Northern Canada can be a forbidding place for a telecommunications operator: harsh weather, sparse population and high expenses.
On Wednesday, NorthwesTel Inc., the region's incumbent local carrier, will face the start of a two-day regulatory hearing in Yellowknife into its request to raise its rates to businesses and homes by $2 a month starting Jan. 1.
The hearing should be contentious. NorthwesTel – a division of BCE Inc.’s Bell Canada -- wants the Canadian Radio-television and Telecommunications Commission (CRTC) to extend its monopoly in the north. But at least one competitor, Yellowknife-based fixed wireless operator, SSi Micro Ltd., says things have to change.
“SSi is stymied in the products and services we offer consumers because local competition is still not allowed in NorthwesTel’s serving territory,” its written submission says in part.
As an example, it says, SSi’s Meet Online product is not allowed to connect to NorthwesTel’s network, “a regulatory incongruity that stifles innovation, that hurts northern consumers.”
SSi has deployed satellite and broadband wireless for VoIP, Internet and related services to organizations and residents in 56 communities in Nunavut and the Northwest Territories. With local interconnection, it says it could offer more competitive voice services.
NorthwesTel says that to implement local competition along the regulatory lines in the rest of Canada it would have to replace 56 of its 78 switches and upgrade other network components.
To help NorthwesTel face its challenges the telco, gets over $20 million a year in subsidies. In exchange, the CRTC has imposed a five-year price cap on rates.
According to the SeaBoard Group, a Montreal-based telecommunications consultancy, people in Yellowknife pay $31.33 a month for basic phone service compared to $29.92 a month in Montreal. But Montreal subscribers get call display and call waiting included in their fee.
In a public opinion paper issued Monday, SeaBoard says its time to end NorthwesTel’s monopoly in the north and order it to offer facilities to competitors at “reasonable rates.”
“Let the sun set on this last vestige of government-sanctioned buccaneering,” says SeaBoard.
NorthwesTel provides phone service to 116,000 people in 96 communities across four time zones in the Northwest Territories, Yukon and Nuvaut, British Columbia and Alberta.
No one doubts the challenges NorthwesTel faces: Small communities that can’t afford even a part-time technician, 31 communities that can only be reached by air, a dozen communities with roads open five months or less a year, Thirty-nine communities don’t have landlines – they have phone service by satellite.
Those scheduled to testify include competitor SSi Micro Ltd.; officials from the governments of the Northwest Territories, Yukon, Nunavut; two consumers groups and Telus Communications Co.
In its written submission, NorthwesTel argues that it operates in a high cost environment marked by harsh climate, low population spread over vast areas with many cultures. It is, it says, “an operating territory unlike any other in Canada.”
The submission says the $2 residential hike would amount to 1.2 per cent a year on average for five years. The business rate increase would be offset partially by a proposed cut to the telco’s teleconferencing service.
“The extent of uneconomic areas relative to NorthwesTel’s total operating territory is greater than any other ILEC (incumbent local exchange carrier)” in Canada, the telco’s submission says. ”The challenge of continuing to provide Canadians living in remote Northern communities with access to comparable services to those available in other regions of the country continues to rely on a balance of reasonable rates, sustainable sources of implicit cross-subsidies, and access to the National subsidy mechanism.
“With the evolution of IP technologies and competitive pressures, risks to this delicate balance are now materializing. Advancements of IP technologies and networks, including the increased penetration of broadband access, are displacing traditional legacy services (such as long distance and digital private line service), and more importantly are eroding critical sources of internal cross-subsidies,” says NorthwesTel.
In addition, it says, the creation of a subsidized duplicate network in the communities served by satellite – an area that is largely uneconomic to serve for one carrier, let alone two-- has resulted in further erosion of NorthwesTel’s internal cross-subsidies.
“With regard to the issue of facilities-based local competition,” it adds, “it is important to note that, to date, no competitive local exchange carrier has approached the company seeking local network interconnection.” This shouldn’t be a surprise, it says, because competition in southern parts of the country is concentrated in urban areas.
There would also be “significant” network upgrades needed if NorthwesTel were ordered to implement the CRTC’s model for competitive local exchange carriers, it has told the commission.