INTRODUCTION



The British Columbia Coalition for Information Access is comprised

of a wide variety of community and public sector organizations

concerned about information and telecommunications policy.  Members

of the Coalition include the British Columbia Library Association,

the BC Teachers Federation, the BC Telecommunication Workers Union,

the BC Public Interest Advocacy Centre, West Coast Environmental

Law, the BC Legal Services Resource Centre, Vancouver Community

Network, and other less involved organizations.



The Coalition was formed approximately nine months ago out of

concern that ordinary BC residents were not being properly

represented or heard in provincial and federal jurisdictions

responsible for adopting and implementing telecommunications and

information policy. The initial efforts of the Coalition were

directed to opening up the public process surrounding the BC

Electronic Highway Accord, and to assure that public voices were

heard on behalf of providing public space on the electronic

highway.



ASSUMPTIONS



The CRTC has suggested two options for discussion at the Local

Service Pricing Options Hearings, "budget services" and "targeted

subsidies".  The BCCIA does not accept that these are the only two

options.  Indeed, the whole premise behind these Hearings requires

greater consideration.



The Hearings were made necessary by decisions taken by the CRTC

since 1992, when CRTC decision 92-19 effectively approved long-

distance competition.  Many community organizations opposed the

deregulation of the telephone system, predicting that it would

result in much higher cost local telephone service and loss of

universal access.



Community and advocacy groups did not have to have a crystal ball

to understand the fundamental economic principles underlying the

deregulation process.  The experience in the United States, which

had previously deregulated its telephone services, was available

for critical examination. The decisions made since 1992 have

fulfilled this prophecy as local service fees inevitably moved

higher.



The BCCIA understands the whole process of deregulation not as an

attempt to end the monopoly of telephone companies and to create

competition in telecommunications services, but rather as creating

the conditions for a new round of consolidations and the emergence

of new monopoly structures embracing all digital communications.



The CRTC has accepted the premise that local telephone service is

subsidized by long-distance service.  BCCIA does not accept this

fundamental premise, which resulted from over a decade of highly

technical hearings from which the general public was excluded and

public advocacy groups were overwhelmed by the superior financial

resources of the telephone and cable companies.



Access to long-distance services still requires use of local

telephone systems.  The decision as to what constitutes a local

service cost and what constitutes a long distance cost is as much

political as it is economic.  Long-distance service was built out

of the profits from local service and requires local access in

order to exist.  This fundamental principle was ignored when the

CRTC accepted the assumption that long-distance services subsidized

local services.



Having decided to deregulate the phone system and to accept the

assumption of local service subsidization, the CRTC then held the

Split Rate Hearings, giving the telephone companies $2.00 per month

increase in each of the next two years in order to increase local

service charges and decrease long-distance charges.  This was

intended to be part of the CRTC s rate rebalancing strategy. The

federal government, petitioned by the Stentor companies,

subsequently reversed the part of the decision that directed the

extra revenue to reducing long distance costs.  The telephone

companies were allowed to keep the windfall estimated to be $4.5

billion over ten years as general revenue.



POSITION # 1



THE CRTC SHOULD RECOMMEND THAT THE GOVERNMENT UNDERTAKE BOTH A

BROAD-BASED EDUCATIONAL CAMPAIGN ON THE IMPLICATIONS OF THE RECENT

CRTC HEARINGS AND FUND COMMUNITY ORGANIZATIONS TO EDUCATE AND

ADVOCATE ON BEHALF OF THE GENERAL POPULATION



Extremely important issues regarding the future direction of

Canadian society have been made in recent CRTC hearings, starting

with CRTC 92-19.  Access to basic telecommunications services, the

future of public use and participation in the electronic highway,

and the methods for equalizing service access in the new convergent

information environment have all be part of these historic

hearings.



There can be little question that the arcane technical discussions

conducted at CRTC hearings have excluded the vast majority of the

population who remain unaware of the decisions which affect not

only their pocketbook but also who owns, creates, and has access to

the new information highway.



January, 1994 demonstrated to the cable companies what an aroused

population can do when fundamental services are manipulated for the

financial benefit of large corporations and no consideration is

given to the user.  The decisions made by the CRTC regarding phone

service and its long term implications are even more fundamental to

our everyday lives than the cable companies earlier attempts to

alter their pricing and marketing structure.  



Not only is the universality of telephone service being diminished

but Local Metered Service is gradually being introduced.  The poor,

the low income, and eventually larger segments of the population,

will have less access to basic communication services and have to

pay more for it.



To date, changes to basic telephone service have been accomplished

without arousing public indignation.  However, people are slowly

beginning to recognize their exclusion from decision-making and to

see that new forms of service delivery reduce the services they

receive while increasing their costs and improving corporate

profits.  Foremost among these new service deliveries are usage

sensitive pricing formulas.



POSITION # 2



THE CRTC SHOULD RECOMMEND THAT THE FEDERAL GOVERNMENT ROLLBACK THE

$2.00 PER MONTH LOCAL TELEPHONE RATE INCREASE IN EACH OF THE NEXT

TWO YEARS.



This increase does not meet the CRTC's own criteria for rate re-

balancing.  It is a $4.5 billion windfall for the telephone

companies over the next ten years.  It is not being used to reduce

long distance rates.  It is not being used to maintain the

telephone workforce.  BC Telephone sent 1,100 employees a

Valentine's Day layoff notice only two months after receiving this

windfall.  



This increase results in a more expensive local service requiring

some form of subsidy or reduced service to the poor and low income

in order to maintain some semblance of universality.  The best way

to maintain universality is to maintain affordable local services.



POSITION # 3



NO LOCAL SERVICE PRICING OPTION SHOULD BE ACCEPTED THAT IS USAGE

SENSITIVE.



Over the last decade, telephone companies across Canada have

submitted proposals for the introduction of Local Metered Service,

a system that would result in telephone charges based on the

number, length, and distance of the telephone calls made.



There is no question that the "budget service" options being

outlined by the telephone companies, and particularly the Pathway

service proposed by B.C. Telephone, is a step towards Local Metered

Service.



From the perspective of the telephone companies, Local Metered

Service will allow maximization of revenue regardless of the

economic and social irrationality of the proposal.



It is economically irrational because an increasing amount of

financial and computer resources will have to be expended in

tracking local calls and charging for each one.  It is irrational

because, by some accounts, 60% of the phone company computer

resources are already dedicated to the billing function rather than

the communications function.



It is economically irrational because the digital switch technology

which maximizes the bandwidth utilization and is the major cost

after line deployment is dropping dramatically along with its major

component, computer chips.  Diminishing costs and exploding

bandwidth capability can not logically result in local service cost

increases unless the technology is being used in such a manner as

to limit its availability.  



The Internet is an example of a technology and a social perspective

which allows for sharing of bandwidth, flat usage charges, and a

decentralized administration which has resulted in exponential

growth.  For more detailed comments on this comparison, BCCIA

recommends the submission by Garth Graham on behalf of

Telecommunities Canada entitled "Canada is the Local Dialing Zone:

A Community Networks View of Local Service Pricing Options". 

Increasingly the technology allows us to move from usage sensitive

pricing even for long distance use.



It is socially irrational because restricting access to the phone

system through Local Metered Service limits the ability to use the

most democratic, and still the most fundamental tool, of the

information age.  If access and communication is the essence of the

new Knowledge Society then it is imperative to discourage use.  



Telephones are used by the old for maintaining friendships,

providing mutual support, and accessing lifeline services.  The

disabled are able to communicate easily beyond the restrictions

imposed by physical limitations.  The unemployed use it for finding

jobs, the sick for medical consultation and so on.  



Over 30% of the population use it to contact their local library

for information.  Many use their telephone lines to access the

Internet through community networks or access their local library

or information provider.  Hundreds of thousands have taught

themselves how to use the new information technology by dialling

into their local library or community network.  Self-learning has

been tremendously expanded as a result of the ability to use a home

computer and link to the networks.



Restricting access by making basic telecommunications services

usage sensitive will exacerbate the tendency to create an

information rich and information poor parallelling the distribution

of wealth.  Increasingly access to telephone and telecommunication

lines have required to take part in a society which is shifting

both its information and decision-making processes to the

electronic realm.



B.C. Telephone argues that a flat rate service will always be

offered.  However, by offering a "budget service", the B.C. Tel

will be able to escalate the cost of the flat rate service to what

will be, increasingly, a luxury rate flat rate service knowing that

those who can no longer afford it will be able to drop to the

"budget service".  The "budget service" concept creates a two tier

service which not only allows the telephone company to continually

escalate the cost of its flat rate service but also to bump more of

the population into the usage sensitive budget tier where they will

have to pay more.



This is not a conspiracy theory but rather a marketplace

inevitability.



ABANDONING THE RURAL AREAS



There are other directions that the telephone companies can take as

a result of de-regulation.  Telephone companies in the U.S. have

started divesting themselves of rural telephone systems, often

offering them to local communities for only $1.00.  The less

profitable rural areas would have to fend for themselves.  



Just this week, the California Public Utilities Commission is

considering proposals from Pacific Bell and GTE California (GTE is

also the majority owner of B.C. Telephone) to "geographically de-

average" telephone rates and abolish "statewide average" basic

rates.  Customers "living in rural areas including households and

businesses located in easily accessible places that are not densely

populated but still close to metropolitan areas could see their

rates increase by 100% or more."



B.C. TELEPHONE PROPOSAL



The particular proposal from B.C. Tel demonstrates many of the

problems outlined above.  The "basic service" charge would be

reduced by $4.00 per month for which the household would be allowed

30 free phone calls per month, averaging one per day per family. 

You have to admit there is a certain irony in creating a "basic

service" which costs $4.00 less per month when you have just been

granted a $4.00 per month rate increase over 2 years.  



In other words, on January 1, 1997, you will pay the same amount

for local service you did in 1995 only you will be restricted to 30

free calls per month.  After that you will pay an extra $.25 per

call.  The increased per call charges will be capped for one year

only at $9.00 per month or $5.00 more than the flat rate service.



A number of community organizations and unions (including the B.C.

and Ottawa- based Public Interest Advocacy Centres; Energy and

Paperworkers Union of Canada; Telecommunication Workers Union;

Consumers Association of Canada; and the Federation des

Associations de Consummateurs du Quebec) conducted, through Ekos

Research Associates, Inc., a survey of 1020 randomly selected

Canadian residents published as a "Survey of Consumer Perception

Surrounding Telephone Service".



The survey indicated that 85% of the population selected fixed

monthly rates with unlimited calling privileges as their preferred

service option.  The same survey determined the average number of

calls made from the home is 8.7 while the median is 5.  Local

calling averages 96 minutes per day.  Women, youth, less educated,

lower income, those with children, those below the poverty line,

and those on social assistance spent the greatest amount of time

using local phone service.  86% indicated that they couldn't cope

in today's environment without telephone service.



The survey proved the importance of telephone service to the entire

population, especially those that have reduced financial resources. 

Rather than using their telephones less, those most likely to be

forced to move to "budget service" rely on their telephones more.



The BC Old Age Pensioners Organization et al, the Consumer

Association of Canada, Manitoba Society of Seniors, National Anti-

Poverty Organization, Federation Nationale des Associations des

Consommateurs du Quebec and the One Voice - The Canadian Seniors

network conducted a membership/Constituent survey published as

"Perceptions of Telephone Service By Low Income Consumers".  The

survey found that the average number of local calls from home each

day is 7 and the median is 5.  The unemployed reported making an

average of 10 calls per week looking for work.  48.8% of

respondents would have trouble paying a $4.00 increase on a base of

only $12.00.



These surveys indicate broad opposition to the direction taken by

the B.C. Telephone proposals.



The BCCIA does support the BC Tel proposal for spreading service

charges over a longer series of installments. This would be of

significant benefit to low income customers. Optional toll-blocking

service would also be of interest to 29% of the population if it

were offered without extra charge. 



DEFINITION OF BASIC SERVICE



The BCCIA agrees with the following list of basic services outlined

in the submission of the Federation Nationale Des Associations De

Consummatuers Du Quebec (FNACQ) et al. in their submission of

February 19, 1996.  These basic telecommunication services should

be priced in such a way as to be affordable for all Canadian

households.



    ·Installation/connection of service, including at least one

     working jack



    ·repair service



    ·free usage within a local calling area, which includes all

     major public services within the subscriber s geographic

     community



    ·access to long distance



    ·individual line service



    ·touch tone service (and any other non-optional features)



    ·directory listing



    ·"reference of call" service where number changes, within local

     area



    ·printed directory for local calling area (updated annually)



    ·local directory assistance for new listings



    ·access to local and long distance directory assistance



    ·access to operator services



    ·access to emergency service (911)



    ·access to optional features



    ·basic Internet access





In addition to the FNACQ list, BCCIA has added basic Internet

service.  Increasingly home computer and modem ownership is a

requirement to access information, especially government

information, as well as another way to maintain contact with

friends and associates.  The recent announcement by AT&T of 5 hours

Internet access included in the basic phone bill is both a smart

strategic marketing decision and a recognition that the base level

of telecommunications service has risen.



The list above is current for 1996.  Basic service must be

continually re-defined.  



TARGETED SUBSIDIES



POSITION # 4



BCCIA TAKES A NEUTRAL POSITION ON TARGETED SUBSIDIES AND THE

UNIVERSAL CONNECTIVITY FUND



A number of community organizations have supported the Universal

Connectivity Fund proposed by FNACQ.  Their brief gives an

extensive outline of their proposal based on the California

Universal Lifeline Telephone Service.



BCCIA understands and appreciates the reasons for such a proposal. 

Clearly if the telephone companies are allowed to continually

increase the cost of basic service then some mechanism must be

found to assure universal access.  However, the fund as proposed

does not place any limits on the ability of phone companies to

increase their telephone rates and therefore the surcharge required

to subsidize those who cannot afford basic service.  



The impact of the surcharge falls on users who range from just

being able to afford basic service to those who are quite wealthy. 

The surcharge is therefore a regressive tax.  The chief

beneficiaries of the fund are not those who are subsidized but

rather the telephone companies who are assured a higher penetration

rate for their product and increased use regardless of the cost of

the basic service.



Other proposals should be investigated such as a tax on telephone

company profits.



While there are many reasons to oppose the new U.S.

Telecommunications Act, McConnaughey, in the article referred to

above, states that:



     As a bedrock principle, the [Telecommunications] Act states

     that every telecom carrier that provides interstate and

     intrastate telecom services shall contribute, on an equitable

     and non-discriminatory basis, to the specific, predictable,

     and sufficient mechanisms established by the FCC and the

     States to preserve and advance universal service.  Those who

     receive support would include at least low-income consumers

     and those in rural, insular, and high cost areas, as well as

     schools, libraries, and rural health care providers. 

     Implementation of these statutory requirements will preoccupy

     telecom policy makers at all levels in this country during the

     months ahead.

Copyright © 1995 BCLA Information Policy Committee

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