Deferral account rebates going to current customers, at cost of $2.3 million

Incumbent phone companies Bell Canada, Telus Corp. and MTS Allstream now have six months to rebate $310 million from deferral account funds they collected between 2002 and 2006—but the rebate program will cost $2.3 million and won’t necessarily go to customers who paid into the fund. They will go to existing customers. Chris Peirce, chief corporate officer at MTS Allstream, told The Wire Report that it is impossible to track down individual customers who paid artificially high rates during the price cap years of 2002 to 2006. “It would have been impossible to track which customer would have experienced which price decrease if the regulatory floor had not been there,” Peirce said. “It’s something that we would rather not be doing. It is what it is.” Customers with one of the three companies on Aug. 31, 2010, the day of the decision, will be rebated between $25 and $90 if they live in a low-cost urban service area. The CRTC has also set aside $2.3 million in deferral account funds to subsidize the administrative costs of the rebate programs. Bell Canada has been approved to spend $1.02 million from its deferral account to distribute $251.6 million in customer rebates. Telus was directed to spend $770,000 from its deferral account to distribute $49 million in rebates in Alberta and British Columbia. The company will use $40,000 to cover the administrative costs of rebating $5.5 million in Quebec. MTS Allstream will have $470,000 to support rebates worth $7 million in Manitoba. In a CRTC decision Tuesday, the commission directed the companies to use funds from a pot of roughly $770 million, with interest, to invest in the expansion of broadband Internet access in rural and remote communities, improve access to telecom services for people with disabilities, and offer direct refunds to their customers. The deferral account funds originate from a price cap period between 2002 and 2006 in which the CRTC artificially inflated the cost of phone services in low-cost urban areas to encourage competition from new entrants. Revenues earned by the incumbent phone companies that surpassed market prices were put into the deferral accounts. The rebate amounts per customer will be determined by dividing each company’s rebate funds by the number of urban phone customers they now have. Although some telcos will be rebating more than others, each customer with a given phone company will receive the same amount. Sources suggest that customers with Bell Canada will receive the highest rebates--closer to $90--because the company has the largest proportion of money per customer set aside for rebates. During the price cap period, Bell had the most customers in urban areas, and pricing was different in Ontario and Quebec than in more rural parts of the country, such as Manitoba. “The problem is there is not necessarily a direct fit between the customers who paid the access rates and the customers who will receive the rebates,” Michael Janigan, executive director of the Public Interest Advocacy Centre (PIAC), told The Wire Report. But Janigan said he understands that, on a practical basis, it would have been a challenge to track down past customers during the period. “Frankly, $1 million is not a lot of money from a billing system perspective,” Mark Goldberg, head of telecom consultancy Mark H. Goldberg & Associates Inc., said, referring to Bell’s administrative costs. Goldberg said in an interview that administrative costs will include making modifications to billing systems, printing a new billing insert, and handling follow-up phone calls from customers unaware of the rebate. “The bulk of that money, I’m going to guess, is training your call centre staff in how to answer the call and getting rid of that call as quickly as possible,” Goldberg said. The commission has given the incumbent telcos several options to distribute their rebates, but none has announced any concrete plans at this point. They can use the deferral account funds to offer the rebates in the form a deduction from a customer’s monthly bill or offer discounts on other services. “The ink is barely dry . We’re looking at it but we haven’t decided what mechanism we will use yet,” Jim Johannsson, a spokesman for Telus, said in an interview. Jacqueline Michelis, a spokeswoman for Bell Canada, said by email that the company will announce its customer rebate plan in the coming days. Greg Burch, a spokesman for MTS, said his company is in the process of confirming its rebate plans but hasn’t yet released any specifics. He said the company will get in touch with customers once plans are in place. Janigan said he is pleased with the end result of the rebates following a long regulatory process. “We think it’s a reasonable conclusion to a very flawed process, and we’re happy that the interests of customers were at least recognized,” Janigan said. jmigneault@thewirereport.ca

Deferral account rebates going to current customers, at cost of $2.3 million

News | September 2, 2010

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