is better for consumers than a $7.43 increase in
22 the same year, but this statement ignores the two
23 previous years of prepayment. If I add $1.60 times 12
24 months which I will have to pay in 1999, $3.20 times 12
25 months which I will have to pay in 2000, plus $4.80
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1 times 12 months which I will pay in 2001, then I find
2 that by the end of 2001 I have paid $115.20 of MTS'
3 income tax. Now, compare that to paying the $7.43
4 cents times 12 months, by the end of 2001 I have only
5 paid $89.16. Prepayment doesn't amount to a saving per
6 subscriber; in fact, the prepayment plan means I pay
7 $26.04 more by the end of 2001.
8 86 Finally, why should I pay this bill
9 ahead of time when I pay every other utility after the
10 cost is incurred? Could this set a dangerous
11 precedent? For instance, is Winnipeg Hydro going to
12 start charging me ahead of time because they need a new
13 computer system or because their property tax goes up?
14 87 Having said that I don't want to
15 prepay, should I have to pay an extra $8.95 a month
16 over two years beginning in 2001? Of course, the
17 answer to this question is another resounding and
18 emphatic "no". If I do some quick math I realize that,
19 out of twenty-six dollars and some per month that I
20 could be paying by 2001 or 2002, $8.95, or roughly 34
21 per cent of it, will be for income tax. I don't even
22 pay that much tax on my own income.
23 88 MTS must gain revenue from other
24 sectors of its utility. Why are they not paying their
25 share of the tax?
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1 89 Premier Filmon assured Manitobans
2 that MTS would cover the cost of income tax by
3 operating more efficiently. Surely this increased
4 efficiency can be counted on to cover at least a
5 portion of the $8.95. It defies common sense that
6 telephone rates in Manitoba would rise to second
7 highest in the country when the cost of living in
8 Manitoba is not nearly second highest in the country
9 and when other companies like NBTel and Bell, who
10 already have income tax costs included in their rates,
11 are only charging $20.70 per month for local
12 residential phone.
13 90 Most importantly, residential local
14 telephone ratepayers like me are protected from large
15 increases like this by price caps. Price caps were
16 supposed to be our assurance that privatization and
17 competition would not make basic local phone service
18 unaffordable and that costs wouldn't be dumped on
19 residential consumers alone. Price caps were supposed
20 to be our assurance that local residential rates would
21 not go up more than 10 per cent of the overall rate per
22 month in one year. If this is true, then why do I, as
23 a residential consumer, somehow feel betrayed?
24 91 I feel betrayed because I was
25 promised that the privatization of MTS would not
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1 increase rates but local phone rates have not stopped
2 going up since privatization. Now MTS is telling me
3 that I have not yet begun to pay the cost of
4 privatization, and when I do pay it, it is going to
5 cost me $8.95 a month, or $8.00 over five years if I
6 prepay.
7 92 I feel betrayed because I was
8 promised that MTS would look to internal cost-cutting
9 measures to pay its income tax, but MTS is not looking
10 any farther than the phone bills of its residential
11 customers and it wants to start collecting my money two
12 or three years before the bill is due.
13 93 Finally, the ultimate betrayal, I
14 believed that price caps would protect me from large
15 and unreasonable rate increases, but one year into
16 price caps Manitobans are faced with a "humongous" rate
17 increase. One year into price caps MTS is telling us
18 that this rate increase is different, that we have
19 already run into an exception to the rule. One year
20 into price caps MTS is telling us we only have two
21 choices: a rate increase of nearly 49 per cent over
22 two years or a prepaid increase of close to 44 per cent
23 over five years. Neither of these options is
24 acceptable.
25 94 I have been doing some surfing on the
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1 Internet lately and I came across some interesting
2 reading on the CRTC website. I am not just saying that
3 to be nice, it was interesting. The Stentor Quarterly
4 Monitoring Report lists telephone penetrations for low
5 income households by province. In May of this year,
6 Manitoba had the lowest percentage of low income
7 households with phones in Canada. This percentage has
8 gone down more than two points since November of last
9 year. It would be interesting to correlate the
10 decrease in percentage of low income households having
11 phones with the ever-increasing local residential
12 telephone rates.
13 95 As a society, do we, North Americans,
14 not consider basic telephone service a necessity? I
15 believe that we do. Yet I am sure that every person in
16 this room knows someone who can't afford a telephone or
17 perhaps can't afford a telephone themselves. Do we
18 stop to think how difficult it is to do simple things
19 like apply for a job without a telephone, not to
20 mention accessing emergency services or keeping in
21 touch with family and friends. Are these Manitobans
22 who struggle to stretch their budgets each time phone
23 rates go up not among the very individuals that price
24 caps were supposed to protect? Isn't the protection of
25 all captive residential ratepayers the true spirit of
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1 the Price Cap Decision?
2 96 I am here today to ask you, the CRTC,
3 to uphold the spirit of the Price Cap Decision. I urge
4 you to disallow MTS' request for a prepaid rate
5 increase, not to accept the assumption that residential
6 subscribers should pay the whole cost of MTS' income
7 tax. I urge you to look for another solution, one that
8 is more equitable and reasonable for all Manitobans and
9 one that is in keeping with the principles of fairness,
10 affordability and accessibility.
11 97 Thank you.
12 98 THE CHAIRPERSON: Thank you very
13 much, Ms Desorcy. I have heard of exogenous factors in
14 price cap formulas and I guess we are going to have to
15 add a "humongous" factor to our price cap formula.
16 99 Thanks again for your presentation.
17 100 MS DESORCY: Thank you.
18 101 THE CHAIRPERSON: Mr. Krushen.
19 102 MR. KRUSHEN: Thank you, Commissioner
20 Colville.
21 103 I would now like to call Mr. Charles
22 Cruden.
23 104 THE CHAIRPERSON: Good morning,
24 Mr. Cruden.
25 PRESENTATION / PRÉSENTATION
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1 105 MR. CRUDEN: Good morning. My name
2 is Charles Cruden and I would like to give you a
3 special welcome and thank you to the Commission for
4 coming this morning. I know that Manitoba is not a
5 particularly inviting vacation spot in November, but I
6 hope the warmth of our welcome will make up for the
7 weather outside.
8 106 As we all know, there are two things
9 which we have to come to expect in life: death and
10 taxes. But just because we expect them, it doesn't
11 mean that we want them, especially if it means having
12 to deal with them before their time. That essentially
13 is the issue before you today.
14 107 While I usually wear the hat of
15 Executive Member on the Board of Directors of the
16 Manitoba Society of Seniors, or MSOS, today I am only
17 wearing the hat of Charles Cruden. I am an individual
18 who is here to express my own views on a subject which
19 I consider very important.
20 108 I am involved with a number of older
21 individuals on a regular basis. To these people, the
22 phone means so much more than to you or to me. This is
23 because the difference to them between having a phone
24 and not having one could literally mean the difference
25 between life and death.
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1 109 In the 1990s local telephone service
2 is something that we all expect and depend on. It is
3 so important that it can no longer be viewed as a
4 luxury. All individuals rely on the phone to
5 communicate with the community, friends and emergency
6 medical or police aid. For seniors in particular,
7 though, the local telephone system is indeed a
8 lifeline.
9 110 For shut-ins, the telephone is an
10 essential part of maintaining a decent and enjoyable
11 standard of living. This is especially true with the
12 advancement of e-mail and Internet technology over the
13 past few years. We are now able to do many everyday
14 functions through the Internet such as banking and
15 shopping. With the perpetual downsizing of many
16 businesses and financial institutions, it might not be
17 long before we need a phone to do even the most basic
18 transactions.
19 111 More importantly, though, in a
20 society where the sense of community is no longer what
21 it once was, the phone is now a key tool for seniors to
22 keep in touch with those who are closest to them.
23 Seniors, as well as everyone else in Canada, have come
24 to rely upon this essential service. We consider it a
25 basic right to have such a service in our homes. No
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1 one in their right mind would try to tell a low income
2 senior that they should not have a phone in their house
3 or apartment. Yet, that seems to be the message that
4 MTS is sending.
5 112 Basic local rates have risen rapidly
6 in the past few years. Residential consumers have
7 faced an increase of approximately $5 per month just to
8 be able to have a phone in their home. MTS is now
9 recommending that, in the next few years, this cost
10 increase another $8 a month. It is not too far in the
11 past that I can remember paying only $13 per month for
12 basic services; now we are looking at a cost that is
13 almost twice that amount. I am not sure that there is
14 anything else around, and definitely no other public
15 utility, which has increased in cost by nearly 100 per
16 cent in under 10 years.
17 113 This cost is not only unfair because
18 of its size, it is also unfair because residential
19 subscribers will have to bear most, if not all, of the
20 cost. There is a good chance that local businesses
21 will not pay anything towards this increase, and this,
22 even though they are consumers just as much as the
23 residential individuals who are being hit with the
24 expense. How could one specific section of the
25 consumer group be allowed to slip out of having to pay
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1 an increase in rates, and why does MTS need the
2 authority to place the entire burden of the utility's
3 income tax on the shoulders of the residential
4 subscribers?
5 114 Though such an increase may not seem
6 like an outrageous amount to some people, it definitely
7 puts a squeeze on seniors. Many of us are already
8 under the poverty line and experiencing difficulty
9 supporting ourselves in today's world. To make us pay
10 an extra $100 a year is something we just can't afford.
11 115 For seniors who were part of an age
12 where the average salary wasn't what it is now, our
13 pensions are much smaller than what people working
14 today are expecting to receive. As well, our
15 retirement incomes are not increasing at the rate that
16 working individual salaries are. We are forced to
17 budget our lives around a monthly income that, for some
18 people, was set 20 years ago. Throw in the fact that
19 there are many people, like myself, who do not even
20 have a pension and you might be able to understand why
21 $100 a year is quite a bit of money. For some low
22 income seniors, then, an extra $8 a month could mean
23 sacrificing some basic necessity or giving up the phone
24 in their home.
25 116 It is important to remember that we
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1 are not talking about a luxury here either. We are not
2 complaining about not being able to watch "Matlock" at
3 all hours of the day because we cannot afford an
4 increase in the television cable rate, nor are we
5 insisting that we have a right to have the invisible
6 answering machine feature. An increase in either of
7 these rates might be acceptable. Neither is a
8 necessity, and we have the option as to whether or not
9 we want that extra service.
10 117 Local basic service, however, is a
11 service that seniors have come to rely on for their
12 everyday needs. For some seniors there is no other way
13 to get in contact with the doctor in an emergency or to
14 order basic medication. It seems greatly unfair that
15 for something such as long distance, something which
16 any individual in Winnipeg may choose to use or not to
17 use, the cost has come down so much that the monthly
18 rate is now less than what the basic MTS service will
19 be if this rate increase is approved.
20 118 The ability to get in contact with a
21 local doctor in emergencies seems to have been given
22 less importance than being able to phone someone in
23 Vancouver to talk about the weather. The health and
24 welfare of seniors is being compromised because our
25 communication lifeline is slowly being eaten away by
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1 these increasing costs.
2 119 As seniors we are also concerned that
3 this increase represents a cost which has not yet
4 arisen. As well, it is also highly speculative as to
5 exactly what that cost will be. What is being asked is
6 that individuals pay now for an expense which they may
7 never experience as a consumer. With the entrance of
8 local competition in the next few years many consumers
9 may have left MTS or even the region entirely before
10 this cost is being incurred.
11 120 In the case of seniors, there is also
12 the very real possibility that certain individuals may
13 literally disconnect with MTS and take up with that big
14 telephone company in the sky. As far as I know, there
15 is a monopoly on telephone service up there, and I
16 don't think MTS will get that contract, although with
17 the $8 rate increase MTS may have guaranteed themselves
18 a contract in the world of a certain pointy-tailed,
19 pitch-forked wielding individual who lives in a warmer
20 climate.
21 121 As morbid as this issue may be, it is
22 a reality. According to Statistics Canada, almost
23 10,000 adult Manitobans pass on each year. Life
24 insurance companies adjust their policy rates and pay-
25 out schedules for seniors specifically for this reason.
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1 Yet, MTS feels that it is more important to extract
2 money from seniors now, even if they are not here to
3 enjoy the benefits of what they have paid for.
4 122 It is for this reason that I don't
5 put the money down today for a new car that I would not
6 get possession of until the year 2001. What's the
7 point of spending the little money that I have now on
8 something that I may never benefit from? This is why,
9 as seniors, we are more inclined to keep our money now
10 and pay when we actually have to pay.
11 123 If I know that a big hit is coming
12 and that it is justified, I can prepare myself for it
13 and I can budget for it. If this involves paying in
14 one big lump sum or paying gradually afterwards, so be
15 it. The fact is that it is my money. I want to be
16 able to use it as I choose for expenses that actually
17 exist. I do not have a problem with paying for
18 services that I actually receive. I value what MTS has
19 to offer me, but just because I have a need for such a
20 service, please do not think that MTS, as my local
21 service provider, can take advantage of me for costs
22 which are not yet justified.
23 124 I would also prefer to have the right
24 to decide who I give my money to. If MTS is not using
25 this money now, then why should they be able to gain
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1 interest on money that really belongs to me and on
2 which I could be collecting my own interest? MTS is
3 not my first choice as a savings institution,
4 especially if its guaranteed return on my money is less
5 than 5 per cent instead of the 10 or 11 per cent that
6 is being offered to shareholders.
7 125 I would like to thank you again for
8 the opportunity to make this presentation and I hope
9 that I have been able to make you appreciate what we as
10 seniors face with the proposed MTS rate increase.
11 126 THE CHAIRPERSON: Thank you very much
12 for your presentation.
13 127 I hope it won't alarm you to learn
14 that in a recent Toronto newspaper I personally have
15 been characterized as that pointy-tailed, pitch-forked
16 individual, but we won't be considering this
17 application in that light.
18 128 Thank you very much.
19 129 MR. CRUDEN: Thank you.
20 130 THE CHAIRPERSON: Mr. Krushen.
21 131 MR. KRUSHEN: Thank you, Commissioner
22 Colville.
23 132 I would now like to call Ms Carol
24 Loveridge of the Canadian Association of the Non-
25 Employed.
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1 PRESENTATION / PRÉSENTATION
2 133 MS LOVERIDGE: Good morning. I am
3 here representing the Canadian Association of the Non-
4 Employed. You will have to excuse me, I just got a
5 slight cold unexpectedly.
6 134 We are a Canada-wide organization and
7 we represent people who are living on fixed income --
8 students, non-employed, under-employed, part-time
9 workers.
10 135 Almost everyone I think needs the
11 telephone and everyone today would say that the
12 telephone is a necessity. I don't think anyone would
13 argue with that point. Some members of our community,
14 such as the elderly, the sick, the disabled, and
15 families of young children are particularly vulnerable
16 and need to be able to contact help if necessary.
17 However, everyone relies on the telephone for help and
18 safety reasons. For people who are non-employed and
19 looking for work, the telephone is particularly
20 important. The telephone is needed to contact and be
21 contacted by employers. Today we have a highly
22 competitive job market. If a job seeker does not have
23 a telephone number to place on an application form,
24 their chances of success are reduced.
25 136 Although there are many important
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1 reasons why every household needs a telephone, many
2 people today are not able to afford telephone service.
3 For example, in Manitoba people on city and provincial
4 welfare are not given money for a telephone. Money for
5 a telephone is not included in that budget.
6 137 So where do people take that money
7 from? They have to make a choice because it is a
8 necessity for people to have a telephone. So they may
9 take the money for their telephone from food or their
10 clothing budget. They may take the money from items
11 that you and I would have no second thought about going
12 out and buying. If we wanted to buy a new pair of
13 mitts for our kids or a new pair of boots, we don't
14 necessarily have to think about "Wait a minute. Wait a
15 minute. If I do that, I can't pay my telephone bill."
16 138 It appears that communication
17 technology is advancing at a very tremendous rate.
18 Surely, with the advances in technology, basic
19 telephone service should be getting more affordable,
20 not more expensive. Isn't this what we are always
21 told? For some reason, here in Manitoba the opposite
22 has happened.
23 139 One of the reasons that we strongly
24 object to the rate increase is that people on low
25 income trying to support their families cannot sustain
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1 a 40 per cent increase in cost, and particularly we
2 object to the fact that this rate increase is being
3 asked for something that may not even happen. Never
4 mind the fact that we are being asked to prepay MTS'
5 income tax -- that's ludicrous -- what if it doesn't
6 happen at all? What if the bill does not materialize?
7 Will Manitobans receive a refund of their payment? I
8 don't think so. I certainly have no confidence that
9 that would happen. For example, if the tax bill didn't
10 arrive, would we get this money back we have prepaid?
11 I don't think anyone believes that we would.
12 140 I think, from what I can read in the
13 MTS application, there is no justification for this
14 increase. It is an unfair increase, it is unfair to
15 burden Manitoba consumers with this increase and
16 particularly low income people. For example, if you
17 are a single person and your EI has run out and you are
18 now living on welfare while you are trying to look for
19 a job, your telephone bill is 11 per cent of your
20 income. That is an enormous percentage.
21 141 Now, MTS also claims that their five-
22 year plan is the best interest of consumers. Well, I
23 don't believe that at all. I think we as consumers,
24 and particularly people on low income, can decide what
25 is in our best interest. It is not in our best
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1 interest to absorb a 40 per cent increase in rate for a
2 tax bill that may not come. I mean, this doesn't even
3 make sense when you say it, never mind when we are
4 being charged it.
5 142 Now, I want to return to something
6 that Mr. Ashton brought up, and this is a little bit of
7 the historic and the accountability of the
8 privatization of MTS.
9 143 The majority of Manitobans fought
10 long and hard against privatization because we feared
11 jobs would be lost and fees would go up. However, both
12 MTS and the Manitoba government ignored the will of the
13 people and privatized MTS. At that time both the
14 government and MTS promised Manitobans two things: no
15 jobs would be lost and there would be no rate increases
16 in basic service. Within three months of privatization
17 170 people lost their job, and here we are not quite
18 two years later fighting against an unfair and
19 unjustified increase.
20 144 MTS has reneged on its promise to
21 Manitobans. We are asking the CRTC to hold MTS
22 accountable to its promise to us to respect and honour
23 the needs of the many and not the wants of the few. We
24 are asking, please, do not approve this rate increase,
25 particularly difficult for people on fixed or limited
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1 income.
2 145 Thank you.
3 146 THE CHAIRPERSON: Thank you very
4 much, Ms Loveridge.
5 147 Mr. Krushen.
6 148 MR. KRUSHEN: Thank you, Commissioner
7 Colville.
8 149 I would now like to call Mr. David
9 Martin of the Manitoba League of Persons with
10 Disabilities.
11 150 Mr. Martin.
12 151 THE CHAIRPERSON: Good morning,
13 Mr. Martin.
14 PRESENTATION / PRÉSENTATION
15 152 MR. MARTIN: Good morning. Thank you
16 very much for the opportunity to be here.
17 153 I would like to introduce Cindy
18 Isles, who is the Chairperson of our organization.
19 Cindy comes from The Pas. I didn't know she would be
20 in town, actually, but she was in town. I thought it
21 might be helpful for her to come as well, so she is
22 going to do part of the presentation with me.
23 154 MS ISLES: Thank you very much, Dave.
24 I will just share your mic, it might be easier that
25 way.
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1 155 As Dave mentioned, I am from The Pas,
2 Manitoba, and I would like to say welcome to Manitoba
3 on behalf of the northern communities as well as from
4 Manitoba League of Persons with Disabilities. I will
5 keep it fairly brief because I am not even supposed to
6 be here; I will just mention some of what Dave was
7 going to say and keep it simple.
8 156 The Manitoba League of Persons with
9 Disabilities Incorporated is an organization of
10 individuals with all types of disabilities. We were
11 formed in 1974 to be a voice expressing needs and
12 concerns of persons with disabilities who live in the
13 province of Manitoba.
14 157 Over the past 24 years -- our
15 anniversary is next year; in 1999, it will be 25 years
16 that we have been involved here -- we have been
17 actively involved in social policy development in such
18 areas as accessibility to public buildings, the rights
19 of children with disabilities to receive an inclusive
20 education, the provision of home care services
21 throughout Manitoba and the development of accessible
22 transportation systems such as Handi-Transit for people
23 with disabilities.
24 158 Through our history the MLPD has been
25 concerned about access to convenient and affordable
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1 telecommunications services. From time to time we have
2 worked closely with MTS to address issues affecting
3 affordability and usability of Manitoba's telephone
4 system for people with disabilities. The MLPD has
5 provided advice to MTS and telephone system regulators
6 on such issues as the development of message relay
7 services to facilitate communications between deaf and
8 hearing individuals, the price of specialized telephone
9 equipment, the creation of MTS Special Needs Centre and
10 issues evolving around the placement of public
11 telephone TTYs for the deaf Manitobans.
12 159 The MLPD has about 200 individual
13 members who come from across Manitoba. We also
14 represent four branches which are located in Steinbach,
15 Souris, The Pas and Thompson. The MLPD is a member of
16 the Council of Canadians with Disabilities as well.
17 160 I will turn the mic over to Dave. He
18 is a much better public speaker. I will let him
19 continue from there.
20 161 MR. MARTIN: Thank you very much.
21 162 It is the MLPD's understanding that
22 MTS is seeking permission to raise monthly residential
23 rates by $8. We understand that this rate increase
24 would be phased in over a period of five years. The
25 MLPD is very concerned about this proposed rate
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1 increase because we believe it will have a significant
2 negative impact on people with disabilities.
3 163 In 1991 something called the Health
4 and Activity Limitation Survey was done by Statistics
5 Canada as part of the Canadian Census. That survey
6 found that there were 160,685 Manitobans who identified
7 themselves as having a disability. Of this total
8 amount, the HAL Survey found that 76,820 Manitobans
9 with disabilities indicated that their annual income
10 was less than $15,000. The MLPD believes this
11 information has changed very little in the past few
12 years.
13 164 It is also widely accepted that
14 people with disabilities have many extra costs which
15 are a direct result of their disability. Our cost of
16 living is higher and yet we often need to make do with
17 much lower incomes and restricted earning potential.
18 165 It is clear that a large number of
19 Manitobans with disabilities live in poverty. Many
20 live on fixed incomes, and these incomes would not
21 necessarily increase to accommodate an $8 per month
22 telephone bill increase. In fact, our members tell us
23 that they have real difficulty paying for their current
24 telephone bills, let alone pay for higher bills.
25 166 For most people with disabilities the
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1 telephone is not a luxury which they can choose to live
2 without. Many of us require telephones for security
3 reasons as part of our desire to live independently in
4 the community. For us, we use telephones to call for
5 Winnipeg's Handi-Transit service; in order to book that
6 service and use it you have to phone in to book your
7 ride and then you have to phone back another day to
8 confirm your ride. We use telephones to order
9 groceries and medications if we have difficulty going
10 out and we use telephones to arrange for home care
11 services to get out of bed. We use telephones to call
12 for emergency assistance if we are alone and need help
13 when home care services are not scheduled. Also, many
14 mobility-disabled individuals simply need a telephone
15 to maintain contact with friends and family because
16 going out sometimes can be difficult.
17 167 Our main point is that most people
18 with disabilities cannot cancel their telephone if the
19 price becomes too high. In many ways, people with
20 disabilities are a captive market for the telephone
21 system and will maintain this service regardless of the
22 price because they simply have no other choice. They
23 will purchase less clothing, medications and even food
24 in order to continue to have a telephone. If approved,
25 the MTS rate increase would be unfair to people with
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1 disabilities because many of us have very limited
2 incomes and will be forced to sacrifice other
3 legitimate needs in order to pay for the higher
4 telephone bills.
5 168 MS ISLES: Dave asked me to just give
6 you our simple conclusion on this.
7 169 The MLPD urges the CRTC to decline
8 the MTS rate increase. Instead, we propose that MTS be
9 directed to find alternatives for dealing with the
10 future tax expenses which they will be required to pay
11 in a few years. For instance, they might increase
12 charges to businesses or perhaps increase charges for
13 additional services like call waiting, caller
14 identification, et cetera. We urge the CRTC to ask MTS
15 to use the next couple of years to find alternative
16 solutions and we ask that people with disabilities be
17 consulted by MTS.
18 170 Thank you very much for listening to
19 our presentation.
20 171 THE CHAIRPERSON: Thank you,
21 Ms Isles. In spite of your comment that Mr. Martin is
22 a better public speaker, I think you both did a great
23 job in presenting your case here this morning.
24 172 MS ISLES: Thank you.
25 173 THE CHAIRPERSON: Thank you very
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1 much.
2 174 Mr. Krushen.
3 175 MR. KRUSHEN: Thank you, Commissioner
4 Colville.
5 176 I would now like to call Mr. Byron
6 Williams of the Public Interest Law Centre on behalf of
7 CAC and the MSOS.
8 177 MR. WILLIAMS: Good morning,
9 Mr. Chairman and Members of the Panel.
10 178 THE CHAIRPERSON: Good morning.
11 PRESENTATION / PRÉSENTATION
12 179 MR. WILLIAMS: On behalf of the
13 Consumers' Association of Canada, the Manitoba Branch,
14 and the Manitoba Society of Seniors, I would like to
15 give you a special warm welcome to Manitoba today.
16 They asked me to pass on a special thank you for coming
17 to visit us in Winnipeg and to hear the views of
18 Manitobans in person on an issue which they consider
19 very important.
20 180 As I look around the room I think we
21 can all agree that, with the number of registered
22 presenters and the crowd that we have here today, it
23 speaks volumes about the strong feelings that
24 Manitobans have about this issue, the issue surrounding
25 MTS and the massive rate increase that's being
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1 proposed. I am sure one of the reasons Manitobans do
2 have strong feelings about MTS is related to the
3 controversy surrounding privatization.
4 181 I don't intend to get into the merits
5 of that debate this morning, but as you embark on this
6 difficult decision you face I think it would be helpful
7 to look at where MTS has been, where it is today, where
8 it is going, and the role that utility segment income
9 taxes, when they are actually incurred, will play in
10 MTS' transition from a Crown corporation to a private
11 sector company, because when MTS actually incurs income
12 taxes on its utility segment it will have made that
13 final step away from the somewhat sheltered world of a
14 Crown corporation to a private sector company. It will
15 become a private sector company fully, competing on a
16 level playing field with other private sector companies
17 who also have to incur income taxes.
18 182 I can understand the trepidation MTS
19 might feel as it is taking that last step away from the
20 gentle cocoon of Crown ownership and entering the less
21 forgiving embrace of the free market, but let's be
22 clear about one thing: it is absolutely and
23 fundamentally wrong for MTS to suggest that it will be
24 at a competitive disadvantage because it will be
25 incurring utility segment income tax at some time in
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1 the future. The reality is that for the first time
2 since MTS became a Crown corporation it will be
3 competing on a level playing field.
4 183 MTS often talks about how it operates
5 a world class fibre optic, fully digital, provincial-
6 wide telecommunications system. It is proud of that
7 fact, and so it should be. But it should be recognized
8 that the modern infrastructure on which MTS has been
9 built, that backbone was built in large part based upon
10 its advantages as a Crown corporation, the fact it had
11 a lower cost of capital because it needed very little
12 equity and the fact it was subsidized with government-
13 guaranteed debt, and of course the fact that it never
14 incurred corporate income tax. No private sector
15 company had those advantages. And think of the
16 advantages even today that the absence of corporate
17 income tax gives MTS thanks to the additional tax
18 deductions stemming from the pre-privatization pension
19 plan; MTS currently faces one less significant cost
20 than its competitors.
21 184 This MTS tax advantage can be
22 reflected in various ways in its rates and its
23 revenues. First, it could charge the same as its
24 competitors and earn a higher return because it has
25 lower costs. Secondly, it could charge less than its
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1 competitors in order to buy market share and still earn
2 the same return because its costs are lower due to the
3 tax advantage. Third, the competitive advantage
4 created by the lack of taxes, the lack of tax expense,
5 might be cancelled out due to internal inefficiency.
6 185 Currently MTS enjoys an undeniable
7 advantage, but the time is coming when it will incur
8 income tax and be obliged to play on a level playing
9 field. I can understand how the thought of losing that
10 advantage might be painful to MTS. I can also
11 understand, if I put myself in their shoes, why it
12 might want to prolong that advantage so that, instead
13 of having to recover its full income tax costs from its
14 rates in the year 2001, it might prefer to put that
15 date off for a couple of years to, say, 2003.
16 186 In other words, if I were MTS, I
17 would like a proposal where I only had to recover $27
18 million in rates from my utility segment income tax in
19 the year 2001 rather than my full cost of $40 million,
20 and I would really like a proposal where I only had to
21 recover $35 million in rates for income tax in 2002
22 rather than my full cost of $42 million. If I were
23 MTS, I would like that extra cushion because I would be
24 prolonging my competitive advantage at the very time
25 when local competition is expected to be gaining
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1 momentum. And I would especially like that option if I
2 could be guaranteed that I would get that extra
3 cushion, that competitive war chest, by pre-collecting
4 part of it in 1999 and the year 2000, years when local
5 competition will be in its infancy.
6 187 So, if I were MTS, I would be
7 prepared to give up a bit of my advantage in 1999 and
8 2000 to prolong it for a couple of years, and if I were
9 MTS, it would be even better, rather than recovering my
10 future income tax costs which are generated from the
11 entire utility services from all utility services, if I
12 could pre-recover them from one or two services,
13 services where subscribers don't have a reasonable
14 opportunity or expectation for competition in the first
15 couple of years, 1999 and 2000, services such as basic
16 rates.
17 188 If I were MTS, I think the best way
18 to make the transition to the real world pain free
19 would be to transfer all that pain to captive
20 residential subscribers. That would be the perfect
21 scenario. I would prolong my advantage over time and I
22 would dump all my future income tax costs on those
23 subscribers with the least prospect for competitive
24 relief. This would be perfect because, if I were well
25 run, I could either generate higher returns by charging
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1 the same rates as my struggling competitors or buy
2 market share by charging lower rates. And, even if I
3 wasn't efficient, or as efficient as my private sector
4 brothers and sisters, I would still have the luxury of
5 a couple more years of competitive returns while I
6 tried to get my house in order.
7 189 But I am not MTS, nor are my clients,
8 and MTS has to recognize that what might look really
9 good from a company perspective might not look nearly
10 as good from the perspective of a regulator or a
11 residential subscriber, and it especially wouldn't look
12 good in an era of price cap and local competition, an
13 era where the rewards are supposed to go to efficient
14 companies, where competition is supposed to be on a
15 level playing field and where residential subscribers
16 are supposed to be shielded against being unfairly
17 loaded with costs, like companies gearing up for local
18 competition.
19 190 If the utility segment of MTS is
20 facing a new cost, the letter, spirit and intent of
21 price cap suggest that that cost should be borne across
22 all services at the level of the price cap index, not
23 downloaded onto the backs of local residential
24 subscribers in the sub-basket.
25 191 If MTS truly feels that it cannot
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1 recover its future income tax costs in a competitive
2 market when they are actually incurred despite the fact
3 that competitors also face the prospect of incurring
4 income tax, the only logical, rational explanation for
5 that is that MTS is not as well run as its competitors.
6 But under price caps subscribers are not supposed to
7 bear the burden of company inefficiency. Only when
8 shareholders bear that consequence is there an
9 incentive to be as efficient as possible.
10 192 Although the MTS proposal has changed
11 somewhat over the year since the initial March 31st
12 filing, there is one constant; it is a desire to part
13 subscribers with their money sooner than it is
14 necessary so that MTS can enhance its own position and
15 fetter competition. Customers lose on both those
16 counts: they pre-fund MTS to help it beat competition,
17 but they are not able to enjoy the fruits of
18 competition because MTS has a competitive advantage.
19 If price caps are to work, MTS has to play by the
20 existing rules, and those rules do not include a
21 prepayment of a forecast expense.
22 193 I think I have a few minutes left, so
23 there is a point my client would like to emphasize
24 quite strongly, and that's that it would be unjust,
25 unfair and contrary to lawful regulatory principles to
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1 authorize the pre-collection of a forecast expense that
2 has not been incurred. My clients, CAC/MSOS, expect
3 that MTS will try and smudge and confuse this issue;
4 they will suggest an analogy to deferred costs, to
5 deferred taxes, which of course are taxes where current
6 accounting costs have actually been recorded.
7 194 With respect, that argument is a less
8 than profound work of accounting and regulatory
9 fiction. That argument founders in the face of the
10 Commission's own decision and the reality that MTS does
11 not have a current income tax expense and it founders
12 in the face of the company's own admission that it is
13 trying to collect these costs before they are incurred.
14 195 There is a fundamental regulatory
15 principle that a regulated company is only allowed a
16 reasonable opportunity to recover costs incurred in
17 providing current services. It is a principle built
18 upon the concept of inter-generational or inter-
19 temporal equity. the commitment to efficiency and the
20 objective of regulatory certainty. This fundamental
21 principle has been enshrined in the concept of just and
22 reasonable rates and has been affirmed by countless
23 regulators and courts over the last seven or eight
24 decades.
25 196 MTS is asking you to violate this
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1 principle. It is promoting a radical reinterpretation
2 of the concept of just and reasonable rates, a concept
3 that historically spoke to the balance between
4 shareholders and subscribers. In the radical
5 interpretation suggested by MTS, this historical
6 balancing act and those decades of jurisprudence have
7 been swept aside. In the MTS world view there is only
8 one side to the equation: the shareholders' view.
9 197 MTS, backed by RBC Dominion
10 Securities, is vehemently opposed to a concept it calls
11 "backloading", a concept that for decades has had
12 another name: "rates that reflect costs when they are
13 actually incurred". What a common sense concept --
14 paying for costs when they are incurred, just as
15 subscribers have for decades under standard regulatory
16 practice and procedure. But to MTS and to RBC this has
17 become anathema. Paying for costs when they are
18 actually occurred has become a confiscatory assault on
19 what they appear to regard as the only sacred
20 principle: a guaranteed return no matter how poorly or
21 how well the company is run, a guaranteed return
22 despite the fact we are under price cap, where the
23 level of return is supposed to reflect the efficiency
24 of the company.
25 198 Just to sum up, MTS is asking you to
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1 violate this fundamental regulatory principle, but my
2 clients, representing many Manitoba consumers, are
3 confident that you will reject their radical solution
4 and retain the balance between shareholders and
5 subscribers that the concept of just and reasonable
6 rates is supposed to uphold.
7 199 Thank you very much, Mr. Chairman.
8 200 THE CHAIRPERSON: Thank you,
9 Mr. Williams.
10 201 Mr. Krushen.
11 202 MR. KRUSHEN: Thank you, Commissioner
12 Colville.
13 203 I would now like to call Ms Judy
14 Wasylycia-Leis, the Member of Parliament for Winnipeg-
15 North-Centre.
16 PRESENTATION / PRÉSENTATION
17 204 MS WASYLYCIA-LEIS: Thank you very,
18 very much.
19 205 I am glad to be here as a Member of
20 Parliament for Winnipeg-North-Centre speaking on behalf
21 of constituents in my area who are very concerned about
22 the proposed increase in basic rates for MTS. I want
23 to thank, as many have done already this morning, the
24 CRTC for agreeing to hold this daylong session here in
25 Winnipeg so that you can meet Manitobans face to face
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1 and feel the passion of concerned citizens here in
2 Winnipeg and throughout the province.
3 206 So I am here to add my voice to the
4 many Manitobans you are hearing from today who are
5 concerned about the proposed rate increase specifically
6 and about the direction of our telephone system
7 generally.
8 207 I am here on behalf of my
9 constituents to register our strongest possible
10 opposition to the proposed rate increase by MTS. Parts
11 of my constituency have the highest poverty rates that
12 are anywhere in this country. We have incredible
13 poverty, unemployment, homelessness, and I think if you
14 wanted to give a human face to the well-known fact that
15 Winnipeg is the child poverty centre of Canada, you
16 only have to walk down the streets of my constituency
17 to realize what that really means.
18 208 Winnipeg-North-Centre has a
19 disproportionately high number of people who are on
20 fixed income and who are working and able just to eke
21 out a subsistence level existence. I speak for all my
22 constituents but in particular for seniors, the working
23 poor, single parent mothers and many families living
24 below the poverty line.
25 209 On their behalf I want to remind you
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1 that phones are a basic necessity, a fact that is
2 increasingly being overlooked these days. In the rush
3 to become a global competitive society using
4 deregulation and privatization at every turn, very
5 little consideration is being given to the impact of
6 pricing phones out of reach for a growing number of
7 citizens.
8 210 In this global economy we are all
9 aware of the growing gap between the rich and the poor,
10 and I think the issue of phones gives us an important
11 symbolism of that growing gap. Isn't interesting that
12 we see on the one hand a number of people with the
13 ability not only to have phones in their homes but to
14 have phones growing out of their ears wherever they go,
15 yet on the other hand to have a growing number of
16 families in our society today without even basic
17 telephone service? Telephones connect us to jobs, to
18 our families, to loved ones and to emergency services.
19 In the lives of many, many people, the loss or the
20 absence of a phone has an impact in just plain survival
21 terms and in fact means further isolation from
22 participating in our society today.
23 211 We already have a problem, as you
24 have heard from so many, about low income people not
25 being able to afford a phone. Surveys on low income
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1 household penetration rates show us that Manitoba has,
2 if not the lowest, the second lowest rate in terms of
3 penetration anywhere in Canada with perhaps one in
4 twelve low income households without any phones at all.
5 212 The proposed rate increase will kill
6 any hope among those families of ever being able to get
7 a phone and it will undoubtedly add more people to the
8 rolls of those without a phone. Is this what we want?
9 Do we want a society of more jobless, homeless and
10 phoneless people?
11 213 If so many have no phones already or
12 no hope of ever getting a phone, what does it mean for
13 those who are already on very tight fixed budgets?
14 What sacrifices will have to be made in order to pay
15 for increasing phone service? What will this mean for
16 low and middle income families everywhere? What will
17 they have to give up in order to retain their phones?
18 214 As you have heard already this
19 morning, since 1995 MTS has already had several rate
20 increases adding up to approximately an additional $5
21 on the monthly phone bill. The proposed increase in
22 basic rates could add up to another 40 per cent over
23 that amount, making the situation very difficult here
24 in Manitoba.
25 215 The questions many are asking in my
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1 constituency and throughout Manitoba are: Why are
2 consumers being asked to bear the brunt of paying MTS'
3 income taxes? Why is there an increasing burden being
4 placed on the residential user and not others? Why
5 should consumers have to start paying taxes for MTS
6 before they are incurred based on their projections of
7 what their taxes might be? And why, given the
8 profitable situation at MTS, are individuals being
9 asked to subsidize the profits of shareholders?
10 216 I wanted to also add too, for the
11 benefit of the Members of the CRTC, that five years
12 ago, on June 7th, 1993, David Orlikow, the former
13 member for Winnipeg-North, a person you may recall as
14 someone who fought vigilantly and diligently for
15 fairness for all citizens, particularly when it came to
16 telephones and telecommunications -- he helped me make
17 an appearance before the Public Utilities Board when we
18 were dealing with that difficult issue of deregulation
19 and particularly the costs that MTS was being required
20 to pick up as a result of the Unitel hook-up costs.
21 217 That year, 1993, probably, looking
22 back, marked the beginning of the end for our notion of
23 a universal phone service. We said at that time that
24 Manitoba and Canada fought for, and enjoyed, one of the
25 best telephone systems in the world and we said that
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1 the Canadian advantage that we had in pricing and
2 services had not been won easily. At the turn of the
3 century Bell Canada and the prairie provinces fought a
4 long battle over access and pricing. The issue was not
5 resolved until the three provinces set up Crown
6 corporations to run the telephone system and adhered to
7 low cost universal access and high quality service
8 principles. In Manitoba, interestingly, it was a
9 Conservative government headed by Sir Rodman Roblin
10 which established MTS as a public utility, and of
11 course it was a Conservative government under Gary
12 Filmon that tore it apart.
13 218
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