News release

May 30^th, 2002

CRTC ANNOUNCES NEW RULES FOR LOCAL PHONE
SERVICE RATES - MORE PROTECTION FOR CUSTOMERS

OTTAWA-GATINEAU - The Canadian Radio-television and Telecommunications Commission (CRTC) has issued new rules to determine the rates charged for local telephone services. The new rules will govern the rates charged to residential and business customers, as well as competitors, by five incumbent Canadian local telephone companies-TELUS, SaskTel, MTS, Bell Canada and Aliant.

The new pricing rules for local phone service will take effect on June 1^st, 2002 and will apply for four years. The new rules were developed after an extensive review of the first four-year regime known as Price Cap Regulation. Price Cap Regulation is considered to be more efficient than the regime that preceded it (known as Rate of Return) because it encourages companies to improve efficiency and is generally used when moving towards a more competitive marketplace. Based on the relatively low level of local competition and the dominance of the incumbent telephone companies, the CRTC has concluded that pricing rules are still needed to protect customers.

"The new pricing rules for local phone service rates will balance more fairly the interests of the main stakeholders-customers, both business and residential; competitors; and incumbent telephone companies. The new rules will distribute the benefits of efficiency gains more evenly across the system. They will also protect consumers both in terms of price and quality of service, while continuing to promote competition," said David Colville, CRTC Vice-Chair, Telecommunications.

Highlights

• The Commission has denied a request by the incumbent telephone companies for the flexibility to raise rates for residential customers. Residential customers, on average, will not see a rate increase for basic services, unless inflation exceeds 3.5 percent.
• The Commission has also denied a request from Bell and TELUS that would have given them the flexibility to raise payphone rates. These rates will be frozen until the Commission holds a policy proceeding to look at the issues related to payphone service in Canada.
• The Commission has also restricted local service rate increases for business customers to the rate of inflation, on average.
• Competitors will also see benefits. The Commission has reduced the rates the incumbent telephone companies charge their competitors for certain services. The Commission has also directed the incumbent telephone companies to provide a new competitor access service (competitor Digital Network Access or DNA).
• Customers and competitors will be entitled to rebates if the incumbent telephone companies do not meet the Commission-mandated service standards. The Commission will also conduct a proceeding to examine a consumer bill of rights.
• The Commission has approved service improvement plans for the incumbent telephone companies that will bring service to unserved customers and upgrade service to others.
• For the incumbent telephone companies, the Commission has reduced the regulatory burden by eliminating a number of reporting requirements; given them more pricing flexibility where sufficient competition exists; and provided appropriate compensation for Commission-imposed revenue reductions from services used by competitors.

Objectives

The new price regulation regime for local phone service in Canada is intended to achieve the following objectives:

• make reliable and affordable telephone service accessible to both urban and rural area customers;
• balance the interests of the main stakeholders - residential and business customers, competitors and incumbent telephone companies;
• foster facilities-based competition in Canadian telecommunications markets;
• give incentives to the incumbent telephone companies to be efficient and innovative; and
• reduce the regulatory burden on the telecommunications market.

Background

The new regulatory regime being announced today was developed based on an extensive review of the first Price Cap regime. This comprehensive process included 14 days of public hearing, at which over 53 intervenors participated. As well, 34 individuals made presentations. A total of 1, 935 letters and e-mails were submitted to the proceeding.

The Canadian Radio-television and Telecommunications Commission is an independent public authority that regulates and supervises broadcasting and telecommunications in Canada.

Reference documents:
     Telecom Decisions CRTC 2002-33 and 2002-34
     CRTC Public Notice  2001-37
     CRTC Public Notice 2000-99
     Telecom Decision CRTC 98-2
     Telecom Decision CRTC 97-9

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Media Inquiries:
   Denis Carmel, Tel: (819) 997-9403, eMail: denis.carmel@crtc.gc.ca

General Inquiries:
   Ottawa, Ontario K1A 0N2
   Tel: (819) 997-0313, TDD: (819) 994-0423, Fax: (819) 994-0218
   Toll-free # 1-877-249-CRTC (2782), eMail: info@crtc.gc.ca
   TDD - Toll-free # 1-877-909-2782

Copies of today's documents are available through our Internet site (http://www.crtc.gc.ca) or by contacting the public examination room of any CRTC office. These documents are available in alternative format upon request.

Date Modified: 2002-05-30

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