Many Bells are tolling

Abstract:

The Canadian Radio-television and Telecommunications Commission announced it is ending the monopoly on long-distance telephone services. Unitel and BCRL will begin competing for long-distance dollars with other companies that meet the CRTC’s qualifications.

Full Text:

BELL LOSES ITS LONG-DISTANCE MONOPOLY AS OTTAWA OPENS THE PHONE LINES TO COMPETITION

Shaking hands with Michael Kedar is like shaking hands with a vise. But even his handshake is no match for the strength of his determination. For the past six years, Kedar, chairman of Call-Net Telecommunications Ltd. of Willowdale, Ont., a Toronto suburb, has been battling with the country’s biggest corporation, BCE Inc., the Montreal-based parent of the telephone company Bell Canada. Declared the stocky 50-year-old former Israeli soldier: “I decided I wasn’t going to be squashed by a monopoly that didn’t want anyone treading on its turf.” Last week, Kedar’s dogged persistence paid off. The Canadian Radio-television and Telecommunications Commission announced that the long-distance telephone market will be thrown open to competition from Kedar’s company and all others that can meet the qualifications.

Almost a year after the commission completed its longest and most comprehensive hearing in its history, the CRTC announced an end to the regional telephone companies’ almost total monopoly on long-distance telephone service. In a decision that the CRTC predicts will result in a significant drop in the cost of long-distance telephone calls, the applications of both Unitel and BCRL were essentially approved. Unitel is a Toronto-based telecommunications company, 60 per cent owned by Canadian Pacific Ltd. of Montreal and 40 per cent by Rogers Communications Ltd. of Toronto, a cable television company. BCRL is a joint venture by B.C. Rail and Lightel, a subsidiary of Kedar’s Call-Net. Said CRTC chairman Keith Spicer: “The CRTC expects competition to have a significant impact on rates–it will bring them down.” But one CRTC commissioner, Edward Ross, dissented from the commission’s decision, saying that he feared it could result in an increase in the cost of local rates. Said Ross: “I consider the cost of allowing these applications to be too high because of the increases in the cost of basic telephone service, something that is a necessity, not a luxury, to Canadians, including the millions of Canadians living on pensions or fixed incomes.”

many-bells-are-tolling-1

Unitel had proposed to set its long-distance rates 15 per cent lower than the rates set earlier by the telephone companies. But in the past three years, since Unitel made its interest in the long-distance telephone market known, some of the regional companies have lowered their long-distance rates significantly in anticipation of increased competition. In light of that preparation, it is not clear whether Unitel will be able to both meet the commitment to lower rates and remain financially viable. Said Unitel senior vice-president Richard Stursberg: “It is an excellent decision for us, for the Canadian consumer and for the business community.” He added that the 15-per-cent-lower rate is “within our range.” Unitel expects to begin offering long-distance service in about a year.

The CRTC’s decision to encourage telephone competition will have a profound impact on several groups. While residential telephone users, for their part, already have access to high-quality service at relatively moderate prices, business users, particularly those with sophisticated telecommunications needs, may now see improvements in the speed with which they gain innovative services and internationally competitive prices. And the telecommunications industry itself, which has traditionally been one of Canada’s competitive strengths in the global marketplace but which has been losing ground in recent years to other countries, including the United States, will be open to competition at home for the first time.

Residential telephone users have the least to gain–and, according to some critics, the most to lose–from the CRTC’s decision. Although they do not need the host of sophisticated new services that business users want, they face additional costs. Bell Canada has warned that it will be forced to increase local telephone rates if it loses revenue from its long-distance operations. BCE Inc. chairman Raymond Cyr has said that Bell subsidizes local rates by $1.8 billion a year. Said Cyr: “As you reduce the total contribution, that has to be paid for by somebody. And that’s the consumer.” But representatives of the Consumers’ Association of Canada say that “there is no valid technological or economic reason for local rates to rise with the advent of competition.” A consumers’ association representative said that long-distance competition will help consumers because most residential users make several long-distance calls each month and, as a result, will benefit from the lower costs that competition is expected to bring. However, analysts say that the new emphasis on competition could encourage the telephone companies to be more market-oriented and less concerned with their mandate as monopolies to provide equal access to the system for all users. If that were to happen, private users might find that the phone companies ignore their interests as they shift their attention to the needs of big-business users. Also, in a more market-oriented environment, small users may no longer be able to depend on the CRTC to protect their interests.

The final disadvantage for consumers is the time and attention they will have to spend shopping for telephone services. In the United States, the advent of long-distance competition gave consumers more choices, but it also created enormous complexity and confusion, particularly in the early days. Visitors to the United States are still dismayed by the difficulties of placing a long-distance call from a public telephone. And it is common for residential users to receive bills from two or more telephone companies each month.

many-bells-are-tolling-2

By contrast, Canadian business users are the big winners from the decision. Many businesses, including almost all of the country’s largest corporations, rely so heavily on telecommunications services that those costs now rank as the third-biggest business expense, after buildings and employee costs. The Royal Bank of Canada, the country’s largest corporate telecommunications user, pays $100 million a year for services that include everything from renting telephones to leasing the lines that are the life-support lines that are the life-support system of its automated-teller-machine network. But the bank complains that, compared with its competitors in the United States, it has fewer telecommunication services to choose from and has to pay more for what it does get.

Royal Bank chairman Allan Taylor has cited the cost of leasing special data-transmission lines from Toronto to New York City through Buffalo, N.Y. For the U.S. leg of the network, a distance of about 500 km, the bank now pays $6,200 a month. For the Toronto-Buffalo line, one-fifth the distance, it pays $12,800.

Many Canadians take pride in being at the cutting edge of telecommunications technology. But experts say that the industry is gradually losing its lead as other countries spur their own companies on by encouraging competition. “We Canadians should be proud of what we have achieved in the past,” said Montgomery Richardson, head of a business lobby group called Communications Competition Coalition. “The phone was invented here. We made the first long-distance telephone call. We put up the first domestic satellite system, the first coast-to-coast microwave system, the first package-switch network.” But Richardson added: “Our firsts stopped about 1975. We have not been innovators since that time. We have become world followers, not leaders. Furthermore, the innovation gap between us and the Americans is widening at a horrendous pace. But somehow we’re still living on what we did in the past.” With its latest decision, the CRTC is gambling that Canada can take a big step towards the future.

>>> Click here: Becoming a global giant

Facebook Comments

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>