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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 In order to meet the requirements of the Official Languages Act, transcripts of proceedings before the Commission will be bilingual as to their covers, the listing of the CRTC members and staff attending the public hearings, and the Table of Contents. However, the aforementioned publication is the recorded verbatim transcript and, as such, is taped and transcribed in either of the official languages, depending on the language spoken by the participant at the public hearing. 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 StenoTran ii 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 StenoTran iii 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 StenoTran 1 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 StenoTran 2 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 StenoTran 3 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 StenoTran 4 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 StenoTran 5 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 StenoTran 6 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. StenoTran 7 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 StenoTran 8 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. StenoTran 9 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 StenoTran 10 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 StenoTran 11 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 StenoTran 12 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 StenoTran 13 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, StenoTran 14 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 StenoTran 15 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 StenoTran 16 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. StenoTran 17 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 StenoTran 18 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 StenoTran 19 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 StenoTran 20 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." StenoTran 21 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 StenoTran 22 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 StenoTran 23 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 StenoTran 24 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? StenoTran 25 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 StenoTran 26 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 StenoTran 27 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 StenoTran 28 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 StenoTran 29 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. StenoTran 30 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 StenoTran 31 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 StenoTran 32 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 StenoTran 33 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 StenoTran 34 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. StenoTran 35 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 StenoTran 36 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. StenoTran 37 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 StenoTran 38 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 StenoTran 39 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 StenoTran 40 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 StenoTran 41 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. StenoTran 42 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 StenoTran 43 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 StenoTran 44 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 StenoTran 45 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 StenoTran 46 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 StenoTran 47 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 StenoTran 48 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 StenoTran 49 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 StenoTran 50 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 StenoTran 51 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 StenoTran 52 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 StenoTran 53 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 StenoTran 54 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 StenoTran 55 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 StenoTran 56 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 StenoTran 57 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 StenoTran 58 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 StenoTran 59 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 StenoTran 60 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 StenoTran 61 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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