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Pay Phones: A dying breed?

CBC News Online | Updated Feb. 27, 2007

The death of pay phones has been greatly exaggerated.

They can’t take photos, play videos, send e-mails or travel — like cellphones, their sleeker, technologically advanced counterparts, — but while pay phones are a dying breed, they won’t be extinct anytime soon, industry analysts say.

They’re evolving with the times, adding new features such as wireless internet access, capabilities for the hearing-impaired and even allowing users to make phone calls for free.

Pay phones going down, cellphones on the rise

Since the Canadian Radio-television and Telecommunications Commission deregulated the pay phone market in 1998, the number of pay phones has steadily declined.

That year, the CRTC decided to allow new competitors to enter the pay-phone market. But the commission put in a few safeguards: new pay phones had to match existing services including 911 calls; it decided not to regulate the rates of new entrants, but kept a hold on the rates of existing pay telephone companies to establish healthy competition.

The CRTC said the move would encourage innovations in service, foster a viable domestic industry, and increase total market revenues. Pay phones by companies other than long-time players Bell Canada and Telus have begun popping up across the country. As of 2002, more than 350 potential payphone service providers had registered with the commission.

But, the increased affordability and popularity of cellphones hit the pay-phone market hard: Profits have dropped steeply, with toll revenues dropping 17 per cent annually. As well, the number of pay phones has dropped by about three to four per cent a year. In 1998, there were about 185,100 pay phones in Canada. By 2002, that figure had dropped to 157,000.

Pay phones by the numbers:

Telus
-in 1999, there were about 37,000 payphones
-in 2003, there were about 33,000
-in 2006, there are about 29,500

Bell Canada
-in 1999, there were about 100,000
-in 2006, there are about 85,000

Aliant
-there are about 15,000 payphones
-the number has stayed consistent, rising and falling about three per cent annually

Canada Payphone
-there are about 2,000 pay phones
-it has stayed consistent since entering the market in 1999

Number of cellphones in Canada

The number of Canadian cellphone users has grown exponentially — to more than 16.6 million in 2006 from 100,000 in 1987, according communications consulting firm, Yankee Group. And many Canadians cut their ties to land lines completely: Cellphones were the only line in 570,000 Canadian households in 2006, about 4.5 per cent of Canadian households, reports Statistics Canada. This is more than double the figure just two years earlier.

Albertans are leading the trend, with 75 per cent of provincial households owning a cell phone, the highest rate in the country. Ottawa is the most wireless city, with 80 per cent of households having a cellphone.

Some households can’t get enough. As of 2005, 40 per cent had one cell phone, 20 per cent had two cell phones, and seven per cent had three or more.

With the Canadian Radio-television and Telecommunication Commission announcing in February 2007 a new service that will allow consumers to keep their numbers even if they change service providers, cellphones are likely to become increasingly popular.

Cellphone users by the numbers:
-in 1987, there were 100,000
-in 2001, there were more than 9.5 million
-in 2002, there were 11.6 million
-in March 2006, there were 16.6 million
-in 2010, expected to have 21.7 million, 65.4 per cent of Canadians.

But Jeff Leiper, director with the communications consulting firm, Yankee Group, said though cellphones are becoming increasingly popular, there’s a swath of Canadians who aren’t interested in the technology.

Leiper said in March 2006, 52 per cent of Canadians had cellphones, a total of 16.6 million users. By 2010, the Yankee Group forecasts that 65.4 per cent of Canadians will have cellphones – a total of 21.7 million users.

However, that still leaves one-third of Canadians with a quarter in hand, in need of a phone booth.

“For those folks, pay phones continue to be an important part of how they communicate,” Leiper said, adding that non-mobile users tend to live in rural areas, are older, and have lower incomes.

He says that the popularity of cellphones in Canada is lower than in the rest of the industrial world. In countries such as Sweden and Korea, more than 90 per cent of people have at least one cell phone, Leiper said.

“But in Canada, where we lag, the need is still pretty clear,” Leiper said.

Pay phones an essential service

Paulo Pasquini, spokesman for Bell Canada, said pay phones are required to back up cell phones.

“We have all had our instances of cellphones crapping out or losing their charge,” Pasquini said. “[Pay phones] are needed as an emergency tool, and in some places where cellphone service is unavailable.”

Shawn Hall, spokesman for Telus, which operates pay phones in B.C., Alberta and Quebec, agrees.

“They’re definitely declining, but they remain important,” he said.

Pay phones are still needed in areas frequented by tourists, such as bus depots, airports and ferries and public places such as schools and hospitals, Hall said, adding they’re important in low-income neighbourhoods.

Although pay phones have been disappearing, he said, they haven’t been proactively removed. Pay phones disappear through attrition, he said. If one is broken or damaged, the company decides whether to fix it after consulting the community or owner of the property where the phone is located, and looking at whether there’s a pay phone within a reasonable distance, Hall said.

“There are some pay phones that hardly see any use. There are some pay phones that remain popular … we’re hesitant to remove them all because of a legitimate demand from real users,” Hall said.

For this reason, in 2004, the CRTC stepped in to make sure pay phones would always be available to those who need them. After hearing from the public – including submissions from telecommunications companies and public interest advocates – they decided that pay phones were an essential service for Canadians. They didn’t force telecommunications companies to provide pay phones, but put in a clause to protect them. If the last pay phone in a community is to be removed, the telecommunications company must notify everyone in a high profile way, such as posting newspaper ads.

New technology: more than just phone calls

However, what is changing is what pay phones look like.

“You used to see a row of pay phones, now you might see only one,” Hall said.

Their capabilities are changing too. Phones now take credit cards, have internet ports and some are specially equipped for the hearing impaired.

Free Fone, a subsidiary of Canada Payphone, is slowly adding phones that provide free calls and create hotspots for free wireless internet access. These phones pay the bills by showing ads on a digital screen on the unit.

They have about 600 Free Fones across North America including 50 in Canada, mainly on university and college campuses. He says Free Fones are used more often than their regular pay phones – about 500 calls daily versus five to 10 calls a day.

Anthony Lacavera, CEO of Globalive Communications Corp, which owns Canada Payphone, says his firm is trying to partner up with the bigger players in the payphone market to try to replace pay phones with Free Fones. He agrees that pay phones are an essential service, but the regular 25-cent pay phone business is not profitable for the long-term.

“[Free Fones] really is a logical evolution of the business,” Lacavera said.

He says a chunk of their users are people who have cell phones, but want to save on charges for extra minutes.

But Leiper said as cell phone rates come down, the compelling case for a free phone seems to disappear. Although cellphone fees are higher here than in other developed countries, he said, the buckets of minutes they get now are large and will get larger.

“Currently, in the very short term, there are still Canadians who are looking at their cell phones minutes, but it is increasingly less of a consideration,” Leiper said.

And, in some phone booths, there is no phone at all.

Enter the Cell Zone, a soundproof booth for cellphone users, offering a quiet environment to chat in nightclubs, restaurants, libraries and other entertainment venues. It also muffles cellphone conversations, to keep from disturbing others.

Tony Ferranti, vice president and founding partner of Salemi Industries, the Massachusetts-based company that created the Cell Zone, said the idea came about after being bombarded by other people’s conversations during a night out.

“We’ve gone to dinner with our spouses and friends and became aggravated listening to other people’s cellphone conversations … We thought, ‘Wouldn’t be great to have a place to have a quiet conversation?'”

After some research, Salemi Industries launched the Cell Zone in May 2006. It’s a futuristic-looking upright tube with a sliding door that closes. It stands just a bit more than two metres high, but ranges in diameter from 76 to 1.7 metres. It costs about $2,500 to $3,500 U.S., depending on size and colour.

It can block out noise between 30 and 40 decibels, depending on where the cell zone is located and the type of noise. (By way of comparison, Ferranti said, a loud office with everyone talking on the phone has a level of 40 to 50 decibels.) And, he said, nothing can be heard outside the booth.

Ferranti said there are no Cell Zones in place yet, but there have been more than 6,000 inquiries. Ferranti said with cell phone use increasing and one million pay phones taken down in the U.S., according to the Federal Communications Commission, the Cell Zone could nudge the pay phone out.

“I truly believe these cellphone booths will take them over,” he said.

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