There are a few groups upon which the CRTC relies to represent consumer interests. The CRTC also has its own consumer group.
A little tarriff approval notice was issued today that caught my eye. Telecom Order 2013-607 provides approval for MTS to increase the rate for its “Compensation Per Call” service.
Most people have never heard of Compensation Per Call. As the CRTC describes it,
This rate is charged by a payphone service provider to an interexchange carrier for each completed toll-free call (such as a call to a 1-800 number) made from one of the payphone service provider’s payphones to access the interexchange carrier’s network. The amount of compensation to be collected is billed to the interexchange carrier and not to the person making the toll-free call from the payphone.
In other words, you go up to a payphone and make a toll-free call – say to a hotel reservation office. You don’t have to put in any coins, since it is a toll-free call. But the payphone operator needs to get compensated somehow. So, the payphone service provider charges the long distance company that is providing the toll-free service. The long distance company in turn passes the charge (likely plus a markup) on to the hotel.
As MTS noted in its application, the number of payphones (and the call volumes) have declined over the years. Of course they have; most of the people reading my blog would be hard pressed to think of when they last used a payphone thanks to our mobile devices. So MTS provided evidence that the current compensation per call rate is no longer compensatory.
MTS proposed increasing the rate from 20.15 cents per call up to 54.58 cents per call; nearly tripling the per call charge. The CRTC received no interventions regarding MTS’s application. As the CRTC’s service description indicates, the Commission felt that the charge is billed to a long distance company, “not to the person making the toll-free call from the payphone.”
Unfortunately, this description didn’t consider whether the IXC passes on the charge.
Consider the pre-paid long distance card business. Many customers are visitors to Canada or new immigrants who find that specialty pre-paid cards are a convenient way to place overseas calls. In some cases, those calls are made from work because time differences make it impossible to wait until people are at home. The caller places a toll-free call to the pre-paid platform. When the pre-paid platform answers, the person making the call punches in their card information and the destination phone number. Keep in mind that the pre-paid service provider has been charged for the toll-free call, even if their end user hangs up at that point or misdials. What was a 20 cent charge for a mistake will now be a substantial 55 cent charge.
How will pre-paid service providers respond to this rate increase? Most likely, pre-paid services will institute a higher per-call charge. What may have been passed along as a 25 cent per call connection charge (on top of per-minute rates) may now turn into a 75 cent charge per call attempt – whether the call goes through or not.
I fully understand the need for MTS to raise the rate. As the CRTC said in its decision “the approved rate should help the company maintain its payphones, thus maintaining customers’ access to them.” But the CRTC continued that sentence saying “without unreasonably impacting interexchange carriers.”
The interexchange carriers are indifferent to this increase; they will pass the charges onto their customers. Customers who are airlines, hotels, car rental agencies are unlikely to notice the increase. The pre-paid phone card companies will pass the charge on to their card holders.
My concern is that the decision does not appear to have heard from any of the people who are supposed to be looking out for consumers. CRTC interrogatories indicate questions about the volume of calls from prison inmates and the response confirmed “that inmates can make toll-free calls to prepaid calling platforms from inmate pay telephones in some situations.”
It was just a little tariff notice, so it is understandable that the consumer advocates missed it. But it makes me wonder who is looking out for consumers who aren’t in prison?
Update: [November 14, 5:30 pm]
A reader provided some additional history that merits an update.
In August 2012, a competitive payphone provider, AFX, applied for an increase in toll-free compensation from the rate of $0.25 per call set more than a decade earlier, in 2000. AFX asked for the rate to be increased to $0.64 per call. Of course it was reasonable to review the rates to bring them up to date. In its decision this past June, the CRTC said that the AFX cost study looked fine except for one small thing: AFX should have asked for more! So, on its own accord, the CRTC added a 25% mark-up to provide a contribution to the recovery of costs such as legal, accounting, and advertising services.
Again, there is no evidence that consumer advocates or the CRTC’s own consumer group understood the potential impact on vulnerable end-users using pre-paid calling cards.
I should also note that MTS is not the only carrier that has updated its toll-free compensation rates. In early 2012, the CRTC approved a September 2011 application from TELUS to raise its rate from $0.2054 per call to $0.2630 per call. And on the same day that the CRTC approved the AFX rates (including that 25% windfall), the Commission approved a SaskTel application to raise its rate from $0.2055 per call to $0.5048 per call.