August 8, 2002

Télébec, Limited Partnership, which is 63.4 % owned by Bell Nordiq Group Inc. and 36.6% by Bell Nordiq Income Fund, stated that it is generally satisfied with the decision on price caps handed down by the Canadian Radio-television and Telecommunications Commission (CRTC) on July 31, 2002.

Commenting on the decision today, the company said that, on the whole, the terms of the new regulation will have no major impact on its financial integrity for the 2002 fiscal year, and will therefore not lead to any layoffs. The decision’s overall impact on revenues will not exceed $3 M, and this amount will be offset by several productivity and work process improvement measures that have already been implemented within the company.

Télébec will only be able to measure the financial impact of the entire four-year price cap period, i.e. from 2002 to 2006, once the CRTC hands down its decision in the proceedings related to Public Notice 2001-69, Implementation of competition in local exchange and local payphone markets in the territories of Télébec and TELUS (Québec), in 2003. Among other things, the decision will determine the costs of providing basic service (phase II), and will define the high-cost serving areas, which will make it possible to calculate the amount of the subsidy that Télébec will receive from the National Fund. This amount represents a major component of the financial equation.

The main aspects of the price cap regulation applying specifically to Télébec are as follows:

• Freeze on basic residential service rates;
• Approval of Télébec L.P.’s proposal regarding the restructuring of business service rates;
• Acknowledgment by the CRTC of the particular circumstances of Télébec’s territory and of the necessity for a transition subsidy.

The CRTC has determined that the rates for basic residential service should not be increased during the next four years, unless the inflation rate rises above 3.5%. Télébec does not perceive this decision in a negative light, as it is currently working with the CRTC to set up subsidy mechanisms that will offset the gap between rates and the costs of providing basic local residential service.

Télébec is pleased to see that the CRTC has accepted its proposal for the restructuring of business service rates. In fact, this simplification of business rates will bring them closer to the actual cost of providing service, while greatly simplifying the rate structure for these services (reducing it to a single rate). This practice is consistent with trends observed in the industry. It should be noted that this measure will have no impact on Télébec’s basic business service revenues.

Télébec notes that the CRTC has acknowledged the specific circumstances of its operating territory and has introduced a transition subsidy intended to finance the residual shortfall associated with the provision of basic local service. This transitional subsidy will enable Télébec to absorb much of its residual local deficit generated by the high cost of providing service throughout its vast, sparsely-populated territory.

CRTC Decision 2002-43 on price caps for Télébec is similar in many respects to the decision rendered on May 30, 2002, for the large Canadian incumbent carriers, including Bell Canada and TELUS. In particular, the introduction of a penalty mechanism associated with the quality of service provided should not have any impact on Télébec, because its performance in this area is among the best in Canada. The service improvement plan, as defined by the CRTC, will enable a larger number of households to obtain telephone service. The CRTC will provide a means to compensate the telephone companies for their additional investments requested by the service improvement plan. Finally, Télébec is confident that it will meet the 3.5% productivity ratio that has been set by the CRTC.