Long distance competition will boost local charges

SEAN McKIBBON
Nunatsiaq News

IQALUIT—The Canadian Radio-Television and Telecomunications Council (CRTC) is expected to make a ruling on long distance telephone service competition that could spell doom or survival for Northwestel.

But no matter what the CRTC decides, local service rates are probably going up.

The ruling will set down how competition is to be carried out in remote areas of Canada such as the Arctic without destroying local service or making it too expensive for the average consumer.

“The decision could possibly impact on our future ability to provide service to less profitable areas. It could also impact on our ability to be competitive in the long distance market and in the long run that in itself could pose a significant financial risk to our company,” said Anne Grainger a Northwestel spokesperson.

In the past telephone companies with monopolies would use long distance profits to subsidize the cost of local telephone service to high cost areas. But just about everywhere Northwestel does business is unprofitable with the exception of Whitehorse, Yellowknife, Iqaluit, Hay River, Fort Nelson and Inuvik, said Grainger.

Grainger says it would be impossible for Northwestel to compete on long distance and subsidize unprofitable communities.

What will make or break Northwestel and affordable phone service in the Arctic is whether the CRTC agrees with a plan to subsidize local service in the North. At the beginning of the yearNorthwestel and Sasktel presented a plan during CRTC hearings. Based on the phone system in Alaska, the plan would see a $30 million fund set up by the federal government to subsidize local phone service to unprofitable or “high cost service areas.” The fund could be paid for by telecommunications companies in the south or by their customers or through federal taxes.

But even the $30 million subsidy proposed by Northwestel would not close the gap between what the company charges it’s customers for local service and what the service really costs, said Grainger. Northwestel changes $26.33 as of Aug. 1999, but the service costs $91. That means local phone rates are headed up.

“There will probably be an upward adjustment,” she said. Although Grainger could not say how high the rates would go she did say that local phone service prices may soon be made comparable to other prices in the north.

“When you look at the price of other goods in the North and how much more expensive they are than things in the south and then compare the price for phone service you find it’s quite comparable,” she said. The $26.33 Northwestel charges is only about $6 more than what a telephone customer in Ottawa pays.

The CRTC’s final decision was expected to be released in September. The date has been pushed back to mid Oct. But Grainger says the time is growing short for Northwestel and other companies to re-ballance their rates and get ready for the competition the CRTC has said will begin after July 2000.