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National Alliance of Communications Unions
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Date: Fri, 4 Oct 1996 16:18:41 -0700 (PDT)
From: D Shniad
It appears that Canada's phone companies have finally awakened to what free trade will mean in the context of the WTO round of negotiations on telecommunications. They are trying to enlist Canada's telephone unions to support their opposition to the kind of changes that are being bandied about by neoliberal bureaucrats in the ministry of trade in Ottawa.
The unions have, by contrast, made it clear that while we oppose liberalization of telecom access via the WTO, our concern is not the protection of Canada's phone companies' right to continue their strategy of downsizing and degrading service. Rather, we are attempting to enlist a host of coalition partners behind a program that would reject liberalization via the WTO in the context of negotiating a comprehensive social contract in this area, built on universal, affordable access to high end telecommunications service and the jobs that go with providing such access.
What follows is the paper we have submitted to the federal government. It encapsulates the position we are taking with the phone companies as well as with our coalition partners.
Sid Shniad
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THE NATIONAL ALLIANCE OF COMMUNICATIONS UNIONS
SUBMISSION TO THE FEDERAL GOVERNMENT
in response to
GAZETTE NOTICE NO. DGTP-008-96:
REVIEW OF CANADIAN TELECOMMUNICATIONS POLICY IN THE CONTEXT OF GLOBAL TRADE DEVELOPMENTS
September 30, 1996
INTRODUCTION to the NATIONAL ALLIANCE OF COMMUNICATIONS UNIONS
The National Alliance is a coalition of unions representing workers in Canada's telecommunications industry. The members of the Alliance meet on a regular basis to discuss matters of mutual concern and to formulate common approaches to matters affecting their members.
The unions which are members of the Alliance include the Communications, Energy & Paper Workers Union, Telecommunications Workers Union, the Atlantic Communications & Technical Workers Union, the International Brotherhood of Electrical Workers, and the Telecommunications Employees Association of Manitoba.
BACKGROUND PERSPECTIVE: THE ROLE OF GOVERNMENT IN KEEPING CANADA TOGETHER
The population of this country is relatively small, with the vast majority of Canadians living within one hundred miles of the U.S. border. Huge regions are sparsely populated. Although it is not popular to take this position in today's political climate, Canada was able to overcome this and other problems through the application of solid industrial strategies whose purpose was to bind the country together. This ethic enabled our nation's leaders to build a physical infrastructure and a social safety net that is the envy of the world.
The people who built this country were well aware that there were individuals and groups who could prosper at the expense of the rest of society under a strictly market-driven approach to economics and politics. They nevertheless opted for a more inclusive strategic approach to social and economic policy. The basis of the Canadian consensus was that a social approach, rather than the untrammelled workings of the free market, would build the country and hold it together.
Historically, communications has played a central role in Canadian life. The provision of communications infrastructure to rural and isolated areas, the ability to make phone calls from British Columbia to Newfoundland, the use of our information infrastructure to reinforce and support Canadian industry and culture -- all have played a powerful role in binding the country together.
Despite the success of this approach, contemporary political wisdom holds that There is No Alternative to embracing the "free market" approach and rejecting the pragmatic approach which Canada's leaders used to build this country. Unfortunately, the viability of Canada in general and the telecommunications sector in particular may be undermined if our leaders encourage the pursuit of deregulation and liberalization as ends unto themselves, with little or no thought given to the ramifications.
In this time of unprecedented change in the telecommunications industry, the regulatory environment must be altered to prepare for the effective adoption of new technologies and the binding support they can offer for Canadian life. It must be emphasized, however, that while regulatory change is necessary, the current opportunity should not be used as a pretext for abdicating regulatory oversight of the telecommunications industry in the name of enhancing corporate power and profitability.
In other words, the opportunity presented by the advent of new technologies must not be used to rationalize the introduction of changes which leave Canadian subscribers paying higher rates for insufficient levels of service, shipping Canadian jobs to unregulated foreign companies and reducing the Canadian standard of living. Canada's telecommunications unions support regulatory changes which will ensure that new technologies are used to support positive social goals, including universal, affordable access to high end telecommunications services, as well as decent wages, working conditions and employment security for those who work in the industry.
THE PRECARIOUS STATE OF CANADIAN TELECOMMUNICATIONS
The Canadian government's position on telecommunications-related issues, including foreign ownership, liberalization, cross-border competition and bypass must be constructed in a broader context. If the government's agenda at the World Trade Organization negotiating table is informed by a narrow, ideological perspective which favours increased competition as an end unto itself, there is a real danger that the ability of future governments to shape this key sector in the interests of all Canadians could be undermined.
Canada's telecommunications industry has not yet experienced the full effect of the deregulatory changes which have already been put in place over the past several years. In addition, further changes are forthcoming from both government and the regulator. All these changes will have enormous effects on consumers, workers, the industry and Canadian society as a whole.
Proponents of existing and pending changes promise tremendous benefits to all Canadians. But there has been a huge gulf between what has been promised and the results that have actually been delivered. For example, when it was pleading its case before the CRTC, the Unitel company promised that hundreds of jobs would be created in cities across Canada. Other would-be competitors made the same argument - that the introduction of competition in long distance telephone service would generate thousands of jobs. Rather than creating jobs, however, Unitel has laid off approximately one thousand of its employees. A great deal of the remaining work has been contracted out to American employees of Unitel's partner, AT&T. And contrary to what the promoters of long distance voice competition promised would happen, there has been a net loss of employment in the sector as a result of the loss of tens of thousands of unionized jobs at Canada's traditional telephone companies. (See Human Resources Development Canada's study of the Canadian Tele communications Industry, Spring 1996.)
More jobs are on the chopping block. The rationale for this unprecedented downsizing is that draconian action is required to prepare the industry to compete with giants like AT&T, MCI, Sprint, British Telecom and other huge, foreign companies. Which brings us to the issues raised by the upcoming round of WTO talks and the government's solicitation of our views on the Review of Canadian Telecommunications Policy in the Context of Global Trade Developments.
Beginning January 1, 1997, the Government of Canada will discuss issues at the international trade negotiating table. These negotiations could have an enormous effect on the continued viability of our domestic telecommunications industry. Our negotiators must be made aware that Canadian carriers are simply too small to survive a competitive battle with giant foreign companies like AT&T and British Telecom. U.S.- based companies have more than enough spare capacity right now to carry all Canadian telecommunications traffic without constructing a single facility or providing a single job in Canada. Canada's traffic could easily be bled off in this manner if these foreign super companies receive permission - either from the Canadian government or from an international organization like the WTO - to carry Canadian traffic.
The existence of domestic regulatory anomalies combined with increasing pressure in international negotiations to allow wide open international competition means that the Canadian industry could be forced to go toe-to-toe with the biggest companies in the world on terms that disadvantage Canadian companies, consumers and workers alike.
A major part of the problem is of our own making. When the Canadian market was opened to long distance competition in 1992, the CRTC allowed competitors to enter without attaching service obligations comparable to those required of incumbent phone companies. In addition to the empty promises about job creation that were made by would-be competitors, the CRTC promised Canadians that with its "consumer friendly" approach to long distance voice competition, local rates would not be allowed to increase as they have in the US.
Knowledgeable industry observers knew that the Commission's position was disingenuous. How could competitors be allowed to enter markets, selectively targeting high revenue, low cost customers, without having a disruptive impact on the subsidies that flow from long distance to local service? Now that a decent interval has passed, the Commission is allowing local rates to rise sharply. The negative impact on low income telephone subscribers is serious. It is conceivable that they and other Canadians will be priced out of access to the Information Highway altogether.
In the United States, liberalized rules have led to a situation where rural local telephone exchanges are being sold off for nominal sums because they are money losers. At the same time, networks have been allowed to deteriorate to the point that carriers can no longer meet their service commitments and are relying on Canadian telecommunications workers to clean up the resulting mess.
In this country, similar competitive pressures are forcing incumbent phone companies as well as their competitors to focus their organizational efforts on high revenue customers situated in low cost areas. All this flows directly from the move to the free market, deregulated model, which shifts the industry from social pricing to cost-based pricing. The result is the creation of a system of haves and have nots. With companies downsizing and cutting costs to be more competitive, service quality can only decline. Unless governments and regulars come to grips with this issue, the costs of providing universal, affordable access will be left to governments or abandoned altogether.
The CRTC has ruled that local competition will be allowed in Canada. In the absence of government intervention informed by a social perspective, there is every likelihood that Canada will follow the American model here as well, allowing would-be competitors to purchase local service at rates discounted from existing, subsidized, money-losing local rates. This will enable resellers to undercut incumbent local carriers' tariffed rates and pocket the difference. They are allowed to take huge profits and add nothing except a billing machine to collect the money. This approach, which is being promoted by both the government and the regulator, can only contribute to undermining the viability of the overall system.
The entry of foreign resellers adds nothing to the system. They will benefit from companies' in-place investment and the efforts of the workers employed in the Canadian telecommunications sector. Offering nothing but lower prices, these resellers will arbitrage the sale of lucrative, premium-priced services which generate the revenues that are used to subsidize the provision of universal service on an affordable basis. Furthermore, the incumbent companies are required to service all customers, including those in high cost, low revenue areas, while new entrants are free to cherry pick the most lucrative customers.
This begs the obvious question: With cost-based pricing, who will service low revenue, high cost customers? And what will be the effect of the selective entrance of such companies? Under a strictly market-driven approach, customers who are unable to pay dramatically higher prices for their service will not receive it at all. If this approach continues, Canada will be headed for a serious fragmentation of both its Information Highway and its public telephone system. New competitors - particularly foreign super corporations - should not be allowed to enter the Canadian market and skim profits off the top without adding anything to the system.
The Canadian situation is already serious. In the spring of this year, Unitel Communications (which has since been renamed AT&T Canada) announced that it was moving its head office to Halifax. According to Lawrence Surtees of the Globe and Mail, the purpose was to change Unitel's terms of incorporation to that of an unlimited liability company:
"It was done for tax reasons only," a Unitel spokeswoman said yesterday when asked to confirm the changes. "The reorganization is part of the new shareholders' agreement," said Carleen Carroll, Unitel's director of communications. And the company chose Nova Scotia for its new jurisdiction because "they (shareholders) needed an unlimited liability company," she added.... A lawyer familiar with Unitel's corporate reorganization explained that the corporate shuffle allows New York-based AT&T to claim Unitel's financial losses from its U.S. income tax. Previously, AT&T Canada Inc. had to report and claim its share of Unitel's financial losses under Canadian tax law. Now, AT&T Canada's parent can claim the loss because Canada's Income Tax Act allows foreign-owned companies that invest in a Canadian unlimited liability company to transfer their share of any losses to their foreign-based corporate parent. ...Nova Scotia is the only province that still allows the incorporation of unlimited liability companies.... Lawrence Surtees, Globe and Mail -- Report on Business, March 2, 1996, page B1
If this anomalous situation is not addressed by the federal government and the regulator, AT&T Canada will be in a position where it can capture as much of the Canadian market as possible by treating this country as a loss leader. Its parent company, AT&T, will be able to have the costs of this strategy absorbed by American tax payers.
THE ALTERNATIVE REQUIRES ACTIVE GOVERNMENT PARTICIPATION
There is a practical alternative model that should be seriously considered by Canada's federal and provincial governments. In British Columbia, Victoria hammered out an Electronic Highway Accord among a range of stockholders, including telecommunications companies, workers and users. Under this model, the government uses its purchasing power as a lever, ensuring that as a condition for attaining lucrative government contracts, companies address a range of economic and social concerns. Under such arrangements, successful bidders on Requests for Proposals (RFPs) are required to provide a full range of service. They are not allowed to relinquish their responsibility to meet the needs of customers in high cost, low revenue areas.
Without a framework similar to that of the B.C. Accord, competing companies will be absolved of responsibility for helping to meet social goals like the provision of universal, affordable access. Under its current orientation, the CRTC seems to see competitors' capture of a sizeable portion of the market as desirable unto itself.
Given the approach of the WTO negotiating round, it is essential that we ask what the objective is that we hope to achieve. Do we want to take steps at the WTO that will allow companies like AT&T to enter the Canadian communications market free of economic and social obligations? If foreign telecommunications giants are allowed access to the Canadian market under such terms, Canadian carriers could easily face annihilation.
These are real problems which must be dealt with if we are to maintain a world class, universally available, affordable, telecommunications system in Canada. Bypass of the Canadian system is already a serious problem. Given the power of huge international companies, the liberalization of international trade rules could enable them to gain untrammelled entry in Canada, causing irreparable damage to the country's telecommunications system.
Issues related to international access to the Canadian telecommunications market must be addressed in a context which focuses on equality of market access. Reciprocal obligations to provide service on a universal, affordable basis must be incorporated into our national regulatory framework. Then similar provisions should be included in international trade agreements like the WTO. In the alternative, domestic companies which are required to address such obligations must be compensated financially by a levy on would-be entrants, to compensate for the revenues lost when the high revenue, low cost portions of our national telecommunications market are captured by com petitors who have no similar obligations.
ELEMENTS OF A NATIONAL TELECOMMUNICATIONS STRATEGY
(a)Governments must work with industry, organized labour, as well as public interest and community- based organizations to develop a national tele communications strategy which provides universal, affordable access to high end telecommunications services as well as the growth and job creation this is capable of generating.
(b)In order for this strategy to work, existing limits on foreign ownership must be maintained to preserve our ability to control this sector in the interests of all Canadians.
(c)To the extent that Canada embraces competition as a guiding principle for its telecommunications system, it must be fair competition, i.e. a system which compels all companies seeking permission to function in the sector to pay a proportionate share of the costs associated with the provision of universal, affordable access to telephone as well as high end telecommunications services. Given that existing and potential competitors are some of the largest companies in the country and the world, they should be granted no special incentives or discounts to encourage them to enter the market.
(d) Participants in the Canadian telecommunications market must be required to provide quid pro quos in the form of the service and cost obligations they are willing to bear as conditions for being allowed to operate in the low cost, high revenue portions of the market.
(e)Governments should play an active role in the procurement of their telecommunications services to encourage the development of the industry on a basis that provides universal, affordable access to POTS as well as high end telecommunications services. (The B.C. Electronic Highway Accord model)
(f)The threats posed by bypass, callbacks and other, similarly pressing issues must be addressed in the domestic regulatory arena before further liber alization is agreed to at the international level.
(g)Domestic competition should be rationalized and stabilized before any move toward liberalization is made on the international level. All competitors, domestic and international, must shoulder the responsibility for providing Canadians with universal, affordable access to high end telecommunications services as a condition of receiving permission to function in the Canadian telecommunications market.
(h)Last but not least, when it comes to jobs and job creation, Canada's telecommunications companies must be required to deliver more than the empty promises that we heard in the context of the Inter- Exchange Competition hearings. The issues that are being discussed here must not be addressed solely in terms of the interests of the companies functioning in the sector. As an integral part of the framework we are discussing, there must be a concrete, enforceable undertaking that Canada's telecommunications companies will put an end to the mindless downsizing that is currently wreaking havoc on quality of service and the workers that provide this service. Furthermore, telephone companies must put an end to their practice of moving work related to the provisioning of new, high end services away from their unionized workers and into the hands of non-union and excluded employees.
oteu 15 960930 ```
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