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Mathew Ingram

Friday, February 17, 2006

Imagine this scenario: Every time you go to park your car in a municipal parking lot, you get charged too much — but you don't know any better, so you pay whatever the lot requires you to pay. Several years later, your municipal government admits that it has been over-charging you, but says that it's for your own good, and that the money that piled up in overflow charges is going to go to a good cause — say, fixing potholes in local roads, or planting trees in a park. Would you feel that was a fair trade, or would you feel ripped off? What if the money were going to a homeless shelter?

Judging by the comments that have been pouring in on the Globe's story on telecom local-calling rates, and the enormous slush fund of overcharges that has built up over the past four years (about $653-million, according to the government), most readers feel ripped off. They seem to feel — and rightly so — that all the extra money they have been paying amounts to a hidden tax, and that the Canadian Radio-television and Telecommunications Commission is taking advantage of them by diverting that money to fund various rural broadband projects that have yet to be identified.

This situation amounts to a double whammy for consumers. The money that is sitting in those "deferral accounts" — more than $400-million for Bell Canada alone — was a result of the CRTC allowing telecom companies to charge higher rates than they otherwise might have for local calling, in an attempt to encourage competition (since low rates would arguably not draw anyone into the business). Not only has there been little or no local competition arise as a result, but now the money that could have been saved by consumers on those local calls is going somewhere else.

Some readers in rural areas have commented that helping to provide broadband to all of Canada is a worthwhile goal, and they are right. But taking money on false pretences isn't the right way to go about it — and it cements the image of the CRTC as a meddling bureaucracy, one that sees Canadian consumers as a piggy bank to be plundered for whatever purposes the government deems important, with or without their consent. And regardless of the purity of the motive, it remains to be seen whether rural Canadians will ever see the benefit. Certainly the process stinks.

It's true that some of the money that collected in the deferral accounts was used (and will be used) to lower phone bills for consumers — but not all of it. And the principle remains the same regardless: if money is collected for a specific purpose, it should be used for that purpose. If those accounts were designed to help improve competition, then they should either be used to do so or they should be given back to the consumers who paid to fill them. To say that doing this would be too complicated — which appears to be the CRTCs excuse — isn't really an effective response.

To answer the dozens of readers who mentioned that rural Canadians need high-speed Internet service too, this is definitely true. But if the government wants to help finance the development of rural broadband — which it routinely talks about but does little to actually help accomplish — then it should make that clear and raise money or use tax revenue in the usual way, by explaining what it wants to do and then going through the appropriate channels. Diverting money from one pocket to another in an attempt to fill that need isn't the way that government programs are supposed to operate.

Even a member of the CRTC itself recognized the inappropriateness of this move. Barbara Cram issued her own dissenting opinion, in which she said that the money should be returned to those who paid it, and that under the commission's chosen course of action "There is no convergence of the donors and ultimate beneficiaries."

It's difficult to think of a recent example of CRTC behaviour that sums up so succinctly the flaws in that agency, which is a holdover from the days when the government not only saw it as being important to control the airwaves and the phone lines, but was actually able to do so. The former is arguably not true any more, and the latter is almost certainly not true. The contortions the CRTC has had to go through when it comes to satellite radio, downloadable video and audio and voice-over-Internet services is truly incredible.

And even what seems like a relatively simple thing, such as encouraging new competitors in local phone service by keeping prices artificially high, has proven to be beyond the powers of the communications regulator.

Kind of makes you wonder — why is it we keep the CRTC around again? Is it just for old-time's sake?

Mathew Ingram is the Globe and Mail's on-line business columnist. Feel free to post a comment or e-mail Mathew at mingram@globeandmail.ca

For past columns and a brief biography, click here

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