Northwestel makes pitch for competition subsidy

SEAN McKIBBON

IQALUIT— Northwestel will ask the Canadian Radio and Telecommunications Commission (CRTC) next week for a subsidy to help the company preserve telephone services and prepare for long distance competition.

“Some of the communities where we operate are just not profitable,” said Anne Grainger, a spokesperson for Northwestel. Her company is bracing itself for the start of long distance competition in Nunavut and other areas of its business territory in the Northwest Territories, Yukon and northern British Columbia.

In its ongoing drive to bring long distance competition to the North, the CRTC came up with a new definition last fall for basic telephone service and gave Northwestel and other independent local phone companies in northern Canada until Jan. 1, 2001 to start making improvements to their basic packages.

It also re-iterated that long distance competition is coming.

The CRTC’s new definition of basic service includes:

* local internet access;
* single line, touch tone service provided via digital switch;
* voice mail;
* telephone privacy features such as call display;
* 911 service;
* access to the long distance network;
* directory services and a local phone book.

Plan revealed next week

Next week, Northwestel will tell the CRTC just how it plans to make that package of bells and whistles a reality and still compete with southern long distance telephone companies that are clamouring for access to Northwestel’s market.

It’s a market the CRTC also recognized as a special case in the Canadian telecommunications industry.

Because of Northwestel’s sparsely populated market and the harsh conditions the company has to operate in, the CRTC recognized in its decision that the company faces “unique and difficult challenges.”

“The CRTC had three goals in its decision,” said Marguerite Vogel, the CRTC’s regional director of the Western and Territories region. “We wanted to extend service to areas that were not currently being served, upgrade existing services and maintain existing service levels.”

Northwestel operates in what the CRTC calls a high cost service area— an area where in most communities the costs of providing services are greater than the revenues generated from telephone subscribers.

Phone companies with monopolies have long used the money they make on long distance rates to subsidize basic service in remote areas.

Competition could change all of that, with falling prices making the profit margin too thin to support a subsidy.

“In some communities, there is no business case to provide services,” said Grainger.

No competition until 2001

However, competitors such as Call-net (Sprint) and Westel probably won’t be able to enter the market until 2001. Although the CRTC did say two years ago that long distance competition would not happen before July 1, 2000, the commission now says it won’t have the rules for competition worked out until late in the fourth quarter of 2000.

That means true competition probably won’t start before 2001, said Grainger.

“How much can Northwestel charge a competitor for the use of our network? Because they aren’t going to build their own— too expensive. That’s all going to be worked out in these proceedings,” said Grainger.

Northwestel executives are confident they will be able to demonstrate the necessity of a subsidy to help them compete and upgrade and maintain services, she said.

Even without Northwestel’s market being opened to direct competition, Grainger said the company is feeling the effects of the telephone war in the south.

With all of the flat rate and low rate plans being offered to southern consumers, many people in the North are simply avoiding Northwestel’s long distance tolls by having their friends call them.

There are also people who use pre-paid calling cards purchased in the south— something Grainger said people aren’t really allowed to do. There are even 800 numbers people call to get around Northwestel’s long distance charges, she said.

“People just don’t want to pay those rates,” said Grainger.

Although Grainger believes the source of any subsidy would be phone companies in the south, Vogel said this was not certain.

She said the on-going process— of which Northwestel’s submission on Jan. 17 is just the first part — would determine who would pay the subsidy and how that subsidy would be collected.

Hearings on the matter will be held in June 2000 in Whitehorse. Interested parties were to have registered with the CRTC by Dec. 16, although Vogel said that organizations could write to the director general of the CRTC for special inclusion.

At present, the Nunavut government is the only organization from Nunavut that appears on the CRTC’s list of interested parties.