Bell Canada has applied for a 10% increase in rates for Centrex III service. Bell has asked for the CRTC to approve the tariff increase by today, to be effective September 1.
Bell’s justification for the increase included:
The rates for these components have remained unchanged since 2002 while network investments have continued. In addition, inflation over this same time period was 10.12% as per the Bank of Canada’s statistics.
Bell’s arguments ignore the productivity improvements that would normally be assigned as offsets against the inflation factors – productivity that represent improved capital and operational efficiency.
Bell may be trying to create better financial incentives for customers to migrate to their IP-based Centrex service, MIPT. There must be confidence that customers won’t look at TELUS IP-One and other carrier and customer premises-based solutions. Even customers under contract will see their rates increase: generally, the contracts refer to the tariff.
Centrex-based resellers of local lines are going to be badly hurt by this action. Their contracts likely don’t point to a tariff and therefore the increases will eat into their margins.
There are three ways for Bell to succeed on this filing: unit revenues for Centrex go up 10%; competitors get hurt; and, customers are incented to migrate to Bell’s portfolio of VoIP solutions, some of which may win forbearance under the CRTC’s pending VoIP reconsideration.
Bell only loses if this manoeuvre angers customers sufficiently to have them take look elsewhere.
The CRTC gave interim approval to the application today./span>