TELECOMMUNICATION POLICY FOR WHOM?
AN ANALYSIS OF RECENT CRTC DECISIONS

Vanda Rideout
Carleton University

Structural Theoretical Considerations

This paper critically examines political and sociological relations in

public telecommunication policy by arguing that the Canadian state has

and continues to play an important role in forging and shaping a

competitive telecommunication environment. Federal telecommunication

decisions approved by the state regulator, the Canadian Radio-television

and Telecommunications Commission (CRTC), are examined from the

years 1977 to 1990. The pro-competitive policies approved by the CRTC
reflect the state's shift from regulating rates and capital expansion

programs by monopoly telecommunication providers (Bell Canada and
BC Tel), toward permitting competition for an array of business services
supplied by monopoly, as well as new, telecommunication providers.

Competition in telecommunication business services has, paradoxically,

resulted in a more regulated telecommunication environment; one in
which there is less regulation in the public interest but more regulation
to manage market forces.

Structural theory (Poulantzas, 1973, 1978; Offe, 1984; Mahon
1980, 1984; Jessop, 1991) best allows us to analyze the role that the

CRTC takes in formulating pro-competitive telecommunication policy.
To get a more complete picture of this it is necessary to interpret and
analyze the state's responses to changes in the nature of capitalism.

Structural state theory reveals that the primary function of the

state in a capitalist society is to serve the interests of the ruling class by

creating and maintaining conditions favourable for capital accumulation.

The state must also reduce the inherent conflicts between fractions of
capital, the working class, and forces within civil society'. Furthermore,

the state has to create and maintain conditions of social harmony by
producing policies which legitimize capitalist social relations. Structural

theory, therefore, explains how the relationship between the ruling class
and the state is a complex one in which the state serves the capitalist

class without appearing to do so.

As part of its ideological function, the state re-defincs workers.

Alternate Routes, Volume 10, 1993 27



Alternate Routes. Volume 10. 1993

civil society groups, and capitalists politically as individual subjects, a

process that Carnoy (1984:99) calls 'individualization'. This process of
individualization, realized through legal and political ideology, isolates

workers and capitalists from their respective class positions. This is why,
in Poulantzas' view, the capitalist class chooses a 'democratic state' as an

expression of class power. The process of capitalist production defines
the formation of classes, but the state reconstitutes buyers and sellers of

labour politically as individual subjects, subjects free of any 'class-

belongingness'. The state reinforces this belief by presenting itself "as
representing the general interest of the competing groups" (Carnoy,

1984:100).

The Dominant Power Bloc, Capitalist Fractions and Relative
A utonomy: Poulantzas' (1973, 1978) work shows how the state provides
the framework for struggles between dominant and subordinate classes,

both reintegrated as 'individuals' detached from any class position. At the
same time, the state provides the political arena for and is itself shaped
by the class struggle. The state unifies the reintegrated dominant class
and subordinate class so that capitalist society is reproduced in a class

structure. Nonetheless, contradictions arise through the relationship

between the state and the dominant class, and through the state's
relationship to the working class and civil society groups.

Poulantzas (1973:43-4) explains that the state plays a principle

role in organizing and unifying the dominant class. He argues that the
capitalist class is itself internally divided into a number of competing
elements, substructures, or fractions. Members of the dominant class
compete among themselves, forging alliances in the process. Frequently,
alliances function under leadership of one of the fractions. The power
alliance that these capital fractions make is called the power bloc. The
leadership which unites the power bloc under its stewardship is the
hegemonic fraction which guarantees that the general interest of the
ruling class is realized through the state.

Structural theory moves beyond the notion that the state is the
captive agent of the capitalist class, arguing instead that the state is

relatively autonomous. As Poulantzas (1978: 313) notes, this implies that
there is a relative separation of economic power from political power
Hence, political struggles tend to conceal their economic and class basis.
The state thus tends to constitute class unity for the capitalist class in
isolation from the economic struggle. Moreover, the relative autonomy

28



Rideout/Telecommunication Policy

of the state sanctions the unity of individual capitalists, reconstituted into

fractions and a dominant bloc, to further their political ideological

operation and to constitute their political interests.

Poulantzas's concept of the relative autonomy of the capitalist

state is used to underline how the operations of the state correspond to
the political interest of the dominant class. This means that the degree,

extent, and form of the state's relative autonomy can only be examined

with reference to the class struggle.

Both Poulantzas (1973) and Mahon (1984) argue that the concept
of relative autonomy also means that other forces can advance and realize

their interests. For example, as will be shown below, the CRTC
encourages a compromise of competing interests, but this does not mean
that Bell Canada and BC Tel are forced to make unlimited concessions
to other dominant class fractions or to the subordinate class in order to

maintain their privileged hegemonic position.

According to Jessop (1991:92), it is also important to examine the

infra-structural power of the state in this context — the manner in which
the state shapes the spatial, temporal, corporeal and social order of

capitalist society. Using the telecommunication regulatory process as an

example, one can see that those 'closest' to state power benefit the most

(i.e. Bell Canada, BC Tel, Unitel, BC Rail/Lightel, and the large
telecommunication users), while those furthest away benefit the least.

This process helps to further fragment the subordinate class's resistance.

State Regulation and Unequal Representation: Mahon's

(1980:160) contribution to structuralist theory is her explanation of how
the state politically organizes the strategies and compromises necessary

to maintain the capitalist system, while at the same time develops policies

that benefit the leading fraction. She maintains that a regulatory agency's

role is a dual one. First, it represents the interests of the regulated and

it subordinates their interests to the long term interests of the hegemonic

fraction. Second, the regulatory agency is a special case because it is

independent of regular state departments and the political apparatus.

Hearings are adversarial and are open to competing private inputs.

Furthermore, the agency's authority is linked to its capacity to make
politically neutral technical judgements. A regulator)' agency is an
"unequal structure of representation" (1980:159), a structure of bias that

organizes the interests of various social forces around the core interests

of the hegemonic fraction, thus creating an "equilibrium of compromises"

29



Alternate Routes, I olume 10, 1993

(1980:159).

Similarly, the state arranges and reorganizes the political relations

of class domination through its policy agenda. In this way, the state

supports and maintains political struggle through its function as a political

organizer of various dominant fractions, non-dominant capitalists and

subordinate classes. Resulting compromises may give access to, and
representation for, the subordinate class. All members of the subordinate

class have been and continue to be, active participants in the regulatory

process. While the conditions won by the subordinate class must be
more than symbolic if their consent is to be secured, the regulatory

process and policy compromises, on the whole, help to disorganize and

fragment this class.

The state also provides suitable conditions for the organization of

capitalist fractions into a power bloc, while aiding in the reproduction of

capitalist hegemonic domination. For example, compromises reached

between Bell/BC Tel and the new telecommunication providers were

created by the CRTC in order to neutralize the threat to hegemony that
could not be contained by normal functioning of the political apparatus

of the state. The CRTC is an instrument of hegemony because it
arranges compromises that reflect a combination of the demands of the

regulated (Bell and BC Tel), other capitalist fractions (the larger user
groups and the new telecommunication providers), and subordinate

classes.

By applying structural analyses to CRTC decisions, I will argue
below that the settlement of these disputes and demands entails more than

regulating telecommunication monopoly pricing and limiting competition.

The CRTC's decision to permit telecommunication competition in key

areas furthers the interest of the whole capitalist class, not just a

dominant fraction. Pro-competition telecommunication decisions also

serve dominant economic interests by facilitating the international

integration of economies, a process reflected most notably by the Canada-

U.S. Free Trade Agreement.

The State as Crisis Manager: When problems arise in the
accumulation process the state responds with specific policies in order to

maintain this process. Responding to economic crisis through policy

intervention, the state acts as a crisis manager (Offe and Range.

1982:253). State policy is an attempt to neutralize economic

contradictions. Such policies arc designed to enhance stability of the

30



RideoutAtelecommunication Policy

whole capital accumulation process, rather than advance the interests of
one dominant fraction. Some policies are geared towards continental or
global accumulation, such as the telecommunication enhanced service

decisions. Other policies reorganize the importance of exchange
relationships among capital fractions. As Offe (1982:254-6) argues,
policy shifts subject the dominant bloc to new rules in order to provide
for economic growth and the survival of the larger capitalist class. With
its renewed role as crisis manager, the state shifts the focus of public
policy to meet the competitive demands of private sector market criteria.
At the same time, the policy shifts intensify class conflict by reinscribing
these social and political struggles to the state administrative apparatus,

such as the CRTC.
In Canadian telecommunication, the dominant bloc (Bell Canada

and BC Tel) has been subjected to new rules. The old 'natural monopoly'
has been changed in a number of specific areas: mobile telephone
services; interconnection and private line voice service, terminal

attachment, enhanced services; resale and sharing; rate rebalancing and

the new resale and sharing application that permits existing and new
telecommunication service providers to meet the demands of the large
telecommunication users.

Structural Telecommunication Relations

A structural model of state telecommunication relations is presented in
Figure 1. The model identifies the major participants in the power bloc,
organized according to their structural position within the federal

telecommunication system. The model helps to explain the relations
evident in the telecommunication field as well as the policy strategies by
capitalist fractions, the state, and subordinate classes. This section

describes how each capital fraction and the subordinate class attempt to
influence and change these relations.

The Dominant Power Bloc:
(i) The Established Powers. It is useful to begin

telecommunication policy analysis by identifying the dominant power
bloc because the interests of these organizations set the pattern for other

forces in the system. Bell Canada and BC Tel are the established powers
in telecommunication. Until recently, their dominant position was met
with only minor challenges from other capitalist fractions and from the

31



I liemate Routes, Volume 10, 1993

federal government. Bell Canada and BC Tel held a virtual monopoly
on local and long distance residential and business telephone

communications. Responding to earlier conflicts, the state regulated this

bloc to meet the social demands of subordinate classes by holding the
companies publicly accountable for rate increases and capital expansion

plans (Babe, 1990:91-101).'

(ii) Telecommunication Domestic Challengers. The major
challenger to the hegemony of the established powers within the
telecommunication industry has been CNCP Communications. CNCP
recently amalgamated with Rogers Communications and is now known
as Unitel. In 1979 CNCP petitioned the CRTC to allow it to connect to
Bell Canada's network in order to provide voice service to its private line

customers; CNCP launched a similar challenge to BC Tel's monopoly
position in 1981 (Telecom Decisions CRTC 79-11 and 81-24). 2 Both
CRTC decisions allowed CNCP customers dial-up access for its voice
and data business services.

Similar challenges came from would-be telecommunication
service providers such as Challenge Communications, Harding

Communications, and Call-Net. They also lobbied the state for a
'liberalized' terminal attachment policy similar to the one granted CNCP.
The CRTC responded with an interim decision followed by a final
decision permitting terminal attachment to Bell's telephone network

(Telecom Decisions CRTC 80-13 and 82-14). Moreover, it was decided
to permit residential customers to own their phones, rather than being
obligated to rent them from the telephone companies.

CNCP Communications made a second challenge to the dominant
bloc in 1985. Their application to the CRTC requested approval to
interconnect to Bell Canada and BC Tel in order to provide long distance
telephone services for their business customers. The subsequent CRTC
ruling (Telecom CRTC 85-19) is considered by many to be a watershed
decision (Janisch, 1986; Stanbury, 1986; Woodrow and Woodside, 1986).
Although the CRTC denied CNCP's request to compete in long distance
voice services and private voice services such as MTS, WATS and PBX,3
Telecom Decision CRTC 85-19 encouraged the formation of more
powerful telecommunication-user affiliations, coalitions and lobby groups.

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Alternate Routes, Volume 10, 1993

The second major challenger, BC Rail Telecommunications -
Lightel Inc. (BCRL), participated in the recent CRTC hearings for
permission to provide long distance service (Telecom Public Notice 1990-

73). BCRL is a joint venture company operated by BC Rail Ltd., Call-
Net, and Lightel Inc. It is not presently operational except as a legal

paper organization. BC Rail Ltd. operates a microwave network.
Lightel, owned by Call-Net, operates a fibre route from Toronto to Fort
Erie and is also presently negotiating a right of way agreement with CN
Rail. Call-Net and Lightel form a facilities-based reselling service.

What is significant about the BCRL application is that Call-Net,
as a re-seller of enhanced services and value added services,

interconnects its switches to facilities leased from Unitel. It also connects

with the U.S. carrier, Sprint, and has an exchange agreement with

Rochester Communications Inc. (Interrogatories BCRL (Bell) 14 Sept 90-
100-105 1C2). BCRL plans to build a number of facilities in Canada and
another supplier (perhaps Sprint) is to build facilities along the Canada-

U.S. border. The BCRL application thus represents the creation of a
potential bypass network.

4
As a microwave fibre network, BCRL could

provide a private MTS/WATS-like service, selling only to large business
users. Rather than develop their own private networks, it would benefit
the large telecommunication users to have one approved by the CRTC in
place.

(iii) Policy Recommendations by Telecommunication User

Associations. The list of telecommunication users in Figure 1 reveals that

a number of broad-based associations and coalitions have been formed.

These act to unite competing capitalists into a counter-hegemonic bloc.

The associations and coalitions, all heavy communication users, have

combined into these lobby groups to influence and promote

telecommunication competition in the state policy-making process. The

members of the associations and coalitions represent various capital

fractions such as finance, manufacturing, and service industries. They

form the lion's share of the large corporate and business

telecommunication users.

The telecommunication users formed these umbrella associations

to get cheaper, efficient, flexible, integrated, and specially designed

telecommunication services. The large users and the new
telecommunication providers recognize the importance and significance

of telecommunication. Telecommunication is no longer simply a

business operating cost Recent technological advances in the industry

34



Rideout/Telecommunication Policy

have generated new services which can be sold as commodities. Unlike

other goods, however, telecommunication service commodities have an

never-ending life; they may be (re)commodified into various additional
services and re-sold. Cheaper and specialized services are, in the users'

view, necessary in order to take advantage of competitive markets

domestically, continentally, and internationally.

Canadians for Competitive Telecommunications (CCT) includes

the following groups and associations: Canadian Association of Data and

Professional Service Organizations, Canadian Bankers Association,

Canadian Business Equipment Manufacturers Association, Canadian

Business Telecommunications Alliance, Canadian Federation of

Independent Business, Canadian Organization of Small Business,

Canadian Radio Common Carriers Association, Hotel Association of
Canada, and the Ontario Hotel and Motel Association. Formed after the

CRTC rejection of CNCP's application in 1985, the coalition expected
their united views to influence federal policy outcomes. Their report.

The Crisis for Canadian Business: Telecommunication Rates and the

Public Interest (1986), argues that policy makers should reduce long

distance rates for the business community because industries involved in

the distribution of goods and sen ices cannot improve their productivity

in the face of excessive long distance rates. In Canada, long distance

rates represent the third highest business operating cost, after wages and

capital expenditures. For example, long distance and private bulk line

rates for teleordering and telemarketing are 50 to 100 percent higher in

Canada than in the United States. The CCT report warns that if
telecommunication rates are not lowered Canadian businesses will simply

bypass the Canadian system and use American systems.

Two policy reports were prepared by the Canadian Bankers
Association (Taylor, 1989) and the Canadian Business

Telecommunication Alliance (CBTA, 1989). The Canadian Bankers
Association, and specifically the Royal Bank, recommended that

telecommunications should be set more firmly under federal jurisdiction

and that policy should be centrally regulated.
5

The Canadian Business

Telecommunication Alliance, following the position taken by the

Business Council on National Issues (Langille, 1987:43-44), favoured a

market driven telecommunication environment with less or no

government regulation. Both the Canadian Bankers Association and

CBTA are ideologically aligned with neo-liberal demands for a return to
Tree enterprise'.

35



Alternate Routes, 1 olume 10. 1993

The Communications Competition Coalition (CCC) was formed
in November 1989 to lobby and influence the Department of
Communications, the CRTC, and other government departments and
agencies. Membership includes company presidents and corporate
executive officers of 150 Canadian corporations.

6
The CCC supports an

economic policy model of telecommunications, one which relies on the

market rather than a regulated duopoly. Finally, the Information

Technology Association of Canada (ITAC) represents approximately sixty

members from information and technology companies. ITAC supports
the Free Trade Agreement, and argues that Canadian businesses must be

internationally competitive and that telecommunication policy must be

restructured to meet these challenges (ITAC, 1989).
These large telecommunication users have concentrated and

consolidated their positions by forming these powerful pro-competition

lobby groups in order to influence the federal government to pass

telecommunication decisions which reflect their position. User coalitions

and associations have made policy recommendations suggesting how the
state should: (a) formulate general national policy; (b) ensure that all

telecommunications fall under federal regulation; and (c) determine that

there be little or no state regulation of telecommunications.

(iv) Bell Canada's Response. Bell Canada responded to the issue

of what was, in their view, excessive state regulation by reorganizing

itself into Bell Canada Enterprises (BCE). The reorganization was
approved by the Federal government's Bill C-19 and Telecom Decision
CRTC 83-10. Prior to Bill C-19 Bell was almost entirely state regulated;
after the BCE reorganization only telephone services were regulated.

Bell has also responded to increased competition by introducing

major discounts for both residential and business users who call Canadian
and/or American destinations. The discount packages, 'Between Friends'
and 'Teleplus Canada', are part of a large offensive mounted by Bell to
counter the various challengers (Telecom Decision CRTC 88-19). Other
discount packages have been filed with the CRTC for special purposes
business long distance lines. One package, called Megalink, is based on
the international standard for Integrated Sen ices Digital Network (ISDN)
(Surtecs, December 3, 199():B4). This discount package is aimed at
medium and large corporate customers.

A second response by Bell Canada is their plan to rebalance
telephone rates It is claimed that if competition is permitted in long

distance services, local rates will have to be rebalanced to counter the

36



Hideout/Telecommunication Policy

current subsidy they receive from long distance revenues (Telecom

Decision CRTC 88-4). Bell's rate rebalancing proposal, and the Phase III
Costing study, reveals that in order to reduce long distance and

MTS/WATS charges, subsidization would have to stop and local usage
would have to increase (Telecom Decisions CRTC 88-4; 89-17; 85-19).

Bell's proposal to increase residential subscribers' local rates is

coupled with its support of some form of targeted subsidies for needy

subscribers. Targeted subsidies are part of the current discourse of

telecommunication policy liberalization, a discourse that camouflages the

effects of competition on low and fixed income subscribers. Targeted

subsidies do not address the needs of those subscribers who are currently
barely able to maintain their services. Similarly, they ignore regional

disparities as well as the differences between urban and rural subscribers.

Bell has argued in various rebalancing proposals that long

distance revenues subsidize local rates. Yet, critical telecommunication

writers (Babe, 1990; Mosco, 1990 a,b,c; Roman, 1990) question Bell's

accounting allocation practices. Tinker, Leham and Neimark (1988:188-

216) explain that, like other forms of information, accounting is a set of

social practices that reflect and reinforce a dominant ideology.
7

They

argue that accounting standards and terminology produce what is

considered to be the objective reporting of business activity. They

maintain that when accounting applications, standards and definitions are
accepted and used by the state in a rational manner their importance is

heightened. Business accounting practices are legitimized by the state via

taxation legislation and the acceptance by state regulators of business

accounting practices audited by the private sector but not by the state.

Roman (1990:96-1 1 0) questions the whole accounting premise for rate
rebalancing and costing in the telecommunication industry. He argues
that the CRTC has been making decisions based on accounting
hypotheses used by Bell and BC Tel; hypotheses which are largely
untested. The CRTC does not provide independent audits. For example,
an argument can be made that Bell Canada's claim that long distance
rates subsidize local service is based on a particular costing method

which justifies their request for rate rebalancing. Babe (1990:121-6)

reveals that Bell does not have separate accounting practices for long

distance and local services. Consequently, it is difficult to identify which

costs and expenses should go to which services. At best, the argument

that local service is subsidized is an arbitrary assessment.

Others also question the premise that long distance rates subsidize

37



Alternate Routes, Volume 10, 1993

local telephone service. Melody (1982) claims that the reverse is true.

Huber (1987) argues that allocating true common costs is arbitrary and
mysterious. Hills (1989:131) suggests that telephone rates tend to be

distance-related, making long distance calls more expensive than local

calls, although in terms of costs to the enterprise they are cheaper.

According to Oettinger (1988), current pricing policies are 'fairy tales';

'subsidies' are accounting constructs that allow for changes in political

relationships. Selecting a particular costing method helps to determine

final corporate outcomes for tax purposes, shareholders return on

investments, and the equitable position of business. The particular

accounting methods a business chooses are not neutral, but are chosen to

reflect the best position of the corporation to shareholders, the tax

department, state regulators and/or stock market investors.

The Capitalist State and the CRTC: An analysis of CRTC
telecommunication decisions from 1977 to 1990 is provided in Figure 2.

These decisions are pro-competitive, reflecting a 'liberalized' environment

for Canadian telecommunications. New telecommunication policy has
been approved by the CRTC to meet the demands of large
telecommunication users and the new telecommunication providers.
Nonetheless, the CRTC must also mediate the conflicts and compromises
between the large user groups, would-be telecommunication providers,

and Bell Canada and BC Tel. In order to ensure economic survival of
the larger capitalist class, the CRTC has permitted competition in some
key areas, thereby denying the telecommunication power bloc their

monopoly position.
By permitting more competition in mobile and cellular telephone

service, the CRTC allowed more companies to provide similar services
to those offered by Bell and BC Tel. The CRTC also approved Cantel
(Rogers Communications) as the national cellular radio service carrier

(Telecom Decisions CRTC 77-16; 84-10; 84-29; 87-13).
Considered a watershed decision. Telecom Decision CRTC 79- 1 1

,

permitted CNCP to interconnect to Bell Canada's network, allowing
CNCP to set up their own private business network. A second decision
(Telecom Decision CRTC 81-14) allowed CNCP to interconnect with BC
Tel. The Commission also permitted CNCP to set its private line service
rates 5 to 10 per cent lower than Bell and BC Tel.

One exception to the pro-compctitivc rulings during this period

38



Rideout/Telecommunication Policy

Figure 2

CRTC Pro-competition Telecommunication Decisions from 1977 to 1990

Mobile and Cellular Radio Telephone Seivice

Telecommunication Decision CRTC 77-16 Challenge v. Bell Canada
Telecommunication Decision CRTC 84-10 Mobile/cellular interconnect to Bell and BC Tel
Telecommunication Decision CRTC 84-29 Follow up to Decision 84-10
Telecommunication Decision CRTC 87-13 Cantel national cellular radio telephone service

Interconnection and Private Line Voice Service

Telecommunication Decision CRTC 79-1 1 CNCP interconnection with Bell
Telecommunication Decision CRTC 81-24 CNCP interconnection with BC Tel
Telecommunication Decision CRTC 83-10 CNCP rates for private line service
Telecommunication Decision CRTC 85-19 CNCP denied competition in long distance service

Terminal Attachment

Telecommunication Decision CRTC 80-13
Telecommunication Decision CRTC 81-19
Telecommunication Decision CRTC 81-21
Telecommunication Decision CRTC 81-23
Telecommunication Decision CRTC 82-14
Telecommunication Decision CRTC 84-11
Telecommunication Decision CRTC 84-12
Telecommunication Decision CRTC 84-13
Telecommunication Decision CRTC 84-14
Telecommunication Decision CRTC 85-5

Interim terminal attachment requirements Bell

Interim terminal attachment requirements Bell

Pre-hearing on terminal attachment competition

Standards for terminal attachment to Bell

Attachment of subscriber terminal equipment

Terminal attachment tariffs by Bell and BC Tel
Terminal attachment to NorthwesTel

Terminal attachment to Terra Nova
Terminal attachment for Telex and TWX equipment
Paradyne attachment for Telex & TWX equipment

Enhanced Services
Telecommunication Decision CRTC 84-18 Regulatory policy for enhanced services
Telecommunication Decision CRTC 85-17 Identity & classification enhanced services
Telecommunication Decision CRTC 87-5 Call-Net's service only basic service
Telecommunication Decision CRTC 87-14 Call-Net's review of Decision 87-5
Telecommunication Decision CRTC 89-17 Call-Net illegal resale & sharing basic service

Resale and Sharing

Telecommunication Decision CRTC 85-19 Some resale & sharing permitted
Telecommunication Decision CRTC 87-1 Resale & sharing of primary exchange voice
Telecommunication Decision CRTC 87-2 Resale & sharing classifications and tariffs
Telecommunication Decision CRTC 90-2 Resale & sharing Teleglobe international service
Telecommunication Decision CRTC 90-3 Resale & sharing of private line service

Source: Adapted and extended from Janisch et. al., 1987.

39



Alternate Routes, Volume 10, 1993

was the denial of CNCP's application to provide long distance public
telephone services (Telecom Decision CRTC 85-19). Retreating from its
former position, the CRTC was concerned that CNCP would not be able
to provide universal service or offer the price discounts it forecasted in

its business plan.
8 The CRTC noted that CNCP's net income would be

negative for its first four years of operation, yet the next six years would
provide a rate of return of 20.6 percent. Hence, the CRTC's refusal to
permit CNCP to compete in long distance telephone service appears to
be primarily influenced by questions concerning the economic feasibility
of CNCP's plan.

Faced with challenges to its monopoly position, Bell Canada
applied to the CRTC to be given permission to liberalize its corporate
rules (Telecom Decision CRTC 80-13). The subsequent decision gave
the telephone subscriber the choice of purchasing or leasing their phone

sets. After five years the CRTC followed this decision by extending
terminal attachment to Telex and TWX equipment (Telecom Decisions
CRTC 81-19,21, 23; 82-14; 84-11, 12, 13, 14).

In the area of enhanced services, the CRTC permitted more
competitors with less regulation. Only Bell's and BC Tel's enhanced
services would be regulated by the CRTC. Bell and BC Tel had to make
sure there would be no cross subsidization from their phone monopolies
to lower their enhanced service rates. The CRTC held both carriers
accountable to make sure they would not participate in unfair competition
practices. Finally, the Commission established a dispute resolution
mechanism placing onus on the carrier to justify a denial of the resale
and sharing of enhanced services to would-be providers (Telecom

Decisions CRTC 84-18; 85-17; 87-5, 14; 89-17).
The rulings reached by the CRTC on enhanced services helped

to intensify disputes throughout the 1980s. Bell and CNCP denied the
resale of enhanced services to Call-Net Communications Ltd. Accepting
Bell's argument, the CRTC concluded that except for voice mail and the
routing of calls, all other Call-Net services were not enhanced but basic

services (Telecom Decision CRTC 87-5). Accordingly, the CRTC
directed both Bell and CNCP to stop supplying Call-Net with their
MTS/WATS facilities.

Call-Net responded by having Decision 87-5 reviewed. In

Telecom Decision CRTC 87-14 Call-Net claimed that the CRTC had
made a number of errors. The CRTC's investigation of its decision found
that no errors had been made. Call-Net applied directly to the

40



Rideout/TeUcommunication Policy

government and through an Order-in-Council the government permitted

Call-Net to extend its access to Bell and CNCP for almost one year.
The Order-in-Council overruled the CRTC decision, giving Call-

Net time to restructure its business operations to conform with the

Commission's ruling in Decision 87-5. In 1988 (Telecom Decision

CRTC 88-11) Call-Net reapplied to the CRTC to examine its new
enhanced services, CDAR. The Commission ruled that except for
incoming call identification and voice recording storage and retrieval, all

other CDAR services were basic and not enhanced services. Moreover,
Call-Net's wide area telephone services (WATS) did not meet the
definition for enhanced services (Telecom Decisions CRTC 84-18; 87-2,
5; 88-11).

These events were repeated as Call-Net tried to organize its

customers into sharing groups so that private lines could be used jointly.

The CRTC considered this reorganization an illegal way to re-sell
enhanced sendees (Telecom Letter Decision 88-9). However, a second

Order-in-Council extended Call-Net's cut-off from Bell and CNCP.
These disputes were resolved when the CRTC relaxed its rules governing
the resale and sharing of private network services (Telecom Decision

CRTC 90-3).
Until Telecom Decision CRTC 85-19, federally regulated carriers

were prohibited from re-selling and sharing their services, except via a
special agreement approved by the CRTC.9 The CRTC concluded that
resale and sharing would benefit through more competition. Non-
regulated suppliers would not be regulated. The rational offered by the

Commission was that the new competitors would rely on competitive
pricing. In other words, the environment would be governed by market

forces rather than government regulation. Meanwhile, the resale and

sharing services offered by Bell and BC Tel would continue to be
regulated.

The Subordinate Class: Telecommunication Trade Unions: In a

commissioned study (Mosco and Zureik, 1987), the Communication,
Energy and Paper Workers Union of Canada (CEP), formerly the
Communication and Electrical Workers of Canada (CEWC), note that
technological modernization in the telecommunication industry leads to

job losses, deskilling, the computerized monitoring of work performance,
and increases in part-time and contract work. Aside from these issues,

the CEP has also been active in sharing information with the Canada

41



Alternate Routes. I olume 10. 199J

public on the effects of deregulation and long distance competition. Part

of their campaign in 1985 to defeat CNCP's bid to compete in long
distance services involved the distribution of petitions and pamphlets, the

creation of toll free phone information, and the launching of a national

media campaign. Along with the Telecommunication Workers Union

(TWU) and other civil society organizations, the CEP was successful in
preventing CNCP from competing in long distance services (Telecom
Decision CRTC 85-19). More recently, the CEP has spoken out against
similar applications filed by Unitel and BCRL (CEWC, 1989).

The CEP supports a single regulated monopoly network, arguing
that the creation of more long distance networks would involve an

expensive capital outlay that would result in substantial telephone rate
increases. The CEP also supports a single future broadband network. The
CEP favours a single network because it would help create and protect
jobs. It is also felt that it would be easier to set policy over one network.

Ironically, this leaves the CEP in a contradictory position, supporting
similar policies to those of Bell.

The Telecommunication Workers Union (TWU), like the CEP,
has been actively involved in the telecommunication policy process.

The TWU has made policy recommendations to the Department of
Communications and the CRTC (Schniad, 1990). They argue that
competition in long distance voice and data services would not be in the

public interest, but would only benefit the business community. Instead,

the union supports a state-of-the-art unitary network governed by strict

regulatory requirements.

Civil Society Groups and Organizations:

(i) First Nations Organizations. Koebberling (1990:22) notes that

as early as 1970 the Inuit presented their telecommunication needs to the

Department of Communications. The Inuit Tapirisat of Canada (ITC)

lobbied for reliable and inexpensive interactive services suitable for the

harsh conditions of the Arctic. Often the whole Inuit community
participated and spoke at hearings (Telecom Decision CRTC 77-16).
Along with complaints about a system that did not work for up to three

or four weeks at a time, the ITC expressed concerns with disconnections

that resulted because bills were received late or written only in English.

Service problems were resolved in the late 1970s, but this was

followed in the 1980s by fewer specialty services and increased rates.

McNulty (1980:1-15) argues that Northern telecommunication expansion

42



Rideout/Telecommunication Policy

and control was geared to meet the needs not of the Inuit, but particular
Northern development projects (for example, mining exploration), the
major telephone companies, and the Federal government.

The ITC challenged Bell's rates at a number of hearings, arguing
that remote northern areas should have specialized flat rates and be able

to take advantage of the special discount packages offered to southern

subscribers. The CRTC rejected the ITC's recommendation for a 24 hour
flat rate (Koebberling, 1990:25). However, the Inuit are not only

interested in the economic advantage of telecommunication services but,

more importantly, in the capabilities for education, health and
transportation as well as social and cultural applications.

(ii) Disabled People's Groups. The Canadian Hearing Society and
the Canadian Coordinating Council on Deafness have participated in a

number of CRTC hearings on rate rebalancing, resale and sharing, and
interconnection. Both organizations urged the CRTC to introduce
technical standards to ensure that all telephones are compatible with a

hearing aid device called a telecoil can. BC Tel, the Canadian
Manufacturers Association and the Canadian Business Manufacturers

Association argued that it would cost too much ($10 per telephone) to
convert single line phones. The CRTC ruled that Canada is committed
to disabled groups and that telephone devices for the hearing impaired

should be as low as possible. Nonetheless, the CRTC did not change the
standards rule for hearing aid compatibilitv (Telecom Decision CRTC 82-
14).

It was only after further standards hearings and additional
participation by other disabled organizations such as the Advocacy
Resource Centre for the Handicapped and the British Columbia Old Age
Pensioners Organization, that the CRTC approved the changes for
telephone sets for federally regulated carriers in 1987 (Telecom Decision

CRTC 87-1).
(iii) Anti Poverty Groups and Public Interest Advocacy

Organizations. The National Anti-Poverty Organization (NAPO) has and
continues to participate in the telecommunication policy process. NAPO
was an active participant in the liberalization of terminal attachment
hearing and in CNCP's long distance bid in 1985. Permitting competition
in telecommunication services, according to NAPO, benefits business
users and the new telecommunication providers at the expense of
ordinary Canadian telephone subscribers.

The Public Interest Advocacy Centre (PIA), a non-public law

43



Alternate Routes. X olume 10, 1993

organization, represents various civil groups before regulatory tribunals,

the courts, and legislative committees. Past hearing involvement includes

those concerning interim terminal attachment, rate rebalancing (Telecom

Decisions CRTC 85-19, 88-4), and the recent hearing on competition in
long distance telephone service (CRTC Telecom Public Notice 1990-73).
PIA agreed with the Federal Provincial Territorial Task Force (1988) that
if competition is permitted and long distance rates are reduced, economic

supply and demand theory predicts that long distance calling would
increase, consequently increasing long distance revenues. Hence, PIA

argues that local rates would not have to increase. PIA also notes that

Bell and BC Tel's modernization programs are subsidized by residential
subscribers, even though most of the programs only benefit the business

subscribers (Todd, 1990:iii-iv).

(iv) Senior Citizen Groups and Coalitions. Various senior citizen

coalitions, such as the British Columbia Old Age Pensioners'
Organization (BCOAP) have taken part in a number of hearings.
BCOAP's position in rate rebalancing and long distance competition is
that if local phone rates increase, numerous seniors on fixed incomes

would be adversely affected. Seniors consider telephone services to be

a necessity for emergency and social use. Such groups hold the view that

it is the telephone system's social aspect which increases its service value

to all subscribers. If competition is permitted in long distance service

and local rates go up, a number of subscribers would drop off the system.

It is interesting to note that in 1985 (Telecom Decision CRTC 85-
19) Bell estimated that 160,000 subscribers, or 400,000 individuals,

would drop of the system if rates were rebalanced. Similarly, BC Tel
forecasted that 30,000 of its subscribers would have to leave the network

and 70 percent of its population would pay higher prices. In the recent

long distance competition hearing Bell, BC Tel, Unitel and BCRL as well
as the large telecommunication user groups all supported 'targeted

subsidies' to alleviate the drop-off of subscribers.

Targeted subsidies, however, is simply another name for
telephone welfare programs. Mosco (1991:4), in evidence presented
before the CRTC on long distance competition, emphasizes that there are
important lessons to be learned from the American experience with

telephone welfare programs:

By 1990, 49 states, the District of Columbia, and the
federal government operated a wide range of programs
to subsidize the cost of telephone installation.

44



Rideout/Telecommunicat'wn Policy

Admittedly the names of these programs avoid
identification with traditional social assistance. Link-Up
America, which subsidizes installation, and Lifeline,
which provides service discounts have replaced earlier
reference to phone stamps.

Included in these programs are not only federal subsidies, but state run

programs each with varying criteria for welfare eligibility, including

income verification tests that are often administered by the phone
companies. Moreover, the welfare programs have failed to reach the
majority of the eligible subscribers.

10

(v) Consumers Association of Canada. The only organization
which claims to represent all Canadian residential telephone subscribers,
the Consumers Association of Canada (CAC), occupies a shifting
ideological position which is increasingly difficult to identify. In
numerous hearings, the CAC supported competition on behalf of business
users (see the terminal attachment Decisions 80-13, 82-14, and enhanced
services Decision 84-10, etc.), but often ignored the interests of
residential subscribers.

The CAC's (1991) evidence in the 1990-91 long distance
competition hearings recommends that the Consumer Price Index would
be a good measure of affordability if applied to telephone bills.
According to the CAC, residential subscribers can afford to pay more for
their services.

11
Further, the CAC (1991:24) emphasizes the importance

of developing economic and technical criteria for meeting the needs of
medium and small business. What is noteworthy about the CAC is that
their position is unlike that presented by American consumer
organizations during AT&T hearings; the CAC has virtually abandoned
the non-business subscriber. This position is a good example of how a
group within the subordinate class can become fractionalized and serve
the interest of the power bloc.

Conclusion

Telecommunication services have been and continue to be created to
meet the demands of large users and the business sector. The CRTC has
contributed to the process by permitting more competition and
liberalizing telecommunication policy. This shift has meant that many
business services are no longer placed under public supervision or
regulation.

45



Alternate Routes. Volume 10. 199

i

Conversely, the submissions offered by unions, anti-poverty

organizations, the hearing impaired, seniors organizations, and native

peoples reveal that recent policy shifts come at the expense of public
interest and universality. In Canada, the concept of universality is

increasingly approached from an economic and/or technical point of view-

by the telecommunication industry and the CRTC. Universal service
simply means the ability to reach more consumers. However, as
Garnham (1989:125) explains, this approach is limiting because it regards
telecommunication service solely as an economic good to be consumed

like any other commodity. Hence, the distribution of telecommunication

welfare becomes an important policy consideration for suppliers, the

state, unions and various civil society groups and organizations. Policy

objectives are translated into reasonable costs (affordability) for

consumers, ignoring the vital issue of the needs of citizens.

Targeted subsidies' are also part of the current discourse of

telecommunication policy liberalization. This discourse is an attempt to

camouflage the effects of telecommunication competition on low and

fixed income subscribers, but it does not address subscribers who value
telephony for its social/cultural usefulness. The shift away from public
service also increases the problems of regional disparity, the differences

between northern and southern, urban and rural subscribers.

Until the late 1940s telephone service in Canada discriminated

against many Canadians on a class basis. Service was considered to be
a business tool or a luxury (Mosco and Pike, 1986). The evidence
presented in this analysis suggests that a shift to liberal policies is

eroding the social principles associated with public policy, generating a

two tiered system; one for basic services and one for privileged and

business users. In the process, the telephone could be transformed back

into the luxury item it was fifty years ago.
An alternative to a two tiered telecommunication system is a

telecommunication environment influenced and guided by social

regulation. Mosco (1990c:30-32) offers important suggestions for social
regulation, breaking it into short term and long term goals and objectives.

In the short run, a commitment to universality requires a stronger focus

on the social regulation of the telecommunication industry. This would

mean stronger regulation of accounting, pricing and investment practices
of all the carriers, including the Telecommunication Canada consortium.

Unitcl. BC Rail/Lightel. and Call-Net. Stronger social regulation also
means that issues with significant social implications must receive

46



RideoiU/Telecommunic&ion Policy

heightened attention. This includes informing and educating the public

about the social, cultural, and economic implications of new services.
In the long term, it is necessary to examine the values, network

types, forms of governance, and pricing mechanisms that can frame

another vision of a transformed telecommunication system. What this

means is that rather than building on a market frame-work, as workers

and citizens we need to determine the real communication and
information needs of people. We need to begin with a broader
commitment to universality; one which includes the fundamental right of

access to the production, distribution and use of information services in

general. Further, the fundamental right to universal access to

telecommunication networks needs to include a wide range of voice,

information, and signalling services. Longer range values involve

developing a strong and democratic policy process which defines issues

for the policy agenda by soliciting and organizing public participation in

policy decision making and implementation.

Postscript

Since this research was conducted, significant developments have

occurred which warrant further comment. In 1992, the CRTC permitted
competition in long distance services, breaking up the monopoly held by

Bell Canada and BC Tel. Although new long distance telephone service
suppliers such as Unitel and BC Rail/Lightel will be able to compete with
Telecommunication Canada members, the process is far from over and

the telecommunication arena continues to change.

Bell Canada has unsuccessfully contested the CRTC ruling.
More recently, Bell has applied to the CRTC to increase its residential
and business local rates. These rate increases range from 10 to 65 per

cent. Bell maintains these increases are necessary so that it can now
compete effectively in Canadian telecommunications. Call-Net, a partner

with BC Rail/Lightel, is in the process of acquiring other
telecommunication companies as it strengthens its position through

consolidation to compete in the public long distance market. Similarly,

significant changes are occurring at Unitel which recently sold a 20 per

cent share of its corporation to AT&T. This is the first step in breaking
a hundred-year tradition in which decision-making and control of the

telecommunications industry was overseen by the Canadian public.

47



Alternate Routes, Volume 10, 1993

Notes

1. Babe (1990:90) explains that in 1880 Bell Telephone Company of
Canada was given a charter to incorporate a national company. The
charter was a de facto monopoly for early telecommunicationmunications.
Bell's charter permitted the company to manufacture and develop a
telephone system with a guarantee from the federal government that there
would be no interference from other competitors. From 1880 until 1906
Bell's "monopolistic price gouging, over predatory business practices, and

over service deprivation in rural areas" (Babe, 1990:90) led to a public

outcry. Numerous petitions were sent to the government demanding that
the company be nationalized. The federal government responded to
public pressure by subjecting Bell to a very loose form of regulation in

1906 by a state agency known as the Board of Railway Commissioners
for Canada. Their mandate was extremely vague, dealing only with the
issue of rates; their only criteria was that rates be just, reasonable and
applied to all people at the same rate. In 1976 federal telecommunication
regulation was assigned to the Canadian Radio-television and
Telecommunication Commission.

2. CNCP is the monopoly producer of telegraph services such as teletex
and telex. The organization also provides a wide range of private
telephone services. More recently CNCP offers private line voice, video,
facsimile and data services. It is also the exclusive supplier of Canada's

broad band data services (Datapro, 1989).

3. Private branch exchanges (PBX) are terminal and switching devices.
When located on the customer's premises, they are called terminals but
when they are provided by a telephone company on its premises, they are
refereed to as centrex exchanges (Babe, 1990:28).

4. The term by-pass' refers to the capability of the new communication
technology and the new telecommunication networks to redirect (by
computer or networks) telecommunication traffic to other networks.

48



Rideout/Telecommunication Policy

5. Until the Supreme Court decision of August 14, 1989,

telecommunication regulation and policy was split between federal,

provincial and a few municipal governments. The federal regulator, the

CRTC, regulated the private telecommunication providers, Bell Canada
and BC Tel. Provincial governments were responsible for regulating the
public telecommunication sector. A few municipalities such as Edmonton
own, operate and regulate their own telecommunication systems.

6. As part of this research project a written request was made to the CCC
for a list of its members. Gloria Schpales, Mr. Richardson's executive

assistant, informed this researcher on July 13, 1990 that the CCC was
"unable to send a list of its members."

7. In Canada, the Canadian Institute of Chartered Accounts (CICA), the

National body of Chartered Accounts, is responsible for accounting and

auditing standards. Its recommendations are used by public accountants,

small businesses, commerce and industry, governments, finance, etc., are

published in the CICA Handbook (Smith et. al., 1978). The accounting
profession, business and the state accept the legality and legitimacy of

these practices. The critique of accounting methods and practices offered

in this paper is an attempt to show that within a class analysis accounting

practices are not neutral. It is common practice, for example, for trade
unions, when negotiating collective agreements with business, to
scrutinize the audited annual corporate reports for various legal ways to

defer taxation through depreciation, reserved funds, shareholder's equity,

contingency funds, etc.

8. CNCP's application proposed that it would obtain a market share of
MTS/WATS service of approximately eight per cent over 10 years, make
contribution payments equal to 1 1.5 cents per minute, and offer prices 20

to 30 per cent below the existing telephone rates. The CRTC noted that
in order to make CNCP's MTS/WATS services profitable, a large
discount would be required from Bell and BC Tel. The Commission was
concerned that requesting such a discount would result in higher local

rates (Telecom Decision CRTC 85-19 and Interrogatory CNCP (CRTC)
05 October 84-1302).

49



Alternate Routes, Volume 10, 1993

10. As of 1990 in the United States only 3.06 percent of eligible link-up
subscribers have enroled in the program and 31.8 per cent of life-line

eligible subscribers have signed up in 48 states (Mosco, 1991:4).

11. After applying the Consumer Price Index to telephone bills from 1986

to 1990, the CAC argues that bills have declined by 7.9 per cent, whereas
other residential bills increased by 16.0 per cent.

References

Babe, Robert. (1990) Telecommunications in Canada:
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Canada. (1990) Interrogatories BCRL (Bell). 14 Sept. 90 - 100 -
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. (1990) Resale and Sharing ofPrivate Line Services.
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. (1990) Unitel Communications Inc. and B.C. Rail
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^
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(1989) Re: Call-Net Telecommunications Ltd.
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_

. (1988)5e// Canada and British Columbia Telephone
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. (1988) Federal Provincial Territorial Task Force on
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( 1 98 8 ) /f ebalancing and Revenue Settlem ent Issues.
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50



Rideout/Telecommunication Policy

(1988) Resale to Provide Enhanced Services.
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__^ . (1988) Bell Canada and British Columbia
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'

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51



Alternate Routes, Volume 10. 1993

A ttachment ofSubscriber-Provided Telex and TWX Terminal Equipment.
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. (1984) Radio Common Carrier Interconnection with
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nected

. (1983) CNCP Telecommunications: Rates for the
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__^_^__, (1981) Bell Canada - Interim Requirements
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.
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RideoutTelecommunication Policy

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Rideout/TeUcommunication Policy

~-~-
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