Northwestel seeks higher rates, promises cheaper long distance

JACKIE WALLACE

Northwestel wants to boost residential phone rates by $2 a month and business rates by $5, but is offering a sweetener – the prospect of cheaper long distance charges and more competition for some services.

Northwestel’s proposal is being heard by the CRTC at a public hearing in Whitehorse that started on July 10 and will continue no later than July 21.

If approved, the changes would go into effect on Jan. 1, 2007.

The proposed rate hike will mean that customers will pay $31.33 per month for “network access,” compared with rates in the south that average between $22 and $27 a month.

“They are among the highest of the rates,” Mark Walker, vice-president of business development for Northwestel, said at the hearing. “It’s a matter of balance. The expense of providing this service in the North is quite costly and we are trying to stay relative with service in the south.”

The company maintains that the rate many customers pay is much lower than the cost. In some small communities, it costs the company more than $100 per phone line to provide access to their network, but customers currently pay only $29.33 for basic service.

If the CRTC says yes to the proposal, these would be the first local phone rate hikes since Jan. 1, 2001, when Northwestel raised local rates but also dropped long-distance rates dramatically.

But Walker did not indicate that there would be a dramatic drop in long-distance rates. He estimates that under the proposed changes customers would see “roughly 40 cents on average in savings per month.” Which means customers will still be paying $1.60 more a month than they are now.

Northwestel has seen increasing competition from pre-paid long-distance cards and cell phone companies that offer long distance rates. There are five cell phone providers in the North that can reach 66 per cent of Northwestel’s access lines and the company projects that they will reach 77 per cent by next year.

The company wants to move toward long distance plans with flat rates for anywhere, anytime calling and offer calling cards.

To encourage more long-distance carriers to provide service in the North, and create competition that will offer customers more choice, Northwestel suggests that the special charge that is paid by competing companies, called the “carrier access tariff,” be lowered.

Right now, a long distance company such as Sprint Canada or Primus must pay Northwestel seven cents a minute for access to its satellite-based equipment – in both directions – for a total of 14 cents a minute. Northwestel is proposing lowering this rate to one cent a minute.

Northwestel is required to take these proposals to the CRTC because they are the only telephone company in the country that is still regulated under what is known as the “rate of return” system. Part of Northwestel’s proposal is to change its regulation to the common “price cap” system.

Under the current system, Northwestel must apply to the CRTC every time they want to introduce a new service or a new rate, a process that can take many months. The company wants to be able to be able to respond more quickly to changes and advances in technology.

This particularly affects Northwestel’s business customers. “We have a situation where we have a small number of large customers and we are very dependent on them for revenues,” said Walker.

The proposed rate hike of $5 per month for business customers helps to prevent residential customers from paying higher costs. But it is with business customers that the company sees an uncertain future as cell phones and technology, such as voice-over-internet, threaten to make inroads into their business.