Manitoba Committee Hansard — 8 November 1988 (PUNR Committee, Sitting 8, 34th Legislature, 1st Session)

34-1-punr8

Manitoba — Debates (Hansard)

MG-8048 first Session - Thirty-fourth legislature of the Legislative Assembly of Manitoba STANDING COMMITTEE on PUBLIC UTILITIES and NATURAL RESOURCES 37 Elizabeth 11 Chairman Mr. Parker Burrell Constituency of Swan River VOL XXXVII No, 8 - 10 a.m., TUESDAY, NOVEMBER 8, 198ft Printed by the Office of the Queens Printer, Province of Manitoba ISSN 0713-9454

MANITOBA LEGISLATIVE ASSEMBLY Thirty-Fou rth Legislature Members, Constituencies and Political Affiliation NAME CONSTITUE NCY ALCOCK,Reg Osborne ANGUS, John St. Norbert ASHTON, Steve Thompson BURRELL, Parker Swan River CARR,James Fort Rouge CARSTAIRS, Sharon River Heights CHARLES, Gwen Selkirk CHEEMA, Gulzar Kildonan CHORNOPYSKI, William Burr ows CONNERY, Edward Hon. Portage la Prairie COWAN,Jay Chur chill CUMMINGS, Glen, Hon. Ste. Rose du Lac DERKACH, Leonard, Hon. Roblin-Rus s ell DOER,Gary Concordia DOWNEY, James Hon. Arthur DRIEDGER, Albert, Hon. Emerson DRIEDGER, Herold, L Niakwa DUCHARME, Gerald, Hon.

Aiel EDWARDS, Paul St. James ENNS,Harry Lakeside ERNST, Jim, Hon. Charleswood EVANS, Laurie Fort Garry EVANS, Leonard Brandon East FILMON, Gary, Hon. Tu xedo FINDLAY, Glen Hon. Vir den GAUDRY, Neil St. Boniface GILLESHAMMER, Harold Minnedosa GRAY, Avis Ell ice HAMMOND, Gerrie Kirkfield Park HARAPIAK, Harry The Pas HARPER, Elijah Ru pertsland HELWER, Edward R. Gimli HEMPHILL, Maureen Logan KOZAK, Richard, J. Transcona LAMOUREUX, Kevin, M. lnks ter MALOWAY, Jim Elm wood MANDRAKE, Ed As sinib oia MANNESS, Clayton, Hon. Morris McCRAE, James Hon. Brandon West MINENKO, Mark Seven Oaks MITCHELSON, Bonnie, Hon.

River East NEUFELD, Harold, Hon. Rossmere OLESON, Charlotte Hon. Gladstone ORCHARD, Donald Hon. Pembina PANKRATZ, Helmut La Verendrye PATTERSON, Allan Radisson PENNER, Jack, Hon. Rhineland PLOHMAN, John Dau phin PRAZNIK, Darren Lac du Bonnet ROCAN, Denia, Hon. Tu rtle Mountain ROCH, Gillea Springfield ROSE, Bob St. Vital STORIE, Jerry Flin Flon TAYLOR, Harold Wolseley URUSKI, Bill lnterlake WASYLYCIA-LEIS, Judy St.

Johns YEO,Iva Sturgeon Creek PARTY LIBER AL LIBER AL NDP PC LIBER AL LIBER AL LIBER AL LIBER AL LIBER AL PC NDP PC PC NDP PC PC LIBER AL PC LIBER AL PC PC LIBER AL NDP PC PC LIB ERAL PC LIBER AL PC NDP NDP PC NDP LIBER AL LIBERAL NDP LIBER AL PC PC LIBER AL PC PC PC PC PC LIBER AL PC NDP PC PC LIBER AL LIBER AL NDP LIB ERAL NDP NDP LIBER AL

LEGISlATIVE ASSEMBlY OF MANITOBA THE STANDING COMMITTEE ON PUBliC UTiliTIES and NA TURAl RESOURCES Tuesday, November 8, 1988 TIME - 10 a.m. LOCATION - Winnip eg, Manitoba CHAIRMAN - Mr. Parker Burrell (Swan River) ATTENDANCE - QUORUM - 6 Members of the Committee present: Hon. Messrs. Findlay, Neufel d, Penner Mrs. Cha rles; Messrs. Burr ell, Driedger (Niakwa), Evans (Brandon East), Roch, Storie, Uruski APPEARI NG: Paul Thomas, Chairp erson , MTS Board of Commis sione rs Mr. Reg Bird, President & Chief Executive Officer Mr.

Bill Fraser, Vice-President - Finance MATTERS UNDER DISCUSSION: Annual Reports of the Manitoba Telephone Syste m. i. fiscal year ended, March 31, 1987 2. nine-month period ended, December 31, 1987 Clerk of Commit tees, Mrs. Janet Summers: Will the committee please come to ord er. We must proceed to elect a Chairman resp onsible for Public Utilities and Natural Resou rces. Are there any nominations? Mr. Gilles Roch (Sprin gfielc!): I nominate Parker Burrel l. Madam Clerk: Are there any further nominations? Mr. Burr ell, will you please take the Chair? Mr.

Chairman, Parker Burrell: I call the Committee of Public Utilities and Natural Resources to order to consider the Annual Reports of the Manitoba Telephone System for the fiscal year ended March 31, 1987, and for the nine-month period ended December 31, 1987. I wou ld invite the Honourable Minister res ponsible to make his opening stat ements and to introduce the staff prese nt here today. Hon. Glen find lay (Minis ter of Agriculture): Mr.

Chairman, I am honour ed to review with this committee of the Legisla tur e the 1986-87, 12-month fiscal report, and the nine-month 1987 report of the Manitoba Telephone Syste m. 136 *

(1005) Since my appointment as Minister last May, the Minister respon sible for the administrat ion of The Manitoba Telephone Act, I have become increasingly aware of the importance of telecommun ications to this province, and of the dynamic natur e of this industr y. The demand for telecommun ication services has been growing. Telecommuni cations technology is evolving rapidly, and the rules governing the regula tion of this indus try throughout North America have been changing.

Our challenge is to ensur e that MTS su bscribers will have access to the kinds of communication services that they need for the 21s t Centu ry. Mr.

Chairman, I wou ld like to remind members of this committee that the decision-making responsi bility with respect to telecommun ications development in this provi nce is divide d between th ree levels: the Government, whose role is to es tablish the legislation and broad policies which govern the telecommun ications indus try; secondly, the Board of Commis sione rs of the Manitoba Telephone System who are res ponsible for est ablishing capital and operating plans for the sys tem; and thirdly, the Public Utilities Boar d which assu res that the rates charge d for telecommun ication services are just and reaso nable.

The annual reports before you tod ay, and the quarterly report tabled in the legislature recently reflect the signif icant achievements of the new management of MTS. Not only have they turned arou nd the financial situa tion, bringing MTS back to a positiv e sta tus, but I believe that they have also succeeded in resto ring the public image of MTS as a competent telephone company and Crown corporation. I would like to pay particular tri bute today to the high level of ability of the Chairman of the Board, Mr.

Paul Thomas, who is here this morning, and his Board of Comm issione rs, and the President and Chie f Executive Officer of the company, Mr. Reg Bird, who has been with the company since Aug ust of '87, and his executive and all the employees of the Manitoba Telephone Sys tem. As a result of technological change in the indu str y, many major policy issues will have to be reviewed in the near futur e. The Government will handle this task on a sys tematic basis.

Our first initiative has been to redefine the standards for basic telephone service in the province to ensur e that all Manitobans have fair access to modern telecommunication services. This was the pu rpose of my annou ncement in the Legislatur e on Septem ber 29. * (10 10) In a nutshe ll, the Government policy will ensur e that every su bscriber will have access to private individual

Tuesday, November 8, 1988 lines, which is connected to an up -to-date digital exchange and which provides toll-free access to local busi ness and service centres. In other words, we are reducing the nu mber of toll-free calling areas from a 160 to 60 in the coming years. Furthermor e, su bscribers with physical disabi lities will gain improved access to basic telecommun ications services.

This policy has been transm itted to the MTS Board, and it is their resp ons ibili ty to deve lop plans to implement the improvements, raising the standard of basic telephone service not overnight but in the near future for the Province of Manitoba. Thank you very much. Mr. Chairman: I would appreciate some gu idance from the committee. Will we consider the reports page by page or otherwise? Mr. Findlay: The chairman of the board would now like to make an opening sta tement. Mr.

Paul Thomas (Ch airp er son, MTS Boar d of Commissioners): I wou ld just like to introduce the MTS staff who accompanied me to the committee today. Mr. Reg Bird has joined me at the table here. He is the President and Chief Execu tive Officer of the corporation. Behind me in the back is Mr. Dennis Wardrop, the Execut ive Vice-President of the corporation, and Mr. Bill Fraser, the Vice-President, Finance, of the corporation. I am very pleased to be here today on behalf of the Manitoba Telephone System's Board of Commissione rs.

At present, the MTS Board includes Patricla Graham of Newdale, Manitoba as Vice-Chairperson. Other members of the board are Holl y Beard, Thomps on; Roy McMillan, Portage la Prairie, who is one of the employee reps on the Board of Commis sion ers; Mr. Edgar Penner from Cola, Manitoba; Hel mut Pankratz from Steinbach, who is an MLA, as you know; Mr. Rubin Spletzer of Winnipeg; Mr. Tom Stefans on, Winnipeg; and Miss Joanne Swayze, Lorette, Manitoba, who is also an employee representative on the board. Appearances before this committee are an important accountabil ity forum for the MTS Board and the corporation.

As ele cted ML As, you are the representatives of the ultim ate sha reholders of the corporation, namely, the citizens of Manitoba. lt is appropriate, therefore, that MTS officials should appear at regular intervals to render an accounting for its recent perfo rmance. We look forward to answ ering your qu es tions and, hopeful ly, addres sing any concerns that you may have. I was appointed to the position of Chairperson of the Board of Commis sione rs of the Manitoba Telephone System on Augus t 18, 1987.

During the ensuing period of ju st over a year, I have been impressed by the dynamic and complex nature of the telecommun ications indus try. MTS is an organization in transiti on, facing rapid change in the form of new technology and a more competitive marketplace.

In these opening remarks, I first wish to comment on how the Board of Commis sion ers has organized itself to deal with the complex issues it faces and, secondly, to highlight some of the major issues it has dealt with during the past year. 137 The role of the Board of Commis sione rs is to ensure that long-term objectives and plans are es tabl ished , to ensur e that an appropriate management structure is in place to achieve thos e objectives, and to ensure tha t this structur e functions to maintain the corporation's effectiveness, efficiency, integrity and resp onsi bility to Its various outside bodies and the Manitoba communit y.

To this end, the Board of Commis sione rs has participated extensively in the development of a Miss ion and Goals Statement for the corporation which was approved on Janua ry 22, 1988. The presi dent will say more about the contents of the Mission and Goals Statement shortly . In ad dition, each vi ce-preside nt at MTS has negotiated with the president and filed with the chairman of the board measurable objectives for each year. The president himself has a set of objectives which are dis cussed with the chairman and filed with the board.

Regular upda tes on progress towards these objectives are filed with my office. *

(1015) The board also review ed and app roved a reorg anizat ion of the execu tiv e structure. The appointment of a Vice-President of Hu man Resources addresses a long-stan ding concern of the board. A program to measure and to improve productivity within the Corporation is under development. In order to comply with certain requir ements of The Crown Corporation Accountabili ty Act of 1987 and to deal more effectively with a crowded and complicated agenda, the Board of Commissioners agreed in October of 1987 to a num ber of changes to its organization and procedu res.

Five subcommittees of the board were est ablis hed in the following areas: Planning, Finance, Audit, Customer Service and Hu man Resources and Compensa tion. The use of subcommittees, it was hoped, wou ld permit the greater development of specialized knowledge among board members, wou ld permit a more intens ive exploration of issues than full board meetings allow, and wou ld help to avoid overloading the agenda of the full board by permitting advance discus sions in the su bcommittees. I am pleased to report that the su bcommittee system is working very j well.

To give you some idea of how the subcomm ittees operate, I will mention briefly the work of the Finance Comm ittee of the board, which is very active at this time of year in fact. Among other activities, it un dertakes a preliminary review of the annual capital and operating budge ts for the corporation prior to their pres entation to the full board. The corporat ion has moved to mult iyear fiscal planning, and the Finance Committee has asked for and received variance analysis of financial changes between original forecasts and final results.

As part of the annual bud get exercise, the Finance Comm ittee has adopted the practice of reviewing the plans and finances of two vice-presiden t's areas each year. In other words, of the eight vice-presidents we have at MTS, two of them come before the Finance Committee annually . In a highly complex industry like telecommun ications, the MTS Board faces a serious challenge in terms of information overload. To assist the board, we have created a position with the dual title of Corporate Secretary and Board Policy Analyst . Previously , the

Tuesday, Nove mber 8, 1988 board was served by a corporate secretary who was also vice-president/general couns el and reported in that capacity to the President. lt was felt that the board should have independent and fully dedicated staff of its own. We were fortu nate to recruit an individual with extensive experience in the tele commun ications industr y. A separate budget category for this profes sional officer, a secretarial supp ort position for the board's expens es has been esta blished.

Previously , the costs of running the board were included in the Executiv e bud get. lt was felt that, if the board was going to ins is t on stricter financial accountabil ity from management, it should apply the same principle to itself.

Other changes introduced at the board level have included: the preparation of an annual calendar for board busine ss, earlier circulation of board documents, the inclusion in all board subm issions of sections ou tlining the alternatives which were considered and the communic at ions req uir ements fl owi ng from decisions , and the introduction of a "Question Period" at each board meeting when commissione rs can raise � questions with sen ior management.

The Board of Commis sioners has been very active since my arrivaL lt has held 19 meetings during tha t 14-month period, including a recent meeting held in Thompson. There have also been numerous meetings of board subcomm ittees. The Board of Commissioners, in terms of substantiv e matters, has approved the busine ss plan for the launch of the Cellular Mobile Radio Service. Because this represented a major competitive ventur e, the board institut ed the practice of requiring qua rterly reports on the performance of this new competitive un it.

On September 29, 1988, the Minister resp onsible for The Telephone Act annou nced a Service for the Futur e plan to provide Manitobans with a new standard of telecommun ications service into the next century. The MTS Board of Commissioners was deeply involved in the development of this plan through the stag ing of several spe cial meetings devoted to this topic. The Customer Service Comm ittee of the Board, the full board, and MTS staff have spent considerable time preparing for the series of annual public meetings with our customers which have taken place throughout the province over the past several weeks.

Five meetings have been held in Thompson, Cross Lake, in southe ast Winnipeg, Deloraine and Carman. An overall Hum an Resou rces planning strategy will soon be considered by the board. The board continues to op erate an Advi sory Commit tee on Equa l Employment Opportun ities, consisting of emplo yee, management and board representatives, and the board has is sued a strong statement of suppor t for the EEO program within the corporation.

MTS and the Commun ications and Electrical Workers of Canada (CWC), the International Brotherhood of Electrical Workers (IB EW), and the Telecommun ications Employees' Associat ion of Manitoba, known by the acronym, TEAM, recently sig ned an agreement on September 7 , 1988, to imp lement pay equ ity adjustments within the corporation. This agreement will 138 raise the salar ies of approximately 2,000 female and male employees within the corporation working in traditionally female-dominated job classifications.

The agreement marked the culmi nation of a two-year process which began October 1, 1986, in accordance with the provisions of Manitoba's Pay Equi ty Act. *

(1020) Work has begun on improving the annual report of the corporation to make it more informative for our customers and a more effective accountabil ity device to the Government, the Legislature and the publ ic. In these ways, we have sought to strengthen the role of the Board of Commissioners as the final policy-making body within the corporation. On behalf of the board, I want to thank President Reg Bird, his executive team and nume rous employees throughout the organization for their consis tent and dedicated supp ort.

The Board of Commis si oners is confident tha t in the years ahead , the Ma nitoba Telephone System will achieve its goals and objectives to the mutual benefit of the communit y, its customers and employees and in a manner consis tent with the goals contained in The Manitoba Telephone Act and prevailing Government policy state ments . That conclude s my remarks, Mr. Chairman. I wou ld like to thank you and I would like, if I could, to turn the microphone over to the president of the corporation to make some brief opening remarks . Mr. Chairman: Mr. Bird. *

(1025) Mr. Reg Bird (President and Chief Executive Officer): Thank you , Mr. Chairman. Mr. Minister, Members of the committee will have received the Ma nitoba Telephone System 's 1986-87 Annual Report with reports on activities prior to my arrival at the System in late 1987. They also will have received the report for the nine month period, April to December 1987, which describes the following financial statistic s. Total revenues were $324,461,000; total expens es were $322,514,000. Net income of $1,947,000 reflects a strong recovery from the $19,991,000 loss incurred in a previous fiscal year.

Capital expenditur es were $132,776,000, and MTS invest ment in tele commun ications plant grew to $1,468,737,000, up from $1,379,826,000.00. The nine-month report also describes a numb er of signif icant activities und ertaken during the reporting period: The conversion to digital sw itching technology in 23 more rural exchanges servi ng 15,000 subscri bers. In Winnipeg, 17,400 su bscribers were trans ferred to this technology. Additional Extended Area Service cross-sect ions have been added, bringing the total availability of the network to 134,000 custom ers in 132 exchanges.

Major service improvements in Northern Manitoba, including the esta blish ment of telephone service at Herb

Tuesday, Nov ember 8, 1988 Lake Landing, Tartan Lake Mine and Puffy Lake Mine; and ins tallation of systems servi ng Grass River lod ge, Spruce Point Mine and Poplar River. Local coaxial cable TV service instal lations extended to an additional 10 ru ral communiti es, bringing the total to 65. Strong demand for service continued in this nine month period, particularly in Winnipeg, with more than 3,000 new building lots being serviced. MTS also completed the major service requir ements for the North Portage Development.

In one part of this development, MTS introduced the Integrated Building Dis tribution Network which provides for internal office wiring to connect computers in a cost-effective manner. A new long dis tance servic e called, "B etween Friends." Moreover, national long distance rates were red uced by between 3 percent and 14 percent depending on the distance of the call. An international toll- free 800 service was extended to the United Kingdom, and another 37 countries became accessible via Direct Distance Overseas Dialing.

Significant steps were taken in the development of the Syste m's Equal Employment Opportunit y Program, with the appointment of a full-time coordinator. A major su rvey of 5,500 MTS customers was completed to assess opinions on improvements in the rural service. Since December 31, 1987, the system has moved forward into other important activities: An additional eight exchanges have been provided with digital swit ching. By the end of the year, Wi nnipeg will have 48.4 percent of its swit ching digital, the other areas of the province will be 47 percent digital.

A further Extended Area Service cross-sect ion has been implemented between The Pas and Wan less. Automatic Numb er Identification has been placed in service at an additional nine exchanges. On Janua ry 22, the system adopted a new Mission and Goals Statement.

The mission of the system is: "To serve the province and its people by overcoming the barriers of time and distance through telecommu nication solutions, outstan ding service and superior products." The system has six corporate goals which are: to provide customer sa tis faction; to be financially responsi ble and self-suffi cient; to pur sue aggressively market opportu nities; to provide equal opportunit ies and to develop dedicated, well-trained employees; to be a good corporate citizen; and to keep the public well informed.

On May 6, Cel lul ar Mobile Rad io service was introduced to Manitoba, with MTS Cellul ar competing with a private company. On May 30, 1988, MTS applied to the Public Utilities Board of Manitoba, request ing that it app rove the 139 creation of a new rate group for the Winnipeg exchange. Under current regul atory rules, rates for local calling areas are esta blished in relation to the num ber of telephone num bers that can be accessed without making toll calls.

With Winnipeg beyond the limit of its current rate group and given that there is no author ized higher rate grou p, the system was obliged to make this application. lt was reviewed during a public hearing held on September 15 and 16. The decision by the PUB was announced on Friday, and that rate application was su bseq uently approved by the Public Utilities Board. On June 28, 1988, MTS launched the Manitoba Relay Service, which allows deaf as well as speech- and hearing-impaired persons dramatically improved access to telephone services.

This service was developed in cooperation with the hearing-impaired community of Manitoba and has been very well received. On September 19, 1988, MTS annou nced that it would make an application to the Public Utilities Board for approval to reduce out -of-province long dis tance calling rates by up to 10.9 percent, beginning on Janua ry � 1, 1989. On September 29, 1988, the Minis ter annou nced a policy to raise the st andard of telephone service to Manitobans . That annou ncement included a des cription of a major service improvement plan called Service for the Futur e.

This plan will see the implementation of a univ ersal Individual line Service Initiative, accelerated modernization of swi tching and transmission facilities, expansion of toll- free calling areas, optional toll-calling plans, and the es tablis hment of a Special Needs Centre to serve the telecommun ication needs of Manitobans with physical disabil ities. The System also is making changes to its organization, to increase the effectiveness of its opera tions, enha nce its dev elopment of hu man resou rces, and improve the extent and qual ity of its customer service.

We are confident that these changes are working to allow the corporation to fulfil! its stated mission and to meet each and every one of its goals. Im portant new th rusts and activitie s have been initiated over the past several months which provide a wider range of services to Manitobans and will raise the level and standard of overall service. Taken together, they represent a strategy which is giving the corporation a new focus and direction that is being enthusia st ically received by the syst em's employees and its customers. Thank you, Mr. Chairman. Mr. Chairman: How does the committee wish to proceed? Mr.

Bill Uruski (lnterlake): Generally, I think it has been the will of the committee to have a wide-ranging dis cussion on all issues and have the Members place their qu es tions, and then when basically all qu es tions have been placed and answered and dis cussion taken place, then we basically get down to deal with the report. Usually , that ends up in a very short period of time when all qu es tions and answers have been dis cussed. We can proceed that way.

Tuesday, November 8, 1988 ..

(1030) Mr. !Roch: Yes, I agree with that, if we will qu es tion first and then deal with the report as a whole. I would like to know what is the current status of the corporation. The report we have here is about a year old and I realize we jus t received a brief upda te in the opening comments, but could the committee get a brief upda te as to where we are at now? Have there been any sign ificant changes in the corporati on's financial status or general direction in the last few months, or is what has been said in the opening statements the most current information? Mr.

Thomas: We have just filed in the Legislature the first of the qu arterly financial reports that are now requir ed, and it sho ws a bottom-line position of almost $ 12 million anticipated for this fiscal year. The way the !lilTS fiscal year operates, there are always obligations that aris e in the latter months, so the forecast is a little more optimistic as of September. But we expect that with the bills coming in in the latter parts of the financial year, we will come out with approximately $ 12 million profit this year, or contribution, I gue ss. Mr.

Roch: On Page 15 of the report, December 31 report, under Deferred Charges, it says: "Unrealized foreign currency losses, net of amortization." lt is over $3.5 million. Is that strictly from the difference in exchange rates? Mr. Thomas: I think I wou ld ask Mr. Fraser to respond to that que stion. Mr. Fraser, on the balance she et of December 31, '87, under Deferred Charges, Unrealized foreign currency losses, net of amortization, sho wing you could perhaps explain that concept. Mr. Bill Fra ser (Vice-President -financ e): Mr.

Chairman, what happens with our long- term debt is that at the end of the year we convert that debt, effective now December 31, our year-end, into the equ ivalent Canadian dollars of all that debt. Some of our debt is in foreign currency, some of it in terms of the years that have been looked at in U.S. dollars, Swiss francs, Japanese yens, and we convert those foreign exchange into the equ ivalent rate as at December 31.

Jus t for the sake of example, and I will not use the figu res in the report, but let us say we had borrowed $ 100 million in equ ivalent Canadian funds over a period of time leading up to that repo rt. When we convert the equ ivalent according to the foreign exchange on those various denominations at the end of the year, we may find that if in fact we had to pay off all that debt at that point in time- let us say, rather than $ 100 million, we had $ 120 million, let us say.

Now if we assume that all that debt had 10 years to matur ity, because it is all varying maturities, but in principle, what we would do then is we say, okay, we ha ve a foreign exchange loss of $20 million effective that date. lt is not going to mature for 10 years and so we amortize that loss over 10 years. We take one-tenth of it as an expens e that year and it gets charged agains t our income.

The remaining nine-tenths gets set up as this deferred asset So what you see there is our potential exposur e over 140 the course of those debts to their maturit y date if the foreign exchange rate does not reverse itself and correct that situa tion, which could in fact happen. That is why it is set up as a deferred asset.

On the side of the liabilities, the debt itself has been bump ed up by an equ ivalent amount So we have increased our debt and written it up to the new value at December 31 but, because we intend to expense it over the remaining nine years of that debt, that nine year portion is set up as a deferred asset , which is standard accounting policy which is generally accepted throughout industry and accepted by the Canadian Ins titut e of Chartered Accountan ts. Mr. Roch: So if I unde rstand you correctly, that amount is an amount over and above any other debts?

If they were to be repaid today, for example, that would be the loss incurred between what was actually borrowed and what is repayable vis-a-vis the foreign currencies and the Canadian dollar. Mr. Fraser: That is correct. Tha t represents the difference between what we borrowed in Canadian dollars and what, as of the exchange rates at December 31, we would have to pay if that debt matur ed, except that some of that debt, as I say, it gets amortized over the life.

So if those exchange rates stayed constant and never changed for the next 10 years, we would gradually amor tize one-tenth of that each year and you would see that num ber going down. Alternatively, if at the following December year-end and what has been happening this year, for example, is that the Canadian dollar has improved against the American dollar up until recently, so that you wou ld see a deterior at ion in tha t figure becaus e the relationship would be lower at December 31. Mr. Roch: I think it is only against the American dollar that the Canadian dollar seems to improving.

On amortized long-term debt costs of $4.5 million, what exactly does that mean? Mr. Fraser: There are a numb er of different sorts of expens es that are involv ed in terms of long-term borrowing that again gets sp read over the life of that issue. There are issue costs in terms of fees that we have to pay in terms of borrowing the money and so on. Those up -front costs again get amortized over the life of the issue so that, if it is a 10-year issue, one tenth of those costs get expenses each year, and so this represents the amount that is yet to be expensed. Mr.

Roch: In other words, that long-term debt causes an actual borrowing. Mr. fraser: That is right. If we pay various fees to various brokerage fees and that sort of thing in terms of borrowing that money, then those charges are spread over the life of the borrowing. Mr. Roch: That figure of almost $30.6 million, it is a very high figur e. Does the corporation anticipate any more large borrowings on the foreign markets? Mr. Fr aser : The corporation deals thr ough the Department of Finance, as do all the Crown corporations

Tuesday, Nove mber 8, 1988 in terms of its borr owi ng program and we have specifically asked that we only receive debt in Canadian currencies. We have had a commitment that every effort will be made to provide debt to us in only Canadian currencies, because our revenue is all in Canadian dollars and we do not have any foreign revenue which could counteract and buf fer us against any changes in foreign exchange. Mr. Roch: Oh yes, you tried to get fore ign revenues but it did not work out. Can I ask why the fiscal year end was changed from March 31 to December 31? Mr.

Fraeer: The main reason for changing it was in order to try to better coincide our year-end with the legislative Sessions so that we could get the reports completed and tabled on a more timely basis in the Legisla tur e and have the reports before this committee be on a more meaningful basis so that the time lag between the end of the year would be shorter . So for example we would expect that with the December 31 year-end that we would be able to table that year-end four or five months later with this committee and deal with it when the information was only four -months old, as opposed to being a year old.

So that was the main purpose, but th e other dimension is that all the other telephone companies in Canada are on a December 31 year-end. Because of the nature of our interrelationshi ps, it makes it far better for us to be on a consistent basis in terms of the comparability of our num bers and our information. Mr. Roch: I think I missed one part but I believe you said that it also coincides with the other telephone util ities across Canada. They end on the 31s t, mo st of them? Mr. Fraeer: All the other telephone companies, Bell Canada, B.C.

Tel, Sask:T el and so on, all have December 31 year -ends and so the comparability of our information to those on an annual basis has always created some anomalies. Mr. Thomas: Let me just add a comment to that. The requir ement for a calendar fiscal year is contained in The Crown Corporation Accountabil ity Act. So all Crown corporations were to adapt to the calendar year basis for pres enting their financial accoun t.

We were the first to do that and so we have complied now with that requ irement. lt happens to be suita ble to us in terms of the indus try, as well, but it falls under The Crown Corporation Accountability Act. Mr. Chairman: Could I ask all Members to wait until they are recognized by the Chair so that Hans ard can get their names, and then we can activate each individual 's microphone? As you realize, I am a little green here but what is happening is you are coming in before I can recognize you and we do not have it recorded properly. Mr. Roch: Mr.

Thomas answered my next qu es tion, because I was going to ask if there was any requir ement to go to December 31. 141 I would like to know what is the current status of MTX. Are the wind-down proceedings as projected? *

(1040) Mr. Thomas: Yes. I serve on the MTS Board of Directors now, which consis ts of the Acting Chief Executive Officer, Mr. Charlie Curtis, who is also as you know, the Deputy Minister of Finance and one other member of the MTX Board. lt was forecasted that MTX would be wound down some time in the summe r, probably now in the fall of next year. What is happening is tha t there is a process of dis solution of the corporation under The Manitoba Companies Act which has to take place, which means that all outstan ding liabilities have to be dis posed of and MTX is owed money by two companies.

The amounts are not large. Both are under $50,000 each. Both amounts are being disp uted by the companies involved. There is a potential for some revenue flowing to MTX from a project involving the Hong Kong police force, a project involved with Canac International, and the original tender on that job was done by the MTX subsid iary of MTS. There is a potential royalty there of $75,000 if the Hong Kong Police Department accepts this computer-ba sed system. So MTX could potentially deriv:e some revenues there.

Finally, there are some outstan ding accounts with AI Bassam International, and this involves the so-called SADL project in which MTX was involved. We have promis sory notes coming from MTX's former partner, AI-Ba ssam International. One was due at the end of October and I am not sure that it has arrived. The amounts are paid in Saudi riyals which is the Saudi Arabian currency. In summ ary, however, we expect the corporation to be wou nd down by the fall of '89. We will stay within the annou nced publ ic figur e of $27.4 million in terms of the total losses of MTX.

So these final steps are part of the orderly wind-down of this corporation. Mr. Roch: You touched upon part of my next question in regards to AI-Ba ssam International, as he calls his company. I believe there were six promis sory notes from September '87 to March '89. You say one was due this past October? You projected by the end of March '89 which is, I believe, when the last one was due, you projected they would all be arriving on time? Mr. Thomas: Yes. Up to this point, the promis sory notes have been paid on time.

This last one involved the sale of a computer that was part of the inventory of the corporation and the computer equipm ent was not sold. There has been some delay in the payment, I gather. While I serve on the MTX Board, Mr. Curtis, who has been acting general manager of MTX during this wind down period, has been working with Coopers and Lybra nd, could giv e you more detai led, specific responses, Mr. Roch. He has really been on top of it on an ongoing basis . Mr. Roch: What is the current equ ity ratio of the corporation?

Tuesday, November 8, 1988 Mr. Thomas: I think maybe Mr. Bird could answer that. Mr. Bird: The cu rrent de bt-eq uit y ratio of the corporation is roug hly 91 percent. Mr. Roch: What do you deem would be a desi rable debt-equi ty ratio for the corporation? Mr. Bird: Well, that is a very good qu es tion. lt depends on a lot of factors. If one is in a total monopolistic situation where your rates are guar anteed through a process of regu lation, then one can have a higher debt equity ratio. If one is in a market system where the revenue s are su bject to competition, one would have a lower debt-equi ty ratio.

I wou ld say, on the whole, that a good debt equ ity that a company should striv e for is around 50 percent. Mr. Roch: Are you sa ying then that 50 percent would be an objective of the corporation? Mr. Bird: lt is an objective that I would like to striv e toward. However , as I indicated , in a regula tory environment it is perfectly acceptable to have a higher debt-equi ty ratio, because debt is cheaper than equ ity in the marketplace. However, debt, you are obliga ted to pay your debt service charges, so it is an expens e which you are obliga ted to pay.

Although we would like to striv e and the plan that we have tabled with the Public Utilities Board is to reduce the debt-equit y ratio over the next several years to a lower level. In my view it will be nowhere near 50 percent for qu ite some time. Mr. Roch: What do you feel then is a good debt-equ ity ratio for Crown corporations, specifically for MTS? Mr. Bird: We like to compare ou rselves with the other Crown corporations across the nation which is AGT and Saskatchewan Telecommun ications. AGT presently has a debt-equi ty in the same range as our s at 90 percent and Saskatchewan has one about 70 percent.

I wou ld like to aim towards the value that SaskT el has achieved, say, in the 70 percent range. Mr. Roch: So 70 percent wou ld be acceptable because of the fact it is a monopoly situa tion. I assu me then that the corporation will be strivi ng towards that goal . I jus t want to know if-which it should be doing-i t will affect any of the proposed service improvements or is that being done concurrently. Mr. Bird: lt is being done concurrently.

The total package which the Minister annou nced contains a clause that we will be financially viable, and so the rates that we have tabled with the Public Utilities Board allow us to implement this program , plus also to attain the net incomes to address our debt-equity ratio and to reduce it. Mr. Roch: According to interrogatories (CAC, MTS), dated Aug ust 12, 1988, MTS projects for the year ending December 31, '88, a net income of $4 million after deducting $ 118.7 million of depreciation. Given these kinds of projections, why is MTS proposing to increase rates by 15 percent within the next two years? 142 Mr.

Thomas: Maybe I could start with an answer to that. We have ju st been discus sing the qu es tion of the corporation's debt-equi ty rat io, and the commitment given in the Service for the Futur e document is to bring the debt-equity ratio down by approximately 1 percent annual ly. To do that, we have to increase our revenues as well as hold our expenses down wherever possi ble. We are balancing the provision of new services at a standard that Manitobans have come to expect and have a right to have in terms of individua l line service and so on.

Part of the challenge is to increase the rates on a gradual basis that does not impose a bu rden on Manitobans, at the same time applying ourselves to the financial problem, which we have a heavy debt load and we have pension obligations as well to cover.

So that while we have the appearance of a very positiv e bottom li ne, you have to keep tha t in perspective in terms of the size of the corporation, close to $400 million annually in the budget, and we have to get a better return so we can pay off some of our debt obliga tions and put the corporation in a better posit ion financially to meet competition in the future because, if we are dragging arou nd a debt burden and paying interest charges annually, we will not be able to compete. lt will add to our costs and in those new areas where competition is coming we will be handicapped.

Part of the strategy in the Service for the Future document is to prepare us for competition. ..

(1050) Mr. Roch: So ess entially, it is the current revenues along with the proposed increases, if I und erstood you correctly, to bring down the debt-equity ratio, pay for the up coming services as well as meeting pension obligations. Mr. Thomas: That is correct. Mr. Roch: I have a quo te here from a news release dated September 19, 1988. lt is entitled, "MTS Long Distance Rates to fall in 1989." lt says, in part, that both busine ss and residential customers will benefit from red uctions when calling points outside of Manitoba, within Canada and the United States.

The biggest savi ngs will come in long haul calls. Further down it says: "Overall, this will result in major savi ngs for Manitobans calling outside the province in 1989." One quo te which intrigues me is where it says we can make these great reductions because of the improved cost effectiveness of the long dis tance network. Have there been no improvements in cost effectiveness here in Manitoba? Mr. Bird: Yes, there has been improvements not only in Manitoba but across the country. We belong to Telecom Canada, which is the 10 la rge telecommu nication entities association which deals with long haul toll.

As we improve the system and improve such things as digital switches and fibre optics, we are able to carry more calls cheaper. Therefore, when we can do that, Telecom Canada has gone back to its respective regula tors, be it Bell Canada, the CRTC, or be it MTS with the PUB, or AGT with its board, and requested that our long haul rates be reduced to reflect those efficiencies.

TUesda� November a, 1988 Mr. Roch: I do not think you have addressed the question of Manitoba. You mentioned there has been cost-effectiveness measures in Manitoba. If so, then why is it pos sibl e to reduce rates for Telecom Canada? I realize there is competition involved there and it is a monopoly situation in Manitoba. But if there is cost effectiveness going on, why Is that not possi ble within Manitoba? Mr. Bird: If I unde rs tand, the que stion Is, will not Manitobans experience a reduction in the rates? They will experience a reduction in the rates as well as citizens In Al berta, Saska tchewan and so on.

Mr. Roch: Yes, but the only ones experiencing that will be those calling outside of Manitoba. For people calling within Manitoba, whether it be long dis tance or. local, they will be experiencing rate increases. So, in effect, people who are calling outside of Manitoba are going to be saving money, while those calling within Manitoba, where most people do their calling, will be experiencing increases. Mr. Bird: Yes, there are two elements to toll. One is interprovincial toll which is long haul toll, which you are absol utely correct, is redu cing. The other one is intraprovinclal toll which is within Manitoba.

That, if our present rate proposal goes through for the Service for the Future Program will increase by approximately 5 percent. That will increase primarily because we have introduced the new service for the improvement, Service for the Futur e Program which initiates a higher level of telecommun ication standard in this province. That new stan dard is going to cost us about $800 million to implement. That has to be paid for. So although there have been productivity improvements, we st ill requir e an increase of roug hly 5 percent in those rates within Manitoba to pay for this program. So you are correct.

The intraprovincial rates will be going up 5 percent, but the inter, between the provinces, will be dropping if the PUB approves it as per the proposals we have in front of them. Mr. Roch: lt is a lot of words. On one hand, we are decreasing rates and, on the other hand, we are increasing them. Any way you look at it, for whatever reasons, the fact st ill remains that this I believe is what?-10.9 percent rate reduction for those calling outside of Manitoba. lt will mean .less revenue for MTS. Mr. Thomas: I thought I might add some thing to what the president of the corporation has said.

Interprovincial long distance tolls has been priced well above cost and what is happening, because of changes in the federal regula tory environment where Bell Canada has been ordered to reduce its long dis tance rates, they are forcing other companies across the country to adjust their rates to correspond to Bell. So people calling from Winnipeg have the same rates, in terms of calling Toronto. Otherwis e, people would call to Ottawa, hang up and get their partners in busi ness to call them back in Winnipeg.

So the rebalancing that is going on in terms of rates in the interprovincial market is. being forced upon us to some extent by what is happening outside of the province. 143 But you were ask ing the qu est ion about cost efficiencies and productivity in the Manitoba Telephone System.

Last spring when the corporation did not get before the PUB because of the event that intervened, called the provincial election, we had to introduce some stricter financial controls which tu rned us around from a potential loss of money to the reported kind of contributi ons we are having this year where we have a posit ive bottom line. There are stricter financial controls. The bu dget process has been concentrated now, the authority for it has been concentrated in Mr. Fraser 's offjce, the Vice-President of Finance.

As I indicated in my opening remarks, we are unde rtak ing a produc t ivity measurement program and hoping to achieve productivity savings. We know that we have to get better value for the money that we are spe nding within the corporation because we are going to be facing increasingly competitive markets in more areas of our activity. This I think is a well-managed corporation from a financial stan dpoint. The Government and the PUB will � have the advantage of se eing mult iyear fiscal plans I think for the first time from this corporation, and that is tes timony to the hard work that Mr.

Bird and his executives have done to lay out forecasts of revenues and expenditur es over a numb er of years, and that will help us tremendously in terms of controlling costs. Mr. Roch: I fully un derstand that arid I can unde rstand the implication of the CRTC ruling which leads to all this, but the fact st ill remains that apart from debt equ ity ratio, service improvements, spe cial obligations, part of the increase has to be to make up for that shor tfall of revenue s which wou ld normally have been generated by not reducing it by 10.9 percent.

I know, to a certain degree, you had no choice but the fact st ill remains . Mr. Chairman, on a different issue here, the concept of having annual publi c information means that the senior staff of our Crown corporations, espe cially with MTS, is a good idea. Would the Minister consider continuing these meetings, at least for MTS, even if he cannot convince his Cabinet colleague s to do so for the other Crown corporations? I realize that the new Act does not requir e it but, on the other hand, it does not say that you are not obligated to.

The reason I ask is because I attended one recently and I thought and the people there thought it was a very good idea. Mr. Findlay: Yes, the five meetings that were held the president or somebo dy else can report on what really happened there, but I think the tu rnout was reaso nably good and I hope the public appreciated the opportun ity to talk directly with MTS officials.

If it is deemed that there is a positiv e response from the commun ity, then I see no problem with continuing to have them, have this corporation continue to have them in the future, realizing of course that there is a cost associated with it to having staff out travelling arou nd. If it is deemed that there is good feedback from those meetings and the public expresses a desire that they want them, I am sure the corporation will be

Tuesday, Nov ember 8, 19 88 prepared to continue to do it because, as you know, the new Act st ill allows it on a voluntar y basis to have those meetings. As long as there is some thing posit ive coming from them, I as the Minister will certainly not interfere with their right to carry on with those meetings . Reg, you might like to comment on what has happened at the meetings and the general response you got from them, or Paul there, whoever. * (1 100) Mr.

Thomas: Maybe I will start , und er the exis ting Crown Corporation Accountabil ity Act, the boards of the Crown corporations are charged with making these events happen. I mu st confess, frankly, that I was somewhat skeptical about what we wou ld encounter out on the road meeting our custom ers. I was pleasa ntly surpris ed. The turnout in Winnipeg, as you know, Mr. Roch, because you were in attendance, was lo w, but tha t was more a � circumstance of weather conditions than lack of interest J among the pu blic.

In both Deloraine and in Carman, we had very big tu rnouts and, in the two northern meetings where the communities are smalle r, there were mod erate turnouts but some very worth while interventions .

I have come around to the view that and I have not discus sed it with my board of colleagues yet-t hese serve a valuable purp ose. lt gives the corporation a chance to see the operation of its system from the customer side . lt is particularly valuable to board members who attended all the meetings, not all board members but a board member attended all meetings in order to get a sense of what is happening out there. We get information presented to us through the eyes of management and this gave us a chance to interact with our custom ers. We learned a great deal out on the road.

I think they serve a valuable function. That is a position I did not adopt originally. I was a bit of a Dou bting Thomas, if you will allow me to say so, about the value of these. I thought there might be other mechanisms that might ensur e the corporation was respon sive to its cus tomers. � We have a five-year plan for these programs-w e are always conducting five-year plans it seems -b ut we expect to be within 60 miles of everybody in the province over the next five years.

The locations for this round of meetings were chosen on the basis of communi ties that had not been visited when the former Ministers went round on the rur al consultation exercise. We went to communities that had not been visited recently by MTS. So I su spect that, if the other board members feel likewise, we will be back out next year in the fall, perhaps a little earlier before the sno w flies. Mr.

Uruski: Jus t to follow up on this issue, I am very pleased to hear that the mee tings that the board and management has had througho ut rural and urb an Manitoba have been going qu ite well. lt is interest ing enough as well, the Minis ter now who is responsible for this corporation did attend some of the meetings -! think you were at Virden-the previous meetings that the former Minis ter and I held through out ru ral and northern Manitoba. it certainly does provide 144 the people of this province an opportunit y to list en, to hear what is happening in the corporation because the information that is being shared is, I am sure, of interest to most Manitobans, both on the operations side, on the financial side, and the service side, in terms of what they can expect.

I kind of sit her e and smile a little bit at the contradictions that seem to be going arou nd this room. Here we have a former Conservative who voted against The Crown Accountabil ity Act, and the Liberals now sa ying let us have· more accountability because it is within the Act. We have a former Minister, who was a Cons ervative, who voted agains t the Act, now sayi ng let us have more accountab ility in this Act. They are bringing in new leg islation tha t does not req uir e accountability.

I really wonder as to the sincerity of either the Liberals, who are appearing to suppo rt this new legisla tion that is being brought in the House about new accountabilit y, and the Cons ervatives, who voted against the previous legislation to say it is not necessary. Now they are saying it really is not necessary so we are taking it out of the Act. Maybe between the Liberals and the Conservatives here, they can make up their minds as to whether or not the boards of directors of Crown agencies, and the Telephone System being one, will be given the mandate. Let us have a clear statement from the Minis ter.

Let us have those public meetings and why change the Act? Let us requi re those public meetings . Clearly, I attended 21- maybe 20 out of 21. I missed one of the northern meetings that I was not able to attend with the former Minister . I can tell you I appreciated the concerns, the sugges tions, the pos itive rapport of the people in this province coming and want ing to hear what kind of services are being provided, and their desires for futur e benefits out of the system.

So maybe out of this meeting today we will be able to send a message to- and the Minis ter himself will make a commitment and he said they are good. Maybe he will come out and say look, I think we should continue to have those meetings and will leave the requir ement that is in the present Act there, because that really should be a part of the process. Mr. Findla y: I have already stated that the meetings that were held this past year, the five meetings around the province, drew a positiv e res pons e from the people who attended.

The former Government with a rou nd of 17 or 21 meetings, whichever it was, were positiv ely received, but it had not happened prior to that. I think the service for the futur e discussion has generated a lot of interest in telephones and un fortuna tely, I gue ss, the Telephone System has received a lot of publ icity in recent years because of one certain negative event. The corporation is doing a good job of recovering from it, and we are moving on into posit ive areas of activity in the eyes of the publ ic.

The fact that we are prepared to have the meetings as a corporation, or the Board of Comm issioner s prepared to have their meetings on an annual basis, as the chairman jus t indicated, so that over a period of time we were within 60 miles of every individual in the province, is it a posit ive thing? Is it a volun tary

Tuesday, November 8, 19 88 thing? Dependin g on the issues year by year, the numb er of meetings may vary in terms of being able to positively get response from the public, but never lose sight of the fact that every time they appear before the PUB, there is another opportun ity for the publ ic to expr ess their opinions on behalf of their thoughts about the way the corpor ation is opera ting. I do not see any di fference in our process of opera ting in the fut ure; whether iHs manda tory in. the Act or it is volunta ry in the Act.

I think we operate a lot better when we have a voluntary choice of wha t we are going to do, when we are going to do it, and how we are going to do it. I know the corporation will always respond positiv ely in the future in terms of the need that the publ ic bri ngs forward for having the se sort of meetings. I know our mun icipal councils are one of the strong voices for requesting certain activities by tile various Crown corporat ions, and I know we will conti nue to have the meetings as long. as they are requir ed by the , public.

Once the· attendance drops off sig nificant ly, for whatever reaso n, then the re will be less demand for them. Mr. Uruski: This is wher e I am not certain just on this issue . I will certainly allo w the Member for Spr ingfield (Mr. Roch) to go on to other ques tions because I have a whole host of questions and ·1 will not go into it.

I just wanted to follow UJ} on tbis one issue: Tha t is, the Minis ter said, as long as the pub lic requi res us to come forward -! recall between '77 and '81 and during part of our first term in office, tha t you do not make the time to go, and you do not make the requir ement of the agencies to really respond to the public unless there is a requir ement. We are removi ng tha t requir ement and I do not understan d, unless ther e is some sensitiv ity, that there may be another issue. We were there through the MT X issue. We st ill went out to the public, notwithstan ding tha t negative issue.

I have some di fficulty with wha t he is really sayi ng. He is saying if the publ ic requi res us, but now the Act does not requir e us, or the new Act tha t is being propo sed does not require us, and the corpora tion is sayi ng, Mr. Chairman , tha t the response of the public has been good. We have had good meetings. We intend to continue them. Maybe the Min ister is prep ared from this comm ittee, to say to his col leagues look, can he giv e an undert aking here tha t we are all in favour of it? This commit tee is in favour of it; I am in favour of it.

Why not leave it in the Act and why leave it open as to deci sion and who will make tha t decision? Who is going to make the decisi on, if it is going to be voluntary, whether or not there are going to be meetings or not? *

(1110) Mr. Findlay: The Memb er for lnterlake (Mr . Uruski) knows full well that he appoi nted a judge by the name of Mr. Kopstein to do a review of MP IC. He brought forth a large numb er of recomme nda tions and one of the recommendations tha t Mr. Kopste in brought forward was tha t the public meetings should not be manda tory, tha t they should be volunt ary. I think that is a sign ificant statement tha t he brought forward on the basis of his 145 review and consulta tion with the ind ustry and the public, and I think that comment supp orts the principle that is in the Bill, that it be voluntar y.

Who will make the decision ? I think it will be a consult ive decision between the executiv e, the board of comm issioners and the Min ister in the future. We all see the positive side of the public meetings, and as long as there is good posit ive need for them they will continu e. I can assure the Mem bers of th� Cl)mm ittee of tha t and I am sure the board chairman and the president wou ld also share the same thoug hts, tha t if the pu blic wants them we will continue to have them. Mr. Uruski: Mr.

Chairman, jus t to the Minis ter, to ask him, I want to be very clear on the reports rega rding the operations of M PlC. I shou ld tell him I do not happen to agree with the judge jus t because he has made the recommenda tions about not having pu blic meetin gs. Quit e frank ly, I believe that corporation should be goin g out to the public .·conti nually because they are involved in the lives of about 200,000 motoris ts a year in terms of th e accidents they .ha ve, and the cir cums tances of tha t involvement is not positive. lt is negat ive.

Those people are involved in a negat ive situation that they do not want to get them selves involved in and the knowledge of how ins urance works is not there in most people's min ds. lt .would be the most pos itiv e move, I belie ve, on tha t corpora tion's part, as I am ind icating to this Minis ter, tha t tha t corpor ation go out. 1-!.e as well did not recommend about going to the Public Util ities Board and we ha ve said that the corpor ation should go to the Public Util ities Board.

I think this Min ister is seei ng here today and he is agreeing and the corpora tion is agre eing that the meetings should go on, and if they should go on, then he should be ask ing his colle ague s to rethink the legisla tion. I think my Li beral friends here may have some thoughts on the new Act, tha t the heari ngs should be a par t of the ongoing process of information and liaison with the pu blic. Mr.

Findlay: Cert ainly I ha ve to respect Judge Kopstei n's recom menda tion because he held exhaust ive consult ive di scussions and, for whatever reasons, there mu st be some reasons behind his sugge stion tha t they should not be mand atory. He did not say they should not be held. He said they should not be manda tor y. Tha t is the position tha t we are in right now. We have had. g.ood success with them and as long as we continue to have good success and there is a need and the public is sho wi ng up, we continue with them.

If they make them manda tory I cou ld predict tha t th ree or four years down the road there may not be any reaso n to have them for one year because the public is not turning out, and we are spe nding mone y on a dog and pony show without atte ndance. Maybe we ha ve them every second year down the road depen ding as events unfold. That way without making it manda tory, the corporation and the board of comm ission ers has the flexi bi lity to resp ond to the public need .

I think as long as we as a corporation are invo lved with the service of the future, there will be obvious need to continue to have consul tative di scussions with the publi c and we will continue to do it. Down the road ,

Tuesday , November 8, 19 88 once that program is in place and opera ting, ther e may be opportun ity or reason to skip a year jus t to save some cost without adversely affecting the public's opportunity to have their opinions exp ressed to the Telepho nes. Mr. Roch: Giv en the extraord inarily high Autopa c incr eases this year and other potential increases next year, and gi ven what is happening at MTS and has hap pened in the past, I think tha t these are all recent occurren ces here, it is good idea to continue with these meeti ngs.

I would say now tha t possi bly it might be a good idea to keep it in the Act, to keep it as !t is. Let us prove tha t it is a go od id ea. I gue ss I want again to point out tha t the meeting which I attended on October 27, there was a time when attend ances at these meetings were not especially high.

They did not gen erate much interest, but again, gi ven what has happened to our Crown corpora tions in recent time s, espe cially this year, I think the people of Manitoba are mor e concerned and I am sure would like to have input. � At tha t particular meeting which was held, I belie ve , at Gl enwood School, it was despite the storm , as Mr. Thoma s or Mr. Bird mentioned, and despite the fact tha t the meeting was held in Winni peg, and despite the fact tha t several rural residents, if not most, received their notic es after the meeting was over, I know all those informed as an ML A well ahead of the meeting.

As a resi dent I received my notic e on the Fri da y after the meeting and sev eral people in the southe ast received their s on Monda ys and Tuesdays. I do not kno w why tha t happened , but it ha ppened . Aga in, despi te all the se problems , both rural and urban, atte nda nce was good at tha t meeting. Before I go on to my actual question, I would like to know what happened that many people received their noti ces after the meeting. Mr. Thomas: I wou ld like to apolog ize for tha t. Some letters did arriv e late and yet others were on time. Ag ain we relied on Canada Post. We mailed almo st 60,000 letters.

We learned from the expefience tha t we will have to mail earlier . We had written a numb er of -., types of letters, some to people in the com mun ity who , were elected officials or promi nent in the com mun ity in busi ness or other parts of the com munit y, and their letters arriv ed on ti me. Some people did not get their letters and we will mail earlier next year. I should add however that this was a follow-up in a way to radio annou ncement s and newspaper advertisements so it was intende d to be a rem ind er notic e.

I think it was less the failure of the mail to get deliv ered than the weather conditions that accounted for the poor or relativ ely small attendanc e at the Winni peg meeting. In future years we will plan ahead to allo w time for the varyi ng deliv ery da tes of Canada Post. Mr. Roch: You mentioned the weather as being a major factor for the low attendan ce. There was a lot about tha t, but why were there no meetings held in eastern or southe astern Manitoba?

As you point ed out earlie r, two were held in the No rth , tw o were held in south western Ma nitoba, but none in the eastern part of the province. 146 Mr. Thomas: Yes, Mr. Roch, again we followed a pattern on the map which took us to locations where the former tour by Min isters had not visited . We also were mindful of the costs involved in staging these meetings, costs both in terms of dir ect cost of adver tising them and prepa ring for them, and ind irect costs in terms of management time. Mr. Bir d was at three of the meetings. Mr.

Wardrop was at two of the meetings, and there were additional MTS staff in attendanc e at all the meetings, including the regional manag ers and local area managers. . . So there are costs involved and some are dir ect and easily identif ied . Others are more ind irect. We felt tha t five meetings for the first round would be an appropriate level of activity for this round and, as I say, we intended over a numb er of years to get wit hin · reach of most people, you know, commuting di stance of most people over 60 mile s or so. * (1 120) Yet, we had some compl aints from people.

I sent out the in vita tions on my office' s letterh ead and my telephone numb er was at the top, and I was very popular for a few days. I have some new pen pals all over the provi nce now who have been writing to me, and we are gett ing respons es to all the qu erie s and the complain ts that have been filed with my office or were presented at the meetings. So we are following up the questions tha t were raised . We hope tha t this will demons trate the responsiv eness of the corpora tion to its customers. Mr.

Roch: The thought had crossed my mind tha t perhaps the corpora tion was .hoping to avoi d hearing from the residents of eastern Manitoba, but I take it tha t is not the case. Nevert heless, despite the nega tive factors that I menti oned before, the storm, the late noti ces, etc., sign ificant num bers of rural resi dents were able to attend. lt is unfortuna te tha t mos t of th ose who were mis sed were in the Dugald, Oak bank, Lor ette, lie des Chenes area, but essentially those who were attending had basically the same concerns.

They had one common complaint, tha t people living in the towns, villa ges and the areas surrou nding Winnipeg will be payi ng more mo ney for less service. Mr. Chairman , I have heard the same complaint too from people living around Brandon.

Would the Min ister reconsider his decision -! am referring to not extending the se exchan ges at the comm uter areas -a nd commit this Government to prov iding th ose people living in the comm uter commun ities- I do not like the term "F rench commu nities," it has a bad connotation to it- but those commun it ies surro unding Win nip eg and Br andon, con nec ting them to the respective Wi nnip eg and Brandon telephone service to which they feel they are right fully entit led to and which they are paying for? Will he exempt them from the propo sed sur charges and incr eases? Mr.

Findl ay: I will answer a portion of your que stion, but I take strong excep tion to your in trod uctor y

Tuesday , November 8, 19 88 comments. You say the corporation does not want to hear the input of the public. I would hope that the Member is not meaning what he said when he made that statement because the corporation- Mr. Roch: I think I clarified that sta tement after I made it. Mr. Find lay: The corporation has been very posit ively commun icating with the pu blic and doing a very respo nsible job of del ivering telecommun ications service to all Manitobans. With regard to the proposal that you bring forward that the commutersheds should have free access to the urb an areas of Winnipeg and Brandon- Mr.

Roch: Not free, they are paying their bills like anybody else. Mr. Findlay: -a s opposed to the toll charges they are paying right now, I would ask him then, if you do that, do you then give the next zone free access also and then the next zone after that? Where do you draw the line?

There are certain costs associated with the abil ity of people to call from the commutershed areas into Winnipeg and, as I mentioned to the Member the previous time he asked his qu es tion, if we were to share tha t cost over all the res idents of Wi nnipe g and Brandon, it wou ld be about $3 a su bscriber that would have to be added on to their telephone bills to pay for that additional cost. Otherwise, all mem bers in the commutershed , if they were to pay the additional cost, it wou ld be arou nd $12 or $15 per person.

I can assure the member tha t not everybody in the commutershed wants necess arily access to Brandon and Winnipeg at a cost of $12 or $15.00. So, the proposal that will be brought to PUB is that they be given an option of pur chasing a package to call into those areas at a specific cost for a specific amount of calls, and I think that will be a choice that they will make, whether they want to pur chase the package or they do not. I do not want to force it upon them that they have to. Everybody has to share that cost.

Maybe the presi dent would like to comment further on it but, any time you give more people access to a particular area, there are costs associated with the delivery of that service. We have to pay our employees, we have to pay the costs of lines and all the additional services. The corporation, in one of its goals, wants to be a fiscally respo nsible corporation. This is what they are doing in the process of bringing the proposal forth that is coming to the PUB. The president might wish to comment further . Mr. Bird: I think the Minister summed it up very well.

I think that there is an increased demand for the type of service that has been mentioned. I think the plan that we have addressed is financially respon sible. lt moves in the right direction. We are in a unique indus try where the demand for our services is increasing, and I am thankful for that. 147 We are trying to address the demand as quickly as possi ble.

The plan that has been tabled is that, first and foremost, everyone in this province will have an individual line and, se condly, that the people in, shall we say, the rural areas have the right to call the central services by reducing the numb er of free-calling areas from 160 to 60 as the two major planks to the program. Also, we introduced a plan to address what we call the extended urban area which is to giv e them the option for a major reduction in their toll charges which was the biggest element of their concern of 50 percent for a $5 charge.

Depending how well that is received and if it is approved by the PUB and implemented, I think we are in a dynamic environment. That will be the first step and years from now or several years that we will even improve on that. Technology changes and we will continue to attempt to meet the demands of the public. The Minister mentioned some dollar figur es that would be requir ed to increase the monthly charge to those residents if they wanted to go on a flat rate. Those figur es, I believe, were based on current calling patterns.

When we engineer our switches on our trunks, we do that based on a financially responsi ble criteria which is based on calling patterns. As we implement change in our total sys tem, calling patterns change. As a matter of fact, as we reduce toll, we see the volume goes up signi ficantly. We have to plan and engineer additions to switches to handle increased calling patterns. Those are not cheap and they are not easy to do.

So we try to implement a plan which will evolve us towards where we want to get over an adequa te time frame and also at rates to the public which will ensure un iversality of service so we will not increase rates so great on a monthly basis that people in our society will be forced to back off the telephone service because they cannot afford those rates. Hon. Jack Penner (Minister of Natural Resources): I have fou nd some of the comments rather interes ting arou nd the table. I refer to the initial opening comment that Mr.

Thomas made when he referred to the word "p rofit" and then corrected hims elf to the word "contributi on." I wou ld sugge st to him, in my presence, the word "profit" is not a word that might not be easily used . I think, I rather appreciate the word "profit." If you do not make profits, it is seldom ever that you can make a contribution to anything. So in my company, it is qui te acceptable to use that term. The second one is in reference to the comments made by Mr. Uruski in referring to the consulta tive process.

I find it rather interes ting that the NDP wou ld sugge st that we should proceed with consu ltations whether they are requir ed or not. I think that is just an indication as to why espe cially rural Manitoba voted so strongly in favour of a new administra tion, and to look at new ideas and adminis tering espe cially public corporations in a more respo nsible manner. I think that is what you are sa ying when you are referring to being very receptive to doing consulta tions out in country, if and when requ ired.

I think we should lis ten very closely to what our su bscribers are sayi ng and what the public req uir ements are and act accordingly.

TUesday, November 8, 1988 * (1 130) The other one is tha t I thought that Mr. Roch's comments re the services that had been announced in September by the Minister were rather interes ting, because any of the comments that I have heard about the intiatives that MTS is indicating that they will take have been very, very favourable, and espe cially the announcement that there will be an initiative or a rapid movement towards privatization of lines.

I, for one, was in a position not too many months ago where I used my telephone an awfu l lot, and my telephone bill ran anywhere between $400 and $500 a month. it was not uncommon at all. To be on a party line unde r those kinds of circumstances is not so much a difficulty for the person who uses it but for those who are on the same line with him.

We had some difficulty and those people who were on the same line with me, when I eventually did acquir e a · private line at the cost of some $800, the comments there were also qu ite favourable. � I find that the rates that we are dis cussing or that , might be in the future that Mr. Roch was ref erring to and when he was indicating that the service was less and we were paying more, I would sugge st to him that he might well want to take a trip south of the border and ask them what kind of rates , espe cially when he is referring to increasing toll -free zones.

As to what kind of base rates they are paying over there, I wou ld sugge st to him that the base rates across the line, right across from where I live on the American side , are some what five times the amount that we pay. If that is what he is indicating that we should be looking at, I find that rather interes ting because I wou ld think that rural su bscribers espe cially and also urban su bscribers might find those kinds of rates rather excessive. Mr. Chairman: I am jus t going to ask the committee as you know, I am a little new. Mr. Roch has had 44 minu tes and Mr. Uruski has had less than 13.

So I will recognize Mr. Roch, and then we will get back to Mr. Uruski. Would that be a fair division of time? Mr. Rocl'l: Okay, I would ju st like to finish this particular is sue on commutersheds because I never made or even suggested that the rates, as Mr. Penner says or attempts to put words in my mouth, should be the same as they are south of the border. What I am sa ying is that we are talking about a corporation being respons ive to its su bs cribers.

I am sayi ng that they have been sa ying loud and clear, and not jus t from the area that I represent in Springfield, but also from areas such as La Salie, Sanford, St. Francois Xavier, all those areas which are paying hundr eds of dollars as well in long distance bills. Sure, some are casual calls, but several of them are for busi ness reaso ns, calling a doctor, whatever. Mr. Bird hims elf said at a meeting on the 27th that telephone service in the home is not a luxu ry, it is a right.

In many cases, becau se thes e are bedroom commun ities, they are places where they do not have all these facilities, they are obliga ted to use long distance telephones. Mr. Findlay mentioned that they had two options, a $3 to $5 a month increase on 148 Winnipeg bills overall or $ 15 to $20 bills for thos e which would be added on. In talking to various people-a s a matter of fact, at that meeting in St. Vital, there was an urban reside nt who sa id, if that is all it costs to add on those areas, it sur e made his problems pale in comparison. He said he, as a Winnipeg resident, was qui te prep ared to pay it.

I su spect in talking to other people, that is a feeling that runs qui te widely because it is not jus t a qu est ion of those areas phoning in to Winnipeg. A lot of people in Winnipeg are also phoning out there because they have relatives and friends which have moved out. But even if it came to the point of jus t paying the extra $ 15 to $20 which Mr. Findlay mentioned a while ago, again the residents there wou ld be qu ite willing to pay that to be able to have access to those exchanges without paying long distance every time they pick up their phone.

Either one of these options would have been accepted by most people, urban and rural, I suspect. The one that has been chosen, this 50 percent discount on long distance calls really insu lted those residents. lt is a far cry, it was never even asked for, it was never even mentioned. lt seems to have come out as jus t a tokenism. I realize that long distance charges generate extra revenu e, not just for the corporation but also for the Department of Finance, provincially and federally , through the sales tax.

Possi bly that is a factor that is being kept in mind too when they rest ricted the acess on these exchanges but this 50 percent discount which applies only to those people arou nd Winnipeg, calling to Winnipeg, a nd applies only to those people arou nd Brandon calling to Brandon, in my opinion and in the opinion of most residents who live in those areas is hardly what they wanted. lt is totally not equi pped to their needs and it is an insult. lt is basically rubbing salt into the wound. But spe cifically on that issue of that 50 percent discount, it says to a maximum of $50.00.

Is this $50 a maximum discount or is it the maximum amount that will be dis countable? Thai has not been clarified. Mr. Bird: The proposal in front of the Public Utilities Board will be that for a $5 fee you will get a 50 percent reduction in your toll charges up to a maximum of $50.00. So if you make $60 worth of toll calls into Winnipeg, the first $50 you will get a 50 percent discount and the other $10 you will have to pay the full rate for.

The idea of the plan was to address the issue identified that if there is a real necessity to call into Winnipeg for some special servi ce, we feel that the $50 is sign ificant to cover that and we realize that the demand out there, in many instances, is far greater than that, but we feel that this is a good program and one that will be adopted by residents in that area who want it.

The good thing about the plan as well is that the su bscriber can make that decision and if there is a subs criber out there who, for wh atever reason, lives out there but does not make that many calls into Winnipeg, we feel that it wou ld be inappropriate to approach him with an $ 18 or $20 increase per month

TUesday, November 8, 1988 so that other su bscribers could , at this point in time. So this is an optional package which people can pick and choose from and we will monitor the usage of it. Mr. Roch: I appreciate what you are sayi ng but again it does not address the concerns that these people have been lobbying for several years under two different administra tions now. lt is a complete reversal of the position the Conservative Party had taken while in Opposit ion.

At that time they were sayi ng that it was a good Idea and several Members, including myself at that point as the then Government qu es tioned that issue and we were pushing for that. And now that the Minister is in a pos ition, or the Government Is in a position to do some thing about it, it has chosen not to. No sense belabou ring the point because obviously they are not going to do anything about it for the forese eable futu re. My next qu es tion, I have several, but I will ask one more and let Mr.

Uruski ask some qu es tions or other members of the committee, what about the cost, what has been termed the exorbitant cost of FX service. Is anything being done to reduce those costs, I mean enlarging the access of calling areas wou ld solv e that problem. In the meantime, because it is not being done, many people are forced to use FX service and it is costing them an arm and a leg in some cases. Mr. Bird: FX service, you mean foreign exchange service? This program annou nced by the Minis ter does not address FX service. FX service is a service we offer which is based on mileage and our cost.

The farther you are from the foreign exchange that you want to have a dial tone from, the greater the cost is to you. So the sh ort answer to you r ques tion is, there is no element of this program which addresses that program specifically. *

(1140) Mr. Findlay: I will just make a couple more comments on the basis of the qu es tions Mr. Roch has asked . The access from the commuter shed into Winnipeg and Brandon is not totally cost neutral . There is some cost the corporation is going to pick up, and even the service that is being offered, in terms of the 50 percent reduction up to $50.00. The other thing is, as I mentioned earlier, when do you stop drawing the line?

I gue ss it would be desirable in many people's eyes to have one calling area in all of Ma nitoba and tha t mi ght be the fair est , mos t equi table way to run the corporation, everybody is equal ized as to the telephone and through the telephone to every resident in the Province of Manitoba, but the cost would go from about $8 a telephone up to $27 to supply that kind of service.

That might be the desirable direction to go, but we know that the public at large, particularly those who are paying $8 now, wou ld not want to have their basic telephone cost rise that amount, so we have reached a compromise and that compromise will be presented to PUB. If you or anybody else wants to intervene that is the time and the place to do it. That is why the PUB is there. Mr. Uruski: I would like to ask to go back to a few of the points that were raised earlier and then go into 149 the qu es tion of the rate application to the PUB.

Can the corporation tell me what as sumptions are us ed in this whole qu est ion of the cu rrency lo sses and amortization of the currency losses? On the one hand it is sho wn as a cost and the cost has been reduced in the annual report from $71 million down to $57 million, and maybe they can explain what that drop is. Is that a repayment of one of our major borrowings, and-s ee, in the annual report in the debt charges, reduced from almost $72 million down to $57 million previous ly. Mr.

Fraser: The reason for that is that we are comparing a 12-month period with a 9-month period, so that on any other basis that numb er wou ld be larger. Mr. Uruski: To Mr. Fraser, what assu mptions are used to calculate the losses on foreign currency at any particular time? That, in my mind, is- I gue ss from an accounting point of view it has to be done, but from an actuarial point of view the debt is not repayable until maybe 5, 10 or 15 years down the road. However, we are showing a loss today and that is the assu mptions � I wanted to know.

Is it today's interest costs, if we were to repay that debt today and that is the loss, even thoug h, and I will use the other assu mption, 15 years from now or 10 years, whenever that loan may have to be repaid, the strength of our dollar may be far different, may be worse, but it may, as well, be higher. Then that of course has to be reflected back into the accounting.

Maybe from an accountant's point of view, it is the right method of accounting but it is a real what word would you use to describe it? lt is a hide and-seek kind of a situation because althoug h you are showing a loss, it is really not a loss because you are not paying it out today but you are showing it. That is the dilemma. I gue ss it is the same in the insur ance industr y as well because of the unr eported in the reserves that they use. Perhaps an explanation wou ld be in order. Mr. Fraser: Mr. Uruski makes an excellent point.

We have no flexibility in terms of the way that we do deal with foreign exchange. We are requir ed to follow the � Canadian Institute of Chartered Accou ntants generally accepted accounting principles, and tha t is the benchmark, that the aud itors review these financial state ments to ensur e that they are presented fairly in accordance with those principles.

But the point that has been made is that we value those things as of the end of the year, and in current terms being December 31, as of the foreign exchange rates at that particular point in time, which can be very mislead ing because it is jus t one point in time, and you could have very su bstantial fluctua tions around that period of the year that change literally days later. Your num bers, as of the middle of Janu ary, could be su bs tantially different than they are as of December 31.

From an accounting concept point of view, there is al ways a tendency to vie w th ese things from a conservative point of view in accounting terms, in terms of recognizing potential bad news and losses. As soon

TUesday, November 8, 19 88 as there is information available to reflect that, and on the other hand, there is a real hesitancy in terms of reflecting positiv e news, so that these potential losses are recognized as of the rates at December 31, and there certainly is the possi bility that within any period of time, or the remaining life of that, that the currencies could change and could go back to being equal or could, in fact, be in a position where the Canadian dollar was su perior to a particular currency, U.S. dolla r, for example. That is why it is done on an annual basis.

The issue that we talked about earlier in terms of these deferred asset s, it is spr ead over the remaining life of it. So that if there was an improvement that would be factored in the next year. But you are certainly right, in terms of the sense that if we look at December 31 this year, let us say, with the U.S. dollar, and that issue has a 15-year life or a 20-year life, that value may bear very little relationship to what it is going to be In 15 years when that issue matur es. So we just take it sort of a step at a time and deal with it on a conservative basis. t Mr.

Uruski: Is there some blending dur ing the year, in terms of, let us say, the next year's snapshot? Do you do any blending of the gyrations that the currency exchange may take in order to arrive at year-end, or is it that one snapsho t at the end of the year? Mr. Fraaer: lt is tha t one snapsho t at the end of the year. As I say, we do not have the flexibility in terms of dealing with it in any other way. That is a requir ement on us. In fact, the province does do blending, in terms of looking at its for eign exchange exposure.

But, in fact, that is one of the things that in their report that Stevenson Kellogg recently did was they suggested that they not do that, because although it may provide for smoo thing out some of these peaks and valleys, in an average of three years may represent a more meaningful numb er than at December 31 num ber, what they were afraid of was that might influe nce financing decisions becaus e you wou ld have those three-year num bers, and you would know that if you went into market at a particular time to do a swap or to do a borrowing, .. what that impact would be. lt may have a negative • impact on that averaging, but it may be a very prudent thing to do in terms of that particular issue.

Their feeling was that issue should be dealt with in terms of the financial prude nce of the decision that is being looked at, as op posed to looking at the impact of averaging over a three-year period. Mr. Uruski: Over the period of the loan, you have accumula ted losses based on the whole host of years of cu rrency fluctuations. Could it make a major difference in the year that you pay off the loan if your currency then is at a very posit ive? Will that really then tend to skew your financial stat ement at the end when that loan matur es?

Does that happen, or is it the balancing out over the years that you give or take in your accounting will balance that off, or will th ere be a ma jor ske w in the year tha t you pa y off your debentur e? Mr. Fraser: Normally there would not be a major sh ift. There could be a major impact, but it would tend to 150 be in the same direction. Normally wha t happens is that the comparison between one currency and another over a num ber of years tends to be going in a particular direction; it is not continu ally changing direction.

In the year that we are looking at, for example, in terms of where we lost the $ 19 million, one of the very major reaso ns for that losS is in terms of foreign exchange and, in particular, one issue which was in Japanese yen which had been, I believe it was a 10- year issue. For the ma jority of that 10-year period, the Japanese yen in relation to the Canadian dollar was relatively st able and we had a very posit ive interest rate on that in comparison to domestic interest rates.

In the space of a 12-month period the Japanese yen appreciated 150 percent agains t the Canadian dollar, so that even though for nine years we had been recognizing at the end of the year what the change was in amortizing it each year, we ended up being far shor t in that last year in having to write off an additional $ 12.5 million jus t in relation to that one issue. lt can be skewed but it is normally in the same direction. They are not normally over a five- or ten year period changing directions a num ber of times. Mr. Uruski: I thank Mr. Fraser for some enlightening in that area.

I think I have a better grasp of it. The corporation and the Government annou nced the rate change pur suant to the plan that is no w being filed before the Public Utilities Board. Can we jus t have a recap of the various rate annou ncements? There was, as 1 recall, the general rate increase across the board. There was the $ 1 per month increase flat across the board, and there were two components of the rate increase in urban Winnipeg.

I wou ld like that recapped for me if the corporation may, because I have some qu es tions with regard to revenue and the impact on revenues from those various increases. * ( 1150) Mr.

Bird: The proposal that was placed in front of the Public Utilities Board basically states that to implement the individual line service program, to implement the communi ty calling package, to implement the program for the physically handicapped , to impl ement the extended calling package, to maintain our financial viabil ity and to ensur e that our rates for basic service remain the lowest , if not among the lowest in Canada, were that we wou ld requir e a $ 1 levy on all residential phones in the province, ur ban and rural both, $2.50 levy on individual line busine ss telephones, $4 levy on multibu si ness trunks, not multi party lines.

In addition to that, there was a 5 percent rate increase to be effective April 1, 1989, and April 1, 1990, to allow us to carry on busine ss as usual. The idea of that concept was that the levy was to provide us with the money to increase the standard of telecommunication service in this province to pay for basically the $800 million program to increase the sta ndard. The 5 percent rate increase was basically a rate increase that we requir ed just to carry on busi ness as usual generally. In addition to that, we also incorporated the reduction in long haul toll which is rough 8 to 10 percent to be

1\.lesday, November 8, 19 88 effective Januar y 1, 1989, which is roug hly three or four months ahead of the rate increases. When you combine all of that together and you look at the rates, the average increases that any su bscriber would realize, they are in an area of 5 percent or less. In addition to that-1 ju st lost my train of thought there for a minute. I think that was basically the funda mental program that we adopted, so that the Public Utilities Board could look at the levy and compare the levy to the program and compare the rate increase that was requir ed on April 1, 1989, for our business as usual.

So if the program, Service for the Future, did not go forward, you wou ld st ill requir e basically a rate increase of 5 percent April 1 just to carry on our busine ss in Manitoba. Mt Uruaki: If I recall, there were two other components to that announcement, perhaps a bit of clarification. There was the additional moving of the City of Winnipeg because the city was at its peak in rating area. There was an additional increase, if I am not mist aken, by bringing the city into another category, another rating group. That would have been an additional grou p, jus t so that I am reading it right and unders tanding it.

As well, there was a ques tion regarding a pension liabi lity which impacted on this increase and the period of time there. Is that a fairly accur ate und erstan ding on my part? Mt Bird: Except for the fact that the rate group change for Winnipeg was a completely independent filing in its own right. Part of the philosophy of rate sett ing in telecommuni cations is a value of service concept. On April 22, we tabled with the Public Utilities Board an increase in Winnipeg rates because they had exceeded the existing rate group levels which had previously been approved by the Publ ic Utilities Board.

Those hearings were held on the 15th and 16th of September and a decision was just made last week. That whole filing and hearings were completely independent of this Service for the Future Program. lt is a rate increase. You are absolutely correct, but it is not part of the funding for the Futur e Program except that when we put together the funding for the Future Program we took into consideration the fact that hopefu lly this would be approved and the revenue s from that reflect in what we would requir e in the later rate increases that we table with the Public Utilities Board. Mr.

Uruaki: And the pensi on qu es tion? Mr. Bird: As I indicated in my opening remarks, there was a six-p art program . One of them is the financial viability. We tied into our rate increases a necessity to reduce our debt-equit y ratio which was dis cussed earlier this morning by 1 percent a year, and also to finance this pension liabil ity which MTS has over the next 15 years, the monies to cover that liability are included in the rate increase proposal we have as well. Mr.

Findla y: Ju st one thing I wou ld add jus t to further help the Mem ber unde rs tand the situation with regard to the rate group increase in Winnipeg. Telephone rates are charged on the basis of the num ber of lines, the numb er of telephones in a particular 151 area. We had nine rate groups in the Province of Manitoba and through out rural Manitoba. You could be in rate group 1, or 2, 3, or 4. When your numb er of lines rises over the maximum limit in that rate group, you automatically move into the next rate group without any public hearing at all.

That has occurred some 80 ti mes since 1980, affecting 100, 000 telephone subscri bers. So it ju st happens qu ietly and that is perfectly legitimate. In the Winnipeg case, there was no rate group 10 in place. So once they moved through the ceiling of rate group 9, which has some 375,000 telephones. There was no rate group 10, so the only way you could get rate group credit was make application to PUB, which makes it look like a sign ificant issue which, when in reality had rate group 10 been in existence, it jus t wou ld have qu ietly happened by regula tions. Mr. Uruski: Mr.

Chairman, I accept and I un ders tand the process and the rationale. Nevertheless, when you have the whole host of programs that are put into place, could the corporation tell us or give us a breakdown � of the impact of the various changes on revenues? Do � they have a breakdown from each area? What does it mean in terms of revenues rais ed for all the other areas? I gue ss, just to lay it on the line of where I am heading so you will know what will follow.

The qu es tion about pensions, should that have been a consideration, that the pension liabil ity, including the viability clause of reducing debt equ ity ratio, should that pension cost have been amortized let us say over 20 years and lessened the impact of all the changes at one time?

No matter how you put it you have got a $ 1 increase for everyone, and I know everyone is agreed on that. lt may be an issue to the actual consumer but in terms of the politics of the issue here as MLAs no one can say well, I was agains t that kind of thing because we all suppor ted that, and the busine ss, and the multi busi ness lines and the 5 percent increases to keep on busi ness -no t an issue. When coupled with all of that, you then make a jump, and I am not sayi ng that jump should not be made. I am sa ying, was there a way?

When we look at the revenues, maybe that way of blending or less ening the impact on the Winnipeg � su bscriber, that additional rate jump, I wou ld like to , know what that means in dollar terms and in every category. What wou ld that mean on corporation finances as well as the pension qu es tion? Mr.

Bird: One of the beauties of looking at long-range planning and putting this plan together was you can look at various scenarios, and we tabled with our board, I think the Chairman would agree, several options that were available for us to pursue and the effects on the rates to drop debt equ ity, fasten on I percent, to not amortize the pension over 15 years.

The two major elements that we kept in mind in all these various scenarios were first that ILS ind ivid ua l lines to rural Manitobans was a must and had to be implemented as qu ickly as pos sib ly, and secondly that our rates in this province with this proposal over the next three or four years were such tha t they, if not the lowest, were amongst the lowest in Canada. This plan addresses tho se two criteria, but there were scenarios developed which did decr ease debt equi ty

Tuesday , November 8, 19 88 faster, but it caused rates to be higher. The pension liabil ity should ha ve been funded when it was incurred. lt was not. That one could look at funding to now or 5 years or 10 years or 15 years or 20 years or 25; the plan that was in place when I came here was 15 years. We looked at the 15-year scenario. We put it in our equation and it came out with the num bers you see in front of the PUB now which reflects these rates being the lowest in the country, or amongs t the lowest . So we stuck with the 15-year amortization program with that pension liabil ity.

One can argue that it could be 13 years or 17 years and that is up to the Public Util ities Board to address. ..

(1200) Mr. Uruslc:i: In all those, there is also the reduction in the extra provincial rates because of the pressure of deregu lation that the out-of-province rates were in fact decreased. Mr. Chairman, you have indicated that. lt may be a positive move to individual su bs cribers, particularly the corporate su bscribers who use the � trans-Canada rates, but it certainly is not from a service point of view of rural and northern Manitoba, although we do use intraprovincial rates. The interprovincial rates impact negatively on our rates.

In effect, and maybe the general manager may clarify that, but they do impact on the cost of our services. The revenues from those rates, as I recall, were on the posit ive side and gave the corporation the ability to provide the kind of services that we req uir e in rural and northern Manitoba to increase telecommun ications, and that are necessa ry, but that pressure is on there right now. Mr. Bird: I would just like to add another interest ing comment to my previous comments. We also looked at the average bill in Winnipeg, in a rate group 4 area and a rate group 1 area and in northern Manitoba.

Interes tingly enoug h, the average bill that a subscriber pays is between $33 a month in Winnipeg and $35 per month in the rural parts of the province, in the southern part, and it is about $68 per month in northern parts. When you look at the elements of that bill, you are quite right, the citizens of Winnipeg pay a larger percentage in intraprovincial toll than for local. The rural su bscribers pay a larger portion of intra-toll than they do for inter-toll, or for local.

We took under consideration our package because when you put the dollar levy on Winnipeg, Winnipeggers could state why are we paying a $ 1 for this rural program. We are saying because it is requi red standard of service in Manitoba and therefore everyone should pay. But Winnipeggers were also reducing long haul toll by 10 percent, which is a greater impact on your bill on the average bill than it is on rural Manitobans. So you are getting the benefit out of that although you are paying $ 1.00.

Rural Manitobans pay $ 1 for their local bill, which percentage wis e is greater than Winnipeggers paying an a percentage basis. One could argue that is how it should be because they are going to get individual lines and larger free calling areas. So it is kind of a balancing act here as who should pay what, what is 15 2 equitable to most people? We felt that by looking at the average bills and by looking at how those bills are paid as towards local service or intraprovincial or interprovincial that the proposal that we have in front of the PUB, most equitably we feel add resses all those concerns.

The northern residents, interest ingly enoug h, although $68 is their average bill, it is equally interprovincial and intraprovincial. Although intraprovincial toll is going up, inter is dropping. So their average bill will roughly stay the same. In fact, it will drop a bit because the interprovincial is dropping mor e than the intra. So one can say they are getting a better deal than the rur al su bscribers in southern Manitoba, but most of the rur al people already have individual lines. So one could say then they are not getting the greatest of benefits.

When you look at the whole pictur e, it kind of comes together as, we feel, a pretty equitable progr am, although elements of it could be looked at to say this specific is not right in this specific element. Overall, we feel that the plan we have tabled and spent a considerable amount of time putting together and discus sing with our board is probably the most equitable program that one could initiate at this time. Mr. Uruski: The ques tion of revenues -is th ere a breakdown of revenues from the various rate changes, decreases and increases in terms of the actual rate changes that you foresee over the next year?

Are those available for Members? Mr. Bird: That information is available and will be tabled with the Public Util itie s Board . I sup pos e th at information could be tabled with the Members here as well, if that is the desire. Mr. Findlay: I have a little bit of reluctance maybe about tabling information prior to the official tabling at the PUB because then it creates possi ble negatives. I would hope that if the Members could wait until it is tabled at PUB, that would be the most appropriate time to do it.

I think some changes may even happen as the data is evolved and then developed timely for that application which I un derstand will occur Februar y, March, thereabouts in the next year, or expected to be. Mr. Uruski: I can recognize that in terms of timing, of tabling of that information, that if it coincides with what is happening at the board, I have no difficulty with that. In terms of the publ icity and the process that the corporation is involved in, I wou ld not want to pre emp t the corpora tion. I have no difficulty of the corporation providing the information to Members at the time that they table it.

Mr. Findlay: I think if you are prepared to accept that, I am sur e that we can make it pos sible to table the information with the committee members at the time it goes to PUB. Whoever the committee Members are, I think we could address it that way, so that you get it at the same time. Mr. Uruski: Could I ask the Minister whether there has been in terms of scheduling on these proposals of rate

Tuesday , November 8, 19 88 of service improvement throughout rural and northern Manitoba-the decreasing of the calling areas-is there now a revised or will there be a revised map that will go to the PUB along with that and when will that be made public or is it public now? Mr. Bird: We have all the "i's" dotted and the "t's" crossed in both the individual line program and the proposal for the commun ity calling but again it is subj ect to scrut iny by the PUB and in fact may change.

I wou ld like to sugge st, as the Minister has previously stated , that when those preliminary hearings start, and I believe the first day of preliminary hearings is November 18, that information that we table is available then, we will table with the committee Members as welL Mr. Uruski: I think that is sati sfactory in terms of the new proposals and the new map and whatever, the preliminary hearing, if it is tab led through us through the Minister to whoever is on the committee then will certainly be okay.

The revenue qu es tion will be dealt within those proposals as well, that I have raised . * (12 10) Can I ask the Minis ter, in terms of the whole que stion of deregu lation we talked about and the reducing of revenues from interprovincial telephone rates, has the province set its policy vis-a-vis the deregula tion and the competition policy that is bringing forward and/or has the federal Government come out with their policy in the last num ber of months? Where is it at?

When we were in office and the whole qu est ion of, as one example of this whole area, taxation of long dis tance rates, the former Minister wrote the federal Minister indicating that we wou ld be prepared to scrap the provincial sales tax on long distance charges if the federal Government wou ld not impose a 10 percent sales tax on long distance charges, which has a very major impact on primarily rural , again, and northern Manitobans based on their long dis tance calling. That of course has gone nowhere.

While they are two separate issues, they are really intertwined in terms of the future of telecommun ications policy in this country. Are we going to continue to face the kind of competition that now is coming in and what we see has occurred south of the bo rder? Where is the Go vernment's position in this whole area and what have they said to their counterparts in Ottawa, or where is the issue headed? Mr. Findl ay: I will make a few comments and then maybe the president or the chairman of the board may want to make some additional comments.

Certainly there are some challenge s ahead of provi ncially regula ted Crown corporations for telecommun ications in the future with regard to activities that are happening somewhat out of our controL The CNCP AGT issue that is in front of the Su preme Court, the decision has not come down yet. lt has been expected weekly now for a long time. When that stat ement comes down as to how the Supr eme Court is going to look at the appeal, it will affect a lot of our activities in the futur e with regard to our abil ity to control our Cr own corporation and set rates.

We have been attempting to get some discussion with the federal Government prior to that decision. They 15 3 have chosen not to engage in any kind of negotiation prior to it. Not only Manitoba, but AGT and SaskT el have also been looking at it and wanting the same thing. lt is in a bit of a stalema te right now and there certainly are potential difficulties ahead. I think the chairman of the board might like to comment further because they have been more closely in touch with the day-to-day activities.

Right now the negotiations that we have attempted to have with the federal Government have not materialized. l\ll r. Thomas: I wou ld jus t add a brief word.

The CRTC order to Bell Canada to reduce its interprovincial long distance toll is not deregula tion. lt is a fact that the toll reductions are being affected through regulation. lt was a case that Bell has been showing such hands ome profits in recent years and the toll was priced so much above cost that they were ordered to bring the prices down. lt has had a domino effect across the country of other companies having to come into line with Bell Canada's rates .

Likewise, BC Tel was also ordered, which is federally regula ted, to bring down its rates, but it is not deregul ation per se. lt is being affected � through the regula tory process. � There is a CRTC Task Force on competition in long dis tance voice message chaired by Mr. Bud Sherman, who will be fam iliar to this group, and their report is expected momentarily, I un derstan d. lt looks at the qu est ion of the futur e in terms of entry of other providers into the long distance voice market.

That is what CNCP was challenging AGT over was the opportu nity to connect to the switch network of Al berta Government Telephones. So with the Sherman task force report available and with the AGT ruling coming down from the Su preme Court, presu mably then Minis ters in federal-provincial foru ms will de bate and decide future direction in terms of public policy and regu lation.

I should say , on behalf of the MTS Board of Comm issioners, that we have been kept very much in the picture on this through the presence on our board, the Director of the Telecommun ications Policy Office in the Government of Manit oba and thr ough collaboration with him on federal-provincial matters. We keep informed and on top of this. We are, after all, the opera ting entity tha t will have to deal with dereg ula tion if it comes or with long distance competition, so the collab oration has been qu ite satisfactory from our sta ndpoint. Mr.

Uruski: Can I ask the Minis ter, is the province prepared to, or continuing to take the same approach on telecommun ications policy and their response, or at least their view, and dis cussions with the federal Government that previously were in place with respect to deregu lation and the whole area, or has there been any direction given by the Minis ter in this area? What direction, if any, or change, if any, has been given? Mr. Find lay: I have given no different direction for ihe corporation. We are awaiting this decision to come down.

We will have to res pond in a fashion that is best for the telecommunication corporation her e in Province of Manitoba. Mr. Uruski: Is t he Min ister fully apprised of the implications for Manitoba subscribers some of the

TUesday, November 8, 19 88 applications and the like that are pending between CN and the challenge between CNCP and the CRTC ruling? Have we, as a province, made subm issions to the CRTC on this issue? Mr. Findlay: We are certainly aware of the impact if we have less income from the interprovincial toll which is, I gu ess to use the word, lu crative income, which the corporation uses to keep the inside -the-province rates relative low. Sur e, we are aware of it, but whether we can control what is going to happen is very difficult to say.

What the decision will be and what impact we will be able to have with the federal Government-who ever they may be at the time-in terms of their reaction to our concerns is an open-ended ques tion, which there are no direct answers at this time. Mr. Uruaki: Should the province be taking a proactive stand in this whole area to rais e the conscious ness of both the consu mers, primarily the consu mers under our jurisdic tion, of what the impacts might be? The � previous Minis ter, during the meeting process, that ' ques tion was raised continu ally by Manitobans at the hearing process and the impacts were made.

Is that an approach that the Minister is considering at this point in time? Mr. Findlay: I gu ess, since nobody knows what the decision will be and what direction it will take us in, we can all specu late and maybe spe culate the worst scenario. I do not really want to be one to rais e fears that are not well-founded. I think we will have sufficient time after the ru ling comes down to deal with the issue, once we know what direction we are going to be forced to go into, if I can use that word. We will deal with the issue as it unf olds.

To go out to the public and say I am worried about this, I am worried about that, I think it would not be constructive for us or the customers at large to deal with some thing before it happens. Let us face it, the is sue is between AGT and CNCP; it is not with us directly. Naturally it has implications for us, but in that light we have an opportun ity to attempt to deal with it and we want to deal with it in conjunction with our neighbours to the west. A un ited voice is stronger than an individual voice.

We have a meeting set up with the Minis ters of three prairie provinces jus t a little bit down the road to address this. Mr. Uruski: Has the Minister approached the federal Government dealing with the whole qu es tion of the sales tax on rev enue s and im pact on Manitoba consumers? I do not know if my figur es are out of date. Maybe the System can provide what revenu es are pres ently flowing to the province on the sales tax and what revenues are flowing to the federal Government. Is it at roughly 2 as to 22 or thereabouts on the way it is applied? *

(1220) Mr. Findlay: I will jus t see if anybody has the figur es as to what revenue is flowing. We will have them the next day. Mr. Uruaki: Is the Minister prepared to continue to push that whole issue? That is an issue primarily-well 154 for all, both for Manitobans but the greatest impact of course is on Northerners in Manitoba. Basically, it ends up being double taxation because the 10 percent is applied on not only all long dis tance calls but on· the total amount of revenue, including the provincial sales tax, of the cost to those subscribers, recognizing provincial revenues and the like.

This was the one component of the federal proposal of placing a sales tax on all consumer goods and services or at least moving to capture an indirect revenue base for them which had a very negative impact on all citizens of the province but primarily citizens in northern Manitoba in terms of both doing busi ness, but also the consumers on the costs of the sales tax as applied to long dis tance calls. Mr. Findlay: As a former Member of Cabinet, he well knows the importance of revenue flowing to the province through the tax that the province applies.

In terms of the tax that the federal Government is put ting in place, certainly after the 21s t we are prepared to make representa tion to ask them to remove it, whoever they may turn out to be. Mr. Uruski: I am very pleased that the Minis ter is prepared to continue that approach to the federal Government in this one very important area on behalf of provincial consumers, particularly those in rural and northern Manitoba, having been given the average cost of available impact on everyone within the province. Perhaps I can defer to my colleague for the remaining few minut es. Mr.

Kevin Lamou reux (ln kster): I just have a couple of qu ick qu es tion regarding the Board of Commissioners. From the December 31, 1987, Annual Report to wha t was handed out by Mr. Thomas today, th ere seems to be a rather large numb er of replacements on the Board of Commis sioners. I was wondering if he might be able to indicate to me, is this usual? From wha t I unde rstan d, six of the nine commissioners were replaced with other people, if he can maybe answer if this is usually what happens? Mr. Thomas: lt is an obvious point that the board changed when the Government changed in the spring of '88.

The practice has been, with a num ber of Crown corporations, to ma ke changes on the Crown corporation boards when a new administra tion came to office, so I do not think anyone then ser ving on the board were surp rised that their services were no longer requir ed, and we have gained a group of very hard working and creative people. The board I think is functioning qu ite well so two employee representativ es remained on the board and I remained as Chairpen;on of the Board of Commis sione rs. Mr. Findlay: I wou ld jus t add that, no, it is not unu sual that changes occur when the Government changes.

The Member for lnterlake in our Estim ates clearly said that he recognized the right of the Minister to make changes and we changed six of nine, left the two employee reps and the chairman, and I commend all the past members of the board for the services they have given to the public of Manitoba and I believe that

Tuesday, November 8, 19 88 the present members will give an equally high level of service to the Province of Manitoba. Also keep in mind that I do not think that anybody has the right to be on a board forever, that other citizens of the province have the right to serve the public through those offices and, in that light, we made the changes and commend the people of the past and look forward to good contributions from the people pres ently there. Mr. Lamoureux: Mr.

Chairperso n, again, maybe if you can give me another answer regarding how long has it been the practice of this Legislature to have an MLA on this particula r board? Mr. Find lay: The Member for lnterlake (Mr. Uruski) thinks it is in the legislation and that may well be, but I know it has been the practice for a long time. But, recognize that the MLA on the board is not in Cabinet, so he is not at the decision-making level of Government; he is an MLA on the Government side, but not in the Cabinet. Mr. Lamoureux: Jus t for clarification, Mr.

Chairperson, it is through legislation that an MLA has to be on the board? Mr. Thomas: I would have to check to confirm that, I know it has been the longs tanding practice, as someone who has studied Crown corporations in my other role as a Professor of Political Science and Public Administra tion, it has been a long-s tanding practice. In fact, somet imes the MLA on the Board also chaired this committee, which was an unusual arrangement. That practice has been discontinued but we have had an MLA on the board for qu ite a num ber of years now, some ti mes in the role of vice-chairman of the corporation board. Mr.

Lamoureux: Mr. Chairpers on, if I can ask the Minister, what does he perceive the role of the MLA that is currently on the Board, what type of input do you look for him to put on the Board? Mr. Findlay: I think I would say the same as any other board member. He is there repres enting, first and foremost, his constituents, but secondly, all the citizens of the Province of Manitoba, as are other

Document details

Collection	Manitoba — Debates (Hansard)
Citation	34-1-punr8
Type	hansard
Volume / chapter	34th 1st hansardpdf punr8.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	49f1d7a3c460ed32106d662aab0b11e551c0f134

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