Wherefore art thou, lower phone rates?

By Peter Nowak, CBCNews.ca

When the government deregulated the local phone market last spring it did so on the premise that consumers would benefit. With Rogers raising phone rates in the country's largest market - Toronto - as of March 1, for example, there doesn't seem to be much evidence that then Minister of Industry Maxime Bernier's promise is having a positive effect on consumers. Moreover, there are a number of things about the price increases by Rogers - which is powering ahead by every financial measure - that are sure to rankle customers.

Let's begin with the Rogers increases itself. The company is boosting home phone prices via an increase in its "system access fee," to $5.95 from $4.50. The system access fee is native to the cellphone world and is a uniquely Canadian marketing trick, critics say, used by phone companies to make consumers think they're paying less than they actually are - there's the advertised price of the service, then there's the extra tacked-on fee. The service provider can raise this fee and bring in more revenue, all the while maintaining the illusion that their rates are lower than they actually are. It's an especially handy trick when you want to compare prices with those in another country - omitting hidden fees makes the Canadian provider look better.

The cellphone companies have also gotten themselves in some doo-doo by telling customers the fee has been mandated by the government, giving rise to a massive ongoing class-action lawsuit.

Exactly why is there a system access fee on Rogers' home phone? The company says it's there to cover the cost of building out its network, which is the same rationale used in the cellphone world. Yet just about every other phone company in the world - whether it's landline or wireless - considers network expenses as just another cost of doing business and does not break out the costs separately.

Rogers is also raising prices across the board, from television to internet access rates to cellphone voice mail fees, all in order to cover rising expenses, a customer service agent says. But according to Rogers' latest quarterly results, expenditures on wireless property, plant and equipment was up 2 per cent over a year ago. The same spending on its cable and telecom unit was down four per cent in the same period. Revenue and profit in both areas, meanwhile, was up significantly - wireless brought in 18 per cent more revenue and 22 per cent more profit, while cable and telecom revenue rose 12 per cent and profit was up 27 per cent. Clearly, a lot more money is coming in than going out, yet rates are going up nonetheless.

But back to home phone rates. A parliamentary committee, the CRTC and consumer groups screamed bloody murder when the government was pushing through deregulation last year, saying it would only lead to higher fees. Cable providers increasing their rates would be the first step, which would embolden phone companies to follow suit. So far, it seems they were exactly right.

What's ironic is that at the time, Bernier said about 60 per cent of Canadians would benefit from lower rates, which should have started hitting major markets last fall. Even more ironic is that cable firms have never had their phone services regulated by the CRTC and, as such, were the main opponents of Bernier's deregulation. They warned that it would only lead to higher prices. "We know that the CRTC's tried-and-true method [of regulating phone companies] works. It leads to more competition and lower prices," said Ken Engelhart, Rogers' regulatory vice-president, back in April. "What the government is doing here is an experiment that hasn't been tried anywhere else in the world. Time will tell if it works."

Clearly, Rogers is following some sort of self-fulfilling prophecy - and customers have yet to see the benefits of deregulation. In the meantime, consumers upset with their rate increases can try to seek answers from the company and, if disatisfied with the answers, lodge a complaint with the newly established Commissioner for Complaints for Telecommunications Services. We'd love to hear about your experiences.