BC TEL’s Proposed Interim Rate Increase
BACKGROUNDER

Teiecommunications Industry

> On June 12, 1992 the CRTC handed down a decision on increased long distance
competition that changed the telecommunications industry forever.

» Canadian telecommunications policy was designed to promote universal access to telephone
service by keeping rates for basic local service well below costs -- this is an issue which has
not been addressed.

> Long distance prices have been kept artifically high to help subsidize the cost of providing
local service.

> Under the CRTC’s long distance competition decision, BC TEL’s competitors pay about
half the rate of contribution BC TEL pays to subsidize local service.

> Because long distance ‘s overpriced in order to allow subsidies to local service, BC TEL is
vulnerable to market share losses in the profitable long distance portion of its business.

> These artificially high prices in long distance are a boon to competitors, who are required
to pay only a fraction of what BC TEL pays toward local service.

>» As BC TEL’s market share decreases, so will the current source of subsidy to local service
-- this shertfall must be addressed.

> The recent purchase of 20% of Unitel by AT&T dramatically alters the market, making
Unitel virtually a division of AT&T. New entrants into the Canadian market are not small
players -- they are formidable, global players and are clearly not in need of the protective
measures.

> The federal Railway Act of 1908 still governs BC TEL and most other Canadian telephone
companies.

» The CRTC has recognized that the current situation cannot continue. A public hearing has
been called for this fall which will review Canada’s telecommunications nvgulatory
framework.

> On April 16, BC TEL, as a member of the Stentor alliance, will be submitting to the CRTC
a proposal for changes to the regulatory framework. The proposal will outline several
measures BC TEL believes wil! streamline the regulatory process, allowing us to bring better
selection of products and services to the Canadian market faster.

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