BUSINESS/ECONOMY

Bell calls for a higher tariff

Ann Walmsley September 24 1984
BUSINESS/ECONOMY

Bell calls for a higher tariff

Ann Walmsley September 24 1984

Bell calls for a higher tariff

BUSINESS/ECONOMY

Ann Walmsley

The proposal was a startling one for Bell Canada's 6.5 million sub scribers in Ontario, Quebec and the Northwest Territories. Last week, in a report to the Canadian Radio-televi sion and Telecommunications Commis sion, the Montreal-based phone monop oly outlined a plan to more than double basic phone bills over a five-year period. The proposal drew immediate criticism from consumer groups. Andrew Roman, general counsel of the Toronto-based Public Interest Advocacy Centre, for one, declared that the rate increase would hurt the elderly and the poor in particular. Added Roman: "This move is most hurtful to those who need their phones, and they will have to do with less nutrition or less living space."

Bell’s new billing strategy is an attempt to adjust its rates to deal with the first-ever threat of competition in the company’s long-distance market. Traditionally, Bell has subsidized losses on local services with revenues from longdistance services. But now Bell argues that the cross-subsidization will no longer be possible, CNCP Telecommunications of Toronto, which already runs a data and private voice network on Bell lines, applied to the CRTC last October to provide long-distance service in Ontar-

io, Quebec and British Columbia. The CRTC will begin a hearing which will consider that application on Oct. 2, and Bell’s report will be among the evidence that it considers.

According to Bell, local phone bill revenues fell $1.2 billion short of the cost of providing the service in 1983. What is more, John Elliot, Bell’s assistant vice-president of rates, claimed that the high long-distance tolls used to subsidize the shortfall have driven away large business customers. Said Elliot: “Businesses are looking for alternatives such as private lines offered by other companies.” Wide-open competition in the long-distance market, Bell claims, would further erode its revenues. CNCP has offered to make payments to Bell if the CRTC permits long-distance competition but does not allow Bell to raise its local rates at the same time. Bell officials, however, are skeptical that CNCP will deliver on its offer. Declared Elliot: “That form of contribution would be very difficult to sustain.”

Under Bell’s five-year plan, the basic rate for a local phone line would gradually rise to between $11.60 and $20 a month. Rates now range from $5 in isolated towns in Northern Ontario to $16.90 at Montreal’s Mirabel Airport. Long-distance charges would drop between 52 and 63 per cent, depending on

the distance called. The customers who would benefit from the juggling would be those who place more than $30 worth of long-distance calls per month. But, according to Bell’s statistics, about 30 per cent of residence subscribers and about 20 per cent of businesses make no long-distance calls at all each month. The rate projections also failed to take into account the company’s periodic requests for across-the-board increases. On Sept. 4 Bell filed a request for an interim 3.6-per-cent general increase effective Jan. 1, 1985.

When last week’s proposal became public, consumer advocates charged that Bell artificially inflates the cost of local service. Said David McKendry, an analyst with the Consumers’ Association of Canada (CAC): “Bell is saying that local subscribers should pay almost all the costs of lines, poles and exchanges. But we say long-distance callers require that equipment too.” He also claimed that business users, who demand sophisticated data-transmission equipment, have driven up the cost of providing local service and that under the new plan residential users would have to share the cost of technology that they do not use.

According to McKendry, Bell has another motive in proposing a major local rate increase: to prepare the public for the eventual introduction of Local Measured Service (LMS), under which subscribers would be billed according to the number and duration of local calls. McKendry contended that Ottawa residents who now pay $9.15 a month for local phone service would pay $25.75 after five years under Bell’s rate proposal. At that stage, LMS would seem more attractive because it would reduce the basic line rate by 60 per cent. Added McKendry: “Ottawa residents could reduce the basic bill to $15.45.” But he argued that the drop would be illusory because it would still be 75 per cent higher than at present.

For its part, Bell Canada insists that its new five-year plan is essential to ensure continued efficiency. Company officials added that Bell will apply for CRTC approval within a year. Elliot said that the plan is neither unfair nor unreasonable. He added, “Sure it’s debatable, but to say it is wrong is an exaggeration.” Still, the 200,000 subscribers that Bell estimates will disconnect their service because of higher rates will indeed be prepared to debate.