December 8, 2000
JIM BELL
Nunatsiaq News
IQALUIT — Canada’s telecommunications watchdog has rolled out the welcome mat and flung the front door wide open to any company willing to challenge Northwestel’s long distance monopoly in northern Canada.
But it doesn’t look as if any of them will show up any time soon.
In a long-awaited decision Nov. 30, the CRTC ruled that alternative long-distance providers may operate in Northwestel’s market area as of Jan. 1, 2001.
But Canada’s money-losing long-distance-only providers may think twice about moving into Northwestel’s high-cost market.
Ian Angus, a telecommunications consultant based in Ontario, says potential long-distance competitors will look at the idea carefully before rushing into Nunavut, the Northwest Territories and Yukon.
"It will be very difficult for any competitors who want to move in," Angus said.
That’s partly because the CRTC also approved:
• a 7 cent-a-minute tariff, to be paid to Northwestel, for any long distance competitor who wants to use Northwestel’s exchange system;
• a new cut-rate long distance plan for all Northwestel residential customers — up to 600 minutes of long distance time during off-peak hours at 10 cents a minute to a maximum of $25 a month;
• $3 a month hike in the company’s local residential phone rate, bringing it to $29.33 a month;
• a $15-million a year industry-supplied subsidy for Northwestel;
• a $67-million service improvement plan that Northwestel will carry out over the next four years.
"Bleeding red ink"
Angus says long-distance-providers such as Sprint Canada and Primus Telecommunications Canada are still "bleeding red ink," and are likely to be nervous about risking an unpredictable foray into the North.
"They have to a pay a tariff to connect and they’re looking at small market that is scattered over a vast area," Angus said.
Angus says, in fact, that it’s entirely possible that competitors may never find it attractive to move into northern Canada, "as along as Northwestel does its job."
He said, for example, that other small telephone companies in Canada, such as New Brunswick’s NBNet and Newfoundland’s NewTel, have managed to hang on to 90 per cent of their long distance customers in the face of stiff competition.
Jean Brazeau of Sprint Canada, the nation’s largest alternative long distance company, said his company hasn’t yet decided whether to enter the northern market.
A media relations officer for AT&T Canada said this week that his company has no plans to offer long distance services in northern Canada in the immediate future.
Northwestel’s new president, Paul Flaherty, this week refused to predict whether competitors will move North to challenge his company.
"It really is anyone’s guess. The market will decide," Flaherty said at a news conference this Monday.
Customers must sign up
Meanwhile, Nunavut residents used to getting monthly phone bills in the hundreds of dollars will soon enjoy long distance rates that until now they could only dream about.
Under Northwestel’s new plan, the company’s long distance customers everywhere will pay only 10 cents a minute up to the first 250 minutes of long distance time they use each month.
As long as they use no more than 600 minutes of long distance time, their long distance bills will not exceed $25. Any long distance time in excess of 600 minutes will be billed at 10 cents a minute.
Customers must voluntarily sign up for the new plan, however, before they can take advantage of it, Flaherty said.
Local residential rates will rise $3 a month to $29.33 per month. That increase is $2 a month less than what Northwestel has asked for.
David Colville, the CRTC’s vice-chair of telecommunications, said last week that the commission limited Northwestel’s residential rate increase because of concerns from residents who complained that the cost of local phone service in the North is too high
"That’s really addressing some of the concerns that were raised with us regarding affordability," Colville said of reduced residential rate increase. "Part of our job is to try and arrive at rates that we feel are just and reasonable."
CRTC balancing act
Colville said the CRTC tried to balance a variety of competing interests in deciding how to redesign northern Canada’s telephone system: consumers versus businesses, Northwestel versus its potential competitors, the cost of local residential service versus the cost of long distance.
He said the commission used the same approach to limit the size of the yearly subsidy that Northwestel will get from Canada’s telecommunications industry.
Northwestel had, in its proposal last January, asked for a subsidy of $30.6 million a year, increasing gradually to $40.2 million in 2003.
Instead, the CRTC will allow Northwestel a subsidy of only $15 million a year. The fund is to be paid out of a billion-dollar pot that’s collected every year by means of a revenue toll on Canada’s telecommunications firms.
"[I]t came out at the bottom end of it. Instead of the $35 million that Northwestel was asking for, it ended up being $15 million," Colville said.
Local service protected
But that should still be enough to protect Northwestel’s ability to provide and expand local residential service in northern Canada.
Until now, Northwestel has used revenue from long distance services to subsidize the installation and maintainenance of residential phones in communities where the real cost per line is $90 a month or more.
"With this decision we fully expect and are certain that service, in fact, will improve in those areas," Colville said. "So I’m not worried that the competition for long distance service will impair Northwestel’s ability to do that."
Ian Angus agrees with this assessment, and believes that Northwestel has the capacity to thrive in northern Canada’s new competitive environment.
"I think Northwestel will get by," Angus said.
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