From: pacolley@ember.UUCP (Paul Colley)
Newsgroups: ont.general
Subject: Re: Long-Distance: Who's got the Feeling now?
Date: 10 Nov 92 20:29:04 GMT
Reply-To: pacolley@ember.UUCP (Paul Colley)
Distribution: can
Organization: Ember---private system

In article <1992Nov07.162602.16147@mongrel.UUCP> amdunn@mongrel.UUCP
(Andrew M. Dunn) writes:

>Why is the system set up this way?  Because, in a monopoly situation,
>the service provider (ie. Bell) can do what they want.  A competitive
>marketplace would never sustain this kind of cross-subsidy.  But it
>allows Bell to claim cheaper local rates.

Wrong.

Bell's rates are set by the government.  Bell is on record as
wanting to raise local rates and lower long-distance rates---they
are not allowed to.

Not that Bell's wishes are terribly relevant.  Prices are dictated
by the government, *BECAUSE* Bell is a legal monopoly.

Andrew Dunn has this point completely backwards---Bell can NOT do
what they want, because they are in a legally-sanctioned monopoly
position.

Andrew Dunn has also erred in associating de-regulation with removal
of Bell's monopoly.  Local phone service will almost certainly
remain a monopoly for a long, long time---only long-distance will
be competitive.

In fact, the "de-regulation" we are facing doesn't look like an
open market in any way, shape, or form.  Because I wish to argue
against competition on phone service, I will comment on three
situations:  Open market for all phone servies, open market for
long-distance only, and the strange version of "open long-distance
market" that the current "de-regulation" would give us.

First, let us consider the situation if all phone service---including
local service---was deregulated.  I disagree with Andrew Dunn's
posting on several points, but his example of Toronto was a
particularly poor choice.  Local rates in Toronto will not go wild
if local telephone service was completely open.  A major metropolitan
area is the cheapest place to service; distances are short, and
houses are tightly packed (apartment bulidings are even better).
Andrew's long-distance charges are not subsidizing those in Toronto
to any significant extent.

The local phone rate subsidy is much more important for people out
in the boonies, where a mile of copper has to be laid to service
a single phone.  If local phone service was an open market, no
company in its right mind would provide service to rural customers
at prices within an order of magnitude of what local phone rates
now are.

What is "fair" is a philosophical issue, and it's unlikely that
Andrew and I will agree on what is fair.  However, we might agree
on some things that are unfair...  more at the end of this posting.

I think it is fair that everyone can call their neighbour, their
police, their local computer store :-) for the same flat AFFORDABLE
rate.  Nearly every home in Canada has a phone.  This is not true
in many other western countries.

Secondly, consider instead complete deregulation of only long
distance, including removal of the local subsidy.  What will happen
is that local phone rates will remain flat for all users (or as
flat as they now are).  Rural customers will be subsidized by urban
customers, instead of by long-distance customers.  Local phone
rates will go up quite substantially for everyone; looking at the
states, this could mean triple or more.  Almost certainly, some of
the poorest segments of Canadian society will choose not to have
a phone, instead relying on the closest pay phone.

This is not viewed as acceptable by the current administration.

What is really proposed is the following:  That long-distance
competition be allowed, but that the long-distance competitors all
still pay money to subsidize local rates.  The competitors are
arguing strongly that they should pay subsidies at much lower rates
than Bell does (Andrew may perhaps agree with me here, that this
is not "fair").  Last I checked, the new companies were asking that
they pay NO subsidies for the first few years, and only a third of
Bell's subsidy in the long run.  It appears quite possible that
they will get essentially that.

Note that much of the geographical area of Canada will not have
any competition for a long time---unless forced to (as Bell was)
no company trying to make a profit would provide phone service to
most of Northern Ontario.   Subscribers are too few and too far
between.  Thus remote customers will not soon have the luxury of
choosing a cheaper long-distance carrier like Andrew and myself
will.

In short, the current so-called "de-regulation" will likely lower
Andrew's phone rates.  It will likely lower MY phone rates.  It
may even be better for Canadian society as a whole, I am not
qualified to judge all the effects.  But it certainly isn't any
"fairer".  And it certainly does not remove the subsidy of local
rates.

----------------------------------------------------------------------------

Radical idea:

With current technology, long-distance calls are not inherently
much more expensive to provide than local calls.

Further, Canada has always had difficulty feeling a unified country.
The current Constitutional problems are an extreme symptom of this.

If, as a country, we want cheaper long-distance and more expensive
local service, why not go all the way?

Make all of Canada a local phone call.

This could be viewed as the modern version of putting a railroad
accross the country.

Like I said, a radical idea.

- Paul Colley
University:  colley@qucis.queensu.ca
Home:        pacolley@ember.uucp   watmath!ember!pacolley  +1 613 545 3807
<Ring> [...] "Sorry, I'm all booked up." "Who was that?" "The library." - B.C.

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