Northwestel raising cost of new phones

Phone services are going to cost you more next month. Northwestel plans to raise service charges as of July 16.

Phone services are going to cost you more next month.

Northwestel plans to raise service charges as of July 16.

It’s the second rate increase this year.

Six months ago, residential rates increased $2 per month and the price of a business line jumped $5 per month.

Now, in the face of an expected $300,000 annual revenue shortfall, Northwestel is turning to customers again.

Residential installation charges will rise to $54.80 from $51.30. Businesses will see charges rise to $70 from $59.70.

If an onsite visit is needed, the cost of setting up home and business lines will be $110.90 and $167.90 respectively, up from $98.05 and $157.60.

The rate proposals were submitted to the Canadian Radio-television and Telecommunications Commission on June 13 after several months of back-and-forth between Northwestel and the regulator.

Northwestel asked the CRTC to approve the new pricing scheme by Monday morning.

The CRTC has agreed to provide Northwestel with an $18.9-million annual subsidy until 2010 to support its residential phone service.

This subsidy is in addition to a supplementary donation that amounted to $9.8 million in 2006, $9.1 million in 2005, and $9.3 million in 2004.

In its latest subsidy negotiations, the CRTC challenged Northwestel’s accounting.

“They did indicate that there was a certain amount every year — $300,000 — that they would not cover by supplementary funding,” said company spokesperson Anne Kennedy.

“They felt that we needed to go back out and adjust a number of our rates to recover costs from the prices that we charge for those services.”

The telco’s customers are now paying some of the highest non-recurring phone-related charges in the country.

The only company charging more than $54.80 for new residential phone access is Northwestel’s parent company Bell Canada, which charges $80 whether a site visit is required or not.

Bell also has the highest charge for a new business phone line, set presently at $117. As of July 16, Northwestel will carry the highest prices for new installations requiring a site visit.

Northwestel could have increased monthly subscription rates to address the shortfall.

“We had just raised it (subscription rates) earlier this year, so it’s not something…” Kennedy began.

“It’s (price increases are) something we wanted to spread out to reduce the impact on our customers.”

However, the CRTC gave the nod to monthly subscription rate increases over the next four years, subject to what the company calls “flexible” and “variable” price caps.

Northwestel has separated long-distance from local access “baskets.” It makes long-distance service more competitive and reduces their subsidy of local service.

As a result, local service rates had to go up.

In January, the monthly residential services went up to $31.33 from $29.33.

Single-line business rates rose to $54.70 per month from $49.70. Multi-line business rates went to $63 per month from $58.

Northwestel plans to raise business rates again in June 2008 to cover a $150,000 deficit from 2007.

Most of Northwestel’s services are priced below cost, said Kennedy.

The directive to raise rates came from the CRTC, which felt “there was room to move.”

“If you look at rates across the country, ours are fairly comparable,” she said.

Costs of serving the North, one “of the most remote and rugged areas of Canada,” are high and don’t scale with population as they do in the South.

Northwestel’s market is “a total population of 110,000, which is comparable only to a small city down south, spread over four million square kilometers,” Kennedy wrote in an e-mail.

Northwestel is also an active contributor to local charities and community events.

Northwestel contributed more than $740,000 in cash and in-kind donations in 2006, and $370,000 in 2005.

Contributions of $360,000 to the 2007 Canada Winter Games are partially included in that total.

“We were top-level sponsorship,” said Kennedy.