NorthwesTel wants subsidy
Money would come from Southern companies

Doug Ashbury
Northern News Services

Yellowknife (Feb 09/00) - NorthwesTel needs $35 million in annual subsidies if services are to be expanded and costs lowered across the company's vast Northern operating area, said Peter Boorman.

Boorman, president of NorthwesTel, spoke at a Yellowknife Chamber of Commerce luncheon Friday at the Explorer Hotel.

On top of the $35 million, the company also wants a one-time $68-million subsidy to upgrade its existing telecommunications network.

The requests come about a year before the Canadian Radio-television Telecommunications Commission (CRTC) allows competition in Canada's North.

In the Yukon, part of NorthwesTel's service area, the government is not waiting to hear what the CRTC decides. It will contribute $13 million for telecommunications, said Boorman.

With mining and exploration industries declining, the Yukon Government feels such an investment will benefit new business development in Canada's westernmost territory, he said.

Last fall, the CRTC recognized Northern Canada as a high-cost service area and required NorthwesTel to submit a service improvement plan for extending basic service and upgrading the quality of long distance.

Proposed subsidies are included in NorthwesTel's high-cost service area submission made to the CRTC Jan. 17.

NorthwesTel wants the subsidy to come from southern telecommunications companies.

"We said this should not be paid for by taxpayers," said Boorman, adding that telecommunications is a $20- billion industry in Canada, For its part, NorthwesTel will raise basic service costs $5 for individual telephone lines.

NorthwesTel's submission will be discussed June 12 at a CRTC hearing in Whitehorse. From the CRTC, seven commissioners will participate. It will be up to the CRTC to rule on NorthwesTel's submission.

"This has never happened before. Normally, this (meeting) happens in Ottawa. But the CRTC said we are going North to listen to what they've got to say in the North," he said.

"They figure anybody who questions (NorthwesTel's submission) should see the environment."

The commission, expressing concern that some small communities in Northern Canada could suffer from next year's planned introduction of competition, recognized the North's uniqueness and asked for NorthwesTel to make the submission.

NorthwesTel is also asking to be "partially-regulated," Boorman said.

The company wants to be able to achieve a 12 per cent return on equity.

Return on equity, which tells common stockholders how well their money is being used, is the amount earned on a company's common stock investment over a given period.

Boorman also noted that NorthwesTel's long-distance rates have come down significantly in just the past few years.

"We were told our long-distance rates were outrageous," he said.

But long-distance rates have dropped from an average of $1.06 per minute in 1997 to the current average of 28 cents a minute, he adds.

"We can't (currently) offer 10 cents a minute and stay in business," he said.

Of the 96 communities NorthwesTel serves across the three territories and Northern British Columbia, 79 of them have populations of less than 500 people. Ten communities have between 500 and 1,500 people. That leaves only seven communities in the company's service area that have populations over 1,500.

For the communities under 500 people, Boorman said it costs NorthwesTel $91 to provide an individual phone line. Costs fall to $81 per line for the 500 to 1,500 communities, and to $51 for communities with over 1,500 people. Northwestel charges $26.33 per line.

Boorman estimated about 110,000 people in NorthwesTel's service area have phone service, while 1,500 people do not.