Settling accounts: the privatization of MTS

The history of public and private ownership of telecommunications services is critical to understanding how government policy can, and should, protect quality service and good, local unionized jobs. 

Twenty-six years ago, in 1997, the Conservative government of Gary Filmon sold the Manitoba Telephone System to private investors. By selling MTS, it was undoing the work of a previous Conservative government, which in, 1906, bought Bell Canada’s Manitoba network. Manitoba was the first of three prairie provincial governments to establish their own phone companies. They did so because Bell had been slow to provide affordable services to rural and residential customers, preferring to concentrate on business customers.

In 1997, at the time of privatization, Manitobans were told that a small provincially owned Crown corporation could not withstand the harsh competitive winds that changes in federal telecommunications policy would unleash. Manitobans were told that only the private sector could provide needed investment in new technology and infrastructure. Furthermore, they were told that the privatization was being managed in a way that would deliver a “Manitoba preference.”

Those opponents of the deal who predicted job loss, higher rates for consumers, and the loss of the provincial government’s ability to exercise influence over an increasingly important economic sector were depicted as nay-sayers who wanted to live in the past.

The newly privatized company quickly went to war with its employees. It staged a raid on the workers’ pension fund, resulting in a 16-year court case that completely vindicated the workers’ position. MTS locked out two of its three unions in 1999 in a direct assault on job security provisions. And it initiated an endless series of job cuts: between 1997 and 2017, the unionized workforce was cut from 4,000 to 2,200. And if the private sector was supposed to prove a superior source of investment, how does one explain the 2022 service failures that were attributed to a long-term lack of maintenance investment by MTS?

As a private, Manitoba-based company MTS lasted for twenty years. In 2017, it was taken over by Bell Canada. Today, MTS can hardly be said to exist anymore other than as a daub of jam on the lips of Bell Canada, the corporate giant which consumed MTS in 2017. Where it once employed 4,000 unionized workers, it now employs closer to 1,500. Someday corporate Bell will lick those lips and MTS will simply disappear.

When Bell purchased MTS, Bell committed itself to making Winnipeg its Western Canadian headquarters and to investing $1-billion over five years in infrastructure.

Bell has failed to live up to its commitment to turn Manitoba into Bell’s headquarters for its Western Canadian region. Instead, it has continued the previous administration’s policy of shrinking the company’s presence in Manitoba. Job loss has been continuous, workplace stress has been on the upswing, and investment is probably no greater than it would have been prior to the sale to Bell—MTS would have had to invest in new technology to survive. Service has declined, and Manitobans, like all Canadians, continue to pay some of the highest prices in the industrial world for telecommunications services. Economically Manitoba has been a loser: while technological change has led to some job loss, other jobs have been shipped out of the province to non-unionized subcontractors or even out of the country to the Philippines or India. In other cases, the remaining workers have simply had more tasks added to their workload. Bell has also switched from local firms for various services, such as insurance, benefits, and legal services, to its preferred and usually Central Canadian suppliers. Finally, the federal government’s handling of the sale of MTS to Bell seems to have set the pattern for telecommunications mergers of the future since the Rogers takeover of Shaw appears to have closely followed the Bell MTS script. 

This is a cautionary tale and a depressing one. But it should not be immobilizing. Regulatory policies can be weaned away from the current blind faith in the market. Government regulators can tie approvals to requirements for telecommunications companies to invest in local economies and workforces. Telecommunications companies make tremendous profits based on government-granted rights to provide services. Canada should ensure that the companies have labour policies that respect Canadian workers. 

Finally, it would be foolish not to consider some form of public-sector ownership in the telecommunications sector. It would be expensive and difficult. It would require tremendous national confidence. But it took tremendous confidence for tiny Manitoba to take over Bell Canada in 1906. The sector is so resistant to competition that it is really not much more than one merger away from establishing a national monopoly. Such a sector is begging to be nationalized.