Posted: 03/1998
By Charlene O'Hanlon
Payphone users in the Great White North soon may have the same satisfaction--and headaches--of their American counterparts. That's because the Canadian Radio-television and Telecommunications Commission (CRTC) is looking into deregulating the pay telephone market--the last bastion of regulated telecommunications services north of the border.
The CRTC--the Canadian version of the Federal Communications Commission (FCC)--issued a public notice last July, asking for comments on whether the payphone industry should be deregulated. In its call for comments, the CRTC requested that respondents answer three questions:
- Is it appropriate at this time to permit competition in the local pay telephone market?
- If so, what consumer safeguards should be met by service providers?
- What is the appropriate mechanism to ensure the enforceability of the consumer safeguards identified above?
Of the 44 responses from telecom companies, payphone-provider hopefuls, advocacy groups and more, 43 had a positive response to the commission's first question. The only naysayer was an Alberta-based advocacy group for the poor, which believes that not only should the payphone industry stay a monopoly, prices for local phone calls should be less than the current 25-cent rate.
Comments were due in August, and those who participated had a chance to respond to others' comments by early September.
Hurry Up and Wait
Since the second round of comments came in to the CRTC, nothing more has been heard from the commission. Cameron Stuart, principal of Independent Payphone Management (IPM), a start-up independent payphone provider (IPP) located in Toronto, doesn't think that's such a bad thing.
"I think they're being cautious and taking their time," he says. "Typically in Canada deregulation has lagged behind the United States by five to 10 years. Almost everything that has been deregulated in Canada follows that pattern," he says.
Cases in point: The long distance segment of the telecommunications industry in Canada was deregulated in 1992, almost 10 years after the Modified Final Judgment in the states, and local markets were opened for competition in 1997. Both were opened only after the CRTC looked at what happened with both markets in the United States and used the failures and successes of the U.S. market to create its own regulations.
Instead of sitting back and waiting for word from the CRTC, Stuart--who left Bell Canada after 15 years to start his own payphone company under the idea that the payphone industry would be deregulated--has taken steps to help the CRTC in its decision. Stuart has formed the Canadian Independent Payphone Association (CIPA) to give those interested in deregulating the industry a voice to the CRTC as well as assist the CRTC in its efforts to establish and enforce consumer safeguards.
"My hope is to establish an association somewhat like the APCC (American Public Communications Council) in the United States. Ideally, what I'd like to see happen is a trade association that is managed and run by the industry and becomes a self-regulating body," Stuart says. "The CRTC, like any other government agency, is faced with staff shortages and funding shortfalls. I think this is one of the concerns for it in looking at deregulating payphones. By creating a self-governing regulatory body in the industry, maybe we could spur the CRTC along.
"We could, in effect, take (the industry standards) issue away from them; present to them a code of ethics and code of conduct for the industry; identify the safeguards to which each member will sign on to; and establish within the association the appropriate enforcement mechanism, up to and including decertification of a company that does not abide by the rules," Stuart adds. "We would look to the CRTC or some other methodology to enforce that (decertification), since obviously we can't go and rip the phones off the wall ourselves. The carriers or the LEC (local exchange carrier) would have to play a part in that."
Stuart hopes CIPA will become a voice of the Canadian payphone industry that the CRTC would hear, as many of the association's members are small- to medium-sized companies. "I thought if we could unite our forces and take away some of the burdens the CRTC is facing, it might have a positive impact in the deregulation process," he says.
David vs. Goliath
The Goliath figure in Canada's current payphone environment is Stentor, the alliance of Canada's full-service telecom companies, whose members have control over the payphone industry. Stentor is made up of Canada's version of the regional Bell operating companies: NorthwesTel, BC Tel, TELUS, SaskTel, Manitoba Telecom Services Inc., Bell Canada, QuebecTel, NewTel, Island Tel, NBTel and Maritime Telegraph & Telephone (MT&T). And, although local and long distance competition is now the norm in Canada, Stentor still is the loudest and most-recognized entity in Canadian telecommunications.
However, Stuart says the time is ripe for the Davids to enter the payphone picture.
"The Canadian customer base is very interested and eager for deregulation," he says. "There is a great deal of discontent with the customers' (location providers) dealings with the Stentor companies. They are not happy with the fact that, for example, Bell Canada pays as a low a commission rate as it does. Bell has steadfastly refused in almost every instance to move beyond its basic compensatory package. The average location provider doesn't feel he or she is being fairly compensated."
Hard feelings or no, the fact remains that until the commission decides to give the go-ahead, the Stentor companies are still in charge of payphones. Don Ford of D.A. Ford and Associates, a Toronto-based consulting firm, points out that although long distance deregulation in 1992 had a small effect on the Stentor companies, they took steps to ensure they continued to hold on to a large chunk of the marketplace.
"The phone companies tried several things to keep the monopoly. Some payphones were programmed so there was a limitation on overdialing so users couldn't use calling cards. The problem was when people tried to use interactive voice response systems, the phone wouldn't let them continue to punch in numbers and they'd get cut off," Ford says.
The Stentor companies also tried to limit the use of credit cards with the payphones, programming the phones so, say, nine of the 10 reader slots on the phones were programmed for Stentor companies' calling cards, Ford says.
"Stentor members were and are keen to hang on to that monopoly and limit access through payphones to competitors," he adds.
Apples and Oranges
One of the issues raised by the Stentor companies is the "stagnation" of the payphone industry--especially equipment--in the United States following deregulation. Stentor's argument against deregulation is that the technology of the Canadian pay telephone industry likewise will stagnate, and customers no longer will have access to the latest equipment. CIPA's Stuart, however, disagrees.
"The CRTC and Bell Canada have looked at the payphone equipment in the United States--where only about 5 percent have card-reading capabilities--and have said that the United States has stagnated as far as the introduction of new technology. My argument has always been that when the market was deregulated in 1985, everyone came into the business with a like phone," Stuart says. "For these larger companies to start changing their phones out today would be a huge capital investment.
"Also, my understanding is that phone card usage in Canada is far greater than in the United States, and that's probably because we have 150,000 card-reading phones," he adds. "If someone is going to come into the Canadian market and introduce the dumb phone, the marketplace will reject them. Large customers have said they will not settle for anything less than an equivalent to the existing smart phones."
The Next Step
Officials at the CRTC declined to speak to PHONE+ regarding the payphone deregulation issue, saying it would be inappropriate to comment until a final decision had been made. However, Stuart believes the commission is close to making an announcement.
"The best that I can ascertain is that the CRTC is going to make a decision or an announcement in March. What that announcement will be could run the gamut of, 'Hey guys, the market's wide open tomorrow morning,' to, 'No, we're not going to do it ever,'" he says. "But my speculation is that they will open deregulation on a time frame in three months to six months."
