Affordability Monitoring and Tracking

1
Maintaining Affordable Telephone Service in Canada
by D. L. Solvason Stentor Resource Centre Inc.
ICFC Presentation 10 June 1998
2
Canadian Information Highway

• Government of Canada Vision
• a low cost, high quality information
  infrastructure to give all Canadians access to
  the employment, educational, health care,
  entertainment and wealth creating opportunities
  for the information age
• National Universal Access Strategy
• maintaining universal and affordable access to
  telecommunications services is a key objective
  of our Information Highway strategy, John
  Manley, Minister of Industry Canada

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Telecommunications Policy Objective

• Subsection 7(b) of the Canadian
  Telecommunications Act states the need
• to render reliable and affordable
  telecommunications services of high quality
  accessible to Canadians in both urban and rural
  areas in all regions of Canada.

4
Universal and Affordable Access

• In a Monopoly Environment
• supported by pricing local residential telephone
  service below cost
• shortfall in local revenue recovered through
  cross-subsidies from long distance to local
  services, value of service pricing, and
  system-wide rate averaging
• In a Competitive Environment
• universal access continues to be supported by the
  requirement for long distance carriers to pay
  contribution
• prices tend to move toward cost and there is
  pressure to reduce or eliminate cross-subsidies
• CRTC assessing the need for more explicit
  subsidies

5
Maintaining Universal and Affordable Access

• PN95-49 Local Service Pricing Options (LSPO)
• In CRTC Decision 95-21 the Commission approved a
  process of rate rebalancing and in 1995 initiated
  a public process to ensure that local service
  remains affordable. Resulted in CRTC Order
  97-1214.
• PN97-42 Service to High Cost Serving Areas
• In December 1997 the CRTC initiated a public
  process to investigate the appropriate regulatory
  approach for serving high cost areas that is
  suited to a fully competitive environment and
  ensure the continued achievement of the policy
  objectives set out in subsection 7(b) of the
  Telecommunications Act. Decision expected to be
  implemented in 2000.

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CRTC Order 97-1214

• The CRTC determined that basic residential
  telephone service in Canada was currently
  affordable and found no conclusive evidence that
  it wouldnt remain so in the future
• Required the implementation of a monitoring
  program to detect, early on, the development and
  specific nature of any affordability concerns
• Directed the Companies
• to file tariffs for bill management tools (BMTs)
• to communicate the tools to low income Canadians
• to track the take rate of the services
• to conduct analysis of disconnection information
  obtained from customers dropping off the network
• Determined that if an affordability problem
  should be detected, a narrowly focused targeted
  subsidy would be implemented

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Monitoring Program

• Annual Monitoring Reports
• to contain residential telephone service
  penetration rates, characteristics of
  non-subscribers/subscribers, the reasons for
  non-subscription, and residential telephone rates
  
• Quarterly Monitoring Reports
• to contain residential telephone service
  penetration rates, the reasons for
  non-subscription, and when the main reason for
  non-subscription is affordability, an
  identification of which charges on the telephone
  bill are the most difficult to afford
• Bill Management Tool tracking results
• Disconnect Report

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Stentor 1996 Annual Monitoring Report

• Data Source Statistics Canada 1996 Household
  Income(1995), Facilities and Equipment File
  (HIFE)
• Survey data on 32.6K households representing
  11.4M households in Canada or 98 of the
  population
• multi-stage stratified cluster probability sample
  
• conducted as a supplement to the Labour Force
  Survey (LFS)
• sample contains 424 non-subscribers with 294 who
  cant afford
• 132.5K households dont subscribe and 67 (88.6K)
  cant afford

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Stentor April 1998 Quarterly Monitoring Report

• Data Source Statistics Canada November 1997
  Residential Telephone Service Survey (RTSS)
• Survey data on 40.7K households representing
  11.7M households in Canada or 98 of the
  population
• conducted as a supplement to the LFS
• sample contains 803 non-subscribers with 532 who
  cant afford
• 190.2K households dont subscribe and 68
  (123.4K) cant afford

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Subscribers

• Households with 0 telephone numbers (including
  cellular phone numbers and phone numbers used for
  business)
• May 1996 HIFE includes 11.7K Canadian households
  (0.1) with only a cellular phone number

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Monitoring Results

• Based on the Nov 1997 RTSS and May 1996 HIFE
• Penetration for Canada exceeds 98, with a level
  95 for households below with household income
  below Statistics Canadas low income cut-off
  (LICO)
• 68 of non-subscribers cite afforability as the
  reason
• 20-25 of households report incomes below LICO
• the vast majority of non-subscribers have incomes
  below LICO
• the installation charge is cited most frequently
  as being difficult to afford by non-subscribers
  (73)

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Monitoring Results

• May 1996 HFE Non-Subscriber Characteristics
• 82.7 had access to a phone for emergency
  purposes
• 76.5 who had terminated a telephone number
  during the year before the day of the survey
  cited cant afford as the reason
• earned significantly lower incomes and relied
  more on government transfer payments as their
  major source of income
• were headed by younger and less educated persons
  and resided in urban areas with population less
  than 100,000
• smaller household size, larger percentage headed
  by a single male, were more mobile
• larger percentage lived in rented apartments
• 31 owned at least one vehicle, 42 subscribed to
  cable TV, more than half had a VCR, camcorder,
  and/or CD player, and 4.9 had a computer

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Bill Management Tools

• Instalment Payment Plan
• Qualifying connection service charges can be
  spread over a period of up to six months.
  Interest charges, which are regulated by the
  CRTC, apply.
• Free Toll Restrict
• Customers can block long distance calls for free.
  Customers can still make toll-free 1-800/877/888
  calls, use prepaid long-distance calling cards,
  and accept long distance calls if the caller is
  paying. A charge of 10 applies to regain access
  to the long-distance network.

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Communication of Bill Management Tools

• To the entire customer base via
• telephone bill inserts
• the introductory pages of the Companies' White
  Pages Directories
• To low income Canadians via posters and brochures
  distributed to
• 8,294 Social Workers in Canada who are members of
  the Canadian Association of Social Workers
• 3,984 agencies that are members of the United Way
  of Canada
• 107 Native Friendship Centres
• 24 member organizations of the Elizabeth Fry
  Society
• 51 member organizations of the John Howard
  Society
• 56 member communities of the Inuit Tapirisat

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Disconnect Tracking Report

• Tracking Results
• involuntary and voluntary disconnects, and
  voluntary disconnects for affordability reasons
  by the charges which have caused the problem
• Process
• when a customer calls to disconnect telephone
  service the client rep screens to determine the
  cause of disconnection, if affordability is the
  cited cause
• the client rep advises the customer about BMTs
  to determine if any of these could save the
  customers service, if not
• a short questionnaire is administered to
  determine the particular telephone charges that
  have caused the affordability problem

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Disconnects

• Involuntary
• non-payment of account
• Voluntary
• moving to another province
• moving and will be sharing an existing phone at
  the new residence
• removing a second line
• does not want/need the phone or dissatisfied with
  the phone company
• going on vacation going south for the winter,
  etc.
• switching service provider

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Disconnects

• Voluntary for Affordability Reasons
• Client Reps list the following charges to
  customers who cite affordability as the reason
  for wanting to disconnect service and ask which
  of the charges they find difficult to afford
• The installation charge
• The monthly charge for a basic telephone line
  which includes local calls
• Optional features and/or set charges
• Long distance charges
• Other usage charges (i.e., 900, features,
  directory assistance, etc.)

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Tracking / Disconnect Survey Results

• April 1998 Quarterly Monitoring Report
• customers are becoming aware of the Bill
  Management Tools
• Companies are making progress in complying with
  CRTC Order 97-1214
• long distance charges are cited most frequently
  as being difficult to afford by customers
  disconnecting for affordability reasons

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Conclusions

• Telephone service is currently affordable in
  Canada
• Canadian penetration continues to be high by
  world standards - the US overall penetration rate
  in July 97 was 93.9
• The installation charge is the major obstacle to
  obtaining telephone service for low income
  Canadians
• Long distance charges are the predominant reason
  for subscribers dropping off the telephone network