Mr. Gary Doer (Leader of the Opposition): Madam Speaker, on Thursday in this Legislature, October 31, I asked the Premier a number of questions about whether the government had considered tax changes dealing with the Manitoba Telephone System as it moved from a public corporation to a private profit corporation. The Premier took the question as notice, then he said we had different scenarios, then he said he did not know if we have an advance ruling from Revenue Canada.

I would like to ask the Premier, has the government provided any analysis of the tax changes and the tax impact on the changing status of the Manitoba Telephone System and its impact on the ratepayers in the Manitoba Telephone System in the province of Manitoba?

Hon. Gary Filmon (Premier): Madam Speaker, I can confirm that the government reviewed the opportunities available for various tax rulings from the federal government and because of tax changes that have taken place since the Telus sale, there was a new set of rules that prevailed that indicate that the maximum that assets can be valued at for depreciation purposes are fair market value. So a tax ruling was not sought on that since it implied no change and certainly any transaction with respect to the telephone system will be predicated on that knowledge and information.

With respect to the transference of pension funds which also required a tax ruling, that ruling has been sought and favourably obtained from the federal government, is my understanding.

On both those bases, the circumstances are known and will be known to prospective investors. With respect to any impact that might be had on the rates, I have indicated that there are a number of things that would have a positive impact on the rates and other things that could in fact contribute otherwise to the rates. We have discussed the fact that no interest at, say, 8 percent being paid on hundreds of millions of dollars of debt would have a positive impact on the rates. The fact that a return on investment would be calculated would be a negative impact on the rates but would be more than offset by the fact that they no longer had to pay a substantial interest rate on the debt. The fact that they had to pay some taxes if they made profits would of course have an impact on the rates, but those can be seen to be calculable and assuming that the company would not necessarily be making any more profit than would be allowed for under CRTC would not necessarily be anything that would not be offset by the gains that they would make in greater efficiency under private ownership, Madam Speaker.

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Mr. Gary Doer (Leader of the Opposition): I would challenge any Manitoban to try to determine an answer out of the Premier's bafflegab there, Madam Speaker.

On May 2 of this year in this House and at his press conference, and October 31 of this year in this Chamber, the Premier repeatedly said--and we have raised the issue of Telus in Alberta, CRTC decisions three weeks ago in this House--on the record that there is absolutely no difference between a publicly owned corporation and a private corporation for purposes of determination of the rates.

Would the Premier please table in this House the impact of the change on rates moving from a public nonprofit corporation to a private corporation with the unfavourable ruling that the government is anticipating from Revenue Canada on taxation and the other factors that would lead to rate increases? Is the Premier still maintaining they will have no impact on the rates here in the province of Manitoba?

Hon. Gary Filmon (Premier): Madam Speaker, I am not anticipating an unfavourable ruling from tax Canada. I said, a favourable ruling has been received with respect to the transfer of pension assets. I said that the assets would be moved at fair market value, which is Revenue Canada's position on this kind of transaction at the moment.

I took time earlier--I know that the member has a short attention span, as short as his normal clips are for television, but I took the time to give him an indication that there are a number of factors on each side of the equation, some of which could have an influence towards decreasing rates and others which could have an influence towards increasing rates, and the net effect to the best judgment and analysis that we have is it would be a wash. There would not be any tendency towards an increase in rates just by virtue of privatization.

Mr. Doer: Maybe the Premier would like to put his clip on the record again about, I will not sell the Manitoba Telephone System if I am elected. Read my lips, Madam Speaker, says the Premier.

I would like to challenge the Premier to table his analysis. I know he had a study done by brokers that are now getting commissions for selling our telephone system to private investors. I challenge the Premier today to table in this House his so-called analysis that says that there will be no impact on rates moving from a public nonprofit corporation to a privately owned corporation. I challenge him to table it in this House today because he has maintained that position from Day One, from May 2 on: There would be no change. Table your analysis.

Mr. Filmon: Madam Speaker, it is not as though the business of operating a telephone company is something that is mired and fixed in place in 1906 or 1905, as members opposite would have you.

There are continual changes that are occurring within the business environment that the telephone company will operate. As I indicated, Madam Speaker, in that continuous changed business environment, there are a number of pressures that would direct towards increasing pressures on rates and other forces that would indicate towards decreasing pressures on rates, and the best analysis that we have is that there would be a wash, and that the rates, there would not be an ongoing tendency to have any other increases in rates other than those that the company would have under public ownership, which are the same inflationary pressures that would occur in the marketplace no matter who owned it, public or private.

Mr. Doer: With a new question, and I do not know why anybody in the public would want to believe this Premier after he promised he would not sell the Manitoba Telephone System in the last election campaign. The Premier does not have an analysis. I went through his press kit and his advertising campaign and his public relations brochures, but he still has not provided an analysis to the people of Manitoba for a $1.2-billion asset that he is proposing to sell contrary to his election promise.

I will table an analysis that has been produced by an economist who has been doing a lot of work in the privatization issue of Ontario Hydro. Ontario Hydro, of course, has been put on hold for privatization because of this tax issue. This analysis says that moving from a public nonprofit corporation to a private corporation will mean at minimum a 9.75 percent increase to the ratepayers of this province.

I would like to ask the Premier: Where is his analysis to counter this argument and where is the proof of his argument? Rather, do we have to just rely on his brokerage friends that are going to make tens of millions of dollars out of this sale?

Mr. Filmon: Madam Speaker, I note right off the bat that the analysis refers to higher financing costs, and it suggests that Manitoba Telephone System would have to pay more money for capital than they do at the present time. I indicate to him that the very study that he put on the table a couple of weeks ago, which was the CRTC decision with respect to Alberta, said that they could have a return on equity of 6.4 percent versus currently paying 8 percent interest on that same capital. So they in fact are being awarded less as return on investment than they are currently paying as interest on the same debt.

He can produce any analysis he wants, Madam Speaker--

Some Honourable Members: Oh, oh.

Madam Speaker: Order, please. The honourable First Minister, to complete his response.

Mr. Filmon: Madam Speaker, he can produce any analysis that he wants, but the fact of the matter is that he is looking for anything that supports his arguments. I am telling him that the best information that we have is that it will have absolutely--

Some Honourable Members: Oh, oh.

Madam Speaker: Order, please.

Mr. Filmon: Madam Speaker, they do not want to hear the answer to the question.

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Mr. Doer: Madam Speaker, we look forward to the analysis that the Premier should have tabled with Manitobans before they broke their election promise, before they broke their word and before they broke their commitment to the people of this province and all their candidates and all their MLAs promised not to sell the Manitoba Telephone System.

I would like to ask the Premier, has the Manitoba Telephone System requested a special factor to be included in a price cap regime due to the costs related to privatization that are not known? Can the Premier please answer whether and when Manitoba Telephone System has applied to the CRTC for this special factor increase to deal with privatization costs?

Mr. Filmon: I will take that question as notice on behalf of the Minister responsible for the Manitoba Telephone System (Mr. Findlay).

Mr. Doer: Why did the Premier not inform Manitobans that they have applied for a special increase in rates to deal with the unpredictable parts of privatization? Did the Premier tell his cabinet? Did the Premier tell his caucus? Did the Premier tell Manitobans? Madam Speaker, why does he keep with maintaining a position that privatization will not affect the ratepayers when seniors, the Manitoba union of municipalities and independent analysis all say the Premier again is not telling the truth to the people of Manitoba?

Mr. Filmon: It is absolute nonsense what the member is putting forward. He can put all of his ideological blinders on and come in here every day and try and fill the public with his fear and loathing and doom and gloom and it is absolute nonsense, Madam Speaker, absolute nonsense.

Mr. Steve Ashton (Thompson): Madam Speaker, the way in which the government is dealing with the selloff of MTS is nothing short of scandalous. The same Premier, who said in the election he was not going to sell off MTS, said on May 2 when he broke that promise, he said at the time, there will be no impact on rates due to the privatization.

I want to ask the Premier, since we know that MTS did not do a single study, since we know that he received a report from the three brokerage firms that did not deal with that aspect, will he now admit to what everyone knows in Manitoba and what this analysis shows and that is that we are looking at a minimum of 9.75 percent and, in fact, in rural areas the increase could be substantially larger than a 9.7 percent increase strictly because of the cost of privatization?

Hon. Gary Filmon (Premier): That is absolute nonsense.

Madam Speaker: The honourable member for Thompson, with a supplementary question.

Mr. Ashton: What does it take for the Premier to tell the truth to Manitobans, that rates are going to increase? When will he start telling the truth and, for example, explain the July 1996 application to the CRTC which builds in a factor to pass on unforeseen costs to privatization? Madam Speaker, 9.7 percent is going to be the minimum. When is he going to admit it is going to cost even more than that to the ratepayers of Manitoba?

Mr. Filmon: Madam Speaker, I repeat that the CRTC will make their decisions based on the business case put forward by telcos, as they do today. Regardless of whether it is publicly or privately owned, it will not make a difference in terms of the manner in which they conduct their analysis.

Mr. Ashton: Madam Speaker, on a new question. I would like to ask the Premier if he does not believe the study and does not believe the Manitoba Society of Seniors, the Union of Manitoba Municipalities and others, will he at least acknowledge that even Peter Holle from the Prairie Centre, formerly with the taxpayers federation, admitted that there will be income tax liabilities that will be incurred by the newly privatized company and, in fact, the change in the tax status alone will lead to a substantial increase in rates under a private company? When will he face facts and tell the truth to Manitobans?

Mr. Filmon: Madam Speaker, as we have indicated before, the mere fact that the telephone system will save some $30 million a year in interest that they do not pay on debt that they would have, along with the potential for them to operate more efficiently than they do in the public sector, all of which will more than offset those factors.

Mr. Steve Ashton (Thompson): Well, Madam Speaker, if the Premier is insisting that Manitobans trust him after he broke his word on MTS, will he not do the right thing and table Bill 67 and put the issue of the sale of MTS to the shareholders of MTS, the people of Manitoba? Let them decide.

Hon. Gary Filmon (Premier): Madam Speaker, the matter will be decided here in the Legislature by people who represent all Manitobans.

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Mr. Tim Sale (Crescentwood): Madam Speaker, I want to quote from this study. In particular the study states: Stentor has proposed that some rates be permitted to increase by up to 18 percent per annum, Stentor representing MTS and others. As another example, the recently privatized Telus, former AGT, is applying to double most residential rates by 1997 and more than double rural residence rates. Therefore, for residence ratepayers in Manitoba, especially in rural areas, the average increases of 9.75 should be viewed as a minimal potential impact.

Madam Speaker, my question for the Premier: If he is, for a change, to keep his word that rates would not increase, how many employees will have to be laid off? How many wages will have to be rolled back by what level? How many services to rural residents will have to be cut to keep this Premier's promise for a change?

Hon. Gary Filmon (Premier): Madam Speaker, the Manitoba Telephone System had its employment reduced from in excess of 5,300 to something just over 3,700 in the past five years, so public ownership of a telephone company is no guarantee of employment in the most rapidly changing field of technology anywhere in the world.

The comparisons are absolutely invalid because a telephone company will do what a telephone company has to do in order to remain competitive, whether it is publicly or privately owned. It has 70 percent of its revenues currently in competition with other companies. That is why it has reduced from 5,300 to just about 3,700 in the past five years.

Mr. Sale: Madam Speaker, can the Premier tell the House why, if Manitoba Telephone System is not sold for more than book value, this independent consultant suggests that average utility rates will have to increase by 9.75 percent as a result simply of privatization in order to cover the increased capital costs?

How many jobs will go to keep those rates to zero, as the Premier has talked about?

Madam Speaker: Order, please. I would remind the honourable member for Crescentwood, a question is to contain a single question.

Mr. Filmon: Madam Speaker, as usual, the question is based on a hypothesis, but in addition to that, the telephone company will continue to provide services to the people of Manitoba. That is the way it will continue to do business here, and that is what it will have to do in order to do business in a very competitive world.

Mr. Sale: Madam Speaker, can the Premier tell the House where Manitobans are supposed to find the extra $25 million that is implied by a rate increase of 9.75 percent? Where are rural and northern and poor people, where are small businesses supposed to find 25 million extra dollars so his friends can get a bigger return on their capital?

Mr. Filmon: Madam Speaker, I have indicated before that the Manitoba Telephone System's rates, whether they are publicly or privately owned, will be evaluated on the same analysis by the CRTC. There will be a number of pressures that will allow Manitoba Telephone System to operate at less cost, including the fact that they will not have to pay the substantial interest that they currently pay on debt. They will have to pay a lesser rate for equity. They will also--[interjection]

Madam Speaker: Order, please.

Mr. Filmon: Madam Speaker, they do not want to listen.

Mr. Kevin Lamoureux (Inkster): When the Premier was at the press conference announcing the sale of MTS, he tried to give the impression that Manitobans as a whole will benefit in the sense that Manitobans are going to be the owners of this new privatized corporation when in fact, of course, all Manitobans today own MTS, but unfortunately within two days that will not be the case.

My question to the Premier is, when AGT went through privatization, within weeks it was registered with the Toronto Stock Exchange. Does the Premier today believe that Manitobans will still own more than 50 percent of MTS one year from today?

Hon. Gary Filmon (Premier): I am more than confident that Manitobans will purchase the vast majority of shares in the privatized Manitoba Telephone System.

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Mr. Lamoureux: Because of the way in which the shares are being issued, a majority of Manitobans will indeed own MTS. The question is, a year from today, does the Premier believe that a majority of the ownership of MTS will be owned by Manitobans or by residents outside of the province of Manitoba?

Mr. Filmon: That is not a question to which anybody can give an answer. It could be that Manitobans would have even more of a percentage of the shares a year from now than they did at the time of issue. But that is one of the things that would be predicated on how people react to the issuance of shares and what people choose to do with those shares.

Mr. Lamoureux: The question, quite specific, is: Does the Premier not believe that, by issuing out these shares, there is going to be a very good likelihood, much like in the province of Alberta where it went to the Toronto Stock Exchange, that it is only a matter of time before Manitobans do not have a majority share of MTS?

Mr. Filmon: The fact of the matter is that Manitobans want to be assured that they will receive the best possible service from their telephone company at a reasonable cost, and they want to ensure that that company continues to be a very positive player in the Manitoba environment with respect to bringing in and being conversant with the most rapidly changing technology of any sector of our economy anywhere in the world.

You have innumerable examples of companies that are privately owned in the telephone area, including in Canada: New Brunswick Tel, who are lauded not only for their efficiency, their effectiveness, but for the very strong role that they play within the province of New Brunswick in attracting business, attracting investment and attracting jobs for the province of New Brunswick. On all counts, I am confident that the telephone company will continue to contribute very substantially to what the people of Manitoba want it to do.

Ms. Diane McGifford (Osborne): Madam Speaker, for the one out of 10 Manitoba women who live in abusive situations, the telephone is central to personal safety plans, a lifesaving device and a lifeline with the outside world. The reasonable rates of a publicly owned utility make the lives of these women possible, and I mean possible in both senses of the word.

Now that the truth is out, I want to ask the Premier what steps his government has taken to protect the lives of abused women when MTS is sold and the rates soar a minimum of 10 percent, making telephone service impossible for many.

Hon. Gary Filmon (Premier): Madam Speaker, I have indicated before the reasons why I reject her arguments on the increase in rates.

Ms. McGifford: Then will the Premier guarantee us today that abused women and their children living on social assistance, once MTS is sold, will have telephone services in their homes?

Mr. Filmon: Madam Speaker, if people are going to be investing over a billion dollars in the telephone system, they are not going to be withdrawing services. They are going to be investing for the purposes of increasing services so they can increase their revenues.

Ms. Diane McGifford (Osborne): Now that the Premier has not answered that question, I will try again.

I want to ask the Premier to guarantee that lifesaving services for abused women, like unlisted numbers and number blocking, will under privatization remain free and accessible to abused women in Manitoba--

An Honourable Member: Like they are now.

Ms. McGifford: --as they are now.

Hon. Gary Filmon (Premier): Madam Speaker, I would just point out to the member opposite that those are services that do not just occur in Manitoba. They occur right across Canada. I point out to her that there are only two telephone services in Canada that are currently under public ownership, that is, Saskatchewan and Manitoba. Yet those services occur in all provinces in Canada.

Hon. James Downey (Minister of Industry, Trade and Tourism): Madam Speaker, yesterday I took a question as notice from the honourable member for Elmwood (Mr. Maloway). I want to make a correction to my answer. I believe I referred to the funding that came to ManGlobe as coming under MIRI. It did not come out of the MIRI program but came out of the Canada-Manitoba Communications Agreement, the program which it was funded under. It is to the tune of $500,000 for the creation of jobs and it is not a loan. I want that corrected.

But, Madam Speaker, in my taking of notice of the question, the member again put information on the record that was again so far out. He put on the record there was some $60,000 in travel. That is an incorrect number. I believe the numbers are something about just over half of that, but that was for the total activity of the travel of that operation.

Ms. Jean Friesen (Wolseley): Madam Speaker, several weeks ago the CRTC ruled that Canada's telephone companies may apply differential rates for nonprofit educational purposes.

I would like to ask the Minister of Education whether she has yet applied to the Manitoba Telephone company for a ruling on special educational rates for Manitoba's educational institutions.

Hon. Linda McIntosh (Minister of Education and Training): Madam Speaker, I believe that I indicated to the member on numerous occasions in the past that MERLIN, our special operating agency which works independently and has been doing some excellent work on behalf of distance education and technology in Manitoba, has been working consistently and constantly on an ongoing basis with Manitoba Telephone System, CRTC, to do everything that it can to help bring rates down for educational services.

I can take the details of her question in terms of the last communication--[interjection] Well, she is asking for the latest communication and, to be perfectly frank, in the last couple of weeks I have been tied up in committee till two, three, four in the morning and I have not had a meeting with MERLIN in the last week or so, but I will check the details of that. I indicate, though, it is one of their prime things that they do. I do not know if they have had responses back from people, but I will check and let her know.

Ms. Friesen: Madam Speaker, I wonder if the Premier could tell us whether it is the intention of his government to grant differential educational rates before MTS is sold so that at least that public obligation is transferred to the new private for-profit owners.

Hon. Gary Filmon (Premier): Madam Speaker, I do not grant those rates.

Ms. Friesen: Would the Premier then confirm that under the new ruling of the CRTC it is indeed the Manitoba Telephone System which does grant those rates? The Premier is responsible for it. Would he tell us whether it is his intention to grant differential educational rates for Manitoba's educational institutions?

Mr. Filmon: Madam Speaker, if the member already knows the answer to the question, then she does not have to bring it here to ask it.

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Ms. Rosann Wowchuk (Swan River): Madam Speaker, under this government we have seen a deterioration of services in rural and northern Manitoba, deterioration in health care services, deterioration in transportation services, and now this government through its decision to privatize MTS is putting at risk the very lifeline for many northern and rural Manitobans.

Will the Premier give people of northern and rural Manitoba the assurance that their services will not be on the chopping block and rates will not be increased to a level where people in the North and rural Manitoba cannot afford a phone?

Hon. Gary Filmon (Premier): Why would investors invest over a billion dollars to purchase the assets of the telephone system, which includes fibre optic cable and digital switching, so that they can service customers in all of the towns, villages and hamlets of this province--once they have that invested and sunk cost, their great incentive is to increase the use of the system, not to decrease it and cut off service. This is an absolutely ridiculous suggestion on the part of the member for Swan River.

Madam Speaker: The honourable member for Swan River, with a supplementary question.

Ms. Wowchuk: Will this Premier admit that his government is prepared to sacrifice jobs in rural Manitoba, opportunities for education and the very lifeline for people in the North and rural Manitoba? Will he admit that this is absolutely foolish and withdraw the bill and go back and listen to the people or at least listen to the people in committee?

Mr. Filmon: Absolutely not, Madam Speaker. I reject categorically the silly suggestions put forth by the member for Swan River. There has been no government in the history of this province that has done more to create jobs in rural Manitoba than this administration.

Every time that we worked hard to create jobs in rural Manitoba that member actively undermined and worked against Louisiana-Pacific--400 jobs for her area. She fought it every single opportunity.

Mr. Steve Ashton (Opposition House Leader): On a point of order, Madam Speaker, Beauchesne Citation 417 is very clear that answers to questions should be as brief as possible, deal with the matter raised and should not provoke debate.

Madam Speaker, if the Premier would for once admit that he cannot answer the questions about the impact on rural Manitoba of the privatization of MTS, let him do so instead of getting into the kind of irrelevant diatribe we have seen from him. Let him answer the questions for rural Manitobans about the impact on their phone rates and phone service from the privatization of MTS put forward by the member for Swan River (Ms. Wowchuk).

Madam Speaker: The honourable First Minister, on the same point of order.

Mr. Filmon: On the same point of order, Madam Speaker, the member for Thompson may think that jobs for rural Manitoba are irrelevant; we do not.

Madam Speaker: The honourable member for Thompson did not have a point of order. It is clearly a dispute over the facts.

Madam Speaker: Order, please. The honourable member for Dauphin was recognized to pose a question. Would the honourable member for Dauphin please pose his question now.

Mr. Struthers: The government has no studies saying that rates will go down. Everything points to rates going up in rural Manitoba. Take a look at the facts. Will the Premier confirm that the MTS has requested special consideration for further price increases due to any costs related to privatization?

Hon. Gary Filmon (Premier): Madam Speaker, with such a lengthy preamble, I must admit that I missed the question, so I wonder if the member could please ask the question. You can skip the preamble; just ask the question.

Madam Speaker: Would the honourable member for Dauphin please repeat the question.

Mr. Struthers: I can skip the preamble, but the Premier should not skip the answers every time we try to get something out of him.

Madam Speaker: Order, please. Would the honourable member for Dauphin please comply with the request to repeat his question.

Mr. Struthers: Will this Premier confirm that the MTS has requested special consideration for further price increases due to any costs related to privatization?

Mr. Filmon: No, Madam Speaker.

Mr. Struthers: If the MTS is concerned about the cost of privatization, why does this Premier say it is just a wash?

Mr. Filmon: Madam Speaker, MTS does not have any anticipation of increased costs, and they simply, I am given to understand, asked to deal with anything that may arise out of privatization in future applications, but they do not anticipate anything coming out of it.

Madam Speaker: Time for Oral Questions has expired.