Northwestel plan would double local phone rates

DWANE WILKIN

Nunavut consumers would pay more than twice what they’re paying now for local phone service under a Northwestel plan to bring long-distance competition to the North.

In a proposal filed Monday with the CRTC, Northwestel says it will need to raise basic phone-service rates by $14 a month over the next two years in order to make up for an expected drop in long-distance revenues.

All that’s in addition to a $4 per month increase the company has already asked the CRTC to approve this year.

Higher local rates, lower long distance

In return, Northwestel says that by 1999, they’ll gradually lower northern long-distance rates to bring them in line with rates enjoyed by southern Canadians.

“Our objective here is to retain somewhere between 70 and 80 per cent of market share as we enter this competitive marketplace, and we believe we need this flexibility in pricing in order to accomplish that objective,” Northwestel vice-president Ray Wells said.

The CRTC ordered the company to prepare the model for long-distance competition following a complaint filed with the regulator last October by Call Net Enterprises, better known as Sprint Canada.

Though Sprint had wanted to start competing immediately, the CRTC decided to give Northwestel more time to restructure.

$30 a month telephone service

Under the Northwestel proposal, the monthly basic cost of having a telephone would rise from about $12 currently to $20 in mid-1998. It would be increased to $24 in early 1999, and to $30 a month by the turn of the century.

Each increase in local rates would be accompanied by reductions in long-distance rates.

“There’ll be more detail provided in the weeks to come, but with our rate rebalance proposal, you’d see decreases somewhere in the line of 40-50 per cent,” said Wells.

Northwestel president Jean Poirier said the proposal would provide consumers with choice in long-distance services without forcing the company to further trim operating costs.

At the same time, the company will appeal to the CRTC to support demands for some form of compensation if the new competition is allowed to “skim” customers from lucrative long-distance markets in Yellowknife, Whitehorse and Iqaluit.

“We do have 600 employees in this organization and we would like to continue to exist and grow,” said Poirier.

The Northwestel model proposes introducing long-distance competition in two phases.

In the first phase, in early 1998, Northwestel would act as a wholesaler of long-distance services, leasing its facilities to competitors, who would then resell these services.

In this first phase, Northwestel would reduce its own long-distance rates to within 15 per cent of the competition, and customers who switched to a competitor would probably have to dial additional numbers to place a long-distance call.

In the second phase, competitors would be granted “equal access” to Northwestel customers in Iqaluit, Yellowknife, Whitehorse and Fort Nelson.

Equal access means customers don’t need to dial extra numbers to place a long-distance call using a competitor’s service.

Subsidy for small communities?

Northwestel also proposes introducing two new subsidies. The first would take the form of a contribution payment, charged to all long-distance providers, and modeled on a system known in the South as the Carrier Access Tariff.

Northwestel says the contribution payment would replace the built-in subsidy to small communities that long-distance sales in larger centres have have traditionally provided.

“Sixty-three percent of our revenues are long-distance. We’re making a fortune on long distance but we’re losing a lot of revenues on local,” said Poirier.

The company is also proposing a second subsidy, to be determined by the CRTC, that would cover revenue shortfalls arising from the provision of long-distance service in small and remote communities ­ markets unlikely to appeal to competitors from the South.

“I don’t think you can ask a private organization to let go a portion of its high-contribution market and then be stuck with the portion of the market where it’s unecomomic to serve. We’re a private organization, we want to continue to operate, we want to continue to live, but also we want to continue to make a profit.”

Northwestel must now make its proposal available for public inspection during normal working hours at every Northwestel business office.

The CRTC has planned a single regional consultation meeting for the NWT, in Yellowknife, on June 24. Iqaluit will be linked to the meeting by video-conference.